1 EXHIBIT 99.6 NATIONSBANC MONTGOMERY SECURITIES IRVINE APARTMENT COMMUNITIES VALUATION DISCUSSION DECEMBER 30, 1998 NATIONSBANC MONTGOMERY SECURITIES LLC
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EXHIBIT 99.6
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NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES
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IRVINE APARTMENT COMMUNITIES
VALUATION DISCUSSION
DECEMBER 30, 1998
NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
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TABLE OF CONTENTS
I. Valuation Summary
II. Public Markets Valuation
III. Private Markets Valuation
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VALUATION SUMMARY
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VALUATION SUMMARY
AFTER CAREFUL CONSIDERATION OF THE PUBLIC AND PRIVATE MARKET VALUATION FOR
IRVINE APARTMENT COMMUNITIES ("IAC"), THE IRVINE COMPANY ARRIVED AT THE OFFER
PRICE OF $32.50. SOME OF THE KEY ELEMENTS OF THIS VALUATION ARE AS FOLLOWS:
SUMMARY OF THE PUBLIC MARKETS ANALYSIS (PRIOR TO PREEMPTIVE OFFER)
- Strong and consistent support at approximately $27 per share for IAC was
evident in the market for the 90 days prior to the offer.
- This market value anticipated the 1999 earnings estimates, apartments under
construction, future development, and the Land Rights Agreement, all of
which were known in the market and well addressed by IAC and the Research
Analyst community.
- This value included the high quality nature of the existing portfolio; in
fact, IAC traded with the highest FFO multiple in the apartment sector.
- The Research Analyst community views the net asset value of IAC on average
at $26.57 per share.
SUMMARY OF THE PRIVATE MARKETS ANALYSIS
- The Irvine Company reviewed the private markets value from both a going
concern valuation and a liquidation value.
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VALUATION SUMMARY
- The going concern value assumes that IAC continues to operate generally as
before with a corporate staff and overhead and looks at value of the
existing, under construction and pipeline of properties on a cap rate and
discounted cash flow basis. Conclusions $19.30 to $24.12 per share.
- The plan of liquidation value assumes that IAC is liquidated in an orderly
fashion over a reasonable period of time. No corporate overhead is
projected, however, buyers of the assets would recognize a Proposition 13
tax reassessment. Conclusions from this analysis show values of $21.70 to
$24.34 per share (excluding any income tax liabilities due upon sale).
- Both of these private market analyses are consistent with the net valuations
calculated by independent Research Analysts.
THE PREEMPTIVE PROPOSAL
- The offer made by The Irvine Company was well in excess of the public and
private market valuations for IAC.
* The offer of $32.50 per share includes a 19% premium to the stock price,
well in excess of comparable company acquisitions.
* The approximate $5.50 per share premium covers all intangible areas of
value, such as control, franchise, and market perception.
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VALUATION SUMMARY
[GRAPH - INFORMATION IS SET FORTH BELOW IN TABULAR FORMAT]
PUBLIC MARKET METHODOLOGIES
Research Analyst 12-18 Mo. Price Targets(1)(2) 25.95 33.50
Public Comparables(1) 23.68 25.43
M&A Comparables(1) 20.00 30.50
Stock Trading History(1)(3) 27.00 32.44
PRIVATE REAL ESTATE METHODOLOGIES
Research Analyst NAV Estimates 24.00 28.71
Going Concern NAV Cap Rate Analysis 21.54 24.12
Going Concern Present Value Analysis 19.30 21.68
Replacement Cost Analysis 23.00 24.00
LIQUIDATION METHODOLOGIES
Liquidation Value 21.70 24.34
(1) Analysis as of November 23, 1998.
(2) Target share price for 12 to 18 month period.
(3) Based on last twelve months
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PUBLIC MARKETS VALUATION
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PUBLIC MARKETS VALUATION
IAC STOCK PRICE - AS OF NOVEMBER 23, 1998
Current stock price $ 27.13
Average stock price over the last:
30 days $ 26.81
60 days $ 26.21
90 days $ 25.95
52-week high $ 32.44
All-time high $ 33.50
Offering prices for:
IPO:
11.8 million shares 12/1/93 $ 17.50
Follow-ons:
4.5 million shares 8/3/95 $ 17.25
1.15 million shares 2/14/97 $ 27.50
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PUBLIC MARKETS VALUATION
SHARES TRADED AT VARIOUS PRICES LTM
[GRAPH - INFORMATION IS SET FORTH BELOW IN TABULAR FORMAT]
Volume Traded at Various Prices Cumulative Volume Traded
---------------------------------------------------------------------- ------------------------------------------------------
Price Range Shares Traded % Price Shares Traded %
-------------------------- ------------------- ----------------- ---------------- --------------- ----------------
$23.00-$25.00 786,000 5.9% <$25.00 786,000 5.9%
$25.00-$27.00 3,611,000 27.3% <$27.00 4,397,000 33.2%
$27.00-$29.00 1,828,500 13.8% <$29.00 6,225,500 47.0%
$29.00-$31.00 4,075,800 30.8% <$31.00 10,301,300 77.8%
$31.00-$33.00 2,944,100 22.2% <$33.00 13,245,400 100.0%
------------------- -----------------
TOTAL VOLUME TRADED 13,245,400 100.0%
-------------------------------------------------------------------
Source: Stock price and volume traded from FactSet Research Systems
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PUBLIC MARKETS VALUATION
HISTORICAL PRICE/FFO ANALYSIS
[GRAPH - INFORMATION IS SET FORTH BELOW IN TABULAR FORMAT]
RANGE OF FFO TRADING OFFER FFO RANGE OF TRADING PRICE OFFER PRICE
DATE RANGE MULTIPLE MULTIPLE
------------------------ ---------------------- --------------- ------------------------ --------------
01/02/96-01/31/96 10.3x-11.0x 12.7x 18.7500-20.000 32.5
02/01/96-02/29/96 10.9x-11.2x 12.7xs 19.8750-21.000 32.5
03/01/96-03/29/96 10.5x-11.3x 12.7x 19.1250-20.5000 32.5
04/01/96-04/30/96 10.1x-10.6x 12.7x 19.0000-20.1250 32.5
05/01/96-05/31/96 10.4x-10.7x 12.7x 19.7500-20.2500 32.5
06/03/96-06/28/96 10.6x-10.9x 12.7x 20.1250-20.6250 32.5
07/01/96-07/31/96 10.3x-10.7x 12.7x 20.2500-21.000 32.5
08/01/96-08/30/96 10.8x-11.6x 12.7x 21.1250-22.7500 32.5
09/03/96-09/30/96 11.2x-11.9x 12.7x 22.0000-23.3750 32.5
