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The following is an excerpt from a 8-K SEC Filing, filed by COMMERCIAL MORTGAGE ACCEPTANCE CORP on 12/5/1997. Next Section Previous Section -- Use Sections To Navigate Through The Document -- FORM 8-K ITEM 5. OTHER EVENTS. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL ... EXHIBIT INDEX EXHIBIT 99.1 EXHIBIT 99.2 EXHIBIT 99.3 EXHIBIT 99.4 EXHIBIT 99.5 EXHIBIT 99.6 EXHIBIT 99.7 EXHIBIT 99.8 EXHIBIT 99.9 EXHIBIT 99.10 EXHIBIT 99.11 EXHIBIT 99.12 EXHIBIT 99.13 EXHIBIT 99.14 EXHIBIT 99.15 EXHIBIT 99.16 EXHIBIT 99.17 EXHIBIT 99.18 EXHIBIT 99.19 EXHIBIT 99.20 EXHIBIT 99.21 EXHIBIT 99.22 EXHIBIT 99.23 EXHIBIT 99.24 EXHIBIT 99.25 EXHIBIT 99.26 EXHIBIT 99.27 EXHIBIT 99.28 EXHIBIT 99.29 EXHIBIT 99.30 EXHIBIT 99.31 EXHIBIT 99.32 EXHIBIT 99.33 EXHIBIT 99.34 EXHIBIT 99.35 EXHIBIT 99.36 EXHIBIT 99.37 EXHIBIT 99.38 EXHIBIT 99.39 EXHIBIT 99.40 EXHIBIT 99.41 EXHIBIT 99.42 EXHIBIT 99.43 EXHIBIT 99.44 EXHIBIT 99.45 EXHIBIT 99.46 EXHIBIT 99.47 EXHIBIT 99.48 EXHIBIT 99.49 EXHIBIT 99.50 EXHIBIT 99.51 EXHIBIT 99.52 EXHIBIT 99.53 EXHIBIT 99.54 EXHIBIT 99.55 EXHIBIT 99.56 EXHIBIT 99.57 EXHIBIT 99.58 EXHIBIT 99.59 EXHIBIT 99.60 APPRAISAL REPORT OF A PORTION OF OPP MARKETPLACE SHOPPING CENTER 507 EAST CUMMINGS ROAD OPP, ALABAMA (CZ97-147R) FOR MR. LARRY MILLER MERRILL LYNCH WORLD FINANCIAL CENTER - NORTH TOWER NEW YORK, NY 10281 AS OF AUGUST 6, 1997 BY HOWARD J. PORTER, JR., MAI, CCIM GLEN E. HEINZELMAN, ASSOCIATE APPRAISER H. J. PORTER & ASSOCIATES 1214 FIRST AVENUE, SUITE 130 COLUMBUS, GEORGIA 31901 (706) 324-4990 [LOGO] H.J. Porter & Associates [LOGO] [H.J. Porter & Associates - LETTERHEAD] August 20, 1997 Mr. Larry Miller Merrill Lynch World Financial Center - North Tower New York, NY 10281 Re: A portion of the Opp Marketplace 507 East Cummings Road Opp, Alabama Dear Mr. Miller: At your request, the undersigned Associate has inspected and we have made an appraisal of the above referenced property. The purpose of this appraisal was to determine the market value of the leased fee interest in the subject property, one of fifteen shopping centers to be included in a portfolio of retail shopping centers cross collateralized, under single management, and subject to stringent provisions. AS SUCH, THE ESTIMATED VALUE OF THE SUBJECT PROPERTY IS SUBJECT TO THE ABOVE CONDITIONS. This complete appraisal communicated in a self contained narrative report has been prepared in a accordance with the Uniform Standards of Professional Appraisal Practice (USPAP) as amended by the Comptroller of the Currency. Based upon our investigation into the subject property, and its current economic environment, we are of the opinion that the market value of the leased fee interest in the subject property as of August 6, 1997, is: ONE MILLION FOUR HUNDRED EIGHTY THOUSAND DOLLARS ($1,480,000) Divided as: Improvements $1,413,400 Land 66,600 ---------- Total $1,480,000 Please note that this report is subject to the contingent and limiting conditions as found in the addendum. It should be noted that our employment was not conditional upon our producing a specific value with a given range. Future employment prospects with Merrill Lynch are not Real Estate Research, Appraisal & Counseling Birmingham, AL; Columbus, GA; Montgomery, AL; Auburn, AL Mr. Larry Miller August 20, 1997 Page #2 dependent upon our producing a specified value. Also, neither payment of our fee, nor our employment are/were based upon whether a loan application is approved or disapproved. We appreciate the opportunity to be of service to you in this matter. The attached report is submitted in support of these conclusions. Yours very truly, /s/Howard J. Porter /s/Glen E. Heinzelman Howard J. Porter, Jr., MAI, CCIM Glen E. Heinzelman, Associate Certified General Real Property Appraiser Licenced Real Property Appraiser Alabama Certificate #G51 Alabama Certificate #L12 [LOGO] H.J. Porter & Associates SUMMARY OF SALIENT FACTS AND CONCLUSIONS PROPERTY IDENTIFICATION: Opp Marketplace 507 East Cummings Road Opp, Alabama PROPERTY RIGHT APPRAISED: Leased Fee Estate HIGHEST AND BEST USE AS VACANT AND IMPROVED: Neighborhood Shopping Center DATE OF VALUE: August 6, 1996 SITE DATA: 2.05 Acres or 89,298 Sq. Ft. BUILDING DATA: 25,350 Sq. Ft. Divided As: Harco Drugs - 8,450 Sq. Ft. B.C. Moore - 16,900 Sq. Ft. ESTIMATED LAND VALUE: $66,600 VALUE INDICATIONS: Cost Approach $1,314,000 Income Approach $1,485,000 Market Approach $1,460,000 MARKET VALUE: $1,480,000 H.J. Porter & Associates, Inc. TABLE OF CONTENTS Intended Use of Appraisal ................................................. 1 Environmental Considerations .............................................. 1 Scope of the Assignment ................................................... 1 Date of Value Estimate .................................................... 2 Exposure Period ........................................................... 2 Type Appraisal/Type Report ................................................ 2 Property Ownership ........................................................ 3 Property Location ......................................................... 3 Zoning/Public Utilities ................................................... 4 Legal Description/Land Size ............................................... 4 Ad Valorem Tax Analysis ................................................... 6 Purpose of Appraisal/Definition of Value .................................. 7 Rights Appraised .......................................................... 7 Area Analysis - Opp/Covington County, Alabama ............................. 8 Neighborhood Analysis ..................................................... 13 Site Analysis ............................................................. 15 Description of Subject Improvements ....................................... 16 Highest and Best Use ...................................................... 18 The Appraisal Process ..................................................... 20 Land Value - Direct Comparison ............................................ 23 Cost Approach to Value .................................................... 29 Income Approach to Value .................................................. 32 Market Approach ........................................................... 45 Reconciliation and Final Value Estimate ................................... 63 Certification ............................................................. 64 EXHIBITS Location Map .............................................. Facing Page 4 State Map ................................................. Facing Page 9 Site Plan ................................................. Facing Page 15 Subject Photographs ....................................... Facing Page 16 Land Sales Map ............................................ Facing Page 27 Improved Sales Map ........................................ Facing Page 60 REAR EXHIBITS Korpacz Real Estate Investor Survey Assumptions and Limiting Conditions Qualifications State of Alabama Certification H.J. Porter & Associates, Inc. 1 INTENDED USE OF APPRAISAL These appraisal have been requested to function as an underwriting guide for mortgage loan purposes and for use in securitization of mortgages. Accordingly, these appraisals may be provided by Merril Lynch & Co., to potential investors in a securitization of other sale of mortgage loans. The appraisal is undertaken without departure in accordance with USPAP as promulgated by the Appraisal Foundation and as amended by the Comptroller of Currency. ENVIRONMENTAL CONSIDERATIONS According to a Phase I Environmental Site Assessment conducted March 25, 1992 and updated December, 1994 by CTE Environmental, there was no evidence of environmental hazards or liabilities at the subject site or adjacent properties. A copy of the Environment Site Assessment is included in the rear exhibits. The appraised value contained herein assumes that the subject is free of any environmental contamination. SCOPE OF THE ASSIGNMENT The subject property, a neighborhood shopping center, is one of fifteen shopping centers to be included in a portfolio of retail properties which are crlss collateralized, under single management, and subject to stringent release provisions. The scope of the assignment includes undertaking the three traditional approaches to value with consideration given to the current status of the retail market in Opp, Alabama and the surrounding market area. In the Cost Approach, local real estate professionals and appraisers were contacted and a search of public records undertaken to locate comparable land sales. A detailed inspection of the site and improvements was made by the Associate Appraiser. Construction details were obtained from the physical inspection by the Associate and from plans prepared by Sanford - Bell & Associates, Inc. dated June 8, 1993, with revision dates of September 10, 1993, October 5, 1993, November 16, 1993, June 21, 1994, and September 30, 1994. Current cost estimates were obtained from the Marshall Valuation Service, a nationally recognized cost service indexed to the local market. In the Income Approach to Value, a survey of local retail market conditions was made by interviewing local leasing and management agents. Rental income was compared to similar properties in the local and regional market areas. Expense comparables were studied to estimate the appropriate expense deductions. The resulting net operating income was then capitalized into a present value estimate by direct capitalization. The overall capitalization rate was derived from market sales, built-up rates using current market rates for debt and equity, and from published investor surveys. H.J. Porter & Associates, Inc. SCOPE OF THE APPRAISAL - (CONTINUED) 2 The Sales Comparison or Market Approach was developed after a search for sales of similar shopping centers. To locate appropriate sale comparables, local Realtors, appraisers, mortgage lenders, and developers were interviewed. The sales located were compared to the subject with adjustments made for items of differences. After development of the three approaches, the value indications derived were reconciled to provide a value estimate for the subject property as of the effective date of appraisal. DATE OF VALUE ESTIMATE The subject property is valued as of August 6, 1997 which is the date the subject was physically inspected by the Associate Appraiser. The date utilized in preparing this appraisal was researched, gathered, and/or updated during the period August 5 through August 15, 1997. The date of the appraisal is August 20, 1997 the date of the transmittal letter. EXPOSURE PERIOD Based on the current economic environment of which the subject is a part and the value estimated to obtain a price in this report, the subject would have required a market exposure period of between 6 and 12 months at or near the appraised value. This estimate is predicated on conversations with local real estate professionals and conversations with parties who purchased properties with lease terms similar to the subject. TYPE APPRAISAL/TYPE REPORT In accordance with the Uniform Standard of Profession Appraisal Practice, the appraisers have performed a "Complete" appraisal according to Standard Rule 1 and the communicated to the client in a "Self-contained Appraisal Report" in accordance with Standard Rule 2-2a. H.J. Porter & Associates, Inc. [GRAPHICS OMITTED] LOCATION MAP 3 PROPERTY OWNERSHIP The subject property is under the ownership of: Opp Partners, Ltd. 250 Washington Street P.O. Box 680176 Prattville, AL 36067 The subject property is a portion of a neighborhood shopping center known as The Opp Marketplace. The underlying land was part of the assemblage for the shopping center. The assemblage took place in September, 1993 in two purchases for a total of $200,000 for 8.06 acres. The total purchase price equates to a per acre purchase price of $24,814 per acre. The shopping center containing a total of 55,975 sq. ft. was constructed soon after in mid 1994 on the northernmost 6.33 acres with the southernmost 1.73 acres retained for expansion or resale. Since construction, two transactions affecting the shopping center have transpired. First, in mid, 1995 the fee simple interest in the southernmost 1.73 acres was sold to SouthTrust Bank for $50,000 or $28,902 per acre. The transaction was recorded in the Covington County Courthouse in Deed Book 909 at page 166 on October 11, 1995. Second, the leasehold in the 30,625 sq. ft. Winn-Dixie was sold to Alvin and Norma Chan in mid 1995 for a purchase price of $1,920,000 or $62.70 per sq. ft. of leasable area. This transaction was recorded in the Covington County Courthouse on November 22, 1995 in Deed Book 911 at page 131. To the best of our knowledge no other transactions involving the subject or Opp Marketplace Shopping Center have occurred in the five years prior to the date of appraisal. Additionally, to the best of our knowledge, there are no offered pending to purchase the subject nor is it currently listed for sale. PROPERTY LOCATION The subject property is located east of the intersection U.S. Highway 331 and County Highway 22 (Opp-Alberton Road) within the city limits of Opp, Covington County, Alabama It is located by street address as: Opp Marketplace 507 East Cummings Road Opp, Alabama H.J. Porter & Associates, Inc. 4 ZONING/PUBLIC UTILITIES The subject property is located in the city limits of Opp, Alabama and is subject to that city's zoning jurisdiction. The site is currently zoned B-2, General Commercial, which allows shopping center use. This zoning classification calls for a minimum lot size of 2,000 sq. ft., minimum lot width of 50', maximum coverage ratio of 50%, maximum height of 65' and no minimum yard set back except when adjacent to a residentially zoned area where the setback requirement would be 30 feet. This classification also calls for an on-site parking ratio of 5 parking spaces for each 1,000 sq. ft. of floor area. Based on an inspection of the property and plans, the existing improvements appear to conform to the current zoning ordinance. The subject has all utilities including electricity, gas, water, sewage, and telephone in sufficient quantities to sustain commercial development. Public services such as police and fire protection are provided by the City of Opp. LEGAL DESCRIPTION/LAND SIZE The legal description for the subject was obtained from the owners, Opp Partners, Ltd. The subject property is legally described as: A parcel of land lying in and being a part of the south half of the Southeast quarter of Section 28, Township 4 North, Range 18 East, Covington County, Alabama; and being more particularly described as follows: Commence at the Southwest corner of the Southeast quarter of the Southeast quarter of Section 28, Township 4 North, Range 18 east, Covington County, Alabama, and run thence North 89 degrees 54 minutes 25 seconds West along the south line of the Southwest quarter of the Southeast quarter of Section 28 for a distance of 163.64 feet to a point on the east right-of-way line of U.S. Highway 331; thence North 16 degrees 19 minutes 15 seconds West along said east right-of-way line for a distance of 55.86 feet; thence continue along said East right-of-way line a curve to the left (having a radius of 1103.62 feet, a chord bearing of North 21 degrees 25 minutes 45 seconds West, a chord distance of 196.54 feet) and arch distance of 196.80 feet; thence leaving said east right-of-way line North 64 degrees 29 minutes 45 seconds East a distance of 32.31 feet; thence North 00 degrees 09 minutes 54 seconds East a distance of 59.18 feet to the POINT OF BEGINNING: Thence North 00 degrees 09 minutes 54 seconds East a distance of 202.36 feet to a point on the south right-of-way line of County Highway 22 (Opp-Alberton Road); thence along said south right-of-way line South 85 degrees 28 minutes 00 seconds East a distance of 223.30 feet; thence South 00 degrees 09 minutes 54 seconds West along a right-of-way widening line a distance of 24.50 feet; thence South 84 degrees 55 minutes 00 seconds East along said south right-of-way line a distance of 220.81 feet; thence leaving said rough right-of-way line South 00 degrees 09 minutes 54 seconds West a distance of 203.85 feet; thence North 89 degrees 50 minutes 06 seconds West a distance of 206.00 feet; thence North 00 degrees 09 minutes 06 seconds West a distance of 61.28 feet; thence North 89 degrees 50 minutes 06 seconds West a distance of 236.70 feet to the POINT OF BEGINNING; said parcel containing 2.05 acres, more or less. Based on this description, the subject property is irregular shaped and contains a total land area of 2.05 acres. The subject parcel has approximately 450 fee of frontage on the south side of County Road 22 (Opp - Alberton Road). H.J. Porter & Associates, Inc. LEGAL DESCRIPTION/LAND SIZE - (CONTINUED) 5 As indicated previously, the subject property is one of fifteen shopping centers to be included in a portfolio of retail properties which are cross collateralized, under single management, and subject to stringent release provisions. The other shopping centers contained in the portfolio are listed as follows: ================================================================================ Greenbrier Station Shopping Center The "Y" Shopping Center Anniston, Alabama Panama City Beach, Florida -------------------------------------------------------------------------------- Clanton Marketplace Mandelville Marketplace Clanton, Alabama Pandelville, Louisiana -------------------------------------------------------------------------------- Betts Crossing Shopping Center Brownsville Place Shopping Center Opelika, Alabama Brownsville, Tennessee -------------------------------------------------------------------------------- Russell Crossing Shopping Center Chicot Crossing Shopping Center Pheinx City, Alabama Pascagoula, Mississippi -------------------------------------------------------------------------------- 29 North Shopping Center Delchamps Plaza Cantonment, Florida Long Beach, Mississippi -------------------------------------------------------------------------------- Nine Mile Plaza Shopping Center One Main Place Pensacola, Florida Moss Point,Mississippi -------------------------------------------------------------------------------- Parker Shopping Center Parker, Florida ================================================================================ H.J. Porter & Associates, Inc. 6 AD VALOREM TAX ANALYSIS The subject parcel is under the taxing authority of the Covington County Tax Assessor's Office and is found on the tax rolls as: Assessed to: Opp Partnership, Ltd. 250 Washington Street P.O. Box 680176 Prattville, AL 36067 Parcel I.D. #: 23-11-08-28-4-403-6-038.003 23-11-08-28-4-404-0-009.001 Value: Land: $ 34,200 Improvements: $828,945 -------- Total: $863,145 Assessment Ratio: 20% Local Millage Rate: $0.039 per $1,000 of assessed value Annual Tax: $6,732.53 The subject property is part of the Opp Marketplace shopping center anchored by a 30,625 sq. ft. Winn Dixie Supermarket. The Winn Dixie is owned by others as discussed in the Ownership