PROFESSIONAL RESERVE STUDY

Transcription

1 PROFESSIONAL RESERVE STUDY Cascara at Redmond Ridge NE 112 th Place & Eastridge Drive NE, Redmond, WA For: Cascara at Redmond Ridge Homeowners Association c/o Luiza Limona Morris Management th Ave SE, Suite 204 Bellevue, WA Prepared By: Jeff Samdal, PE, RS, PRA (206) Date Prepared: August 22, 2016 JEFF SAMDAL & ASSOCIATES, INC. WOODINVILLE, WA P: (206) F: (425)

2 TABLE OF CONTENTS TABLE OF CONTENTS EXECUTIVE SUMMARY Required Statement Per State of Washington Senate Bill General Description of Property Immediate Necessary Capital Expenditures...4 Table 1.3: Summary of Immediate Necessary Capital Expenditures Current Status of Capital Reserve Fund...5 Table 1.4: Current Status of the Reserve Fund Recommendations and Assumptions for Future Reserve Contributions...6 Table 1.5: Recommendations and Assumptions for Future Reserve Contributions RESERVE STUDY BACKGROUND Purpose of This Level 1 Reserve Study Washington State Senate Bill (SB) Washington State House Bill (HB) Scope and Methodology Sources of Information Definitions Frequently Asked Questions About Reserve Studies PHYSICAL ANALYSIS Component Assessment and Valuation...13 Table 3.1A: Component Assessment and Valuation Table 3.1B: Table of Categorized Expenses over the Duration of the Study Figure 3.1B: Pie Chart of Categorized Expenses over the Duration of the Study Site Structure Roofing Exterior Electrical Systems Plumbing Systems HVAC Systems Elevators Fire Detection and Suppression Common Interior Finishes Miscellaneous Mechanical Amenities Summary of Annual Anticipated Expenses...34 PAGE 2 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

3 4.0 FINANCIAL ANALYSIS Current Financial Information and Current Funding Plan Recommended Reserve Funding Plan Other Required Funding Plan Options Assumptions for Future Interest Rate and Inflation Annual Fund Balances; Annual Funding Table and Figures...44 Figure 4.5A-1 Comparison of Funding Plans Reserve Fund Balances Through Figure 4.5A-2 Comparison of Funding Plans Reserve Fund Balances Through Figure 4.5B Comparison of Funding Plans -- Association Contributions to Reserve Fund by Year Figure 4.5C Comparison of Funding Plans Percentage of Full Funding by Year Other Common Funding Methods LIMITATIONS...57 APPENDIX...58 PAGE 3 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

4 1.0 EXECUTIVE SUMMARY 1.1 REQUIRED STATEMENT PER STATE OF WASHINGTON SENATE BILL 6215 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. 1.2 GENERAL DESCRIPTION OF PROPERTY The subject property is approximately 12 acres and is located on the east side of Eastridge Drive NE in the Redmond Ridge neighborhood of King County. There are 64 buildings containing 122 residential units. According to King County Records, the property was constructed in in two phases. The first phase consists of 40 units (20 duplexes) that were constructed between ; while the second phase consists of 82 units (38 duplexes and 6 single family homes) that were constructed between The property is relatively flat and consists of an asphalt service drive, a central park, common fencing, lawns, and mature landscaping outside of the buildings themselves. Adjacent to the property there are other residential properties and a neighborhood shopping area. The roofs of these buildings are pitched and are surfaced with asphalt composition roof surfacing. The exteriors of these buildings are clad with vinyl siding and wood trim. The windows of these buildings are vinyl frame, double pane windows. Like all properties, this property will require capital maintenance. We have itemized areas of capital maintenance that we anticipate over the next thirty (30) years along with estimated costs and estimated schedule of repair/replacement. 1.3 IMMEDIATE NECESSARY CAPITAL EXPENDITURES Table 1.3 below shows the items that are in need of action immediately or within the near future. This is a summary; all tasks are explained in greater detail in Section 3.0 Physical Analysis. Table 1.3: Summary of Immediate Necessary Capital Expenditures Component Cost Urgency Section Construction defect mitigation on Phase 1 per recommendations by Pacific Engineering TBD To be performed in 2016 via a separate income source from the Reserve Fund 3.4 and 3.5 PAGE 4 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

5 1.4 CURRENT STATUS OF CAPITAL RESERVE FUND Table 1.4 below shows the current status of the Capital Reserve Fund and how it relates to Full Funding. The current Reserve Fund data was provided to us by Luiza Limona of Morris Management. Table 1.4: Current Status of the Reserve Fund Current Reserve Balance $262,608 as of May 31, 2016 Current Annual Reserve Fund Contribution $96,353 Average Per Unit Per Month $65.81 Planned Special Assessment(s) N/A Balance Required for Full Funding $438,968 Current Percentage of Full Funding 59.8% PAGE 5 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

