VALUATION REPORT - TASE · 2014-05-29 · VALUATION REPORT CROSSWINDS AT ROLLING ROAD APARTMENTS 7500 Hithergreen Drive Baltimore, Baltimore County, MD 21244 CBRE, Inc. File No. 13-081DC-1094

VALUATION REPORT CROSSWINDS AT ROLLING ROAD APARTMENTS 7500 Hithergreen Drive Baltimore, Baltimore County, MD 21244 CBRE, Inc. File No. 13-081DC-1094 (1)

Mr. Jamie Lee HARBOR GROUP INTERNATIONAL 999 Waterside Drive, Suite 2300 Norfolk, VA 23510

© 2014 CBRE, Inc.

VA L U A T I O N & A D V I S O R Y S E R V I C E S

1861 International Drive, Suite 300 McLean, VA 22102

T (703) 734-4762 F (703) 734-3012

www.cbre.com

December 23, 2013 Mr. Jamie Lee HARBOR GROUP INTERNATIONAL 999 Waterside Drive, Suite 2300 Norfolk, VA 23510 RE: Appraisal of Crosswinds at Rolling Road Apartments 7500 Hithergreen Drive Baltimore, Baltimore County, MD 21244 CBRE, Inc. File No 13-081DC-1094 (1)

Dear Mr. Lee:

At your request and authorization, CBRE, Inc. has prepared an appraisal of the fair value of the referenced property. Our analysis is presented in the following Self-Contained Appraisal Report.

The subject is an 808-unit multi-family garden property located at 7500 Hithergreen Drive in the Windsor Mill section of Baltimore, MD. The property is located on a 58.05-acre site, and consists of 88 predominantly 2 & 3-story apartment buildings and 1 clubhouse building. Construction occurred in phases between 1976 and 1988 for the apartments, and 2013 for the clubhouse. The improvements include 803 apartment units and 5 condominium units located in the adjacent condominium complex. The condominium units are leased and managed as typical apartment units. Currently, the property is 94.4% occupied and is considered to be in average overall condition. The subject is more fully described, legally and physically, within the enclosed report.

Based on the analysis contained in the following report, the fair value of the subject is concluded as follows:

FAIR VALUE CONCLUSION

Appraisal Premise Interest Appraised Date of Value Value Conclusion

As Is Fee Simple Estate December 31, 2013 $84,000,000

Compiled by CBRE

Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of, and inseparable from, this letter.

© 2014 CBRE, Inc.

Mr. Jamie Lee December 23, 2013 Page 2

The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and the requirements set forth by the International Financial Reporting Standards under IFRS-13.

The intended use and user of our report are specifically identified in our report as agreed upon in our contract for services and/or reliance language found in the report. No other use or user of the report is permitted by any other party for any other purpose. Dissemination of this report by any party to non-client, non-intended users does not extend reliance to any other party and CBRE will not be responsible for unauthorized use of the report, its conclusions or contents used partially or in its entirety.

It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CBRE, Inc. can be of further service, please contact us.

Respectfully submitted, CBRE, Inc. - VALUATION & ADVISORY SERVICES

Philip A. Mottola Jerrold Harvey, MAI, MRICS, CCIM Senior Appraiser Managing Director Maryland Cert. No. 31822 Maryland Cert. No. 10086 Phone: 703-734-4794 Phone: 703-734-4759 Fax: 703-734-3012 Fax: 703-734-3012 Email: [email protected] Email: [email protected]

© 2014 CBRE, Inc.

CROSSWINDS AT ROLLING ROAD APARTMENTS | CERTIFICATION OF THE APPRAISAL

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CERTIFICATION OF THE APPRAISAL

We certify to the best of our knowledge and belief:

1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions

and limiting conditions and are our personal, impartial and unbiased professional analyses, opinions, and conclusions.

3. We have no present or prospective interest in or bias with respect to the property that is the subject of this report and have no personal interest in or bias with respect to the parties involved with this assignment.

4. Our engagement in this assignment was not contingent upon developing or reporting predetermined results.

5. Our 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.

6. This appraisal assignment was not based upon a requested minimum valuation, a specific valuation, or the approval of a loan.

7. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice, as well as the requirements of the State of Maryland.

8. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute.

9. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

10. As of the date of this report, Jerrold Harvey, MAI, MRICS, CCIM has completed the continuing education program of the Appraisal Institute for Designated Members.

11. As of the date of this report, Philip A. Mottola has completed the Standards and Ethics Education Requirement of the Appraisal Institute for Candidates for Designation.

12. Philip A. Mottola has and Jerrold Harvey, MAI, MRICS, CCIM has not made a personal inspection of the property that is the subject of this report.

13. No one provided significant real property appraisal assistance to the persons signing this report. 14. Valuation & Advisory Services operates as an independent economic entity within CBRE, Inc.

Although employees of other CBRE, Inc. divisions may be contacted as a part of our routine market research investigations, absolute client confidentiality and privacy were maintained at all times with regard to this assignment without conflict of interest.

15. Philip A. Mottola and Jerrold Harvey, MAI, MRICS, CCIM have provided services as an appraiser regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment.

Philip A. Mottola Jerrold Harvey, MAI, MRICS, CCIM Maryland Cert. No. 31822 Maryland Cert. No. 10086

© 2014 CBRE, Inc.

CROSSWINDS AT ROLLING ROAD APARTMENTS | SUBJECT PHOTOGRAPHS

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SUBJECT PHOTOGRAPHS

AERIAL VIEW

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TYPICAL VIEW OF THE SUBJECT


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VIEW OF REAR ELEVATION

VIEW OF TYPICAL TOWNHOUSE KITCHEN

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VIEW OF TYPICAL GARDEN APARTMENT KITCHEN

VIEW OF NEW ACTIVITY CENTER

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INTERIOR VIEW OF ACTIVITY CENTER

VIEW OF NEW FITNESS CENTER

© 2014 CBRE, Inc.

CROSSWINDS AT ROLLING ROAD APARTMENTS | SUMMARY OF SALIENT FACTS

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SUMMARY OF SALIENT FACTS

Property Name

Location

Assessor’s Parcel Number

Highest and Best Use

As If Vacant

As Improved

Property Rights Appraised

Land Area 60.32 AC 2,627,539 SF

Improvements

Property Type Apartment

Number of Buildings

Number of Stories

Gross Building Area

Net Rentable Area

Number of Units 808

Average Unit Size 1,045 SF

Year Built 1982 Renovated: 0

Condition

Estimated Exposure/Marketing Time

Financial Indicators

Current Occupancy 94.4%

Stabilized Occupancy 95.0%

Stabilized Credit Loss 1.0%

Overall Capitalization Rate 7.25%

Pro Forma Operating Data Total Per Unit

Effective Gross Income $10,158,703 $12,573

Operating Expenses $4,055,553 $5,019

Expense Ratio 39.92%

Net Operating Income $6,103,150 $7,553

89

850,573 SF

844,508 SF

Crosswinds at Rolling Road Apartments

Fee Simple Estate

Apartment

Hold for Development

7500 Hithergreen Drive, Baltimore, Baltimore County, MD 21244

Multiple

(Multi-family Garden)

5 Months

Average

2 & 3

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VALUATION Total Per Unit

Sales Comparison Approach $81,000,000 $100,248

Income Capitalization Approach $84,200,000 $104,208

Insurable Value (Replacement Cost) $66,300,000 $82,054

CONCLUDED FAIR VALUE

Appraisal Premise Interest Appraised Value

As Is Fee Simple Estate $84,000,000

Compiled by CBRE

Date of Value

December 31, 2013

STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS (SWOT)

Strengths and weaknesses are internal to the subject; opportunities & threats are external to the subject

Strengths

• The subject is currently 94.4% occupied. • Units include washers and dryers which are in demand in the local market. • A new activity center has been completed and includes a fitness center, lounge area, leasing

office, and kitchen area.

Weaknesses

• Some of the unit interiors have not been recently upgraded. • No covered parking is offered.

Opportunities

• Proximity to the Baltimore Beltway affords tenants with good access to the Baltimore metropolitan area.

• Proximity to the Social Security Administration campus provides a stable employment base in the area.

• At its projected completion in 2021, the proposed Red Line light rail system is expected to have a station within approximately 1 mile of the subject, which would provide access to a number of the region’s job and entertainment centers.

Threats

• The local market has a large number of multifamily properties, causing strong price competition in the area.

EXTRAORDINARY ASSUMPTIONS

An extraordinary assumption is defined as “an assumption directly related to a specific assignment, which, if found to be false, could alter the appraiser’s opinions or conclusions. Extraordinary

assumptions presume as fact otherwise uncertain information about physical, legal, or economic

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characteristics of the subject property; or about conditions external to the property such as market

conditions or trends; or about the integrity of data used in an analysis.” 1

• The value conclusions in this report represent a prospective appraisal of the subject. The conclusions are provided based on the extraordinary assumption that the subject is in the same general condition on the date of value as it was on the date of inspection.

HYPOTHETICAL CONDITIONS

A hypothetical condition is defined as “that which is contrary to what exists but is supposed for the purpose of analysis. Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the

property, such as market conditions or trends; or about the integrity of data used in an analysis.” 2

• None noted

1 Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010), 73.

2 Dictionary of Real Estate Appraisal, 97.

© 2014 CBRE, Inc.

CROSSWINDS AT ROLLING ROAD APARTMENTS | TABLE OF CONTENTS

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TABLE OF CONTENTS

CERTIFICATION OF THE APPRAISAL .......................................................................................... i

SUBJECT PHOTOGRAPHS ........................................................................................................ ii

SUMMARY OF SALIENT FACTS ................................................................................................ vii

TABLE OF CONTENTS .............................................................................................................. x

INTRODUCTION .................................................................................................................... 1

AREA ANALYSIS ....................................................................................................................... 6

NEIGHBORHOOD ANALYSIS ................................................................................................. 22

MARKET ANALYSIS ................................................................................................................ 26

SITE ANALYSIS ...................................................................................................................... 48

IMPROVEMENTS ANALYSIS .................................................................................................... 53

ZONING .............................................................................................................................. 59

TAX AND ASSESSMENT DATA ................................................................................................. 61

HIGHEST AND BEST USE ....................................................................................................... 65

APPRAISAL METHODOLOGY ................................................................................................. 67

INSURABLE VALUE ................................................................................................................. 68

SALES COMPARISON APPROACH .......................................................................................... 70

INCOME CAPITALIZATION APPROACH .................................................................................. 77

RECONCILIATION OF VALUE .............................................................................................. 106

ASSUMPTIONS AND LIMITING CONDITIONS ....................................................................... 107

ADDENDA A Improved Sale Data Sheets B Rent Comparable Data Sheets C Operating Data D Legal Description E Client Contract Information F Qualifications

© 2014 CBRE, Inc.

CROSSWINDS AT ROLLING ROAD APARTMENTS | INTRODUCTION

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INTRODUCTION

PROPERTY IDENTIFICATION

The subject is an 808-unit multi-family garden property located at 7500 Hithergreen Drive in the Windsor Mill section of Baltimore, MD. The property is located on a 58.05-acre site, and consists of

88 predominantly 2 & 3-story apartment buildings and 1 clubhouse building. Construction occurred in phases between 1976 and 1988 for the apartments, and 2013 for the clubhouse. The improvements include 803 apartment units and 5 condominium units located in the adjacent

condominium complex. The condominium units are leased and managed as typical apartment units. Currently, the property is 94.4% occupied and is considered to be in average overall condition.

OWNERSHIP AND PROPERTY HISTORY

The property consists of 13 parcels as indicated in the following table:

Parcel Current Owner Most Recent Seller Date Deed

Book/PagePrice

02-1600012902 Crosswinds Gardens Associates LP Kingswood I Property GP 7/28/2011 31040/00178 $16,737,49202-1700012534 Crosswinds Gardens Associates LP Kingswood II Property LP 7/28/2011 31040/00161 $17,160,15602-1700012535 Crosswinds Gardens Associates LP Kingswood II Property LP 7/28/2011 31040/00161 incl. above02-1700012536 Crosswinds Gardens Associates LP Courtleigh Property LP 7/28/2011 31040/00187 $23,669,18002-1800000234 Crosswinds Gardens Associates LP Second Rolling Road Associates 7/28/2011 31040/00178 incl. above02-1900001524 Crosswinds Gardens Associates LP Courtleigh Property LP 7/28/2011 31040/00187 incl. above02-1900012136 Crosswinds Gardens Associates LP Coventry Property LP 7/28/2011 31040/00171 $10,313,00002-2000005340 Crosswinds Gardens Associates LP Courtleigh Property LP 7/28/2011 31040/00187 incl. above02-1700000811 Baltimore Portfolio Land LP Kingswood I Property GP 7/28/2011 31044/00203 incl. above02-1700000816 Baltimore Portfolio Land LP Kingswood I Property GP 7/28/2011 31044/00203 incl. above02-1700000822 Baltimore Portfolio Land LP Kingswood I Property GP 7/28/2011 31044/00203 incl. above02-1700000825 Baltimore Portfolio Land LP Kingswood I Property GP 7/28/2011 31044/00203 incl. above02-1700000830 Baltimore Portfolio Land LP Kingswood I Property GP 7/28/2011 31044/00203 incl. aboveTotal $67,879,828Compiled by CBRE


Title to the property is currently vested in the name of Crosswinds Gardens Associates LP for the apartment community and Baltimore Portfolio Land LP for the condominium units. The owner acquired title to the property in July 2011 for $67,879,828 as recorded in the above-referenced

Deed Book and Page numbers of the Baltimore County deed records. However, according to the sales contract provided by the buyer, the sale price of the subject was $70,750,000. The buyer reported that certain costs were re-allocated between the buyer and the seller to establish the sale

price reported in the public record; however the true sales price of the subject was $70,750,000.

The property sold as part of a 6-property portfolio for a total sales price of $198,000,000. According to the listing broker, the portfolio was given widespread exposure in the market; however the potential

pool of offers was somewhat reduced due to the cross-collateralization of the properties and significant projected defeasance costs. A portion of the underlying portfolio debt had associated defeasance costs in excess of $13,000,000, of which the seller agreed to pay a maximum of

$3,000,000. The offers reflected these costs, resulting in a contract price below the current fair value.

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To the best of our knowledge, there has been no other ownership transfer of the property during the previous three years.

A prior appraisal of the subject dated December 18, 2012 was completed by CBRE, with a value indication of $77,200,000. The current value reflects an increase in fair value due to higher projected rental income at the subject, and a lower concluded capitalization rate reflecting the lower

risk associated with a future tax increase.

PREMISE OF THE APPRAISAL

The following table illustrates the various dates associated with the valuation of the subject, the valuation premise(s) and the rights appraised for each premise/date:


Item Date Interest Appraised

Date of Report: December 23, 2013

Date of Inspection: November 1, 2013

Date of ValueAs Is: December 31, 2013 Fee Simple Estate

Compiled by CBRE

PURPOSE OF THE APPRAISAL

The purpose of this appraisal is to estimate the fair value of the subject property. Fair value is defined as the amount for which an asset or liability could be exchanged between knowledgeable, willing

parties in an arm's length transaction.

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. 3

3 Office of Comptroller of the Currency (OCC), 12 CFR Part 34, Subpart C – Appraisals, 34.42 (g); Office of Thrift

Supervision (OTS), 12 CFR 564.2 (g); Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010), 122-123. This is also compatible with the RTC, FDIC, FRS and NCUA definitions of market value as well as the updated Interagency Appraisal and Evaluation Guidelines promulgated in 2010.

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INTENDED USE OF REPORT

This appraisal is to be used for financial reporting purposes, and no other use is permitted.

INTENDED USER OF REPORT

This appraisal is to be used by Harbor Group International, and no other user may rely on our report

unless as specifically indicated in the report.

Intended Users - the intended user is the person (or entity) who the appraiser intends will use the results of the appraisal. The client may provide the appraiser with information about other potential users of the appraisal, but the appraiser ultimately determines who the appropriate users are given the appraisal problem to be solved. Identifying the intended users is necessary so that the appraiser can report the opinions and conclusions developed in the appraisal in a manner that is clear and understandable to the intended users. Parties who receive or might receive a copy of the appraisal are not necessarily intended users. The appraiser’s responsibility is to the intended users identified in the report, not to all readers of the appraisal report. 4

SCOPE OF WORK

The scope of the assignment relates to the extent and manner in which research is conducted, data is

gathered and analysis is applied, all based upon the following problem-identifying factors stated elsewhere in this report:

• Client • Intended use • Intended user • Type of opinion • Effective date of opinion • Relevant characteristics about the subject • Assignment conditions

This appraisal of the subject has been presented in the form of a Self-Contained Appraisal Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(a) of

USPAP. That is, this report incorporates, to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. This report also includes thorough descriptions of the subject and the market for the property type. CBRE, Inc. completed the

following steps for this assignment:

4 Appraisal Institute, The Appraisal of Real Estate, 13th ed. (Chicago: Appraisal Institute, 2008), 132.

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Data Resources Utilized in the Analysis

RESOURCE VERIFICATIONSite Data Source/Verification:

Size Current assessment record, and Land Surveys provided by KCI Technologies dated 8/15/2005 and revised 7/7/2011, and VIKA Incorporated dated 4/26/2004 and revised 7/7/2011.

Improved Data Source/Verification:Gross Size/Units Rent roll dated 12/6/2013Net Size/Units Rent roll dated 12/6/2013Area Breakdown/Use Visual ObservationNo. Bldgs. Visual ObservationParking Spaces Current assessment record, and Land Surveys provided by KCI

Technologies dated 8/15/2005 and revised 7/7/2011, and VIKA Incorporated dated 4/26/2004 and revised 7/7/2011.

YOC Current owner representative.Economic Data Source/Verification:

Deferred Maintenance: Visual ObservationBuilding Costs: Marshall Valuation ServiceIncome Data: Provided Operating StatementsExpense Data: Provided Operating Statements

Compiled by CBRE

Extent to Which the Property is Identified

CBRE, Inc. collected the relevant information about the subject from the owner (or representatives), public records and through an inspection of the subject property. The property was legally identified through the following sources:

• postal address • assessor’s records • legal description

Extent to Which the Property is Inspected

CBRE, Inc. inspected the interior and exterior of the subject, as well as its surrounding environs on the effective date of appraisal. This inspection was considered an adequate representation of the subject property and is the basis for our findings.

Type and Extent of the Data Researched

CBRE, Inc. reviewed the micro and/or macro market environments with respect to physical and

economic factors relevant to the valuation process. This process included interviews with regional and/or local market participants, available published data, and other various resources. CBRE, Inc. also conducted regional and/or local research with respect to the following:

• applicable tax data • zoning requirements • flood zone status • demographics

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• income and expense data • comparable data

Type and Extent of Analysis Applied

CBRE, Inc. analyzed the data gathered through the use of appropriate and accepted appraisal methodology to arrive at a probable value indication via each applicable approach to value. The

steps required to complete each approach are discussed in the methodology section.

EXPOSURE/MARKETING TIME

Current appraisal guidelines require an estimate of a reasonable time period in which the subject

could be brought to market and sold. This reasonable time frame can either be examined historically or prospectively. In a historical analysis, this is referred to as exposure time. Exposure time always precedes the date of value, with the underlying premise being the time a property would have been on

the market prior to the date of value, such that it would sell at its appraised value as of the date of value. On a prospective basis, the term marketing time is most often used. The exposure/marketing time is a function of price, time, and use. It is not an isolated estimate of time alone. In consideration

of these factors, we have analyzed the following:

• exposure periods for comparable sales used in this appraisal; • exposure/marketing time information from the CBRE, Inc. National Investor Survey and the

PwC Real Estate Investor Survey; and • the opinions of market participants.

The following table presents the information derived from these sources.

EXPOSURE/MARKETING TIME INFORMATION

Exposure/Mktg. (Months)Investment Type Range Average

PwC Apartment

National Data 0.0 - 18.0 5.1

Local Market Professionals 3.0 - 6.0 4.5

CBRE Exposure/Marketing Time Estimate

Source: CBRE National Investor Survey & PwC Real Estate Investor Survey

5 Months

© 2014 CBRE, Inc.

CROSSWINDS AT ROLLING ROAD APARTMENTS | AREA ANALYSIS

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AREA ANALYSIS

REGIONAL INFLUENCES

The dynamic nature of economic relationships within a market area has a direct bearing on real

estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers

and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area.

Since real estate is an immobile asset, economic trends affecting its locational quality in relation to

other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends that may affect the economic structure of the market and evaluate their impact on the

market potential of the subject. This section of the analysis is designed to isolate and examine the discernible economic trends in the Baltimore metropolitan area. The discussion below is broken down between the property's regional and neighborhood influences followed by a market analysis. Within

the Baltimore metropolitan area, the subject property is located in Baltimore County; a regional map indicating the specific location of the subject is presented above.

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Location

Baltimore is situated on the eastern seaboard approximately 170 miles southwest of New York City, and is the central business and financial core for the State of Maryland. It has an attractive network of interstate highways providing excellent access to other cities on the East Coast. The Baltimore area is

generally considered to be all of the Baltimore Primary Metropolitan Statistical Area (PMSA) as defined by the U.S. Department of Commerce, Bureau of the Census. The Baltimore PMSA currently includes:

• The City of Baltimore, and

• The Suburban Maryland counties of Anne Arundel, Baltimore, Carroll, Harford, Howard and Queen Anne’s.

The Baltimore PMSA encompasses over 2,600 square miles; although the municipalities are physically

and politically independent, they are all interrelated economically.

Transportation

The Baltimore area is located at the junction of a number of interstate highways, creating an excellent

network for entering and exiting the vicinity. Interstate routes 95, 70, 97, 83 and 795 connect to the Baltimore Beltway, Interstate 695. Interstate 95 is the most important north-south highway on the

eastern seaboard. To the north, it connects Baltimore with Wilmington, Philadelphia, and New York, as well as other cities in the northeast corridor; to the south, it reaches to Washington, DC and beyond all the way to Miami, Florida. Interstate 95 also traverses downtown Baltimore and serves as

an expressway in the local vicinity. Interstate 395 is a feeder from Interstate 95 to the CBD, while Interstates 195 and 895 provide access to the Baltimore-Washington International Airport and eastern Baltimore, respectively.

Interstate 70 provides access from the Baltimore Beltway to western Maryland, while Interstate 83 traverses northwest into southern Pennsylvania. Interstate 97 connects Annapolis, the state capital, with Baltimore, while 795 traverses through northwestern Baltimore County and provides primary

access to Westminster, the seat of Carroll County at the northeastern edge of the MSA. Other major roadways include the Baltimore-Washington Parkway, which parallels Interstate 95 between Baltimore and Washington. U.S. 40, which begins in Baltimore, heads west across the United States. Access

from the Baltimore region to the Washington area’s Interstate 270 Corridor in Montgomery County was recently enhanced with the opening of the Inter-County Connector (ICC), a toll road linking Laurel and Gaithersburg.

The region has a sizable light rail system, known as Mass Transit Authority, operating Metro and Light Rail throughout Baltimore City and County and to the Baltimore-Washington International (BWI)

Airport. Amtrak access, with trains running between Washington DC and New York, is also accessible in the region. Maryland Rail Commuter System (MARC) also traverses through the state, connecting

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Frederick, Martinsburg, West Virginia, Washington DC’s Union Station, and Perryville in Cecil County, Maryland, to the City of Baltimore.

BWI (aka Thurgood Marshall) Airport is operated by the Maryland Aviation Administration, Maryland Department of Transportation and located seven miles south of the Baltimore CBD. Forty airlines (25 of which are commercial) currently operate out of the airport, including commuter, charter and cargo

airlines. Of the various commercial airlines that utilize the airport, Southwest Airlines has a large hub at BWI and accounts for a majority of all passenger traffic. Other major carriers include AirTran (owned by Southwest), with the remaining share left to Delta, US Airways and United. General

passenger statistics are illustrated below:

2012 2011 2010 2009 2008 2007 2006 2005 2004 Average Number of Passengers per Day 62,136 61,347 60,100 57,407 55,871 57,456 56,703 54,088 55,578 Total Passengers per Year (millions) 22.68 22.39 21.94 20.95 20.49 21.04 20.70 19.74 20.34 Percentage Change from the previous year 1.30% 2.10% 4.70% 2.30% -2.60% 1.70% 4.90% -2.90% 3.30%Source: BWI Airport, 12/2012

BALTIMORE-WASHINGTON INTERNATIONAL AIRPORTGENERAL PASSENGER STATISTICS

The terminal is situated on a 3,596.3-acre site and encompasses 1.976 million square feet with five

concourses (4 domestic and 1 international) and 69 jet gates, with 9 gates dedicated to commuter aircraft. The terminal runs an average of 632 daily flights, and is one of the largest hubs for Southwest Airlines.

In February 2010, the airport was ranked first in the world among airports serving 15-25 million passengers per year, according to the 2009 Airports Council International (ACI), Airport Service

Quality (ASQ) survey. The annual survey program of airport users examines a wide range of services, operations, and facilities at airports worldwide. According to ACI, there are 140 global airports participating in the ASQ program.

Currently, BWI is in its fifth year of a six year capital improvement program. The capital improvement program will consist of upgraded taxiways, concourses, terminals, baggage screening concourses, homeowner soundproofing assistance, security, land acquisition, new construction, and runway

extensions. Additionally, a new $3.7 million air traffic control tower will be constructed. The total cost of the program is $567.7 million and the estimated year of completion is 2013.

The Port of Baltimore consists of public and privately operated marine terminals, private water

dependent industrial users and other related business entities. The Port is one of America's busiest international deepwater ports. Situated in the Baltimore-Washington metropolitan area—the fourth largest marketplace in the nation—the Port of Baltimore is closer to the Midwest than any other

Atlantic seaport. Its strategic location, 200 miles closer to the Midwest than any other Atlantic seaboard city, coupled with direct access to interstate highway and rail service make it a desirable

shipping location based on trends in the industry.

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The Port of Baltimore is the most inland port on the eastern seaboard of the United States. The port serves more than 70 ocean carriers whose vessels make nearly 2,300 annual port visits. The port is

the second largest automobile importer in the nation, and the 13th largest container port in the country. Along the port's 45-mile long shoreline are public and private cargo terminals that handle everything from bulk raw materials to finished goods. In addition, 23 million square feet of

warehousing, nearly 12 million cubic feet of cold storage and 2.7 million bushels of grain storage are available.

The Port of Baltimore serves as a point for intermodal cargo as the closest East Coast port to

America's industrial center. CSX Intermodal and Norfolk Southern both maintain intermodal facilities that connect Baltimore with key U.S. markets. Every Port of Baltimore marine terminal is within one

traffic light of an interchange connecting to I-95 and I-70, the north-south and east-west cargo throughways to the important Midwest and East Coast consumer markets. The port is also just a short distance from I-83 and an easy connection to the Pennsylvania Turnpike. Within an overnight drive of

Baltimore, businesses can connect with one-third of the nation's population and manufacturing base.

In 1990, the main shipping channel, which is 800 feet wide from Cape Henry to Fort McHenry, was dredged to a depth of 50 feet, allowing deeper-draft vessels to entry the port in anticipation of the

2014 opening of wider, deeper locks at the Panama Canal, effectively tripling the tonnage carried by single vessels. It is one of only three Eastern U.S. ports where the main shipping channel reaches a depth of 50 feet (15.2 meters) accommodating larger ships than other ports. Baltimore has a major

head-start on the New York Port Authority, which must raise the Bayonne Bridge to allow these ships to pass, estimated to cost two billion dollars and not be completed until 2022. Five public and twelve private terminals handle the port’s traffic spreading from Sparrows Point along the harbor line to

Locust Point and across Curtis Bay to Hawkins Point. In addition, eighty-two private companies perform a number of services including freight forwarding and/or customs house brokerage services.

The recent closure of the former Bethlehem Steel plant at Sparrows Point presents a 2,500-acre opportunity to greatly enlarge the Port’s total area in anticipation of greater activity.

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In the most recent rankings in 2012, Baltimore ranked 9th in imports (down from from 8th in 2011), 14th in exports (as in 2011), and 12th

RANK PORT/STATE TONS RANK PORT/STATE TONS RANK PORT/STATE TONS1 New Orleans,LA 128,540,000 1 Houston-Galveston,TX 147,019,000 1 New Orleans,LA 255,358,000

2 Houston-Galveston,TX 100,318,000 2 New Orleans,LA 126,817,000 2 Houston-Galveston,TX 247,337,000

3 Norfolk,VA 55,944,000 3 Los Angeles,CA 77,329,000 3 Los Angeles,CA 123,073,000

4 Los Angeles,CA 45,744,000 4 New York City,NY 57,608,000 4 New York City,NY 80,802,000

5 Columbia-Snake 33,284,000 5 Port Arthur,TX 47,190,000 5 Norfolk,VA 64,279,000

6 Seattle,WA 28,184,000 6 Philadelphia,PA 42,919,000 6 Port Arthur,TX 64,168,000

7 New York City,NY 23,194,000 7 San Francisco,CA 30,843,000 7 Mobile,AL 52,050,000

8 Mobile,AL 21,950,000 8 Mobile,AL 30,100,000 8 San Francisco,CA 49,490,000

9 Baltimore,MD 21,662,000 9 Seattle,WA 19,502,000 9 Philadelphia,PA 48,175,000

10 San Francisco,CA 18,647,000 10 Savannah,GA 15,194,000 10 Seattle,WA 47,686,000

11 Savannah,GA 17,724,000 11 Tampa,FL 15,183,000 11 Columbia-Snake 38,389,000

12 Port Arthur,TX 16,978,000 12 Boston,MA 12,005,000 12 Baltimore,MD 33,395,000

13 Tampa,FL 9,437,000 13 San Juan,PR 11,969,000 13 Savannah,GA 32,919,000

14 Miami,FL 6,519,000 14 Baltimore,MD 11,733,000 14 Tampa,FL 24,620,000

15 Charleston,SC 6,413,000 15 Charleston,SC 9,731,000 15 Charleston,SC 16,144,000

16 Buffalo,NY 5,318,000 16 Miami,FL 9,343,000 16 Miami,FL 15,861,000

17 Philadelphia,PA 5,257,000 17 Norfolk,VA 8,334,000 17 Boston,MA 14,174,000

18 Detroit,MI 5,162,000 18 Honolulu,HI 7,175,000 18 San Juan,PR 12,883,000

19 Anchorage,AK 3,870,000 19 Portland,ME 6,247,000 19 Cleveland,OH 9,271,000

20 Minneapolis,MN 3,719,000 20 Cleveland,OH 5,702,000 20 Detroit,MI 8,824,000

21 Cleveland,OH 3,570,000 21 Columbia-Snake 5,105,000 21 Honolulu,HI 7,630,000

22 Wilmington,NC 2,513,000 22 Wilmington,NC 5,039,000 22 Wilmington,NC 7,552,000

23 Boston,MA 2,168,000 23 Detroit,MI 3,661,000 23 Portland,ME 7,028,000

24 Ogdensburg,NY 1,667,000 24 Providence,RI 3,450,000 24 Buffalo,NY 6,010,000

25 U.S. Virgin Islands 1,076,000 25 Chicago,IL 3,008,000 25 Anchorage,AK 5,287,000

Source: American Association of Port Authorities

TOTAL FOREIGN TRADE

UNITED STATES WATERBORNE FOREIGN COMMERCE2012 PORT RANKINGS BY CARGO TONNAGE

IMPORTS EXPORTS

in total foreign trade based on cargo volume (as in 2011).

The Port of Baltimore continues to increase its rankings nationally with the amount of cargo handled annually. In addition, the Port loads and unloads cargo faster than the national averages—

productivity at the report was recently reported to be 40 containers per hour, while the national average is just 25 to 35 containers per hour.

Activities at the Port of Baltimore generate about 16,700 direct jobs, while about 120,000 jobs in

Maryland are linked to Port activities. The Port is responsible for $3.7 billion in personal wages and salary and nearly $400 million in state and local taxes. Out of about 360 U.S. ports, Baltimore is ranked number one for handling imported roll on/roll off and imported forest products, gypsum, and

sugar. The Port ranks second nationally for exported autos. The Port is responsible for about $3.7 billion in personal wage and salary income. Activities at the Port of Baltimore generate nearly $400 million in state and local tax revenues.

The U.S. Census Bureau Foreign Trade Division is the official source for U.S. export and import statistics and measures the amount of foreign cargo that moves through all U.S. ports annually. For

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2011 (the latest figures reported), U.S. Foreign waterborne commerce totaled 1.343 billion tons - up 3% from 2010. Total foreign commerce moving through the Port of Baltimore in 2011 was 34.307

million tons. This represented an increase of 15% from 2010. Exported goods through the Port of Baltimore increased 35% over 2010, while imported goods decreased 9%.

The Port of Baltimore is made of publicly and privately owned marine terminals. According to the

Maryland Port Administration, total foreign commerce moving through the Port of Baltimore in 2012 was 36.7 million tons with a value $53.9 billion. This represented a 2.5% increase in tons from 2011. Exported tons through the Port of Baltimore remained unchanged over 2011, while imported tons

decreased 7.6%. Overall, the Port of Baltimore improved in its cargo rankings for 2012 compared to other U.S. Port Districts. The Port of Baltimore now ranks 11th in terms of total tonnage (compared to

12th in 2011) and 9th in terms of dollar value (11th

Bulk cargos such as coal, iron ore, and petroleum products are handled almost exclusively at the privately owned terminals. Almost 74% of all tonnage moving through the Port of Baltimore is in the

form of bulk cargo. Bulk exports were down 5.4% in 2012 compared to 2011, largely driven by declines in iron ore, salt and liquefied natural gas.

in 2011).

At the Maryland Port Administration owned public terminals, foreign and domestic cargo

increased 8% in 2012 with total general cargo tonnage increasing to 9.594 million tons.

Domestic container cargo, which uses the MPA’s public terminals, is included in general cargo tonnage as this tonnage is of a foreign origin or destined for a foreign location. Non-

Containerized and Non-Bulk cargos at MPA facilities increased in tonnage by 11% from the previous year, while containerized tonnage increased 7% from the previous year. The MPA

handles approximately 92% of the foreign general cargo that moves through the Port of

Baltimore.

In April 2010, the Port held a groundbreaking for a new 50-foot berth at its Seagirt Marine Terminal. It is being developed as a 50-year partnership agreement between the State of Maryland and Ports

America Chesapeake. It is expected to bring 5,700 additional jobs to the port, 3,000 of them related to construction and 2,700 related to on-going operations after completion.

In addition to shipping, three cruise lines operated from the Port of Baltimore in 2013, though Carnival left in June 2013, leaving American and Royal Caribbean. For the 2012 cruise season, the Port maintained a near record level with 100 homeport cruises, sailing 240,676 passengers, down

slightly from 2011 (251,889 passengers on 105 cruises). The number of cruises offered in 2010 (91) extended a growth trend from 2009, with 81 cruises, tripling that from 2008 (27). The record number of passengers (251,889) in 2011 ranked Baltimore fifth on the East Coast, behind only Florida cruise

ports and the Port of New York, and ahead of Boston, Charleston, Norfolk and Philadelphia. Royal Caribbean offers 47 cruises on its renovated ship, Grandeur of the Seas, from Baltimore, with ships to Bermuda, the Eastern Caribbean and New England/Canada and offered all-season cruising from

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Baltimore for the first time beginning in 2012. American Cruise Lines began offering all-season cruising beginning in October of 2012 aboard the Independence, the American Star or on the

American Glory, which tours the Chesapeake Bay, the East Coast Inland Passage, the Mid-Atlantic Inland Passage and the Potomac and Tidewaters within the continental U.S. from Baltimore’s Inner Harbor.

While the Baltic Dry index (a leading indicator for global demand of raw materials) has improved in recent months, it remains only a fraction of its highs reached prior to the 2008 financial market implosion. Lower trade has translated into layoffs at the port and among services related to port

activity such as warehousing and transportation services. With the weak conditions in the global economy, trade is expected to remain tepid through 2013.

SOCIAL FORCES

Population

The 2013 population of the Baltimore PMSA and its components was estimated by Claritas to be 2,750,201, which is an increase of almost 3% from the 2010 census. The most significant growth

occurred in Carroll, Harford and Howard Counties, although this data may not have been updated for 2010 in those counties. Harford, Howard and Queen Anne’s Counties are forecast to experience

the highest level of future growth during the period 2013 to 2018.

Conversely, population in the City of Baltimore appears to leveled off after decades of decline, with an estimated 2013 population of 617,450, which is essentially unchanged from the 2010 Census.

Population within the City is expected to stabilize, at an estimated population of 617,338 in the year 2018.

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Selected population trends for the Baltimore PMSA are detailed as follows:

2000-2010 2010-2013 2018 2013-2018County 2000 2010 % Change 2013 % Change Projection % ChangeCity of Baltimore 651,154 620,961 -4.64% 617,450 -0.57% 617,338 -0.02%Baltimore 754,292 805,029 6.73% 815,468 1.30% 835,805 2.49%Anne Arundel 489,656 537,656 9.80% 552,258 2.72% 575,948 4.29%Carroll 150,897 150,896 0.00% 167,391 10.93% 169,028 0.98%Harford 218,590 218,592 0.00% 248,369 13.62% 255,057 2.69%Howard 247,842 247,846 0.00% 300,268 21.15% 319,842 6.52%Queen Anne's 40,563 47,798 17.84% 48,997 2.51% 50,980 4.05%Total 2,552,994 2,628,778 2.97% 2,750,201 4.62% 2,823,998 2.68%

POPULATION TRENDS - BALTIMORE PMSA

Source: Claritas, 11/2013

In 1990, the City of Baltimore comprised approximately 31% of the population within the PMSA, while in 2012 the city represented approximately 22.5% of the area’s population. This drop in population

within the city marks a shift experienced by many urban areas, whereby residents have relocated from blighted inner-city neighborhoods to the outer suburbs. Based on the population trends displayed above, it is evident that an outward migration to the suburbs has occurred. This migration is due in

large part to new employment opportunities for residents, as many companies have relocated to the suburbs as well.

Although this population shift has been significant, we note that the rate of population loss within the

City of Baltimore appears to be moderating. The redevelopment of the Inner Harbor area, once an industrial port, led the way for revitalization projects all over the city, making Baltimore a national

model for urban renewal. Several historic neighborhoods mostly along the waterfront have experienced population growth within the past few years, partially offsetting the overall trend discussed above.

Households

In addition to analyzing population, it is equally important to analyze household trends. Patterns of change in households can have a profound effect on property values. Although not shown on the

chart below, the average household size has decreased in almost all areas from 1990 to 2010. The reduced average household size reflects the increasing number of single-person households and the

growing trend of couples of childbearing years to delay having children, or have fewer children. As may be expected, the average household size is greatest in the more distant suburban areas, apparently reflecting the desire of families to locate where housing is more moderately priced.

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Selected household trends for the Baltimore PMSA are detailed as follows:

2000-2010 2010-2013 2018 2013-2018County 2000 2010 % Change 2013 % Change Projection % ChangeCity of Baltimore 257,996 249,903 -3.14% 249,196 -0.28% 250,136 0.38%Baltimore 299,877 316,715 5.61% 320,437 1.18% 328,382 2.48%Anne Arundel 178,670 199,378 11.59% 205,291 2.97% 214,915 4.69%Carroll 52,503 52,503 0.00% 60,144 14.55% 61,033 1.48%Harford 79,667 79,666 0.00% 91,804 15.24% 94,582 3.03%Howard 90,043 90,041 0.00% 109,556 21.67% 116,814 6.62%Queen Anne's 15,315 18,016 17.64% 18,454 2.43% 19,200 4.04%Total 974,071 1,006,222 3.30% 1,054,882 4.84% 1,065,862 1.04%

HOUSEHOLD TRENDS - BALTIMORE PMSA

Source: Claritas, 11/2013

Since 2010, the number of households in the Baltimore PMSA has increased by nearly 5%. It is projected that the number of households in the PMSA over the next five years will increase more slowly, indicating an annualized growth rate of less than 1.0% overall. The City of Baltimore

experienced a decline in the number of households between 2000 and 2010, but the projection over the next five years is a bottoming out of this trend. The remaining counties within the Baltimore PMSA

are projected to experience household growth, mirroring the population growth patterns discussed above. Queen Anne’s County is poised to see a large increase in household growth, slowing from the growth seen before the housing boom of second homes (however, it should be noted that they

also have the smallest overall population relative to the other counties in the Baltimore PMSA).

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Household Income

Shown in the following table is a breakdown of the median household income and average household income levels for each component of the Baltimore PMSA.

2013 2013Median Household Average Household

County Income Levels Income LevelsCity of Baltimore $38,896 $56,355Baltimore $64,043 $85,039Anne Arundel $83,499 $108,591Carroll $82,881 $100,469Harford $75,376 $92,642Howard $104,741 $137,622Queen Anne's $81,128 $97,744Baltimore PMSA Avg $81,128 $97,744Source: Claritas, 11/2013

HOUSEHOLD INCOME LEVELS - BALTIMORE PMSA

The City of Baltimore displays the lowest median household income level by a significant margin, whereas Howard County has the highest median household income level in the region. With respect

to average household income, the same relationship exists. Overall, income levels are expected to continue to increase in-line with existing trends.

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Unemployment Rate

The following table compares the unemployment rate for the area to that of the state and national average. Historically, the Baltimore PMSA has generally experienced a higher unemployment rate than the state. Since 2001, however, the unemployment rate has been consistently lower than the

national average. Since 2008, unemployment nationally and locally has shown a sharp increase in line with the economic downturn. The June 2013 upturn in unemployment was noted by the state DLLR as likely to be revised downward in subsequent reports.

Baltimore State of OverallYear PMSA Maryland United StatesAugust 2013 7.1% 7.0% 7.3%2012 7.2% 6.8% 7.8%2011 6.6% 6.6% 8.5%2010 7.9% 7.4% 9.4%2009 7.7% 7.6% 9.9%2008 4.6% 5.4% 7.2%2007 3.6% 3.6% 5.0%2006 4.1% 3.9% 4.5%2005 3.8% 3.9% 4.9%2004 4.2% 4.0% 5.4%2003 4.1% 4.5% 5.7%2002 4.9% 4.4% 5.8%2001 4.6% 4.1% 4.8%2000 4.4% 3.9% 4.0%1999 4.0% 3.5% 3.7%1998 5.1% 4.5% 4.5%1997 5.6% 5.1% 4.9%1996 5.4% 4.9% 5.4%1995 5.6% 5.1% 5.6%1994 5.9% 5.1% 6.1%1993 7.1% 6.2% 6.8%Source: U.S. Department of Labor & Statistics, 11/2013

UNEMPLOYMENT RATES

The national unemployment rate saw some improvement during 2012, but the US economy has lost over 5 million jobs since December 2007. As of September 2013, the Federal Open Market

Committee is forecasting real GDP growth of 2.0% to 2.3% for 2013, followed by 2.9% to 3.1% in 2014, and 3.0% to 3.5% for 2015. For unemployment, the FOMC forecast is 7.1% to 7.3% by 4th quarter 2013, 6.4% to 6.8% by 4th quarter 2014, and 5.9% to 6.2% at year-end in 2015.

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Employment Characteristics

The Baltimore area relies heavily on the government sector. Government employment comprises over 16% of the total, non-agricultural employment in the Baltimore PMSA. The following chart illustrates the distribution of employment by sector and the percent change in each category for the Baltimore

PMSA:

Average Employment

Average Employment

Industry Aug-13 Share 2012 Annual Share % ChangeTotal Non-Agricultural Employment 1,338,200 100.0% 1,326,100 100.0% 0.91%

Goods ProducingConstruction & Mining 76,300 5.7% 71,500 5.4% 6.71%Manufacturing 56,900 4.3% 57,200 4.3% -0.52%

Service ProducingTrade, Transportation, & Utilities 242,000 18.1% 231,500 17.5% 4.54%Information 16,800 1.3% 16,500 1.2% 1.82%Financial Activities 76,700 5.7% 73,000 5.5% 5.07%Professional & Business 217,900 16.3% 208,000 15.7% 4.76%Educational & Health Services 249,200 18.6% 258,500 19.5% -3.60%Leisure & Hospitality 131,000 9.8% 110,200 8.3% 18.87%Other Services 55,200 4.1% 58,800 4.4% -6.12%Government 216,200 16.2% 240,900 18.2% -10.25%Source: U.S. Department of Labor & Statistics, 11/2013

EMPLOYMENT BY INDUSTRY - BALTIMORE PMSA

Over the period displayed above, total non-agricultural employment in the Baltimore PMSA increased just under 1%, with the largest gain in Leisure & Hospitality, and gains in Construction and Mining, Trade, Transportation & Utilities, Professional & Business, and Financial Activities. The greatest job

losses were reported in the Government sector, due to early effects of the federal sequester.

Baltimore is the largest city in the State of Maryland, although the state’s capital is located in the City of Annapolis, in Anne Arundel County. The City of Baltimore accounts for about one-third of the

employment within the PMSA. The Washington DC MSA blends with the Baltimore MSA at the southwestern portion of the PMSA, as the District of Columbia is located approximately 37 miles southwest of Baltimore. Due to this proximity, some residents of Anne Arundel and Howard Counties

have found long-term employment within the Washington, DC MSA.

EMPLOYMENT

Historically, the Baltimore area has been an industrial/manufacturing center, although over time this industry has declined in importance along with the overall national trend toward service-related

industries. The city’s current industrial base includes more than 700 companies, such as the General Motors Truck Assembly Plant, Poly Seal, Millennium Inorganic Chemicals, Domino Sugar and the

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pharmaceutical company Alpharma. Warehouse/distribution companies number approximately 950 within the city, collectively employing more than 17,500.

Currently, the financial services industry is a mainstay of the Baltimore area economy. More than 1,400 financial services companies are located in the Baltimore area, from the international headquarters of Deutsche Bank/Alex Brown, Legg Mason, and T. Rowe Price, to a major center for

Rochester-based M&T Bank.

Consolidation and relocation in the financial services sector have taken a toll on headquarters employment in Baltimore, however, with mergers of The St. Paul Companies (formerly USF&G) and

Travelers Insurance, the move of Zurich Commercial’s Baltimore operation to Owings Mills, the acquisition of local banks such as Provident (M&T Bank) and Mercantile Bank & Trust (PNC). Stanley

Works’ acquisition of Towson-based Black and Decker and Exelon’s merger with Constellation Energy will further dampen the City’s importance, though Exelon did agree to build a new regional headquarters in Baltimore’s Harbor East area. However, Baltimore-based Jos. Bank clothiers recently

announced plans to buy Houston-based Men’s Wearhouse, and more than 5,700 companies combine to make up Baltimore's service industry, with strong medical, business, educational and nonprofit components. Following is a list of the largest employers located within Baltimore County:

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Rank Company Employees1 Social Security Administration/ Centers for 16,0002 United Parcel Service (UPS) 5,5623 Greater Baltimore Medical Center 3,6954 Towson University 3,2085 Franklin Square Hospital 2,8296 T. Rowe Price 2,5807 University of Maryland, Baltimore County 2,1888 McCormick & Co, Inc 2,1329 St. Joseph Medical Center 2,109

10 Sheppard Pratt Health Systems 1,97911 Carefirst 1,87712 Northwest Health Systems 1,62213 BD Diagnostic Systems 1,60014 AAI 1,49015 GE Middle River Aircraft System 1,15416 Stanley/Black & Decker 1,12817 Comcast 1,07418 Stevenson University 1,00419 Bank of America 1,00020 PHH 1,00021 Verizon-Maryland 97822 Procter & Gamble Beauty 94023 Goucher College 80824 Whiting Turner 79725 Quest Diagnostic 76826 TESSCO Technologies 70327 Stella Maris 70028 ViPS 55029 Automatic Data Processing (ADP) 50030 Pharmaceutics International 47231 KCI technologies 40032 U.S. Filter - Pall Corporation 37033 Marquip Ward United 35034 General Motors Baltimore Operations 241

Source: Baltimore County Office of Economic Development, 11/2013

MAJOR EMPLOYERS - BALTIMORE COUNTY

The Johns Hopkins Hospital is located at the intersection of North Broadway and Orleans Street. The

campus is under construction with a recently completed $994 million hospital, which opened in 2012. The new complex features 224 adult acute care rooms, 96 adult intensive care rooms, 35 obstetrics rooms, 120 pediatric acute care rooms, 85 pediatric intensive care rooms, a level 1 pediatric trauma

service, pediatric burn services, an indoor play area, modernized emergency departments and diagnostic imaging and radiology facilities, and a 33 operating rooms. Johns Hopkins, along with the University of Maryland and its medical system, comprise the growth engine for Baltimore and the

region: Johns Hopkins is the largest private employer in Maryland. Combined with a major federal employment presence, the region has benefited tremendously from “eds, meds and feds”.

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ECONOMIC ANALYSIS

Within the City of Baltimore and surrounding region, there are more than 30 institutions of higher learning. Additionally, Baltimore City has more than 14 private schools including both parochial and

non-secular, offering kindergarten through 12th grade education.

Summary

Moody’s Economy.com provides the following Baltimore metro area economic summary as of mid-2013.

BALTIMORE, MD - ECONOMIC ANALYSISIndicators 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Gross Metro Product (C$B) 122.1 124.1 125.1 123.7 128.9 131.8 136.1 140.5 144.8 149.8 152.8 155.2

% Change 1.7 1.7 0.8 -1.1 4.2 2.2 3.3 3.2 3.1 3.4 2.0 1.5

Total Employment (000) 1,306.6 1,317.3 1,313.3 1,272.5 1,272.6 1,293.3 1,317.8 1,347.7 1,373.3 1,405.9 1,430.3 1,440.4

% Change 1.6 0.8 -0.3 -3.1 0.0 1.6 1.9 2.3 1.9 2.4 1.7 0.7

Unemployment Rate 4.0 3.6 4.5 7.8 8.3 7.7 7.2 7.0 6.9 6.6 6.0 5.7

Personal Income Growth 6.6 5.1 4.6 -2.1 3.5 5.5 3.7 1.9 5.2 7.1 6.4 4.7

Population (000) 2,658.2 2,667.6 2,679.8 2,696.0 2,715.6 2,733.7 2,753.1 2,766.1 2,777.8 2,789.5 2,801.5 2,813.6

Single-Family Permits 6,339.0 4,775.0 3,131.0 3,099.0 3,554.0 3,277.0 3,895.0 5,137.1 8,057.7 9,944.5 9,443.1 8,343.0

Multifamily Permits 1,794.0 1,432.0 2,413.0 2,016.0 2,040.0 2,876.0 2,061.0 2,202.5 2,118.4 2,278.5 1,987.2 1,775.5

Existing-Home Price ($Ths) 279.0 284.7 272.4 250.8 245.1 228.6 241.7 255.3 267.7 280.0 293.5 309.7

Mortgage Originations ($Mil) 34,065.5 28,838.5 19,734.1 27,990.3 22,074.4 17,579.7 20,136.7 16,549.9 11,095.7 10,697.7 9,861.4 10,366.1

Net Migration (000) 0.4 -4.0 -0.9 3.9 8.0 7.3 9.7 1.9 -0.1 -0.8 -0.6 -0.5

Personal Bankruptcies 4,834.0 6,488.0 7,914.0 11,550.0 13,230.0 12,028.0 11,691.0 9,937.8 9,091.8 8,913.7 9,281.2 9,932.7

Source: Moody's Economy.com

RECENT PERFORMANCE

Federal austerity and political gridlock are impeding Baltimore's recovery. As budget cuts ramp up, federal agencies have cut positions faster in Baltimore than elsewhere in the U.S. The government

shutdown has resulted in another wave of furloughs for federal civilian employees, hurting low-margin consumer services. Further, uncertainty over the impact of cuts and the budget and debt-ceiling dilemmas has dampened hiring and investment. On the positive side, trade is driving job and output

growth, and banks have hired staff to handle spiking foreclosures, though foreclosures are a weight on house price appreciation.

FEDERAL GOVERNMENT

The drag from federal austerity will weigh on the recovery through at least mid-2014. Federal

employment slid 4.7% in August from last year because of budget cuts. Baltimore's share of federal workers is nearly twice as large as the U.S. average, and they earn about 50% more than other metro area employees. Job losses have disproportionately damaged local consumer services and led retail

employment to flatten over the last six months. Sequestration will increase from $37 billion in calendar 2013 to $52 billion in fiscal 2014 unless Congress intervenes. These cuts will likely do more damage, since agencies and contractors have already exhausted budget savings that did not include layoffs.

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Risks to the outlook skew to the downside, as a prolonged government shutdown would hurt local business confidence more than it would elsewhere. Although the Defense Department recalled several

thousand civilian federal employees placed on unpaid furlough in October, a prolonged furlough of nondefense civilian employees could still hurt retailing. Worse is the prospect of a government default as the debt ceiling looms. A default would likely cause the U.S. economy to plunge back into

recession.

STATE AND LOCAL

Sequestration and federal gridlock will also delay improvement in state and local employment. State and local government employment will grow slowly in the near term, as federal support remains up in

the air absent a fiscal 2014 budget. The federal government provides 26% of the state government's budget, which in turn is a cornerstone of local budgets. As a result, state and local governments are

deferring hiring decisions. Baltimore bears the brunt of the state hiring freeze because it includes Annapolis, the capital. Federal budget uncertainty is the last burr in the economy's saddle, as the state budget and tax revenues have broadly improved.

PORT OF BALTIMORE

Developments at the Port of Baltimore will remain a key support for job and output growth in the near term. Infrastructure improvements and new trade relationships produced a record year for cargo shipments in 2012. Although Europe's recession was a weight, trade will rebound in the near term as

the region recovers. Moreover, the port will extend its lead as the largest automobile handler in the U.S.; a five-year Mazda partnership boosted auto shipments 10% in September.

On the downside, cruise traffic will decline after November 2014, when Carnival plans to move its

Baltimore-based Pride to Florida as part of a consolidation strategy. The loss will hurt, as port officials have said that the two cruise lines, Carnival and Royal Caribbean, support 220 jobs in Baltimore and more than 700 crewmembers per ship. Passengers and ship suppliers spend $90 million every year in

the local economy, according to the port.

CONCLUSION

Baltimore's recovery will slow through late 2013 as federal fiscal drag escalates. Over the medium term, developments in biotechnology, cyber-security and trade will drive above-average job and

output growth. Longer term, this mature economy will track the U.S. average as poor demographics and high costs constrain expansion.

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NEIGHBORHOOD ANALYSIS

LOCATION

The subject is in the Windsor Mill section of Baltimore County and is considered a suburban location. The location is just west of I-695 and north of I-70, about 8 miles west of the Baltimore Central

Business District.

BOUNDARIES

The neighborhood boundaries are detailed as follows:

North: Liberty Road (SR-26) South: I-70 East: Gwynn Oak Park West: Ridge Road

LAND USE

Land uses within the subject neighborhood consist primarily of residential multifamily development

with supporting commercial services. The immediate area surrounding the subject is a newer area of development, consisting of single family homes and apartment properties built during the 1970s, 1980s and1990s. Multi-family development is dispersed throughout the neighborhood and accounts

for a large portion of the housing stock. The majority of the single-family residential development

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within a one mile radius of the subject may be described as tract homes in the $150,000-$300,000 price range. The median home value within a three-mile radius is just under $224,000.

The subject neighborhood is home to headquarters for both the Social Security Administration (SSA) as well as the Centers for Medicare and Medicaid Services, two of the largest employers in the State of Maryland. Areas of Woodlawn are sometimes informally referred to as Security, Maryland, due to

the importance of the SSA's headquarters as well as nearby Security Boulevard (Maryland Route 122) and Security Square Mall. As a result of the importance of this submarket, an application has reportedly been submitted to the State of Maryland Business and Economic Development for

Enterprise Zone designation.

The submarket also continues to be a heavy draw for technology and financial firms. Northrop

Grumman Corporation and 20/20 Ventures have moved and expanded their footprints at Windsor Boulevard, bringing Windsor Office Park to 100 percent occupancy. UMBC Research and Technology Park is a 71-acre community offering Class A office space for research, entrepreneurship and

economic development. Current tenants include RWD Technologies, the U.S. Geological Survey, and Retirement Living TV.

Windsor Corporate Park is located just east of the subject and includes approximately 500,000

square feet of office and R&D/flex space on an 82-acre campus. Tenant sizes range from 2,400 square feet to 60,000 square feet, and include the FBI Regional Headquarters. Additional business parks in the area include Meadows Industrial Park and Rutherford Business Center.

There is supporting commercial development just outside the city limits. Security Square Mall is located at the intersection of I-70 and I-695. Macy’s, Sears, Burlington Coat Factory, Old Navy and AMC General Cinemas now anchor this retail facility. Montgomery Wards closed their anchor store

in early 2001, and International Furniture has now replaced it. JC Penney’s also closed their outlet store in August 2001. TJ Maxx, United Artist Theater, Value City and Sam’s Club anchor Westview

Mall. It is located at the intersection of US Route 40 and I-695. Neighborhood centers include Security Station Shopping Center, Security Square Shopping Center, 40 West Shopping Center, Giant Food Plaza, Pike Park Plaza, Ingleside Shopping Center, Wilkens Beltway Plaza, and One Mile West

Shopping Center.

ACCESS

Primary access to the subject neighborhood is provided by Interstates 695 and 70. Interstate 695 is the Baltimore Beltway, encircling the city and providing access to Interstates 795 and 95. Interstate

70 terminates at the city limits of Baltimore, and provides access to points westward including Frederick and Mount Airy within the Baltimore region. Major roads in the neighborhood include Edmondson Avenue, Frederick Avenue, and Rolling Road.

© 2014 CBRE, Inc.


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Red Line Light Rail

The Red Line is a proposed Light Rail transit project that will create the Baltimore region's first east-west rapid transit connection. The Red Line will travel 14.1 miles between west Baltimore County and east Baltimore City, stopping at 19 proposed stations as indicated below:

In addition to serving downtown Baltimore, the line will also reach key Baltimore institutions like the

Social Security Administration, University of Maryland at Baltimore and the Johns Hopkins Bayview Medical Center Campus, as well as local attractions such as the Inner Harbor, Gwynn Falls Trails, the historic communities of West Baltimore, as well as the historic Fells Point community. As indicated,

the western-most station located at the Centers for Medicare and Medicaid Services will be within approximately 1 mile of the subject providing access to a number of the region’s job and entertainment centers as well as existing bus and rail services:

The Maryland General Assembly passed the 2013 Transportation Infrastructure Investment Act supporting engineering and preparations for construction. Pending funding, construction is expected to begin in 2015 and could be operating by 2021.

