Revised FULL RESERVE STUDY. Falcon Ridge at Highland Creek Homeowners Association, Inc.

Transcription

1 Revised FULL RESERVE STUDY Falcon Ridge at Highland Creek Homeowners Association, Inc. Charlotte, North Carolina Inspected - February 20, 2018 Revised - August 6, 2018 This Report contains intellectual property developed by Reserve Advisors Engineering, PLLC and cannot be reproduced or distributed to those who conduct reserve studies without their written consent. Reserve Advisors Engineering, PLLC (P-1327) 2018

2 Reserve Advisors Engineering, PLLC 735 N. Water Street, Suite 175 Milwaukee, WI Falcon Ridge at Highland Creek Homeowners Association, Inc. Charlotte, North Carolina Dear Board of Directors of Falcon Ridge at Highland Creek Homeowners Association, Inc.: At the direction of the Board that recognizes the need for proper reserve planning, we have conducted a Full Reserve Study of Falcon Ridge at Highland Creek Homeowners Association, Inc. in Charlotte, North Carolina and submit our findings in this report. The effective date of this study is the date of our visual, noninvasive inspection, February 20, This Full Reserve Study exceeds the Association of Professional Reserve Analysts (APRA) standards fulfilling the requirements of a Level I Full Reserve Study. An ongoing review by the Board and an Update of this Reserve Study are necessary to ensure an equitable funding plan since a Reserve Study is a snapshot in time. We recommend the Board budget for an Update to this Reserve Study in two years. We look forward to continuing to help Falcon Ridge at Highland Creek Homeowners Association, Inc. plan for a successful future. As part of our long-term thinking and everyday commitment to our clients, we are available to answer any questions you may have regarding this study. Respectfully submitted on August 6, 2018 by Reserve Advisors Engineering, PLLC (P-1327) Visual Inspection and Report by: Colin Niemeyer Alan M. Ebert, P.E. (NC ) PRA 1, RS 2, Director of Quality Assurance PRA (Professional Reserve Analyst) is the professional designation of the Association of Professional Reserve Analysts. Learn more about APRA at 2 RS (Reserve Specialist) is the reserve provider professional designation of the Community Associations Institute (CAI) representing America's more than 300,000 condominium, cooperative and homeowners associations.

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4 Table of Contents 1. RESERVE STUDY EXECUTIVE SUMMARY RESERVE STUDY REPORT RESERVE EXPENDITURES and FUNDING PLAN RESERVE COMPONENT DETAIL Property Site Elements Asphalt Pavement, Repaving Concrete Curbs and Gutters Landscape Light Poles and Fixtures Pergolas, Wood Site Furniture Stream, Erosion Control Tennis Courts, Color Coat Tennis Courts, Fence Tennis Courts, Light Poles and Fixtures Tennis Courts, Surface Clubhouse Elements Air Handling and Condensing Units, Split Systems Interior Renovations Kitchen, Renovation Rest Rooms, Renovation Roof, Asphalt Shingles Security System Walls, Vinyl Siding Windows and Doors Reserve Study Update METHODOLOGY CREDENTIALS DEFINITIONS PROFESSIONAL SERVICE CONDITIONS...8.1

5 1. RESERVE STUDY EXECUTIVE SUMMARY Client: Falcon Ridge at Highland Creek Homeowners Association, Inc. (Falcon Ridge) Location: Charlotte, North Carolina Reference: Property Basics: Falcon Ridge at Highland Creek Homeowners Association, Inc. is a planned unit development which is responsible for the common elements shared by 231 single family homes in one single family homes. The common elements of the Association were built in Reserve Components Identified: 21 Reserve Components. Inspection Date: February 20, Funding Goal: The Funding Goal of this Reserve Study is to maintain reserves above an adequate, not excessive threshold during one or more years of significant expenditures. Our recommended Funding Plan recognizes multiple threshold funding years in 2028 due to the surface replacement of the tennis courts and in 2043 due to the complete interior renovation of the clubhouse. Cash Flow Method: We use the Cash Flow Method to compute the Reserve Funding Plan. This method offsets future variable Reserve Expenditures with existing and future stable levels of reserve funding. Our application of this method also considers: Current and future local costs of replacement 1.2% annual rate of return on invested reserves 1.8% future Inflation Rate for estimating Future Replacement Costs Sources for Local Costs of Replacement: Our proprietary database, historical costs and published sources, i.e., R.S. Means, Incorporated. Cash Status of Reserve Fund: $47,457 as of May 31, budgeted Reserve Contributions of $15,048 A potential deficit in reserves might occur by 2023 based upon continuation of the most recent annual reserve contribution of $15,048 and the identified Reserve Expenditures. Project Prioritization: We recommend the Association prioritize the following projects in the next five years based on the conditions identified: Tennis Court, Color Coat and Crack Repair Recommended Reserve Funding: We recommend the following in order to achieve a stable and equitable Funding Plan: Phased increases of approximately $3,900 from 2019 through 2023 Inflationary increases from 2024 through 2028 Decrease to $23,000 by 2029 due to fully funding for replacement of tennis court surface replacement Inflationary increases from 2030 through 2048, the limit of this study's Cash Flow Analysis Page Executive Summary

