PROFESSIONAL RESERVE STUDY

PROFESSIONAL RESERVE STUDY Villa Marina 17104 NE 45 th Street, Redmond, WA 98053 For: Villa Marina Association of Apartment Owners c/o Sacha Copeland The Copeland Group, LLC 221 First Ave W, Suite 105 Seattle, WA 98119 (206) 388-0181 Prepared By: Jeff Samdal, PE, RS, PRA jeff@samdalassoc.com (206) 412-4305 Date Prepared: March 31, 2017 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 Required Statement Per State of Washington Senate Bill 6215...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 Senate Bill (SB) 6215...7 2.3 Washington State House Bill (HB) 1309...8 2.4 Scope and Methodology...9 2.5 Sources of Information...10 2.6 Definitions...10 2.7 Frequently Asked Questions About Reserve Studies...11 3.0 PHYSICAL ANALYSIS...13 3.1 Component Assessment and Valuation...13 Table 3.1A: Component Assessment and Valuation... 14 Table 3.1B: Table of Categorized Expenses over the Duration of the Study... 18 Figure 3.1B: Pie Chart of Categorized Expenses over the Duration of the Study... 18 3.2 Site...19 3.3 Structure...27 3.4 Roofing...28 3.5 Exterior...30 3.6 Electrical Systems...34 3.7 Plumbing Systems...35 3.8 HVAC Systems...36 3.9 Elevators...36 3.10 Fire Detection and Suppression...36 3.11 Common Interior Finishes...37 3.12 Miscellaneous Mechanical...39 3.13 Amenities...40 3.20 Summary of Annual Anticipated Expenses...41 PAGE 2 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

4.0 FINANCIAL ANALYSIS...54 4.1 Current Financial Information and Current Funding Plan...54 4.2 Recommended Reserve Funding Plan...54 4.3 Other Required Funding Plan Options...56 4.4 Assumptions for Future Interest Rate and Inflation...57 4.5 Annual Fund Balances; Annual Funding Table and Figures...57 Figure 4.5A-1 Comparison of Funding Plans Reserve Fund Balances Through 2047... 64 Figure 4.5A-2 Comparison of Funding Plans Reserve Fund Balances Through 2027... 64 Figure 4.5B Comparison of Funding Plans -- Association Contributions to Reserve Fund by Year... 65 Figure 4.5C Comparison of Funding Plans Percentage of Full Funding by Year... 65 4.6 Other Common Funding Methods...66 5.0 LIMITATIONS...67 APPENDIX...68 PAGE 3 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

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 8.75 acres and is located on the west shore of Lake Sammamish at the northern end of the lake, adjacent Marymoor Park. There are 25 residential buildings containing 180 residential units. Additionally, there is a clubhouse, a pool house, and two laundry buildings. According to King County Records, the property was constructed in 1968. The property gradually slopes down to the lake and consists of a large asphalt parking lot, a swimming pool, lawns, and mature landscaping outside of the buildings themselves. Adjacent to the property there are other residential properties. The roofs of these buildings are primarily flat with a pitched permimeter mansard on each roof. The flat roof surfaces are surfaced with a combination of modified bitumen torch down roof surfacing, PVC single ply roofing, and EPDM single ply roofing. The perimeter pitched roofs are surfaced with laminate asphalt composition roof surfacing. The exteriors of these buildings are primarily clad with wood lap siding and stucco, with wood trim. The windows of these buildings are a combination of aluminum frame windows with many windows upgraded to vinyl frame windows. The elevated decks are wood frame solid membrane decking that is surfaced primarily with elastomeric coating. There are also ground level wood decks that are added by individual owners. 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 There are numerous scopes of work that we believe are necessary in 2017 and 2018 that are listed in Table 3.20. PAGE 4 OF 68 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 Sacha Copeland of The Copeland Group. Table 1.4: Current Status of the Reserve Fund Current Reserve Balance $608,000 as of February 28, 2017 Current Annual Reserve Fund Contribution $62,500 Average Per Unit Per Month $28.94 Planned Special Assessment(s) $62,500 Balance Required for Full Funding $9,556,051 Current Percentage of Full Funding 6.4% PAGE 5 OF 68 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. In order to pay for immediate needs, a 2017 special assessment or loan of $8,460,000 will be necessary. This has been assumed for all funding options listed below. All funding options below are in addition to the initial assessment or loan that is necessary, which translates to an average of $47,000 per unit. 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 $488,051 Average Initial Special Assessment per Unit $2,711 Annual Reserve Fund Contribution Required for the Reserve Fund to remain Fully Funded $401,111 Option 2 Path to Full Funding in 5 Years Average Contribution per Unit per Month $185.70 Annual Reserve Fund Contribution Required for the Reserve Fund to be Fully Funded in 5 years $504,576 of which $103,464 will be make up funding Option 3 Path to Full Funding in 10 Years Average Contribution per Unit per Month $233.60 Annual Reserve Fund Contribution Required for the Reserve Fund to be Fully Funded in 10 years $456,659 of which $55,548 will be make up funding Option 4 Path to Full Funding in 30 Years* Average Contribution per Unit per Month $211.42 Annual Reserve Fund Contribution Required for the Reserve Fund to be Fully Funded in 30 years $425,286 of which $24,175 will be make up funding Option 5 Baseline Funding* Average Contribution per Unit per Month $196.89 Annual Reserve Fund Contribution Required for Baseline Funding (Keeping the Reserve Fund above Zero over the 30 Year Period) $182,000 Average Contribution per Unit per Month $84.26 *These funding levels are required by WA State HB 1309. 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 68 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 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 64.38.065 to 64.38.090. 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 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

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 64.34.3.80 64.34.392 for condominiums and codified within RCW 64.38.065 64.38.090 for homeowners associations. This law became effective January 1, 2012. 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 1309. This Reserve Study meets the reporting qualifications of Reserve Studies per WA State HB 1309 PAGE 8 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

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 January 25, 2017, which was based on our correspondence with Sacha Copeland. 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 February 24, 2017 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 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

2.5 SOURCES OF INFORMATION The following people provided us information for this study: Sacha Copeland, Property Manager, The Copeland Group Amy Byron, Board Vice President and Treasurer The following documents were viewed as part of this study Schematic Site Map of Property Survey Maps Property Inspection Report, by The Soltner Group, dated May 1, 1991 Property Inspection Report, by Grace Architects, dated 2009 Watershed Company, Proposal for Environmental Services, dated September 26, 2016 Pacific Piling & Underpinning Inspection Report, dated April 5, 2004 Reserve Study in 2016, by Reserve Consultants Roof Inspection Report by Four Seasons Roofing The physical inspection of the property occurred on the following date: February 24, 2017 2.6 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 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

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

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 64.34.380 64.34.392. 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: http://apps.leg.wa.gov/documents/billdocs/2007 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 68 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 13 OF 68 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 2017 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 92,600 SF $2.85 2 30 $263,910 $1,466 $48.87 Asphalt repairs prior to resealing and overlay 4,630 SF $8.50 2 5 $39,355 $219 $43.73 Asphalt seal coating and restriping 92,600 SF $0.28 2 5 $25,928 $144 $28.81 Storm system allotment 8.75 ACRE $1,000 0 5 $8,750 $49 $9.72 Roof drain installation 1 LS $10,000 0 2 $10,000 $56 $27.78 Replace wood fence 1,620 LF $32 21 25 $51,840 $288 $11.52 Restain wood fence and spot fencing replacement 1,620 LF $2.35 1 5 $3,807 $21 $4.23 Replace garbage enclosures 4 EA $3,500 0 10 $14,000 $78 $7.78 Replace mailbox kiosks 9 EA $3,200 3 25 $28,800 $160 $6.40 Landscaping and irrigation system allotment 1 LS $8,000 4 4 $8,000 $44 $11.11 Replace the entrance sign 1 EA $1,200 5 20 $1,200 $7 $0.33 Concrete flatwork allotment 1 LS $10,000 5 5 $10,000 $56 $11.11 Boat launch repairs 1 LS $4,000 5 5 $4,000 $22 $4.44 Deliver and spread new gravel in boat yard Clean, seal, and spot tuck-point both sides of front masonry wall Marina structural inspection of docks and pilings Dock pilings, floats, and clubhouse deck repairs allotment (gross estimate) Replace decking on docks and clubhouse deck 280 YDS $45.00 5 N/A $12,600 $70 N/A 2,700 SF $2.65 7 10 $7,155 $40 $3.98 1 BID $12,890 0 5 $12,890 $72 $14.32 1 LS $30,000 0 5 $30,000 $167 $33.33 4,664 SF $25 2 20 $116,600 $648 $32.39 Replace railing on clubhouse deck 240 LF $65 2 20 $15,600 $87 $4.33 3.3 STRUCTURE Gross estimate of periodic repairs of piers and sub-structural framing 1 LS $250,000 10 10 $250,000 $1,389 $138.89 PAGE 14 OF 68 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 3.4 ROOFING Roof repairs of Building 17301, 17305, 17309, 17408, 17404, and 17108 Roof repairs of Building 17110 and 17204 Resurface roof of Building 17104 1 Resurface roof of Building 17411 1 Resurface roof of Building 17203 1 Resurface roof of Building 17412 1 Resurface roof of Building 17211 1 Resurface roof of Building 17106 1 Resurface roof of Building 17212 1 Resurface roof of Building 17208 1 Resurface roof of Building 17112 1 Resurface roof of Building 17109 1 Resurface roof of Building 17207 1 Resurface roof of Building 17403/17407 Resurface roof of Building 17315 1 Resurface roof of Building 17301 1 Resurface roof of Building 17305 1 Resurface roof of Building 17309 1 Resurface roof of Building 17408 1 Resurface roof of Building 17404 1 Resurface roof of Building 17108 1 Resurface roof of Building 17110 1 Resurface roof of Building 17204 1 Resurface roof of Building 17302 1 Resurface roof of Building 17306 1 Resurface roof of Building 17310 1 Resurface the roofs of the laundry rooms 1 1 1 3 BID + 10% BID + 10% BID + 10% BID + 10% BID + 10% BID + 10% BID + 10% BID + 10% BID + 10% BID + 10% BID + 10% BID + 10% BID + 10% BID + 10% BID + 10% COMP BID + COMP 10% BID + COMP 10% BID + COMP 10% BID + COMP 10% BID + COMP 10% BID + COMP 10% BID + COMP 10% BID + COMP 10% BID + COMP 10% BID + COMP 10% BID + 10% BIDS + 10% $54,500 0 N/A $54,500 $303 N/A $8,600 0 N/A $8,600 $48 N/A $59,500 1 25 $59,500 $331 $13.22 $51,600 1 25 $51,600 $287 $11.47 $54,200 1 25 $54,200 $301 $12.04 $54,200 1 25 $54,200 $301 $12.04 $58,400 1 25 $58,400 $324 $12.98 $53,500 1 25 $53,500 $297 $11.89 $61,600 1 25 $61,600 $342 $13.69 $61,600 1 25 $61,600 $342 $13.69 $60,600 1 25 $60,600 $337 $13.47 $31,100 3 25 $31,100 $173 $6.91 $23,400 3 25 $23,400 $130 $5.20 $62,300 3 25 $62,300 $346 $13.84 $33,200 3 25 $33,200 $184 $7.38 $60,600 10 25 $60,600 $337 $13.47 $60,600 10 25 $60,600 $337 $13.47 $58,400 10 25 $58,400 $324 $12.98 $54,200 10 25 $54,200 $301 $12.04 $54,200 10 25 $54,200 $301 $12.04 $60,600 10 25 $60,600 $337 $13.47 $60,600 12 25 $60,600 $337 $13.47 $58,400 12 25 $58,400 $324 $12.98 $60,600 24 25 $60,600 $337 $13.47 $60,600 24 25 $60,600 $337 $13.47 $60,600 24 25 $60,600 $337 $13.47 $7,600 0 25 $22,800 $127 $5.07 PAGE 15 OF 68 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 3.5 EXTERIOR Re-clad the exterior siding, windows, and other building envelope elements 192,500 SF $25.00 1 50 $4,812,500 $26,736 $534.72 20% rot replacement contingency 20% Project $962,500 1 50 $192,500 $1,069 $21.39 15% for architecture, permitting, and project management 15% Project $750,750 1 50 $112,613 $626 $12.51 Paint exteriors of all buildings 192,500 SF $2.35 1 10 $452,375 $2,513 $251.32 Recoat elevated decks with elastomeric deck surface Replace 4 sets of exterior stairs every 5 years Finish the installation of foundation skirting where necessary 11,800 SF $9.50 1 5 $112,100 $623 $124.56 9 EA $4,000 3 5 $36,000 $200 $40.00 1 LS $80,000 0 N/A $80,000 $444 N/A All bottom floor open rear wood decks are the responsibility of each individual homeowner to maintain 3.6 ELECTRICAL SYSTEMS Replace exterior building mounted lights Miscellaneous electrical systems expenditures 360 EA $125 15 25 $45,000 $250 $10.00 180 UNIT $150 5 5 $27,000 $150 $30.00 3.7 PLUMBING SYSTEMS Replace supply piping in all units 180 EA $8,000 1 50 $1,440,000 $8,000 $160.00 Replace waste piping in all units 180 EA $5,000 1 50 $900,000 $5,000 $100.00 Replace one of the four common water heaters every 3 years Miscellaneous plumbing systems expenditures 1 EA $1,000 3 3 $1,000 $6 $1.85 180 UNIT $300 5 5 $54,000 $300 $60.00 3.8 HVAC SYSTEMS There are no significant common HVAC systems on this property. 3.9 ELEVATORS There are no elevators on this property 3.10 FIRE DETECTION & SUPPRESSION Replace the fire alarm control panel 1 EA $2,800 19 20 $2,800 $16 $0.78 PAGE 16 OF 68 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 3.11 COMMON INTERIOR FINISHES Refinish hardwood floors in the clubhouse 2,800 SF $2.65 5 10 $7,420 $41 $4.12 Renovate clubhouse kitchen 1 LS $12,000 5 20 $12,000 $67 $3.33 Renovate clubhouse bathrooms 2 EA $3,000 5 20 $6,000 $33 $1.67 Renovate pool house bathrooms 2 EA $5,000 7 20 $10,000 $56 $2.78 3.12 MISCELLANEOUS MECHANICAL Surveillance system upgrade 1 LS $10,000 1 5 $10,000 $56 $11.11 3.13 AMENITIES Re-plaster and re-tile the swimming pool 1 LS $60,000 8 18 $60,000 $333 $18.52 Replace the hot tub 1 LS $40,000 0 10 $40,000 $222 $22.22 Replace swimming pool furnace 1 EA $5,000 5 10 $5,000 $28 $2.78 Replace hot tub furnace 1 EA $3,800 5 10 $3,800 $21 $2.11 Replace hot tub filter 1 EA $2,600 0 10 $2,600 $14 $1.44 Replace hot tub pump 1 EA $1,100 0 10 $1,100 $6 $0.61 Replace swimming pool filter 1 EA $2,600 5 10 $2,600 $14 $1.44 Replace swimming pool pump 1 EA $1,100 5 10 $1,100 $6 $0.61 Pool furniture allotment 1 LS $3,000 5 5 $3,000 $17 $3.33 Average Cost Per Unit Per Year $2,163 PAGE 17 OF 68 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 $2,019,574 10.9% Structure $439,719 2.4% Roofing $3,290,185 17.7% Exterior $8,672,011 46.7% Electrical Systems $350,593 1.9% Plumbing Systems $2,987,988 16.1% HVAC Systems $0 0.0% Elevators $0 0.0% Fire Detection & Suppresion $4,910 0.0% Common Interior Finishes $128,764 0.7% Miscellaneous Mechanical $92,299 0.5% Amenities $584,132 3.1% TOTAL $18,570,175 Figure 3.1B: Pie Chart of Categorized Expenses over the Duration of the Study Electrical Systems Exterior Plumbing Systems Fire Detection & Suppresion Common Interior Finishes Miscellaneous Mechanical Amenities Site Roofing Structure PAGE 18 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