10/01/96-10/31/96 11.1x-11.6x 12.7x 22.1250-23.2500 32.5
11/01/96-11/29/96 11.5x-12.5x 12.7x 23.0000-25.0000 32.5
12/02/96-12/31/96 12.0x-12.5x 12.7x 24.0000-25.0000 32.5
01/02/97-01/31/97 12.1x-13.5x 12.7x 25.2500-27.5000 32.5
02/03/97-02/28/97 13.0x-13.5x 12.7x 26.7500-27.7500 32.5
03/03/97-03/31/97 13.3x-14.3x 12.7x 27.2500-28.6250 32.5
04/01/97-04/30/97 12.6x-13.6x 12.7x 26.5000-28.6250 32.5
05/1/97-05/30/97 12.1x-13.4x 12.7x 25.6250-28.3750 32.5
06/02/97-06/30/97 13.2x-14.2x 12.7x 28.0000-30.0000 32.5
07/01/97-07/31/97 13.2x-13.7x 12.7x 29.0625-30.1875 32.5
08/01/97-08/29/97 12.8x-13.6x 12.7x 28.2500-29.8750 32.5
09/02/97-09/30/97 13.0x-15.2x 12.7x 28.4375-33.3750 32.5
10/01/97-10/31/97 12.7x-14.8x 12.7x 29.7500-33.5000 32.5
11/03/97-11/28/97 13.6x-14.0x 12.7x 30.7500-31.6875 32.5
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RANGE OF FFO TRADING OFFER FFO RANGE OF TRADING PRICE OFFER PRICE
DATE RANGE MULTIPLE MULTIPLE
------------------------ ---------------------- --------------- ------------------------ --------------
12/01/97-12/31/97 13.6x-14.1x 12.7x 30.8750-32.0000 32.5
01/02/98-01/30/98 13.2x-13.5x 12.7x 31.5625-32.1875 32.5
02/02/98-02/27/98 12.7x-13.4x 12.7x 30.3125-32.0000 32.5
03/02/98-03/31/98 12.7x-13.2x 12.7x 30.4375-31.1250 32.5
04/01/98-04/30/98 12.3x-12.9x 12.7x 30.5000-31.8750 32.5
05/01/98-05/29/98 11.9x-12.3x 12.7x 29.5000-30.4375 32.5
06/01/98-06/30/98 11.5x-12.1x 12.7x 28.3125-29.9375 32.5
07/01/98-07/31/98 11.2x-11.8x 12.7x 28.2500-29.7500 32.5
08/03/98-08/31/98 10.1x-11.2x 12.7x 25.5000-28.1875 32.5
09/01/98-09/30/98 9.3x-10.7x 12.7x 23.5000-27.0000 32.5
10/01/98-10/30/98 9.1x-10.4x 12.7x 23.3750-26.4375 32.5
11/02/98-11/20/98 10.2x-10/8x 12.7x 26.1875-27.7500 32.5
------------------------ ---------------------- --------------- ------------------------ --------------
MEAN MEDIAN
---- ------
Forward FFO Multiple since 1/1/96 12.1x 12.2x
1999E FFO per Share $2.56 $2.56
---------------------- -------------------------
IMPLIED PRICE PER SHARE $30.97 $31.20
Methodology: FFO/share estimate equals four quarters after current quarter share
price. Valuation price range is calculated by multiplying 1999E FFO per share by
range of historical forward multiples.
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PUBLIC MARKETS VALUATION
TRADING COMPARABLES
12-Month Range
Stock Price ------------------------ % Above % Below
Company Ticker 11/23/98 Low High Low High
---------------------------- ------ ----------- ------- ------- ------- --------
Avalon Bay Communities, Inc. AVB $ 33.38 $ 30.50 $ 40.50 9.4% (21.3%)
Apartment Investment and Mgmt AIV 34.94 30.00 41.00 16.5% (17.4%)
BRE Properties BRE 23.88 21.50 30.00 11.0% (25.7%)
Equity Residential Ppts Trust EQR 42.75 34.69 52.56 23.2% (23.0%)
Post Properties, Inc. PPS 38.69 35.81 42.00 8.0% (8.6%)
Archstone Communities ASN 20.50 17.88 25.13 14.7% (22.6%)
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Residential SRW 29.13 28.31 35.75 2.9% (22.7%)
United Dominion Realty Trust UDR 10.56 10.44 14.94 1.2% (41.4%)
MEAN 10.9% (22.8%)
MEDIAN 10.2% (22.7%)
IAC - Current IAC $ 27.13 $ 23.00 $ 32.44 17.9% (19.6%)
IAC - Offer IAC $ 32.50 41.3%
Est. CY FFO/Share
Indicated Current ----------------------------------------- Implied FFO 1998 Payout
Company Annual Div. Yield 1997A 1998E 1999E Est. CAGR(2) Ratio
---------------------------- ----------- ----- --------- --------- -------- ------------ ----------
Avalon Bay Communities, Inc. $ 2.04 6.1% $ 2.45 $ 2.88 $ 3.29 15.9% 70.8%
Apartment Investment and Mgmt 2.25 6.4% 2.78 3.42 3.95 19.2% 65.8%
BRE Properties 1.44 6.0% 1.84 2.11 2.34 12.8% 68.2%
Equity Residential Ppts Trust 2.68 6.3% 3.69 4.05 4.44 9.7% 66.2%
Post Properties, Inc. 2.60 6.7% 3.03 3.37 3.66 9.9% 77.2%
Archstone Communities 1.42 6.9% 1.61 1.80 2.03 12.3% 78.9%
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Residential 2.14 7.3% 2.65 2.91 3.16 9.2% 73.5%
United Dominion Realty Trust 1.05 9.9% 1.36 1.38 1.46 3.6% 76.1%
MEAN 7.0% 11.6% 72.1%
MEDIAN 6.6% 11.1% 72.2%
IAC - Current $ 1.54 5.7% $ 2.01 $ 2.25 $ 2.56 12.9% 68.4%
IAC - Offer 4.7%
Price/FFO
-------------------------------- Shares Market Cap. Net LTD
Company Ticker 1997A 1998E 1999E O/S(mm)(3) ($ mm) ($ mm)
----------------------------- ------ ----- ----- ----- ---------- ------ ------
Avalon Bay Communities, Inc. AVB 13.6x 11.6x 10.1x 69.1 $ 2,305.2 $ 1,524.5
Apartment Investment and Mgmt AIV 12.6 10.2 8.8 52.4 1,829.6 1,623.0
BRE Properties BRE 13.0 11.3 10.2 50.0 1,193.2 699.6
Equity Residential Ppts Trust EQR 11.6 10.6 9.6 133.5 5,708.2 4,830.2
Post Properties, Inc. PPS 12.8 11.5 10.6 44.4 1,717.9 773.1
Archstone Communities ASN 12.7 11.4 10.1 104.6 2,144.7 2,328.9
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Residential SRW 11.0 10.0 9.2 34.0 989.3 890.7
United Dominion Realty Trust UDR 7.8 7.7 7.2 103.8 1,096.8 1,775.4
MEAN 11.9x 10.5x 9.5x
MEDIAN 12.7x 10.9x 9.9x
IAC - Current IAC 13.5x 12.1x 10.6x 45.2 $ 1,224.9 $ 987.0
IAC - Offer 16.2x 14.4x 12.7x $ 1,467.6 $ 987.0
Firm Debt/ ▇▇▇▇▇ S&P Total Implied Value
Company Value Firm Value Rating Rating Units Per Unit
----------------------------- ----- ------------ ------ ------ ----- -------------
Avalon Bay Communities, Inc. $ 3,829.7 39.8% Baa2 BBB 42,564 $ 89,975
Apartment Investment and Mgmt 3,452.6 47.0% NR NR 58,495 59,023
BRE Properties 1,892.9 37.0% Baa2 BBB 23,301 81,236
Equity Residential Ppts Trust 10,538.3 45.8% A3 BBB+ 192,558 54,728
Post Properties, Inc. 2,491.0 31.0% Baa1 BBB+ 32,514 76,614
Archstone Communities 4,473.6 52.1% NR NR 93,170 48,015
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Residential 1,880.0 47.4% NR NR 23,400 80,342
United Dominion Realty Trust 2,872.2 61.8% Baa1 BBB+ 73,000 39,345
MEAN 45.2% 66,160
MEDIAN 46.4% 67,819
IAC - Current $ 2,211.9 44.6% Baa2 BBB- 18,758 117,915
IAC - Offer $ 2,454.6 130,855
IMPLIED VALUATION BASED ON COMPARABLE TRADING MULTIPLES:
Price/FFO
-----------------------------
1997A 1998E 1999E
----- ----- -----
Mean Multiples $23.87 $23.68 $24.30
Median Multiples $25.43 $24.60 $25.25
(1) FFO Estimates derived from First Call and NationsBanc ▇▇▇▇▇▇▇▇▇▇
Securities research.
