Full Reserve Study. Sample Condominium. Anywhere, USA. Report #: For Period Beginning: January 1, 2016 Expires: December 31, 2016

Transcription

1 Full Reserve Study Sample Condominium Anywhere, USA Report #: For Period Beginning: January 1, 2016 Expires: December 31, 2016 Date Prepared: June 19, 2015

2 Hello, and welcome to your Reserve Study! W e don t want you to be surprised. This Report is designed to help you anticipate, and prepare for, the major common area expenses your association will face. Inside you will find: 1) The Reserve Component List (the Scope and Schedule of your Reserve projects) telling you what your association is Reserving for, what condition they are in now, and what they ll cost to replace. 2) An Evaluation of your current Reserve Fund Size and Strength (Percent Funded). This tells you your financial starting point, revealing your risk of deferred maintenance and special assessments. 3) A Recommended Multi-Year Reserve Funding Plan, answering the question What do we do now? More Questions? Visit our website at or call us at: 303/ Association Reserves Colorado, LLC

3 Table of Contents 3- Minute Executive Summary... i Reserve Study Summary... i Reserve Component List Table 1... ii Introduction, Objectives, and Methodology... 1 Which Physical Assets are Funded by Reserves?...2 How do we establish Useful Life and Remaining Useful Life estimates?...2 How do we establish Current Repair/Replacement Cost Estimates?...2 How much Reserves are enough?...3 How much should we contribute?...4 What is our Recommended Funding Goal?...4 Projected Expenses... 6 Expense Graph Figure Reserve Fund Status & Recommended Funding Plan... 7 Funding Plan Graph Figure Cash Flow Graph Figure % Funded Graph Figure Table Descriptions... 9 Reserve Component List Detail Table Contribution & Fund Breakdown Table Component Significance Table Year Reserve Plan Summary Table Year Reserve Plan Year by Year Detail Table Accuracy, Limitations, and Disclosures Terms and Definitions Component Details... Appendix Association Reserves Colorado, LLC

4 3- Minute Executive Summary Association: Sample Condominium #: Location: Anywhere, USA # of Units: 15 Report Period: January 1, 2016 through December 31, 2016 Findings/Recommendations as-of 1/1/2016: Projected Starting Reserve Balance:... $62,000 Current Fully Funded Reserve Balance:... $109,273 Average Reserve Deficit Per Unit:... $3,152 Recommended 2016 Monthly Full Funding Contributions:... $1,080 Alternate Minimum Contributions to keep Reserves above $0:... $930 Recommended 2016 Special Assessment for Reserves:... $0 Most Recent Budgeted Reserve Contribution Rate:... $400 Economic Assumptions: Net Annual After Tax Interest Earnings Accruing to Reserves % Annual Inflation Rate % This is a Full Reserve Study (original, created from scratch ), and is based on our site inspection on May 6, It was prepared by a credentialed Reserve Specialist (RS #260). Your Reserve Fund is currently 57% Funded. This means the association s special assessment & deferred maintenance risk is currently medium. The objective of your multi-year Funding Plan is to fund your Reserves to a level where you will enjoy a low risk of such Reserve cash flow problems. Based on this starting point and your anticipated future expenses, our recommendation is to increase your Reserve contributions in order to be within the 70% to 100% level as noted above. 100% Full and 70% contribution rates are designed to achieve these funding objectives by the end of our 30-year report scope. No assets appropriate for Reserve designation were excluded. See photo appendix for component details; the basis of our assumptions. Association Reserves Colorado, LLC i

5 Table 1: Executive Summary Useful Rem. Current Life Useful Cost # Component (yrs) Life (yrs) Estimate Sites/Grounds 2105 Driveway Concrete - Repair 10 5 $2, Fencing: Metal - Repair/Paint 5 3 $2, Fencing: Wood - Repair/Paint 5 3 $ Fencing: Metal - Replace $12, Fencing: Wood - Replace $2, Mailboxes - Replace $1, Sign/Monument - Refurbish 15 8 $2, Entry Planters - Waterproof $24,500 Building Exteriors 2303 Exterior Wall Lights - Replace 25 7 $4, Balcony Decks - Seal/Repair 4 0 $1, Balcony Deck - Resurface 25 7 $5, Balcony Rails - Replace $14, Composite Deck - Replace $2, Wood Deck - Resurface/Restore $1, Building Exterior - Seal/Paint $35, Roof: Comp Shingle - Replace 25 7 $60, Gutters/Downspouts - Replace 25 7 $12,500 Mechanical 2501 Entry Access System - Replace 12 0 $6, Total Funded Components Note 1: a Useful Life of N/A means a one-time expense, not expected to repeat. Note 2: Yellow highlighted line items are expected to require attention in the initial year, green highlighted items are expected to occur within the first five years. Association Reserves Colorado, LLC ii

6 Assoc Introduction A Reserve Study is the art and science of anticipating, and preparing for, an association s major common area repair and replacement expenses. Partially art, because in this field we are making projections about the future. Partially science, because our work is a combination of research and welldefined computations, following consistent National Reserve Study Standard principles. The foundation of this and every Reserve Study is your Reserve Component List (what you are reserving for). This is because the Reserve Component List defines the scope and schedule of all your anticipated upcoming Reserve projects. Based on that List and your starting balance, we calculate the association s Reserve Fund Strength (reported in terms of Percent Funded ). Then we compute a Reserve Funding Plan to provide for the Reserve needs of the association. These form the three results of your Reserve Study. Reserve contributions are not for the future. Reserve contributions are designed to offset the ongoing, daily deterioration of your Reserve assets. Done well, a stable, budgeted Reserve Funding Plan will collect sufficient funds from the owners who enjoyed the use of those assets, so the association is financially prepared for the irregular expenditures scattered through future years when those projects eventually require replacement. Methodology For this Full Reserve Study, we started with a review of your Governing Documents, recent Reserve expenditures, an evaluation of how expenditures are handled (ongoing maintenance vs Reserves), and research into any well-established association precedents. We performed an on-site inspection to quantify and evaluate your common areas, creating your Reserve Component List from scratch. Association Reserves Colorado, LLC 1

7 Assoc Which Physical Assets are Funded by Reserves? There is a national-standard four-part test to determine which expenses should appear in your Reserve Component List. First, it must be a common area maintenance responsibility. Second, the component must have a limited life. Third, the remaining life must be predictable (or it by definition is a surprise which cannot be accurately anticipated). Fourth, the component must be above a minimum threshold cost (often between.5% and 1% of an association s total budget). This limits Reserve Components to major, predictable expenses. Within this framework, it is inappropriate to include lifetime components, unpredictable expenses (such as damage due to fire, flood, or earthquake), and expenses more appropriately handled from the Operational Budget or as an insured loss. How do we establish Useful Life and Remaining Useful Life estimates? 1) Visual Inspection (observed wear and age) 2) Association Reserves database of experience 3) Client History (install dates & previous life cycle information) 4) Vendor Evaluation and Recommendation How do we establish Current Repair/Replacement Cost Estimates? In this order 1) Actual client cost history, or current proposals 2) Comparison to Association Reserves database of work done at similar associations 3) Vendor Recommendations 4) Reliable National Industry cost estimating guidebooks Association Reserves Colorado, LLC 2