3.2 SITE The address of this property is 17104 NE 45 th Street, Redmond, WA 98053. Aerial image of property (courtesy of Google Earth) General Description of Site The subject property is approximately 8.75 acres and is located on the west shore of Lake Sammamish at the northern end of the lake, adjacent Marymoor Park. There are 25 residential buildings containing 180 residential units. Additionally, there is a clubhouse, a pool house, and two laundry buildings. According to King County Records, the property was constructed in 1968. The property gradually slopes down to the lake and consists of a large asphalt parking lot, a swimming pool, lawns, and mature landscaping outside of the buildings themselves. Adjacent to the property there are other residential properties. PAGE 19 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

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 following building envelope re cladding, we have also budgeted for periodic patching and other repairs as necessary. There are numerous areas of asphalt repairs that are necessary within the near future. 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 2019 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. Main Entrance Parking Lot Typical Asphalt Damage Typical Asphalt Damage PAGE 20 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

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. There are many storm drains that did not appear to be functioning properly; therefore, we suspect that they are in need of cleanout at this time. Roof Drains There is a conspicuous lack of downspout drains on this property. Therefore, we have budgeted for the installation of such drains. We have budgeted for this to be done little by little, as it is a significant undertaking. Typical Storm Drain Stream at the South Side of the Building Wood Fencing There is a perimeter fence along the northern border of this property. While it is possible that the cost to replace this fence will be split between Villa Marina and the neighboring property to the north. All wood fences are the responsibility of the Homeowners Association. The northern fence appeared to be approximately 1,620 linear feet long and 6 feet high. The wood fence is in good condition and does not appear to be that old. We do recommend that this fence be cleaned and stained within the near future. The wood fencing should have a lifespan of 25 years if it is maintained by stain and spot replacement. We have budgeted for painting every 5 years. North Fence North Fence PAGE 21 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Garbage Enclosures There are 4 garbage enclosures on this property. The garbage enclosures are basically solid privacy fencing with privacy fence gates. These garbage enclosures take a significant amount of wear and tear and will require constant maintenance, particularly the doors. We understand that these garbage enclosures will be replaced in 2017 and we have assumed that these garbage enclosures will have a total lifespan of 10 years if routine maintenance is done. Garbage Enclosure Garbage Enclosure Pole Mounted Lights There are some pole mounted lights on this property that are constructed of metal. We believe that it is likely that these lights will have a lifespan beyond the 30 year duration of this study unless damaged by a vehicle, which should be paid for via insurance. Pole Mounted Light PAGE 22 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Mailboxes Kiosks There are 9 metal mailbox kiosks around this property that are very old. We have budgeted for replacement of these mailbox kiosks in 2020. These metal mailbox kiosks should have a total lifespan of 25 years prior to replacement. Typical Metal Mailbox Kiosks Typical Metal Mailbox Kiosks Typical Metal Mailbox Kiosks PAGE 23 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Landscaping and Irrigation Generally, landscaping and irrigation systems are maintained via the operating budget. However, we have included a landscaping and irrigation allotment to cover expenses such as the replacement of dead trees and large scale repairs to the irrigation system. Sign Replacement There is a simple wood property sign at the entrance to this property. We have budgeted for sign replacement every 20 years. Our budget is relatively small as we have merely budgeted for replacement of this sign with another sign of comparable stature. If the Board would like a more prominent entrance sign or monument, then the budget will need to be adjusted accordingly. Masonry Wall There is a masonry wall along the southern border of this property. We have budgeted for cleaning, sealing, and spot tuckpointing of both sides of this masonry wall every 10 years. Entrance Sign and Entrance Wall and Common Landscaping Entrance Wall and Common Landscaping Concrete Flatwork There are concrete sidewalks and concrete curbing that are the responsibility of the HOA. We have budgeted for a general concrete flatwork and curbing allotment in the reserve study every 5 years. Concrete Walkway PAGE 24 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Boat Launch There is a boat launch on this property that is primarily asphalt and concrete. We have budgeted for periodic boat launch repairs that tend to be necessary periodically at these types of boat launches every 5 years. Boat Launch Boat Yard There is a boat yard adjacent the lake at the northern border of the property. This boat yard is a gravel lot that is approximately 30,240 square feet in area. We understand that there is some desire to pave this area with asphalt at some point in the future. However, as this is an improvement, we have not budgeted for repaving at this time. We have however budgeted for 280 yards of gravel to be dumped and spread in this parking lot every 5 years. This would translate into about 3 inches of gravel spread evenly across the lot. Gravel Boat Yard PAGE 25 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Docks, Clubhouse Deck, and General Marina Maintenance We understand that the Board plans to engage The Watershed Company in 2017 to perform a complete marina inspection that will include inspection of the pilings and the underside of all of the docks and the clubhouse deck. This inspection will be performed by 2 divers. The cost of this marina inspection is a bid price of $12,890. We recommend a similar type of inspection every 5 years. We really have no proper basis for an estimate of the repairs that will be necessary following the inspection. Therefore, we have simply budgeted for a gross marina and dock repairs allotment every 5 years. This budgetary number will clearly need to be more properly dialed in and will likely be more of an iterative estimate based on historical costs. We have budgeted for replacement for the wood decking of the docks and the clubhouse deck in 2019 and every 20 years thereafter. We recommend that synthetic decking be installed on all docks and decks to ensure a long lifespan of 20 years. Main Dock Leading to Clubhouse with Finger Docks Adjacent Main Dock Leading to Clubhouse with Finger Docks Adjacent PAGE 26 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Clubhouse Deck Clubhouse Deck 3.3 STRUCTURE The foundations of many of these buildings are slab on grade construction, presumably with grade beams and piers below all load bearing walls and columns respectively. However, the buildings that are closer to the water are built upon piers that support wood glue laminated beams that support the superstructures. The superstructures of these buildings are all wood. We understand that there have recently been extensive repairs of rotten piers and damaged framing below these buildings. Going forward, we have assumed that all existing structural repairs have been addressed appropriately. It is very difficult to determine an appropriate budget for future sub structural repairs below these buildings. Therefore, we have essentially just budgeted for a placeholder for sub structural repairs of piers and framing of $250,000 every 10 years. Please understand that this is a gross estimate and could sway widely either way based on the conditions that are present at the time. Based on the visual evidence, there are no anticipated capital expenditures associated with the structures of these buildings during the next 30 years. PAGE 27 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

3.4 ROOFING The roofs of these buildings are primarily flat with a pitched permimeter mansard on each roof. The flat roof surfaces are surfaced with a combination of modified bitumen torch down roof surfacing, PVC single ply roofing, and EPDM single ply roofing. The perimeter pitched roofs are surfaced with laminate asphalt composition roof surfacing. A complete roof analysis of all roofs on this property was performed in 2016 by Four Seasons Roof & Remodel Services Inc. We have used this roof analysis and the corresponding budgetary numbers as the basis for our estimates in this report. This report is located in the appendices of this report. By and large, the majority of the roofs on this property will need to be replaced within the near future; however, some have recently been replaced and/or repaired. Gutter replacement has been built into each estimate provided by Four Seasons. In all cases, we have added sales tax as well as a 10% contingency for sheathing replacement and rot repairs. For the purposes of this report we have assumed that all new roof surfaces on both the flat roofs and the pitched roofs will have a lifespan of 25 years. We are aware that the nominal lifespans of these surfaces vary slightly, as the pitched asphalt composition roof surface has an assumed nominal lifespan of 30 years and the PVC roofs surfacing has a typical lifespan of 20 to 30 years. Single Ply Roof Surfacing on Flat Roof Single Ply Roof Surfacing on Flat Roof Patch on Single Ply Roof Surfacing on Flat Roof Pitched Roof with Asphalt Composition Roof Surface PAGE 28 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Typical Flat Roof with EPDM Roof Surfacing Typical Flat Roof with EPDM Roof Surfacing Typical Metal Cap Flashing Typical Metal Cap Flashing Pitched Roof on Clubhouse Pitched Roof on Clubhouse PAGE 29 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

3.5 EXTERIOR The exteriors of these buildings are primarily clad with wood lap siding and stucco, with wood trim. The windows of these buildings are a combination of aluminum frame windows with many windows upgraded to vinyl frame windows. The elevated decks are wood frame solid membrane decking that is surfaced primarily with elastomeric coating. There are also ground level wood decks that are added by individual owners. Siding and Window Replacement The building envelopes of these buildings is currently 57 years old and is very weak when compared to modern building envelope assemblies. Therefore, we believe that these buildings should be re clad within the near future. We do not know what type of exterior finishes or future exterior design will be decided upon. Therefore, we have simply assumed that the exteriors will be primarily fiber cement and the windows will all be replaced at the same time with vinyl frame standard grade windows. Our gross estimate including windows is $25/sf including tax. In addition to cladding replacement, we have also budgeted for a 20% rot contingency and 15% for architecture, permitting, and project management. Exterior Re Painting and Re Caulking We recommend that the exteriors of all buildings be repainted in 2018 following re cladding. Typically, a property should clean, caulk, and repaint this type of exterior siding and trim every 7 to 10 years, depending on how the caulk and paint is holding up. We have scheduled repainting to occur every 8 years in the Reserve Study. 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 prepared for painting by scraping all loose paint off and spot replacing areas of siding and trim where necessary. Stucco We have budgeted for the stucco to be replaced at the same time as the wood siding and wood trim. Windows We understand that the windows are currently the responsibility of each individual owner. However, it makes no sense for this one building envelope element to be an individual item when it works in concert with the rest of the building envelope. Therefore, we recommend that the by laws be changed to make this a collective expense. We have budgeted for these windows to be replaced at the same time as the siding and the rest of the building envelope in 2018. Solid Membrane Decks and Landings The solid membrane decks and landings on this property are coated with elastomeric coating. We have budgeted for these decks to be cleaned and to be recoated in 2018 every 5 years thereafter. Exterior Stairs Each building has exterior stairs leading to the common landing between the upstairs units. Therefore, there are approximately 45 sets of exterior stairs. We really do not know how often these stairs will need to be rebuilt; however, for budgetary purposes, we have assumed that 9 sets of stairs will need to be rebuilt every 5 years. This way each set of stairs will be rebuilt every 45 years on average, always with the most urgent need taking precedence. Rear Open Wood Decks There are many rear open wood decks on the bottom floors that have been added since these buildings were originally constructed at the expense of each homeowner. Therefore, we have not budgeted for any funding to be put towards the rear open wood decks and have assumed that the maintenance of these decks is entirely the responsibility of each homeowner. Skirting The property is in process of replacing many areas of skirting surrounding many of these buildings. We do not know the budget for this skirting replacement; therefore, we have included a gross budgetary allotment for completing this project. PAGE 30 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Front of Clubhouse Front of Typical Building Front of Typical Building Rear of Typical Building Typical Windows Front of Typical Building PAGE 31 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Typical Deck Typical Deck Typical Unit Entry Typical Landing Perimeter Rim Joists Consisting of Stacked 2X Material Perimeter Rim Joists Consisting of Stacked 2X Material PAGE 32 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Laundry Building Laundry Building Rear Decks Rear Deck Close up of Stucco Cladding Clubhouse PAGE 33 OF 68 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 exterior light fixtures consist of one building mounted light at the front of each individual unit and one building mounted light above the doors at the rear of each individual unit. We have scheduled these lights to be replaced on a 25 year cycle. The interior light fixtures in the common areas that can simply be replaced as necessary via the operating budget at a relatively small cost. No funding has been budgeted for from the Reserve Fund. Typical Meter Bank PAGE 34 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