6 Initial adjustment in Reserve Contributions of $3,852 represents an average monthly increase of $1.39 per homeowner and about an one percent (1.3%) adjustment in the 2018 total Operating Budget of $298,774. Page Executive Summary

7 Falcon Ridge Recommended Reserve Funding Table and Graph Year Reserve Contributions ($) Reserve Balances ($) Year Reserve Contributions ($) Reserve Balances ($) Year Reserve Contributions ($) Reserve Balances ($) ,900 27, ,000 66, , , ,800 38, ,400 78, , , ,700 41, ,800 94, , , ,600 72, , , , , ,500 35, , , ,500 57, ,100 71, , , ,000 87, ,700 96, , , , , , , , , , , , , , , , , ,700 42, , , , , Recommended Reserve Contributions Reserve Expenditures Year-End Reserve Balances Years Page Executive Summary

8 2. RESERVE STUDY REPORT At the direction of the Board that recognizes the need for proper reserve planning, we have conducted a Full Reserve Study of Falcon Ridge at Highland Creek Homeowners Association, Inc. Charlotte, North Carolina and submit our findings in this report. The effective date of this study is the date of our visual, noninvasive inspection, February 20, We present our findings and recommendations in the following report sections and spreadsheets: Identification of Property - Segregates all property into several areas of responsibility for repair or replacement Reserve Expenditures - Identifies reserve components and related quantities, useful lives, remaining useful lives and future reserve expenditures during the next 30 years Reserve Funding Plan - Presents the recommended Reserve Contributions and year-end Reserve Balances for the next 30 years Reserve Component Detail - Describes the reserve components, includes photographic documentation of the condition of various property elements, describes our recommendations for repairs or replacement, and includes detailed solutions and procedures for replacements for the benefit of current and future board members Methodology - Lists the national standards, methods and procedures used to develop the Reserve Study Definitions - Contains definitions of terms used in the Reserve Study, consistent with national standards Professional Service Conditions - Describes Assumptions and Professional Service Conditions Credentials and Resources Page Report

9 IDENTIFICATION OF PROPERTY Our investigation includes Reserve Components or property elements as set forth in your Declaration. The Expenditure tables in Section 3 list the elements contained in this study. Our analysis begins by segregating the property elements into several areas of responsibility for repair and replacement. Our process of identification helps assure that future boards and the management team understand whether reserves, the operating budget or Homeowners fund certain replacements and assists in preparation of the annual budget. We derive these segregated classes of property from our review of the information provided by the Association and through conversations with Management and the Board. These classes of property include: Reserve Components Long-Lived Property Elements Operating Budget Funded Repairs and Replacements Property Maintained by Homeowners Property Maintained by Others We advise the Board conduct an annual review of these classes of property to confirm its policy concerning the manner of funding, i.e., from reserves or the operating budget. The Reserve Study identifies Reserve Components as set forth in your Declaration or which were identified as part of your request for proposed services. Reserve Components are defined by CAI as property elements with: Page Report

10 Falcon Ridge responsibility Limited useful life expectancies Predictable remaining useful life expectancies Replacement cost above a minimum threshold Long-Lived Property Elements may not have predictable Remaining Useful Lives or their replacement may occur beyond the 30-year scope of the study. The operating budget should fund infrequent repairs. Funding untimely or unexpected replacements from reserves will necessitate increases to Reserve Contributions. Periodic updates of this Reserve Study will help determine the merits of adjusting the Reserve Funding Plan. We identify the following Long-Lived Property Elements as excluded from reserve funding at this time. Electrical Systems, Clubhouse Foundation, Clubhouse Pipes, Interior Building, Domestic Water, Sanitary Waste, Gas Supply, Building Heating and Cooling, Clubhouse Pipes, Subsurface Utilities Structural Frame, Clubhouse The operating budget provides money for the repair and replacement of certain Reserve Components. The Association may develop independent criteria for use of operating and reserve funds. For purposes of calculating appropriate Reserve Contributions, we identify the following list of Operating Budget Funded Repairs and Replacements: General Maintenance to the Common Elements Expenditures less than $2,000 (These relatively minor expenditures have a limited effect on the recommended Reserve Contributions.) Asphalt Pavement, Crack Repair, Patch, Seal Coat and Striping Concrete Sidewalks, Partial Replacements Creek, Shoreline Maintenance Light Fixtures, Exterior, Clubhouse Paint Finishes, Touch Up Sealants, Windows and Doors, Clubhouse Shutters, Vinyl, Clubhouse Signage, Community, Replacement Trash Enclosure Walls, Masonry, Inspections and Capital Repairs, Clubhouse Other Repairs normally funded through the Operating Budget Certain items have been designated as the responsibility of the homeowners to repair or replace at their cost. Property Maintained by Homeowners, including items billed back to Homeowners, relates to: Homes and Lots Page Report

11 Certain items have been designated as the responsibility of others to repair or replace. Property Maintained by Others relates to: Light Poles and Fixtures, Streets (Leased) Perimeter Walls, Brick (Highland Creek Master Association) Signage, Entrance Monuments (Highland Creek Master Association) Street Systems (City of Charlotte) Page Report