8 Assoc How much Reserves are enough? Reserve adequacy is not measured in cash terms. Reserve adequacy is found when the amount of current Reserve cash is compared to Reserve component deterioration (the needs of the association). Having enough means the association can execute its projects in a timely manner with existing Reserve funds. Not having enough typically creates deferred maintenance or special assessments. Adequacy is measured in a two-step process: 1) Calculate the value of deterioration at the association (called Fully Funded Balance, or FFB). 2) Compare that to the Reserve Fund Balance, and express as a percentage. Each year, the value of deterioration at the association changes. When there is more deterioration (as components approach the time they need to be replaced), there should be more cash to offset that deterioration and prepare for the expenditure. Conversely, the value of deterioration shrinks after projects are accomplished. The value of deterioration (the FFB) changes each year, and is a moving but predictable target. There is a high risk of special assessments and deferred maintenance when the Percent Funded is weak, below 30%. Approximately 30% of all associations are in this high risk range. While the 100% point is Ideal (indicating Reserve cash is equal to the value of deterioration), a Reserve Fund in the 70% -130% range is considered strong (low risk of special assessment). Measuring your Reserves by Percent Funded tells how well prepared your association is for upcoming Reserve expenses. New buyers should be very aware of this important disclosure! Association Reserves Colorado, LLC 3

9 Assoc How much should we contribute? According to National Reserve Study Standards, there are four Funding Principles to balance in developing your Reserve Funding Plan. Our first objective is to design a plan that provides you with sufficient cash to perform your Reserve projects on time. Second, a stable contribution is desirable because it keeps these naturally irregular expenses from unsettling the budget. Reserve contributions that are evenly distributed over current and future owners enable each owner to pay their fair share of the association s Reserve expenses over the years. And finally, we develop a plan that is fiscally responsible and safe for Boardmembers to recommend to their association. Remember, it is the Board s job to provide for the ongoing care of the common areas. Boardmembers invite liability exposure when Reserve contributions are inadequate to offset ongoing common area deterioration. What is our Recommended Funding Goal? Maintaining the Reserve Fund at a level equal to the value of deterioration is called Full Funding (100% Funded). As each asset ages and becomes used up, the Reserve Fund grows proportionally. This is simple, responsible, and our recommendation. Evidence shows that associations in the % range enjoy a low risk of special assessments or deferred maintenance. Allowing the Reserves to fall close to zero, but not below zero, is called Baseline Funding. Doing so allows the Reserve Fund to drop into the 0-30% range, where there is a high risk of special assessments & deferred maintenance. Since Baseline Funding still provides for the timely execution of all Reserve projects, and only the margin of safety is different, Baseline Funding contributions average only 10% - 15% less than Full Funding contributions. Threshold Funding is the title of all other Cash or Percent Funded objectives between Baseline Funding and Full Funding. Association Reserves Colorado, LLC 4

10 Assoc Site Inspection Notes During our site visit on May 6, 2015, we started the site inspection beginning with the building exteriors. We visually inspected all of the buildings, and were able to see the majority of the common areas. We were not able to inspect the balcony deck surfaces. Association Reserves Colorado, LLC 5

11 Assoc Projected Expenses While this Reserve Study looks forward 30 years, we have no expectation that all these expenses will all take place as anticipated. This Reserve Study needs to be updated annually because we expect the timing of these expenses to shift and the size of these expenses to change. We do feel more certain of the timing and cost of near-term expenses than expenses many years away. Your first five years of projected Reserve expenses total $12,576. Adding the next five years, your first ten years of projected Reserve expenses are $125,933. Please be aware of your near-term expenses, which we are able to project more accurately than the more distant projections. The figure below summarizes the projected future expenses at your association as defined by your Reserve Component List. A summary of these expenses are shown in Table 5, while details of the projects that make up these expenses are shown in Table 6. Annual Reserve Expenses $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $ Years Figure 1 Association Reserves Colorado, LLC 6

12 Assoc Reserve Fund Status The starting point for our financial analysis is your Reserve Fund balance, projected to be $62,000 as-of the start of your Fiscal Year on January 1, As of January 1, 2016, your Fully Funded Balance is computed to be $109,273 (see Table 3). This figure represents the deteriorated value of your common area components. Comparing your Reserve Balance to your Fully Funded Balance indicates your Reserves are 57% Funded. Across the country, approx 6% of associations in this range experience special assessments or deferred maintenance. Recommended Funding Plan Based on your current Percent Funded and your near-term and long-term Reserve needs, we are recommending budgeted contributions of $1,080/month this Fiscal Year. The overall 30-yr plan, in perspective, is shown below. This same information is shown numerically in both Table 5 and Table 6. Annual Reserve Funding Recommended Alternate (Minimum) Current Budget $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $ Years Figure 2 Association Reserves Colorado, LLC 7

13 Assoc The following chart shows your Reserve balance under our recommended Full Funding Plan, an alternate Baseline Funding Plan, and at your current budgeted contribution rate, compared to your always-changing Fully Funded Balance target. $350, Yr Cash Flow Target Fully Funded Balance Recommended Funding Plan Alternate (Minimum) Current Budget $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $ Years Figure 3 This figure shows this same information, plotted on a Percent Funded scale. 120% Percent Funded Recommended Funding Plan Alternate (Minimum) Funding Plan Current Budget 100% 80% 60% 40% 20% 0% Years Figure 4 Association Reserves Colorado, LLC 8

14 Assoc Table Descriptions The tabular information in this Report is broken down into six tables. Table 1 is a summary of your Reserve Components (your Reserve Component List), the information found in Table 2. Table 2 is your Reserve Component List, which forms the foundation of this Reserve Study. This table represents the information from which all other tables are derived. Table 3 shows the calculation of your Fully Funded Balance, the measure of your current Reserve component deterioration. For each component, the Fully Funded Balance is the fraction of life used up multiplied by its estimated Current Replacement Cost. Table 4 shows the significance of each component to Reserve needs of the association, helping you see which components have more (or less) influence than others on your total Reserve contribution rate. The deterioration cost/yr of each component is calculated by dividing Current Replacement Cost by Useful Life, then that component s percentage of the total is displayed. Table 5: This table provides a one-page 30-year summary of the cash flowing into and out of the Reserve Fund, with a display of the Fully Funded Balance, Percent Funded, and special assessment risk for each year. Table 6: This table shows the cash flow detail for the next 30 years. This table makes it possible to see which components are projected to require repair or replacement each year, and the size of those individual expenses. Association Reserves Colorado, LLC 9

