Sunland Division 7 Condo

Transcription

1 Washington Office Corporate Office 505 South 336 th St., Ste 620 Calabasas, CA Federal Way, WA Regional Offices TEL 253/ Phoenix, AZ FAX 253/ San Francisco, CA Denver, CO Honolulu, HI Las Vegas, NV Miami, FL Full Reserve Study Sunland Division 7 Condo Sequim, WA Report #: For Period Beginning: January 1, 2017 Expires: December 31, 2017 Date Prepared: June 2, 2016

2 Hello, and welcome to your Reserve Study! W e don t want you to be surprised. This Report is designed to help you anticipate, and prepare for, the major common area expenses your association will face. Inside you will find: 1) The Reserve Component List (the Scope and Schedule of your Reserve projects) telling you what your association is Reserving for, what condition they are in now, and what they ll cost to replace. 2) An Evaluation of your current Reserve Fund Size and Strength (Percent Funded). This tells you your financial starting point, revealing your risk of deferred maintenance and special assessments. 3) A Recommended Multi-Year Reserve Funding Plan, answering the question What do we do now? More Questions? Visit our website at or call us at: 253/ Relax, it s from Association Reserves WA, LLC. 6/2/2016

3 Table of Contents 3- Minute Executive Summary...i Reserve Study Summary...i Reserve Component List Table 1...ii Introduction, Objectives, and Methodology...1 Which Physical Assets are Funded by Reserves?...2 How do we establish Useful Life and Remaining Useful Life estimates?...2 How do we establish Current Repair/Replacement Cost Estimates?...2 How much Reserves are enough?...3 How much should we contribute?...4 What is our Recommended Funding Goal?...4 Projected Expenses...6 Expense Graph Figure Reserve Fund Status & Recommended Funding Plan...7 Funding Plan Graph Figure Cash Flow Graph Figure % Funded Graph Figure Table Descriptions...9 Reserve Component List Detail Table Contribution & Fund Breakdown Table Component Significance Table Year Reserve Plan Summary Table Year Reserve Plan Year by Year Detail Table Accuracy, Limitations, and Disclosures...20 Terms and Definitions Appendix Association Reserves WA, LLC. 6/2/2016

4 3- Minute Executive Summary Association: Sunland Division 7 Condo #: Location: Sequim, WA # of Units: 63 Report Period: January 1, 2017 through December 31, 2017 Findings/Recommendations as-of 1/1/2017: Projected Starting Reserve Balance:... $163,500 Current Fully Funded Reserve Balance:... $506,046 Average Reserve Deficit (Surplus) Per Unit:... $5, % 2017 Quarterly Full Funding Contributions:... $14,080 70% 2017 Quarterly Threshold Funding Contributions:... $12,244 Baseline contributions (min to keep Reserves above $0):... $11,918 Recommended 2017 Special Assessment for Reserves:...$0 Most Recent Budgeted Reserve Contribution Rate:... $4,359 Economic Assumptions: Net Annual After Tax Interest Earnings Accruing to Reserves % Annual Inflation Rate % This is a Full Reserve Study, based on our site inspection on October 14, 2015 and meets or exceeds all requirements of the RCW. This study was prepared by, or under the supervision of a credentialed Reserve Specialist (RS 153). Your Reserve Fund is currently 32% Funded. This means the association s risk of special assessment and/or deferred maintenance is currently at just within the medium range (nearing 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 and your anticipated future expenses, our recommendation is to substantially increase your Reserve contributions to within the 70% to 100% level as noted above. 100% Full and 70% contribution rates are designed to achieve these funding objectives by the end of our 30-year report scope. The reader should note that a number of significant expenses have historically been treated as operating budget items, including exterior painting. See photo appendix for component details; the basis of our assumptions. Association Reserves WA, LLC i 6/2/2016