12 3. RESERVE EXPENDITURES and FUNDING PLAN The tables following this introduction present: Reserve Expenditures Line item numbers Total quantities Quantities replaced per phase (in a single year) Reserve component inventory Estimated first year of event (i.e., replacement, application, etc.) Life analysis showing useful life remaining useful life Unit cost of replacement 2018 local cost of replacement Total future costs of replacement anticipated during the next 30 years Schedule of estimated future costs for each reserve component including inflation Reserve Funding Plan Reserves at the beginning of each year Total recommended reserve contributions Estimated interest earned from invested reserves Anticipated expenditures by year Anticipated reserves at year end Predicted reserves based on current funding level Financial statements prepared by your association, by you or others might rely in part on information contained in this section. For your convenience, we have provided an electronic data file containing the tables of Reserve Expenditures and Reserve Funding Plan. Page Reserve Expenditures and Funding Plan

13 Reserve Advisors Engineering, PLLC Years 2018 to 2033 RESERVE EXPENDITURES Explanatory Notes: Falcon Ridge 1) 1.8% is the estimated future Inflation Rate for estimating Future Replacement Costs. at Highland Creek Homeowners Association, Inc. 2) FY2018 is Fiscal Year beginning January 1, 2018 and ending December 31, Charlotte, North Carolina Estimated Life Analysis, Costs, $ Line Total Per Phase 1st Year of Years Unit Per Phase Total 30-Year Total RUL = Item Quantity Quantity Units Reserve Component Inventory Event Useful Remaining (2018) (2018) (2018) (Inflated) FY Property Site Elements ,100 1,100 Square Yards Asphalt Pavement, Mill and Overlay, Clubhouse Parking Area to ,575 14,575 15,376 15, ,100 1,100 Square Yards Asphalt Pavement, Total Replacement, Clubhouse Parking Area to ,300 36,300 54, Linear Feet Concrete Curbs and Gutters, Partial 2021 to 65 3 to ,980 19,800 5,073 2, Allowance Landscape, Partial Replacements 2020 to , ,000 10,000 78,617 10,363 11,330 12, Each Light Poles and Fixtures 2028 to , ,400 10,400 12,431 12, Each Pergolas, Wood 2042 to , ,400 10,400 15, Allowance Site Furniture, Phased to 25 3 to 13 7, ,000 14,000 26,763 7,385 8, Allowance Stream, Erosion Control 2028 to , ,000 10,000 27,573 11, ,400 1,400 Square Yards Tennis Courts, Color Coat (2019 is crack repair) to ,000 14, ,382 26,000 15,306 18, Linear Feet Tennis Courts, Fence 2028 to ,600 17,600 21,037 21, Each Tennis Courts, Light Poles and Fixtures 2028 to , ,000 27,000 32,273 32, ,400 1,400 Square Yards Tennis Courts, Surface Replacement 2028 to ,400 57,400 68,610 68,610 Clubhouse Elements Each Air Handling and Condensing Units, Split Systems to , ,000 11,000 26,636 11, Allowance Interior, Renovation, Complete 2023 to , ,500 41, ,197 45, Each Interior, Renovation, Partial 2033 to , ,500 19,500 25,483 25, Allowance Kitchen, Renovation 2028 to , ,000 15,000 17,930 17, Each Rest Rooms, Renovation 2028 to , ,000 4,000 4,781 4, Squares Roof, Asphalt Shingles (Includes Gutters and Downspouts) to ,660 10,660 28,306 11, Allowance Security System 2019 to , ,500 10,500 24,658 10, ,050 2,050 Square Feet Walls, Vinyl Siding 2043 to ,508 8,508 13, Square Feet Windows and Doors, Wood Frames 2043 to ,500 27,500 42,956 1 Allowance Reserve Study Update with Site Visit , ,750 1,750 1,750 1, Anticipated Expenditures, By Year $779,794 26,000 21,887 12,113 24, , , , ,387 8, ,779 Printed on 8/6/2018 Expenditures - Section 3-1 of 2

