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EMENT ICIAL STAT OFF OFFICIAL STATEMENT

,000 $26,330 $26,330,000 INDIO OF CITY CITY OF INDIO LAGO) 3 (TERRA 2004CT NO. CILITIES DISTRI NITY FAFACILITIES COMMU COMMUNITY DISTRICT NO. 2004-3 (TERRA LAGO) 2005 , SERIES BONDS CIAL TAX SPE SPECIAL TAX BONDS, SERIES 2005 1) 1) NO. AREA VEMENT (IMPRO (IMPROVEMENT AREA NO. TEMENT STA DUCTORY INTRO INTRODUCTORY STATEMENT neral GeGeneral Appendices the and page cover inside thethe page, cover g the the nt, includin This Official Statement, including cover page, inside cover page and the Appendices Stateme Official This and sale by the City of issuance h the the on witwith connecti tion in in informa certain furnish to to provided hereto, provided furnish certain information connection issuance and sale by the City of , is is hereto Special Tax Bonds, its its t") of of "Distric (the Lago) (Terra 2004-3 No.No. s District Indio Community Facilities District 2004-3 (Terra Lago) (the "District") Special Tax Bonds, nity Facilitie Commu Indio of $26,330,000 amount l principa te aggrega the in ) "Bonds" (the 1) No. ement Area Series 2005 (Improvement Area No. 1) (the "Bonds") in the aggregate principal amount of $26,330,000 (Improv 2005 Series ments improve tain public cer and fees facilities capital g of of financin the being issued connection with the financing capital facilities fees and certain public improvements on with connecti in in issued being issued be will Bonds The 1"). No. Area vement ("Impro District thethe 1 of No. ment Area servicing Improvement Area No. 1 of District ("Improvement Area No. 1"). The Bonds will be issued g Improve servicin Agent "Fiscal (the 2005 er 1, 1, Septemb of of as as ent, dated Agreem Agent a Fiscal pursuant the provisions a Fiscal Agent Agreement, dated September 2005 (the "Fiscal Agent ns of of provisio the t to to pursuan "Fiscal agent (the fiscal as as ia, N.A., Californ of of Bank Union and District en the betwe Agreement"), and between the District and Union Bank California, N.A., fiscal agent (the "Fiscal and ent"), byby Agreem (Sections 53311 amended as , 1982 of Act s Facilitie nity Commu oos Mello-R the to t Agent"), and pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Sections 53311 pursuan and , Agent") "Act"). (the ia) Californ of State the of Code ent et seq. of the Government Code of the State of California) (the "Act"). et seq. of the Governm method of financing alternate anan provide ure to to ia Legislat Californ the by enacted The Act was enacted by the California Legislature provide alternate method of financing was Act The ed, a community establish duly Once as. e ar ing develop in ly especial vices, r se and certain public facilities and services, especially in developing areas. Once duly established, a community facilities public certain of financing purpose the for ed establish entity ental governm ted constitu legally a is facilities district is a legally constituted governmental entity established for the purpose of financing district facilities a two-thirds vote of the l byby approva toto Subject ies. boundar defined within services and specific facilities and services within defined boundaries. Subject approval a two-thirds vote of the facilities specific the Act, a ns ofof provisio the nce with complia and district facilities ity qualified electors within a community facilities district and compliance with the provisions the Act, a commun a within electors qualified bonds. its repay to taxes special collect and levy and bonds issue may district community facilities district may issue bonds and levy and collect special taxes to repay its bonds. facilities ity commun e thereof and egral multipl int any oror ,000 each $5 ations ofof denomin in be will The Bonds will beissued issued in denominations $5,000 each any integral multiple thereof and Bonds The the inside cover page on forth set rates the atat ir deliver, the e ofof dat the from interest bear will be dated and bear interest from the date their deliver, the rates set forth on the inside cover page and dated be will the name of Cede & Co., as d inin registere be will issued, when Bonds, The ." BONDS "'THE hereof. See "THE BONDS." The Bonds, when issued, will be registered the name of Cede & Co., as See hereof. DTC will act as securities ). ("DTC" York New York, New y, Compan Trust ry Deposito The nominee The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities ofof nominee try form only. the s ofof al purchase depository the Bonds. Individu Individual purchases theBonds Bondswill willbe bemade madein in book-en book-entry form only. Bonds. the ry ofof deposito through the DTC DTC by payable be will Bonds the on any, if , premium and Principal of and interest and premium, if any, on the Bonds will be payable by DTC through the DTC st e r e int and of l Principa will not receive Bonds the of ers Purchas herein. System" try Book-En -BONDS participants. See "THE BONDS -Book-Entry System" herein. Purchasers of the Bonds will not receive "THE participants. See them. by d purchase the of physical delivery of theBonds Bonds purchased by them. delivery physical ds e of Us Use ofProcee Proceeds and/or the acquisition ees and ties ffees tal facili finance capi ssued to The Bonds Bondsare are being being iissued to finance capital facilities and the acquisition and/or The fund a to 1, No. Area ment Improve ty within proper ments serving public construction ofcertain certain publicimprove improvements serving property within Improvement Area No. 1, to fund a tion of construc and 006, 2 er 1, the talized interest t for reserveaccoun account forthe theBonds, Bonds,to tofund fundcapi capitalized intereston on theBonds Bondsthrough throughSeptemb September 1, 2006, and reserve ING PLAN" Bonds. the topay paythe thecosts costsof of issuanceof of the Bonds. See See"THE "THEFINANC FINANCING PLAN"herein. herein. issuance to

Security forthe theBonds Bonds urity for Sec


s in the Special Tax Fund her amount axes and et TTaxes ledge of he ppledge y tthe cured bby s are The Bonds arese secured ofN Net andthe theot other amounts in the Special Tax Fund e Bond Th s Special efined a re d s a e x a T Net in). here t t Accoun e s pen x E e ativ r t s mini d A e h t (other than amounts in the Administrative Expense Account therein). Net Taxes are defined as Special in s (other than amount

Special Taxes means the se Requirement. nistrative Expen Admi to the nt equal Taxes minus an amount equal to the Administrative Expense Requirement. Special Taxes means the an amou minus Taxes Improvement Area No. 1, together with the within levied be to rized autho taxes l specia amount of all special taxes authorized to be levied within Improvement Area No. 1, together with the nt of all amou foreclosure provision of the Fiscal agent ant to the rty pursu of prope sale sale the the ted fromfrom proceeds collected of property pursuant to the foreclosure ent provision of the Fiscal agent eds collec proce d relate costs of all the remaining after the paym al Taxes Speci such of uency delinq the for Agreement for the delinquency of such Special Taxes remaining after the payment of all the costs related ent greem A ral." Gene URITY FOR THE BONDS "SEC s. SeeSee osure action forecl to such to such foreclosure actions. "SECURITY FOR THE BONDS - General." The unt pursuant to the Fiscal Agent Agreement. ve Acco ished a Reser establ ct has has Distri District established a Reserve Account pursuant to the Fiscal Agent Agreement. The TheThe The s in the initial amount of $1,758,080. Bond the of eds proce the from d funde be will Reserve Account will be funded from the proceeds of the Bonds in the initial amount of $1,758,080. The unt Reserve Acco of the be an amount equal to the lowest of (1) 10% will lation calcu of date any of as nt ireme Reserve Requirement as of any date of calculation will be an amount equal to the lowest of (1) 10% of the ve Requ Reser plus any, st, if any, less original issue discount, if ed intere accru s, lessless Bond eds of the al proce original proceeds of the Bonds, accrued interest, if any, less original issue discount, if any, plus origin Service, or (3) 125% of the average Annual al Debt Annu mum Maxi (2) or any, if um, premi original issue premium, if any, or (2) Maximum Annual Debt Service, or (3) 125% of the average Annual issue al origin THE BONDS - Reserve Account." URITY FOR "'SEC s. See anding Bond Outst ce of the Debt Service of the Outstanding Bonds. See "SECURITY FOR THE BONDS - Reserve Account." Servi Debt w Fund Special Escrow Fund al Escro Speci be deposited into the Special Escrow Fund to be be s will Bond thethe eds of of proce thethe n of of portion proceeds Bonds will deposited into the Special Escrow Fund to be portio AA and isition Acqu funds will be released to the These ment. Agree t Agen l Fisca the established under the Fiscal Agent Agreement. These funds will be released to the Acquisition and ished under establ "SECURITY FOR THE BONDS - Special tions. See n condi certai action of of satisf upon Construction Fund upon satisfaction certain conditions. See "SECURITY FOR THE BONDS Special ruction Fund Const to used amounts in the Special Escrow Fund will be the met, not are tions condi these If " Fund. Escrow Fund." If these conditions are not met, the amounts in the Special Escrow Fund will be used to w Escro " ption. Redem DS BON "THE redeem Bonds. See "THE BONDS Redemption." s. See m Bond redee ict Distr The The District acres comprising two improvement areas on 6 gross ximately 364.9 appro sts of of ct consi Distri The District consists approximately 364.96 gross acres comprising two improvement areas on The associated therewith are to be vements impro and ies facilit the and unity comm Lago Terra which the Terra Lago community and the facilities and improvements associated therewith are to the which ofbe 135.75 acres 0 acres, approximately ximately 174.8 appro sts ofof consi 11 No. vement Area located. Improvement Area No. consists approximately 174.80 acres, approximately 135.75 acres d. Impro locate vement of 39.05 acres of which are open space, and Impro and nt opme devel ntial reside for slated are which are slated for residential development and 39.05 acres of which are open space, and Improvement which 190.16 acres, 173.76 acres of sts of approximately consi which 2") No. Area rovement ("Imp 22 No. Area No. ("Improvement Area No. 2") which consists of approximately 190.16 acres, 173.76 Area it isof ut,acres 16.4 acres of which are open space. At buildo opment and ntial devel reside for slated are which are slated for residential development and 16.4 acres of which are open space. At buildout, it is which residential dwelling units and Improvement in 635 conta will 1 No. Area nt veme Impro that anticipated that Improvement Area No. 1 will contain 635 residential dwelling units and Improvement pated antici "THE DISTRICT" for further information ing units. ntial dwell reside in 849 conta will Area No. will contain 849 residential dwelling units.See See "THE DISTRICT" for further information 22 No. Area further information regarding the Terra Lago for ENT" LOPM DEVE "THE and ct Distri regarding the District and "THE DEVELOPMENT" for further information regarding the Terra Lago ing the regard in public improvements serving properties ce certa issued s are Bond community. The Bonds arebeing being issuedto tofinan finance certain public improvements serving mmunity. The co ovement in Imprproperties financing public improvements not are and only 1 No. Area ent ovem Impr within Improvement Area No. 1 only and are not financing public improvements in Improvement n withi security be will or is 2 rty in Improvement Area No. s levied al Taxe 2.2. No AreaNo. No. No Speci Special Taxes leviedon onprope property in Improvement Area No. 2 is or will be security Area N" herein. NANCING PLA E FI ee "TH s. SSee for "THE FINANCING PLAN" herein. forthe theBond Bonds. al Tax TheSpeci Special Tax The the Act, the landowners who comprised the ant to on held OnJuly July20, 20,2005, 2005,at atan an electi election held pursu pursuant to the Act, the landowners who comprised On ntthe ct to incur bonded indebtedness in Improveme rized the ct autho rs of qualified electors ofthe the Distri District authorized theDistri District to incur bonded indebtedness in Improvement ied electo qualif and approved a Rate and Method of 00,000, d $30,0 nt not gate amou Area No. No.11in in an an aggre aggregate amount not to to excee exceed $30,000,000, and approved a Rate and Method of Area nt Area od") to be levied within and for Improveme Meth and "Rate (the Tax al Speci of ent Apportionment of Special Tax (the "Rate and Method") to be levied within and for Improvement Area rtionm Appo bonded indebtedness and approved an authorized bonded the authorized on, the st intere and of, pal No. 1 to pay the principal of, and interest on, indebtedness and approved an princi the pay to 1 No. the maximum amount of bonded indebtedness to equal 1 No. rea A nt veme Impro for limit appropriations limit for Improvement Area No. 1 equal to the maximum amount of bonded indebtedness ons priati appro HOD 1. See "APPENDIX A -- RATE AND MET vement Area ed for rized to authorized tobe be incurr incurred for Impro Improvement AreaNo. No. 1. See "APPENDIX A -- RATE AND METHOD autho IAL TAXES." OF RTIONMENT OF OF APPO APPORTIONMENT OF SPEC SPECIAL TAXES." nant reclosure Cove Fo Foreclosure Covenant anted for District has The District The has coven covenanted for the the benef benefit of the owners of the Bonds that, under certapii judicial foreclosure proceedings with- respc_, commence judicial will commence District will the District , the described herein circumstances herein, foreclosure proceedings with- respc circumstances described it of the owners of the Bonds that, under certai__

will diligently pursue such proceedings to ct, and and Distri the the rty within on prope l Taxes to delinquent Special Taxes on property within District, will diligently pursue such proceedings uent Specia to delinq FOR THE to l Taxes" and "SECURITY Specia The S BOND THE FOR RITY "SECU See completion. See "SECURITY FOR THE BONDS - The Special Taxes" and "SECURITY FOR THE etion. compl "SECURITY FOR THE BONDS on, see see In additi losure." Forec ior Court Super BONDS - Covenant Superior Court Foreclosure." In addition, "SECURITY FOR THE BONDS ant for for S - Coven BOND le on a parity with the Bonds. payab onal debt additi of sion discus a for Debt" Direct and Overlapping Debt" for a discussion of additional debt payable on a parity with the Bonds. apping Overl and Direct ions Limited Obligations ited Obligat Lim HE THE TAXING POWER OF THE DISTRICT, T NOR CREDIT H AND FAIT HER THE NEIT NEITHER THE FAITH AND CREDIT NOR THE TAXING POWERO OF THE DISTRICT, THE R ANY POLITICAL STATE OF CALIFORNIA RSIDE, THE RIVE Y OFOF E COUNT THTHE CITY, COUNTY RIVERSIDE, THE STATE OF CALIFORNIA OR ANY POLITICAL CITY, FOR THE THE PAYMENT OF THE BONDS. EXCEPT DGED TO TO EREOF IS PL IVISION THTHEREOF SUBD SUBDIVISION IS E PLEDGED THE PAYMENT OF THE BONDS. EXCEPT FOR THE PLEDGED TO THE PAYMENT OF THE ES ARE TAX ENUES OROR ER REV OTH ES, NO NET TAXES, NO OTHER REVENUES TAXES ARE PLEDGED TO THE PAYMENT THE TAX NET NOR OF THE CITY OF ERAL OR SPECIAL OBLIGATIONS GEN NOT NDS ARE BO DS. THE BON BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY NOR OF THE T ARE LIMITED OBLIGATIONS TRICT, BUBUT DIS THE OF OF ATIONS ERAL OBLIG GENERAL OBLIGATIONS THE DISTRICT, ARE LIMITED OBLIGATIONS OFAL THE GEN FISC HE T ER D NET TAXES AND AMOUNTS HELD UN LY FROM YABLE SOLE RICT PAPAYABLE DIST DISTRICT SOLELY FROM NET TAXES AND AMOUNTS HELD UNDER THE FISCAL Y DESCRIBED HEREIN. E FULL MOR EMENT AS NT AGRE AGE AGENT AGREEMENT AS MORE FULLY DESCRIBED HEREIN. a discussion ent entitled "SPECIAL RISK FACTORS" for al Statem Offici this n of of sectio the See See the section this Official Statement entitled "SPECIAL RISK FACTORS" for a discussion on to the other matters set forth herein, in additi ered, in in consid be be should s which factor risk certain risk factors which should considered, addition to the other matters set forth herein, in certain of of . Bonds the y of of ment qualit evaluating the investment quality the Bonds. invest ting the evalua ation r Inform Furthe Further Information Bonds, special risk factors, the District, the the ty for securi s, the Bond the criptions of of Brief descriptions the Bonds, the security for the Bonds, special risk factors, the District, the ef des Bri rms are hereinafter defined) and other h teterms suc s (a s r pe lo e v e D he t or r e p o el v e D r e t s City, the Master Developer or the Developers (as such are hereinafter defined) and other Ma he City, t information do not purport to and tions p i r sc e d h Suc . nt e m e Stat al Offici is h t ed in in this Official Statement. Such descriptions and information do not purport information included to e includ ation arare inform Bonds, the Fiscal Agent Agreement, the rein ofof scriptions heherein he de TThe finitive. dedefinitive. comprehensive descriptions the Bonds, the Fiscal Agent Agreement, rehensive or or comp bebe reference to the forms thereof and the ety by by r entir thei ied in in qualif ents are r docum resolutions other documents are qualified their entirety reference to the forms thereof and the d othe olutions anand res Agent Agreement, such resolutions and cal s Fi he t , s Bond he t in d e includ to here t ct e sp e r h respect thereto included in the Bonds, the Fiscal Agent Agreement, such to information with resolutions ation wit inform to laws and and their entirety by reference ied inin rther qualif e fufurther iptions arare h descr suc documents. All such descriptions qualified their entirety by reference to laws and to ents. All her docum otother ement of creditors' rights. For definitions enforc erally thethe ecting gen affaffecting oror lating to to ty rerelating equi equity generally enforcement of creditors' rights. For definitions inciples ofof prprinciples fined, and a description of certain terms herwise de t ot no ein and d her use lized terms of certain capitalized terms used herein and not otherwise defined, and a description of certain terms rtain capita ce of AL AGENT AGREEMENT" hereto. FISC F O RY A SUMM C NDIX APPE " ee s s, Bond the the Bonds, see "APPENDIX C SUMMARY OF FISCAL AGENT AGREEMENT" hereto. lating toto rerelating e of the City Manager of the City. offic the tained from ob ay be ents mmay h docum suc Copies of such documents be obtained from the office of the City Manager of the City. pies of Co ents ng Statem Forward Looking Statements ard Looki Forw ference in this Official Statement constitute orated by incorp ed oror tements includ Certain statements included incorporated byre reference in this Official Statement constitute ertain sta C Private Securities Litigation ed States Unit ofofthe aning me he t in h it w s" nt e m e "forward-looking statements" within the meaning the United States Private Securities Litigation tat s g ookin l "forwardities Exchange Act of 1934, as amended, and tes Secur d Sta Unite the n 21E , Sectio Reform Actof of1995 1995, Section 21Eof of the United States Securities Exchange Act of 1934, as amended, and m Act Refor Such statements are generally ed. amend as 1933, of Act ities Secur States Section 27Aof ofthe theUnited United States Securities Act of 1933, as amended. Such statements are generally n 27A Sectio estimate," "project," "budget" or similar ct, .... "estimate," " "expe "plan, asas such ology used termin identifiable by the terminology used such "plan," "expect," "project," "budget" or similar the fiable by identi limited to certain statements contained in not are but e, includ ents statem king rd-loo words. Such forward-looking statements include, but are not limited to certain statements contained in forwa Such words. "THE MASTER DEVELOPER AND and ENT" LOPM DEVE "THE ns captio the theinform information under the captions "THE DEVELOPMENT" and "THE MASTER DEVELOPER AND ation under the LOPERS." THE THEDEVE DEVELOPERS." CONTAINED LTS OR OTHER EXPECTATIONS AIN RESU IEVEMENT OF THE THE ACH ACHIEVEMENT OFCERT CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED RISKS, OWN UNKN LVE KNOWN AND INVO TS EMEN STAT ING LOOK ARDFORW IN UNKNOWN RISKS, SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND N SUCH I LTS, RESU ACTUAL CAUSE MAY WHICH ORS R FACT AND RTAINTIES UNCERTAINTIES ANDOTHE OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, UNCE FROM DIFFERENT TO BE MATERIALLY DESCRIBED EVEMENTS OR ORMANCE PERF PERFORMANCE ORACHI ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM BY OR IMPLIED D ESSE EXPR EVEMENTS OR ORMANCE LTS, PERF RE RESU ANY FUTU FUTURE RESULTS, PERFORMANCE OR ACHI ACHIEVEMENTS EXPRESSED OR IMPLIED BY ANY ANY ISSUE TO N A PL NOT THE DISTRICT DOES TS. EMEN STAT NG OOKI L ARDFORW SUCH SUCH FORWARD-LOOKING STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY

STATEMENTS SET FORTH IN TillS RWARD-LOOKING FOFORWARD-LOOKING THE VISIONS TOTO REREVISIONS ES OROR UPDAT UPDATES THE STATEMENTS SET FORTH IN THIS ENT. AL STATEM OFFICI OFFICIAL STATEMENT. OSURE DISCL NTINUING CO CONTINUING DISCLOSURE "Developers") as ers (the ur develop ibfour ped byby develo bebe rict will Dist the anticipated that the District will developed developers (the "Developers") as ted that anticipa is is It It DEVELOPERS." HE T AND R PE O DEVEL R MASTE E TH " eading h he t under ein r further described herein under the heading "THE MASTER DEVELOPER AND THE DEVELOPERS." e h further described ave separately h , ) " yland ("R . Inc , nia r Califo of s Home yland R an h t er h ot ers, Develop thethe The District and Developers, other than Ryland Homes of California, Inc. ("Ryland"), have separately and District The tion and operating l informa financia certain provide to to Bonds thethe ners of of owowners of of benefit thethe covenanted benefit Bonds provide certain financial information and operating ted forfor covenan to provide notices of orts"), and Rep "Annual vely, thethe . 1 (collecti NoNo. ement Area Improv to to data relating Improvement Area 1 (collectively, "Annual Reports"), and to provide notices of relating data rial. , if mate rated events tain enume cercertain rrences of of occu thethe occurrences enumerated events, if material. al Securities ecognized Municip Nationally R h Nationally ith eac d w bebefile rts will Repo Annual The Annual Reports will filed with each Recognized Municipal Securities The notices of . The sitory, if any n depo e intbrmatio iate Stat appropr the the with Information Repository with appropriate State information depository, if any. The notices of ry andand rmation Reposito Info iate appropr e h t h it w (and Board king Rulema s e iti r Secu al Municip e h t h it w with the Municipal Securities Rulemaking Board (and with the appropriate filed be be material events will filed will rial events mate Annual ed in the contain bebe rmation toto info ofof nature e specific . Th ry, if any) State information depository, if any). The specific nature information contained in the Annual tion deposito informa State CONTINUING OF RMS O F -G DIX EN APP " in ed z i summar is events l materia of Reports or the notice of material events is summarized in "APPENDIX G -FORMS OF CONTINUING notice e h t or ts r Repo and the Developers e District ththe byby made been ts have ese covenan ThThese REEMENTS." DISCLOSURE AGREEMENTS." covenants have been made District and the Developers SURE AG DISCLO has never failed to comply in e District . Th Rule h thethe ng wit complyi writer in in Under sist the asassist order the Underwriter complying with Rule. The District has never failed to comply in to to order in in annual reports or provide to to Rule said to s regard th i w s king underta s previou any h it w all material respects with any previous undertakings with regards to said Rule provide annual reports or s t c pe res l all materia spects with any re l materia all in comply to failed never ave h s r e lop e v e D The s. notices of material events. The Developers have never failed to comply in all material respects with any event notices of material events. ial er mat of s notice or rts po e r annual provide to ule R said to h regard undertakings with regard to said Rule to provide annual reports or notices of material events. rtakings wit evious unde prprevious USES OF FUNDS URCES AND ATED SO ESTIM ESTIMATED SOURCES AND USES OF FUNDS the Bonds is set forth below: ofof issuance the ating toto rel funds ofof used rces and timated sou esestimated The The sources and used funds relating the issuance the Bonds is set forth below: Funds ofof Sources Sources Funds ...., ..................................................................... Bonds the ofof Principal Amount the Bonds t lAmoun Principa t ........................................................ Discoun Less:Net NetOriginal OriginalIssue Issue Discount Less: ............................................................................ Sources Total Total Sources Funds of Uses Uses of Funds ction Fund Constru Deposit to and Construction Fund.................................................. cquisition and AAcquisition Deposit to ..................................................... ............. ............. count c A Deposit to Reserve Account Deposit to Reserve nt (t) Deposit toInterest Interest Account(1) Accou it to Depos (2)............................................................. Issuance of Depositto toCosts Costs of IssuanceAccount Account(2) Deposit ............................................................ ............. ............. t riter's Discoun Underwriter's Discount Underw (3) Depositto toSpecial SpecialEscrow EscrowFund Fund(3) Deposit ................................................................................. otal Uses Total Uses T $26,330,000.00 $26,330,000.00 (71,272.00) (71,272.00) $26,258,728.00

$26,258,728.00

$19,497,172.37 $19,497,172.37 1,758,080.00 1,758,080.00 030.63 1,234, 1,234,030.63 335,000.00 335,000.00 434,445.00 434,445.00 3,000,000.00 3,000,000.00 $26.258,728,00

$26,258,728.00

er 1, gh Septemb estthrou Capitalized interest through September 1,2006 2006 (1) Capitali zedinter (i) ultant, Appraiser, the Market AbsorptionCons tant, the lConsul , Financia re Disclosu , Counsel (2) Includes Includesfees feesfor forBond Bond Counsel, DisclosureCounsel Counsel, Financial Consultant, the Appraiser, the Market Absorption Consultant, (2_ Official the printing of costs counsel, its and Agent ers, the of nt costs l consulta legaland andfinancia financial consultant costs ofthe theDevelop Developers, theFiscal Fiscal Agent and its counsel, costs of printing the Official legal nt,and Stateme Statement, andother othercosts costsof ofissuance issuanceof ofthe theBonds. Bonds. (4) ion of certainconditions. See "SECURITY FOR THE onstruction Fund ion and Tobe bereleased releasedto tothe theAcquisit Acquisition andC Construction Fundupon uponsatisfact satisfaction of certain conditions. See "SECURITY FOR THE (4) To scrow Fund. BONDS- Special Escrow Fund. SpecialE BONDS PLAN ING HE FINANC T THE FINANCING PLAN and certain public fees and facilities fees capital facilities finance capital to finance used to will used Bonds will s of The proceed proceeds of the the Bonds certain public The and improvements eligible improvements Such eligible Area ment es within properti improvements serving properties withinImprove Improvement AreaNo. No.1. 1. Such and ments serving improve are the improvements these improvements financing these in financing shortfall in Any shortfall estimated coststhereof thereofare areset set forth forth below. below. Any are the d costs estimate

any shortfall oper to finance Devel Master the the y of of inabilit TheThe oper. Devel responsibilities of the Master Developer. inability Master Developer to finance any shortfall Master sibilities of the respon plated. contem as pment develo te the the to comple pers' ability Develo on the may have an adverse effect on the Developers' ability to complete development as contemplated. effect an adverse have may in to be constructed ements improv the of of tion descrip a a forth setssets ng table The following table forth description the improvements to be constructed in followi The each item. ted with associa ed costs estimat the the with 1, along No.No. Improvement Area 1, along with estimated costs associated with each item. ement Area Improv IO CFD 2004-3 IND OFOF CITY CITY INDIO CFD 2004-3 AREA NO. 1 PROVEMENT IMIMPROVEMENT AREA NO. I FUNDED FROM SPECIAL IMPROVEMENTS/FEES

IMPROVEMENTS/FEES FUNDED FROM SPECIAL TAX BONDS


Unit Quant Quant Unit New New Price Unit Unit Price 500 500 85 85 400 400 700 700 794 794 156 156 5 3,025.2 3,025.25 1,988 1,988 Phase 1 Phase 1 Prqiect Total

TAX BONDS

Project Total

City Fees Fees Ci_ Storm Drainage Fees ge Fees Draina Storm tion Fee Mitiga Fire Station Mitigation Fee Station Fire Sheriff/Police Fee /Police Fee Sheriff Park Fee Fee Park Fees Impact Bridge/Major Street Impact Fees /Major Street Bridge TUMF TUMF Fee Meter Water Meter Fee Water ement Fees Improv Water Capital Improvement Fees Capital Water Fee Park Capital Impact Fee Impact Capital Park
Fees Other Other Fees School Fees Fees School ty Fees Sewer Connection Capacity Fees tion Capaci Connec Sewer Fees Sewer Service Fees Service Sewer

Acres 450 450 Acres EA 635 635 EA EA 635 635 EA EA 635 635 EA EA 635 635 EA EA 635 635 EA EA 635 635 EA EA 1484 1484 EA EA 635 635 EA

$ 225,000.00 $ 225,000.00 00.00 1,000,0 1,000,000.00 53,975.00 53,975.00 0.00 254,00 254,000.00 444,500.00 414,500.00 ,190.00 504 504,190.00 .00 99,060 99,060.00 1.00 4,489,47 4,489,471.00 1,262,380.00 1,262,380.00 ,576.00 $8,332

$8,332,576.00

EA 635 635 EA EA 635 635 EA EA 635 635 EA

8,800 8,800 3,110 3,110 127

127

$5,588,000.00* $5,588,000.00* 1,974,850.00 1,974,850.00 80,645.00 80,645.00 $7,643,495.00

$7,643,495.00

per Develo to to ursable Capital Costs Reimbursable Developer Reimb Costs Capital Site Preparation tion Prepara Site Grading g Gradin Surface Improvements ements Improv Surface Landscaping aping Landsc Storm Drainage ge Draina Storm l Traffic Control Contro Traffic Water Water Sewer Sewer Engineering ering Engine Soils Engineering ering Engine Soils Blueprints ints Bluepr Repairs forInspect Inspection ion s for Repair DryUtilitie Utilities s Dry Contingency gency Contin Phase from Suncal ursed toto Reimb bebe Shortfall Reimbursed Suncal from Phase22 to to ll - Shortfa ursement Suncal NetAAvailable for SuncalReimb Reimbursement vailable for Net ds Phase1 1Bond BondProcee Proceeds Phase d from le to $3,000,000 available tobe bepaid paidwhen whenrelease released fromEscrow EscrowFund. Fund. ,000 availab **$3,000

$ 355,268.00 355,268.00 $ 68,576 .00 68,576.00 591,956.00 591,956.00 75.00 1,508,8 1,508,875.00 133,800.00 133,800.00 1.00 610,41 610,411.00 1,186,300.00 1,186,300.00 814,222.00 814,222.00 00.00 1,862,9 1,862,900.00 150,000.00 150,000.00 35,000.00 35,000.00 141,897.00 141,897.00 263,471.00 263,471.00 7.00 503,43 503,437.00 ,113.00 $8,226 $8,226,113.00 011.63) (1,705, (1,705,011.63) ,101.37 $6,521

$6,521,101.37

$22,497,172.37

$22,497,172.37

THE BONDS s Bond Description of the Bonds iption of the Descr

THE BONDS

denominations of $5,000 each or any , in in stered bonds regi fully as as issued be be s willwill Bonds issued fully registered bonds, denominations of $5,000 each or any Bond TheThe dated and bear interest from the date of their be be willwill ity and matur in a single eof with integral multiple thereof within a single maturity and dated and bear interestTh from the date of their ple ther gral multi inte e Bonds will be cover page hereof. inside the the h on on fortforth set set rates he the "), at tat ed Date "Dat delivery (the "Dated Date"), rates inside cover page hereof. The Bonds will be ry (the delive ns. hout coupo , witwithout issued in fully registered form, coupons. stered form regi ed in fully issu d States of America semiannually Unite thethe y of of l mone lawfu in in paid be be ds will Bon Interest Bonds will paid lawful money United States of America semiannually thethe rest on on Inte ent Date"), commencing on March 1, rest Paym "'Inte ch, an an (ea(each, h year eaceach tember 1 of Sep March 1 and September 1 of year "Interest Payment Date"), commencing on March 1, rch 1 and Ma on on 0-day year comprised of twelve 30-day 6360-day 3 a of asis b e h t on ulated c al c be will s Bond e 2006. Interest on the Bonds will be calculated on the basis of a year comprised of twelve 30-day h t 2006. Interest on Date next preceding the date of ent Paym st Intere e h t from e ayabl p be all h s s Bond the months. Interest the Bonds shall be payable from the Interest Payment Date next at preceding the date of rest onon hs. Inte mont an Interest Payment D e in which event hentication is is aut of of h date sucsuch (i) (i) of unless authentication thereof unless date authentication an Interest Payment Date in which event hentication there aut (ii) the date of authentication is after a Record ion, nticat he aut f o date h uc s om r f le b paya e b interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record all sh interest in which event interest shall be Date, nt e Paym st e r e Int ding cee suc ly e diat imme the Date but prior the immediately succeeding Interest Payment Date, in which event interest shall be to to prior but Date date of authentication, or (iii) the ceeding thethe ediately suc imm ent Date est Paym Inter payable from the Interest Payment Date immediately succeeding date of authentication, or (iii) the the ble from paya Record Date occurring after the issuance first the onon iness s u b of close he t to prior is tion date of authentication is prior to the close of business the first Record Date occurring after the issuance entica h aut date of the dated date of such Bond; provided, ble from paya all bebe est shshall inter ich event wh , in in such Bond, which event interest payable from the dated date of such Bond; provided, h Bond suc of of , interest is in default, interest on that Bond h Bond suc hentication of of aut ofof time the at at if if that the time authentication such Bond, interest is in default, interest on that Bond wever, that hohowever, ich the interest has been paid or made available wh e to to ent Dat est Paym t Inter las the ble from shall payable from the last Interest Payment Date which the interest has been paid or made available paya bebe shall payment on that Bond, interest on that for le b availa made or paid een b as h t s intere no for payment if if no interest has been paid or made available for payment on that Bond, interest on that ent or,or, paym for . date dated itsits ble form paya all bebe Bond payable form dated date. shshall Bond nts and years as shown on the inside ipal amou e princ ththe in in ember 1 1 Sept re onon matu The Bonds will mature September principal amounts and years as shown on the inside s will e Bond Th ial mandatory redemption and mandatory ec sp , tion demp e r al option to ject b su are and cover page and are subject to optional redemption, special mandatory redemption and mandatory reof hehereof page cover low. own be sh emption asas red fund sinking fund redemption shown below. sinking

Redemption ption Redem


ption Optional Redemption tional Redem Op ing on or after September l, 2016 may s matur e Bond ow, th rth bel t fo ions se limitat the Subject the limitations set forth below, the Bonds maturing on or after September 1, 2016 may bject toto Su funds, prior to maturity on any date on or e of sourc any rom f t c Distri e h t of option e h t at be redeemed, at the option of the District from any source of funds, prior to maturity on any date on or med, be redee maturity selected by the District and by lot of order he t in art p in r o , ole wh n i , 5 01 2 , 1 after September 1, 2015, in whole, or in part in the order of maturity selected by the District and by lot mber er Septe aft a percentage of the principal amount essed as es, expr demption pric wing re e follo rity, at within maturity, atth the following redemption prices, expressed as a percentage of the principal amount ithin aamatu w ption: e of rest to crued inte ith ac ether w tobbe redeemed, together with accrued interest tothe thedat date ofredem redemption: deemed, tog e re to demption Dates Re Redemption Dates t 31, h Augus ber l, Septem September 1, 2015 2015throug through August 31,2016 2016 31, t h Augus ber 1, Septem September 1, 2016 2016throug through August 31,2017 2017 fter therea and 2017 1, ber Septem September 1, 2017 and thereafter Redemption Prices 102.0% 102.0% 101.0 101.0 100.0

Redemption Prices

100.0

ed above, the District shall give Written ct elects Inthe the event eventthe the Distri District elects to to redeem redeem Bonds Bonds as as provid provided above, the District shall give Written In so redeem, the redemption date and the to n electio its of Agent Fiscal the to ct Request ofthe the Distri District to the Fiscal Agent of its election to so redeem, the redemption date and the st of Reque Fiscal Agent shall be given at least 60 The ed. t of principal amount ofthe theBonds Bondsto tobe beredeem redeemed. The notice notice to to the the Fiscal Agent shall be be accep given at least 60 pal amoun princi to the table shorter period as shall ption date, but no no more more than than 90 90 days days prior prior to to the the redem redemption date, or or such such shorter period as shall be acceptable to the but . Fiscal Agent Agent. Fiscal

Special Tax Prepayments tion from datory Redemp ManMandatory Redemption from Special Tax Prepayments part and on a pro rata basis ry redemption, in whole or in to man subject cial ds are are of Spe BonBonds ent a pro The The subject to dato mandatory redemption, in whole or part and rata basis aymon prep any of in t Date from and to the extent men Pay rest Inte be any to on unt es, l amo maturities, on any Interest Payment Date from and to the extent of any prepayment of Special ng maturiti principa amoamong the expressed as a percentage of mption prices, wing rede follo at the Taxes at the following redemption prices, expressed as a percentage of the principal amount to be Taxes to the date of redemption: ued interest accraccrued ther withwith interest to the date of redemption: emed, togetogether redcredeemed, s emption Date Red Redemption Dates ugh August 31, 2009 5 thro tember 1, 20 Sep September 1,02005 through August 31, 2009 through August 31, 2015 9 200 1, ber tem Sep September 1, 2009 through August 31, 2015 September 1,2015 and thereafter Redemption Prices

Redemption Prices
103.0% 103.0% .5 102 for Optional As Provided 102.5 As Provided for Optional Redemption

September 1, 2015 and thereafter

Redemption
unts in the Reserve Account the District may also apply amo ion, mpt rede such with em n to rede ectio conn In In prep connection with such redemption, the District may also apply amounts in aym the ent Reserve Account t as a result of such Special Tax men uire Req erve Res the of ss exce in in be be ch will which will excess of the Reserve Requirement as a result of such Special Tax prepayment to redeem whi e. abov forth setset ds as as Bon Bonds forth above. emption d Red ing Fun datory_ Sink Man Mandatory Sinking Fund Redemption 1, 2035 and the tember 1, 2030 and September Sep 5, 202 l, ber tem Sep on g urin and ds mat urity and Bon mat The The Bonds maturing on September 1, tem 2025, September 2030 September 2035 the d before 1, calle l be and shal 1, 2035 1, uring on Sep ber mat s ond B on t, Term oun Acc ow Escr tion cial Special Escrow Term Bonds maturing on September 1, 2035 called before maturity and Spe Redemp the into be sitedshall d Payments that have been depo ing Fun Sink the and on emed, from ectively, rede redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on resp 7, 200 1, 31 and September 1,20 ber tem Sep 6, 202 1, ber tem ts Sep men Pay d Fun ing September 1, 21, 2021, September 1, 2026, September 1, 2031 and September 1, 2007, respectively, and on tember 1,20 Sink Sep schedule of maturity, in accordance with the r to to eafter prio shall ther lot and tember 1 1 Sep each September thereafter prior maturity, in accordance with the schedule of Sinking Fund Payments Agent by each the Fiscal by cted sele redemption shall be for d calle so ds Bon The eof, ther w. belo unt by lot andplus forth set forth below. The Bonds so called for redemption shall be selected by the Fiscal Agent shall l amo set emed Bond equal to the principa rede each for e pric ion mpt rede a a redemption price for each redeemed Bond equal to the principal amount thereof, plus emed atat rede be redeemed be , without premium, as follows: mption date rede the rest toto ued inte accrued interest the redemption date, without premium, as follows: accr on September 1, 2025 (CUSIP 455697 AQ 5) Maturing ds Bon Bonds (CUSIP 455697 AQ 5) Maturing on September 1, 2025 emption Date Red Redemption Date 1) ber tem (Sep (September 1) 2021 2021 2022 2022 2023 2023 2024 2024 2025 (maturity) Principal Amount

Principal Amount
$740,000 $740,000 775,000 775,000 ,000 815 815,000 855,000 855,000 895,000

2025 (maturity)

895,000
1, 2030

(CUSIP 455697 AR 3) Maturing on September 1, 2030 Bonds (CUSIP Bonds Redemption Date Redemption 1) (September 1) (September Date Principal Amount

tember 455697 AR 3) Maturing on Sep

Principal Amount
$940,000

2026 2027 2027 2028 2028 2029 2029 2030 (maturity) 2030 (maturity)

2026

$940,000 990,000 990,000 1,040,000 1,040,000 1,090,000 1,090,000 1,150,000 1,150,000

2035 ber 1, 1, Septem g on on I) Maturin ASAS 455697 (CUSIP Bonds Bonds (CUSIP 455697 I) Maturing September 2035 tion Date Redemp Redemption Date !) ber (Septem (September 1) 2031 2031 2032 2032 2033 2033 2034 2034 ty) (maturi 2035 2035 (maturity) l Amount Principa Principal Amount $1,205,000 $1,205,000 1,270,000 1,270,000 1,335,000 1,335,000 1,405,000 1,405,000 1,475,000 1,475,000

ber l, 2035 Septem g onon Maturin 9) 9) AT 455697 (CUSIP Bonds Term Escrow Special Escrow Term Bonds (CUSIP 455697 AT Maturing September 1, 2035 Special

Redemption Date tion Date Redemp (September ber 1)1) (Septem 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 2021 2021

t l Amoun Principa Principal Amount $45,000 $45,000 50,000 50,000 55,000 55,000 60,000 60,000 65,000 65,000 65,000 65,000 70,000 70,000 75000 75,000 000 75 75,000 000 80 80,000 000 85 85,000 000 90 90,000 000 90 90,000 000 95 95,000

tion Date Redemp Redemption Date ber 1)1) (Septem (September 2022 2022 2023 2023 2024 2024 2025 2025 2026 2026 2027 2027 2028 2028 2029 2029 2030 2030 2031 2031 2032 2032 2033 2033 2034 2034 ty) 2035 2035(maturi (maturity)

Principal Amount 100,000 100,000 105,000 105,000 110,000 110,000 120,000 120,000 125,000 125,000 130,000 130,000 135,000 135,000 145,000 145,000 150,000 150,000 160,000 160,000 165,000 165,000 175,000 175,000 185,000 185,000 195,000

Principal Amount

195,000

redemption dates sinking fund ng one ately precedi If during during the the Fiscal Fiscal Year Year immedi immediately preceding one of of the the sinking fund redemption dates If tion date, the District atatleast es Bonds, specified abovethe theDistrict Districtpurchas purchases Bonds, least45 45days daysprior priorto to the the redemp redemption date, the District d above specifie amount purchased and l principa the t as t of shallnotify notifythe theFiscal FiscalAgent Agentby byWritten WrittenReques Request ofthe theDistric District as to to the principal amount purchased and shall the extent of the full to e, atatthe be ed shall the amount amountof ofBonds Bondsso sopurchas purchased shall becredited credited thetime timeof of purchas purchase, to the extent of the full the le maturity of t for ng Sinking principal amountthereof, thereof,to toreduce reducesuch suchupcomi upcoming SinkingFund FundPaymen Payment forthe theapplicab applicable maturity of l amount principa to the Fiscal t pursuan d cancelle be subsection shall t to purchased pursuan the Bonds. Bonds. All pursuant to this this subsection shall be cancelled pursuant to the Fiscal Bonds purchased All Bonds the Agent Agreem Agreement. ent. Agent pursuant to optional redemption or Bonds pursuant Term Bonds the Term redemption of partial redemption event of In In the the event of a partial of the to optional redemption or Fund Payments for Sinking ng remaini the of each ents, prepaym Tax Special from mandatory redemption tion from Special Tax prepayments, each of the remaining Sinking Fund Payments for ory redemp mandat rata basis. pro a ble, on , as d above, such Term Term Bonds, Bonds, as asdescribe described above, will will be be reduced reduced, as nearly nearly as as practica practicable, on a pro rata basis. such

. Escrow Special ption from Redemption from Special Escrow. Redem ber 1, 2035 are Septem g on on 9) maturin AT AT 455697 (CUSIP Bonds Term The Special Escrow Term Bonds (CUSIP 455697 9) maturing September 1, 2035 are Escrow Special The date as is permitted later such or on ber 1, 2007, on Septem rata,rata, tion, pro pro subject to mandatory redemption, on September 1, 2007, or on such later date as is permitted ory redemp to mandat subject thereof to be al amount princip to the equal tion price redemp nt, at aat Agreeme under Fiscal Agent Agreement, a redemption price equal to the principal amount thereof to be Agent Fiscal thisthis under m, from amounts t premiu tion, withou redemp of of date to the interest accrued redeemed, together accrued interest to the date redemption, without premium, from amounts r withwith ed, togethe redeem Fund. Escrow available in the Special Escrow Fund. Special le in the availab ption Notice Redemption Redem of of Notice Fiscal Agent shall ent, thethe Agreem Agent Fiscal the the tion under redemp for for duedue When Bonds redemption under Fiscal Agent Agreement, Fiscal Agent shall areare Bonds When d, however, that a notice provide Bonds; tion of such redemp , of the District the the of of give notice, in the name District, of the redemption of such Bonds; provided, however, that a notice name in the notice, give be conditioned on there ts shall Paymen Fund Sinking from than other from made be be a redemption made from other than from Sinking Fund Payments shall be conditioned on there tion to to a redemp of of price of the Bonds to be tion redemp the pay to money nt sufficie date tion redemp the on on the redemption date sufficient money to pay the redemption price of the Bonds to be being deposit deposit on on being any), the bond numbers s (if (if number CUSIP thethe specify (a) (a) tion shall redemp of of redeemed. Such notice redemption shall specify CUSIP numbers any), the bond numbers notice Such ed. redeem all of the Bonds of where that except tion, redemp for selected Bonds the of dates and the maturity date or dates of the Bonds selected for redemption, except that where all of the Bonds of or date y maturit and the to be redeemed, the bond are , y maturit one of Bonds the all or tion, redemp to a maturity subject to redemption, or all the Bonds of one maturity, are to be redeemed, the bond subject y areare a maturit tion and surrender of the redemp forfor fixed date thethe state d; (b)(b) specifie be be notnot need issue numbers such issue need specified; state date fixed redemption and surrender of the such s of of number or places where the Bonds are to place thethe state (d) (d) tion price; redemp thethe state ed; (c)(c) Bonds redeemed; state redemption price; state place or places where the Bonds are to redeem be be to to Bonds of such Bond which is portion thethe state part, in in ed only redeem to be Bonds of of case redeemed; case Bonds to be redeemed only part, state portion of such Bond which is thethe in in ed; (e)(e) redeem bebe the rate of interest state (g) issued; lly origina as Bonds the of issue of date thethe state redeemed; state date of issue of the Bonds as originally issued; (g) state the rate of interest ed; (f) (f) redeem bebe to to tion needed to identify tive informa descrip other any state (h)(h) ed; and redeem being borne each Bond being redeemed; and state any other descriptive information needed to identify Bond each byby borne Such notice shall further Agent. Fiscal the by d specifie be shall as ed redeem being accurately the Bonds being redeemed as shall be specified by the Fiscal Agent. Such notice shall further Bonds the accurately on each Bond, or portion payable and due become shall there tion, redemp for fixed date state that the date fixed for redemption, there shall become due and payable on each Bond, or portion the onon that state premium, and interest accrued to any r with , togethe al thereof princip tion, thethe redemp for thereof called for redemption, principal thereof, together with any premium, and interest accrued to called thereof shall cease to accrue and be thereon interest date, such after and from that and the redemption date, and that from and after such date, interest thereon shall cease to accrue and be tion date, redemp the the Fiscal Agent shall tion date, redemp the toto prior days 60 than more no but days payable. least 30 days but no more than 60 days prior the redemption date, the Fiscal Agent shall 30 t least . AAt payable thereof at their Owners ive respect the to , prepaid postage mail, class first byby first class mail, postage prepaid, to the respective Owners thereof at their notice, mail copy such notice, such ofof copy aa mail of any Bond or the original Owner the byby receipt actual r. The Registe Bond the addresses appearing the Bond Register. The actual receipt the Owner of any Bond or the original ng on on es appeari address nt to redemption, and on precede conditi a be not shall tion redemp such of notice of Bond purchaser of any Bond of notice of such redemption shall not be a condition precedent to redemption, and any of purchaser of the proceedings for validity the affect shall notice such in defect any nor receive to to receive nor any defect in such notice shall affect the validity of the proceedings for neither the failure failure the neither tion date. redemp the onon interest n of of cessatio the or or Bonds, such the redemption such Bonds, the cessation interest the redemption date. tion ofof redemp the ption Redem of Effect Notice of Redemption Notice ofof Effect amount necessary for the and ed above, describ asas given, duly been tion having Notice redemption having been duly given, described above, and the amount necessary for redemp ofof Notice r on the date fixed le therefo availab being and purpose that le for availab made been the redemption having been made available for that purpose and being available therefor on the date fixed tion havin.g redemp the for such redemption: tion: redemp such for tion shall, on the date fixed for redemp ted tbr , designa s thereof or The TheBonds, Bonds, orportion portions thereof, designated for redemption shall, on the date fixed for (1) (1) Fiscal Agent d ininthe provide asas thereof tion price redemp the at at payable and redemption, become due and payable the redemption price thereof provided the Fiscal Agent due tion, become redemp standing; y notwith contrar the toto Bonds the inin ent oror Agreem Agent Fiscal the Agreement, anything the Fiscal Agent Agreement the Bonds the contrary notwithstanding; g inin ent, anythin Agreem the redemption the of office the atat er thereof surrend ation and Uponpresent presentation and surrender thereof the office of theFiscal FiscalAgent, Agent, the redemption (2) Upon (2) ; priceof ofsuch suchBonds Bondsshall shallbe bepaid paidto tothe theOwners Ownersthereof thereof; price ted for redemption s thereof tion date As of of the the redemp redemption datethe theBonds, Bonds,or orportion portions thereof so so designa designated for redemption As (3) (3) , shall cease to bear s thereof ding and shallbe bedeemed deemedto tobe be no no longer longerOutstan Outstanding andsuch suchBonds, Bonds,or orportion portions thereof, shall cease to bear shall ; and furtherinterest interest; and further rtions thereof so tion no (4) As of of the the date datefixed fixed for forredemp redemption noOwner Ownerof ofany anyof ofthe theBonds, Bonds,or orpo portions thereof so As (4) Agreement, or to any toto entitled be designated forredemp redemption shall be entitled anyof ofthe thebenefits benefitsof ofthis thisFiscal Fiscal Agent Agent Agreement, or to tion shall ted for designa 9

any other rights, rights, except except with with respect respect to to payment of the to the the accrued to interest accrued and interest price and redemption price the redemption payment of any other redemption date date from from the the amounts amounts so so made available. made available. redemption The Fiscal Fiscal Agent Agent The Union B Bank of C California, N.A., has has been been appoin appointed as the the Fiscal Fiscal Agent Agent for for all all of Bonds the Bonds of the ted as alifornia, N.A., ank of Union under the Fiscal Agent Agreement. For a further description of the rights and obligations of the Fiscal Fiscal the of For a further description of the rights and obligations under the Fiscal Agent Agreement. Agent pursuant to the Fiscal Agent Agreement, see "APPENDIX C SUMMARY OF FISCAL AGENT AGENT FISCAL Agent pursuant to the Fiscal Agent Agreement, see "APPENDIX C - SUMMARY OF hereto. AGREEMENT" hereto. AGREEMENT" Book-Entry System System Book-Entry The Depository Trust Trust Company, Company, New New York, York, New New York York ("DTC"), ("DTC"), will depository tory securities deposi as securities act as will act The Depository for the Bonds. The Bonds will be registered in the name of Cede & Co. (DTC's partnership nominee), nominee), partnership (DTC's Co. & Cede of tbr the Bonds. The Bonds will be registered in the name and will be available to ultimate purchasers in the denomination of $5,000 or any integral multiple and will be available to ultimate purchasers in the denomination of $5,000 or any integral multiple thereof, under the the book-entry book-entry system system maintained maintained by by DTC. DTC. Ultimate receive not receive will not Bonds will of Bonds purchasers of Ultimate purchasers thereof, under physical certificates representing their interest in the Bonds. So long as the Bonds are registered in the in the registered are Bonds the as long So physical certificates representing their interest in the Bonds. name of Cede & Co., as nominee of DTC, references herein to the Owners shall mean Cede & Co., and and Co., & Cede mean shall Owners the to herein name of Cede & Co., as nominee of DTC, references shall not not mean mean the the ultimate ultimate purchasers purchasers of of the the Bonds. Bonds. Payments any, and and premium, if any, of, premium, principal of, the principal of the Payments of shall interest on the Bonds will be made directly to DTC, or its nominee, Cede & Co., by the Fiscal Agent, so so Agent, Fiscal the by Co., & Cede nominee, its interest on the Bonds will be made directly to DTC, or long as DTC or Cede & Co. is the registered owner of the Bonds. Disbursements of such payments to to payments such of long as DTC or Cede & Co. is the registered owner of the Bonds. Disbursements DTC's Participants is the responsibility of DTC and disbursements of such payments to the Beneficial of such payments to the Beneficial DTC's Participants is the responsibility of DTC and disbursements Owners is the of DTC's H "APPENDIX H See "APPENDIX Participants. See Indirect Participants. and Indirect Participants and DTC's Participants of responsibility the responsibility Owners is BOOK-ENTRY ONLY SYSTEM." SYSTEM." BOOK-ENTRY ONLY

10

Schedule Debt Service Schedule ons other redempti no no assuming Bonds, the the for for schedule service debt annual is the The following is the annual debt service schedule Bonds, assuming redemptions other following ns. redemptio fund than mandatory sinking fund redemptions. sinking LE VICE SCHEDU SER DEBT DEBT SERVICE SCHEDULE

Year Ending Ending Year 1) 1) er (September (Septemb 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 2026 2026 2027 2027 2028 2028 2029 2029 2030 2030 2031 2031 2032 2032 2033 2033 2034 2034 2035 2035
Total Total

Principal Principal -0- -0$ $ 385,000 385,000 415,000 415,000 445,000 445,000 480,000 480,000 520,000 520,000 560,000 560,000 580,000 580,000 605,000 605,000 635,000 635,000 660,000 660,000 690,000 690,000 725,000 725,000 760,000 760,000 795,000 795,000 835,000 835,000 875,000 875,000 920,000 920,000 965,000 965,000 1,015,000 1,015,000 1,065,000 1,065,000 1,120,000 1,120,000 1,175,000 1,175,000 1,235,000 1,235,000 1,300,000 1,300,000 1,365,000 1,365,000 1,435,000 1,435,000 1,510,000 1,510,000 1,590,000 1,590,000 1,670,000 1,670,000 00 $26,330,0 $26,330,000

lnterest Interest 0.63 $1,234,03 $ 1,234,030.63 .50 1,283,962 1,283,962.50 .00 1,271,065 1,271,065.00 .50 1,256,167 1,256,167.50 .50 1,238,977 1,238,977.50 .00 1,219,570 1,219,570.00 .00 1,198,080 1,198,080.00 .00 1,174,190 1,174,190.00 .00 1,148,955 1,148,955.00 .50 1,122,612 1,122,612.50 .00 1,094,250 1,094,250.00 .50 1,064,062 1,064,062.50 50 ! ,031,882. 1,031,882.50 0 997,425.0 997,425.00 0 960,965.0 960,965.00 0 922,137.5 922,137.50 0 880,245.0 880,245.00 0 836,345.0 836,345.00 0 790,187.5 790,187.50 0 741,772.5 741,772.50 0 690,842.5 690,842.50 0 636,465.0 636,465.00 0 579,280.0 579,280.00 0 519,287.5 519,287.50 0 456,230.0 456,230.00 0 389,855.0 389,855.00 0 319,557.5 319,557.50 0 245,655.0 245,655.00 0 167,890.0 167,890.00 86,005.00 86,005.00 50.63 $25,557,9 $25,557,950.63

al Annu Annual Service Debt Debt Service $1,234,030.63 $ 1,234,030.63 .50 1,668,962 1,668,962.50 .00 1,686,065 1,686,065.00 .50 1,701,167 1,701,167.50 .50 1,718,977 1,718,977.50 .00 1,739,570 1,739,570.00 .00 1,758,080 1,758,080.00 .00 1,754,190 1,754,190.00 .00 1,753,955 1,753,955.00 1,757,612.50 1,757,612.50 .00 1,754,250 1,754,250.00 .50 1,754,062 1,754,062.50 .50 1,756,882 1,756,882.50 .00 1,757,425 1,757,425.00 .00 1,755,965 1,755,965.00 1,757,137.50 1,757,137.50 .00 1,755,245 1,755,245.00 .00 1,756,345 1,756,345.00 .50 1,755,187 1,755,187.50 .50 1,756,772 1,756,772.50 .50 1,755,842 1,755,842.50 1,756,465.00 1,756,465.00 .00 1,754,280 1,754,280.00 .50 1,754,287 1,754,287.50 .00 1,756,230 1,756,230.00 .00 1,754,855 1,754,855.00 .50 1,754,557 1,754,557.50 .00 1,755,655 1,755,655.00 1,757,890.00 1,757,890.00 .00 1,756,005 1,756,005.00 $51,887,950.63

$51,887,950.63

NDS TY FOR SECURI SECURITY FORTHE THEBO BONDS

General
DISTRICT, THE OF ING POWER TAX THE NOR CREDIT AND FAITH THE NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT, THE AL ANY OR FORNIA I CAL OF STATE THE DE, RIVERSI OF TY N COU CITY, THE COUNTY OF RIVERSIDE, THE STATE OF CALIFORNIA OR ANY POLITIC POLITICAL THE FOR EXCEPT BONDS. THE OF T PAYMEN THE D TO PLEDGE ISIS THEREOF SUBDIVISION THEREOF PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE OR TAXES ARE ES NO. AREA EMENT NET TAXES OFIMPROV IMPROVEMENT AREA NO.1,1,NO NO OTHER OTHER REVENU REVENUES OR TAXES ARE GENERAL OR SPECIAL BONDS. THE YMENT OF PA PLEDGED TO THE PAYMENT OF THE BONDS.THE THEBONDS BONDSARE ARENOT NOT GENERAL OR SPECIAL THE

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T, BUT ARE OF TIONS L OBLIGA R GENERA OF OBLIGATIONS OFTHE THECITY CITYNO NOR GENERAL OBLIGATIONS OFTHE THE DISTRIC DISTRICT, BUT ARE IGATIONS OBL TAXES OF NET SOLELY E PAYABL T THE OF IONS LIMITED LIMITEDOBLIGAT OBLIGATIONS OF THEDISTRIC DISTRICT PAYABLE SOLELYFROM FROM NET TAXES OF AGENT THE FISCAL UNDER HELD AMOUNTS NO. AREA EMENT IMPROV IMPROVEMENT AREA NO.11 AND AND AMOUNTS HELD UNDER THE FISCAL AGENT ED HEREIN. ENT AS AGREEM AGREEMENT ASMORE MOREFULLY FULLYDESCRIB DESCRIBED HEREIN.

The Bonds Bondsare aresecured securedby byaapledge pledgeof of Net Net Taxes Taxes and and the the other other amounts amounts in in the the Special Special Tax Tax Fund Fund The Special as defined is Taxes Net therein). Account Expense ative (other than amounts in the Administrative Expense Account therein). Net Taxes is defined as Special Administr the in (other than amounts Special ent. Expense ative Taxes minus minus an an amoun amount equal to to the the Administr Administrative ExpenseRequirem Requirement. Special Taxes Taxes means means the the t equal Taxes with District with the District amount of of all all special special taxes taxes (the (the "Special "Special Taxes" Taxes" or or the the "Special "Special Tax") Tax") received received by by the amount property of property ent Area respectto to Improvem Improvement AreaNo. No. 1, 1, together together with with the the proceeds proceeds collected collected from from the the sale sale of respect cy of t for t Agreemen pursuant to to the the foreclosur foreclosure provision of ofthe the Fiscal Fiscal Agen Agent Agreement for the the delinquen delinquency of such such Special Special e provision pursuant actions. e foreclosur such to Taxes remaining remaining after after the thepayment payment of of all allthe the costs costs related related to such foreclosure actions. Taxes
within Taxes within Special Taxes the Special of the receipt of the receipt occur delinquencies In the occur in in the that delinquencies event that the event In on in Improvement Area No. inany anyfiscal fiscalyear, year, the the District District may may increase increase its its Special Special Tax Tax levy levy on 11 No. Area ent Improvem amount maximum amount the maximum to the ent Area property within Improvem Improvement AreaNo. No.11in in the the following following fiscal fiscal year year up up to operty within pr levied Taxes Special will however, circumstances, however, will Special Taxes levied no circumstances, Under no permitted under the the Rate Rate and andMethod. Method. Under permitted under a percent as I0 percent e increased l purposes against any any parcel parcel used used for for private private residentia residential purposes b be increased by by more more than than 10 as a against within parcels within or parcels parcel or other parcel any other f any wner o or consequence ofdelinquen delinquency ordefault defaultby bythe the o owner of cy of nce conseque 1 No. 1 ent Improvem within ty proper on property levy on Tax levy Special Tax Although the Improvement AreaNo. No.I. 1. Although the Special within Improvement No. Improvement Area any cure to available to cure any om the may Special Taxes Taxes resulting resultingfr from the increase increase may may not not be be available increased, Special be increased, may be may levy may Tax levy Special Tax e th in increase an addition, In more. or delinquencies for a a period period of of one one year year or more. In addition, an increase in the Special delinquencies for "Rate See "Rate operty owners ss of ty or adversely affect the the abili ability or willingne willingness of pr property owners to to pay pay their their Special Special Taxes. Taxes. See adversely affect AND RATE A IX APPEND " and "APPENDIX A RATE AND below and Taxes" below Special Taxes" of Apportionment and of Special of Apportionment Method of and Method the of description hereto " OF METHOD OF APPORTIONMENT OFSPECIAL SPECIALTAXES TAXES" heretofor for a a description of the APPORTIONMENT OF METHOD "SPECIAL and "SPECIAL I, and No. 1, Area No. Improvement within Improvement Taxes within Special Taxes District's Area levying Special for levying procedures for District's procedures " ncy of RISK Insufficiency of Special Special Taxes. Taxes." - Insufficie FACTORS RISK FACTORS SIGNIFIC A SIGNIFICANT TO A SUBJECT TO IS SUBJECT BONDS IS THE BONDS OWNERSHIP OF OWNERSHIP OF THE DEGREE OF RISK. READ THE SECTION OF THIS CAREFULLY INVESTORS ARE POTENTIAL INVESTORS POTENTIAL ARE ADVISED ADVISED TO TO CAREFULLY READ THE SECTION OF THIS FACTORS." RISK FACTORS." "SPECIAL RISK ENTITLED "SPECIAL STATEMENT ENTITLED OFFICIAL STATEMENT OFFICIAL ANT DEGREE OF RISK.

The Taxes Special Taxes The Special


Method and Method Rate and the Rate to the according to collected according and collected levied and apportioned, levied be apportioned, to be are to The Taxes are Special Taxes The Special and below Taxes" Special of ment Apportion Method of "- Rate See " 1. See for No. 1. Rate and and Method of Apportionment of Special Taxes" below and Area No. Improvement Area for Improvement hereto. TAXES" SPECIAL OF ONMENT - RATE A "APPENDIX A "APPENDIX RATE AND AND METHOD METHOD OF OF APPORTI APPORTIONMENT OF SPECIAL TAXES" hereto. Agent Fiscal Agent the Fiscal under the issued under Bonds issued any Bonds as any long as so long and so 2006-2007 and Year 2006-2007 Beginning Fiscal Year in Fiscal Beginning in sufficient, amount an in Tax Special the Special Tax in an amount sufficient, levy the to levy covenanted to has covenanted District has the District Agreement Outstanding, the are Outstanding, Agreement are (1) pay (1) to pay purpose, to such purpose, for such available for and Fund Tax Special the in deposit on together with other amounts on deposit in the Special Tax Fund and available together with other amounts any (3) any and (3) Expenses, and Administrative Expenses, theAdministrative (2) the due, (2) when due, Bonds when the Bonds on the interest on the and interest of and principal of the principal ent. Requirem Reserve the to Fund Tax Special the of the Special Tax Fund to the Reserve Requirement. Account of Reserve Account the Reserve replenish the to replenish amounts required to amounts required each levy the in result to d formulate is formulated to result in the levy each Method is and Method Rate and the Rate rates, the tax rates, special tax Subject maximum special the maximum to the Subject to the of the replenishment of interest, replenishment and interest, any, and ifany, premium, if principal, premium, of principal, payment of year such payment of such amount of an amount of an year of for aa FACTORS" for RISK FACTORS" "SPECIAL RISK see "SPECIAL however, see expenses; however, administrative expenses; Reserve related administrative and related Account and Reserve Account levies. Tax Special such Special Tax levies. ofsuch collection of timely collection actual timely the actual affecting the discussion factors affecting certain factors of certain discussion of

Special Fund Tax Fund Special Tax


and held and beheld tobe Fund" to Tax Fund" "Special Tax established aa"Special isestablished there is Agreement, there Agent Agreement, Pursuant Fiscal Agent the Fiscal tothe Pursuant to an d e at e r c and d he lis b ta es r urthe f s thereisifurther established and created an Fundthere TaxFund Special Tax theSpecial Inthe Agent. In maintained Fiscal Agent. the Fiscal by the maintained by 12 12

an Administrative andand Account , a Reserve ion Account , a Redempt Account , a Principal Interest Account, a Principal Account, a Redemption Account, a Reserve Account an Administrative Account Interest Expense Account. . Expense Account Fiscal Agent in the the by by held be be willwill accounts andand g funds foregoin in the deposit on on The amounts deposit in the foregoing funds accounts held Fiscal Agent in amounts The in accordance accounts andand funds such in amounts the disburse and invest will gent A trust and the Fiscal Agent will invest and disburse the amounts in such funds accounts in accordance Fiscal the and trust in thereon earnings nt investme disburse will and t greemen A Agent Fiscal with provisions Fiscal Agent Agreement and will disburse investment earnings thereon in thethe s of of provision thethe with nt. Agreeme Agent Fiscal thethe s of of accordance with provisions Fiscal Agent Agreement. provision thethe ce with accordan Taxes to Special thethe transfer Taxes, Special it receives which on on date each on on The District will, each date which it receives Special Taxes, transfer Special Taxes to will, District The Agent Fiscal the of terms the with ce accordan in Fund Tax Special the in Fiscal Agent deposit in the Special Tax Fund in accordance with the terms of the Fiscal Agent deposit forfor Agent Fiscal thethe Expense trative will Agent Fiscal trust. in in Agreement held trust.The The Fiscal Agent willfirst firstdeposit depositinto intothe theAdminis Administrative Expense held be be nt to to Agreeme ent and shall Requirem trative Expense Adminis thethe to to equal amount an an Fund Tax Account Special Tax Fund amount equal Administrative Expense Requirement and shall Special thethe of of Account in tbrth set amounts the in and dates the on Fund Tax Special the in deposit then transfer amounts on on deposit in the Special Tax Fund on the dates and in the amounts set forth in amounts thethe transfer then to:to: priority, of of g order followin thethe the Fiscal Agent Agreement, following order priority, nt, in in Agreeme Agent Fiscal the 1. 1. 2. 2. 3. 3. 4. 4. 5. 5. 6. 6. Fund; Tax Special thethe of of Account Interest The The Interest Account Special Tax Fund; Fund; Tax Special the of of Account Principal The The Principal Account the Special Tax Fund; Fund; Tax Special the of of ion Account Redempt The Redemption Account the Special Tax Fund; The Fund; Tax Special the ofof Account The Reserve Account the Special Tax Fund; Reserve The and Fund; Tax Special the ofof Account trative Expense Adminis The The Administrative Expense Account the Special Tax Fund; and Fund. The Surplus Fund. Surplus The

Fund and Tax Special the from transfer will Agent Fiscal . The Account Administrative Expense Account. The Fiscal Agent will transfer from the Special Tax Fund and rative Expense Administ amounts tototime time from Fund Tax Special the of Account Expense deposit in the Administrative Expense Account of the Special Tax Fund from time time amounts trative Adminis the in deposit the Fiscal by disbursed be will which s, Expense trative Adminis of payment necessary to make timely payment of Administrative Expenses, which will be disbursed by the Fiscal timely necessary to make Fund Expense trative Adminis the in deposited Amounts District. the of Request Agent upon the Written Request of the District. Amounts deposited in the Administrative Expense Fund Written the upon Agent Bonds. the nt on repayme are not pledged the the repayment on the Bonds. toto pledged not are of and interest principal . The Fund Tax Special the ofof l Account Principa and Interest Account and Principal Account the Special Tax Fund. The principal of and interest Account Interest by the Fiscal paid be will on, redempti upon due principal than other , maturity due on theBonds Bonds until maturity, other than principal due upon redemption, will be paid by the Fiscal until the on due At ely. respectiv Fund, Tax Special the of of Account Interest the and Account Agent from the Principal Account and the Interest Account the Special Tax Fund, respectively. At Principal the from Agent the following make will Agent Fiscal the 1, er Septemb and 1 March each to prior Days least five Business Days prior to each March 1 and September 1, the Fiscal Agent will make the following Business five least Account; totothe first Fund Tax Special the transfers from the Special Tax Fund first theInterest InterestAccount Accountand andthen thento to the the Principal Principal Account; from transfers the or Account Interest the inin made been have deposits that extent the provided, however, that the extent that deposits have been made the Interest Account or thePrincipal Principal toto , that , however provided Special the from transfer the e, otherwis or Bonds, the of issue an of sale the of Account from the proceeds of the sale of an issue of the Bonds, or otherwise, the transfer from the Special proceeds the from Account are Fund Tax Special the in amounts if that, further, , provided and made; Tax Fund need not be made; and provided, further, that, if amounts in the Special Tax Fund are be not Tax Fund need te immedia an by up made be shall y deficienc any then , transfers g foregoin the inadequate make the foregoing transfers, then any deficiency shall be made up by an immediate make te toto inadequa : transfer transferfrom fromthe theReserve ReserveAccount Account: Account five t the ount, an terest Acc To 1. Tothe theIn Interest Account, anamount amountsuch suchtha that the balance balancein in the the Interest Interest Account five 1. interest nt of be will Date Payment BusinessDays Daysprior prior toeach eachInterest Interest Payment Date will beequal equalto tothe theinstallme installment of interestdue dueon onthe the to Business nt of Date Bondson onsaid saidInterest InterestPayment Payment Dateand andany anyinstallme installment ofinterest interestdue dueon onaa previous previousInterest Interest Payment Payment Bonds on Datewhich whichremains remains unpaid. Moneys Moneysin inthe the Interest Interest Account Account shall shallbe beused usedfor forthe thepayment payment of of interest interest on unpaid. Date the theBonds Bondsas asthe thesame samebecome becomedue. due. , an 2. To the the Principal Principal Account Account, anamount amountsuch such that that the the balance balance in in the the Principal Principal Account Account five five To 2. the equal least at shall 2007 er 1, Septemb cing commen year, each of 1 er Business Days prior to September 1 of each year, commencing September 1, 2007 shall at least equal the Septemb to prior Days Business

13 13

payment due on a principal any er 1 and Septemb such onon nds maturing Bo the on on due principal payment due the Bonds maturing such September 1 and any principal payment due on a payment principal for the used be be will Account Principal the in Moneys unpaid. remains previous September 1 which remains unpaid. Moneys in the Principal Account will used for the which 1 er Septemb previous . maturity at due become same the as Bonds such of principal payment of the principal of such Bonds as the same become due at maturity. the of payment a Sinking Fund which on er l 1 Septemb each . On Fund Tax Special the of of ion Account Redemption Account the Special Tax Fund. On each September on which a Sinking Fund Redempt of Account Principal the and Account Interest the to made been have deposits Payment is due, after the deposits have been made to the Interest Account and the Principal Account of the after due, is Payment Tax Special the of Account ion Redempt the into transfer next will Agent Fiscal the the Special Tax Fund, the Fiscal Agent will next transfer into the Redemption Account of the Special Tax Fund, Tax Special the five ion Account Redempt the inin balance the make to needed amount the Fund Tax Fund from the Special Tax Fund the amount needed to make the balance the Redemption Account five Special the from Fund ing any Outstand on due Payment Fund Sinking the to to equal er 1 1 Septemb each toto Business Days prior each September equal the Sinking Fund Payment due on any Outstanding prior Days Business inadequate are Fund Tax Special the in amounts if that, , however , provided 1; Bonds on such September 1; provided, however, that, if amounts in the Special Tax Fund are inadequate er Septemb Bonds on such from the transfer te immedia an by up made be will y deficienc any then , make the foregoing transfers, then any deficiency will be made up by an immediate transfer from the g transfers foregoin the make toto by the applied and used bebe will ion Account Redempt the inin so Reserve Account. Moneys sodeposited deposited the Redemption Account will used and applied by the Moneys . Account Reserve schedule set Payment Fund Sinking the with ce accordan in Bonds Term redeem and Fiscal Agent to call and redeem Term Bonds in accordance with the Sinking Fund Payment schedule set call to Agent Fiscal nt tbr such Term Agreeme Agent Fiscal ental Supplem any in and nt Agreeme Agent forth the Fiscal Agent Agreement and in any Supplemental Fiscal Agent Agreement for such Term Fiscal the inin forth Bonds. Bonds. Account Reserve Reserve Account of, of purpose the for solely used be will Account Reserve the Moneys the Reserve Account will be used solely for the purpose ofpaying payingthe theprincipal principal of, inin Moneys that the moneys in event the inin due when Bonds any onon interest s, and Payment Fund including Sinking Fund Payments, and interest any Bonds when due the event that the moneys in Sinking including nt therefor or insufficie are Fund Tax Special the of Account Principal the and the Interest Account and the Principal Account of the Special Tax Fund are insufficient therefor or Account Interest the Sinking a make to nt insufficie are Fund Tax Special the of ccount A moneys in theRedempt Redemption Account of the Special Tax Fund are insufficient to make a SinkingFund Fund ion the in moneys ion , the Payment when due. If If the the amounts amounts in in the the Interest Interest Account Account, the Principal Principal Account Account or or the the Redempt Redemption due. when Payment Fund including Sinking principal of, nt to Account ofthe the Special SpecialTax Tax Fund Fundare are insufficie insufficient to pay pay the the principal of, including Sinking Fund of Account Account Reserve the from Payments, orinterest intereston onany anyBonds Bondswhen whendue, due,the theFiscal FiscalAgent Agentwill willwithdraw withdraw from the Reserve Account s, or Payment Tax ion Account Redempt the or Account Principal the , fordeposit depositin inthe theInterest InterestAccount Account, the Principal Account or the Redemption Accountof ofthe theSpecial Special Tax for . y for le, moneys Fund,as asapplicab applicable, moneysnecessar necessary forsuch suchpurposes purposes. Fund, transfers ter making ount, af thdrawn from oneys are Whenever moneys arewi withdrawn fromthe theReserve ReserveAcc Account, after makingthe therequired required transfers r m Wheneve available m ro f unt o t will scal Agen nt, the t Agreeme under theF Fiscal Agent Agreement, theFi Fiscal Agent willtransfer transferto tothe the Reserve Reserve Acc Account from available iscal Agen der the un rict elects to ds which fun lable i a v a legally ther o any om any other legally available funds r fr und, oor moneys inthe the Special SpecialTax TaxF Fund, from whichthe the Dist District elects to oneys in m ount to the Reserve Acc Reserve such f o nt ou am the re o rest o t ed d nee unt o am the se, o purp apply to such purpose, the amount needed to restore the amount of such Reserve Account to the Reserve such o t apply transfer to the Reserve r o f lable i ava d eeme d be ll i w Fund Tax Special he t n i neys o M Requirement. Moneys in the Special Tax Fund will be deemed available for transfer to the Reserve uirement. Req osits he dep d to ot be ounts will t such etermines tha Account iftthe FiscalAgent Agentd determines that sucham amounts willnnot be neede needed to make make tthe deposits he Fiscal nly if ount oonly Acc ount of the ion Acc he Redempt r tthe ount o he Principal ount, tthe he Interest required to be be made made tto the Interest Acc Account, Principal Acc Account or Redemption Account of the o t equired to r the Reserve enish l rep to d e r transfer se i therw o r o Fund Tax l Specia he t n i unts o am Special Tax Fund. If If amounts in the Special Tax Fund or otherwise transferred to replenish the Reserve Special Tax Fund. will hen the ent, tthen he Reserve ount to tore the o res Account are restore the Reserve ReserveAcc Account to tthe Reserve Requirem Requirement, the District District will nadequate tto re iinadequate ount a Acc next ent in the y fully include the the am amount necessary fullyto torestore restorethe theReserve ReserveAccount Accountto to the the Reserve Reserve Requirem Requirement in the next ount necessar include maximum the maximum of extent the to 1 No. Area ment Improve within property annual Special Tax levy for property within Improvement Area No. 1 to the extent of the for levy Tax annual Special permitted Special Special Tax Tax rates. rates. permitted may, at any twithstanding, the nt no ontrary in Anything to to the the c contrary in the the Fiscal Fiscal Agent Agent Agreeme Agreement notwithstanding, the District District may, at any Anything ccount. time, substitut substitute an Alternate Alternate Reserve Reserve Account Account Security Security for for cash cash in in the the Reserve Reserve A Account. e an time, Fund Special Escrow Fund pecial Escrow S Fiscal Agent The Fiscal nt. established under, Fund is The Special is established under.the theFiscal FiscalAgent AgentAgreeme Agreement. The Agent Escrow Fund Special Escrow The Fund upon Construction Fund and Construction ion and Acquisit the to Fund Escrow Special the from ent shall make a disbursement from the Special Escrow Fund to the Acquisition upon disbursem a make shall directing the strator") "Admini (the City the of tative Represen ed Authoriz the of e receipt of a certificate of the Authorized Representative of the City (the "Administrator") directing the certificat receipt of the Fiscal , e certificat such of receipt Upon Fund. Escrow Special the from Fiscal Agent to to release funds from the Special Escrow Fund. Upon receipt of such certificate, the Fiscal release funds Fiscal Agent specified by amount specified an amount in an tion Fund, ion and ent to the disbursem Agent disbursement to the the Acquisit Acquisition and Construc Construction Fund, in by deposit the shall deposit Agent shall shall only be sentence shall preceding sentence the in to referred transfers The e. certificat written a in the Administrator in a written certificate. The transfers referred to in the preceding only be trator Adminis the

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Escrow Close Revised anyany or or Date Close Escrow Initial to the or prior on on made Business or prior to the Initial Escrow Close Date Revised Escrow Close s DayDay Busines any any on on made such draw ng any any trator requesti Adminis the of tificate r cc any and below) defined Date (as such terms are defined below) and any certificate of the Administrator requesting such draw are terms such (as Date days as of number lesser such (or days l0 least at District the by Agent Fiscal the shall be presented to the Fiscal Agent by the District at least 10 days (or such lesser number of days as to _,hall be presented made. be to transfer the for date the to prior Agent) agreed to the by the Fiscal Agent) prior to the date for the transfer to be made. Fiscal to by agreed in the Special held moneys all all of of release to the prior andand Date Delivery the the after time after Delivery Date prior to the release moneys held in the Special time anyany At At a formal cause may District the that so funds with District the provide may er Escrow Fund, the Developer may provide the District with funds so that the District may cause a formal Develop Escrow Fund, the of the s standard l appraisa the with nt consiste er, Develop the of expense , at the prepared appraisal to be prepared, at the expense of the Developer, consistent with the appraisal standards of the l to be appraisa trator If the Adminis al"). nal Apprais "Additio (the(the 1 Value No. No. ment Area Improve e the the City to determine Improvement Area 1 Value "Additional Appraisal"). If the Administrator to determin City the Additional by by ed establish Value 1 No. Area ment Improve the and al Apprais approves the Additional Appraisal and the Improvement Area No. 1 Value established the Additional al approves the Addition consistent Fund Escrow Special the from released be to are moneys al addition Appraisal indicates additional moneys are to be released from the Special Escrow Fund consistent s thatthat al indicate Apprais e ratio as described coverag Tax Special and -lien ratio ing a value-to maintain of of with City's policy maintaining a value-to-lien ratio and Special Tax coverage ratio as described policy City's thethe with Agent ibr the release Fiscal to the provided be notice written a cause will trator Adminis the below, then the Administrator will cause a written notice be provided to the Fiscal Agent for the release then below, Fund. ction Constru and ion Acquisit thethe Acquisition and Construction Fund. of amounts s to to _;famount value of any g thethe includin (not 1 Value No. ment Area Improve The Value-to-Lien Ratio. The Improvement Area No. 1 Value (not including value of any -Lien Ratio. Value-to (i) (i) times the three least at be shall Taxes) Special of t paymen the in nt delinque parcel that is then delinquent in the payment of Special Taxes) shall be at least three times the then is parcel that principal the less ing, Outstand then Bonds all of amount l principa te aggrega sum (a) the aggregate principal amount of all Bonds then Outstanding, less the principal (a)the of:of: sum the Special Escrow in in deposit on on remain to to any) (if (if ting amounts represen Bonds any amount any Bonds representing amounts any) remain deposit the Special Escrow of of amount l amount of any fixed te principa aggrega thethe (b) (b) ment, plus d disburse propose g thethe Fund following proposed disbursement, plus aggregate principal amount of any fixed followin Fund Special Taxes, plus (c) a of of levy thethe to to subject District the the in in parcels thethe on on ent liens assessment liens parcels District subject levy Special Taxes, plus (c) a assessm district bonds ity facilities commun other all all and any of of l amount te principa portion aggregate principal amount any and other community facilities district bonds aggrega thethe of of portion from special partially least at at payable ing and outstand then ent liens assessm assessment district assessment liens then outstanding and payable least partially from special /ssment district ass_ or or Bonds") equal "Prior (the District the within land of parcels on levied be to ents taxes or assessments to be levied on parcels of land within the District (the "Prior Bonds") equal taxes or assessm numerator of the fraction, a by ed multipli Bonds Prior the of amount l te principa the aggregate principal amount of the Prior Bonds multiplied by a fraction, the numerator of aggrega the to to Prior Bonds on parcels thethe for ents levied assessm special and taxes special of of amount the which the amount special taxes and special assessments levied for Prior Bonds on parcels is is which of special taxes and amount total the is is which ator of of denomin the and District, the within land within the District, and the denominator which the total amount of special taxes and land of of which the special against land of parcels all on Bonds Prior the for levied ents assessm special assessments levied for the Prior Bonds on all parcels of land against which the special special fraction to be determined (such Bonds Prior the pay to to levied ents areare assessm special and taxes and special assessments levied pay the Prior Bonds (such fraction to be determined taxes maximum which inin year the in in levied be be could which taxes m special maximu based upon the maximum special taxes which could levied the year which maximum the upon based recent most the from tion informa upon based occurs), Bonds Prior the onon service annual debt service the Prior Bonds occurs), based upon information from the most recent debt annual Year. e Fiscal availabl available Fiscal Year. those parcels g only (includin Value 11 No. ment Area Improve The TeSt. (ii) Minimu Minimum Value Test. The Improvement Area No. Value (including only those parcels m Value (ii) in the Rate defined as ," Property loped "Undeve ting constitu then District the in of real property in the District then constituting "Undeveloped Property," as defined in the Rate of real property two and least at be shall 1), No. Area ment Improve to relating nment Apportio ofof and Method Apportionment relating to Improvement Area No. 1), shall be at least two and Method and (c) of (i) above which and (b) (a), clauses in in to to referred amounts the ofof sum the (a) times one-half times (a) the sum the amounts referred clauses (a), (b) and (c) of (i) above which one-half e to the parcels of allocabl bebe nt to to consulta tax special s District' the byby ed aredetermin determined the District's special tax consultant allocable to the parcels of are nt shall allocate to consulta tax special the above (a) for that g assumin Property oped Undeveloped Property assuming that for (a) above the special tax consultant shall allocate to Undevel ing Bonds for which the Outstand the ofof l amount principa the of of portion that ed Property Developed Property that portion the principal amount the Outstanding Bonds for which the Develop Tax in the then Fiscal d Special te Assigne aggrega the to to equal is is service debt m annual maximum annual debt service equal the aggregate Assigned Special Tax in the then Fiscal maximu ped ed Special the (as ed Property Yearfor forall allthen thenDevelop Developed Property (as theterms terms"Assign "Assigned SpecialTax" Tax"and and "Develo "Developed Year into taking not e otherwis and nment), Apportio of Method and Rate the inin Property" are defined the Rate and Method of Apportionment), and otherwise not taking into defined " are Property in deposit on remain toto any) (if ting amounts represen Bonds any ofof l amount account the principal amount any Bonds representing amounts (if any) remain on deposit in principa the account ment). d disburse propose g the followin theSpecial Special EscrowFund Fund following the proposed disbursement). Escrow the in each Fiscal m Special The e. Coverag (iii) Special SpecialTax Tax Coverage. Themaximu maximum SpecialTaxes Taxesthat thatmay maybe belevied levied in each Fiscal (iii) at least one shall Taxes t of paymen the nt inin delinque then not are that Yearon onparcels parcels that are not then delinquent the payment ofSpecial Special Taxes shallbe be at least one Year Rate and Debt m Annual Maximu then the of (110%) hundred ten percent (110%) of the then Maximum Annual DebtService, Service,based basedupon uponthe the Rate and percent ten hundred 1. No. ment Area Taxes Special nment of Methodof of Apportionment of Special Taxesof ofImprove Improvement Area No. 1. Apportio Method

15 15

r may Administrato the (iii), and (ii) (i), clauses preceding the making the determinations under the preceding clauses (i), (ii) and (iii), the Administrator may ns under determinatio the making InIn District. the by engaged consultant tax conclusively rely on a certificate of a special tax consultant engaged by the District. special a conclusively rely on a certificate of make shall Agent the Close Onand and afterJuly July15, 15,2007 2007(the (the"Initial "InitialEscrow Escrow CloseDate"), Date"), theFiscal Fiscal Agent shall makeno no after On Escrow "Initial (the 2007 1, September on and Fund, further disbursements from the Special Escrow Fund, and on September 1, 2007 (the "Initial Escrow Escrow Special the from ts further disbursemen Bonds the redeem toto Fund Escrow the in use shall Redemption Date"), the Fiscal Agent shall useamounts amounts in theSpecial Special Escrow Fund redeem the Bonds Agent Fiscal the Date"), Redemption above. described as Date, Escrow the maximum extent possible onthe theInitial Initial EscrowRedemption Redemption Date, as described above. on possible extent maximum the toto Date Close Escrow Initial Notwithstanding the foregoing, the Initial Escrow Close Date(and (andany anyRevised RevisedEscrow EscrowClose Close the foregoing, the ing Notwithstand Revised any (and Date Redemption Escrow Initial the and Dateestablished established pursuant tothis thisparagraph) paragraph) and the Initial Escrow Redemption Date (and any Revised to pursuant Date upon time to time pursuant Escrow Redemption Dateestablished established pursuantto tothis thisparagraph) paragraph)may maybe beextended extendedfrom from time to time upon Date Redemption Escrow (or, Date Close .Escrow receipt by theFiscal FiscalAgent, Agent,not notlater laterthan thanone oneBusiness BusinessDay Dayprior priorto tothe theInitial Initial .Escrow Close Date (or,ifif the by receipt Date), Close extended pursuant theterms termsof ofthis thisparagraph, paragraph,the thethen thenapplicable applicableRevised RevisedEscrow Escrow Close Date),of ofaa the toto pursuant extended Special the in amounts which after date new the WrittenRequest Request requestingsuch suchextension extensionand andstating stating(a) (a) the new date after which amounts in the Special requesting Written t pursuant Escrow Fundwill willno nolonger longerbe be subject subjectto to disbursemen disbursement pursuantto tothe the Fiscal Fiscal Agent Agent Agreement Agreement(the (the Fund Escrow the to prior days 90 than more not but days 45 least at be shall date which "Revised Escrow Close Date") which date shall be at least 45 days but not more than 90 days prior to the Date") Close "Revised Escrow the (b) and (b), clause following the in described as Bonds the redeem datesuch suchamounts amounts areto tobe beused usedto to redeem the Bonds as described in the following clause (b), and (b) the are date newdate dateon onwhich whichthe theBonds Bondsare areto to be be subject subject to to mandatory mandatory redemption redemptionfrom fromthe theamounts amountsheld heldin inthe the new Payment Interest an be shall date which Date"), Redemption Escrow Special Escrow Fund (the "Revised Escrow Redemption Date"), which date shall be an Interest Payment "Revised (the Fund Special Escrow extended beyond Redemption Date Escrow Redemption Revised Escrow Date. In Date be be extended beyond the the earliest earliest date date the Revised will the event will no event In no Date. Bonds the which on Date Delivery ofofthe the ofof following thethird thirdanniversary anniversary theissuance issuance the Delivery Date on which the Bondsmay may be be the following

redeemedpursuant pursuantto tothe theterms termsthereof. thereof. redeemed


ts Onor or after afterany any Revised RevisedEscrow EscrowClose CloseDate Datethe theFiscal FiscalAgent Agentshall shallmake makeno nofurther furtherdisbursemen disbursements On shall Agent Fiscal the Date Redemption fromthe theSpecial SpecialEscrow EscrowFund Fundand andon on the the Revised Revised Escrow Escrow Redemption Date the Fiscal Agent shall use use from amountsin inthe the Special Special Escrow EscrowFund Fundto toredeem redeemthe theBonds Bonds to tothe themaximum maximumextent extentpossible possibleon onthe theRevised Revised amounts

EscrowRedemption Redemption Date. Date. Escrow Rate and andMethod Methodof ofApportionm Apportionment of Special Special Taxes Taxes ent of Rate
This summary . This Thefollowing followingis isaassummary ofcertain certainprovisions provisionsof ofthe theRate Rateand andMethod Method. summary does does ummary of The hereto attached Method and Rate the to made be should reference not purport to to be be comprehensi comprehensive and reference should be made to the Rate and Method attached hereto ve and ot purport n as Appendix AppendixA A. terms not not defined defined in in this this section section have have the the meanings meanings set setforth forth in in the the Rate Rate capitalized terms All capitalized . All as . and and Method Method.

Each Fiscal Fiscal Year, Year, commencing commencing with with the the 2006-2007 2006-2007 Fiscal Fiscal Year, Year, all all Parcels Parcels of of Taxable Taxable Property Property Each either as classified and Area t Improvemen applicable Improvement Area and classified as either within the the District District shall shall be be categorized into the the applicable categorized into within Association Owner's Property Owner's Association /or Property Developed Property, Property, Undeveloped UndevelopedProperty, Property,Public Public Property Property and and/or Developed Taxes Special of levy the to subject be shall and Property Property that is not Exempt Property and shall be subject to the levy of Special Taxes in in accordance accordance with with Exempt not Property that is OF METHOD AND RATE A "APPENDIX See nt. Apportionme of Apportionment. the Rate See "APPENDIX A RATE AND METHOD OF Method of and Method Rate and the classified be further shall Property Developed APPORTIONMENT OF SPECIAL SPECIALTAXES." TAXES." Parcels Parcels of of Developed Property shall further be classified OF MENT APPORTION shall further Property shall Residential Property of Residential Parcel of A Property. as Residential Property or Non-Residential Property. A Parcel further be be tial Non-Residen or Property as Residential shall Property Family Single Property. Residential Multifamily or classified as as Single Single Family Family Property Property or Multifamily Residential Property. Single Family Property shall be be classified the further categorized categorized based based on on the the Residential Residential Floor Floor Area Area for for such such Parcel, Parcel, which which is is determined determined based based on on the further zones two zones are two square footage footage shown shown on on the the building building permit permitfor for such such Single Single Family FamilyProperty. Property. There There are square and t Area established within within Improvemen Improvement AreaNo. No. 1 1and and such such zones zones are are taxed taxed at at different different rates rates ("Zone ("Zone A" A" and established "Zone B"). "Zone B").
levy following Fiscal Commencing with Fiscal Fiscal Year Year 2006-2007 2006-2007 and and for for each each following Fiscal Year, Year, the the City City shall shall levy Commencing with Special of Special amount of the amount until the 1 until No. 1 Area No. Improvement Area within Improvement Property within the Taxable Property all Taxable on all Tax on Special Tax the Special following the with accordance in 1 No. Area t Improvemen for Taxes equals the Tax Requirement Requirement for Improvement Area No. 1 in accordance with the following Special Tax the Special Taxes equals steps: steps:

16 16

First: The Special Tax shall be levied on each Parcel of Developed Property at up to 100% of the applicable Assigned Special Tax rate as needed to satisfy the Special Tax Requirement for Improvement Area 1, Zone A and Zone B; Second: If additional moneys are needed to satisfy the Special Tax Requirement for Improvement Area No. 1, Zone A and Zone B, after the first step has been completed, the Special Tax shall be levied Proportionately on each Parcel of Undeveloped Property within Improvement Area No. 1, Zone A and Zone B at up to 100% of the Maximum Special Tax for Undeveloped Property; and Third: If additional moneys are needed to satisfy the Special Tax Requirement for the Bonds after the first two steps have been completed, then for each Assessor's Parcel of Developed Property whose Assigned Special Tax is the Backup Special Tax shall be increased Proportionately from the Assigned Special Tax up to 100% of the Backup Special Tax as needed to satisfy the Special Tax Requirement. No Special Taxes levied on property of the Bonds. Covenant for Superior Court Foreclosure within Improvement Area No. 2 are security for repayment

In the event of a delinquency in the payment of any installment of Special Taxes, the District is authorized by the Act to order institution of an action in the Superior Courts of the State to foreclose any lien therefor. In such action, the real property subject to the Special Taxes may be sold at a judicial foreclosure sale. The ability of the District to foreclose the lien of delinquent unpaid Special Taxes may be limited in certain instances and may require prior consent of the property owner in the event the property is owned by or in receivership of the Federal Deposit Insurance Corporation (the "FDIC") or other similar federal agencies. See "SPECIAL RISK FACTORS - Bankruptcy and Foreclosure" and "SPECIAL RISK FACTORS - Tax Delinquencies." Such judicial foreclosure proceedings are not mandatory. However, in the Fiscal Agent Agreement, the District has covenanted for the benefit of the Owners of the Bonds that it (i) will commence judicial foreclosure proceedings against all parcels owned by a property owner where the aggregate delinquent Special Taxes on such parcels is greater than $5,000 by the October 1 following the close of each Fiscal Year in which such Special Taxes were due and (ii) will commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied for such Fiscal Year, and (iii) will diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided, however, that the District may elect to defer foreclosure proceedings on any parcel so long as the amount in the Reserve Account of the Special Tax Fund is at least equal to the Reserve Requirement and such delinquencies will not cause moneys in the Reserve Account to be withdrawn on the next succeeding Interest Payment Date. The District may, but is not obligated to, advance funds from any source of legally available funds in order to maintain the Reserve Account of the Special Tax Fund at the Reserve Requirement. There could be a default or a delay in payments to the owners of the Bonds pending prosecution of foreclosure proceedings and receipt by the District of foreclosure sale proceeds, if any, and subsequent transfer of those proceeds to the City. However, up to the maximum amount permitted under the applicable Rate and Method, the District may adjust the Special Taxes levied on all property within the District to provide the amount required to pay debt service on the Bonds. Under current law, a judgment debtor (property owner) has at least 140 days from the date of service of the notice of levy in which to redeem the property to be sold. If a judgment debtor fails to redeem and the property is sold, his only remedy is an action to set aside the sale, which must be brought within 90 days of the date of sale. If, as a result of such an action a foreclosure sale is set aside, the

17

judgment is revived, the judgment creditor is entitled to interest on the revised judgment and any liens extinguished by the sale are revised as if the sale had not been made (Section 701.680 of the Code of Civil Procedure of the State of California). No Obligation of the City Upon Delinquency

The City is under no obligation to transfer any funds of the City into the Special Tax Fund or any other funds or accounts under the Fiscal Agent Agreement for the payment of the principal of or interest on the Bonds if a delinquency occurs in the payment of any Special Taxes. See "SECURITY FOR THE BONDS - Covenant for Superior Court Foreclosure" for a discussion of the District's obligation to foreclose Special Tax liens upon delinquencies. Direct and Overlapping Debt

Set forth below is the existing authorized indebtedness payable from taxes and assessments that may be levied on property within Improvement Area No. 1. In addition, other public agencies may issue additional indebtedness at any time, without the consent or approval of the City or the District.

