NT Exterior Building. Balconies and Balconies and. Mailboxes Walls, Stucco Elements Owner s Club ...4.

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2 TABLE OF CONTENTS 1. RESERVE STUDY EXECUTIVE SUMMARY RESERVE STUDY REPORT RESERVE EXPENDITURES and FUNDING PLAN CONDITION ASSESSMEN NT Exterior Building Elements Balconies and Breezeways, Concrete Balconies and Breezeways, Railings, Aluminum Doors, Common Mailboxes Roofs, Thermoplastic Walls, Stucco Windows, Common Interior Building Elements Elevator Cab Finishes Exercise Equipment Exercise Room Owner s Club Building Services Elements Air Handling and Condensing Units, Split Systems Electrical System Elevators, Traction Generator, Emergency Life Safety System

3 Pipes Pumps, Domestic Water Pump, Fire Suppression Valves Pool Elements Boardwalk, Composite and Wood Concrete Decks Deck, Wood Furniture Mechanical Equipment Pool Finishes, Plaster Garage Elements Concrete, Elevated Floors Concrete, On-grade Gates, Swing Arm Light Fixtures Traffic Coating Reserve Study Update METHODOLOGY DEFINITIONS PROFESSIONAL SERVICE CONDITIONS CREDENTIALS...8.1

4 Reserve Advisors, Inc. 735 N. Water Street, Suite 175 Milwaukee, WI Client: One Ocean Place Homeowners Association (One Ocean Place) Location: Murrells Inlet, South Carolina Reference: Property Basics: One Ocean Place Homeowners Association is an apartment style development of 114 units in one building with two residential towers. The exteriors of the buildings comprise stucco finish walls and flat roofs. The buildings were built from 1989 to 1990 and contain four elevators, two pools and a parking structure. Reserve Components Identified: 40 Reserve Components. Inspection Date: March 16, RESERVE STUDY EXECUTIVE SUMMARY Funding Goal: The Funding Goal of this Reserve Study is to maintain reserves above an adequate, not excessive threshold during one or more years of significantt expenditures. Our recommended Funding Plan recognizes this threshold funding year in 2032 due to stucco paint finishes. Cash Flow Method: We use the Cash Flow Method to compute the Reserve Funding Plan. This method offsets future variable Reserve Expenditures with existing and future stable levels of reserve funding. Our application of this method also considers: current and future local costs of replacementt 1.35% annual rate of return on invested reserves 2.4% future Inflation Rate for estimating Future Replacement Costs Sources for Local Costs of Replacement: Our proprietaryy database, sources, i.e., R.S. Means, Incorporated. historical costs and published Cash Status of Reserve Fund: $689,962 as of January 1, A potential deficit in reserves might occur by 2024 based upon continuation of the most recent annual reserve contributionn of $141,000 and the identified Reserve Expenditures s. Recommended Reserve Funding: The Association budgeted $141,0000 for Reserve Contributions in We recommend the Association budget annual phased increases in Reservee Contributions of $25,500 from 2017 through Afterwards, the Association should budget gradual annual increases in reserve funding that in part consider the effects of inflation through 2046, the limit of this study's Cash Flow Analysis. The initial adjustment in Reserve Contributions of $25,500 represents about a three percent (2.6%) adjustment in the 2016 total Operating Budget of $971,925. This initial adjustment of $24,500 is equivalent to an increasee of $18.64 in the monthly contributionss per homeowner. Certification: This Full Reserve Study exceeds the Community Associations Institute (CAI) and the Association of Professional Reservee Analysts (APRA) standards fulfilling the requirements of a Level I Full Reserve Study.

5 One Ocean Placee Recommended Reserve Funding Table and Graph Year Reserve Contributions ($) 166, , , , , , , , , ,300 Reserve Balances ($) 838, , ,737 1,065,517 1,164,745 1,440,975 1,510, , ,175 1,087,935 Year Reserve Contributions ($) Reserve Balances ($) Year Reservee Contributions ($) Reserve Balances ($) ,600 1,,081, ,6000 1,268, ,000 1,,384, ,0000 1,639, ,600 1,,143, ,6000 1,739, ,400 1,,196, ,5000 1,288, , , ,6000 1,572, , , ,0000 1,316, , , ,6000 1,754, , , ,5000 2,245, , , ,6000 2,444, , , ,0000 2,696,209 Respectfully submitted on April 11, 2016 by RESERVE ADVISORS, INC. Alan M. Ebert, PRA 1, RS 2, Directorr of Quality Assurance Visual Inspection and Report by: Timothy J. Matthiesen, RS 1 PRA (Professional Reservee Analyst) is the professional designation of thee Association of Professional Reserve Analysts. more about APRA at RS (Reserve Specialist) is the reserve provider professional designation of the Community Associations Institute representingg America's more than 300,000 condominium, cooperative and homeowners associations. Learn (CAI) Page Executive Summary

6 2. RESERVEE STUDY REPORT At the direction of the Board that recognizes the need for proper reserve planning, we have conducted a Full Reserve Study of One Ocean Place Homeowners Association Murrells Inlet, South Carolina and submit our findings in this report. The effective date of this study is the date of our visual, noninvasive inspection, March 16, We present our findings and recommendations in the following report sectionss and spreadsheets: Identification of Property - Segregates all property into several areas of responsibility for repair or replacement Reserve Expenditures - Identifies reserve components and related quantities, useful lives, remaining useful lives and future reservee expenditures during the next 30 years Reserve Funding Plan - Presents the recommended Reserve Contributions and year-end Reservee Balances for the next 30 years Condition Assessment - Describes the reserve components, describes our recommendations for repairs or replacement, and includes detailed solutions and procedures for replacements for the benefit of current and future board members Photographs - Documentatio on of Condition of various property elements Methodology - Lists the national standards, methodss and procedures used, financial information relied upon for the Financial Analysis of the Reserve Study Definitions - Contains definitions of terms used in the Reserve Study, consistent with national standards Professional Service Conditions - Describes Assumptions and Professional Service Conditions Credentials and Resources Page Report

7 IDENTIFICATION OF PROPERTY One Ocean Place Homeowners Association is an apartment style development of 114 units in one building with two residential towers. The exteriors of the buildings comprise stucco finish walls and flat roofs. The buildings were builtt from to 1990 and containn four elevators, two pools and a parking structure. We identify 40 majorr reserve components that are likely to require capital repair or replacement during the next 30 years. Our investigation includes Reserve Components or property elements as set forth in your Declaration. Our analysis begins by segregating the property elements into several areas of responsibility for repair and replacement. Our process of identification helps assure that future boards and the management team understand whether reserves, the operating budget or Homeowners fund certain replacements and assists in preparation of the annual budget. We derive these segregated classes of property from our review of the informationn provided by the Page Report

8 Association and through conversations with Management and the Board. These classes of property include: Reserve Components Long-Lived Property Elements Operating Budget Funded Repairs and Replacementss Property Maintained by Homeowners We advise the Board conduct an annual review of these classes of property to confirm its policy concerning the manner of funding, i.e., from reserves or the operating budget. The Reserve Study identifies Reserve Components as sett forth in your Declaration or which were identifiedd as part of your request for proposed services. Reserve Components are defined by CAI as property elements with: One Ocean Place responsibility Limited useful life expectancies Predictable remaining useful life expectancies Replacement cost above a minimum threshold Long-Lived Property Elements do not have predictable Remaining Useful Lives. The operating budget should fund infrequent repairs. Funding untimely or unexpected replacements from reserves will necessitate increases to Reserve Contributions. Periodic updates of this Reserve Study will help determine the merits of adjusting the Reserve Funding Plan. We identify the following Long-Lived Property Elements as excluded from reserve funding at this time. Foundations Structural Frames Pool Structures Valves, Large Diameter, Domestic Waterr (2009) The operating budget provides money for the repair and replacement of certain Reserve Components. Operating Budget Funded Repairs and Replacements relate to: General Maintenance to the Common Elements Page Report

9 Expenditures lesss than $6,0000 (These relatively minor expenditures have a limited effect on the recommended Reserve Contributions.) Balconies and Breezeways, Undersides, Paint Finishes (The Board informs us the Association will paint these elements on an as-needed basis using on-site maintenance personnel.) Doors, Service Areas Elevator Lobbies, Ground Floor Exercise Room and Owner s Lounge, Interim Paint Finishes and Furnishing Replacement Irrigation System Landscape Light Fixtures, Balconies and Breezeways Maintenance Shop Paint Finishes, Touch Up Pipes, Subsurface Utilities Pool Decks, Paint Finishes Pumps Less Than Five-HP (horsepower)) Rest Room, Common, First Level Roof, Heating, Ventilating, and Air Conditioning (HVAC) Unit Stands, Interim Repairs Signage Storage Areas Valves, Small Diameter (we assume replacement as needed in lieu of an aggregate replacement of all the small diameter valves as a single event) Water Heaters, Common Areas Other Repairs normally funded through the Operating Budget Certain items have been designated as the responsibility of the homeowners to repair or replace at their cost. Property Maintained by Homeowners, including items billed back to Homeowners, relates to unit: Electrical Systems HVAC Units Interiors Pipes, Interior Building, Water and Sewer Windows and Balcony Doors Water Heaters Page Report

10 3. RESERVEE EXPENDITURES and FUNDING PLAN The tables following this introductionn present: Reserve Expenditures Line item numbers Total quantities Quantities replaced per phase (in a singlee year) Reserve component inventory Estimated first year of event (i.e., replacement, application, etc.) Life analysis showing useful life remaining useful life Unit cost of replacement 2016 local cost of replacement Total future costss of replacement anticipated during the next 30 years Schedule of estimated future costs for each reserve component ncluding inflation Reserve Funding Plan Reserves at the beginning of each year Total recommended reserve contribution ns Estimated interest earned from invested reserves Anticipated expenditures by year Anticipated reserves at year end Predicted reserves based on current funding level Financial statements prepared by your association, by you orr others might rely in part on information contained in this section. For your convenience, we have provided an electronic data file containing the tables of Reserve Expenditures and Reserve Funding Plan. Page Reserve Expenditures and Funding Plan

11 The following chart illustrates the relative importance of the categories noted in Reserve Expenditures and relative funding during the next 30 years. One Ocean Place Future Expenditures Relative Cost Illustration Page Reserve Expenditures and Funding Plan

