Update With Site-Visit Reserve Study

Transcription

1 Washington Office Corporate Office 505 South 336 th St., Ste 620 Calabasas, CA Federal Way, WA Regional Offices TEL 253/ Phoenix, AZ FAX 253/ San Francisco, CA Denver, CO Honolulu, HI Las Vegas, NV Miami, FL Update With Site-Visit Reserve Study Park Place North Bend, WA Report #: For Period Beginning: March 1, 2016 Expires: December 31, 2016 Date Prepared: March 3, 2016

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: 253/ Relax, it s from Association Reserves WA, LLC. 3/3/2016

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...20 Terms and Definitions Appendix Association Reserves WA, LLC. 3/3/2016

4 3- Minute Executive Summary Association: Park Place #: Location: North Bend, WA # of Units: 30 Report Period: March 1, 2016 through December 31, 2016 Findings/Recommendations as-of 3/1/2016: Projected Starting Reserve Balance:...$141,676 Current Fully Funded Reserve Balance:...$424,366 Average Reserve Deficit (Surplus) Per Unit:...$9, % 2016 Monthly Full Funding Contributions:...$3,667 70% 2016 Monthly Threshold Funding Contributions...$3,189 Baseline contributions (minimum to keep Reserves above $0):...$3,076 Recommended 2016 Special Assessment for Reserves:...$3,667 Current 2016 Budgeted Reserve Contribution Rate:...$3,667 Economic Assumptions: Net Annual After Tax Interest Earnings Accruing to Reserves % Annual Inflation Rate % This is an Update With-Site-Visit Reserve Study, based on our on-site inspection on January 6, 2016 and meets or exceeds all requirements of the RCW. This study was prepared by, or under the supervision of a credentialed Reserve Specialist (RS 153). Your Reserve Fund is 33% Funded. This means the association s risk of special assessment and/or deferred maintenance is currently in the higher end of 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 maintain your Reserve contributions to 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 knowingly excluded. The reader is directed to the attached and detailed Photographic Inventory Appendix (Photo Pages) to gain a comprehensive understanding of the basis of our recommendations for this year s report. Association Reserves WA, LLC. i 3/3/2016

5 Table 1: Executive Summary Useful Rem. Current Life Useful Cost # Component (yrs) Life (yrs) Estimate Site/Grounds 201 Asphalt - Resurface 30 1 $52, Asphalt - Seal/Repair 5 6 $8, Mailboxes - Repair/Replace 30 3 $3, Garbage Enclosures - Replace $4, Chain Link Fence, North - Replace $4, Wood Fence - Replace 20 3 $14,400 Building Exterior 800 Exterior Surfaces - Seal/Paint 8 7 $25, Exterior Surfaces - Clean 2 1 $3, Vinyl Siding - Replace $320, Comp Shingle Roof - Replace 28 2 $135, Gutters/Downspouts, Front - Replace $6, Gutters/Downspouts, Rear - Replace $7, Chimney Caps/Covers/Pipes - Replace 28 2 $13, Building Lights - Replace 16 7 $5, Building Lights, Replace $1,350 Systems/Equipment 935 Fire Alarm Panel - Replace 20 8 $2, Total Funded Components Note; Green highlighted items are expected to occur within the first five years. Cross reference component numbers with photographic inventory appendix. A reserve-funding threshold of $1,000 is established for your association (expenses below this level expected to be factored within operating budget) Association Reserves WA, LLC. ii 3/3/2016

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 Update With-Site-Visit Reserve Study, we started with a review of your prior Reserve Study, then looked into recent Reserve expenditures, evaluated how expenditures are handled (ongoing maintenance vs Reserves), and researched any well-established association precedents. We performed an on-site inspection to evaluate your common areas, updating and adjusting your Reserve Component List as appropriate. Association Reserves WA, LLC 1 3/3/2016

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 WA, LLC 2 3/3/2016

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 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 WA, LLC 3 3/3/2016

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 Board members to recommend to their association. Remember, it is the Board s job to provide for the ongoing care of the common areas. Board members 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 WA, LLC 4 3/3/2016

10 Assoc Site Inspection Notes Our site inspection was conducted to update information that appeared in our prior reserve studies, a Full report prepared for the association s 2010 fiscal year (six years ago). The component inventory was analyzed for completeness and accuracy. All components were re-inspected and checked for appropriateness for reserve funding using the standard fourpart test. During our site visit on January 6, 2016, we noted current condition, materials, apparent levels of care and maintenance as well as exposure to weather elements. During our site inspection and subsequent research we were informed which components were being handled from the operational maintenance budget, not reserves. Park Place Townhomes is a condominium community of 7 residential buildings containing 30 units, completed in 1989 and is now approaching 27years old. Reserve projects recommended in the near term (next five years) include asphalt resurfacing and roof replacement, among others. It was also noted that the Association considers expenses for maintenance, repair and replacements of Unit doors, skylights and windows as the responsibility of the respective Unit owner so no reserve funding is factored for such. The reader is directed to the attached and detailed Photographic Inventory Appendix (Photo Pages) to gain a comprehensive understanding of the basis of our recommendations for this year s report. Association Reserves WA, LLC 5 3/3/2016

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 $238,608. Adding the next five years, your first ten years of projected Reserve expenses are $302,498. 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 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $ Years Figure 1 Association Reserves WA, LLC 6 3/3/2016

12 Assoc Reserve Fund Status The starting point for our financial analysis is your Reserve Fund balance, projected to be $141,676 as-of the start of your Fiscal Year on March 1, As of March 1, 2016, your Fully Funded Balance is computed to be $424,366 (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 33% Funded. Across the country approx 20% 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 $3,667/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 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $ Years Figure 2 Association Reserves WA, LLC 7 3/3/2016

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. $1,400, Yr Cash Flow Target Fully Funded Balance Recommended Funding Plan Alternate (Minimum) Current Budget $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $ Years Figure 3 This figure shows this same information, plotted on a Percent Funded scale. 160% Percent Funded Recommended Funding Plan Alternate (Minimum) Funding Plan Current Budget 140% 120% 100% 80% 60% 40% 20% 0% Years Figure 4 Association Reserves WA, LLC 8 3/3/2016

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 the estimated 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 WA, LLC 9 3/3/2016