15 Table 2: Reserve Component List Detail Rem. Useful Useful [ --- Current Cost Estimate --- ] # Component Quantity Life Life Best Case Worst Case Sites/Grounds 2105 Driveway Concrete - Repair ~ 9,300 GSF 10 5 $2,000 $3, Fencing: Metal - Repair/Paint ~ 300 LF 5 3 $2,000 $3, Fencing: Wood - Repair/Paint ~ 100 LF 5 3 $500 $ Fencing: Metal - Replace ~ 300 LF $11,000 $14, Fencing: Wood - Replace ~ 100 LF $2,000 $3, Mailboxes - Replace (15) Boxes $1,000 $2, Sign/Monument - Refurbish (1) Stone Sign 15 8 $2,000 $3, Entry Planters - Waterproof ~ 135 LF, 4' High $22,000 $27,000 Building Exteriors 2303 Exterior Wall Lights - Replace ~ (49) Fixtures 25 7 $4,000 $5, Balcony Decks - Seal/Repair ~ 840 GSF 4 0 $1,000 $2, Balcony Deck - Resurface ~ 840 GSF 25 7 $4,000 $7, Balcony Rails - Replace ~ 172 LF $14,000 $15, Composite Deck - Replace ~ 90 GSF $2,000 $3, Wood Deck - Resurface/Restore ~ 90 GSF $1,000 $2, Building Exterior - Seal/Paint ~ 17,500 GSF $30,000 $40, Roof: Comp Shingle - Replace ~ 14,900 GSF 25 7 $45,000 $75, Gutters/Downspouts - Replace ~ 1,755 LF 25 7 $11,000 $14,000 Mechanical 2501 Entry Access System - Replace (2) Panels 12 0 $5,000 $7, Total Funded Components Association Reserves Colorado, LLC 10

16 Table 3: Fully Funded Balance Current Fully Cost Effective Useful Funded # Component Estimate X Age / Life = Balance Sites/Grounds 2105 Driveway Concrete - Repair $2,500 X 5 / 10 = $1, Fencing: Metal - Repair/Paint $2,500 X 2 / 5 = $1, Fencing: Wood - Repair/Paint $600 X 2 / 5 = $ Fencing: Metal - Replace $12,500 X 15 / 30 = $6, Fencing: Wood - Replace $2,500 X 10 / 20 = $1, Mailboxes - Replace $1,500 X 10 / 20 = $ Sign/Monument - Refurbish $2,500 X 7 / 15 = $1, Entry Planters - Waterproof $24,500 X 18 / 30 = $14,700 Building Exteriors 2303 Exterior Wall Lights - Replace $4,500 X 18 / 25 = $3, Balcony Decks - Seal/Repair $1,500 X 4 / 4 = $1, Balcony Deck - Resurface $5,500 X 18 / 25 = $3, Balcony Rails - Replace $14,500 X 18 / 30 = $8, Composite Deck - Replace $2,500 X 18 / 30 = $1, Wood Deck - Resurface/Restore $1,500 X 18 / 30 = $ Building Exterior - Seal/Paint $35,000 X 2 / 15 = $4, Roof: Comp Shingle - Replace $60,000 X 18 / 25 = $43, Gutters/Downspouts - Replace $12,500 X 18 / 25 = $9,000 Mechanical 2501 Entry Access System - Replace $6,000 X 12 / 12 = $6,000 $109,273 Association Reserves Colorado, LLC 11

17 Table 4: Component Significance Current Useful Cost Deterioration Deterioration # Component Life Estimate Cost/yr Significance Sites/Grounds 2105 Driveway Concrete - Repair 10 $2,500 $ % 2133 Fencing: Metal - Repair/Paint 5 $2,500 $ % 2135 Fencing: Wood - Repair/Paint 5 $600 $ % 2137 Fencing: Metal - Replace 30 $12,500 $ % 2139 Fencing: Wood - Replace 20 $2,500 $ % 2165 Mailboxes - Replace 20 $1,500 $75 0.8% 2167 Sign/Monument - Refurbish 15 $2,500 $ % 2187 Entry Planters - Waterproof 30 $24,500 $ % Building Exteriors 2303 Exterior Wall Lights - Replace 25 $4,500 $ % 2315 Balcony Decks - Seal/Repair 4 $1,500 $ % 2317 Balcony Deck - Resurface 25 $5,500 $ % 2321 Balcony Rails - Replace 30 $14,500 $ % 2331 Composite Deck - Replace 30 $2,500 $83 0.9% 2333 Wood Deck - Resurface/Restore 30 $1,500 $50 0.5% 2343 Building Exterior - Seal/Paint 15 $35,000 $2, % 2379 Roof: Comp Shingle - Replace 25 $60,000 $2, % 2387 Gutters/Downspouts - Replace 25 $12,500 $ % Mechanical 2501 Entry Access System - Replace 12 $6,000 $ % 18 Total Funded Components $9, % Association Reserves Colorado, LLC 12

18 Table 5: 30-Year Reserve Plan Summary Fiscal Year Start: 01/01/16 Interest: 1.0% Inflation: 3.0% Reserve Fund Strength Calculations (All values as of Fiscal Year Start Date) Projected Reserve Balance Changes Starting Fully Special Loans or Reserve Funded Percent Assmt Reserve Special Interest Reserve Year Balance Balance Funded Risk Contribs. Assmts Income Expenses 2016 $62,000 $109, % Med $12,960 $0 $650 $7, $68,110 $114, % Med $13,349 $0 $751 $ $82,210 $128, % Med $13,749 $0 $895 $ $96,855 $142, % Med $14,162 $0 $1,027 $3, $108,656 $154, % Low $14,587 $0 $1,156 $1, $122,711 $168, % Low $15,024 $0 $1,294 $2, $136,130 $181, % Low $15,475 $0 $1,445 $ $153,051 $199, % Low $15,939 $0 $1,108 $101, $68,633 $112, % Med $16,417 $0 $727 $8, $76,783 $119, % Med $16,910 $0 $856 $ $94,549 $135, % Med $17,417 $0 $1,010 $5, $107,601 $147, % Low $17,940 $0 $1,171 $ $126,712 $165, % Low $18,478 $0 $1,004 $72, $74,193 $110, % Med $19,032 $0 $560 $55, $37,834 $70, % Med $19,603 $0 $479 $ $57,915 $87, % Med $20,191 $0 $566 $23, $55,303 $81, % Med $20,797 $0 $648 $2, $74,341 $97, % Low $21,421 $0 $854 $ $96,616 $116, % Low $22,064 $0 $1,055 $5, $114,457 $131, % Low $22,725 $0 $1,264 $ $138,447 $153, % Low $23,407 $0 $1,495 $2, $160,639 $172, % Low $24,109 $0 $1,735 $ $186,484 $196, % Low $24,833 $0 $1,998 $ $213,315 $221, % Low $25,578 $0 $2,216 $11, $230,056 $235, % Low $26,345 $0 $2,367 $15, $243,522 $247, % Low $27,135 $0 $2,556 $5, $267,979 $270, % Low $27,949 $0 $2,832 $ $298,761 $299, % Low $28,788 $0 $3,146 $ $330,695 $330, % Low $29,652 $0 $3,016 $90, $272,761 $269, % Low $30,541 $0 $2,894 $0 Association Reserves Colorado, LLC 13