12 Reserve Advisors, Inc. Years 2016 to 2031 RESERVE EXPENDITURES Explanatory Notes: One Ocean Place 1) 2.4% is the estimated future Inflation Rate for estimating Future Replacement Costs. Homeowners Association 2) FY2016 is Fiscal Year beginning January 1, 2016 and ending December 31, Murrells Inlet, South Carolina Estimated Life Analysis, Costs, $ Line Total Per Phase 1st Year of Years Unit Per Phase Total 30-Year Total RUL = Item Quantity Quantity Units Reserve Component Inventory Event Useful Remaining (2016) (2016) (2016) (Inflated) FY Exterior Building Elements ,850 6,963 Square Feet Balconies, Concrete, Repairs and Waterproof Coating Applications, Phased to 12 2 to , ,500 1,026,703 73,007 78,391 84,171 90,378 97, ,500 2,250 Linear Feet Balconies, Railings, Aluminum, Phased (Incl. Pool Decks) 2024 to 40 8 to , , , , , ,900 7,450 Square Feet Breezeways, Concrete, Repairs and Waterproof Coating Applications, Phased to 12 7 to , , ,384 61,568 63,045 74, , Square Yards Breezeways, Floor Coverings, Carpet, Phased to 12 7 to ,340 70, ,950 41,722 42,723 50, ,190 1,095 Linear Feet Breezeways, Railings, Aluminum, Phased 2023 to 40 7 to , , ,390 93,078 95, Each Doors, Stairwells 2017 to ,400 49, ,108 50, Each Doors, Units 2040 to , , , Each Mailboxes 2033 to ,400 11,400 17, Squares Roofs, Thermoplastic to , , , , , ,300 41,300 Square Feet Walls, Stucco, Paint Finishes and Capital Repairs, East Elevation (Incl. Sealants to , , , , , , ,300 Square Feet Walls, Stucco, Paint Finishes and Capital Repairs, Remaining (Incl. Sealants) to , , , , Square Feet Windows, Common 2024 to ,000 27,000 32,641 32,641 Interior Building Elements Each Elevator Cab Finishes 2023 to , ,000 30,000 85,968 35, Allowance Exercise Equipment, Cardiovascular, Phased 2018 to 6 2 to 5 6, ,500 13,000 95,849 6,816 7,318 7,858 8,437 9, Allowance Exercise Equipment, Strength Training 2030 to , ,700 13,700 46,348 19, Allowance Exercise Room, Renovation 2030 to , ,000 15,000 50,746 20, Allowance Owner's Club, Renovation 2021 to , ,000 30,000 85,540 33,777 Building Services Elements Each Air Handling and Condensing Units, Split Systems, Common Areas to , ,000 14,000 39,962 16, Each Air Handling and Condensing Units, Split Systems, Elevator Rooms to , ,000 14,000 38,111 16, Allowance Electrical System, Main Panels, Partial 2046 to , ,000 25,000 50, Each Elevators, Traction, Controls and Equipment, North Tower 2029 to , , , , , Each Elevators, Traction, Controls and Equipment, South Tower 2031 to , , , , , Each Generator, Emergency, 350-kW to , , , , , Each Life Safety System, Control Panel 2027 to , ,000 10,000 31,508 12, Allowance Life Safety System, Emergency Devices 2032 to , ,000 46,000 67, Each Pipes, Riser Sections, Domestic Water, Waste and Vent, Partial 2036 to to 30+ 2, , , , Each Pumps, Domestic Water, 7.5-HP (Includes Controller) to , ,500 49, ,283 55, Each Pump, Fire Suppression (Includes Controller) 2024 to , , , , , Each Valves, Fire Suppression System 2024 to , ,000 20,000 24,179 24,179 Pool Elements Square Feet Boardwalk, Composite and Wood 2035 to ,500 17,500 27, ,270 1,270 Square Feet Concrete Decks, Textured Coating, Partial Replacements and Repairs to ,620 7,620 46,372 8,182 10,129 Printed on 7/13/2016 Expenditures - Page of 4

13 Reserve Advisors, Inc. RESERVE EXPENDITURES Years 2032 to 2046 One Ocean Place Homeowners Association Murrells Inlet, South Carolina Estimated Life Analysis, Costs, $ Line Total Per Phase 1st Year of Years Unit Per Phase Total 30-Year Total Item Quantity Quantity Units Reserve Component Inventory Event Useful Remaining (2016) (2016) (2016) (Inflated) Exterior Building Elements ,850 6,963 Square Feet Balconies, Concrete, Repairs and Waterproof Coating Applications, Phased to 12 2 to , ,500 1,026, , , , , , ,500 2,250 Linear Feet Balconies, Railings, Aluminum, Phased (Incl. Pool Decks) 2024 to 40 8 to , , , ,900 7,450 Square Feet Breezeways, Concrete, Repairs and Waterproof Coating Applications, Phased to 12 7 to , , , , Square Yards Breezeways, Floor Coverings, Carpet, Phased to 12 7 to ,340 70, ,950 76,217 89,982 92,141 51,649 60,977 62, ,190 1,095 Linear Feet Breezeways, Railings, Aluminum, Phased 2023 to 40 7 to , , , Each Doors, Stairwells 2017 to ,400 49, ,108 91, Each Doors, Units 2040 to , , , , Each Mailboxes 2033 to ,400 11,400 17,061 17, Squares Roofs, Thermoplastic to , , , , ,300 41,300 Square Feet Walls, Stucco, Paint Finishes and Capital Repairs, East Elevation (Incl. Sealants to , , , , ,300 Square Feet Walls, Stucco, Paint Finishes and Capital Repairs, Remaining (Incl. Sealants) to , , , , , , , Square Feet Windows, Common 2024 to ,000 27,000 32,641 Interior Building Elements Each Elevator Cab Finishes 2023 to , ,000 30,000 85, Allowance Exercise Equipment, Cardiovascular, Phased 2018 to 6 2 to 5 6, ,500 13,000 95, Allowance Exercise Equipment, Strength Training 2030 to , ,700 13,700 46, Allowance Exercise Room, Renovation 2030 to , ,000 15,000 50, Allowance Owner's Club, Renovation 2021 to , ,000 30,000 85,540 50,550 9,728 10,445 11,215 12,042 12,930 27,253 29,839 51,763 Building Services Elements Each Air Handling and Condensing Units, Split Systems, Common Areas to , ,000 14,000 39,962 23, Each Air Handling and Condensing Units, Split Systems, Elevator Rooms to , ,000 14,000 38,111 21, Allowance Electrical System, Main Panels, Partial 2046 to , ,000 25,000 50,926 50, Each Elevators, Traction, Controls and Equipment, North Tower 2029 to , , , , Each Elevators, Traction, Controls and Equipment, South Tower 2031 to , , , , Each Generator, Emergency, 350-kW to , , , , Each Life Safety System, Control Panel 2027 to , ,000 10,000 31,508 18, Allowance Life Safety System, Emergency Devices 2032 to , ,000 46,000 67,229 67, Each Pipes, Riser Sections, Domestic Water, Waste and Vent, Partial 2036 to to 30+ 2, , , , Each Pumps, Domestic Water, 7.5-HP (Includes Controller) to , ,500 49, , , , ,111 74,081 98, Each Pump, Fire Suppression (Includes Controller) 2024 to , , , , Each Valves, Fire Suppression System 2024 to , ,000 20,000 24,179 Pool Elements Square Feet Boardwalk, Composite and Wood 2035 to ,500 17,500 27,462 27, ,270 1,270 Square Feet Concrete Decks, Textured Coating, Partial Replacements and Repairs to ,620 7,620 46,372 12,539 15,522 Printed on 7/13/2016 Expenditures - Page of 4

14 Reserve Advisors, Inc. Years 2016 to 2031 RESERVE EXPENDITURES Explanatory Notes: One Ocean Place 1) 2.4% is the estimated future Inflation Rate for estimating Future Replacement Costs. Homeowners Association 2) FY2016 is Fiscal Year beginning January 1, 2016 and ending December 31, Murrells Inlet, South Carolina Estimated Life Analysis, Costs, $ Line Total Per Phase 1st Year of Years Unit Per Phase Total 30-Year Total RUL = Item Quantity Quantity Units Reserve Component Inventory Event Useful Remaining (2016) (2016) (2016) (Inflated) FY ,600 2,600 Square Feet Deck, Wood 2020 to ,000 52, ,051 57, Allowance Furniture 2019 to , ,000 6,000 26,388 6,442 8, Allowance Mechanical Equipment, Phased 2019 to 15 3 to 9 12, ,500 25,000 91,020 13,422 15,474 17, ,170 1,170 Square Feet Pool Finishes, Plaster to ,210 15,210 92,561 16,332 20,218 Garage Elements ,940 29,940 Square Feet Concrete, Elevated Floors, Inspections and Capital Repairs to ,892 53, ,468 56,510 75, ,670 1,235 Square Feet Concrete, On-grade, Partial 2024 to 90 8 to , ,375 93,588 18,663 21, Each Gates, Swing Arm 2021 to , ,000 8,000 23,481 9, Each Light Fixtures 2018 to ,200 25,200 26,424 26, ,850 6,850 Square Feet Traffic Membrane, Top Level, Proposed to ,675 37, ,815 39,505 52,511 1 Allowance 2016 Reserve Expenditures , , , , ,364 1 Allowance Reserve Study Update with Site Visit , ,450 3,450 3,450 3, Anticipated Expenditures, By Year $8,976, ,364 50, ,284 44,378 57, ,225 16, ,786 1,148,772 15, , ,846 30, , ,247 1,211,719 Printed on 7/13/2016 Expenditures - Page of 4

15 Reserve Advisors, Inc. RESERVE EXPENDITURES Years 2032 to 2046 One Ocean Place Homeowners Association Murrells Inlet, South Carolina Estimated Life Analysis, Costs, $ Line Total Per Phase 1st Year of Years Unit Per Phase Total 30-Year Total Item Quantity Quantity Units Reserve Component Inventory Event Useful Remaining (2016) (2016) (2016) (Inflated) ,600 2,600 Square Feet Deck, Wood 2020 to ,000 52, ,051 91, Allowance Furniture 2019 to , ,000 6,000 26, Allowance Mechanical Equipment, Phased 2019 to 15 3 to 9 12, ,500 25,000 91, ,170 1,170 Square Feet Pool Finishes, Plaster to ,210 15,210 92,561 11,383 20,569 23,714 25,028 30,983 Garage Elements ,940 29,940 Square Feet Concrete, Elevated Floors, Inspections and Capital Repairs to ,892 53, , ,670 1,235 Square Feet Concrete, On-grade, Partial 2024 to 90 8 to , ,375 93, Each Gates, Swing Arm 2021 to , ,000 8,000 23,481 99,844 24,807 28,601 14, Each Light Fixtures 2018 to ,200 25,200 26, ,850 6,850 Square Feet Traffic Membrane, Top Level, Proposed to ,675 37, ,815 69,799 1 Allowance 2016 Reserve Expenditures , , , ,364 1 Allowance Reserve Study Update with Site Visit , ,450 3,450 3, Anticipated Expenditures, By Year $8,976, , , ,522 49, ,118 81,173 50, , , , ,131 35, , ,542 Printed on 7/13/2016 Expenditures - Page of 4