3.7 PLUMBING SYSTEMS We understand that there have been a considerable amount of leaks associated with the supply piping and the waste piping in these buildings. We have budgeted for the supply piping and the waste piping in all units to be replaced in 2018. Following replacement of the supply piping and the waste piping, 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. There is a common water heater in the pool house and a common water heater, the club house, and each of the 2 laundry buildings. These types of water heaters have a typical lifespan of 10 to 15 years. We have budgeted for replacement of one of these water heaters every 3 years, so each water heater will have a total lifespan of 12 years on average. We understand individual water heaters provide hot water to each individual unit. These water heaters are not the responsibility of the Homeowners Association. 40 Gallon Hot Water Tank in Pool House Manufactured in 2013 PAGE 35 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

3.8 HVAC SYSTEMS There are no significant common HVAC systems on this property. 3.9 ELEVATORS There are no elevators on this property. 3.10 FIRE DETECTION AND SUPPRESSION Building 17302/17306/17310 has a newly installed central fire alarm system. The fire alarm system includes smoke and heat detectors, pull stations, and audio video annunciators (combination strobe and speaker). The cost to install this entire system was considerable. Going forward, we have merely budgeted for the replacement of the fire alarm control panel alone and not a full replacement of the system. Therefore, the cost will be considerably less than a full system replacement. We have budgeted for replacement of the fire alarm control panel every 20 years. None of the other buildings have a comprehensive fire detection system. There are no fire suppression systems on this property. One Fire Alarm Control Panel on 17302/17306/17310 PAGE 36 OF 68 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 clubhouse, the pool house bathrooms, and two common laundry rooms. The clubhouse has a large open area that has hard wood floors, a kitchen, and two bathrooms. We have budgeted for resurfacing of the clubhouse floor every 10 years. Additionally, we have budgeted for refurbishment of the clubhouse kitchen and bathrooms every 20 years, starting in 5 years from now. There laundry rooms have tile floors and have been maintained outside of the Reserve Fund historically. Therefore, no Reserve Funding has been budgeted for. We understand that the laundry washers and dryers are leased equipment. There is also an old leasing center on this property, as this is an unfinished space. At this time, the Board has no plans for any renovation of this unfinished space. The interiors of each individual residential unit are the responsibility of each individual owner. Therefore, no reserve funding has been allocated to these areas. Interior of West Laundry House Interior of Old Leasing Center One of Two Bathrooms in Pool House Clubhouse Floor PAGE 37 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Clubhouse Kitchen Clubhouse Kitchen PAGE 38 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

3.12 MISCELLANEOUS MECHANICAL Surveillance System There is a surveillance system on this property. We understand that the Board plans on a significant upgrade to this surveillance system in 2018 at a budgetary cost of $10,000. We have planned for a similar surveillance system upgrade every 5 years. Typical Surveillance Cameras Typical Surveillance Camera City of Redmond Pump Station #7 There is a pump station located on this property that is owned and maintained entirely via the City of Redmond. City of Redmond Pump Station #7 PAGE 39 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

3.13 AMENITIES Swimming Pool and Hot Tub There is a swimming pool and hot tub on this property. We understand that the swimming pool was re plastered around 2007. We have budgeted for this swimming pool to be re plastered and re tiled every 18 years. We understand that the hot tub is currently out of commission and will be replaced within the near future. We have scheduled this replacement of the hot tub at $40,000 in 2017 and every 15 years thereafter. The swimming pool deck consists of concrete pavers. We have assumed that this concrete paver pool deck will be maintained as necessary via the operating budget. No Reserve Funding has been budgeted for the swimming pool deck. The fence surrounding the swimming pool area is iron and is corroding in some areas. We recommend that this fence to be painted with an oxidation inhibiting paint in 2017 and every 5 years thereafter. We understand that this type of maintenance is performed as part of routine maintenance outside of the Reserve Fund. With maintenance, we have assumed that this fence will have a lifespan well beyond the 30 year duration of this study. We have assumed that all mechanical equipment will be replaced on a 10 year cycle. We have also budgeted for a pool furniture allotment every 5 years. Swimming Pool Swimming Pool Hot Tub Swimming Pool Fence PAGE 40 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Swimming Pool Equipment Hot Tub Equipment 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 41 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 3.20: ANNUAL CAPITAL EXPENSES Action Required 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 3.2 SITE Asphalt overlay $279,982 Asphalt repairs prior to resealing and overlay $41,752 $48,402 $56,111 Asphalt seal coating and restriping $27,507 $31,888 $36,967 Storm system allotment $8,750 $10,144 $11,759 Roof drain installation $10,000 $10,609 $11,255 $11,941 $12,668 $13,439 $14,258 Replace wood fence Restain wood fence and spot fencing replacement $3,921 $4,546 $5,270 Replace garbage enclosures $14,000 $18,815 Replace mailbox kiosks $31,471 Landscaping and irrigation system allotment $9,004 $10,134 $11,406 Replace the entrance sign $1,391 Concrete flatwork allotment $11,593 $13,439 Boat launch repairs $4,637 $5,376 Deliver and spread new gravel in boat yard $14,607 Clean, seal, and spot tuck-point both sides of front masonry wall $8,800 Marina structural inspection of docks and pilings $12,890 $14,943 $17,323 3.3 STRUCTURE Gross estimate of periodic repairs of piers and sub-structural framing $156,701

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 3.20: ANNUAL CAPITAL EXPENSES Action Required 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 3.4 ROOFING Roof repairs of Building 17301, 17305, 17309, 17408, 17404, and 17108 $54,500 Roof repairs of Building 17110 and 17204 $8,600 Resurface roof of Building 17104 $61,285 Resurface roof of Building 17411 $53,148 Resurface roof of Building 17203 $55,826 Resurface roof of Building 17412 $55,826 Resurface roof of Building 17211 $60,152 Resurface roof of Building 17106 $55,105 Resurface roof of Building 17212 $63,448 Resurface roof of Building 17208 $63,448 Resurface roof of Building 17112 $62,418 Resurface roof of Building 17109 $33,984 Resurface roof of Building 17207 $25,570 Resurface roof of Building 17403/17407 $68,077 Resurface roof of Building 17315 $36,279 Resurface roof of Building 17301 $81,441 Resurface roof of Building 17305 $81,441 Resurface roof of Building 17309 $78,485 Resurface roof of Building 17408 $72,840 Resurface roof of Building 17404 $72,840 Resurface roof of Building 17108 $81,441 Resurface roof of Building 17110 $86,401 Resurface roof of Building 17204 $83,264 Resurface roof of Building 17302 Resurface roof of Building 17306 Resurface roof of Building 17310 Resurface the roofs of the laundry rooms $22,800

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 3.20: ANNUAL CAPITAL EXPENSES Action Required 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 3.5 EXTERIOR Re-clad the exterior siding, windows, and other building envelope elements $4,956,875 20% rot replacement contingency $198,275 15% for architecture, permitting, and project management $115,991 Paint exteriors of all buildings $465,946 $626,193 Recoat elevated decks with elastomeric deck surface $115,463 $133,853 $155,173 Replace 4 sets of exterior stairs every 5 years $39,338 $45,604 Finish the installation of foundation skirting where necessary $80,000 3.6 ELECTRICAL SYSTEMS Replace exterior building mounted lights Miscellaneous electrical systems expenditures $31,300 $36,286 3.7 PLUMBING SYSTEMS Replace supply piping in all units $1,483,200 Replace waste piping in all units $927,000 Replace one of the four common water heaters every 3 years $1,093 $1,194 $1,305 $1,426 Miscellaneous plumbing systems expenditures $62,601 $72,571 3.8 HVAC SYSTEMS There are no significant common HVAC systems on this property. 3.9 ELEVATORS There are no elevators on this property 3.10 FIRE DETECTION & SUPPRESSION Replace the fire alarm control panel

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 3.20: ANNUAL CAPITAL EXPENSES Action Required 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 3.11 COMMON INTERIOR FINISHES Refinish hardwood floors in the clubhouse $8,602 Renovate clubhouse kitchen $13,911 Renovate clubhouse bathrooms $6,956 Renovate pool house bathrooms $12,299 3.12 MISCELLANEOUS MECHANICAL Surveillance system upgrade $10,300 $11,941 $13,842 3.13 AMENITIES Re-plaster and re-tile the swimming pool $76,006 Replace the hot tub $40,000 $53,757 Replace swimming pool furnace $5,796 Replace hot tub furnace $4,405 Replace hot tub filter $2,600 $3,494 Replace hot tub pump $1,100 $1,478 Replace swimming pool filter $3,014 Replace swimming pool pump $1,275 Pool furniture allotment $3,478 $4,032 ANNUAL EXPENSES BY YEAR $255,240 $8,807,627 $359,850 $235,810 $20,259 $198,653 $163,474 $101,388 $144,412 $1,305 $876,959 $800,478 $289,833

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 3.20: ANNUAL CAPITAL EXPENSES Action Required 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 3.2 SITE Asphalt overlay Asphalt repairs prior to resealing and overlay Asphalt seal coating and restriping Storm system allotment Roof drain installation Replace wood fence Restain wood fence and spot fencing replacement Replace garbage enclosures $65,048 $75,408 $42,855 $49,681 $13,632 $15,803 $15,126 $16,047 $17,024 $18,061 $19,161 $20,328 $96,438 $6,109 $7,082 $25,286 Replace mailbox kiosks Landscaping and irrigation system allotment $12,838 $14,449 $16,262 Replace the entrance sign Concrete flatwork allotment Boat launch repairs $15,580 $18,061 $6,232 $7,224 Deliver and spread new gravel in boat yard Clean, seal, and spot tuck-point both sides of front masonry wall Marina structural inspection of docks and pilings $11,826 $20,082 $23,281 3.3 STRUCTURE Gross estimate of periodic repairs of piers and sub-structural framing

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 3.20: ANNUAL CAPITAL EXPENSES Action Required 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 3.4 ROOFING Roof repairs of Building 17301, 17305, 17309, 17408, 17404, and 17108 Roof repairs of Building 17110 and 17204 Resurface roof of Building 17104 Resurface roof of Building 17411 Resurface roof of Building 17203 Resurface roof of Building 17412 Resurface roof of Building 17211 Resurface roof of Building 17106 Resurface roof of Building 17212 Resurface roof of Building 17208 Resurface roof of Building 17112 Resurface roof of Building 17109 Resurface roof of Building 17207 Resurface roof of Building 17403/17407 Resurface roof of Building 17315 Resurface roof of Building 17301 Resurface roof of Building 17305 Resurface roof of Building 17309 Resurface roof of Building 17408 Resurface roof of Building 17404 Resurface roof of Building 17108 Resurface roof of Building 17110 Resurface roof of Building 17204 Resurface roof of Building 17302 Resurface roof of Building 17306 Resurface roof of Building 17310 $123,187 $123,187 $123,187 Resurface the roofs of the laundry rooms

