Reserve Study Canyon Park Townhomes

Transcription

1 Reserve Study Canyon Park Townhomes

2 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 Canyon Park Townhomes Bothell, WA Report #: For Period Beginning: January 1, 2016 Expires: December 31, 2016 Date Prepared: June 9, 2015

3 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. 6/9/2015

4 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...21 Component Details... Appendix Association Reserves WA, LLC. 6/9/2015

5 3- Minute Executive Summary Association: Canyon Park Townhomes #: Location: Bothell, WA # of Units: 81 Report Period: January 1, 2016 through December 31, 2016 Findings/Recommendations as-of 1/1/2016: Projected Starting Reserve Balance:...$193,325 Current Fully Funded Reserve Balance:...$823,586 Average Reserve Deficit (Surplus) Per Unit:...$7, % 2016 Monthly Full Funding Contributions:...$5,755 Baseline contributions (minimum to keep Reserves above $0):...$5,150 Recommended 2016 Special Assessment for Reserves:... $0 Most Recent Budgeted Reserve Contribution Rate:...$3,757 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 onsite inspection on May 8, 2015 and meets or exceeds all requirements of the RCW. This study was prepared by a credentialed Reserve Specialist (RS ). Your Reserve Fund is 23% Funded. This means the association s special assessment & deferred maintenance risk is currently high. 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, your anticipated future expenses, our recommendation is to increase your Reserve contributions to 100% level as noted above. 100% Full contribution rate is designed to achieve 100% funding 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 WA, LLC. i 6/9/2015

6 Table 1: Executive Summary Useful Rem. Current Life Useful Cost # Component (yrs) Life (yrs) Estimate Site / Grounds 120 Asphalt - Resurface $93, Asphalt - Seal/Stripe/Repair 5 4 $20, Fence: Wood - Repair/Replace 20 9 $48, Fence: Wood - Prep/Stain/Paint 5 0 $7, Fence: Chain Link - Replace $8, Trash Enclosures - Repair/Replace $10, Pole Lights - Replace 30 1 $12, Mailboxes - Replace $7,200 Building Exterior 500 Roof: Steep Slope (17) - Replace $195, Roof: Steep Slope (M & K) - Replace $33, Roof: Steep Slope (S & V) - Replace 25 9 $29, Gutters/Downspouts - Repair/Replace $42, Siding: Wood - Replace $1,020, Exterior Surfaces -Prep/Caulk/Paint 10 6 $105, Windows: Cabana - Repair/Replace 30 1 $9, 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. Cross reference component numbers with photographic inventory appendix. A reserve-funding threshold of $2,000 is suggested for your association (expenses below this level expected to be factored within operating budget) Association Reserves WA, LLC. ii 6/9/2015

7 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 6/9/2015

8 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 6/9/2015

9 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 6/9/2015

10 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 WA, LLC 4 6/9/2015

11 Assoc Site Inspection Notes During our site visit on May 8, 2015, we started the site inspection beginning with the entry sign. We visually reviewed all visible common areas while compiling a photographic inventory, noting: current condition, make & model information where appropriate, apparent levels of care and maintenance, exposure to weather elements and other factors that may affect the components useful life. Association Reserves WA, LLC 5 6/9/2015

12 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 $52,586. Adding the next five years, your first ten years of projected Reserve expenses are $314,120. 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 $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $ Years Figure 1 Association Reserves WA, LLC 6 6/9/2015

13 Assoc Reserve Fund Status The starting point for our financial analysis is your Reserve Fund balance, projected to be $193,325 as-of the start of your Fiscal Year on January 1, As of January 1, 2016, your Fully Funded Balance is computed to be $823,586 (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 23% Funded. Across the country approx 35% 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 $5,755/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 $200,000 $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $ Years Figure 2 Association Reserves WA, LLC 7 6/9/2015

14 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. $2,500, Yr Cash Flow Target Fully Funded Balance Recommended Funding Plan Alternate (Minimum) Current Budget $2,000,000 $1,500,000 $1,000,000 $500,000 $ 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 WA, LLC 8 6/9/2015

15 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 6/9/2015

16 Table 2: Reserve Component List Detail Rem. Useful Useful [ --- Current Cost Estimate --- ] # Component Quantity Life Life Best Case Worst Case Site / Grounds 120 Asphalt - Resurface ~ 67,000 square feet $87,000 $100, Asphalt - Seal/Stripe/Repair ~ 67,000 square feet 5 4 $16,800 $23, Fence: Wood - Repair/Replace ~ 2,000 linear feet 20 9 $42,000 $54, Fence: Wood - Prep/Stain/Paint ~ 12,000 square feet 5 0 $6,000 $8, Fence: Chain Link - Replace ~ 400 linear feet $6,000 $10, Trash Enclosures - Repair/Replace (3) wood/chain link $8,400 $12, Pole Lights - Replace (10) metal 30 1 $10,000 $15, Mailboxes - Replace ~ (90) boxes $6,300 $8,100 Building Exterior 500 Roof: Steep Slope (17) - Replace ~ 50,000 square feet $170,000 $220, Roof: Steep Slope (M & K) - Replace ~ 7,000 square feet $28,000 $39, Roof: Steep Slope (S & V) - Replace ~ 6,200 square feet 25 9 $24,800 $34, Gutters/Downspouts - Repair/Replace ~ 7,000 linear feet $35,000 $49, Siding: Wood - Replace ~ 85,000 gross square ft $850,000 $1,190, Exterior Surfaces -Prep/Caulk/Paint ~85,000 gross square ft 10 6 $91,000 $120, Windows: Cabana - Repair/Replace ~ (12) assorted 30 1 $7,200 $12, Total Funded Components Association Reserves WA, LLC 10 6/9/2015

17 Table 3: Fully Funded Balance Current Fully Cost Effective Useful Funded # Component Estimate X Age / Life = Balance Site / Grounds 120 Asphalt - Resurface $93,500 X 1 / 30 = $3, Asphalt - Seal/Stripe/Repair $20,100 X 1 / 5 = $4, Fence: Wood - Repair/Replace $48,000 X 11 / 20 = $26, Fence: Wood - Prep/Stain/Paint $7,200 X 5 / 5 = $7, Fence: Chain Link - Replace $8,000 X 29 / 40 = $5, Trash Enclosures - Repair/Replace $10,200 X 9 / 20 = $4, Pole Lights - Replace $12,500 X 29 / 30 = $12, Mailboxes - Replace $7,200 X 29 / 40 = $5,220 Building Exterior 500 Roof: Steep Slope (17) - Replace $195,000 X 8 / 25 = $62, Roof: Steep Slope (M & K) - Replace $33,500 X 13 / 25 = $17, Roof: Steep Slope (S & V) - Replace $29,400 X 16 / 25 = $18, Gutters/Downspouts - Repair/Replace $42,000 X 8 / 25 = $13, Siding: Wood - Replace $1,020,000 X 29 / 50 = $591, Exterior Surfaces -Prep/Caulk/Paint $105,500 X 4 / 10 = $42, Windows: Cabana - Repair/Replace $9,600 X 29 / 30 = $9,280 $823,586 Association Reserves WA, LLC 11 6/9/2015