14 Reserve Advisors Engineering, PLLC RESERVE EXPENDITURES Years 2034 to 2048 Falcon Ridge at Highland Creek Homeowners Association, Inc. Charlotte, North Carolina Estimated Life Analysis, Costs, $ Line Total Per Phase 1st Year of Years Unit Per Phase Total 30-Year Total Item Quantity Quantity Units Reserve Component Inventory Event Useful Remaining (2018) (2018) (2018) (Inflated) Property Site Elements ,100 1,100 Square Yards Asphalt Pavement, Mill and Overlay, Clubhouse Parking Area to ,575 14,575 15, ,100 1,100 Square Yards Asphalt Pavement, Total Replacement, Clubhouse Parking Area to ,300 36,300 54, Linear Feet Concrete Curbs and Gutters, Partial 2021 to 65 3 to ,980 19,800 5, Allowance Landscape, Partial Replacements 2020 to , ,000 10,000 78,617 54,715 13,543 14,806 16,188 2, Each Light Poles and Fixtures 2028 to , ,400 10,400 12, Each Pergolas, Wood 2042 to , ,400 10,400 15,958 15, Allowance Site Furniture, Phased to 25 3 to 13 7, ,000 14,000 26,763 10, Allowance Stream, Erosion Control 2028 to , ,000 10,000 27, ,400 1,400 Square Yards Tennis Courts, Color Coat (2019 is crack repair) to ,000 14, ,382 15,620 20,002 21,869 23, Linear Feet Tennis Courts, Fence 2028 to ,600 17,600 21, Each Tennis Courts, Light Poles and Fixtures 2028 to , ,000 27,000 32, ,400 1,400 Square Yards Tennis Courts, Surface Replacement 2028 to ,400 57,400 68,610 Clubhouse Elements Each Air Handling and Condensing Units, Split Systems to , ,000 11,000 26,636 15, Allowance Interior, Renovation, Complete 2023 to , ,500 41, ,197 64, Each Interior, Renovation, Partial 2033 to , ,500 19,500 25, Allowance Kitchen, Renovation 2028 to , ,000 15,000 17, Each Rest Rooms, Renovation 2028 to , ,000 4,000 4, Squares Roof, Asphalt Shingles (Includes Gutters and Downspouts) to ,660 10,660 28,306 16, Allowance Security System 2019 to , ,500 10,500 24,658 13, ,050 2,050 Square Feet Walls, Vinyl Siding 2043 to ,508 8,508 13, Square Feet Windows and Doors, Wood Frames 2043 to ,500 27,500 42,956 13,289 42,956 1 Allowance Reserve Study Update with Site Visit , ,750 1,750 1, Anticipated Expenditures, By Year $779,794 13,969 13, ,438 20, ,806 68,250 15, , , ,909 Printed on 8/6/2018 Expenditures - Section 3-2 of 2

15 Reserve Advisors Engineering, PLLC Page 1 of 1 RESERVE FUNDING PLAN CASH FLOW ANALYSIS Falcon Ridge Ridge at Highland Creek Homeowners Association, Inc. Individual Reserve Budgets & Cash Flows for the Next 30 Years Charlotte, North Carolina FY Reserves at Beginning of Year (Note 1) 47,457 30,507 27,868 38,954 41,283 72,562 35,373 71,108 96, , ,986 42,959 66,613 78,491 94, ,975 Total Recommended Reserve Contributions (Note 2) 8,778 18,900 22,800 26,700 30,600 34,500 35,100 35,700 36,300 37,000 37,700 23,000 23,400 23,800 24,200 24,600 Plus Estimated Interest Earned, During Year (Note 3) ,000 1,376 1,832 1, ,032 1,279 1,325 Less Anticipated Expenditures, By Year (26,000) (21,887) (12,113) (24,850) 0 (72,333) 0 (11,330) 0 0 (169,015) 0 (12,387) (8,827) 0 (43,779) Anticipated Reserves at Year End $30,507 $27,868 $38,954 $41,283 $72,562 $35,373 $71,108 $96,478 $134,154 $172,986 $42,959 $66,613 $78,491 $94,496 $119,975 $102,121 (NOTE 5) Predicted Reserves based on 2018 funding level of: $15,048 30,507 23,993 27,234 17,700 33,051 (24,181) (9,333) (continued) Individual Reserve Budgets & Cash Flows for the Next 30 Years, Continued Reserves at Beginning of Year 102, , , , , , , , , ,190 57,020 87, , , ,181 Total Recommended Reserve Contributions 25,000 25,500 26,000 26,500 27,000 27,500 28,000 28,500 29,000 29,500 30,000 30,500 31,000 31,600 32,200 Plus Estimated Interest Earned, During Year 1,292 1,445 1,690 1,933 2,064 2,296 2,568 2,439 2,308 1, ,140 1,426 1,819 2,080 Less Anticipated Expenditures, By Year (13,969) (13,543) 0 (15,438) (20,002) 0 (14,806) (68,250) (15,958) (175,210) 0 (16,188) 0 0 (23,909) Anticipated Reserves at Year End $114,444 $127,846 $155,536 $168,531 $177,593 $207,389 $223,151 $185,840 $201,190 $57,020 $87,884 $103,336 $135,762 $169,181 $179,552 (NOTE 5) (NOTE 4) Explanatory Notes: 1) Year 2018 starting reserves are as of May 31, 2018; FY2018 starts January 1, 2018 and ends December 31, ) Reserve Contributions for 2018 are the remaining budgeted 7 months; 2019 is the first year of recommended contributions. 3) 1.2% is the estimated annual rate of return on invested reserves; 2018 is a partial year of interest earned. 4) Accumulated year 2048 ending reserves consider the age, size, overall condition and complexity of the property. 5) Threshold Funding Years (reserve balance at critical point). Printed on 8/6/2018 Funding Plan - Section 3

16 4. RESERVE COMPONENT DETAIL The Reserve Component Detail of this Full Reserve Study includes Enhanced Solutions and Procedures for select significant components. This section describes the Reserve Components, documents specific problems and condition assessments, and may include detailed solutions and procedures for necessary capital repairs and replacements for the benefit of current and future board members. We advise the Board use this information to help define the scope and procedures for repair or replacement when soliciting bids or proposals from contractors. However, the Report in whole or part is not and should not be used as a design specification or design engineering service. Asphalt Pavement, Repaving Line Items: and Property Site Elements Quantity: Approximately 1,100 square yards History: Seal coated in 2016 Condition: Good to fair overall with minor surface cracks evident Clubhouse parking lot entrance Parking lot overview previous crack repairs evident Page Reserve Component Detail