16 Reserve Advisors, Inc. Page 1 of 1 RESERVE FUNDING PLAN CASH FLOW ANALYSIS One Ocean Place Homeowners Association Individual Reserve Budgets & Cash Flows for the Next 30 Years Murrells Inlet, South Carolina FY Reserves at Beginning of Year (Note 1) 689, , , , ,737 1,065,517 1,164,745 1,440,975 1,510, , ,175 1,087,935 1,081,233 1,384,418 1,143,403 1,196,243 Total Recommended Reserve Contributions (Note 2) 141, , , , , , , , , , , , , , , ,400 Plus Estimated Interest Earned, During Year (Note 3) 9,400 10,394 10,201 10,392 12,955 14,953 17,471 19,789 14,583 10,860 13,699 14,544 16,532 16,948 15,687 10,268 Less Anticipated Expenditures, By Year (128,364) (50,586) (357,284) (44,378) (57,175) (184,225) (16,141) (231,786) (1,148,772) (15,474) (183,239) (330,846) (30,347) (582,563) (295,247) (1,211,719) Anticipated Reserves at Year End $711,998 $838,306 $683,223 $866,737 $1,065,517 $1,164,745 $1,440,975 $1,510,478 $664,589 $955,175 $1,087,935 $1,081,233 $1,384,418 $1,143,403 $1,196,243 $335,192 Predicted Reserves based on 2016 funding level of: $141, , , , , , , , ,666 (173,708) (continued) Individual Reserve Budgets & Cash Flows for the Next 30 Years, Continued Reserves at Beginning of Year 335, , , , , ,531 1,268,784 1,639,735 1,739,924 1,288,250 1,572,580 1,316,822 1,754,920 2,245,240 2,444,285 Total Recommended Reserve Contributions 348, , , , , , , , , , , , , , ,000 Plus Estimated Interest Earned, During Year 3,523 3,594 5,641 8,883 11,880 14,826 19,501 22,660 20,303 19,181 19,373 20,595 26,820 31,442 34,466 Less Anticipated Expenditures, By Year (497,041) (205,069) (221,522) (49,432) (282,118) (81,173) (50,550) (334,071) (893,477) (166,451) (717,131) (35,097) 0 (306,997) (268,542) Anticipated Reserves at Year End $190,274 $345,799 $495,518 $829,369 $942,531 $1,268,784 $1,639,735 $1,739,924 $1,288,250 $1,572,580 $1,316,822 $1,754,920 $2,245,240 $2,444,285 $2,696,209 (NOTE 5) (NOTE 4) Explanatory Notes: 1) Year 2016 starting reserves are as of January 1, 2016; FY2016 starts January 1, 2016 and ends December 31, ) Reserve Contributions for 2016 are budgeted; 2017 is the first year of recommended contributions. 3) 1.35% is the estimated annual rate of return on invested reserves. 4) Accumulated year 2046 ending reserves consider the age, size, overall condition and complexity of the property. 5) Threshold Funding Year (reserve balance at critical point). Printed on 7/13/2016 Funding Plan - Page 3.4

17 4. CONDITION ASSESSMENT The Condition Assessment of this Full Reserve Study includes Enhanced Solutions and Procedures for select significant components. These narratives describe the Reserve Components, document specificc problems and conditions, and may include detailed solutionss and procedures for necessary capital repairs and replacements for the benefit of current and future board members. We advise the Board use this information to help define the scope and procedures for repair or replacement when soliciting bids or proposals from contractors. However, the Report in whole or part is not and should d not be used as a design specification or design engineering service. Front and side elevations Rear elevation Exterior Building Elements Balconies and Breezeways, Concrete - The building provides structural support for the concrete balconies and breezeways that comprise approximately 27,850 square feet and 14,900 square feet of horizontal surface area, respectively. A majority of the balconies comprise reinforced concrete with tile floor coverings. The Boardd informs uss the tile floor coverings vary in condition from good to poor. The Board also informs us the Association will fund for ongoing tile removal and the installation of waterproof coatings at the balconies as necessary during the Page Condition Assessment

18 next 30 years. The Board has tested a Sealoflex waterproofing system on a limited number of balconies and will likely continue using this product in lieu of tile replacement in like kind. The breezeways comprise reinforced concrete with a waterproof coating and carpet floor coverings. The waterproof coating applications and carpet floor coverings are in good overall conditionn at an age of one year. The topsides of the breezewayss exhibit isolated and minor deterioration. Our inspection notes evidence of water infiltration at the undersides of the breezeways. Balcony with tile floor coverings Balcony with surface applied waterproof coating Balcony and building intersection Aluminum railing embedded in balcony Page Condition Assessment

19 Breezeway overview Breezeway with surface applied waterproof coating and carpet floor coverings Sealed joint between breezeway and building Evidence of waterr infiltration below breezeway Balconies and breezeways of this type have an indeterminately long useful life with proper maintenance and periodic capital repairs. Properr maintenance should include waterproof coating applications and capital repairs every 8- to 12-years. Capital repairs should include a close-up visual inspection, patching of delaminated concrete, and the routing and filling of cracked concrete. Capital repairs may also include replacement of the caulked joint between the balcony and the building, and repair or replacement of the railings and railing fastener attachments as needed. Page Condition Assessment

20 Based on the current good conditionn of the exposed concrete of the balconies, we do not anticipate the need to replace the balconies during the next 30 years.. Instead, we recommend the Association budget for the following periodic repairs: Partial depth replacement of up to one percent (1%) of the concrete topsides and undersides Crack repairs as necessary Repairs to the railings as necessary Replacement of perimeter sealants as needed Application of a waterproof coating (Urethane based elastomeric) Removal of the tile floor coverings (balconies only) Replacement of the carpet floor coverings (breezeways only) Due to the varied ages and conditions reported to us by the Board, we recommend the Association fund for this work to approximately twenty-five percent (25%) of the balconies by 2018 and every threee years thereafter. We recommendd the Association budget for this work at the breezeways beginning by 2023, concluding by Due to the carpet s ability to retain storm water and moisture, we recommend subsequent waterproof coating applications and carpet floor covering replacements at the breezeways every eight years rather than on a similar schedule to coordinate with the balconies. We depict this information on Line Items 1.060, and of Reserve Expenditures. Balconies and Breezeways, Railings, Aluminumm - The balconies include approximately 4,500 linear feet of prefinished aluminum railings. Thiss quantity includes the aluminum railings near the pool deck. The breezeways include an additional 2,190 linear feet of prefinished aluminumm railings. This quantity includes the railingss at the elevated sections of the parking garage. The railings at each location are original and in good condition with isolated damage evident, particularly at the balconies. Page Condition Assessment

21 Prefinished aluminum railing Picket damage at balcony The finish on these types of railings is maintenance free and should last the life of the railing. We estimatee a useful life of up to 40 years for the aluminum railings. We recommend the Association budget for replacement of the balcony railings beginning by 2024 and concluding by We recommend the Association budget for replacement of the breezeway railings beginning by 2023 and concluding by Wee recommend the Association coordinate railing replacements with repairs and waterproof coatingg applications at each location due to the interrelated nature of these events. We include this information on Line Items and of Reserve Expenditures. Doors, Common - One Ocean Place maintains 168 common entrance doors at the units and 52 common entrance doors at the stairwells. The unit doors are in good condition at an age of one year. The stairwell doors are likely original and are in fair to poor condition. The stairwell doors exhibit finish deterioration throughout thee buildings. Page Condition Assessment

22 Unit door Finish deterioration at stairwell door The useful life of these doors is up to 25 years. We suggest the Association budget for an aggregated replacement of the stairwell doors in and again by We suggest the Association budget for an aggregated replacement of the unit doors by This type of replacement will ensure the availability of similar hardware and maintain aesthetic continuity throughout the community. We include this information on Line Items and of Reserve Expenditure es. Mailboxes - The unit mailboxes are located at the ground level at One Ocean Place. The mailboxes are in good condition at an age of three years. Page Condition Assessment

23 Mailboxes of this type have useful lives of up too 20 years. Based on their conditionn and age, we recommend the Association anticipate replacement of the mailboxes by We include this information on Line Item of Reservee Expenditures. The Association should verify the new mailboxes meet the specifications of the United Statess Postal Service. Roofs, Thermoplastic - The roofs at One Ocean Place consist of 210 squares 1 of thermoplastic roofing. The roofs are in good overall condition at an age of four years. Thermoplastic roof Thermoplastic roof Thermoplastic roof in good condition HVAC unit stands 1 We quantify the roof area in squares, where one square is equal to 100 square feet of surface area. Page Condition Assessment

24 Management and the Board inform us the roof iss comprised of Fibertite, a thermoplastic material, and there are no active leaks. Thermoplastic roofs include the following: Polyvinyl chloride (PVC or simply vinyl) PVC alloys or compounded thermoplasti ics Thermoplastic olefin (TPO) Chlorinated polyethylene (CPE) The useful life of thermoplastic roofs in Murrells Inlet is from 15- to 20-years. We include the following solutions and procedures pertaining to replacement of thermoplastic roofs for the benefit of present and future board members. The following characteristics define most thermoplastic roofs: Attachment to the roof deck is either fullyy adhered, mechanical or ballasted Membranes are commonly white and reinforced with polyester Seams are sealed with heat or chemical welding Sheet widths range from 6- to 12-feet wide Sheets are typically 40- to 100-mils thickk Single ply (one layer) The white material of thermoplasti ic roofs provides high solar reflectance and high thermal emittance. Therefore, thermoplastic roofs are considered "cool roofs." These membranes can be repeatedly softened by heating too conduct repairs. Thermoplastic roof systems are highly resistant to tears, impacts and punctures. Reroofing is always more labor intensive than an originall installation. Removal and disposal are a problem in multistory buildings because of problemss conveying the materials off and ontoo the roof. To maximize the remaining useful life of the roof, the Association should conduct periodic repairs as necessary and fund these expenses through the operating budget. The Association should retain a maintenance company for inspections of the roofs semiannually and fund these inspections through the operating budget. Page Condition Assessment

25 Over time, exposure to ultraviolet light, heat and weather degrade the membrane. This degradation results in membrane damage from thermal expansion and contraction, adverse weather and pedestrian traffic. The aging process makes the membrane less pliable and more difficult to maintain. Ponding water on the roof can increase the effects of ultraviolet light on the membrane and contaminants in ponded water cann cause the membrane to deteriorate prematurely. Thermoplastic roofs (especially TPO) are relatively new and their long term performance is not well defined. Contractors can install a new thermoplastic roof in one of two ways: tear-off or an overlay. An overlay is the application of a new roof membrane over an existing roof. This method, although initially more economical, often covers up problems with the deck, flashing and saturated insulation. The tear-off method of replacement includes removal of the existing roofing, flashings and insulation, and installation of a new roofing system. The contractor should follow the manufacturer's directions and specifications upon installation of the roof. The contractor should remove the original insulation if saturated or compacted and apply a new layer of insulation from ½ inch to one inch thick per the manufacturer's instructions. The insulation should fit loosely with gaps no greater than ¼ inch. Gaps will cause failure of the membrane later. Mechanical fastening of the insulationn is the best manner of installation. The time or need to replace the roofs becomes apparent with multiple or recurring leaks. The Association should determine whether the origin of the leaks is from the membrane or flashings. Repairs of the flashings may be more cost-effectivfinding several or many breaks in a roof, replacement than replacement of the entire roof. However, because of the difficulty in eventually becomes the more economical option rather than repair. We recommend One Ocean Place prepare for a complete tear-off at the time of replacement by replacement by We Page Condition Assessment