18 Table 4: Component Significance Current Useful Cost Deterioration Deterioration # Component Life Estimate Cost/yr Significance Site / Grounds 120 Asphalt - Resurface 30 $93,500 $3, % 121 Asphalt - Seal/Stripe/Repair 5 $20,100 $4, % 140 Fence: Wood - Repair/Replace 20 $48,000 $2, % 141 Fence: Wood - Prep/Stain/Paint 5 $7,200 $1, % 144 Fence: Chain Link - Replace 40 $8,000 $ % 147 Trash Enclosures - Repair/Replace 20 $10,200 $ % 160 Pole Lights - Replace 30 $12,500 $ % 199 Mailboxes - Replace 40 $7,200 $ % Building Exterior 500 Roof: Steep Slope (17) - Replace 25 $195,000 $7, % 501 Roof: Steep Slope (M & K) - Replace 25 $33,500 $1, % 502 Roof: Steep Slope (S & V) - Replace 25 $29,400 $1, % 510 Gutters/Downspouts - Repair/Replace 25 $42,000 $1, % 523 Siding: Wood - Replace 50 $1,020,000 $20, % 534 Exterior Surfaces -Prep/Caulk/Paint 10 $105,500 $10, % 537 Windows: Cabana - Repair/Replace 30 $9,600 $ % 15 Total Funded Components $55, % Association Reserves WA, LLC 12 6/9/2015

19 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 $193,325 $823, % High $69,060 $0 $2,253 $7, $257,438 $898, % High $73,894 $0 $2,843 $22, $311,412 $960, % Med $79,067 $0 $3,526 $ $394,004 $1,050, % Med $84,601 $0 $4,383 $ $482,989 $1,144, % Med $90,524 $0 $5,193 $22, $556,083 $1,219, % Med $96,860 $0 $6,031 $8, $650,627 $1,313, % Med $103,640 $0 $6,424 $125, $634,719 $1,291, % Med $110,895 $0 $6,933 $ $752,548 $1,400, % Med $118,658 $0 $8,156 $ $879,362 $1,515, % Med $126,964 $0 $8,833 $127, $887,943 $1,504, % Med $135,851 $0 $9,554 $9, $1,023,673 $1,616, % Med $139,927 $0 $10,810 $35, $1,139,250 $1,708, % Med $144,125 $0 $11,929 $47, $1,247,541 $1,791, % Med $148,449 $0 $13,278 $ $1,409,268 $1,929, % Low $152,902 $0 $14,773 $30, $1,546,540 $2,042, % Low $157,489 $0 $16,271 $11, $1,709,083 $2,181, % Low $162,214 $0 $17,134 $169, $1,719,134 $2,164, % Low $167,080 $0 $16,142 $391, $1,510,631 $1,920, % Low $172,093 $0 $16,040 $ $1,698,764 $2,075, % Low $177,255 $0 $17,779 $35, $1,858,553 $2,201, % Low $182,573 $0 $19,523 $13, $2,047,644 $2,357, % Low $188,050 $0 $11,984 $1,897, $350,178 $580, % Med $193,692 $0 $4,491 $ $548,361 $707, % Low $199,502 $0 $6,511 $ $754,374 $841, % Low $150,000 $0 $8,127 $40, $871,641 $940, % Low $154,500 $0 $9,457 $15, $1,020,523 $1,073, % Low $159,135 $0 $9,909 $227, $962,046 $994, % Low $163,909 $0 $10,488 $ $1,136,443 $1,151, % Low $168,826 $0 $12,265 $ $1,317,534 $1,317, % Low $173,891 $0 $12,196 $380,821 Association Reserves WA, LLC 13 6/9/2015

20 Table 6: 30-Year Income/Expense Detail (yrs 0 through 4) Fiscal Year Starting Reserve Balance $193,325 $257,438 $311,412 $394,004 $482,989 Annual Reserve Contribution $69,060 $73,894 $79,067 $84,601 $90,524 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $2,253 $2,843 $3,526 $4,383 $5,193 Total Income $264,638 $334,175 $394,004 $482,989 $578,706 # Component Site / Grounds 120 Asphalt - Resurface $0 $0 $0 $0 $0 121 Asphalt - Seal/Stripe/Repair $0 $0 $0 $0 $22, Fence: Wood - Repair/Replace $0 $0 $0 $0 $0 141 Fence: Wood - Prep/Stain/Paint $7,200 $0 $0 $0 $0 144 Fence: Chain Link - Replace $0 $0 $0 $0 $0 147 Trash Enclosures - Repair/Replace $0 $0 $0 $0 $0 160 Pole Lights - Replace $0 $12,875 $0 $0 $0 199 Mailboxes - Replace $0 $0 $0 $0 $0 Building Exterior 500 Roof: Steep Slope (17) - Replace $0 $0 $0 $0 $0 501 Roof: Steep Slope (M & K) - Replace $0 $0 $0 $0 $0 502 Roof: Steep Slope (S & V) - Replace $0 $0 $0 $0 $0 510 Gutters/Downspouts - Repair/Replace $0 $0 $0 $0 $0 523 Siding: Wood - Replace $0 $0 $0 $0 $0 534 Exterior Surfaces -Prep/Caulk/Paint $0 $0 $0 $0 $0 537 Windows: Cabana - Repair/Replace $0 $9,888 $0 $0 $0 Total Expenses $7,200 $22,763 $0 $0 $22,623 Ending Reserve Balance: $257,438 $311,412 $394,004 $482,989 $556,083 Association Reserves WA, LLC 14 6/9/2015

21 Table 6: 30-Year Income/Expense Detail (yrs 5 through 9) Fiscal Year Starting Reserve Balance $556,083 $650,627 $634,719 $752,548 $879,362 Annual Reserve Contribution $96,860 $103,640 $110,895 $118,658 $126,964 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $6,031 $6,424 $6,933 $8,156 $8,833 Total Income $658,974 $760,692 $752,548 $879,362 $1,015,159 # Component Site / Grounds 120 Asphalt - Resurface $0 $0 $0 $0 $0 121 Asphalt - Seal/Stripe/Repair $0 $0 $0 $0 $26, Fence: Wood - Repair/Replace $0 $0 $0 $0 $62, Fence: Wood - Prep/Stain/Paint $8,347 $0 $0 $0 $0 144 Fence: Chain Link - Replace $0 $0 $0 $0 $0 147 Trash Enclosures - Repair/Replace $0 $0 $0 $0 $0 160 Pole Lights - Replace $0 $0 $0 $0 $0 199 Mailboxes - Replace $0 $0 $0 $0 $0 Building Exterior 500 Roof: Steep Slope (17) - Replace $0 $0 $0 $0 $0 501 Roof: Steep Slope (M & K) - Replace $0 $0 $0 $0 $0 502 Roof: Steep Slope (S & V) - Replace $0 $0 $0 $0 $38, Gutters/Downspouts - Repair/Replace $0 $0 $0 $0 $0 523 Siding: Wood - Replace $0 $0 $0 $0 $0 534 Exterior Surfaces -Prep/Caulk/Paint $0 $125,973 $0 $0 $0 537 Windows: Cabana - Repair/Replace $0 $0 $0 $0 $0 Total Expenses $8,347 $125,973 $0 $0 $127,215 Ending Reserve Balance: $650,627 $634,719 $752,548 $879,362 $887,943 Association Reserves WA, LLC 15 6/9/2015

