{"id":41876,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/appraisal-of-healthsouth-rehabilitation-center-virginia-beach.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"appraisal-of-healthsouth-rehabilitation-center-virginia-beach","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/land\/appraisal-of-healthsouth-rehabilitation-center-virginia-beach.html","title":{"rendered":"Appraisal of HealthSouth Rehabilitation Center (Virginia Beach, VA) &#8211; HealthSouth Corp. and Valuation Counselors Group Inc."},"content":{"rendered":"<pre>\n                                AN APPRAISAL OF\n                       HEALTHSOUTH REHABILITATION CENTER\n                               OF VIRGINIA BEACH\n                            VIRGINIA BEACH, VIRGINIA\n\n (LOGO)       VALUATION COUNSELORS GROUP, INC.    \n\n             340 Interstate North Parkway        \n             Atlanta, Georgia 30339              \n             (404) 955-0088                      \n             (Fax) 955-0466                      \n\n \n                                                              February 7, 1994\n\n\nHealthSouth Corporation\nTwo Perimeter Park South\nBirmingham, Alabama  35243\n\nAttention:  Mr. Mike Martin, Treasurer\n\nGentlemen:\n\nIn accordance with your request, we are pleased to submit this appraisal report\ncovering the market value of the professional office building identified as\nfollows:\n\n              HEALTHSOUTH REHABILITATION CENTER OF VIRGINIA BEACH\n                           1849 OLD DONATION PARKWAY\n                               RICHMOND, VIRGINIA\n\nThe purpose of this valuation is to estimate the market value of the subject\nproperty's leased fee estate as of September 29, 1993, the effective date of\nthis report.  The report is to be used for asset valuation purposes.\nHealthSouth Corporation is selling nine professional office buildings for the\npurpose of establishing a real estate investment trust (REIT).  This valuation\nassumes that the prospective REIT is the owner of the property, with\nHealthSouth Corporation guaranteeing net rental income of $18.00 per square\nfoot.\n\nThis appraisal investigation includes visits to the facility, discussions with\nthe current owners and management of the property, a review of available\nfinancial data, discussions with local brokers and government offices, and\nresearch and analysis of the market.\n\n'Market value' is defined as:\n\n         'The most probable price which a property should bring in a\n         competitive and open market under all conditions requisite to a fair\n         sale, the buyer and seller each acting prudently and knowledgeably,\n         and assuming the price is not affected by undue stimulus.  Implicit in\n         this definition is the consummation of a sale as of a specified date\n         and the passing of title from seller to buyer under conditions\n         whereby:\n\n         o       Buyer and seller are typically motivated;\n\nHealthSouth Corporation\nFebruary 7, 1994\nPage Two\n\n\n\n         o       Both parties are well informed or well advised, and  acting in\n                 what they consider their own best interests;\n\n         o       A reasonable time is allowed for exposure in the open market;\n\n         o       Payment is made in terms of cash in U.S. dollars or in terms\n                 of financial arrangements comparable thereto; and\n\n         o       The price represents the normal consideration for the property\n                 sold unaffected by special or creative financing or sales\n                 concessions granted by anyone associated with the sale.'\n\n         [The Appraisal of Real Estate, p. 21, 10th Ed., published by The\n         Appraisal Institute].\n\n\nThe subject property is a one-story rehabilitation center\/office building\ncontaining 10,000 rentable square feet of office space.  The building is a\nClass C facility, with a steel frame and overlapped wood siding exterior walls\nconstructed in 1993.  The building is currently 100 percent occupied.\n\nIn arriving at the opinion expressed in this report, it is assumed that the\ntitle to the property is free and clear and held under responsible ownership.\nThe information furnished us by others is believed to be reliable, but no\nresponsibility for its accuracy is assumed.  The value reported herein is based\nupon the integrity of the information provided.\n\nBased upon the procedures, assumptions and conditions outlined in this report,\nwe estimate the market value of the leased fee interest in the HealthSouth\nRehabilitation Center of Virginia Beach, as of September 29, 1993, to be:\n\n                                   $1,460,000\n                                   ==========\n\nWe have no responsibility to update our report for events and circumstances\noccurring after the date of this report.\n\nHealthSouth Corporation\nFebruary 7, 1994\nPage Three\n\n\n\nNeither the whole, nor any part of this appraisal or any reference thereto may\nbe included in any document, statement, appraisal or circular without Valuation\nCounselors Group, Inc.'s prior written approval of the form and context in\nwhich it appears.\n\nThis appraisal report consists of the following:\n\n         o       This letter outlining the services performed;\n\n         o       Certification of the appraisers;\n\n         o       A Statement of Facts and Limiting Conditions;\n\n         o       A Summary of Salient Facts and Conclusions;\n\n         o       A Narrative Section detailing the appraisal of the property;\n                 and\n\n         o       An Exhibit Section containing supplementary data.\n\nA copy of this report and the working papers from which it was prepared will be\nkept in our files for eight years.\n\n                                        Respectfully submitted,\n\n                                        VALUATION COUNSELORS GROUP, INC.\n\n                                        \/s\/ Patrick J. Simers\n                                        ---------------------\n                                        Patrick J. Simers\n                                        Managing Director\n\n\n                            APPRAISER CERTIFICATION\n\n\nWe, the undersigned, do hereby certify that to the best of our knowledge and\nbelief:\n\n         The statements of fact contained in this report are true and correct.\n\n         The reported analyses, opinions, and conclusions are limited only by\n         the reported assumptions and limiting conditions and are our personal,\n         unbiased professional analyses, opinions and conclusions.\n\n         We have no present or prospective interest in the property that is the\n         subject of this report, and have no personal interest or bias with\n         respect to the parties involved.\n\n         Our compensation is not contingent on an action or event resulting\n         from the analyses, opinions, or conclusions in or the use of this\n         report.\n\n         Our analyses, opinions, and conclusions were developed, and this\n         report has been prepared in conformity with the requirements of the\n         Code of Professional Ethics, the Appraisal Institute, American Society\n         of Appraisers, and the Uniform Standards of Professional Appraisal\n         Practice.\n\n         The use of this report is subject to the requirements of the Appraisal\n         Institute and American Society of Appraisers relating to review by its\n         duly authorized representatives.\n\n         Cheryl Worthy-Pickett, the primary appraiser of this property, has\n         made a personal inspection of the property that is the subject of this\n         report.\n\n\n\n         \/s\/ Patrick J. Simers             \/s\/ Cheryl Worthy-Pickett\n         ---------------------             -------------------------\n         Patrick J. Simers                 Cheryl Worthy-Pickett\n         Managing Director                 Senior Appraiser\n\n                   STATEMENT OF FACTS AND LIMITING CONDITIONS\n\n\nValuation Counselors Group, Inc. strives to clearly and accurately disclose the\nassumptions and limiting conditions that directly affect an appraisal analysis,\nopinion, or conclusion.  To assist the reader in interpreting this report, such\nassumptions are set forth as follows:\n\nAppraisals are performed, and written reports are prepared by, or under the\nsupervision of, members of the Appraisal Institute in accordance with the\nInstitute's Standard of Professional Practice and Code of Professional Ethics.\n\nAppraisal assignments are accepted with the understanding that there is no\nobligation to furnish services after completion of the original assignment. \nIf the need for subsequent services related to an appraisal assignment (e.g.,\ntestimony, updates, conferences, reprint or copy services) is contemplated,\nspecial arrangements acceptable to Valuation Counselors Group, Inc. must be\nmade in advance.  Valuation Counselors Group, Inc. reserves the right to make\nadjustments to the analysis, opinions and conclusions set forth in the report\nas we may deem necessary by consideration of additional or more reliable data\nthat may become available.\n\nNo opinion is rendered as to legal fee or property title, which are assumed to\nbe good and marketable.  Prevailing leases, liens and other encumbrances,\nincluding internal and external environmental conditions and structural\ndefects, if any, have been disregarded, unless otherwise specifically stated in\nthe report.  Sketches, maps, photographs, or other graphic aids included in\nappraisal reports are intended to assist the reader in ready identification and\nvisualization of the property and are not intended for technical purposes.\n\nIt is assumed that:  no opinion is intended in matters that require legal,\nengineering, or other professional advice which has been or will be obtained\nfrom professional sources; the appraisal report will not be used for guidance\nin legal or professional matters exclusive of the appraisal and valuation\ndiscipline; there are no concealed or dubious conditions of the subsoil or\nsubsurface waters including water table and floodplain, unless otherwise noted;\nthere are no regulations of any government entity to control or restrict the\nuse of the property unless specifically referred to in the report; and the\nproperty will not operate in violation of any applicable government\nregulations, codes, ordinances or statutes.\n\nIn the absence of competent technical advice to the contrary, it is assumed\nthat the property being appraised is not adversely affected by concealed or\nunapparent hazards, such as, but not limited to, asbestos, hazardous or\ncontaminated substances, toxic waste or radioactivity.  