PROFESSIONAL RESERVE STUDY

PROFESSIONAL RESERVE STUDY Seavue Condominiums 130-5 th Avenue South, Edmonds, WA 98020 For: Seavue Homeowners Association c/o Jay Grant Board President (202) 351-9399 Prepared By: Jeff Samdal, PE, RS, PRA jeff@samdalassoc.com (206) 412-4305 Date Prepared: November 25, 2018 JEFF SAMDAL & ASSOCIATES, INC. WOODINVILLE, WA WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

TABLE OF CONTENTS TABLE OF CONTENTS...2 1.0 EXECUTIVE SUMMARY...4 1.1 Disclosures Required by State of WA RCW 64.90.550...4 1.2 General Description of Property...4 1.3 Immediate Necessary Capital Expenditures...4 Table 1.3: Summary of Immediate Necessary Capital Expenditures... 4 1.4 Current Status of Capital Reserve Fund...5 Table 1.4: Current Status of the Reserve Fund... 5 1.5 Recommendations and Assumptions for Future Reserve Contributions...6 Table 1.5: Recommendations and Assumptions for Future Reserve Contributions... 6 2.0 RESERVE STUDY BACKGROUND...7 2.1 Purpose of This Level 1 Reserve Study...7 2.2 Washington State RCW 64.90.550...7 2.3 Scope and Methodology...8 2.4 Sources of Information...9 2.5 Definitions...9 2.6 Frequently Asked Questions About Reserve Studies...10 3.0 PHYSICAL ANALYSIS...12 3.1 Component Assessment and Valuation...12 Table 3.1A: Component Assessment and Valuation... 13 Table 3.1B: Table of Categorized Expenses over the Duration of the Study... 15 Figure 3.1B: Pie Chart of Categorized Expenses over the Duration of the Study... 15 3.2 Site...16 3.3 Structure...20 3.4 Roofing...21 3.5 Exterior...23 3.6 Electrical Systems...26 3.7 Plumbing Systems...26 3.8 HVAC Systems...27 3.9 Elevators...27 3.10 Fire Detection and Suppression...29 3.11 Common Interior Finishes...30 3.12 Miscellaneous Mechanical...32 3.13 Amenities...32 3.20 Summary of Annual Anticipated Expenses...33 PAGE 2 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

4.0 FINANCIAL ANALYSIS...40 4.1 Current Financial Information and Current Funding Plan...40 4.2 Recommended Reserve Funding Plan...40 4.3 Other Required Funding Plan Options...42 4.4 Assumptions for Future Interest Rate and Inflation...43 4.5 Annual Fund Balances; Annual Funding Table and Figures...43 Figure 4.5A-1 Comparison of Funding Plans Reserve Fund Balances Through 2048... 50 Figure 4.5A-2 Comparison of Funding Plans Reserve Fund Balances Through 2028... 50 Figure 4.5B Comparison of Funding Plans -- Association Contributions to Reserve Fund by Year... 51 Figure 4.5C Comparison of Funding Plans Percentage of Full Funding by Year... 51 4.6 Other Common Funding Methods...52 5.0 LIMITATIONS...53 APPENDIX...54 PAGE 3 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

1.0 EXECUTIVE SUMMARY 1.1 DISCLOSURES REQUIRED BY STATE OF WA RCW 64.90.550 The undersigned makes the following disclosures required by RCW 64.90.550 to establish that this Reserve Study meets all requirements of the Washington Uniform Common Interest Ownership Act, Chapter 64.90 RCW: a. This Reserve Study was prepared with the assistance of a reserve study professional and that professional was independent; b. This Reserve Study includes all information required by RCW 64.90.550 Reserve Study Contents; and c. 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 the association to (1) defer major maintenance, repair, or replacement, (2) increase future reserve contributions, (3) borrow funds to pay for major maintenance, repair, or replacement, or (4) impose special assessments for the cost of major maintenance, repair, or replacement. 1.2 GENERAL DESCRIPTION OF PROPERTY The subject property is approximately 0.75 acres and is located on the west side of 5 th Avenue South in downtown Edmonds. There is one 3 story building containing 18 residential units. According to Snohomish County Records, the property was constructed in 1979. The property slopes down to the west and consists of an asphalt parking lot and mature landscaping outside of the building itself. Adjacent to the property there are other condominiums and apartment buildings. The roofs of this building are flat and are surfaced with single ply 60 mil PVC. The exterior of this building is clad with a combination of stucco and fiber cement lap siding, with a small amount of rock veneer at the main east entrance. The windows of this building are primarily aluminum frame windows that are primarily original. The decks are solid membrane decks that are surfaced with elastomeric deck coating. 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 Several scopes of work occurring in 2018/2019 listed in Table 3.1A PAGE 4 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