5 Table 1: Executive Summary Useful Rem. Current Life Useful Cost # Component (yrs) Life (yrs) Estimate Site/Grounds 110 Asphalt - Resurface $110,500 Building Exterior 500 Decks/Rails/Walls - Partial Replace 4 1 $38, Comp Roof, Replace 25 7 $54, Comp Roof, Replace 25 8 $84, Comp Roof, Replace 25 9 $123, Comp Roof, Replace $79, Comp Roof, Replace $22, Comp Roof, Replace $66, Comp Roof, Replace $72, Comp Roof, Replace $40, Tile Roof, Replace $155, Total Funded Components Note; Green highlighted items are expected to occur within the first five years. Cross reference component numbers with photographic inventory appendix. A reserve-funding threshold of $2,000 is established for your association (expenses below this level typically expected to be factored within operating budget). Association Reserves WA, LLC ii 6/2/2016

6 Assoc Introduction A Reserve Study is the art and science of anticipating, and preparing for, an association s major common area repair and replacement expenses. Partially art, because in this field we are making projections about the future. Partially science, because our work is a combination of research and welldefined computations, following consistent National Reserve Study Standard principles. The foundation of this and every Reserve Study is your Reserve Component List (what you are reserving for). This is because the Reserve Component List defines the scope and schedule of all your anticipated upcoming Reserve projects. Based on that List and your starting balance, we calculate the association s Reserve Fund Strength (reported in terms of Percent Funded ). Then we compute a Reserve Funding Plan to provide for the Reserve needs of the association. These form the three results of your Reserve Study. Reserve contributions are not for the future. Reserve contributions are designed to offset the ongoing, daily deterioration of your Reserve assets. Done well, a stable, budgeted Reserve Funding Plan will collect sufficient funds from the owners who enjoyed the use of those assets, so the association is financially prepared for the irregular expenditures scattered through future years when those projects eventually require replacement. Methodology For this Full Reserve Study, we started with a review of your Governing Documents, recent Reserve expenditures, an evaluation of how expenditures are handled (ongoing maintenance vs Reserves), and research into any well-established association precedents. We performed an on-site inspection to quantify and evaluate your common areas, creating your Reserve Component List from scratch. Association Reserves WA, LLC 1 6/2/2016

7 Assoc Which Physical Assets are Funded by Reserves? There is a national-standard four-part test to determine which expenses should appear in your Reserve Component List. First, it must be a common area maintenance responsibility. Second, the component must have a limited life. Third, the remaining life must be predictable (or it by definition is a surprise which cannot be accurately anticipated). Fourth, the component must be above a minimum threshold cost (often between.5% and 1% of an association s total budget). This limits Reserve Components to major, predictable expenses. Within this framework, it is inappropriate to include lifetime components, unpredictable expenses (such as damage due to fire, flood, or earthquake), and expenses more appropriately handled from the Operational Budget or as an insured loss. How do we establish Useful Life and Remaining Useful Life estimates? 1) Visual Inspection (observed wear and age) 2) Association Reserves database of experience 3) Client History (install dates & previous life cycle information) 4) Vendor Evaluation and Recommendation How do we establish Current Repair/Replacement Cost Estimates? In this order 1) Actual client cost history, or current proposals 2) Comparison to Association Reserves database of work done at similar associations 3) Vendor Recommendations 4) Reliable National Industry cost estimating guidebooks Association Reserves WA, LLC 2 6/2/2016

8 Assoc How much Reserves are enough? Reserve adequacy is not measured in cash terms. Reserve adequacy is found when the amount of current Reserve cash is compared to Reserve component deterioration (the needs of the association). Having enough means the association can execute its projects in a timely manner with existing Reserve funds. Not having enough typically creates deferred maintenance or special assessments. Adequacy is measured in a two-step process: 1) Calculate the value of deterioration at the association (called Fully Funded Balance, or FFB). 2) Compare that to the Reserve Fund Balance, and express as a percentage. Each year, the value of deterioration at the association changes. When there is more deterioration (as components approach the time they need to be replaced), there should be more cash to offset that deterioration and prepare for the expenditure. Conversely, the value of deterioration shrinks after projects are accomplished. The value of deterioration (the FFB) changes each year, and is a moving but predictable target. There is a high risk of special assessments and deferred maintenance when the Percent Funded is weak, below 30%. Approximately 30% of all associations are in this high risk range. While the 100% point is Ideal (indicating Reserve cash is equal to the value of deterioration), a Reserve Fund in the 70% -130% range is considered strong (low risk of special assessment). Measuring your Reserves by Percent Funded tells how well prepared your association is for upcoming Reserve expenses. New buyers should be very aware of this important disclosure! Association Reserves WA, LLC 3 6/2/2016

