\n JANUARY 6, 1994 JANUARY 2, 1992<\/p>\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<\/c><\/c><\/s><\/caption>\n<\/table>\nEconomic Outlook<\/p>\n
According 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.<\/p>\n
\n\n 1993 1994 1995<\/p>\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<\/c><\/c><\/c><\/s><\/caption>\n<\/table>\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.<\/p>\n
-5-
\n 17
\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.<\/p>\n
REASONABLE EXPOSURE TIME<\/p>\n
The Appraisal Foundation defines “Exposure Time” as follows:<\/p>\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.”<\/p>\n
[Statement on Appraisal Standards No. 6 (SMT-6) from the Appraisal
\n Foundation].<\/p>\n
It 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.<\/p>\n
-6-
\n 18
\n DESCRIPTIVE DATA<\/p>\n
AREA DATA – Metropolitan Atlanta<\/p>\n
The subject property is located in DeKalb County, approximately 15 miles
\nnortheast of downtown Atlanta via Interstate 85. The Atlanta Metropolitan
\nStatistical Area (MSA) is a 5,148 square mile region encompassing 18 counties
\nin the northwestern portion of the state of Georgia. Atlanta has grown to
\nbecome the major economic center of the Southeast in recent decades. Very
\nearly in its history, the city developed a retail, wholesale, and distribution
\neconomy based upon its transportation and locational advantages. Atlanta’s
\nemergence as a major urban center, however, did not begin until the 1950s after
\nchanges wrought by the wartime economy laid the groundwork for a major
\ntransformation of the Southeast regional economy. Despite its early dominance
\nas a transportation hub and center of commerce, Atlanta could only expand in
\nconcert with the region it served.<\/p>\n
During the past three decades, Atlanta has consistently out-paced the nation as
\nwell as the Southeast region in population and employment growth. In 1950,
\nAtlanta comprised only .48 percent of the nation’s population and 3.47 percent
\nof the Southeast’s population. By 1980, Atlanta had increased these
\npercentages to .89 percent and 5.76 percent, respectively. Employment growth
\nwas no less dramatic. In 1950, Atlanta accounted for only .57 percent of all
\nnon-agricultural employment in the nation and 5.60 percent of the region’s
\nemployment. By 1980, these percentages were 1.06 percent and 7.27 percent,
\nrespectively.<\/p>\n
The Atlanta MSA now ranks as the ninth largest primary metropolitan area in the
\nnation. The 1980 census recorded 2,029,710 persons residing in the 18-county
\nmetropolitan area. The 1990 estimated population was 2,717,784, a 33.9 percent
\nincrease from the 1980 census. The population for the 18-county metropolitan
\narea for 1995 is forecast to be 3,071,283, a 13.0 percent increase from the
\n1990 estimate.<\/p>\n
The Atlanta economy is distinguished from the national economy by its greater
\nconcentration of trade and service employment, and the relatively low share of
\nmanufacturing employment. The service sector of the economy has consistently
\ngrown at a much faster pace than the goods-producing sector. Atlanta’s
\nemployment base is broadly diversified, with no single industry dominating the
\nlocal economy.<\/p>\n
-7-
\n 19
\nAtlanta’s economy continued to expand during the 1980 and 1982 nationwide
\neconomic recessions. From 1978 to 1983, Atlanta was the second fastest growing
\nemployment center in the nation. During the eight economic recessions since
\nWorld War II, Atlanta was only seriously affected by the 1974-1975 slowdown,
\nwhich was largely the result of an over-built real estate market. Atlanta has
\nfelt the impact of the current recession, but the overall impact has been mild
\nand as the national economy improves, so will the city’s.<\/p>\n
Anticipated high growth areas include retail trade, services, international
\nbusiness, interstate banking, and high technology. Atlanta should continue to
\nbenefit from the emergence of interstate banking because of the strength of its
\nfinancial institutions and its obvious locational advantages.<\/p>\n
International business has grown steadily and holds great promise, partially
\nwith improved overseas air connections. Georgia Tech has spawned many high
\ntechnology firms and is actively involved in nurturing this growing sector of
\nthe national and local economies. Trade activity has always been, and will
\ncontinue to be, a mainstay of Atlanta’s economy. Services will continue to
\nkeep pace with these basic growth factors.<\/p>\n
In summary, metropolitan Atlanta has developed the necessary infrastructure of
\ntransportation and commercial services to secure its role as a regional trade,
\nconvention, and office center. Led primarily by the service sector, growth in
\neconomic indicators such as employment and population are expected to continue
\nduring the 1990s; however, at a slower rate than the current decade. Further,
\nthe 1980s have left most markets over-built, specifically office, retail and
\nhousing; a slowing of new construction is expected in order to allow the
\nabsorption of existing inventories.<\/p>\n
NEIGHBORHOOD ANALYSIS<\/p>\n
The subject property is located in unincorporated DeKalb County, Georgia along
\nthe east side of Montreal Road approximately 250 feet south of the
\nLawrenceville Highway, also known as Highway 29. It’s physical street address
\nis 1491 Montreal Road.<\/p>\n
-8-
\n 20
\nThe neighborhood boundaries are considered to be Lawrenceville Highway to the
\nnorth, Interstate Highway 285 to the west, Stone Mountain Parkway (Highway 78)
\nto the south, and John’s Road to the east. Within the neighborhood, the
\npredominant land uses are institutional and single-family residential, with
\ncommercial and retail uses located along the major thoroughfares; and the
\nNorthlake Regional Medical Center to the south of the subject property along
\nthe East side of Montreal Road.<\/p>\n
Lawrenceville Highway, a major east\/west thoroughfare with Interstate 285
\naccess, gives the neighborhood excellent access. Development along
\nLawrenceville Highway is comprised of commercial and retail structures.