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 Jay Grant. Table 1.4: Current Status of the Reserve Fund Current Reserve Balance $77,747 as of October 31, 2018 Current Annual Reserve Fund Contribution $39,130 Average Per Unit Per Month $181.16 Planned Special Assessment(s) N/A Balance Required for Full Funding $197,570 Current Percentage of Full Funding 39.4% PAGE 5 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

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 $119,823 Average Initial Special Assessment per Unit $6,657 Annual Reserve Fund Contribution Required for the Reserve Fund to remain Fully Funded $40,742 Option 2 Path to Full Funding in 5 Years Average Contribution per Unit per Month $188.62 Annual Reserve Fund Contribution Required for the Reserve Fund to be Fully Funded in 5 years $66,144 of which $25,402 will be make up funding Average Contribution per Unit per Month $306.22 Option 3 Path to Full Funding in 10 Years RECOMMENDED PLAN BY JEFF SAMDAL & ASSOCIATES Annual Reserve Fund Contribution Required for the Reserve Fund to be Fully Funded in 10 years $54,380 of which $13,638 will be make up funding Option 4 Path to Full Funding in 30 Years* Average Contribution per Unit per Month $251.76 Annual Reserve Fund Contribution Required for the Reserve Fund to be Fully Funded in 30 years $46,677 of which $5,935 will be make up funding Option 5 Baseline Funding* Average Contribution per Unit per Month $216.10 Annual Reserve Fund Contribution Required for Baseline Funding (Keeping the Reserve Fund above Zero over the 30 Year Period) $38,978 Average Contribution per Unit per Month $180.45 *These funding levels are required by WA State RCW 64.90.550. 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 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

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 RCW 64.90.550 As of July 1, 2018, WA State RCW 64.90.550 defined a Reserve Study in WA State as the following: (1) Any reserve study is supplemental to the association's operating and maintenance budget. (2) A reserve study must include: (a) A reserve component list, including any reserve component, the replacement cost of which exceeds one percent of the annual budget of the association, excluding contributions to the reserves for that reserve component. If one of these reserve components is not included in the reserve study, the study must explain the basis for its exclusion. The study must also include quantities and estimates for the useful life of each reserve component, the remaining useful life of each reserve component, and current major replacement costs for each reserve component; (b) The date of the study and a disclosure as to whether the study meets the requirements of this section; (c) The following level of reserve study performed: (i) Level I: Full reserve study funding analysis and plan; (ii) Level II: Update with visual site inspection; or (iii) Level III: Update with no visual site inspection; (d) The association's reserve account balance; This reserve study meets the qualifications of WA State RCW 64.90.550 (e) The percentage of the fully funded balance to which the reserve account is funded; (f) Special assessments already implemented or planned; (g) Interest and inflation assumptions; (h) Current reserve account contribution rates for a full funding plan and a baseline funding plan; (i) A recommended reserve account contribution rate for a full funding plan to achieve one hundred percent fully funded reserves by the end of the thirty year study period, a recommended reserve account contribution rate for a baseline funding plan to maintain the reserve account balance above zero throughout the thirty year study period without special assessments, and a reserve account contribution rate recommended by the reserve study professional; (j) A projected reserve account balance for thirty years based on each funding plan presented in the reserve study; PAGE 7 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