The appraiser is not\nqualified to detect such substances.\n\n                   STATEMENT OF FACTS AND LIMITING CONDITIONS\n\n\nNo engineering survey has been made by the appraiser.  Except as specifically\nstated, data relative to size and area were taken from sources considered\nreliable, and no encroachment of real property improvements is considered to\nexist.\n\n\nInformation furnished by others is presumed to be reliable, and where so\nspecified in the report, has been verified; however, no responsibility, whether\nlegal or otherwise, is assumed for its accuracy, and cannot be guaranteed as\nbeing certain.  All facts and data set forth in the report are true and\naccurate to the best of Valuation Counselors Group, Inc.'s knowledge and\nbelief.  No single item of information was completely relied upon to the\nexclusion of other information.\n\nIt should be specifically noted by any prospective mortgagee that the appraisal\nassumes that the property will be competently managed, leased, and maintained\nby financially sound owners over the expected period of ownership.  This\nappraisal engagement does not entail an evaluation of management's or owner's\neffectiveness, nor are we responsible for future marketing efforts and other\nmanagement or ownership actions upon which actual results will depend.\n\nNo effort has been made to determine the impact of possible energy shortages or\nthe effect on this project of future federal, state or local legislation,\nincluding any environmental or ecological matters or interpretations thereof.\n\nThe date of the appraisal to which the value estimate conclusions apply is set\nforth in the letter of transmittal and within the body of the report.  The\nvalue is based on the purchasing power of the United States dollar as of that\ndate.\n\nNeither the report nor any portions thereof, especially any conclusions as to\nvalue, the identity of the appraiser, or Valuation Counselors Group, Inc.,\nshall be disseminated to the public through public relations media, news media,\nsales media or any other public means of communications without the prior\nwritten consent and approval of Valuation Counselors Group, Inc.\n\nUnless otherwise noted, Valuation Counselors Group, Inc. assumes that there\nwill be no changes in tax regulations.\n\nNo significant change is assumed in the supply and demand patterns indicated in\nthe report.  The appraisal assumes market conditions observed as of the current\ndate of our market research stated in the letter of transmittal.  These market\nconditions are believed to be correct; however, the appraisers assume no\nliability should market conditions materially change because of unusual or\nunforeseen circumstances.\n\n                   STATEMENT OF FACTS AND LIMITING CONDITIONS\n\n\nThe report and the final estimate of value and the prospective financial\nanalyses included therein are intended solely for the information of the person\nor persons to whom they are addressed, solely for the purposes stated and\nshould not be relied upon for any other purpose.  Any allocation of total price\nbetween land and the improvements as shown is invalidated if used separately or\nin conjunction with any other report.\n\nA copy of this report and the working papers from which it was prepared will be\nkept in our files for eight years.\n\n                    SUMMARY OF SALIENT FACTS AND CONCLUSIONS\n\n\n\n\n                                                     \nGENERAL DATA\n\nEffective Date of Value:                                September 29, 1993\n\nLast Date of Inspection:                                September 28, 1993\n\nProperty Identification:                                HealthSouth Rehabilitation Center of Virginia Beach\n\nProperty Location:                                      1849 Old Donation Parkway, Virginia Beach, Virginia Beach County, Virginia\n\nInterest Appraised:                                     Leased Fee Estate\n\nGross Building Area:                                    12,500 square feet\n\nNet Rentable Area:                                      10,000 square feet\n\nSubject Land Size:                                      1.10 acres, or 48,000 square feet\n                                                        Ground lease with Holcar, Inc. for five years.\n\nImprovements Description:                               One-story, steel frame structure, Class C rehabilitation center\/office\n                                                        building that was constructed in 1993.\n\nOccupancy Percentage:                                   100%\n\n\nCONCLUSIONS\n\nCost Approach:                                          $1,177,000\n\nDirect Sales Comparison Approach:                       $1,500,000\n\nIncome Approach:                                        $1,460,000\n\n\nFinal Value Estimate:                                   $1,460,000\n                                                        ==========\n\nSale to REIT Price:                                     $1,460,000\n                                                        ==========\n\n\n\n\n\n\n\n                                      TABLE OF CONTENTS\n\n\n                                                                                            Page\n\n                                                                                           \nTransmittal Letter                                                                  \nAppraiser Certifications                                                            \nStatement of Facts and Limiting Conditions                                          \nSummary of Salient Facts and Conclusions                                            \n                                                                                    \nINTRODUCTION                                                                                   1\n     Property Identification                                                                   1\n     Purpose and Effective Date of the Appraisal                                               1\n     Function of the Appraisal                                                                 1\n     Scope of the Appraisal                                                                    1\n     Property Rights Appraised                                                                 2\n     Definition of Value                                                                       2\n     History of the Property                                                                   3\n     History and Nature of the Business Environment                                            3\n     Market Data - Metropolitan Virginia Beach\/Virginia Beach County                           5\n                                                                                    \nDESCRIPTIVE DATA                                                                               6\n     Regional Analysis                                                                         6\n     Neighborhood Analysis                                                                     9\n     Zoning                                                                                    9\n     Real Estate Taxes and Assessments                                                        10\n     Site Analysis                                                                            10\n     Building and Site Improvements                                                           11\n                                                                                    \nHIGHEST AND BEST USE                                                                          13\n                                                                                    \nVALUATION SECTION                                                                             17\n     Valuation Methodology                                                                    17\n     Cost Approach                                                                            18\n     Direct Sales Comparison Approach                                                         22\n     Income Approach                                                                          30\n                                                                                    \nCORRELATION AND CONCLUSION                                                                    33\n                                                                     \n\n                               TABLE OF CONTENTS\n\n\n\n\n              \nEXHIBIT SECTION\n\nExhibit A     -    Professional Qualifications\nExhibit B     -    Location Map\nExhibit C     -    Area Map\nExhibit D     -    Tax Plat Map\nExhibit E     -    Building Description\nExhibit F     -    Land Improvements Description\nExhibit G     -    Rent Comparables Summary\nExhibit H     -    Subject Photographs\nExhibit I     -    Ground Lease Agreement\n   \n\n                                  INTRODUCTION\n\n\nPROPERTY IDENTIFICATION\n\nThe subject of this appraisal is the HealthSouth Rehabilitation Center of\nVirginia Beach, located at 1849 Old Donation Parkway, Virginia Beach, Virginia\nBeach County, Virginia.  The building is a one-story, Class C, building\nconstructed in 1993.\n\n\nPURPOSE AND EFFECTIVE DATE OF THE APPRAISAL\n\nThe purpose of this appraisal is to estimate the market value of the real\nproperty identified above.  The effective date of valuation is September 29,\n1993, the date of our last inspection.\n\n\nFUNCTION OF THE APPRAISAL\n\nThe report is to be used for internal financial valuation purposes.  The owners\nare considering the sale of nine professional office buildings for the purpose\nof establishing a real estate investment trust (REIT).  The subject property\nwould be included in that sale.\n\n\nSCOPE OF THE APPRAISAL\n\nThis appraisal engagement includes all three of the standard valuation\napproaches and is in conformity with the requirements of the Code of\nProfessional Ethics and Standards of Professional Practice of the Appraisal\nInstitute and Society of Real Estate Appraisers.  The scope of our assignment\nincluded collecting, verifying and analyzing market and property data\napplicable to the three approaches and consistent with the property's highest\nand best use.  The results of the three approaches are then reconciled into a\nfinal value conclusion considering the relevancy and quality of data presented\nin each of the approaches.\n\n\n\n\n\n                                      -1-\n\nPROPERTY RIGHTS APPRAISED\n\nThe property right appraised herein is the Leased Fee Estate.