9 Assoc How much should we contribute? According to National Reserve Study Standards, there are four Funding Principles to balance in developing your Reserve Funding Plan. Our first objective is to design a plan that provides you with sufficient cash to perform your Reserve projects on time. Second, a stable contribution is desirable because it keeps these naturally irregular expenses from unsettling the budget. Reserve contributions that are evenly distributed over current and future owners enable each owner to pay their fair share of the association s Reserve expenses over the years. And finally, we develop a plan that is fiscally responsible and safe for Board members to recommend to their association. Remember, it is the Board s job to provide for the ongoing care of the common areas. Board members invite liability exposure when Reserve contributions are inadequate to offset ongoing common area deterioration. What is our Recommended Funding Goal? Maintaining the Reserve Fund at a level equal to the value of deterioration is called Full Funding (100% Funded). As each asset ages and becomes used up, the Reserve Fund grows proportionally. This is simple, responsible, and our recommendation. Evidence shows that associations in the % range enjoy a low risk of special assessments or deferred maintenance. Allowing the Reserves to fall close to zero, but not below zero, is called Baseline Funding. Doing so allows the Reserve Fund to drop into the 0-30% range, where there is a high risk of special assessments & deferred maintenance. Since Baseline Funding still provides for the timely execution of all Reserve projects, and only the margin of safety is different, Baseline Funding contributions average only 10% - 15% less than Full Funding contributions. Threshold Funding is the title of all other Cash or Percent Funded objectives between Baseline Funding and Full Funding. Association Reserves WA, LLC 4 6/2/2016

10 Assoc Site Inspection Notes During our site visit on October 14, 2015, we noted current condition, materials, apparent levels of care and maintenance as well as exposure to weather elements. During this site inspection and subsequent research we were informed which components were being handled from the operational maintenance budget, not reserves. As already mention, a number of significant expenses have historically been treated as operating budget items, including exterior painting. Sunland Division 7 is a condominium community of 18 wood-framed residential buildings containing 63 units, where building was completed over an extended period, and also Construction therefore ranges from years old for our 2017 report. Reserve projects to anticipate in the near term (next five years) include partial deck repairs / replacements. The reader is directed to the attached and detailed Photographic Inventory Appendix (Photo Pages) to gain a comprehensive understanding pf the basis for our recommendations for this year s report. Association Reserves WA, LLC 5 6/2/2016

11 Assoc Projected Expenses While this Reserve Study looks forward 30 years, we have no expectation that all these expenses will all take place as anticipated. This Reserve Study needs to be updated annually because we expect the timing of these expenses to shift and the size of these expenses to change. We do feel more certain of the timing and cost of near-term expenses than expenses many years away. Your first five years of projected Reserve expenses total $39,398. Adding the next five years, your first ten years of projected Reserve expenses are $469,245. 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 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $ Years Figure 1 Association Reserves WA, LLC 6 6/2/2016

12 Assoc Reserve Fund Status The starting point for our financial analysis is your Reserve Fund balance, projected to be $163,500 as-of the start of your Fiscal Year on January 1, As of January 1, 2017, your Fully Funded Balance is computed to be $506,046 (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 32% Funded. Across the country, approx 20% of associations in this range experience special assessments or deferred maintenance. Recommended Funding Plan Based on your current Percent Funded and your near-term and long-term Reserve needs, we are recommending budgeted contributions of $14,080/Quarter 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 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $ Years Figure 2 Association Reserves WA, LLC 7 6/2/2016