(k) A disclosure on whether the reserve study was prepared with the assistance of a reserve study professional, and whether the reserve study professional was independent; and (l) A statement of the amount of any current deficit or surplus in reserve funding expressed on a dollars per unit basis. The amount is calculated by subtracting the association's reserve account balance as of the date of the study from the fully funded balance, and then multiplying the result by the fraction or percentage of the common expenses of the association allocable to each unit; except that if the fraction or percentage of the common expenses of the association allocable vary by unit, the association must calculate any current deficit or surplus in a manner that reflects the variation. (3) A reserve study must also include the following disclosure: "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 the association to (1) defer major maintenance, repair, or replacement, (2) increase future reserve contributions, (3) borrow funds to pay for major maintenance, repair, or replacement, or (4) impose special assessments for the cost of major maintenance, repair, or replacement." 2.3 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 September 6, 2018, which was based on our correspondence with Jay Grant. 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 October 26, 2018 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: PAGE 8 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

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. 2.4 SOURCES OF INFORMATION The following people provided us information for this study: Jay Grant, Board President The following documents were viewed as part of this study Internal Reserve Fund Spreadsheet, prepared by Jay Grant, dated September 18, 2018 The physical inspection of the property occurred on the following date: October 26, 2018 2.5 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. PAGE 9 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

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. 2.6 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 RCW 64.90.550). 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. PAGE 10 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

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 RCW 64.90.555 (which we recommend), 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 after year 1. 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 View the rules regarding Reserve Studies and Reserve Accounts here: http://app.leg.wa.gov/rcw/default.aspx?cite=64.90 Sections 535, 540, 545, 550, 555, and 560 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 11 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

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 12 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Table 3.1A: Component Assessment and Valuation Note: All numbers provided are the engineer's opinion of probable life and cost in 2018 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 - phase 1 of 2 1 LS $41,000 0 30 $41,000 $2,278 $75.93 Asphalt overlay - phase 2 of 2 1 LS $25,000 1 30 $25,000 $1,389 $46.30 Asphalt repairs prior to resealing and overlay 381 SF $8.50 5 5 $3,239 $180 $35.98 Asphalt seal coating and restriping 12,700 SF $0.32 5 5 $4,064 $226 $45.16 Entry bridge - repair/replace 1 LS $3,700 18 20 $3,700 $206 $10.28 Fencing project at the southwest side of the property Northeast drainage project - remaining cost to be paid 1 LS $2,800 1 N/A $2,800 $156 N/A 1 LS $18,000 1 N/A $18,000 $1,000 N/A All landscaping expenses are paid for via the general operating budget 3.3 STRUCTURE No structural expenditures budgeted 3.4 ROOFING Resurface flat roofs with 60-mil PVC 120 SQ $1,500 30 30 $180,000 $10,000 $333.33 Replace skylights 9 EA $750 15 15 $6,750 $375 $25.00 Paint metal roofs with electrostatic coating 1 LS $12,000 9 10 $12,000 $667 $66.67 Replace chimney caps 6 EA $1,600 15 20 $9,600 $533 $26.67 3.5 EXTERIOR Spot siding repair allotment prior to each painting cycle Clean, caulk, and paint the exteriors of the stucco on the building and garage Clean, caulk, and paint the exteriors of the James Hardie on the building and garage 1 LS $10,000 5 7 $10,000 $556 $79.37 11,700 SF $3.85 5 7 $45,045 $2,503 $357.50 11,500 SF $3.85 18 20 $44,275 $2,460 $122.99 Replace the front entrance door 1 EA $4,500 23 25 $4,500 $250 $10.00 Replace the auxiliary entrance doors to the buildings 3 EA $4,500 5 25 $13,500 $750 $30.00 Replace wood garage doors 11 EA $1,850 5 25 $20,350 $1,131 $45.22 Replace metal garage doors 5 EA $1,850 23 25 $9,250 $514 $20.56 Periodic unit common door/window replacement 4 EA $5,000 4 4 $20,000 $1,111 $277.78 Complete replacement of the siding, stucco, and windows is not anticipated within the next 30 years Individual decks are maintained by each individual homeowner PAGE 13 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