26 depict this information on Line Item of Reserve Expenditures. The Association should monitor outside vendors when they service any elements on the roofs to minimize unreported roof damage. Walls, Stucco Hardcoat stucco comprises approximately 144,600 square feet of the building exteriors. The stucco is in good to fair overalll condition. The stucco paint finish is in fair overall condition at varied ages. Our inspection notes cracks, deterioration, stains throughout the building and color discrepancy between different areas of the building. Hardcoat stucco with paint finish Recently painted stucco at west elevation Concrete column deterioration at east elevation Stucco cracks and deterioration at east elevation Page Condition Assessment

27 Stain from generator exhaust Finish discrepancy at east elevation Previous stucco repairs Partial replacements and repairs at south elevation of north tower Stucco deterioration Typical cracks at parking structure wall (willl be remediated in 2016) Page Condition Assessment

28 The Board informs us the Association has historically funded for paint finishes on an as needed basis. However, the Board informs us the Association is in the processs of completing a project to paint and repair the stucco at the north, south and west elevations in We elaboratee on solutions and procedures necessary for the optimal maintenance of stucco in the following discussion. Stucco is Portland cement plaster that is appliedd either directly to a solid base such as masonry or concrete, or is applied to galvanized metal lath attached with galvanized fasteners. The actual construction may vary and must follow the specifications of the supplier, manufacturer or local building codes; however, the following graphic details the typical components of a stucco wall system on frame construction: Along with proper installation, proper maintenance and periodic finish applications, the inherent composition of stucco wall systems results in ann indefinitely long useful life. The useful Page Condition Assessment

29 life of these finish applications is from 8- to 10-years. Color variations at repairs often warrant completee coating application to maintain aesthetics. Periodic repairss and finish applications help prevent water infiltration and spalling from weather exposure, maintain a good appearancee and maximize the useful life of the system. We include the following commentary as a summary of the minimum requirements for a successful paint finish application for present and future board members. Correct and complete preparation of the surface before application of the paint finish maximizes the useful life of the paint finish and surface. The contractor should remove all loose, peeled or blistered paint before application of the new paint finish. power wash the surface to remove all dirt and biological growth. The contractor should then Water-soluble cleaners that will not attack Portland cement are acceptable for removing stains. Summarizing the minimum requirements of the proposed scope of work, all bids should include the following: 1. Name of paint finish product 2. The contractor will involve manufacturer r representatives to ensure specifications and warranty 3. The contractor will apply the paint to clean and dry surfaces at the manufacturer's recommended spreading rates 4. The contractor will apply successive coats of the paint finish, with sufficient time elapsee between coats, as necessary to ensure uniform appearance 5. The contractor will conduct crack repairs and replace deteriorated or damaged stucco prior to the application of the paintt finish 6. The contractor will replace deteriorated sealants or caulk prior to the application of the paint finish In consideration of the above recommended maintenance,, useful life and age of the stucco paint finishes, we advise One Ocean Place budget for paint applications, partial stucco replacements and crack repairs to the east elevation byy 2018 and the remaining elevations by Page Condition Assessment

30 2024. We recommend subsequent applications every eight years thereafter. Our estimate of cost anticipates the following in coordination with each paint finish application: Crack repairs as needed (Each paint product has the limited ability to cover and seal cracks but we recommend repair of all cracks which exceed the ability of the paint product to bridge.) Replacement of up to three percent (3%), of the stucco walls (The exact amount of area in need of replacement will be discretionary based on the actual future conditions and the desired appearance.) Replacement of up to fifty percent (50%)) of the sealants in coordination with each paint finish application. We depict this information on Line Items and of f Reserve Expenditures. Windows, Common - The common windows at the exercise room and Owner s Club comprise approximately 360 square feet, are original andd are in good to fair condition. The useful life of aluminum frame windows is up to 40 years. The useful life of the windows is based on the occurrence of water infiltration, thermal inefficiencies compared to present technology, type of frame, availability of replacement parts and aesthetics. Based on these factors, we recommend the Association anticipate replacement of these windows by We depict this information on Line Item of Reserve Expenditures. Page Condition Assessment

31 Interior Building Elements Elevator Cab Finishes - Four elevators serve the building. The elevator cab finishes consist of: Rubber floor coverings Laminate wall coverings Eggcrate ceiling finishes The finishes are in fair overall condition at an unknown age. The useful life of the elevator cab finishes is up to 15 years. Based on the existing conditionn of the cab finishes, we recommend the Association budget for renovation of the cab finishes by 2023 and again by We include this information on Line Item of Reserve Expenditures. Exercise Equipment - The exercise room contains the following types of cardiovascular aerobic training equipment: Elliptical Stationary cycle Treadmills The exercise room contains the following types of strength training equipment: Benches Dumbbells Weight training machines Page Condition Assessment

32 The equipment is in good condition at an agee of one year. Based on advances in technology and overall usage, the useful life of cardiovascular equipment of this type is up to six years. The useful life of strength training equipment of this type is up to 15 years. We recommend One Ocean Place anticipate replacement t of up to fifty percent (50%) of the cardiovascular equipment by 2018 and every three years thereafter. We recommend the Association budget for replacement of the strength training equipment by 2030 and again by The times and costs of these replacements may vary. However, we judge the amounts shown on Line Items and of Reserve Expenditures sufficient to budget appropriate reserves. Exercise Room - The exercise room components are in good overall condition at an age of one year. The exercise room components include: Rubber floor covering Acoustical ceiling tile Paint finishes on the walls and portions of the ceiling Rest room Sauna Light fixtures Furnishings Page Condition Assessment

33 We recommend the Association renovate the exercise room components up to every 15 years to maintain the appearance of this common area. We include an allowance for the renovation of the exercise room by 2030 and again by We depict this information on Line Item of Reserve Expenditures. Owner s Club - The common area amenities include an Owner s Club on the fifth floor. Components of the Owner s Club include: Carpet and tile floor coverings Acoustical ceiling tile Paint finishes on the walls and portions of the ceilings Light fixtures Furnishings Kitchen cabinets, countertops and appliances The components are in good condition at varied ages. Owner s club overview Kitchen cabinets, countertops and appliances We recommend renovations of the Owner s Club every 20 years. The periodic comprehensive renovation of the Owner s Club will maintain an attractive appearance of this amenity. The specific time of any interiorr renovation is somewhat discretionary and may be implemented by the Board priorr to the end of its usefull life. We recommend One Ocean Place Page Condition Assessment

34 anticipate a renovation of this common area by 2021 and again by We note this information on Line Item of Reserve Expenditures s. Building Services Elements Air Handling and Condensing Units, Split Systems - The Association maintains four split system air conditioners to provide heated or cooled air, depending on the season, to the common areas and elevator rooms. A split system air conditioner consists of an outside condensing unit, an interior evaporator coil, refrigerantt lines and an interior air handling unit. The split systems are reported in satisfactory condition at ages of five- to seven-years. Condensing unit serving elevator room With periodic maintenance, the useful life of these units is from 12- to 18-years. We base the time of replacement of a split system on its anticipated useful life and frequency of service interruptions. The condensing unit may require replacement prior to replacement of the related interior forced air unit. However, One Ocean Place should coordinate the replacement of the interior forced air unit, evaporator coil, refrigerant lines and exterior condensing unit. We recommend the Association anticipate replacement of the two systems serving the common areas by 2024 and again by We anticipate replacementt of the two systems serving the elevator Page Condition Assessment

35 rooms by 2022 and again by We include this information on Line Items and of Reserve Expenditures. Electrical System - The electrical system at One Ocean Place is primarily original to construction. Based on our conversations with the Board, the system is in reported satisfactory condition. The exact locations and conditions of all thee electrical system components were not ascertained due to the nature of their location and the non-invasive nature of our inspection. For purposes of this Reserve Study, we excludee the electrical systems within the units based upon information from the Board. We give a brief overview of electrical system components in the following sections of this narrative. Primary Switchgear - The primary switchgear iss located where the electric supply comes into the building. Switchgear can include associated controls, regulating, metering and protective devices, and is used for the transmission, distribution and conversion of electric power for use within the building. Switchgear components have a useful life of up to and sometimes beyond 70 years. Replacement is often determined by a desired upgrade of the entire electrical system. Transformer - A transformer is an electric device with two or more coupled windings used to convert a power supply from one voltage to another voltage. Transformers within a building lower the supplied electrical voltagee to a levell that can be utilized by the building's equipment and unit owners. Transformers do not utilize mechanical components and therefore have a long useful life. However, the Association should anticipate periodic replacement of a limited quantity of transformers. Distribution Panel - The distribution panel is an electric switchboard or panel used to control, energize or turn off electricity in total or for individual circuits. The panel also distributes electricity to individual and controllable circuits. One or more distribution panels may exist and further distribute electricityy to individual panel boards for each unit. The distribution panel is enclosed in a box and containss circuit breakers, fusess and switches. Distribution panels have a useful life of up to and sometimes beyond 70 years. Bus Bar - A bus bar is an electric conductor thatt serves as a common connection for two or more circuits and carries a large current. The metall enclosure contains factory assembled conductors, usually copper or aluminum bars or tubes. Bus bars typically convey electricity in a vertical riser to the multiple stories in the building. This component has an indefinite useful life and would rarely require replacement in total unless an upgrade of the capacity of the electricall system is desired. Page Condition Assessment

36 Circuit Protection - Once electricity is distributed throughout the building and is at a usable voltage level, the electricity is divided into circuits. Each circuit requires circuit protection. Circuit protection is necessary to prevent injury and fires, and minimize damage to electrical components and disturbances to the electrical system. Abnormalities in the circuit can include overloads, short circuits and surges. Circuit protection devices are commonly referred to as circuit breakers andd fuses. For the protection of the circuits in the units and common areas, we recommend the use of only circuit breakers as they are safer than fuses. However, the use of fuses is common for equipment like emergency systems and individual items of equipment. Fuses with a low capacity rating can easily be replaced with fuses of a higher rating resulting in an unprotected, overloadedd and unsafe circuit. The circuit protection panels have a useful life of up to and sometimes beyond 70 years. Conductors - Conductors are the electrical wiress that convey electricity to the units, light fixtures, receptacles and appliances. Conductorss in typical high and low capacity circuits are copper, as is reported the case at One Ocean Place. Copper conductors have an ndefinite useful life. Conductor Insulation and Conduit - Conductor insulationn provides protection against the transfer of electricity. Conductor insulation can eventually become brittle and damaged from rodents or heat from many years of service. Conductor conduit is a pipe or tube used to enclose insulated electric wires to protectt them from damage. Steel conductor conduit, although galvanized, will eventually rustt if used in damp conditions. The useful life of conductor insulation and conduit is indeterminate. Changes in service loads over time can cause arcing conductor connection points and line overloads within a system. Periodic thermoscans of primary switchgear and distribution panels are advisable and can detect defective or prematurely aging electrical system components. We recommend the Association conduct thermoscans of the distribution panels and circuit protection panels, and inspections of the transformers for any indications of arcing, burning or overheating on a regular basis, funded through the operating budget. Verification of the integrity of all connection points minimizes the potential for arcing andd fires. The Association should repair or replace all loose and corroded parts at that time. Due to the limited amount of mechanical components, electrical system components have a long, often indeterminate, useful life. The Association may find it necessary to replace individual components of the electrical system due too service load changes and changes in Page Condition Assessment