19 Table 6: 30-Year Income/Expense Detail (yrs 0 through 4) Fiscal Year Starting Reserve Balance $62,000 $68,110 $82,210 $96,855 $108,656 Annual Reserve Contribution $12,960 $13,349 $13,749 $14,162 $14,587 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $650 $751 $895 $1,027 $1,156 Total Income $75,610 $82,210 $96,855 $112,043 $124,399 # Component Sites/Grounds 2105 Driveway Concrete - Repair $0 $0 $0 $0 $ Fencing: Metal - Repair/Paint $0 $0 $0 $2,732 $ Fencing: Wood - Repair/Paint $0 $0 $0 $656 $ Fencing: Metal - Replace $0 $0 $0 $0 $ Fencing: Wood - Replace $0 $0 $0 $0 $ Mailboxes - Replace $0 $0 $0 $0 $ Sign/Monument - Refurbish $0 $0 $0 $0 $ Entry Planters - Waterproof $0 $0 $0 $0 $0 Building Exteriors 2303 Exterior Wall Lights - Replace $0 $0 $0 $0 $ Balcony Decks - Seal/Repair $1,500 $0 $0 $0 $1, Balcony Deck - Resurface $0 $0 $0 $0 $ Balcony Rails - Replace $0 $0 $0 $0 $ Composite Deck - Replace $0 $0 $0 $0 $ Wood Deck - Resurface/Restore $0 $0 $0 $0 $ Building Exterior - Seal/Paint $0 $0 $0 $0 $ Roof: Comp Shingle - Replace $0 $0 $0 $0 $ Gutters/Downspouts - Replace $0 $0 $0 $0 $0 Mechanical 2501 Entry Access System - Replace $6,000 $0 $0 $0 $0 Total Expenses $7,500 $0 $0 $3,387 $1,688 Ending Reserve Balance: $68,110 $82,210 $96,855 $108,656 $122,711 Association Reserves Colorado, LLC 14

20 Table 6: 30-Year Income/Expense Detail (yrs 5 through 9) Fiscal Year Starting Reserve Balance $122,711 $136,130 $153,051 $68,633 $76,783 Annual Reserve Contribution $15,024 $15,475 $15,939 $16,417 $16,910 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $1,294 $1,445 $1,108 $727 $856 Total Income $139,028 $153,051 $170,098 $85,777 $94,549 # Component Sites/Grounds 2105 Driveway Concrete - Repair $2,898 $0 $0 $0 $ Fencing: Metal - Repair/Paint $0 $0 $0 $3,167 $ Fencing: Wood - Repair/Paint $0 $0 $0 $760 $ Fencing: Metal - Replace $0 $0 $0 $0 $ Fencing: Wood - Replace $0 $0 $0 $0 $ Mailboxes - Replace $0 $0 $0 $0 $ Sign/Monument - Refurbish $0 $0 $0 $3,167 $ Entry Planters - Waterproof $0 $0 $0 $0 $0 Building Exteriors 2303 Exterior Wall Lights - Replace $0 $0 $5,534 $0 $ Balcony Decks - Seal/Repair $0 $0 $0 $1,900 $ Balcony Deck - Resurface $0 $0 $6,764 $0 $ Balcony Rails - Replace $0 $0 $0 $0 $ Composite Deck - Replace $0 $0 $0 $0 $ Wood Deck - Resurface/Restore $0 $0 $0 $0 $ Building Exterior - Seal/Paint $0 $0 $0 $0 $ Roof: Comp Shingle - Replace $0 $0 $73,792 $0 $ Gutters/Downspouts - Replace $0 $0 $15,373 $0 $0 Mechanical 2501 Entry Access System - Replace $0 $0 $0 $0 $0 Total Expenses $2,898 $0 $101,465 $8,994 $0 Ending Reserve Balance: $136,130 $153,051 $68,633 $76,783 $94,549 Association Reserves Colorado, LLC 15

21 Table 6: 30-Year Income/Expense Detail (yrs 10 through 14) Fiscal Year Starting Reserve Balance $94,549 $107,601 $126,712 $74,193 $37,834 Annual Reserve Contribution $17,417 $17,940 $18,478 $19,032 $19,603 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $1,010 $1,171 $1,004 $560 $479 Total Income $112,977 $126,712 $146,194 $93,785 $57,915 # Component Sites/Grounds 2105 Driveway Concrete - Repair $0 $0 $0 $0 $ Fencing: Metal - Repair/Paint $0 $0 $0 $3,671 $ Fencing: Wood - Repair/Paint $0 $0 $0 $881 $ Fencing: Metal - Replace $0 $0 $0 $0 $ Fencing: Wood - Replace $3,360 $0 $0 $0 $ Mailboxes - Replace $2,016 $0 $0 $0 $ Sign/Monument - Refurbish $0 $0 $0 $0 $ Entry Planters - Waterproof $0 $0 $34,931 $0 $0 Building Exteriors 2303 Exterior Wall Lights - Replace $0 $0 $0 $0 $ Balcony Decks - Seal/Repair $0 $0 $2,139 $0 $ Balcony Deck - Resurface $0 $0 $0 $0 $ Balcony Rails - Replace $0 $0 $20,674 $0 $ Composite Deck - Replace $0 $0 $3,564 $0 $ Wood Deck - Resurface/Restore $0 $0 $2,139 $0 $ Building Exterior - Seal/Paint $0 $0 $0 $51,399 $ Roof: Comp Shingle - Replace $0 $0 $0 $0 $ Gutters/Downspouts - Replace $0 $0 $0 $0 $0 Mechanical 2501 Entry Access System - Replace $0 $0 $8,555 $0 $0 Total Expenses $5,376 $0 $72,001 $55,951 $0 Ending Reserve Balance: $107,601 $126,712 $74,193 $37,834 $57,915 Association Reserves Colorado, LLC 16