22 Table 6: 30-Year Income/Expense Detail (yrs 10 through 14) Fiscal Year Starting Reserve Balance $887,943 $1,023,673 $1,139,250 $1,247,541 $1,409,268 Annual Reserve Contribution $135,851 $139,927 $144,125 $148,449 $152,902 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $9,554 $10,810 $11,929 $13,278 $14,773 Total Income $1,033,349 $1,174,410 $1,295,304 $1,409,268 $1,576,943 # Component Site / Grounds 120 Asphalt - Resurface $0 $0 $0 $0 $0 121 Asphalt - Seal/Stripe/Repair $0 $0 $0 $0 $30, Fence: Wood - Repair/Replace $0 $0 $0 $0 $0 141 Fence: Wood - Prep/Stain/Paint $9,676 $0 $0 $0 $0 144 Fence: Chain Link - Replace $0 $11,074 $0 $0 $0 147 Trash Enclosures - Repair/Replace $0 $14,119 $0 $0 $0 160 Pole Lights - Replace $0 $0 $0 $0 $0 199 Mailboxes - Replace $0 $9,966 $0 $0 $0 Building Exterior 500 Roof: Steep Slope (17) - Replace $0 $0 $0 $0 $0 501 Roof: Steep Slope (M & K) - Replace $0 $0 $47,763 $0 $0 502 Roof: Steep Slope (S & V) - Replace $0 $0 $0 $0 $0 510 Gutters/Downspouts - Repair/Replace $0 $0 $0 $0 $0 523 Siding: Wood - Replace $0 $0 $0 $0 $0 534 Exterior Surfaces -Prep/Caulk/Paint $0 $0 $0 $0 $0 537 Windows: Cabana - Repair/Replace $0 $0 $0 $0 $0 Total Expenses $9,676 $35,160 $47,763 $0 $30,403 Ending Reserve Balance: $1,023,673 $1,139,250 $1,247,541 $1,409,268 $1,546,540 Association Reserves WA, LLC 16 6/9/2015

23 Table 6: 30-Year Income/Expense Detail (yrs 15 through 19) Fiscal Year Starting Reserve Balance $1,546,540 $1,709,083 $1,719,134 $1,510,631 $1,698,764 Annual Reserve Contribution $157,489 $162,214 $167,080 $172,093 $177,255 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $16,271 $17,134 $16,142 $16,040 $17,779 Total Income $1,720,300 $1,888,430 $1,902,356 $1,698,764 $1,893,798 # Component Site / Grounds 120 Asphalt - Resurface $0 $0 $0 $0 $0 121 Asphalt - Seal/Stripe/Repair $0 $0 $0 $0 $35, Fence: Wood - Repair/Replace $0 $0 $0 $0 $0 141 Fence: Wood - Prep/Stain/Paint $11,217 $0 $0 $0 $0 144 Fence: Chain Link - Replace $0 $0 $0 $0 $0 147 Trash Enclosures - Repair/Replace $0 $0 $0 $0 $0 160 Pole Lights - Replace $0 $0 $0 $0 $0 199 Mailboxes - Replace $0 $0 $0 $0 $0 Building Exterior 500 Roof: Steep Slope (17) - Replace $0 $0 $322,305 $0 $0 501 Roof: Steep Slope (M & K) - Replace $0 $0 $0 $0 $0 502 Roof: Steep Slope (S & V) - Replace $0 $0 $0 $0 $0 510 Gutters/Downspouts - Repair/Replace $0 $0 $69,420 $0 $0 523 Siding: Wood - Replace $0 $0 $0 $0 $0 534 Exterior Surfaces -Prep/Caulk/Paint $0 $169,297 $0 $0 $0 537 Windows: Cabana - Repair/Replace $0 $0 $0 $0 $0 Total Expenses $11,217 $169,297 $391,725 $0 $35,245 Ending Reserve Balance: $1,709,083 $1,719,134 $1,510,631 $1,698,764 $1,858,553 Association Reserves WA, LLC 17 6/9/2015

24 Table 6: 30-Year Income/Expense Detail (yrs 20 through 24) Fiscal Year Starting Reserve Balance $1,858,553 $2,047,644 $350,178 $548,361 $754,374 Annual Reserve Contribution $182,573 $188,050 $193,692 $199,502 $150,000 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $19,523 $11,984 $4,491 $6,511 $8,127 Total Income $2,060,648 $2,247,679 $548,361 $754,374 $912,501 # Component Site / Grounds 120 Asphalt - Resurface $0 $0 $0 $0 $0 121 Asphalt - Seal/Stripe/Repair $0 $0 $0 $0 $40, Fence: Wood - Repair/Replace $0 $0 $0 $0 $0 141 Fence: Wood - Prep/Stain/Paint $13,004 $0 $0 $0 $0 144 Fence: Chain Link - Replace $0 $0 $0 $0 $0 147 Trash Enclosures - Repair/Replace $0 $0 $0 $0 $0 160 Pole Lights - Replace $0 $0 $0 $0 $0 199 Mailboxes - Replace $0 $0 $0 $0 $0 Building Exterior 500 Roof: Steep Slope (17) - Replace $0 $0 $0 $0 $0 501 Roof: Steep Slope (M & K) - Replace $0 $0 $0 $0 $0 502 Roof: Steep Slope (S & V) - Replace $0 $0 $0 $0 $0 510 Gutters/Downspouts - Repair/Replace $0 $0 $0 $0 $0 523 Siding: Wood - Replace $0 $1,897,500 $0 $0 $0 534 Exterior Surfaces -Prep/Caulk/Paint $0 $0 $0 $0 $0 537 Windows: Cabana - Repair/Replace $0 $0 $0 $0 $0 Total Expenses $13,004 $1,897,500 $0 $0 $40,859 Ending Reserve Balance: $2,047,644 $350,178 $548,361 $754,374 $871,641 Association Reserves WA, LLC 18 6/9/2015