15 Table 2: Reserve Component List Detail Rem. Useful Useful [ --- Current Cost Estimate --- ] # Component Quantity Life Life Best Case Worst Case Site/Grounds 201 Asphalt - Resurface Approx 21,200 square feet 30 1 $30,000 $75, Asphalt - Seal/Repair Approx 21,200 square feet 5 6 $6,900 $9, Mailboxes - Repair/Replace (2) cluster, (1) parcel 30 3 $3,000 $4, Garbage Enclosures - Replace (2) metal $3,000 $5, Chain Link Fence, North - Replace Approx 150 linear feet $3,900 $4, Wood Fence - Replace Approx 480 linear feet 20 3 $13,440 $15,360 Building Exterior 800 Exterior Surfaces - Seal/Paint Approx 32,000 GSF 8 7 $21,000 $30, Exterior Surfaces - Clean Approx 32,000 GSF 2 1 $3,000 $4, Vinyl Siding - Replace Approx 32,000 GSF $256,000 $384, Comp Shingle Roof - Replace Approx 30,000 square feet 28 2 $120,000 $150, Gutters/Downspouts, Front - Replace Approx 1,400 linear feet $5,600 $7, Gutters/Downspouts, Rear - Replace Approx 1,600 linear feet $6,400 $8, Chimney Caps/Covers/Pipes - Replace (30) assorted 28 2 $12,000 $15, Building Lights - Replace (60) assorted 16 7 $4,800 $6, Building Lights, Replace (15) assorted $1,200 $1,500 Systems/Equipment 935 Fire Alarm Panel - Replace (1) Ademco Vista 32FB 20 8 $2,000 $3, Total Funded Components Association Reserves WA, LLC 10 3/3/2016

16 Table 3: Fully Funded Balance Current Fully Cost Effective Useful Funded # Component Estimate X Age / Life = Balance Site/Grounds 201 Asphalt - Resurface $52,500 X 29 / 30 = $51, Asphalt - Seal/Repair $8,200 X 0 / 5 = $0 403 Mailboxes - Repair/Replace $3,500 X 27 / 30 = $3, Garbage Enclosures - Replace $4,000 X 6 / 25 = $ Chain Link Fence, North - Replace $4,200 X 3 / 35 = $ Wood Fence - Replace $14,400 X 17 / 20 = $12,425 Building Exterior 800 Exterior Surfaces - Seal/Paint $25,500 X 1 / 8 = $3, Exterior Surfaces - Clean $3,500 X 1 / 2 = $2, Vinyl Siding - Replace $320,000 X 25 / 40 = $202, Comp Shingle Roof - Replace $135,000 X 26 / 28 = $126, Gutters/Downspouts, Front - Replace $6,300 X 17 / 32 = $3, Gutters/Downspouts, Rear - Replace $7,200 X 1 / 32 = $ Chimney Caps/Covers/Pipes - Replace $13,500 X 26 / 28 = $12, Building Lights - Replace $5,400 X 9 / 16 = $3, Building Lights, Replace $1,350 X 1 / 16 = $99 Systems/Equipment 935 Fire Alarm Panel - Replace $2,500 X 12 / 20 = $1,529 $424,366 Association Reserves WA, LLC 11 3/3/2016

17 Table 4: Component Significance Current Useful Cost Deterioration Deterioration # Component Life Estimate Cost/yr Significance Site/Grounds 201 Asphalt - Resurface 30 $52,500 $1, % 202 Asphalt - Seal/Repair 5 $8,200 $1, % 403 Mailboxes - Repair/Replace 30 $3,500 $ % 410 Garbage Enclosures - Replace 25 $4,000 $ % 500 Chain Link Fence, North - Replace 35 $4,200 $ % 505 Wood Fence - Replace 20 $14,400 $ % Building Exterior 800 Exterior Surfaces - Seal/Paint 8 $25,500 $3, % 805 Exterior Surfaces - Clean 2 $3,500 $1, % 810 Vinyl Siding - Replace 40 $320,000 $8, % 830 Comp Shingle Roof - Replace 28 $135,000 $4, % 835 Gutters/Downspouts, Front - Replace 32 $6,300 $ % 836 Gutters/Downspouts, Rear - Replace 32 $7,200 $ % 840 Chimney Caps/Covers/Pipes - Replace 28 $13,500 $ % 870 Building Lights - Replace 16 $5,400 $ % 875 Building Lights, Replace 16 $1,350 $84 0.4% Systems/Equipment 935 Fire Alarm Panel - Replace 20 $2,500 $ % 16 Total Funded Components $23, % Association Reserves WA, LLC 12 3/3/2016

18 Table 5: 30-Year Reserve Plan Summary Fiscal Year Start: 03/01/16 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 $141,676 $424, % Med $36,670 $0 $1,607 $ $179,953 $453, % Med $45,324 $0 $1,746 $57, $169,343 $433, % Med $46,684 $0 $1,144 $157, $59,628 $309, % High $48,084 $0 $723 $23, $85,051 $321, % High $49,527 $0 $1,103 $ $135,681 $358, % Med $51,013 $0 $1,599 $4, $184,235 $393, % Med $52,543 $0 $2,066 $9, $229,053 $424, % Med $54,119 $0 $2,360 $42, $243,225 $423, % Med $54,661 $0 $2,702 $3, $297,420 $464, % Med $55,207 $0 $3,242 $4, $351,303 $505, % Med $55,759 $0 $3,809 $ $410,872 $553, % Low $56,317 $0 $4,329 $16, $455,322 $587, % Low $56,880 $0 $4,860 $ $517,062 $639, % Low $57,449 $0 $5,457 $5, $574,828 $689, % Low $58,023 $0 $6,066 $ $638,917 $746, % Low $58,604 $0 $3,922 $555, $145,794 $235, % Med $59,190 $0 $1,696 $13, $193,521 $267, % Low $59,781 $0 $2,215 $5, $249,732 $310, % Low $60,379 $0 $2,812 $ $312,924 $361, % Low $60,983 $0 $3,384 $13, $364,139 $401, % Low $61,593 $0 $3,968 $ $429,700 $457, % Low $62,209 $0 $4,520 $21, $474,663 $494, % Low $62,831 $0 $5,084 $ $542,578 $555, % Low $63,459 $0 $5,286 $96, $515,012 $521, % Low $64,094 $0 $5,496 $ $584,601 $586, % Low $64,735 $0 $6,161 $7, $648,169 $647, % Low $65,382 $0 $6,751 $17, $702,618 $701, % Low $66,036 $0 $7,351 $7, $768,231 $769, % Low $66,696 $0 $8,024 $5, $837,231 $842, % Low $67,363 $0 $8,708 $8,248 Association Reserves WA, LLC 13 3/3/2016