22 Table 6: 30-Year Income/Expense Detail (yrs 15 through 19) Fiscal Year Starting Reserve Balance $57,915 $55,303 $74,341 $96,616 $114,457 Annual Reserve Contribution $20,191 $20,797 $21,421 $22,064 $22,725 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $566 $648 $854 $1,055 $1,264 Total Income $78,673 $76,748 $96,616 $119,735 $138,447 # Component Sites/Grounds 2105 Driveway Concrete - Repair $3,895 $0 $0 $0 $ Fencing: Metal - Repair/Paint $0 $0 $0 $4,256 $ Fencing: Wood - Repair/Paint $0 $0 $0 $1,021 $ Fencing: Metal - Replace $19,475 $0 $0 $0 $ Fencing: Wood - Replace $0 $0 $0 $0 $ Mailboxes - Replace $0 $0 $0 $0 $ Sign/Monument - Refurbish $0 $0 $0 $0 $ Entry Planters - Waterproof $0 $0 $0 $0 $0 Building Exteriors 2303 Exterior Wall Lights - Replace $0 $0 $0 $0 $ Balcony Decks - Seal/Repair $0 $2,407 $0 $0 $ Balcony Deck - Resurface $0 $0 $0 $0 $ Balcony Rails - Replace $0 $0 $0 $0 $ Composite Deck - Replace $0 $0 $0 $0 $ Wood Deck - Resurface/Restore $0 $0 $0 $0 $ Building Exterior - Seal/Paint $0 $0 $0 $0 $ Roof: Comp Shingle - Replace $0 $0 $0 $0 $ Gutters/Downspouts - Replace $0 $0 $0 $0 $0 Mechanical 2501 Entry Access System - Replace $0 $0 $0 $0 $0 Total Expenses $23,370 $2,407 $0 $5,278 $0 Ending Reserve Balance: $55,303 $74,341 $96,616 $114,457 $138,447 Association Reserves Colorado, LLC 17

23 Table 6: 30-Year Income/Expense Detail (yrs 20 through 24) Fiscal Year Starting Reserve Balance $138,447 $160,639 $186,484 $213,315 $230,056 Annual Reserve Contribution $23,407 $24,109 $24,833 $25,578 $26,345 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $1,495 $1,735 $1,998 $2,216 $2,367 Total Income $163,349 $186,484 $213,315 $241,108 $258,768 # Component Sites/Grounds 2105 Driveway Concrete - Repair $0 $0 $0 $0 $ Fencing: Metal - Repair/Paint $0 $0 $0 $4,934 $ Fencing: Wood - Repair/Paint $0 $0 $0 $1,184 $ Fencing: Metal - Replace $0 $0 $0 $0 $ Fencing: Wood - Replace $0 $0 $0 $0 $ Mailboxes - Replace $0 $0 $0 $0 $ Sign/Monument - Refurbish $0 $0 $0 $4,934 $ Entry Planters - Waterproof $0 $0 $0 $0 $0 Building Exteriors 2303 Exterior Wall Lights - Replace $0 $0 $0 $0 $ Balcony Decks - Seal/Repair $2,709 $0 $0 $0 $3, Balcony Deck - Resurface $0 $0 $0 $0 $ Balcony Rails - Replace $0 $0 $0 $0 $ Composite Deck - Replace $0 $0 $0 $0 $ Wood Deck - Resurface/Restore $0 $0 $0 $0 $ Building Exterior - Seal/Paint $0 $0 $0 $0 $ Roof: Comp Shingle - Replace $0 $0 $0 $0 $ Gutters/Downspouts - Replace $0 $0 $0 $0 $0 Mechanical 2501 Entry Access System - Replace $0 $0 $0 $0 $12,197 Total Expenses $2,709 $0 $0 $11,052 $15,246 Ending Reserve Balance: $160,639 $186,484 $213,315 $230,056 $243,522 Association Reserves Colorado, LLC 18

24 Table 6: 30-Year Income/Expense Detail (yrs 25 through 29) Fiscal Year Starting Reserve Balance $243,522 $267,979 $298,761 $330,695 $272,761 Annual Reserve Contribution $27,135 $27,949 $28,788 $29,652 $30,541 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $2,556 $2,832 $3,146 $3,016 $2,894 Total Income $273,214 $298,761 $330,695 $363,363 $306,195 # Component Sites/Grounds 2105 Driveway Concrete - Repair $5,234 $0 $0 $0 $ Fencing: Metal - Repair/Paint $0 $0 $0 $5,720 $ Fencing: Wood - Repair/Paint $0 $0 $0 $1,373 $ Fencing: Metal - Replace $0 $0 $0 $0 $ Fencing: Wood - Replace $0 $0 $0 $0 $ Mailboxes - Replace $0 $0 $0 $0 $ Sign/Monument - Refurbish $0 $0 $0 $0 $ Entry Planters - Waterproof $0 $0 $0 $0 $0 Building Exteriors 2303 Exterior Wall Lights - Replace $0 $0 $0 $0 $ Balcony Decks - Seal/Repair $0 $0 $0 $3,432 $ Balcony Deck - Resurface $0 $0 $0 $0 $ Balcony Rails - Replace $0 $0 $0 $0 $ Composite Deck - Replace $0 $0 $0 $0 $ Wood Deck - Resurface/Restore $0 $0 $0 $0 $ Building Exterior - Seal/Paint $0 $0 $0 $80,077 $ Roof: Comp Shingle - Replace $0 $0 $0 $0 $ Gutters/Downspouts - Replace $0 $0 $0 $0 $0 Mechanical 2501 Entry Access System - Replace $0 $0 $0 $0 $0 Total Expenses $5,234 $0 $0 $90,602 $0 Ending Reserve Balance: $267,979 $298,761 $330,695 $272,761 $306,195 Association Reserves Colorado, LLC 19

25 Assoc Accuracy, Limitations, and Disclosures The reserve study should be reviewed carefully. It may not include all common and limited common element components that will require major maintenance, repair or replacement in future years, and may not include regular contributions to a reserve account for the cost of such maintenance, repair, or replacement. The failure to include a component in a reserve study, or to provide contributions to a reserve account for a component, may, under some circumstances, require you to pay on demand as a special assessment your share of common expenses for the cost of major maintenance, repair or replacement of a reserve component. Because we have no control over future events, we do not expect that all the events we anticipate will occur as planned. We expect that inflationary trends will continue, and we expect Reserve funds to continue to earn interest, so we believe that reasonable estimates for these figures are much more accurate than ignoring these economic realities. We can control measurements, which we attempt to establish within 5% accuracy through a combination of on-site measurements, drawings, and satellite imagery. The starting Reserve Balance and interest rate earned on deposited Reserve funds that you provided to us were considered reliable and were not confirmed independently. We have considered the association s representation of current and historical Reserve projects reliable, and we have considered the representations made by its vendors and suppliers to also be accurate and reliable. Component Useful Life, Remaining Useful Life, and Current Cost estimates assume a stable economic environment and lack of natural disasters. Because the physical condition of your components, the association s Reserve balance, the economic environment, and legislative environment change each year, this Reserve Study is by nature a one-year document. Because a long-term perspective improves the accuracy of near-term planning, this Report projects expenses for the next 30 years. It is our recommendation and that of the Financial Accounting Standards Board (FASB) that your Reserve Study be updated each year as part of the annual budget process. Association Reserves CO, LLC and its employees have no ownership, management, or other business relationships with the client other than this Reserve Study engagement. Bryan Farley R.S., company president, is a credentialed Reserve Specialist (#260). All work done by Association Reserves CO, LLC is performed under his Responsible Charge. There are no material issues to our knowledge that have not been disclosed to the client that would cause a distortion of the association s situation. Component quantities indicated in this Report were developed by Association Reserves unless otherwise noted. No destructive or intrusive testing was performed. This Report and this site inspection were accomplished only for Reserve budget purposes (to help identify and address the normal deterioration of properly built and installed components with predictable life expectancies). The Funding Plan in this Report was developed using the cash-flow methodology to achieve the specified Funding Objective. Association Reserves liability in any matter involving this Reserve Study is limited to our Fee for services rendered. Association Reserves Colorado, LLC 20