25 Table 6: 30-Year Income/Expense Detail (yrs 25 through 29) Fiscal Year Starting Reserve Balance $871,641 $1,020,523 $962,046 $1,136,443 $1,317,534 Annual Reserve Contribution $154,500 $159,135 $163,909 $168,826 $173,891 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $9,457 $9,909 $10,488 $12,265 $12,196 Total Income $1,035,598 $1,189,567 $1,136,443 $1,317,534 $1,503,622 # Component Site / Grounds 120 Asphalt - Resurface $0 $0 $0 $0 $220, Asphalt - Seal/Stripe/Repair $0 $0 $0 $0 $47, Fence: Wood - Repair/Replace $0 $0 $0 $0 $113, Fence: Wood - Prep/Stain/Paint $15,075 $0 $0 $0 $0 144 Fence: Chain Link - Replace $0 $0 $0 $0 $0 147 Trash Enclosures - Repair/Replace $0 $0 $0 $0 $0 160 Pole Lights - Replace $0 $0 $0 $0 $0 199 Mailboxes - Replace $0 $0 $0 $0 $0 Building Exterior 500 Roof: Steep Slope (17) - Replace $0 $0 $0 $0 $0 501 Roof: Steep Slope (M & K) - Replace $0 $0 $0 $0 $0 502 Roof: Steep Slope (S & V) - Replace $0 $0 $0 $0 $0 510 Gutters/Downspouts - Repair/Replace $0 $0 $0 $0 $0 523 Siding: Wood - Replace $0 $0 $0 $0 $0 534 Exterior Surfaces -Prep/Caulk/Paint $0 $227,520 $0 $0 $0 537 Windows: Cabana - Repair/Replace $0 $0 $0 $0 $0 Total Expenses $15,075 $227,520 $0 $0 $380,821 Ending Reserve Balance: $1,020,523 $962,046 $1,136,443 $1,317,534 $1,122,801 Association Reserves WA, LLC 19 6/9/2015

26 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 employees 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 6/9/2015

27 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 WA, LLC 21 6/9/2015

28 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 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 6/9/2015

29 Client: 17941A Canyon Park Townhomes Comp # : 100 Concrete - Repair/Replace Location : Sidewalks, patios, walkways, curbs, etc Funded? : No Useful life is not predictable History : 2012 $8,000 verify Quantity: Extensive square feet Evaluation : Concrete appeared in fair condition with some local areas of deterioration at this time. One trip hazard was observed at the front of the cabana. Component Association Details Reserves W Due to general age and anticipated ongoing wear, we suggest a rotating funding allowance to supplement the operating budget for periodic larger scale repair/replacements as reflected below. Time larger repairs to coincide with Asphalt Seal/Repair (Component #121) and curb painting for cost efficiency when possible. As routine maintenance utilizing operating funds, inspect regularly and pressure wash for appearance. Repair promptly as needed to prevent water penetrating into the base, which can cause further damage. Factors affecting the quality of the concrete include; the preparation of the underlying soil and drainage, thickness and strength of concrete used, steel reinforcement (none likely), and amount and weight of traffic, if any. Additional resource 5 years 4 years Best Case: $3,000 Worst Case: $5,000 Lower allowance Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History June 09,2015 Page 1 of 27

30 Client: 17941A Canyon Park Townhomes Comp # : 120 Asphalt - Resurface Location : Roadway and parking areas of association Funded? : Yes History : Assumed for 2015 $113, spot repairs/overlay Quantity: ~ 67,000 square feet Component Association Details Reserves W Evaluation : Asphalt generally appeared in poor condition, with extensive alligator cracking observed during our limited visual review. Canyon Park reports they have bids for resurfacing in the summer of Useful life below assumes regular seal coating and repairs (see component #121). The lack of seal coating and repairs can greatly decrease the asphalt s useful life. Resurfacing is typically one of the larger expense items in a reserve study. When need to resurface is apparent within a couple of years, consult with geotechnical engineer for recommendations, specifications / scope of work and project oversight. As routine maintenance, keep surfaces clean and free of debris, ensure that drains are free flowing, repair cracks, and clean oil stains promptly.. Further resources below: Pavement Surface Condition Field Rating Manual for Asphalt Pavement. Washington Asphalt Pavement Association 30 years 29 years Best Case: $87,000 Worst Case: $100,000 $1.30/Sq Ft, lower allowance $1.50/Sq Ft, higher allowance Cost Source: Client Cost History (not incl seal coating) June 09,2015 Page 2 of 27

31 Client: 17941A Canyon Park Townhomes Comp # : 121 Asphalt - Seal/Stripe/Repair Location : Roadway and parking areas of association Funded? : Yes History : Assumed for , 2003 Quantity: ~ 67,000 square feet Component Association Details Reserves W Evaluation : Generally, the surface condition of the asphalt coating appeared to be in poor condition during our visual review. Canyon Park reports they have bids for seal coating in the summer of 2015 after new overlay / resurface. Regular cycles of seal coating, along with needed repairs is a best practice for the long term care of lower traffic asphalt areas. We recommend regular asphalt seal coating cycles with repair as needed to extend the useful life of the asphalt. The State of Washington Department of Transportation (WSDOT) recommends regular cycles of seal coating for the long-term care of asphalt paving with low traffic and low speed. The primary reason to seal coat asphalt pavement is to protect the pavement from the deteriorating effects of sun and water. When asphalt pavement is exposed, the asphalt oxidizes or hardens and this causes the pavement to become increasingly brittle. As a result, the pavement will become more likely to crack, as it is unable to bend and flex when subjected to traffic (weight) and temperature changes (thermal expansion and contraction). A seal coat combats this situation by providing a waterproof membrane, which not only slows down the oxidation process, but also helps the pavement shed water. Seal coating also provides uniform appearance and conceals the inevitable patching and repairs which accumulate over time, ultimately extending the useful life of asphalt before more costly resurfacing is needed (see component # 120). Repairing asphalt before seal coating is imperative. Surface preparation and dry weather during and following application, is key to lasting performance. The ideal conditions are when the air and surface temperatures are 50 degrees and rising, with low humidity and calm wind. Seal coating should never be done when showers are threatening. Apply a Catatonic Slow Seal (CSS-1 or CSS-1h) diluted up to 50/50 with water. Application rates usually ranges from 0.10 to 0.15 gallons per square yard and is dependent on pavement texture, local conditions and traffic. Incorporate any striping and curb repair into this project. Fill cracks and clean oil stains promptly in between cycles as routine maintenance. For further resources: Best Practices Handbook on Asphalt Pavement Maintenance For a general overview of Asphalt Seal Coat Treatments review this publication: Other references: 5 years 4 years Best Case: $16,800 Worst Case: $23,400 $0.25/Sq Ft, lower allowance $0.35/Sq Ft, higher allowance Cost Source: Client Cost History June 09,2015 Page 3 of 27

32 Client: 17941A Canyon Park Townhomes Comp # : 140 Fence: Wood - Repair/Replace Location : Partial perimeter of project Funded? : Yes History : 2005 Quantity: ~ 2,000 linear feet Component Association Details Reserves W Evaluation : Six foot tall wood fence appeared in generally fair condition with aging apparent. No extensive decay or damage was observed in the small sample observed during our limited visual review. Plan to replace at roughly the time frame below. Typical failures from deterioration through end grains, contact with ground and surrounding landscape. As routine maintenance, inspect regularly for any damage and repair as needed. Avoid unnecessary contact with ground, sprinkler patterns and surrounding vegetation. Regular cycles of stain/paint will help to maintain appearance. Painting or staining the fence has a higher overall life cycle cost but may extend life somewhat in addition to aesthetic benefit. 20 years 9 years Best Case: $42,000 Worst Case: $54,000 $21/Lin Ft, lower allowance $27/Lin Ft, higher allowance Cost Source: ARI Cost Database: Similar Project Cost History June 09,2015 Page 4 of 27

