Prepared For. The Preserve at Sharp Mountain 134 Westview Drive Jasper, Georgia Attention: Jerry Givan. Reserve Study

Transcription

1 Prepared For The Preserve at Sharp Mountain 134 Westview Drive Attention: Jerry Givan Reserve Study At The Preserve at Sharp Mountain Version 1.0 Project #: 11L-102 February 10, 2011 Prepared By: Greg Lason Greg L. Lason, R.S. WEC Sr. Project Engineer Prepared and Reviewed By: John Mercer John Mercer Senior Consultant

2 Reesseerrvvee Stuuddyy Reeppoorrt t 1.0 EXECUTIVE SUMMARY INTRODUCTION GOALS SCOPE OF WORK ASSUMPTIONS DISCLOSURES FIELD ASSESSMENT (Part 1) ASHPALT PAVEMENT RESURFACING CONCRETE CURBING WOOD RAIL FENCING SITE LIGHTING SITE FURNISHINGS RETENTION POND WELL AND WATERFALL PUMPS MASONRY TUCKPOINTING GAZEBO LODGE SIGNAGE ENTRANCE GATE LANDSCAPING WATER STORAGE TANK EXTERIOR BUILDING ELEMENTS INTERIOR BUILDING ELEMENTS RESERVE ANALYSIS (Part 2) LONG TERM REVIEW Phhoot tooggrraapphhss Appppeennddi ixx A Exhibit 1 Element Expense Summary Exhibit 2 Present Day Annual Expense Summary (6 pages) Exhibit 3 Inflated Annual Expense Summary (6 pages) Exhibit 4 Recommended Reserve Funding Plan (Expense Data Taken from Exhibit 3) Exhibit 5 Graphical Illustration of Exhibit 4 Exhibit 6 Current Fund Status

3 1.0 EXECUTIVE SUMMARY A Reserve Study was conducted for The Preserve at Sharp Mountain to determine a reasonable level of annual reserve fund contributions required to meet the future expenditures for the elements on the property that will likely require major repairs or replacements over the next 30-year period. The elements that have been included in the Reserve Study are considered common to the property as defined by the Association s declarations and bylaws, unless otherwise noted. Part 1 - Field Assessment Part 1 of the Reserve Study involved a visual inspection of the property to assess the general condition and obtain the necessary quantities and specifications of the major elements that will likely require repair or replacement over the next 30 years. A summary of the property data is as follows: Property Data Building Style # of Units/Lots # of Buildings Year(s) Constructed Lodge & Amenities ~2003 Overall, the property appears to be in satisfactory condition. However, during the course of the field inspection, some specific deficiencies were observed such as: Asphalt road deterioration, settlement Observation deck deterioration Road Sign deterioration Lodge fireplace firebrick cracked See the photograph section of this report for a detailed description of these and any other observed deficiencies. Part 2 - Reserve Analysis Part 2 of the Reserve Study involved an analysis based on a 30-year period. The latest version of the R.S. Means Repair and Remodeling Cost Data, along with other reliable cost resources, were used to determine the present day repair or replacement expenses for each of the elements as illustrated in Exhibit 1. To determine the future repair or replacement expenses over the next 30-year period, the present day expenses have been inflated at an annual rate of 3.82%. The present day expenses are inflated to account for historical increases in construction costs. The inflation rate was determined using the average of the last 20 years of the RS Means Historical Cost Indexes for Atlanta, Georgia. Given the present day expense, the future expense is calculated using the future value of a single amount formula as follows: where F = P (1 + IR) n F = future expense P = present day expense IR = inflation rate expressed as a decimal n = number of years until future expense occurs February 10, 2011 Page 1

4 The future repair or replacement expenses that are anticipated over the next 30 years are illustrated in Exhibits 2 and 3. The future expenses are aggregated on an annual basis to determine the recommended reserve funding plan as illustrated in tabular form in Exhibit 4 and in graphical form in Exhibit 5. The recommended reserve funding plan has been compiled using financial information provided by a representative of the property. The information has been deemed reliable and has not been verified. The following table summarizes this information. Summary of Financial Information Projected Year End Reserve Fund Balance (As of ) Current Annual Reserve Fund Contribution $68,561 $7,650 Reserve Fund Interest Rate 2.25% Based on the projected year-end reserve fund balance, the current reserve fund interest rate, and the estimated inflation rate, an iterative procedure was used to determine a recommended reserve funding plan. The intent of the plan is to have adequate funds available for future expenditures required for major repairs or replacements so that the potential need of a loan or special assessment can be avoided, which ultimately preserves the market value of the property. Based on the reserve analysis, it was concluded that the potential need for a loan or special assessment is not anticipated at this time; however an increase in the annual reserve fund contribution is recommended from the $7650 currently being contributed to the amounts shown in Exhibit 4 in order to avoid the potential of a future loan or special assessment. The following table summarizes the recommended annual reserve fund contributions over the next 5 years. Recom mended Annual Reserve Contribution Year Calendar Year Interest = 2.25% Inflation = 3.82% (Summary of Exhibit 4) $58, $59, $59, $60, $60, See Exhibit 4 The status of the current funding plan as it relates to the recommended funding plan is illustrated in Exhibit 6, assuming that the current budgeted amount continues to be contributed to the reserve study. The following chart illustrates the expenses that will be incurred for each of the element categories over the 30-year study period. These expenses are divided into five and ten-year segments to provide a graphical summary that assists the user in identifying the amount of funding that will be required for each category over a period of time, whether it is short-term or long-term. February 10, 2011 Page 2

5 Inflated Capital Expenses over 30 Years Site Elements Exterior Building Elements Interior Building Elements $0 $500 $1,000 $1,500 $2,000 Thousands 1 to 5 Years 6 to 10 Years 11 to 20 Years Years The following chart illustrates the ratio of expenses that will be incurred over the 30-year study period for each of the elements that represent a majority of the future repair or replacement expenses. % of Future Expenses Accumulated Over Life of Study 1.9% 2.3% 1.8% 2.4% 2.0% 14.9% 8.9% 65.8% Asphalt Pavement Resurfacing (65.8%) Asphalt Parking and Path Seal Coating (8.9%) Wood Rail Fencing (2.3%) Retention Pond Dam Repair (1.8%) Well and Waterfall Pumps (1.9%) Entrance Gate Repair (2.4%) Water Storage Tank Replacement (2.0%) Other (14.9%) The annual contributions made to the reserve fund are a means to compensate for the difference between the ongoing deterioration of a property and its finances. Since elements deteriorate at varying rates and the finances of the property are typically changing on an annual basis, the need to maintain balance between the two is an ongoing process. Therefore, to maintain this balance, periodic updates to the Reserve Study are recommended approximately every three years. Annual updates may be warranted depending on the age of the property and the amount of repair or replacement activity. February 10, 2011 Page 3

6 2.0 INTRODUCTION A Reserve Study was conducted for The Preserve at Sharp Mountain to determine a reasonable level of annual reserve fund contributions required to meet the future expenditures for the elements on the property that will likely require major repairs or replacements over the next 30-year period. The elements that have been included in the Reserve Study are considered common to the property as defined by the Association s declarations and bylaws, unless otherwise noted. The goals of the Reserve Study are as follows: 3.0 GOALS 1. Visually assess the general current condition and obtain the necessary quantities and specifications of the major elements that will likely require repair or replacement over the next 30 years. 2. Estimate the remaining useful life until major repair or replacement of the elements is considered necessary. 3. Estimate the future expense schedule for repair or replacement of the elements. 4. Analyze the annual reserve fund contributions needed to ensure that funds are available for the ongoing repair or replacement of the elements. 5. Provide a status of the current fund as it relates to the recommended funding plan, assuming that the current budgeted amount continues to be contributed to the reserve fund. 4.0 SCOPE OF WORK To accomplish the Reserve Study goals, performed a Level I, Full Reserve Study with site visit in the following two parts. Field Assessment (Part 1) Part 1 of the Reserve Study involved a visual inspection of the property to assess the general condition and obtain the necessary quantities and specifications of the major elements that will likely require repair or replacement over the next 30 years. Reserve Analysis (Part 2) Part 2 involved an analysis of the future repair or replacement expenses anticipated for each of the elements. Based on the general condition, age, and average life expectancy of each element, a longterm repair and replacement schedule was established. has selected a 30-year period for the repair and replacement schedule to capture the long-term cyclic expenses associated with elements that exhibit longer life times. February 10, 2011 Page 4

7 Included in the report are the following exhibits that illustrate the results of the reserve analysis: Exhibit 1: A summary of the element quantities and total present day and inflated expenses incurred over the 30 year period of the study. Exhibit 2: The future repair or replacement expenses as shown in present day dollars that are anticipated over the next 30 years, presented on a year by year basis. Exhibit 3: The future repair or replacement expenses as shown in inflated dollars that are anticipated over the next 30 years, presented on a year by year basis. Exhibit 4: The recommended reserve funding plan as illustrated in tabular form. Exhibit 5: The recommended reserve funding plan as illustrated in graphical form. Exhibit 6: The status of the current funding plan as it relates to the recommended funding plan assuming that the current budgeted amount continues to be contributed to the reserve study. February 10, 2011 Page 5