6 1.5 RECOMMENDATIONS AND ASSUMPTIONS FOR FUTURE RESERVE CONTRIBUTIONS The following table is a summary of our assumptions and several options that we have provided for funding contributions to the Reserve Fund. This is only a summary table; for a detailed view of our recommended funding plans, please see section 4 of this report. Table 1.5: Recommendations and Assumptions for Future Reserve Contributions Assumed Average Future Inflation Rate over 30 Years 3% Assumed Average Future Interest Rate over 30 Years 3% Option 1 Immediate Full Funding Immediate Special Assessment Required IF the Association is to be Fully Funded Immediately $176,360 Average Initial Special Assessment per Unit $1,446 Annual Reserve Fund Contribution Required for the Reserve Fund to remain Fully Funded $122,166 Option 2 Path to Full Funding in 5 Years Average Contribution per Unit per Month $83.45 Annual Reserve Fund Contribution Required for the Reserve Fund to be Fully Funded in 5 years $159,554 of which $37,387 will be make up funding Option 3 Path to Full Funding in 10 Years Average Contribution per Unit per Month $ Annual Reserve Fund Contribution Required for the Reserve Fund to be Fully Funded in 10 years $142,239 of which $20,073 will be make up funding Option 4 Path to Full Funding in 30 Years* Average Contribution per Unit per Month $97.16 Annual Reserve Fund Contribution Required for the Reserve Fund to be Fully Funded in 30 years $130,902 of which $8,736 will be make up funding Option 5 Baseline Funding* Average Contribution per Unit per Month $89.41 Annual Reserve Fund Contribution Required for Baseline Funding (Keeping the Reserve Fund above Zero over the 30 Year Period) $110,535 Average Contribution per Unit per Month $75.50 *These funding levels are required by WA State HB They are bare minimum funding plans and therefore carry a higher level of risk. Because of this, they are not recommended by Jeff Samdal & Associates. PAGE 6 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

7 2.0 RESERVE STUDY BACKGROUND 2.1 PURPOSE OF THIS LEVEL 1 RESERVE STUDY The primary purpose of this Level 1 Reserve Study is to provide the Association with a planning and budgeting tool to adequately maintain the property 30 years into the future without unexpected special assessments. This study is intended to provide the Association with an understanding of their property and to bring to light necessary immediate expenditures and reasonably anticipated future capital expenses that should be addressed. Associations have a responsibility to their members to adequately maintain their properties and our Reserve Studies provide our clients with the tools to implement capital maintenance. When small issues and maintenance items are addressed prior to becoming larger problems, there is typically a significant overall savings for a property owner. Properly maintained properties maintain higher property values than those with an abundance of deferred maintenance. An additional benefit of this Reserve Study is that it is one of the qualifications required for Associations to obtain FHA approval (which is very helpful in selling or refinancing individual units). Many other sources of funding are also beginning to require them as well. 2.2 WASHINGTON STATE SENATE BILL (SB) 6215 On March 8, 2008, the Washington Legislature passed Senate Bill 6215 regarding reserve studies for condominiums, which became effective June 12, 2008 and was codified into RCW to This Reserve Study meets the requirements of preparing a reserve study presented by the State. According to the State of Washington, SB 6215, an Association shall prepare and update a reserve study... According to the State, the terminology for this Scope of Work is Level I: Full reserve study funding analysis and plan. Components from this law include: Requirements for a Residential Condominium Association unless doing so would impose an unreasonable hardship to (1) prepare an initial reserve study based upon a visual site inspection conducted by a reserve study professional (LEVEL 1 STUDY); (2) update the study annually (LEVEL 3 STUDY); and (3) arrange for a visual site inspection every three years by a reserve study professional (LEVEL 2 STUDY). Reserve studies must include detailed information on projected expenditures and current reserve account information and must be conducted by a reserve study professional. Encourages, but does not require, a Residential Condominium Association to establish a reserve account, supplemental to the Association s annual operating budget, to fund major maintenance, repair, and replacement of common elements. Requires a condominium Public Offering Statement or Resale Certificate to include a copy of the current reserve study; or (2) a disclosure to the potential buyer stating that the Association does not have a reserve study. The statute does not define "unreasonable hardship." The law also allows an Association to withdraw funds from the reserve account for unforeseen expenses, as long as notice is given to unit owners, and a repayment schedule is set up. This Reserve Study meets these qualifications and we provide the required (LEVEL 3 STUDY) Annual Updates in years 2 and 3 to our original Reserve Study at NO ADDITIONAL CHARGE. These Annual Updates are performed without a site visit and are simply a review and update of the financials. This reserve study meets the qualifications of WA State SB 6215 PAGE 7 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

