EXHIBIT 99.4
ITALIAN VILLAGE AND ▇▇▇▇▇ ▇▇▇▇▇▇ APARTMENTS
Charlotte, North Carolina
On August 28, 1997, Cornerstone Realty Income Trust, Inc. (the "Company")
purchased the Italian Village Apartments ("Italian Village") and the ▇▇▇▇▇
▇▇▇▇▇▇ Apartments ("▇▇▇▇▇ ▇▇▇▇▇▇"), comprising a total of 204 apartment units
located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇. Italian Village and
▇▇▇▇▇ ▇▇▇▇▇▇ are sometimes referred to herein collectively as the "Property".
The Company has renamed the Property the "Heatherwood Apartments," and plans to
operate the Property as an integrated apartment community with the Heatherwood
Apartments (formerly the ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Apartments), which are located adjacent
to the Property and which were purchased by the Company in September 1996.
The single Seller (Italian Investment Company, a partnership) was
unaffiliated with the Company and its Affiliates. The purchase price was an
aggregate of $7,425,000. At closing, the Company paid the entire purchase price
with borrowed funds under its unsecured line of credit with First Union National
Bank. Title to the Property was conveyed to the Company by limited warranty
deed.
LOCATION. The following information is based in part upon information
provided by the Charlotte Chamber of Commerce.
Based in part upon its fast rate of growth and a diversified economy,
Charlotte has in recent years come to national attention as an attractive
location for business and residential growth. According to the August 1995, Site
Selection magazine, Charlotte's corporate popularity ranked second nationally
only to Dallas during the period between 1990 and 1994, being the site of 474
significant new and expanded facilities.
Charlotte has developed into a major financial, distribution and
transportation center, with a metropolitan population of approximately 1.3
million and a population of approximately 5.6 million within a 100-mile radius.
Charlotte's growth is also attributable to its favorable year-round climate, a
moderate cost of living, excellent quality of life, educated work force, pro
business political climate, extensive transportation network, and strategic
geographic location.
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According to the Charlotte Chamber of Commerce, during the first six months
of 1995, approximately 530 firms announced new or expanded businesses which will
provide approximately 6,200 new jobs in the area. Charlotte is home to major
offices of more than 225 of the Fortune 500 industrial firms and approximately
300 of the Fortune 500 service firms.
Charlotte is the leading financial center of the Southeast, serving as
corporate headquarters to NationsBank and First Union, with assets of
approximately $170 billion and $124 billion, respectively. The growth of
Charlotte's banking and financial communities has had a positive effect on the
growth of its supporting industries, such as insurance, accounting, legal
services, and real estate. Another recent aspect of Charlotte's development is
as the location of professional basketball and football franchises known as the
Charlotte Hornets and the Carolina Panthers, respectively.
The city of Charlotte is located near the border of North Carolina and
South Carolina within Mecklenburg County. It is located at the intersection of
Interstates 77 and 85, the major north/south and east/west thoroughfares in the
region, which provide convenient access to all other regional areas.
Italian Village and ▇▇▇▇▇ ▇▇▇▇▇▇ are located in a well-established portion
of the expanding Charlotte market. The surrounding neighborhood includes both
retail and residential development and the Property enjoys convenient access to
all major areas of the city. As noted above, the Property shares a common
property line with the Heatherwood Apartments acquired by the Company in 1996
(under the name ▇▇▇▇▇▇▇▇ ▇▇▇▇▇), and the Company intends to operate all three
properties as an integrated apartment community. The properties are adjacent to
Providence Square Shopping Center, which features a ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
Drug Store, and are readily accessible from Interstate 85 and Interstate 77. The
Property is located approximately four miles from the SouthPark Mall area and
approximately seven miles from the Charlotte central business district via
Providence Road.
DESCRIPTION OF THE PROPERTY. Italian Village was built in 1970 and 1971 and
consists of 156 garden- and townhouse-style apartments on approximately 22.5
acres of land. Italian Village offers eight unit types. The unit mix and rents
currently being charged to new tenants are as follows.
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APPROXIMATE
INTERIOR MONTHLY
QUANTITY TYPE SQUARE FOOTAGE RENTAL
-------- ---- -------------- ------
20 One bedroom, one bath 728 $510
7 One bedroom, one bath 950 500
(large)
7 Two bedrooms, one 1,000 550
bath
15 Two bedrooms, two 1,060 610
baths
18 Two bedrooms, one and 1,116 610
one half baths
(townhouse)
20 Three bedrooms, two 1,235 710
baths
52 Three bedrooms, two 1,578 710
and one half baths
(townhouse)
17 Four bedrooms, two 1,992 870
and one half baths
(townhouse)
▇▇▇▇▇ ▇▇▇▇▇▇ was built in 1980. ▇▇▇▇▇ ▇▇▇▇▇▇ consists of 48 garden-style
apartments on approximately four acres. It offers two unit types. The unit types
and rents currently being charged new tenants are as follows.
APPROXIMATE
INTERIOR MONTHLY
QUANTITY TYPE SQUARE FOOTAGE RENTAL
-------- ---- -------------- ------
36 One bedroom, one bath 700 $510
12 Two bedrooms, two 1,000 610
baths
The units at the Property provide for a combined total of approximately
242,000 square feet of net rentable area. The
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Property features two outdoor swimming pools, a tennis court and a laundry
facility. There are also two lakes and a playground on the Property. The
Property has a clubhouse with a kitchen, fireplace and leasing office. There is
ample paved parking for tenants.