(2) Est. CAGR derived from percentage change between 1997 and 1999 estimates.
(3) Includes OP Units.
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PUBLIC MARKETS VALUATION
SELECTED COMPARABLE M&A TRANSACTIONS
Date
Announced Target Name Acquiror Name
--------- ----------- -------------
11/17/98 Meridian Industrial Trust ProLogis Trust
09/10/98 American Apartment Communities United Dominion Trust
07/08/98 Merry Land & Investment Co Inc Equity Residential Pptys Trust
04/02/98 Security Capital Atlantic Inc Security Capital Pacific Trust
03/08/98 Avalon Properties Inc Bay Apartment Communities
12/22/97 ASR Investments Corp United Dominion Realty Trust Inc
12/17/97 Oasis Residential Inc Camden Property Trust
12/16/97 Ambassador Apartments Inc Apartment Investment & Mgmt Co
08/28/97 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Residential Equity Residential Pptys Trust
08/25/97 Arbor Property Trust Vornado Realty Trust
08/04/97 Columbus Realty Trust Post Properties Inc
02/20/97 NHP Inc Apartment Investment & Mgmt Co
01/17/97 Wellsford Residential Property Trust Equity Residential Pptys Trust
Average
Median
Private Eye Data
Implied Valuation - Average
Implied Valuation - Median
Aggregate Premium Paid to Premium Paid to
Date Value Share Price Share Price Agg Value/ Equity Value/
Announced ($mil) 1 Day Before 30 Days Before LTM EBITDA LTM FFO
--------- ------ ------------ -------------- ---------- -------
11/17/98 $ 1,472.6 12.7% 9.0% 13.1x 14.5x
09/10/98 787.0 NA NA NA NA
07/08/98 2,228.7 12.0% 14.5% 15.1x 14.9x
04/02/98 1,627.0 14.9% 14.2% 15.2x 13.3x
03/08/98 1,967.7 (1.3%) (4.4%) 17.9x 19.7x
12/22/97 281.6 3.2% 2.0% 15.7x 13.9x
12/17/97 947.9 9.4% 10.1% 12.9x 10.9x
12/16/97 629.8 4.0% 4.3% 13.0x 10.6x
08/28/97 957.4 14.2% 18.9% 13.6x 12.4x
08/25/97 234.2 3.2% 4.8% 11.3x 13.6x
08/04/97 590.9 4.2% 4.5% 17.5x 15.0x
02/20/97 284.0 NM NM 8.1x NM
01/17/97 996.0 7.9% 10.1% 13.7x 14.0x
7.7% 8.0% 13.9x 13.9x
7.9% 9.0% 13.6x 13.9x
$ 27.13 $ 27.13 $ 138.4 $ 98.7
$ 29.20 $ 29.29 $ 20.79 $30.37
$ 29.27 $ 29.57 $ 19.96 $30.35
(*) Source: Public Filings, SDC, and Factset.
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PUBLIC MARKETS VALUATION
RESEARCH ANALYSTS' VIEWS
REPORT DATE FIRM ANALYST RATING TARGET PRICE
------- ------------- ------------- --------- -------------
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11/4/98 ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ I. Hemel Long Term Not in report
Accumulate
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11/3/98 NationsBanc ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Buy $32.00
Securities
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11/3/98 ▇▇▇▇▇▇▇▇▇ & Co., Inc. ▇▇▇▇▇ ▇▇▇▇▇▇ Buy $32.00
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10/7/98 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇ Outperform $34.00
▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------------------------------------------------------------------------
10/5/98 Sutro & Co. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Accumulate/ $30.00
Buy
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9/1/98 ▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ Buy Not in report
-------------------------------------------------------------------------------------------------------
8/28/98 Painewebber ▇▇▇▇▇ ▇▇▇▇▇▇ Neutral Not in report
▇▇▇▇▇▇▇▇ ▇▇▇▇
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8/19/98 CIBC ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Buy Not in report
-------------------------------------------------------------------------------------------------------
2/1/98 EVEREN Securities Burland B. East
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1/1/98 ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇ No report
▇▇▇▇▇ ▇▇▇▇▇▇ since 1/98
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10/24/97 ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ Outperform $33.00
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (2nd highest
rating)
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10/28/97 ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Market Not in report
& ▇▇▇▇▇▇▇▇ Perform
-------------------------------------------------------------------------------------------------------
Prudential Securities ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------------------------
Average (1) $32.00
------------------------------------------------------------
REPORT DATE TARGET DATE NAV ESTIMATE NAV METHODOLOGY
------- ---------------- ------------ --------------------------------------
-------------------------------------------------------------------------------------------------------
11/4/98 $27.18 NAV estimate is from July 24, 1997: no
NAV was stated in the most recent report
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11/3/98 12 month $24.50 Cap rate of 8.0% with estimated 99 NOI of
148mm based upon a 3% growth rate
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11/3/98 was $35-36 in $24.00 No basis for analysis was given
June 1998
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10/7/98 Not in Report
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10/5/98 12 month Not in report
-------------------------------------------------------------------------------------------------------
9/1/98 $28.71 Q2 98 annualized property cash flow;
capped at 8.0% (states in report that a 7.5%
cap equates to a $32 NAV; development is
based on 10.5% return on cost and an 8.0%
cap rate
-------------------------------------------------------------------------------------------------------
8/28/98 Not in Report
-------------------------------------------------------------------------------------------------------
8/19/98 $28.46 Cap rate used: 8.0% on Q2 98 annualized
NOI; NAV increased by $100MM for "under
market debt."
