{"id":41883,"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-north-shore-surgical-center-evanston-il.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"appraisal-of-north-shore-surgical-center-evanston-il","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/land\/appraisal-of-north-shore-surgical-center-evanston-il.html","title":{"rendered":"Appraisal of North Shore Surgical Center (Evanston, IL) &#8211; Crescent Capital Trust Inc."},"content":{"rendered":"<pre>\n                                AN APPRAISAL OF\n                                  NORTH SHORE\n                                SURGICAL CENTER\n                               EVANSTON, ILLINOIS\n\n\n\n\n\n\n                                 April 28, 1994\n\n\nCrescent Capital Trust, Incorporated\nOne Perimeter Park South, Suite 335-S\nBirmingham, Alabama  35243\n\nAttention:       Mr. John W. McRoberts\n                 President &amp; CFO\n\nGentlemen:\n\nIn accordance with your request, we are pleased to submit this appraisal report\ncovering the market value of the surgical center identified as follows:\n\n                          NORTH SHORE SURGICAL CENTER\n                               815 HOWARD STREET\n                               EVANSTON, ILLINOIS\n\nThe purpose of this valuation is to estimate the market value of the subject\nproperty's leased fee estate as of March 15, 1994, subject to a master lease\nfrom Surgical Health Corporation.  The report is to be used for asset valuation\npurposes in conjunction with financing.  Crescent Capital Trust, Incorporated\nis establishing a real estate investment trust (REIT) and the valuation assumes\nthat the prospective REIT is the owner of the property, with Surgical Health\nCorporation guaranteeing annual net rental income of $105,860 on a fifteen-year\nlease.\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\nCrescent Capital Trust, Incorporated\nApril 28, 1994\nPage Two\n\n\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\nThe subject property is a one-story outpatient surgery center containing 5,100\ngross square feet constructed in the 1960s, but completely remodeled in 1988,\nlocated on an 0.23-acre site.  The net leasable square feet is equal to its\ngross amount of 5,100 square feet.\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 North Shore\nSurgical Center, as of March 15, 1994, to be:\n\n                                    $910,000\n                                    ========\n\nCrescent Capital Trust, Incorporated\nApril 28, 1994\nPage Three\n\n\n\nThis value estimate includes real property only, and excludes the value of any\nfurniture or equipment located within the property.\n\nWe have no responsibility to update our report for events and circumstances\noccurring after the date of this report.  Neither the whole, nor any part of\nthis appraisal or any reference thereto may be included in any document,\nstatement, appraisal or circular without Valuation Counselors Group, Inc.'s\nprior written approval of the form and context in which it appears.\n\nThis appraisal report consists of the following:\n\n         o       This letter outlining the services performed;\n\n         o       Certifications 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\n                                        \/s\/ Patrick J. Simers                  \n                                        ---------------------                  \n                                        Patrick J. Simers                      \n                                        Managing Director                      \n                                                        \nPJS:mhb\n\n                            APPRAISER CERTIFICATION\n\n\nI, 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         I 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         My compensation is not contingent on an action or event resulting from\n         the analyses, opinions, or conclusions in or the use of this report.\n\n         My analyses, opinions, and conclusions were developed, and this report\n         has been prepared in conformity with the requirements of the Code of\n         Professional Ethics, the Appraisal Institute, American Society of\n         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         A representative of Valuation Counselors Group made a personal\n         inspec-tion of the property that is the subject of this report.\n         Patrick J. Simers has not made a personal inspection of the property.\n\n\n         \/s\/ Patrick J. Simers\n         ---------------------\n         Patrick J. Simers\n         Managing Director\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.  If\nthe 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\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\nThis report assumes that the property is in compliance with the various\nrequirements of the Americans with Disabilities Act (ADA) or that the cost of\ncompliance is minimal.  As appraisers, we are not qualified to determine\ncompliance with ADA, and this report does not consider any effects of the ADA\non the value of the property.\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- ------------\n                                        \nEffective Date of Value:                   March 15, 1994\n\nProperty Identification:                   North Shore Surgical Center\n\nProperty Location:                         815 Howard Street, Evanston, Illinois\n\nInterest Appraised:                        Leased Fee Estate\n\nGross Building Area:                       5,100 square feet\n\nNet Leasable Area:                         5,100 square feet\n\nLand Size:                                 Approximately 10,004 square feet, or 0.23 acres\n\nImprovements Description:                  A one-story, Class D, building constructed in the 1960s, containing 5,100 gross square\n                                           feet and used as an ambulatory surgical center.\n\nPhysical Occupancy Percentage:             100%\n\nCONCLUSIONS\n- -----------\nCost Approach:                             $925,000\n\nSales Comparison Approach:                 N\/A\n\nIncome Approach:                           $912,000\n\nFinal Value Estimate:                      $910,000\n                                           ========\n\n\n                               \n\n\n\n\n                               TABLE OF CONTENTS\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                                                      4\n     Reasonable Exposure Time                                                                            6\n                                                                                          \nDESCRIPTIVE DATA                                                                                         7\n     Area Data - Metropolitan Chicago                                                                    7\n     Neighborhood Analysis                                                                              10\n     Zoning                                                                                             12\n     Real Estate Taxes and Assessments                                                                  12\n     Site Analysis                                                                                      13\n     