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 3.20: ANNUAL CAPITAL EXPENSES Action Required 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 3.5 EXTERIOR Re-clad the exterior siding, windows, and other building envelope elements 20% rot replacement contingency 15% for architecture, permitting, and project management Paint exteriors of all buildings Recoat elevated decks with elastomeric deck surface Replace 4 sets of exterior stairs every 5 years $841,551 $179,888 $208,539 $52,867 $61,288 $71,049 Finish the installation of foundation skirting where necessary 3.6 ELECTRICAL SYSTEMS Replace exterior building mounted lights Miscellaneous electrical systems expenditures $70,109 $42,065 $48,765 3.7 PLUMBING SYSTEMS Replace supply piping in all units Replace waste piping in all units Replace one of the four common water heaters every 3 years Miscellaneous plumbing systems expenditures $1,558 $1,702 $1,860 $2,033 $84,130 $97,530 3.8 HVAC SYSTEMS There are no significant common HVAC systems on this property. 3.9 ELEVATORS There are no elevators on this property 3.10 FIRE DETECTION & SUPPRESSION Replace the fire alarm control panel $4,910

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 3.20: ANNUAL CAPITAL EXPENSES Action Required 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 3.11 COMMON INTERIOR FINISHES Refinish hardwood floors in the clubhouse $11,560 Renovate clubhouse kitchen Renovate clubhouse bathrooms Renovate pool house bathrooms 3.12 MISCELLANEOUS MECHANICAL Surveillance system upgrade $16,047 $18,603 3.13 AMENITIES Re-plaster and re-tile the swimming pool Replace the hot tub $72,244 Replace swimming pool furnace Replace hot tub furnace $7,790 $5,920 Replace hot tub filter Replace hot tub pump $4,696 $1,987 Replace swimming pool filter Replace swimming pool pump Pool furniture allotment ANNUAL EXPENSES BY YEAR $4,051 $1,714 $4,674 $5,418 $52,867 $15,126 $289,096 $230,928 $119,729 $80,014 $4,910 $352,806 $1,174,073 $144,250 $71,049 $408,185

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 3.20: ANNUAL CAPITAL EXPENSES Action Required 2042 2043 2044 2045 2046 2047 3.2 SITE Asphalt overlay Asphalt repairs prior to resealing and overlay Asphalt seal coating and restriping Storm system allotment Roof drain installation $87,419 $57,594 $18,321 $21,239 $21,566 $22,879 $24,273 Replace wood fence Restain wood fence and spot fencing replacement $8,210 Replace garbage enclosures $33,982 Replace mailbox kiosks Landscaping and irrigation system allotment $65,892 $18,303 Replace the entrance sign Concrete flatwork allotment Boat launch repairs $2,513 $20,938 $24,273 $8,375 $9,709 Deliver and spread new gravel in boat yard Clean, seal, and spot tuck-point both sides of front masonry wall Marina structural inspection of docks and pilings 3.3 STRUCTURE Gross estimate of periodic repairs of piers and sub-structural framing $15,893 $26,989 $31,287 $283,019

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 3.20: ANNUAL CAPITAL EXPENSES Action Required 2042 2043 2044 2045 2046 2047 3.4 ROOFING Roof repairs of Building 17301, 17305, 17309, 17408, 17404, and 17108 Roof repairs of Building 17110 and 17204 Resurface roof of Building 17104 Resurface roof of Building 17411 Resurface roof of Building 17203 Resurface roof of Building 17412 Resurface roof of Building 17211 Resurface roof of Building 17106 Resurface roof of Building 17212 Resurface roof of Building 17208 Resurface roof of Building 17112 $128,317 $111,280 $116,887 $116,887 $125,945 $115,378 $132,846 $132,846 $130,689 Resurface roof of Building 17109 Resurface roof of Building 17207 Resurface roof of Building 17403/17407 Resurface roof of Building 17315 $71,155 $53,538 $142,538 $75,959 Resurface roof of Building 17301 Resurface roof of Building 17305 Resurface roof of Building 17309 Resurface roof of Building 17408 Resurface roof of Building 17404 Resurface roof of Building 17108 Resurface roof of Building 17110 Resurface roof of Building 17204 Resurface roof of Building 17302 Resurface roof of Building 17306 Resurface roof of Building 17310 Resurface the roofs of the laundry rooms $47,738

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 3.20: ANNUAL CAPITAL EXPENSES Action Required 2042 2043 2044 2045 2046 2047 3.5 EXTERIOR Re-clad the exterior siding, windows, and other building envelope elements 20% rot replacement contingency 15% for architecture, permitting, and project management Paint exteriors of all buildings Recoat elevated decks with elastomeric deck surface $241,754 Replace 4 sets of exterior stairs every 5 years $82,365 Finish the installation of foundation skirting where necessary 3.6 ELECTRICAL SYSTEMS Replace exterior building mounted lights Miscellaneous electrical systems expenditures $56,532 $65,536 3.7 PLUMBING SYSTEMS Replace supply piping in all units Replace waste piping in all units Replace one of the four common water heaters every 3 years Miscellaneous plumbing systems expenditures $2,221 $2,427 $113,064 $131,072 3.8 HVAC SYSTEMS There are no significant common HVAC systems on this property. 3.9 ELEVATORS There are no elevators on this property 3.10 FIRE DETECTION & SUPPRESSION Replace the fire alarm control panel

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 3.20: ANNUAL CAPITAL EXPENSES Action Required 2042 2043 2044 2045 2046 2047 3.11 COMMON INTERIOR FINISHES Refinish hardwood floors in the clubhouse Renovate clubhouse kitchen Renovate clubhouse bathrooms $15,536 $25,125 $12,563 Renovate pool house bathrooms $22,213 3.12 MISCELLANEOUS MECHANICAL Surveillance system upgrade $21,566 3.13 AMENITIES Re-plaster and re-tile the swimming pool $129,395 Replace the hot tub $97,090 Replace swimming pool furnace Replace hot tub furnace $10,469 $7,956 Replace hot tub filter Replace hot tub pump $6,311 $2,670 Replace swimming pool filter Replace swimming pool pump Pool furniture allotment ANNUAL EXPENSES BY YEAR $5,444 $2,303 $6,281 $7,282 $380,146 $1,533,567 $185,340 $532,630 $0 $740,169

4.0 FINANCIAL ANALYSIS The financial analysis in this Reserve Study is a proprietary system that was developed by Jeff Samdal & Associates. We have provided the funding method that we believe will most adequately fund the reserves of this Association. 4.1 CURRENT FINANCIAL INFORMATION AND CURRENT FUNDING PLAN The Association s Reserve Fund balance was $608,000 as of February 28, 2017 (Balance provided by Sacha Copeland). According to our calculations detailed in this report, the Reserve Fund balance required for Full Funding of this property at this time is $9,556,051. Therefore, the property is 6.4% funded. The current annual contribution to the reserve fund is $240,000, which averages $111.11 per unit per month. For the purpose of comparison to our recommended funding plans, we have assumed that the Association will increase their current reserve fund contribution by 3% annually to account for inflation. This is shown in Table 4.5 Reserve Fund Balance Sheet (Section 4.5) and all subsequent figures. This property is currently 6.4% funded. Additionally, there will be a special assessment of $62,500 in 2017. This funding contribution is not adequate to obtain Full Funding of this property. 4.2 RECOMMENDED RESERVE FUNDING PLAN Full Funding is the ideal position for any property and represents a strong financial position. We recommend that all properties be Fully Funded, as Full Funding allows Associations to maintain their properties adequately and minimizes their risk of unplanned special assessments. In order to pay for immediate needs, a 2017 special assessment or loan of $8,460,000 will be necessary. This has been assumed for all funding options listed below. All funding options below are in addition to the initial assessment or loan that is necessary, which translates to an average of $47,000 per unit. Ideally, the Association should be Fully Funded immediately; however, we recognize that financial realities can sometimes make this difficult. Therefore, we have provided three different plans to get the Association Fully Funded within three different time frames: Immediately, Within Five Years, and Within Ten Years. It is to the Association s benefit to be Fully Funded as soon as possible. Our funding recommendations are as follows: Option One: Immediate Full Funding If the Association desires to be Fully Funded immediately, then based on the anticipated expenditures the Association will need to immediately contribute a total of $488,051 to the Reserve Fund. This translates to an average of $2,711 per unit. Following this initial contribution, the funding plan necessary to maintain a Fully Funded Capital Reserve Fund for the duration of this study will be a total property contribution of $401,111 per year in the initial year, which translates to $185.70 per unit per month. This annual contribution will need to be increased 3% each subsequent year to maintain Full Funding and to account for inflation. For a detailed look at the annual funding contribution necessary per year, see Table 4.5 Reserve Fund Balance Sheet (Section 4.5). OR Option One Average Immediate Contribution Per Unit: $2,711 Avg. Contribution Thereafter Per Unit Per Month: 2018 $185.70 (with 3% annual increase thereafter) PAGE 54 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Option Two: Full Funding Within Five Years There is currently a full funding deficiency of $488,051. This option makes up this deficiency over the next five years. Starting in 2018 for five years through 2022, the Association will make up their Reserve Fund deficiency by contributing $504,576 annually (which includes $103,464 in make up funds and $401,111 in capital maintenance funds that will increase annually with inflation). This translates to an average of $233.60 per unit per month in the initial year. If this plan is followed, the Association will be Fully Funded by the start of 2023. From this point on, the funding plan will be identical to funding plan listed above in the Immediate Full Funding option to maintain Full Funding. This means that the Association will reduce their Reserve Fund contribution to $464,998 in 2023, which translates to $215.28 per unit per month. This 2023 annual contribution will need to be increased 3% each subsequent year (to account for inflation) for the duration of this 30 year study to maintain Full Funding and to account for inflation. For a detailed look at the annual funding contribution necessary per year, see Table 4.5 Reserve Fund Balance Sheet (Section 4.5). Option Two Average Contributions Per Unit Per Month: 2018 $233.60 Increasing at 3% per year through: 2022 $256.91 At year end, full funding will be achieved. Then: 2023 $215.28 (with 3% annual increase thereafter) OR Option Three: Full Funding Within Ten Years There is currently a full funding deficiency of $488,051. This option makes up this deficiency over the next ten years. Starting in 2018 for ten years through 2027, the Association will make up their Reserve Fund deficiency by contributing $456,659 annually (which includes $55,548 in make up funds and $401,111 in capital maintenance funds that will increase annually with inflation). This translates to an average of $211.42 per unit per month in the initial year. If this plan is followed, the Association will be Fully Funded by the start of 2028. From this point on, the funding plan will be identical to funding plan listed above in the Immediate Full Funding option to maintain Full Funding. This means that the Association will reduce their Reserve Fund contribution to $539,060 in 2028, which translates to $249.56 per unit per month. This 2028 annual contribution will need to be increased 3% each subsequent year for the duration of this 30 year study to maintain Full Funding and to account for inflation. For a detailed look at the annual funding contribution necessary per year, see Table 4.5 Reserve Fund Balance Sheet (Section 4.5). Option Three Average Contributions Per Unit Per Month: 2018 $211.42 Increasing at 3% per year through: 2027 $268.01 At year end, full funding will be achieved. Then: 2028 $249.56 (plus 3% annual increase thereafter) Other funding options are also possible. Section 4.6 details other common funding methods as well. It is up to the Association to decide which funding option is best for them. PAGE 55 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

4.3 OTHER REQUIRED FUNDING PLAN OPTIONS Per Washington State HB 1309, our Reserve Study is required to provide the following funding plans: 30 Year Make up Funding Plan necessary for the Association Reserve Fund to reach a Full Funding Level in 30 years. Baseline Funding Minimum level of funding required in order to maintain the Reserve Fund above zero while paying for all components listed in Table 3.1 Component Assessment and Valuation Table. Special Note: Because these are bare minimum funding options that increase an Association s risk for special assessments (and financial instability), we do not recommend either of these funding options. We recommend that the Association obtain a level of Full Funding as soon as possible to ensure that the Association has the resources necessary to adequately maintain its collective property and minimize the burden of special assessments. These required options are as follows: Option Four: Full Funding in 30 Years There is currently a full funding deficiency of $488,051. This option makes up this deficiency over the next thirty years. Starting in 2018 for thirty years through 2047, the Association will make up their Reserve Fund deficiency by contributing $425,286 annually (which includes $24,175 in make up funds and $401,111 in capital maintenance funds that will increase annually with inflation). This translates to an average of $196.89 per unit per month in the initial year. If this plan is followed, the Association will be Fully Funded by the start of 2048. For a detailed look at the annual funding contribution necessary per year, see Table 4.5 Reserve Fund Balance Sheet (Section 4.5). Option Four Average Contributions Per Unit Per Month: 2018 $196.89 Increasing at 3% per year through: 2047 $448.81 OR Option Five: Baseline Funding Keeping Reserve Balance above Zero The funding plan necessary to maintain the Reserve Fund above zero for the duration of this study will be an annual contribution of $182,000 per year in the initial year, which translates to $84.26 per unit per month. This annual contribution will need to be increased 3% each subsequent year to maintain the Reserve Fund above zero and to account for inflation. For a detailed look at the annual funding contribution necessary per year, see Table 4.5 Reserve Fund Balance Sheet (Section 4.5). Option Five Average Contributions Per Unit Per Month: $84.26 (with 3% annual increase thereafter) PAGE 56 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

