EXHIBIT 99.5
CLARION CROSSING APARTMENTS
Raleigh, North Carolina
On September 30, 1997, Cornerstone Realty Income Trust, Inc. (the
"Company") purchased the Clarion Crossing Apartments, a 228- unit apartment
complex located in Wake County, near Raleigh, North Carolina (the "Property").
The Company purchased the Property from Clarion Crossing Limited
Partnership, which is not affiliated with the Company or its affiliates. The
aggregate purchase price for the Property was $10,600,000. The Property includes
undeveloped land which the Company believes will accommodate up to 32 additional
apartment units if and when the Company determines to add such units to the
Property. The entire purchase price of the Property was borrowed on an interim
basis under the Company's unsecured line of credit and title to the Property was
conveyed to the Company by a limited warranty deed.
Location. The following information is based in part on information
provided by the Raleigh Chamber of Commerce.
The Property is located in Wake County, near Raleigh within the
Raleigh/Durham Metropolitan Statistical Area. The area is also known as the
Research Triangle, and contains the cities of Raleigh, Durham and Chapel Hill.
It is the second largest metropolitan area in North Carolina, after the
Charlotte metropolitian area.
Raleigh is the capital of North Carolina and is the fastest growing major
city in North Carolina. The population of the city was approximately 150,000 in
1980 and estimated to be approximately 208,000 in 1993.
Research Triangle Park, which is located an approximately 15-minute drive
from the Property, is the largest planned research and development industrial
park in the United States. It was founded in 1958 as a cooperative effort among
Duke University, the University of North Carolina and North Carolina State
University. The Park comprises approximately 6,800 acres and contains over 14
million square feet of industrial space. Among the Park's approximately 60
research-oriented firms are IBM, Glaxo and Northern Telecom.
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Raleigh's economy generally is a blend of industry, education and
government. The city's employment stability, strategic location, favorable labor
climate, pro-business attitude and pool of educated workers have helped the area
attract many major businesses and industries. Major industries in the area
include electronics, electrical equipment and machinery, metal working and food
processing.
The Research Triangle is home to Duke University, the University of North
Carolina at Chapel Hill and North Carolina State University.
The Property is located at 0000 Xxxx Xxxxxxx Xxxxx off of Avent Ferry Road.
The immediate area surrounding the Property consists of other multi-family
housing, commercial and retail development and single-family housing. The
Property is located near major shopping, schools and churches, and is readily
accessible from Interstates 40 and 440. The Property is located an approximately
15-minute drive from both Raleigh/Durham International Airport and Research
Triangle Park.
Description of the Property. The Property consists of 228 garden and
townhouse-style apartment units in 20 two-story buildings on approximately 22.8
acres of land. As indicated above, there is additional undeveloped land that the
Company believes could accommodate up to 32 additional apartment units.
The Property was built in 1972 and was substantially renovated in 1993. The
renovations completed in 1993 included raising the elevation of the roofs,
installing new vinyl siding on the entire Property, construction of a clubhouse,
installation of additional washer/dryer connections in apartment units; and
replacing light fixtures, carpeting, vinyl flooring and appliances throughout
the Property.
The Company believes that the Property is in very good condition and that,
because of the substantial renovation completed in 1993, few additional repairs
and improvements are necessary to bring the Property into compliance with the
Company's standards. However, the Company has budgeted approximately $114,000
for additional renovations and improvements to the Property. These additional
renovations and improvements will include redecorating of the clubhouse, some
apartment interior upgrading and minor creek erosion control.
The Property offers seven unit types. The unit mix and rents currently
being charged new tenants are as follows:
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Approximate
Interior
Quantity Type Square Footage Monthly Rental
-------- ---- -------------- --------------
40 Efficiency 420 $ 470
20 One bedroom, one 562 545
bathroom
20 One bedroom, one 606 570
bathroom w/WD
connections
20 One bedroom, one 706 570
bathroom
20 One bedroom, one 776 600
bathroom w/WD
connections
60 Two bedrooms, one 880 650
bathroom w/WD
connections
48 Two bedrooms, two 1,100 740
bathrooms w/WD
connections
The apartments provide a combined total of approximately 175,400 of net
rentable area.