19 Table 6: 30-Year Income/Expense Detail (yrs 0 through 4) Fiscal Year Starting Reserve Balance $141,676 $179,953 $169,343 $59,628 $85,051 Annual Reserve Contribution $36,670 $45,324 $46,684 $48,084 $49,527 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $1,607 $1,746 $1,144 $723 $1,103 Total Income $179,953 $227,023 $217,172 $108,435 $135,681 # Component Site/Grounds 201 Asphalt - Resurface $0 $54,075 $0 $0 $0 202 Asphalt - Seal/Repair $0 $0 $0 $0 $0 403 Mailboxes - Repair/Replace $0 $0 $0 $3,825 $0 410 Garbage Enclosures - Replace $0 $0 $0 $0 $0 500 Chain Link Fence, North - Replace $0 $0 $0 $0 $0 505 Wood Fence - Replace $0 $0 $0 $15,735 $0 Building Exterior 800 Exterior Surfaces - Seal/Paint $0 $0 $0 $0 $0 805 Exterior Surfaces - Clean $0 $3,605 $0 $3,825 $0 810 Vinyl Siding - Replace $0 $0 $0 $0 $0 830 Comp Shingle Roof - Replace $0 $0 $143,222 $0 $0 835 Gutters/Downspouts, Front - Replace $0 $0 $0 $0 $0 836 Gutters/Downspouts, Rear - Replace $0 $0 $0 $0 $0 840 Chimney Caps/Covers/Pipes - Replace $0 $0 $14,322 $0 $0 870 Building Lights - Replace $0 $0 $0 $0 $0 875 Building Lights, Replace $0 $0 $0 $0 $0 Systems/Equipment 935 Fire Alarm Panel - Replace $0 $0 $0 $0 $0 Total Expenses $0 $57,680 $157,544 $23,384 $0 Ending Reserve Balance: $179,953 $169,343 $59,628 $85,051 $135,681 Association Reserves WA, LLC 14 3/3/2016

20 Table 6: 30-Year Income/Expense Detail (yrs 5 through 9) Fiscal Year Starting Reserve Balance $135,681 $184,235 $229,053 $243,225 $297,420 Annual Reserve Contribution $51,013 $52,543 $54,119 $54,661 $55,207 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $1,599 $2,066 $2,360 $2,702 $3,242 Total Income $188,293 $238,844 $285,532 $300,587 $355,870 # Component Site/Grounds 201 Asphalt - Resurface $0 $0 $0 $0 $0 202 Asphalt - Seal/Repair $0 $9,791 $0 $0 $0 403 Mailboxes - Repair/Replace $0 $0 $0 $0 $0 410 Garbage Enclosures - Replace $0 $0 $0 $0 $0 500 Chain Link Fence, North - Replace $0 $0 $0 $0 $0 505 Wood Fence - Replace $0 $0 $0 $0 $0 Building Exterior 800 Exterior Surfaces - Seal/Paint $0 $0 $31,362 $0 $0 805 Exterior Surfaces - Clean $4,057 $0 $4,305 $0 $4, Vinyl Siding - Replace $0 $0 $0 $0 $0 830 Comp Shingle Roof - Replace $0 $0 $0 $0 $0 835 Gutters/Downspouts, Front - Replace $0 $0 $0 $0 $0 836 Gutters/Downspouts, Rear - Replace $0 $0 $0 $0 $0 840 Chimney Caps/Covers/Pipes - Replace $0 $0 $0 $0 $0 870 Building Lights - Replace $0 $0 $6,641 $0 $0 875 Building Lights, Replace $0 $0 $0 $0 $0 Systems/Equipment 935 Fire Alarm Panel - Replace $0 $0 $0 $3,167 $0 Total Expenses $4,057 $9,791 $42,308 $3,167 $4,567 Ending Reserve Balance: $184,235 $229,053 $243,225 $297,420 $351,303 Association Reserves WA, LLC 15 3/3/2016

21 Table 6: 30-Year Income/Expense Detail (yrs 10 through 14) Fiscal Year Starting Reserve Balance $351,303 $410,872 $455,322 $517,062 $574,828 Annual Reserve Contribution $55,759 $56,317 $56,880 $57,449 $58,023 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $3,809 $4,329 $4,860 $5,457 $6,066 Total Income $410,872 $471,518 $517,062 $579,968 $638,917 # Component Site/Grounds 201 Asphalt - Resurface $0 $0 $0 $0 $0 202 Asphalt - Seal/Repair $0 $11,351 $0 $0 $0 403 Mailboxes - Repair/Replace $0 $0 $0 $0 $0 410 Garbage Enclosures - Replace $0 $0 $0 $0 $0 500 Chain Link Fence, North - Replace $0 $0 $0 $0 $0 505 Wood Fence - Replace $0 $0 $0 $0 $0 Building Exterior 800 Exterior Surfaces - Seal/Paint $0 $0 $0 $0 $0 805 Exterior Surfaces - Clean $0 $4,845 $0 $5,140 $0 810 Vinyl Siding - Replace $0 $0 $0 $0 $0 830 Comp Shingle Roof - Replace $0 $0 $0 $0 $0 835 Gutters/Downspouts, Front - Replace $0 $0 $0 $0 $0 836 Gutters/Downspouts, Rear - Replace $0 $0 $0 $0 $0 840 Chimney Caps/Covers/Pipes - Replace $0 $0 $0 $0 $0 870 Building Lights - Replace $0 $0 $0 $0 $0 875 Building Lights, Replace $0 $0 $0 $0 $0 Systems/Equipment 935 Fire Alarm Panel - Replace $0 $0 $0 $0 $0 Total Expenses $0 $16,196 $0 $5,140 $0 Ending Reserve Balance: $410,872 $455,322 $517,062 $574,828 $638,917 Association Reserves WA, LLC 16 3/3/2016

22 Table 6: 30-Year Income/Expense Detail (yrs 15 through 19) Fiscal Year Starting Reserve Balance $638,917 $145,794 $193,521 $249,732 $312,924 Annual Reserve Contribution $58,604 $59,190 $59,781 $60,379 $60,983 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $3,922 $1,696 $2,215 $2,812 $3,384 Total Income $701,443 $206,679 $255,517 $312,924 $377,291 # Component Site/Grounds 201 Asphalt - Resurface $0 $0 $0 $0 $0 202 Asphalt - Seal/Repair $0 $13,159 $0 $0 $0 403 Mailboxes - Repair/Replace $0 $0 $0 $0 $0 410 Garbage Enclosures - Replace $0 $0 $0 $0 $7, Chain Link Fence, North - Replace $0 $0 $0 $0 $0 505 Wood Fence - Replace $0 $0 $0 $0 $0 Building Exterior 800 Exterior Surfaces - Seal/Paint $39,728 $0 $0 $0 $0 805 Exterior Surfaces - Clean $5,453 $0 $5,785 $0 $6, Vinyl Siding - Replace $498,550 $0 $0 $0 $0 830 Comp Shingle Roof - Replace $0 $0 $0 $0 $0 835 Gutters/Downspouts, Front - Replace $9,815 $0 $0 $0 $0 836 Gutters/Downspouts, Rear - Replace $0 $0 $0 $0 $0 840 Chimney Caps/Covers/Pipes - Replace $0 $0 $0 $0 $0 870 Building Lights - Replace $0 $0 $0 $0 $0 875 Building Lights, Replace $2,103 $0 $0 $0 $0 Systems/Equipment 935 Fire Alarm Panel - Replace $0 $0 $0 $0 $0 Total Expenses $555,649 $13,159 $5,785 $0 $13,151 Ending Reserve Balance: $145,794 $193,521 $249,732 $312,924 $364,139 Association Reserves WA, LLC 17 3/3/2016