History section of this report and taxed separately. To test the reasonableness of the taxes levied against the subject, the taxes levied against two other shopping centers in Opp were investigated. The result of that investigation is contained in the following chart. ================================================================================ PROPERTY NAME SIZE (SQ. FT.) TAX VALUATION VALUATION/SQ.FT. ================================================================================ Sanford Station 54,280 $2,074,601 $39.35 Three Notch Plaza 39,300 $1,721,338 $43.80 ================================================================================ SUBJECT 25,350 $ 863,145 $34.05 ================================================================================ The two tax comparables are older shopping centers anchored by secondary tenants such as Piggly Wiggly and IGA Supermarkets who took over second generation anchor space. Based on factors such as age, overall condition, quality of anchor tenant, etc. the taxes levied against the subject appear to be appropriate. H.J. Porter & Associates, Inc. 7 PURPOSE OF APPRAISAL/DEFINITION OF VALUE The purpose of the appraisal is to estimate the market value of the leased fee interest in the subject property as of the effective date of appraisal, August 6, 1997. Market Value is defined by the Appraisal Standards Board of the Appraisal Foundation in the 1997 Glossary - Uniform Standards of Professional Appraisal Practice, page 155 as: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their best interest; 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. RIGHTS APPRAISED The ownership interest in the subject property appraised is the "Leased Fee Estate." The Dictionary of Real Estate Appraisal, 3rd Edition, Page 204, defines Leased Fee Estate as, "an ownership interest held by a Landlord with the right of use and occupancy conveyed by lease to others. The rights of lessor "the leased fee owner" and the leased fee are specified by contract terms contained within the lease." H.J. Porter & Associates, Inc. [GRAPHICS OMITTED] AREA MAP 8 AREA ANALYSIS - COVINGTON COUNTY AND OPP, ALABAMA The four basic factors which should be considered in analyzing an area are: (1) Physical-Location factors; (2) Economic-Financial factors; (3) Political-Governmental factors; and (4) Sociological factors. Each of these factors is briefly analyzed. PHYSICAL-LOCATIONAL FACTORS The subject property is located in Covington County in the town of Opp. Covington County is located in southeastern Alabama approximately twenty miles north of the Florida state line. Traveling distances to major metropolitan areas are: ================================================================ LOCATION MILES DIRECTION ---------------------------------------------------------------- Birmingham, Alabama 166 North Mobile, Alabama 145 Southwest Montgomery, Alabama 75 North Atlanta, Georgia 244 Northeast Tampa, Florida 408 Southeast Jacksonville, Florida 322 Southeast ================================================================ Opp is served by two Federal highways. U.S. Highway 331 is the north/south artery linking Opp to the state capital of Montgomery to the north and the Florida panhandle to the south. U.S. Highway 84 is the east/west traffic artery linking Opp to the City of Dothan to the east and Interstate 65 to the west. Access to the interstate highway system is within a short drive time. Interstate 65, the major north/south artery, is 48 miles west of Opp and Interstate 10 in the Florida panhandle, a major east/west artery, is approximately 46 miles south. The town of Opp was established in 1920 after the L & N Railroad won its litigation against the Central of Georgia Railroad to survey a right-of-way into Covington County. The L & N Built a rail line eastward from Andalusia, the county seat, and made a southbound arm where the town of Opp is located. This southbound arm provided a good "turning around" place for trains, and because is was already inhabited, a small town was laid out. The town was named after Henry Opp, the lawyer for the L & N Railroad who won the litigation. The railroad continues to play a vital road in the economy of Opp to this day. H.J. Porter & Associates, Inc. AREA ANALYSIS - COVINGTON COUNTY AND OPP, ALABAMA (CONTINUED) 9 PHYSICAL AND LOCATIONAL FACTORS - (CONTINUED) Other major transportation facilities in the area include the Andalusia-Opp Airport located midway between the two communities and the Chattahoochee River Dock approximately 75 miles to the east. The topography of the area is gentle rolling hills. The mean annual temperature is 64 degrees with an average rainfall of 54.8 inches. The topography, climate, and rail system provided the ideal environment for the area to become an important agricultural region. Major agricultural products include cattle, cotton, broilers, hogs, nuts, fruits, eggs, and soybeans. Natural resources include calcitic lime as well as pine and other hardwood timber. ECONOMIC AND FINANCIAL FACTORS The 1990 Census indicated that the population of Covington County and the town of Opp declined from the 1980 levels. However, the population of the area has remained fairly constant since 1970. The table below shows the population changes, according to the U.S. Census, from 1970 to 1990. ============================================================ YEAR COUNTY OPP ------------------------------------------------------------ 1970 34,079 6,593 1980 36,850 7,204 1990 36,478 6,985 ============================================================ The population of the county increased 7% and the population of Opp increased 5.9% from 1970 to 1990. The county's population has a civilian labor force of 17,580 and are employed by in a variety of industries. The table below shows the breakdown of the labor force by industry groups as of March, 1997. ============================================================ INDUSTRY EMPLOYMENT ------------------------------------------------------------ Manufacturing 5,590 Transp., Comm., Utility 1,127 Wholesale & Retail 3,252 Services 2,320 Other 5,291 ============================================================ H.J. Porter & Associates, Inc. AREA ANALYSIS - COVINGTON COUNTY AND OPP, ALABAMA (CONTINUED) 10 ECONOMIC AND FINANCIAL FACTORS - (CONTINUED) As of May, 1997 the unemployment rate in Covington County stood at 7.3%, which compares with 4.9% for the State of Alabama and 4.8% nationwide. Major private sector employers in and around Opp are listed in the table below. ========================================================================= NAME PRODUCT EMPLOYEES YR. EST. ------------------------------------------------------------------------- Opp & Nicolas Mills Cotton Sheeting 901-1,000 1920 Covington Industries Men's Clothing 651-750 1950 Alabama Farmer Co-Op Shelled Peanuts 310-350 1969 General Manufacturing Ladies Sportswear 251-300 1967 Phillips Van Husen Shirts 151-200 1970 Anderson's Peanuts Peanut Processing 101-150 1961 Sweatt's Prefade Industrial Laundry 101-150 1961 Sonoco Products Spiral Tubes 21-30 1982 Shuler Brothers Chips Wood Chips 16-20 1986 Food Services, Inc. Processed Foods 16-20 1967 Opp New, Inc. Publishing 31-40 1901 ========================================================================= As indicated in the table above, the textile, forest product, and agricultural industries dominate the private sector economy of Covington County. Baring any unforeseen development initiative by the State of Alabama, the economic mix of the county with its reliance on agriculture and natural resources is anticipated to continue into the future. As illustrated in the table on the following page, retail sales in Covington County almost doubled from 1986 to 1996. Much of the increase coming between 1992 and 1996, given stagnant population growth rates and high relative unemployment rates, would appear to more of a function of inflation rather than increased population and economic prosperity. H.J. Porter & Associates, Inc. AREA ANALYSIS - COVINGTON COUNTY AND OPP, ALABAMA (CONTINUED) 11 ECONOMIC AND FINANCIAL FACTORS - (CONTINUED) ================================================= YEAR RETAIL SALES ------------------------------------------------- 1986 140,683,000 1987 142,939,000 1988 142,710,000 1989 174,826,000 1990 178,905,000 1991 173,680,000 1992 207,997,000 1993 212,156,000 1994 214,278,000 1995 217,492,000 1996 222,930,000 ================================================= POLITICAL-GOVERNMENTAL FACTORS The town of Opp is governed by a mayor/council form of government. In 1987, the town established a Planning Commission which has increased the efficiency and implementation of zoning ordinances, utility services, and other governmental related services. Opp owns and operates distribution services for water, sewer, electricity, and cable television. Natural gas is provided by local and regional gas companies. Opp has a total of 23 police personnel and thirteen police cars. There are four full-time fire fighters and seventeen volunteers. They have a fire insurance rating of 5. SOCIOLOGICAL FACTORS The community's education, health, and recreation facilities are typical of many small rural towns in Alabama. Opp has one hospital with 99 beds and eight doctors and one nursing home with 179 beds. They have an elementary, junior high, and high school with a total enrollment of approximately 1,600 students. Higher education facilities include the MacArthur Technical College in Opp, Enterprise State Junior College in Enterprise approximately 22 miles east, and Troy State University in Troy approximately 42 miles north. H.J. Porter & Associates, Inc. AREA ANALYSIS - COVINGTON COUNTY AND OPP, ALABAMA (CONTINUED) 12 SOCIOLOGICAL FACTORS - (CONTINUED) The area's recreational facilities are typical with four swimming pools, thirteen tennis courts, one golf course, eight ball fields, two parks, and nine basketball courts. In 1992, the State of Alabama opened the Lake Frank Jackson State Park just outside the city limits of Opp. It is a 1,100 acre lake which cost over $8 million to build. The lake is stocked with bass, bream, crappie, and catfish. Local civic organizations have several bass and other fishing tournaments annually. Planned additions include restrooms and camping facilities. Throughout Alabama and the panhandle of Florida, Opp is most noted for its annual "Rattlesnake Rodeo" where visitors learn the many facts and myths regarding rattlesnakes. This event which also includes country music, arts and crafts, and stock car racing, is held in the fall of each year. CONCLUSION In conclusion, Opp is a small rural community located in southeast Alabama. Agriculture is the economic base and has fostered some related industries. The population has remained stable over the past twenty years and is anticipated to remain so into the foreseeable future. H.J. Porter & Associates, Inc. NEIGHBORHOOD ANALYSISZ 13 The term neighborhood is defined in "The Appraisal of Real Estate" 11th Ed. at page 189 as "a group of complementary land uses." The four basic factors which must be considered in analyzing a neighborhood or district, as in an area analysis are: (1) Physical and Locational Factors (2) Economic and Financial Factors (3) Political and Governmental Factors (4) Sociological Factors Each of these factors is discussed briefly with conclusions as to their effect on the subject property. PHYSICAL AND LOCATIONAL FACTORS The subject is located in the city limits of Opp, Alabama just south of the Central Business District. The neighborhood boundaries are considered to be the city limits. The shopping center of which the subject is a portion is located in the "Y" intersection of U.S. Highway 331 and Parry Store Road. At this location U.S. Highway 331 heads in an easterly direction and turns south at Parry Store Road. South-bound travelers have an excellent view of the subject. In the subject's immediate area, U.S. Highway 331 is a four-lane highway. There is a traffic signal west of the subject where U.S. Highway 331 turn eastward at Cummings Avenue and at the "Y" intersection where State Highway 52 turns eastward. Parry Store Road is a minor two-lane paved street which links the mostly rural areas to the east to the city of Opp. The subject property is conveniently located with easy access from any location within Opp and the surrounding area. The Central Business District of Opp is located generally north of Cummings Avenue which runs parallel to the A & F Railroad. Like many small rural communities in Alabama, the "downtown" area of Opp was first established in the early 1990's. In connection with the early development, residential properties encompassed the business district. Many of the stores and offices buildings have been remodeled and expanded over the years. In the early 1960's as the "baby boom" generation started to come of age, new businesses and commercial properties started locating outside of the Central Business District due to the lack of available vacant land within the CBD. New commercial development proceeded mostly in a southerly direction along U.S. Highway 331 around the "Y" intersection of Staten Highway 52. These was a limited amount of development just north of the downtown area. Developments along these paths range from fast food restaurants, service stations, free standing stores, and neighborhood shopping centers. They range in age from twenty-five years old to five H.J. Porter & Associates, Inc. NEIGHBORHOOD ANALYSIS - (CONTINUED) 14 years old. As such, the subject neighborhood is considered to be in the growth stage of its life cycle. The topography of the neighborhood is gentle rolling hills with very little problem of flooding. All utilities area available in sufficient quantities to sustain commercial development. ECONOMIC AND FINANCIAL FACTORS The primary factor effecting the subject is competing retail properties. As indicated above, most retail properties are located in the Central Business District where the age of the properties range from 30 to 90 years and also along U.S. Highway 331 south of the subject. There are two neighborhood shopping centers in Opp. Based on a visual inspection of these centers, their ages are estimated to be between 20 and 25 years. It appears that they were part of the original commercial property expansion outside of the CBD. Neither of these centers have any small, local tenant shop space which will compete with the subject. Each center is anchored by a grocery store. The first shopping center is located on the north fringe of the CBD and is anchored by Piggly Wiggly and Babcock Furniture. Other tenants include Family Dollar, Factory Connection, and T & C Pharmacy. There is one vacant shop. Based on interviews with these tenants rental rates are below $3.00 per square foot. The second shopping center is located in the "Y" intersection of U.S. Highway 331 and State Highway 52 just south of the subject. Tenants in this unnamed center include Bargain Town, Movie Gallery, D's Furniture, IGA Foods, and Heilig Myers. In addition to the subject, Burger King and McDonald's have located near the subject on Highway 331. The Burger King is located in front of the subject in the "Y" intersection and McDonald's is located across the street to the west. CONCLUSION In conclusion, the subject is well located between the original Central Business District and the expanded southern district. Its location is suited to serve the needs of the city of Opp and surrounding rural community as well as travelers along U.S. Highway 331 on route to the Florida beaches. H.J. Porter & Associates, Inc. [GRAPHICS OMITTED] 15 SITE ANALYSIS The subject site is located east of the intersection of U.S. Highway 331 and County Highway 22 (Opp-Alberton Road) in the city limits of Opp, Covington County, Alabama. The individual site characteristics are as follows: Size: 89,298 Sq. Ft. or 2.05 Acres Shape: Irregular Street Frontage: Approximately 550 ln. ft. on the south side of County Highway 22 Average Depth: Approximately 250 Ln. Ft. Topography: Relatively level and at grade with the fronting roadway Access: Good from U.S. Highway 22. In addition, as part of the Opp Marketplace shopping center anchored by Winn Dixie, the site enjoys cross easements for ingress and egress across the adjacent parcel to the south for access to U.S. Highway 331. Drainage/Flood Hazard: According to the FEMA Flood Insurance Rate Map, Community Panel No. 010241, effective July 8, 1985, the subject property is located in a Zone C flood hazard area. This is an area designated as being one with minimal flooding and flood insurance is typically not required for lending purposes. Soils: Considered typical and adequate for development as evidenced by the surrounding development. Utilities: All utilities are available in sufficient quantities development. Site Improvements: Portion of a neighborhood shopping center and all associated site improvements. Street Improvements: U.S. Highway 331 is a four-lane roadway with curb, cutters, and streetlights installed. County Road 22 is basically a two-lane residential street. Surrounding Uses: Retail, commercial, and residential uses. H.J. Porter & Associates, Inc. SUBJECT PHOTOGRAPHS [GRAPHICS OMITTED] [PHOTOGRAPHS] 1) Front View of Subject looking East 2) Side View of Subject looking Southeast 3) Side View of Subject looking Northeast 4) Rear View of Subject looking Southwest 5) View of U.S. Hwy 331 looking North (Subject on Right) 6) View of County Rd 22 looking East (Subject on Right) 7) View of County Rd 22 looking West (Subject on Left) H.J. Porter & Associates, Inc. SUBJECT PHOTOGRAPHS [GRAPHICS OMITTED] [PHOTOGRAPHS] 1) Front View of Subject looking East 2) Side View of Subject looking Southeast 3) Side View of Subject looking Northeast 4) Rear View of Subject looking Southwest 5) View of U.S. Hwy 331 looking North (Subject on Right) 6) View of County Rd 22 looking East (Subject on Right) 7) View of County Rd 22 looking West (Subject on Left) H.J. Porter & Associates, Inc. SUBJECT PHOTOGRAPHS [GRAPHICS OMITTED] [PHOTOGRAPHS] 1) Front View of Subject looking East 2) Side View of Subject looking Southeast 3) Side View of Subject looking Northeast 4) Rear View of Subject looking Southwest 5) View of U.S. Hwy 331 looking North (Subject on Right) 6) View of County Rd 22 looking East (Subject on Right) 7) View of County Rd 22 looking West (Subject on Left) H.J. Porter & Associates, Inc. SUBJECT PHOTOGRAPHS [GRAPHICS OMITTED] [PHOTOGRAPHS] 1) Front View of Subject looking East 2) Side View of Subject looking Southeast 3) Side View of Subject looking Northeast 4) Rear View of Subject looking Southwest 5) View of U.S. Hwy 331 looking North (Subject on Right) 6) View of County Rd 22 looking East (Subject on Right) 7) View of County Rd 22 looking West (Subject on Left) H.J. Porter & Associates, Inc. SUBJECT PHOTOGRAPHS [GRAPHICS OMITTED] [PHOTOGRAPHS] 1) Front View of Subject looking East 2) Side View of Subject looking Southeast 3) Side View of Subject looking Northeast 4) Rear View of Subject looking Southwest 5) View of U.S. Hwy 331 looking North (Subject on Right) 6) View of County Rd 22 looking East (Subject on Right) 7) View of County Rd 22 looking West (Subject on Left) H.J. Porter & Associates, Inc. SUBJECT PHOTOGRAPHS [GRAPHICS OMITTED] [PHOTOGRAPHS] 1) Front View of Subject looking East 2) Side View of Subject looking Southeast 3) Side View of Subject looking Northeast 4) Rear View of Subject looking Southwest 5) View of U.S. Hwy 331 looking North (Subject on Right) 6) View of County Rd 22 looking East (Subject on Right) 7) View of County Rd 22 looking West (Subject on Left) H.J. Porter & Associates, Inc. SUBJECT PHOTOGRAPHS [GRAPHICS OMITTED] [PHOTOGRAPHS] 1) Front View of Subject looking East 2) Side View of Subject looking Southeast 3) Side View of Subject looking Northeast 4) Rear View of Subject looking Southwest 5) View of U.S. Hwy 331 looking North (Subject on Right) 6) View of County Rd 22 looking East (Subject on Right) 7) View of County Rd 22 looking West (Subject on Left) 16 DESCRIPTION OF SUBJECT IMPROVEMENTS The subject is a portion of a neighborhood shopping center known as The Opp Marketplace. The center, anchored by Winn-Dixie, contains a total gross leasable area of 55,975 square feet. The subject property consists of the northernmost two tenant spaces containing 25,350 sq. ft. of gross leasable area. The two tenant spaces are currently leased to Harco Drugs (8,450 sq. ft.) and B.C. Moore's (16,900 sq. ft.). The shopping center in general, and the subject improvements in particular have been well maintained and appear to be functionally designed for their intended purpose. No significant degree of deferred maintenance was observed upon physically inspecting the improvements. It is beyond the scope to narratively discuss all of the pertinent construction details that comprise the subject improvements. The basic construction details that follow were obtained from the physical inspection of the property by the Associate Appraiser on August 6, 1997. The subject's basic construction details are as follows: Property Type: Portion of neighborhood shopping center Total GLA: 55,975 - Opp Marketplace Shopping Center 25,350 - Subject portion of shopping center Year Built: Late 1994 Effective Age: 2 years Roof: Built up tar and gravel over rigid insulation on metal decking. Steel truss support system Walls: Concrete block and brick veneer over concrete block on the from. Painted concrete block at rear and sides. Partition walls between tenant spaces are metal studs covered with sheetrock. Doors: Anodized aluminum store front doors. Interior (rest room) doors hollow core wood. Windows: Anodized bronze aluminum store fronts with single glazing. Floors: Reinforced 4" concrete slab with resilient tile cover. Insulation: Rigid insulation in built-up roof system. Ceilings: Suspended lay-in acoustic tile with recessed fluorescent light fixtures. H.J. Porter & Associates, Inc. DESCRIPTION OF SUBJECT IMPROVEMENTS - (CONTINUED) 17 HVAC: Individual roof mounted electric central heating and cooling for each unit. Plumbing: One and two-two fixture restrooms in each shop space. Miscellaneous: Approximately 53,450 sq. ft. of asphalt paving, 820 ln. ft. of concrete curbing, 5,425 sq. ft. of concrete paving, 4 metal light poles and fixtures, and landscaping. There are 114 parking spaces on the site equating to a parking ratio of 4.5 spaces for each 1,000 sq. ft. of floor area. Additional parking is located on the adjacent parcel also associated with the Opp Marketplace and available through cross easements for parking. H.J. Porter & Associates, Inc. 18 HIGHEST AND BEST USE Highest and best Use is defined in the Dictionary of Real Estate Appraisal, 3rd edition, page 171, as: "The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are LEGAL PERMISSIBILITY, PHYSICAL POSSIBILITY, FINANCIAL FEASIBILITY, AND MAXIMUM PROFITABILITY." Based on this definition, consideration must be given to both the subject land site as if vacant, and the total property as improved. HIGHEST & BEST USE - AS IF VACANT PHYSICALLY POSSIBLE - The 2.05 acre size of the subject would support a wide range of uses including residential, commercial, and some light industrial uses. All the necessary utilities and other public services are available in sufficient quantities to support development. The subject site is part of a larger parcel currently improved with a Winn-Dixie Supermarket. Further, there are no other physical site characteristics that would negatively impact the development potential of the site. LEGALLY PERMISSIBLE - The subject site is zoned B-2, General Commercial, by the City of Opp. The current zoning allows for office or retail use as well as certain governmental and non-profit related uses such as schools and churches. The subject's B-2 zoning is the same as that of the adjacent parcel improved with the Winn-Dixie Supermarket. FINANCIALLY FEASIBLE - An inspection of the area surrounding the subject, including the Opp central business district, suggests that there is no effective demand for office use. Almost all of the office development in Opp is concentrated in the downtown area in older storefront buildings or converted residences. The pattern of commercial development in the area, and that which is also considered the most financially feasible, is for retail or commercial service uses along U.S. Highway 331 to serve the Opp community and traveling public. The adjacent parcel to the south is currently improved with a Winn-Dixie Supermarket. Therefore, it would appear that development of the site with a retail use to take maximum advantage of the adjacent development would meet the test of being financially feasible. MAXIMALLY PRODUCTIVE - In determining the highest and best use of the subject site, "as if vacant and available", the use which is maximally productive generally becomes the deciding factor. Maximally productive uses are limited by the current real estate market, the availability of substitute property for development, and the growth stage of the area. To be maximally productive, that use which provides the most return to the land must be selected. H.J. Porter & Associates, Inc. HIGHEST AND BEST USE - (CONTINUED) 19 HIGHEST AND BEST USE-AS VACANT - (CONTINUED) It has previously been determined that it would be physically possible, legally permissible, and financially feasible to develop the site with a retail use compatible with the current zoning classification and adjacent use. Therefore, as of the effective date of appraisal, retail use is considered to be maximally productive and therefore the highest and best use of the subject site, as if vacant and available. HIGHEST AND BEST USE - AS IMPROVED The same criteria utilized to determine the highest and best use of the subject site, as if vacant and available for development, is utilized to determine the highest and best use of the property, as improved. As stated throughout this report, as of the date of appraisal, the subject site is currently improved retail shop space containing a total of 25,350 sq. ft of gross leasable area and associated site improvements as portion of a neighborhood shopping center anchored by Winn-Dixie. The shopping center in general and the subject improvements in particular are considered to be in good condition and functionally designed for their intended use. PHYSICALLY POSSIBLE AND LEGALLY PERMISSIBLE - The subject improvements are situated on a site containing 2.05 acres or 89,298 sq. ft. of land. The improvements generate a land-to-building ratio of 3.52:1 based on the total gross leaseable area. The land-to-building ratio allows for an ample amount of on-site parking. Additionally, a retail use, such as the existing improvements is allowable without exception under the sites current B-2 zoning classification. FINANCIALLY FEASIBLE AND MAXIMALLY PRODUCTIVE - Subsequent sections of this report indicate a site value of $66,600, as if vacant and developable to its highest and best use. The three approaches to value produced indications of value from $1,314,000 to $1,485,000. Hence, the existing improvements appear to contribute significantly to overall property value. Therefore, the focus of this analysis will be on the property "as improved". No other use or development option, as of the effective date of value, would appear to generate a higher return to the land. H.J. Porter & Associates, Inc. 20 THE APPRAISAL PROCESS The appraisal process is a procedure for estimating the market value of real property. This process involves gathering all pertinent information available from the market which may influence the value of the subject property. This data is then utilized in forming an estimate of value based upon the three generally accepted approaches to value. These three approaches are the Cost Approach, the Income Approach, and the Direct Sales Comparison Approach. COST APPROACH The Cost Approach is defined as that approach in appraisal analysis which is based upon the proposition that an informed purchaser would pay no more than the cost of producing a substitute property with the same utility as the subject property. It is assumed that the potential purchaser considers producing a substitute property with the same utility as the property being appraised. This analysis involves the cost to buyer of producing an exact replica of the subject property, in the same location and condition as the subject property, as of the effective date of the appraisal. The application of the Cost Approach involves the following steps: 1. Estimating value of the site as if vacant and available to be put to its highest and best use. 2. Estimating the reproduction cost new of the improvements. 3. Estimating all elements of accrued depreciation. 4. Subtracting the total accrued depreciation from the reproduction cost new of the improvements (resulting in an estimate of the present worth of the improvements). 5. Adding the present worth of all the improvements (including site improvements) to the estimated site value. 6. Rounding the figure to an appropriate indication of value. The major limitations of the Cost Approach is its reliance upon an estimation of accrued depreciation. Generally, the older the property and the higher the estimate of accrued depreciation, the less reliable becomes the value indication from this approach. This is particularly critical in the valuation of older properties that normally incur greater amounts of depreciation. The Cost Approach is particularly appropriate when the property being appraised involves relatively new improvements which represent the highest and best use of the site or when the improvements are relatively unique or specialized and there is limited or a total lack of comparable properties which have sold recently. H.J. Porter & Associates, Inc. THE APPRAISAL PROCESS - (CONTINUED) 21 INCOME ANALYSIS The Income Analysis is defined as that procedure in appraisal analysis which converts anticipated benefits (dollar income or amenities) to be derived from the ownership of property into a value estimate. Anticipated future income and/or reversions are discounted to a present-worth figure through the capitalization process. This analysis requires an estimate of market rent based upon comparable rent of leased properties. This rental estimate is a gross amount and all expenses to real estate are deducted. These expenses include vacancy and rent loss which, when subtracted from the gross income, produces the effective gross income. Other expenses include real estate taxes, management cost, insurance cost, and maintenance expense. If applicable, a reduction would also be made for services and utilities. All expense estimates are obtained from the market by comparison to similar structures. After all expenses have been subtracted from the gross income, the resulting figure is the net operating income, which will be capitalized into value. The capitalization rate is derived from actual sales that have occurred in the market place. The sales are analyzed in order to estimate the net operating income of the property. After the net operating income is estimated, it is divided by the sales price to provide an indication of the overall capitalization rate. Capitalization rates can also be built up from the market factors considered most applicable to income-producing properties. After the net operating income and the capitalization rate are estimated, the net income is then capitalized into a value indication by the applicable capitalization technique. DIRECT SALES COMPARISON APPROACH The Direct Sales Comparison Approach is defined as that approach in an appraisal analysis which is based upon the proposition that an informed purchaser would pay no more for the property than the cost to him of acquiring an existing property with the same utility. Presumably, the potential purchaser considers the alternatives that are available to him and then makes a rational decision based upon the information he has about those alternatives that are available to him and then makes a rational decision based upon the information he has about those alternatives. The application of the Direct Sales Comparison Approach involves selecting a number of competitive properties which have recently sold on the market. The information derived from this section is analyzed through an adjustment process which develops indications of what the competitive properties would have sold for if they possessed all the important characteristics of the subject property. These indications fall into a pattern surrounding one figure which, when appropriately rounded, is an indication of the market value of the subject property as of the date of the appraisal. H.J. Porter & Associates, Inc. THE APPRAISAL PROCESS - (CONTINUED) 22 The reliability of this approach is dependent upon the availability and verification of the comparable sales data. The degree of comparability between the competitive properties and the subject, and the absence of non-typical conditions affecting the sales price of those properties are also important items that are considered. Therefore, this approach is particularly applicable when an active market provides sufficient quantities of reliable data which can be verified from authoritative sources. RECONCILIATION ANALYSIS The reconciliation analysis is an evaluation process where the appraiser carefully evaluates value indications from each of the three approaches. The reliability of each approach to the present appraisal problem is examined and weight is given to the accuracy, reliability, quantity of data available for use in each approach, and the approach in which the market participant typically has the greatest confidence. H.J. Porter & Associates, Inc. LAND VALUE - DIRECT COMPARISON 23 The subject site is valued by direct comparison with recent sales of other similarly zoned commercial sites. Three of the sales are located in the Opp area in close proximity to the subject. The fourth sale is located in Andalusia in an area considered to be reasonably comparable to the subject. Each of the sales analyzed on the basis of their location and utility relative to the subject. Sales considered include: SALE #1 Address/Location: Part of Opp Market Place U.S. Highway 331 Opp, Alabama Grantor: Sara H. Long Grantee: Tom Newton Sale Date: 12\08\1993 Sale Price: $65,000 Cash Equiv Price: $65,000 Terms: Cash to Seller Recorded: Deed Book 852, Page 42 Covington County Verified With: Angie Metcalf, Coldwell Banker Real Estate Verified By: Glen Heinzelman, H. J. Porter & Associates Date Verified: 08\07\1997 Rights Conveyed: Fee simple title Land Size: Acres: 1.366 Square Feet: 59,503 Zoning: B-2, General Commercial District Highest & Best Use: Commercial Use At Sale: Vacant Topo/Drainage: Level/Typical of the area Access/Visibility: Good/Good Utilities: All available Remarks: This property is located on the south side of U.S. 331 south of its intersection with County Road 22 (Opp-Alberton Road) next to the Dairy Queen. Indicators of Value: PRICE PER ACRE: $47,584 H.J. Porter & Associates, Inc. LAND VALUE - DIRECT COMPARISON (CONTINUED) 24 SALE #2 Address/Location: NEC U.S. 331 and Kellum Street Opp, Alabama Grantor: Nagarbhai B. Patel Grantee: Saidutt, Inc. Sale Date: 04\07\1994 Sale Price: $51,000 Cash Equiv Price: $51,000 Terms: Cash to seller Recorded: Deed Book 877 Page 390 Covington County Verified With: Angie Metcalf, Coldwell Banker Real Estate Verified By: Glen Heinzelman Date Verified: 08\07\1997 Rights Conveyed: Fee simple title Land Size: Acres: 1.20 Square Feet: 52,272 Zoning: B-2, General Commercial Highest & Best Use: Commercial Use At Sale: Vacant Topo/Drainage: Level; typical of the area Access/Visibility: Good; Good Utilities: All except sewer Remarks: This property has 100' of frontage on U.S. 331 and 350' of frontage on Kellum Street. It is currently improved with a Holiday Inn Express. Indicators of Value: PRICE PER ACRE: $42,500 H.J. Porter & Associates, Inc. LAND VALUE - DIRECT COMPARISON (CONTINUED) 25 SALE #3 Address/Location: U.S. Highway 84 Andalusia, Alabama Grantor: Kenneth R. Odem Grantee: W. S. Rabren, Jr. Sale Date: 07\18\1994 Sale Price: $85,000 Cash Equiv Price: $85,000 Terms: Cash to seller. Recorded: Deed Book 880 Page 240 Covington County Verified With: Danny Solomon, Cedar Creek Realty Verified By: Linda Yates Date Verified: 10\28\1994 Rights Conveyed: Fee simple title Land Size: Acres: 2.13 Square Feet: 92,783 Zoning: B-3, Highway Commercial Highest & Best Use: Commercial Use at Sale: Vacant Topo/Drainage: Above street grade; Adequate Access/Visibility: Good; good Utilities: All available Remarks: The property has 302' of frontage along U.S. Highway 84 and an average depth of 360 feet. It is presently improved with an accounting office. Indicators of Value: PRICE PER ACRE: $39,906 H.J. Porter & Associates, Inc. LAND VALUE - DIRECT COMPARISON (CONTINUED) 26 SALE #4 Address/Location: Parcel "B" Opp Marketplace Opp, Alabama Grantor: Opp Partners, Ltd. Grantee: South Trust Bank, NA. Sale Date: 10\11\1995 Sale Price: $50,000 Cash Equiv Price: $50,000 Terms: Cash to seller Recorded: Deed Book 909, Page 166 Covington County Verified With: Tom Newton, Opp Partners Verified By: Glen Heinzelman, H.J. Porter & Associates Date Verified: 08\07\1997 Rights Conveyed: Fee simple title Land Size: Acres: 1.73 Square Feet: 75,359 Zoning: B-2, General Commercial Highest & Best Use: Commercial Use At Sale: Vacant Topo/Drainage: Level/adequate Access/Visibility: Good/Good Utilities: All available Remarks: This property is part of the Opp Marketplace shopping center adjacent to and south of the Winn-Dixie Supermarket. It has no direct access from U.S. Highway 331. Access is by easements for ingress and egress with the shopping center. It is to be developed with a South Trust Bank branch. Indicators of Value: PRICE PER ACRE: $28,902 H.J. Porter & Associates, Inc. [GRAPHICS OMITTED] COMPARABLE LAND SALES LAND VALUE -DIRECT COMPARISON (CONTINUED) 27 Land Sales 1 through 4 detailed above are compared to the subject's shopping center site and adjusted to the subject for notable differences. These adjustments are made in the adjustment grid below. =============================================================================================================================== LAND