8 2.3 WASHINGTON STATE HOUSE BILL (HB) 1309 On April 29, 2011, the Washington Legislature passed House Bill 1309 that expands the minimum criteria that reserve studies in Washington are required to meet. This law has been codified within RCW for condominiums and codified within RCW for homeowners associations. This law became effective January 1, The expanded required elements of Reserve Studies include the following: Requires that the Board distribute the financial planning statistics from the Reserve Study to all owners as part of their summary of the annual budget. Requires that a Reserve Study contain the following data: reserve contribution rate; recommended contribution rate and the funding plan upon which it is based; any and all special assessments that are scheduled and the date(s) and purpose of each assessment. Requires that the Reserve Study have a statement of the ability of the current reserve contribution to meet the financial obligations of the components listed in the Reserve Study, while keeping a positive balance in the Reserve Fund over the next 30 years. Requires that the Reserve Study have a listing of the Reserve Study provider s recommended level of funding that should be present in the Reserve Fund at the end of the current fiscal year, as well as the projected actual account balance at the end of the current fiscal year and the ratio of these two values in terms of a Percentage of Full Funding. Requires that the Reserve Study have a listing of the following values in each of the 5 years following the year that the study was performed: recommended reserve balance, projected reserve balance (based on current funding plan), and the ratio of these numbers in terms of a Percentage of Full Funding. Requires that the Reserve Study component list include or otherwise address the following items: roofing, exterior cladding (siding and trim), painting, decks, windows, and paving. It also requires that the component list contain any anticipated capital expenditure that will cost more than 1% of the annual budget. If any of these components are excluded from the Reserve Fund component list, then an explanation of the basis for this exclusion must be present. Inclusion of a funding plan that leads to a Reserve Fund that is fully funded at the end of a 30 year period. Inclusion of a baseline funding plan that is the minimum regular contribution to the Reserve Fund to meet the financial obligations of the components listed in the Reserve Study while keeping a positive balance in the reserve fund over the next 30 years. Requirement that Homeowners Associations obtain a Reserve Study if it has significant assets. Significant assets are defined as the following: For Condominium Association If the current total cost of capital repairs and replacement of components maintained by the Association is 50% or more of the total annual budget of the Association (excluding reserve contributions) in any one fiscal year, then the Condominium Association has significant assets. For Homeowners Association If the current total cost of capital repairs and replacement of components maintained by the Homeowners Association is 75% or more of the total annual budget of the Association (excluding the budgeted reserve contribution) in any one fiscal year, then the HOA has significant assets. For HOAs Only: Exempts an HOA from the Reserve Study requirement if the cost of the Reserve Study exceeds 5% of the Association s annual budget or there are ten or fewer homes in the Association. For HOAs Only: States that HOAs do not have to specifically address roofing, exterior cladding, windows, painting, decks, and paving as many of these components are not found in HOAs. For Condominiums Only: Exempts a Condominium Association from the Reserve Study requirement if the cost of the Reserve Study exceeds 10% of the Association s annual budget. Allows an Association to withdraw funds from its Reserve Fund to pay for unforeseen costs that are unrelated to maintenance, repair, or replacement of specific reserve components. However, notification to the homeowners must be performed of this Reserve Fund withdrawal. Allows an Association to withdraw funds from its Reserve Fund for components in the Reserve Study without notification to the homeowners, whether or not this expenditure is listed in the year of repair in the Reserve Study. This Reserve Study meets the reporting qualifications of Reserve Studies per House Bill This Reserve Study meets the reporting qualifications of Reserve Studies per WA State HB 1309 PAGE 8 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

9 2.4 SCOPE AND METHODOLOGY This Level 1 Reserve Study has been prepared based on Community Associations Institute (CAI) standards and our proposal to the Association dated May 1, 2016, which was based on our correspondence with Chuck Hazen, Board Secretary. Information Gathering Our initial task was to gather information regarding the property such as financials, drawings, maintenance records, and historical background. This Reserve Study is a reflection of the information provided to us. Physical Analysis Following the initial correspondence regarding the property, we performed an inspection of the property on June 16, 2016 so that we may provide an opinion of the current condition of the common building components. This is also the basis for our opinion of the anticipated capital needs that the Association will be responsible for over the next 30 years. This was a visual inspection and no invasive or destructive testing was performed. This visual inspection focused on the typical features of a building and surrounding property such as structure, drainage, roof, exterior, electrical, plumbing, HVAC systems, and interior finishes. This inspection was limited to accessible and visible areas. The physical analysis included the following tasks: 1. Identification of Anticipated Capital Expenses: We consider anticipated capital expenses to be major expenses that can be reasonably predicted. Anticipated capital expenses are not considered routine maintenance such as routine landscaping or touch up paint; routine maintenance should be taken care of through an operating budget. Nor do we consider anticipated capital needs to be expenditures that result from an accident or an unpredictable event, such as flood damage or earthquake damage; these items should be paid for by insurance. The general criteria that we used to define an anticipated capital expense that warranted inclusion on our Itemized capital expenses is the following: The component must be a common component that is the responsibility of the Association. Repair or replacement of the component is significant and not budgeted for in the operating budget. The component repair or replacement occurs within the period of this study. 2. Estimated Replacement Schedule: Our opinions of the various life expectancy estimates that we prepared are based on a combination of the following: National Association of Home Builders (NAHB) averages Building Owners and Managers (BOMA) averages Product vendors and suppliers Our company database 3. Estimated Replacement Cost: Our opinions of the various costs for repair or replacement are based on a combination of the following: R.S. Means Product vendors and suppliers Our company database 4. Financial Analysis: We performed an analysis on the financial needs and current status at the property. The financial analysis provides the following: Forecasts the anticipated Capital Reserves necessary at the property over the next 30 years. Projects future Capital Reserve balances and determines the appropriate funding levels necessary. Reviews the current funding plan and current financial position. Provides our recommended annual contribution to the Reserve Fund to maintain Full Funding. PAGE 9 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