23 Table 6: 30-Year Income/Expense Detail (yrs 20 through 24) Fiscal Year Starting Reserve Balance $364,139 $429,700 $474,663 $542,578 $515,012 Annual Reserve Contribution $61,593 $62,209 $62,831 $63,459 $64,094 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $3,968 $4,520 $5,084 $5,286 $5,496 Total Income $429,700 $496,428 $542,578 $611,323 $584,601 # Component Site/Grounds 201 Asphalt - Resurface $0 $0 $0 $0 $0 202 Asphalt - Seal/Repair $0 $15,254 $0 $0 $0 403 Mailboxes - Repair/Replace $0 $0 $0 $0 $0 410 Garbage Enclosures - Replace $0 $0 $0 $0 $0 500 Chain Link Fence, North - Replace $0 $0 $0 $0 $0 505 Wood Fence - Replace $0 $0 $0 $28,420 $0 Building Exterior 800 Exterior Surfaces - Seal/Paint $0 $0 $0 $50,326 $0 805 Exterior Surfaces - Clean $0 $6,511 $0 $6,908 $0 810 Vinyl Siding - Replace $0 $0 $0 $0 $0 830 Comp Shingle Roof - Replace $0 $0 $0 $0 $0 835 Gutters/Downspouts, Front - Replace $0 $0 $0 $0 $0 836 Gutters/Downspouts, Rear - Replace $0 $0 $0 $0 $0 840 Chimney Caps/Covers/Pipes - Replace $0 $0 $0 $0 $0 870 Building Lights - Replace $0 $0 $0 $10,657 $0 875 Building Lights, Replace $0 $0 $0 $0 $0 Systems/Equipment 935 Fire Alarm Panel - Replace $0 $0 $0 $0 $0 Total Expenses $0 $21,765 $0 $96,311 $0 Ending Reserve Balance: $429,700 $474,663 $542,578 $515,012 $584,601 Association Reserves WA, LLC 18 3/3/2016

24 Table 6: 30-Year Income/Expense Detail (yrs 25 through 29) Fiscal Year Starting Reserve Balance $584,601 $648,169 $702,618 $768,231 $837,231 Annual Reserve Contribution $64,735 $65,382 $66,036 $66,696 $67,363 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $6,161 $6,751 $7,351 $8,024 $8,708 Total Income $655,497 $720,302 $776,005 $842,951 $913,302 # Component Site/Grounds 201 Asphalt - Resurface $0 $0 $0 $0 $0 202 Asphalt - Seal/Repair $0 $17,684 $0 $0 $0 403 Mailboxes - Repair/Replace $0 $0 $0 $0 $0 410 Garbage Enclosures - Replace $0 $0 $0 $0 $0 500 Chain Link Fence, North - Replace $0 $0 $0 $0 $0 505 Wood Fence - Replace $0 $0 $0 $0 $0 Building Exterior 800 Exterior Surfaces - Seal/Paint $0 $0 $0 $0 $0 805 Exterior Surfaces - Clean $7,328 $0 $7,775 $0 $8, Vinyl Siding - Replace $0 $0 $0 $0 $0 830 Comp Shingle Roof - Replace $0 $0 $0 $0 $0 835 Gutters/Downspouts, Front - Replace $0 $0 $0 $0 $0 836 Gutters/Downspouts, Rear - Replace $0 $0 $0 $0 $0 840 Chimney Caps/Covers/Pipes - Replace $0 $0 $0 $0 $0 870 Building Lights - Replace $0 $0 $0 $0 $0 875 Building Lights, Replace $0 $0 $0 $0 $0 Systems/Equipment 935 Fire Alarm Panel - Replace $0 $0 $0 $5,720 $0 Total Expenses $7,328 $17,684 $7,775 $5,720 $8,248 Ending Reserve Balance: $648,169 $702,618 $768,231 $837,231 $905,054 Association Reserves WA, LLC 19 3/3/2016

25 Assoc Accuracy, Limitations, and Disclosures Washington disclosures, per RCW: This 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 WA, LLC and its associates have no ownership, management, or other business relationships with the client other than this Reserve Study engagement. James D. Talaga R.S., company president, is a credentialed Reserve Specialist (#66). All work done by Association Reserves WA, 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 found in prior Reserve Studies 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 WA, LLC 20 3/3/2016

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. Inflation: Interest: FFB = (Current Cost X Effective Age) / Useful Life 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 WA, LLC 21 3/3/2016

27 Assoc 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 ½ 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 budge 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 WA, LLC 22 3/3/2016

28 Inventory Appendix Comp #: 103 Concrete/Curb - Repair/Replace Quantity: Extensive square feet Funded?: No Annual cost best handled as operating expense History: Location: Entry walks, patios, curbing, etc Evaluation: Generally fair condition without widespread cracking, damage or deterioration evident. Some previous curb repair was indicated in 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. If any trip and fall hazards repair immediately. Repair needs should be evaluated at least annually and provided from general maintenance funds, not as a cyclical reserve component. 0 years 0 year(s) Best Case: $ 0.00 Worst Case: $ 0.00 Cost Source: March 03, 2016 Page 1 of 29

29 Comp #: 201 Asphalt - Resurface Quantity: Approx 21,200 square feet Funded?: Yes Meets National Reserve Study Standards criteria for Reserve Funding History: Location: Roadway, parking areas throughout association Evaluation: Functional but overall poor appearance and condition at present. General wear with significant local alligatoring (cracking), damage, areas of previous patching and repair observed. Research for this update indicated potential course of action in the near term may range from only targeted full depth repairs and then seal coating of all (~$30,000) which you have previously been considering, all the way up to more comprehensive combination of remove, replace, resurface and seal coat project (~$75,000 or more). Underlying conditions and drainage measures may be included, we suggest seeking further independent expert evaluation to help determine specifications for definitive and long lasting improvements. For purposes of long term planning, this component factors the eventual need to resurface or renovate asphalt at roughly the year time frame below but we have factored previously mentioned range below for now. Update in future reserve study updates after further evaluation and as conditions merit. 30 years 1 year(s) Best Case: $ 30, Lower allowance for only targeted repair and maintenance coating Worst Case: $ 75, Higher allowance for comprehensive project and maintenance coating Cost Source: Estimate Provided by Client/Similar Project Cost History March 03, 2016 Page 2 of 29