18

INDIO OF INDIO CITY CITY OF COMMUNITY FACILITIES DISTRICT NO. (TERRA LAGO) LAGO) 2004-3 (TERRA . 2004-3 ISTRICT NO FACILITIES D COMMUNITY (IMPROVEMENT AREA NO. 1) NO. AREA (IMPROVEMENT DIRECT OVERLAPPING DEBT DEBT AND OVERLAPPING DIRECT AND

2004-05 Local Secured Secured Assessed Assessed Valuation: Valuation: $24,144,014 $24,144,014 2004-05 Local DIRECT AND OVERLAPPING OVERLAPPING TAX TAX AND ASSESSMENT DEBT: % Applicable % Applicable DEBT: AND ASSESSMENT DIRECT AND Desert Community College District 0.056% 0.056% Desert Community College District Desert Sands Unified School District 0.102 0.102 Desert Sands Unified School District Desert Sands Sands Unified Unified School School District Lease Tax Tax Obligations 0.240 0.240 Obligations District Lease Desert City of Indio Indio Assessment Assessment District District No. 2.713 2.713 90-1 No. 90-1 City of City of Indio Community Facilities District No. 2004-3 100. 100. 2004-3 No. District Facilities Community City of Indio Coachella Valley Recreation and Park Park Reassessment 0.828 0.828 01-1 No. 01-1 District No. Reassessment District ation and lley Recre Coachella Va TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT DEBT TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT OVERLAPPING GENERAL GENERAL FUND FUND OBLIGATION DEBT: OBLIGATION DEBT: OVERLAPPING Riverside County General Fund Obligations Riverside County General Fund Obligations Riverside County of Education Education Certificates of Participation Participation Certificates of Board of County Board Riverside Desert Sands Unified School District Certificates of Participation Participation of Certificates District School Desert Sands Unified City of Indio Indio Certificates Participation of Participation Certificates of ty of Ci Coachella Valley County Water District, I.D. I.D. No. No. 71 Participation Certificates of Participation 71 Certificates Coachella Valley County Water District, Coachella Valley Recreation and Park District Certificates of Participation Coachella Valley Recreation and Park District Certificates of Participation TOTAL GROSS GROSS OVERLAPPING OVERLAPPING GENERAL GENERAL FUND FUND OBLIGA OBLIGATION DEBT TION DEBT TOTAL Less: Riverside County self-supporting obligations Less: Riverside County self-supporting obligations TOTAL NET NET OVERLAPPING OVERLAPPING GENERAL GENERAL FUND OBLIGATION DEBT DEBT FUND OBLIGATION TOTAL GROSS COMBINED COMBINED TOTAL DEBT T TOTAL DEB GROSS NET COMBINED TOTAL DEBT NET COMBINED TOTAL DEBT 0.023% 0.023% 0.023 0.023 0.240 0.240 1.010 1.010 0.100 0.100 0.202 0.202 Debt 8/1/05 8/1/05 Debt $ 38,703 38,703 139,709 139,709 53,676 53,676 52,632 52,632 - (1) 35,935 35,935 $320,655 $320,655

$142,910 $142,910 2,809 2,809 35,436 35,436 35,754 35,754 9,530 9,530 5,383 5,383 $231,822 $231,822 4,722 4,722 $227,100 $227,100 $552,477 (2) $552,477 (2) $547,755 $547,755

(I) sold. to be sold. bonds to Act bonds Mello-Roos Act Excludes Mello-Roos ( 1) Excludes (2) Excludes tax and revenue anticipation notes, allocation and tax allocation revenue and mortgage revenue revenue, mortgage enterprise revenue, (2) Excludes tax and revenue anticipation notes, enterprise bonds and non-bonded capital obligations. lease obligations. capital lease and non-bonded bonds
Valuation: Ratios to to 2004-05 2004-05 Assessed Assessed Valuation: Ratios o % - cy Direct Debt ebt ........................................................................... Direct D Total Direct and and Overlapping Overlapping Tax Tax and and Assessment Assessment Debt 1.33% Debt ....... 1.33% Total Direct Gross Combined Total Debt 2.29% 2.29% .......... ......................................... Debt Total Gross Combined 2.27% Net Combined Total 2.27% Debt ....................................................... otal Debt Combined T Net

STATE SCHOO SCHOOL BUILDING AID AID REPAYABLE REPAYABLE AS ASOF OF 6 6/30/05: /30/05:$0$0 L BUILDING STATE Source: California Statistics, Inc. Municipal Statistics, California Municipal Source:

19

Tax tive Estimated Effec Effective Tax Rate Rate Estimated

Set for developed sample developed a sample tbr a obligations tax obligations 2006/07 tax year 2006/07 fiscal year estimated fiscal the estimated is the below is forth below Set forth 1. property within Zone A and Zone B of Improvement Area No. 1. No. Area within Zone A and Zone B of Improvement property ESTIMATED FISCAL YEAR OBLIGATION TAX OBLIGATION 2006/07 TAX YEAR 2006/07 FISCAL D ESTIMATE PROPERTY SAMPLE DEVELOPED A SAMPLE FOR A DEVELOPED PROPERTY FOR (IMPROVEMENT AREA NO. NO. 1, I, ZONE A) ZONE A) AREA VEMENT (IMPRO Projected Amount Prqiected Amount Projected Sales Price (Based on Feet) Square Feet) 1,800 Square of 1,800 Size of Home Size a Home on a rice (Based s P jected Sale Pro Ad Valorem Property Taxes: Taxes: lorem Property Ad Va Basic Levy Levy (1.00%) (1.00%) Basic Desert Unified School District G.O. (0.09581%) Bond (0.09581%) G.O. Bond School District Sands Unified ert Sands Des Coachella Valley Water District Debt Service (0.02080%) Coachella Valley Water District Debt Service (0.02080%) Desert College District District Debt (0.01994%) .01994%) Service (0 Debt Service Community College rt Community Dese Total General Property Taxes (1.13655%) Total General Property Taxes (1.13655%) Assessment, Special Taxes Taxes & & Parcel Charges: Parcel Charges: , Special Assessment Coachella Valley Recreation and Park District Reassessment 01-1 - Estimate Estimate No. 01-1 District No. eassessment District District R Park and ecreation R Coachella Valley Landscaping & Lighting District Estimate(1) Landscaping & Lighting District - Estimate (1) City No. 2004-3 Area No. l) No. 1) (Improvement Area 2004-3 (Improvement CFD No. Indio CFD of Indio City of City of No. 2004 2004-1(2) -l (2) CFD No. Indio CFD of Indio City Total Assessments Assessments & & Parcel Charges Parcel Charges Total Projected Total Property Tax Tax Total Property Projected Projected Effective Tax Rate ax Rate Projected Effective T
(2)

$351,500.00 $351,500.00

3,515.00 3,515.00 336.77 336.77 73.11 .11 73 70.09 70.09 3,994.97 3,994.97

$ $

54.00 54.00 115.00 115.00 2,467.83 2,467.83 367.20 367.20 3,004.03 3,004.03

6,999.00 6,999.00 2.00% 2.00%

_) (2)

Anticipated lig lighting and landscape to service the development. pment, he develo service t district to landscape district hting and Anticipated Special taxes for the City of Indio CFD No. 2004-1 (Police, Fire and Paramedic increase annually annually by by 2%. Services) increase Paramedic Services) ire and Special taxes for the City of Indio CFD No. 2004-1 (Police, F

Associates. Source: Webb Associates. A. Webb Albert A. Source: Albert

20 20

ESTIMATED FISCAL OBLIGATION TAX OBLIGATION 2006/07 TAX YEAR 2006/07 FISCAL YEAR ESTIMATED FOR DEVELOPED PROPERTY PROPERTY DEVELOPED SAMPLE A SAMPLE OR A F (IMPROVEMENT AREA 1, ZONE B) B) 1, ZONE AREA (IMPROVEMENT Projected Amount Proiected Amount Projected Sales Price (Ba (Based on a a Home Home Size Size of Square Feet) Feet) 1,800 Square of 1,800 sed on s Price Projected Sale Ad Valorem Valorem Proper Property Taxes: ty Taxes: Ad Basic Levy ( (1.00%) 1.00%) sic Levy Ba Desert Sands Unified Sc School District G. G.O. (0.09581%) Bond (0.09581%) O. Bond hool District s Unified esert Sand D Coachella Valley Water District Debt Service (0.02080%) 2080%) 0 . 0 ( ice v Ser Debt t ric t Dis er Coachella Valley Wat Desert Community College District Debt Service (0.01994%) 0.01994%) Desert Community College District Debt Service ( Total G General Property Taxes (1.13655%) axes (1.13655%) roperty T eneral P Total Assessment, Special Taxes & & Pa Parcel Charges: rcel Charges: pecial Taxes sessment, S As Coachella Valley Recreation and Park District Reassessment D District No. 01-1 Estimate timate 1-1 - Es o. 0 istrict N trict Reassessment Dis Park d an n tio Coachella Valley Recrea Landscaping & Lighting District Estimate()) ) 0 e t ima t Es t stric i D Landscaping & Lighting City o of Indio CFD N No. 2004-3 (Improvement Area N No. 1) o. 1) ovement Area 004-3 (Impr o. 2 dio CFD f In City City of Indio CFD No. 2004-1(2) City of Indio CFD No. 2004-1 (2) Total Assessments & Pa Parcel Charges rcel Charges ssessments & Total A Projected Total Property Tax roperty Tax al P rojected Tot P Projected Effective Tax R Rate ate Projected Effective Tax
_J) _2_
(2) (i)

$431,500.00 $431,500.00

4,315.00 4,315.00 413.42 413.42 89.75 89.75 86.04 86.04 4,904.21 4,904.21

$ $

54.00 54.00 I 15.00 115.00 3,158.59 3,158.59 367.20 367.20 3,694.79 3,694.79

8,599.00 8,599.00 .00% 2 2.00%

Anticipated lighting and l landscape district to service development. the development. service the trict to andscape dis ghting and ticipated li An Special taxes for the City of Indio CFD No. 2004-1 (Police, Fire and Pa Paramedic Services) annually by 2%. 2%. lly by increase annua ices) increase ramedic Serv ire and Special taxes for the City oflndio CFD No. 2004-1 (Police, F

Associates. Webb Associates. Albert A. Webb Source: Albert Source:

Appraisal Appraisal The Bonds are secured by Special Taxes which may include amounts realized upon foreclosure The Bonds are secured by Special Taxes which may include amounts realized upon foreclosure sale of of delinquent delinquentpa parcels. Therefore, ability of tthe District to meet meet debt service on on t the may Bonds may he Bonds debt service rict to he Dist bility of he a Therefore, tthe rcels. sale depend on the ability of delinquent parc parcels to generate sufficient proceeds upon foreclosure sale to pay pay to sale foreclosure upon proceeds sufficient els to generate depend on the ability of delinquent delinquent Special Taxes. The City has commissioned First American Commercial Real Estate Services, , Services state E eal R Commercial American First delinquent Special Taxes. The City has commissioned Santa Ana, California (t (the "Appraiser") to perform an appraisal (the "Appraisal") of the property values of the property values to perform an appraisal (the "Appraisal") he "Appraiser") Santa Ana, California of parcels within tthe District. See "APPENDIX D -APPRAISAL REPORT" hereto. was as Appraisal w The Appraisal . The ereto h ORT" P RE AISAL R APP -D APPENDIX " e e S . t c of parcels within he Distri prepared with a date of value of June 17, 2005. In the opinion of the Appraiser, the discounted "bulkulk"b discounted e h t er, s ai r App e h t of opinion e h t In . 5 00 2 17, June of value prepared with a date of sale" value of of the within Improvement Area No. the date of of value value stated stated in in the the e date ofofth asas . 1,1, No Area ithin Improvement w properties the properties sale" value Appraisal, iis $71,000,000, which is 3 times the aggregate principal amount of Bonds issued (excluding which is 3 times the aggregate principal amount of Bonds issued (excluding s $71,000,000, Appraisal, EPORT" R the portion to b be deposited in tthe Special Escrow Fund). See " "APPENDIX D --- APPRAISAL REPORT" APPRAISAL D APPENDIX ). See row Fund ecial Esc he Sp sited in e depo rtion to he po t for description of the valuationmet methodology. The Appraiser's value estimates absorption certain absorption reflect certain estimates reflect value 's e Appraiser Th hodology. of the valuation for description assumptions set forth in the Appraisal including the sale of finished properties to "end users." In addition, addition, In s." r e us assumptions set forth in the Appraisal including the sale of finished properties to "end the Appraiser's estimate refers to the sale of lots to developers or investors who will ultimately sell off to the Appraiser's estimate refers to the sale of lots to developers or investors who will ultimately sell off to "end users." costs by represent the costs he costs represent t Developer Master Developer the Master y the furnished b costs furnished development land development the land Also, the rs." Also, end use " estimated at the time of the Appraisal for developing the tract within Improvement Area No. 1. There can can ere Th I. . No Area Improvement in h wit tract e h estimated at the time of the Appraisal for developing t be no assurance that property values set forth in the Appraisal will not decrease, or that at any time the be no assurance that property values set forth in the Appraisal will not decrease, or that at any time the amount that could be realized upon sale of a particular parcel in a foreclosure sale for nonpayment of of sale for nonpayment amount that could be realized upon sale of a particular parcel in a foreclosure Special Taxes will equal that parcel's appraised value. Special Taxes will equal that parcel's appraised value.

21 21

Maximum Special Special Tax Tax Coverage Coverage Maximum The f following table sets sets forth taxes per per undeveloped taxes and undeveloped tax and developed tax estimated developed of estimated summary of a summary forth a ollowing table The Developer in Improvement Area No. 1 for the years 2006 through 2012. Developer in Improvement Area No. ! for the years 2006 through 2012. SUMMARY DEVELOPED TAX AND AND TAX EVELOPED ESTIMATED D OF ESTIMATED SUMMARY OF UNDEVELOPED TAXES PER DEVELOPER R DEVELOPER TAXES PE NDEVELOPED U COMMUNITY FACILITIES DISTRICT NO. (TERRA LAGO) LAGO) 2004-3 (TERRA . 2004-3 DISTRICT NO ACILITIES F COMMUNITY (IMPROVEMENT AREA NO. 1) 1) EA NO. AR (IMPROVEMENT Year Year Ending Ending Sept. 1
2006 2006

Estimated Estimated Developed Developed Tax Tax $704,300 $704,300 1,518,894 1,518,894 1,789,873 1,789,873 1,930,844 1,930,844 1,950,152 1,950,152 1,969,654 1,969,654

Estimated Undeveloped Undeveloped Taxes Taxes Estimated Woodside Woodside $194,681 $194,681 Lennar Lennar $354,125 $354,125 Ryland Ryland $244,705 $244,705 132,403 132,403 17,830 17,830 -

Ashbrook Ashbrook $376,248 $376,248 241,502 241,502 104,023 104,023


-

Total tal To $1,169,758 $1,169,758 373,905 373,905 121,854 121,854 -

Total Total ted Estima Estimated Taxes Taxes

2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012

$1,874,058 $1,874,058 1,892,799 1,892,799 1,911,727 1,911,727 1,930,844 1,930,844 1,950,152 1,950,152 1,969,654 1,969,654

Source: Special Consultant. Tax Consultant. Special Tax Source: The following tables show show the the debt on the 100% assuming 100% Bonds assuming the Bonds achieved on coverage achieved service coverage debt service following tables The buildout, with the Special Tax levied at the maximum amount permitted by the Rate and Method. Method. and Rate the by permitted buildout, with the Special Tax levied at the maximum amount

22

SPECIAL COMMUNITY

TAXES AND DEBT SERVICE

FACILITIES DISTRICT NO. 2004-3 (TERRA LAGO) (IMPROVEMENT AREA NO. 1)

Estimated Assigned Special Taxes 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 $1,874,058 1,892,799 1,911,727 1,930,844 1,950,152 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654 1,969,654

Admin. Costs $(35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000) (35,000)

Estimated Net Taxes $1,839,058 1,857,799 1,876,727 1,895,844 1,915,152 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654 1,934,654

Debt Service $1,668,963 1,686,065 1,701,168 1,718,978 1,739,570 1,758,080 1,754,190 1,753,955 1,757,613 1,754,250 1,754,063 1,756,883 1,757,425 1,755,965 1,757,138 1,755,245 1,756,345 1,755,188 1,756,773 1,755,843 1,756,465 1,754_280 1,754 288 1,756 230 1,754 855 1,754 558 1,755 655 1,757 890 1,756 005

Coverage 110.2% 110.2 110.3 110.3 110.1 110.0 110.3 110.3 110.1 110.3 110.3 110.1 110.1 110.2 110.1 110.2 110.2 110.2 110.1 110.2 110.1 110.3 110.3 110.2 110.2 110.3 110.2 110.1 110.2

Source: Special Tax Consultant and Underwriter. No assurance can be given that any of the foregoing ratios can or will be maintained during the period of time that the Bonds are Outstanding. The City and the District have no control over the amount additional indebtedness that may be issued in the future by other public agencies, the payment of which secured by the levy of a tax or an assessment, whether on a parity with or subordinate to the Special Taxes. See "SPECIAL RISK FACTORS - Appraised Value; Land Value."

23

ITY THE C THE CITY

The City is located approximately 120 Valley, Coachella Valley, the Coachella in the Angeles in Los Angeles of Los east of miles east 120 miles The City is located approximately Its surrounded by the San Jacinto Mountains to the east and the Santa Rosa Mountains to the south. Its south. the to Mountains Rosa Santa the and surrounded by the San Jacinto Mountains to the east neighboring communities are La Quinta to the west, unincorporated areas of Riverside County to the areas of Riverside County to the neighboring communities are La Quinta to the west, unincorporated south, the City of Coachella to the east and unincorporated Riverside County landto tothe the north. north. In In 1893, 1893, land County Riverside south, the City of Coachella to the east and unincorporated Indio became one of 12 townships in the County of Riverside and was incorporated as a general law city city law general a as Indio became one of 12 townships in the County of Riverside and was incorporated in 1930 with a council-manager form of municipal government. The City Council is composed of The City Council is composed of a form of municipal government. in 1930 with a council-manager Mayor and four members elected bi-annually at large to four-year alternating terms with the mayor Mayor and four members elected bi-annually at large to four-year alternating terms with the mayor rotating on an annual basis. Positions of City Manager and City Attorney are filled by appointments of rotating on an annual basis. Positions of City Manager and City Attorney are filled by appointments of herein. the City Council. INFORMATION" herein. INFORMATION" SUPPLEMENTAL INDIO SUPPLEMENTAL OF INDIO CITY OF -- CITY B -"APPENDIX B See "APPENDIX the City Council. See
ISTRICT THE THE D DISTRICT

On May May 18, 18, 2 2005, the City a Resolution community a community form a to form Intention to of Intention Resolution of adopted a Council adopted City Council 005, the On facilities district district under under the the Act, Act, to to levy levy a a special special tax tax and and to incur bonded indebtedness for the the purpose purpose of of for indebtedness bonded incur to facilities financing the improvements. After conducting a noticed public hearing, on July 20, 2005, the City City the 2005, 20, After conducting a noticed public hearing, on July financing the improvements. Council adopted the the Resolution Resolution of of Formation, Formation, which established the Improvement of Improvement (consisting of District (consisting the District which established Council adopted Area No. 1 and Improvement Area No. 2) and set forth the Rate and Method of Apportionment for the the for Apportionment of Method and Rate the forth set and 2) No. Area Area No. 1 and Improvement levy and collection of Special Special Taxes. Taxes. collection of levy and On July 20, 20, 2005, 2005, an an election election was Improvement Area Area No. No. 1 in which landowners the landowners which the within Improvement held within was held On July exceed to not eligible to vote unanimously approved the incurrence of bonded indebtedness in an amount not to exceed amount eligible to vote unanimously approved the incurrence of bonded indebtedness in an $30,000,000 and the levy of the Special Tax within Improvement Area No. 1. The Bonds are secured by $30,000,000 and the levy of the Special Tax within Improvement Area No. 1. The Bonds are secured by Special Taxes payable by the property owners within Improvement Area No. 1 only and not Improvement Special Taxes payable by the property owners within Improvement Area No. 1 only and not Improvement No. 2. Area No. Area The District District expects expects to to issue issue bonds bonds iin the the proceeds proceeds of of which be used finance used to finance will be which will future, the he future, n t The certain public public facilities facilities in in Improx_ement Improvement Area Area No. No. 2 2 and and which, which, when issued, will be secured by Special when issued, will be secured by Special certain Taxes on taxable taxable parcels parcels within within the the Improvement Area No. No. 2. 2. Improvement Area levied on Taxes levied The District consists of approximately 364.96 gross acres known as the Terra Lago comprising The District consists of approximately 364.96 gross acres known as the Terra Lago comprising two Improvement Areas ImprovementArea Area No. No.11 consists 174.80 acres, 174.80 acres, approximately of approximately consists of - Improvement Areas two Improvement approximately 135.75 acres. of which are slated for residential development and 39.05 acres of which are 135.75 acres, of which are slated for residential development and 39.05 acres of which are approximately open space, Improvement Area Area No. No. 2 190.16 acres of of 173.76 acres acres, 173.76 190.16 acres, approximately of approximately consists of which consists 2 which and Improvement space, and open which are slated for residential development and 16.4 acres of which are open space. At buildout, it is is it buildout, At space. open are which of acres which are slated for residential development and 16.4 anticipated that Improvement Area No. 1 will contain 635 residential dwelling units and Improvement anticipated that Improvement Area No. 1 will contain 635 residential dwelling units and Improvement Area No. units. See for further for further DEVELOPMENT" "THE DEVELOPMENT" See "THE dwelling units. residential dwelling 849 residential contain 849 will contain 2 will No. 2 Area information regarding the Terra Lago housing community. The Bonds are being issued to finance the e the c finan to issued being are Bonds The information regarding the Terra Lago housing community. acquisition of public improvements serving properties within Improvement Area No. 1 only and not Area No. 1 only and not serving properties within Improvement acquisition of public improvements Improvement Area Area No. No. 2. "THE FINANCING FINANCING PLAN" PLAN" herein. herein. See "THE 2. See Improvement
T THE DEVELOPMENT THE DEVELOPMEN

Unpaid Special Taxes Taxes do do not not constitute constitute a a personal personal indebtedness indebtedness of of the the Master Master Developer Developer or or the the Unpaid Special Developers (as (as each each such such term term is is defined defined herein), herein), their their affiliates affiliates or or any any subsequent subsequent owners owners of of the parcels parcels the Developers within Improvement Area No. 1 and neither the Master Developer nor the Developers (as defined below) within Improvement Area No. 1 and neither the Master Developer nor the Developers (as defined below) have made any enforceable commitment to pay the principal of or interest on the Bonds or to support have made any enforceable commitment to pay the principal of or interest on the Bonds or to support payment of the Bonds in any manner. There is no assurance that the Developers have or any subsequent payment of the Bonds in any manner. There is no assurance that the Developers have or any subsequent
24 24

choose will , they abifity thethe have if they , even that or or Taxes Special thethe owners will have ability to pay Special Taxes that, even if they have ability, they will choose to pay ability thethe have s will owner legally be cannot and due when Taxes Special the _ m p to not elect may to pay such taxes. An owner may elect not to pay the Special Taxes when due and cannot be legally owner An to pay such taxes. seek to to time any at at ability thethe have will Bondowner r any nonor compelled to do Neither the District any Bondowner will have ability any time seek District the Neither so. so. to do compelled Tax Special any of District thethe District of any Special W within of proper owners from Developers any subsequent owners of property within Tax subsequent any s or or Developer thethe ment from paypayment owner subsequent a becomes who control to v ( abili the or , Bonds or any principal or interest due on the Bonds, or the ability to control who becomes a subsequent owner the on due t s intere or any principal or SPECIAL RISK " and BONDS THE FOR SECURITY See any property within District. See ""SECURITY FOR THE BONDS" and""SPECIAL RISK trict. Dis thethe within property any of of " herein. FACTORS FACTORS" herein. the under forth set set inJbrmation thethe provided have Developers thethe and The Master Developer and Developers have provided information forth under the ster Developer Ma The No " . RS DEVELOPE THE AND R DEVELOPE MASTER THE " and heading "THE DEVELOPMENT" and "THE MASTER DEVELOPER AND THE DEVELOPERS. - No ENT" DEVELOPM "THE heading of of all all own currently Developers the . Although complete is" is injbrmation all all that assurance can given that information complete. Although the Developers currently own given be be can assurance residential the sell ild and bubuild to to intend Developers thethe 1, 1, No.No. property within Improvement Area Developers intend and sell the residential t Area Improvemen within property thethe within land the oj hip s wner o the cur, c o sales such When rs. properties individual homeowners. When such sales occur, the ownership of the land within homeowne individual to to properties t of of developmen that given be can assurance No . diversified more become Improvement Area 1 will become more diversified. No assurance can be given that development 1 will No.No. t Area Improvemen asas occur will it it that or or manner timely a a in in completed be be it will pleted, that the property will completed, that it will completed timely manner that will occur com be be will property the . herein described described herein. General General for slated are which of of 135.7 acres, gross 174.80 of of a total of of 1 consists Improvement Area No. 1 consists a total 174.80 gross acres, 135.7 which are slated for No. nt Area Improveme residential The space. open of acres 39.05 and lots residential 635 residential development comprising 635 residential lots and 39.05 acres of open space. The residential t comprising developmen residential See builders. merchant four byby developed bebe t will tha tracts residential five lots are contained within five residential tracts that will developed four merchant builders. See within contained are lots the within situated are tracts subject The ERS." DEVELOP THE ER AND "THE MASTER DEVELOPER AND THE DEVELOPERS." The subject tracts are situated within the TER DEVELOP MAS "THE Indio of City the of portion northern the in located is that Hills" "Shadow as known larger area generally known as "Shadow Hills" that is located in the northern portion of the City of Indio larger area generally

north the Interstate 10 Freeway. Freeway. 10 Interstate the of of north


0 Interstate-1 ofof north mile one than less located is is Lago Terra of of The master-planned community Terra Lago located less than one mile north Interstate-10 ned community master-plan The the by bisected is is community The 43. Avenue and Parkway Center Golf thenortheas northeast Golf Center Parkway and Avenue 43. The community bisected by the rner ofof t cocorner the at at property. the through rd southeastwa runs that Canal, American Coachella Canal, extension the All American Canal, that runs southeastward through the property. All the of of extension anan Canal, Coachella boundary northern the atat foothills the ofof base the abuts community The northern edge the Terra Lago community abuts the base the foothills the northern boundary Lago Terra the ofof edge northern The open isis property the of east the To 44. Avenue to southward extends of the City of Indio. The property extends southward to Avenue 44. To the east of the property open property The of the City of Indio. the within s subdivision home new six are Street Jackson of off northwest the to mile one About desert. desert. About one mile to the northwest off of Jackson Street are six new home subdivisions within the community the of discussion further aa For homes. marketing currently are Shadow Hills community that are currently marketing homes. For further discussion of the community that community Hills Shadow UDY." T S STUDY." ON ABSORPTI MARKET - X EE "APPENDI and the surrounding area, see "APPENDIX MARKET ABSORPTION see area, surrounding the and on Availability Water for Construction Constructi for Water ofof Availability ings, her th at, among solution th a are hority adopted dio Water e In 5, th On June 20, 2005, the Indio WaterAut Authority adopted resolution that, amongot other things, , 200 20 June On cleaning, street ucks, r t ater w , filling control dust e. grading, (i.(i.e. struction meters use construction meters grading, dust control, filling water trucks, street cleaning, con ofof e use rminated ththe teterminated 005 ctober 31, rough O 005 th , 1 July etween b iod r pe e h t etc.) except in special circumstances during the period between July 1,22005 through October 31,22005 during etc.) except in special circumstances isis ater w sufficient at h t ure s en to order in taken s a w action h Suc "). onservation Period "Summer Period"). Such action was taken in order to ensure that sufficient water er CConservation he "Summ (t(the of at h t times 0 6 as h muc s a consume can n meters constructio available existing Indio construction meters can consume as much as 60 times that ofaa sidents asas reresidents sting Indio r exi ble fofor availa hority e Indio wever. Th s, ho ater source wwater ortage ofof sh no here isis single family dwelling unit.TThere no shortage sources, however. The IndioWater WaterAut Authority lling unit. dwe family single required, ells as new additional drilling anticipates ells, and wwells, existing in thepprocess of upgrading existing and anticipates drilling additional newwwells as required,in in upgrading rocess of the in isis expected not is meters ater w n constructio of sion of construction water meters is not expectedto his suspen . T ater demands order to meet increasing demands. This suspension to sing wwater increa meet to order Area nt rmits within ts or ding permi haveany anyimpact impact onthe theissuance issuance of of buil building permits or occupancy occupancype permits within Improveme Improvement Area on have No. No.1. I. t the the inin that stated also resolution Authority Water Furthermore, the Indio Water Authority resolution also stated that theevent eventtha that thepotable potable Indio e, the Furthermor construction new to service potable expanded providing not waterdistribution distribution systemisis notcapable capableof of providing expanded potablewater water service to new construction system water thority would inthe theCity, City,the the |ndio IndioWater WaterAu Authority wouldconsider considersuspension suspensionof ofthe theinstallation installationof ofadditional additionalwater water in

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meters until the end of the Summer take any such action. No assurance can future that may impact the timely manner. Any delay debt service on the Bonds. Public Facilities

Conservation

Period.

The Indio Water Authority

does not expect to

be made that the lndio Water Authority will not take similar actions in the ability of the Developers to proceed with their respective developments in a in development may have an adverse impact on the District's ability to pay See "SPECIAL RISK FACTORS - Failure to Develop Properties."

A description of the public facilities proposed to be financed for Improvement Area No. 1 is contained in the Funding and Acquisition Agreement by and between the City and the Master Developer (the "Funding and Acquisition Agreement"). These public facilities consist of in-tract public facilities that arc within and required to develop Improvement Area No. 1 and backbone public facilities, both within and outside the District, required to serve the entire District or both Improvement Areas. The costs of many of the backbone public facilities are eligible to be financed by either of the Improvement Areas. In addition, pursuant to the Agreement of Formation of Mello-Roos Community Facilities District No. 2004-3 (the "Development Agreement"), the costs of many of the backbone public facilities are eligible to be financed with the proceeds of bonds including, without limitation, the Bonds. The Master Developer has identified two development phases within Terra Lago. Phase 1 currently includes Improvement Area No. 1 and Phase 2 includes Improvement Area No. 2. The Master Developer completed mass grading of Improvement Area No. 1 prior to the sale of the tracts contained therein to the Developers. With respect to the major backbone public infrastructure improvements required to serve Improvement Area No. 1, as of August 1, 2005, approximately 98% of such infrastructure improvement for Improvement Area No. 1, including sewer, water, storm drain, dry utilities and landscaping improvements, had been completed. The backbone public infrastructure improvements required to serve Improvement Area No. 2 are expected to be completed by December, 2006. As of July, 2005, the Master Developer had expended approximately $25 million for the mass grading and major backbone public infrastructure improvements for Improvement Area No. 1. Initial funding for the work completed by Master Developer has been provided by internal sources. To the extent available, costs of the public facilities with respect to Improvement Area No. 1 will be funded from proceeds of the Bonds. The City will not be obligated to pay for the public facilities except from amounts on deposit in the applicable Acquisition and Construction Fund once established with respect to each of the Improvement Areas. The City makes no warranty, express or implied, that the proceeds of the bonds deposited and held in the applicable Acquisition and Construction Fund, and any investment earnings thereon, will be sufficient to pay for the Improvements. Environmental Assessment

A Phase 1 Environmental Assessment (the "Phase I Environmental Assessment") was undertaken by Earth Systems Southwest, Consulting Engineers and Geologists, in October 2002 to evaluate the potential for the presence of soil or groundwater contamination as a result of past use, handling, storage or disposal of hazardous materials or petroleum. Certain areas were excavated to remove certain contaminated or stained soil but no remediation was recommended and no additional items of environmental concern were identified on the site and further investigation was not warranted. See "SPECIAL RISK FACTORS - Hazardous Substances."

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Development and and Financing Financing Plans Area No. 1 No. 1 Improvement Area - Improvement Plans Development Improvement Area N No. to be be developed developed w with 635 ho homes ranging in s size from 1,658 1,658 ize from anging in mes r ith 635 expected to is expected 1 is o. 1 Improvement Area to 3,120 square feet. The Master Developer has sold all tracts within Improvement Area No. 1 to the the to 1 No. to 3,120 square feet. The Master Developer has sold all tracts within Improvement Area Developers in mass-graded, blue-top condition. The on-site infrastructure development costs are being Developers in mass-graded, blue-top condition. The on-site infrastructure development costs are being funded from the proceeds of the Bonds. Total on-site development costs to develop the property in funded from the proceeds of the Bonds. Total on-site development costs to develop the property in ImprovementArea AreaNo. No. 1 I are of any costs). construction costs). home construction any home (exclusive of $9,608,416 (exclusive be $9,608,41.6 to be estimated to are estimated Improvement These costs are to pay fees and convert the land from mass graded blue-top condition into finished pads These costs are to pay fees and convert the land from mass graded blue-top condition into finished pads including the construction construction or or installation installation of of in-tract streets, sidewalks, curbs, gutters, gutters, sewer, sewer, water water and and sidewalks, curbs, in-tract streets, including the 1, 2005, storm drain improvements, landscaping, and dry utilities and related soft costs. As of August 2005, 1, August of As costs. soft related and landscaping, and dry utilities storm drain improvements, construction of of the the inin-tract had not not commenced commencedbut but is is expec expected to commence in in the the near near o commence ted t improvements had tract improvements construction ture. fu future.
OVALS SUMMARY OF OF T TRACT MAP APPR APPROVALS RACT MAP SUMMARY COMMUNITY FACILITIES DISTRICT NO. 2004-3 (TERRA LAGO) ERRA LAGO) FACILITIES DISTRICT NO. 2004-3 (T COMMUNITY (IMPROVEMENT AREA NO. NO. 1) AREA (IMPROVEMENT

Expected Expected Completion of mpletion of Co On-Site On-Site Tract # # Tract 31601-2 601-2 31 31601-3 601-3 31 31601-4 31601-4 31601-5 31601-5 31601-7 31601-7 Source: The Developers The Developers Source: As currently proposed, the homes homes that that are are planned planned for on the properties subject properties the subject construction on for construction , the currently proposed As consist of product lines that will be marketed independently of one another by the four Developers. The The consist of product lines that will be marketed independently of one another by the four Developers. homes will offer a variety of design configurations that will appeal to a broad mix of household types homes will offer a variety of design configurations that will appeal to a broad mix of household types including families families with with children, children, young young married married couples, couples, move-down move-down households, households, retired retired couples, couples, and and including second home buyers. In addition to the base sale prices of the subject Terra Lago homes, many of the the of many second home buyers. In addition to the base sale prices of the subject Terra Lago homes, homes will command substantial premiums primarily for views of the lake located within Improvement homes will command substantial premiums primarily for views of the lake located within Improvement Area No. 1 and the the golf golf course course located located in in Improvement Improvement Area Area No. No. 2. 2. 1 and Area No. Builder Builder Woodside Homes es e Hom Woodsid Lennar Homes Lennar Homes Lennar Homes Homes Lennar Ryland Homes Homes Ryland Ashbrook Homes Ashbrook Homes Number Number of Lots Lots of 178 178 128 128 86 86 110 110 133 133 Final Map Map Final Approval Approval May 4, 2 2005 005 May 4, July 6, 2005 July 6, 2005 July 6, 6, 2005 2005 July July 6, 6, 2005 2005 July August 3, 2005 2005 August Infrastructure frastructure In and Grading Grading and June, 2006 006 e, 2 Jun June, 2006 2 June, 006 June, 2006 2006 June, June, 2006 2006 June, June, 2006 2006 June,

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SUMMARY HOMES NEW HOMES PROPOSED NEW OF PROPOSED SUMMARY OF COMMUNITY LAGO) (TERRA LAGO) 2004-3 (TERRA NO. 2004-3 DISTRICT NO. FACILITIES DISTRICT COMMUNITY FACILITIES (IMPROVEMENT AREA NO. 1) I) NO. AREA (IMPROVEMENT
Minimum Minimum Size Lot Lot Size (Si. Ft.) (So. Ft.) Size Home Size Home Range (SF) Range (SF)

Tract # # Tract 31601-2 31601-2 31601-3 31601-3 31601-4 31601-4 31601-5 31601-5 31601 31601

Builder Builder Woodside Homes Woodside Homes Lennar Homes Lennar Homes Lennar Homes Lennar Homes Ryland Homes Ryland Homes Ashbrook Homes Homes Ashbrook Total / Range Total / Range

Number Number of Lots of Lots 178 178 128 128 86 86 110 110 133 133 635 635

% of Lots of Lots 27.7% 27.7% 20.3 20.3 13.6 13.6 17.4 17.4 21.0 21.0 100.0% 100.0%

5,000 5,000 7,200 7,200 8,400 8,400 6,000 6,000 3,300 3,300 3,300-8,400 3,300-8,400

1,658-2,407 1,658-2,407 2,092-2,660 2,092-2,660 2,595-3,120 2,595-3,120 1,987-2,591 1,987-2,591 2,100-2,500 2,100-2,500 1,658-3,120 1,658-3,120

Source: SunCal Properties, Market Profiles ofiles arket Pr roperties, M unCal P Source: S

PROPOSED SPECIAL SUMMARY SPECIAL TAXES TAXES OF PROPOSED SUMMARY OF COMMUNITY FACILITIES DISTRICT NO. 2004-3 LAGO) (TERRA LAGO) COMMUNITY FACILITIES DISTRICT NO. 2004-3 (TERRA (IMPROVEMENT AREA NO. 1) NO. 1) AREA (IMPROVEMENT

Tract # Tract 31601-3 31601-3 31601-4 31601-4 31601-5 31601-5 31601 31601 31601-2 31601-2

Builder Builder Lennar Homes ennar Homes L Lennar Homes Lennar Homes Ryland Homes Ryland Homes Ashbrook Homes Homes Ashbrook Woodside Homes Woodside Homes Total Total

Number Number of Lots Lots of 128 128 86 86 110 110 133 133 178 178 635 635

Tax Avg Tax AvE

Special Special Tax Tax $391,552 $391,552 300,601 300,601 320,447 320,447 467,673 467,673 393,786 393,786 $1,874,058 $1,874,058

% of A) ofTotal Total

$3,059 $3,059 3,495 3,495 2,913 2,913 3,516 3,516 2,212 2,212

21% 21% 16 16 17 17 25 21 21 100% 100%

Source: SunCal Properties, Market Market Profiles Profiles SunCal Properties, Source: Developmentof of the the infrastructure improvements within Improvement Area No. No. 1 1 is is being being Area nt thin hnproveme wi improvements infrastructure Development overseen by the Master Developer in accordance with the provisions of the separate purchase agreements overseen by the Master Developer in accordance with the provisions of the separate purchase agreements entered into into between between the the Master Master Developer Developerand andeach eachof of the the Developers. (see MASTER "THE MASTER (see "THE Developers. entered DEVELOPER AND THE DEVELOPERS" below). As of August 1, 2005, four building permits had below). As of August 1, 2005, four building permits had DEVELOPER AND THE DEVELOPERS" been issued within Improvement Area No. 1 for the Model Park located in Tract No. 31601-2 owned by been issued within Improvement Area No. 1 for the Model Park located in Tract No. 31601-2 owned by Woodside Portofino, Portofino, Inc. Inc. Woodside There is no to finance finance the within costs within development costs site development the site necessary to amounts necessary that amounts assurance that no assurance There is Improvement Area No. 1 will be available from the Master Developer, the Developers, or any other Improvement Area No. 1 will be available fi'om the Master Developer, the Developers, or any other source, when needed. Neither the Master Developer nor the Developers are under any legal obligation of of obligation legal any under are Developers the nor Developer Master the Neither . source, when needed any kind to expend funds for the development of the property within District. Any contribution or loans loans or contribution Any . District within any kind to expend funds for the development of the property by Developer or or the to fund fund costs Improvement within Improvement development within of development costs of whether to Developers, whether the Developers, Master Developer the Master by the Area No. 1 or to pay special taxes, is entirely voluntary. The public infrastructure improvements improvements The public infrastructure Area No. 1 or to pay special taxes, is entirely voluntary. associated with with Improvement Improvement Area Area No No. 2 are are not not being beingfinanced financed with the proceeds proceeds of Bonds. the Bonds. of the with the . 2 associated

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Absorption

Study

A market absorption report dated July, 2005 (the "Absorption Study") has been prepared by Market Profiles, Santa Ana, California, at the request of the City in connection with the issuance of the Bonds. The study evaluated the depth of demand for new homes in Coachella Valley, as well as, the competitive market demand within the local Indio marketplace. The Absorption Study indicated that market demand is ample to support the development and sales of new homes in Improvement District No. I. Competitive evaluations of the price structures that are anticipated and projected sales absorption rates for each of the residential tracts in Improvement Area No. 1, as well as further information regarding the Absorption Study, its assumptions and conclusions, are set forth in "APPENDIX E - MARKET ABSORPTION STUDY."

THE MASTER The Master Developer

DEVELOPER

AND THE DEVELOPERS

Indio Land Ventures/SunCal Companies. Indio Land Ventures LLC, a Delaware limited liability corporation ("Indio Land Ventures") acquired the raw land comprising Improvement Area No. 1 and Improvement Area No. 2 on January 1, 2003. Indio Land Ventures has since sold the five tracts of Improvement Area No. 1 to the following merchant builders: Ashbrook (40.70 acres owned by Terra Lago, 133, L.P.), Ryland Homes (32.65 acres), Woodside Portofmo, Inc. (38.75 acres) and Lennar Homes (62.70 acres owned by MW Housing Managers III Cal Pets) as further described below. See also "THE DEVELOPMENT.'" Indio Land Ventures remains the owner of all the property contained in Improvement Area No. 2 which comprises approximately 190.16 acres, approximately 173.76 acres are slated for residential development and 16.4 acres are open space. SunCal Properties ("SunCal") is the developer of the property owned by Indio Land Ventures in Improvement Area No. 2 and SunCal remains the Master Developer in connection with the implementation of the infrastructure in Improvement Area No. 1 in accordance with the provisions of the respective purchase agreements entered into between the Master Developer and each of the Developers. Founded in 1973, SunCal has developed at least 20 projects located mostly in Southern California. Current developments include Tesoro Del Valle in Los Angeles, Fairway Canyon in Beaumont, and Summerland Ranch in Calimesa. More information about SunCal can be found on the company's website, www.suncal.com. This Internet address is included for reference only, and the information on this ]nternet site is not a part of this Official Statement or incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on this Internet site. Provided below is a partial listing of recent regional projects and developments undertaken by

SunCal.

Jurisdiction Tesoro Del Valle Fairway Canyon Masterplan Summerland Ranch McSweeney Farms College Park Westport at Mandalay Bay Los Angeles Beaumont Calimesa Hemet Chino Oxnard

29

rporation, co liability limited Delaware aa LLC, /Indio Land, SCC by owned is is Indio Land Ventures owned by SCC/Indio Land, LLC, Delaware limited liability corporation, Ventures o Land Indi owned isis turn ill which corporation, liability limited Delaware a Ventures, Mezz which owned by SCC Mezz Ventures, a Delaware limited liability corporation, which in turn owned SCC by owned isis which by owned is LLC Acquisitions, SCC corporation. liability by SCC Acquisitions, LLC, Delaware limited liability corporation. SCC Acquisitions, LLC is owned by limited Delaware aa LLC, Acquisitions, SCC by is Ventures Land Indio corporation. Nevada a Co., Investment SCC Acquisitions, Inc. and Nevada Sun Investment Co., a Nevada corporation. Indio Land Ventures is Sun Nevada and Inc. Acquisitions, SCC wholly is which company, liability limited Delaware A LLC, also owned by LB Indio Land Ventures LLC, A Delaware limited liability company, which is wholly Ventures also owned by LB Indio Land isisowned turn inin which owned byPAMI PAMI LLC, Delawarelimited limited liability corporation, which turn ownedby by Lehman Lehman corporation, liability a aDelaware LLC, by owned Brothers. Lehman and Cal Sun by managed ' Brothers Entities. Indio Land Ventures is jointly managed by Sun Cal and Lehman Brothers. jointly is Ventures Land Indio Entities. Brothers

The Developers Developers The


omes") isis yland HHomes") rporation ("R laware co De ., a a rnia, Inc Califo Ryland Homes. omes of Homes of California, Inc., Delaware corporation ("Ryland yland H . RRyland Homes Ryland YSE sted on rnia and basas, Califo adquartered in ., he p, Inc subsidiary ofThe TheRRyland Group, Inc., headquartered inCala Calabasas, California andlilisted onthe theN NYSE yland Grou bsidiary of su aa 005 2 of h arc M in s re ac e l b a p lo e v e d s os r g 2.65 3 ed 32.65 gross developable acres in March of 2005 under the symbol "RYL". Ryland Homes acquired es acquir yland Hom R L'. bol "RY sym er the und e h ic wh of 34 d an ! . ea No provement Ar Im of e AA Zon comprising 110 lots, 76 of which are in Zone of Improvement Area No. 1 and 34 of whichar are cated in e lolocated ich ar wh of s, 76 lot mprising 110 co yland . R them on ouses built ave hhouses ady to e re located Zone Allof oftthese lotsand andar are ready tohhave built on them. Ryland raded lots re ggraded hese aare e B.B.All Zon inin located and y, r sto e singl be will h ic wh of x irty-si h t es, om h ed ch ta e d Homes plans to build 110 single family detached homes, thirty-six of which will be single story, and family single Homes plans to build 110 of nd e he t y b sold and d e t e l p com be to d e ct e p ex e ar ich are expected to be completed and sold by the end wh of , all o story tw seventy-four of which be two story, all of which of ill be ich wwill wh venty-four of se or loan any from not and and h on s e moni om r f 2006 and which shall be self-funded by Ryland Homes from monies on hand and not from any loan or s e Hom yland R y b d e lf-fund e s be all h s h ic wh and 6 00 2 . erra Lago ristalo @ evelopment is other funding mechanism. Thenam name ofthe theddevelopment isC Cristalo @T Terra Lago. e of chanism. The me her funding ot 7 perates in omes and 25,000 hhomes han 2 uilt more s bbuilt yland ha 1967, Ryland has moretthan 225,000 andcurrently currentlyooperates in227 67, R ounded inin19 FFounded erris, eadows in rcos, M emont in e Ros markets acrossthe the country. Current developments include Rosemont inSan SanMa Marcos, Meadows inP Perris, evelopments includ ent d ry. Curr count ets across mark 's company he t on found be can s e Hom yland R out b and Hermosa in Coachella. More information about Ryland Homes can be found on the company's a information e Mor and Hermosa in Coachella. information the and , y onl reference or f included website, www.ryland.com. This Internet addressis is included for reference only, and the informationon on ternet address s ln Tki land.com. site, www.ry web y reference ncorporated bby thisIn Internet siteis isno not part o of this Official Official Statement Statement or or iincorporated referenceinto intothis thisOfficial Official f this t aapart ternet site this dequacy of y or fficial Statement his O ade in Statement. No representation representationis is m made in tthis Official Statementas asto tothe the accurac accuracy oraadequacy of the the No . Statement . information contained this Internetsite site. s ]nternet n thi ained oon ation cont inform y ertaken bby evelopments und ects and gional proj cent re Provided below partial listing listingof of re recent regional projects and d developments undertaken low isisaapartial ed be Provid jects. hose pro mpletion of e of cipants and Ryland Homes andthe their participants andthe thedat date ofco completion oftthose projects. rincipal parti ir pprincipal es and yland Hom R

Project Proiect Rosemont t Rosemon Oasis-Sorano Oasis-Sorano Oasis-Orviento Oasis-Orviento Serenada Serenada Pasatiempo Pasatiempo Oasis-Palermo Oasis-Palermo Waterford Waterford Meadows Meadows Hermosa Hermosa Concord Estates Estates Concord Sienna Sienna

Numberof of Units Units Number


68 68 250 250 304 304 127 127 88 88 217 217 74 74 139 139 120 120 128 128 132 132

Jurisdiction Jurisdiction n Marcos Sa San Marcos Menifee Menifee Menifee Menifee Murrieta Murrieta French French Valley Valley Menifee Menifee San SanMarcos Marcos Perris Perris Coachella Coachella French French Valley Valley Indio Indio

Completion Completion Date Date pril 2004 A April 2004 May May2004 2004 July July 2004 2004 September September 2004 2004 September September 2004 2004 November November 2004 2004 December December 2004 2004 Est. Est. December December 2005 2005 Est. Est. February February 2006 2006 Est. Est. May May 2006 2006 Est. Est. June June 2006 2006

purpose special purpose Woodside Portofino. WoodsidePortofino, Portofino,Inc. Inc. ("Woodside ("WoodsidePortofino") Portofino")is is a a special Woodside . side Portofino Wood which 1 No. Area Improvement within located property the develop corporation formed to acquire and develop the property located within Improvement Area No. 1 which it it and corporation formed to acquire the is which Inc., California, of Homes Woodside Homes of California, Inc., which is the of Woodside affiliate of an affiliate is an t is acquiredin in February February 2005. IIt 2005. acquired on homes ofof homebuilder/contractor for construction homes onthe the land land owned owned by by Woodside Woodside Portofino, Portofino, Inc. Inc. in in construction for /contractor homebuilder are Inc. California, of Homes Woodside and Inc. Portofino, Woodside Both Improvement Area No. 1. Both Woodside Portofino, Inc. and Woodside Homes of California, Inc. are 1. No. Area Improvement Its a aprivately Inc., wholly-owned subsidiaries Woodside Group, Inc., privatelyowned ownedholding holdingcompany. company. Its Group, Woodside of of subsidiaries wholly-owned California, southern and central, northern, in subsidiaries are are homebuilding homebuildingcompanies companieswith with operations operations in northern, central, and southern California, subsidiaries 3O 30

ah. The Ut tonio, and An San Minnesota, Denver, D.C., The Phoenix, Las Vegas, Jacksonville, Washington D.C., Denver, Minnesota, San Antonio, and Utah. onville, Washington Jacks Vegas, Las Phoenix, either Portofino, ide d_ Woo to unds f contribute to obligation contractual or Woodside Group has legal or contractual obligation to contribute funds to Woodside Portofino, either legal no no has Group Woodside complete the project pay the Special Taxes. . Taxes Special the pay to to oror project the complete toto February inin 11 No. Area Improvement inin land ofof acres gross 38.75 Woodside Portofino acquired 38.75 gross acres land Improvement Area No. February acquired Portofino Woodside be residences single-family 179 that planned is it which on acres developable are 2005, 33.05 which are developable acres on which it is planned that 179 single-family residences be which ofof 33.05 2005, ofof Woodside by self-funded be shall which B Zone in located lots 2020 and AA Zone in in built on 158 lots located Zone and lots located in Zone B which shall be self-funded by Woodside located lots 158 t on buil ofofthese None loan any from not Portofino from monies hand and not from any loanor orother otherfunding fundingmechanism. mechanism. None these and hand on on monies from Portofino Lago. Terra @ Portofino called be to is project The residences have been built on to date. The project is to be called Portofino @ Terra Lago. date. to residences have been built on website, company's on found be be cancan Homes Moreinformation information about Woodside Homes found on the the company's website, Woodside about More the and only, reference for included isis address Internet www.woodsidegroupinc.com. This This Internet address included for reference only, and theinformation information egroupinc.com. www.woodsid cial s 0I_ thi into re/erence bv porated r inco or Statement Ojficial this of part a a part of this Official Statement or incorporated by reference into this on this Inter-net site not Official not is is ternet site h2 this oll of y c adequa or y c ra u acc the to as Statement this inin made isis Statement. Norepresentation representation made thisOfficial Official Statement as to the accuracy or adequacy ofthe the . No Statement . site Internet this on information contained on this Internet site. contained information Woodside by undertaken developments and projects regional recent ofof listing aa isis Provided below listing recent regional projects and developments undertaken by Woodside below Provided projects. those for completion of dates the and Division Homes'Southern Southern California Division and the dates of completion for those projects. California Homes'

Project Proiect Aberdeen Aberdeen Mahogany Mahogany Marquis Marquis Nelson Nelson OakCreek Creek Oak Park ParkLane Lane Serrano Serrano Sienna Sienna Solana Solana Summerset Summerset Traditions Traditions WestcreekPA PA 1 1 Westcreek Westcreek WestcreekPA PA33 WoodsValley Valley Woods

Number Numberof ofUnits Units 175 175 121 121 127 127 116 116 124 124 185 185 136 136 108 108 103 103 160 160 134 134 105 105 85 85 79 79

Jurisdiction Jurisdiction Yucaipa Yucaipa Temecula Temecula Temecula Temecula Riverside Riverside Riverside Riverside Riverside Riverside Victorville Victorville Victorville Victorville Victorville Victorville Victorville Victorville Riverside Riverside Victorville Victorville Victorville Victorville San SanDiego Diego

Completion CompletionDate Date November, Est. Est. November,2005 2005 ry, 2005 Janua January, 2005 June, June,2005 2005 February, February,2005 2005 2005 March, March, 2005 Est. Est.December, December,2005 2005 December, Est. Est. December,2005 2005 Est. Est.August, August,2005 2005 April, April,2005 2005 Est. Est.December, December,2005 2005 2005 ember, c De Est. Est. December, 2005 Est. Est.December, December,2005 2005 December, Est. Est. December,2005 2005 May, May,2005 2005

Partnership Limited Partnership California Limited 133, a erra Lago WHP WHP Terra Terra Lago Lago 133/Ashbrook. WHP T Terra Lago 133, a California 133/Ashbrook. WHP res of ("WHPTerra TerraLago"), Lago"),owns owns40.70 40.70gross grossac acres ofthe theland landin inImprovement ImprovementArea AreaNo. No.11acquired acquiredin in May, May, ("WHP building duplex three in arranged units residential 133 o t in 2005, 17.60 of which are to be developed into 133 residential units arranged in three duplex building developed be 2005, 17.60 of which are to typeswithy withyseveral severalzero zerolot lotline linehomes homeson on30 30lots lotslocated locatedin inZone ZoneA Aof ofImprovement ImprovementArea AreaNo. No. 1 1 and and 103 103 types improvements residential for Two lots lotslocated locatedin inZone ZoneB. B. Two lots comprising comprising 23.10 23.10 acres acres will will not not be be used used for residential improvements lots . Buildout lake and butwill willbe bedeveloped developed toprovide providefor fora aclubhouse clubhouse andadjoining adjoining lake. Buildout for forthe the residential residentialunits units is is to but and hand on monies from Ashbrook by self-funded be shall and mid-2007 expectedto tobe becompleted completedin in mid-2007 and shall be self-funded by Ashbrook from monies on hand and expected

not from fromany anyloan loanor orother otherfunding fundingmechanism. mechanism. not The property propertyheld held by by WHP WHPTerra Terra Lago Lago is is being being developed developed by by Ashbrook Ashbrook Development Development Company, Company, The affiliate an is Lago Terra WHP ("Ashbrook"). Communities Ashbrook Communities ("Ashbrook"). WHP Terra Lago is an affiliate of Inc., doing doing business business as as Ashbrook of Inc., truction of for /contractor Ashbrookwhich whichis is the the homebuilder homebuilder/contractor forcons construction ofhomes homeson onthe the land land owned owned by by WHP WHP Ashbrook obligation to contractual obligation or contractual legal or Terra Lago Lagoin in Improvement ImprovementArea Area No.1. 1. Ashbrook has no no legal to contribute contribute Ashbrook has No. Terra th. therewi nnection o c in Taxes Special pay or t jec o pr he t mplete o c o t either o Lag funds to WHP Terra Lago either to complete the project or pay Special Taxes in connection therewith. Terra WHP to funds
in Ashbrook is is aa privately-held privately-held home home building building and and land land development development company company that that was was formed formed in Ashbrook developments recent Communities' Ashbrook Communities' April 1995 1995by by Timothy TimothyMcGowan McGowanand andRichard RichardCrook. Crook. Ashbrook recent developments April 31 31

include Buenavida in in San San Marcos, and Santo Pasadera in La in La Mirage, Pasadera Rancho Mirage, in Rancho Tomas in Santo Tomas Augustine and Saint Augustine Marcos, Saint include Buenavida can Ashbrook about Ashbrook can be Quinta, Blossom Blossom Valley Valley in Lakeside, and and Murrieta Murrieta in in Murrieta. Murrieta. More be information about More information in Lakeside, Quinta, included is included Internet address This Internet found on the This address is www.ashbrookcommunities.com. at www.ashbrookcommunities.com. website, at company's website, the company's found on only, and the on this Internet site site i is part of or Statement or Official Statement this Official of this a part not a s not this lnternet information on the information y, and reference onl for reference .for incorporated by reference into this Official Statement. No representation is made in this Official Official this in made is representation No . Statement O[ficial this into incorporated by reference Statement as as to to the the accura accuracy site. Internet site. this Internet on this contained on information contained the information of the adequacy of or adequacy cy or Statement Provided below below is is a a partial partial listing undertaken by Ashbrook by Ashbrook developments undertaken and developments projects and regional projects of regional listing of Provided and their principal participants within the last five years and the date of completion of those projects. projects. those of completion of date the and years five last the within and their principal participants Project Buenavida Buenavida Penis Meadows erris Meadows P Hemet 196 Hemet 196 Saint Augustine Augustine Saint Pasadera Pasadera Blossom Valley Valley Blossom Santo Tomas Tomas Santo Murrieta Murrieta Desert Trace Trace Desert Number of Units of Units Number 408 408 177 196 196 137 137 92 92 44 44 152 152 289 289 111 111 Jurisdiction Jurisdiction San Marcos Marcos Perris erris P Hemet Hemet Rancho Mirage Rancho Mirage La Quinta La Quinta Lakeside Lakeside Rancho Mirage Rancho Mirage Murrieta Murrieta Indio Indio Completion Date Completion Date
2003 2003 1999 1999 2004 2004 2004 2004 February 2005 February 2005 2004 2004 2006 (estimated) 2006 (estimated) 2003 2003 February 2007 February 2007

MW Housing Partners HI/Lennar Corporation. Two tracts tracts of of land land comprising comprising a a total total of of 62.70 62.70 Two Corporation. Partners llI/Lennar MWHousing acres located in Improvement Area No. 1 are owned by MW Housing Partners III ("MW Housing Housing ("MW III Area No. 1 are owned by MW Housing Partners acres located in Improvement Partners") are being developed by Lennar Homes, an affiliate of Lennar Corporation, a publicly traded Partners") are being developed by Lennar Homes, an affiliate of Lennar Corporation, a publicly traded company listed listed on on the the New New York York Stock Stock Exchange Exchangeunder under the the trading tradingsymbol symbol"LEN". "LEN". Both owned tracts owned Both tracts company by MW Housing Partners, comprising a total of 214 lots, are located in Zone A of Improvement Area Area Improvement of A Zone in located are lots, by MW Housing Partners, comprising a total of 214 No. 1 and which shall be self-funded by Lennar Homes from monies on hand and not from any loan or or loan any from not No. 1 and which shall be self-funded by Lennar Homes from monies on hand and other funding mechanism. Lennar Corporation, together with its subsidiaries, operates primarily as Lennar Corporation, together with its subsidiaries, operates primarily as a other funding mechanism. geographically diversified builder builderof of single-family single-family homes homes throughout throughout major major metropolitan markets in metropolitan markets diversified geographically Arizona, California, Colorado, Florida, Illinois, Maryland, Minnesota, Nevada, New Jersey, North North Jersey, New Arizona, California, Colorado, Florida, Illinois, Maryland, Minnesota, Nevada, Carolina, South Carolina, Texas, and Virginia. Through its 68 homebuilding divisions, Lennar divisions, Lennar Through its 68 homebuilding Carolina, South Carolina, Texas, and Virginia. Corporation delivered approximately approximately 23,899 23,899 homes homes in in 2001, 2001, 27,393 27,393 homes homes in in 2002 2002 and and 32,180 32,180 homes homes in Corporation delivered 2003. 2003.
for MW Partners is is an an affiliate affiliate of of Lennar for homebuilder/contractor the homebuilder/contractor is the which is Homes which Lennar Homes Housing Partners MW Housing construction of homes on the land owned by MW Housing Partners in Improvement Area No. 1. Neither construction of homes on the land owned by MW Housing Partners in Improvement Area No. 1. Neither Lennar Homes Homes nor nor Lennar Lennar Corporation Corporationhave haveany any legal legal or or contractual obligation to to contribute funds to to contribute funds contractual obligation Lennar MW Housing Partners either to complete the project or pay Special Taxes in connection therewith. therewith. connection in Taxes Special pay MW Housing Partners either to complete the project or

Lennar Corporation is subject to the periodic reporting requirements of the Exchange Act of Lennar Corporation is subject to the periodic reporting requirements of the Exchange Act of 1934, as amended amended (the (the "Exchange "Exchange Act") Act") and, and, accordingly, accordingly, files files periodic periodic financial and other information other information financial and 1934, as with the Securities and Exchange Commission (the "Commission") on a regular basis, including but not not but including on a regular basis, with the Securities and Exchange Commission (the "Commission") limited to its annual report on Form 10-K and its quarterly reports on Form 10-Q. More information limited to its annual report on Form 10-K and its quarterly reports on Form 10-Q. More information about Lennar Homes and Lennar Lennar Corporation Corporationcan canbe be found found on on the the company's company's website, www.lennar.com. website, www.lennar.com. Homes and about Lennar This Internet address is included for reference only, and the information on this Internet site is not a part This Internet address is included for reference only, and the information on this Internet site is not a part of this Official Statement or incorporated by reference into this Official Statement. No representation is No representation is of this Official Statement or incorporated by reference into this Official Statement. made in this Official Statement as to the accuracy or adequacy of the information this on this contained on made in this Official Statement as to the accuracy or adequacy of the information contained . lnternet Internet site site.

32 32

Current projects projects under under development development by by Lennar Lennar Homes Homes include include the following: the following: Current Project Project La Mo Morada rada La Las Plumas s Las Pluma Sunburst burst Sun Vista Serena Serena Vista Cala Rosa Cala Rosa Paradiso aradiso P Cordoba Lago Terra Lago @ Terra Cordoba @ Marquesa @ Terra Lago Marquesa @ Terra Lago Desert River River Estates Estates Desert La Quinta del Oro La Quinta del Oro La Quinta Desert Villas Villas Quinta Desert La Esplanade Esplanade Escena Escena Number of Units of Units Number 171 171 87 131 131 1 1 11 l1 118 118 225 225 128 128 86 86 123 123 141 141 132 132 268 268 240 240 Jurisdiction Jurisdiction Coachella Coachella Coachella Coachella Indio Indio Indio lndio lndio Indio Indio Indio Indio Indio Indio Indio Indio lndio La Quinta Quinta La La Quinta La Quinta La Quinta Quinta La Palm Springs Palm Springs Completion Date Completion Date
007 2 2007 006 2 2006 005 2 2005 2006 2006 006 2 2006 2008 2008 2008 2008 2008 2008 2006 2006 2005 2005 2008 2008 2006 2006 2007 2007

FACTORS SPECIAL RISK FACTORS SPECIAL RISK

Thefollowing following is factors in addition to addition to considered, in be considered, shouM be which should s which risk factor certain risk of certain discussion of a discussion is a The other matters set forth herein, in evaluating the investment quality of the Bonds. This discussion does not not does other matters set forth herein, in evaluating the investment quality of the Bonds. This discussion purport to to be be comprehensive comprehensive or or definitive definitive. of one one or of the discussed herein herein events discussed the events more of or more occurrence of The occurrence . The purport could adversely affect the ability or willingness of property owners in Improvement Area No. 1 to pay pay to 1 . No could adversely affect the ability or willingness of property owners in Improvement Area their Special Taxes when due. Such failures to pay Special Taxes could result in the inability of the their Special Taxes when due. Such failures to pay Special Taxes couM result in the inability of the District to make full and punctual payments of debt service on the Bond. In addition, the occurrence of District to make full and punctual payments of debt service on the Bond. In addition, the occurrence of one or affect the the value value of of the in property in the property adversely affect could adversely herein could discussed herein events discussed the events of the more of or more one Improvement Area Area No. 1. No. 1. Improvement Concentration of Ownership of Ownership Concentration As buildout and market absorption continues within Improvement Area No. 1, property As buildout and market absorption continues within Improvement Area No. 1, property ownership within Improvement Area No. 1 can be expected to become diversified. Lack of diversity of ownership within Improvement Area No. 1 can be expected to become diversified. Lack of diversity of ownership presents a ri risk to Bondowners, in tthat failure of a a large Area Improvement Area within Improvement taxpayer within large taxpayer e of hat failur Bondowners, in sk to esents a ownership pr No. 1 to pay Special Taxes when due could result in the depletion of the Reserve Account prior to the the to prior Account e rv e s Re he t of tion e pl e d he t No. 1 to pay Special Taxes when due could result in replenishment thereof from moneys realized upon resale of property from foreclosure or otherwise, or or se, i herw ot or e closur e for from rty e rop p of e al replenishment thereof from moneys realized upon res delinquency redemptions after a foreclosure sale. delinquency redemptions after a foreclosure sale. Risks of Real Real Estate Estate Secured Generally Investments Generally Secured Investments Risks of The Bon Bondowners will be s subject to t the risks generally incident to an an inv investment secured by real eal y r ecured b estment s ent to enerally incid sks g he ri ubject to ill be downers w The estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of r real property in t the vicinity of of Im Improvement Area No. 1, the supply of or or demand for demand for upply of he s , t . 1 rea No provement A he vicinity roperty in eal p e of et valu mark competitive properties in such area, and the market value of commercial and industrial buildings and/or or / and uildings b industrial and rcial e comm of e competitive properties in such area, and the market valu sites in the event of sale or foreclosure, (ii) changes in real estate tax rate and other operating expenses, , es ns e xp e sites in the event of sale or foreclosure, (ii) changes in real estate tax rate and other operating government rules (including, without limitation, zoning laws and restrictions relating to threatened and government rules (including, without limitation, zoning laws and restrictions relating to threatened and endangered and fiscal fiscal policies limitation, without limitation, (including, without disasters (including, natural disasters (iii) natural and (iii) policies and pecies) and ndangered sspecies) e earthquakes and floods), which may result in uninsured losses, or natural disasters elsewhere in the the in ewhere ls e rs e t s disa natural or , s sse lo d e ur s unin in ult res may h ic wh s), earthquakes and flood country or other parts of the world affecting supply of building materials that may cause delays in country or other parts of the world affecting supply of building materials that may cause delays in struction. con construction.

33 33

ks Attac Terrorist Terrorist Attacks ties in in activi /or terrorist and military subsequent and 2001 The terrorist attacks September tember 11,11, Sep 2001 and subsequent military and/or terrorist activities of of orist attacks terr The overall State's the as well as ional t na the of slowdowns to to contributed this country abroad have contributed slowdowns of the national as well as the State's overall have abroad andand country this likelihood the predict can Developers the or Developer economy. None of the City, District, the Master Developer or the Developers can predict the likelihood Master the District, City, the of economy. None terrorist Future attacks. such by by caused impact economic future terrorist attacks long-term economic impact caused such attacks. Future terrorist long-term thethe or or attacks terrorist future of of Area t Improvemen within values land in a decrease and sales home of of attacks may result a slowdown home sales and a decrease in land values within Improvement Area a slowdown in in result may attacks 1. 1. No. No.

Land Development Costs t Costs Developmen Land


off-site -site and on in-tract, private and public thethe plus The cost additional improvements plus public and private in-tract, on-site and off-site ments tional improve addi of of cost The t Improvemen within land the by secured debt private and public improvements would likely increase the public and private debt secured by the land within Improvement the increase likely improvements would debt increased This Debt." Overlapping andand Direct - BONDS THE Area No. See "SECURITY FOR THE BONDS Direct Overlapping Debt." This increased debt FOR "SECURITY See 1. 1. No. Area against levied Taxes Special annual the pay to to could reduce ability desire the property owners pay the annual Special Taxes levied against owners property the of of desire or or ability thethe reduce could THE FOR "SECURITY and Taxes" Special The - the property. See "SECURITY FOR THEBONDS BONDS The Special Taxes" and "SECURITY FOR THE THE FOR "SECURITY See property. the interest and of, principal of payment the in default a be could BONDS Appraisal." In that event there could be a default in the payment of principal of, and interest there In that event BONDS - Appraisal."

on, the Bonds. Bonds. the on,


Initiatives Control Growth and Future Land Use Regulations and Growth Control Initiatives Regulations Use Land Future including a anumber ofof recent years, citizens numberof oflocal localcommunities communitiesin inSouthern SouthernCalifornia, California, including citizens years, recent In In placed have Diego, San of County the and Orange of of County the Riverside, citizens the County Riverside, the County Orange and the County of San Diego, have placed ofof County the of of citizens that possible is It areas. those in in growth future of of rate thethe control to to designed measures the ballot designed control rate future growth those areas. It is possible that ballot the on on measures conducted be to proposed development the to applicable become future initiatives could be enacted and become applicable to the development proposed to be conducted future initiatives could be enacted and , negatively could, and nt") "'Developme within Improvement Area No. (the "Development") and could,ififapplied appliedretroactively retroactively, negatively (the 11 No. Area t Improvemen within assume should Bondowners t. Developmen proposed the complete to to impact the ability the Developers complete the proposed Development. Bondowners should assume Developers the of of ability the impact land the cause could I No. Area t Improvemen in land develop to ability that any event that impacts the ability to develop land in Improvement Area No. 1 could cause the land the impacts that that any event the of ability and willingness the affect could and decrease to 1 No. values within Improvement Area No. 1 to decrease and could affect the willingness and ability of the t Area Improvemen within values due. when Taxes Special the pay 1 to No. t Area owners land within Improvement Area No. 1 to pay the Special Taxes when due.See See"SECURITY "SECURITY Improvemen within land ofof owners

FOR THE BONDS Appraisal." Appraisal." - BONDS THE FOR


the that assume should investors Bonds, the ofof quality evaluating the investment quality the Bonds, investors should assume that thepossible possible investment the evaluating InIn voter by or Riverside, of County the or City the by by regulations use land enactment more restrictive land use regulations the City or the County of Riverside, or by voter restrictive more ofof enactment except , development of timely the toto risk initiative presents substantial risk the timelyconstruction constructionand andcompletion completion of development, except substantial aa tive presents initia work been already have with respect unitsfor forwhich whichbuilding buildingpermits permits have already beenissued issuedand andsubstantial substantial workand and units toto respect with land such any of adoption of date the to prior thereon reliance liabilities have been incurred good faith reliance thereon prior to the date of adoption of any such land faith good inin incurred been have liabilities

use regulations. regulations. use


of completion the inin delays substantial oror planned, t asas The failure complete the Development planned, substantial delays the completion of Developmen the complete toto failure The within property the of value the reduce may causes other or or theDevelopmen Development, due litigation other causes may reduce the value of the property within litigation to to due t, the of owners the by paid bebe to to Taxes Special of of amount the increase Improvement Area No. and will increase the amount Special Taxes paid by the owners of will and 1, 1, No. t Area Improvemen within land of owners the of ability and willingness the affect undeveloped property and may affect the willingness and ability of the owners of land within may and property undeveloped on due. when Improvement AreaNo. No.11 totopay paythe the Special SpecialTaxes Taxes when due. Depending Depending onthe thenature natureof ofthe the Area t Improvemen . 11 No Area t Improvemen within land the of value the completed, and Development eventually approved and completed, the value of the land within Improvement Area No. approved t eventually Developmen

may be reduced. reduced. be may Failure to Develop Properties Properties Develop to Failure
Federal, ve Landdevelopment developmentoperations operationsare aresubject subjectto tocomprehensi comprehensive Federal,State Stateand andlocal localregulations. regulations. Land s, the development of design and layout the with Approval is required from various agencies in connection with the layout and design of developments, the connection in agencies various from Approval is required health and school zoning, use, land activity, construction ts, nature and extent of improvements, construction activity, land use, zoning, school and health improvemen of nature and extent

34 34

will approvals such that possibility the always requirements, well numerous other matters. There always the possibility that such approvals will isis There matters. ous other numer as as well asas requirements, such y satisf or approval agency such any obtain any such agency approval or satisfy such not beobtained obtained timely basis. Failure to obtain Failure to basis. a atimely onon be noi the isis there addition, In operations. development governmental requirements would adversely affect land development operations. In addition, there the land affect adversely would requirements governmental instituted. be will Development the of risk that lawsuits challenging the City's approval of the Development will be instituted. approval City's the challenging lawsuits that risk exempt not ment isis develop proposed that accepted Under current California law, generally accepted that proposed development not exempt generally isis it it law, California current Under has work substantial and issued properly been have permits from future land use regulations until building permits haVe been properly issued and substantial work has building until regulations use land future from permits. such on reliance faith good inin incurred been have been performed and substantial liabilities have been incurred good faith reliance on such permits. liabilities substantial and performed been on or constructi upon contingent trict isis Dis the within land Development certain portions the land within the District contingent upon construction or the ons ofof porti certain ofof Development sewage cilities, a f such acquisition majorpublic publicimprovements improvements suchas asarterial arterialstreets, streets,water waterdistribution distribution facilities, sewage major ofof acquisition as well cilities, asas fafacilities, electrical and telephone gas, collection and transmission facilities, gas, telephone and electrical well aslocal localin-tract in-tract facilities, transmission and collection toto expected are or been have improvements these of certain While grading. improvements including site grading. While certain of these improvements have been or are expected site improvements including will improvements all that assurance no be be constructed with proceeds the Bonds, there can be no assurance that allof ofthese these improvements will can there Bonds, the ofof proceeds with constructed be the increase act and be constructed.The Thecost costof ofthese thesepublic publicand andprivate privatein-tr in-tract andoff-site off-siteimprovements improvementscould could increase the constructed. be This security. provides 1 No. a Are Improvement within land the public and private debt for which the land within Improvement Area No. 1 provides security. This which for public and private debt totopay rty owners prope the ofof /or ability and willingness the increased debt could reduce the willingness and/or ability the property owners paythe the annual annual reduce could debt increased Special Taxeslevied levied againsttheir their property. property. against Taxes Special , t limited t no bu ons, including overnmental restricti Inadditi addition, there therisk riskthat that future future g governmental restrictions, including but not limitedto to, isisthe on, there In a Should enacted. be will District the within development controlling oror governmental policies restricting controlling development within the District will be enacted. Should a restricting policies governmental the not do maps tentative vesting courtof ofcompetent competent jurisdiction determine that the vesting tentative maps do notexempt exempt theDevelopment Development the that determine jurisdiction court and restrictions more City the by adopted regulations from future initiatives approved by the voters or regulations adopted by the City more restrictions and or voters the by from future initiatives approved initiatives such to pursuant imposed be could requirements on development within the District could be imposed pursuant to such initiativesor or District the t within developmen on requirements rol Land Future regulations. See See "SPECIAL "SPECIAL RISK RISK FACTORS FACTORS Future LandUse UseRegulations Regulationsand andGrowth Growth Cont Control regulations. Initiatives" Initiatives"above. above. can there Moreover, there canbe beno noassurance assurancethat thatthe themeans meansand andincentive incentiveto to conduct conductland land development development Moreover, deterioration be not will operationswithin withinImprovement Improvement Area No.11 will not beadversely adverselyaffected affectedby byaafuture future deteriorationof ofthe the No. Area operations policies governmental federal governmental real estate estate market marketand and economic economicconditions conditionsof of future future local, local, State State and and federal policies real relatingto toreal realestate estatedevelopment, development, theincome incometax taxtreatment treatmentof ofreal realproperty propertyownership, ownership,or orthe thenational national the relating affect adversely could rate absorption the and economy. A A slowdown slowdown of of the the development development process process and the absorption rate could adversely affect land land economy. Taxes. Special annual the pay toto owners the ofof desire oror valuesand andreduce reduce theability ability desire theproperty property owners pay the annual Special Taxes. In In that that the values event,there therecould could beaadefault defaultin inthe thepayment paymentof ofprincipal principalof, of,and andinterest intereston, on,the theBonds. Bonds. be event, property. of value the involves Anotherrisk riskto tothe theBondowners Bondowners involves the value ofundeveloped undeveloped property. The Theinability inability or or Another the reduce failureto to develop developproperty propertydue dueto toadverse adverseregulatory regulatoryor oreconomic economicconditions conditionsmay may reduce thevalue value of of failure undevelopedproperty. property. The The undeveloped undevelopedproperty property also also provides provides less less security security to tothe the Bondowners Bondowners should shouldit it undeveloped the to due 1 No. Area Improvement in property undeveloped on foreclose to be necessary for the District to foreclose on undeveloped property in Improvement Area No. 1 due to the be necessary for the District Improvement within Improvement land within nonpaymentof ofthe theSpecial SpecialTaxes. Taxes. Furthermore, Furthermore, an an inability inability to to develop develop the the land nonpayment within land within ownership of diversity of the diversity reduce the Area No. No.1I as will likely .of ownership likely reduce of land proposed will currently proposed as currently Area Special the of payment timely upon dependent more Improvement Area No. 1, making the Bondowners more dependent upon timely payment of the Special Bondowners the making 1, Improvement Area No. concentration of current concentration Tax levied levied on on the the undeveloped undevelopedproperty. property. Because Because of of the the current of ownership ownershipof of the the Tax upon depends the undevelopedproperty propertyin inthe theaffiliated affiliatedlandowners, landowners, thetimely timelypayment paymentof ofthe the Bonds Bonds depends upon the the undeveloped willingnessand andability abilityof ofthe thepresent presentowners ownersof ofthe theundeveloped undevelopedproperty propertyto topay pay the the Special Special Taxes Taxes levied levied willingness of Concentration - Concentration FACTORS RISK FACTORS "'SPECIAL RISK See "SPECIAL on the the undeveloped propertywhen when due. due. See of undeveloped property on 1 No. Area Improvement of development continued development of Improvement Area No. 1 the continued Ownership" above. above. A A slowdown slowdown or or stoppage stoppage in in the Ownership" undeveloped on could reduce reducethe the willingness willingnessand andability abilityof ofsuch such owners owners to to make make Special Special Tax Tax payments payments on undeveloped could to has it event the in property, and could greatly reduce the value of such property in the event it has tobe be foreclosed foreclosed upon. upon. property such of value the reduce property, and could greatly

35 35

Disclosure to to Future Future Homebuyers Homebuyers Disclosure Pursuant to Secti Section Lien in Tax Lien Special Tax of Special Notice of a Notice recorded a has recorded District has the District Act, the the Act, of the 53328.3 of on 53328.3 Pursuant to the Office of the Riverside County Recorder. The sellers of property within the District are required to to required are the Office of the Riverside County Recorder. The sellers of property within the District the of give prospective buyers a Notice of Special Tax in accordance with Sections 53340.2 and 53341.5 of the 53341.5 and 53340.2 Sections with give prospective buyers a Notice of Special Tax in accordance Act. While title companies companies normally normally refer of Special be can be there can reports, there title reports, in title Lien in Tax Lien Special Tax Notice of the Notice to the refer to While title Act. no guarantee that such reference will be made or the seller's notice given or, if made and given, that a that given, and made if or, given notice seller's no guarantee that such reference will be made or the prospective purchaser or lender will consider such Special Tax obligation in the purchase of a home or home a of prospective purchaser or lender will consider such Special Tax obligation in the purchase commercial facility or the lending of money thereon. Failure to disclose the existence of the Special commercial facility or the lending of money thereon. Failure to disclose the existence of the Special Taxes may may affect the willingness to 1 to No. 1 Area No. Improvement Area within Improvement land within of land owners of future owners of future ability of and ability willingness and affect the Taxes pay the the Special Special Taxes Taxes when when due. due. pay Parity T Taxes and Special Special Assessments Assessments axes and Parity The Spec Special Taxes and will constitute a lien the lots of parcels of and parcels lots and against the lien against constitute a thereon will penalties thereon any penalties and any ial Taxes The land on which they will be annually imposed until they are paid. Such lien is on a parity with all special land on which they will be annually imposed until they are paid. Such lien is on a parity with all special taxes and and special assessments levied by other other agencies agencies and and is is coequal coequal to and independent of the the lien for lien for independent of to and levied by special assessments taxes general property taxes regardless of when they are imposed upon the same property. The Special Taxes Taxes Special The property. same the upon general property taxes regardless of when they are imposed have priority over all all existing existing and and future future private private liens liens imposed imposed on on the the prope property. however, District, however, The District, rty. The ty over have priori has no control over the ability of other entities and districts to issue indebtedness secured by special taxes has no control over the ability of other entities and districts to issue indebtedness secured by special taxes or assessments assessments payable from all addition, In addition, No. 1. In Area No. Improvement Area within Improvement property within the property of the portion of a portion or a all or payable from or the landowners within Improvement Area No. 1 may, without the consent or knowledge of the District, District, the of the landowners within Improvement Area No. 1 may, without the consent or knowledge petition other public agencies to issue public indebtedness secured by special taxes or assessments. Any Any petition other public agencies to issue public indebtedness secured by special taxes or assessments. such special taxes or assessments may have a lien on such property on a parity with the Special Taxes. Taxes. Special the with parity a on property such on lien a have may such special taxes or assessments See "SECURITY Direct and and Overlapping Overlapping Debt." Debt." - Direct BONDS THE BONDS FOR THE "SECURITY FOR See Appraised Value; Land Value and Value Value; L Appraised The value of land within Improvement Area No. 1 is an important factor in evaluating the The value of land within Improvement Area No. 1 is an important factor in evaluating the investment quality of the Bonds. In the event that a property owner defaults in the payment of Special investment quality of the Bonds. In the event that a property owner defaults in the payment of Special Tax installments, the District's District's only only remedy remedy is is to to judicially on that Prospective property. Prospective that property. foreclose on judicially foreclose Tax installments, the purchasers of the Bonds should not assume that the property within Improvement Area No. 1 be could be 1 could No. Area Improvement within property the that assume not should purchasers of the Bonds for sale for foreclosure sale sold in the at a foreclosure Statement at Official Statement the Official described in value described appraised value or appraised assessed or the assessed for the sold for delinquent Special SpecialTax Tax installments installments or for for an an amount Tax Special Tax delinquent Special pay delinquent to pay adequate to amount adequate or delinquent installments. Reductions in property values within Improvement Area No. 1 due to a downturn the in the Area No. 1 due to a downturn in Reductions in property values within Improvement installments. economy or the real estate market, events such as earthquakes, droughts, or floods, stricter land use use land stricter floods, or droughts, earthquakes, as such events market, economy or the real estate regulations, threatenedor or endangered endangeredspecies speciesor or other other events security the security impact the adversely impact may adversely events may threatened regulations, underlying the Special Taxes. underlying the Special Taxes. The property values set forth in the various tables herein are the property values determined by The property values set forth in the various tables herein are the property values determined by the Appraiser. The minimum the minimum confirming the and confirming estimating and of estimating purpose of the purpose for the prepared for was prepared Appraisal was The Appraisal the Appraiser. on market value of the property in Improvement Area No. 1 as of June 17, 2005 in its as is condition on the the condition as its in 2005 17, June of as 1 market value of the property in Improvement Area No. basis of certain assumptions. assumptions. Prospective of the the that the however, that assume, however, not assume, should not Bonds should the Bonds purchasers of Prospective purchasers of certain basis land within Improvement Area No. 1 could be sold for the appraised amount described herein at the the at herein described amount appraised the for sold be could 1 No. Area land within Improvement present time or at a foreclosure sale for delinquent Special Taxes. See the Appraisal included as as included See the Appraisal present time or at a foreclosure sale for delinquent Special Taxes. Appendix D hereto for a brief description of the analysis used and assumptions made by the Appraiser. Appendix D hereto for a brief description of the analysis used and assumptions made by the Appraiser. The actual value of the property is subject to future events that might render invalid the assumptions The actual value of the property is subject to future events that might render invalid the assumptions relied upon upon by by the the Appraiser the appraised appraised value. value. determining the in determining Appraiser in relied The actual market value of the the property property is is subject subject to to future future events events such such as as a downturn the in the downturn in lue of arket va ctual m The a economy, and and occurrences of certain certain acts acts of of nature, nature, all all of of which which could could adversely adversely impact impact the the value value of of the the occurrences of economy, land in Improvement Area No. 1 which is the security for the Bonds. As discussed herein, many factors factors many herein, discussed As Bonds. the for land in Improvement Area No. 1 which is the security
36 36

could adversely affect property values or prevent or delay land development within Improvement Area No. 1. Furthermore, the estimated value-to-lien ratio of individual parcels may vary. No assurance can be given that, should a parcel with delinquent Special Taxes be foreclosed upon and sold for the amount of the delinquency, any bid will be received for such property or, if a bid is received, that such bid will be sufficient to pay all delinquent Special Taxes. Value to Lien Ratios Value-to-lien ratios have traditionally been used in land-secured bond issues as a measure of the "collateral" supporting the willingness of property owners to pay their special taxes and assessments (and, in effect, their general property taxes as well). The value-to-lien ratio is mathematically a fraction, the numerator of which is the value of the property (usually a market value as determined by an appraiser) and the denominator of which is the "lien" of the assessments or special taxes. A value to lien ratio should not, however, be viewed as a guarantee for credit-worthiness. Land values are more volatile in the early stages of a development, and are especially sensitive to economic cycles. A downturn of the economy or other market factors may depress land values and hence the value-to-lien ratios, by increasing risk to investors and lenders, and lengthening the absorption period for new development projects. Further, the value-to-lien ratio cited for a bond issue is an average. Individual parcels in a community facilities district may fall above or below the average, sometimes even below a 1:1 ratio. (With a ratio below 1:1, the land is worth less than the debt on it.) If property ownership in a community facilities district is highly concentrated during the early stages of development, the delinquency of a major property owner can deplete the bond's reserve fund and threaten the timely payment of the debt service, even though the value-to-lien ratio is adequate. Although judicial foreclosure proceedings can be initiated rapidly, the process can take several years to complete, and the bankruptcy courts may impede the foreclosure action. No assurance can be given that, should a parcel with delinquent Special Taxes be foreclosed upon and sold for the amount of the delinquency, any bid will be received for such property or, if a bid is received, that such bid will be sufficient to pay all delinquent Special Taxes. Finally, local agencies may form overlapping community facilities districts or assessment districts because they typically do not coordinate their bond issuances. Debt issuance by another entity can dilute value-to-lien ratios, as set forth in the table in the section above entitled "'SECURITY FOR THE BONDS - Direct and Overlapping Debt." See "SECURITY FOR THE BONDS - Estimated Appraised Value-to-Lien Ratios." Insufficiency of Special Taxes the annual amount of Special Tax to be levied on each taxable parcel based primarily on whether such parcel is developed or not and, for square footage, and for undeveloped property on the acreage of the A - RATE AND METHOD OF APPORTIONMENT OF SPECIAL

Under the Rate and Method, in Improvement Area No. 1 will be detached developed property on the Assessor's Parcel. See "APPENDIX

TAXES" and "SECURITY FOR THE BONDS - Rate and Method of Apportionment of Special Taxes." Accordingly, to the extent property is not developed, collection of the Special Taxes will be dependent on the willingness and ability of the owners of undeveloped property to pay such Special Taxes when due. See "SPECIAL RISK FACTORS - Future Land Use Regulations and Growth Control Initiatives" and "Failure to Develop Properties" above for a discussion of the risks associated with undeveloped property. The Act provides that, if any property within Improvement Area No. 1 not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by a girl or devise, the Special Tax will continue to be levied on and enforceable against the public entity that acquired the property. In addition, the Act provides that, if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Act have not been tested in the courts. MOREOVER, IF A SUBSTANTIAL PORTION OF LAND WITHIN IMPROVEMENT AREA NO. I

37

LIC OWNERSHIP, L TAX THE FROM EXEMPT BECAME EXEMPT FROM THESPECIA SPECIAL TAX BECAUSE BECAUSEOF OF PUB PUBLIC OWNERSHIP,OR OR BECAME THE UPON LEVIED BE COULD WHICH TAX SPECIAL MAXIMUM THE OTHERWISE, THE MAXIMUM SPECIAL TAX WHICH COULD BE LEVIED UPON THE OTHERWISE, OF TO SUFFICIENT BE NOT MIGHT ACREAGE REMAINING REMAINING ACREAGE MIGHT NOT BE SUFFICIENT TOPAY PAYPRINCIPAL PRINCIPAL OFAND ANDINTEREST INTEREST RESPECT WITH OCCUR COULD T L DEFAU A AND DUE ON ONTHE THEBONDS BONDSWHEN WHEN DUE AND A DEFAULT COULD OCCUR WITH RESPECTTO TOTHE THE INTEREST. PRINCIPAL SUCH OF PAYMENT PAYMENT OF SUCH PRINCIPALAND AND INTEREST.