37 building code requirements. However, future changes in service loads and the requirements of future building code changes are indeterminate. We recommend the Association budget to replacee up to twenty percent (20%) of the main switchgear, distribution and circuit protection panels byy Updates of this Reserve Study will consider possible changes in the scope and times of component replacements based on the conditions, including the need for replacement of the wires. We note this information on Line Item of Reserve Expenditures. Elevators, Traction - The building utilizes twoo traction elevators. The major elevator system components are in reported good condition at ages of six- to eight-years. Elevator hoist Elevator controls The Board informs us that service interruptions are infrequent. The elevators utilize programmable logic computer controls. Elevator system components that utilize programmable logic computer controls provide many years of servicee and when cared for by a maintenance contract, can have useful lives of up to 25 years. However, the scarcity of parts, and the potential frequency and duration of service interruption makes controls replacement more desirable as the Page Condition Assessment

38 components age. We include the following solutions and procedures for traction elevator component modernization for present and future board members. Traction elevators are raised and lowered by woven steel cables, or hoisting ropes. The ropes are attached to the elevator car and wound around a sheave. The sheave is connected to an electric motor. As the motor turns one way or the other, the sheave either raises or lowers the elevator car. The ropes that lift the car are also connected to a counterweight to ease the load on the motor. Three basic types of traction elevators include gearless, geared and machine-roomless. In gearless elevators, the motor rotates the sheaves directly while in geared elevators, the motor turns a gear train that rotates the sheave. For gearless and geared elevators, the sheave, motor and controls are located in a machine room above the elevator shaft. Machine-roomless elevators are relatively new elevator systemss that use smaller sheaves than conventional traction elevators. The smaller sheave size allows the lifting components to be mounted within the hoistway itself, eliminating the need for a machine room. The traction elevators at One Ocean Place are geared. We anticipate replacement of the following traction elevator system components: Cab control panels Door operators Hallway panels/buttons Hoists and motors Microprocessor based controllers Based on the age and condition of the elevators,, we recommend the Association budget for replacement of the above noted elements beginningg by 2029 and concluding by We depict this information on Line Items and off Reserve Expenditures.. Page Condition Assessment

39 The elevator cabs and shafts have an indefinite useful life and therefore we do not include their replacement during the next 30 years. The Association should fund all other elevator component replacements throughh the operating budget ass normal maintenance. These costs may vary based on the desired scope of the actual replacements, changes in technology and requirements of local codes or ordinances at the actual times of replacements. However, we judge our estimated costs sufficient to budget appropriate reserves at this time. The Association should require the contractor to verify that elevator component replacement includes all of the necessary features for the latest in elevator code compliance. In addition, the design should meet or exceed accessibility standards as defined by the Disabilities Act. Americans with Generator, Emergency - A 350-kW (kilowatt)) diesel generator provides power to the critical electrical systems during power supply interruptions or outages. The generator is original and reported in good condition. The generator has a useful life of 25- to 35-years. One Ocean Place should continue to test the emergency generator periodically and conduct repairs as needed. We suggest the Association fund these periodic tests and repairs from the operating budget. We recommend the Page Condition Assessment

40 Association anticipate replacement of the generator by Ourr cost on Line Item of Reserve Expenditure es includes replacement of the transfer switch. Life Safety System - The life safety system at One Ocean Place includes the following components: Audio/visual fixtures Control panel Detectors Emergency light fixtures Exit light fixtures Pull stations Wiring The system is reported in good operational condition at an age of four years excluding the exit signs. The Board informs us the Association willl replace the exit signs in the near term using funds from the operating budget. The digital display on the Honeywell central panel read System Normal at the time of our inspection. Central panel Emergency devices Life safety system devices have useful lives of up to 20 years with proper maintenance. Control panels have a useful life of up to 15 years. Changes in technology or building codes may make a replacement desirable prior to the end of the functional life. With consideration of the operational condition and age, we recommend the Association budget for replacement of the Page Condition Assessment

41 devices by 2032, and the control panel by 2027 and again by Our estimate of future cost considerss only that amount necessary to duplicate the same functionality. Local codes or ordinances at the actual time of replacement may require a betterment as compared to the existing system. A bettermentt could result in a higher, but at this time unknown, cost of replacement than the future amount shown on Line Items and of Reserve Expenditures. Our cost assumess reuse of the existing wiring. Pipes - The Association is responsible for maintenance and replacement of the piping system sections arranged in vertical and horizontal segments. We regard each segment of pipe rising one story or floor a riser section. The majority of these pipes are located in vertical chases and lesser quantities above or within walls and ceilings in the building. A riser comprises a complete set of riser sections of vertical pipe within a chase. The vertical pipe risers connect to usually shorter segments of horizontal branch pipes. The exact locations and conditions of the pipes were not ascertained due to the nature of their location and the non-invasive nature of our inspection. Based on our conversations with the Board, we estimate approximately 420 riser sections throughout the building. We comment on the respective quantities and conditions of the riser sections in the following sections of this narrative. Domestic Water - The supply and return copperr domestic water risers are original. The Board reports no deficiencies. Copper piping is the predominant type of pipe used in new construction for domestic waterr piping. With low mineral content in the water, the useful life of copper domestic water pipes is up to and sometimes beyond 80 years. However, there is recent evidence that copper piping prematurely develops pinhole leaks. Studies have shown that changes in water treatment practices, recently required in response to U.S. Environmental Protection Agency regulations, are Page Condition Assessment

42 dramatically increasing the risk of pitting corrosion in many geographic locations. Utility companies are implementing higher chloride levels to prevent outbreaks of waterborne disease. These higher chloride levels can accelerate corrosion of copper pipes and ndeterminately reduce their useful life. In the event that numerous pinhole leaks develop or occur throughout the system of pipes, One Ocean Place should also considerr in-place pipe restoration technology. This process includes drying, sandblasting away interior pipe occlusionss and applying an epoxy lining to the interior surfaces of the pipes. Future updates of this study will consider the possibility of the pipe restoration process in lieu of pipe replacement at One Ocean Place. Restoration technology can extend the useful life of a pipe system thus avoiding a system pipe replacement. Sanitary Waste Disposal and Vent - The sanitary waste disposal and vent riser sections are original. The Board reports no deficiencies. The useful life of these vent and sanitary waste disposal pipes is up to and sometimes beyond 80 years. These pipes typically deteriorate from the inside out as a result of sewer gases, condensation and rust. Valves - The piping systems include various valves. Identification of a typical useful life and remaining useful life for individual valves is difficult. Associations typically replace valves on an as needed basis in our experience. Therefore, we recommend the Association replace valves as needed throughh the operating budget. Our cost for a single riser section assumes replacement of all pipes located within each wall opening, associated branch piping, fittings and minimal interiorr finishes. However, the cost Page Condition Assessment

43 does not include temporary housing for affected residents or replacement of expansion joints, pipes within the units or significant interior finishes. The Association budgets an amount in the annual operating budget for minor pipe repairs and replacements. We recommend the Association continue to fund interim pipe replacements, prior to more aggregate replacements identified in the following paragraphs, from the operating budget. We also recommend the Association contract for an invasive investigation of the conditionn of the piping system prior to beginning more aggregate replacements, funded through the operating budget. We recommend the Association budget to replace 42 riser sections by 2036 and every five years thereafter. Our estimate provides funds to replace approximately thirty-three percent (33%) of the riser sections during the next 30 years. Ann invasive analysis of the piping systems will provide various replacement options. Replacement of the systems as an aggregate event will likely require the use of special assessmentss or loans too fund the replacements. We depict this information on Line Item of Reserve Expenditures s. Although it is likely thatt the times of replacement and extent of repairr costs may vary from the budgetary allowance, One Ocean Place could budget sufficient reserves for the beginning of these pipe replacements and have the opportunity to adjust its future reserves up or down to meet any changes to these budgetary estimates. Updates of this Reserve Study would incorporate changes to budgetary costs through a continued historical analysis of the rate of deterioration and actual pipe replacements to budget sufficient reserves. Page Condition Assessment

44 Pumps, Domestic Water - One Ocean Placee utilizes three 7.5-HP pumps and one controller for the domestic water. These pumps and the controller are reported in good condition at an age of seven years and have useful life of 10- to 15-years. Major pumps included in this Reserve Study are those with a motor drive of at least five- HP. The Association should replace or repair all pumps with motor drives lesss than five-hp as needed and fund this ongoing maintenance activity through the operating budget. The Association may choose to rebuild pumps prior to complete replacement. However, this activity becomes less desirable as pumps age due too the scarcity of parts. We regard interim replacements of motors and component parts as normall maintenance and base our estimates on completee replacements. An exact replacement time for each individual pump is difficult, if not impossible, to estimate. Based on the age and reportedd condition of the pumps we recommend replacement by 2021 and every of Reserve Expenditures. 12 years thereafter. We depict this information on Line Item Pump, Fire Suppression - The fire protectionn system includes one fire suppression pump. The pump is original and reported in good condition. Our inspection notes partial Page Condition Assessment

45 replacements and evidence of previous repairs at the pump and at several components of the surrounding components. Fire suppression pump Fire suppression pump controller Fire suppression pumps have useful lives of upp to 35 years. Prior to replacement, the Association should schedule periodic inspections to maintain its correct operation in the event of an emergency. One Ocean Place should also anticipate, as normal maintenance, interim repairs and component replacements to maximize its remaining useful life. We recommend the Association budget to replace the fire suppression pump, motor and motor controller by We include this information on Line Item of Reserve Expenditures. Valves - The building utilizes four valves for thee fire suppression system. The valves are original and the Board informs us they are in good operational condition. As the valves age, seals will deterioratee and mineral deposits will limit their operation. Large valves have a useful life of up to 35 years. We recommend the Association anticipate replacement by 2024 in conjunction with replacement of the fire suppression pump. We include this information on Line Item of Reserve Expenditures. The Association should replace or repair all valves with diameters less than four-inches as needed and fund this ongoing maintenance activity through the operating budget. Page Condition Assessment

46 Pool Elements Boardwalk, Composite and Wood - The Association maintains a boardwalk with composite deck boards and a wood frame and wood railings which comprises a total of 500 square feet of area. The boardwalk is in good condition at an age of four years. Composite deck boards These elements have a useful life of up to 25 Wood support structure and railings years. The composition of composite materials used in the construction of balconies typicallyy includes a combination of wood waste material, plastic and recycled materials. These composite materials are low maintenance and do not split, cup or splinter. Composite materials doo not require periodic stain or sealer applications. Composite deck materials are not structural components and therefore require traditional framing members, such as wood or metal. In addition, some manufacturers require closer spacing of framing components to minimize sagging. Based on these factors, we recommend the Association anticipate replacement of the boardwalk by We note this information on Line Item of Reserve Expenditures s. Concrete Decks - Two concrete decks with textured coatings surround the pools and comprise approximately 1,270 square feet. The decks are original and in good condition. The textured coatings are original and in fair condition at an unknown age. Page Condition Assessment