10 2.5 SOURCES OF INFORMATION The following people provided us information for this study: Chuck Hazen, Board Secretary Rich Halbert, Board Vice President Luiza Limona, Property Manager, Morris Management The following documents were viewed as part of this study Map of Property Reserve Study by Association Reserves dated April 8, 2015 Building Envelope Report by Pacific Engineering Technologies, dated January 16, 2015 General Repair Recommendations by Pacific Engineering Technologies, dated February 20, 2015 The physical inspection of the property occurred on the following date: June 16, DEFINITIONS Assumed Inflation Our assumed inflation rate is our best guess of the long term average of the inflation rate over the next thirty years; it is not based on the current Consumer Price Index (CPI). Our number is much closer to the historical average of the CPI over the previous 25 years. Capital Reserves Balance Actual or projected funds as of a particular point in time that the Association has identified for use to defray the future repair or replacement of those major components which the Association is obligated to maintain. Also known as reserves, reserve accounts, cash reserves. Component An individual line item in the Reserve Study developed or updated in the physical analysis. These elements form the building blocks of the Reserve Study. Components typically are: 1) Association responsibility, 2) with limited useful life expectancies, 3) predictable remaining useful life expectancies, 4) above a minimum threshold cost, and 5) as required by local codes. Component Inventory The task of selecting and quantifying reserve components. This task is accomplished through onsite visual observations, review of Association design and organizational documents, and a review of established Association precedents. Deficit An actual (or projected) reserve balance less than the fully funded balance. The opposite would be a surplus. Effective Age The difference between useful life and remaining useful life. Not always equivalent to chronological age, since some components age irregularly. Used primarily in computation. Financial Analysis The portion of a Reserve Study where current status of the reserves measured as cash or percent funded) and a recommended reserve contribution rate (reserve funding plan) are derived. The financial analysis is one of the two parts of a Reserve Study. Fully Funded 100% funded. When the actual (or projected) reserve balance is equal to the fully funded balance. Fully Funded Balance (FFB) Total accrued depreciation. An indicator against which actual (or projected) reserve balance can be compared. In essence, it is the reserve balance that is proportional to the current Repair/replacement cost and the fraction of life used up. This number is calculated for each component, them summed together for an Association total. Percent Funded The ratio, at a particular point of time (typically the beginning of the fiscal year), of the actual (or projected) reserve balance to the fully funded balance, expressed as a percentage. Special Assessment An assessment levied on the members of an Association in addition to regular assessments. Special assessments are often regulated by governing documents or local statutes. PAGE 10 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

11 2.7 FREQUENTLY ASKED QUESTIONS ABOUT RESERVE STUDIES What is a reserve study? Reserve studies are comprehensive reports that are used as budget planning tools that will assess the current financial health of the reserve fund as well as create a plan for future funding to offset anticipated major future common area expenditures. According to Community Association Institute's Best Practices, Reserve Studies/Management: There are two components of a reserve study a physical analysis and a financial analysis. During the physical analysis, a reserve provider evaluates information regarding the physical status and repair/replacement cost of the association s major common area components. To do so, the provider conducts a component inventory, a condition assessment, and life and valuation estimates. A financial analysis assesses only the association s reserve balance or fund status (measured in cash or as percent funded) to determine a recommendation for an appropriate reserve contribution rate (funding plan)." What are the different types of reserve studies? Reserve studies fit into one of three categories: Full; Update with Site Visit; and Update with No Site Visit. They are frequently called Level 1, Level 2, and Level 3 respectively (as defined by Washington State Senate Bill 6215). Level 1: A full reserve study the reserve provider conducts a component inventory, a condition assessment (based upon on site visual observations), and life and valuation estimates to determine both a fund status and a funding plan. They typically extend 30 years. A full reserve study must be in place before a Level 2 or Level 3 can take place. Level 2: An update with site visit (on site review) the reserve study provider conducts a component inventory (verification only, not quantification), a condition assessment (based on on site visual observations), and life and valuation estimates to determine both a fund status and a funding plan. A Level 2 update is performed every third year, with the first one scheduled 3 years after the Level 1 was completed. Level 3: An update with no site visit (off site review) the reserve study provider conducts life and valuation estimates to determine a fund status and a funding plan. A Level 3 update is performed annually, except in years when a Level 1 or Level 2 has been conducted. When should associations obtain reserve studies? Most association experts would agree that an initial full 30 year reserve study should be conducted sooner rather than later if one is not already in place. They are typically updated annually after that to account for things such as inflation and any adjustments in funding levels, budgets, repairs or replacements. If you follow Washington State Senate Bill (SB) 6215 (which we recommend that you do), your reserve study schedule would look like this: Year 1: Level 1 full 30 year study Years 2, 3: Level 3 annual updates Year 4: Level 2 update with site visit Years 5, 6: Level 3 annual updates Year 7: Level 2 update with site visit The cycle of Level 2 and Level 3 updates continues indefinitely. A Level 1 full study is not necessary according to SB 6215 after year 1. PAGE 11 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