8 5.0 ASSUMPTIONS Several general assumptions have been made for the completion of this study, which are as follows: 1. The elements will be replaced with like kind unless otherwise noted or directed by a representative of the property to use alternate materials. 2. All new installations will comply with current city, state and local building code requirements. 3. The building structures have a remaining useful life greater than 30 years. 4. A maintenance program will be implemented to ensure that all building components, systems, and equipment are maintained and operated at or near optimum capacities. 5. Since cash flow takes place at frequent and varying time intervals within an interest period, a simplified method of assuming that all cash flow occurs at the midpoint of the interest period is used in the reserve analysis. 6. The reserve analysis was performed using the baseline funding method. By definition, the baseline funding method maintains a reserve fund balance above zero for each year of the study. 7. The study is limited to the elements of the property that likely require major repair or replacement during the study period and that have a significant impact on the reserve contributions. Elements that require minor repairs or replacements and are relatively insignificant in cost when compared to the property in its totality are assumed to be funded from the operating and maintenance budget. 8. The following recurring expenses are considered to be maintenance items; therefore, adequate funding for such expenses should be allocated in the operating and maintenance budget, but not limited to the following: Painting or staining of exterior or interior walls. Applying protective coatings to the wood decks. Crack sealing, seal coating, and striping of asphalt pavement. Routine masonry repair. Expenses associated with maintaining the water quality of the retention pond. 9. Elements such as electrical, water supply, and waste water systems for the buildings are considered to have an extensive lifetime that make it very difficult to predict or establish major repair or replacement expenses. These elements can function indefinitely with ongoing maintenance and repairs which are considered minor when compared to wholesale replacement expenses; therefore, we assume that future minor ongoing maintenance and repair expenses incurred will be funded from the operating and maintenance budget. This assumption is based on the premise that a reserve study is to include elements that have a definable remaining useful life. Therefore, incorporating replacement expenses for elements that do not have a predictable useful life into the study can significantly impact the accuracy and validity of the results. February 10, 2011 Page 6

9 6.0 DISCLOSURES This report is a study to evaluate the adequacy of the HOA s replacement funds and the annual contribution thereto. It is not an engineering study of client-owned elements. The data gathered for this report consisted of on-site field work to inventory the quantity and assess the general condition of HOA owned property, assigning current and future values and likely replacement dates of those components resulting in this financial analysis. This report is based on observations of the visible and apparent conditions of a reasonable representative sampling of the property s elements at the time of inspection. Although due diligence was performed during the inspection phase, makes no representations regarding latent or concealed defects that may exist. The inspection did not constitute any invasive investigations and was not intended to determine whether applicable building components, systems, or equipment are adequate or in compliance with any specific or commonly accepted design requirement, building code, or specification. Such tasks as material testing, engineering analysis, destructive testing, or performance testing of building systems, components, or equipment are not considered as part of the scope of work, nor are they considered by the reserve study industry standard. Judgments in this study are based on estimates of the age and typical useful life of the various elements included in this study. The predictions of useful life and remaining useful life are based on industry and/or statistical comparisons, along with sound engineering judgment. It is necessary to recognize that the actual conditions can alter the useful life of any element. The methods of installation, deferral of maintenance, or other unforeseen conditions make it virtually impossible to predict precisely when each element will require major repair or replacement. The tabulated values for expected useful life and remaining useful life are estimates, as noted, and should not be construed as a guarantee or warranty, either expressed or implied, as to the performance of products, materials, or workmanship. If the property representative has not disclosed any known issues or problems with materials, components, or systems, it is noted that the validity of this study may be impacted. Where applicable, comments regarding the general condition of the property and any significant deficiencies as observed at the time of inspection have been documented. A qualified contractor or building engineer should be retained to repair, replace, or adjust defective components to ensure optimum performance or efficiency. Pricing used for the repair or replacement costs indicated in this report are derived from the R.S. Means Repair and Remodeling Cost Data publication in conjunction with other reliable resources such as individual material and equipment suppliers and sound engineering judgment. The material and labor pricing provided are estimates and have been augmented, as necessary, to account for specific site conditions (i.e. material handling, scaffolding, etc.). The total expenses represent a useful guideline whereby reserve funds can be accumulated for future repairs and replacements. The estimated repair and replacement expenses, unless otherwise noted, do not include allowances for architectural, engineering, or permitting fees. The information provided by a property representative regarding the financial, physical, or historical data is deemed reliable. The reserve study is intended to be a reflection of the information provided and is not for the purpose of performing an audit, quality analysis, forensic analysis, or background check of historical records. By review of the property representative, the elements listed in the Appendix A of this report have been identified as the elements for which the property has long-term responsibility for repair and replacement. The property representative assumes full responsibility for determining that the list of elements is complete. has not reviewed any documents or declarations as part of this Reserve Study and assumes no responsibility for the completeness of the inventory. This report is intended solely for the use of the The Preserve at Sharp Mountain in connection with funding for major repairs and replacements, and may not be used by any other party for any purpose. February 10, 2011 Page 7

10 7.0 FIELD ASSESSMENT (Part 1) The contract to perform a Reserve Study for The Preserve at Sharp Mountain required an on-site, visual inspection of the property and a report on the general condition of the elements. The definitions below summarize the method used to determine the condition of each element included in this study. The colors shown below correspond to the general condition column of each of the following element tables. Condition Definitions Poor a major deficiency of a component in which the function or operation is affected, is at or beyond its typical useful life, or whose remaining useful life should not be relied upon as a result of the information gathered regarding actual or effective age or evidence of abuse, excessive wear and tear, exposure to the elements, lack of proper maintenance, etc. This definition specifically excludes deficiencies that may be remedied with routine maintenance, miscellaneous minor repairs, normal operating maintenance, etc., however it may include components that are governed by aesthetics as opposed to performance. Marginal no major component deficiencies observed or evidence that would suggest that a major deficiency may exist. The component remains functional and operational, as it exists, however there is evidence that it is nearing its typical useful life. Satisfactory no major component deficiencies observed, or evidence that the component is nearing its typical useful life, however it is apparent that the component has not been recently replaced or repaired to its original condition. Good no major component deficiencies observed and it is apparent that the component has been recently replaced or repaired to its original condition. Varies the general condition of an element cannot be generally defined by one of the above mentioned definitions. During the course of our inspection, several general observations were made regarding the construction and maintenance of the property. In general, a diligent effort was made to distribute the repair and replacement expenses over a number of years to create a more uniform expense report. The following discussions relate to the general features of the elements. February 10, 2011 Page 8

11 7.1 ASHPALT PAVEMENT RESURFACING General Description The 12 miles of private roads and amenity center parking lots and drives located throughout the property are constructed of asphalt pavement. Due to the mountainous topography of the subject property, most road surfaces are built on hill cut or fill areas. Asphalt pavement is constructed of two layers of material consisting of an asphalt-wearing course and granular base course. The asphalt-wearing course for streets is typically constructed of two layers consisting of a thin surface course and a thicker binder course, which provides a bond between the surface course and granular base course. The granular base course usually ranges from 6 to 18 in thickness depending on sub-base (i.e. soil) conditions and loading requirements. Compaction of the sub-base (i.e. soil) and granular base course is one of the most important procedures to ensure proper performance of the pavement. Typically, the single most significant cause of asphalt pavement failure is poor drainage. However, due to the hilly nature of the property, incomplete compaction of fill is the likely cause of observed areas of subsidence. Based on the observed conditions and the estimated age and condition of the paving, we have included funding for replacement of portions of the roads and parking areas over the 30-year period of this study as illustrated in the chart below and Exhibit 2. Periodic seal coating and crack sealing approximately every 5 to 6 years is the most important preventative maintenance that can be done to extend the life of asphalt pavement. Due to the extensive road areas in the property, we are recommending periodic seal coating of only the amenity areas parking and driveways. Seal coating minimizes oils from evaporating, reduces the degradation that occurs from ultraviolet light, and prevents water from penetrating the pavement. Random cracks that are greater than 1/8 in width should be routed out, cleaned, and filled with a rubberized hot tar crack sealant to prevent water from penetrating the pavement. Based on the observed conditions and the estimated age and condition of the coating, we have included funding for replacement over the 30-year period of this study as illustrated in the chart below and Exhibit 2. Deficiencies Noted See photograph section of this report for any observed deficiencies. Element Condition Key Poor Marginal Satisfactory Good Varies Element / Sub Element General Condition Typical Remaining Asphalt Pavement Resurfacing Ongoing 1,268,000 Square Feet $2,029,000 Asphalt Parking and Path Seal Coating ,500 Square Feet $24,000 Total Quantities Units Present Day Expense Total $2,053,000 February 10, 2011 Page 9