33 Client: 17941A Canyon Park Townhomes Comp # : 141 Fence: Wood - Prep/Stain/Paint Location : Partial perimeter of project Funded? : Yes History : Quantity: ~ 12,000 square feet Component Association Details Reserves W Evaluation : The finish on the wood fence appeared in generally fair condition. No recent history of painting/staining wood fence was reported. Regular sealer applications are recommended for the appearance, protection, and maximum useful life of the wood. Actual timing of staining will vary based on exposure and quality of material and application. In our experience, quality solid-bodied stain typically produces best result. Remove any unnecessary contact with ground and surrounding landscape and sprinkler patterns. Repair as needed and clean prior to sealer application. If the wood is cedar, the Western Red Cedar Lumber Association (WRCLA) has additional information available on their website at 5 years 0 years Best Case: $6,000 Worst Case: $8,400 $0.50/Sq Ft, lower allowance $0.70/Sq Ft, higher allowance Cost Source: ARI Cost Database: Similar Project Cost History June 09,2015 Page 5 of 27

34 Client: 17941A Canyon Park Townhomes Comp # : 144 Fence: Chain Link - Replace Quantity: ~ 400 linear feet Location : Surrounding retention pond and partial west perimeter of property Funded? : Yes History : Component Association Details Reserves W Evaluation : Chain link fence appeared in generally fair to poor condition with extensive corrosion on the cross bars observed on the small areas sampled during our limited visual review. For financial planning purposes, plan on replacing at roughly the time frame shown below. Evaluate fence as remaining useful life approaches zero years and adjust life accordingly. Chain link fencing is generally a low maintenance item. Inspect periodically and repair as needed. If corrosion is observed, apply rust inhibitor to prevent corrosion from decreasing the useful life. 40 years 11 years Best Case: $6,000 Worst Case: $10,000 $15/Lin Ft, lower allowance $25/Lin Ft, higher allowance Cost Source: ARI Cost Database: Similar Project Cost History June 09,2015 Page 6 of 27

35 Client: 17941A Canyon Park Townhomes Comp # : 147 Trash Enclosures - Repair/Replace Location : At end of driveways Funded? : Yes History : Evaluation : Garbage enclosures appeared in fair condition. Quantity: (3) wood/chain link Component Association Details Reserves W A general rotating funding allowance is factored below; track actual expenses for basis within reserve study updates. These garbage enclosures are subject to abuse. It is reasonable to expect repairs at relatively small intervals due to misuse, although it is difficult to predict precise scope and timing of repairs. We suggest at next replacement, to consider a more durable enclosure material such as steel posts and rails. By utilizing such materials, the enclosure can better withstand regular abuse, reduce repair costs, and increase useful life. A less expensive option is to install concrete wheel stops (typically used at the front of parking spaces) to prevent the container from impacting the enclosure. 20 years 11 years Best Case: $8,400 Worst Case: $12,000 $2,800 each, lower allowance $4,000 each, higher allowance Cost Source: ARI Cost Database: Similar Project Cost History June 09,2015 Page 7 of 27

36 Client: 17941A Canyon Park Townhomes Comp # : 156 Rockeries - Repair/Replace Location : Scattered common area locations Funded? : No Useful life is not predictable History : Quantity: Extensive linear feet Component Association Details Reserves W Evaluation : Our visual observations of rockery walls were limited, but no widespread deterioration was observed. There were no obvious signs of recent large scale movement and none were reported. Analysis of a rockery wall, beyond visual observation, is not within the scope of a reserve study. No information regarding its construction was available to us, which could include how it was installed, including if drainage (critical) was provided, and if the drainage is still fully functioning. At this time, no large-scale repairs or replacements are predictable. Funding can be added to future reserve studies if conditions dictate. Inspect regularly including drainage, and repair as needed. If movement or other problems are suspected, consult with an engineer (geo-technical) for evaluation and repair recommendations for walls 4' and higher. Best Case: Cost Source: Worst Case: June 09,2015 Page 8 of 27

37 Client: 17941A Canyon Park Townhomes Comp # : 160 Pole Lights - Replace Location : Adjacent to parking/driveway areas Funded? : Yes History : Quantity: (10) metal Component Association Details Reserves W Evaluation : Pole lights appeared in fair condition with no obvious damage or other problems noted. Observed during daylight hours; lights are assumed to be in functional operating condition. Our recommendation is to plan for a large scale replacement at roughly the time frame below, for both cost efficiency and consistent quality/appearance throughout association. There are a variety of materials and styles available and a general mid-range funding allowance is projected below. Cost can vary significantly depend on the quality of the light pole chosen. As routine maintenance, inspect, repair, and change bulbs as needed. 30 years 1 years Best Case: $10,000 Worst Case: $15,000 $1,000 each, lower allowance $1,500 each, higher allowance Cost Source: ARI Cost Database: Similar Project Cost History June 09,2015 Page 9 of 27

38 Client: 17941A Canyon Park Townhomes Comp # : 170 Landscape - Refurbish Location : Common areas Funded? : No Annual cost best handled within operation budget History : Evaluation : Extensive landscape area. Quantity: Extensive square feet Component Association Details Reserves W Currently, landscaping is funded out of operational budget. The Association did not request an allowance be included for future refurbish projects. This component can be used to supplement the operation landscape budget for larger projects that occur less frequently and are not included within the maintenance contract. These types of projects can include: tree trimming, major replanting, bark or mulch replacements, turf renovations, etc... Walk area each year with landscape contractor and perhaps landscape architect to assess overall health, function and future needs of maintenance and refurbish to determine if supplemental reserve funding should be planned for. Best Case: Cost Source: Worst Case: June 09,2015 Page 10 of 27

39 Client: 17941A Canyon Park Townhomes Comp # : 182 Drainage System - Repair/Replace Location : Throughout community Funded? : No Useful life is not predictable History : Quantity: Extensive system Component Association Details Reserves W Evaluation : Analysis of the drainage system is beyond the scope of a reserve study as the vast majority of the drainage systems are located below ground. Observations were very limited to catch basin areas. No current problems were reported to us. Canyon Park reported some flooding problems in 2011, and that repairs were undertaken to decrease the likelihood of future flooding. No predictable large-scale repairs/replacement at this time. Local repairs should be performed as part of general maintenance. If problems become known from professional evaluation, funding can be included in future reserve studies. As routine maintenance, inspect regularly and keep drains/grates free of debris to ensure water drains as intended. Maintenance schedules on storm water systems depend on the condition of the system itself and the amount of sediment and debris moving around on site. Storm water inspections usually consist of inspecting the catch basins and manholes, ensuring vaults and control structures are properly functioning. Evaluation of drainage can include the visual review of interior drain lines by use of miniature remote camera. Clean out drain lines and basins as often as needed in order to prevent decreased drainage capacity. Repair as needed. The responsibility of keeping the storm water system in good working order falls on the association/owner. Best Case: Cost Source: Worst Case: June 09,2015 Page 11 of 27