12 What are the benefits of a Reserve Study? Benefits of reserve studies, in short, include improved property maintenance (and therefore value) as well as complying with the law. In more detail: Complying with Washington State law Washington Senate Bill 6215 took effect in June 2008 and was codified into RCW It does not require a reserve study, but rather, strongly encourages it the following way: Each Public Offering Statement or Resale Certificate should include a copy of the association s reserve study for the current fiscal year that meets all of the requirements of the new law, or the following disclaimer: This association does not have a current reserve study. The lack of a current reserve study poses certain risks to you, the purchaser. Insufficient reserves 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 common element. View the full bill at: 08/Pdf/Bills/Senate%20Bills/6215.pdf. Fulfilling lender requirements (such as FHA) Many lenders are requiring up to date reserve studies that indicate adequate financial health before they lend. Having a reserve study in place that shows a healthy funding plan before a homeowner finds a buyer could save significant time in the closing process. Help maintain the property's value and appearance A reserve study helps maintain the property's value and the property owner's investment. By identifying and budgeting for future repairs or replacement (anticipated capital expenditures), the property's common elements continue to look attractive and well kept, adding to the community's overall quality of life. Many features, when properly maintained, can also benefit from an extended lifespan resulting in overall cost savings to the owners. Well maintained properties almost always have higher resale values than those that have been neglected. Establishing sound financial planning and budget direction A comprehensive reserve study lays out a schedule of anticipated major repairs or replacements to common property elements and applies cost estimates to them. It typically spans a 30 year period, and will serve as a financial planning tool for the association to use when determining homeowners dues and contributions to the reserve fund. Reducing the need for special assessments An association that has properly implemented their reserve study will strategically collect fees over time from homeowners (via monthly dues) rather than need large sums of cash unexpectedly (special assessments). Therefore, the need for special assessments should be minimalized because expenses have already been planned for and the funds exist when needed. Fulfilling the board of directors' fiduciary responsibility Board members of community associations have a fiduciary responsibility to their members. Directors are legally bound to use sound business judgment in guiding the association and cannot ignore major capital expenditures or eliminate them from the budget. PAGE 12 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

13 3.0 PHYSICAL ANALYSIS 3.1 COMPONENT ASSESSMENT AND VALUATION The component assessment and valuation of the itemized capital expenses on this property was done by providing our opinion of Useful Life, Remaining Useful Life, and Repair or Replacement Costs for the Reserve components. Table 3.1A lists this component inventory, and is based on the information that we were provided and on onsite visual observations. The remainder of Section 3.0 Physical Analysis details each of the items in Table 3.1A using narratives and photos. They are meant to be read together. Table 3.1B is a summary of expenses, grouped according to their expense category. Chart 3.1B is a pie chart illustrating the same. Table 3.1A Key: Quantity The total quantity of each component. Units SF = Square Feet SY = Square Yards LF = Lineal Feet EA = Each LS = Lump Sum SQ = Roofing Square (10 ft X 10 ft) Cost/Unit The cost of a component. The unit cost is multiplied by the component s quantity to obtain the total estimated replacement cost for the component. Remaining Life An opinion of the probable remaining life, in years, that a reserve component can be expected to continue to serve its intended function. Replacements anticipated to occur in the initial or base year have zero Remaining Life. Useful Life Total Useful Life or Depreciable Life. An opinion of the total probable life, in years, that a reserve component can be expected to serve its intended function in its present condition. PAGE 13 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

14 Table 3.1A: Component Assessment and Valuation Note: All numbers provided are the engineer's opinion of probable life and cost in 2016 dollars. Exact numbers may vary. Component Quantity Units Cost/Unit Remaining Life (Years) Useful Life (Years) Total Cost Cost per Unit Avg. Cost per Unit per Year 3.2 SITE Asphalt overlay 128,000 SF $ $364,800 $2,990 $99.67 Asphalt repairs prior to resealing and overlay 3,200 SF $ $27,200 $223 $44.59 Asphalt seal coating and restriping 128,000 SF $ $35,840 $294 $58.75 Storm system allotment 12 ACRE $1, $12,000 $98 $19.67 Replace wood good neighbor fencing 900 LF $ $28,800 $236 $11.80 Replace wood privacy fencing 1,050 LF $ $35,700 $293 $14.63 Restain all wood fencing and spot fencing replacement 1,950 LF $ $4,583 $38 $7.51 Replace mailbox kiosks 13 EA $1, $20,800 $170 $6.82 Landscaping and irrigation system allotment 1 LS $5, $5,000 $41 $13.66 Concrete flatwork allotment 1 LS $6, $6,000 $49 $16.39 Electrostatically paint metal picnic shelter 1 LS $2, $2,500 $20 $1.37 Replace trellises 2 EA $1, $2,500 $20 $1.02 Replace picnic tables 6 EA $1, $7,200 $59 $2.36 Replace park benches 5 EA $ $3,500 $29 $1.15 Replace planter boxes 10 EA $ $5,000 $41 $1.64 Replace entrance mounument 1 EA $6, $6,000 $49 $1.64 Retention pond owned and maintained by King County Small walking paths maintained via the general operating budget Asphalt utility path owned and maintained by the utility Metal yard railings assumed to have a lifespan beyond the 30-year duration of this study No funding budgeted for the retaining walls as we have assumed any repairs will be made via the general operating budget as necessary Steel fire gate assumed to have a lifespan beyond the 30-year duration of this study Pole mounted lights are leased from PSE PAGE 14 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