30 Comp #: 202 Asphalt - Seal/Repair Quantity: Approx 21,200 square feet Funded?: Yes Meets National Reserve Study Standards criteria for Reserve Funding History: Location: Roadway, parking areas throughout association Evaluation: Research indicated previous asphalt seal coating and repair occurred last in 2008 and prior to that in Going forward, we recommend timely intervals (every 4-5 years) for seal coating along with any needed repair. This is the best program in our opinion for the long term care of asphalt. Seal coating provides some limited benefit against damaging weather elements while bridging small surface cracks and providing a somewhat uniform appearance over the inevitable patching and repairs needed over time. Incorporate any striping/paint into this project. 5 years 6 year(s) Best Case: $ 6, $.30/Sq Ft, lower estimate to clean, seal and stripe, plus $500 repair allowance Worst Case: $ 8, $.40/Sq Ft, higher estimate to clean, seal and stripe, plus $1,000 repair allowance Cost Source: ARI Cost Database: Similar Project Cost History March 03, 2016 Page 3 of 29

31 Comp #: 220 Drainage/Storm System - Replace Quantity: Extensive systems Funded?: No Annual cost best handled as operating expense History: Location: Throughout community Evaluation: Systems include both upon drive/parking surface areas and landscaping, yard areas as well. No significant problems or expense history reported in recent years. Piping, vaults, infalls, etc are typically very long lived when properly constructed and maintained. Inspect regularly, keep drains and grates free of debris and free flowing to ensure water evacuating as designed. Pump out sediments if needed utilizing mobile evacuator service and fund from operating budget. 0 years 0 year(s) Best Case: $ 0.00 Worst Case: $ 0.00 Cost Source: March 03, 2016 Page 4 of 29

32 Comp #: 250 Landscape - Refurbish Quantity: Extensive landscaping Funded?: No Annual cost best handled as operating expense History: $9,600 in landscape improvement projects occurred in 2015, $6,000 hedge replacement in 2007 Location: Common areas Evaluation: History of targeted landscape improvement projects, from operating funds, continues. Recent improvements to install gravel path and pavers were evident. We assume that these were part of the $9,600 in landscape improvement projects that occurred in Provided expense details indicates at least $5,300 in segregated tree related expenses in 2015; this amount was likely included as well. Previously, $6,000 in hedge replacement occurred in Although typically funded as ongoing maintenance item, this component may be utilized for setting aside funds for larger expenses that do not occur on an annual basis, such as large scale plantings, extensive bark mulch every two/three years, resodding lawn areas, extensive tree delimbing/removal, landscape improvement projects, etc As before, no stated desire for future cyclical funding at this time, these types of expenses may be incorporated into future reserve study updates. Regardless, carefully track expense history to help form basis for potential inclusion. 0 years 0 year(s) Best Case: $ 0.00 Worst Case: $ 0.00 Cost Source: March 03, 2016 Page 5 of 29

33 Comp #: 320 Pole Lights - Replace Quantity: (9) metal Funded?: No Annual cost best handled as operating expense History: Location: Scattered common area locations Evaluation: Pole lights were older but without advanced deterioration. Fixtures atop appear to have been replaced in the past. Indications were that problems with underground wiring exist so apparent recent decision to attach new LED lighting at unit garages in lieu of significant expense to restore wiring; savings of $20,000 was reported. No further near term plans were expressed whether removal of some or all of the existing pole lights. We were informed that the two pole lights in the center landscaping circle still work. For now, we assume no future need for large scale cyclical replacement of older pole lights. Update in future reserve study updates as conditions merit. 0 years 0 year(s) Best Case: $ 0.00 Worst Case: $ 0.00 Cost Source: March 03, 2016 Page 6 of 29

34 Comp #: 403 Mailboxes - Repair/Replace Quantity: (2) cluster, (1) parcel Funded?: Yes Meets National Reserve Study Standards criteria for Reserve Funding History: Location: Adjacent to driveway Evaluation: Some apparent painting of housing covers for old units but general deterioration and wear of individual boxes. No plans for imminent replacement. Inspect regularly, clean by wiping down for appearance, change lock cylinders, lubricate hinges and repair as needed from operating budget. Best to plan for replacement due to constant exposure, usage and wear over time. Note; USPS has limited budget for replacement and can't be relied upon for purposes of long term planning. 30 years 3 year(s) Best Case: $ 3, $1,200/each cluster average (x2), plus $600/each parcel post, lower estimate to replace Worst Case: $ 4, $1,600/each cluster average (x2), plus $800/each parcel post, higher estimate to replace Cost Source: ARI Cost Database: Similar Project Cost History March 03, 2016 Page 7 of 29

35 Comp #: 410 Garbage Enclosures - Replace Quantity: (2) assorted Funded?: Yes Meets National Reserve Study Standards criteria for Reserve Funding History: One enclosure at East perimeter was replaced last in 2010 at expense of $1,400 Location: Adjacent to asphalt private drive and parking area Evaluation: Both chain link enclosures with slats were in fair condition when we inspected on Provided expense report indicates the one enclosure at East perimeter was replaced last in 2010 at expense of $1,400. Going forward, anticipate uniform replacements of enclosures due to typical exposure, wear and tear at roughly the time frame below. Inspect regularly, clean and spot repair as needed from operating budget. 25 years 19 year(s) Best Case: $ 3, Lower estimate to replace both Worst Case: $ 5, Higher estimate to replace both Cost Source: ARI Cost Database: Similar Project Cost History March 03, 2016 Page 8 of 29

36 Comp #: 500 Chain Link Fence, North - Replace Quantity: Approx 150 linear feet Funded?: Yes Meets National Reserve Study Standards criteria for Reserve Funding History: Transition to chain link with vinyl slats; indicated cost of $2,750 in 2013 for 100' Location: Partial North property perimeter Evaluation: Replacement of previous wood fencing at this location with apparent transition to chain link utilizing vinyl slats. Provided expense detail indicating cost of $2,750 in 2013 for 100'; we assume other 50' was replaced shortly before. Maintenance regimen should include regular cleaning, minor repair as annual budget item. Eventual needs for similar perimeter fence replacement are assumed below. 35 years 32 year(s) Best Case: $ 3, $26/LF, lower estimate to replace with similar Cost Source: Research with Local Vendor/Contractor Worst Case: $ 4, $30/LF, higher estimate to replace Comp #: 502 Chain Link Fence, S/E - Replace Quantity: Approx 600 linear feet Funded?: No Research suggests association not responsible History: Location: South and East perimeter of property Evaluation: Previous research with former Community Representatives had informed us that these runs of fencing belong to the adjacent property owners, so as before, they are not included for funding within this reserve study. 0 years 0 year(s) Best Case: $ 0.00 Worst Case: $ 0.00 Cost Source: March 03, 2016 Page 9 of 29