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DEMOGRAPHICS

Selected neighborhood demographics in 1-, 3-, and 5-mile radii from the subject are shown in the following table:

SELECTED NEIGHBORHOOD DEMOGRAPHICS

7500 Hithergreen DriveBaltimore, MD

Population

2018 Population 11,965 97,626 305,684

2013 Population 11,675 96,055 301,426

2010 Population 11,530 95,430 299,977

2000 Population 12,305 91,241 294,803

Annual Growth 2013 - 2018 0.49% 0.32% 0.28%

Annual Growth 2010 - 2013 0.10% 0.05% 0.04%

Annual Growth 2000 - 2010 -0.65% 0.45% 0.17%

Households

2018 Households 4,666 37,177 120,040

2013 Households 4,596 36,790 118,501

2010 Households 4,580 36,783 118,128

2000 Households 4,688 35,036 116,401

Annual Growth 2013 - 2018 0.30% 0.21% 0.26%

Annual Growth 2010 - 2013 0.03% 0.00% 0.02%

Annual Growth 2000 - 2010 -0.23% 0.49% 0.15%

Income

2013 Median HH Inc $61,318 $58,904 $55,140

2013 Estimated Average Household Income $66,955 $68,558 $70,892

2013 Estimated Per Capita Income $26,358 $26,259 $27,870

Age 25+ College Graduates - 2010 2,198 17,931 63,669

Age 25+ Percent College Graduates - 2013 29.1% 27.6% 31.0%

Source: Nielsen/Claritas

1 Mile Radius

3 Mile Radius

5 Mile Radius

CONCLUSION

As shown above, the population within the subject neighborhood has shown positive growth over the past few years and the neighborhood currently has a strong income demographic profile. The outlook for the neighborhood is for good performance with continued improvement over the next

several years. As a result, the demand for existing developments is expected to be good. Generally, the neighborhood is expected to continue its current growth pattern in the foreseeable future.

© 2014 CBRE, Inc.

CROSSWINDS AT ROLLING ROAD APARTMENTS | MARKET ANALYSIS

26

MARKET ANALYSIS

The market analysis forms a basis for assessing market area boundaries, supply and demand factors, and indications of financial feasibility. The subject is in the Baltimore market and is considered a

Class C garden-style apartment community. According to the Institute of Real Estate Management (in Income/Expense Analysis: Conventional Apartments

Garden Type Projects: We consider this to be a group of low-rise apartment buildings situated on a sizable landscaped plot, under one management.

), the following apartment property definitions may be applicable towards the subject:

DEMOGRAPHIC ANALYSIS

Demand for additional residential property is a direct function of population change. Multi-family

communities are products of a clearly definable demand relating directly to population shifts.

Housing, Population and Household Formation

The following table illustrates the population and household changes for the subject neighborhood with primary focus on the 1, 3, and 5-mile radius.

POPULATION AND HOUSEHOLD PROJECTIONS

Population

2018 Population 11,965 97,626 305,684

2013 Population 11,675 96,055 301,426

2010 Population 11,530 95,430 299,977

2000 Population 12,305 91,241 294,803

Annual Growth 2013 - 2018 0.49% 0.32% 0.28%

Annual Growth 2010 - 2013 0.10% 0.05% 0.04%

Annual Growth 2000 - 2010 -0.65% 0.45% 0.17%

Households

2018 Households 4,666 37,177 120,040

2013 Households 4,596 36,790 118,501

2010 Households 4,580 36,783 118,128

2000 Households 4,688 35,036 116,401

Annual Growth 2013 - 2018 0.30% 0.21% 0.26%

Annual Growth 2010 - 2013 0.03% 0.00% 0.02%

Annual Growth 2000 - 2010 -0.23% 0.49% 0.15%


1 Mile Radius

3 Mile Radius

5 Mile Radius

As shown, the subject’s neighborhood is experiencing moderate positive increases in both population and households.

© 2014 CBRE, Inc.


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Income Distributions

Household income available for expenditure on housing and other consumer items is a primary factor in determining the price/rent level of housing demand in a market area. In the case of this study, projections of household income, particularly for renters, identifies in gross terms the market from

which the subject submarket draws. The following table illustrates estimated household income distribution for the subject neighborhood.

HOUSEHOLD INCOME DISTRIBUTION

Households by Income Distribution - 2013

Less than $15K 7.14% 9.08% 12.11%$15K - $25K 7.79% 7.38% 8.78%$25K - $35K 9.14% 9.18% 9.67%$35K - $50K 14.69% 15.60% 14.74%$50K - $75K 24.26% 22.97% 20.53%$75K - $100K 20.58% 16.34% 13.31%$100K - $150K 12.97% 14.65% 13.33%$150K - $250K 2.96% 3.97% 5.63%$250K - $500K 0.41% 0.74% 1.56%$500K or more 0.04% 0.08% 0.33%


1 Mile Radius

3 Mile Radius

5 Mile Radius

The following table illustrates the median and average household income levels for the subject neighborhood.

HOUSEHOLD INCOME LEVELS

Income

2013 Median HH Inc $61,318 $58,904 $55,140




1 Mile Radius

3 Mile Radius

5 Mile Radius

An analysis of the income data indicates that the submarket is generally comprised of a middle-

income economic group, which includes the target group to which the subject is oriented.

Employment

An employment breakdown typically indicates the working class characteristics for a given market area. The specific employment population within the indicated radii of the subject is as follows:

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EMPLOYMENT BY INDUSTRY

Occupation

Agr/Frst/Fish/Hunt/Mine 0.17% 0.17% 0.16%Construction 2.99% 4.42% 4.09%Total Manufacturing 3.66% 4.22% 4.73%Wholesale Trade 1.49% 1.62% 1.75%Retail Trade 13.37% 10.07% 9.24%Transport/Warehse/Utils 8.07% 6.41% 5.93%Information 1.72% 2.25% 2.40%Fin/Insur/RE/Rent/Lse 10.10% 8.21% 7.56%Prof/Sci/Tech/Admin 5.16% 5.09% 7.08%Mgmt of Companies 0.02% 0.03% 0.04%Admin/Spprt/Waste Mgmt 3.77% 4.44% 4.09%Educational Svcs 9.18% 8.97% 10.87%Health Care/Soc Asst 16.52% 19.24% 18.61%Entertainment & Rec Services 0.60% 1.53% 1.60%Accommdtn/Food Svcs 5.34% 5.12% 5.00%Oth Svcs, Not Pub Admin 2.99% 4.91% 4.97%Public Administration 14.84% 13.31% 11.90%


1 Mile Radius

3 Mile Radius

5 Mile Radius

The previous table illustrates the employment character of the submarket, with a large portion of the population holding positions in Health Care and Public Administration.

Outlook

Based on this analysis, the immediate area surrounding the subject is projected to experience moderate, positive growth relative to households and population into the near future. Given the area

demographics, it appears that demand for both comparable surrounding area apartment units and the subject will continue to be favorable.

APARTMENT MARKET TRENDS

An overview of local market conditions is a necessary aspect of the appraisal process. The market

analysis forms a basis for assessing market area boundaries, supply and demand factors, and indications of financial feasibility. In this section, CBRE discusses the status of local market conditions.

REIS published the Third Quarter 2013 Report, which was utilized in our analysis of the subject property's submarket. We also noted the Third Quarter 2013 Mid-Atlantic Class-B Apartment Market Report, published by Delta Associates. Other data used in CBRE surveys was collected through

conversations and meetings with property managers, leasing agents, and brokers in the immediate area and throughout Suburban Maryland and the Baltimore area.

© 2014 CBRE, Inc.


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ECONOMIC TRENDS

The following trends are evident in the Baltimore area economy and the national economy:

• According to the preliminary unemployment numbers released by Bureau of Labor Statistics in

September 2013, the national unemployment rate had edged down to 7.2%. In the last 12 months, the number of new jobs has increased by 2.2 million, and the unemployment rate declined from 7.8%.

• The macroeconomic sluggishness is reflected in the housing market. Home-buyer affordability remains near its 40-year zenith which is boosting home sales. But all other things in the market are not the same as the backlog of foreclosures since 2008 is still being processed, despite record

levels of affordability and record low interest rates. Households remain concerned over their financial futures and are holding off on major purchases, particularly homes. Credit underwriting has returned to more traditional and sustainable practices that had been downplayed during the

height of the housing boom at the middle of the last decade. While home-value appreciation is up more than 10% in many markets, many potential first-time buyers remain in rental housing due to a lack of a down-payment.

• The state of Maryland’s unemployment rate is 6.7% as of August 2013, lower than the August 2012 rate. The Baltimore-Towson Metro Area shares this trend, with an unemployment rate of 7.1%, substantially lower over the last 12 months. Both the Baltimore Region and the State of

Maryland are exhibiting unemployment rates below the national average of 7.3%.

• The United States Bureau of Economic Analysis has released its estimate for Third Quarter 2013 GDP; the current estimate is that GDP has increased at an annualized rate of 2.3%. The revised

First Quarter 2013 annualized real GDP increased by 1.1%. The acceleration in real GDP primarily reflected greater confidence among business owners and consumers, slightly offset by the effects of the government shutdown and concerns over anticipated tapering of Treasury

purchases by the Federal Reserve.

• The Baltimore metro area experienced positive economic conditions during 2012, according to a publication of Delta Associates, in consultation with Transwestern. The Baltimore metro area

gained 24,500 new payroll positions during the 12 months ending July 2013, driven largely by Professional/Business Services, Education/Health, and Construction – these sectors combined brought 21,900 jobs (offsetting a loss of over 5,000 jobs from state and local government). This

compares to the 20-year average of 11,300 net new payroll jobs created.

• The Baltimore metro area's gross regional product (GRP) was $152.8 billion in 2012 in current year dollars, an increase of 2.1%. Federal and financial activities make up a notable portion of

the economy, generating 27% and 21%, respectively of the Baltimore metro area economy.

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• As the cuts from sequestration begin to be felt by companies and consumers later this year, it is project that 2013, on an annual basis, will add 20,000 new jobs. In the medium term 13,500

and 15,000 jobs are forecasted to be added in 2014 and 2015, respectively.

Trends in the Multi-Family Real Estate Market

• Demand for rental housing in the Baltimore area has improved and fundamentals are looking strong as supply has come into line with demand.

• Metro-wide stabilized Class-A vacancy is up 40 basis points from last year at this time, to 4.6%. Vacancy in Baltimore’s southern submarkets is down to 4.5% from 4.9% one year ago. Vacancy in Baltimore’s northern submarkets is up to 5.3% from 4.3% this time last year.

• Concessions in the Baltimore metro area as of September 2013 have decreased to 2.3% from 2.6% as of September 2012.

• Average effective rents in the metro area are $1,607 ($1.58 per SF). Rents in the Baltimore metro area were modest over the year since September 2012 – as the flat growth in the southern

suburbs dragged down the positive growth in Baltimore City and western Baltimore County. Chiefly, Annapolis experienced a substantial rent decrease of 5.5%.

• Effective rents in the southern suburbs were flat over the past 12 months and the northern suburbs increased by 2.8% during the same period – overall, Baltimore suburbs surveyed reported a 1.3% increase in effective rents. The Baltimore City submarket saw a 2.3% increase.

• The supply pipeline metro-wide is more robust than the fall of 2012 – up by nearly 1,000 units for

a total of 10,188 deliveries within the next 36 months. These counts exclude Baltimore’s southern most suburbs – Anne Arundel and Howard Counties – whose units are counted in the Washington Metro pipeline and do not count for attrition.

• Lease-up pace for the eight actively marketing projects in the Baltimore area currently averages 14 units per month per project. Projects that have recently stabilized have average lease-up paces of 13 and 9 units per month at low-rise and high-rise properties, respectively.

• The pipeline has once again increased by the Third Quarter of 2013 after reviving in 2011 and 2012. As a result, Delta projects that the 36-month supply will exceed the number of units that will be absorbed in the Baltimore area by the end of their 36-month forecast period. Baltimore’s

supply/demand relationship (which is far more stable than in Washington to the southwest) indicates that occupancy will increase slightly and rent growth is likely to continue at a flat to even declining pace over the next 24 months.

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Baltimore Apartment Market

Historical apartment market statistics for the Baltimore Metro area are as follows:

BALTIMORE METRO AREA

YearInventory

(Units) CompletionsVacancy

RateNet

AbsorptionAsking Rent

$/UnitAsking Rent % Change

Effective Rent $/Unit

1991 123,361 2,454 6.2% 604 $551 2.6% $5261992 124,237 876 5.7% 1,468 $557 1.1% $5251993 125,313 1,076 6.2% 412 $566 1.6% $5441994 125,881 568 5.4% 1,541 $575 1.6% $5581995 126,395 514 4.7% 1,367 $585 1.7% $5741996 127,531 1,136 4.4% 1,520 $605 3.4% $5961997 127,833 302 4.2% 465 $616 1.8% $6101998 128,401 568 4.0% 834 $631 2.4% $6261999 129,928 1,527 2.5% 3,384 $661 4.8% $6562000 131,448 1,520 1.7% 2,528 $705 6.7% $7012001 131,983 535 2.6% -611 $746 5.8% $7302002 133,751 1,768 4.1% -301 $778 4.3% $7542003 134,986 1,399 4.9% 65 $808 3.9% $7782004 135,883 897 4.8% 1,065 $848 5.0% $8152005 135,937 1,153 4.4% 548 $882 4.0% $8502006 137,146 1,697 5.8% -740 $917 4.0% $8812007 139,242 1,949 4.9% 3,226 $961 4.8% $9272008 140,186 992 5.7% -267 $979 1.9% $9442009 141,270 1,084 6.0% 656 $981 0.2% $9462010 142,573 1,303 5.0% 2,601 $1,003 2.2% $9692011 143,133 560 4.1% 1,781 $1,025 2.2% $9932012 145,162 1,941 3.8% 2,308 $1,070 4.3% $1,043

3Q 2013 147,273 977 3.6% 1,043 $1,095 1.0% $1,0702013 Estimated 148,004 2,223 3.4% 3,103 $1,103 3.0% $1,0802014 Estimated 149,635 1,631 3.1% 2,014 $1,137 3.1% $1,1142015 Estimated 151,321 1,686 3.3% 1,384 $1,168 2.7% $1,1422016 Estimated 152,569 1,248 3.3% 730 $1,198 2.6% $1,1692017 Estimated 153,767 1,198 3.8% 902 $1,225 2.3% $1,194

Source: Reis, 3rd Quarter 2013

APARTMENT MARKET STATISTICS (All Properties)

Rent growth in the Third Quarter of 2013 reflected a slight increase on a per unit basis, and, since

1991 to the Third Quarter of 2013, rental rates have shown an average annual increase of 3.2% annually. REIS are forecasting growth at 3.0% for 2013, with respectably increasing positive growth thereafter, of approximately 2.3% to 3.1% per year.

Vacancy rates range from 1.70% to 6.20% from 1991 to the Third Quarter of 2013 and average 4.6% during the same time period. From 2013 through 2017, vacancy rates are expected to range

from 3.1% to 3.8%. It is noted that REIS expects that vacancy rates peaked in 2009 at 6.0%, trended downward in 2010 through 2012, and will continue downward in 2013.

Net absorption ranges from a negative 740 units in 2006 to a high of 3,384 units in 1999, however

2013 is forecast to come close to this mark. Overall absorption was positive in 2010 at 2,601 units, 1,781 units in 2011, and 2,308 units in 2012. Absorption is expected to remain positive from 2013 through 2017 at the upper end of the historic range, but slowing. Overall, we expect the population

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growth to support a positive trend; however, we also recognize the market will experience swings based on economic conditions and development trends.

Submarket Distribution (Class B & C Property)

REIS classifies the metropolitan Baltimore apartment market into ten submarkets: Central Baltimore

City; Dundalk, Essex and Rosedale; Glen Burnie, Harundale, and Odenton; Parkville, Carney and White Marsh; Woodlawn and Catonsville; Pikesville, Randallstown and Owings Mills; Towson, Timonium, Hunt Valley; Harford County; Columbia and Howard County; and Annapolis and Crafton.

The following chart shows the current status of each submarket.

BALTIMORE METRO AREA APARTMENT SUBMARKETS

SubmarketInventory (SF Units) Completions

Vacancy Rate

Net Absorption

Asking Rent $/Unit

Asking Rent % Change

Effective Rent $/Unit

Annapolis/Crofton 2,278 0 3.8% 9 $1,340 2.2% $1,289

Columbia/Howard Co 5,347 0 4.4% -10 $1,157 0.6% $1,106

Ctl Baltimore City 5,595 0 5.0% 27 $806 0.4% $766

Dundalk/Essex 15,276 0 3.4% 49 $750 0.8% $725

Glen Burnie 6,311 0 2.3% -47 $954 2.6% $932

Harford County 3,386 0 6.0% 16 $835 -0.9% $785

Parkville 10,047 0 3.1% 58 $865 0.3% $838

Pikesville/Owings 16,580 0 3.7% -22 $1,025 0.6% $987

Towson/Timonium 8,295 0 1.9% 18 $1,135 0.1% $1,113

Woodlawn 12,010 0 2.6% 47 $905 1.7% $881

Total/Average 85,125 0 3.4% 145 $977 0.8% $942

Source: Reis, 3rd Quarter 2013

CLASS B APARTMENT MARKET STATISTICS

The overall vacancy rate for Class B/C product within the Baltimore metro area is 3.4%. The lowest

vacancy rate of 1.9% was found in the Towson/Timonium submarket, while the highest vacancy rate of 6.0% was in the Harford County submarket.

Class B/C effective rental rates range from $$750 in the Dundalk/Essex/Rosedale submarket to

$1,340 per month in the Annapolis/Crofton submarket. The metro effective average rental rate increased to $928 from $977 per month last quarter.

There was no new construction within the Class B/C development sector. Overall, the market

experienced a positive net absorption of 145 units. The metro area currently has 85,125 class B/C units with a 3.4% vacancy rate, down from 3.5% in the previous quarter, suggesting a strong, stable

apartment market in the Baltimore MSA.

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Recently Completed Construction Inventory (All Property Types)

New construction has spread across multiple submarkets within the Baltimore region. A chart summarizing recently completed construction inventory for all property types is illustrating as follows:


Property Name Secondary Type City SubmarketEst. Comp

YearSize

(Units)% of Total

Towson Promenade Apartment Towson Towson/Timonium/Hunt Valley 2010 397 5.6%The Fitzgerald At UB Midtown Apartment Baltimore Central Baltimore City 2010 275 3.9%Penniman Park Apartment Elkridge Columbia/Howard County 2010 186 2.6%Hopewell Point Ph II Condominiums Essex Dundalk/Essex/Rosedale 2010 48 0.7%Elms At Stoney Run Ph II Apartment Hanover Glen Burnie/Harundale/Odenton 2010 106 1.5%The Palisades Of Towson Apartment Towson Towson/Timonium/Hunt Valley 2010 357 5.1%McHenry Row Apartment Baltimore Central Baltimore City 2011 250 3.6%The Arbors At Baltimore Crossroads Apartment White Marsh Dundalk/Essex/Rosedale 2011 365 5.2%Town Center At Arundel Preserve Apartment Hanover Glen Burnie/Harundale/Odenton 2011 242 3.4%Reserve At Stoney Creek Ph I Apartment Pasadena Glen Burnie/Harundale/Odenton 2011 88 1.3%Harper House Redevelopment Apartment Columbia Columbia/Howard County 2011 100 1.4%Mission Place Townhomes Townhomes Jessup Columbia/Howard County 2011 104 1.5%Mission Place Apartments Apartment Jessup Columbia/Howard County 2011 262 3.7%1111 Light Street Apartment Baltimore Central Baltimore City 2012 93 1.3%1901 South Charles Apartments Apartment Baltimore Central Baltimore City 2012 193 2.7%Enclave At Emerson Apartments Apartment Laurel Columbia/Howard County 2012 164 2.3%Guilford Gardens Apartment Columbia Columbia/Howard County 2012 169 2.4%Orchard Meadows At Northridge Ph Ii Apartment Ellicott City Columbia/Howard County 2012 144 2.0%Quarry Lake Bldg Iv Condominiums Pikesville Pikesville/Randallstown/Owings Mills 2012 45 0.6%Union Mill Apartments Apartment Baltimore Central Baltimore City 2012 56 0.8%Uplands Redevelopment Ph I Apartment Baltimore Woodlawn/Catonsville 2012 215 3.1%The View At Mill Run Apartment Owings Mills Pikesville/Randallstown/Owings Mills 2012 375 5.3%Village Of Odenton Station Apartments Apartment Odenton Glen Burnie/Harundale/Odenton 2012 235 3.3%Quarry Lake Bldg V Condominiums Pikesville Pikesville/Randallstown/Owings Mills 2012 45 0.6%Reserve At Riverside Ph I Apartment Belcamp Harford County 2012 212 3.0%The Arbors At Baltimore Crossroads Apartment White Marsh Dundalk/Essex/Rosedale 2012 365 5.2%The Haven At Odenton Gateway Apartment Odenton Glen Burnie/Harundale/Odenton 2013 235 3.3%The National Apartment Baltimore Central Baltimore City 2013 440 6.3%Union Wharf Apartment Baltimore Central Baltimore City 2013 281 4.0%Mill No. 1 Apartment Baltimore Central Baltimore City 2013 93 1.3%Beacon At Waugh Chapel Towne Centre-Ph I Apartment Gambrills Glen Burnie/Harundale/Odenton 2013 149 2.1%300 Cathedral Street Apartment Baltimore Central Baltimore City 2013 59 0.8%521 Saint Paul Place Apartment Baltimore Central Baltimore City 2013 69 1.0%Serentiy Place At Dorsey Ridge Ph I Apartment Odenton Glen Burnie/Harundale/Odenton 2013 252 3.6%Pikeswood Park Apartments Apartment Randallstown Pikesville/Randallstown/Owings Mills 2013 140 2.0%The Groveton Apartment Randallstown Pikesville/Randallstown/Owings Mills 2013 226 3.2%TOTAL 7,035Source: Reis, 3rd Quarter 2013

RECENTLY COMPLETED APARTMENT PROJECTS

Central Baltimore City includes the recently completed Union Wharf and The National Apartments, which represent 4.0% and 6.3% respectively of the 7,035 new units delivered since 2010, about 15% of which were built in the Columbia/Howard County submarket, and 25% in downtown Baltimore.

The inventory considers all property classes and multifamily property types as the market study does not delineate between property class types. The total number of new units in 2012 equates to 2,311 units (1,944 so far in 2013), including condominiums and townhouse units. The market is projected

to absorb the new inventory; however, some concessions may be seen during lease-up until the new product is absorbed.

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Under Construction Inventory


Property Name Secondary Type City SubmarketEst. Comp

YearSIze

SF/Units % of TotalJefferson Square At Washington Hill Ph I Apartment Baltimore Central Baltimore City 2014 304 8.4%The Gunther At Brewers Hill Apartment Baltimore Central Baltimore City 2013 160 4.4%301 N Charles Apartments Apartment Baltimore Central Baltimore City 2014 92 2.6%Marketplace At Fells Point Apartment Baltimore Central Baltimore City 2014 159 4.4%114 Lexington Street Apartment Baltimore Central Baltimore City 2014 104 2.9%Annapolis Towne Centre Apartments Apartment Annapolis Annapolis 2014 215 6.0%Guilford Gardens Apartment Columbia Columbia/Howard County 2012 269 7.5%Flats 170 At Academy Yards Apartment Odenton Glen Burnie/Harundale/Odenton 2013 369 10.2%The Arcadian Apartment Gambrills Glen Burnie/Harundale/Odenton 2013 298 8.3%Village South At Waugh Chapel Ph I Apartment Gambrills Glen Burnie/Harundale/Odenton -- 298 8.3%The Marley Meadow Apartments Apartment Glen Burnie Glen Burnie/Harundale/Odenton 2013 36 1.0%Beechtree Estates Townhomes Aberdeen Harford County 2013 768 21.3%Hollywoods Townhomes Aberdeen Harford County -- 89 2.5%Metro Centre At Owings Mills Bldg 1&2 Apartment Owings Mills Pikesville/Randallstown/Owings Mills 2013 240 6.7%Towson Green Townhomes Towson Towson/Timonium/Hunt Valley 2013 121 3.4%Patapsco Overlook Condominiums Catonsville Woodlawn/Catonsville 2013 80 2.2%TOTAL 3,602Source: Reis, 3rd Quarter 2013

UNDER CONSTRUCTION APARTMENT STATISTICS

The largest group of the properties under construction by far is located in the Central Baltimore City

submarket—23% of the total, with 819 units. Collectively, the Glen Burnie/Odenton and Columbia/Howard County submarkets contain over a third of the total of the under-construction inventory, chiefly due to their location in the I-95 corridor. High growth areas are expected to

experience concessions and higher vacancy levels.

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Planned and Proposed Activity

Approximately 130 projects are either planned or proposed within the Baltimore metro, with about a quarter each of all planned/proposed units in the Central Baltimore City and the Columbia/Howard County submarkets. Another 20% are planned in the Glen Burnie/ Odenton submarket. The following

chart shows the distribution of planned and proposed projects in the Baltimore Metro area:

Submarket No. Units% of Total

Annapolis/Crofton 1,211 4.8%Central Baltimore City 6,745 26.9%Columbia/Howard County 5,783 23.1%Dundalk/Essex/Rosedale 1,460 5.8%Glen Burnie/Harundale/Odenton 4,560 18.2%Harford County 693 2.8%Parkville/Carney/White Marsh 127 0.5%Pikesville/Randallstown/Owings Mills 1,981 7.9%Towson/Timonium/Hunt Valley 2,377 9.5%Woodlawn/Catonsville 118 0.5%Total 25,055Source: REIS, 3rd Quarter 2013

PLANNED AND PROPOSED APARTMENT PROJECTSBALTIMORE METRO AREA

The following chart shows planned and proposed projects in the subject’s submarket.

If the projects being considered occur, these markets can expect additional concessions until the market has time to absorb the new product.

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Absorption Trends

The lease-up of recently completed and under construction inventory situated in the Baltimore market

area is highlighted as follows:

ACTIVELY MARKETING RENTAL APARTMENT PROJECTS

Project Total UnitsUnits

Absorbed

Date Marketing

Began

Overall Monthly

Lease-up pace

375 345 06/11 17365 352 08/11 2193 73 05/12 7

178 130 08/12 9226 121 09/12 11440 154 12/12 14281 86 01/13 1793 36 03/13 12

2,051 1,297 --- 14Source: Delta Associates, Inc., 3rd Quarter 2013

Arbors at Baltimore

ABSORPTION SUMMARY

The View at Mill Run

Total/Average

1111 Light Street1901 South Charles

Groveton GreenThe National Apts.

Union WharfMill No. 1

The average indicated absorption rate is 14 units per month. The absorption summary for recently stabilized garden apartment projects illustrated below shows an average absorption rate is 13 units

per month.

# Project Location Total Units

Date Marketing

BeganDate

Stabilized

Overall Monthly

Lease-up pace

1 Red Run Apartments Phase 2 Owings Mills, MD 216 04/03 09/04 132 The Reserve at Stonegate Woodlawn, MD 219 07/04 08/06 93 Brookside Commons Phase 2 Owings Mills, MD 48 04/05 08/06 34 Greenwich Place at Town Center Owings Mills, MD 332 06/06 06/09 95 The Excalibur Pikesville, MD 147 03/07 06/09 66 Oella Mills Ellicott City, MD 147 04/08 11/09 77 The Renaissance & Jazz at the Quarter Towson, MD 432 03/09 03/11 188 Towson Promenade Towson, MD 376 05/09 09/11 149 The Riverside Apartments Aberdeen, MD 212 04/12 02/13 21

10 Groveton Green Owings Mills, MD 226 09/12 09/13 25Total/Average 2,355 --- --- 13Source: Delta Associates, Inc., 3rd Quarter 2013

ABSORPTION SUMMARYRECENTLY STABILIZED GARDEN APARTMENT PROJECTS

Rent Growth

Rental rates have improved over the past 12 months. The Baltimore MSA saw a 2.2% increase in the

average rental rate per unit in 2010 and 2011, quickening to 4.3% in 2012, and slowing down to 1.0% this year. It is forecast to rise between 2.3% to 3.0% per year as the pipeline of new projects

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widens with new deliveries after a three-year lull. Below is a table illustrating the most recent market forecast performed by Torto Wheaton (a division of CBRE Econometric Advisors).

2006 1,313 2,663 139.7 184,953 1,981 3,840 3.6 1,034.50 4.5

2007 1,319 2,673 140.8 186,372 1,419 -1,474 4.6 1,055.51 2.0

2008 1,303 2,687 141.9 187,698 1,326 -2,306 6.1 1,078.73 2.2

2009 1,267 2,706 137.3 188,740 1,042 2,069 6.3 1,067.89 -1.0

2010 1,281 2,725 142.6 189,406 666 3,410 4.7 1,101.26 3.1

2011 1,303 2,743 145.1 190,672 1,266 1,794 4.3 1,145.92 4.1

2012 1,331 2,760 147.7 192,891 2,219 2,140 4.4 1,179.17 2.9

Forecast 2013 1,358 2,772 149.8 195,466 2,575 1,940 4.5 1,205.96 2.3

2014 1,382 2,784 155.5 198,221 2,755 2,992 3.9 1,232.06 2.2

2015 1,398 2,796 159.6 200,473 2,253 1,825 4.1 1,266.53 2.8

2016 1,412 2,808 163.0 202,405 1,932 1,716 4.2 1,306.23 3.1

2017 1,425 2,820 166.2 204,247 1,842 1,650 4.2 1,346.54 3.1

2018 1,436 2,832 169.4 206,054 1,807 1,528 4.3 1,386.21 2.9

Source: CBRE EA - Baseline Fall 2013 Outlook data as of 3Q-2013

VacancyRate

(Avg %)

Same-StoreRent Index

(Avg $/Unit)

RentInflation(Avg %)

BALTIMORE MULTIHOUSING MARKET TRENDS: FORECAST

YearTotal

Employment(Jobs x 1000)

Population(x 1000)

PersonalIncome

($ billions)

Stock(Units)

Completions(Units)

NetAbsorption

(Units)

This most recent forecast indicates that rental rates will continue to exhibit growth this year, and for the upcoming five years.

WOODLAWN / CATONSVILLE SUBMARKET (SUBJECT’S SUBMARKET)

The subject property is in the Woodlawn/Catonsville Submarket. Data about the submarket was gathered from the most recent REIS reports for Class B/C properties. The following table presents

market statistics specific to the submarket.

YearInventory

(Units) Completions Vac %Vacant Stock

Occupied Stock

Net Absorption

Asking Rent $

2007 12,010 0 5.0% 600 11,410 -12 7952008 12,010 0 6.8% 814 11,196 -214 8052009 12,010 0 6.1% 734 11,276 80 8002010 12,010 0 5.9% 704 11,306 30 8102011 12,010 0 4.8% 580 11,430 124 8352012 12,010 0 3.7% 444 11,566 136 882

2013 Q3 12,010 0 2.6% 313 11,697 131 905Source: REIS, 3rd Quarter 2013

WOODLAWN / CATONSVILLE SUBMARKET SUMMARY - CLASS B/C APARTMENTS

The submarket has shown a stable inventory since 2006. As of the end of Q3 2013, the Class B/C vacancy rate in the market was 2.6% while the average vacancy rate experienced in the market since 2006 was 5.0%. The average asking rental rate was $905 per unit per month which equates to an

average annual increase of 2.18% since 2007. Demand in the local market has been improving based on an increase in occupied stock and positive net absorption since 2009, and this trend has

continued into the most recent quarter.

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In addition to the market statistics indicated above, the following chart shows forecasted inventory, and associated vacancy and absorption for the submarket:

YearInventory

(Units) Completions Vac %Vacant Stock

Occupied Stock

Net Absorption

Asking Rent $

2013 16,441 0 2.3% 378 16,063 247 $1,0022014 16,441 0 1.8% 296 16,145 82 $1,0342015 16,441 0 1.6% 263 16,178 33 $1,0632016 16,481 40 1.8% 290 16,191 13 $1,0982017 16,521 40 1.3% 220 16,301 110 $1,131

Source: REIS, 3rd Quarter 2013

WOODLAWN / CATONSVILLE SUBMARKET FORECAST - ALL CLASSES

The submarket is forecasted to show a small increase in inventory over the next 3-4 years, and is

projected to continue to achieve positive net absorption and increasing rental rates, indicating strong demand in the market.

INVESTMENT TRENDS

According to data from Real Capital Analytics, as apartment prices nationally return to peak levels,

acquisitions have been losing momentum to either development or acquisitions of other property types offering higher returns. In Second Quarter 2013, sales volume posted its first year-over-year decline in years. In Third Quarter 2013, the decline worsened as higher interest rates provided additional

headwinds. Volume fell 20% below levels from a year earlier. Excluding the effects of entity and portfolio transactions, sales of individual properties totaled about $15.0 billion in each of the past two quarters, which is relatively flat against the same quarters a year ago. Similar to national volume

trends, pricing has also started to plateau and capitalization rates have been relatively stable.

Capitalization rates trended upward significantly between the end of 2007 and the end of 2009 due to declining market conditions and an ongoing deterioration of the credit markets. They steadily

climbed from their lowest levels of early 2008 and climbed steeply between late 2008 and mid 2009. They began to stabilize in late 2009 and compressed in 2010 and 2011, but have flattened in 2012 and 2013. This is further supported by the graph below, which plots the average overall capitalization

rates, residual capitalization rates and discount rates (IRR) reported by the PricewaterhouseCoopers Real Estate Investor Survey over the past several years.

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This is further supported by the graph below, which plots the average overall capitalization rates, residual capitalization rates and discount rates (IRR) reported by the PricewaterhouseCoopers Real

Estate Investor Survey over the past several years.

The PricewaterhouseCoopers Real Estate Investor Survey began incorporating Regional Apartment

Market-specific results in their 4Q 2009 report. The Mid-Atlantic Region includes Delaware, Maryland, Washington DC, Virginia, North Carolina, and South Carolina.

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This data for the past five quarters is summarized as follows:

3Q 2013 2Q 2013 1Q 2013 4Q 2012 3Q 2012Discount Rate (IRR) Range 5.0% - 13.0% 5.0% - 14.0% 5.0% - 14.0% 5.0% - 14.0% 5.5% - 14.0% Average 8.60% 8.69% 8.69% 9.02% 9.25% Change (bps) -9 0 -33 -23 0

Overall Cap Rate (OAR) Range 4.0% - 7.5% 4.0% - 7.5% 4.0% - 7.5% 4.0% - 7.5% 4.0% - 7.5% Average 5.67% 5.67% 5.67% 5.69% 5.67% Change (bps) 0 0 -2 2 -4

Residual Cap Rate Range 4.5% - 9.75% 4.5% - 9.75% 4.5% - 9.75% 4.5% - 9.75% 4.5% - 9.75% Average 6.31% 6.31% 6.31% 6.27% 6.27% Change (bps) 0 0 4 0 -8 Spread (bps) 64 64 64 58 60

Expense Change Rate Range 1.0% - 3.0% 1.0% - 3.0% 1.0% - 3.0% 1.0% - 3.0% 1.0% - 3.0% Average 2.83% 2.75% 2.75% 2.75% 2.58% Change (bps) 8 0 0 17 0

Average Marketing Time (Months) Range 1.0 - 18.0 1.0 - 18.0 1.0 - 18.0 1.0 - 18.0 1.0 - 18.0 Average 5.4 5.4 5.4 5.4 5.4Source: PWC Real Estate Investor Survey; Compiled by: CBRE

MID-ATLANTIC REGIONAL APARTMENT MARKET

While IRRs declined 56 basis points from Third Quarter 2012 to First Quarter 2013, they have flattened from First Quarter 2013 to Third Quarter 2013. OARs and residual cap rates have also

been relatively flat. Residual cap rate spreads have also remained relatively flat in 2012 and 2013 near 60-65 basis points.

Interest Rates

Market participants note that multi-family mortgage rates and overall capitalization rates in the subject’s asset class are influenced by 10-year treasury yields.

In 2011 and 2012, the supply of capital available for multifamily loans increased relative to 2009 and 2010 led by historically low Treasury rates. Most lenders, including FNMA and FHLC, price their fixed rate loans based on a spread over the Treasury rate or yield. The spread represents the risk

premium that a lender will want for making the loan instead of buying Treasury bonds. The following chart indicates yields for 10-year treasury notes over the past 12 months.

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Date 10-Year YieldOct-12 1.72%Nov-12 1.62%Dec-12 1.78%Jan-13 2.02%Feb-13 1.89%Mar-13 1.87%Apr-13 1.70%May-13 2.16%Jun-13 2.52%Jul-13 2.60%

Aug-13 2.78%Sep-13 2.64%

Source: US Treasury Dept.

HISTORICAL 10-YEAR TREASURY YIELDS

Treasury yields had been near or below 2% over the past 22 months since August 2011; however, as shown in the chart above, rates increased about 50-60 basis points in mid-June 2013 following comments by the Federal Reserve regarding the central bank's plans to gradually scale back its

stimulus measures in light of increased confidence in economic growth. As of Third Quarter 2013, there has not been evidence of declining market conditions or increased capitalization rates as a result of the spike in interest rates.

Increases in interest rates may result in future upward pressure on overall capitalization rates; however, in the subject’s asset class, institutional buyers rely less heavily on traditional financing.

CONCLUSION

The Baltimore metro apartment market continues to enjoy strong occupancy levels and low

concessions; however, vacancy has crept upward in many submarkets from very tight levels seen in 2012. Despite the recent trends in absorption and expansion of the supply pipeline, the local market area should maintain a stabilized occupancy position. The addition of new product to the market will

likely create downward pressure on occupancy and on owners’ ability to obtain the effective rental increases of the past several years. While job growth has been positive, it is below the long-term average and, along with uncertainty from spending cuts to regional government agencies and

institutions that rely on federal funding, will continue to drag recovery and growth in demand. However, the long-term projection for the Baltimore metro apartment market is for continued growth.

COMPETITIVE PROPERTIES

Comparable properties have been surveyed in order to identify the occupancy trends within the immediate submarket. The comparable data is summarized in the following table:

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SUMMARY OF COMPARABLE APARTMENT RENTALS

Comp. No. Name Location Occupancy

1 Stratton Meadows 2 Heatherton Court,Baltimore, MD

99%

2 Glens at Rolling Road 2340 Noonham Road,Baltimore, MD

98%

3 Village of Pine Run Apartments 103 Village of Pine Court,Baltimore, MD

99%

4 Carlson Woods Townhomes 103 Village of Pine Court,Baltimore, MD

98%

5 Valley Terrace 3630 Valley Terrace Court,Baltimore, MD

98%

6 Rockdale Gardens 3601 Yennar Lane,Windsor Mill, MD

95%

Subject Crosswinds at Rolling Road Apartments

7500 Hithergreen Drive,Baltimore, MD

94%

Compiled by CBRE

The comparable properties surveyed reported occupancy rates of 95% or better, and all are currently

in average condition.

SUBJECT ANALYSIS

Occupancy

The subject’s occupancy is detailed in the following chart.

OCCUPANCY

Year % PGI

2011 Annualized 92%

2012 96%

2013 Annualized 96%

2013 Budget 96%

CBRE Estimate 95%

Compiled by CBRE

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Based on the foregoing analysis, CBRE, Inc.’s conclusion of stabilized occupancy for the subject is illustrated in the following table. This estimate considers both the physical and economic factors of

the market.

OCCUPANCY CONCLUSIONS

Baltimore Area 96.6%

Submarket 97.4%

Rent Comparables 97.5%

Subject's Current Occupancy 94.4%

Subject's Stabilized Occupancy 95.0%

Compiled by CBRE

Our estimate is below the occupancy in the submarket; however is consistent with occupancy levels at

the closest competing properties.

CONCLUSION

The area apartment market and the local submarket are exhibiting strong occupancy levels and upward trending rental rates, while maintaining favorable absorption in recent years. Considering the

recent trends in absorption and the prospects for new construction, the local market area should maintain a stabilized occupancy position. The addition of new product to the market may create

minor downward pressure on occupancy and on owners’ ability to obtain the effective rental increases of the past several years. However, the long-term projection for the subject submarket is for continued growth.

With respect to the subject in particular, we believe the subject is reasonably well located for an apartment project. It is in reasonable proximity to both employment centers and major roadways, and the surrounding apartment developments are experiencing average to above average levels of

demand. Based upon our analysis, the subject should continue to enjoy good market acceptance.

COST TO ACHIEVE STABILIZED OPERATIONS

The cost estimates employed for this approach are reflective of a property operating at a stabilized level. A stabilized occupancy for the subject has been estimated to be 95.0% while the subject is

currently operating at 94.4%. As the subject is currently below a stabilized occupancy position, it would typically require a deduction for lease-up to stabilization. However, considering the current occupancy characteristics in the area, it appears that the submarket is capable of absorbing the 5

units necessary for the subject’s stabilization in a reasonable period of time. As the adjustment for the lease-up of 5 units is not significant, we have assumed no lease-up discount in our analysis.

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CROSSWINDS AT ROLLING ROAD APARTMENTS | SITE ANALYSIS

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PLAT MAPS

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FLOOD PLAIN MAP

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SITE ANALYSIS

The following chart summarizes the salient characteristics of the subject site.

SITE SUMMARY

Physical DescriptionGross Site Area 60.32 Acres 2,627,539 Sq. Ft.

Net Site Area 60.32 Acres 2,627,539 Sq. Ft.

Primary Road Frontage Tudsbury Road

Secondary Road Frontage Hithergreen Drive

Excess Land Area None

Surplus Land Area None

Shape

Topography

Zoning District

Flood Map Panel No. & Date 2400100359F 26-Sep-08

Flood Zone Zone X

Adjacent Land Uses

Earthquake Zone

Comparative AnalysisAccess

Visibility

Functional Utility

Traffic Volume

Adequacy of Utilities

Landscaping

Drainage

Utilities AdequacyWater Yes

Sewer Yes

Natural Gas Yes

Electricity Yes

Telephone Yes

Mass Transit Yes

Other Yes No UnknownDetrimental Easements x

Encroachments x

Deed Restrictions x

Reciprocal Parking Rights x

Common Ingress/Egress x

Source: Various sources compiled by CBRE

Assumed adequate

Average

Assumed adequate

Rating

Average

Assumed adequate

Average

Average

Irregular

Level

DR-16; High Density Residential

N/A

Commercial and residential uses

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INGRESS/EGRESS

Ingress and egress is available to the site via Tudsbury Road and Hithergreen Drive. Please refer to the prior site/plat exhibit for the layout of the streets that provide access to the subject.

ENVIRONMENTAL ISSUES

CBRE, Inc. is not qualified to detect the existence of potentially hazardous material or underground storage tanks which may be present on or near the site. The existence of hazardous materials or underground storage tanks may affect the value of the property. For this appraisal, CBRE, Inc. has

specifically assumed that the property is not affected by any hazardous materials that may be present on or near the property.

A draft Phase 1 Environmental Site Assessment (ESA) for the subject was prepared by Real Estate

Advisory LLC with a date of April 19, 2011. This ESA indicated the following conclusions for the subject:

“REA has performed a Phase I Environmental Site Assessment in conformance with the scope and limitations of ASTM E 1527-05 and Fannie Mae environmental guidelines. This assessment has not revealed evidence of Recognized Environmental Conditions (REC) in connection with the Property.

One previously resolved environmental condition is described below:

• An ERNS listing for the Property resulted when a transformer leaked materials/fluids to the underlying soil at 2407 Molton Way (a building/address on the Property) in July 2002. Baltimore Gas & Electric and a cleanup crew responded. Reportedly, less than two gallons of materials/fluids were released to the soils and no impact to groundwater was noted. The released materials and impacted soils were reportedly “cleaned up” and no additional investigation, assessment and/or remedial activities are believed to be necessary. As such, REA does not believe that this ERNS listing represents a present-day REC.

In addition to the tasks required by the ASTM Practice, REA screened the Property for ACBM, LBP, radon and mold. REA did not find LBP, radon or mold to represent significant concerns. However, the following were noted regarding ACBM:

• Based on the previous sampling asbestos-containing building materials (ACBM) are present at the Property. Based on the observed condition of the materials, these materials can continue to be managed in place with the existing Operation and Maintenance (O & M) Plan.”

CBRE is not qualified to determine the reliability of the findings included in this assessment. For this appraisal, CBRE has specifically assumed that the property is not affected by any hazardous materials

that may be present on or near the property.

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ADJACENT PROPERTIES

The adjacent land uses are summarized as follows:

North: Residential Multifamily and Single Family South: Residential Multifamily and Vacant Land East: Vacant Land and Industrial West: Residential Multifamily

CONCLUSION

The site is well located and afforded good access and visibility from roadway frontage. The size of the

site is typical for the area and use, and there are no known detrimental uses in the immediate vicinity. Overall, there are no known factors which are considered to prevent the site from development to its highest and best use, as if vacant, or adverse to the existing use of the site.

© 2014 CBRE, Inc.

CROSSWINDS AT ROLLING ROAD APARTMENTS | IMPROVEMENT ANALYSIS

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IMPROVEMENTS LAYOUT

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IMPROVEMENTS ANALYSIS

The following chart shows a summary of the improvements.

IMPROVEMENTS SUMMARY

Apartment

1982 Renovated: 0


Total Spaces:

1.75Parking Ratio (spaces/unit)

Development Density

1,416

Parking Improvements Surface

13.4 Units/Acre

89

850,573 SF

844,508 SF

2 & 3

Number of Units

Average Unit Size

Number of Buildings

Number of Stories

Gross Building Area

Year Built

1,045 SF

808

(Multi-family Garden)Property Type

Net Rentable Area

UNIT MIX

Unit Mix/Type Comments No. UnitsPercent of

TotalUnit Size

(SF) NRA (SF)

2BR/1.5BA Standard 438 54.2% 1,042 456,396

2BR/1.5BA Partial Ren Partial Renovation 21 2.6% 1,042 21,882

2BR/1.5BA Ren Full Renovation 115 14.2% 1,042 119,830

3BR/1.5BA Standard 151 18.7% 1,062 160,362

3BR/1.5BA Ren Partial Renovation 21 2.6% 1,062 22,302

2BR/2BA 62 7.7% 1,028 63,736

Total/Average: 808 100.0% 1,045 844,508


Please refer to the Resource Verification table in the Scope of Work for the source of the building area size. The following is a description of the subject improvements and basic construction features

derived from CBRE, Inc.’s inspection.

YEAR BUILT

The subject was built in 1982. Management reports that a recent renovation of the subject was budgeted at approximately $4.2 million, and included the following general categories:

• Asphalt Repair • Landscaping and Site Work • Roofing and Eaves • Exterior Paint and Finish • Miscellaneous Electrical and Plumbing • Clubhouse Construction and Management Office Setup • Unit Interior Upgrades

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• Pool structural repairs and furnishings • ADA Modifications • Signage

The recent renovations have been reflected in the condition analysis.

CONSTRUCTION CLASS

Building construction class is as follows:

D - Wood frame, floor and structure; considered combustible

The construction components are assumed to be in working condition and adequate for the building.

The overall quality of the facility is considered to be average for the neighborhood and age.

However, CBRE, Inc. is not qualified to determine structural integrity and it is recommended that the client/reader retain the services of a qualified, independent engineer or contractor to determine the structural integrity of the improvements prior to making a business decision.

FOUNDATION/FLOOR STRUCTURE

The foundation is assumed to be of adequate load-bearing capacity to support the improvements. The floor structure is summarized as follows:

Ground Floor: Concrete slab on compacted fill

Other Floors: Plywood deck with light-weight concrete cover

EXTERIOR WALLS

The exterior walls are wood frame with brick veneer and wood accents and trim. The buildings have single and double pane aluminum frame windows.

ROOF COVER

All buildings have pitched roofs with a built-up composition shingle covering.

ELEVATOR/STAIR SYSTEM

Townhouse units have interior stairwells. There are no elevators at the property.

HVAC

The HVAC systems are assumed to be good working order and adequate for the buildings.

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UTILITIES

Each unit is individually metered for utility usage. Current operations indicate the tenant is responsible for all utilities to the individual units.

SECURITY

Each unit features a security keypad. Management provides monitoring services for all units that have a landline telephone.

FIRE PROTECTION

It is assumed the improvements have adequate fire alarm systems, fire exits, fire extinguishers, fire

escapes and/or other fire protection measures to meet local fire marshal requirements. CBRE, Inc. is not qualified to determine adequate levels of safety & fire protection, whereby it is recommended that the client/reader review available permits, etc. prior to making a business decision.

PROJECT AMENITIES

The project amenities include a pool, playground, and basketball court.

UNIT AMENITIES

Kitchens

Each unit features a full appliance package including a gas or electric range/oven, vent-hood, frost-free refrigerator with icemaker, garbage disposal, and dishwasher. Additionally, each unit features wood cabinets with Formica countertops and vinyl tile flooring in the kitchen area. According to

management, the project has experienced an adequate on-going replacement program for all kitchen appliances and no appliances are known to be inoperable.

Bathrooms

The bathrooms within each unit feature combination tub/showers with ceramic tile wainscot. Additionally, each bathroom features a commode, wood cabinet with Formica counter and built-in

sink, wall-mounted medicine cabinet with vanity mirror and vinyl tile flooring.

Interior Features

Each unit includes a washer and dryer, ceiling fan, and vertical/mini-blinds.

Interior Lighting

Each unit features incandescent lighting in appropriate interior and exterior locations with fluorescent

lighting in bathrooms and kitchen areas.

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Patios, Balconies and Storage

All townhouse units include a private patio or balcony area. Garden units feature a small patio area adjacent to the entry door.

SITE AMENITIES

Parking and Drives

The project features adequate surface parking, including reserved handicap spaces. All parking spaces and vehicle drives are asphalt paved and considered to be in average condition. Resurfacing

to the travel lanes was reportedly recently completed.

Landscaping

Landscaping is considered to be in average condition and well maintained.

FUNCTIONAL UTILITY

All of the floor plans are considered to feature functional layouts and the layout of the overall project is considered functional in utility. Therefore, the unit mix is also functional and no conversion is warranted to the existing improvements.

ADA COMPLIANCE

Most common areas of the property appear to have handicap accessibility. The client/reader’s attention is directed to the specific limiting conditions regarding ADA compliance.

FURNITURE, FIXTURES AND EQUIPMENT

The apartment units are rented on an unfurnished basis. However, miscellaneous maintenance tools,

pool furniture, leasing office furniture, recreational room and clubhouse furniture, and various exercise machines are examples of personal property associated with and typically included in the sale

of multifamily apartment complexes.


CBRE, Inc. is not qualified to detect the existence of any potentially hazardous materials such as lead paint, asbestos, urea formaldehyde foam insulation, or other potentially hazardous construction

materials on or in the improvements. The existence of such substances may affect the value of the property. A draft Phase 1 Environmental Site Assessment (ESA) for the subject was previously discussed in the Site Analysis section of this report. For the purpose of this assignment, we have

specifically assumed that any hazardous materials that would cause a loss in value do not affect the subject.

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DEFERRED MAINTENANCE

Our inspection of the property indicated no significant items of deferred maintenance.

ECONOMIC AGE AND LIFE

CBRE, Inc.’s estimate of the subject improvements effective age and remaining economic life is

depicted in the following chart:


Actual Age 31 Years

Effective Age 20 Years

MVS Expected Life 55 Years

Remaining Economic Life 35 Years

Accrued Physical Incurable Depreciation 36.4%

Compiled by CBRE

The overall life expectancy is based upon our on-site observations and a comparative analysis of typical life expectancies reported for buildings of similar construction as published by Marshall and Swift, LLC, in the Marshall Valuation Service cost guide. While CBRE, Inc. did not observe anything to

suggest a different economic life, a capital improvement program could extend the life expectancy.

CONCLUSION

The improvements are in average overall condition. Overall, there are no known factors that adversely impact the marketability of the improvements.

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CROSSWINDS AT ROLLING ROAD APARTMENTS | ZONING

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ZONING MAP

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ZONING

The following chart summarizes the subject’s zoning requirements.

ZONING SUMMARYCurrent Zoning DR-16; High Density Residential

Legally Conforming Assumed

Uses Permitted Group houses, Back-to-Back Dwellings, Multi-Family

Zoning Change Not likely

Category Zoning Requirement

F. A. R. 16.0 density units per acre

Min Lot Area per DU 2,500 square feet

Minimum Lot Width 20 FeetFront setback 10 Feet

Rear setback 30 Feet

Side yard setbacks 25 Feet

Height limit 60 FeetParking 1.25 per studio unit, 1.5 per one or two-

bedroom unit, 2.0 per three bedroom unit.Required Parking 1,298

Actual Parking 1,416

Source: Planning & Zoning Dept.

The DR-16 zone allows for the development of 16 density units per acre. Each unit type has a density-unit rating based on the number of bedrooms. Density units for the subject are calculated below:

Unit Type Density Unit Rating

Subject Units

Subject Density Unit Total

2BR 1 636 636

3BR+ 1.5 172 258

Total Subject Density Units 894

Subject Acreage 60.32

Subject Density Units per Acre 14.8

Total Density Units Allowed per Acre 16.0

Total Density Units Allowed 965

Percent of Subject Units Allowed 108.0%

Complied by CBRE

SUBJECT DENSITY UNITS

According to the above calculations, the subject is currently developed to a density of 15.4 density units per acre, which falls below the maximum density for the zone. As indicated in the above chart,

this would allow for an increase in the number of units; however, given the current configuration of

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buildings on the site, any additional land is scattered throughout the site, and would not be considered excess land.

ANALYSIS AND CONCLUSION

We were not provided a zoning compliance letter, nor is one known to exist. Accordingly, we cannot authoritatively state that the subject property legally conforms to all applicable zoning codes. Nonetheless, it is our unqualified opinion that the subject property, as improved, appears to be within

the established guidelines of the zoning ordinance in regard to both physical aspects and current use. It is recommended that local planning and zoning personnel be contacted regarding more specific information that might be applicable to the subject.

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CROSSWINDS AT ROLLING ROAD APARTMENTS | TAX AND ASSESSMENT DATA

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TAX AND ASSESSMENT DATA

The following summarizes the local assessor’s estimate of the subject’s market value, assessed value, and taxes, and does not include any furniture, fixtures or equipment.

AD VALOREM TAX INFORMATION

Assessor's Market Value 7/13-6/14 7/14-6/15 7/15-6/16 Pro Forma

Multiple $43,225,700 $47,541,800 $51,857,900

Subtotal $43,225,700 $47,541,800 $51,857,900 $51,857,900

Assessed Value @ 100% 100% 100% 100%

$43,225,700 $47,541,800 $51,857,900 $51,857,900

General Tax Rate (per $100 A.V.) 1.212000 1.212000 1.212000 1.212000

General Tax: $523,895 $576,207 $628,518 $628,518

Special Assessments: 279,430 279,430 279,430 279,430

Less Sewer Service Charge: (203,316) (203,316) (203,316) (203,316)

Special Assessments: 76,114 76,114 76,114 76,114

Effective Tax Rate (per $100 A.V.) 1.388085 1.372099 1.358774 1.358774

Total Taxes $600,009 $652,321 $704,632 $704,632

Source: Assessor's Office

The subject property is located in Maryland and is assessed by the Maryland State Department of Assessment and Taxation (SDAT). This department is an independent state agency responsible for real

and personal property assessment as well as the mapping of all real estate. The applicable tax rate is set by the local jurisdiction and is a combination of state, county and local rates.

Maryland’s assessment system is currently based on a three-year cycle in which one-third of the taxable real estate in each county is physically inspected and reassessed each year. Assessments are based upon an estimate of ad valorem value known as full cash value. The state assessors utilize the

three traditional approaches to value: the cost, sales comparison, and income capitalization approaches. To lessen the impact of any increase in full cash value, a three-year phase-in is implemented. This provides for one-third of the increase in full cash value added to the first year of

the assessment cycle with the balance being added in equal installments over the next two years in the case of increases in full cash value. Decreases are implemented immediately and are not phased in.

Property owners receive an assessment notice once every three years. These notices are generally

issued in December of the year that the assessor reviewed the property. The notice shows the proposed full cash value as of January 1, which is known as the date of finality. The proposed full cash value is the basis upon which assessments for the three forthcoming taxable years will be based.

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The fiscal year runs from July 1 through June 30 of the following year, with taxes due by September 30. According to a representative of SDAT, commercial properties remain on a fixed three-year

assessment cycle, and the sale of a property or any renovations do not trigger an early re-assessment. However, properties that undergo an expansion, as determined by the permitting process, may receive an off-cycle assessment upon completion of the expansion program, and any increases in assessed

value will be phased in over the remaining three-year assessment cycle.

The current tax rate of $1.212 per $100 of assessed value for the subject includes the Baltimore County tax rate of $1.10, and the State of Maryland property tax rate of $0.112. In addition to

county and state taxes, Baltimore County includes the following special assessments in the tax bill for each property:

Bay Restoration Fee

In 2004 the State of Maryland established a Bay Restoration Fund. The law charges a monthly fee on residential wastewater system users, commercial users, and onsite sewage disposal system owners. This annual fee will be used by the State to upgrade

66 sewage treatment plants in Maryland and reduce water pollution in the Chesapeake Bay.

Water and Sewer Benefit Assessments

As authorized by Baltimore County Code 2003, Section 20-3-201, these charges are

levied on all properties within the Metropolitan District, improved and unimproved, to recover construction costs of water and sewer mains and are amortized over a forty

(40) year period. Once applied, these charges remain constant unless the property classification changes (i.e. subdivision/residential to business, small acreage to subdivision/residential, etc.) or unless the property is subdivided. Charges are based

on the average width of the property.

Water Distribution Charge

Established in 1964, this charge furnishes funds for debt service of Metropolitan Bonds issued for the financing of capital expenditures for major facilities such as pumping

stations, transmission mains and storage facilities. The charge is determined by the size of the meter servicing the property. The current minimum rate, effective July 1, 2010 is $98.11. Levy of the annual charge is based on the date of application and

not the actual installation of the meter. It is an annual user charge and can only be removed upon notification by Baltimore City that a water meter has been abandoned

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Sewer Service Charge

This charge is assessed to recover the cost of treatment and transportation of wastewater and the disposition of its by-products. Every property connected to the

Metro District sewer system, which has a separate property tax identification number, will be charged based on the volume of water consumed during the prior calendar year. The current rate, effective July 1, 2010, is $39.48 per 1,000 cubic feet of water,

with a minimum charge of $70. Properties with private wells, and properties where a master water meter serves multiple properties, such as condominiums, will be charged

based on plumbing fixtures. This is an annual user charge and can only be removed upon receipt of a permit that shows the house connection has been capped off. As the Sewer Service Charge is based on water consumption, it is considered a utility cost

rather than a tax, and has been deducted from the Special Assessment in the above table.

Stormwater Remediation Fee

Stormwater runoff from impervious surfaces—such as parking lots, roads and roofs—

causes a range of environmental problems including pollution of the Chesapeake Bay and other waterways, more frequent flooding, increased erosion and contamination of drinking water. This fee is the result of Maryland House Bill 987, which passed in

2012, and requires the largest jurisdictions in Maryland to help offset the cost of stormwater management services provided to those who live and work in Baltimore

County.

The subject property is currently in the first year of a three-year assessment cycle and is scheduled for reassessment in January 2016 for the tax year beginning in the following July. According to local

authorities, there are no delinquent property taxes encumbering the subject.