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 Replace the interior light fixtures 1 LS $5,000 28 30 $5,000 $278 $9.26 Replace the exterior building-mounted light fixtures 1 LS $1,500 18 20 $1,500 $83 $4.17 Replace the parking lot yard lights 1 LS $3,500 0 20 $3,500 $194 $9.72 Miscellaneous electrical systems expenditures 18 UNIT $150 5 5 $2,700 $150 $30.00 3.7 PLUMBING SYSTEMS Miscellaneous plumbing systems expenditures 18 UNIT $300 5 5 $5,400 $300 $60.00 3.8 HVAC SYSTEMS There are no significant common HVAC systems on this property 3.9 ELEVATORS Elevator cab interior renovations 1 LS $6,000 20 30 $6,000 $333 $11.11 Elevator hoist and track - major maintenance Elevator HPU and controls - major maintenance 1 LS $45,000 20 30 $45,000 $2,500 $83.33 1 LS $35,000 20 30 $35,000 $1,944 $64.81 Elevator door operator packages 1 LS $30,000 20 30 $30,000 $1,667 $55.56 We understand that all other anticipated elevator costs are covered under the maintenance contract with Schindler 3.10 FIRE DETECTION & SUPPRESSION Replace the fire alarm control panel 1 EA $2,800 19 20 $2,800 $156 $7.78 3.11 COMMON INTERIOR FINISHES Repaint common areas 6,800 SF $2.80 4 8 $19,040 $1,058 $132.22 Recarpet common areas 530 SY $45 12 16 $23,850 $1,325 $82.81 Remodel recreation room 1 LS $2,400 18 20 $2,400 $133 $6.67 Remodel recreation room bathroom 1 LS $2,000 18 20 $2,000 $111 $5.56 Replace common furnishings 1 LS $1,200 18 20 $1,200 $67 $3.33 3.12 MISCELLANEOUS MECHANICAL Replace secured access control panel 1 EA $3,000 18 20 $3,000 $167 $8.33 Replace mailbox bank 1 LS $2,500 28 30 $2,500 $139 $4.63 Replace sump pump 1 EA $1,200 7 7 $1,200 $67 $9.52 3.13 AMENITIES No amenities not mentioned in other areas of this table Average Cost Per Unit Per Year $2,198 PAGE 14 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Table 3.1B: Table of Categorized Expenses over the Duration of the Study Category Total Expenditure over 30 Years Percentage Site $269,851 12.4% Structure $0 0.0% Roofing $543,742 24.9% Exterior $812,432 37.3% Electrical Systems $39,488 1.8% Plumbing Systems $56,097 2.6% HVAC Systems $0 0.0% Elevators $209,509 9.6% Fire Detection & Suppresion $4,910 0.2% Common Interior Finishes $224,632 10.3% Miscellaneous Mechanical $19,096 0.9% Amenities $0 0.0% TOTAL $2,179,757 Figure 3.1B: Pie Chart of Categorized Expenses over the Duration of the Study Electrical Systems Plumbing Systems Elevators Exterior Fire Detection & Suppresion Common Interior Finishes Miscellaneous Mechanical Site Roofing PAGE 15 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

3.2 SITE The address of this property is 1130 5 th Avenue South, Edmonds, WA 98020. Aerial image of property (courtesy of Google Earth) General Description of Site The subject property is approximately 0.75 acres and is located on the west side of 5 th Avenue South in downtown Edmonds. There is one 3 story building containing 18 residential units. According to Snohomish County Records, the property was constructed in 1979. The property slopes down to the west and consists of an asphalt parking lot and mature landscaping outside of the building itself. Adjacent to the property there are other condominiums and apartment buildings PAGE 16 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Asphalt There is a parking lot on the north and west sides of the building that wraps around the south side of the building. The west side of the parking was resurfaced in 2018 as Phase 1 of 2; however, this has yet to be paid for. We understand that Phase 2 will be done in 2019. In addition to asphalt repairs, starting in 2023, this asphalt should be emulsion seal coated every 5 years following any repairs that are necessary. Following emulsion seal coating, the asphalt and curbing should be painted with any appropriate fire lane markings that are recommended. Storm System Periodic cleanout and miscellaneous maintenance of the storm drains should be expected. However, we have assumed that storm drain cleanout will be an operational expense. Landscaping Generally, landscaping is maintained via the operating budget. We understand that all landscaping expenses are paid for via the general operating budget. West Area of Parking Lot that was Recently Re Paved East Side of Parking Lot to be Re Paved in 2019 South Parking Lot that was Recently Re Paved East Side of Parking Lot to be Re Paved in 2019 PAGE 17 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Fencing There is chain link fencing on portions of the south side of the building and all of the north side of the property. We understand that the Board will be adding additional fencing along the southwest side of the building as part of a special project. Once the forthcoming project is completed, this chain link fencing should have a lifespan beyond the 30 year duration of this study. South Chain Link Fence North Chain Link Fence Entry Bridge There is an entry bridge that was constructed in 2016. We assume that this entry bridge will have a lifespan of 20 years. Entry Bridge PAGE 18 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Retaining Walls There is a rock wall at the south side of the property as well as a new concrete block retaining wall that was constructed in 2018. It is possible that some repairs will be made, but it is unlikely. Therefore, no funding has been allotted for these retaining walls. Rock Wall Rock Wall Concrete Block Retaining Wall PAGE 19 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Northeast Drainage Project We understand that the Board plans on commencing a drainage project at the northeast corner of the building in 2019. We understand that this project is partially paid for already, with approximately $18,000 remaining to be paid. This will be a onetime expense. East Side of Building in Need of Drainage Mitigation 3.3 STRUCTURE The foundation of this building was only partially visible and no structural drawings were available for our review. The foundation of this building consists of concrete foundation walls and interior concrete piers. None of the footings were visible during our inspection. The superstructure of this building is likely constructed from wood framing. Based on the visual evidence, there are no anticipated capital expenditures associated with the structure of this building during the next 30 years. PAGE 20 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