-------------------------------------------------------------------------------------------------------
2/1/98
-------------------------------------------------------------------------------------------------------
1/1/98
-------------------------------------------------------------------------------------------------------
10/24/97 12 month Not in report
(estimate over 1
year old)
-------------------------------------------------------------------------------------------------------
10/28/97
-------------------------------------------------------------------------------------------------------
----------------------------------
$26.57
----------------------------------
Source: Research Bank (Investtext), and Bloomberg.
(1) Excludes reports over six months old.
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PRIVATE MARKETS VALUATION
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PRIVATE MARKETS VALUATION
SUMMARY DISCUSSIONS
NMS APPROACHED THE PRIVATE MARKETS VALUATION USING TWO METHODS:
GOING CONCERN VALUATION
- Valued IAC as a going concern using two methodologies: (1) capitalization
rate, and (2) present value of future cash flows.
- NMS applied a 10% discount to the Total Enterprise Value to account in
part for:
* The lack of property control in that the purchaser would only obtain
a 45% minority interest in the properties,
* The lack of corporate control over IAC due to provisions of the IPO
agreement (e.g., supermajority voting requirements, current and
continuing TIC representation on IAC board, etc.), and
* The illiquidity due to the large size of the transaction.
LIQUIDATION VALUATION
- Valued IAC in an orderly plan of liquidation using the same cap rates as
above.
- NMS assumed that the buyer would need to account for a Proposition 13 Real
Estate Tax Reassessment, which would impact price.
- NMS applied a 10% discount to the Total Enterprise Value in part for:
* Brokerage and legal fees associated with the selling of the assets,
* The time value of money, and
* The cost of overhead and operations during the liquidation.
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PRIVATE MARKETS VALUATION
GOING CONCERN CAPITALIZATION RATE ANALYSIS
($ IN THOUSANDS)
VALUATION RANGE
-----------------------------------
LOW HIGH
----------- -----------
Stabilized Portfolio Valuation: 56 assets, 16,317 units
(Methodology: Cap Rate)(1) $ 2,026,086 $ 2,158,598
Unallocated Corporate G&A (TIC Estimate) (118,613) (121,578)
----------- -----------
Stabilized Portfolio Valuation after Allocation of Corporate G&A $ 1,907,473 $ 2,037,020
Lease Up Portfolio: 3 assets, 927 units
(Methodology: Cost plus 10% Developers Profit) 75,359 75,359
Under Construction: 5 assets, 2,030 units (Methodology: Cost) 114,180 114,180
Land Rights Agreement (Methodology: Present Value) 10,651 10,651
Value of Tax - Exempt Debt(2) 58,000 58,000
----------- -----------
TOTAL ENTERPRISE VALUE PRE BULK DISCOUNT $ 2,165,663 $ 2,295,210
Bulk Discount @ 10% of Enterprise Value(3) (216,566) (229,521)
----------- -----------
TOTAL ENTERPRISE VALUE $ 1,949,097 $ 2,065,689
Total Debt
Existing Net Debt Outstanding(4) (776,527) (776,527)
Preferred Securities Outstanding (200,000) (200,000)
----------- -----------
TOTAL EQUITY VALUE $ 972,570 $ 1,089,162
Total Shares Outstanding 45,157 45,157
---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE(5) $ 21.54 $ 24.12
---------------------------------------------------------------------------------------------------------------
(1) For purposes of this analysis, stabilized portfolio value based on cap
rate analysis.
(2) Present value of interest expense savings (discounted at 7.15%) assuming
7.15% normalized interest rate.
(3) Discount due to lack of control, illiquidity and the size of the
investment.
(4) Net Debt as of November 30, 1998 adjusted for Other Assets and Other
Liabilities.
(5) This analysis does not include prepayment penalties and premiums required
to retire existing debt and preferred stock.
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PRIVATE MARKETS VALUATION
GOING CONCERN PRESENT VALUE ANALYSIS
($ IN THOUSANDS)
VALUATION RANGE
---------------------------------
LOW HIGH
----------- -----------
Stabilized Portfolio Valuation: 56 assets, 16,317 units (Methodology: Present Value)(1) $ 1,795,236 $ 1,914,638
Unallocated Corporate G&A (Included Above) -- --
----------- -----------
Stabilized Portfolio Valuation after Allocation of Corporate G&A $ 1,795,236 $ 1,914,638
Lease Up Portfolio: 3 assets, 927 units (Methodology: Cost plus 10% Developers Profit) 75,359 75,359
Under Construction: 5 assets, 2,030 units (Methodology: Cost) 114,180 114,180
Land Rights Agreement (Methodology: Present Value) 10,651 10,651
Value of Tax - Exempt Debt(2) 58,000 58,000
----------- -----------
TOTAL ENTERPRISE VALUE PRE BULK DISCOUNT $ 2,053,426 $ 2,172,828
Bulk Discount @10% of Enterprise Value(3) (205,343) (217,283)
----------- -----------
TOTAL ENTERPRISE VALUE $ 1,848,083 $ 1,955,545
Total Debt
Existing Net Debt Outstanding(4) (776,527) (776,527)
Preferred Securities Outstanding (200,000) (200,000)
----------- -----------
TOTAL EQUITY VALUE $ 871,556 $ 979,018
Total Shares Outstanding 45,157 45,157
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE(5) $ 19.30 $ 21.68
-----------------------------------------------------------------------------------------------------------------------------------
(1) For purposes of this analysis, stabilized portfolio value based on present
value analysis.
(2) Present value of interest expense savings (discounted at 7.15%) assuming
7.15% normalized interest rate.
(3) Discount due to lack of control, illiquidity and the size of the
investment.
(4) Net Debt as of November 31, 1998 adjusted for Other Assets and Other
Liabilities.
(5) This analysis does not include prepayment penalties and premiums required
to retire existing debt and preferred stock.
19
19
PRIVATE MARKETS VALUATION
LIQUIDATION ANALYSIS
($ IN THOUSANDS)
Valuation Range
-----------------------------
Low High
----------- -----------
Stabilized Portfolio Valuation: 56 assets, 16,317 units (Methodology: Cap Rate) (1) $ 2,026,086 $ 2,158,598
Effect of Property Tax Reassessment (Proposition 13) (110,531) (110,531)
----------- -----------
Stabilized Portfolio Valuation after Property Tax Reassessment $ 1,915,554 $ 2,048,066
Lease Up Portfolio: 3 assets, 927 units (Methodology: Cost plus 10% Developers Profit) 75,359 75,359
Under Construction: 5 assets, 2,030 units (Methodology: Cost) 114,180 114,180
Land Rights Agreement (Methodology: Present Value) 10,651 10,651
Value of Tax - Exempt Debt (2) 58,000 58,000
----------- -----------
Total Enterprise Value - Pre Bulk Discount $ 2,173,744 $ 2,306,256
Bulk Discount @ 10% of Enterprise Value (3) (217,374) (230,626)
----------- -----------
Total Enterprise Value $ 1,956,370 $ 2,075,631
Total Debt
Existing Net Debt Outstanding (4) (776,527) (776,527)
Preferred Securities Outstanding (200,000) (200,000)
----------- -----------
Total Equity Value $ 979,843 $ 1,099,104
Total Shares Outstanding 45,157 45,157
--------------------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share (5) $ 21.70 $ 24.34
--------------------------------------------------------------------------------------------------------------------------
(1) For purposes of this analysis, stabilized portfolio value based on cap
rate analysis.