\nMontreal Road provides north\/south access for the residential and institutional
\nuses within the neighborhood.<\/p>\n
Land uses adjacent to the subject property are medical office to the south,
\nused car lot and vacant land to the north, single-family residence to the east
\nand a car dealership and vacant land to the west, across Montreal Road. The
\nolder, single-family residences are being demolished or converted to medical
\nand professional offices. The redevelopment of the area is being driven
\nprimarily by the central location of the Northlake Regional Medical Center
\nwithin the neighborhood.<\/p>\n
All typical urban services including utilities and police and fire protection
\nare available to the subject property. No negative influences or trends were
\nnoted in the neighborhood.<\/p>\n
In summary, the property is located in a mixed-use residential and
\ninstitutional neighborhood with close proximity to the Northlake Regional
\nMedical Center. The neighborhood is considered to have good access and
\nexposure. The surrounding land uses are not considered detrimental to the
\nsubject’s existing improvements. The subject’s use as an outpatient surgery
\ncenter blends in well with the surrounding land development.<\/p>\n
ZONING<\/p>\n
The subject property is zoned “C-1, Conditional”, Commercial Conditional
\nDistrict, by the County of DeKalb. According to the County zoning
\nrequirements, the commercial district provides for the orderly arrangement of
\ncommercial, sales and service space.<\/p>\n
-9-
\n 21
\nPermitted uses include commercial, retail, service, professional office and
\nother similar uses consistent with this zoning code’s purpose and surrounding
\nuses.<\/p>\n
The subject’s “conditional” zoning, effective May 7, 1992, allows one point of
\nentry from Montreal Road and no point of entry from Woodlawn Circle.<\/p>\n
Improvement setback requirements within the C-1 District are as follows:<\/p>\n
\n
\n Front 75 feet
\n Rear 30 feet, if adjacent to commercial
\n 50 feet with buffer, if adjacent to residential
\n Side 20 feet
\n<\/c><\/s><\/table>\nThe maximum building height is not to exceed five stories. Parking
\nrequirements for medical office require four spaces per 1,000 square feet of
\nbuilding. The subject building contains 8,749 square feet which equates to 35
\nparking spaces. The subject is improved with 44 parking spaces including 4
\nhandicap spaces. According to a review of the zoning ordinance and discussions
\nwith the local zoning authorities, the subject is a legal and conforming use
\nand is in conformance with current zoning requirements.<\/p>\n
REAL ESTATE TAXES AND ASSESSMENTS<\/p>\n
The subject’s real property is assessed and taxed by the County of DeKalb. The
\nsubject’s full parcel number is 018-144-003-229. All properties within DeKalb
\nCounty are assessed at 40 percent of their fair market value. The property’s
\n1993 assessed value is $330,500 (land only) indicating a total value for county
\ntax purpose of $132,200. The 1993 milage or tax rate for DeKalb County was
\n$42.53 per $1,000 of assessed value. Therefore, taxes were $5,622.00 for 1993.
\nThe 1994 milage rate has not been set; however, a change in the assessment is
\nanticipated due to the 1993 construction of the improvements on the site.<\/p>\n
-10-
\n 22
\nWe have estimated the market value of the improvements, based on the Cost
\nApproach in this report, to be $1,104,965, assessed at 40 percent, results in
\nan estimated assessed value of $441,986. Added to the indicated current
\nassessed land value of $132,200 for a total estimated assessment of $574,186.
\nBased on the foregoing, the subject property taxes are estimated as follows:<\/p>\n
$1,435,465 x 40% \/ $1,000 x $42.53 = $24,420<\/p>\n
SITE ANALYSIS<\/p>\n
The subject 2.16-acre site is located along the east side of Montreal Road,
\napproximately 250 feet south of Lawrenceville Highway, at 1491 Montreal Road,
\nTucker, DeKalb County, Georgia. The site is basically rectangular in shape and
\nexhibits an arc distance of 131.80 feet along the eastern right-of-way line of
\nMontreal Road. The topography of the site is graded level on the western
\nportion of the side and is at grade with Montreal Road. The parking area at
\nthe southeast corner of the improved area has been in-filled, held by a
\nconcrete retainer wall. The remainder of the site is gently rolling and slopes
\ndown toward the east. The eastern portion of the site exhibits approximately
\nan eight-foot grade difference. No limitations to potential development
\nresults from the size, shape, or terrain of the site.<\/p>\n
The subject property is located in Flood Zone C, an area of minimal flooding,
\naccording to Flood Insurance Rate Map Panel Number 130065 0006 C, with an
\neffective date of July 5, 1983. The site appears to have adequate drainage and
\nsoil load-bearing capabilities to support most development alternatives. A
\nsoil report, however, was not made available to the appraiser and it is
\nassumed, based on existing improvements, that soil load-bearing capabilities
\nare adequate.<\/p>\n
The site is improved with a one-story facility constructed of a structural
\nsteel frame with dryvit covered exterior walls and a store-front type entrance,
\nutilized as an outpatient surgery center. In addition to concrete and asphalt
\npaving, the site is also improved with general landscaping, site lighting and
\nsignage.<\/p>\n
Access to the site is provided from one curb cut along the east side of
\nMontreal Road. Montreal Road is a two-lane thoroughfare with an additional
\nturn lane along the east side.<\/p>\n
-11-
\n 23
\nAll utilities, inclusive of water, sanitary sewer, electricity, natural gas and
\ntelephone service, are available to the site. The public utilities that are
\navailable at the present time are considered adequate to service the property.<\/p>\n
Our 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.<\/p>\n
To our knowledge, no environmental study has been conducted on the subject
\nsite. 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.<\/p>\n
Overall, the characteristics of the subject property are functional, marketable
\nand well suited for the current use as a medical office building.<\/p>\n
A legal description of the property and a land configuration plat are included
\nin the Exhibit section of this report.<\/p>\n
BUILDING AND SITE IMPROVEMENTS<\/p>\n
The site is improved with a one-story structure constructed in 1993. The
\nbuilding contains 8,749 gross square feet, which is the same as the leasable
\nsquare feet.<\/p>\n
The building areas are the appraiser’s calculations based on the dimensions on
\nthe Davis-Stokes-Chilton Collaborative P.C. Architects, architectural plans
\ndated June 25, 1992. We assume that the building was constructed according to
\nthese plans.<\/p>\n
The building is a one-story, pre-fabricated steel structure, with a dryvit
\nexterior. The entire building is sprinklered with a wet system. The building
\nhas reinforced concrete floors. The roof is comprised of steel joists, and
\nmetal decking, with a waterproof membrane covering. 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.<\/p>\n