SALES COMPARISON GRID =============================================================================================================================== COMP. NUMBER SUBJECT #1 #2 #3 #4 ------------------------------------------------------------------------------------------------------------------------------- Grantor Long Patel Odem Opp Partn. Grantee Newton Saidutt Rabrem SouthTrust Location U.S. 331 U.S. 331 Hwy 84 U.S. 331 City Opp Opp Andalusia Opp Sale Price $65,000 $51,000 $85,000 $50,000 Date of Sale 8/6/97 12/8/93 4/7/94 7/18/94 10/11/95 Size (Acres) 2.050 1.366 1.200 2.130 1.730 Price/Acre $47,584 $42,500 $39,906 $28,902 =============================================================================================================================== ADJUSTMENTS ------------------------------------------------------------------------------------------------------------------------------- Conditions of Sale Normal Normal Normal Normal Market Conditions 0.0% 0.0% 0.0% 0.0% Preliminary Adj. Unit Price $47,584 $42,500 $39,906 $28,902 =============================================================================================================================== PHYSICAL DIFFERENCES #1 #2 #3 #4 ------------------------------------------------------------------------------------------------------------------------------- Location -20.0% -20.0% -20.0% 15.0% Size -6.0% -8.0% 1.0% -3.0% --- --- --- --- Subtotal-Physical -26.0% -28.0% -19.0% 12.0% =============================================================================================================================== FINAL ADJ. UNIT PRICE $35,212 $30,600 $32,324 $32,370 =============================================================================================================================== The comparable sales listed above were adjusted to the subject for: Conditions of Sale: All sales were normal arm's length transactions that required no adjustments. Time: Conversations with local real estate professionals and the county tax appraiser indicate that land values in Opp have remained stable over the past five years. Therefore, no adjustment for market conditions or time was considered appropriate. H.J. Porter & Associates, Inc. LAND VALUE - DIRECT COMPARISON (CONTINUED) 28 Location: The subject property has no direct access from the major area roadway, U.S. Highway 331. It is accessible from the minor artery, County Highway 22 (Opp-Alberton Road). Comparables No. 1, 2, and 3 all front and are accessible from U.S. Highway 331 and are considered to have superior locations relative to the subject. Downward adjustments of 20% were applied to these comparables to recognize their superior locations relative to the subject. Comparable No. 4 is Parcel "B" of the Opp Marketplace Shopping Center and does not have any direct access to a roadway other than by an easement across the Winn-Dixie property to the north. The location of this comparable is considered to be inferior relative to the subject. An upward adjustment of 15% was applied to this comparable for location. Size: All sales were adjusted to a 90% curve using the Dilmore Size adjustment table. This table is based on the fact that a property's price per unit is generally inversely related to its size. The comparable sales after adjustment, indicate a range of value from $32,324 to $35,212 per acre. Each of the adjusted sales were given relatively equal consideration in the value estimate of the subject site, as if vacant. Based on these adjusted sales, the subject site, "As if Vacant", is valued as: ESTIMATED LAND VALUE - AS IF VACANT 2.05 Acres @ $32,500 per Acre = $66,625 ROUNDED: $66,600 =========================================================== H.J. Porter & Associates, Inc. 29 COST APPROACH TO VALUE The cost factors used from the Marshall Valuation Service, a national cost service indexed to the Opp market and found to be reliable and consistent with costs incurred by builders within the area. The cost factors from this cost service are inclusive of architect/engineering fees, construction period interest, contractors overhead and profit, and normal site prep costs. Excluded are site improvements such as paving, landscaping, etc., land costs, and indirect costs such as developers profit permanent loan fees. Calculations of total building reproduction costs are: ============================================================================================== ESTIMATED REPRODUCTION COST NEW - NEIGHBORHOOD SHOPPING CENTER ============================================================================================== Average Class "C" - Sec 13, Pg 21 Base Cost $46.06 Current Cost Multiplier x 1.000 Local Cost Multiplier x 0.920 Perimeter Multiplier x 0.880 ----- 25,350 Sq. Ft. @ $37.29 per Sq. Ft. = $945,302 ============================================================================================== INDIRECT COST Indirect costs including developer's fee/entrepreneurial profit and permanent loan fees are added to the subject's direct cost to estimate the total value of the subject property via the Cost Approach. Developer's fee/Entrepreneurial profit is added at 20% based upon sales of new shopping centers, discussions with Developers and Brokers, and with consideration given to the cross collateralization of the portfolio of retail properties of which the subject is a part. Permanent loan fees are added at the amount typically charged by lenders - 2% of the loan amount (1% construction - 1% permanent). DEPRECIATION AND OBSOLESCENCE Incurable physical deterioration identifies items of deterioration that cannot be practically or economically corrected at present. For the purposes of this analysis, incurable physical deterioration has not been classified as being either long or short lived. A long-lived item is a building component that is expected to have a remaining economic life that is the same as the remaining economic life of the structure. A short-lived item is a building component that is expected to have a remaining economic life that is shorter than the remaining life of the structure. H.J. Porter & Associates, Inc. COST APPROACH TO VALUE - (CONTINUED) 30 DEPRECIATION AND OBSOLESCENCE - (CONTINUED) In this instance separating the items of incurable physical deterioration into long and short lived items would serve little or no useful appraisal purpose because of the overall age of the improvements. In the case of the subject improvements, incurable physical deterioration has been estimated using the age/life concept in that we estimate the improvements to have an effective age of approximately 2 years, from a total estimated economic life of approximately 40 years. Therefore, it is estimated that the improvements suffer from incurable physical deterioration, both long and short-lived, of approximately 5.0 percent (2 years/40 years = 5.0 percent) of the estimated Reproduction Cost New. Functional obsolescence is a loss in value resulting from defects in design. The defect may be curable or incurable. Curable functional obsolescence is measured by the cost to cure the condition. Incurable functional obsolescence may be caused by a deficiency or a superadequacy. A deficiency may be a component or system that should be in the property but is not, or it may be a substandard or defective component or system in the property that does not work properly. A superadequacy is a component or system in the property that exceeds market requirements and does not contribute to value an amount equal to its cost. Upon inspection of the subject, no degree of functional obsolescence, either curable or incurable, was noted. External obsolescence is the diminished utility of a structure or project due to negative influences from outside the site and can be caused by a variety of factors, i.e., neighborhood declined, the property's location in a community, state, or region; or market conditions. No degree of external obsolescence is believed to be present in the subject improvements as of the effective date of appraisal. CONCLUSION TO COST APPROACH The calculation of value by the Cost Approach is presented in tabular form on the following page. H.J. Porter & Associates, Inc. COST APPROACH TO VALUE - (CONTINUED) 31 CONCLUSION TO COST APPROACH (CONTINUED) ==================================================================================================================================== VALUATION - COST APPROACH ==================================================================================================================================== DIRECT COST Shopping Center 25,350 Sq. Ft. x $37.29 per Sq. Ft. = $945,302 LESS DEPRECIATION: Curable Incurable ------- --------- Physical $0 $47,265 Functional $0 $0 External $0 $0 Total $0 $0 $47,265 -- -- ------- DEPRECIATED COST OF SHOPPING CENTER $898,036 Add: Site Improvements Area Cost/Sq. Ft. % Dep. Cost New ---- ------------ ------ -------- Asphalt Paving 53,450 $1.50 15.0% $68,149 Concrete Paving 5,425 $1.75 10.0% $8,544 Concrete Curbs 820 $7.50 10.0% $5,535 Light Poles 4 $2,500 10.0% $9,000 Landscaping $25,000 ------- TOTAL SITE IMPROVEMENTS $116,228 -------- TOTAL DEPRECIATED COST NEW $1,014,264 INDIRECT COST Developer's Fee 20.0% of Total Cost/Land $216,173 Permanent Loan Fees @ 2.0% of Loan Amount (Loan basis = 80.0% of Land/Bldg Cost) $17,179 ------- TOTAL INDIRECT COST $233,467 -------- TOTAL REPRODUCTION COST NEW $1,247,731 LAND VALUE (FROM PREVIOUS SECTION) $66,600 ------- PRELIMINARY VALUE BY COST APPROACH $1,314,331 (ROUNDED) $1,314,000 ==================================================================================================================================== H.J. Porter & Associates, Inc. 32 INCOME APPROACH TO VALUE As a primary approach to value for the subject, the subject's net operating income is capitalized into a value estimate by use of an overall capitalization rate. In arriving at a net operating income, consideration is given to rentals and expenses which are incurred in the operation of the property. CONTRACT INCOME The subject is currently occupied by two tenants. B.C. Moor & Son's, Inc. occupies 16,900 sq. ft. or 66.6% of the total net rentable area and Harco Drug occupies 8,450 sq. ft. or 33.4% of the total net rentable area. A summary of these leases appear in the Rear Exhibits. To determine whether the previously summarized leases are representative of market rents for similar retail space, the contract rents were compared to other drug store leases in the States of Alabama, Georgia, and Tennessee. A summary of those leases appears in the following chart. ==================================================================================================================================== SUMMARY OF RENT COMPARABLES ==================================================================================================================================== Tenant Location Year Leased Size (Sq. Ft.) Rent/Sq. Ft. ------------------------------------------------------------------------------------------------------------------------------------ Drugs For Less Birmingham, AL 1993 18,000 $7.50 Harco Drugs Birmingham, AL 1993 12,876 $5.95 Harco Drugs Pell City, AL 1993 9,100 $7.50 Harco Drugs Alabaster, AL 1993 9,100 $8.50 Big B Drugs Chattanooga, TN 1994 8,470 $7.00 Harco Drugs Tuscaloosa, AL 1994 10,160 $7.90 Big B Drugs Phenix City, AL 1995 15,500 $4.75 Revco Drugs Anniston, AL 1995 9,240 $7.75 Drugs For Less Birmingham, AL 1995 18,000 $7.00 Revco Drugs Dalton, GA 1996 8,450 $9.75 Harco Drugs Mobile, AL 1997 10,125 $8.25 ==================================================================================================================================== HARCO DRUGS OPP, AL 1994 8,450 $7.50 ==================================================================================================================================== H.J. Porter & Associates, Inc. INCOME APPROACH TO VALUE - (CONTINUED) 33 Based on the rents summarized on the previous chart, it is determined that the current contract rent of $7.50 per sq. ft. for the 8,450 sq. ft. leased by Harco Drugs, Inc. is commensurate with market rents for similar drug store space in anchored shopping centers. Additionally, given adjustments for size and name recognition, the current contract rent of $5.00 per sq. for the 16,900 sq. ft. leased by B.C. Moore & Son's, Inc. is also considered to be commensurate with the market rent for similar space located in similar shopping centers. EXPENSE CONTRIBUTIONS Each tenant is contractually obligated to contribute to the expenses incurred in the operation of the shopping center. Their contributions amount to their pro-rata share of the taxes, property insurance, and common area maintenance expenses. These expenses have been estimated later in this report and summarized in the following chart. ESTIMATED OF EXPENSE CONTRIBUTIONS Taxes $6,733 Insurance $2,535 Common Area Maintenance $11,408 ------- Total Reimbursable $20,676 Total Sq. Ft. (NRA) 25,350 ============================================ REIMBURSEMENT/SQ. FT. (NRA) $0.82 ============================================ VACANCY AND COLLECTION LOSS The subject is 100% leased as of the effective date of appraisal. However, it would be imprudent to believe that a potential buyer would not consider some degree of vacancy collection loss when evaluating the income producing potential of the subject. This opinion is supported by the pro-forma operating statements obtained in the confirmation of the sales utilized to develop a value estimate by the Market Approach. For the purposes of this analysis, given the credit quality of the existing tenants, a vacancy and collection loss factor of 2.5% of the total potential gross income for subject, including expense contributions, has been incorporated into this analysis. H.J. Porter & Associates, Inc. INCOME APPROACH TO VALUE - (CONTINUED) 34 EFFECTIVE GROSS INCOME Given the preceding discussion, the Effective Gross Income for the subject is estimated as follows: ==================================================================================================================================== ESTIMATE OF EFFECTIVE GROSS INCOME ==================================================================================================================================== POTENTIAL GROSS INCOME: Harco Drug 8,450 Sq. Ft. @ $7.50 per Sq. Ft. = $63,375 B.C. Moore 16,900 Sq.Ft. @ $5.00 per Sq. Ft. = $84.500 -------- Potential Gross Rental Income $147,875 EXPENSE CONTRIBUTIONS: Harco Drug 8,450 Sq. Ft. @ $0.82 per Sq. Ft. = $6,929 B.C. Moore 16,900 Sq.Ft @ $0.82 per Sq. Ft. = $13,858 ------- Total Expense Contributions $20.787 -------- Total Potential Gross Income $168,662 Less Vacancy & Collection Loss: 2.5% of Potential Gross Income $4,217 -------- EFFECTIVE GROSS INCOME $164,445 ==================================================================================================================================== OPERATING EXPENSES After estimating Effective Gross Income, all applicable expenses are deducted to arrive at Net Operating Income. To estimate the appropriate expense levels, statements from similar shopping centers are analyzed. The expense comparables are presented on the following pages. H.J. Porter & Associates, Inc. INCOME APPROACH TO VALUE - (CONTINUED) 35 COMPARABLE #1 Project Name: Delchamps Plaza South Location: Skyland Boulevard Tuscaloosa, Alabama Year Built: 1986 GLA: 108,903 SF Source: Yearn end statements Type Center: Neighborhood Shopping Center Analysis Year: 1996 Analysis By: LHH Item Total $/SF % PGR ---- ----- ---- ----- Effective Gross Rent: $751,676 $6.90 % (plus) CAM/Reimbursemen: $61,400 $0.56 % (plus) Misc Income: $300 $0.00 % -------- ----- ---- Effec. Gross Income: $813,376 $7.47 100.0% Less Expenses: Management: $42,686 $0.39 5.2% Ad Valorem Tax: $39,174 $0.36 4.8% Insurance: $13,588 $0.12 $1.7% Administration Expense: $17,144 $0.16 $2.1% CAM: $25,322 $0.23 3.1% Utilities: $6,564 $0.06 0.8% Miscellaneous: $5,071 $0.05 0.6% -------- ----- ---- Total Expenses: $149,549 $1.37 18.4% -------- ----- ---- Net Operating Income: $663,827 $6.10 81.6% ======== ===== ==== Comments: Miscellaneous expense consists of travel and structural repair expenses H.J. Porter & Associates, Inc. INCOME APPROACH TO VALUE - (CONTINUED) 36 COMPARABLE #2 Project Name: Delchamps Plaza North Location: MacFarland & Watermelon Road Tuscaloosa, Alabama Year Built: 1986 GLA: 59,389 SF Source: Year end statements Type Center: Neighborhood Shopping Center Analysis Year: 1995 Analysis By: DPM Item Total $/SF %PGR ---- ----- ---- ---- Effective Gross Rent: $459,768 $7.74 100% Less Vac/Credit Loss $603 $0.01 0.1% -------- ----- ---- Effective Gross Rent $459,165 $7.73 99.9% + CAM/Reimbursements: $42,120 $0.69 8.9% + Misc Income: $3,439 $0.06 0.7% -------- ----- ---- Effec. Gross Income: $503,724 $8.48 100.0% Less Expenses: Management: $30,762 $0.52 6.1% Ad Valorem Tax: $33,939 $0.57 6.7% Insurance: $4,915 $0.08 1.0% Administration Expense: $1,391 $0.02 0.3% CAM: $41,892 $0.71 8.3% Utilities: $0 $0.00 0.0% Miscellaneous: $8,765 $0.15 1.7% -------- ----- ---- Total Expenses: $121,664 $2.05 24.2% -------- ----- ---- Net Operating Income: $382,060 $6.43 75.8% ======== ===== ==== Comments: Utilities expense is included in CAM. Miscellaneous expense is non-pass through expense for building repair. H.J. Porter & Associates, Inc. INCOME APPROACH TO VALUE - (CONTINUED) 37 COMPARABLE #3 Project Name: Stratford Square Location: East Boulevard Montgomery, Alabama Year Built: 1987 GLA: 121,236 SF Source: Year end statement Type Center: Community Shopping Center Analysis Year: 1995 Analysis By: PJM Item Total $/SF %PGR ---- ----- ---- ---- Effective Gross Rent: $771,843 $6.37 % + CAM/Reimbursements: $118,804 $0.98 % + Misc Income: $412 $0.00 % -------- ----- ---- Effec. Gross Income: $891,079 $7.35 $100.0% Less Expenses: Management: $43,173 $0.36 4.8% Ad Valorem Tax: $47,541 $0.39 5.3% Insurance: $12,987 $0.11 1.5% Administration Expense: $13,769 $0.11 1.5% CAM: $53,488 $0.44 6.0% Utilities: $0 $0.00 0.0% Miscellaneous: $5,650 $0.05 0.6% -------- ----- ---- Total Expense: $176,608 $1.46 19.8% -------- ----- ---- Net Operating Income: $714,471 $5.89 80.2% ======== ===== ==== Comments: Miscellaneous expense includes $3,762 for on-site management and $1,888 for advertising and promotional expenses. H.J. Porter & Associates, Inc. INCOME APPROACH TO VALUE - (CONTINUED) 38 COMPARABLE #4 Project Name: Confidential Location: Central Alabama Year Built: 1978 GLA: 62,510 SF Source: Year End Statement Type Center: Neighborhood Shopping Center Analysis Year: 1995 Analysis By: PJM Item Total $/SF %PGR ---- ----- ---- ---- Effective Gross Rent: $260,657 $4.17 100% (plus) CAM/Reimbursements: $22,347 $0.36 % (plus) Misc Income: $83 $0.00 % -------- ----- ---- Effec. Gross Income: $283,087 $4.53% 100.0% Less Expenses: Management: $10,663 $0.17 3.8% Ad Valorem Tax: $21,172 $0.34 7.5% Insurance: $4,405 $0.07 1.6% Administration Expense: $3,556 $0.06 1.3% CAM: $25,305 $0.40 8.9% Utilities: $332 $0.01 0.1% Miscellaneous: $1,718 $0.03 0.6% -------- ----- ---- Total Expenses: $67,151 $1.07 23.7% -------- ----- ---- Net Operating