40 Association Reserves Washington, LLC 17941A Client: 17941A Canyon Park Townhomes Comp # : 185 Retention Pond - Maintain/Repair Location : Central common area between buildings D & J. Funded? : No Useful life is not predictable Component Details Quantity: Extensive square feet History : Evaluation : Storm water detention pond appeared in fair condition during our limited visual review with no excess vegetation; ongoing maintenance assumed. The state Department of Ecology and local (i.e. county or city) stormwater resources have standards for maintaining and eventually reconstructing the pond to original design parameters. Sediment must be removed when the floor depth has reached 10% of original design. Timing is difficult to predict, but in our experience, it may be in the 10 to 15 year range. Regular maintenance and inspection are keys to extending useful life. Have pond periodically assessed by professional engineer. Best Case: Worst Case: Cost Source: Comp # : 197 Entry Sign - Replace Location : Entry location Funded? : No Board treats sign as an operational expense Quantity: (1) wood, carved, painted History : Evaluation : Main sign appeared in good condition. Inspect periodically, repair, clean, and touch up for appearance as needed using general maintenance funds. Best Case: Worst Case: Cost Source: June 09,2015 Page 12 of 27

41 Association Reserves Washington, LLC 17941A Client: 17941A Canyon Park Townhomes Component Details Quantity: ~ (90) boxes Comp # : 199 Mailboxes - Replace Location : Central common area Funded? : Yes History : Evaluation : Mailboxes appeared in fair condition. Mailboxes are protected from the rain by a kiosk structure. In our experience, it is best to plan for total replacement at roughly the time frame below due to constant usage and wear over time. As routine maintenance, inspect regularly, clean by wiping down for appearance, change lock cylinders, lubricate hinges, and repair as needed from operating budget. Note: USPS has a limited budget for replacement and should not be relied upon for purposes of long term financial planning. 40 years 11 years Best Case: $6,300 Worst Case: $8,100 $70/box, lower allowance $90/box, higher allowance Cost Source: ARI Cost Database: Similar Project Cost History Quantity: ~ 1,350 gross square ft Comp # : 448 Cabana Interiors - Refurbish/Update Location : Cabana Interiors Funded? : No Board projects costs to be too small for reserve funding History : 2004 Evaluation : No access was provided to the cabana interior. Board reports limited use and they project costs are too small for reserve funding. Best Case: Worst Case: Cost Source: June 09,2015 Page 13 of 27

42 Association Reserves Washington, LLC 17941A Client: 17941A Canyon Park Townhomes Component Details Quantity: ~ 50,000 square feet Comp # : 500 Roof: Steep Slope (17) - Replace Location : Rooftop of buildings A-J, L, N-U, and Cabana (excludes bldg M & K) Funded? : Yes History : 2008 Evaluation : Roof shingles are laminated composition shingle with an open valley. Ventilation (the lack of which can greatly reduce the roof s useful life) was observed at eave and ridge. Eave venting consisted of three circular holes in every other rafter blocking. Ridge venting appeared to be provided by gable end louvers and/or roof jacks. Visible portions of roof flashing were observed at the rake, headwall, and sidewall conditions. Gutters blocked the view of eaves, so eave flashing was not confirmed. Debris and moss was observed on the roof surface. A reserve study conducts only a limited visual review, and many of the critical waterproofing and ventilation items of the roof are not readily viewable. For a full evaluation have a professional roof consultant/contractor perform a thorough up-close survey of your entire roof system, including attic inspection (if any). Costs below factors replacement with an architectural grade laminated shingle. 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 any other repair needed to ensure waterproof integrity of roof. Keep roof surface, gutters, and downspouts clear and free of moss or debris. Moss growth can decrease the life of the roofing shingles and should be removed sooner than later. Cleaning moss off of a roof with high-pressure water can damage the roof and greatly decrease its life. Many roofing consultants only allow air cleaning in order to prevent damage caused by water pressure washing. Another option is liquid applied fungicide (moss killer), which can be used instead of power washing the moss off the shingles. Moss roots grow into the shingles. Killing the moss with a fungicide allows the roots to gradually release from the shingles. After roots have died and released, then the moss can be removed (with broom or very low pressure water) with care not to damage the shingles. Never use high-pressure water to remove moss as the high-pressure can loosen granular surface of shingles and erode the shingle surface, which greatly reduces the remaining useful life. The National Roofing Contractors Association (NRCA) has additional information available on their web site At the time of re-roofing, we recommend that you hire a professional consultant to evaluate the existing roof and specify the new roof materials/design, provide installation oversight. We recommend that all Associations hire qualified consultants whenever they are considering having work performed on any building envelope (waterproofing) components including; roof, walls, windows, decks, exterior painting, and caulking/sealant. Other resources: NRCA discuss maintenance and warranties here: NRCA discusses warranties here: NRCA discusses getting your money s worth when buying a new roof NRCA discusses selecting a contractor here NRCA Frequently Asked Questions (FAQ): Here is a brochure on the lifecycle of roofing by Certainteed, who manufactures roof shingles: There is a wealth of information available through Roofing Organizations such as: National Roofing Contractors Association (NRCA) Asphalt Roofing Manufacturers Association (ARMA) Roof Consultant Institute (RCI) Western States Roofing Contractors Association (WSRCA) June 09,2015 Page 14 of 27

43 Association Reserves Washington, LLC 17941A Client: 17941A Canyon Park Townhomes Component Details 25 years 17 years Best Case: $170,000 Worst Case: $220,000 $4.00/Sq Ft, lower allowance $5.50/Sq Ft, higher allowance Cost Source: Client Cost History, inflated Comp # : 501 Roof: Steep Slope (M & K) - Replace Location : Rooftop of buildings M and K Funded? : Yes Quantity: ~ 7,000 square feet History : 2003 Evaluation : This component reflects buildings with roofs that were reported replaced in Waviness in the roof surface of building M was noted during our limited visual review. For typical notes, see component # years 12 years Best Case: $28,000 Worst Case: $39,000 $4.00/Sq Ft, lower allowance $5.50/Sq Ft, higher allowance Cost Source: ARI Cost Database: Similar Project Cost History June 09,2015 Page 15 of 27

44 Association Reserves Washington, LLC 17941A Client: 17941A Canyon Park Townhomes Comp # : 502 Roof: Steep Slope (S & V) - Replace Location : Rooftop of buildings S and V Funded? : Yes Component Details Quantity: ~ 6,200 square feet History : 2000 Evaluation : This component reflects buildings with roofs that were reported replaced in For typical notes, see component # years 9 years Best Case: $24,800 Worst Case: $34,000 $4.00/Sq Ft, lower allowance $5.50/Sq Ft, higher allowance Cost Source: ARI Cost Database: Similar Project Cost History Comp # : 510 Gutters/Downspouts - Repair/Replace Location : Perimeter of roofs Funded? : Yes Quantity: ~ 7,000 linear feet History : 2008 Evaluation : Based on our limited visual review, metal gutters and downspouts appeared in fair condition. We suggest planning for a total replacement of gutter and downspouts at the same intervals as roof replacement for cost efficiency. Evaluate at time of project to determine if replacement or re-use is the better value. As routine maintenance, inspect regularly and keep gutters and downspouts free of debris. 25 years 17 years Best Case: $35,000 Worst Case: $49,000 $5.00/Lin Ft, Lower allowance $7.00/Lin Ft, Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History June 09,2015 Page 16 of 27