Tax Delinquencies Delinquencies Tax


axes, from TTaxes, of Under provisions ofthe theAct, Act,the theSpecial Special fromwhich whichfunds fundsnecessary necessaryfor forthe thepayment paymentof of provisions Under Improvement within properties the to billed be principal of,and andinterest interest on,the theBonds Bondsare arederived, derived,will will be billed to the properties within Improvement on, of, principal totoowners sent AreaNo. No. onthe theregular regularproperty property tax bills sent ownersof ofsuch suchproperties. properties. Such Such Special Special Tax Tax bills tax on 11 Area regular do as non-payment, for interest and penalties same the installments are due and payable, and bear the same penalties and interest for non-payment, as do regular bear and payable, and due are installments property tax installments. Special Special Tax Taxinstallment installmentpayments paymentscannot cannotbe bemade madeto tothe theCounty CountyTax TaxCollector Collector installments. tax property owner property a of inability or unwillingness separately fromproperty property taxpayments. payments.Therefore, Therefore,the the unwillingness or inability of a property ownerto to tax from separately an indicate also may delinquencies tax pay regular property tax bills as evidenced by property tax delinquencies may also indicate an property by evidenced as bills tax property regular pay tax unwillingnessor orinability inabilityto tomake makeregular regularproperty property taxpayments paymentsand andSpecial SpecialTax Taxinstallment installmentpayments paymentsin in unwillingness future. the the future. BONDS THE BONDS See See"SECURITY "SECURITY FOR FOR THE THE BONDS BONDS Reserve ReserveFund" Fund" and and "SECURITY "SECURITY FOR FOR THE a adiscussion Covenantfor forSuperior SuperiorCourt CourtForeclosure," Foreclosure,"for for discussionof ofthe theprovisions provisionswhich whichapply, apply,and andprocedures procedures Covenant delinquency of event the in Agreement, Agent whichthe theDistrict Districtis isobligated obligatedto tofollow followunder underthe theFiscal Fiscal Agent Agreement, in the event of delinquency in in which thepayment paymentof ofSpecial SpecialTax Tax installments. installments. the Future FutureIndebtedness Indebtedness roved. The n imp bee as not . 11hhas ea No ement Ar ithin Improv art of e ppart Atthe thepr present time ofthe theland landw within Improvement Area No. not been improved. The esent tim At in land he t h ic wh for t eb d e privat and c li pub he t e cost of any additional improvements may well increase the public and private debt for which the land in as e r c in ll we may s nt e m e ov r imp additional any of cost of e ir es d or ity l i b a the e duc e r d l u co t eb d d se a cre in h uc s Improvement Area No. I provide security, and such increased debt could reduce the ability or desire of and ty, uri sec e Improvement Area No. I provid , . In ea No. provement Ar st the property owners topay paytthe Special Taxes levied against the land land in in Im Improvement Area No. 1 vied again 1. In addition addition, es le pecial Tax he S ers to operty own pr an of nt e m sh li b ta es he t suant to nanced pur e fi in tthe event any additional improvements orfees feesar are financed pursuant to the establishment of an rovements or additional imp vent any he e in evied to ssessments llevied or xes ta any , t c A he t to uant rs u p d e form assessment district or another district formed pursuant to the Act, any taxes or a assessments to trict s di r he anot or ct tri s di nt e ssm e s s a ee S xes. a T l cia e Sp he t of n e li he t h it w ty i r pa a on n e li a e av h finance such improvements way have a lien on a parity with the lien of the Special Taxes. See ay w finance such improvements ebt." erlapping D ect and - Dir "SECURITY FOR THE Direct andOv Overlapping Debt." BONDS HE BONDS OR T SECURITY F " Natural Natural Disasters Disasters ctivity, seismic a unpredictable seismic bject to The Di District, like all California communities, may be be su subject to unpredictable activity, ommunities, may California c ke all strict, li The cording c A . rainfall ficant rainfall. According to vent of fires due to tthe vegetation andtopograp topography, orflooding floodingin inthe theeevent ofsigni significant to hy, or egetation and he v e to es du fir . n regio active ically m s i se a in located is City the n, a l P l a Gener the seismic safety element of the City's General Plan, the City is located in a seismically active region. City's the of ent m ele safety seismic the faults numerous the from earthquake major a by impacted be could 1 As a result, Improvement Area No. 1 could be impacted by a major earthquake from the numerous faults No. As a result, Improvement Area The encompass both in the the area. both potential potential surface surface rupture ruptureand and ground groundshaking. shaking. The hazards encompass Seismic hazards area. Seismic in substantial in result could result in substantial District could occurrenceof of seismic seismicactivity, activity,fires firesor orflooding floodingin in or or around around the the District occurrence reduce substantially could turn, in damage to properties in Improvement Area No. 1, which, in turn, could substantially reduce the the value value of of which, 1, No. Area damage to properties in Improvement property the of portion substantial a event, an such an event, a substantial portion of the property such properties. properties. As of such occurrence of the occurrence of the result of a result As a such the reserve fund owners may may be be unable unable or or unwilling unwillingto to pay pay the the Special Special Taxes Taxes when when due, due, and and the the reserve fund for for the owners be could be Area No. Improvement in Improvement land in Bonds may may become becomedepleted. depleted. In In addition, the value value of of land Area No. 1 1 could addition, the Bonds in sales foreclosure of proceeds resulting the reducing events, diminished in the aftermath of such natural events, reducing the resulting proceeds of foreclosure sales in natural such of diminished in the aftermath Taxes. the event event of of delinquencies delinquencies in in the the payment payment of of the the Special Special Taxes. the

38 38

Endangered

and Threatened

Species

On a regular basis, new species are proposed to be added to the State and federal protected species lists. Any action by the State or federal governments to protect species located on or adjacent to the property within the District could negatively affect the Developers' ability to complete the development of the properties within Improvement Area No. 1 as planned. This, in turn, could reduce the ability or willingness of the property owners to pay the Special Taxes when due and would likely reduce the value of the land and the potential revenues available at a foreclosure sale for delinquent Special Taxes. Hazardous Substances

A serious risk in terms of the potential reduction in the value of a parcel within Improvement Area No. 1 is a claim with regard to a hazardous substance. In general, the owners and operators of a parcel within Improvement Area No. 1 may be required by law to remedy conditions of such parcel relating to release or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Superfund Act," is the most well known and widely applicable of these laws, but California laws with regard to hazardous substances are also similarly stringent. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of the property whether or not the owner or operator had anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the parcels within Improvement Area No. 1 be affected by a hazardous substance, will be to reduce the marketability and value of such parcel by the costs of remedying the condition, because the prospective purchaser, upon becoming the owner, will become obligated to remedy the condition just as the seller is. Further it is possible that liabilities may arise in the future with respect to any of the parcels resulting from the current existence on the parcel of a substance currently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the current existence on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method in which it is handled. All of these possibilities could significantly affect the value of a parcel within Improvement Area No. 1 that is realizable upon a delinquency. As described in the Phase 1 Environmental Assessment, certain areas within Improvement Area No. 1 have been excavated to remove contaminated or stained soil but no remediation has been recommended and further investigation was not warranted. See "THE DEVELOPMENT -Environmental Assessment." Bankruptcy and Foreclosure

The payment of property owners' taxes and the ability of Improvement Area No. 1 to foreclose " the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursue judicial foreclosure proceedings, may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. See "SECURITY FOR THE BONDS Covenant for Superior Court Foreclosure." In addition, the prosecution of a foreclosure could be delayed due to many reasons, including crowded local court calendars or lengthy procedural delays. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel's approving legal opinion) will be qualified, as to the enforceability of the various legal

39

instruments, by moratorium, rights of creditors generally.

bankruptcy,

reorganization,

insolvency

or other similar laws affecting

the

In addition, bankruptcy of a property owner (or a property owner's partner or equity owner) would likely result in a delay in procuring Superior Court foreclosure proceedings unless the bankruptcy court consented to permit such foreclosure action to proceed. Such delay would increase the likelihood of a delay or default in payment of the principal of, and interest on, the Bonds and the possibility of delinquent tax installments not being paid in full. Under 11 U.S.C. Section 362(b)(18), in the event of a bankruptcy petition filed on or after October 22, 1994, the lien for ad valorem taxes in subsequent fiscal years will attach even if the property is part of the bankruptcy estate. Bondowners should be aware that the potential effect of 11 U.S.C. Section 362(b)(18) on the Special Taxes depends upon whether a court were to determine that the Special Taxes should be treated like ad vatorem taxes tbr this purpose. On July 30, 1992, the United States Court of Appeals for the Ninth Circuit issued its opinion in a bankruptcy case entitled In re Glasply Marine Industries. In that case, the court held that ad valorem property taxes levied by Snohomish County in the State of Washington after the date that the property owner filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on the property. Although the court upheld the priority of unpaid taxes imposed before the bankruptcy petition, unpaid taxes imposed after the filing of the bankruptcy petition were declared to be "administrative expenses" of the bankruptcy estate, payable after all secured creditors. As a result, the secured creditor was able to foreclose on the property and retain all the proceeds of the sale except the amount of the pre-petition taxes. According to the court's ruling, as administrative expenses, post petition taxes would be paid, assuming that the debtor had sufficient assets to do so. In certain circumstances, payment of such administrative expenses may be allowed to be deferred. Once the property is transferred out of the bankruptcy estate (through foreclosure or otherwise), it would at that time become subject to current ad valorem taxes. The Act provides that the Special Taxes are secured by a continuing lien which is subject to the same lien priority in the case of delinquency as ad valorem taxes. No case law exists with respect to how a bankruptcy court would treat the lien for Special Taxes levied after the filing of a petition in bankruptcy. Glasp]y_lis controlling precedent on bankruptcy courts in the State. If the Glasply precedent was applied to the levy of the Special Taxes, the amount of Special Taxes received from parcels whose owners declare bankruptcy could be reduced. Property Controlled by FDIC

The District's ability to collect interest and penalties specified by State law and to foreclose the lien of delinquent Special Tax payments may be limited in certain respects with regard to properties in which the Internal Revenue Service, the Drug Enforcement Agency, the Federal Deposit Insurance Corporation (the "FDIC") or other similar federal agencies has or obtains an interest. The District is not aware of any such interest of a federal agency in the land within Improvement Area No. 1. On June 4, 1991 the FDIC issued a Statement of Policy Regarding the Payment of State and Local Real Property Taxes. The 1991 Policy Statement was revised and superseded by a new Policy Statement effective January 9,1997 (the "Policy Statement"). The Policy Statement provides that real property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its proper tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent

40

with sound business practice arid the orderly administration of the institution's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent. The Policy Statement states that the FDIC generally will not pay non ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Act and a special tax formula which determines the special tax due each year, are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity. The FDIC has filed claims against one California county in United States Bankruptcy Court contending, among other things, that special taxes authorized under the Act are not ad valorem taxes and therefore not payable by the FDIC, and seeking a refund of any special taxes previously paid by the FDIC. The FDIC is also seeking a ruling that special taxes may not be imposed on properties while they are in FDIC receivership. The Bankruptcy Court ruled in favor of the FDIC's positions and, on August 28, 2001, the United States Court of Appeals for the Ninth Circuit affirmed the decision of the Bankruptcy Court, holding that the FDIC, as an entity of the federal government, is exempt from post-receivership special taxes levied under the Act. This is consistent with provision in the Law that the federal government is exempt from special taxes. The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency with respect to a parcel in which the FDIC has an interest, although prohibiting the lien of the FDIC to be foreclosed on at a judicial foreclosure sale would likely reduce the number of or eliminate the persons willing to purchase such a parcel at a foreclosure sale. Owners of the Bonds should assume that the District will be unable to foreclose on any parcel owned by the FDIC. Such an outcome would cause a draw on the Reserve Fund and perhaps, ultimately, a default in payment of the Bonds. The District has not undertaken to determine whether the FDIC or any FDIC-insured lending institution currently has, or is likely to acquire, any interest in any of the parcels, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding. Billing of Special Taxes A special tax formula can result in a substantially heavier property tax burden being imposed upon properties within a community facilities district than elsewhere in a city or county, and this in turn, along with various other factors, can lead to problems in the collection of the special tax. In some community facilities districts, taxpayers have refused to pay the special tax and have commenced litigation challenging the special tax, the community facilities district and the bonds issued by the District. Under provisions of the Act, the Special Taxes are billed to the properties within Improvement Area No. 1 which were entered on the Assessment Roll of the County Assessor by January 1 of the previous Fiscal Year on the regular property tax bills sent to owners of such properties. Such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. Ordinarily, these Special Tax installment payments cannot be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular

41

or unwillingness or an unwillingness indicate an also indicate may also delinquencies may property tax bills bills as as evidenced tax delinquencies property tax by property evidenced by property tax future. the in axes T l a i Spec f o payments t allmen t ns i and installment payments of Special Taxes in the future. inability to regular property payments and tax payments property tax make regular o make inability t the of the discussion of a discussion for a Foreclosure," for Court Foreclosure," Superior Court tbr Superior See FOR T THE Covenant for BONDS - Covenant HE BONDS "SECURITY FOR See "SECURITY of t even the event of n the ollow, iin bligated to istrict is provisions whichapply, apply, and and pr procedures whichthe theD District is o obligated to f follow, ocedures which provisions which Taxes. Special Taxes. of Special delinquency installments of of installments payment of the payment delinquency in the

Collection Taxes Special Taxes Collection of Special


land against land levied against Tax levied Special Tax the Special that the necessary that is necessary it is Bonds, it In the Bonds, on the service on debt service pay debt to pay order to In order of payment the in delays that possible is It manner. within Area No. No. l 1 be be paid paid in in a a timely timely manner. It is possible that delays in the payment of Improvement Area within Improvement of ownership of transfer the by or by the transfer of ownership of subdivisions or processing subdivisions debt County processing the County of the result of the result be the may be service may debt service Agreement Agent Agreement Fiscal Agent the Fiscal in the covenanted in has covenanted District has The District property Area No. No. 1. 1. The Improvement Area within Improvement property within Special delinquent with property t agains proceedings under foreclosure proceedings against property with delinquent Special institute foreclosure to institute conditions to certain conditions under certain were ceedings o pr sure lo rec o f f Bonds. If I the Bonds. on the Taxes foreclosure proceedings were service on debt service pay debt to pay funds to obtain funds to obtain order to in order Taxes in amount the amount advance the to, advance required to, be required not be would not but would could, but instituted, or deed holder could, trust holder deed of trust mortgage or any mortgage instituted, any court superior such event the In interest. security its of the delinquent Special Taxes to protect its security interest. In the event such superior court protect to Taxes of the delinquent Special the of owners the to payments interest and principal in principal and interest payments to the owners of the delay in be a delay foreclosure could be there could necessary, there foreclosure is necessary, foreclosure the of proceeds the of the proceeds of the foreclosure receipt of and receipt proceedings and foreclosure proceedings the foreclosure of the Bonds prosecution of pending prosecution Bonds pending judicial at aa judicial sale at and sale foreclosure and to subject property real the sale, if any. No assurances can be given that the real property subject to foreclosure that given be can sale, if any. No assurances any pay to sufficient be will sale such of proceeds the proceeds of such sale will be sufficient to pay any foreclosure sale will will be be sold that the sold, that if sold, or, if sold or, foreclosure sale to action an such cause to District to cause such an action to the District authorizes the Act authorizes the Act delinquent Although the installment. Although Taxes installment. Special Taxes delinquent Special the of obligations of the the obligations specify the not specify does not Act does completion, the to completion, be the Act pursued to diligently pursued and diligently commenced and be commenced the at the sold at property of parcel or lot any acquiring otherwise or District with regard to purchasing or otherwise acquiring any lot or parcel of property sold District with regard to purchasing BONDS THE FOR "SECURITY See sale. such at such sale. See "SECURITY FOR THE BONDS purchaser at other purchaser no other is no foreclosure there is sale if there foreclosure sale Foreclosure." Covenant Court Foreclosure." Superior Court for Superior Covenant for

Maximum Rates Tax Rates Special Tax Maximum Special


all on all levied on Taxes levied Special Taxes the Special adjust the may adjust District may the District Method, the Within and Method, Rate and the Rate of the limits of the limits Within the debt annual debt pay annual to pay year to each year required each amount required the amount provide the to provide property 1 to No. 1 Area No. Improvement Area within Improvement property within Reserve the to equal amount an to Account Reserve the replenish service on the Bonds and to replenish the Reserve Account to an amount equal to the Reserve to service on the Bonds and of categories particular against levied be may that Taxes that may be levied against particular categories of Special Taxes of Special Requirement. amount of the amount However, the Requirement. However, of event the In Method. and Rate and Method. In the event of applicable Rate the applicable in the forth in set forth rates set tax rates property maximum tax the maximum to the subject to is subject property is in property in for property rates for tax rates maximum tax the maximum that the assurance that no assurance is no there is significant delinquencies, there Tax delinquencies, Special Tax significant Special See Bonds. See obligations on service obligations debt service sufficient to Improvement Area No. No. 1 1 would would be be sufficient to meet meet debt on the the Bonds. Area Improvement METHOD AND RATE A "APPENDIX A RATE AND METHOD and "APPENDIX Taxes" and Special Taxes" "SECURITY The Special - The BONDS THE BONDS FOR THE "SECURITY FOR TAXES." SPECIAL TAXES." OF SPECIAL APPORTIONMENT OF OF APPORTIONMENT OF

Exempt Properties Exempt Properties


not shall not District shall the District that the provides that Method provides and Method Rate and each Rate met, each are met, So conditions are certain conditions ascertain long as Solong Board theBoard Method, the andMeth6d, Rateand theRate Under the Property. Under Exempt Property. as Exempt classified as levy Property classified on Property Tax on Special Tax levy aaSpecial District the within property Association Owner's will Property Owner's Association property within the District property, Property public property, on public Taxes on Special Taxes levy Special notlevy willnot other certain as well as 2) No. Area Improvement in (located in Improvement Area No. 2) as well as certain other course (located golf course the golf or comprising the property comprising orproperty the in assigned in the be assigned will be status will Property status Exempt Property parcels Area No. No.2. 2. Exempt Area Improvement in Improvement specified in parcels specified Exempt ofExempt categories of suchcategories insuch included in becomes included District becomes the District chronological in the property in which property in which order in chronological order Property. Property. government localgovernment or federal or State, federal theState, ofthe entities of orentities properties or that properties provides that In local Actprovides the Act addition, the Inaddition, No.1 1 Area No. Improvement Area within Improvement property within theproperty however, the provided, however, Taxes; provided, are Special Taxes; theSpecial from the exempt from areexempt otherwise nototherwise which isis devise, which ordevise, gift or by gift or by transaction or negotiated transaction through aanegotiated acquired not entity through public entity by aapublic acquired by provides further Act The Taxes. Special Taxes. The Act further provides the Special to the subject to be subject exempt to be continue to will continue Taxes, will Special Taxes, the Special from the exempt from 42 42

domain eminent through entity public a a by by acquired is is Taxes Special the the that if property subject Special Taxes acquired public entity through eminent domain to to subject if property that as if it treated be be is to property to tha respect with Taxes Special the the proceedings, obligation to pay Special Taxes with respect to tthat property is to treated as if it tion to pay obliga ngs, the the proceedi Act have not thethe s of of provision these of operation and ionality constitut The nt. were a special assessment. The constitutionality and operation of these provisions Act have not assessme special a were entity federal a by Taxes Special the of t paymen requires Act the as been tested. In particular, insofar as the Act requires payment of the Special Taxes by a federal entity been tested. In particular, insofar tutional. unconsti be be 1, it No.No. ment Area acquiring property within Improvement Area 1,may it may unconstitutional. Improve within property acquiring by taxation from exempt l becomes No. ment Area Improve within any reason property within Improvement Area No. 1 becomes exempt from taxation by property reason any forfor If If such entity le nontaxab a by ip ownersh its of reason by or Method, and reason of its status under the Rate and Method, or by reason of its ownership by a nontaxable entity such Rate reason of its status under the d authorize maximum thethe n of of limitatio thethe to to subject agency, public another federal government another public agency, subject limitation maximum authorized ent or or governm federal thethe as as ment Area Improve s within propertie g taxable remainin thethe ed to to reallocat be be rates, Special Taxes will will reallocated remaining taxable properties within Improvement Area Taxes Special thethe rates, and Taxes Special the of amount eater r g a paying property such of No. 1. This would result in the owners of such property paying a greater amount of the Special Taxes and owners No. 1. This would result in the Taxes. Special the of payment timely thethe could have adverse impact upon timely payment of the Special Taxes. upon impact adverse an an have could XIIID Article and XIIIC tion Article Constitu California California Constitution Article XIIIC and Article XIIID "Right to so-called thethe ion 218, Proposit te approved Sta thethe of of voters thethe 1996, On November 1996, voters State approved Proposition 218, so-called "Right to vember 5, 5, No On tion, which Constitu State the to to XIIID and XIIIC Articles added ion 218 Proposit Vote Taxes Act." Proposition 218 added Articles XIIIC and XIIID the State Constitution, which Act." Taxes on on Vote existing both collect and levy to District the of ability the affecting s articles contain a number of provisions affecting the ability of the District to levy and collect both existing provision of number a articles contain y" of Summar and Title "Official the g to to Accordin charges. andand and future taxes, assessments, fees charges. According the "Official Title and Summary" of nts, fees assessme taxes, future and ty "'authori the limits ion 218 Proposit General, Attorney rnia State Califo the Proposition 218 prepared the California State Attorney General, Proposition 218 limits the "authority by by prepared ion 218 Proposit On July 1, charges." andand nts, fees assessme -related property and taxes impose local governments impose taxes and property-related assessments, fees charges." On July 1, rnments to to gove local ofof the enacted 919 SB law. into signed was 919") ("SB 919 Bill Senate State 1997 California State Senate Bill 919 ("SB 919") was signed into law. SB 919 enacted the 1997 California and 218 ion Proposit clarifies and nts impleme which Act," ntation "Proposition 218 Omnibus Implementationi Act," which implements and clarifies Proposition 218 and Impleme Omnibus tion 218 "Proposi and XIIIC Articles g with complyin ons in in jurisdicti local for rs paramete and prescribes specific procedures and parameters for local jurisdictions complying with Articles XIIIC and es procedur specific s prescribe XIIID. XIIID. Special any ofof levy the ngs for proceedi the that tion reaffirms Article XIIID te Constitu the State Constitution reaffirms that the proceedings for the levy any Special Sta the ID ofof XII Article 4 of Section of s provision the with ity conform in d conducte be must Act Taxes by the District under the Act must be conducted in conformity with the provisions of Section 4 of the under District the by Taxes ce accordan in Taxes Special of levy the for ngs proceedi its d complete Article XIIIA. The District has completed its proceedings for the levy of Special Taxes in accordance has District The Article XIIIA. ent a Governm of 53358 Section XIIIA. Article of 44 with the provisions Section of Article XIIIA. Under Under Section 53358 ofthe theCaliforni California Government Section s ofof provision the with an increase oror tax special aa ofof levy the annul oror void, aside, setset review, ng to to Code, any action proceeding review, aside, void, annul the levy special tax an increase proceedi oror action any Code, after the days 30 within ced commen be must e) challeng ional constitut any g in a Special Tax (including any constitutional challenge) must be commenced within 30 days after the (includin Tax Special a in voters. the by Special Tax is approved by the voters. approved Special Tax is ofoflocal matters in in power initiative the ns on on limitatio certain Article XIIIC removes certain limitations the initiative power matters localtaxes, taxes, C removes XIIl Article protest hearing, notice, includes which e, procedur a for provides Act The assessments, fees and charges. The Act provides for a procedure, which includes notice, hearing, protest charges. and fees nts, assessme tax. ofofan ment of method and rate the alter ents, to to and voting requirements, alter the rate and method ofapportion apportionment anexisting existingspecial special tax. requirem voting and special any of rate the reduce n toto resolutio aa adopting from e body However, the Act prohibits legislative body from adopting resolution reduce the rate of any special legislativ aa prohibits Act , the However such unless Act the to pursuant incurred debt any retire to utilized being are tax that ofof tax the proceeds that tax are being utilized to retire any debt incurred pursuant to the Act unless such proceeds the if if tax t of retiremen timely the with interfere not would tax that ofof reduction legislative body determines that the reduction that tax would not interfere with the timely retirement of the es that determin e body legislativ the of voters the by exercise that likely is it doubt, from free not is that debt. Although the matter is not free from doubt, it is likely that exercise by the voters of the that debt. Although the matter to isissubject Tax Special the terminate oror reduce toto XIIIC Article inin initiative power referred Article XIIIC reduce terminate the Special Tax subject tothe thesame same toto referred power initiative to the Act. pursuant District, the of body e legislativ the as Board, the to le restrictions as are applicable to the Board, as the legislative body of the District, pursuant to the Act. applicab are as ns restrictio conferred not has 218 ion Proposit that likely is it doubt, from free not is matter Accordingly, although the matter is not free from doubt, it is likely that Proposition 218 has not conferred the Accordingly, although Taxes the to onthe thevoters votersthe thepower power torepeal repealor orreduce reduce theSpecial Special Taxesififsuch suchrepeal repealor orreduction reductionwould would interfere interfere on t of withthe thetimely timelyretiremen retirement ofthe theBonds. Bonds. with e body the or voters , for Itmay maybe bepossible, possible,however however, for voters or theBoard, Board,acting actingas asthe thelegislativ legislative bodyof ofthe theDistrict, District, It the of nt repayme timely the with interfere not does which manner a toreduce reducethe theSpecial SpecialTaxes Taxesin in a manner which does not interfere with the timely repayment of theBonds, Bonds, to be may that Taxes Special of amount butwhich whichdoes doesreduce reducethe themaximum maximum amount of Special Taxes that may belevied leviedin inany anyyear yearbelow below the the but e can existinglevels. levels. Furtherm Furthermore, noassuranc assurance canbe begiven givenwith withrespect respectto tothe the future futurelevy levy of of the the Special Special ore, no existing t of y for Taxesin inamounts amountsgreater greaterthan thanthe theamount amountnecessar necessary forthe thetimely timelyretiremen retirement ofthe theBonds. Bonds. Taxes 43 43

ively interpreted by the extens be toto yet on have plementing legislati the and tion 218 Proposition 218 and theim implementing legislation have yet be extensively interpreted by the Proposi of the constitutionality April 1998 ofofAppeal Court ia Californ the r, courts; however, the California Court Appealin in April 1998upheld upheld the constitutionality of howeve courts; of local and collectibility the tion to to condi a a as as res procedu g ballotin Proposition balloting procedures condition thevalidity validity and collectibility of local tion218's 218's Proposi local various to es challeng and for on actions ofofvalidati A Anumber ents. assessm ental governmental assessments. number validation actions for and challenges to various local governm which State, out the through r Court Superio inin filed been ents have assessm and fees governmental taxes, fees and assessments have been filed Superior Court throughout the State, which ental taxes, governm and application of ion erpretat t in The 218. tion Proposi of ions erpretat t in al addition in could result in additional interpretations of Proposition 218. The interpretation and application of result could to a number of the matters respect h t wi courts the by ned determi be ly ultimate will Proposition 218 will ultimately be determined by the courts with respect to a number of the matters tion 218 Proposi predicted at this time with any t bebe canno nation such e ofof the and discussed above, and theoutcom outcome suchdetermi determination cannot predicted at this time with any d above, discusse certainty. y. certaint es egislative Measur ves and BallotInitiati Initiatives andLLegislative Measures Ballot d for the ballot pursuant to a a measure nt to to pursua adopted was tion 218 Proposition 218 was adopted pursuant measurequalifie qualified for the ballot pursuant to Proposi as in the past enacted legislation ture hhas Legisla State the and ; process e initiativ tional constitu California's constitutional initiative process; and the State Legislature in the past enacted legislation ia's Californ provisions for particular funding m minimu hed establis or s n limitatio g spendin the whichhas hasaltered altered the spending limitations or established minimum funding provisions for particular which California voters or measures could initiative measures other initiative time, other activities. From time time to to time, could be be adopted adopted by by California voters or From s. activitie e or legislation might place n of The ture. the by legislation enacted by theLegisla Legislature. The adoptio adoption of any any such such initiativ initiative or legislation might place on enacted legislati to increase revenues or to districts local other or t c Distri the State, the of ability the limitations on the ability of the State, the District or other local districts to increase revenues or to ns on limitatio See development of property. te the ner to of the on iations oror increaseappropr appropriations on theability ability ofaalandow landowner tocomple complete the development of property. See increase above. Control Initiatives" ions and Regulat Use Land Future RS AL RISK "SPECIAL RISK FACTO FACTORS Future Land Use Regulations andGrowth Growth Control Initiatives" above. "SPECI ation No NoAcceler Acceleration event of a payment cceleration in heir a lowing for rovision al The B Bonds do not not contain contain a ap provision allowing forttheir acceleration in the the event of a payment onds do The ent or upon any adverse er default default or or oth other default under underthe the terms termsof of the the Bonds Bondsor orthe the Fiscal Fiscal Agent Agent Agreem Agreement or upon any adverse default Act or the Fiscal Agent the in n provisio no provision changein inthe the tax tax status statusof of interest intereston onthe theBonds. Bonds. There There is is no in the Act or the Fiscal Agent change t default by an owner of a parcel tion of Agreement foraccelera acceleration of the the Special Special Taxes Taxes in inthe theevent event of of aa paymen payment default by an owner of a parcel ent for Agreem ent, a Bond Owner is given the t to ement Area within Improv Improvement AreaNo. No.1. 1. Pursuan Pursuant to the the Fiscal Fiscal Agent Agent Agreem Agreement, a Bond Owner is given the within remedies described in certain pursue to Owners Bond all of on protecti and benefit right for the equal benefit and protection of all Bond Owners to pursue certain remedies described in right for the equal " MENT. AGREE T AGEN FISCAL OF ARY SUMM C DIX "APPEN "APPENDIX C SUMMARY OF FISCAL AGENT AGREEMENT." tion Loss of Tax Tax Exemp Exemption oss of L - Tax Exemption," in order to INFORMATION "CONCLUDING INFORMATION caption "CONCLUDING the caption under the d under As discusse discussed Tax Exemption," in order to As s of the interest on the Bonds, n from maintain the exclusio exclusion from gross gross income income for for federal federal income income tax tax purpose purposes of the interest on the Bonds, n the maintai action, or fail to take any ent not he Fiscal ted in the has covenan covenanted in tthe Fiscal Agent Agent Agreem Agreement notto to take take any any action, or fail to take any District has the District affect the exclusion from gross adversely affect would adversely action would such action take such to take failure to or failure action or such action if such action, the exclusion from gross action, if e Code of 1986, as amended. Revenu Internal the of 103 Section under Bonds the on interest on the Bonds under Section 103 of the Internal Revenue Code of 1986, as amended. of interest income income of of Federal income taxation purposes of for purposes income for gross income in gross includable in become includable could become Interest Federal income taxation Bonds could the Bonds on the Interest on of the City or the District in omissions of or omissions acts of result a as issued, were Bonds the date the retroactive to the date the Bonds were issued, as a result of acts or the City or the District in to ive retroact are not subject to early Bonds the occur, ty taxabili of event an such Should Code. the Code. Should such an event of taxability occur, the Bonds are not subject to early violation of the violation of under the optional redemption or redeemed under until redeemed or until maturity or outstanding to remain outstanding will remain and will redemption to maturity the optional redemption or redemption and Agreement. Agent Agreement. Fiscal Agent the Fiscal of the provisions of redemption provisions fund redemption sinking fund mandatory mandatory sinking Remedies on Remedies Limitations on Limitations a variety limited by y be Owners ma Bond Owners available to Remedies available Remedies to the the Bond may be limited by a variety of factors and may be Bonds or to preserve the the Bonds on the interest and of l principa of t paymen timely the inadequate to assure the timely payment of principal of and interest on or to preserve the assure to ate inadequ of the the enforceability to as opinion its limited has l Counse Bond Bonds. the of status mpt tax-exempt status of the Bonds. Bond Counsel has limited its opinion as to the enforceability of the tax-exe may be limited by bankruptcy, enforceability may that enforceability extent that the extent to the Agreement to Agent Agreement Fiscal Agent the Fiscal Bonds be limited by bankruptcy, of the and of Bonds and or other similar laws affecting moratorium, or transfer, moratorium, or transfer, conveyance or fraudulent conveyance insolvency, other similar laws affecting reorganization, fraudulent insolvency, reorganization, by the exercise of judicial and by principles and equitable principles by equitable rights, by creditor's rights, of creditor's enforcement of generally the exercise of judicial the enforcement generally the 44 of factors and may be

44

any of of breach thethe of of event ion in the accelcrat to to subject discretion. Additionally, Bonds subject acceleration in the event breach any notnot are are Bonds ally, the the Addition n. discretio the or remedies certain of ity availabil of lack The t. greemen A Agent Fiscal covenant or duty under the Fiscal Agent Agreement. The lack of availability of certain remedies or the the under duty or covenant Bond thethe of of rights the of tion modifica or n limitatio delay, of risks entail limitation of remedies may entail risks of delay, limitation or modification of the rights Bond may limitation of remedies Owners. Owners. by the ns incurred obligatio thethe and Owners, Bond thethe of of remedies andand rights Enforceability rights remedies Bond Owners, and obligations incurred by the thethe bility of of Enforcea cy, insolven cy, bankrupt le applicab and code cy bankrupt federal the to District, may become subject to the federal bankruptcy code and applicable bankruptcy, insolvency, subject become District, may rights creditor's ent of of enforcem thethe affecting to or relating laws um, or similar reorganization, moratorium, or similar laws relating to or affecting enforcement creditor's rights ation, moratori reorganiz ent under enforcem specific thethe limit may s which principle equity effect, in in generally, now hereafter effect, equity principles which may limit specific enforcement under hereafter or or , now generally to it delegated powers the of America of States United the by exercise the , State law of certain remedies, the exercise by the United States of America of the powers delegated to it remedies State law of certain the police of s, situation nal exceptio certain in exercise, y necessar and le Constitution, reasonable and necessary exercise, in certain exceptional situations, of the police reasonab tion, the the Constitu thethe by by of serving a interest thethe in in ental bodies governm its its and State thethe nty of of sovereig powers inherent sovereignty State and governmental bodies interest of serving a thethe in in inherent powers authorities powers joint against remedies ns on on limitatio thethe and purpose e public significant and legitimate public purpose and limitations remedies against joint powers authorities legitimat nt and significa ure." Foreclos and tcy Bankrup CTORS A F RISK L "SPECIA in the State. See "SPECIAL RISK FACTORS Bankruptcy and Foreclosure." in the State. See

Limited Secondary Market y Market Secondar Limited


may not be which c risks economi certain poses Bonds thethe nt in in investme stated herein, investment Bonds poses certain economic risks which may not be herein, stated AsAs nd the understa who s resource financial al substanti with persons only and , investors appropriate certain investors, and only persons with substantial financial resources who understand the certain ate forfor appropri antee that there guar nono bebe can There nt. investme such consider should Bonds thethe risk investment Bonds should consider such investment. There can guarantee that there nt in in investme of of risk exists, that the y market secondar aa if if or, Bonds the of of sale or or purchase forfor y market will secondary market purchase sale the Bonds or, secondary market exists, that the secondar a a be be will rating for a credit for made been on has applicati NoNo r price. particula any for Bonds can could sold for any particular price. application has been made for a credit rating for sold be be could or or can Bonds future for the the in in or or now either secured bebe could rating a credit whether known the Bonds, and it is not known whether a credit rating could secured either now the future for the not it is and Bonds, the Bonds. Bonds. FORMATION IN NCLUDING CO CONCLUDING INFORMATION

Underwriting riting Underw


representing the 283, a apurchase at at Bonds d thethe purchase iter The Underwriter purchased Bonds purchaseprice priceof of $25,824, $25,824,283, representing the Underwr The Issue Original Net less and .00 $434,445 of discount iter's Underwr anan less principal amount the Bonds less Underwriter's discount of $434,445.00 and less Net Original Issue Bonds the of of amount principal prices the atat initially public the toto Bonds the offer to to iter intends Discount $71,272.00. TheUnderwr Underwriter intends offer the Bonds the public initially the prices The 00. $71,272. of of Discount ntly change t, which setforth forth onthe theinside insidecover coverpage pageof of this this Official Official Statemen Statement, whichprices prices may may subseque subsequently change on set notice. prior without any requirement of prior notice. ent of requirem any without the ters ininoffering alers and de with join toto right the iter reserves The Underwriter reserves the right join with dealers andother otherunderwri underwriters offering the Underwr The g dealers iter may Bonds the public.The TheUnderwr Underwriter mayoffer offerand andsell sellthe theBonds Bondsto tocertain certaindealers dealers(includin (including dealers public. the toto Bonds dealers such and prices, offering public the than lower prices at sts) ru t nt depositing Bonds into investment trusts) at prices lower than the public offering prices, and such dealers investme into g Bonds depositin dealers. to sales s on may reallow any such discounts on sales toother other dealers. discount such any reallow may

Opinion egal Opinion LLegal


g the a, approvin Los L.L.P., Jaworski ht & Thelegal legalopinion opinionofFulbrig of Fulbright & Jaworski L.L.P., LosAngeles, Angeles,Californi California, approving thevalidity validity The to available made be IX FFhereto, set form ally the ofthe theBonds, Bonds,in insubstanti substantially the form setforth forthin in APPEND APPENDIX hereto,will will be made available to of will be delivery. original of time atatthe purchasers of the Bonds the time of original delivery.A Acopy copyof ofthe thelegal legalopinion opinionfor forthe theBonds Bonds will be Bonds the rs of purchase Owners the en on provided with each definitive bond.Bond BondCounsel Counselhas hasnot notundertak undertaken onbehalf behalfof of the Ownersor orthe the e bond. definitiv each with provided such to ility responsib no assumes and t Statemen Official the Beneficial Owners ofthe theBonds Bondsto toreview review the Official Statement and assumes no responsibility to such of al Owners Benefici legal d herein. ion containe the ofof the for al Owners Ownersand andBenefici Beneficial Owners for theaccuracy accuracy theinformat information contained herein. Certain Certain legal Owners L.L.P., Los t & matterswill willbe bepassed passedupon uponfor forthe theCity Cityby bythe theCity CityAttorney Attorneyand andby by Fulbrigh Fulbright & Jaworski Jaworski L.L.P., Los matters Jones Hall, Bonds. the of issuance the toto respect with City the toto re Counsel a, Disclosu Angeles,Californi California, Disclosure Counsel the City with respect the issuance of the Bonds. Jones Hall, Angeles, iter. Underwr a, has o, Californi ion, San nal Law AProfessio Professional LawCorporat Corporation, SanFrancisc Francisco, California, hasacted actedas ascounsel counselto tothe the Underwriter. A

45 45

Tax Exemption on Exempti Tax


must be met uirements that reqrequirements certain imposes "Code"), (the 1986 of of Code Revenue The Internal Revenue Code 1986 (the "Code"), imposes certain that must be met Internal The excluded remain and be to thereon interest for Bonds the of delivery and issuance subsequent to the issuance and delivery of the Bonds for interest thereon to be and remain excluded nt to the subseque tax income federal for for thereof owners the the of of income gross the the from Code of the pursuant to section 103(a) of the Code from gross income owners thereof federal income tax 103(a) to section pursuant included in be be to to Bonds thethe on on interest thethe cause ents could requirem such purposes. Noncompliance with such requirements could cause interest Bonds included in pliance with . Noncom purposes issuance of date the to e retroactiv purposes tax income federal for thereof owners the the gross income of the owners thereof for federal income tax purposes retroactive to the date of issuance of the gross income from the onds B the on interest the of exclusion the maintain to ed covenant has District The Bonds. the of of the Bonds. The District has covenanted to maintain the exclusion of the interest on the Bonds from the . purposes taxtax income federal forfor thereof owners the the of of gross income owners thereof federal income purposes. income gross interest on the law, existing under Counsel, Bond L.L.P., Jaworski t && Fulbrigh of of opinion Fulbright Jaworski L.L.P., Bond Counsel, under existing law, interest on the opinion thethe In In ce with the complian assuming and, a Californi of State the of taxes income personal from Bonds is exempt from personal income taxes of the State of California and, assuming compliance with the is exempt Bonds Code from thethe of of 103(a) section to to pursuant is excluded Bonds thethe on on interest , aforementioned covenant, interest Bonds is excluded pursuant section 103(a) Code from covenant tioned aforemen of the also is Counsel Bond . purposes tax income federal for thereof ers n ow the the gross income of the owners thereof for federal income tax purposes. Bond Counsel is also of the of the gross income d "specifie not are Bonds the , covenant tioned aforemen the with ce complian opinion that, assuming compliance with the aforementioned covenant, the Bonds are not "specified assuming that, opinion , the interest on therefore and, Code the of of 57(a)(5) section of of meaning the within bonds" private activity bonds" within the meaning section 57(a)(5) the Code and, therefore, the interest on activity private rnative alte g the computin of purposes for e preferenc tax of item an as the Bonds will not be treated as an item of tax preference for purposes of computing the alternative treated be not the Bonds will owned Bonds the onon the Bonds interest of of accrual or or receipt The Code. thethe of of 55 55 section minimum imposed section Code. The receipt accrual interest owned by by imposed taxtax minimum which the upon income, mum taxable ernative mini alt itsits utation of of comp the affect aorp corporation may affect the computation alternative minimum taxable income, upon which the oration may a c byby in determining account into taken is is interest such t that exten thethe , to to imposed is is taxtax alternative minimum imposed, extent that such interest taken into account in determining e minimum alternativ current adjusted such of any, if excess, the of percent (75 on corporati that of the adjusted current earnings of that corporation (75 percent of the excess, if any, of such adjusted current ings earn current adjusted the minimum ative rn nt totoalte adjustme anan being income taxable e minimum alternativ earnings over the alternative minimum taxable income being adjustment alternative minimum the over earnings loss operating net e tax alternativ the to to nt or or adjustme such to to regard taxable income (determined without regard such adjustment the alternative tax net operating loss ned without (determi income taxable deduction)). n)). deductio e aggregat the exceeds that price aa at at Bond that acquires a Bond r of of To the extent that a purchaser a Bond acquires that Bond price that exceeds the aggregate a purchase that extent the To section ofof meaning the within interest stated qualified s of of payment than amount payments (other than payments qualified stated interest within the meaning section s (other payment of of amount callable a of case the in ned, (determi Bonds the on made be to ons) Regulati 1.1273-1 of the Treasury Regulations) to be made on the Bonds (determined, in the case of a callable reasury T 1.1273-1 of the the " under premium e "bond constitut will excess such below), on described Bond, under the assumption described below), such excess will constitute "bond premium" under the assumpti the under Bond, generally er, provide ated thereund ons promulg the the Code.Section Section171 171 of theCode, Code,and and theTreasury TreasuryRegulati Regulations promulgated thereunder, provide generally of Code. accrual, c economi yield, constant a on d amortize be must n obligatio pt tax-exem a on that bond premium on a tax-exempt obligation must be amortized on a constant yield, economic accrual, premium bond that federal for n obligatio such in basis owner's the reduce will d amortize so premium of basis;the theamount amount of premium so amortized will reduce the owner's basis in such obligation for federal basis; . purposes tax income federal le for deductib bebe not will d premium amortize income tax purposes, but such amortized premium will not deductible for federal income tax purposes. such , but purposes tax income bond is amortizable there ation whether determin the isiscallable, that Bond aa ofof purchase aa the case purchase Bond that callable, the determination whether there is amortizable bond ofof case the InIn on that the under made be must , premium that of accrual the of tion premium, and the computation of the accrual of that premium, must be made under theassumpti assumption that computa premium, and the (or Bond the on yield r's purchase the e minimiz would that date on redempti the the Bond will be called on the redemption date that would minimize the purchaser's yield on the Bond (or on called be will Bond the The rate r's yield). purchase e the minimiz would that if if maturity to to prior called bebe not that the Bond will not called prior maturity that would minimize the purchaser's yield). The rate will Bond the that may result in reduction nding basis the and premium bond the tion ofof amortiza and timing of the amortization the bond premium and thecorrespo corresponding basis reduction may result in the of timing and an amount for of disposed or sold is owner such by owned Bond a when gain taxable a an owner realizing a taxable gain when a Bond owned by such owner is sold or disposed of for an amount an owner realizing owner. the to Bond the of cost original the than less even ances circumst some equal or some circumstances even less than the original cost of the Bond to the owner. inin or toto equal over the of maturity atat on price any, ifif Theexcess, excess, any,of ofthe thestated statedredempti redemption price maturity ofBonds Bondsof ofaamaturity maturity over the The Official this of cover the on of Bonds the ofof public the toto price initial offering price the public the Bonds ofthat thatmaturity maturityset setforth forth on the cover of this Official offering initial Bond is a on Code. the " under discount issue Statement "original issue discount" under the Code.Such Suchoriginal originalissue issuediscount discountaccruing accruing on a Bond is "original t isis Statemen income gross the from treatedas asinterest interest excluded from the gross incomeof ofthe theowner ownerthereof thereoffor forfederal federalincome incometax taxpurposes purposes excluded treated on the interest stated be would as extent same the to tax income personal a Californi from and exempt from California personal income tax to the same extent as would be stated interest on the exempt and to pursuant and price offering initial such at d purchase Bond any on Bond. Original Original issue issue discount discount on any Bond purchased at such initial offering price and pursuant tosuch such Bond. basis of a constant of term the over al basis semiannu aa on accrue will initialoffering offering will accrue on semiannual basis over the term ofthe theBond Bondon onthe the basis of a constant initial of basis. daily ratable aa onon accrue will al period, semiannu each yieldmethod methodand, and, within each semiannual period, will accrue ratable daily basis.The Theamount amount of within yield such of basis adjusted the to originalissue issuediscount discounton onsuch sucha aBond Bondaccruing accruingduring duringeach eachperiod periodis isadded added to the adjusted basis of such original ) of on or redempti sale, g (includin on dispositi upon Bondto todetermin determine taxablegain gain upon disposition (including sale, redemption orpayment paymenton onmaturity maturity) of e taxable Bond the in lating to s re suchBond. Bond. The Code includes includes certain certain provision provisions relating to the the accrual accrual of of original original issue issue discount discount in the The Code such 46 46

and pursuant g price ial offerin initinitial he the at tat than other Bonds se such purcha case of purchasers of Bonds who purchase such Bonds other than offering price and pursuant who onds sers of B of purcha case to the initial offering. g. offerin initial to the premium should consult s bond include thatthat price at aat sing a Bond ring purcha Any person considering purchasing a Bond a price includes bond premium should consult conside person Any such bond premium, of t n treatme and ation amortiz the o t respect h t own advisors s wi with respect to the amortization and treatment of such bond premium, advisor taxtax own herher or or his his ther disposition tion or o redemp sale, the the upon or loss n of gain calculatio the the including, limited calculation of gain or loss upon sale, redemption or other disposition to, to, limited not not ng, but but includi l origina issue discount rity having a matu of of sing a Bond ring purcha conside person Bond. Any person considering purchasing a Bond a maturity having original issue discount Any Bond. the the of of ownership of Bonds uences of of conseq taxtax thethe to to respect s with advisor tax tax own should consult own advisors with respect consequences ownership of Bonds herher or or his his ld consult shou se in the original purcha not do who sers purcha of nt treatme the ng t, includi original issue discount, including the treatment of purchasers who do not purchase in the original discoun l issue h origina witwith any loss on a sale or other ion for for nce of a allowa the the g price, l offerin origina offering at the original offering price, allowance ofdeduct a deduction any loss on a sale or other at the g andand offerin Bonds under federal individual such t on on discoun issue l origina accrued of t n treatme disposition, and the treatment of accrued original issue discount such Bonds under federal individual he t and disposition, taxes. m minimu tive and corporate alternative minimum taxes. te alterna corpora and r any events after the date of whethe future thethe in in ken to advise underta notnot l has has Bond Counsel undertaken to advise future whether any events after the date of Counse Bond or the tax consequences of the Bonds the on t interes of status tax the affect may Bonds issuance of the Bonds may affect the tax status of interest on the Bonds or the tax consequences of the the issuance of or amendments to the Code, if ion, legislat future that given be can ce assuran No Bonds. the the ownership Bonds. No assurance can be given that future legislation, or amendments to the Code, if hip of of owners the benefit of the tly reduce indirec or or directly could ons that provisi contain notnot enacted into law, will contain provisions that could directly indirectly reduce the benefit of the will law, into enacted State of California or of the thethe n by by taxatio al income person from Bonds thethe t on on exemption interest Bonds from personal income taxation State of California or of the interes tion of of exemp thereof for federal income tax owners the of income gross the from Bonds the on t interes exclusion interest on the Bonds from the gross income of the owners thereof for federal income tax thethe on of of exclusi any federal, state or local tax law to to as as opinion es no no l express Counse more, Bond purposes. Furthermore, Bond Counsel expresses opinion any federal, state or local to tax law Further es. purpos the action is taken with respect , if any t thereon interes thethe or or Bonds, thethe to to respect consequences with respect Bonds, interest thereon, if any action is taken with respect to if the uences with conseq approval of bond counsel or advice the upon ed permitt or ted predica thereof Bonds the proceeds thereof predicated or permitted upon the advice or approval of bond counsel if ds procee the or or Bonds l. Counse Bond than l other counse byby given al is is such advice approval given counsel other than Bond Counsel. approv or or advice such exempt from state personal is is Bonds the t onon interes that opinion the of of l is is Counse Although Bond Counsel the opinion that interest the Bonds exempt from state personal gh Bond Althou income tax purposes, an federal for thereof owners the of income gross the from ed income tax and excluded from the gross income of the owners thereof for federal income tax purposes, an exclud and tax income hip or disposition of owners the d byby ise affecte otherw bebe may liability tax local or or owner's federal, state local tax liability may otherwise affected the ownership or disposition of , state s federal owner' depend upon the owner's other uences will conseq tax other these ofof extent and the Bonds. The nature and extent these other tax consequences will depend upon the owner's other nature The Bonds. the ng, prospective purchasers of foregoi the of lity genera the g limitin t Withou ion. deduct or items of income or deduction. Without limiting the generality of the foregoing, prospective purchasers of items of income ion for interest on indebtedness deduct a denies Code the of 265 section (i) that aware bebe aware that (i) section 265 of the Code denies a deduction for interest on indebtedness the Bonds should should Bonds the a financial institution, that portion ofof case the in in or,or, Bonds the carry se or or purcha ed to to incurred continued purchase carry the Bonds the case a financial institution, that portion continu d or or incurre to insurance companies respect with (ii) Bonds, the on t interes to ed allocat e of an owner's interest expense allocated to interest on the Bonds, (ii) with respect to insurance companies expens t interes s of an owner' (5)(B)(i) reduces the deduction for 832(b) section Code, the of 831 section by d impose tax the subject toto the tax imposed by section 831 of the Code, section 832(b)(5)(B)(i) reduces the deduction for subject the Bonds, (iii) interest on t on ng interes includi items, certain ofof sum the t ofof percen loss reserves 15 percent the sum certain items, including interest on the Bonds, (iii) interest on 15 s byby reserve loss States could be subject to a United the s inin busines tions doing corpora foreign certain byby the Bonds earned certain foreign corporations doing business the United States could be subject to a earned Bonds the ent income, including interest investm passive (iv) Code, the of 884 section by d impose branch profits tax imposed by section 884 of the Code, (iv) passive investment income, including interest tax branch profits Code for Subehapter S the ofof 1375 section n under taxatio income federal toto on the Bonds, may be subject federal income taxation under section 1375 the Code for Subchapter S subject be may Bonds, the on year if greater than taxable of the close the at at profits s and earning pter C C Subcha have corporations that have Subchapter earnings and profits the close of the taxable year if greater than tions that corpora investment income, (v) section 86 passive tion isis corpora pter S S Subcha such s ofof receipt 25% of thegross gross receipts such Subchapter corporation passive investment income, (v) section 86 the of 25% Railroad Retirement benefits to take certain and y Securit Social certain of nts recipie s require of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take Code the of interest on the Bonds ruals of acc s oror s, receipt benefit such ity ofof taxabil ining the intoaccoun account, in determining the taxability such benefits, receipts accruals of interest on the Bonds determ t, in into ng interest on the Bonds, , includi ent income of receipt the of 32(i) and(vi) (vi)under under section 32(i) of theCode, Code, receipt ofinvestm investment income, including interest on the Bonds, section and Bond Counsel has credit. income earned the ng obtaini from thereof nt recipie may disqualify the recipient thereof from obtaining the earned income credit. Bond Counsel has the ify may disqual . uences conseq tax other such any ng regardi expressed noopinion opinion regarding any such other tax consequences. ed no express legal judgment based nts its tee of not isis BondCounse Counsel's opinion notaaguaran guarantee ofaa result, result,but but represe represents its legal judgment based l's opinion Bond decisions and the rulings ed publish ions, , regulat existing statutes upon its its review review of of existing statutes, regulations, published rulingsand andcourt court decisions and the upon ruling has been sought ed above. t describ Distric the and City the nts of of covena representations and covenants the City and the District described above.No No ruling has been sought ntations and represe ed in the opinion of address to th respect e") wi "Servic (the e Service fromthe theInte Internal Revenue Service (the "Service") with respect tothe thematters matters addressed in the opiniongof rnal Revenu from . The Service has an ongoin the on binding not isis l's opinion Counse Bond BondCounse Counsel, and Bond Counsel's opinion not binding on theService Service. The Service has an ongoing l, and Bond If an audit of the ions. pal obligat munici t on interes the of status mpt tax-exe the g program of auditing the tax-exempt status of the interest on municipal obligations. If an audit of the auditin of program the District as the "taxpayer," treat to likely is Service the ures proced current under Bondsis iscomme commenced, under current procedures the Service is likely to treat the District as the "taxpayer," nced, Bonds 47

47

g an an defendin ng to or respondi In In process. audit te in the to participa right Owners would have right to participate in the audit process. responding to or defending no no have would Owners the the andand or conflicting different have may District the the Bonds, the the on on interest thethe of of pt status audit of the tax-exempt status interest Bonds, District may have different or conflicting tax-exem of the audit adversely affect the may audit an an of of initiation thethe e of of disclosur thethe Further, Owners. the the interest from Owners. Further, disclosure initiation audit may adversely affect the from interest audit. the of on dispositi final the of s regardles market price of the Bonds, regardless of the final disposition of the audit. Bonds, of the price market

Litigation n Litigatio No No
d concerning the threatene or or is pending litigation no no that effect thethe to to District thethe e of of A certificate District effect that litigation is pending threatened concerning the A certificat of the delivery original the of time the at iter Underwr the to furnished be be furnished to the Underwriter at the time of the original delivery of the will Bonds validity Bonds will the the of of validity questions d which threatene or or pending litigation any of of aware are District the nor Bonds. Neither the City nor the District are aware any litigation pending threatened which questions City the Neither Bonds. the collect and levy to District the of authority he t contests or City the or t the existence of the District or the City or contests the authority of the District to levy and collect the Distric the the existence of Bonds. thethe Special Taxes issue Bonds. issue to to or or Taxes Special

Rating the Bonds s Bond the on on Rating NoNo


on the Bonds. a rating forfor e applying anticipat notnot does District thethe and rated not areare Bonds The Bonds not rated and District does anticipate applying a rating on the Bonds. The neous Miscella Miscellaneous le legislation, applicab nt, other Agent the es ofof g summari precedin All the preceding summaries theFiscal Fiscal AgentAgreeme Agreement, other applicable legislation, the of of All not purport do and ts documen such of s provision the to subject made are ts documen agreements and other documents are made subject to the provisions of such documents and do not purport other nts and agreeme to such documents made hereby e is is s. Referenc provision such of of all all or or any ts of of documen complete documents any such provisions. Reference hereby made to such documents complete bebe to to h. t herewi t ion t connec in ion informat further for City on file with the City for further information in connection therewith. the with file on Bonds. the rs ofof purchase the act with e a contr t constitut nonot t does Statemen This Official Statement does constitute a contract with the purchasers the Bonds. Official This estimates, ofof oror opinion of of g matters t involvin Statemen Official this in in Any statements made this Official Statement involving matters opinion estimates, ts made statemen Any and no fact, of tations represen as not and such as forth set are stated, whether or not so expressly stated, are set forth as such and not as representations of fact, and no expressly so whether or not realized. be will estimates the of any that representation made that any of the estimates will be realized. made tation is is represen

48

48

The City Council of the City of Indio has duly authorized the City Manager to execute and and has duly authorized the City Manager to execute City of Indio the of il Counc City The t. Distric deliver this Official Statement on behalf of the District. the of behalf on ent Statem l Officia dclivcr this CITY OF INDIO COMMUNITY FACILITIES DISTRICT ICT CITY OF INDIO COMMUNITY FACILITIES DISTR NO. 2004-3 (TERRA LAGO) A LAGO) 2004-3 (TERR NO.

By /s/ Glenn Southard Southard /s/Glenn By City Manager of the City of Indio on behalf of the City of of City Manager of the City of lndio on behalf of the City Indio Community Facilities District No. 2004-3 (Terra Indio Community Facilities District No. 2004-3 (Terra Lago) Lago)

49 49

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[THIS

APPENDIX APPENDIX A RATE AND METH METHOD OF APPORTIONMENT OF TAXES SPECIAL TAXES OF SPECIAL OD OF APPORTIONMENT
RATE AND

A-I A-1

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[THIS

SPECIAL TAX FOR RTIONMENT OF OF APPO OD OF OF METH AND RATE RATE AND METHOD APPORTIONMENT SPECIAL TAX FOR 2004-3 NO. T LITIES DISTRIC MMUNITY FACI COCOMMUNITY FACILITIES DISTRICT NO. 2004-3 O) A LAG (TERR (TERRA LAGO) FORNIA O, CALI INDI OF OF CITY CITY INDIO, CALIFORNIA shall be itions below) Defin ion A., A., ed m Sect defm are are italized terms cap A Special capitalized terms defined in Section Definitions below) shall be (all(all TaxTax pecial A S ity mmun Co f aries o bound hin thethe ted witwithin ty loca xable Proper TaTaxable cel of of ParParcel ach applicable to each Property located boundaries ofeCommunity able to e applic al Tax to be levi d m each mm of Sp amt ). The A LAGO 4-3 (TERR 2002004-3 ict No.No. ties Distr Facilities District (TERRA LAGO). The amount ofeci Special Tax to be levied in each Facili a Parcel shall 006 on on 2005-2 al Year iscFiscal cing in Fin , commen al Year FiscFiscal Improvement in each Year, commencing Year 2005-2006 a Parcel shall a m each rovement AreArea Imp legislative he t in its capacity as acting of Indio, City heThe ncil of T Cou City he the rmined by t dete be be determined by City Council of City of Indio, acting in its capacity as the legislative operty, Undeveloped Pr oped l Deve r fo x a T pecial S ate i r pprop a he t ing y appl y b D CFCFD body ofethe by applying the appropriate Special Tax for Developed Property, Undeveloped y of th bod ty that is not Exempt ciation Proper 's Asso rty Owner /or Prope rty andandfor c Prope Publi Property and Public Property Property Owner's Association Property that is not Exempt erty and Prop al property within the CFD, rereal he t f o ll A . below i.dD., r a ., C ., B s ion t c Se in *_h t fo t se s a Property as set forth in Sections B., C., and D., below. All of the property within the CFD, Property the purposes, r fo ed x a t be l al sh ., E ion t Sec in f o e r h_ ions s ovi r p e th y by the provisions hereof in Section E., shalt be taxed for or b law exempted law or the purposes, ed by by ess exempt unlunless ed. :in provid nner hen ma the d m in nt anand exte the to to the extent the manner herein provided.

DEFINITION ITION 8 DEFIN A. A.


anings: ng memeanings: followi the the h have fort ftei set set ms h_cina terterms e The hereinafter forth have following "l_h the most recent Assessor's icated mlon ind rcel as as a Pa ge of of aoea eans the reage" mmeans Ac re or or "Ac "Acre Acreage" die acreage a Parcel indicated the most recent Assessor's e1 Map, the land area essor's Prat Ass the on on t shown nonot is is d area lan if the or or Parcel Map, if the land area shown the Assessor's Parcel Map, the land area cel Map, Par mim'um plan, ca other similar , condo rcel map ap, pa M licable Final app the own onon shshown the applicable Final Map, parcel map, condominium plan, or other similar rument. inst i nstrument. 2, as amended, being Chapter 198 t of of ities Ac mmunity Facil lo-Roos Co Mel ans the me "Act" means the Mello-Roos Community Facilities Act 1982, as amended, being Chapter "Aef' nment Code of the State of lifornia Gover he Ca tle 55of of sion 2 2 Divi ofof rt I 1 Pa 2.5, 2.5, Part Division ofTi Title of tthe California Government Code of the State of lifornia. Ca California. and expenses of imated costs asonably est rereasonably tual oror ac ns all enses" mea istrative Exp "Administrative Expenses" means all actual estimated costs and expenses of "Admin rovement Area to carry out licable Imp app the ocable toto allallocable rgeable oror cha t are strict tha e Di the District that are chargeable the applicable 'Improvement Area to carry out th , which shall include without Act e th by d allowe as D F C e h t of or at tr s i n dmi a e h t s a s e i t u d its its duties as the administrator of the CFD as allowed by the Act, which shall include without m the annual levy and ting fro or of of ising out enses ararising exp s and cost itation, allall limitation, costs and expenses out orresul resulting from the annual levyg-,d and lim lculation fees, and le e ca m im mpl o c e t a b e r ees, f t s tru , ax T al i pec S e th of n io collection of the Special Tax, trustee fees, rebate compliance calculation fees, and legal lect col CFD, continuing disclosure ng the gation involvi eatened litilitigation thr tential or al, po es, or issues, oractu actual, potential or threatened involving the Ci.D, continuing disclosure issu d regulations, cotrmJunication ws an plicable lalaws osed by imp strict asas e Di ththe undertakings District imposed takings ofof byap under applicable and regulations, communication s. inistrative expense rmal adm d no dholders an th bon wi with bondholders and normal administrative expenses. hereof, respomible for signee tthereof, r de strict, oor icial of off eans aaan "Administrator" official ofthe theDi District, designee responsible for dministrator" mmeans "A . axes T ial c Spe he t f o ction e ll o c and levy e th g n i min r e t determining the levy and collection of the Special Taxes. de or of Lhe County of Riverside e Assess f th p oof icial ma " meam arcel Map sor's P "Assessor's Parcel Map" meansan anoff official map the Assessor of the County of Riverside "Asses . r umbe n l ce r a P s or' Assess by s cel par ting na g esi ddesignating parcels by Assessor's Parcel number. Category of Developed and Use ax for ial TTax he Spec eans tthe ax" m ecial 'F ssigned Sp "Assigned Special Tax" means Special foreach eachLLand Use Category of Developed "A . w lo be .l.a., below. .ctiot_CC.1.a., th Sc ordam, wiwith acc tenninod inin de roperty, as P Property, as determined accordance Section
'.... .1=111111 ,

dio City Cityof of In Indio ag,o) ra L . 2004-3 bttict No ities D Community facilities District Nu. 2004-3 (Ter (Terra Lego) omm_aity Facil C

Augest 17, 2005 August 17.2005 Page 1

Page 1

ction E below. ed in Se e describ namname of tha ial TaxTax Spec s the the mean "Backup Special Tax" ial Tax" means Special of tthat described in Section E below. Spec "Backup an he Act) issued by by ed in tin defin ebteclncss (as (as er mdindebtedness or oth bonds ns any any ds" meameans bonds or other defined the Act) issued ch an "Bonds" "Bon s within su ci',d Taxe Spo of of levy ted by the scou and CFD he the of t Improvement Area of CFD and secured by the levy Special Taxes within such ement Area Improv Improvement Area. rovement Area. Imp the boundaries of CFD within tory area terri ing the the show ap s am " mean "Boundary Map" means a ary Map map showing territory area within the boundaries of CFD "Bound " HIBIT "'A"A" ified on EX -3 ident 2004 2004-3 identified on EXHIBIT RRA LAGO) of the District (TE 2004-3 ict No. No. ities Distr mity Facil ns Commt D" mea "CFD" means Community Facilities District 2004-3 (TERRA LAGO) of the District "CF . ct A the o suantt r pu shed i establ established pursuant.to the Act. ncil Cou o City ndi of l City ns The "Council" means The City of Indio City Council il" mea "Counc e. iversid unty of R CoCounty ns thethe unty" mea "Co "County" means of Riverside. classified as Undeveloped perty, notnot e Pro Taxabl s of of Parcel ns all " mea Property" means all Parcels Taxable Property, eveloped Property classified as Undeveloped "D"Developed are not Exempt operty that PrProperty n eialio o s s A s ' er n Ow ty r e op r P r o / d an y t r pe ro P lic Property, Public Property and/or Property Owner's Association that are not Exempt Pub y, rt e Prop t arc included in a Final Map tha (i) 0) below: tion E. E. _'Section visions of S proprovisions e the uant to th Property pursuant to of below: erty purs that arc included in a Final Map Prop the Special Tax is in which Year Fiscal eding the the ec ty 1't pr to ;lanua ded prior that was recorded prior to January 1" preceding Fiscal Year in which the Special Tax is recor was that n issued prior to April 1 *t bee shas a h n o cti ru st on c w ne r o f rmit e p g uildin b a (ii) and ied v le being levied and (ii) a building permit for new construction been issued prior to April lg being d, g levie ein is bis cial TaxTax SpeSpecial h the the hic r in w cal Yea FisFiscal preceding Year in which being leviol. ceding thethe pre es pursuant to ecial Tax Sp mpt from exe ch is is cel, whi Par s any operty" mean "Exempt means any Parcel, which exempt from Special Taxes pursuant to pt lh-Property" 'Exem ow. bel ction E.,E., SeSection below. a final map, parcel map, or cordation of of rerecordation erty by prop ision ofof subdiv ans a a " me Map" means subdivision property by a final map, parcel map, or inal Map "F"Final Act (California Government Code vision Map e Subdi ththe ant to to tment, pursu e adjus lin line adjustment, pursuant lotlot Subdivision Map Act (California Government Code pursuant to C.alLfomia Civil plan um ni i ondom c a of ion t da r o ec r or ) . seq et et seq.) 6410 6 Section 66410 n io or recordation of a condominium plan pursuant to California Civil Sect be issued without rmits may ng pepermits ich buildi wh for ividual lots eat_ ind at cr Code 1352 creates individual lots for which building may be issued without 52 ththat e 13 Cod bdivision. ther susubdivision. fur further on the following June 30. ending Ia July ting onon iod star per s the ear" mean l YYear" "Fiscal means the period starting July 1nd and ending on the following June 30. "F'mea Zone B or Improvement one AAor ZZone I, 1, vement Area eans Impro a(s_" m ovement Are "Impr "Improvement Area(sr means Improvement Area or Zone B or Improvement ". HIBIT "B fied on ographically identi ge as e BB Zon or e AA Zone or Zone as geographically identified onEX EXHIBIT "B". Zon rea 2,2, AArea entified on EXHIBIT "B" as rea id pecific a e sspecific ns th one A" mprovement Area "I "Improvement Area1, 1,Z Zone A" mea means the area identified on EXHIBIT "B" as FD. e CCFD. ththe ofof e AA , Zon ea 11, ovement nt Ar Area Zone. Imp, oveme rea identified on EXHIBIT "13" as pecific a he sspecific ans tthe " me one B ea 1, mprovement Ar "I "Improvement Area 1, Z Zone B" means area identified on EXHIBIT "B" as FD. C eB 1, ,Zon Improvement Area Zone Bof ofthe the CFD. proverneat Area Im entified on EXHIBIT "B'" as area id fic area he speci means t " means one A rea 2, ovement A "Improvement Area 2, Z Zone A" the specific identified on EXHIBIT "B" as "Impr . FD C the. of A e n o Z , 2 ea Ar nt Improvement Area 2, Zone A of the.CFD. e m ve Impro entified ore EXHIBIT "B" as ific area eans the " m one B , Z ea 22, "Improvement Area Zone B" means the spec specific area id identified mprovement Ar "I on EXHIBIT "B" as , CFD f the one B rea 2. the cm. 2.Z Zone Boof rovement A improvement Area Imp
io f Ind City Cityoof Indio August 17, 2005

) rraLago (Te 004-.3 o. 2 N istri_a (Terra Lago) ifitiesD Community Facilities District No. 2004-3 Fac ommunity C

August 17. ge2 Pa2005 Page 2

ent, resolution t agreem ent, trustrust t agreem l agen re, fisca indentu bond the the "Indenture" means bond indenture, fiscal agent agreement, agreement, resolution ture" means "Inden fied, amended and/or modi as ed, u ss i re a dg n Bo which o t nt a u s pur nt strume n i or other instrument pursuant to which Bonds are issued, as modified, amended and/or the_ o or same. e h t enting pplean u s or g n replaci t rumen nst i any d n a ime, t to timetime to time, and any instrument replacing or supplementing the same. supplemented from emented from suppl I, 2, 3, 4 and 5. in Tables gories listed cate he the of tof ns anyany gory" mea Cate in Tables 1, 2, 3, 4 and 5. d UseUse "Land Category" means categories listed "Lan exrmned in accordance with , detdetermined cial Tax ximum Spe mamaximum ns the the mea l Tax" um Specia "Maximum Special Tax" means Special Tax, in accordance with "Maxim el. c r Pa y n a n o r a e Y Fiscal ny a in ied v le be n a c ch whiwhich can be levied in any Fiscal Year on any Parcel. on C., C., Section Secti operty thai consists veloped PrProperty DeDeveloped l of of Parce ns any rty" mea ntial Prope Residential Property" means any Parcel that consists dtifamily Reside "M"Multifamily abl avail e for rental by the ential ,mits ched resid atta ised or of dings compr uil ing or b units ofbu a ild building or buildings comprised attached residential available for rental by the of a agement. mon man com ader be re may andand user, ndend ne to a salesale or for c, or for general public, to an user, may be under common management. l publi genera which a building erty for for veloped Prop DeDeveloped cels of of Par ns all all " mea "Non-Residential Property" means Parcels Property which a building esidential Property "Non-R e. us al i t en d si non-re of type any permit was issued for any type of non-residential use. for d e su permit was is p with an assigned l Ma ssor's Parce Asse an an wn on on el shoshown parc or or ans a lo (s)" momeans "Parcel(s)" at lot parcel Assessor's Parcel Map with an assigned "Parcel fox which the Year al c Fis e th r fo led ol r ca s i x Ta cial pe S he t e m i t e h t at valid r e parcel number valid at the time the Special Tax is enrolled for the Fiscal Year for which the cel numb par ed. levi Special Tax is being levied. eing is b uial Tax Spe thin the boundary of the rcel wiwithin Pa ans any rty" me ociation Prope er's Ass rty Own "Property Owner's Association Property" means any Parcel the boundary of the "Prope ich the Special whwhich forfor Year Fiscal thethe lled forfor hi x is c ecial TaTax SpSpecial e thethe tim the CID, which, the time is enrolled Fiscal Year the Special ich, at at wh CFD, iealed to a property ably ded oc v re r i or to, d e at ic d e d ed, y e v n co n bee s a h d e vi le g bein is Tax is being levied has been conveyed, dedicated to, or irrevocably dedicated to a property Tax n. ociatio ass sub or er ast m any luding any master or sub-association. owner association, including ciation, inc asso owner the actual Special Tax o of of rati the rty that veloped Prope De (i)(i) ans tbr "Proportionately" means for Developed Property that the ratio the actual Special Tax rtionately" me "Propo rty, and evelopexi Prope rcels ofofD l Pa alall e for e sam ththe x is is _ial Ta ed Sp Assign levy the Assigned Special Tax same for Parcels Developed Property, and the y to to lev ociation Property thai Js er's Ass erty Own /or Prop erty and c Prop operty, Publi eveloped PrProperty, Undeveloped Public Property and/or Property Owner's Association Property that is Und Tax levy per l a i c Spe l ua t ac the of io t a r e th that , , E ction e S to nt a u rs rty pu pursuant to Section E., that the ratio of the actual Special pt Prope not Exempt Property Tax levy per Exe_a not els. h Pmc suc allall for same e is th r acr x peper al TaTax ximum Speci Ma the to to acre the Maximum Special acre isethe same for such Parcels. aca_ h, at the time the I) whic CF the lmdary of of bo the _c_i within y Pa ans an _erty" me c Prol "Public Property" means any Parcel within the boundary the CFD which, at theis time the "Publi used is being levied, .eial Tax Sl_r ich thethe whwhich ar for cal YeYear FisFiscal the rolled for enenrolled x is is cial 'l'a Special Tax for the for Special Tax is being levied, is used Spe or inevocably offered cated to, to, dedi ed by,by, is own pose and r pur othe any of-way oror for rights-of-way any other purpose and is owned dedicated or incvocably offered rightsfor or rely unty, City Co rnia, the Califo e of of Stat vertmmnt, thethe eral Go e Fed ththe for Federal Government, State California, the County, City or any dication to to dededication for a public agency to a ed byby pcxty leas pto t any er, tha ovided, howev risdietion, prprovided, al jttjurisdiction, other local however, that any property leased a public agency to a er loc oth taxed and all be s t c A e th of 3340.1 5 ion ect S er und n taxatio to ject sub entity and subject to taxation under Section 53340.1 of the Acthshall he taxed and ty and ivate enti prprivate e. ususe. itsits rding to to d acco e_iflefled classi according cla area of" a residential tage of are foo e squ th l ofof eans alall mmeans oor Area" ntial FlFloor "Residential Area" the square footage ofliving living area of a residential "Reside sed patio or tio, enclo rhang, papatio, ove way, garage, ort, walk carp any including structure, not including any carport, walkway, garage, overhang, enclosed patio or ture, not struc oor Area shall be made by Fl l a identi s Re f o ion t ina determ e h T l. e rc a P a on a re a similar area on a Parcel. The determination of Residential Floor Area shall be made by similar ial do_atmen! means selected ilar offic sim el or or Parc x the rmit(a) fofor ilding pe e bu ththe ference toto re reference building permit(s) the Parcel similar official document means selected r a Parcel. it shall remain ade fofor en mmade s bebeen etermination hahas ch ddetermination nce su dministrator. O AAdministrator. the by by the Once such a Parcel, it shall remain s. r a e Y l a c s Fi e r u t fu l al n i fixed fixed in all future Fiscal Years. ich a building roperty for veloped P s of ans all me ol_rty" "Residential Property" means allParcel Parcels ofDe Developed Property forwh which a building ential Pr "Resid August17,201_5 o a_li ityof/ CCity August 17, 2005 of Indio e3 Pag o) Lag a 3{Terr 4-istrictNo.2 litiesDDistrict 3 (Terra Lap) Faci 2004 ommunity C Community Facilities No. 00 Page 3

tial dwelling units. residen ore or m ucting one one onstr es of cof purpos for for issued has been permit has been issued purposes constructing or more residential dwelling units. permit than Multifamily rty, other idc_ntial Prope esResidential ls of R Parce ns all all ty" mea ily Proper Property, other than Multifamily gle Fam "Single Family Property" means Parcels of "Sin hed or attached c eta d for for detached issued been its havehave g perm h buildin erty, for whi Residential for c which building permits been issued or attached ial PropProperty, Resident tial units. residen residential units_ h Fiscat Year on each Parcel of ac ed in e levilevied to be ! tax tax spe_ia the the " meam ecial Ta_(_) Tax(es)" means special to be in each Fiscal, Year on each Parcel of "Sp"Special , ty Proper Taxable Property. ble a Tax y Fiscal Year to pay for uired in an oum reqrequired amamount that uirement(s)" means Req ecial Tax Tax Requirement(s)" means that in any Fiscal Year to pay for "Sp"Special Special Tax r for B, or A or ne 1, Zo rovement AreaArea Imp. or for ft Special Tax Requirement Improvement 1, Zone AZone or Zone B, fo or Special Tax J.reme_a Re_qu ial Tax Spec B. B. one A or 2, Zo rovement Area laup irement for for Requirement Improvement Area 2,ne Zone AZ or Zone Requ at amount required in any eans ththat mmeans 1" vement Area Impro quirement for ReRequirement ecial Tax "Special Tax for Improvement Area 1" amount required in any "Sp annual debt service on all (i) (i) ay:pay: to pto D e CF th 1 of 1 ment Area in Improve with Fiscal Year within Improvement Area of the CFD annual debt service on all al .Year Fisc uch Fiscal Year;, (ii) e_lces in s h onun whic ndar year cale in th duedue Bonds inethe calendar year which commences in such Fiscal Year; (ii) standing Bonds outoutstanding ancement and rebate dit enh cre ited to, lim not ding but , inclu Bonds the on on costs periodic costs the Bonds, including but not limited to, credit enhancement and rebate periodic an amount equal Io any nses; (iv) (iv) ministrative Expe Ad s; (iii) Bond thethe payments Bonds; (iii) Administrative Expenses; an amount equal to any ents on on paym l Ye_; and (v) any Fisca _ o i r p he t in ncy que n i l e d x Ta ial c pe S o t tfall due due to Special Tax delinquency in the prior Fiscal shortfall Year; and (v) any icipated shor autanticipated tanding Bonds; less outs the the for for rve funds rese fish anyany blish or replea sta uired to e amounts to establish or replenish reserve funds outstanding Bonds; less reqrequired mounts y as determined ptwsuanl levlevy Tax l cia e Sp l a u n n a e th ce u red o t le ab il va a funds for it (vi) a credit for funds available to reduce the annual Special Tax as determined pursuant cred a (vi) . e r u nt e Ind the to to the Indenture. amount requ/.redin any eans that m 2" vement Area Impro quirement for x Re l Ta "Special Tax Requirement for Improvement Area 2" means that amount requited in any "Specia debt service on all nual (i) an to pay: CFD he the 2 of2tof provenmut Area in ImImprovement with l Year Fiscal Year within Area CFD to pay: (i) annual debt service on all Fisca such Fiscal Year; (ii) ences in in mm co ch whi r ea y r alenda c e th n i e u d ds n Bo ing d outstanding Bonds due in the calendar year which commences such Fiscal Year; (ii) an t outs hancement and rebate dit en , cre mited to t lilimited t no cluding bu onds, in BBonds, the ts onon periodic costs the including but not to, credit enhancement, and rebate ic cos period amount equal to any an an scs; (iv)(iv) xpen dministrative F, i) AAdministrative nds; (ii(iii) Bo the the Bonds; Expenses; amount equal to any yments on on papayments Year; and (v) any ior Fiscal prprior tbc linquency in in de l Tax Specia to to rtfall due anticipated shortfall due Special Tax delinquency the Fiscal Year; and (v) any icipated sho ant ding Bonds; I_,s tan s ut o e h t r fo s d rve fun rese lenish any repreplenish blish or or sta red to e unts requi amo amounts required to establish any reserve funds for the outstanding Bonds; less , levy as determineat pursuant ecial Ta_ l SpSpecial annua ce the redu ilable to to ava r funds dit fofor cre aa (vi) credit funds available reduce the annual Tax levy as determined pursuant (vi) denture. In the to to the Indenture. ave not prepaid hich hhave rea wwhicb rovement AArea n Imp rcels in l Pa alall ol_rty s' means "Taxable Properly" means Parcels inaan Improvement not prepaid axable Pr 'W on E., Secti or w a l o t suant r pu ax T ial ' . pex S o _ O om fr t exemp t o n e r a , ot or are not exempt from the Special Tax pursuant to law or Section E., on H.H., pursuant Section Secti rsuant to to pu ow. bel below. Developed Property, ssified as cla xty trot xable Prope l Ta rty" means "Undeveloped Property" meansal all Taxable Property not classified as Developed Property. eveloped Prope "Und is riot Exempt Property erty that ociation Prop ner's Ass perty Ow /or Pro operty and Public Property and/or Property Owner's Association Property that is not Exempt Property blic pr Pu on iL Secti sions of of provi pursuant the provisions Section E. the rsuant to to pu

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of dio laIndio ity of CCity ago) 'en'a L 004-3 (l . 2 strict No acilities Di ommuaRy FFacilities Community District No. 2004-3 (Terra 1-ago) C

Aught 17, 2005 August 17, 2005 4 Page

Page 4

RY _ATEG_O_ USE ASSIGNMENT LAND USE cATEGDRY LAND NT TO TO ASSIGNME A. A-, Taxable cels of of Par all all al Year, 5-2006 Fisc 2002005-2006 the the Fiscal Year, commencing Fiscal Year, Parcels Taxable encing withwith r, comm Yea h Fiscal EacEach and a e r A t Improvemen able lic app the into rized go cate be l Property within the CFD shall be categorized into the applicable Improvement Area and shal Property within the CFD F o / d an erty p Pro Public rty, veloped Prope classified Developed Undeveloped Property, Public Property and/or operty, Unde PrProperty, her Developed eiteither sified as as clas suant to th purpursuant perty o Pr Exempt t o n Property Owner's Association Property that is not Exempt Property toe the is t ha t y ert p o Pr on ociati l_operty Owner's Ass ith w nce rda co ac m xes Ta al i c e p S of y v le e h t to ect ubj be s provisions in and shall be subject to the levy of Special Taxes in accordance with shall and tion E., E., ecSection isions in S prov ,, D., D nd a C., ns tio c Se to uant purs ortionment as determined App Rate and Method Apportionment as determined pursuant to Sections C., and hod of of Met and Rate thisthis w. belo below. Non rty or or sidential Prope ReResidential ified as as ass r be cl ll fishe Developed Property further be classified Property Nonerty shashall eloped Prop Dev cels of of ParParcels gle inSingle sified as S asclassified be cl l further erty shal idential Prop Res of of arcel Residential A Parcel Residential Property shall further be as perty. A P ProProperty. Residential be be l shal erty p Pro mily a F Family Property shall Single dential Property. Family or Multifamily Residential Property. Single family Resi ulti perty or M ProProperty Family cel. Par such a for for r AreArea idential Floo ResResidential he the d on t further categorized based on Floor such Parcel. orized base categ further RATE MAXIMUM SPECIAL TAX RATE L TAX SPECIA MAXIMUM C. C operty veloped PrProperty De 1. 1. Developed hin its its operty witwithin mily PrProperty Fa Single cel of of h ParParcel The Maximum Tax Single Family eaceach for for cial "lax um SpeSpecial Maxim The in in ribed c des Tax l a Speci igned cable AssAssigned appli he the be tbe shall applicable Improvement Area shall applicable Special Tax described rovement Area Imp applicable 4. 4. r or ,o e l, 2, Table 1, 3 2, 3, Tabl s withinit ty roper Pl -Residentia Non of rcet h Pa reac fofor The Maximum Tax each Parcel of Non-Residential Property within its Tax ecial ximum SpSpecial Ma The ,2, ableI, inT cribed des Tax ial Spec Assigned he be t ll asha Are applicable Improvement Area shall be the Assigned Special Tax described in Table 2 1, ovement Impr cable appli . 4 3 or 3 or 4.

Assigned Special Tax ial Tax Spec a.a. As,simaed


n itsits withi Property Developed rcel ofof Pa each Assigned Special each Parcel Developed Property within x forfor al TaTax igoed Speci e Ass ThThe 4. 4. or or , 3, 1, 2 in Table a is shown applicable Improvement is shown in Table 1, 2, 3, ovement AreArea licable Impx app

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.2005 nst1717.2005 Aug August e5 5 Pag Page

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TABLE 1 TABLE 1 within Property within forProperty Taxes for Special Taxes Assigned Special Assigned A Zone , 1 a e Ar 1, Im _rovement Area Improvement A __ -_..... c c_, _ _ ._ :v. :....c_,, PP ?M 11,,. , -. '_ ; _ _, ; ...::_l_," , ,... . -.:..:v..._'. )1 i,, fi .., "
t,

I. _

VI i

":_-_'_'_"'_;)_':'.;';!9!:,l:i_!!:"'.:!._!

1n

? .
,., },l :.=..:_.
). ? .0.440r;it

',

,,
4 -t-7P

i 33

ZZ , .'.. ., :_ .......... ,,_ ,..i.:'-.., :_.... ,," ......

F S IP6iiiih. 1

, )Riili . "

'

- ,i ' b '

.. r -.4,04,' *Ziett '' ' .' i::::'i"ii_."' ,:,_ii;::i"


'' '' V ill

ale ,.Prope_ Famil_ Property Single Family

Single Property Family Property Single Family


I III I[

Single Property FamilyProperty Single Family !Single Property, Family Property Single Family iR.EdeFamily2roMy__ Single Fa11_ily Pl__Opl_y Single Property Famil 7Property Single Family Single Family Property perty Pro / il] _S.ingleFam Single Property FamilyProperty Single Family Single Family Property SingleF .a_ailyPrope_ Single Property Family Property !SingleFamily Single Family Property , ily Single Fam Property Property FamilyProperty Single Single Family Single Pr0perty FamilyProperty SingleFamily Single Family Property ily !Shtsle Fam Property , Single Family Property FamilyProperty [S__gle Multi Family Property [Multi.Family Property Non Property Residential Property NonResidential

I'

SF 1,501 SF than 1,501 Less than DU Less ,, DU DU 1,501 SF to 1,625 SI_'* 1,501 SF to 1,625 SF DU SF 1,750 SF to 1,750 SF to 1,626 SF DU DU , . 1,626 DU SF SF to 1,900 SP to 1,900 1,751SF DU 1,751 1.TU01 SF 1,950 to ,,950 SF to 1,901 SF DU DU 1,951 SF to 2,100 SF SF ,100 2 to SF 51 9 , 1 DU DU to 2,150 . 0SFSF 2,15 SFto 2,101 SF .D.U 2,101 SF 50 2,2 to F S ,151 2 DU DU '2,151 SF to 2,250 SF i

DU DU DU DU DU DU DU DU DU DU DU DO DU DU Acre Aere Acre ... Acre

2,251 to 2,300 SF 2,300SF SFto 2,25I SF 2,301 SF to 2,400 SF SI_" ,400 2 to F S 1 ,30 2 2,401 SF 2,500 SF to2,500 SF to 2,401 SF SF 0 ,55 2 to F S 501 2, 2,501 SF to 2,550 SF 2,600SF to 2,551 SF 2,600 SF SFto 27551, SF 2,850 SF to 2,850 F to 2,601 SF 2,60!'S Over SF 2,850 SF Over 2,850 NIA N/A N/A N/A

Ii

$1,828.87 $1,828.87 $2,028.55 $2,028.55 $2,228.22 $2,228.22 $2,467.83 $2,467.83 $2,547.70. , $2,547.70 $2,605.98 $2,605.98 $2,681_53 $2,681_53 $2,832.63 $2,832.63 $2,908.19 $2,908.19 $3,059.29 $3,059.29 $3,102.46 $3,102.46 $3,175.86 $3,175.86 $3,249.25 $3,249.25 $3,616.22 $3,616.22 $4,O56.57 $4,056.57 0.00 $20,46 $20,460.00 $2_0,..460..00 $20,460.00

until years,until (5) five(5) offive period of for aaperiod On years, 2007, for 1, 2007, July 1, on July commencing on 1,commencing July 1, each July On each the ofthe (1.00%) of percent(1.00%) onepercent byone increased by beincreased July shallbe Taxshall SpecialTax Assigned Special theAssigned 2012, the 1,2012, July 1, Year. Fiscal Year. priorFiscal the in effectin ineffect amount the prior amount in

City ofoIndio f lrtdio City Community District No. 2004-3 (Terra Lago) Lago) gl'erra . 2004-3 No Di,st_ict Facilities CommunityFacilities

. _05172005 August17, August ge Pa Page 66

2 TABLE TABLE 2 in I_rty with Pro es forfor cial Tax gned Spe Assi Assigned Special Taxes Property within
,,
lll i _ .......... ...... .... ; ..ii ..... _... ..... ......... ........ ' .'........._'_":. _.: ,_ r "" !P " , ''' .: ' . lii: M ' i .2 ...1 ...... ,_: _, ......T..._:_ _ T 1 , '

Improvement Area 1, Zone B


. mp..0

_ ,' Migiyr ',"


:: . 'l OnVII;1 t

,,;,,

t NMf

qi .iW 1

-.

''''';6S.,!,.1

pd) ,

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: _ ,..... _'_"_.. O' ......


lg.

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'_ "'"". "'_'_"_'_""_'_'


1:; . .. .l 4

al 1i' !,i' " :I. ) ill $' ts, --4141in..; ig At' a dg ,:;_, Ng;iit - - ,...,,,,6, Ali .,;-. .4t." 519.63 $2,$2,519.63 01 SFSF 1,51,501 ss than ......... DU Single Family Property DU LeLess l_rty Pro than gleFamily Sin 31 719. , $2 25 SFSF 1,61,625 to to .1 SFSF DU DU 1,50 Single Family Property erty Prop 1,501 $2,719.31 _ Family Single 8 $2,918.9 SF 50 ,7 1 _ SF 6 2 ,6 ! i Single Family Property DU DU 1,626 SF to 1,750 SF $2,918.98 rty pe Single Family Pro 158.59 $3,$3,158.59 SF 900 1 _1 to to 51 SFSF DU Single Family Property DU ii,71,751 erty Prop le Family iSing t_900 SF 238.46 $3,$3,238.46 50 SFSF 1,91,950 to to SFSF DU DU i!,901 Single Property )_ 1,901 mily Propert #e FaFamily :Sin 372.29 , 3 $ SFSF 2,100 to to 51 SFSF DU Family Property DU !I,9 )_ 1,951 2,100 $3,372.29 ily Propert n_le Fam ISiSingle 69.43 $3,4 SFSF 2,150 to to 1 SFSF DU FamilyIrmrty DU !2,10 2,101 2,150 $3,469.43 Property .......... ngle Family !SiSingle 3,39 $3,52 50SF SF 2,2 lS!..SFto D Single Family Property , U DU12_2151 SF to 2,250 erty $3,523.39 ily.Prop gleFam iSin 1,64 $3,77 .... SFSF 2,300 to to 1 SFSF DU Single , 2,251 2,300 erty ..... $3,771.64 mily _pyroperty gle FaFamily Sin - - -DU 2,25 91 65_ 9 3, $ SF ,300 2 r ve O DU Single Family Property DU y Over 2,300 SF p_ $3,965.91 . Single Family Pro ,460.00 $20 A / N .... e r c A Multi Family Property Acre , y i $20,460.00 rt e N/A. Prop y l i m Fa i Mult 0,460.09 $2$20,460.00 .A ...... I_.N/A re Ac ,Non Residential Acre operty idct_tial PrProperty n Res No
i : il A

:i; ,iii' ,E' ,: , iii ig ;y, .. ,g, , .;., .:,qti! gigii,'

1 .,

ars, until ) ye e (5 fiv iod ofof per aa 7, for 200 1, 1, July ncing on on comme 1, 1, ch July eaeach On July commencing July 2007, for period five (5) years, until On e ththe 00%) of of t { 1. e percen on creased by inincreased ll be sha ecial Tax signed Sp As 2012, the Assigned Special Tax shall be by one percent (1.00%) , the 2012 ly 1, 1, JuJuly cal Year. Fis e prior ththe inhi effect ount in in am amount effect prior Fiscal Year.

......