(2) Present value of interest expense savings (discounted at 7.15%) assuming
7.15% normalized interest rate.
(3) Discount for brokerage commission, legal fees, and overhead during
liquidation and time value of money.
(4) Net Debt as of November 30, 1998 adjusted for Other Assets and Other
Liabilities.
(5) This analysis does not include prepayment penalties and premiums required
to retire existing debt and preferred stock.
20
20
PRIVATE MARKETS VALUATION
STABILIZED PORTFOLIO VALUATION
CAP RATE ANALYSIS
- NMS conducted site due diligence on approximately 45 of the subject
multifamily complexes and 20 comparable multifamily complexes. In
addition, NMS conducted interviews with TIC management, appraisers, and
industry experts.
- NMS assigned a 1, 2 or 3 rating (i.e., 1 = highest quality, lowest cap
rate, etc.) to each asset.
- In an effort to derive 1999E property level operating cash flow, NMS
started with IAC's 1998E amounts (based on 10 month actuals and a 2 month
forecast) and consistent with the IAC Preliminary 1999 Business Plan made
the following assumptions:
1999 Assumptions
-------------------------------
Revenue:
Irvine Ranch 5.0% Growth
San Diego 4.0% Growth
Silicon Valley 5.0% Growth
West L.A. 5.0% Growth
Operating Expenses: 2.5% Growth on All Assets
FF&E Reserve: Normalized to 3.0% of Revenues
- Using comparable transactions, NMS assigned the following cap rates to
each asset:
Asset: Cap Rate Range:
-------------- ---------------
Tier 1 Assets: 7.25%
Tier 2 Assets: 7.70%
Tier 3 Assets: 8.00%
21
21
PRIVATE MARKETS VALUATION
STABILIZED PORTFOLIO VALUATION
CAP RATE ANALYSIS
- The appraisers and local brokers indicate that these cap rates should be
applied to run rate cash flow or last twelve months cash flow, and are not
forward-looking cap rates. NMS derived a value for each stabilized asset
by applying the appropriate cap rate to the 1998E and 1999E cash flows.
GOING CONCERN VALUATION
- Going concern corporate overhead is not allocated at the property level,
and is estimated to be $9,041,000 in 1998 and projected to grow at 2.5% in
1999.
- Corporate overhead deducted from the NAV valuation is derived by capping
the annual estimate at the blended portfolio cap rate of 7.62%.
- Assumes a bulk discount of 10% to enterprise value due to the size of the
investment.
LIQUIDATION VALUATION
- Liquidation Valuation deducts a property tax reassessment (Proposition 13)
- Assumes a bulk discount of 10% to account for brokerage commissions, legal
fees, overhead during liquidation and time value of money.
22
22
PRIVATE MARKETS VALUATION
STABILIZED PORTFOLIO VALUATION
CAP RATE ANALYSIS
Year 1998 1998E
Prop # Property Name Location Built # Units Cash Flow
------ ------------- -------- ----- ------- ---------
Tier 1
1 Baypointe Newport 1997 300 4,174
2 Newport Ridge Newport 1996 512 6,657
3 One Park Place (1)(2) Irvine 1997 216 --
4 Promontory Point Newport 1974 520 7,100
5 Santa ▇▇▇▇▇ ▇▇▇▇▇▇ 1996 378 4,106
6 Santa ▇▇▇▇ ▇ ▇▇▇▇▇▇ 1996 368 3,703
7 Santa ▇▇▇▇ ▇▇ (1) Irvine 1997 207 --
8 The Colony (1) Newport 1997 245 --
9 Villas at Renaissance (1)(2) San Diego 1997 923 --
----- --------
Tier 1 Total 3,669 $ 25,740
Tier 2
10 Amherst Court Irvine 1991 162 1,116
11 Berkeley Court Irvine 1986 152 1,290
12 Cedar Creek Irvine 1985 176 1,466
13 Cross Creek Irvine 1985 136 1,198
14 Dartmouth Court Irvine 1986 294 2,392
15 Newport North Newport 1986 570 5,330
16 Northwood Park Irvine 1985 168 1,353
17 Northwood Place Irvine 1986 604 5,007
18 Rancho Alisal Tustin 1988 356 2,898
19 Rancho Maderas Tustin 1989 266 2,442
20 Rancho Mariposa Tustin 1992 238 2,059
21 Rancho Monterey Tustin 1996 436 4,823
22 Rancho San ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 1976 368 3,211
23 Rancho Santa Fe (1) Tustin 1997 316 --
24 Rancho ▇▇▇▇▇▇ ▇▇▇▇▇▇ 1989 252 2,497
25 San ▇▇▇▇▇ ▇▇▇▇▇▇ 1989 354 3,578
26 San ▇▇▇▇ ▇▇▇▇▇▇ 1987 248 2,152
27 San ▇▇▇▇▇ ▇▇▇▇▇▇ 1988 426 3,415
28 San ▇▇▇▇▇▇ ▇▇▇▇▇▇ 1986 200 1,599
29 San ▇▇▇▇▇ ▇▇▇▇▇▇ 1990 283 2,143
30 San ▇▇▇▇▇ ▇▇▇▇▇▇ 1993 382 3,023
31 San ▇▇▇▇ ▇▇▇▇▇▇ 1986 248 1,927
32 Santa ▇▇▇▇▇ ▇▇▇▇▇▇ 1997 227 2,856
33 Sierra Vista Tustin 1992 306 2,736
34 Stanford Court Irvine 1985 320 2,659
35 The Parklands Irvine 1983 121 1,092
1999E Value Range Implied Value
Prop # Property Name Cash Flow Cap Rate 1998 CFLO 1999 CFLO Per Unit
------ ------------- --------- -------- --------- --------- -------------
Tier 1
1 Baypointe 4,255 7.25% 57,572 58,695 192 196
2 Newport Ridge 6,850 7.25% 91,819 94,488 179 185
3 One Park Place (1)(2) 784 7.25% 28,000 10,814 130 --
4 Promontory Point 7,505 7.25% 97,936 103,524 188 199
5 Santa ▇▇▇▇▇ 4,215 7.25% 56,637 58,139 150 154
6 Santa ▇▇▇▇ I 3,788 7.25% 51,075 52,244 139 142