37 Comp #: 505 Wood Fence - Replace Quantity: Approx 480 linear feet Funded?: Yes Meets National Reserve Study Standards criteria for Reserve Funding History: Provided expense detail indicates ~$3,000 repair event in 2011 Location: West and partial North property perimeter, privacy fence Evaluation: Provided expense detail indicates ~$3,000 repair event in Some fence post replacement was evident but otherwise majority of wood fence identified as association responsibility illustrates general deterioration. As previously mentioned, we also noted where one run of perimeter fencing had been transitioned to chain link with slats in Detailed bids, specification or timing for near term replacements were not expressed. As routine maintenance, inspect regularly for any damage, clean and repair as needed; provide from operating funds. Regular cycles of stain/paint may help to maintain appearance and maximize life; it appears the community prefers to allow wood to "silver". For purposes of long term planning, anticipate replacement at roughly the time frame below. Note that costs, useful life cycles assume similar type of wood fencing; adjust in future reserve study updates as conditions warrant. Note; solar light fixtures we observed atop some fence posts apparently belong to individual owners so no impact upon reserves was assumed. 20 years 3 year(s) Best Case: $ 13, $28/LF, lower estimate to replace with similar Worst Case: $ 15, $32LF, higher estimate to replace with similar Cost Source: Research with Local Vendor/Contractor March 03, 2016 Page 10 of 29

38 Comp #: 700 Entry/Storm Doors - Replace Quantity: (30) entry, (30) storm Funded?: No Board suggests owner responsibility, not association History: Location: Entry to each unit Evaluation: Storm doors were noted at most units; many were added in 2004/2005. All unit doors are reportedly the responsibility of individual Unit owners to maintain, repair and replace. Good appearance for surface finish at entry doors observed; evidently painted during recent 2015 exterior paint project. In any event, regardless of responsibility for expense, ensure cleaning and painting along with other exterior building surfaces to maintain a quality, uniform appearance. 0 years 0 year(s) Best Case: $ 0.00 Worst Case: $ 0.00 Cost Source: Comp #: 701 Garage Doors - Replace Quantity: (30) wood doors Funded?: No Board suggests owner responsibility, not association History: Location: Garages throughout association Evaluation: Fair condition without significant damage or advanced deterioration. Some bottom seals may need replacement soon. Same understanding for responsibility and maintenance will apply as with other exterior doors. With this assumption no separate reserve funding required. 0 years 0 year(s) Best Case: $ 0.00 Worst Case: $ 0.00 Cost Source: March 03, 2016 Page 11 of 29

39 Comp #: 800 Exterior Surfaces - Seal/Paint Quantity: Approx 32,000 GSF Funded?: Yes Meets National Reserve Study Standards criteria for Reserve Funding History: Building exteriors were cleaned, painted surfaces were refinished last in 2015 at total expense of $28,500 Location: Building exterior surfaces Evaluation: Building exterior cladding (siding) consists primarily of vinyl products which will require cleaning but not painting. Buildings were reportedly cleaned and exterior painted surfaces were refinished last in 2015 at total expense of $28,500. Where recently painted, good condition with ample coverage noted. Previous expense history included limited painting in 2009 at an expense of $10,000 (one coat of paint utilized). We recommend regular professional inspections with prompt touch-up and repair as needed to ensure water proof integrity and quality appearance is maintained. Typical Northwest paint cycles are between five and eight years depending upon surface conditions and preparation, material quality, application methods and weather conditions. Removal and replacement of any caulking with high quality product is important part of surface preparation. Going forward, plan to maintain caulking and refinish painted surfaces at the intervals below. Add separate clean expense for total cost. 8 years 7 year(s) Best Case: $ 21, $700/unit (x30), lower estimate to maintain caulk, refinish painted surfaces. Add separate clean expense for total cost Worst Case: $ 30, $1,000/unit (x30), higher estimate to maintain caulk, refinish painted surfaces. Add separate clean expense for total cost Cost Source: 2015 Client Cost History Extrapolated March 03, 2016 Page 12 of 29

40 Comp #: 805 Exterior Surfaces - Clean Quantity: Approx 32,000 GSF Funded?: Yes Meets National Reserve Study Standards criteria for Reserve Funding History: Building exteriors were cleaned, painted surfaces were refinished last in 2015 at total expense of $28,500 Location: Building exterior surfaces Evaluation: Going forward, this component will represent large scale cleaning of buildings every 2 years to maintain good appearance. Note that these cleaning intervals are timed to coincide in same years as future paint intervals. Some spot cleaning may be needed in between from operating budget (see image below). 2 years 1 year(s) Best Case: $ 3, Lower estimate to clean building exteriors Worst Case: $ 4, Higher estimate to clean building exteriors Cost Source: 2015 Client Cost History Extrapolated March 03, 2016 Page 13 of 29

41 Comp #: 810 Vinyl Siding - Replace Quantity: Approx 32,000 GSF Funded?: Yes Meets National Reserve Study Standards criteria for Reserve Funding History: Vinyl siding reportedly installed at some point in the early/mid 1990's Location: Exterior building surfaces Evaluation: Some fading emerging but generally fair condition without significant damage or instability illustrated. Vinyl siding reportedly replaced defective engineered wood product (possibly L.P.) at some point in the early/mid 1990's; no further specifications from long ago project are known. No reported problems such as water infiltration but no recent comprehensive evaluation to confirm weather proofing performance is known to have occurred or was provided for our review. Working assumption is that exterior cladding to have been installed properly with adequate moisture barrier below. We recommend regular professional inspections to ensure that the water proof integrity of building structures is maintained, with prompt repair as needed. Durable, low maintenance product but anticipate eventual replacement will be needed at roughly the year mark of life, as vinyl will typically become brittle and worn over time. Underlying moisture proofing and flashing details will likely need at least some repairs as well. Although still years into the future, this component meets the criteria for reserve funding. Project is timed to coincide with future seal and paint project for cost efficiency and quality waterproofing. Note: cost below is for similar type siding/trim and only minor underlying repair- professional architectural details, project oversight, additional underlying waterproofing details/repair, etc could add significantly to project cost. Association should conduct research and define scope of work/material specifications well in advance of this and all similar large scale projects. 40 years 15 year(s) Best Case: $ 256, $8.00/GSF, lower allowance to replace vinyl siding and trim, minor underlying repair Worst Case: $ 384, $12.00/GSF, higher allowance to replace vinyl siding and trim, minor underlying repair Cost Source: ARI Cost Database: Similar Project Cost History March 03, 2016 Page 14 of 29