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E, 3 TABL TABLE 3 thin erty wi Prop or f xes Ta l ia ec ssigned Sp AAssigned Special Taxes for Property within e AA Zon _ 2, 2, ovementAr lmlZ_ Improvement Area Zone , _,_s .. _:_ _.._ _:,_ _. '_ _ .n, _,. . :_:. . . _,_ ,,, ; " _'_ , _ -.. ''. . . 1 .. t' |_ _ z ,:it;', ,'-'1:).( '_ . ,. _ _, V1 t ," ur:,_ H T :._ _ s_" _'-'"_ ,,.'._,,,,, _:.:,,u._:_ ' ,:_: , , . '' tt'" " a " 3 `i' n ro, ' -V
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' -'i' ' , : 11, On ' .pili .e Liiii i, A;' kitit . ,: ,.` 7 l' ;: ig 11 N ialcie , ''7.' 77 . 77 6 , $1 SF ,501 , 1 han t ss _. 1 ..,. Single Family Property DU ty Less than 1,501 SF $1,677.77 ;ingle Family Proper 2,4,11.70 $ . F. . S 000 , 2 o t SF 501 , ! DU __ Single Family Poverty DU rty e p 1,501 SF to 2,000 SF ro P ily m Fa ;in#e - $2,411.70 3,162.90 $$3,162.90 SF 2,500 F to _001SSF DO Family Property DU 12 2,001 to 2,500 SF pert_ Pro mily irtgle Fa SSingle 3,905.47 $$3,905,47 er 2,500 U iOv I) Single Family Propert_y DU ........... Over 2,500SF SF mily' _y le.Fa Sing 304._ 22, $ .... ....... /A.. .N. P roperty re Ac Multi M Acre N/A rty $22,304.00 oPe mnilyPr ti FFamily Mul r ,304'00 1 2 2 $ /A N re Ac ropmy -7" I I I _, tial P Non NonResiden Residential Property Acre ..... N/A $22,304.00
4

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e O) y_ars, until f fiv riod oof r aape 7, fo 200 ], 1, July encing on ly 1, ach Ju On Oneeach July 1,comm commencing on July 2007, for period five (5) years, until he f tthe ) oof (1.00% nt e c per e o o y b eased cr n i e b ll a sh _ a; T cial e p S gned i s s A e h t July 1, 2012, the Assigned Special Tax shall be increased by one percent (1.00%) 12, 20 1, July ear. cal Y ior Fis e pr ect in ,qt in amou amount ineff effect in th the prior Fiscal Year.
.__ itl

City ofIIndio ndio yof Cit go) I.a Terra -3( o.200 Conimunity Facilities District No. 2004.3 (Terra Lago) N istrict ilitiesD Fac ommanity C

August17,21305 August 17, 2005 Page '7


Page 7

I
"::

44 TABLE TABLE thin erty wi Prop es fox ecial Tax ned Sp Assig Assigned Special Taxes for Property within e BB Zon 2, 2, provement Area Im Improvement Area Zone ... !O , iz; FiP,74gl.fri ! ,,,PIrk ,,,,, : ,,,, , !t1111t11 ? .s1: "1 Illi' 0 010i ,:'J I, " - :.:.' ci.... ,, .:,. ,m s}st-,,,,......_-_ ,::,;,ll!,lll_tl_it_ ._ _.' r 11il ill_T .., : ..,_,,.,._ : rS ' , 'is t i '_ .... _ :_!_i ' : ,l_ : ._"f, . I _!I ' _;r,;;_l; : ........ ,:< , "=-: , : :' . ".r : I "_::.--": : .._' / '_""""': : ill,l,t l_" II l!htfb" ... >l Illl_l_lllll_il;lllll,'_ t.. _ ............... ...... _,ll II ll.r l i .......I <' :_lllI_l" " ......... ........ . .... ........ IIIiI,.,,,. _ .... i :I I' " ............... PlilEili' l i, qii' , .$14-0, zs ''81$1. fiii, ! ''i ' '.! . =.' , I w' d, . 1, h3' I 4 I '188:I..' -4N'hi is ' iii ,:.. ,i-, ), op ,, id, i -- , op..,,,".. '0110 .,.4. ,, i , . i . 1 i ;. ,,. i,k :iii.' i; f,s; ,, ....A .0.. 4,,,0 gip, I (xl.;4 "" Myr. oil " k IWI 1.41 W.; 'tz' ,154.9-7 $3 SF n 2t001_ Single Family DU LLess than 2,001 SF ess tha DU $3,154.27 opext_ milyPrProperty ngle Fa Si ,905A7 $3 Single Family Property F 00 SSF 2,5 F to 2,001.SSF to 2,500 $3,905.47 U_. 2,001 DDU .... . erty mily Prop ngle Fa Si 648.04 $4, Family Property DO 22,501 000 SF 3,3,000 to SF to SF $4,648.04 ,501 SF DO ... pet_ amily Pro tngle,,F SSingle 665.31 $4, Property DU 000 SF r 3,3,000 Over SF $4,665.31 U Ove i_ ........ operty Pr _y ingle FFamily SSingle 22.304.00 $$22.304.00 /A N Multi Family Property Acre re Ac N/A operty mily Pr lti Fa Mu ,304.00 $22 NonR Residential Property /A.. Acre N/A '.- '..... N re $22,304.00 I Ac opp_y ....... esidentild Pr Non
{:,.-<'::;"L:'._" b. IIl_'t _:. If I]:t: _:'"') IIlillll$11 ' "i_1 "_" . II$1 _'_ ly.lt; :_:1_3")1;_ _111 iiIIII I lit i . 11 J'."l

l years, unti ) years, ve (5 riod of r aa p_ , fo 2007 y 1,1, $ul caxcing on , comm ly 11, On July commencing on July 2007, for period of fi five (5) until ach Ju n eeach O he f tthe 00%) oof ercent (1. e p ncreased by x: iincreased hah ibe x s pecial Ta igned S July the Assigned Special Tax shall byon one percent (1.00%) e Ass 012, th , 22012, ly 11, ffu ear. iscal Y rior FFiscal he pprior amount in intthe Year. fect in _effect omit in am

erty 1. Undeveloped Property Undeveloped Prop 1. ach in e Prol_m_ with Undeveloped Property Parcel of Undeveloped ach Parcel r e x fo ecial Ta The Maximum Special Tax for each within each aximtml Sp e M Th low. able 55be own in Area shown iuT Table below. ea isissh mprovement Ar IImprovement

aL $ S T TABLE
te _ial Tax ximum SI Ma ndeveloped Property U Undeveloped Property Maximum Special fax Ra Rate
.... . ' .
r....... :'._'-:::'.:)'.7_i .......... : il :. :_:'_.'i" ::::' "_t'.=:.:: f" .if"'ii::f:._.i="'"i_ !' ........!_%ii ..... tlfltXk,-..=... _X .......... ........... I"'_ L . ', .......................... ........ <i"_='_i{_{_:_'".'" % -f,_'_..... i;_i_'"_ ,'e '.'i .:_ ,}:I_ .'.IF':'l!X,_,_htg': ' . '_. :, .::: + T :..c.':.': = _ d_:. , . _i..tm . , .. 9 _ :. . ,,t?l_,_:l#l.t _.._t,_ou_ ...... . . ..,:,:$ -

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y. 1-O Undevelo rolem,y. d Pt loi_ .adcv._.ped I 2 Undeveloped Property _1_ Property 2 Ul'l.devlcJo

cre A Acre
.
Acre __

0,460.00 $2 $20,460.00
22,304.l'i0 Yg $22,304-00

until years, until (5) years, five (5) pcriod of 007, for uly I, oomxlleaLcing Oil , commencing ly 1 h Ju On eac each July 1, onJJuly 1, 2 2007, for a a period of five On the of ) 1.00% of the percent ( y one creased b e in all b ax sh cial T July 2012, Special Tax shall be increased by one percent (1.00%) Maximum Spe the Maximum 12, the ly 1, 20 Ju Year. scal Year. pri_ Fi the prior ffect, in the ne amount effect Fiscal fflot_t iin a

Exempt s not n Property 's Associatio 2. operty Owner nd/or Pr Public and/or Property Owner's Association Property that that iis not Exempt _roperty a ublic lProperty . P 2 E. provisions of Property of Section Section pursuant to the provisions Property pursuant Owners Property Owners and/or Property Property and/or Public Property of Public Parcel of each Parcel for each Tax for The Special Tax Maximum Special The Maximum
City I.mlio oF Indio City of Ago) ..ago) Community Facilities 2004-3 004-_ (Terra/! No. 2 District No_ acilities District Coramtmity F

17, 2005 August 17, August 2005 Page 8 Page 8

.. on EE., Secti ovisions ofof prprovisions the to to pursuant Property t Exempt no isis Association Propertythat that not Exempt Property pursuant the Section on Property Associati m operty Maximu developed Pr e Un rea shall ent AArea within eachImprovem Improvement shallbe bethe theapplicabl applicable Undeveloped Property Maximum each within able 5. re m t Ac SpecialTax Tax1rate per Acre inTTable 5. "atepe Special L TAX IONMENT OF D. METHO METHOD OF APPORTIONMENT OFTHE THESPECIA SPECIAL TAX F APPORT D .Q D. ouncil cal Year, llowing Fis 6 and 2005-200 Commencing with Fiscal Year 2005-2006 andfor foreach eachfo following Fiscal Year,the theC Council cal Year Fis cing with Commen e til th n u ea r A vement o r p Im h c a e in ly r pe o Pr Taxable Property all Taxable on all e Special shalllevy levy th the Special Tax Tax on in each Improvement Area until the shall ach e or f nt e Requirem ax Requirement cial T applicable Spe the applicable s the ial Taxes of Spec Special Taxes equal equals Special Tax for each motmt of aamount steps: following the with ce n accorda m Improvement Area in accordance with the following steps: ovement Area Impr

ea 1I I. Area Improvement Ar . Improvement 1 % o 100 t up Property a Developed Property Parcel of each Parcel on each levied on shall be levied Ta_ shall Special Tax The of Developed at upt to 100% The Special : _Pim: t en m e ir Requ ax T l Specia he t y atisf the Special Tax Requirement o ssatisfy d tto ate as xr ecial Ta gned Sp of th the applicable Assigned Special Tax rate as neede needed plicable Assi e ap of ne B. d Zo one A rea 1, for Improvement Area I ,ZZone Aan and Zone B. rovement A r Imp fo or Requirement f Tax Requirement Special Tax the Special satisfy the to satisfy needed to are needed moneys are Second: for addRional moneys If additional cond: If Se ecial ompleted, the s been p ha t ste ter the , af one B dZ one A rea 1, Improvement Area 1,ZZone A an and Zone B, after thefrrs first step has beenccompleted, theSp Special ement A Improv within perty o Pr ped o l eve d Un f o cel r Pa h eac Parcel of Undeveloped Property within l_oportionately on levied Proportionately be levied Tax on each shall be ax shall T or ecial Tax aximum Sp e M 00% of at B Zone nd a A e on Z 1, a Improvement Area 1, Zone A and Zone B atirp up to to 1 100% of th the Maximum Special Tax ffor Are Improvement Undeveloped Property, ndeveloped Property; U irst the f after the Requirement after Tax Requirement Sp_'ial Tax the Special satisfy the eeded to are n moneys arc additional moneys Third: needed to satisfy first : If additional Third Property Developed Property of Developed Parcel of Assessor's Parcel each Assessor's for each then for completed, then been completed, two have been steps have o steps tw onately orti op Pr eased r c in e b l l sha be increased Proportionately Tax shall Special Tax Backup Special the Backup is the Tax is Special Tax Assigned Special hose Assigned w whose tisfy ded to pecial Tax ackup S 100% of ax up pecial T J}_ed S from the Ass Assigned Special Tax up m to 100% of the the B Backup Special Tax as as nee needed to sa satisfy m the fro the Special Special Tax Requirement. Tax Requirement. the Area 2 2. Improvement Area 2. Improvement 100% to 100% up to at up Property at Developed Property of Developed Parcel of each Parcel on each levied on be levied shall be Tax shall First: The Special Tax llxeSpecial _: " Fir.....g ent quirem Re _ a T al eci p S e th y sf i at s to ed d e ne as needed to satisfy the Special Tax Requirement rate as Tax rate Special Tax Assigned Special of the applicable Assigned file applicable . Zone B and Zone one A and for Improvement Area 2, Z Zone B. Improvement Area for Reqairemeaat for TaxRequirement Special Tax the Special satisfy the to satisfy needed to are needed moneys are additional moneys : dd If Second: If additional S_on__..__. Special e th d, e t comple 'ttst step after the f B, after Zone B, and Zone Zone A and , Zone Improvement Area 2 2, first step has has beta been completed, the Special Improvement Area within y within pert o r P ped o devel Un f o cel r a P each n o nately o i Proport levied Proportionately Tax be levied on each Parcel of Undeveloped Property shall be Tax shall for Tax al eci p S um m i ax M e th of the Maximum Special Tax for 100% of to 100% up to at up Zone B at and Zone Improvement Area 2, Zone Zone A A and a 2, Improvement Are Undeveloped Property; Undeveloped Property; first the first after the Requirement after TaxRequirement Special Tax theSpecial satisfy the tosatisfy needed to areneeded moneys are Third: additional moneys Ifadditional Third: if Property Developed Property ofDeveloped Part.,elof A_essor's Parcel each Assessor's for each then for two completed, then been completed, have been steps have two steps nately tio r o Prop ed s increa be all sh ax T 'ial , Slxx Tax shall be increased Proportionately Backup Special theBackup isthe Tax is Special Tax whose Assigned Special whose Assigned satisfy to ed d nee as Tax al i Spec Backup Special the Backup of the 100% of to 100% up to Tax up Special Tax Assigned Special from Tax as needed to satisfy the Assigned from the the Requirement. TaxRequirement. Special Tax the Special
City of Indio Indio of City go) rraLa 04-3(Te tNo.20 Community Facilities District 2004-3 (Terra Lago) DistricNo. Facilities Commuaity

t1 2005 Augus17, August Page 9 Page 9

7,2005

anyany against levied Taxes Special the the ances will will ircumst r no c unde above, under no circumstances Special Taxes levied against above, withstanding the the NotNotwithstanding tenten r_ than rnomore eased by by incr be be Residential within Improvement Area increased than rovement Area Imp au an perty within dential ProProperty Resi cel of of ParParcel any of er own the by d_fault r o percent (10%) per Fiscal Year as a consequence of delinquency or default by the owner of any delinquency f percent (10%) per Fiscal Year as a consequence o . D CF CFD. of the vement Area other Parcel within an Improvement Area of the in all Impro with Pared other

BACKUP SPECIAL TAXES TAXES SPECIAL _KUI_, BA_ E. E.


sidential ReResidential ified as as operty class veloped PrProperty De cel of of essor's Par Ass each Each Fiscal Year, each Assessor's Parcel Developed classified al Year, h Fisc Eac al Speci ackup B e h t . Year Fiscal each . In In Property shall be subject toBa ac Backup Special Tax. each Fiscal Year, the Backup Special ial Tax kup Spec ect to a ubj l be s ty shal Proper shall al Map inFinal a Fa perty within dential Pro Resi ified as as Tax rate Developed Property classified Residential Property within Map shall perty class eloped Pro Dev forfor rate Tax mula: for wing o oll calculated according to the f following formula: ng to the accordi calcutated Lot Lot e per per ratrate. thethe be be RxA RxA

B
L L above have following meanings: ing meanings: follow e the the e hav ms abov e terterms ThThe

Special Tax per each ar scal YeYear h FiFiscal eac ot inin LLot ax per l T Backup Specia --= Backup B B
eveloped Und for Acre per ax rate Maximum Special Tax rate per Acre for Undeveloped pecial T aximum S "-= M g R r Property for the applicable Fiscal Year Yea al c is F e l cab i appl he t Property for sidential Re asas classified bebe toto or of Developed Property classified or classified Residential perty classified eveloped Pro fD Acreage o == Acreage AA Property in such Final Map Map al n Fi Property in such perty ntial Pro Reside fied as as classi be be to to ssified or or claclassified ch areare whi Map Final the Final Map which classified Residential Property the ts in in LoLots = = L L

the serihext in in p(s) dedescribed Ma Final the ion of of y9ort Notwithstanding foregoing, any portion the Final Map(s) the ma oror allall if if foregoing, withstanding thethe Not h eac for Tax Special Backup n thethe preceding is subsequently changed modified, then Backup Special Tax for each ed, the modifi ed or or sequently chang ragraph is sub ceding paparagraph pre n i y t r pe o r P ential sid Re ssified asas cla bebe to to ied oror perty classif velopcgl Pro De of of Assessor's Parcel Developed Property classified classified Residential Property in r's Parcel Assesso ge ea r Ac of t foo e r sq_la r epe rar a e b ll sha d ifie mod r o d e such Final Map Area that is changed or modified shall be a rate per square foot of Acreage g chan is such Final Map Area that ows: foll as as calculated calculated follows: dified mo anged at or chchanged the ply tOto apapply ticipated to to ananticipated Determine the total Backup Special Tax the modified cial Tax p Spe Backu total rmine the !. 1.Dete Final Maps ps Ma Final perty veloped Pro De reage of of AcAcreage thethe ed by by divid l be be e shal The result paragraph 1 ov above shall divided Developed Property agraph 1 ab par lt of of e resu Th 2. 2. ist exexist ected to to imatdy exp ult is is operty which classified classified Residential which ultimately expected PrProperty Residential ssified asas cla bebe to to ified oror class . y Cit e th by etermined d y nabl o s rea s a , in a e r A p a M such changed or modified Final Map Area, as reasonably determined by the City_ Final xtified t m r in such changed o ckalp e Ba ththe sult is is re The 43,560. ided by by divdivided ll be be sha bove xagraph 2 a2 paparagraph ult of of res The result above shall 43,560. The result Backup The 3. 3. ofof Parcels Assessor's plicable to to apapplicable bebe Special Tax per square foot Acreage which shall Assessor's Parcels ch shall reage whi Ac of of foot square per Tax Special Final d fie odi m r o ed or modified Final chang such opm'ty in iu sidential prProperty Re Developed Property classified Residential such changed ssified asas cla oped Property Devel levied. y be be ma cial Tax Spe thethe which ars in in YeYears aining Fiscal rem Map for remaining Fiscal which Special Tax may levied. allall ea for ArArea Map

EXEMPTIONS 8 F.F.EXEMIrl'ION
City dia InIndio y of of Cit go) Community District No. 2004.3 (Terra Lago) a La 4-3 (Terr 200 ict No. cilitlcs Distr mmun/ty FaFacilities Co
5 , 200 st 1717, Augu August 2005 ge IO PaPage 10

ciation s A._o perty Owner' operty, Pro ublic Pr xes on ecial Ta Sp t levy no The Council shall not levy Special Taxes onPPublic Property, Property Owner's Association cil shall e Coun Th ounty C vexside County ea or provement Ar ithin each erty wwithin ourse Prop olf C Property Course Property eachIm Improvement Area orRi Riverside GGolf perty oror Pro ea 2 rovement Ar thin Imp cated wi 1-270-018 lo 60 -150-024 and umbers 601 _l NNumbers Assessor Parcel 601-150-024 and 601-270-018 located within Improvement Area 2 ssor Paz Asse e in r o t a str Admini the Administrator y the assigned b e assigned ill b tatus w Property sstatus Exempt Property of the the CFD CFD. will be by in th the . Exempt of s Property Owner' Property, Property c Property, comes Publi operty be hich pr der ininw chronological order which property becomes Public Owner's onological or chr erty. op Pr e rs Cou Golf or y Association Property or Golf Course Property. Propert tion Associa CTION ER OF G. MANNER OFCOLLE COLLECTION . MANN G rdinary at/ so e aas me tim t the nd aat e manner e sam cted in e colle ll bbe ax sha ial T The Special Tax shall collected inth the same manneraand thesa same time ordinary ad e Spec Th rocedure, sale ne p he _r lties, tthe e pena ect to subj all be nd sh roperty taxes valoremp property taxesaand shall be subject tothe thesam same penalties, same procedure, sale valorem dministrator may he A hat tthe ever, t _ovided, how elinquency; p e of the rity in lienprio priority in thecas case of d delinquency; provided, however, that Administrator may nd lien aand iffemnl r in e o reat tim axes at ial T ollect Spec y ccollect , ma ecial Tax directly billthe theSp Special Tax, may Special Taxes at a a diffe different time or in a ad different irectly bill d ose and may ant to ay coven m ns, and nancial obligatio s fifinancial eet itits m ssary to nece manner necessary to meet obligations, and may covenant toforecl foreclose and may ffif manner Act if the by ted t permi a.s s xe a T Special uent q delin els having n Parc se oon foreclose Parcels having delinquent Special Taxes as permitted by the Act if ctually foreclo aactually D. bligations of al oobligations et the necessary tome meet thefinanci financial ofthe theCF CFD. cessary to ne PPEALS L A IIL APPEALS ith t.be Parcel(s) w hi._aer Parcel(s) n his/her ecial Tax e Sp peal of en ap ay file Any ttaxpayer may filea a writt written appeal ofth the Special Tax o on with the axpayer m Any cial Taxes. ents of Paer paym his rrem inin cu ellant isis app at the ded th Administrator, provided that the appellant current his/her payments ofSpe Special Taxes. ministrator, provi Ad efore b or on paid e b must d e vi e l viously e r p s e Tax pecial S l l a , l appea n a During pendency of an appeal, all Special Taxes previously levied must be paid on or before endency of p m-Lng D sons a e r he pecify t um s appeal m The appeal , The vy was e lelevy hen th tablished w te es ent da payment date established when the wasmade made. roust specify the reasons he paym tthe review the Administrator shag The Administrator error. The in error. s in ax iis ecial T he Sp laims tthe llant cclaims he appe why t the appellant Special Tax shall review the why advise the nd a , ecessary and advise ems n Administrator de the Administrator appellant ff th the eet wi l, m appeal, meet with the appellant if the deems necessary, the appea the appellant, the the appellant, with the agrees with Administrator agrees the Administrator If the determination. If ts determination. appellant of iits llant of appe the on es x a T ial c e Sp re futu educe future Special Taxes on the r r liminate o edit to a acr graat Administrator shall grant credit to eeliminate or reduce inistrator shall Adm made. be made. shall be xes shall pecial Ta id S viously pa refunds of appellant's Parcel(s). of lxe previously paid Special Taxes rcel(s). No refunds pellanl's Pa ap make and make Appoxtionment and of Apportionment Method of s Rate nterpret thi hall iinterpret The this Rate and and Method Administrator sshall The Administrator any d an Tax pecial Tax e S dministration of d a y an ual lev lative to determinations relative tothe the ana annual levy and administration ofth the Special and any determinations re pecified. erein s as h appeals, as o appeals, taxpayer who herein specified. taxpayer wh TAX CIAL TAX O.FSPE I. SPECIAL _REPAYMI_NT OF I. PREPAYMENT H: Section H: this Section to this apply to The definitions apply following definitions The following the by the seoaed by a_d secured issued and boDds issued issued bonds previously issued all previously means all Bonds" means "Outstanding levy of "Outstanding Bonds" rincipa p r o / d an t s e ez t in rst fu the r e ft a g n i utstand o n i rema outstanding after the first interest and/or principall wi]lremain whicb will Special Taxes, which Special Taxes, at a later redeemed at be redeemed to be bonds to excluding bonds r, excluding iscal Yea cament F the current lowing the date fol payment following Fiscal Year, a later payment date . es x a T l a ci e p S um Maxim of ts ymen a ep r p r io r p of e.ds date prior prepayments of Maximum Special Taxes. proce.. the proceeds with the date with Full in Full Prepayment in i. Prepayment 1. by a satisfied by emtaaently satisfied ",rodp prepaid and beprepaid only be may only obligation may Tax obligation The permanently a Special Tax Maximum Special TheMaximum has it rm e p ng i d l i bu a h ic h w r o f ty er p o r P d e p evelo d Un or / and rty, pe ro P d ope l Parcel of Developed Property, and/or Undeveloped Property for which a e Dev f building permit has o Parcel is not yhat t Propert .Association Owner's y PropertOwner's and/or Property Property and/or PublicProperty andPublic been Association Property that is not issued,and been issued, to applicable to obligationapplicable Tax obligation Special Tax Maximum Special The Maximum ctiOn E. pursuant to Exempt to Se Section E. The Prolxa'ty pursuant Exempt Property
City of Indioo oflndi city a Lago) -3(l'ertI...ago) 2004(Terra tNo. Distric s Community Facilities District No. 2004-3 Facilitie Commlmity August 17, 2005 e 11 Pag Page 11

levy of

August17,2005

the Special Tax l to pa Parce hethe gation of t obli the the paid and pre fully be he cel may Parcel may fully prepaid and obligation of Parcel toy pay the Special Tax h Par sucsuch be made only if ment may epay a pr vided that in; proprovided cribed here des ed as as ancndy satisfi permanently satisfied described herein; that a prepayment may be made only if perm time of prepayment. hethe cel at t Par such to to respect es with l Tax t Specia delinquen no no delinquent Special Taxes with respect such Parcel at time of prepayment. re areare thethere obligation shall cial Tax aximum Spe M epay the pr ending toto rcel int Pa aa ner of of owowner Parcel intending prepay the Maximum Special Tax obligation shall AnAn usiness days in 5 b5 with pay, and re t to p nten ice of i ten notnotice w_t nistrator with Admi provide Administrator with written of intent to prepay, and within business days ide thethe prov ount of the am he t of ner owowner y such l notif ministrator shal e Ad ce, ththe ch noti susuch of of receipt notice, Administrator shall notify such of the amount of the receipt of of by the CFD m incurred to be cost the the ver to co ined determ it depos r_undable nonnon-refundable deposit determined to cover cost to be incurred by the CFD in of suchnonceipt rereceipt fof dayso 1515 Within payment. re t of a amoun r prope the calculating the proper amount ofpa prepayment. Within days of such nonating calcul amountof epayment thepr ner ofof chowowner susuch ify not ll ra sh inistrato eAdm , the th it depos dable refundable deposit, Administrator shall notify the prepayment amount of refun redemption date y an o t or i r p s y a d 60 han t ss e l t o n de ma e b t us m t n me ay p e r P . such Prepayment must be made not less than 60 days prior to any redemption date rcel h PaParcel. suc al Taxes. paid Speci h pre suc ceeds of of pro thethe med with redee be be ds to to Bon any any Bonds redeemed with proceeds such prepaid Special Taxes. forfor rized below lated asassumma calcu l bebe w') shal mexi belo ount (dcf payment Am Prepayment Amount (dcfmed below) shall calculated summarized below e Pre ThThe ed below):. defin ms as as (capitalized terms defined below): . pitalized ter (ca t cmption Amoun Rexl Bond Bond Redemption Amount emium PrPremium n o i pt Redem plus plus Redemption nt feasance Amou De plus plus Defeasance Amount e_ Expens s and ministrative Fee Ad plus s plu Administrative Fees and Expenses t edi r C und F e v eser R s les less Reserve Fund Credit ount payment Am re P Total: al: equals Prepayment Amount Tot equals fined bdow) shall be ount (de epayment Am Pr ayment, the prep te of posed da e pro ofofth As the proposed date of prepayment, the Prepayment Amount (defined below) shall be As : s follow as d e t la cu cal calculated as follows: arcel. PParcel. such ply to nquencies ap deli cial Tax Spe t nono nfirm tha 1.1. Co Confirm that Special Tax delinquencies apply to such ax for the Parcel ecial T ximuni Sp Ma mpute the ty, co ped Proper Develo els ofof Parc For Parcels Developed Property, compute the Maximum Special Tax for the Parcel 2.2. For epaid, compute the roperty to Undeveloped P rcels of r Pa epaid. Fo e pr bbe to to prepaid. For Parcels of Undeveloped Property tobe be pr prepaid, compute the dy designzXcd as akea was t i h g u o h t as el Parc at th or f ax T l ecia p S lm t m i ax M Maxim= Special Tax for that Parcel as though it was already designated cd as arcady bccn Lssu ch tins rmit whi ng pe e braidi on ththe sed up lol_tty , ba cvclope.d PProperty, DDeveloped based upon building permit which has already been issued roperty Owner's Association nd/or PProperty roperty a ublic P f P rcels oof or Pa l. F Parce that for for that Parcel. For Parcels Public Property and/or Owner's Association arcel. hat t r o f x a T l ia pec S aximum M e h t e mput o c d, pai e r p be o t y t per o r PProperty to be prepaid, compute the Maximum Special Tax for thatP Parcel. . 3.3. y the total aragraph 2 2bby ttrsuam to omputed p x c pecial Ta aximum S e M ide th Div Divide the Maximum Special Tax computed pursuant to p paragraph the total pecial Tax S y t r ope r P ed op el ev D e th on ased b s e Tax l a peci S aximum M d ate m i est estimated Maximum Special Taxes based on the Developed Property Special Tax epaid. een pr ave bbeen arcels which ny PParcels ss aany arged, leless ould be hich ccould w which bech charged, whichhhave prepaid. e Outstanding Bouds to y th bby aragraph 3 3 ursuant to omputed ppursuant ient ccomputed ly the Multip Multiply thequot quotient topparagraph the Outstanding Bonds to retired and prepaid (the "Bond o be onds tto standing B otmt of mpute the co compute theam amount of Out Outstanding Bonds be retired and prepaid (the "Bond mount"). ption A Redem Redemption Amount"). aph 4 by the o paragr ursuant tto puted p mount com mption A ond Rede ply the Multiply the B Bond Redemption Amount computed pursuant paragraph 4 by the Multi bc tedecmed to nds o B g din tan s t u O he t n o , y an ff mium, e r p tion emp ed r e bl lica pp a applicable redemption premium, if any, on the Outstanding Bonds to be redeemed m"). Redemption Premiu he "' (t "Redemption Premium"). (the

4. . 4

5. . 5

Redemption Amount from n the nterest o teeded to mount rneeded e aamount ompute th C Compute the topay pay iinterest on the Bond Bond Redemption Amount from August17, 2005 Imlio f Indio of ity o City C August 17, 2005 e12 Pag ago) L Terra 004-3( o, 2 t istri_N D acilities F Community Facilities District No. 2004-3 (Terra Lago) ommunity C Page 12 6. 6.

Year Fiscal rrent ing the cu follow ent datedate ipal paym or princ t and/and/or the bond interest principal payment following the current Fiscal Year iJlteres bond rstfirst the fi ds, tanding BonBonds. for the ption datedate the earliest redemption for Ou thetsOutstanding redem liest the ear untiluntil which Year nt Fiscal om'e el in the rcParcel e Pa on th levied ial Taxes Spec tile the Determine Special Taxes levied on the in the current Fiscal Year which 7. 7.Determine have not yet been paid. paid. n bee yet have not 8. the the from erive cts to dto nably expeexpects inistrator reaso Adm nt the the amou Compute amount Administrator reasonably derive from ute the the Comp Expenses andand Expenses rative Fees Administ the the unt less t Amo Prepaymen e the reinvestment of Prepayment Amount less Administrative Fees ltmt of th remvestn ds to to ng BonBonds Outstandi the for e dat mption e red redemption date for the Outstanding the the nt until from of prepayment until of prepayme datedate the the from prepayment. the the with be redeemed with prepayment. be redeemed

amount act the the subtr 7 and 6 and aragraphs to pto puted pursuant unts comcomputed Add amounts pursuant paragraphs 6 and 7 and subtract amount amo the the 9. 9.Add "). Amount e Defeasanc ' " e th ( 8 h p ra g a computed pursuant to paragraph 8 (the "Defeasance Amount"). par to ant su r pu ed compm putation of the om s of cof costcosts ding the the rtses, inclu expe and and Verify administrative expenses, including computation of the nistrative feesfees admi fy the the Veri 10. 10. he the t g in m redee of osts c e th , ceeds ro p _t m y a prep he t nvest i o t costs the , ent m prepayment, the costs to invest the prepayment proceeds, the costs of redeeming ay prep dence thethe evievidence to to notices ording anyany recrecording of of costs the the , and and Bonds, costs notices standing Bonds OutOutstanding "). Expenses andand .iniatrative Fees "Adm prepayment redemption (the mption (the "Administrative Fees Expenses"). rede the the ayment andand prep the the (a) (a) of: of: lesser al the the equequal ") shall Credit erve Fund "R_ reserve credit (the t (the "Reserve Fund Credit") d credi shall lesser rve funfund rese TheThe II. 11. , ny a if ), enture IndIndenture), in the defined irement (as (as rve requ resereserve expected reduction in the requirement defined in the if any, ction in the redu expected payment, pre hethe t of t res ds as a standing BonBonds ption of Out redem the the associated with redemption of Outstanding as a ul result of prepayment, iated with assoc ed in in defin s a ( nt reme i u q re reserve new cting the the subtra ived by by or amount subtracting new reserve requirement (as defined unt derderived amo the the b) (b) or ( of the res ds as a ding Bon tion of Outstan redemption of Outstanding Bonds as a ult result of the redemp indenture) in effect after r the the ct afte nture) in effe Inde the the o no in t bu e, al d ment y epa r p the on und f e v r rese e the ce in th balan the the from prepayment from balance in reserve fund on the prepayment date, but n in ayment prep o. r ze than ss e l be nt amou uch l s nt shal eveevent shall such amount be less than zero. ted cmnts compu amamounts of the sum e the al to th paymm_t is eq prcprepayment ial Tax The Special Tax isuequal to sum of the computed ximum Spec MaMaximum The 12.12. rsuant to to mputed pupursuant unt co amo the less ]0,10, , 9 pursuant to paragraphs 5, and 9 and less the amount computed graphs 4, 54, suant to para pur '). ntAmoun paragraph (the "Prepayment Amount"). "Prepayme (the graph 11 11 para . 9, graphs 4, 5, t to pa ted pursuan unts compu amo ount, the the From Prepayment amounts computed pursuant tora paragraphs 4, 9 5, ayment AmAmount, Prep thethe From 13.13. ure m nde I e th r e nd u d he is l b _ e. a_ d un f te ropria app the the sited into depo and deposited into appropriate fund as established under the Indenture ll be be shashall I I 11 and ouot amamouot ments. The ice paypayments. t serv e debdebt ak s or m slanding Bond e OulOutstanding to re and used totir retire Bonds or make service The used be be and CFD. thethe ined by by ta be re hall raph 10 s computed pursuant to paragraph 10 shall be =tallied CH.). suant to parag puted pur com ement of of incr a $ r than othe edeem icient to r suff be be The Prepayment Amount may sufficient to redeem other than a5,000 $5,000 increment mnt may yment Amc Prepa 1he l bebe reof wil dtiple the egral ml int 000 or or e $5, such cases, the above $5,000 integral multiple thereof will crement abov inincrement es, the h cas suc nds, InIn BoBonds. t nex _e t t with used e b o t enture IndIndenture the the hed ,ruder establis retained appropriate fund established under to be used with the next ropriate fund app thethe in in retained ents. paym service payments. debt service prepayment bonds to make debt to make ds or or bon yment of of prepa ermined under det as as x levy cial TaTax 's Spe al Year result payment ofethe current Fiscal Year's Special levy determined under ent Fisc curr ent of th paym thethe t of of esul a ra AsAs Tax Special 's r ea Y Fiscal nt e rr cu he t ve o rm ll sha r o t a tr paragraph 7 (above), the Administrator shall remove the current Fiscal Year's Special Tax s i n paraglaph 7 (above), the Admi th d, i prepa is that l arce P y an o t _speet ith . W With respect to any Parcel that is prepaid,ethe rolls nty tax tax Cou levy such Parcel County rolls. m thethe cel frofrom Par sud) forfor levy icate the hld t, to to AcAct, thethe pliance with om in c recorded ce to be ble noti se a suita Board shall cause a suitable notice to be recorded in compliance with indicate the l cau d shal Boar the and cel, r Pa h c su on n lie Tax al i Spec the f o e as e l e r the prepayment of Special Taxes and the release of the Special Tax lien on such Parcel, and the prepayment of Special Taxes and se. cea x shall cial TaTax Spe the pay obligation such Parcel pay the Special shall cease. cel to to Pax such igation of of obl
Indio o Irdi y of of CitCity go) Facilities District 2004-3 (Terra a [,aLago) 3 (Terr . 2004riot NoNo. ilities Disl mmunhy Fac CoCommunity
August 17, 2005 August 17. 2005 ge 1313 PaPage

less the lowed un alallowed bebe epayment shall pr cial "Fax Notwithstanding foregoing, Special Tax prepayment shall unless the Spe nono foregoing, twithstanding thethe No d an toto prior th bo ty per xable Pro Ta on levied be may xes that amount Maximum Special Taxes that may be levied on Taxable Property both prior and ecial Ta Sp Maximum t of of amoun l a onon l bt service ual dedebt aximum ann e mmaximum es ththe tim st 1.1 lealeast at at yment is is after the prepayment 1.1 times annual service all oposed prepa prproposed er the aft Outstanding Bonds. nds. tstanding Bo Ou the pted upon acce be may ecial Taxes m Sp Maximu Tenders Bonds in Maximum Special Taxes may be accepted upon the repayment ofof pprepayment nd.,; in Bo nders of of Te of use the r, ve owe H Act. e h t to t uan s r pu ard BoBoard thethe hed by by nditions establis coconditions terms and established pursuant to the Act. However, the use of ms and ter the roved by cally app specifi is as se bas a case-by-e a on allowed e b Bond tenders shall only be allowed on a case-by-case basis as specifically approved by the nly o shall rs e Bond tend d. r Boa Board.

Prepayment Part rt Pa ayment inin 2.2. Prep


r roperty fofor ndeveloped PProperty ty or ol_d Proper Devel arcel of x on Maximum Special Tax onaaPParcel of Developed Property orU Undeveloped al Ta imum Speci he Max TThe 1XI0. $2, rements ofof inc epaid inin artially pr ay be sued m building permit has been may beppartially prepaid increments $2,000. en isissued s be t ha lding permi bui hich a a wwhich rtial a p a that t p exce .1; H n o i ct Se n i s a d e t calcula be amount thepprepayment shall be calculated as in Section H.1; except that a partial repayment shah t ofofthe he amotm TThe rmula: llowing fo e fofollowing ththe rding toto prepayment shall be calculated according formula: ulated a_o calc be payment shall pre F _x xF PP'-'P PP=Pa eaning: llowing m e fo ve th s ha These terms have the following meaning: se term The payment e partial PP the partiallxe prepayment ==th PP L1 ection IIL1 SSection cording to culated ac ount cal epayment Am Pr PE the Prepayment Amount calculated according to the == P_. e repaying th rtially pprepaying rcel(s) is e Pa of e owner hich th a-centby e pe =rit the percent byw which the owner ofth the Parcel(i) is pa partially the = FF Maximum Special Tax. x. cial Ta Spe Maximum otify all nnotify ax sh ecial TTax aximum Sp M pay the rtially pre o pa sires tto Theow owner aP Parcel whode desires partially prepay the Maximum Special shall arcel who f a ner oof The ax, pecial T ximum SSpecial e Ma epay th artially pr tent to ner's in theA Administrator (i)such suchow owner's intent top partially prepay the Maximum Tax, (i_ dministrator ofof the e ) ii i ( d an 2,000, $ f crements o of $2,000, and (iii)th in inin epayment expressed (ii) amount of pax partial prepayment expressed increments the tial pr ount of he am i) tthe (i f o ays of 5 5ddays nd within plicable aand ent, ff crow ag es the cting as e aacting will ency that companyor orag agency that willbbe as the escrow agent, ifap applicable within company mount of er of roperty own uch p tify ssuch all no dministrator sh e A receipt ofsuc such notice, th the Administrator shall notify property owner ofthe theaamount of h notice, ceipt of re FT) in the by n_ cu t to cos er the cov mined to to osit deter fundable dep n re theno non refundable deposit determined cover the cost tobe bem incurred by theC CI1) the iu f x_ipt oof ays of usiness ddays bbusiness hin 15 ayment. Wit rtial prep pa aa unt ofof calculating thepproper amount partial prepayment. Within 15 ofre receipt roper amo ulating the calc l a parti he t f o r e own uch s y f ti no ll sha dministrator osit, the non-refundable deposit, theAAdministrator shall notify such owner of the partial _m-refundable dep uch n ssuch ays an 60 s th de not e ma ust bbe nt m e ym pa e pr al i t r a P l. e c r a P prepayment amount of such Parcel. Partial prepayment must made notles less than 60ddays h c u s of unt mo a t n e m prepay epaid roceeds of he pproceeds be s to y Bond r an ate fo edemption ddate prior toaany for any Bonds to beredeemed redeemedwith withtthe of such such pr prepaid ny rredemption rior to p SpecialT Taxes. axes, Special istribute the i) d ,hall((i) trator ,* e Adminis repaid, th artially p s p cel that With respect to an any Parcel that iis partially prepaid, the Administrator shall distribute the y Par spect to th re Wi _.ords in cate i ind ) .I,I ,and on H f Secti ragraph 13 o Pa rding tto t acco funds remitted toiit according Paragraph 13oof Section IL and0i (ii) indicate in the the re records emitted to mds r fi ta x and ecial Ta he Maximum f tthe ayment oof of the the C CFD that there has been been a ap partial artial prep re has prepayment Maximum Sp Special Tax hat the and tha FD t that a of he t of _) 1 0 0 . (I ge ata m e r pe g andin t s out e h t o the outstanding percentage (1.00 - 17) of the l tto ax equa ecial T aximum Sp portion of file the M Maximum Special Tax equal rtion of po xx:l uch Pm ied on e lev uthorized to e aauthorized ontinue to all ccontinue eiat Tax a,dmum Spe remaining Maximum Special Taxsh shall to b be tob be levied on s such Parcel emaining M r pursuant toS Section D. . ection D uant to purs

_7

' "

City o of hxlio f Indio City aago) l. (TerrLago) 004-3. o. 2 t _tdeN Community Facilities District No. 2004-3 (Tetra cilitiesDt, Fa mmtmity Co

ust17,200.5 Aug August 17, 2005 Page 14


Page 14

J. TERM OF THE sPECIAL TAX For each year that any Bonds are outstanding the Special Tax shall be levied on all Parcels subject to the Special Tax. If any delinquent Special Taxes remain uncollected prior to or after all Bonds are retired, the Special Tax may be levied to the extent necessary to reimburse the CVD for uncollected Special Taxes associated with the levy of such Special Taxes, but not later than the Fiseal Year.

City of ladio Community Facilities District No. 2_.t4-3 (Terra Lago)

---

August 17, 2005 Page 15

BOUNDARY MAP COMMUNITY FACEITES DISTRICT NO. 2004-3


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APPENDIX CITY OF INDIO

B INFORMATION

SUPPLEMENTAL

The following information concerning the City of Indio is presented as general background data. l'he Bonds are payable solely from unpaid Assessments as described in the Official Statement. The Bonds are not an obligation of the City, and the taxing power of the City is not pledged to the payment of the Bonds (except to the limited extent described herein). General Information In 1893, Indio became one of 12 townships in the County of Riverside and was incorporated in 1930 and encompasses 24.8 square miles. It is a general law city with a council-manager form of municipal government. The City Council is composed of a Mayor and four members elected bi-annually at large to four-year alternating terms with the mayor rotating on an annual basis. Positions of City Manager and City Attorney are filled by appointments of the City Council. Indio is the geographic mid point of both Riverside County and the Coachella Valley. It is known as both a desert resort and a major agricultural area. Indio is about 75 miles north of the California-Baja California Mexican border and 120 miles east of the center of the Riverside metropolitan complex and 30 miles southeast of Palm Springs. It is the halfway point for all the weekly Southern Californians who make the weekend and holiday trips to the Colorado River and the Glamis Off Road recreational facilities. Indio's neighboring communities are La Quinta to the west, unincorporated areas of Riverside County to the south, the City of Coachella to the east and unincorporated Riverside County land to the north. Home of the National Date Festival, Shalimar Sports Center's satellite off-track wagering facility and international polo matches, Indio welcomes tens of thousands of visitors each year. Governmental Services

The City provides a broad range of services to its citizens which include police protection, water service, trash collection, street construction and maintenance, parks and recreation, planning and zoning, housing and community development, building inspection and general and administrative support services. It cooperates with Riverside County in the provision of fire protection and with Coachella Valley Water District for flood control. The Indio Police Department operates from one station and has 49 sworn officers serving the community. The City maintains five parks and the Coachella Valley Recreation District operates a 39,000 square foot comprehensive recreational facility in the City. Transportation Interstate 10 connects Indio with Los Angeles, San Diego and Phoenix, Arizona. 86 and 111 provide access to neighboring communities and Palm Springs. Commercial rail service to Indio is provided by Southern Pacific Railroad. Airport and State Highways

Air cargo and passenger flight services are provided at the Palm Springs International at nearby Bermuda Dunes and Thermal Airports. Population Table No. B-1 summarizes population surrounding cities and Riverside County. growth between 2001 and 2005

for the City of Indio,

B-I

TABLE NO. B-1 CHANGE IN POPULATION CITY OF INDIO, SURROUNDING CITIES* AND RIVERSIDE 2001 - 2005 INDIO Year 2001 2002 2003 2004 2005 Population 50,464 52,507 55,155 60,175 66,118 Percentage Chan_e SURROUNDING Population 113,040 115,918. 120,631 123,309 130,556 CITIES Percentage Change

COUNTY

RIVERSIDE Population 1,590,473 1,654,220 1,726,754 1,807,858 1,877,000

COUNTY Percentage Change

4.0% 5.0 9.1 9.9

2.5% 4.1 2.2 5.9

4.0% 4.4 4.7 3.8

% Change Between 2001 - 2005

31.0%0

15.5%

18.0%

* Surrounding cities include Palm Springs, Palm Desert, Indian Wells and Coachella. Source: State of California Department of Finance.

Employment

and Industry

The City of Indio is located in the Riverside/San Bernardino/Ontario labor market area. Six major job categories constitute 64.9% of the work force. They are government (15.5%), service producing (14.4%), professional and business services (9.2%), manufacturing (8.8%), educational and health services (8.6%) and leisure and hospitality (8.4%). The June 2005 unemployment rate in the Riverside/San Bernardino/Ontario area was 5.2%. The State of California June 2005 unemployment rate (unadjusted) was 5.4%.

B-2

TABLE NO. B-2 RIVERSIDE/SAN BERNARDINO/ONTARIO MSA WAGE AND SALARY WORKERS BY INDUSTRY (in thousands) Industry Government Other Services Leisure and Hospitality Educational and Health Services Professional and Business Services Financial Activities Information Trade, Transportation Service Producing Retail Trade Wholesale Trade Manufacturing Nondurable Goods Durable Goods Goods Producing Construction Natural Resources and Mining Total Nonfarm Farm Total (all industries) and Utilities 2000 192.1 35.0 100.8 102.2 97.0 34.8 12.9 212.2 127.4 38.3 34.5 85.6 80.1 1.3 1,154.2 21.7 1.175.9 2001 200.2 37.1 104.4 106.0 101.7 38.2 14.6 219.4 132.2 41.6 34.4 84.1 88.4 1.2 1,203.5 20.9 1.224.4 2002 212.7 38.1 107.2 112.4 106.8 39.5 14.1 226.3 137.5 41.9 33.4 82.0 90.9 1.2 1,244.0 20.3 1.264.3 2003 211.6 38.4 109.0 115.8 115.4 42.6 13.9 236.3 142.7 43.5 33.7 82.4 99.0 1.2 1,285.5 20.3 _ 2004 211.5 38.8 115.2 117.7 125.2 45.3 13.8 250.4 151.8 44.4 34.5 85.5 110.8 1.2 1,346.1 18.8 1.364.9

Source: State of California Employment Development Department.

The major employers operating June 30, 2005 area as follows: Name of Employer

within the City and their respective

number

of employees

as of

Number

of Employees 900 525 445 226 142 115 100 100 100 100

Product/Service Government Casino Medical Hospital Government Department Store Physical Therapy Grocery Store Farm Produce Concrete Telephone Service

County of Riverside Fantasy Springs Casino John F. Kennedy Memorial Hospital City of Indio Sears Roebuck & Company Desert Orthopedic Center Super Saver Food Dimare Company Granite Construction GTE Source: City oflndio. 2004 data not yet available.

B-3

Personal Income Personal income information for Riversidc County, the State of California and the United States are summarized in Table No. B-3. TABLE NO. B-3 EFFECTIVE BUYING INCOME COUNTY, CALIFORNIA AND UNITED 1999 - 2003 Count. State of California $39,942 44,464 43,532 42,484 42,924 for smaller geographical

RIVERSIDE

STATES

Yea._.....Er 1999 2000 2001 2002 2003 Note:

Riverside

United States $37,233 39,129 38,365 38,085 38,201 areas such as the City of

$35,145 39,293 37,480 38,691 39,321 Personal income data not available Indio. 2004 data not yet available.

Source: Sales and Marketing Management, "Survey of Buying Power. "'

Commercial

Activity

The following table summarizes the volume of retail sales and taxable transactions for the City of Indio for 1999 through 2003. TABLE NO. B-4 CITY OF INDIO TOTAL TAXABLE TRANSACTIONS (in Thousands) 1999 - 2003 Total Taxable Transactions ($000's) 401,104 473,781 531,686 536,126 589,327

Year 1999 2000 2001 2002 2003

Retail Sales ($000's) 318,955 385,117 444,519 450,141 504,197

% Change

Retail Sales Permits 496 560 612 699 743

% Change

Issued Sales Permits 1,169 1,204 1,250 1,481 1,636

20.7% 15.4 1.3 12.0

18.1% 12.2 0.8 9.9

Source: State of California Board of Equalization. 2004 data not yet available.

B-4

The following

table compares

taxable transactions

for the City oflndio

and surrounding

cities.

TABLE NO. B-5 CHANGE IN TOTAL TAXABLE TRANSACTIONS INDIO AND SURROUNDING CITIES (in thousands) 1999 - 2003 % Change 1999 - 2003 46.9% 35.5 40.3 10.9 79.2

City INDIO Palm Springs Palm Desert Indian Wells Coachella

1999 $ 401.104 542,041 1,098,211 63,611 113,485

2000 $ 473,781 601,316 1,217,986 68,599 132,640

2001 $ 531,686 623,956 1,211,069 62,958 146,254

2002 $ 536,126 617,260 1,209,385 57,178 155,831

2003 $ 589,327 675,487 1,296,730 67,186 176,051

Source: State of California Board of Equalization. 2004 data not yet available. Taxable transactions by type of business summarized in Table No. B-6. for the City of Indio for 1999 through 2003 are

TAXABLE

TABLE NO. B-6 CITY OF INDIO TRANSACTIONS BY TYPE OF BUSINESS (in thousands) 1999 - 2003 1999 2000 2001 2002 2003

Retail Stores Apparel Stores General Merchandise Stores Food Stores Eating/Drinking Places Home Furnishings and Appliances Building Materials and Farm Implements Auto Dealers/Suppliers Service Stations Other retail stores Total Retail Stores All Other Outlets Total All Outlets $ 6,304 48,362 30,749 37,763 9,276 46,350 95,464 24,138 20,549 318,955 82,149 $ 8,090 51,256 34,011 42,343 22,404 46,344 130,246 29,073 21,350 385,117 88,664 $ 7,651 51,293 36,761 42,707 27,503 43,136 185,893 27,255 22,320 444,519 87,167 $531,686 $ 7,380 48,720 39,208 39,710 30,794 40,158 191,899 27,889 24,383 450,141 85,985 $536,126 $ 7,599 50,580 43,369 43,666 35,800 54,461 206,886 33,789 28,047 504,197 85,130 $589,327

$401.10____44$473,781

Source: State of California Board of Equalization. 2004 data not yet available.

B-5

Building Activity Activity Building


the five for lndio of of City thethe s forfor valuation activity es building summariz table The following table summarizes building activity valuations City Indio for the five following The 2004. fiscal years from 2000 through 2004. 00 through 20 from years fiscal B-7 NO. TABLE TABLE NO. B-7 INDIO OF CITY CITY OF INDIO ACTIVITY AND VALUATION

G BUILDIN BUILDING ACTIVITY AND VALUATION s) thousand (in (in thousands) 2004 2000 2000 2004

2000 ___0.0 200. TotalResiden Residential tial Total Total Commercial ial Commerc Total Total Valuation Total Valuation Source:City Cityo of Indio. f Indio. Source:
60,913,897 $$60,913,897 5 26,509,45 26,509,455 52 $90,423,3 $90,423,352

200__. 2001!

___2 200. 2002

_.__3 200_ 2003

__._44 200 2004

$394,347,500 ,525 $230,927 ,529 $142,813 17 $74,439,0 $394,347,500 $74,439,017 $142,813,529 $230,927,525 7 56,330,89 2 9,401=35 9,085,542 0 16,374,15 16,3741150 9,085,542 9,401,352 56,330,897 ,397 $450,678 ,877 $240,328 ,071 $151,899 90,813,167 $$90,813,167 $151,899,071 $240,328,877 $450,678,397

B-6 B-6

APPENDIX C APPENDIX

SUMMARY OF FISCAL FISCAL AGENT AGENT AGREEMEN AGREEMENT T SUMMARY OF The a summary of the and is is and Agreement, Agent Agreement, Fiscal Agent the Fiscal of provisions certain provisions of certain summary of s a ollowing iis The ffollowing supplemental to the summary of other provisions of such document described elsewhere in this Official Oftqcial this in supplemental to the summary of other provisions of such document described elsewhere Statement. should be be reference should and reference definitive, and or definitive, comprehensive or be comprehensive to be purport to not purport does not summary does This summary Statement. This made to such document for full and complete statement of its provisions. All capitalized terms used but ut b used terms capitalized All . provisions its of statement complete and ull f for made to such document not otherwise defined in this Appendix shall have the meanings assigned to such terms in the Fiscal Agent Agent Fiscal the in not otherwise defined in this Appendix shall have the meanings assigned to such terms Agreement. greement. A
DEFINITIONS DEFINITIONS

Unless the context requires, the following terms shall have the following meanings: Unless the context requires, the following terms shall have the following meanings: "Acquisition and Construction Construction Fund" Fund"means meansthe the fund fund by by such established and established created and name created such name "Acquisition and pursuant to the Fiscal Fiscal Agent Agent Agreement. Agreement. to the pursuant "Act" Facilities Act Act of et 53311 et Sections 53311 amended, Sections 1982, as amended, of 1982, Community Facilities Mello-Roos Community the Mello-Roos means the t" means "Ac seq. of the California Government Code. seq. of the California Government Code. "Administrative Expense ExpenseAccount" Account"means meansthe theaccount accountby by such such name name in in the the Special Fund Tax Fund Special Tax "Administrative created and established pursuant to the Fiscal Agent Agreement. . t created and established pursuant to the Fiscal Agent Agreemen "Administrative Expense Requirement" Requirement"means meansfor forany any Fiscal Fiscal Year, Year, an an amount amount necessar necessar to to pay pay Expense "Administrative Administrative Expenses. Expenses. Administrative "Administrative Expenses"me means the administrative administrativecosts costs with with respect respect to to the the calculation and calculation and ans the "Administrative Expenses" collection of the Special Taxes, including all attorneys' fees and other costs related thereto, the fees and and fees he t thereto, related costs other and fees attorneys' all including Taxes, collection of the Special expenses of the Fiscal Agent, any fees for credit enhancement for the Bonds which are not otherwise paid paid otherwise t no expenses of the Fiscal Agent, any fees for credit enhancement for the Bonds which are as Costs of Issuance, any costs related to the District's compliance with State and federal laws requiring as Costs of Issuance, any costs related to the District's compliance with State and federal laws requiring continuing disclosure of information concerning the Bonds and the District, and any other costs otherwise continuing disclosure of information concerning the Bonds and the District, and any other costs otherwise incurred by by the the City City staff staff on on behalf behalf of of the the District District in in order order to to carry carry out out the the purposes purposes of of the the District District as as set set incurred forth in the the Resolution Resolution of of Formation Formation and and any any obligation obligation of of the the District District under under the the Fiscal Fiscal Agent Agent Agreemen Agreement. t.
forth in

"Annual Debt Service" means the principal amount of any Outstanding Bonds payable in a Bond "Annual Debt Service" means the principal amount of any Outstanding Bonds payable in a Bond Year either at maturity or or pursuant to a Sinking Fund Payment and any interest payable on any pursuant to a Sinking Fund Payment and any interest payable on any Year either at maturity Outstanding Bonds in in such such Bond Bond Year, Year, if if the the Bonds Bonds are are retired retired as as scheduled. scheduled. Outstanding Bonds "Alternate Reserve Account Security" means one or more surety bonds, bond insurance policies, "Alternate Reserve Account Security" means one or more surety bonds, bond insurance policies, or other form of guaranty from a municipal bond insurer for the benefit of the Fiscal Agent meeting the or other form of guaranty from a municipal bond insurer for the benefit of the Fiscal Agent meeting the requirements therefor in the Fiscal Agent Agreement in substitution for or in place of all or any portion of requirements therefor in the Fiscal Agent Agreement in substitution for or in place of all or any portion of the Reserve Requirement. the Reserve Requirement. "Authorized Investments" means any of the following which at the time of investment are legal "Authorized Investments" means any of the following which at the time of investment are legal investments under the laws of of the the State State for for the the moneys moneys proposed proposed to to be be invested invested therein: therein: investments under the laws Direct obligations of of the the United United States States of of America obligations issued issued or or held held (1 ) (including obligations America (including Direct obligations (1) in book-entry form on the books of the Department of the Treasury, and CATS and TIGRS) or or TIGRS) and CATS and Treasury, the of Department the of books the in book-entry form on obligations the principal of and interest on which are unconditionally guaranteed by the United States of of States United the by guaranteed obligations the principal of and interest on which are unconditionally America ("Direct Obligations"). America ("Direct Obligations").

C-I C-1

any by or of notes (2) Bonds, debentures, notesor orother otherevidence evidence ofindebtedness indebtednessissued issued orguaranteed guaranteed by any debentures, Bonds, (2) of credit and faith full the by backed are obligations such provided and of the following federal agencies and provided such obligations are backed by the full faith and credit of agencies federal following of the the by stripped been have they if permitted only are theUnited United States America (stripped securities are only permitted if they have been stripped by the securities (stripped ofofAmerica States the agencyitself): itself): agency Export-Import U.S. Export-ImportBank Bank("Eximbank") ("Eximbank") U.S. ownership Direct Directobligations obligationsor orfully fullyguaranteed guaranteedcertificates certificatesof ofbeneficial beneficial ownership ("FmHA") n FarmersHome HomeAdministratio Administration ("FmHA") Farmers Certificates Certificatesof ofbeneficial beneficialownership ownership

FederalFinancing FinancingBank Bank Federal


n Debentures FederalHousing HousingAdministratio Administration Debentures("FHA") ("FHA") Federal n General General Services ServicesAdministratio Administration Participation Participationcertificates certificates

GovernmentNational NationalMortgage MortgageAssociation Association("GNMA" ("GNMA"or or"Ginnie "GinnieMac") Mae") Government


bonds ed mortgage-back nteed GNMA-guaranteed mortgage-backed bonds GNMA-guara pass-through nteed GNMA-guara GNMA-guaranteed pass-through obligations obligations n t3.S. U.S. Maritime Maritime Administratio Administration Guaranteed Guaranteed Title Title XI XI financing financing

U.S. Department Department of of Housing Housing and and Urban UrbanDevelopment Development (HUD) (HUD) U.S.
Project Project Notes Notes Local Local Authority Authority Bonds Bonds New New Communities Communities Debentures Debentures - U.S. U.S. government government guaranteed guaranteed debentures debentures guaranteed government guaranteed U.S. government - U.S. Housing Notes U.S. U.S. Public Public Housing Notes and and Bonds Bonds bonds and housing notes public housing notes and bonds public guaranteed by any indebtedness issued Bonds, debentures, debentures, notes notes or or other other evidence evidence of of indebtedness issued or or guaranteed Bonds, (3) (3) only permitted are only securities are government agencies U.S. government and credit faith and of non-full faith credit U.S. agencies (stripped (stripped securities permitted following non-full the following of the if they have have been been stripped itself: agency itself: the agency by the stripped by if they System Bank System Loan Bank Home Loan Federal Home Federal obligations debt obligations Senior debt Senior by any

C-2 C-2

Federal Home Loan Mortgage Corporation ("FHLMC" or "Freddie Mac") Participation certificates

Senior debt obligations Federal National Mortgage Association ("FNMA" or "Fannie Mae")

Mortgage-backed Student Loan Marketing

securities and senior debt obligations ("SLMA" or "Sallie Mae")

Association

Senior debt obligations Resolution Funding Corp. ("REFCORP") obligations system-wide bonds and notes

Farm Credit System CM. - Consolidated

(4) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Securities Act of 1933, and having a rating by Standard & Poor's of "AAAm-G", "AAAm" or "AAm", and, if rated by Moody's, rated "Aaa", "Aal" or "Aa2" (including those of the Fiscal Agent and its affiliates). (5) Certificates of deposit secured at all times by collateral described in (1) and/or (2) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the Bondholders must have a perfected first security interest in the collateral. (6) Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC or which are with a bank rated "AA" or better by Standard & Poor's and "Aa" or better by Moody's (including those of the Fiscal Agent and its affiliates). (7) provided that Investment Agreements with any corporation, including banking or financial institutions,

(a) the long-term debt of the provider of any such investment agreement is rated, at the time of investment, at least "AA" and "Aa" by the Rating Agency (without regard to gradations of plus or minus within such category), and (b) any such investment agreement is collateralized with United States Treasury or agency obligations which at least equal 102% of the principal amount invested thereunder, and (c) any such agreement shall include a provision to the effect that, in the event the long-term debt rating of the provider of such agreement is downgraded below "AA-" or below "Aa" by the applicable Rating Agency, the District has the right to withdraw or cause the Fiscal Agent to withdraw all funds invested in such agreement and thereafter to invest such funds pursuant to the Fiscal Agent Agreement. (8) Commercial better by Standard & Poor's. paper rated, at the time of purchase, "Prime - 1" by Moody's and "A-1" or

C-3

Bonds or notes are rated and (9) Moody's and by Moody's rated by which are municipality which or municipality state or any state by any issued by notes issued Bonds or (9) Standard & Poor's in one of the two highest rating categories assigned by such agencies. agencies. such by assigned categories rating highest two the of one in Poor's & Standard (10) Federal funds funds or or bankers with a a maximum term of of one one year bank any bank of any year of maximum term acceptances with bankers acceptances Federal (10) which has an unsecured, uninsured or unguaranteed obligation rating of "Prime 1" or "A3" or better by which has an unsecured, uninsured or unguaranteed obligation rating of"Prime - l" or "A3" or better by Moody's and "A-1" or "A" or better by Standard & Poor's. Moody's and "A-1" or "A" or better by Standard & Poor's. (11) Repurchase agreements agreements collateralized collateralizedby by Direct Direct Obligations, GNMAs, FNMAs or FNMAs or GNMAs, Obligations, Repurchase l) (l FHLMCs with any registered broker/dealer subject to the Securities Investors' Protection Corporation subject to the Securities Investors" Protection Corporation FHLMCs with any registered broker/dealer jurisdiction or any commercial bank insured by the if such uninsured, an uninsured, has an bank has or bank broker/dealer or such broker/dealer FDIC, if the FDIC, by insured bank commercial any or jurisdiction unsecured and unguaranteed obligation rated "P-1" or "A3" or better by Moody's, and "A-1" or "A-" by "A-" or "A-1" and Moody's, by better or "A3" unsecured and unguaranteed obligation rated "P-1" or Standard & Poor's; provided: Standard & Poor's; provided: (a) a governs agreement governs repurchase agreement written repurchase specific written or specific agreement or repurchase agreement mastcr repurchase a master (a) the transaction; transaction; and and the (b) the are held held free free and and clear clear of of any or an an Agent or Fiscal Agent the Fiscal by the lien by any lien securities are the securities (b) independent third party acting solely as agent ("Agent") for the Fiscal Agent, and such third party party third such and Agent, Fiscal the for ("Agent") agent as solely acting independent third party is (i) a Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit Insurance is (i) a Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit Insurance Corporation and which which has combined capital, capital, surplus surplus and and undivided undivided profits profits of of not not less than $50 $50 less than has combined Corporation and million, or or (iii) (iii) a Insurance Guaranty Insurance Financial Guaranty by Financial purpose by such purpose for such writing for in writing approved in bank approved a bank million, Company, and the Fiscal Agent shall have received written confirmation from such third party party third such from confirmation written Company, and the Fiscal Agent shall have received that it holds such securities, free and clear of any lien, as agent for the Fiscal Agent; and and Agent; that it holds such securities, free and clear of any lien, as agent for the Fiscal a Code, or or book (c) book Commercial Code, Uniform Commercial the Uniform under the interest under security interest first security perfected first a perfected (c) in such securities or 31 C.F.R. 350.0 et seq. entry procedures prescribed at 31 C.F.R. 306.1 et seq. securities such in . seq et 350.0 C.F.R. 31 or . seq et entry procedures prescribed at 31 C.F.R. 306.1 is created created for for the the benefit benefit of the Fiscal Agent; and and Fiscal Agent; of the is the agreement has has a a term term of of 180 or less, less, and and the the Fiscal Agent or (d) or Fiscal Agent days or 180 days repurchase agreement the repurchase (d) the Agent will value the collateral securities no less frequently than weekly and will liquidate the the liquidate will and weekly than frequently less the Agent will value the collateral securities no collateral securities securities if if any any deficiency deficiency in in the percentage is is not within restored within not restored collateral percentage required collateral the required collateral two business days of such valuation; and two business days of such valuation; and (e) the fair value of the amount repurchase the repurchase of the amount of to the relation to in relation securities in the securities of the market value fair market the (e) obligation, including principal and interest, is equal to at least 103% 103% least at to equal obligation, including principal and interest, is (12) (12) (13) (13) Local Agency Agency Investment Investment Fund Fund ("LAIF") ("LAIF") of of the the State California. of California. State of Local Any other other investment which the the District District is is permitted permitted by to make. make. law to by law investment which Any

"Authorized Representativeof of the the District" District" means means the the Mayor, Manager, City Manager, Mayor, City Vice Mayor, Mayor, Vice Representative "Authorized Finance Director, or any other person or persons designated by the City Council of the City. City. the of Council City the by designated persons or person Finance Director, or any other "Bond Counsel" means means an an attorney attorney at at law law or or a a firm by the of District of the District selected by attorneys selected of attorneys firm of "Bond Counsel" nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued issued bonds on interest nationally recognized standing in matters pertaining to the tax-exempt nature of by states and their political subdivisions duly admitted to the practice of law before the highest court of by states and their political subdivisions duly admitted to the practice of law before the highest court of any state state of the United United States States of of America America or or the the District District of of Columbia. Columbia. of the any "Bond Register" means the books which the Fiscal Agent shall keep or cause to be kept on which "Bond Register" means the books which the Fiscal Agent shall keep or cause to be kept on which the registration and transfer transfer of of the the Bonds Bonds shall recorded. be recorded. shall be the registration and

C-4 C-4

es any Bond is n or persons in whose name or nam perso the s mean ner" "'Ow or ner" dow "Bondowner" or "Owner" means the person or persons in whose name or names any Bond is "Bon registered. tered. regis er 2 of each year and th period commencing on Septemb ve mon twel s the the " mean d Year "Bon "Bond Year" means twelve month period commencing on September 2 of each year and n on begi shall the Bonds except that the first Bond Year for , year wing follo the of 1 er emb Sept ending September I of the following year, except that the first Bond Year mon for the shall begin very on Deli ng on on endi after the ths Bonds ember 1 which is not more than 12 Sept first of the endend andand very Date Delivery Date of the first September 1 which is not more than 12 months after the Delivery Deli the the . Dale Date. of the year on which not a Saturday or Sunday or a day is h whic day a s mean Day" iness the "Business Day" means a day which is not a Saturday or Sunday or a day oftrust the year ofwhich "Bus officeon fornia, or the city where the corporate eles, Cali Ang , Los York , New York banks in New York, New York, Los Angeles, California, or the city where the corporate trust office of the s in New bank authorized to remain closed. ired or or requ notnot ed, areare locat t is is Fiscal Agent located, required authorized to remain closed. al Agen Fisc rulings, judicial Code of 1986 and any Regulations, nue Reve nal Inter he t s mean e" nt or "Cod "Code" means the Internal Revenue Code of 1986 and any Regulations, Departmejudicial tes Treasury rulings, and other releases of the United Sta uncements, es, anno notic ions, and decisions, and notices, announcements, and other releases of the United States Treasury Department or decis construing it. preting and ice inter nue Serv Internal Revenue Service interpreting and construing it. nal Reve Inter the issuance and expenses incurred in connection with and costs the s mean nce" Issua of ts "Cos Agent and "Costs of Issuance" means the costs and expenses incurred in connection the with the and al issuance Fisc initial annual fees and expenses of ptance and acce ding the ds, inclu Bon ial the offic ofof sale the Bonds, including the acceptance and initial annual fees and expenses of the Fiscal Agent and final sale and minary of printing the Bonds and the preli nses, costs expe and fees sel, legal as coun ds, its counsel, legal fees and expenses, costs of printing the Bonds and the preliminary and final official its expenses, Bon ultants and all other related fees and cons cial finan of fees ds, Bon the statements for the Bonds, fees of financial consultants and all other related fees and expenses, Bonds, as ments for state esentative. orized Repr Auth an ficate ofof en certi writt aa inin set forth written certificate an Authorized Representative. forth set and e in the Acquisition means the account by such nam unt" Acco nce Issua of ts "Cos "Costs of Issuance Account" means the account by such name in the Acquisition and uant to the Fiscal Agent Agreement. lished purs estab ed and creat Construction Fund created and established pursuant to the Fiscal Agent Agreement. struction Fund Con of the following: s any rities" mean easance Secu "Def "Defeasance Securities" means any of the following: (a) (a) ash C Cash

ds (including State and Local Treasury Certificates, Notes and Bon s State ed Unit (b) (b) United States Treasury Certificates, Notes and Bonds (including State and Local S") s -ernment Serie Gov Government Series --"SLG "SLGS") been stripped by the U.S. of the U.S. Treasury which have s ation oblig ct Dire (c) (c) Direct obligations of the U.S.secu Treasury rities. which have been stripped by the U.S. and similar Treasury itself, e.g., CATS, TIGRS

Treasury itself, e.g., CATS, TIGRS and similar securities.

h have been Resolution Funding Corp. strips whic component of interest component The (d) (d) . The interest of Resolution Funding Corp. strips which have been in book-entry form Reserve Bank of New York and are ral Fede the to est requ by ped strip stripped by request to the Federal Reserve Bank of New York and are in book-entry form. dy's and "AAA" by Standard municipal bonds rated "Aaa" by Moo ded efun Pre-r (e) Pre-refunded municipal bonds rated "Aaa" by Moody's and "AAA" by Standard (e) Poor's. & Poor's. & h are backed by the full faith issued by the following agencies whic ns gatio Obli (f) Obligations issued by the following agencies which are backed by the full faith United States: the United of the credit of and credit and States: Bank - direct obligations or fully guaranteed certificates of beneficial Export-Import Bank U.S. Export-Import U.S. ownership ownership Administ Home Administration Farmers Home Farmers - certificates of beneficial ownership Bank Financing Bank Federal Financing Federal Administration - participation certificates Services Administration General Services General - participation certificates ration - certificates of beneficial ownership - direct obligations or fully guaranteed certificates of beneficial

C-5

C-5

financing X! XI Title tion - guaranteed Administra U.S. Maritime Administration - guaranteed Title financing Maritime U.S. Local Notes, - Project nt (HUD) Developme Urban and Housing t of of U.S. Department Housing and Urban Development (HUD) - Project Notes, Local Departmen U.S. guaranteed t governmen U.S. Debentures ies Communit New Bonds, Authority Bonds, New Communities Debentures U.S. government guaranteed Authority public t guaranteed governmen - U.S. Bonds and Notes Housing Public , U.S. debentures, U.S. Public Housing Notes and Bonds - U.S. government guaranteed public debentures bonds. housing notes and bonds. and notes housing initial the to to delivered and issued were Bonds the which onon date thethe "Delivery Date" means date which the Bonds were issued and delivered the initial means Date" "Delivery purchasers thereof. thereof. purchasers itsits and York, New York, New Company, Trust Depository The mean "Depository" shall mean The Depository Trust Company, New York, New York, and shall y" "Depositor depository securities other any s, or or Certificate the forfor depository securities as as successors and assigns securities depository the Certificates, any other securities depository assigns and successors . Agreement Agent acting Depository under the Fiscal Agent Agreement. Fiscal the under Depository as as acting established Lago) (Terra 2004-3 No. District y Facilities Communit Indio of of City "District" means City Indio Community Facilities District No. 2004-3 (Terra Lago) established means "_District" . Formation of Resolution the and pursuant the Act and the Resolution of Formation. Act the to to pursuant duly association a anational N.A., California, ofof Bank Union means "Fiscal Agent" means Union Bank California, N.A., nationalbanking banking association duly Agent" "Fiscal principal its at America, of States United the of laws the of ue t vir by and under organized and existing under and by virtue of the laws of the United States of America, at its principal existing and organized trust or or bank other any or or assigns, or or successors itsits and California, trust office Los Angeles, California, and successors assigns, any other bank trust s Angeles, Lo in in office rporate trust cocorporate and Agreement Agent Fiscal the in provided as place itsits in in substituted bebe time company which may any time substituted place as provided in the Fiscal Agent Agreement and any at at may which company

any successor thereto. thereto. successor any


tal Supplemen any with , together Agreement Agent Fiscal the "Fiscal Agent Agreement" means the Fiscal Agent Agreement, together with any Supplemental " means Agreement Agent "Fiscal hereof. 66 Article toto Fiscal Agent Agreement approved pursuant Article hereof. pursuant approved Agreement Agent Fiscal t the onon ending and year each of of 1 1 July on on beginning period the means "Fiscal Year" means the period beginning July each year and ending thenex next Year" "Fiscal following June 30. 30. June following t. Distric the of 11 No. nt Area Improveme means 1" No. "Improvement Area No. 1" means Improvement Area No. of the District. ent Area "Improvem tax oror appraisal the ofof date the ofof asas value, market the means Value" 11 "Improvement Area No. Value" means the market value, the date the appraisal tax No. ent Area "Improvem the of levy he t to t subjec 1 No. Area nt Improveme in property real ofof real property in Improvement Area No. 1 subject to the levy of the roll described below, all parcels parcels all ofof below, described roll with including owing, and due then Taxes Special any ofof payment the inin Special Taxes and not delinquent the payment any Special Taxes then due and owing, including with delinquent not and Taxes Special be to facilities any and nts improveme existing then the of value the parcels uent respect to such non-delinquent parcels the value of the then existing improvements and any facilities to be non-delinq such to respect as Fund, on Constructi and n Acquisitio the in deposit on then amounts any with. constructed or acquired with, any amounts then on deposit in the Acquisition and Construction Fund, as acquired or constructed proposed any ofof date the ofof months (6) six within performed determined by reference (i) an appraisal performed within six (6) months the date any proposed appraisal an (i) toto reference by determined the by selected ") "Appraiser (the appraiser MAI an by Fund Escrow Special the from release of moneys from the Special Escrow Fund by an MAI appraiser (the "Appraiser") selected by the moneys of release nts improveme and parcels uent non-delinq such all of value assessed the District, or (ii) in the alternative, the assessed value of all such non-delinquent parcels and improvements , alternative District, or (ii) in the District. the toto available roll tax property real County current thereon shown on the then current County real property tax roll available the District.The TheDistrict District then the on shown asas thereon any of respect in entity or person other any r oror Underwrite shallnot notbe beliable liable theOwners, Owners,the the Underwriter any other person or entity in respect of anyappraisal appraisal the toto shall any by exercise any ofof reason by oror provided for purposes ofthis thisdefinition definition by reason any exerciseof ofdiscretion discretionmade made by anyAppraiser Appraiser of purposes for provided

pursuant to this definition. definition. this to pursuant


consultant financial aa " means "Independent FinancialConsultant Consultant" means financialconsultant consultantor orspecial specialtax tax consultantor orfinn firm ent Financial "'Independ special or consulting financial the in qualified well be to recognized of either such consultants generally recognized to be well qualified in the financial consulting or special generally consultants such of either or taxconsulting consultingfield, field,appointed appointedand andpaid paidby bythe theDistrict, District,who, who, oreach eachof ofwhom: whom: tax (1) (1) t and is,in infact, fact,independen independent andnot notunder underthe thedomination dominationof ofthe theDistrict; District; is, does doesnot not have have any anysubstantial substantialinterest, interest,direct director orindirect, indirect,in inthe theDistrict; District;and and

(2) (2)

C-6 C-6

trict, butbut DisDistrict, thethe oyee of of empl or or officer a member, trict as as DisDistrict the the is connected with a member, officer employee with connected otnot (3) (3) is n District. the to reports or other annual who may be regularly retained to make annual or other reports to the District. to make retained be regularly may who Tax Special in the established andand created name such by by account "Interest Account" means account such name created established in the Special Tax the the means Account" "Interest Fund pursuant to the Fiscal Agent Agreement. Fund pursuant to the Fiscal Agent Agreement. I, I2006; March commencing 1, 1, September 1 and March "Interest Payment Date" means each March 1 and September commencing March , 2006; each means Date" Payment "'Interest Date t Paymen erest t In he t to up erest t in Day, Business a t no is day provided, however, that, if any such day is not a Business Day, interest up to the Interest Payment Date such any if that, provided, however, Day. will be paid on the next succeeding Business Day. will be paid on the next succeeding Business thethe of of funds of of investment the the for for agreements or more one one "Investment Agreement" means or more agreements investment funds means Agreement" "Investment Authorized of of definition thethe of of (7) (7) Subsection in in forth as set therefor District complying with criteria therefor as set forth Subsection definition Authorized criteria the the with complying District Investments. Investments. to to prior Year Bond any forfor obtained sum maximum thethe means "Maximum Annual Debt Service" means maximum sum obtained any Bond Year prior Service" Debt Annual "Maximum Year: Bond each for for following thethe adding final maturity of the Bonds adding following each Bond Year: by by Bonds of the maturity final thethe at at either Year Bond such in in payable Bonds Outstanding all all of of principal amount Outstanding Bonds payable such Bond Year either amount principal (1)(I) thethe and Payment; Fund maturity pursuant a Sinking Fund Payment; and a Sinking to to pursuant or or maturity such in in Outstanding Bonds all all of of amount principal aggregate thethe interest payable aggregate principal amount Bonds Outstanding such on on payable interest (2)(2) thethe scheduled. as retired are Bonds if the Year Bond Bond Year if the Bonds are retired as scheduled. assigns. and successors itsits Service, "Moody's" means Moody's Investors Service, successors and assigns. Investors Moody's means "Moody's" Expense ve totothe equal amount anan minus Taxes Special "Net Taxes" means Special Taxes minus amount equal the Administrati Administrative Expense means Taxes" "Net Requirement. . Requirement asas Depository, the bebe may which Depository, the of of nominee "Nominee" shall mean nominee the Depository, which may the Depository, thethe mean shall "Nominee" Agreement. Agent Fiscal the to to determined from time time pursuant the Fiscal Agent Agreement. pursuant time to to time from determined District, the byby issued theretofore Bonds all all means Bonds" "Outstanding" "Outstanding Bonds" means Bonds theretofore issued the District, "Outstanding or or " "Outstanding

except: except:
Fiscal the with accordance in in cancellation for surrendered or or cancelled theretofore Bonds theretofore cancelled surrendered for cancellation accordance with the Fiscal (1) (1) Bonds Agent Agreement; Agreement; Agent deposited theretofore been have shall monies which of of redemption oror (2) Bonds Bonds for payment redemption which monies shall have been theretofore deposited payment for (2) if if that, provided Bonds), such of date redemption trust (whether upon prior the maturity the redemption date of such Bonds), provided that, the or or maturity the to to prior or or upon (whether trust inin been have shall redemption such of notice thereof, maturity the to to prior such Bonds are redeemed prior the maturity thereof, notice of such redemption shall have been redeemed bebe to to are Bonds such and Agreement; given provided the Fiscal Agent Agreement; and Agent Fiscal the inin provided asas given pursuant exchange oror transfer for Agent Fiscal the to to surrendered been Bonds which have been surrendered the Fiscal Agent for transfer exchange pursuant have which Bonds (3) (3) Agent Fiscal the to pursuant issued been has replacement a a which for or or the Fiscal Agent Agreement for which replacement has been issued pursuant to the Fiscal Agent Agreement Agent Fiscal the toto Agreement. Agreement. toto time from institutions financial other and rs, banks broker-deale those mean "Participants" shall mean those broker-dealers, banks and other financial institutions from time " shall "Participants depository. securities as time for which the Depository holds Bonds as securities depository. Bonds holds Depository the which for time trusts, partnerships, "Person"means meansnatural naturalpersons, persons,firms, firms,corporations, corporations, partnerships,associations, associations, trusts,public public "Person" entities. other and bodies bodies and other entities.

C-7 C-7

and created Fund Tax Special thethe in in name such by by account the the "Principal Account" means account such name Special Tax Fund created and " means al Account "Princip ent. Agreem Agent established pursuant to the Fiscal Agent Agreement. Fiscal t to the ed pursuan establish in Los located Agent Fiscal thethe of of office the the means Agent" Fiscal the the "Principal Office Fiscal Agent" means office Fiscal Agent located in Los of of al Office "Princip or time, to time from e designat may Agent Fiscal the as offices or office other such or ia Angeles, California or such other office or offices as the Fiscal Agent may designate from time to time, or , Californ Angeles Fiscal as serving of of business s its its lly conduct principa it it where Agent r Fiscal office any successor Fiscal Agent where principally conducts business serving as Fiscal successo any of of office the the issued. are ns obligatio ental governm or al municip which to t pursuan Agent under indentures pursuant to which municipal or governmental obligations are issued. es indentur under Agent Resolution of the in in d describe fees /or capital andand/or facilities public those "Project" means those public facilities capital fees described the Resolution of " means "Project including all District, thethe of of outside and within financed ted or or , construc acquired Formation that to be acquired, constructed financed within and outside District, including all to be are are on that Formati such facilities and to to s related al expense incident other and services design andand engineering, planning design services and other incidental expenses related such facilities and ing, planning engineer time. to time from District the within electors qualified the by other facilities, if any, by the qualified electors within the District from time to time. horized autauthorized , if any, facilities other and replenish any create to to Project, the finance y to to necessar amounts the means "Project Costs" means the amounts necessary finance the Project, create and replenish any Costs" "Project including, but not Bonds, the ed with associat costs annual and initial the pay to necessary reserve funds, to pay the initial and annual costs associated with the Bonds, including, but not funds, reserve y necessar expenses relating to the and fees other and Agent Fiscal ment, enhance credit ting, limited remarketing, credit enhancement, Fiscal Agent and other fees and expenses relating to the remarke to, to, limited "incidental expenses" of the other any pay to to and District, thethe n of of formatio thethe and Bonds thethe issuance Bonds and formation District, and pay any other "incidental expenses" of the of of issuance Act. the in in defined is is term such as as District, District, such term defined the Act. . requires context the asas both, or Poor's, && Standard and Moody's means "Rating Agency" means Moody's and Standard Poor's, or both, the context requires. Agency" "Rating Payment Date, g an the ofof day fifteenth the means Date" "Record Date" means the fifteenth day themonth monthprecedin preceding anInterest Interest Payment Date, "'Record s Day. a Busines is is day such regardless whether such day a Business Day. whether ss of of regardle the Special ed inin establish and created name such byby account the " means "Redemption Account" means the account such name created and established the Special ption Account "Redem ent. Agreem Agent Fiscal the Tax Fund pursuant the Fiscal Agent Agreement. t to to pursuan Fund Tax Treasury from ent ofof Departm the d by propose oror ns adopted regulatio the means "Regulations" means the regulations adopted proposed by the Department Treasury from tions" "Regula Code. the of 103 section to t pursuan issued ns obligatio toto time time with respect obligations issued pursuant to section 103 of the Code. respect with time to to time from the District to the ntations Represe ofof Letter Blanket the mean shall Letter" entation "Representation Letter" shall mean the Blanket Letter Representations from the District to the "Repres ent. Agreem Agent Fiscal Depository as described in the Fiscal Agent Agreement. the in d Depository as describe ed in the Special Tax establish and name such by account the " means "Reserve Account" means the account by such namecreated created and established in the Special Tax e Account "Reserv ent. Agreem Agent Fiscal the Fund pursuant the Fiscal Agent Agreement. t toto pursuan Fund to the lowest of (1) equal amount on, an calculati ofof date any of as ment" means, "Reserve Requirement" means, as of any date calculation, an amount equal to the lowest of (1) e Require "Reserv discount, if original less any, if interest, accrued less Bonds, the of s proceed 10%of of theoriginal original proceeds of the Bonds, less accrued interest, if any, less originalissue issue discount, if the 10% or (3) 125% of the Service, Debt m Annual or any, , if if issue any,plus plusoriginal original issuepremium premium, any, or(2) (2)Maximu Maximum Annual Debt Service, or (3) 125% of the any, y fund the Reserve originall may District The Bonds. ing Outstand the of Service Debt average Annual Debt Service of the Outstanding Bonds. The District may originally fund the Reserve Annual average an Alternate Reserve e substitut time any at may or Security Account Reserve e Alternat Account withan an Alternate Reserve Account Security or may at any time substitute an Alternate Reserve with Account ment Reserve Require AccountSecurity Security for thecash cashon ondeposit depositin in the the Reserve Reserve Account Accountto to satisfy satisfy the the Reserve Requirement the for Account ent. pursuant tothe the FiscalAgent AgentAgreem Agreement. Fiscal t to pursuan of the City on No. on" means "Resolution ofFormati Formation" meansResoluti Resolution No.9025 9025adopted adoptedby bythe theCity CityCouncil Council of the City tion of "Resolu t to onJuly July20, 20,2005, 2005,pursuan pursuant to which whichthe theCity Cityformed formedthe theDistrict. District. on tion Account d in t to t" means "SinkingFund Fund Paymen Payment" meansthe the annual annualpaymen payment tobe be deposite deposited in the the Redemp Redemption Account "Sinking Fiscal Agent the in forth set schedule the with ce accordan in Bonds Term the of toredeem redeemaa portion portion of the Term Bonds in accordance with the schedule set forth in the Fiscal Agent to Agreement. ent. Agreem

C-8 C-8

No. 1 by the ement Area Improv within levied bebe zed to to authori taxes the means "Special Taxes" means the taxes authorized levied within Improvement Area No. 1 by the l Taxes" "Specia approval obtained at the voter the and Act ion, the Format tion ofof Resolu the District accordance with the Resolution Formation, the Act and the voter approval obtained at the nce with accorda inin District proceeds collected from the and thereof ents prepaym with r togethe , District the in July 20, 2005 election in the District, together with prepayments thereof and the proceeds collected from July 20, 2005 election Agreement for the Agent Fiscal the of ons provisi sure foreclo the to t y pursuan the saleof ofpropert property pursuant to the foreclosure provisions of the Fiscal Agent Agreement for the sale the related to such foreclosure costs the all t ofof paymen the ng after remaini Taxes Special such delinquency such Special Taxes remaining after the payment all the costs related to such foreclosure ency ofof delinqu District from time to time which the by levied be to zed authori taxes special nal additio any actions, and any additional special taxes authorized to be levied by the District from time to time which and actions, Bonds. the of ent repaym he '/ to District the are pledged by the District to the repayment of the Bonds. by pledged are hed pursuant to the Fiscal and created name by the Fund" l Tax "Special Tax Fund"means means thefund fund bysuch such name created andestablis established pursuant to the Fiscal "Specia Agent Agreement. ent. Agreem Agent its successors and on of McGraw-Hill, oor's, a d & or's" means rd & "Standa "Standard &Po Poor's" meansStandar Standard &PPoor's, a divisi division of McGraw-Hill, its successors and

assigns. , assigns
fiscal agent agreement ental means ent" Fiscal mental "Supplemental FiscalAgent AgentAgreem Agreement" meansany any supplem supplemental fiscal agent agreement "Supple ent. enting the amending orsupplem supplementing theFiscal FiscalAgent AgentAgreem Agreement. ng or amendi hed pursuant to the Fiscal "Surplus Fund"means meansthe the fund fundby by such such name name created created and and establis established pursuant to the Fiscal s Fund" "Surplu ent. AgentAgreem Agreement. Agent d by the District on a Delivery ate by ate" means "Tax "Tax Certific Certificate" meansthe thecertific certificate bythat thatname nameto tobe beexecute executed by the District on a Delivery covenants relevant to contains certain and expectations and expectations Date to to establish certain facts facts and and which which contains certain covenants relevant to establish certain Date compliance with the the Code. Code. ance with compli whom the District enters into a ions, ififany, r institut ion oor writer" means "Under "Underwriter" means the the institut institution institutions, any,with with whom the District enters into a purchase contract for the the sale sale of of the the Bonds. Bonds. t for e contrac purchas writing executed by an Authorized in writing request in District" means t of n Reques "Written Request of the the District" means a a request executed by an Authorized "Writte ntative. Representative. Represe

INVESTMENTS
the Fiscal Agent Agreement shall be under the accounts under and accounts funds and the funds of the any of s held Money Moneys held in in any Fiscal Agent Agreement shall be the limitations set forth below only in nce with District in the District of the Request of the Written at the invested Written Request in accorda accordance with the limitations set forth below only in invested at funds and accounts. Any ents which Authorized Investments which shall shall be bedeemed deemedat atall alltimes timesto tobe be aapart part of of such such funds and accounts. Any Authorized Investm to the fund or account from ents shall ized Investm such Author from such loss Authorized Investments shall be be credited credited or or charged charged to the fund or account from resulting from loss resulting or account shall be applied as s on ent earning and any investment was which was made, made, and any investm investment earnings on a a fund fund or account shall be applied as such investment which such Fund (other than the Reserve Special Tax in the deposited in amounts deposited all amounts on all earnings on investment earnings follows: the Special Tax Fund (other than the Reserve (i) investment follows: (i) each Account therein shall be ction Fund ition and Account), Acquisition and Constru Construction Fundand and Surplus Surplus Fund Fund and and each Account thereindeposit shall ed be Account), Acquis ent earnings shall be investm other all (ii) and ts, accoun and funds ive respect those respective funds and accounts, and (ii) all other investment earnings shall be deposited in those deposited deposited in investment earnings in the Reserve however, investment provided, however, Fund; provided, Tax Fund; Special Tax the Special of the Account of Interest Account in earnings in the Reserve the Interest in the Tax Fund only to the extent moneys in Special Tax the Special of the Account of Interest Account the Interest in the deposited in be deposited shall be Account Fund only to the extent moneys in Account shall funds and accounts held under the funds in the Moneys in ment. Reserve Require the Reserve exceed the Account exceed such Requirement. Moneys and accounts held under Reserve Account such Reserve Written Request of the District the Written at the Agent at Fiscal Agent the Fiscal by the invested by be invested may be Agreement may the Request of the District Agent Agreement Fiscal Agent the Fiscal date, from time to time, in Authorized investment date, the investment to the prior to Days prior Business Days 2 Business least 2 at least received at received from time to time, in Authorized restrictions: following restrictions: the following to the subject to Investments Investments subject Accoun Principal Account the Principal Account, the Interest Account, the Interest in the Moneys in (1) Moneys and the Redemption Account of (1 ) will by their terms mature, which will ents which Investm ized Author in only in Authorized Investments invested only be invested shall be Fund shall the by their terms mature, Tax Fund Special Tax the Special penalty, on such dates so without penalty, wal without withdra for le availab are ent Agreem ent Investm an of or in the case of an Investment Agreement are available for withdrawal on such dates so case or in the t and the Redemption Account of

INVESTMENTS

C-9

C-9

as the same become Bonds thethe on on interest , andand , if any premium l of, of, t of principa as ensure to ensure payment of principal premium, if any, interest Bonds as the same become paymen the the as to
due. due.

in Authorized invested be be shall Fund ction Constru and tion Acquisi thethe in in Moneys Acquisition and Construction Fund shall invested in Authorized (2) (2) Moneys are available ent Agreem ent Investm an of case the in or mature, terms their by by Investments which their terms mature, or in the case of an Investment Agreement are available willwill ents which Investm represented by the moneys s thethe estimate District thethe date thethe ble to to practica as as close without penalty, close practicable date District estimates moneys represented by the , as as penalty without Fund. Construction tion and Acquisi the wal from withdra forfor needed be be ent willwill particular investment needed withdrawal from the Acquisition and Construction Fund. ar investm particul and tion Acquisi the in s , amount contrary ent to the Agreem Agent Fiscal Notwithstanding anything in the Fiscal Agent Agreement to the contrary, amounts in the Acquisition and g in the anythin standing Notwith those than greater yields at at invested be be notnot shall Bonds thethe forfor y Date Deliver Construction Fund Delivery Date Bonds shall invested yields greater than those the the on on ction Fund Constru ate. Certific Tax thethe in in forth set set forth Tax Certificate. may be invested Fund Tax Special the t of of Accoun Reserve the in in amount thethe lf of of One-half amount the Reserve Account the Special Tax Fund may be invested (3)(3) One-ha date of purchase by the their from years two than later notnot mature ents which only Authorized Investments which mature later than two years from their date of purchase by the zed Investm Authori in in only only in Authorized invested bebe t may Accoun Reserve the in in amount thethe f of of one-hal Fiscal Agent, and one-half amount the Reserve Account may invested only in Authorized and Agent, Fiscal Fiscal Agent; the by e purchas of of date thethe from years three than more not not Investments which mature more than three years from date purchase by the Fiscal Agent; mature ents which Investm maturity of the final the ent to to ent Agreem Investm anan in in invested be be s may provided that such amounts may invested Investment Agreement the final maturity of the amount such d that provide , for application in penalty without time, any wn at at withdra bebe s may amount Bonds long such amounts may withdrawn any time, without penalty, for application in such as as long so so Bonds zed Investment of Authori such no that d provide and ent; Agreem Agent Fiscal accordance with the Fiscal Agent Agreement; and provided that no such Authorized Investment of accordance with the Bonds. the of date maturity final ve respecti the than later mature shall t Accoun Reserve amounts the Reserve Account shall mature later than the respective final maturity date of the Bonds. the s in in amount ent directions, the g investm the t ofof Reques Written ofof absence (4) In In the absence Written Request theDistrict Districtprovidin providing investment directions, the the (4) definition thereof. the of (4) clause in d specifie ents Investm zed Authori in solely Fiscal Agent shall invest solely in Authorized Investments specified in clause (4) of the definition thereof. invest shall Agent Fiscal Authorized tion, any redemp for present ble, oror obtaina price best the at at sell shall The Fiscal Agent shall sell the best price obtainable, present for redemption, any Authorized Agent Fiscal The meet any payment or toto moneys provide toto order in in soso dodo ry to to necessa be be Investment whenever it may necessary order provide moneys meet any payment or er it may ent whenev Investm of determining at purpose the For . ts Accoun and Funds such from or ts Accoun and transfer such Funds and Accounts or from such Funds and Accounts. For the purpose of determining at Funds such to to transfer ting a part of constitu ents investm such ts, any Accoun and Funds such any inin balance the any given time the balance any such Funds and Accounts, any such investments constituting a part of time given any the Reserve Account shall s inin amount that except cost, their at at valued bebe ts shall Accoun such Funds and Accounts shall valued their cost, except that amounts the Reserve Account shall and Funds such Notwithstanding y. annuall least at market to marked and thereof value be valued at the fair market value thereof and marked to market at least annually. Notwithstanding market be valued at the fair ible for any respons be not shall Agent Fiscal the , contrary the to ent Agreem anything the Fiscal Agent Agreement to the contrary, the Fiscal Agent shall not be responsible for any Agent Fiscal the g inin anythin ns of the Fiscal Agent provisio the nce with accorda ken inin s underta transfer oror loss from investments, sales transfers undertaken accordance with the provisions of the Fiscal Agent ents, sales investm from loss the acquisition of any ion with connect in agent or l principa as act may Agent Fiscal Agreement. The Fiscal Agent may act as principal or agent in connection with the acquisition of any The ent. Agreem es shall be registered in securiti ble registra are that ents Investm zed Authori Any Authorized Investments. Any Authorized Investments that are registrable securities shall be registered in ents. zed Investm Authori ent g of ed, in the name the Fiscal Agent.The TheFiscal FiscalAgent Agentis isauthoriz authorized, inmaking makingor ordisposin disposing ofany anyinvestm investment Agent. Fiscal the ofof name the with any one or ) or al capacity individu its (in itself with deal ent, toto Agreem permitted by the Fiscal Agent Agreement, deal with itself (in its individual capacity) or with any one or Agent Fiscal the d by permitte or for any third Agent Fiscal the of agent an as acting is affiliate such or it more of its affiliates, whether it or such affiliate is acting as an agent of the Fiscal Agent or for any third whether more of its affiliates, . account own its l for person dealing as principal for its own account. principa as dealing oror person AND WARRANTY OVENANTS C COVENANTS AND WARRANTY the Fiscal Agent ledged under security p he security protect t and protect preserve and shall preserve District shall The District Warranty. the pledged under the Fiscal Agent arranty. The W . s of demand Agreement tothe theBonds Bondsagainst againstall allclaims claimsand and demands ofall allpersons persons. ent to Agreem Agent Agreement are Fiscal Agent the Fiscal under the issued under Bonds issued the Bonds of the any of as any long as So long Covenants. So Agreement are venants. Co ners under the Bondow the with ts covenan g followin the makes District the Outstanding andunpaid, unpaid, the District makes the following covenants with the Bondowners under the ding and Outstan District or its proper ed by ent (to provisions ofthe theAct Actand andthe the Fiscal Fiscal Agent AgentAgreem Agreement (tobe be perform performed bythe the District or its proper ns of provisio the Bonds and tend e to ry and ts are ees), which officers, agentsor oremploy employees), whichcovenan covenants arenecessa necessary anddesirabl desirable tosecure secure the Bonds and tend , agents officers the District to ts do r, that d, howeve ble; provide to make makethem themmore more marketa marketable; provided, however, thatsaid saidcovenan covenants donot not require require the District to to Special Tax the to d s deposite expendany anyfunds fundsor ormoneys moneysother otherthan than the theSpecial SpecialTaxes Taxesand and other other amount amounts deposited to the Special Tax expend Fund: Fund:

C-10 C- 1 0

receive all it will s that covenant District The ances. Encumbr ; Against Payment Punctual Payment; Against Encumbrances. The District covenants that it will receive all (1) (1) Punctual the District andand Agent, Fiscal the the with amounts such tely deposit immedia willwill Special Taxes in trust immediately deposit such amounts with Fiscal Agent, the District andand in trust Taxes Special by the Fiscal provided as as except deposited so so amounts in the interest or or l right shall have beneficial right interest in the amounts deposited except provided by the Fiscal beneficia no no have shall the uses and to solely applied and allocated , disbursed be shall Taxes Special such All Agent Agreement. All such Special Taxes shall be disbursed, allocated and applied solely to the uses and Agent Agreement. all from apart and y separatel for d accounte be shall and nt, Agreeme Agent purposes forth in the Fiscal Agent Agreement, and shall be accounted for separately and apart from all Fiscal in the forth oses set set purp District. s of the resource or other accounts funds, other money, funds, accounts or other resources of the District. money, other and of of principal the the paid be be to to cause or or ly paypay punctual andand duly it will The District covenants that it will duly punctually cause paid principal and s that covenant District The any, if , premium the with together nt, Agreeme Agent Fiscal the the under interest every Bond issued under Fiscal Agent Agreement, together with the premium, if any, issued Bond every on on interest the ce with accordan in in and Bonds thethe in in forth set set manner the in and place thereon on the date, at the place and in the manner forth Bonds and accordance with the the at date, the on thereon the into s payment the that and therefor, available are are Taxes NetNet that extent Fiscal Agent Agreement to the extent that Taxes available therefor, and that the payments into the nt to the Agreeme Agent Fiscal with ity conform strict in in all all made, be be nt will Agreeme Agent Fiscal thethe under Funds and Accounts created under Fiscal Agent Agreement will made, strict conformity with s created Account and Funds all perform and observe faithfully will it that and nt, Agreeme Agent Fiscal the terms of the Bonds and the Fiscal Agent Agreement, and that it will faithfully observe and perform all the and Bonds the of terms the Fiscal ental Supplem all and nt Agreeme Agent Fiscal the of ents requirem and s of the conditions, covenants and requirements of the Fiscal Agent Agreement and all Supplemental Fiscal covenant of the conditions, nt. Agreeme Agent Fiscal thethe under issued Bonds thethe Agent Agreements and Bonds issued under Fiscal Agent Agreement. of of nts and Agreeme Agent any of upon charge any place or or r, pledge e encumbe otherwis or or mortgage notnot The District will mortgage otherwise encumber, pledge place any charge upon any of will District The n or obligatio any issue not will and nt, Agreeme Agent Fiscal the in provided the Net Taxes except as as provided in the Fiscal Agent Agreement, and will not issue any obligation or except the Net Taxes Nothing in Bonds. the with parity a on or to superior Taxes Net the upon charge or or security having a lien charge upon the Net Taxes superior to or on a parity with the Bonds. Nothing in a lien having security ness which is indebted incurring or or issuing from District thethe prevent nt shall Agreeme Fiscal Agent Agreement shall prevent District from issuing incurring indebtedness which is Agent Fiscal thethe of Net Taxes to pledge the to to respects all in ate subordin is which Taxes Net of pledge a payable from a pledge of Net Taxes which is subordinate in all respects the pledge of Net Taxes to from payable

repay the Bonds. Bonds. the repay


any Bonds issued asas long soso and 2006-07 Year Fiscal g in in Beginnin Tax. Special of of (2) Levy_ Levy Special Tax. Beginning Fiscal Year 2006-07 and long any Bonds issued (2) covenants to levy District the of of body e legislativ the ing, Outstand are nt Agreeme Agent under the Fiscal Agent Agreement are Outstanding, the legislative body the District covenants to levy Fiscal the under Fund Tax Special the in deposit on amounts other with together t, sufficien the Special Tax amount sufficient, together with other amounts on deposit in the Special Tax Fund amount an an in in Tax Special the the (2) due, when Bonds the onon interest and of of principal thethe (1)(1) pay to to purpose, such forfor and available such purpose, pay principal and interest the Bonds when due, (2) the available and Special the of of Account Reserve the replenish to to required amounts any (3)(3) Administrative Expenses, and any amounts required replenish the Reserve Account the Special s, and trative Expense Adminis ent. Tax Fund to the Reserve Requirement. Requirem Reserve Tax Fund to the the benefit of the s forfor covenant District The ngs. ure Proceedi ce Foreclos Commen Commence Foreclosure Proceedings. The District covenants the benefit of the (3) (3) owned parcels all ngs against proceedi re foreclosu judicial ce commen will (i) Owners of the Bonds that it (i) will commence judicial foreclosure proceedings against all parcels owned it that Bonds the of Owners $5,000 than greater is parcels such on Taxes Special nt delinque e aggregat the by a property owner where the aggregate delinquent Special Taxes on such parcels is greater than $5,000 where by a property owner due and (ii) were Taxes Special such which inin Year Fiscal each ofof close g the the October following the close each Fiscal Year which such Special Taxes were due and (ii) followin 11 October the byby by the Taxes nt Special delinque with parcels allall ngs against re proceedi foreclosu will commence judicial foreclosure proceedings against parcels with delinquent Special Taxes by the ce judicial commen will amount which an inin Taxes Special receives it which in Year Fiscal each of close the October 1 following the close of each Fiscal Year in which it receives Special Taxes an amount which g followin 1 October such y pursue diligentl will (iii) and Year, Fiscal such for levied Tax Special total is less than 95% of the total Special Tax levied for such Fiscal Year, and (iii) will diligently pursue such the of is less than 95% District the that , however , provided paid; are Taxes Special nt delinque the ngs until foreclosure proceedings until the delinquent Special Taxes are paid; provided, however, that the District re proceedi foreclosu Reserve Account of the inin amount the asas long soso parcel any ngs onon re proceedi foreclosu may elect defer foreclosure proceedings any parcel long the amount the Reserve Account of defer toto elect may cause not ncies will delinque such and ent Requirem Reserve the to equal the Special Tax Fund is at least equal to the Reserve Requirement and such delinquencies will not cause least at is Fund the Special Tax Date. Payment Interest ng succeedi next the on n withdraw be to moneys the Reserve Account to be withdrawn on the next succeeding Interest Payment Date.The The Account Reserve the inin moneys order to inin funds available legally of source any from funds advance to, District may, but not obligated to, advance funds from any source of legally available funds order to obligated not isis but may, District ent. Requirem Reserve the atat Fund Tax Special the ofof maintain the Reserve Account the Special Tax Fund the Reserve Requirement. Account Reserve the maintain Tax re in of proceeds the deposit will it it s that covenant TheDistrict District covenants that will deposit the proceeds ofany anyforeclosu foreclosure inthe theSpecial Special Tax The Fund. Fund. for e any of (4) Payment ofClaims. Claims.The The District Districtwill willpay payand and discharg discharge anyand and all all lawful lawfulclaims claims for Payment (4) other or; Taxes Net the upon charge or lien aa become might unpaid, ifif which, labor, materials or supplies which, unpaid, might become lien or charge upon the Net Taxes or; other supplies or materials labor, might Expense trative Adminis the than (other fundsin inthe theSpecial SpecialTax TaxFund Fund (other than the Administrative ExpenseAccount Accounttherein), therein),or orwhich which might funds Agent d in that ing; provided impair thesecurity securityof ofthe theBonds Bondsthen thenOutstand Outstanding; provided thatnothing nothingcontaine contained inthe theFiscal Fiscal Agent the impair