47 Concrete pool deck with textured coating Textured coating deterioration The useful life of a concrete pool deck is up too 60 years or more with regular coating applications and repairs. We recommend the Association conduct inspections, partial replacements and repairs to the deck every 8- to 12-years in conjunction with coating replacements. Inadequate subsurface preparation, improperr concrete mixtures, poor finishing techniques, soil movement and water infiltration underneath the concrete deck can cause significant settlement and cracks in the concrete. Thee pool deck should also be free of trip hazards for the safety of residents and their guests. Wee recommend the Association budget for the following by 2019 and every nine years thereafter: Selective cut out and replacements of upp to ten percent (10%) of concrete Crack repairs as needed Mortar joint repairs Caulk replacement Coating replacement The times, amounts and related costs of these repairs and replacements may vary. However, we judge the amounts shown on Line Item of Reserve Expenditures sufficient to budget appropriate reserves. Page Condition Assessment

48 Deck, Wood - The Association maintains a wood deck near the pool 2,600 square feet. The deck is in good to fair conditionn at an unknown age. which comprises We note isolated wood warp and weathered deck boards. Weathered deck boards Wood deck materials treated with a protective finish have useful lives of up to 20 years with proper maintenance. Proper maintenance should through the operating budget: include the following activities funded Annual inspections to identify and correct any unsafe conditions Securing of loose fasteners and replacement of deteriorated fasteners Replacement of deteriorated wood components Power washing with an algaecide and application of a sealer/stain The rates and types of deterioration are not uniform due to the nature of wood. Replacement is normally an ongoing process which eventually leads to a complete replacement for economic or aesthetic reasons. Based on condition, we recommend the Association anticipate replacement of the wood deck by 2020 and again by We depict this information on Line Item of Reserve Expenditures s. Furniture - Associated furniture and fixtures around the pool include the following: Chairs Lounges Page Condition Assessment

49 Tables Ladders and life safety equipment These items are in good condition at various ages. Pool furniture has a useful life of up to 12 years. We recommend the Association budget ann allowance for replacement of the pool furniture and fixtures by 2019 and every 12 years thereafter. The times and costs of these replacements may vary. However, we judge the amounts shown on Line Item of Reserve Expenditures sufficient to budget appropriate reserves. We recommend interim re-strapping, refinishing, cushion replacements, reupholstering and other repairs to the furniture as normal maintenance to maximize its useful life. Mechanical Equipment - The pool mechanical equipment comprises the following: Automatic chlorinator Controls Filters Heaters Interconnected pipe, fittings and valves Pumps The pool mechanical equipment is reported in good to fair condition at varied ages. Spa mechanical equipment Pool mechanical equipment Pool mechanical equipment has a useful life of up to 15 years. Failure of the pool mechanical equipment as a single event is unlikely. We recommend the Association anticipate Page Condition Assessment

50 replacement of up to fifty percent (50%) of the pool mechanical equipment by 2019 and every six years thereafter. We consider interim replacement of motors and minor repairs as normal maintenance. We note this information on Line Item of Reserve Expenditures. Pool Finishes, Plaster - The pool wall and floor surfaces have plaster finishes of 1,170 square feet based on the horizontal surface area. This quantity includes the spas. Pool with plaster finish Spa with plaster finish The finishes are in good to fair condition at an age of five years. The Board informs us of a leak at the north pool which will be remediated in the nearr term using funds from the operating budget. This type of pool finish deteriorates with time and requires periodic maintenance and replacement. We recommend the Association anticipate the need to replace the finish and conduct related repairs every 8- to 12-years to maintain the integrity of the pool structure. Removal and replacement provides the opportunity to inspect the pool structure and to allow for partial repairs of the underlying concrete surfaces as needed. We recommend the Association budget for the following by 2019 and every nine years thereafter: Removal and replacement of the finish Partial replacements of the scuppers and coping as needed Replacement of tiles as needed Replacement of joint sealantss as needed Concrete structure repairs as needed Page Condition Assessment

51 We include this information on Line Item of Reserve Expenditures. Garage Elements Concrete, Elevated Floors - The development t includes two floors of elevated garage parking. These elevated cast in place concrete floor structures comprise approximately 29,940 square feet. The concrete floors and ceilings at the undersides of each level are in good to fair overall condition. Our visual inspection identifies surface spall. Elevated concrete parking deck Concrete spall at ceiling below uppermost level Surface spall at elevated concrete Concrete deterioration at ceiling below uppermost level Page Condition Assessment

52 The elevated structural concrete does not utilize a protective traffic coating. We recommend the Association consider the use of a traffic coating on the uppermost exposed section of the elevated floors to protect the concrete. The Association should conduct annual inspections of the elevated garage concrete as normal maintenance. Timely repairs of concrete cracks and spalls are necessary to maintain the safe and cost-effective operation of the garage. Concrete structures like these have ndeterminately long useful lives with proper periodic maintenance, use of a protective coating on top of thee elevated structural concrete floors and periodic capital repairs. We recommend the Association budget forr the following repairs to the various concrete surfaces every 10- to 15-years: Complete inspection of the garage concrete Partial depth concrete replacement of less than one percent (0.3%) of the surface area of the concrete floors Partial depth concrete replacement of upp to less than one percent (0.3%) of the surface area of the elevated structural concrete ceilings Remediation of structural concrete columns and beams as neededd Crack repairs on all surfaces as needed We anticipate the need to conduct this work by 2018 and every 12 years thereafter. Line Item of Reserve Expenditures notes our estimatee of future costs and anticipated times of garage concrete repairs. In addition to the periodic repairs detailed above, we recommend the Association clean the garage floors annually or seasonally as needed to prevent the buildup of salts, sand, vehicle fluids and other damaging chemicals. The Association should fund these ongoing maintenancee activities through the operating budget. Concrete, On-grade - One Ocean Place maintains approximately 24,670 square feet of on-grade concrete in the garage. This quantity includes the driveways and parking areas from the street. The concrete is original and in good condition. We note isolated and minor cracks and partial replacements. Page Condition Assessment

53 Isolated and minor partial replacements On-grade concrete in good condition Concrete in this application has a useful life of up to 90 years although premature deterioration of isolated areas of concrete is common. We recommend One Ocean Place budget for the following work by 2024 and every six years thereafter: Complete inspection of the floor Selective cut out and replacement of upp to five percent (5%), feet, of the on-grade concretee Crack repairs as needed or 1,235 square Line Item of Reserve Expenditures notes our estimate of future costss and anticipated times of partial garage concretee replacements. In addition to the periodic repairs detailed above, we recommend the Association clean the garage floor annually or seasonally as needed to prevent the buildup of vehicle fluids and other damaging chemicals and fund these expensess through the operating budget. Gates, Swing Arm - The Association maintains two swing arm gates to limit accesss into the parking structure. These elements are reported in good conditionn at an approximate age of 15 years. We anticipate a useful life of up to 20 years for the swing arm gates and recommend the Association budget for replacement by 2021 and again by We depict this information on Line Item of Reserve Expenditures. Page Condition Assessment

54 Light Fixtures - Approximately 168 light fixtures illuminate the parking garage. The light fixtures utilize fluorescent lamps. The light fixtures are original, in good conditionn and have a useful life of up to 30 years. We regard replacement of fixture components as normal maintenance. We recommend the Association budget for their replacement by Line Item of Reserve Expenditure s notes our estimate of future cost and anticipated time of replacement. Our estimate of replacement assumes reuse of the electrical wiring. To reduce energy consumption n, the Association should consider fixture use. the use of motion sensors to minimize Traffic Coating - The parking garage has 6,850 square feet of unprotected elevated concrete at the uppermost levell of the parking structure. In ourr experience, active periodic maintenance and protection with a traffic coating on concrete structures like these resultss in a longer useful life, safer operation and a lower overall life cycle cost of the structure. After the initial application, a traffic membrane has a useful life off 10- to 15-years. Salts and moisture-driven chemical reactions are detrimental to the integrity of an elevated structural concrete garage floor The dissolvedd chlorides and moisture then migrate to the imbedded reinforcing steel through pores in the concrete or directly through cracks. Once they reach the steel, salts and moisture cause expansive corrosion, ultimately causing the concrete to expand and pop or spall. Left unrepaired, additionall chlorides and moisture will continue to infiltrate the concrete, eventually causing structural failure. This type of deterioration is progressive and costly to repair. The utilization of a traffic coating atop the concrete minimizes the infiltration of salts and moisture into the concrete thereby minimizing future capital repairs. Page Condition Assessment

55 Traffic coating replacement methods are dependent on the type of existing and proposed coating. While the traffic coating industry is constantlyy developing new materials, we identify three common types of traffic coatings for application to existing structures: Penetrating Sealers - These liquid applied treatments penetrate the concrete to limit the amount of chlorides that reach the reinforcing steel. These coatings are vapor permeable which makes them a popular choice for concretee slabs on grade. Penetrating sealers are relatively inexpensive and quickly applied. Unfortunately,, these sealers do not bridge cracks and have a limited useful life. Acrylic and Epoxy Sealers - These sealers bridge passive cracks and seal pores in the concrete to minimize chloride intrusion. They limit vapor transmission so they should not be applied to concrete on grade or in other areas that could be susceptible to trapped moisture. These rigid sealers do not work well on active cracks or on surfacess that experience moderate or high thermal or mechanical expansive or contractive forces. Epoxies degrade quickly under ultraviolet (UV) radiation which makes them undesirable for exposed upper decks. Conversely, acrylics should not be applied in enclosed areas due to noxious fumes released during installation. Regardless of these factors, their moderate cost makes them an attractive option inn many cases. Elastomeric and Urethane Coatings - These coatings do not penetrate the surface of the concrete but remain on the surface to create a barrier that locks out moisture and chlorides. Most of these coatings have two or more layers that bridge cracks and provide a safe non-skid surface. These coatings tend to be more expensive and labor intensive to install, requiring a significant amount of down time. Once one of these coatings has been installed, the coating must be maintained or replaced as failure can trap moisture and chlorides in the concrete, having a negative effect on the useful life of the structure. Replacement of elastomeric and urethane coatings requiress the removal of the existing coating (where applicable) through mechanical abrading, and then the installationn of a new base coat, aggregate intermediatee coat and top coat. Failure to maintain a traffic coating on elevated floors will result in acceleration of concrete deterioration at concrete ceilings below the elevated floorss and a higher overall capital investment in the parking structure over time. Therefore, we recommend One Ocean Place budget for the following activities by 2018 and every 12 years thereafter: Complete inspection of the garage concrete and concrete repairs as described in the previous narratives Concrete, On-grade and Concrete, Elevated Floors Preparation of the concrete surface Application of a urethane base coat, intermediate aggregate membrane and top coat to the top level floor Page Condition Assessment

