Table Of ContentSELF-CONTAINED APPRAISAL REPORT OF
The Irene Apartments
4701 Willard Avenue
Chevy Chase, MD 20815
EFFECTIVE DATE OF VALUE
January 1, 2008
PREPARED FOR
Terry R. Dunkin, MAI, CCIM, CRE
Senior Vice President
Colliers Pinkard Valuation Group
210 W. Pennsylvania Avenue Suite 310
Towson, MD 21204
Marie C. Moineau
Academic Adviser
The Edward St. John Department of Real Estate Johns Hopkins University
Carey Business School
Room 711, 100 North Charles Street
Baltimore, MD 21201
PREPARED BY
George “Robby” Robinson Jr.
3524 Soffit Place
Woodbridge, VA 22192
EFFECTIVE DATE OF REPORT
May 5, 2008
May 5, 2008
Terry R. Dunkin, MAI, CCIM, CRE
Senior Vice President
Colliers Pinkard Valuation Group
210 W. Pennsylvania Avenue Suite 310
Towson, MD 21204
Marie C. Moineau
Academic Adviser
The Edward St. John Department of Real Estate Johns Hopkins University
Carey Business School
Room 711, 100 North Charles Street
Baltimore, MD 21201
Re: The Irene Apartments
4701 Willard Avenue
Chevy Chase, MD 20815
Dear Mr. Dunkin,
Per your request, I have inspected the interior and exterior of the subject property, and performed the
necessary investigation and analyses in order to prepare a self-contained appraisal report on the
above-referenced property. The appraisal has been developed, and this report has been prepared,
with the intent of complying with the Uniform Standards of Professional Appraisal Practice (USPAP)
adopted by the Appraisal Standards Board of the Appraisal Foundation, FIRREA, and has also been
prepared in conformance with The Appraisal Institute’s guidelines for demonstration appraisal report
writing.
The subject’s Irene Apartments consists of a 16-story Class A- high-rise apartment building that is
situated on a 2.32-acres parcel in Chevy Chase Maryland. The property contains 530 rental units
(currently, 511 residential and 19 commercial units) and was constructed in 1966. At the time of
inspection, the improvements were considered to be in very good condition. As of the effective date
of value, the property was reportedly 99% occupied. The purpose of the appraisal is to estimate the
market value of the Fee Simple interest in the subject property on “As Is” basis as of January 1, 2008.
Market Value is defined in the appraisal report.
The intended use of this report is to satisfy the requirements of The Appraisal Institute as it pertains to
demonstration appraisal reports. As such, the intended user is The Appraisal Institute and its
representatives as well as Terry R. Dunkin, Johns Hopkins Adviser & Marie Moineau, Johns Hopkins
Adviser. In addition to the basic assumptions and limiting conditions in the forthcoming Introduction
Section of this report, the value conclusion is also subject to a few special assumptions and limiting
conditions, which are described in detail within this report.
Mr. Terry R. Dunkin, MAI, CCIM, CRE
Colliers Pinkard Valuation Group
May 6, 2008
Page 2
Reconciled “As Is” Value Conclusion
Based on my inspection of the referenced property and the investigations and analyses undertaken,
and subject to the basic and special assumptions and limiting conditions set forth in the
accompanying report, it is my opinion that the estimated “As Is” Market Value of the Fee Simple
Interest in the subject property as of January 1, 2008, is:
ONE HUNDRED SIXTY EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS
$168,500,000 ($329,700/unit or $226/SF-NRA)
The attached report is deemed a "Self-Contained Appraisal Report" as defined in Standards Rule 2-2
of USPAP. As such, it identifies and describes the real estate being appraised; states the real
property interest being appraised; states the purpose and function of the appraisal; defines the value
to be estimated; states the effective date of the appraisal and the date of the report; states the extent
of the process of collecting, confirming and reporting data; states all assumptions and limiting
conditions that affect the analyses, opinions and conclusions; describes the information considered,
the appraiser's opinion of highest and best use, the appraisal procedures followed, and the reasoning
that supports the analyses, opinions, and conclusions; and includes a signed certification in
accordance with USPAP Standards Rule 2-3.
This letter of transmittal should only be used in conjunction accompanying appraisal report in its
entirety. Any separation of the signature page of this transmittal letter or the Certificate of Value from
the accompanying report invalidates the conclusions found therein.
Respectfully Submitted,
George “Robby” Robinson Jr.