26 Assoc Terms and Definitions BTU DIA GSF GSY HP LF British Thermal Unit (a standard unit of energy) Diameter Gross Square Feet (area). Equivalent to Square Feet Gross Square Yards (area). Equivalent to Square Yards Horsepower Linear Feet (length) Effective Age: The difference between Useful Life and Remaining Useful Life. Note that this is not necessarily equivalent to the chronological age of the component. Fully Funded Balance (FFB): The value of the deterioration of the Reserve Components. This is the fraction of life used up of each component multiplied by its estimated Current Replacement. While calculated for each component, it is summed together for an association total. FFB = (Current Cost X Effective Age) / Useful Life Inflation: Interest: Cost factors are adjusted for inflation at the rate defined in the Executive Summary and compounded annually. These increasing costs can be seen as you follow the recurring cycles of a component on Table 6. Interest earnings on Reserve Funds are calculated using the average balance for the year (taking into account income and expenses through the year) and compounded monthly using the rate defined in the Executive Summary. Annual interest earning assumption appears in the Executive Summary. Percent Funded: The ratio, at a particular point in time (the first day of the Fiscal Year), of the actual (or projected) Reserve Balance to the Fully Funded Balance, expressed as a percentage. Remaining Useful Life (RUL): The estimated time, in years, that a common area component can be expected to continue to serve its intended function. Useful Life (UL): The estimated time, in years, that a common area component can be expected to serve its intended function. Association Reserves Colorado, LLC 21

27 Assoc Component Details The primary purpose of the photographic appendix is to provide the reader with the basis of our funding assumptions resulting from our physical analysis and subsequent research. The photographs herein represent a wide range of elements that were observed and measured against National Reserve Study Standards to determine if they meet the criteria for reserve funding. 1) Common area maintenance repair & replacement responsibility 2) Components must have a limited life 3) Life limit must be predictable 4) Above a minimum threshold cost (board s discretion typically 1/2 to 1% of annual operating expenses). Some components are recommended for reserve funding, while others are not. The components that meet these criteria in our judgment are shown with corresponding maintenance, repair or replacement cycles to the left of the photo (UL = Useful Life or how often the project is expected to occur, RUL = Remaining Useful Life or how many years from our reporting period) and a representative market cost range termed Best Cost and Worst Cost below the photo. There are many factors that can result in a wide variety of potential costs, we are attempting to represent a market average for budget purposes. Where there is no UL, the component is expected to be a one-time expense. Where no pricing, the component deemed inappropriate for Reserve Funding. Association Reserves Colorado, LLC 22

28 Association Reserves Component Details Comp # : SITE & GROUNDS--- Location : Funded? : No Evaluation : Quantity: Best Case: Cost Source: Worst Case: Comp # : 2105 Driveway Concrete - Repair Location : Adjacent to roadway and parking areas Funded? : Yes Quantity: ~ 9,300 GSF Evaluation : No issues were noted. The concrete appeared to be well sloped. No heaving or lifting observed. Concrete maintenance should be minimal and typically consists of pressure washing, crack repairs, and replacement of small sections as needed. Exposure to sunlight, weather, and frequent vehicle traffic can lead to larger, more frequent repairs, especially for older properties. Inspect all areas periodically to identify trip hazards or other safety issues. Repairs are frequently considered an Operating budget line item, but if a pattern of larger repairs develops, Reserve funding may be required. 10 years 5 years Best Case: $2,000 Worst Case: $3,000 Lower allowance for repair Higher allowance, more extensive Cost Source: ARI Cost Database: Similar Project Cost History June 19,2015 Page 1 of 16

29 Association Reserves Component Details Comp # : 2133 Fencing: Metal - Repair/Paint Location : Adjacent to entry Funded? : Yes Painted in 2014 Quantity: ~ 300 LF Evaluation : Rail was noted to be well painted. No issues were noted. No rusting or cracking seen. Metal fencing should be painted at the interval shown here in order to inhibit corrosion and prevent/limit costly repairs and replacement. Painting not only protects the metal surface from excessive wear, but promotes a good, attractive appearance in the common areas. 5 years 3 years Best Case: $2,000 Worst Case: $3,000 Lower allowance to repaint Comp # : 2135 Fencing: Wood - Repair/Paint Location : North side of property Funded? : Yes Cost Source: ARI Cost Database: Similar Project Cost History Higher allowance, Includes additional surface prep, etc. Quantity: ~ 100 LF Evaluation : Minor cracking and minor chipping noted. Regular uniform, professional paint or sealer applications are recommended for appearance, protection of wood and maximum design life. Repair as needed and clean prior to application. Plan for regular applications as shown below. Repair/paint should be coordinated with eventual fence replacement. 5 years 3 years Best Case: $500 Worst Case: $700 Lower allowance to clean/seal Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History June 19,2015 Page 2 of 16

30 Association Reserves Component Details Comp # : 2137 Fencing: Metal - Replace Location : Adjacent to entry Funded? : Yes Quantity: ~ 300 LF Evaluation : Good condition observed with no significant deterioration, instability and/or damage evident at railings sampled at this time. Sturdy item that can typically last for an extended period with ordinary care and maintenance. In our experience, however, eventual replacement is warranted due to constant wear, usage and exposure over time. Plan to replace at roughly the time frame below. Inspect regularly, clean for appearance and repair promptly as needed to ensure safety and maintain waterproofing. 30 years 15 years Best Case: $11,000 Worst Case: $14,000 Lower allowance to replace Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History June 19,2015 Page 3 of 16

31 Association Reserves Component Details Comp # : 2139 Fencing: Wood - Replace Location : North side of property Funded? : Yes Quantity: ~ 100 LF Evaluation : Minor cracking and chipping seen. No leaning sections observed. As routine maintenance, inspect regularly for any damage, repair as needed and avoid contact with ground and surrounding vegetation wherever possible. Regular cycles of uniform, professional sealing/painting will help to maintain appearance and maximize life. Plan to replace at roughly the time frame below with funding included here for similar wood replacement. At next replacement, association might want to consider replacing with more sturdy, lower-maintenance products like composite, vinyl, etc. Although installation costs are higher, total life cycle cost is lower due to less maintenance and longer design life expectancy. 20 years 10 years Best Case: $2,000 Worst Case: $3,000 Lower allowance to replace Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History Comp # : 2161 Retaining Wall - Replace Quantity: ~ 150 LF Location : Entry Funded? : No Evaluation : Good condition noted with no significant or widespread cracking, settling or other problems observed. Key to long lasting performance is original proper designed and installation with adequate base and surrounding drainage. Inspect regularly, repair as needed from operating budget. If shifting, cracking, etc. are observed, consult with civil or geotechnical engineer or landscape architect for repair scope. At this time, no predictable expectation of large scale repairs or replacement; no basis for reserve funding. Best Case: Cost Source: Worst Case: June 19,2015 Page 4 of 16

