The URL can be used to link to this page

Home My WebLink About03-25-08 (2) 15056041147 06 05 REV-1500 EX ( ) - OFFICIAL USE ONLY PA Department of Revenue Bureau of Individual Taxes County Code Year File Number PO BOX.28060i INHERITANCE TAX RETURN Harrisburg, PA 17128-0601 RESIDENT DECEDENT 21 0 7 0 718 ENTER DECEDENT INFORMATION BELOW Social Security Number Date of Death Date of Birth 579 20 5155 07 16 2 007 04 26 1924 Decedent's Last Name Suffix Decedent's First Name MI HURST DONALD A (If Applicable) Enter Surviving Spouse's Information Below Spouse's Last Name Suffix Spouse's First Name MI HURST SHARON J Spouse's Social Security Number THIS RETURN MUST QE FILED IN DUPLICATE WITH THE REGISTER OF WILLS FILL IN APPROPRIATE OVALS BELOW j I 1. Original Return ~ 2. Supplemental Return j 3. Remainder Return (date of death " - prior to 12-13-82) 4. Limited Estate - ~ 4a. Future Interest Compromise U 5. Federal Estate Tax Return Required (date of death after 12-12-82) IX I, 6. Decedent Died Testate - (Attach Copy of Will) ~ _ 1 ~-~ --~ ~ Decedent Maintained a Living Trust (Attach Copy of Trust) 0 8. Tota! Number of Safe De osit Boxes P 9. LlUgabon Proceeds Received ~~, CORRESPONDENT -THIS SECTION MUST BE COI Name RICHARD W. STEWART Firm Name (If Applicable) 1 D Spousal Poverty Credit (date of death I~,~ 11. Election to tax under Sec. 9113(A) between 12-31-91 and i-1-95) ~- I (Attach SCh. O) APLETED. ALL CORRESPONDENCE AND CONFIDENTIAL TAX INFORMATION SHOULD BE DIRECTED TO: Daytime Telephone Number (717) 761 4540 JOHNSON D U F F I E REGISTER OF WILLS USE ONLY First line of address 301 MARKET ST. Second line of address PO BOX 10 9 -:- DATE FILED City or Post Office State ZIP Code LEMOYNE PA 17043-0109 Correspondent's a-mail address: Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct and complete. Declaration of preparer other than the personal representative Is based on all information of which preparer has any knowledge. SIGNATURE~R~ESP//~ E FO FILING RETURN ~jDA~TE~ Richard W Stewart ,j~~~F ~~ ADDRESS 301 Market Street, Lemoyne, PA 17043 SIGNATURE O R RER OTHER THAN PRESENTATIVE DATE RICHARD W. STEWART ~ ~!y ~ ADDRESS 301 Market St., Lemoyne, PA 17043-0109 Side 1 15056041147 15056041147 PA Inheritance Tax Return Signature of Additional Fiduciaries ESTATE OF FILE NUMBER Hurst, Donald A 21-07-0718 Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct and complete. Declaration of preparer other than the personal representative is based on all information of which preparer has any knowledge. Signature #2 Name Address1 Address2 City, State, Zip Date Sharon June 58 Fairway Drive Camp Hill, PA 17011 3 ~ o~ REV-1500 EX Page 3 Decedent's Complete Address: File Number 21-07-0718 DECEDENT'S NAME Donald A Hurst _ _ STREET ADDRESS 58 Fairway Drive ___ __ CITY STATE ZIP Camp Hill PA 17011 Tax Payments and Credits: 1. Tax Due (Page 1 Line 19) 2. Credits/Payments A. Spousal Poverty Credit g. Prior Payments C. Discount 10,000.00 482.12 (1) 9,642.37 -- Total Credits (A + g + C) (2) 10,482.12 3. Interest/Penalty if applicable p. Interest E. Penalty Total InterestlPenalty (D + E) (3) 4. If Line 2 is greater than Line 1 + Line 3, enter the difference. This is the OVERPAYMENT. (4) 839.75 Check box on Page 2 Line 20 to request a refund 5. If Line 1 + Line 3 is greater than Line 2, enter the difference. This is the TAX DUE. (5) A. Enter the interest on the tax due. (5A) B. Enter the total of Line 5 + 5A. This is the BALANCE DUE. (56) Make Check Payable to: REGISTER OF WILLS, AGENT PLEASE ANSWER THE FOLLOWING QUESTIONS BY PLACING AN "X" IN THE APPROPRIATE BLOCKS 1. Did decedent make a transfer and: Yes No a. retain the use or income of the property transferred :.................................................................................^x ',_~ b. retain the right to designate who shall use the property transferred or its income :.................................... ~ iL !! c. retain a reversionary interest; or ...............................................................................................................:` I [, d. receive the promise for life of either payments, benefits or care? .............................................................{ I 2. If death occurred after December 12, 1982, did decedent transfer property within one year of death without receiving adequate consideration? .....................................................................................................................~' 3. Did decedent own an "in trust for" or payable upon death bank account or security at his or her death?......... ~ J f x 4. Did decedent own arylndiv9 ual Retirement Account, annuity. or other non-probate property which ~ , _ .. xI ~ i contains a beneficia desi nation .................. . IF THE ANSWER TO ANY OF THE ABOVE QUESTIONS IS YES, YOU MUST COMPLETE SCHEDULE G AND FILE IT AS PART OF THE RETURN. _ _ _ _ -- For dates of death on or after July 1, 1994 and before January 1, 1995, the tax rate imposed on the net value of transfers to or for the use of the surviving spouse is three (3) percent [72 P.S. §9116 (a) (1.1) (i)]. For dates of death on or after January 1, 1995, the tax rate imposed on the net value of transfers to or for the use of the surviving spouse is zero (0) percent [72 P.S. §9116 (a) (1.1) (ii)]. The statute does not exempt3 transfer to a surviving spouse from tax, and the statutory requirements for disclosure of assets and filing a tax return are still applicable even if the surviving spouse is the only beneficiary. For dates of death on or after July 1, 2000: The tax rate imposed on the net value of transfers from a deceased child twenty-one years of age or younger at death to or for the use of a natural parent, an adoptive parent, or a stepparent of the child is zero (0) percent [72 P.S. §9116 (a) (1.2)]. The tax rate imposed on the net value of transfers to or for the use of the decedent's lineal beneficiaries is four and one-half (4.5) percent, except as noted in 72 P.S. §9116 1.2) [72 P.S. §9116 (a) (1)]. The tax rate imposed on the net value of transfers to or for the use of the decedent's siblings is twelve (12) percent [72 P.S. §9116 (a) (1.3)]. A sibling is defined under Section 9102, as an individual who has at least one parent in common with the decedent, whether by blood or adoption. 15056042148 REV-1500 EX oe~der,c5 Name: D o n a l d A H u r s t Decedent's Social Security Number 579 20 5155 RECAPITULATION 1. Real Estate (Schedule A) .......................................................................................... 1. 2. Stocks and Bonds (Schedule B) ............................................................................... 2. 3. Closely Held Corporation, Partnership or Sole-Proprietorship (Schedule C).......... 3. 4. Mortgages & Notes Receivable (Schedule D) ................................................... ....... 4. 5. Cash, Bank Deposits & Miscellaneous Personal Property (Schedule E) ........... ..... 5. 6. Jointly Owned Property (Schedule F) [] Separate Billing Requested ......... .... 6. 7. Inter-Vivos Transfers & Miscellaneous Non-Probate Property (Schedule G) '~ Separate Billing Requested ......... .... 7. 8. Total Gross Assets (total Lines 1-7) ............................................................... ........ 8. 9. Funeral Expenses & Administrative Costs (Schedule H) .................................. ....... 9. 10. Debts of Decedent, Mortgage Liabilities, & Liens (Schedule I) ......................... ....... 10. 11. Total Deductions (total Lines 9 & 10) ............................................................. ........•11. 12. Net Value of Estate (Line 8 minus Line 11) ..................................................... ........12. 13. Charitable and Governmental Bequests/Sec 9113 Trusts for which an election to tax has not been made (Schedule J) .......................................... ....... 13. 14. Net Value Subject to Tax (Line 12 minus Line 13) . ............................................ .... 14. TAX COMPUTATION -SEE INSTRUCTIONS FOR APPLICABLE RATES 15. Amount of Line 14 taxable at the spousal tax rate, of transfers under Sec. 9116 (a)(1.2) x .o0 314 , 2 7 4 8 5 15. 16. Amount of Line 14 taxable 8 5 2 7 4 2 1 4 16. at lineal rate X .045 . , 17. Amount of Line 14 taxable at sibling rate X .12 0 0 0 17. 18. Amount of Line 14 taxable at collateral rate X .15 0 0 0 18. 19. Tax Due .................................................................. ............................................ .....19. 20. FILL IN THE OVAL IF YOU ARE REQUESTING A REFUND OF AN OVERPAYMENT. 172,805.03 86,000.00 145,468.03 161,051.10 565,324.16 35,130.01 1,644.45 36,774.46 528,549.70 528,549.70 0.00 9,642.37 0.00 0.00 9,642.37 Side 2 15056042148 15056042148 J Rev-7503 EX+ (6-98) SCHEDULE B STOCKS & BONDS COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT ESTATE OF FILE NUMBER Hurst, Donald A 21-07-0718 All property jointly-owned with right of survivorship must be disclosed on Schedule F. ITEM NUMBER CUSIP NUMBER DESCRIPTION UNIT VALUE VALUE AT DATE OF DEATH EDWARD JONES SINGLE ACCOUNT 851-08332-1-6 1 209115104 300 shares of Consolidated Edison Inc -Com 45.835 13,750.50 2 354723801 1,836.547 shares of Franklin Tax Free Trust - PA Tax 10.25 18,824.61 Free Income A 3 453320103 184.104 shares of Income Fund American Inc -Com 21.62 3,980.33 4 713291102 729 shares of Pepco Holdings Inc -Com 28.605 20,853.05 5 717823A99 Philadelphia PA Gas Wks Rev -DTD: 06/01/1999 Mat: 103.219 15,482.85 07/01 /2029 5% Accrued income on Item 5 through date of death 103.219 31.25 6 06050XNC3 $10,000 Bank of America Corp Sub Internotes BE 94.5894 9,458.94 (XNC3) -DTD: 11/13/2003 Mat: 10/15/2028 6% Accrued interest on Item 6 through date of death 94.5894 151.67 7 07387EFG7 13,000 shares of Bear Stearns Cos Inc -DTD: 94.49440 12,284.27 05/20/2004 Mat: 05/15/2029 6.34% Accrued dividend on Item 7 through date of death 94.49440 139.66 8 12557WPF2 $10,000 Cit Group Internotes Book -DTD: 06/01/1999 95.1296 9,512.96 Mat: 11/15/2021 6.1 Accrued interest on Item 8 through date of death 95.1296 103.36 Total of Continuation Schedule See attached page TOTAL (Also enter on Line 2, Recapitulation) 172,805.03 (If more space is needed, additional pages of the same size) Copyright (c) 2002 form software only The Lackner Group, Inc. Form PA-1500 Schedule B (Rev. 6-98) Rev-1503 EX+ (6-98) SCHEDULE B STOCKS & BONDS continued COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT ESTATE OF (FILE NUMBER Hurst, Donald A 21-07-0718 ITEM NUMBER CUSIP NUMBER DESCRIPTION VALUE AT DATE UNIT VALUE OF DEATH 9 41013MPS3 $30,000 Hancock John Life Insurance Co -DTD: 87.2574 26,177.22 05/30/2003 Mat: 05/15/2028 5.2% 10 52519FC65 $15,000 Lehman Bros Holdings Inc. Lehman (FCBS) - 93.7677 14,065.16 DTD: 11/13/2003 Mat: 11118/2028 6% Accrued interest on Item 10 through date of death 93.7677 70.00 11 52519FCQ2 $30,000 Lehman Bros Holdings Inc. Lehman (FCQ2) - 93.0165 27,904.95 DTD: 04/13/2004 Mat: 04/13/2029 5.7% Accrued interest on Item 11 through date of death 93.0165 14.25 ~ . i 'I I TOTAL (Also enter on Line 2, Recapitulation) 172,805.03 Copyright (c) 2002 form software only The Lackner Group, Inc. Form PA-1500 Schedule B (Rev. 6-98) Rev-1503 EX+(6-98) COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE C CLOSELY-HELD CORPORATION, PARTNERSHIP OR SOLE-PROPRIETORSHIP ESTATE OF (FILE NUMBER Hurst, Donald A 21-07-0718 Schedule C-t or C-2 (Including all supporting information) must be attached for each closely-held corporationlpartnership interest of the decedent, other than a sole-proprietorship. See instructions for the supporting information to be submitted for sole-proprietorships. (If more space is needed, additional pages of the same size) Copyright (c) 2002 form software only The Lackner Group, Inc. Form PA-1500 Schedule C (Rev. 6-98) Rev-7508 EX+ (8-98) SCHEDULE E CASH, BANK DEPOSITS, & MISC. PERSONAL PROPERTY COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT ESTATE OF FILE NUMBER Hurst, Donald A 21-07-0718 Include the proceeds of litigation and the date the proceeds were received by the estate. All property jointly-owned with the right of survivorship must be disclosed on schedule F. ITEM VALUE AT DATE NUMBER DESCRIPTION OF DEATH 1 Money Market Retirement Cash Fund 5,567.03 2 EDWARD JONES IRA ACCOUNT 851-91510 -Securities Account haolding various 135,757.18 securites. Date of Death Valuation for all Securities provided by Edward Jones and is part of this Return Accrued income on Item 2 through date of death 715.42 3 Edward Jones Single Account No. 851-08332 ~ Cash 837.04 4 Genworth Financial Life Insurance Company ~ Refund of Premium 611.36 5 Genworth Financial Life Insurance Company -Refund of Premium 1,980.00 TOTAL (Also enter on Line 5, Recapitulation) I 145,468.03 (If more space is needed, additional pages of the same size) Copyright (c) 2002 form software only The Lackner Group, Inc. Form PA-1500 Schedule E (Rev. 6-98) Rev-1510 EX+ (6-98) COMMONWEALTH OF PENNSYLVANIA SCHEDULE G INTER-VIVOS TRANSFERS & MISC. NON-PROBATE PROPERTY ESTATE OF (FILE NUMBER Hurst, Donald A 21-07-0718 This schedule must be completed and fled if the answer to any of questions 1 through 4 on the reverse side of the REV-1500 COVER SHEET is yes. ITEM NUMBER I N RTY INCLUDE NAME OF TRANSFEREE, THEIR RELATIONSHIP TO DECEDENT AND THE DATE OF TRANSFER. ATTACH A COPY OF THE DEED FOR REAL ESTATE. DATE OF DEATH VALUE OF ASSET ~ OF DECD'S INTEREST EXCLUSION (IF APPLICABLE) TAXABLE VALUE 1 EDWARD JONES -DONALD A. HURST 160,250.18 160,250.18 REVOCABLE TRUST ACCOUNT 851-12019-1-8 - Securities Account holding various securities. Date of Death valuation for all securities provided by Edward Jones and is part of this Return Accrued dividend on Item 1 through date of 800.92 800.92 death TOTAL (Also enter on Line 7, Recapitulation) I 161,051.10 (If more space is needed, additional pages of the same size) Copyright (c) 2002 form software only The Lackner Group, Inc. Form PA-1500 Schedule G (Rev. 6-98) REV-1151 EX+(12-99) SCHEDULE H COMMONWEALTH OF PENNSYLVANIA FUNERAL EXPENSES & IN RES DENT DECEDENTRN ADMINISTRATIVE COSTS ESTATE OF FILE NUMBER Hurst, Donald A 21-07-0718 Debts of decedent must be reported on Schedule I. ITEM DESCRIPTION AMOUNT NUMBER q, FUNERAL EXPENSES: See continuation schedule(s) attached 13,787.51 B. ADMINISTRATIVE COSTS: 1. Personal Representative's Commissions Social Security Number(s) / EIN Number of Personal Representative(s): Street Address City State Zip Year(s) Commission paid 2. Attorney's Fees Johnson Duffie 11,750.00 3, Family Exemption: (If decedent's address is not the same as claimant's, attach explanation) 3,500.00 Claimant Sharon J Hurst Street Address 58 Fairway Drive City Camp Hill State PA Zip 17011 Relationship of Claimant to Decedent SpOUSe a. Probate Fees 306.00 5. Accountant's Fees 1,000.00 6. Tax Return Preparer's Fees 7. Other Administrative Costs 4,786.50 See continuation schedule(s) attached TOTAL (Also enter on line 9, Recapitulation) 35,130.01 Copyright (c) 2002 form software only The Lackner Group, Inc. Form PA-1500 Schedule H (Rev. 6-98) Rev-1502 EX+(6-88) SCHEDULE H-A FUNERAL EXPENSES continued COMMONNIEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT ESTATE OF (FILE NUMBER Hurst, Donald A 21-07-0718 Copyright (c) 2002 form software only The Lackner Group, Inc. Form PA-1500 Schedule H-A (Rev. 6-98) Rev-1502 EX+(6-98) SCHEDULE H-B7 OTHER ADMINISTRATIVE COSTS COMMONWEALTH OF PENNSYLVANIA continued INHERITANCE TAX RETURN RESIDENT DECEDENT ESTATE OF FILE NUMBER Hurst, Donald A 21-07-0718 ITEM NUMBER DESCRIPTION AMOUNT 1 Cumberland County Register of Wills Office -Filing Fees for Inheritance Tax Return 30.00 ($15.00) and Inventory ($15.00) 2 Lipman Frizzell & Mitchell LLC -Fee for the Appraisal of 2% Interesrt in Oakview 4,500.00 Gardens LLP 3 The Patriot News Company -Notice of Estate Administration 181.50 4 Cumberland Law Journal -Notice of Estate Administration 75.00 Subtotal I 4,786.50 Copyright (c) 2002 form software only The Lackner Group, Inc. Form PA-1500 Schedule H-67 (Rev. 6-98) Rev1512 EX+ (6-98) COMMONWEALTH OF PENNSYLVANIA INHERITANCE TAX RETURN RESIDENT DECEDENT SCHEDULE I DEBTS OF DECEDENT, MORTGAGE LIABILITIES, & LIENS ESTATE OF (FILE NUMBER Hurst, Donald A 21-07-0718 Include unrefmbursed medical expenses. ITEM VALUE AT DATE NUMBER DESCRIPTION OF DEATH 1 Edward Jones IRA Account 851-91510 -Withdrawals and Fees 51.61 2 Edward Jones IRA Account 851-91510 -Withdrawals to purchase securities 192.84 3 Waggoner Frutiger 8r Daub -Account Services for the benefit of the Trust under the 1,400.00 Estate TOTAL (Also enter on Line 10, Recapitulation) I 1,644.45 (If more space is needed, additional pages of the same size) Copyright (c) 2002 form software only The Lackner Group, Inc. Form PA-1500 Schedule I (Rev. 6-98) SCHEDULE J COM MHER TANCE TAX RETURNANIA BENEFICIARIES RESIDENT DECEDENT ESTATE OF FILE NUMBER Hurst, Donald A 21-07-0718 NAME AND ADDRESS OF RELATIONSHIP TO DECEDENT SHARE OF ESTATE AMOUNT OF ESTATE NUMBER PERSON(S) RECEIVING PROPERTY Do Not List Trusteels) (Words) ($$$) I. TAXABLE DISTRIBUTIONS [include outright spousal and transfers distributions , under Sec. 9116(a)(1.2)] 1 Murry Wayne Allen Stepchild 25,000.00 108 Oakcrest Manor Dr. N.E. Leesburg, VA 20176 2 Robert L Allen Stepchild 25,000.00 101 Carolyn Circle Bristol, TN 37620 4 Donna Eaton Daughter Specific 89,675.31 729 Beall Avenue Bequest & 1/2 Camp Hill, PA 17011 of Residue 5 Kevin Eaton Grandson 25,000.00 10029 Dellcastle Road Montgomery Village, MD 20886 6 Tracy L Ellis Stepchild 25,000.00 108 Oakcrest Manor Dr. N.E. Leesburg, VA 20176 See continuation schedule attached Continuation 274,925.49 Total 439,600.80 -- ~-- Enterdollar amounts for distributions shown above on lines 1 5 through 18, as appropri ate, on Rev 1500 cove r sheet III NON-TAXABLE DISTRIBUTIONS: A. SPOUSAL DISTRIBUTIONS UNDER SECTION 9113 FOR WHICH AN ELECTION TO TAX IS NOT BEING MADE B. CHARITABLE AND GOVERNMENTAL DISTRIBUTIONS TOTAL OF PART II -ENTER TOTAL NON-TAXABLE DISTRIBUTIONS ON LINE 13 OF REV-1500 COVER SHEE~ U.UU Copyright (c) 2002 form software only The Lackner Group, Inc. Form PA-1500 Schedule J (Rev. 6-98) SCHEDULE J BENEFICIARIES (Part I, Taxable Distributions) ESTATE OF: Donald A Hurst 07/16/2007 579-20-5155 Item Name and Address of Person(s) Share of Estate Amount of Estate Number Receiving Property Relationship (Words) {$$$) 6 Tracy L Ellis Stepchild 25,000.00 108 Oakcrest Manor Dr. N.E. Leesburg, VA 20176 7 Sharon June Hurst Spouse Residue of Estate 8< 224,925.49 58 Fairway Drive Trust Beneficiary Camp Hill, PA 17011 8 Sharon D Wagner Stepchild 25,000.00 3118 Harvard Avenue Camp Hill, PA 17011. Total 274,925.49 1 ESTATE OF DONALD A. HURST SCHEDULE OF EXHIBITS EXHIBIT A EXHIBIT B EXHIBIT C EXHIBIT D EXHIBIT E EXHIBIT F Last Will and Testament of Decedent signed and dated Revocable Trust Agreement dated December 7`h, 2004 Edward Jones Single Account 851-083332-1-6 Date of Death Valuation Oakview Garden Apartments LLP Appraisal done by Lipman Frizzell & Mitchell LLC Edward Jones IRA Account 851-91510 Date of Death Valuation Edward Jones Donald A. Hurst Revocable Trust Account 851- 12019-1-8 Date of Death Valuation 327520 ESTATE OF DONALD A. HURST SCHEDULE OF EXHIBITS EXHIBIT A EXHIBIT B EXHIBIT C EXHIBIT D EXHIBIT E EXHIBIT F Last Will and Testament of Decedent signed and dated Revocable Trust Agreement dated December 7`h, 2004 Edward Jones Single Account 851-083332-1-6 Date of Death Valuation Oakview Garden Apartments LLP Appraisal done by Lipman Frizzell & Mitchell LLC Edward Jones IRA Account 851-91510 Date of Death Valuation Edward Jones Donald A. Hurst Revocable Trust Account 851- 12019-1-8 Date of Death Valuation 327520 ESTATE OF DONALD A. HURST SCHEDULE OF EXHIBITS EXHIBIT A EXHIBIT B EXHIBIT C EXHIBIT D EXHIBIT E EXHIBIT F Last Will and Testament of Decedent signed and dated Revocable Trust Agreement dated December 7`h, 2004 Edward Jones Single Account 851-083332-1-6 Date of Death Valuation Oakview Garden Apartments LLP Appraisal done by Lipman Frizzell & Mitchell LLC Edward Jones IRA Account 851-91510 Date of Death Valuation Edward Jones Donald A. Hurst Revocable Trust Account 851- 12019-1-8 Date of Death Valuation 327510 ESTATE OF DONALD A. HURST SCHEDULE OF EXHIBITS EXHIBIT A Last Will and Testament of Decedent signed and dated EXHIBIT B Revocable Trust Agreement dated December 7`h, 2004 EXHIBIT C Edward Jones Single Account 851-083332-1-6 Date of Death Valuation EXHIBIT D Edward Jones IRA Account 851-91510 Date of Death Valuation EXHIBIT E Edward Jones Donald A. Hurst Revocable Trust Account 851- 12019-1-8 Date of Death Valuation EXHIBIT F Oakview Garden Apartments LLP Appraisal done by Lipman Frizzell & Mitchell LLC 327520 010755-2/ 11.13.03/RW S/bf/101804v.2 C7 rv ° ~ '"r _:.-; ,'r i _ - l-~'~7 mss. _-, _ _;~ of ~ ~ ~ ~ -- ,-- _- rv - DONALD A. HURST cx3 I, DONALD A. HURST, of the Township of Hampden, Cumberland County, and Commonwealth of Pennsylvania, declare this to be my last Will and revoke any Will previously made by me. ITEM I. I bequeath my automobiles, household and personal effects, and other tangible personalty of like nature (not including cash or securities), together with any existing insurance thereon, to my wife, SHARON JUNE HURST, if she survives me by thirty (30) days. Should my wife, SHARON JUNE HURST, not be living on the thirty-first (31st) day after my death, I bequeath such tangible personalty and insurance thereon to such of my children as are living on the thirty-first (31st) day after my death, to be divided among them by my executor with due regard for their personal preferences in as nearly equal shares as practical. ITEM II. I devise and bequeath the sum of Twenty-Five Thousand ($25,000.00) Dollars to each of the following named persons who survive me by thirty (30) days: A. My daughter, DONNA ANN EATON, B. My son, THOMAS E. HURST, and C. My grandson, KEVIl~l EATON. _ ITEM III. Should the value of the principal of the Donald A. Hurst Revocable Trust be less than Two Hundred Fifty Thousand ($250,000.00) Dollars at the time of my death, I bequeath to the Donald A. Hurst Revocable Trust an amount sufficient to increase the value of the principal to the sum of Two Hundred Fifty Thousand ($250,000.00) Dollars. 010755-2/ 11.13.03/RW S/bf/101804v.2 ITEM IV. I bequeath the sum of One Hundred Thousand ($100,000.00) Dollars to be divided equally among said of my wife's children ROBERT L. ALLEN, MITRRY WAYNE ALLEN, TRACY L. ELLIS and SHARON D. WAGNER as survive me provided, however, that if any said child predeceases me but has issue then living that child's share shall be distributed to the child's then living issue per stirpes. If the child has no issue then living that child's share shall be distributed to the then living issue of my wife, SHARON JUNE HURST, per stirpes. ITEM V. I devise and bequeath the residue of my estate of every nature and wherever situate as follows: A. One-third (1/3) thereof to my wife, SHARON JUNE HURST, if she survives me. If my wife, SHARON JUNE HURST, fails to survive me, her share shall be added to and treated as a part of the other shares created in subparagraphs B and C below. B. One-third (1/3) thereof to my daughter, DONNA ANN EATON, if she survives me. If my daughter, DONNA ANN EATON ,fails to survive me, her share shall be distributed to her then living issue, per stirpes, and in default of such issue, her share shall be added to and treated as a part of the other shares created in subparagraphs A above and C below. C. One-third (1/3) thereof to my son, THOMAS E. HURST, if he survives me. If my son, THOMAS E. HURST, fails to survive me, his share shall be distributed to his then living issue, per stirpes, and in default of such issue, his share shall be added to and treated as a part of the other shares created in subparagraphs A and B above. ITEM VI. All federal, state and other death taxes payable because of my death, with respect to the property forming my gross estate for tax purposes, whether or not passing under this Will, including any interest or penalty imposed in connection with such tax, shall be considered a part of the expense of the administration of my estate and shall be paid from my residuary estate without apportionment or right of reimbursement provided that any taxes on the revocable trusts created by me, maybe paid from the assets of these trusts as provided therein. My Executor may qualify the gift given to my wife under a Revocable 010755-2/11.13.03/RW S/bf/101804v.2 Trust created by me or as much there of as he deems advantageous for the qualified terminable interest property provision set forth in Section 2056(b) (7) of the Internal Revenue Code as amended by Section 403 of the Economic Recovery Act of 1981. My Executors are hereby authorized to make the election to qualify or not to qualify. As such, I direct that: A. If any provision of my Will shall result in depriving my estate of the benefits of the Internet Revenue Code of Section 2056 (b)(7), if elected, such provision is hereby revoked and my Will shall be read as if any portion thereof which would result in such disqualification is null and void; B. My Executor is hereby excused from any liability to any person for the decision to elect to have the gift qualify for the marital deduction or for the decision to elect not so to qualify it; C. No reimbursement or other adjustment shall be made among beneficiaries by reason of the consequences of such election or failure to elect. ITEM VII. My executors and guardian shall have the following powers in addition to those vested in them by law and by other provisions of my Will, applicable to all property, whether principal or income, including property held for minors, exercisable without court approval, and effective until actual distribution of all property: A. To retain any or all of the assets of my estate, real or personal, including any shares of stock or other securities I may own of the corporate fiduciary or its successors, or of a holding company controlling the corporate fiduciary or its successor, without restriction to investments authorized for Pennsylvania fiduciaries, as they deem proper, without regard to any principle of diversification. B. To invest in all forms of property without restriction to investments authorized for Pennsylvania fiduciaries, as they deem proper, without regard to any principle of diversification. C. To sell at public or private sale, to exchange, or to lease for any period of time, any real or personal property and to give options for sales, exchanges or leases, for such prices and upon such terms or conditions as they deem proper. 010755-2/11.13.03/RWS/bf/101804v.2 D. To allocate receipts and expenses to principal or income or partly to each as they from time to time think proper. E. To borrow from, or sell to, the trustee under my inter vivos trust mentioned above, even though such trustee may be my executor. F. To join with my wife, SHARON JUNE HURST, or her personal representative in filing ii a joint income tax return without requiring her or her estate to indemnify my estate against liability for the tax attributable to her income and to consent to any gifts made by my wife during my lifetime being treated as having been made one-half by me for purposes of the federal gift tax law. ITEM VIII. I appoint RICHARD W. STEWART and SHARON JUNE HURST, Executors of this my last Will. Should RICHARD W. STEWART fail to qualify or cease to act as Co-Executor, I appoint another member of the firm of Johnson, Duffie, Stewart & Weidner or its successor Co-Executor of this my last Will. Should my wife, SHARON JUNE HURST, fail to qualify or cease to act as Co-Executor, I appoint SHARON D. WAGNER, Co-Executor in her place. ITEM IX. I direct that Richard W. Stewart or his successor shall be entitled to reasonable compensation for his duties as Co-Executor and counsel. ITEM X. I direct that my executors and guardian shall not be required to give bond for the faithful performance of their duties in any jurisdiction. 010755-2/11.13.03/RW S/bf/101804v.2 IN WITNESS WHEREOF, I have hereunto set my hand this ~ s ¢-'2 day of ~c ~~-~~f._ , 2003. '~ EAL Donald A. urst SIGNED, SEALED, PUBLISHED AND DECLARED, by Donald A. Hurst, the Testator above named, as and for his Last Will and Testament and in the presence of us, who, at his request, in his presence and in the presence of each other, have subscribed our names as witnesses. Witness Wi~ne~s ~~~ ~? Address Address ACKNOWLEDGMENT COMMONWEALTH OF PENNSYLVANIA :SS: COUNTY OF CUMBERLAND I, Donald A. Hurst, Testator, whose name is signed to the foregoing instrument, having been duly qualified according to law, do hereby aclmowledge that I signed and executed the instrument as my Last Will and Testament; that I signed it willingly; and that I signed it as my free and voluntary act for the purposes therein expressed. Donald A. Hurst Sworn to or affirmed and aclrnowledged before me, by Donald A. Hurst, the Testator, this i ?~ `"~-day of ~~'~~~ v., ~L ti , 2003. Notary Public ~~ My commission expires: (SEAL) ~~CJt~Ti~{~~,- S~tiL ~ DIA~l~1~ Lc~!?~, tdefar~ ~ub~ic _ Lern~y~ ~ ~oroup~ Our rrharla:~d Oa. E ~id° Carrrrrissinn Expires 'dec. 2I, 2005 , 010755-2/11.13.03/RW S/bf/101804v.2 COMMONWEALTH OF PENNSYLVANIA COUNTY OF CUMBERLAND AFFIDAVIT SS: We, _ ~~c L, G..r~ ~.~} S~ecc~, ~- and ~ ~ , Fri ~ i n s cti.. ,the witnesses whose names are signed to the foregoing instrument, being duly qualified according to law, do depose and say that we were present and saw the Testator sign and execute the foregoing instrument as his Last Will and Testament; that he signed willingly and that he executed it as his free and voluntary act for the purposes therein expressed; that each of us in the hearing and sight of the Testator signed the Will as witnesses; and that to the best of our lrnowledge, the Testator was at that time at least 18 years of age, of sound mind and under no constraint or undue influence. t Sworn to or affirmed and subscribe o before 'me by ~~'' ti,,~.,:,r.~a '~ , ~;;~..~,:~ and "~^-~-~rY-.= i`L;.-~~.