7 Santa ▇▇▇▇ ▇▇ (1) 2,591 7.25% 26,631 35,741 129 173
8 The Colony (1) 4,032 7.25% 45,633 55,614 186 227
9 Villas at Renaissance (1)(2) 9,455 7.25% 127,000 130,414 138 141
-------- ---- -------- -------- -------- --------
Tier 1 Total $ 43,476 7.25%(3) $582,303 $599,673 $ 159 $ 163
Tier 2
10 Amherst Court 1,281 7.70% 14,494 16,640 89 103
11 Berkeley Court 1,343 7.70% 16,751 17,441 110 115
12 Cedar Creek 1,534 7.70% 19,041 19,925 108 113
13 Cross Creek 1,248 7.70% 15,555 16,208 114 119
14 Dartmouth Court 2,606 7.70% 31,068 33,847 106 115
15 Newport North 5,789 7.70% 69,225 75,180 121 132
16 Northwood Park 1,439 7.70% 17,577 18,691 105 111
17 Northwood Place 5,328 7.70% 65,024 69,201 108 115
18 Rancho Alisal 3,213 7.70% 37,637 41,722 106 117
19 Rancho Maderas 2,571 7.70% 31,710 33,393 119 126
20 Rancho Mariposa 2,135 7.70% 26,741 27,732 112 117
21 Rancho Monterey 4,926 7.70% 62,643 63,973 144 147
22 Rancho San ▇▇▇▇▇▇▇ 3,363 7.70% 41,701 43,670 113 119
23 Rancho Santa Fe (1) 3,742 7.70% 38,409 48,598 122 154
24 Rancho Tierra 2,595 7.70% 32,426 33,695 129 134
25 San Carlo 3,761 7.70% 46,472 48,838 131 138
26 San ▇▇▇▇ 2,279 7.70% 27,953 29,594 113 119
27 San Marco 3,669 7.70% 44,349 47,644 104 112
28 San Marino 1,691 7.70% 20,761 21,967 104 110
29 San Mateo 2,249 7.70% 27,833 29,206 98 103
30 San Paulo 3,198 7.70% 39,258 41,529 103 109
31 San Remo 2,041 7.70% 25,022 26,507 101 107
32 Santa ▇▇▇▇▇ 2,941 7.70% 37,087 38,193 163 168
33 Sierra Vista 2,980 7.70% 35,527 38,702 116 126
34 Stanford Court 2,819 7.70% 34,539 36,611 108 114
35 The Parklands 1,317 7.70% 14,182 17,098 117 141
(1) 1998 value based on total project costs.
(2) Year built reflects acquisition dates.
(3) Based on 1999 Cash Flow.
23
PRIVATE MARKETS VALUATION
STABILIZED PORTFOLIO VALUATION
CAP RATE ANALYSIS
Year 1998 1998E 1999E
Prop # Property Name Location Built # Units Cash Flow Cash Flow
------ ------------------ -------- ----- ------- --------- ---------
36 Turtle Rock Canyon Irvine 1991 217 2,479 2,593
37 Turtle Rock Vista Irvine 1976 252 2,623 2,801
38 Villa Coronado Irvine 1996 513 5,454 5,643
39 Windwood ▇▇▇▇ ▇▇▇▇▇▇ 1985 196 1,713 1,795
40 Windwood Knoll Irvine 1983 248 1,959 2,122
41 Woodbridge Oaks Irvine 1983 120 1,138 1,198
42 Woodbridge Pines Irvine 1976 220 1,546 1,812
43 Woodbridge Villas Irvine 1982 258 1,603 2,103
44 Woodbridge Willows Irvine 1984 200 1,632 1,717
----- ---------- ----------
Tier 2 Total 9,833 $ 84,408 $ 93,842
Tier 3
45 Bayport Newport 1971 104 984 1,026
46 Bayview Newport 1971 64 677 744
47 Baywood Newport 1973 388 3,604 4,044
48 Columbia Court Irvine 1984 58 479 524
49 Cornell Court Irvine 1984 109 1,056 1,101
50 Deerfield Irvine 1975 288 1,944 2,301
51 Harvard Court Irvine 1986 112 961 1,000
52 Mariner Square Newport 1969 114 972 1,089
53 Orchard Park Irvine 1982 60 536 567
54 Park West Irvine 1970 880 7,113 7,537
55 Parkwood Irvine 1974 296 2,255 2,448
56 The Hamptons (1) Silicon Valley 1998 342 -- 4,835
----- ---------- ----------
Tier 3 Total 2,815 $20,579 $ 27,216
Total Portfolio 16,317 $130,728 $164,534
Value Range Implied Value
Prop # Property Name Cap Rate 1998 CFLO 1999 CFLO Per Unit
------ ------------------ -------- --------- --------- --------------------------
36 Turtle Rock Canyon 7.70% 32,193 33,676 148 155
37 Turtle Rock Vista 7.70% 34,063 36,379 135 144
38 Villa Coronado 7.70% 70,833 73,288 138 143
39 ▇▇▇▇▇▇▇▇ ▇▇▇▇ 7.70% 22,241 23,317 113 119
40 Windwood ▇▇▇▇▇ 7.70% 25,435 27,553 103 111
41 Woodbridge Oaks 7.70% 14,778 15,562 123 130
42 Woodbridge Pines 7.70% 20,080 23,538 91 107
43 Woodbridge Villas 7.70% 20,819 27,307 81 106
44 Woodbridge Willows 7.70% 21,188 22,301 106 112
---- ---------- ---------- ---------- ----------
Tier 2 Total 7.70%(3) $1,134,617 $1,218,728 $115 $124
Tier 3
45 Bayport 8.00% 12,296 12,830 118 123
46 Bayview 8.00% 8,457 9,304 132 145
47 Baywood 8.00% 45,049 50,545 116 130
48 Columbia Court 8.00% 5,988 6,552 103 113
49 Cornell Court 8.00% 13,204 13,757 121 126
50 Deerfield 8.00% 24,297 28,758 84 100
51 Harvard Court 8.00% 12,010 12,503 107 112
52 Mariner Square 8.00% 12,152 13,608 107 119
53 Orchard Park 8.00% 6,696 7,085 112 118
54 Park West 8.00% 88,907 94,214 101 107
55 Parkwood 8.00% 28,186 30,597 95 103
56 The Hamptons (1) 8.00% 51,923 60,443 152 177
---- ---------- ---------- ---------- ----------
Tier 3 Total 8.00%(3) $ 309,166 $ 340,197 $110 $121
Total Portfolio 7.62%(3) $2,026,086 $2,158,598 124 132
(1) 1998 value based on total project costs.
(2) Year built reflects acquisition dates.
(3) Based on 1999 Cash Flow.
24
24
PRIVATE MARKETS VALUATION
STABILIZED PORTFOLIO VALUATION
PRESENT VALUE ANALYSIS
- NMS projected cash flows for the stabilized portfolio through 2008 and
calculated a present value.