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13 7.2 CONCRETE CURBING General Description Concrete curb and gutter is located only around the perimeter of the asphalt paved walkway at the Lodge lawn. It is not expected that a wholesale replacement of the concrete curb and gutter will be required within this study period; however, partial replacements are anticipated periodically because of accelerated deterioration that can occur depending on the concrete mix, finishing techniques, and local conditions. Based on the observed conditions and the estimated age of the curbing, we have provided a repair allowance over the 30-year period of this study as illustrated in the chart below and Exhibit 2. Deficiencies Noted See photograph section of this report for any observed deficiencies. Element Condition Key Poor Marginal Satisfactory Good Varies Element / Sub Element General Condition Typical Remaining Concrete Curbing Up to 60 Ongoing 280 Linear Feet $3,400 Total Quantities Units Present Day Expense Total $3,400 February 10, 2011 Page 11

14 7.3 WOOD RAIL FENCING General Description The property features wood 3-rail fencing at the main entry road, and split rail fencing located around the Lodge area and other amenity areas. Wood fencing is also present between masonry columns at certain road intersections. Replacement of wood fencing is periodically necessary due to lateral displacement of the vertical support posts, wood rot, termite damage, and mechanical damage to the pickets or rails, etc. Based on the observed conditions, funding has been allocated for periodic replacement of the wood fencing as illustrated in the chart below and Exhibit 2. The recurring expense of applying a protective coating to the fencing is considered to be a maintenance item; therefore, adequate funding should be allocated to the operating and maintenance budget for such an expense. Deficiencies Noted See photograph section of this report for any observed deficiencies. Element Condition Key Poor Marginal Satisfactory Good Varies Element / Sub Element General Condition Typical Remaining Wood Rail Fencing Ongoing 5,200 Linear Feet $81,000 Total Quantities Units Present Day Expense Total $81,000 February 10, 2011 Page 12

15 7.4 SITE LIGHTING General Description The property features lighting located at the entry monuments, lodge, pond and general landscape lighting. Often, the need for replacement is determined by the extent of damage to the lighting such as corrosion, the frequency and costs of repairs due to the age of the lighting, or merely the desire to change the aesthetic appearance of the lighting to maintain the market value of the property. Based on the observed conditions, funding has been allocated for periodic partial replacement of the site lighting as illustrated in the chart below and Exhibit 2. Deficiencies Noted See photograph section of this report for any observed deficiencies. Element Condition Key Poor Marginal Satisfactory Good Varies Element / Sub Element General Condition Typical Remaining Site Lighting Allow ance $3,000 Total Quantities Units Present Day Expense Total $3,000 February 10, 2011 Page 13

16 7.5 SITE FURNISHINGS General Description Clustered around the amenity areas is a variety of furnishings, such as trail benches, wood picnic tables, wood trash receptacles, wood swing set and six heavy custom picnic tables and benches at the Lodge. Replacement of such furnishings is often considered necessary as a result of weather deterioration, physical damage, a loss of finish, the fixtures becoming worn or outdated, and to maintain the aesthetics of the property. Based on the observed conditions, funding has been allocated for an allowance for periodic replacement as illustrated in the chart below and Exhibit 2. Deficiencies Noted See photograph section of this report for any observed deficiencies. Element Condition Key Poor Marginal Satisfactory Good Varies Element / Sub Element General Condition Typical Remaining Site Furnishings Allow ance $5,000 Total Quantities Units Present Day Expense Total $5,000 February 10, 2011 Page 14

17 7.6 RETENTION POND General Description This property features a wet retention pond located at the main, eastern entry of the property. To insure proper function, these holding ponds should generally be kept clear of tree and vegetation growth. Any accumulated debris can block the overflow pipe in times of heavy precipitation, which in turn can allow pond water to overtop the dam, which for the subject property is the entry road. Allowing vegetation other than grass, particularly roots of trees and shrubs to grow on dams can weaken it. In the worst case scenario, dam erosion or collapse of the dam can occur, threatening property and life below the dam. Based on the observed conditions, funding has been allocated for the periodic clearing of the pond and dam as illustrated in the chart below and Exhibit 2. Located in the Nesting Waters Park lake is a floating water pump and fountain assembly. For the purpose of this study, we have assumed the pump is rated at 2 horsepower. Pumps eventually fail due to constant wear and tear from operation, bearing and impeller failure and electrical problems which necessitates replacement. Based on the observed conditions, funding has been allocated for replacement of the fountain and pump as illustrated in the chart below and Exhibit 2. Deficiencies Noted See photograph section of this report for any observed deficiencies. Element Condition Key Poor Marginal Satisfactory Good Varies Element / Sub Element General Condition Typical Remaining Retention Pond Dam Repair Allow ance $3,000 Retention Pond Aerator Each $5,000 Total Quantities Units Present Day Expense Total $8,000 February 10, 2011 Page 15

18 7.7 WELLS AND WATERFALL PUMPS General Description The property features five wells, located at Nesting Waters, Lodge, Enterkin Park and one each at the two fire water holding tanks, and one for the Lodge waterfall pump. For the purpose of this study, we have assumed the pumps are each rated at 2 horsepower. Pumps eventually fail due to constant wear and tear from operation, bearing and impeller failure and electrical problems which necessitates replacement. Based on the observed conditions, funding has been allocated for replacement of the fountain and pump as illustrated in the chart below and Exhibit 2. Deficiencies Noted See photograph section of this report for any observed deficiencies. Element Condition Key Poor Marginal Satisfactory Good Varies Element / Sub Element General Condition Typical Remaining Well and Waterfall Pumps Each $10,000 Total Quantities Units Present Day Expense Total $10,000 February 10, 2011 Page 16

19 7.8 MASONRY TUCKPOINTING General Description Located at the main and west entrances to the property are stone veneer monument planter walls and columns. Stone veneer columns are also present at the entry gates, at certain road intersections, park sign marker columns and walls. The Lodge column bases are stone veneer. The Lodge features a large stone fireplace. Tuckpointing of masonry is periodically necessary to prevent costly and extensive damage such as deterioration of mortar joints, cracking and spalling of brick, etc., that is caused by moisture penetration. Some loose stones in random areas were noted. Based on the observed conditions, funding has been allocated for maintenance tuckpointing of the masonry as illustrated in the chart below and Exhibit 2. Deficiencies Noted See photograph section of this report for any observed deficiencies. Element Condition Key Poor Marginal Satisfactory Good Varies Element / Sub Element General Condition Typical Remaining Masonry Tuckpointing Allow ance $3,000 Total Quantities Units Present Day Expense Total $3,000 February 10, 2011 Page 17

20 7.9 GAZEBOS General Description Gazebos are located at Nesting Waters Park and Enterkin Park. They are constructed of wood posts and open roof structure. Roofing materials have been included in Section Wood structures are subject to weather and termite damage as well as normal wear and tear from usage. Funding has been allocated for partial major repairs of the gazebos as illustrated in the chart below and Exhibit 2. Deficiencies Noted See photograph section of this report for any observed deficiencies. Element Condition Key Poor Marginal Satisfactory Good Varies Element / Sub Element General Condition Typical Remaining Gazebo Repairs Allow ance $5,000 Total Quantities Units Present Day Expense Total $5,000 February 10, 2011 Page 18

21 7.10 LODGE General Description The main amenity area features an open-sided wood structure Lodge constructed of heavy cypress wood posts and open roof structure. Wood structures are subject to weather and termite damage as well as normal wear and tear from usage. Electrical system repairs are included in this allocation. Funding has been allocated for partial major repairs of the Lodge as illustrated in the chart below and Exhibit 2. Deficiencies Noted See photograph section of this report for any observed deficiencies. Element Condition Key Poor Marginal Satisfactory Good Varies Element / Sub Element General Condition Typical Remaining Lodge Repairs Allow ance $5,000 Total Quantities Units Present Day Expense Total $5,000 February 10, 2011 Page 19

22 7.11 SIGNAGE General Description Located at the main and west entrances to the property are wood monument signs. An additional monument sign is located off-site at the intersection of Pettit Road and Salem Church Road. Over time wood signage of this type can become warped, damaged, or experience deterioration that necessitates replacement. Located throughout the property are street stop signs and name signs, a few miscellaneous directional/advisory signs at random areas, and recreation area signs. Replacement of the signs is often considered necessary as a result of physical damage, a loss of finish, the structures becoming worn or outdated, and to maintain the aesthetics of the property. Several signs were observed to be damaged. For the purpose of this study we have provided an allowance for periodic partial replacement. Based on the observed conditions, maintenance funding has been allocated for periodic replacement of the signs as illustrated in the chart below and Exhibit 2. Deficiencies Noted See photograph section of this report for any observed deficiencies. Element Condition Key Poor Marginal Satisfactory Good Varies Element / Sub Element General Condition Typical Remaining Monument Signage Each $4,500 Signage Replacement Each $22,000 Total Quantities Units Present Day Expense Total $26,500 February 10, 2011 Page 20