\n\n'Leased Fee Estate' is:\n\n         'an ownership held by the landlord with the right of use and occupancy\n         conveyed by lease to others; the rights of lessor (the leased fee\n         owner) and leased fee are specified by contract terms contained within\n         the lease.'\n\n         [The Appraisal of Real Estate, p. 123, 10th Ed., published by The\n         Appraisal Institute].\n\n\nDEFINITION OF VALUE\n\nFor the purpose of this valuation, 'market value' is defined as follows:\n\n         'The most probable price which a property should bring in a\n         competitive and open market under all conditions requisite to a fair\n         sale, the buyer and seller each acting prudently and knowledgeably,\n         and assuming the price is not affected by undue stimulus.  Implicit in\n         this definition is the consummation of a sale as of a specified date\n         and the passing of title from seller to buyer under conditions\n         whereby:\n\n         o       Buyer and seller are typically motivated;\n\n         o       Both parties are well informed or well advised, and  acting in\n                 what they consider their own best interests;\n\n         o       A reasonable time is allowed for exposure in the open market;\n\n         o       Payment is made in terms of cash in U.S. dollars or in terms\n                 of financial arrangements comparable thereto; and\n\n         o       The price represents the normal consideration for the property\n                 sold unaffected by special or creative financing or sales\n                 concessions granted by anyone associated with the sale.'\n\n         [The Appraisal of Real Estate, p. 21, 10th Ed., published by The\n         Appraisal Institute].\n\n\n\n\n\n                                      -2-\n\nHISTORY OF THE PROPERTY\n\nThe subject professional building was constructed in 1993 by HealthSouth\nRehabilitation Corporation.  The building is constructed on approximately 1.10\nacres, which is leased from Holcar, Inc., a Virginia stock corporation.  This\nground lease is for an initial period of five years, with five-year renewal\nperiods.  The commencement date of the lease is November 1992.  The annual\nyearly payment is $17,496 which is net to the Lessor.  Adjustments to the lease\npayment will occur every five years.  A copy of this lease is included in the\nExhibit Section of this report.\n\nThe subject rehabilitation center building has reportedly not been marketed for\nsale and is not currently under an agreement of sale.  No other deed transfers\nwere noted in the last three years.  A title search is recommended for official\ndetermination.\n\n\nHISTORY AND NATURE OF THE BUSINESS ENVIRONMENT\n\nUnited States Economic Performance and Outlook\n\nThe value of the business enterprise value is influenced by potential returns\navailable from alternative investments.  These return expectations are affected\nby economic conditions as they impact the ability of a business enterprise to\ngenerate a return on its invested capital.  Perhaps the most important economic\nindicator affecting potential investor returns is the aggregate demand for\ngoods and services.  Aggregate demand is measured by a country's Gross Domestic\nProduct (GDP), which is the sum of all domestic expenditures for consumption,\ngovernment services, and net exports.\n\nAs of the valuation date, the United States economy is currently mired in a\nperiod of slow economic growth.  Gross Domestic Product (GDP) increased at a\n2.1 percent annual rate during 1992 after declining (1.2%) during 1991.  The\nGDP was 0.7 percent and 1.6 percent, respectively, for the first and second\nquarters of 1993, or an annualized rate of 1.1 percent.\n\nThe components of GDP indicate that the economic recovery is affecting many\nsectors of the economy.  Personal consumption expenditures, which account for\napproximately\n\n\n\n\n\n                                      -3-\n\ntwo-thirds of GDP, rose only 1.3 percent during the first half of 1993.\nNon-residential Fixed Investment advanced 2.2 percent and Residential Fixed\nInvestment grew 1.7 percent.  Federal Government Purchases declined (0.6%) over\nthe same period.  Federal Government Purchases account for 7.2 percent of the\ntotal GDP, and this decline is limited to the rate of overall GDP growth.\n\nThe value of the business enterprise value is also affected by the current and\nexpected levels of inflation and interest rates.  Inflation creates uncertainty\nin the mind of investors as they attempt to estimate future investment returns.\nThis uncertainty is incorporated into both the required return on equity and\ndebt capital.\n\nThe economic downturn has resulted in sharply lower inflation.  The Consumer\nPrice Index (CPI) ended 1992 with a 3.0 percent increase compared to a 4.2\npercent increase during 1991.  The CPI for 1993 is currently estimated at 3.3\npercent.  The GDP Deflator, a much broader price level index, ended 1992 with a\n2.6 percent annual increase compared to a 4.0 percent increase during 1991.\nThe GDP Deflator is currently estimated at 2.5 percent for 1993.\n\nThe Federal Reserve Bank has adopted a relatively easier monetary policy as a\nresult of the recession.  Interest rates, as represented by long-term Treasury\nbond yields, declined approximately ten basis points compared to rates existing\na year earlier.  Long-term corporate bond rates have also decreased and the\nFederal Reserve's discount rate reductions have prompted commercial banks to\nlower their prime lending rate to 6.0 percent.  Selected monetary statistics\nare presented in the following table.\n\n\n                                 INTEREST RATES AND SELECTED STATISTICS\n\n\n<font size=\"2\">\n                                                   JUNE 30, 1993                 JANUARY 2, 1992\n\n                                                                                \n  Federal Fund Rate                                     3.0%                          3.9%\n  90-Day Treasury Bill Rate                             3.1%                          3.9%\n  30-Year Treasury Bond                                 6.9%                          7.5%\n  Aaa Bond Yield                                        7.4%                          8.2%\n  Prime Rate                                            6.0%                          6.5%\n<\/font>\n\n\n                                      -4-\n\nEconomic Outlook\n\nAccording to Value Line's Quarterly Economic Review, dated June 30, 1993, the\neconomic recovery is now two years old, but shows much slower growth than\nnormal for a mature recovery.  Among factors cited by Value Line for\ncontributing to the slow growth are 'high debt, stagnant personal income, low\nconsumer confidence and a troubling unemployment rate'.  Value Line's Quarterly\nEconomic Review identified the following estimates for selected economic\nstatistics from 1993 to 1995.\n\n\n<font size=\"2\">\n                                                              1993           1994           1995                 \n                                                                                                                 \n                                                                                                     \n       Real GDP                                               2.7%           3.2%           3.3%                 \n       Personal Consumption Expenditures                      2.8%           2.7%           2.5%                 \n       Federal Government Purchases                          (5.2%)         (3.0%)         (4.0%)                \n       30-Year Treasury Bond Yields                           7.1%           7.2%           7.2%                 \n       Prime Rate                                             6.0%           6.3%           6.7%                 \n       Consumer Price Index                                   3.5%           3.5%           3.6%                 \n<\/font>          \n\n\n\nMARKET DATA - Metropolitan Virginia Beach\/Virginia Beach County\n\nBased upon a study prepared by Goodman Segar Hogan-Odu Real Estate Center, the\naverage occupancy is approximately 82.1 percent throughout the Hampton Roads\nMetropolitan Statistical Area (MSA).  This survey includes Class A, B and C\nspace, buildings exceeding 10,000 square feet in leasable area, are non-medical\nin primary use, and are not exclusively owner-occupied.\n\nIn the Hampton Roads area, there is approximately 15.2 million square feet of\noffice space available with the highest rents found in the downtown area.\nMedical office space is estimated to be approximately 15 percent to 20 percent\nhigher than the general professional office space in the market.  Based upon\nour discussions with local realtors in the marketplace, medical office space\n(in proximity to the hospital) has an estimated average occupancy of 85 percent\nto 90 percent.\n\n\n\n\n\n                                      -5-\n\n                                DESCRIPTIVE DATA\n\n\nREGIONAL ANALYSIS\n\nThe subject facility is located in Virginia Beach, Virginia, which is located\nin the eastern portion of the Hampton Roads MSA.  The Hampton Roads MSA\nencompasses the nine cities and three counties in the Norfolk-Virginia\nBeach-Newport News MSA.  The 1,707 square mile region is bounded by the\nAtlantic Ocean and the Chesapeake Bay and crisscrossed by dozens of rivers and\ncreeks.\n\nHampton Roads is made up of Gloucester County, James City County, York County,\nWilliamsburg, Newport News, Poguoson and Hampton on the Virginia Peninsula.\nJust across the Hampton Roads Bridge Tunnel are the south side cities of\nNorfolk, Portsmouth, Virginia Beach, Suffolk and Chesapeake.  Together they\nform the county's 28th most populous MSA, with nearly 1.4 million residents.\n\nHampton Roads is renowned for building Navy submarines and aircraft carriers,\ngrowing peanuts, and importing most of the nation's rubber through the Port of\nHampton Roads.  The region has Virginia's most populous city (Virginia Beach),\nas well as its largest city (Suffolk).  It also has the state's fastest-growing\ncounty (Gloucester).\n\n\nPopulation\n\nFrom 1980 to 1988, Hampton Roads' population grew by 227,789, or 19.63 percent.\nAlthough some transplants were military personnel, many civilians were lured to\nthe rapidly expanding region by the promise of jobs in shipbuilding,\nconstruction, or the service sector.\n\nLike northern Virginia, Hampton Roads benefited from a rapid influx of defense\ncontractors, consultants and service firms that responded to the government's\nmilitary build-up in the 1980s, but Hampton Roads, with several older\nland-locked cities, did not have the steady across-the-board growth that\nnorthern Virginia experienced.  