TAX COMPARABLES

As a crosscheck to the subject’s applicable real estate taxes, CBRE, Inc. has reviewed the real estate tax information according to Baltimore County for comparable properties in the market area. The

following table summarizes the comparables employed for this analysis:

AD VALOREM TAX COMPARABLES

Comparable Rental2 Heatherton

Court2340 Noonham

Road103 Village of

Pine Court103 Village of

Pine Court3630 Valley

Terrace Court3601 Yennar

LaneSubject

Year Built 1989 1974 1974 1984 1971 1985 1982No. Units 270 270 228 52 100 261 808Tax Year 2013 2013 2013 2013 2013 2013 2013

Total Assessed Value $19,955,800 $17,762,800 $6,440,400 $5,143,500 $6,424,100 $7,366,300 $51,857,900AV Per Unit $73,910 $65,788 $28,247 $98,913 $64,241 $28,223 $64,181


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FUTURE ASSESSMENT ANALYSIS

Based on the value conclusion indicated in this report, the subject is currently assessed below its market value. Conversations with the State of Maryland indicate the subject’s in-place assessment will

remain unchanged for the duration of the existing 3-year tax cycle. In this case, the subject’s next 3-year cycle begins July 2016, and any increase in assessment would be phased in during the next assessment cycle beginning July 2016. As such, we believe a subsequent increase in assessed value

would have a minor effect on the overall value of the subject, and we have utilized the current full cash value assessment in our analysis.

As further support for this conclusion, the following table indicates recent sales in the Baltimore area,

along with their respective assessed values at the time of sale:

Address County Sale Date Sale PriceAssessment At

SaleAssessment %

of Sale Price4335 Bedrock Circle Baltimore Aug-12 $32,650,000 $16,573,800 50.8%386 Attenborough Drive Baltimore Aug-11 $90,400,000 $63,602,300 70.4%3701 Twin Lakes Court Baltimore Sep-13 $45,350,000 $27,108,300 59.8%5900 Park Heights Ave. Baltimore City Feb-13 $8,600,000 $4,291,300 49.9%67 Timbergrove Road Baltimore Dec-12 $29,150,000 $13,871,600 47.6%59 High Falcon Road Baltimore Nov-12 $45,901,000 $20,122,500 43.8%

Minimum: 43.8%Maximum: 70.4%Average: 53.7%

Source: State of Maryland

PERCENTAGE OF ASSESSED VALUE TO SALE PRICE - BALTIMORE AREA

The subject is currently assessed at of the market value indicated in this report, which falls within the range indicated by other sales in the Baltimore area. Additionally, as each buyer had an understanding of the in-place assessed value at the time of sale, each capitalization rate included the

risk associated with a future assessment increase.

CONCLUSION

Based on the foregoing information, the subject’s current assessment is well supported by both its historical trend and by the comparable properties shown.

© 2014 CBRE, Inc.

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HIGHEST AND BEST USE

In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria the highest and best use must meet are:

• legally permissible; • physically possible; • financially feasible; and • maximally productive.

The highest and best use analysis of the subject is discussed on the following pages.

AS VACANT

Legally Permissible

The legally permissible uses were discussed in the Site Analysis and Zoning Sections.

Physically Possible

The subject is adequately served by utilities, and has an adequate shape and size, sufficient access, etc., to be a separately developable site. There are no known physical reasons why the subject site would not support any legally probable development (i.e. it appears adequate for development).

Existing structures on similar sites provides additional evidence for the physical possibility of development.

Financially Feasible

The determination of financial feasibility is dependent primarily on the relationship of supply and demand for the legally probable land uses versus the cost to create the uses. As discussed in the

market analysis of this report, the subject apartment market is generally stabilized; however development of new apartment properties has not occurred in the past few years, and only a small number of units are forecasted for construction in the next few years. These factors indicate that

developers and investors perceive the market to be developed to its full potential, and additional development would carry greater risk. As such, we believe that most investors would not move forward with new construction at this time.

Maximally Productive

The final test of highest and best use of the site as though vacant is that the use be maximally

productive, yielding the highest return to the land. In the case of the subject as if vacant, the analysis has indicated that the highest and best use of the site, as vacant, would be to hold for future development when market conditions improve.

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CONCLUSION: HIGHEST AND BEST USE AS VACANT

As noted, new development is not financially feasible at this time. Therefore, the highest and best use of the site, as vacant, would be to hold for future apartment development when market conditions

improve.

AS IMPROVED

Legally Permissible

The site has been improved with an apartment development that is assumed to be a legal, conforming use.

Physically Possible

The layout and positioning of the improvements are considered functional for apartment use. While it would be physically possible for a wide variety of uses, based on the legal restrictions and the design

of the improvements, the continued use of the property for apartment users would be the most functional use.

Financially Feasible

The financial feasibility of an apartment property is based on the amount of rent which can be generated, less operating expenses required to generate that income; if a residual amount exists, then

the land is being put to a productive use. Based upon the income capitalization approach conclusion, the subject is producing a positive net cash flow and continued utilization of the improvements for apartment purposes is considered financially feasible.

Maximally Productive

The maximally profitable use of the subject as improved should conform to neighborhood trends and

be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. As shown in the applicable

valuation sections, buildings that are similar to the subject have been acquired or continue to be used by apartment owners/tenants. None of the comparable buildings have been acquired for conversion to an alternative use. These comparables would indicate that the maximally productive use of the

property is consistent with the existing use as an apartment property.

CONCLUSION: HIGHEST AND BEST USE AS IMPROVED

Based on the foregoing, the highest and best use of the property, as improved, is consistent with the existing use as an apartment development.

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APPRAISAL METHODOLOGY

In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available.

COST APPROACH

The cost approach is based on the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements that

represent the highest and best use of the land, or when it is improved with relatively unique or specialized improvements for which there exist few sales or leases of comparable properties.

SALES COMPARISON APPROACH

The sales comparison approach utilizes sales of comparable properties, adjusted for differences, to

indicate a value for the subject. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived

from the comparable sale. The unit of comparison chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences,

with the final estimate derived based on the general comparisons.

INCOME CAPITALIZATION APPROACH

The income capitalization approach reflects the subject’s income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived

in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over a period of time. The two common valuation techniques associated with the income capitalization approach are direct capitalization and

the discounted cash flow (DCF) analysis.

METHODOLOGY APPLICABLE TO THE SUBJECT

In valuing the subject, only the sales comparison and income capitalization approaches are applicable and have been used. The cost approach is not applicable in the estimation of fair value

due to the age of the subject improvements and the amount of depreciation noted.

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INSURABLE VALUE

Insurable value is defined as follows:

1. the value of an asset or asset group that is covered by an insurance policy; can be estimated by deducting costs of noninsurable items (e.g., land value) from market value.

2. value used by insurance companies as the basis for insurance. Often considered to be replacement or reproduction cost plus allowances for debris removal or demolition less deterioration and noninsurable items. Sometimes cash value or market value, but often entirely a cost concept. 5

3. a type of value for insurance purposes.

6

CBRE, Inc. has followed traditional appraisal standards to develop a reasonable calculation based upon industry practices and industry-accepted publications such as the Marshall Valuation Service. The methodology employed is a derivation of the cost approach and is not reliable for insurable value

estimates. Actual construction costs and related estimates can vary greatly from this estimate.

The insurable value estimate presented herein is intended to reflect the value of the destructible portions of the subject, based on the replacement of physical items that are subject to loss from

hazards (excluding indestructible items such as basement excavation, foundation, site work, land value and indirect costs). In the case of the subject, this estimate is based upon the base building costs (direct costs) as obtained via the Marshall Valuation Service handbook, with appropriate deductions.

This analysis should not be relied upon to determine proper insurance coverage as only consultants considered experts in cost estimation and insurance underwriting are qualified to provide an insurable value. It is provided to aid the client/reader/user as part of their overall decision making process and

no representations or warranties are made by CBRE, Inc. regarding the accuracy of this estimate and it is strongly recommended that other sources be utilized to develop any estimate of insurable value.

5 Marshall & Swift/Boeckh, LLC, Marshall Valuation Service, (Los Angeles: Marshall & Swift/Boeckh, LLC, 2010), Sec 3, p 2.


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INSURABLE VALUE (REPLACEMENT COST) CONCLUSION

Primary Building Type: Height per Story: 8'Effective Age: Number of Buildings: 89Condition: Gross Building Area: 850,573 SFExterior Wall: Net Rentable Area: 844,508 SFNumber of Units: Average Unit Size: 1,045 SFNumber of Stories: Average Floor Area: 340,229 SF

MVS Sec/Page 0 0 11/30/D 12/31/D 12/16/DQuality/Bldg. Class 0 0 Average/D Average/D Average/DBuilding Component 0 0 Clubhouse Townhomes Garden AptsComponent Sq. Ft. 0 SF 0 SF 6,065 SF 780,772 SF 63,736 SFBase Square Foot Cost $0.00 $0.00 $93.25 $79.84 $73.08

Square Foot RefinementsHeating and Cooling $0.00 $0.00 $0.00 $0.00 $0.00Subtotal $0.00 $0.00 $96.81 $79.84 $73.08

Height and Size RefinementsNumber of Stories Multiplier 0.00 0.00 1.00 1.00 1.00Height per Story Multiplier 0.00 0.00 1.00 1.00 1.00Floor Area Multiplier 0.00 0.00 1.00 1.00 1.00Subtotal $0.00 $0.00 $96.81 $79.84 $73.08

Cost MultipliersCurrent Cost Multiplier 0.00 0.00 1.08 1.08 1.08Local Multiplier 0.00 0.00 1.01 1.01 1.01

Final Square Foot Cost $0.00 $0.00 $105.60 $87.09 $79.72

Base Component Cost $0 $0 $640,466 $67,999,150 $5,080,931

Base Building Cost (via Marshall Valuation Service cost data) $73,720,548

Insurable Exclusions 10.0% of Total Building Cost ($7,372,055)

Insurable Value (Replacement Cost) Indication $66,348,493

Rounded $66,300,000

Value Per Unit $82,054

Compiled by CBRE

2 & 3808

Apartment20 YRSAverageMasonry

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The following map and table summarize the comparable data used in the valuation of the subject. A detailed description of each transaction is included in the addenda.

SUMMARY OF COMPARABLE APARTMENT SALES

Year No. Avg. Unit Actual Sale Adjusted Price Per NOI PerNo. Name Type Date Built Units Size Price Sale Price 1 Unit 1 Occ. Unit OAR

1 Windsor Mill Portfolio,Baltimore, MD

Contract Sep-13 1971 500 860 $45,350,000 $45,350,000 $90,700 96% $5,905 6.51%

2 5900 Park Heights Avenue,Baltimore, MD

Sale Feb-13 1979 100 578 $8,600,000 $8,600,000 $86,000 100% $6,185 7.19%

3 Timbercroft Townhomes and Apartments,Owings Mills, MD

Sale Dec-12 1971 284 840 $29,150,000 $29,150,000 $102,641 99% $7,441 7.25%

4 Falcon Crest,Owings Mills, MD

Sale Nov-12 1968 396 872 $45,901,000 $45,901,000 $115,912 99% $8,155 7.04%

5 The Hamptons at Town Center,Germantown, MD

Sale Aug-12 1979 768 676 $90,250,000 $90,250,000 $117,513 97% $8,225 7.00%

6 Villas at Langley ,Hyattsville, MD

Sale Aug-12 1964 590 855 $48,164,409 $53,664,409 $90,957 97% $6,525 7.17%

Subj.Pro

Forma

Crosswinds at Rolling Road Apartments,Baltimore, MD

--- --- 1982 808 1,045 --- --- --- 95% $7,553 ---

1 Transaction amount adjusted for cash equivalency and/or deferred maintenance (where applicable)

Compiled by CBRE

Transaction

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The sales utilized represent the best data available for comparison with the subject. They were selected from our research of comparable improved sales within the general market area and were chosen

based upon their date of sale, location, age, condition and quality.

DISCUSSION/ANALYSIS OF IMPROVED SALES

Improved Sale One

This comparable represents a multifamily portfolio consisting of 3 properties with a total of 500 units in Baltimore, MD. The properties consist of the following:

• Cedar Towers: an eight-story mid/high-rise community with 172 units that was originally

constructed in 1972 with renovations beginning in 2008;

• Cedar Gardens: a three-story garden-type community with 228 units that was originally constructed in 1972;

• Valley Terrace: a three-story garden and townhouse community with 100 units that was originally constructed in 1969.

The improvements were constructed in 1971 on a weighted average basis, and were considered to be in average condition at the time of sale. The exterior walls depict brick construction components. The

average unit size was 860 square feet and project amenities included a pool and a tennis/fitness center. The portfolio sold in September 2013 for $45,350,000, or $90,700 per unit. Existing net

operating income at the time of sale was $2,952,545, or $5,905 per unit, for an overall capitalization rate of 6.51%. Occupancy at the time of sale was 96%.

In terms of age/condition, this comparable was judged inferior due to its older year of construction

and received an upward adjustment for this characteristic. An adjustment for avg. unit size was considered appropriate for this comparable given the lower income per unit associated with smaller unit sizes. Because of this inferior trait, an upward adjustment was considered appropriate. Overall,

this comparable was deemed inferior in comparison to the subject and an upward net adjustment was warranted to the sales price indicator.

Improved Sale Two

This comparable represents a multifamily property consisting of 100 units and is situated on a 1.34-acre parcel at 5900 Park Heights Avenue, Baltimore, MD. The improvements were originally

constructed in 1979 and were considered in average condition at the time of sale. The exterior walls depict brick construction components. The average unit size was 578 square feet and project amenities included on-site laundry and community rooms. The property sold in February 2013 for

$8,600,000, or $86,000 per unit. Pro Forma net operating income at the time of sale was

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$618,539, or $6,185 per unit, for an overall capitalization rate of 7.19%. Occupancy at the time of sale was 100%.

In terms of conditions of sale, this comparable was considered inferior and received an upward adjustment for this characteristic due to the rent restrictions associated with the hap contract. Upon comparison with the subject, this comparable was considered superior in terms of project size and

received a downward adjustment for this characteristic due to the higher price per unit typically associated with a smaller number of units. An adjustment for avg. unit size was considered appropriate for this comparable given the lower income per unit associated with smaller unit sizes.

Because of this inferior trait, an upward adjustment was considered appropriate. Overall, this comparable was deemed inferior in comparison to the subject and an upward net adjustment was

warranted to the sales price indicator.

Improved Sale Three

This comparable represents a garden-style, multifamily property consisting of 284 units and is situated

on a 15.2-acre parcel at 67 Timbergrove Road, Owings Mills, MD. The improvements were originally constructed in 1971 and were considered in average condition at the time of sale. The

exterior walls depict brick veneer construction components. The average unit size was 840 square feet and project amenities included swimming pool, laundry facilities, playground, and a clubhouse. The property sold in December 2012 for $29,150,000, or $102,641 per unit. Pro Forma net operating

income at the time of sale was $2,113,375, or $7,441 per unit, for an overall capitalization rate of 7.25%. Occupancy at the time of sale was 99%.

In terms of conditions of sale, this comparable was considered inferior and received an upward

adjustment for this characteristic due to the rent restrictions associated with the HAP contract. The downward adjustment for location reflects this comparable's superior feature with respect to higher potential rental rates due to superior demographic characteristics in the area. Upon comparison with

the subject, this comparable was considered superior in terms of project size and received a downward adjustment for this characteristic due to the higher price per unit typically associated with a smaller number of units. In terms of age/condition, this comparable was judged inferior due to its

older year of construction and received an upward adjustment for this characteristic. An adjustment for avg. unit size was considered appropriate for this comparable given the lower income per unit

associated with smaller unit sizes. Because of this inferior trait, an upward adjustment was considered appropriate. Overall, this comparable was deemed superior in comparison to the subject and a downward net adjustment was warranted to the sales price indicator.

Improved Sale Four

This comparable represents a garden-style, multifamily property consisting of 396 units and is situated on a 22.6-acre parcel at 59 High Falcon Road, Owings Mills, MD. The improvements were originally

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constructed in 1968 and were considered in average condition at the time of sale. The exterior walls depict brick veneer construction components. The average unit size was 872 square feet and project

amenities included clubhouse, fitness center, access to a swimming pool, and business center. The property sold in November 2012 for $45,901,000, or $115,912 per unit. Pro Forma net operating income at the time of sale was $3,229,583, or $8,156 per unit, for an overall capitalization rate of

7.04%. Occupancy at the time of sale was 99%.

The downward adjustment for location reflects this comparable's superior feature with respect to higher potential rental rates due to superior demographic characteristics in the area. Upon

comparison with the subject, this comparable was considered superior in terms of project size and received a downward adjustment for this characteristic due to the higher price per unit typically

associated with a smaller number of units. In terms of age/condition, this comparable was judged inferior due to its older year of construction and received an upward adjustment for this characteristic. Overall, this comparable was deemed superior in comparison to the subject and a downward net

adjustment was warranted to the sales price indicator.

Improved Sale Five

This comparable represents a garden-style, multifamily property consisting of 768 units and is situated on a 36.97-acre parcel at 19757 Crystal Rock Drive, Germantown, MD. The improvements were originally constructed in 1979 and were considered in average condition at the time of sale. The

exterior walls depict vinyl siding construction components. The average unit size was 676 square feet and project amenities included a swimming pool, clubhouse, fitness center, business center, tennis court, volleyball court, playgrounds, and laundry facilities. The property sold in August 2012 for

$90,250,000, or $117,513 per unit. Existing net operating income at the time of sale was $6,317,500, or $8,226 per unit, for an overall capitalization rate of 7.0%. Occupancy at the time of sale was 97%.

The downward adjustment for location reflects this comparable's superior feature with respect to higher potential rental rates due to superior demographic characteristics in the area, and favorable access to several employment districts. An adjustment for avg. unit size was considered appropriate

for this comparable given the lower income per unit associated with smaller unit sizes. Because of this inferior trait, an upward adjustment was considered appropriate. Overall, this comparable was

deemed superior in comparison to the subject and a downward net adjustment was warranted to the sales price indicator.

Improved Sale Six

This comparable represents a garden-style, multifamily property consisting of 590 units and is situated on a 24.45-acre parcel at 8100 15th Avenue, Hyattsville, MD. The improvements were originally constructed in 1964 and were considered in average condition at the time of sale. The exterior walls

© 2014 CBRE, Inc.


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depict brick construction components. The average unit size was 855 square feet and project amenities included a swimming pool, playground, basketball court, and laundry facilities. The

property sold in August 2012 for $53,664,409, or $90,957 per unit. Existing net operating income at the time of sale was $3,850,000, or $6,525 per unit, for an overall capitalization rate of 7.17%. Occupancy at the time of sale was 97%. The difference between the Actual Sale Price and Adjusted

Sale Price reflects an adjustment of -$3,500,000 for unfavorable loan terms and $2,000,000 for immediate capital needs.

In terms of conditions of sale, this comparable was considered inferior and received an upward

adjustment for this characteristic due to its higher level of concessions at the time of sale. The downward adjustment for location reflects this comparable's superior feature with respect to its

proximity to the downtown Washington DC area. In terms of age/condition, this comparable was judged inferior due to its older year of construction and received an upward adjustment for this characteristic. An adjustment for avg. unit size was considered appropriate for this comparable given

the lower income per unit associated with smaller unit sizes. Because of this inferior trait, an upward adjustment was considered appropriate. Overall, this comparable was deemed superior in comparison to the subject and a downward net adjustment was warranted to the sales price indicator.

SUMMARY OF ADJUSTMENTS

Based on our comparative analysis, the following chart summarizes the adjustments warranted to each comparable.

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APARTMENT SALES ADJUSTMENT GRID

Comparable Number 1 2 3 4 5 6Subj.Pro

FormaTransaction Type Contract Sale Sale Sale Sale Sale ---Transaction Date Sep-13 Feb-13 Dec-12 Nov-12 Aug-12 Aug-12 ---

Year Built 1971 1979 1971 1968 1979 1964 1982

No. Units 500 100 284 396 768 590 808

Avg. Unit Size 860 578 840 872 676 855 1,045Actual Sale Price $45,350,000 $8,600,000 $29,150,000 $45,901,000 $90,250,000 $48,164,409 ---Adjusted Sale Price 1 $45,350,000 $8,600,000 $29,150,000 $45,901,000 $90,250,000 $53,664,409 ---Price Per Unit 1 $90,700 $86,000 $102,641 $115,912 $117,513 $90,957 ---

Occupancy 96% 100% 99% 99% 97% 97% 95%

NOI Per Unit $5,905 $6,185 $7,441 $8,155 $8,225 $6,525 $7,553

OAR 6.51% 7.19% 7.25% 7.04% 7.00% 7.17% ---

Adj. Price Per Unit $90,700 $86,000 $102,641 $115,912 $117,513 $90,957

Property Rights Conveyed 0% 0% 0% 0% 0% 0%Financing Terms 1 0% 0% 0% 0% 0% 0%

Conditions of Sale 0% 5% 5% 0% 0% 5%

Market Conditions (Time) 0% 0% 0% 0% 0% 0%

Subtotal - Price Per Unit $90,700 $90,300 $107,773 $115,912 $117,513 $95,505

Location 0% 0% -15% -15% -20% -20%

Project Size 0% -10% -5% -5% 0% 0%

Age/Condition 10% 0% 5% 5% 0% 10%

Quality of Construction 0% 0% 0% 0% 0% 0%

Avg. Unit Size 5% 15% 5% 0% 10% 5%

Project Amenities 0% 0% 0% 0% 0% 0%

Parking 0% 0% 0% 0% 0% 0%

Other 0% 0% 0% 0% 0% 0%

Total Other Adjustments 15% 5% -10% -15% -10% -5%

Indicated Value Per Unit $104,305 $94,815 $96,996 $98,525 $105,762 $90,730


Compiled by CBRE

Overall, Comparables 1, 2, 3, and 4 are the closest in proximity to the subject, and are considered to be the most representative of the local market area. These comparables were given primary weight,

with greatest weight given to the more recent transactions. Comparables 5 and 6 were given secondary weight.

SALES COMPARISON APPROACH CONCLUSION

The following table presents the estimated value for the subject as indicated by the sales comparison

approach.

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Total Units X Value Per Unit = Value

808 X $99,000 = $79,992,000

808 X $101,000 = $81,608,000

VALUE CONCLUSION

Indicated Stabilized Value $81,000,000

Deferred Maintenance $0

Lease-Up Discount $0

Value Indication $81,000,000

Rounded $81,000,000


Compiled by CBRE

© 2014 CBRE, Inc.

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The following map and table summarize the comparable data used in the valuation of the subject. A detailed description of each transaction is included in the addenda.


Comp. No. Property Name Location

Year Built Occ.

No. Units

Avg. Rent Per Unit

1 1989 99% 270 $1,141

2 1974 98% 270 $1,074

3 1974 99% 228 $1,070

4 1984 98% 52 $1,470

5 1971 98% 100 $955

6 1985 95% 261 $1,072

Subj. Crosswinds at Rolling Road Apartments

7500 Hithergreen Drive,Baltimore, MD

1982 94% 808 ---

Compiled by CBRE

Glens at Rolling Road

3601 Yennar Lane,Windsor Mill, MD

Rockdale Gardens

Stratton Meadows 2 Heatherton Court,Baltimore, MD

Village of Pine Run Apartments

Valley Terrace 3630 Valley Terrace Court,Baltimore, MD

103 Village of Pine Court,Baltimore, MD

2340 Noonham Road,Baltimore, MD

103 Village of Pine Court,Baltimore, MD

Carlson Woods Townhomes

© 2014 CBRE, Inc.


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The rentals utilized represent the best data available for comparison with the subject. They were selected from our research within the general market area. These comparables were chosen based

upon their location, age, condition and quality.

DISCUSSION/ANALYSIS OF RENT COMPARABLES

Rent Comparable One

This comparable represents the Stratton Meadows apartments, a 270-unit multi-family garden property at 2 Heatherton Court, Baltimore, MD. The improvements were originally constructed in 1989 and were considered to be in average condition at the time of our research. The structure's

exterior depicts brick veneer construction components and the average unit size is 1,047 square feet. Kitchen amenities include electric range, frost-free refrigerators, dishwasher, and garbage disposal. Select units include a microwave oven. Additional features include air-conditioning, alarm system,

vertical/mini-blinds, carpeting in living areas, vinyl flooring in the kitchen and tile and vinyl in the bathroom. All units have washer and dryers and a patio or balcony. The efficiency and apartments have stackable washer/dryer. Project amenities include a pool, playground, and community garden.

According to the unit mix and asking rates for this property, the average base rental rate is $1.09 per square foot monthly ($1,141/unit) based on typical lease terms of 12 months. Select renovated units

include new kitchens or full renovations. Additional premiums include end units. No utilities are included in the rental rate, and no concessions are currently offered. The property is currently 95% leased.

As compared to the subject, this project was viewed as inferior with respect to project amenities, while regarded as similar in terms of location, age, design appeal and quality of construction, and superior in terms of condition. Overall, this comparable is similar to the subject and we expect the subject to

achieve rental rates that are similar to this project on a monthly basis.

Rent Comparable Two

This comparable represents the Glens at Rolling Road apartments, a 270-unit multi-family garden property at 2340 Noonham Road, Baltimore, MD. The improvements were originally constructed in 1974 and were considered to be in average condition at the time of our research. The structure's

exterior depicts brick veneer construction components and the average unit size is 1,028 square feet. Kitchen amenities include a frost-free refrigerator, gas range, dishwasher, and a garbage disposal. Additional features include air-conditioning, alarm systems, and vertical & mini-blinds. Flooring is

carpeting in living areas and vinyl in the kitchens and baths. All units have washer and dryers and a patio. Project amenities include a pool and playground. According to the unit mix and asking rates for this property, the average base rental rate is $1.05 per square foot monthly ($1,074/unit) based

on typical lease terms of 12 months. Renovated units include new kitchens and baths with new cabinets, counters, and flooring, appliances and light fixtures. Premiums are charged for renovated

© 2014 CBRE, Inc.


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units, new windows, and end units. No utilities are included in the rental rate, and no concessions are currently offered. The property is currently 95% leased.

As compared to the subject, this project was viewed as inferior with respect to age and project amenities, while regarded as similar in terms of location, condition, design appeal and quality of construction. Overall, this comparable is inferior to the subject and we expect the subject to achieve

rental rates that are above this project on a monthly basis.

Rent Comparable Three

This comparable represents the Village of Pine Run Apartments, a 228-unit multi-family garden property at 103 Village of Pine Court, Baltimore, MD. The improvements were originally constructed in 1974 and were considered to be in average condition at the time of our research. The structure's

exterior depicts brick construction components and the average unit size is 963 square feet. Unit features include frost free refrigerator w/ice maker, gas range, dishwasher, wall-to-wall carpeting, patio or balcony, air conditioning, and mini-blinds. Townhomes feature a full size washer/dryer.

Project amenities include a pool, laundry facilities, and a playground. According to the unit mix and asking rates for this property, the average base rental rate is $1.11 per square foot monthly

($1,070/unit) based on typical lease terms of 12 months. No rent premiums were reported. Tenants pay electric and gas in apartment units, and all utilities in townhouse units. Concessions currently offered consist of 1 month free. The property is currently 99% leased.

As compared to the subject, this project was viewed as inferior with respect to location, age, condition and project amenities, while regarded as similar in terms of design appeal and quality of construction. Overall, this comparable is inferior to the subject and we expect the subject to achieve rental rates

that are above this project on a monthly basis.

Rent Comparable Four

This comparable represents the Carlson Woods Townhomes apartments, a 52-unit multi-family garden property at 103 Village of Pine Court, Baltimore, MD. The improvements were originally constructed in 1984 and were considered to be in average condition at the time of our research. The

structure's exterior depicts brick veneer construction components and the average unit size is 1,960 square feet. Kitchen amenities include a frost-free refrigerator, electric range, dishwasher, microwave, and a garbage disposal. Additional features include air-conditioning, washer/dryer, and vertical &

mini-blinds. All units have a patio space. Flooring is carpeting in living areas and vinyl in the kitchens and baths. Project amenities include a pool and playground. According to the unit mix and asking rates for this property, the average base rental rate is $0.75 per square foot monthly ($1,470/unit)

based on typical lease terms of 12 months. Premiums are charged for end units. No utilities are included in the rental rate, and no concessions are currently offered. The property is currently 98% leased.

© 2014 CBRE, Inc.


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As compared to the subject, this project was viewed as inferior with respect to location and project amenities, while regarded as similar in terms of age, condition, design appeal and quality of

construction. Overall, this comparable is inferior to the subject and we expect the subject to achieve rental rates that are above this project on a monthly basis.

Rent Comparable Five

This comparable represents the Valley Terrace apartments, a 100-unit multi-family garden property at 3630 Valley Terrace Court, Baltimore, MD. The improvements were originally constructed in 1971

and were considered to be in average condition at the time of our research. The structure's exterior depicts brick veneer construction components and the average unit size is 816 square feet. Kitchen amenities include a frost-free refrigerator, gas range, dishwasher, microwave and garbage disposal.

Additional features include air-conditioning, fireplace, vaulted ceilings, and vertical & mini-blinds. All units have a patio or balcony. Flooring is carpeting in living areas and vinyl in the kitchens and baths. Project amenities include a pool, playground, laundry facilities, and controlled access entry.

According to the unit mix and asking rates for this property, the average base rental rate is $1.17 per square foot monthly ($955/unit) based on typical lease terms of 12 months. No rent premiums were

reported. No utilities are included in the rental rate, and no concessions are currently offered. The property is currently 98% leased.

As compared to the subject, this project was viewed as inferior with respect to location, age and

project amenities, while regarded as similar in terms of condition, design appeal and quality of construction. Overall, this comparable is inferior to the subject and we expect the subject to achieve rental rates that are above this project on a monthly basis.

Rent Comparable Six

This comparable represents the Rockdale Gardens apartments, a 261-unit multi-family garden

property at 3601 Yennar Lane, Windsor Mill, MD. The improvements were originally constructed in 1985 and were considered to be in average condition at the time of our research. The structure's exterior depicts brick construction components and the average unit size is 1,110 square feet. Kitchen

amenities include a frost-free refrigerator, range, dishwasher, microwave and garbage disposal. Additional features include air-conditioning and vertical & mini-blinds. All units have a patio or balcony. Flooring is carpeting in living areas and vinyl in the kitchens and baths. Project amenities

include a pool and laundry facilities. According to the unit mix and asking rates for this property, the average base rental rate is $0.97 per square foot monthly ($1,072/unit) based on typical lease terms of 12 months. No rent premiums were reported. Rental rates for garden units include water, sewer,

and trash removal, while no utilities are included in townhome rental rates. Concessions currently offered consist of 1 month free. The property is currently 95% leased.

© 2014 CBRE, Inc.


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As compared to the subject, this project was viewed as inferior with respect to location and project amenities, while regarded as similar in terms of age, condition, design appeal and quality of

construction. Overall, this comparable is inferior to the subject and we expect the subject to achieve rental rates that are above this project on a monthly basis.

SUBJECT RENTAL INFORMATION

The following table shows the subject’s unit mix and quoted rental rates.


No. of Unit Unit Quoted Rent

Type Units Size (SF) Occ. $/Unit Per SF

2BR/1.5BA 438 1,042 SF 98% $1,050 $1.01

2BR/1.5BA Partial Ren 21 1,042 SF 100% $1,075 $1.03

2BR/1.5BA Ren 115 1,042 SF 91% $1,100 $1.06

3BR/1.5BA 151 1,062 SF 87% $1,100 $1.04

3BR/1.5BA Ren 21 1,062 SF 95% $1,200 $1.13

2BR/2BA 62 1,028 SF 87% $1,020 $0.99

Total/Average: 808 1,045 SF 94% $1,069 $1.02

Compiled by CBRE

The above rental rates exclude all utilities, as the tenant pays for water and sewer through a RUBS

program, and pays for all other utilities directly. Additionally, a monthly trash pickup fee of $8 is charged to all tenants.

MARKET RENT ESTIMATE

In order to estimate the market rates for the various floor plans, the subject unit types have been

compared with similar units in the comparable projects.

Utility Adjustments

Several comparable properties offer differing levels of utilities in their rental rates, as indicated below:

COMPARABLE RENT INCLUSIONSComparable Water/Sewer Trash

Stratton Meadows - -

Glens at Rolling Road - -

Village of Pine Run Apartments Y* Y*

Carlson Woods Townhomes - -

Valley Terrace - -

Rockdale Gardens - -

Subject - -

* Garden apartments only

Compiled by CBRE

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The subject’s rental rates exclude all utilities, while the Village at Pine Run provides water, sewer, and trash removal for garden apartments, and no utilities for townhomes. In order to provide a

meaningful comparison between properties, adjustments are required to account for this difference. In order to develop utility adjustments for comparable properties, we collected the following utility cost information from the US Housing and Urban Development:

TYPICAL UTILITY COSTS2-Bedroom

Unit

Water $33

Sewer $32

Trash $10

Source: Dept. of Housing and Urban Development

Utilizing the utility costs in the above table, adjustments have been calculated for each comparable

property, as indicated below:

COMPARABLE RENT ADJUSTMENTS

Comparable2-Bedroom

Unit

Stratton Meadows $0

Glens at Rolling Road $0

Village of Pine Run Apartments -$75

Carlson Woods Townhomes $0

Valley Terrace $0

Rockdale Gardens $0

Compiled by CBRE

Comparable rental rates in each of the following sections have been adjusted to account for

differences in utility structures. The following is a discussion of each unit type.

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Two-Bedroom Townhome Units

SUMMARY OF COMPARABLE RENTALSTWO BEDROOM TOWNHOME UNITS

Rental RatesComparable Plan Type Size $/Mo. $/SFValley Terrace 2BR/1.5BA TH 900 SF $1,080 $1.20

Glens at Rolling Road 2BR/1.5BA TH 1,024 SF $1,061 $1.04

Subject (Quoted Rent) 2BR/1.5BA 1,042 SF $1,050 $1.01

Subject (Concluded Mkt.) 2BR/1.5BA 1,042 SF $1,010 $0.97

Subject (Quoted Rent) 2BR/1.5BA Partial Ren 1,042 SF $1,075 $1.03

Subject (Concluded Mkt.) 2BR/1.5BA Partial Ren 1,042 SF $1,015 $0.97

Subject (Quoted Rent) 2BR/1.5BA Ren 1,042 SF $1,100 $1.06

Subject (Concluded Mkt.) 2BR/1.5BA Ren 1,042 SF $1,095 $1.05

Stratton Meadows 2BR/1.5BA TH 1,048 SF $1,124 $1.07

Compiled by CBRE

The subject’s quoted rental rates for its unrenovated units are below the range indicated by the comparables. An analysis of the most recent leases for this unit type is as follows:

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Date Size (SF) Asking Rate Lease RateDifference

($)Difference

(%)

12/6/2013 1,042 $1,050 $951 -$99 -9.4%

12/6/2013 1,042 $1,050 $1,005 -$45 -4.3%

12/6/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/6/2013 1,042 $1,050 $1,043 -$7 -0.7%

12/4/2013 1,042 $1,050 $873 -$177 -16.9%

12/4/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/4/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/1/2013 1,042 $1,050 $983 -$67 -6.4%

12/1/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/1/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/1/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/1/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/1/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/1/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/1/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/1/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/1/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/1/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/1/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/1/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/1/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/1/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/1/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/1/2013 1,042 $1,050 $1,013 -$37 -3.5%

12/1/2013 1,042 $1,050 $1,023 -$27 -2.6%

12/1/2013 1,042 $1,050 $1,048 -$2 -0.2%

12/1/2013 1,042 $1,050 $1,113 $63 6.0%

12/1/2013 1,042 $1,050 $1,138 $88 8.4%

Average Recent Lease Rate $1,015 -3.3%

Average In-Place $987 -6.0%

Compiled by CBRE

RECENT LEASE SUMMARY - 2BR/1.5BA (1,042 SF)

The subject’s most recent leases have been signed at an average rental rate below the subject’s quoted rates. Additionally, the average in-place rental rates are also below the quoted rates. Our

concluded rental rate gives greater weight to recent leases as they provide an indication of current market conditions. Considering the available data, monthly market rent for the subject units is estimated at $1,010.

The subject’s quoted rental rates for its partially renovated units are within the range indicated by the comparables. An analysis of the most recent leases for this unit type is as follows:

© 2014 CBRE, Inc.


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($)Difference

(%)

11/20/2013 1,042 $1,075 $943 -$132 -12.3%

10/25/2013 1,042 $1,075 $1,015 -$60 -5.6%

9/28/2013 1,042 $1,075 $1,065 -$10 -0.9%

Average Recent Lease Rate $1,075 $1,008 -6.3%

Average In-Place $992 -7.8%

Compiled by CBRE

RECENT LEASE SUMMARY - 2BR/1.5BA PARTIAL REN (1,042 SF)

The subject’s most recent leases have been signed at an average rental rate below the subject’s quoted rates. Additionally, the average in-place rental rates are also below the quoted rates. Our


The subject’s quoted rental rates for its renovated units are within the range indicated by the comparables. An analysis of the most recent leases for this unit type is as follows:

© 2014 CBRE, Inc.


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($)Difference

(%)

12/1/2013 1,042 $1,100 $1,113 $13 1.2%

11/30/2013 1,042 $1,100 $1,115 $15 1.4%

11/30/2013 1,042 $1,100 $1,135 $35 3.2%

11/29/2013 1,042 $1,100 $1,010 -$90 -8.2%

11/29/2013 1,042 $1,100 $1,030 -$70 -6.4%

11/29/2013 1,042 $1,100 $1,030 -$70 -6.4%

11/26/2013 1,042 $1,100 $1,115 $15 1.4%

11/23/2013 1,042 $1,100 $1,030 -$70 -6.4%

11/20/2013 1,042 $1,100 $938 -$162 -14.7%

11/20/2013 1,042 $1,100 $1,030 -$70 -6.4%

11/15/2013 1,042 $1,100 $943 -$157 -14.3%

11/6/2013 1,042 $1,100 $1,045 -$55 -5.0%

11/1/2013 1,042 $1,100 $1,100 $0 0.0%

11/1/2013 1,042 $1,100 $1,115 $15 1.4%

11/1/2013 1,042 $1,100 $1,115 $15 1.4%

11/1/2013 1,042 $1,100 $1,115 $15 1.4%

10/31/2013 1,042 $1,100 $1,673 $573 52.1%

10/26/2013 1,042 $1,100 $1,115 $15 1.4%

10/25/2013 1,042 $1,100 $1,295 $195 17.7%

10/24/2013 1,042 $1,100 $1,115 $15 1.4%

10/18/2013 1,042 $1,100 $1,080 -$20 -1.8%

10/10/2013 1,042 $1,100 $943 -$157 -14.3%

10/1/2013 1,042 $1,100 $1,115 $15 1.4%

Average Recent Lease Rate $1,100 $1,101 0.1%

Average In-Place $1,078 -2.0%

Compiled by CBRE

RECENT LEASE SUMMARY - 2BR/1.5BA REN (1,042 SF)

The subject’s most recent leases have been signed at an average rental rate that is consistent with the subject’s quoted rates; however the average in-place rental rates are below the quoted rates. Our concluded rental rate gives greater weight to recent leases as they provide an indication of current

market conditions. Considering the available data, monthly market rent for the subject units is estimated at $1,095.

© 2014 CBRE, Inc.


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Three-Bedroom Townhome Units

SUMMARY OF COMPARABLE RENTALSTHREE BEDROOM TOWNHOME UNITS

Rental RatesComparable Plan Type Size $/Mo. $/SFValley Terrace 3BR/1.5BA TH 950 SF $1,182 $1.24

Glens at Rolling Road 3BR/1.5BA 1,042 SF $1,123 $1.08

Subject (Quoted Rent) 3BR/1.5BA 1,062 SF $1,100 $1.04

Subject (Concluded Mkt.) 3BR/1.5BA 1,062 SF $1,140 $1.07

Subject (Quoted Rent) 3BR/1.5BA Ren 1,062 SF $1,200 $1.13

Subject (Concluded Mkt.) 3BR/1.5BA Ren 1,062 SF $1,220 $1.15

Stratton Meadows 3BR/1.5BA TH 1,062 SF $1,250 $1.18

Rockdale Gardens 3BR/1.5BA TH 1,356 SF $1,418 $1.05

Village of Pine Run Apartments 3BR/3BA TH 1,960 SF $1,516 $0.77

Carlson Woods Townhomes 3BR/2BA TH 1,960 SF $1,470 $0.75

Compiled by CBRE

The subject’s quoted rental rates for its unrenovated units are within the range indicated by the comparables. An analysis of the most recent leases for this unit type is as follows:

© 2014 CBRE, Inc.


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($)Difference

(%)

12/4/2013 1,062 $1,100 $1,138 $38 3.5%

12/1/2013 1,062 $1,100 $1,055 -$45 -4.1%

12/1/2013 1,062 $1,100 $1,138 $38 3.5%

12/1/2013 1,062 $1,100 $1,138 $38 3.5%

12/1/2013 1,062 $1,100 $1,138 $38 3.5%

11/30/2013 1,062 $1,100 $1,160 $60 5.5%

11/30/2013 1,062 $1,100 $1,260 $160 14.5%

11/29/2013 1,062 $1,100 $1,110 $10 0.9%

11/27/2013 1,062 $1,100 $1,100 $0 0.0%

11/21/2013 1,062 $1,100 $1,130 $30 2.7%

11/9/2013 1,062 $1,100 $1,138 $38 3.5%

11/1/2013 1,062 $1,100 $946 -$154 -14.0%

11/1/2013 1,062 $1,100 $1,130 $30 2.7%

11/1/2013 1,062 $1,100 $1,140 $40 3.6%

11/1/2013 1,062 $1,100 $1,160 $60 5.5%

11/1/2013 1,062 $1,100 $1,160 $60 5.5%

11/1/2013 1,062 $1,100 $1,160 $60 5.5%

11/1/2013 1,062 $1,100 $1,160 $60 5.5%

11/1/2013 1,062 $1,100 $1,160 $60 5.5%

11/1/2013 1,062 $1,100 $1,225 $125 11.4%

11/1/2013 1,062 $1,100 $1,168 $68 6.2%

11/1/2013 1,062 $1,100 $1,168 $68 6.2%

10/24/2013 1,062 $1,100 $1,100 $0 0.0%

10/1/2013 1,062 $1,100 $1,140 $40 3.6%

10/1/2013 1,062 $1,100 $1,140 $40 3.6%

10/1/2013 1,062 $1,100 $1,140 $40 3.6%

10/1/2013 1,062 $1,100 $1,140 $40 3.6%

10/1/2013 1,062 $1,100 $1,140 $40 3.6%

10/1/2013 1,062 $1,100 $1,140 $40 3.6%

10/1/2013 1,062 $1,100 $1,140 $40 3.6%


Average In-Place $1,162 5.6%

Compiled by CBRE

RECENT LEASE SUMMARY - 3BR/1.5BA (1,062 SF)

The subject’s most recent leases have been signed at an average rental rate above the subject’s quoted rates. Additionally, the average in-place rental rates are also above the quoted rates. Our


The subject’s quoted rental rates for its renovated units are within the range indicated by the comparables. An analysis of the most recent leases for this unit type is as follows:

© 2014 CBRE, Inc.


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($)Difference

(%)

11/16/2013 1,062 $1,200 $1,325 $125 10.4%

11/15/2013 1,062 $1,200 $1,120 -$80 -6.7%

10/1/2013 1,062 $1,200 $1,230 $30 2.5%


Average In-Place $1,220 1.6%

Compiled by CBRE

RECENT LEASE SUMMARY - 3BR/1.5BA REN (1,062 SF)

The subject’s most recent leases have been signed at an average rental rate above the subject’s quoted rates. Additionally, the average in-place rental rates are also above the quoted rates. Our


Two-Bedroom Garden Units

SUMMARY OF COMPARABLE RENTALSTWO-BEDROOM GARDEN UNITS

Rental RatesComparable Plan Type Size $/Mo. $/SFVillage of Pine Run Apartments 2BR/1BA 788 SF $835 $1.06

Valley Terrace 2BR/1BA 790 SF $863 $1.09

Village of Pine Run Apartments 2BR/2BA 798 SF $872 $1.09

Rockdale Gardens 2BR/1.5BA 1,021 SF $953 $0.93

Subject (Quoted Rent) 2BR/2BA 1,028 SF $1,020 $0.99

Subject (Concluded Mkt.) 2BR/2BA 1,028 SF $950 $0.92

Stratton Meadows 2BR/2BA 1,028 SF $910 $0.89

Compiled by CBRE

The subject’s most recent leases have been signed at an average rental rate below the subject’s

quoted rates. Additionally, the average in-place rental rates are also below the quoted rates. Our concluded rental rate gives greater weight to in-place leases as they provide an indication of rental rates across a longer timeframe. Considering the available data, monthly market rent for the subject

units is estimated at $950.

© 2014 CBRE, Inc.


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MARKET RENT CONCLUSIONS

The following chart shows the market rent conclusions for the subject:


No. Unit Monthly Rent Annual Rent AnnualUnits Unit Type Size Total SF $/Unit $/SF PRI $/Unit $/SF Total

438 2BR/1.5BA 1,042 SF 456,396 SF $1,010 $0.97 $442,380 $12,120 $11.63 $5,308,560

21 2BR/1.5BA Partial Ren 1,042 SF 21,882 SF $1,015 $0.97 $21,315 $12,180 $11.69 $255,780

115 2BR/1.5BA Ren 1,042 SF 119,830 SF $1,095 $1.05 $125,925 $13,140 $12.61 $1,511,100

151 3BR/1.5BA 1,062 SF 160,362 SF $1,140 $1.07 $172,140 $13,680 $12.88 $2,065,680

21 3BR/1.5BA Ren 1,062 SF 22,302 SF $1,220 $1.15 $25,620 $14,640 $13.79 $307,440

62 2BR/2BA 1,028 SF 63,736 SF $950 $0.92 $58,900 $11,400 $11.09 $706,800

808 1,045 SF 844,508 SF $1,047 $1.00 $846,280 $12,569 $12.03 $10,155,360

Compiled by CBRE

RENT ROLL ANALYSIS

The rent roll analysis serves as a crosscheck to the estimate of market rent for the subject. The collections shown on the rent roll include rent premiums and/or discounts.

RENT ROLL ANALYSIS

Total TotalRevenue Component Monthly Rent Annual Rent

763 Occupied Units at Contract Rates $789,356 $9,472,267

45 Vacant Units at Market Rates $48,500 $582,000

808 Total Units @ Contract Rent $837,856 $10,054,267

808 Total Units @ Market Rent $846,280 $10,155,360

Indicated Loss-to-Lease 1.0%

Compiled by CBRE

The variation between the total annual rent reflected in the rent roll analysis and the market rent conclusion is due to in-place leases that have not yet achieved market rental rates.

POTENTIAL RENTAL INCOME CONCLUSION

Within this analysis, potential rental income is estimated based upon the forward looking market

rental rates over the next twelve months. This method of calculating rental income is most prevalent in the local market and is consistent with the method used to derive overall capitalization rates from the comparable sales data.

© 2014 CBRE, Inc.


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POTENTIAL RENTAL INCOME

Year Total % Change

2011 Annualized $9,688,933 ---

2012 $9,925,349 2%

2013 Annualized $10,108,616 2%

2013 Budget $10,128,456 0%

CBRE Estimate $10,155,360 0%

Compiled by CBRE

Our pro forma estimate is above the most recent historical amount due to increasing rental rates at

the subject. Our estimate is above the budget due to higher projected rental rates for some of the subject units.

OPERATING HISTORY

The following table presents the available operating data for the subject.

OPERATING HISTORY

Year-Occupancy

2011 Annualized 2012

2013 Annualized 2013 Budget

CBRE Estimate

Total $/Unit Total $/Unit Total $/Unit Total $/Unit Total 2 $/UnitIncome

Rental Income $9,688,933 $11,991 $9,925,349 $12,284 $10,108,616 $12,511 $10,128,456 $12,535 $10,079,195 $12,474Vacant Space at Market Rents (784,023) (970) (846,858) (1,048) (935,706) (1,158) (607,929) (752) (498,882) (617) Bad Debt (65,424) (81) (92,060) (114) (279,761) (346) (94,516) (117) (99,776) (123) Other Income 300,095 371 334,382 414 339,687 420 347,840 430 343,400 425 Concessions (242,292) (300) (418,004) (517) (244,907) (303) (356,556) (441) (101,554) (126) RUBS/Utility Income 325,575 403 434,681 538 428,483 530 490,500 607 436,320 540 Effective Gross Income $9,222,864 $11,414 $9,337,490 $11,556 $9,416,411 $11,654 $9,907,795 $12,262 $10,158,703 $12,573

ExpensesReal Estate Taxes $529,712 $656 $472,244 $584 $554,221 $686 $512,100 $634 $704,632 $872Property Insurance 125,837 156 227,333 281 76,366 95 300,023 371 $169,680 210 Utilities 411,382 509 525,858 651 533,884 661 515,104 638 $545,400 675 Administrative & General 233,997 290 267,144 331 270,987 335 221,286 274 $250,480 310 Repairs & Maintenance 471,185 583 347,524 430 448,558 555 314,135 389 $436,320 540 Landscaping & Security 184,859 229 219,885 272 251,816 312 252,045 312 $254,520 315 Management Fee ¹ 318,409 394 252,882 313 258,531 320 271,900 337 $304,761 377 Payroll 787,836 975 1,041,598 1,289 1,005,492 1,244 1,095,075 1,355 $1,070,600 1,325 Non-Revenue Units 18,857 23 22,148 27 23,627 29 20,400 25 $24,240 30 Advertising & Promotion 50,524 63 47,339 59 49,491 61 67,962 84 $72,720 90 Reserves for Replacement - - - - - - - - $222,200 275 Operating Expenses $3,132,599 $3,877 $3,423,955 $4,238 $3,472,972 $4,298 $3,570,030 $4,418 $4,055,553 $5,019

Net Operating Income $6,090,265 $7,537 $5,913,535 $7,319 $5,943,439 $7,356 $6,337,765 $7,844 $6,103,150 $7,553

¹ (Mgmt. typically analyzed as a % of EGI) 3.5% 2.7% 2.7% 2.7% 3.0%

Annualized Amounts Represent 9 Months of Actuals 2 (Some revenue categories may reflect net figures)

Source: Operating statements

94.0%91.9% 96.0% 96.0% 96.0%

LOSS TO LEASE

Within the local market, buyers and sellers typically recognize a reduction in potential rental income due to the difference between market and contract rental rates. In this market, lease rates are typically

flat and are anticipated to roll to market every 12 months on average. As a result, actual collections typically lag behind market rates by approximately 6 months. Based upon the difference between market rent and contract rent, the current loss to lease associated with the subject is approximately

1.0% of gross rental income, and we estimate it will improve to 0.75% over the next 12 months. This

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method of calculating rental income is most prevalent in the local market and is consistent with the method used to derive overall capitalization rates from the comparable sales data.

CONCESSIONS

Rent concessions are currently available on a limited basis in the local market, and appear to be based on short-term occupancy variations at comparable properties. The subject reported historical concessions of 2.4% to 4.2% in recent periods, indicating that price competition is occurring in the

local market. We note that the subject has recently implemented a lease-rent optimization (LRO) system, whereby daily pricing adjustments are made in lieu of concessions; however price discounting will still occur as a result of market competition, and our analysis accounts for these discounts as part

of concessions. Considering the historical performance of the subject, as well as comments from comparable property managers, we have concluded to concessions of 1.00% of rental income.

VACANCY

The subject’s estimated stabilized occupancy rate was previously discussed in the market analysis. The subject’s vacancy is detailed as follows:

VACANCY

Year % PGI

2011 Annualized 8%

2012 4%

2013 Annualized 4%

2013 Budget 4%

Current 6%

CBRE Estimate 5%

Compiled by CBRE

CREDIT LOSS

The credit loss estimate is an allowance for nonpayment of rent or other income. The subject’s credit

loss is detailed as follows:

CREDIT LOSS

Year % PGI

2011 Annualized 0.7%

2012 0.9%


2013 Budget 0.9%

CBRE Estimate 1.0%

Compiled by CBRE

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OTHER INCOME

Other income is supplemental to that derived from leasing of the improvements. This includes categories such as forfeited deposits, vending machines, late charges, etc. The subject’s ancillary

income is detailed as follows:

OTHER INCOMEYear Total $/Unit

2011 Annualized $300,095 $371

2012 $334,382 $414

2013 Annualized $339,687 $420

2013 Budget $347,840 $430

Expense Comparable 1 N/A $430



CBRE Estimate $343,400 $425

Compiled by CBRE

The primary source of other income is late charges, pet fees, and other various administrative fees. The historical amounts indicate an increasing trend, and the most recent operating period falls at the upper end of the comparable range. Our estimate gives equal weight to the most recent operating

period and the budget.

RUBS INCOME

The subject includes a RUBS program (Ratio Utility Billing System), whereby a portion of the utility

expense is shared by tenants and reimbursed to the landlord on a pro rata basis. The subject’s RUBS income is detailed as follows:

RUBS/UTILITY INCOME

Year Total $/Unit

2011 Annualized $325,575 $403

2012 $434,681 $538

2013 Annualized $428,483 $530

2013 Budget $490,500 $607


Compiled by CBRE

The most recent operating period indicates a RUBS reimbursement of approximately 80% of utility expenses. Our estimate assumes this portion of utility expense will continue to be recovered.

EFFECTIVE GROSS INCOME

The subject’s effective gross income is detailed as follows:

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Year Total % Change

2011 Annualized $9,222,864 ---

2012 $9,337,490 1%

2013 Annualized $9,416,411 1%

2013 Budget $9,907,795 5%

CBRE Estimate $10,158,703 3%

Compiled by CBRE

Our pro forma estimate is above the most recent historical amounts and the most recent budget largely due to lower projected concessions.

OPERATING EXPENSE ANALYSIS

Expense Comparables

The following chart summarizes expenses obtained from recognized industry publications and/or comparable properties.

EXPENSE COMPARABLES

Comparable Number 1 2 3Subject

Concluded

Location Balt/Wash Metro Balt/Wash Metro Balt/Wash Metro

No. Units 791 270 347 808

Expense Year 2012 Budget 2012 2012

Effective Gross Income $10,125 $12,609 $9,548 $12,573

Expenses $/Unit $/Unit $/Unit

Real Estate Taxes $1,025 $534 $464 $872

Property Insurance 187 258 123 210

Utilities 734 684 2,107 675

Administrative & General 188 280 460 310

Repairs & Maintenance 933 527 1,159 540

Landscaping & Security 213 309 164 315

Management Fee ¹ 385 345 287 377

Payroll 1,164 1,312 1,041 1,325

Non-Revenue Units - 61 30 30

Advertising & Promotion 150 131 161 90

Reserves for Replacement - - - 275

Operating Expenses $4,980 $4,441 $5,998 $5,019

Operating Expense Ratio 49.2% 35.2% 62.8% 34.3%¹ (Mgmt. typically analyzed as a % of EGI) 3.8% 2.7% 3.0% 3.0%

Compiled by CBRE

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The following subsections represent the analysis for the pro forma estimate of each category of the subject’s stabilized expenses.

Real Estate Taxes

The subject’s expense is detailed as follows:

REAL ESTATE TAXES

Year Total $/Unit

2011 Annualized $529,712 $656

2012 $472,244 $584

2013 Annualized $554,221 $686

2013 Budget $512,100 $634

Expense Comparable 1 N/A $1,025




Compiled by CBRE

The subject’s taxes were previously discussed in the Tax and Assessment Data section of this report.

Our estimate is based on the current property assessment and tax rate, and is above the historical amounts due to a recent increase in assessment.

Property Insurance

Property insurance expenses typically include fire and extended coverage and owner’s liability coverage. The subject’s expense is detailed as follows:

PROPERTY INSURANCE

Year Total $/Unit

2011 Annualized $125,837 $156

2012 $227,333 $281

2013 Annualized $76,366 $95

2013 Budget $300,023 $371





Compiled by CBRE

The historical amounts vary and the 2013 annualized period does not appear to be representative of a full year. Our estimate is based on the most recent insurance premium reported by management.

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Utilities

Utility expenses include electricity, natural gas, water, trash and sewer. The subject’s expense is detailed as follows:

UTILITIES

Year Total $/Unit

2011 Annualized $411,382 $509

2012 $525,858 $651

2013 Annualized $533,884 $661

2013 Budget $515,104 $638





Compiled by CBRE

Utility expenses are typically property specific, and comparables offer a minimal indication of an appropriate level. We have found the best indication of this expense is the subject’s recent historical

amounts. Our estimate gives primary weight to the recent trend.

Administrative & General

Administrative expenses typically include legal costs, accounting, telephone, supplies, furniture, temporary help and items that are not provided by off-site management. The subject’s expense is detailed as follows:

ADMINISTRATIVE & GENERAL

Year Total $/Unit

2011 Annualized $233,997 $290

2012 $267,144 $331

2013 Annualized $270,987 $335

2013 Budget $221,286 $274





Compiled by CBRE

The historical amounts indicate an increasing trend, while the budget indicates an expected decline. Our estimate gives equal weight to the most recent operating period and the budget.

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Repairs and Maintenance

Repairs and maintenance expenses typically include all outside maintenance service contracts and the cost of maintenance and repairs supplies. The subject’s expense is detailed as follows:

REPAIRS & MAINTENANCE

Year Total $/Unit

2011 Annualized $471,185 $583

2012 $347,524 $430

2013 Annualized $448,558 $555

2013 Budget $314,135 $389





Compiled by CBRE

The historical amounts vary, and the most recent operating period falls within the comparable range. Our estimate gives greatest weight to the most recent operating period, and secondary weight to the

budget.

Landscaping and Security

Landscaping and security expenses typically include all outside landscaping and grounds maintenance service contracts and the cost of landscaping supplies, as well as security services. The subject’s expense is detailed as follows:

LANDSCAPING & SECURITY

Year Total $/Unit

2011 Annualized $184,859 $229

2012 $219,885 $272

2013 Annualized $251,816 $312

2013 Budget $252,045 $312





Compiled by CBRE

The historical amounts indicate an increasing trend, and the most recent operating period falls just above the comparable range. Our estimate gives greatest weight to the most recent operating period.

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Management Fee

Management expenses are typically negotiated as a percentage of collected revenues (i.e., effective gross income). The subject’s expense is detailed as follows:

MANAGEMENT FEE

Year Total % EGI

2011 Annualized $318,409 3.5%

2012 $252,882 2.7%

2013 Annualized $258,531 2.7%

2013 Budget $271,900 2.7%

CBRE Estimate $304,761 3.0%

Compiled by CBRE

Professional management fees in the local market range from 3.0% to 4.0% for comparable

properties. Given the subject’s size and the competitiveness of the local market area, we believe an appropriate management expense for the subject would be towards the lower end of the range.

Payroll

Payroll expenses typically include all payroll and payroll related items for all directly employed administrative personnel. Not included are the salaries or fees for off-site management firm personnel

and services. The subject’s expense is detailed as follows:

PAYROLL

Year Total $/Unit

2011 Annualized $787,836 $975

2012 $1,041,598 $1,289

2013 Annualized $1,005,492 $1,244

2013 Budget $1,095,075 $1,355




CBRE Estimate $1,070,600 $1,325

Compiled by CBRE

The historical amounts vary, and the most recent operating period and budget fall within the comparable range. Our estimate gives greatest weight to the budget, and secondary weight to the

most recent operating period.