Income: $215,936 $3.45 76.3% ======== ===== ==== Comments: Miscellaneous expense is for building repair and maintenance not passed through to tenants. H.J. Porter & Associates, Inc. INCOME APPROACH TO VALUE - (CONTINUED) 39 ===================================================================================================================== SUMMARY OF EXPENSE COMPARABLES ===================================================================================================================== EXPENSE COMPARABLE 1 2 3 4 AVG --------------------------------------------------------------------------------------------------------------------- Effective Gross Income (Sq. Ft.) $7.47 $8.48 $7.35 $4.53 $6.96 Less: Expenses Management (%) 5.2% 6.1% 4.8% 3.8% 5.0% Ad Valorem Taxes (Sq. Ft.) $0.36 $0.57 $0.39 $0.34 $0.42 Insurance (Sq. Ft.) $0.12 $0.08 $0.11 $0.07 $0.10 Administrative Expense (Sq. Ft.) $0.16 $0.02 $0.11 $0.06 $0.09 CAM (Sq. Ft.) $0.23 $0.71 $0.44 $0.40 $0.45 Utilities (Sq. Ft.) $0.06 $0.00 $0.00 $0.01 $0.02 Miscellaneous (%) 0.6% 1.7% 0.6% 0.6% 0.9% ----- ----- ----- ----- ----- Total Expenses (Sq. Ft) $1.37 $2.05 $1.46 $1.07 $1.49 ===== ===== ===== ===== ===== Expense Ratio (%) 18.4% 24.2% 19.8% 23.7% 21.5% ===================================================================================================================== Based on these expense comparables, the pertinent expense categories in appropriate amounts are estimated below. Management/Leasing: The management fees of the comparable properties range from 3.8% to 6.1%. As indicated previously, the subject property is one of fifteen shopping centers in a cross collateralized portfolio of retail properties under single management. Considering economics of scale, the subject's management fee is estimated at the low end of the range at 4% of effective rental income. Ad Valorem tax: The actual ad valorem taxes levied against the subject obtained from the Covington County Tax Assessor's office have been deemed appropriate and included in this analysis. Insurance: Based upon the expense comparable information included herein, the cost of insuring the subject's improvements and the cost of liability insurance is estimated to be $2,535 per year or $0.10 per square foot of net leasable area. H.J. Porter & Associates, Inc. INCOME APPROACH TO VALUE - (CONTINUED) 40 OPERATING EXPENSES (CONTINUED) Common Area Maintenance: The common area maintenance expense, including utility expense for the parking and walkway areas, based on the expense comparables has been estimated to be $11,408 per year or $0.45 per sq. ft. of net leasable area. Structural Maintenance: Structural maintenance is estimated to be $.10 per square foot for a total annual amount of $2,535 which is found to be similar to other neighborhood shopping centers as well as typical requirements by permanent lenders. Miscellaneous Expenses: Miscellaneous expenses for legal and accounting services has been estimated to amount to 1.0% of the effective gross income. Based on the preceding, the total operating expenses are estimated to be $30,770 per year or $1.21 per square foot of net leasable area. The total expense estimate results in an operating expense ratio of 18.7% which is supported by the expense comparables. NET OPERATING INCOME The Net Operating Income is calculated by subtracting the Operating Expenses from the Effective Gross Income and is estimated at $133,676. The table on the following page is a reconstructed operating statement for the subject illustrating the previously discussed calculation of income and expenses. H.J. Porter & Associates, Inc. INCOME APPROACH TO VALUE - (CONTINUED) 41 NET OPERATING INCOME - (CONTINUED) ==================================================================================================================================== VALUATION - INCOME APPROACH ==================================================================================================================================== Potential Gross Income Harco Drug 8450 Sq. Ft. @ $7.50 per Sq. Ft. = $63,375 B. C. Moore 16900 Sq. Ft. @ $5.00 per Sq. Ft. = $84,500 ------- Potential Gross Rental Income $147,875 Expense Contributions Harco Drug 8450 Sq. Ft. @ $0.82 per Sq. Ft. = $6,929 B. C. Moore 16900 Sq. Ft. @ $0.82 per Sq. Ft. = $13,858 ------- Total Expense Contributions $20,787 ------- Total Potential Gross Income $168,662 Less Vacancy & Collection Loss 2.5% of Potential Gross Income $4,217 ------ Effective Gross Income $164,445 Less Expenses: % of EGI Per Sq. Ft. Total -------- ----------- ----- Management 4.0% $0.35 $5,915 Ad Valorem Taxes 4.0% $0.27 $6,733 Property Insurance 1.5% $0.10 $2,535 Common Area Maintenance 6.8% $0.45 $11,408 Structural Maintenance/Reserves 1.5% $0.10 $2,535 Miscellaneous 1.0% $0.07 $1,644 Total Expenses $30,770 ------- Net Operating Income $133,676 ==================================================================================================================================== H.J. Porter & Associates, Inc. INCOME APPROACH TO VALUE - (CONTINUED) 42 CAPITALIZATION RATE To estimate the subject's value via the Income Approach, the subject's stabilized net operating income is capitalized with an overall capitalization rate of 9.0%. The selected overall capitalization rate is based on several methods of capitalization rate development with consideration given to the cross collateralization of the subject property with the other fourteen shopping centers in the securitized portfolio of retail properties. The capitalization rate development methods, which are presented following the Income Approach Summary on the following page, includes rates extracted from comparable sales, recently published investor surveys, and three methods using mortgage and equity positions which include the Ellwood, Band of Investment, and Debt Coverage Ratio methods. Rates extracted from the comparable sales ranged from 9.57% to 10.20% with an average of 9.81% and the most recent sale being at 9.64%. Published rates from the Second Quarter 1997, Korpacz Real Estate Investor Survey for National Strip Shopping Centers, ranged from 8.25% to 13.00% with an average rate of 9.84% which is similar to the market extracted rates. The mid range rates from the three mortgage/equity methods ranged from 8.90% to 9.24%. The rates developed with mortgage equity factors reflect current conditions and declining interest rates. The criteria used for these methods was taken from the above mentioned investor survey and from interviews with mortgage brokers. The High, Middle, and Low average of the five methods of capitalization rate development are 10.25%, 9.31%, and 8.71% respectively. Based on this analysis and the above considerations, the subject's overall capitalization rate is estimated to fall between the Middle and Low range of the five methods. Given the preceding, the value indication provided by the Income Approach can be expressed as follows: VALUE INDICATION Net Operating Income $133,676 Capitalized at 9.0% $1,485,283 (ROUNDED) $4,485,000 H.J. Porter & Associates, Inc. INCOME APPROACH TO VALUE - (CONTINUED) 43 ==================================================================================================================================== PROPERTY CAPITALIZATION RATE JUSTIFICATION ==================================================================================================================================== PROPERTY: Opp Marketplace Shopping Center ADDRESS: Opp, Alabama DATE: August 6, 1997 Pessimistic Most Likely Optimistic ----------- ----------- ---------- ----------------------------------------------------- 1. Market extracted rates for 10.20% 9.81% 9.57% ----------------------------------------------------- similar local properties ----------------------------------------------------- 2. Recent published cap rates 13.00% 9.84% 8.25% ----------------------------------------------------- used by institutional investors Source: Korpacz 2nd Q, 1997 3. Ellwood method calculated rates 11.55% = Eqty yield before tax % Property appreciation (income) over hold period = -5.00% 0.00% 5.00% 75.00% = Mortgage percent of value 7.75% = Mortgage interest rate 20 = Mortgage term in years 10 = Investment holding period 9.85% = Rm = Mortgage constant 14.40% = Rmp = Mortgage constant over holding period 31.59% = P = Percent of mortgage paid off over hold period 5.82% = SFF = Sink fund factor 37.18% = J factor ----------------------------------------------------- Calculated cap rate = 9.36% 8.90% 8.45% ----------------------------------------------------- 4. Band of Investment Method Mortgage percent to value 70.00% 75.00% 80.00% Mortgage constant (Rm) 10.35% 9.85% 9.35% Equity percent to value 30.00% 25.00% 20.00% Eqty cash on cash rate (Re) 8.00% 7.00% 6.00% ----------------------------------------------------- Calculated cap rate = 9.65% 9.14% 8.68% ----------------------------------------------------- 5. Debt Coverage Ratio Method Req'd debt coverage ratio 1.25 1.20 1.15 Mortgage percent to value 70.00% 75.00% 80.00% Mortgage constant 10.35% 9.85% 9.35% ----------------------------------------------------- Calculated cap rate = 9.06% 8.87% 8.60% ----------------------------------------------------- H.J. Porter & Associates, Inc. 44 Explanatory Notes Capitalization Rate Evidence The accompanying chart illustrates 5 different sets of data or evidence to appropriate current property capitalization rates. Item # 1 Reflects the current range in capitalization rates in the local market based on actual sales - this information is historical in nature although there has been a fairly consistent pattern evident in this market over the years. Item # 2 Reflects actual cap rates used by large financial institutions in the acquisition and financing of major real estate projects. These rates are also historical in nature, but are based on properties of a magnitude atypical in this market area. Properties that would appeal to at least a regional and perhaps a national market of potential buyers. Item # 3 Reflects a calculated cap rate utilizing the Ellwood model based on future expectations in income and property value growth and equity yield rates - explicit input assumptions are listed. This method is compelling when market mortgage and equity yield returns are predictable and property and income changes can be reliably predicted. Item # 4 Analyzes required capital outlays to service both the debt (ie mortgage payment) and the equity (cash on cash or before tax cash flow or equity dividend). The weighted average of these required returns is, by definition, equal to the capitalization rate. It should be noted that the mortgage interest rate and equity yield rate are NOT part of this calculation. Item #5 Provides another method often used by lenders. The debt coverage ratio is a factor equal to the net operating income divided by the annual debt service - in other words, it is an estimate of the "cushion" or excess of net operating income over and above debt service. The calculated cap can be solved for by the following formula R(o) = R(m) X DCR X M. The actual cap rate used by the appraisers in this analysis is bracketed by this information. Further, this chart illustrates the implicit market expectations of the various investment parameters that are reflected by the specific capitalization rate used. H.J. Porter & Associates, Inc. 45 MARKET APPROACH To estimate the subject property's value by market comparison, a direct comparison is made with actual sales of other shopping center properties. These sales are analyzed on the basis of price per square foot of gross building area (GBA) and their effective gross income multiplier (EGIM). While the subject property is part of a large portfolio of retail properties which would most likely be marketed as a total package, no sales of similar portfolios of properties were found with which to compare. The market for retail properties is national with purchase decisions made on the strength and reliability of the income streams. Similar shopping center sales were located in Birmingham, Moody, Madison, and Mobile, Alabama and Chattanooga, Tennessee. Each sale is adjusted to the subject for pertinent items, including unusual financing or conditions of sale, time lapsed since sale, and physical differences such as age, condition, and construction quality and location as reflected in the net operating income. The sales considered are detailed on the following pages with a comparison and adjustment following the presentation of the sales data. H.J. Porter & Associates, Inc. MARKET APPROACH - (CONTINUED) 46 COMPARABLE IMPROVED SALES [GRAPHICS OMITTED] [PHOTOGRAPH] SALE #1 Address/Location: The Village on Lorna 3001 Lorna Road Hoover, Alabama Grantor: Lorna Properties Grantee: Village on Lorna Shopping Center, Ltd. Sale Date: 05/26/1995 Sale Price: $11,200,000 Cash Equiv Price: $11,200,000 Equity: $2,240,000 Debt: $8,960,000 First Yr. Debt Service: $933,084 Terms: Cash to seller; equity, debt, and Yr. 1 debt service estimated based on 80% LTV, 8.5% interest, and 20 year amortization. Recorded: Inst. No. 1995-61351, Jefferson County Verified With: Hunter Keller, Engel Realty (205) 939-6800 Verified By: David Mullins, MAI, H.J. Porter & Associates Date Verified: 04/18/1996 Rights Conveyed: Leased fee Land Size: 12.6 Acres H.J. Porter & Associates, Inc. MARKET APPROACH - (CONTINUED) 47 SALE #1 (CONTINUED) Access/Visibility: Average/Average Highest & Best Use: Neighborhood shopping center Parking: 728 spaces Parking Ratio: 5.15/1,000 Sq. Ft. Building Size: 141,444 SF(NRA) Land:Bldg Ratio: 3.9:1 Year Built: 1986 Condition: Average to Good Building Description: One story neighborhood shopping center containing two separate building of masonry construction Anchors: Delchamps (51,945 Sq. Ft.) and Drugs for Less (14,500 Sq. Ft.) Anchor - Sq. Ft.: 66,445 Anchor %: 46.98 Local: Typical local, regional, and national small shop tenants Local - Sq. Ft.: 74,999 Local %: 53.02 Lease Information: Anchor & Local: CAM, taxes and insurance. Delchamps recently expanded and renovated their space with an estimated expenditure of 2.5 to 3.0 million dollars. In conjunction, they signed a new 15 year lease with 3, five year options. ANALYSIS (1|2|3)*Source TOTAL $ AMOUNT $ PER SF (GBA) -------------- -------------- (S\A\P) Potential Gross Income: $1,578,760 $11.16 (A\E\F) Vac & Credit Loss: $94,725 $ 0.67 ---------- ------ (A\E\F) Effec. Gross Income: $1,484,034 $10.49 (A\E\F) Less Expense: $376,266 $ 2.66 ---------- ------ (A\E\F) Net Oper. Income $1,107,768 $ 7.83 (A\E\F) Debt Service (Yr. 1) $933,084 $ 6.60 ---------- ------ (S\A\F) Cash Flow $174,684 $ 1.24 ================================================================================ Field 1: S=Seller B=Buyer A=Appraiser Field 2: A=Actual E=Estimated Field 3: P=Prior Year F=Year Following ================================================================================ H.J. Porter & Associates, Inc. MARKET APPROACH - (CONTINUED) 48 SALE #1 (CONTINUED) INDICATORS OF VALUE: Price Per SF (NRA): $79.18 PGIM: 7.09 EGIM: 7.55 R(o): 9.89% Expense Ratio: 25.35% Remarks: PGI includes potential rent based on actual base rent plus expense contributions and miscellaneous income. The actual 1994 NOI was $901,481 and is somewhat skewed due to vacancy of local space during Delchamp's expansion and rent concessions during this period. Also, leasing commissions and tenant improvements were deducted as expenses before the NOI calculation. H.J. Porter & Associates, Inc. MARKET APPROACH - (CONTINUED) 49 [GRAPHICS OMITTED] SALE #2 Address/Location: The Village at Moody U.S. Highway 411 Moody, Alabama Grantor: F.S. Partnership, Ltd. Grantee: Birmingham Realty Sale Date: 02/14/1996 Sale Price: $4,485,000 Cash Equiv Price: $4,485,000 Equity: $1,485,000 Debt: $3,000,000 Terms: $1,485,000 cash plus assumption of $3,000,000 mortgage at market rates and terms. Recorded: Deed Book 261 at page 313, St. Clair County Verified With: Paul Spina, Grantor (205) 733-1131 Verified By: David Mullins, MAI, H.J. Porter & Associates Date Verified: 04/10/1996 Rights Conveyed: Leased fee Land Size: 8.43 Acres H.J. Porter & Associates, Inc. MARKET APPROACH - (CONTINUED) 50 SALE #2 (CONTINUED) Access/Visibility: Average/Average Highest & Best Use: Neighborhood shopping center Parking: 396 spaces Parking Ratio: 6.51/1,000 Sq. Ft. Building Size: 60,800 SF(NRA) Land: Bldg Ratio: 6.0:1 Year Built: 1995 Condition: Good Building Description: In-line, one story masonry construction with brick exterior on front and sides, and CCB on rear. Flat built-up roof system Anchors: Winn-Dixie (44,000 Sq. Ft.) Anchor - Sq. Ft.: 44,000 Anchor %: 72.37 Local: J&E Ent., Head Start, Movie Gallery, Open Book, Vulcan Rehabilitation, Moody Cleaners, Village Beverage, Merle Norman, and The Nail Shop Local - Sq. Ft.: 16,800 Local %: 27.63 Lease Information: Winn-Dixie - $7.00 per Sq. Ft.; Local tenant rent ranges from $10.50 to $11.50 per Sq. Ft. with an average of $10.67 per sq. ft. All tenants pay pro-rata share of CAM, taxes, and insurance. ANALYSIS (1|2|3) *Source TOTAL $ AMOUNT $ PER SF (GBA) -------------- -------------- (S\A\P) Potential Gross Income: $533,922 $8.78 (A\E\F) Vac & Credit Loss: $9,920 $0.16 ------ ----- (A\E\F) Effec. Gross Income: $524,002 $8.62 (A\E\F) Less Expenses: $87,532 $1.44 ------- ----- (A\E\F) Net Oper. Income $436,470 $7.18 ================================================================================ Field 1: S=Seller B=Buyer A=Appraiser Field 2: A=Actual E=Estimated Field 3: P=Prior Year F=Year Following ================================================================================ H.J. Porter & Associates, Inc. MARKET APPROACH - (CONTINUED) 51 SALE #2 (CONTINUED) INDICATORS OF VALUE: Price Per SF (NRA): $73.77 PGIM: 8.40 EGIM: 8.24 R(o): 10.18% Expense Ratio: 16.09% Remarks: At the time of sale this center was less than one year old and did not have a complete year of operating history. PGI includes contract rent plus estimated expense contributions. Market vacancy was estimated at 5% of local tenant rent and expense contributions. Expenses include 4% management fee, taxes at $0.58 per sq. ft., insurance at $0.10 per sq. ft., CAM at $0.40 per sq. ft., and structural maintenance at $0.50 per sq. ft. This center is located at the northeast corner of Interstate 10 and U.S. Highway 411 in Moody, Alabama. This area is a rapidly growing commercial district in the Birmingham/Atlanta interstate corridor. MARKET APPROACH - (CONTINUED) 52 [GRAPHICS OMITTED] [PHTOGRAPH] SALE #3 Address/Location: Plaza Center Hughes Road at Old Madison Pike Madison, Alabama Grantor: Plaza, Ltd. Grantee: Amberjack, Ltd. Sale Date: 12/21/1994 Sale Price: $5,850,000 Cash Equiv Price: $5,850,000 Terms: Cash to seller Recorded: Deed Book 846 at page 1097, Madison County Verified With: Tommy Tillman, Broker, (205) 822-7116 Verified By: David Mullins, MAI, H.J. Porter & Associates Date Verified: 01/11/1995 Rights Conveyed: Leased fee Land Size: 9.08 Acres Access/Visibility: Good/Good Highest & Best Use: Neighborhood shopping center Building Size: 79,400 Sq. Ft. (NRA) H.J. Porter & Associates, Inc. MARKET APPROACH - (CONTINUED) 53 SALE #3 (CONTINUED) Land: Bldg Ratio: 5.0:1 Year Built: 1994 Condition: Good Building Description: One story masonry construction with brick veneer and dryvit front. Flat built-up roof Anchors: Kroger (62,800 Sq. Ft.) Anchor - Sq. Ft.: 62,800 Anchor %: 79.09 Local: Sporting Edge, Cleaners, Papa John's Pizza, Heavenly Hear, Baskin-Robbins, Cornerstone, Movie Gallery, and Hallmark Cards Local - Sq. Ft.: 16,600 Local %: 20.91 Lease Information: All tenants pay pro-rata share of CAM, taxes, and insurance. ANALYSIS (1|2|3) *Source TOTAL $ AMOUNT $ PER SF (GBA) (S\A\P) Potential Gross Income: $689,320 $8.68 (A\E\F) Vac & Credit Loss: $17,750 $0.22 -------- ----- (A\E\F) Effec. Gross Income: $671,570 $8.46 (A\E\F) Less Expenses: $111,457 $1.40 -------- ----- (A\E\F) Net Oper. Income $560,113 $7.05 ================================================================================ Field 1: S=Seller B=Buyer A=Appraiser Field 2: A=Actual E=Estimated Field 3: P=Prior Year F=Year Following ================================================================================ INDICATORS OF VALUE: Price Per SF (NRA): $73.68 PGIM: 8.49 EGIM: 8.71 R(o): 9.57% Expense Ratio: 16.60% H.J. Porter & Associates, Inc. MARKET APPROACH - (CONTINUED) 54 [GRAPHICS OMITTED] [PHOTOGRAPH] SALE #4 Address/Location: North Hixson Marketplace Hixson Pike and Camp Columbus Road Chattanooga, TN Grantor: North Hixson, L.L.C. Grantee: Amberjack, Ltd. Sale Date: 03/04/1996 Sale Price: $4,760,000 Cash Equiv Price: $4,760,000 Terms: Cash to seller Recorded: Unknown, Hamilton County Verified With: Dick Schmalz with Grantor (205) 871-2617 Verified By: David Mullins, MAI, H.J. Porter & Associates Date Verified: 03/15/1996 Rights Conveyed Leased fee Land Size: 9.24 Acres Access/Visibility: Average/Average Highest & Best Use: Neighborhood shopping center H.J. Porter & Associates, Inc. MARKET APPROACH - (CONTINUED) 55 SALE #4 (CONTINUED) Parking: 405 Spaces Parking Ratio: 5.88/1,000 sq. ft. Building Size: 63,270 Sq. Ft. (NRA) Land: Bldg Ratio: 6.4:1 Year Built: 1995 Condition: Good Building Description: One story neighborhood shopping center with split face block exterior walls and synthetic stucco on steel stud canopy. Anchors: Winn-Dixie (49,600 sq. ft. GBA and 44,000 sq. ft. NRA) and Big B Drugs (8,470 sq. ft.) Anchor - Sq. Ft.: 52,470 Anchor %: 82.93 Local: Movie Gallery, Sally's Beauty, and other local tenants Local - Sq. Ft.: 10,800 Local %: 17.07 Lease Information: All tenants pay pro-rata share of CAM, taxes, and insurance. ANALYSIS (1|2|3) *Source TOTAL $ AMOUNT $ PER SF (GBA) -------------- -------------- (S\A\P) Potential Gross Income: $623,083 $9.85 (A\E\F) Vac & Credit Loss: $13,057 $0.21 -------- ----- (A\E\F) Effec. Gross Income: $610,026 $9.64 (A\E\F) Less Expenses: $124,533 $1.97 -------- ----- (A\E\F) Net Oper. Income: $485,493 $7.67 ================================================================================ Field 1: S=Seller B=Buyer A=Appraiser Field 2: A=Actual E=Estimated Field 3: P=Prior Year F=Year Following ================================================================================ INDICATORS OF VALUE: Price Per SF (NRA): $75.23 PGIM: 7.64 EGIM: 7.80 R(o): 10.20% Expenses Ratio: 20.41% H.J. Porter & Associates, Inc. MARKET APPROACH - (CONTINUED) 56 SALES #4 (CONTINUED) Remarks: At the time of sale there were two vacant local shops containing 2,400 sq. ft. Expense contribution included in PGI and local vacancy. Vacancy based on 10% of local shop income plus expense contributions. Expenses based on 4% management, excluding expense contributions, $1.59 for taxes, CAM, and insurance, plus $0.05 for structural reserves. The estimated expenses were consistent with the Grantor's pro forma. Average local shop space rent for leased space was $10.45 per sq. ft. H.J. Porter & Associates, Inc. MARKET APPROACH - (CONTINUED) 57 [GRAPHICS OMITTED] [PHOTOGRAPH] SALE #5 Address/Location: Hillcrest Marketplace Hillcrest Road at Grelot Road Mobile, Alabama Grantor: Hillcrest Marketplace, Ltd. Grantee: Confidential Sale Date: 9/15/1997 (Proposed Closing Date) Sale Price: $6,490,000 Cash Equiv Price: $6,490,000 Terms: Cash to seller Recorded: Sale Pending Verified With: Scott Holcombe, Arlington Properties - Developer (205) 328-9600 Verified By: Harris Hollans, H.J. Porter & Associates Date Verified: 04/02/1997 Rights Conveyed: Leased fee Land Size: 12.49 Acres Access/Visibility: Good/Good Highest & Best Use: Neighborhood shopping center H.J. Porter & Associates, Inc. MARKET APPROACH - (CONTINUED) 58 SALE #5 (CONTINUED) Parking: 359 Spaces Parking Ratio: 4.63/1,000 sq. ft. Building Size: 76,365 Sq. Ft.(NRA) Land:Bldg Ratio 7.1:1 Year Built: 1997 Condition: Good Building Description: Red brick veneer front over concrete block walls. Reinforced concrete slab. Single ply membrane roof. Raised seam metal and canvas awning. Anchors: Winn-Dixie (51,282 sq. ft.) and Revco Drugs (9,240 sq. ft.) Anchor - Sq. Ft.: 60,522 Anchor %: 79.25 Local: Typical national, regional, and local tenants Local - Sq. Ft.: 15,843 Local %: 20.75 Lease Information: Winn-Dixie rent is $8.00 per sq. ft.; Revco rent is $8.00 per sq. ft.; local tenant rents are $12.50 per sq. ft. Anchor expense contributions were estimated at $0.99 per sq. ft. with local tenants at $1.38 per sq. ft. ANALYSIS (1|2|3) (*)Source TOTAL $ AMOUNT $ PER SF (GBA) (S\A\P) Potential Gross Income $756,072 $9.90 (A\E\F) Vac & Credit Loss: $17,613 $0.23 ------- ----- (A\E\F) Effec. Gross Income: $738,459 $9.67 (A\E\F) Less Expenses: $112,823 $1.48 -------- ----- (A\E\F) Net Oper. Income $625,636 $8.19 ================================================================================ Field 1: S=Seller B=Buyer A=Appraiser Field 2: A=Actual E=Estimated Field 3: P=Prior Year F=Year Following ================================================================================ INDICATORS OF VALUE: Price Per SF (NRA) $84.99 PGIM: 8.58 EGIM: 8.79 R(o): 9.64% Expense Ratio: 15.28% H.J. Porter & Associates, Inc. MARKET APPROACH - (CONTINUED) 59 SALE #5 (CONTINUED) Remarks: The total gross building area of the shopping center is 77,557 sq. ft. Local tenant space was projected to be 100% leased prior to completion. The sale of the property was also negotiated prior to completion. Estimated completion date was July, 1997. There were five out-parcel lots at the center which were not included in the transaction. Significant site work was necessary for development. Estimated site work totalled $85,000 per acre. Out-parcels were marketed to Wendy's, New York Bagel, and Boston Market. H.J. Porter & Associates, Inc. [GRAPHICS OMITTED] IMPROVED SALES MAP MARKET APPROACH - (CONTINUED) 60 The sales detailed above are compared and adjusted to the subject for pertinent items of difference as: =============================================================================================================================== SUMMARY OF IMPROVED SALES AND ADJUSTMENTS =============================================================================================================================== Comp. Number Subject #1 #2 #3 #4 $5 ------------------------------------------------------------------------------------------------------------------------------- Center Name Vill @ Lorna Vill @ Plaza North Hixson Hillcres+ Moody Center Grantor Lorna Prop. FS Partners Plaza, Ltd North Hixson Hill. Ltd Grantee Birm. Realty Birm Realty Amberjack. Amberjack. Conf Ltd Ltd Cash Eq. Sale Price $11,200,000 $4,485,000 $5,850,000 $4,760,000 $6,490,000 Date of Sale 8/6/97 5/26/96 2/14/96 12/21/94 3/4/96 7/1/97 Gross Leasable Area 25,350 141,444 60,800 79,400 63,270 76,365 Sale Price/Sq. Ft. $79.18 $73.77 $73.68 $75.23 $84.99 NOI $133,676 $1,107,768 $436,470 $560,113 $485,493 $625,636 NOI per Sq. Ft. $5.27 $7.83 $7.18 $7.05 $7.67 $8.19 EGIM 7.55 8.56 8.71 7.80 8.79 =============================================================================================================================== ADJUSTMENTS #1 #2 #3 #4 #5 ------------------------------------------------------------------------------------------------------------------------------- Conditions of Sale Normal Normal Normal Normal Normal $0.00 $0.00 $0.00 $0.00 $0.00 Market Conditions/Time 5.00% 11.0% 7.4% 13.1% 7.1% 0.5% Preliminary Adj. Price/Sq. Ft. $87.89 $79.21 $83.36 $80.59 $85.41 =============================================================================================================================== PHYSICAL DIFFERENCES #1 #2 #3 #4 #5 ------------------------------------------------------------------------------------------------------------------------------- NOI Adjustment -32.7% -26.5% -25.2% -31.3% -35.6% Overall Adjustment ($25.87) ($19.58) ($18.60) $23.53 ($30.29) =============================================================================================================================== FINAL ADJUSTED PRICE/SQ. FT. OF BLDG $62.02 $59.63 $64.75 $57.06 $55.12 =============================================================================================================================== The sales were adjusted to the subject for the following items: CONDITION OF SALE: No adjustment indicated. TIME: Considers an increase of 5% per year based on analysis of the overall capitalization rates of the comparable sales and range of rates from the five methods considered in the Income Approach. H.J. Porter & Associates, Inc. MARKET APPROACH - (CONTINUED) 61 NET OPERATING INCOME: The comparable sales were adjusted to the subject based on the difference in net operating income. As indicated in the following table, there is a direct relationship between the sale price per square foot and net operating income per square foot. =============================================== SALE NO. SP/SQ. FT. NOI/SQ. FT. =============================================== 1 $79.18 $7.83 2 $73.77 $7.18 3 $73.68 $7.05 4 $75.23 $7.67 5 $84.99 $7.64 =============================================== Subject NA $5.27 =============================================== The adjustment for NOI is based on the following formula: the subject's NOI per square foot is subtracted from the comparables estimated NOI per square foot and the difference is divided by the comparable's NOI per square foot. The adjusted sales present an adjusted range of value from $55.12 to $64.75 per square foot. Each of the sales was given relatively equal weight in the estimate of value on a per sq. ft. basis. Based on these adjusted sales, the subject property is valued by direct comparison as: VALUE INDICATION - MARKET APPROACH Price per Sq. Ft.: 25,350 Sq. Ft. x $58.00 per Sq. Ft.= $1,470,300 ROUNDED $1,470,000 H.J. Porter & Associates, Inc. MARKET APPROACH - (CONTINUED) 62 The Effective Gross Rent Multipliers (EGIM) derived from the above sales are highlighted as: ===================================================================== Sale No. EGIM Expense Ratio ===================================================================== 1 7.55 25.30% 2 8.56 16.70% 3 8.71 16.60% 4 7.80 20.40% 5 8.79 15.28% Subject NA 18.71% ===================================================================== The Effective Gross Income Multipliers of the four comparable sales range from 7.55 to 8.79. There is a direct correlation between operating expense ratios and EGIM's. Sales 2, 3, and 5 have lower operating expense ratios; Sales 1 and 5 have higher operating expense ratios. As the subject's forecasted operating expense ratio is 18.71 which is closer to Sales 2, 3 and 4, it would be considered reasonable to assume it would have an EGIM near the higher end of the range. The subject is part of a cross collateralized portfolio as discussed previously and would enjoy the benefits of such an association hence, a EGIM toward the higher end of the range would appear justified. Based on these sales, the subject is valued by EGIM as: VALUE INDICATION - MARKET APPROACH Effective Gross Income Multiplier $164,445 PGI x 8.75 = $1,439,000 CONCLUSION The two market indicators of value are correlated with greater weight given to adjusted sale price per square foot for a value by Market Approach of $1,460,000. H.J. Porter & Associates, Inc. 63 RECONCILIATION AND FINAL VALUE ESTIMATE Cost Approach ...................................................... $1,314,000 This approach is felt to be reliable, being based on a respected national cost service's figures as well as actual cost of other centers and the Developer's cost breakdown. The land value is based on commercial land sales from the subject's market area and is felt to be well supported. However, this approach does not mirror the actions of investors in properties similar to the subject. Therefore, this approach is given little consideration in the final value estimate. Income Approach .................................................... $1,485,000 This approach is felt to be most indicative of the subject's value. It best reflects current and projected market conditions as they relate to the subject and mirrors the actions of investors in today's market. Overall, this approach is afforded greatest consideration and is supported by the Market Approach. Market Approach .................................................... $1,460,000 This approach is based on the most recent sales of other neighborhood shopping centers and is reliant upon the direct sales comparison on a price per square foot basis, and the effective income multiplier method. This approach is afforded less consideration than the Income Approach. Based on the value indications summarized above, we are of the opinion that the subject's leased fee interest, has a market value, as of August, 6, 1997, of: ONE MILLION FOUR HUNDRED EIGHTY THOUSAND DOLLARS ($1,480,000) Divided As: Improvements $1,413,400 Land $ 66,600 ---------- Total $1,480,000 H.J. Porter & Associates, Inc. 64 CERTIFICATION We certify that, 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, unbiased professional analyses, opinions and conclusions. 3. Neither party signing this report has a present or prospective interest in the property that is the subject of this report, nor do they have any personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent on an action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of stipulated result, or the occurrence of a subsequent event. 5. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute, and the Uniform Standards of Professional Appraisal Practice as promulgated by the Appraisal Standards Board of the Appraisal Foundation. 6. The use of this report is subject to the requirements of the Appraisal Institute and the Alabama Real Estate Appraisers Board relating to review by its duly authorized representatives. 7. This assignment was made subject to regulations of the State of Alabama Real Estate Appraisers Board. The undersigned state certified appraiser has met the requirements of the board that allow this report to be regarded as a 'certified appraisal'. 8. Howard J. Porter, Jr., MAl, CCIM, is currently certified under the continuing education program of the Appraisal Institute. 9. Howard J. Porter, Jr., MAl, CCIM, has not made a personal inspection of the property that is the subject of this report. H.J. Porter & Associates, Inc. CERTIFICATION - (CONTINUED) 10. Glen E. Heinzelman, Associate, has made a personal inspection of the property that is the subject of this report. 11. No one provided significant professional assistance to the persons signing this report. 12. This appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. 13. Based upon the foregoing investigations and analysis, it is our opinion that the subject property has a market value estimate as of August 6, 1997: ONE MILLION FOUR HUNDRED EIGHTY THOUSANDS DOLLARS ($1,480,000) /s/Howard J. Porter 11/13/97 ------------------------------------------ --------- Howard J. Porter, Jr., MAI, CCIM Date Certified General Real Property Appraiser Alabama Certificate #G51 /s/Glen E. Heinzelman ------------------------------------------ --------- Glen E. Heinzelman, Associate Date Licensed Real Property Appraiser Alabama Certificate #L12 H.J. Porter & Associates, Inc. EXHIBITS Location Map ................................................. Facing Page 4 Tax Map Segments ....................................... Facing Page 6 and 7 State Map .................................................... Facing Page 9 Site Plan ....................................................Facing Page 15 Subject Photographs ..........................................Facing Page 16 Land Sales Map ...............................................Facing Page 27 Improved Sales Map ...........................................Facing Page 60 REAR EXHIBITS Korpacz Real Estate Investor Survey Assumptions and Limiting Conditions Qualifications State of Alabama Certification H.J. Porter & Associates, Inc. LEASE SUMMARY NO. 1. Tenant: B.C. Moore & Son's, Inc. Term: 15 Years Area: 16,900 Sq. Ft. Renewal Options: One, five year option Minimum Rent: $84,500 per year or $5.00 per Sq. Ft. Percentage Rent: 2% of gross exceeding breakpoint Expense Contributions: Tenant pays pro-rata share of taxes, insurance, and common area maintenance. Utilities: Paid by tenant Repairs by Landlord: Common area and all structural repairs Repairs by Tenant: HVAC, plumbing, electrical, sewage, and interior repairs Parking: Not less than 4.5 spaces per 1,000 sq. ft. NRA Subletting: Allowed with written permission from landlord Subordination: Lease is fully subordinated. H.J. Porter & Associates, Inc. LEASE SUMMARY NO. 2 Tenant: Harco Drugs, Inc. Term: 15 Years Area: 8,450Sq. Ft. Renewal Options: Four, five year options Minimum Rent: $63,375 per year or $7.50 per Sq. Ft. Percentage Rent: 2% of gross exceeding breakpoint Expense Contributions: Tenant pays pro-rata share of taxes, insurance, and common area maintenance. Utilities: Paid by tenant Repairs by Landlord: Common area and all structural repairs Repairs by Tenant: HVAC, plumbing, electrical, sewage, and interior repairs Parking: Not less than 4.5 spaces per 1,000 sq. ft. NRA Subletting: Allowed with written permission from landlord Subordination: Lease is fully subordinated. H.J. Porter & Associates, Inc. [KORPACZ - LETTERHEAD] NATIONAL STRIP SHOPPING CENTER MARKET The trend toward investors focusing on retail acquisitions continues this quarter. They believe that since the prices of other property types have been bid up, retail offers better relative values. "We're seeing the beginning of a run up in retail again," says one participant. The major interest tends to be on neighborhood and community centers. The optimum size of the ideal strip shopping center is 100,000 square feet to 130,000 square feet, but investors will also consider larger properties, especially if there is the potential to put in other anchor stores, such as Marshall's or T.J. Maxx. Although buyers prefer not to have centers that are smaller than 100,000 square feet, some portfolios may have centers as small as 70,000 square feet and as large as 200,000 square feet. "But there you have to take good with bad," comments a participant. The supply of available strip centers is plentiful, but it is hard to find those of optimum size that are anchored by a market-dominant grocery store. The importance of the grocery anchor is based on its capability to generate traffic in the center, which greatly enhances the landlord's ability to lease the in-line stores. The traffic increases in-line store sales volume, which mitigates the risk of ownership and provides the investor with the requisite yield from such a center. The size of the grocery anchor is also significant in its competitive position. Although the optimum size varies by market, in major metropolitan areas between 50,000 square feet and 75,000 square feet is ideal. In smaller markets a 40,000-square-foot store can be successful. However, the older 25,000-square-foot stores are considered functionally obsolete. Over the next 12 months, prices in the national strip shopping center market are expected to remain stable or drop slightly. Survey participants put the average decrease at 1.78%. Key indicators in the national strip shopping center market support the expectation of stagnant values for the year. Again this quarter, the changes in indicators are small. The average discount rate (IRR) increased 2 basis points (see Table 7). This follows a 10-basis-point decrease last quarter. The average overall cap rate (OAR) decreased 1 basis point to 9.84%. Highly desirable centers trade at cap rates between 8.00% and 10.00%, but most close at cap rates between 10.00% and 11.00%. Strip shopping centers have long been perceived to pose higher investment risk than regional malls, and both IRRs and going-in cap rates have reflected a premium for the higher risk. In fourth quarter 1996, however for the first time since we began tracking the national strip shopping center market in fourth quarter 1991, the average IRR fell below the national regional mall market average IRR. This quarter the rates are 11.55% and 11.75%, respectively. The strip shopping center OAR is still considerably higher than the regional mall rate. The spread between the two had narrowed during 1996. However, last quarter's 7-basis-point increase in the strip shopping center OAR widened the gap again. The current OAR premium is 127 basis points. It was 173 one year ago. By comparison, the national power center OAR is 9.58%, 26 basis points lower than the strip shopping center rate. Investors would like to acquire portfolios of neighborhood and community shopping centers that are located in one region, thus presenting the opportunity for management and leasing efficiencies. These are difficult to find, however, and are priced at a premium.