17 Clubhouse parking lot patch Useful Life: 15- to 20-years Component Detail Notes: The initial installation of asphalt uses at least two lifts, or two separate applications of asphalt, over the base course. The first lift is the binder course. The second lift is the wearing course. The wearing course comprises a finer aggregate for a smoother more watertight finish. The following diagram depicts the typical components although it may not reflect the actual configuration at Falcon Ridge: The manner of repaving is either a mill and overlay or total replacement. A mill and overlay is a method of repaving where cracked, worn and failed pavement is mechanically removed or milled until sound pavement is found. A new layer of asphalt is overlaid atop the remaining base course of pavement. Total replacement includes the removal of all existing asphalt down to the base course of aggregate and native soil Page Reserve Component Detail

18 followed by the application of two or more new lifts of asphalt. We recommend mill and overlayment on asphalt pavement that exhibits normal deterioration and wear. We recommend total replacement of asphalt pavement that exhibits severe deterioration, inadequate drainage, pavement that has been overlaid multiple times in the past or where the configuration makes overlayment not possible. Based on the apparent visual condition and configuration of the asphalt pavement, we recommend the mill and overlay method for initial repaving followed by the total replacement method for subsequent repaving at Falcon Ridge. Priority/Criticality: Defer only upon opinion of independent professional or engineerdefer only upon opinion of independent professional or engineer Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. Our cost for milling and overlayment includes area patching of up to ten percent (10%). Concrete Curbs and Gutters Line Item: Quantity: 600 linear feet Condition: Good to fair overall Concrete curbs and gutters at clubhouse parking lot Concrete curbs and gutters at clubhouse parking lot Useful Life: Up to 65 years although interim deterioration of areas is common Priority/Criticality: Per Board discretionper Board discretion Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. We estimate that up to 120 linear feet of curbs and Page Reserve Component Detail

19 gutters, or twenty percent (20%) of the total, will require replacement during the next 30 years. Landscape Line Item: Component Detail Notes: The Association contains a large quantity of trees, shrubbery and other landscape elements. Replacement of these elements is an ongoing need. Many associations budget for these replacements as normal maintenance. Other associations fund ongoing replacements from reserves. Large amounts of landscape may need replacement due to disease, drought or other forces of nature. If the cost of removal and replacement is substantial, funding from reserves is logical. The Association may also desire to periodically update the appearance of the community through major improvements to the landscape. Useful Life: At the request of Management and the Board, we include a landscape allowance for partial replacements every five years for tree replacement and aeration of the common grounds. Priority/Criticality: Per Board discretionper Board discretion Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. Light Poles and Fixtures Line Item: Quantity: Four total at the clubhouse parking lot History: Original Condition: Good overall Page Reserve Component Detail

20 Example of light fixture Useful Life: Up to 25 years Priority/Criticality: Per Board discretionper Board discretion Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. Pergolas, Wood Line Item: Quantity: Two each History: Rebuilt and repainted in 2017 Condition: Good overall Pergola at rear of clubhouse Pergola structure Page Reserve Component Detail

21 Useful Life: Up to 25 years with periodic maintenance Priority/Criticality: Per Board discretionper Board discretion Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. We recommend the Association budget for paint applications and repairs through the operating budget. Site Furniture Line Item: History: Varies Condition: Good overall Seating area at pergolas Benches at rear of clubhouse Useful Life: 15- to 25-years Priority/Criticality: Per Board discretionper Board discretion Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. Stream, Erosion Control Line Item: History: Maintenance of the shoreline performed in recent years Useful Life: Shorelines are subject to fluctuations in water levels resulting in the need for erosion control measures up to every 15 years. Page Reserve Component Detail

22 Component Detail Notes: The steep shoreline embankments are likely to exacerbate soil movement and erosion. The use and maintenance of landscape, natural vegetation and/or stone rip rap along the shoreline will help maintain an attractive appearance and prevent soil erosion. Priority/Criticality: Defer only upon opinion of independent professional or engineer Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. We include an allowance of $10,000 dollars based on information provided by the Association. Tennis Courts, Color Coat Line Item: Quantity: 1,400 square yards comprising two tennis courts History: Original Condition: Poor overall. The Association has closed the tennis courts due to the condition of the surface. Overview of the tennis courts Severe crack at tennis court surface Page Reserve Component Detail

23 Useful Life: Four- to six-years Tennis courts are currently closed Component Detail Notes: Prior to the application of the color coat, the Association should require the contractor to rout and fill all cracks with hot emulsion. This deters water infiltration and further deterioration of the asphalt playing surface. Priority/Criticality: Not recommended to defer Not recommended to defer Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. Our cost estimate for the color coat also includes an allowance for repairs to the surface, including a surface replacement of up to 130 square feet. Tennis Courts, Fence Line Item: Quantity: 440 linear feet History: Original Condition: Good overall Page Reserve Component Detail