--r ~~'~ ,witnesses, this ~ 3~~ay of ~1 ~_-Y~,~,,s_-1. , 2003. _-~,;,~r~_-,~-~- w_ Notary Public ~~ ~, k N~T~~i3m~ Sc,~,L My commission expires: f ~`~t,~"~~ L~PIi ~, ~~€al~ry Put~~ic ~ (SEAL) ~-~~4~~a~ Gera€f~ii Gumb~ri~nd GQ. Y~i~ Camri?issior~ ExGires Dec. 2i, 2005 REVOCABLE TRUST AGREEMENT THIS AGREEMENT OF TRUST, executed in duplicate this ~ i 1~ day of .alzter,,~ic-„ 2004, between Donald A. Hurst of Hampden Township, Cumberland County, Pennsylvania, (hereinafter called Settlor), and Donald A. Hurst and Sharon June Hurst, of Hampden Township, Cumberland County, Pennsylvania (hereinafter called Trustees}, WITNESSETH: WHEREAS, Settlor has transferred to Trustees property described in Schedule A attached hereto and from time to time will transfer to the Trustees other property; NOW THEREFORE, Settlor hereby establishes with Trustees a trust hereinafter known as the Donald A. Hurst Revocable Trust consisting of the property in Schedule A, together with all other property, real or personal that maybe added to the trust and including the proceeds of any policies of Life insurance in which the Trustees are named as beneficiary (such property, additions and proceeds being hereinafter called principal} to be held by the Trustees, 1N TRUST, for the following uses and purposes: FIRST: During the lifetime of the Settlor: A. The Trustees shall pay the net income to the Settlor, as Settlor directs, in such periodic installments as the Settlor shall find convenient. B. The Trustees may apply the net income of this Trust for the support of the Settlor should he by reason of age, illness or any other cause, in the opinion of the Trustees, be incapable of disbursing it and Trustees are further authorized to expend or apply from the principal of this Trust such sums as they, in their sole discretion, may from time to time think advisable for the support of Settlor to maintain him in the station of life to which he is accustomed at the creation of this Trust or during illness or emergency. C. The Trustees shall pay so much of the principal of the Trust up to the entire amount of to the Settlor as the Settlor shall request in writing. SECOND: Following Settlor's death, if Settlor's wife, Sharon June Hurst, survives Settlor (and Settlor directs that for the purpose of this Article Second she shall be deemed to have survived Settlor unless it appears unmistakably that she predeceased Settlor}. Trustees shall hold all of the principal hereof as a separate trust under this Article far the following uses and purposes: A. To pay the net income therefrom to Settlor's wife, Sharon June Hurst, for and during her lifetime in such periodic installments as Trustees shall find convenient, but at least as often as quarter-annually. B. Trustees may apply the net income of this Trust for the support of Settlor's wife, Sharon June Hurst, should she by reason of age, illness or any other cause, in the opinion of Trustees, be incapable of disbursing it. C. Trustees may expend from the principal of the Trust in an amount not to exceed $50,000.00 in the aggregate over the duration of the Trust for the medical care of the Settlor's wife, Sharon June Hurst, after taking into consideration her other readily available assets and source of income. D. Upon the death of the Settlor's wife, Sharon June Hurst, or upon the Settlor's death, if his wife predeceases him, the Trust shall terminate and the Trustees shall distribute the then remaining principal as follows: (1) One-half (1/Z) thereof to the Settlor's daughter, Donna Ann Eaton, if she is then living. If the said Donna Ann. Eaton is not then living, her share shall be distributed to her then living issue, per stirpes, and i default of such issue, her share shall be added to and treated as part of the share created in paragraph (Z) below. (2) One-half (1/2) thereof to the Settlor's son, Thomas E. Hurst, if he is then Living. If said Thomas E. Hurst is not then living, his share shall be distributed to his then living issue, per stirpes, and in of such issue, his share shall be added to and treated as part of the shares created in paragraph (1) above. E. Should any person entitled to distribution from the Trust be, in the opinion of the incapable of disbursing it because of age, illness or other cause, and should it be impossible or inadvisable, in opinion of the Trustees, for such share to be awarded to such person or distributed to another for such person's ben the share of such person shall be held, IN FURTHER TRUST, and Trustees shall accumulate the income and shall at from time to time such portions of income, accumulated income, and principal as it thinks proper for that perso~'s 2 support and education (including education in college, trade school, or graduate school) without regard to his or her parent's ability to provide for such support and education, or to make payment for these purposes without further responsibility to the beneficiary or the beneficiary's parent, or to any person taking care of the beneficiary. Any principal or income not so applied shall be distributed to the beneficiary when he or she becomes of age or competent, or to the personal representative of the beneficiary's estate in case of death during minority ar before becoming competent. F. Upon the death of Settlor's wife, Sharon June Hurst, the Trustees shall first deduct and pay to the personal representative of Settlor's wife's estate, an amount equal to the increase in federal estate tax or state death taxes which her estate will have to pay because of the inclusion of the assets under this Trust in her gross estate (unless she directs otherwise in her Will). This Item of the Trust is intended to empower Settlor's Executors or Trustees to qualify this gift or as much thereof as they deem advantageous for the qualified terminable interest property provision set forth in Section 2056(b)(7) of the Internal Revenue Code as amended by Section 403 of the Economic Recovery Act of 1981. Settlor's Executors are hereby authorized to make the election to qualify or not to qualify. As such Settlor directs that: (1) If any provision of this Trust or Settlor's Will shall result in depriving this Item of the benefits of Internal Revenue Code Section 2056 (b)(7), if elected, such provision is hereby revoked and my Trust shall be read as if any portion thereof which would result in such disqualification is null and void; (2) Settlor's Trustees are hereby excused from liability to any person for the decision to elect to have this Item qualify for the marital deduction or for the decision to elect not to so qualify it; and (3) No reimbursement or other adjustment shall be made as among beneficiaries by reason of the consequences of such election or failure to elect. THIRD: The interests of the beneficiaries hereafter shall not be subject to anticipation or to voluntary or involuntary alienation. FOURTH: Trustees shall have the power, but not the duty, to make such expenditures out of the principal allocated to the Trust as it, in its uncontrolled discretion, may consider desirable in order to facilitate the settlement of Settlor's estate. In exercising such power, Trustees may pay, in whole or in part, any or all of the following items: the 3 expenses of Settlor's last illness and burial, including cost of gravemarker; his debts; his income taxes; the death taxes or any or all property included in his gross estate for tax purposes; and all other items in connection with the settlement of his estate. Any such items may be paid directly by Trustees or the funds for their payment may be paid directly by Trustees or the funds for their payment may be transferred by Trustees to Settlor's. All such death taxes on present or future interests shall be paid at such time as Trustees may think proper, regardless of whether such taxes are then due. FIFTH: Trustees shall have the following powers in addition to those vested in it by law and by other provisions of this Trust, applicable to all property, whether principal or income, including property held for minors, exercisable without court approval, and effective until actual distribution of all property. A. To retain any or all of the assets of this Trust, real or personal, including stock of Trustees or its parent holding company, without regard to any principle of diversification. $. To invest in all forms of property, including stock, common trust funds and mortgage investment funds whether operated by Trustees or others, without restriction to investments authorized for Pennsylvania fiduciaries, as it deems proper, without regard to any principle of diversification. C. To sell at public or private sale, to exchange or to lease for any period of time, any real or personal property and to give options for sales, exchanges or leases for such prices and upon such terms and conditions as it deems proper. D. To allocate receipts and expenses to principal or income, or partly to each, as Trustees from time to time think proper in its sole discretion, but in no event shall the income of the marital deduction trust be reduced by exercise of this power. E. To compromise any claim or controversy. F. To distribute in cash or kind or partly each. G. To hold property in its name without designation of any fiduciary capacity or in the name of nominee or unregistered. 4 SIXTH: Trustees shall have no duty to pay any premiums on the life insurance policies subject hereto and the companies issuing such policies shall have no responsibility to see to the fulfillment of this trust or the application of the proceeds of such policies and Trustees shall have no duty to bring suit upon any of the life insurance policies subject hereto unless it holds funds hereunder out of which it may be indemnified against all costs, legal fees and other expenses of suit. SEVENTH: Settlor reserves to himself the following rights (each of which may be exercised by Settlor alone whenever and as often as Settlor may wish): A. All rights now or hereafter vested in Settlor as the owner and the insured under the life insurance policies subject hereto, including, but not limited to, the rights to change beneficiaries, to borrow on policies either from the issuing companies or from other institutions or other persons, to assign and pledge policies for any loan, and to receive dividends and all other payments available to the owner and the insured; and B. The right by an instrument in writing, intended to take effect during Settlor's lifetime signed by Settlor and delivered to Trustees to revoke or amend this Agreement in whole or in part provided that the duties, powers and liabilities of Trustees shall not be substantially changed without its written consent. EIGHTH: Subject to the approval of Trustees, anyone may add property, real or personal, to the principal of this trust by deed, will or otherwise. NINTH: The sites of this Trust, for adnunistrative and accounting purposes, shall be in the County of Cumberland and Commonwealth of Pennsylvania, and all questions pertaining to the construction or validity of the provisions of this instrument shall be governed by the laws of the Commonwealth. TENTH: Should either of the Trustees be disabled or cease to act as Trustees, the Settlor's stepdaughter, Sharon D. Wagner shall serve as a Co-Trustee. If there is a question as to whether or not a Co-Trustee is disabled, the written opinion of the Co-Trustee's last treating physician shall be deternunative. 5 IN WITNESS WHEREOF, Settlor and the Trustees have hereunto set their hands and seals the day and year first above written. Witness {f ,~-~ Witness Settlor: ~'~~~~~ ~'' ~i'T' ..~a~_~ _ (SEAL) Donald A. Hurst Trustees: r%t-~ ~'i~.--~'~ ~- .-v (SEAL) ~~!~ ``" Donald A. Hurst ~~n %~L, Witness ~~/ ~, .~.f"~'.-~1/'C,r'~iJ i~ / ~~~U~~~ (SEAL) Sharon June Hurst :24005 S 6 COMMONWEALTH OF PENNSYLVANIA COUNTY OF CUMBERLAND ss: On the _ ~ ~ day of ~,~,,,~,.~.,-`, ,2004, before me, the undersigned officer, personally appeared Donald A. Hurst, lmown to me or satisfactorily proven to be the person whose name is subscribed to the foregoing instrument, and aclmowledged that he executed the same for the purposes therein contained. IN WITNESS WHEREOF, I hereunto set my hand and official seal. O ARIAL SEAL DIANNE LENlG, Notary Public Lemoyne Borough Cumberland Co. My Cor~missian Expires Dec. 21, 2005 ' Notary Public COMMONWEALTH OF PENNSYLVANIA COUNTY OF CUMBERLAND ss: On the 1 ~'~1 day of _~~,..~~,,,~._~~,,~ ,2004, before me, the undersigned officer, personally appeared Sharon June Hurst, known to me or satisfactorily proven to be the person whose name is subscribed to the foregoing instrument, and acknowledged that she executed the same for the purposes therein contained. IN WI"CNESS WHEREOF, I hereunto set my hand and official seal. NOTARIAL SEAL GIANNE LENIG, Notary Public Lemoyne Borough Cumberland Co. ,~ f,~,. ~Y Con~~misslon Expires Dec. 21, 2005 Notary Public,. ne Account of• ~NALD A HUAST REVOCAC~LE TRUST ' {; .ccount Number: ~: -- - ~` 20 00 Boas o6 s ~ ~~ ~ - INVESTMENT o~ta... 4 ;: -. ~ ~ ~~~ : GRbUP ~~'" NOVEMBEROI, 200a -NOVEMBER 30,2004 . 235 North Second Street ` `~ ' ~ %~P.O. Box 1711= - ~? Harrisburg, Pennsylvania 17105" . - www.waYPolntbank.com ~ ,:. . _ , ;~,• ~: .,. :. ~ :' . . .'INVESTMENTS , -. - ~ ..... : ' ' ;~. : -, , >:<. ~:::; ~. :, > ~ 111111 Pr`~~~ ; . ; ..:: ...:, ..... ...... ........ ::;:::z _ ~::,~<:>:':::: ~?o:~~::~:e<'~:~>::;;::~:lUl~'k~>;:: ~ •:::::; . ~ '~: ; CASH 8 EQUIVALENTS ~ - _ 0.0000 CASH; .._ : ~ ~ ~ ~ 337.50 337 50 1,010.69 FEDERATED PRIME OBLIGATlON5 FUND #396 ' ` 0 000 . . ~ ~ ~" 1,010.69 1,010.69 15.16. ~ 1.50 ... , " , t , :, -, _ ~ ~' ~" FIXED WCOME SECURITIES ~ : ~ ~- "~ 1,348.19 1,348.19 15.16 1.12 ~~ , . . , 15,000 FEDERAL HOME LOAN.MTG CORP z ~ 99.274 _ 14,971.88 14 891 10 2 1.50%DUE 7120105 ~ ~ ~ ~° , . 2 5.00 1.51 ' .: ~:.. 25,000 FEDERAL HOME LOAN BKS 103.313 25,049.25 25,828.25 :.1,218,75 4 72 4.875°0 42/15/2007 - ' . _ 20,000 FEDERAL HOME LOAN BKS ~ ~ '` 103.250 19 894 80 ' ~ _ _ 6.220%11/21/2005 ~, - . , . 20,650.00 - . 1,244,00 1 6.OZ j _ 10,000 FREDDfE MAC 6 750% 05/30/2006 105 469 11,333.85 10 546 90 , . 675.00 6.40 .I , ~ ~ _ ~ 71,249.78 71,916.25. 3,362.75 - - 4 68 -. , MUTUAL FUNDS . 400.967 f1MERICAN C1=NTURY ~(P1TEaN~1710N ~ ~ '~` ~~ ~ ~ 14.870 AL BOND #992'x ~ ' " ~ ~ 5,480.00 5,962.38 ..' ~ ~ 413.40. _ g.g3 , : ~ y~ ~- " '~- ~ 4,094.062 FEDERATED TOTAL RETURN gONb FUND # : 90 , 1 ,~ 10.7 288 ~ 44,014.36. 44,174,93 _ ,. ,981,53. 4.qg i h ~, ~ ' ~ 49,494 36 50,137.31. 2,394.93 4 78 . , _ EDUITIES _ -, " ~ - } - La 305 385 WM BLA1R INTERNATIONAL GROWT ~ ` 21130 1 ~ " ' - ~. ' H CLASS N FUND #317 _ 5,9 8 37 y 6,452 79 =' ': 6.41 ' ~ 010, ~ ~ 540 988" FEDERATED5 CAPITAL APPRECWTI ~r~ ' ~ ., ~ ~ ~ , ,. ~~ 24740 t +.c"' r ~fii~" ,c ON FUND #6!4'r"y 13,286 67 13,384 04 - 60.59 r 0.45*' :i l r _ 289.508 f~OYCE PREMIER FUND #265 ~; 7 ~ 15 580 3,946 00 4,510.53 - 0.00 0.00' . ~r z ~- .. - - , '; ~ 'To~ltallnvestments : 23,151 04 ~. 24,347.36 . ~~ ' ;'.67.00 ' -~~ ~ 028 , 1 , ~ ~ 145,243 37 147,749 11 5,839.84 ~ ~ , 3 95 " . - . - - r. ~ - - - :} . - . ~ ACTIVITY REVIE~t!' ~ ~~~f .. , > . . ...::... ~~ ~ ~ .~ m ~ ' w ~ ~ ° m j-t3~v~ p ~. 7> m ~ O rn ~, 77 o Z ~ ,,~ ~'`~ p ~ ~" Umj t Q- f ^ ~~ 4 LJ~ H ~~ C~"~ l ~ O -~ r ~a ~~ Qz o `~ c~ ~p ~ j O -~ a n~ a 0 G coo ~ ~ o ~- < cc CD r• ~: ~ ~. a, H G R 0 ~ ~ ~y 011 d .~ G =~ ..rrte ~. `a.~~ ~ two o ~ ~~ ~ ~ .~ ~. ¢ ~~~ ~a ~~ row p G~ ~ i c y ~ m R O LC W M y m• ~ K `J' Q,~ roK 'Q dw dw n ~ ~ c r ~ ~ ~ m .j O F, a ~ M W o 0 O 0 'P ° p ~ t+J H O p O Hn dN ~ a ~ A' ~ ' ~y "'~ ~ ~ "~ n ~ • A F ~ oYi oYi ~q F tD rS m ~ F,.~ ~ '9 O 1~ ...i r-a E'• ~ t7p ~ ;t '• ~ -3 I ~. t7 i3 H .. w ~, W ~'' F t~ ~ r •• W ~ ~~ m -i ~i wY• N N N oo ~ N ~ ~ rn ' p o F ~ A n O 'Jd ~ ~ . 7 cr yy NOiF'•t'1 f ' R4G "t„y +• } 'M ~, O ~O W N N W O , ` O` er C N x ~''" ~ W ~ ~ ~ o~O o° ~ v~y ~ a~H H ... O Cf ` ~ r. H ~ in t N H N Y• "1. N tF''O C• `.d ~''~~ ~• n O O mm ~" p RHO O J O t' WW H O "~ i~ H O 7i ~ ~HL1 ~ ~ •• ° N•w ° ~KN ~' K ~ ~ ~c°'i~ ~~ 0 ~ rn N o` yo ~° ~ ~ -' ~ ~r ~c • i w i ~~ m C 'G fl+ N to ti• ^ N O ~ ID O N ° O N K m ti °' w~ rn °' N `o o\ t+f m w ~ " d ~ o a N .° a x m• g W _ ~ N v C Cbd '~ ~ ~ ~ ~ m~ C co ~, R ,,d ~~~ ~° w car rr m ~ ~ ~ o o n R ~ r a F, ~ m ~- ~ gm ~ ~' ~ ~ m w w -~ a, ~ ~„ N w o ~ N f' ~ ' N N ~ O ~ ~ l71 t0 O O ~ P O "~ {'. p fi t~' '~ OD p~ (t Ol nn . Qi 1D m fA ~ ~ ' K O i G R- O b W ~ ;~ ~ P~ J N Y N N N 10 .~ •.1 (~ ~: J W Q ~ n O i O O O 'A ~ O ~ .~ K ~ - t~~{ ~ W ~ K N?~ 9n A m ~ R ~ C W ~ +• f~+ N I ~+ O ri ~ ~~¢ o ~ ~ ~M o W N m N g •p W Ol lJl O H m C] `.~ Z : ~ Y C ~ O R Y• a W C ~ ~, „ p> tD d ~~ n~ ~~ ... ,o m m rs ~ cYr o v+ 7- • ~ ~ N ~ Nt..M, t'• f+ N ~O •n O u` OM ~ O~ ~ T V1 ~P OD W J dp .. m O W ~ ~"~ F~Aro a N .a O NN`„YNH O ~ ~ ~ N N to rn cn d 't7 r- n m O (~ ~ ~ A r- rt~ m o -t M •• .~y+ W t+f H C m ~ m cr r- ~ m cr m K m CRS cr w o O F rt ~ ww O o0 ~~ro ~ ~ ~ m ~ ~ ova W 14 'G `~ ~ w p, rmr a a ~ a n m a- ti C~ H '.7 ~ n ~ m m O C ro d m N rm C ro amo N w r•r m ~ w r• w m o n rt •~ C O N UJ W 't! m m ~ m r• w n r m r r- n p A m rt O p r rt H I m ~ m ~ r- ao rt a mm I n .a. rn m r>. O q7 Nn o n cn w cr ~~ cJn ~ w • n w a n n •- ~C w ryd r m W A C p F r• W r+ m W r• n rt ~ ~ R~ v I-+ F m m o rt r- • m p ~+ .~ W ~- m - m t~ ~ ~ w rt ~ 4~ a ~ ~ m m ~l 01 (Jf 1-+ w 1-' F-~ w o to o 0 0 0 0 0 0 0 0 o 0 0 0 p ~~yy w~ ~ p r t9 ~ p ~H wth p ~H wm cr H \d p ~ cr H \d p rt \d d cr \d p ~ Vt N Vf r•H ~7 NPW 01 NF-'r- ~P N1~W \ o\p \ o\W bo \ o\W trl \ o\W I-+ oNr f+ orr7o r orl-+9a N orr~ lJf ~ V O W ~1 W O OD ~1 OD O UI J W \ \H \ \H m \ \H m \ \H f] N N Ul ~ N O N r• O"~' ' ' N O N O~• h' N O N O O~ " U O 0 O o m C~ o ~ o m r o . i o m r o . o m ro v r. m v ~ oo t7 ~t w m C J w m ~ ~ rt .`{H rt ~HU] rt '.3,HU] rt ".~,HC, o W p H o W p o a~ o w~ W rtct7, rf ftH !•hctH rtrt •- n n z •• h HH J -j J Yj V Iy f ] .,~ z \ opl -. \ opl \ rW \ Nw H N cnn o ~ t>•n r N rn r -~ on 7 rn \rrJ rn \rrtli rn \rtt~ rn \rt ~ \ ~ r- w \ ~ r• \ --~ r• \ I-+ r• to N UiQ OD N W e,' N CD 4' N VI ti' m m m m O N L~J O N O N O N C+7 ~ o ty `+~} v o C v o C v o C N p y7 N W .-. N W~ N W .-. ~or•rv ~crv, miter orto QI ~ p1 N p1 N W 01 01 UI Uf 01 U1 91 O •' ~o H oho ~ W J l0 l0 O 0 ,o w n N U1 W O U] t't .7 w roK a m Fi tI! m m ~ ~ -i M r• W rt~ O x r- \ m x ro C ti -t w w O t-+ ct A ~ m m W ut rt O ro r• ro W O p p t7 w m da d W ct W ft '.Y tt m •• m •• 0 0 0 mvv \\\ t+ f+ F+ A Ol 01 \ \ \ N N N O O O 0 0 0 v v v r E ~o ~o ~o ~n \ ~. w w ~ W r- ~ o :.~ ~„ a ~c r rn m 1P 01 J b ~P V1 ~7 ~P 0 0 0 0 cr rt cr rt ~ ~ p, m io ~o ~o ~n ~• w .a• w w r~ p p as ~o r rn m a. rn v ~o m w .a. to v a+• p \ 0 0 0 o rt 0 0 0 0 o m M ~' d ~ m m C o w ~ ~ ~ a ' R+ r N c rA ~ ~ o r ~ ~ ~ ro ~~ • rt r• o ~ rn t.~ o rn rrom n rn cn o v .• ~ O m ~ Cm m w rtx w dc i n ••d ~~ ~ I~ N r m rt ao W o0 N V ~P l0 r- to rt O to $+ rt f+ r• hfi t-~ N l0 O ~P 4,• I m 1 m o rn cn om d o *+. r~. cn m m •• m m w pl w iv ~c i-+ ~o w N rt w ~ cr a m C w r rt r- d H rocs ~ 0 a a o t W I 'r H c r r r l t -' c ~ ~ m ~ m r ~ Ga ~ m tt O - A r ~ c ~~ p p H n C d O ~ ° m am ~ w r i~ c r~~ r d ~ a s r+ O W It W C a cr ' r1-+m A rn m~ a <~~ c r m - a tA {? O A N O A ~P ~l 10 O F m f'S J W o ~ !] H o ~ ro ~ ~l o z l] ro ~m ova 0 7a f7 C~ ~m oo G Cn m m oo ~1 ~7 \\\ to C R7 o ~ o z ~ rra O , \rr~rZ \ct \~ ~ro \g ~z m n rrr wrri ~ rG O r~ H r (] r to A F ~rnrn O C cr rn rn a ~ rn a\ rn K O rn K O ri n \\\ a \N \F+~ \O \O C' WF+- NNN P ~' ~ f 01 N N H NH x NFj H R7 1't OOO ~ Wa O O ~ '~J O~+y H z 07G' o O r 07G' o C ?~ l7 -C ~- 000 ~~~ O a, o ~p d o z .gyp f~ H ~cn b ern H O m ~' n °' p' z ~ o z o d ~ ~' ~ ~ e x ~ x m a. w x a ~ e~ ~ ~ ~ 0 o a '~ ~ '~ ~ o O O O H w ~ z r p !7 c r r ~. r c O 7 -~ '° ~ a ~ a w ~ w z n . . -- rt m ~q W w m w m n L*] W $ 'C N IC iP ~c '~ W fr a O ~1 r N ~~p y o ~ w o ~ , h m cn w to oo N r p' ~ ~ ~ ~ r ~ r o v l m p b ~- O O h o mom ~ ~ ~+ n m g se yro ° d a n }S d x r ~ aroa ro N ~ ' a a m ~ c r m ~ u q ~ N ~' r- a m ro p K cr m w x• N w o 0 C O 0 0 cn w ~ 0 0 m m ~ o ~ wa E ~ o r N r N ~. \ m r N- r o o~ In bo n ~- a n m rn i~ w ~ R+ (t O N (ll W IP ~ O O O O r cr y o 0 0 0 1 m '.Y o 0 0 0 m ~ F+- o~r~ ~ ~ x x om ~ ~ ~ r r ¢m ono 1 fS N r N r. ~. a vl a ct r o 0o cn ~ p ~ n ao J A $ 01 N 01 OD fr a (r ~ p1 N (Jf O W ~ ~ pl O O O O e~ (Z (] O O O O ft O .-. ~ (11 O O O O tll F{ m a (] ~ d W ~ ~ a• A C m p o r e~t rr ~S r• n cr F a O a ° ° ~ a ~ m ~ Q. p ~ . q7 vl m m ~ m ~ y o ~ m p ~C mor n ~l o cr r- cr r- o t7 n m p v rrnm A P p IQ N .. ~~Jy m m ~ r+ O ' ~ am ~ ~z W ~ d ~ ~ ~ F-• n a ~+ •• m ~ K ~] r N r m K ao W W H m W W OD O W W In ft O VI `,Y M ~'. ~ ~ Cr r W Yh r a r l0 OD OD ~7 ~!. I m 1 N W OD N Ctl C!1 O fA d O ~ r O iP• W O .. ~ W ~ w pr co w rn o cn w r cr w ut OD W r UI O NN°~'NH a rr m c a r a a rr N- O p ~ ~ H d 1 C~"~ n Q O ~r m ~ -a ~ ~ m ~ ~', -~ o ,o @ ~- ~° ~ o ~ m ~ m ~ y -~ _ -~ -~ ~ v y ~3n v ^J~ ~ ~ Q ~ V , '~ o. T~ c... j~ p o-./-~ O s 1 / ~ ~ O ~ ~ W o ~ m ,-G, , ~ ~ N ~ Q N ,~ , o ~ ~ j ~ d a, K a ~ ~ o ~ ~+• Y ~•. ~ H ' s'' G ~ Q rO f"'~~ ~ O ~ '+ ~ ~ o ~. G r~ ~. :~ c~ro ~ ~ ~ ~"` .-n N'~ ~' ~ ~ ~~ Q C ~ 4 m d m r• It m O n R+ r ~ p ~ ~. cr m o n ~ ,,, .. p t~ H ~'. m7 m R W ,q p m G m h rt ro o O ~ rt m Ct O apo ~ m ~d m ~' a m ro~ K f] o n p. p IQ ~ c~rtnt~ t+l m E ~ ~ ~ a -00 4 o ~ m ~~m m m g cba p H F~ a C p m F~ p rt (D ~ 1Q W p m ~ C o ~ v~ w ~ ID m C E m wp !2 Y m Y r- n p~m rt O r t7 H 1 m p• au p F'- 0o rt m mm 1 t~ .a.rom ~ o ~d N -i O 1 Ft vl p rt ~n ~ K m p n n -r k p ~ r 4 ~ ~ w R+ 1-+ m a a°O~a ~s .~ r p m m O rt W ~ p W ... ~ ~ m m rt p rt H lD M pc IC 1'a p gyp. W N Y of N r N F~ 01 O N OD A O O O O O O N O O O ~P H O K!~ a H Ott~~y9G] ~l J H ~ Ot~yy hJ b t + J .b a.'~. t o p n H w t~ J \a~ ~ R H w t \a~ ~* - ~ H 1 \a~ o w ~ e~ .. F....py~y .. ,.....payy .. Y..pc ~aK o ~on Iv o ~on+17 0 won d p m OI Nlp WH J NN WH ~i N.]t+•H N"`! \ o\p y \ o\p H \ o\p y W t-~ o F+ I-~ b r o w F+ b r o 1•+ r z m a t~ ~ t" ~~ ~ ny • H ~ ~H •H ~ H ~ H o O~ ~ O O~ O O~ ~ w ~ ~ m~ ~ m t+ ~ o m L+ 9 N t+a ,~ d ~ H rt ,~,Hx tt ,';'H7. 17 ~H'J C ~ y ~ ~ H O m L +] O m t9 O ~ ~I rt v: J n ra •~ K r o~ \rtw rn \crw rn \crx \ r w vl \ Y w o, \ t~ w N ill 4' lp N U1 Q LO N N y' O \m O1 O \(D 01 O \m ~i OrJ ',t0 ~7 Oa ~ J Oa^ w ~ ~ °D ~ a a N a ~ rn ~ <n ~ rn o Cn a.° a~ x ~ ~ a~ o w n a roK K m m m ~~ -i K r- r- f1' 1~ w O .~y x r• m X roCrJ Kpp O rrt n ~ m m p m cr O m F+- M, ~aa la m ap a ~ ~ ft m •. m .. O O O m~v \\\ rrr A O1 Ol \ \ \ N N N O O O 0 0 0 r] J ~] r ° Y S t0 lp O \ V1 W O W w N ~ w a W w N 10 O O o w o 0 0 0 cr rt rt ~~ 1-• R+ m ~o to o u, vl w o p m N J W [t p W W N w o o m p. o w o p \ 0 0 o cr O 0 0 o m It ~a n m m C o p ~ a ~ a ~ m . m m vl r N H tj o F-+ W vt w ~ ~! M ~ ~ O Ol W o N F -~ l -fi m n ~] N O N ~ •• O ~ V pm a~p~+~ m K m a r N r m ao - l0 W O 01 ~ ft NN MF•' UI P O N k,' I m 1 N W Uf O1 l0m al0 w N J ~ r •• N 1~ v to p to ~o cn , N F+Nrtrv+ 0 00 0 ~ oop•oH m p (7 m p r p r• 0 p n ~ a~ R K M ~ ~ ~ R ~ m ~ m '~ O c+' O ¢ f~' N 7 fi ~+ N to O ~ ~ ~m K o0 ~ ~, ¢ ,~ 90 my ed F ~t H ~ O op°'°, ~y>~ ~ ~~: h. Us C'1 Q' ~ K ~ a K °' ca ¢' ` o 4 '~' m ~ ~ ~ m ~~ ~ ~,~a a w m R p ~ o N v~ -c'• ~ ~ £ '~ W w ~° m ~ ~ p C1 m R Ct ~ OC ~ tp O ~ O ~ ~ M ~ '~" rOt O N rt "' n R ~ ~ m p A K ~ n Y' R' ~ ~. n ~ ~ ~ ~ p J~~ o ~ ~ ~ [~ (rt ~ m iy R M ~ k ~ O ~ w m w 0 0 O H ~ ~ p ~ ~.. ,,,, o ~ ~ N Y' .. O N -'' 'A N O J ~" ~ ~ N o~ ~ J a+ ~ ~ ~ ~ 0 fi H ~ < ti°, p ~ ..~. Ct ~ N l'• N ~ W ~ ~ b w~,w ~ ~ N w a ~ ~o N J O iy O ~o N 3 P O O w 0 rn J a n ~~ n~~ ~, R o r+~ ~ rQt ~ m w 0 a a ~ ~ ty ~ nm ~~ Rm ~ m ~D 0 O OOj O 0 0 ~y KS ~ ~ c~ ti' ~'°` °'. H S l'• R 'J J ~~ ~ K J~~ ~~ r,, .• 4o rt ~, :~ 0 0 O ON ° f7 ~ c ' t~ Y L+0 , a ,,,, ~ o p ~ ~ ~ J O J a p . t , ~ o+on ~ ~' NNW ... o~ ~ ~ O ~,, --+ w °.aw p ~ ., a ~ Y71 ° NN'd O 'aO ~7 N . ~± oS t °,sao a~ N ~ o~ ~ r ~~ N O a O iD ~ J ~ ~ ~ ~ n J ~~w O ft w ~' ~ NA r N ~ i Fl S J ig .... ~ ( wfi~ ~ w4m O . ~~ c .,ID O N J ply y4 J r ~ ~ ~ Q ply y ~ t ..i U ti ~ ~' J yt m w ~ fti ~ ~ tp u+ w ca ca ~ ~ 'i'' '' a J R ~ ~ ~o d+• id ~ Y o a~ rn m t•- w ~ o ~ ~ F* O O ~ (7' R R t0 ~ ~O O W O ~'- O~ co N o~ ~- o v+ a- 0 O O O O t~ t0 ~D N Q'~ OD o m N O~ lD in 0 ~o O W N J t7~ Y N N ~ O~ tr ~ O tJ~ t71 v N w 0 w a x 0 m w ~ ~ f1' !Y O ~, n d n ~ titi F~ p' ~ ~ R ~~ Q0 n ~ ~ ti iD r- Cg R C w R 0 ~ ~ m ~ O ~ K R t~' fD tA~~yMy ~ M ~ O O ~ ~ ~ b ~ H oo~O tv'7~q N l,. rn -~ ~ m tl ~° ~ n' my u~+ oo~v~ a7 rt n O y+ fi ~ K ~ .. ~ ~ ~ ~ m ~ ri ~ G 4 ~ ~ 4 ~ ~ ~ ~ £ O ~ ~ ~ ~o r n ~ yr O m m 'a a rt ~ ~ a ~ ~ ~ ~ k n' ~ C'1 ~ i{ A+ ~ ~ ~ ~p ti ~, a M ~ G ~' ~ O ~ ~ W ~ n ar g cbd ~°~ m '~ ~ O W Cf1 ~'~ '~ £ ~ m r- m ~~a ~ n ~ c+' ~ R Y ~ ~ W ~ ~ W ~ ~ H ~ ~ m ~ O 'd -~ H tt "'n`` ~~w v' K w ~ n K ~ ~~ W pi ~ ~ O ~ ~ ~ ~ A~ +ti a~~ O ~ .y tq ~ C9 ~ ~ ft' CST H M ~ K ~ ~y -~ ~ -~ '~ ~ a H K ~~ ~ ar '3 n P N i O i u ,~ h ~ ~~~~ ~~G~° n WY- rn .'¢.y °-' ~ a ~ o ~ d o N ~~~~ p.7 ~ ~ o a r' G ~ ~ 7d ~'b~ ~ ~. m ~ ~ ~ [~1' w ~- "` d w ~, ~ o o ~'' r~ w ~ N d ~ O ~ L~7 ~ N ...i W O O O 0 W 0 O+ O d O O ..1 N .o N W ...] J CA O O N ~+ N O O O N N O 0 O O ~a K ~n n~tD ~ ~a m ~,. ~,, `" o ~~ m ~~ °' m ~.. oao m"~:'~ F.` t' ~ ~_ a+ N N O O ~ W K r w N N N N Or ts~ m F ~ ¢' .~ `` t1' ~ '~ ~. ~w ~ H ~~ GN ~ ~ m K R k C+7 1A C~' P O y m R ~b 40 K ~ cr ~ n y °rh -~ ~ a '' "' ~ ° ~i R ~~ ~ ~~ b~~..d ti ~ W~"0 ~5°' ct F. " ~ ~ ~ ` ~ a ~ oo~pt3 a ro ~' ¢, ~ ~ ~ ~ o ~^ c~ ~• ~~ a ~~~~~ ~-_-~`~ ~,t = ~ ~ 4 w, -0 t?- y ~ ~T~~aO N p~ Q'mU) ,y [!' r+ a `~ a - ~ 0 oQ ~~ -~ r ~,; ~o $. ~' o r} ~ ~ ~ N~ O O a o -o ?' m ~ C rn m ~ v O '~ ~ ~ ~ '~ -'~ .P j O .~.i r} ~` ~. G G r h, ~ ?~' ~ ~ ~. °" ~ ~ .n ~ ri r r a ~ ~ ~, ~ ~ ~~ o ~ ~. ~ ~~ ~, a c ~ o ro C d h m w ~ d N v (1 C (D K trl p ~ ,~ m W o n W cr o a ~ ~ M m n . ' F '' ~ ~ m o »m c r e rn •• N ~ ~ ~' O' r r o o ;'' m .. C ~ ~ o 0 ° .. m • p O A m V1 O O O O '~ ~ N o ~+9ro H oCh1F0 ~ Hf] Ctn mv~ m O a ~ d a ~ :~ i ~ ~ ~ .. ~ ~ x a M ~ or, or, r c :r i ~ ~ ~ r t ~.\~ o ~ cat O °~ ~ \ O f 1 o °\'on z n ~ wr- fi G NNN o 0 0 ° ~ ~ ~ o~ ~ H o~ W H ~ o~ W H r f , b [ t ~ ~ 3oi~ ~ F ,,W ~... p o o ~-+ 7d w y y~ ~ w~ r oNF-.yy ~ to to x . F O O ~ ~ ~ t'~ y t ig \ cn \ H ' F' W~ ~ fi ~ ~!_ O N C N O ~'+~ N C O~ HH N O N W +J O~ H ~~ a O O Oa .~ O m ro v j O O (D ~ ~1 01 Cl 3 W C' J Vl ~ ~ ~ C] O n G ° ~ rt~ ° rtKn ° ~rtn . c r .. H .. 3 i rt p tr' ~' ~~ ~ ~ 'LH' ~ ~ H z o \ i i H r w 7 t i crmti7 ~' F'' rnn \R~ r a~ j in ~ \ctt+7 r rn ~ r0 \ttt+l ~ O+ ~ r Y. y \ ~ yG r W N CTf ~ ¢C? O \m W 4 m O i \m O ~ ~w ~ ~ O ~ y N ° ~ ~ ~~' K ot7 ~ ww W O R+` ~ o rn N~ ~ ~ ~ o p ~ w ~ °'° ~ ~ o, ,a ~° ~ , w p n w w o w ' g ~° ~ ~ ~ x a ~ Ew ro a rmro m ~ on~* ~ e o r rn w ~ C+ ~ o ~ £ m w w ~ ~o ~0 1O m m N O1 :n 'P w p, (] wnm ~P N ,P ~ ~ ~* ~ a oo ~ .~ o ti ~ ~H, c o OD '.y N- mrtm gg 0o m rt R ~, ~ ~ P M m N n O ~ ~ w ~o ,tOp ~ ~ ~ fS ~n A~ R m ~ cWr W rn . n m o ~ o rt o n n o °o o m K ,,~ p~ o m ~ nw 90 w n C m ~ o ~• ~ ~ w ~ ~ ~ wn rr F ..p, r c ~ ~ a N ~ 6' ~ ~ w O ° H a m h ~ ~ ~r~ r m w r c i ~d c w ~ ~ M O ~ ~ V W W ~ N ~ m f p m d Ib P1 f r M N W mn °°" mg ~ ~' N- v+ r• O cn ~ p ;D ;D cr r cr M r z H ; ~ M~•' ~ V1 N rm d-~ W ~ ~ `J 1O P ~ O R r r G ~ ~ ~ ~ ~ooop'~H W 0 tit m [t w r 0 rJ Y7 w -~ w o ~ p, r n ~ rr ~- o n rh .. N~ L+h H C m ~' m rt w w m rt m K car W O o ~ rt m c~* $ O to m ~ fS a R' p, o n ~ ~ wm ~ ~• a. ww~e rnrmt~ ~a R~ ct W M ~ R+ a, O O ~ f~D ~ n w m d crod ~~ C r~r m a w r• w m '.Y m W N C o ww~ m m ~ m ~- a ~ ~ m r r- n K o ~ r cat H i ~ ~ mp w ao ct a mm ~ K rP O ~ r ri ~ to W rt ~P (] J p ~ ~ ~ • Fj G9 m n n --'C m po r coao 4 p G w p, r m w ~• ~ rt ~~a ~~ ~ • m W o rt --- ~ p W m • us t+] m on rt w rt ~~ ~ ~ ~ ` ao v o, cn r r rn rn ~ W o m w ~ ,a r 01 OD N O --+ o o~ o ~ ~o w o v~ 0"Hl J~dC ~y ~~O ~ ~ ~ w~ a ~ rr ~ f~ ~ rr ro ~ cr ~ ct H ~ b p r~ ~ ~ O ~ rG tr! ~ ~ H H r~ ¢ ',i1 r•• W 1 + ~ -'~ ~ ~~ -' n o won ~! N N N ~ N + N N W$ + a C ~~~ ~~ w JJ LL ~ v ~ Cd \H f ] O ~ c • o ~ ~ ~ m ~ m m y ~ ° ro n ~m n ~ d ~ d o a~ o ~ ~ ~ '~ rt cr r c d H m iP ~ M m v K a w a d a H ~ ow z r Nn z _ ~ 'G N ~C r ~ \ r r• U1 N ~.' (ii r o ~ o r 7 0 0 ~ m b0 d W w o ~ ~ .. t7 d w p ,b y 1-+ b J VrtO ~O y i0 0 ~O r W rn 3 w r rn o J C o '~~ f] n t o ?d (] •• ~' N H SS ~ N 01 N lp r o~ o .p ai ~ w ~n N W W N 0 0 0 ~o 0 0 0 ~ 0 0 0 0 N Ot N ~p r O1 O Ya Ot ~P W tD N W W N O O O ~p 0 0 0 ~. 0 0 0 0 0 0 0 0 w v 0 W P W ,... o N ., W W N r v o w m rn o to OD J O qa O V1 J ~..~ ro C d n w w o ~rt ~ ~ ro a m c r o o ~' - s ~ w o K wpm ro n m rt d W W ct ~ Ct m .. m 000 m m ~ ~ ~ n ~ ~ rn rn Ft Ft ~ ~ ~ F'• W N N N RAC 006 F'• J J V O p x w m X r bo R~ ~ m u. pn ~ .`i m a ~ ~ ct o ~ n ~ d n C m m o ~ ~ a' '~ ~ H ID 0~1 rt A N ~ ~ T f O ] c N rh •• O ID m a m ~ a W t r c C N h ~ -i ~ r* r Z rm Cr-~x N W fD N C 7 ~ O •• p O r rt r fA ~coo~'~oH [^J m a ~r m a r ro rr r• 0 p _ " ,.~ R '~ ~ ~ N ~ ~ ~ d G ~ ~ ~ 0 * ~ M ~ c ~ ~ ~ ~ OYi n, ~ ~ K M+ " ~ ~ ~ ~ t9 ~ ~ o ~ !'~ ~ ~ m ~ Kj °R ~ O ~ M O ~ R' ~ ~ ~ N Y• W O ~ ~ ~ ~ ~ fP a `"w ~ ~ n ~pR+ ~ Y- CS ~ ~ ~ ~' ~ a ~ K ~ £ y,, mm a` o c~ --{ m O n y ~~ ~ ~ Yd G 0~ ~ ~ m c+' ~~o w 4 ~~~ ~£~' m Y' ~ ~ F' a ~,~m c+' R~ pD ~ m ~ ~ ~ n ' r++ co ~" o qs +' no Y' r{ ~ ~ c-' ~ n " ] ~ . ~ ~ H ~ ~ ~ ~ ~ '` Y F ~ m p N ~~~ ~ ~ ~ om.Yy w m C'1 ~ ~ ct ~ G r++ ~ ,~ r o~ G ~ ~ ~• ~ rs ~ ~ ~ ~ ~ ~ ~ O ~ ~,. H+ O ~ ~ d~ ~ ~~ R ~ .. 0~~„1 ~ J ~A'. O~ ~_~ ~ N N o ~ O O p O ~ J "~ O 0 N 0 N 0 iy w C+1 m n e G Y' rD ~ ~ Y m ~ ~ nq K ~ ~j ~ F. O ~ p ~N ro ** ' F H ~ ~ R M d O ~... ~ ® W ~~-„,fig R ~ ~ ~ Y N m ~ ~ M o•' ~~~ ~~~`° RETROSPECTIVE APPRAISAL OF: 2% INTEREST IN: OAKVIEW GARDENS APARTMENTS LLP OWNER OF: OAKVIEW GARDEN APARTMENTS -PHASE I FOR THE ESTATE OF DONALD H U RST AS OF )ULY 1 7, 2007 Prepared by: Submitted to: LIPMAN FRIZZELL & MITCHELL LLC Richard Stewart, Esquire Real Estate Appraisers & Consultants Johnson, Duffie, Stewart, Weidner Three Centre Park P.O. Box 109 8815 Centre Park Drive -Suite 200 Lemoyne, Pennsylvania 1 7043 Columbia, Maryland 21045 LFM - 11130 Copyright O 2008, by Lipman Friuell ~ Mitchell, a Maryland Limited Liability Lo. T Lipman Frizzell & Mitchell ~~c f~EAI_ ESTATE COf~JSULT~I~JT~> • M. Ronald Lipman, CRE, MAI George P. Frizzell, CRE, MAI Ryland L. Mitchell III, CRE, MAI David H. Brooks, CRE, MAI Calvin V. Thomas, Jr., MAI Joseph M. Cronyn March 5, 2008 Richard Stewart, Esquire Johnson, Duffie, Stewart, Weidner P.O. Box 109 Lemoyne, Pennsylvania 17043 RE: Estate of Donald A. Hurst 2% Interest - Oakview Gardens LLP Date of Death: July 17, 2007 Dear Mr. Stewart: Sheldon A. Stern, MAI Kelly A. Hoffert Nathan O. Brantley F. Ford Dennis, Jr. Joanne L. Andrews Heather R. Lueben Michael J. Lester Stacy A. Harman Eileen T. Thomas Barbara C. Gardner Michael J. Chicorelli Janet L. Seward James E. Caminis Jack L. Powell, Jr. William O. Donahue, Jr. Deborah M. Ryba, Mgr. In accordance with your request that we appraise the above captioned real property for the • purpose of estimating 1) its market value in fee simple and 2) fair market value of Mr. Hurst's interest therein as of his death, we herewith submit our report. Following is a complete appraisal submitted in comprehensive summary format. SUBJECT PROPERTY/VALUATION METHODOLOGY The subject property was inspected on February 27, 2008 and was found to consist of a 166- unit, subsidized garden apartment complex constructed in 1964 and situate in the Falls Church area of Fairfax County, Virginia. In preparation of this report, Kelly Hoffert personally inspected the subject real property and the neighborhood in which it is located, and we familiarized ourselves with the competitive market in which it exists. We have reviewed the real estate tax bill, Notice of Assessment, rent roll, income and expense statements and other pertinent property and entity-specific data supplied us by the property owner. The subject property, owned by Oakview Garden Apartments, LLP, has been valued based on the income capitalization and sales comparison approaches. Given the subject's age, the cost approach was not developed. Based on our investigations and analyses, it is our opinion that the Fee Simple market value of the subject property, as of July 17, 2007, was: C7 ~ Per Revenue Ruling 59-60 Three Centre Park ^ 8815 Centre Park Drive, Suite 200 Columbia, Maryland 21045 (410) 423-2300 Fax (410) 423-2410 * (301) 565-3380 Fax (301) 587-3033 ~ www.lfmvalue.com • Richard Stewart, Esquire -2- FIFTEEN MILLION FIVE HUNDRED THOUSAND ($15,500,000) DOLLARS PARTIAL INTEREST VALUATION As the focus of this appraisal is to estimate fair market value of certain interests in the above described property held by Mr. Donald Hurst as of his death, we have included in this report a section entitled "Valuation of Partial (Fractional) Interests in Real Estate", in which we have estimated fair market value of said interests. M. Ronald Lipman valued the partial interest. In summary, we estimate fair market value of the interest under appraisement as of July 17, 2007 as follows: Add: Net Cash & Cash Equivalents (incl. Reserves for Replacement') Total Value of Assets Deduct: Mortgage Debt (7/17/07) Net Asset Value (NAV) Before Adj. for Partial Interest Amount of Interest Under Appraisement Unadjusted Value of2% Interest Less: Fractional Interest Discount at 35% Fair Market Value of 2% Member Interest Rounded to: $15,500,000 $1,002,867 $16,502,867 9 896 463 $6,606,404 2% $132,128 46,245 $85,883 $86,000 This report was prepared with the intent to comply with FIRREA Regulations, the Uniform Standards of Professional Appraisal Practice (USPAP) as set forth by the Appraisal Foundation and the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. This comprehensive summary appraisal report is the result of a complete appraisal process. Respectfully submitted, LIPMAN FRIZZELL & MITCHELL LLC M. Ronald Lipman, CRE, MAI Certified General Real Estate Appraiser Commonwealth of Virginia.: 4001 002875 Kelly A. Hoffert, Associate Certified General Real Estate Appraiser State of Maryland License No.: 04-1 1081 • MRL/KAH/mam Estate ~f Donald Hurst TABLE OF CONTENTS Page • No. SUMMARY OF IMPORTANT FACTS & CONCLUSIONS ......................................................................1 PURPOSE & INTENDED USE OF APPRAISAL .....................................................................................2 INTENDED USER OF APPRAISAL ....................................................................................................2 PROPERTY RIGHTS APPRAISED ......................................................................................................2 EASEMENTS & ENCROACHMENTS .................................................................................................2 DEFINITIONS ..............................................................................................................................2 0 MARKET VALUE ..................................................................................................................2 0 FEE SIMPLE E:STATE ..............................................................................................................3 0 VALUE AS-IS ................................................................................... ....................................3 DATE OF APPRAISAL ................................................................................ ....................................3 LEGAL DESCRIPTION ............................................................................... ....................................3 HISTORY OF THE SUBJECT PROPERTY ........................................................ ....................................3 SCOPE OF THE APPRAISAL ....................................................................•-- ....................................3 FAIRFAX COUNTY, VIRGINIA DESCRIPTION ............................................... ....................................4 NEIGHBORHOOD DESCRIPTION ............................................................... ....................................5 PROPERTY DESCRIPTION ......................................................................... ....................................7 ZONING ................................................................................................ .................................. 11 HIGHEST & BEST USE ............................................................................... ....•-••-----..................... 12 ASSESSMENT DATA &TAXES ..................................................................... .................................. 15 APPROACH TO VALUE ............................................................................. .................................. 16 SALES COMPARISON APPROACH .............................................................. .................................. 17 INCOME APPROACH ............................................................................... .................................. 19 RECONCILIATION & FINAL VALUE CONCLUSIONS ...................................... .................................. 24 • EXPOSURE TIME/MARKETING PERIOD ANALYSIS ......................................... VALUATION OF PARTIAL (FRACTIONAL) INTERESTS IN REAL ESTATE .............. .................................. 25 .................................. 26 UNDERLYING ASSUMPTIONS & CONTINGENT CONDITIONS ....................... .................................. 53 CERTIFICATION ...................................................................................... ..................................56 CERTIFICATION ............................................•---...................--•--.............. ..................................57 COMPARABLE DATA IMPROVED SALES SALES COMPARISON ADJUSTMENT GRID ADDENDA SUBJECT PHOTOGRAPHS FLOOR PLANS FLOOD PLAIN MAP QUALIFICATIONS Lipman Frizzell & Mitchell ltC Estate of Donald Hurst • SUMMARY OF IMPORTANT FACTS & CONCLUSIONS Name: ESTATE OF DONALD HURST Property Name: OAKVIEW GARDEN APARTMENTS -SECTION Location: 5800 Oakview Gardens Drive Falls Church, Fairfax County, Virginia 22041 Tax Map 61-4, Parcel 91 A Ownership: Oakview Gardens Limited Liability Partnership Property Rights Appraised: Fee Simple Estate Land Area: 7.76E Acres Zoning: R-20 (Residential) Improvements: The subject improvements consist of 16, three- and four-story masonry garden apartments constructed in 1964. The buildings contain a total of 166 apartments. The property is aproject-based, Section 8 rental property subject to a five year HUD contract through August 7, 2011. Highest & Best Use: As Vacant - For sale, medium density housing or multi-family rental project As Improved - Continued use as garden apartments Date of Inspection: February 27, 2008 Effective Date of Appraisal: July 17, 2007 Value Indicators: Cost Approach ....................................................................Not Used Sales Comparison Approach ..........................................$15,770,000 Income Approach .......................................................... $15,475,000 FINAL OPINION OF MARKET VALUE ................................................................ $15,500,000 SUMMARY OF ADDITIONAL ASSUMPTIONS This valuation assumes that the improvements are strz~cturally sound and that the property has no environmental impairment. This valuation assumes competent and prudent ownership and management. Lipman Erizzell & Mitchell LLC 1 INTRODUCTION Estate of Donald Hurst • PURPOSE & INTENDED USE OF APPRAISAL The purpose of this report is to develop an opinion of 1) the market value of the real property known as Oakview Garden Apartments and 2) the fair market value of Mr. Hurst's interest in Oakview Gardens Limited Liability Partnership. The function of this appraisal is for use in the administration of the Estate of Donald Hurst. INTENDED I~SER OF APPRAISAL The intended user of this report is Richard Stewart, Esquire. PROPERTY RIGHTS APPRAISED The property rights appraised consist of the Fee Simple Estate interest in the subject property. EASEMENTS & ENCROACHMENTS We are not aware of any easements or encroachments which negatively impact value of the subject property. DEFINITIONS O MARKET VALUE' • The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: a. Buyer and seller are typically motivated; b. Both parties are well informed or well advised, and acting in what they consider their own best interests; c. A reasonable time is allowed for exposure in the open market; d. Payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and e. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. • ~ Per Revenue Ruling 59-60 ' The Dictionary of Real Estate Appraisal, Fourth Edition, Page 117 Introduction Lipman Erizzell & Mitchell ~~C 2 T- • C - ~ _--- a--~~ ion T~ M ~ • ~ ~ a X~~,,~ ~ a as9 T' a '.x ~ ~f ~~ ~ ~~ _ C~.1.s~~/".~C~~~l~~~b'•.li'~~ a '' ' • • k~. f - o °t`:~.~ 7 11 f/\\ A Y J\/ . s E ' ~.rs ' ;' ~ ~ - ' -` xo ~` ~ e . re * .sc ~ a] T bn . '~fj,',~ '~. ~ {i .~.s x / /~'': T •• Tl `~ t}' :.,'^e.o° r:yG ]a ~ ]x -T » ° - '+~, .>.~ ~ v a - ,} ~ ~•Ej ~, ~~M'" .~ m/ ~yo '&~e~ea ~ ~~~,:s za .~* • ]e P 90 ]y 9e =fix \ °° >t'R4 n ]i~ '=~, t r f { ~ ~.. e % v ~.6Y o ~ ] ~! R 4• xx ~ bx ' n yx •! ~• r ~ "'` '>. ~ - so+ *° °' ! y ' ~.. ~ e ~ iii x, ~~~h~ fl b] °' j •` r e 9 r!" ?. a 9e ' ~-~, /! ~~ • ),- ~.. , .~~ • 1~ ab ~ l~l,ur'v,a. e'~ ,~~, -:_~.~~- ~~.,, ~~' yy ~ " nn ~ 9• ea eT'. 1.1 !e ,~'° ea.' ~`,~'~;'/.. ] ~~ ~` rte. ~,~' ~ ~ x ~ ° w• ~ +y ]8'ce w a$ ~ /`f ,. "~ - '*+. w k,,183 ~ ~ - e tk '1 ~ ~, ~~ ~ j~ r ~ s p j, d 'a nn n .H N ~~~ ~ 94 9e %~ ~~ ~ • ~^a4 J n r !; t ] ~a. x ~, s ~'.. ° f S'K P .n~y ~~ a nn ! ~. ! ~ {b ~iy n "' ,T ' i fv ~~:. _•, E.." .N 1. • ~~tc s] tta,. ~ 5 n ] ~ .ocs ~ ~ ~•i:~+. ~ 8 • k~ s i • ~~ s // c: aon , ~ s p cm. ~ e y ,n xn , n '"' oa ,o d ~ ~ 'x : ~ ` .r.. ~ -nR T • decd , m _ t r '~ • ;, fix a g T ~ E] ~ .) U " ~ .5 0 ~. SEr n\ ~ ?~6 119 ~~! ~ _UU1AN ` Z ~ x . 2 s ~ :,CME _ '7y sea n" .W _ e ~7:,] !~ ..]SARK ~ ~.E . ° ` ay`% w ,. a et ex ] ,'~ 2Pta 8.54 » ~, 3 "nn 'x nb .: A,6~"',z9 eau e~ n`• a ~~'fE • ?pOWDEN TERfl3 EPld1K > ,. (R 3' ~ y ~ xn, • , eT '~a '~, ~ e n e 9~ ;} `. N o l y .. 1• ~ .?w ~ ay '° •] .o. '~ as ss ; x ..y~.. 'e n. ~, . ..'N~ S ~ ~ -- ~+ y rob n ~~~ ~ tBC9 Mpndn .~' 4,a ' ae. '~ 9 Say > ~ 1 •]f q ]] t ^ ,49 _R 9 .+ j to .oa ~ noQ ~ se T ,• ¢o r ``0. '°13 ne ~ti w •.x~~~ DSO as r ,. ne \ wee ' • •,.x n• 't F- % ~ /~y ~ ' a Be 9t K' ~ E Mr J•: AbQO 1 .w tj' eb N s9 nx & jt~' ..e T sxo ° ~}Q "h= i' n ~ 7 q ea `~' ~~~ ys 0 e 4a.. Y }a~ ^.. s+ie ~ Gtr •~y~ 9 ~y z ~ ~ net .D~ b E_ , ~/~e 9^ l xy i4 xa ~' J• N n L93 (t,8\~~`X~ 8 t~ ~ e en . Te y e9 ~ ~ ~ ' 1e x 9L h~ 1Q ' •] ~}r )r \\ { b { 6e~': ,a_J. n yo '~ ax 1] t>t• • ,Q ./G~//F66nne \ .. .E aT N~P•. G~ 6,a ~ Z Rn 9a9 1 `, >O .~n ~~0~ 1$e n •6a b1 ~ '~.~ ei ~' c9~ p ' 1a 1 ae n,~t \, ~`.... gy .M ~ /~~ 6e .M• _ G M ~Yy.T~3 ~ ~ n e1 y ] i 1]a !e. • ~ x e I f .•69. e, tF.! 93 4~ G ., s N~ s a~ ,n n~ s 1 n "a A' <~ a~'0 en S ~~~ j0 -~ °6 g 5 { ] ~,r,^ a3a 9 Q• je ~]t ..~ ~a ~y0 9 ~l Y M ~ ~ qe P~'~ a '.t ~ S ~ ~ ,a ' } • ,MY' 0 4. d~ x ,aa • 'lAly^ e " ]y ~ T ell -.~__ ~ 9~ ''~ ~` ell Mitch ~:. a. ..• - ~. ' __ A] y s`/ l efit t ,~_.r.~_~°.__-- ___._--- Estate of Donald Hurst O FEE SIMPLE ESTATES Absolute ownership unencumbered by any other interest or estate; subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. O VALUE AS-IS4 The value of specific ownership rights to an identified parcel of real estate as of the effective date of the appraisal; related to what physically exists and is legally permissible and excludes all assumptions concerning hypothetical market conditions or possible rezoning. DATE OF APPRAISAL The effective date of this appraisal is July 17, 2007. We physically inspected the subject property on February 27, 2007; as such this is a retrospective appraisal. The date of this appraisal report is March 5, 2008. LEGAL DESCRIPTION The subject property has a street address of 5800 Oakview Gardens Drive in Falls Church, Fairfax County, Virginia. The property can be identified on the tax map records of Fairfax County as Tax Map 61-4, Parcel 91 A I~ISTORY OF THE SUBJECT PROPERTY The subject property is currently in the ownership of Oakview Gardens Limited Liability Partnership and has not changed ownership for more than five years. We are unaware of any more recent transactions nor are we aware of any current listings or offers for the subject property. SCOPE OF THE APPRAISAL The scope of the appraisal includes the following: 1. An inspection of the subject property and its surrounding environment. 2. Analysis of the general and local market characteristics. 3. A search of land records and our appraisal database for comparable apartment sales. 4. An inspection of the sales and verification of the transactions with at least one of the participants (grantor, grantee). 5. Development of the sales comparison and income approaches to value and correlation of the individual value conclusions into a final value conclusion. 6. Development of aself-contained appraisal report in summary format. s The Dictionary of Real Estate Appraisal, Fourth Edition a The Dictionary ofReal Estate Appraisal, Fourth Edition Introduction Lipman Frizzell & Mitchell ~~c 3 T LOCATION • • • www.delorme.com V - - --- 1" = 4.73 mi Data Zoom 9-4 Estate of Donald Hurst • FAIRFAX COUNTY, VIRGINIA DESCRIPTION Fairfax County lies in the northeastern corner of the Commonwealth of Virginia, is centrally situated within the Washington, D.C. Metropolitan area, and has a land area of 3951 square miles. Surrounding Washington, D.C. to the southwest, Fairfax County is bounded by the Potomac River to the north and southeast and Arlington County to the northeast. To its south and west, Fairfax County is bounded by Prince William and Loudoun Counties, respectively. The County has 31 communities, with the City of Fairfax as its County seat. Due to its strategic proximity to the District of Columbia, the County's economy is closely linked to activity occurring within and surrounding the nation's capital and the seat of the Federal Government. Between 1990 and 2000, Fairfax County's population expanded from 818,584 to 969,749 representing an annual compound change of 1.7%. In 2002, the County's population was estimated at 993,966, an increase of nearly 0.7% from 2001 at 987,146. Fairfax County's 2003 population was estimated at 998,083, a 0.4% increase over 2002. The population in the County in 2005 was an estimated 1,010,015, a nearly 0.7% increase over 2004, at 1,003,496. In 2006, the County's population was an estimated 1,010,443, an increase of 0.04% over the previous year. The County's 2006 population estimate represents an annual average increase of 0.69% and a total change of 4.20% from 2000 to 2006. In September 2007, the labor force for Fairfax County totaled 596,470, with an unemployment rate of 2.0%, compared to a rate of 2.8% for the Commonwealth of Virginia and the U.S. unemployment rate of 4.7%. Fairfax County's median household income for 2004 was • estimated at $92,190. The 2004 figure represents a nearly 3% increase from the 2003 median income of $89,515. In 2005, the County had a median household income of $95,547, an increase of 3.6% over 2004. In 2006, the estimated median household income for the County was $97,590, an increase of 2.1% over the previous year. The County has experienced an average annual change of 2.5% and a total change of 16.2% from 2000 to 2006. During the past 10 years, Fairfax County had experienced increased commercial and residential growth, the majority of which had been situated near its numerous METRO rail stations and major highway connections to the District of Columbia. Generally, this growth has established Fairfax County as one of the highest ranked municipalities in the United States in terms of per capita income. Moreover, it also has generated additional sources of County revenues in terms of growth in its real estate tax base. With respect to anticipated reductions in federal government spending, this increasing tax base should continue to assist County officials in maintaining its high standard of living and overall quality as a business and residential address. However, Fairfax County does not exist without problems. Increasing traffic congestion, fueled by its economic expansion, is anticipated to continue. The County's existing road network is nearing capacity during peak commuting hours and is currently in need of repair in many areas. As such, the improvement of land transportation linkages represents a high priority among many County officials. Despite these shortcomings, Fairfax County has historically been recognized as a well managed jurisdiction. Its various government services have complimented its economic growth while initiating efforts to address the aforementioned shortcomings. As it is now anticipated that the County's population growth will moderate, development pressures are expected to alleviate somewhat. On balance, these factors suggest that the County s prominence will continue with anticipated moderate economic expansion. Locational Data Lipman Erizzell & Mitchell LLC 4 rH ~ Data use subject to license. acme ~ . i~,o~~ '''~~~``` a z~ ~ ~o a~ ,o~ ~~ ©2006 DeLorme. Street Atlas USA® 2007. ~N aa.e•w~ l '-~ ~^ RV o ioa zoo aoo aaa soo ~nnvw.delorme.com 1" = 1,066.7 ft Data Zoom 14-0 Estate of Donald Hurst NEIGHBORHOOD DESCRIPTION The subject property is situated near the southeastern quadrant of the intersection of Leesburg Pike and Columbia Pike in the Baileys Crossroads area of Falls Church in Fairfax County, Virginia. The Baileys Crossroads area generally extends from the Arlington County line to the northeast, to the City of Alexandria to the southeast, and to Lake Barcroft to the west. The area is located in the northeastern portion of Fairfax County, and the subject property is located centrally in the community. A map showing the location of the subject property may be found on the facing page. The subject property is located in Zip Code 22041. The zip code extends from the Arlington County line to the northeast, to the City of Alexandria to the southeast, Columbia Pike to the southwest, Sleepy Hollow Road and Lake Barcroft to the west, and Seven Corners to the north. We reviewed information from the 2007 edition of the Source Book of Zip Code Demographics as published by ESRI. ESRI estimated the 2000 population at 25,937 and the 2007 population at 27,321, an increase of 5.3%. ESRI forecast that the population will reach 28,088 by the year 2012, an increase of approximately 2.8%. ESRI estimates that the number of households grew from 9,516 in 2000 to 9,856 in 2007. A further gain of 2.1 % is expected by the year 2011. ESRI estimates the median household income at $70,291 in 2007, well above the median for Virginia ($59,797) and the United States ($53,154). The demographic data suggest a mature, stable neighborhood. The subject is located within the Baileys Crossroads area of Falls Church. Baileys Crossroads • is located six miles west of Washington National Airport, and 20 miles southwest of Dulles International Airport. An excellent highway network services the northeastern Fairfax County area. Leesburg Pike runs northwest/southeast, and provides access to I-395 to the south and I- 66 and I-495, the National Beltway, to the northwest. Columbia Pike runs northeast/southwest between Arlington and Annandale. I-395, the Henry G. Shirley Memorial Highway, is located just south of the area, and runs from I-95 north to Washington D.C. I-66 runs west from Roslyn to I-495 and western Virginia. The area is also served by the Metrobus system, and a Metrorail station is located nearby in Falls Church. The excellent transportation system and the neighborhood's proximity to Washington, DC provide convenient access to a multitude of employment opportunities within the neighborhood and throughout northern Virginia and the District of Columbia. Baileys Crossroads is served by several shopping centers. These centers include Baileys Crossroads Shopping Center, Crossroads Center Shopping Center, Leesburg Pike Plaza, Leesburg Plaza, Seven Corners Shopping Center, and Plaza Seven Shopping Center. There is a high concentration of strip retail along Columbia and Leesburg Pikes. Regional shopping centers in the area include Ballston Commons and Landmark Mall. Retail sales are strong in the Fairfax County market. The subject property is located approximately two blocks southeast of Columbia Pike off of Lacy Boulevard. The immediate area around the subject is primarily residential in nature. Modest single family detached homes surround the subject property to the south and east along • Lacy Boulevard. New office and residential construction has occurred in the area on infill sites. Intensive commercial development is oriented around the intersection of Leesburg Pike and Columbia Pike. Leesburg Pike is heavily developed with a mix of retail, office, and other commercial properties. Columbia Pike is also heavily developed, with a mix of retail, office, Locational Data Lipman Frizzell & Mitchell LLC 5 Estate of Donald Hurst and mid- and high-rise residential buildings. Renovation and redevelopment has occurred at various commercial centers in Baileys Crossroads. Surrounding the commercial core are several residential communities including Courtland Park, Culmore, Munson Hill, and Glen Forest. The community is well served by several public and private schools, churches, and other institutions. Public utilities are available within the subject neighborhood in order to permit development of residential, office, commercial, industrial and flex facilities. Public water and sewer are provided by Fairfax County. Electricity is provided by VEPCO, natural gas service is provided by Washington Gas, and telephone service is provided by Verizon. In summary, the subject property is situated in a mature and highly-developed area known as Baileys Crossroads in Fairfax County, Virginia. The neighborhood is centered around the major commercial intersection of Leesburg Pike and Columbia Pike with residential and institutional uses surrounding the commercial core. The subject is located in a residential area approximately two blocks south and east of the core. The area is supported by a diverse array of commercial, cultural, and institutional services. The neighborhood also has excellent vehicular access, and public transportation service which provides convenient access to the nation's capital. We expect the area to experience further growth and expect the subject to benefit from this growth. Locational Data Lipman Frizzell & Mitchell LLC 6 PROPERTY Estate of Donald Hurst PROPERTY DESCRIPTION • SITE DESCRIPTION The subject site is a 7.76 acre land parcel improved with a 166 unit garden apartment community and associated site improvements. The site is in fact the first phase of a two-phase apartment complex having a total of 323 units on 15.2821 total acres. The subject parcel is somewhat irregular in shape. It has level topography and very good access and street frontage. There are two access points onto Oakview Gardens Drive from the northeast side of Lacy Boulevard. All utilities including public sewer and water, electricity, natural gas, and telephone are connected to the property. Fire hydrants are also located on the property. Your appraisers are not aware of easements or encroachments which negatively impact the subject property. According to Fairfax County Flood Hazard Map No. 515525-0093-D, dated March 5, 1990, the subject property is not located in a flood hazard area as designated by Zone X, an area of minimal flooding. A copy of this flood plain map maybe found in the Addenda. The surrounding area is medium to high density residential in character. The subject parcel is bordered on the southwest by Lacy Boulevard, on the southeast and northeast by Section II of the Oakview Garden Apartments, and on the northwest by single family detached dwellings. Single family detached homes lie across Lacy Boulevard. Metro bus service is available to the property and along Lacy Boulevard. Convenient retail and commercial services are located within one mile of the site along Columbia Pike and in the Bailey's Crossroads area. • The site is fully developed and adequately supports the existing improvements. Site improvements include macadam surface parking, concrete sidewalks, curbs and gutters, swimming and wading pools, a basketball court, and chain link and brick fencing. Based on our site visit, we expect the site to adequately support the existing improvements for the foreseeable future. Consistent with the age of the property, the site improvements do show some signs of wear. Most notable were cracks in the macadam paving. However, the overall condition of the property was good. • Property Data Lipman Frizzell & Mitchell ttC 7 --- ---- -- - - ---- --r- -... Estate of Donald Hurst DESCRIPTION OE IMPROVEMENTS • The subject improvements consist of Phase I of atwo-phase apartment complex. While the two sections are virtually identical, the subject of this report is Section I, only. Our description of the improvements is based upon our inspection of the property, discussions with the property manager, and reviews of previous appraisals by LF&M, the most recent of which is dated October 4, 2004. We have described the improvements in outline form as follows: Type: Three- and four-story garden apartment community. A total of 166 apartments are offered in 16 buildings. Ample surface parking is provided conveniently around the buildings. The unit mix is as follows: Area Count Unit Type S .Ft. # Rooms 9 1 BR/ 1 BA 640 3. S 142 2BR/1 BA 782 4.S 1S 2BR/1BA/Den 93S S.0 166 -Totals- 130,829 74S.S Age: The project was constructed in 1964. Building Layout: The typical residential building has a central enclosed stairwell on the front elevation leading to four apartments on each landing. The enclosed • stairwells feature metal stairs and railings with vinyl treads and rubber- clad or VCT landings. The building entries feature glass storefront entry doors that are covered by exterior canvas canopies. Stairwells are well lighted with upper level windows allowing natural light. Three community laundry rooms are provided on the ground floor of buildings spaced throughout the community. A swimming pool with bathhouse, a wading pool, a basketball court, and several tot lot areas are provided on- site. Each unit has a private concrete balcony or patio. HVAC closets are accessed from the balconies. The landscaping is appropriate and well maintained and mature trees enhance the common outdoor areas. Concrete sidewalks provide convenient access throughout the property. In general, the property layout is functional and well maintained. Unit Finishes: Individual apartments generally contain parquet wood floors in bedrooms and living areas with painted drywall ceilings and walls. As units turn over, wall-to-wall carpeting is being installed. Kitchens have vinyl the flooring and painted drywall walls and ceilings. Kitchens are equipped with wood cabinetry and a full appliance package including gas range, refrigerator, and disposals. Also upon turnover, kitchen cabinets and appliances are being upgraded. Baths have ceramic the floors and surrounds, ceramic over steel tubs, all new commodes, and wall-mounted sinks. Mini blinds or vertical blinds are included. • Foundation: Concrete and block Property Data Lipman Frizzell & Mitchell t.t.c 8 r Estate of Donald Hurst Exterior Walls: Brick • Framing: Masonry and wood framing Roofing: Flat tar and gravel roofs. Regular repairs have kept the roofs in overall good condition. Windows: Single pane, aluminum frames; screens on sliding windows. Exterior Doors: Hollow metal doors in metal frames. Sliding glass doors with metal frames to balconies/patios. Interior Doors: Entry doors in the apartments are hollow core metal in metal frames; some metal closet doors; interior doors are hollow core wood in wood frames. Floor System: Concrete slabs on first level (no basement). Plywood subfloors on upper levels supported by wood joists. Flooring: First floor slab typically covered with tile; upper level subfloors covered with parquet wood floors or vinyl tile. Beginning in 2007, wall-to-wall carpeting is being installed upon turnover. Balconies: All units have balconies or patios. Partitions: Drywall. Stairs: Concrete and steel with vinyl treads. Plumbing: Combination of copper and cast iron plumbing with individual water heaters within each apartment. Each apartment has one, three fixture bathroom. HVAC: Apartments are separately metered and have gas heat and central air conditioning. Tenants are responsible for gas heat and cooking fuel and all electricity. Landlord provides hot and cold water (gas heated) and sewer. Fire & Security Protection: Individual smoke detectors in each unit. Special Features: Amenities include a swimming pool basketball court, and several tot lots. Three laundry rooms are located on the property. Condition & Utility • of Improvements: The improvements are in good condition with a minimum amount of deferred maintenance. No major capital improvements are currently planned. However, beginning in 2007, new wall-to-wall carpeting, kitchen cabinets, and kitchen appliances are being installed upon Property Data Lipman Frizzell & Mitchell LLC 9 Estate of Donald Hurst turnover. Each year, the 30 "worst" HVAC units between the two Phases • are replaced; this program has been ongoing for several years, and approximately 75% of the units have been replaced. Occupancy: As of the date of inspection, the community had a closed waiting list. Typical occupancy is near 100%. • • Property Data Lipman Frizzell & Mitchell ~~c 10 __ .~.__. ___ ._ _ _~_.~_ _ _ oni g Map r,. ~..a: ~1 -easA 9 _ rl /// t1~ ~ d /.~/.~~~ ,,,~•~~ `eef w ( 1 .::nom is 'i ~~~~~ ~ tf ~ ~' ~ .m, i7~ .. _ ai 1, ~.~;\ /~ .`\ \ ..LS- :~ :l .,.e ~ n.' 1''~yte to of ~ `.j t ..,~.. ,` ~ t° ~~,~ ~~p' ~ - '4 yr *u %i6'~ .~ 4 n e° ~ fgaa \Y'~ /" / r i3 / ~ ~,: ~ 7 ~ $ti! ya ~ .t x ~ j i ~ 3 n , 'N , u.,,S ~ ~ ~ of ' lz .~ .n Lax. ~ vS.i,~ ~` ~/ \ 4y ° / i ,+t tS ~ `t.~.,. Y apt ~ w `a X44 ; f ' ~ a~.,a ~ °O b~""`yam. ~ \ /Y n /R! )1' ~.: t, ,~/~/J/a.,. ~ ~ i1~~~,y~, ~#~, y ~ / I wn e> e ° k52 ~ \( fit' io 2 ~ S ryf'~`\ / / . 'Y - ~ ,pal. ~` ~ ~F,;:105.(` -fa 3 f/~, "' ~~ '~' T. / jC 4 F F: 5~0 6a al .. t t p Z 8 .hl zP~""•~r 4~ a w ~ t~/~v" 325 ~ r iti~ ..~'.a~,t:~~ '. ! n nn °n > ;. ~e~~' m ~' z.~ a ~! x; aF ~`.•+ \ °' `"1 '"' ~, vs ~f~ .5:~. ~ i Al) tee 5f ea a. .. '1G \ ~ ~~'~' Y so :< Y ~ ~ . ~ oY~ ->- r,. , ! f~ . f '' '~''';~ ,,,,Y:" Vii- / w if ti t ~ ~ ay ` r . ~ ri` v e an w r ~ ., ~1 v s ~~.wP ~'.//' K ~"x• ~ay ~' 1 e~ti ~ ~ ,~` Ti: ~ P' " ° ~Jt ka~? m ~ ' y 9r ae a) ~nbcu tl t)rj-~ pnr '., # ` 5 d o ~ ~ / ,y c ~,r'dj~: % ''15FF~~ fl ~-a' S 5 r ra . ~ a ~ , ~~~: = w~a //'~~ ~ e ~~ ca. :~~'~~; / f ,:W ~b. to Tn' St t ~ 5 gr 1pC0 r ~G F'•~ 1 1 ° f ' eon ~ F •' ~ ° °e F ~,a ~'-'~ j e) ;~~ .,J~J ~ n4 .Pl ~ ~° ~9fX1 ~ ~ ' ss < r i°°'a 4 a~7. a~,iz~" n~: ~ pf ° a' ..13 +\ ,p?~S (` _"a.~T kLFz~ y )p J p9. 1 l~ , a ° .1, `- Ipa -. to 'tB6 u 1 •: f ;, .~' ) va to ~ 4t ~' an ~ of - ~ ~ m 7 _~ ~ ~.,~ 6 Ft~°~ `~~~t-- sec ° ..v ~1~a / )~ - a m '° ' ` ` R to ~`r 'b ~r,gEV ~ q:' ~ a a P 2 c,Ex 1,`. ~ 7~t y ~j~F PARK ~ ~ >~ ~4c°. i °en ° S4 ee sec zo+a y~ ° ie '•! n° ' ~ /( ( ~ .° °a ° `t: ° \ ~ tr ,,' ~ 2Pte 8564 s » ., ~^ '~ ~! ,~` ~ Cq)` ;a as 66 ,. a5s°^ 15, eeh ear °ne ~., ' ~ a ~~On~EN T4RfzACEPMK r r R, vs ~ ezd r, a ~~~7a ~ 'i ° ~ A 3~ >: jF .s.. .r' -~ a .,.„: - o ° vyf ~ .~"' V ~. ~° ~ as .~ •° a tpa .e , , za ie is to '~ e b n xo 1 :; ~~ ap ` . ! a w ~.` II to _ ~ ~ °.~ ~ ''~} p5 b ~ >t~.yw w k ~ tees tmy„u° t.~+~' a ~ r~: . '~ ~ •;.,, rc, ~^ ~ ~' d tb tOl p 3E~ N 4 ' 1103 )da .:. 9 ;a ~~yy m~ ) e ne f?J ,9 m r ; ~sp'13 tri lJ f x~S.- ' t'n ,ee e ( nOA~~}, ~ . ~ "~4' ~ •~br ,1 .__z ~a ~ 1 'Jq p Abp ...ea. •~ p} nrlea anz ` ' ,9 t° a!' w9 ,~ J f t %`~ o -,jc 4 ~ ~ ~pp~~~)Ai °D n1 aRf ~ ,lp ~ HO ~ '~I a '~ r ~ 0f 9,~ M, '~~~ aev;:. L ° ee` .~ _ ° ~ a~ e n J an ae J 4t+ n~/~ ' n/ " \ 1 A:.\~: r a ~ ar%w ''' '.Ps. r 9 ? ~' ! en ~ `~~ t 6e 7 9a 2a ~ 15 '°1~ bk ~ !4 91/ ~ y~8' \ Y _ ) )~ 4 i! T8 .. A9) lU 333 ~ ~ ~ e t+- 1 i ° ; 8~\ ~ .1 ' elf H°~s L~ F,~ ~ 2r tp ~ ~ 1A~ y ~ ~ v51 ar ~`\ 2 e < 69 ~. ~'j,~ ~~. r ~' - ,p,"2~e of °~ ,-•._ sa -( e w ~ e ~ `\~~~el `~ Jr at ,\ ~~n° - e T~ \ ~Y ~p. n J 13 'e. ~d~ ~,>/m' r J °" sa a) 4 , ,9 ~q ~)9 ~ "`. . . S'S • .w. ~~wa .._s . , 'J`A'Y Z ~• 1977777 \~~f/ ~41 .? ".7-` `~~~///"'~{~~~}~J,,,6 °.~, .''~( ae t fe e) \r4.~ ~1 ' "r. t ~q 1t s, a •a a ' ,a L~'1) j4 ~ 6 4 ° )~/~ 1 5 N~ \ n as tn6 ae s 9 `,,~ ~- ° J ~.: In .. , , ; i-~, o ,. '; ,~ - ,~,, 2~ t/~ ,s ~ mss ' ..: ~{ \ "'&i},Zr "°` a i^„~ ~ . ,~ -r ~~~ d ~ f '~ -~~° ti~ ~Ait heN ~~ .