While rural\n\n\n\n\n\n                                      -6-\n\nareas in Virginia Beach and James City County boomed with new neighborhoods,\nurban cities such as Norfolk and Portsmouth grew only slightly.\n\n\nTransportation\n\nInterstate 95 connects Chesapeake with northern Virginia.  Interstate 64, the\nprincipal east-west highway in the state, intersects Interstate 95 in the\nRichmond\/Petersburg MSA and heads east to the Norfolk area and west to\nCharlottesville.\n\n\nEmployment - Income\n\nIn 1988, there were 792,265 workers in Hampton Roads according to the Center\nfor Public Service at the University of Virginia.  One-third held some type of\ngovernment or military job -- a drop from the 37.8 percent share in 1980.\nServices is the next largest job category with 171,437 employees, followed by\nretail trade, construction and manufacturing.  Although its jobs are primarily\nseasonal, tourism remains an employment mainstay in Williamsburg and Virginia\nBeach.\n\nA marketing study by WVEC Television shows that 57 percent of Hampton Roads'\nadults work full-time, 11 percent work part-time, 4.0 percent are students, and\n14 percent are retired.  In Virginia, per capita income was $15,516 in 1987,\nthe most recent year in which data was available.  In Hampton Roads, the figure\nwas $14,462, which placed it 143rd among 310 MSAs across the country.  The only\nVirginia areas to top the national figure were northern Virginia, with a per\ncapita income of $21,539 and Richmond\/Petersburg with $17,446.\n\n\n\n\n\n                                      -7-\n\nHealthcare\n\nHealthcare facilities abound in the Hampton Roads area.  The following is a\nlist of local hospitals:\n\n\n<font size=\"2\">\n                                                                         Number\n         Facility                                                        of Units\n\n                                                                        \n         Chesapeake General                                                210\n         DePaul Medical Center                                             390\n         First Medical Group Langley                                        70\n         Humana Hospital Bayside                                           250\n         Louise Obici Memorial                                             243\n         Mary Immaculate Hospital                                          110\n         McDonald Army                                                      57\n         Newport News General                                              126\n         Norfolk Community                                                 189\n         Portsmouth General                                                311\n         Riverside Middle Peninsula                                         71\n         Riverside Regional Medical Center                                  57\n         Sentara Hampton General                                           343\n         Sentara Norfolk General                                           644\n         Sentara Leigh Hospital                                            250\n         Tidewater Beach General                                           263\n         Veteran's Administration                                          411\n         Williamsburg Community                                            139\n<\/font>\n\n\nConclusion\n\nDevelopment over the next decade is expected to be at a pace slightly above\nthat of the state average, but below that of Northern Virginia.  The next\nseveral years will likely be very sluggish until the economy recovers from its\ncurrent doldrums.  This community should continue to offer a stable environment\nfor operation and growth in the future.\n\n\n\n\n\n                                      -8-\n\nNEIGHBORHOOD ANALYSIS\n\nThe neighborhood area's boundaries are Old Donation Parkway to the north, First\nColonial Drive to the east, Lasken Road to the south, and Great Neck Road to\nthe west.\n\nThe immediate area is primarily medical or professional developments\nsurrounding the subject, with small sections of modest single-family homes and\nmulti-family developments to the north and east of the subject.  Located just\neast of the facility, along First Colonial Drive, is Tidewater General\nHospital.  Development along First Colonial Drive is mainly\noffice-institutional in nature.  Located further south, along First Colonial\nDrive, are more retail\/commercial developments.  West of the subject, along Old\nDonation Parkway toward Great Neck Road, is more of the residential\ndevelopment.\n\nThe area has convenient access to State Road 44, the Virginia Beach Toll Road\nproviding access to Interstate 64, a major east\/west thoroughfare in the state\nof Virginia.\n\nThe immediate surrounding area is supportive and complementary to the continued\ngrowth potential of the subject facility.  The development has also contributed\nto continued growth of the neighborhood.\n\n\nZONING\n\nThe subject property is zoned 'O-I', Office-Institutional, by the Virginia\nBeach County Zoning District.  The purpose of this district is to provide for\noffice buildings in attractive surroundings with other types of similar uses.\n\nThe subject improvement is considered a legal, conforming use.  Principle uses\nincluded in this zoning district are as follows:\n\n         Office buildings\n         General hospitals\n         Hotels or motels\n         Retail and service facilities\n         Schools\n         Banks\n\n\n\n\n\n                                      -9-\n\nREAL ESTATE TAXES AND ASSESSMENTS\n\nBased upon the assessment record available, the subject property has not been\nadded to the tax roll.  Its assessment is currently being determined.  The\nproperty will be taxed based upon 100 percent of the assessed value.\n\n\nSITE ANALYSIS\n\nThe subject site is located on the south side of Old Donation Parkway in the\nnorthern section of Virginia Beach, Virginia.  The street address is 1849 Old\nDonation Parkway, Virginia Beach, Virginia.  As indicated by the plat map\nincluded in the Exhibit Section of this report, the site is irregular in shape\nand contains a total of approximately 1.10 acres.  A survey of the land parcel\nwas not provided to us, but we have included (in the Exhibit Section of this\nreport) a copy of the tax plat showing the entire parcel owned by Holcar, Inc.\nAccess to the site is via Old Donation Parkway to the north via First Colonial\nDrive; both being four-lane roadways.\n\nThe subject land is approximately level with grade on Old Donation Parkway.\nUtilities to the site include water, sewer, electricity, cable, telephone and\ngas.\n\nThe subject property appears to have adequate drainage and soil load-bearing\ncapabilities to support most development alternatives.  A soil report, however,\nwas not made available to the appraiser and it is assumed, based on existing\nimprovements, that soil load-bearing capabilities are adequate.\n\nAccording to the County Planning Office, the subject property is not located in\na flood plain zone.\n\n\n\n\n\n                                      -10-\n\nBUILDING AND SITE IMPROVEMENTS\n\nBuilding\n\nThe medical office building is a Class C, one-story structure containing 10,000\nsquare feet constructed in 1993.  The building is of good construction and is\nin excellent condition.  The building is considered competitive in condition to\nother office buildings in the area.\n\nThe building's foundation consists of concrete walls and footings supporting\nexterior walls.  The floor is poured-in-place concrete.  Exterior walls consist\nof overlapped wood siding with brick cover in sections.  Windows and doors are\naluminum and glass with some limited solid-core metal doors.  The roof is\ngabled with asphalt shingles.\n\nThe building is partitioned by gypsum board on metal stud partitions.  Wall\nfinishes are typically paint and vinyl wall covering.  Wood and metal doors in\nmetal door jambs are typical throughout.  Ceiling finishes are primarily\ndrop-down acoustical panels.  Floor finishes are primarily carpeting and vinyl\ntile with portions of the building having ceramic and quarry tile.  Main areas\nin the building include therapy areas, offices and public areas.\n\nMechanical services consist of standard plumbing fixtures, and a central\nheating and air conditioning system supported by roof-top units.  Electrical\nwiring is in conduit with fluorescent and incandescent light fixtures typical\nthroughout.\n\n\nSite\n\nLand improvements consist of general landscaping, asphalt paving, concrete\npaving and curbing, exterior lighting, and general signage.\n\nMore detail descriptions of the buildings and site improvements are included in\nthe Exhibit Section of this report.\n\n\n\n\n\n                                      -11-\n\nCONDITION OF IMPROVEMENTS AND OBSOLESCENCE\n\nThe building is in excellent overall condition.  It appears to have been\nadequately maintained.  No significant deferred maintenance was indicated from\nthe appraiser's inspection of the property.  There does not appear to be any\nfunctional or economic obsolescence.\n\n\n\n\n\n                                      -12-\n\n                              HIGHEST AND BEST USE\n\n\nThe Appraisal Institute defines 'highest and best use' as follows:\n\n         'The reasonably probable and legal use of vacant land or an improved\n         property, which is physically possible, appropriately supported,\n         financially feasible, and that results in the highest value.'\n\n         [The Appraisal of Real Estate, p. 45, 10th Ed. published by The\n         Appraisal Institute]\n\n<font size=\"2\">The four categories of highest and best use analysis are:\n\n         1.      Physically Possible - Uses which are physically possible for\n                 the site and improvements being analyzed.\n\n         2.      Legally Permissible - Uses permitted by zoning and deed\n                 restrictions applicable to the site and improvements being\n                 analyzed.\n\n         3.      Financially Feasible - This step identifies if the physically\n                 possible and legally permitted alternatives produce a net\n                 income equal to or greater than the amount needed to satisfy\n                 operating expenses.\n\n         4.      Maximally Productive - This step clarifies which of the\n                 financially feasible alternatives provides the highest value\n                 consistent with the rate of return warranted by the market for\n                 a particular use.