24 Chain link fence at tennis court Useful Life: Up to 25 years Priority/Criticality: Per Board discretionper Board discretion Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. Tennis Courts, Light Poles and Fixtures Line Item: Quantity: Nine light poles History: Original Condition: Good overall Light fixture at tennis court Page Reserve Component Detail

25 Useful Life: Up to 35 years Priority/Criticality: Per Board discretionper Board discretion Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. Tennis Courts, Surface Line Item: Quantity: 1,400 square yards of asphalt comprising two tennis courts History: Original Condition: Poor overall. The Association has closed the tennis courts due to the condition of the surface. Useful Life: Up to 25 years Priority/Criticality: Defer only upon opinion of independent professional or engineerdefer only upon opinion of independent professional or engineer Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. Clubhouse Elements Clubhouse front elevation Page Reserve Component Detail

26 Air Handling and Condensing Units, Split Systems Line Item: Quantity: Two split systems History: Original Condition: Reported in satisfactory operational condition Useful Life: 15- to 20-years Component Detail Notes: Condensing units at clubhouse Two remote condensing units with cooling capacities of 4-tons each Priority/Criticality: Defer only upon opinion of independent professional or engineerdefer only upon opinion of independent professional or engineer Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. Interior Renovations Line Items: and History: The Association last partially renovated the clubhouse interior in Condition: Good overall Page Reserve Component Detail

27 Tables and chairs at the main room Seating area Fireplace at clubhouse Useful Life: Complete interior renovation every 20 years and partial renovations every 10 years Component Detail Notes: The clubhouse interior comprises the following: Carpet and tile Paint finishes on the walls and ceilings Light fixtures including exit and emergency lights Furnishings including sofas, tables, and chairs Priority/Criticality: Per Board discretionper Board discretion Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. The complete renovation should include replacement of all the interior components listed above. These partial renovations should include the following: Application of paint finish to all surfaces Page Reserve Component Detail

28 Replacement of the carpet Replacement of up to fifty percent (50%) of the furnishings Kitchen, Renovation Line Item: History: Components are original Condition: Good overall Kitchen at the clubhouse Useful Life: Renovation up to every 25 years Component Detail Notes: Components of the kitchen include: Appliances Cabinets and countertops Tile Priority/Criticality: Per Board discretionper Board discretion Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. Rest Rooms, Renovation Line Item: Quantity: Two common History: Components are original Condition: Good overall Page Reserve Component Detail

29 Rest room at clubhouse Useful Life: Renovation up to every 25 years Component Detail Notes: Components include: Tile Paint finishes Light fixtures Plumbing fixtures Priority/Criticality: Per Board discretionper Board discretion Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. Roof, Asphalt Shingles Line Item: Quantity: 26 squares 1 History: Original Condition: Good overall with biological growth evident 1 We quantify the roof area in squares where one square is equal to 100 square feet of surface area. Page Reserve Component Detail

30 Asphalt shingle roof Asphalt shingle roof biological growth evident Useful Life: 15- to 20- years Gutter and downspout connection Priority/Criticality: Defer only upon opinion of independent professional or engineerdefer only upon opinion of independent professional or engineer Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. Our cost estimate includes the replacement of the gutters and downspouts concurrently with the roofs. Security System Line Item: Quantity: Falcon Ridge utilizes the following security system components: Automated card reading system (1 access points) Cameras (six) Page Reserve Component Detail

31 Multiplexer (1) Recorder (1) Intercom panel (1) History: Installed in 2014 Condition: Reported in unsatisfactory operational condition Useful Life: Up to 15 years Camera at clubhouse Priority/Criticality: Per Board discretionper Board discretion Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. The Association should anticipate replacement of all of the security system components per event. The Association informs us that they are not satisfied with the quality of the system and plan to replace the entire system in the near future. Walls, Vinyl Siding Line Item: Quantity: Approximately 2,050 square feet of the exterior walls History: Original Condition: Good overall with no significant deterioration evident Page Reserve Component Detail

32 Clubhouse side elevation Vinyl siding at clubhouse Useful Life: Up to 40 years Component Detail Notes: The siding at Falcon Ridge consists of the following: Clapboard double four-inch profile The following diagram details the use of building wrap in a vinyl siding system: Priority/Criticality: Defer only upon opinion of independent professional or engineerdefer only upon opinion of independent professional or engineer Page Reserve Component Detail

33 Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. Windows and Doors Line Item: Quantity: 550 square feet History: Original Condition: Good overall Useful Life: Up to 40 years Double hung window at clubhouse Component Detail Notes: Construction of the windows and doors at the clubhouse includes the following: Wood frames Double hung windows Priority/Criticality: Per Board discretionper Board discretion Expenditure Detail Notes: Expenditure timing and costs are depicted in the Reserve Expenditures table in Section 3. Reserve Study Update An ongoing review by the Board and an Update of this Reserve Study are necessary to ensure an equitable funding plan since a Reserve Study is a snapshot in time. Many variables change after the study is conducted that may result in significant Page Reserve Component Detail