~ ) _ ~,.,a, ~ ~~ ~ ,~, a N , . ell ~ e ., .. N ~ ~z finer ,) ~ r n r Estate of Donald Hurst • ZONING The subject property zoned R-20 (residential). The R-20 district is provided to establish a mixture of residential dwelling types at a density not to exceed 20 dwelling units per acre. Affordable dwelling unit developments are allowed at a density not to exceed 24 dwelling units per acre. Permitted uses include multi-family dwellings, affordable dwelling unit developments, single family attached dwellings, churches and public uses. The minimum lot size for this zoning category is 10,000 sq.ft. with a minimum lot width of 75 ft. Minimum yard requirements are 20 ft. for front, 10 ft. side and 25 ft. rear yard. Height limitations are 90 ft. The maximum floor area ratio is 0.70:1. Open space is required for 30% of the gross land area. Parking requirements for multiple family dwellings is 1.6 spaces per unit. Affordable dwelling developments do not have a minimum lot width for multiple family dwellings. Maximum building height is 90 ft. Minimum yard requirements are a minimum of 15 ft. front yard, 10 ft., side yard and 20 ft. rear yard. The maximum density is 24 units per acre. Open space is required for 20% of the gross land area. The property, which is subject to a HUD contract, is developed at a density of 21.39 units per acre and appears to conform to the existing zoning regulations for affordable housing. We assume that the development was constructed in compliance with all applicable local, state, and federal regulations. Property Data Lipman Frizzell & Mitchell PLC 11 Estate of Donald Hurst HIGHEST & BEST USE Potential purchasers will pay prices that reflect their analyses of the most profitable use of the land or of the property as improved. This most profitable use assumption produces the highest offering price and therefore the market value of the property in question. Highest and best use is therefore a fundamental premise in the valuation process, and is defined as follows: That reasonable and probable use that supports the highest present value as defined as of the effective date of the appraisal. Alternatively, that use from among reasonable probable and legal alternative uses found to be physically possible, legally permissible, financially feasible and which results in the highest land value. This definition applies specifically to the highest and best use of land. It is to be recognized that in cases where a site has existing improvements on it, the highest and best use may be determined to be different from the existing use. The existing use will continue, however, unless and until land value in its highest and best use exceeds the total value of the property in its existing use. Implied within the definition is recognition of the contribution of a specific use to community environment or to community development goals in addition to wealth maximization of individual property owners. Also implied is that the determination of highest and best use results from the appraisers' judgment and analytical skills, i.e., that the use determined from • analysis represents an opinion, not a fact. HIGHEST & BEST USE OF PROPERTY AS IF VACANT VERSUS AS IMPROVED It is incutnbent upon the appraiser to analyze the effect of existing improvements in order to determine whether they contribute to or detract from land value as if vacant. A further consideration is if the existing improvements contribute to property value should they be modified in order to increase their contribution. INTERIM USE There are many instances where highest and best use probably will change in the foreseeable future. The uses to which sites and improved properties are put until they are ready for their future highest and best uses are called interim uses. Interim uses are thus current highest and best uses that are anticipated to change in the foreseeable future. Examples of these interim uses include farms, parking lots, and old buildings. EXCESS LAND Many parcels of land are too large for their principle highest and best uses. Such land parcels may have, in effect, two highest and best uses -the use for the improved portion and another use for the remaining, or excess, land. Property Data Lipman Frizzell & Mitchell LLC 12 Estate of Donald Hurst ELEMENTS IN HIGHEST AND BEST USE In determining highest and best use of either land as though vacant or property as improved, the use must be (1) physically possible, (2) legally permissible, (3) financially feasible, and (4) maximally productive. These four conditions are discussed as follows: PHYSICALLY POSSIBLE: Size, shape, dimensions, soil conditions, utilities availability, and terrain affect the uses to which land may be developed. Highest and best use of a property as improved depends on whether the property is in good repair and can continue to accommodate the current or another use. If vacant, the site could physically support a wide variety of residential and commercial uses. As improved, the subject property is an existing, 166-unit apartment community located on a 7.76E acre site. The improvements are in good condition, although they are older and do not offer some of the amenities that newer projects include. However, the subject, as improved, is physically capable of continuing its current use as an apartment community. LEGALLY PERMISSIBLE: A threshold component of highest and best use is to determine what is legally permissible. Private restrictions, existing or most probable zoning, building codes, historic district controls, urban renewal ordinances, environmental regulations, or other encumbrances are considered because they may preclude many possible highest and best uses. If vacant, the site could legally support a variety of residential uses, including apartments and townhomes. As improved, the subject site has a density of 21.78 units/acre, which is consistent with the current zoning regulations for affordable housing. As such, the subject, as improved, represents a legal, conforming use. FINANCIALLY FEASIBLE: After determining the uses that are physically possible and legally permissible, an appraiser needs to consider the uses that are likely to produce an adequate return on investment. All uses that are expected to produce a positive return are regarded as financially feasible. If vacant, the property could support a variety of housing types. Over the past few years there have been several single family houses and townhouses built on infill sites within the subject's neighborhood, and it appears that residential development would be financially feasible. As improved, the subject property is a residential rental community that has been in operation for many years, and is clearly a financially feasible use. Property Data Lipman Erizzell & Mitchell PLC 13 Estate of Donald Hurst • MAXIMALLY PRODUCTIVE: Among financially feasible uses, the use that provides the highest rate of return, or value, is the highest and best use. The subject is an older apartment community that maintains high occupancy levels and generates positive income. If vacant, the maximally productive use of the site would be for multifamily housing, consistent with the existing community and adjacent properties along Lacy Boulevard. As improved, continued use as a subsidized rental property is the maximally productive use of the property. Given the age and condition of the improvements, a complete renovation of the units would be necessary to convert the property to market-rate. Regular maintenance and appropriate management will insure maximum productivity. CONCLUSIONS In the preceding paragraphs, we discussed the subject's physical and legal characteristics and its financial feasibility. Physically and legally, the property can support townhouse or apartment development. Apartments are financially feasible as rent levels in the market are sufficient to support new construction and provide an adequate return on investment capital. The improved property is physically and legally appropriate for the site. We conclude that the subject's financial feasibility and maximum productivity are as it exists today, i.e. as a subsidized multi-family rental community. • While all the principles of highest and best use are interwoven and influence the subject property, those described above are indicated since they have the greatest effect on the subject. Based on the application of these and other principles governing the valuation of real estate, it is our opinion that highest and best use of the subject property, as if vacant, would be as an apartment development. It also is our opinion that the highest and best use of the existing development is for continued use as a subsidized multi-family, apartment community. Property Data Lipman Frizzell & Mitchell uC 14 Estate of Donald Hurst ASSESSMENT DATA ~c TAXES REAL ESTATE TAXES The subject property is assessed in Account No. 614-01-91A for January 1, 2007 date of finality in Fairfax County to Oakview Gardens Limited Liability Partnership. The property's assessed value is as follows: Current Assessment Date of Finality: January 1, 2007 Acct No. 0614-01-0091 A Land $6,640,000 Improvements 7,854,560 Total $14,494,560 The appropriate 2007 tax rates for the subject are as follows: Real Estate Tax Rates Fairfax County $0.890 /$100 of Assessment Infestation Prevention $0.001 /$100 of Assessment Leaf Collection $0.015 /$100 of Assessment Combined Rate $0.906 /$100 of Assessment The real estate tax burden for the subject property is calculated as follows: Real Estate Tax Calculation 2007 Assessed Value: $14,494,560 Times: Tax Rate/$100: 0.906 Estimated Tax: $131,321 Rounded to: $131,300 Property Data Lipman Frizzell & Mitchell LLC 15 VALUATION Estate of Donald Hurst • APPROACH TO VALUE The purpose of this appraisal is to develop an opinion of market value for Phase I of the Oakview Garden Apartments, a 166-unit apartment complex located in Falls Church, Fairfax County, Virginia. In completing our valuation, we consider three approaches to value -cost, sales comparison and income. A brief description of each approach and of its relevance to the appraisal maybe found in the following paragraphs. In the cost approach, we obtain a preliminary indication of value by adding to the underlying land value an estimate of the depreciated replacement cost of the improvements. We derive the land value conclusion through an analysis of recent sales in the market. The depreciated value of the improvements is derived by subtracting all forms of accrued depreciation, if any, from the replacement cost new. The value indication by the cost approach results from the addition of the land value, the depreciated value of the improvements, and an appropriate level of entrepreneurial profit. The cost approach is important in appraising new or nearly new properties. Due to the age of the improvements, the cost approach was not developed. The sales comparison approach uses the sales of similar properties as the basis for its value indication. We estimate market value by comparing the subject property to sales of similar properties located in the same or comparable markets. We make direct comparisons between the subject and comparables using a common unit of comparison. We then make adjustments to the comparable properties to obtain a range of adjusted unit prices into which the market value of the subject property should fall. The sales comparison approach is essential to almost every • appraisal of the value of real property and reflects the actions of buyers and sellers in the marketplace. The sales comparison approach was developed. In the income approach, a market value conclusion is developed by calculating the present worth of future potential benefits to the property owner. These benefits may include net cash flow, income tax savings and sale of the property at the end of the holding period. One method, known as direct capitalization, involves development of a stabilized income and expense forecast and capitalization of the net operating income into a value conclusion. Another method used to achieve this valuation is known as yield capitalization or Discounted Cash Flow analysis. The basis for this analysis is the net income stream the property may produce during its remaining useful life or during a specific holding period combined with a value reversion at the end of the period. The income stream and reversion are then discounted to present value at a market responsive yield rate. The income approach is most useful in appraising investment type properties such as shopping centers, office buildings, multi-tenant warehouses, apartment buildings and similar facilities. Because the subject would be purchased based on its income potential, we give the income approach primary consideration in arriving at a final value conclusion. The appraiser's knowledge and judgment are important to all approaches to value. After arriving at a value indication by each of the approaches, the appraiser correlates them into a single conclusion of value based on the approach that has the best quality and quantity data • available, and the one in which the appraiser has the highest degree of confidence. All of the pertinent facts and data used in the appraisal process are analyzed in the following sections. Valuation Lipman Erizzell & Mitchell LLC 16 • O ~ N a O 4 m f u O a m v r c o c 3 a m ~_ c m n m _ D ~ C D N O O r 3 Z ---~ - Y II v (v v v 0 0 v c3 3 Estate of Donald Hurst • SALES COMPARISON l~PPROACH INTRODUCTION The sales comparison approach is a valuation method based on an analysis of recent sales of improved properties similar to the subject. This approach is essential in almost every appraisal of the value of real property and assumes that the market will determine a price for the property being appraised in the same manner that it determines the price for comparable, competitive properties. The application of this approach leads to a value conclusion of a property by comparing it to similar properties of the same type and class which recently have sold or currently are offered for sale in the same or comparable markets. The comparative process used in determining the degree of comparability of any two properties involves judgment as to similarities with respect to many value factors such as date of transaction, property rights, conditions of sale, location, physical characteristics and similar factors. The adjusted transaction prices of those properties deemed most comparable tend to set a range into which the market value of the subject property should fall. The basic unit of comparison for an apartment project is the price paid per apartment. We derive this figure by dividing the transaction or offering price by the number of apartment units. The value of the underlying land is reflected in this unit of comparison. We then analyze the comparable transactions and make adjustments to reflect observed differences between the comparable properties and the subject. The adjusted transaction prices and the weighted comparability of the individual sales lead to a market value conclusion. A brief summary chart of the comparable sales is presented below. A map showing the location of the subject property and the comparable transactions may be found on the facing page. A profile of each sale may be found in the Comparable Data section at the end of this report. A chart summarizing our adjustments to the comparable sales also may be found in the Comparable Data section. Our analysis of the sales and conclusion as to the value of the subject property by the sales comparison approach maybe found on the following pages. Summary of Comparable Sales • No Location Date $/Apt. $/Room 1 Coralain Apartments, Falls Church, Jul-07 $140 094 $37 883 Fairfax Co., VA , , 2 Glen Arbor Apartments, Woodbridge, Pr. Apr-07 $78 947 $15 744 William Co., VA , , 3 Regency Lane Apartments, Capitol ' Dec-06 $55 233 $12 402 Heights, Pr. George s Co., MD , , 4 River Pointe Apts., Fort Washington, Pr. ' Nov-06 $96 471 $19 641 George s Co., MD , , Valuation Lipman Frizzell & Mitchell LLC 1 7 r -o' 3 m m m m m n 0 N C d 7 V1 d t0 N n O O ~ ~ < _. ~+ ~ ~ ~ O ~ ~ ~D Q. ~ ~ D w ~ ~ ~ ~ c rr 3 ~ ~ ~~ M~ ~ M ~ D ~1 Q TV N• ?~ V1 Estate of Donald Hurst ANALYSIS OF COMPARABLE IMPROVED SALES • On the facing page and in the Comparable Data section, we have set forth pertinent data regarding transactions involving four apartment projects that have taken place over the last few years. Of the total, two properties sold in 2006, and two sold in 2007. Capitalization rates have remained low during that period, ranging from approximately 4.0% to 7.0%. The sales are located in the Washington Metropolitan area, within Fairfax County and Prince William Counties, Virginia, and Prince George's County, Maryland. Most of the comparables require upward adjustment for market conditions. All of the comparables require location adjustments, as Comparable No. 1 is located in a superior area of Falls Church, while the remainder have inferior locations. The comparables also require adjustment for age/condition. comparables No. 1 and 4 were in better condition than the subject, while Comparable No. 2 was purchased with the intent to renovate the units and Comparable No. 3 was in worse condition. comparables No. 3 and 4 require upward adjustment for amenities. Finally, three of the comparables require downward adjustment as they were market-rate units at time of sale. Sale prices range from $9,500,000 for Sale No. 3 to $16,500,000 for Sale No. 2. Project sizes range from 106 to 209 units, as compared to 166 at the subject. The average unit size ranges from 3.7 to 5.0 rooms/apartment as compared to 4.5 at the subject. Vacancy levels at the comparable projects were all fairly low, typically less than 10%. Per apartment prices range from $55,233 for the Regency Lane Apartments (Sale No. 3) to a i high of $140,094 for the Coralain Apartments (Sale No. 1). Coralain is awell-located community that is in good condition and was operating as a market rate community at time of sale. Regency Lane is a subsidized project in an inferior location that has limited project amenities. Although the subject property is subsidized, it has a good location and is well maintained. Its occupancy is consistently near 100%, and the community offers amenities including a pool, playgrounds, air conditioning, and balconies. The value of the subject property should be fall near the middle of the range due to higher operating expenses associated with subsidized housing and the project's age and condition. After consideration of all factors influencing sale prices of the comparables, we conclude that they indicate a value for the subject property at $95,000/apartment. As the subject contains 166 apartments, we estimate its market value to be $15,770,000. This is at the rate of approximately $21,100/room, which is also well supported by the sales data. VALUE BY THE SALES COMPARISON APPROACH ........................... 15,770,000 Valuation Lipman Frizzell & Mitchell LLC 18 Estate of Donald Hurst INCOME APPROACH INTRODUCTION In the income approach, we estimate the market value of the subject property on the basis of a projected net operating income stream which reasonably may be expected from the property. Income producing property, by nature, typically is purchased for investment purposes, and earning power is the most critical element which affects a property's value. An investor is essentially trading a sum of present dollars for the right to receive future dollars. The estimate of net operating income is, therefore, a critical aspect of the valuation process. The subject property's physical and locational characteristics are most common to those assets frequently acquired by owner-occupants. Owner occupants typically have acquisition motives quite different then investors. However, it is conceivable that the subject could be purchased on the basis of its ability to generate income and capital returns. As such, the income approach is considered relevant to this analysis. In order to arrive at an estimate of net operating income, several steps are necessary. The first step is typically to estimate market rent and apply it to the vacant apartment units and to evaluate the current rent roll in light of the market. We modify this step in the instant case because the subject rents are set according to a section 8 contract with HUD. We note that the section 8 contract was renewed for five years as of August 17, 2006. The contract rents were "marked to market" based on a comparative study of market rate properties in the subject's market area. We therefore use the contractual rents applied to each unit as a basis for estimating • potential gross rental income. We next estimate income from other sources associated with the apartments. The sum of these items represents the property's total gross potential income. From this figure, we subtract a vacancy and collection loss allowance based on current market conditions and the specific characteristics of the subject property. From the effective gross income, we subtract the operating expenses associated with the property. These are estimated based on operating history and expense comparables. We subtract the operating expenses from the effective gross income to obtain a net operating income for the property. The net operating income is then evaluated and analyzed in the Valuation section by one or more techniques. The steps in developing the income approach are explained in the following pages. INCOME POTENTIAL As discussed above, the rental rates for the subject property have been established according to a section 8 HUD contract. The contract was renewed for five years as of August 17, 2001. The initial year rents were "marked to market'' based on a comparative study of competitive market rate rental projects in the subject's market area. The contractual rental rates will be adjusted annually using an Operating Cost Adjustment Factor (OCAF) established by HUD. Under the HUD contract, market rent may be increased one each year. Rents were most recently increased on August 18, 2007. Existing rents at the subject property as of July 17, 2007 (the effective date of this appraisal) and as of the date of our inspection, are as follows: Valuation Lipman Frizzell & Mitchell ~~C 19 OAKVIEW GARDENS APARTMENTS -SECTION I 166 Apartments . Appraisers' 2004 2005 2006 2007 Forecast Revenue Gross Potential at 100% Occup. $2,055,604 $2,115,300 $2,162,290 $2,217,856 $2,247,300 Less: Vacancy & Coll Loss 45.011 47,838 58,366 45.221 56,200 Vacancy as a Percentage 2.2% 2.3% 2.7% 2.0% 2.5% Effective Gross Income $2,010,593 $2,067,462 $2,103,924 $2,172,635 $2,191,100 Plus: Other Revenue Laundry & Vending $20,936 $20,936 $20,936 $20,936 $20,900 NSF & Late Fees 2,945 2,153 893 1,075 1,800 Other Revenue 587 848 933 388 700 Total Other Revenue $24,468 $23,937 $22,762 $22,399 $23,400 Effective Gross Inc, All Sources $2,035,061 $2,091,399 $2,126,686 $2,195,034 $2,214,500 Operating Expenses Administrative Expense $37,136 $53,922 $40,235 $56,959 $50,000 Office Salaries 69,619 72,606 78,931 84,926 90,000 Office Model/Employee Apts. 40,170 41,250 38,814 43,074 40,800 Management Fee 124,019 126,994 129,421 133,342 132,900 Professional Fees 15,000 5,452 4,924 9,520 6,600 Electricity 18,846 19,405 17,848 15,364 18,000 Water 16,276 17,212 17,151 18,880 19,000 Gas 48,713 67,233 70,110 63,735 65,000 Sewer 35,627 37,247 37,993 43,194 40,000 Janitor 53,719 49,809 43,648 46,054 48,000 Trash Removal 23,636 24,083 24,154 25,784 26,000 Security Contract 6,626 7,508 16,931 9,270 10,000 Grounds 46,083 49,806 62,295 54,555 55,000 Maintenance Payroll 61,501 65,427 62,633 96,015 100,000 Repairs/Materials 46,114 40,778 30,118 184,253 65,000 Repairs Contract 26,526 38,987 30,227 21,158 29,000 Heating & Cooling Maint. 51,327 5,269 5,796 -31,081 5,500 Swimming Pool Maint/Cont. 15,229 16,292 16,615 ~ 16,528 16,500 Carpet Replacement 27,546 26,829 35,040 26,298 29,000 Painting 34,076 49,403 39,321 38,698 40,000 Appliances 20,362 15,432 20,080 13,938 17,500 Misc. Rep. & Maint. 13,388 14,538 14,783 24,753 15,000 Real Estate Taxes 119,250 117,423 108,702 131,321 131,300 Payroll Taxes 14,437 15,456 16,202 17,994 18,500 Misc. Taxes Lic. & Permits 6,367 6,400 6,454 5,810 6,400 Personal Property Taxes 976 542 448 1,123 800 Property & Liability Ins. 33,278 38,847 41,293 ~ 39,275 40,000 Workmen's Comp. Ins. 6,851 4,506 4,193 1,958 4,000 Health Ins. & Other Empl. Ben. 23.114 26.008 35.330 43,636 50,000 Total Expenses $1,035,811 Expense/Apt./Year $6,240 Expense Ratio 50.90% Net Operating Income $999,250 $1,054,665 $1,049,691 $1,236,336 $6,353 $6,323 $7,448 50.43% 49.36% 56.32% $1,036,735 $1,076,996 $958,698 $1,169,800 $7,047 52.82% $1,044,700 Estate of Donald Hurst Rent Rent Apartment As of As of Type 7/12/07 2127/08 1 BR/1 Bath $936 $958 2 BR/1 Bath $1,105 $1,132 2 BR/1 Bath/Den $1,190 $1,219 Market rent was increased approximately one month after Mr. Hurst's death, upon the anniversary of the contract. Rents may not be increased again until August 2008. Based on our analysis of the subject's rental history and our review of the HUD section 8 contract renewal for the five year period ending August 17, 201 I, we have projected potential gross apartment rental income at $2,247,300 (rounded). From this must be deducted Vacancy & Collection Losses, Tenant Allowances & Concessions which over the five year period studied ranged from 2.2% to 2.7%. It was reported that the project currently has a closed waiting list. We have projected Vacancy & Collection Losses to include Concessions and Tenant Allowances at 2.5% or $56,200, which when deducted from Gross Potential at 100% Occupancy leaves Effective Gross Income of $2,191,100. Other Income includes Laundry & Vending which we projected at $20,900, NSF & Late Charges forecast at $1,800, and Other Revenue at $700. Our forecasts are based on average income over the past several years. Total Other Revenues of $23,400 are added to Effective • Gross Income generating Effective Gross Income, All Sources of $2,214,500. OPERATING EXPENSES Operating Expenses are forecast based on the project's history (see facing page) and deducted as follows: Administrative Expense is estimated at $50,000 reflecting a general upward trend over the past four years. Office Salaries are estimated at $90,000 based on an upward trend over the past few years. Office ModeUEmployee Apartment Rent has been forecast at $40,800, which reflects the market rent for the three apartments used for the office and employee housing. Management Fee has been projected at 6% of Effective Gross Income or $132,900 consistent with actual costs for this line item. Our forecast reflects higher expenses related to operating a Section 8 property. Professional Fees are forecast at $6,600 based on the average expense over the past three years. This expense was unusually high in 2004. Electricity is forecast at $18,000. Despite declining expenses in 2006 and 2007, we expect utility costs to rise. Valuation Lipman Erizzell & Mitchell LLC 20 Estate of Donald Hurst Water is forecast at $19,000 based on the continuation of an upward trend over the past few years. Gas is projected at $65,000 based on the average expense over the past several years, adjusted upward to reflect rising utility costs. Sewer is forecast at $40,000 based on the average expense over the past several years, adjusted upward to reflect rising utility costs. Janitor is estimated at $48,000 based on the average expenses for the past four years. Trash Removal is estimated at $26,000 based an upward trend over the past four years. Security Contract is forecast at $10,000 based on the most recent year's expense. This line item was unusually high in 2006. Grounds is forecast at $55,000 based on the most recent year's expense, when one employee was transferred from grounds to maintenance. Maintenance Payroll is projected at $100,000 based primarily on actual costs in 2007, when a new employee was added to the payroll (in addition to a former • grounds employee who is now on maintenance payroll). Repairs/Materials is forecast at $65,000. In 2007, a policy of installing wall-to- wall carpet and replacing the kitchen cabinets and appliances upon rollover commenced. This line item also captures the ongoing replacement of 30 HVAC units within the two Phases. The 2007 expense is unusually high, and reflects some non-recurring site improvements, including sidewalk repairs and new benches. Our forecast reflects a higher expense than previous years to capture the unit upgrades. Repairs Contract is forecast at $29,000, which is the average expense for the past four years. Heating & Cooling Maintenance is forecast at $5,500. In 2004 this expense was unusually high, and in 2007 this expense was unusually low due to the reallocation of certain HVAC expenses to repairs/materials. Our forecast reflects the more typical expenses in 2005 and 2006. Swimming Pool Maintenance/Contract is forecast at $16,500, which reflects the actual expense over the past two years. Carpet Replacement is forecast at $29,000. Most of the apartments are not carpeted, and our forecast reflects the average expense for the past four years. The installation of new wall-to-wall carpet upon rollover (which is included in Repairs/Materials) began in 2007, and this line item should remain fairly constant for the next few years. Valuation Lipman Frizzell & Mitchell PLC 21 C • Oakview Garden Apartments Apartment Capitalization Rate Analysis No. of No. Apartment Town County Date Units $/Unit OAR 1 Alpine Apartments Temple Hills Prince George's Jun-07 171 $107,427 4.75% 2 Glen Arbor Laurel Prince George's Apr-07 209 $78,947 5.70% 3 Briarvvood Laurel Prince George's Mar-07 330 $115,152 6.07% 4 Regency Lane Capitol Heights Prince George's Dec-06 172 $55,233 5.06% 5 Hunting Oaks Laurel Prince George's Nov-06 319 $95,925 6.65% 6 Charlestowne North Greenbelt Prince George's Oct-06 178 $101,124 6.64% 7 The Oaks at Park Southe Oxon Hill Prince George's Sep-06 510 $69,804 5.90% 8 Townes at Herndon Center Herndon Fairfax Aug-06 218 $274,427 4.10% 9 Parke Laurel Laurel Prince George's Aug-06 526 $87,928 6.77% 10 Exective Gardens Gaithersburg Montgomery Jun=06 85 $122,353 5.67% 11 Cheverly Crossing Hyattsville Prince George's Jun-06 168 $81,696 6.85% 12 Laurel Square Laurel Prince George's Jun-06 982 $90,425 7.00% 13 Village at McNair Farms Alexandria Alexandria Apr-06 283 $217,314 4.80% 14 Lions Gate Herndon Fairfax Apr-06 328 $289,024 4.20% 15 Carlyle Station Manassas Prince William Apr-06 408 $185,294 3.80% 16 Burtons Crossing Woodbridge Prince William Mar-06 532 $242,481 4.40% Minimum 85 $55,233 3.80% Maximum 982 $289,024 7.00% Average 339 $138,410 5.52% Lipman Frizzell & Mitchell, LLC -Real Estate Consultants, all rights reserved Estate of Donald Hurst Painting is forecast at $40,000 based on the average expense over the past few • years. Appliances is forecast at $17,500, which reflects the average expense over the past four years. The installation of new appliances as part of the unit upgrades is included in the Repairs/Materials line item. Miscellaneous Repairs & Maintenance is forecast at $15,000, which reflects the generally upward trend from 2004 to 2006. This expense was unusually high in 2007. Real Estate Taxes are forecast at $131,300 based on the Assessment Data & Taxes section of this report. Payroll Taxes are estimated at $18,500, which reflects an upward trend over the past several years. Miscellaneous Taxes, Licenses, etc. is estimated at $6,400 based the typical expense over the last four years. Personal Property Taxes are estimated at $800, based on the average expense over the past four years. • Property & Liability Insurance is estimated at $40,000 based on actual premiums paid during 2005 through 2007, which ranged from $38,800 to $41,300. Workman's Compensation Benefits are estimated at $4,000 based on an average of the last four years actual costs. Health Insurance & Other Employee Benefits is estimated at $50,000, reflecting the continuation of an upward trend over the past four years. Total Expenses are estimated at $1,169,800 or at $7,047/apartment/year, with an expense ratio of 52.82%, both of which are generally supported by actual history. The expense ratio in 2007 is slightly higher due to some unusual expenses, primarily site work. However, in 2007 an apartment upgrade policy commenced and new staff were added, and we would expect a higher ratio than in previous years. Our forecast reflects a stabilized cash flow. Net Operating Income is estimated at $1,044,700. VALUATION/CAPITALIZATION RATE ANALYSIS On the facing page is a list of 16 sales of apartment projects in the Washington metropolitan area from which we have derived an overall capitalization rate (OAR). This universe of sales resides in our database and has been maintained therein through a consistent program of database research and analysis conducted by Lipman Frizzell & Mitchell. We have sorted the information by date of sale for purposes of analysis. The capitalization rates range from 3.80% to 7.00%, and average 5.52%. The lowest rates are typically for new construction, while higher rates are for older projects with extensive deferred maintenance or low occupancy levels. The subject is an older project, but is well maintained and has very high occupancy. Operating Valuation Lipman Frizzell & Mitchell LAC 22 Estate of Donald Hurst expenses are somewhat higher than typical, though, since the property is subject to a HUD contract. Therefore, we would expect a capitalization rate in the upper part of the range. We have also reviewed capitalization rates reported by Korpacz and Real Estate Research Corporation (BERG), national sources for yields on income properties. As the subject would be considered anon-institutional grade or second tier property, we focused on those rates which were, for Korpacz, during the third quarter of 2007 at an average of 6.69% and for RERC for the third quarter 2007 at an average of 7.0%. Given the subject's age and income characteristics, we would expect a capitalization rate to fall slightly above the averages reported by RERC and Korpacz. Last, we have also calculated an overall capitalization rate by use of mortgage/equity analysis as follows: Mortgage: 7.195% KS x 75% LTV6 = 5.396% Equity: 8.00% x 25% = 2.000% 7.396% Say: 7.40% Based on the universe of sales set forth on the facing page, data from Korpacz and RERC, and the mortgage equity calculations, we conclude that a capitalization rate of 6.75% is appropriately applied to the subject's projected net operating income stream as follows: U Value = Net Operating Income Overall Cap Rate _ $1,044,700 6.75% _ $15,477,037 Rounded to: $15,475,000 VALUE CONCLUSION BY THE INCOME APPROACH ....................... 