\n\n<\/font>There are two types of highest and best use:  THE HIGHEST AND BEST USE OF LAND\nAS VACANT and THE HIGHEST AND BEST USE OF A PROPERTY AS IMPROVED.  Both types\nare discussed as follows using the four categories of highest and best use.\n\n\n\n\n\n                                      -13-\n\nAs Vacant\n\nThe purpose of this analysis, given the site is vacant or can easily be made\nvacant, is to determine if something should be constructed on the site, and, if\nso, what should be constructed on the site.\n\nPHYSICALLY POSSIBLE\n\nThe size and shape of the subject site is adequate for the development of a\nnumber of alternative uses including small residential, commercial,\noffice\/institutional, industrial and special-purpose properties.  The site\npossesses good access and visibility.  The size of the parcel would preclude\nany large developments.\n\nLEGALLY PERMISSIBLE\n\nAs stated earlier in the Zoning Section of this report, the property is\ncurrently zoned 'O-I', Office-Institutional.  Permitted uses in this general\nzoning category vary widely.  Potential legal uses would include some retail\nand restaurants, office\/institutional, hotels, hospitals and other\nmedical-oriented uses.\n\nSurrounding uses include the hospital, other professional office uses, some\napartments and some old single-family residential properties.  These use\npatterns would likely preclude industrial, retail or future single-family\ndevelopment on the site.\n\nFINANCIALLY FEASIBLE\n\nHaving established that the site is physically suited for and legally\nrestricted to office\/institutional development, the next consideration is\neconomic feasibility.  Financially feasible uses for the site, if vacant, are\nthose uses that would generate an economic return to the land.  The location of\na large medical facility nearby would tend to suggest that related medical\nimprovements possibly would be in demand.  Tidewater General Hospital is\ncurrently expanding and has an average census of 98 percent.  The subject\nfacility is currently 100 percent occupied.\n\n\n\n\n\n                                      -14-\n\nMAXIMALLY PRODUCTIVE\n\nThe maximally productive use is a financially feasible use that would produce\nthe greatest land value.  Office\/institutional use is physically possible and\nlegally permissible, and new development is financially feasible.  Based on\nthis analysis, the current highest and best use of the land, if vacant, would\nbe for office\/institutional development.\n\n\nAs Improved\n\nThe subject site is currently improved with a 10,000 rentable square foot\noffice building and associated site improvements.  The purpose of this\ndiscussion is to determine whether to leave the improvements as they are, to\nmodify the improvements or to remove the improvements.\n\nPHYSICALLY POSSIBLE\n\nIt would obviously be physically possible to leave the improvements as they\nare, to demolish the existing improvements and replace them with new\nimprovements, or to make minor repairs to the deferred maintenance items on the\nproperty.  The improvements are considered functional.\n\nLEGALLY PERMISSIBLE\n\nThe improvements, as improved, are a legal conforming use according to the\nCounty of Virginia Beach zoning guidelines.  Under the zoning, the property\ncould remain as it is, be torn down or renovated.\n\nFINANCIALLY FEASIBLE\n\nThe highest and best use of the land, if vacant, was to develop with an office\/\ninstitutional use based on the adjacent hospital's growth needs.  Of the\nphysically possible and legally permissible changes that could be made to the\nexisting facility, demolishing the building would significantly reduce the\ncurrent asset value, and would\n\n\n\n\n\n                                      -15-\n\nnot be financially feasible.  It would, however, be financially feasible to\ncorrect any deferred maintenance.\n\nMAXIMALLY PRODUCTIVE\n\nThe maximally productive use for the existing property is the financially\nfeasible use that produces the greatest property value.  The only financially\nfeasible use is to correct any deferred maintenance that currently exist.  This\nwill enable to the property to remain competitive in the leasing market.  The\nhighest and best use, as improved, is to not make any major changes to the\ncurrent asset use.  The improvements represent the current highest and best use\nof the property.\n\n\n\n\n\n                                      -16-\n\n                               VALUATION SECTION\n\n\nVALUATION METHODOLOGY\n\nThere are three principal methods to estimate the market value of the assets of\nthe subject property.  These are summarized as follows:\n\n         COST APPROACH:  This method is based on the principle of substitution,\n         whereby no investor would prudently pay more for a property than it\n         costs to buy land and build a comparable new building.  The market\n         value is estimated by calculating the replacement costs of a new\n         building and subtracting all forms of depreciation and obsolescence\n         present in the existing facility.  This provides a depreciated value\n         of the subject improvements if replaced new.  The estimate of the\n         current value of the subject land is then added to provide a market\n         value of the property.\n\n         DIRECT SALES COMPARISON APPROACH:  The principle of substitution also\n         says that market value can be estimated as the cost of acquiring an\n         equally desirable substitute property, assuming no costly delay in\n         making the substitution.  This method analyses the sales of other\n         comparable improved properties.  Since two properties are rarely\n         identical, the necessary adjustments for differences in quality,\n         location, size, services and market appeal are a function of appraisal\n         experience and judgment.\n\n         INCOME APPROACH:  This method is based on the principle of\n         anticipation, which recognizes that underlying value of the subject\n         property can be estimated by its cash flow or stream of earnings.\n         This approach simulates the future earnings for the property, and\n         converts those earnings into a present market value estimate.\n\nConsideration has been given to each of the three methods to arrive at a final\nopinion of value.  The application of each approach to value is further\ndiscussed in the appropriate sections which follow.\n\n\n\n\n\n                                      -17-\n\n                                 COST APPROACH\n\n\nIn the Cost Approach, the subject property is valued based upon the market\nvalue of the land, as if vacant, to which is added the depreciated replacement\ncost of the improvements.  The replacement cost new of the improvements is\nadjusted for accrued depreciation resulting from physical deterioration,\nfunctional obsolescence, and external (or economic) obsolescence.\n\nThe cost analysis involves three basic steps:\n\n        o    Land value estimate.\n\n        o    Estimated replacement cost of the improvements.\n\n        o    Estimation of the accrued depreciation from all causes.\n\nThe sum of the market value of the land and the depreciated replacement cost of\nthe improvements and equipment is the estimated market value via the Cost\nApproach.\n\n\nLand Valuation\n\nBecause the subject land is under a ground lease, we have not considered it in\nour valuation.\n\n\nBuilding and Site Improvements\n\nThe building and site improvements have been valued on the basis of replacement\ncost less accumulated depreciation.  The cost new was estimated via the\nsegregated cost method, with cost factors obtained from Marshall Valuation\nServices, Inc., a national cost manual.  The unit cost includes both direct and\nindirect costs, with adjustments made for special building features,\nconstruction quality, time and location.  The composite unit cost has then been\napplied to the gross square footage of the building to derive the replacement\ncost new.  The total project replacement costs for the subject building are\nestimated to be $1,132,380.\n\n\n\n\n\n                                      -18-\n\n\nThe total accumulated depreciation of a structure represents the loss in value\ndue to physical deterioration, functional obsolescence, or external (or\neconomic) obsolescence.  Economic life of a structure or improvement is the\nperiod over which they contribute to the value of the property.  These terms\nare defined as follows:\n\n        Physical Deterioration:  The loss in value due to deterioration or\n        ordinary wear and tear, i.e., natural forces taking their toll of the\n        improvements.  This begins at the time the building is completed and\n        continues throughout its physical life.\n\n        Functional Obsolescence:  The loss in value due to poor plan,\n        functional inadequacy, or super-adequacy due to size, style, design, or\n        other items.  This form of depreciation occurs in both curable or\n        incurable forms.\n\n        External (or Economic) Obsolescence:  The loss in value caused by\n        forces outside the property itself.  It can take many forms such as\n        excessive noise levels, traffic congestion, abnormally high crime\n        rates, or any other factors which affect a property's ability to\n        produce an economic income, thereby causing a decline in desirability.\n        Other forms of economic obsolescence may include governmental\n        restrictions, excessive taxes, or economic trends.\n\n        Economic Life:  The economic life of a good quality medical office\n        buildings is typically 40 to 50 years.  For the subject Class C\n        building, we have assumed an economic life of 45 years.\n\n        Remaining Economic Life:  Remaining economic life can be defined as the\n        number of years remaining in the economic life of the structure or\n        structural components as of the date of the appraisal.\n\nMarshall Valuation Services, Inc., and the actual experience of other buildings\nin the market, were use to estimate the overall economic life of the\nimprovements.  The assignment of economic lives assumed that, except for the\nbuilding shell and foundation, building components would be replaced\nperiodically over the life of the building.\n\n\n\n\n\n                                      -19-\n\nPhysical Depreciation\n\nThe amount of physical depreciation and obsolescence in the subject building is\njudged normal for a building of this age since it was constructed in 1993.\nObservation of the subject property indicated that the structure and related\ncomponent parts have been adequately constructed and currently are being\nmaintained through a continuous maintenance service program.