13 Assoc The following chart shows your Reserve balance under our recommended Full Funding Plan, an alternate Baseline Funding Plan, and at your current budgeted contribution rate, compared to your always-changing Fully Funded Balance target. $1,400, Yr Cash Flow Target Fully Funded Balance Recommended Funding Plan Alternate (Minimum) Current Budget $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $ Years Figure 3 This figure shows this same information, plotted on a Percent Funded scale. 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 6/2/2016

14 Assoc Table Descriptions The tabular information in this Report is broken down into six tables. Table 1 is a summary of your Reserve Components (your Reserve Component List), the information found in Table 2. Table 2 is your Reserve Component List, which forms the foundation of this Reserve Study. This table represents the information from which all other tables are derived. Table 3 shows the calculation of your Fully Funded Balance, the measure of your current Reserve component deterioration. For each component, the Fully Funded Balance is the fraction of life used up multiplied by its estimated Current Replacement Cost. Table 4 shows the significance of each component to Reserve needs of the association, helping you see which components have more (or less) influence than others on your total Reserve contribution rate. The deterioration cost/yr of each component is calculated by dividing 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 6/2/2016

15 Table 2: Reserve Component List Detail Rem. Useful Useful [ --- Current Cost Estimate --- ] # Component Quantity Life Life Best Case Worst Case Site/Grounds 110 Asphalt - Resurface Approx 44,200 square feet $101,700 $119,300 Building Exterior 500 Decks/Rails/Walls - Partial Replace Approx 13,890 SF, total 4 1 $34,000 $42, Comp Roof, Replace Approx 13,100 SF 25 7 $53,780 $55, Comp Roof, Replace Approx 20,000 SF 25 8 $80,000 $89, Comp Roof, Replace Approx 29,100 SF 25 9 $116,580 $130, Comp Roof, Replace Approx 18,600 SF $74,680 $83, Comp Roof, Replace Approx 5,400 SF $21,520 $24, Comp Roof, Replace Approx 15,700 SF $62,660 $70, Comp Roof, Replace Approx 17,000 SF $68,600 $77, Comp Roof, Replace Approx 9,600 SF $38,480 $43, Tile Roof, Replace Approx 21,500 square feet $132,500 $177, Total Funded Components Association Reserves WA, LLC 10 6/2/2016

16 Table 3: Fully Funded Balance Current Fully Cost Effective Useful Funded # Component Estimate X Age / Life = Balance Site/Grounds 110 Asphalt - Resurface $110,500 X 19 / 30 = $69,983 Building Exterior 500 Decks/Rails/Walls - Partial Replace $38,250 X 3 / 4 = $28, Comp Roof, Replace $54,400 X 18 / 25 = $39, Comp Roof, Replace $84,800 X 17 / 25 = $57, Comp Roof, Replace $123,600 X 16 / 25 = $79, Comp Roof, Replace $79,200 X 15 / 25 = $47, Comp Roof, Replace $22,800 X 14 / 25 = $12, Comp Roof, Replace $66,400 X 13 / 25 = $34, Comp Roof, Replace $72,800 X 12 / 25 = $34, Comp Roof, Replace $40,800 X 11 / 25 = $17, Tile Roof, Replace $155,050 X 27 / 50 = $83,727 $506,046 Association Reserves WA, LLC 11 6/2/2016

17 Table 4: Component Significance Current Useful Cost Deterioration Deterioration # Component Life Estimate Cost/yr Significance Site/Grounds 110 Asphalt - Resurface 30 $110,500 $3, % Building Exterior 500 Decks/Rails/Walls - Partial Replace 4 $38,250 $9, % 600 Comp Roof, Replace 25 $54,400 $2, % 600 Comp Roof, Replace 25 $84,800 $3, % 600 Comp Roof, Replace 25 $123,600 $4, % 600 Comp Roof, Replace 25 $79,200 $3, % 600 Comp Roof, Replace 25 $22,800 $ % 600 Comp Roof, Replace 25 $66,400 $2, % 600 Comp Roof, Replace 25 $72,800 $2, % 600 Comp Roof, Replace 25 $40,800 $1, % 605 Tile Roof, Replace 50 $155,050 $3, % 11 Total Funded Components $38, % Association Reserves WA, LLC 12 6/2/2016