15,475,000 s K =Constant based on 6.0%, 30 year term G Loan-to-value ratio Valuation Lipman Frizzelf & Mitchell LLC 23 Estate of Donald Hurst • RECONCILIATION & FINAL VALUE CONCLUSIONS In the preceding pages, we developed the sales comparison and income approaches to value. A restatement of the value conclusions developed in each approach is presented below. COST APPROACH ................................................................................... NOT USED SALES COMPARISON APPROACH ..........................................................$15,770,000 INCOME APPROACH ...........................................................................$15,475,000 The purpose of this section of the appraisal report is to reconcile the values derived in the individual approaches into a final opinion of value. This section provides us with an opportunity to consider the quality and quantity of the data, the strengths and weaknesses of each approach, and the degree of emphasis that should be placed on each approach. It is our opinion that the value of the subject property lies within the indicated range. In the cost approach, we obtain a preliminary indication of value by adding land value to the depreciated cost of constructing the subject improvements plus an appropriate level of entrepreneurial profit. This approach was not developed due to the age of the building improvements. In the sales comparison approach, value of the subject is derived by comparing it to similar properties recently sold in the same or competing markets. The physical unit of comparison used as the basis for our value analysis was price paid per apartment. Each of the sales was • analyzed and adjustments for any discernible differences between the comparables and the subject property were considered. The analysis yielded a valuation of $15,770,000. Please note that we were unable to find truly comparable sales, as the subject is a subsidized property that is in good condition. The comparables tend to be either in poor condition and/or be market-rate projects. Therefore, less weight is given the sales comparison approach in our analysis. However, it provides support for our valuation via the income approach. The income approach addresses the present worth of future potential benefits of owning a property. These benefits are measured by developing a net income stream which a fully informed person is warranted in assuming a property will produce during a normal holding period. The income approach was fully developed into a valuation of $15,475,000. As a result of our investigations and analyses, it is our opinion that market value of the subject property, as of July 17, 2007, was $15,500,000. FINAL OPINION OF MARKET VALUE ........................................... $15,500000 • Valuation Lipman Frizzell & Mitchell uC 24 Estate of Donald Hurst • EXPOSURE TIME/MARKETING PERIOD ANALYSIS As part of the appraisal process, it is necessary to estimate the exposure time for the subject property. The Appraisal Institute defines exposure time as ..."the estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market." The definition assumes that the property was actively exposed and aggressively marketed to potential purchasers through marketing channels commonly used by sellers of similar type properties. The definition also assumes that the property was offered at a price reflecting the most probable mark-up over market value and that a sale was consummated under the terms and conditions of the definition of market value required by the regulation. The key to selling any property is realistic pricing. Properties which are overpriced tend to stay on the market until the owner adjusts the asking price to reflect the expectations of today's buyers. The owner must recognize that today's buyers are looking for current income and are not willing to pay for future expectations to any great degree. Once the price adjustment has been made, most property types can be sold in a 12 month period. In the past several years, there have been numerous transactions involving all property types reflecting the improved market conditions and the willingness of buyers to make positive investment decisions. The subject must be realistically priced in order to be marketable. Our analysis of the property • is based on current market conditions and the outlook of today's buyers. It is our opinion that the subject property would be attractive to a variety of buyers and could be sold within a period of 12 months or less if reasonably priced. For confirmation, we relied on a comparable sale used within the Sales Comparison Approach and others contained within our database. Overall, we find marketing times generally less than 12 months. This information reflects the demand for apartment properties by regional and local investors. Based on our analyses, we conclude that the subject's exposure time would be 12 months or less. This opinion assumes that the property is priced consistent with our opinion of market value and marketed through normal channels. We do not foresee an immediate change in market conditions. Therefore, it is our opinion that the marketing time for the subject property is also 12 months or less. • Valuation Lipman Frizzell & Mitchell ~~c 25 Estate of Donald Hurst • VALUATION OF PARTIAL (FRACTIONAL) INTERESTS IN REAL ESTATE O OVERVIEW Our objective in this section is to estimate Fair Market Value of a 2% interest in Oakview Gardens Limited Liability Partnership held by Donald A. Hurst as of his death, July 17, 2007. O BACKGROUND Partial interests in real estate can take the form of 1) interests in a limited, limited liability and/or general partnership, 2) membership interests in a limited liability company, 3) shares in a corporation (S or C), 4) interests in a joint venture or 5) direct interests via a tenancy in common or some other form of joint ownership. Limited Partnershipsg ("LP's"), Limited Liability Partnerships ("LLP's") and General Partnerships are finite-life, self liquidating investment vehicles created to acquire or develop, operate and sell assets for the benefit of their partners. Limited Liability Companies ("EEC's" or "EC's") are a relatively new form of business structure which replicates a limited partnership in terms of the way the owners are taxed, however, the company has no general partner but rather a managing member or members and the operating agreement spells out limitations - if any - on ownership of the LLC interest. Owners of an interest in LLC are called members. Corporations are formed to act as a single person although constituted by one or more persons; partnerships and companies comprise groups of individuals or entities which are contractually associated as joint owners in a business. Joint Ventures are pass through entities similar to a limited partnership. Tenancy • in Common is an estate held by two or more persons, each of whom has an undivided interest; in this estate there is no right of survivorship. The principal benefits of ownership in these entities are economic since partners/shareholder/members receive distributions of operating cash flow9 to the extent they are available and are distributed, as well as their share of the net asset value upon liquidation. Where the asset is non-income producing land, the economic benefit relates only to net asset value. Because owners of partial interests are typically unable to control when property is liquidated; they are left only with the benefit of income (to the extent it is distributed) and future liquidation of the entity or the ability to sell their shares in a secondary market transaction. Given the fact that the opportunity to sell these interests is not consistently available, there is an inherent lack of marketability requiring a discount to reflect the negatives of illiquidity. ' Per Revenue Ruling 59-60 s Limited partnerships shall be referred to in this section as "LP's". 9 In limited partnerships (and Sub S corporations), the partners share in the taxable income proportionately and • distributions of cash flow are typically made at the discretion of the directors or general partners. "C" corporations pay corporate income taxes on earnings and then distribute unnecessary surplus via dividends, which are also taxable as income to their recipients. Valuation Lipman Frizzell & Mitchell uC 26 Estate of Donald Hurst Interests in closely held corporations, private limited or general partnerships, companies and tenancy in common interests are not traded in an organized market as are, for example, shares in real estate investment trusts (REIT's), public limited partnerships or stock in public companies. As such, these interests are perceived to lack marketability and are illiquid. In the case of non-distributing entities (i.e. those holding income properties which do not generate sufficient cash flow or which hold non-income producing land), the discounts tend to be higher than those extant for properties which generate cash flow because, though the property held by the entity may have a face value of $XXX, it cannot be readily captured by a shareholder who cannot precipitate a sale. For entities holding properties which generate stable cash flow, for those with higher quality assets and/or properties which are net leased to credit tenants, the discounts are at the lower end of the spectrum. There are thousands of public limited partnerships and corporations, so named because they are publicly registered and are required to report certain financial and other data which is generally available to the public. There are millions of closely held "C" and "S" corporations, private limited and general partnerships, companies, and tenancies-in-common formed to own single or multiple properties. These typically have a relatively small ownership group and have no obligation to report out information to the public. Shareholders in such entities have no control over the day-to-day operations of the properties. Individually, even collectively, partial interest owners typically cannot determine the timing and amount of cash flow distributions, control the purchase, sale or refinancing of assets, or set management policies. In a corporation, a majority of shareholders can effect control, but minority shareholders cannot. In an estate held by tenants-in-common, effectively, unanimity is required. This introduces yet another reason for discount, namely lack of control. O SEPARATION OF MARKETABILITY car CONTROL DISCOUNTS Much has been written about the distinction between lack of marketability and lack of control and many practitioners attempt to estimate them separately. In fact, the Courts have rendered opinions that address these factors independently. It should be noted, however, that much of what is written and many of those cases deal with valuations of interests in closely held corporations, partnerships or other entities which are operating businesses rather than those holding primarily real estate assets. Our experience with buyers of interests in entities holding real property assets, particularly as it relates to the anecdotal information set forth later in this section and that reported by Partnership Spectrum, leads us to conclude that the accuracy with which one may estimate these two components separately is somewhat elusive. We prefer to estimate them in composite, with consideration to how they relate to the specific entity agreements, character of the assets themselves, the history of and prospect for cash flow distributions to shareholders and other economic and property-specific factors. In fact, these components of the overall discount tend to overlap since lack of management control also affects marketability. Many appraisers who separately quantify the discounts tend to ignore such factors; we believe them to be critical. Valuation Lipman Frizzell & Mitchell LLC 27 Estate of Donald Hurst Moreover, one of the best sources for discounts relating to entities owning income producing real estate -Partnership Spectrum -reports that partial interest discounts they have found in their research are inclusive of both lack of control and to some extent, lack of marketability. This is so, because: 1) Trading volume in the partnership secondary market has been moderating over the past several years, with a peak of $225,000,000 in 1996 and an average of $54,000,000 over the past four years, figures which include increased trading in the shares of non-listed REIT's. Obviously the universe of sales and data is greatly diminished. 2) There are only eight independent securities brokerage firms that deal in the secondary market for publicly registered limited partnership interests. 3) These brokerage firms act primarily as mediators, matching buyers and sellers; they are not market makers and the costs of sale are relatively high10 compared to those associated with publicly traded stocks ~. This cost alone represents a 4% to 8% "discount" for lack of marketability over and above the discount reflected in secondary market transactions pricing. 4) The "market" in many of the stocks that are traded is quite thin, thus making it difficult to match buyers and sellers. 5) Most of the transactions are for $5,000 or less. • 6) It takes an average of two months to consummate a sale. In a recent issue of Partnership Spectrum, it is suggested that the marketability component in the discounts they report could be in the 20% to 30% range, though there is no attempt to definitively quantify or separate it. O THE SECONDARY MARKET FOR PUBLIC LIMITED PARTNERSHIPS There is a "secondary market" in which public partnership interests are thinly traded. This market is addressed later in a section entitled "Price-to-Value Discounts in the Public Limited Partnership Secondary Market". However, it is interesting to note here a comment made by the Chicago Partnership Board, Inc., the largest of a handful of market makers for public limited partnership interests, in its recent publication to prospective clients entitled, The Secondary Market for Limited Partnerships: "Secondary LPs...usually are purchased for less than the liquidation value of the assets in the LP. In other words, if the general partner were to immediately liquidate the portfolio and distribute all assets to the limited partners, the amount to be distributed per unit would generally exceed the secondary market price." 10 5% to 10% of transaction amount ~~ 1%to2% Valuation Lipman Erizzell & Mitchell ~~~ 28 Estate of Donald Hurst This statement confirms the notion that there is a discount inherent in valuing shares in real . property held via LP's, closely held corporations or through tenancies in common. Most closely-held corporate interests, private limited and general partnership interests and member interests in companies do not trade at all and there has often been insufficient transactional data to constitute a foundation for direct valuation. However, we have been able to accumulate a substantial amount of anecdotal evidence regarding partial interest discounts which will be discussed later. O REVENUE RULING 59-60 Revenue Ruling 59-60 defines fair market value of closely held business interests as the price at which the interest would transact between willing and informed buyers and sellers, neither acting under duress or undue compulsion. The ruling further states that a sound valuation will be based upon all of the relevant facts, but the elements of common sense, informed judgment, and reasonableness must enter into the process of weighing those factors in determining their aggregate significance. This then is the criteria by which an appraiser must evaluate a closely held business interest for gift tax, estate tax and other such reasons. Revenue Ruling 59-60 sets forth the various factors which should be considered in valuing closely held business interests. Among these factors are: 1) Nature of business including its history since organization • 2) Economic status of the industry and the nation at the critical date of valuation 3) Earnings 4) Asset value 5) Distributions and dividends and distribution/dividend -paying capacity 6) Existence or lack of intangible value 7) Sales of the shares and the size of the block to be valued 8) Selling price of comparable securities relative to their earnings, dividends and asset value O VALUATION CRITERIA In practice, buyers of shares in closely held corporations, of limited partnership interests, and tenancies in common as well as buyers of REIT shares and real estate corporate stock are guided by a number of factors in making their investment decisions. These include: Resale Potential Investment Control Current and Future Cash Flow Historical Distribution Performance Property or Portfolio Type, Quality and Character Debt Margins Liquidation Time Horizons Valuation Lipman Frizzell & Mitchell ltC 29 Step 1: Estimated Gross Asset Value (market value of real estate) $7r;:KXXX Step lA: Add: Net Cash (operating capital only) Total Gross Asset Value Step 2: Less: Mortgages & Other Long Term Liabilities Unadjusted Net Asset Value Step 3: Multiply By: Percentage Interest under appraisement Unadjusted Equity Value of Interest Less: Discount for lack of marketability, (i.e. illiquidity) lack of control, cost of share sale XXX% Fair Market Value of Subject Interest Before Cash Adj. Step 5: Add: Distributable Net Cash (if and only to the extent it exceeds normal operating requirements) x Percentage Interest XXXXX $~;~~:KXX ~s;XXXX $x:~~:KXX XX% $~::KXXX XXXXX $~::KXXX XXXXX Fair Market Value of Subject Interest $~r~~XXX Estate of Donald Hurst Specific factors to be included in an appraiser's analysis of minority/partial interests in real property include: the nature of the business and history of the enterprise, the economic outlook in general and of the specific real estate submarket, character of the property held, financial condition of the business entity, earning capacity of the real estate and the dividend-paying capacity and history of the company, the nature of the corporate by-laws, operating and partnership agreements and the rights of/limitations placed upon shareholders, members and partners and whether the subject interest represents a majority position, able to influence operations. O VALUATION PROCESS Estimating fair market value of a partial interest in real estate often starts with an estimate of the Gross Asset Value i.e. Market Value of the real estate asset(s). The generally accepted definition for market value of real estate is as followstz: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) buyer and seller are typically motivated. • 2) both parties are well informed or well advised, and acting in what they consider their own best interests. 3) a reasonable time is allowed for exposure in the open market. 4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. Having established Gross Asset Value of the real property, the next step is to review the entity's balance sheet to identify and quantify other assets and to determine liabilities. If Net Cash13 held is representative of operating capital only, it is added to Gross Asset Value to develop Total Gross Asset Value; if it is substantial, above that level needed to operate the enterprise and it is likely to be distributed, it is added later in the calculations and is not subjected to a discount. Next, the Unadjusted Net Asset Value of the entity is estimated by deducting all Mortgages & Other Long Term Liabilities of the entity from Total Gross Asset Value. Via this exercise, we can determine how much net equity the entire entity could generate if it were liquidated. The final steps are accomplished by multiplying the Unadjusted Net Asset Value of the entire entity by the percentage that the subject interest represents, to develop Unadjusted Equity Value of the Interest under appraisement. Then by adjusting that value -where appropriate - ~' Standards of Professional Practice of the Appraisal Institute, December 1990, p.B-7 i3 i.e. cash, cash equivalents, A/R's, notes receivable and prepaids balanced by A/P's, prepaid rents, notes payable, security deposits held, etc. Valuation Lipman Frizzell & Mitchei~ uC 30 Estate of Donald Hurst to reflect lack of marketability, lack of control, cost of share sale and other factors which influence a buyer's investment decisions, we can estimate Fair Market Value of the Subject Interest. If Net Cash exceeds normal operating requirements and can be expected to be distributed, we then add Net Cash (times the Estate's percentage interest in the entity) for a final estimate of the interest's Fair Market Value. On the preceding facing page is an outline of the steps described above. O VALUATION BASED ON CASH FLOW Income real estate and therefore interests in income real estate are often evaluated based on the property's ability to generate bottom line income and the entity's distribution of that income to partners. Many factors affect a property's income and the willingness/ability of the entity to distribute it. A property not generating substantial cash flow and/or an entity not distributing it may not necessarily reflect a lack of value. For example, a property in which an entity has a large equity, may, for reasons of anticipated capital costs or vacancy, be unable to generate cash flow after debt service. That would obviously not be a reason to value the interest as if were owned by a "non-distributing" entity. Accordingly, exclusive dependence on "yield pricing" to valuing partial interests is unwarranted. However, mature properties which are not overleveraged typically produce cash flow after debt service and the general partners/managers typically distribute most of it to the • shareholders/members. Such income can then form the basis of a valuation via capitalization, utilizing the dividend rate at which the market is willing to buy the income stream as the capitalization rate to derive value. Partnership Spectrum publishes "current yield" charts in the "Secondary Spectrum" section of its semimonthly reports. These yields are calculated on the basis of current distributions per share compared with the weighted average trading prices during a particular period. "Secondary Spectrum" breaks down the partnership types so that the reader can focus on entities which are like the subject. For example, yields are calculated for lodging partnerships, mini-warehouse partnerships, net lease program partnerships and "conventional" real estate partnerships which partnership typically own apartments, offices, shopping centers or warehouses. With some modicum of research, the reader can determine what type of real estate is owned by these conventional partnerships. Following is a chart summarizing the typical dividend yield ranges for various types of real estate reported for December/January 2001/2002, 2002/2003, 2003/2004, 2004/2005, 2005/2006, and 2006/2007 in the January/February 2001, 2002, 2003, 2004, 2005, 2006, and 2007 issue of Direct Investments Spectrum (formerly Partnership Spectrum): Dividend Yield Ranges Dec 'Ol -Jan '02 Dec '02 -Jan '03 Dec ' 03 -Jan '04 Property Type Range Averaee Range Average Range Averaee Mini-Warehouse 8.9% to 12.0% 10.2% 6.2% to 10.7% 9.4% 9.98% to 10.55% 10.27% NNN Lease Pgms 8.9% to 14.8% 11.1% 7.5% to 11.6% 9.5% 8.66% to 12.68% 10.32% Conventional RE 3.5% to 13.0% 8.5% 2.7% to I3.6% 8.4% 2.94% to 30.35% 12.25% Valuation Lipman Frizzell & Mitchell ~~C 31 Estate of Donald Hurst Dec ' 04 -Jan '05 Dec ' 05 -Jan '06 Dec ' 06 -Jan '07 Property Tvne Range Averaee Range Averar?e Range Averaee Mini-Warehouse N/A to N/A N/A 5.56% to 10.77% 8.17% N/A to N/A N/A NNN Lease Pgms 6.72% to 17.33% 11.53% 6.29% to 8.84% 7.23% 5.88% to 10.36% 7.75% Conventional RE 2.51% to 12.50% 7.02% 2.00% to 9.05% 6.42% 2.94% to 10.12% 6.45% Source:Yartnership Spectrum -January/February `L002,2003,2004,2005,2006,2007 The above rates are a general indication of the capitalization rate applicable to distributions generated by partnerships which hold real estate similar to those reported. They create the baseline for selection of dividend yield capitalization rates for interests in widely held, publicly registered partnerships. These yield rates must be adjusted up to reflect the appropriate capitalization rates applicable to distributions made to partial interest holders in closely held private limited partnerships or LLC's. In a later section entitled "Distribution Ratios" we will consider yields from a checks and balances perspective. O SECONDARY MARKET TRANSACTIONS INVOLVING INTERESTS !N CLOSELY HELDIPRIVATE ENTITIES Secondary market transactions relate to sales and purchases of limited partnership interests after the partnership is originally formed. Actual sales of limited partnership interests potentially provide an excellent bellwether for determining whether discounts are appropriate and if so, to what extent. For this information to be useful, the Gross Asset Value and Net Asset Value of the partnerships must be known in addition to the actual price at which the • limited partnership interest sold, so that a comparison can be made and a discount derived there from, if extant. To this end, your appraisers sent a comprehensive questionnaire to over 150 real estate and estate attorneys and accountants active in the Washington and Baltimore Metropolitan areas with whom we have worked. These individuals and their firms are the most prominent in the area and represent a broad cross-section and a large proportion of the real estate investors active in this region. Though many attorneys responded, most did not have any transactional information to share because they had simply not been involved in an arms length sale of a limited partnership interest14 or in sales of other types of partial interests in real estate. This rather one-sided response is quite telling! It confirms the relative lack of such transactions and the implied illiquidity of such interests. O ANECDOTAL EVIDENCE REGARDING PARTIAL INTEREST DISCOUNTS However, over the past several years, we have had an opportunity to participate in several major divorce matters involving dozens of limited partnership interests. In an attempt to equitably distribute partnership interests among the parties to the divorce, partial interest discounts become a critical component of the negotiations. It is in this context that we have observed firsthand the types of considerations made by these "sellers" and "buyers" when • disposing of or acquiring such interests by parties of the divorce. And, we have knowledge of 14 Such a sale requires legal involvement due to the need to amend the partnership agreement under such circumstances. Valuation Lipman Frizzell & Mitchell LLC 32 Estate of Donald Hurst the resultant discounts applied by the parties because we are familiar with the value of the real • property assets in that we have typically appraised or evaluated them in the context of the divorce proceedings. Thus, we have a comprehensive view of all of the components which are critical in the calculation of partial interest discounts as they are applied in the context of divorce proceedings related to interests in closely held private limited partnerships and LLC's. We have also gathered data regarding other sales of partial interests over the past several years and have observed how disparate interests in an entity holding real estate can impact negatively on the value of those interests. In a later section entitled Appraisal/Consulting Experience, we will discuss this activity in more detail. ~ PRICE-TO-VALUE DISCOUNTS IN THE PUBLIC LIMITED PARTNERSHIP SECONDARY MARKET Every year, in their May/June issue, Partnership Spectrum published by Partnership Profiles, Inc. contains an article relating to resale discounts, i.e. discounts at which the LP shares in widely held publicly registered private limited partnerships sell in relation to their underlying real estate asset values. • IV1AYl/UNE 1999 STUDY According to the 1999 survey the average price-to-value discount for the entire spectrum of partnerships studied is 27% compared to 29% and 30%, respectively for 1998 and 1997. The article notes, however, that one of the reasons for the slight moderation in discount is because of the higher percentage of triple net lease partnership sales which now comprise a greater portion of the partnerships included in the study. (Triple net lease partnership units tend to sell at lower discounts than partnership shares holding other types of real estate.) Again, all of the partnerships included in the study are publicly registered with the FCC but none are publicly traded on any recognized Securities Exchange. Rather, they are bought and sold in the limited partnership secondary market which is now comprised of 10 to 12 independent securities brokerage firms that act primarily as mediators, matching buyers and sellers. These are not market makers and the costs of sale are relatively high. Accordingly, the price-to-value discounts reflect both lack of control and marketability issues. The results of this most recent analysis are consistent with previous studies with the following average discounts reported: Partnership Category No. of Average Partnerships Discount Equity -Distributing (low or no debt) 27 Equity -Distributing (moderate-to-high debt) 17 Equity -Non-Distributing 15 Undeveloped Land 4 Triple-Net-Lease 22 Insured Mortgages 10 25% } 29% wtd. 35% } avg. 46% 46% 14% 14% • Thus, based on this most recent study, the discounts imposed by buyers on public limited partnership shares in the entities which hold income producing assets appear to be consistent with those reported in the past. Valuation Lipman Frizzell & Mitchell ttC 33 Estate of Donald Hurst • MAYIf UNE 2000 STUDY In the May/June 2000 report on discounts extant in the secondary market, Partnership Spectrum reports that price-to-value discounts for all categories are now averaging 25% compared to 27% in 1999, 29% in 1998, and 30% in 