42 Comp #: Funded?: History: Location: Evaluation: 820 Windows/Glass Doors- Quantity: Repair/Replace No Board suggests owner responsibility, not association (160) assorted Exterior building surfaces Varying condition, ages and types of windows apparent; many appear older with some individual fogging evident. If properly installed without defect, most windows and glass doors have a service life of 20 to 30 years or more. No reported problems such as water infiltration, however, no comprehensive evaluations were indicated. Previous history of replacement at Unit owner expense with Community Representatives again confirming assumption that individual Unit owners are responsible to maintain, repair and replace windows (glass and frames). In any event, we continue to recommend annual inspections (including Component #998, Association Annual Inspection) of windows and glass doors, penetrations, sealants and adjacent structure by a highly qualified contractor or engineer to assess repair needs and timing, notwithstanding responsibility of expense, to help prevent structural damage to buildings. 0 years 0 year(s) Best Case: $ 0.00 Worst Case: $ 0.00 Cost Source: March 03, 2016 Page 15 of 29

43 Comp #: 830 Comp Shingle Roof - Replace Quantity: Approx 30,000 square feet Funded?: Yes Meets National Reserve Study Standards criteria for Reserve Funding History: Reportedly roofed last in 2000; roof-over, not tear-off was likely Location: Rooftop of buildings Evaluation: General deterioration such as granular loss but roofs were clean without significant edge curling or missing shingles observed during our limited scope visual inspection. Some recent problems with water infiltration were reported; minor (~$1,000) flashing repairs were needed. More notably, we were informed regarding concerns with potential for further, widespread water infiltration issues due to development of "nail pops" with indications that too short of fasteners may have been used last during previous roof replacement. That project was reportedly completed last in 2000 at only the eleven year mark of life. Likely project was a roof-over instead of tear-off replacement but this was not confirmed. We recommend further expert evaluation to confirm current conditions, provide specifications, timeline and oversight for near term replacement. Pending further input, best to plan for replacement of existing roof at roughly the 1-3 year time frame indicated below. Wide range of potential roof specification, type, underlying repair needs are possible with associated costs. We assume a higher quality, dimensional shingle with at least a year practical useful life will replace existing three-tab to help achieve future cost efficiency. As routine maintenance, we recommend professional inspections at least twice annually and after wind storms, promptly replacing damaged/missing shingles or any other repair as may be needed to ensure that the water proof integrity of the buildings is maintained. Keep gutters and downspouts clear and free of debris to allow water to evacuate from rooftops as designed. 28 years 2 year(s) Best Case: $ 120, $4.00/Sq Ft; lower estimate to tear off and reroof with a higher quality shingle Worst Case: $ 150, $5.00/Sq Ft; higher estimate to tear off and reroof with a higher quality shingle Cost Source: ARI Cost Database: Similar Project Cost History March 03, 2016 Page 16 of 29

44 Comp #: 835 Gutters/Downspouts, Front - Replace Quantity: Approx 1,400 linear feet Funded?: Yes Meets National Reserve Study Standards criteria for Reserve Funding History: Likely replaced last during 2000 roof project Location: Front perimeter of buildings throughout association Evaluation: Age and condition varies since recent replacement was noted. Older installations, generally at front of buildings, were without significant deterioration or damage evident. We now assume that these locations were likely replaced last during 2000 roof project. Best to plan for large scale replacement to ensure functionality and cost efficiency. 32 years 15 year(s) Best Case: $ 5, $4/LF, lower estimate to replace Worst Case: $ 7, $5/LF, higher estimate to replace Cost Source: Research with Local Contractor March 03, 2016 Page 17 of 29

45 Comp #: 836 Gutters/Downspouts, Rear - Replace Funded?: History: Likely replaced last during 2000 roof project Location: Rear perimeter of buildings throughout association Quantity: Yes Meets National Reserve Study Standards criteria for Reserve Funding Approx 1,600 linear feet Evaluation: Newer installations, generally at rear of buildings, were replaced last as part of 2014 project expense of $6,950 (which also included some front gutter cleaning and minor flashing work. Need for recent replacement was apparently due to some damage and need to provide better slope for drainage. Future intervals are factored below at current pricing by provider of 2014 project. Inspect regularly, keep gutters and downspouts free of debris to ensure water evacuating from rooftops as designed and repair as needed from general operating funds. 32 years 31 year(s) Best Case: $ 6, $4/LF, lower estimate to replace Worst Case: $ 8, $5/LF, higher estimate to replace Cost Source: Research with Local Contractor March 03, 2016 Page 18 of 29

46 Comp #: 838 Skylights - Replace Quantity: (16) assorted Funded?: No Board suggests owner responsibility, not association History: Location: At individual units only Evaluation: These are reportedly considered the responsibility of individual Unit owners where installed. In any event, inspect regularly, ensure prompt repair/replacement as needed to maintain water proof integrity of building roofs. 0 years 0 year(s) Best Case: $ 0.00 Worst Case: $ 0.00 Cost Source: Comp #: 840 Chimney Caps/Pipes - Repair/Replace Quantity: (30) assorted Funded?: Yes Meets National Reserve Study Standards criteria for Reserve Funding History: Location: Roofs throughout association Evaluation: Varying types and usage noted. Overall general deterioration with some local corrosion from our grade level observation. Some ongoing discussion regarding near term painting or replacements. We recommend planning for uniform replacement of metal work timed to coincide with roof replacements for quality weatherproofing and cost efficiency. 28 years 2 year(s) Best Case: $ 12, $400/each, lower allowance to replace pipes, covers and caps Worst Case: $ 15, $500/each, higher allowance to replace pipes, covers and caps Cost Source: ARI Cost Database: Similar Project Cost History March 03, 2016 Page 19 of 29

47 Comp #: 850 Building/Unit Signs - Replace Quantity: (30) Units Funded?: No Annual cost best handled as operating expense History: Location: Building exterior surfaces Evaluation: Simple, utility signage is in legible condition. Varying exposures and relatively modest replacement expenses so treat individual or small groupings of replacements as maintenance item. No reserve funding suggested. 0 years 0 year(s) Best Case: $ 0.00 Worst Case: $ 0.00 Cost Source: Comp #: 860 Vents - Clean/Repair Quantity: Extensive quantity Funded?: No Annual cost best handled as operating expense History: Location: Exterior buidling elevations Evaluation: We recommend regular professional inspections and cleaning, funded from the operating budget, to ensure the vents are performing properly and to mitigate any potential structural damage or fire hazard. 0 years 0 year(s) Best Case: $ 0.00 Worst Case: $ 0.00 Cost Source: March 03, 2016 Page 20 of 29

48 Comp #: 870 Building Lights - Replace Quantity: (60) assorted Funded?: Yes Meets National Reserve Study Standards criteria for Reserve Funding History: Location: Exterior common and limited common area locations Evaluation: Age, condition, exposure and type vary somewhat but majority of these fixtures are older but still fair. Observed during daylight hours; 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 to plan for large scale replacement, timed to coincide with clean and paint cycles, at roughly the time frame below for cost efficiency and consistent quality/appearance throughout association. 16 years 7 year(s) Best Case: $ 4, $80/each, lower allowance to replace, installed Worst Case: $ 6, $100/each, higher allowance to replace, installed Cost Source: ARI Cost Database: Similar Project Cost History March 03, 2016 Page 21 of 29