Building and Site Improvements                                                                     14\n                                                                                          \nHIGHEST AND BEST USE                                                                                    16\n                                                                                          \nVALUATION SECTION                                                                                       20\n     Valuation Methodology                                                                              20\n     Cost Approach                                                                                      22\n     Income Approach                                                                                    31\n                                                                                          \nCORRELATION AND CONCLUSION                                                                              33\n                                                                  \n\n                         TABLE OF CONTENTS\n\nEXHIBIT SECTION\n- ---------------\nExhibit A    -    Professional Qualifications\nExhibit B    -    Legal Description\nExhibit C    -    Area Map\nExhibit D    -    Location Map\nExhibit E    -    Land Sales Map\nExhibit F    -    Building Description\nExhibit G    -    Land Improvements Description\nExhibit H    -    Estimation of Annual Rental Value\nExhibit I    -    Improved Sales Comparables\nExhibit J    -    Subject Photographs\n\n\n                                  INTRODUCTION\n\n\nPROPERTY IDENTIFICATION\n\nThe subject of this appraisal, known as North Shore Surgical Center, is a 5,100\nsquare foot outpatient surgery facility located at 815 Howard Street, Evanston,\nCook County, Illinois.\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 March 15, 1994.\nThe date of the appraisal report is March 25, 1994.\n\n\nFUNCTION OF THE APPRAISAL\n\nThe report is to be used for asset valuation purposes in conjunction with\nfinancing.  Crescent Capital Trust, Incorporated is establishing a real estate\ninvestment trust (REIT).  It is our understanding that the REIT will involve\nmortgage financing.\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\nIn November 1987, the subject property was purchased for $200,000.  Subsequent\nremodeling hard costs were $473,000, indirect costs $87,000 and $40,000 for\nspecial purpose fixed systems.  Total remodeling costs were estimated at\n$600,000.\n\nOn April 1, 1989, Affiliated Bank Group\/North Shore National Bank as Trustee\nunder Trust Agreement dated March 22, 1988, Trust Number 965, entered into a\npurchase agreement to sell the subject property on April 1, 1989 for $800,000\nto 815 Howard Associates Limited Partnership, an Illinois Corporation.  The\npurchase closed on June 30, 1989 at a final purchase price of $748,458.28.  The\ndocument number for the transaction is 89-3808671.\n\nThe subject facility was purchased as part of an entire business enterprise in\nAugust 1992 by Surgical Health Corporation.\n\n\nHISTORY AND NATURE OF THE BUSINESS ENVIRONMENT\n\nUnited States Economic Performance and Outlook\n\nThe value of the business enterprise 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\nThe United States economy has been in a period of slow economic growth, but the\nrate of growth appears to have increased in recent months.  Gross Domestic\nProduct (GDP) increased at a 2.1 percent annual rate during 1992 after\ndeclining (1.2%) during 1991.  The GDP was 0.7 percent and 1.6 percent,\nrespectively, for the first and second quarters of 1993, and an estimated 4.0\npercent for the fourth quarter of 1993.\n\n\n\n\n\n                                      -3-\n\nThe components of GDP indicate that the economic recovery is affecting many\nsectors of the economy.  Personal consumption expenditures, which account for\napproximately two-thirds of GDP, rose only 1.3 percent during the first half of\n1993.  Non-Residential Fixed Investment advanced 2.2 percent and Residential\nFixed Investment grew 1.7 percent.  Federal Government Purchases declined\n(0.6%) over the same period.  Federal Government Purchases account for 7.2\npercent of the total GDP, and this decline is limited to the rate of overall\nGDP growth.\n\nThe value of the business enterprise 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.  The Federal Reserve has warned, however, that interest rates\nwill be pushed higher if inflation begins to show signs of 'heating up'.\n\nThe economic downturn in the early 1990s resulted in sharply lower inflation.\nThe Consumer Price Index (CPI) ended 1992 with a 3.0 percent increase compared\nto a 4.2 percent increase during 1991.  The CPI for 1993 is currently estimated\nat 3.3 percent.  The GDP Deflator, a much broader price level index, ended 1992\nwith a 2.6 percent annual increase compared to a 4.0 percent increase during\n1991.  The 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\n\n\n                                      -4-\n\n                     INTEREST RATES AND SELECTED STATISTICS\n\n\n<font size=\"2\">\n                                                                     JANUARY 6, 1994        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                              6.4%                    7.5%\n                       Aaa Bond Yield                                     6.9%                    8.2%\n                       Prime Rate                                         6.0%                    6.5%\n<\/font>\n\n\nEconomic Outlook\n\nAccording to Value Line's Quarterly Economic Review, dated December 24, 1993,\nthe economic recovery is now 2.5 years old, but shows much slower growth than\nnormal for a mature recovery.  Among factors cited by Value Line for\ncontributing to the recent slow growth are 'high debt, stagnant personal\nincome, low consumer confidence and a troubling unemployment rate'.  Recent\nimprovements have focussed on the auto, machinery, steel, housing and specialty\nretailer market segments.  Value Line cautions, however, that the recent\nimprovements in the economy are being limited by a slow job growth base.  Value\nLine's Quarterly Economic Review identified the following estimates for\nselected economic statistics from 1993 to 1995.\n\n\n\n<font size=\"2\">\n                                                                           1993           1994           1995\n\n                                                                                               \n                    Real GDP                                               2.6%           3.3%           3.3%\n                    Personal Consumption Expenditures                      3.0%           2.7%           2.3%\n                    Federal Government Purchases                          (4.8%)         (5.8%)         (4.0%)\n                    30-Year Treasury Bond Yields                           6.6%           6.6%           6.8%\n                    Prime Rate                                             6.0%           6.2%           6.4%\n                    Consumer Price Index                                   3.1%           3.2%           3.3%\n<\/font>\n\n\nIn summary, these factors play an important part in determining the supply and\ndemand for real property, and, indirectly, the value of properties.  