-12-
\n 24
\nAir conditioning is supplied via four roof-mounted York compressors and air
\nhandlers with electric duct heaters in the zoned system. In addition, the
\nfacility is equipped with a medical gas system with vacuum. A 175 kilawatt
\ngenerator provides emergency power for the facility. We assume that the
\nheating and electrical capacity is adequate for the subject facility.<\/p>\n
The 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, a procedure room, patient recovery areas, a laboratory, a
\npharmacy, a nurses’ station, locker rooms, a lounge, and office and reception
\nareas. A portion of the interior has not been finished out at this time. This
\narea is reportedly for future expansion for two additional surgery suites. A
\ntypical floor plan for the building is shown in the Exhibit section of this
\nreport.<\/p>\n
Site improvements include asphalt paving and concrete sidewalks and curbing,
\nexterior lighting, wood fencing, and ground cover and shrubbery around the
\nsubject building. A detail description of the building and site improvements
\nare included in the Exhibit section of this report.<\/p>\n
CONDITION OF IMPROVEMENTS AND OBSOLESCENCE<\/p>\n
The building is new and in excellent condition. There is no deferred
\nmaintenance, or functional or economic obsolescence.<\/p>\n
-13-
\n 25
\n HIGHEST AND BEST USE<\/p>\n
The Appraisal Institute defines “highest and best use” as follows:<\/p>\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”<\/p>\n
[The Appraisal of Real Estate, P. 45, 10th Ed. published by The
\n Appraisal Institute.]<\/p>\n
The four categories of highest and best use analysis are:<\/p>\n
1. Physically Possible – Uses which are physically possible for
\n the site and improvements being analyzed.<\/p>\n
2. Legally Permissible – Uses permitted by zoning and deed
\n restrictions applicable to the site and improvements being
\n analyzed.<\/p>\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.<\/p>\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.<\/p>\n
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.<\/p>\n
-14-
\n 26
\nAs Vacant<\/p>\n
The 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.<\/p>\n
PHYSICALLY POSSIBLE<\/p>\n
The 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.<\/p>\n
LEGALLY PERMISSIBLE<\/p>\n
As stated earlier in the Zoning section of this report, the property is
\ncurrently zoned “C-1, 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. The subject’s conditional zoning provided for the limited access from
\nthe adjacent residential street.<\/p>\n
Surrounding uses include the hospital, other professional office uses, car lots
\nand some older single-family residential properties. These use patterns would
\nlikely preclude industrial, retail or future single-family development on the
\nsite.<\/p>\n
FINANCIALLY FEASIBLE<\/p>\n
Having 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 hospital related development in the subject area indicates that new medical
\ndevelopment is financially feasible. New medical offices have recently been
\nconstructed along Lawrenceville Highway to the west of the subject property.
\nOffice business-use facilities, however, are generally over-built in Atlanta,
\nas is the case in other major metropolitan areas. General business space is
\nnot considered financially feasible in the subject market at this time.<\/p>\n
-15-
\n 27
\nMAXIMALLY PRODUCTIVE<\/p>\n
The 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 current highest and best use of the
\nland, if vacant, would be for office\/institutional development based on the
\ngrowth needs of the area hospitals.<\/p>\n
As Improved<\/p>\n
The subject site is currently improved with an 8,749 leasable square foot
\nprofessional 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.<\/p>\n
PHYSICALLY POSSIBLE<\/p>\n
It 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 constructed 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.<\/p>\n
LEGALLY PERMISSIBLE<\/p>\n
The building, as improved, is assumed to be a legal conforming use, since the
\nproperty was recently constructed and received an occupancy permit. Under the
\ncurrent zoning, the property could remain as it is, be torn down or renovated.<\/p>\n
-16-
\n 28
\nFINANCIALLY FEASIBLE<\/p>\n
The 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.<\/p>\n
MAXIMALLY PRODUCTIVE<\/p>\n
The 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.<\/p>\n
-17-
\n 29
\n VALUATION SECTION<\/p>\n
VALUATION METHODOLOGY<\/p>\n
There are three principal methods to estimate the market value of the assets of
\nthe subject property. These are summarized as follows:<\/p>\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.<\/p>\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.<\/p>\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.<\/p>\n
Consideration 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.<\/p>\n
-18-
\n 30
\n COST APPROACH<\/p>\n
In 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.<\/p>\n
The cost analysis involves three basic steps:<\/p>\n
o Land value estimate.<\/p>\n
o Estimated replacement cost of the improvements.<\/p>\n
o Estimation of the accrued depreciation from all causes.<\/p>\n
The 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.<\/p>\n
Land Valuation<\/p>\n
Land valuation, assuming the site is vacant, is based upon the following steps:<\/p>\n
o A comparison with recent sales and\/or asking prices for
\n similar land.<\/p>\n
o Interviews with reliable real estate brokers and other
\n informed sources who are familiar with local real estate
\n activity.<\/p>\n
o Our experience in estimating land values.<\/p>\n
The 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.<\/p>\n
-19-
\n 31<\/p>\n
\n\nLand Comparable Number 1
\n– ————————
\n
\nParcel Number: 18-145-08-014<\/p>\nLocation: North side of Lawrenceville Highway
\n approximately 271 feet west of Spruce Valley
\n Drive.<\/p>\n
Size: 35,625 square feet<\/p>\n
Sale Date: February 11, 1992<\/p>\n
Deed Book\/Page: 7184\/295<\/p>\n
Grantor: Mildred M. Fisher<\/p>\n
Grantee: Bruce A. and Iris Feinberg<\/p>\n
Sale Price: $105,000<\/p>\n
Price Per Square Foot: $2.95<\/p>\n
Terms of Sale: All Cash<\/p>\n
Shape: Rectangular<\/p>\n
Zoning: R-3<\/p>\n
Utilities: All utilities are available.<\/p>\n
Comments: This parcel was part of two parcels
\n assembled for the construction of a medical
\n office building.
\n<\/c><\/s><\/caption>\n<\/table>\n
-20-
\n 32<\/p>\n
\n\nLand Comparable Number 2
\n– ————————
\n
\nParcel Number: 18-145-08-015<\/p>\nLocation: North side of Lawrenceville Highway
\n approximately 396 feet west of Spruce Valley
\n Drive.<\/p>\n
Size: 35,625 square feet<\/p>\n
Sale Date: February 11, 1992<\/p>\n
Deed Book\/Page: 7184\/288<\/p>\n
Grantor: O. S. Bailey, Jr.<\/p>\n
Grantee: Bruce A. & Iris Z. Feinberg<\/p>\n
Sale Price: $105,000<\/p>\n
Price Per Square Foot: $2.95<\/p>\n
Terms of Sale: All Cash<\/p>\n
Shape: Rectangular<\/p>\n
Zoning: R-3<\/p>\n
Utilities: All utilities are available.<\/p>\n
Comments: This parcel was part of two parcels assembled
\n for the construction of a medical office
\n building.