4.4 ASSUMPTIONS FOR FUTURE INTEREST RATE AND INFLATION For the purposes of this report, we have assumed that the inflation rate over the next 30 years will average 3%. This is based on historical averages over the last 25 years and our conservative best guess for the future. This percentage can vary greatly just as global economic conditions can vary, which is one reason why this Reserve Study should be updated annually per Washington State SB 6215, which we provide complimentary over the next two years with this Reserve Study (see Appendix). For the purpose of this study, we will assume that the Association manages their money in the Reserve Fund so that the average interest rate return on its money will be equal to that of inflation. This is a conservative estimate given that since 1965, the average yield between short term treasuries and inflation has been 1.04%, which means that these relatively conservative investments have been able to outpace inflation over the long term (according to Crestmont Research, www.crestmontresearch.com). Since we have assumed that the inflation rate over the duration of this study will average 3%, we have conservatively also assumed that the Reserve Fund average interest rate will equal 3%. Again, this does not reflect current averages but rather a best guess of the future assuming you have invested effectively. A common strategy is to invest in multiple accounts. Funds that will be necessary in the shorter term must be kept in a relatively liquid account. Funds that are not allotted for near future planned expenditures can be deposited into longer term investments which frequently earn higher interest rates. Consult with a qualified financial advisor for the best solution for your Association. 4.5 ANNUAL FUND BALANCES; ANNUAL FUNDING TABLE AND FIGURES The table and figures shown in this section are intended to give the Association a clearer view of the likely future financial position that the Association will be in, provided that the reserve funding plan is followed. Table 4.5: Reserve Fund Balance Sheet. This table lists annual revenue, expenses, and year end reserve fund balances. All Section 4.5 Figures are based on this data. Figure 4.5A 1: Comparison of Funding Plans Reserve Fund Balances Through 2047. This line graph depicts the funding balances of the proposed funding options vs. the current. Note the current plan, in dotted red, falls below zero in several places. This represents insufficient funding for repairs needed in these years. Figure 4.5A 2: Comparison of Funding Plans Reserve Fund Balances Through 2027. This line graph focuses on the next ten years, comparing the proposed plans to get the Association to a Full Funding status. 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 PAGE 57 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 4.5: RESERVE FUND BALANCE SHEET 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 CURRENT FUNDING PLAN Beginning Reserve Balance 608,000 631,864 (8,045,322) (8,401,022) (8,633,965) (8,647,358) (8,834,238) (8,982,792) (9,064,314) (9,183,224) (9,151,460) Planned Special Assessments 62,500 Regular Reserve Fund Contribution 201,205 240,000 247,200 254,616 262,254 270,122 278,226 286,573 295,170 304,025 313,146 Annual Total Property Contribution to The Reserve Fund 263,705 240,000 247,200 254,616 262,254 270,122 278,226 286,573 295,170 304,025 313,146 Average Monthly Contribution to the Reserve Fund per Unit 111.11 111.11 114.44 117.88 121.41 125.06 128.81 132.67 136.65 140.75 144.97 Annual Capital Expenses 255,240 8,807,627 359,850 235,810 20,259 198,653 163,474 101,388 144,412 1,305 876,959 Interest Income 15,398 (109,559) (243,049) (251,749) (255,389) (258,349) (263,306) (266,706) (269,668) (270,956) (283,001) Ending Reserve Balance 631,864 (8,045,322) (8,401,022) (8,633,965) (8,647,358) (8,834,238) (8,982,792) (9,064,314) (9,183,224) (9,151,460) (9,998,275) Percentage of Full Funding 6.6% -586.5% -572.7% -506.8% -396.8% -353.2% -311.7% -270.4% -241.3% -206.3% -237.5% Yellow Highlighted Cells Represent Make-Up Funds IMMEDIATE FULL FUNDING Beginning Reserve Balance 608,000 9,134,965 1,371,772 1,467,020 1,703,605 2,179,030 2,500,994 2,882,071 3,351,756 3,806,446 4,435,053 Full Funding Annual Maintenance Funding 201,205 401,111 413,145 425,539 438,305 451,454 464,998 478,948 493,316 508,116 523,359 Planned Special Assessments / Make up Funds 8,460,000 488,051 Annual Total Property Contribution to The Reserve Fund 8,661,205 889,163 413,145 425,539 438,305 451,454 464,998 478,948 493,316 508,116 523,359 Average Monthly Contribution to the Reserve Fund per Unit 111.11 185.70 191.27 197.01 202.92 209.01 215.28 221.74 228.39 235.24 242.30 Annual Capital Expenses 255,240 8,807,627 359,850 235,810 20,259 198,653 163,474 101,388 144,412 1,305 876,959 Interest Income 121,000 155,272 41,953 46,857 57,379 69,163 79,553 92,126 105,786 121,796 127,748 Full Funding - Ending Reserve Balance 9,134,965 1,371,772 1,467,020 1,703,605 2,179,030 2,500,994 2,882,071 3,351,756 3,806,446 4,435,053 4,209,201 Percentage of Full Funding 95.6% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Yellow Highlighted Cells Represent Make-Up Funds FULL FUNDING WITHIN 5 YEARS Beginning Reserve Balance 608,000 9,134,965 981,416 1,169,969 1,502,659 2,077,072 2,500,994 2,882,070 3,351,755 3,806,446 4,435,053 Full Funding Annual Maintenance Funding 201,205 401,111 413,145 425,539 438,305 451,454 464,998 478,948 493,316 508,116 523,359 Planned Special Assessments / Make up Funds 8,460,000 103,464 103,464 103,464 103,464 103,464 Annual Total Property Contribution to The Reserve Fund 8,661,205 504,576 516,609 529,003 541,769 554,919 464,998 478,948 493,316 508,116 523,359 Average Monthly Contribution to the Reserve Fund per Unit 4,782.95 233.60 239.17 244.91 250.82 256.91 215.28 221.74 228.39 235.24 242.30 Annual Capital Expenses 255,240 8,807,627 359,850 235,810 20,259 198,653 163,474 101,388 144,412 1,305 876,959 Interest Income 121,000 149,503 31,794 39,497 52,902 67,656 79,553 92,125 105,786 121,796 127,748 Ending Reserve Balance 9,134,965 981,416 1,169,969 1,502,659 2,077,072 2,500,994 2,882,070 3,351,755 3,806,446 4,435,053 4,209,201 Percentage of Full Funding 95.6% 71.5% 79.8% 88.2% 95.3% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 4.5: RESERVE FUND BALANCE SHEET 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 FULL FUNDING WITHIN 10 YEARS Beginning Reserve Balance 608,000 9,134,965 932,781 1,071,240 1,352,333 1,873,601 2,242,784 2,672,495 3,192,274 3,698,562 4,380,313 Full Funding Annual Maintenance Funding 201,205 401,111 413,145 425,539 438,305 451,454 464,998 478,948 493,316 508,116 523,359 Planned Special Assessments / Make up Funds 8,460,000 55,548 55,548 55,548 55,548 55,548 55,548 55,548 55,548 55,548 55,548 Annual Total Property Contribution to The Reserve Fund 8,661,205 456,659 468,693 481,087 493,853 507,002 520,546 534,496 548,864 563,664 578,907 Average Monthly Contribution to the Reserve Fund per Unit 111.11 211.42 216.99 222.73 228.64 234.72 240.99 247.45 254.10 260.96 268.01 Annual Capital Expenses 255,240 8,807,627 359,850 235,810 20,259 198,653 163,474 101,388 144,412 1,305 876,959 Interest Income 121,000 148,784 29,616 35,816 47,674 60,833 72,640 86,671 101,835 119,392 126,939 Ending Reserve Balance 9,134,965 932,781 1,071,240 1,352,333 1,873,601 2,242,784 2,672,495 3,192,274 3,698,562 4,380,313 4,209,200 Percentage of Full Funding 95.6% 68.0% 73.0% 79.4% 86.0% 89.7% 92.7% 95.2% 97.2% 98.8% 100.0% Yellow Highlighted Cells Represent Make-Up Funds FULL FUNDING WITHIN 30 YEARS Beginning Reserve Balance 608,000 9,134,965 900,938 1,006,597 1,253,907 1,740,379 2,073,720 2,466,516 2,948,272 3,415,396 4,056,808 Full Funding Annual Maintenance Funding 201,205 401,111 413,145 425,539 438,305 451,454 464,998 478,948 493,316 508,116 523,359 Planned Special Assessments / Make up Funds 8,460,000 24,175 24,175 24,175 24,175 24,175 24,175 24,175 24,175 24,175 24,175 Annual Total Property Contribution to The Reserve Fund 8,661,205 425,286 437,319 449,714 462,480 475,629 489,173 503,123 517,491 532,291 547,534 Average Monthly Contribution to the Reserve Fund per Unit 111.11 196.89 202.46 208.20 214.11 220.20 226.47 232.93 239.58 246.43 253.49 Annual Capital Expenses 255,240 8,807,627 359,850 235,810 20,259 198,653 163,474 101,388 144,412 1,305 876,959 Interest Income 121,000 148,314 28,190 33,406 44,251 56,366 67,097 80,022 94,044 110,427 116,763 Ending Reserve Balance 9,134,965 900,938 1,006,597 1,253,907 1,740,379 2,073,720 2,466,516 2,948,272 3,415,396 4,056,808 3,844,146 Percentage of Full Funding 95.6% 65.7% 68.6% 73.6% 79.9% 82.9% 85.6% 88.0% 89.7% 91.5% 91.3% Yellow Highlighted Cells Represent Make-Up Funds BASELINE FUNDING Beginning Reserve Balance 608,000 9,134,965 654,002 498,647 470,238 665,642 691,893 760,877 901,371 1,009,029 1,271,986 Full Funding Annual Maintenance Funding 201,205 182,000 187,460 193,084 198,876 204,843 210,988 217,318 223,837 230,552 237,469 Planned Special Assessments / Make up Funds 8,460,000 Annual Total Property Contribution to The Reserve Fund 8,661,205 182,000 187,460 193,084 198,876 204,843 210,988 217,318 223,837 230,552 237,469 Average Monthly Contribution to the Reserve Fund per Unit 111.11 84.26 86.79 89.39 92.07 94.83 97.68 100.61 103.63 106.74 109.94 Annual Capital Expenses 255,240 8,807,627 359,850 235,810 20,259 198,653 163,474 101,388 144,412 1,305 876,959 Interest Income 121,000 144,665 17,034 14,318 16,786 20,062 21,470 24,565 28,233 33,710 28,567 Ending Reserve Balance 9,134,965 654,002 498,647 470,238 665,642 691,893 760,877 901,371 1,009,029 1,271,986 661,063 Percentage of Full Funding 95.6% 47.7% 34.0% 27.6% 30.5% 27.7% 26.4% 26.9% 26.5% 28.7% 15.7%