\n\n\nBuilding\n\nThe subject property was constructed in 1993 and is in excellent condition.\nBecause of the recent construction, we have not considered depreciation as\napplicable at this time.\n\n\nSite Improvements\n\nBecause of the recent construction of the property, a depreciation factor was\nnot considered applicable at this time.\n\n\nCost Approach Conclusion\n\nThe schedule on the following page is a summary of the estimated replacement\ncost by category for the subject building plus estimates of all forms of\ndepreciation.\n\nBased on the investigation as previously defined, the market value of the\nsubject property by the Cost Approach, as of September 29, 1993, is:\n\n                                   $1,177,000\n                                   ==========\n\n\n\n\n                                      -20-\n\n                        SUMMARY OF REPLACEMENT COST NEW\n                      HEALTHSOUTH REHABILITATION CENTER\n                           VIRGINIA BEACH, VIRGINIA\n\n<font size=\"2\">\n                                                                                                      REPLACEMENT\n                                                                                                          COST\n                                                                                                \nSite Preparation                                                                                           3,821\nFoundation                                                                                                29,717\nFrame                                                                                                     64,642\n                                                                                                         124,223\nFloors                                                                                                    44,617\nRoof                                                                                                      34,994\nRoof Cover                                                                                                36,185\nPartitioning and Built-in                                                                                258,125\nCeilings                                                                                                  35,724\nFloor Coverings                                                                                           64,185\nPlumbing                                                                                                  60,241\nHVAC                                                                                                      63,043\nElectrical                                                                                                68,997\nOther Features                                                                                            66,002\n\nTotal Replacement Cost                                                                                $  954,950\n\nArchitect's Fees Plans and Specs                                                4.4%                      42,018\nArchitect's Fees Supervision                                                    3.4%                      32,468\nEntrepreneural Overhead, Profit, and Other\n     Miscellaneous Fees                                                        10.0%                     102,944\nTotal of Other Costs                                                                                     177,430\n\nTotal Project Replacement Cost                                                                        $1,132,380\n\nAccrued Depreciation:\nBuilding Costs                                                       0% Straight Line 0\/45ths                  0\n                                                                                                                \n\nDepreciated Value Building                                                                            $1,132,380\n\nSite Improvements\n     Replacement Cost                                                                                 $   45,000\n     Depreciated Cost                                                0% Straight Line 0\/20ths                  0\n                                                                                                                \n\nDepreciated Value                                                                                     $   45,000\n\nPlus Land Value                                                      GROUND LEASE                     $        0    \n                                                                      \nDEPRECIATED COST APPROACH VALUE                                                                       $1,177,380\n<\/font>\n\n\n\n\n\n                                     -21-\n\n                        DIRECT SALES COMPARISON APPROACH\n\n\nThe Direct Sales Comparison Approach is based upon the principle of\nsubstitution; that is, when a property is replaceable in the market, its value\ntends to be set at the cost of acquiring an equally desirable substitute\nproperty, assuming there is no costly delay in making the substitution.  Since\ntwo properties are rarely identical, the necessary adjustments for differences\nin quality, location, size, services and market appeal are a function of\nappraisal experience and judgment.\n\nThe Direct Sales Comparison Approach gives consideration to actual sales of\nother similar properties with adjustments as previously stated.  The sales\nprices are analyzed in common denominators and applied to the subject property\nin respective categories to be indicative of market value.\n\nThe unit of comparison used in this analysis is the price per square foot,\nwhich is the gross purchase price of the building divided by the net leasable\narea in the building.  The following sales are considered to be representative\nof market activity and conditions as of the valuation date.  Unless otherwise\nindicated, the sales involved arms-length transactions that conveyed a fee\nsimple interest, and only real property was included in the transactions.\nAlso, all purchase prices quoted in this report represent all cash sales unless\nseller financing is noted and the sale prices adjusted for cash equivalency.\n\nIn our analysis, we obtained details on four professional office building sales\nwhich have occurred over the past two years.  The terms of the sale and\nsignificant data was verified to the extent possible by county deed records and\nwith parties to the transaction.  Information on these sales is shown on the\nfollowing pages:\n\n\n\n\n\n                                      -22-\n\nIMPROVED SALE NUMBER 1\n\n\n\n<font size=\"2\">                                                 \nGENERAL SALE DATA\n\nLocation:                                           1016 Independence Boulevard, Virginia Beach, Virginia\nDate of Sale:                                       May 12, 1992\nDeed Book\/Page:                                     3086\/1410\nGrantor:                                            Diagnostic Center Associates\nGrantee:                                            Diagnostic Center of Virginia Beach\nSale Price:                                         $1,586,500\nTerms of Sale:                                      Assumption of original note, $568,494 cash\n\nPROPERTY DATA\n\nLand Size:                                          .93 acres\nBuilding Size:                                      15,000 square feet\nYear Built:                                         1986\n\nSTABILIZED OPERATING DATA\n                                                       Dollars                Per SF \n                                                      ---------              --------\nEstimated Gross Income:                                $225,000                $15.00\nVacancy Allowance @ 5%:                                ($11,250)               ($0.75)\n                                                      ---------               -------\nEffective Gross Income:                                $213,750                $14.25\nEstimated Expenses @ $3.50\/SF                          ($52,500)                $3.50\n                                                      ---------                ------\nNet Operating Income:                                  $161,250                $10.75\n\nMARKET VALUE INDICATORS\n\nSale Price Per Square Foot:                             $105.77\nStabilized Overall Rate:                                  10.16%\nEGIM:                                                      7.42\n\nCOMMENTS\n\nStructure is a one-story, Class C, medical office designed for a single-tenant user.  The building is located adjacent to a\nhospital.\n<\/font>\n\n\n\n\n\n                                      -23-\n\nIMPROVED SALE NUMBER 2\n\n\n                                                 \nGENERAL SALE DATA\n\nLocation:                                           West side of 20th Street South at the address 908 20th Street South in\n                                                    Birmingham, Alabama\nDate of Sale:                                       December 20, 1991\nDeed Book\/Page:                                     4166\/170\nGrantor:                                            The Byrd Company, Inc.\nGrantee:                                            Board of Trustees of the University of Alabama\nSale Price:                                         $3,750,000\nTerms of Sale:                                      All Cash\n\nPROPERTY DATA\n\nLand Size:                                          82,460 square feet\nBuilding Size:                                      52,440 square feet - gross\n                                                    44,574 square feet - leasable\nYear Built:                                         1964\n\nSTABILIZED OPERATING DATA\n                                                       Dollars                Per SF \n                                                      ---------              --------\nEstimated Gross Income:                                $624,036                $14.00\nVacancy Allowance @ 10%:                                $62,404                 $1.40\n                                                                               ------\nEffective Gross Income:                                $561,632                $12.60\nEstimated Expenses @ $6.00\/SF                          $222,870                 $5.00\n                                                       --------                ------\nNet Operating Income:                                  $338,762                 $7.60\n\nMARKET VALUE INDICATORS\n\nSale Price Per Square Foot:                         $84.13\nStabilized Overall Rate:                            9.0%\nEGIM:                                               6.68\n\nCOMMENTS\n\nThis three-story building was purchased by the UAB Medical Center.  