Non-Revenue Units

Non-revenue units represent otherwise rentable units which are not available for lease due to their use for other purposes such as employee occupied units and/or model units. The lost revenue, which

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would have been generated by these units if leased, is deducted as an operating expense. The subject’s expense is detailed as follows:

NON-REVENUE UNITS

Year Total $/Unit

2011 Annualized $18,857 $23

2012 $22,148 $27

2013 Annualized $23,627 $29

2013 Budget $20,400 $25





Compiled by CBRE

The historical amounts are generally stable, and our estimate is based on the most recent operating period.

Advertising and Promotion

Advertising and promotion expenses typically include all costs associated with the promotion of the subject including advertisements in local publications, trade publications, yellow pages, et cetera. The

subject’s expense is detailed as follows:

ADVERTISING & PROMOTION

Year Total $/Unit

2011 Annualized $50,524 $63

2012 $47,339 $59

2013 Annualized $49,491 $61

2013 Budget $67,962 $84





Compiled by CBRE

The recent historical amounts fall below the comparable range, and the budget indicates an expected

increase. This expense has typically fallen below the comparable range, likely due to efficiencies gained by the large size of the subject. Our estimate is based on the budget.

Reserves for Replacement

Reserves for replacement have been estimated based on discussions with knowledgeable market participants who indicate a range from $150 to $300 per unit for comparable properties. The subject

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did not provide historical Reserves; therefore our estimate of $275 per unit is just above the midpoint indicated by local market professionals. This appears reasonable given the age of the subject and the

competitiveness of the local market.

OPERATING EXPENSE CONCLUSION


OPERATING EXPENSES

Year Total $/Unit

2011 Annualized $3,132,599 $3,877

2012 $3,423,955 $4,238

2013 Annualized $3,472,972 $4,298

2013 Budget $3,570,030 $4,418




CBRE Estimate $4,055,553 $5,019

Compiled by CBRE

The subject’s per unit operating expense pro forma is in line with the total per unit operating expenses indicated by the expense comparables. Our estimate is above the historical amounts due to the recent tax increase at the subject, and our inclusion of replacement reserves.

NET OPERATING INCOME CONCLUSION

The subject’s net operating income is detailed as follows:

NET OPERATING INCOME

Year Total $/Unit

2011 Annualized $6,090,265 $7,537

2012 $5,913,535 $7,319

2013 Annualized $5,943,439 $7,356

2013 Budget $6,337,765 $7,844

CBRE Estimate $6,103,150 $7,553

Compiled by CBRE

Our pro forma estimate is just above the most recent operating period and appears reasonable.

DIRECT CAPITALIZATION

Direct capitalization is a method used to convert a single year’s estimated stabilized net operating income into a value indication. The following subsections represent different techniques for deriving an overall capitalization rate for direct capitalization.

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Comparable Sales

The overall capitalization rates (OARs) confirmed for the comparable sales analyzed in the sales comparison approach are as follows:

COMPARABLE CAPITALIZATION RATES

Sale Sale Price

Sale Date $/Unit Occupancy OAR Basis OAR

1 Sep-13 $90,700 96% Existing 6.00%-7.76%

2 Feb-13 $86,000 100% Pro Forma 7.19%

3 Dec-12 $102,641 99% Pro Forma 7.25%

4 Nov-12 $115,912 99% Pro Forma 7.04%

5 Aug-12 $117,513 97% Existing 7.00%

6 Aug-12 $90,957 97% Existing 7.17%

Indicated OAR: 94% 7.25%-7.50%

Compiled by: CBRE

The overall capitalization rates for these sales were derived based upon the actual or pro-forma income characteristics of the property. Sale 1 transpired within the past three months, while Sales 2-6 represent slightly older transaction dates. Therefore, primary emphasis has been placed upon the

more recent data, which is generally reflective of current market trends, interest rates, and buyer’s expectations and motivation in the market. We note that Sale 1 represented a portfolio, and the capitalization rate for the townhome component was at the upper end of the range.

Published Investor Surveys

The results of the most recent investor surveys are summarized in the following chart.

OVERALL CAPITALIZATION RATES

Investment Type OAR Range Average

CBRE Apartments

Class A 3.75% - 7.75% 5.45%

Class B 4.25% - 8.50% 6.27%

Class C 4.75% - 9.50% 7.26%

PwC Apartment

National Data 3.50% - 10.00% 5.70%

Indicated OAR: 7.25%-7.50%

Compiled by: CBRE

The subject is considered to be a Class C property. Given its location and condition characteristics,

an OAR above the midpoint of the range indicated in the preceding table is considered appropriate.

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Market Participants

The results of recent interviews with knowledgeable real estate professionals are summarized in the following table.


Respondent Company OAR Income Date of Survey

Broker National Brokerage Firm 1 7.25%-7.50% Pro Forma Q4 2013

Broker National Brokerage Firm 2 7.25%-7.50% Pro Forma Q4 2013

Indicated OAR: 7.25%-7.50%

Compiled by: CBRE

Band of Investment

The band of the investment technique has been utilized as a crosscheck to the foregoing techniques. The Mortgage Interest Rate and the Equity Dividend Rate (EDR) are based upon current market yields

for similar investments. The analysis is shown in the following table.

BAND OF INVESTMENT

Mortgage Interest Rate 4.50%

Mortgage Term (Amortization Period) 25 Years

Mortgage Ratio (Loan-to-Value) 65%

Mortgage Constant (monthly payments) 0.06670

Equity Dividend Rate (EDR) 9.00%

Mortgage Requirement 65% x 0.0667 = 0.04336

Equity Requirement 35% x 0.09000 = 0.03150

100% 0.07486

Indicated OAR: 7.50%

Compiled by: CBRE

Capitalization Rate Conclusion

The following chart summarizes the OAR conclusions.

OVERALL CAPITALIZATION RATE - CONCLUSION

Source Indicated OAR

Comparable Sales 7.25%-7.50%

National Investor Survey 7.25%-7.50%

Market Participants 7.25%-7.50%

Band of Investment 7.50%

CBRE Estimate 7.25%

Compiled by: CBRE

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In concluding an overall capitalization rate for the subject, primary reliance has been placed upon the data obtained from the comparable sales and interviews with active market participants, as this data

tends to provide the most accurate depiction of both buyers’ and sellers’ expectations within the market. Further secondary support for our conclusion is noted via both the CBRE National Investor Survey and the band of investment methodology. Considering the data presented, the concluded

overall capitalization rate appears to be well supported in the local market.

We note that the concluded OAR represents a decline of 25 basis points from the prior appraisal of the subject. This is due to a newly assessed value of the subject that is more consistent with the

market value, resulting in less risk associated with future tax increases.

Direct Capitalization Summary

A summary of the direct capitalization at stabilized occupancy is illustrated in the following chart.

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DIRECT CAPITALIZATION SUMMARY

Income $/Door/Mo. $/Unit/Yr Total Potential Rental Income $8,463 $12,569 $10,155,360Loss to Lease 0.75% (63) (94) (76,165) Concessions 1.00% (85) (126) (101,554)

Adjusted Rental Income $8,315 $12,349 9,977,641 Vacancy 5.00% (416) (617) (498,882) Credit Loss 1.00% (83) (123.49) (99,776)

Net Rental Income $7,816 $11,608 $9,378,983

Other Income 286 425 343,400 RUBS/Utility Income 364 540 436,320

Effective Gross Income $8,466 $12,573 $10,158,703

ExpensesReal Estate Taxes $872 $704,632Property Insurance 210 169,680 Utilities 675 545,400 Administrative & General 310 250,480 Repairs & Maintenance 540 436,320 Landscaping & Security 315 254,520 Management Fee 3.00% 377 304,761 Payroll 1,325 1,070,600 Non-Revenue Units 30 24,240 Advertising & Promotion 90 72,720 Reserves for Replacement 275 222,200

Operating Expenses $5,019 $4,055,553

Operating Expense Ratio 39.92%

Net Operating Income $7,553 $6,103,150

OAR / 7.25%


Rounded $84,200,000

Deferred Maintenance -

Lease-Up Discount -


Rounded $84,200,000


Sensitivity Analysis Cap Rate Value

7.00% $87,187,900

7.25% $84,181,400

7.50% $81,375,300

Occupancy Value

92.50% $80,844,030

95.00% $84,181,379

97.50% $87,518,728

NOI Value

$5,797,992 $79,972,310

$6,103,150 $84,181,379

$6,408,307 $88,390,448

Compiled by CBRE

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CONCLUSION OF INCOME CAPITALIZATION APPROACH

The conclusions via the valuation methods employed for this approach are as follows:

INCOME CAPITALIZATION APPROACH VALUESDirect Capitalization Method $84,200,000

Reconciled Value $84,200,000

Compiled by CBRE

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RECONCILIATION OF VALUE

The value indications from the approaches to value are summarized as follows:

SUMMARY OF VALUE CONCLUSIONSSales Comparison Approach $81,000,000

Income Capitalization Approach $84,200,000


Compiled by CBRE

In the sales comparison approach, the subject is compared to similar properties that have been sold

recently or for which listing prices or offers are known. The sales used in this analysis are considered comparable to the subject, and the required adjustments were based on reasonable and well-supported rationale. In addition, market participants are currently analyzing purchase prices on

investment properties as they relate to available substitutes in the market. Therefore, the sales comparison approach is considered to provide a reliable value indication, but has been given secondary emphasis in the final value reconciliation.

The income capitalization approach is applicable to the subject since it is an income producing property leased in the open market. Market participants are primarily analyzing properties based on

their income generating capability. Therefore, the income capitalization approach is considered a reasonable and substantiated value indicator and has been given primary emphasis in the final value estimate.

Based on the foregoing, the fair value of the subject has been concluded as follows:

FAIR VALUE CONCLUSION


As Is Fee Simple Estate December 31, 2013 $84,000,000

Compiled by CBRE

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ASSUMPTIONS AND LIMITING CONDITIONS

1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to title that would adversely affect marketability or value. CBRE, Inc. is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CBRE, Inc., however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject’s title should be sought from a qualified title company that issues or insures title to real property.

2. Unless otherwise specifically noted in the body of this report, it is assumed: that the existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CBRE, Inc. professionals are not engineers and are not competent to judge matters of an engineering nature. CBRE, Inc. has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CBRE, Inc. by ownership or management; CBRE, Inc. inspected less than 100% of the entire interior and exterior portions of the improvements; and CBRE, Inc. was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CBRE, Inc. reserves the right to amend the appraisal conclusions reported herein.

3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property, was not observed by the appraisers. CBRE, Inc. has no knowledge of the existence of such materials on or in the property. CBRE, Inc., however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired.

We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal.

4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CBRE, Inc. This report may be subject to amendment upon re-inspection of the subject subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation.

5. It is assumed that all factual data furnished by the client, property owner, owner’s representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CBRE, Inc. has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor’s Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CBRE, Inc. reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should

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carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CBRE, Inc. of any questions or errors.

6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CBRE, Inc. will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject.

7. CBRE, Inc. assumes no private deed restrictions, limiting the use of the subject in any way.

8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposits or subsurface rights of value involved in this appraisal, whether they are gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred.

9. CBRE, Inc. is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject.

10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market.

11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CBRE, Inc. does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CBRE, Inc.

12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CBRE, Inc. to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form.

13. Also, unless otherwise noted in the body of this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated.

14. This study may not be duplicated in whole or in part without the specific written consent of CBRE, Inc. nor may this report or copies hereof be transmitted to third parties without said consent, which consent CBRE, Inc. reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express written consent of CBRE, Inc. which consent CBRE, Inc. reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a “sale” or “offer for sale” of any “security”, as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CBRE, Inc. shall have no accountability or responsibility to any such third party.

15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report.

16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used.

17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area of the subject and comparable properties has been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report.

© 2014 CBRE, Inc.


109

18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CBRE, Inc. unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CBRE, Inc. assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance.

19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client’s designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CBRE, Inc. assumes responsibility for any situation arising out of the Client’s failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired.

20. CBRE, Inc. assumes that the subject analyzed herein will be under prudent and competent management and ownership; neither inefficient nor super-efficient.

21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report.

22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist.

23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Notwithstanding any discussion of possible readily achievable barrier removal construction items in this report, CBRE, Inc. has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CBRE, Inc. has no specific information relating to this issue, nor is CBRE, Inc. qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject.

24. Client shall not indemnify Appraiser or hold Appraiser harmless unless and only to the extent that the Client misrepresents, distorts, or provides incomplete or inaccurate appraisal results to others, which acts of the Client approximately result in damage to Appraiser. Notwithstanding the foregoing, Appraiser shall have no obligation under this Section with respect to any loss that is caused solely by the active negligence or willful misconduct of a Client and is not contributed to by any act or omission (including any failure to perform any duty imposed by law) by Appraiser. Client shall indemnify and hold Appraiser harmless from any claims, expenses, judgments or other items or costs arising as a result of the Client's failure or the failure of any of the Client's agents to provide a complete copy of the appraisal report to any third party. In the event of any litigation between the parties, the prevailing party to such litigation shall be entitled to recover, from the other, reasonable attorney fees and costs.

25. As part of the client’s requested scope of work, an estimate of insurable value is provided herein. CBRE, Inc. has followed traditional appraisal standards to develop a reasonable calculation based upon industry practices and industry accepted publications such as the Marshal Valuation Service handbook. The methodology employed is a derivation of the cost approach which is primarily used as an academic exercise to help support the market value estimate and therefore is not reliable for Insurable Value estimates. Actual construction costs and related estimates can vary greatly from this estimate.

This analysis should not be relied upon to determine proper insurance coverage which can only be properly estimated by consultants considered experts in cost estimation and insurance underwriting. It is provided to aid the client/reader/user as part of their overall decision making process and no representations or warranties are made by CBRE, Inc. regarding the accuracy of this estimate and it is strongly recommend that other sources be utilized to develop any estimate of insurable value.

© 2014 CBRE, Inc.

CROSSWINDS AT ROLLING ROAD APARTMENTS | ADDENDA

ADDENDA

© 2014 CBRE, Inc.


ADDENDUM A

IMPROVED SALE DATA SHEETS

© 2014 CBRE, Inc.

APARTMENT SALE No. 1Windsor Mill PortfolioLocation DataLocation: 3701 Twin Lakes Court

Baltimore, MD 21244

County: Baltimore

Parcel No: Multiple--see comments

Atlas Ref:

Physical DataType: Multi-family Mid/High Rise

Land Area: 35.020 Acres

Grs Liv.Area 430,097 SF

Number of Units: 500

Average Unit Size: 860 SF

Year Built: 1971, Cedar Towers & Cedar Gardens built 1972, Valley Terrace built in 1969

No. of Stories: 8

Exterior: Brick

Condition: Average

Amenities: pool, balconies

Sale DataTransaction Type: Contract

Date: 9/2013

Marketing Time: NA

Grantor: Berkshire

Grantee: CONFIDENTIAL

Document No.:

Sale Price: $45,350,000

Financing: Market Terms

Cash Eq.Price: $45,350,000

Req.Capital Cost: $0

Adj. Sale Price: $45,350,000

Verification: broker

AnalysisUnderwriting Criteria: Direct Cap

Overall Cap Rate (OAR): 6.51%

Projected IRR:

Eff Gross Inc Mult (EGIM):

Op Exp Ratio (OER):

Price Per SF: $105.44

Price Per Unit: $90,700

Occupancy / Lease DataSource: Seller

Occupancy at Sale: 96%

Based On: Existing Income

Total Per Unit

Potential Gross Inc:

Vacancy & Credit Loss:

Effective Gross Inc:

Expenses & Reserves: $2,572,090 $5,144

Net Operating Inc: $2,952,545 $5,905

© 2014 CBRE, Inc.

APARTMENT SALE No. 1CommentsThe portfolio of properties represents three different communities - Cedar Towers, Cedar Gardens, and Valley Terrace. The three communities share a pool and a tennis/fitness center (not transferred with the sale) located across from Cedar Towers on Twin Lakes Court.

Cedar Towers is an eight-story mid/high-rise, 172 units, that was originally constructed in 1972 with renovations beginning in 2008.Cedar Gardens is a three-story garden-type apartment complex, 228 units, that was originally constructed in 1972.Valley Terrace is a three-story garden-type and townhouse community, 100 units, that was originally constructed in 1969.

The weighted average year of construction was 1972. The purchase and sale agreement included individual prices for each community they are as follows:

Cedar Towers - $15,600,000Cedar Gardens - $20,679,600Valley Terrace - $9,070,000

The Trailing-12 month historic cap rates are as follows:

Cedar Towers - 5.986%Cedar Gardens - 7.371%Valley Terrace - 7.760%

Tax IDs: 02-1800011441, 02-2000005537, 02-2000005538, 02-1600010136, 02-1600010140, 02-1600010141, 02-1700000839, 02-1900000359, and 02-2100004038.

© 2014 CBRE, Inc.

APARTMENT SALE No. 25900 Park Heights AvenueLocation DataLocation: 5900 Park Heights Avenue

Baltimore, MD 21215

County: Baltimore City

Parcel No: 27-23-4312-001

Atlas Ref:

Physical DataType: Multi-family Subsidized





Year Built: 1979

No. of Stories: 7

Exterior: Brick

Condition: Average

Amenities: on-site laundry, community rooms

Sale DataTransaction Type: Sale

Date: 2/2013

Marketing Time: NA

Grantor: Park Heights Associates LP

Grantee: Park Heights LLC

Document No.: 15739/0007

Sale Price: $8,600,000



Req.Capital Cost:


Verification: buyer

AnalysisUnderwriting Criteria: Direct Cap


Projected IRR:


7.86

Op Exp Ratio (OER): 43.50%



Occupancy / Lease DataSource: Buyer


Based On: Pro Forma Income

Total Per Unit



Effective Gross Inc: $1,094,748 $10,947

Expenses & Reserves: $476,209 $4,762

Net Operating Inc: $618,539 $6,185

Unit Type No. SF %

1BR/1BA 88 567 88%

1BR/1BA 12 662 12%

Totals/Avg

100 100%

Unit Mix

CommentsSeven-story brick high-rise apartment community built in 1979 in the Park Heights section of Northwest Baltimore, subject to a Section 8 HAP contract. Units are all one-bedroom, with through-the-wall HVAC systems. The HAP contract can be adjusted to market beginning in 2019, but as of the date of sale was above market levels.

© 2014 CBRE, Inc.

APARTMENT SALE No. 3Timbercroft Townhomes and ApartmentsLocation DataLocation: 67 Timbergrove Road

Owings Mills, MD 21117

County: Baltimore

Parcel No: 04-0412001600 & 04-0412001603

Atlas Ref:

Physical DataType: Multi-family Garden





Year Built: 1971

No. of Stories: 2

Exterior: Brick Veneer

Condition: Average

Amenities: swimming pool, laundry facilities, playground, and clubhouse.


Date: 12/2012

Marketing Time: NA

Grantor: Home Properties

Grantee: Timbercroft Housing, LLC

Document No.: 32928-0271

Sale Price: $29,150,000





Verification: Broker, Public record, CoStar

AnalysisUnderwriting Criteria:


Projected IRR: 0.00%





Occupancy / Lease DataSource:



Total Per Unit

Potential Gross Inc: $0 $0

Vacancy & Credit Loss: $0 $0

Effective Gross Inc: $0 $0

Expenses & Reserves: $0 $0


Unit Type No. SF %

1BR/1BR 94 650 33%

2BR/1BR/TH

174 875 - 975 61%

3BR/1BR/TH

16 1,040 6%

Totals/Avg

284 100%

Unit Mix

© 2014 CBRE, Inc.

APARTMENT SALE No. 3Commentscomparable represents the sale of the Timbercroft Apartments and Townhomes, a 284-unit garden and townhome-style, walk-up affordable housing multifamily community situated on a 15.2-acre site in Owings Mills, Maryland. The Property was originally developed in 1971 with two separate parcels (Section I - 122 units & Section III - 162 units) with each parcel subject to a project-based Section-8 HAP contract (Timbercroft I 119-units & Timbercroft III 158 units) or 277 of the units. The project received tax credits under the Low-Income Housing Preservation and Resident Homeownership Act of 1990. The improvements were in average condition at the time of the sale. The exterior walls are brick and vinyl siding and the average unit size was 840 square feet. The project amenities include a swimming pool, laundry facilities, playground, and clubhouse. Kitchens include a full appliance package (white) including a gas range/oven, vent hood, refrigerator, garbage disposal, and dishwasher. Tenants also receive an allowance for trash, snow and utility costs.

The property sold in December 2012 for $29,150,000, or $102,641 per unit. Pro-forma net operating income at the time of sale was approximately $7,441 per unit, for an overall capitalization rate of 7.25%. The OAR based on trailing 12-month income as was reportedly 6.9%. The community was reportedly 99% occupied at the time of the sale with monthly rents averaging $952 or about $1.13 per square-foot.

© 2014 CBRE, Inc.

APARTMENT SALE No. 4Falcon CrestLocation DataLocation: 59 High Falcon Road

Owings Mills, MD 21117

County: Baltimore

Parcel No: See comments

Atlas Ref:






Year Built: 1968, Renovated 2005

No. of Stories: 2


Condition: Average

Amenities: Clubhouse, fitness center, access to a swimming pool, and business center


Date: 11/2012

Marketing Time: 3 months

Grantor: Home Properties

Grantee: Falcon Crest Housing, LLC


Sale Price: $45,901,000





Verification: Broker





9.50




Occupancy / Lease DataSource: Broker



Total Per Unit

Potential Gross Inc: $4,832,237 $12,203



Expenses & Reserves: $1,602,654 $4,047


Unit Type No. SF %

1BR/1BA 29 820 7%

1BR/1BA 61 830 15%

2BR/1BA/TH

24 865 6%

2BR/1.5BA/TH

186 865 47%

2BR/1.5BA/TH

61 880 15%

2BR/1BA/TH

7 880 2%

3BR/1BA/TH

28 1,050 7%

Totals/Avg

396 100%

Unit Mix

© 2014 CBRE, Inc.

APARTMENT SALE No. 4CommentsThis comparable represents the sale of a garden and townhome-style multifamily property consisting of 396 units situated on a 22.6-acre parcel at 59 High Falcon Road in Owings Mills, Maryland. The improvements were constructed in two phases in 1968 and 1976 and most unit interiors have been renovated on turnover since 2005. The improvements are currently in average condition. Project amenities include a clubhouse (built in 2005), fitness center, access to a swimming pool (via cost sharing agreement with a neighboring apartment community), and business center. Typical kitchens have a full appliance package (white) with laminate countertops and vinyl tile flooring. Units have washer/dryer combinations. The pro-forma OAR includes a 3.0% management fee, $350 per unit in reserves and in-place real estate taxes. The current tax assessment (2011) is $20,122,500, or 44% of the contract price. With an adjustment for anticipated real estate taxes at 85% of the highest offer, the overall rate falls to the mid-6s.

© 2014 CBRE, Inc.

APARTMENT SALE No. 5The Hamptons at Town CenterLocation DataLocation: 19757 Crystal Rock Drive

Germantown, MD 20874

County: Montgomery

Parcel No: Multiple

Atlas Ref:






Year Built: 1979, R. 2002-2008

No. of Stories: 2

Exterior: Vinyl Siding

Condition: Average

Amenities: a swimming pool, clubhouse, fitness center, business center, tennis court, volleyball court, playgrounds, and laundry facilities


Date: 8/2012

Marketing Time: 2 months

Grantor: Fairfield Colony Limited Partnership

Grantee: Montgomery County/AHC

Document No.:

Sale Price: $90,250,000

Financing: Cash to Seller









Op Exp Ratio (OER):






Total Per Unit




Expenses & Reserves:


Unit Type No. SF %

1BR/1BA 496 604 65%

2BR/1BA 135 779 18%

2BR/2BA 137 836 18%

Totals/Avg

768 100%

Unit Mix

© 2014 CBRE, Inc.

APARTMENT SALE No. 5CommentsThe Hamptons at Town Center is located across Germantown Road from Germantown Town Center. The financial data shown above reflects the trailing 12 data from 2011. In 2011, concessions were approximately 9% of the potential gross rent. The operating expenses include replacement reserves $435/unit and the management fee was 2.5%. This property does not offer an affordable housing component because it was constructed prior to the implementation of Montgomery County's MPDU program.

The buyers pro forma NOI (including reserves) is $6,633,375, indicating a 7.35% capitalization rate. The property offers assumable debt of an existing $65M mortgage which is interest-only through the maturity date of Feb 2017 at an interest rate of 5.481%. This property was under contract in 2010 for an undisclosed price. This property was re-listed in March of 2011.

The property's assessment is about 62% of the sale price. The Montgomery County PINs are: 09-01975146, 09-02036301, 09-01813591, and 09-00772552.

© 2014 CBRE, Inc.

APARTMENT SALE No. 6Villas at Langley Location DataLocation: 8100 15th Avenue

Hyattsville, MD 20783

County: Prince George's

Parcel No: 17-3952900

Atlas Ref:






Year Built: 1964

No. of Stories: 3

Exterior: Brick

Condition: Average

Amenities: a swimming pool, playground, basketball court, and laundry facilities


Date: 8/2012

Marketing Time: NA

Grantor: Willowbrook LP

Grantee: Krieger Skyline LLC


Sale Price: $48,164,409

Financing: See Comments


Req.Capital Cost: $2,000,000


Verification: Broker, Public Record











Total Per Unit

Potential Gross Inc: $0 $0


Effective Gross Inc: $0 $0

Expenses & Reserves: $0 $0


Unit Type No. SF %

1BR/1BA 44 685 7%

1BR1/BA Patio/Balcon

121 685 21%

2BR/1BA 54 875 9%

2BR/1BA Patio/Balcon

260 875 44%

2BR/1BA/Den/Balcony

11 985 2%

2BR/1BA/Den/Patio

4 985 1%

3BR/1.5BA/Balcony

59 1,050 10%

3BR/1.5BA/Patio

26 1,050 4%

3BR/1.5BA/Den/Balcon

11 1,160 2%

Totals/Avg

590 100%

Unit Mix

© 2014 CBRE, Inc.

APARTMENT SALE No. 6CommentsThis comparable represents the sale of Villas at Langley, a 590-unit garden-style multifamily property situated on a 24.45-acre parcel in Hyattsville, Maryland. The improvements were constructed in 1964 and were in average condition. The exterior walls are brick and the average unit size was 855 square feet. Project amenities included a swimming pool, playground, basketball court, and laundry facilities. Interior features include a full appliance package with gas range/oven, but do not include dishwashers. The buildings have central heat and air conditioning. No major upgrades have been completed within the unit interiors.

The property sold in August 2012 for $48,164,409; however, the property transferred with assumed debt with an outstanding principal balance of $37,464,900 at 5.04%, due in 2019. A $3,500,000 adjustment has been added to the sale price to account for these unfavorable loan terms. Additionally, the buyer was projecting approximately $2 million in immediate capital needs, resulting in a total adjusted sale price of $53,664,409, or $90.957 per unit. Existing net operating income at the time of sale was $3,850,000, or $6,525 per unit, for an overall capitalization rate of 7.17%. Occupancy at the time of sale was 97%. The assessed value at the time of the sale was approximately 86% of the sales price (prior to adjustments); however, the property was reassessed effective January 2013 at approximately 98% of the sale price.

© 2014 CBRE, Inc.


ADDENDUM B

RENT COMPARABLE DATA SHEETS

© 2014 CBRE, Inc.

APARTMENT COMPARABLE No. 1Stratton MeadowsLocation DataLocation: 2 Heatherton Court

Baltimore, MD 21244

County: Baltimore

Parcel No: 02-2000013190+

Atlas Ref:



Year Built 1989

No. of Stories 3

Average Unit Size: 1,047 SF


Condition: Average

Amenities: a pool, playground, and community garden

Occupancy / Lease DataOccupancy: 99%

Rent Premiums: renovations and end units

Concessions: None

Typical Lease Term: 12 Months

Utilities incl. in Rent: None

Tenant Profile: Various

Management Co.: Harbor Group

Phone No: 410-277-4500

Survey Date: 12/13

Unit Type No. SF Rent Rent Per Sq Ft

Efficiency 2 600 $880 $1.47

2BR/2BA 20 1,028 $910 $0.89

2BR/1.5BA TH 173 1,048 $1,124 $1.07

3BR/1.5BA TH 75 1,062 $1,250 $1.18

Total/Avg 270 282,714 $1,141 $1.09

Rent Summary

CommentsThe property is located at the intersection of Tudsbury Road and Fairbrook Road in the Woodlawn sub-market of western Baltimore County. The property's 270 townhomes and apartments are in 23 buildings on approximately 26.74 acres with 448 parking spaces.

Kitchen amenities include electric range, frost-free refrigerators, dishwasher, and garbage disposal. Select units include a microwave oven. Additional features include air-conditioning, alarm system, vertical/mini-blinds, carpeting in living areas, vinyl flooring in the kitchen and tile and vinyl in the bathroom. All units have a washer and dryer and a patio or balcony. The efficiencies and garden apartments have stackable a washer/dryer. Select renovated units include new kitchens for a $50 premium, and full renovations at $100 - $125 each. Additional premiums include end units ($10). Premiums are included in the above average rental rate ranges. Reserved parking is available for $30 per month. A monthly trash pickup fee of $8 is charged to all tenants. Parcel #s are 02-2000013190, 02-2000013191, 02-2000013192.

© 2014 CBRE, Inc.

APARTMENT COMPARABLE No. 2Glens at Rolling RoadLocation DataLocation: 2340 Noonham Road

Baltimore, MD 21244

County: Baltimore

Parcel No: 02-1600009370

Atlas Ref:



Year Built 1974

No. of Stories 2



Condition: Average

Amenities: a pool and playground


Rent Premiums: renovations, new windows, and end units

Concessions: None




Management Co.: Harbor Group

Phone No: 410-298-2442

Survey Date: 12/13


2BR/1.5BA TH 212 1,024 $1,061 $1.04

3BR/1.5BA 58 1,042 $1,123 $1.08

Total/Avg 270 277,524 $1,074 $1.05

Rent Summary

CommentsThe property is just west of the intersection of N. Rolling Road and Stony Barr Road in the Woodlawn sub-market of western Baltimore County. The property's 270 townhomes and apartments are in 36 buildings on approximately 29.14 acres with 518 parking spaces.

Kitchen amenities include a frost-free refrigerator, gas range, dishwasher, and a garbage disposal. Additional features include air-conditioning, alarm systems, and vertical & mini-blinds. Flooring is carpeting in living areas and vinyl in the kitchens and baths. All units have washer and dryers and a patio. Premiums for renovated units ($75 - $100), new windows ($15), and end units ($15) are included in the above average rental rate ranges. Renovated units include new kitchens and baths with new cabinets, counters, and flooring, appliances and light fixtures. A monthly trash pickup fee of $8 is charged to all tenants.

© 2014 CBRE, Inc.

APARTMENT COMPARABLE No. 3Village of Pine Run ApartmentsLocation DataLocation: 103 Village of Pine Court

Baltimore, MD 21244

County: Baltimore

Parcel No: 02-1600009508+

Atlas Ref:



Year Built 1974

No. of Stories 3


Exterior: Brick

Condition: Average

Amenities: a pool, laundry facilities, and a playground


Rent Premiums: None

Concessions: 1 month free


Utilities incl. in Rent: water, sewer, and trash (None in TH)

Tenant Profile: Varies

Management Co.: Apartment Services

Phone No: 410-655-8300

Survey Date: 12/13


1BR/1BA 18 563 $841 $1.49

1BR/1BA Den 26 599 $846 $1.41

2BR/1BA 20 788 $910 $1.15

2BR/1.5BA 20 788 $930 $1.18

2BR/2BA 20 798 $947 $1.19

2BR/2BA/Den 26 934 $1,024 $1.10

3BR/1.5BA 18 938 $1,174 $1.25

3BR/2BA 20 958 $1,185 $1.24

3BR/1.5BA/Den 18 1,074 $1,200 $1.12

3BR/2BA/Den 18 1,094 $1,200 $1.10

3BR/3BA TH 24 1,960 $1,516 $0.77

Total/Avg 228 219,580 $1,070 $1.11

Rent Summary

CommentsThis complex is located south of Liberty Road approximately 1.5 miles west of I-695. Unit features include frost free refrigerator w/ice maker, gas range, dishwasher, wall-to-wall carpeting, patio or balcony, air conditioning, and mini-blinds. Townhomes feature a full size washer/dryer. Tenants pay electric and gas in apartment units, and all utilities in townhouse units. The 3 bedroom townhomes include 2 full and 2 half-baths. Unit mix was not provided, so an even mix was estimated. Parcels include 02-1600009509 & 02-1600009508

© 2014 CBRE, Inc.

APARTMENT COMPARABLE No. 4Carlson Woods TownhomesLocation DataLocation: 103 Village of Pine Court

Baltimore, MD 21244

County: Baltimore

Parcel No: 02-2200024568

Atlas Ref:


Number of Units: 52

Year Built 1984

No. of Stories 3



Condition: Average

Amenities: a pool and playground


Rent Premiums: end units

Concessions: None

Typical Lease Term: 12 months


Tenant Profile: Professional

Management Co.: Apartments Services Inc.

Phone No: 410-655-2700

Survey Date: 12/13


3BR/2BA TH 52 1,960 $1,470 $0.75

Total/Avg 52 101,920 $1,470 $0.75

Rent Summary

CommentsThis apartment complex is located along the west side of Carlson Lane just south of Kenjac Road in Windsor Mill, MD. This project is located on Carlson Lane, but the rental office is shared with the Village of Pine Run apartments. Kitchen amenities include a frost-free refrigerator, electric range, dishwasher, microwave, and a garbage disposal. Additional features include air-conditioning, washer/dryer, and vertical & mini-blinds. All units have a patio space. Flooring is carpeting in living areas and vinyl in the kitchens and baths. Premiums of $28 are charged for end units, and are included in the above average rental rates.

© 2014 CBRE, Inc.

APARTMENT COMPARABLE No. 5Valley TerraceLocation DataLocation: 3630 Valley Terrace Court

Baltimore, MD 21244

County: Baltimore

Parcel No: 02-2100004038

Atlas Ref:



Year Built 1971

No. of Stories 2



Condition: Average

Amenities: a pool, playground, laundry facilities, and controlled access entry


Rent Premiums: end units

Concessions: None




Management Co.: Berkshire Property Advisors

Phone No: 410-655-4290

Survey Date: 12/13


1BR/1BA 18 645 $800 $1.24

2BR/1BA 42 790 $863 $1.09

2BR/1.5BA TH 24 900 $1,080 $1.20

3BR/1.5BA TH 16 950 $1,182 $1.24

Total/Avg 100 81,590 $955 $1.17

Rent Summary

CommentsThis apartment complex is located west of Rolling Road and north of Liberty Road (SR-26) in Windsor mill, MD. The property includes 60 garden apartment units, and 40 townhomes on 6.93 acres. Kitchen amenities include a frost-free refrigerator, gas range, dishwasher, microwave and garbage disposal. Additional features include air-conditioning, fireplace, vaulted ceilings, and vertical & mini-blinds. All units have a patio or balcony. Flooring is carpeting in living areas and vinyl in the kitchens and baths.

© 2014 CBRE, Inc.

APARTMENT COMPARABLE No. 6Rockdale GardensLocation DataLocation: 3601 Yennar Lane

Windsor Mill, MD 21244

County: Baltimore

Parcel No: 02-0210950442

Atlas Ref:



Year Built 1985, est.

No. of Stories 3


Exterior: Brick

Condition: Average

Amenities: a pool and laundry facilities


Rent Premiums: None

Concessions: 1 month free




Management Co.: Apartment Services

Phone No: 410-655-8600

Survey Date: 12/13


1BR/1BA 30 722 $821 $1.14

2BR/1.5BA 112 1,021 $953 $0.93

3BR/2BA 88 1,269 $1,187 $0.94

3BR/1.5BA TH 31 1,356 $1,418 $1.05

Total/Avg 261 289,720 $1,072 $0.97

Rent Summary

CommentsThis apartment complex is located on the west side of Rolling Road just north of Liberty Road (SR-26) in Windsor Mill, MD. Kitchen amenities include a frost-free refrigerator, range, dishwasher, microwave and garbage disposal. Additional features include air-conditioning and vertical & mini-blinds. All units have a patio or balcony. Flooring is carpeting in living areas and vinyl in the kitchens and baths. Rental rates for garden units include water, sewer, and trash removal, while no utilities are included in townhome rental rates.

© 2014 CBRE, Inc.


ADDENDUM C

OPERATING DATA

© 2014 CBRE, Inc.

Database: HARBORGROUP Profit & Loss Variance Report Page: 1ENTITY: CRA HARBORGROUP Date: 10/25/2013

CROSSWINDS AT ROLLING ROAD Time: 10:04 AMFor Period Ending September 30, 2013

Accrual, CashProject SF / # of Units: 0

MTD MTD MTD YTD YTD YTD AnnualActual Budget Variance Actual Budget Variance Budget

INCOME

RENTAL INCOME

1010 GROSS POTENTIAL RENT 836,026.35 842,776.00 (6,749.65) 7,536,261.79 7,534,066.00 2,195.79 10,070,8321020 VACANCY (77,568.36) (42,139.00) (35,429.36) (698,893.20) (464,165.00) (234,728.20) -607,9291030 MANAGEMENT OFFICE/MODEL (1,076.00) (1,105.00) 29.00 (9,684.00) (9,945.00) 261.00 -13,2601040 STAFF UNITS (1,025.80) (595.00) (430.80) (8,036.52) (5,355.00) (2,681.52) -7,1401050 CONCESSIONS (12,862.87) (27,164.00) 14,301.13 (180,848.13) (275,368.00) 94,519.87 -356,556

RENT COLLECTIBLE 743,493.32 771,773.00 (28,279.68) 6,638,799.94 6,779,233.00 (140,433.06) 9,085,9471065 PREPAID RENT 30,828.01 0.00 30,828.01 60,466.49 0.00 60,466.49 01070 UNCOLLECTED (18,228.39) (7,718.00) (10,510.39) (217,598.00) (84,004.00) (133,594.00) -107,072

NET RENT COLLECTED 756,092.94 764,055.00 (7,962.06) 6,481,668.43 6,695,229.00 (213,560.57) 8,978,875

OTHER INCOME

3010 LATE CHARGES 7,964.76 9,250.00 (1,285.24) 70,828.30 75,500.00 (4,671.70) 101,0003030 APPLICATION FEES 1,638.60 2,100.00 (461.40) 16,124.22 15,750.00 374.22 20,6503040 TENANT DAMAGE REIMBURSEMENT 2,943.93 6,000.00 (3,056.07) 51,716.76 51,000.00 716.76 69,0003050 UTILITIES RECOVERY 13.53 300.00 (286.47) 2,360.62 3,100.00 (739.38) 4,0003066 CABLE INCOME 1,732.98 0.00 1,732.98 6,170.88 4,710.00 1,460.88 6,2803085 BAD DEBT WRITE\OFF (21,479.89) (3,473.00) (18,006.89) (167,868.42) (37,800.00) (130,068.42) -48,1813086 REFERRED TO COLLECTIONS/ATTNY 21,479.89 3,473.00 18,006.89 167,868.42 37,800.00 130,068.42 48,1813087 BAD DEBT COLLECTED 660.71 972.00 (311.29) 10,374.71 10,129.00 245.71 12,7243110 LEASE BREAK FEE 0.00 2,000.00 (2,000.00) 9,285.20 14,000.00 (4,714.80) 17,0003120 PET FEES 1,938.35 2,375.00 (436.65) 17,306.96 20,000.00 (2,693.04) 26,5003150 STORAGE INCOME 179.31 100.00 79.31 179.31 900.00 (720.69) 1,2003155 SHORT TERM PREMIUM 2,128.10 2,500.00 (371.90) 26,656.79 22,500.00 4,156.79 28,7503170 SECURITY DEPOSIT FORFEIT 200.00 0.00 200.00 645.00 0.00 645.00 03180 MISCELLANEOUS INCOME 6,417.97 6,280.00 137.97 53,886.36 58,520.00 (4,633.64) 77,3603185 PARKING INCOME 140.00 0.00 140.00 700.00 0.00 700.00 03186 WATER/SEWER REIMBURSEMENT 27,203.64 34,960.00 (7,756.36) 264,893.75 311,880.00 (46,986.25) 414,4603187 TRASH REIMBURSEMENT 5,702.23 5,800.00 (97.77) 50,927.49 51,760.00 (832.51) 69,160

TOTAL OTHER INCOME 58,864.11 72,637.00 (13,772.89) 582,056.35 639,749.00 (57,692.65) 848,084

TOTAL INCOME 814,957.05 836,692.00 (21,734.95) 7,063,724.78 7,334,978.00 (271,253.22) 9,826,959

EXPENSES

RENTING EXPENSE

5010 PROMOTIONAL MATERIALS 0.00 0.00 0.00 1,333.33 0.00 (1,333.33) 05030 BROCHURES 0.00 0.00 0.00 0.00 2,000.00 2,000.00 2,0005050 APARTMENT GUIDES 2,209.00 2,301.00 92.00 23,576.67 20,612.00 (2,964.67) 27,5155070 ONLINE ADVERTISING 485.00 1,168.00 683.00 7,694.58 9,308.00 1,613.42 12,4145090 SPECIALTY ADVERTISING 0.00 685.00 685.00 3,313.77 8,578.00 5,264.23 10,7335120 COMMUNITY FUNCTIONS 0.00 0.00 0.00 0.00 3,500.00 3,500.00 4,5005160 TENANT REFERRAL FEES 300.00 900.00 600.00 1,200.00 8,100.00 6,900.00 10,800

TOTAL RENTING EXPENSE 2,994.00 5,054.00 2,060.00 37,118.35 52,098.00 14,979.65 67,962

ADMINISTRATIVE COSTS

5410 OFFICE SUPPLIES 590.67 900.00 309.33 5,928.63 8,100.00 2,171.37 10,8005420 OFFICE RENT 0.00 0.00 0.00 117.81 0.00 (117.81) 0

© 2014 CBRE, Inc.





5430 TRAINING/SEMINARS 226.24 249.00 22.76 4,080.45 3,371.00 (709.45) 4,2285440 OFFICE EQUIP/LEASE/PURCHASE 199.21 205.00 5.79 3,257.23 1,845.00 (1,412.23) 2,4605455 CAREER APPAREL 0.00 0.00 0.00 3,699.19 2,400.00 (1,299.19) 4,8005460 TRAVEL 0.00 0.00 0.00 (710.73) 0.00 710.73 05470 DUES/SUBSCRIPTIONS 0.00 0.00 0.00 1,322.90 1,275.00 (47.90) 1,2755480 CREDIT REPORTS 2,087.40 1,045.00 (1,042.40) 14,262.10 9,975.00 (4,287.10) 12,8255510 LEGAL EXPENSE 7,501.00 9,000.00 1,499.00 75,655.52 72,000.00 (3,655.52) 98,0005515 MRI FEES 3,951.04 1,746.00 (2,205.04) 20,176.35 15,714.00 (4,462.35) 20,9525530 TELEPHONE - LOCAL LINES 1,258.53 2,070.00 811.47 11,468.99 17,880.00 6,411.01 24,0905550 MISCELLANEOUS 1,740.32 275.00 (1,465.32) 28,760.63 2,475.00 (26,285.63) 3,3005560 SECURITY DEPOSIT REFUND 0.00 0.00 0.00 328.38 0.00 (328.38) 05565 SECURITY DEPOSITS FORFEITED 0.00 0.00 0.00 (100.00) 0.00 100.00 05570 INTEREST EXPENSE 0.00 0.00 0.00 1,741.54 0.00 (1,741.54) 0

TOTAL ADMIN. COSTS 17,554.41 15,490.00 (2,064.41) 169,988.99 135,035.00 (34,953.99) 182,730

MANAGEMENT FEES

5700 MANAGEMENT FEES 20,209.13 23,009.00 2,799.87 192,744.31 201,711.00 8,966.69 270,240

TOTAL MANAGEMENT FEES 20,209.13 23,009.00 2,799.87 192,744.31 201,711.00 8,966.69 270,240

SALARIES & BENEFITS

5805 NEWSPAPERS - HELP WANTED 0.00 0.00 0.00 0.00 150.00 150.00 1505810 PROPERTY MANAGER/ADMINISTRATOR 5,384.62 6,214.00 829.38 41,916.88 61,444.00 19,527.12 81,5785820 ASSISTANT MGR/LEASING AGENT 22,524.33 25,868.00 3,343.67 209,873.91 221,212.00 11,338.09 294,3165830 MAINTENANCE/ENGINEER/SUPERVISOR 5,378.58 6,029.00 650.42 54,462.95 51,983.00 (2,479.95) 69,0745840 MAINTENANCE PAYROLL 27,975.62 33,313.00 5,337.38 253,288.13 286,134.00 32,845.87 380,6905855 TEMPORARY EMPLOYMENT 370.00 0.00 (370.00) 17,526.00 0.00 (17,526.00) 05860 LEASING BONUSES 6,955.51 4,666.00 (2,289.51) 49,180.92 41,524.00 (7,656.92) 54,3475870 FRINGE BENEFITS 5,964.93 8,764.00 2,799.07 57,878.57 75,344.00 17,465.43 101,6365875 WORKERS COMP INSURANCE (1,315.91) 1,622.00 2,937.91 12,443.59 14,098.00 1,654.41 18,7505880 PAYROLL TAXES 5,898.50 6,190.00 291.50 57,236.06 71,862.00 14,625.94 90,4325882 RECRUITING EXPENSE 0.00 0.00 0.00 1,146.77 0.00 (1,146.77) 05885 PAYROLL PROCESSING 525.59 335.00 (190.59) 2,326.58 2,910.00 583.42 3,870

TOTAL SALARIES & BENEFITS 79,661.77 93,001.00 13,339.23 757,280.36 826,661.00 69,380.64 1,094,843

CONTRACT REPAIRS

6010 GROUNDS 9,316.58 15,070.00 5,753.42 139,879.55 134,835.00 (5,044.55) 180,0456020 POOL 8,100.00 5,600.00 (2,500.00) 33,337.50 28,000.00 (5,337.50) 28,0006030 SECURITY 5,308.19 6,000.00 691.81 48,982.49 54,000.00 5,017.51 72,0006040 CLEANING 3,922.00 1,875.00 (2,047.00) 23,394.80 20,000.00 (3,394.80) 24,3756045 SNOW REMOVAL 0.00 0.00 0.00 5,111.00 6,000.00 889.00 6,0006060 PLUMBING 250.00 1,450.00 1,200.00 6,465.16 11,550.00 5,084.84 15,7506070 ELECTRICAL 0.00 0.00 0.00 597.85 0.00 (597.85) 06100 BUILDING EXTERIORS/MISC. 400.00 0.00 (400.00) 2,920.00 0.00 (2,920.00) 06140 GLASS 0.00 600.00 600.00 3,705.00 4,900.00 1,195.00 6,5006150 BUILDING INTERIOR/MISC. 150.00 0.00 (150.00) (630.00) 0.00 630.00 06160 CARPET REPAIR/CLEANING 6,974.36 2,975.00 (3,999.36) 52,417.01 26,775.00 (25,642.01) 35,7006190 EXTERMINATING CONTRACT 2,490.00 725.00 (1,765.00) 14,967.65 8,025.00 (6,942.65) 10,7006200 INTERIOR PAINT 13,090.00 6,000.00 (7,090.00) 120,400.62 55,500.00 (64,900.62) 69,0006220 HVAC REPAIRS 0.00 550.00 550.00 2,034.00 4,750.00 2,716.00 6,2506250 APPLIANCE REPAIRS 150.00 0.00 (150.00) 150.00 0.00 (150.00) 06290 EQUIPMENT REPAIRS 0.00 0.00 0.00 1,382.70 0.00 (1,382.70) 06310 LOCKS & KEYS 686.80 100.00 (586.80) 3,783.93 900.00 (2,883.93) 1,200

TOTAL CONTRACT REPAIRS 50,837.93 40,945.00 (9,892.93) 458,899.26 355,235.00 (103,664.26) 455,520

© 2014 CBRE, Inc.





MAINT/REPAIR SUPPLIES

6510 GROUND SUPPLIES 12.72 0.00 (12.72) 13.72 4,000.00 3,986.28 5,5006520 POOL SUPPLIES 0.00 0.00 0.00 0.00 500.00 500.00 5006540 JANITORIAL SUPPLIES 122.84 50.00 (72.84) 1,199.55 450.00 (749.55) 6006560 ELECTRICAL SUPPLIES 1,055.20 900.00 (155.20) 8,161.26 8,100.00 (61.26) 10,8006570 PLUMBING SUPPLIES 674.68 2,500.00 1,825.32 9,393.29 22,500.00 13,106.71 30,0006610 BUILDING REPAIRS 1,729.16 500.00 (1,229.16) 8,705.25 1,500.00 (7,205.25) 2,0006640 SCREENS 322.93 200.00 (122.93) 1,085.70 1,800.00 714.30 2,4006660 GLASS 0.00 400.00 400.00 0.00 2,000.00 2,000.00 2,4006700 INTERIOR PAINT 71.62 0.00 (71.62) 814.52 300.00 (514.52) 4006720 FILTERS 136.00 0.00 (136.00) 198.58 0.00 (198.58) 06730 HVAC PARTS 3,951.66 1,200.00 (2,751.66) 7,901.00 10,800.00 2,899.00 14,4006760 APPLIANCE PARTS 395.80 1,100.00 704.20 6,626.53 9,900.00 3,273.47 13,2006770 HARDWARE 0.00 0.00 0.00 (141.26) 0.00 141.26 06830 TOOLS & EQUIPMENT 47.29 0.00 (47.29) 505.86 0.00 (505.86) 06860 GAS, OIL & TRAVEL 0.00 30.00 30.00 459.22 270.00 (189.22) 3606870 UNIFORMS 144.57 0.00 (144.57) 2,174.78 1,250.00 (924.78) 2,900

TOTAL MAINT/REPAIR SUPPLIES 8,664.47 6,880.00 (1,784.47) 47,098.00 63,370.00 16,272.00 85,460

UTILITIES

7010 GAS 332.68 0.00 (332.68) 5,635.62 1,950.00 (3,685.62) 2,5007025 TRASH REMOVAL 2,530.38 2,850.00 319.62 19,282.99 18,650.00 (632.99) 25,2007030 ELECTRICITY - COMMON AREA 6,406.38 6,300.00 (106.38) 58,439.96 56,700.00 (1,739.96) 75,6007040 ELECTRICITY - VACANT 2,084.00 2,750.00 666.00 21,519.69 24,750.00 3,230.31 33,0007050 RECOVERABLE ELEC/GAS/WATER 744.59 0.00 (744.59) 4,434.76 0.00 (4,434.76) 07060 WATER 4,017.26 16,339.00 12,321.74 68,989.00 57,536.00 (11,453.00) 78,0967070 SEWAGE 26,736.09 27,633.00 896.91 240,799.60 240,057.00 (742.60) 322,9567075 UTILITY BILLING EXPENSE 2,632.29 2,147.00 (485.29) 23,336.93 19,323.00 (4,013.93) 25,764

TOTAL UTILITIES 45,483.67 58,019.00 12,535.33 442,438.55 418,966.00 (23,472.55) 563,116

TAXES

7110 REAL ESTATE TAXES 41,642.63 42,675.00 1,032.37 415,665.48 384,075.00 (31,590.48) 512,100

TOTAL TAXES 41,642.63 42,675.00 1,032.37 415,665.48 384,075.00 (31,590.48) 512,100

INSURANCE

7220 PROPERTY INSURANCE 6,616.00 19,029.00 12,413.00 57,274.40 242,936.00 185,661.60 300,023

TOTAL INSURANCE 6,616.00 19,029.00 12,413.00 57,274.40 242,936.00 185,661.60 300,023

TOTAL OPERATING EXPENSES 273,664.01 304,102.00 30,437.99 2,578,507.70 2,680,087.00 101,579.30 3,531,994

NET OPERATING INCOME 541,293.04 532,590.00 8,703.04 4,485,217.08 4,654,891.00 (169,673.92) 6,294,965

PROPERTY IMPROVEMENTS

7330 LANDSCAPING/DRAINAGE 0.00 0.00 0.00 11,106.95 0.00 (11,106.95) 07360 STRUCTURAL EXTERIOR 0.00 0.00 0.00 4,750.18 0.00 (4,750.18) 07370 INTERIOR REPAIRS 12,840.72 8,000.00 (4,840.72) 116,282.85 72,000.00 (44,282.85) 96,0007390 HVAC 1,116.32 1,400.00 283.68 12,627.23 16,800.00 4,172.77 19,6007398 INSURANCE LOSS REPAIRS 350.00 0.00 (350.00) 12,708.95 0.00 (12,708.95) 0

© 2014 CBRE, Inc.





7400 MISCELLANEOUS 9.66 4,500.00 4,490.34 12,038.06 64,724.00 52,685.94 85,6247505 REPLACEMENT RESERVE DEPOSIT 21,280.00 21,280.00 0.00 191,520.00 191,520.00 0.00 255,3607506 REPLACEMENT RESERVE RECEIPT (63,840.00) (78,165.00) (14,325.00) (191,520.00) (191,520.00) 0.00 -248,0307510 REFRIGERATORS 0.00 500.00 500.00 2,618.20 5,000.00 2,381.80 6,5007520 RANGES 598.86 525.00 (73.86) 2,566.03 3,675.00 1,108.97 4,2007530 DISHWASHERS 0.00 460.00 460.00 4,371.85 3,680.00 (691.85) 4,3707540 DISPOSALS 289.25 275.00 (14.25) 2,207.89 2,475.00 267.11 3,3007550 CARPETS & VINYL 41,921.47 14,800.00 (27,121.47) 188,275.23 138,600.00 (49,675.23) 175,4007555 MICROWAVE OVENS 0.00 0.00 0.00 209.88 1,000.00 790.12 1,5007560 WASHER/DRYER 1,156.46 1,500.00 343.54 7,441.92 16,500.00 9,058.08 21,0007580 HOT WATER HEATERS 1,848.40 1,600.00 (248.40) 7,272.53 13,600.00 6,327.47 17,600

TOTAL PROPERTY IMPROVEMENTS 17,571.14 (23,325.00) (40,896.14) 384,477.75 338,054.00 (46,423.75) 442,424

CAPITAL IMPROVEMENTS / REHAB

7601 CAPITAL RESERVE RECEIPT - INTERNAL (151,363.18) 0.00 151,363.18 (1,136,267.68) 0.00 1,136,267.68 07622 EXTERIOR DOORS & WINDOWS 0.00 0.00 0.00 7,946.65 0.00 (7,946.65) 07630 POOL STRUCTURAL 0.00 0.00 0.00 4,161.20 0.00 (4,161.20) 07650 CLUBHOUSE/LEASING CTR RENOVATE 136,426.00 0.00 (136,426.00) 950,579.66 0.00 (950,579.66) 07652 CLUBHOUSE/LEASING CTR FURNISH 0.00 0.00 0.00 19,126.43 0.00 (19,126.43) 07658 APPLIANCES 0.00 0.00 0.00 1,995.98 0.00 (1,995.98) 07664 MISC. ELECTRICAL/PLUMBING 0.00 0.00 0.00 182.47 0.00 (182.47) 07682 CONSTRUCTION MANAGEMENT 3,962.00 0.00 (3,962.00) 38,391.00 0.00 (38,391.00) 07684 PERMITS/FEES/INSPECTIONS 0.00 0.00 0.00 35,555.00 0.00 (35,555.00) 07686 ENGINEERING/ARCHITECT/SURVEY (3,293.36) 0.00 3,293.36 28,655.55 0.00 (28,655.55) 07692 ALARM SYSTEM 5,515.18 0.00 (5,515.18) 8,080.38 0.00 (8,080.38) 07696 UPGRADE UNITS 5,495.00 0.00 (5,495.00) 38,335.00 0.00 (38,335.00) 0

TOTAL CAPITAL IMPROVEMENTS / REHAB (3,258.36) 0.00 3,258.36 (3,258.36) 0.00 3,258.36 0

NET BEFORE DEBT SERVICE 526,980.26 555,915.00 (28,934.74) 4,103,997.69 4,316,837.00 (212,839.31) 5,852,541

DEBT SERVICE & OWNER EXPENSE

7710 FIRST MORTGAGE 215,913.28 215,913.00 (0.28) 1,908,394.78 1,908,392.00 (2.78) 2,542,2017748 ASSET MANAGEMENT FEES 5,511.58 6,275.00 763.42 52,566.62 55,011.00 2,444.38 73,7017749 PARTNERSHIP EXPENSE 0.00 7,698.00 7,698.00 64,747.54 59,809.00 (4,938.54) 67,198

TOTAL DEBT SERVICE 221,424.86 229,886.00 8,461.14 2,025,708.94 2,023,212.00 (2,496.94) 2,683,100

NET INCOME (LOSS) 305,555.40 326,029.00 (20,473.60) 2,078,288.75 2,293,625.00 (215,336.25) 3,169,441

© 2014 CBRE, Inc.

Database: HARBORGROUP Profit & Loss Variance Report Page: 1ENTITY: BPL HARBORGROUP Date: 10/25/2013

BALTIMORE PORTFOLIO LAND Time: 10:04 AMFor Period Ending September 30, 2013



INCOME

RENTAL INCOME

1010 GROSS POTENTIAL RENT 5,035.00 4,802.00 233.00 45,200.00 43,218.00 1,982.00 57,6241020 VACANCY 0.00 0.00 0.00 (2,886.33) 0.00 (2,886.33) 01050 CONCESSIONS (206.00) 0.00 (206.00) (2,831.88) 0.00 (2,831.88) 0

RENT COLLECTIBLE 4,829.00 4,802.00 27.00 39,481.79 43,218.00 (3,736.21) 57,6241065 PREPAID RENT 0.00 0.00 0.00 (697.44) 0.00 (697.44) 01070 UNCOLLECTED 2,082.34 (14.00) 2,096.34 (2,597.45) (126.00) (2,471.45) -168

NET RENT COLLECTED 6,911.34 4,788.00 2,123.34 36,186.90 43,092.00 (6,905.10) 57,456

OTHER INCOME

3010 LATE CHARGES 151.00 50.00 101.00 337.50 100.00 237.50 1003030 APPLICATION FEES 0.00 0.00 0.00 105.00 0.00 105.00 03040 TENANT DAMAGE REIMBURSEMENT 0.00 0.00 0.00 120.00 0.00 120.00 03050 UTILITIES RECOVERY 0.00 0.00 0.00 184.69 0.00 184.69 03085 BAD DEBT WRITE\OFF 0.00 (14.00) 14.00 0.00 (126.00) 126.00 -1683086 REFERRED TO COLLECTIONS/ATTNY 0.00 14.00 (14.00) 0.00 126.00 (126.00) 1683090 INTEREST INCOME 0.00 0.00 0.00 0.68 0.00 0.68 03155 SHORT TERM PREMIUM 0.00 0.00 0.00 130.00 0.00 130.00 03180 MISCELLANEOUS INCOME 386.00 0.00 386.00 572.00 0.00 572.00 03186 WATER/SEWER REIMBURSEMENT 431.04 200.00 231.04 2,747.73 1,800.00 947.73 2,4003187 TRASH REIMBURSEMENT 51.00 40.00 11.00 247.73 360.00 (112.27) 480

TOTAL OTHER INCOME 1,019.04 290.00 729.04 4,445.33 2,260.00 2,185.33 2,980

TOTAL INCOME 7,930.38 5,078.00 2,852.38 40,632.23 45,352.00 (4,719.77) 60,436


5410 OFFICE SUPPLIES 0.00 0.00 0.00 0.60 0.00 (0.60) 05470 DUES/SUBSCRIPTIONS 720.00 720.00 0.00 5,760.00 6,480.00 720.00 8,6405515 MRI FEES 5.03 11.00 5.97 43.33 99.00 55.67 1325550 MISCELLANEOUS 0.00 0.00 0.00 621.02 0.00 (621.02) 0

TOTAL ADMIN. COSTS 725.03 731.00 5.97 6,424.95 6,579.00 154.05 8,772

MANAGEMENT FEES

5700 MANAGEMENT FEES 218.09 140.00 (78.09) 1,153.94 1,246.00 92.06 1,660

TOTAL MANAGEMENT FEES 218.09 140.00 (78.09) 1,153.94 1,246.00 92.06 1,660

SALARIES & BENEFITS

5820 ASSISTANT MGR/LEASING AGENT 0.00 372.00 372.00 161.60 3,201.00 3,039.40 4,2525870 FRINGE BENEFITS 0.00 0.00 0.00 2.42 0.00 (2.42) 05875 WORKERS COMP INSURANCE 0.00 0.00 0.00 126.90 0.00 (126.90) 05880 PAYROLL TAXES 0.00 0.00 0.00 20.93 0.00 (20.93) 05885 PAYROLL PROCESSING 0.00 0.00 0.00 2.03 0.00 (2.03) 0

TOTAL SALARIES & BENEFITS 0.00 372.00 372.00 313.88 3,201.00 2,887.12 4,252

UTILITIES

© 2014 CBRE, Inc.