Most of\nthe forces discussed above are indicating an on-going soft demand for many\ntypes of commercial real estate.\n\n\n\n\n\n                                      -5-\n\nThis soft demand has caused some property values to remain flat and some to\ndecline.  The lower interest rates in recent periods, however, are serving to\nstabilize commercial property values.\n\n\nREASONABLE EXPOSURE TIME\n\nThe Appraisal Foundation defines 'Exposure Time' as follows:\n\n         'The estimated length of time the property interest being appraised\n         would have been offered on the market prior to the hypothetical\n         consummation of a sale at market value on the effective date of the\n         appraisal; a retrospective estimate based upon an analysis of past\n         events assuming a competitive and open market.  Exposure Time is\n         different for various types of real estate and under various market\n         conditions.  It is noted that the overall concept of reasonable\n         exposure encompasses not only adequate, sufficient and reasonable time\n         but also adequate, sufficient and reasonable effort.  This statement\n         focusses on the time component.'\n\n         [Statement on Appraisal Standards No. 6 (SMT-6) from the Appraisal \n         Foundation].\n\nIt is our opinion, based on an analysis of comparable sales and market\ntransactions, that a reasonable exposure time for the subject property type, at\nthe appraised market value, is three to six months.\n\n\n\n\n\n                                      -6-\n\n                                DESCRIPTIVE DATA\n\n\nAREA DATA -  Metropolitan Chicago\n\nThe subject property is located in Evanston, in the Chicago Metropolitan\nStatistical Area.  This area has the third largest population in the United\nStates, behind New York and Los Angeles.  The Metropolitan Statistical Area\nincludes six counties in Illinois and one in Indiana.  The MSA has an estimated\n1987 population of 8,146,900 persons.(1)\n\nChicago was first discovered by the French in 1673 when Pere Marquette and\nLouis Joliet passed the mouth of the Chicago River during a trip through the\narea.  The future site of the city became part of the portage route between the\nMississippi and the Saint Lawrence to French Canada.  In the 1770 Jean Baptiste\nPoint du Sable had set up a trading post at the mouth of the river, becoming\nthe first permanent resident.  Fort Dearborn was built in 1803 to secure the\narea and guard the portage route.  Platted in 1830, the original town had\napproximately 50 residents.  In 1837 the city was incorporated, with a\npopulation of 4,170 persons.  Chicago soon became a center of transportation.\nBy 1848 the Illinois and Michigan Canal was opened connecting the city to the\nMississippi River by a water route.  The canal lost its importance as a\ntransportation route as Chicago soon became the major railroad center of the\nWest.  In 1856 Chicago had ten trunk lines with 58 passenger trains and 389\nfreight trains serving the city daily.  In 1871 the city was ravaged by fire.\nAlmost 100,000 people were homeless and nearly $200 million worth of property\ndestroyed.  Many predicted the end of Chicago.  The city was, however, rapidly\nrebuilt.  A new style of architecture developed, the Chicago School, and the\ncity continued to grow by leaps and bounds.  The population increased from\n298,977 persons in 1870 to 503,185 persons by 1880 and over one million persons\nby 1890.\n\nToday, the Northeastern Illinois Counties Area (NICA), as defined by the\nNortheastern Illinois Planning Commission, consists of the six northeastern\nIllinois Counties, encompassing 3,724 square miles.  It includes Cook, DuPage,\nMcHenry, Kane, Lake and Will.  This area encompasses not only the City of\nChicago but also 208 communities.  It had an estimated 2,659,500 households, in\n1987, with an average size of 2.76 persons,\n\n\n\n\n\n____________________\n\n(1)  U.S. Census\n\n                                      -7-\n\nand a calculated median household effective buying income of $32,067.  In 1987\ntotal retail sales exceeded $47.6 billion, or $17,915 per household.\n\n\n<font size=\"2\">\n                                         CHICAGO NICA POPULATION\n                                               (thousands)\n\n\n                              1960 Census          1970 Census          1980 Census          1990 Census\n\n                                                                                     \n  Chicago                         3,550.4              3,369.4              3,005.1              2,783.7\n  Suburban Cook                   1,579.3              2,132.2              2,248.6              2,321.3\n  DuPage                            313.5                492.2                658.8                781.7\n  Kane                              208.2                251.0                278.4                317.5\n  Lake                              293.7                382.6                440.4                516.4\n  McHenry                            84.2                111.6                147.9                183.2\n  Will                              191.6                247.8                324.5                357.3\n  Total                           6,220.9              6,977.6              7,103.6              7,261.2\n<\/font>\n\n\nSource:  Bureau of the Census, 1960, 1970, 1980, 1986 and 1990.\n\n\nNational trends during the late 1970s have shown a shift in population movement\nfrom the central city to the outlying suburban areas.  This trend seems to be\nconstant with that experienced in the Chicago area.  During this period, each\nof the five collar counties within the metropolitan area has shown a strong\ncontinual growth pattern.\n\nBusiness and industry have tended to shift from the city to the suburbs.  This\ntrend is due in part to the increase in crime rate, traffic, taxes and the lack\nof new facilities in the urban areas.  It is causing the outlying areas to\nabsorb the region's industries.  The trend has been increasing steadily over\nthe past few years.\n\nThere are 3.4 million people in the Chicago Metropolitan Statistical Area work\nforce.  Their professions include 28.7 percent in managerial and professional\nfields; 28.0 percent in administration, technical and sales; and 9.0 percent in\nservice businesses.  Other occupations include 15.9 percent in crafts and\nrepair; 17.2 percent operators and laborers; and 1.2 percent in farming and\nfishing.  Important industries include\n\n\n\n\n\n                                      -8-\n\npublishing, food, printing and chemical industries.  One result of the region's\nnumerous industries is that the unemployment rate is typically less than other\nareas throughout the United States.\n\nDue to the excellent air, rail and expressway system, the Chicago Metropolitan\nRegion is considered a major national transportation and distribution center.\nO'Hare International Airport, located just southwest of Elk Grove Village, is\nthe would's busiest airport both in terms of number of passengers and cargo.\nMidway Airport and Meigs Field also operate in Chicago.  More than 63,700,000\nair passengers and more than 1,000,000 flights pass through Chicago's three\nairports during a year.  