56 Parking and directional line striping as needed We depict this information on Line Item of Reserve Expenditures. The Association should allow ample time to conduct a phased membrane installation over a few weeks, during which, parking in the affected areas will not be permitted. One Ocean Place should fund interim applications in high traffic areas through the operating budget. Again, maintenance of the coating is critical to maximize itss useful life and to minimize future capital repairs to the concrete. Our costs and times of coating replacements assume the Association will maintain the membrane according to thee manufacturer s recommendations. The Association should conduct partial, interim coating applications or patching as needed, especially at high traffic areas, garage entrances and ramps. Onee Ocean Place should fund these interim repairs as normal operating maintenance. Reservee Study Update An ongoing review by the Board and an Updatee of this Reserve Study in two- to three- years are necessary to ensure an equitable funding plann since a Reserve Study is a snapshot in time. Many variables change after the study is conducted that may result in significant overfunding or underfunding the reserve account. Variables that may affect the Reserve Funding Plan include, but are not limited to: Deferred or accelerated capital projects based on Board discretion Changes in the interest rates on reserve investments Changes in the local construction inflation rate Additions and deletions to the Reserve Component Inventory The presence or absence of maintenance programs Unusually mild or extreme weather conditions Technological advancements Periodic updates incorporate these variable changes since the last Reserve Study or Update. Page Condition Assessment

57 The Association can expense the fee for an Update with site visit from the reserve account. This fee is included in the Reservee Funding Plan. We base this budgetary amount on updating the same property components and quantities of this Reserve Study report. Budgeting for an Update demonstrates the Board's objective to continue fulfilling its fiduciary responsibility to maintain the commonly owned property and to fund reserves appropriately. Page Condition Assessment

58 5. METHODOLOGY Reserves for replacement are the amounts of money required for future expenditures to repair or replace Reserve Components that wear out before the entire facility or project wears out. Reserving funds for future repair or replacement of the Reservee Components is also one of the most reliable ways of protecting the value of the property s infrastructure and marketability. One Ocean Place can fund capital repairs and replacements in any combination of the following: 1. Increases in the operating budget during years when the shortages occur 2. Loans using borrowed capital for major replacement projects 3. Level monthly reserve assessments annually y adjusted upward for inflation to increase reserves to fund the expected major future expenditures 4. Special assessments We do not advocate special assessments or loans unless near term circumstances dictate otherwise. Although loans provide a gradual method of funding a replacement, the costs are higher than if the Association were to accumulate reservess ahead of the actual replacement. Interest earnings on reserves also accumulate in this process of saving or reserving for future replacements, thereby defraying the amount of gradual reserve collections. We advocate the third method of Level Monthly Reserve Assessments with relatively minor annual adjustments. The "fair share" of the weathering and aging of the commonly method ensures that Homeowners pay their owned property each year. Level reserve assessments preserve the property and enhance the resale value of the homes. This Reserve Study is in compliance with and exceeds the National standards 1 set forth by the Community Associations Institute (CAI) and the Associationn of Professional Reserve Analysts (APRA) fulfilling the requirements of a Full Reserve Study. Thesee standards require a Reserve Component to have a predictable remaining Useful Life. Estimating Remaining Useful Lives and Reserve 1 Identifiedd in the APRA Standards - Terms and Definitions and the CAI "Termss and Definitions". Page Methodology

59 Expenditures beyond 30 years is often indeterminate. Long-Lived Property Elements are necessarily excluded from this analysis. We considered the following factors in our analysis: Information Furnishedd by the Association 2016 unaudited Cash Status of the Reserve Fund 2016 Budgeted Reserve Contribution Anticipated Interest on Reserve Fund Less Anticipated Reserve Expenditures Projected 2016 Year-End Reserve Balance 689, ,000 9,400 (128,364) $711,998 The Cash Flow Method to compute, project and illustrate the 30-year Reserve Funding Plan Local 2 costs of material, equipment and labor Current and future costs of replacement for the Reserve Components Costs of demolition as part of the cost of replacementt Local economic conditions and a historical perspective to arrive att our estimate of long term future inflationn for construction costs in Murrells Inlet, South Carolina at an annual inflationn rate of 2.4%. Isolated or regional markets of greater construction (development) activity may experience slightly greater rates of inflation for both construction materials and labor. The past and current maintenance practices of One Ocean Place and their effects on remaining useful lives The Funding Plan excludes necessary operating budget expenditures. It is our understanding that future operating budgets will provide for the ongoing normal maintenance of Reserve Components. The anticipated effects of appreciation of the reservess over time in accord with an anticipated future return or yield on investment of your cash equivalent assets at an annual rate of 1.35% (We did not consider the costs, if any, of Federal and Statee Taxes on income derivedd from interest and/or dividend income). Interest rates on reserves are steady or increasing in n concert with the certificates of deposit and money market rates. Slight increases exist in the savings rates of one, two or three-year CDs. Without significant differences in these savings rates, shorter term investments are the choice of many investors. 2 See Credentials for addition information on our use of published sources of cost data. Page Methodology

60 We recommend consultation with a professional investment adviser before investing reserves to determinee an appropriate investment strategy to maximize a safe return on reserve savings. The following table summarizes rates of inflation and key rates for government securities, generally considered as safe investment alternatives. Interest Rate and Inflation Data Average or Last Actual = (A) 2014:1 (A) :2 (A) 2014:3 (A) 2014:4 (A) 2015:1 (A) 2015:2 (A) 2015:3 (A) 2015:4 (E) 1-Year Treasury Bill 10-Year Treasury Note 30-Year Treasury Bond Consumer Price Index (annualized rate) 0.13% 2.80% 3.90% 1.50% 0.15% 2.65% 3.50% 2.00% 0.13% 2.40% 3.35% 2.40% 0.01% 2.25% 3.00% 2.60% 0.25% 1.90% 2.55% 0.00% 0.27% 2.50% 3.20% 0.00% 0.30% 2.70% 3.40% 0.00% 0.50% 2.28% 3.05% 0.00% Residential Construction Producer Price Index-Inflation Rate, Bureau of Labor Statistics (Year over Year Oct Showing no meaningful change ) -0.3% Savings Rates Results RANGE as found in to 1.10% 0.65 to 1.35% Money Market Savings 1-Year Certificate of Deposit Estimated Near Term Yield Rate for Reserve Savings % Est. Near Term Local Inflation Rate for Future Capital Expenditures % 0.65 to 1.53% for 2-Year Certificate of Deposit 0.9 to 1.35% for 3-Year Certificate of Deposit 11/13/2015 Updates to this Reserve Study will continue to monitor historical facts and trends concerning the external market conditions. Page Methodology

61 6. DEFINITIO ONS Definitions are derived from the standards set forth by the Community Associations Institute (CAI) representing America's 305,000 condominium and homeowners associations and cooperatives, and the Association of Professional Reserve Analysts, setting the standards of care for reserve study practitioners Cash Flow Method - A method of calculating Reserve Contributions where contributions to the reservee fund are designedd 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 developing a Reserve Fundingg Plan with the total contribution is based on the sum of the contributions for individual components. Current Cost of Replacement - That amount required today derived from the quantity of a Reserve Component and its unit cost to replace or repair a Reserve Component using the most current technology and construction materials, duplicating the productive utility of the existing property at current local market prices for materials, labor and manufactured equipment, contractors' overhead, profit and fees, but without provisionss for building permits, overtime, bonuses for labor or premiums for material and equipment. We include removal and disposal costs where applicable. Fully Funded Balance - The Reserve balance that is in direct proportion to the fraction of life "used up" of the current Repair or Replacement cost similar to Total Accrued Depreciation. Funding Goal (Threshold) - The stated purpose of this Reserve Study is to determine the adequate, not excessive, minimal threshold reserve balances. Future Cost of Replacement - Reserve Expendituree derived from the inflated current cost of replacement or current cost of replacement as defined above, with consideration given to the effects of inflation on local market rates for materials, labor and equipment. Long-Lived Property Component - Property component of One Ocean Place responsibility not likely to require capital repair or replacement during the next 30 years with an unpredictable remaining Useful Life beyond the next 30 years. Percent Funded - The ratio, at a particular point of time (typicallyy the beginningg of the Fiscal Year), of the actual (or projected) Reserve Balance to the Fully Funded Balance, expressed as a percentage. Remaining Useful Life - The estimated remaining functional or useful time in years of a Reserve Component based on its age, condition and maintenance. Reserve Component - Property elements with: 1) One Ocean Placee responsibility; 2) limited Useful Life expectancies; 3) predictable Remaining Useful Life expectancies; and 4) a replacement cost above a minimum threshold. Reserve Component Inventory - Line Items in Reserve Expenditures that identify a Reserve Component. Reserve Contribution - An amount of money set aside or Reserve Assessment contributed to a Reserve Fund for future Reserve Expenditures to repair or replace Reserve Components. Reserve Expenditure - Future Cost of Replacement of a Reserve Component. Reserve Fund Status - The accumulated amount of reserves in dollars at a given point in time, i.e., at year end. Reserve Funding Plan - The portion of the Reserve Study identifying the Cash Flow Analysis and containing the recommended Reservee Contributions and projected annual expenditures, interest earned and reserve balances. Reserve Study - A budget planning tool that identifies the current status of the reserve fund and a stable and equitable Funding Plan to offset the anticipated future major common area expenditures. Useful Life - The anticipated total time in years that a Reserve Component is expected to servee its intended function in its present application or installation. Page Definitions

62 7. PROFESSIONAL SERVICE CONDITIONS Our Services accordance with our conclusions. - Reserve Advisors, Inc. will perform its services as an independent contractor in professional practice standards. Our compensation is not contingent upon our Our inspectionn and analysis of the subject property is limited to visual observations and is noninvasive. We will inspect sloped roofs from the ground. We will inspect flat roofs where safe access (stairs or ladder permanently attached to the structure) is available. The report is based upon a snapshot in time at the moment of our observation. Conditions can change between the time of inspectionn and the issuance of the report. Reserve Advisors does not investigate, nor assume any responsibility for any existence or impact of any hazardous materials, structural, latent or hidden defects which may or may not be present on or within the property. Our opinions of estimated costs and remaining useful lives are not a guaranteee of the actual costs of replacement, a warranty of the common elements or other property elements, or a guarantee of remaining useful lives. We assume, without independent verification, the accuracy of all data provided to us. You agree to indemnify and hold us harmless against and from any and all losses, claims, actions, damages, expenses or liabilities, including reasonable attorneys' fees, to which wee may become subject in connection with this engagement, because of any false, misleading or incomplete information which we have relied upon as supplied by you or others under your direction, or which mayy result from any improper use or reliance on the report by you or third parties under your control or direction. Your obligation for indemnification and reimbursement shall extend to any controlling person of Reserve Advisors, Inc., ncluding any director, officer, employee, affiliate, or agent. Liability of Reserve Advisors, Inc.. and its employees, affiliates, and agents for errors and omissions, if any, in this work is limitedd to the amount of its compensation for the work performed in this engagement. Report - Reserve Advisors, Inc. will complete the services in accordance with the Proposal. The Report represents a valid opinion of our findings and recommendations and is deemedd complete. However, we will consider any additional information made available to us in the interest of promptly issuing a Revised Report if changes are requested within six months of receiving the Report. We retain the right to withhold a Revised Report if payment for services is not rendered in a timely manner. All files, work papers or documents developed by us during the course of the engagement remains our property. Your Obligations - You agree to provide us access to the subjectt property during our on-site visual inspectionn and tour. You will provide to us to the best of your ability and if reasonably available, historical and budgetary information, the governing documents, and other information that we request and deem necessary to complete our Study. You agree to pay our actual attorneys fees and any other costs incurred in the event we have to initiate litigation to collect on any unpaidd balance for our services. Use of Our Report and Your Name - Use of this Report is limited to only the purpose stated herein. Any use or reliance for any other purpose, by you or third parties, is invalid. Our Reserve Study Report in whole or part is not and cannot be used as a design specification, design engineering services or an appraisal. You may show our report in its entirety to those third parties who need to review the information contained herein. The Client and other third parties viewing this report should not reference our name or our report, in whole or in part, in any document prepared and/orr distributed to third parties without our written consent. This report contains intellectual property developed by Reserve Advisors, Inc. specific to this engagement and cannot be reproduced or distributed to those who conduct reserve studies without the written consent of Reserve Advisors, Inc. Page Professional Service Conditionss