Database: HARBORGROUP Profit & Loss Variance Report Page: 2ENTITY: BPL HARBORGROUP Date: 10/25/2013

BALTIMORE PORTFOLIO LAND Time: 10:04 AMFor Period Ending September 30, 2013



7010 GAS 0.00 0.00 0.00 302.58 0.00 (302.58) 07040 ELECTRICITY - VACANT 0.00 0.00 0.00 106.91 0.00 (106.91) 07050 RECOVERABLE ELEC/GAS/WATER 0.00 15.00 15.00 184.69 135.00 (49.69) 1807070 SEWAGE 0.00 231.00 231.00 0.00 2,079.00 2,079.00 2,7727075 UTILITY BILLING EXPENSE 0.00 0.00 0.00 14.15 0.00 (14.15) 0

TOTAL UTILITIES 0.00 246.00 246.00 608.33 2,214.00 1,605.67 2,952

TAXES

TOTAL TAXES 0.00 0.00 0.00 0.00 0.00 0.00 0

TOTAL OPERATING EXPENSES 943.12 1,489.00 545.88 8,501.10 13,240.00 4,738.90 17,636

NET OPERATING INCOME 6,987.26 3,589.00 3,398.26 32,131.13 32,112.00 19.13 42,800


TOTAL PROPERTY IMPROVEMENTS 0.00 0.00 0.00 0.00 0.00 0.00 0

NET BEFORE DEBT SERVICE 6,987.26 3,589.00 3,398.26 32,131.13 32,112.00 19.13 42,800


7748 ASSET MANAGEMENT FEES 59.48 38.00 (21.48) 314.72 342.00 27.28 4567749 PARTNERSHIP EXPENSE 0.00 0.00 0.00 1,865.00 0.00 (1,865.00) 0

TOTAL DEBT SERVICE 59.48 38.00 (21.48) 2,179.72 342.00 (1,837.72) 456

NET INCOME (LOSS) 6,927.78 3,551.00 3,376.78 29,951.41 31,770.00 (1,818.59) 42,344

© 2014 CBRE, Inc.

Database: HARBORGROUP 12 Month Profit & Loss Statement Page: 4ENTITY: CRA HARBORGROUP Date: 10/25/2013

CROSSWINDS AT ROLLING ROAD Time: 11:36 AMFor 12 Month Period Ending December 31, 2012

Account Description Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 12 Month Total

INCOME

RENTAL INCOME

1010 GROSS POTENTIAL RENT 816,179 816,100 817,850 816,535 812,098 809,404 818,204 830,743 832,696 833,009 833,606 836,107 9,872,5301020 VACANCY -100,226 -120,053 -98,798 -74,914 -63,207 -46,030 -47,014 -45,766 -50,013 -64,715 -62,582 -68,725 -842,0441030 MANAGEMENT OFFICE/MODEL -1,076 -1,076 -1,076 -1,076 -1,076 -1,076 -1,076 -1,076 -1,076 -1,076 -1,076 -1,076 -12,9121040 STAFF UNITS -1,101 -1,101 -908 -860 -860 -860 -591 -591 -591 -591 -591 -591 -9,2361050 CONCESSIONS -19,487 -14,904 -21,477 -46,886 -51,124 -52,005 -47,442 -46,808 -35,799 -30,534 -21,994 -28,445 -416,904

RENT COLLECTIBLE 694,289 678,965 695,591 692,798 695,831 709,432 722,080 736,502 745,217 736,093 747,364 737,271 8,591,4331065 PREPAID RENT 6,234 3,707 -8,755 835 6,372 12,671 114,005 -98,982 -19,387 1,354 -6,183 -6,815 5,0551070 UNCOLLECTED 3,465 16,051 1,811 -5,188 1,525 6,230 1,319 -13,219 -18,915 -24,013 -30,607 -39,731 -101,2731071 UNCOLLECTED - ACCRUAL ADJUSTMENT -41 0 0 0 0 0 0 0 0 0 0 0 -41

NET RENT COLLECTED 703,948 698,723 688,646 688,446 703,728 728,333 837,404 624,301 706,915 713,433 710,574 690,725 8,495,175

OTHER INCOME

3010 LATE CHARGES 8,810 7,625 5,335 5,998 6,340 8,346 6,634 7,092 7,610 8,867 8,067 9,714 90,4393030 APPLICATION FEES 735 1,815 2,830 1,535 2,360 2,245 2,001 1,710 1,440 770 1,110 595 19,1463040 TENANT DAMAGE REIMBURSEMENT 9,043 4,001 3,164 3,917 5,794 5,599 5,844 5,022 10,277 10,941 4,335 5,098 73,0343050 UTILITIES RECOVERY 243 233 221 276 342 168 798 838 439 324 34 244 4,1593066 CABLE INCOME 0 1,590 0 0 1,570 0 0 1,507 0 0 1,874 0 6,5403085 BAD DEBT WRITE\OFF -12,119 300 -7,956 -13,959 -10,683 0 0 -14,928 -7,000 -20,572 -12,985 -8,144 -108,0473086 REFERRED TO COLLECTIONS/ATTNY 12,119 -300 7,956 13,959 10,683 0 0 14,928 7,000 20,572 12,985 8,144 108,0473087 BAD DEBT COLLECTED 1,350 0 1,963 405 0 939 405 387 356 499 0 864 7,1683110 LEASE BREAK FEE 4,044 3,629 801 173 300 2,123 3,097 0 0 1,084 5,393 0 20,6443120 PET FEES 1,075 1,963 2,616 3,066 2,223 2,463 3,018 2,909 2,830 2,207 2,375 2,333 29,0773150 STORAGE INCOME 0 0 92 127 0 0 56 0 57 0 0 0 3323155 SHORT TERM PREMIUM 2,050 1,890 2,005 2,657 2,858 2,443 1,502 2,820 1,778 2,072 1,400 1,000 24,4753170 SECURITY DEPOSIT FORFEIT 0 0 0 0 0 0 0 300 0 -4,770 0 0 -4,4703180 MISCELLANEOUS INCOME 7,772 7,966 4,182 2,826 4,790 5,716 7,839 5,744 6,052 6,731 6,669 5,629 71,9153183 UTILITY FEE REIMBURSEMENT 0 97 0 34 0 0 0 0 0 0 0 0 1323186 WATER/SEWER REIMBURSEMENT 28,031 29,458 36,210 29,877 31,385 32,337 32,379 35,195 33,158 33,565 34,208 32,449 388,2533187 TRASH REIMBURSEMENT 628 863 1,267 1,844 2,504 3,089 3,694 4,300 4,708 5,184 5,516 5,671 39,268

TOTAL OTHER INCOME 63,781 61,130 60,685 52,735 60,466 65,469 67,268 67,823 68,704 67,473 70,980 63,598 770,111

TOTAL INCOME 767,728 759,853 749,332 741,181 764,194 793,802 904,672 692,123 775,619 780,907 781,553 754,323 9,265,286

© 2014 CBRE, Inc.




EXPENSES

RENTING EXPENSE

5030 BROCHURES 0 0 0 0 0 0 725 0 0 115 0 0 8405040 PRINT ADVERTISING 0 0 0 0 0 500 0 0 0 0 0 0 5005050 APARTMENT GUIDES 1,994 2,094 3,273 1,087 1,099 1,087 4,372 1,099 3,273 1,191 1,099 2,191 23,8595070 ONLINE ADVERTISING 440 478 324 625 790 560 648 790 50 788 755 623 6,8695090 SPECIALTY ADVERTISING 123 1,359 2,108 244 526 2,094 941 191 138 241 1,216 1,035 10,2165160 TENANT REFERRAL FEES 300 0 900 300 0 0 300 900 1,500 500 0 300 5,000

TOTAL RENTING EXPENSE 2,857 3,931 6,605 2,256 2,415 4,241 6,986 2,980 4,961 2,834 3,070 4,149 47,285


5410 OFFICE SUPPLIES 148 659 1,712 737 1,530 1,197 950 933 1,156 242 1,202 337 10,8045430 TRAINING/SEMINARS 733 186 1,244 1,062 184 194 203 161 198 161 252 161 4,7395440 OFFICE EQUIP/LEASE/PURCHASE 553 0 382 129 0 608 191 382 165 254 273 191 3,1285455 CAREER APPAREL 0 0 0 0 0 1,134 416 0 0 22 0 0 1,5725460 TRAVEL 51 147 0 -198 0 22 756 1,816 287 0 0 467 3,3475470 DUES/SUBSCRIPTIONS 0 546 216 0 0 0 0 0 0 0 0 0 7635480 CREDIT REPORTS 0 917 662 1,168 2,528 1,907 4,152 1,597 0 1,468 793 649 15,8425510 LEGAL EXPENSE 16,068 1,950 15,571 5,400 5,310 12,013 6,642 7,032 6,384 10,892 2,166 3,846 93,2745515 MRI FEES 1,811 1,805 1,811 1,816 2,774 1,805 1,804 1,803 1,803 1,841 834 849 20,7565530 TELEPHONE - LOCAL LINES 1,727 1,497 1,367 531 3,435 1,614 1,318 436 2,300 1,444 274 2,256 18,2015550 MISCELLANEOUS 2,775 55 824 173 269 9,810 65 700 450 11,082 5,159 7,398 38,7595570 INTEREST EXPENSE 0 0 10 0 0 8 371 13 0 0 0 0 402

TOTAL ADMIN. COSTS 23,867 7,762 23,799 10,818 16,031 30,312 16,867 14,873 12,743 27,406 10,954 16,153 211,585

MANAGEMENT FEES

5700 MANAGEMENT FEES 21,057 20,902 20,614 20,240 20,888 21,622 21,630 18,877 20,445 22,124 21,440 21,585 251,422

TOTAL MANAGEMENT FEES 21,057 20,902 20,614 20,240 20,888 21,622 21,630 18,877 20,445 22,124 21,440 21,585 251,422

SALARIES & BENEFITS

5805 NEWSPAPERS - HELP WANTED 0 0 0 0 0 0 240 0 0 0 0 0 2405810 PROPERTY MANAGER/ADMINISTRATOR 5,917 7,521 5,976 6,035 7,414 6,836 6,035 7,419 6,035 6,035 7,335 4,132 76,6905820 ASSISTANT MGR/LEASING AGENT 25,038 25,678 21,158 25,542 27,071 26,413 25,537 28,881 27,776 22,459 24,698 22,663 302,9145830 MAINTENANCE/ENGINEER/SUPERVISOR8,626 8,744 7,720 4,203 11,600 9,467 7,750 11,539 8,382 5,715 6,106 617 90,469

© 2014 CBRE, Inc.




5840 MAINTENANCE PAYROLL 19,766 25,803 24,401 28,493 28,434 28,172 22,647 25,279 23,460 24,776 31,414 30,797 313,4425855 TEMPORARY EMPLOYMENT 3,480 6,710 5,040 1,300 600 1,020 0 7,480 0 2,145 0 689 28,4645860 LEASING BONUSES 4,387 7,625 3,275 4,330 4,521 6,825 8,540 5,508 6,750 7,299 6,122 5,710 70,8915870 FRINGE BENEFITS 3,774 4,212 4,272 4,709 4,709 4,854 4,884 4,276 5,819 5,613 6,697 4,578 58,3965875 WORKERS COMP INSURANCE 1,226 1,580 1,298 1,367 1,628 1,562 1,392 1,552 1,383 1,597 1,894 1,592 18,0725880 PAYROLL TAXES 6,722 10,534 11,174 5,823 6,571 6,021 5,644 6,173 5,579 4,887 6,166 4,846 80,1395882 RECRUITING EXPENSE 0 0 0 0 0 0 0 0 0 132 354 283 7695885 PAYROLL PROCESSING 238 374 225 341 351 294 257 321 215 317 252 607 3,793

TOTAL SALARIES & BENEFITS 79,173 98,780 84,538 82,144 92,900 91,464 82,926 98,429 85,400 80,975 91,036 76,513 1,044,279

CONTRACT REPAIRS

6010 GROUNDS 5,258 5,258 13,825 21,624 13,825 13,825 8,567 13,825 22,392 10,517 8,567 13,825 151,3106020 POOL 0 0 0 0 0 2,642 5,945 11,889 0 132 0 0 20,6086030 SECURITY 0 5,742 5,621 5,231 10,953 5,864 5,673 895 10,724 5,770 5,748 6,354 68,5756040 CLEANING 890 3,937 477 257 106 1,030 1,723 583 4,929 318 1,272 2,842 18,3646045 SNOW REMOVAL 5,683 0 0 615 0 0 0 0 0 0 0 0 6,2986060 PLUMBING 5,948 1,290 1,966 1,754 4,140 2,534 6,303 1,509 -19,625 4,130 -2,258 4,378 12,0686070 ELECTRICAL 0 956 890 0 0 0 0 0 0 221 0 0 2,0676100 BUILDING EXTERIORS/MISC. 0 0 0 0 0 0 0 200 0 0 0 0 2006140 GLASS 223 865 215 1,050 0 1,155 1,105 305 0 1,470 280 555 7,2236150 BUILDING INTERIOR/MISC. 470 0 0 45 0 0 0 0 0 0 0 0 5156160 CARPET REPAIR/CLEANING 1,690 2,326 2,648 4,002 4,252 0 122 2,116 5,543 12,466 115 9,418 44,6986190 EXTERMINATING CONTRACT 1,770 1,879 1,019 1,190 2,065 1,016 737 1,343 1,451 1,393 2,119 1,665 17,6466200 INTERIOR PAINT 6,830 3,650 5,100 3,495 6,450 1,950 3,300 12,350 4,376 20,463 75 0 68,0396220 HVAC REPAIRS 0 595 551 230 166 1,324 0 606 0 3,957 0 247 7,6776250 APPLIANCE REPAIRS 0 0 0 0 0 0 16 0 0 0 136 0 1526290 EQUIPMENT REPAIRS 0 0 0 0 0 0 0 0 0 1,178 0 0 1,1786310 LOCKS & KEYS 0 0 0 403 0 2,224 1,461 27 683 0 0 0 4,798

TOTAL CONTRACT REPAIRS 28,762 26,498 32,312 39,898 41,958 33,564 34,951 45,648 30,473 62,014 16,054 39,284 431,415


6510 GROUND SUPPLIES 0 0 6 1,156 0 0 51 0 147 0 0 0 1,3606520 POOL SUPPLIES 0 0 0 -216 0 177 186 496 0 2,336 0 0 2,9796540 JANITORIAL SUPPLIES -1,058 42 293 454 26 60 401 441 49 199 567 826 2,3006560 ELECTRICAL SUPPLIES 1,377 0 339 830 234 1,750 517 398 721 484 1,549 1,070 9,2706570 PLUMBING SUPPLIES 3,196 2,960 1,047 2,773 1,557 1,679 6,134 681 2,863 1,215 3,796 79 27,9796610 BUILDING REPAIRS -91 0 1,749 691 162 4,527 1,654 61 651 8,052 431 872 18,7586640 SCREENS 423 0 0 0 186 663 596 0 0 194 0 282 2,344

© 2014 CBRE, Inc.




6660 GLASS 0 0 430 0 2,680 0 0 0 0 0 0 0 3,1106700 INTERIOR PAINT 0 0 135 278 0 238 58 190 0 0 133 0 1,0326720 FILTERS 0 0 0 344 0 95 0 0 309 0 66 172 9866730 HVAC PARTS 2,729 59 297 0 77 2,052 1,412 6,989 571 3,048 763 350 18,3476760 APPLIANCE PARTS 1,388 2,143 4,109 535 30 3,636 1,030 2,704 426 841 1,590 936 19,3676770 HARDWARE 0 0 0 0 0 0 -80 129 0 0 0 0 496830 TOOLS & EQUIPMENT 0 503 1,471 8 0 88 76 24 284 79 19 0 2,5526860 GAS, OIL & TRAVEL 17 0 50 0 0 0 35 15 158 0 46 0 3216870 UNIFORMS 0 0 0 0 0 922 0 0 0 0 0 0 922

TOTAL MAINT/REPAIR SUPPLIES 7,981 5,707 9,926 6,853 4,951 15,886 12,071 12,126 6,179 16,449 8,960 4,588 111,676

UTILITIES

7010 GAS 718 986 26,282 569 213 -50 219 29 159 186 214 472 29,9977025 TRASH REMOVAL 0 1,808 1,808 2,482 1,808 1,808 1,808 1,808 3,035 1,935 1,935 3,165 23,3987030 ELECTRICITY - COMMON AREA 6,361 6,768 6,421 6,262 5,953 5,784 5,973 6,338 6,078 6,029 5,851 6,202 74,0197040 ELECTRICITY - VACANT 2,815 5,927 5,243 3,389 2,390 564 848 7,298 1,383 1,268 1,310 1,745 34,1807050 RECOVERABLE ELEC/GAS/WATER 415 191 316 323 524 206 619 897 221 374 239 266 4,5907060 WATER 0 0 23,793 0 0 15,967 0 0 14,990 3,725 0 20,084 78,5587070 SEWAGE 0 50,702 25,351 25,351 25,351 25,351 25,351 25,351 25,351 25,351 25,351 25,351 304,2127075 UTILITY BILLING EXPENSE 1,370 1,259 0 1,234 2,264 2,227 5,150 2,531 2,568 2,388 2,612 2,408 26,010

TOTAL UTILITIES 11,679 67,641 89,213 39,609 38,503 51,856 39,967 44,252 53,784 41,255 37,512 59,692 574,965

TAXES

7110 REAL ESTATE TAXES 63,624 12,922 38,273 38,273 38,273 38,273 38,273 38,273 38,273 38,273 38,273 51,239 472,2447120 PERSONAL PROPERTY TAXES 0 12 0 0 0 0 0 0 0 0 9,449 0 9,461

TOTAL TAXES 63,624 12,934 38,273 38,273 38,273 38,273 38,273 38,273 38,273 38,273 47,722 51,239 481,705

INSURANCE

7210 LIABILITY INSURANCE 0 0 0 0 0 0 0 0 0 3,590 376 808 4,7747220 PROPERTY INSURANCE 926 41,589 21,764 21,764 22,607 77,371 6,939 6,939 6,939 6,939 6,939 6,616 227,333

TOTAL INSURANCE 926 41,589 21,764 21,764 22,607 77,371 6,939 6,939 6,939 10,529 7,315 7,424 232,107

TOTAL OPERATING EXPENSES 239,925 285,744 327,044 261,855 278,527 364,590 260,611 282,398 259,198 301,859 244,063 280,626 3,386,440

© 2014 CBRE, Inc.




NET OPERATING INCOME 527,803 474,109 422,288 479,325 485,667 429,212 644,062 409,725 516,421 479,048 537,490 473,697 5,878,846


7310 ROOFS 0 0 0 0 0 0 0 0 0 100 0 0 1007330 LANDSCAPING/DRAINAGE 0 0 0 0 0 0 608 0 0 1,080 0 0 1,6887340 PAINT - EXTERIOR 0 0 0 0 300 0 0 0 0 0 0 0 3007360 STRUCTURAL EXTERIOR 0 0 116 6,434 0 650 0 5,626 0 0 0 0 12,8267370 INTERIOR REPAIRS 3,981 12,656 5,364 12,975 6,095 10,154 11,384 32,767 9,873 8,546 11,894 11,013 136,7047390 HVAC 1,280 0 0 4,522 0 630 4,410 9,052 2,026 448 1,813 0 24,1807398 INSURANCE LOSS REPAIRS 0 0 0 0 0 778 40,763 3,317 843 0 0 30 45,7317399 INSURANCE CLAIM RECEIPTS 0 0 0 0 0 0 -15,287 0 0 -3,021 0 0 -18,3087400 MISCELLANEOUS 1,824 1,463 5,138 0 0 183 0 0 20,256 0 8,848 840 38,5517502 INTERNAL REPLACEMENT RESERVE RECEIPTS0 0 -72,798 72,798 0 0 0 0 0 0 0 0 07505 REPLACEMENT RESERVE DEPOSIT 21,280 21,280 21,280 21,280 21,280 21,280 21,280 21,280 21,280 21,280 21,280 21,280 255,3607506 REPLACEMENT RESERVE RECEIPT 0 0 0 -71,620 0 -61,671 0 0 -66,009 0 0 -63,840 -263,1407510 REFRIGERATORS 0 0 1,968 0 0 0 4,035 1,916 3,619 1,035 0 0 12,5737520 RANGES 314 0 639 625 0 868 349 2,324 4,789 411 546 0 10,8657530 DISHWASHERS 217 217 222 465 0 479 240 1,199 737 684 0 0 4,4607540 DISPOSALS 0 286 0 761 48 99 960 0 0 288 916 0 3,3597550 CARPETS & VINYL 21,787 13,440 33,070 11,156 5,660 6,799 5,841 30,046 1,324 44,588 23,815 4,922 202,4477555 MICROWAVE OVENS 0 0 0 0 0 536 0 0 0 0 0 0 5367560 WASHER/DRYER 1,369 1,295 1,489 1,437 0 0 721 5,519 6,698 1,354 0 0 19,8817580 HOT WATER HEATERS 1,340 278 278 670 764 2,414 1,677 6,679 4,332 312 4,259 0 23,004

TOTAL PROPERTY IMPROVEMENTS 53,392 50,915 -3,235 61,503 34,148 -16,801 76,981 119,726 9,767 77,104 73,372 -25,755 511,116


7600 CAP EXP/REHAB RESERVE RECEIPTS 0 -108,100 0 0 0 0 0 0 0 0 0 0 -108,1007601 CAPITAL RESERVE RECEIPT - INTERNAL-852,895 -241,027 -101,955 -13,532 -1,473 -3,544 -31,600 -48,456 -30,897 -10,296 -25,530 -178,812 -1,540,0177602 ASPHALT REPAIRS/SEAL COAT 46,063 0 0 0 0 0 0 0 0 0 0 0 46,0637612 ROOFING & EAVES 570,398 144,333 0 0 0 0 0 0 0 0 0 0 714,7317620 EXTERIOR FINISH(VINYL,MASONRY) 14,552 1,537 0 0 0 0 0 0 0 0 0 0 16,0897622 EXTERIOR DOORS & WINDOWS 0 0 0 0 0 0 0 0 0 0 19,183 52,337 71,5207624 EXTERIOR PAINT 79,992 8,888 0 0 0 0 0 0 0 0 0 0 88,8807626 EXTERIOR LIGHTING 0 0 0 932 0 0 0 0 0 0 0 0 9327632 POOL FURNISHINGS 0 0 0 0 0 0 11,249 2,594 0 0 0 0 13,8427638 SIGNAGE 25,753 -6,282 0 0 0 0 0 0 0 0 0 0 19,4717640 LANDSCAPING 0 34,044 0 0 0 0 0 0 0 0 0 0 34,0447652 CLUBHOUSE/LEASING CTR FURNISH 0 0 0 0 0 0 0 0 0 0 0 110,565 110,565

© 2014 CBRE, Inc.




7653 MODEL UNIT REHAB 23,945 0 0 0 0 0 0 0 0 0 0 0 23,9457664 MISC. ELECTRICAL/PLUMBING 63,000 102,110 95,234 0 0 0 200 26,082 0 0 0 0 286,6267676 ADA MODIFICATIONS 0 5,650 0 0 0 0 0 0 0 0 0 0 5,6507680 MANAGEMENT OFFICE SET UP 0 30,138 0 0 0 0 0 0 0 0 0 0 30,1387682 CONSTRUCTION MANAGEMENT 20,851 8,564 2,380 330 36 86 809 1,170 757 251 622 4,361 40,2177684 PERMITS/FEES/INSPECTIONS 0 0 0 0 0 0 0 256 3,448 0 1,325 0 5,0297686 ENGINEERING/ARCHITECT/SURVEY 10,322 22,506 0 12,270 1,437 3,458 19,342 18,348 3,564 10,045 2,310 3,410 107,0117694 TURN DOWN UNITS 0 0 0 0 0 0 0 0 23,135 0 0 0 23,1357696 UPGRADE UNITS 0 0 0 0 0 0 0 0 0 0 2,090 8,139 10,229

TOTAL CAPITAL IMPROVEMENTS / REHAB1,980 2,361 -4,341 0 0 0 0 -7 7 0 0 0 0

NET BEFORE DEBT SERVICE 472,431 420,832 429,864 417,823 451,519 446,013 567,080 290,006 506,647 401,944 464,118 499,452 5,367,730


7710 FIRST MORTGAGE 215,913 215,913 201,983 215,913 208,948 215,913 208,948 215,913 215,913 208,948 215,913 208,948 2,549,1707748 ASSET MANAGEMENT FEES 5,743 5,701 5,622 5,520 5,697 5,897 5,899 5,148 5,576 6,034 5,847 5,887 68,5707749 PARTNERSHIP EXPENSE 0 5,261 24,268 1,106 11,835 2,267 600 6,774 7,698 816 6,573 1,659 68,8577750 OTHER FINANCING FEES 0 0 5,031 0 0 0 0 0 0 0 0 0 5,031

TOTAL DEBT SERVICE 221,656 226,875 236,904 222,539 226,480 224,077 215,447 227,836 229,187 215,798 228,333 216,494 2,691,627

NET INCOME (LOSS) 250,775 193,957 192,960 195,284 225,039 221,936 351,633 62,170 277,460 186,146 235,785 282,958 2,676,103

© 2014 CBRE, Inc.

Database: HARBORGROUP 12 Month Profit & Loss Statement Page: 1ENTITY: BPL HARBORGROUP Date: 10/25/2013

BALTIMORE PORTFOLIO LAND Time: 11:36 AMFor 12 Month Period Ending December 31, 2012


INCOME

RENTAL INCOME

1010 GROSS POTENTIAL RENT 4,767 4,802 4,802 4,802 4,799 4,802 4,802 4,802 4,802 4,802 0 4,837 52,8191020 VACANCY 0 -1,010 -1,010 -1,010 -774 0 0 0 0 0 0 -1,010 -4,8141050 CONCESSIONS 0 0 0 0 0 -520 -520 0 -20 -20 0 -20 -1,100

RENT COLLECTIBLE 4,767 3,792 3,792 3,792 4,025 4,282 4,282 4,802 4,782 4,782 0 3,807 46,9051065 PREPAID RENT 98 -96 8 129 11 5 9 7 143 -4 2,750 -147 2,9141070 UNCOLLECTED 609 -782 -164 210 -948 960 -37 -941 985 15 1,552 627 2,086

NET RENT COLLECTED 5,474 2,915 3,636 4,131 3,088 5,247 4,253 3,868 5,910 4,793 4,303 4,287 51,905

OTHER INCOME

3010 LATE CHARGES 0 0 0 0 0 84 0 35 51 0 0 0 1693040 TENANT DAMAGE REIMBURSEMENT 0 0 0 0 0 0 0 0 0 0 0 50 503155 SHORT TERM PREMIUM 300 100 100 0 0 500 400 400 400 400 100 300 3,0003180 MISCELLANEOUS INCOME 0 0 0 0 0 0 0 0 32 0 0 0 323186 WATER/SEWER REIMBURSEMENT 352 270 329 0 197 261 287 210 199 283 66 282 2,7333187 TRASH REIMBURSEMENT 8 8 8 8 8 16 16 16 16 16 0 16 136

TOTAL OTHER INCOME 660 378 437 8 205 861 703 661 697 699 166 648 6,120

TOTAL INCOME 6,134 3,292 4,073 4,139 3,292 6,108 4,956 4,529 6,607 5,492 4,468 4,934 58,024

EXPENSES

RENTING EXPENSE

5090 SPECIALTY ADVERTISING 0 0 0 54 0 0 0 0 0 0 0 0 54

TOTAL RENTING EXPENSE 0 0 0 54 0 0 0 0 0 0 0 0 54


5410 OFFICE SUPPLIES 0 0 8 0 0 0 0 49 30 0 0 0 885470 DUES/SUBSCRIPTIONS 720 720 720 720 720 1,440 720 720 0 1,440 720 720 9,3605515 MRI FEES 5 5 5 17 5 5 5 5 5 5 5 5 685550 MISCELLANEOUS 0 0 23 0 0 74 0 150 150 76 100 225 798

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5570 INTEREST EXPENSE 0 0 47 0 0 0 0 0 0 0 0 0 47

TOTAL ADMIN. COSTS 725 725 802 737 725 1,519 725 924 185 1,521 825 950 10,361

MANAGEMENT FEES

5700 MANAGEMENT FEES 169 91 112 114 91 168 136 125 182 151 123 0 1,460

TOTAL MANAGEMENT FEES 169 91 112 114 91 168 136 125 182 151 123 0 1,460

SALARIES & BENEFITS

5820 ASSISTANT MGR/LEASING AGENT 160 160 161 81 81 162 162 162 162 162 323 162 1,9355875 WORKERS COMP INSURANCE 1 1 2 1 1 2 2 2 2 2 4 2 205880 PAYROLL TAXES 16 22 28 5 6 11 11 12 11 11 23 11 166

TOTAL SALARIES & BENEFITS 178 183 190 87 87 174 174 175 174 175 350 175 2,121

CONTRACT REPAIRS

6200 INTERIOR PAINT 0 0 300 180 440 0 0 0 0 0 0 0 920

TOTAL CONTRACT REPAIRS 0 0 300 180 440 0 0 0 0 0 0 0 920

UTILITIES

7010 GAS 0 0 41 31 15 0 0 0 0 0 0 0 877040 ELECTRICITY - VACANT 0 0 19 13 13 0 0 0 0 0 0 0 457050 RECOVERABLE ELEC/GAS/WATER 0 8 44 0 44 13 0 15 33 14 0 0 1707075 UTILITY BILLING EXPENSE 0 0 0 0 0 0 0 136 0 0 0 14 151

TOTAL UTILITIES 0 8 104 44 71 13 0 151 33 14 0 14 453

TAXES

TOTAL TAXES 0 0 0 0 0 0 0 0 0 0 0 0 0

TOTAL OPERATING EXPENSES 1,071 1,007 1,508 1,215 1,414 1,874 1,035 1,374 574 1,861 1,297 1,139 15,368

© 2014 CBRE, Inc.




NET OPERATING INCOME 5,063 2,286 2,564 2,924 1,879 4,234 3,921 3,155 6,033 3,631 3,171 3,796 42,656


7370 INTERIOR REPAIRS 0 0 0 0 750 0 0 0 0 0 0 0 750

TOTAL PROPERTY IMPROVEMENTS 0 0 0 0 750 0 0 0 0 0 0 0 750

NET BEFORE DEBT SERVICE 5,063 2,286 2,564 2,924 1,129 4,234 3,921 3,155 6,033 3,631 3,171 3,796 41,906


7748 ASSET MANAGEMENT FEES 46 25 31 31 25 46 37 34 50 41 34 37 4357749 PARTNERSHIP EXPENSE 0 550 6,343 606 10,788 600 150 200 0 0 336 600 20,172

TOTAL DEBT SERVICE 46 575 6,373 637 10,812 646 187 234 50 41 369 637 20,607

NET INCOME (LOSS) 5,017 1,711 -3,809 2,287 -9,684 3,588 3,733 2,921 5,984 3,590 2,802 3,159 21,299

© 2014 CBRE, Inc.

Database: HARBORGROUP Page: 3ENTITY: CRA HARBORGROUP Date: 9/5/2012



INCOME

RENTAL INCOME

1010 GROSS POTENTIAL RENT 0 0 0 0 0 0 0 805,539 811,860 789,611 824,527 810,718 4,042,2551020 VACANCY 0 0 0 0 0 0 0 -65,688 -66,109 -84,463 -88,569 -89,164 -393,9941030 MANAGEMENT OFFICE/MODEL 0 0 0 0 0 0 0 -1,076 -1,076 -1,076 -1,076 -1,076 -5,3801040 STAFF UNITS 0 0 0 0 0 0 0 0 0 0 -1,101 -1,101 -2,2021050 CONCESSIONS 0 0 0 0 0 0 0 -18,682 -16,805 -19,390 -22,733 -18,662 -96,273

RENT COLLECTIBLE 0 0 0 0 0 0 0 720,093 727,870 684,681 711,048 700,715 3,544,4071065 PREPAID RENT 0 0 0 0 0 0 0 20,710 9,118 -1,182 -2,548 -74 26,0241070 UNCOLLECTED 0 0 0 0 0 0 0 -50,292 -47,740 20,064 14,056 8,514 -55,398

NET RENT COLLECTED 0 0 0 0 0 0 0 690,511 689,247 703,563 722,556 709,155 3,515,032

OTHER INCOME

3010 LATE CHARGES 0 0 0 0 0 0 0 11,905 8,114 11,199 7,016 9,367 47,6003030 APPLICATION FEES 0 0 0 0 0 0 0 560 490 595 1,010 1,224 3,8793040 TENANT DAMAGE REIMBURSEMENT 0 0 0 0 0 0 0 3,609 1,957 3,292 2,932 4,183 15,9733050 UTILITIES RECOVERY 0 0 0 0 0 0 0 8,155 1,569 1,440 363 164 11,6913066 CABLE INCOME 0 0 0 0 0 0 0 0 0 0 1,901 0 1,9013085 BAD DEBT WRITE\OFF 0 0 0 0 0 0 0 0 0 0 0 -67,368 -67,3683086 REFERRED TO COLLECTIONS/ATTNY 0 0 0 0 0 0 0 0 0 0 0 67,368 67,3683087 BAD DEBT COLLECTED 0 0 0 0 0 0 0 0 0 0 0 833 8333110 LEASE BREAK FEE 0 0 0 0 0 0 0 0 1,990 0 0 2,925 4,9153120 PET FEES 0 0 0 0 0 0 0 1,217 1,073 1,456 1,054 1,469 6,2693155 SHORT TERM PREMIUM 0 0 0 0 0 0 0 1,750 1,196 1,670 3,404 2,695 10,7163180 MISCELLANEOUS INCOME 0 0 0 0 0 0 0 8,356 7,285 11,683 6,550 5,695 39,5693183 UTILITY FEE REIMBURSEMENT 0 0 0 0 0 0 0 328 63 20 548 0 9593186 WATER/SEWER REIMBURSEMENT 0 0 0 0 0 0 0 14,298 27,604 30,477 23,803 33,566 129,7493187 TRASH REIMBURSEMENT 0 0 0 0 0 0 0 0 32 79 166 291 567

TOTAL OTHER INCOME 0 0 0 0 0 0 0 50,178 51,373 61,911 48,745 62,411 274,618

TOTAL INCOME 0 0 0 0 0 0 0 740,689 740,621 765,474 771,301 771,565 3,789,651

EXPENSES

RENTING EXPENSE5030 BROCHURES 0 0 0 0 0 0 0 0 1,728 90 550 0 2,368

© 2014 CBRE, Inc.

5050 APARTMENT GUIDES 0 0 0 0 0 0 0 0 1,990 1,648 1,994 995 6,6275070 INTERNET ADVERTISING 0 0 0 0 0 0 0 0 280 782 351 429 1,8425090 SPECIALTY ADVERTISING 0 0 0 0 0 0 0 0 1,585 365 806 200 2,956

TOTAL RENTING EXPENSE 0 0 0 0 0 0 0 0 5,583 2,884 3,701 1,624 13,792


5410 OFFICE SUPPLIES 0 0 0 0 0 0 0 14 1,278 1,872 993 4,521 8,6785430 TRAINING/SEMINARS 0 0 0 0 0 0 0 162 0 223 15 577 9775440 OFFICE EQUIP/LEASE/PURCHASE 0 0 0 0 0 0 0 0 0 0 1,583 0 1,5835455 CAREER APPAREL 0 0 0 0 0 0 0 0 0 45 0 0 455460 TRAVEL 0 0 0 0 0 0 0 596 1,360 477 3,345 32 5,8115470 DUES/SUBSCRIPTIONS 0 0 0 0 0 0 0 0 4,707 0 0 0 4,7075480 CREDIT REPORTS 0 0 0 0 0 0 0 0 381 391 779 622 2,1735510 LEGAL EXPENSE 0 0 0 0 0 0 0 0 5,002 26,697 1,816 950 34,4655515 MRI FEES 0 0 0 0 0 0 0 838 2,397 846 1,347 866 6,2935530 TELEPHONE - LOCAL LINES 0 0 0 0 0 0 0 0 1,474 3,970 3,812 1,392 10,6485531 HIGH SPEED INTERNET 0 0 0 0 0 0 0 0 0 111 0 0 1115550 MISCELLANEOUS 0 0 0 0 0 0 0 800 238 70 554 5,480 7,1425570 INTEREST EXPENSE 0 0 0 0 0 0 0 0 0 0 10 81 91

TOTAL ADMIN. COSTS 0 0 0 0 0 0 0 2,410 16,837 34,703 14,254 14,522 82,725

MANAGEMENT FEES

5700 MANAGEMENT FEES 0 0 0 0 0 0 0 20,370 19,655 21,741 21,180 21,206 104,153

TOTAL MANAGEMENT FEES 0 0 0 0 0 0 0 20,370 19,655 21,741 21,180 21,206 104,153

SALARIES & BENEFITS

5805 NEWSPAPERS - HELP WANTED 0 0 0 0 0 0 0 390 0 0 0 0 3905810 PROPERTY MANAGER/ADMINISTRATOR 0 0 0 0 0 0 0 1,234 2,635 5,917 6,647 5,917 22,3505820 ASSISTANT MGR/LEASING AGENT 0 0 0 0 0 0 0 5,903 21,863 23,254 24,710 25,556 101,2855830 MAINTENANCE/ENGINEER/SUPERVISOR 0 0 0 0 0 0 0 2,180 4,495 10,558 9,674 8,835 35,7435840 MAINTENANCE PAYROLL 0 0 0 0 0 0 0 4,858 9,865 15,006 18,818 19,859 68,4065855 TEMPORARY EMPLOYMENT 0 0 0 0 0 0 0 0 2,637 4,361 12,355 3,734 23,0875860 LEASING BONUSES 0 0 0 0 0 0 0 0 0 4,519 4,470 4,140 13,1305870 FRINGE BENEFITS 0 0 0 0 0 0 0 2,795 3,198 2,795 2,461 3,632 14,8805875 WORKERS COMP INSURANCE 0 0 0 0 0 0 0 287 679 1,115 1,195 1,251 4,5265880 PAYROLL TAXES 0 0 0 0 0 0 0 1,901 5,670 7,766 5,602 5,352 26,2915885 PAYROLL PROCESSING 0 0 0 0 0 0 0 330 94 190 263 311 1,188

TOTAL SALARIES & BENEFITS 0 0 0 0 0 0 0 19,877 51,137 75,481 86,193 78,586 311,275

CONTRACT REPAIRS

6010 GROUNDS 0 0 0 0 0 0 0 0 10,517 40,637 12,085 10,040 73,2806020 POOL 0 0 0 0 0 0 0 0 5,944 0 0 0 5,9446030 SECURITY 0 0 0 0 0 0 0 0 261 0 11,730 5,445 17,436

© 2014 CBRE, Inc.

6040 CLEANING 0 0 0 0 0 0 0 0 633 1,781 5,504 742 8,6606060 PLUMBING 0 0 0 0 0 0 0 0 0 5,595 2,565 1,620 9,7806070 ELECTRICAL 0 0 0 0 0 0 0 0 0 214 0 0 2146100 BUILDING EXTERIORS/MISC. 0 0 0 0 0 0 0 0 0 400 1,560 0 1,9606140 GLASS 0 0 0 0 0 0 0 0 0 1,944 2,157 0 4,1016150 BUILDING INTERIOR/MISC. 0 0 0 0 0 0 0 0 0 10,395 15,400 830 26,6256160 CARPET REPAIR/CLEANING 0 0 0 0 0 0 0 0 101 16,412 10,595 2,490 29,5976190 EXTERMINATING CONTRACT 0 0 0 0 0 0 0 0 0 2,899 420 902 4,2216200 INTERIOR PAINT 0 0 0 0 0 0 0 0 135 10,065 10,685 0 20,8856220 HVAC REPAIRS 0 0 0 0 0 0 0 0 890 175 490 0 1,5556250 APPLIANCE REPAIRS 0 0 0 0 0 0 0 0 0 398 82 0 4806290 EQUIPMENT REPAIRS 0 0 0 0 0 0 0 0 0 0 205 0 2056320 TRASH REMOVAL 0 0 0 0 0 0 0 0 74 0 0 0 74

TOTAL CONTRACT REPAIRS 0 0 0 0 0 0 0 0 18,555 90,915 73,477 22,070 205,017


6510 GROUND SUPPLIES 0 0 0 0 0 0 0 0 0 101 0 0 1016540 JANITORIAL SUPPLIES 0 0 0 0 0 0 0 0 0 1,026 23 1,728 2,7776560 ELECTRICAL SUPPLIES 0 0 0 0 0 0 0 0 0 3,929 1,655 1,497 7,0826570 PLUMBING SUPPLIES 0 0 0 0 0 0 0 0 0 14,935 2,787 1,433 19,1546610 BUILDING REPAIRS 0 0 0 0 0 0 0 0 0 7,420 3,369 2,178 12,9676640 SCREENS 0 0 0 0 0 0 0 0 0 197 82 -423 -1456660 GLASS 0 0 0 0 0 0 0 0 0 0 345 0 3456700 INTERIOR PAINT 0 0 0 0 0 0 0 0 0 108 59 180 3476720 FILTERS 0 0 0 0 0 0 0 0 0 0 84 0 846730 HVAC PARTS 0 0 0 0 0 0 0 0 0 829 1,040 388 2,2576760 APPLIANCE PARTS 0 0 0 0 0 0 0 0 18 1,183 1,158 2,387 4,7466770 HARDWARE 0 0 0 0 0 0 0 0 0 39 0 36 756830 TOOLS & EQUIPMENT 0 0 0 0 0 0 0 0 0 326 293 193 8126860 GAS, OIL & TRAVEL 0 0 0 0 0 0 0 0 0 678 0 56 7346870 UNIFORMS 0 0 0 0 0 0 0 0 544 104 0 1,834 2,482

TOTAL MAINT/REPAIR SUPPLIES 0 0 0 0 0 0 0 0 562 30,874 10,896 11,486 53,818

UTILITIES

7010 GAS 0 0 0 0 0 0 0 0 198 190 138 291 8187025 TRASH REMOVAL 0 0 0 0 0 0 0 0 4,199 3,860 1,871 1,808 11,7387030 ELECTRICITY - COMMON AREA 0 0 0 0 0 0 0 2,778 6,914 5,568 5,923 6,114 27,2987040 ELECTRICITY - VACANT 0 0 0 0 0 0 0 123 2,516 1,864 1,882 1,957 8,3427050 RECOVERABLE ELEC/GAS/WATER 0 0 0 0 0 0 0 7 1,905 289 218 309 2,7287060 WATER 0 0 0 0 0 0 0 0 0 26,150 0 21,659 47,809

TOTAL UTILITIES 0 0 0 0 0 0 0 2,908 15,732 37,921 10,033 32,139 98,733

TAXES

7110 REAL ESTATE TAXES 0 0 0 0 0 0 0 0 63,624 63,624 63,624 63,624 254,4977120 PERSONAL PROPERTY TAXES 0 0 0 0 0 0 0 477 0 0 749 0 1,226

© 2014 CBRE, Inc.

TOTAL TAXES 0 0 0 0 0 0 0 477 63,624 63,624 64,373 63,624 255,722

INSURANCE

7210 LIABILITY INSURANCE 0 0 0 0 0 0 0 0 0 0 325 1,616 1,9417220 PROPERTY INSURANCE 0 0 0 0 0 0 0 0 3,878 1,939 1,939 25,532 33,289

TOTAL INSURANCE 0 0 0 0 0 0 0 0 3,878 1,939 2,264 27,148 35,230

TOTAL OPERATING EXPENSES 0 0 0 0 0 0 0 46,042 195,564 360,083 286,373 272,405 1,160,466

NET OPERATING INCOME 0 0 0 0 0 0 0 694,648 545,057 405,391 484,929 499,160 2,629,184


7360 STRUCTURAL EXTERIOR 0 0 0 0 0 0 0 0 0 705 0 0 7057370 INTERIOR REPAIRS 0 0 0 0 0 0 0 0 3,567 21,187 29,135 9,898 63,7877390 HVAC 0 0 0 0 0 0 0 0 10,890 18,488 3,387 800 33,5657398 INSURANCE LOSS REPAIRS 0 0 0 0 0 0 0 0 0 767 0 0 7677400 MISCELLANEOUS 0 0 0 0 0 0 0 0 0 160 0 163 3227505 REPLACEMENT RESERVE DEPOSIT 0 0 0 0 0 0 0 0 21,280 21,280 21,280 21,280 85,1207506 REPLACEMENT RESERVE RECEIPT 0 0 0 0 0 0 0 0 0 0 0 -77,090 -77,0907510 REFRIGERATORS 0 0 0 0 0 0 0 0 0 445 0 462 9087520 RANGES 0 0 0 0 0 0 0 0 339 1,084 0 654 2,0767530 DISHWASHERS 0 0 0 0 0 0 0 0 0 869 0 217 1,0877540 DISPOSALS 0 0 0 0 0 0 0 0 0 191 0 328 5197550 CARPETS & VINYL 0 0 0 0 0 0 0 0 0 27,514 29,954 11,635 69,1037555 MICROWAVE OVENS 0 0 0 0 0 0 0 0 0 244 0 0 2447560 WASHER/DRYER 0 0 0 0 0 0 0 0 766 6,433 0 603 7,8027580 HOT WATER HEATERS 0 0 0 0 0 0 0 0 875 1,388 0 0 2,263

TOTAL PROPERTY IMPROVEMENTS 0 0 0 0 0 0 0 0 37,717 100,755 83,757 -31,049 191,179


7601 CAPITAL RESERVE RECEIPT - INTERNAL 0 0 0 0 0 0 0 -18,736 -34,017 -25,207 -728,988 -8,206 -815,1547602 ASPHALT REPAIRS/SEAL COAT 0 0 0 0 0 0 0 0 0 0 414,568 0 414,5687612 ROOFING & EAVES 0 0 0 0 0 0 0 0 0 0 285,199 0 285,1997638 SIGNAGE 0 0 0 0 0 0 0 0 0 10,891 0 0 10,8917652 CLUBHOUSE/LEASING CTR FURNISH 0 0 0 0 0 0 0 0 760 0 0 0 7607680 MANAGEMENT OFFICE SET UP 0 0 0 0 0 0 0 10,376 0 0 0 0 10,3767682 CONSTRUCTION MANAGEMENT 0 0 0 0 0 0 0 0 0 1,900 17,780 148 19,8287684 PERMITS/FEES/INSPECTIONS 0 0 0 0 0 0 0 0 0 0 0 2,178 2,1787686 ENGINEERING/ARCHITECT/SURVEY 0 0 0 0 0 0 0 8,360 19,577 11,597 11,410 3,931 54,8767690 VEHICLES/GOLF CART 0 0 0 0 0 0 0 0 13,680 819 0 0 14,499

TOTAL CAPITAL IMPROVEMENTS / REHAB 0 0 0 0 0 0 0 0 0 0 -31 -1,949 -1,980

© 2014 CBRE, Inc.

NET BEFORE DEBT SERVICE 0 0 0 0 0 0 0 694,648 507,340 304,636 401,204 532,158 2,439,986


7710 FIRST MORTGAGE 0 0 0 0 0 0 0 0 215,913 208,948 215,913 208,948 849,7237720 SECOND MORTGAGE 0 0 0 0 0 0 0 0 23,104 0 0 0 23,1047748 ASSET MANAGEMENT FEES 0 0 0 0 0 0 0 5,556 5,361 5,929 5,776 5,784 28,4057749 PARTNERSHIP EXPENSE 0 0 0 0 0 0 0 750 450 -17,647 11,187 7,438 2,178

TOTAL DEBT SERVICE 0 0 0 0 0 0 0 6,306 244,828 197,230 232,877 222,170 903,411

Database: HARBORGROUP Page: 8ENTITY: CRA HARBORGROUP Date: 9/5/2012


Account Description Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-12 12 Month Tota

NET INCOME (LOSS) 0 0 0 0 0 0 0 688,342 262,512 107,406 168,326 309,988 1,536,575



Account Description Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-12 12 Month Tota

INCOME

RENTAL INCOME

1010 GROSS POTENTIAL RENT 0 0 0 0 0 0 0 4,755 4,755 4,755 4,755 4,755 23,775

RENT COLLECTIBLE 0 0 0 0 0 0 0 4,755 4,755 4,755 4,755 4,755 23,7751065 PREPAID RENT 0 0 0 0 0 0 0 15 110 111 -134 -50 511070 UNCOLLECTED 0 0 0 0 0 0 0 -949 -975 -945 2,106 -957 -1,719

© 2014 CBRE, Inc.

NET RENT COLLECTED 0 0 0 0 0 0 0 3,822 3,890 3,921 6,727 3,748 22,107

OTHER INCOME

3155 SHORT TERM PREMIUM 0 0 0 0 0 0 0 204 100 200 300 100 9043186 WATER/SEWER REIMBURSEMENT 0 0 0 0 0 0 0 124 0 0 179 190 493

TOTAL OTHER INCOME 0 0 0 0 0 0 0 327 100 200 479 290 1,397

TOTAL INCOME 0 0 0 0 0 0 0 4,149 3,990 4,121 7,207 4,038 23,504


5430 TRAINING/SEMINARS 0 0 0 0 0 0 0 0 0 0 16 16 325470 DUES/SUBSCRIPTIONS 0 0 0 0 0 0 0 0 0 0 1,440 2,160 3,6005515 MRI FEES 0 0 0 0 0 0 0 5 5 5 5 5 245550 MISCELLANEOUS 0 0 0 0 0 0 0 0 0 0 696 696 1,391

TOTAL ADMIN. COSTS 0 0 0 0 0 0 0 5 5 5 2,156 2,876 5,048

MANAGEMENT FEES

5700 MANAGEMENT FEES 0 0 0 0 0 0 0 114 110 113 198 111 646

TOTAL MANAGEMENT FEES 0 0 0 0 0 0 0 114 110 113 198 111 646

SALARIES & BENEFITS

5820 ASSISTANT MGR/LEASING AGENT 0 0 0 0 0 0 0 0 0 0 160 160 3205880 PAYROLL TAXES 0 0 0 0 0 0 0 0 0 0 12 11 23

TOTAL SALARIES & BENEFITS 0 0 0 0 0 0 0 0 0 0 172 171 343

TAXES

TOTAL TAXES 0 0 0 0 0 0 0 0 0 0 0 0 0

TOTAL OPERATING EXPENSES 0 0 0 0 0 0 0 119 115 118 2,526 3,159 6,037

NET OPERATING INCOME 0 0 0 0 0 0 0 4,029 3,875 4,002 4,681 880 17,467


TOTAL PROPERTY IMPROVEMENTS 0 0 0 0 0 0 0 0 0 0 0 0 0

© 2014 CBRE, Inc.

NET BEFORE DEBT SERVICE 0 0 0 0 0 0 0 4,029 3,875 4,002 4,681 880 17,467


7748 ASSET MANAGEMENT FEES 0 0 0 0 0 0 0 31 30 31 54 30 176

TOTAL DEBT SERVICE 0 0 0 0 0 0 0 31 30 31 54 30 176

NET INCOME (LOSS) 0 0 0 0 0 0 0 3,998 3,845 3,972 4,627 849 17,291

© 2014 CBRE, Inc.

07/19/2011 #k6m Crosswinds at Rolling Road Consolidated Page: 1 7:39 PM 12 MONTHS ROLLING ACTUAL (SRO2) 808 Units

06/30/2011Sawyer Property Management MD9658 Baltimore AveSuite 300College Park, MD 20740

Account Description

July 2010

August 2010

September 2010

October 2010

November 2010

December 2010

January 2011

February 2011

March 2011

April 2011

May 2011

June 2011

TOTAL PER UNIT

RENTAL INCOMELease Rent 819,365 818,590 818,630 818,630 818,630 818,630 818,605 818,495 824,117 834,855 834,855 834,855 9,878,257 12,226Loss to Lease -29,014 -31,716 -32,327 -32,121 -29,238 -26,454 -24,908 -25,176 -29,440 -38,846 -37,687 -35,840 -372,766 -461

¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯ ¯¯¯¯¯TOTAL LEASE RENT 790,351 786,874 786,303 786,509 789,392 792,176 793,697 793,319 794,677 796,010 797,168 799,015 9,505,491 11,764

Prior Month's Rent Change 38 202 -1,212 600 -606 0 -1,007 -796 125 225 1,223 79 -1,129 -1Vacancy -60,755 -57,962 -65,622 -70,736 -73,313 -74,746 -73,669 -73,542 -57,106 -39,259 -37,869 -43,249 -727,826 -901Month to Month Fee 1,003 850 953 908 1,110 1,350 1,451 2,050 2,153 1,913 1,950 2,005 17,697 22Rent Adj 19 -7 -68 -31 93 -604 -548 -73 362 321 29 511 6 0Bad Debt Write Off -19,441 -11,731 -5,167 -14,195 -10,896 -4,027 -7,303 -8,976 -5,336 -8,728 -6,457 -5,516 -107,772 -133Rent Concessions -25,650 -22,694 -18,779 -18,262 -23,525 -18,784 -21,362 -19,828 -18,932 -21,799 -23,292 -20,615 -253,523 -314

¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯ ¯¯¯¯¯NET RENTAL INCOME 685,565 695,532 696,409 684,794 682,255 695,366 691,258 692,155 715,944 728,683 732,752 732,231 8,432,944 10,437

OTHER INCOMEApplication/cbi Fees 698 1,745 915 645 777 337 978 1,558 1,903 1,130 1,275 1,291 13,249 16Water Reimbursement 23,824 21,300 22,650 24,381 24,321 23,841 23,878 28,865 22,673 24,656 27,420 26,630 294,438 364Utility Service Charge 28 152 30 40 40 70 60 10 1 -10 20 60 501 1Miscellaneous Income 0 0 0 0 0 32,912 0 0 40 0 0 0 32,952 41Cable Income 3,042 3,043 3,040 2,694 3,043 -452 2,616 2,615 1,596 450 889 1,853 24,430 30Pet Rent 1,561 1,589 1,775 1,575 1,344 1,375 1,100 1,350 1,700 2,145 1,451 1,562 18,526 23Storage Income 51 0 0 197 51 51 0 0 273 0 432 93 1,150 1Tenant Charges 123 14 60 144 16 156 167 233 1,012 363 433 185 2,906 4Late Charges/fees 8,386 6,764 7,168 7,385 5,427 6,255 8,651 7,214 4,180 4,994 6,123 8,070 80,617 100Nsf Fees 105 560 315 245 175 283 353 281 206 280 180 298 3,280 4Rent & Dep Forfeit -126 0 0 0 0 1,084 10 0 1,230 0 0 0 2,198 3Summons & Legal fee incom 6,056 4,014 4,571 6,157 4,838 4,845 7,854 7,708 3,387 4,875 5,865 6,993 67,164 83Move-In Fees 0 300 0 0 -300 0 0 0 0 0 0 0 0 0Move-Out Charges 1,997 5,295 1,147 6,497 4,804 1,260 4,048 3,110 707 4,454 3,382 4,025 40,725 50Bad Debt Collection 7,662 5,843 2,206 922 3,111 4,847 3,328 7,149 10,261 8,480 6,401 6,017 66,228 82Community Fee 0 0 0 0 0 300 0 0 0 500 0 0 800 1

¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯ ¯¯¯¯¯TOTAL OTHER INCOME 53,407 50,618 43,877 50,881 47,647 77,164 53,043 60,092 49,168 52,317 53,870 57,077 649,164 803

¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯ ¯¯¯¯¯TOTAL INCOME 738,973 746,151 740,285 735,675 729,902 772,530 744,301 752,247 765,112 781,000 786,622 789,308 9,082,107 11,240

–––––– –––––– –––––– –––––– –––––– –––––– –––––– –––––– –––––– –––––– –––––– –––––– –––––––– –––––

SALARIESSalaries - Leasing 28,077 28,341 36,485 22,162 25,083 12,206 24,921 24,754 38,538 25,889 25,755 25,125 317,334 393Salaries - Maintenance 28,970 32,103 46,980 30,922 28,756 16,046 21,603 25,923 41,359 24,643 24,816 28,863 350,984 434Lodging 2,946 2,777 3,665 2,121 2,332 2,882 1,676 1,908 1,720 1,401 1,628 1,371 26,428 33Payroll Tax/Benefits 3,653 4,144 5,838 3,685 3,459 4,796 5,705 6,299 9,277 4,389 4,150 3,564 58,959 73Workers Compensation Insu 1,413 1,588 2,083 1,421 1,403 1,390 1,067 1,217 1,941 1,173 1,813 1,680 18,190 23

© 2014 CBRE, Inc.