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 4.5: RESERVE FUND BALANCE SHEET 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 CURRENT FUNDING PLAN Beginning Reserve Balance (9,998,275) (10,783,330) (11,063,811) (11,102,070) (11,092,750) (11,350,498) (11,545,885) (11,622,880) (11,650,147) (11,589,922) (11,868,564) Planned Special Assessments Regular Reserve Fund Contribution Annual Total Property Contribution to The Reserve Fund Average Monthly Contribution to the Reserve Fund per Unit Annual Capital Expenses Interest Income Ending Reserve Balance Percentage of Full Funding 322,540 332,216 342,183 352,448 363,022 373,912 385,130 396,683 408,584 420,841 433,467 322,540 332,216 342,183 352,448 363,022 373,912 385,130 396,683 408,584 420,841 433,467 149.32 153.80 158.42 163.17 168.07 173.11 178.30 183.65 189.16 194.83 200.68 800,478 289,833 52,867 15,126 289,096 230,928 119,729 80,014 4,910 352,806 1,174,073 (307,117) (322,864) (327,575) (328,002) (331,674) (338,370) (342,396) (343,936) (343,449) (346,677) (367,166) (10,783,330) (11,063,811) (11,102,070) (11,092,750) (11,350,498) (11,545,885) (11,622,880) (11,650,147) (11,589,922) (11,868,564) (12,976,336) -264.9% -248.0% -216.7% -189.3% -178.6% -166.2% -151.2% -136.9% -122.6% -117.6% -130.6% Yellow Highlighted Cells Represent Make-Up Funds IMMEDIATE FULL FUNDING Beginning Reserve Balance Full Funding Annual Maintenance Funding 4,209,201 4,070,138 4,461,622 5,122,278 5,858,475 6,356,614 6,947,212 7,687,425 8,509,753 9,453,171 10,092,570 539,060 555,232 571,889 589,046 606,717 624,918 643,666 662,976 682,865 703,351 724,452 Planned Special Assessments / Make up Funds Annual Total Property Contribution to The Reserve Fund Average Monthly Contribution to the Reserve Fund per Unit Annual Capital Expenses Interest Income Full Funding - Ending Reserve Balance Percentage of Full Funding 539,060 555,232 571,889 589,046 606,717 624,918 643,666 662,976 682,865 703,351 724,452 249.56 257.05 264.76 272.71 280.89 289.31 297.99 306.93 316.14 325.63 335.39 800,478 289,833 52,867 15,126 289,096 230,928 119,729 80,014 4,910 352,806 1,174,073 122,355 126,085 141,634 162,277 180,519 196,608 216,275 239,367 265,462 288,853 296,033 4,070,138 4,461,622 5,122,278 5,858,475 6,356,614 6,947,212 7,687,425 8,509,753 9,453,171 10,092,570 9,938,981 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Yellow Highlighted Cells Represent Make-Up Funds FULL FUNDING WITHIN 5 YEARS Beginning Reserve Balance Full Funding Annual Maintenance Funding 4,209,201 4,070,138 4,461,622 5,122,278 5,858,474 6,356,614 6,947,212 7,687,424 8,509,753 9,453,170 10,092,569 539,060 555,232 571,889 589,046 606,717 624,918 643,666 662,976 682,865 703,351 724,452 Planned Special Assessments / Make up Funds Annual Total Property Contribution to The Reserve Fund Average Monthly Contribution to the Reserve Fund per Unit Annual Capital Expenses Interest Income Ending Reserve Balance Percentage of Full Funding 539,060 555,232 571,889 589,046 606,717 624,918 643,666 662,976 682,865 703,351 724,452 249.56 257.05 264.76 272.71 280.89 289.31 297.99 306.93 316.14 325.63 335.39 800,478 289,833 52,867 15,126 289,096 230,928 119,729 80,014 4,910 352,806 1,174,073 122,355 126,085 141,634 162,277 180,519 196,608 216,275 239,367 265,462 288,853 296,033 4,070,138 4,461,622 5,122,278 5,858,474 6,356,614 6,947,212 7,687,424 8,509,753 9,453,170 10,092,569 9,938,981 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 4.5: RESERVE FUND BALANCE SHEET 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 FULL FUNDING WITHIN 10 YEARS Beginning Reserve Balance Full Funding Annual Maintenance Funding 4,209,200 4,070,137 4,461,621 5,122,277 5,858,473 6,356,613 6,947,211 7,687,423 8,509,752 9,453,169 10,092,568 539,060 555,232 571,889 589,046 606,717 624,918 643,666 662,976 682,865 703,351 724,452 Planned Special Assessments / Make up Funds Annual Total Property Contribution to The Reserve Fund Average Monthly Contribution to the Reserve Fund per Unit Annual Capital Expenses Interest Income Ending Reserve Balance Percentage of Full Funding 539,060 555,232 571,889 589,046 606,717 624,918 643,666 662,976 682,865 703,351 724,452 249.56 257.05 264.76 272.71 280.89 289.31 297.99 306.93 316.14 325.63 335.39 800,478 289,833 52,867 15,126 289,096 230,928 119,729 80,014 4,910 352,806 1,174,073 122,355 126,085 141,634 162,277 180,519 196,608 216,275 239,367 265,462 288,853 296,033 4,070,137 4,461,621 5,122,277 5,858,473 6,356,613 6,947,211 7,687,423 8,509,752 9,453,169 10,092,568 9,938,980 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Yellow Highlighted Cells Represent Make-Up Funds FULL FUNDING WITHIN 30 YEARS Beginning Reserve Balance Full Funding Annual Maintenance Funding Planned Special Assessments / Make up Funds Annual Total Property Contribution to The Reserve Fund Average Monthly Contribution to the Reserve Fund per Unit Annual Capital Expenses Interest Income Ending Reserve Balance Percentage of Full Funding 3,844,146 3,718,669 4,124,147 4,799,215 5,550,258 6,063,688 6,670,035 7,426,470 8,265,507 9,226,135 9,883,260 539,060 555,232 571,889 589,046 606,717 624,918 643,666 662,976 682,865 703,351 724,452 24,175 24,175 24,175 24,175 24,175 24,175 24,175 24,175 24,175 24,175 24,175 563,235 579,407 596,064 613,220 630,892 649,093 667,841 687,151 707,040 727,526 748,627 260.76 268.24 275.96 283.90 292.08 300.51 309.19 318.13 327.33 336.82 346.59 800,478 289,833 52,867 15,126 289,096 230,928 119,729 80,014 4,910 352,806 1,174,073 111,766 115,904 131,872 152,948 171,635 188,183 208,323 231,901 258,497 282,405 290,116 3,718,669 4,124,147 4,799,215 5,550,258 6,063,688 6,670,035 7,426,470 8,265,507 9,226,135 9,883,260 9,747,930 91.4% 92.4% 93.7% 94.7% 95.4% 96.0% 96.6% 97.1% 97.6% 97.9% 98.1% Yellow Highlighted Cells Represent Make-Up Funds BASELINE FUNDING Beginning Reserve Balance Full Funding Annual Maintenance Funding 661,063 116,671 81,701 293,872 558,618 561,364 631,616 825,477 1,074,357 1,416,095 1,424,405 244,593 251,931 259,488 267,273 275,291 283,550 292,057 300,818 309,843 319,138 328,712 Planned Special Assessments / Make up Funds Annual Total Property Contribution to The Reserve Fund Average Monthly Contribution to the Reserve Fund per Unit Annual Capital Expenses Interest Income Ending Reserve Balance Percentage of Full Funding 244,593 251,931 259,488 267,273 275,291 283,550 292,057 300,818 309,843 319,138 328,712 113.24 116.63 120.13 123.74 127.45 131.27 135.21 139.27 143.45 147.75 152.18 800,478 289,833 52,867 15,126 289,096 230,928 119,729 80,014 4,910 352,806 1,174,073 11,494 2,932 5,550 12,598 16,551 17,630 21,533 28,076 36,805 41,978 30,052 116,671 81,701 293,872 558,618 561,364 631,616 825,477 1,074,357 1,416,095 1,424,405 609,096 2.9% 1.8% 5.7% 9.5% 8.8% 9.1% 10.7% 12.6% 15.0% 14.1% 6.1%

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 4.5: RESERVE FUND BALANCE SHEET 2039 2040 2041 2042 2043 2044 2045 2046 2047 CURRENT FUNDING PLAN Beginning Reserve Balance (12,976,336) (13,058,872) (13,055,990) (13,381,212) (13,673,308) (15,130,034) (15,246,709) (15,703,624) (15,617,393) Planned Special Assessments Regular Reserve Fund Contribution Annual Total Property Contribution to The Reserve Fund Average Monthly Contribution to the Reserve Fund per Unit Annual Capital Expenses Interest Income Ending Reserve Balance Percentage of Full Funding 446,471 459,865 473,661 487,871 502,507 517,582 533,109 549,103 565,576 446,471 459,865 473,661 487,871 502,507 517,582 533,109 549,103 565,576 206.70 212.90 219.29 225.87 232.64 239.62 246.81 254.21 261.84 144,250 71,049 408,185 380,146 1,533,567 185,340 532,630-740,169 (384,757) (385,934) (390,698) (399,820) (425,665) (448,917) (457,394) (462,872) (471,141) (13,058,872) (13,055,990) (13,381,212) (13,673,308) (15,130,034) (15,246,709) (15,703,624) (15,617,393) (16,263,128) -120.4% -109.9% -106.0% -101.7% -115.1% -107.1% -104.5% -95.2% -95.1% Yellow Highlighted Cells Represent Make-Up Funds IMMEDIATE FULL FUNDING Beginning Reserve Balance Full Funding Annual Maintenance Funding 9,938,981 10,848,115 11,881,543 12,627,184 13,447,758 13,147,056 14,231,357 15,022,027 16,404,168 746,185 768,571 791,628 815,377 839,838 865,033 890,984 917,714 945,245 Planned Special Assessments / Make up Funds Annual Total Property Contribution to The Reserve Fund Average Monthly Contribution to the Reserve Fund per Unit Annual Capital Expenses Interest Income Full Funding - Ending Reserve Balance Percentage of Full Funding 746,185 768,571 791,628 815,377 839,838 865,033 890,984 917,714 945,245 345.46 355.82 366.49 377.49 388.81 400.48 412.49 424.87 437.61 144,250 71,049 408,185 380,146 1,533,567 185,340 532,630-740,169 307,198 335,906 362,198 385,344 393,027 404,607 432,316 464,427 495,201 10,848,115 11,881,543 12,627,184 13,447,758 13,147,056 14,231,357 15,022,027 16,404,168 17,104,445 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Yellow Highlighted Cells Represent Make-Up Funds FULL FUNDING WITHIN 5 YEARS Beginning Reserve Balance Full Funding Annual Maintenance Funding 9,938,981 10,848,114 11,881,543 12,627,183 13,447,758 13,147,056 14,231,356 15,022,027 16,404,167 746,185 768,571 791,628 815,377 839,838 865,033 890,984 917,714 945,245 Planned Special Assessments / Make up Funds Annual Total Property Contribution to The Reserve Fund Average Monthly Contribution to the Reserve Fund per Unit Annual Capital Expenses Interest Income Ending Reserve Balance Percentage of Full Funding 746,185 768,571 791,628 815,377 839,838 865,033 890,984 917,714 945,245 345.46 355.82 366.49 377.49 388.81 400.48 412.49 424.87 437.61 144,250 71,049 408,185 380,146 1,533,567 185,340 532,630-740,169 307,198 335,906 362,198 385,344 393,027 404,607 432,316 464,427 495,201 10,848,114 11,881,543 12,627,183 13,447,758 13,147,056 14,231,356 15,022,027 16,404,167 17,104,444 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

LEVEL 1 RESERVE STUDY FOR VILLA MARINA TABLE 4.5: RESERVE FUND BALANCE SHEET 2039 2040 2041 2042 2043 2044 2045 2046 2047 FULL FUNDING WITHIN 10 YEARS Beginning Reserve Balance Full Funding Annual Maintenance Funding 9,938,980 10,848,113 11,881,541 12,627,182 13,447,756 13,147,054 14,231,355 15,022,025 16,404,166 746,185 768,571 791,628 815,377 839,838 865,033 890,984 917,714 945,245 Planned Special Assessments / Make up Funds Annual Total Property Contribution to The Reserve Fund Average Monthly Contribution to the Reserve Fund per Unit Annual Capital Expenses Interest Income Ending Reserve Balance Percentage of Full Funding 746,185 768,571 791,628 815,377 839,838 865,033 890,984 917,714 945,245 345.46 355.82 366.49 377.49 388.81 400.48 412.49 424.87 437.61 144,250 71,049 408,185 380,146 1,533,567 185,340 532,630-740,169 307,198 335,906 362,198 385,344 393,027 404,607 432,316 464,426 495,201 10,848,113 11,881,541 12,627,182 13,447,756 13,147,054 14,231,355 15,022,025 16,404,166 17,104,442 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Yellow Highlighted Cells Represent Make-Up Funds FULL FUNDING WITHIN 30 YEARS Beginning Reserve Balance Full Funding Annual Maintenance Funding Planned Special Assessments / Make up Funds Annual Total Property Contribution to The Reserve Fund Average Monthly Contribution to the Reserve Fund per Unit Annual Capital Expenses Interest Income Ending Reserve Balance Percentage of Full Funding 9,747,930 10,675,869 11,728,667 12,494,259 13,335,383 13,055,847 14,161,949 14,975,075 16,380,344 746,185 768,571 791,628 815,377 839,838 865,033 890,984 917,714 945,245 24,175 24,175 24,175 24,175 24,175 24,175 24,175 24,175 24,175 770,360 792,746 815,803 839,552 864,013 889,208 915,159 941,889 969,420 356.65 367.01 377.69 388.68 400.01 411.67 423.68 436.06 448.81 144,250 71,049 408,185 380,146 1,533,567 185,340 532,630-740,169 301,830 331,102 357,974 381,719 390,018 402,233 430,596 463,381 494,849 10,675,869 11,728,667 12,494,259 13,335,383 13,055,847 14,161,949 14,975,075 16,380,344 17,104,443 98.4% 98.7% 98.9% 99.2% 99.3% 99.5% 99.7% 99.9% 100.0% Yellow Highlighted Cells Represent Make-Up Funds BASELINE FUNDING Beginning Reserve Balance Full Funding Annual Maintenance Funding 609,096 824,608 1,131,193 1,115,402 1,138,533 2,902 213,256 89,374 514,704 338,574 348,731 359,193 369,969 381,068 392,500 404,275 416,403 428,895 Planned Special Assessments / Make up Funds Annual Total Property Contribution to The Reserve Fund Average Monthly Contribution to the Reserve Fund per Unit Annual Capital Expenses Interest Income Ending Reserve Balance Percentage of Full Funding 338,574 348,731 359,193 369,969 381,068 392,500 404,275 416,403 428,895 156.75 161.45 166.29 171.28 176.42 181.71 187.16 192.78 198.56 144,250 71,049 408,185 380,146 1,533,567 185,340 532,630-740,169 21,188 28,903 33,201 33,309 16,868 3,194 4,472 8,927 10,772 824,608 1,131,193 1,115,402 1,138,533 2,902 213,256 89,374 514,704 214,201 7.6% 9.5% 8.8% 8.5% 0.0% 1.5% 0.6% 3.1% 1.3%