34 overfunding or underfunding the reserve account. Variables that may affect the Reserve Funding Plan include, but are not limited to: Deferred or accelerated capital projects based on Board discretion Changes in the interest rates on reserve investments Changes in the local construction inflation rate Additions and deletions to the Reserve Component Inventory The presence or absence of maintenance programs Unusually mild or extreme weather conditions Technological advancements Periodic updates incorporate these variable changes since the last Reserve Study or Update. We recommend the Board budget for an Update to this Reserve Study in two years. Budgeting for an Update demonstrates the Board's objective to continue fulfilling its fiduciary responsibility to maintain the commonly owned property and to fund reserves appropriately. Page Reserve Component Detail

35 5. METHODOLOGY Reserves for replacement are the amounts of money required for future expenditures to repair or replace Reserve Components that wear out before the entire facility or project wears out. Reserving funds for future repair or replacement of the Reserve Components is also one of the most reliable ways of protecting the value of the property s infrastructure and marketability. Falcon Ridge can fund capital repairs and replacements in any combination of the following: 1. Increases in the operating budget during years when the shortages occur 2. Loans using borrowed capital for major replacement projects 3. Level monthly reserve assessments annually adjusted upward for inflation to increase reserves to fund the expected major future expenditures 4. Special assessments We do not advocate special assessments or loans unless near term circumstances dictate otherwise. Although loans provide a gradual method of funding a replacement, the costs are higher than if the Association were to accumulate reserves ahead of the actual replacement. Interest earnings on reserves also accumulate in this process of saving or reserving for future replacements, thereby defraying the amount of gradual reserve collections. We advocate the third method of Level Monthly Reserve Assessments with relatively minor annual adjustments. The method ensures that Homeowners pay their "fair share" of the weathering and aging of the commonly owned property each year. Level reserve assessments preserve the property and enhance the resale value of the homes. This Reserve Study is in compliance with and exceeds the National standards 1 set forth by the Community Associations Institute (CAI) and the Association of Professional Reserve Analysts (APRA) fulfilling the requirements of a Full Reserve Study. These standards require a Reserve Component to have a predictable remaining Useful Life. Estimating Remaining Useful Lives and Reserve Expenditures beyond 30 years is often indeterminate. Long-Lived Property Elements are necessarily excluded from this analysis. We considered the following factors in our analysis: The Cash Flow Method to compute, project and illustrate the 30-year Reserve Funding Plan Local 2 costs of material, equipment and labor Current and future costs of replacement for the Reserve Components Costs of demolition as part of the cost of replacement Local economic conditions and a historical perspective to arrive at our estimate of long term future inflation for construction costs in Charlotte, North Carolina at an annual inflation rate. Isolated or regional markets of 1 Identified in the APRA Standards - Terms and Definitions and the CAI "Terms and Definitions". 2 See Credentials for addition information on our use of published sources of cost data. Page Methodology

36 greater construction (development) activity may experience slightly greater rates of inflation for both construction materials and labor. The past and current maintenance practices of Falcon Ridge and their effects on remaining useful lives Financial information provided by the Association pertaining to the cash status of the reserve fund and budgeted reserve contribution The anticipated effects of appreciation of the reserves over time in accord with a return or yield on investment of your cash equivalent assets. (We did not consider the costs, if any, of Federal and State Taxes on income derived from interest and/or dividend income). The Funding Plan excludes necessary operating budget expenditures. It is our understanding that future operating budgets will provide for the ongoing normal maintenance of Reserve Components. Updates to this Reserve Study will continue to monitor historical facts and trends concerning the external market conditions. Page Methodology

37 6. CREDENTIALS HISTORY AND DEPTH OF SERVICE Reserve Advisors Engineering, PLLC is the leading provider of reserve studies and other engineering consulting services. The architectural engineering consulting firm was formed to take a leadership role in helping fiduciaries, boards, and property managers manage their property like a business with a long range master plan known as a Reserve Study. Reserve Advisors employs the largest staff of Reserve Specialists with bachelor s degrees in engineering dedicated to Reserve Study services. Our principals are founders of Community Associations Institute's (CAI) Reserve Committee that developed national standards for reserve study providers. One of our principals is a Past President of the Association of Professional Reserve Analysts (APRA). Our vast experience with a variety of building types and ages, on-site examination and historical analyses are keys to determining accurate remaining useful life estimates of building components. No Conflict of Interest - As consulting specialists, our independent opinion eliminates any real or perceived conflict of interest because we do not conduct or manage capital projects. TOTAL STAFF INVOLVEMENT Several staff members participate in each assignment. The responsible advisor involves the staff through a Team Review, exclusive to Reserve Advisors, and by utilizing the experience of other staff members, each of whom has served hundreds of clients. We conduct Team Reviews, an internal quality assurance review of each assignment, including: the inspection; building component costing; lifing; and technical report phases of the assignment. Due to our extensive experience with building components, we do not have a need to utilize subcontractors. OUR GOAL To help our clients fulfill their fiduciary responsibilities to maintain property in good condition. VAST EXPERIENCE WITH A VARIETY OF BUILDINGS Reserve Advisors has conducted reserve studies for a multitude of different communities and building types, and routinely inspects buildings with various types of mechanical systems such as simple electric heat, to complex systems with air handlers, chillers, boilers, elevators, and life safety and security systems. We're familiar with all types of building exteriors as well. Our well versed staff regularly identifies optimal repair and replacement solutions for such building exterior surfaces such as adobe, brick, stone, concrete, stucco, EIFS, wood products, stained glass and aluminum siding, and window wall systems. OLD TO NEW Reserve Advisors experience includes ornate and vintage buildings as well as modern structures. Our specialists are no strangers to older buildings. We're accustomed to addressing the unique challenges posed by buildings that date to the 1800's. We recognize and consider the methods of construction employed into our analysis. We recommend appropriate replacement programs that apply cost effective technologies while maintaining a building's character and appeal. Page Credentials