32 Association Reserves Component Details Comp # : 2165 Mailboxes - Replace Location : Entry areas Funded? : Yes Quantity: (15) Boxes Evaluation : No issues were noted. Simple fixtures. No rusting or heavy corrosion seen. Inspect regularly, and clean by wiping down exterior surfaces. If necessary, change lock cylinders, lubricate hinges and repair as an Operating expense. Best to plan for total replacement at roughly the time frame below due to constant exposure, usage and wear over time. Note: USPS has a limited budget for replacement and should not be relied upon for purposes of long term planning. 20 years 10 years Best Case: $1,000 Worst Case: $2,000 Lower allowance to remove and replace Comp # : 2167 Sign/Monument - Refurbish Location : Entry location Funded? : Yes Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History Quantity: (1) Stone Sign Evaluation : Good, legible condition with no significant damage/deterioration noted. Plan to refurbish and freshen up at the interval below based on typical deterioration caused by constant exposure. Funding allowance here can vary significantly depending on style/type desired. As routine maintenance, inspect regularly, clean/touch up for appearance and repair from operating budget. 15 years 8 years Best Case: $2,000 Worst Case: $3,000 Lower allowance to replace Higher allowance; more elaborate, better quality Cost Source: ARI Cost Database: Similar Project Cost History June 19,2015 Page 5 of 16

33 Association Reserves Component Details Comp # : 2187 Entry Planters - Waterproof Location : Entry areas Funded? : Yes Quantity: ~ 135 LF, 4' High Evaluation : No reports of water intrusion. Planters line the front siding of the buildings. At long intervals, the planter boxes need to be waterproofed in order to protect the integrity of the concrete structure. Waterproofing typically consists of removing the dirt and plants from the planter boxes, then wrapping the interiors of the boxes with a waterproofing membrane. 30 years 12 years Best Case: $22,000 Worst Case: $27,000 Lower allowance Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History Comp # : BUILDING EXTERIORS--- Location : Funded? : No Evaluation : Quantity: Best Case: Cost Source: Worst Case: June 19,2015 Page 6 of 16

34 Association Reserves Component Details Comp # : 2303 Exterior Wall Lights - Replace Location : Exterior common area locations Funded? : Yes Quantity: ~ (49) Fixtures Evaluation : Fixtures appeared to be in good condition. No problems were noted. No broken fixtures seen. Observed during daylight hours, but assumed to be in functional operating condition. As routine maintenance, clean by wiping down with an appropriate cleaner, change bulbs and repair as needed. Best practice is to plan for large-scale replacement at roughly the time frame below for cost efficiency and consistent quality/appearance throughout association. Should be coordinated with exterior painting projects whenever possible. Be sure to inspect for tight seal with building envelope. Note: expect the need to replace individual fixtures occasionally due to failure or damage. Individual replacements should be considered an Operating expense. If available, an extra supply of replacement fixtures should be kept on-site to allow for prompt replacement. 25 years 7 years Best Case: $4,000 Worst Case: $5,000 Lower allowance to replace; installed Higher allowance to replace Cost Source: ARI Cost Database: Similar Project Cost History June 19,2015 Page 7 of 16

35 Association Reserves Component Details Comp # : 2315 Balcony Decks - Seal/Repair Location : Balconies Funded? : Yes Quantity: ~ 840 GSF Evaluation : No access to verify the surface material. Drip edge of deck was open. Unable to view if coating was turned up the wall a few inches. Railing connections did not attach through deck surface. Generally speaking, decking surfaces should have as few penetrations as possible in order to minimize water intrusion. Elastomeric deck surfaces are typically a three-coat system. Coatings lose thickness each year due to wear and exposure to UV light. If more than the topcoat is allowed to wear off, the surface may still appear to be in good condition to the untrained eye, but waterproof integrity may be compromised. Decks should be thoroughly evaluated by a decking or waterproofing contractor prior to re-coating in order to determine scope of any required repairs. If the deck system has a warranty, the association should make sure to follow any requirements necessary to maintain said warranty, such as recoating at required intervals and conducting professional inspections. As a general rule, potted plants and other items that may trap water should be elevated off the deck or used with a waterproof liner in order to prevent prolonged exposure. 4 years 0 years Best Case: $1,000 Worst Case: $2,000 Lower allowance to recoat Higher allowance to recoat Cost Source: ARI Cost Database: Similar Project Cost History June 19,2015 Page 8 of 16

36 Association Reserves Component Details Comp # : 2317 Balcony Deck - Resurface Location : Balconies Funded? : Yes Quantity: ~ 840 GSF Evaluation : No access to inspect the decking surfaces at the time of the inspection. Even with regular preventive maintenance (cleaning/repairing/sealing), decking system will eventually wear down to the point of failure. If not resurfaced or replaced with a new system, water penetration can damage the building structure. Typical warning signs that the surface may be failing include large cracks visible on surface or from beneath the deck, staining patterns, spalling/chipping (for concrete decks) and exposed framing, among others. Sub-surface evaluation including moisture testing is outside the scope of this Reserve Study engagement. The association should consult with a decking or waterproofing contractor when evaluating scope of work in order to properly define any necessary structural repairs/restoration. Funding recommendations shown here should be updated based on any new analysis/information provided by more comprehensive evaluations. 25 years 7 years Best Case: $4,000 Worst Case: $7,000 Lower allowance to resurface Higher allowance to resurface Cost Source: ARI Cost Database: Similar Project Cost History June 19,2015 Page 9 of 16

37 Association Reserves Component Details Comp # : 2321 Balcony Rails - Replace Location : Adjacent to decks Funded? : Yes Quantity: ~ 172 LF Evaluation : No major issues noted or reported. No broken sections seen from the limited inspection from the ground. As routine maintenance, inspect regularly to ensure safety and stability; repair promptly as needed using general operating/maintenance funds. We suggest Reserve funding for regular intervals of total replacement as indicated below. Consult with a decking/railing contractor to ensure that replacements are compliant with all relevant building codes. 30 years 12 years Best Case: $14,000 Worst Case: $15,000 Lower allowance to replace Comp # : 2331 Composite Deck - Replace Location : Alley Funded? : Yes Higher allowance to replace Cost Source: ARI Cost Database: Similar Project Cost History Quantity: ~ 90 GSF Evaluation : (1) deck was noted to be composite. Repair any trip and fall hazards immediately to ensure safety. As routine maintenance, inspect regularly, pressure wash for appearance and repair promptly as needed to prevent water penetrating into the base and causing further damage. Conditions can vary in different areas based on sun and weather exposure, adequacy of drainage, level of foot traffic, etc. If properly installed composite decking systems should experience an extended useful life. 30 years 12 years Best Case: $2,000 Worst Case: $3,000 Lower allowance Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History June 19,2015 Page 10 of 16