15 Component Quantity Units Cost/Unit Remaining Life (Years) Useful Life (Years) Total Cost Cost per Unit Avg. Cost per Unit per Year 3.3 STRUCTURE No structural expenditures budgeted 3.4 ROOFING Resurface roofs in Phase I 528 SQ $ $258,720 $2,121 $70.69 Replace gutters and downspouts in Phase I 3,600 LF $ $24,300 $199 $6.64 Resurface roofs in Phase II 1,082 SQ $ $530,180 $4,346 $ Replace gutters and downspouts in Phase II 7,380 LF $ $49,815 $408 $ EXTERIOR 2016 mediation project costs that will be paid for via the Reserve Fund Clean exteriors of all phase 1 buildings, prepare wood soffits & wood trim, replace failed caulking, & repaint wood trim, wood soffits, and planter boxes Spot trim and vinyl siding replacement prior to each phase 1 painting cycle Clean exteriors of all phase 2 buildings, prepare wood soffits & wood trim, replace failed caulking, & repaint wood trim, wood soffits, and planter boxes Spot trim and vinyl siding replacement prior to each phase 2 painting cycle 1 LS $27,290 0 N/A $27,290 $224 N/A 40 UNITS $2, $87,600 $718 $ UNITS $ $12,000 $98 $ UNITS $2, $179,580 $1,472 $ UNITS $ $24,600 $202 $28.81 Replace phase 1 garage doors 40 EA $1, $78,000 $639 $25.57 Replace phase 2 garage doors 82 EA $1, $159,900 $1,311 $52.43 Construction defect mitigation 2016 will be performeddressed via a separate funding source Vinyl siding, vinyl-frame windows, and all other parts of the building envelope systems assumed to have a lifespan of 50 years provided that the construction defect mitigation is performed in PAGE 15 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

16 Component Quantity Units Cost/Unit Remaining Life (Years) Useful Life (Years) Total Cost Cost per Unit Avg. Cost per Unit per Year 3.6 ELECTRICAL SYSTEMS There are no collective electrical expenditures anticipated in this development 3.7 PLUMBING SYSTEMS There are no collective plumbing expenditures anticipated in this development 3.8 HVAC SYSTEMS There are no common HVAC systems in this development 3.9 ELEVATORS There are no elevators in this development 3.10 FIRE DETECTION & SUPPRESSION There are no common fire detection systems or fire suppression systems in this development 3.11 COMMON INTERIOR FINISHES There are no common interior areas in this development 3.12 MISCELLANEOUS MECHANICAL There are no miscellaneous mechanical items on this property that are not accounted for in other sections of this report 3.13 AMENITIES No amenities not mentioned in other areas of this table Average Cost Per Unit Per Year $972 PAGE 16 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

17 Table 3.1B: Table of Categorized Expenses over the Duration of the Study Category Total Expenditure over 30 Years Percentage Site $1,917, % Structure $0 0.0% Roofing $1,742, % Exterior $2,488, % Electrical Systems $0 0.0% Plumbing Systems $0 0.0% HVAC Systems $0 0.0% Elevators $0 0.0% Fire Detection & Suppresion $0 0.0% Common Interior Finishes $0 0.0% Miscellaneous Mechanical $0 0.0% Amenities $0 0.0% TOTAL $6,148,689 Figure 3.1B: Pie Chart of Categorized Expenses over the Duration of the Study Exterior Roofing Site PAGE 17 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

18 3.2 SITE The address of this property is NE 112 th Place & Eastridge Drive NE, Redmond, WA Aerial image of property (courtesy of Google Earth) General Description of Site The subject property is approximately 12 acres and is located on the east side of Eastridge Drive NE in the Redmond Ridge neighborhood of King County. There are 64 buildings containing 122 residential units. According to King County Records, the property was constructed in in two phases. The first phase consists of 40 units (20 duplexes) that were constructed between ; while the second phase consists of 82 units (38 duplexes and 6 single family homes) that were constructed between The property is relatively flat and consists of an asphalt service drive, a central park, common fencing, lawns, and mature landscaping outside of the buildings themselves. Adjacent to the property there are other residential properties and a neighborhood shopping area. PAGE 18 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