O'Hare Airport has an average of 927 flights per day\nand with approximately 795,000 flights per year.  The region's extensive\nhighway system, which is the third largest in the United States (behind Texas\nand California), is served by nine interstate highways including the new\nNorth-South Tollway, Interstate 355, which opened at the end of 1989.  This\nresults in an effective means of travel between city and suburban areas.  There\nare more than 1,650 trucking and warehousing firms and 350 interstate trucking\ncompanies serving the metropolitan area.\n\nThe Chicago Metropolitan Region is also important as the central point for\nmoving goods and materials across the nation through its excellent system of\nrailroads.  Chicago's trunk lines operate half of the nation's railway mileage.\nThe city has 22 Class I railroads, three Class II railroads and 22 terminal\ncompanies.  It is the leading area in the nation for total number of persons\nemployed in the railroad industry.  Employing one of the most extensive spur\nand trunk lines in the county, all major rail companies have carry-through\nservice to make Chicago the world's largest center, handling 37,000 freight\ncars daily and 40 million tons of freight per day out of the city.\n\nThe port of Chicago is a major seaport of Lake Michigan, connecting the\nAtlantic Ocean through the St. Lawrence Seaway and the Gulf of Mexico via the\nIllinois Sanitary and Shipping Canal and the Mississippi River.  Interstate\nwaterways include the Cal-Sag Channel, joining the Illinois Waterway River with\nLake Calumet and Lake Calumet joining Lake Michigan and the Calumet River.  In\n1987, some 188 overseas ships carried more than 1.6 million short tons of\ncargo.\n\nAccording to a recent study by the Chicago Association of Commerce and\nIndustry, Chicago's suburbs gained $22.8 billion in industrial and commercial\ndevelopment since 1970, compared with only $10.6 billion in the city.  There\nhas been a continual shift from\n\n\n\n\n\n                                      -9-\n\ngoods produced to serve producing industries within the city with a\ncorresponding relocation of manufacturing industries out of the central city.\nDuring 1987, Chicago lost 524 manufacturing plants, almost a tenth of the\ntotal, while only 73 new plants were begun, indicating a net loss of 451\nplants.  Since 1970, Chicago has lost more than 250,000 manufacturing jobs.\n\nThe Chicago area has a rich cultural heritage, including its would famous\narchitecture, and has much to offer.  Cultural attractions include the world\nfamous Chicago Symphony Orchestra, the Lyric Opera, and the Ravinia Festival.\nMuseums include the Art Institute of Chicago, the Museum of Science and\nIndustry, the Field Museum of Natural History, the Adler Planetarium and the\nJohn G. Shedd Aquarium.  In addition, there are two zoos and numerous annual\nevents including the Chicago Blues Festival and Taste of Chicago.  Free\nopen-air concerts are offered throughout the warm months at the Petrillo Music\nShell in Grant Park.  Chicago has two major league baseball teams, as well as\nprofessional football, hockey and basketball.\n\nIn conclusion, it can be stated that the Chicago Metropolitan Area, as a whole,\nrepresents a thriving political, physical, economic and social climate which\nshould continue to prosper in terms of growth and economy due to the great\ndiversity of industry and excellent transportation.  However, the majority of\nthe growth is expected to occur in the suburban areas while the City of Chicago\nexperiences a continued gradual decline in industry and population.\n\n\nNEIGHBORHOOD ANALYSIS\n\nThe subject property is locate at 815 Howard Street within the community of\nEvanston, Illinois.  Evanston is located near Lake Michigan, 12 miles north of\nthe Loop.  It is bounded on the south by Chicago, on the west by Skokie and on\nthe north by Wilmette.  The population of Evanston is approximately 73,700.\n\nThe development of Evanston proper began with the founding of Northwestern\nUniversity, located in the northeastern corner of the city along the lake\nshore.  The university was founded in 1850.  Evanston was incorporated as a\ntown in 1863.  In 1872, the town was reincorporated as a village.  In 1892,\nEvanston was incorporated as a city with a mayor-council form of government.\n\n\n\n\n\n                                      -10-\n\nImproved transportation was the key to development of Evanston.  By the turn of\nthe century, the Chicago North Shore and Milwaukee Line was operating between\nWilson Avenue in Chicago and Waukegan.  In 1908, the Chicago Rapid Transit\nSystem was extended to Central Street near the northern border of Evanston and\nin 1912 to Linden Street in Wilmette.  Population increased rapidly in the\nfirst decades of the twentieth century.\n\nGrowth continued but at a slower pace after World War II.  In 1952, Evanston\nadopted a council manager form of government.\n\nThere are over 100 manufacturing establishments in the city but Evanston is\nprimarily a residential community.  Property tax is the single largest source\nof revenue, and the tax rate is one of the highest in the metropolitan area.\n\nEvanston has a large downtown area which was a key retail center serving the\nnorth shore for many years.  In the 1950s, however, downtown Evanston began to\ndecline in terms of retail sales,a nd general desirability.  The Old Orchard\nregional shopping center in Skokie signaled the beginning of this decline.  A\ngrowth of community shopping centers is continuing to this day.  These centers\nhave the advantage of ample parking which is not available in traditional\ndowntown retail districts.  However, in the late 1980s there has been both new\ndevelopment and rehabilitation in downtown Evanston.  Central Evanston has over\n200 stores.  In addition, there has been construction for over a decade of\nmodern high-rise office space.  Washington National Insurance Company is the\nlargest user in the downtown area.  There are other modern office buildings as\nwell as some rehabilitated older offices.  Another major development is the\nAmerican Hospital Plaza.\n\nAll typical city services such as police, fire and garbage pickup are provided.\nPublic transportation is also available.  Access to the Loop is available via\nthe CTA, Evanston Express or the Chicago and Northwestern Railroad, which also\naccesses northern suburbs.  Entry to Edens Expressway is available at Dempster\nStreet in adjoining Skokie, as well as Old Orchard Road (known as Harrison\nStreet in Evanston).  Access is also available to the Chicago Outer Drive via\nSheridan Road.\n\nThe immediate area of the subject property is improved with commercial\nproperties.  Immediately to the west of the subject is a dental center.  The\nsubject property is in census tract 81-2.\n\n\n\n\n\n                                      -11-\n\nIn conclusion, Evanston in general and the vicinity of the subject are\nconsidered to be stable.\n\n\nZONING\n\nAccording to the zoning code for the City of Evanston, the subject property is\nzoned C-2, Commercial District.\n\nIt is the Appraiser's opinion that the subject property represents a conforming\nuse under this zoning classification.\n\nFor full permitted uses or restrictions thereof under this classification, we\nsuggest that an inspection of the complete ordinance be made.