The Company believes that the Property has generally been well maintained
and is in good condition. However, the Company believes that the Property is in
need of a "face-lift." The Property has a desirable location but, in the opinion
of management, must be repositioned in the marketplace following significant
capital improvements. Management of the Company believes that the completion of
the capital improvements and repositioning of the Property in the market will
permit substantial increases in rents. The Company has budgeted approximately
$1,750,000 in renovations to the Property, which will include residing, roof
replacement, replacing and repainting trim and fascia board, repaving of the
parking areas, extensive interior upgrades and clubhouse renovations.
Leases at the Property are for terms of one year or less. Generally, rental
rates for the past five years at the Property have increased. As an example, a
two bedroom, one and one-half bath (1,116 square feet) apartment at Italian
Village rented for $455 in 1992, $460 in 1993, $495 in 1994, $520 in 1995, and
$545 in 1996. The average effective annual rental per square foot at Italian
Village for 1992, 1993, 1994, 1995, and 1996 was $4.53, $4.58, $4.93, $5.18, and
$5.43 respectively. A one bedroom, one bath (700 square feet) apartment at ▇▇▇▇▇
▇▇▇▇▇▇ rented for $400 in 1992, $405 in 1993, $415 in 1994, $425 in 1995, and
$435 in 1996. The average effective annual rental per square foot at ▇▇▇▇▇
▇▇▇▇▇▇ for 1992, 1993, 1994, 1995, and 1996 was $6.50, $6.58, $6.75, $6.91, and
$7.07, respectively.
The 18 two- and three-story buildings at Italian Village are concrete
masonry and wood-frame construction on concrete slabs. The exteriors are stucco
on concrete masonry or painted wood siding and the roofs consist of plywood
sheathing and three tab shingles. The three three-story buildings at ▇▇▇▇▇
▇▇▇▇▇▇ are ▇▇▇▇-frame with painted masonite siding. The roofs at ▇▇▇▇▇ ▇▇▇▇▇▇
consist of plywood sheathing and three tab shingles.
All apartment units have wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and an individually controlled heating and air conditioning unit. Each
kitchen is equipped with a refrigerator/freezer, electric range and oven,
dishwasher and garbage disposal. Selected units at Italian Village feature
vaulted ceilings, skylights, wet bars and large
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balconies or decks. Selected units at ▇▇▇▇▇ ▇▇▇▇▇▇ include fireplaces and large
balconies. The owner of the Property supplies cold water, sewer service and
trash removal. The tenants are responsible for electricity, which includes
heating, air conditioning, hot water, cooking and lights.
There are at least five apartment properties in the area that compete with
the Property. As noted above, in 1996, the Company purchased the ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Apartments, located adjacent to Italian Village and ▇▇▇▇▇ ▇▇▇▇▇▇. The Company
intends to operate all three apartment properties as an integrated apartment
community known as Heatherwood. The other properties that will compete with
Heatherwood offer similar amenities and generally have rents that are comparable
to those of the Property. Based on a recent telephone survey, the Company
estimates that occupancy in nearby competing projects now averages approximately
93%.
According to information provided by the seller, physical occupancy at
Italian Village and ▇▇▇▇▇ ▇▇▇▇▇▇ averaged approximately 93% in 1992, 94% in
1993, 94% in 1994, 94% in 1995, and 96% in 1996. On August 20, 1997, the
Property was 93% occupied. The tenants of the Property are a mix of blue-collar
and white-collar workers, students and retired persons. Of the tenants for which
financial information was available, the tenants were approximately evenly
divided among the following four income levels: below $20,000; between $20,000
and $30,000; between $30,000 and $40,000; and in excess of $40,000. Management
of the Company believes that the resident profile is somewhat below that of the
general market area.
The following tables set forth 1996 real estate tax information for the
Property.
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ITALIAN VILLAGE
TAX
ASSET VALUE RATE TAX
----- ----- ---- ---
Land $1,074,760.00 $1.2550 $13,488.24
Buildings 3,560,490.00 1.2550 44,684.15
Other features 44,980.00 1.2550 564.50
--------- ------
Total $4,680,230.00 $58,736.89
============= ==========
Solid Waste Fee: $5,148.00
TOTAL TAX: $63,884.89
==========
▇▇▇▇▇ ▇▇▇▇▇▇
TAX
ASSET VALUE RATE TAX
----- ----- ---- ---
Land $337,680.00 $1.2550 $4,237.88
Buildings 978,320.00 1.2550 12,277.92
Other features 56,570.00 1.2550 709.95
--------- ------
Total $1,372,570.00 $17,225.75
============= ==========
Solid Waste Fee: $1,617.00
TOTAL TAX: $18,842.75
==========
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 Charlotte, North Carolina area will
experience continued strong economic development and steady population increase,
and that such development and
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increase will support stable occupancy rates and reasonable increases in rents
at the Property.
2. Based upon an engineering report and its own inspections, the Company
believes that the Property is in generally sound condition. In addition, the
Company believes that the completion of its planned significant capital
improvements will reposition the Property in its marketplace and permit
significant increases in rental rates to prevailing market levels.
3. The Property is conveniently located and proximate to major employers
and shopping.
4. The Company is very familiar with the Charlotte rental market. The
Company already owns other apartment complexes in the Charlotte area, which may
provide certain economies and efficiency in operation. In particular, the
Company already owns an apartment community located immediately adjacent to the
Property. The Company believes that the knowledge it has obtained through the
prior operation of the adjacent property will provide advantages in the
operation of the new Property and that the operation of all of the apartment
properties as an integrated community will offer operational, advertising and
marketing advantages.
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 necessarily indicative of future operating
results.
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