Associate Member of the
Appraisal Institute
Account #500525
TABLE OF CONTENTS
SECTION I: INTRODUCTION
Summary of Important Facts and Conclusions..................................................................................1
Certification........................................................................................................................................3
Basic Assumptions and Limiting Conditions......................................................................................5
Special Assumptions and Limiting Conditions...................................................................................8
SECTION II: MAPS AND PHOTOGRAPHS
SECTION III: GENERAL INFORMATION
Identification of the Property............................................................................................................25
Purpose of the Appraisal.................................................................................................................25
Intended Use and User of the Appraisal..........................................................................................25
Scope of Work.................................................................................................................................25
Property Rights Appraised...............................................................................................................26
Date of Value...................................................................................................................................26
Definition of Value............................................................................................................................26
Ownership History and Occupancy.................................................................................................26
SECTION IV: ECONOMIC AND MARKET ANALYSES
Washington, DC Regional Analysis.................................................................................................29
Montgomery County Analysis..........................................................................................................44
Neighborhood Analysis....................................................................................................................56
Multifamily Submarket Analysis.......................................................................................................60
SECTION V: PROPERTY DESCRIPTION
Site Description and Analysis..........................................................................................................77
Improvement Description and Analysis...........................................................................................80
Zoning and Land Use Plans............................................................................................................87
Real Estate Assessment and Taxes................................................................................................89
Highest and Best Use......................................................................................................................93
SECTION VI: VALUATION OF THE PROPERTY
Appraisal Process............................................................................................................................98
Income Capitalization Approach....................................................................................................100
Sales Comparison Approach.........................................................................................................161
Cost Approach...............................................................................................................................186
Final Reconciliation........................................................................................................................223
SECTION VII: ADDENDA
Definitions of Property & Submarket Ratings
Appraiser Qualifications
Subject Property Data (Rent Roll, Income/Expenses, Etc.)
Miscellaneous Exhibits
SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS
Effective Date of Value: January 1, 2008
Effective Date of Report: May 6, 2008
Date of Inspection: December 19, 2007 (and numerous other prior and subsequent
dates)
Property Location: The Irene Apartments
4701 Willard Avenue
Chevy Chase, MD 20815
Property Description: The Irene Apartments consists of a 16-story Class A high-rise
apartment building that is situated on a 2.23-acres parcel in
Chevy Chase Maryland. The property contains 530 rental units
(currently, 511 residential and 19 commercial units) and was
constructed in 1966. At the time of inspection, the improvements
were considered to be in very good condition. As of the effective
date of value, the property was 99% occupied. A detailed
breakdown of the various unit types and sizes at the subject is
shown in the chart below:
The Irene Apartments - Residential Unit Mix
Unit Type # of DU Avg SF* Total SF (NRA)
Studio 44 819 36,038
1 BR 129 1,072 138,245
2 BR 263 1,502 395,100
3 BR 75 2,059 154,454
Total/Weighted Avg. 511 1,417 723,837
* Weighted Average
Source: Pollin Properties
Property Rating: A-
Submarket Rating: Primary
Zoning: CBD-1 (Montgomery County)
Specific Subject Property Advantages:
1. The subject property is a “Class A-” high-rise apartment complex located within the Chevy
Chase/Bethesda submarket of Montgomery County. It maintains a good location on a quiet street
(Willard Avenue), while still having excellent access to Route 355 (Wisconsin Avenue), which is
located to the east of the property.
2. Solid occupancy history; high occupancy levels in the subject’s submarket coupled with limited
supply and the lack of developable sites in this area of suburban Washington, D.C. bode well for
rental rates.
3. The property is located within a highly desirable residential area of suburban Washington, D.C., as
convenient access to major employment centers, entertainment, Metrorail (Friendship Heights),
shopping and restaurants are afforded to those residing in this area. Chevy Chase is considered
one of Washington’s most prestigious suburbs.
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SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS
4. Submarket conditions are positive at present with occupancies averaging 93.2% for stabilized
properties. The sale market is aggressively bidding up prices to unprecedented levels via
substantially declining rate of return requirements from “feverish” buyer interest as well.
5. Excellent historical and on-going maintenance program exists.
6. The Montgomery County Sector Plan is in effect, which adds to local density and limits future
competition by preventing re-zonings or variances.
7. Access to Route 355, I-270, and I-495 is deemed excellent, as these roadways provide regional
access to and from major employment centers of the Washington, DC Metro area.
8. The subject property was originally constructed in 1966 and the improvements have been well
maintained and were in good condition at the time of inspection.
Specific Subject Property Disadvantages:
1. The current tenancy has many below market leases, which have been in place at the property for
many years. It is the understanding of this appraiser that many of these tenants are personal
friends/ acquaintances of ownership. This greatly affects the income potential of the subject
property, with current lease rates representing only +83% of market.