45 Association Reserves Washington, LLC 17941A Client: 17941A Canyon Park Townhomes Component Details Quantity: (82)caps (44)cover/shroud Comp # : 515 Chimney Caps/Covers Replace Location : Chimney Chases Funded? : No Costs are reported handled as part of general maintenance History : Evaluation : Observation of top of chimney was very limited to viewing from distance. Metal chimney shrouds appeared in fair condition with no corrosion. Chimney covers and flue caps were difficult to observe. Board requested to handle this component as a general maintenance item. No reserve funding requested. As routine maintenance, inspect and clean during roof maintenance. Repair locally as needed. Best Case: Worst Case: Cost Source: June 09,2015 Page 17 of 27

46 Association Reserves Washington, LLC 17941A Client: 17941A Canyon Park Townhomes Comp # : 523 Siding: Wood - Replace Location : Exterior walls Funded? : Yes Component Details Quantity: ~ 85,000 gross square ft History : Evaluation : Siding is horizontal clapboard with some installed at an diagonal. Siding has a four and a half inch exposure. Surface was painted. No view of the critical underlying waterproofing was available as part of our limited visual review. Replacement may be needed due to the failure of the underlying waterproofing degrading over the decades, and/or the end of the useful life of the siding materials from general aging. Evaluate the siding and the critical underlying waterproofing (typically building paper or house wrap) more frequently as the remaining useful life approaches zero years. Adjust remaining useful life as dictated by the evaluation. Align with window replacement for cost efficiencies. Inspect and repair as needed using operation and maintenance funds. Keep wood siding painted to protect the wood from decay caused by water, see component # 533. Many factors influence the useful life, including exposure to (or protection from) wind driven rain and quality of the waterproofing and flashing beneath the siding. Almost all waterproofing systems will degrade over time (decades) as it ages. Another item that greatly influences useful life is the thoroughness of the original painting. Wood siding will last longer if each piece was painted on all six sides. Typically, wood siding is painted on the two sides that are exposed and not on the back, ends, or top. Since we perform only a visual review, we were unable to confirm the extents of the painting. It is reasonable to presume that not all six sides are painted. If the siding is not painted on all sides, water can infiltrate and be absorbed into the wood on the unpainted sides, which over time will lead to cupping, warping and decay, limiting its useful life. 50 years 21 years Best Case: $850,000 $10/Sq Ft lower allowance Worst Case: $1,190,000 $14/Sq Ft, higher allowance Cost Source: ARI Cost Database: Similar Project Cost History June 09,2015 Page 18 of 27

47 Association Reserves Washington, LLC 17941A Client: 17941A Canyon Park Townhomes Comp # : 534 Exterior Surfaces -Prep/Caulk/Paint Location : Exterior surfaces Funded? : Yes Component Details Quantity: ~85,000 GSF History : 2012/11, 1995 Evaluation : The painted surface of the siding and trim appeared in generally good to fair condition with no peeling or blistering observed. As routine maintenance, inspect regularly (including sealants) repair locally, and touch-up paint as needed. Typical Northwest paint cycles vary greatly depending upon many factors including type of material painted, surface preparation, quality of primer/paint/stain, application methods, weather conditions during application, moisture beneath paint, and exposure to weather conditions. Repair areas as needed prior to painting/caulking. Proper sealant/caulking is critical to keeping water out of the walls and preventing water damage. Incorrect installations of sealant are very common and can greatly decrease its useful life. Inspect sealant (more frequently as it ages) to determine if it is failing. Typical sealant problems include failure of sealant to adhere to adjacent materials and tearing/splitting of the sealant itself. As sealants age and due to exposure to ultra-violet sunlight, they will dry out, harden, and lose their elastic ability. Remove and replace all sealant at the time sealant failure begins to appear. Proper cleaning, prep work, and installation technique (shape, size, tooling of joint) are critical for a long lasting sealant/caulking. Do not install sealant in locations that would block water drainage from behind the siding (e.g. at head flashings). Additional information on painting is available through: American Coatings Association at Master Paint Institute at Paint Quality Institute at 10 years 6 years Best Case: $91,000 Lower allowance Worst Case: $120,000 Higher allowance Cost Source: Prior estimate Provided by Client, inflated June 09,2015 Page 19 of 27

48 Association Reserves Washington, LLC 17941A Client: 17941A Canyon Park Townhomes Component Details Quantity: ~(520) metal frames Comp # : 535 Windows & Sliding Doors - Replace Location : Exterior walls Funded? : No Board reports the component is not the Association s responsibility History : Evaluation : Metal framed windows consisted of mostly horizontal sliders and fixed operation. Head flashing was installed inconsistently. The pattern of head flashing installed/not installed appeared to not be installed if the window is 'protected' from the rain by either the roof overhang or recessed entry Windows typically had wood trim at all four sides. Weep holes at exterior lower corners were observed to be clear in the few windows sampled for our study. No observation of the critical underlying waterproofing details and flashing was part of our limited visual review. The underlying details and flashing are critical to maintaining the waterproofing of the building envelope and preventing structural damage as a result of water infiltration. Board reports the windows are not the association's responsibility. Article 6.2 appears to indicate windows are common elements, and therefore are association responsibility. We highly recommend you have this issue resolved by your attorney. If no action is taken by the time of our next reserve study we will include reserve funding for window replacement. Even if windows are determined to be individual owner s responsibility, we suggest it is in the Associations best interests to control the quality of windows installed as well as the installation, waterproofing requirements. Boards are typically charged with setting the standard of care for the association. At minimum, we strongly recommend the board develop an architectural control process that includes standard specifications for window quality (design pressure rating), window frame type (acceptable manufacturer(s) and model numbers), and waterproofing and/or flashing, other installation details. This should include integrating the new window and flashing with the existing waterproof system. Architectural control specifications should increase the likelihood of consistent quality installation and lessen the chance of poor materials and/or installation leading to water infiltration and causing water damage to the common structural wood framing and ancillary components. Water damage of structural wood framing is usually the Association s responsibility and typically very expensive to remedy. Many factors effect useful life, including quality of window (design pressure rating), waterproofing and flashing details, building movement and exposure to the elements including wind driven rain. Those same variables, along with glazing and frame materials can also greatly affect the appropriate choice, replacement costs. You can learn more about window design here: Best Case: Worst Case: Cost Source: June 09,2015 Page 20 of 27