Account Description

July 2010

August 2010

September 2010

October 2010

November 2010

December 2010

January 2011

February 2011

March 2011

April 2011

May 2011

June 2011

TOTAL PER UNIT

Employee Benefits 8,201 6,948 7,106 7,395 7,480 6,414 6,408 5,741 6,092 6,089 6,158 6,590 80,621 100¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯ ¯¯¯¯¯

TOTAL SALARIES 73,260 75,900 102,157 67,706 68,512 43,734 61,380 65,842 98,926 63,584 64,320 67,193 852,515 1,055

MAINTENANCEAppliance Repair 0 0 0 148 0 50 0 0 0 0 0 302 501 1Appliance Supplies 925 847 1,170 721 1,192 1,107 183 889 1,296 1,080 270 658 10,337 13Counter Top Resurfacing 0 0 100 100 100 0 100 49 100 0 0 100 649 1Cabinet Supply 0 59 0 0 0 0 0 0 0 0 125 0 184 0Air Condition Repair 0 52 0 0 0 0 0 0 0 0 0 0 52 0Carpet/flooring-repair 1,516 2,258 2,201 1,572 1,475 -647 1,297 415 1,831 2,651 2,880 2,486 19,936 25Carpet/flooring-supplies 0 0 13 0 22 139 550 55 -55 0 0 0 723 1Cleaning Contract 5,258 5,258 5,258 5,258 5,258 5,258 6,219 5,293 6,219 6,219 6,219 5,258 66,978 83Cleaning Supplies 239 28 906 278 119 332 22 407 267 240 331 301 3,469 4Electrical Repairs 221 362 1,191 628 252 540 0 0 0 214 0 0 3,408 4Electrical Supplies 2,786 1,093 1,466 1,938 1,256 780 690 991 453 587 992 1,468 14,502 18Extermination Contract 1,198 958 1,208 1,198 1,858 958 2,074 1,429 1,137 1,296 1,157 1,101 15,572 19Extermination Treatment 205 0 517 362 0 210 297 543 318 1,091 840 416 4,799 6Fire & Life Safety 291 0 497 47 22 208 100 448 173 209 58 26 2,079 3Glass/screen Supplies 2,206 699 223 413 188 541 -47 196 0 118 0 588 5,126 6Glass/screen Repair 355 292 1,378 765 925 951 875 130 518 1,116 857 1,623 9,783 12Hvac Repair 284 0 199 728 363 790 564 693 0 0 0 651 4,272 5Hvac Supplies 2,157 749 1,474 1,862 948 345 323 1,557 233 567 749 2,521 13,486 17Landscaping Contract 8,639 8,639 8,639 8,639 8,639 8,639 7,519 7,519 7,519 7,519 7,519 7,519 96,945 120Landscaping Repairs 0 1,460 0 86 150 180 0 0 890 977 0 0 3,743 5Locks/keys Supplies 1,214 1,049 1,132 1,464 272 509 329 723 626 389 470 540 8,718 11Blinds Supplies 1,010 2,652 1,971 485 601 1,773 1,297 480 1,301 1,207 585 1,986 15,348 19Painting Repairs 1,636 1,424 2,770 2,090 1,795 750 50 434 1,046 1,572 810 830 15,207 19Drywall/Plaster Repair 7,588 3,914 5,207 7,512 7,372 2,749 4,466 3,675 4,993 5,408 2,509 4,832 60,225 75Paint Supplies 178 88 255 352 426 341 63 409 -14 114 342 39 2,592 3Pool Contracts 5,181 5,181 4,955 0 0 0 0 0 0 0 5,993 5,993 27,301 34Pool Repairs 0 0 0 0 0 -1,800 0 0 0 0 0 0 -1,800 -2Plumbing Repair 436 1,326 1,642 614 1,168 4,444 1,852 1,625 1,534 1,104 1,672 1,187 18,604 23Plumbing Supplies 2,676 2,839 5,519 4,308 3,211 4,482 2,122 3,798 2,134 1,607 4,410 1,564 38,671 48Roof/Gutter Repair 946 64 1,148 389 635 380 1,000 499 0 970 588 2,350 8,970 11Roof/gutter Supplies 0 0 0 0 0 300 0 0 0 0 0 0 300 0Snow Removal Contract 0 0 0 0 0 2,830 4,341 6,355 6,638 0 0 0 20,165 25Snow Removal - Supplies 0 0 0 0 695 491 918 1,161 0 0 0 0 3,266 4Uniform Contract 365 689 409 406 510 394 349 1,007 528 333 338 250 5,579 7Uniform Purchase 18 131 65 26 48 12 73 16 0 43 0 75 505 1Cleaning - Turnover 3,392 5,447 3,416 3,668 1,584 -4,600 1,052 1,582 4,273 1,326 1,542 1,540 24,222 30Painting - Turnover 6,589 11,559 7,785 10,475 7,191 -4,217 4,568 6,250 6,507 7,847 6,711 6,355 77,620 96Contract Turnover 884 0 0 424 0 4,000 2,500 2,000 1,800 0 0 0 11,608 14General R&M 1,275 649 2,049 2,537 1,100 707 919 721 324 1,462 990 709 13,442 17

© 2014 CBRE, Inc.



Account Description

July 2010

August 2010

September 2010

October 2010

November 2010

December 2010

January 2011

February 2011

March 2011

April 2011

May 2011

June 2011

TOTAL PER UNIT

Cabinet Repair 0 0 0 0 0 100 0 0 0 0 0 0 100 0Small Appliances 884 0 276 468 0 185 0 93 324 92 277 124 2,722 3Doors 866 147 662 786 254 973 629 982 420 814 400 408 7,341 9Water Extractions 2,124 4,755 7,816 3,933 9,479 3,228 3,736 1,349 3,477 3,801 4,012 7,542 55,252 68

¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯ ¯¯¯¯¯TOTAL MAINTENANCE 63,541 64,668 73,517 64,681 59,107 38,412 51,032 53,772 56,809 51,973 53,648 61,342 692,502 857

UTILITIESElectricity 7,226 6,998 6,898 5,835 7,247 5,074 9,041 8,371 10,050 5,313 6,839 5,890 84,782 105Vacant Utilities 5,284 3,438 6,932 3,954 3,505 1,000 3,551 8,867 9,331 4,398 2,109 1,056 53,425 66Water & Sewer 5,860 5,948 7,862 10,993 -7,684 -7,595 5,043 6,860 7,595 8,426 8,486 9,115 60,907 75W&S - County Tax 37,086 6,935 26,723 26,723 26,723 -42,387 28,294 28,294 28,294 28,294 28,294 28,294 251,569 311Trash Removal 1,285 1,285 1,285 1,397 1,695 2,260 2,260 2,260 2,260 2,260 2,260 2,260 22,767 28Roll Off Trash 516 516 516 2,113 1,031 190 645 473 500 449 2,357 301 9,607 12Septic Pumping & Maintena 250 250 250 250 164 -14 500 337 1,090 1,107 250 850 5,283 7Utility Billing Charges 2,735 2,713 2,524 3,437 2,358 1,706 3,769 2,573 801 2,121 2,387 2,419 29,543 37

¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯ ¯¯¯¯¯TOTAL UTILITIES 60,242 28,083 52,990 54,702 35,038 -39,765 53,103 58,034 59,920 52,368 52,983 50,185 517,883 641

LEASE EXPENSEAdvertising & Marketing 3,108 4,032 4,444 3,510 3,510 3,510 5,083 5,809 4,457 4,122 3,340 3,697 48,619 60Credit Reports 1,173 1,295 865 995 816 759 528 561 752 885 579 898 10,108 13Call Source 447 300 229 121 350 350 350 350 350 350 350 350 3,897 5Model Apartment Furnishin 0 0 0 0 0 0 0 0 0 0 0 155 155 0Leasing Costs 10 663 602 240 416 -817 273 11 362 115 25 212 2,113 3Resident Retention 0 310 77 0 5 0 44 150 51 33 72 60 802 1Resident Referrals 700 1,600 0 400 0 235 700 0 0 300 300 900 5,135 6Rewards & Recognitions 0 49 0 0 0 116 0 0 0 0 150 0 315 0

¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯ ¯¯¯¯¯TOTAL LEASE EXPENSE 5,438 8,251 6,216 5,266 5,097 4,153 6,979 6,881 5,972 5,804 4,816 6,273 71,145 88

ADMINISTRATIONAnswering Service 195 197 40 139 142 139 142 140 185 137 100 140 1,697 2Bank Charges 502 798 518 416 734 422 593 888 602 568 828 586 7,454 9Credit Card & Other Proce 6,413 6,543 6,492 6,661 9,620 11,952 435 0 388 471 40 808 49,824 62Cable Expense 27 26 26 27 27 26 25 25 25 25 28 25 312 0Dues, Meetings & Subscrip 0 58 0 0 0 510 0 36 0 12 20 0 635 1Donations 0 0 0 0 0 0 0 0 0 210 0 0 210 0Eviction & Legal Costs 9,783 8,103 8,433 9,327 4,089 7,998 11,173 4,566 5,741 6,659 4,838 11,920 92,631 115Office Supplies 530 559 807 342 650 360 689 695 410 793 217 443 6,493 8Postage & Shipping 340 387 477 256 429 413 448 195 269 251 288 224 3,977 5Printing & Photocoping 85 719 558 220 1,113 889 0 442 359 595 639 18 5,638 7Security Patrol 0 0 0 0 0 1,018 0 0 0 0 0 0 1,018 1Security Repairs 1,361 406 1,246 225 1,469 879 362 447 255 296 277 696 7,920 10

© 2014 CBRE, Inc.



Account Description

July 2010

August 2010

September 2010

October 2010

November 2010

December 2010

January 2011

February 2011

March 2011

April 2011

May 2011

June 2011

TOTAL PER UNIT

Security Alarm 5,644 5,293 5,510 5,638 3,503 7,546 5,751 4,463 5,755 6,631 5,445 5,579 66,757 83Telephone - Local Svcs 1,086 1,113 1,130 1,111 1,169 1,106 1,215 1,034 955 1,294 1,139 1,247 13,597 17Telephone - Cell Phone 256 259 257 259 258 257 257 266 258 257 805 471 3,860 5Telephone - Internet 161 104 247 89 168 168 247 168 89 168 141 142 1,893 2

¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯ ¯¯¯¯¯TOTAL ADMINISTRATION 26,381 24,566 25,742 24,710 23,370 33,683 21,336 13,365 15,290 18,368 14,804 22,299 263,915 327

¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯ ¯¯¯¯¯

TOTAL OPERATING EXPENSE 228,861 201,467 260,622 217,065 191,124 80,217 193,831 197,894 236,917 192,098 190,571 207,292 2,397,960 2,968

FIXEDManagement Fees 30,966 27,630 30,189 28,694 30,377 29,924 30,165 30,974 31,473 31,972 30,376 30,985 363,725 450Other Taxes & Fees 1,022 630 630 630 -1,608 630 720 720 720 720 1,317 720 6,851 8Real Estate Taxes 38,512 38,512 38,512 38,512 38,512 38,512 38,512 38,512 38,512 38,512 38,512 38,512 462,143 572Personal Property Taxes 1,003 0 528 36 0 -276 0 0 0 0 0 0 1,290 2Building Insurance 12,919 12,919 12,919 12,919 12,919 12,920 12,919 12,919 12,919 12,919 15,193 15,193 159,580 198Other Insurance 2,748 2,857 2,857 2,857 2,875 2,857 2,857 2,857 2,857 2,857 3,016 3,673 35,171 44

¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯ ¯¯¯¯¯TOTAL FIXED 87,169 82,549 85,636 83,649 83,075 84,567 85,174 85,982 86,482 86,980 88,415 89,083 1,028,760 1,273

¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯ ¯¯¯¯¯

Replacment Reserves 16,833 16,833 16,833 16,833 16,833 16,833 16,833 16,833 16,833 16,833 16,833 16,833 202,000 250¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯ ¯¯¯¯¯

TOTAL OPERATING/FIXED & R 332,864 300,849 363,091 317,547 291,033 181,617 295,838 300,710 340,233 295,911 295,819 313,208 3,628,720 4,491¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯ ¯¯¯¯¯

NET OPERATING INCOME 406,109 445,302 377,194 418,129 438,870 590,913 448,463 451,537 424,880 485,089 490,803 476,100 5,453,387 6,749–––––– –––––– –––––– –––––– –––––– –––––– –––––– –––––– –––––– –––––– –––––– –––––– –––––––– –––––

© 2014 CBRE, Inc.


ADDENDUM D

LEGAL DESCRIPTION

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.


ADDENDUM E

CLIENT CONTRACT INFORMATION

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.


ADDENDUM F

QUALIFICATIONS

© 2014 CBRE, Inc.

CROSSWINDS AT ROLLING ROAD APARTMENTS| QUALIFICATIONS

JERROLD HARVEY, MAI, MRICS, CCIM

Managing Director

CBRE, Inc. – Valuation & Advisory Services 1861 International Drive, Suite 300

McLean, Virginia 22102 Voice (703)-734-4759 Fax (703)-734-3012

E-Mail [email protected]

EDUCATIONAL Bachelor in Business Administration, Emory University, Atlanta, Georgia Successfully completed all the necessary courses to qualify for the MAI and CCIM designation. Graduate course work at various institutions in real estate law, commercial leasing, finance and investment, construction cost analysis and valuation of fractional interests.

PROFESSIONAL Designated Member, Appraisal Institute (MAI) #8935, Current on Continuing Education Member, Royal Institute of Chartered Surveyors Member, Commercial Investment Real Estate Institute President, Washington DC Chapter, Appraisal Institute, 2013 Vice President, Washington DC Chapter, Appraisal Institute, 2012 Treasurer, Washington DC Chapter, Appraisal Institute, 2011 Secretary, Washington DC Chapter, Appraisal Institute, 2010 Member, Board of Directors - Washington DC Chapter, Appraisal Institute, 2008-2009 Former Member, Local Appraisal Institute Chapter Admissions Committee. Former Member, Regional Appraisal Institute Ethics and Counseling Panel. Qualified Expert Witness - Superior Court of the District of Columbia Qualified Expert Witness - United States Bankruptcy Court

LICENSES/CERTIFICATIONS Certified General Real Estate Appraiser: District of Columbia (10016, expiration 2/28/14) Certified General Real Estate Appraiser: State of Maryland (10086, expiration 2/25/16) Certified General RE Appraiser: Commonwealth of Virginia (4001-001321, exp 1/31/14) Certified General Real Estate Appraiser: State of West Virginia (268, expiration 9/30/14)

EXPERIENCE Thirty (30) years of Real Estate Appraisal, Consulting and Brokerage experience throughout the United States specializing in the Washington DC, Baltimore, Richmond and Hampton Roads metropolitan areas. 1995 - Present CB Richard Ellis, Inc. - Valuation & Advisory Services Washington, D.C. 1987 - 1994 Chase National Corporate Services - Real Estate Washington, D.C. 1982 - 1987 Chase Manhattan Bank, N.A. - Real Estate New York, New York 1981 - 1982 KDL Real Estate Company New York, New York Assignments span a wide variety of properties and markets, including office buildings, community retail centers, regional malls, industrial buildings, residential and commercial subdivisions, apartment buildings and hotels.

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.

CROSSWINDS AT ROLLING ROAD APARTMENTS| QUALIFICATIONS

PHILIP A. MOTTOLA Senior Appraiser

CBRE, INC.

Valuation and Advisory Services 1861 International Drive, Suite 300

McLean, Virginia 22102 703-734-4715

E-Mail [email protected]

EDUCATIONAL

Masters in Business Administration, George Washington University, Washington DC BS Electrical Engineering, Georgia Institute of Technology, Atlanta, GA Appraisal Education & Training Advanced Concepts and Case Studies (Appraisal Institute) Advanced Income Capitalization (Appraisal Institute) Advanced Sales Comparison and Cost Approaches (Appraisal Institute) General Market Analysis and Highest & Best Use (Appraisal Institute) Report Writing and Valuation Analysis (Appraisal Institute) Supporting Capitalization Rates (Appraisal Institute) Basic Income Capitalization (Appraisal Institute) Basic Appraisal Procedures (Appraisal Institute) Basic Appraisal Principles (Appraisal Institute) Business Practices and Ethics (Appraisal Institute) 15-hour USPAP

PROFESSIONAL

Appraisal Institute, Candidate for Designation #479662

LICENSES/CERTIFICATIONS Certified General Real Estate Appraiser: Commonwealth of Virginia (4001-014158, exp 7/31/2015) Certified General Real Estate Appraiser: District of Columbia (GA 11575, exp. 2/28/2016) Certified General Real Estate Appraiser: State of Maryland (31822, exp. 8/21/2016) Certified General Real Estate Appraiser: State of West Virginia (GCG449, exp. 9/30/2014)

EXPERIENCE Assignments include multi-family properties, industrial properties, retail centers, office properties, and land. Clients include developers, individuals, and corporate property owners.

© 2014 CBRE, Inc.

© 2014 CBRE, Inc.

© 2013 CBRE, Inc.

VALUATION REPORT HAMPTON CENTER 6001 Terrell Lane Hampton, Virginia 23666 CBRE, Inc. File No. 13-081DC-0906-3

Jim Vallos HARBOR GROUP INTERNATIONAL 999 Waterside Drive, Suite 2300 Norfolk, VA 23510

© 2013 CBRE, Inc.

V A L U A T I O N & A D V I S O R Y S E R V I C E S

150 Main Street, Suite 1100 Norfolk, VA 23510

T (757) 228-1855

www.cbre.com

September 30, 2013 Jim Vallos HARBOR GROUP INTERNATIONAL 999 Waterside Drive, Suite 2300 Norfolk, VA 23510 RE: Appraisal of Hampton Center 6001 Terrell Lane Hampton, Virginia 23666 CBRE, Inc. File No 13-081DC-0906-3

Dear Mr. Vallos:

At your request and authorization, CBRE, Inc. has prepared an appraisal of the market value of the referenced property. Our analysis is presented in the following Self-Contained Appraisal Report.

The subject is a 418-unit multi-family garden property located at 6001 Terrell Lane in Hampton. The property consists of 22 predominantly three-story apartment buildings. The improvements were constructed in 1985 and are situated on a 19.73-acre site. Currently, the property is 90.0% occupied and is considered to be in average overall condition. The subject is more fully described, legally and physically, within the enclosed report.

Based on the analysis contained in the following report, the market value of the subject is concluded as follows:

MARKET VALUE CONCLUSION


As Is Fee Simple Estate September 10, 2013 $31,300,000

Compiled by CBRE

Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of, and inseparable from, this letter.

The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP),

© 2013 CBRE, Inc.

Jim Vallos September 30, 2013 Page 2

the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. It also conforms to the International Financial Reporting Standards (IFRS).

The intended use and user of our report are specifically identified in our report as agreed upon in our contract for services and/or reliance language found in the report. No other use or user of the report is permitted by any other party for any other purpose. Dissemination of this report by any party to non-client, non-intended users does not extend reliance to any other party and CBRE will not be responsible for unauthorized use of the report, its conclusions or contents used partially or in its entirety.

It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CBRE, Inc. can be of further service, please contact us.

Respectfully submitted, CBRE, Inc. - VALUATION & ADVISORY SERVICES

Thomas O. McCoy, MAI Jack Aspinwall Director Unlicensed Virginia Cert Gen. 4001-007629 September 10th 2013 September 10th 2013 Email: [email protected] Email: [email protected]

© 2013 CBRE, Inc.

HAMPTON CENTER | CERTIFICATION OF THE APPRAISAL

i

CERTIFICATION OF THE APPRAISAL

We certify to the best of our knowledge and belief:

1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting

conditions and are our personal, impartial and unbiased professional analyses, opinions, and conclusions.

3. We have no present or prospective interest in or bias with respect to the property that is the subject of this report and have no personal interest in or bias with respect to the parties involved with this assignment.

4. Our engagement in this assignment was not contingent upon developing or reporting predetermined results. 5. Our 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.

6. This appraisal assignment was not based upon a requested minimum valuation, a specific valuation, or the approval of a loan.

7. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice, as well as the requirements of the State of Virginia.

8. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute.

9. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

10. As of the date of this report, Thomas O. McCoy, MAI has completed the continuing education program of the Appraisal Institute.

11. Jack Aspinwall has and Thomas O. McCoy, MAI has made a personal inspection of the property that is the subject of this report.

12. No one provided significant real property appraisal assistance to the persons signing this report. 13. Valuation & Advisory Services operates as an independent economic entity within CBRE, Inc. Although

employees of other CBRE, Inc. divisions may be contacted as a part of our routine market research investigations, absolute client confidentiality and privacy were maintained at all times with regard to this assignment without conflict of interest.

14. Jack Aspinwall and Thomas O. McCoy, MAI have provided real estate related services on this property in the three years prior to accepting this assignment.




Compiled by CBRE

Thomas O. McCoy, MAI Jack Aspinwall Virginia Cert Gen. 4001-007629 September 10th 2013

Unlicensed September 10th 2013

© 2013 CBRE, Inc.

HAMPTON CENTER | SUBJECT PHOTOGRAPHS

ii

SUBJECT PHOTOGRAPHS

AERIAL VIEW OF THE SUBJECT

AERIAL VIEW OF THE SUBJECT

© 2013 CBRE, Inc.


iii



© 2013 CBRE, Inc.


iv

VIEW OF A TYPICAL APARTMENT INTERIOR

VIEW OF A TYPICAL APARTMENT INTERIOR

© 2013 CBRE, Inc.

HAMPTON CENTER | SUMMARY OF SALIENT FACTS

v

SUMMARY OF SALIENT FACTS

Property Name

Location

Assessor’s Parcel Numbers

Highest and Best Use

As If Vacant

As Improved

Property Rights Appraised

Land Area 19.73 AC 859,439 SF

Improvements

Property Type Apartment

Number of Buildings

Number of Stories

Gross Building Area

Net Rentable Area

Number of Units 418

Average Unit Size 974 SF

Year Built 1985 Renovated: 0

Condition

Estimated Exposure Time

Financial Indicators

Current Occupancy 90.0%

Stabilized Occupancy 90.0%

Stabilized Credit Loss 3.0%

Overall Capitalization Rate 7.00%

Pro Forma Operating Data Total Per Unit

Effective Gross Income $4,329,905 $10,359

Operating Expenses $2,135,711 $5,109

Expense Ratio 49.32%

Net Operating Income $2,194,194 $5,249

7003016

3

22

Hampton Center

Fee Simple Estate

Apartment

Apartment

7003017

6001 Terrell Lane, Hampton, Virginia 23666


6 Months

Average

406,965 SF

410,379 SF

VALUATION Total Per Unit

Sales Comparison Approach $31,400,000 $75,120

Income Capitalization Approach $31,300,000 $74,880

Insurable Value $25,750,000 $61,603

CONCLUDED MARKET VALUE

Appraisal Premise Interest Appraised Value

As Is Fee Simple $31,300,000

Compiled by CBRE

Date of Value

September 10, 2013

STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS (SWOT)

Strengths and weaknesses are internal to the subject; opportunities & threats are external to the subject

© 2013 CBRE, Inc.

HAMPTON CENTER | SUMMARY OF SALIENT FACTS

vi

Strengths

The property benefits from convenient access to major roadways, employment centers and commercial districts in Hampton.

Weaknesses

The property’s age, while comparable to a number of nearby properties, is inferior to various newly constructed multifamily properties in the area.

Opportunities

There may be some opportunity to obtain increased income from the property by performing various renovations to units.

Threats

The weak overall economy and related macro-economic concerns may increase the difficulty of leasing the remaining vacant units.

EXTRAORDINARY ASSUMPTIONS

An extraordinary assumption is defined as “an assumption directly related to a specific assignment,

which, if found to be false, could alter the appraiser’s opinions or conclusions. Extraordinary

assumptions presume as fact otherwise uncertain information about physical, legal, or economic

characteristics of the subject property; or about conditions external to the property such as market

conditions or trends; or about the integrity of data used in an analysis.” 1

None noted

HYPOTHETICAL CONDITIONS

A hypothetical condition is defined as “that which is contrary to what exists but is supposed for the

purpose of analysis. Hypothetical conditions assume conditions contrary to known facts about

physical, legal, or economic characteristics of the subject property; or about conditions external to the

property, such as market conditions or trends; or about the integrity of data used in an analysis.” 2

None noted


2 Dictionary of Real Estate Appraisal, 97.

© 2013 CBRE, Inc.

HAMPTON CENTER | TABLE OF CONTENTS

vii

TABLE OF CONTENTS

CERTIFICATION OF THE APPRAISAL ............................................................................................. i

SUBJECT PHOTOGRAPHS .......................................................................................................... ii

SUMMARY OF SALIENT FACTS .................................................................................................... v

TABLE OF CONTENTS .............................................................................................................. vii

INTRODUCTION ...................................................................................................................... 1

AREA ANALYSIS ......................................................................................................................... 7

NEIGHBORHOOD ANALYSIS .................................................................................................. 17

MARKET ANALYSIS .................................................................................................................. 21

SITE ANALYSIS ........................................................................................................................ 30

IMPROVEMENTS ANALYSIS ...................................................................................................... 34

ZONING ................................................................................................................................ 39

TAX AND ASSESSMENT DATA .................................................................................................. 40

HIGHEST AND BEST USE ......................................................................................................... 42

APPRAISAL METHODOLOGY ................................................................................................... 45

INSURABLE VALUE ................................................................................................................... 46

SALES COMPARISON APPROACH ............................................................................................ 48

INCOME CAPITALIZATION APPROACH .................................................................................... 54

RECONCILIATION OF VALUE .................................................................................................. 74

ASSUMPTIONS AND LIMITING CONDITIONS .......................................................................... 75

ADDENDA A Glossary of Terms B Improved Sale Data Sheets C Rent Comparable Data Sheets D Property Data E Legal Description F Required Client Information G Qualifications

© 2013 CBRE, Inc.

HAMPTON CENTER | INTRODUCTION

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INTRODUCTION

PROPERTY IDENTIFICATION

The subject is a 418-unit multi-family garden property located at 6001 Terrell Lane in Hampton. The

property consists of 22 predominantly three-story apartment buildings. The improvements were

constructed in 1985 and are situated on a 19.73-acre site. Currently, the property is 90.0% occupied

and is considered to be in average overall condition. The subject is more fully described, legally and

physically, within the enclosed report.


Title to the property is currently vested in the name of Harbor Group International, who acquired title

to the property in mid-2011 as part of an 8-property portfolio for approximately $166 million.

HGI acquired ownership stakes in the properties through entity purchases and in most cases

purchased fractional ownership of the entities. The 2011 price allocated to the subject transfer does

not appear to be reflective of its market value due to the fractional-purchase issue and the distressed

nature of the asset in previous years. Additionally, the portfolio acquisition included the assumption of

existing unfavorable financing. Subsequent to the sale, significant renovations were performed. We

are aware of no other sales of the property within the last three years, and the property is currently not

listed for sale.


The following table illustrates the various dates associated with the valuation of the subject, the

valuation premise(s) and the rights appraised for each premise/date:


Item Date Interest Appraised

Date of Report: September 30, 2013

Date of Inspection: September 10, 2013

Date of ValueAs Is: September 10, 2013 Fee Simple Estate

Compiled by CBRE

PURPOSE OF THE APPRAISAL

The purpose of this appraisal is to estimate the market value of the subject property. The current

economic definition of market value agreed upon by agencies that regulate federal financial

institutions in the U.S. (and used herein) is as follows:

The most probable price which a property should bring in a competitive and open market under all

conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and

© 2013 CBRE, Inc.


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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. 3

The definition of fair market value is as follows: Fair market value is the price at which the property

would change hands between a willing buyer and a willing seller, neither being under any compulsion

to buy or to sell and both having reasonable knowledge of relevant facts. Source: United States v.

Cartwright, 411 U. S. 546, 93 S. Ct. 1713, 1716-17, 36 L. Ed. 2d 528, 73-1 U.S. Tax Cas. (CCH) ¶

12,926 (1973) (quoting from U.S. Treasury regulations relating to Federal estate taxes, at 26 C.F.R.

sec. 20.2031-1(b)).

TERMS AND DEFINITIONS

The Glossary of Terms in the Addenda provides definitions for additional terms that are, and may be

used in this appraisal.

INTENDED USE OF REPORT

This appraisal is to be used for financial reporting purposes.

INTENDED USER OF REPORT

This appraisal is to be used by Harbor Group International, its affiliates and investors.

Intended Users - the intended user is the person (or entity) who the appraiser intends will use the results of the appraisal. The client may provide the appraiser with information about other potential users of the appraisal, but the appraiser ultimately determines who the appropriate users are given the appraisal problem to be solved. Identifying the intended users is necessary so that the appraiser can report the opinions and conclusions developed in the appraisal in a manner that is clear and understandable to the intended users. Parties who receive or might receive a copy of the appraisal are not necessarily

3 Office of Comptroller of the Currency (OCC), 12 CFR Part 34, Subpart C – Appraisals, 34.42 (g); Office of Thrift

Supervision (OTS), 12 CFR 564.2 (g); Appraisal Institute, The Dictionary of Real Estate Appraisal, 4th ed. (Chicago: Appraisal Institute, 2002), 177-178. This is also compatible with the RTC, FDIC, FRS and NCUA definitions of market value as well as the example referenced in the Uniform Standards of Professional Appraisal Practice (USPAP).

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intended users. The appraiser’s responsibility is to the intended users identified in the report, not to all readers of the appraisal report. 4

SCOPE OF WORK

The scope of the assignment relates to the extent and manner in which research is conducted, data is

gathered and analysis is applied, all based upon the following problem-identifying factors stated

elsewhere in this report:

Client Intended use Intended user Type of opinion Effective date of opinion Relevant characteristics about the subject Assignment conditions

This appraisal of the subject has been presented in the form of a Self-Contained Appraisal Report,

which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(a) of

USPAP. That is, this report incorporates, to the fullest extent possible, practical explanation of the

data, reasoning and analysis that were used to develop the opinion of value. This report also includes

thorough descriptions of the subject and the market for the property type. CBRE, Inc. completed the

following steps for this assignment:

4 Appraisal Institute, The Appraisal of Real Estate, 13th ed. (Chicago: Appraisal Institute, 2008), 132.

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Data Resources Utilized in the Analysis

RESOURCE VERIFICATION

Site Data Source/Verification:Size Public tax records and Owner Submissions

Improved Data Source/Verification:Gross Size/Units Owner SubmissionsNet Size/Units Owner Submissions/Rent RollNo. Bldgs. InspectionParking Spaces Owner SubmissionsYOC Public Tax Records

Economic Data Source/Verification:Building Costs: N/AIncome Data: Income Statement and Rent RollExpense Data: Income Statement

Compiled by CBRE

Extent to Which the Property is Identified

CBRE, Inc. collected the relevant information about the subject from the owner (or representatives),

public records and through an inspection of the subject property. The property was legally identified

through the following sources:

postal address assessor’s records legal description

Economic characteristics of the subject were identified via:

recent rent roll historical operating statements

Extent to Which the Property is Inspected

CBRE inspected both the interior and exterior of the subject, as well as its surrounding environs on the

effective date of the appraisal. This included inspecting a sample of subject units and common areas

within the complex.

This inspection sample was considered an adequate representation of the subject property and is the

basis for our findings.

Type and Extent of the Data Researched

CBRE, Inc. reviewed the micro and/or macro market environments with respect to physical and

economic factors relevant to the valuation process. This process included interviews with regional

and/or local market participants, available published data, and other various resources. CBRE, Inc.

also conducted regional and/or local research with respect to the following:

applicable tax data

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zoning requirements flood zone status demographics income and expense data comparable data

Type and Extent of Analysis Applied

CBRE, Inc. analyzed the data gathered through the use of appropriate and accepted appraisal

methodology to arrive at a probable value indication via each applicable approach to value. The

steps required to complete each approach are discussed in the methodology section.

EXPOSURE/MARKETING TIME

Current appraisal guidelines require an estimate of a reasonable time period in which the subject

could be brought to market and sold. This reasonable time frame can either be examined historically

or prospectively. In a historical analysis, this is referred to as exposure time. Exposure time always

precedes the date of value, with the underlying premise being the time a property would have been on

the market prior to the date of value, such that it would sell at its appraised value as of the date of

value. On a prospective basis, the term marketing time is most often used. The exposure/marketing

time is a function of price, time, and use. It is not an isolated estimate of time alone. In consideration

of these factors, we have analyzed the following:

exposure periods for comparable sales used in this appraisal; exposure/marketing time information from the CBRE, Inc. National Investor Survey and the

PwC Real Estate Investor Survey; and the opinions of market participants.

The following table presents the information derived from these sources.

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Exposure/Mktg. (Months)Investment Type Range Average

Comparable Sales Data 3.0 - 9.0 6.0

CBRE Apartments

Class A 1.8 - 42.5 5.8

Class B 1.8 - 42.5 5.8

Class C 1.8 - 42.5 5.8

PWC ApartmentNational Data 0.0 - 18.0 5.3

Local Market Professionals 6.0 - 12.0 9.0

CBRE Exposure Time Estimate

Source: CBRE National Investor Survey & Korpacz Real Estate Investor Survey

6 Months

EXPOSURE/MARKETING TIME INFORMATION

© 2013 CBRE, Inc.

HAMPTON CENTER | AREA ANALYSIS

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AREA ANALYSIS

The subject property is located in the city of Hampton, within southeastern Virginia. The area also lies

within the Norfolk-Newport News-Virginia Beach MSA (Norfolk MSA), which includes fourteen Virginia

municipalities plus Currituck County, North Carolina. The Virginia municipalities for the Norfolk MSA

include the cities of Chesapeake, Hampton, Newport News, Norfolk, Poquoson, Portsmouth, Suffolk,

Virginia Beach and Williamsburg, and the counties of Gloucester, Isle of Wight, James City, Mathews

and York. The region is also referred to as Hampton Roads.

POPULATION

The following statistics are available through the U.S. Census Bureau and Claritas, Inc. Historical

population and household statistics are summarized as follows:

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Population

2018 Population 325,322,277 8,565,075 1,744,834

2013 Population 314,861,807 8,207,491 1,695,181

2010 Population 308,745,538 8,001,024 1,671,683

2000 Population 281,421,943 7,078,681 1,576,373

Annual Growth 2013 - 2018 0.7% 0.9% 0.6%

Annual Growth 2000 - 2013 0.2% 0.2% 0.1%

Annual Growth 1990 - 2000 0.9% 1.2% 0.6%

Households

2018 Households 123,405,917 3,278,676 662,244

2013 Households 119,206,509 3,137,169 640,197

2010 Households 116,716,292 3,056,058 628,572

2000 Households 105,480,131 2,699,207 580,288

Annual Growth 2013 - 2018 0.7% 0.9% 0.7%

Annual Growth 2000 - 2013 0.2% 0.2% 0.1%

Annual Growth 1990 - 2000 1.0% 1.2% 0.8%

Income

2013 Median HH Inc $49,232 $61,455 $58,233



Age 25+ College Graduates - 2010 58,671,709 1,872,304 306,743



United States Virginia Hampton Roads

As shown in the preceding chart, population and the number of households in Hampton Roads have

shown moderate increases since 1990. Between 2000 and 2013, Hampton Roads has witnessed

modest growth in population (0.1%) and households (0.1%), which is slightly lower than the national

averages.

These figures predict positive annual growth over the next five years, with a 0.6% average annual

population increase estimated for Hampton Roads and a 0.9% expected average annual increase for

the state. The median household income of the MSA indicates a middle class area.

TRANSPORTATION

Hampton Roads has a comprehensive and increasingly efficient transportation system that, when

combined with the area’s strategic geographical location on the East Coast, provides a vital link to

regional, national and international markets.

Hampton Roads is at the eastern terminus of Interstate 64, which extends east-to-west through Virginia

providing relative ease of access to the principal north-south interstates of I-95 and I-85. Important

east-west highways include U.S. Routes 58, 60, and 460, and major north-south roadways include

U.S. Routes 13 and 17. These roadways provide vital access throughout the metropolitan area and to

important non-interstate travel links throughout the Mid-Atlantic.

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The location of the region on the Hampton Roads Harbor has necessitated the construction of several

bridges and tunnels. Hampton Roads is connected to the Eastern Shore of Virginia via U.S. Route 13

(The Ocean Highway) and the Chesapeake Bay Bridge-Tunnel, the longest bay bridge-tunnel in the

world. Connecting the Peninsula and Southside segments are the Hampton Roads Bridge-Tunnel

(Interstate 64), the Monitor-Merrimac Bridge-Tunnel (Interstate 664) and the James River Bridge (U.S.

Route 17). These bridge-tunnel crossings provide convenient inter-city and interstate linkages and

insure that virtually all of the cities and counties of the region are accessible to other locations in

Virginia and along the Eastern Seaboard.

The Inter-coastal Waterway-Albemarle Chesapeake Canal extends from the Currituck Sound of North

Carolina through Virginia Beach and Chesapeake where it runs into the southern branch of the

Elizabeth River. It then continues up the Chesapeake Bay to the Atlantic Ocean and points north. A

considerable amount of waterborne barge freight and boat traffic moves through the region on the

Inter-coastal Waterway.

Rail is also an important transportation consideration in the region, especially in connection to the

region’s port. From Hampton Roads, shippers can reach every major distribution center east of the

Mississippi via a one-line haul. Hampton Roads is the Mid-Atlantic terminus for two major railroad

corporations, the Norfolk-Southern Railroad running east-west and connecting to industrial centers in

the Mid-west, and CSX Transportation, Inc. which operates over 24,000 miles in nine states. The CSX

railroad and its barge line, American Commercial Lines, lead the transportation industry in hauling

coal, which accounts for the vast majority of rail freight tonnage in Virginia.

Other important rail lines include the Norfolk and Portsmouth Belt Line, which connects all the truck

line rail systems via a rail switching service to provide needed flexibility for all railroads serving the

area. Amtrak also provides passenger rail service from its station in Newport News.

The region also has a modern light rail system, known as The Tide, operating in Norfolk. This rail line,

completed in 2011, is operated by Hampton Roads Transit and handles approximately 3,000

passengers daily. Long-term plans call for an expansion of the line north to Naval Station Norfolk and

east to the Virginia Beach Oceanfront.

There are two international airports in Hampton Roads. Norfolk International Airport is located on the

Southside in Norfolk and Newport News-Williamsburg International Airport is on the Peninsula in

Newport News. Norfolk International Airport is ranked as the 75th largest airport in the U.S. and is

served by 4 major airlines including American, Delta, United, and Southwest. The airport also offers

one of the most modern and efficient air cargo facilities in Virginia. Approximately 70 million pounds

of air cargo are shipped through the Norfolk International Airport each year. Air cargo carriers include

FedEx, DHL, Airborne Express and UPS. The Newport News Williamsburg International Airport is

operated by the Peninsula Airport Commission and is served by Delta, Frontier Airlines and Allegiant

Air.

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PORT OF VIRGINIA

One of the region’s greatest assets is the Port of Virginia, which has the largest ice-free, natural

harbor in the world. The harbor lies 18 miles from the open seas and has developed into a thriving

shipping center. In terms of cargo handled, the Port of Virginia in recent years has been the East

Coast’s third largest, behind New York City and Savannah. The port’s 2012 East Coast market share

is illustrated in the following chart.

TEUs Market ShareNew York/New Jersey 5,503,485 34%Savannah 2,944,678 18%Hampton Roads 1,918,029 12%Charleston 1,381,349 9%Miami 914,913 6%Port Everglades 911,802 6%Jacksonville 900,350 6%Baltimore 631,802 4%Philadelphia 291,091 2%Wilmington (NC) 287,469 2%

SOURCE: Virginia Port Authority

TOP 10 EAST COAST CONTAINER PORTS

The port provides a wide range of international trade and commodity services, including U.S.

Customs service, numerous international freight forwarding firms, custom house brokers, port-

connected rail lines, port-side and public warehousing, fumigation, refrigeration, ship repair, pilot

services, and international banking.

The Port of Virginia was recently ranked the 8th most active U.S. port in terms of total foreign trade

based on cargo value. According to the U.S. Department of Commerce, the region’s primary

international trading partners include Brazil, India, China, Germany and the Netherlands. The Port’s

historical activity, in terms of ship calls and container units, is shown on the following chart.

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As noted above, the Port of Virginia terminals handled 1,966 ship calls and 1,209,822 container

units for Fiscal Year 2012. These figures represent a 7.5% annual increase in ship calls and a 9.8%

increase in annual container traffic. Looking ahead, many experts predict that the Port’s unique 50-

foot depth will give the region a competitive advantage as larger ships, with deeper drafts, begin to

transit the enlarged Panama Canal in 2014. The port’s overall 2011 performance is summarized in

the following chart.

Metric Tons (000s)Total Cargo 56,325.73 General Cargo 14,166.54 Container Cargo 13,851.24 Breakbulk Cargo 315.30

Container Units 1,102,051 TEUs 1,918,029 Total Cargo Dollar Value (Millions) 54,810.55$

SOURCE: Virginia Port Authority

2011 PERFORMANCE INDICATORS

In addition to shipping, the world’s largest cruise line, Carnival, operates spring and fall cruises to

Bermuda and the Bahamas out of Norfolk’s Half Moone Cruise and Celebration Terminal. This

80,000 SF terminal, opened in 2007, handles approximately 90,000 cruise ship passengers per year.

The facility consistently receives among the highest passenger approval ratings in the country.

EMPLOYMENT

Employment growth is a good measure of regional economic performance. The following is a

summary of historical employment growth in the region:

AREA EMPLOYMENT STATISTICS - HAMPTON ROADS

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Dec-11 Dec-12 % Increase

Construction & Mining 44,700 47,200 48,800 50,000 49,800 48,900 45,500 38,400 36,900 35,300 34,000 34,100 -23.7%

Manufacturing 60,100 59,300 59,800 59,900 58,400 57,400 56,300 53,600 51,900 51,500 52,000 52,900 -12.0%Trade, Transportation & Utilities 139,600 136,500 139,400 141,300 142,300 143,900 139,300 129,700 128,300 129,500 133,700 134,800 -3.4%

Information 16,500 16,000 15,500 15,100 15,400 15,600 14,800 13,300 12,400 11,500 11,400 10,700 -35.2%Financial Activities 36,700 37,500 39,700 39,900 40,700 41,600 40,400 37,500 36,000 37,000 37,400 37,400 1.9%

Professional & Business Services 104,700 104,400 100,300 101,500 102,000 102,200 105,600 99,700 97,800 97,100 97,800 98,900 -5.5%Education & Health Services 76,900 78,100 82,000 84,700 87,200 89,400 91,000 93,000 93,500 97,100 98,100 101,500 32.0%

Leisure & Hospitality 76,500 76,400 79,000 82,000 84,500 85,400 86,600 83,300 83,400 83,100 76,100 79,900 4.4%Other Services 28,900 32,800 34,100 35,000 34,100 36,100 32,200 34,300 34,300 34,600 34,600 34,700 20.1%

Total Government 149,400 149,300 151,300 151,500 153,000 154,300 156,700 158,000 158,500 160,200 163,100 164,200 9.9%Total Non-agricultural Employment 734,000 737,500 749,900 760,900 767,400 774,800 768,400 740,800 733,000 736,900 738,200 749,100 2.1%% Change 0.5% 1.7% 1.4% 0.8% 1.0% -0.8% -3.7% -1.1% 0.5% 1.5%

Source: Bureau of Labor Statistics

(Prelim)2002 - Present

Since 2002, total employment within the region increased to a peak in 2007 and subsequently

decreased. Total employment is approximately 2.1% higher than in 2002. Total employment has

increased year-over-year by 1.5%. The Hampton Roads area has had reasonably strong employment

trends compared to much of eastern US. The Construction & Mining, Manufacturing, and Information

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Sectors saw notable declines over the past 5 years. The region has experienced large increases in

Education & Health Services, Leisure & Hospitality, and Other Services.

UNEMPLOYMENT RATES

Shown below are the historical unemployment rates for the MSA, the Commonwealth of Virginia, and the US:

UNEMPLOYMENT RATE COMPARISON BY MSA, STATE, AND U.S.

Year Hampton Roads Virginia US1999 3.2% 2.8% 3.9%

2000 2.5% 2.2% 5.8%2001 3.3% 3.4% 6.0%

2002 4.2% 4.1% 6.0%2003 4.3% 4.1% 5.7%

2004 4.1% 3.7% 5.5%2005 4.0% 3.7% 5.5%

2006 3.3% 2.9% 4.5%2007 3.2% 3.2% 5.0%

2008 3.3% 4.0% 5.8%2009 7.0% 6.8% 9.3%

2010 7.4% 6.9% 9.6%2011 7.2% 5.9% 8.3%

December-11 6.8% 6.1% 8.5%December-12 6.0% 5.5% 7.8%

Source: Bureau of Labor Market Information Compiled by: CBRE, Inc.

As of December 2012, the MSA unemployment rate was 6.0%, which is lower than the rate 12

months ago. Historical unemployment for the MSA in most years has been below that of the US. This

demonstrates the strength of the Hampton Roads area compared to the nation, especially in light of

the recent national economic recession.

Traditionally, the region's dominant industries have been the military, shipbuilding/repair, local

government, and healthcare. Within the past decade the region has grown into a focal point on the

East Coast for financial firms, distribution companies, telemarketing and customer service operations.

According to the Hampton Roads Statistical Digest, a variety of companies are drawn to this area by

reasonable wage rates, a large labor pool, inexpensive land, the Port of Hampton Roads, and the

limited influence of labor unions. Hampton Roads is home to 18 publicly traded corporations, the

world’s largest naval base, a major East Coast port, and numerous internationally known tourist

attractions.

The chart that follows depicts the major employers in the region, which reflects the growing diversity of

the local economy and the continuing emergence of service oriented firms.

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MAJOR EMPLOYERS# of

Rank Company Employee1 U.S. Federal Government 50,000

2 Sentara Healthcare 15,000

3 Virginia Beach City Public Schools 10,000

4 Norfolk Naval Shipyard 7,000

5 Norfolk City Public Schools 6,527

6 Virginia Beach City 6,000

7 Dominion Enterprises 5,700

8 Wal-Mart Stores 5,270

9 Chesapeake City Public Schools 5,200

10 Portsmouth Naval Medical Center 4,770

11 Farm Fresh 4,400

12 Norfolk City 4,364

13 Bon Secours Hampton Roads Health System 4,000

14 Old Dominion University 4,000

15 Bank of America 3,600

Source: Hampton Roads Economic Development Alliance

MILITARY

Hampton Roads has numerous military installations which include the Norfolk Naval Base, Little Creek

Amphibious Base, the Naval Air Station-Oceana, Naval Weapons Station-Yorktown, Langley Air Force

Base and Fort Eustis, to mention a few.

In total, the Navy’s presence in the region includes approximately 75 ships, including six aircraft

carriers, 80,000 active duty personnel and 35 aircraft squadrons.

The Navy is expected to be a strong force for the local economy for years to come. Hampton Roads

boasts the world’s largest Navy base – Naval Station Norfolk. This station is the current headquarters

of the U.S. Atlantic Fleet and is the home port for the Navy’s 2nd fleet. The region is also headquarters

for the North Atlantic Treaty Alliance (NATO) as well as the Supreme Allied Command Atlantic.

Additionally, in 1993 the Commander in Chief of the U.S. Atlantic Command gave the region the

distinction of being second in military might only to the Pentagon.

Northrop Grumman (a.k.a Newport News Shipbuilding) is the top defense contractor operating in the

commonwealth and the third largest in the U.S. Last year its Virginia divisions received defense

contracts totaling $6.46 billion and employed more than 35,000 workers, 21,000 of them work in

Newport News building nuclear submarines and aircraft carriers. While Northrop Grumman is the

sole provider of nuclear aircraft carriers for the U.S Navy, it is not the only company operating in

Virginia that is benefiting from the surge in Navy shipbuilding. Falls Church-based General Dynamics

Corp. recently won a multibillion dollar contract to help the Navy meet its goal of 30 new submarines

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by 2020. In total, approximately 35% of Hampton Roads’ Gross Regional Product is attributable to

military spending.

SEQUESTRATION

The economic impact in Hampton Roads of Sequestration, or the across the board government

spending cuts mandated by Congress in the Budget Control Act of 2011, has yet to be fully

determined. While a variety of spending cuts have been discussed, specific plans have not been

announced. The Hampton Roads Planning District Commission has indicated that the area may lose

upwards of 1,600 jobs in the health care sector, along with budget cuts that could shrink the region's

income by an estimated $80 million a year, said James A. Clary, an economist with the HRPDC.

Sentara Healthcare will receive about $1 million less a month for its Hampton Roads operations. Bon

Secours predicts a $300,000 hit to its offerings in the region, and Chesapeake Regional Medical

Center anticipates a reduction of about $185,000.

An Old Dominion University economic forecast indicates the Hampton Roads region stands to lose

more than 12,000 jobs this year due to automatic spending cuts in the federal budget, which will yield

a $2 billion loss in both direct and indirect spending.

Cuts in the military are of primary concern, since that sector comprises a major component in the

Norfolk economy. On the table is a plan to temporarily ground the VFA-34 “Blue Blasters” squadron.

Furloughs are coming for close to 39,000 civilian government employees of the region’s naval bases,

costing them one day a week of work and pay from late April through September. The Navy is

deferring scheduled shipyard maintenance for up to 11 ships in the third and fourth quarters, cutting

deployments, and may temporarily shut down carrier strike groups. Hours would be scaled back at

many facilities. Training programs will be substantially reduced. Many contractors, including BAE

Systems, NSSC Technologies and SERCO Inc., have announced layoffs contingent on federal

government contracts.

On a positive note, legislation that will fund the federal government through September reverses some

of the cuts that were threatening the local economy. The bill restores funds for refueling the aircraft

carrier Abraham Lincoln, dismantling the carrier Enterprise, and starting construction of a carrier to be

named after John F. Kennedy. The bill also restores funding to a college tuition assistance program

for active-duty military personnel. In total, the bill will provide more than $3 billion to Newport News

Shipbuilding.

OUTLOOK

The Norfolk-Virginia Beach-Newport News Metropolitan Area is one of the more significant

metropolitan areas within the Commonwealth of Virginia and is the dominant metropolitan area in the

southern portion of the state. The physical features of the region offer a positive environment for

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residents and businesses alike. Cultural, social, recreational, and educational opportunities are

readily available to the influx of new households into the region. New and existing businesses are

also supported by a favorable network of transportation routes, the physical features bolstering the

tourist industry, and one of the largest port facilities in the world. The Mid-Atlantic location should

continue to attract residents and businesses to this region.

Notwithstanding the recent economic downturn, the economic and demographic indicators show that

the Hampton Roads region has witnessed favorable economics since the early 2000’s. Population

and the number of households have increased by moderate amounts, while the total number

employed is projected to increase. Currently, the MSA is outperforming the US with regard to

unemployment figures. Due to the area’s relatively stable employment base, the region has not been

as deeply affected by the recent national economic recession. Overall, this bodes well for the

economic outlook of the area.

ECONOMIC ANALYSIS

Summary

Moody’s Economy.com provides the following Hampton Roads metro area economic summary as of

March 2013.

RECENT PERFORMANCE

The weights on the Hampton Roads economy have grown in 2013, increasing downside risks to the

outlook. Federal budget cuts, many related to the sequester, are the biggest weight. This comes on

the heels of a good end to 2012, with port traffic up, job growth improving, and unemployment

hitting a cyclical low. A weak overall housing recovery remains a drag on the economy.

PORT

With the threat of a strike averted, port activity continues to support the economy. Activity late in 2012

was lifted by diverted traffic from the New York and New Jersey ports after Superstorm Sandy. The

number of 20-foot equivalent units through the port grew by more than 20% in November and

December, but growth slumped to less than 3% in January. Though growth has moderated, it will

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support the economy, especially when the European economy improves. One positive is the renewed

use of the Portsmouth Marine Terminal.

The sequester has the potential to impact the port with furloughs of federal workers. Cuts within the

Customs and Border Protection Department could increase wait times for goods entering the port to

get the necessary clearances, slowing the growth of port traffic.

ENTERTAINMENT

Prospects for important tourism look bright. A project to develop the site of the former Dome concert

hall into an entertainment complex, conceived of before the financial crisis, is moving forward again.

The development would be the largest such project in city history. The city would finance 25% of the

project, to pay for a parking garage and street improvements, as well as give the land to the

developer rent-free for at least 10 years. Construction could begin this year, and the goal is to open

in time for the 2015 tourist season. Hotel owners are enthusiastic supporters of the project.

CONCLUSION

The global and U.S. recoveries, which drive activity at the civilian port, as well as tourism and retail

trade, underpin Virginia Beach's weak recovery. A low cost structure, available labor supply from

military spouses, and state incentives give long-term upside potential to the expansion of the region’s

high-tech base. However, the drag from fiscal cuts will be major, and ongoing cuts in defense will

restrain the economy even beyond the initial blow. As a result, long-term growth will fall modestly

below the U.S. average.

© 2013 CBRE, Inc.

HAMPTON CENTER | NEIGHBORHOOD ANALYSIS

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NEIGHBORHOOD ANALYSIS

LOCATION

The subject is in the city of Hampton and is considered a suburban location. The city of Hampton is

situated in southeast Virginia.

BOUNDARIES

The neighborhood boundaries are detailed as follows:

North: Hampton Roads Center Pkwy South: Interstate 64 East: Armistead Ave West: Interstate 64

LAND USE

Land uses immediately surrounding the subject include multi-family developments to the north, south

and west. Additionally, commercial properties and single family residential are located about a

quarter of a mile north of the subject property. The Riverside Behavioral Health Center is located just

east of the subject. Hampton Roads Center Parkway, a major commercial corridor in the area is

located directly north, less than ½ mile from the subject.

The residential area surrounding the subject is a mature area of development, consisting primarily of

single-family homes with much of the development being built between the 1970s and 1990s. The

© 2013 CBRE, Inc.


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majority of the single-family residential development within a one mile radius of the subject may be

described as tract homes in the $100,000-$300,000 price range.

Commercial uses in the neighborhood include strip centers and shopping centers, big box retailers,

and service oriented establishments catering to the surrounding residential base. The types of

commercial uses range from small, free-standing structures housing automotive service facilities and

gas stations, branch banks, restaurants, convenience stores and the like. Jefferson Commons, a

389,000 square foot power center completed in 2005, is situated north of the subject. Tenants

include Kohl’s, Trader Joe’s, TJ Maxx, Shoe Carnival, Ulta, PetCo, Panera Bread, Starbucks, Golf

Galaxy, Chili’s, Smokey Bones, among others.

The newest retail development on the peninsula is the Peninsula Town Center, an open air mixed-use

development located in the Coliseum Central Business Improvement District of Hampton, Virginia in

the Hampton Roads region. The Town Center is located on the site of the original Coliseum Mall, an

enclosed facility constructed in 1973 by Mall Properties Inc. of New York, its first and only owner. At

991,000-square feet (876,000 retail, 115,000 office), Peninsula Town Center is the largest

redevelopment project in Hampton's history. Peninsula Town Center has a mix of department and

specialty retailers and restaurants, as well as commercial office and residential space above stores on

some buildings. There are also several landscaped parks, plazas and squares and 4,402 parking

spaces in surface and structured lots as well as on-street.

The subject is located several miles from City Center at Oyster Point in Newport News. City Center is

central to many of the most popular retail outlets and large businesses of the city. With this convenient

location subject residents can enjoy among the best dining, shopping and entertainment in Newport

News.

The Oyster Point Industrial Park, which lies at the northwest quadrant of Jefferson Avenue and J. Clyde

Morris Boulevard, contains 736 acres and is generally considered to be the premier business park on

the Peninsula. The park contains a combination of owner-occupied and multi-tenant facilities. Uses in

the park are predominately office, warehouse and light industrial. According to the latest Old

Dominion University Office Market Survey, Oyster Point has about 1.8 million square feet of office

space.

Also, the Newport News/Williamsburg International Airport is about 10 miles to the north of the

subject.

ACCESS

Primary access to the subject neighborhood is provided by Interstate 64 which is primarily an eight-

lane, variable width right-of-way, traversing the neighborhood in essentially a north-south direction.

This thoroughfare connects the subject neighborhood with the cities of Norfolk and Virginia Beach to

© 2013 CBRE, Inc.


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the south and with Williamsburg to the north. Secondary access to the neighborhood is provided by

Magruder Blvd, Hampton Roads Center Parkway and North Armistead Avenue.

The commute to the Hampton Central Business District is about five minutes, compared with the

commute to Norfolk, which is about a thirty minute drive. The drive to Williamsburg takes about

twenty five minutes. The Newport News–Williamsburg Airport is about a fifteen minute drive from the

subject neighborhood.

DEMOGRAPHICS

Selected neighborhood demographics in 1-, 3-, and 5-mile radii from the subject are shown in the

following table:


Population

2018 Population 11,376 71,826 200,530

2013 Population 10,869 71,306 199,527

2010 Population 10,598 71,498 200,328

2000 Population 9,973 75,504 205,618

Annual Growth 2013 - 2018 0.9% 0.1% 0.1%

Annual Growth 2010 - 2013 0.2% 0.0% 0.0%

Annual Growth 2000 - 2010 0.6% -0.5% -0.3%

Households

2018 Households 5,486 30,034 81,450

2013 Households 5,237 29,632 80,597

2010 Households 5,108 29,575 80,549

2000 Households 4,591 28,221 77,200

Annual Growth 2013 - 2018 0.9% 0.3% 0.2%

Annual Growth 2010 - 2013 0.2% 0.0% 0.0%

Annual Growth 2000 - 2010 1.1% 0.5% 0.4%

Income

2013 Median HH Inc $50,833 $50,894 $50,978



Age 25+ College Graduates - 2010 1,976 10,441 32,080


Source: Claritas

6001 Terrell Ln 1 Mile Radius



CONCLUSION

As shown above, the population within the subject neighborhood has shown modest growth since

2000. This reflects the largely fully developed nature of this area. The neighborhood currently has an

average income demographic profile with a 2013 median household income of $50,895 on a three-

mile radius. The outlook for the neighborhood is for relatively stable performance over the next

several years. As a result, the demand for existing developments is expected to remain reasonable.

© 2013 CBRE, Inc.


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The subject is a Class B apartment property and appears to conform reasonably well to surrounding

neighborhood infrastructure and support services. Recent growth in the neighborhood has primarily

been related to retail and mixed use development, which appears to be supported by both

neighborhood demographics and the primary traffic carriers within the neighborhood.

© 2013 CBRE, Inc.

HAMPTON CENTER | MARKET ANALYSIS

21

MARKET ANALYSIS

The market analysis forms a basis for assessing market area boundaries, supply and demand factors,

and indications of financial feasibility. Primary data sources utilized for this analysis includes the most

recently available Real Data Apartment Index May 2013, and our own observations of the market.

The subject is in the Hampton market and is considered a Class B garden-style apartment community.

According to the Institute of Real Estate Management (in Income/Expense Analysis: Conventional

Apartments), the following apartment property definitions may be applicable towards the subject:

Garden Type Projects: We consider this to be a group of low-rise apartment buildings situated on a sizable landscaped plot, under one management.

DEMOGRAPHIC ANALYSIS

Demand for additional residential property is a direct function of population change. Multi-family

communities are products of a clearly definable demand relating directly to population shifts.

Housing, Population and Household Formation

The following table illustrates the population and household changes for the subject neighborhood

with primary focus on the three mile radius.