19 Asphalt The Homeowners Association is responsible for the maintenance of the asphalt service drive on this property. The asphalt is currently in need of some maintenance and we have budgeted for the current and future maintenance of this asphalt. Along with a complete overlay of this asphalt well into the future, we have also budgeted for periodic patching and other repairs as necessary. In addition to asphalt repairs, this asphalt should be emulsion seal coated every 5 years following any repairs that are necessary. We have budgeted for this to occur in 4 years and every 5 years thereafter. Following emulsion seal coating, the asphalt and curbing should be painted with any appropriate fire lane markings that are recommended. Typical Private Street Typical Private Street Typical Private Street Typical Private Street PAGE 19 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

20 Typical Private Street Typical Private Street Storm System Periodic cleanout and miscellaneous maintenance of the storm system should be expected. Therefore, we have budgeted some funding for this storm system maintenance. This periodic storm system allotment is based upon the acreage of the property. Typical Storm Drain Retention Pond Owned and Maintained by King County PAGE 20 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

21 Wood Fencing There is a significant amount of wood fencing on this property in the form of good neighbor fencing and privacy fencing. All wood fences are the responsibility of the Homeowners Association. There appeared to be a total of 900 total linear feet of good neighbor fencing and 1,050 total linear feet of wood privacy fencing. The fencing should have a lifespan of 20 years if it is maintained by paint and spot replacement. We have budgeted for staining every 5 years. Typical Privacy Fence Typical Good Neighbor Fence Typical Privacy Fence PAGE 21 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

22 Mailboxes Kiosks There are j13 mailbox kiosks around this development. These metal mailbox kiosk should have a total lifespan of 25 years prior to replacement. Typical Mailbox Kiosk Typical Mailbox Kiosk Landscaping and Irrigation Generally, landscaping and irrigation systems are maintained via the operating budget. However, we have included a small landscaping and irrigation allotment to cover expenses such as the replacement of dead trees and large scale repairs to the irrigation system. Community Park Typical Irrigation Sprinkler PAGE 22 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

23 Picnic Shelter There is a picnic shelter in the common park of this development. This picnic shelter is constructed entirely of metal with a corrugated metal roof. Therefore, we believe that that this structure should have a lifespan well beyond the 30 year duration of this study if maintained via electrostatic painting. We have budgeted for electrostatic painting of this picnic structure every 15 years. We understand that this picnic shelter was constructed in Picnic Shelter Picnic Shelter Trellises There are two wood trellises in the common park of this development. We have assumed that these trellises will have a lifespan of 20 years before replacement is necessary. Wood Trellises PAGE 23 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

24 Picnic Tables and Park Benches There are six common picnic tables and 5 park benches in the common park area of this property. These picnic tables are constructed of metal and synthetic decking; therefore, they are relatively durable. Therefore, we have assumed that these items will have a 25 year total lifespan. We understand that the picnic tables and park benches were installed in Typical Picnic Tables Typical Park Bench Horseshoe Pits There are two horseshoe pits on this property. We have assumed that these horseshoe pits will be maintained as necessary via the general operating budget. Horseshoe Pits PAGE 24 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

25 Planter Boxes There are a total of 10 planter boxes in this development that were installed in We have budgeted for these planter boxes to be rebuilt every 12 years due to the wood/earth direct contact. Planter Boxes in Community Park Planter Boxes at the North Side of the Property Walking Paths and Utility Paths There are walking paths in this development that lead to the main trail system in Redmond Ridge. We understand that these walking paths are maintained entirely via the general operating budget. There is an asphalt utility path at the north side of the development that is owned and maintained by the utility. Private Community Path Leading to Redmond Ridge Master Trail System Asphalt Path Maintained by Utility at the North Side of the Property PAGE 25 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

26 Concrete Flatwork There are sidewalks that are the responsibility of the HOA. We have budgeted for a concrete flatwork and curbing allotment in the reserve study every 5 years. Yard Railings There is a small amount of metal yard railing on this property. This railing should have a lifespan beyond the duration of this study. This railing is an aluminum factory coated fence and should not have to be recoated within the 30 duration of this study. Concrete Stairs and Concrete Sidewalk Concrete Sidewalk Concrete Sidewalk and Aluminum Railing Concrete Sidewalk PAGE 26 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

27 Retaining Walls There are concrete and rock retaining walls on this property. We have assumed that these retaining walls can be maintained via general maintenance as necessary. We see no reason why these retaining walls should ever need to be rebuilt within the 30 year duration of this study. Concrete Block Retaining Wall Rock Retaining Wall Fire Gate There is a steel fire gate at one of the two entrance/exits to this property. We have assumed that this steel fire gate will have a lifespan well beyond the 30 year duration of this study. Fire Gate Kept Closed and Locked on a Normal Basis PAGE 27 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

28 Entrance Monument There is an entrance monument at the main entrance to this property. This monument is relatively durable as it is primarily constructed of stone. Therefore, this monument will likely only be replaced due to a desire to change the style of the sign and update it aesthetically. Therefore, we have assumed a total lifespan of 30 years for this monument. Entrance Monument Pole Mounted Lights There are 19 pole mounted lights on this property. These lights are leased from PSE and are not the responsibility of the HOA to replace. Therefore, no funding has been allotted for these lights. Typical Pole Mounted Light Typical Pole Mounted Light 3.3 STRUCTURE The foundations of these buildings were only partially visible and no structural drawings were available for our review. The foundations of these buildings consist of concrete foundation walls and interior concrete piers. None of the footings were visible during our inspection. The superstructures of these buildings are likely constructed from wood framing. Based on the visual evidence, there are no anticipated capital expenditures associated with the structures of these buildings during the next 30 years. PAGE 28 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