C-11 C-11

faith shall in good District as the long ts so so paymen such anyany t to make Distric the the Agreement shall require District to make such payments long as the District in good faith shall require ment shall Agree claims. such contest validity of any such claims. of any validity the the contest and accounts, records of of books proper keep will District The s. Account andand Books Accounts. The District will keep proper books records and accounts, (5) (5) Books shall be entries correct and e complet which in District, the of accounts andand accounts of the District, in which complete and correct entries shall be records separate from other records other all all from separate to the Special Tax Fund. deposits the the and Tax Special thethe of of levy to the ons relating made transactions relating to the levy Special Tax and deposits to the Special Tax Fund. transacti all all of of made inspection of to the subject be hours business during times all at shall accounts Such books of records and accounts shall at all times during business hours be subject to the inspection of and Such books of records ed in authoriz tatives represen their or ing Outstand then Bonds the of Owners Fiscal Agent Owners of the Bonds then Outstanding or their representatives authorized in thethe of of or or Agent Fiscal thethe writing. writing. actions necessary in order allall take shall it it ts that covenan District The ts, Covenan Tax Covenants. The District covenants that shall take actions necessary in order (6)(6) Tax from the gross Code thethe of 103(a) section to t pursuan excluded remain and be be that interest Bonds and remain excluded pursuant to section 103(a) of Code from the gross Bonds thethe on on interest that or invest, and shall use not it shall that s, and purpose taxtax income federal forfor thereof income owners thereof federal income purposes, and that it shall not use or invest, and shall owners thethe of of income s or any other Proceed Gross invest oror use to to omit not shall and ent of, of, investm or or not permit investment and shall not omit use invest Gross Proceeds or any other useuse thethe permit not directly financed be to is which of ment improve or tion construc on, acquisiti the property amounts any property the acquisition, construction or improvement of which is to be financed directly any (or(or amounts cause the ely, could respectiv omitted, oror made if if that a manner s) in in Proceed indirectly with Gross Proceeds) a manner that made omitted, respectively, could cause the Gross y with indirectl or or the gross income from Code the of of 103(a) section to t pursuan excluded be to fail interest on any Bond to fail to be excluded pursuant to section 103(a) the Code from the gross income to Bond any on interest s. purpose tax income federal of the owner thereof for federal income tax purposes. for of the owner thereof that, es Taxes. Special m Maximu n of of Reduction Maximum Special Taxes.The TheDistrict Districtfinds findsand and determin determines that, (7) (7) Reductio Act in community the t to to ed pursuan authoriz taxes special t of of paymen thethe historically, delinquencies payment special taxes authorized pursuant the Act in community ncies in in lly, delinque historica g the levy of requirin levels at been time to time from have ia Californ Southern facilities districts in Southern California have from time to time been at levels requiring the levy of in facilities districts l of and principa of t paymen timely make to order in rates ed authoriz m maximu special taxes the maximum authorized rates in order to make timely payment of principal of and the at at taxes special For this reason, the . districts ity facilities commun such of of ness ing indebted outstand interest the outstanding indebtedness such community facilities districts. For this reason, the the onon interest be levied on parcels ed to to authoriz rates Tax Special m maximu the in n reductio a that es District determines that a reduction in the maximum Special Tax rates authorized be levied on parcels determin District with the timely interfere would ent Agreem Agent Fiscal the in provided levels the District below the levels provided in the Fiscal Agent Agreement would interfere with the timely the below District the inin the security for preserve to order y inin necessar be toto es it it determin The retirement the Bonds. TheDistrict District determines be necessary order to preserve the security for Bonds. the nt of of retireme the District does so, do toto it it permits law the that m extent maximu the to to the Bonds covenant, and, the maximum extent that the law permits do so, the District does t, and, covenan toto Bonds the for the District, rates Tax Special m maximu the reduce to ings proceed initiate not covenant, that it shall not initiate proceedings to reduce the maximum Special Tax rates for the District, covenant, that it shall Independent more or one from te certifica a receives District the (i) h, on therewit unless, connection therewith, (i) the District receives a certificate from one or more Independent connecti inin unless, parcels of land and the ofof basis the onon that, , certify together taken when nts which, Financial Consultants which, when taken together, certify that, the basis the parcels of land and l Consulta Financia maximum amount of n, the reductio the g precedin 1 July the of as District the in existing improvements existing in the District as of the July 1 preceding the reduction, the maximum amount of ments improve Rate and the in defined (as Property ed Develop existing then on levied be the Special Tax which may be levied on then existing Developed Property (as defined in the Rate and may which Tax Special the Year for any Bond each inin District) the in in effect in in then Taxes Special of of Method Apportionment Special Taxes then effect the District) each Bond Year for any nment Apportio ofof Method s and trative Expense d Adminis estimate the on sum the of 110% least at equal will Bonds Outstanding will equal at least 110% of the sum on the estimated Administrative Expenses and ing Outstand Bonds d, approve is n reductio the after ing Outstand remain to Bonds all on Year Bond that in gross debt service in that Bond Year on all Bonds to remain Outstanding after the reduction is approved, service debt gross y affect the ns will n made and(ii) (ii)the theDistrict Districtfinds findsthat thatany anyreductio reduction madeunder undersuch suchconditio conditions willnot notadversel adversely affect the and Expenses for the Administrative estimating Administrative of estimating purposes of For purposes of Owners interests the Owners ofthe theBonds. Bonds. For Expenses for the the ofof interests trative Expenses Adminis the compute shall nt Consulta l Financia dent Indepen the on, foregoing calculation, the Independent Financial Consultant shall compute the Administrative Expenses calculati g foregoin Year. Fiscal ent subsequ each in (2%) percent two by amount that escalate and for the current Fiscal Year and escalate that amount by two percent (2%) in each subsequent Fiscal Year. Year Fiscal current the for any initiative is t that ovenants that nts totoDefend. Covenants Defend. The The District District ccovenants thatin inthe the even event that any initiative is Covena (8) (8) below m Special the adoptedby by thequalified qualifiedelectors electorsin in theDistrict Districtwhich whichpurports purportsto toreduce reducethe themaximu maximum SpecialTax Tax below the adopted Special the levy to to ent or thelevels levelsspecified specified inthe theFiscal FiscalAgent AgentAgreem Agreement or tolimit limitthe thepower powerof ofthe theDistrict District to levy the Special in the action ce and commen will it ent, Agreem Agent Taxesfor forthe thepurpose purposes setforth forthin inthe theFiscal Fiscal Agent Agreement, it will commence andpursue pursuelegal legal action s set Taxes ts. inorder orderto topreserve preserveits itsability abilityto tocomply complywith withsuch suchcovenan covenants. in not adopt any ts that on on Limitation onRight Rightto toTender TenderBonds. Bonds. The The District District covenan covenants thatit it will will not adopt any Limitati (9) (9) in full District the ng the t totoSection policypursuan pursuant Section53341.1 53341.1of ofthe theAct Actpermitti permitting thetender tenderof ofBonds Bondsto to the District in full policy t of payment orpartial partialpaymen payment of any any Special Special Taxes. Taxes. t or paymen

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C-12

tinuing Con thethe of of term thethe with comply ts to to trict covenan (10) Con Dis Continuing Disclosure. The District covenants comply with term Continuing e. The tinuing Disclosur (10) Bonds. t to the respec it with by by Disclosure Agreement executed it with respect to the Bonds. nt executed e Agreeme Disclosur ENT NT AGREEM AL AGE FISC TOTO ENTS AMENDM AMENDMENTS FISCAL AGENT AGREEMENT The er Consent. g Bondown Requirin Not Orders nts or or Agreeme Agent ental Fiscal Supplemental Fiscal Agent Agreements Orders Not Requiring Bondowner Consent. The Supplem wners, Bondo the of of any sent of of con or or e to to hout notic e, witwithout tim any at at e, and may from to time, and any time, notice consent any the Bondowners, e to tim timtime from trict may DisDistrict oses: wing purp follo thethe of of any eements forfor nt Agr adopt Supplemental Fiscal Agent Agreements any following purposes: Age lemental Fiscal Supp adopt Fiscal Agent the ns in in provisio nt any suppleme or or correct , to to ambiguity any cure cure any ambiguity, correct supplement any provisions the Fiscal Agent (1)(1) to to to nt, or or Agreeme Agent Fiscal the in provision other any with nt inconsiste Agreement which may be inconsistent with any other provision in the Fiscal Agent Agreement, to be may which Agreement t n Agreeme Agent Fiscal he t under arising questions or ers tt ma to respect with make any other provision with respect to matters or questions arising under the Fiscal Agent Agreement provision other any make interests thethe to to adverse materially is no action such that provided order, tion or or any additional resolution order, provided that such action is t not materially adverse interests tional resolu addi any in in or or ers; Bondown thethe Bondowners; of of rictions upon rest the s and limitation the and ts of of agreemen ants and coven the to to add the covenants and agreements and the limitations and the restrictions upon add (2)(2) to to s and ts, limitation s, agreemen covenant other nt, t Agreeme Fiscal the in in District contained the FiscalAgen Agent Agreement, other covenants, agreements, limitations and rict contained Dist thethe the Fiscal Agent onsistent with inc or or to to contrary not areare which District thethe by by observed be be restrictions observed District which not contrary inconsistent with the Fiscal Agent s to to restriction ; payments Bond secure further which or effect in Agreement as theretofore in effect or which further secure Bond payments; Agreement as theretofore as to permit manner such nt in in Agreeme Agent Fiscal nt the suppleme or or amend modify, modify, amend supplement the Fiscal Agent Agreement such manner as to permit (3) (3) to to , or or amended asas 1939, of of t Ac Indenture Trust the under nt Agreeme Agent the qualification of the Fiscal Agent Agreement under the Trust Indenture Act 1939, amended, Fiscal the of ion the qualificat r, thereunde issued s regulation or or Code the with comply to to or or effect, in in any similar federal statute hereafter effect, comply with the Code regulations issued thereunder, te hereafter statu federal similar any federal similar oror act said byby permitted bebe may s as as provision s and condition and add such other terms, conditions and provisions may permitted said act similar federal terms, other such add to to and then Bonds the of Owners the of interests the affect terially adversely t ma nonot statute, and which shall materially adversely affect the interests of the Owners of the Bonds then shall which and statute,

Outstanding; ing; oror Outstand


in Taxes Special the ionment ofof apport ofof d method an rate the amend oror alter (4) modify, alter amend the rate and method apportionment the Special Taxes in modify, toto (4) in each levied bebe may that Taxes Special maximum the reduce not dodo changes any manner long such changes not reduce the maximum Special Taxes that may levied in each such asas long soso manner any Agent Fiscal the under permitted that than less is is which amount anan to to District the year on property within the District amount which less than that permitted under the Fiscal Agent within property on year Agreement; nt; oror Agreeme respect other any nt inin Agreeme Agent Fiscal nt the suppleme oror amend alter, modify, alter, amend supplement the Fiscal Agent Agreement any other respect modify, toto (5) (5) ers. Bondown the to adverse which is not materially adverse to the Bondowners. materially not which is Consent. er Bondown Requiring or nts Agent Supplemental Fiscal AgentAgreeme Agreements or Orders Orders Requiring Bondowner Consent. Fiscal ental Supplem nt, the Agreeme Agent Fiscal the in described s t n Agreeme Agent scal ntal FiFiscal Suppleme the Exclusive the Supplemental Agent Agreements described in the Fiscal Agent Agreement, the usive ofof Excl the have ing shall Outstand Bonds the of amount principal aggregate inin majority not less than majority aggregate principal amount of the Bonds Outstanding shall have the aa than less not wners ofof OOwners Agent Fiscal ntal Suppleme such of District the by adoption the approve right to consent to and approve the adoption by the District of such Supplemental Fiscal Agent right to consent to and the byby desirable oror necessary be Agreements shall bedeemed deemed necessary desirable theDistrict Districtfor forthe the purpose purposeof of waiving, waiving, shall nts as as Agreeme s or terms the of any , particular any in g, rescindin oror toto , adding modifying, altering, amending, adding rescinding, in any particular, any of the terms orprovision provisions amending g, altering, modifyin nt Agreeme Agent Fiscal the in nothing that however, nt; provided, Agreeme Agent contained the Fiscal Agent Agreement; provided, however, that nothing in the Fiscal Agent Agreement Fiscal the inin contained the or principal, the date maturity the of extension an g, (a) permittin shall permit, orbe beconstrued construedas as permitting, (a) an extension of the maturity dateof of the principal, or the or permit, shall n premium of, amount principal the in reduction a (b) Bond, any on, payment date of interest on, any Bond, (b) a reduction in the principal amount of,or orredemptio redemption premium interest of date payment Bond, any over Bond any of priority or e preferenc (c) rate on,any anyBond Bond orthe the rateof ofinterest interestthereon, thereon, (c)a a preference or priority of any Bond over anyother other Bond, or on, to required are which of Owners the the of amount or(d) (d)aareduction reductionin inthe theaggregate aggregateprincipal principal amount of theBonds Bonds the Owners of which are required to or Bonds all of Owners of consent the nt, without Agreeme ntal Fiscal consent tosuch suchSuppleme Supplemental FiscalAgent Agent Agreement, without the consent ofthe the Owners of all Bonds to consent ing. thenOutstand Outstanding. then nt, which Supplemental Fiscal all desire Ifat at any any time time the the District District sh shall desire to to adopt adopt a a Supplemental Fiscal Agent Agent Agreeme Agreement, which If the ers, Bondown the of consent the require shall nt Agreeme Agent Fiscal the pursuant tothe theterms termsof of the Fiscal Agent Agreement shall require the consent of the Bondowners, the to pursuant

C-13 C-13

of the proposed a copy Agent Fiscal to the deliver shall andand Agent Fiscal the the shall so notify Fiscal Agent shall deliver to the Fiscal Agent a copy of the proposed so notify trict shall DisDistrict cause District, thethe of of expense at the shall, Agent Fiscal he T ent. Supplemental Fiscal Agent Agreement. The Fiscal Agent shall, at the expense District, cause Agreem gent A Fiscal ental Supplem postage mail, class first by mailed, bc to ent Agreem Agent Fiscal ental notice of the proposed Supplemental Fiscal Agent Agreement to be mailed, by first class mail, postage Supplem d notice of the propose notice shall Such . Register Bond in the appear s as they addresse prepaid, to all Bondowners at their addresses as they appear in the Bond Register. Such notice shall ners at their Bondow to all prepaid, shall state that a ent andand Agreem Agent ental Fiscal d Supplem propose thethe of of briefly forth nature proposed Supplemental Fiscal Agent Agreement shall state that a nature the the forth set set briefly of failure The ners. Bondow n by all inspectio for for Agent Fiscal of the copy thereof is on at the office of the Fiscal Agent inspection by all Bondowners. The failure of office at the file file is on thereof copy Agent Fiscal ental Supplem such of validity the affect not shall notice any Bondowners to receive such notice shall not affect the validity of such Supplemental Fiscal Agent any Bondowners to receive such in aggregate a majority than less notnot of of Owners the the d by by approve Agreement when consented to and approved Owners less than a majority in aggregate d to and consente ent when Agreem er at any Whenev ent. Agreem Agent Fiscal the by required as ing Outstand Bonds principal amount of the Bonds Outstanding as required by the Fiscal Agent Agreement. Whenever at any the of amount l principa an receive shall Agent Fiscal the notice, such of mailing first the of date the after time within one year after the date of the first mailing of such notice, the Fiscal Agent shall receive an time within one year l principa te aggrega in majority a of Owners the by executed ng to be instrument instruments purporting to be executed by the Owners of a majority in aggregate principal nts purporti instrume nt or or instrume proposed the to to refer shall nts instrume nt or or instrume which ing, amount of the Bonds Outstanding, which instrument instruments shall refer the proposed Outstand Bonds the of amount to and consent lly specifica shall and notice, such in d describe ent Agreem Supplemental Fiscal Agent Agreement described in such notice, and shall specifically consent to and Agent Supplemental Fiscal notice such in to referred copy the of form the in ially substant District the by by the District substantially in the form of the copy referred to in such notice approve adoption thereof thereof adoption thethe approve when duly t, Agreemen Agent Fiscal ental d Supplem file with theFiscal FiscalAgent, Agent,such suchpropose proposed Supplemental Fiscal Agent Agreement, when duly the with file onon as as Bonds. thethe of of issuance the for ings proceed the of part a become r adopted by the District, shall thereafter become a part of the proceedings for the issuance Bonds. thereafte shall adopted by the District, have Bonds the of amount l principa te aggrega the of majority a of Owners determining whether Owners of a majority of the aggregate principal amount of the Bonds have thethe ing whether determin In In the by owned areare which ent, Bonds Agreem Agent ental Fiscal Supplem any of of consented adoption any Supplemental Fiscal Agent Agreement, Bonds which owned by the adoption thethe d to to consente or indirect direct the under or or d by by controlle ng or or y controlli indirectl or or directly District any person directly indirectly controlling controlled under the direct or indirect person any by by or or District were not they though as treated be shall and ded disregar be shall District the common control with the District shall be disregarded and shall be treated as though they were not with common control ation. determin such any of of any such determination. purpose Outstanding the purpose the ing forfor Outstand of consent to any receipt the ent and Agreem Agent ental Fiscal Supplem any of of Upon adoption any Supplemental Fiscal Agent Agreement and the receipt of consent to any adoption thethe Upon in aggregate majority a than less not of Owners the from ent Agreem Agent such Supplemental Fiscal Agent Agreement from the Owners of not less than a majority in aggregate Fiscal such Supplemental t to the pursuan required is consent such where s instance in Bonds ing Outstand the principal amount the Outstanding Bonds in instances where such consent is required pursuant to the of of l amount principa shall be deemed to and be,be, ent shall Agreem Agent Fiscal ent, the Agreem Agent Fiscal provisions the Fiscal Agent Agreement, the Fiscal Agent Agreement shall and shall be deemed to the ns of of provisio s under obligation and duties rights, e respectiv the and h, therewit ce accordan be, modified and amended in accordance therewith, and the respective rights, duties and obligations under in be, modified and amended r be thereafte shall Bonds ing Outstand of Owners all and District the the Fiscal Agent Agreement ent of of the District and all Owners of Outstanding Bonds shall thereafter be Agreem Agent Fiscal the to such respects allall in in ent, subject Agreem Agent Fiscal the under enforced determined, exercised and enforced under the Fiscal Agent Agreement, subject respects to such d and ed, exercise determin ents. amendm tions and modifications and amendments. modifica taken as action any ofof date effective fter the d Bonds. Amende ofof Notation Bonds; Delivery Amended Bonds.AAfter Delivery the effective date any action taken as Bonds; tion ofof Nota , notation a bear may Bonds the e that determin may District ent, the Agreem provided the Fiscal Agent Agreement, the District may determine that the Bonds may bear a notation, Agent Fiscal the inin provided demand of the upon case that inin and action, such to to as as District, the d by by endorsement form approved by the District, such action, and that case upon demand of the approve form ent in in endorsem by purpose at the the for Bond his of tion presenta and date effective such at Bond Owner of any Outstanding Bond at such effective date and presentation of his Bond for the purpose at the ing Owner of any Outstand e for designat and select may Agent Fiscal the as offices al addition such atat such additional offices as the Fiscal Agent may select and designate for oror office the Fiscal Agent Agent Fiscal the ofof office so shall If the District Bonds. such onon made be be shall action such to to as as notation that purpose, suitable notation such action shall made such Bonds. If the District shall so suitable , a a purpose that to such conform y toto necessar be shall District, the ofof opinion the inin as, determine, new Bonds so modified as, the opinion the District, shall be necessary conform to such modified so Bonds e, new determin ing Outstand any of Owner the of demand upon case that in and , executed action shall be prepared and executed, and in that case upon demand of the Owner of any Outstanding and prepared be shall action at or Agent the ofof office the ed atat exchang bebe shall Bonds new such Bond such effective date such new Bonds shall exchanged the office theFiscal Fiscal Agent or at date effective atatsuch Bond to each , without purpose that e for designat and select may Agent Fiscal such additional offices as the Fiscal Agent may select and designate for that purpose, withoutcost cost to each the as al offices addition such Bonds. ing Outstand such of r surrende upon Owner of Outstanding Bonds, upon surrender of such Outstanding Bonds. Bonds, ing Owner of Outstand IES EFAULT; REMED F DDEFAULT; S O EVENT EVENTS OF REMEDIES te an "event of g events he followin Any Events ofDe Default. fault. Anyone oneor ormore more of of tthe following eventsshall shall constitu constitute an "event of vents of E t": defaul default": or redemption l of t of l paymen (a) Default Defaultin inthe the due due and and punctua punctual payment of the the principa principal of or redemption (a) at premium, any,on onany anyBond Bondwhen whenand andas asthe the same same shall shallbecome becomedue due and and payable, payable,whether whether at any, , ifif premium e; ion or d, by maturityas astherein thereinexpresse expressed, bydeclarat declaration orotherwis otherwise; maturity

C-14 C-14

and as when Bond anyany on on interest the the of of payment punctual and due thethe in in Default due and punctual payment interest Bond when and as (b)(b) Default or or payable; and due same shall become due and payable; become shall same the the in the District thethe by by made be be shall default (b), or or (a) (a) in in described as as Except described (b), default shall made District in the (c)(c) Except Fiscal the in d containe part its on s covenant or s condition nts, agreeme the of of the agreements, conditions or covenants on its part contained in the Fiscal observance any any ce of of observan days 3030 of of a period d for for continue have shall default such and Agent Agreement Bonds, and such default shall have continued a period days Bonds, the the nt or or Agreeme Agent the or Agent Fiscal the by default such of writing ifi in notice given been have shall after District shall have been given notice writing of such default by the Fiscal Agent or the District thethe after ing Bonds. Outstand thethe of of amount e principal aggregat in in Owners 25% aggregate principal amount Outstanding Bonds. 25% of of Owners ce of an occurren thethe tely upon immedia Agent Fiscal the to to notice give to to agrees The District agrees give notice the Fiscal Agent immediately upon occurrence of an District The an event of ge of of knowled District's the of days 30 within and above (b) or (a) event of default under (a) or (b) above and within 30 days of the District's knowledge an event of under default of event default of event any of ge knowled have to deemed be not shall Agent Fiscal default under above. The Fiscal Agent shall not be deemed to have knowledge of any event of default The above. (c)(c) under default Agent Fiscal the or or ge thereof knowled actual have shall le officer a responsib described above unless a responsible officer shall have actual knowledge thereof the Fiscal Agent unless above (c)(c) in in described Office. Principal its at notice shall have received written notice at its Principal Office. written received have shall have the shall Owner any default, of of event anan ce of of occurren g the Owners. ers. Followin Following the occurrence event default, any Owner shall have the Own medies of of ReRemedies situated: similarly Owners allall n of of protectio and right for the equal benefit and protection Owners similarly situated: benefit equal the for right against rights his enforce to to equity in in oror law ng at at proceedi or or suit other us oror (1) By By mandamus other suit proceeding law equity enforce his rights against mandam (1) or District the compel to and District, the of es employe and officers , members the the District and any the members, officers and employees of the District, and to compel the District or of of any and District the their Act and the under duties their out carry and perform es to to employe or or any such members, officers employees perform and carry out their duties under the Act and their , officers members such any nt; Agreeme Agent Fiscal the in provided as agreements with the Owners as provided in the Fiscal Agent Agreement; Owners the with nts agreeme the rights violate oror unlawful are which things oror actions any enjoin toto (2) By equity By suit equity enjoin any actions things which are unlawful violate the rights inin suit (2) oror the Owners; Owners; the ofof and employees to , officers t and a asuit By By suitin inequity equityto torequire requirethe theDistric District andits itsmembers members, officers and employees to (3) (3) trust. express an of agent fiscal account as the fiscal agent of an express trust. the as account n of the obligatio the impair oror affect shall Bonds nt, the Agreeme Agent the Nothing theFiscal Fiscal Agent Agreement, the Bonds shall affect impair the obligation of the inin Nothing Bonds to the the ofof principal and onon interest the pay ional, to to uncondit and District, which absolute and unconditional, pay the interest and principal the Bonds to the absolute is is which District, nt, Agreeme Agent Fiscal the in provided as , maturity of dates e respectiv respective Owners thereof at the respective dates of maturity, as provided in the Fiscal Agent Agreement, the respective Owners thereof at action, of right the impair or affect , oror payment such for pledged amounts other and Taxes out of the Net Taxes and other amounts pledged for such payment, affect or impair the right of action, Net the of out such enforce to suit institute to Owners such of ional, uncondit which is also absolute and unconditional, of such Owners to institute suit to enforce suchpayment paymentby by and absolute also is which nt. Agreeme Agent Fiscal the in and Bonds the in d virtue of the contract embodied in the Bonds and in the Fiscal Agent Agreement. embodie virtue of the contract affect any of waiver ofany anydefault defaultor orbreach breachof ofduty dutyor or contract contractby byany any Owner Owner shall shallnot not affect any AAwaiver nt on remedies or rights any impair or contract, or duty subsequent default or breachof of duty or contract, or impair any rights or remedies onany anysuch suchsubseque subsequent breach or nt default subseque any upon accruing power or right defaultor orbreach. breach.No No delay delayor oromission omissionby byany anyOwner Ownerto toexercise exerciseany any right or power accruing upon any default an a awaiver to d construe be shall or power or right defaultshall shallimpair impair anysuch such right or power or shall be construed tobe be waiverof ofany anysuch suchdefault defaultor or an any default Fiscal by the upon conferred acquiescence therein,and andevery everypower powerand andremedy remedy conferred upon theOwners Owners bythe theAct Actor orby bythe the Fiscal ence therein, acquiesc deemed be shall as often as and time to time from exercised and enforced Agent Agreement may be enforced and exercised from time to time and as often as shall be deemed be may nt Agreeme Agent

expedient bythe theOwners. Owners. t by expedien


abandoned or ng to If any any suit, suit, action action or or proceedi proceeding to enforce enforceany anyright right or or exercise exerciseany any remedy remedyis is abandoned or If to their former the and the the to to determined adversely theOwners, Owners, theDistrict District and theOwners Ownersshall shallbe be restored restored to their former ed adversely determin or brought been ng had positions, rightsand andremedies remedies as asif ifsuch suchsuit, suit,action actionor orproceedi proceeding hadnot not been brought ortaken. taken. , rights positions intended r reserved greement conferred l Agent Noremedy remedy in in the the Fisca Fiscal Agent A Agreement conferredupon uponoor reservedto to the the Owners Owners is is intended No addition to ve and . Every to be be exclusive exclusiveof ofany anyother otherremedy remedy. Every such such remedy remedy shall shall be be cumulati cumulative and shall shall be be in in addition to to at law or in nt or every other other remedy remedygiven givenunder underthe theFiscal FiscalAgent AgentAgreeme Agreement ornow nowor orhereafter hereafterexisting, existing, at law or in every

C-15 C-15

any to to hout regard wit ting and exhaus without exercised be be may , and equity statute otherwise, and may exercised without exhausting and without regard any otherwise te or or statu by by or or equity law. other any or or Act the the other remedy conferred Act any other law. by by conferred remedy other above (b)(b) or or (a) (a) to to pursuant default of of event an an after Agent Fiscal the by by held case moneys held the Fiscal Agent after event default pursuant above moneys thethe case In In Bonds, ng Outstandi the upon unpaid and owing so amount whole the full in in pay shall insufficient pay full the whole amount so owing and unpaid upon the Outstanding Bonds, t to to insufficien be be shall t t withou interes and principal such of of payment the to to applied be then all available amounts shall be applied the payment such principal and interest without shall amounts available then all t interes of t installmen any of of or or principal, over interest or or interest, over preference priority principal over interest, interest over principal, any installment of interest principal of of priority or or preference interest. and principal such of of aggregate thethe to to ratably interest, over any other installment interest, ratably aggregate such principal and interest. t of of installmen other any over SANCE DEFEA DEFEASANCE to the paid, bebe otherwise shall there id, oror pa be toto cause oror pay shall District the IfIf the District shall pay cause be paid, there shall otherwise paid, to the feasance. DeDefeasance. the in in and times thethe at at thereof, principal thethe and thereon due interest thethe Owner Outstanding Bond interest due thereon and principal thereof, times and the ng Bond Outstandi an an of of Owner the then t, Agreemen Agent Fiscal ntal Suppleme any or t Agreemen manner stipulated in the Fiscal Agent Agreement or any Supplemental Fiscal Agent Agreement, then the Agent Fiscal the in stipulated manner forth set as than other and, axes, T Net of pledge the to entitled be to cease Owner of such Bond shall cease to be entitled to the pledge of Net Taxes, and, other than as set forth Owner of such Bond shall under Bond such of of Owner thethe to to District thethe s of of obligation other ts and below, covenants, agreements and other obligations District Owner such Bond under , agreemen covenants allall below, and discharged be and void become and terminate cease, thereupon t shall the Fiscal Agent Agreement shall thereupon cease, terminate and become void and be discharged and Agreemen Agent Fiscal the t, Agreemen Agent Fiscal the to pursuant Bonds ng Outstandi all of e satisfied. In the event of a defeasance of all Outstanding Bonds pursuant to the Fiscal Agent Agreement, defeasanc a satisfied. In the event of toto desirable bebe may ts as as instrumen such allall District the to to deliver and the Fiscal Agent shall execute and deliver the District such instruments may desirable execute shall Agent Fiscal the District's the to to deliver or or over pay shall Agent Fiscal thethe n, and satisfactio evidence such discharge and satisfaction, and Fiscal Agent shall pay over deliver the District's and discharge such evidence not are which t Agreemen Agent Fiscal the to pursuant it by held securities general fund all money or securities held by it pursuant to the Fiscal Agent Agreement which are not or money all fund general Bonds. such on due interest and any, if premium, of, principal the of required for the payment of the principal of, premium, if any, and interest due on such Bonds. payment the for required oror one any in in paid is is Bond such if if paid been have to to deemed be be shall Any Outstanding Bond shall deemed have been paid such Bond paid any one ng Bond Outstandi Any ways: more the following ways: following the of of more on interest and any, if if premium, of, principal the paid be toto causing oror (a) by paying causing be paid the principal of, premium, any, and interest on paying by (a) payable; and due become same such Bond, and when the same become due and payable; the when and asas Bond, such oney which, mmoney maturity, before oror atat trust, inin Agent, Fiscal the with (b) depositing by by depositing with the Fiscal Agent, trust, before maturity, which, (b) of (exclusive Fund Tax Special the in deposit on then amounts the with together with the amounts then on deposit in the Special Tax Fund (exclusive ofthe the together the pay toto sufficient fully is is purpose, such forfor available and Account) Administrative Expense Account) and available such purpose, fully sufficient pay the ative Expense Administr due become shall same the when and asas Bond, such on interest and any, if if principal of, premium, any, and interest on such Bond, and when the same shall become due premium, of, principal

and payable; or or payable; and


by escrow Agent Fiscal the (c) with bydepositing depositing with the Fiscal Agentor oranother another escrowbank bankappointed appointed bythe the by (c) invest lawfully may District the which , inin e Securities le Defeasanc District,in in trust, noncallable Defeasance Securities, which the District may lawfully investits its st, noncallab tru District, and thereon e ru acc to interest the with together sufficient, be will as money, in such amount as will be sufficient, together with the interest to accrue thereon and amount money, in such Expense Administrative on moneys then ondeposit depositin inthe the Special Special Tax Tax Fund Fund (exclusive (exclusive of of the the Administrative Expense then moneys pay to thereon, e ru acc to interest the with together purpose, such for Account) andavailable available for such purpose, together with the interest to accrue thereon, to payand and and Account) the when and as Bond, such on interest and any, if if premium, of, principal discharge the principal of, premium, any, and interest on such Bond, as and when thesame same the discharge

shallbecome becomedue dueand andpayable; payable; shall


ng Bonds that thstanding d notwi then,at atthe the election electionof ofthe the District, District, an and notwithstanding thatany anyOutstandi Outstanding Bondsshall shallnot not then, t and Agreemen Agent Fiscal the under District the of s obligation all payment, for d have been surrendered for payment, all obligations of the District under the Fiscal Agent Agreement and surrendere have been ond shall such toto respect t with Agent anySuppleme Supplemental Fiscal AgentAgreemen Agreement with respect suchBBond shallcease ceaseand andterminate, terminate,except except ntal Fiscal any be toto cause oror pay toto Agent forthe theobligation obligationof ofthe theFiscal Fiscal Agent pay cause bepaid paidto tothe theOwners Ownersof ofany anysuch suchBond Bondnot notso so for contained District the of covenants the for and paid, surrendered and paid,all allsums sumsdue duethereon thereon andexcept except for the covenants of the District contained in in d and surrendere Agent Fiscal ntal Suppleme a in covenants any or t Agreemen Agent Fiscal the of certain section of the Fiscal Agent Agreement or any covenants in a Supplemental Fiscal Agent section certain Code. the e with Agreement relating tocomplianc compliance with the Code.Notice Noticeof ofsuch suchelection electionshall shallbe befiled filed with withthe the Fiscal Fiscal to t relating Agreemen time of period shorter such or date, e Agentnot notless lessthan thanten tendays daysprior priorto tothe theproposed proposeddefeasanc defeasance date, or such shorter period of timeas asmay may Agent

C-16 C- 1 6

ance under (b) or (c) above, there shall be a defeas tion with In connec Agent. Fiscal acceptable to the Fiscal Agent. In connection with a defeasance under (b) or (c) above, there shall be able to the accept be be ized certified public lly recogn ndent nationa indepe an from report ation provided to the District a verification report from an independent nationally recognized certified public verific a t Distric the to ed provid ies deposited with the Fiscal s or securit money the of ency suffici the to as n opinio its accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Fiscal stating tant accoun premium, if any, and interest on all of, al princip the rge discha and pay to bank escrow Agent or the escrow bank to pay and discharge the principal of, premium, if any, and interest on all or the Agent Agent Agreement, as and when the same Fiscal the the ance with ed in accord to be Outstanding Bonds to defeas be defeased in accordance with Fiscal Agent Agreement, as and when thethe same nding Bonds Outsta rely upon the opinion of may el (which Couns Bond of n opinio an and e, payabl shall become due and payable, and an opinion of Bond Counsel (which may rely upon the opinion of the and due e becom shall been legally defeased in ed have defeas being Bonds the that effect the tant)'to certified public accountant) to the effect that the Bonds being defeased have been legally defeased in accoun certified public Fiscal Agent Agreement. mental Supple ble applica any and nt greeme A gent A Fiscal the the accordance with Fiscal Agent Agreement and any applicable Supplemental Fiscal Agent Agreement. ance with accord e refunding to be effected under (c) advanc an an tion with ed in connec t is employ y contrac a forward supply contract is employed in connection with advance refunding to be effected under (c) d suppl If aIfforwar adequacy of the amounts deposited with thethe thatthat state sly expres shall report ation verific above, (i) such verification report shall expressly state adequacy of the amounts deposited with such (i) above, on the initial escrowed investments and solely relies ing refund the plish accom to above (c) bank under (c) above to accomplish the refunding relies solely on the initial escrowed investmentsor and under bank thethe not assume performance under does andand thereon t income interes andand al thereof maturity principal thereof interest income thereon does not assume performance under or ty princip maturi thethe agreement executed to effect ble escrow applica thethe (ii) and t, contrac supply d forwar the compliance with the forward supply contract, and (ii) applicable escrow agreement executed to effect with ance compli in the event of any discrepancy or e that, provid shall above (c) (c) ance with accord ing in in advance refunding accordance with above shall provide that, in the event of any discrepancy or e refund advanc an an the escrow agreement, the terms of the t and contrac d supply forwar thethe of of terms n thethe difference between terms forward supply contract and the escrow agreement, the terms of the nce betwee differe lling. contro be be escrow agreement shall controlling. ent shall agreem escrow the District, shall release the rights of the t of of reques t, upon Agen Fiscal ance, thethe on a defeas Upon a defeasance, Fiscal Agent, upon request the District, shall release the rights of the Up and any Agent Agreement Fiscal the ed under defeas been have which Bonds Owners such Bonds which have been defeased under the Fiscal Agent Agreement as and any such s of of Owner may t all such instruments Distric thethe to to deliver e and execut ent and Agreem Agent Supplemental Fiscal Agent Agreement and execute and deliver District all such instruments asthe may mental Fiscal Supple In the case of a defeasance under ction. satisfa and rge discha , release such ce eviden desirable the le to to evidence such release, discharge and satisfaction. In the case of a defeasance under desirab bebe shall pay over or deliver to the Agent Fiscal , the the nding Bonds Outsta all all ent of of Fiscal Agent Agreement Outstanding Bonds, Fiscal Agent shall pay over or deliver to the Agreem Agent Fiscal ance, which are not required for tile defeas aa of of time the at at Agent Fiscal the byby held District any funds held the Fiscal Agent the time defeasance, which are not required for the funds t any Distric any, or interest on the Bonds when due. m, if if premiu of, al princip the rging discha and paying purpose of paying and discharging the principal of, premium, any, or interest on the Bonds when due. of e purpos first class, postage prepaid, a notice to mail, t, Distric the of on directi written the at shall, Agent The Fiscal Agent shall, at the written direction of the District, mail, first class, postage prepaid, a notice to Fiscal The the District, stating that the d byby directe form thethe ed, in in defeas been have Bonds the Bondowners whose Bonds have been defeased, form directed the District, stating that the wners whose Bondo the ed. occurr ance has defeas defeasance has occurred.

C- l 7

C-17

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[THIS PAGE

D APPENDIX APPENDIX D

APPRAISAL REPORT APPRAISAL REPORT

D-l D-1

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RT REPO RAISAL APP APPRAISAL REPORT


T NO. 2004-3 IES DISTRIC NITY FACILIT COMMU COMMUNITY FACILITIES DISTRICT NO. 2004-3 OF INDIO CITY CITY OF INDIO RNIA CALIFO INDIO, INDIO, CALIFORNIA

ED FOR: PREPAR PREPARED FOR: INDIO OF CITY CITY OF INDIO ER ITY ENGINE CCITY NSON, STEPHE ROY ROY STEPHENSON, ENGINEER MALL ENTER C C CIVI 100 100 CIVIC CENTER MALL RNIA 92201 CALIFO INDIO, INDIO, CALIFORNIA 92201

: REPARED BY PPREPARED BY: ENT CE PRESID /SENIOR VI HREWSBURY, MAI M V. WILLIA WILLIAM V.SSHREWSBURY, MAI/SENIOR VICE PRESIDENT SER APPRAI E T CIA ASSO / BASSO Z. M]E Z. BASSO/ASSOCIATE APPRAISER JAI JAIMIE REAL ESTATE SERVICES OMMERCIAL AN C FIRST FIRSTAMERIC AMERICAN COMMERCIAL REAL ESTATE SERVICES ALUATION DMSION SAL AND APPRAI APPRAISAL ANDVVALUATION DIVISION NDY PLACE 1217 1217EAST EASTNORMA NORMANDY PLACE 5 ALIFORNIA 9270 , CCALIFORNIA SANTA SANTAANA ANA, 92705 5 -898 564 ) 4 (71 : FAX / -8982 564 ) 4 (71 PH" PH: (714) 564-8982 / FAX: (714) 564-8985 : DATE DATEOF OFVALUE VALUE: 5 200 , JUNE JUNE 17 17, 2005 PORT: DATE DATEOF OFRE REPORT: 005 2 , ULY 15 JJULY 15, 2005 ll rights ivision.. A uation DDivision.. Val ppraisaland rvices AAppraisal Se ealEstate ercialRReal canComm rst Ameri 5 by Copyright 2005 byFi First American Commercial Estate Services and Valuation All rights pyright200 Co aland s rai esApp c i rv eSe stat E al Re al ci r mme o anC ric e Am st r Fi of n o ssi i m r pe tten ri orw pri e th ith the prior written permission of First American Commercial Real Estate tServices sw reserved. Unless with Appraisal and eserved.Unles r by ed itt sm ortran em ys als etriev r eor s ataba d na i tored , s ded r o ec r , d e c u eprod e rreproduced, ay b tm ivision,no luationD Va Valuation Division, nopar part may be recorded, stored in a database or retrieval system or transmitted by se. otherwi lmor fi cro i orm,m f ble hine-reada form, microfilm or otherwise. ormac dable neye-rea hetheriin eans,w erm otocopyor electronic, photocopy oranyoth any other means, whether eye-readable or machine-readable tronic,ph elec

First American rs t Am edcanReal Estate Services, Inc. Fi Commercial Inc. Real Estate Services, ercial
Comm
July 15, 2005 2005 15, July
614 No. File File No. 614

City Indio Indio ofof City r Enginee Roy Stephenson, City Engineer on, City Stephens Roy Mall Center Civic 100 100 Civic Center Mall 92201 CA Indio, CA 92201 Indio,

e: RRe:

Terra the ne of OOne Phase within Lots (635 land of Tracts Various al of Appraisal of Various Tracts of land (635 Lots within Phase of the Terra Apprais ty i ommun C r e Und d e lop e v e D e b to ity) ommun C d e Plann r e Lago Master Planned Community) to be Developed Under Community Logo Mast alifornia ity of e CCity th ed in 4-3 Locat 200 No. es District Facilities District No. 2004-3 Located in the ofIndio, Indio,CCalifornia Faciliti

on: Stephens Mr. Dear Mr. Stephenson: Dear l report g narrative followin the prepared have ation, we authoriz your toto In response your authorization, we have prepared the following narrativeappraisa appraisal report response In estate. real ferenced above-re the in interest simple fee the of value market ng the concerning the market value of the fee simple interest in the above-referenced real estate. concerni rs ce asasreal experien en, our undertak analyses tion and investiga Basedon on the investigation and analyses undertaken, our experience realestate estateappraise appraisers the Based l appraisa this in d containe ns ions and ns, assumpt andsubject subjectto to the definitions, assumptions andlimiting limitingconditio conditions contained in this appraisal definitio the and June of as data market current the on based g opinions report,the thefollowin following opinionshave havebeen beenformed formed based on the current market data as of June report, 17, 2005. 17, 2005. n, ed for al parcels, Theestimate estimated valueof ofthe theresidenti residential parcels,discount discounted forthe thetime timeand andcost costof ofabsorptio absorption, d value The g isisin 4-3 financin 200 No. ities District ommunity Facil ed CCommunity e propos assuming the proposed Facilities District No. 2004-3 financing inplace place g th assumin llows: s fo , is isaas follows: andrready forfunding funding, eady for and RS N DOLLA TY ONE SEVEN SEVENTY ONEMILLIO MILLION DOLLARS ,000 $71,000 $71,000,000

nson Mr.RRoy Stephenson oy Stephe Mr. 05 0 2 15, July 15, 2005 July PageTwo Two Page ions of The Thedefinit definitions ofvalue valueare areas assuch: such: ty in the t value estimate of an estimate Means an ue As-Is: Market Value As-Is: Means of the the marke market value of of a a proper property in the t Val Marke without exists legally and ally physic it as tion and ed upon ion observ condition observed uponinspec inspection and as it physically and legally exists without condit tion. cations as ptions or ions, assum hypothetical conditions, assumptions orqualifi qualifications asof ofthe thedate dateof ofinspec inspection. etical condit hypoth bring in a ty should le price ue: Means Market Value: Meansthe the most most probab probable pricewhich which aa proper property should bring in a t Val Marke buyer and the ite to ions requis t under competitive andopen openmarke market underall allcondit conditions requisite to aa fair fair sale, sale, the buyer and titive and compe is not affected ing the edgeably and tly and sellereach eachacting actingpruden prudently andknowl knowledgeably andassum assuming theprice price is not affected seller mation of a sale as of a ion is it in us. Implic by byundue unduestimul stimulus. Implicit in this this definit definition is the the consum consummation of ions a sale as of a whereby: g of ed date specified dateand andthe thepassin passing oftitle title from from seller sellerto tobuyer buyer under under condit conditions whereby: specifi

(1) (1) (2) (2) (3) (3) (4) (4) (5) (5)

ted; lly motiva Buyer Buyer and and seller seller are are typica typically motivated; they consider d and well or ed inform well are Both parties parties are well informed or well advise advised and acting acting in in what what they consider Both ts; their their own own best best interes interests; t; re in d for A reason reasonable time is is allowe allowed for exposu exposure in the the open open marke market; able time A of financial terms in or dollars U.S. in cash of nt is Payme Payment is made made in in terms terms of cash in U.S. dollars or in terms of financial ; and comparable thereto ements comparable arrangements thereto; and arrang unaffected by ty sold eration for consid l norma the ents repres The price represents the normal consideration for the the proper property sold unaffected by price The associated e anyon by d grante sions conces sales or ing financ e creativ or l special or creative financing or sales concessions granted by anyone associated specia sale. with with the the sale. and

investigations and s sets The narrative appraisal report which which follow follows sets forth forth the the results results of of our our investigations sal report ve apprai The narrati ing rable data ty, compa analyses, pertinent facts about about the the area area and and the the proper property, comparable data and and the the reason reasoning nt facts analyses, pertine forth. set forth. conclusions set the conclusions led to part, led which, to the which, in part, the Code subject to mance with ed to This is intend intended to be be in in confor conformance with and and is is subject to the Code of Professional report is This report Uniform the Uniform te, the Institu isal Appra the of e Practic sional Profes of rds Ethics and Standards of Professional Practice of the Appraisal Institute, Ethics and Standa in compliance and ation Found isal Foundation e of Appraisal Practic Standards of Profes Professional Practice of the the Appra Appraisal and in compliance sional Appraisal Standards of guidelines. appraisal guidelines. with CDIAC appraisal with CDIAC submitted, Respectfully Respectfully submitted, of Professional

MAI Shrewsbury, MAI V. Shrewsbury, William William V. President Vice President Senior Vice Senior AG004522 No. AG004522 License No. OREA License California OREA California

so e Z. ciate praiser aiser A'lSpr _ciate /_o AT031532 No. AT031532 License No. OREA License California OREA California
WVS:pa WVS:pa

WWI

S AND CONCLUSIONS NT FACT SALIE ARY OF SUMM SUMMARY OF SALIENT FACTS AND CONCLUSIONS 2005 17, June AISAL: APPR TE OF FECTIVE DA EF June 17, 2005 EFFECTIVE DATE OF APPRAISAL: RAISED: EST APP INTEREST APPRAISED: INTER RIPTION: L DESC LEGA LEGAL DESCRIPTION: RSHIP: OWNERSHIP: OWNE SITE: SITE: simple. Fee Fee simple. this report ofof 13 page See See page 13 this report rt s repo thi ofof 13 e page Se See page 13 this report (zones) of land to be developed tracts Five Five tracts (zones) of land to be developed ties District No. 2004ommunity Facili r CCommunity unde under Facilities District No. 20043.

3.

PA PA1: 1: : 2 PA PA 2: 3: PA PA 3: : PA PA44: PA 5:

PA 5:

Tract No. 31601-2 Tract No. 31601-2 Tract No. 31601-3 Tract No. 31601-3 Tract No. 31601-4 Tract No. 31601-4 Tract No. 31601-5 Tract No. 31601-5 Tract No. 31601-5

Tract No. 31601-5


TOTAL

(178 Lots) (178 Lots) ts) Lo (128 (128 Lots) ) ts Lo (86 (86 Lots) (133 Lots) (133Lot Lots) s) (110

(110 Lots)

TOTAL

635 LOTS

635 LOTS

TION: LOCA LOCATION: ,: EL NOS ESSOR'S PARC ASSESSOR'S PARCEL NOS.: ASS

cels described in the report herein s par Variou Various parcels described in the report herein City of Indio. cated in lo located inthe the City of Indio. omprised of Assessor's Parcel -4 is CFD CFD 2003 2003-4 isccomprised of Assessor's Parcel -290-008 and portions 01-290-003, 601 rs 6 Numbe Numbers 601-290-003, 601-290-008 and portions of 601-270-013, 601-270-015, and 601-270-006.

of 601-270-013, 601-270-015, and 601-270-006.

RID: ROTHERS G AS B THOM THOMAS BROTHERS GRID:

ounty, 5410-H5 and 541 l-A5, A6, iverside C R Riverside County, 5410-H5 and 5411-A5, A6, B5, B5, and and B6 B6 land. te tracts Five Five separa separate tracts of of land. ar Irregul Irregular . one N None. s report. scription in te De ee Si S See Site Description in thi this report. scription in this report. De Site e e S See Site Description in. this report. ses See Site Description in esidential u us r Vario Various residential uses. See Site Description in port. his re t this report. See Property Tax Summary.

SITE: SITE: : -Shape: -Shape d: quake Hazar -Earth -Earthquake Hazard: azard: -Flood H Hazard: -Flood es: Issu ronmental -Envi -Environmental Issues: g: -Zonin -Zoning:
es: -Tax -Taxes: UBJECT: OF S ADVANTAGES OF SUBJECT: ADVANTAGES SUBJECT: OF SUBJECT: OF DISADVANTAGES DISADVANTAGES

See Property Tax Summary.

thin location wi Good location Good within a strong developing area of and surrounding desert communities. Indio Indio and surrounding desert communities. apparent. None apparent. None

a strong developing area of

REAL ESTATE COMMERCIAL REAL AMERICAN COMMERCIAL FIRST AMERICAN FIRST ESTATE SERVICES - APPRAISAL AND EVALUATION -7057 C,_LIFORNL-X_ 92705* PHONE 714.580-7056 FAX 714.550 ANA, CALIFORNIA *S._NTA ANA, PL.a.CE SANTA NOR.z\La`NDY PLACE 1217 NORMANDY 1217 92705 PHONE 714.580-7056 FAX 714.550-7057

SERVICES

-- APPRAISAL

AND EVALUATION

4 4

/ SALE FOR MARKETABILITY FOR SALE/ ETABILITY MARK TYPICAL BUYER: ER: ICAL BUY TYP ENCE: INFLU AJOR MAJOR AREA INFLUENCE: AREA M

e subject site is a ser of thof purcha likely most The The most likely purchaser the subject site is a se of the purcha ted in bulk per interes develo large large developer interested in bulk purchase of the parcel. entire entire parcel. City oflndio and or, the the y Corrid 10 Freewa TheThe 10 Freeway Corridor, City of Indio and nities. commu nding desert surrou the the surrounding desert communities.

USE: BEST EST AND HIGH AND BEST USE: HIGHEST t: Vacan -"As Vacant: Is" Is" -"As

proposed Master in the forth ped as set Develo Developed as set forth in the proposed Master t 2004ies Distric unity Facilit Comm the the for for Plan Plan Community Facilities District 20043. 3 0,000 $71,00 $71,000,000

ATE: E ESTIM VALU FINAL VALUE ESTIMATE: FINAL e Valu Bulk d e nt Discou Discounted Bulk Value

AND EVALUATION ESTATE SERVICES --APPRAISAL REAL MMERCIAL ERICAN CO RST AM FIFIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION 714.550-7057 FAX 0-7056 8 705* PHONE 714.5 RNL_, 9292705 A, CALIFO ._X,I *SANTA L-kNDY PLACE 7 NORX 121 1217 NORMANDY PLACE *SANTA ANA, CALIFORNIA PHONE 714.580-7056 FAX 714.550-7057

CONTENTS E OF TABL TABLE OF CONTENTS ................................................. ER LETT RANSMITTAL TTRANSMITTAL LETTER ................................ LUSIONS CONC AND F FACTS ARY OOF SUMM SUMMARY FACTS AND CONCLUSIONS ................................................... ENTS CONT E OF TABL TABLE OF CONTENTS ......................................................... DUCTION INTRO INTRODUCTION eport .................................................. f the urpose oof PPurpose theRReport t ............................................. e Repor th of ended Use Int Intended Use of the Report eport ............................................ f the ed Users Intended Usersoof theRReport Intend ppraisal ................................................. Scope Scopeof ofthe theA Appraisal ion ........................................ ction and Dates Datesof ofInspe Inspection andValuat Valuation ation ...................... eport Prepar t/Dates of ent of Statem Statement ofWork WorkProduc Product/Dates ofR Report Preparation ............................ tions ng Condi ptions and emises, Assum Premises, Assumptions andLimiti Limiting Conditions Pr tions ............................................ d Condi l Limite Specia Special Limited Conditions ndards ..................................... ting Sta tions and Definitions andRepor Reporting Standards Defini ................................... .......... ed pprais A ty Rights Proper Property Rights Appraised ............................ .......... .......... ication ty Identif Proper Property Identification ....... .......... .......... .............................. ship Ownership Owner ............ .......... .......... ption .................... egal Descri L Legal Description .................................................... SCRIPTION REA DE A AREA DESCRIPTION iew ............................................ y Overv erside Count Riv Riverside County Overview City City of of Indio Indio ........................................................ ary .......................................................... Summary Summ ATA ................................................. D GHBORHOOD NEI NEIGHBORHOOD DATA .................................. ndings/Neighborhood iate Surrou Immed Immediate Surroundings/Neighborhood ... dary ess and borhood Acc ry Neigh Prima Primary Neighborhood Access and Secon Secondary Routes Routes .................... hood ighbor e N t Subjec Neighborhood the Subject ections from ces and Distan Distances and Dir Directions from the ................................. .......... cts ri Dist ss Busine to Major Major Business Districts .................... DATA ................ SITE DATA SITE Analysis ....................................................... Site Analysis Site tion ca Lo Location ........................................................... .......................................... Characteristics Site Characteristics Important Important Site ................................. .......... Exposure and Exposure Ingress/Egress and Ingress/Egress ........ Neighborhood Properties' Neighborhood Subject Properties' the Subject to the Available to Services Available and Services Utilities Utilities and .... .......... Shape ........................................ and Shape Size and Size Properties .................................................. nt Adjacent Adjace Properties ........................................................ Topography Topography Uses ...................................................... Proposed Proposed Uses Conditions ............................................ il Conditions Subso and Soil Soil and Subsoil Hazards ....................... and Hazards Nuisances and Other Nuisances and Other Flood, and Earthquake, Flood, Earthquake, ................................................. Improvements Street Improvements Street ............................... Encroachments and Encroachments tions Restric Easements, Restrictions Easements, and ......................... 2

2 4 6

8 8 8 8 8 8 8 8 8 8 9 9 9 9 9 9 11 11 12 12 12 12 13 13 13 13 13 14

13 14 14 14 21 21 24 24
25

25 25 25 25 25 25
27 25

27 27 27 27 27 27 27 27 27 27 27 28 28 28 28 28 28 28 28 29 29 29 29 29 29 29 29

REAL COMMERCIAL REAL AMERICAN COMMERCIAL FIRST AMERICAN FIRST ESTATE SERVICES - APPRAISAL AND EVALUATION X 714.550-7057 A, C.kLIFORNL-X_ 92705e PHONE 714.580-7056 FA N A A NT A S e PLACE -kNDY L NOIL_ 1217NORMANDY PLACE SANTA ANA, 1217 C.ALIFORNLk 92705 PHONE 714.580-7056 FAX 714.550-7057 6 6

ESTATE

SERVICES -- APPRAISAL

AND EVALUATION

ions ............................................ Provis ial Zoning Essent Essential Zoning Provisions .............................. ing Use Use tions, Govern s/Private Restric CC&Rs/Private Restrictions, Governing CC&R ........................................... of Site onal Adequacy Functional Adequacy of Site Functi .................................. ........... Data ment Assess and and Tax Tax Assessment Data .................................................. ITIONS ET COND MARK MARKET CONDITIONS .................................. erations onal Consid Locati al and and Physical Locational Considerations Physic ................................................. erations Consid Legal Considerations Legal ........................................ ........... y asibilit e F t Market Feasibility Marke ....................... ........... ........... nting ........... Discounting Discou ................................................ USE BEST AND ST mGHE HIGHEST AND BEST USE t ..................................... Vacan As As -- UseUse Best t andand Highest Best Vacant Highes ........................................... ODOLOGY ATION METH VALU VALUATION METHODOLOGY ............................. ........... ........... ion of Valuat Basis Basis of Valuation aches .................................... ion Appro Valuation Approaches Valuat

29 29 29 29 29 29 29

29

37 37 37 38 37 38 38 42 38

42 45

44 4544 48 4848 4848

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48

...................................... ACH APPRO ARISON T COMP DIREC DIRECT COMPARISON APPROACH ........................................................ ction Introdu Introduction _ ..................... .................... rable Sales Compa is of of Analys Analysis Comparable Sales is .......... ach Analys Appro rison Compa Sales ential Land -Family Resid Single-Family Residential Land Sales Comparison Approach Analysis Single ...... ........... e Valu Land ded Conclu Value Lots d Finishe ciliation of of Finished Lots Value Concluded Land Value Recon Reconciliation ........................................... YSIS ANAL LOPMENTAL DEVE DEVELOPMENTAL ANALYSIS tion ......................................................... Absorption Absorp pment Costs, Develo istrative, Taxes, eral, Admin Gen General, Administrative, Taxes, Development Costs, ...................... ........... ........... ting Costs Marke and Profit and Marketing Costs Profit ....................................................... nt Rate Discou Discount Rate ................................... YSIS ANAL FLOW CASH UNTED DISCO DISCOUNTED CASH FLOW ANALYSIS ............................................ ATIONS VALU ARY OF SUMM SUMMARY OF VALUATIONS ARY ................................................. ATION SUMM VALU VALUATION SUMMARY ........................................................ IFICATION CERT CERTIFICATION ......................................... IFICATIONS QUAL ISER'S APPRAISER'S QUALIFICATIONS APPRA ............................................................ NDUM ADDE ADDENDUM -Absorption Study ption Study -Absor

49 49 49 49 50 50 56 56 58

58

59 59 59

59

59 59 60

60 62 67

62

67

68

68

69

69
71

71 70

70

N ESTATE SERVICES -- APPRAISAL AND EVALUATIO OMMERCIAL REAL ERICAN CCOMMERCIAL AM FIRST FIRST AMERICAN REAL ESTATE 92 SERVICES APPRAISAL AND EVALUATION 57 0-70 5 5 . 4 1 7 X A F 56 0 .580-7 4 1 7 705e PHONE LIFORNL_ A, CA ANTA AN *S ,\L-kNDY PLACE 217 NOR 11217 NORMANDY PLACE SANTA ANA, CALIFORNIA 92705 PHONE 714.580-7056 FAX 714.550-7057 7

UCTION INTROD INTRODUCTION

Purpose of the Report t Repor of the Purpose the the in in interest simple fee fee e of the valu market the the estimate o to rt is tis purpose of this report estimate market value of the simple interest repo ose of this purp TheThe ty Facilities Communi to the pursuant levies tax tax to special subject following described estate, subject to special levies pursuant to the Community Facilities estate, ribed realreal desc following
premises: valuation following District of 1982, under following valuation premises: the the under of 1982, ActAct District of of cost andand time the the d for for discounte l acreage residentia thethe of of The estimated value value residential acreage discounted time cost is" is" "as"as estimated The e. plac ding is in funfunding posed CFD absorption, CFD is in place. proproposed uming thethe , assassuming absorption CFD proposed the the assuming property, subject thethe of of value assuming proposed CFD The estimated retail market value subject property, market d retail estimate The Financing ded. n funfunded. beebeen ing hashas Financ

Intended Use Report t Repor thethe of of Use Intended


financing bond CFD for for used be be is to report appraisal this Itthese is these appraisers' understanding that this appraisal report is to used CFD bond financing ding that ' understan appraisers It is limiting ns andand assumptio premises, ct to the subje areare forth setset opinions named CFD 2004-3. The opinions forth subject to the premises, assumptions limiting -3. The 2004 CFD named in in be be to to intended is is report This , report t this this throughou conditions detailed below throughout report. This report intended and and below detailed conditions al of Profession Standards andand al Ethics of Profession Code to the conformance with and is subject to the Code of Professional Ethics Standards of Professional is subject and nce with conforma Practice al Appraisal of Profession Standards Uniform the the andand of the Appraisal Institute Uniform Standards of Professional Appraisal Practice Institute Appraisal ctice of the PraPractice CDIAC. by by out setset guidelines thethe ce to to conforman in in made also is is n. It It Appraisal Foundation. also made conformance guidelines out CDIAC. Foundatio Appraisal thethe of of

Intended Users the Report Report the of of Users Intended


unsel and cocounsel ers, ficials, underwrit io ofofficials, Ind ofof City The The intended users report are The City Indio underwriters, and are report thethe of of users intended The

potential investors only. only. investors potential


l Scope the Appraisal Appraisa the of of Scope igations and pendent invest inde r ofof numbe e aa mad appraisers praisal, the aart part the appraisers made number independent investigations and s apappraisal, thithis of of ap AsAs as known h, c Approa Income the of of a form ch and arison Approa Comp analyses. Only the Direct Comparison Approach and a form the Income Approach, known as Direct the Only analyses. felt was Approach Cost The utilized. been have Analysis, the Discounted Cash Flow Analysis, have been utilized. The Cost Approach was felt Flow d Cash Discounte the : following lude the ertaken inc und analyses inapplicable. The investigations and analyses undertaken include the following: ions and investigat cable. The inappli 1. 1. 2. 2. 3. 3. 4. 4. n. informatio economic hic and demograp area Review area demographic and economic information. view of of Re the ts of of componen various the for activity market the of Review and analysis of the market activity for the various components the analysis and Review ies. communit planned master for market the as well as subject property as well as the market for master planned communities. ect property subj parcels the to to use in in similar sales land u'mation of of conf and tion Accumula Accumulation and confirmation land sales similar use the parcels erty. prop subject comprising the subject property. g the comprisin eable other s and developer buyers, planners, City Discussions with City planners, buyers, developers and otherknowledg knowledgeable ns with Discussio area. the the area. rsons inin pepersons

rrative appraisal ed nanarrative document -contained, fully a self in in All conclusions reached are presented a self-contained, fully documented appraisal presented axe ns reached conclusio All

RAISAL AND EVALUATION VICES -- A ATE SER L EST REA MMERCIAL CO ERICAN AM FIRST FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - PP APPRAISAL AND EVALUATION 4.550-7057 AX 71 FFAX 4.580-7056 71 705 PHONE LIFORNL4 9292705 A, CACALIFORNIA NTA AN ACE S._ 1217 NORMANDY SANTA ANA, PHONE 714.580-7056 714.550-7057 LKNDY PLPLACE 7 NOIL'_ 121

88

report. report.
on Valuati Dates of Inspection Valuation ion and and of Inspect Dates ed or or is express valuation No future 17, 2005. is June report in this effective of value in this report is June 17, 2005. No future valuation is expressed of value date date effective The The V. V. by William 2005 17, 17, d on June inspecte last last was was property implied by this report. property inspected on June 2005 by William TheThe report. by this implied

Shrewsbury, MM. ury, MAI. Shrewsb


tion Prepara t/Dates of Report Produc Statement of Work Product/Dates of Report Preparation nt of Work Stateme ury, MAI. V. Shrewsb d by William analyze ed and and d, verifi collecte was was report in this in this report collected, verified analyzed by William V. Shrewsbury, MAI. usedused datadata The The 2005. 15, 15, JulyJuly and and 1, 2005 of June the dates between report prepared between the dates of June 1, 2005 2005. prepared was was report ThisThis ons g Conditi Limitin tions andand Premises, Assumptions Limiting Conditions s_ Assump Premise ions andand g assumpt followin to the subject are are report in this s set forth opinion analyses opinions set forth in this report subject to the following assumptions and and analyses TheThe

limiting conditions. ns. conditio limiting


proposed by lanplan use p c land land ptual specifi gnce e cthe on thon t,part, d, in par sebased, erty is bais ct propproperty ubje of sthe subject in conceptual specific use proposed ation of the valuvaluation The The such by allow to granted been have approvals ital pvemmei g all t a th d e er assum furth pers. It is It the various developers. is further assumed that all governmental approvals havethis been granted torallow s develo the variou esuch ese We port. e r in defined as veloped e d ing e ct b being developed as defined in this report. We rv the proj d upon on is bas is" conditi "as "as a plan. is" condition isebased upon the e project reserve TheThe a plan. ge han c ny a that nt ve e he t in t r repo ed in this s contain value stimated lusion of the ncconclusion the co eralter to alt ght the right to the of e the estimated values contained in this report in the event that any change the ri of dwelling the as toas use plan land land cific in the is a change or ther occur ent costs the development costs occur orethere is a change inspe the specific use plan to number the number ofodwelling velopm e de in thin ned onditi c her t fur is report this in d e contain value The The value contained in this report is further conditioned uses.uses. ed landland defin the e of e for any units or acreage for on any one ofthe defined or acreag units 2004-3. t ric Dist ilities ac F ity Commun e th of body the within d e fin e d as developed upon the e project being developed as defined within the body of the Community Facilities District 2004-3. ct being the proj upon as to title which is opinion er any any do we cter, nor nor ara in ch ers legal ility for mat no responsib assume no responsibility for tmatters legal in character, do rend we render opinion as to title which is assume We We e and clear of all deeds of fre e b to assumed are mises e pr e th that and table, e mark and good e b to assumed assumed to be good and marketable, and that the premises are assumed to s, be cases free and clear ofpending, all deeds of or actions , easement nants, conditions cove reservations, ctions and and restri use use leases, trust, trust, leases, restrictions reservations, covenants, conditions, easements, cases or actions pending, ified). c e spe specified). ess otherwis ess (unl(unless ed indebtedn bond and and liens liens bonded indebtedness otherwise tax tax that the legal assumed It isIt e. me. by m made has been property of this ng analysis or engineeri legal survey, legal or engineering analysis of this property has been made by is assumed that the legal survey, No No nce of a survey, no opinion abse In the y accurate. are reasonabl s furnished computation area n and and descriptio description area computations furnished are reasonably accurate. In the absence of a survey, no opinion s (if any). closed easement achments or undis ncro for e ility taken responsib nor nor is made is made responsibility taken for encroachments or undisclosed easements (if any). refore, we assume that the soil TheTherefore, for review. appraiser to this not furnished was was report soils A current A current soils report not furnished to this appraiser for review. we assume that the soil reserve the right to appraisers This lopment. e v e d xisting e e th or f suitable e ar site subject e the at th conditions at subject site are suitable for the existing development. This appraisers reserve the right to conditions erty. ect prop subj the the for for report soils by a e if so ons of valu conclusi his his alter conclusions of value ifwarranted so warranted by a soils report subject property. alter unless otherwise appraisal thisthis d in making considere not not were e rights subsurfac and and eral rights gas, rights subsurface rights were considered in making appraisal unless otherwise minmineral gas, Oil,Oil, exist. any if appraisal, of the a part not not are are a part of the appraisal, if any exist. ed andand statstated ntal er governme othother or any ndance in court tteattendance or a testimony to give be required not not willwill This appraisers be required to give testimony or in court or any governmental appraisers This made. been y previousl have ments e arrang ess l un unless arrangements have previously been made. appraisal of this ason by re hearing by reason of this appraisal hearing ative proceeding and is ordered or administr judicial deposition, aed for a aiser is subpoen appr thisthis event In the In the event appraiser is subpoenaed for a deposition, judicial or administrative proceeding . and is ordered employer the the notify ly e t a immedi will appraiser this files, andand report appraisal to produce appraisal report files, this appraiser will immediately notify employer. e thisthis to produc ed for such testimony at ed prepar undersign e the is th ony nor nor testim court ed for for prepar been not not rt hashas repo This This report been prepared court testimony is undersigned prepared for such testimony at e and reasonable to e v ha will ts n me e rrang a e c an v d a , y ecessar n omes ony becbecomes testim ourt . If c time. If court testimony necessary, advance arrangements will havebe to ma be d made and reasonable time thisthis upon. d e agre mutually be to have ces would l servi h additiona sucsuch n for for compensation additional services would have to be mutually agreed upon. compensatio is limited to the client and to the fee Inc.Inc. e Services Estat ercial Real erican Comm AmAmerican of First liability The The liability of First Commercial Real Estate Services is limited to If the client and the fee placed is to report this party. third an to bility a li or ity, obligation ere is no ThThere y received. actually received. is ac nocountabil accountability, obligation or liability toyany third party. If this report is placed actuall all of e war a rty pa h third king sucsuch mamaking nsible forfor is respo client the the client, the the than one other inethe hands of anyone other than client, client is responsible third party aware of all ds of any han in th ions. s discus lated e r and ignment s as the f ons o of the assignment and related discussions. assumpti and conditions limiting conditions and assumptions limiting

VICES -- APPRAISAL AND EVALUATION E SER ESTAT ERCIAL REAL ERICAN COMM AM FIRST FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES APPRAISAL AND EVALUATION 714.580-7056 * F,MX714.550-7057 05* PHONE 7 92 RNL a. CALIFO -NTAANA, *S,M L.\LM_'-D PLACE 7 NOt 1217 NORMANDY PLACE SANTA ANA, CALIFORNIA 92705 PHONE 714.580-7056 FAX 714.550-7057 121

99

to discover incurred stscosts for any esponsible s not Inc. iInc. Services, Estate cial Real Real can Commer Ameri American Commercial Estate Services, isrnot responsible forco any incurred tolient discover First First The c . l a g e l or / d an l a i nanc fi , l ysica h p y; t r pe o pr t subjec e h t n i pe y t encies of any eficideficiencies or ect correct of any type in the subject property; physical, financial and/or legal. The client any dany or corr e held harmless in ts will b lys he ana d tand ces Inc. an ServiServices Estate ercial Real Real can Comm Ameri st First that Fir agrees that American Commercial Estate Inc. the analysts will be (br held harmless in agrees n o t gh u o estate l rea n i s g fferin o k ation or stoc erships, syndic d partnpartnerships, limite its involving f lawsu the case the o case of lawsuits involving limited syndication or stock offerings in real estate (brought on ll awards, pay any will will ient he cl , and t party) therother or any wner, tenant rt-o r or paor r, partne aelender, partner part-owner, tenant or o any party), and the client pay and any a and all awards, lend by a by e. utcom dless of the regarregardless pe, type, ts of any settlemen settlements ofty any ofothe outcome. tion and that te infesta mitermite e or ter tural damag ucstructural no str ement suffers ct improv bjesubject e su ed that th assum en been be has assumed that the improvement suffers no damage or infestation and that It hasIt have been used in its rials may may rdous matematerials hazahazardous her tos or ot I), asbes (UFF -Formaldehyde Foam UreaUrea-Formaldehyde Foam (UFFI), asbestos or other have been used in its for these items. t to check por s re of thi r user r or use , lende lient e cthe nsibility of thof espo he ruction. It is t construction. It isrthe responsibility client, lender or of this report to check for these items. const raisal report his app ng withwith inistrative heari ial or adm sition, judicjudicial epodeposition, r at the appea aisers will will apprappraisers These appear at d the or administrative hearing his appraisal These n who thereport unsel o c al g e l ith w er ais r app e h t es d i rov p r ye o pl em e h t ess l un ns o i t ques ll a r e w ans l l d wi es an and fil and files and will answer all questions unless the employer provides the appraiser with legal counsel who then ot n r he / him ucts r nst i or cuments do ce_ain uce rod p to t o r n not to produce certain documents or instructs him/her not him/he r, instructs appea er not to him/h instructs him/her not to appear, instructs him/her instructs sers i a r app he t ch rwhi e ord urt o c r pe ro en by pby proper court order which the appraisers erridd be ov uctions will will instrinstructions ions. These in questquestions. er certacertain to answ to answer These be overridden a protective yer to obtain mplo onsibility of the espresponsibility be the t sha . Iso. so to doto y required all if legif will w follow legally required do Itllshall be r the of e the employer to obtain a protective will follo r. orde order. elated r r /he e from his/her fromhis ervabl obsobservable dily eareadily notr itions cond ty forany ibili espons cno r assum aisers appraisers assume no responsibility for any conditions not related appr The The ally ific spec ms c t i those ng i pt e xc e on i t a lu a v e th fect af hmight andwhi subject e on of iofth inspect ary customary inspection the subject and c which might affect the valuation excepting those items specifically custom eport. r s i h mentioned in this report. t in mentioned e specialized or expertis al eeg irl requ t tha ers matt ing degard r expresse c be to b nded isin nion iopinion No op No iste intended to expressed regarding matters that require legal expertise or specialized r. e is a ppr e a t a st e l ea r e th by d e oy l mp ly e i ustomar c t a yondth e b e dg e on i orknowl or knowledge beyond that customarily employed by the real estate appraiser. estigat invinvestigation e dollar 005.Th 2 17, Jun is eport, r is nth d i xpresse e arc e ofvalu ions in op the h ic , wh efor The date of u value, for which the opinions of value are expressed in this report, is e June 17, 2005. The dollar ofval ate Thed te. da that r on a doll States d e t i Un e rofth e pow ng i has c pur e th on d e s a b s i on i opin e lu a v fthis amount of this value opinion is based on the purchasing power of the United States dollar on that date. amounto after occurring itions cond ical orphys ic conom inein es hang c ty or fi ibil o respons assumen isers These appraisers assume no responsibility for changes economic or physical conditions occurring after appra These ts exhibi and ts a c Maps,pl ' por e s r i nth d i e t a t s on i n i op on ati lu a v e h t affect y a m at th port e r s i ofth ate the date of this report that may affect the valuation opinion stated in this report. Maps, plats and exhibits thed e h t n i th i d w e uss c s i d rs e tt ng ma i z i l a nvisu i r e read e h t for d ai san a y, l on i on ustrat only, as an aid for the reader in visualizing matters discussed within the llillustration nrefor ia here luded incincluded herein are i for bc they hould , nor nors purpose er thother nyo d upon a uponfor ie el orr eys assurv ered onsid notbe ld yshou The report. They should notc be considered as surveys or relied for any purpose, should they be report. eport. s r i th m fro rt a p a orused ed c reprodu , m frofrom, reproduced or used apart from this report. removed removed thereal only se; premi on th ed locat erty l property prop a erson al to istop appra s inth en ngivgiven onhasebeen hasbe iderati ons No consideration inithis appraisal personal located onethe premise; only the real No c d. e fi eci e sp s i rw e th o ess l un red c d i ons c n ee hasb te esta estate has been considered unless otherwise specified. nd. le obc reliaba d t ve belie hare shic cew msour d from hcrcfro ngat cc hasb rt repo s nth d i aine ont on atic Information contained inithis report has been gathered sources which are believed to be Inform dand. by onreliable supplie ti ma y ofinfor c ura acc e th dfor e ssum a s i bility i respons d. No fie ri e nv cc sb , a e h bl si feafeasible, re whe where has been verified. No responsibility is assumed for the accuracy of information supplied by ers. oth others. no such is There snly. o purpose arison l comparison aomp aisc e appraisal vppr atia elrelative for arc d use ensions anddim culations alcalculations Areac Area and dimensions used are r for purposes only. There is no such ry. a anv c ions t ni efi ndd a nt c m c sur mca t exac pletely co asa thing thing as am completely exact measurement and definitions can vary. ge th ssistin ofaof purpose th for y on is report dnthis ludei inc erty prop he oftof edsurvey survey tifi Any sketch the property included in this report isl only fore the purpose assisting the h or identified tcoriden ske Any erty. prop e the the reader to visualize property. er to visualiz read estimate of time only. These a point e for for of valu e an nded to bto teintended e is in of valu opinion This This opinion of value is be opinion an opinion of value a point estimate of time only. or nomic These agement, ecoeconomic nt man e qu e subs for lity responsibi e no no assum opinion, ering thisthis nd in rendering opinion, assume responsibility for subsequent management, or raisers, in re appappraisers, sions or opinion. conclu ct saidsaid affeaffect not not or ma ch may ors whiwhich sical factfactors phyphysical may orymay conclusions or opinion. separately ted if used t, is invalida repor in this if shown or to e to land valu otal cation of tof alloallocation The total value to land orbuildings, to buildings, if shown in this report, is invalidated if used The of the sumseparately he en, t tion is giv st valua ial intere rt e or pa leas ifa if aisal and,and, appr other any any tion with in conjunc in conjunction with other appraisal a lease or partial interest valuation is given, the sum of the te. esta l ea r e h t in t s e r te in e simpl fee e ir t n e entire fee simple interest in the real estate. l the the equa not not or may parts may or may equal s may part months. 12 12 thin erty is wi prop the the to sell eting time mark the the te thatthat This estimate marketing time to sell property is within months. raisers estima appappraisers This n do not constitute an o i t Sec ow l F Cash d e t Discoun e h t in in the Discounted Cash Flow Section ates used ense estim expexpense e andand ted incom estima The The estimated income estimates used do not constitute an e and expenses shown arc for incom imated t Es such. as d e u tr miscons be t no should and t c e j ro p his t of t audi audit of this project and should not be misconstrued as such. Estimated income and expenses shown are for a, experience and eting datdata, mark on on ents based tion of judgm sent a combina repre andand poses only appraisal only represent a combination of judgments based marketing experience raisal purpurposes app expensesand and e incom ual ct a d; e abiliz t s d e r e consid c b o t areare to be considered stabilized; actual income and e used incom enses and enses. Exp ted expexpenses. estima estimated Expenses and income used expenses t. be differen may may be different. existence of toxic waste, terials and/or mamaterials ntially hazardous tence of po exis t, the the raisal assignmen appappraisal In this In this assignment, existence ofte potentially hazardous and/or existence of toxic waste, r has not been appraise This . red e id s on c n e e b ot n s a h , erty prop e h t n o t presen be t no may or or may not be present on the property, has not been considered. This which may appraiser has not been ch may whi ect such substances. etdetect ed to d qualifi er is not apprais ever, the the how items; such tence of any exis ified of th notified ofethe existence of any such items; however, appraiser is not qualified to such substances. not of such ce n e es r p e possibl he t r fo ld e fi the in t er xp e h a qualified t witwith der consul rea the the ted that It is It sugges is suggested that reader consult a qualified expert in the field for the possible presence of such rection, if found. of co ntial cost pote thethe terials and mamaterials and potential cost ofrcorrection, if found.

VICES -- APPRAISAL AND EVALUATION TATE SER ESESTATE REAL ERCIAL ERICAN COMM ST AM FIR FIRST AMERICAN COMMERCIAL REAL SERVICES APPRAISAL AND EVALUATION E 714.580-7056 FAX 714.550-7057 05o PHON 7 92 FORNL_. CALI TA .UqA, _.CE *S_N ,\LUNDY PI.PLACE 17 NOR 121217 NORMANDY SANTA ANA, CALIFORNIA 92705 PHONE 714.580-7056 FAX 714.550-7057 10

10

Flood zones have have either eitherbeen beenconfirmed confirmedwith withthe thecounty countyor orcity cityof ofthe theproperty. property. If If th the flood zone zone has has not not Flood zones e flood been confirmedwith with th the city, then then the the flood flood zone zone has been researched by looking at the been confirmed e city, has been researched by looking at the National National Flood Flood Insurance Program's FIRM FIRM(Flood (FloodInsur Insurance Rate Map). Map). Although Although the the FIRM FIRM panel been researched, researched, We Insurance Program's ance Rate panel has has been We are not a a flood engineer engineer and and be bear no responsibility responsibility for for its its accuracy. accuracy. If If there there is any question question as to the the validity validity ar no is any as to of the FIRM FIRM panel, panel,then then IIsuggest suggestthat thatthe theclient clientdo doan anindependent independent search, search, confirming confirming the the subject subject and and panel panel of the with the the National National Flood Flood Insurance Insurance Program Program in in Washington, Washington, D.C. D.C. The Americans with Disabilities Disabilities A Act became effectiveJanuary January 26, 26, 1992. 1992. We not made made a a specific specific The A mericans with ct ((ADA) ADA) bec ame effective We have have not compliance and analysis this property todet determine whether not it iis conformity comp liance ssurvey urvey an d anal ysis oof f th is p roperty to ermine w hether oor rn ot it s iin n confo rmity with with the the various detailed detailed requirements requirements of ofthe theA ADA. It is is possibl possible that a ac compliance survey of the property, tog together various DA. It e that ompliance surv ey o f th e property, ether with detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with on one or mor more of th the requirements ofthe theA Act. If so, this fact fact c could have negative effect upon upon th the value with e or e of e requir ements of ct. If so, this ould hav e a a negativ e effect e valu e of the property. to this this issue, o f th e pr operty. Since Since we we have have no no direct direct evidence evidence relating relating to issue, we we did did not not consider consider possible possible noncompliance with requirements of ADA in estimating the value of the property. noncompliance with requirements of ADA in estimating the value of the property. The signatory of ofthis this apprai appraisal report is is a a member member of of the the A Appraisal Institute and is licensed b by the State of The signatory sal report ppraisal Institut e and is licensed y th e Stat e of California. and Regulations of the the Institute Institute rrequire each member and candid candidate to c control the California. The The Bylaws Bylaws a nd R egulations of equire e ach m ember and ate to ontrol th e uses and distributi distribution of appraisal report signed signed by by such suchmemb member or ccandidate. Therefore, except as uses and on o f eeach ach a ppraisal report er or andidate. T herefore, ex cept as hereinafter provided, the p party for whom whom thi this appraisal rreport or her einal_er pr ovided, the arty for s appraisal eport o r evaluation evaluation was was prepared prepared may may distribute distribute copies of this this ap appraisal oreevaluation report in in its its e entirety such third p parties as may may b be selected by th the party c opies of praisal or valuation report ntirety tto o suc h third arties as es elected by e party for whom whom this this ap appraisal reportwas waspr prepared. However, selected portions o of this ap appraisal report shall not for praisal report epared. How ever, sel ected portions f this praisal r eport s hall not be gi given third parties without the prior written consent ofth the signatory ofthi this appraisal report. (Nothing be ven tto o th ird pa rties with out th ep rior wri tten co nsent of e si gnatory of s app .rgisalrep ort..(N o_ing to b be removed, conclusions ofvalu value. The entire report report is isto to b be presented atall alltime times.) Further, is to e rem oved, pparticularly articularly conclusi ons of e. Th e entire e pr esentea at s.) ru nner, neither all nor nor any any p part of this this a appraisal report sshall be disseminat disseminated toth the general public b by the use o of neith er all art of ppraisal report hall be ed to e g eneral public y th e use f advertising media, p public relations media, news m media, sales media or other media public co communication adv ertising media, ublic relati ons m edia, news edia, sal es medi ao r oth er medi a ffor or public mmunication without the prior writt written consent o of the signatoryof ofthis thisappraisal appraisalre report, particularly as asto to v value conclusions, with out th e prior en consent f th e signatory port, particularly alue c onclusions, the id identity of the a appraiser or any anyref reference to the the Appraisal Appraisal Institute Institute or or to to th the designations granted b by the the entity oftbe ppraiser or erence to e d esignations granted y the organization. organization. Any futur future seismic earthquakes in the the Southland Southland ma may haveaadetrim detrimental influence uponvalue. value. We Any e seismi c earthqu akes in y have ental influen ce upon We have have examined the theprop property fromthe theeexterior tosee seeif ifther there anystru structural problems. As a result, we cannot examined erty from xterior to e aare re any ctural probl ems. As a result, we c annot say whether the structure structurehas hasbeen beenaffected affectedby byany anyearthquakes. earthquakes. In In addition, addition, w we do riot not know whether this say wh ether the e do know wheth er this structure can withstand withstand another anotherearthquake. earthquake. Since have no dire direct evidence did structure can Since we we h ave no ct e vidence relating relating to to this this issue, issue, we we did not consider consider possible possible stru structural damage in in estimating estimating the the valu value of tthe property. ctural damage e of he prop erty. Acceptance of and/or use of tthis report by the the c client or an any third party constitutes of the Acceptance o f and /or us e of his r eport by lient or y thi rd p arty c onstitutes acceptance acceptance o ft he above above conditions. Real Estat Estate Services Inc. Inc. a and the analysts' analysts' liability extends only to conditions. First First American American Commercial Commercial Real e Services nd the liability e xtends only to the stated stated client, client, not not subs subsequent parties or users, users, and and is is limit limited to the the amount amount of of th the fee equent p arties or ed to e fe e received. received. The the flood information provided provided by the County County of of Ri Riverside is ac accurate; however, The appraisers appraisers assume assume that that th e fl ood information by the verside is curate; how ever, if it it is is different, different, then then the the a appraiser does not not take take responsibility. responsibility. if ppraiser does

Special Limited Conditions Conditions S pecial Limited It should be n noted that con considerable weight has been been c considered in the the abs absorption assumptions should be oted that siderable we ight has onsidered in orption assum ptions contained in the the Market MarketAbsorption Absorption Study StudyCFD CFD 2004-3, 2004-3, City City oflndio, of Indio, dated dated July July 2005, 2005, prepared prepared contained in by Market Market Profiles. Profiles. A Absorption assumptions set set forth forth in in the the report report call call for of finished by bsorption assumptions for the the sale sale of finished properties to to "end "endusers." users." Our estimate refers refers to to the the sale sale of of lots lots to to developers who properties Our estimate developers or or investors investors who will ultimately sell off offto to "end "endusers." users." Also, will ultimately sell Also, the the land land development development costs costs furnished furnished by by SunCal SunCal Companies represent the costs estimated at this time for developing the tract within the Companies represent the costs estimated at this time for developing the tract within the CFD CFD 2004-3 development. development. Our Our value value estimates estimatesreflect reflect these theseassumptions. assumptions. We We reserve reserve the the right right to 2004-3 to amend value estimate estimate should shouldthey theyamend amendtheir theirabsorption absorptionand and/or development cost cost estimates. estimates. a mend our our value /or development Definitions and Reporting Reporting Standards Standards Definitions and The terms "marke "market value" and "fee simpleestate estate," asuse used inthis thisreport report, ared defined below. The The terms t va lue" an d "fe e simple ," as d in , are efined bel ow. The

FIRST AMERICAN COMMERCIAL REAL ES ESTATE APPRAISAL AND EVALUAT EVALUATION F IRST AM ERICAN C OMMERCIAL REAL TATE SERVICES SERVICES -- A PPRAISAL AND ION 1217 NORMANDY PLACE SANTA 92705 PHONE 714.580-7056 1217 NORI\ L_'.NDY PLACE SANTA ANA, ANA, C.A.LIFORNL-1 C.,M..,IFORNL-k 92 705 PHO NE 7 14.580-7056 FAX FAX 714.550-7057 714.550-7057
II 11

term"highest "highestand andbest bestuse" use"is isdefmed definedin inthat thatsection sectionof ofthis thisreport. report. In In addition, addition, other otherstandards standards term " ined appraisals. arepresented presentedwith withrespect respectto to"personal "personalproperty" property"and and"self-conta "self-contained appraisals." are
I Market MarketValue Value' nder all d open mpetitive an na ng iin uld bri roperty sho pproperty Means the most which should bring a co competitive and openmarket marketu under all hich a a rice w robable pprice st pprobable mo ns the Mea y, and knowledgeabl and rudently p acting each seller nd a buyer the sale, ir a f to conditionsrequisite requisite toaa fair sale, the buyer and seller each acting prudently and knowledgeably, and conditions stimulus. undue ffected by not rice is assumingthe thepprice is notaaffected by undue stimulus. Implicit Implicit in inthis this definition definition is isthe theconsummation consummationof ofaasale sale assuming whereby: onditions c under buyer to seller from title of ing s pas the as of a specified date and the passing of title from seller to buyer under conditions whereby: and date ed fi eci p s a of as (1) (1) (2) (2) (3) (3) (4) (4) (5) (5)
Buyeraand sellerare aretypically typicallymotivated; motivated; nd seller Buyer dvised and r well Bothp parties are well wellinformed informedoor wellaadvised andacting acting in in what whatthey theyconsider considertheir theirown ownbest best arties are Both ts; interes interests; Areason reasonable timeis isallowed allowedfor forexposure exposurein inthe theopen openmarket; market; able time A omparable U.S. ade in Payment ism made interms termsof ofcash cashin in U.S.Dollars Dollarsor orin interms termsof offinancial financialarrangements arrangementsccomparable ayment is P nd thereto; thereto;a and pecial or The price represents representsthe thenormal normalconsideration consideration for the the property property sold sold unaffected unaffected by bysspecial orcreative creative he price T g or financing orsales salesconcessions concessionsgranted grantedby byanyone anyoneassociated associatedwith withthe thesale. sale. financin

alue As-Is t V Marke Market Value As-Is on and bserved upon ndition o n the roperty iin f aap Meansan anesti estimate ofthe the market marketvalue valueoof property the co condition observed upon inspecti inspection andas as it it mate of Means of date the of as qualifications or assumptions , onditions c physically and legally exists without hypothetical conditions, assumptions or qualifications as of the date of hypothetical without exists legally and hysically p ction. 2 inspection.' inspe
FeeS Simple Estates tate 3 imple Es Fee

wers of nly to other any by Absoluteownership ownershipunencumbered unencumbered by any otherinterest interestor or estate estate subject subjectoonly to the the four four po powers of Absolute government. government. ion Cash Equiva Equivalency Definition lency Definit Cash paragraph following paragraph The following uivalency. The ept of n it e contains arketvalu Thed definition of m market value containswithi within itthe theconc concept ofcash cash eq equivalency. efinition of The ational Federal N the Federal by the alue used by market v f market efinition o he d ithin t elaborates ontthis concept contained within the definition of value National ntained w ncept as co his co laborates on e (FHLMC): Corporation Mortgage Loan e Hom l a Feder the and Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC): (FNMA) tion a Associ e Mortgag ade for omparables must ents to alue, adjustm In a applying this definition definition of of market value, adjustments to the the c comparables must be be m made for special special or or market v pplying this In paid normally thatare ts s o c those for essary c ne are nts e djustm a No concessions. sales creative financing or sales concessions. No adjustments are necessary for those costs that are normally paid r o ing c nan fi e creativ entifiable since ea; these r law by s sellers as a result result of tradition tradition o or law in in a a market marketar area; thesecosts costs are are readily readily id identifiable since the the seller seller ellers as by made to can be adjustments can financing adjustments creative financing or creative pays th these costs in in virtu virtually all sales sales transactions. transactions. Special or be made to ally all ese costs pays institution that nancial institution third-party fi a third-party by a offered by terms offered nancing terms parisons to fi the com comparable property by com comparisons financing financial that perty by parable pro the calculated on be calculated not be adjustment should Any adjustment ction. Any the property olved in involved in the property or or transa transaction. should not on a a already inv not already is not adjustment any adjustment of any amount of dollar amount the dollar but the concession, but financing or concession, mechanical dollar for for dollar dollar cost cost of the financing mechanical dollar appraiser's judgement.' the appraiser's on the based on oncessions based nancing or ction to should approximate approximate the market's market'srea reaction tothe thefi financing orcconcessions judgement.'

Property Rights Rights Appraised Appraised Property subject the subject f the interest o simple interest fee simple The appraised in in this this report report is is considered considered to to be be the fee of interest appraised The interest total transfer assumes a total explicitly assumes based on and explicitly property described herein. herein. This transfer of of valuation is based This valuation property described
component positions. series of component the real estate estate described described whether whether it it be be in in o one lump total total or in a series positions. ne lump the real

(f). Definitions(f). Appraisals,34.42 part C - Appraisals, art 34, 2 CFR, nder 1 'Office of Comptroller of the Currency under 12 CFR, P Part 34, Sub Subpart 34.42 Definitions ncyu e Curre f th omptrollero theC of the 1Office tebut physicallycomple ephysically mayb enclosed);ititmay notenclosed); andnot upand frameworkup structuralframework (onlystructural complete(only partiallycomplete bepartially maybe 'Clarification: The be complete but propertymay Theproperty 2Clarification: "stabilized." alreadybe only partiallyup oru sold out or it may already be "stabilized." it may or out por sold rtiallyleased only pa 120. 1989,p. Appraisers,1989, EstateAppraisers, RealEstate ofReal Instituteof Americaninstitute theAmerican bythe publishedby 'The Dictionary of SecondEdition Edition,, published p. 120. Appraisal, Second Estate Appraisal, Real Estate of Real _TheDictionary HLMC). Corporation(F MortgageCorporation LoanMortgage HomeLoan Federal Home 'Federal (FHLMC). (FNMA)and the Federal Association (FNMA) MortgageAssociation NationalMortgage l 4FederaNational

EVALUATION ND EVALUATION APPRAISAL A -- APPRAISAL SERVICES ESTATE SERVICES REAL ESTATE FIRST AND COMMERCIAL REAL AMERICAN COMMERCIAL FIRST AMERICAN 714.550-7057 .M,x_. F * 056 7 08 .5 4 1 7 PHONE * 05 7 92 C._,IFORNL-k ,kNA, C-ALIFORNIA. -SANTA ANA, 1217 92705* PHONE 714.580-7056 FAX 714.550-7057 PLACE *SANTA NO1L.\L-kND PLACE 1217 NORMANDY 12 12

Property Identification/Ownership This property is an appraisal of the land and improvements as follows: PA 1: PA 2: PA 3: PA 4: PA 5: TOTAL Woodside Homes Lennar Homes Lennar Homes Ashbrook Comm. Ryland Homes Tract 31601-2 Tract 31601-3 Tract 31601-4 Tract 31601-5 Tract 31601-5 located in the zones or tracts set forth 178 Lots 128 Lots 86 Lots 133 Lots 110 Lots 635 LOTS

Legal Description The land referred to in this report is situated in the City of Indio, County of Riverside, California, and is described in the addendum. State of

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NOtL\LkNDY PLACE eSANTA ANA, C_kLIFORNIA 92705* PHONE 714.580-7056 * FAX 714.550-7057 13

DESCRIPTION AREA DESCRIPTION AREA

Riverside County_ County Overview Overview Riverside Riverside County c consists of 24 24 individual individual cities cities and and num numerous unincorporated c communities, as ommunities, as erous unincorporated onsists of rside County Rive of 2005. 2005. Riverside with adjacent form the the to form County to Bemardino County San Bernardino adjacent San grouped with typically grouped is typically County is Riverside County of Riverside-San BernardinoMetropolitan MetropolitanStatistical StatisticalArea Area(MSA), (MSA),and and the the area area is commonly is commonly -San Bemardino Riverside referred to to as as the the Inl Inland Empire. and Empire. referred The major major urbanized urbanizedareas areasare are located locatedin inthe the west western portionof ofthe the county. county. The major The major em portion The incorporated cities cities include include Riverside, Riverside,Corona Coronaand andMoreno MorenoValley. Valley. Peripheral areas such as such as Peripheral areas incorporated Temecula and and Moreno MorenoValley Valleyare arethe themost mostactive activeareas areasfor fornew newgrowth. growth. The The desert area of of desert area Temecula Riverside County, County, known known as as the desert world-famous desert such world-famous includes such Valley, includes Coachella Valley, the Coachella Riverside communities as Palm Palm Sp Springs, Rancho Mirage, Mirage,Palm PalmDesert Desertand andIndian IndianWells. Wells. Riverside Riverside County County rings, Rancho communities as is bounded by Orange Orange County Countyto to the the west, west, San San Bemardino Bernardino County County to to the the north, north, the the state state of of bounded by is Arizona to the the east, east, and and San San Diego County and and Imperial Imperial County County to to the the south, south, as as the the map map on on the the Diego County Arizona to next page page indicates. indicates. next The following section section summarizes summarizes the the ge general population, employment, income income and and reta retail sales il sales ulation, employment, neral pop The following trends in Riverside Riverside County. County. trends in Riverside County Population Trends Trends nty Population Riverside Cou As of of January January 2003, 2003, the the countywide countywide population population stood stood at at approx approximately residents, idents, in 1,726,754 res imately 1,726,754 As 2004 it it was was 1,807,858, 1,807,858, and and 2005 2005the thepopulation populationwas was1,877,000. 1,877,000. Annual Annual population population gains gains from from 2004 natural increase increase and and in-migration in-migration changed changedaccounted accounted for for a a 2.90% 2.90% increase increase per per year. year. natural The future future rate rate of of growth growth within within the the county county w will depend on on a a number including factors including of factors number of ill depend The availability of of developable developable land, land, availability availabilityof ofwater, water, the the national national and economic regional economic and regional availability climates, and and public publicpolicy policytoward towardgrowth. growth. The The areas areas within within the the county county which which will will continue continue to climates, experience the the largest largest share share of of the the new newpopulation population growth growth will will be be the the peripheral peripheral area area between between experience Corona and the Temecula Temecula Valley Valley and and the the Moreno Moreno Valley Valley area. area. and the Corona

1217 NORMANDY PLACE ANA, CALIFORNIA 92705 PHONE 7 714.580-7056 714.550-7057 F.LX 714.550-7057 14.580-7056 FAX 705* PHONE LLIFORNL-k 92 A, C_ SANTA AN ACE *SANTA L-kNDY PL 1217 NOIL\
14

VALUATION D E FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES APPRAISAL AND EVALUATION PPRAISAL AN VICES - -A TATE SER ES OMMERCIAL REAL MERICAN C IRST A F

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Copyright Microsoft Corp. its suppliers. http:llwwwmicrosoft,cornlstreet= reserved, http://vAmmicrosoft.comistreets rights reserved. All rights suppliers.All its . and/or Corpand/or Microsoft 1988-2003 Copyright 1988-2003 Canada of Canada Governmentof 1991-2002 Government uthorities anadian a om C C 2002 by Geographic DataaTechnology, Inc. Technologies. All rights taken with permission from Canadian authorities 1991-2002 ermission fr ith p ken w information ta includes information data includes This date reserved. This rights reserved. Technologies.All Navigation 2002Navigation 2002 reserved.C rights reserved. Allrights Inc.All Technology. GeographicDat by Copyrigh12002 Copyright (Statistics Canada andlor Geomatics Canada), all rights reserved. ed. rv e s re ts h rig all ticsCanada), a Geom or / and (StatisticsCanada

Riverside County Employment Employment

Trends Bemardino MSA,

data for Riverside County is compiled for the entire Riverside-San construction

which includes both Riverside County and San Bernardino County. These counties have a diverse economy with manufacturing, and tourism as the major industry groups. The most employment.

common measure of employment The following information

growth is the increase in non-agricultural

in italics was taken from Market Profiles,

Inc.'s Feasibility Report

dated July I, 2005. Employment Growth

The demand for new homes in the Coachella Valley is influenced by the economic vitality of Riverside County and all of Southern California. Tourist expenditures and second home purchases are important elements of the Valley's economy. The strength oflocally based, primary home purchases is dependent upon the vitality of the tourism industry, which, in turn, is dependent upon the strength of the national and Southern California economies. From 1997 through 2000, employment in Southern California increased at a healthy average annual rate of 3.0 percent. During the same period, employment in Riverside and San Bernardino counties increased at a very strong rate of 5.2 percent per year. The rate of employment growth began to decline in the first three quarters of 2001 due to rising interest rates and a slowing national economy. Following the attack on the World Trade Center in September, job growth came to a virtual halt in the fourth quarter of 2001. Total employment in Southern California increased by 1.2 percent for the year 2001. The economic weakness experienced in the late fourth quarter of 2001 carried over into 2002 and2003 andemployment in Southern California declined slightly each of those years. Positive job growth is projected to be reestablished in 2004 and employment is projected to grow by 1.5 percent in 2004, improving to 2. 2 percent in 2005. Employment growth in Riverside County is monitored by the State along with San Bernardino County On a combined, bi-county basis. Employment in the bi-county region is projected to grow by about 2.5 percent in 2004, and the rate of job growth is projected to improve to 3.5 percent in 2005. Southern California "scontinuously expanding employment base will result in substantial demand for new homes in the Coachella Valley. Locally, the Valley's economy has begun to benefit from new employment opportunities relating to the recent voter approval of Proposition 1A which authorized the establishment of Las Vegas style casinos with slot machines on Indian lands in California. As a result, several major casino projects have been completed or are in various states of the development process in the Coachella Valley. These projects are projected to add several hundred jobs to the Valley's employment base and to attract several thousand

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NOIL_,L_-NDY PLACE eS,MN_I'A._qA, CALIFORNL-k 92705e PHONE 714.580-7056 F,MX 714.550-7057 16

EXHIBIT 11-2 EMPLOYMENT GROWTH RIVERSIDE-SAN BERNARDINO BI-COUNTY REGION AND SOUTHERN CALIFORNIA 1980 - 2006 IRiverside & San Bernardino Counties Total Increase/ Percent Employment Decrease Change 2006 1,252,700 42,000 3.5% 2005 1,210,700 40,000 3.4% PROJE!CTED 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1,170,700 1,120,200 1,082,500 1,050,700 1,010,100 960,300 903,800 863,100 824,800 801,700 772,800 755,900 751,500 741,500 735,200 689,200 647,700 610,900 574,400 536,700 495,700 465,700 452,600 458,900 452,000 50,500 37,700 31,800 40,600 49,800 56,500 40,700 38,300 23,100 28,900 16,900 4,400 10,000 6,300 46,000 41,500 36,800 36,500 37,700 41,000 30,000 13,100 (6,300) 6,900 N.A. 4.5% 3.5% 3.0% 4.0% 5.2% 6.3% 4.7% 4.6% 2.9% 3.7% 2.2% 0.6% 1.3% 0.9% 6.7% 6.4% 6.0% 6.4% 7.0% 8.3% 6.4% 2.9% -1.4% 1.5% N.A. Southern California Total Increase/ Percent Employment Decrease Change 8,464,400 168,000 2.0% 8,296,400 135,100 1.7% 8,161,300 8,039,300 8,050,500 8,063,200 7,966,600 7,750,300 7,529,300 7,283,600 7,066,800 6,940,800 6,816,100 6,780,400 6,883,300 7,088,300 7,268,900 7,165,800 6,975,400 6,734,100 6,493,200 6,267,100 6,029,300 5,762,500 5,708,600 5,844,400 5,755,100 122,000 (11,200) (12,700) 96,600 216,300 221,000 245,700 216,800 126,000 124,700 35,700 (102,900) (205,000) (180,600) 103,100 190,400 241,300 240,900 226,100 237,800 266,800 53,900 (135,800) 89,300 N.A. 1.5% -0.1% -0.2% 1.2% 2.8% 2.9% 3.4% 3.1% 1.8% 1.8% 0.5% -1.5% -2.9% -2.5% 1.4% 2.7% 3.6% 3.7% 3.6% 3.9% 4.6% 0.9% -2.3% 1.6% N.A.