- NMS used the same assumptions for the future as found in the IAC 1999
Business Plan (dated October 1998)
1999 2000 2001-2008
Revenue: Irvine Ranch 5.0% growth 4.0% growth 3.0% growth
San Diego 4.0% 4.0% 3.0%
Silicon Valley 5.0% 4.0% 3.0%
West L.A. 5.0% 4.0% 3.0%
Operating Expenses and Corporate G&A: 2.5% 2.8% 2.8%
Other Assumptions:
FF&E Reserve 3.0% of revenues
Exit Cap Rate 1.0% higher than "going-in" cap rates
Discount Rates 11.0%, 12.0%, 13.0%
25
25
PRIVATE MARKETS VALUATION
STABILIZED PORTFOLIO VALUATION
PRESENT VALUE ANALYSIS
($ IN THOUSANDS)
---------------------------------------------------------------------------------------------------------------
Period 1 2 3 4 5
Year 1999 2000 2001 2002 2003
---------------------------------------------------------------------------------------------------------------
Total Cashflows (1) $ 164,534 $ 171,907 $ 177,310 $ 182,882 $ 188,630
Terminal Value (2)
----------------------------------------------------------------------
Total Cashflows $ 164,534 $ 171,907 $ 177,310 $ 182,882 $ 188,630
Corporate Overhead (2.8% Growth/Year) (9,041) (9,294) (9,554) (9,822) (10,097)
Terminal Effect of Corporate Overhead
----------------------------------------------------------------------
Cashflow After Effect of Reassessment 155,493 162,613 167,755 173,060 178,533
------------------------------------------------------------------------------------------------------------
Period 6 7 8 9 10
Year 2004 2005 2006 2007 2008
------------------------------------------------------------------------------------------------------------
Total Cashflows (1) $ 194,559 $ 200,675 $ 206,984 $ 213,492 $ 220,206
Terminal Value (2) 2,615,341
--------------------------------------------------------------------
Total Cashflows $ 194,559 $ 200,675 $ 206,984 $ 213,492 $ 2,835,546
Corporate Overhead (2.8% Growth/Year) (10,380) (10,670) (10,969) (11,276) (11,592)
Terminal Effect of Corporate Overhead (138,242)
--------------------------------------------------------------------
Cashflow After Effect of Reassessment 184,180 190,005 196,015 202,216 2,685,712
Total Asset Value
PV @11.00% $1,914,638
PV @12.00% $1,795,236
PV @13.00% $1,685,715
(1) After management fee and FF&E reserve.
(2) Terminal values calculated using cap rates on each asset that are 100
basis points greater than the "going-in" cap rates.
26
26
PRIVATE MARKETS VALUATION
STABILIZED PORTFOLIO VALUATION
REPLACEMENT COST ANALYSIS
($ IN THOUSANDS)
- Based on IAC's experience with recently developed assets and assets under
construction on the Irvine Ranch, NMS applied the range of costs to the
total units in the stabilized portfolio.
Property First Stabilized Total Total
Name Location Units Occupancy Occupancy Cost ($000) Cost/Unit
----------------------- ----------- ------ --------- ---------- ----------- ---------
Sonoma (Oak Creek I) Irvine, CA 198 Aug-98 Mar-99 $ 25,361 $128,086
Britanny I (Oak Creek II) Irvine, CA 393 Jan-99 May-00 44,607 113,504
Baypointe Newport, CA 300 1997 1998 32,928 109,760
Santa ▇▇▇▇ ▇▇ Irvine, CA 207 1997 1998 26,631 128,652
Santa ▇▇▇▇▇ Irvine, CA 227 1997 1998 22,613 99,617
Rancho Santa Fe Tustin, CA 316 1997 1998 38,409 121,547
----- -------- --------
1,641 $190,549 $116,118
Cost/Unit Aggregate Value ($000)
------------------------- --------------------------
Complexes Units Average Median Low High
--------- ------ --------- ---------- ----------- -----------
Stabilized IAC Portfolio 57 16,317 $ 116,118 $ 117,526 $ 1,894,691 $ 1,917,666
(1) This analyis considers constructing new assets with greater amenities
(compared to the average age of the stabilized assets of 12 years with
less amenities)
27
27
PRIVATE MARKETS VALUATION
LEASE-UP PORTFOLIO VALUATION
($ IN THOUSANDS)
- NMS valued the lease-up portfolio at costs incurred through November plus
10.0% profit increment.
Property First Stabilized Total Total
Name Location Units Occupancy Occupancy Cost Cost/Unit
--------------------- ------------- ----- --------- ---------- -------- ---------
Sonoma Irvine, CA 198 Aug-98 Mar-99 $ 25,361 $128,086
Arcadia at Stonecrest San Diego, CA 336 Jan-99 Oct-99 42,340 126,012
Britanny I Irvine, CA 393 Jan-99 May-00 44,607 113,504
--- -------- --------
927 $112,308 $121,152
Less: Unincurred Cost To Complete 43,800
--------
Cost Incurred To Date $ 68,508
Plus: 10.0% Developer's Profit 6,851
--------
Aggregate Value $ 75,359
========
28
28
PRIVATE MARKETS VALUATION
VALUATION OF ASSETS UNDER CONSTRUCTION
($ IN THOUSANDS)
- Since these assets were recently purchased in a competitive market
process, NMS valued these assets at costs incurred to date.
Property First Stabilized Total Total
Name Location Units Occupancy Occupancy Cost Cost/Unit
------------------- ------------------ ----- --------- ---------- ---------- ------------
Champagne Towers (1) Santa Monica, CA 119 Sep-99 Jan-00 73,900 621,008
▇▇▇▇▇ Site Silicon Valley, CA 298 Mar-00 Dec-00 40,947 137,406
Park Place Land (1) Irvine, CA 1,226 May-00 Sep-02 204,272 166,617
▇▇▇▇ Island Silicon Valley, CA 155 Jun-99 Nov-99 35,756 230,684
Avventura San Diego, CA 232 Aug-99 Jan-00 44,170 190,388
----- ---------- ------------
2,030 $ 399,045 $ 196,574
Less: Unincurred Cost
To Complete 284,865
----------
Aggregate Value $ 114,180
==========
(1) Champagne Towers and Park Place represent 81% of the total and were both
recently purchased in a competitive market process.
29
29
PRIVATE MARKETS VALUATION
LAND RIGHTS VALUATION METHODOLOGY
OVERVIEW:
- IAC has the exclusive right to acquire apartment land on the Irvine Ranch
at 95% of fair market value. However, TIC is not obligated to offer land
for development to IAC.
- The value of this right to IAC can be calculated by discounting the 5%
benefit over the total existing inventory of multi-family land intended to
be designated by TIC on the Irvine Ranch.
ASSUMPTIONS:
- Projected five year apartment development pipeline and therefore projected
five year land sales are taken from the IAC 1999 Business Plan (dated
October 1998).
- Assumes $177MM in land sales over a five year period.
* Assumes the following units per year-- Year 1: 1,476; Year 2: 559;
Year 3: 1,075; Year 4: 1,558; Year 5: 1,220.
* Average land cost per unit assumed to be $47,000 based on recent
Irvine Ranch land appraisals.
* Annual value of benefit to IAC; $3.5MM, $1.3MM, $2.5MM, $3.7MM,
$3.0MM.