49 Association Reserves Washington, LLC 17941A Client: 17941A Canyon Park Townhomes Comp # : 537 Windows: Cabana - Repair/Replace Location : Exterior walls of cabana building Funded? : Yes Component Details Quantity: ~ (12) assorted History : Evaluation : This component is specifically for windows at the common area cabana building; windows at individual units are in previous component (#535). Mostly horizontal sliders and fixed operation. Head flashing was not observed. Windows had wood trim on all four sides. Weep holes at exterior lower corners were observed to be clear in the few windows sampled for our study. No observation of the critical underlying waterproofing details and flashing was part of our limited visual review. The underlying details and flashing are critical to maintaining the waterproofing of the building envelope and preventing structural damage as a result of water infiltration. Many factors effect useful life, including quality of window (design pressure rating), waterproofing and flashing details, building movement and exposure to the elements including wind driven rain. Those same variables, along with glazing and frame materials can also greatly affect the appropriate choice, replacement costs. You can learn more about window design here: Inspect regularly, including sealant, if any, and repair as needed. Typical sealant failures include a lack of adhesion to adjacent materials, tearing/splitting of the sealant itself, and lose of elastic ability. Loss of elastic ability can be caused by exposure to ultra-violet light and general aging. Remove and replace all sealants as signs of failure begin to appear. Proper cleaning, prep work, and installation of specified joint design are critical for lasting performance. Keep weep holes free and clear to allow proper drainage of water that gets into window frame. Do not block (caulk or seal) gap at top of head flashing, as this allows water that gets behind the siding, to drain out. We recommend the Board conduct research well in advance of this project to help better define timing and costs (scope of work, material specifications, etc.). Further, we recommend that you hire a professional consultant (Architect, Engineer, building envelope consultant) to evaluate the existing windows, design and specify new installation requirements, assist with bid process and observe construction to increase the likelihood of proper installation. We recommend all Associations hire qualified consultants whenever they are considering having work performed on any high-risk building envelope components (roof, walls, windows, decks, exterior painting and caulking/sealant). 30 years 1 years Best Case: $7,200 Worst Case: $12,000 $600 each, Lower allowance $1,000 each, Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History June 09,2015 Page 21 of 27

50 Association Reserves Washington, LLC 17941A Client: 17941A Canyon Park Townhomes Comp # : 568 Doors: Unit Entry - Repair/Replace Location : Exterior walls Funded? : No Useful life is not predictable Component Details Quantity: (81) metal doors History : Evaluation : Exterior doors are six panel metal with wood frames. Doors appeared in fair condition. No wide spread problems were observed. Doors are typically recessed and protected by entry roof. No predictable large-scale repair or replacement of doors. Individual unit doors are expected to receive limited use (wear and tear). Door painting is included as part component #533. Inspect periodically and repair as needed to maintain appearance, security and operation with maintenance funds. Touch up paint as needed between painting cycles. Best Case: Worst Case: Cost Source: Quantity: (81) wood doors Comp # : 569 Doors: Utility - Replace Location : Storage room doors Funded? : No Useful life is not predictable History : Evaluation : Storage doors are flush with a painted finish. No predictable large scale replacement at this time. Paint as part of component #533 Exterior Painting. Best Case: Worst Case: Cost Source: June 09,2015 Page 22 of 27

51 Association Reserves Washington, LLC 17941A Client: 17941A Canyon Park Townhomes Component Details Quantity: ~ (160) assorted Comp # : 572 Lights: Exterior - Replace Location : Exterior common area locations Funded? : No Costs are projected to be too small for reserve funding History : Evaluation : Light fixtures appeared in fair condition. Lights were observed during daylight hours so operation was not confirmed. Board reports they replace fixtures individually, as needed, using general maintenance funds. Cost of fixtures was reported to be less than $50 and labor was provided by handy man. Best Case: Worst Case: Cost Source: June 09,2015 Page 23 of 27

52 Association Reserves Washington, LLC 17941A Client: 17941A Canyon Park Townhomes Comp # : 599 Building Envelope - Inspection Location : Common elements throughout association Funded? : No Annual cost best handled within operation budget Component Details Quantity: Every year History : Evaluation : Multi-family buildings in the Puget Sound area, constructed between 1985 and 2005, have relatively high occurrence of needing repairs due to water infiltration. Types of building materials prevalent in this era along with code requirements and construction quality have likely been contributing factors. Many Associations are required by their declarations to have annual inspections by a qualified Architect or Engineer to assess the physical condition of the building envelope enclosure. The building envelope inspection typically covers the roofs, decks, siding, windows, doors, sealants/caulking, and flashings. Although your Association s governing documents do not appear to have such a requirement, we strongly recommend the Board provide for periodic building envelope inspections funded from the operating budget, to ensure weatherproofing and structural integrity are maintained. Two of the factors that can generally affect the potential for water infiltration are exposure to wind driven rains and the height of the building. Winds tend to be typically from the South and West, but can be site specific. Protection from wind can be in the form of large roof overhangs or decks. Taller buildings are generally exposed to higher wind at the upper levels. Provide more frequent inspection as the buildings age and the waterproofing typically deteriorates. Building envelope inspections can be either visual or intrusive. An intrusive investigation (where finish materials are removed to view and better understand the underlying waterproofing systems and their performance) should be of greater benefit, since a visual review provides only a limited amount of information derived from surface observation. Best Case: Worst Case: Cost Source: June 09,2015 Page 24 of 27

53 Association Reserves Washington, LLC 17941A Client: 17941A Canyon Park Townhomes Component Details Quantity: Extensive systems Comp # : 900 Plumbing - Repair/Replace Location : Throughout association Funded? : No Useful life is not predictable History : Evaluation : Periodic plumbing issues reported in the past but no ongoing/repetitive issues that would suggest predictable, large scale reserve project. The vast majority of the plumbing system is hidden and not visible for review. A reserve study conducts only a limited visual review. No testing was conducted and no problems were observed or reported. Typically, if installed per architectural specifications and local building codes without defect, there is no predictable time frame for large-scale repair/replacement expenses within the scope of our report. Current Washington state reserve study law requires plumbing to be considered in the reserve study. Patterns of significant repair expenses, leaks, poor flow, sediments in line should be evaluated promptly by qualified plumber and / or engineer. Some types of piping used historically are known to be life limited. Manufacturing defects become apparent from time to time and certain site conditions (e.g. galvanic corrosion, certain minerals in contact with piping, chemical reactions, etc ) can contribute to premature deterioration of plumbing system. We highly recommend you have a qualified plumber or consultant provide an evaluation of your system to assess condition, material types and note any deficiencies. Treat minor repairs as ongoing maintenance expense. Best Case: Worst Case: Cost Source: June 09,2015 Page 25 of 27

54 Association Reserves Washington, LLC 17941A Client: 17941A Canyon Park Townhomes Component Details Quantity: Extensive systems Comp # : 905 Electrical - Maintain/Repair Location : Throughout association Funded? : No Useful life is not predictable History : Evaluation : Our Board had previously reported some replacement of main feeds to buildings. The majority of the electrical system was not visible for review. Analysis of the electrical system beyond a limited visual review is not within the scope of a reserve study. No large issues or problems/defects were reported. Typically, 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 review. Some electrical system components are known to be life limited. Manufacturing defects become known from time to time and certain site conditions can contribute to premature deterioration of electrical components. Periodic inspections and maintenance by a master electrician may become necessary. Some associations employ infrared or other testing methodologies to identify potential trouble spots. A good resource book available for purchase is NFPA 70B Recommended Practices for Electrical Equipment Maintenance. 70B13&src%5Fpid=&link%5Ftype=search&icid=&Page=1 Best Case: Worst Case: Cost Source: June 09,2015 Page 26 of 27