1997. They also note that in 1994, their research found that the average discount was 48%. The substantial difference between the earlier year and more recent years is attributed to the real estate recovery and the increased efficiency of the partnership secondary market. However, the gradual reduction since 1997 is attributed to buyers anticipating near-term liquidation, even for those partnerships that have not announced any such plans. This further confirms the market's focus on marketability (or lack thereof) and the fact that a potential "exit plan" diminishes its concern. Partnership Spectrum attributes this to market buyers factoring relatively short holding periods into their pricing models. In terms of the universe surveyed, Partnership Spectrum reports that they excluded any partnerships that had already announced a definitive, near term liquidation plan "since price-to- value discounts typically shrink considerably once a partnership has announced near term liquidation plans..." In fact, a study published in the March/April 2000 issue of Partnership Spectrum found that the average discount for liquidating partnerships is only 16%. They further report that the 87 partnerships selected for this years price-to-value discount study are all publicly registered with the Securities & Exchange Commission, though none of the • partnerships have publicly traded on any recognized Securities & Exchange. Though the study found a slight downturn in the average discount, they also found that certain categories changed materially, to include equity based partnerships which do not pay operating distributions and triple net lease partnerships (see chart below). Partnership Spectrum notes that "the results of this year's price-to-value discount study are consistent with prior studies in that the two most important factors considered by secondary market buyers when pricing units of real estate partnerships continue to be 1) whether the partnership has the ability to pay operating distributions and 2) the degree of debt financing utilized by the partnership." This conclusion further confirms our belief that character of the real estate, its income producing capacity and the leverage utilized to finance it are critical factors in the evaluation and determination of a partial interest discount. MAY/f UNE 2OO 1 STUDY This study generates slightly higher discounts than studies over the past years and there are some interesting observations made by the researchers. First, they believe that the limited partnership secondary market has bottomed out. Over the past years, partnership discounts have moderated; now they seem to have plateau'd based on the results of this study. One of the reasons for the downward trend in the past is the fact that, since 1995 some of the larger real estate partnership sponsors began to liquidate their • partnerships and secondary market buyers began to shorten the holding period assumptions in their pricing models from an eight to ten year holding period to more like a three to five year hold. This acceleration of the ownership period brings closer to the point of purchase the ultimate reversion at market value, thus enhancing present worth of a purchase. Valuation Lipman Frizzell & Mitchell uC 34 Estate of Donald Hurst • The article goes on to say that price-to-value discounts for equity-based partnerships paying cash distributions, triple net lease programs and undeveloped land partnerships changed very little compared to results of last year's study. The article also noted that the secondary market had reached its zenith in terms of annual trading volume in 1996 at about $225,000,000. Trading volume for 2001 is expected to be in the range of only $60,000,000 to $65,000,000. Thus, the universe of such sales is diminishing and perhaps the results of the survey can be regarded as less persuasive. Our observation is that the reduction in discounts is precipitated more by the shortening of holding periods than by inherent factors considered by buyers in the secondary market, thus suggesting an "artificial" downward pressure on discounts which is not related to the traditional factors we consider, notably lack of marketability and lack of control. MAYIf UNE 202 STUDY In their 2002 study, Partnership Spectrum reports that "investors in the partnership secondary market are purchasing minority interests in publicly-held real estate partnerships at an average price-to-value discount of only 22%" (including all categories). It went on to say "The lower average discount in this year is due primarily to a decline in discounts on i) equity-based partnerships with little or no debt which pay regular cash distributions, ii) triple net lease partnerships, and iii) insured mortgage programs." However a mitigating factor was noted. The article stated that "More than any other factor, the steep drop in price-to-value discounts since 1994 is the result of secondary market buyers shortening the anticipated holding periods in their pricing models." This is the result of various real estate partnership managers beginning to liquidate their partnerships in the mid 1980's which policy became almost universal in the late 1990's. In fact in 1998, at least 115 publicly- registered partnerships sold all of their assets and in the three following years, at least 260 more public partnerships did likewise. The article also notes that trading volume in the partnership secondary market, which topped out in 1996 at $225,000,000, was down to only $57,000,000 in 2001. MAYIf UNE 2003 STUDY In their May/June 2003 annual update, Partnership Spectrum reports that the average-price-to- value discount is relatively unchanged from last year's study. After a period of moderating discounts (46% in 1993 to 22% in 2002), the decline appears to have stabilized. This Iatest study introduces a new concept known as "horizon risk" which focuses on the length of time a purchaser expects the partnership he is buying into will be maintained prior to liquidation. Partnership Spectrum equates the moderating discounts to a steadily shortening horizon risk, thus diminishing the impact that lack of control has on the amount of discount applied by the marketplace. An analogy they make is the short and long term bond markets, • wherein the longer term bonds are sold at higher rates of return. The study also notes a diminishing amount of volume in the secondary market for minority interests in publicly held real estate partnerships, from a high of $225,000,000 in 1996, the Valuation Lipman Frizzell & Mitchell LLC 35 Estate of Donald Hurst activity has been gradually decreasing until, in 2002 it reached only $50,000,000. This is more a result of the lack of supply than anything else since so many public partnerships have been liquidated over that period. Partnership Spectrum reiterates that while all of the 77 partnerships selected for this year's price-to-value discount study are all publicly held and publicly registered with the FCC, none are publicly traded on any recognized security exchange. Rather, these minority interests are bought and sold in the informal limited partnership secondary market which is comprised of 10 to 12 independent securities brokerage firms which act primarily as intermediaries and matching buyers and sellers of interest in non-listed partnerships. Comment: While the partnerships that were studied in this year's report weren't listed on a recognized securities exchange (NYEX, AMEX, NASDAQ, etc.), the fact that there is an organized market for these interests is an important consideration in the appraisal of the subject interests for which there is absolutely no organized market in which to buy and sell them. Partnership Spectrum reports that, where income is assured and therefore distributions are dependable, the interests tend to be "yield priced", a factor that is inherent in the economic analysis of any real estate investment or interest in real estate. Their reference is specifically focused on the triple-net-lease programs which they studied. Another factor that the study notes is the time it takes to convert these partnership interests into • cash. In the case of registered securities on a recognized securities exchange, liquidity is almost instantaneous, with a one week period necessary to translate shares into cash. The study contrasts that condition with the illiquidity of interests in publicly traded limited partnerships, wherein it first takes a period of time to match buyers and sellers and, typically another two months before the paperwork is approved by the limited partnership. Comment: Taking that one step further, one can compare that condition with sale of an interest in a closely held entity such as the subject and how much longer such a transaction can take. Accordingly, illiquidity, compounded by the fact that there is no organized market for the subject interest, coalesce to create a condition which is best described as lack of marketability. Partnership Spectrum also discusses discounts for lack of control which they suggest results from 1) general partner entrenchment, 2) no minimum cash distribution requirements and 3) the inability to control or influence the timing of liquidation of the partnership which can leave investors "trapped" in the investment for many years. Comment: Add to those factors any restrictions on transferability which are prevalent in private (vs. public) entities and it becomes obvious that discounts appropriately applied to interests in private entities would be materially higher than those found in these public limited partnerships. Valuation Lipman Erizzell & Mitchell LLC 36 Estate of Donald Hurst ~ MAYIf UNE 2004 STUDY In this report, Direct Investments Spectrum~5 ("Spectrum") states that price-to-value discounts "have clearly stabilized in recent years." and that "investors in the limited partnership secondary market are purchasing non-controlling, minority interest in publicly-held real estate partnerships at an average price-to-value discount of 23%" which is virtually unchanged from 2002 and 2003. The study goes on to say that "more than any other factor, the steep drop in price-to-value discount since 1994 is the result of secondary market buyers shortening the anticipated holding periods in their pricing models." (This confirms conclusions found in the following section of this report entitled "Importance of Cash Flow/Calculations Relating to Reversionary Component".) In effect, Spectrum has concluded that the shorter the holding period, the earlier and more certain the ultimate sale (i.e. exit plan), thus reducing the impact that lack of control has on the discount. Spectrum focused on 79 partnerships for this study and reported that none are publicly traded on any recognized securities exchanged. Rather, they are bought and sold in the informal limited partnership secondary market which is comprised of about nine independent securities brokerage firms which act as intermediaries, matching up buyers and sellers. In another portion of their study, Spectrum notes that, "when it comes to the marketability of the partnership interest included in our study, it is not a matter of whether a buyer can be found...but how long it takes to locate a buyer, process the transaction and pay the seller. It is important to understand that the partnership interests that change hands in the secondary market were never meant to be actively traded or otherwise quickly converted into cash." This is a factor to be considered in the valuation of the interest under appraisement which has no organized or even informal market. The Spectrum further concludes that most of the overall discount inherent in the market is due to lack of control issues as it relates to the partnership interests they have studied, notably because there is an opportunity for owners of these partnership interests to sell in the secondary market, an opportunity not extant in the subject interests. The Spectrum warns that, whatever discount is applied, a "sanity check" should be made to determine what the rate of return to the buyer is and, if it is too low, the discount used in the valuation is too low and, likewise, if the discount translates into a rate of return that is too high, it would suggest that the discount used in the valuation is too high. Last, Spectrum concludes that the results of this new price-to-value discount study are entirely consistent with previous studies and that two important factors considered by secondary market buyers are 1) the partnership's ability to pay operating cash distributions and 2) the degree of debt financing, if any, utilized by the partnership. • rs Name has been changed from Pm~tnership Spectrum Valuation Lipman Frizzell & Mitchell LAC 37 Estate of Donald Hurst ~ 2005 SURVEY OF PARTNERSHIP RE-SALE DISCOUNTS • In its 2005 survey of Partnership Re-Sale Discounts published in August 2005, Partnership Profiles reports that "investors in the limited partnership secondary market are purchasing non- controlling, minority interests in publicly-held real estate programs at an average price-to-value discount of 28%. This average discount is slightly higher compared to the results of similar surveys published in recent years of 23% (2004), 21% (2003) at 22% (2002)." They go on to say, however, that the higher average price-to-value discount does not reflect a fundamental change in the pricing of the interest. Rather "the higher overall discount this year simply reflects the composition of the partnerships in the new survey compared to previous years. Specifically, this year's survey has many fewer triple-net-lease partnerships and insured mortgage programs relative to prior surveys. These programs, which typically pay high cash distributions, invariably trade at the low end of the price-to-value discount spectrum which impacts the average discounts reported for these surveys." The 2005 report goes on to address the reasons for a generally declining average discount over the 12 year period that it has reported such data. They point out that moderation from a high of 48% in 1994 to a low of 23% in 2004 "is the result of secondary market buyers shortening the holding period expectations in their pricing models." Needless to say, buyers in the early 1990's anticipated it would be many years before their programs would liquidate their assets. On balance, in more recent years, many real estate partnerships were being liquidated or announcing plans to begin to doing so; accordingly, secondary market buyers began to shorten the holding period assumptions and thus an exit plan was more imminent. • Partnership Profiles associates this shortening of the holding period with the term "horizon risk", the longer the amount of time until a bond matures the more risk the owner of the bond will be exposed to. Thus, investors in the public bond market typically require higher returns for longer term bonds than short term bonds, all things being equal. This also holds true for mortgage rates which are lower for five year loans than for 30 year terms. In the same way, investors owning limited partnership interests are subject to greater risks as the length of time increases until the partnership is ultimately liquidated. Because of the partnership liquidations, the trading volumes in the secondary market for non- publicly-traded interests in limited partnerships fell from a high of $225,000,000 in 1996 to approximately $55,000,000 in 2004; thus the universe of sales and data available to Partnership Profiles has moderated which, in this writer's mind, begins to limit the accuracy of their survey. Partnership Profiles continues to report a relationship between distributing partnerships versus those which distribute little or no cash to their owners, noting that the higher discounts are applied to the latter group. They also note that partnerships with significant debt financing are penalized by secondary market buyers resulting in higher discounts for interests in such partnerships. Specifically they note that "for appraisers using price-to-value discount data from this annual survey to value anon-controlling interest in an entity owning real estate, one of the most • critical issues that must be addressed is whether the owner of the interest being valued can expect to receive cash flow distributions from the interest." Valuation Lipman Frizzell & Mitchell LLC 38 Estate of Donald Hurst Last, the report states that, while Undeveloped Land partnerships are typically penalized due to • the non-income producing nature of such an asset, the current survey suggests that the price-to- value discount is relatively low, for the reason that four partnerships comprising the group studied could end up selling all of their remaining land parcels in the next few years. The group reflecting the lowest discount is the Triple Net Lease programs for the reason that the income stream is definitive, fairly stable and dependable. This further confirms the position that cash flowing entities are subjected to more modest discounts. In summary, the 2005 report reflects little change from the conclusions derived from earlier reports, except for those reasons articulated above. O 2006 SURVEY OF PARTNERSHIP RE-SALE DISCOUNTS In their 2006 Survey, Partnership Profiles notes that Revenue Ruling 59-60 states that "in valuing unlisted securities, the value of stock or securities of corporations engaged in the same or similar line of business which are listed on an exchange should be taken into consideration along with all other factors." Thus, by analyzing real-world transactions (as reported by Partnership Profiles) appraisers may use the price-to-discount data to gage how the interest being valued would be priced if it were traded in an open market. Recognizing that for limited partnerships and other non-publicly traded entities, a secondary market for partnership or member interests does not exist; that lack of marketability component must also be considered. • Market pricing in 2006 is generally consistent in terms of discount from past years. Specifically, the 2006 survey indicated an average price-to-value discount of 29%, very similar to the 28% found in 2005. These discounts are slightly higher than those in 2004, 2003 and 2002 in which the discounts were 23%, 21 % and 22%, respectively. Taking a larger view, discounts over the past several years are generally lower than they were when the survey began in the early 1990's. However, the reason for that moderation is the fact that over time, secondary market buyers have been shortening their holding period expectations due to the roll-ups of so many public real estate partnerships. The reason this is important is because most limited partnerships are "open ended", meaning that there is no liquidation time table that is set in stone and "horizon risk" is a factor considered by most buyers. For example, the survey conducted by Partnership Profiles in 2000 separated those partnerships that announced a definitive plan to liquidate and found that the discount for those partnership interests was only 16% against an average that year of 25%. The American Partnership Board is the main source for Partnership Profiles data and represents the largest secondary market active in supporting the sale of publicly traded limited partnership interests. According to the Board, the average period it takes to complete a sale through them is approximately 45 days, but it can be shorter or twice as long. It should also be noted that trading volume on the Board has moderated from a high of $225 million in 1996 to a low in 2005 of $48 million. Valuation Lipman Frizzell & Mitchell LLC 39 Estate of Donald Hurst For the first time, Partnership Profiles has reported both an average discount for the various categories of partnership interests and the average yield generated therefrom. Following is a chart from their survey: Category Equity -Distributing (low or no debt) Equity -Distributing (moderate-to-high debt) Equity -Non-Distributing No of Average Average Programs Discount Yield 6 20% 6.8% 7 28% 5.8% 26 37% 0.0% The chart confirms a number of conclusions drawn from past surveys and which are intuitive: • Debt ratios are a consideration of buyers. Specifically, partnerships with moderate to high debt are discounted higher by 8 percentage points than similar partnership interests where there is low or no debt. • Cash flow is critical to the buyer of a partnership interest as indicated by the substantial discount (37%) suffered by non-distributing equity partnerships compared to 20% to • 28% for similar ones that do distribute. • Assurance of income moderates the discount as may be seen by the lowest discount indicated (17%) for triple net lease partnerships which, due to the character of their investments, produce a regular and dependable income stream which can be both quantified and assured. • Buyers of interests in the secondary market view distributing equity entities more favorably from a yield perspective than partnerships holding triple net leases due to the better long term results that may be available from the latter. This is reflected in the higher yields at which triple net lease interests are traded (8.4% compared to the equity distributing categories which distributed 5.8% to 6.8%). • Valuation Lipman Frizzell & Mitchell PLC 40 Estate of Donald Hurst STUDIES SUMMARY Following is a chart which summarizes results from the past eight years' studies, by selected category: Comparison of Current Discounts with Previous Years (Selected Categories) Average Discounts Reported (May/June) LP Category 1999 2000 2001 2002 2003 2004 2005 2006 Equity -Distributing 29 % 25 % 25 % 21 % 22 % 23 % 19 % 23 Equity -Non-Distributing 46% 35% 42% 32% 32% 38% 24% 37% Undeveloped Land 46% 40% 38% 35% 29% 33% 42% 34% Triple Net Lease 14% 21% 24% 19% 16% 14% 23% 18% Mortgages -Insured 14% 21% 28% 19% 15% 14% 18% N/A Averages: 30% 28% 31% 25% 23% 24% 25% 28% Source: The Perspective, now k/a P¢rtnership Profiles May/June 1999, 2000, 2001, 2002, 2003 and 2004 and August 2005 and 2006 editions. It may readily be seen that triple net lease partnerships and those holding insured mortgages enjoyed the lowest discounts among partnerships holding real property, a factor driven by the relative assurance of regular dividends. Thus, values of those interests in these partnerships tend to be "yield driven". In the January/February 2002 issue of the Partnership Spectt-zlm, an article entitled "Partnership Re-Sale Discounts Justified" provided additional insights into the traditional reasons that a discount is imposed: for marketability and lack of control. As to marketability, the article notes that, "while the partnership secondary market does represent some semblance of a market for minority interests in otherwise non-traded limited partnership, this market does not offer the liquidity of, say, the New York Stock Exchange, where investors can convert their securities into cash in just a few days." It goes on to say that interests in partnerships were not meant to be actively traded and many of these illiquid securities have transfer restrictions not dissimilar from those we find in private limited partnerships, LLLP's and LLC's. It should be noted that sales of limited partnership interests as reported by the Partnership Spectrum reflect varying discounts which are based on either the general partners' or an independent appraisers' estimates of market value. In our opinion, for those LP's which are valued by the general partners, the amount of discount may derive from an exaggerated view of what the general partner believes the value of the underlying real estate to be. Accordingly, we conclude that some of the reported absolute price-to-value discount percentages set forth on the list may be artificially high. On balance, there does exist a loosely organized medium through which these publicly registered widely held limited partnership interests may be sold, a condition not extant in the case of the subject interests. r Valuation Lipman Frizzell & Mitchell uC 41 Estate of Donald Hurst r: O IMPORTANCE OF CASH FLOW/CALCULATIONS RELATING TO REVERSIONARY COMPONENT Our attempt to elicit information from over 150 real estate and estate attorneys and accountants active in the Washington-Baltimore Metropolitan area regarding actual transactions involving private limited partnerships and closely held corporations revealed that there is not a great deal of arms length activity outside the context of divorce matters, thus confirming the notion that partial interests in real estate have little liquidity, evidenced by how few arm's length third party transactions can be reported (other than in divorce cases). This conclusion then, emphasizes the importance of cash distributions to the limited partners, members, corporate shareholders or tenants-in-common. Since liquidity (i.e. marketability) is problematic, current returns become all important and we conclude that interests in entities not generating sufficient funds to distribute have little, if any value. Thus, the history of cash distributions and the prospect for their continuation are important factors in the valuation of partial interests and the determination of an appropriate discount for lack of marketability. • We also conclude that, due to the illiquidity of partial interests, a traditional value component is missing, the ability to "cash out". One method to quantify its importance is to reconstruct the typical "model" utilized by most sophisticated investors in evaluating income producing real estate today, notably the ten year forecast cash flow (i.e. holding period} convention. In this exercise, ten years of net income and a reversionary value at the end of that period is discounted to present worth (i.e. market value) by an appropriate yield rate. Assuming a cash flow of $100,000/year for ten years and a reversion of $1,000,000 at the end of the period, the value of that income stream and therefore, value of the property generating it, at say a 12% discount rate, is as follows: Dollar Amounts Percentage Present Worth of $100,000/year at 12% ...................................................... $565,000 64% Present Worth of $1,000,000 reversion at the end of ten years ............... 322,000 36% Totals: $887,000 100% It may be seen that, of the total $887,000 value, the reversion represents $322,000 or 36% of the total present value. While we would not eliminate the reversionary component totally from the value of a private limited partnership or closely held corporate interest, it obviously represents a large contribution to market value on a discounted cash flow basis. Accordingly, the inability to liquidate looms large to the holder of a private LP or closely held, corporate interest or tenancy in common and therefore to a potential purchaser of that interest. • Valuation Lipman Frizzell & Mitchell PLC 42 Estate of Donald Hurst Even assuming an extended holding period of say, 15 years, the calculations would be as • follows: Dollar Amounts Percentage Present Worth of $100,000/year at 12% ................................................. $681,000 79% Present Worth of $1,000,000 reversion at the end of fifteen years....... 183,000 21 Totals: $864,000 100% Intuitively, the farther off the reversion, the lower the reversionary component of value. A study of bond yields confirms that the longer one must wait for maturity, the higher the rate of return expected. Thus, the reversion becomes less important over the longer anticipated investment horizon suggesting the use a higher discount. In summary then, the reversionary component of a real estate investment (the equivalent of the "liquidity factor") can have the following contributory values: 5 yr Horizon 10 yr Horizon 15 yr Horizon Reversionary Value Component @ 12% 61 % 36% 21 Since the loss of liquidity relates directly to these percentages and there is almost no liquidity • available to a private limited partnership interest or shares in a closely held corporation, these percentages provide an indication of the discount required to reflect lack of liquidity. Interestingly, they correlate well with the discounts inherent in the REIT/Public Limited Partnership yield comparisons calculated on the preceding pages. 0 APPRAISAL/CONSULTING EXPERIENCE -COMPARABLE SALES DATA Over the past several years, your appraisers have had first hand experience in the sale of minority and fractional/partial interests in real estate entities to include limited partnerships, general partnerships, sub "S" and "C" corporations and in tenancies in common. Our exposure to these transactions was both from a seller's and buyer's perspective and ran the gamut in terms of motivation or lack thereof on the part of both parties. Not surprisingly, the breadth of these transactions generated a variety of outcomes which were not always consistent. 1) In one transaction, a well motivated owner of a 90% interest in two large apartment projects purchased the remaining 10% minority limited partnership interest in 1996 at a discount of 10%. 2) Ina 1996 transaction involving an owner of a 50% tenant in common interest, no discount was applied when he made an offer to purchase the remaining 50% which had threatened partition. These first two transactions involved purchases by owners of the balance of each entity and are therefore perceived as somewhat unique. • 3) Another example of discount imposed by the market involved negotiations for sale of a partial interest in a major regional mall located in Maryland. The interest was offered to the minority partners on the basis of real property value at $90,000,000 and countered at $75,000,000 for a property that Lipman Frizzell & Mitchell LLC had Valuation Lipman Frizzell & Mitchell LLC 43 Estate of Donald Hurst contemporaneously appraised for $105,000,000. Though the transaction was not • completed, the offering by the owner and the counter by a group headed by the minority owners in that same project suggest discounts as follows: Original Offer of Interest: $90,000,000 = 85.7% i.e. a 14.3% discount $105,000,000 Counter by Potential Purchaser: $75,000,000 = 71.4% i.e. a 28.6% discount $105,000,000 Subsequent to these negotiations, a controlling 68% interest in the property was sold on the basis of a $75,000,000 value, thus confirming the 28.6% discount. Note that the property was debt free during all of these negotiations and that gross real property value was the equivalent of equity in the property. The sale took place in 1997. 4) Yet another example of partial interest discount is confirmed by the sale of a 50% joint venture interest (actually a 50% interest in an unwritten general partnership) in a large parcel of unimproved land located in Anne Arundel County, Maryland to owners of the balance of the partnership. Neither the buyer nor the seller could exert control over one another and this was about to result in a partition suit. The sale price was on the basis of $5,000/acre. Contemporaneous with that sale, Lipman Frizzell & Mitchell LLC had appraised the property for $7,500/acre, thus suggesting a discount • of 33.3%. 5) In the late 1990's, we were involved in valuation of and negotiations relating to limited partnership interests in the context of three large divorce cases. Specifically, we have addressed partial interest discounts applied against limited partnership interests in a wide variety of properties in substantial portfolios comprising commercial/retail, office and industrial income producing projects in addition to vacant industrial and residential land and residential land under development. Negotiations initially focused on valuations of the real property and then valuation of the limited partnership interests in the entities which owned such property. Partial interest discounts were applied by representatives of each party and ultimately negotiated, generally within a range of 25% to 40% depending on the property type, financial condition of the real estate, whether it was income producing, whether it was cash flowing and other such factors which have been discussed in this section of our report. These discounts were the result of hard bargaining, negotiation and/or arbitration normally expected to take place between buyers (usually the husbands) and sellers (usually the wives) of such interests. Accordingly, they are perceived as arm's length and representative of market actions as they relate to property -specific and limited partnership -specific cases. 