\n\n\nREAL ESTATE TAXES AND ASSESSMENTS\n\nAccording to the Cook County's Assessors office, the properties Permanent Index\nNumbers, assessments and taxes are represented as follows:\n\n\n<font size=\"2\">\n      Permanent                                                                           1992\/1993\n        Index                  Assessed           Equalization         Equalized          Real Estate\n        Number                 Valuation             Factor              Value               Taxes   \n    -------------              ---------          ------------         ---------          -----------\n                                                                               \n    11-30-123-019               $ 38,938              2.0897           $81,368.74          $ 9,198.74\n    11-30-123-020               $ 38,938              2.0897           $81,368.74          $ 9,198.74\n\n    11-30-123-021               $ 24,325              2.0897           $50,831.95          $ 5,746.55\n\n    11-30-123-022               $ 10,054              2.0897           $21,009.84          $ 2,375.16\n                                --------                               ----------          ----------\n        Totals                  $112,255                               $  234,579          $26,519.19\n<\/font>\n\n\n\n\n\n                                      -12-\n\n<font size=\"2\">         11-30-123-019       Land                             $ 9,712\n                             Improvements                      29,226\n                                                              -------\n                             Total                            $38,938\n\n         11-30-123-020       Land                             $ 9,712\n                             Improvements                      29,226\n                                                              -------\n                             Total                            $38,938\n\n         11-30-123-021       Land                             $ 9,712\n                             Improvements                      14,613\n                                                              -------\n                             Total                            $24,325\n\n         11-30-123-022       Land                             $ 9,712\n                             Improvements                         342\n                                                              -------\n                             Total                            $10,054\n\n\nSITE ANALYSIS\n\n<\/font>The subject site is a rectangular-shaped interior parcel of land having\napproximately 100.04 feet of frontage along the north side of Howard Street and\na depth of 100 feet, for a total land area of approximately 10,004 square feet.\n\nThe site is level throughout.  All street improvements are in, as well as\nconcrete curbs, gutters, and sidewalks.  Public utilities of water, sewer and\nelectricity are available and connected to the property.  No portion of the\nsubject site lies within a special flood hazard area, but rather in Flood Zone\nC, an area of minimal flood hazard.  The flood plain map is effective date\nJanuary 2, 1981.\n\nNo soil boring tests were made or caused to be made to determine the\nsuitability of land for construction purposes, as necessity for the same is\nprecluded by the existence of the present improvement thereon.  There were no\nnoticeable settlement cracks or indication of any sub-soil problems.\n\nNo plat of survey was provided to the appraiser.\n\n\n\n\n\n                                      -13-\n\nOur site inspection of the property revealed no obvious easements or\nencroachments, other than the typical street and utility easements, which do\nnot negatively affect the utility of the property.  Further, we assume that the\nsubject site is not encumbered with detrimental easements or encroachments.\n\nTo our knowledge, no environmental study has been conducted on the subject\nside.  As appraisers, we are not qualified to detect hazardous materials.\nConsequently, our report assumes that there are no environmentally hazardous\nmaterials in the site or building that would adversely affect the subject\nproperty's value.\n\nOverall, the characteristics of the subject property are functional, marketable\nand well suited for the current use as a surgical center.\n\nA legal description of the property is included in the Exhibit Section of this\nreport.\n\n\nBUILDING AND SITE IMPROVEMENTS\n\nThe site is improved with a one-story structure constructed in the 1960s and\ncompletely renovated in 1988.  The building contains 5,100 gross square feet,\nwhich is the same as the leasable square feet.\n\nThe building is a one-story, Class D structure, with a brick exterior.  The\nbuilding has reinforced concrete floors.  The roof is comprised of wood joists,\nand wood decking, with asphalt composition shingles.  Ceiling finishes consists\nof acoustical ceiling tiles and recessed fluorescent lighting and gypsum board\nwith painted finish.  The interior walls are gypsum board over metal studs with\nvinyl wall coverings and paint.\n\nAir conditioning is supplied via package units with electric baseboard heat in\nthe zoned system.  Heat is also supplied by a gas-fired forced air system.  In\naddition, the facility is equipped with a medical gas system with vacuum.  We\nassume that the heating and electrical capacity is adequate for the subject\nfacility.\n\nThe interior floors have both carpeting and vinyl tiles.  Windows and doors are\nmetal-framed, and interior doors are solid-core wood.  The facility has two\nsurgery suites, administrative offices, patient recovery areas, a laboratory,\nan instrument preparation room, locker rooms, a lounge, and reception areas.\n\n\n\n\n\n                                      -14-\n\nSite improvements include paved parking, exterior lighting and shrubbery around\nthe subject building.  A detail description of the building and site\nimprovements are included in the Exhibit section of this report.\n\n\nCONDITION OF IMPROVEMENTS AND OBSOLESCENCE\n\nThe building has been remodeled and in excellent condition.  There is no\ndeferred maintenance, or functional or economic obsolescence.\n\n\n\n\n\n                                      -15-\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                                      -16-\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, and special-purpose properties.  The site possesses good\naccess and visibility.  The size of the parcel would preclude any large\ndevelopments.\n\nLEGALLY PERMISSIBLE\n\nAs stated earlier in the Zoning section of this report, the property is\ncurrently zoned 'C-2, Commercial'.  Permitted uses in this general zoning\ncategory vary widely.  Potential legal uses would include retail and\nrestaurants, office\/institutional, hotels, hospitals and other medical-oriented\nuses.\n\nSurrounding uses include a dentist office and other office\/commercial uses.\nThese use patterns would likely preclude industrial, 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 and commercial development, the next\nconsideration is economic feasibility.  Financially feasible uses for the site,\nif vacant, are those uses that would generate an economic return to the land.\nNew commercial related development in the subject area indicates that new\ncommercial\/office development is financially feasible.