Figure 4.5A 1 Comparison of Funding Plans Reserve Fund Balances Through 2047 $20,000,000 $15,000,000 $10,000,000 SEE FIGURE 4.5A 2 Reserve Balance $5,000,000 $0 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047 $5,000,000 $10,000,000 $15,000,000 $20,000,000 Year CURRENT FUNDING PLAN IMMEDIATE FULL FUNDING FULL FUNDING WITHIN 5 YEARS FULL FUNDING WITHIN 10 YEARS FULL FUNDING WITHIN 30 YEARS BASELINE FUNDING Figure 4.5A 2 Comparison of Funding Plans Reserve Fund Balances Through 2027 $9,000,000 $8,000,000 $7,000,000 $6,000,000 Reserve Balance $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Year CURRENT FUNDING PLAN IMMEDIATE FULL FUNDING FULL FUNDING WITHIN 5 YEARS FULL FUNDING WITHIN 10 YEARS FULL FUNDING WITHIN 30 YEARS BASELINE FUNDING PAGE 64 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Figure 4.5B Comparison of Funding Plans Association Contributions to Reserve Fund by Year $10,000,000 $9,000,000 $8,000,000 $7,000,000 NOTE: Immediate special assessment in year 2018 is included in the 2018 contribution Contribution Amount $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047 Year CURRENT FUNDING PLAN IMMEDIATE FULL FUNDING FULL FUNDING WITHIN 5 YEARS FULL FUNDING WITHIN 10 YEARS BASELINE FUNDING FULL FUNDING WITHIN 30 YEARS Figure 4.5C Comparison of Funding Plans Percentage of Full Funding by Year 100% 90% 80% Percentage of Full Funding 70% 60% 50% 40% 30% 20% 10% 0% 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047 Year CURRENT FUNDING PLAN IMMEDIATE FULL FUNDING FULL FUNDING WITHIN 5 YEARS FULL FUNDING WITHIN 10 YEARS FULL FUNDING WITHIN 30 YEARS BASELINE FUNDING PAGE 65 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

4.6 OTHER COMMON FUNDING METHODS The following methods are methods that are sometimes implemented. We believe that many of these funding methods that keep the reserve fund at less than Fully Funded represent a weaker position for the Association. As the Fully Funded percentage decreases, the likelihood of unplanned special assessments increases. Cash Flow Method A method of calculating Reserve contributions where contributions to the Reserve fund are designed to offset the variable annual expenditures from the Reserve fund. Different Reserve Funding Plans are tested against the anticipated schedule of Reserve expenses until the desired Funding Goal is achieved. Component Method A method of calculating Reserve contributions where the total reserve contribution is based on the sum of contributions for individual components. Baseline Funding Establishing a Reserve funding goal of keeping the Reserve cash balance above zero. Full Funding Setting a Reserve funding goal of attaining and maintaining the Reserve Fund at or near 100% funded. Recommended by Jeff Samdal & Associates Statutory Funding Establishing a Reserve funding goal of setting aside the specific minimum amount of Reserves required by local statutes. Threshold Funding Establishing a Reserve funding goal of keeping the Reserve Balance above a specified dollar or Percent Funded amount. Depending on the threshold this may be more or less conservative than Fully Funded. PAGE 66 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

5.0 LIMITATIONS This report has been prepared for the exclusive use of Villa Marina Association of Apartment Owners and their property management company. We do not intend for any other party to rely on this report for any reason without our expressed written consent. If another individual or party relies on this study, they shall indemnify and hold Jeff Samdal & Associates harmless for any damages, losses, or expenses they may incur as a result of its use. The Level 1 Reserve Study is a reflection of the information provided to us. This report has been prepared for Villa Marina Association of Apartment Owners use, not for the purpose of performing an audit, quality/forensic analyses, or background checks of historical records. Our inspection report is not an exhaustive technical inspection of the property; we merely comment on the items that we believe that our clients would benefit from knowing. During a typical inspection, no invasive inspection is performed, no furnishings are moved, and no finishes are removed. This report is a snap shot in time of the condition of the property at the time of inspection. The remaining life values that we list are based on our opinion of the remaining useful life and are by no means a guarantee. Our opinions are based on what we believe one could reasonably expect and are not based on worst case scenarios. These opinions are based upon our experience with other buildings of similar age and construction type. Opinions will vary and you may encounter contractors and/or consultants with differing opinions from ours. Ratings of various building components are most often determined by comparison to other buildings of similar age and construction type. The quality of materials originally impacts our judgment of their current state. The life expectancy estimates that we prepare are based on National Association of Home Builders (NAHB) averages, Building Owners and Managers (BOMA) averages, product defined expected life averages, and our own assessment of typical life expectancy based on our experience with similar components in our area. This report will tell you a great deal about the overall condition of this property. However, this report does not constitute a warranty, an insurance policy, or a guarantee of any kind. Owning any property involves some risk and while we can give an excellent overview of the property, we cannot inspect what we cannot see. Our inspection and report do not include building code compliance or municipal regulatory compliance. Nor do they include mold investigations, hazardous materials investigations, or indoor air quality analysis. The purpose of this report is not intended to be a statement of insurability of this property as insurance companies have particular standards for insurability of certain building types and certain building materials. While we may comment that certain components have been recalled that we are aware of, we are not aware of all recalls. It is beyond the scope of this inspection to determine all systems or components that are currently or will be part of any recall in the future. You may wish to subscribe or contact the CPSC (Consumer Product Safety Commission) web site for recall information regarding any system or component. If a problem is encountered on your property, we cannot be responsible for any corrective action that you take, unless we have the opportunity to review the conditions, before repairs are made. Please ensure that you have read and understand the entire proposal to perform this Level 1 Reserve Study that was signed prior to our inspection. If you have any questions regarding this document, please contact us. We appreciate the opportunity to be of assistance and we hope that we have provided you a clear understanding of your financial situation and given you a better overall understanding of the your property. This report supersedes any opinion or discussion that occurred during the inspection and should be considered our complete opinion of the condition of this property. Please contact us if you have any questions regarding this report. We will be happy to be of assistance. Sincerely, Jeff Samdal, PE, RS, PRA PAGE 67 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

APPENDIX Resume of Engineer Performing Study Four Seasons Roof & Remodel Services Inc. PAGE 68 OF 68 JEFF SAMDAL & ASSOCIATES, INC. WWW.SAMDALASSOC.COM P: (206) 412-4305 F: (425) 825-9090

Jeff Samdal, P.E., Principal Professional Qualifications and Experience Areas of Expertise Mr. Samdal is the owner of Jeff Samdal & Associates, Inc. (formerly Samdal Engineering), a corporation that specializes in building inspections, engineering, project management, and related services. He is a doublelicensed Professional Engineer (Mechanical and Civil) in Washington State. He is also an accredited Building Inspection Engineer (BIE) and Reserve Specialist (RS). He has performed thousands of building inspections as well as numerous additional services such as building envelope investigations, construction management, and general consulting for property owners pertaining to building maintenance and long term budgeting. Mr. Samdal consistently earns repeat and referral business because of his attention to detail, practical approach, knowledge of the industry, and genuine appreciation for clients concerns for their real estate investments. Capabilities Mr. Samdal is experienced at performing residential (single- and multi-family), commercial, and industrial inspections in Washington State and beyond. Mr. Samdal s experience includes the following: Property Condition Assessments (PCAs) Owner s Representative Construction Management Building Envelope Design and Construction Monitoring Capital Needs Assessments and Facilities Surveys Condominium/Homeowner s Association Reserve Studies Condominium Conversion Studies Relevant Work History Mr. Samdal has been owner and operator of Jeff Samdal & Associates / Samdal Engineering since 2005. Before concentrating on building inspections, Mr. Samdal worked for Washington Group International s (WGI) Hydropower and Water Resources Group. While working for WGI, Mr. Samdal was involved in rebuilding and rehabilitating hydro facilities. He served as the on-site powerhouse and switchyard inspector during construction. His duties included design, drawing and specification preparation, cost estimating, scheduling, and construction management. Prior to working for WGI, Mr. Samdal worked for Duke Energy in a similar role. Education BS in Mechanical Engineering, University of Washington Licenses and Certifications Licensed Professional Engineer (PE), Mechanical Engineering, State of Washington, #40985 Licensed Professional Engineer (PE), Civil Engineering, State of Washington, #40985 Reserve Specialist (RS), Community Associations Institute (CAI), #173 Professional Reserve Analyst (PRA), Association of Professional Reserve Analysts Building Inspection Engineer (BIE), National Association of Building Inspection Engineers Structural Pest Inspector, State of Washington, #70763 Licensed Home Inspector, State of Washington, #349 Professional Affiliation American Society of Mechanical Engineers, 2002 present Community Involvement Mr. Samdal is married with two elementary aged children in Woodinville. He has volunteered as a Little League coach since 2009 starting with tee-ball. He also plays a key role in supporting his wife s volunteer involvement in their school; where she is an active part of pioneering the district s first STEM program, chair of their annual science fair, and classroom art docent.

www.fourseasonsroof.com Four Seasons Roof & Remodel proposes to furnish all materials and perform all labor necessary to complete the following roof repair project as outlined below for Villa Marina Association of Apartment Owners as the "Owner'' referred to throughout the agreement.: Date: November 11, 2016 To: Villa Marina Association of Apartment Owners NE 45 th Street Redmond, WA. 98052 (206) 388-0180 INSPECTION: Four Seasons walked and inspected all the remaining roofs to determine which roofs needed what type of work and to prioritize which work on which roofs needed to be completed first. Below are templet scopes of work for full sloped composition and flat PVC re-roofs and for sloped and flat roof repairs. We have itemized out which roofs we feel need full re-roofs, which roofs need partial re-roofs with partial repairs and which roofs just need roof repairs at this time. We have put them in chronological order as to which ones we feel need the work completed first. SCOPE OF WORK COMPOSITION RE-ROOF: 1. JOB SET-UP: Four Seasons will stage all necessary scaffolding, tarps and barricades to protect home and landscaping and keep safe job-site through-out duration of roof project. Four Seasons will store all tools and materials in safe designated area and clean all loose debris from harm s way on nightly basis. Four Seasons will require access to driveway and for the use of electrical outlets. If these items are not provided there may be additional charges as outlined in Time and Materials. 2. PROPERTY CARE: Four Seasons will take all precautions to protect the surrounding property and landscaping during the roof process, however some damage may occur to the existing siding and or plants and flowers and the repair and or replacement costs of these items are not covered in this proposal. 3. ROOF REMOVAL: Four Seasons agrees to remove up to 1 layer of existing composition roofing material from all sloped sections of roof down to bare sheeting and will dispose of properly. Four Seasons will inspect all existing fascia boards, gutters, chimney and all other roof related items for any structural inadequacies. Note; any additional layers of roofing found that need to be removed and disposed of will be billed at an additional rate of $ 65.00 per square (10 x 10 ). PAGE #1

4. DECK PREPERATION: Four Seasons will remove all existing nails, staples and fasteners from all open eave areas of home and flatten all existing fasteners in field area of roof. All debris will be swept free from roof leaving a clean smooth surface. 5. TIME & MATERIALS: Any additional work performed that is not outlined in this proposal will be billed on a time and material basis of ($68.00 per man hour plus material cost). Four Seasons will make attempt to contact customer prior to additional work being performed. 6. INTAKE VENTILATION: Once existing roofing has been removed Four Seasons will remove the bottom row of plywood sheeting from around the entire perimeter edge of the building so that we can remove the existing solid non-vented bird block from every other rafter bay. Four Seasons will replace non-vented bird block with new vented bird block to allow for proper intake air into attic areas of roofs. Four Seasons will install new cardboard insulation baffles where needed and will install new row of ½ CDX exterior grade plywood replacing all existing sheeting that was removed. 7. PERIMETER EDGE FLASHINGS: Four Seasons will install new 26-gauge factory coated metal drip edge flashings around all eave perimeter edges of roof protecting all fascia boards and decking from water and moisture damage. 8. LEAK BARRIER: Ice & Water Shield: Four Seasons will install a new heavy duty self-adhering Ice and Water Shield leak barrier around base of all roof protrusions, vents, pipes etc. to ensure a proper seal through-out full life of roof system. 9. MOISTURE BARRIER: Tiger Paw: Four Seasons will cover all plywood sheathing with 100% synthetic Tiger Paw moisture barrier extending from eave edge to ridgeline in even rows. Tiger Paw will be fastened with plasti-cap fasteners as per manufacturer recommendations. 10. VALLEY FLASHING: Four Seasons will install new 26-gauge factory coated w- valley metal flashings in all the valley areas your roof which will be capped and caulked at the peaks to ensure a proper seal. All new roofing will be cut in straight lines 2 from the center of valley flashings for a clean finished look and to allow all debris to flow easier from roof. PAGE #2