38 QUALIFICATIONS THEODORE J. SALGADO Principal Owner CURRENT CLIENT SERVICES Theodore J. Salgado is the founder of Reserve Advisors Engineering, PLLC. He is responsible for the production, management, review, and quality assurance of all reserve studies, property inspection services and consulting services. Under his direction, the firm conducts reserve study services for community associations. EXPERT WITNESS Mr. Salgado has testified successfully before the Butler County Board of Tax Revisions in Ohio. His depositions in pretrial discovery proceedings relating to reserve studies of Crestview Estates Condominium Association in Wauconda, Illinois, Rivers Point Row Property Owners Association, Inc. in Charleston, South Carolina and the North Shore Club Associations in South Bend, Indiana have successfully assisted the parties in arriving at out of court settlements. EDUCATION - Milwaukee School of Engineering - B.S. Architectural Engineering PROFESSIONAL AFFILIATIONS/DESIGNATIONS American Association of Cost Engineers - Past President, Wisconsin Section Association of Construction Inspectors - Certified Construction Inspector Association of Professional Reserve Analysts - Past President & Professional Reserve Analyst (PRA) Community Associations Institute - Member and Volunteer Leader of multiple chapters Concordia Seminary, St. Louis - Member, National Steering Committee Milwaukee School of Engineering - Member, Corporation Board Professional Engineer, Wisconsin (1982) and North Carolina (2014) Ted continually maintains his professional skills through American Society of Civil Engineers, ASHRAE, Association of Construction Inspectors, and continuing education to maintain his professional engineer licenses. Page Credentials

39 COLIN A. NIEMEYER Responsible Advisor CURRENT CLIENT SERVICES Colin Niemeyer, a Chemical Engineer, is an Associate Engineer for Reserve Advisors. Mr. Niemeyer is responsible for the inspection and analysis of the condition of clients' properties, and recommending engineering solutions to prolong the lives of the components. He also forecasts capital expenditures for the repair and/or replacement of the property components and prepares technical reports on assignments. He is responsible for conducting Life Cycle Cost Analyses and Capital Replacement Forecast services and the preparation of Reserve Study Reports for condominiums, townhomes and homeowner associations. The following is a partial list of clients served by Colin Niemeyer demonstrating his breadth of experiential knowledge of community associations in construction and related buildings systems. Heron Lake Villas at Homeowners Association, Inc. This apartment community located in Myrtle Beach, South Carolina were constructed in 1995 and comprise three buildings constructed with fiber cement siding, asphalt single roofs, and wood decks. The property is situated in the middle of a golf course allowing for wonderful views. Brookhaven Citizens Assembly, Inc. - This single family home community contains over 550 residential homes and is located in Matthews, North Carolina. The Master Association maintains the shared common elements including a luxurious clubhouse, a pool featuring a massive waterslide, as well as multiple recreational courts. Rozzelles Landing Homeowners Association, Inc. - This townhome and single family home community in Huntersville, North Carolina comprises 157 townhome units in 27 buildings in addition to 129 single family homes. Expenditures of this property include large quantities parking areas and streets, large retaining walls, a pool with an adjoining pool house, and retention pond. The townhomes comprise a combination of brick and vinyl siding construction, featuring multiple different styles. Several of the townhomes feature attached garages. Del Webb Carolina Orchards Community Association - A lavish single family home community located just outside of Rock Hill, South Carolina. Features of this property include an extravagant amenities center, including multiple conference rooms, a spa, yoga and fitness rooms. This property includes both an indoor and outdoor pool with pool house. The Cape Townhomes Owners Association, Inc. - This townhome community built in the early 2000 s is located in Hickory, NC that is adjacent to a public park. The property contains 12 units comprising 8 buildings, featuring multiple different style units, ranging from single family homes to triplexes. Atlantic Towers Condominium - Located in next to the sandy beaches of Carolina Beach, North Carolina, this apartment building contains 137 residential units. The townhomes are comprised of brick, fiber cement siding, asphalt shingle roofs and wood balconies at the unit rears. The community includes a pool, pool house, ponds, and a large quantity of stone retaining walls. PRIOR RELEVANT EXPERIENCE Before joining Reserve Advisors, Mr. Niemeyer successfully completed the bachelors program in Chemical Engineering at West Virginia University. In the past, he has worked for multiple engineering companies covering a wide variety of roles but with a concentration in improving efficiency and optimization with a focus on Lean and Six Sigma strategies. He has also spent time working in design engineering for one the Nation s leading construction companies. EDUCATION West Virginia University B.S. in Chemical Engineering Page Credentials