|_| TABLE 7 NATIONAL STRIP SHOPPING CENTER MARKET SECOND QUARTER 1997 CURRENT LAST YEAR KEY INDICATORS QUARTER QUARTER AGO ================================ =================== ================ =============== Discount Rate (IRR)(a) ================================ =================== ================ =============== RANGE 10.00%-14.00% 10.00%-14.00% 10.00%-14.00% AVERAGE 11.55% 11.53% 11.74% CHANGE(Basis Points) -- +2 -19 ================================ =================== ================ =============== Overall Cap Rate (OAR)(a) ================================ =================== ================ =============== RANGE 8.25%-13.00% 8.25%-13.00% 8.25%-13.00% AVERAGE 9.84% 9.85% 9.90% CHANGE (Basis Points) -- -1 -6 ================================ =================== ================ =============== Market Rent Change Rate(b) ================================ =================== ================ =============== RANGE 0.00%-6.00% 0.00%-6.00% 0.00%-6.00% AVERAGE 2.83% 2.73% 2.60% CHANGE (Basis Points) -- +10 +23 ================================ =================== ================ =============== Expense Change Rate(b) ================================ =================== ================ =============== RANGE 0.00%-5.00% 0.00%-5.00% 2.00%-5.00% AVERAGE 3.58% 3.67% 3.99% CHANGE (Basis Points) -- -9 -41 ================================ =================== ================ =============== Residual Cap Rate ================================ =================== ================ =============== RANGE 8.25%-12.00% 8.25%-12.00% 8.25%-13.50% AVERAGE 9.92% 9.92% 10.13% CHANGE (Basis Points) -- 0 -21 a. Rate on unleveraged, all-cash transactions b. Initial rate of change 12============================================================================== [CTE ENVIRONMENTAL - LETTERHEAD] December 28, 1994 First Alabama Bank P.O. Box 511 Montgomery, Alabama 36134-0511 Attn: Mr. Spencer Knight Newton, Oldacre & McDonald 725 East Main Street Prattville, Alabama 36067 Attn: Mr. Tom Newton Re: Site Assessment/Review Winn Dixie/Harco Drugs Shopping Center Opp, Alabama Gentlemen; CTE Environmental has completed the requested site visit and environmental report review of the Phase 1 Environmental Assessment conducted jointly by Associated Testing Laboratory and Gallett & Associates, Inc. The purpose of this letter is to verify that the previously mentioned report is still valid and that, since March 25, 1992, no environmental hazards have been introduced onto the site or adjacent sites. Our investigation began with a review of the existing site through a personal visit by our engineer. The site has changed in physical appearance since 1992. Many cubic yards of soil has been excavated and hauled away from the site to prepare the construction site for a future Winn Dixie and Harco Drugs Store. The preparation of the site has improved the overall environmental issue since any potential surface contaminant has been removed leaving bare, undisturbed earth. No off-site soils have been used at the site. The parcel of land to the Northwest at the intersection of Perry Store Road and U.S. Highway 331 is now occupied by a new Burger King Restaurant. A new McDonald's Restaurant occupies the lot to the Southwest of the Winn Dixie parcel and across U.S. 331. All other references in the report of 1992, are basically correct as to surrounding properties with the exception of the Independant Service Station to the Southeast of the site. It could no longer be located. 2821 Chestnut Street Montgomery Alabama 36107 (205) 834-4719 P.O. Box 6325 36106 Winn Dixie/Harco, Opp, AL December 28, 1994 Page 2 State, County, and local files remain free of site related environmental concerns. The Tom Thumb Amoco Convenience Store is currently registered on the Alabama Department of Environmental Management Trust Fund Program (a State Insurance program). No reported leaks or spills have occurred at this site. The store is in basic compliance with Federal and State laws at this time. Other paragraphs contained in the Associated Testing/Gallet & Associates report concerning the Geology, Hydrogeology, Property Ownership, and Aerial Photographs have not changed and are still applicable to a current sale of the property. It is our opinion that the site is environmentally clear of contamination. Our survey is the result of conditions at the site on the date of this report and does not extend to contamination introduced at a later date by other parties. Very Truly yours; CTE Environmental /s/Jerry W. Gilbert ----------------------- Jerry W. Gilbert, P.E. President Attachment cc: Ruston, Stakely, Johnson & Garrett P.O. Box 270 Montgomery, Alabama 36101-0270 Attn: Mr. Jesse Williams, Attorney [SEAL] [ASSOCIATED TESTING LABORATORY, INC. - LETTERHEAD] Montgomery, AL PRELIMINARY ENVIRONMENTAL SITE ASSESSMENT (PHASE I) WINN DIXIE /HARCO DRUGS SHOPPING CENTER OPP, ALABAMA JOB # 92-172 Prepared For: NEWTON DEVELOPMENT CORP 725 East Main Street Prattville, Alabama ASSOCIATED TESTING LABORATORY, INC. P.O. Box 250954 Montgomery, AL 36125-0954 PHONE: (205) 834-9861 3029 Fairwest Place Voice Beeper 269-7361 March 25, 1992 Montgomery, AL 36108 NEWTON DEVELOPMENT CORP. 725 East Main Street Prattville, Alabama 36067 Attn: Mr Tom Newton Re: Preliminary Environmental Site Assessment (Phase I) Winn Dixie/Harco Drugs Shopping Center Opp, Alabama Dear Mr Newton: ASSOCIATED TESTING LABORATORY, INC. AND GALLETT & ASSOCIATES, INC. jointly have completed the authorized environmental site assessment for above referenced site. This report describes our study and presents our findings. The site was inspected by an ATL Engineering Technician for the purpose of evaluating any past or present environmental liabilities which may be associated with the present ownership of the subject property and with the surrounding area. In addition, regulatory and historical information was reviewed to determine past site conditions and usage. Specifically, potential enviromental liabilities which were addressed in this study include: local past and present waste disposal practices, presence of underground storage tanks or electrical equipment, unusual storage conditions, and stressed vegitation growth. Based on our inspection and data review, we found no evidence to suggest the presendence of hazardous materials or the past disposal of hazardous materials on the site. We appreciate the opportunity to be of service to you on this project. If you have any questions pertaining to this report or if we may be of service to you in the future, please do not hesitate to contact us. Very truly yours, /s/H.W. Carr, Jr. /s/William W. Cooch --------------------------------- ------------------------ ASSOCIATED TESTING LABORATORY, INC. GALLET & ASSOCIATES, INC. H.W. Carr, Jr. William W. Cooch President Manager, Environmental Services Materials Testing and Inspection Environmental Site Studies / Geo Technical Investigations TABLE OF CONTENTS 1.0 INTRODUCTION 1.1 PURPOSE, SCOPE, AND AUTHORIZATION....................................................... 1.2 INFORMATION SOURCES..................................................................... 2.0 SITE DESCRIPTION................................................................................. 3.0 GEOLOGY AND HYDROGEOLOGY AND SUBSURFACE INVESTIGATION............................................ 3.1 GEOLOGY................................................................................. 3.2 HYDROGEOLOGY............................................................................ 3.3 GEOTECHNICAL INVESTIGATION RESULTS...................................................... 4.0 ASSESSMENT PROCEDURES............................................................................ 4.1 PROPERTY OWNERSHIP RECORDS REVIEW....................................................... 4.2 GOVERNMENT REGULATORY/EMERGENCY RESPONSE RECORDS REVIEW 4.3 AERIAL PHOTOGRAPH REVIEW................................................................ 4.4 INTERVIEWS.............................................................................. 4.5 WALKING SURVEY.......................................................................... 5.0 SUMMARY AND CONCLUSIONS.......................................................................... 6.0 QUALIFICATIONS................................................................................... APPENDIX PLATE #1SITE LOCATION MAP PLATE #2 SITE PHOTOGRAPHS PLATE #3 BOREING LOCATIONS 1.0 INTRODUCTION 1.1 PURPOSE, SCOPE AND AUTHORIZATION The purpose of this assessment was to investigate potential liabilities associated with the site and/or surrounding property. The scope of our study included review of available information and records, visual inspection of the site and surrounding property, and preparation of this report. This work was authorized by Mr. Tom Newton, NEWTON DEVELOPMENT CORP., 725 E. Main Street, Prattville, Alabama. 1.2 INFORMATION SOURCES Research of land use and environmental conditions of the site and surrounding property included utilization of the following sources: (1) Geological and hydrogeological information obtained from publications of Geological Survey of Alabama. (2) Records of past ownership obtained from Title Information prepared by Mr. Mark Murphy, MURPHY, MURPHY & BUSH, 5 E. Court Square, Andalusia, Alabama, Attorneys. (3) United States Environmental Protection Agency (EPA) National Priority List (NPL) of known environmentally contaminated sites which will be or are receiving federal assistance in remediation. (4) United States Environmental Protection Agency (EPA) Comprehensive Environmental Response, Compensation and Liability List (CERCLIS) of sites suspected to contain contamination. (5) United States Environmental Protection Agency (EPA) Hazardous Waste Data Management System (HWDMS) List of facilities involved in the treatment, storage and disposal of hazardous waste. (6) United States Environmental Protection Agency (EPA) Facility Index System (FINDS) List of sites or facilities subject to EPA regulations. (7) 1975 aerial photographs of the study area examined at Covington County Mapping Office and 1985 aerial photographs examined at USDA Soil Conservation Service, Andalusia, Alabama. (8) Personal interviews with the following: a. Mr. Lawrence Bowden, Deputy Director of State of Alabama Emergency Management Agency b. Mr. Gary Morrison, Covington County Director of Emergency Management c. Mr. G. Waltney, Opp Fire Chief, Opp, Alabama d. Mr. Charles McGowan, Opp Utilities Board e. Mr. Rick Moore, Amoco Oil Co. Distributor, owner of adjacent property f. Mr. Breedlowe, OPP BUILDING MATERIALS, current owner of property g. Mr. Rigas Logiotatos, owner of adjacent property including service station. (9) A walking survey and inspection of the site and surrounding area by an ATL professional. 2.0 SITE DESCRIPTION STATE OF ALABAMA COVINGTON COUNTY Tract No. 1 Description Commence at the Southwest corner of the Southeast 1/4 of the Southeast 1/4 of Section 28, Township 4 North, Range 18 East, Covington County, Alabama, said point being the point of beginning. Thence North 00 degrees 09' 54" East a distance of 470.70 feet to an iron pin lying on the South right-of-way line of Perry Store Road; thence along said South right-of-way line South 84 degrees 55' 00" East a distance of 210.00 feet to an iron pin; thence leaving said right-of-way line South 00 degrees 14' 22" West a distance of 679.33 feet to an iron pin; thence. North 85 degrees 16' 12" West a distance of 209.01 feet to an iron pin; thence North 00 degrees 09' 54" East a distance of 210.00 feet to an iron pin and the point of beginning; said Tract No. 1 lying in the Southeast 1/4 of the Southeast 1/4 of Section 28, and the Northeast 1/4 of the Northeast 1/4 of Section 33, Township 14 North, Range 18 East, Covington County, Alabama and containing 3.26 acres, more or less. STATE OF ALABAMA COVINGTON COUNTY Tract No. 2 Description Commence at the Southwest corner of the Southeast 1/4 of the Southeast 1/4 of Section 28, Township 4 North, Range 18 East, Covington County, Alabama, said point being the point of beginning. Thence North 89 degrees 57' 06" West a distance of 163.66 feet to an iron pin lying on the East right-of-way line of U.S. Highway 331; thence along said East right-of-way line North 13 degrees 26' 41" West a distance of 55.70 feet to an iron pin and P.C. of a curve to the left; thence along the chord bearing of said curve to the left North 23 degrees 19' 53" West a chord distance of 249.58 feet to an iron pin lying on the East right-of-way line of U.S. Highway 331; thence leaving said right-of-way line North 54 degrees 25' 00" East a distance of 42.24 feet to an iron pin; thence North 04 degrees 06' 00" West a distance of 97.50 feet to an iron pin; thence North 08 degrees 25' 00" West a distance of 89.71 feet to an iron pin lying on the South right-of-way line of Perry Store Road; thence along said right-of-way line South 84 degrees 55' 00" East a distance of 263.60 feet to an iron pin; thence leaving said right-of-way line South 00 degrees 09' 54" West a distance of 470.70 feet to an iron pin and the point of beginning, said Tract No. 2 lying in the Southwest 1/4 of the Southeast 1/4 of Section 28, Township 4 North, Range 18 East, covington County, Alabama and containing 2.51 acres, more or less. 3.1 GEOLOGY The project site is underlain by Residuum, which consists of white to moderate reddish-orange sandy clay and clay with scattered layers of gravelly medium to coarse sand, fossiliferous chert and limestone boulders, and limonitic sand masses. The Residuum was derived from the solution and collapse of limestone in the Jackson Group and Oligocene Series and the slumping of Miocene sediments. 3.2 HYDROGEOLOGY The site slopes from east to west generally with a drainage slough running along the south property line. The north side is bounded by Perry Store Road. A drainage swell runs between survey site and small parcel on northwest corner. 3.3 GEOTECHNICAL INVESTIGATION REPORT There was a Geo-Technical Study made for the proposed Shopping Center performed by ASSOCIATED TESTING LABORATORY, INC., on June 17, 1991. A review of this report does not indicate the presence of any contamination on the site. 4.0 ASSESSMENT PROCEDURES 4.1 PROPERTY OWNERSHIP REVIEW The study site is currently owned by OPP BUILDING & SUPPLY INC. which has owned the site since 1977. Ownership of a portion of the property came from J. M. Breedlowe Estate while another portion of the property was acquired from Marie Helms who obtained her portion of the property from Helms, Reiser & Williams in 1900. This information does not indicate any commercial use of the property even though present owner is a business firm. The adjoining property is a mixture of undeveloped farm land, residential and commercial property with one light manufacturing business (textile) within 1/2 mile of site. 4.2 GOVERNMENT REGULATORY/EMERGENCY RESPONSE RECORDS REVIEW Following are the pertinent data obtained from the government regulatory/emergency response records: (1) EPA NPL List - No NPL sites listed in Opp within one-half mile of the study site. (2) EPA CERCLIS List - No CERCLIS sites listed in Opp within one-half mile of the study site. (3) EPA HWDMS List - HWDMS lists no sites in Opp within one-half mile of the study site. (4) Facilities located within one-half mile of the study site which are not currently shown on EPA HWDMS and FINDS Lists that may generate contaminants: a. TOM THUMB AMOCO CONVENIENCE STORE adjacent to southeast corner of site b. INDEPENDENT SERVICE STATION adjacent to southeast corner of site c. HELMS OIL CO. (TEXACO DISTRIBUTOR) west of site 1/4 mile on north side of Highway 331 South d. FINA OIL CO. DISTRIBUTOR west of site 1/4 mile on south side of Highway 331 South 4.3 AERIAL PHOTOGRAPH REVIEW Aerial photographs taken in 1975 on file at the Covington County Mapping Office and photographs taken in 1985 on file at USDA Soil Conservation Service, Andalusia, Alabama, were examined and no indication of any widespread dumping of contaminants was found either on the site or the surrounding property. 4.4 WALKING SURVEY The project site is located in the southeast quadrant of U.S. 331 and Perry Store Road in Opp, Alabama. The site generally slopes from east (E1 325) to west (E1-295). Proposed for construction is a Winn Dixie and Harco Drugs along with smaller retail shops and associated parking and drive areas. The site is bounded on the east by undeveloped farm land, residential and commercial property. On the south is an Amoco Service Station adjacent to the southwest corner and commercial and residential property. The west is bounded by Highway 331 South and commercial property. On the north is undeveloped land, residential and commercial property. Adjacent to the site at the northwest corner is an independent service station and other small commercial sites. Further to the west is a small textile manufacturing facility as well as two oil company distributors with above ground storage tanks. Our investigation did not indicate the presence of any contamination on the site or on the adjoining property. 