23 7.12 ENTRANCE GATE General Description Located at the two vehicle entries are double-width wrought iron motorized gates. The system features two resident bar code readers, two guest phone pad call boxes and two road exit sensors. The gates themselves should last indefinitely if properly maintained. However, minor or significant repairs may be necessary due to damage or lack of maintenance. Motor operators eventually fail due to constant use. Electronics can fail due to use and weather. Based on the observed conditions, an allowance has been allocated for repair of the various systems as illustrated in the chart below and Exhibit 2. Deficiencies Noted See photograph section of this report for any observed deficiencies. Element Condition Key Poor Marginal Satisfactory Good Varies Element / Sub Element General Condition Typical Remaining Entrance Gate Repair Allow ance $10,000 Total Quantities Units Present Day Expense Total $10,000 February 10, 2011 Page 21

24 7.13 LANDSCAPING General Description Landscaping for which the HOA is responsible is located at the main entries and at the amenity centers. It is very difficult to predict the expenses associated with the replacement of plant material. The day-to-day care of the plants will have a significant impact on how each will endure throughout this study period. Lifelimiting factors include cultural problems, insects, disease and physical damage. The property also has extensive irrigation piping and features that has an indeterminate life cycle. Irrigation pumps have been addressed in Section 7.7. The client has requested that an allowance be included in this study to insure that funding is set aside for needed replacements as illustrated in the chart below and Exhibit 2. Deficiencies Noted See photograph section of this report for any observed deficiencies. Element Condition Key Poor Marginal Satisfactory Good Varies Element / Sub Element General Condition Typical Remaining Landscaping Improvement Allow ance $3,000 Total Quantities Units Present Day Expense Total $3,000 February 10, 2011 Page 22

25 7.14 WATER STORAGE TANKS General Description Due to the remoteness of this rural area, the property features two buried 5,000 gallon water tanks reported by the HOA as fiberglass, the purpose of which is to supply water for the fire department for structure or brush fires. Well pumps keep the tanks filled (see Section 7.7). The tanks may have a life beyond the 30 years of this study. However, due to their critical importance, an allowance has been allocated for possible replacement as illustrated in the chart below and Exhibit 2 Deficiencies Noted See photograph section of this report for any observed deficiencies. Element Condition Key Poor Marginal Satisfactory Good Varies Element / Sub Element General Condition Typical Remaining Water Storage Tank Replacement Each $16,000 Total Quantities Units Present Day Expense Total $16,000 February 10, 2011 Page 23

26 7.15 EXTERIOR BUILDING ELEMENTS General Description The roofs of the Lodge, restroom and storage buildings, and two gazebos are covered with a single layer of a laminated architectural asphalt shingle. Replacement of the roofing is eventually necessary due to chronic problems with moisture penetration and the degradation of shingles as evident by curling, torn shingle tabs, excessive granule loss, etc. For the purpose of this analysis, we assume that the roof covering will be torn off and replaced with a similar shingle style, rather than recovered. Recovering a roof is not the preferred method due to the reduced useful life of the new roof that is caused by the underlying shingle layers absorbing additional heat causing accelerated degradation. A recover also restricts the repair of delaminated or decayed roof sheathing and flashing deficiencies. The flashing and felt paper are integral with the entire roof system. Therefore, they are considered as part of the overall roof replacement. Based on the observed conditions, funding has been allocated for wholesale replacement of the roofing as illustrated in the chart below and Exhibit 2. The restroom and storage building facades are constructed with cypress lap siding per the HOA. Included in this category are the double doors for the storage building and the faux shutters on both buildings. Cypress has an unusually long life expectancy. However, replacement eventually becomes necessary due to deterioration (warping, decay, splitting, etc.) of the wood. However, with proper maintenance such as applying protective coatings the siding should last indefinitely. Based on the observed conditions, and allowance has been allocated for partial replacement of the siding during this 30-year study period as illustrated in the chart below and Exhibit 2. The recurring expense of staining the siding is considered to be a maintenance item; therefore, adequate funding should be allocated in the operating and maintenance budget for such an expense. The property features several wood decks and footbridges. Replacement of the wood features becomes necessary as a result of deterioration (wood rot, splitting, termites, etc.) and to maintain the aesthetic appearance of the property. However, periodic minor replacements may become necessary. For the purpose of this study, funding has been allocated for a regular replacement schedule for the wood structures over the duration of the study period as illustrated in the chart below and Exhibit 2. The recurring expense of staining the decks is considered to be a maintenance item; therefore, adequate funding should be allocated in the operating and maintenance budget for such an expense. The two restroom building doors are insulated steel with keypad locks. Due to the exposed exterior location, over time the doors can be expected to deteriorate with the exposure to weather. Heavy use of the restroom doors often results in accelerated wear and tear. For replacement of the doors, funding has been allocated for a regular replacement schedule over the duration of the study period as illustrated in the chart below and Exhibit 2. Deficiencies Noted See photograph section of this report for any observed deficiencies. Element Condition Key Poor Marginal Satisfactory Good Varies Element / Sub Element General Condition Typical Remaining Roofing ,400 Square Feet $7,000 Wood Siding Ongoing 850 Square Feet $5,000 Wood Decks and Stairs Ongoin 1,500 Square Feet $23,000 Lodge Restroom Doors Each $2,000 Total Quantities Units Present Day Expense Total $37,000 February 10, 2011 Page 24

27 February 10, 2011 Page 25

28 7.16 INTERIOR BUILDING ELEMENTS General Description While the Lodge is open-sided, it does feature lighting and ceilings fans. The restroom building features exterior and interior lighting as well. Often, the need for lighting replacement is determined by the extent of damage to the lighting such as corrosion or broken lenses, the frequency and costs of repairs due to the age of the lighting, or the desire to change the aesthetic appearance of the lighting to maintain the market value of the property. Based on the observed conditions, funding has been allocated for wholesale replacement of the lighting fixtures as illustrated in the chart below and Exhibit 2. The restroom building features tile on the floor and fixture walls, 2 toilets, 2 wall sinks, plywood paneling, miscellaneous fixtures and basic electrical wiring and plumbing. Due to heavy physical use, periodic refurbishing is needed to maintain aesthetics. Costs of routine maintenance and minor replacements are commonly expensed to operating funds. However, an overall allowance has been provided in this study for more significant renovations or upgrades as deemed necessary or desired for aesthetic changes. Based on the observed conditions, funding for replacement of these elements is provided as illustrated in the chart below and Exhibit 2. Deficiencies Noted See photograph section of this report for any observed deficiencies. Element Condition Key Poor Marginal Satisfactory Good Varies Element / Sub Element General Condition Typical Remaining Lighting and Fan Replacement Allow ance $3,000 Lodge Restroom Refurbishing Allow ance $5,000 Total Quantities Units Present Day Expense Total $8,000 February 10, 2011 Page 26

29 8.0 RESERVE ANALYSIS (Part 2) Repair and Replacement Expenses At the time of inspection, the necessary quantities of the major elements that will likely require repair or replacement over the next 30 years were determined. The repair or replacement quantities for each element are compiled and presented in Exhibit 1. Also, information was gathered regarding the material, component, or system specifications of each of the elements. These specifications were matched with the specifications in the national cost data source and a present-day expense for materials, labor, overhead and profit for each element was established. The sources used provide costs based on the unit price for each element. The total present-day expenses are the product of multiplying the total units by the unit expenses as indicated in Exhibit 1. Having determined the present-day expenses for repairing or replacing each of the elements, the future costs were evaluated. The future costs are based on the fact that commercial and residential construction costs have historically increased with time and can be expected to increase in the future. To determine the future repair or replacement expenses over the next 30-year period, the present day expenses have been inflated at an annual rate of 3.82%. The inflation rate was determined using the average of the last 20 years of the RS Means Historical Cost Indexes for Atlanta, Georgia. Given the present day expense, the future expense is calculated using the future value of a single amount formula as follows: where F = P (1 + IR) n F = future expense P = present day expense IR = inflation rate expressed as a decimal n = number of years until future expense occurs The future repair or replacement expenses for each of the elements were calculated from the present day expenses accounting for the year in which the element is to be repaired or replaced. This information is provided in Exhibits 2 and 3 and is listed by each element and each year of the analysis. The sum of the expenditures for all of the elements in any given year equals the total expenditures for that year. This value is the basis for determining the future reserve requirements for each year of the analysis. In other words, the reserve funds that must be on hand in any given year are equal to the total expenses projected for that year. Recommended Reserve Funding Plan For each year that future expenses are incurred, there is an annual levelized series of contributions that can be placed in an interest bearing account that will ensure that the future reserves are available when needed. These annual contributions represent the recommended contribution to the reserve fund to meet the future reserve needs. Exhibit 4 presents a compilation of the reserve fund balance, contributions, and expenses for each year of the analysis that satisfy the future reserve funding plan based on the current reserve fund interest rate and inflation rate. February 10, 2011 Page 27