\n<\/c><\/s><\/caption>\n<\/table>\n
-21-
\n 33<\/p>\n
\n\nLand Comparable Number 3
\n– ————————
\n
\nParcel Number: 18-145-08-018<\/p>\nLocation: North side of Lawrenceville Highway
\n approximately 721 feet south of Spruce Valley
\n Drive.<\/p>\n
Size: 45,846 square feet<\/p>\n
Sale Date: April 27, 1993<\/p>\n
Deed Book\/Page: 7652\/353<\/p>\n
Grantor: Carde M. Connely<\/p>\n
Grantee: Bruce & Iris Feinberg<\/p>\n
Sale Price: $49,600<\/p>\n
Price Per Square Foot: $1.08<\/p>\n
Terms of Sale: All Cash<\/p>\n
Shape: Basically rectangular<\/p>\n
Zoning: C-3 (Commercial)<\/p>\n
Utilities: All utilities are available.<\/p>\n
Comments: The site has 237 feet of frontage and is at
\n grade with Lawrenceville Highway. The site is
\n presently improved with a two-story
\n professional office building.
\n<\/c><\/s><\/caption>\n<\/table>\n
-22-
\n 34<\/p>\n
\n\nLand Comparable Number 4
\n– ————————
\n
\nLocation: Southeast side of Lawrenceville Highway
\n approximately 419 feet south of McClendon
\n Drive.<\/p>\nSize: 89,298 square feet<\/p>\n
Sale Date: September 25, 1991<\/p>\n
Deed Book\/Page: 7139\/754<\/p>\n
Grantor: Orr Palmer Brick Company<\/p>\n
Grantee: Jarvis W. Palmer<\/p>\n
Sale Price: $217,000<\/p>\n
Price Per Square Foot: $2.43<\/p>\n
Terms of Sale: All Cash<\/p>\n
Shape: Irregular<\/p>\n
Zoning: C-3 (Commercial)<\/p>\n
Utilities: All utilities are available.<\/p>\n
Comments: The site has approximately 227 feet of
\n frontage along Lawrenceville Highway and is at
\n grade. The topography is rolling and slopes
\n down to the rear of the lot. The site is
\n improved with a single-family residence,
\n constructed in 1959, which does not contribute
\n any value.
\n<\/c><\/s><\/caption>\n<\/table>\n
-23-
\n 35
\nA summary of the land sales is shown as follows:<\/p>\n
\n\n SUMMARY OF LAND COMPARABLES<\/p>\n SALE SALE SIZE PRICE
\n NO. LOCATION DATE (SF) PER SF<\/p>\n
\n 1 N\/s Lawrenceville Hwy. 02\/92 35,625 $2.95
\n 2 N\/s Lawrenceville Hwy. 02\/92 35,625 $2.95
\n 3 N\/s Lawrenceville Hwy. 04\/93 45,846 $1.08
\n 4 SE\/s Lawrenceville Hwy. 09\/91 89,298 $2.43
\n SUBJECT 1419 MONTREAL ROAD 94,090
\n<\/c><\/c><\/c><\/c><\/s><\/caption>\n<\/table>\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 35,625
\nsquare feet to 89,298 square feet and indicate an unadjusted range of value
\nfrom $1.08 per square foot to $2.95 per square foot. Unless otherwise
\nindicated, the sales involved arm’s length transactions that conveyed a fee
\nsimple interest, and only real property was included in the transactions. The
\ncomparable sales are analyzed in the following paragraphs.<\/p>\n
LAND SALE NUMBER 1 was one of two parcels that were assembled for the
\nconstruction of a professional office building. A downward adjustment is
\nindicated for this condition of sale. The land sale is recent and no
\nadjustment appears warranted for time of sale. The sale is located
\napproximately one mile to the west of the subject and is not adjacent to a
\nhospital. As such, an upward adjustment for location is indicated. The site
\nhas good access and exposure characteristics and is considered comparable to
\nthe subject. As such, no adjustment is indicated for these factors. The
\nparcel is smaller in size compared to the subject. Typically, smaller sites
\ncommand a higher unit price than larger sites. A downward adjustment is
\nindicated for the sale site compared to the subject. The topography, overall
\nutility and zoning are considered comparable to the subject and no adjustment
\nis indicated for these factors. Overall, a downward adjustment is indicated
\nfor the sale.<\/p>\n
-24-
\n 36
\nLAND SALE NUMBER 2 was one of two parcels that were assembled for the
\nconstruction of a professional office building. A downward adjustment is
\nindicated for this condition of sale. The land sale is recent and no
\nadjustment appears warranted for time of sale. The sale is located
\napproximately one mile to the west of the subject and is not adjacent to a
\nhospital. As such, an upward adjustment for location is indicated. The site
\nhas good access and exposure characteristics and is considered comparable to
\nthe subject. As such, no adjustment is indicated for these factors. The
\nparcel is smaller in size compared to the subject. Typically, smaller sites
\ncommand a higher unit price than larger sites. A downward adjustment is
\nindicated for the sale site compared to the subject. The topography, overall
\nutility and zoning are considered comparable to the subject and no adjustment
\nis indicated for these factors. Overall, a downward adjustment is indicated
\nfor the sale.<\/p>\n
LAND SALE NUMBER 3 was the April 1993 sale of a 45,846 square foot site located
\nalong the north side of Lawrenceville Highway. The site was vacant at the time
\nof sale and is presently improved with a medical office building. The sale is
\nrecent and no adjustment is indicated for market conditions. The sale is
\nlocated approximately one mile to the west of the subject and is not adjacent
\nto a hospital. As such, an upward adjustment for location is indicated. The
\nsite has good access and exposure characteristics and is considered comparable
\nto the subject. As such, no adjustment is indicated for these factors. The
\nparcel is smaller in size compared to the subject. Typically, smaller sites
\ncommand a higher unit price than larger sites. A downward adjustment is
\nindicated for the sale site compared to the subject. The topography, overall