6) In October 1991, one limited partner in an entity which owned a suburban strip shopping center purchased a 25% limited partnership interest in that same partnership for $455,000 from an estate. Based on appraisals completed by this firm close to that date and based on actual operating statements through October 31st of that year, value • of the real property was approximately $4,400,000. Reducing that amount by debt in the amount of $1,380,000 and adding cash and cash equivalents of $72,000 produces an equity which we have rounded to $3,100,000. 25% of that total equity is $775,000 Valuation Lipman Frizzell ~ Mitchell trC 44 Estate of Donald Hurst which therefore suggests a total discount of approximately 40%. It should be noted • that this property is located in a declining commercial corridor. 7) We obtained information regarding two sales of limited partnership interests in a medical office building located on a hospital campus. This information was conveyed by the developer of the property who also has a continuing management role. In 1996, a 3.396% interest in this property, a 70,000 sq.ft. modern office building was conveyed at a price which was intended to reflect a 50% partial interest discount. In late 1997, a similar interest in the property was sold at a discount of 30%. Both of these interests were held by owners of the building who also occupied portions of its space and were sold to new tenants who also wished to have equity in the building. 8) In several situations during the late 1990's in which the owner of a minority limited partnership interest desired to sell and in which the remaining partners were not motivated to purchase, discounts of 25% to 50% were experienced in terms of response offers made by the non-motivated other partners. Some of these offers were accepted, others were rejected. In another case wherein the representative of an estate attempted to sell limited partnership interests to other partners who did not purchase, the representative attempted to sell those interests in the open market with absolutely no response. 9) Another example of the necessity for partial interest discounting is reflected in the January 22, 1998 transaction involving an older strip shopping center located in northwest Baltimore City. The property was owned by a corporation and the sale reflected two areas for discount. • The corporation had substantial retained earnings and a substantial built-in tax liability due to a low basis; in addition, as a "C" corporation, the income generated by the real estate (which was debt free) was taxed twice -once at the corporate level and once at the individual level as a dividend. This is not generally an acceptable vehicle for investment real estate. Because the real property could not be sold as a result of a double tax/capital gain, the stock had to be sold and because of that, there was a discount imposed by the buyer in the amount of $400,000 on a base of $2,800,000. In fact, the day after settlement the purchaser liquidated the corporation and paid approximately $400,000 to the IRS to do so. That is to say, the stockholders were paid $2,800,000 and the buyer immediately liquidated the corporation and paid another $400,000 for a total of $3,200,000. Therefore the discount at the corporate entity level was calculated as follows: $400,000 = 12% $3,200,000 Had the buyer purchased the real property versus the stock, they would have paid the seller $3,200,000. The other factor involving discounting resulted from the fact that there was a leased fee interest which was disparate from the balance of the stockholders (the equivalent • of lack of control) which interest demanded a payment equal to twice the value of its position. As a result, the discount inherent in that factor was calculated as follows: Valuation Lipman Frizzell & Mitchell LLC 45 Estate of Donald Hurst Leased Fee Market Value $180,000 Actual Payment 360,000 Different (180,000) Discount = 180 000 = 6.4% $2,800,000 (stock price) Total Discount: 18.4% (12% + 6.4%) This transaction did not involve sale of a partial interest per se, but did reflect other aspects of disparate ownership and corporate form which generated a diminution in price available to holders of interests in the ownership entity. 10) In August 1995 (effective January 1, 1995), a 90% interest in the limited partnership owning a 300 unit housing-for-the-elderly project in Baltimore City sold for a consideration of $2,000,000. Your appraiser was involved in the evaluation of this interest which depended on two different sets of instructions; these instructions had to do with certain aspects of entity control. Based on the $2,000,000 negotiated sales price, a discount from the pro-rata share of the equity value of 31% was indicated, calculated as follows: Appraised Value of Real Property $12,285,000 Less: Mortgage Balance at Date of Sale 9,085,000 100 % Equity $3,200,000 90% Pro-Rata Share of Equity $2,880,000 Negotiated Price of 90% LP Interest $2,000,000 Implied Discount [l - (2,000,000 _ 2,880,000)] 31 11) Some sales of partial interests are complicated; the following is a good example: In early 2000, resolution of ongoing family litigation resulted in the sale of a one-third interest in a family partnership (created by the parents of three siblings) whose assets included 1) income producing office buildings in the Hunt Valley section of Baltimore County, 2) an operating swim club also in that area and, 3) a farm in northern Baltimore County. The seller was one of the siblings; the buyers were the other two. The real estate assets were appraised by this firm and one other at just over $3,000,000, suggesting that the par value of a one-third interest therein would be approximately $1,000,000. The matter was ultimately submitted to an arbitrator who, in lieu of a partial interest discount being applied against the withdrawing partner's value, determined that she would be paid over a 30 year period without interest. Assuming a 7% opportunity cost, the present value of a 30 year payout without interest is $.41 on the dollar, thus suggesting a discount of 59%. In other words, by imposing the 30 year payout without interest, the arbitrator was in fact utilizing what amounted to a 59% discount for lack of control and lack of marketability. At a 6% opportunity cost, the discount is 25%. While the discount appears somewhat high, it may be explained by the "mixed bag" of Valuation Lipman Frizzell & Mitchell LLC 46 Estate of Donald Hurst assets held by the partnership and the fact that the unresolved litigation had been . extensive and drawn out. 12) The following example is an indication of the premium associated with assurance of cash flow and thus the discount associated with the lack of that assurance. (Keep in mind that "lack of control" coupled with an entity's GP or managing member unwilling to distribute cash flow coalesces to create such a "lack of assurance".) In a third quarter 2000 transaction, a limited partnership acquired title to a large apartment project in North Carolina. The partnership is made up of Class A and Class B partners with the Class B partner putting up 64% of the capital requirement but only getting a 50% interest in the project. As aquid-pro-quo for that diminution in ownership, he will receive a preferred 10% cumulative return on his capital investment Thus, for the preferred cumulative position, the Class B investor is paying a 22% premium. The context of this transaction in terms of partial interest discounting is the implication that, without assurance of income, a discount of 22% is implied (50% 64% = 78% and 100% - 78% = 22%). 13) In an October 1997 transaction, a 27% tenant-in-common interest in a 63,000 sq.ft., multi-tenant office/warehouse project located in Frederick, Maryland, was transferred for $225,000. The property had been appraised for a lender that financed purchase of the partial interest generating the following relevant calculations: Market Value (100%) $2,750,000 Equity (after balance sheet items) $1,304,232 25 %Tenant-in-Common Interest (at par) $326,058 Purchase Price $225,000 Discount 31 14) In an October 1996 transaction, a 10% limited partnership interest in non-income producing land located in Montgomery County, Maryland was transferred at a consideration of $57,575. Market value of the property had been established by an appraisal one month earlier at $1,011,375. The following figures are relevant: Market Value (100%) $1,011,375 10% Limited Partnership Interest (at par) $101,138 Purchase Price $57,575 Discount 43 I S) In the summer of 2000, immediately prior to the death of Allen Berenter, the Rejane Herman Revocable Trust's 1.202802% limited partnership interest in Belle Haven Limited Partnership was sold for $188,400. Your appraisers confirmed this information with Herbert H. Blum, sole trustee of the Rejane Herman Revocable Trust, who represented the seller on behalf of the beneficiary who was a charity. In • this case, the general partners of Belle Haven Limited Partnership agreed to exercise their right of first refusal to match an offer that had been made to acquire this partial interest. Mr. Blum provided the opinion that the sale price for this partial interest Valuation Lipman Frizzell & Mitchell LLC 47 Estate of Donald Hurst represented a 17.5% discount from his opinion of value for Belle Haven Towers Apartments at approximately $31,600,000 to include net cash of approximately $3,300,000 and with outstanding debt of about $12,600,000. Your appraisers, however, believe the discount is much greater based on our higher estimate of value for the Belle Haven Towers, a 569 unit, four building highrise complex in Alexandria, Virginia. 16) In December 2000, an 8.16% Class A membership interest in CHAI Associates LLC was sold by Richard Rothstein to Malcolm Berman for price of $58,688. In June of that same year, Lipman Frizzell & Mitchell LLC had appraised the property at $3,650,000. Adjusting for the net cash of $147,126 and mortgages and notes totaling $2,900,000, the unadjusted net asset value was $877,126. Extending that unadjusted net asset value by 8.16% indicates an unadjusted net asset value for the interest sold in the amount of $71,573, i.e. at par. As the interest sold for $58,688, a discount of 18% is indicated. The property involved was a 120E unit 1960's vintage garden apartment project in Baltimore City which would be best characterized as a third tier property. Of significance is the fact that Mr. Bennan's son owned the controlling interest in this LLC, thus perhaps motivating him to moderate the discount imposed. 17) In the third quarter of 1999, the Estate of Sydney S. Horowitz sold its 18.75% interest in Burtonsville Shopping Center (General) Partnership to the majority partner, Chris Jones, t/a 17 BSC, L.L.C. The entity owned a shopping center located along the U.S. Route 29 Corridor (Columbia Pike) at Route 198 in Montgomery County, Maryland, in addition to an adjacent vacant parcel zoned both commercial and residential. As a • preface to the sale, representatives of the Estate had an independent appraisal prepared which addressed the value of both the shopping center and the adjacent unimproved parcel. The appraiser estimated value of these two components at $7,340,000. There was no debt associated with the property; the proportionate unadjusted value of an 18.75% interest was $1,376,250. The Estate sold the interest for $894,563, accepting a 35% discount for aminority/non-controlling interest with transferability issues. 18) In January 2005, co-members of four different LLC's purchased a 1/6th interest in each from the Estate of a member at a discount of 35% utilizing a Lipman Frizzell & Mitchell LLC appraisal of the real property as a baseline, along with the then current balance sheets. The real properties involved commercial/retail facilities located in Alexandria, Virginia, Washington, D.C. and Lanham, Maryland. There had been three Members in each of the LLC's who jointly shared management responsibility and control under agreements that provided for restrictions on transferability and the notion that any sale of an interest would be subject to a first right of refusal. Assuming the first right of refusal was exercised, the price would be determined based on an appraisal of the "fair market value" of the interests. The two surviving members each purchased 1/6th interest bringing their total interest to 50% in each of the LLC's. The discounts imposed against the Lipman Frizzell & Mitchell LLC values after adjustment for balance sheet items were consistently 35% to include lack of control and marketability issues. No attempt to separate, isolate or allocate the discounts between lack of control and marketability was considered by the parties. 19) In June 2006, a 1.25% limited partnership interest in an entity which owned an older Valuation Lipman Frizzell & Mitchell LLC 48 .~ O W N tS ~ p -.~ .~ cfl ~ -1 7 ° r ~ '~ cD r ~ r° v •° -; r ~ ~ ~ a c> ~ "' r r o r ~ ~ ~ o a o c u ° m r rt'! n ~ ~ 1. ~ .P ~ G o C3~ o W p ° O o N W ° O ~ o ° ~ ~ o ~ o `~ ..> O cr , ° c~ cfl 'r ro w o ~ ~ ° p p ,R p ~ ° -' c0 -" ~ ~-' o N o ~ ~ ~ u' ~ N tSl cD O ° N y "~ N ~ p p ~ ~ ~~, -po (~9 ° ° ~ -i o •° ° cc~n ° m n ~ t -• o r ~ co ~ ~ ~ N C ^D ~ 9^ O (OD ~ ~ ~ ~ y .P a O- N ~ ~ • ~ ~. O N (P A7 tT1 ~ ~ C~ ^ ~ p N d- C1 .~ ~ ~ ~ N ~ ~ ~ Z, co r m 3 2 c g ?~. ~ ? ~ ~ ~ ~~ ~ ~ N ~ p N ° ° ~ O vN+ 3 ~ ~ 6 7a, o- cNr w ~ = ^~ +~ o O o i ° ° °° -rs ~ ~ a o ~~ U~ , r N s o 0 0 `~ a ~ ~ ° N v w ~° o o ~ u ~ ~, o ° ° _ ~ ~ .~ 0 0 0 ~ W O~ O O ~ ,~ p ~ ~ ° O ~ o ' ~ ~ y ~ O r} (~ ° 'a °o ° 0 3 O s m a m .. o ° a z ~ ~ m ~ U, ~ c o o ~ ~ O ~ rv ~ ° ~ m m 0 0 o Q ~ ~ ~~ o a © ~ O ~ fl. ~ ~ N ~ ~ N N (D ^~ W W ~ -^1 'O (fl ~ ~ C~yD N N ~ ~ r 0 ~ in' r ~ . O- -p ~^ ~ ~ ~ N 6 ~ ~ C7 n ~ ~ ~ ro ~ .~ N ~ `` ~ ~ ~ '~ ~ 3 ~ m ~ ~ r• ~ a ° ~ ° m tD ~ ~ ~ 3 _ ~' N ~ ~ ~ N ^ t0!'~ 7 ~ CA ~ O (D ~ N .g cfl ~ O N ~ 'd N N O- N N p- O ~ ' O 3. n .~ N ~ 7 ~. " O U1 p p ~ N• ~ p ~ N 4. X ~ ~ ~ > N ~ G }V O, ~ ~~ N ~ • O N N 0 3 ~ C ED p o ~' N N ~y CD O- S ~' ~ ~ ~ p] O O .«. ~, ~ t0 t6 p y ~ ~ -+. ~• 2 fl. N ~ O ^ O- a ~ N fA ~ 4~, .- O e o Q: c -cs ~' .. O ~ m ~ ~ N ~ ~ ~" ~• ~ N ~ a O ~ O ~ { ~ N ~ O_ N C1 > > ~ 4 N 41 ' N ;1 .' O' Cl CD , . ~ O 6 ~.C p. N ';~ ~ m ~ ~ 3 m ~ ca tY a N N ~ ~ "" 3 ~ ~ ~' ~ ~ ~ c~ m ~ v ' . ~ G O CD r ..Q Estate of Donald Hurst 197 unit garden apartment project located in the Laurel area of Prince George's • County was purchased by an existing partner in the partnership at a 60% discount for lack of marketability and lack of control. The discount was calculated based on an appraisal prepared by Lipman Frizzell & Mitchell that was made within nine months of the partial interest sale date. O CONCLUSION BASED ON MARKET DATA On the facing page is a summary of the data presented above. Consistent with Revenue Ruling 59-60 which envisions an open market sale, discounts generally ranging from 10% to 50% have been experienced and are appropriate in valuing partial/fractional interests in entities holding real estate, depending on a myriad of factors which have been fully discussed above. Following is aproperty-specific and entity-specific analysis of those factors as they apply to the subject at hand. While the above transactions tend to orient to interests held in properties located in the Mid- Atlantic region, their geography is not significant vis-a-vis the percentages of discounts imposed by the marketplace. The fact is, the sale of minority interests is not a geographically sensitive transaction, but rather one which is driven by factors that relate to 1) economics (yield on investment), 2) specific provisions relating to control, transferability, distributions and other factors spelled out in entity operating agreements and 2) classic supply and demand dynamics. In discussions with other appraisers who specialize in the valuation of minority interests and with practitioners who represent taxpayers in the context of estate planning and administration, • we have determined that there is a strong consensus regarding this issue. O SPECIFIC CONSIDERATIONS RELATING TO SUB/ECT PROPERTIES Purchasers of partial interests in entities which own real property are typically focused on 1) character of the real estate, 2) the operating agreement by which the entity which owns the real estate exists and the rights of and restrictions on the shareholders, 3) income productivity of the real estate, 4) debt-to-value ratios, and 5) cash flow distribution history and prospects. On the following pages we have addressed these aspects of the properties under appraisement and the entities which hold title to them. O REAL PROPERTY OVERVIEW Oakview Gardens Apartments (Section I) consists of an older but well maintained 166 unit garden apartment project located in Falls Church, Virginia. O ENTITY OVERVIEW We have reviewed and analyzed an Amended Agreement of Limited Partnership (converted to an LLP on December 29, 1998) for Oakview Gardens and all amendments thereafter and have abstracted same on the following facing page. In summary, this is an LLP in which Mr. Hurst owned a 2% interest. Management of the business is by the general partners exclusively. Net • cash profits are distributed annually subject to reserve requirements imposed by the General Partner. Transferability is limited and requires approval of the general partner. Valuation Lipman Erizzell & Mitchell LAC 49 ABSTRACT OF OAKVIEW GARDENS LIMITED PARTNERSHIP Type: Single asset limited partnership Date: September 15, 1979 Purpose: To construct, operate, maintain, improve and rehabilitate and to buy, own, assign, mortgage or lease any real estate and any personal property necessary to the operation of Property. Property: Several parcels located on Lacey Boulevard in Fairfax County. The Partnership was also formed to apply for and obtain a 221 (d(4)) for tenants pursuant to Section 8 assistance Tenn: Until December 31, 2030 Profits & Losses: Pro rata Transferability: Allowed but subject to the first right of refusal by other partners and also requiring General Partner consent General Partner: Ralph D. Rocks AMENDMENTS Date: Background: Purpose: February 1, 1997 Original agreement was amended on October 17, 1978, October 1, 1979 and restated on September 15, 1979 (see abstract above) The Partners agree to amend the original Agreement after conversion of a ] % limited partnership interest owned by Samuel A. Rocks and a 1% limited partnership interest owned by William B. Hungerford, to general partnership interests. Date: December 29, 1998 Purpose: Partners agree to register the partnership as a limited liability partnership in accordance with provisions of the Virginia Partnership Act Asset Management Decisions: By General Partner Excess Cash Flow: To be distributed annually to all of the partners in accordance with their pro rata share. Rocks Ownership: Ralph D. Rocks, Trustee of the Ralph D. Rocks Revocable Trust25.25% Jean W. Rocks, - Trustee of the Jean W. Rocks Revocable Trust 25.25% Transferability: Requires agreement of General Partner Date: June 1, 2002 Purpose: To approve all transfers and assignments of interest in Oakview Gardens LP which have occurred from 1997 through June 1, 2002. Date: August 1, 2003 Purpose: To approve certain transfers of interests and to provide that upon a vote of consent of the partners equaling 66% or more of the Partnership Interests, a Partnership Agreement may be amended. Also to accommodate the Partnership's authority to secure new loan insured by the Department of Housing & Urban Development. Date: April 1, 2005 Purpose: To allow the General Partner to request additional Funds for the Partnership if the General Partner determines additional funds is desirable. Date: August 1, 2005 Purpose: To expand the right to permit a Trustee of a Trust that is or becomes a Member of the Partnership LLP to assign its Partnership Interest to the beneficiaries of such trust, without the consent of a Limited Partner. Estate of Donald Hurst O PROPERTY f NCOME • The subject property is a mature operating apartment complex generating Net Operating Income as follows: Appraiser's 2004 2005 2006 2007 Forecast $999,250 $1,036,735 $1,076,996 $958,698 $1,044,700 Our forecast represents a stabilized income stream upon which a prudent investor would depend and excludes major maintenance programs which have been completed at the subject. 0 DEBT CONSIDERATION The Oakview Apartments were subject to a first mortgage in the amount of $9,896,463 (as of July 17, 2007) which represents approximately 64% of value, a reasonable loan-to-value ratio of value. O DISTRIBUTION HISTORY Distributions over the past five years are as follows: ~ Avg. 2003 2004 2005 2006 2007 (exc1.2004) $550,000 $6,100,00016 $0" $1,000,000 $300,000 $462,500 We forecast future distributions based on our projection of NOI and debt service of approximately $500,000 as follows: Net Operating Income Forecast $1,044,700 Less: Mortgage Debt Service 414,413 Reserves 130,000 ($783/apt.) Cash Flow Available to Distribute $500,287 Say: $500,000 0 CASH & CASH EQUIVALENTS Oakview Gardens LLP held cash and cash equivalents totaling $1,151,802 and had current liabilities of $148,935, leaving net cash and cash equivalents of $1,002,867 as of July 17, 2007. According to management, these reserves are appropriate since HUD (the mortgagee) changed to a three year renewal contract. i~ Resulting from financing ~~ No distribution; need to build reserves Valuation Lipman Frizzell & Mitchell LLC 50 Estate of Donald Hurst ~ DISTRIBUTION RATIO (PRIOR TO PARTIAL INTEREST DISCOUNT) Past year's and, most importantly, future distributions made to owners of an entity owning real estate should have a certain relationship with Unadjusted Net Equity Value i.e. net asset value (or NAV) that has been estimated in this report. Net asset value is defined as value of the real property, adjusted for non-real estate items such as current assets and liabilities, real estate debt financing and other balance sheet items. Thus, the distribution rate is the equivalent of a dividend rate or payment of cash flow measured against unadjusted equity value. This is an important measure of an asset's productivity which may then be considered vis-a-vis its value from a pure cash flow or yield perspective. Following are calculations pertinent to these ratios for the subject: Unadj. Equity Unadjusted Net Forecast Dividend Entity ID Equity Value Distribution Ratio Oakview Gardens LLP $6,606,409 $500,000 7.6% The above chart calculates equity dividends against unadjusted net equity values. The dividend rate is at the low end of such rates discussed earlier in this section thus suggesting the need for a discount. In a following section, after we have applied the appropriate discount, we • will again review the equity dividend (distribution) ratio and compare it to those generated by sales of interests in widely held publicly registered limited partnerships. O SPECIFIC USE OF DISCOUNT After condition of all factors relevant in the determination of appropriate partial interest discounts, we conclude that the following discount is appropriately applied to the unadjusted value of the subject real property interests: Partial Interest Entity ID Discount Oakview Gardens LLP 35% This level of discount reflects the lack of marketability inherent in a small member interest, combined with the lack of control a holder of such an interest is subject to. It also reflects the transferability issues discussed above. • Valuation Lipman Frizzell & Mitchell LLC 51 Estate of Donald Hurst • O DISTRIBUTION RATIO (AFTER PARTIAL INTEREST DISCOUNT) It is now appropriate consider the distribution ratio against fair market value of the interests after deduction for partial interest discount. In the chart below, we have presented those calculations. Unadjusted Partial Fair Market Equity Net Equity Interest Value Forecast Dividend Entity ID Value Discount of Equity Distribution Ratio Oakview Gardens LLP $6,606,409 35% $4,294,166 $500,000 11.6% The dividend ratio has improved and is at the upper end of a reasonable range. O CONCLUSION Below is a chart which sets forth in summary form our calculations to estimate fair market value of the interest under appraisement: Add.: Net Cash & Cash Equivalents (incl. $15,500,000 • Reserves for Replacements) $1,002.867 Total Value of Assets $16,502,867 Deduct: Mortgage Debt (7/17/07) $9.896.463 Net Asset Value (NAV) Before Adj. for Partial Interest $6,606,404 Amount of Interest Under Appraisement 2 Unadjusted Value of 2% Interest $132,128 Less: Fractional Interest Discount at 35% 46.245 Fair Market Value of 2% Member Interest $85,883 Rounded to: $86,000 [7 Valuation Lipman Frizzell & Mitchell ~~C 52 Estate of Donald Hurst UNDERLYING ASSUMPTIONS & CONTINGENT CONDITIONS This appraisal is subject to the following limiting conditions: That the legal description - if furnished us - is assumed to be correct. That no responsibility is assumed for matters legal in character, nor is any opinion rendered by us to title which is assumed to be marketable. All existing liens and encumbrances have been disregarded and the property is appraised as though free and clear, under responsible ownership and competent management unless otherwise noted. That no one provided significant professional assistance to the person signing this report. (If there are exceptions, the name of each individual providing significant professional assistance must be stated.) That the stamps and/or consideration placed on deeds used to indicate sales are in correct relationship to the actual dollar amount of the transaction. That unless otherwise noted, it is assumed there are no encroachments, zoning violations or restrictions existing in the subject property. That the appraiser is not required to give testimony or attendance in court by reason of this appraisal, unless previous arrangements have been made. • The values for land and/or improvements, as contained in this report, are constituent parts of the total value reported and neither is (or are) to be used in making a summation appraisal of a combination of values created by another appraiser. Either is invalidated if so used. The current (as of the date of appraisal) purchasing power of the dollar is the basis for our value; no extreme fluctuations in economic cycles are anticipated. The plans in this report are included to assist the reader in visualizing the property. The appraiser has made no survey of the property and assumed no responsibility in connection with such matters. Information, estimates and opinions contained in this report, obtained from sources outside of this office, are considered reliable, however, no liability for them can be assumed by the appraiser. Possession of this report, or a copy thereof, does not carry with it the right of publication, nor may it be used for any purposes by anyone but the client without the previous written consent of the appraiser and the client, and in any event, only with proper qualification. The appraiser assumes no liability for unauthorized use of the appraisal report by a third party. Further, neither all nor any part of this appraisal report shall be disseminated to the general public by the use of media or public communication without the prior written consent of the appraiser(s) signing this appraisal report. That this appraisal shall be considered in its entirety. No part thereof shall be utilized separately or out of context. Lipman Frizzell & Mitchell uC 53 Estate of Donald Hurst That the value opinion provided herein is subject to any and all predications set forth in this • report. That, if required by governmental authorities, any environmental impact statement prepared for the subject property will be favorable and will win approval of the appropriate regulatory bodies. That, unless otherwise noted in the body of this report, this appraisal assumes that the subject property does not fall within the areas where mandatory flood insurance is effective. That, if the appraisal is for mortgage loan purposes 1) we assume physical completion, 2) no consideration has been given rent loss during rent-up unless otherwise noted in the body of this report, and 3) occupancy at levels consistent with our "Income & Expense Projection" are anticipated. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures which would render it more or less valuable. No responsibility is assumed for such conditions or for engineering which may be required to discover them. It is assumed that all required licenses, consents or other legislative or administrative authority from any local, state or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value conclusion contained in this report is based. That this appraisal is not intended to be used, and may not be used, on behalf of or in connection with a real estate syndicate or syndicates. A real estate syndicate means a general or limited partnership, joint venture, unincorporated association or similar organization formed for the purpose of, and engaged in, an investment or gain from and interest in real property, including, but not limited to a sale or exchange, trade or development of such real property, on behalf of others, or which is required to be registered with the United States Securities and Exchange Commission or any state regulatory agency which regulates investments made as a public offering. It is agreed that any user of this appraisal who uses it contrary to the prohibitions in this section indemnifies the appraiser and the appraiser's firm and holds them harmless of and from all claims, including attorney's fees, arising from said use. Unless expressly specified in this Agreement, the fee for this appraisal does not include the attendance or giving of testimony by Appraiser at any court, regulatory, or other proceedings, or any conferences or other work in preparation for such proceeding. If any partner or employee of Lipman Frizzell & Mitchell is asked or required to appear and/or testify at any deposition, trial, or other proceeding about the preparation, conclusions or any other aspect of this assignment, client shall compensate Appraiser for the time spent by the partner or employee in appearing and/or testifying and in preparing to testify according to the Appraiser's then current hourly rate plus reimbursement of expenses. Lipman Frizzell & Mitchell uc 54 Estate of Donald Hurst Unless otherwise stated in this report, the existence of hazardous material18, which may or may not be present on the property, was not observed by the appraiser. The appraiser has no knowledge of the existence of such materials on or in the property. The appraiser, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea- formaldehyde foam insulation, or other potentially hazardous materials may affect the value of the property. The value conclusion is predicted on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. The American with Disabilities Act ("ADA") became effective January 26, 1992. We have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since we have no direct evidence relating to this issue, we did not consider possible non-compliance with the requirements of ADA in estimating value of the property. Unless otherwise noted in the body of this report, we have not completed nor have we contracted to have completed an investigation to identify and/or quantify the presence of non- tidal wetland conditions on the subject property. Acceptance of and/or use of this appraisal report constitutes acceptance of the foregoing general assumptions and general limiting conditions. This appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. This appraisal does not guarantee compliance with building code and life safety code requirements of the local jurisdiction. Nor does it certify that tenants have complied with all requirements necessary to obtain use and occupancy permits. ~s Urea-formaldehyde Foam Insulation, Radon Gas, Asbestos Products, Lead or Lead Based Products, Toxic Waste Contaminants. Lipman Frizzell & Mitchell LAC 55 Estate of Donald Hurst CERTIFICATION • Property Name: Value: Date of Appraisal: I certify that, to thf Oakview Garden Apartments -Section 1, 5800 Oakview Gardens Drive, Falls Church, Fairfax County, Virginia $15,500,000 July 17, 2007 (Date of Mr. Hurst's Death) best of my knowledge and belief: 1. The statements of fact contained in this appraisal report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions. 3. I have no present or prospective interest in the property that is the subject of this report, and I have no personal interest with respect to the parties involved. 4. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. 5. My engagement in this assignment was not contingent upon developing or reporting predetermined results. 6. My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, . the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. 7. My reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice. 8. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 9. I have not made a personal inspection of the property that is the subject of this report. 10. No one provided significant real property appraisal assistance to the person signing this certification. 11. As of the date of this report, M. Ronald Lipman, CRE, MAI has completed the requirements of the continuing education program of the Appraisal Institute. 12. As a result of my knowledge and experience with similar type properties, I am competent to complete this assignment. March 5, 2008 M. Ronald Lipman, CRE, MAI C7 Lipman Frizzell & Mitchell ~~C 56 Estate of Donald Hurst • CERTIFICATION Property Name: Value: Date of Appraisal: I certify that, to the Oakview Garden Apartments -Section 1, 5800 Oakview Gardens Drive, Falls Church, Fairfax County, Virginia $15,500,000 July 17, 2007 (Date of Mr. Hurst's Death) best of my knowledge and belief: 1. The statements of fact contained in this appraisal report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions. 3. I have no present or prospective interest in the property that is the subject of this report, and I have no personal interest with respect to the parties involved. 4. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. 5. My engagement in this assignment was not contingent upon developing or reporting predetermined results. 6. My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, . the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. 7. My reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice. 8. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 9. I have made a personal inspection of the property that is the subject of this report. 10. No one provided significant real property appraisal assistance to the person signing this certification. March 5, 2008 Kelly A. Hoffert Lipman Frizzell & Mitchell ~tC 57 COMPARABLE DATA • IMPROVED SALES ~t r~ U M ,M as -`~~ Ta = t" • , ~' -l ~ t ,1Z ~y n 4d J~ -'1~2 ~iy~~ .1R ~ ~~ ~s'; t n ~ . sa :iw °~ M q" ', asap it,; ;1'~'~ ~ - zi~'~, ~`, w :~ ~,(~. A. '~ y- T M M_- a~ .Z ~c,~ ~ y i ~, ~. 4•:yi ~~. tY ~ ~I . YMM'* s. . yy r sa :_ `.S. •M ,'l- .$ ~, ~ ,a` ..1 {. 'iy, 'a. y `~. C~, g a S ;» as s"~ s La~ e ~- t~ ~~ V "~ ~. .J ~ a) ~"` K P V ~ K «n/ » as ,N n. a ~ r .aa ~ Ns ~ ~ ~} ~ y/ ,a ' t. ' ,s m a s M ~ ~ s T iJ.~ ~ -'? ~}~ ~ ~%~'~w~ ` As ~ w nt ~- n a t sas ps ,M 'aa x f 1, '~ ~ " '~.c{1 --" ~al i ~h~.' . .a' E H M ~~, _~.. ~ _1~~ ~ F~ a E a ~ „`.4 s s ,a ' " p~ r~~ ~?7. ~ (.--~ tr' -~ .5,.!t 1..Jas r Aa'k^ ~ 12 ,~ k 9 ~ `. '!^ ~ .` i ~ ~ s a 2 a" i~5. -• I -~~•~.y.~%„~~~ V' ~„y~rl'~''''~441 ~ t.. ~ ~ N Kl~ri t ~~ .~-- ~, ~ r'"' ~ „~ --'~ ~i' •fsi u 4 ~ ~r„~-~ ii'P^f!'~ c`l ~ •5_~ ~~ ^;~; '~/i 1 ~ w~L. ` ; m r'"" ri r S ~/"' y a~~"~ ~`y"_+, '- ~t'~C~J ~~l' i '~t °s '~~~~a~c~` ~s dY. s ' ~~. ~5~r!~:... '....-'~ { ~~~ s. y ~~,~' eao ~ wv :j~ i a t ; a az-++' ~ i' ~ .i. -- ~ '1 ¢ r,.~, s. ~* K~~-. ~ y 4y '. __ ~e ~.. ,,.2i s s~ I .. "~~"'_ ~ s~3 ~ '7~ F. .r..:...r ...:-",~~~•r~ ^v~'i*`~~; .I _ ~ T A 'r.•„"F . ` - ~{ ..may., I Q~ ~ ~ ' /,.: ~ ~ ,n t..o ,w a .- ,.. ,N ,N ,,... ,,~ ~~ `~ --., ~ rl FrizzeN Mitchel ~ ~. _" -- __ ~,_----- a0507 Estate of Donald Hurst • C J Improved Sale No. 1 Building Name: Coralain Apartments Location: 7417-35 Arlington Boulevard, Falls Church, Fairfax County, Virginia 22042 Tax Map 5-3-1-3 & 3A Transaction Date: July, 2007 Information: Consideration: $14,850,000 Grantor: Coralain Associates, LLC Grantee: Coralain Apartments, LP Deed Reference: Liber: Recent Sal Folio: Marketing Time: N/A Confirmation: Representative of Grantor Financing: All cash to seller Size & Unit Size Unit Price Prices: 106,438 Sq.Ft. Rentable $139.52 106 Apts. $140,094.34 Site & Density Land Area Density Information: 2,980 acres; 35.57 Apts. /Acre 129,809 sq.ft. Zoning: R-20 Improvements Description: IS 40507 Three-story garden apartments constructed in 1963 with brick veneers. The project features a mix of studio, one- and two-bedroom units. Rents at time of sale were approximately $850 and $1,000 for the one- and two-bedroom units. The apartments were in good condition at time of sale, and had strong occupancy. Public amenities include a pool, playground, and laundry rooms. Unit amenities include air conditioning and balconies. Remarks: The buyer converted the project to atax-credit project, requiring 20% of the units be leased to households below 50% of median, and the remainder to be leased to households below 60% of median. Comparable Data Lipman Frizzell & Mitchell tLC Estate of Donald Hurst Improved Comparable Sale No. 1 (continued) Comp: IS 40507 • Unit Mix: Total Apts: 106 Total Rooms: 392 Avg Rooms/Apt: 3.7 No. Type Mix Rooms Sq•Ft. 17 Studio 16.0% 2.0 309 43 IBR/1BA 40.6% 3.5 536 46 2BR/1BA 43.4% 4.5 646 • Comparable Data Lipman Frizzell & Mitchell ~~C t f ~ ~? v 3~ 91-342619 821 j ~ O f~ 839138-2594 V 11 8392 3U~6718 ~~' 92-308818 ~~'_ s~ Q'? X19 8392~G~3215~ f/ ~4~"'~' ~ 15` \ /~~8392-347919 ~ ~ gI13 ~ a392-0az4?7 a3e2-aa4o?a r 83927494, ~' 8392-30-7108] ~9z-~10-1990 t ~~ ~ ~ ~d392-S4-232A ~ ~// 1392-d0-6706' 839209642 ~ ~ +' ~A391.3 ~ 0; ~l ~ ~ 8392-307800 l ~~+J 31-39i1l2 Jj~ ~~ 839t~9-8684 ~ ~l -f'~`'-y` ~ ~.,..~ S. k'141~4647T f1. Q ~ { ~' ~ ~'~QU ~ ~~yy ~~~.J) 8-39?-~39.8474 -~..! ~ 4~ ~~ 391-3~9~60T2 ~``+~~ / 839139$?68 i~1 '~~ ~ ~- ~ ,~ 1~ ~ 8399-39.7860 ~ ~. ~~` ~~ 90~ -39-7554 ~1 a39,'~39.~io42'' / ~~~ n ~ ~, 1 es91-~ r G /'~ ~8391~39.5607 ~,~r, r '391.38-5196 ~~ ~V ~ ~D ~.~' `"-f -38052 J 8391.36 1587 ,~ X8391-38-4972" Q'r2498 princr+""~"__ ^_..__. ,, .~ 839t-A8-2999 8391-48-1436 _~ 40506 8391-48-8 cr ~~. s39,.~a-69~~. ~, ~ ~~ Lipman Friuell & Mitchell ~~c -- . Estate of Donald Hurst • • Improved Sale No.2 Building Name: Glen Arbor Apartments Location: Transaction Information: Size & Unit Prices: Site & Density Information: IS 40506 1901 Stevens Road, Woodbridge, Prince William County, Virginia 22191 Tax Map 8392-40-2303 Date: Consideration: Grantor: Grantee: Deed Reference: Marketing Time: Confirmation: Financing: Size 189,662 209 Land Area 13.910 605,920 Zoning: R-M-1 Improvements Description: April, 2007 $16,500,000 FAD LLC BPMS Glen Arbor LLC Liber: Recent Sal Folio: < 6 Months Representative of Grantor All cash to seller Sq.Ft. Rentable Apts. acres; sq.ft. Unit Price $87.00 $78,947.37 Density 15.03 Apts. /Acre Three-story, garden apartments constructed in 1972 with brick veneers. The property includes a mix of one-, two-, three-, and four-bedroom units ranging from 710 to 1,200sq.ft. The units were in fair condition, and the buyer planned to renovate at an undisclosed cost. Public amenities include laundry rooms, a pool and playground. Unit amenities include air conditioning and balconies. Remarks: At time of sale, the occupancy rate was around 90%. Rents ranged from $775 to $1,175. Comparable Data Lipman Frizzell & Mitchell LLC Estate of Donald Hurst Improved Comparable Sale No. 2 (continued) Comp: IS 40506 • Income Net Operating Income: $940,500 Information: Overall Cap Rate (OAR): 5.70% Unit Mix: Total Apts: 209 Total Rooms: 1,048 Avg Rooms/Apt: 5.0 No. ape Mix Rooms Sg~Ft. 25 1BR/1BA 12.0% 3.5 710 88 2BR/1 BA 42.1 % 4.5 774 60 3BR/1BA 28.7% 5.5 1,010 36 4BR/1.SBA 17.2% 6.5 1,200 • • Comparable Data Lipman Frizzell & Mitchell LLC v i~4 SL 11~' a'` i `p~'PAEiC 4 PARCEL- A ~ Z~ ~ ~ _•` Y.7~i~1~ I ~,1zcEL A ..~- 11l 0 7L1'l ~\ ~~~~ F1 / ,314 ' .~. ~ .. ~~ tee.. , 4osa~ ~,ppySC?N, p~fiAS gPTS I s _ .~'~ 7 ..r ~ row' ~ t 7 ~ g ~l~T- `8~ i _126_.:'... '~IFi~Jr...~ ~.... ~ ~.. ``b0AR0 OF E0. WALKER NULL TOWNS ~~ ~,oT-1 55e3 ` ~ 48~Z t ~~ '~' --BLAND ti" '''' 25099 UNIT 1 '~ P/d PAR.~A~ x ~ ~~~ 4 F A ~~1 "t i ~ \ f ~ P.294 ~ .~. tr1~ r `~ \i .~ j 3 a'$a ! ~ ~ ~~ s 11 `~. ? 1 ~ P.43~~` '~° 96 A. P.3' p3? 1. ~~ 6 pAFtGtL C y nla4as5~ P ~ ~„ ~ ~,. ~ „/" ~ LKD~ iSiG'ti ~<r ii ~~ ~T~ylO~ ~ ~~~ ~~,~ `~~ ~~ Lac spy I e~ay ~o s 4 ~ ,~~~/flP~ ` P ~R i ` 3i! P.'.i7~ % ~ ~ ~~ ~ ~ 7V I i 4~~~o sr ~ ~,.I, ~` ~? ; ~.~yia ~ ' ~ ~ `~ ~¢ V 1 ,~aa/WptrKER °` .:~j~,L, VtLI.AGE A ~' 17p/5 ~ - ~~ i 68't2 r: ~,,~+ L ~:^ ; j °'.~' ~r ______ Lipman Frizzell & Mitchell ~~~ Estate of Donald Hurst Improved Sale No. 3 Building Name: Regency Lane Apartments Location: 6816 Walker Mill Road, Capitol Heights, Prince George's County, Maryland 20743 Tax Map 73, Grid D4, p/o Parcel "A" Transaction Date: December, 2006 Information: Consideration: $9,500,000 Grantor: Foxglenn Investors Partnership Grantee: MPI FoxGlenn, LLC Deed Reference: Liber: Recent Sal Folio: Marketing Time: 5 Months Confirmation: Representative of Grantor/Grantee Financing: All cash to seller Size & Unit Size Unit Price Prices: 86,725 $109.54 172 Apts. $55,232.56 Site & Density Land Area Density Information: 7.900 acres; 21.77 Apts. /Acre 344,124 sq. ft. Zoning: R-18 Improvements Description: IS 40505 Three-story, garden apartments constructed in 1967 with brick veneers and flat, built-up roofing. The property includes a mix of one-, two-, and three-bedroom units ranging from 713 to 1,029 sq.ft. The seller had recently completed modest renovations (paint/carpet) and the units were in fair conditions. Unit amenities include air conditioning and balconies. Remarks: This is a subsidized property. At sale, the average rent was $997/month. Comparable Data Lipman Frizzell & Mitchell ~~c Estate of Donald Hurst Improved Comparable Sale No. 3 (continued) Comp: IS 40505 Income Potential Gross Income: Information: Vacancy: Effective Gross Income: $1,743,000 Expenses: 1,262,000 Net Operating Income: $481,000 Overall Cap Rate (OAR): 5.06% Effective Gross Income M ultiplier (EGIM): 5.45:1 Unit Mix: Total Apts: 172 Tota l Rooms: 766 Avg Rooms/Apt: 4.5 No. ape Mix Rooms Sq.Ft. 40 1BR/1BA 23.3% 3.5 713 18 1BR/1BA/Den 10.5% 4.0 857 7 2BR/1BA 4.1% 4.5 941 66 2BR/2BA 38.4% 4.5 1029 31 3BR/2BA 18.0% 5.5 1029 10 3BR/3BA 5.8% 5.5 1029 r ~ ~,_.I Comparable Data Lipman Frizzell & Mitchell ~~c ____ L 11~A17 6 ~~ 70 1 5 ~ 14 ! io. ~ g 9 31 D T K c S M.N.C.P d P.G. ~ ~ Sf27 /~/St0 iiA. R 227 M 114 - P284 ~, ioy- ?27 ~ ~~ .ti/ i / ~ i M.N.G.P.1P.t. !v1 N c.~ t~ ;~Z;~ 304 ;~{; J 104 P.264 l.24'[ I ~ ~~ / i P. G 6 ~ ~I ~ ~ p~psfi ~~ ~ :, M I71 py 1 ~ ~~ ' / M 1DA '~ >PryA~ ~E•YALLEY +~ ~ COVIR ~I ~~ fA i PARA- ~ PH9~ v1 t ~u ~ ~` ~ / '~ o~~~ ~~~ '~ K~ ~ ~ ~ s ~~ '! cr. ¢f °~=~ ~'r ~~~ ~~ 3. ~ ~l.'~ itchelf ~~_~ _- Lipman Fr~zzelt ~ M 40144 Estate of Donald Hurst Improved Sale No. 4 IS 40144 • Building Name: River Pointe Apartments Location: 8318 Indian Head Highway, Fort Washington, Prince George's County, Maryland 20744 Map 114, Grid A1, Parcel A, Plat: A-5895, Transaction Information: • • Date: Consideration: Grantor: Grantee: Deed Reference Marketing Time Confirmation: Financing: November, 2006 $16,400,000 River Pointe Apartments LLC River Point Two Apartments, LLC Liber: Not Folio: Recorded Not Available Public Records $13,725,000 Size & Unit Size Prices: Sq.Ft. Rentable 170 Apts. 835 Apt. Rooms Site & Density Land Area Information: 8,900 acres; 387,684 sq.ft. Zoning: R-18 Unit Price $96,470.59 $19,640.72 Densit 19.10 Apts. /Acre Improvements Description: Improvements consist of a 1962 vintage, three story garden apartment complex with brick veneers and flat built -up roofing. Public amenities include controlled access entries, public laundry facilities and community center. Apartment amenities consist of carpeting, dishwashers, microwaves and balconies. Remarks: Property is located on Indian Head highway, south of the Capital Beltway and Livingston Road. Prior to the sale, the property had been renovated. Comparable Data Lipman Frizzell & Mitchel[ tLC Estate of Donald Hurst Improved Comparable Sale No. 4 (continued) Unit Mix: Total Apts: 1 70 Tota l Rooms: 835 No. Type Mix 17 1 BR11 B 10.0% 84 2BR/1B 49.4% 51 3BR/1.SB 30.0% 18 4BR/2B 10.6% • • Comp: IS 40144 Avg Rooms/Apt: 4.9 Rooms Sq.Ft. 3.5 670 4.5 770 5.5 895 6.5 905 Comparable Data Lipman Frizzell & Mitchell LLC • SALES COMPARISON ADJUSTMENT GRID .~ lD 0.~ C tD N d (9 7 N N tD fi N tD N Q' r d 0 ~ G `T1 N (D /~ ~ Q1 ~ ~ ~' [D ` '~„' h (9 N m N h N N n O 7 N C N 7 N w ~n io N (D z SD C1 0 r r: ~ SUBJECT PHOTOGRAPHS OAKVIEW GARDEN APARTMENTS -SECTION SUBJECT PHOTOGRAPHS • • VIEW FACING NORTHWEST ON LACY BOULEVARD, SUBJECT PROPERTY ON RIGHT VIEW FACING SOUTHEAST ON LACY BOULEVARD, SUBJECT PROPERTY ON LEFT OAKVIEW GARDEN APARTMENTS -SECTION 1 SUBJECT PHOTOGRAPHS e • EXTERIOR VIEW OF SUBJECT PROPERTY EXTERIOR VIEW OF SUBJECT PROPERTY OAKVIEW GARDEN APARTMENTS -SECTION 1 SUBJECT PHOTOGRAPHS • TYPICAL INTERIOR VIEW OF SUBJECT PROPERTY WITH NEW CARPET TYPICAL INTERIOR VIEW OF SUBJECT PROPERTY WITH NEW CARPET • • OAKVIEW GARDEN APARTMENTS -SECTION SUBJECT PHOTOGRAPHS VIEW OF UPDATED KITCHEN i .t TYPICAL VIEW OF BATHROOM • FLOOR PLANS Floor Pian Orie Bedroom: 640 Sq. ft. fiwo Bedroom: 782 5q. ft. Price: $ - ~ Price:, $ - • C Kitc en ~ -. Balcony -~ Heat -10' z 'S ~ Bedroom 2 Bedroom 1 i 4'17 x ____ )0' x 9'11 10'8 x 13'3 y„~ I __ f Living Room Bedroom Living and Dining Room ` 15' x 16' 10' x 14' . 20' 10 x 15 4- . I - Dining Room Kitchen • ~ T4 x q ~2 ~ CbNt - .. Fever 1 I• ~~ . Balcony Heat • ~ 4:11 x 7 Two Bedroom with Qen:• 935 Sq.~ft~• - ~ Price: $ • - Heat^. Balcony Bedroom 1 Bedroom 2 _ 10'8 x.15'8 YO'b x10'1 . ,~ . ~ ' Den I. _ Tbx8' , ` - ' , -- - Living 8, . Dining Room _ tbset ~ Kitchen 15' x 16'8 Bathroo 4 x 9'2 :i Four 4'11 x T 1 3 i ~ 4~ _' 5 • FLOOD PLAIN MAP C • Flood Plain Map ~~~ v ~ ® ~ NATIONAL FLDOD INStlRANCF PA06AAM F'RIIf } FLOOD INSURANCE RATE MAP i ~ FAIRFAX COUNTY, VIRGINIA UNINCORPORATED AREAS PANEL 93 OF 150 ~aee Mn. ~.,nex ron e,Hr~s r+ol .ninreo ZONE X COMMUNITT-PANEL NUMBER 515525 0093 0 MAP REVISED: ~~ MARCH 5,1990 \\7"/_'111 s Federal Emergency Mamgement Agency 244 1 t i t i l 4 i i 1 1 } 5 Q C i z ~ C 3 tr I 1 Lipman Frizzell & Mitchell ~~~ __- -' QUALIFICATIONS OF CONSULTANT - M. RONALD LIPMAN, CRE, MAI MEMBER: Member (CRE): American Society of Real Estate Counselors Member (MAI): Appraisal Institute (Chapter Pres.-'78 & '79) Certified General Real Estate Appraiser: State of Maryland Certified General Real Property Appraiser: District of Columbia Certified General Real Estate Appraiser: Commonwealth of Virginia Licensed Broker -Maryland Real Estate Commission Board of Trustees -Mid Atlantic Realty Trust (NYSE), Chairman Investment Committee Member -Association for Conflict Resolution EDUCATION: Awarded Masters Degree in Bus. Admin. (Real Estate Major) American Univ., 1964 Awarded Bachelor of Arts Degree (Bus.Admin.Major) Duke University, 1960 Continuously engaged in appraisal since 1961; in consulting since 1970 TEACHING ASSIGNMENTS: Instructor: SREA 101 and 201 Courses, 1971 thru 1980, Loyola & Notre Dame Colleges Instructor: Annual School of Maryland Assessing Officers, 1969-1973, 1978-1980 Instructor: Condemnation Course IV for Appraisal Institute, Baltimore 1979/80 Instructor: Capitalization Theory & Techniques, for Appraisal Institute, Baltimore, 1981 Instructor: Income Property Valuation for Maryland Tax Court, 1984 Instructor: Md. Chapter, Appraisal Institute - R41-c Seminar, 1985 Instructor: Internal Rate of Return Seminar for Md. Commercial Assessors, 1986 Instructor: Acquisition of Real Estate -John Hopkins University Continuing Studies, 1987 Instructor: The Appraisal of Real Estate, Masters Program - JHU MBA program, 1992 SPEAKING ENGAGEMENTS/OTHER: 2005 -Speaker, Bankruptcy Bar Association of Maryland, 17th Annual CLE Program 2003 -Succession Planning Panel, Urban Land Institute Spring Forum -Baltimore 2003 -Family Limited Partnerships Seminar presented by MICPEL • 2000-Annual MACPA/MICPEL Advanced Tax Institute-Partial Interest Discounting in the Context of Real Estate FLP's 1999-Selected as Mediator by Montgomery County and Property Owner in Condemnation Case 1997/98/99 Educational Seminar - MD Property Tax Assessment Appeals Boards 1995 Howard County Economic Plan -Update Committee 1995 Professional Education Seminar -Baltimore District, Internal Revenue Service 1994 Maryland Real Estate Tax Assessment Seminar - NAIOP 1993/94 -Property Tax Assessment Seminar - Linowes & Blocher and Miller, Miller & Canby 1993 "Trends in Real Estate Appraising" -Commercial Finance Association 1992/93 "Appraising Real Estate in Today's Marketplace" -The Rouse Company/MD Asssoc. of CPA's 199 i "Appraising in a Recessionary Economy" sponsored by NAIOP & BOMA 1987 "Challenges in the Development Process", Appraisal Institute Regional Conference 1986 "Real Estate in Tax Crisis" sponsored by Walpert, Smullian & Blumenthal, PA 1985 Appraisal Institute Regional Conference 1985 Maryland State Bar Association Real Estate Study Group 1984 "Annual Metropolitan Development Update" sponsored by Daft, McCune & Walker 1980 Appraisal Institute Regional Conference 1980 Mid Year Meeting, Maryland State Bar Association, Baltimore 1977 National Assoc. of Corporate Real Estate Executives-Balto./Wash.Area 1976 U.S. League of Savings Associations Convention, New York 1974 Joint Baltimore/Washington Mortgage Bankers Association Meeting 1973 International Appraisal Conference, SREA, Atlanta, Georgia QUALIFIED AS EXPERT WITNESS BEFORE THE COURTS OF: Baltimore City; Baltimore, Anne Arundel, Montgomery, Howard, Prince Georges, Carroll, Frederick & Cecil Counties; District of Columbia Superior Court; U.S. District Court of Maryland; Federal Bankruptcy Court; Los Angeles County Superior Court; Federal Tax Court; American Arbitration Association, NY; Court of Common Pleas, Erie, PA COMPETENCY: Numerous appraisals have been completed for all types of income and owner/user properties including office buildings, apartment complexes, shopping centers and industrial properties in addition to raw land and finished sites for development of these uses and special purpose properties such as mobile home parks, marinas and assisted living facilities. Lipman Frizzell & Mitchell LLC QUALIFICATIONS OF ASSOCIATE APPRAISER -KELLY A. HOFFERT MEMBERSHIP/AFFILIATIONS: Certified General Appraiser: State of Maryland EDUCATION: Master of Regional Planning -University of North Carolina at Chapel Hill, 1996 Bachelor of Arts -Mary Washington College, Fredericksburg, VA, 1994 REAL ESTATE COURSES COMPLETED: Appraisal Institute Course 110 -Appraisal Principles Appraisal Institute Course 120 -Practices of Real Estate Appraisal Standards and Ethics of Real Estate Appraisal Appraisal Institute Course 320 -General Applications Appraisal Institute Course 410 -National USPAP Course Appraisal Institute Course 510 -Advanced Income Capitalization Appraisal Institute Course 520 -Highest & Best Use and Market Analysis Real Estate Investment Analysis Urban Revitalization Housing Law Housing Policy and Analysis • BACKGROUND EXPERIENCE: August 1997 -present -Associate Appraiser, Lipman Frizzell & Mitchell, LLC May 1996 -August 1997 -Development Officer, Baltimore Corporation for Housing Partnerships Lipman Frizzell & Mitchell LLC REPRESENTATIVE CLIENTS OF LIPMAN FRIZZELL & MITCHELL DEVELOPERSII_NVESTO RS/ADVISO RS A&R Development Corporation Acacia Realty Advisors ADC Builders AEW Capital Management Ahmanson Development Allen & Rocks American Trading & Production Corp. Bavar Properties Group Dr. Leonard P. Berger B1ackRock Realty Blaustein Family Interest Boston Real Estate Counsel BSC America Bozzoto Group BVT Development Co. Capital Associates Casey Management, Inc. Chevy Chase Land Company Cigna) Corporation Circle Management Company Clark Enterprises, Inc. Constellation Properties Continental Realty Cordish Companies Corporate Office Properties Trust DeChiaro Properties Dickinson Heffner The Dolben Company, Inc. Dome Corporation Edward J. DeBartolo Corp. • Edward A. Meyerberg Co. Enterprise Homes Inc. Federal Realty Investment Trust Forest City Enterprises Fred Schnider Company LLC General Growth Properties, Inc. Gilligan Group Great Point Investors Greenebaum & Rose Gulf Stream Properties H & S Properties Harrison Group Harvey Companies Heaver Properties Heritage Properties Himmelrich Associates, Inc. Hoffberger Foundations, Inc. Home Properties of New York Homes for America, Inc. Howard Research & Development Integral Group Investment Group Development Corporation James Keelty & Co. James F. Knott Development Company JBG Properties, Inc. JHP Development Company J.P. Morgan Investment Carl & Edward Julio Kenilworth Equities (Robert Morrow) Kennedy Associate Real Estate Counsel Kimco Real Estate Investment Trust • The David Kornblatt Company Kravco Company Lee Development Group (LDG) Land Design & Development Company Landex Corporation LaSalle Investment Mgmt. Lazard Development Lee Sammis Associates, Inc. Legum Development Lerner Company Lubert-Adler Management Inc. MacKenzie Commercial Real Estate Services LLC Maisel-Hollins Manekin Corporation Meisel & Cohen Props. Merritt Properties LLC Mid-Atlantic Properties Michael T. Rose Associates MIE Investment Co. M[G Realty Advisors, Inc. Montgomery Housing Partnership Monumental Properties, Inc. MultiEmployee Property Trust Multi-Properties Natelli Communities Nottingham Properties NVR, Inc. Osprey Property Group Park Tower Developments, Ltd. Pennrose Properties, Inc. Peter G. Angelos Petrie, Dierman & Kughn PM Realty Advisors Quantum Management Riparius Development Corporation Rock Realty, Inc. Rockspring Properties (Camalier Family Interests) Ryland Homes Saybrook Community Capital Senior Campus Living Shelter Development Spaulding & Slye SSR Realty Advisors Inc. St. Paul Community Development St. PauUTravelers Struever Bros. Eccles & Rouse Time Group Toll Brothers, Inc. Town & Country Management Trammel Crow United Trust Fund (UTF) Wallace H. Campbell Real Estate Mgmt. Whiting Turner Winchester Commercial Winchester Homes Winthrop Financial Assocs. CORPORATE' 7-Eleven, Inc. A.S. Abell Co. Advest Allied Chemical Amtrak American Trading & Production BGE Saks 5th Avenue BFI Industries Bell Atlantic Properties Bethlehem Steel Black & Decker Blue CrossBlue Shield BP North America 7/07 Lipman Frizzell & Mitchell LLC REPRESENTATIVE CLIENTS OF LIPMAN FRIZZELL & MITCHELL C&P Telephone • C.J. Langenfelder & Son, Inc. Cellular One Cherner Lincoln Mercury Chrysler Realty Corp. Circuit City Columbia Association Corporate Office Properties Trust (COPT) CSX Realty Enterprise Environmental Elements Exxon Fairlanes Food Lion Ford Motor Company GEICO General Electric Genstar Giant Food Hyatt Hotels IBM JCPenney Jos. A. Bank Kaiser Aluminum Kaiser Permanente Lockheed Martin Corporation Lord & Taylor Macy's Marriott Corporation Maryland Casualty Maryland Cup May Department Stores (Hecht's) . McDonalds Corporation Meridian Merrill Lynch Midas Monumental Insurance Nextell Noxell Peebles Department Stores PEPCO Richfood Holdings, Inc. S&S Management Safeway Sears Roebuck & Co. Senior Campus Living Solo Cup Times Mirror (The Sunpapers) Toyota T. Rowe Price Wal-Mart Washington Gas ACCOUNTING FIRMS: American Express Tax and Business Grant Thornton Coopers & Lybrand Ernst & Young Ellin & Tucker Chartered Faw Casson & Company Grabush Newman Haskins & Sells Hertzbach & Company Peat, Marwick & Mitchell Weil, Akman, Baylin & Coleman LAw FIRMS: Abramoff, Neuberger, Linder, LLP Adelberg, Rudow, Dorf & Hendler Ain & Bank Arder & Hadden Arent, Fox, Kintner, Plotkin & Kahn Arnold & Porter Ballard Spahr Blades & Rosenfeld Blank, Rome, Comisky & McCauley, LLP Blumenthal, Delavan & Williams P.A. Bryan W. Young, P.A. Conroy, Bauman & Dameron DLA Piper, Rudnick ,Gray & Cary US LLP Drinker, Biddle & Reath Fedder & Garten Feldesman, Tucker, Leifer, Fidell & Bank, LLP Fisher & Winner, LP Fossett and Brugger Chartered Fried, Frank, Harris, Shriver & Jacobson Furey, Doolan & Abell, LLP Gallagher, Evelius & Jones Goodwin Procter Gordon, Feinblatt, Rothman, Hoflberger & Hollander Hanley & Hanley Hogan & Hartson Hunton & Williams Knight, Manzi, Nussbum & LaPlaca P.A. Koehler & West Chartered Kramon & Graham Law Offices of Peter G. Angelos, P.C. Levin & Gann Linowes & Blocher London & Mead Martin, Snyder & Bernstein PA McGuire Woods Miles & Stockbridge Miller, Miller & Canby Morgan, Lewis & Bockius Murphy Schaeffer Neuberger, Quinn, Gielen, Rubin & Gibber P.A. Niles, Barton & Wilmer Nolan, Ptumhoff & Williams Ober, Kaler, Grimes & Shriver Paley, Rothman,Goldstein,Rosenberg ,Eig &Cooper,Chartered Patton Boggs, L.L.P. Patterson, Belknap, Webb & Tyler Romadka Gontrum & McLaughlin Rosenberg Martin Funk & Greenberg Royston, Mueller, McLean & Reid Saul Ewing Weinberg & Green Semmes, Bowen & Semmes Shapiro, Sher & Guinor Shaw, Pittman, Potts & Trowbridge Services Shulman Rogers Gandal Pordy & Ecker Steptoe & Johnson Tydings & Rosenberg LLP Venable Ward & Klein Chartered Whiteford, Taylor & Preston Wilkes Artis William J. Monks Williams, Hammond, Moore, Shockley & Harrison Zuckerman Spaeder LLP 7/p7 Lipman Frizzell & Mitchell LLC REPRESENTATIVE CLIENTS OF LIPMAN FRIZZELL & MITCHELL LENDERS/MORTGAGE BROKERS: Lehman Bros. 1st Mariner Bank Lend Lease Real Estate Investments, Inc. • Acacia Federal Savings Bank Liberty Federal Savings Bank Advance Bank Lutheran Brotherhood Aetna Insurance M & T Bank Marine Midland Bank AGM Financial Services, Inc. Allstate Investments LLC Mercantile Safe Deposit & Trust Co. American City Mortgage Corp. Minnesota Life Insurance Company American Federal Savings Bank Money Store Monumental Life Ins. Co. AMRESCO Capital Archon Finanical Morgan Guaranty Trust Company Co Baltimore Life Ins Nationwide Insurance Company . . Banc One Capital New York Life Investment Management, Inc. Bangkok Bank Limited Nomura Capital Bank of America NorthMarq Capital Inc. Bank of Boston Bank of New England Ocean Bank Paine Webber Real Estate Securities Inc. Bear Stearns Patrician Group Berkshire Mortgage Finance Peninsula Bank Branch Banking & Trust Co. (BB&T) Potomac Valley Bank California Bank & Trust PPM Finance, Inc. Canada Life Assurance Co. Penrose Financial Carroll County Bank & Trust Preston Partners Chase Manhattan Bank Principal Real Estate Investors Chemical Bank Provident Bank of Maryland Chesapeake Bank Prudential Ins. Co. of America Chevy Chase Savings & Loan Riggs Bank Sandy Spring National Bank of Maryland Citibank Bank Citizens National Bank Severn Savings Bank FSB Columbia Bank Sonneblick-Goldman Corp. Columbia National Real Estate Finance LLC Stancorp Column Financial State Farm Insurance Company Commercial Bank of Kuwait St.PauUTravelers Community Bank of Northern Virginia Suburban Bank Conseco Finance Servicing Corporation Sun Life of Canada Continental Bank SunTrust Credit Suisse/First Boston Susquehanna Bank C W Ca ital Taneytown Bank Deutsche Bank Mortgage Capital LLC Teachers Ins. & Annuity Assn. of America Eagle Bank Tower Federal Credit Union Eastern Savings Bank Union Capital [nvestments LLC Equitable Investment Services Union Dime Savings Bank Equitable Life Assurance Wachovia Bank Farmers & Mechanics National Bank Walker & Dunlop FCNB Bank Wells Fargo Bank First Union Corp. Wells Fargo Realty Advisors FHLMC Wilmington Trust Company Fleet Bank Wise Metals FNMA Woodmen of the World Life Insurance Co. Fremont Investment & Loan INSTITUTIONAL• GE Capital Corporation General Electric Real Estate American University Giant Food, Inc. Archdiocese of Baltimore Greater Atlantic Savings Bank Baltimore Symphony Orchestra Hagerstown Trust Bons Secours Baltimore Health System Harbor Bank Catholic Charities Cooperative Services Harbor Federal Savings Bank Coppin State University Home Federal Savings Bank Franklin Square Hospital Household Bank Greater Baltimore Medical Center (GBMC) Huntoon Hastings Good Samaritan Hospital IDS Certificate Company Harry & Jeanette Weinberg Foundation Jefferson Pilot Life Insurance Company HofEberger Foundation, Inc. JP Morgan Mortgage Johns Hopkins Hospital K Bank Johns Hopkins Real Estate Key Bank Johns Hopkins University Key Bank & Trust Massachusetts Institute of Technology (MIT) Laureate Capital LLC Morgan State University 7/07 Lipman Frizzell & Mitchell LLC iii REPRESENTATIVE CLIENTS OF LIPMAN FRIZZELL & MITCHELL Northwest Hospital Center Burning Tree Golf Club St. Agnes Hospital Caves Valley Golf Club St. Joseph Medical Center Columbia Association St. Paul Community Development Corp. Country Club of Maryland St. Paul School Country Club at Woodmore Sinai Hospital/LifeBridge Green Spring Valley Hunt Club Sisters of Notre Dame Elkridge Club Sisters of Charity Hunters Oak Golf Course Tauber Foundation Manor Country Club United Brotherhood of Carpenters & Joiners Maryland Club University of Maryland at Baltimore Somerset Farm Golf Club University of Maryland College Park Suburban Country Club University of Maryland Medical System Woodmont Country Club University of Maryland Hospital University of Maryland Foundation Volunteers of America GOVERNMENTAUOTHER: Baltimore City Government Baltimore County Government Baltimore County Revenue Authority Baltimore Development Corp. (BDC) Blaustein Family Interests BOMA Carroll County Government Cecil County Government Department of Justice District of Columbia Government Estate of Jack Kent Cooke Federal Communication Commission Federal Deposit Insurance Corp.(FDIC) • Federal Home Loan Bank Board Frederick County Government GPU Energy Harford County Government Housing Authority of Anne Arundel County Howard County Government Internal Revenue Service Maryland Department of Housing and Community Dev. Maryland Economic Development Corp. Maryland Historical Trust Maryland Industrial Dev. Financing Authority (MIDFA) Maryland Insurance Deposit Fund (MIDF) Maryland Nat'l. Capital Park & Planning Comm. (MNCPPC) Maryland Stadium Authority Mass Transit Administration (MTA) Montgomery County Government Montgomery Co. Housing Opportunities Commission (HOC) Montgomery Co. Office of Law National Association of Industrial & Office Parks (NAIOP) Prince George's County Government Resolution Trust Corporation (RTC} State Highway Administration (SHA) U.S. Army Corps of Engineers U.S. Dept.of Housing Urban Development U.S. Dept. of Justice U.S. Dept. of the Navy U.S. General Services Administration U.S. Naval Academy Athletic Association U.S. Postal Service Washington Suburban Sanitary Commission (WSSC) RECREATIONAL; Argyle Country Club Baltimore Country Club Belmont Bay Golf Course 7/07 Lipman Frizzell & Mitchell PLC iv . ~- ~;lp'~;L ~ ~~ ~c~ ~ D 1 .~'~ P~