29 3.4 ROOFING The roofs of these buildings are pitched and are surfaced with asphalt composition roof surfacing. The 20 phase I buildings are surfaced with a basic three tab shingle that has a typical lifespan of 18 years. For purposes of budgeting, we have assumed that all phase I roofs were installed in 2009, though we are aware that these buildings were constructed between 2009 and Pacific Engineering identified some defects with the installation of these roofs including the lack of a metal drip edge. We understand that these issues will be addressed in 2016 via a separate funding source than the Reserve Fund and was recently part of a construction defect claim. Provided that these issues are addressed, we believe that these roofs will obtain their full typical lifespan of 18 years and will not need to be resurfaced until We have assumed that these roofs will be resurfaced with a superior 30 year product at the time of roof resurfacing to match phase II of this development and because it is more cost effective in the long term. The 44 phase II buildings are surfaced with an architectural grade laminate shingle that has a typical lifespan of 30 years. For purposes of budgeting, we have assumed that all phase II roofs were installed in 2014, though we are aware that these buildings were constructed between 2014 and We see no reason that these roofs will not obtain a typical nominal lifespan of 30 years; therefore, this is the cycle that we have budgeted for. Additionally, we have budgeted for replacement of the gutters and downspouts of both types of roofs on the same cycle as the roof resurfacing. Typical Phase II Roof Typical Phase II Roof Typical Phase II Roof Typical Phase II Roof PAGE 29 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

30 Typical Phase I Roof Typical Phase I Roof Typical Phase I Roof Gutter on Typical Phase I Roof 30 Pound Roofing Felt Below Typical Phase I Roof Surface Typical Phase I Roof PAGE 30 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

31 3.5 EXTERIOR The exteriors of these buildings are clad with vinyl siding and wood trim. The windows of these buildings are vinyl frame, doublepane windows. Construction Defect Mitigation Pacific Engineering identified numerous construction defects and areas of repair that are necessary on Phase I of this development. We understand that mitigation of these deficiencies will take place in 2016 and none of this mitigation will be paid for via the Reserve Fund. We have assumed that the mitigation will enable the building envelope systems to obtain typical nominal life cycles. Vinyl Siding The vinyl siding should have a lifespan of 50 years. Replacement of the vinyl siding is well beyond the 30 year duration of this study. However, there will be a small amount of replacement necessary for cracked pieces of vinyl siding and wood trim periodically as well. Rather than budgeting for the total replacement of the siding and trim, we have included a spot siding and trim replacement line item on the same schedule as caulking and painting. Clearly, the siding and trim replacement should occur prior to re caulking and re painting. Exterior Re Painting and Re Caulking As part of the construction defect mitigation, we understand that all exterior wood soffits, planter boxes, and wood trim will be painted in Going forward, we have assumed that the two phases will be on two separate cleaning, caulking, and painting cycles; though there would be a better economy of scale to do them together. We have scheduled Phase 1 and Phase 2 to be repainted for 7 years from now and 5 years from now respectively, and every 7 years going forward. Typically, a property should clean the exteriors of these buildings and repaint the exterior wood every 7 to 10 years, depending on how the caulk and paint is holding up. Often, the painting schedule is dictated by the south and west sides of the buildings, as that is typically hit by weather hardest in our area. Prior to repainting, the exteriors should be properly cleaned using a product such as Simple Green and a low pressure wash. Then, the soffits and trim should be prepared for painting by scraping all loose paint off and spot replacing areas of siding and trim where necessary. Typically, the cost to properly clean, prepare, replace failed caulking, and repaint wood soffits and trim is around $2,000 per unit plus WSST for these types of garden style townhomes. We understand that $27,290 will be used from the Reserve Fund to pay for the current mediation project. Windows The vinyl frame windows and sliding glass doors on this property should be 50 year products, which is well beyond the 30 year duration of this study.. Therefore, no Reserve Funding has been allotted for windows and sliding glass doors. Front Doors and Garage Doors The front doors on this property should have a long life of 50 years or more, which is well beyond the 30 year duration of this study. However, the garage doors should have a life of 25 years. We have budgeted for replacement of these garage doors on these schedules; however, in reality, the doors should only be replaced as necessary and this schedule will vary up or down. PAGE 31 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

32 Typical Phase I Building Typical Phase I Building Typical Phase II Building Wood Trim on Phase I Buildings in Need of Repainting Soffits on Phase I Buildings in Need of Repainting Front of Several Phase II Buildings PAGE 32 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)

33 Rear of Several Phase II Buildings Rear of Several Phase II Buildings Close up of Vinyl Siding Typical Vinyl Window PAGE 33 OF 58 JEFF SAMDAL & ASSOCIATES, INC. P: (206) F: (425)