3.4 ROOFING The roofs of the building and the the garage are flat and are surfaced with single ply 60 mil PVC. These roofs were resurfaced in 2018 under our direction and carry a 20 year warranty; though they have a typical lifespan of approximately 30 years. This roof resurfacing included replacement of all fixed vents and flashings and these elements should have a corresponding 30 year lifespan. As part of the roof resurfacing project, sloped polyisocyanurate foam was installed below this roof surface so that the drainage slope complies with IBC standards. There are also 9 skylights on this roof that were replaced in 2018. We have budgeted for replacement of the skylights every 15 years; however, this may occur earlier if the seals fail. There are also standing seam metal roofs on this building. We have budgeted for these metal roofs to be cleaned and electrostatically painted every 10 years. There are 6 chimneys containing 18 flues with flue caps on this roof. We have assumed that the chimney caps will have a total lifespan of 20 years. We understand that the flues are the responsibility of the individual homeowners to maintain. Roof of Building Roof of Building Typical Roof Turbines Typical Skylights PAGE 21 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Typical Chimney Typical Internal Drain Garage Roof PAGE 22 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

3.5 EXTERIOR The exterior of this building is clad with a combination of stucco and fiber cement lap siding, with a small amount of rock veneer at the main east entrance. The windows of this building are primarily aluminum frame windows that are primarily original. The decks are solid membrane decks that are surfaced with elastomeric deck coating. Spot Siding and Trim Replacement We understand that the fiber cement siding on this building was installed in 2016. Typically, this siding and the building envelope assembly is assumed to be a nominal 50 year product and assembly. Therefore, the fiber cement siding is a very durable material and should have a lifespan beyond the duration of this study. There will be a small amount of replacement necessary for cracked pieces of fiber cement siding and trim periodically; however, this will be minor. Rather than budget for total replacement of this 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. Stucco There is stucco on the exterior of this building. Overall, this cladding looks like it is in good condition; however, the stucco should be periodically inspected for visible defects. These types of inspections are typically paid for via the operating budget. Exterior Re Painting and Re Caulking New stucco does not require painting; however, it appears that this stucco has had some type of acrylic sealant in the past; therefore, we have assumed that the entire building will be cleaned and painted at the same time to maximize mobilization costs; however, clearly different products should be used for the siding and the stucco. The Board has scheduled painting of the stucco every 7 years and painting of the James Hardie siding every 20 years. Solid Membrane Decks The solid membrane decks on this property are coated with elastomeric coating. We understand that maintenance of each individual deck is the responsibility of each individual owner. Windows and Sliding Glass Doors The majority of the windows on this property are the original aluminum frame windows. We do not recommend replacing the individual windows without corresponding siding/stucco replacement, which should not be necessary within the 30 year duration of this study. We understand that periodic replacement of the failed window panes is the responsibility of individual homeowners. We have budgeted for replacement of 4 sliding glass doors every 4 years. Pedestrian Doors and Garage Doors There is a main entrance door at the east side of the building, as well as 3 auxiliary entrances at the north, south, and east sides of the building. We have assumed that all doors will be replaced every 25 years. There are 16 single car garage doors on this building. The 5 garage doors on the west side of the building have been replaced with new metal garage doors, while the other 11 garage doors are constructed of wood. The metal garage doors are much lighter weight; ultimately all doors will need to be replaced (likely with metal). For budgeting purposes, we have assumed that the wood garage doors will be replaced in 5 years and all of the garage doors will have a total lifespan of 25 years. PAGE 23 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Front or East Side of Building South Side of Building Garage Doors at the South Side of the Building Decks at the South Side of the Building Rear or East Side of the Building North Side of the Building PAGE 24 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Garage Doors at the North Side of the Building Typical Decks Typical Deck Typical Deck Surface PAGE 25 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