\nutility and zoning are considered comparable to the subject and no adjustment
\nis indicated for these factors. Overall, no adjustment is indicated for the
\nsale.<\/p>\n
LAND SALE NUMBER 4 represents the September 1991 sale of a 89,298 square foot
\nparcel located along the southeast side of Lawrenceville Highway south of
\nMcClendon Drive. A slight downward adjustment is indicated for market
\nconditions based on the date of sale. The site is improved with an older,
\nsingle-family residence constructed in 1959. However, the improvements do not
\ncontribute any value to the site. The sale is located approximately one mile
\nto the west of the subject and is not adjacent to a hospital. As such, an
\nupward adjustment for location is indicated. The site has good access and
\nexposure characteristics and is considered comparable to the subject. As such,
\nno adjustment is indicated for these factors. The parcel is comparable in size
\ncompared to the subject and no adjustment is indicated. The topography,
\noverall utility and zoning<\/p>\n
-25-
\n 37
\nare considered comparable to the subject and no adjustment is indicated for
\nthese factors. Overall, a downward adjustment is indicated for the sale.<\/p>\n
Land Conclusion<\/p>\n
Based upon the preceding analysis and conversations with local brokers, it is
\nour opinion that a value of $1.50 per square foot is representative of the
\nsubject site, as if vacant. Multiplied by the subject’s 94,090 square foot
\nsite, this would indicate a market value of the subject land calculated as
\nfollows:<\/p>\n
94,090 SF x $1.50\/SF = $141,135<\/p>\n
Rounded to: $140,000
\n ========<\/p>\n
Building and Site Improvements<\/p>\n
The 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.<\/p>\n
-26-
\n 38
\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:<\/p>\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.<\/p>\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.<\/p>\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.<\/p>\n
Economic Life: The economic life of a good quality medical office
\n buildings is typically 45 to 50 years. For the subject Class C
\n building, we have assumed an economic life of 45 years.<\/p>\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.<\/p>\n
Marshall 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.<\/p>\n
Physical Depreciation<\/p>\n
The amount of physical depreciation and obsolescence in the subject building is
\nminimal due to its young age. Observation of the subject property indicated
\nthat the structure and related component parts have been adequately maintained
\nthrough a continuous maintenance service program.<\/p>\n
-27-
\n 39<\/p>\n
The subject property was constructed in 1993 and it is in excellent condition.
\nIt is judged that the subject has an effective age equal to its actual age of
\none year. The remaining useful life is estimated to be 44 years. This
\ntranslates into a physical depreciation estimate of 2.0 percent (1 year divided
\nby 45 years). The amount of depreciation attributable to the property has been
\nestimated on a straight-line basis, which is founded on the assumption that
\ndepreciation of a property occurs equally throughout its economic life.<\/p>\n
Due to the design and structural components of the building, we have not
\nindicated any loss in value due to functional obsolescence.<\/p>\n
The 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 one year and a remaining useful life of 19
\nyears. Therefore, the depreciation rate attributable to the site improvements
\non a straight-line basis is estimated to be 5.0 percent.<\/p>\n
During our area study, we did not notice any evidence of economic obsolescence
\nassociated with the subject property.<\/p>\n
The computation of value is shown as follows:<\/p>\n
\n\n Replacement Accumulated Depreciated
\n Cost Depreciation Value
\n ———— ———— ———–
\n
\n MOB $1,083,375 $21,668 $1,061,707
\n Site Improvements 45,535 2,277 43,258
\n ———- ——- ———-
\n Total Improvements $1,128,910 $23,945 $1,104,965
\n<\/c><\/c><\/c><\/s><\/caption>\n<\/table>\nCost Approach Conclusion<\/p>\n
Based 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:<\/p>\n
$1,100,000
\n ==========<\/p>\n
-28-
\n 40
\n SALES COMPARISON APPROACH<\/p>\n
The Sales Comparison Approach is based upon the principle of substitution; that
\nis, when a property is replaceable in the market, its value tends to be set at
\nthe cost of acquiring an equally desirable substitute property, assuming there
\nis no costly delay in making the substitution. Since two properties are rarely
\nidentical, the necessary adjustments for differences in quality, location,
\nsize, services and market appeal are a function of appraisal experience and
\njudgment.<\/p>\n
The Sales Comparison Approach gives consideration to actual sales of other
\nsimilar properties with adjustments as previously stated. The sales prices are
\nanalyzed in common denominators and applied to the subject property in
\nrespective categories to be indicative of market value.<\/p>\n
The 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 arm’s 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.<\/p>\n
In our analysis, we obtained details on seven professional office building
\nsales which 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:<\/p>\n
-29-
\n 41<\/p>\n
\n\nIMPROVED SALE NUMBER 1
\n– ———————- <\/p>\nGENERAL SALE DATA
\n
\nLocation: 1770 Independence Court, Homewood, Jefferson County, Alabama
\nDate of Sale: March 9, 1993
\nDeed Book\/Page: 4223\/115