18 Table 5: 30-Year Reserve Plan Summary Fiscal Year Start: 01/01/17 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 2017 $163,500 $506, % Med $56,320 $0 $1,925 $ $221,745 $560, % Med $58,010 $0 $2,321 $39, $242,679 $577, % Med $59,750 $0 $2,738 $ $305,167 $636, % Med $61,542 $0 $3,375 $ $370,084 $698, % Med $63,389 $0 $4,036 $ $437,509 $763, % Med $65,290 $0 $4,500 $44, $462,957 $786, % Med $67,249 $0 $4,989 $ $535,195 $856, % Med $69,266 $0 $5,388 $66, $542,945 $861, % Med $71,344 $0 $5,273 $107, $512,140 $826, % Med $73,485 $0 $4,453 $211, $378,901 $685, % Med $75,689 $0 $3,652 $106, $351,804 $648, % Med $77,960 $0 $2,999 $184, $248,245 $532, % Med $80,299 $0 $2,422 $94, $236,295 $507, % Med $82,708 $0 $1,970 $163, $157,892 $412, % Med $85,189 $0 $1,704 $61, $183,071 $420, % Med $87,745 $0 $2,280 $ $273,096 $494, % Med $90,377 $0 $3,197 $ $366,670 $572, % Med $93,088 $0 $3,834 $63, $400,371 $589, % Med $95,881 $0 $4,504 $ $500,756 $673, % Low $98,757 $0 $5,527 $ $605,040 $762, % Low $101,720 $0 $6,589 $ $713,349 $856, % Low $104,772 $0 $7,335 $71, $754,300 $881, % Low $107,915 $0 $8,120 $ $870,334 $983, % Low $111,152 $0 $7,765 $306, $683,247 $775, % Low $114,487 $0 $7,439 $ $805,173 $878, % Low $117,922 $0 $8,279 $80, $851,286 $904, % Low $121,459 $0 $9,162 $ $981,907 $1,016, % Low $125,103 $0 $10,493 $ $1,117,503 $1,134, % Low $128,856 $0 $11,874 $ $1,258,233 $1,258, % Low $132,722 $0 $12,854 $90,139 Association Reserves WA, LLC 13 6/2/2016

19 Table 6: 30-Year Income/Expense Detail (yrs 0 through 4) Fiscal Year Starting Reserve Balance $163,500 $221,745 $242,679 $305,167 $370,084 Annual Reserve Contribution $56,320 $58,010 $59,750 $61,542 $63,389 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $1,925 $2,321 $2,738 $3,375 $4,036 Total Income $221,745 $282,076 $305,167 $370,084 $437,509 # Component Site/Grounds 110 Asphalt - Resurface $0 $0 $0 $0 $0 Building Exterior 500 Decks/Rails/Walls - Partial Replace $0 $39,398 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 605 Tile Roof, Replace $0 $0 $0 $0 $0 Total Expenses $0 $39,398 $0 $0 $0 Ending Reserve Balance: $221,745 $242,679 $305,167 $370,084 $437,509 Association Reserves WA, LLC 14 6/2/2016

20 Table 6: 30-Year Income/Expense Detail (yrs 5 through 9) Fiscal Year Starting Reserve Balance $437,509 $462,957 $535,195 $542,945 $512,140 Annual Reserve Contribution $65,290 $67,249 $69,266 $71,344 $73,485 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $4,500 $4,989 $5,388 $5,273 $4,453 Total Income $507,299 $535,195 $609,850 $619,562 $590,078 # Component Site/Grounds 110 Asphalt - Resurface $0 $0 $0 $0 $0 Building Exterior 500 Decks/Rails/Walls - Partial Replace $44,342 $0 $0 $0 $49, Comp Roof, Replace $0 $0 $66,905 $0 $0 600 Comp Roof, Replace $0 $0 $0 $107,422 $0 600 Comp Roof, Replace $0 $0 $0 $0 $161, Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 605 Tile Roof, Replace $0 $0 $0 $0 $0 Total Expenses $44,342 $0 $66,905 $107,422 $211,178 Ending Reserve Balance: $462,957 $535,195 $542,945 $512,140 $378,901 Association Reserves WA, LLC 15 6/2/2016