Source: CaliforniaEmployment Department, MarketProfiles

MARKET PROFILES, INC.

274211x2-1,2,3,4,5,6,7.xls

more visitors to the region. This growth will have a stimulating influence on the demand for new homes in the Coachella Valley. The first major impacts of the casino expansion were felt in 2001. Casino projects recently completed and planned include the following: opened for business in

The Augustine Casino, south o! the City ol Coachella, 2004. The casino employs approximately 300persons.

The Morongo Band o! Mission Indians recently completed construction o! a $250 million casino resort hotel on a site located a few miles west o! Palm Springs on the north side of Interstate 10. The project is expected to create 4, 000 new iobs over the next l_ve years. When completed it will be one of the largest gaming destinations on the West Coast. A $90 million, 125,000 square foot casino recently Rancho Mirage. opened in 2004 north of

The Aclua Caliente Band o! Cahuilla Indians announced in January plans to expand the Aclua Caliente Casino by additional 65, 000 square feet, add a new 14 story hotel with 400-rooms, and add 350,000 scluare !eet of retail space. These various proiects will be on the Aclua Caliente Reservation at the corner o! Bob Hop Drive and Ramon Road, which is an unincorporated area of Riverside

County.
In Palm Springs, the Spa Resort Casino opened in 2004. The $95 million gaming faciliIv has 30 tables, 1,000 slot machines, an entertainment lounge, and four restaurants. Construction has begun on the first phase of a 300-acre resort and corporate development located in Palm Springs. The Indian Oasis Resort and Corporate Center will ultimately include a l O-storv hotel, 290 condominium units, an 18-hole goll course, a 100, 000 square foot shopping center, and 500, 000 square feet of office space.

In 2003, the :_'owth o! the Coachella Vallev's economy was affected bv the slowdown in tourism that began in 2001. Hotel revenues in the Valley declined by 4. 8% and 3. 2% in 2001 and 2002, respectively. This drop in visitor activity had a dampening effect on the demand for new homes in the Vallep. Nevertheless, the sales of new homes increased in 2002 compared to 2001 (see New Home Sales Trends below). Since 2003, however, tourism has started to rebound, with hotel room revenues increasing by 2. 4 percent in 2003 and 4. 3 percent in 2004. Further improvement in hotel revenues is projected for 2005. The projected improvement in the health of the Southern California economy over the next two years will strengthen the underlying demand for new homes in the Coachella Valley. The volume o/visitors to the Valley will recover and grow, while the financial state and the confidence levels of new home buyers will improve. Demographic and Housing Profile

There are 365, 648persons residing in the Valley. The population has grown at a strongpace of 4.1% per year since 2000. The Valley's population is projected to grow at a rate of 3.8% per

FIRST AMERICAN COMMERCIAL REAL ESTATE 1217 NOtL\LkNDY PLACE eSANTA ANA, CALIFORNIA

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18

year over the next five years. Although the percentage rate of growth is declining, the growth rate in absolute terms is projected to remain near recent levels. The average household size in the Coachella Valley is 2. 68persons. This is a low figure resulting from a large proportion of one and two-person households. Nearly two-thirds (64%) of the market area's households consist of one or two persons, compared to 54percent countywide. The large proportion of small households is partly due to a large retired population. Nineteen percent of the population is over 65 years of age. Countywide this age group accounts for 14 percent of the population. The population of the City of lndio is 61,516persons. At 3.46persons, the average household size in the city is much larger than that of the Coachella Valley as a whole. The city has a much largerproportion offamily households with children than do the other communities in the Valley. The income profile of the Valley's households is very diverse. Households are distributed across a broad range of annual incomes from under $25,000 (21%) to over $100,000 (20%). The median income of households in the Coachella Valley is $44,240. This is a modest figure that is 8. 6% below the countywide median figure of $48, 384. The median income of households in lndio is $39,477.

Housing Profile Single family detached homes account for 46percent of the Valley's housing stock compared to a countywide proportion of 61 percent. The median housing value in the Coachella Valley is $238,378 (existing homes). This figure is slightly below the figurefor Riverside County of $245,354. However, the Valley's housing stock is very diverse. The Valley has a greater than typical proportion of the least expensive homes and of the most expensive homes. Twenty five percent of the Valley's housing stock is valued below $150,000 compared to 22% countywide. However, the Valley also has a higher proportion of homes valued over $400,000 (24% versus 18% countywide). Housing vacancy rates are very high in the City of Palm Desert, as well as in the Cities of Indian Wells, La Quinta, Palm Springs and Rancho Mirage. These high vacancy rates of over 30%, 40% and even 50% are due to the high incidence of second home ownership in these cities. Assuming an underlying vacancy rate of five to ten percent, second home ownership in these cities ranges from 20 to 45 percent of the total housing stock. The proportion of second home ownership in the City of lndio is relatively low. The proportion of second home ownership in the city is estimated to be about ten percent. However, this proportion is projected to increase over the next five years. New Home Sales Trends The volume of sales in the Valley declined from a peak of 3,356 in 1989 to 953 in 1993 due to the effects of the regional recession that began in mid-1990. Sales activity remained moderate from 1993 through 1997, then accelerated to 2,226 homes sold in 1998 and to 3,330 homes in 2000. Sales for 2001fell to 2,510 homes due to a general slowdown in economic growth in Southern California Sales increased to 4,236 homes in 2002. Sales activity continued to increase in 2003 and in 2004 with 5, 768 homes sold in 2003 and 5, 851 homes sold in 2004.

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NOR_\LkNDY PL-kCE *SANTA ANA, CALIFORNL, 92705* PHONE 714.580-7056 * F_M3_ 714.550-7057

19

The geographic pattern of new home sales in the Coachella Valley has shifted over the past few years. Excluding the lndio-Coachella submarket, sales activity among the other submarket areas varied significantly from year to year. The sales fluctuations have been due largely to supply considerations. Sales in the Palm Desert submarket dropped from 1,313 homes in 2002 to 383 homes in 2003 due to a decline in home supply. Alternatively, homes sales in the Palm SpringsCathedral City submarket (including Desert Hot Springs) increased from 393 homes in 2002 to 1,161 homes in 2004 due to an increase in supply. The shifting geographic pattern of sales activity is likely to continue in the future. More sales activity is expected to emerge in Palm Desert since the city has recently ended its moratorium on development in its northern sector. In contrast to fluctuating sales activity in the other submarket areas of the valley, new home sales in the lndio-Coachella Submarket have consistently increased over the past three years. Sales jumped from 591 homes in 1999 to 1,217 in 2002 and2,890 homes in 2003. New home sales in the Indio-Coachella Submarket continued to accelerate in 2004 with sales totaling 2,596. Moderate home prices have been a major attractor of home buyers to the submarket. Price Trends The average price of a detached home sold in the Coachella Valley in the third quarter of 2005 was $487, 063. The average sale price has fluctuated from quarter to quarter due to the changing mix of product offerings. Although the prices of individual homes have risen significantly, the average sale price of all homes has risen only moderately over the past 4 years due to the increase in the sales volume of modestly-priced homes located in the lndio-Coachella submarket area. The average price of new homes sold in the lndio-Coachella submarket during the first quarter of 2005, was $381,349. This figure is 40percent higher than the average sale price for the first quarter of 2004 of $2 72,163. Sales are spread across a broad price spectrum ranging from under $200,000 to over $400,000. During 2004 and 2005, there is a clear pattern of decreasing sales oflower priced homes as the price structure of new homes in the Valley has shifted upward In the first quarter of 2004, 50% of the new homes sold were priced under $300,000. By the first quarter of 2005, that proportion has dropped to just 6. 7%. The lndio-Coachella submarket area dominated the sales of homes in the Coachella first quarter 2005 that were priced under $400,000. Profected New Home Demand The primary factors that have contributed to strong new home sales in the Coachella Valley the local job-creating projects outline above, and very low mortgage interest rates. Supported by favorable regional and national economic trends, job growth within the Valley is projected to continue at a favorable pace. And, although mortgage interest rates are expected to rise moderately, a healthy volume of new homes sales is projected to be sustained within the Coachella Valley. Based on the data analysis, it is projected that the demand for new homes in the Coachella Valley will average 4,500 homes per year over the next five years. With 5,851 homes sold, the 2004 sales volume surpassed the projected annual demand of 4,500 homes. However, it is projected that the pace of sales will moderate in 2005 and 2006. Valley in

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NOIL.\IANDY PLh.CE *SANTA ANA, CALIFORNL-k 92705* PHONE 714.580-7056 * F_MX714.550-7057

20

The majority of the demand will be fueled by the primary buyer segment (i. e., owner occupants as opposed to second home owners), including retired households. Second home buyers, includingpre-retirement buyers, are projected to account for just over one quarter of the demand The great majority of the buyers that are active in the community of lndio consist of primary home buyers consisting primary of first time buyers and local move-up households. The Coachella Valley new home market is diverse. Market spread across a wide range of prices from under $300,000 to over $1,000,000. The majority of the demand for new homes in the IndioCoachella submarket emanates from primary resident households. Primary homebuyers are responsible for the high volume of demand below the $400, O00 price level.

Riverside County Transportation Riverside County is served by a major airport, Ontario International, Bemardino County. international flight capabilities. miles west of Riverside. Los Angeles International which is located in San national and 60

Several major airlines have flights into Ontario, providing Also, Palm Springs has its own airport.

Airport is located approximately

A network of freeways links most urbanized areas of the county.

The major north-south

arterial

are the Devore Freeway (Interstate 15) and the Escondido Freeway (Interstate 215). The Riverside Freeway (State Highway 91), the Pomona Freeway (State Highway 60) and the San Bernardino Freeway (Interstate 10) provide east-west access to the desert communities and Los Angeles.

Riverside County Amenities Within a two-hour drive of the County of Riverside are ocean and mountain famous desert communities ski resorts. World-

such as Palm Springs are also found in Riverside County.

Riverside County Conclusion Riverside County is the fastest growing county in the Southem population and employment. real estate values in general. The county remains employment become diversified with an ever-growing California region in terms of expansion. It has

poised for considerable

base which should be a positive factor on

City of Indio The subject property is located within the incorporated County. Indio is located in the south-central 78 miles southeast approximately limits of the City of Indio in Riverside Valley. Indio is located which also serves as the County seat, region of the Coachella

of the City of Riverside,

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NOR_\L-_NDY PLACE *SANTA _-_NA, CALIFORNIA 92705* PHONE 714.580-7056 FAX 714.550-7057 21

City The Francisco. San of of south miles 529 and Angeles 130 miles southeast City Los Angeles and 529 miles south San Francisco. The City Los of of City thethe of of southeast miles 130 miles square tely 24.8 approxima of of consists city The 1930. 16,16, Indio was incorporated May 1930. The city consists approximately 24.8 square miles d May incorporate was lndio of of Quinta ofLa City the south, and north the {oto County ated Riverside and bounded unincorporated Riverside County the north and south, the City of La Quinta unincorpor by by bounded is is and section. this in in earlier map location the to to refer Please east. thethe to to the west and Coachella east. Please refer the location map earlier this section. Coachella and west the to to

Population Population
m 1970 fro Growth years. 3030 last the eases in in n incr atic populatio dram had has The City of Indio has had dramatic population increases the last years. Growth from 1970 oflndio City The later years four and 1,2000, January ofof asas 45,700 to to 14,469 ofof 2000 has been from a population 14,469 45,700 January 1, 2000, and four years later a population from been has 2000 to to nts developme suburban other from shifts Population increase. a 22.7% was 66,118, reflecting a 22.7% increase. Population shifts from other suburban developments reflecting 66,118, was it it asas well as as years, recent inin growth Indio's inin factor a key been have within the Coachella Valley have been a key factor Indio's growth recent years, well Valley Coachella the within will city the inin growth future Most Springs. Palm from away east the to to growth n in in the progression growth the east away from Palm Springs. Most future growth the city will progressio the city. the ofof sections southern and east the the development the east and southern sections the city. nt of of developme the bebe median overall The 18.4%. is is 6565 over for age median overall city's the The Census showed that the city's overall median age for over 18.4%. The overall median that showed Census The and winter the between le fluctuation considerab isis There $35,555. at at stood income household income stood $35,555. There considerable fluctuation between the winter and household ofof more becomes Indio ics asas demograph and age count, population ofof terms inin summer months terms population count, age and demographics Indio becomes more months summer citizens. senior and boomers baby winter retreat for many baby boomers and senior citizens. many for retreat winter aa unty. co the toto on compared educati ome and inc average an lies have Indio's families have an average income and education compared the county. s fami lndio'

Transportation ation Transport


available Rail available. ion facilities transportat ofof The City Indio has variety transportation facilities available. Railisis availableby byUnion Union variety aa has Indio ofof e City Th Truck Springs. Palm and Indio inin available service rail Pacific main line.Amtrak Amtrakpassenger passenger rail serviceisis available Indio and Palm Springs. Truck line. main Pacific delivery Angeles. Los to to service daily direct for carriers two transportation has two carriers for direct daily service Los Angeles.Overnight Overnight deliveryisis ion has transportat ion isis transportat Mexicali. and Phoenix Diego, San Francisco, San offered Los Angeles, San Francisco, San Diego, Phoenix and Mexicali.Air Air transportation Angeles, Los toto offered al Airport, available.Palm PalmSprings SpringsInternation International Airport,20 20miles milesnorthwest, northwest,is isserved servedby bynine nineairlines airlines available. Bermuda The runway. an and facilities general (Alaska being thelargest), largest), general facilities and an8,500-foot 8,500-foot runway. The BermudaDunes Dunes the laska being (A ned Dunes. Bermuda adjacent inin located is is facility, aviation private general aviation facility, located adjacent Bermuda Dunes.County-ow County-owned general private irport, a a AAirport, general southeast miles DesertResorts Resorts Regional Airport,77 miles southeastin inThermal, Thermal,has has generalaviation aviationfacilities facilitiesand and Airport, Regional Desert Agency Transit SunLine The . ion is 5,000-footrunway. runway.Bus Bustransportat transportation isavailable availableby byGreyhound Greyhound. The SunLine Transit Agency aa5,000-foot tion Center. Transporta the throughout service provideslocal local bus service throughout theCoachella CoachellaValley Valleyfrom fromthe theIndio Indio Transportation Center. bus provides Beach, ngeles/Long nearestports portsare areLos LosA Angeles/Long Beach,133 133miles mileswest, west,and andSan SanDiego, Diego, 130 130 miles miles he nearest TThe

southwest. Highways Highwaysserving servingIndio Indioare arethe the 1-10 I-10 west west to to Los Los Angeles Angeles and and east east to to Phoenix; Phoenix; southwest. A Highway) and /southwest; California111 111 northwest/southwest; andCalifornia California 86 86(NAFT (NAFTA Highway)south southto toBrawley Brawleyand and northwest California

-- APPRAISAL AND EVALUATION AL ESTATE IAL RE IRST AMERICAN F FIRST AMERICANCOMMERC COMMERCIAL REAL ESTATESERVICES SERVICES - APPRAISAL AND EVALUATION 6 FAX 714.550-7057 LLIFORNL_ 92705o NA, C, NTA A ANDY PLACE 17 NO1LM 12 1217 NORMANDY PLACEoSA SANTA ANA, CALIFORNLk 92705 PHONE PHONE 714.580-705 714.580-7056 FAX 714.550-7057

22 22

ElEl Centro Imperial County, Yuma, Arizona, and Mexicali and Mexico City, Mexico. Centroinin Imperial

County, Yuma, Arizona, and Mexicali and Mexi co City, Mexico.

Industrial Industrial There acres in the City limits zoned for industry. This is available in parcels ranging Thereare are1,341 1,341 acres in the City limits zoned for industry. This is available in parcels ranging toto 200 acres. Included in this acreage total are 20 industrial parks. City-owned inin size from size from1/2 200 acres. Included in this acreage total are 20 industrial parks. City-owned land no longer landisis no longeravailable. availa
ble.

Community Community Characteristics Characteristics The city has numerous available, In the health-related area Indio has one full-service The city has numerous facilities facilities available. In the health-related area Indi o has one full-service hospital, beds; a 24-hour emergency care facility; and a base for paramedic service. hospital, with with 130 130 beds; a 24-hour emergency care facility; and a base for paramedic service. Seventy-one 18 dentists, 9 optometrists and 8 chiropractors practice in Indio. Seventy-one physicians/surgeons, physicians
/surgeons, 18 dentists, 9 optometrists and 8 chiropractors

practice in Indio.

With education, the Desert Sands Unified School District has 14 elementary schools, With regard regard to to education, the Desert Sands Unified School District has 14 elementary schools, 55middle high schools and 1 continuation school. The School District is planning to middle schools, schools, 3 3 high schools and 1 continuation school. The School District is planning to build the subject property, north of Interstate 10 at Jefferson and Avenue 39. build a a K-12 K- 12campus, campus, near near the subject property, north of Interstate 10 at Jefferson and Avenue 39. The be completed in 2008. College of the Desert is opening up the Valley The high high school school should should be completed in 2008. College of the Dese rt is opening up the Valley Education expand educational opportunities in Indio. The facility will partner with Education Center Center to to expand educational opportunities in Indio. The facility will partner with several offer distance learning on a "per class" basis. Chapman College; National several universities universities to to offer distance learning on a "per class" basis. Chapman College; National University; State University, San Bernardino; and University of Redlands offer University; California California State University, San Bernardino; and University of Redlands offer programs in Palm Desert/Palm Springs leading to bachelor's and graduate degrees. programs in Palm Dese
rt/Palm Springs leading to bachelor's and graduate degrees.

Of cultural interest, the community has two direct TV channels and one cable system (MediaOne). Of cultu ral intere st, the community has two direct TV channels and one cable system (MediaOne). Indio has 36 36 churc churches, 2 libraries, 1 daily newspaper, 3 weekly newspapers, 4 banks, 2 savings Indio has hes, 2 libraries, 1 daily newspaper, 3 weekly news papers, 4 banks, 2 savings and parks, 1 sports complex, 1 theater with eight screens and 1 live performing arts and loans, loans, 7 7 parks, 1 sports complex, 1 theater with eight screens and 1 live performing arts center. Coachella has 13 churches, 1 library, 1 bank, 1 boxing club, 1 radio station, center. Neighboring Neighboring Coac hella has 13 churches, 1 library, 1 bank, 1 boxin g club, 1 radio station, 1 community center and 5 parks. Other regional recreational facilities include: over 90 public 1 comm unity cente r and 5 parks. Other regional recreational facili ties de: over 90 public and p private golf cours courses; 200-acre Lake Cahuilla Park (County); andinclu Salton Sea for boating, and rivate golf es; 200-acre Lake Cahuilla Park (County); and Salton Sea for boating, waterskiing and fishin fishing. water skiing and g. Indio offers offersmany many recreational facilities including the Indio Municipal Golf Course, Heritage Indio recreational facilities including the Indio Muni cipal se, among Heritage Palms, Indian Springs, President's Club at Indian Palms and LandmarkGolf GolfCour Club, the Palms, Indian Springs, Presi dent's Club at Indian Palms and Landmark Golf Club, among the city'sseven seven public courses. Other recreational opportunities include equestrian, polo, swimming, city's publi c courses. Other recreational opportunities inclu de equestrian, polo, swimming, tennis, mountain biking, hiking, four wheeling and off-roading. Indio provides a variety of tenni s, moun tain bikin g, hiking, four wheeling and off-roading. Indio provides a variety of activities forthe theoutdo outdoor enthusiast. activi ties for or enthu siast.

COMMERCIAL ESTATE SERVICES - APPRAISAL AND EVALUATION FFIRST IRST AAMERICAN MERICAN COMM ERCIAL REREAL AL ESTATE SERVICES -- APPRAISAL AND 1217 NORMANDY PLACE SANTA ANA, CALIFORNIA 92705 PHONE 714.580-7056 EVAL FAX UA 714.550-7057 TION 121 7 NOR_ \LLNDY PLAC E .SANTA ANA, C,_LIFORNL_, 92705 PHON E 714.580-7056 F,_X 714.550-7057 23

23

The median sales price for new and existing homes is $377,449, Estate May 2005 Report. The medium and upper-medium developments,

according to the Desert Real

housing stock is growing quickly. the

Indio has a number of newer developments such as The Shadow Hills residential Ventanas, and Palazzo.

where prices range from $300,000 to over $400,000, such as the E1 Dorado Collection, area with

There are also new homes being built in the Indio Ranchos

many prices exceeding $300,000. There are 40 hotel/motels,


areas.

with approximately

2,500 rooms in Indio. There are 20 mobile home and Indio and surrounding unincorporated

parks, with 3,000 spaces, in the Cities of Coachella

Summary Indio is strategically located in the Coachella Valley as a service and retail center for a strong agriresort and recreational economy. A major interstate highway (Ibusiness and rapidly expanding

10) and railroad (Union Pacific) offer excellent transportation sector, all of which provide a healthy economy attractive emerging industry sectors, including: cluster and home improvement/home relocation/consolidation Auto Mall, Metropolitan

service for an emerging industrial Indio hosts several include:

for investment.

golf industry manufacturing

cluster, agricultural industry

furnishings industry cluster. Recent developments

of county facilities, including courts, Dash Golf Carts, Matzie Golf, I- 10 8 Theater, JFK Hospital expansion, East Valley Education Center and

the new casinos being developed.

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NOtL\LkNIDY PLACE eSANTA ANA, C.KLIFORNIA 92705* PHONE 714.580-7056 * F_MX714.550-7057

24

DATA EIGHBORHOOD N NEIGHBORHOOD DATA

Immediate Surroundings Surroundings/Neighborhood /Neighborhood Immediate On the following following p page a ne neighborhood map id identifying the sub subject properties in re relation to the o the lation t operties in ject pr entifying the ighborhood map sa age iis n the O City of of Indio Indio and and surrounding surroundingaareas. As can be seen subject the subject map, the neighborhood map, this neighborhood on this seen on can be reas. As City properties are are loc located in the the north north centr central section of of Indio. Indio. City of the City of the al section ated in properties CFD 2004-3 is located located north north of of Interstate Interstate 10, 10, at at the the northe northeast corner of Golf Golf Center Center Pa Parkway and rkway and omer of ast c 2004-3 is CFD Avenue 43. 43. The has become commercial ommercial residential, c the residential, of the much of of much point of focal point a focal become a Indio has of Indio City of The City Avenue and expansion along the I-1 I-10 Highway southwestern the southwestern within the Corridors within 111 Corridors ighway 111 and H 0 and ong the ion al industrial expans and industrial Coachella Valley regi region in which whichthe thesubjects subjectsare arelo located. expansion has abs absorbed much orbed much on has This expansi cated. This on in oachella Valley C of the sk skilled labor pool and created d demands skills which which are are available available o only through training ining ough tra nly thr or skills emands ffor d created ool an or p illed lab f the o and i importation other areas. Unskilled Unskilled and, and, f for the most part, semi-skilled workers are orkers are semi-skilled w most part, or the ther areas. rom o mportation ffrom and available supply. adequate supply. in adequate vailable in a The subject subject pr property isjudged judgedto tobe beconducive conduciveto toaasingle-family, single-family,detached detachedhhousing development, ousing development, operty is The competitivewith with similar similar developments developmentswithin withinthe the immediate immediate market market areas areas of of the subject the subject competitive development. At At present, present, the the commercial commercial area area is is along along Highway Highway 1t 111 and Jackson Jackson Street. Street. 1 and development. Primary Neighborhood Access Access and and Secondary Secondary Routes Routes Primary_ Neighborhood The primary access to to tthis neighborhood isby byautomo automobile with some limited bus access. This is his is ess. T us acc ed b e limit ith som bile w hborhood is his neig mary access e pri Th supported close proximity of tthe I-10 Freeway, Freeway, located located appro approximately mile sou south of t the he th of 1 mile ximately 1 he I-10 ty of e proximi he clos by tthe pported by su subject property. bject property. su Distances and and Directions Directions from from the the Subject Subject Neighborhood Neighborhood to to Major Major Business Business Districts Districts Distances Major urban areas areas in in the the v vicinity of the the subjec subject property include the C City of Riversi Riverside and County d County de an ity of clude the roperty in t p icinity of ajor urban M seat, located approximately approximately 78 78 miles miles west west of of the the subject subject property, property, and and the the City City of of Palm Palm Springs, Springs, seat, located located approximately approximately 15 15miles milesnorthwest. northwest. The The City City of of Ontario, Ontario, which which is is home home to to the the Ontario Ontario located International Airport, Airport, is is located located approximately approximately 100 100 miles miles northwest northwest of of the the subject property. subject property. International In summary, summary, the the immediate immediate neighborhood neighborhood is is going going through through a a transition transition fr from agricultural/desert /desert om agricultural In land uses uses to toresidential residentialand andcommercial commercial uses. uses. As As previously previously mentioned, mentioned, steady growth is is expected expected steady growth land to continue. continue. to

ALUATION ND EV APPRAISAL A FIRST AMERICAN COMMERCIAL ESTATE SERVICES - APPRAISAL AND EVALUATION ERVICES -TATE S EAL ES OMMERCIAL RREAL ERICAN C IRST AM F 714.550-7057 X A F 1217 NORMANDY PLACE SANTA ANA, CALIFORNIA 92705 PHONE 714.580-7056 FAX 714.550-7057 6 705 714.580 E N PHO * 92705 CA.LIFORNL-k ANA, A SANT CE . PL_ 1217 NOtL\L_DY 25 25

NEIGHBORHOOD MAP

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SITE DATA

Site Analysis:

The subject site description is based on a personal inspection of the subject property and discussions with developers, as well as a review of plat maps, Assessor's Maps and land use plans. The subject property consists of five separate tracts, located in the City ofIndio. A map showing the outline of the residential tracts is included on the map at the end of this section. The tracts have generally level topography. The market area is well supported by various residential developments. Average to good proximity and freeway access. No apparent negative factors were observed. Access to and circulation within the developments are depicted on the map at the end of this section. The design of the internal collectors appears to allow for adequate travel lanes in each direction. Additionally, there will be sidewalks and landscaping on both sides of the roadways. All roads will be constructed to City of Indio standards. The roadways will be dedicated to the City of Indio upon completion and maintained by the City through the assessments of a community service agency. The tracts will be valued assuming a finished map is in place and the lots are in a "readyto build" condition. They will also be valued, discounted back to an "as is" condition, with the assessment infrastructure in place. The land development costs have been furnished by SunCal Companies and are presented and applied in our market value analysis.

Location:

Important Site Characteristics: Positive Site Characteristics: Negative Site Characteristics: Ingress/Egress and Exposure:

Utilities and Services Available to the Subject Properties' Neighborhood:

Utilities and services are furnished by the followir_g agencies/companies: Electricity: Natural Gas: Water: Waste Water: Imperial Irrigation District Southem California Gas City of Indio Valley Sanitary District

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NORz\L-kNDY PL-XCE SANTA ANA, CA.LIFORNL-k 92705 PHONE 714.580-7056 FAX 714.550-7057

27

Telephone: Fire: Police: Transit:

Verizon County of Riverside Indio Police Department Sun Line Transit Agency

Rates for these utilities, to be provided and applied to the subject properties, are generally competitive with the Riverside County area as a whole. All the aforementioned utilities have source proximate to or directly to the subject zones. Size and Shape: The zones of the CFD 2004-3 project following approximate sizes and densities.
LAND USE SUMMARY PA Total Acreage* Total Residential Acreage** 33.05 33.95 24.25 17.60 26.9 135.75 # of Lots Density Based on Total Acreage 3.78 3.50 3.32 3.20 4.22 3.60 Density Based on Residential Acreage 5.38 3.77 3.55 7.55 4.10 4.87

lines

consist of the

1 2 3 4 5 TOTAL

47.09 36.58 25.67 41.56 26.01 176.91

178 128 86 133 110 635

Source: FACRES * Information obtained from Tract Maps **Information obtained from the Master Plan Map

The tracts are irregular in shape and will be identified such in the CFD 2004-3. Adjacent Properties:

as

The land area adjacent to the subject tracts is either vacant or improved with residential developments, similar to the proposed uses for the subject. The land is generally level. For a summary of the specifics and projected prices of the residential product type proposed for these tracts, the reader is referred to the Price and Absorption Study of the subject tracts prepared by Market Profiles of Tustin, California. A portion of that report is included within this appraisal report.

Topography: Proposed Uses:

FIRST AMERICAN COMMERCIAL 1217 NO1L\LMNDY PLACE S_2qTA

REAL ESTATE ,kNA, CA/_,IFORNL_

SERVICES -- APPRAISAL AND EVALUATION 92705 PHONE 714.580-7056 F_kX 714.550-7057

28

Soil and Subsoil Conditions:

A soils report was not provided

for review.

Based on the nature of this report, we have assumed the soil is of suitable load-bearing capacity for the proposed development and indicated highest and best use of the site under study.

Earthquake, Flood, and Other Nuisances and Hazards:

The subject property is not located in an environmentally hazardous area per the City of Indio. The site is considered a seismically active area, as is all of Southern California. There are, however, no known active faults on or immediately adjacent to the site, and the hazard of surface fault ruptures is considered very low. All of the parcels in CFD 2004-3 are located in Flood Zone B, Map Page and Community PanelNumber 0602550002, dated May 1, 1985.

Street Improvements:

In general, the subject tracts will have finished roads and utility access completed. A title report was not available for our review. We have assumed there are no easements or encroachments which could adversely affect the value of the subject property. The appraisers reserve the right to alter their conclusion of value if subsequent information indicates a change is warranted. The subject tracts in CFD 2004-3 consists of residential land use sites within the Master Planned Community. There are Covenants, Conditions and Restrictions (CC&Rs). First American Commercial Real Estate Services Appraisal and Valuation Division assumes these do not have an adverse effect upon value. The sites appear functionally adequate for the proposed development as described in the developer's proposed plan. In California, all real property is assessed at 100% of full cash value (which is interpreted to mean market value of the fee simple interest) as determined by the County Assessor. Generally, a reassessment occurs only when a property is sold (or transferred) or when new construction occurs (as differentiated from replacing existing construction). Assessments for properties that were

Easements, Restrictions and Encroachments:

Essential Zoning Provisions: CC&Rs/PrivateRestrictions, Governing Use:

Functional Adequacy

of Site:

Tax and Assessment

Data:

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NOR,\L-kNDY PLACE *SANTA ANA, CALIFORNL_ 92705- PHONE 714.580-7056 * FAX 714.550-7057

29

acquired before the tax year 1975/76 were stabilized as of the tax year 1975/76. Property taxes are limited by State law to 1% of the assessed value plus voter-approved obligations. Taxes are payable in two equal installments, which become delinquent after December 10 and April 10, respectively. The existing parcels are not currently assessed by individual lot parcel numbers by the Riverside County Tax Assessor. Total taxes will ultimately reflect the presence of the CFD bonds, the creation of which is the purpose of this appraisal.

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NORi\LkNDY PLACE eSANTA ANA, CALIFORNL-X_ 92705e PHONE 714.580-7056 FAX 714.550-7057

30

MASTER PLAN
MASTER PLAN

01.01111Mr,1 1. 41110 61.111011.10S

....

44 4004041 rm :11011

annum

Mu0',IIM AM

COMMUNITY MASTER PLAN


COMMUNITY MASTER PLAN

........

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MARKET

CONDITIONS

Physical and Locational

Considerations characteristics of the five planning areas of the subject CFD No.

The physical and locational

2004-3 are considered to be very good. The sites are all located in a master planned development in a developing area of Indio. The subject referred to as Phase 1 of the Master Plan, will include a 22 acre private lake with boat access, two golf courses and a recreation clubhouse, pool and a tennis complex. park. The planning areas are currently surrounded, complex, complete with land.

In addition each tract will have it's own neighborhood to a large degree, by undeveloped

Currently, strong growth is seen as imminent economy stays stabilized as it presently is.

surrounding

the subject tracts as long as the

As noted in the Site Description

section of this report, the subject's Engineering development

sizes and topographies

are

adequate for residential development. the use outlined in the proposed perspective, a variety of residential

and site work is necessary to accommodate plans but from a physical possible. and locational

uses are physically

Access to all zones is considered good. Accessibility residential constructed land uses to be developed on the zones and access roads are extended,

and location would allow for a variety of as planned. As residential units are and retail support use

the demand for residential

should increase, thereby increasing an already good economic

environment.

The five subject zones, as currently proposed, will consist of the following family units: P_AA 1 2 3 4 5 Lots 178 128 86 133 110

detached

single-

TOTAL

635

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NOIL\L_NDY PLACE *S,_XITA ANA, CALIFORNL_ 92705o PHONE 714.580-7056 * FAX 714.550-7057 37

The subject properties

will consist of predominately

single-family

residential

developments. near the subject

This appears to be a logical extension of the existing residential area. The land will physically accommodate

developments

the proposed density.

Legal Considerations The legal factors influencing governmental regulations the highest and best use of the subject properties are primarily

such as zoning and building codes.

The subject zones and tracts are zoned for residential uses within the Terra Lago Master Planned Community. requirements There are no other existing entitlements other than current City of Indio building covenants and restrictions associated for the tracts. There will be some conditions, however,

with the tract developments; expected to negatively

these are mostly cosmetic in nature and would not be

affect the lot value.

The developers'

conceptual

plan for the subject developments

are currently use.

being developed.

Based on the ultimate approval of the developer's conceptual plan, which includes all residential use, the proposed development Market Feasibility the subject property will be considered. The is assumed to be a legally conforming

In this section, market conditions that influence major factor requiring consideration or its financial feasibility. or market feasibility.

is the attractiveness

of the subject as a real estate investment

Financial feasibility

is based, to a large degree, on market acceptance

The pathway of the growth in Riverside County has been concentrated the Coachella Valley.

in several growth "nodes." Jacinto, Murrieta and

These nodes of growth include the Cities of Corona, Riverside, Hemet/San

The City of Indio has historically been known as primarily The area was characterized

an affordable

housing community.

by mobile home parks and subdivisions

of small homes, and small

detached residential product targeting the first-time buyer and/or the empty nester, retirement or winter resident market.

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NOtL\LkNDY PLACE *SANTA ANA, CALIFORNIA 92705 PHONE 714.580-7056 FAX 714.550-7057

38

The current conceptual plans proposed for the subject tracts appears to be the highest and best use of the subject property when analyzed from a market perspective. as the subject, we have endeavored supportable development the market conditions In valuing property such to analyze the market conditions and compare the anticipated plan currently in place. Where possible, if of the product type proposed for the subject, it

uses with the conceptual

support the development

is assumed that a purchaser of the subject property would develop the site with a similar use. In the case of land uses outlined in the conceptual plan that are deemed not supportable by market conditions, alternative uses are considered. report for the land use, a determination Based on the data and analysis of the Market Profiles is made as to whether the development plan for the plan is

subject site is the highest and best use of the land. This market-supported

development

then used to estimate the value of the subject site in the Valuation section of this appraisal report.

The following analyses of the market conditions and absorption rates by product are used as tests of reasonableness rather than a full detailed market analysis of the subject project. A number of to help in our analysis. The most important was the report

marketing reports were reviewed

prepared by Market Profiles, Inc. The following Profiles, Inc.'s Feasibility Report dated July 2005. New Home Competition

information

in italics was taken from Market

During the first quarter of 2005, there were 78 subdivisions marketing new detached homes in the Coachella Valley. The 78projects account for a total of 15,042 homes of which 8,213 homes have been offered for sale and all but 559 of the homes offered have been sold. This is a low unsold inventory level The Coachella Valley new home market is very diverse. The lndio-Coachella and the lndian Wells-LaQuinta submarkets had the largest number of active new home subdivisions during the first quarter period with 26 and 24 projects, respectively. The lndio-Coachella submarket generated the highest sales volume during the quarter (585 homes). The sales of new homes in the submarket were aided by the moderate prices of homes. The average sales price was $381,349 compared to $792,518 in the nearby LaQuinta-lndian Wells submarket. There were 26 new home subdivisions that were active in the lndio-Coachella Submarket during the first quarter of 2005. The 26projects account for 7,330 homes, of which 3, 722 have been offered for sale and only 155 of those remain unsold. Seventeen of the new home projects are located in Indio andnine are located in Coachella. With 3,200 homes, the retirement community of Sun City in Indio (Shadow Hills) accounts for nearly half of the homes. An additional three of the projects, accounting for 344 homes are located within the lndian Palms Country Club, also in lndio.

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NOtL\L_NDY PL-X_CEeSANTA ANA, CALIFORNIA92705e PHONE 714.580-7056 FAX 714.550-7057

39

lnvento_

Levels

The total of 559 new detached homes that remain unsold (including homes under construction, completed, and pre-selling) throughout the Coachella Valley is a favorable unsold inventory figure. As a rule, a balance between the unsold inventory at the end of a quarter and the number of homes sold during the quarter is indicative of a healthy market condition (i.e., 1:1 unsold to sold ratio). Thus, compared to the sales volume of 964 homes sold during the first quarter period, the unsold inventory of 559 homes at the end of the first quarter of 2005 is indicative of a favorable market condition (0.58:1 unsold to sold ratio). Inventory conditions in the lndio/Coachella submarket area are even more restricted than elsewhere in the Coachella Valley. At the end of the first quarter of 2005, the unsold inventory in the Indio/Coachella submarket totaled 155 homes compared to fourth quarter sales of 585 homes (0. 26:1 unsold to sold ratio). Sales Rates The sales rates include "Cumulative" and "Current Quarter" rates. The Cumulative sales rate describes the rate of sales generated since the date of opening of each project, and the Current Quarter sales rate describes the rate of sale during the third quarter period. Cumulative sales rates range widely from O.08 to 7. 9 homes per week sales rate is 2. 79 homes per week per project. The average cumulative

The new home projects that are most similar to the subject development are those that are located in the Shadow Hills community of north Indio. During the first quarter of 2005, there were seven new home subdivisions active in the Shadow Hills community. The cumulative sales rates among those seven subdivisions range from 0.31 to 7.87 homes per week. The average sales rate is 2. 79 homes per week and the median rate is 1.64 homes per week.. Most Competitive New Home Projects The new home subdivisions that are most relevant to the subject properties are those that are located within the Shadow Hills community located north of the 1-10 Freeway. The seven projects are described below. The fastest selling subdivision in Shadow Hills is Bella Tierra. The first 40 of these 3- and 5bedroom homes have been sold at a rate of 8.12 homes per week. The base prices range from $379,990 to $419,990 for plans that range in size from 1,895 to 2,629 square feet ($159. 75 to $200.52 per sq. ft.). The homes are sited on 8, 000 square foot lots (minimum). Another fast selling subdivision is Foxstone by KB Home. All 63 homes that were released during the first quarter were sold equating to a sales rate of 4.88 homes per week. The project has another 182 homes remaining to be sold in subsequent phases. The base prices of these homes range from $307,990 to $368,990 for 2- and 3-bedroom plans that range in size from 1,517 to 2, 526 square feet ($146. 07 to $203.02 per sq. ft. ). The residents pay a homeowners fee of $100 per month, plus CFD taxes. The neighborhood is gated and the minimum lot size is 8, 000 square feet.

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NO1L\LM',IDY PLACE .SANTA ANA, CALIFORNIA 92705,, PHONE 714.580-7056 FAX 714.550-7057

40

Sienna subdivision The 132-lot Hills. prices of the homes homes The 132-lot Sienna subdivision recently recently opened opened in in Shadow Shadow Hills . The The base base prices of the rangefro from $394,990 to $447, 990 for 3and 4-bedroom plans that range in size from 2,448 to range m $394,990 to $44 7,990for 3- and 4-bedroom plans that range in size from 2,448 to 3,143 square feet ($142.54 to $161.35 per sq. ft.). 3,143 square feet ($142.54 to $161.35 per sq. ft.). Ranch subdivision The 263-lot subdivision by Family Development Development sold sold out out its itsftrst first phase phase of of 30 The 263 -1ot Shadow Shadow Ranch by Family 30 homes at at a a rate rate of of33.0 homesper perweek week. Thesehomes homesrange range in inprice pricefrom from $394,990 $394,990 to to $489,990 $489,990 homes . 0 homes . These for 3 3-, 4-, and 5 5-bedroom plans that that range range in in size sizefrom from 3,185 3,185 to to 3,24 3,247 squarefeet feet ($150.90 to for -, 4 -, and -bedroom plans 7 square ($150. 90 to $180.77 per sq sq. ft.) The residents pay a homeowners fee of $95 per month for green belt $180 .77 per . ft.) The residents pay a homeowners fee of $95 per month for green belt maintenance. The minimum minimum lot lot size size is is 8, 8,500 feet. maintenance . The 500 square square feet . a gated gated subdivision subdivision of of 142 homes. The base base prices prices of of these these 3 3-bedroom The Desert Collection Collection is The Desert is a 142 homes . The -bedroom homes range from $364,990 to $414, 990 for plans that range in size from 1,610 to 2,266 square homes range from $364,990 to $414,990forplans that range in size from 1,610 to 2, 266 square feet ($183 ($183.13 to $226 $226.70 per sq. The residents pay a a homeowne homeowners fee of of $ $75 per month month. feet .13 to . 70pe r sq . ftft.). .). Th e reside nts pay rs fee 75 per . The The first 73 homes were were sold sold at at a arate rate of of 3 3.31 homesper perweek week. The minimum lot size is 7,200 square first 73 homes . 31 homes . The minimum lot size is 7,200 square feet. feet . There are are two two subdivisions subdivisionsstill stillactive activewithin within one oneprivate private, gated neighborhood neighborhood developed developed by by There , gated Century Vintage Homes. The three subdivisions are The Ventana Collection, The El Dorado Century Vintage Homes. The three subdivisions are The Ventana Collection, The El Dorado Collection, and Villa VillaEstates Estates11 II. The homeowners homeownerswill will paydues dues of of $50 $50 per per month for Collection, and . The pay month for maintenance of the the private private streets, streets, plus plus an fee. maintenance of an assessment assessment district district fee . The The Ventana Ventana Collection Collection consists of23-bedroom that range range in in size sizefr from 1,208 to 1,843 square feet with base base consists of 2- and and 3 -bedroom homes homes that om 1,208 to 1,843 square feet with prices ranging rangingfr from $299,990 to $339,990 ($184.47 to $248.33 per sq. ft.). Of the 198 homes prices om $299,990 to $339,990 ($184. 47 to $248.33 per sq. ft.). Of the 198 homes in in this tract, tract, 87 87 have have been been sold sold at at a a rate rate of of O 0.81 homesper per week week this .81 homes . The base prices prices of of the the homes homes in in The El D Dorado Collection range range from from $339,990 990 for The base The EI orado Collection $339,990 to to $424, $424,990for 2and 3-bedroom plans that range in size from 1,720 to 2,778 square feet ($152.98 to $197.66 2- and 3-bedroom plans that range in size from 1, 720 to 2, 778 square feet ($152.98 to $197.66 per sq sq. ft.). Of the the 198 198homes homes in inthe thetract, tract, 176 176have havebeen beensold soldat ataarate rateof of11.64 homesper per week week per . ft .). Of .64 homes . The Villa Estates II homes homes h have baseprices prices ranging rangingfrom 3and The Villa E states II ave base from $294,990 $294,990 to to $394,990. $394,990. These These 3 - and 4-bedroom homes range range in in size sizefrfrom 1,302 to to 2 2,735 square feet ($144.42 to $226.56 per sq. ft.). 4 -bedroom homes om 1,302 , 735 square feet ($144. 42 to $226.56per sq. ft .). Of the the 137 137 homes homes in in the thesubdivision, subdivision, 123 123have havebeen beensold soldat at a arate rate ofl of.53 1.53 homes homesper per week week Of . The new community community of of Talavera in northeastern northeastern most most Indio Indio recently recently openedwith opened withfour four new new home home The new Talavera in subdivisions offering homes for sale. The homes range in price from $299,999 to $416,990. subdivisions offering homes for sale. The homes range inprice from $299,999 to $416,990. The The minimum lot lot size sizefor for all all of of the the homes homes in in Tal Talavera is 8 8,000 square feet feet. minimum avera is , 000 square . are the thesmallest smallest being beingoffered offered in inTalavera Talavera. They consistof of3and 4 4-bedroom The Venecia The V enecia homes homes are . Th ey consist 3- and -bedroom plans that that range range in insize size from 1,576 to 1,947 square feet with base prices rangingfrom $299,999 plans from 1, 576 to 1, 94 7 square feet with base prices ranging from $299,999 to $333,990 ($171.54 to $190 $190.35 per sq sq. Twenty-five of the 45 homes in the first phase to $333,990 ($171 .54 to .35 per . ftft.). .). Twe nty-five of the 45 homes in the first phase release were were sold sold at at a a rate rate of of 1 1.76 homesper per wee week release .76 homes k. Florencia The homes homes in the the Florenc subdivision in Talavera range range in in size sizeform form 1,855 1,855 to to 2,380 2,380 with with base base The ia subdivision in Talavera prices rangingfrom $330,000 to $370,000 ($155.46 to $179.45 per sq. ft.). Of the 44 homes prices ranging from $330,000 to $370,000 ($155.46 to $179.45per sq. ft.). Of the 44 homes in in the first phase, phase, 26 26 were were sold sold at at a a rate rate of of 5 5.93 homes per per wee week the first .93 homes k. Also in the Alican Alicante consist of of 3 3-, 4-, and 5 5-bedroom plans that that range range i in size Also in Talavera, Talavera, the te homes homes consist -, 4 -, and -bedroom plans n size from $389,540 to to $404,990 $404,990 ($130 ($130.68 to $156.25 per sq. ft.). Two thirds of the 33 homes released fr om $389,540 . 68 to $156.25per sq. ft.). Two thirds of the 33 homes released in the thefirst first phase phase have have been been sold sold at at a a rate rate of of 3 3.61 homesper per wee week in .61 homes k.

FI RST AM ERICAN C FIRST AMERICAN COMMERCIAL REALESTA ESTATE SERVICES APPRAISAL AND EVALUATION OMMERCIAL REAL TE SER VICES --- A PPRAISAL A ND EV ALUATION 1217 NORMANDY PLACE*SANTA ANA, CALIFORNLk 92705 PHONE 714.580-7056 FAX 1217 NOR.I\ L-kNDY PLACE SANTA A NA, C M-,IFORNL'X 92 705* PHONE 714.580-7056 * FAX 714.550-7057 714.550-7057 41 41

The largest homes being offered in Talavera are those in the Genova subdivision. The base prices of these homes range from $396,990 to $416,990for 2-, 3-, and 5-bedroom plans that range in size from 2,848 to 3,280 square feet ($127. 64 to $139.39 per sq. ft.). Eighteen homes have been sold at a rate of 1.9 homes per week.

Proposed New Home Development There are approximately 7,500 new homes within more than 40 subdivisions that are proposed for future development in the City of lndio. With this scale of proposed activity, it is projected that the Indio market area will experience a competitive environment for the next several years. However, the market is currently undersupplied and the homes that are planned for development will be constructed in a phased manner over the next several years. It is projected that competitive conditions will be more intense than those currently being experienced in the lndio marketplace, however, generally healthy demand-supply conditions are projected to be maintained. The majority of the new homes that will be constructed in lndio over the next few years will be located in and around the Shadow Hills community located north of Interstate 10 Freeway. In addition to the 1,400-plus homes that will be developed within the subject Terra Lago community, there are more than 2, 700 homes that are planned for construction elsewhere in the Shadow Hills community. The majority of these homes will be constructed over the next three to four years. There will be 2, 723 homes that will be part of the City of lndio Assessment District 2004-VSD. All of these homes will be located in the Shadow Hills community to the west of Terra Lago community. The prices of the homes will generally range between $350,000 to $500,000. The two subdivisions by Family Development are under construction and are actively selling homes. Also located north of the 1-10 Freeway is the site of the Andreas Ranch that will include 937 homes within a private, gated community. This property is located north of Avenue 38 at Jefferson Street.

Diseountinl_ In order to obtain an "as is" value, the finished lots need to be analyzed considering would take to sell them off. Consideration

the time it

needs to be given to the costs to finish the lots and Our

the various costs associated with marketing and holding the lots during this time period.

absorption rate estimates are by land product which were compared to the estimated absorption rates from the Market Profiles Market Consultants expectations report dated July 2005. Our absorption estimate assumed are very similar to those outlined in that report. Our absorption is within a reasonable range.

a purchase of the subject tracts by a merchant builder. advised by Market Profiles Market Consultants Based on the tracts that are being analyzed,

It appears the absorption rate projection

it is estimated

that a period of one year would be

FIRST AMERICAN COMMERCIAL REAL ESTATE 1217 NOtL\LkNDY PLACE eS_N'TA ANA, C_LIFORNL_

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required to sell the land associated with the proposed residential 635 residential infrastructure lots. Our absorption estimate

tracts. This includes a total of proforma and

is tied to the developer's

costs as well as Market Profiles Consultants' absorption study.

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HIGHEST

AND BEST USE

Highest and Best Use 5 is an appraisal concept which has been defined as follows: 1. The reasonable and probable use that supports the highest present value of vacant land 6 or improved property, as defined, as of the date of appraisal. The reasonably probable and legal use of land or sites as though vacant, found to be physically possible, appropriately supported, financially feasible and that results in the highest present land value. The most profitable use.

2.

3.

Implied in these definitions is that determination benefits of that use to individual property owners.

of highest and best use takes into account the development goals as well as the Hence, in certain situations the highest and conservation, wildlife habitats and

contribution of a specific use to the community and community

best use of land may be for parks, greenbelts, preservation,

the like. A use which does not meet the needs of the public will not meet the above highest and best use criteria.

The determination

of the highest and best use opinion, therefore, requires a separate analysis for as if vacant. must Secondly, the highest and best use of the property, to consider any deviation of the existing be analyzed

the land as legally permitted, with their improvements, improvements

from the ideal.

"For highest and best use of both land as though vacant and The criteria are that the highest and best use (3) financially feasible and (4) maximally sequentially; it makes no difference that or if such

property as improved, a use must meet four criteria.

must be (1) physically possible, (2) legally permissible, productive. These criteria should usually be considered

a use is financially feasible if it is physically impossible a use is not legally permitted. ''7

to construct an improvement

5The Appraisal of Real Estate, 9th Edition, published by the American Institute of Real Estate Appraisers, Chicago, IL, p. 269. 6Tbe questions to be answered in this analysis are: If the land is, or were vacant, what use should be made of it? What type of building or other improvement, if any, should be constructed on the land, and when? 7The Appraisal of Reai Estate, 9th Edition, published by the American Institute of Real Estate Appraisers, Chicago, IL, p. 274.

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Highest and and Best Best Use Use - As As Vacant Vacant Highest Physical Considerations Physical Considerations Location/Topography/Size: As set the parcel sizes are more more than Location /Topography/Size: As set forth forth previously, previously, t he subject subject p arcel s izes are than adequate for proposed single-family development. The adequate for proposed single-family development. The parcel parcel comprising the propertiesare are regular in their comprising th e subject subject properties regular in their configuration, however, it results in no significant development configuration, however, it results in no significant development limitations. limitations. The The properties properties should should have have adequate adequate drainage drainage when when completed per per City City of requisites. completed of Indio Indio requisites. The of t the are situated situated within The location location of he properties properties are within what what should should continue be developing residential residential ar areas. Therefore, would continue to to b e developing eas. Therefore, it it would appear as though a planned residential type of land use would appear as though a planned residential type of land use would be be fe asible. feasible. Utilities/Flood Utilities /Flood Zone: Zone: The areas designated wi with a flood flood zone T he properties properties are are located located in in ar eas designated th a zone risk. risk. All of of the the pla planning areas are are located located within within Flood Flood Zone an area area All nning areas Zone B, B, an of minimal to moderate moderate flood flood hazrd. hazrd. The Panel is minimal to The Community Community Panel is 0602550602 revised May May 1, 0602550602 revised 1, 1985. 1985. This defined as as areas areas between between limits limits of of the the 100-year flood and This is defined 100-year flood and 500-year flood; or certain areas subject to 100-year flooding with 500-year flood; or certain areas subject to 100-year flooding with average depths less less than than one average depths one foot foot or or where where the the contributing contributing drainage area is is less less than than one one squ square mile; or or a areas protected by drainage area are mile; reas protected by levees from from the the base base floo flood and a are no significant hazard. The levees d and re n o sign ificant hazard. The parcels access to to public public water, water, sewer, sewer, electricity, electricity, natural natural gas gas parcels have have access and telephone lines. Therefore, they appear to have no potential and telephone lines. Therefore, they appear to have no potential deficiency from from a a utility utility or or flood flood zone zone development development standpoint. standpoint. deficiency Conclusion: Conclusion: No soils has been been reviewed reviewed by by us. us. Overall, No soils report report has Overall, there there appears appears to be to be no no adverse adverse soil soil conditions conditions of of which which the the appraisers appraisers are are aware. this aware. The The shape shape of of the the parcels parcels are are irregular, irregular, however, however, this results in no no specifi specific development limitation. limitation. From results in c development From a a physical physical standpoint, the sites sites are considered adequate for various types of standpoint, the are considered adequate for various types of residential development development as as regulated regulated and and di dictated by the master residential ctated by the master plan zoning. zoning. The is likely plan The nature nature of of the the surrounding surrounding market market is likely to to support these uses. support these uses.

Legally Permissible Legally Permissible Legal Le gal Factors: Factors: The legal legal f factors affecting a site site and and it its potential uses The actors a ffecting a s pote ntial u ses are are often often the most governmental the most restrictive. restrictive. These These would would typically typically be be governmental regulations such as as zoning zoningand andbuilding buildingccodes. The developers' regulations such odes. Th e developers' proposed plans are based on residential developments. The proposed plans are based on residential developments. The existing zoning will permit residential and limited commercial existing zoning will permit residential and limited commercial use Considering use development. development. Considering the the nature nature of of the the surrounding surrounding developments and the subject's zoning classifications, the developments and the subject's zoning classifications, the

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proposed developments highest and best use. Conclusion:

appear

to meet the legal criteria

for

From a legally permissible standpoint, the subject is restricted by the zoning under the General Plan of the City of Indio. The subject appears to be feasible for development with residential uses within the Master Planned Community over the next several years. As discussed in the Market Condition section of the area description for the City of Indio, there has been a resurgence of Riverside County home sales, commercial and industrial real estate activity over the 2003-05 period. The market has been very strong over this period and all indications indicate this will continue and stabilize. The majority of the existing housing inventory in the area is priced competitively and the majority of the demand appears to be generated by the lower price range market. Sales of homes under $250,000 are limited, and the future inventory of homes in the $250,000 to $300,000 category are decreasing. This pattern is expected to continue as the existing lower priced inventory is sold out and is slowly replaced by similar homes which reflect the necessary higher price for finished single-family lots to be commercially viable. The Coachella Valley submarket has continued to capture a representative share of the Riverside County sales. This market share can be attributed to the lower priced concentration of new home supply which is available in the area. The submarket should continue to capture a good share of sales due to the erosion of alternative lower price supply in most of the other submarkets. The Coachella Valley submarket should continue to experience a good rate of activity among products priced $300,000. The lack of new single-family homes that can be brought to market at prices under $300,000 will continue to place limits on future total sales volume. This factor forms a primary opportunity for the subject areas to successfully enter the Riverside market. While the overall Riverside market should continue to experience a period of concentration, Coachella Valley's residential product, targeted to the under-supplied, lower-priced, conventional single-family detached market, should experience a positive market response if priced properly. We believe the subject tracts have the potential to meet with good market acceptance. The previous factors, coupled with the acquisition cost of the land, development costs consideration and the potential absorption level, should provide the highest return to the subject sites. Therefore, the proposed development is

Financial Feasibility and Maximum Productivity

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NOR_\LLNDY PLa, CE SANTA ANA, C,LLIFORNIA 92705o PHONE 714.580-7056 FAX 714.550-7057 46

financially feasible and maximally productive if brought into the development arena under the right set of economic circumstances such as those we are currently experiencing. The highest and best use as of the date of value is a timely development of the various projects according to the developer's proposed development plan. The current economic environment would indicate this be initiated as soon as possible. Physical and Locational Characteristics The physical and locational characteristics of the subject residential property have previously been described in this report. The subject's location is considered good for residential use. The subject has average proximity to various employment centers in the Coachella Valley. Commercial and retail services are also close by. In addition, the physical possibility of the potential development, based on the present zoning, appears to be feasible. The size, shape and topography physically possible. Legal Considerations of the sites makes development

The legal factors influencing the highest and best use of the subj.ect property are primarily government regulations, such as zoning and building codes. The tracts zoning allows development to residential as reported by the City oflndio. It is assumed that any development will be built in conformance with the developing codes and other governmental regulations. Based upon this assumption, the stated legal consideration for highest and best use is supportable. The regional economy as well as the national economy has been recovering nicely for residential development since the early '90s in the desert area. A survey of some of the more established residential developments in the Indio area supports the potential resurgence of residential development. Physical, legal and market considerations have been analyzed to evaluate the highest and best use of the tracts. This analysis is presented to evaluate the type of use which will generate the greatest level of future benefits possible from the properties. Based on the purpose of this appraisal, the highest and best use would be to develop to residential, which is the highest and best
use.

Financially

Feasible

Conclusion:

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METHODOLOGY VALUATION VALUATION METHODOLOGY

Basis of Valuation Valuation Basis of Valuation based experience; opinions of qualified, qualified, ions of opin experience; background specific background and specific general and upon general sed upon s ba Valuation iis informed persons; consideration of all all data data ga gathered during the investigative phase of the the se of pha stigative e inve g th thered durin of sideration rsons; con informed pe appraisal; and an analysis of all all mar market data available to the appraiser. the appraiser. available to ket data alysis of appraisal; and Valuation Approaches Valuation Approaches Three basic approaches value are ava available to th the appraiser: the the Direct rect he Di Approach, t Cost Approach, he Cost praiser: t e ap ilable to alue are o v tto proaches ic ap Three bas Comparison Approach an and the Income Income App Approach. the subject sites are e essentially vacant acant ssentially v ites are ubject s e s Since th roach. Since d the Comparison Approach land parcels, only the the Direc Direct Comparison Approach and and a a fo form of th the Income App Approach known nown roach k e Income rm of omparison Approach t C cels, only land par as the Discounted Cash Flow An Analysis havebeen beenuutilized in e estimating the market value of the the alue of rket v e ma stimating th tilized in alysis have h Flow scounted Cas e Di s th a "as if fini finished" fee s simple value. imple value. shed" fee "as if
Cost Approach Approach Cost This calculates eithe either the or cost estimate subject the subject of the estimate of reproduction cost r reproduction replacement o e replacement r th approach calculates This approach property improvements new comparable quality quality and and utili utility). are Losses in value are ty). Losses maintaining comparable ew ((maintaining rovements n property imp then subtracted from this value. Losses are sustained through depreciation, age, wear and tear, r, tea r wea , e ag rough h t d e sustain re a Losses value. is th m o fr d e act r subt then functionally obsolescent obsolescent ffeatures and economic factors affecting thep property. roperty. The net value is ffecting the rs a conomic facto de eatures an functionally then added to to the the e estimated land value value to top provide a to total value estimat estimate. is Approach is Cost Approach e. The Cost tal value rovide a stimated land en added th not particular appraisal. rticular appraisal. this pa in this applicable in t applicable no Direct Comparison Approach rison Approach Direct Compa This approach the principle property tends by price rice y the p be set b tends to be a property of a value of the value that the rinciple that ep upon th based upon is based approach is This at which which compa comparable properties have r recently been s sold or for W which theyccan be acquired. Thi This s e acquired. an b hichthey r for old o ecently been erties have rable prop at approach requires a detailed comparison of sales subject the subject with the properties with comparable properties of comparable sales of mparison of detailed co equires a approach r property. of transactions of number of transactions sufficient number a sufficient that a is that therefore, is requisites, therefore, main requisites, the main of the One of erty. One prop comparable properties provide an accurate that accurate and that accurate indicator of value and an accurate to provide available to be available roperties be rable p compa information regarding price, te terms, property description and proposed use be through hrough obtained t e obtained se b roposed u d p ription an operty desc rms, pr egarding price, rmation r info servation. interview and ob observation. Income Approach Approach Income This approach based upon th the theory that the value property the expected e expected by th set by be set to be tends to perty tends of pro lue of e va hat th eory t e th ased upon is b ch is This approa income therefrom to the owner. effect, the capitalization of expected income into to e in future incom xpected future fe tion o he capitaliza ffect, t in e is, in It is, er. It e own o th erefrom t e th incom present worth. This approach requires an estimate of net income, an analysis of all expense items, ms, te i nse e exp l l a s i ys anal , e incom et n of te present worth. This approach requires an estima the of a a capitalization rate and t the processing the value into a value stream into income stream net income he net essing of t he proc ate and capitalization r selection of e selection th estimate. known as a form known in a form appraisal in particular appraisal this particular in this applicable in is applicable Approach is Income Approach The Income estimate. The Discounted Flow Analysis wherein projected sales ofthe subject developers who evelopers who to d portions to ubject portions the s ales of ected s erein proj alysis wh low An Cash F Discounted Cash will u ultimately develop land ar are discounted into a pr present value estimate. stimate. e e esent valu to a scounted in e di he land evelop tthe ltimately d will Methodology Methodology Due to the consists Direct the Direct only the land, only parcel of land, vacant parcel a vacant of a ts of property consis subject property the subject that the fact that the fact Due to Comparison Approach and a a form form of of t the Income Analysis) Flow Analysis) Cash Flow (Discounted Cash Approach (Discounted e Approach he Incom roach and rison App Compa utilized. have been een utilized. e b hav

UATION FIRST AMERICAN REAL ESTATE APPRAISAL AND EVALUATION ND EVAL PPRAISAL A -- A SERVICES STATE SERVICES AL E COMMERCIAL RE ERICAN COMMERCIAL T AM FIRS 714.550-7057 FAX 714.550-7057 714.580-7056 HONE 714.580-7056 1217 NORMANDY PLACE SANTA ANA, CALIFORNLk 92705 PHONE FAX 705 P 92 FORNL-X_ NA, C_kLI ANTA A LACE S YP 1217 NOR_\L_ND 8 4 48

DIRECT Introduction The Direct Comparison

COMPARISON

APPROACH

Approach is based upon the premise that when a property is replaceable to acquire an equally as the Principle of in making the decision and

in the market, its value tends to be set by the purchase price necessary desirable substitute property, assuming no costly delay is encountered the market is reasonably Substitution) informed. In appraisal practice,

this is known

A search was undertaken to identify recent sales of comparable searched for comparable family developments. data was average. sales of small to medium-sized, In our survey, eleven single-family

properties.

In our survey, we of singleThe area of the

bulk acreage transactions sales were uncovered.

sales covered the northeastern portions of the Coachella Valley. The quality and quantity of the Of the sales uncovered, the most relevant were selected and are set forth in is provided in the (able on the this report. A summary of the most comparable sales information

following page. The data sheets are located before the sales location map.

_This approach is a method of analyzing the subject property by comparison of actual sales of similar properties. These sales are evaluated by weighing both overall comparability and the relative importance of such variables as time, terms of sale, location of sale property, lot characteristics, improvement characteristics and amenities (if any).

FIRST

AMERICAN

COMMERCIAL PLACE *SANTA

REAL ANA,

ESTATE

SERVICES 92705*

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AND

EVALUATION

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PHONE

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Analysis of Comparable

Sales sales have been analyzed on a price per buildable lot basis. The were based upon price per lot. A more detailed the comparable sales used in the analysis.

For comparison, the comparable The following table summarizes description of each transaction

comparables were compared to the subject and final conclusions

is included in the pages following the table.

SINGLE-FAMILY RESIDENTIAL COMPARABLE SALES # 1. 2. 3. 4. 5. Location PA 1 subject development, Indio, CA PA 2 subject development, Indio, CA PA 3 subject development, Indio, CA PA4 subject development, Indio, CA PA 5 subject development, Indio, CA Sale Date Mar 05 Mar05 Mar 05 May 05 Mar 05 Cash Equivalent Sale Price** $17,281,075 $14,728,625 $11,689,842 $18,619,937 $13,934,365 Total Acres 47.09 36.58 25.67 41.56 26.01 Lots 178 128 86 133 1L0 Finished Lot Costs $113,500 $132,000 $152,000 $151,000 $141,000

Source: First American Commercial Real Estate Services ** Sale of land in Blue Top Condition

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Datum No. 1

This is within the subject master plan, known as Planning Area 1. This sale took place on March 1,2005 for $17,281,075 for the blue top conditioned land. The finished lot estimate was reported at $113,500 for a density of 3.78 lots per acres. This sale is located on the NEC of Golf Center Parkway and Avenue 43. Only 33.05 acres will be used for residential, giving the residential acreage a density of 5.38 lots per acre.

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Datum No. 1

This is within the subject master plan, known as Planning Area 1. This sale took place on March 1,2005 for $17,281,075 for the blue top conditioned land. The finished lot estimate was reported at $113,500 for a density of 3.78 lots per acres. This sale is located on the NEC of Golf Center Parkway and Avenue 43. Only 33.05 acres will be used for residential, giving the residential acreage a density of 5.38 lots per acre.

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NORi\L-KNDY PL-KCE oSA_NTA ,..LNA, CALIFORNL__ 92705e PHONE 714.580-7056 FAX 714.550-7057

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Datum No. 2

This sale is within the subject development and is known as Planning Area 2, Tract No. 316013. The total price is $14,728,625 and took place on March 28, 2005. The finished lot price is estimated at $132,000. The density is 3.50 units per acre. It is located north of Avenue 44 and east of Golf Center Parkway.

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Datum No. No. 3 Datum

Sijf

The sale is within within the the subject subject dev development and is isknown known as as Planning Planning Area Area 3 3 Tract Tract No. No. 3 31601-4. 1601-4. elopment and e is The sal The total price is $11,689,842 and is estimated at $152,000 per finished lot. This sale took place The total price is $11,689,842 and is estimated at $152,000 per f'mished lot. This sale took place on March 28, 2005. The size is 25.67 acres and has a density of 3.32 lots per acre. This is located on March 28, 2005. The size is 25.67 acres and has a density of 3.32 lots per acre. This is located within Tract No, No, 31601-4 31601-4 and and is is located located on on Avenue Avenue44, 44, east east of of Golf Golf Center Center Parkway, Parkway, in in the the City City within Tract Indio. of of Indio.

VALUATION D E AN FIRST AMERICAN COMMERCIAL REALEST ESTATE SERVICES APPRAISAL AND EVALUATION PPRAISAL --A RVICES SE ATE REAL IAL COMMERC MERICAN RST A FI 714.550-7057 FA_X 714.550-7057 FAX 14.580-7056 705e PHONE 1217 NORMANDY PLACE *SANTA .ANA, CALIFORNIA 92705* PHONE 7 714.580-7056 FORNL-X_ 92 , C_,_LI S_-LNTA ,MNA h_CE e PL LM'NDY 1217 NORi\ 53

Datum No. 4

The is a sale within the subject development and is known as Planning Area 4, Tract No. 316015. The total price is $18,619,937 and is estimated at $151,000 per finished lot. This sale took place on May 18, 2005. The size is 41.56 acres and a density of 3.20 lots per acre. This is located North of Avenue 44 and east of Golf Center parkway, in the City oflndio. Only 17.6 acres will be used as residential acreage, based on the residential acreage, the density would be 7.55 units per acre. The remaining acreage is for the lake.

FIRST AMERICAN COMMERCIAL REAL ESTATE 1217 NOR.z\L:_NDY PI_.-kCE eS.MN'TA A_NA, CALIFOR_'qL_

SERVICES -- APPRAISAL AND EVALUATION 92705e PHONE 714.380-7036 F.LX 714.530-7057

54

Datum No. 5

The is a sale is within the subject development and is known as Planning Area 5, Tract No. 31601-5. The total price is $13,934,365 or $141,000 per finished lot. This sale took place on March 25, 2005. The size is 26.01 acres and a density of 4.22 lots per acre. This is located north of Avenue 44, north of Tract No. 61601-4, and just south of the golf course driving range.

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NORI\LMNDY PI.ACE eSANTA ,MNA, CALIFORNLR 92705e PHONE 714.580-7056 F=X_X 714.550-7057

55

Single-Family

Residential

Land Sales Comparison

Approach

Analysis The adjustments

Five comparable sales were used to estimate the value of the subject properties. a 3plied and derivation of each are set forth in the following
LAND SALES ANALYSIS Sale I Unadjusted Price/SF Property Subtotal Financing Terms Subtotal Conditions Subtotal Market Conditions Subtotal Other Adiustments Location Parcel Physical Characteristics Legal Encumbrances Availability Zoning Highest and Best Use Amenities Total Other Adjustments Value Indication I for Subject Commercial of Utilities 0% 0% 0% 0% 0% 0% 0% 0% $113,500 0% 0% 0% 0% 0% 0% 0% 0% $132,000 0% 0% 0% 0% 0% 0% 0% 0% $152,000 0% 0% 0% 0% 0% 0% 0% 0% $151,000 0% 0% 0% 00,4 00,4 0% 0% 0%_ $141,000 I of Sale Rights $I 13,500 0% $113,500 0% $113,500 0% $113,500 0% $113,500 ADJUSTMENTS Sale 2 $132,000 0`4 $132,000 0% $132,000 0% $132,000 0% $132,000 Sale 3 $152,000 0% $152,000 0% $152,000 0% $152,000 0% $152,000 Sale 4 $151,000 0% $151,000 0% $151,000 0% $151,000 0% $151,000 Sale $ $141,000 0% $141,000 0% $141,000 0% $141,000 0% $141,000

grid.

Source: First American

Real Estate Services

The adjustments Property

made are discussed below: A transaction price is always predicated on the real property interests conveyed. The real property rights being valued in this appraisal are the fee simple interests assuming community facility district assessments under 2004-3 are in place. Consideration was given to the influence of financing terms and arrangements. However, all of the sales were either all cash or market financed and were adjusted where warranted.

Rights Conveyed:

Financing:

Condition

of Sale:

Each of the property transfers included herein was an arm's length transaction where the buyers and sellers were not under undue duress. No adjustment was made.

FIRST AMERICAN COMMERCIAL 1217 NO1LM.ANDY PLACE eS,kNTA

REAL ESTATE ,kNA, CALIFORNL_,

SERVICES -- APPRAISAL AND EVALUATION 92705e PHONE 714.580-7056 FAX 714.550-7057

56

Date of Sale (Changes in Market

Conditions):

All of the comparable sales occurred between March 2005 and May 2005 Our research indicates that the market has been very strong within this period. Our analysis considered price level increases since March 2005 in homes as well as residential lots. Based on Market Data information we have not made any adjustments to the comparable sales.

Location:

Adjustments were made to the data for differences in the location of the comparable properties. Consideration was given to variances in underlying land values, visibility, access and schools, as well as average sale prices of homes. Location adjustments were applied to the comparable sales where appropriate. However, the sales data did not permit the derivation of location adjustments through paired sales data analysis that was felt to be highly supportive. A number of other variables contained in the data set prohibit reasonable grouping of the sales. The market data was subsequently considered on a broader basis to identify general patterns which would indicate the need for location adjustments. No adjustment was necessary.

Physical

Characteristics:

Physical characteristics include such things as the parcel size and market appeal. In general, assuming all other factors are similar, larger developments will sell for less than smaller ones on a per lot basis due to the economics of constructing and operating larger developments. In addition, unit prices for most real estate products tend to decline as the number of units purchased increases. The subject property is part of a master planned community and all of the comparable sales where within that community.

Size:

It is difficult to measure from the market variances in size, therefore, the market data was considered a broader basis. No adjustment was made. The subject property will have a lake, two-golf courses and a club house. All of the comparables were located in the master planned community and no adjustment was necessary.

Amenities:

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NOR2\LMqDY PLACE eSANTA ANA, C.LLIFORNLk 92705e PHONE 714.580-7056 FAX 714.550-7057

57

Reconciliation Reconciliation of of Finished Finished Lots Lots Value Value Concluded Land Land Value Value Concluded

The adjusted adjusted land land values values concluded concluded for for the the subject subject range range from from $113,500 $113,500 to to $152,000 per lot. lot. The $152,000 per The average averageor or mean meanvalue valueis is $137,900, $137,900,while whilethe themedian medianvalue valueis is$132,750. $132,750. The concluded The The concluded estimate of of land land value value for for the the subject subject is is $137,000 $137,000 per land estimate per lot, lot, which which results results in in the the following following land value indicated indicated for for the the subject: subject: value
SUM SUM OF OF THE THE FINISHED FINISHED LOT VALUES LOT VA LUES RECONCILIATION SUMMARY SUMMARY RECONCILIATION Esti mated Lot Value Estimated Lot Value

Lots
635 635

Indicated Indicated Value Valu e $86,995,000 $86,995,000

$137,000 $137,000

Source: First Source: Commercial Estate Services First American American Comm ercial Real Real E state Servic es

We have have concluded concluded at at $137,000 $137,000 for for a a finished finished l lot, that indicates a value We ot, that indicates a value of of $86,995,000, $86,995,000, or or $87,000,000 R Rounded. $87,000,000 ounded.

1217 NOtL_ 1217 NORMANDY PLACE SANTA ANA, CALIFORNIA 92705 92705 PHONE 714.580-7056 FAX ,L_qDY PL ACE S_qT A AN A, C_LIFORNL_. PHONE 714.580-7056 F_LX 714.550-7057 714.550-7057 58

FIRST MERICAN FIRST A AMERICAN COMMERCIAL REAL ESTATE SERVICES APPRAISAL ANDE EVALUATION C OMMERCIAL R EAL ESTA TE SERVICES -- A PPRAISAL AND VALUATION

DEVELOPMENTAL

ANALYSIS

Following is a summary of an estimated analysis of the costs of development the subject property. of the subject zones.

and absorption

for

The cash flow analysis takes into account the time and cost of absorption

The reader should note that this is an analysis of typical investor thinking and not a projection or future value estimate. This analysis is to estimate the value of the Community prior to full absorption, and after full absorption. Facilities District No. 2004-3 at completion,

Absorption Market feasibility deals with market conditions which influence the subject property. The major factors in considering whether a development lot values in relationship to the competition is feasible in the market are the potential finished and the subject's market segment, as well as the

demand for reasonably priced finished lots within that market. Based on Market Profiles Consultants' study, the builders' proforma and our analysis, it is our builders over a

opinion the subject lots could be sold out to initial purchasers proposed one year development General, Administrative,

or merchant

time frame. For our cash flow we used 1 year. Costs, Profit and Marketing Costs The office field other

Taxes, Development

We have estimated the overhead, real estate tax and marketing costs for the subject parcel. category of "Overhead" covers all overhead and management, expenses, supervision miscellaneous accountants, personnel, expenses. the management insurance Marketing premiums, expenses travel and including vehicle the developer's expenses, and staff, along with supporting clerical/secretarial,

include not only sales commissions We have utilized

but also

brochures, advertising,

closing costs borne by the seller, and any other items required to attract a successful transfer. 2% for general and by similar

and secure buyers to complete administration projects. The estimated percentage Assessment

costs and 2% for marketing

for costs based upon rates experienced

District

and ad valorem

tax cost is not computed The tax calculations

on an exact have been

formula, rather it is on a per acre or unit basis.

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NORz\LkN-DY PLACE *S.,MNTA ANA, CALIFOR.NL_t 92705* PHONE 714.580-7056 F.,MX 714.550-7057

59

approximated at a rate of 2% of the estimated value during the sell-off period, reflecting bonds and finished condition of the land.

the

Development

cost proforma has been provided by SunCal Companies. the cost per lot is $39,425.74.

The total costs for the contribution is

subject tracts is $25,035,347, $3,168,656 or $4,990.01 Discount Rate

The developer

per lot, leaving a residual for the bond of $21,866,691.

The final element in the discounted

cash flow analysis is the discount rate. Since we have used

a format which incorporates a partial profit in the discount rate, the rate will need to cover the investment in the land and compensate for all the risks and effort in developing was added as a line item in our cash flow. the land, which

The discount rate used in our analysis reflects time, risk and return for this development. experience assumptions with other similar developments have been undertaken indicates

Our a

that the larger and more complex

property, the greater the discount rate required.

It should be noted that the discounted

cash flow

on a before-tax

basis and before the effects of financing.

Different types of investments

require widely varying rates of return. The lowest rates are those A "safe" rate is represented by the return on U.S. Government at higher risk, is corporate bonds were selling can be much alternative,

attached to the safest investments.

Treasury rates, as of June 2005 was 4.37%. Another

bonds. As of the effective date of this appraisal, long high-yield corporate at average yield rates of 5.40%. However, even high-yield corporate an investment in development land like the subject property.

bonds are less risky than

Bond investments

smaller than the amount needed to buy the subject land, the bonds are far more liquid and there is a larger pool of potential buyers. yield rate on high-yield Consequently, the discount rate should be higher than the

corporate bonds. investor' s initial

According to the 2005 second quarter, Investor Survey published by Realtyrates.com, 8.78% to 22.01%. The subject land is not an income property.

in various types of improved real estate (incoming properties) required an average yield between It requires an enormous construction, investment and it will require cash infusions to cover infrastructure overhead and carrying costs. development

It would be very difficult to find a buyer for a quick sale if the

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NOtL\LANDY PI-,_CE eS,MqTA _M'qA, CALIFORNL_ 92705e PHONE 714.580-7056 FAX 714.550-7057

60

property had had to to be be liquidated. liquidated. Therefore, the yield yield rate rate should should be be substantially substantially higher higher than than the property Therefore, the the average 12.0% return on on income income properties properties and, and, in in fact, fact, higher higher than than the the highest highest rate rate of of return return on on average 12.0% return income properties. According According to to Realtyrates.com, Realtyrates.com, Developer's Developer's Survey Survey, PUD' s income properties. , subdivisions subdivisions and and PUD' s actual discount rates rates for for 500+ 500+ units units ranged ranged between between 14.07% to 34.62%. actual discount 14.07% to 34.62%. Banks are are currently currently charging charging approximately approximately 7.54% 7.54% (prime (prime rate rate 5.54%) 5.54%) plus plus 2% 2% for for loan loan costs. costs. Banks Considering loan costs, costs, liquidity liquidity risks, risks, property property taxes taxes and and profit profit for for the the holding holding period period before before Considering loan a sale could could occur, occur, a arate rate higher higherthan thanany anyof ofthe theabove abovein indictated dictatedyield yieldwould wouldbe berequired. required. In a sale In light of these these facts facts and and analysis, analysis, the the appraisers appraisers believe believeit it is is reasonable reasonable to to require require at at least least 6% 6% light of premium the yield yieldrate rateon onsecure secureincome incomeproperties propertiesfor foran aninvestment investment in in development development land land premium above above the like the the subject subject property. property. A like A 6% 6% premium premium on on the the 10.0% 10.0% rate rate reported reported for for secured secured income income properties produces produces a adiscount discount rate rateof ofapproximately approximately14%. 14%. It Ithas hasbeen beenthe theappraisers' appraisers' experience experience properties over the the last last several several years years that that discount discountrates rates on on vacant vacant land land have have ranged ranged from from 12% 12% to to as as much much over as 25%. 25%. In rate of of 14.0% is appropriate appropriate for as In general, general, it it is is believed believed that that a a rate 14.0% is for the the subject. subject. In order order to to run run a single Discounted Cash Flow Flow for for the the subject, subject, it it was was necessary to make In a single Discounted Cash necessary to make an an analysis based on on the the estimated estimated time time period period that that the the land land development development will will be be in in place place and and that that analysis based the number number of of lots lots projected projected by bythe thedeveloper developer coincides coincides with withthe the estimate estimate by by the theMarket Market Profiles Profiles the absorption estimate. absorption study study estimate. As has has been been explained, explained, the the subject subjectlots lotsare are projected projectedto tobe beabsorbed absorbedin inone oneyear. year. The The bulk bulk lot As lot sales are scheduled scheduled throughout throughoutthe theone oneyear yearabsorption absorptionperiod. period. This This is consistent with with Market Market sales are is consistent Profiles "land "land take takedown" down" absorption absorptionestimates estimatesfor forall allproduct producttypes. types. Sales Sales prices prices for for the bulk Profiles the bulk lots sales are anticipated anticipated to to remain remain stable stable for for the the first first year year and and then then are lots sales are are likely likely to to increase. increase. However, we we have haveused usedaazero zeroinflation inflationassumption assumptionduring duringour ourcash cashflow. flow. A Anon-constant non-constant dollar dollar However, assumption would would have have resulted resulted in inaahigher higherdiscount discountrate rateselection. selection. Please Please refer refer to to the the following following assumption page for for our our detailed detailed Cash Cash Flow Flow A Analysis. page nalysis. This analysis analysis results results in in a adiscounted discounted "as "as is" is" value value of ofthe theland landwith with the the bond bond amount amount in in place place for for This
the the residential residential lots. lots.