\nGrantor: Brookwood Medical & Dental Group
\nGrantee: Proxy Land Development Corporation
\nSale Price: $850,000
\nTerms of Sale: All Cash<\/p>\nPROPERTY DATA <\/p>\n
Land Size: 92,200 square feet
\nBuilding Size: 7,808 square feet – gross
\n 6,928 square feet – leasable
\nYear Built: 1984
\nOccupancy at Sale: 100%<\/p>\n
STABILIZED OPERATING DATA
\n Dollars Per SF
\n ——- ——
\nEstimated Gross Income: $100,456 $14.50
\nVacancy Allowance @ 5%: $ 5,023 $ 0.73
\n ——– ——
\nEffective Gross Income: $ 95,433 $13.77
\nEstimated Expenses @ $4.00: $ 27,712 $ 4.00
\n ——– ——
\nNet Operating Income: $ 67,721 $ 9.77<\/p>\n
MARKET VALUE INDICATORS <\/p>\n
Sale Price Per Square Foot: $ 122.69
\nStabilized Overall Rate: 8.0%
\nEGIM: 8.91
\n<\/c><\/s><\/caption>\n<\/table>\n
COMMENTS<\/p>\n
The Grantor was an affiliate of HealthSouth Medical Center. The hospital paid
\nmore than market value for the building so the Grantee\/physician would move his
\nsurgical practice to the HealthSouth Medical Center.<\/p>\n
-30-
\n 42<\/p>\n
\n\nIMPROVED SALE NUMBER 2
\n– ———————- <\/p>\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<\/p>\nPROPERTY DATA <\/p>\n
Land Size: 82,460 square feet
\nBuilding Size: 52,440 square feet – gross
\n 44,574 square feet – leasable
\nYear Built: 1964<\/p>\n
STABILIZED 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<\/p>\n
MARKET VALUE INDICATORS <\/p>\n
Sale Price Per Square Foot: $ 84.13
\nStabilized Overall Rate: 9.0%
\nEGIM: 6.68
\n<\/c><\/s><\/caption>\n<\/table>\n
COMMENTS<\/p>\n
This three-story building was purchased by the UAB Medical Center. A Medical
\nGenetics Center now occupies the facility. The current land value near the UAB
\ncampus is estimated at 40% to 45% of the total purchase price.<\/p>\n
-31-
\n 43<\/p>\n
\n\nIMPROVED SALE NUMBER 3
\n– ———————- <\/p>\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<\/p>\nPROPERTY DATA <\/p>\n
Land Size: 1.65 acres (approximate)
\nBuilding Size: 32,500 square feet
\nYear Built: 1991
\nOccupancy at Sale: 100%<\/p>\n
STABILIZED 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<\/p>\n
MARKET VALUE INDICATORS <\/p>\n
Sale Price Per Square Foot: $ 139.23
\nStabilized Overall Rate: 10.1%
\nEGIM: 7.10
\n<\/c><\/s><\/caption>\n<\/table>\n
COMMENTS<\/p>\n
This property included three buildings containing 12,400 SF, 12,000 SF and
\n8,100 SF. The first two buildings were leased to North Fulton Hospital for
\nseven years. The first 12,400 SF was leased for $16.00\/SF net, and the other
\n12,000 SF was leased for $16.25\/SF net. The tenants were responsible for all
\ncosts but structural maintenance and management.<\/p>\n
* The rents were adjusted upward $4.50\/SF for gross comparison.<\/p>\n
-32-
\n 44<\/p>\n
\n\nIMPROVED SALE NUMBER 4
\n– ———————- <\/p>\nGENERAL SALE DATA
\n
\nLocation: 2519 Galiano Street, Miami, Dade County, Florida
\nDate of Sale: December 29, 1992
\nDeed Book\/Page: 15762\/4643
\nGrantor: American Equities No. 2, Inc.
\nGrantee: CAC Properties, Inc.
\nSale Price: $12,521,000
\nTerms of Sale: Third party financing had no impact on the purchase price<\/p>\nPROPERTY DATA <\/p>\n
Parcel Number: 03-4117-005-1340 & 1330
\nBuilding Size: 139,500 square feet
\nYear Built: 1986<\/p>\n
STABILIZED OPERATING DATA
\n Dollars Per SF
\n ——- ——
\nEstimated Gross Income: $2,511,000 $18.00
\nVacancy Allowance: $ 376,650 $ 2.70
\n ———- ——
\nEffective Gross Income: $2,134,350 $15.30
\nEstimated Expenses @ $6.00\/SF: $ 837,000 $ 6.00
\n ———- ——
\nNet Operating Income: $1,297,350 $ 9.30<\/p>\n
MARKET VALUE INDICATORS <\/p>\n
Sale Price Per Square Foot: $ 89.76
\nStabilized Overall Rate: 10.4%
\nEGIM: 5.87
\n<\/c><\/s><\/caption>\n<\/table>\n
COMMENTS<\/p>\n
This building has six stories of office space over seven stories of parking
\ndeck. The building was purchased by the primary tenant in the building. This
\nbuilding is not adjacent to a hospital. Sun Bank has bank space in the bottom
\nfloor of the building.<\/p>\n
-33-
\n 45<\/p>\n
\n\nIMPROVED SALE NUMBER 5
\n– ———————- <\/p>\nGENERAL SALE DATA
\n
\nLocation: 5 West Sample Road in Pompano Beach, Broward County, Florida
\nDate of Sale: July 5, 1991
\nDeed Book\/Page: 18536\/769
\nGrantor: Robert T. Held, Sr.
\nGrantee: William J. Rand, et al
\nSale Price: $3,150,000
\nTerms of Sale: Third party conventional financing had no impact on price.
\nPROPERTY DATA <\/p>\nLand Size: 15,000 square feet
\nBuilding Size: 27,500 square feet – gross
\n 25,000 SF estimated leasable
\nYear Built: 1991
\nOccupancy at Sale: Build-to-suit for Rand Eye Institute<\/p>\n
STABILIZED OPERATING DATA
\n Dollars Per SF
\n ——– ——
\nEstimated Gross Income: $450,000 $18.00
\nVacancy Allowance @ 5%: $ 22,500 $ 0.90
\n ——– ——
\nEffective Gross Income: $427,500 $17.10<\/p>\n
Estimated Expenses @ $5.00: $125,000 $ 5.00
\n ——– ——
\nNet Operating Income: $302,500 $12.10<\/p>\n
MARKET VALUE INDICATORS <\/p>\n
Sale Price Per Square Foot: $ 126.00
\nStabilized Overall Rate: 9.6%
\nEGIM: 7.37
\n<\/c><\/s><\/caption>\n<\/table>\n
COMMENTS<\/p>\n
This is a three-story, Class B, reflective glass and concrete building is
\nlocated in the northeast quadrant of the intersection of I-95 and Samples Road
\nnear the campus of the North Broward Medical Center.<\/p>\n
-34-
\n 46<\/p>\n
\n\nIMPROVED SALE NUMBER 6
\n– ———————- <\/p>\nGENERAL SALE DATA
\n
\nLocation: 9750 NW 33rd Street in Coral Springs, Broward County, Florida
\nDate of Sale: September 19, 1991
\nDeed Book\/Page: 18762\/194
\nGrantor: Central Medical Plaza Associates, Inc.