38 Association Reserves Component Details Comp # : 2333 Wood Deck - Resurface/Restore Location : Alley Funded? : Yes Quantity: ~ 90 GSF Evaluation : (1) deck was noted to be wood. Deck surface is open boards that allow water to drain off in between. Plan for large scale repair / replacement at roughly the interval below. As routine maintenance, inspect deck, stairs, and railings annually and repair as needed. As part of maintenance, apply water repellant stain/preservative at least every other year. Any painting is included in component # 525. Almost all exterior wood in the Puget Sound area will decay over time and require replacement. Current building code requires flashing of the ledger joist (at the exterior building wall) to prevent decay from compromising it s structural integrity. Options for a longer lasting deck include such things as using a thick wood boards of suitable species or a composite product. Composite materials are available that require less maintenance and lower life cycle costs typically. Funding for replacing existing wood boards with inkind material is factored below. Costs can increase greatly, if decay of the structural framing is found. 30 years 12 years Best Case: $1,000 Worst Case: $2,000 Lower allowance to resurface Higher allowance to resurface Cost Source: ARI Cost Database: Similar Project Cost History June 19,2015 Page 11 of 16

39 Association Reserves Component Details Comp # : 2343 Building Exterior - Seal/Paint Location : Exterior building surfaces Funded? : Yes Painted in 2014 Quantity: ~ 17,500 GSF Evaluation : No large- scale cracking of stucco was observed. The sealant material is unknown. Stucco is a relatively low maintenance material, although sealants require more maintenance. As annual maintenance, inspect stucco and sealants for any visible problems. Replacing sealants is an important part of maintaining stucco s waterproofing. Sealants are typically located at the intersections of the stucco and other material such as windows, door and vents. We have assumed the sealants are silicone, which under good conditions may have a useful life of approximately 15 to 20 years. Urethane sealants would have a useful life of 8-12 years. At time of sealant replacement we recommend recoating the stucco to minimize water penetration and for appearance. Stucco can be recoated to help limited the amount of water penetrating into the stucco. There are three general options for recoating stucco. The least expensive option is applying a new acrylic topcoat, the second option is coating with an elastomeric finish, preferably permeable (~50% more expensive than acrylic) and a third option is a skim coat of stucco (about three times as expensive as acrylic). Generally the more expensive option has the longest useful life, and the least expensive has the shortest useful life. Additional information on Stucco is available at the Portland Cement Association s website 15 years 13 years Best Case: $30,000 Worst Case: $40,000 Lower allowance to prep and paint / caulk Higher allowance, more prep work Cost Source: Client Cost History June 19,2015 Page 12 of 16

40 Association Reserves Component Details Comp # : 2359 Brick Cladding - Repair Location : Exterior walls Funded? : No Quantity: Minimal GSF Evaluation : Some stone veneer was used for cladding on small portions of the building. No cracked grout or broken stone were observed during our limited visual review. Stone veneer is a relatively low maintenance item. Inspect periodically and repair as needed using operation and maintenance funds. No reserve funding suggested. Best Case: Cost Source: Worst Case: Comp # : 2373 Garage Doors - Replace Location : Entry / exit of parking area Funded? : No Quantity: (15) Doors Evaluation : Reported that the individual owners (not the association) appear to be responsible for door replacement. Consult with the association's attorney to determine actual responsibility, but based on our review there is no need for Reserve funding. Reported that the association is responsible for the painting of the doors. Plan to paint the doors along with item #2343. Best Case: Cost Source: Worst Case: June 19,2015 Page 13 of 16

41 Association Reserves Component Details Comp # : 2379 Roof: Comp Shingle - Replace Location : Rooftop of building Funded? : Yes Quantity: ~ 14,900 GSF Evaluation : Roofing is laminated shingles, with closed cut valley. Ventilation (the lack of which can greatly reduce useful life) was observed at eave. Eave venting consisted of soffits in blocking between rafters. No ridge venting was observed. Visible portions of roof flashing were observed at the headwall and sidewall. No portion of flashing was observed at the rake. Kick out flashing were not observed. Gutters blocked the view of eaves, so eave flashing was not confirmed. Roofing is typically a long-lived component assuming it was properly installed and is properly maintained. As routine maintenance, many manufacturers recommend inspections at least twice annually (once in the fall, before the rainy season, and again in the spring) and after large storm events. Promptly replace any damaged/missing sections or conduct any other repair needed to ensure waterproof integrity of roof. Keep roof surface, gutters and downspouts clear and free of debris. We recommend having roof inspected in greater detail (including conditions of sub-surface materials) by an independent roofing consultant prior to replacement. There is a wealth of information available through organizations such as the Roof Consultant Institute and the National Roofing Contractors Association (NRCA) If the roof has a warranty, be sure to review terms and conduct proper inspections/repairs as needed to keep warranty in force. 25 years 7 years Best Case: $45,000 Worst Case: $75,000 Lower allowance to remove and replace roof Cost Source: ARI Cost Database: Similar Project Cost History Higher allowance; upgrades, underlying repair needs, metal work, etc June 19,2015 Page 14 of 16

42 Association Reserves Component Details Comp # : 2387 Gutters/Downspouts - Replace Quantity: ~ 1,755 LF Location : Perimeter of building Funded? : Yes Evaluation : Generally the metal gutters and downspouts appeared in good condition. We suggest to plan for total replacement of gutter and downspouts at the same intervals as roof replacement for cost efficiency. National Roofing Contractor Association (NRCA) roofing standard includes installing eave flashings at the gutters. As routine maintenance, inspect regularly, keep gutters and downspouts free of debris. 25 years 7 years Best Case: $11,000 Worst Case: $14,000 Lower allowance to replace Higher allowance to replace Cost Source: ARI Cost Database: Similar Project Cost History Comp # : MECHANICALS/ELECTRICAL/PLUMBING-Quantity: Location : Funded? : No Evaluation : Best Case: Cost Source: Worst Case: June 19,2015 Page 15 of 16

43 Association Reserves Component Details Comp # : 2501 Entry Access System - Replace Location : Entry areas of property Funded? : Yes Quantity: (2) Panels Evaluation : Units are reportedly original. Access/intercom system was not inspected internally during site inspection. Should be checked and repaired as needed by servicing vendor as routine maintenance. Individual components can often be replaced for relatively low cost as an Operating expense. Plan for complete replacement at the approximate interval shown here for functional and aesthetic considerations. 12 years 0 years Best Case: Lower allowance $5,000 Worst Case: $7,000 Comp # : 2587 Irrigation Controllers - Replace Location : Entry areas of property Funded? : No Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History Quantity: (1) Controller Evaluation : Inspect regularly and repair/replace as needed as an Operating expense. Although eventual replacement will be needed due to parts obsolescence, technological upgrades, etc., cost is not expected to meet threshold for Reserve funding. Best Case: Cost Source: Worst Case: June 19,2015 Page 16 of 16