A Medical Genetics Center now occupies the facility.  The\ncurrent land value near the UAB campus is estimated at 40% to 45% of the total purchase price.\n\n\n\n\n\n\n                                      -24-\n\nIMPROVED SALE NUMBER 3\n\n\n<font size=\"2\">                                                  \nGENERAL SALE DATA                                       \n                                                    \nLocation:                                           1260 Upper Hembree Road in Roswell, Fulton County, Georgia\nDate of Sale:                                       November 20, 1991\nDeed Book\/Page:                                     14752\/1-8\nGrantor:                                            Upper Hembree Associates II, Ltd.\nGrantee:                                            Medical Plaza, Inc.\nSale Price:                                         $4,525,000\nTerms of Sale:                                      All Cash\n\nPROPERTY DATA\n\nLand Size:                                          1.65 acres (approximate)\nBuilding Size:                                      32,500 square feet\nYear Built:                                         1991\nOccupancy at Sale:                                  100%\n\nSTABILIZED OPERATING DATA\n                                                       Dollars                Per SF \n                                                      ---------              --------\nEstimated Gross Income*:                               $671,125                $20.65\nVacancy Allowance @ 5%:                                 $33,556                 $1.03\n                                                       --------                ------\nEffective Gross Income:                                $637,569                $19.62\nEstimated Expenses @ $6.00\/SF                          $178,750                 $5.50\n                                                       --------                ------\nNet Operating Income:                                  $458,819                $14.12\n\nMARKET VALUE INDICATORS\n\nSale Price Per Square Foot:                         $139.23\nStabilized Overall Rate:                            10.1%\nEGIM:                                               7.10\n<\/font>\nCOMMENTS\n\nThis property included three buildings containing 12,400 SF, 12,000 SF and 8,100 SF.  The first two buildings were leased to North\nFulton Hospital for seven years.  The first 12,400 SF was leased for $16.00\/SF net, and the other 12,000 SF was leased for $16.25\/SF\nnet.  The tenants were responsible for all costs but structural maintenance and management.\n\n* The rents were adjusted upward $4.50\/SF for gross comparison.\n\n\n\n\n\n\n                                      -25-\n\nIMPROVED SALE NUMBER 4\n\n\n<font size=\"2\">                                                 \nGENERAL SALE DATA\n\nLocation:                                           816 Independence Boulevard, Virginia Beach, Virginia\nDate of Sale:                                       August 1991\nDeed Book\/Page:                                     3006\/1566\nGrantor:                                            Humana of Virginia, Inc.\nGrantee:                                            MPB, Inc.\nSale Price:                                         $5,011,700\nTerms of Sale:                                      Cash to Seller\n\nPROPERTY DATA\n\nLand Size:                                          3.507 acres (approximate)\nBuilding Size:                                      35,000 square feet\nYear Built:                                         1977\nOccupancy at Sale:                                  75.0%\n\nSTABILIZED OPERATING DATA\n                                                       Dollars                Per SF \n                                                      ---------              --------\nEstimated Gross Income*:                               $630,000                $18.00\nVacancy Allowance @ 5%:                                 $31,500               ($0.90)\n                                                       --------               -------\nEffective Gross Income:                                $598,500                $17.10\nEstimated Expenses @ $5.00\/SF                          $175,000               ($5.00)\n                                                       --------               -------\nNet Operating Income:                                  $423,500                $12.10\n\nMARKET VALUE INDICATORS\n\nSale Price Per Square Foot:                             $143.19\nStabilized Overall Rate:                                   8.45%\nEGIM:                                                      8.37\n\nCOMMENTS\n\nBuilt as a four-story Class A building located next to hospital.  The construction is steel frame with brick veneer.  It is located\nnorth side of Independence Avenue.\n<\/font>\n\n\n\n\n\n                                      -26-\n\nThese four sales are summarized as follows:\n\n<font size=\"2\">   \n                                           SUMMARY OF IMPROVED SALES\n\n\n      SALE                                                 RENTABLE                          PRICE PER                        \n      NO.     ADDRESS                                    (SQUARE FEET)    SALE PRICE        SQUARE FOOT                       \n                                                                                                          \n       1      1016 Independence Blvd                        15,000        $1,586,500         $105.77                     \n              Virginia Beach, Virginia                                                                                   \n       2      20th Street South                             44,574        $3,750,000          $84.13                     \n              Birmingham, Alabama                                                                                        \n       3      1260 Upper Hembree                            32,500        $4,525,000         $139.23                     \n              Roswell, Georgia                                                                                           \n       4      816 Independence Blvd                         35,000        $5,011,700         $143.19                     \n              Virginia Beach, Virginia                                                                                   \n<\/font>          \n\n\nThe unadjusted prices of these comparables range from $84.13 per square foot to\n$143.33 per square foot.  Each of the comparables will be discussed and\nadjusted for comparisons with the subject property.  An Improved Sales\nAdjustment Matrix is shown at the end of this section.\n\nSALE NUMBER 1 is a Class C professional office building that is located\nadjacent to a hospital. The facility was acquired by a physician's group to\nprovide outpatient service in conjunction with the hospital.  This transaction\nwas reportedly at a market value price.  However, a downward adjustment is\nstill indicated because the building never was marketed as a vacant building\ndue to this relationship.  The building has a substantial setback from\nIndependence Boulevard and has poor visibility.  An upward adjustment is\nindicated due to this inferior location compared to the subject.  An upward\nadjustment to this comparable is indicated because of the subject's superior\nconstruction quality.  The adjusted price per square foot of this comparable is\n$118.99.\n\nSALE NUMBER 2 is the sale of a building purchased by the University of Alabama\nto use as a Medical Genetics Center.  An upward adjustment was indicated\nbecause of the time of sale.  Upward adjustments were indicated because of the\ninferior location as\n\n\n\n\n\n                                      -27-\n\ncompared to the subject.  An additional upward adjustment was made for and\nconstruction quality.  A downward adjustment was made for size.  The adjusted\nprice for this comparable is $119.84 per square foot.\n\nSALE NUMBER 3 was the sale of a three-building professional office facility\nthat is located approximately one-quarter-mile from the North Fulton Medical\nCenter in Roswell, Georgia.  An upward adjustment was made for time of sale.\nDownward adjustments to the price per square foot of this comparable are\nindicated for size.  Upward adjustments are indicated due to the subject's\nsuperior location and construction quality.  The adjusted price per square foot\nof this comparable is $144.73.\n\nSALE NUMBER 4 was the August 1992 sale of an office building in Virginia Beach,\nVirginia.  Upward adjustment was indicated for the time of sale.  A downward\nadjustment to the price per foot of this comparable is indicated because of the\ncomparable's size.  Downward adjustments are indicated for location, quality\nand size.  An upward adjustment is warranted for location and quality.  A\ndownward adjustment is indicated for size.  The adjusted price for this\ncomparable is $172.90 per square foot.\n\nThe adjusted prices per square foot range from $106.00 to $172.90.  An adjusted\nprice of $150.00 per square foot is representative of the subject property.