21 Table 6: 30-Year Income/Expense Detail (yrs 10 through 14) Fiscal Year Starting Reserve Balance $378,901 $351,804 $248,245 $236,295 $157,892 Annual Reserve Contribution $75,689 $77,960 $80,299 $82,708 $85,189 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $3,652 $2,999 $2,422 $1,970 $1,704 Total Income $458,242 $432,763 $330,965 $320,973 $244,785 # Component Site/Grounds 110 Asphalt - Resurface $0 $152,958 $0 $0 $0 Building Exterior 500 Decks/Rails/Walls - Partial Replace $0 $0 $0 $56,171 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $106,438 $0 $0 $0 $0 600 Comp Roof, Replace $0 $31,561 $0 $0 $0 600 Comp Roof, Replace $0 $0 $94,671 $0 $0 600 Comp Roof, Replace $0 $0 $0 $106,909 $0 600 Comp Roof, Replace $0 $0 $0 $0 $61, Tile Roof, Replace $0 $0 $0 $0 $0 Total Expenses $106,438 $184,518 $94,671 $163,081 $61,714 Ending Reserve Balance: $351,804 $248,245 $236,295 $157,892 $183,071 Association Reserves WA, LLC 16 6/2/2016

22 Table 6: 30-Year Income/Expense Detail (yrs 15 through 19) Fiscal Year Starting Reserve Balance $183,071 $273,096 $366,670 $400,371 $500,756 Annual Reserve Contribution $87,745 $90,377 $93,088 $95,881 $98,757 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $2,280 $3,197 $3,834 $4,504 $5,527 Total Income $273,096 $366,670 $463,592 $500,756 $605,040 # Component Site/Grounds 110 Asphalt - Resurface $0 $0 $0 $0 $0 Building Exterior 500 Decks/Rails/Walls - Partial Replace $0 $0 $63,221 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 605 Tile Roof, Replace $0 $0 $0 $0 $0 Total Expenses $0 $0 $63,221 $0 $0 Ending Reserve Balance: $273,096 $366,670 $400,371 $500,756 $605,040 Association Reserves WA, LLC 17 6/2/2016

23 Table 6: 30-Year Income/Expense Detail (yrs 20 through 24) Fiscal Year Starting Reserve Balance $605,040 $713,349 $754,300 $870,334 $683,247 Annual Reserve Contribution $101,720 $104,772 $107,915 $111,152 $114,487 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $6,589 $7,335 $8,120 $7,765 $7,439 Total Income $713,349 $825,456 $870,334 $989,251 $805,173 # Component Site/Grounds 110 Asphalt - Resurface $0 $0 $0 $0 $0 Building Exterior 500 Decks/Rails/Walls - Partial Replace $0 $71,156 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 605 Tile Roof, Replace $0 $0 $0 $306,005 $0 Total Expenses $0 $71,156 $0 $306,005 $0 Ending Reserve Balance: $713,349 $754,300 $870,334 $683,247 $805,173 Association Reserves WA, LLC 18 6/2/2016

24 Table 6: 30-Year Income/Expense Detail (yrs 25 through 29) Fiscal Year Starting Reserve Balance $805,173 $851,286 $981,907 $1,117,503 $1,258,233 Annual Reserve Contribution $117,922 $121,459 $125,103 $128,856 $132,722 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $8,279 $9,162 $10,493 $11,874 $12,854 Total Income $931,373 $981,907 $1,117,503 $1,258,233 $1,403,809 # Component Site/Grounds 110 Asphalt - Resurface $0 $0 $0 $0 $0 Building Exterior 500 Decks/Rails/Walls - Partial Replace $80,087 $0 $0 $0 $90, Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 600 Comp Roof, Replace $0 $0 $0 $0 $0 605 Tile Roof, Replace $0 $0 $0 $0 $0 Total Expenses $80,087 $0 $0 $0 $90,139 Ending Reserve Balance: $851,286 $981,907 $1,117,503 $1,258,233 $1,313,670 Association Reserves WA, LLC 19 6/2/2016