\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 medical-related development is financially\nfeasible.  Based on this analysis, the\n\n\n\n\n\n                                      -17-\n\ncurrent highest and best use of the land, if vacant, would be for\noffice\/institutional development based on the growth needs of the area.\n\n\nAs Improved\n\nThe subject site is currently improved with an 5,100 leasable square foot\nsurgical center 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 modify existing improvements.  The improvements were\nrecently renovated and are considered functional.  The building could be\nconverted to an alternative medical office use as recent trends in the hospital\nbusiness call for more outpatient business and less inpatient stays.\n\nLEGALLY PERMISSIBLE\n\nThe building, as improved, is assumed to be a legal conforming use, since the\nproperty was recently renovated and received an occupancy permit.  Under the\ncurrent zoning, the property could 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 not be financially feasible.  The only\nfinancially feasible use of the existing improvements is its current use as an\noutpatient surgery center.\n\n\n\n\n\n                                      -18-\n\nMAXIMALLY PRODUCTIVE\n\nThe maximally productive use for the existing property is the financially\nfeasible use that produces the greatest property value.  The existing use was\nthe only financially feasible use.  The highest and best use, as improved, is\nthe property's current use.\n\n\n\n\n\n                                      -19-\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         SALES COMPARISON APPROACH:  The principle of substitution also says\n         that market value can be estimated as the cost of acquiring an equally\n         desirable substitute property, assuming no costly delay in making the\n         substitution.  This method analyses the sales of other comparable\n         improved properties.  Since two properties are rarely identical, the\n         necessary adjustments for differences in quality, location, size,\n         services and market appeal are a function of appraisal experience and\n         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.  Due to the specialized nature of the subject property, we\nhave not considered the Sales Comparison Approach as being appropriate for the\nsubject property.  The subject property has been specifically designed to\naccommodate a freestanding surgical center.  An alternative use for this\nstructure would require extensive renovation and remodeling and as such,\ncomparisons to medical office space or commercial office sales\n\n\n\n\n\n                                      -20-\n\nwould be inappropriate.  We did not find any sales of comparable specialized\nfacilities in the region which were similar in size or use and as such, due to\nthe lack of reliable comparable data, we have not considered this approach as\nbeing an appropriate determinant of value.  The application of the Cost and\nIncome Approaches to value is further discussed in the appropriate sections\nwhich follow.\n\n\n\n\n\n                                      -21-\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\nLand valuation, assuming the site is vacant, is based upon the following steps:\n\n        o        A comparison with recent sales and\/or asking prices for\n                 similar land.\n\n        o        Interviews with reliable real estate brokers and other\n                 informed sources who are familiar with local real estate\n                 activity.\n\n        o        Our experience in estimating land values.\n\nThe following sales are located within the general market area of the subject\nproperty and are considered to be representative of market activity and\nconditions as of the valuation date.  Unless otherwise indicated, the sales\ninvolved arm's length transactions that conveyed a fee simple interest, and\nonly real property was included in the transactions.\n\n\n\n\n\n                                      -22-\n\n\n\nLand Comparable Number 1\n- ------------------------\n                                        \nParcel Number:                             09-23-106-001\n\nLocation:                                  Greenwood Terrace\/Blk 2, Southeast corner Dempster Street and Greenwood Avenue.\n\nSize:                                      17,269 square feet\n\nSale Date:                                 May 1993\n\nDocument Number:                           93-855170\n\nGrantor:                                   Union Oil Co. of California, 1201 W 5th Street, Los Angeles, California  90017\n\nGrantee:                                   S &amp; S Petroleum Products, 400 S. Curran Road, Grayslake, Illinois  60030\n\nSale Price:                                $278,000\n\nPrice Per Square Foot:                     $16.09\n\nTerms of Sale:                             All Cash\n\nShape:                                     Rectangular\n\nZoning:                                    Evanston Commercial\n\nUtilities:                                 All utilities are available.\n\n\n\n\n\n\n                                      -23-\n\n\n\nLand Comparable Number 2\n- ------------------------\n                                        \nParcel Number:                             05-19-109-001\n\nLocation:                                  Northeast corner Central Avenue and Cherry Street.  Willow Crest\/Blk 12, Parcel has\n                                           additional frontage on Frontage Road for Edens Expressway.\n\nSize:                                      21,780 square feet\n\nSale Date:                                 August 1993\n\nDocument Number:                           93-683 844\n\nGrantor:                                   LaSalle National Trust, Chicago (no Trust No. listed)\n\nGrantee:                                   NBD Bank-Highland Park (no Trust No. listed)\n\nSale Price:                                $295,000\n\nPrice Per Square Foot:                     $13.54\n\nTerms of Sale:                             All Cash\n\nShape:                                     Rectangular\n\nZoning:                                    Commercial\n\nUtilities:                                 All utilities are available.\n\nComments:                                  This parcel was improved with a 12,000 square foot two-story office building.\n\n\n\n\n\n\n                                      -24-\n\n\n\nLand Comparable Number 3\n- ------------------------\n                                        \nParcel Number:                             10-21-414-053\n\nLocation:                                  N. Lincoln Avenue\n\nSize:                                      7,800 square feet\n\nSale Date:                                 April 1993\n\nDocument Number:                           93-344648\n\nGrantor:                                   NBD Skokie\n\nGrantee:                                   Village of Skokie\n\nSale Price:                                $94,000\n\nPrice Per Square Foot:                     $12.05\n\nTerms of Sale:                             All Cash\n\nShape:                                     Basically rectangular\n\nZoning:                                    Commercial\n\nUtilities:                                 All utilities are available.