FIRST AMERICAN COMMERCIAL REALESTAT ESTATE APPRAISAL AND EVALUAT EVALUATION FI RST AMER ICAN COMM ERCIAL REAL E SSERVICES ERVICES --- A PPRAISAL AND ION 1217 NORMANDY PLACE S_X4TA *SANTA A ANA, C.-kLIFORNL-k PHONE 714.580-7056 FAX 714.550-7057 121 7 NOtL\IAND Y PLACE NA, C __,IFORNLk 9292705* 705 PHONE 71 4.580-7056 F ,M,x_ 7 14.550-7057 61 61

DISCOUNTED CASH CASH FLOW DISCOUNTED FLOW ANALYSIS ANALYSIS


CFD2 004"3 CFD 2004-3 Riming Pim'Vt Am _U I

Properly Typos. PropMly Types: RESIMP. .IMPLOTS RES. .LOTS

IIllOflot 0110184NI per /trait Price Isdce _ unit un4 17B $137000 I Z8 $13r.000

Total Told $24,386000.00 $24+31,000,00

IJ SUBTOTAL SUBTOTAL

lie 178

$131,000 $137,0DO 024.366.000.00 $24,366,000.00I I

TOTAL DISCOUNT RATE:

$24.688000.00 14.00%

Examosex. EJmnw_ DEVELOPMENT COSTS OEVELOPMENT COSTS O& A COSTS COSTS 13 6A

REAL ESTATE REAL ESTATE TAXES TAXES MARKETIN C GOSTS MARKETING COSTS

$668.200 $884.200 2.DO% 2.00% 2.00% 2.00% 2.00% 2.00%

!YEARS !YEARS RES. IMP LOTS RES. IMPLOTS

1 1 178 178

22

3 2 0 0

4 0 4

77

10 10

tl

12 12

13 13

14 14

15 15

18 YEARS 16 TOTAL TOTAL YEARS 178 178

TOTAL LOTS TOTAL LOTS TOTAL ACRES TOTAL ACRES I ITOTAL REVENUE(YEAR TOTAL REVENUFJYEAR

178.00 178.CO $24,368.030.00

SO4,31_.DOO.DO

$0.00 10.00

10.00

SO.00

$0.00

SO.00

$0.00

SO.DO

$0.00

S0.D0
$0 SO

$0.00

SO.CO
10 SO

$0.00

SO.DO

$0.00

SO.00

50.00

S0.DO

50.00

SO+DO

10.00

SO.DO

$0.00

SO.DO

$0.00

$24,388000.00 I

SO.DO $24.3CO,CO0.CO

EX,"__',,',3 EXPENSES DEVELOPMENT COSTS DEVELOPMENT COSTS O&^ COSTS G 11, A COSTS REAL TAXES REAL TAXES MARKETING COSTS MARKETING COSTS

$660200.03 SOIm,2CO+DO $417,720.00 $481,)'20.CO

0.00 0.DO $0.00 SO.00

0.00 0.00 $0.00 SO.00

I!TOTAL EXPENSES: TOTAL EXPENSES:

II0.00 $0.00 $487,720.03 S4M,TDO.00 SO .DO $0.00 o 0 0 o 0 o $1,883,640.00


$22,822,380 I_,l_t, 3_ 0.677193% 0.Mrt63% $19.758.458 $19.756,456

$1.863,640.DO

SO.CO $0.00 $0.00 SO.00 SO.DO 50.00 SO' $o. $0 SO SO SO $0.00 SO.DO
$0 SO 0.000000% 0.COO000% $0 SO

SO.DO $-0.120 $0.00 SO.DO SO+DO $0.00 so SO $O SO


10 SO 30.00 $0 $0 0.000000% 0.DODO00% $0 $0

0.00 0.00 $0.00 SO.00 5-000 SO.DO $0.00 S_DO I_DO $0.00 so SO $0 SO $0 SO 10.00 30 SO 0.000000% 0.0DOCO0% $0 SO

SO.00

SO.DO

0.00 0.DO $0.00 SO.DO $-13.00 S'0.DO $0.00 SO+DO 10.00 SO.DO $o SO So So $0 SO saw

50.00 SO.DO sa.00 $.O+CO 10.00 S_CO $0.00 _00 so SO so SO So SO $0.00 $0 SO 0.000300% 0.000000% SO SO

$0.00 S(_00 tato SO_0 $0.00 S_CO $0.00 SO.DO So SO So SO $0 SO $0.00 $L1 S0

$0 $0 1000 SO.DO 50.00 $-0.DO 10.00 SO-DO 00.00 S(_DO SO SO $0 So $0 SO $0.00 $0 SO

$0 SO $0.00 SO.DO 5-0.00 SO.CO Moo SO,DO $0.00 SO.DO 00 SO so SO SO SO $0.00 $0 SO

SO.DO
$0 SO

SO.DO

SO.DO

S0+DO

SO,DO

SO SO $003 SO.DO to.00 F0.00 $aoo S0.DO $0.00 SO+00 30 SO So SO SO SO $0.00 $0 SO

So

SO

$0.00 SO.00 8-0.00 S'0.DO $000 SO.DO 00.00 SO+DO so SO to 1o So SO $0.00 $0 $0

$0 SO $0.00 SO.DO s-o.00 SO+00 $0.00 SO.DO $0.00 SO.DO so SO So SO SO SO $000 $0

SO SO $0.00 S0.DO $-o.00 SO.DO Woo SO.DO $aoo SO.DO 30 SO $0 SO 30 SO 60.00

$0 SO $0.00 SO+DO ta.00 SO100 50.00 SO.CO so.00 SO-DO 3o SO So SO SO s000 $0

SO

SO+CO

SO,DO

$0 SO $0.00 SO,0S 8-0.00 $-0,DO $0.00 SO.DO $0.00 SO*DO So S0 So SO SO $o $0.00

$0 SO $0.00 $0.00 5-0.00

$888.200.00 S_U_.2DO.DO $487,720.03 S4_,720.DO 50.00 S0.DO SO.DO $487,720.00 $0.00 1IS.00 $48;',720.DO $0.00 so.00 S0.DO S0.CO $0.00 $0 SO SO.00 S0.00 $O SO So.so So 30.00 SO SO CO $1,883,640.03 I $aw

$0.CO $0

SO.DO
$0

SO.DO SO

SO-DO
30

SO.DO $1,1M3.640.CO
$0

Ned CUhFlow: Flaw; Nal Cash PresellVid Praiml Value Fedor: e4 Facin_ PrelenValue Present of Cash Flaw lValue ofC lml+ Flow:

S0

$0

S0

$22,522,380 1.000000%

$22,522,360 t.00DODO%

0.003000% 0.DODOOQ% $0 S0

0.000000% 0+DODODO% 0.000300% O.DO(OOD% SO SO $0 SO

0.000000% 0.000000% 0.030300% 0030000% 0.000000% 0.0DOODO% 0+0DO(X)0%0 .0O0DO0%0 DODO00%0.000000% 0.000000% $0 $0 $0 SO $0 $0 $0

0.DOODOO% 0.DODO0O% 0.(XXXX)0%


$0

0.000000ls

0.000000%

SO

$0

SO

SO

$0

$0

SO

SO

$10758,450

$1g+75S.4_

!'Indicated ':+lncl cared Net Present Value

Net Present Value

II

019,756,456

s,.._+_6

Source. Finn American Real Emus Services SourceF +rSi ,_rlllr+caCommon:al C n ot+_lm'cJiiI Rea_ E|lale So_ces

DISCOUNTED CASH CASH FLOW FLOW ANALYSIS DISCOUNTED ANALYSIS


CFD2004CFO 2004.3 3 siennese 2 _ng IN Area2

Property ProiNmTypes: c Tyl ly a4s: RES. LOTSS RESIMP. .IMP.LOT

e lotheel POO. per Total Jof ofIoUu _4 1Prir_ I_caret w unil Tola_ 128 $137.000 t28 $137,0(30 $17,536,000.00 $t7,556.0DO.00

I ISUBTOTAL SUETOTAL

128 128

$137.000 $13T,DO0 $17,536,000.00 StT,534,DOO.00

TON
DISOUNT RATE:

51 7.536.000.00
14.00%

EaReigemic... DEVELOPMENT COSTS DEVELOPMENT COSTS OS COSTS 06 AA COSTS REAL ESTATE TAXES REAL ESTATE TAXES MARKETING COSTS MARKETING COSTS

$635721 N38,72I 2.00% 2,00% 2.00% 2.00% 2.00% 2.00%

IYEARS YEARS RES. IMP LOTS RES. IMPLO TS

1 I 128 t28

2
0 0

3 3 0 0

4 4

5 5

6 S

7 r

6 8

10 10

I1

12 12

13

t3

14

14

15

15

16 TOTAL YEARS

te

TOTALYEARS 128 128

TOTAL LOTS TOTAL LOTS

128.00 128,00 $17530000.00 $1T.S36,DOO.DO $0.00 SO.00 50.00 SO.DO $0.00 SO.DO 10.00 S0.00 $0.00 SODO $0.00 SO.00 $0.00

TOTAL ACRES TOTAL ACRES I1 TOTAL REVENUE/YEAR TOTAL REVENUErCEAR


EXPENSES O EVILOPMENT COSTS a A COSTS aa&ACO STS REALTA XES REAL TAXES MARKETING COSTS MARKETING COSTS

SO.00

50.00

SO.00

0000

SO00

50.00

$0DO

$0.00

SO.CO

$0.00

SO.DO

$0.00 317,538.000.00

SO00

St7,5:_,000.00

,,,e_m,_ COSTS

$635.721.00 $350.720.00 f_S0.720.00 00.00 S0.DO $350.720.00 S,lkq). 720._1

m.,_,=o
so.(Io $0.00 o O 0 0

0.00 10.00 so.00 $0.00 so.DO WOO so.0O

oDo

0.03

o Do

so.DO $0.00 SO 10 SO so so So $0.00 so.D0


SO SO 0.000000% 0,_% $0 SO

$0.00 so.DO $0.00 $-O.DO 50.00 SO.0O so.DO $0.00 50 SO so 10 SO so $0.00 so,DO 10 so 0.030000% 0,000000% $0 so

0.00 00.00 SO.DO 1-0.00 _O.DO 10.00 SO.QO $0.00 $o.oo 10 SO so so so so 10,00 so,DO SO so 0.030000% 0.000000% SO so

oDo

0.00 00.00 SO.DO $-0.00 $-0.DO 50.00 14).00 $0.00 so.DO 50 SO so SO 10 so $0.00

oDo

so 10.00 so.00 1-0.00 $-0,00 $0.00 SO.(Xi $0.00 so.DO SO SO so so go So 10.00 S0,DO SO $0

so

$0 30.00 so.DO 0-0.00 I-0.00 $0.00 SO.DO saw soDO SO so SO so SO SO $0.00 S $0 $0 0.000000% 0,0DO000% $0 SO

so

SO 60.00 so,DO 5-0.00 S-0.DO $0.00 SO,00 $0.00 so.DO 10 so so so $0 so $0.00 so.DO 10 $0 0.000003% 0.000000% SO SO

so

$0 $0.00 SO.00 1-0.00 F0.00 $0.00 so.00 so.00 so.DO SO SO $0 so So SO $0.00 10 so

50 10.00 so.00 0-000 $-O.DO $0.00 so.00 $0.00 I;O.OO $0 SO so SO 10 so $0.00 SO SO

so

$0 00.00 SO.DO $0.00 $-0.00 $0.00

TOTAL EXPENSES: ]TO TAL EXPENSES:

o o $1,340.161.00 $ t,340.161.00
$16,195.639 $16,1DO.839 0.577193% 0,871193% 114,206176 $14._.BTE

$O00 $0.00 SO.DO SO SO so SO So So


$0.00

10 $0.00 so.DO 1-0.00 $-ODO $0.00

so

so.00 $0.00 so.DO SO so $0 SO So So


$0.00

50 10.00 SO.DO 1-0.00 S-0.DO $0.00

So

$0.00 $0.00 so.DO $0 So $0 SO So So

So $0.00 so.DO 5-0.00 $43.00 $0.00

so

so 10.00

so

SO.00 $0.00 SO.DO $0 $0 so SO So so


$0.00 SO

5-0.00 S-0.DO 10.00 S0.DO 50.00

so.DO

S0.DO
10 $0

0.DO

S0.DO

so.DO

SO.00
SO so

so.DO
$0 so

10.00 $O

S0,DO so

SO.DO SO

10.00 $O

SO.DO $0 SO so so So SO

30.00 SO,00 1-0.00 S-0.00 $0.00 SO,00 $0.00

so $350,720.00 ._.721 oo
$0.00 SO,DO 5350720.00

$350,720.00

SO.00 SO

$0.00 50

SO.DO $0 so so $0 50 so

$1,340,161.00 1 $16,165,630 1.000000%

$350.T20.00 $0.00 so.DO $0.00 SO.OO $aoo SO.DO so.00 SO.DO

SO.00 SO

$1,340,161.00 $16,195,1)39 1.000000%

NMC Hh Flow: NM Cash Flax


Present Fo000. PmmwValue _ Va_ i m Fac_';

0.000000% 0,DO0000% $O SO

0000000% 0DODO00% $0 SO

0.000000% 0,000000% 0.000000% 0.000000% 0.000000% 0.000000% 0.000000% 0.000000% 0.000000% $0 so SO SO SO SO $0

0,DODODO% 0.0DOO(X)%0,00(3000% 0.00DODO%0.DOODO0% 0.0(XX)DO%0,DO(O00% SO


SO

P_'IIImlV adue ol CashFlow: Present Valued Cash Flow:

So

10

so

50

SO

50

SO

114.206.876

$t4.20G.76

('Indicated Net Present Value f

ind Gated Net Present

Value

d sisaosais

!I

sl4,2t_q?_

Source American Commercial Real Estate Services S_r_: rsl Fir slAmair.a nCog_nerczzd Read Estate Ser_rAs

DISCOUNTED DISCOUNTED CASH CASH FLOW FLOW ANALYSIS ANALYSIS


CFO 20C4-3 CEO 2004-3 Planners kee F_innln_ g ee 33

Property Types: Prc_erty TypeS; RES. IMP. LOTS RES.IMP .LOTS

8 per one Tole, II ol O/lotrunit Iot/unlt Pr= PriceINKunit Tolat ea $137,030 86 S13T,0QO $11,790000.00 $11,TS2,000.(]0

!SUBTOTAL tSUSTOTAL

06 M

"

$137,000 $11,782,000.1:0 $i=T,000St l.7_.DO I

0.00 I

ITOTAL TOTN? DISCOUNT RATE: DISCOUN R T ATE:

$1 1.752,000.00 $i 1.762.000.00 14.00% 14.00_

EIDIMOOL.. DEVELOPMENT COSTS DEVELOPMENT COSTS G EA COSTS G ACOSTS REAL ESTATE TAXES REAL ESTATE TAXES MARKETING COSTS MARKETING COSTS

$420,141 $429,14 I 2.430% 2.DO% 2.00% 2.00% 2.00% 2.00%

I IYEAR YEARS S RES. IMP LOTS RES, IMPLOTS

10 Be

11

2 2 0 0

3 3 0 O

4 4 0 0

5 S

10

t0

11

tl

12

12

13

t3

14

14

15

IS

18 TOTAL YEARS

16 TOTALYEARS I so 66

TOTAL TOTAL LOTS LOTS TOTAL ACRES TOTAL ACRES !TOTAL REVENUE/YEAR ! TOTAL REVENUF._EAR
EXPENSES DEVELOPMENT COSTS DEVELOPMENT COSTS D A COSTS G6& ACO STS REAL TAXES REAL TAXES MARKETING COSTS MARKETING COSTS

0600 CO.O0 $11,702,000.00 $1t,7S2,COCO O 10.00 SO.DO 50.00 S0.DO 80.00 SO.DO 80.00 I;0.o0 $0.00 SO.DO $0.00

SOCO

80.00

SO.DO

80.00

SO.CO
so SO

0
SO

80.00

SO.DO

$0.00

S0.CO

50.00

SO,DO

00.00

SO.DO

50.03

SO,DO S1 t,TS2,0CO.CO I
$429,141.00 S429,141.00 1235,040.00 |235,1_40.DO 80.00 SO.00 $235,640.00 |215,M0,00 10,00

511,782.000.00 I

5120.111.00 _ki2g.141.Do
$216,040.00 SO215,e40.CO S0.00 S0.IX) $235,640.00 $235,640.00 $0.00 SO.DO 0 o 0 o

0.00 O.DO 00.00 SO.DO $0.00 SO.IX) $0.00 SO.IX) $0.00 SO.DO SO $0 $O So

0.00 0.00 10.00 SO.DO 1.0.00 |-O.CO $0.00 SO.IX) $0.00 SO.DO SO SO $0 So

0.00 0.00 00.00 SO.DO 9-000 $-0.CO $0.00 SO,IX) $0.00 SO.DO

0.00 0.DO $0.00 SO.DO 60.00 S-0,IX) 00.00 SO.IX) $0.00 SO.DO SO SO SO SO $0.00

$0 $0 $000 SO.DO 60.00 S-0,00 moo $0.00 $0.00 SO.OO SO SO $0 So

$5 SO 80.00 SO.CO 8-0.00 . $-0.IX) 10.00 SO.IX) $0.00 SO.DO $0 SO 50 SO

SO $0 10.00 SO,DO 60.03 ll-0,00 $0.00 SO.IX) $0.00 SO.DO $0 SO $0 SO $0.00

o o
TOTAL EXPENSES: 1TOT /_ EXPENSES: . Na) Flow: N_Cron Cesh Flaw: 8900,421.00

so SO
$0.00

so SO
$0,03

SO $O SO SO

00.00 SO.DO 60.03 S0.IX) 80.00 SO,IX) 80.00 SO.DO $0 SO

80.00 SO.DO 86.00 SO.CO $0.00 SO.IX) WOO So.DO

SO

$0 SO 50.00 SO.DO 8-0.00 $-0DO 10.00 10.00

$0 SO 50.00 SO.DO 8-0.00

$0 SO
$0.00

so SO
so SO

$0 SO
50 SO

so So
$0.00 so 0.000000% 0O0Q_ 80 $0

so SO
50 SO

sg00,421.IX)

S0,DO
So SO

SO,IX)
80 So

SO,DO
$0 S0

SO.IX)

10.00

so SO
$0.00 so

50 SO

SO.00

SO,IX) SO

SO,DO

SO.CO So

$0.00 so

so SO $0 SO So So
SO

S0,CO

5060 $0

SO.IX) SO.DO so SO $o SO so SO

SO.IX) $0.00 SO.IX) $0.00 SO.DO So SO So SO so SO


80.00

50 $o $0.00 SO.DO 60.00 SO.00 50.03 SO.00 $0.00

So,IX) SO

SO,IX)
so

$0.00

So,CO to SO so So $0 SO
$0

$0 SO $0.00 $0.CO 60.00 SO.IX) $0.00 SO.IX) $0.00

$0 SO $0.00 SO.DO 60.00

10.00

So.oo $0 SO $0 SO so SO
$0

F0.00 $0.00 10.00 $0.00 So.DO $o SO So SO so SO


10.00

$0 SO $0.00 SO.DO 60.00 S0.IX) $0.00 SO.IX) 10.00

$0.00

SO,DO $O SO so So so SO
$0

So.DO $0.00 SO'DO 8900,421.00 I


110601,579 1.000300%

SO.DO soca

$0.00

l;o.oo

So.IX) SO

SO.IX) SO

SO'IX)
$0 0.000000%

SO,IX) So

$900,421,00] $10,1RI1,579 1.000000%

$10,8111,579 StO,Ml,Sll; 0177193% 0.677193% 89,545245 $9.545.,9.45

SO

So

PreurdVadue Prosant Voles Factor: Fac_:


Present Veto. of 4C CaBil Floe P;'uerdV _ueo ash FLOW:

6000000% O,0000DO% 0.000000% 0.00DO_ 10 SO SO So

0.000000% 0.000_ $0 SO

0.000000% 0.000000% $0 SO

0.000000% 0.000000% $0 $0

0.000000% O.0(_ 50

0.000000% 0.000000% 0.000000% 0.000000% 0.000000% 0. So

DOQQOO% 0.000000% 0.000000% 0.DOODO0% 0.000000% g0(_%


50

0.000000%

0.000000%

0.003000%

0.003000%

SO

SO

so

So

So

So SO

$0 S0

So $0

So SO

$0 SO

59,545,245

S9.545.245

Indicated Net Present Value !! Indicated Ne[Present Value

II

19,045,245

st_._.Z.L_

Sow.. Fool Commercial Reel Emelt. Services Source: F_American il hne_can _mer cllln mll E|tall)Se r_s

CFID 2004-3 CFO 2004-3 Flamm 44 PlarevArea nA grea

DISCOUNTED CASH DISCOUNTED CASH FLOW FLOW ANALYSIS ANALYSIS

Properly Types: Properly Typos; RES.IMP.LOTS RES. IMP. LOTS

I/ ol laUunil per wit Total JOI IOUU_I Price Pricepe(u nll Total 133 $137,000 133 S137,0CO 511,221,000.00 S18,221,QOO.00

ISUBTOTAL SUBTOTAL

133 110221,003.00 t33 $137,000 S137,000 |1S,221,DO0.00I

1 TOTAL |TOTAL OISCOUNT RATS: DISCOUNT RATE:

Sl8.g_'1.0'00.00 1 $111,221,000.00 14.00% 14.00%

UMW:. DEVELOPMENT COSTS DEVELOPMENT COSTS G1A COSTS A COSTS REALE STATE TAXES REAL ESTATE TAXES MARKETING COSTS MARKETING COSTS

5663,671 :11_L1.5 I 7 2.00% 2.00% 2.00% 2,00% 2.00% 2.00%

IYEARS YEARS RES. IMPLOTS RES. IMP LOTS

1 133 133

2 2 0

3 3 0

4 4 0 0

5 5

6 6

$ 9

10 10

11 11

12 12

13 t3

14 14

15 15

15 TOTAL YEARS 16 TOTALYEAR&t33 133 i

TOTAL TOTAL LOTS LOTS TOTAL ACRES TOTAL ACRES TOTAL REVENUE/YEAR 1TOT AL REVENUE/YEN_
EXPENSES DEVELOPMENT COSTS OEVELOPMENT CO STS O& ACOS O6 A COSTS TS REAL TAXES REAL TAXES MARKETING MARKETING COSTS COSTS

133.00 1:)3.00 318,221.000.00 118,221.CO0.DO 3663,671.00 SO63,671.00 $364,420.00 S3S4,420.DO 10.00 110.00 1364,420.00 F_,4DO.GO $0.00 SO.DO 0o 0o 0o $1,392,511.00 Sl,392.511.00 $16,1211.489 S16J2&.48g 0.677163% 0.811183% $14,761,632 $14.761,1132 $0.00 SO.CO 0.00 0.00 $0.00 SO.DO 10.00 SO.00 $0.00 SO.00 $0.00 SO.DO SO SO $0 SO so SO $0.00 SO.DO 60 SO 10.00 SO.DO 000 0.00 $000 SO.DO 5-0.00 SO.CO 10.00 SO.DO 50.00 S0.DO $0 $o SO SO $0 SO $0.00 SO.DO $0 SO $0.00 SO.00 MOO 0,00 $0.00 SO.00 5-0.00 S-0.00 $0.00 SO.DO 50.00 SO.DO 60 SO $5 SO so SO $0.00 SO.CO SO SO 0.000003% 0.000000% SO SO $0.00 SO.CO 0.00 0.00 $0.00 SO.DO 6-0.00 S0.CO $0.00 SO,00 30.00 $0.(30 $0.00 $0.CO $0 SO woo S0.CO 1-0.00 SO.DO $0.00 SO.DO $0.00 SO,00 $0 So SO SO 10.00 10.00 SO SO 50.00 S0.CO 3-0.00 S-0.00 $0.00 SO.DO $0.00 SO.CO $0 SO SO SO 10 SO 50.00 SO.00 50.00 SO.CO $0 SO $0.00 S0.CO 343.00 S0.CO 10.00 SO.00 $0.00 SO.00 $0 SO SO SO 50 SO 50.00 SO.DO 50.00 SO,DO 10 SO $000 SO.CO 8-0.00 .I;-0.00 30.00 SO.DO $0.00 SO.DO $0 SO 10 SO $0 SO 50.00 SO.00 $0 SO 0 0 $0.00 SO.0O $0.00 SO,CO 50.00 SO.CO 30.00 $O.0O $0.00 511,221,000.00 I

SO.CO $18,221,0CO.CO I
00 $663,671.00 1364. SO SO63.571.CO $0 00 S0.CO I._4,420. DO 1-0.00 $0.00 $ $364,420.00 -0.CO SO.DO $0.00 SO.DO S364,420, $0.00 50.00DO SO ,CO SO,DO $0.00 $0 SO so.co $0.00 so SO SO.DO $0.00 $0 SO $1,392.511.00 SO.CO 50.00

EXPENSES: ITOTAL TOTAL EXPENSES: WI Cull Flow: NelCash Flow: Present Value Fe0101: P_'eSeN Vllue Fact_x; Present of Cub Flow: PresentValue ValueolCa shFlow:

so SO SO SO so SO $0.00 SO.DO
$0 SO 0.000000% G._DODO% SO SO

so SO 50.00 SO.DO so SO
0.000000% O.(_DODO% SO SO

so SO

so SO

0.000000% O,SODODO% 0.033000% O,DOGDO0% 50 SO 50 SO

0.000000% 0.000000% O.OOGCOO% 0,00_00% SO SO SO SO

SO.DO SO.00 50 30 $0 SO S0 0.000000% 0.000003% 0.000000% 0.000000% 0.000000% 0.000000% 0.000000% 0.000000% O.G_(X]0% O,ODO(X]0% 0.0(]0000% O._DODO% 0.DO0_0% O.(XX]ODO% 0.000000% 0.000000% SO SO $0 30 $0 SO SO SO SO SO $0 SO SO SO S0 SO
$0 SO

SO $0.00 SO.CO 5-0.00 SO.DO 50.00 SO,D0 $0.03 $0.DO $0 So $0 SO SO SO WOO SO.00

so

S0 $0.00 SO.CO 6-0.00 SO .CO $0.00 ,50.00 10.00 $0.DO $O SO SO SO 50 SO 30.00 SO.CO

so

so
SO $OW SO.DO 1-0.00 SO .00 50.00 SO,DO $0.00 SO.DO 50 SO $0 SO $0 SO 50,00 SO.CO

SO $0.03 S0.CO 50.00 SO .DO $0.00 SO,DO $0.00 SO.00 $0 SO 10 SO 50 SO 50.00 S0.00

so

so
$0 $0.00 SO.CO 1-0.00 I -0.00 $0.00 SO.00 $0.00 SO.DO so SO so SO $0 SO $0.00 SO.CO
$0

$oso
SO 60.00 SO.DO 0-4300 tO. CO $0.00 SO,00 30.00 SO .SO $0 so $0 SO 30 SO 10.00

oo

SO

so

SO

so

10

Sl.302.511.00I $16,828,469 $16,828_4g 1.000000% 1.0(X]_0% $14,761,132 $14,761,832

IIIndicated Net Present Value Jllnd catedNet Present Value

II

sii,761,1ut

s14,?61,toz

Soural : Fir_A.111,11/1 _ Source. Firwl C0111111.:181 R..I Sermon C_ivnerall R ill EMMA Ellltl _ r.ll

DISCOUNTED CASH CASH FLOW FLOW ANALYSIS ANALYSIS DISCOUNTED


CFD2004-3 CFO 2004-3 Pinning Area PtmNr_ /Vu 6 6

Property Types: Property Typel: RES. IMP. LOTS RE:S. iMP, LOTS

9IIof lolionit pm unit Taal o4 Iot/u_ Price Priceperunit Tolal 110 $137,000 I tO $137.0(X) $15,070000.00 $15,070,000.00

'SUBTOTAL [SUeTOT_.

110 110

$137,000 m_,o_

$15,070,000.00 I oo m,oTo.ooo. J

TOTAL n)t_. ..... 018COUNRATE: T RATE: DISCOUNT

$15.070.003.00 sls.o?o.ooo I .oo 14,00_, 14,133%

DEV1ELOPMENT COSTS DEVELOPMENT COSTS O6 &ACOST CI A COSTS S REAL ESTATE TAXES REAL ESTATE TAXES MARKETING COSTS MARKETING COSTS

954,901 f_901 2.00% 2.00% 3.00% 2.00% 2.03% 2.00%

IYEARS YEARS RES. LOTS RESIMP *tMPLOTS

1 110 110

2 2 0 0

3 3 0 0

44 0 0

7?

08

9 9

10 10

II 11

12 12

13 13

14 14

16 t5

15 TOTAL YEARS I 16 TOTAL YEARS 110 110

TOTAL LOTS TOTAL LOTS TOTAL ACRES TOTAL ACRES 'TOTAL REVENUEIYEAR ]TOTN.REVENUE/YEAR
EXPENSES DEVELOPMEN COST T S DEVELOPMENT COSTS

110.00 1 lO.Oo $15,070000.03 $15,070,000.O0 $0.00 SO.GO SOHO SO, GO 50.00

SO.GO

$0.00

SO.O0

$0.00

SO.O0

$0.00

SO.O0

$0.00

IO.00

50.00

SO.QO

O
SO SO $0.00 SO.00 $0.00 S-0.e0 $0.00 SO._ $0.00 SO.OO SO SO 50 SO $0 $o 9000 SO00

50.03

SO+00

$0.00

$O.OO

50,00

SO,00

50.00

$O.00

$0.00

$15,070,000.00'

SOOO $15,070,0OO.00
$540901.00 SO SO $S48,901.00 $301,400.00 $0.00 So.00 $301,400.00 9-0.00 $0.00 S-0.O0 t0.oo $301,400.00 90.00 $0.o0 $201.400.oo $000 $0.00 SOOO So.oo $0.00 $0 S0 SO+OO $0.00 50 SO SO.OO SO $0.00 SO So.co $1,161,701.00 I 50.03 SO.O0 S1,151,701.00 50 SO $13,919299 S13.Sle,299 1.000000% 1.000(_)%
1)2,209.034

13 & A COSTS G&ACOSTS REAL TAXES REAL TAXES MAJ_hlG COSTS MARKETING I_T8

'TOTAL EXPENSES: ITOTAL EXPENSES:

594901,00 154S,901,00 $301,400.03 13OI.400.00 $0.03 S0.00 9301.400.00 S_lOt ._.00 $0.00 So.o0 0 o 0 0 0 0 $1,161,701.00 |1,151,701.00

0.00 0.00 $0.00 SO.O0 $0._ $0.00 50.00 SO.00 50.00 SO.OO SO SO So 50 So $O $0.00 SO.gO

0.00 0.00 $0.00 14).00 S0.00 S-0.00 50.00 $O,00 $0.00 Io.oo SO SO $0 SO SO SO $0.00 SO.00

0.03 0.00 10.00 SO.O0 5-003 S-0.00 $0.00 10.00 50.00 SO.OO $0 SO 50 So 50 SO 90.00 S0.O0

0.00 0.00 . . $0.00 SO.m} 9-0.00 S-0.0o $0.00 I[,0,00 50.00 SO.OO SO SO 10 SO 50 So $0.00 $0.00

$0 SO $0.00 SO.00 6-0.03 S-0.00 $0.00 S0.00 513,00 So,oo SO SO SO SO SO SO 90,00 S0.OO

$0 SO $0.00 SO,00 6-0.00 S-000 $0.00 $0.00 $0.00 $o.oo $0 SO $0 SO SO SO $0.00 SO.O0

50 SO WOO SO.CO 8-0.00 S-.o.00 50.00 SO.00 $0.00 $o.oo $0 SO 50 SO $0 SO 60.00 SO.00

SO $0 $0.00 SO.00 9-0.00 I-0.00 00.013 SO.00 50.00 SO.OO SO SO 50 SO SO SO 50.03 SO.OO

SO SO 50.00 S0.00 6-0.00 S-O.eO $0.00 S0.o0 soap SOOO $0 So SO SO $0 SO 90,00 SO.00

SO SO 00.00 SO.O0 9.0.00 S.0.00 $0.00 SO.00 50.03 SO.OO 50 SO 50 SO SO SO 50.00 SO.DO

SO SO 60.00 SO.00 50.00 $-0.eO 50.00 S0.0O 50.00 SO.OO $0 SO $0 to SO SO $0.00 SO.(XI

50 SO $0.00 So.00 S-0.00 S-0.00 10.00 S0.00 $0.00 So.oo SO SO SO SO $0 SO $0.00 SO.00

SO SO $0.00 SO.O0 S-0.00 S-O.0o 50.00 SO.00 $0.00 SO,O0 $0 SO SO so SO SO $0.00 SO.GO SO SO

Net C41sh NM Cash Rom Row:


Resent Wk. Fodor: Pvuen[Vllul Fackx:

$13,9111,2119 St_918,299 0.677193% 0.1177_93%

$0 SO 0.000003% 0.00Q00_4 10 SO

SO SO 0.000000% 0.000000% 50 SO

$0 $0 0.000003% 0.000000% 50 SO

$0 SO 0.00001:0% 0.000000% SO SO

$0 SO 0.000000% 0.000000% $O $0

SO S0 0.000000% 0.000000% 50 SO

$0 SO 0.1700003% 0.O0_00% 50 $0

SO SO

90 S0

SO SO

SO SO

$0 SO

SO $0

0.000000% a000000x 0.000000% 0.000000% ov00000ss 0A:00000% 0.000000% 0.000000% 0.0Q0000% 0000000% 0000000% 0.(]O00(X)%0.000000% 0.000000% O.00000O%0.000000% 10 SO $o SO so SO so SO so SO $0 SO 50 SO so S0

PrsumlV 4dt ,O G ICNhFloor. Fk:_ Prowl Value of Cash

S 12.209.034 $12,209,034

S 12.20g.034

:Indicated Net Present Value

+l:_lndica NetPresent ted Value

Jl ssz,zz_,o._4

$ 2,209,03.4

Source: F irst& meriw1C t, Commute _li Source, First Amnon Reel 611a14 Serous RealEz taleSe r_ces

Summary of Valuations:

SUM OF THE VALUES CONCLUSION Discounted Bulk Value $19,757,000 $14,207,000 $9,545,000 $14,762,000 $12,209,000 270,408,000 $71,000,000

Subject Planning Area 1 Planning Area 2 Planning Area 3 Planning Area 4 Planning Area 5 CFD 2004-3

Lots 178 128 86 133 110 635 Rounded

Source: First American Commercial Real Estate Services

FIRST AMERICAN COMMERCIAL 1217 NORI\L-kNDY PLkCE eSANTA

REAL ESTATE ANA, CALIFORNL2k 67

SERVICES -- APPRAISAL AND EVALUATION 92705e PHONE 714.580-7056 FAX 714.550-7057

VALUATION

SUMMARY

The following values are the estimated values of the property as of June 17, 2005.

The estimated value of the residential parcel, discounted assuming the proposed Assessment District Financing is as follows: SEVENTY ONE MILLION $71,1)00,000

for the time and cost of absorption, is in place and ready for funding, DOLLARS

FIRST AMERICAN COMMERCIAL REAL ESTATE 1217 NORI\LkNDY PLACE eSANTA _A2,IA,C_LIFORNL_

SERVICES -- APPRAISAL AND EVALUATION 92705e PHONE 714.580-7056 FAX 714.550-7057

68

CERTIFICATION We certify that to the best of our knowledge and belief: During the completion of the assignment, we did personally inspect the property that is the subject of this report (except as specifically noted). We have no present or contemplated future interest in the real estate or personal interest with respect to the subject matter or the parties involved in this appraisal report, and our employment in this matter is not in any manner contingent upon anything other than the delivery of this report. We have no bias with respect to the property that is the subject of this appraisal or the parties involved with this assignment. Our compensation was not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value as estimated, the attainment of a stipulated result or the occurrence of a subsequent event directly related to the intended use of this report. This report is not based upon a requested minimum approval of a loan. valuation, specific valuation or the

The statements of fact contained in this appraisal report, upon which the analyses, opinions and conclusions expressed herein are based, are true and correct. This evaluation report sets forth all of the limiting conditions (imposed by the terms of my assignment or by the undersigned) affecting the analyses, opinions and conclusions contained in this report. The analyses, opinions and conclusions were developed and this appraisal report has been prepared in conformity with the Uniform Standards of Professional Appraisal Practice as promulgated by the Appraisal Foundation for an evaluation report. We alone have prepared the personal, unbiased professional analyses, opinions conclusions concerning real estate that are set forth in this appraisal report. and

William V. Shrewsbury, MAI, is a "Certified General Real Estate Appraiser" within the State of California. William V. Shrewsbury's Certification Number is AG004522. Jaimie Z. Basso's OREA License No. is AT031532. This appraisal report is invalid unless all signature pages have been signed. We certify that to the best of my knowledge and belief the reported analyses, opinions and conclusions were developed and this report has been prepared in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. We certify that the use of this report is subject to the requirements relating to review by its duly authorized representatives. of the Appraisal Institute

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES -- APPRAISAL AND EVALUATION 1217 NO1Lt\L-kNDY PLACE *SANTA ANA, CALIFORNL_, 92705o PHONE 714.580-7056 * FAX 714.550-7057

69

We are competent appraise this particular property type and have appraised similar ," ~~ We are competent to to appraise this particular property type and have appraised similar property types in the area. Disclosure of the contents of this appraisal report is governed property types in the area. Disclosure of the contents of this appraisal report is governed by the Bylaws and Regulations of the Appraisal Institute. by the Bylaws and Regulations of the Appraisal Institute. The Appraisal Institute conducts voluntary programs continuing education for its designated The Appraisal Institute conducts voluntary programs of of continuing education for its designated members. MAIs who meet the minimum standards of this program are awarded periodic members. MAIs who meet the minimum standards of this program are awarded periodic educational certification. educational certification. the date this report, William Shrewsbury has completed the requirements of the AsAs of of the date of of this report, William V.V. Shrewsbury has completed the requirements of the continuing education program of the Appraisal Institute. continuing education program of the Appraisal Institute. Respectfully s

William Shrewsbury, MAI William V.V. Shrewsbury, MAI Senior Senior Vice President Vice President California Certification No. AG004522 California Certi fication No. AG004522

ie Z. ociate aiser ifornia cense License AT031532 No.No. AT 031532

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL EVALUATION FIRST AME RICAN COMMER CIAL REAL ESTATE SERVICES -- APPRAISAL ANDAND EVALUATI ON 1217 NORMANDY PLACE SANTA CALIFORNIA 92705 PHONE 714.580-7056 FAX 714.550-7057 1217 NOIL\ LkNDY PLACE eSANTA ANAANA, , C,M_,IFORNI A 92705e PHONE 714.580-7 056 FA.X 714.550-7057

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QUALIFICATIONS QUALIFICATIONS
OF OF

WILLIAM MAI WIL LIAM V. SHREWSBURY, SHREWSBURY, MAI


PROFESSIONAL PROFESSIONAL BACKGROUND BACKGROUND

Actively engaged as as a a real realeestate appraiser and andconsulting consulting apprais appraiser with forty years years e experience. Ac tively engaged state appraiser er w ith forty xperience. I am Senior Vice Pr President, Real Estate Apprai Appraisal/Commercial Division, of First Senior Vice esident, R eal Estate sal/Commercial Division, of First American American Commer cial R eal E Commercial Real Estate Services lo located state Services cated at: 1217 Normandy 1217 Norm andy Place Place Santa Santa Ana, Ana, California California 92705 92705 Previously engaged as as President President of of Int Interstate Appraisal Corporation Corporation an and Director of of Re Real Estate Pr eviously engaged erstate Appraisal d Director al E state Appraisal with The Irvine Company. Appraisal wi th T he Irvine Company.
PROFESSIONAL PROFESSIONAL ORGANIZATIONS ORGANIZATIONS

Member of t the Appraiial Institute with with MAI MAI designation designation. M ember of he App raisal Institute . Licensed Real Estate App Appraiser, Stateof of California, California, " "Certified General R Real Estate Appraiser Appraiser". Li censed Re al Estate raiser, State Certified General eal Estate ". Member of tthe InternationalAssociation Associationof ofAss Assessing Officerswi with the Accredited Assessment Member of he International essing Officers th th e Accredit ed Ass essment Evaluation ((CAE) designation. am also also a a mem member of the Orange County Assessment Appeals Evaluation CAE) d esignation. I I am ber of the Orange County Assessment App eals Board. Board.
A sed C alifornia R A licen licensed California Real Estate Broker Broker. eal Estate . EDUCATION EDUCATION

Real Estate S Special Courses: R eal Estate pecial Courses: Essentials of R Residential Design and Structure Structure E ssentials of esidential Desi gn and Intermediate R Real Estate Appraisal, Courses V Intermediate eal Estate Appraisal, Courses I, I, II, II, III, III, IV, IV, V Real Estate Principles Real Estate Principles Commercial Property Commercial Investment Investment Prop erty Advanced Real Estate Appraisal Advanced Real Estate Appraisal R Real Estate Law eal Es tate Law R e al Real Estate Estate Practices Practices Real Estate Real Estat e Finance Finance Subdivision Analysis Engineering Su bdivision An alysis Engineering

Qualifications of William V. Shrewsbury, Page Two

MAI

Courses Sponsored by Appraisal Institute: Principles, Methods, Techniques of Real Estate Appraising Urban Properties Techniques of Capitalization Residential Appraising Appraising Leasehold Estates Capitalization A Standards of Professional Practice A and B COURT Qualified as an expert witness. SCOPE Vacant Land Various large land holdings such as the 1,700 acres, planned community (Village of Woodbridge); 350 acres, planned community (Village of Deerfield); 1,000 acres, planned community (University Park); 1,200 acres, planned community (Village of Turtle Rock); 650 acres, commercial development (Newport Center); 10,000 acres, planned community, coastal area; 77,000 acres, land holdings of The Irvine Company. Also various land holdings from San Diego County to Los Angeles County. Residential Single-family dwellings, multiple-family throughout Southem California. Commercial Shopping centers (neighborhood and sub-regional), retail stores, general office buildings (lowand high-rise), service stations, carwash, parking lots and medical office buildings. Industrial Warehouses, industrial condominiums and highly improved industrial buildings. dwellings, condominiums and mobile home parks OF APPRAISAL EXPERIENCE QUALIFICATIONS

Special Purpose Churches, marinas, television studio, restaurant, parks_ nursery, golf courses, tennis club, lessor and lessee interests, packing house operation and fractional interests.

ADDENDUM

ENGAGEMENT

LETTER

ABSORPTION

STUDY

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APPENDIX APPENDIX E MARKET ABSORPTION STUDY MARKET ABSORPTION STUDY

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MARKET FEASIBILITY AND ABSORPTION ANALYSIS (TERRA LAGO) COMMUNITY FACILITIES DISTRICT - PHASE ONE INDIO, CALIFORNIA

JULY 2005

Prepared for: CITY OF INDIO 100 Civic Center Mall Indio, California 92202

Prepared by: MARKET PROFILES 200 North Tustin Avenue, Suite 102 Santa Ana, California 92705 Telephone Number: 714/546-3814 Facsimile Number: 7141546-0953

Market Profiles www.marketprofilesinc.com

Real Estate

Research

Market Profiles and Cons ultants.for

over 30 ye_r_

July 1,2005 Mr. Roy Stephenson CITY OF INDIO 100 Civic Center Mall Indio, California 92202 RE: MARKET FEASIBILITY AND ABSORPTION ANALYSIS COMMUNITY FACILITIES DISTRICT- PHASE I TERRA LAGO

Dear Mr. Stephenson: This market report presents Market Profile's evaluation of the market opportunities relating to the residential tracts that compose Terra Lago Community Facilities District in the City of Indio. The Assessment District consists of 635 lots that are located in the Shadow Hills district in the northern portion of the City of Indio. The study evaluated the depth of demand for new homes in the Coachella Valley, as well as, the competitive conditions within the local Indio marketplace. Briefly, the research findings indicate that market demand is ample to support the development and sale of the proposed new homes. Competitive evaluations of the price structures that are anticipated for the homes are presented in Section I of the report, and the sales absorption rates that are projected for each of the subject residential tracts are presented at the end of that section. The report has been reorganized as follows: Section Section Section Section I - Summary of Findings and Conclusions II -- Market Demand Analysis III - Summary of Competition IV- Supporting Documentation

We appreciate the opportunity to work with you in evaluating the opportunities for development of new homes in the City of lndio. Please call if you have any questions. Boyd Martin directed the study effort and David Dickey served as project manager. Sincerely, MARKET PROFILES

Boyd D. Martin Chairman


200 North Tuxtin Avenue, (714) 546_3814

David W. Dickey Senior Economist


Suite 102, Santa Aria, C_ 92705 Fax (714) 546-0953

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TABLE OF CONTENTS TABLE CONTENTS


SECTION DESCRIPTION SECTION DESCRIPTION
I

PAGE PAGE NO. NO. 1-1 kl 1-1 I-1 1-3 I-3 1-4 I-4 1-5 I-5 1-7 I-7 1-7 I-7 1-8 I-8 1-9 I-9

SUMMARY CONCLUSIONS SUMMARY OF OF FINDINGS FINDINGS AND AND CONCLUSIONS Introduction ......................................................................................... Introduction Property Location Location and and Description Description ...................................................... Description of Subject Description o f Su bject Homes Homes ............................................................ The Market The Market Opportunity Opportunity ...................................................................... Existing New Existing N ew Home Home Competition Competition ........................................................ Future Future New New Home Home Competition Competition ........................................................... Price Price Positioning Positioning Analysis Analysis ................................................................... Premiums Lake and Course Premiums for for Lake and Golf Golf Cour se Frontage Frontage ................................... Projected Sales Absorption Projected Sales Absorption ................................................................. ECONOMIC AND HOUSING HOUSING DEMAND ECONOMIC BACKGROUND BACKGROUND AND DEMAND FORECAST FORECAST Introduction ........................................................................................ Introduction Employment Growth .......................................................................... Employment Growth Demographic Demographic Profile Profile .......................................................................... Housing Housing Profile Profile .................................................................................. New Home Home Sales Sales Trends New Trends ................................................................... Price Trend s ............................ Price Trends .......................................................... Projected Projected New New Home Home Demand Demand ..........................................................
SUMMARY OF COMPETITION SUMMARY COMPETITION Introduction Introduction ...................................................................................... New New Home Home Competition Competition .................................................................... Inventory Trends ............................................................................... Inventory Trends S ales Rates Rates ...................................................................................... Sales Most New Home Most Competitive Competitive New Home Projects Projects .............................................. Proposed New Home Development Proposed New Home Development ..................................................

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111-1 II1-1 Ill-1 II1-1 111-2 111-2 111-2 111-2 111-2 111-2 111-4 !11-4

IV IV

SUPPORTING DOCUMENTATIO DOCUMENTATION (Available with Hard Hard Copy) Copy) SUPPORTING N (Avai lable with

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LIST OF EXHIBITS
EXHIBIT SECflON I-1 I-2 I-3 I-4 I-5 I-6 I-7 DESCRIPTION ....SUMMARY OF FINDINGS AND CONCLUSIONS Regional Site Location Map Neighborhood Site Location Map Summary of Proposed Home Prices, Terra Lago Phase One, June 2005 Projected Annual New Home Demand, Coachella Valley, 2005-2006 Summary of New Home Developments, Shadow Hills, July 2005 Price and Product Characteristics, Indio Comps New Home Sales Rates by Price Range, Coachella Valley, First Quarter 2005 Quarterly Absorption Schedule, Terra Lago Community Facilities District, Phase One, City of Indio

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SECTION II - ECONOMIC BACKGROUND I1-1 11-2

AND HOUSING DEMAND FORECAST

Coachella Valley Submarket Areas Employment Growth, Riverside / San Bemardino Southern California, 1980-2006 Hotel Room Sales, Coachella Valley, 1988-2004 Demographic Profile, Coachella Valley and Riverside County Housing Profile, Coachella Valley and Riverside County, 2005 Housing Stock Profiles, Coachella Valley Cities, 2000 New Home Sales by Submarket Quarter 2005 Area, Coachella Valley, 1992-First Bi-County Region and

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Market Market Profiles Profiles

LIST LIST OF EXHIBITS EXHIBITS


EXHIBIT EXHIBIT DESCRIPTION DESCRIPTION 11-8 11-8 Average New Home Av erage New Home Price, Price, Detached Detached Product, Product, Coachella Coachella Valley Valley by by Submarket Area, 1998 1998-Third 2004 Submarket Area, -Third Quarter Quarter 2004 New New Home Home Sales Sales by by Price Price Range, Range, Detached Detached Product, Product, Coachella Coachella Valley, Valley, 2003-First Quarter 2005 2005 2003-First Quarter New New Home Home Sales Sales Distributed Distributed by by Price Price Range, Range, Indio-Coachella Indio-Coachella Submarket Submarket Area and Coachella Valley, First Quarter 2005 Area and Coachella Valley, First Quarter 2005 Housing G Growth Summary, River Riverside County a and Housing rowth Summary, side County nd the the Coachella Coachella Valley Valley Market Area, 1980-2009 Market Area, 1980-2009 Projected Annual New New Hom Home Demand, Coachella Valley, 2005-2006 Projected Annual e Dem and, Co achella V alley, 2005-2006

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_ECTION III SUMMARY OF OF COMPETITION COMPETITION SECTION III -- SUMMARY

111-1 I I1-1 I11-2 111-2 111-3 111-3 111-4 1 11-4 III-5 111-5 III-6 111-6

Summary of Summary o f New New Home Home Developments, Developments, Detached Detached Product, Product, Coachella Coachella Valley, Quarter 2005 2005 Valley, First First Quarter New New Home Home Market Market Summary Summary by by Submarket Submarket Area, Area, Detached Detached Product, Product, First First Quarter Quarter 2005 2005 Summary of New Area, Summary of New Home Home Developments, Developments, Indio-Coachella Indio-Coachella Submarket Submarket Are a, First Quarter 2005 First Qu arter 2005 Summary July 2005 2005 Summary of of New New Home Home Developments, Developments, Shadow Shadow Hills, Hills, July New Home Map Home Projects Projects Location Location M ap Development Report, City o of Indio, June 2005 Development Status Status R eport, City f Ind io, Jun e 200 5

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SECTION I
SUMMARY OF FINDINGS AND CONCLUSIONS
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CTION I I SE SECTION ONCLUSIONS D C DINGS AN F FIN MMARY O SU SUMMARY OF FINDINGS AND CONCLUSIONS
ODUCTION INTR INTRODUCTION rtunities identified with respect to rket oppo he ma f tthe ummary o resents a ion p This section presents as summary of market opportunities identified with respect to s sect Thi in the Terra Lago Community tructed with e cons proposed to e proposed omes that the new new h homes that ar are to b be constructed within the Terra Lago Community the homes consist of five tracts that The homes . The Indio f o City e th in D) (CF ct i str i D Facilities District (CFD) in the City of Indio. consist of five tracts that s e ti i l Faci d upon the anticipated Base . unity omm c ned plan Lago rra e T the f hase II o compose Phase of the Terra Lago planned community. Based upon the anticipated pose P com es absorption has been formulated and is f sal orecast o es, a f the cture oof ice stru price structure thehom homes, afforecast of sales absorption has been formulated and is pr Exhibit I-8). rt (see ion I f this t the presented at the end end o of this Sect Section I of of the the repo report (see Exhibit 1-8). resented a p DESCRIPTION ATION AND PERTY LOC PRO PROPERTY LOCATION AND DESCRIPTION that are contained within five residential lots ists of property cons subject property The subject consists of 635 635 residential lots that are contained within five The ers. The subject tracts are lity build qua our f y b d e p o l e v e d be will at th acts r t l residential tracts that will be developed by four quality builders. The subject tracts are entia resid is located in the northern portion at th ity n u comm ls l i H w o d ha S er larg the ithin the larger Shadow Hills community that is located in the northern portion situated within tuated w si reeway. state 10 ity of of the the C City of Indio Indio north north of ofthe the Inter Interstate 10 F Freeway. of ocated less than one mile north of ago is a L unity of master-planned comm The community ofTerr Terra Lago is llocated less than one mile north of e master-planned Th er Parkway and Avenue 43. The r of ortheast corne e n Interstate-10 at th the northeast corner ofGolf GolfCent Center Parkway and Avenue 43. The Interstate-10 at an extension of the All American Canal, al, an C a hell c a Co the by ected s bi is nity u comm community is bisected by the Coachella Canal, an extension of e the All American Canal, e northern dge of the Terra Lago erty. Th e prop gh th southeastward throu runs southeastward that through the property. The northern edge of the Terra Lago that runs northern boundary of the City of Indio. the northern foothills at the foothills of the base of s the community abuts the base at the boundary of the City of Indio. community abut 44. To the east of the property is open e u n Ave to rd wa th u o s s d exten ty r e p o r p The property extends southward to Avenue 44. To The the east of the property w is open home northwest off of Jackson Street are six ne thenorthwest to the mile to one mile About one desert. About desert. off of Jackson Street are six new home that are currently marketing homes. community that Hills community Shadow Hills n the subdivisions within the Shadow are currently marketing homes. subdivisions withi ssed below. discu e r a s ion s i ubdiv s se e Th These subdivisions are discussed below. from aaregional viewpoint in Exhibit 1-1, shown from isshown property is subject property the subject of the The location of The location ext. cont local context. a local ina property in the property shows the I-2 shows Exhibit 1-2 and Exhibit and regional viewpoint in Exhibit I-1,

e I-10 ss to convenient acce offer convenient sites offer the sites of the All of All access to th the 1-10 Freeway. There are a wide variety of along Highway 11 in downtown Indio located along services located and services shops and retail shops quality retail good HighwayF11 in downtown Indio good quality of the indio ashion Mall is planned expansionof major southwest. A A miles southwest. three miles about major expansion the Indio Fashion Mall is planned about three 000 square feet and transform it into a 0, 22 nt curre ts i m fro ize s the e s a e ncr i d woul that it into a that would increase the size from its current 220,000 square feet and transform a 500,000 square foot power community, a Hills community, Shadow Hills the Shadow Within the center". Within "lifestyle 500,000 square foot power "lifestyle center". comer of Interstate 10 and Monroe northwest corner thenorthwest atthe located at sitelocated asite for a planned for isplanned center of Interstate 10 and Monroe center is to begin in mid- to late-2005. In anticipated to is anticipated center is this center ofthis Development of Street. begin in mid- to late-2005. In Street. Development has been approved for a 10supermarket has a supermarket with a center with retail center neighborhood retail addition, been approved for a 10addition, aaneighborhood ckson Street and Avenue 42. Given the large a J of r corne t s thwe or n the at rcel a p e cr a acre parcel at the northwest corner of Jackson Street and Avenue 42. Given the large

Freeway. There are a wide variety of

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MarketProfiles,Inc. Market Profiles, Inc, inity, it is reasonable to assume that its vic the structed in in ing con es be hom number homes being constructed the vicinity, it is reasonable to assume that its ber of of num ompletion of all of the subject homes. c the of e nc a dv a in ted initia be will nt velopme development will be initiated in advance of the completion of all of the subject homes. de r high school located on the south junio aa hool and entary scschool elem an is is Currently, there an elementary and junior high school located on the south ently, there Curr s School District has announced plans esert Sand ever, the state 10. Inter ofof side side Interstate 10.How However, theD Desert Sands School District has announced plans at Jefferson Street and Avenue 39. rstate 10 e Int of north ol scho high new a to build a new high school north of Interstate 10 at Jefferson Street and Avenue 39. build to built ultimately will also include new be will ol scho high e th h c whi on erty prop The property on which the high school will be built ultimately will also include new The ol scho gh 12 campus. The new high KKthrou ing a a hools, form le sc midd high school elementary and middle schools, forming through 12 campus_ The new entary and elem construction of the elementary and tables for , but y to read willbe be ready toopen openin in2008 2008, but time timetables for construction of the elementary and will ablished. n est bee not ols have le scho midd middle schools have not been established. alley area include: College of the oachella VValley e CCoachella th cated inin cilities lolocated cation fafacilities education the area include: College of the igher edu HHigher alm Desert; the Coachella Valley ted in llege loca munity co year com Desert, two-year community college located inP Palm Desert; the Coachella Valley esert, aatwoD SB), which recently opened ernardino (CSU B San ty si r e iv n U e t a t S ornia Calif of s Campus of California State University San Bernardino (CSUSB), which recently opened mpu Ca te at Cook Street and Frank si a on rt Dese lm a P in nt e pm o l e v e d se of initial phase of development in Palm Desert on a site at Cook Street and Frank ial pha s init itits extension and degree program offered ersity, with apman Univ nd Ch dve; aand Drive; Chapman University, withan an extension and degree program offered inatra D SSinatra oUC Riverside (UCR) will be building a tw n, o dditi a In . rt e Des alm P in s ie t i adl f t facilities in Palm Desert. In addition, UC Riverside (UCR) iwill aat be building a two. s u amp c s t ite on which CSUSB s building i ame ssite on of plex on ing com building complex onaaporti portion ofthe thessame on which CSUSB is building its campus. build in academic programs graduate-level house graduate-level will house campus will satellite campus R satellite The The UC UCR academic programs in area and the university's outreach the in h earc es r R C U for r e nt e c a ip, sh entrepreneurship, a center for UCR research in the area and arly the-200 university's outreach ntrepreneur e 5. ned to open in e cilities plan al fa ith initi rvices, w nd se programs and services, with initial facilities planned to open in early-2005. rams a prog 18-hole, Par-3 Indio Municipal Golf Course, ast of ile e ne m perty is ubject pro The The s subject property is o one mile east of the the 18-hole, Par-3e Indio Municipal Golf Course, alley. Th lndio Municipal Course is chella V ourse in ght-lighted ccourse the only only ni night-lighted inthe the Coa Coachella Valley. The Indio Municipal Course is the to be reconfigured into a Par 60 tion a ov n e r nd a n o i s n a xp e an rgo e d n u planned to undergo an expansion and renovation to be reconfigured into a Par 60 anned to pl rse. ecutive Cou Ex Executive Course. nd Fantasy Spdngs Casino, are located asino a tlight 29 asinos, Spo ian c or Ind Two major Indian casinos, Spotlight 29 C Casino and Fantasy Springs Casino, are located wo maj T near the inter_ection of Golf Center Drive ject, near ubject pro e s s from ee mile less than thr three miles from th the subject project, the intersection of Golf Center Drive ess than l undergoing significant improvement and are undergoing ies t li i fac e s e th of th o B 10. te a t s Inter and Interstate 10. Both of these facilities are significant improvement and and ms. a r prog expansion expansion programs. everal maj r s ll offe community wi La9o community Terra Lago The will offer several major amenities. The community will be The Terra olf Club that includes two 18-hole andmark G existing L e existing ound th constructed around the Landmark Golf Club that includes two 18-hole constructed ar ll be homes in the Phase I of the community wi subject homes The subject ses. The championship golf championship golf cour courses. in the Phase I of the community will be so that will offer boat access. Phase I will al e k a l e at v pri cre a 22a nd u ro a d e t c tru s con constructed around a 22-acre private lake that will offer boat access_ Phase I will also . plex com s of a clubhouse, pool, and tenni consist of will consist that will complex that recreation complex a recreation include a clubhouse, pool, and tennis complex. include a park. neighborhood park. a neighborhood have a will have tract will each tract addition, each In addition, In or amenities. The community will be

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S ECT HOME SUBJ RIPTION OF DESC DESCRIPTION OF SUBJECT HOMES the subject struction on con nned for pla are mes that ho sed, the As currently proposed, the homes that are planned for construction on the subject ently propo curr As n e pend tly of one arketed inde l be wil that ct lines produ five st of of properties consist five product lines that will be m marketed independently of one erties consi prop perienced hly ex hig isis s uilder b e m o h e th f o Each ers. ebuild m ho ent r another by four different homebuilders. Each of the homebuilders highly experienced diffe another by four et quality homes in d mark ruct an const toto e ability nstrated ththe stently demo and has consistently demonstrated ability construct and market quality homes in consi has and Text Table mmarized inin su are nes i l uct d ro p e v fi The . r e n n ma al n ssio e f a timely and professional manner. The five product lines are summarized Text Table pro and ly a time low. e b I-1 1-1 below. a broad mix of peal toto ap will nfigurations that sign co de riety of va aa The homes will offer variety of design configurations that will appeal a broad mix of ll offer s wi home The move-down s, e l p cou d rie mar g n ou y n, e r ild h c h wit s e amili f cluding families with children, young married couples, move-down household pes inincluding ehold tytypes hous ers. me buy d ho secon es, and retired couples, and second home buyers. tired coupl ouseholds, re hhouseholds, E I-1 TABL TEXT TEXT TABLE 1-1 HOMES OSED PROP OF ARY SUMM SUMMARY OF PROPOSEDNEW NEW HOMES D CF A LAGO TERR TERRA LAGO CFD er Numb Number of ofLots Lots 178 178 !28 128 86 86 110 110 133 133 635 635 Minimum Minimum Home Size Lot Size Home Size Lot Size Range (SF) . Ft.) (Sq % (Sq. Ft.) Range (SF) %Mix Mix 1,658-2,407 5,000 27.7% 27.7% 5,000 1,658-2,407 2-2,660 2,09 200 , 7 ..... 3% _ 20 7,200 2,092-2,660 20.3% -3,120 2,595 0 8,40 13.6% 2,595-3,120 13.6% 8,400 ,987-2,591 !1,987-2,591 6.000 .-4% ..7 1 174% 6,000 -2,500 2,100 3,300 21.0% 21.0% 3,300 2,100-2,500 0 8-3,12 5 1,6 -8,400 %.. 3,300 100.0 1,658-3,120 100.0% 3,300-8,400

ofiles arket Pr erties, M l Prop ource: SunCa SunCal Properties, Market Profiles SSource:

er Builder Build Tract## Tract s Home side Wood 31601-2 Woodside Homes 2 31601 Lennar Homes omes nar H 1601 ----3-- Len 331601-3 omes H r Lennar Homes Lenna 31601-4 31601-4 31601-5 Ryland Homes s yland Home R 1:5 3160 es m Ho Ashbrook Homes rook 31601 Ashb 31601 e TotalI /Rang Range Total

re shown in Exhibit acts a ach of oposed for urrently pr e c t ar s tha The home prices that are currently proposed foreeach ofthe thetr tracts are shown in Exhibit ome price e h Th struct homes r will at each nticipated th evision, ititis ct to 1-3. Although subject torrevision, isaanticipated that eachbuilde builder will con construct homes lthough subje . A I-3 this esented in re pr t aare a th s t ge r a t d e s propo the h t wi nce a rm o f n o c e that are in reasonable conformance with the proposed targets that presented in this bl a n that are in reaso tion a infl e futur of e iv s xclu ars, e ay's doll n tod tated iin hown are pdces s shown are s stated today's dollars, exclusive of future inflation sale prices The sale eport. The rreport. . occur s likely ciation that or p price appreciation that iis likely to to occur. rice appre or home subdivisions are new home subject new the subject r the sorption rates les ab absorption The projec projected sales ted sa rates fo for subdivisions are The I-3 (see Exhibit 1-3 in Exhibit n in e show ar t a th s size d n a s ce pri home predicated upon the home prices and sizes that are shown (see the upon ted a predic the at the th ee r eg d the upon g n ndi e ep D ). below PTION R PROJECTED SALES ABOSRPTION below). Depending upon the degree that PROJECTED SALES.ABOS tions c proje ption projections hown, the se s ffer from izes may actual home price prices and s sizes may di differ from tho those shown, the absor absorption s and ctual home a . ments opriate adjust may r require appropriate adjustments. equire appr may

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Mo_el Profiles, Inc.

Market Profiles, Inc.

ra Lago homes, many of the homes ect Ter e subj ththe rices ofof e pprices e sal bas the tion toto addi InIn addition the base sale subject Terra Lago homes, many of the homes of the lake and golf course. The views for ly imari r p iums prem l a ti n ta s ub s d n a omm will command substantial premiums primarily for views of the lake and golf course. The c will at will be able to command th s home of r e numb the nd a s ium em pr w e vi e view premiums and the number of homes that will be able to command ththe values lues ofof va Exhibit I-3. The values of arized in in summ ighborhood are ch ne thin ea such premiums each neighborhood are summarized Exhibit 1-3. The values of emiums wiwithin pr such premiums that are currently being of w revie a on d se a b d e riv e d were ums i prem the premiums were derived based on a review of premiums that are currently being the (see PREMIUMS FOR mparable views cocomparable ubdivisions with e ssubdivisions hom new commanded by new home with views (see PREMIUMS FOR anded by comm ). NTAGE below RSE FRO F COU GOL AND LAKE AND GOLF COURSE FRONTAGE below). LAKE ORTUNITY KET OPP THE THEMAR MARKET OPPORTUNITY een strong over the past three years. . alley have oachella V he C es in ome sal ew h New home sales intthe Coachella Valley haveb been strong over thee past three years N 5,851 homes w re sold in 2004. 2003 es in ached 5,768 me re Thesales salesvolu volume reached 5,768hom homes in 2003and and 5,851 homes were sold in 2004. The homes. Although this is a strong sales ed 1,331 005, sales 22005, rter of rst qua In Inthe thefi first quarter of salestotal totaled 1,331 homes. Although this is a strong sales first quarter of 2004. the n i rted repo were that sales 2 2,05 e h t low e bbelow the 2,052 sales that were reported in the first quarter of 2004. figure, itis is e, it figur ed into five submarket areas. een divid as b alley h oachella V oses, the nalysis purp Fora analysis purposes, theC Coachella Valley has been divided into cti five submarket areas. For -1 in Se on II of this report, I1 t i b i xh E in hown s e r a s t e k ar ubm s the of ies dar The boun boundaries of the submarkets are shown in Exhibit 11-1 in Section indi II of this report. The a achell o-Co The characteristics. unique characteristics. has unique areas has submarket areas the submarket Each of the The Indio-Coachella ach of E nding nd the immediately surrou achella a nd Co s of sists of submarket consists ofthe thecitie cities ofIndio Indioaand Coachella and the immediately surrounding arket con subm reas. unincorporated incorporated aareas. un rea have accelerated over the past ubmarket a Indio-Coachella s e Indio-Coachella n th sales i home sales New home in the submarket area have accelerated over the past New to 591 in 2001, then sales omes in 41 h rom 2 increased ffrom Sales increased years. 241 homes in 1999 1999 to 591 in 2001, then sales ears. Sales hree y tthree in 2003. Sales continued strong in omes h ,890 2 to d n a 2002 in s e m o h 217 , 1 to ed jumped to 1,217 homes in 2002 and to 2,890 homes in 2003. Sales continued strong in jump have been a major attractor of prices have home prices Moderate home sold. Moderate homes sold. 2004 2,596 homes been a major attractor of with 2,596 4 with 200 market. homebuyers the sub submarket. mebuyers to the ho the Indio-Coachella submarket totaled in the sales in home sales new home 005, new quarter of first quarter In of 2 2005, the first Indio-Coachella submarket totaled in the that were reported sold in the first homes that 872 homes the 872 below the is below figure is This figure homes. This 585 were reported sold in the first 585 homes. . 2004 of rter quarter 2004. qua 44 percent of all new detached homes ccounted for submarket a Indio-Coachella submarket The Indio-Coachella The accounted for 44 percent of all new detached homes 2004, The high proportional of er quart t s fir e th g durin y Valle a ll e h Coac the Coachella Valley during the first quarter of 2004. The high proportional in the sold sold in major factors as follows: three major to three due to is due submarket is the submarket by the captured by share captured share factors as follows: prices. home Moderatehome 1. prices_ 1.Moderate areas of the Valley. other areas in other homes in new homes priced new moderately priced of moderately 2_ of the Valley. Shortages of 2. Shortages as a desirable residential location. Indio of ns ptio e rc e p yer mebu o h ing eas Incr 3. 3_ Increasing homebuyer perceptions of India as a desirable residential location.

I-4 1-4

Market Profiles, Inc.

Market Profiles, Inc.

average 4,500 ted to to projec ley is is ella ValValley Coach thethe in in homes new d for for The demand new homes Coachella projected average 4,500 deman The The projected n II). II). Sectio report (see rs a ye two xt e n the over r ea y homes per year over the next two years (see report Section The projected per homes . I-4 t Exhibi in shown is nge a r e pric distribution of demand and by by price range is shown in Exhibit 1-4. tion of dem distribu 00 to over er $300,0 und s from of price range ide ss a wa acro Market demand is spread across wide range of prices from under $300,000 to over d is spread et deman Mark ased purch been ve a h Indio in e dat to sold s e hom new the of jority $1,000,000. The majority of the new homes sold to date in Indio have been purchased ma ,000. The $1,000 first thethe . During y home pdmar erately pdced g a mod seekin by households that were seeking a moderately priced primary home. During first were t a th holds house by all of rcent e p 89 for ted accoun area rket subma lla e oach Indio-C the quarter of 2005, the Indio-Coachella submarket area accounted for 89 percent of all quarter of 2005, of s supplie New 00. $400,0 low e b priced were t a th ey homes sold in the Valley that were priced below $400,000. New supplies of achella Vall CoCoachella in the sold homes Hot Springs Desert unities of of comm ed in the emerg have 00 $400,0 under homes priced under $400,000 have emerged in the communities Desert Hot Springs priced homes the market e at domin e to to continu will Indio unity of of comm ever, the and Coachella. However, the community Indio will continue dominate the market ella. How Coach and sis, the Indioained babasis, sust a a t, onon ected tha proj is is . It It homes moderately priced homes. projected that, sustained the Indioately priced moder forfor home l new annua l a tot the of nt e c r e p 45 y roughl pture ca will a are Coachella submarket area will capture roughly 45 percent of the total annual new home rket Coachella subma homes 2,000 about of volume s e l sa a to s equate s Thi . ella Valley sales Coachella Valley. This equates to a sales volume of about 2,000 homes Coach thethe in in sales per year. r. yea per the 6%), ., near s (i.e rest rate ge inte mortga low very lity of of Given the continued availability very low mortgage interest rates (Le., near 6%), the ed availabi continu the Given projection of rpass the su may area t marke Indio the in sales home volume of new home sales in the Indio market area may surpass the projection of new of e volum es that interest ssum a t s eca for d ne i a t s su e Th s. e hom 2,000 of sales l ed annua sustained annual sales of 2,000 homes. The sustained forecast assumes that interest sustain g in a moderation resultin rcentage point, pepercentage half st one lea at at by by entually rise eveventually rates will rise least one half point, resulting in a moderation es will rat is assumed that the it it n, additio In rket. subma the within nd a m e d e hom in new home demand within the submarket. In addition, is assumed that the new in es in uniti comm r e oth that nd a nsify e int will Indio of City the ons within competitive conditions within the City of Indio will intensify and that other communities in titive conditi compe es than w hom ced nenew erately pripriced mod ers of of er numb er larg offoffer ey will the Coachella Valley will larger numbers moderately homes than achella Vall Co the . s month they have in recent months. they have in recent ETITION COMP HOME ING NEW EXIST EXISTING NEW HOME COMPETITION Coachella Valley hout the e throug e activ wer isions that subdiv home new 78 There were 78 new home subdivisions that were active throughout the Coachella Valley re were The ed in Section III includ ojects are prprojects these iptions of of Descr 2005. rter ofof qua first during the first quarter 2005_ Descriptions these are included in Section III the during w Hills Shado inin active tly curren ns o isi subdiv home w e n 12 re a of this report. There are 12 new home subdivisions currently active Shadow Hills There of this report. e 12 Th . s e erti p pro t subjec the to nt releva most e ar isions 2 subdiv These1 12 subdivisions are most relevant to the subject properties_ The 12 ea. These ararea. cribed e des ojects ar rtinent pr pe most the and I-5 Exhibit arized in in projects are summarized Exhibit 1-5 and the most pertinent projects are described summ e r a projects . below below. first 40 of these 3. The Tlerra Bella isis w Hills Shado isioninin lling subdiv The selling subdivision Shadow Hills Bella Tierra. The first 40 of these 3stest se e fafastest Th The base week. er p es m ho 12 . 8 of rate a t a sold n ee b ve a h have been sold at a rate of 8.12 homes per week. and homes The base bedroom homes d 5-5-bedroom an to 2,629 1,895 from size inin range that plans 990 for $419, 9,990 toto $37 prices from $379,990 $419,990 for plans that range size from 1,895 to 2,629 nge from ces rarange pri uare foot sq 8,000 n o sited re a homes The . ) . ft sq. per 2 $200.5 o t 75 . square feet ($159.75 to $200.52 per sq. ft.). The homes are sited on 8,000 square foot 9 15 square feet ($ lots (minimum). um). (minim lots omes that were me. All Ho KB stone by ision isisFox Another fastselling sellingsubdiv subdivision Foxstone by KB Home. All63 63hhomes that were r fast Anothe es per 4.88 of e of es rat sal aa ng to to equati sold r were quarte first the released during the first quarter were sold equating sales rate 4.88hom homes per ed during releas

I-5

1-5

MarketProfiles.tnc

Market Profiles, Inc

be sold in subsequent phases. aining to s rem nother 182 ct has week. week.The Theproje project hasa another 182 home homes remaining to be sold in subsequent phases. 990 to $368,990 for 2- and 3$307, from nge a r s home these of prices base The base prices of these homes range from $307,990 to $368,990 for 2and 3The feet ($146.07 to $203.02 re a squ 2,,526 to 517 , 1 from size in e rang that droom plans be bedroom plans that range in size from 1,517 to 2,526 square feet ($146.07 to $203.02 um lot size is 8,000. minim the and borhood is e neigh ft.). sq. per sq. ft.).Th The neighborhood isgated gated and the minimum lot size is 8,000. per The base prices of ow Hills. Shad d in in cently opene vision rerecently na subdi ot Sien The132-1 132-lot Sienna subdivision opened Shadow Hills. The base prices of The and 4-bedroom plans that range in 3 for 990 $447, to 990 $394, from e ng a r s home the homes range from $394,990 to $447,990 for 3- and 4-bedroom plans that range in the 35 per sq. ft.). $161. .54 to ($142 e feet 3,143 toto 2,448 from size from 2,448 3,143squar square feet ($142.54 to $161.35 per sq. ft.). size lopment sold out its first phase y Deve subdivision by Ranch subdivision adow Ranch ot Sh The263-1 263-lot Shadow by Famil Family Development sold out its first phase The . These homes range in price from er week homes p s at of of30 30 home homes ataa rate rate of of 3.0 3.0 homes per week. These homes range in price from that range in size from 3,185 to 5-bedroom plans nd 5-bedroom 990 for 990 to $394, $394,990 to$489, $489,990 for 3-, 3-, 4-, 4-, a and plans that range in size from 3,185 to minimum lot size is 8,500 e Th ). . ft sq. per 77 . $180 to .90 ($150 feet re a 3,247 3,247squ square feet ($150.90 to $180.77 per sq. ft.). The minimum lot size is 8,500 et. square feet. are fe squ f 142 homes, The base prices of these subdivision oof gated subdivision a gated is a ction is ert Colle e Des Th The Desert Collection 142 homes. The base prices of these that range in size from or plans ,990 4 $41 to 990 $364, om fr range s e hom 3-bedroom plans that rangehome in size from room homes range from $364,990 to $414,990 ffor 3-bed s were . ft.) The first 73 er sq .70 p .13 to re feet ,266 squa 1,610to to 2 2,266 square feet($183 ($183.13 to$226 $226.70 per sq. ft.). The first 73 homes were 1,610 size is 7,200 square feet. um lot , The er week omes p sold soldat ataarate rateof of3.31 3.31 h homes per week. The minim minimum lot size is 7,200 square feet. Indio recently opened with four most Indio northeastern most in northeastern era in mmunity of ew co he n T The new community of Talav Talavera recently opened with four sale. The homes range in price from mes forfor ring ho bdivisions offe me su ew ho n new home subdivisions offering homes sale. The homes range in price from l of the homes in Talavera is 8,000 al r fo ze i s lot um minim e h T 90. 416,9 $ to 999 $299, $299,999 to $416,990. The minimum lot size for all of the homes in Talavera is 8,000 eet. square re ffeet. squa Talavera. They consist of 3- and ered in eing off smallest b the smallest are the homes are cia homes e Vene Th The Venecia being offered in Talavera. They consist of 3- and square feet with base prices 1,947 square to 1,576 rom f ze i s in ange r that plans droom e b 4-bedroom plans that range in size from 1,576 to 1,947 feet with base prices 4 sq. ft.). Twenty-five of the per .35 0 $19 to .54 ($171 0 9 333,9 $ to 999 , $299 rom $299,999 to $333,990 ($171.54 to $190.35 per sq. ft.). Twenty-five of the ranging ffrom ranging .76 homes per week. ere sold se w hase relea in the first p 45 homes phase release were soldat at a a rate rate of of 1 1.76 homes per week. homes in era range in size from 1,855 to 2,380 n Talav subdivisioniin Florencia subdivision the Florencia homes in the The homes The Talavera range in size from pe 1,855 to 2,380 . Of ft.) r sq. .46 to $179.45 ,000 ($155 $370 0,000 to $33 ng from dces rangi base p with base with prices ranging from $330,000 to $370,000 ($155.46 to $179.45 per sq. ft.). Of . at a rate of 5.93 homes per week sold were 6 2 e, phas first the in s home 44 the 44 homes in the first phase, 26 were sold at a rate of 5.93 homes per week. 3-, 4-, and 5-bedroom plans that range of 3-, consist of homesconsist Alicante homes the Alicante Talavera, the in Talavera, Also in Also 4-, and 5-bedroom plans that range per sq. ft.). Two thirds of the 33 $156.25 per to $156.25 (130.68 to $404,990 (130.68 to $404,990 $389,540 to from $389,540 size from in size in sq. ft.). Two thirds of the 33 a rate of 3.6t homes per week. ld at been so have been phase have first phase the first inthe released in homes released homes sold at a rate of 3.61 homes per week. n the Genova subdivision. The those i re those alavera a in T offered in being offered homes being largest homes The Talavera are in the Genova subdivision. The The largest for 2-, 3- and 5-bedroom $416,990 for to 990 , 396 $ from nge a r s e hom these of s ce pri base prices of these homes range from $396,990 to $416,990 2-, 3and 5-bedroom e bas .64 to $139.39 per sq. ft.). feet ($127 square feet 3,280 square to 3,280 48 to from 2,8 size from in size range in that range plans 2,848 ($127.64 to $139.39 per sq. ft.). plans that

I-6 1-6

Market Profiles, Inc_

Eighteen homes have been sold at a rate of 1.9 homes per week.

Manet Profiles, Inc_

FUTURE NEW HOME COMPETITION There are approximately 7,500 new homes within more than 40 subdivisions that are k. weereport per mes .9 ho of 1 tethe proposed for future development in City of Indio (see Section III). With this sold at a ra been s have teen home Eigh scale of proposed activity, it is projected that the Indio market area will experience a N next several years. However, the Indio market has ITIO competitive environment for the E COMPET URE NEW HOM FUT hat are ns tthe isio subdiv an 40 n more th s withicondition home been experiencing an under supplied market (see Section III) and homes ew n There are approximately 7,500 this With . III) n ectio S rt o p e r ee (s c di n I of y constructed that are planned for will be in a phased manner over the next e Cit elopment in th evdevelopment future d d for se propo a ce erien will exp ea next ar Indic market ed that theconditions several years. is projected that competitive over the three years will oject ity, it is pr osedItactiv e of prop scal market has he Indic However, ral years. next sevebeing be intense those experienced intthe Indio marketplace, the currently ent for nvironmthan titive e pemore com the homes nd maintained. Section III) ee projected ition (s however, demand-supply conditions are toa be lied market cond under supp ncing an healthy experiegenerally been
next constructed in a phased manner over the that are planned for development will be s year ree h t next the next few will the over conditions over iveconstructed competit The of the new homes will be in Indio years d that that ecte proj t is years. I eral majority sev ketplace, ar dic m the In in ed c ien xper e ng ei b will be located in and around the Shadow Hills community located north of Interstate 10 ntly e r r cu e thos be more intense than d. maintaine bewithin to ted c e proj are ns ditio n co ply p .su d Freeway. In addition to the 1,400-plus homes that will be developed the subject an however, generally healthy dem Terra Lago community, there are more than 2,700 homes that are planned for few years the next ic over tructed in Ind conscommunity. will be Hills construction elsewhere in the Shadow The majority of these homes s that e new home The majority of th h of Interstate 10 nort ted loca y unit m com Hills dow Sha e th next three to four years. A summary of the 2,723 homes will constructed over the round ted in and a loca be be will in the subject loped withis be deve es that will s hom that will be part of the City of Indio Assessment District 2004-VSD presented in 0-plu 1,40 the to tion Freeway. In addi or planned f are at h t es m ho 0 2,70 than ore m Section III of this report. All of these homes will be located in the Shadow Hills are Terra Lago community, there s e hom e thes f o y it r jo prices of the homes y. The maThe munit lls com HiTerra primarily of the Lego community. Shadow thewest inthe ewhere to nstruction els cocommunity es hom of the 2,723by ary s. A summ will generally range between $300,000 and year Two subdivisions Family $500,000. three to four the next over constructed be will ed in sent e pr is -VSD 2004 ict r Dist ent m s sses A Development located in the AD 2004-VSD are under construction and are actively Indic that will be part of the City of the Shadow Hills selling homes (see Exhibit All of these homes will be located in rt. 1-5). repo of this ion III Sect s Lago community. The prices of the home community primarily to the west of the Terra by Family divisions Two sub 0,000. $50 nd 000 a Also located north theeen 1-10 Freeway is the site of the Andreas Ranch that will include $300, betw e of rally rang gene will actively are n and uctio r constr unde -VSD areThis 2004 937 homes a private, gated community. property is located north of Avenue in the AD located ent within elopm Dev 38 at h Jefferson Street. Exhibit I-5). omes (see lling se ch that will include ANALYSIS I-I0 Freeway is the site of the Andreas Ran ted north of the lso locaPOSITIONING APRICE of Avenue north located property is mmunity. The subject new homes that are proposed forThis development within Phase I of the Terra d co gate private, in a es with hom 937 Lago community will offer an assortment of designs that will appeal to a variety of rson Street. at Jeffe 38

household types. The price positioning of the subject homes compared to the existing new projects are located in Shadow Hills is shown in Exhibit 1-6. The home IS LYS ANA NING that POSITIO CEhome PRI Terra se I of theor thin Pha lopmentofwi d for deve shown in h the exhibits are base prices, exclusive location premiums other opose pr s that are ome ect new he subj Tprices al to a variety of appe will that s sign e d f o upgrades. nt e m rt asso Lago community will offer an
ng f the subject homes compared to the existi household types. The price positioning o e m o h e Th . I-6 ibit n in Exh Hills is Shadow Exhibit 1-6 shows structure ofshow the majority of the subject homes located in price areanticipated thatthe ectsthat e proj ew hom n other ums tion premiof loca exclusive es, within (shown with lines) positions them well the of price structures theor existing pric its are base exhib in the n solid es show pric new home . projects in Shadow Hills (shown with dashed lines). This is a favorable price rades upg es structure of the majority of the subject hom Exhibit I-6 shows that the anticipated price g n ti s xi e e th of s ell within the price structure (shown with solid lines) positions them w 1-7 pdce e bl a with dashed lines). This is a favor new home projects in Shadow Hills (shown

I-7

Ma_'et Profiles, Inc.

Market Profiles, Inc.

ge that the unity ima lity comm h qua highigh thethe es given ct hom subje positioning subject homes given quality community image that the the the itioning for for pos etplace. mark io Ind the in ablish with cipated to es unity is anti comm subject Lago community is anticipated to testablish within the Indio marketplace. ra Lago ect TerTerra subj an attractive and cohesive ained within cont be be willwill ential tracts The subject residential tracts contained within an attractive and cohesive ect resid subj The available to the existing not e r a t a th s tie meni a jor a m r offe will t a t th that will offer major amenities that are not community context available to the existing unity contex comm dow Hills. etitors in Sh new home competitors in a Shadow Hills. e comp hom new TAGE RSE FRON F COU GOL AND LAKE PREMIUMS FOR LAKE AND GOLF COURSE FRONTAGE IUMS FOR PREM Terra Lago community the f of ase I oI Ph r o f d ose prop t are s tha ect home subj Many of subject homes that are proposed for Phase the Terra Lago community hethe y of t Man The resulting views . se cour lf go ark andm L g n xisti e the to or e lak will adjacent to the lake or to the existing Landmark golf course. The resulting views ent to the adjac be be will homes. View those miums for for those tantial prepremiums and subs comm portunities to to will create command substantial homes. View e opopportunities creat will cts in the Coachella e proje hom w e n by d e and mm co being ntly curre e ar premiums that are currently being commanded by new home projects in the Coachella premiums that nced by the quality of influe emium is is prpremium the ount of of am ,000. The $250 Valley range $250,000. The amount the influenced by the quality of to to e upup rang Valley erally range from iums gen prem mum maxi The . e om h the f o ue l va the y b the view and by the value of the home. The maximum premiums generally range from and view the , the highest view Indio of City the in th Wi . e valu home e th f o t n ce r pepercent of the home value. Within the City of Indio, the highest view 33 33 ten percent cent to to per ten s with frontage on the home forfor mmanded areare cocommanded ntly being curre are premiums that are currently being homes with pe frontage on the iums that prem rcent of the ,000 and 20 t $100 abou to up of s m emiu r P se. cour f gol s Palm Indian Palms golf course. Premiums of up to about $100,000 and 20 percent of the ian Ind n Palms golf course India The s. Palm n India in h wit d nde a comm being home are being commanded within Indian Palms. The Indian Palms golf course lue are me vavalue ho Terra Lago that is part of the f Club ndmark Gol La the ality than sser qu le lesser quality than the Landmark Golf Club that is part of the Terra Lago ofof is is mmunity. cocommunity. irage that are marketing ncho MMirage Ra divisions in in sub w home ne two are Currently, there are two new home subdivisions Rancho that are marketing ently, there Curr are located within the private ns ivisio subd ese h t f o Both s. view lake ave h homes that have lake views. Both of these subdivisions are located within the private s that home unity range up comm this ge inin fronta lake iums for prem lake Santo Tomas community. The premiums for frontage this community range up unity. The as comm m To Santo ice. prprice. home the f o nt e rc e p 40 s a h muc as to uate q to $200,000 and equate to as much as 40 percent of the home e and to $200,000 will be created in ews that se viviews cour golf e and lak the ty ofof ipated quali Based on anticipated quality the lake and golf course that will be created in e antic ththe d on Base the subject homes that will that luded conc is t i , unity mm co Lago rra e T e th Phase I of the Terra Lago community, it is concluded that the subject homes that will e I of Phas remiums of about iew ppremiums and vview ill be ge wwill rse fronta cou have lake or golf course frontage beable ableto tocomm command of about golf e or lak have the subject new home mmanded by co be can ms that ated premiu $100,000. The estimated premiums that can be commanded by the subject new home e estim ,000. Th $100 have lake and golf will at h t s home f o r e numb e Th . I-3 ibit h Ex in tracts summarized mmadzed in Exhibit 1-3. The number of homes that will have lake and golf e su s arare tract aps. m e us inary land prelim on ated based estim ve been course frontage have been estimated based on preliminary land use maps. ge ha se fronta cour of the subject homes will, many ces of pd sale mium, the pre ajor view e m th Inaddit addition to the major view premium, the sale prices of many of the subject homes will, ion to In nificant characteristics such as less iums for ditional prem clude ad appropriately, additional premiums for lesssig significant characteristics such as opdately, ininclude appr . Premiums of $1,000 to etc ), e-sac cul-d a as h c (su n o ocati l able desir larger lot size, desirable location (such as a cul-de-sac), etc. Premiums of $1,000 to larger lot size, ivisions in Shadow subd home new by d e d an m com ly l u f ess succ ave been $15,000 been successfully commanded by new home subdivisions in Shadow 000 hhave $15, etitive new home f the rtually all g vi mon amon iums are Hills. Such premiums are com common among virtually allo of the comp competitive new home prem Such s. l Hil ketplace. ivisions in subdivisions inthis thismar marketplace. subd

I-8

1-8

MarketProfiles,Inc,

Market Profiles, Inc.

RPTION S ABSO ECTED SALE PROJ PROJECTED SALES ABSORPTION ng detached homes in selli were ects thatthat e projprojects hom new 78 78 the the among home were selling detached homes in rates sales rates among sales new TheThe ely from 0.08 to 79 ed widwidely rang 005 er of 2of quart firstfirst ng the the ey dudduring Coachella quarter 2005 ranged from 0.08 to 7.9 chella VallValley Coa the the week per project. es per hom 1.73 e was ratrate age sales aver k. The wee homes week. The average sales was 1_73 homes per week per prOject. es perper hom shown in Exhibit I-5 range from areare ts that s projec ow HillHills Shad 12 12 of the rates The sales rates of the projects sales Shadow that shown in Exhibit 1-5 range from The homes per week and the is 3.43 rate s e sal e g avera he T k. e we r pe s e m ho 8.12 0.81 to 8.12 homes per week. The average sales rate is homes per week and the o 3.43 t 0.81 homes are very favorable se e th of rates sales The . k e we r pe s e hom 3.0 is rate is 3.0 homes per week. The sales rates of these homes are very favorable dian rate memedian es rates tend to be salsales ed and tly open m recen of th many that fact in part due fact that many ofethem recently opened and rates tend to be thethe to to e du part in phases. ter la n i off r pe ta then ses, ha p g n ti e rk ma tial ini e h t n more rapid in the initial marketing phases, then taper off in later phases. i more rapid maintained in the Indio bebe ected to to proj es is is e sal hom new ume of of new home sales projected maintained in the Indio althy volvolume hehealthy A A of the builders that ach e that d e at p i antic is It s. r yea wo t xt e n the r ove submarket area over the next two years. It is anticipated that each of the builders that market area sub substantial track record of monstrated a a dedemonstrated s has ct home subje ing the market marketing the subject homes has substantial track record of l be be wilwill hern California. ghout Sout throu s home new f o ing arket m and ent m successful development and marketing of new homes throughout Southern California. op l eve d successful projected that the es, it is ect hom subj ioning of th ce posit imated pd Based the estimated price positioning ofethe subject homes, it is projected that the est the d onon Base homes per week. to 2.0 0.75 from ng rangi s e rat s e sal e nerat e g will five product lines will generate sales rates ranging from 0.75 to 2.0 homes per week. lines ct produ five n in Text Table I-2 below. show is line t oduc r p each or f d e ct e oj r p is at h t ate r sales rate that is projected for each product line is shown in Text Table 1-2 below. e sales ThThe TABLE I-2 TEXT TEXT TABLE 1-2 S RATES BY TRACT KLY SALE ECTED WEE PROJ PROJECTED WEEKLY SALES RATES BY TRACT LITIES DISTRICT MUNITY FACI COM RA LAGO TER TERRA LAGO COMMUNITY FACILITIES DISTRICT
manning Arc; tract # o' S (Sq.
i

Av VI/Pr-k]y of Lots Sales Rate"

t.)

11 01-2 316 31601-2 22 -3 31601 31601-3 33 -4 31601 31601-4 44 -5 31601 31601-5 55 01 316 31601 eek. perw s Home ** Homes per week. rofiles tPProfiles rke a M ce: r u So Source: Market

00 5,0 5,000 7,200 7,200 400 8,8,400 000 6,6,000 0 3,30 3,300
Total Lots.

17'8 178 128 128 86 86 110 110 133


133

2.0 1.5 1.0 0.75


.= .

....

0.75

635

I-9 1-9

MarketProfiles,Inc_

Markel Profiles, Inc_

pdce structure dly to the tes pdma rela ct lines produ of the each tion for for The sales projection each of the product lines relates primarily to the price structure projec sales The lowest prices d at the offere pated to be antici t are es tha ect hom subj of homes. The subject homes that are anticipated to be offered at the lowest has prices s. The home ethe of th rical experience Histo rates. s e l a s pid a r most e th e t a r e gen to are projected to generate the most rapid sales rates. Historical experience has are projected y than those rapidl e mor ll e s lly ca typi s e pdc r e low with mes o h new demonstrated new homes with lower prices typically sell more rapidly than the those nstrated thatthat demo throughout nerally holds ern gegenerally tt a p this that s show 7 I it Exhib . with higher prices. Exhibit 1-7 shows that this pattern holds throughout the prices r highe with the determining factor in sarily s e nec not s i ce pri e hom e th ver, e How . Coachella Valley. However, the home price is not necessarily the determining w factor in chella Valley Coa on ithin ighborhood locati cific ne spe e the includ factors nce. Other sales experience. Other factors include the specific neighborhood location within experie sales thethe the marketing es, and hom thethe lity of of ruction qua const n and desig community, design and construction quality homes, and the marketing nity, thethe commu thethe r. builde program of the builder. am of the progr conservative relative to the es are bject hom susubject the ected forfor proj are es that The sales that are projected the homes are conservative relative ow to the s ratrates sale The s in the Shad rketing home ently ma curr t are ects tha proj home new experience new home projects that are currently marketing homes in the Shadow erience of of exp onsideration the general market ke into so ta tes alalso s ra sale The nity. s commu Hill Hills community. The sales rates take intocconsideration the general market the subject new of s live g in et rk a m e th r e ov il a v e pr to ed at nticip a is is anticipated to prevail over the marketing lives of the subject new environment that nment that enviro n that market o umpti ss the sed on e ba tes arare les ra ojected sa home Thepr projected sales rates based on theaassumption that market cts. The e tratracts. hom re experienced in the t we a th se tho n a h t e bl ra vo a f s s e l tely a r mode be conditions will be moderately less favorable than those that were experienced in the will conditions ted to occur expec s i s on i ondit c t e rk a m f o ion s ro e The . 2004 rketplace during Indio marketplace during 2004. The erosion of market conditions is expected to toccur ma Indio rest rates and o a age inte mortg e in in oderate ris mmoderate aa e to to s dudue month few xt e n over the next few months rise mortgage interest rates and to a e th r e ov ccurred. As the new home o dy a lre a s ha t a h t ector s t e rk a m e l esa r e th in slowdown in the resale market sector that has already occurred. As de the new wdown slo the se home crea slow and this will s will price home rease in in inc e ofof rat ls, the rket coo market cools, the rate increase home prices will slow and this will decrease the ma 004. 22004_ buyers in g home ent amon evid was ency that urg sense urgency that was evident among homebuyers in nse of of se expected to be accompanied ity isis rket activ e ma w hom ne eration in in The moderation new home market activity expected to be accompanied ojected mod e prprojected Th number of rketplace. The a m Indio e th in h wit ity s n e t n i e titiv e comp the in e s by an increase in the competitive intensity within the Indio marketplace. The number of by an increa y is projected to t i n u comm s Hill w o d a Sh the within e tiv ac be will t a ts ththat will be active within the Shadow Hills community is projected to projec new home projects w home ne 06. However, on late-20 ojects by prprojects more oror 15 ts toto projec rrent 12 cu the increase from the current 12 projects 15 more by. late-2006. However, on from e s a e r c in arketing homes within the m be to d e t expec e ar ts projec n e t nd a eight tween balance, between eight and ten projects are expected to be marketing homes within the lance, be ba rs. ee yea xt thr ne er the e ov ven tim gigiven community any time over the next three years. any unity atat comm the subject homes is chedule for bsorption sschedule rojected aabsorption ary of tabular summary ofthe the p projected for the subject homes bular summ AAta is e rate of closed transactions scribe th asts de les forec e sa it I-8. inExhib Exhibit presented sales forecasts describe the 1-8.Th The transactions ented in rate of closed of pres the new each nticipated for at are gs ththat st closin e fir th te ofof da the calculated from the date the first closings areaanticipated for each oft the new lculated from ca of the ercen p n e t of e l sa e th n i t resul o t jected o pr s i tivity ac e sal s. Pre home tracts. Presale activity is projected to result in the sale of ten dul percent of the me tract ho absorption sche es assume sings. The clo of st month e fir th ted in reflec homes andis is reflected in the first month of closings. es and The absorption schedules hom assume en the homes are riods wh e p long by d e pt nterru i be not ll i w ms a progr that the sales programs will not be interrupted by long periods when the homes are that the sales . s y a l e d r e oth or e l u sched n o i t truc s con e th to due temporarily soldout out due to the construction schedule or other delays. mporarily sold te n estimated based on as bee racts h he t h of osings for rst cl he fi f tthe timing of first closings for eac each of tthe tracts has been estimated based on ming o he ti TThe alized and, thus, are subject to fin t to e ye at ar chedules ththat onstruction sschedules pated cconstruction anticipated are yet tobe be finalized and, thus, are subject to antici change. hange. c

1-10

1-10

EXHIBIT 1-1 REGIONAL SITE LOCATION MAP

MARKET PROFILES, INC. . ROFILES, INC KET P MAR

274211x1-1,2,3,4,5,6,7,8,xls 274211x1-1,2,3,4,5,6,7,8,xls

EXHIBIT 1.2 NEIGHBORHOOD SITE LOCATION MAP

MARKET PROFILES, INC. . ILES, INC KET PROF MAR

27421 lxl-1,2,3,4,5,6,7,8.xls

274211x1-1,2,3,4,5.6,7,8.xls

IT I-3 EXHIB EXHIBIT 1-3 S OSED PROP OF ARY SUMM SUMMARY OF PROPOSEDHOME HOMEPRICE PRICES E ONE AGO PHAS A I_ TERR TERRA LAGO PHASE ONE JUNE 2005

JUNE 2005

i ract

601-2 31 31601-2

Number Of Lots 178 178

Miii L, Sq. Ft. 5,000 5,000

01-3 316 31601-3 01-4 316 31601-4 1601-5 3 31601-5

28 1 128 6 8 86 ' 110 110

00 ' 7,2 7,200 _,00 8, 8,400 000 6, 6,000

:1601 3 31601

133.... 133

,300 3 3,300

r3.ist. Price' ,900 $289 $289,900 ,990 $301 $301,990 ,990 $309 $309,990 ,990 $319 $319,990 ,000 $342 $342,000 372,000 $ $372,000 2,000 $39 $392,000 6,000 2 $4 $426,000 ;000 $446 $446;000 ,000 $466 $466,000 450,990 $ $450,990 ,990 $465 $465,990 470,990 .$ $470,990 0,990 $48 $480,990 475,990 $ $475,990 90,990 $4 $490,990 ,000 399 $ $399,000 ,500 $425 $425,500 $450,000 $450,000

Price, , Sq. Ft.Sq. Ft $215 ,350 1 $215 1,350 $159 898 1, $159 1,898 $137 59 2 , 2 $137 2,259 $133 2,407 2,407 $133 $163 ,093 2 2,092 $163 $153 34 4 , 2 2,434 $153 $147 ,660 2 2,660 $147 $164 2,595 2,595 $164 $159 03 2,8 $159 2,803 $149 0 3,12 3,120 $149 $227 1,987 1,987 $227 $215 2,164 2,164 $215 $211 230 2, 2,230 $211 $200 8 0 2,4 2,408 $200 $203 2,348 2,348 $203 $189 ,591 2 2,591 $189 $190 2,100 2,100 $190 $187 2,275 2,275 $187 $180 0 0 ,5 2 2,500 $180

Summary Premium Summary Lot Premium Estimated Lot Estimated Planning Type of Ave Prem. No of Ave. Prem. Area Premium Prem. Lots Per Lot Value 31601-2 31601-2 31601-3 31601-3 31601-4 31601-4 31601 31601 31601-5 31601-5 Lake Lake Open Open Space Space Open Open ace Sp Space Golf Golf urse Co Course Lake Lake $100,000 $100,000 $30,000 $30,000 $50,000 $50,000 $100,000 $100,000 $100,000 $100,000 22 22 12 12 4 4 34 34 103 103 $12,360 $12,360

$2,813

$2,813

$2,326 $2,326 $ $30,909 $77,444 $77,444 30,909

upgrades. orupgrades. premiums lotpremiums of exclusive price saleprice Base **Base sale exclusive of lot or dollars. today's in stated pricesare All All prices are stated in today's dollars, premiums. jorlot includingma price sale Average **Average ** sale price including major lot premiums.

INC. MARKET PROFILES. INC. MARKETPROFILES,

274211x1-1,2,3A,5,6,7,8.xls

274211xl-l,2,3.4,5,6,7,8.xls

EXHIBIT I-4 EXHIBIT 1-4 ANNUAL NEW HOME DEMAND ED JECT PRO PROJECTED ANNUAL NEW HOME DEMAND COACHELLA VALLEY COACHELLA VALLEY 2005-2006 2005-2006 GE* E RAN PRIC PRICE RANGE* 00,000 r $3$300,000 Unde Under 0,000 35 $ 0,000 $30 $300,000-$350,000 000 00, 4 ,000-$ $350 $350,000-$400,000 0,000-$450,000 $40 $400,000-$450,000 ,000-$500.000 $450 $450,000-$500,000 ,000-$750,000 $500 $500,000-$750,000 $1,000,000 ,000$750 $750,00041,000,000 Over 0,000 and $1,00 $1,000,000 and Over L TOTA TOTAL RAGE ANNUAL SALES AVE AVERAGE ANNUAL SALES 500 500 750 750 900 900 650 650 450 450 550 550 450 450 250 250 4.500
4.500

OF TOTAL %/o % OF TOTAL 11.1% 11.1% .7% 16 16.7% 20.0% 20.0% .4% 14 14.4% 10.0% 10.0% 12.2% 12.2% 10.0% 10.0% 5.6% 5.6% 00.0%
100.0%

UAL NEW HOME DEMAND JECTED ANN PRO PROJECTED ANNUAL NEW HOME DEMAND CHELLA VALLEY COA COACHELLA VALLEY 2005-2006
2005-2006
-- . 1000 1000 g00 900 0 80 800 700 700 00 6500 0 50 500 0 ,: 4O 400 300 300 AVER/_GE ANNUAL a AVERAGE E$ $_L ANNUAL I SALES ....

200 200
00 1 100 0 0 i 50,0003OO.O00- $3 $ der Un $350,000Under $300,000$400,000 000 350, $ 0 300,00 $ 5300,000 $350,000 $400,000 I -4.-.

1,000,000 $400,000. $450.0o0- $500.000- $750,000-$ $400,000. $450,000$500,000$750,000-$1,000,000 and Over 0 0 0 . .000 1 $ 0D0 , 750 $ 0 00 , 0 0 $5 $4-G0,000

$450,000 $500,000 $750,000 $1,000,000 and Over

futu excluding llars today'sdo in today's edin * Prices stated dollars excluding future Pricesstat Profiles Market Source: Market Source: Profiles

nflationor appreciation rei inflation or appreciation

27421 lx1-1,2,3,4,5,6, INC_ MARKET PROFILES, INC_ MARKET PROFILES,

7,B.xls

274211x1-1,2,3,4,5,6,7,8 xls

EXHIBIT 1.5 EXHIBIT 1-5 S SUMMARY OF NEW HOME DEVELOPMENT SUMMARY SHAD OF NEW HILLSDEVELOPMENTS OWHOME SHADOW 2005HILLS JULY JULY 2005
Sole , RiAlt3r .. I ot-,i'r' fc*%11 '-7.- es Vic.r $* iw -ft oOt i'lt ' *.t TY , 22 i. 105 8,000 $389,540 2,493 $130.68 20-May-05 31 . 3 31 . 3 22 105 8,000 5389,540 2,493 $130.68 20-May-05 VERA 3.31 3.31 0 TALAVERA AUCA ."_ TALA $404,990 3,099 $156.25 TON HOR $404,990 3,099 $156.2501-Jun-O5 8,000 DR DR HORTON 40 56 9.75 $379.990 1,895 $15 2 8.18.12 2 81 56 40 01-Jun-05 8,000 $159.75 W HILLS 8.12 $379.990 1,895 BELLA TIERRA 0HADO SHADOW HILLS (_ S A TIERRA DELL .52 $2D0 9 ,62 2 0 9 9 . 9 $41 OPMENT $419.990 2629 3200.52 ILY DEVEL 90 FAMILY DEVELOPMENT FAM 2 4 1 7,200 3 06-Nov-04 $375.990 t.610 $183.1 t.75 ,S W HrLL 90 142 06-Nov-04 7,200 5183.13 COLLECTION 0 SHADOW HILLS 1.75 2.6I 2.61 $375.990 1,610 ECTION _,SHADO SERT COLL E DEDESERT THTHE 70 . $225 2.266 0 $419,99 MUNITIES $419,990 2.266 $226.70 NOLDS COM REYNOLDS COMMUNITIES 178 REY 8 19 ,990 1.720 $152.98 22-Mar--03 6.000 9 $339 _ 0.17 ADOW HILL 6.000 198 178 $152.98 22-Mar-03 $339,990 1.720$197 ECTION (_ SH 0.17 1.4 1.49 THE DORADO COLLECTION 0 SHADOW HILLS DO COLL DORA ELEL ITHE .67 $424,990 2.778 MES IAGE HO $424,990 2.778 $197.67 6 2 CENTURY VINTAGE HOMES NTURY VIN CE 1 12 8,000 8 $330,000 1.855 $155.46 01-Jura05 5.2 8 2.1 121 26 FLORENCIA TALAVERA 2.18 5.28 3330,000 1.855 $155.46 01-Jun-05 8,000 VERA TALA ENCIA(_ 0 FLOR 9,45 $17 0 38 , 2 0 0 :$370,0 0 10 TON DR HORTON 45 $370,0001,51 2 HOR 2,380 $179.45 DR 0 8,00 7 $146.07 12-Fsb-05 4.88 $326,000 3.10 FOXSTONE 3.10 4.88 3326,000 1,517 203 $146.07 12-Feb-05 100 8,000 245 XSTONE FO .02 $387,000 2,526 $ KB HOME 8 1 $387,000 2,526 $203.02 0 ME 11 O KB H 8,001 5 1.90 $396,990 2,848 $127.64 30-Apr-0 0 1.9 VERA GENOVA TALAVERA 1.90 1.90 3396,990 2,848 $127.64 30-Apr-05 TALA 8,001 110 18 VA O 0 GENO 39 . $139 7 6 $416,990 3,2 2 t2 N DR HORTON O $416,990 3,267 263 $139.39 DR HORT 8,000 05 5.53 $414.990 2,185 $157.06 01-Feb2.58 W HILLS SHADO SHADOW RANCH SHADOW HILLS 2.58 5.53 $414,990 2,185 $157.06 NCH (_ 0 8,000 263 01-Feb-05 122 ADOW RA SH 3 9 . 9 $18 7 4 $509.990 3,2 T FAMILY DEVELOPMENT PMEN O 8 L 2 DEVE $509.990 3,247 $189.93 132 LY FAMI 8,000 2.35 $394.990 2,448 $142.54 13-Apt-05 5 23 LS SIENNA SHADOW HILLS 2.35 ADOW HIL 2.35 SH $394.990 2,448 $142.54 13-Apr-05 8,000 132 28 NA e 41 SIEN $447r990 3,143 $161.35 HOMES 97 $447 990 3,143 $18 $161.35 1 4 2 MES 00 6,0 YLANDHO 3 RRYLAND 0 Mar2 2 47 . 4 $299,990 1,208 0.81 4 0.8 S OW HILL SHAD THEENTA VENTANA COLLECTION SHADOW HILLS ECTION _ 0 0.84 0.81 $299,990 1,208 3184.47 22-Mar-03 NA COLL 6,000 241 97 THEV ,990 1.843 $248.33 $339 ES CENTURY HOMES NTAGE HOM $339,990 1.843 $248.33 25 NTURY VIVINTAGE CE 100 0 0 0 8, 5 0 y a $299,990 f,576 $171.54 16-M 7 3.47 VENECIA AT TALAVERA 3.47 3.4 3.47 $299,990 1,576 $171.54 16-May-05 VERA 8,000 100 25 TALA ClA AT VENE $333,990 1.947 $190.35 DR 4 ORTON 3 1 $333,990 1.947 $144,4 R HHORTON D $190.35 37 1 200 , 7 3 -0 2 01-Oct 1.46 $294,990 1.302 46 1. _ OWHILL VILLA ESTATES 0 SHADOW HILLS 1.46 _SHAD 1.46 3294,990 1.302 $228 $144.42 01-Oct-03 7200 137 134 TATES II II ES VILLA .56 $394,990 2.735 ES AGE HOM CENTURY VINTAGE HOMES URY VINT $394,990 2.735 $226.56 CENT VD ,t I' 7.', .11 NI 1 c3 7iC

z, :-'t1

22
22

11
11

40
40 17 17

2
2

8
8

2
2 26 26 37 37 18 18 30 30 28 28 10 10 25 25 11 11

6
6 18 1B 0 0

1
1

0
0 24 24 2 2 20 20 3 3

1 ,,ity* Fie riao f INDIO 72 VERA TALAINDIO 72 INDIO TALAVERA 14 HILLS OW D A SH INDIO 14 INDIO SHADOW HILLS 44 HILLS INDIO 44 SHADOW O NDt I 14 SHADOW HILLS HILLS 14 SHADOW INDIO IO IND 77 SHADOW HILLS RA TALAVE 77 INDIO INDIO 145 TALAVERA HILLS 145 SHADOW INDIO IO D IN 91 SHADOW HILLS VEP._ TAL.A 91 INDIO DIO N I 233 TALAVERA W HILLS 233 SHADO INDIO INDIO 80 SHADOW HILLS HILLS 80 SHADOW INDIO INDIO 142 SHADOW HILLS HILLS 142 SHADOW INDIO INDIO HILLS 55 SHADOW VERA TALA INDIO 55 INDIO 0 TALAVERA W HILLS O HAD S 0 INDIO SHADOW HILLS 'T'

. . INC MARKET INC. TROFILES P MARKEPROFILES,

5 OF9 PAGE
PAGE 5 OF 9

274211x1-1.2,3,4,5,6,7.8.xls
274211x1-1.2,3,4,5,5,7.8,

$520,000 $520,000

.... ....... _ ................... :_..