30 It is emphasized that the recommended reserve funding plan presented in Exhibit 4 is only one of many possible schedules that can be employed to meet the future reserve requirements. Exhibit 5 is a graphical representation of the information in Exhibit 4. This illustrates how the leveled reserve fund contributions are utilized to meet the annual expenses, and how the reserves build over time. The status of the current funding plan as it relates to the recommended funding plan is illustrated in Exhibit 6, assuming that the current budgeted amount continues to be contributed to the reserve study. 9.0 LONG TERM REVIEW The annual contributions made to the reserve fund are a means to compensate for the difference between the ongoing deterioration of a property and its finances. Since elements deteriorate at varying rates and the finances are typically changing on an annual basis, the need to maintain balance between the two is an ongoing process. In order to maintain this balance, it may be appropriate to have the reserve study updated. When considering an update to a study, the following questions should be considered: Has there been a significant departure (i.e. 2% to 3%) from the anticipated rates for interest, inflation, and construction cost increases previously assumed? Have any major elements been added or replaced since the previous study? Have any elements sustained premature deterioration due to unseasonable weather or lack of maintenance since the previous study? Have any repairs or replacements been accelerated or deferred from the estimated schedule previously generated? If the answer is yes to one or more of the above questions, then an update to the reserves study should be strongly considered. Generally, a property that is relatively new in age and is not undergoing any major repairs or replacements should have the reserve study updated approximately every 3 years to maintain the validity of the estimates. However, if the property is older and is experiencing major repairs or replacements, then the study should be updated on an annual basis. An update to a previous reserve study can typically be performed for a percentage of the original cost of the study. The re-evaluation can include a field walk down of the property, or simply an update to the tables. February 10, 2011 Page 28

31 Recent road patches observed Large road section repair near west entry Center joint separation noted, random areas Settled areas noted February 10, 2011 Page 1

32 Downhill slippage noted, newer sections Settlement noted, likely due to improper sub-base compaction View of curb at Lodge lawn. Note asphalt path. View of 3-rail fence along main entry February 10, 2011 Page 2

33 Fence and stone columns at road intersections 2-rail split rail fence, typical Landscape lighting, typical Examples of site furnishings February 10, 2011 Page 3

34 Examples of site furnishings Nesting Waters Park fountain and gazebo Example of wellhead Examples of masonry throughout property. Some spalling stones noted at main entry planter. February 10, 2011 Page 4

35 Masonry column bases at Lodge Crack in Lodge fireplace firebrick noted Nesting Waters gazebo Enterkin Park gazebo February 10, 2011 Page 5

36 View of Lodge exterior. Note roofing. View of Lodge roof structure. Note fans. Example of property signage. Note deterioration. Example of property signage. Note deterioration February 10, 2011 Page 6

37 Main entry gate West gate. Note operators, typical. Resident bar code reader Guest call box February 10, 2011 Page 7

38 Emergency (buried) water tank locations View of restroom building. Note roofing, siding. View of storage building. Note roofing, siding. Examples of wood footbridges and decks February 10, 2011 Page 8

39 Restroom door, 1 of 2 Restroom interior, typical, Example of street/stop signage, typical February 10, 2011 Page 9

40 Report Section # Quantities Element Total Units Present Day Unit Expenses Exhibit 1 Element Expense Summary The Preserve at Sharp Mountain Project #: 011L-102 Version #: 1.0 Total Present Day Expenses Expenses Present Day Expenses for 30 Year Period Inflated Expenses for 30 Year Period % of Total Inflated Expense s For 30 Year Period Life Analysis (years) Site Elements 7.1 Asphalt Pavement Resurfacing ####### Square Feet $1.60 $2,029,000 $649,280 $1,382, % Ongoing Varies 7.1 Asphalt Parking and Path Seal Coating 34,500 Square Feet $0.70 $24,000 $96,000 $183, % Marginal 7.2 Concrete Curbing 280 Linear Feet $12.14 $3,400 $1,360 $4, % Up to 60 Ongoing Satisfactory 7.3 Wood Rail Fencing 5,200 Linear Feet $15.58 $81,000 $24,300 $47, % Ongoing Satisfactory 7.4 Site Lighting 1 Allowance $3, $3,000 $9,000 $16, % Satisfactory 7.5 Site Furnishings 1 Allowance $5, $5,000 $15,000 $32, % Satisfactory 7.6 Retention Pond Dam Repair 1 Allowance $3, $3,000 $18,000 $38, % Satisfactory 7.6 Retention Pond Aerator 1 Each $5, $5,000 $10,000 $19, % Satisfactory 7.7 Well and Waterfall Pumps 6 Each $1, $10,000 $20,000 $39, % Satisfactory 7.8 Masonry Tuckpointing 1 Allowance $3, $3,000 $9,000 $15, % Satisfactory 7.9 Gazebo Repairs 1 Allowance $5, $5,000 $15,000 $29, % Satisfactory 7.10 Lodge Repairs 1 Allowance $5, $5,000 $15,000 $36, % Satisfactory 7.11 Monument Signage 3 Each $1, $4,500 $9,000 $17, % Satisfactory 7.11 Signage Replacement 55 Each $ $22,000 $13,200 $25, % Marginal 7.12 Entrance Gate Repair 1 Allowance $10, $10,000 $20,000 $52, % Satisfactory 7.13 Landscaping Improvement 1 Allowance $3, $3,000 $9,000 $22, % Satisfactory 7.14 Water Storage Tank Replacement 2 Each $8, $16,000 $16,000 $42, % Satisfactory Typical Useful Life Remaining General Current Condition Exterior Building Elements 7.15 Roofing 2,400 Square Feet $2.92 $7,000 $7,000 $11, % Satisfactory 7.15 Wood Siding 850 Square Feet $5.88 $5,000 $1,500 $3, % Ongoing Satisfactory 7.15 Wood Decks and Stairs 1,500 Square Feet $15.33 $23,000 $13,800 $27, % Ongoin Satisfactory 7.15 Lodge Restroom Doors 2 Each $1, $2,000 $2,000 $4, % Satisfactory Interior Building Elements 7.16 Lighting and Fan Replacement 1 Allowance $3, $3,000 $9,000 $16, % Satisfactory 7.16 Lodge Restroom Refurbishing 1 Allowance $5, $5,000 $15,000 $27, % Satisfactory Printed by on 07-Jun-11 Totals $2,276,900 $997,440 $2,098, %

41 Exhibit 2 Page 1 of 6 Present Day Annual Expense Summary (Years 1 thru 5) The Preserve at Sharp Mountain Project #: 011L-102 Version #: Years 1 thru 5 Element % of Totals Totals Site Elements Asphalt Pavement Resurfacing $40,580 #N/A #N/A #N/A #N/A $40, % Asphalt Parking and Path Seal Coating $24,000 #N/A #N/A #N/A #N/A $24, % Concrete Curbing Wood Rail Fencing #N/A #N/A #N/A $8,100 #N/A $8, % Site Lighting #N/A $3,000 #N/A #N/A #N/A $3, % Site Furnishings Retention Pond Dam Repair #N/A #N/A $3,000 #N/A #N/A $3, % Retention Pond Aerator Well and Waterfall Pumps Masonry Tuckpointing $3,000 #N/A #N/A #N/A #N/A $3, % Gazebo Repairs #N/A #N/A #N/A $5,000 #N/A $5, % Lodge Repairs Monument Signage Signage Replacement $2,200 #N/A #N/A #N/A #N/A $2, % Entrance Gate Repair Landscaping Improvement Water Storage Tank Replacement Exterior Building Elements Roofing Wood Siding Wood Decks and Stairs #N/A #N/A #N/A $4,600 #N/A $4, % Lodge Restroom Doors Interior Building Elements Lighting and Fan Replacement #N/A $3,000 #N/A #N/A #N/A $3, % Lodge Restroom Refurbishing #N/A $5,000 #N/A #N/A #N/A $5, % Present Day Expense Totals $69,780 $11,000 $3,000 $17,700 $101, % Inflation Rate (1+IR) n Inflated Expense Totals (From Exhibit 3) $72,920 $12,012 $3,423 $21,108 Printed by on 07-Jun-11 $109, %

42 Exhibit 2 Page 2 of 6 Present Day Annual Expense Summary (Years 6 thru 10) The Preserve at Sharp Mountain Project #: 011L-102 Version #: Years 6 thru 10 Element % of Totals Totals Site Elements Asphalt Pavement Resurfacing #N/A #N/A #N/A $202,900 #N/A $202, % Asphalt Parking and Path Seal Coating #N/A #N/A #N/A $24,000 #N/A $24, % Concrete Curbing Wood Rail Fencing Site Lighting Site Furnishings $5,000 #N/A #N/A #N/A #N/A $5, % Retention Pond Dam Repair #N/A #N/A $3,000 #N/A #N/A $3, % Retention Pond Aerator #N/A $5,000 #N/A #N/A #N/A $5, % Well and Waterfall Pumps #N/A $10,000 #N/A #N/A #N/A $10, % Masonry Tuckpointing Gazebo Repairs Lodge Repairs #N/A #N/A #N/A $5,000 #N/A $5, % Monument Signage #N/A $4,500 #N/A #N/A #N/A $4, % Signage Replacement $2,200 #N/A #N/A #N/A #N/A $2, % Entrance Gate Repair #N/A #N/A #N/A #N/A $10,000 $10, % Landscaping Improvement #N/A #N/A #N/A $3,000 #N/A $3, % Water Storage Tank Replacement Exterior Building Elements Roofing Wood Siding #N/A #N/A #N/A #N/A $500 $ % Wood Decks and Stairs Lodge Restroom Doors Interior Building Elements Lighting and Fan Replacement Lodge Restroom Refurbishing Present Day Expense Totals $7,200 $19,500 $3,000 $234,900 $10,500 $275, % Inflation Rate (1+IR) n Inflated Expense Totals (From Exhibit 3) $9,376 $26,537 $4,266 $349,083 $16,306 Printed by on 07-Jun-11 $405, %