3.6 ELECTRICAL SYSTEMS The electrical systems on this property should be relatively low maintenance over the duration of this study. However, we have budgeted for a small miscellaneous electrical allotment for funding associated with the general electrical systems on this property. This allotment is $30 per unit per year for the miscellaneous electrical systems. The interior and exterior electrical fixtures are both relatively new. The interior light fixtures should have a total lifespan of 30 years, while the exterior building mounted light fixtures should have total lifespan of 20 years. While we were on site, the parking lot yard lights were in the process of being moved and replaced. We understand that this project has not been paid for. These parking lot yard lights should also have a lifespan of 20 years. Meter Bank Typical Exterior Light Typical Common Interior Light PAGE 26 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

3.7 PLUMBING SYSTEMS The plumbing system at this building should be relatively low maintenance. However, we have budgeted for periodic expenditures with the plumbing system for miscellaneous expenses that tend to occur periodically. We have budgeted for $60 per unit per year for miscellaneous plumbing systems. We understand individual water heaters provide hot water to each individual unit. These water heaters are not the responsibility of the Homeowners Association. 3.8 HVAC SYSTEMS There are no significant common HVAC systems on this property. PAGE 27 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

3.9 ELEVATORS The property is served by one Dover hydraulic elevator. The elevator is currently under contract with Schindler. The majority of the maintenance items on this elevator will be covered under the service contract with Schindler as long as the various components of this elevator are not considered obsolete. While we cannot determine precisely when this obsolescence will happen, we estimate that this will occur next in approximately 20 years. The elevator HPU, controls, and hoist/track system will require periodic maintenance and replacement of parts during the duration of this study. This maintenance is often expensive and some of these expenses should be considered capital expenditures. Typically, the elevator cabs are renovated every 20 to 30 years and we have planned for this renovation with reserve funding. We have also budgeted for upgrade of the control systems, replacement of the door operator packages, and for overhauls of the operators on a 30 year schedule. Dover Hydraulic Power Unit for Elevator Schindler Maintenance Log Interior of Elevator PAGE 28 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

3.10 FIRE DETECTION AND SUPPRESSION This building has a central fire alarm system. The fire alarm system includes smoke and heat detectors, pull stations, audio video annunciators (combination strobe and speaker), links to the fire sprinkler flow meters, and links to the elevator controls. Manual pull stations are located at all exits, stairwell doors, and critical points within the building. Annunciator units are located in all occupied spaces, rooms, corridors, and in the elevator. We have assumed that this system will be updated every 20 years. There is not a fire suppression system in this building. Fire Alarm Control Panel PAGE 29 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

3.11 COMMON INTERIOR FINISHES The common areas of the interior will have to be maintained periodically. This includes the entrance lobby, the hallways, the stairwells, and a recreation room. Our estimates for repainting and re carpeting assume that each task will be done throughout the common areas in the building at the same time. The costs to repaint and re carpet each area independently will increase the overall cost. We understand that the front entrance lobby was renovated with new tile, and the interior of the common hallways and stairwells were painted and re carpeted in 2014. We have assumed that interior painting will be done every 8 years. We have also budgeted for replacement of the carpet every 16 years to coincide with painting. We have also assumed that the front entrance tile will have a lifespan beyond the 30 year duration of this study. There is a recreation room with a bathroom. The Board already had a future budget for renovation of these areas including for replacement of the common furnishings, which we have used in this study. The interiors of each individual residential unit are the responsibility of each individual owner. Therefore, no reserve funding has been allocated to these areas. Entrance Lobby Floor 1 Hallway Floor 2 Hallway One of Two Main Stairwells PAGE 30 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Basement Entrance Lobby Basement Hallway Basement Stairwell Recreation Room PAGE 31 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