5.0 SUMMARY CONCLUSION The site location, as described in Section 4.4 above, in Opp, Alabama was evaluated for environmental liabilities in a Phase I Environmental Site Assessment at the request of Mr. Tom Newton of NEWTON DEVELOPMENT CORP., 725 East Main Street, Prattville, Alabama. The evaluation was accomplished by maps, aerial photographs, historical data, by reviewing pertinent environmental regulatory records, personal interviews and a physical inspection of the site and surrounding areas. Our evaluation focused on potential liabilities associated with the past and present usage. Personal property owners of adjacent service stations state that there have been no spills on their property and that the underground storage tanks are checked for leaks as directed by ADEM and the tanks are in compliance with current ADEM Regulations. Based on this assessment, we have found no evidence to suggest that the subject property or the surrounding properties were used for hazardous waste disposal or for industrial purposes nor that any environmentally regulated or investigated sites have adversely affected the site, thereby making it unnecessary to perform further investigation (Phase II Study). 6.0 QUALIFICATIONS Our evaluation of the environmental conditions at this site is based on the previously available information and the data obtained during research and field study. These services have been performed in accordance with generally accepted standards of performance for this level of assessment. Our conclusions are limited to the surface conditions only and the subsurface soil and/or groundwater concerning contamination from hazardous substances are unknown. ATL is not responsible for the conclusions or opinions made by others based on the findings of this report. WINN-DIXIE/HARCO DRUG SHOPPING CENTER PLATE # 1 SITE LOCATION MAP [GRAPHICS OMITTED] VICINITY MAP WINN DIXIE/HARCO DRUGS SHOPPING CENTER PLATE # 2 [GRAPHICS OMITTED] [PHOTOGRAPHS} WINN-DIXIE/HARCO DRUG SHOPPING CENTER PLATE # 3 [GRAPHICS OMITTED] BOREING LOCATION PLAN [GRAPHICS OMITTED] [PHOTOGRAPHS} [GRAPHICS OMITTED] [PHOTOGRAPHS} [GRAPHICS OMITTED] [PHOTOGRAPHS} [GRAPHICS OMITTED] [PHOTOGRAPHS} LEASE SUMMARY NO. 1 Tenant: B.C. Moore & Son's, Inc. Term: 15 Years Area: 16,900 Sq. Ft. Renewal Options: One, five year option Minimum Rent: $84,500 per year or $5.00 per Sq. Ft. Percentage Rent: 2% of gross exceeding breakpoint Expense Contributions: Tenant pays pro-rata share of taxes, insurance, and common area maintenance. Utilities: Paid by tenant Repairs by Landlord: Common area and all structural repairs Repairs by Tenant: HVAC, plumbing, electrical, sewage, and interior repairs Parking: Not less than 4.5 spaces per 1,000 sq. ft. NRA Subletting: Allowed with written permission from landlord Subordination: Lease is fully subordinated. LEASE SUMMARY NO. 2 Tenant: Harco Drugs, Inc. Term: 5 Years Area: 8,450Sq. Ft. Renewal Options: Four, five year options Minimum Rent: $63,375 per year or $7.50 per Sq. Ft. Percentage Rent: 2% of gross exceeding breakpoint Expense Contributions: Tenant pays pro-rata share of taxes, insurance, and common area maintenance. Utilities: Paid by tenant Repairs by Landlord: Common area and all structural repairs Repairs by Tenant: HVAC, plumbing, electrical, sewage, and interior repairs. Parking: Not less than 4.5 spaces per 1,000 sq. ft. NRA Subletting: Allowed with written permission from landlord Subordination: Lease is fully subordinated. ASSUMPTIONS AND LIMITING CONDITIONS 1. COPIES, PUBLICATION, DISTRIBUTION, USE OF REPORT: Possession of this report or any copy thereof does not carry with the right of publication, nor may it be used for other than its intended use. The report may not be used for any purpose by any persons or corporation other than the client or the party to whom it is addressed or copied without the written consent of the appraiser, and then only in its entirety. Neither all nor any part of the contents of this report shall be conveyed to the public through advertising, public relations efforts, news, sales, or other media, without the written consent and approval of the appraiser, nor may any reference be made in such a public communication to the Appraisal Institute or the MAI designation. 2. CONFIDENTIALITY: The appraiser may not divulge the material (evaluation) contents of the report, analytical findings or conclusions, or give a copy of the report to anyone other than the client or his designee as specified in writing except as may be required by the Appraisal Institute as they may request in confidence for ethics enforcement, or by a court of law or body with the power of subpoena. This appraisal is to be used only in its entirety and no part is to be used without the whole report. All conclusions and opinion concerning the analysis are set forth in the report and were prepared by the Appraiser whose signature appears on the appraisal report, unless indicated as "Review Appraiser". No change of any item in the report shall be made by anyone other than the Appraiser and/or officer of the firm. The Appraiser and firm shall have no responsibility if any such unauthorized change is made. 3. INFORMATION USED: No responsibility is assumed for accuracy of information furnished by or from others, the client, his designee, or public records. We are not liable for such information or the work of possible subcontractors. The comparable data relied upon in this report has been confirmed with one or more parties familiar with the transaction or from affidavit; all are considered appropriate for inclusion to the best of our factual judgement and knowledge. H.J. Porter & Associates, Inc. ASSUMPTIONS AND LIMITING CONDITIONS - (CONTINUED) 4. TESTIMONY, CONSULTATION, COMPLETION OF CONTRACT FOR APPRAISAL SERVICES: The contract for appraisal, consultation or analytical service, are fulfilled and the total fee payable upon completion of the report. The appraiser or those assisting in the preparation of the report will not be asked or required to give testimony in court or hearing because of having made the appraisal, in full or in part, nor engage in post appraisal consultation with client or third parties except under separate and special arrangement and at additional fee. 5. EXHIBITS: The sketches and maps in this report are included to assist the reader in visualizing the property and are not necessarily to scale. Various photos, if any, are included for the same purpose and are not intended to represent the property in other than actual status, as of the date of the photos. Site plans are not surveys unless shown from separate surveyor. 6. LEGAL, ENGINEERING, FINANCIAL, STRUCTURAL, OR MECHANICAL NATURE HIDDEN COMPONENTS, SOIL: No responsibility is assumed for matters legal in character or nature, nor matters of survey, nor of any architectural, structural, mechanical, or engineering nature. No opinion is rendered as to the title, which is presumed to be good and merchantable. The property is appraised as if free and clear, unless otherwise stated in particular parts of the report. The legal description is assumed to be correct as used in this report as furnished by the client, his designee, or as derived by the appraiser. The appraiser has inspected as far as possible, by observation, the land and the improvements thereon; however it was not possible to personally observe conditions beneath the soil or structural, or other components. We have not critically inspected mechanical components within the improvements and no representations are made herein as to these matters unless specifically stated and considered in the report. The value estimate considers there being no such conditions that would cause a loss of value. The land or the soil of the area being appraised firm, however subsidence in the area is unknown. The appraiser does not warrant against this condition or occurrence of problems arising from soil conditions. H.J. Porter & Associates, Inc. ASSUMPTIONS AND LIMITING CONDITIONS - (CONTINUED) The appraisal is based on there being no hidden, unapparent, or apparent conditions of the property site, subsoil, or responsibility is assumed for any such conditions or for any expertise or engineering to discover them. All mechanical components are assumed to be in operable condition and status standard for properties of the subject type. Conditions of heating, cooling, ventilating, electrical and plumbing equipment is considered to be commensurate with the condition of the balance of the improvements unless otherwise stated. No judgement is made as to adequacy of insulation, type of insulation, or energy efficiency of the improvements or equipment. 7. RELATING TO THE AMERICAN WITH DISABILITIES ACT: The Americans with Disabilities Act ("ADA") became effective January 26, 1992. The appraisers have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since there is no direct evidence relating to this issue, possible non-compliance with the requirements of ADA in estimating the value of the property has not been considered. 8. LEGALITY OF USE: The appraisal is based on the premise that, there is full compliance with all applicable federal, state and local environmental regulations and laws unless otherwise stated in the report; further that all applicable zoning, building, and use regulations and restrictions of all types have been complied with unless otherwise stated in the report; further, that all applicable zoning, building, and use regulations and restrictions of all types have been complied with unless otherwise stated in the report; further, it is assumed that all required licenses, consents, permits, or other legislative or administrative authority, local, state, federal and/or private entity or organization have been or can be obtained or renewed for any use considered in the value estimate. 9. COMPONENT VALUES: The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. The separate valuations for land and building must not be used in conjunction with any other appraisal and are invalid if so used. H.J. Porter & Associates, Inc. ASSUMPTIONS AND LIMITING CONDITIONS - (CONTINUED) 10. AUXILIARY AND RELATED STUDIES: No environmental or impact studies, special market study or analysis, highest and best use analysis study or feasibility study has been requested or made unless otherwise specified in an agreement for services or in the report. The appraiser reserves the unlimited right to alter, amend, revise or rescind any of the statements, findings, opinions, values, estimates, or conclusions upon any subsequent study or analysis or previous study or analysis subsequently becoming known to him. 11. DOLLAR VALUES, PURCHASING POWER: The market value estimated, and the costs used, are as of the date estimate of value. All dollar amounts are based on the purchasing power and price of the dollar as of the date of the value estimate. 12. INCLUSIONS: Furnishings and equipment of business operations except as specifically indicated and typically considered as a part of real estate, have been disregarded with only the real estate being considered in the value estimate unless otherwise state. 13. PROPOSED IMPROVEMENTS, CONDITIONED VALUE: Improvements proposed, if any, on or off-site, as well as any repairs required are considered, for purpose of this appraisal to be completed in good and workmanlike manner according to information submitted and/or considered by the appraiser. In cases of proposed construction, the appraisal is subject to change inspection of property after construction is completed. This estimate of market value is as of the date shown, as proposed, as if completed and operating at levels shown and projected. 14. VALUE CHANGE, DYNAMIC MARKET, INFLUENCES: The estimated market value is subject to change with market changes over time; value is highly related to exposure, time, promotional effort, terms motivation, and conditions surrounding the offering. The value estimate considers the productivity and relative attractiveness of the property physically and economically in the marketplace. The "Estimate of Market Value" in the appraisal report is not based in whole or in part upon the race, color or national origin of the present owners or occupants of the properties in the vicinity of the property appraised. H.J. Porter & Associates, Inc. ASSUMPTIONS AND LIMITING CONDITIONS - (CONTINUED) In cases of appraisals involving the capitalization of income benefits, the estimate of market value is a reflection of such benefits and appraiser's interpretation of income and yields and other factors derived from general and specific market information. Such estimates are as of the date of the estimate of value; they are thus subject to change if the market is naturally dynamic. 15. MANAGEMENT OF THE PROPERTY: It is assumed that the property which is the subject of this report will be under prudent and competent ownership and management; neither inefficient nor super efficient. 16. CONTINUING EDUCATION CURRENT: The Appraisal Institute conducts a voluntary program of continuing education for its designated members. MAIs and RMs who meet the minimum of this program are awarded periodic certification. I am currently certified under the Appraisal Institute Voluntary Continuing Education Program. 17. FEE: The fee for this appraisal or study is for the service rendered and not for the time spent on the physical report. 18. AUTHENTIC COPIES: The authentic copies of this report are signed in blue ink. Any copy that does not have an original signature is unauthorized and may have been altered. 19. HAZARDOUS MATERIALS: Unless otherwise stated in this report, the appraiser signing this report has no knowledge concerning the presence of urea-formaldehyde foam insulation or asbestos containing material in existing improvements; if such materials are present the value of the property may be adversely affected and reappraisal at additional cost necessary to estimate the effects of such material. 20. Unless otherwise noted within the attached report, there are no items of FF&E included in the reported value. Any equipment included with the property in the value are only those items that are considered as an integral part of the realty, even though technically they could be legally considered as personalty. H.J. Porter & Associates, Inc. ASSUMPTIONS AND LIMITING CONDITIONS - (CONTINUED) 21. NOTE: ACCEPTANCE OF, AND/OR USE OF, THIS APPRAISAL REPORT CONSTITUTES ACCEPTANCE OF THE ABOVE CONDITIONS. H.J. Porter & Associates, Inc. PROFESSIONAL QUALIFICATIONS OF GLEN E. HEINZELMAN CURRENT STATUS Glen E. Heinzelman is involved in the appraisal of and consulting with owners of income producing real estate. He is an Associate Appraiser with H. J. Porter & Associates, Inc. with offices located at: H. J. Porter & Assoc., Inc. 631 Stage Road/P.O. Box 28 Auburn, AL 36830 (205)826-8682 H. J. Porter & Assoc. of Birmingham #14 Office Park Circle Suite 230 Birmingham, AL 35223 (205) 871-3600 H. J. Porter & Assoc. of Montgomery 235 S. Court Street Montgomery, AL 36104 (205) 262-8331 PROFESSIONAL AFFILIATIONS Mr. Heinzelman is an MAI candidate for membership in the Appraisal Institute; Candidate No. M-921950. Alabama Licenced Real Property Appraiser - Certificate No. L12 Georgia Licenced Real Property Appraiser - Certificate No. 6165 Licenced Real Estate Salesperson - State of Alabama PROFESSIONAL EDUCATION STATUS These courses include: Course Sponsor Location ------ ------- -------- Real Estate Appraisal AIREA Arizona State University Principles Basic Valuation Procedures AIREA Arizona State University Capitalization Theory & AIREA Arizona State University Techniques Advanced Capitalization Appraisal Institute Birmingham, Alabama USPAP Parts A & B Appraisal Institute Birmingham, Alabama Advanced Applications Appraisal Institute Tuscaloosa, Alabama Report Writing & Valuation Appraisal Institute Plano, Texas Analysis Mr. Heinzelman has also taken various seminars offered by the AIREA, IR/WA, and others. PROFESSIONAL EXPERIENCE The scope of Mr. Heinzelman's experience includes the appraisal of commercial, multi-family residential, industrial, farm, condemnation, special use properties, marketability, feasibility, and reuse analysis, appraisal review, and consulting. Geographic areas of experience include the States of Alabama, Arizona, California, Florida, Georgia, Mississippi, Nevada, and Tennessee. Qualified as expert witness in Federal and Circuit Courts in the States of Arizona, California, and Nevada. H.J. Porter & Associates, Inc. PROFESSIONAL QUALIFICATIONS OF HOWARD J. PORTER, JR., MAI, CCIM CURRENT STATUS Howard J. Porter, Jr., is involved in the appraisal of and consulting with owners of income producing real estate. He is President of H J Porter & Associates, Inc. with offices located at: H. J. Porter & Assoc., Inc. 631 Stage Road/P.O. Box 28 Auburn, AL 36830 (205)826-8682 H. J. Porter & Assoc. of Birmingham #14 Office Park Circle Suite 230 Birmingham, AL 35223 (205) 871-3600 H. J. Porter & Assoc. of Montgomery 235 S. Court Street Montgomery, AL 36104 (205) 262-8331 PROFESSIONAL AFFILIATIONS Mr. Porter is a member of the Appraisal Institute and holds the MAI Designation (Certificate Number 5924). He has served as a member of the SREA Young Advisory Council (1977 & 1978). He served as President of the Birmingham SREA Chapter #106 (1983) and the Montgomery SREA Chapter #127 as President (1986-1987). He is a Realtor(R) Member and past Vice-President of the Lee County Association of Realtors(R), Lee County, AL. He holds the CCIM designation conferred by the Commercial Investment Real Estate Council of the National Association of Realtors(R). He is a member of the International Right of Way Association (Alabama Chapter #26) and is a panel member of the American Arbitration Association. PROFESSIONAL EDUCATION STATUS Mr. Porter has taken courses leading to professional designation as offered by the Appraisal Institute (AIREA) and the Society of Real Estate Appraisers (SREA) now merged as The Appraisal Institute. Additionally, he has credit for courses offered by the Real Estate Securities and Syndication Institute (RESSI) the Urban Land Institute (ULI), and the International Right of Way Association (IR/WA), and the Commercial Investment Real Estate Institute. Mr. Porter has also taken various seminars offered by SREA, AIREA, RESSI, IR/WA, Institute of Real Estate Management, and others. The Appraisal Institute conducts a voluntary program of continuing education for its designated members. MAIs and RMs who meet the minimum standards of this program are awarded periodic educational certification. He is currently certified under the Institute's voluntary continuing education program. Mr. Porter is currently a Certified General Real Property Apprai