43 Exhibit 2 Page 3 of 6 Present Day Annual Expense Summary (Years 11 thru 15) The Preserve at Sharp Mountain Project #: 011L-102 Version #: Years 11 thru 15 Element % of Totals Totals Site Elements Asphalt Pavement Resurfacing Asphalt Parking and Path Seal Coating Concrete Curbing Wood Rail Fencing #N/A #N/A #N/A $8,100 #N/A $8, % Site Lighting #N/A $3,000 #N/A #N/A #N/A $3, % Site Furnishings Retention Pond Dam Repair #N/A #N/A $3,000 #N/A #N/A $3, % Retention Pond Aerator Well and Waterfall Pumps Masonry Tuckpointing $3,000 #N/A #N/A #N/A #N/A $3, % Gazebo Repairs #N/A #N/A #N/A $5,000 #N/A $5, % Lodge Repairs Monument Signage Signage Replacement $2,200 #N/A #N/A #N/A #N/A $2, % Entrance Gate Repair Landscaping Improvement Water Storage Tank Replacement Exterior Building Elements Roofing #N/A $7,000 #N/A #N/A #N/A $7, % Wood Siding Wood Decks and Stairs #N/A #N/A #N/A $4,600 #N/A $4, % Lodge Restroom Doors Interior Building Elements Lighting and Fan Replacement #N/A $3,000 #N/A #N/A #N/A $3, % Lodge Restroom Refurbishing #N/A $5,000 #N/A #N/A #N/A $5, % Present Day Expense Totals $5,200 $18,000 $3,000 $17,700 $43, % Inflation Rate (1+IR) n Inflated Expense Totals (From Exhibit 3) $8,439 $30,526 $5,317 $32,780 Printed by on 07-Jun-11 $77, %

44 Exhibit 2 Page 4 of 6 Present Day Annual Expense Summary (Years 16 thru 20) The Preserve at Sharp Mountain Project #: 011L-102 Version #: Years 16 thru 20 Element % of Totals Totals Site Elements Asphalt Pavement Resurfacing #N/A $202,900 #N/A #N/A #N/A $202, % Asphalt Parking and Path Seal Coating #N/A $24,000 #N/A #N/A #N/A $24, % Concrete Curbing #N/A #N/A #N/A $680 #N/A $ % Wood Rail Fencing Site Lighting Site Furnishings $5,000 #N/A #N/A #N/A #N/A $5, % Retention Pond Dam Repair #N/A #N/A $3,000 #N/A #N/A $3, % Retention Pond Aerator Well and Waterfall Pumps Masonry Tuckpointing Gazebo Repairs Lodge Repairs #N/A #N/A #N/A $5,000 #N/A $5, % Monument Signage Signage Replacement $2,200 #N/A #N/A #N/A #N/A $2, % Entrance Gate Repair Landscaping Improvement #N/A #N/A #N/A $3,000 #N/A $3, % Water Storage Tank Replacement Exterior Building Elements Roofing Wood Siding #N/A #N/A #N/A #N/A $500 $ % Wood Decks and Stairs Lodge Restroom Doors #N/A $2,000 #N/A #N/A #N/A $2, % Interior Building Elements Lighting and Fan Replacement Lodge Restroom Refurbishing Present Day Expense Totals $7,200 $228,900 $3,000 $8,680 $500 $248, % Inflation Rate (1+IR) n Inflated Expense Totals (From Exhibit 3) $14,561 $483,752 $6,625 $20,032 $1,206 Printed by on 07-Jun-11 $526, %

45 Exhibit 2 Page 5 of 6 Present Day Annual Expense Summary (Years 21 thru 25) The Preserve at Sharp Mountain Project #: 011L-102 Version #: Years 21 thru 25 Element % of Totals Totals Site Elements Asphalt Pavement Resurfacing #N/A #N/A #N/A #N/A $202,900 $202, % Asphalt Parking and Path Seal Coating #N/A #N/A #N/A #N/A $24,000 $24, % Concrete Curbing Wood Rail Fencing #N/A #N/A #N/A $8,100 #N/A $8, % Site Lighting #N/A $3,000 #N/A #N/A #N/A $3, % Site Furnishings Retention Pond Dam Repair #N/A #N/A $3,000 #N/A #N/A $3, % Retention Pond Aerator #N/A $5,000 #N/A #N/A #N/A $5, % Well and Waterfall Pumps #N/A $10,000 #N/A #N/A #N/A $10, % Masonry Tuckpointing $3,000 #N/A #N/A #N/A #N/A $3, % Gazebo Repairs #N/A #N/A #N/A $5,000 #N/A $5, % Lodge Repairs Monument Signage #N/A $4,500 #N/A #N/A #N/A $4, % Signage Replacement $2,200 #N/A #N/A #N/A #N/A $2, % Entrance Gate Repair Landscaping Improvement Water Storage Tank Replacement #N/A $16,000 #N/A #N/A #N/A $16, % Exterior Building Elements Roofing Wood Siding Wood Decks and Stairs #N/A #N/A #N/A $4,600 #N/A $4, % Lodge Restroom Doors Interior Building Elements Lighting and Fan Replacement #N/A $3,000 #N/A #N/A #N/A $3, % Lodge Restroom Refurbishing #N/A $5,000 #N/A #N/A #N/A $5, % Present Day Expense Totals $5,200 $46,500 $3,000 $17,700 $226,900 $299, % Inflation Rate (1+IR) n Inflated Expense Totals (From Exhibit 3) $13,106 $122,464 $8,256 $50,906 $681,933 Printed by on 07-Jun-11 $876, %

46 Element Exhibit 2 Page 6 of 6 Present Day Annual Expense Summary (Years 26 thru 30) The Preserve at Sharp Mountain Project #: 011L-102 Version #: Years 26 thru 30 % of Totals Totals Years 1 thru 30 % of Totals Totals Site Elements Asphalt Pavement Resurfacing $649, % Asphalt Parking and Path Seal Coating $96, % Concrete Curbing #N/A #N/A #N/A $680 #N/A $ % $1, % Wood Rail Fencing $24, % Site Lighting $9, % Site Furnishings $5,000 #N/A #N/A #N/A #N/A $5, % $15, % Retention Pond Dam Repair #N/A #N/A $3,000 #N/A #N/A $3, % $18, % Retention Pond Aerator $10, % Well and Waterfall Pumps $20, % Masonry Tuckpointing $9, % Gazebo Repairs $15, % Lodge Repairs #N/A #N/A #N/A $5,000 #N/A $5, % $15, % Monument Signage $9, % Signage Replacement $2,200 #N/A #N/A #N/A #N/A $2, % $13, % Entrance Gate Repair #N/A #N/A #N/A #N/A $10,000 $10, % $20, % Landscaping Improvement #N/A #N/A #N/A $3,000 #N/A $3, % $9, % Water Storage Tank Replacement $16, % Exterior Building Elements Roofing $7, % Wood Siding #N/A #N/A #N/A #N/A $500 $ % $1, % Wood Decks and Stairs $13, % Lodge Restroom Doors $2, % Interior Building Elements Lighting and Fan Replacement $9, % Lodge Restroom Refurbishing $15, % Present Day Expense Totals $7,200 $3,000 $8,680 $10,500 $29, % $997, % Inflation Rate (1+IR) n Inflated Expense Totals (From Exhibit 3) $22,612 $10,289 $31,109 $39,326 Printed by on 07-Jun-11 $103, % $2,098, %

47 Exhibit 3 Page 1 of 6 Inflated Annual Expense Summary (Years 1 thru 5) The Preserve at Sharp Mountain Project #: 011L-102 Version #: Years 1 thru 5 Element % of Totals Totals Site Elements $1 Asphalt Pavement Resurfacing $42,406 #N/A #N/A #N/A #N/A $42, % Asphalt Parking and Path Seal Coating $25,080 #N/A #N/A #N/A #N/A $25, % Concrete Curbing Wood Rail Fencing #N/A #N/A #N/A $9,659 #N/A $9, % Site Lighting #N/A $3,276 #N/A #N/A #N/A $3, % Site Furnishings Retention Pond Dam Repair #N/A #N/A $3,423 #N/A #N/A $3, % Retention Pond Aerator Well and Waterfall Pumps Masonry Tuckpointing $3,135 #N/A #N/A #N/A #N/A $3, % Gazebo Repairs #N/A #N/A #N/A $5,963 #N/A $5, % Lodge Repairs Monument Signage Signage Replacement $2,299 #N/A #N/A #N/A #N/A $2, % Entrance Gate Repair Landscaping Improvement Water Storage Tank Replacement Exterior Building Elements $1 Roofing Wood Siding Wood Decks and Stairs #N/A #N/A #N/A $5,486 #N/A $5, % Lodge Restroom Doors Interior Building Elements $1 Lighting and Fan Replacement #N/A $3,276 #N/A #N/A #N/A $3, % Lodge Restroom Refurbishing #N/A $5,460 #N/A #N/A #N/A $5, % 1 Inflated Expense Totals $72,920 $12,012 $3,423 $21,108 $109, % Inflation Rate Reciprocal (1/(1+IR) n ) Present Day Expense Totals (From Exhibit 2) $69,780 $11,000 $3,000 $17,700 Printed by on 07-Jun-11 $101, %