2. The older nature of the subject property (constructed 1966) slightly hinders the site’s overall
appearance, desirability and competitiveness with other, modern or remodeled complexes in the
market and lowers the property’s appeal to some institutional investors. However, the subject is
considered to be in good condition, as minimal repairs and maintenance are required. Additionally,
a several renovation projects have occurred between 1996 and 2007 at the subject. Renovations to
the following have occurred: kitchens, elevators, garage, access control system, common areas,
and fire alarm system.
3. The unit size and mix at the subject property are considered comparable to those found at
competitive projects. I would also note this item varies with market conditions. In a weak market, a
high number of one-bedroom units is beneficial as tenants can afford their own unit. In a tight or
expensive market, two-bedroom units allow for a cost (roommate) sharing unit.
4. The subject is just beyond a comfortable walking distance to metro rail. This requires a valet,
shuttle-service (bus) which increases operating costs.
5. Nearly 68% of the units have month/month leases. This leasing pattern has existed for many years,
but investors may find there is additional (potential) leasing risk as a result.
Value Indications by Approaches:
Income Capitalization Approach (Reconciled): $168,500,000 ($329,700/unit or $226/SF-NRA)
Direct Capitalization: $167,500,000 ($327,800/unit or $2255/SF-NRA)
Discounted Cash Flow: $168,500,000 ($329,700/unit or $226/SF-NRA)
Comparison Approach: $169,100,000 ($330,900/unit or $227/SF-NRA)
Cost Approach: $169,900,000 ($332,500/unit or $227/SF-NRA)
Land Value (Excludes Improvements): $53,500,000 ($104,600/unit or $62/SF-FAR)
Final Reconciliation: $168,500,000 ($329,700/unit or $226/SF-NRA)
Caveat
Please note that this Summary of Important Facts and Conclusions has been included for the reader's
convenience and is only a part of this appraisal report. As such, it must be used in conjunction with
the entire appraisal report and is subject to the Basic and Special Assumptions and Limiting
Conditions found herein.
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CERTIFICATION
I, George “Robby” Robinson Jr., do hereby certify, to the best of my knowledge and belief, that:
- I have personally inspected the interior and exterior of the subject property during the course of
the assignment;
- The statements of fact contained in this report are true and correct;
- The reported analyses, opinions, and conclusions are limited only by the reported assumptions
and limiting conditions, and are my personal, impartial, and unbiased professional analyses,
opinions and conclusions;
- I have no present or prospective interest in the property that is the subject of this report, and no
personal interest with respect to the parties involved;
- I have no bias with respect to the property that is the subject of this report or to the parties
involved in this assignment;
- My engagement in this assignment was not contingent upon developing or reporting
predetermined results;
- My compensation for completing this assignment is not contingent upon the development or
reporting of a predetermined value or direction in value that favors the cause of the client, the
amount of the value opinion, the attainment of a stipulated result, or the occurrence of a
subsequent event directly related to the intended use of this appraisal;
- My analyses, opinions, and conclusions were developed, and this report has been prepared, in
conformity with the Uniform Standards of Professional Appraisal Practice (USPAP).
- I certify that, to the best of my knowledge and belief, the reported analyses, opinions, and
conclusions were developed, and this report has been prepared, in conformity with the
requirements of the Code of Professional Ethics & Standards of Professional Appraisal
Practice of the Appraisal Institute. I have also read, understood, and satisfied the Competency
Provision of USPAP;
- I certify that the use of this report is subject to the requirements of the Appraisal Institute
relating to review by its duly authorized representatives;
- No one has provided significant real property appraisal assistance to the undersigned in the
preparation of the analyses, opinions and conclusions concerning real estate that are set forth
in this appraisal report;
- All market data pertaining to the final value estimate has been accumulated from various
sources and, where possible, personally examined and verified as to details, motivation, and
validity;
- To the best of my knowledge, this report complies with The Official Guide to Demonstration
Appraisal Reporting: General, which has been provided by the Appraisal Institute.
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CERTIFICATION
Value Conclusion
Based on my inspection of the referenced property and the investigations and analyses undertaken, and
subject to the basic and special assumptions and limiting conditions set forth in the accompanying
report, it is my opinion that the estimated “As Is” Market Value of the Fee Simple Interest in the subject
property as of January 1, 2008, is:
ONE HUNDRED SIXTY EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS
$168,500,000 ($329,700/unit or $226/SF-NRA)
Any separation of this signature page from the balance of this report invalidates the conclusion. The
value conclusion expressed herein is subject to the attached Basic Assumptions and Limiting
Conditions.
Respectfully Submitted,
George “Robby” Robinson Jr.
Associate Member of the
Appraisal Institute
Account #500525
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BASIC ASSUMPTIONS AND LIMITING CONDITIONS
This appraisal report has been made with the following general assumptions:
The valuation estimate and any market or feasibility conclusions apply only to the property
specifically identified and described in this report.