25 Assoc Accuracy, Limitations, and Disclosures Washington disclosure, per RCW: The reserve study should be reviewed carefully. It may not include all common and limited common element components that will require major maintenance, repair or replacement in future years, and may not include regular contributions to a reserve account for the cost of such maintenance, repair, or replacement. The failure to include a component in a reserve study, or to provide contributions to a reserve account for a component, may, under some circumstances, require you to pay on demand as a special assessment your share of common expenses for the cost of major maintenance, repair or replacement of a reserve component. Because we have no control over future events, we do not expect that all the events we anticipate will occur as planned. We expect that inflationary trends will continue, and we expect Reserve funds to continue to earn interest, so we believe that reasonable estimates for these figures are much more accurate than ignoring these economic realities. We can control measurements, which we attempt to establish within 5% accuracy through a combination of on-site measurements, drawings, and satellite imagery. The starting Reserve Balance and interest rate earned on deposited Reserve funds that you provided to us were considered reliable and were not confirmed independently. We have considered the association s representation of current and historical Reserve projects reliable, and we have considered the representations made by its vendors and suppliers to also be accurate and reliable. Component Useful Life, Remaining Useful Life, and Current Cost estimates assume a stable economic environment and lack of natural disasters. Because the physical condition of your components, the association s Reserve balance, the economic environment, and legislative environment change each year, this Reserve Study is by nature a one-year document. Because a long-term perspective improves the accuracy of near-term planning, this Report projects expenses for the next 30 years. It is our recommendation and that of the Financial Accounting Standards Board (FASB) that your Reserve Study be updated each year as part of the annual budget process. Association Reserves WA, LLC and its associates have no ownership, management, or other business relationships with the client other than this Reserve Study engagement. James D. Talaga R.S., company president, is a credentialed Reserve Specialist (#66). All work done by Association Reserves WA, LLC is performed under his Responsible Charge. There are no material issues to our knowledge that have not been disclosed to the client that would cause a distortion of the association s situation. Association Reserves WA, LLC 20 6/2/2016

26 Assoc Component quantities indicated in this Report were developed by Association Reserves unless otherwise noted in our Site Inspection Notes comments. 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 21 6/2/2016

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. Inflation: Interest: FFB = (Current Cost X Effective Age) / Useful Life Cost factors are adjusted for inflation at the rate defined in the Executive Summary and compounded annually. These increasing costs can be seen as you follow the recurring cycles of a component on Table 6. Interest earnings on Reserve Funds are calculated using the average balance for the year (taking into account income and expenses through the year) and compounded Quarterlyly 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 22 6/2/2016

28 Assoc The primary purpose of the photographic appendix is to provide the reader with the basis of our funding assumptions resulting from our physical analysis and subsequent research. The photographs herein represent a wide range of elements that were observed and measured against National Reserve Study Standards to determine if they meet the criteria for reserve funding. 1) Common area maintenance repair & replacement responsibility 2) Components must have a limited life 3) Life limit must be predictable 4) Above a minimum threshold cost (board s discretion typically 1/2 to 1% of annual operating expenses). Some components are recommended for reserve funding, while others are not. The components that meet these criteria in our judgment are shown with corresponding maintenance, repair or replacement cycles to the left of the photo (UL = Useful Life or how often the project is expected to occur, RUL = Remaining Useful Life or how many years from our reporting period) and a representative market cost range termed Best Cost and Worst Cost below the photo. There are many factors that can result in a wide variety of potential costs, we are attempting to represent a market average for budget purposes. Where there is no UL, the component is expected to be a one-time expense. Where no pricing, the component deemed inappropriate for Reserve Funding. Association Reserves WA, LLC 23 6/2/2016

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