48 Exhibit 3 Page 2 of 6 Inflated Annual Expense Summary (Years 6 thru 10) The Preserve at Sharp Mountain Project #: 011L-102 Version #: Years 6 thru 10 Element % of Totals Totals Site Elements $1 Asphalt Pavement Resurfacing #N/A #N/A #N/A $301,529 #N/A $301, % Asphalt Parking and Path Seal Coating #N/A #N/A #N/A $35,666 #N/A $35, % Concrete Curbing Wood Rail Fencing Site Lighting Site Furnishings $6,511 #N/A #N/A #N/A #N/A $6, % Retention Pond Dam Repair #N/A #N/A $4,266 #N/A #N/A $4, % Retention Pond Aerator #N/A $6,804 #N/A #N/A #N/A $6, % Well and Waterfall Pumps #N/A $13,609 #N/A #N/A #N/A $13, % Masonry Tuckpointing Gazebo Repairs Lodge Repairs #N/A #N/A #N/A $7,430 #N/A $7, % Monument Signage #N/A $6,124 #N/A #N/A #N/A $6, % Signage Replacement $2,865 #N/A #N/A #N/A #N/A $2, % Entrance Gate Repair #N/A #N/A #N/A #N/A $15,530 $15, % Landscaping Improvement #N/A #N/A #N/A $4,458 #N/A $4, % Water Storage Tank Replacement Exterior Building Elements $1 Roofing Wood Siding #N/A #N/A #N/A #N/A $776 $ % Wood Decks and Stairs Lodge Restroom Doors Interior Building Elements $1 Lighting and Fan Replacement Lodge Restroom Refurbishing 1 Inflated Expense Totals $9,376 $26,537 $4,266 $349,083 $16,306 $405, % Inflation Rate Reciprocal (1/(1+IR) n ) Present Day Expense Totals (From Exhibit 2) $7,200 $19,500 $3,000 $234,900 $10,500 Printed by on 07-Jun-11 $275, %

49 Exhibit 3 Inflated Annual Expense Summary (Years 11 thru 15) The Preserve at Sharp Mountain Project #: 011L-102 Version #: 1.0 Page 3 of Years 11 thru 15 Element % of Totals Totals Site Elements $1 Asphalt Pavement Resurfacing Asphalt Parking and Path Seal Coating Concrete Curbing Wood Rail Fencing #N/A #N/A #N/A $15,001 #N/A $15, % Site Lighting #N/A $5,088 #N/A #N/A #N/A $5, % Site Furnishings Retention Pond Dam Repair #N/A #N/A $5,317 #N/A #N/A $5, % Retention Pond Aerator Well and Waterfall Pumps Masonry Tuckpointing $4,869 #N/A #N/A #N/A #N/A $4, % Gazebo Repairs #N/A #N/A #N/A $9,260 #N/A $9, % Lodge Repairs Monument Signage Signage Replacement $3,570 #N/A #N/A #N/A #N/A $3, % Entrance Gate Repair Landscaping Improvement Water Storage Tank Replacement Exterior Building Elements $1 Roofing #N/A $11,871 #N/A #N/A #N/A $11, % Wood Siding Wood Decks and Stairs #N/A #N/A #N/A $8,519 #N/A $8, % Lodge Restroom Doors Interior Building Elements $1 Lighting and Fan Replacement #N/A $5,088 #N/A #N/A #N/A $5, % Lodge Restroom Refurbishing #N/A $8,479 #N/A #N/A #N/A $8, % 1 Inflated Expense Totals $8,439 $30,526 $5,317 $32,780 $77, % Inflation Rate Reciprocal (1/(1+IR) n ) Present Day Expense Totals (From Exhibit 2) $5,200 $18,000 $3,000 $17,700 Printed by on 07-Jun-11 $43, %

50 Exhibit 3 Inflated Annual Expense Summary (Years 16 thru 20) The Preserve at Sharp Mountain Project #: 011L-102 Version #: 1.0 Page 4 of Years 16 thru 20 Element % of Totals Totals Site Elements $1 Asphalt Pavement Resurfacing #N/A $428,804 #N/A #N/A #N/A $428, % Asphalt Parking and Path Seal Coating #N/A $50,721 #N/A #N/A #N/A $50, % Concrete Curbing #N/A #N/A #N/A $1,569 #N/A $1, % Wood Rail Fencing Site Lighting Site Furnishings $10,112 #N/A #N/A #N/A #N/A $10, % Retention Pond Dam Repair #N/A #N/A $6,625 #N/A #N/A $6, % Retention Pond Aerator Well and Waterfall Pumps Masonry Tuckpointing Gazebo Repairs Lodge Repairs #N/A #N/A #N/A $11,539 #N/A $11, % Monument Signage Signage Replacement $4,449 #N/A #N/A #N/A #N/A $4, % Entrance Gate Repair Landscaping Improvement #N/A #N/A #N/A $6,924 #N/A $6, % Water Storage Tank Replacement Exterior Building Elements $1 Roofing Wood Siding #N/A #N/A #N/A #N/A $1,206 $1, % Wood Decks and Stairs Lodge Restroom Doors #N/A $4,227 #N/A #N/A #N/A $4, % Interior Building Elements $1 Lighting and Fan Replacement Lodge Restroom Refurbishing 1 Inflated Expense Totals $14,561 $483,752 $6,625 $20,032 $1,206 $526, % Inflation Rate Reciprocal (1/(1+IR) n ) Present Day Expense Totals (From Exhibit 2) $7,200 $228,900 $3,000 $8,680 $500 Printed by on 07-Jun-11 $248, %

51 Exhibit 3 Inflated Annual Expense Summary (Years 21 thru 25) The Preserve at Sharp Mountain Project #: 011L-102 Version #: 1.0 Page 5 of Years 21 thru 25 Element % of Totals Totals Site Elements $1 Asphalt Pavement Resurfacing #N/A #N/A #N/A #N/A $609,803 $609, % Asphalt Parking and Path Seal Coating #N/A #N/A #N/A #N/A $72,130 $72, % Concrete Curbing Wood Rail Fencing #N/A #N/A #N/A $23,296 #N/A $23, % Site Lighting #N/A $7,901 #N/A #N/A #N/A $7, % Site Furnishings Retention Pond Dam Repair #N/A #N/A $8,256 #N/A #N/A $8, % Retention Pond Aerator #N/A $13,168 #N/A #N/A #N/A $13, % Well and Waterfall Pumps #N/A $26,337 #N/A #N/A #N/A $26, % Masonry Tuckpointing $7,561 #N/A #N/A #N/A #N/A $7, % Gazebo Repairs #N/A #N/A #N/A $14,380 #N/A $14, % Lodge Repairs Monument Signage #N/A $11,851 #N/A #N/A #N/A $11, % Signage Replacement $5,545 #N/A #N/A #N/A #N/A $5, % Entrance Gate Repair Landscaping Improvement Water Storage Tank Replacement #N/A $42,138 #N/A #N/A #N/A $42, % Exterior Building Elements $1 Roofing Wood Siding Wood Decks and Stairs #N/A #N/A #N/A $13,230 #N/A $13, % Lodge Restroom Doors Interior Building Elements $1 Lighting and Fan Replacement #N/A $7,901 #N/A #N/A #N/A $7, % Lodge Restroom Refurbishing #N/A $13,168 #N/A #N/A #N/A $13, % 1 Inflated Expense Totals $13,106 $122,464 $8,256 $50,906 $681,933 $876, % Inflation Rate Reciprocal (1/(1+IR) n ) Present Day Expense Totals (From Exhibit 2) $5,200 $46,500 $3,000 $17,700 $226,900 Printed by on 07-Jun-11 $299, %