No responsibility is assumed for the legal description provided or for matters pertaining to legal
or title considerations. Title to the property is assumed to be good and marketable unless
otherwise stated.
The property is appraised free and clear of any or all liens, encumbrances, encroachments,
easements and restrictions, unless otherwise stated.
Responsible ownership and competent property management are assumed.
Information and data contained in the appraisal, although obtained from public record and
other reliable sources and, to the extent possible, carefully checked by the appraiser, are
accepted as satisfactory evidence upon which rest the final conclusions of value. Any
information furnished by others is believed to be reliable, but no responsibility for its accuracy
is assumed. Unless otherwise noted, it is assumed that all information known to the client and
relative to the valuation has been accurately furnished and that there are no undisclosed
leases, agreements, liens, or other encumbrances affecting the use of the property. Any
financial information provided with respect to the operation of the property, such as financial
statements and reports, rent rolls and lease data, is assumed to be complete, true and correct.
Any lease, mortgage, deed of trust, or other agreement or instrument relating to the property
reviewed by us is assumed to be legal, valid, binding, and enforceable in accordance with its
express terms.
All engineering studies are assumed to be correct. The appraiser has made no legal survey
nor have they commissioned one to be prepared; therefore, any plot plans or other such
illustrative materials in this report are included only to help the reader visualize the property.
It is assumed that there are no hidden or unapparent conditions of the property, subsoil or
structures that render it more or less valuable. No responsibility is assumed for such
conditions or for obtaining the appropriate engineering studies that may be required to
discover them. Unless otherwise noted, the property is not located in an area in which the
purchase of flood insurance is required as a condition for federal or federally related financial
assistance.
No responsibility beyond reason is assumed for matters of a legal nature, whether existing or
pending.
It is assumed that the property is in full compliance with all applicable federal, state, and local
laws and environmental regulations unless the lack of compliance is stated, described, and
considered in the appraisal report
It is assumed that all required licenses, certificates of occupancy, consents, and other
legislative or administrative authority from any local, state, or national government or private
entity or organization have been or can be obtained or renewed for any use on which the value
estimate contained in this report is based.
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BASIC ASSUMPTIONS AND LIMITING CONDITIONS
It is assumed that the used of the land and improvements is confined within the boundaries or
property lines of the property described and that there is no encroachment or trespass unless
noted in the report
Unless otherwise noted in this report, the existence of hazardous materials, which may or may
not be present on the property, was not observed by the appraisers. The appraiser has no
knowledge of the existence of such materials on the property. However, the appraiser is not
qualified to detect such substances. The presence of substances such as asbestos, urea-
formaldehyde foam insulation, mold, and other potentially hazardous materials may affect the
value of the property. The value estimated is predicated on the assumption that there is no
such material on or in the property that would cause a loss in value. No responsibility is
assumed for such conditions or for any expertise or engineering knowledge required to
discover them. The client is urged to retain an expert in this field, if desired. The valuation is
subject to modification if any such potentially hazardous materials or conditions are detected
by a qualified expert in these areas. The appraiser reserves the right to modify this valuation if
so warranted.
The appraiser is not an engineer, and any references to physical property characteristics in
terms of quality, condition, cost, suitability, soil conditions, flood risk, obsolescence, etc., are
strictly related to their economic impact on the property. No liability is assumed for any en-
gineering-related issues.
Unless otherwise stated in this report, the subject property is appraised without a specific
compliance survey having been conducted to determine if the property is or is not in
conformance with the requirements of the Americans with Disabilities Act (ADA). The
presence of architectural and communications barriers that are structural in nature that would
restrict access by disabled individuals may adversely affect the property’s value, marketability,
or utility. As such, full compliance with the Americans with Disabilities Act (ADA) is assumed.
If this is not the case, the appraiser reserves the right to amend this report, as needed, upon
receipt of a competent study outlining compliance costs.
This appraisal report has been made with the following general limiting conditions:
An appraisal is inherently subjective and represents only an estimate of a property's value.
The conclusions stated in the appraisal apply only as of the date indicated, and no
representation is made as to the effect of any subsequent events.
The values reported herein are only applicable to the Property Rights Appraised in conjunction
with the Purpose of the Appraisal and the Intended Use and User(s) of the Appraisal as set
forth herein; the appraisal is not to be used for any other purposes or functions.
Any allocation of the total value estimated in this report between the land and the
improvements applies only to the stated program of utilization. The separate values allocated
to the land and buildings must not be used in conjunction with any other appraisal and are not
valid if so used.
Possession of this report, or any type of copy thereof, does not carry with it the right of
publication.
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Description:Jan 1, 2008 The Edward St. John Department of Real Estate Johns Hopkins The attached
report is deemed a "Self-Contained Appraisal Report" as