Leases at the Property are generally for terms of one year or less. Average
rental rates for the past five years have generally increased. As an example, a
two-bedroom, one-bath apartment unit (880 square feet) rented for $430 in 1992,
$480 in 1993, $520 in 1994, $560 in 1995, and $590 in 1996. The average
effective annual rental per square foot at the Property for 1992, 1993, 1994,
1995 and 1996 was $6.30 $7.04, $7.62, $8.21 and $8.65, respectively.
The buildings are wood-frame construction on concrete slabs. Exteriors are
covered with vinyl siding and the roofs are pitched and covered with asphalt
shingles.
Each apartment unit at the Property has wall-to-wall carpeting in the
living areas and vinyl floors in the kitchen and bath, as well as a cable
television hook-up and an individually controlled heating and air conditioning
unit. Each apartment unit has mini-blinds and vertical blinds, a private deck or
patio, and walk-in closets. Each kitchen is equipped with a
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refrigerator/freezer, electric range and oven, dishwasher and garbage disposal.
The owner of the Property supplies cold water, sewer service and trash removal.
The tenants pay for their electricity usage, which includes heat, cooking, air
conditioning, hot water and lights.
The Property has an outdoor swimming pool with surrounding decking, two
tennis courts, a fully-equipped fitness center, a creek-side picnic area and a
central laundry facility. In addition, each building has its own laundry room.
The clubhouse includes a kitchen, bar, entertainment center and a leasing
office. There is ample paved parking for tenants.
There are at least seven apartment properties in the area that compete with
the Property. All offer similar amenities and have rents that generally are
comparable to those of the Property. Based on a recent telephone survey, the
Company estimates that occupancy in nearby competing properties now averages
approximately 97%.
According to information provided by the seller, physical occupancy at the
Property averaged approximately 96% in 1992, 85% in 1993, 97% in 1994, 99% in
1995, and 96% in 1996. On September 22, 1997, the Property was 95% occupied.
The tenants at the Property are a mix of white-collar and blue-collar
workers, students and retired persons.
The following table sets forth the 1996 real estate tax information on the
Property.
Assessed
Jurisdiction Value Tax Rate Tax
------------ ----- -------- ---
Wake County $5,349,226 0.6300 $33,700.12
City of Raleigh 5,349,226 0.5375 28,752.09
Plus residential
waste reduction
fee of $15 per
unit: 3,420.00
TOTAL: $65,872.21
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The basis of the depreciable residential real property portion of the
Property (currently estimated at about $7,506,295) will be depreciated over 27.5
years on a straight-line basis. The basis of the personal property portion will
be depreciated in accordance with the modified accelerated cost recovery system
of the Internal Revenue Code of 1986, as amended ("the Code"). Amounts to be
spent by the Company on repairs and improvements will be treated for tax
purposes as permitted by the Code based on the nature of the expenditures.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Company to be relevant in evaluating the Property for
acquisition by the Company included the following:
1. The Company believes that the Raleigh, North Carolina area will enjoy
continued economic development and steady population increase, and that such
development and increase will support stable occupancy rates and reasonable
increases in rents at the Property. In particular, the Company believes that the
presence of Research Triangle Park and three major universities in the area and
associated businesses and activities will have a positive impact on the area for
the indefinite future.
2. The Company already owns several other apartment complexes in Raleigh
and believes that it is knowledgeable and experienced regarding the Raleigh
apartment rental market.
3. Based upon an engineering report and its own inspections, the Company
believes that the Property is in very good condition. In particular, the Company
believes the Property benefitted substantially from the extensive renovation
completed by the seller in 1993.
4. The Property is conveniently proximate to major employers and shopping.
The Company is not aware of any material adverse factors relating to the
Property not set forth in this report that would cause the financial information
contained in this report not to be indicative of future operating results.
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