52 Exhibit 3 Inflated Annual Expense Summary (Years 26 thru 30) The Preserve at Sharp Mountain Project #: 011L-102 Version #: 1.0 Page 6 of Years 26 thru 30 Years 1 thru 30 Element % of % of Totals Totals Totals Totals Site Elements $1 Asphalt Pavement Resurfacing $1,382, % Asphalt Parking and Path Seal Coating $183, % Concrete Curbing #N/A #N/A #N/A $2,437 #N/A $2, % $4, % Wood Rail Fencing $47, % Site Lighting $16, % Site Furnishings $15,703 #N/A #N/A #N/A #N/A $15, % $32, % Retention Pond Dam Repair #N/A #N/A $10,289 #N/A #N/A $10, % $38, % Retention Pond Aerator $19, % Well and Waterfall Pumps $39, % Masonry Tuckpointing $15, % Gazebo Repairs $29, % Lodge Repairs #N/A #N/A #N/A $17,920 #N/A $17, % $36, % Monument Signage $17, % Signage Replacement $6,909 #N/A #N/A #N/A #N/A $6, % $25, % Entrance Gate Repair #N/A #N/A #N/A #N/A $37,453 $37, % $52, % Landscaping Improvement #N/A #N/A #N/A $10,752 #N/A $10, % $22, % Water Storage Tank Replacement $42, % Exterior Building Elements $1 Roofing $11, % Wood Siding #N/A #N/A #N/A #N/A $1,873 $1, % $3, % Wood Decks and Stairs $27, % Lodge Restroom Doors $4, % Interior Building Elements $1 Lighting and Fan Replacement $16, % Lodge Restroom Refurbishing $27, % 1 Inflated Expense Totals $22,612 $10,289 $31,109 $39,326 $103, % $2,098, % Inflation Rate Reciprocal (1/(1+IR) n ) Present Day Expense Totals (From Exhibit 2) $7,200 $3,000 $8,680 $10,500 Printed by on 07-Jun-11 $29, % $997, %

53 Exhibit 4 Recommended Reserve Funding Plan (2.25% Interest and 3.82% Inflation) The Preserve at Sharp Mountain Project #: 011L-102 Version #: 1.0 Beginning Annual Ending Annual Calendar Balance of Reserve Annual Annual Balance of Year Reserve Fund Year Reserve Fund Expenses Interest Reserve Contribution Fund Increase Fund $68, $68,561 $58, % $72,442 $1,387 $56, $56,086 $59,166 1% $11,855 $1,794 $105, $105,191 $59,757 1% $3,357 $3,001 $164, $164,592 $60,355 1% $20,560 $4,151 $208, $208,538 $60,959 1% $0 $5,378 $274, $274,875 $61,568 1% $9,013 $6,776 $334, $334,206 $62,184 1% $25,342 $7,934 $378, $378,982 $62,806 1% $4,048 $9,188 $446, $446,928 $63,434 1% $329,020 $7,068 $188, $188,410 $64,068 1% $15,268 $4,788 $241, $241,998 $64,709 1% $7,850 $6,085 $304, $304,942 $65,356 1% $28,210 $7,279 $349, $349,367 $66,009 1% $4,881 $8,548 $419, $419,043 $66,670 1% $29,896 $9,842 $465, $465,659 $67,336 1% $0 $11,235 $544, $544,230 $68,010 1% $13,107 $12,863 $611, $611,996 $68,690 1% $432,582 $9,676 $257, $257,780 $69,377 1% $5,886 $6,514 $327, $327,785 $70,070 1% $17,679 $7,965 $388, $388,141 $70,771 1% $1,057 $9,517 $467, $467,372 $71,479 1% $11,414 $11,192 $538, $538,629 $72,194 1% $105,968 $11,739 $516, $516,594 $72,915 1% $7,097 $12,364 $594, $594,776 $73,645 1% $43,472 $13,722 $638, $638,671 $74,381 1% $578,545 $8,698 $143, $143,205 $75,125 1% $19,059 $3,853 $203, $203,124 $75,876 1% $0 $5,424 $284, $284,424 $76,635 1% $8,559 $7,165 $359, $359,665 $77,401 1% $25,708 $8,674 $420, $420,032 $78,175 1% $32,284 $9,967 $475,890 Totals $2,037,699 $1,864,159 $233,787 Projected Reserve Fund Balance of $68,561 as of December 31, Printed by on 07-Jun-11

54 Exhibit 4 A Recommended Reserve Funding Plan (1.50% Interest and 2.50% Inflation) The Preserve at Sharp Mountain Project #: 011L-102 Version #: 1.0 Beginning Annual Ending Annual Calendar Balance of Reserve Annual Annual Balance of Year Reserve Fund Year Reserve Fund Expenses Interest Reserve Contribution Fund Increase Fund $68, $68,561 $48, % $71,525 $856 $46, $46,372 $48,965 1% $11,557 $976 $84, $84,756 $49,454 1% $3,231 $1,618 $132, $132,597 $49,949 1% $19,538 $2,217 $165, $165,225 $50,448 1% $0 $2,857 $218, $218,530 $50,953 1% $8,349 $3,597 $264, $264,731 $51,462 1% $23,179 $4,183 $297, $297,197 $51,977 1% $3,655 $4,820 $350, $350,339 $52,497 1% $289,611 $3,477 $116, $116,702 $53,022 1% $13,441 $2,047 $158, $158,330 $53,552 1% $6,823 $2,725 $207, $207,784 $54,088 1% $24,208 $3,341 $241, $241,005 $54,628 1% $4,136 $3,994 $295, $295,491 $55,175 1% $25,010 $4,659 $330, $330,315 $55,727 1% $0 $5,373 $391, $391,415 $56,284 1% $10,689 $6,213 $443, $443,223 $56,847 1% $348,298 $4,462 $156, $156,234 $57,415 1% $4,679 $2,739 $211, $211,709 $57,989 1% $9,080 $3,542 $264, $264,160 $58,569 1% $819 $4,396 $326, $326,306 $59,155 1% $8,734 $5,273 $382, $382,000 $59,746 1% $80,054 $5,578 $367, $367,270 $60,344 1% $5,294 $5,922 $428, $428,242 $60,947 1% $32,015 $6,641 $463, $463,815 $61,557 1% $420,660 $4,264 $108, $108,976 $62,172 1% $13,682 $1,998 $159, $159,464 $62,794 1% $0 $2,863 $225, $225,121 $63,422 1% $5,989 $3,808 $286, $286,362 $64,056 1% $11,624 $4,689 $343, $343,483 $64,697 1% $22,025 $5,472 $391,627 Totals $1,686,372 $1,477,905 $114,600 Projected Reserve Fund Balance of $68,561 as of December 31, Printed by on 07-Jun-11

55 Exhibit 4 B Recommended Reserve Funding Plan (3.50% Interest and 4.50% Inflation) The Preserve at Sharp Mountain Project #: 011L-102 Version #: 1.0 Beginning Annual Ending Annual Calendar Balance of Reserve Annual Annual Balance of Year Reserve Fund Year Reserve Fund Expenses Interest Reserve Contribution Fund Increase Fund $68, $68,561 $60, % $72,920 $2,175 $57, $57,911 $60,696 1% $12,012 $2,879 $109, $109,474 $61,303 1% $3,423 $4,844 $172, $172,198 $61,916 1% $21,108 $6,741 $219, $219,747 $62,535 1% $0 $8,786 $291, $291,068 $63,160 1% $9,376 $11,129 $355, $355,981 $63,792 1% $26,537 $13,111 $406, $406,347 $64,430 1% $4,266 $15,275 $481, $481,786 $65,074 1% $349,083 $11,892 $209, $209,669 $65,725 1% $16,306 $8,203 $267, $267,291 $66,382 1% $8,439 $10,369 $335, $335,603 $67,046 1% $30,526 $12,385 $384, $384,508 $67,717 1% $5,317 $14,550 $461, $461,458 $68,394 1% $32,780 $16,774 $513, $513,846 $69,078 1% $0 $19,193 $602, $602,117 $69,768 1% $14,561 $22,040 $679, $679,364 $70,466 1% $483,752 $16,545 $282, $282,623 $71,171 1% $6,625 $11,021 $358, $358,190 $71,882 1% $20,032 $13,444 $423, $423,484 $72,601 1% $1,206 $16,071 $510, $510,950 $73,327 1% $13,106 $18,937 $590, $590,108 $74,061 1% $122,464 $19,807 $561, $561,512 $74,801 1% $8,256 $20,817 $648, $648,874 $75,549 1% $50,906 $23,142 $696, $696,659 $76,305 1% $681,933 $13,785 $104, $104,816 $77,068 1% $22,612 $4,622 $163, $163,894 $77,838 1% $0 $7,098 $248, $248,830 $78,617 1% $10,289 $9,905 $327, $327,063 $79,403 1% $31,109 $12,292 $387, $387,649 $80,197 1% $39,326 $14,283 $442,803 Totals $2,090,398 $2,098,270 $382,115 Projected Reserve Fund Balance of $68,561 as of December 31, Printed by on 07-Jun-11

56 Exhibit 5 Recommended Reserve Funding Plan (3.50% Interest and 4.50% Inflation) (Data from Exhibit 4) The Preserve at Sharp Mountain Project #: 011L-102 Annual Reserve Fund Contributions $100,000 $80,000 $60,000 $40,000 $20,000 $0 YEAR Annual Expenses $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 YEAR Annual Reserve Fund Balance $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 YEAR Printed by on 07-Jun-11

57 Exhibit 6 Current Fund Status (3.50% Interest and 4.50% Inflation) The Preserve at Sharp Mountain Project #: 011L-102 $1,000,000 $500,000 $0 ($500,000) ($1,000,000) ($1,500,000) ($2,000,000) Year Projected Fund Balances Using Current Contributions Fund Balances Using Recommended Funding Plan Printed by on 07-Jun-11