POPULATION AND HOUSEHOLD PROJECTIONS

Population

2018 Population 11,376 71,826 200,530

2013 Population 10,869 71,306 199,527

2010 Population 10,598 71,498 200,328

2000 Population 9,973 75,504 205,618

Annual Growth 2013 - 2018 0.9% 0.1% 0.1%

Annual Growth 2010 - 2013 0.2% 0.0% 0.0%

Annual Growth 2000 - 2010 0.6% -0.5% -0.3%

Households

2018 Households 5,486 30,034 81,450

2013 Households 5,237 29,632 80,597

2010 Households 5,108 29,575 80,549

2000 Households 4,591 28,221 77,200

Annual Growth 2013 - 2018 0.9% 0.3% 0.2%

Annual Growth 2010 - 2013 0.2% 0.0% 0.0%

Annual Growth 2000 - 2010 1.1% 0.5% 0.4%Source: Claritas




As shown, the subject’s neighborhood is experiencing relative stability in both population and

households.

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Income Distributions

Household income available for expenditure on housing and other consumer items is a primary factor

in determining the price/rent level of housing demand in a market area. In the case of this study,

projections of household income, particularly for renters, identifies in gross terms the market from

which the subject submarket draws. The following table illustrates estimated household income

distribution for the subject neighborhood.

HOUSEHOLD INCOME DISTRIBUTION

Households by Income Distribution - 2013

Less than $15K 9.68% 11.30% 12.17%$15K - $25K 9.39% 9.74% 10.55%$25K - $35K 13.35% 11.62% 11.39%$35K - $50K 16.65% 16.41% 14.93%$50K - $75K 24.21% 22.84% 21.71%$75K - $100K 11.78% 12.52% 12.41%$100K - $150K 11.71% 12.09% 11.87%$150K - $250K 2.94% 2.90% 3.26%$250K - $500K 0.10% 0.24% 0.78%$500K or more 0.00% 0.02% 0.20%

Source: Claritas




The following table illustrates the median and average household income levels for the subject

neighborhood.

HOUSEHOLD INCOME LEVELS

Income

2013 Median HH Inc $50,833 $50,894 $50,978



Source: Claritas




An analysis of the income data indicates that the submarket is generally comprised of middle and

lower-middle income economic cohort groups, which include the target groups to which the subject is

oriented.

Employment

An employment breakdown typically indicates the working class characteristics for a given market

area. The specific employment population within the indicated radii of the subject is as follows:

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EMPLOYMENT BY INDUSTRY

Occupation

Agr/Frst/Fish/Hunt/Mine 0.55% 0.42% 0.24%Construction 4.19% 5.03% 5.77%Total Manufacturing 10.04% 11.95% 12.01%Wholesale Trade 1.11% 1.94% 1.76%Retail Trade 11.51% 11.75% 11.42%Transport/Warehse/Utils 1.82% 2.86% 3.34%Information 1.70% 2.04% 2.19%Fin/Insur/RE/Rent/Lse 4.78% 5.57% 5.08%Prof/Sci/Tech/Admin 7.46% 6.66% 6.20%Mgmt of Companies 0.00% 0.00% 0.00%Admin/Spprt/Waste Mgmt 4.11% 5.47% 5.39%Educational Svcs 9.31% 8.74% 9.05%Health Care/Soc Asst 13.61% 12.84% 12.67%Entertainment & Rec Services 2.27% 1.58% 2.19%Accommdtn/Food Svcs 8.77% 6.01% 6.73%Oth Svcs, Not Pub Admin 5.49% 6.02% 5.58%Public Administration 13.29% 11.12% 10.36%

Source: Claritas




The previous table illustrates the employment character of the submarket, indicating a predominantly

middle-income employment profile, with the majority of the population holding Retail Trade and

Heath Care related jobs.

Outlook

Based on this analysis, the immediate area surrounding the subject is projected to experience stability

relative to households and population into the near future. Given the area demographics, it appears

that demand for both comparable surrounding area apartment units and the subject will continue to

be reasonable.

MARKET OVERVIEW

The following discussion illustrates some general observations in the surrounding apartment market.

Market Summary

Market statistics for the Hampton area and the subject submarket are shown in the following table:

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APARTMENT MARKET STATISTICS

Category Hampton Roads MSAHampton - West

Submarket

Existing Supply (Units) 92,744 7,984

Absorption (6 months) 1,756 171

Units Under Construction 2,805 195

Proposed Units 3,375 0

Change in Supply (6 Mos) 880 120

Average Occupancy 94.0% 94.0%

Average Rent $946 $961

Date of Survey April-13 April-13

Source: Real Data Apartment Index - May 2013

As shown above, the average occupancy rate for the subject submarket is in line with that of the

overall market area. The average rental rate for the submarket is slightly higher than that of the

overall market. The subject submarket is considered a middle tier submarket as compared to the

other submarkets in the overall market area. Net absorption for 2013 has been positive for the

overall market area and at the submarket level.

Market Trends

The table below presents the quarterly trends in rental rates and occupancy for the Hampton

submarket and the Hampton Roads MSA over the past two years:

APARTMENT MARKET TRENDS

Hampton Roads MSA Hampton - West Submarket

DateRent Per

Unit

Annualized Change in

RentsNet

AbsorptionChange in

Supply VacancyRent Per

Unit

Annualized Change in

RentsNet

AbsorptionChange in

Supply Vacancy

Apr-13 $946 2.3% 876 880 6.0% $961 5.7% 51 120 6.0%

Oct-12 $931 0.5% -913 775 7.3% $933 1.5% 102 96 6.7%

Apr-12 $925 1.5% 83 494 6.3% $909 1.2% -79 160 7.4%

Oct-11 $926 2.9% -332 458 6.4% $919 -0.9% 12 0 6.5%

Apr-11 $911 2.5% -257 759 6.1% $898 2.4% -27 0 6.6%

Oct-10 $900 2.0% 707 307 5.7% $927 6.6% 165 0 6.2%

Apr-10 $889 N/A 42 1,087 6.4% $877 N/A -121 207 8.3%

Oct-09 $882 N/A 350 463 6.9% $870 N/A -151 0 6.9%

*Annualized change in rent indicate YOY changes for each bi-annual period

Source: Real Data Apartment Index - May 2013

The overall market area and the local submarket have maintained generally stabilized occupancy

rates over the past two years. Over the same time frame, rental rates have been following a

moderately increasing trend.

Barriers to Entry

The multi-family pipeline in the Hampton Roads area is expected to decline due to a lack of zoned

land in the region. Undeveloped land currently zoned for multi-family is somewhat rare in Hampton

Roads, and the rezoning process has become difficult. Several factors have led to this including

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physical limitations of the region (wetlands, no-build zones surrounding military installations, etc.), and

school overcrowding. As a result, relatively healthy occupancy and rent growth are expected to

continue for years to come.

Demand Generators

Various civilian and non-civilian employers are situated throughout Hampton Roads. Military

installations including Langley Air Force Base (in northern Hampton), Fort Eustis, Naval Station

Norfolk, Little Creek Amphibious Base, Jefferson Lab, Fort Monroe, Oceana Naval Base, and the

Yorktown Naval Weapons Facilities are situated in Hampton Roads. Military employees make up a

relatively large number of apartment dwellers in the area. The economy has a strong Federal and

Military base, but has diversified greatly, and is now strengthened by a strong tourism and convention

industry, shipping/warehousing, distribution, and high quality medical facilities.

Hampton Submarket Summary

The Hampton submarket is located in the south-central portion of the Peninsula. This region borders

the rest of Hampton to the east at Armistead/LaSalle Avenues and Newport News to the west. Langley

Air Force Base is located at the northern end of this submarket. There are 7,984 units in the

Hampton submarket, making up almost 9% of the greater metro area.

Development Pipeline

Our research indicates that there are no proposed and under-construction multi-family projects in the

subject’s submarket.

Investment Trends

Compared to other property types, the multi-family real estate market is currently relatively strong as

many multifamily properties are holding values better than other property types in part due to the

declining availability of residential single-family mortgages and from the forced sales and foreclosures

of single-family homes. The only real offsets to this are houses that are being put on the rental market

and condos that are being converted into rentals. Some of these rental homes are competing with

apartment rentals.

COMPETITIVE PROPERTIES

Comparable properties have been surveyed in order to identify the occupancy trends within the

immediate submarket. The comparable data is summarized in the following table:

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Comp. No. Name Location Occupancy

1 Addison at Hampton 2 Wyndham Drive,Hampton, VA

96%

2 Bridgewater 507 Marcella Road,Hampton, VA

96%

3 Coliseum Gardens Apartments 135 Pine Chapel Road,Hampton, VA

96%

4 Signature Place Apartments 103 Signature Way,Hampton, VA

91%

5 Township In Hampton Woods 260 Marcella Road,Hampton, VA

95%

Subject Hampton Center 6001 Terrell Lane,Hampton, Virginia

90%

Compiled by CBRE

The majority of comparable properties surveyed reported occupancy rates of 91% or better, and all

are currently in average to good condition.

SUBJECT TRENDS AND PROJECTIONS

Occupancy

Occupancy rate is the relationship between the actual income received from a property and the

income that would be received if the entire space were occupied. Consequently, the occupancy rate

is a product of both (1) the relationship between the amount of occupied space in a building or

market (physical) and (2) the relationship between the contract rent for the occupied building or

market space and the total rent estimated for all space in the building or market (economic).

Based on the foregoing analysis, CBRE, Inc.’s conclusion of stabilized occupancy for the subject is

illustrated in the following table. This estimate considers both the physical and economic factors of

the market.

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OCCUPANCY CONCLUSIONS

Hampton Roads MSA 94.0%

Hampton - West Submarket 94.0%

Rent Comparables 94.8%

Subject's Current Occupancy 90.0%

Subject's Stabilized Occupancy 90.0%

Compiled by CBRE

Our concluded stabilized occupancy is slightly lower than the average occupancy position of the

Hampton Roads market and the average occupancy position of the local submarket. However, it is

essentially in line with the property’s current occupancy position.

CONCLUSION

The Norfolk MSA and the local submarket are exhibiting average occupancy levels and modestly

upward trending rental rates, while maintaining reasonable absorption in recent years. Considering

the recent trends in absorption and the prospects for new construction, the local market area should

maintain a fairly stabilized occupancy position. The addition of new product to the market may create

minor downward pressure on occupancy and on owners’ ability to obtain the effective rental increases

of the past several years. However, the long-term projection for the subject submarket is for continued

stability.

With respect to the subject in particular, we believe the subject is reasonably well located for an

apartment project. It is in reasonable proximity to both employment centers and major roadways, and

the surrounding apartment developments are experiencing average levels of demand. Based upon our

analysis, the subject should continue to enjoy reasonably good market acceptance.

© 2013 CBRE, Inc.

HAMPTON CENTER | SITE ANALYSIS

28

SITE LAYOUT MAP

© 2013 CBRE, Inc.


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FLOOD MAP

© 2013 CBRE, Inc.


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SITE ANALYSIS

The following chart summarizes the salient characteristics of the subject site.

SITE SUMMARY

Physical DescriptionGross Site Area 19.73 Acres 859,439 Sq. Ft.

Net Site Area 19.73 Acres 859,439 Sq. Ft.

Primary Road Frontage Executive Drive 1,200 Feet

Average Depth 350 Feet

Excess Land Area None

Surplus Land Area None

Zoning District

Flood Map Panel No. & Date 5155270117G 16-Aug-11

Flood Zone Zone X


C2- Limited Commercial

LOCATION

The subject is located along Executive Drive, just east of Magruder Blvd. The street address is 6001

Terrell Lane.

LAND AREA

The site is considered adequate in terms of size and utility. There is no unusable, excess or surplus

land area. Please refer to the Resource Verification table within the Scope of Work for the source of

the land area size.

SHAPE AND FRONTAGE

The site is generally irregular and has adequate frontage along a primary thoroughfare within the

neighborhood.

INGRESS/EGRESS

Ingress and egress is available to the site via three curb cuts along Executive Drive.

Please refer to the prior site/plat exhibit for the layout of the streets that provide access to the subject.

TOPOGRAPHY AND DRAINAGE

The site is generally level and at street grade. The topography of the site is not seen as an impediment

to the development of the property. During our inspection of the site, we observed no drainage

problems and assume that none exist.

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SOILS

A soils analysis for the site has not been provided for the preparation of this appraisal. In the absence

of a soils report, it is a specific assumption that the site has adequate soils to support the highest and

best use.

EASEMENTS AND ENCROACHMENTS

There are no known easements or encroachments impacting the site that are considered to affect the

marketability or highest and best use. It is recommended that the client/reader obtain a current title

policy outlining all easements and encroachments on the property, if any, prior to making a business

decision.

COVENANTS, CONDITIONS AND RESTRICTIONS

There are no known covenants, conditions or restrictions impacting the site that are considered to

affect the marketability or highest and best use. It is recommended that the client/reader obtain a

copy of the current covenants, conditions and restrictions, if any, prior to making a business decision.

UTILITIES AND SERVICES

The site is within the jurisdiction of Hampton and is provided all municipal services, including police

and fire. All utilities are available to the site in adequate quality and quantity to service the highest

and best use.

FLOOD ZONE

According to flood hazard maps published by the Federal Emergency Management Agency (FEMA),

the site is within Zone X, as indicated on Community Map Panel No. 5155270117G. FEMA defines

the flood zone(s) as follows:

Zones C and X (unshaded) are flood insurance rate zones used for areas outside the

0.2-percent-annual-chance floodplain. No Base Flood Elevations (BFEs) or depths are

shown in this zone, and insurance purchase is not required.


CBRE, Inc. is not qualified to detect the existence of potentially hazardous material or underground

storage tanks which may be present on or near the site. The existence of hazardous materials or

underground storage tanks may affect the value of the property. For this appraisal, CBRE, Inc. has

specifically assumed that the property is not affected by any hazardous materials that may be present

on or near the property.

© 2013 CBRE, Inc.


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ADJACENT PROPERTIES

The adjacent land uses are summarized as follows:

North: Retail and Single Family Residential South: Multi-Family Developments East: Multi-Family Developments and Medical Center West: Multi-Family Developments

CONCLUSION

The site is well located and afforded average access and visibility from roadway frontage. The size of

the site is typical for the area and use, and there are no known detrimental uses in the immediate

vicinity. Overall, there are no known factors which are considered to prevent the site from

development to its highest and best use, as if vacant, or adverse to the existing use of the site.

© 2013 CBRE, Inc.

HAMPTON CENTER | IMPROVEMENT ANALYSIS

33

IMPROVEMENTS LAYOUT

© 2013 CBRE, Inc.


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IMPROVEMENTS ANALYSIS

The following chart shows a summary of the improvements.

IMPROVEMENTS SUMMARY

Apartment

1985 Renovated: 0

Unit Mix Unit TypeNo. of Units

Percent of Total Unit Size (SF) NRA (SF)

1BR/1BA Alexander 87 20.8% 689 59,943

1BR/1BA Alexander - Renovated 8 1.9% 689 5,512

1BR/1BA Birch 35 8.4% 808 28,280

1BR/1BA Berkley 46 11.5% 860 39,560

2BR/1BA Berkley - Renovated 2 15.8% 860 1,720

2BR/1BA Courtney/Cypress 66 15.8% 950 62,700

2BR/2BA Dandridge 120 28.7% 1,100 132,000

3BR/2BA Fenwick 24 5.7% 1,375 33,000

3BR/2BA Elm 30 7.2% 1,475 44,250

Total/Average: 418 100.0% 974 406,965


Parking Improvements

21.2 Units/Acre

1.50Parking Ratio (spaces/unit)

Development Density

Total Spaces:

Open

626

Net Rentable Area

22

410,379 SF

406,965 SF

3

Number of Buildings

Number of Stories

Gross Building Area

Year Built

Property Type

Number of Units

Average Unit Size


974 SF

418

As noted above, the property features ten 1-bedroom units that have been recently renovated.

Renovations include refreshed bathrooms and kitchens with new appliances and cabinets.

BUILDING AREA

Please refer to the Resource Verification table in the Scope of Work for the source of the building area

size. The following is a description of the subject improvements and basic construction features

derived from CBRE, Inc.’s inspection.

YEAR BUILT

The subject was built in 1985.

FOUNDATION

The foundation is assumed to be of adequate load-bearing capacity to support the improvements.

© 2013 CBRE, Inc.


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CONSTRUCTION COMPONENTS

The construction components are assumed to be in working condition and adequate for the building.

FLOOR STRUCTURE

The floor structure is summarized as follows:

Ground Floor: Concrete slab on compacted fill

Other Floors: Plywood deck with light-weight concrete cover

EXTERIOR WALLS

The exterior wall structure is wood frame with vinyl siding.

ROOF COVER

All buildings have pitched roofs with composition shingle covering.

ELEVATOR/STAIR SYSTEM

Exterior covered stairs provide access to second floor apartment units.

HVAC

The HVAC system features electric heat pumps with forced warm and cooled air.

UTILITIES

Each unit is individually metered for electrical usage. Units are also assessed a flat fee for trash

collection. Water and sewer costs are allocated to tenants based on a RUBS formula.

FIRE PROTECTION

It is assumed the improvements have adequate fire alarm systems, fire exits, fire extinguishers, fire

escapes and/or other fire protection measures to meet local fire marshal requirements. CBRE, Inc. is

not qualified to determine adequate levels of safety & fire protection, whereby it is recommended that

the client/reader review available permits, etc. prior to making a business decision.

PROJECT AMENITIES

The project amenities include a fitness center, clubhouse, swimming pool, playground, tennis courts

and a volleyball court.

© 2013 CBRE, Inc.


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UNIT AMENITIES

Kitchens

Each unit features an appliance package including an electric range/oven, garbage disposal,

dishwasher and frost-free refrigerator with ice maker. Additionally, each unit features wood cabinets

with laminate countertops and vinyl tile flooring in the kitchen area. According to management, the

project has experienced an adequate on-going replacement program for all kitchen appliances and

no appliances are known to be inoperable.

Bathrooms

The bathrooms within each unit feature combination tub/showers with ceramic tile wainscot.

Additionally, each bathroom features a commode, wood cabinet with Formica counter and built-in

porcelain sink, with vanity mirror and vinyl tile flooring.

Interior Features

Units feature wall to wall carpeting in living areas and sheet vinyl flooring in the kitchens and

bathrooms. Additionally, each unit features a washer and dryer.

Interior Lighting

Each unit features incandescent lighting in appropriate interior and exterior locations with fluorescent

lighting in bathrooms and kitchen areas.

Patios and Balconies

All units include a private patio or balcony.

SITE AMENITIES

Parking and Drives

The project features adequate surface parking. All parking spaces and vehicle drives are asphalt

paved and considered to be in average condition.

Landscaping

Landscaping is considered to be in average condition and well maintained.

QUALITY AND STRUCTURAL CONDITION

The overall quality of the facility is considered to be average for the neighborhood and age.

However, CBRE, Inc. is not qualified to determine structural integrity and it is recommended that the

© 2013 CBRE, Inc.


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client/reader retain the services of a qualified, independent engineer or contractor to determine the

structural integrity of the improvements prior to making a business decision.

FUNCTIONAL UTILITY

All of the floor plans are considered to feature functional layouts and the layout of the overall project

is considered functional in utility. Therefore, the unit mix is also functional and no conversion is

warranted to the existing improvements.

ADA COMPLIANCE

The client/reader’s attention is directed to the specific limiting conditions regarding ADA compliance.

FURNITURE, FIXTURES AND EQUIPMENT

The apartment units are rented on an unfurnished basis. However, miscellaneous maintenance tools,

pool furniture, leasing office furniture, recreational room and clubhouse furniture, and various

exercise machines are examples of personal property associated with and typically included in the sale

of multifamily apartment complexes.


CBRE, Inc. is not qualified to detect the existence of any potentially hazardous materials such as lead

paint, asbestos, urea formaldehyde foam insulation, or other potentially hazardous construction

materials on or in the improvements. The existence of such substances may affect the value of the

property. For the purpose of this assignment, we have specifically assumed that any hazardous

materials that would cause a loss in value do not affect the subject.

DEFERRED MAINTENANCE

Our inspection of the property indicated no significant items of deferred maintenance.


CBRE, Inc.’s estimate of the subject improvements effective age and remaining economic life is

depicted in the following chart:


Actual Age 28 Years

Effective Age 20 Years

MVS Expected Life 45 Years

Remaining Economic Life 25 Years

Accrued Physical Incurable Depreciation 44.4%

Compiled by CBRE

© 2013 CBRE, Inc.


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The overall life expectancy is based upon our on-site observations and a comparative analysis of

typical life expectancies reported for buildings of similar construction as published by Marshall and

Swift, LLC, in the Marshall Valuation Service cost guide. While CBRE, Inc. did not observe anything to

suggest a different economic life, a capital improvement program could extend the life expectancy.

CONCLUSION

The improvements are in average overall condition. Overall, there are no known factors that adversely

impact the marketability of the improvements.

© 2013 CBRE, Inc.

HAMPTON CENTER | ZONING

39

ZONING

The following chart summarizes the subject’s zoning requirements.

ZONING SUMMARY - HAMPTON CENTERCurrent Zoning C2- Limited CommercialLegally Conforming YesUses Permitted Commercial Uses and Various Multiple-

Family Housing Types

Zoning Change Not likely

Category Zoning Requirement

Minimum Lot Size N/A

Minimum Lot Width N/AMaximum Height N/A

Minimum Setbacks

Front Yard N/A

Street Side Yard N/A

Rear Yard N/A

Maximum Bldg. Coverage N/A

Subject's Actual Density 21.2 Units/Acre

Parking Requirements 1.5 spaces / Unit

Subject's Actual Parking 1.5 spaces / Unit

Source: Planning & Zoning Dept.

ANALYSIS AND CONCLUSION

The improvements represent a legally-conforming use and, if damaged, may be restored without

special permit application. Additional information may be obtained from the appropriate

governmental authority.

© 2013 CBRE, Inc.

HAMPTON CENTER | TAX AND ASSESSMENT DATA

40

TAX AND ASSESSMENT DATA

The following summarizes the local assessor’s estimate of the subject’s market value, assessed value,

and taxes, and does not include any furniture, fixtures or equipment.

AD VALOREM TAX INFORMATION

Assessor's Market Value 2013 2014 Pro Forma

7003016 $16,103,200 $16,103,200

7003017 $20,472,200 $20,472,200

Subtotal $36,575,400 $36,575,400 $36,575,400

Assessed Value @ 100% 100% 100%

$36,575,400 $36,575,400 $36,575,400

General Tax Rate (per $100 A.V.) 1.240000 1.240000 1.240000

Total Taxes $453,535 $453,535 $453,535


The local assessor’s methodology for valuation is a combination of the Sales, Cost and Income

Approaches. Properties are revalued every year, and properties are assessed at 100% of the

assessor’s opinion of market value. The sale of a property may have some impact on the

reassessment for the following year, in addition to various other factors.

The actual assessed values are reasonably consistent with our market value estimates. We therefore

make the assumption that the current assessed value remains in place. The pro-forma total tax figure

above reflects the current assessment and current tax rate.

TAX COMPARABLES

As a crosscheck to the subject’s applicable real estate taxes, CBRE, Inc. has reviewed the real estate

tax information for comparable properties in the market area. The following table summarizes the

comparables employed for this analysis:

AD VALOREM TAX COMPARABLES

Comparable Rental2 Wyndham

Drive103 Signature

Way260 Marcella

RoadSubject

Year Built 1986 1991 1986 1985No. Units 276 232 296 418Tax Year 2012 2012 2012 2012

Total Assessed Value $24,651,300 $20,373,800 $27,001,800 $36,575,400AV Per Unit $89,316 $87,818 $91,222 $87,501


© 2013 CBRE, Inc.

HAMPTON CENTER | TAX AND ASSESSMENT DATA

41

CONCLUSION

Based on the foregoing, the total taxes for the subject have been estimated as $453,535 for the base

year of our analysis, given an assessed value of $36,575,400.

For purposes of this analysis we are assuming any outstanding property tax liability has been paid.

CBRE assumes that all taxes are current. If the subject sold for the value estimate in this report, a

reassessment at that value could occur. The consequences of this reassessment have been considered

in the appropriate valuation sections.

© 2013 CBRE, Inc.

HAMPTON CENTER | HIGHEST AND BEST USE

42

HIGHEST AND BEST USE

In appraisal practice, the concept of highest and best use represents the premise upon which value is

based. The four criteria the highest and best use must meet are:

* legal permissibility; * physical possibility; * financial feasibility; and * maximum profitability.

The highest and best use analysis of the subject is discussed on the following pages. This analysis

incorporates the information presented in the Market Analysis section, as well as any unique

characteristics of the subject described previously.

AS VACANT

Legal Permissibility

The legally permissible uses were discussed in the Site Analysis and Zoning Sections.

Physical Possibility

The subject is adequately served by utilities, and has an adequate shape and size, sufficient access,

etc., to be a separately developable site. There are no known physical reasons why the subject site

would not support any legally probable development (i.e. it appears adequate for development).

Existing structures on nearby sites provides additional evidence for the physical possibility of

development.

Financial Feasibility

Potential uses of the site are noted in the zoning sections. The determination of financial feasibility is

dependent primarily on the relationship of supply and demand for the legally probable land uses

versus the cost to create the uses. As discussed in the market analysis of this report, the subject

apartment market is generally stabilized. Development of new apartment properties has occurred in

the past few years. Further, within the subject market, there are few proposed or under construction

apartment projects in the competitive market. These factors indicate that it would be financially

feasible to complete a new apartment project if the site acquisition cost was low enough to provide an

adequate developer’s profit.

Maximum Profitability

The final test of highest and best use of the site as if vacant is that the use be maximally productive,

yielding the highest return to the land. In the case of the subject as if vacant, the analysis has indicated

that a new apartment project would be most appropriate.

© 2013 CBRE, Inc.


43

CONCLUSION: HIGHEST AND BEST USE AS VACANT

Based on the information presented above and upon information contained in the market and

neighborhood analysis, we conclude that the highest and best use of the subject as if vacant would be

the development of an apartment property. Our analysis of the subject and its respective market

characteristics indicate the most likely buyer, as if vacant, would be an investor (land speculation) or a

developer.

AS IMPROVED

Legal Permissibility

As discussed, the subject site’s zoning and legal restrictions permit a variety of land uses. The site has

been improved with an apartment development that is a legal, conforming use.

Physical Possibility

The physical characteristics of the subject improvements were discussed in detail in the improvements

analysis. Both the layout and positioning of the improvements are considered functional for apartment

use. While it would be physically possible for a wide variety of uses, based on the legal restrictions

and the design of the improvements, the continued use of the property for apartment users would be

the most functional use.

Financial Feasibility

The financial feasibility of an apartment property is based on the amount of rent which can be

generated, less operating expenses required to generate that income; if a residual amount exists, then

the land is being put to a productive use. As will be indicated in the income capitalization approach,

the subject is producing a positive net cash flow and continued utilization of the improvements for

apartment purposes is considered financially feasible.

Maximum Profitability

The maximally profitable use of the subject as improved should conform to neighborhood trends and

be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy

the required rate of return on investment and provide a return on the land, the single use that

produces the highest price or value is typically the highest and best use. As shown in the applicable

valuation sections, buildings that are similar to the subject have been acquired or continue to be used

by apartment owners/tenants. None of the comparable buildings have been acquired for conversion

to an alternative use. These comparables would indicate that the maximally productive use of the

property is consistent with the existing use as an apartment property.

© 2013 CBRE, Inc.


44

CONCLUSION: HIGHEST AND BEST USE AS IMPROVED

Based on the foregoing, the highest and best use of the property, as improved, is consistent with the

existing use as an apartment development.

© 2013 CBRE, Inc.

HAMPTON CENTER | APPRAISAL METHODOLOGY

45

APPRAISAL METHODOLOGY

In appraisal practice, an approach to value is included or omitted based on its applicability to the

property type being valued and the quality and quantity of information available.

COST APPROACH

The cost approach is based on the proposition that the informed purchaser would pay no more for the

subject than the cost to produce a substitute property with equivalent utility. This approach is

particularly applicable when the property being appraised involves relatively new improvements that

represent the highest and best use of the land, or when it is improved with relatively unique or

specialized improvements for which there exist few sales or leases of comparable properties.


The sales comparison approach utilizes sales of comparable properties, adjusted for differences, to

indicate a value for the subject. Valuation is typically accomplished using physical units of comparison

such as price per square foot, price per unit, price per floor, etc., or economic units of comparison

such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived

from the comparable sale. The unit of comparison chosen for the subject is then used to yield a total

value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences,

with the final estimate derived based on the general comparisons.


The income capitalization approach reflects the subject’s income-producing capabilities. This

approach is based on the assumption that value is created by the expectation of benefits to be derived

in the future. Specifically estimated is the amount an investor would be willing to pay to receive an

income stream plus reversion value from a property over a period of time. The two common

valuation techniques associated with the income capitalization approach are direct capitalization and

the discounted cash flow (DCF) analysis.

METHODOLOGY APPLICABLE TO THE SUBJECT

In valuing the subject, only the sales comparison and income capitalization approaches are

applicable and have been used. The cost approach is not applicable in the estimation of market

value due to the significant amounts of accrued depreciation.

© 2013 CBRE, Inc.

HAMPTON CENTER | INSURABLE VALUE

46

INSURABLE VALUE

Insurable value is defined as follows:

(1) the value of an asset or asset group that is covered by an insurance policy; can be estimated by deducting costs of noninsurable items (e.g., land value) from market value. (2) value used by insurance companies as the basis for insurance. Often considered to be replacement or reproduction cost plus allowances for debris removal or demolition less deterioration and noninsurable items. Sometimes cash value or market value, but often entirely a cost concept. (Marshall & Swift LP) 5

CBRE, Inc. has followed traditional appraisal standards to develop a reasonable calculation based

upon industry practices and industry-accepted publications such as the Marshall Valuation Service.

The methodology employed is a derivation of the cost approach and is not reliable for insurable value

estimates. Actual construction costs and related estimates can vary greatly from this estimate.

The insurable value estimate presented herein is intended to reflect the value of the destructible

portions of the subject, based on the replacement of physical items that are subject to loss from

hazards (excluding indestructible items such as basement excavation, foundation, site work, land value

and indirect costs). In the case of the subject, this estimate is based upon the base building costs

(direct costs) as obtained via the Marshall Valuation Service handbook, with appropriate deductions.

This analysis should not be relied upon to determine proper insurance coverage as only consultants

considered experts in cost estimation and insurance underwriting are qualified to provide an insurable

value. It is provided to aid the client/reader/user as part of their overall decision making process and

no representations or warranties are made by CBRE, Inc. regarding the accuracy of this estimate and

it is strongly recommended that other sources be utilized to develop any estimate of insurable value.


© 2013 CBRE, Inc.

HAMPTON CENTER | INSURABLE VALUE

47

INSURABLE VALUE CONCLUSION

Primary Building Type: Height per Story: 9'Effective Age: Number of Buildings: 22Condition: Gross Building Area: 410,379 SFExterior Wall: Net Rentable Area: 406,965 SFNumber of Units: Average Unit Size: 974 SFNumber of Stories: Average Floor Area: 136,793 SF

MVS Sec/Page 0 0 0 11/30 12/16Quality/Bldg. Class 0 0 0 Average/D Average/DBuilding Component 0 0 0 Clubhouse Multiple ResidenceComponent Sq. Ft. 0 SF 0 SF 0 SF 3,000 SF 407,379 SFBase Square Foot Cost $0.00 $0.00 $0.00 $84.43 $67.07

Square Foot RefinementsHeating and Cooling $0.00 $0.00 $0.00 $0.00 $0.00Subtotal $0.00 $0.00 $0.00 $84.43 $67.07

Height and Size RefinementsNumber of Stories Multiplier 0.00 0.00 0.00 1.00 1.00Height per Story Multiplier 0.00 0.00 0.00 1.00 1.00Floor Area Multiplier 0.00 0.00 0.00 1.00 1.00Subtotal $0.00 $0.00 $0.00 $84.43 $67.07

Cost MultipliersCurrent Cost Multiplier 0.00 0.00 0.00 1.07 1.07Local Multiplier 0.00 0.00 0.00 0.97 0.97

Final Square Foot Cost $0.00 $0.00 $0.00 $87.63 $69.61

Base Component Cost $0 $0 $0 $262,890 $28,358,448

Base Building Cost (via Marshall Valuation Service cost data) $28,621,337

Insurable Value Exclusions 10.0% of Total Building Cost ($2,862,134)

Insurable Value Indication $25,759,204

Rounded $25,750,000


Compiled by CBRE

3418

Apartment20 YRSAverageWood frame and Vinyl

© 2013 CBRE, Inc.

HAMPTON CENTER | SALES COMPARISON APPROACH

48


The following map and table summarize the comparable data used in the valuation of the subject. A

detailed description of each transaction is included in the addenda.

SUMMARY OF COMPARABLE APARTMENT SALES

Year No. Avg. Unit Actual Sale Adjusted Price Per NOI PerNo. Name Type Date Built Units Size Price Sale Price 1 Unit 1 Occ. Unit OAR

1 Woodmere Trace,Norfolk, VA

Sale Sep-13 1974 300 995 $15,250,000 $15,250,000 $50,833 96% $3,634 7.15%

2 Village at Woodshire,Williamsburg, VA

Sale May-13 1975 252 1,004 $14,150,000 $14,150,000 $56,151 89% $4,218 7.51%

3 Apex at Ashton Green,Newport News, VA

Sale Oct-12 1985 118 958 $7,192,800 $7,192,800 $60,956 93% $4,286 7.03%

4 Ashton at Oyster Point,Newport News, VA

Sale Oct-12 1986 132 898 $10,359,630 $10,359,630 $78,482 91% $5,378 6.85%

5 Arboretum Place,Newport News, VA

Sale Oct-12 1995 184 929 $16,700,000 $16,700,000 $90,761 95% $5,912 6.51%

6 Commons at Churchland,Chesapeake, VA

Sale Aug-12 1995 124 840 $8,325,000 $8,325,000 $67,137 97% $4,816 7.17%

Subj.Pro

Forma

Hampton Center,Hampton, Virginia

--- --- 1985 418 974 --- --- --- 90% $5,249 ---


Compiled by CBRE

Transaction

© 2013 CBRE, Inc.


49

The sales utilized represent among the best data available for comparison with the subject. They were

selected from our research of comparable improved sales within the Hampton Roads region. These

sales were chosen based upon their physical and locational similarity to the subject.

DISCUSSION/ANALYSIS OF IMPROVED SALES

Improved Sale One

This comparable represents a multi-family garden-style property consisting of 300 units and is situated

on a 19.46-acre parcel at 6741 E Tanners Creek Dr, Norfolk, VA. The improvements were originally

constructed in 1974 and were considered in average condition at the time of sale. The exterior walls

depict synthetic construction components. The average unit size was 995 square feet and project/unit

amenities included a laundry facility, swimming pool, and a playground. The property sold in

September 2013 for $15,250,000, or $50,833 per unit. Net operating income at the time of sale

was $1,090,375, or $3,635 per unit, for an overall capitalization rate of 7.15%. Occupancy at the

time of sale was 96%.

The 20% upward adjustment for location reflects this comparable's inferior feature with respect to

proximity to commercial activity and employment. An upward adjustment of 15% was applied to this

comparable based upon the older effective age. Overall, this comparable was deemed inferior in

comparison to the subject and an upward net adjustment was warranted to the sales price indicator.

Improved Sale Two


on a 26.95-acre parcel at 159 Merrimac Trail, Williamsburg, VA. The improvements were originally

constructed in 1975 and were considered in average condition at the time of sale. The exterior walls

depict vinyl siding construction components. The average unit size was 1,005 square feet and

project/unit amenities included a pool, sand volleyball court, playground and a picnic area. The

property sold in May 2013 for $14,150,000, or $56,151 per unit. Pro Forma net operating income

at the time of sale was $1,062,991, or $4,218 per unit, for an overall capitalization rate of 7.51%.

Occupancy at the time of sale was 89%.


proximity to commercial activity and employment. An upward adjustment of 15% was applied to this

comparable based upon the older effective age. Overall, this comparable was deemed inferior in


Improved Sale Three

This comparable represents a garden-style multifamily property consisting of 118 units and is situated

on a 7.4-acre parcel at 329 Boulder Drive, Newport News, VA. The improvements were constructed

in 1985 with 2007 renovations and were considered in average condition at the time of sale. The

© 2013 CBRE, Inc.


50

average unit size was 958 square feet and project/unit amenities included swimming pool, storage,

w/d connections, ceiling fans. The property sold on October 2012 for $7,192,800, or $60,956 per

unit. Existing net operating income at the time of sale was $505,822, or $4,287 per unit, for an

overall capitalization rate of 7.03%. The property's EGIM was calculated as 6.13 and occupancy at

the time of sale was 93%. The subject is located on Boulder Drive & Warwick Blvd. in Newport News.

At the of sale the property was 93.2% occupied and is considered to be in average overall condition.

The NOI includes $300 per unit for reserves.


proximity to commercial activity and employment. Overall, this comparable was deemed inferior in


Improved Sale Four


on a 5.63-acre parcel at 802 Constance Drive, Newport News, VA. The improvements were

originally constructed in 1986 and were considered in average condition at the time of sale. The

exterior walls depict brick construction components. The average unit size was 898 square feet and

project/unit amenities included a pool, leasing office, laundry facility. The property sold in October

2012 for $10,359,630, or $78,482 per unit. Pro Forma net operating income at the time of sale

was $709,955, or $5,378 per unit, for an overall capitalization rate of 6.85%. The property's EGIM

was calculated as 7.49 and occupancy at the time of sale was 91%. The improvements were

constructed in 1986 and renovated in 2007. The 2012 net income is from appraiser proforma and

includes LTL of 1.5%, very large concessions of 8%, vacancy of 7% credit loss of 2%, and a $300 per

unit reserve.

The -10% downward adjustment for location reflects this comparable's superior feature with respect to

proximity to commercial activity and employment. In terms of avg. unit size, this comparable was

judged inferior due to the smaller unit size and received an upward adjustment of 5%. Overall, this

comparable was deemed superior in comparison to the subject and a downward net adjustment was

warranted to the sales price indicator.

Improved Sale Five

This comparable represents a multifamily property consisting of 184 units and is situated on an

11.38-acre parcel at 210 Arboretum Way, Newport News, VA. The improvements were originally

constructed in 1995 and were considered in good condition at the time of sale. The exterior walls

depict composite construction components. The average unit size was 929 square feet and

project/unit amenities included swimming pool, tennis court, clubhouse with fitness center,

playground. The property sold in October 2012 for $16,700,000, or $90,761 per unit. Existing net

operating income at the time of sale was $1,087,979, or $5,913 per unit, for an overall

© 2013 CBRE, Inc.


51

capitalization rate of 6.51%. The property's EGIM was calculated as 8.04 and occupancy at the time

of sale was 95%. This complex is partially income and rent restricted to low income tenants, however,

the rents are very close to market, and the complex is considered to be essentially at market rents. The

project amenities include a community clubhouse, pool, tennis, fitness center, some garage parking,

carwash area, playground, and laundry rooms. The income assumptions for the NOI at the date of

sale include the in-place contract rent per the rent-roll and reserves of $250 per unit.

The -5% downward adjustment for location reflects this comparable's superior feature with respect to

proximity to commercial activity and employment. A downward adjustment of -10% was applied to

this comparable based upon the younger effective age. Overall, this comparable was deemed

superior in comparison to the subject and a downward net adjustment was warranted to the sales

price indicator.

Improved Sale Six

This comparable represents a garden-style multifamily property consisting of 124 units and is situated

on a 3.96-acre parcel at 3504 Executive Center Drive, Chesapeake, VA. The improvements were

originally constructed in 1995 and were considered in average condition at the time of sale. The

property sold in August 2012 for $8,325,000, or $67,137 per unit. Pro Forma net operating income

at the time of sale was $597,200, or $4,816 per unit, for an overall capitalization rate of 7.17%.

The property's EGIM was calculated as 7.59 and occupancy at the time of sale was 97%. The

property is a senior community (55+) in year 17 of its LIHTC tax credit compliance period. There are

extended use restrictions in place until 12/2025. The complex has 20 market rate units and 104 low

income restricted units, and it includes elevator access and is oriented to seniors with basic amenities

of on-site office and community room. Units have full size W/D, dishwashers, disposals, and

refrigerators. Restricted rents are $867 monthly (based on 60% of AMI), which is very close to market

levels. The indicated cap rate is based on the buyer's proforma, including $300 for reserves.

The upward market conditions (time) adjustment of 5% reflects the improved market conditions since

the date of sale. The -5% downward adjustment for location reflects this comparable's superior

feature with respect to proximity to commercial activity and employment. In terms of avg. unit size,

this comparable was judged inferior due to the smaller unit size and received an upward adjustment

of 10%. A downward adjustment of -10% was applied to this comparable based upon the younger

effective age. Another adjustment was considered appropriate for this comparable given the income

restrictions. Because of this inferior trait, an upward adjustment of 10% was considered appropriate.

Overall, this comparable was deemed inferior in comparison to the subject and an upward net

adjustment was warranted to the sales price indicator.

© 2013 CBRE, Inc.


52

SUMMARY OF ADJUSTMENTS

Based on our comparative analysis, the following chart summarizes the adjustments warranted to each

comparable.

APARTMENT SALES ADJUSTMENT GRID

Comparable Number 1 2 3 4 5 6Subj.Pro

FormaTransaction Type Sale Sale Sale Sale Sale Sale ---Transaction Date Sep-13 May-13 Oct-12 Oct-12 Oct-12 Aug-12 ---

Year Built 1974 1975 1985 1986 1995 1995 1985

No. Units 300 252 118 132 184 124 418

Avg. Unit Size 995 1,004 958 898 929 840 974Actual Sale Price $15,250,000 $14,150,000 $7,192,800 $10,359,630 $16,700,000 $8,325,000 ---Adjusted Sale Price 1 $15,250,000 $14,150,000 $7,192,800 $10,359,630 $16,700,000 $8,325,000 ---Price Per Unit 1 $50,833 $56,151 $60,956 $78,482 $90,761 $67,137 ---

Occupancy 96% 89% 93% 91% 95% 97% 90%

NOI Per Unit $3,634 $4,218 $4,286 $5,378 $5,912 $4,816 $5,249

OAR 7.15% 7.51% 7.03% 6.85% 6.51% 7.17% ---

Adj. Price Per Unit $50,833 $56,151 $60,956 $78,482 $90,761 $67,137

Property Rights Conveyed 0% 0% 0% 0% 0% 0%Financing Terms 1 0% 0% 0% 0% 0% 0%

Conditions of Sale 0% 0% 0% 0% 0% 0%

Market Conditions (Time) 0% 0% 0% 0% 0% 5%

Subtotal - Price Per Unit $50,833 $56,151 $60,956 $78,482 $90,761 $70,494

Location 20% 15% 15% -10% -5% -5%

Project Size 0% 0% 0% 0% 0% 0%

Avg. Unit Size 0% 0% 0% 5% 0% 10%

Age/Condition 15% 15% 0% 0% -10% -10%

Quality of Construction 0% 0% 0% 0% 0% 0%

Project Amenities 0% 0% 0% 0% 0% 0%

Parking 0% 0% 0% 0% 0% 0%

Other 0% 0% 0% 0% 0% 10%

Total Other Adjustments 35% 30% 15% -5% -15% 5%

Indicated Value Per Unit $68,625 $72,996 $70,099 $74,558 $77,147 $74,019


Compiled by CBRE

Overall, comparables Four, Five, and Six were the most representative of the subject, and warranted

greatest consideration due to the lesser overall adjustments required.

SALES COMPARISON APPROACH CONCLUSION

The following table presents the estimated value for the subject as indicated by the sales comparison

approach.

© 2013 CBRE, Inc.


53


Total Units X Value Per Unit = Value

418 X $75,000 = $31,350,000

VALUE CONCLUSION


Deferred Maintenance $0

Lease-Up Discount $0


Rounded $31,400,000


Compiled by CBRE

© 2013 CBRE, Inc.

HAMPTON CENTER | INCOME CAPITALIZATION APPROACH

54


The following map and table summarize the comparable data used in the valuation of the subject. A

detailed description of each transaction is included in the addenda.


Comp. No. Property Name Location

Year Built Occ.

No. Units

Avg. Rent Per Unit

1 1986 96% 276 $933

2 1997 96% 216 $1,095

3 1980 96% 182 $784

4 1991 91% 232 $1,135

5 1986 95% 296 $954

Subj. Hampton Center 6001 Terrell Lane,Hampton, Virginia

1985 90% 418 ---

Compiled by CBRE

103 Signature Way,Hampton, VA

Signature Place Apartments

Addison at Hampton 2 Wyndham Drive,Hampton, VA

Coliseum Gardens Apartments

Township In Hampton Woods 260 Marcella Road,Hampton, VA

135 Pine Chapel Road,Hampton, VA

507 Marcella Road,Hampton, VA

Bridgewater

© 2013 CBRE, Inc.


55

The comparables utilized represent among the best data available for comparison with the subject.

They were selected from our research of comparable properties within a several mile radius. These

sales were chosen based upon their physical and locational similarity to the subject.

DISCUSSION/ANALYSIS OF RENT COMPARABLES

Rent Comparable One

This comparable rental represents the Addison at Hampton apartments, a 276-unit garden-style

multifamily property at 2 Wyndham Drive, Hampton, VA. The improvements were originally

constructed in 1986 and were considered in good condition at the time of our research. The

structure's exterior walls depict brick construction components and the average unit size is 758 square

feet. Project/unit amenities include the following: clubhouse, spa, fitness, storage, tennis, sundeck

and volleyball. According to the unit mix and asking rates for this property, the average base rental

rate is $933/unit, based upon typical lease terms of 12 months. Standard in-unit amenities include

fireplace, view, dishwasher, air conditioning, private balcony, washer/dryer, ceiling fans, vertical/mini

blinds and disposal.

As compared to the subject, this project was viewed as generally similar with respect to location, age,

project amenities and quality of construction. It was viewed as slightly inferior in terms of average unit

size. Overall this property was judged slightly inferior to the subject.

Rent Comparable Two

This comparable rental represents the Bridgewater apartments, a 216-unit garden-style multifamily

property at 507 Marcella Road, Hampton, VA. The improvements were originally constructed in

1997 and were considered in good condition at the time of our research. The structure's exterior

walls depict vinyl siding construction components and the average unit size is 994 square feet.

Project/unit amenities include the following: storage, laundry, pool, fitness, playground,

clubhouse/spa and tennis. According to the unit mix and asking rates for this property, the average

base rental rate is $1,095/unit, based upon typical lease terms of 3-12 months. In-unit amenities

include private balcony, vertical blinds, ice maker, washer/dryer connections, air conditioning,

dishwasher and disposal.

As compared to the subject, this project was viewed as generally similar with respect to location,

quality of construction, project amenities and average unit size. However, it was viewed as slightly

superior in terms of age. Overall, this property was judged slightly superior to the subject.

Rent Comparable Three

This comparable rental represents the Coliseum Gardens Apartments, a 182-unit garden-style

multifamily property at 135 Pine Chapel Road, Hampton, VA. The improvements were originally

constructed in 1980 and were considered in average condition at the time of our research. The

© 2013 CBRE, Inc.


56

structure's exterior walls depict brick veneer construction components and the average unit size is 849

square feet. Project/unit amenities include a playground. According to the unit mix and asking rates

for this property, the average base rental rate is $784/unit, based upon typical lease terms of 12

months. No rent premiums were reported. Utilities included with the rent consist of water and sewer.

The property is currently 96% leased.

As compared to the subject, this project was viewed as generally similar with respect to location, age

and quality of construction. However, it was viewed as slightly inferior in terms of project amenities

and average unit size. Overall, this property was judged slightly inferior to the subject.

Rent Comparable Four

This comparable rental represents the Signature Place Apartments, a 232-unit garden-style multifamily

property at 103 Signature Way, Hampton, VA. The improvements were originally constructed in 1991

and were considered in good condition at the time of our research. The structure's exterior walls

depict vinyl siding construction components and the average unit size is 951 square feet. Project/unit

amenities include the following: storage, fitness, pool, volleyball, clubhouse, laundry and car wash.

According to the unit mix and asking rates for this property, the average base rental rate is

$1,135/unit, based upon typical lease terms of 6-12 months. Utilities included with the rent consist of

water and sewer. The property is currently 91% leased. Project amenities also include tennis courts

and a spa. Standard in-unit amenities include air conditioning, fireplace, washer/dryer connections,

9-foot ceilings, private balconies, disposal, dishwasher and ice maker.

As compared to the subject, this project was viewed as generally similar with respect to location,

project amenities, average unit size, age and quality of construction. Overall, this property was judged

approximately similar to the subject.

Rent Comparable Five

This comparable rental represents the Township In Hampton Woods apartments, a 296-unit garden-

style multifamily property at 260 Marcella Road, Hampton, VA. The improvements were originally

constructed in 1986 and were considered in average condition at the time of our research. The

structure's exterior walls depict brick/wood construction components and the average unit size is 840

square feet. Project/unit amenities include the following: pool, clubhouse, storage, tennis courts,

volleyball and fitness center. According to the unit mix and asking rates for this property, the average

base rental rate is $954/unit, based upon typical lease terms of 12 months. The property is currently

95% leased. The property is on the northwest corner of Coliseum Drive and Marcella Road in

Hampton. Standard in-unit amenities include washer/dryer connections, private balcony/patio,

dishwasher, disposal, fireplace, vaulted ceilings and ceiling fans.

© 2013 CBRE, Inc.


57

As compared to the subject, this project was viewed as generally similar with respect to project

amenities, location, age and quality of construction. However, it was viewed as slightly inferior in

terms of average unit size. Overall, this property was judged slightly inferior to the subject.


The following table shows the subject’s unit mix, quoted rental rates and management’s market rent

estimates. The subject property features a number of slight variations to the seven basic unit types

listed below. As these variations feature slightly different rent levels, the weighted average rent is

displayed below.


No. of Unit Unit Quoted RentType Units Size (SF) Occ. Rents Per SF

1BR/1BA 87 689 SF 90% $735 $1.07

1BR/1BA 8 689 SF 100% $840 $1.22

1BR/1BA 35 808 SF 94% $705 $0.87

1BR/1BA 46 860 SF 93% $730 $0.85

2BR/1BA 2 860 SF 100% $830 $0.97

2BR/1BA 66 950 SF 94% $765 $0.81

2BR/2BA 120 1,100 SF 89% $805 $0.73

3BR/2BA 24 1,375 SF 92% $1,105 $0.80

3BR/2BA 30 1,475 SF 70% $1,235 $0.84

Total/Average: 418 974 SF 90% $861 $0.88

Compiled by CBRE

Offering rents at the subject property currently average about $0.88 PSF. Management indicates that

quoted rents are calculated daily using a Lease Rent Optimization program that analyzes a variety of

inputs to determine the optimal rent level for each unit. As a result of this program, quoted rent levels

fluctuate frequently. The above quoted rents reflect the offering rents as of the date of inspection.

These rents appear to be reasonably representative of the subject’s average offering rents.

MARKET RENT ESTIMATE

In order to estimate the market rates for the various floor plans, the subject unit types have been

compared with similar units in the comparable projects. The following is a discussion of each unit

type.

© 2013 CBRE, Inc.


58

One-Bedroom Units

SUMMARY OF COMPARABLE RENTALSONE BEDROOM UNITS

Rental RatesComparable Plan Type Size $/Mo. $/SFSubject (Quoted Market Rent) 1BR/1BA 860 SF $730 $0.85

Subject (Quoted Market Rent) 1BR/1BA 808 SF $705 $0.87

Coliseum Gardens Apartments 1BR/1BA 700 SF $730 $1.04

Subject (Concluded Mkt.) 1BR/1BA 808 SF $855 $1.06



Bridgewater 1BR/1BA 775 SF $851 $1.10

Township In Hampton Woods 1BR/1BA 800 SF $905 $1.13


Bridgewater 1BR/1BA 825 SF $961 $1.16

Signature Place Apartments 1BR/1BA 927 SF $1,128 $1.22



Addison at Hampton 1BR/1BA 677 SF $845 $1.25

Signature Place Apartments 1BR/1BA 839 SF $1,050 $1.25


Signature Place Apartments 1BR/1BA 774 SF $995 $1.29


Addison at Hampton 1BR/1BA 749 SF $1,015 $1.36


Signature Place Apartments 1BR/1BA 642 SF $910 $1.42


Compiled by CBRE

The subject’s quoted rental rates appear below-market. The property’s leasing agent indicates that the

LRO system may be temporarily overcompensating for a recent decline in inquiries and that quoted

rates are expected to rise in the near future. Our estimated market rents are more consistent with the

range indicated by the rent comparables on a monthly basis. The subject’s rent roll indicates that a

majority of the occupied one-bedroom units are leased above the current quoted rates. Considering

the available data, monthly market rent for the subject units is estimated at the above noted market

rent conclusions.

© 2013 CBRE, Inc.


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Two-Bedroom Units

SUMMARY OF COMPARABLE RENTALSTWO BEDROOM UNITS

Rental RatesComparable Plan Type Size $/Mo. $/SFSubject (Quoted Market Rent) 2BR/2BA 1,100 SF $805 $0.73


Coliseum Gardens Apartments 2BR/1.5BA 960 SF $825 $0.86

Subject (Concluded Mkt.) 2BR/2BA 1,100 SF $1,055 $0.96


Township In Hampton Woods 2BR/1.5BA 1,150 SF $1,165 $1.01

Township In Hampton Woods 2BR/2BA 1,050 SF $1,080 $1.03


Bridgewater 2BR/2BA 1,050 SF $1,139 $1.08


Signature Place Apartments 2BR/2BA 1,082 SF $1,210 $1.12



Addison at Hampton 2BR/2BA 1,010 SF $1,250 $1.24

Addison at Hampton 2BR/2BA 904 SF $1,190 $1.32

Compiled by CBRE


LRO system may be temporarily overcompensating for a recent decline in inquiries. Our estimated

market rents are more consistent with the range indicated by the rent comparables on a monthly basis.

The subject’s rent roll indicates that a majority of the occupied two-bedroom units are leased above

the current quoted rates. Considering the available data, monthly market rent for the subject units is

estimated at the above noted market rent conclusions.

Three-Bedroom Units

SUMMARY OF COMPARABLE RENTALSTHREE BEDROOM UNITS

Rental RatesComparable Plan Type Size $/Mo. $/SFSubject (Quoted Market Rent) 3BR/2BA 1,375 SF $1,105 $0.80

Subject (Quoted Market Rent) 3BR/2BA 1,475 SF $1,235 $0.84






Compiled by CBRE


LRO system may be temporarily overcompensating for a recent decline in inquiries. Our estimated

© 2013 CBRE, Inc.


60

market rents are more consistent with the range indicated by the rent comparables on a monthly basis.

The subject’s rent roll indicates that a majority of the occupied three-bedroom units are leased above

the current quoted rates. Considering the available data, monthly market rent for the subject units is

estimated at the above noted market rent conclusions.


The following chart shows the market rent conclusions for the subject:


No. Unit Monthly Rent Annual Rent AnnualUnits Unit Type Size Total SF $/Unit $/SF PRI $/Unit $/SF Total

87 1BR/1BA 689 SF 59,943 SF $800 $1.16 $69,600 $9,600 $13.93 $835,200

8 1BR/1BA 689 SF 5,512 SF $875 $1.27 $7,000 $10,500 $15.24 $84,000

35 1BR/1BA 808 SF 28,280 SF $855 $1.06 $29,925 $10,260 $12.70 $359,100

46 1BR/1BA 860 SF 39,560 SF $920 $1.07 $42,320 $11,040 $12.84 $507,840

2 2BR/1BA 860 SF 1,720 SF $975 $1.13 $1,950 $11,700 $13.60 $23,400

66 2BR/1BA 950 SF 62,700 SF $989 $1.04 $65,274 $11,868 $12.49 $783,288

120 2BR/2BA 1,100 SF 132,000 SF $1,055 $0.96 $126,600 $12,660 $11.51 $1,519,200

24 3BR/2BA 1,375 SF 33,000 SF $1,399 $1.02 $33,576 $16,788 $12.21 $402,912

30 3BR/2BA 1,475 SF 44,250 SF $1,399 $0.95 $41,970 $16,788 $11.38 $503,640

418 974 SF 406,965 SF $1,001 $1.03 $418,215 $12,006 $12.33 $5,018,580

Compiled by CBRE

RENT ROLL ANALYSIS

The rent roll analysis serves as a crosscheck to the estimate of market rent for the subject. The

collections shown on the rent roll include rent premiums and/or discounts.

RENT ROLL ANALYSIS

Total TotalRevenue Component Monthly Rent Annual Rent

376 Occupied Units at Contract Rates $377,365 $4,528,380

42 Vacant Units at Market Rates $44,730 $536,760

418 Total Units @ Contract Rent $422,095 $5,065,140

418 Total Units @ Market Rent $418,215 $5,018,580

Indicated Loss-to-Lease -0.9%

Compiled by CBRE

The subject’s contract rents are essentially in line with our estimated market rents. The small variation

between the total annual rent reflected in the rent roll analysis and the market rent conclusion is due

primarily to older leases which incorporate slightly above-market rates.

© 2013 CBRE, Inc.


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POTENTIAL RENTAL INCOME CONCLUSION

Within this analysis, potential rental income is estimated based upon the current contract income via

the current in-place rent roll. We note that we handle monthly rent concessions as a separate line

item. This method of calculating rental income is reasonably prevalent in the local market, which

emphasizes existing in place income, and it is generally consistent with the method used to derive

overall capitalization rates from the comparable sales data.

OPERATING HISTORY

The following table presents the available operating data for the subject.

OPERATING HISTORY

Year-Occupancy 20122013

Annualized2013

Budget

Total $/Unit Total $/Unit Total $/UnitIncome

Rental Income 3,256,427 $7,790 $3,594,608 $8,600 3,904,322 $9,340Non-Revenue Units (39,905) (95) (89,091) (213) (69,420) (166) Other Income 162,331 388 83,807 200 141,773 339 RUBS/Utility Income 138,533 331 214,577 513 174,600 418 Effective Gross Income $3,517,386 $8,415 $3,803,900 $9,100 $4,151,275 $9,931

ExpensesReal Estate Taxes $387,091 $926 $400,961 $959 $416,495 $996Property Insurance 123,813 296 130,917 313 138,677 332 Utilities 310,833 744 331,679 793 320,676 767 Administrative & General 88,844 213 87,846 210 71,924 172 Repairs & Maintenance 233,444 558 295,967 708 232,257 556 Management Fee 99,286 238 105,483 252 114,160 273 Payroll 465,666 1,114 427,475 1,023 449,802 1,076 Advertising & Leasing 44,262 106 37,383 89 39,973 96 Operating Expenses $1,753,239 $4,194 $1,817,709 $4,349 $1,783,964 $4,268

Net Operating Income $1,764,147 $4,220 $1,986,191 $4,752 $2,367,311 $5,663

Source: Operating statements

N/A N/A N/A

We note that the 2013 Annualized operating performance reflects 8 months of data.

CONCESSIONS

Rent concessions are currently prevalent in the local market in the form of move-in specials and

discounted monthly rents. Our discussions with local apartment operators indicate that concessions

have been prevalent in this area over the past year with some tenants having rental discounts of $30

to $100 per month on 12-month leases. To reflect these market-oriented discounts, we have

concluded a stabilized concession amount for the subject estimated at 7.0% of gross rental income.