3.12 MISCELLANEOUS MECHANICAL Controlled Access System There is a controlled access system with an intercom panel at the main entrance to this building that we understand was installed in 2016. We have budgeted for replacement of the controlled access system intercom panel every 20 years. Controlled Access Panel Mailbox Bank There is a mailbox bank at the east entrance to this building that we understand was installed in 2016. We have assumed that this mailbox bank will have a total lifespan of 30 years. Mailbox Bank Sump Pump We understand that there is a sump pump in the east crawlspace. We have assumed that this sump pump will have a typical lifespan of 7 years. PAGE 32 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

3.13 AMENITIES There are no amenities on this property that are not accounted for in other sections of this report. 3.20 SUMMARY OF ANNUAL ANTICIPATED EXPENSES Using the conclusions described throughout Section 3.0 Physical Analysis, the following Table 3.20 lists the annual anticipated capital expenses for each reserve item in the year that we believe is most probable. All of these anticipated expenses already have inflation factored into them at the assumed level that is listed in Section 4.3 Assumptions for Future Interest Rate and Inflation. PAGE 33 OF 54 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

LEVEL 1 RESERVE STUDY FOR SEAVUE CONDOMINIUMS TABLE 3.20: ANNUAL CAPITAL EXPENSES Action Required 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 3.2 SITE Asphalt overlay - phase 1 of 2 $41,000 Asphalt overlay - phase 2 of 2 $25,750 Asphalt repairs prior to resealing and overlay $3,754 $4,352 Asphalt seal coating and restriping $4,711 $5,462 Entry bridge - repair/replace Fencing project at the southwest side of the property $2,884 Northeast drainage project - remaining cost to be paid $18,540 3.3 STRUCTURE No structural expenditures budgeted 3.4 ROOFING Resurface flat roofs with 60-mil PVC Replace skylights Paint metal roofs with electrostatic coating $15,657 Replace chimney caps 3.5 EXTERIOR Spot siding repair allotment prior to each painting cycle $11,593 $14,258 Clean, caulk, and paint the exteriors of the stucco on the building and garage $52,220 $64,223 Clean, caulk, and paint the exteriors of the James Hardie on the building and garage Replace the front entrance door Replace the auxiliary entrance doors to the buildings $15,650 Replace wood garage doors $23,591 Replace metal garage doors Periodic unit common door/window replacement $22,510 $25,335 $28,515 3.6 ELECTRICAL SYSTEMS Replace the interior light fixtures Miscellaneous electrical systems expenditures $3,130 $3,629

LEVEL 1 RESERVE STUDY FOR SEAVUE CONDOMINIUMS TABLE 3.20: ANNUAL CAPITAL EXPENSES Action Required 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 3.7 PLUMBING SYSTEMS Miscellaneous plumbing systems expenditures $6,260 $7,257 3.8 HVAC SYSTEMS There are no significant common HVAC systems on this property 3.9 ELEVATORS Elevator cab interior renovations Elevator hoist and track - major maintenance Elevator HPU and controls - major maintenance Elevator door operator packages 3.10 FIRE DETECTION & SUPPRESSION Replace the fire alarm control panel 3.11 COMMON INTERIOR FINISHES Repaint common areas $21,430 $27,146 Recarpet common areas $34,004 Remodel recreation room Remodel recreation room bathroom Replace common furnishings 3.12 MISCELLANEOUS MECHANICAL Replace secured access control panel Replace mailbox bank Replace sump pump $1,476 3.13 AMENITIES No amenities not mentioned in other areas of this table ANNUAL EXPENSES BY YEAR $41,000 $47,174 $0 $0 $43,940 $120,909 $0 $1,476 $25,335 $15,657 $20,700 $0 $168,147