11. COMPOSITION ROOFING SYSTEM: A. Starter course: Four Seasons will install a new GAF composition Pro-starter course around the perimeter edges of your roof as per manufacturer s recommendations with the proper overhangs on both eave and gable edges of the roof. B. Roofing shingle: Four Seasons will install new GAF composition roofing shingle as per manufacturer recommendations, fastened with 1¼ hot dipped barbed and coated roofing nails with 5-6 nails per every full shingle. C. Ridge cap: Four Seasons will install new matching high profile composition ridge pieces along all hips and main ridgelines. 12. PLUMBING PIPE FLASHINGS: Four Seasons will re-flash around all existing plumbing pipes with new all lead pipes flashing boots, capped at top side of pipe to ensure proper seal. 13. FAN VENT FLASHINGS: Four Seasons will install new PBK 4 & 6 metal sleeved flapper fan vents replacing existing. Four Seasons will ensure all fan vents are properly connected to insulated ducting from inside attic area of roof. 14. ATTIC VENTILATION: Four Seasons will install new metal exhale RV0-38 roof attic vents approximately every 20 25 apart along upper section of sloped composition roofs to properly ventilate attic air from sloped roof sections. 15. STOVE PIPES: Four Seasons will re-roof around all existing stove pipe heating flu s protruding up through composition roof system. Four Seasons will install new base flanges at base of stove pipes along with new storm collars. Four Seasons will caulk around storm collars to ensure proper seal. 16. UPPER FASCIA BOARDS: Four Seasons will remove and replace all upper fascia boards where sloped composition roof sections meet parapet walls of flat roof. Four Seasons will replace existing fascia boards with a new 5/4 x 8 preprimed fascia board. All new fascia boards will be installed per local building codes. PAGE # 3

17. WALL FLASHINGS: Four Seasons will install new 26-gauge sidewall and end wall flashing where lower and dormer rooflines meet siding. Flashing will extend up and under existing siding and will weave in between new composition roofing shingles; all flashing will be caulked at corners to ensure proper seal. Note: Damage to siding is possible (see Time and Material). 18. DETAIL & CLEAN-UP: Four Seasons will clean all debris from roof, gutters and grounds and dispose of properly, sweep all walkways and parking areas, run nail magnet around entire grounds of work area, all precautions will be taken during length of project to protect all landscaping and property leaving your home clean and undamaged. SCOPE OF WORK PVC RE-ROOF: 1. JOB SET-UP: Four Seasons will stage all necessary scaffolding, tarps and barricades to protect building and landscaping and keep safe job-site through-out duration of roof project. Four Seasons will store all tools and materials in safe designated area and clean all loose debris from harm s way on nightly basis. Four Seasons will require access to driveway and for the use of electrical outlets. If these items are not provided there may be additional charges as outlined in Time and Materials. 2. PROPERTY CARE: Four Seasons will take all precautions to protect the surrounding property and landscaping during the roof process, however some damage may occur to the existing siding and or plants and flowers and the repair and or replacement costs of these items are not covered in this proposal. 3. INSULATION & VENTILATION: Four Seasons will remove all existing wet and damaged insulation and all existing batt insulation currently installed between over framed taper system rafters. Four Seasons will remove any existing insulation that would be blocking the new intake ventilation system. Four Seasons will install new batt insulation down between original roof rafters where needed. 4. OVER FRAME RAFTERS: Four Seasons will install additional nailing and cross bracing to existing over framed taper system rafters as needed. Note; if any of the existing rafters need to be replaced then additional cost would apply on a time and material basis. 5. PLYWOOD: Four Seasons will remove all existing sheeting and will install new ½ CDX exterior grade plywood decking. All new plywood decking will be fastened with 7-penny galvanized sheathing nails per local building codes, all seams on plywood will be off-set and properly spaced with H-clips for contraction and expansion. 6. BARRIER BOARD: Four Seasons will install a new 3/8 protective fan fold barrier board which will cover all new plywood decking. New barrier board will be attached using ring shank flathead roofing nails per code and will act as a protective sheet between existing decking and new PVC vinyl membrane giving the new roof a clean and smooth surface. PAGE #4

7. PVC INSTALLATION: Four Seasons will install new 60mil. Mule-Hide PVC white single ply mechanically fastened roofing membrane system with fully heat welded seams; all PVC roofing membrane will be fastened with HD screws and barbed plates 12 on center along all overlapping seams and will be fully glued down with PVC bonding adhesive around all drain areas of roof. All PVC roofing will be installed per manufacturer s recommendations and per local building codes. 8. PLUMBING PIPES & VENTS: Plumbing Pipes: Four Seasons will ensure all plumbing pipes are extended up through roofline and will re-flash around all existing plumbing pipes with Mule-Hide PVC pre-molded pipe boot flashings and clamping rings, all pipe boot flashings will be fully heat welded to field membrane as per manufacturer recommendations. Fan Vents: Four Seasons will ensure all existing fan vent ducting is properly extending up through roofline and properly connected to new factory coated metal fan vent flashings and PVC vent liners, all fan vent flashings will be fully heat welded to field membrane as per manufacturer recommendations. Note; if any of the existing fan vent ducting that extends down to the actual bathroom or kitchen fans needs to be replaced then additional cost will apply on a time and material basis. 9. ROOF DRAINS: Four Seasons will remove and dispose of all existing roof drains and roof overflow drains and will replace them with new 3 Redline spun aluminum PVC coated roof drains with debris cages. All new roof drains will be installed per manufacturer recommendations. 10. STOVE PIPES: Four Seasons will re-flash around all existing stove pipe heating flu s currently protruding up through flat roof membrane with new pre-molded PVC liners. New stove pipe flashings will be fully heat welded to existing membrane with roofing hot air welder as per manufacturer recommendations. Four Seasons will re-seal around all existing storm collars to ensure a proper seal. 11. CAP FLASHING: Four Seasons will remove and dispose of all existing cap metal flashing from top edge of all outer parapet walls and will replace it with new 24-gauge factory painted custom bent metal cap flashing. All cap flashing will be fastened using painted rubber garmented sheet metal roofing screws and sealed between all overlapping seams to ensure a proper seal. 12. TIME & MATERIALS: Any additional work performed that is not outlined in this proposal will be billed on a time and material basis of ($68.00 per man hour plus material cost). Four Seasons will make attempt to contact customer prior to additional work being performed. If unsuccessful your agreement to this proposal is your approval for Four Seasons to repair and or replace damaged items as specified above. 13. DETAIL & CLEAN-UP: Four Seasons will clean all debris from roof, gutters and grounds and dispose of properly, sweep all walkways and parking areas, run nail magnet around entire grounds of work area. PAGE #5

SCOPE OF WORK ROOF REPAIRS: 1. SAFETY ANCHORS: Four Seasons will remove existing roof safety anchors and will remove the exiting composition roofing shingles from around the roof anchor. Four Seasons will install new leak barrier around roof anchors with new matching composition roofing shingles. All Safety anchors will be properly installed per manufacturer recommendations. 2. DAMAGED DECKING: Four Seasons will remove the damaged pieces of plywood decking and will install new matching decking; all new plywood decking will be installed per local building codes. Four Seasons will install new heavy duty self-adhering Ice & Water Shield leak barrier covering new plywood decking that will be weaved into existing moisture barrier to ensure a proper seal. Four Seasons will weave in new matching composition roofing, all new composition roofing shingles and all surrounding shingles that were loosened to properly perform roof repairs will be fastened using barbed and coated roofing nails as per manufacturer recommendations and will be hand sealed using a bead of plastic roof cement to help ensure a proper seal. 3. TORN & DAMAGED SHINGLES: Four Seasons will remove all torn and damaged composition roofing shingles and ridge caps where the existing nail fasteners are poking up through the face of the shingles and ridge caps from all sloped composition sections of roof. Four Seasons will replace them with new matching composition roofing shingles and ridge caps. All new shingles and ridge caps will be properly weaved into existing roofing and will be fastened with barbed and coated roofing nails as per manufacturer recommendations. Four Seasons will hand seal all new shingles and ridge caps and all surrounding shingles and ridge caps that were loosened to properly perform roof repairs using a bead of plastic roof cement to help ensure a proper seal. 4. ROOF TO WALL & CAP FLASHING: Four Seasons will remove all current existing improperly installed fasteners through face of existing roof to wall flashing and along top side of all existing surface mount cap flashing. Four Seasons will replace all improperly installed fasteners with new rubber washer ring shank fasteners. Four Seasons will install a new bead of silicone sealant between all overlapping seams to ensure a proper seal. 5. PVC FLAT ROOF REPAIR: Loose Seams: Four Seasons will clean all the existing PVC membrane around all the loose un-welded seams, corners and flashings with a PVC roof cleaner as per manufacturer recommendations. Four Seasons will re-weld all loose seams, corners and flashing using a hot air roofing welder as per manufacturer recommendations. Damaged Decking: Four Seasons will remove an approximate 10 x 10 section of PVC roofing membrane where we discovered dry rotted decking and missing decking on the PVC flat roof. Four Seasons will remove damaged decking and will install new matching decking. Four Seasons will install new PVC membrane where existing membrane was removed to replace damaged decking. New PVC membrane will be fully heat welded to existing membrane using hot tip air welder as per manufacturer recommendations. Drains: Four Seasons will clean all debris from drain areas of roof and will re-install all existing drain covers and install new drain covers where existing were missing. Four Seasons will check all membrane and seams around roof drains and will re-seal as needed. PAGE # 6

TERMS: Unless otherwise specified, all materials shall be installed by Four Seasons Roofing in accordance with manufacturers' instructions and recommendations. Four Seasons shall have General Liability Insurance and Automobile Liability Insurance in an amount of at least $1 mi11ion, naming Villa Marina Association of Apartment Owners as an additional insured on Four Seasons' policy, and shall submit to Owner a certificate of insurance showing Villa Marina Association of Apartment Owners Association as additional insured, and as the certificate holder, prior to commencing any work under the agreement. Fully permitted by law, the Four Seasons defend, indemnify, and hold harmless the Owner and its managing agent from all claims, demands, losses and liabilities to or from third parties arising from, resulting from, or connected with services performed or to be performed under the agreement by Four Seasons Roofing, it subcontractors, agents or employees, even though such claims may prove to be false, groundless, or fraudulent. The indemnification obligation under this agreement shall not be limited in any way by any limitation on the amount or type of damages, compensation, or benefits payable to or for any third party under workers' compensation acts, disability benefits, or other employee benefit acts. For purposes of fulfilling this indemnity obligation, Four Seasons expressly waives any employer/indemnitor immunity Under industrial insurance provided by Title 51, Revised Code of Washington. Four Seasons shall also defend shall indemnify and hold harmless the Owner, and its managing agent from and against claims, damages, losses and expenses, including but not limited to attorneys fees, arising out of or resulting from performance of the work, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the work itself), but only to the extent caused by the negligent acts or omissions of the Four Seasons, its subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Section. By their initials signed below, the parties expressly acknowledge that this waiver was mutually negotiated and bargained for between the parties. Entitlement to recovery of defense costs shall include all fees (of attorneys and others), costs and expenses incurred in good faith., Initial Four Seasons Roofing, Initial Villa Marina PAGE # 7

RE-ROOF WARRANTIES: MANUFACTURER GAF: TIMBERLINE HD SYSTEM PLUS COMPOSITION: Lifetime warranty, fully transferable with a 50 Year 100% non-pro-rated period covering full cost of shingle replacement and disposal on all manufacture for 25 years. GAF EVERGUARD 60MIL PVC: 20-Year non-pro-rated manufacturer warranty covering full cost of material replacement on all manufacturer defects. FOUR SEASONS ROOFING WORKMANSHIP WARRANTY: 20-YEAR workmanship warranty which includes the following: MAINTAINENCE: Four Seasons will visit your home on 1 separate occasion during the labor warranty period to inspect and evaluate the condition of your new roof. Four Seasons will also clean all loose debris from roof surface and gutters to ensure all components of your new roof system are performing properly. SERVICE CALLS: You receive no charge service calls during 1-Year labor warranty period, if a storm blows through, a tree falls, a pesky rodent happens to call your roof home or your just concerned about something you see or hear on your roof give us a call we will come inspect it for you with no service call charge. We will even help you file any necessary claims with either your insurance company or the material manufacturer if need be by supplying you with inspection reports and photos. REPAIRS: Four Seasons will repair any damage to the outside of your home as well as the inside of your home in the case of any faulty workmanship at no cost to you. Like we said: When it comes to your HOME!! We ve got you COVERED!! PAGE # 8