\nGrantee: Gary V. Caplan, Trustee
\nSale Price: $4,790,200
\nAdjusted Sale Price: $4,550,500
\nTerms of Sale: Seller provided a 75% mortgage. The sale price was adjusted downward 5%
\n for cash equivalency.<\/p>\nPROPERTY DATA <\/p>\n
Land Size: 3.5 acres
\nBuilding Size: 48,031 square feet – gross
\n 43,500 sf leasable
\nYear Built: 1988
\nOccupancy at Sale: 95%<\/p>\n
STABILIZED OPERATING DATA
\n Dollars Per SF
\n ——– ——
\nEstimated Gross Income: $891,750 $20.50
\nVacancy Allowance @ 10%: $ 89,175 $ 2.05
\n ——– ——
\nEffective Gross Income: $802,575 $18.45
\nEstimated Expenses @ $6.00: $261,000 $ 6.00
\n ——– ——
\nNet Operating Income: $541,575 $12.45<\/p>\n
MARKET VALUE INDICATORS <\/p>\n
Sale Price Per Square Foot: $ 104.61
\nStabilized Overall Rate: 11.9%
\nEGIM: 5.67
\n<\/c><\/s><\/caption>\n<\/table>\n
COMMENTS<\/p>\n
This is a two-story, steel frame medical office building that was constructed
\nin 1988. It is located east of University Road and northwest of the Coral
\nSprings Medical Center. This sale occurred in the recession of 1991 when
\nconventional financing was difficult to obtain.<\/p>\n
-35-
\n 47<\/p>\n
\n\nIMPROVED SALE NUMBER 7
\n– ———————- <\/p>\nGENERAL SALE DATA
\n
\nLocation: South side of SW 8th Street at 4950 SW 8th Street in Coral Gables, Dade
\n County, Florida
\nDate of Sale: January 6, 1992
\nDeed Book\/Page: 15338\/2902
\nGrantor: Abbey Health Services Inc.
\nGrantee: Kendall Health Care Group, Inc.
\nSale Price: $10,500,000
\nTerms of Sale: Third party financing had no impact on the purchase price.<\/p>\nPROPERTY DATA <\/p>\n
Land Size: 21,250 square feet
\nBuilding Size: 37,100 square feet – leasable
\nYear Built: 1985<\/p>\n
STABILIZED OPERATING DATA
\n Dollars Per SF
\n ——– ——
\nEstimated Gross Income: $593,600 $16.00
\nVacancy Allowance @ 10%: $ 59,360 $ 1.60
\n ——– ——
\nEffective Gross Income: $534,240 $14.40
\nEstimated Expenses @ $5.00\/SF $185,500 $ 5.00
\n ——– ——
\nNet Operating Income: $348,740 $ 9.40<\/p>\n
MARKET VALUE INDICATORS <\/p>\n
Sale Price Per Square Foot: $ 94.34
\nStabilized Overall Rate: 9.9%
\nEGIM: 5.90
\n<\/c><\/s><\/caption>\n<\/table>\n
COMMENTS<\/p>\n
This building has two stories of office space above a covered, open-air parking
\nlot. This location is near the Vencor Hospital. The building was reported to
\nbe 100% occupied at the time of sale.<\/p>\n
-36-
\n 48
\nThe comparable improved sales are summarized as follows:<\/p>\n
SUMMARY OF IMPROVED SALES<\/p>\n
\n\n SALE RENTABLE PRICE PER
\n NO. ADDRESS (SQUARE FEET) SALE PRICE SQUARE FOOT<\/p>\n
\n 1 Independence Court 6,928 $ 850,000 $122.69
\n Birmingham, Alabama
\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 2519 Galiano Street 139,500 $12,521,000 $ 89.76
\n Miami, Florida
\n 5 5 West Sample Road 25,000 $ 3,150,000 $126.00
\n Pompano Beach, Florida
\n 6 9750 N.W. 33rd Street 43,500 $ 4,550,500 $104.61
\n Coral Springs, Florida
\n 7 4950 SW 8th Street 37,100 $10,500,000 $ 94.34
\n Coral Springs, Florida
\n<\/c><\/c><\/c><\/c><\/s><\/caption>\n<\/table>\nThe unadjusted prices of these comparables range from $89.76 per square foot to
\n$153.33 per square foot. All of the transactions presented involved improved
\nfacilities conveyed in fee simple. The sales were either purchased with all
\ncash or with a down payment and financing to be considered at market, unless
\nindicated otherwise.<\/p>\n
IMPROVED SALE 1 is a Class C professional office building that is located near
\nthe Brookwood Medical Center. An affiliate of HealthSouth Medical Center
\npurchased this building to entice its physician\/owner to move his practice to
\ntheir facility. This transaction was reportedly at a market value price.
\nHowever, a downward adjustment is indicated because the building was not
\nmarketed as a vacant building due to this relationship. The building is
\nconsidered comparable in size to the subject and no adjustment is indicated for
\nsize. The building is located at the end of a steep winding road, and has poor
\nvisibility. An upward adjustment is indicated due to this inferior location
\ncompared to the subject. An addition upward adjustment to this comparable is
\nalso indicated due to the subject’s recent construction making the subject
\nbuilding<\/p>\n
-37-
\n 49
\nnewer than this comparable. Overall, an upward adjustment to the sale, in
\ncomparison to the subject, was made.<\/p>\n
IMPROVED SALE 2 is the sale of a building purchased by UAB to use as a Medical
\nGenetics Center. Upward adjustments are indicated because of the subject’s
\nsuperior location and quality, and because of the older age of this comparable.
\nAn upward adjustment is indicated because this sale occurred during the
\nrecession in 1991 when property values were declining and financing restricted.
\nAn upward adjustment is indicated for the sale’s larger size in comparison to
\nthe subject facility. Overall, an upward adjustment has been made to the sale.<\/p>\n
IMPROVED SALE 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. A downward adjustment is indicated because 80
\npercent of this facility was net leased to the hospital. An upward adjustment
\nis indicated due to the larger size of this comparable. Upward adjustments are
\nindicated for location and quality of improvements. All factors considered, a
\nslight upward adjustment is indicated.<\/p>\n
IMPROVED SALE 4 was the December 1992 sale of a 139,500 square foot
\nprofessional office building located in Miami, Florida. The sale was to the
\nmain tenant in the building, a healthcare plan operated by Ramsay. An upward
\nadjustment is indicated because this tenant has such a large economic impact on
\nthe property, and because the sellers were reportedly very motivated to sell.