\n\n\n\n\n\n\n                                      -25-\n\nA summary of the land sales is shown as follows:\n\n                          SUMMARY OF LAND COMPARABLES\n\n\n<font size=\"2\">\n                   SALE                                                             SALE         SIZE            PRICE\n                    NO.       LOCATION                                              DATE         (SF)           PER SF\n\n                                                                                                    \n                     1        Greenwood Terrace                                    05\/93        17,269          $16.09\n                     2        NEC Central Avenue &amp; Cherry Street                   08\/93        12,000          $13.54\n                     3        8017 - 8019 Lincoln Avenue                           04\/93         7,800          $12.05\n                  SUBJECT     815 HOWARD STREET                                                 10,004\n<\/font>\n\n\nThe above sales are located within the general market area of the subject\nproperty and are considered to be representative of market activity and\nconditions as of the valuation date.  The sales range in size from 7,800 square\nfeet to 17,269 square feet and indicate an unadjusted range of value from\n$12.05 per square foot to $16.09 per square foot.  Unless otherwise indicated,\nthe sales involved arm's length transactions that conveyed a fee simple\ninterest, and only real property was included in the transactions.  The\ncomparable sales are analyzed in the following paragraphs.\n\nLAND SALE NUMBER 1 is a corner parcel which is utilized as a gas station.  This\ncomparable's location is considered to be superior to the subject's and a\ndownward adjustment for location is considered appropriate.  The sales's size\nis larger than the subject's which would necessitate that a downward adjustment\nfor this factor be made.  Overall, we believe that these factors offset each\nother negating any overall adjustment to this parcel.  The adjusted price is\n$16.09.\n\nLAND SALE NUMBER 2 is located on a more travelled thoroughfare with greater\nexposure than the subject.  This sale was used for the development of an\noffice structure.  Due to its location, a down ward adjustment to this sale is\nwarranted.  Overall, we have made a downward adjustment of five percent for an\nadjusted price of $13.24.\n\nLAND SALE NUMBER 3 is located near a hospital campus and carries with the most\nsimilar characteristics as the subject.  We believe that this sale has a\nslightly superior location and have adjusted this sale downward by five\npercent.  This indicates an adjusted sale price of the subject of $11.44.\n\n\n\n\n\n                                      -26-\n\nLand Conclusion\n\nBased upon the preceding analysis and conversations with local brokers, it is\nour opinion that a value of $14.00 per square foot is representative of the\nsubject site, as if vacant.  Multiplied by the subject's 10,004 square foot\nsite, this would indicate a market value of the subject land calculated as\nfollows:\n\n                      10,004 SF  x  $14.00\/SF  =  $140,056\n\n                             Rounded to:   $140,000\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\nService, 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.  A schedule, indicating the derived costs from the Marshall Valuation\nService shows the estimated replacement cost by category for the subject\nbuilding, is presented in the Exhibit Section of this report.  An amount\nrepresenting entrepreneurial profit has also been included in this analysis.\nThis profit is a necessary element in the motivation to construct the\nimprovements and represents an additional amount the developer would expect to\nreceive for construction of the project.  The amount of entrepreneurial profit\nvaries according to economic conditions and types of development.  For the\npurpose of this report, entrepreneurial profit was estimated to comprise ten\npercent of the direct and indirect building costs.\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\n\n\n\n                                      -27-\n\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 45 to 50 years.  For the subject Class D\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 Service, Inc. was used to estimate the overall economic life\nof the improvements.  The assignment of economic lives assumed that, except for\nthe building shell and foundation, building components would be replaced\nperiodically over the life of the building.\n\n\nPhysical Depreciation\n\nThe amount of physical depreciation and obsolescence in the subject building is\nminimal due to its recent renovation.  Observation of the subject property\nindicated that the structure and related component parts have been adequately\nmaintained through a continuous maintenance service program.\n\nThe subject property was renovated in 1988 and it is in excellent condition.\nIt is judged that the subject has an effective age equal to five years.  The\nremaining useful life is estimated to be 40 years.  This translates into a\nphysical depreciation estimate of 11.0\n\n\n\n\n\n                                      -28-\n\npercent (5 years divided by 45 years).  The amount of depreciation attributable\nto the property has been estimated on a straight-line basis, which is founded\non the assumption that depreciation of a property occurs equally throughout its\neconomic life.\n\nDue to the design and structural components of the building, we have not\nindicated any loss in value due to functional obsolescence.\n\nThe elements which make up site improvements have shorter economic lives than\nthe building.  We have estimated the aggregate useful lives of these items to\nbe 20 years with an effective age of five years and a remaining useful life of\n15 years.  Therefore, the depreciation rate attributable to the site\nimprovements on a straight-line basis is estimated to be 25 percent.\n\nDuring our area study, we did not notice any evidence of economic obsolescence\nassociated with the subject property.\n\n\nCost Approach Conclusion\n\nBased on the investigation as previously defined, the market value of the\nsubject property by the Cost Approach, as of March 15, 1994, is rounded to:\n\n                                    $925,000\n                                    ========\n\n\n\n\n                                      -29-\n\n               North Shore Surgical Center - 815 Howard Street\n\n\n<font size=\"2\">EXCAVATION AND SITE PREPARATION                                   1,771\nFOUNDATION                                                       16,033\nFRAME                                                            21,009\nEXTERIOR WALLS                                                   67,431\nFLOORS                                                           18,638\nROOF                                                             26,950\nROOF COVER                                                       15,261\nPARTITIONING &amp; BUILT-IN ITEMS                                   264,891\nCEILINGS                                                         34,225\nFLOOR COVERINGS                                                  30,847\nPLUMBING                                                         