- A discount rate of 12% was used to calculate present value.
30
30
PRIVATE MARKETS VALUATION
LAND RIGHTS VALUATION
($ IN THOUSANDS)
Year 1 Year 2 Year 3 Year 4 Year 5
------- ------- ------- ------- -------
Units Acquired (1) 1,476 559 1,075 1,558 1,220
Average Land Value Per Unit (2) 47 49 51 53 55
Appraised Value $69,372 $27,324 $54,648 $82,369 $67,080
Land Cost to IAC (3) 65,903 25,958 51,915 78,251 63,726
------- ------- ------- ------- -------
Annual Savings to IAC $ 3,469 $ 1,366 $ 2,732 $ 4,118 $ 3,354
Discount Per
Rate Value Share
-------- ----- -----
12.0% $10,651 $0.24
14.0% $10,119 $0.22
16.0% $ 9,627 $0.21
(1) Per IAC Business Plan.
(2) Based on recent Irvine Ranch land appraisals, including ▇▇▇▇▇▇ Canyon (2
and 3) and Park Place.
(3) Assumes 5% discount to Appraised Value.
31
31
PRIVATE MARKETS VALUATION
ANALYSIS OF OTHER ASSETS AND LIABILITIES
($ IN THOUSANDS)
November 30,
1998 (1)
------------
Other Assets
Cash and Cash Equivalents $ 19,049
Other Assets 14,396
---------
Total Other Assets $ 33,445
Other Liabilities
Accounts Payable and Accrued Liabilities $ 44,985
Security Deposits 9,446
Dividends and Distributions Payable 3,403
---------
Total Other Liabilities $ 57,834
Total Debt
Tax-Exempt Mortgage Bond Financings $ 18,000
Conventional Mortgage Financings 129,775
Mortgage Notes Payable to The Irvine Company 49,592
Tax-Exempt Assessment District Debt 21,306
Unsecured Tax-Exempt Bond Financings 334,190
Unsecured Term Loan 100,000
Unsecured Notes Payable 99,275
---------
Total Debt $ 752,138
Other Assets and Liabilities (24,389)
---------
Net Debt $ 776,527
=========
Preferred A (Toprs) 150,000
Preferred B (▇▇▇▇▇▇ Street Exchange Fund) 50,000
---------
Total Debt and Preferred $ 976,527
=========
(1) Source: November 30, 1998 Balance Sheet
32
32
PRIVATE MARKETS VALUATION
PROPERTY TAX REASSESSMENT ANALYSIS
($ IN THOUSANDS)
- Assuming a sale of individual IAC properties, a property tax reassessment
(per Proposition 13) would have an $8.4 million negative impact to cash
flow.
Equity value @ $32.50/share 1,469
Add: Liabilities 984
Less: Other Assets (20)
------
Net Asset Value 2,433
Less: Current Assessed Value 1,614
Property Tax Increased Assessment 818
Ad Valorem Tax Rate 1.03%
Property Tax Reassessed Increase 8.4
Capped @ 7.62% 110.6
Per Share Impact 2.45
33
33
PRIVATE MARKETS VALUATION
COMPARABLE SALES TRANSACTIONS
Number Units/ NRA
Name/ Location City Sale Date Age Land Ac Average Size
-------------- ---- --------- --- ------------ ------------
One Park Place Irvine Oct-98 N/A 216 N/A
N/A N/A
The Lakes at South Coast Costa Mesa Aug-98 13 770 716,080
14.13 930
The Resorts Aliso Viejo Jul-98 7 & 8 1,609 2,133,560
96.55 1,326
-------------------------------------------------------
Average 10 865 1,424,820
Median 10 770 1,424,820
-------------------------------------------------------
Adjusted cap rate for IAC assets based upon current market conditions: 7.25%
Sale
Name/ Location Price Price/Unit Price/SF Cap Rate
-------------- ------------ ---------- -------- --------
One Park Place $ 28,000,000 $129,630 N/A 8.3%(1)
The Lakes at South Coast $114,000,000 $148,052 $159 6.6%(1)
The Resorts $198,600,479 $123,431 $107 5.8%
--------------------------------------------------------------
$113,533,493 $133,704 $133 6.9%
$114,000,000 $129,630 $133 6.6%
--------------------------------------------------------------
Adjusted cap rate for IAC assets based upon current market conditions: 7.25%
Villas Alliento Rancho Santa Oct-98 10 225 164,484
▇▇▇▇▇▇▇▇▇
11.30 731
Laguna Brisas Apartments Laguna Niguel Feb-98 12 175 174,843
999
Sea Terrace Apartments ▇▇▇▇ Point May-97 26 208 183,820
11.88 884
▇▇▇▇▇ ▇▇▇▇▇▇ Apartments Rancho Santa Apr-97 9 301 229,593
▇▇▇▇▇▇▇▇▇
14.29 763
Toscana Apartments Irvine Feb-97 5 563 501,337
11.64 890
-----------------------------------------------
Average 13 294 250,815
Median 10.5 225 183,820
-----------------------------------------------
Adjusted cap rate for IAC assets based upon current market conditions: 7.70%
Villas Alliento $14,450,000 $64,222 $88 9.0%
Laguna Brisas Apartments $16,750,000 $95,714 $96 7.4%
Sea Terrace Apartments $19,450,000 $93,510 $106 7.2%(2)
▇▇▇▇▇ ▇▇▇▇▇▇ Apartments $17,710,000 $58,837 $77 7.2%
Toscana Apartments $51,250,000 $91,030 $102 8.3%
-------------------------------------------------
$23,922,000 $80,663 $94 7.8%
$17,710,000 $91,030 $96 7.4%
-------------------------------------------------
Adjusted cap rate for IAC assets based upon current market conditions: 7.70%
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Mesa Oct-97 10 713 642,249
13.88 901
Sea Palms Village Costa Mesa Jun-97 8 146 130,053
4.77 893
Crown Terrace Apartments Laguna Niguel Mar-97 13 176 175,296
19.43 996
Woodbridge Meadows Irvine Feb-97 18 375 299,318
17.80 798
Mill Creek Costa Mesa Jul-96 25 258 208,333
807
-----------------------------------------------
Average 15 334 291,050
Median 13 258 208,333
-----------------------------------------------
Adjusted cap rate for IAC assets based upon current market conditions: 8.00%
Oasis Martinque $67,500,000 $94,670 $105 7.6%
Sea Palms Village $11,550,000 $79,347 $89 9.8%
Crown Terrace Apartments $12,305,000 $69,915 $70 8.0%
Woodbridge ▇▇▇▇▇▇▇ $29,158,000 $77,755 $97 7.8%
Mill Creek $17,500,000 $67,829 $84 8.0%
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$27,602,600 $77,903 $89 8.2%
$17,500,000 $77,755 $89 8.0%
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Adjusted cap rate for IAC assets based upon current market conditions: 8.00%
(1) Includes benefit of existing tax-exempt financing.
(2) Cap rate increased for favorable financing and revenues adjusted to
reflect actual occupancy.