\nAn upward adjustment to the price per foot of this comparable is indicated
\nbecause the building is larger than the subject property. Overall, the sale
\nhas been adjusted upward.<\/p>\n
IMPROVED SALE 5 is a Class B professional office building that is located in
\nPompano Beach near the North Broward Medical Center. This building was
\nconstructed for use by the Rand Eye Institute. An upward adjustment is
\nindicated because this sale occurred during the recession in 1991 when property
\nvalues declining and financing restricted. Upward adjustments are also
\nindicated for location and quality of the improvements. All factors
\nconsidered, this comparable has been adjusted upward.<\/p>\n
IMPROVED SALE 6 was the September 1991 sale of a professional office facility
\nthat is located northwest of the Coral Springs Medical Center. The sale price
\nwas adjusted downward for cash equivalency because of seller financing. Upward
\nadjustments are indicated due to the improving property values and the economy
\nsince this sale, and<\/p>\n
-38-
\n 50
\nbecause of the subject’s superior location and superior quality of
\nimprovements. All factors considered, this sale has been adjusted upward.<\/p>\n
IMPROVED SALE 7 was January 1992 sale of a medical building located near the
\nVencor Hospital in Coral Gables, Florida. Upward adjustments to the price per
\nsquare foot of this comparable are indicated for location and size. Upward
\nadjustment are also indicated due to the older age of this comparable and the
\nsubject’s superior quality of improvements. Overall, this comparable sale has
\nbeen adjusted upward.<\/p>\n
Based on the preceding analysis, we are of the opinion that $130.00 per square
\nfoot would be indicative of the subject’s value. Therefore, the market value
\nof the subject property via the Sales Comparison Approach, as of March 15,
\n1994, the effective date of this report, is calculated as follows:<\/p>\n
8,749 SF x $130.00\/SF = $1,137,370<\/p>\n
Rounded to: $1,140,000
\n ==========<\/p>\n
-39-
\n 51
\n INCOME APPROACH<\/p>\n
The 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.<\/p>\n
The subject property is one of several professional office buildings that
\nCrescent Capital Trust, Incorporated is establishing a real estate investment
\ntrust (REIT). Surgical Health Corporation will provide a net rental guarantee,
\nin the form of a master lease. The REIT, as the new property owner, will
\nreceive the net rental master lease rate per square foot of rentable office
\narea, regardless of the rental rates charged or received from the actual
\ntenant(s). Additionally, the annual rental income provided for in the ground
\nlease, associated with the subject property, will be received by the REIT.<\/p>\n
This master lease is a credit enhancement vehicle that will enable the REIT
\nissuer to sell the REIT shares. It will also allow Crescent Capital Trust,
\nIncorporated leasing flexibility for the medical office building space, i.e.,
\nthey can lease office space to various physicians at different rates and terms,
\nor they can use the office space for hospital purposes.<\/p>\n
The 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.<\/p>\n
The master lease rate for the subject property will be $115,000 annually based
\non a 15-year lease, and an additional $104,709 annual rental income in
\nconjunction with the ground lease associated with the subject property.<\/p>\n
-40-
\n 52
\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.<\/p>\n
Since 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$5,750, based on the management experience of other properties. The income
\nreceived in conjunction with the ground lease will be offset by the ground
\nlease expense. The net operating income for the property is calculated as
\nfollows:<\/p>\n
\n
\nMaster lease revenue $ 115,000
\nGround lease revenue 104,709
\n ———
\n Total revenues $ 219,709<\/p>\nLess:
\nManagement fees (5% of master lease) $ (5,750)
\nGround lease expense (104,709)
\n ———
\nNet Operating Income $ 109,250
\n<\/c><\/s><\/table>\n
The estimated direct capitalization rates, or overall rates (OARs), for the
\nseven improved sale comparables presented in the Sales Comparison Approach
\nsection of this report ranged from 8.0 percent to 11.9 percent. Two of the
\ncapitalization rates in the upper end of this range represent sales that
\noccurred in 1991 when sales and financing availability were restricted. In
\nImproved Sale Number 4, with a high estimated capitalization rate of 10.4
\npercent, the buyer was the major tenant in the building, and the sale was
\nreportedly not completely an arm’s length sale. Based on the comparables and
\nthis discussion, a capitalization rate of 10.5 percent is considered
\nappropriate for the subject property.<\/p>\n
-41-
\n 53<\/p>\n
It is, therefore, our opinion that the market value of the subject property, as
\nof March 15, 1994, by the Income Approach is calculated and rounded as follows:<\/p>\n
Net Operating Income\/OAR = Estimated Value<\/p>\n
$109,250\/.105 = $1,040,476<\/p>\n
Rounded to: $1,040,000
\n ==========<\/p>\n
-42-
\n 54
\n CORRELATION AND CONCLUSION<\/p>\n
We have considered three approaches to value in order to estimate the value of
\nthe Northlake Tucker Ambulatory Surgery Center. The values derived from the
\nthree approaches are summarized as follows:<\/p>\n
\n
\n Cost Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,100,000
\n Sales Comparison Approach . . . . . . . . . . . . . . . . . . . . . . . $1,140,000
\n Income Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,040,000
\n<\/c><\/s><\/table>\nThe Cost Approach involved a detailed analysis of the individual components of
\nthe property. These costs were estimated using reliable sources. The Cost
\nApproach provides a good indicator of the current replacement cost for new and
\nspecial purpose properties such as the subject. This approach is
\nrepresentative of the value in use as part of the hospital complex. The Cost
\nApproach, however, does not necessarily reflect the value that investors and
\nusers would be willing to pay if the property were to be sold. Overall, this
\napproach is considered only a fair indicator of value.<\/p>\n
The 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 several of the comparable sales differed in size from the
\nsubject and were in other geographic locations outside the Atlanta market. The
\nappraisers only consider this approach to be a fair indicator of value for the
\nsubject property for this reason.<\/p>\n
The Income Approach normally provides the most reliable value estimate for
\nmulti-tenant professional office buildings. The value of the property is
\nstrongly related to the expected income stream of the property. Although the
\nbuyers of professional office buildings are usually owner\/occupants, these
\nbuyers are generally aware of the property’s cash flow potential and its value
\nfrom an investor’s perspective. For this reason, the Income Approach is
\nconsidered the best indicator of value for the subject.<\/p>\n
-43-
\n 55
\nBased on this analysis, it is our opinion that the market value of the
\nNorthlake Tucker Ambulatory Surgery Center, as of March 15, 1994, subject to
\nthe Surgical Health Corporation master lease, and based on the assumptions and
\nlimiting conditions in this report, is the Income Approach value of:<\/p>\n
$1,040,000
\n ==========
\nThe values derived in the other approaches support the Income Approach value as
\nthe final value.<\/p>\n
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