63 We reserve the right to include our client's name in our client lists, but we will maintain the confidentiality of all conversations s, documents provided to us, and the contents of our reports, subject to legal or administrative process or proceedings. These conditions can only be modified by written documents executed by both parties. Payment Terms, Due Dates and Interest Charges - The retainer payment is due upon authorization and prior to shipment of the report. The final payment off the fee is due immediately upon receipt of the Report. Subsequent changes to the report cann be made forr up to six months from the initial report date. Any outstanding balance after 30 days of the invoice date is subject to an interest charge of 1.5% per month. Any litigation necessary to collect an unpaid balance shall be venued in Milwaukeee County Circuit Court in the State of Wisconsin. CONDITION NS OF OUR SERVICE ASSUMPTIO ONS To the best of our knowledge, all dataa set forth inn this report are true and accurate. Although gathered from reliablee sources, we make no guarantee nor assume liability for the accuracy of any data, opinions, or estimates identified as furnished by others that wee used in formulating this analysis. We did not make any soil analysis or geological study with this report; nor were any water, oil, gas, coal, or other subsurface mineral and use rights or conditions investigated. Substances such as asbestos, urea-formaldehyde foam insulation, other chemicals, toxic wastes, environmental mold or other potentially hazardous materials could, if present, adversely affect the validity of this study. Unless otherwise stated in this report, the existence of hazardous substance, that may or may not be present on or in the property, was not considered. Our opinions are predicated on the assumption that there are no hazardous materials on or in the property. We assume no responsibility for any such conditions. We are not qualified to detect such substances, quantify the impact, or develop the remedial cost. We have made a visual inspection of the property and noted visible physical defects, if any, in our report. Our inspectionn and analysiss was made by employees generally familiar with real estate and building construction; however, we did not do any invasive testing. Accordingly, we do not opine on, nor are we responsible for, the structural integrity of the property including its conformity to specific governmental code requirements, such as fire, building and safety, earthquake, and occupancy, or any physical defects that were not readily apparent during the inspection. Our opinions of the remaining useful lives of the property elements do not represent a guarantee or warranty of performance of the products, materials and workmanship. Page Professional Service Conditionss

64 8. CREDENTIALS HISTORY AND DEPTH OF SERVICE Founded in 1991, Reservee Advisors, Inc. is the leading provider of reserve studies, insurance appraisals, developer turnover transition studies, expert witness services, and other engineering consulting services. Clients include community associations, resort properties, hotels, clubs, non-profioffice/commercial building owners in 48 states, Canada and throughout the world. The architectural engineering consulting firm wass formed to take a leadership role in helping fiduciaries, boards, and property managers manage their property like a business with a long range master organizations, apartment building owners, religious and educational institutions, and plan known as a Reserve Study. Reserve Advisors employs the largest staff of Reserve Specialists with bachelor s degrees in engineering dedicated to Reserve Study services. Our principals are founders of Community Associations Institute's (CAI) Reserve Committee that developed national standards for reserve study providers. One of our principals is a Past President of the Association of Professional Reserve Analysts (APRA). Our vast experience with a variety of building types and ages, on-site examination and historical analyses are keys to determining accurate remaining useful life estimates of building components. No Conflict of Interest - As consulting specialists, our independent opinion eliminates any real or perceived conflict of interest because we do not conduct orr manage capital projects. TOTAL STAFF INVOLVEMENT Several staff members participate in each assignment. The responsible advisor involves the staff through a Team Review, exclusivee to Reserve Advisors, and by utilizing the experience of other staff members, each of whom has served hundreds of clients. Wee conduct Team Reviews, an internal quality assurance review of each assignment, including: the inspection; building component costing; lifing; and technical report phases of the assignment. Each Team Review requires the attendance of several engineers, a Review Coordinator, Director of Quality Assurance and otherr participatory peers. Due to our extensive experience with building components, we do not have a need to utilize subcontractors. OUR GOAL To help our clients fulfill their fiduciary responsibilities to maintain property in good condition. VAST EXPERIENCE WITH A VARIETY OF BUILDINGS Reserve Advisors has conducted reserve studies forr a multitude of different communities and building types. We'vee analyzed thousands of buildings, from as small as a 3,500-square foot day care center to the 2,600,000-square foot 98-story Trump International Hotel and Tower in Chicago. We also routinely inspect buildings with various types of mechanical systems such as simple electric heat, to complex systems with air handlers, chillers, boilers, elevators,, and life safety and security systems. We're familiar with all types of building exteriorss as well. Our well versed staff regularly identifies optimal repair and replacement solutions for suchh building exterior surfaces such as adobe, brick, stone, concrete, stucco, EIFS, wood products, stained glass and aluminum siding, and windoww wall systems. OLD TO NEW Reserve Advisors experience includes ornate and vintage buildings as well as modern structures. Our specialists are no strangers to older buildings. We're accustomed to addressing the unique challenges posed by buildings that date to the 1800's. We recognize and consider the methods of construction employed into our analysis. We recommend appropriate replacement programs that apply cost effective technologies while maintaining a building's character and appeal. Page Credentials

65 QUALIFICATIONS THEODORE J. SALGADO Principal Owner CURRENT CLIENT SERVICES Theodore J. Salgado is a co-founder of Reserve Advisors, Inc., which is dedicated to serving community associations, city and country clubs, religious organizations, educational facilities, and public and private entities throughout the United States. He is responsible for the production, management, review, and quality assurance of all reserve studies, property inspection services and consulting services for a nationwide portfolio of more than 6,000 clients. Under his direction, the firm conducts reserve study services for community associations, apartment complexes, churches, hotels, resorts, office towers and vintage architecturally ornate buildings. PRIOR RELEVANT EXPERIENCE Before founding Reserve Advisors, Inc. with John P. Poehlmann in 1991, Mr. Salgado, a professional engineer registered in the State of Wisconsin, served clients for over 15 years through American Appraisal Associates, the world's largest full service valuation firm. Mr. Salgado conducted facilities analyses of hospitals, steel mills and various other large manufacturing and petrochemical facilities and casinos. He has served clients throughout the United States and in foreign countries, and frequently acted as project manager on complex valuation, and federal and state tax planning assignments. His valuation studies led to negotiated settlementss on property tax disputes between municipalities and property owners. Mr. Salgado has authored articles on the topic of reserve studies and facilities maintenance. He also co- Studies and maintaining appropriate reserves. Mr. Salgado has also written in-house computer applications manuals and taught techniques relating to valuation studies. authored Reserves, an educational videotape produced by Reserve Advisors on the subject of Reserve EXPERT WITNESS Mr. Salgado has testified successfully before the Butler County Board of Tax Revisions in Ohio. His depositions in pretrial discovery proceedings relating to reserve studies of Crestview Estates Condominium Association in Wauconda, Illinois, Rivers Point Row Property Owners Association, Inc. in Charleston, South Carolina and the North Shore Club Associations in South Bend, Indiana have successfully assisted the parties in arriving at out of court settlements. EDUCATION - Milwaukee School of Engineering - B.S. Architectural Engineering PROFESSIONAL AFFILIATIONS/DESIGNATIONS American Association of Cost Engineers - Past President, Wisconsin Section Association of Construction Inspectors - Certified Construction Inspector Association of Professional Reservee Analysts - Past Presidentt & Professional Reserve Analyst (PRA) Community Associations Institute - Member and Volunteer Leader of multiple chapters Concordia Seminary, St. Louis - Member, National Steering Committee Milwaukee School of Engineering - Member, Corporation Board Professional Engineer, Wisconsin (1982) and North Carolina (2014) Ted continually maintains his professional skills through American Society of Civil Engineers, ASHRAE, Association of Construction Inspectors, and continuing education to maintain his professional engineer licenses. Page Credentials

66 JOHN P. POEHLMAN NN, RS Principal John P. Poehlmann is a co-founder of Reserve Advisors, Inc. He is responsible for the finance, accounting, marketing, and overall administration of Reserve Advisors, Inc. He also regularly participates in internal Quality Control Team Reviews of Reserve Study reports. Mr. Poehlmann directs corporate marketing, including business development, advertising, press releases, conference and trade show exhibiting, and electronic marketing campaigns. He frequently speaks throughout the country at seminars and workshops on the benefits of future planning and budgeting for capital repairs and replacements of building components and other assets. PRIOR RELEVANT EXPERIENCE Mr. Poehlmann served on the national Board of Trustees of Community Associations Institute. An international organization, Community Associations Institute (CAI) is a nonprofit 501(c)(3) trade association created in 1973 to provide education and resources to America s 335,000 residential condominium, cooperative and homeowner associations and related professionals and service providers. He is a founding member of the Institute's Reserve Committee. The Reserve Committee developedd national standards and the Reserve Specialist (RS) Designation Program for Reserve Study providers. Mr. Poehlmann has authored numerous articles on the topic of Reserve Studies, including Reserve Studies for the First Time Buyer, Minimizing Board Liability, Sound Association Planning Parallels Business Concepts, and Why Have a Professionall Reserve Study. He is also a contributing author in Condo/HOA Primer, a book published for the purpose of sharing a wide background of industry knowledge to help boards in making informed decisions about their communities. INDUSTRY SERVICE AWARDS CAI Wisconsin Chapter Award CAI National Rising Star Award CAI Michigan Chapter Award EDUCATION University of Wisconsin-Milwaukee - Master of Science Management University of Wisconsin - Bachelor of Business Administration PROFESSIONAL AFFILIATIONS Community Associations Institute (CAI) - Foundingg member off Reserve Committee; former member of National Board of Trustees; Reserve Specialist (RS) designation; Member of multiple chapters Association of Condominium, Townhouse, & Homeowners Associations (ACTHA) member Page Credentials