49 Comp #: 872 Building Lights, Replace Quantity: (15) assorted Funded?: Yes Meets National Reserve Study Standards criteria for Reserve Funding History: $7,700 for initial installation of (15) fixtures, including labor, wiring modifications, permits, etc Location: Exterior common and limited common area locations Evaluation: As mentioned elsewhere, ongoing project for additional LED fixtures to enhance/restore lighting in lieu of more expensive wiring repair project for older pole lights. Project is planned for completion in 2016, with assumed total cost of ~$7,700 for initial installation of (15) fixtures, including labor, wiring modifications, permits, etc Going forward, anticipate simple, routine replacements of fixtures at expense and timing below. 16 years 15 year(s) Best Case: $ 1, $80/each, lower allowance to replace, installed Worst Case: $ 1, $100/each, higher allowance to replace, installed Cost Source: Extrapolated Client Cost History March 03, 2016 Page 22 of 29

50 Comp #: 900 Plumbing - Repair/Replace Quantity: Extensive systems Funded?: No Useful life not predictable or extended History: Location: Throughout common and limited common areas of community Evaluation: No systemic problems were reported at this time (such as; corrosion, sediment, pressure issues, leaks or occlusions, etc. ). Vast majority of systems are likely original to 1989 construction and so are now approaching 27 years old. Previous expense history includes $2,200 to replace backflow units in Assessing the plumbing systems is beyond the scope of a reserve study in any event. Prudent measure would include inspections and effecting timely replacements of "high risk" components such as water heaters, hose connections, drains, etc., including those inside Units, regardless of responsibility for expense. If installed per architectural specifications and local building codes, there is no predictable time frame for large scale repair/replacement expenses within the scope of our report. Treat minor repairs as an ongoing maintenance expense. Funding may be incorporated into future reserve study updates when remaining life of existing plumbing systems appears to be less than thirty years. No reserve funding suggested at this time. 0 years 0 year(s) Best Case: $ 0.00 Worst Case: $ 0.00 Cost Source: March 03, 2016 Page 23 of 29

51 Comp #: 902 Electrical - Repair/Replace Quantity: Extensive systems Funded?: No Useful life not predictable or extended History: Location: Throughout common and limited common areas Evaluation: Assessing the electrical systems is also beyond the scope of our services. No reported problems at this time. If properly maintained, installed per architectural specifications and local building codes, there is typically no predictable time frame for large scale repair/replacement expenses within the scope of our report. Treat minor repairs as ongoing maintenance expense. We recommend routine inspections (including infrared or thermographic testing) to assess conditions on an ongoing basis, along with regular maintenance of cleaning, tightening connections, etc. Funding may be incorporated into future reserve study updates if conditions change. No reserve funding suggested at this time. 0 years 0 year(s) Best Case: $ 0.00 Worst Case: $ 0.00 Cost Source: March 03, 2016 Page 24 of 29

52 Comp #: 930 Fire Sprinklers/Valves - Replace Quantity: Extensive systems Funded?: No Annual cost best handled as operating expense History: Location: Evaluation: No image available or direct observation made; access is thru individual garages and inside units. Previous history includes replacement of fire sprinkler heads in 2005 at expense of ~$18,400 and more modest $1,200 expense in Regular maintenance and testing indicated. No predictable large scale expenses suitable for reserve designation. Going forward, treat individual repairs and replacements as maintenance/operating issue. 0 years No Photo Available 0 year(s) Best Case: $ 0.00 Worst Case: $ 0.00 Cost Source: March 03, 2016 Page 25 of 29

53 Comp #: 935 Fire Alarm Panel - Replace Quantity: (1) Ademco Vista 32FB Funded?: Yes Meets National Reserve Study Standards criteria for Reserve Funding History: Panel was replaced last in 2004 Location: Unkown fire closet Evaluation: No image available as we were previously unaware of equipment existence and access is apparently thru an individual garage. Research for this update confirmed panel was replaced last in Assumed to be in working order and operating as designed. Professional inspections are recommended and indicated. The failure rate of these types of panels is typically difficult to predict and they can last many years barring an unforeseen electrical event, however, prudent planning suggests setting aside funding for periodic replacement at the roughly the interval indicated below. 20 years No Photo Available 8 year(s) Best Case: $ 2, Lower allowance to replace Worst Case: $ 3, Higher allowance to replace Cost Source: ARI Cost Database: Similar Project Cost History March 03, 2016 Page 26 of 29

54 Comp #: 940 Surveillance System - Replace Quantity: Non-working deterrent Funded?: No Cost projected to be too small History: Apparent addition of "dummy " surveillance system since our previous site inspection Location: Scattered common areas Evaluation: Apparent addition of non-working deterrence ("dummy") surveillance system since our previous site inspection. Research for this update confirmed no current plans for actual and more costly surveillance system that would merit future reserve funding designation. Update in future reserve study updates as conditions merit. 0 years 0 year(s) Best Case: $ 0.00 Worst Case: $ 0.00 Cost Source: March 03, 2016 Page 27 of 29

55 Comp #: 998 Association Annual Inspection Quantity: Every year Funded?: No Annual cost best handled as operating expense History: No such reports were provided for our review Location: Common and limited common areas Evaluation: Forensic building inspection is beyond the scope of a Reserve Study. Some Associations are required to have the Condominium inspected annually by a qualified engineer or architect in order to ascertain the physical condition of the improvements in the Condominium and to determine whether maintenance, repairs or replacements of any improvements are indicated. The inspection typically covers, at a minimum, the building envelopes, including the roofs, siding, caulking, flashings, windows and doors. No such reports were provided for our review. Although your Associations governing documents do not appear to require such, we continue to recommend the Board provide for regular comprehensive building envelope inspections, funded from the maintenance/operating budget, to ensure the weatherproofing and structural integrity of the buildings is maintained. 0 years 0 year(s) Best Case: $ 0.00 Worst Case: $ 0.00 Cost Source: March 03, 2016 Page 28 of 29

56 Comp #: 999 Reserve Study Update Quantity: Annual update Funded?: No Annual cost best handled as operating expense History: Location: Common and limited common areas Evaluation: Per Washington law (RCW), reserve studies are to be updated annually, with site inspections by an independent reserve study professional to occur no less than every three years to assess changes in condition (i.e., physical, economic, governmental, etc...) and the resulting effect on the community's long-term reserve plan. Most appropriately factored within operating budget, not as reserve component. 0 years 0 year(s) Best Case: $ 0.00 Worst Case: $ 0.00 Cost Source: March 03, 2016 Page 29 of 29