75,201\nHEATING, VENTILATION &amp; AIR CONDITIONING (NET)                    59,745\nELECTRICAL                                                       85,786\nOTHER FEATURES                                                        0\n                                                                      -\nTOTAL LABOR, MATERIALS, INCIDENTALS AND PROFIT                  717,788\nARCHITECTS FEES, PLANS AND SPECIFICATIONS                        25,123\nARCHITECTS FEES, SUPERVISION                                     21,534\nADD FOR MISCELLANEOUS FEES                                       76,445\n                                                               --------\nTOTAL REPRODUCTION COST                                         840,890\n\nTOTAL OVERALL LIFE                                      45\nEFFECTIVE AGE                                            5\nCURVILENEAR DEPR RATE                               11.00%       92,498\n                                                               --------\nDEPRECIATED VALUE OF BUILDING                                   748,392\n\nREPRODUCTION COST OF LAND IMPROVEMENTS                           50,000\nLESS DEPRECIATION OF IMPROVEMENTS @ 25%                         (12,500)\n                                                               --------\nDEPRECIATED VALUE OF LAND IMPROVEMENTS                           37,500\n\nTOTAL DEPRECIATED VALUE OF IMPROVEMENTS                         785,892\n\nADD LAND VALUE                                                  140,000\n                                                               --------\n\nTOTAL VALUE COST APPROACH                                      $925,892\n\n\n\n<\/font>                                      -30-\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 several buildings that Crescent Capital Trust,\nIncorporated is establishing a real estate investment trust (REIT).  Surgical\nHealth Corporation will provide a net rental guarantee, in the form of a master\nlease.  The REIT, as the new property owner, will receive the net rental master\nlease rate per square foot of rentable office area, regardless of the rental\nrates charged or received from the actual tenant(s).  Additionally, the annual\nrental income provided for in the ground lease, associated with the subject\nproperty, will be received by the REIT.\n\nThis master lease is a credit enhancement vehicle that will enable the REIT\nissuer to sell the REIT shares.  It will also allow Surgical Health Corporation\nleasing flexibility for the surgical space, i.e., they can lease office space\nto various physicians at different rates and terms.\n\nThe appraisers received a draft of the form of master lease agreement, but the\nactual master lease agreement for the property are not yet available.  For the\npurpose of our Income Approach, the gross income will be the master lease rate\nfor the property times the rentable building area.  We reserve the right to\nmodify the Income Approach valuation if the actual master lease for the\nproperty differs significantly from the draft lease presented to us.\n\nThe master lease rate for the subject property will be $105,860 annually based\non a 15-year lease.  We have verified the reasonableness of this rental rate by\nconducting a return analysis of the property based upon the expected remaining\nlives of the improvements and investment rates of return found in the\nmarketplace.  A schedule of this analysis is found in the Exhibit section of\nthis report.  Based upon this analysis, utilizing a required rate of return of\n10 percent on land and 12 percent to 14 percent rate on improvements, the\nannual rental rate would be anticipated to approximate\n\n\n\n\n\n                                      -31-\n\n$21.56 to $24.54 per square foot.  The rate established in the master lease at\n$20.75 appears to be reasonable.\n\nThe subject appraisal assumes 100 percent of the income is guaranteed through\nthe master lease agreement.  Since the leased fee interest is being appraised,\nthere is no deduction for vacancy or credit loss.\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$5,293, based on the management experience of other properties.  The net\noperating income for the property is $105,860 less $5,293 or $100,567.\n\nAlthough we have not utilized the Sales Comparison Approach to arrive at an\nindication of value for the subject property, we have conducted a survey of\nmedical office building sales throughout the region in order to abstract an\noverall rate for capitalization.  The full details of these sales are located\nin the Exhibit Section of this report and indicate overall rates from 8.0\npercent to 11.33 percent.\n\nA capitalization rate of 11.0 percent is considered appropriate because of the\nquality of the tenant and the overall reasonableness of the rental rate\nnegotiated.\n\nTherefore, it is our opinion that the market value of the subject property by\nthe Income Approach, as of March 15, 1994, is calculated and rounded as\nfollows:\n\n                  Net Operating Income\/OAR  =  Estimated Value\n\n                           $105,567\/.11  =  $914,245\n\n                             Rounded to:  $910,000\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 North Shore Surgical Center.  The three approaches are summarized as\nfollows:\n\n\n                                                                                  \n        Cost Approach   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $925,000\n        Sales Comparison Approach   . . . . . . . . . . . . . . . . . . . . . . . . . . . N\/A\n        Income Approach   . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $910,000\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.  However, estimating the replacement cost and all forms of\ndepreciation for the subject.  For this reason, the Cost Approach is considered\nonly a fair indicator of value for the subject property.\n\nThe Sales Comparison Approach was not utilized due to the specialized nature of\nthe subject property.\n\nThe Income Approach normally provides the most reliable value estimate for\nspecialty properties such as the subject.  Although many buyers of professional\noffice buildings are owner\/occupants, these buyers are generally aware of a\nproperty's cash flow potential and its value from an investor's perspective.\nFor this reason, the Income Approach is considered the best indicator of value\nfor the subject property.\n\nBased on this analysis, it is our opinion that the market value of the North\nShore Surgical Center, as of March 15, 1994, and based on the assumptions and\nlimiting conditions in this report, is:\n\n                                    $910,000\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":[9590,9579],"class_list":["post-41883","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-healthsouth-corp","corporate_contracts_industries-health__misc","corporate_contracts_types-land__il","corporate_contracts_types-land"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/41883","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=41883"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=41883"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=41883"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=41883"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}