\nBased on this analysis, the market value of the subject hospital by the Direct\nSales Comparison Approach, as of September 29, 1993, the effective date of this\nreport, is calculated as follows:\n\n                          10,000 SF  x  $150.00\/SF   =\n\n                                   $1,500,000\n                                   ==========\n\n\n\n\n                                      -28-\n\n \n<font size=\"2\">\n                                    I M P R O V E D   S A L E S   A D J U S T M E N T   G R I D\n                                                 HealthSouth Rehabilitation Center\n                                                     Virginia Beach, Virginia\n\n        \n                                                                                                             \n                                   Subject            Bldg Comp        Bldg Comp        Bldg Comp        Bldg Comp\n                                                                                           \nElement                                                   #1               #2               #3               #4\n                                               \nSale Price\/SF                                           $105.77           $84.13          $139.23          $143.19\n                                               \nProperty Rights                    Fee Simple           Same              Same            Same             Same\n     Adjustment                                       ------------------------------------------------------------\n                                               \nAdjusted Price\/SF                                       $105.77           $84.13          $139.23          $143.19\n                                               \nFinancing                          Cash                 Cash              Cash            Cash             Cash\n     Adjustment                                       ------------------------------------------------------------\n                                                                                              \nAdjusted Price\/SF                                       $105.77           $84.13          $139.23          $143.19\n                                               \nConditions of Sale                                                        None            None             None\n     Adjustment                                            -10%                              -10%\n                                                      ------------------------------------------------------------\nAdjusted Price\/SF                                        $95.19           $84.13          $125.31          $143.19\n                                               \nMarket\/Time                                    \n     Adjustment                                              0%               5%               5%               5%\n                                                      ------------------------------------------------------------                 \n                                               \nAdjusted Price\/SF                                        $95.19           $88.34          $131.57          $150.35\n                                               \nOther Adjustments:                             \n     Location Adjustment                                    15%              15%              10%              10%\n     Topography Adjustment                                   0%               0%               0%               0%\n     Size Adjustment                                         0%              -5%              -5%              -5%\n     Zoning Adjustment                                       0%               0%               0%               0%\n     Construction Quality                                   10%              10%               5%              10%\n       Net Other Adjustments                                25%              20%              10%              15%\n                                               \nFINAL ADJUSTED PRICE PER SF                             $118.99          $106.00          $144.73          $172.90\n                                                      ============================================================\n<\/font>                                       \n\n\n\n\n\n                                     -29-\n\n                                INCOME APPROACH\n\n\nThe Income Approach is based on the principle of anticipation, and has as its\npremise that value is represented by the present worth of expected future\nbenefits.  The price that an investor will pay for an income property usually\ndepends on the anticipated income stream.  The Income Approach represents an\nattempt to simulate the future cash flows for the property, and to quantify the\nfuture benefits in present dollars.\n\nThe subject property is one of nine professional office buildings that\nHealthSouth is selling for the purpose of establishing a real estate investment\ntrust (REIT).  HealthSouth Corporation, the seller, will provide a net rental\nguarantee, in the form of a master lease.  The REIT, as the new property owner,\nwill receive the net rental master lease rate per square foot of rentable\noffice area, regardless of the rental rates charged or received from the actual\nphysicians\/tenants.\n\nThis master lease is a credit enhancement vehicle that will enable the REIT\nissuer to sell the REIT shares.  It will also allow HealthSouth leasing\nflexibility for the office space.  HealthSouth can lease office space to\nvarious doctors at different rates and terms, or they can use the office space\nfor hospital purposes.  This master lease also guarantees payment regardless of\noccupancy levels.\n\nThe appraisers received a draft of the form of master lease agreement, but the\nactual master lease agreements for each property are not yet available.  For\nthe purpose of our Income Approach, the gross income will be the master lease\nrate for each property times the rentable building area.  We reserve the right\nto modify the Income Approach valuation if the actual master lease for each\nproperty differs significantly from the draft lease presented to us.\n\nThe gross income for the subject property is calculated as follows:\n\n                      10,000 SF  x  $18.00\/SF  =  $180,000\n\nBecause of the guarantee of payment related to the master lease regardless of\noccupancy levels, we have not utilized a vacancy allowance for the property.\n\n\n\n\n\n                                      -30-\n\nSince the master lease provides for an income level to the REIT net of all\noperating expenses, the only out-of-pocket expenses to the REIT will be\naccounting, legal and internal administration or management expenses.  These\nmanagement expenses are estimated at 5.0 percent of effective gross income, or\n$9,000 based on the management experience of other properties.  The net\noperating income for the property is $180,000 less $9,000, or $171,000.\n\n\nGround Lease\n\nThe ground lease payment will be paid by the current owner.  Currently, that\npayment is $17,496 annually.  Our analysis gives consideration that this\npayment will be made by the REIT.  This would indicate a net operating income\nfor the property of $153,504.\n\nThe estimated direct capitalization rates, or overall rates (OARs), for the\nfour improved sale comparables presented in the Direct Sales Comparison Section\nof this report are summarized as follows:\n\n\n<font size=\"2\">\n        Sale No.     Property Location                                Sale Date                 OAR (%)\n                                                                                    \n        1        Independence Boulevard                           May 1992                   7.42%\n                 Virginia Beach, Virginia\n        2        20th Street South                              December 1992                 9.0%\n                 Birmingham, Alabama\n        3        Upper Hembree                                  November 1991                10.1%\n                 Roswell, Georgia\n        4        Independence Boulevard                          August 1991                 8.45%\n                 Virginia Beach, Virginia\n<\/font>\n\n\nThe direct capitalization, or overall rates, for these comparables ranged from\n7.4 percent to 10.1 percent.\n\nA capitalization rate slightly above the upper end of this range, at 10.5\npercent, is considered appropriate because of the current physical condition of\nthe building as compared to the comparable and the guaranteed rents involved.\n\n\n\n\n\n                                      -31-\n\nTherefore, it is our opinion that the market value of the subject property by\nthe Income Approach is calculated and rounded as follows:\n\n                  Net Operating Income\/OAR  =  Estimated Value\n\n                          $153,504\/10.5  =  $1,461,942\n\n                            Rounded to:  $1,460,000\n                                         ==========\n\n\n\n\n                                      -32-\n\n                           CORRELATION AND CONCLUSION\n\n\nWe have considered three approaches to value in order to estimate the value of\nthe HealthSouth Rehabilitation Center of Virginia Beach.  The three approaches\nare summarized as follows:\n\n\n                                                                                \n        Cost Approach   . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $1,177,000\n        Direct Sales Comparison Approach  . . . . . . . . . . . . . . . . . . . .  $1,500,000\n        Income Approach   . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $1,460,000\n\n\nThe Cost Approach involved a detailed analysis of the individual components of\nthe property.  These costs were estimated using sources which were considered\nto be reliable.  For this reason, this approach is only considered a fair\nindicator of value for the subject property.\n\nThe Direct Sales Comparison Approach is based on the price that investors and\nowner-occupants have recently paid for comparable professional office\nbuildings.  The quality and quality of data available in this approach was\nconsidered good, but two of the four sales were not properties located in the\nVirginia market.  The appraisers only consider this approach to be a fair\nindicator of value for the subject property.\n\nThe Income Approach normally provides the most reliable value estimate for\nprofessional office buildings such as the subject.  Although many buyer of\nprofessional office buildings are owner\/occupants, these buyers are generally\naware of a property's cash flow potential and its value from an investor's\nperspective.  For this reason, the Income Approach is considered the best\nindicator of value for the subject property.\n\nBased on this analysis, it is our opinion that the market value of the\nHealthSouth Rehabilitation Center of Virginia Beach, as of September 29, 1993,\nand based on the assumptions and limiting conditions in this report, is:\n\n                                   $1,460,000\n\n\n\n\n\n                                      -33-\n<\/pre>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[7751],"corporate_contracts_industries":[9438],"corporate_contracts_types":[9579,9611],"class_list":["post-41876","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-healthsouth-corp","corporate_contracts_industries-health__misc","corporate_contracts_types-land","corporate_contracts_types-land__va"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/41876","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=41876"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=41876"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=41876"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=41876"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}