© 2013 CBRE, Inc.


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VACANCY

The subject’s estimated stabilized occupancy rate was previously discussed in the market analysis. The

subject’s vacancy is detailed as follows:

VACANCY

Year % PGI

Current 10%

CBRE Estimate 10%

Compiled by CBRE

Our stabilized vacancy estimate reflects the practice of market participants assuming a stabilized

vacancy applicable to the property over a typical holding period.

CREDIT LOSS

The credit loss estimate is an allowance for nonpayment of rent or other income. The subject’s credit

loss is detailed as follows:

CREDIT LOSS

Year % PGI

2012 7.2%


2013 Budget 4.3%

CBRE Estimate 3.0%

Compiled by CBRE

Our Credit Loss estimate is reasonably well supported by the subject’s recent historical performance.

NON-REVENUE UNITS

Non-revenue units represent otherwise rentable units which are not available for lease due to their use

for other purposes such as employee occupied units and/or model units. The lost revenue, which

would have been generated by these units if leased, is deducted from the potential rental income.

The subject’s non-revenue unit adjustment is detailed as follows:

NON-REVENUE UNITS

Year Total $/Unit

2012 -$39,905 -$95

2013 Annualized -$89,091 -$213

2013 Budget -$69,420 -$166

CBRE Estimate -$40,000 -$96

Compiled by CBRE

© 2013 CBRE, Inc.


63

OTHER INCOME

Other income is supplemental to that derived from leasing of the improvements. This includes

categories such as forfeited deposits, vending machines, late charges, etc. The subject’s ancillary


OTHER INCOME

Year Total $/Unit

2012 $162,331 $388

2013 Annualized $83,807 $200

2013 Budget $141,773 $339


Compiled by CBRE

The primary source of other income is security deposit forfeitures. Our estimate is reasonably

consistent with other properties operating in the area and generally supported by the available

historical financial data.

RUBS INCOME

The subject includes a RUBS program (Ratio Utility Billing System), whereby a portion of the utility

expense is shared by tenants and reimbursed to the landlord on a pro rata basis. The subject’s RUBS


RUBS/UTILITY INCOME

Year Total $/Unit

2012 $138,533 $331

2013 Annualized $214,577 $513

2013 Budget $174,600 $418


Compiled by CBRE

Our RUBS revenue pro forma falls within the range indicated by the subject’s recent historical and

budgeted performance.


The subject’s effective gross income is detailed as follows:

© 2013 CBRE, Inc.


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Year Total $/Unit

2012 $3,517,386 $11,725

2013 Annualized $3,803,900 $12,680

2013 Budget $4,151,275 $13,838

CBRE Estimate $4,329,905 $14,433

Compiled by CBRE

Our pro forma estimate is slightly higher than the subject’s recent historical performance but is

generally consistent with the 2013 budget.

OPERATING EXPENSE ANALYSIS

Expense Comparables

The following chart summarizes expenses obtained from recognized industry publications and/or

comparable properties.

EXPENSE COMPARABLES

Comparable Number 1 2 3

Location Virginia Beach, VA Chesapeake, VA Hampton, VA

No. Units 126 176 168

Expense Year 2011 2012 2013 Budget

Effective Gross Income $9,500 $15,607 $8,243

Expenses $/Unit $/Unit $/Unit

Real Estate Taxes $504 $1,475 $532

Property Insurance 161 250 370

Utilities 797 950 956

Administrative & General 780 375 392

Repairs & Maintenance 725 650 649

Management Fee 427 468 344 (as a % of EGI) 4.5% 3.0% 4.2%

Payroll 1,033 1,325 944

Advertising & Leasing 128 227 229

Operating Expenses $4,554 $5,620 $4,860Operating Expense Ratio 47.9% 36.0% 59.0%

Source: Operating Statements

The following subsections represent the analysis for the pro forma estimate of each category of the

subject’s stabilized expenses.

Real Estate Taxes

The real estate taxes for the subject were previously discussed. The subject’s expense is detailed as

follows:

© 2013 CBRE, Inc.


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REAL ESTATE TAXES

Year Total $/Unit

2012 $387,091 $926

2013 Annualized $400,961 $959

2013 Budget $416,495 $996




CBRE Estimate $453,535 $1,085

Compiled by CBRE

Our estimate is based on the current property assessment and tax rate, and is reasonably consistent

with other properties operating in the area.

Property Insurance

Property insurance expenses typically include fire and extended coverage and owner’s liability

coverage. The subject’s expense is detailed as follows:

PROPERTY INSURANCE

Year Total $/Unit

2012 $123,813 $296

2013 Annualized $130,917 $313

2013 Budget $138,677 $332





Compiled by CBRE

Our estimate is essentially in line with the historical financial data and is reasonably consistent with

other properties operating in the area.

Utilities

Utility expenses include electricity, water, trash and sewer. The subject’s expense is detailed as

follows:

© 2013 CBRE, Inc.


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UTILITIES

Year Total $/Unit

2012 $310,833 $744

2013 Annualized $331,679 $793

2013 Budget $320,676 $767





Compiled by CBRE

Our utility expense is essentially in line with the actual subject expenses and is also reasonably

consistent with the expense comparables where applicable.

Administrative & General

Administrative expenses typically include legal costs, accounting, telephone, supplies, furniture,

temporary help and items that are not provided by off-site management. The subject’s expense is

detailed as follows:

ADMINISTRATIVE & GENERAL

Year Total $/Unit

2012 $88,844 $213

2013 Annualized $87,846 $210

2013 Budget $71,924 $172





Compiled by CBRE

The estimate is reasonably consistent with other properties operating in the area and generally

supported by the available historical financial data.

Repairs and Maintenance

Repairs and maintenance expenses typically include all outside maintenance service contracts and the

cost of maintenance and repairs supplies. The subject’s expense is detailed as follows:

© 2013 CBRE, Inc.


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REPAIRS & MAINTENANCE

Year Total $/Unit

2012 $233,444 $558

2013 Annualized $295,967 $708

2013 Budget $232,257 $556





Compiled by CBRE

The estimate is reasonably consistent with other properties operating in the area and generally

supported by the available historical and budgeted financial data.

Management Fee

Management expenses are typically negotiated as a percentage of collected revenues (i.e., effective

gross income). The subject’s expense is detailed as follows:

MANAGEMENT FEE

Year Total % EGI

2012 $99,286 2.8%

2013 Annualized $105,483 2.8%

2013 Budget $114,160 2.7%

CBRE Estimate $173,196 4.0%

Compiled by CBRE

Professional management fees in the local market range from 3.0% to 5.0% for comparable

properties. Historically, the subject has incurred a 2.8% management fee. Given the subject’s size

and the competitiveness of the local market area, we believe an appropriate management expense for

the subject would be towards the middle of the range.

Payroll

Payroll expenses typically include all payroll and payroll related items for all directly employed

administrative personnel. Not included are the salaries or fees for off-site management firm personnel

and services. The subject’s expense is detailed as follows:

© 2013 CBRE, Inc.


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PAYROLL

Year Total $/Unit

2012 $465,666 $1,114

2013 Annualized $427,475 $1,023

2013 Budget $449,802 $1,076




CBRE Estimate $463,980 $1,110

Compiled by CBRE

Our payroll estimate is essentially in line with the subject property’s historical expenses and reasonably

consistent with the performance of comparable properties.

Advertising and Promotion

Advertising and promotion expenses typically include all costs associated with the promotion of the

subject including advertisements in local publications, trade publications, yellow pages, et cetera. The

subject’s expense is detailed as follows:

ADVERTISING & LEASING

Year Total $/Unit

2012 $44,262 $106

2013 Annualized $37,383 $89

2013 Budget $39,973 $96





Compiled by CBRE

Our Advertising & Leasing estimate is reasonably consistent with the performance of comparable

properties and with our experience in the market.

Reserves for Replacement

Reserves for replacement have been estimated based on market parameters with an indicated range

of $150 to $350 per unit for comparable properties. The subject’s expense is detailed as follows:

RESERVES FOR REPLACEMENT

Year Total $/Unit


Compiled by CBRE

© 2013 CBRE, Inc.


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OPERATING EXPENSE CONCLUSION


OPERATING EXPENSES

Year Total $/Unit

2012 $1,753,239 $4,194

2013 Annualized $1,817,709 $4,349

2013 Budget $1,783,964 $4,268




CBRE Estimate $2,135,711 $5,109

Compiled by CBRE

The subject’s per unit operating expense pro forma is generally in line with the total per unit operating

expenses indicated by the expense comparables and published data. Our total expense estimate is

also reasonably consistent with the actual operating history as indicated above, after accounting for

reserves.

NET OPERATING INCOME CONCLUSION

The subject’s net operating income is detailed as follows:

NET OPERATING INCOME

Year Total $/Unit

2012 $1,764,147 $4,220

2013 Annualized $1,986,191 $4,752

2013 Budget $2,367,311 $5,663

CBRE Estimate $2,194,194 $5,249

Compiled by CBRE

DIRECT CAPITALIZATION

Direct capitalization is a method used to convert a single year’s estimated stabilized net operating

income into a value indication. The following subsections represent different techniques for deriving

an overall capitalization rate for direct capitalization.

Comparable Sales

The overall capitalization rates (OARs) confirmed for the comparable sales analyzed in the sales

comparison approach are as follows:

© 2013 CBRE, Inc.


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COMPARABLE CAPITALIZATION RATES

Sale Sale Price

Sale Date $/Unit Occupancy OAR Basis OAR

1 Sep-13 $50,833 96% N/A 7.15%

2 May-13 $56,151 89% Pro Forma 7.51%

3 Oct-12 $60,956 93% Existing 7.03%

4 Oct-12 $78,482 91% Pro Forma 6.85%

5 Oct-12 $90,761 95% Existing 6.51%

6 Aug-12 $67,137 97% Pro Forma 7.17%

Indicated OAR: 87% 6.51% - 7.51%

Compiled by: CBRE

The overall capitalization rates for the comparable sales were derived based upon the actual or pro-

forma income characteristics of the properties. These sales are generally reflective of current market

trends, interest rates, and buyer’s expectations and motivation in the market. Each of these sales

shows a fairly similar tenancy structure with regard to stability and tenant quality, whereby little

adjustment is required when compared with the subject. Overall, an OAR in the middle portion of the

range indicated by the comparables is considered appropriate for the following reasons:

Property Attributes

The property benefits from convenient access to major roadways, employment centers and commercial districts.

The property’s age, while comparable to a number of nearby properties, is inferior to many multifamily properties in the area.

The weak overall economy and related macro-economic concerns may increase the difficulty of leasing the remaining vacant units;

The City of Hampton experiences somewhat higher crime rates compared to other cities in the area.

Published Investor Surveys

The results of the most recent investor surveys are summarized in the following chart.


Investment Type OAR Range Average

CBRE Apartments

Class A 3.50% - 7.75% 5.40%

Class B 4.25% - 10.00% 6.37%

Class C 4.75% - 11.00% 7.59%

PwC Apartment

National Data 3.75% - 10.00% 5.83%

Indicated OAR: 6.50% - 7.50%

Compiled by: CBRE

© 2013 CBRE, Inc.


71

The subject is considered to be a Class B property. In light of the subject’s Class B status and other

investment attributes, an OAR near the middle of the range indicated in the preceding table is

considered appropriate.

Market Participants

The results of recent interviews with knowledgeable real estate professionals are summarized in the

following table.

OVERALL CAPITALIZATION RATES - APARTMENT

Respondent Company OAR Income Date of Survey

Senior Broker CBRE, Inc. 6.75% - 7.25% Existing Income 2H2013Broker CBRE, Inc. 6.50% - 7.50% Existing Income 2H2013

Indicated OAR: 6.50% - 7.50%

Compiled by: CBRE

Band of Investment

The band of the investment technique has been utilized as a crosscheck to the foregoing techniques.

The Mortgage Interest Rate and the Equity Dividend Rate (EDR) are based upon current market yields

for similar investments. The analysis is shown in the following table.

BAND OF INVESTMENT

Mortgage Interest Rate 4.50%Mortgage Term (Amortization Period) 30 Years

Mortgage Ratio (Loan-to-Value) 75%Mortgage Constant (monthly payments) 0.06080

Equity Dividend Rate (EDR) 10%

Mortgage Requirement 75% x 0.0608 = 0.04560

Equity Requirement 25% x 0.10000 = 0.02500

100% 0.07060

Indicated OAR: 7.10%

Compiled by: CBRE

Debt Coverage Ratio

The debt coverage ratio (DCR) is the ratio of net operating income to annual debt service and

measures the ability of a given property to meet its debt service out of net operating income. Utilizing

data obtained from knowledgeable mortgage finance professionals, the subject’s projected NOI can

be tested for reasonableness against the market’s typical loan parameters to determine whether or not

the DCR is positive. This analysis is shown in the following table.

© 2013 CBRE, Inc.


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DEBT COVERAGE RATIO ANALYSIS

Estimated As Is Value $31,300,000

Mortgage Ratio (Loan-to-Value) 75%

Estimated Mortage Loan Amount $23,475,000

Mortgage Interest Rate 4.50%

Mortgage Term (Amortization Period) 30 Years

Mortgage Constant (monthly payments) 0.06080

Annual Debt Service (monthly payments) $1,427,333

Estimated NOI $2,194,194

Estimated Debt Coverage Ratio (DCR) 1.54

Market Debt DCR 1.40

Positive DCR? (Y or N) Yes

Compiled by: CBRE

Capitalization Rate Conclusion

The following chart summarizes the OAR conclusions.

OVERALL CAPITALIZATION RATE - CONCLUSION

Source Indicated OAR

Comparable Sales 6.51% - 7.51%

National Investor Survey 6.50% - 7.50%

Market Participants 6.50% - 7.50%

Band of Investment 7.10%

CBRE Estimate 7.00%

Compiled by: CBRE

Direct Capitalization Summary

A summary of the direct capitalization at stabilized occupancy is illustrated in the following chart.

© 2013 CBRE, Inc.


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DIRECT CAPITALIZATION SUMMARY

Hampton Center

Income $/Door/Mo. $/Unit/Yr Total Potential Rental Income $4,221 $12,118 $5,065,140Concessions 7.00% (295) (848) (354,560) Vacancy 10.00% (393) (1,127) (471,058) Credit Loss 3.00% (118) (338.08) (141,317)

Net Rental Income $3,415 $9,804 $4,098,205

Non-Revenue Units (33) (96) (40,000) Other Income 105 300 125,400 RUBS/Utility Income 122 350 146,300

Effective Gross Income $3,608 $10,359 $4,329,905

ExpensesReal Estate Taxes $1,085 $453,535Property Insurance 300 125,400 Utilities 775 323,950 Administrative & General 275 114,950 Repairs & Maintenance 675 282,150 Management Fee 4.00% 414 173,196 Payroll 1,110 463,980 Advertising & Leasing 175 73,150 Reserves for Replacement 300 125,400

Operating Expenses $5,109 $2,135,711

Operating Expense Ratio 49.32%

Net Operating Income $5,249 $2,194,194

OAR / 7.00%


Rounded $31,300,000

Deferred Maintenance -

Lease-Up Discount -


Rounded $31,300,000


Matrix Analysis Cap Rate Value

6.75% $32,506,600

7.00% $31,345,600

7.25% $30,264,700

Compiled by CBRE

© 2013 CBRE, Inc.

HAMPTON CENTER | RECONCILIATION OF VALUE

74

RECONCILIATION OF VALUE

The value indications from the approaches to value are summarized as follows:

SUMMARY OF VALUE CONCLUSIONSSales Comparison Approach $31,400,000

Income Capitalization Approach $31,300,000


Compiled by CBRE

In the sales comparison approach, the subject is compared to similar properties that have been sold

recently or for which listing prices or offers are known. The sales used in this analysis are considered

highly comparable to the subject, and the required adjustments were based on reasonable and well-

supported rationale. In addition, market participants are currently analyzing purchase prices on

investment properties as they relate to available substitutes in the market. Therefore, the sales

comparison approach is considered to provide a reliable value indication, but has been given

secondary emphasis in the final value reconciliation.

The income capitalization approach is applicable to the subject since it is an income producing

property leased in the open market. Market participants are primarily analyzing properties based on

their income generating capability. Therefore, the income capitalization approach is considered a

reasonable and substantiated value indicator and has been given primary emphasis in the final value

estimate.

Based on the foregoing, the market value of the subject has been concluded as follows:




Compiled by CBRE

© 2013 CBRE, Inc.

HAMPTON CENTER | ASSUMPTIONS AND LIMITING CONDITIONS

75

ASSUMPTIONS AND LIMITING CONDITIONS

1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to title that would adversely affect marketability or value. CBRE, Inc. is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CBRE, Inc., however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject’s title should be sought from a qualified title company that issues or insures title to real property.

2. Unless otherwise specifically noted in the body of this report, it is assumed: that the existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CBRE, Inc. professionals are not engineers and are not competent to judge matters of an engineering nature. CBRE, Inc. has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CBRE, Inc. by ownership or management; CBRE, Inc. inspected less than 100% of the entire interior and exterior portions of the improvements; and CBRE, Inc. was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CBRE, Inc. reserves the right to amend the appraisal conclusions reported herein.

3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property, was not observed by the appraisers. CBRE, Inc. has no knowledge of the existence of such materials on or in the property. CBRE, Inc., however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired.

We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal.

4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CBRE, Inc. This report may be subject to amendment upon re-inspection of the subject subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation.

5. It is assumed that all factual data furnished by the client, property owner, owner’s representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CBRE, Inc. has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor’s Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CBRE, Inc. reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should

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carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CBRE, Inc. of any questions or errors.

6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CBRE, Inc. will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject.

7. CBRE, Inc. assumes no private deed restrictions, limiting the use of the subject in any way.

8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposits or subsurface rights of value involved in this appraisal, whether they are gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred.

9. CBRE, Inc. is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject.

10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market.

11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CBRE, Inc. does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CBRE, Inc.

12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CBRE, Inc. to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form.

13. Also, unless otherwise noted in the body of this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated.

14. This study may not be duplicated in whole or in part without the specific written consent of CBRE, Inc. nor may this report or copies hereof be transmitted to third parties without said consent, which consent CBRE, Inc. reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express written consent of CBRE, Inc. which consent CBRE, Inc. reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a “sale” or “offer for sale” of any “security”, as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CBRE, Inc. shall have no accountability or responsibility to any such third party.

15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report.

16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used.

17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area of the subject and comparable properties has been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report.

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18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CBRE, Inc. unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CBRE, Inc. assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance.

19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client’s designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CBRE, Inc. assumes responsibility for any situation arising out of the Client’s failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired.

20. CBRE, Inc. assumes that the subject analyzed herein will be under prudent and competent management and ownership; neither inefficient nor super-efficient.

21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report.

22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist.

23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Notwithstanding any discussion of possible readily achievable barrier removal construction items in this report, CBRE, Inc. has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CBRE, Inc. has no specific information relating to this issue, nor is CBRE, Inc. qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject.

24. Client shall not indemnify Appraiser or hold Appraiser harmless unless and only to the extent that the Client misrepresents, distorts, or provides incomplete or inaccurate appraisal results to others, which acts of the Client approximately result in damage to Appraiser. Notwithstanding the foregoing, Appraiser shall have no obligation under this Section with respect to any loss that is caused solely by the active negligence or willful misconduct of a Client and is not contributed to by any act or omission (including any failure to perform any duty imposed by law) by Appraiser. Client shall indemnify and hold Appraiser harmless from any claims, expenses, judgments or other items or costs arising as a result of the Client's failure or the failure of any of the Client's agents to provide a complete copy of the appraisal report to any third party. In the event of any litigation between the parties, the prevailing party to such litigation shall be entitled to recover, from the other, reasonable attorney fees and costs.

25. The report is for the sole use of the client; however, client may provide only complete, final copies of the appraisal report in its entirety (but not component parts) to third parties who shall review such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CBRE, Inc. or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors in its entirety (but not component parts) without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter.

26. As part of the client’s requested scope of work, an estimate of insurable value is provided herein. CBRE, Inc. has followed traditional appraisal standards to develop a reasonable calculation based upon industry practices and industry accepted publications such as the Marshal Valuation Service handbook. The methodology employed is a derivation of the cost approach which is primarily used as an academic exercise to help support the market value estimate and therefore is not reliable for Insurable Value estimates. Actual construction costs and related estimates can vary greatly from this estimate.

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This analysis should not be relied upon to determine proper insurance coverage which can only be properly estimated by consultants considered experts in cost estimation and insurance underwriting. It is provided to aid the client/reader/user as part of their overall decision making process and no representations or warranties are made by CBRE, Inc. regarding the accuracy of this estimate and it is strongly recommend that other sources be utilized to develop any estimate of insurable value.

© 2013 CBRE, Inc.

HAMPTON CENTER | ADDENDA

ADDENDA

© 2013 CBRE, Inc.


ADDENDUM A

GLOSSARY OF TERMS

© 2013 CBRE, Inc.


assessed value Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. †

cash equivalency The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms.

contract rent The actual rental income specified in a lease. ‡

disposition value The most probable price which a specified interest in real property is likely to bring under all of the following conditions: 1) Consummation of a sale will occur within a limited future marketing period specified by the client; 2) The actual market conditions currently prevailing are those to which the appraised property interest is subject; 3) The buyer and seller is each acting prudently and knowledgeably; 4) The seller is under compulsion to sell; 5) The buyer is typically motivated; 6) Both parties are acting in what they consider their best interests; 7) An adequate marketing effort will be made in the limited time allowed for the completion of a sale; 8) Payment will be made in cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 9) 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.‡

effective rent The rental rate net of financial concessions such as periods of no rent during the lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. ‡

excess land In regard to an improved site, the land not needed to serve or support the existing improvement. In regard to a vacant site or a site considered as though vacant, the land not needed to accommodate the site’s primary highest and best use. Such land may be separated from the larger site and have its own highest and best use, or it may allow for future expansion of the existing or anticipated improvement. See also surplus land. ‡

extraordinary assumption An assumption directly related to a specific assignment, which, if found to be false, could alter the appraiser’s opinions or conclusions. Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property; or about conditions external to the property such as market conditions or trends; or about the integrity of data used in an analysis. See also hypothetical condition. ‡

fee simple estate Absolute ownership unencumbered by any other interest or estate, subject only to the limitations

imposed by the governmental powers of taxation, eminent domain, police power, and escheat. ‡

floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. ‡

full service lease A lease in which rent covers all operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed through to the tenant and are known as expense pass-throughs.

going concern value Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. †

gross building area (GBA) The total floor area of a building, including below-grade space but excluding unenclosed areas, measured from the exterior of the walls. Gross building area for office buildings is computed by measuring to the outside finished surface of permanent outer building walls without any deductions. All enclosed floors of the building including basements, mechanical equipment floors, penthouses, and the like are included in the measurement. Parking spaces and parking garages are excluded. ‡

hypothetical condition That which is contrary to what exists but is supposed for the purpose of analysis. Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis. See also extraordinary assumption. ‡

investment value Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires,

© 2013 CBRE, Inc.


needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they may be established by an expert on real estate and its value, that is, an appraiser. †

leased fee See leased fee estate

leased fee estate An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.‡

leasehold See leasehold estate

leasehold estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.‡

liquidation value The most probable price which a specified interest in real property is likely to bring under all of the following conditions: 1) Consummation of a sale will occur within a severely limited future marketing period specified by the client; 2) The actual market conditions currently prevailing are those to which the appraised property interest is subject; 3) The buyer is acting prudently and knowledgeably; 4) The seller is under extreme compulsion to sell; 5) The buyer is typically motivated; 6) The buyer is acting in what he or she considers his or her best interests; 7) A limited marketing effort and time will be allowed for the completion of a sale; 8) Payment will be made in cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 9) 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. ‡

market rent The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the specified lease agreement including term, rental adjustment and revaluation, permitted uses, use restrictions, and expense obligations; the lessee and lessor each acting prudently and knowledgeably, and assuming consummation of a lease contract as of a specified date and the passing of the leasehold from lessor to lessee under conditions whereby: 1) lessee and lessor are typically motivated; 2) both parties are well informed or well advised, and acting in what they consider their best interests; 3) a reasonable time is allowed for exposure in the open market; 4) the rent payment is made in terms of cash in U.S. dollars and is expressed as an amount per time period consistent with the payment schedule of the lease contract; and 5) the rental amount represents the normal consideration for the

property leased unaffected by special fees or concessions granted by anyone associated with the transaction. ‡

market value Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.§

marketing period The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. ‡

net lease Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent.

net rentable area (NRA) 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. *

occupancy rate The relationship or ratio between the income received from the rented units in a property and the income that would be received if all the units were occupied.‡

prospective value opinion A forecast of the value expected at a specified future date. A prospective value opinion is most frequently sought in connection with real estate projects that are proposed, under construction, or under conversion to a new us, or those that have not

© 2013 CBRE, Inc.


achieved sellout or a stabilized level of long-term occupancy at the time the appraisal report is written. ‡

reasonable exposure time The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective opinion based upon an analysis of past events assuming a competitive and open market. ††

rent See full service lease net lease market rent contract, coupon, face, or nominal rent effective rent

shell rent The typical rent paid for retail, office, or industrial tenant space based on minimal “shell” interior finishes (called plain vanilla finish in some areas). Usually the landlord delivers the main building shell space or some minimum level of interior build-out, and the tenant completes the interior finish, which can include wall, ceiling, and floor finishes; mechanical systems, interior electric, and plumbing. Typically these are long-term leases with tenants paying all or most property expenses. ‡

surplus land Land not necessary to support the highest and best use of the existing improvement but, because of physical limitations, building placement, or neighborhood norms, cannot be sold off separately. Such land may or may not contribute positively to value and may or may not

accommodate future expansion of an existing or anticipated improvement. See also excess land. ‡

usable area 1) The area actually used by individual tenants. 2) The Usable Area of an office building is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. *

use value Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property’s highest and best use or the monetary amount that might be realized upon its sale. †

value indication An opinion of value derived through application of the appraisal process. ‡

† The Appraisal of Real Estate, Thirteenth Edition, Appraisal Institute, 2008.

‡ The Dictionary of Real Estate Appraisal, Fourth Edition, Appraisal Institute, 2002.

§ Office of Comptroller of the Currency (OCC), 12 CFR Part 34, Subpart C – Appraisals, 34.42 (g); Office of Thrift Supervision (OTS), 12 CFR 564.2 (g); Appraisal Institute, The Dictionary of Real Estate Appraisal, 4th ed. (Chicago: Appraisal Institute, 2002), 177-178. This is also compatible with the RTC, FDIC, FRS and NCUA definitions of market value as well as the example referenced in the Uniform Standards of Professional Appraisal Practice (USPAP).

* 2000 BOMA Experience Exchange Report, Income/Expense Analysis for Office Buildings (Building Owners and Managers Association, 2000)

†† Statement on Appraisal Standard No. 6, Appraisal Standards Board of The Appraisal Foundation, September 16, 1993, revised June 15, 2004.

© 2013 CBRE, Inc.


ADDENDUM B

IMPROVED SALE DATA SHEETS

© 2013 CBRE, Inc.

APARTMENT SALE No. 1Woodmere TraceLocation DataLocation: 6741 E Tanners Creek Dr

Norfolk, VA 23513

County: Norfolk

Parcel No: 42962840

Atlas Ref:






Year Built: 1974

No. of Stories: 2

Exterior: Synthetic

Condition: Average

Amenities: Laundry facility, swimming pool, playground


Date: 9/2013

Marketing Time: NA

Grantor: Harborgroup

Grantee: Community Preservation and Development Corp

Document No.: 42962840

Sale Price: $15,250,000

Financing:


Req.Capital Cost:





Projected IRR:


Op Exp Ratio (OER):



Occupancy / Lease DataSource: Appraiser

Occupancy at Sale: 96.00%

Based On: N/A

Total Per Unit






CommentsThis transaction represents the sale of the Woodmere Trace Apartments on E Tanners Creek Dr in Norfolk, VA. This 300 unit multifamily property sold for $15,250,000 on September 10, 2013. The property was about 96 percent occupied at the time of sale and traded at a 6.75 percent cap rate based on forward-looking income.

© 2013 CBRE, Inc.

APARTMENT SALE No. 2Village at WoodshireLocation DataLocation: 159 Merrimac Trail

Williamsburg, VA 23185

County: James City County

Parcel No: 4090100A

Atlas Ref:






Year Built: 1975

No. of Stories: 2

Exterior: Vinyl Siding

Condition: Average

Amenities: a pool, sand volleyball court, playground and picnic area


Date: 5/2013

Marketing Time: NA

Grantor: Woodshire LLP

Grantee: Merrimac Associates LLC

Document No.: 130904

Sale Price: $14,150,000



Req.Capital Cost:


Verification: Broker, CoStar



Projected IRR:


Op Exp Ratio (OER):






Total Per Unit






Unit Type No. SF %

1BR/1BA 57 850 23%

2BR/1.5BA 153 1,000 61%

2BR/1.5BA 18 1,125 7%

3BR/2BA 22 1,300 9%

3BR/2BA 2 1,425 1%

Totals/Avg

252 100%

Unit Mix

© 2013 CBRE, Inc.

APARTMENT SALE No. 2CommentsThis comparable represents the sale of a Class B garden property in the city of Williamsburg. It was built in 1975 and was in average condition but needed modest repairs. The buyer plans to invest roughly $1,000,000 on modest defferred maintenance and upgrades.

© 2013 CBRE, Inc.

APARTMENT SALE No. 3Apex at Ashton GreenLocation DataLocation: 329 Boulder Drive

Newport News, VA 23608

County: Newport News

Parcel No: 057000501

Atlas Ref:






Year Built: 1985, Renovated 2007

No. of Stories: 3

Exterior: Composite

Condition: Average

Amenities: swimming pool, storage, W/D connections, ceiling fans


Date: 10/2012

Marketing Time: NA

Grantor: BPMS Apex at Ashton Green, LLC

Grantee: Breedon Investment Properties, Inc.

Document No.:






Verification: Contract, buyer





6.13







Total Per Unit


Vacancy & Credit Loss: $101,998 $864




Unit Type No. SF %

2 BD 1.5 BA

8 925 7%

2 BD 2 BA 110 960 93%

Totals/Avg

118 100%

Unit Mix

CommentsThe subject is a 118-unit multi-family garden property located on Boulder Drive & Warwick Blvd. in Newport News. The property consists of six predominantly two-story apartment buildings. The improvements were constructed in 1985, renovated in 2007 and are situated on a 7.390-acre site.

© 2013 CBRE, Inc.

APARTMENT SALE No. 4Ashton at Oyster PointLocation DataLocation: 802 Constance Drive


County: NA


Atlas Ref:






Year Built: 1986, Renov 2007

No. of Stories: 3

Exterior: Brick

Condition: Average

Amenities: pool, leasing office, laundry


Date: 10/2012

Marketing Time: NA

Grantor: BPMS Oyster Point, LLC

Grantee: Breeden Investment Properties, Inc.

Document No.:

Sale Price: $10,359,630



Req.Capital Cost:


Verification: Contract, broker



Projected IRR:


7.49







Total Per Unit


Vacancy & Credit Loss: $136,716 $1,036




Unit Type No. SF %

1 BR/1BA 2 780 2%

2 BR/2 BA 130 900 98%

Totals/Avg

132 100%

Unit Mix

CommentsThe property is a garden property located in the Oyster Point area of Newport News, . The improvements were constructed in 1986, renovated in 2007. The property was was considered to be in average overall condition. The property sold in 2012 as part of the three-property Ashton Green portfolio. The 2012 net income is from appraiser proforma and includes LTL of 1.5%, very large concessions of 8%, vacancy of 7% credit loss of 2%, and a $300 per unit reserve.

© 2013 CBRE, Inc.

APARTMENT SALE No. 5Arboretum PlaceLocation DataLocation: 210 Arboretum Way


County: N/A


Atlas Ref:






Year Built: 1995

No. of Stories: 3

Exterior: Composite

Condition: Good

Amenities: Swimming Pool, Tennis Court, Clubhouse with fitness center, playground


Date: 10/2012

Marketing Time: NA

Grantor: BIR Arboretum, L.L.C.

Grantee: CAPREIT Acquisition Corporation

Document No.:

Sale Price: $16,700,000





Verification: Contract





8.04







Total Per Unit






Unit Type No. SF %

1 BR, 1 BA 36 700 20%

2 BR, 1 BA 36 850 20%

2 BR, 2 BA 96 1,000 52%

3 BR, 2 BA 16 1,200 9%

Totals/Avg

184 100%

Unit Mix

CommentsThis complex is partially income and rent restricted to low income tenants, however, the rents are very close to market, and the complex is considered to be essentially at market rents. The project amenities include a community clubhouse, pool, tennis, fitness center, some garage parking, carwash area, playground, and laundry rooms. The income assumptions for the NOI at the date of sale include the inplace contract rent per the rentroll and reserves of $250 per unit.

© 2013 CBRE, Inc.

APARTMENT SALE No. 6Commons at ChurchlandLocation DataLocation: 3504 Executive Center Drive

Chesapeake, VA 23321

County: Virginia

Parcel No: 51019000040

Atlas Ref:






Year Built: 1995, 1987

No. of Stories: 3

Exterior: Brick

Condition: Average

Amenities:


Date: 8/2012

Marketing Time: NA

Grantor: Churchland Courtyard Apartments, LP

Grantee: Daniel & Victor Kaufman

Document No.:


Financing: Cash to Seller


Req.Capital Cost:


Verification: Contract, buyer



Projected IRR:


7.59




Occupancy / Lease DataSource: Buyer



Total Per Unit






Unit Type No. SF %

2 BR/1 BA 104 819 84%

2 BR/1.5 BA

18 940 15%

2 BR/1.5 BA

2 1,050 2%

Totals/Avg

124 100%

Unit Mix

© 2013 CBRE, Inc.

APARTMENT SALE No. 6CommentsThe Section 42 LIHTC property is a senior community (55+) in year 17 of its tax credit compliance period. There are extended use restrictions in place until 12/2025. The complex has 20 market rate units and 104 low income restricted units, and it includes elevator access and is oriented to seniors with basic ameniities of on-site office and community room. Units have full size W/D, dishwashers, disposals, and refridgerators. Restricted rents are $867 monthly (60% of AMI), which is very close to market levels. The indicated cap rate is based on the buyers proforma, including $300 for reserves.

© 2013 CBRE, Inc.


ADDENDUM C

RENT COMPARABLE DATA SHEETS

© 2013 CBRE, Inc.

APARTMENT COMPARABLE No. 1Addison at HamptonLocation DataLocation: 2 Wyndham Drive

Hampton, VA 23666

County: Hampton

Parcel No:

Atlas Ref:



Year Built 1986

No. of Stories 3


Exterior: Brick

Condition:

Amenities: Clubhouse, Spa, Fitness, Storage, Tennis, Sundeck, Volleyball (See Comments)


Rent Premiums: See comments

Concessions: None


Utilities incl. in Rent: Cold Water

Tenant Profile:

Management Co.: WMCI

Phone No: (757)838-8231

Survey Date: 9/13


1 BR, 1 BA 60 489 $725 $1.48

1 BR, 1 BA 56 590 $781 $1.32

1 BR, 1 BA 48 677 $845 $1.25

1 BR, 1 BA 28 749 $1,015 $1.36

2 BR, 2 BA 60 904 $1,190 $1.32

2 BR, 2 BA 24 1,010 $1,250 $1.24

Total/Avg 276 194,328 $933 $1.33

Rent Summary

CommentsStandard in-unit amenities include fireplace, view, dishwasher, air conditioning, private balcony, washer/dryer, ceiling fans, vertical/mini blinds, and disposal. In addition to the amenities listed above, the project also features a swimming pool, basketball facility and aerobics classes.

© 2013 CBRE, Inc.

APARTMENT COMPARABLE No. 2BridgewaterLocation DataLocation: 507 Marcella Road

Hampton, VA 23666

County: City of Hampton

Parcel No:

Atlas Ref:



Year Built 1997

No. of Stories 3


Exterior: Composite

Condition:

Amenities: Storage, Laundry, Pool, Fitness, Playground, Clubhouse/Spa, Tennis (See Comments)


Rent Premiums: See Comments

Concessions: None

Typical Lease Term: 3-12 months

Utilities incl. in Rent:

Tenant Profile: Military and local

Management Co.: Berkshire Property Advisors

Phone No: (757)838-5188

Survey Date: 9/13


1 BR, 1 BA 36 775 $851 $1.10

1 BR, 1 BA 36 825 $961 $1.16

2 BR, 2 BA 60 1,050 $1,139 $1.08

2 BR, 2 BA 60 1,100 $1,204 $1.09

3 BR, 2 BA 12 1,150 $1,271 $1.11

3 BR, 2 BA 12 1,200 $1,287 $1.07

Total/Avg 216 214,800 $1,095 $1.10

Rent Summary

CommentsIn-unit amenities include private balcony, vertical blinds, ice maker, washer/dryer connections, air conditioning, dishwasher and garbage disposal. Short term leases are a $50 to $150 monthly premium, garage rental is $75/month, and additional storage space is $25/month.

© 2013 CBRE, Inc.

APARTMENT COMPARABLE No. 3Coliseum Gardens ApartmentsLocation DataLocation: 135 Pine Chapel Road

Hampton, VA 23666

County: Hampton

Parcel No:

Atlas Ref:



Year Built 1980

No. of Stories 2



Condition: Average

Amenities: Playground


Rent Premiums: None

Concessions: None


Utilities incl. in Rent: Water and Sewer

Tenant Profile: Military and Local

Management Co.: Riverdale Management

Phone No: (757)826-4100

Survey Date: 9/13


1 BR, 1 BA 78 700 $730 $1.04

2 BR, 1.5 BA 104 960 $825 $0.86

Total/Avg 182 154,440 $784 $0.92

Rent Summary

Comments

© 2013 CBRE, Inc.

APARTMENT COMPARABLE No. 4Signature Place ApartmentsLocation DataLocation: 103 Signature Way

Hampton, VA 23666

County: Hampton

Parcel No:

Atlas Ref:



Year Built 1991

No. of Stories 3


Exterior: Composite

Condition:

Amenities: Storage, Fitness, Pool, Volleyball, Clubhouse, Laundry, Car Wash, (See Comments)



Concessions: None

Typical Lease Term: 6-12 months

Utilities incl. in Rent: Water and Sewer

Tenant Profile: Military and local

Management Co.: Signature

Phone No: (757)827-8147

Survey Date: 9/13


1 BR, 1 BA 30 642 $910 $1.42

1 BR, 1 BA 30 774 $995 $1.29

1 BR, 1 BA 30 839 $1,050 $1.25

1 BR, 1 BA Den 30 927 $1,128 $1.22

2 BR, 2 BA 48 1,082 $1,210 $1.12

2 BR, 2 BA 48 1,100 $1,250 $1.14

3 BR, 2 BA 16 1,274 $1,420 $1.11

Total/Avg 232 220,580 $1,135 $1.19

Rent Summary

CommentsProject amenities also include tennis courts and a spa. Standard iIn-unit amenities include air conditioning, fireplace, washer/dryer connections, 9-foot ceilings, private balconies, disposal, dishwasher and ice maker. Washer/dryer is available in some units.

Monthly premiums are charged for the following amenities/services:Garage: $75Courtyard View: $15Additional Storage: $30Washer/Dryer: $353 Month Lease: $1506 Month Lease $50

© 2013 CBRE, Inc.

APARTMENT COMPARABLE No. 5Township In Hampton WoodsLocation DataLocation: 260 Marcella Road

Hampton, VA 23666

County: Hampton

Parcel No: 7001310

Atlas Ref:



Year Built 1986

No. of Stories 3


Exterior: Composite

Condition: Average

Amenities: Pool, clubhouse, storage, tennis courts, volleyball and fitness center.



Concessions: None


Utilities incl. in Rent: none

Tenant Profile: Military & Local

Management Co.: Mid America

Phone No: (757)838-0192

Survey Date: 9/13


Studio 24 500 $715 $1.43

1 BR, 1 BA 56 575 $810 $1.41

1 BR, 1 BA 48 685 $850 $1.24

1 BR, 1 BA 48 800 $905 $1.13

2 BR, 2 BA 48 1,050 $1,080 $1.03

2 BR, 1.5 BA Loft 72 1,150 $1,165 $1.01

Total/Avg 296 248,680 $954 $1.14

Rent Summary

CommentsThe property is on the northwest corner of Coliseum Drive and Marcella Road in Hampton. Standard in-unit amenities include washer/dryer connections, private balcony/patio, dishwasher, disposal, fireplace, vaulted ceilings, ceiling fans and air conditioning. A community laundry facility is available. Monthly premiums include: $10 for vaulted ceilings; $10 for a fireplace; and $10 for a 2nd floor unit and $10 for a 3rd floor unit.

© 2013 CBRE, Inc.


ADDENDUM D

PROPERTY DATA

© 2013 CBRE, Inc.

Hampton Center2012 Cash Flow Forecast

Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 2012Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Budget Forecast

Net Effective Rent 876$ 825$ 837$ 805$ 816$ 839$ 838$ 866$ 826$ 854$ 793$ 808$ 832$ Occupancy % 69.9% 70.9% 77.1% 81.5% 83.4% 85.4% 86.4% 87.2% 87.1% 87.3% 88.0% 88.4% 82.7%

Uncollected % 4.8% -0.2% 5.4% 4.3% 6.7% 11.1% 8.8% 10.9% 3.1% 6.6% 2.5% 4.2% 5.9%Concession % 14.9% 19.7% 18.8% 22.0% 19.7% 17.4% 18.1% 15.9% 20.0% 16.6% 22.7% 21.3% 19.0%

Gross Potential Rent 430,046$ 429,553$ 430,929$ 431,209$ 424,642$ 424,561$ 427,680$ 430,851$ 431,526$ 428,089$ 429,048$ 429,554$ 5,147,688$ Vacancy (129,322) (124,942) (98,845) (79,924) (70,568) (61,975) (58,254) (55,084) (55,856) (54,547) (51,478) (50,000) (890,795) Management Office/Model (2,004) (2,004) (2,004) (2,004) (1,091) (989) (539) (2,339) (2,339) (729) (2,339) (2,339) (20,720) Staff Units (1,434) (1,434) (1,434) (1,346) (1,105) (1,105) (1,105) (1,105) (1,105) (1,215) (4,518) (2,279) (19,185) Concessions (44,266) (59,289) (61,935) (76,405) (69,237) (62,752) (66,451) (59,363) (74,443) (61,703) (84,209) (80,000) (800,053) Prepaid Rent (1,281) 3,398 3,177 (2,636) (551) 920 1,580 (1,304) (3,228) (906) 1,492 - 661 Uncollected (12,203) 466 (14,495) (11,831) (19,103) (33,319) (26,714) (34,112) (9,326) (20,684) (7,312) (12,441) (201,074)

Net Rent Collected 239,536$ 245,748$ 255,393$ 257,063$ 262,987$ 265,341$ 276,197$ 277,544$ 285,229$ 288,305$ 280,684$ 282,495$ 3,216,522$ Total Other Income 22,875 14,943 18,282 18,092 25,576 22,175 25,669 31,478 27,752 32,743 28,955 32,324 300,864

Total Income 262,411$ 260,691$ 273,675$ 275,155$ 288,563$ 287,516$ 301,866$ 309,022$ 312,981$ 321,048$ 309,639$ 314,820$ 3,517,387$

Total Renting Expense 3,922 5,297 4,875 2,868 523 5,611 6,655 3,050 4,038 1,974 1,770 3,679 44,262 Total Admin. Costs 12,741 6,920 7,005 10,070 6,162 8,803 4,999 5,299 6,382 8,354 5,710 6,399 88,844 Total Management Fees 7,373 7,387 7,619 7,637 7,951 7,936 8,251 8,381 8,657 8,883 8,583 10,628 99,286 Total Salaries & Benefits 36,522 40,020 36,679 35,981 39,629 36,489 36,226 41,733 40,879 38,417 42,679 40,412 465,666 Total Contract Repairs 15,520 13,927 10,007 21,368 19,399 22,677 19,900 9,478 18,387 15,750 11,822 10,751 188,986 Total Maint/Repair Supplies 7,337 3,033 494 4,268 5,061 1,995 5,183 3,400 4,569 1,986 2,612 4,520 44,458 Total Utilities 42,970 8,251 40,675 4,697 34,069 7,818 43,120 7,523 52,082 10,735 51,478 7,415 310,833 Total Taxes 33,329 33,329 33,329 33,329 33,625 33,329 33,604 19,284 33,329 33,329 33,625 33,650 387,091 Total Insurance 8,683 9,893 9,893 9,893 9,893 9,893 9,893 9,893 10,910 12,767 11,286 10,916 123,813

Total Operating Expenses 168,397$ 128,057$ 150,576$ 130,111$ 156,312$ 134,551$ 167,831$ 108,041$ 179,233$ 132,195$ 169,565$ 128,370$ 1,753,239$ Net Operating Income 94,014$ 132,634$ 123,099$ 145,044$ 132,251$ 152,965$ 134,035$ 200,981$ 133,748$ 188,853$ 140,074$ 186,449$ 1,764,147$

Total Property Improvements 12,223 24,309 (16,948) 18,182 13,530 (16,999) 21,567 35,046 (18,114) 40,073 (99,796) 150,508 163,581 Total Capital Improvements / Rehab - - - (292,752) 292,752 - - (2,325) - - 4,726 - 2,401 Debt Service 98,900 91,719 95,895 100,520 98,543 93,051 107,958 87,955 101,666 91,142 92,590 105,682 1,165,621 Other Non-operating Expenses 5,631 8,150 29,317 11,042 15,996 8,374 5,870 6,735 9,092 14,080 10,111 6,519 130,917

Total Non-operating Expenses 116,754$ 124,178$ 108,264$ (163,008)$ 420,821$ 84,426$ 135,395$ 127,411$ 92,644$ 145,295$ 7,631$ 262,709$ 1,462,520$ Net Income (loss) (22,740)$ 8,456$ 14,835$ 308,052$ (288,570)$ 68,539$ (1,360)$ 73,570$ 41,104$ 43,558$ 132,443$ (76,260)$ 301,627$

© 2013 CBRE, Inc.

© 2013 CBRE, Inc.

© 2013 CBRE, Inc.

© 2013 CBRE, Inc.

© 2013 CBRE, Inc.

Database: HARBORGROUP Rent Roll Page: 93HARBORGROUP Date: 8/26/2013

Grand Totals Time: 10:43 AMReport Period: 08/13

Beginning Charges Adjustments Cash NSF/ Security EndingBalance PR/RF Applied Balance

Grand TotalsMTM MONTH TO MONTH -140.01 590.01 150.00 400.00 0.00 0.00 200.00 0.14%

-250.00 PPD -9.99 V 200.00 C

109.99 DLQ 200.00 DLQ

RNT Rent 38,128.12 369,396.80 -80,491.82 293,195.97 -5,700.15 -473.65 39,063.63 86.34%

4,666.37 V -2,814.91 C 0.00 PPD

38,128.12 DLQ 39,063.63 DLQ

M EMP EMPLOYEE RENT 0.00 4,504.50 0.00 0.00 0.00 0.00 0.00 1.05%

M MOD MODEL/OFFICE 0.00 3,464.00 0.00 0.00 0.00 0.00 0.00 0.81%

M V Vacancy 0.00 49,870.62 0.00 0.00 0.00 0.00 0.00 11.66%

Total Potential 37,988.11 427,825.93 -80,341.82 293,595.97 -5,700.15 -473.65 39,263.63 100.00%

M Total Lost Rent 57,839.12 13.52%

ATT ATTORNEY/ COURT COS 615.00 -329.00 0.00 106.00 0.00 0.00 180.000.00 PPD

615.00 DLQ 180.00 DLQ

DAM DAMAGE CHARGES 167.47 1,165.87 0.00 63.34 0.00 0.00 1,270.00167.47 DLQ 1,270.00 DLQ

MIS MISCELLANEOUS -678.47 703.99 0.00 109.28 0.00 0.00 -83.76-769.20 PPD -200.00 PPD

90.73 DLQ 116.24 DLQ

NSF NSF 280.00 105.00 0.00 260.10 0.00 0.00 124.90-855.00 PPD

1,135.00 DLQ 124.90 DLQ

TER TERMINATION FEE 0.00 2,152.00 0.00 0.00 0.00 0.00 1,776.001,776.00 DLQ

APP APPLICATION FEE -90.93 1,245.93 -130.00 824.00 -70.00 0.00 251.00-200.93 PPD -45.00 PPD

110.00 DLQ 296.00 DLQ

LAT LATE FEE 4,336.80 3,716.17 0.00 3,934.48 -252.30 0.00 4,370.79-263.50 PPD -98.90 PPD

4,600.30 DLQ 4,469.69 DLQ

PPR PREPAID RENT -9,739.90 0.00 0.00 7,707.33 -11,255.21 0.00 -6,192.02-9,739.90 PPD -6,192.02 PPD

0.00 DLQ

A WRO BAD DEBT-WRITEOFF 0.00 -14,716.90 14,716.90 0.00 0.00 0.00 0.00A CON RENT CONCESSION -1,076.12 -64,346.17 63,140.01 0.00 0.00 -27.78 -2,310.06

-1,076.12 PPD -2,310.06 PPD

0.00 DLQ

O PET PET FEE 829.63 1,309.17 0.00 1,814.63 0.00 -145.36 178.81-0.83 PPD

829.63 DLQ 179.64 DLQ

O RED REDEC FEE 165.00 450.00 0.00 515.00 -100.00 0.00 200.00-100.00 PPD

165.00 DLQ 300.00 DLQ

O S3 3 MO SHORT TERM PREM 0.00 50.00 0.00 50.00 0.00 0.00 0.00O S5 5 MO SHORT TERM PREM 0.00 50.00 0.00 50.00 0.00 0.00 0.00O S6 6 MO SHORT TERM PREM 21.67 100.00 0.00 75.94 0.00 0.00 45.73

21.67 DLQ 45.73 DLQ

O TRS TRASH REIMBURSEMENT 653.33 1,887.20 0.00 2,039.83 -37.53 -37.45 500.78-10.18 PPD -0.20 PPD

663.51 DLQ 500.98 DLQ

O UTI UTILITY INCOME 1,041.55 697.86 0.00 646.90 0.00 0.00 1,092.511,041.55 DLQ 1,092.51 DLQ

O WTR WATER/SEWER 5,895.59 15,269.54 0.00 15,753.25 -240.84 -497.41 5,155.31-117.88 PPD -29.17 PPD

6,013.47 DLQ 5,184.48 DLQ

Total Non Potential 2,420.62 -50,489.34 77,726.91 33,950.08 -11,955.88 -708.00 6,559.99Totals 40,408.73 377,336.59 -2,614.91 327,546.05 -17,656.03 -1,181.65 45,823.62

PET Pet Deposit 150.00 0.00 0.00 0.00 0.00 150.00SEC Security Deposit 34,588.00 0.00 4,721.00 -842.85 -1,577.65 36,888.50

© 2013 CBRE, Inc.

Database: HARBORGROUP Rent Roll Page: 94HARBORGROUP Date: 8/26/2013

Grand Totals Time: 10:43 AMReport Period: 08/13

Beginning Charges Adjustments Cash NSF/ Security EndingBalance PR/RF Applied Balance

Security Totals 34,738.00 0.00 4,721.00 -842.85 -1,577.65 37,038.50

Description Units / Max. Percent Description Units Percent Description Units Percent Rent 327,546.05Occupied 376 89.95% Leases Pending 28 6.70% Units Leased 324 77.51% Security 4,721.00Special Use 1 0.24% Total Occ & Pend 404 96.65% Month To Month 8 1.91% Rent-NSF/PR -17,656.03New Construction 0 0.00% Units Not Leased 97 23.21% Security-NSF/PR -800.00Vacant 38 9.09% C/M Move Outs 29 6.94% C/M Leases Expiring 41 9.81% Misc. Income 1,781.12Total Units 418 418 100.00% Future Move Outs 24 5.74% Total Deposit 315,592.14

Rent-Refunded 0.00

© 2013 CBRE, Inc.

Current PSF Current PSF Prior WeekA1 1x1 Alexander 689 87 6 7 14.94% $735 $735.00 735$ $1.07 679$ 0.0%

A1R 1X1 Alexander Upgraded 689 8 0 0 0.00% $840 $1.22 840$ $1.22 840$ 0.0%A2 1x1 Birch 808 35 1 0 2.86% $705 $0.87 705$ $0.87 749$ 0.0%

A2R 1X1 Birch Upgraded 808 0 0 0 0.00% $955 $1.18 955$ $1.18 955$ 0.0%A3 1x1 Berkley 860 46 3 4 15.22% $730 $0.85 730$ $0.85 779$ 0.0%

A3R 1x1 Berkley Upgraded 860 2 0 0 0.00% $830 $0.97 830$ $0.97 1,039$ 0.0%B1 2x1 Courtney 950 44 4 2 13.64% $765 $0.81 765$ $0.81 849$ 0.0%

B1R 2x1 Courtney Upgraded 950 0 0 0 0.00% $1,089 $1.15 1,089$ $1.15 1,089$ 0.0%B2 2x1 Cypress 950 22 1 1 9.09% $765 $0.81 765$ $0.81 765$ 0.0%

B2R 2X1 Cypress Upgraded 950 0 0 0 0.00% $1,089 $1.15 1,089$ $1.15 1,089$ 0.0%B3 2x2 Dandridge 1,100 120 10 8 15.00% $805 $0.73 805$ $0.73 985$ 0.0%

B3R 2x2 Dandridge Upgraded 1,100 0 0 0 0.00% $1,155 $1.05 1,155$ $1.05 1,155$ 0.0%C1 3x2 Fenwick 1,375 24 2 3 20.83% $1,105 $0.80 1,105$ $0.80 1,095$ 0.0%

C1R 3X2 Fenwick Upgraded 1,375 0 0 0 0.00% $1,499 $1.09 1,449$ $1.05 1,499$ 3.3%C2 3x2 Elm FP 1,475 30 6 0 20.00% $1,235 $0.99 1,235$ $0.88 1,175$ 10.9%

C2R 3x2 Elm Upgraded 1,475 0 0 0 0.00% $1,335 $0.91 1,335$ $0.91 1,559$ 0.0%Totals 974 418 33 25 13.88% $816 $0.84 816$ $0.84 870$ 0.0%

$100.00 Admin Fee 1/2 off if application is submitted with in 24hrs

Effective RentMarket RentVacant Intents

Specials

Short term lease fee: Market + $50.00 for 6-11 months

Community Policies

Short term lease fee: Market + $100.00 for 3 -5 monthsLease Terms: FLEX

Rent & Policy ScheduleHampton Center

September 6, 2013

Unit Desc.

MRI Unit Type Name SF Unit Total Percent

AvailablePercent

Concession

Renewal Policies

Guarantor application fee: $35.00

Fees

NSF Fee $35 00

4% increases upon renewalNon-refundable Admin Fee: $100.00 Application: $35.00pp

Non refundable pet fee: pets up to 45lbs- $300 over 45 lbs $500

Premiums

ISTA $7.49 for Trash plus W/S as billedLate fee 10% of market rate plus concession payback for late month

NSF Fee $35.00

Lease Break Fees Transfer Policy

Pet Rent: $25.00 per pet

Month to Month: Market + $100.00$30.00 Premium for Fireplace$30.00 Premium for Vaulted Ceiling

DepositsSecurity Deposit: $250.00

market rent per day.

Preferred Employers - Hometown Heroes-TEMP ON HOLD

Transfer Fee:$250.00 at the end of lease $500.00 mid lease

60 day notice is requiredLease Break fee equal to 1 full month market rent.

60 Day notice is required. All days short of 60 will have a fee equivalent to All Concessions must be paid back if transferring to a different property All concessions will need to be paid back.

RPP

10% off the Market Rent for PEP

1% New leases 1.25% per renewal divided among entire team once a month1.25% per renewal to be divided among entire team

Resident Referral Locator Fees

Leasing Team Commissions

$250.00 Resident Referral Rent.com $329.00 per leaseApartment Communities that Refer Prospects, Prospect must move in

Schools OtherElementary:

Service Team Renewal CommissionsHigh: Hampton High SchoolMiddle- Eaton Middle School

© 2013 CBRE, Inc.


ADDENDUM E

LEGAL DESCRIPTION

© 2013 CBRE, Inc.

© 2013 CBRE, Inc.


ADDENDUM F

REQUIRED CLIENT INFORMATION

© 2013 CBRE, Inc.

© 2013 CBRE, Inc.

© 2013 CBRE, Inc.

© 2013 CBRE, Inc.

© 2013 CBRE, Inc.

© 2013 CBRE, Inc.

© 2013 CBRE, Inc.

© 2013 CBRE, Inc.


ADDENDUM G

QUALIFICATIONS

© 2013 CBRE, Inc.

QUALIFICATIONS OF

JACK ASPINWALL

Appraiser

CBRE, INC.

Valuation and Advisory Services

150 W. Main Street, Suite 1100

Norfolk, VA 23510

(757) 228 – 1820

EDUCATION

Bachelor of Science in Commerce – Finance and Management with an emphasis on Real Estate,

McIntire School of Commerce at the University of Virginia, Charlottesville, VA

LICENSE/CERTIFICATION

ARGUS Software Certified – Valuation DCF (expiration 8/2015)

EMPLOYMENT EXPERIENCE

July 2011-Present CBRE, Inc Norfolk, Virginia

Assignments involve a variety of property types including apartment buildings, retail community

centers, industrial facilities, and office buildings.

© 2013 CBRE, Inc.

QUALIFICATIONS OF

THOMAS O. MCCOY, MAI Director

CBRE, Inc. [email protected] www.cbre.com/tom.mccoy

150 W. Main Street, Suite 1100 Norfolk, Virginia (757) 228 - 1855

EDUCATION

Bachelor of Business Administration - Finance, George Mason University Fairfax, VA Appraisal Institute - All course work and requirements necessary to qualify for the MAI designation.

LICENSES/CERTIFICATIONS

Certified Real Estate General Appraiser: Commonwealth of Virginia (#4001 007629)

Certified Real Estate General Appraiser: West Virginia (#CG 387)

PROFESSIONAL Appraisal Institute - Designated Member Appraisal Institute (MAI) HRACRE – Hampton Roads Association of Commercial Real Estate EMPLOYMENT EXPERIENCE Real estate appraisal and consulting experience throughout the Northeast region. Oct 1997 – Present CB Richard Ellis, Inc., Norfolk Virginia and New York, New York 1992-1997 Grubb & Ellis Appraisal and Consulting New York, New York 1989-1992 Joseph J. Blake & Associates, Appraisal New York, New York Assignments include full and partial interest appraisals of shopping centers, industrial facilities, office buildings, commercial lofts, garden apartments, cooperatives, condominiums, townhouses, office market studies, portfolio valuations and multi-property assignments. Notable assignments include the appraisal of over 1,500 acres of various railroad-owned land throughout Virginia and the redevelopment analysis and appraisal of 6,000 acres within the Calverton Military Base in Calverton, New York.

© 2013 CBRE, Inc.