......... ::il;iz;:

I T'XHIBI E EXHIBIT 1-6 T HA"*CTE"ISTmCSl UC C .D OO C*PR PRIAND PRICE PRODUCT CHARACTERISTICS I MPs, '"'co INDIO COMPS
:i

.
$470,000 -

._:" "

.......... $420,000 -.......... $420,00D -

................

.......

_ ; _:"_"

...-''""

'; ".'. -.m-,_ ..... "A"e'""A"""_"


..... " _ :--J : : :

e
$370,000
_370 j000 ...................

"
....
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+-
--

+;;22

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=,

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or.

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: :.:.-..--_'_-" ; @_. "" - .:. . .... ..-"'4' w" ;,"e-'"i.... .................................................. - .......... ...... , ---.......... 000 0, 32 $ " . ._ $320,000 . ..-- -_
...

I :: : :i _ .... = _-_, -_ C._i:ii!_!

$270,000 $270,000

3,00t) 3,11)0 3.200 3,3g0 2.700 2,800 2,900 00 2.600 1,900 2,000 2,100 2.200 2,300 2,400 2,5 1.51)0 1,600 1,700 t.800 1.300 t,400 0 0 2 . 1 1,200 1,300 1,400 1,500 1,600 1,700 1,800 1,900 2,000 2,100 2,200 2,300 2,400 2,500 2,800 2,700 2,800 2,900 3,000 3,100 3,200 3,300

'

'

:'_.-_ =_ _:: ...... .... ,;-,_;:_=_i,!_----_ ,_ :,.::i :: :: ,..-:;_:::::

_Terta

l_ago Lago 31601-2

31801-2

SQUARE FEET SQUARE FEET -..-IB-'--Terra

Lago 31601-3

111Terra Lago 31601

Lago 31601-4 erra _T _'-_* -Terra Lago 31601-4 31601 lago rra e _T io

--111---Terra Lago 31601-3 31601-5 Lago _Terra Terra Lago 31601-5 - O -AIIcanta _ Talavera, 80Q0 Sqfl Lot, Indio - IF -Alicante Dorado Talavera, 8000 Lot, Indio Hills, 6000 Sqft Lot, Imdio adow @ Sh _n er.Ji<Soft Col_ The El ...... Col/action la Shadow Hills, 6000 Soft Lot, Indio -The El Dorado e, 800(] Sqfl Lot, Indio
- _ - * - -Fox.ston

a I_ Shadow Hills, 8000 Sqf_ Lo_, lnd s Tierr(fp - -BellTierra - -- - + --- Bella Shadow Hills, 8000 Soft Lot, Indio @ Talavera ia Talavera. Florenc ..... Florencia @ 8000 Sqft Lot, Indio _ - -C__r_ova@ - -*- dGenova t Talavera, 8001 Soft Lot, Indio I : (
I i

. 80(]0 Sqft Lot, Indio

Talave_a, 8001 Sqft Lot, Ir_dio

io 4- -Foxstone, 8000 Sqfl Lot, Indio - -Sh_lo_ Ranch @ Shadow Hills, 8(100 Sql_ Lot,lnl

Hills, 80,0(1Sqff Lot, Indlo @ Shadow a Shadow - - -Sienn X-Sienna - - - -Hills, 8000 Soft Lot, Indio

- -

-Shadow Ranch

Shadow Hills, 8000 Soft Loi,Indio Lot. Ir_i0 -The Deserl ColleClion @ Shadow Hills, 7200 Sqtt

@ Shadow Hills. 6000 Sq_ Lot, ]ndio na Cof.le,ction Venta ...... -- -The The Ventana Collection Shadow Hills. 6000 Sqft Lot, Indio @ Shadow FrillS. 7200 Sqff 1.ol. Indio i ii lla Estates II Shadow -ViEstates _ -Villa Ii i Hills, 7200 Sqft Lol. Indio II @
i ii i ; _KET _k

- 4110- -The Desert Collection ig Shadow Hills, 7200 Soft Lot. Indio _a AI Talavera, 8000 Sqft LoL tndio
- - 4,- - -Venec
i

-i i ii

- -Venecta Al Talavera, 8000 Stilt Lot, Indio


ii i

/_. "_=:EkI _ RESI]ENT I I_OI,RC SOLPCE RESIJENTAI TIEI.C1;WRILET

FR711-53

I_J_5

27421 Ix1-1,2,3A,5,8,7,B.xis PROFILES, MARKET MARKET PROFILES, INCINC.

274211x1-1,2,3.4,5,6,7,8.xls

I-71-7 EXHIBIT EXHIBIT RANGE PRICE BYBY RATES SALES HOME NEW NEW HOME SALES RATES PRICE RANGE LEY L VA A ELL H COAC COACHELLA VALLEY ER 2005 QUART FIRST FIRST QUARTER 2005

Price Range
00,000 r $3$300,000 Unde Under 000-$400,000 $300, $300,000-$400,000 0-$500,000 $400,00 $400,000-$500,000 00,000-$600,000 $5$500,000-$600,000 0-$700,000 $600,00 $600,000-$700,000 ,000-$800,000 $700 $700,000-$800,000 00,000-$900,000 $8 $800,000-$900,000 0-$1,000,000 $900,00 $900,000-$1,000,000 er Ov 00,000 && $1,0 $1,000,000 Over

Ave Sales Sales/Week No of Range' Per Week' Projects


1.11 1.11 2.24 2.24 1.26 1.26 0.07 0.07 1.09 1.09 1.11 1.11 0 0.0 0.00 8 0.0 0.08 07 0.0.07 4 - 2.0 0.52 0.52 - 2.04 -7 0.54 0.54 -87 7.87 - 3.0 0.25 0.25 - 3.0 0.080.08 1.04 - 1.04 - 2,0 0.5 0.5 - 2.0 87 -2 O.12 012 - .2.87 00 0.370.37 1.25 - 1.25 63 1. 4 - 02 0.24 1.63 8 8 24 24 1515 44 77 77 00 3 7

3 7

ek. r we pe homes 1010 es over rat h sales ectswit sproj * Exclude * Excludes projects with sales rates over homes per week.

C. ILES, IN ET PROF MARKET PROFILES, INC. MARK

274211x1-1,2,3,4,5,6,7,8.xls

274211x1-1,2,3,4,5,6,7,8_xls

EXHIBIT I-8 EXHIBIT 1-8 SCHEDULE Y ABSORPTION TERL QUAR QUARTERLY ABSORPTION SCHEDULE DISTRICT .- PHASE I ITIES FACIL .AGO COMMUNITY A L TERR TERRA LAGO COMMUNITY FACILITIES DISTRICT -- PHASE I CITY OF INDIO

CITY OF INDIO

....... Closed Saie Transactions Closed Sate Transactions 13 (II , t, , ,,i- V11'7 stQtr 200F, 1''109 NIL rib( s T, i 1 ',It ) 'c I " Lt.. 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 10 26 26 26 26 26 38 2.00 178 10 26 26 1 26 178 2.00 26 26 36 8 17 68 1 2 4 1 116 90 64 38 Closed Cumulative Closed 31601-2 116 142 168 178 Cumulative 64 90 31601-2 38 7 19 19 19 19 19 4 2 .50 1 128 7 19 19 19 19 2 24 19 128 1.50 128 121 101 82 62 43 4 2 losed Cumulative C 31601-3 101 121 82 128 24 43 62 31601-3 Cumulative Closed .......... 5 13 ' ' /3 ' ......... 13 13 13 16 1.00 86 3 5 16 13 13 13 86 13 13 1.00 81 86 16 29 42 55 68 31601-4 Cumulative Closed 6 10 i0 .... 10 10 10 10 86 10 81 10 68 10 55 16 42 29 ' " 16 0.75 d 110 se Clo e v i t a l 10 10 6 4 Cumu 16 10 10 10 10 10 10 10 4 110 0.75 4 31601 110 I04 84 j 94 75 65 55 ,,, 65 45 36 26 16 16 55 75 84 94 104 26 36 45 110 31601-5 Cumulative Closed CumulativeClosed 31601-5 0.75 17 10 10 10 10 10 10 10 10 10 10 9 5 133 9 133 10 124 14 10 1 10 104 5 10 9 10 I 10 85 10 75 10 65 10 56 10 46 10 36 6 10 2 7 17 1 d e 0,75 os Cl e v i 33 at l 1 Cumu 17 26 36 46 56 65 104 114 124 133 Cumulative Closed 75 85 95 5 31601 31601 41 xfl .+ 74, ;qv, riv 411 -0111' iiAL .1 , lb, ..., 247 25 4J: 431 )2. ,2.... . ons ti ransac t e sal d ose l "C Closed sale transactions. project. the project. ofthe lifeof thelife overthe rateover ""*Average salesrate weekly sales Average weekly
.....

Profiles Market Profiles Source: Market Source:

27421lx1-1,2,3,4,5 6,7.$.xls S.INC TPROFILEINC MARKET PROFILES. MARKE


274211x1-1,2,3,4,5 6,7. 8.xls

SECTION SECTION II
ECONOMIC BACKGROUND ECONOMIC BACKGROUND AND FORECAST DEMAND FORECAST HOUSING DEMAND AND HOUSING

Market Profiles, Inc

Market Profiles, Inc

TION II II SEC SECTION CKGROUND ONOMIC BA EC ECONOMIC BACKGROUND RECAST MAND FO USING DE D HO AN AND HOUSING DEMAND FORECAST
ODUCTION INTR INTRODUCTION influence the demand for new rs that r facto majo the w of of sents a revie tion prepresents section a review the major factors that influence the demand for new s sec ThiThis of Riverside County. Factors y area hella Valle Coac the o in in Indi of of homes the City Indio City the Coachella Valley area of Riverside County. Factors the es in in hom e Coacheila Valley and files of th graphic pro lude demo sis inc nd analy dema evaluated ine the demand analysis include demographic profiles of the Coachella Valley e and luated in th eva ends, and hom r t tory inven nd a sales e hom w e n h, t grow t ymen , emplo the City Indio, employment growth, new home sales and inventory trends, and home ndio of Iof City the of of mand distributed by price ing dedemand hous of of cast e r fo a sis, y anal ata d e h t on d Base price trends. Based on the data analysis, a forecast housing distributed by price s. trend pnce y. e ll a V a hell Coac the for ated l u form n bee range has been formulated for the Coachella Valley. ge has ran between Palm mmunities located co and cities the of of ludes allall y inc Coachella Valley includes the cities and communities located between Palm hella Valle e Coac ThThe ta and Coachella Quin a L f o s e iti c e th to west north the on gs Sprin rt Hot Springs and Desert Hot Springs on the northwest to the cities of La Quinta and Coachella Dese s and Spring e submarket areas as shown in fivfive d into divide y is hella Valle e Coac heast. Th the southeast. The Coachella Valley is divided into submarket areas as shown in sout the onon the cities of Indio and Coachella and the ists of of bmarket cons su e Indio . ThThe bit I1-1 Exhi Exhibit 11-1. Indio submarket consists the cities of Indio and Coachella and the corporated areas. unding unin immediately surrounding unincorporated areas. diately surro imme WTH LOYMENT GRO EMP EMPLOYMENT GROWTH the economic vitality of enced by influ y is hella Valle Coac the es inin hom new The demand for new homes the Coachella Valley is influenced by the economic vitality of nd for dema The d second home nditures an expe ist Tour ia m o Uf Ca hern Sout of all of and Riverside County and of all of Southern California. Tourist expenditures and second home ty Riverside Coun strength of locallybased, omy, The iley's econ Va the ents ofof portant elem im purchases are important elements the Valley's economy. The strength of locally based, hases are purc the tourism industry, which, in ty ofof vitali on the ndent up depe chases is e pur primary home purchases is dependent upon the vitality the tourism industry, which, in ary hom prim hern California economies. Sout and nal natio e th of gth stren the upon nt e nd dependent upon the strength of the national and Southern California economies. depe rn, isis tuturn, th throughout Southern oyment grow empl mary ofof rical sum histo ts a a Exhibit 11-2resen presents historical summary employment growth throughoutgh Southern bit 11-2p Exhi 1997 throu 2000, From n. regio unty co bi dino r a Bern San / side r e Rive ththe inin California and Riverside/San Bernardino bi-county region. From 1997 through 2000, ornia and Calif ge annual rate of 3.0 hy avera a healt at at ased incre ia rn o Calif hern employment in Southern California increased a healthy average annual rate of 3.0 Sout in nt oyme empl Bemardino counties nd San aand rside Rive in t ymen mplo e d, perio me a s the g percent. During the same period, employment in Riverside San Bernardino counties percent. Durin . year ent per perc 5.2 of g rate stron very aa increased at very strong rate of 5.2 percent per year. creased at in first three quarters of 2001 gh the ne throu decli n to rowth bega oyment g Thera rate ofempl employment growth began to decline through the first three quarters on of 2001 te of The the wing the attack nomy. Follo nal eco ing natio slow aa tes and rest rarates due torisin rising interest and slowing national economy. Following the attack on the ginte to due of r e t quar ourth f in the rtual halt vi a e to cam th grow job r, embe Sept in er Cent World Trade Center in September, job growth came to a virtual halt in the fourth quarter of de a Tr d Worl ercent for the year 2001. p 1,2 by ased incre ornia Calif hern Sout in nt oyme in Southern California increased by 1.2 percent for the year 2001. 2001. Total employment l empl , Tota 2001 ried over into 2002 and 2003 -2001 car late n inin at bega th th down in Theslow slowdown ingrow growth that began late-2001 carried over into 2002 and 2003. The ty region increased at coun bi o ardin m Be n a S rside Rive the in nt oyme However, totalempl employment in the Riverside-San Bernardino bi-county region increased at ever, total How 00 jobs) in 2003. rcent (37,7 3,5 , and 2002 in ,800 jobs) ent (31 perc 3.0 healthy rates of 3.0 percent (31,800 jobs) in 2002, and 3.5pe percent (37,700 jobs) in 2003. tes of hy ra healt ge counties, whichboth nd Oran ngeles aand pared to formance com able per Thisis isaa favorable performance compared toLosA Los Angeles Orange counties, which both favor This

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e ththe inin growth Job 2003. and 2002 ent during employm in in declines experienced modest declines employment during 2002 and 2003. Job growth ced modest experien le . Favorab jobs) (50,500 in 2004 percent ed to 4.5 improv ino region Riverside-San Bernardino region improved to 4.5 percent in 2004 (50,500 jobs). Favorable e-San Bernard Riversid ars. ye e ofof coupl next the through ined a int a be d toto expecte are job growth are expected bem maintained through the next couple years. growth job tes ofof rarates and 2005 in t cen r pe 5 . 3 t u o b a erate to to about 3.5 percent in 2005 mod ojected to to prprojected owth isis grgrowth ce ofof e pa pace moderate and owever, ththe HHowever, will years few t nex the over y econom l a region the of xpansion of the regional economy over the next few years will 2006. Th The expansion projected e e projected 2006. s. tial unit residen new for demand lthy support continued healthy demand for new residential units. ea h d e ontinu c support ubstantial ssubstantial ult inin res e will ent bas anding employm tinuously exp ia's con Southern California's continuously expanding employment base will result ern Californ South as conomy hhas alley's eeconomy e V lley. Locally, achella Va Co the inin homes new demand for new homes the Coachella Valley. Locally,th the Valley's for demand tion 1A Proposi al of approv the lating toto nities re ent opportu employm benefited from new employment opportunities relating the approval of Proposition 1A new ed from benefit s on machine slot inos with as-style cas s Veg La tablishment ofof es thorized the which authorized the establishment Las Vegas-style casinos with slot machines on au which completed been ve a h cts proje o n si a c jor a m l a r e v se ult, s re a s A a. liforni a C in ds n a l Indian Indian lands in California. As a result, several major casino projects have been completed rojects ese pprojects lley. Th hella Va Coac the in in velopment process dedevelopment the ofof rious states are in various states the process the Coachella Valley. These va in r are oor to attract e and ment bas y's employ e Valle ththe bs to d jo ral hundre seve add rojected to are to add several hundred jobs to Valley's employment base and to attract e pprojected ar fluence n i g in ulat im st a have will h growt This . region the to tors i vis more d more visitors to the region. This'growth will have a stimulating influence thousand everal thousan sseveral pacts of the lla Valley. e Coache th inin homes r new emand fo ddemand the on the for new homes the Coachella Valley. The The first first major majorim impacts of the on . 2001 in re felt sions we expan casino casino expansions were felt in 2001. owing: he foll clude tthe anned in nd pl pleted aand ly com ts recent otel projec dh no an Casino and hotel projects recently completed planned include following: Casi 2004. usiness in pened for achella, o f Co ty o he Ci f tthe asino, southo Augustine C The Augustine 13 LI The Casino, south of City of Coachella, opened forb business in 2004. rsons. roximately 300 s app Thecasino casinoemploy employs approximately 300pe persons. The a $250 onstruction of pleted c ntly com dians rece nd of orongo Ba K The [] The M Morongo Band of Mission Mission In Indians recently completed construction of a $250 e prings on f Palm est o w miles fe ed aa locat site aa on hotel millioncasino casinoresort resort hotel on site located few milesw west of PalmS Springs onth the million r e ov jobs new reate 4,000 xpected to roject is e p te 10. f Intersta orth side n north sideoof Interstate 10. Th The project iseexpected toccreate 4,000 new jobs over gaming largest gaming the largest of the one of be one ill be completed it When completed ears. When ve y the next next fi five years. it w will the . n the tions oon destina destinations theWest WestCoast Coast. Rancho orth of 4 n ned in ecently ope o rrecently ot casin square fo 000 square on, 125, 90 milli I_ K A A$ $90 million, 125,000 foot casino opened in200 2004 north of Rancho Mirage. irage. M xpand oe ans tto nuary pl n Ja nnounced iin dians a huilla In f Ca Band o iente Band K Th The Agua Cal Caliente of Cahuilla Indians announced January plans expand e Agua El y hotel r sto 14 new dd a eet, a 0 square dditional65,00 e Casino he Agua tthe Agua Calient Caliente Casino by bya additional 65,000 square ffeet, add a new 14-story hotel s various project e. These etail spac of r eet of square f 00-rooms, and with with4 400-rooms, and add add 350,000 350,000 square feet retail space. These various projects amon mer Bob he co ation at ente Reserv e on ll b wi will be on the theAgua AguaCali Caliente Reservation attthe corner Bob Hope Hope Drive Drive and and R Ramon nty. erside Cou f Riv rea o incorporated a is an , which is Road Road, an un unincorporated area of Riverside County. gaming million gaming $95 million The $95 004. The asino opened ort C pa Res Springs, the D In In Palm Palm Springs, O the S Spa Resort Casino openedin in22004. four nd a , e loung entertainment lounge, and four an entertainment machines, an slot machines, 1,000 slot tables, 1,000 as 30 acility h f facility has 30 tables, estaurants. r restaurants.

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cre resort and corporate a 300-a e of of phas firstfirst thethe n on on begu phase a 300-acre resort and corporate truction hashas Construction begun Cons {3 K rt and Corporate Reso Oasis n a Indi e Th , gs Sprin lm a P in ted a elopment loc located in Palm Springs. The Indian Oasis Resort and Corporate devdevelopment ominium units, an 18-hole cond l, 290290 ory hote e a 10-st ately includ ultim er willwill Center ultimately include a 10-story hotel, condominium units, an 18-hole Cent 00 square feet of 500,0 and nter, e c ping shop foot re squa 00 100,0 , a a 100,000 square foot shopping center, and 500,000 square feet of golf course, course golf ce. ce spa space. offioffice s affected by the slowdown in omy wawas y's econ achella Valle CoCoachella th of th In 2003, grow growth ofethe Valley's economy affected by the slowdown in , thethe In 2003 Valley declined by ues in the reven hotel t a th s show 11-3 it Exhib . 2001 in n tourism that began in 2001. Exhibit II-3 shows that hotel revenues in the Valley declined by bega hat t m touris s drop in visitor activity had a ctively. Thi , respe 2002 and 2001 ent in in perc and 3.2 percent 2001 and 2002, respectively. This drop in visitor activity had a 3.2 and 4.84.8 ey. Despite the slowdown, Vall es in the hom new for for demand thethe ct on on dampening effect demand new homes in the Valley. Despite the slowdown, ening effe damp E SALES TRENDS HOM NEW (see to 2002 2001 eased from s incr sales new homes increased from 2001 to 2002 (see NEW HOME SALES TRENDS home new of of sales nd, with hotel room revenues rebou to d starte has m s touri ver, e how , 2003 ). Since below). Since 2003, however, tourism has started to rebound, with hotel room revenues below er improvement in hotel . Furth ent in 2004 perc 4.34.3 and in 2003 percent increasing percent in 2003 and percent in 2004. Further improvement in hotel 2.42.4 by by ing as incre . 2005 revenues projected 2005. jected forfor pro ues is is reven rnia economy over the next ern Califo South the alth of of hehealth the vement in in The projected improvement the the Southern California economy over the next cted impro proje The mes in the Coachella Valley. ho new for nd a m e d rlying unde the n e ngth e tr s two years will strengthen the underlying demand for new homes in the Coachella Valley. rs will yea two the financial state and the w, while gro er and recov ey will Vall the itors to to vis volume visitors the Valley will recover and grow, while the financial state and the e of of e volum ThThe ve. impro rs will e buye hom new s of of confidence levels new home buyers will improve. ence level confid FILE OGRAPHIC PRO DEM DEMOGRAPHIC PROFILE hella Valley, the City of Coac files of the me proprofiles inco lation and ents popu Exhibit 11-4 presents population and income of the Coachella Valley, the City of -4pres bit 11 Exhi ing in the Valley. The rsons resid 48 pe 365,6 e are ty. Ther rside Coun Indio, and Riverside County_ There are 365,648 persons residing in the Valley. The Rive , and Indic 2000, The Valley's since year ent per perc of 4.1 g pace a stron n at at population has grown a strong pace of 4.1 percent per year since 2000. The Valley's grow lation has popu year over the next five years per ent perc 3.8 of rate a t a grow to d cte proje population years. lation is is projected to grow at a rate of 3.8 percent per year over the next five popu th rate in absolute terms is grow ning, the decli th isis grow te ofof centage rarate per Although the percentage growth declining, the growth rate in absolute terms is ugh the Altho els. t lev recen ain near rem ected toto projected remain near recent levels. proj sons. This is a low figure per 2.68 lley is is hella Va Coac the inin sehold size The average household size the Coachella Valley 2.68 persons. This is a low figure age hou aver The households. Nearly two thirds n o s r e p wo t and e n o of ion oport r p rge a l a resulting from a large proportion of one and two person households. Nearly two thirds sulting from re o persons, compared to 54 tw or one ist ofof seholds cons ea's hou arket ar (64%) ofthe them market area's households consist one or two persons, compared to 54 ) of (64% partly due to a large seholds is is hou mall s of n o i t por o pr e rg a l e Th . e percent countywide_ The large proportion of small households partly due to a large ywid t percent coun 65 years of age. Countywide over pulation isis e po th ercent of een p retired population. Nineteen percent of the population over 65 years of age. Countywide lation. Ninet tired popu re lation. popu the ercent of 14 unts for acco this age group accounts for 14ppercent of the population. group age this 3.46 persons, the average rsons. At ,516 pe 61 isis Indic of e City population ofth the City of Indio 61,516 persons. At 3.46 persons, the average opulation of he p TThe achella Valley as a whole. The CoCoachella the t of of tha r than large much y isis e cit ththe inin household size city much larger than that the Valley as a whole. The ehold size hous ildren than do the other ch with s hold e s hou y famil of rtion propo r large city has a much larger proportion of family households with children than do the other city has a much alley. e VValley. ththe communities in unities in comm

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ed distribut eholds are are se. Hous diver olds is very househ Valley's income profile of the Valley's households is very diverse. Households distributed of the profile income TheThe 00 $100,0 over to (21%) 0 er $25,00 und omes from incincomes of annual range across a broad range of annual from under $25,000 (21 %) to over $100,000 a broad across a is s hi T . 240 , ehold's is $44 s hous chella Valley' CoaCoachella of the income median TheThe (20%). median income of the Valley's household's is $44,240. This is a (20%). 384. The of $48 figure tywide median coun the the t below percen is 8.6 modest figure is 8.6 percent below countywide median figure of ,$48,384. The e that that t figur modes 7. $39,47 is dio n I in s old househ of income median median income of households in Indio is $39,477. LE SING PROFI HOU HOUSING PROFILE y, Single ella Valle k of the g stocstock g housin stin e of the a pro 5shows Exhibit shows afil profile of exi the existing housing of Coach the Coachella Valley. Single ibit 11-11-5 Exh red to a compa g stock housin s ' Valley e th of nt e c r e p 46 for ccount a s e hom family detached homes account for 46 percent of the Valley's housing stock compared to a ached t de mily fa s i y e Vall lla e h c Coa the in value g housin median The nt. e rc e p 61 tion of of 61 percent. The median housing value in the Coachella Valley is countywide proportion wide propor county nty of rside Cou Rive e for for figur thethe below is slightly figure es). This g hom $238,378 (existing homes). This figure is slightly below figure Riverside County of 78 (existin $238,3 has a greater Valley se, The diver is ve g stock ey's housin Vall er, thethe 54. Howev $245,354. However, Valley's housing stock isry very diverse. The Valley has a greater $245,3 sive st expen mo of the as, as, well , as as ensive homes t exp leas rtion of the propo than typical proportion of the least expensive homes, well of the most expensive typical than below $150,000 valued ck is is sing sto lley's hou Va the t of of percen five homes. Twenty five percent the Valley's housing stock valued below $150,000 es. Twenty hom proportion of higher a s a h o s al y e Vall e th r, e v e How wide. county nt e rc e p 22 compared ared to to 22 percent countywide. However, the Valley also has a higher proportion of comp ide). countyw sus 18% verversus 0,000 (24% r $40 homes valued over $400,000 (24% 18% countywide). ed ove es valu hom sing stock by city. ey hou la Vall Coachel racteristics of the cy cha vacan ws thethe sho 11-6 Exhibit II-6 shows vacancy characteristics of the Coachella Valley housing stock by city. Exhibit s of citie in the as,as, well s as a rt, e s e D Palm of ity C the in high y er v e r a s e t a .Housing vacancy rates are very high in the City of Palm Desert, well in the cities of r y c an c va g Housin of es t a r y c n a vac high e s The ge. a Mir ho c n a R and , s Spdng lm a P , a t n i u Q Indian Wells, La Quinta, Palm Springs, and Rancho Mirage. These high vacancy rates of La Indian Wells. e ownership ond hom sec ce of of inciden high thethe to due cent are per 50 50 even high and over 30, and even percent are to due 40,40, incidence second home ownership r 30, ove cent, second home per tenten to to five of of ancy rate derlying vac ununderlying uming anan . Ass se cities inethese cities. Assuming vacancy rate five percent, second home in th ck. to s ing s hou l a tot e th f o t percen 45 to 0 2 from ges ran s e citi e s ownership in these cities ranges from of the 20 to 45 percent the total housing stock. ownership in portion of e pro ThThe tively low. is rel of Indio City ethe s in th home second The proportion second homes in City of Indio is a relatively low. proportion of tion of of propor The er, this Howev . t n e rc e p n e t about be to timated s e s i city e th in hip s owner second home ownership in the city is estimated to be about ten percent. However, this ond home sec ars. yeyears. five next the rease over inc ed to to proportion projected increase over the next five project tion is is propor S TREND SALES HOME NEW NEW HOME SALES TRENDS buted by lley distri chella VaValley Coa s in th sale home ew ary of n umm sents a sa Exhibit 11-7 summary of new home sales inethe Coachella distributed by -7prepresents hibit 11 Ex in 1989 3,356 of k a pe a from ed n li c de y e ll a V e th in s ale s of e lum o v The a. e submarket arket ar area. The volume of sales in the Valley declined from a peak of 3,356 in 1989 subm 90. Sales an in mid-19 t beg ession thathat al rec region ects of the effeffects the e to to dudue 1993 in in 953 1993 the of the regional recession began in mid-1990. Sales 953 toto homes sold 2,226 elerated to to n acc 7, the ough 199 thrthrough 1993 erate from activity moderate from 1993 1997, then accelerated 2,226 homes sold mained mod tivity reremained ac a general to due s home 2,510 to ll e f 2001 for s le Sa 0. 0 20 in homes 0 3 3,3 to and 1998 and to 3,330 homes in 2000. Sales for 2001 fell to 2,510 homes due to a general 1998 in in sed to 4,236 homes in les increa lifornia. Sa thern Ca Sou th in in ic grow econom wn in in slowdown economic growth Southern California. Sales slowdo increased to 4,236 homes in PROJECTED cussed inin dis ors asas veral fact seseveral to to s due wa 2002 les inin sa inin jump 2002. The jump sales 2002 was due factors discussed . The 2002 PROJECTED in 2003 and gly n crease stro inincrease ed toto ivity continu ales act NEW HOME DEMAND MAND below. DE HOME below.SSales activity continued strongly in 2003 and NEW in 2004. es sold hom 5,851 and 2003 in in s sold home 5,768 with 2004 2004 with 5,768 homes sold 2003 and 5,851 homes sold in 2004.

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e first quarter of 2005. This is a es in th hom d 1,331 y totale hella Valle Coac Sales in the Coachella Valley totaled 1,331 homes in the first quarter of 2005. This is a in the Sales t were reported in the first es thathat salsales 2,052 e th below well is it r, e v howe , however, it figure strong sales figure, is well below the 2,052 were reported in the first s e l a s g stron . quarter of 2004. er of 2004 quart ley has shifted over the ella ValValley Coach ethe in th e sales hom ew rn of n The geographic pattern of new home sales in Coachella has shifted over the graphic patte geo The g the other amon vity i ct a les a s t, e rk ubma s chella a -Co Indio ding the past years. Excluding the Indio-Coachella submarket, sales activity among the other rs. Exclu yea t fewfew pas sales fluctuations have been . The year to r ea y from ntly a ignific s ried a v submarket areas varied significantly from year to year. The sales fluctuations have been areas t e rk a subm rt submarket dropped from Dese lm a P e th in s le a S . s tion a ider s con upply s ely to to supply considerations. Sales in the Palm Desert submarket dropped due largely from larg due ome supply. Alternatively, e in h a declin e to to dudue 2003 s in in home 383 to to 1,313 homes in 2002 383 homes 2003 a decline in home supply. Alternatively, es in 2002 hom 1,313 ding Desert Hot Springs) rket (inclu subma gs-Cathedral City Sprin Palm home in the Palm Springs-Cathedral City submarket (including Desert Hot Springs) es in the e salsales hom crease in supply. The in n a due 2004 in s home 1,161 to 002 2 in s home 393 from 393 homes in 2002 to 1,161 homes in 2004 due an increase in supply. The reased from incincreased e future. More sales nue in th to conti likely s i tivity ac es l sa of rn e patt shifting geographic pattern of sales activity is likely to continue in the future. More sales phic a ogr e g g n shifti city has recently ended its the sert since De Palm ge in in emer ected to to activity is expected emerge Palm Desert since the city has recently ended its ty is exp activi tor. ern sec north itsits lopment in in deve moratorium development northern sector. torium on on mora of the Valley, new market areas er sub othother ivity in th act ating sales fluctu contrast fluctuating sales activity inethe submarket areas of the Valley, new trast to to con In In over the past ased incre istently cons bmarket have -Coachella Su Indio the es in in home sales the Indio-Coachella Submarket have consistently increased over the past e sal hom to 1,217 homes in 2002 and 2,890 1999 in omes h 591 rom f d pe um j Sales rs. a ye three years. Sales jumped from 591 homes in 1999 to 1,217 homes in 2002 and 2,890 three hella Submarket continued to accelerate Coac io d In the in sales e hom w e N . 2003 in es hom homes in 2003. New home sales in the Indio-Coachella Submarket continued to r accelerate e been a major att actor of ces hav pri e hom rate e d Mo . 2,596 ing total sales in 2004 with sales totaling 2,596. Moderate home prices have been a major attractor of with in 2004 low). e b DS TREN E PRIC e (se t e ark m sub he t o t homebuyers mebuyers to the submarket (see PRICE TRENDS below). ho Indio-Coachella Submarket totaled 585 the in in me sales hohome new 2005, arter of of t ququarter firs the In In the first 2005, new sales the Indio-Coachella Submarket qua totaled 585 f rter o in the first sold ed rt repo were that es hom 872 the below e is homes. figure is below the 872 homes that were reported sold in the first quarter of his figur es. TThis hom 04. 20 2004. DS E TREN PRIC PRICE TRENDS quarter in the five submarket ld each mes so ho new ce of of rage priprice ave the Exhibit 11-8 shows the average new homes sold each quarter in the five submarket 8shows hibit 11Ex detached home sold in the a of ce i pr ge avera e Th y. Valle hella Coac e Coachella Valley. The average price of a detached home sold in th areas the the ofof areas average sale price has 63. The $487,0 05 was 20 ter of st quar e fir th Coachella Valley in the first quarter ey in of 2005 was $487,063. The average sale price has hena Vall Coac uctofferings. Although the prod ofof ging mix e chan e th ter du quar ter to fluctuated from quarter to quarter due the changing mix product offerings. Although the m quar ated fro fluctu price of all homes has sale ge a aver the , tly fican signi n e is r e hav es idual hom indiv prices individual homes have risen significantly, the average sale price of all homes has es ofof pric increase in the sales volume of the to rs due yea t four pas the erately over mod risen only moderately over the past four years due to the increase in the sales volume of only risen arket area. dio-Coachella subm InIndio-Coachella the ed inin es locat iced hom modestly priced homes located the submarket area. odestly pr m ubmarket during the first ndio-Coachella s rice of Theaver average price ofaanew newhome home sold soldin inthe the IIndio-Coachella submarket a during the first age p The r than the aver ge sale price highe t n e c r e p 40 s i figure s Thi ,349. $381 was 2005 quarter 2005 was $381,349. This figure is 40 percent higher than the average chan sale ged price er ofof quart ge sale price has not ever, the ,163. How $272 ofof 2004 er of of for quarter 2004 $272,163. However, theavera average sale price has not changed st quart e firfirst ththe for rters. ast three the over theppast threequa quarters. ignificantly over ssignificantly

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Exhibit 11-9 pattern of new home sales in the CoachelliVa4 Exhibit il-9 shows shows the the quarterly quarterly pattern of new home sales in the Co area distributed by price range. Sales are spread across a broad price spectrUM' ,ra area distributed by price range. Sales are spread across a broad price from under $200,000 to well over $400,000. During 2004 and 2005, there is a cleat P, from under $200,000 to well over $400,000. During 2004 and 2005, there is ofof decreasing sales of lower priced homes as the price structure of new homes inin the Valley decreasing sales of lower priced homes as the price structure of new homes the has shifted the first quarter of 2004, 50 percent of the new homes sold were has shiftedupward. upward. InIn the first quarter of 2004, 50 percent of the new homes sold we priced under $300,000. By the first quarter of 2005, that proportion had dropped to just 6.7 priced under $300,000. By the first quarter of 2005; that proportion had dropped to just 6.7 percent. percent. Exhibit1I-10 showssthat the Indio-Coachella dominated sales of homes Exhibit I1-10show that the Indio-Coachella submarket submarketarea area dominatedthe the sales of homes under $400,000. inin the Coachella Valley in first quarter 2005 that were priced the Coachella Valley in first quarter
2005 that were priced under $400,000.

PROJECTED PROJECTED NEW NEWHOME HOMEDEMAND DEMAND contributed to strong new home sales in the Coachella Valley The primary factors that have The primary factors that have contributed to strongnew home sales in the Coachella Valley the job-creating above, and very low mortgage interest rates. thelocal local job-creating projects projects outlined outlined above, and very low mortgage interest rates. Supported by favorable regional and national economic trends, job growth within the Valley Supported by favorable regional and national economic trends, job growth withinthe Valley is projected to continue at a favorable pace_ And, although mortgage interest rates are is projected to continue at a favorable pace. And, although mortgage interest rates are expected volume of new homes sales is projected to be expected to torise risemoderately, moderately, aahealthy healthy volume of new homes sales is projected to be sustained within the Coachella Valley. sustained within the Coachella Valley. Based on the data itit is projected the demand for new homes in the Coachella Based on the dataanalysis, analysis, is projectedthat that the demand for new homes in the Coachella Valley will average 4,500 homes per year over next five years. With 5,851 homes sold, Valley will average 4,500 homes per year overthe the next five years. With 5,851 homes sold, the annual demand of 4,500 homes. However, the2004 2004sales salesvolume volumesurpassed surpassedthe theprojected projected annual demand of 4,500 homes. However, itit is projected that the pace of sales will moderate is projected that the pace of sales will moderate in 2005 and 2006.
in 2005 and 2006.

The demand forecast are summarized in Thedemographic demographicfactors factors that that underlie underliethe the housing housing demand forecast are summarized in Exhibit II-11. The majority of the demand will be fueled the primary buyer segment (i.e., Exhibit I1-11. The majority of the demand will be fueledby by the primary buyer segment (i.e., owner owners), including retired households. owner occupants occupants as as opposed opposed to tosecond secondhome home owners), including retired households. Second home buyers, including pre-retirement buyers, projected to account for just Second home buyers, including pre-retirement buyers, are are projected to account for just over one quarter of the demand. The great majority of the buyers are active in the over one quarter of the demand. The great majority of the buyersthat that are active in the community buyers consisting primary of first time buyers communityof ofIndio Indioconsist consistof ofprimary primaryhome home buyers consisting primary of first time buyers and and local local move-up move-up households. households. The is diverse. Exhibit 11-12 shows the projected The Coachella Coachella Valley Valley new new home home market market is diverse. Exhibit 11-12 shows the projected average annual demand for new homes by price range. Market demand is average annual demand for new homes distributed distributed by price range. Market demand is spread aw wide of prices from under $300,000 to over $1,000,000. The spread across across a ide range range of prices from under $300,000 to over $1,000,000. The majority of the demand for new homes in submarket emanates from majority of the demand for new homes in the the Indio-Coachella Indio-Coachella submarket emanates from primary resident households. Primary homebuyers are responsible the high volume of pdmary resident households. Primary homebuyers are responsible for for the high volume of demand shown Exhibit 11-12. demand below below the the $400,000 $400,000 price pricelevel levelas as showninin Exhibit
11-12.

11-6 11-6

EXHIBIT II-1 COACHELLA VALLEY SUBMARKET AREAS

27421 lx2-'I ,2.3,4,5,6,7.xls NC. MARKET PROFILES, FILES, IINC. KET PRO MAR
274211x2-1,2,3,4,5,6,7 xls

BIT 11-2 EXHI EXHIBIT 11-2 WTH GRO ENT OYM EMPL EMPLOYMENT GROWTH COUNTY REGION BI O N ARDI RSIDE-SAN BERN RIVE RIVERSIDE-SAN BERNARDINO -BI-COUNTY REGION NIA IFOR L CA HERN SOUT AND AND SOUTHERN CALIFORNIA 006 - 21980 1980 2006 Southern California ties ardino Coun n Bern saSan side & & River Southern California Riverside Bernardino Counties Percent increase/ Totai .2_t , Per,.; ' se. _._ _nr:,e Percent ' n i- , t-, 1 - ., P v r,. Increase! Tota! t, f 1 t TrAa I Total ge Ct_an ase Decre e_t oy_t_ Emp! ge Chan Change Year _.mploy Change Et Decrease ase plt ynt nit E..Inployinent Decrease Decre ment 2.0% 00 168,0 ,400 8,464 3.5% ,000 4242,000 2.0% 168,000 52,700 8,464,400 1,2 2006 3.5% 1,252,700 6 200 .7% 1 00 _1 , 135 00 8_4 3.4% 1.7% ,000 4040,000 2005 1,210,7 34% 135,100 00 8,296,400 1,210,700 2005 D JECTE PRO PROJECTED 1.5% .000 122 61,300 8,1 % 4.5 ,500 5050,500 1_5% 8,161,300 1,170,700 4.5% 122,000 2004 70,700 1,1 04 20 1% -0. 00) (11,2 0 0 ,039,3 8 3.5% (11,200) -0.1% ,700 8,039,300 37 2003 1,1,120,200 37,700 3.5% 120,200 2003 -0.2% 700) (12, ,500 8.050 3.0% -0.2% 2002 1,082,500 3.0% 800 (12,700) 31, 31,800 8,050,500 82,500 1,0 02 20 2% 1 0 0 6 , 96 ,200 8,063 4.0% ,600 40 1.2% 2001 50,700 96,600 1,0 1,050,700 8,063,200 4.0% 40,600 01 20 8% . 2 00 216,3 ,600 7,966 5.2% 49,800 2000 1,1,010,100 2.8% 7,966,600 010,100 49,800 5.2% 216,300 2000 2.9% ,000 221 ,300 7,750 3% 6.6.3% 0 56,50 2.9% 00 1999 221,000 56,500 7,750,300 960,300 960,3 1999 3.4% 0 0 245,7 0 30 , 529 , 7 4.7% ,700 40 3.4% 00 1998 903,800 4.7% 7,529,300 245,700 40,700 903,8 8 199 1% . 3 0 80 , 216 0 ,60 7,283 4.6% ,300 38 1997 3.1% . 4.6% 7,283,600 3,100 863,100 216,800 86 38,300 97 19 1.8% ,000 126 ,800 7,066 9% 2.2.9% 0 1996 23,10 23,100 1.8% 824,800 7,066,800 126,000 4,800 82 1996 1.8% 0 0 124,7 00 940,8 , 6 3.7% 900 , 28 1.8% 1995 801,700 3.7% 124,700 00 6,940,800 28,900 801,7 5 199 5% . 0 0 70 . 35 0 O ,1 6,816 % 2 . 2 0 16,90 1994 16,900 2.2% 6,816,100 772,800 0.5% 35,700 2,800 77 1994 -1.5% 2,900) (10 780,400 6, 0.6% 1993 4,400 4,400 6,780,400 -1.5% 755,900 0.6% (102,900) 5,900 75 1993 -2.9% ) 000 5, 0 (2 ,300 6,883 1.3% 0 1992 751,500 10,00 1.3% (205,000) 10,000 -2.9% 6,883,300 ,500 751 2 199 -2.5% 600) , 0 8 (1 ,088,300 77,088,300 0.9% 1991 ,300 66,300 741,500 0.9% (180,600) -2.5% 00 741,5 1991 1.4% 3,100 0 1 ,900 7,268 6.7% 0 46,00 1990 735,200 46,000 6.7% 1.4% 7,268,900 103,100 ,200 735 1990 2.7% 00 190,4 ,800 7,165 .4% 66.4% 0 1989 41,50 41,500 7,165,800 2.7% 689,200 190,400 00 689.2 1989 3.6% 00 241,3 00 975,4 , 6 .0% 66.0% 800 36, 1988 647,700 241,300 00 36,800 6,975,400 3.6% 647,7 1988 3.7% 0,900 24 00 ,734,1 66,734,100 6.4% 00 36,5 610.900 1987 36,500 3.7% 6.4% 240,900 0.900 61 87 19 3.6% 00 226,1 00 2 , 6,493 % 0 . 7 0 37,70 1986 00 574,400 37,700 6,493,200 3.6% 574,4 7.0% 226,100 1986 3.9% 00 237,8 0 67,10 2 6, 3% . 8 000 , 1 441,000 1985 536,700 3.9% 00 237,800 8.3% 6,267,100 536,7 1985 4.6% 00 8 266, 0 ,30 6,029 4% . 6 0,000 330,000 1984 6.4% 6,029,300 266,800 95,700 4495,700 4.6% 1984 0.9% 00 53,9 ,500 5,762 .9% 22.9% 3,100 113,100 465,700 1983 53,900 5,762,500 00 0.9% 465,7 983 1 -2.3% ) 00 8 (135, ,708,600 5 1.4% --1.4% 1982 ,300) (6,300) 5,708,600 (6 (135,800) -2.3% 52,600 4452,600 982 1 1.6% ,300 89 0 40 , 5,844 % 5 1 900 6, 1981 6,900 58,900 4458,900 1.6% 1.5% 5,844,400 89,300 981 1 N.A. N.A. ,100 5,755 . A . N .A. N 1980 N.A. N.A.N.A. 5,755,100 N.A. 52,000 4452,000 1980 ofiles arket Pr partment,M loymentDe Source: California Employment Department, Market Profiles aliforniaEmp ource:C S
27421 lx2-1,2,3,4,5,6,7.xls

MARKET PROFILES, INC. ROFILES, INC. T P MARKE

274211x2-1,2,3,4,5,6,7 xis

11-3 EXHIBIT EXHIBIT 11-3 ES HOTEL SALES ROOM SAL HOTEL ROOM VALLEY COACHELLA CHELLA VALLEY COA 4 1988 2004 1988 - 200

2004 2004 2003 2003 2002 2002 2001 2001 2000 2000 1999 1999 1998 1998 1997 1997 1996 1996 1995 1995 1994 1994 1993 1993 1992 1992 1991 1991 1990 1990 1989 1989 1988 1988

Room Revenue ($ Millions) $362 $362 $347 $347 $339 $339 $350 $350 $368 $368 $347 $347 $311 $311 $287 $287 $265 $265 $244 $244 $232 $232 $220 $220 $225 $225 $224 $224 $226 $226 $209 $209 $185 $185

Percent
Change

Revenue
Pc: Rc,cmi

Percent
Change

4.2% 4.2% 2.4% 2.4% -3.2% -3.2% -4.8% -4.8% 6.1% 1% 6. 11.6% 11.6% 8.4% 8.4% 8.3% 8.3% 8.6% 8.6% 5.2% 5.2% 5.5% 5.5% -2.2% -2.2% 0.4% 0.4 % -0.9% -0.9% 81% % 8.1 13_0% 13.0% N A. . NA

$23,352 352 $22,440 $22,440 $22,521 521 $22, $23,528 $23,528 $25,126 $25,126 $23,954 954 $23, $21,988 $21,988 $20,523 $20,523 $17,545 $17,545 $16,200 $16,200 $15,200 $t 5,200 $14,539 $14,539 $14,306 $14,306 $14,617 $14,617 $15,400 $15,400 $14,384 $14,384 N.A. N.A.

4.1% 4.1% -0_4% -0.4% -.4.3% -4.3% -6.4% -6.4% 4.9% 4.9% .9% 8 8.9% 7.1% 7.1% 17.0% 17.0% .3% 8 8.3% 6.6% 6.6% 4.5% 4.5% 1.6% 1.6% -2.1% -2.1% -5.1% -5.1% 7.1% 7.1% A. N ..A. . N .A. N.A

Source:

Source: Whee Wheeler's Desert Profiles Market Profiles Letter, Market ert Letter, ler's Des

INC_ MARKET PROFILES, INC_ MARKET PROFILES,

xfs 274211x2-1,2,3,4,5,6,7 xls 27421 lx2-1,2,3,4,5,6,7

EXHIBIT il-4 EXHIBIT 11-4 DEMOGRAPHIC PROFILE DEMOGRAPHIC PROFILE COACHELLA VALLEY COACHELLA VALLEY AND RIVERSIDE COUNTY
CITY OF DES C RIPTION

AND RIVERSIDE COUNTY COACHELLA VALLEY


435,809 435,809 365,648 365,648 303,579 303,579 222,945 222,945 19.19% 19.19% 20.45% 20.45% 36.17%

INDIO
N.A. N.A. 61,516 51,510 49,116 49,116 37,554 37,554 N.A. N.A. 25 25% 25 25% 30 79%

RIVERSIDE COUNTY
2,155,693 2,155,693 1,843,493 1,843,493 1,545,387 1,545,387 1,170,413 1,170,413 16.94% 16.94% 19.29% 19.29% 32.04%

ULATION POP POPULATION n 0 Projectio 2012010 Projection Estimate 2005 2005 Estimate 0 Census 200 2000 Census sus Cen 1990 1990 Census 2005-2010 Growth Growth 2005-2010 2000-2005 Growth Growth 2000-2005 0 1990-200 Growth Growth 1990-2000 OLDS HOUSEH HOUSEHOLDS n Projectio 2010 2010 Projection e Estimat 2005 2005 Estimate Census 2000 2000 Census nsus CeCensus 1990 1990 -2010 th 2005 Grow Growth 2005-2010 0-2005 0 20 Growth Growth 2000-2005 000 h 1990-2 Growt Growth 1990-2000 RACE TION BY ED POPULA 05 ESTIMAT 202005 ESTIMATED POPULATION BY RACE WHITE WHITE ACK BL BLACK NDER IFIC ISLA PAC && ASIAN ASIAN PACIFIC ISLANDER RACES OTHER OTHER RACES RE MO OR O TW TWO OR MORE TION ED POPULA 5 ESTIMAT 200 2005 ESTIMATED POPULATION GIN C ORI HISPANI HISPANIC ORIGIN S D UNIT 5 OCCUPIE 200 2005 OCCUPIED UNITS CCUPIED WNER OOCCUPIED OOWNER D OCCUPIE RENTER RENTER OCCUPIED HH PER GE PERSON AVERA AVERAGE PERSON PER HH COME OLDS BY HOUSEH 05 EST. 20 2005 EST. HOUSEHOLDS BYIN INCOME 5,000 DER $1 UN UNDER $15,000 ,999 $24 0 TO $15,00 $15,000 TO $24,999 O $34,999 25,000 TTO $$25,000 $34,999 ,999 $49 ,000 TO $35 $35,000 TO $49,999 74,999 $ TO 0 00 , $50 $50,000 TO $74,999 9 ,000 TO $75 $75,000 TO$99,99 $99,999 999 , 9 14 $ TO 000 , $100 $100,000 TO $149,999 999 $249, O T $150,000 $150,000 TO $249,999 O $499,999 000 T $250, $250,000 TO $499,999 ER ND OV 00,000 A $5 $500,000 AND OVER OLD INCOME E HOUSEH T. AVERAG 2005 2005ES EST. AVERAGE HOUSEHOLD INCOME D INCOME L O N HOUSEH . MEDIA 005 EST 2 2005 EST. MEDIAN HOUSEHOLD INCOME COME 2005 2005 EST. EST. PER PER CAPITA CAPITA IN INCOME Profiles t e ,Mark las ri a e:Cl c our S Source: Claritas, Market Profiles

30 79%

36.17%

32.04%

. N.A N.A. 17,532 17,532 13,871 13,871 11,003 11,003 N.A. N.A. 26.39% 26.39% 26.07%

26.07%

160,815 160,815 135,402 135,402 113,516 113,516 85,186 85,186 18.77% 18.77% 19.28% 19.28% 33.26%

694,251 694,251 597,519 597,519 506,218 506,218 402,067 402,067 % 16.19 16.19% 18.04% .90% 2518.04%

33.26%

25.90%

61,516 61,516 47.71% 47.71% 2.30% 2.30% 1.83% 1.83% 44.21% 44.21% 3.96%

3.96%

365,648 365,648 67 85% 67 85% 2.03% 2.03% 2.47% 2.47% 23.31% 23.31% 3.51%

3.51%

1,843,493 1,843,493 52.92% 62.92% 19% 6. 6.19% 4.32% 4.32% 20.69% .73% 420.69%

4.73%
40.14%

78.15%

78.15%

51.79%

51.79%

40.14%
597,519 597,519 69.39% 69.39% .61% 30 30.61% 3_03

3.46

3.46

132,010 132,010 67.58% 67.58% 32.42% 32.42% 2.68

2.68

3_03

17,532 17,532 15.31% 15.31% 15.21% 15.21% 13.63% 13.63% 19,61% 19,61% 17.69% 17.69% 8.37% 8.37% 7.08% 7.08% 2.02% 2.02% 0.75% 0.75% 0.33%

0.33%

132,010 132,010 9.20% 9.20% 11.83 % 11.83% 12,36% 12.36% 16.86% 16.86% 19.10% 19.10% 11.06% 11.06% 10.58% 10.58% 5.76% 5.76% 2.14% 2.14% 1.12%

1.12%

597,519 597,519 12.86% 12.86% 11.75% 11.75% .38% 11 11.38% 15.69% 15.69% 19.36% 19.36% 12.16% 12.16% 11.33% 11.33% 3.97% 3.97% 8% 1.0 1.08% 41% 0.

0.41%

$51,732 $51,732 $39,477 $14,979

$39,477 $14,979

$65,569 $65,569 $44,240 $24.481

$44,240 $24,481

$63,592 $63,592 48,384 $ $20,892

$48,384 $20,892

NC ROFILES. I ARKET P M MARKET PROFILES. INC

27421 lx2-1,2,3,4,5,6,7.x|s 274211x 2-1,2,3,4,5,6,7.xls

-5 T 11 EXHIBI EXHIBIT 11-5 E NG PROFIL HOUSI HOUSING PROFILE IDE COUNTY RIVERS AND Y ELLA VALLE COACH COACHELLA VALLEY AND RIVERSIDE COUNTY 2005 2005 ION , IPT DESCR DESCR PTIO1' 4 TURE YEAR YEARROUND ROUNDUNITS UNITSIN INSTRUC STRUCTURE D E TACH E D LY I AM INGLE F S SINGLE FAMILY DETACHED HED ATTAC Y AMIL F E L NG SI SINGLE FAMILY ATTACHED S UNIT E DOUBL DOUBLE UNITS TS O 19 33T TO 19UNI UNITS S UNIT 9 4 O T 20 20 TO 49 UNITS NITS 50+ 50+ U UNITS ER E OR E HOM MOBIL MOBILE HOME OR TRAIL TRAILER THER LL O A ALL OTHER S RTY VALUE IED PROPE NER OCCUP OW OWNER OCCUPIED PROPERTY VALUES 80,000 UNDER UNDER $ $80,000 TO ,000 80 $ $80.000 TO $99,999 $99,999 ,999 O $149 100,000 T $ $100,000 TO $149,999 9 $199,99 TO 00 0 $150, $150,000 TO $199,999 9 $299,99 0 TO $200,00 $200,000 TO $299,999 9 0 TO $300,00 $300,000 TO $399,99 $399,999 9 $499,99 400,000 TO $ $400,000 TO $499,999 9 500,000 TO $ $500,000 TO $749,99 $749,999 9 $999,99 TO 750,000 TO $999,999 $ $750,000 000+ $1,000, $1,000,000+ E RTY VALU MEDIAN PROPE MEDIAN PROPERTY VALUE BU ILT U NITS BY HOUSING UNITS HOUSING BY YEAR YEAR BUILT PRESENT TO PRESENT 1999 TO BUILT 1999 BUILT 199B TO 1995 LT I BU BUILT 1995 TO 1998 1994 TO 1994 1990 TO BUILT 1990 BUILT 1989 TO 1989 1980 TO BUILT 1980 BUILT 1979 O T 1970 T L UI B BUILT 1970 TO 1979 1969 O T 1969 1960 TO BUILT 1960 BUILT 1959 TO 1959 1950 TO BUILT 1950 BUILT 1949 O T 0 4 19 T L UI B BUILT 1940 TO 1949 EARLIER OR EARLIER 1939 OR BUILT 1939 BUILT
Profiles Market Profiles Claritas. Market Source. Claritas, Source:

COACHELLA COACHELLA VALLEY

VALLLY

RIVERSIDE RIVERSIDE COUN IY

COuNi

189,200 189,200 .85% 45 45.85% 17% 16. 16.17% 2.18% 2.18% .20% 12 12.20% 2.05% 2.05% 5,37% 5.37% 14.07% 14.07% 2.11%

2.11%

689,903 689,903 61.26% 61.26% 7,12% 7.12% 1.38% 1.38% 9.29% 9.29% 1.93% 1.93% 4,560/0 4.56% 13.30% 13.30% 1.15%

1.15%

91,511 91,511 .34% 10 10.34% 2.74% 2.74% 1.60% 1 11.60% 6.36% 1 16.36% 23.37% 23.37% 12.05% 12.05% 08% 7. 7.08% 72% . 8 8.72% 3.66% 3.66% 4.08% 4.08% $238,378 $238,378 189,200 189,200 19.44% 19.44% 7.26% 7.26% 10.13% 10.13% 25,93% 25.93% 19.34% 19.34% 10.00% 10.00% 5.61% 5.61% 1.39% 1.39% 0-90% 0.90%

14,642 4 414,642 8.51% 8.51% 2.36% 2.36% 10.77% 10_77% 15,62% 15.62% 28.27% 28.27% 16.72% 16.72% 8.19% 8.19% 6.27% 6.27% 1.66% 1.66% 1.71%

1.71%

$245,354 689,903 18.94% 18.94% 6.84% 6.84% 11.02% 11.02% 25.23% 25.23% 17.00% 17.00% 9.84% 9.84% 6.69% 6.69% 2.22% 2.22% 2.21% 2.21%
689,903

$245,354

INC_ PROFILES. INC MARKET MARKETPROFILES,

274211x2-1,2,3,4,5,6,7.xls

274211 x2-1,2,3,4,5,6,7.xls

II-6 EXHIBIT EXHIBIT 11-6 PROFILES STOCK HOUSING HOUSING STOCK PROFILES CITIES VALLEY A L L COACHE COACHELLA VALLEY CITIES 2000 2000

Cite
Cathedral City edral City Cath ts ing Uni Housing Units Hous Units Vacant Vacant Units rcent Vacant PePercent Vacant a Coachell Coachella
sing Units Hou Housing Units Units Vacant Vacant Units Vacant Percent Percent Vacant rings t SpSprings sert HoHot DeDesert its Un Housing Housing Units Units Vacant Vacant Units cent Vacant Per i=,, Percent Vacant lls We Indian Indian Wells ts Uni Housing Units Housing cant Units VaVacant Units Vacant Percent Percent Vacant ,, Indio Indio Units Housing Units Housing Units Vacant Vacant Units Vacant Percent Percent Vacant Quinta [La La Quinta its ing Un Housing Units Hous Units Vacant Units Vacant cant rcent Va Pe Percent Vacant Desert !Palm Palm Desert its Un Housing Units Housing Units Vacant Units Vacant rcent Vacant Pe Percent Vacant

i  etactred

AttaGrIt.:Li

MuftiI - Jnilly

Mobile rioiiic5

Other Misc

Total Units

85 8,78,785 763 763 8,7% 8.7% 3,074 3,074 104 104 % 3.4 3.4% 5 3,77 3,775 523 523 .9% 1313.9% 2,436 2,436 1,195 1,195 .1% 4949.1% 8 7,65 7,658 602 602 7.9% 7.9% 71 9,4 9,471 496 2,2,496 26.4% 26.4% ,120 11 11,120 0 2,53 2,530 22.8% 22.8% 10,163 10,163 040 2,2,040 20.1% 20.1% 4,312 4,312 554 1,1,554 0% 36. 36.0% ,794 60 60,794 07 11,8 11,807 9,4% 119.4% ,447 356 356,447 9,374 229,374 8,2% 8.2%

2,575 2,575 1,412 1,412 54.8% 54.8% 316 316 0 0 0.0% 0.0%

29 3,83,829 608 608 15.9% 15.9% 1,141 1,141 49 49 4.3%

813 103 2,521 2,521 103 17,17,813 3,741 61 897 3,741 61 897 21.0% 35.6% 21.0% 59.2% 35.6% 59.2% 451 451 52 52 11.5% 0 0 4,982 4,982 205 0 205 0 4.1% 0.0%

4.3%

11.5%

0.0%

4.1%

" 180 2,504 180 2,504 330 35 35 330 .2% 19.4% 19.4% .,,,.. 1313.2% 597 9 90909 597 361 7 42427 361 0.5% 47.0% 47.0% .,. 6 60.5% 7 87877 212 212 24.2% 5,196 5,196 662 662 7% . 12 i=, , 567 567 318 318 56,1% 7,026 0 7,026 0 1,206 0 1,206 0 17.2% 00%

56.1%

0.0%

17.2%

8 8 0 0 0.0%

0.0%

0 0 0 3,95 3,950 1,983 0 1,983 0 50.2% 0.0%

0.0%

50.2%

24.2%

12.7%

2,716 2,716 1,220 1,220 44.9%

44.9%

452 452 16,899 16,899 3,011t 315 3,011 315 17.8% 69.7%

69.7%

17.8%

1,272 1,272 463 483 .0% 3838.0% 9,551 9,551 081 5,5,081 2% . 53 53.2% 191 6,6,191 3,046 3,046 49.2%

2 76 762 4 31 314 41.2%

41.2%

8 25 258 15 15 5.8%

5.8%

11,7631 0 0 11,763 3,3081 0 0 3,308 28.1% 0.0%

0.0%

28.1%

201 6,6,201 947 947 15.3%

15.3%

28,071 9 190 1,1,190 9 28,071 8,772 9 5 20 8,772 205 9 31.2% 100.0% 17.2%

17.2%

100.0%

31.2%

Palm Springs Springs Palm Units Housing Housing Units Units Vacant Vacant Units cent Vacant Per Percent Vacant Rancho Mirage Mirage Rancho Units Housing Housing Units nt Units Vacant Units Vaca ercent Vacant PPercent Vacant Cities for Totals Totals for Cities
Units Housing Units Housing nt Units Vaca Vacant Units ercent Vacant PPercent Vacant

49.2%

,379 12 12,379 4,617 4,617 37.3%

37.3%

2,172 2,172 689 689 31.7%

31.7%

30,979 74 74 30,979 10,439 47 47 10,439 33.7% 63.5%

63.5%

33.7%

3,626 3,626 1,525 1,525 .1% 42 42.1% 25,497 25,497 12,221 12,221 47.9% 47.9% ,300 42 42,300 13,495 13,495 31.9% 31.9%

735 1,1,735 842 842 48.5% 48.5% "" 34,344 34,344 ,730 88,730 25.4%

1,253 1,253 476 476 38.0%

38.0%

11,643 717 717 11,643 5,026 9 2 6 5,026 629 43.2% 87.7%

87.7%

43.2%

25.4%

,136 11 11,136 3,872 3,872 34.8%

34.8%

1,355 133,126 1,355 133,126 37,691 1,061 1,061 237,691 8.3% 78.3%

78.3%

28.3%

Riverside County rside County Rive ing Units Hous Housing Units VacantUnits Units Vacant acant ercent VVacant P Percent

03,066 1103,066 4,881 114,881 14.4%

14.4%

76,411 76,411 6,247 116,247 21.3%

21.3%

6,450 584,674 6,450 584,674 78,456 4,459 4,459 78,456 13.4% 69.1%

69.1%

13.4%

rofiles arket P ensus, M S. C 000 U. ource: 22000 S Source: U.S. Census, Market Profiles C. ROFILES, IN MARKET PROFILES, INC. ARI_ETP M 274211x2-I ,2,3,4,5,6,7 xls 274211x2-1,2,3,4,5,6.7 xis

EXHIBIT 11.7 EXHIBIT 11-7 NEW HOME SALES BY SUBMARKET AREA NEW HOME SALESLA BY VALLEY SUBMARKET AREA COACHEL COACHELLA VALLEY 1992 THROUGH FIRST QUARTER 2005

1992 THROUGH FIRST QUARTER 2005

.
it Palm Springs-Cathedral Ci -Cathedral C Jrn$pnngs Pa 13 13 2 1 12 65 65 23 I123 0 0 4 15 154 23 23 5 8 85 8 0 2 208 0 27 270 7 16 167 35 35 150 150 1 33 331 0 27 270 4 4 7 7 45 1 145 _

1C, 17

11

263 263 5 1 15 0 11 110 417

267 22

267 22

32 25

32

155 27

155

187 52

187

16

Rancho Mirage irage ncho M Ra Palm Desert ,srt m Des Pal ta a Qutn L La Cunt?
io..Coachella Indio-Coachella Ind

77
o

417 318

255 255 494

25 t30 130
142 36

494 318

142 36

550

27 122 122 550 231

52 252 252
592 267

11

16 11

133 6

133 6

149 17

39 7

73 66

112

39

53

92

46

53

99

149 17

39 7

73 66

112 3 7 73 570 570 383 383 14g 1,287

44 44 56 7

223 223 449 232

267 267 505 239

144 144 25

426 426 358

39 3 3 117 117 13 13 4 3 206

53 144
46 6144 646 337

92 7 14 147 763 763 50 3 350 199

46 0 0 10 10 11 11 24

53 218

99 218

218 159 1,169 1 218 1,169 531 1 159 0 52 520 185 531 9 20

Totals als Tot

!34 }1,4S0 8S 65 }t.0. ,35S 3 }i, 1123 233 11 f40 I 953' 1.123 213 953 1E01 1,356 1.085 1.450 13 I -740 365 2
' 11
W71

31B

318

231

692

56 7

449

505

25
7

358 42 1 1,065

337 5 16

267

232 239 I1,'i77 ,043 J1 1,043 1,177


rIC 2 - I :

149 S 34 7 6, i 720 11,'2' 0S5 t.l,142 '222 222

199 1 345']1,55 11,165 1,345* 1,551

24 ,,12, 185 209 ",26 I 12,; _135 91 2,135 2,226 91


` 1"Ir C''

Palm Springs-Cathedral Cit -CathedraICi lm Springs Pa Ra c.tio Mirage e r..hoMirag Ran Palm Desert alm Desert P La Otiinta uinla aQ L Indio-Coachella -Coachell_ Indio Totals s Total

52 0 C) 0 46 46 45

93 2 293 97 2 297 7 91 917 1,004 1,004 196

45 3 345 297 297 7 91 917 1,05D 1,050 241 241

17 17 0 0 0 0 59 59 5 5

379 379 6 25 256

396

396 56 2 256

10 0 0 0

10 0 0

303

Product Delwiched ; FD= S roduct P At_.ac_ed = Attached SFA= SFA Product: SFD = Detached Product Profiles i.nage1 lMarkel n_nds nlistT t, e Reac : Sour{_ Source: Resoclentiel Trends. Profifes

e! .J2.asO 143 2,707 2,850 .-70, I.+3I2

,.33' + 367 [ ms,] , Is.sin 8 J,+03 , ,I1._.+'+_..2 m IS m-_ . 97 14.2:m 3 73 14,m .S,O. O 2 + ,=1 0 'J2. 3.3302 , 1 3.2,+ 1 964 1,331 20 5,639 5,851 367 2,490 73 4,163 4,236 5,671 5,768 3,249 3,330 2,510

1.224 459 459

931 1 93 931 931 1+224 1283

303 282 282 708 708


616

313

282

313

24

1,283 464 464

0 10 10

616 581 581

282 708 708 616 616 591 591

24 0 0 0 0

369

16 33 33

16

1,313 767 767 t,184 1,184

1,313

369 530 530

393

48

785 655

f t

833

83

1,078

1,161

100

136

236

1,313 783 783 1,217 1,217

1,313

393 530 530

48
0

785

833 55 6

83 0 0 37 37 92 92 0 0

17

0 0 0

17 32 32

655 83 3 38.3 O07 1, 1,007 990 2,890 2,115_ 2,858 2,890

655 383 383 99D

,5D6 1213 1,506 1.414 2,596 2,596 2,596 2,696

1,078 375 375 176 176 1.414

1,161 375 375 213

100 0 0 0 4 40 7 22 227 0 0

136 22 22 6 2 26 5 19 195 585 585

236 22 22 66 66 422 422 585 585

274211y2-1.2,3,,t,5.B,7._= , C. SIN PROFILEINC. MARKET MARKET PROFILES,


27421150-1.2,3 ,4

EXHIBIT 11-8 AVERAGE NEW HOME PRICE DETACHED PRODUCT COACHELLA VALLEY BY SUBMARKET AREA 1998 THROUGH THIRD QUARTER 2004

2005-1 2004-4 -3 -2 -1 2003-4 -3 -2 -1 2002-4 -3 -2 -1 2001-4 -3 -2 -1 2000-4 -3 -2 -1 1999-4 -3 -2 -1 1998-4 -3 -2 -1

$487,063 $499,631 ,$457.466 $510,106 $361,324 $346,358 $313,006 $296,622 $340,765 $300,454 $281,557 $340.713 $312r116 $329,280 $255,805 $296,827 $324,701 $324,022 $287,569 $284,240 $333,048 $306,379 $277,309 $356,066 $311_993 $261,202 $244,795 $241,970 $254.635

$462,322 $360,870 $299,834 $304,485 $279,160 $305,670 $217,490 $256,104 $336,465 $238,373 $223,604 $225,636 $214,903 $201,729 $186,125 $189,472 $217r298 $194,660 $214,066 $231,023 $204v60.2 $168,613 $169,002 $163,783 $156w986 $142,881 $131,435 $132,544 $122,826

$736,646 $717,860 $658,127 $590,519 $496,667 $468,964 $448.814 $425,579 $447,426 $441,490 $454,508 $440,543 $441,411 $445,032 $452,987 $442,205 $437,138 $414.78ho $412.485 $394,995 $405,141 $412,549 $358,096 $350,545 $382,024 $359,811 $398,290 $329,771 $307,834

$521 254 $5081513 $485,217 $535,581 $611,757 $375.655 $332,545 $337,418 $2871891 $276,209 $248,836 $292,771 $277,911 $268,632 $247,040 $256,930 $249_576 $286,109 $339,922 $270,721 $318,494 $330,832 $294,271 $290,086 $338,503 $270,587 $247,275 $238,423 $242.658

$792,518 $729,686 $724,240 $ 749,098 . ,$567.776 $676.643 $505,884 $429,891 $567_382 $489,195 $477,517 $456,337 $420,302 $503,068 $363,954 $396,384 $426,394 $399,754 $317,687 $320,949 $430,968 $372,182 $310,590 $473,375 $322,317 $271,954 $254,547 $253.779 $298,036

$381,349 $388,340 $359,647 ,$411,898 $272,163 $243,005 $204,431 $218.396 .. $214.492 $229,710 $184,27t $204,472 $196r025 $189,480 $185,520 $202,200 $1881030 $181,196 $174,732 $159,021 $169,353 $162,632 $159,317 $164,763 $159,636 $153,273 $144,043 $142,302 $144,500

SourceR : esidentiTre al ndsM , arket Profiles MARKET PROFILES, INC. 274211 x2-8,9.10,11.12 xis

-9 EXHIBIT EXHIBIT11 11-9 RANGE PRICE BY SALES HOME NEW NEW HOME SALES BY PRICE RANGE PRODUCT D DETACHE DETACHED PRODUCT LA VALLEY COACHEL COACHELLA VALLEY 2005 QUARTER FIRST THROUGH 2003 2003 THROUGH FIRST QUARTER 2005
201;3 2r0 Cr 3rni 0

.........
1st 0 [rig;

.......
74 74 22 126 126 5 21 215 295 295 381 381 499 499 513 513 44 25 25 54 54 128 126 161 161 249 249 142 11142 00 55 10 10 81 81 159 159 2 41 412 530 530 ,197 11,197 00 00 00 12 12 128 128 4 t7 174 6 33 336 650 650 22 00 00 -1-1 64 64 1 45 451 448 448 964 964

50,000 $1 Under Under $150,000

71 71 66 66 73 73 151 151 115 115

112 112 7 15 157 152 152 324 324 269 269 308 308

87 87 108 108 94 94 176 176 159 159 100 100

$150-175,000 50-175,000 $1 $175-200,000 75-200,000 $1


00 $200-250,0 $200-250,000 00 $250-300,000 $250-300,0 300-400,000 I$$300-400,000

7 17 177 8 17 178 621 621 350 350 288 288

176 6 17 245 245 897 ,97 ,,8

$400,000 U p 0.0,000&&U :$4 Totals Totals r Quarte == QQ ** Quarter

280 0 28
,602 11,602

209 9 20 933 933

551 551 2,239 2,239

1,761 2,031 2,031 1,761

rofiles PProfiles ends, Market Tr rce: Residential Sou Source: Residential Trends, Market

C. OFILES, IN MARKET PROFILES, INC ARKET PR M

421 lx2-8.9,10,11= 12.xls 27 274211x2-8.9,10,11,12.xls

I1-10 EXHIBIT EXHIBIT 11-10 PRICE RANGE IBUTED BYBY S DISTR SALE HOME NEW NEW HOME SALES DISTRIBUTED PRICE RANGE ARKET AREA SUBM ELLA OACH .C INDIO IND1O-COACHELLA SUBMARKET AREA Y HELLA VALLE E COAC THTHE AND AND COACHELLA VALLEY TER 2005 ST QUAR FIR FIRST QUARTER 2005 Numl_er of Homes* Sold Number of Homes* Sold Coat. he I la tits Valley ella Coach Coachella Valley 2 2 0 0 5757 2 24242 157 157 127 127 585 585
2 (1) (1) 64 64 264 264 187 187 448 448

je c; _;_an_ Pri Pry anye 00 $200,0 Under Under $200,000 250,000 $200-$ $200-$250,000 -$300,000 $250 $250-$300,000 -$350,000 $300 $300-$350,000 400,000 $350-$ $350-$400,000 Up $400,000 Up 00,000 & & $4 Totals Totals
d homes. * Detache Detached homes. ofiles PrProfiles nds, Market idential Tre e: Res Sourc Source: Residential Trends, Market

964 964

NC, MARKET PROFILES, OFILES, IINC, ARKET PR M

27421 lx2-8,9,10,11,12_xts 274211x2-8,9,10,11,12Ats

EXHIBIT I1-11 EXHIBIT II-'11 ING GROWTH SUMMARY HOUS HOUSING GROWTH SUMMARY TY AND THE COACHELLA VALLEY MARKET AREA COUN E RSID RIVE RIVERSIDE COUNTY AND THE COACHELLA VALLEY MARKET AREA t980 - 2009 1980 - 2009 Riverside-San Riverside-San Co.s Bernardino Co.s Bernardino
Ya

Riverside Riverside Coun

Coachella Valle, Coachella Valle Houstn Primary Housin N.A. N.A. 2,833 2,833 4,377 4,377 5,083 5,083 NA. N.A. 1,841 1,841 2,845 2,845 3,300 3,300 N.A. N.A. 992 992 1,532 1,532 1,783 1,783 N.A N.A. 552 552 854 854 1,200 1,200

735,200 1990 735,200 to 2000 1,010,100 1,010,100 to 2005 1,210,700 1,210,700 to 2010 1,425,700 1,425,700

N.A. N.A. 27,490 27,490 40,120 40,120 43,000 43,000

402,067 402,067

NJ_. N.A.

85,186 85,186 113,516 113,516 135,402 135,402 160,815 160,815

10,415 506,218 10,415 506,218 18,260 597.519 18,260 597.519 19,346 694,251 19,346 694,251

region ty hi-counregion. Bemardino **Riverside/San Bernardino bi-county RiversidelSan , M ,Ctairtas Dept. lopment t Deve Employmen . :CalifEmployment Source: Calif. Development Dept, Clairtas. Market Profiles Source arketProfiles

MARKET PROFILES, INC. ,NC. I PROFILES MARKET

x'2-8,9,10,11.12.xls 274211
274211x2-8,9,10,11.12.xls

11-t2 EXHIBIT EXHIBIT II-12 HOME DEMAND W E N ANNUAL TED PROJEC PROJECTED ANNUAL NEW HOME DEMAND LLEY LLA VA COACHE COACHELLA VALLEY 2005-2006

2005-2006

NGE r RA PRICE PRICE RANGE ,000 er $300 Und Under $300,000 -$350,000 $300,000 $300,000-$350,000 -$400,000 $350,000 $350,000-$400,000 -$450,000 ,000 0 0 $4 $400,000-$450,000 50,000-$500,000 $4 $450,000-$500,000 0,000-$750,000 $50 $500,000-$750,000 ,000-$1,000,000 $750 $750,000-$1,000,000 ver OOver ,000,000 and $1 $1,000,000 and TOTAL TOTAL

LES UAL SA E ANN AVERAG SALES AVERAGE ANNUAL 500 500 750 750 900 900 650 650 450 450 550 550 0 45 450 250 250 500 4, 4,500

% OF TOTAL % OF TOTAL 11.1% 11.1% 16.7% 16.7% 20.0% 20.0% 14.4% 14.4% 10.0% 10.0% 12.2% 12.2% .0% 10 10.0% 5,6%

5.6%

100.0% 100 OY,

L NEW HOME DEMAND TED ANNUA PROJEC PROJECTED ANNUAL NEW HOME DEMAND VALLEY LLA COACHE COACHELLA VALLEY 2005-2006

2005-2006

1000
1000 0 90 900 B0g 000 ................ ...........

700 000
_0 500 500 0 7 O g0 4400 _ ._

300 200 100

$4

C AVERAGE ANNUAL SALES

Under 300,000 $ $300,000

,0ou_ 0,000- $350 $30 $300,000$350,001300,000 $4 350,000 $ $350,000 $400,000

$400,000- $450,000- $500,0O0. $750,000-$1,000,000 $500,000$400,000- $450,000$750,000and Over 000,000 $1,000,000 $750,000 $1, $500.000 $450,000

$450,000

5500.000

$750,000 $1.000,000 end Over


i

ppreciation. inflationora futureinflation xcluding ollarse d today's in today's statedin Pricesstated Prices dollars excluding future or appreciation. rofiles MarketP Source:Market Source: Profiles

INC. PROFILES. INC. MARKET PROFILES. MARKET

274211x2-8,9,10,11,12 xls

27421 lx2-8,9,10,11,12

xls

SECTION SECTION III


SUMMARY COMPETITION ARY OF COMPETITION SUMM

Market Profiles, Inc

Market Profiles, Inc

ON Iil III SECTI SECTION PETITION COM ARY OF SUMM SUMMARY OF COMPETITION
CTION INTRODU INTRODUCTION ut the mpetition througho co w home nenew existing the of of eview This section presents review the existing home competition throughout the a ra presents section This , the purposes nalysis r a analysis purposes, FoFor Indio. mmunity of of cocommunity the within and Coachella Valley and within the Indio. the ella Valley Coach the daries of of e boun ThThe market areas. sub fivefive intointo Valley is divided submarket areas. boundaries the is divided achella Valley CoCoachella t arl<e ubm s la l che a o -C dio In e h T ). I I n o i ort Sect 1 (rep hibit I1Ex n in in submarkets are shown Exhibit 11-1 (report Section ID_ The Indio-Coachella submarket show markets are sub ing surround ely immediat the hella and Coac and Indio of of cities the osed of of area is composed the cities Indio and Coachella and the immediately surrounding is comp area . unincorporated areas. orated areas unincorp home new of all rterly audit a qua d onon ion is base sect this The that is presented this section is based .a quarterly audit of all new home ented in in Lspres ta that dadata The that data sales nd a s e pric home . The a Valley Coachell projects that active Coachella Valley. The home prices and sales data that he the in tin active are are ts that projec of nd e the f o as stances m circu rket a m e th sent e repr report market are presented in this market report represent the market circumstances as of the end of this n i are presented w e n the of s ce pri sale The . ril p id-A m in ended which period audit the first quarter 2005 audit period which ended in mid-April. The sale prices of the new rter 2005 qua first the lyear of of ed as as updat e been hav s area HillHills Shadow keted in th mar being are homes that are being marketed inethe Shadow area have been updated earlyes that hom July. . July ITION NEW HOME COMPETITION E COMPET NEWHOM w detached rketing nenew ivisions ma subd 78 re were 5, the 200 of of quarter During the first quarter 2005, there were 78 subdivisions marketing detached first ring the Du 7878 the of of ary m sum ular b ta a presents II1-1 Exhibit a Valley. the Coachella Valley. Exhibit III-1 presents a tabular summary the Coachell the mes in in hohomes have homes 8,213 which of of 042 homes, of 15, a total forfor account e projects projects. projects account a total of 15,042 homes, which 8,213 homes have ThThe projects. . This is a low sold been e hav ffered o s e hom the f o 559 but all and e sal or f offered been been offered for sale and all but 559 of the homes offered have been sold. This is a low . RY TRENDS) INVENTO (see d below l as discusse ry leve unsold inventory level as discussed below (see INVENTORY TRENDS). invento unsold mmary ows a s sh -2 ibit 111 rse. Exh dive rket is ve me ma ho Coachella Valley new home market is ry very diverse. Exhibit III-2 shows ausummary ley new chella Val e Coa ThThe ached (det s a e r a ket ar subm e v fi s y' e all VValley's the h of of hin eac tivity wit ac new home activity within each the five submarket areas (detached w home ne of of d the arkets hahad ta subm ells-La Quin an WWells-La Indi the achella and product). TheIndio-Co Indio-Coachella and the Indian Quinta submarkets the duct), The pro 26 with od ri pe er t r a qu st fir the ng ri du sions me subdivi ho largest number active new home subdivisions during the first quarter period with 26 ive new act er of of est numb larg est high ated the bmarket gener achella su pectively, The and 24 projects, respectively. TheIndio-Co Indio-Coachella submarket generated the highest s, res project d 24 an the es in in w hom ne les of of sasales The es sold. hom 585585 rter with qua thethe volume during quarter with homes sold. The new homes the during les volume sasales e pric s le a s e g a ver a e Th . s e hom e th of s erate price mod the by by submarket were aided the moderate prices of the homes. The average sales price aided et were submark arket. ells subm ian WWells Quinta-lnd La e nearby ththe 92.518 in $7 ed toto compar was $381,349 compared $792,518 in nearby La Quints-Indian submarket. $381,349 was ioe Ind ththe e inin re activ t we ects tha proj 2626 the of of summary Exhibit III-3 presents summary the projects that were active Indioesents a a 111-3pr Exhibit e th of ch a e of s profile ed 5. Detail 00 of 2 t quarter firsfirst thethe arket during Coachella submarket during quarter of 2005. Detailed profiles of each of the achella subm Co 7,330 for account 26 The report. hishis of of IV IV Section projects are included Section report. The 26projects projects account for 7,330 luded in in inc ects are proj sold. un remain e os th of 155 only nd a e l sa ed for offer ve been ha 3,722 homes, which 3,722 have been offered for sale and only 155 of those remain unsold. which es, ofof hom ated inin are nine dio and lnIndio ated in in loc ects are e proj hom new the Seventeen the new home projects are located and nine areloc located enteen of of Sev hadow (S Indio inin City Sun munity ofof t com es, the Coachella. With 3,200hom homes, theretiremen retirement community Sun City Indio (Shadow ith 3,200 ella. W Coach

II1-1

Market Profiles, #_c.

Market Profiles, inc.

of the projects, ional three addit AnAn s. home of the y half half nearl nts for for Hills) accounts nearly of the homes. additional three of the a projects, accou Hills) try Club, lso in s Coun n Palm a Indi the hin t wi d e locat re a , s e hom 344 accounting for 344 homes, are located within the Indian Palms Country Club, also in for accounting are presented below cts proje home new etitive comp most e th of riptions Indio. Descriptions of the most competitive new home projects are presented below . Desc Indio CTS). E PROJE HOM NEW IVE T PETI COM T (see MOST COMPETITIVE NEW HOME PROJECTS). MOS (see DS NTORY TREN INVE INVENTORY TRENDS ld (including homes under in unso rema mes that hed ho detac new 559 of of The total 559 new detached homes that remain unsold (including homes under total The y is a favorable Valle hella Coac e th t ghou throu ) elling pre-s and ted, ple construction, completed, and pre-selling) throughout the Coachella Valley is a favorable struction, com con unsold inventory at the end of een thethe ce betw a balan a rule, . As As entory figure unsold inventory figure_ a rule, a balance between unsold inventoryf at the end of ld inv unso is indicative o a healthy ter quar the ing r u d sold s home f o er numb e th a quarter and the number of homes sold during the quarter is indicative volum of a healthy rter and a qua e of pared to the sales , com o). Thus ratiratio). ld to sold unso 1:1 dition (i.e., market condition (i.e., 1:1 unsold to sold Thus, compared to the sales volume et con mark the of at s e hom tory of 559 ld inven unso the d, perio r uarte q irst f e th g durin sold s 964 homes sold during the first quarter period, the unsold inventory of 559 homes at the home 964 ble market condition (0.58:1 avora f a f o ative indic is 5 00 2 f o r e rt qua first the of of end the first quarter of 2005 is indicative of a favorable market condition (0.58:1 end ratio). sold unsold sold ratio). ld to to unso market are more io-Coachella sub Ind the itions in in tory cond inven s that show 2 Exhibit III-2 shows that inventory conditions the Indio-Coachella submarket are more it 111Exhib end of the first quarter of the . At At alley V lla e h Coac e h t in here elsew restricted than elsewhere in the Coachella Valley. the end of the first quarter of than ed t ic restr arket totaled 155 homes subm a U ache io-Co d In e h t in tory inven ld unso the unsold inventory in the Indio-Coachella submarket totaled 155 homes 05, the 202005, ld to sold ratio). :1 unso s (0.26 home 585 of of ter sales quar first first quarter sales 585 homes (0.26:1 unsold to sold ratio). mpared to to cocompared

SALES RATES S S RATE SALE w home projects in the ne the ch of of eaeach forfor rate ekly sales we ows the hshows Exhibit III-1 the weekly sales rate the new home projects in the s -1 1 I I hibit Ex s "Cumulative" and "Current Quarter" a hown s e r a s e t ra s e sal The . y e ll a V hella c a Coachella Valley. The sales rates are shown as "Cumulative" and sinc "Current Quarter" Co e the date of les generated sasales e of of rat ibes the e descr s rat lative sale Cumu rates. The Cumulative sales rate describes the rate generated since the date of s. The rate les rate describes the rate of sale ter sasales rrent Quar Cu the ect, and ch proj ea ing of of opening each project, and the Current Quarter rate describes the rate of sale open ge widely from 0.08 to 7.9 n a r es t a r s le a s tive a l Cumu riod. e p rter a qu t s fir first quarter period. Cumulative sales rates range widely from 0.08 during the to 7.9 ring the du is 1.73 homes per week per s rate lative sale erage cumu av . The r week homes per week. The average cumulative sales rate is 1.73 homes per week per es pe hom project. ect. proj velopment are those that ect de subj the ar toto simil e most at arare cts ththat The new home projects most similar the subject development are those that me proje w ho e ne Th quarter of st r fi e th g n d Du o. i d In h rt no f o y t uni m m co ls dow Hil the are theSha Shadow Hills community of north Indio_ During the first quarter cated inin lolocated are unity. of omm c e Shadow Hills th inin active ions s i ubdiv s e hom new 12 e r e w e 2005, there were 12 new home subdivisions active the Shadow Hills community. ther , 2005 cumulative sales rates among . The it 111-4 ummarized ininExhib e ssummarized cts ar These projects are Exhibit 111-4. The cumulative sales rates among se proje The week. The average sales es per hom 7.87 1 to to m 0.3 nge fro isions rarange subdiv those seven subdivisions from 0.31 7.87 homes per week. The average sales se seven tho s per week. 4 home 1.6 te isis an ra medi the eek and er wweek s pper home rate 2.79 homes and the median rate 1.64 homes per week. 2.79 te isis ra
JECTS E PRO PETITIVE NEW T COM MOS MOST COMPETITIVE NEWHOM HOME PROJECTS the subject properties are those evant to rel most at are ivisions th Thenew newhome homesubd subdivisions that are most relevant to the subject properties are those The of the 1-10 Freeway north ated c lo unity mm o c Hills ow Shad the n cated withi thatare arelo located within the Shadow Hills community located north of ions the 1-10 Freeway that n in are show and their locat ribed below re desc ects a ).The it 111-4 (seeExhib Exhibit III-4). The 12 12 proj projects are described below and their locations are shown in (see 1-5. hibit 11 Ex Exhibit III-5.

111-2

III-2

Market Profiles. inc.

Market Profiles. Inc.

of of 40 40 first The #1 ). #1). (map(map Tierra is Bella Hills Hills ivision in Shadow fastest selling subdivision in Shadow is Bella Tierra The first subd st selling faste TheThe The week. r e p s e hom 2 1 . 8 of te a r a at soldsold at a rate of 8.12 homes per week. The been es have om hom 5-bedro ndand 3- a these these 35-bedroom homes have been to to 1,895 from in size range that plans 0 forfor 0 to $419,99 $379,99 base prices range from $379,990 to $419,990 plans that range in size from 1,895 from es range e pric bas 00 0 8, on d e sit e r a omes h The ft.). ft.). sq. sq. 0.52 per per to $2 ($159.75 2,629 square ($159.75 to0$200.52 The homes are sited on 8,000 feetfeet square 2,629 um). m (mini lots re foot square foot lots (minimum). squa mes that hohomes 63 63 All All #8). #8). (map e by KB division is Foxston subsubdivision Another selling is Foxstone by Home KB Home (map that selling fastfast Another homes 88 . 4 f o rate sales a to quating e sold ter were quar first thethe were released during first quarter were sold equating to a sales rate of 4.88 homes ased during rele were equent subs inin sold bebe ng to to es remaini m o h 182 r nothe a has roject p per week. The project has another 182 homes remaining sold subsequent The ek. e w per and 2- 20 forfor 0 to $368,99 $307,99 from es range se hom the of of prices phases. base prices these homes range from $307,990 to $368,990 and e base ThThe phases. .02 $203 to 07 . ($146 eet f uare q s 2,526 to 1,517 from in size range that 3-bedroom plans that range in size from 1,517 to 2,526 square feet ($146.07 to $203.02 edroom plans 3-b . taxes CFD , plus r month peper $100 of of ners feefee a homeow s pay per The residents pay a homeowners $100 month, plus CFD taxes. e resident Th ft.).ft.). sq.sq. per is 8,000. size um lot lot minim thethe and The neighborhood is gated and minimum size is 8,000. borhood is gated neigh The The base #7). #7). (map dow Hills haShadow in S tly opened bdivision recen susubdivision 2_1ot Sienna 13132-lot The The Sienna recently opened in Hills (map The base that edroom plans d 4-b anand 3- 3forfor 447,990 0 to $ $394,99 from es range prices of homes range from $394,990 to $447,990 4-bedroom plans that hom hethe es of t pric t.). f . sq per 35 . $161 to 2.54 4 1 $ ( eet f e squar 3,143 to 2,448 om r f ze i s range in size from 2,448 to 3,143 square feet ($142.54 to $161.35 per sq. ft.). in e rang itsits out sold #3) elopment (map Dev Family sion byby subdivi Ranch Shadow The 263-lot Shadow Ranch subdivision Family Development (map #3) sold out 263-1ot The e ic r p in range homes e hes T week. per homes e of 3.0 es at a hom of 30 first phase of 30 homes atrat a rate of 3.0 homes per week. These homes range in price phase first m fro size in nge rarange that edroom plans d 5-b an 4-, 3-,3-, for $489,990 4,990 to to m $39 $394,990 $489,990 for 4-, and 5-bedroom plans that in size from frofrom y a ts papay e h T ft.). . sq r e p 77 . 0 8 $1 $180.77 per sq. ft.). Theresiden 0.90 to to t ($15 feefeet square 3,247 to to 3,185 3,247 square ($150.90 residents a 3,185 is size ot l m minimu The nce. a mainten t el b green or f month per 95 $ f o fee ers homeown homeowners fee of $95 per month for green belt maintenance. The minimum lot size is 8,500 square feet. feet. 00 square 8,5 ices se prprices ba The #2). (map homes 142 vision of of subdi gated aa on isis sert Collecti The Desert Collection gated subdivision 142 homes (map #2). The base e De Th e in rang that plans 14,990 for $4$414,990 ,990 to to $364 from range om homes ese 3-bedro ththese 3-bedroom homes range from $364,990 for plans that range in ofof pay s esident r The t.). f . sq r e p 226.70 $ to ($183.13 eet f square 6 6 2,2 to 1,610 size from 1,610 to 2,266 square feet ($183.13 to $226.70 per sq. ft.). The residents pay rom f e siz of 3.31 rate aa d at at re sol mes we ho 73 first The month. per $75 of of homeowners fee $75 per month. The first 73 homes were eowners fee hom aa sold rate of 3.31 . feet 0 square 7,20 e is is siz nimum lot mi k. The r wee mes peper ho homes week. The minimum lot size 7,200 square feet. eloped ighborhood dev ne vate, gated priprivate, hin one ve wit bdivisions stillacti su two There are two subdivisions still active within one gated neighborhood developed are There El The tion, ec Coll a Ventan e Th are sions subdivi three es. The Hom Vintage Century by Century Vintage Homes. The three subdivisions are The Ventana Collection, The El by pay will ners homeow e h T . 6) 6). The homeowners will pay && 4, 5, #'s #'s II (map Estates Villa on, and Collecti Dorado Dorado Collection, and Villa Estates II (map 4, 5, ent an ets, plus private e th f o e nanc e onth for er m 0 pper $5 es ofof dues $50 month formaint maintenance of the privatestre streets, plus anassessm assessment du range that mes o h om ro d 3-be nd a 2 f o s t onsis on c entana Collecti strict fee, didistrict fee.The The V Ventana Collection consists of 2- and 3-bedroom homes that range 0 to $299,99 from ces ranging base with eet f e squar 3 4 1,8 to ,208 to 1,843 square feet with basepri size prices ranging from $299,990 to om 11,208 frfrom size inin been have 87 tract, es in f the ). O . ft. er sq 248.33 pper 84.47 to 0 ($1 $339,990 ($184.47 to$$248.33 sq. ft.). Of the198 198hom homes inthis this tract, 87 have been $339,99 . r week mes pe ho 0.81 te ofof ra sold rate 0.81 homes per week. aa atat sold to m $339,990 nge fro ection ra Coll Dorado e ElEl ThThe in in e homes ththe es ofof The base prices homes Dorado Collection range from $339,990 to pric base The

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square feet to 2,778 1,720 from ge in size ranrange that room plans 3-bed nd $424,990 2and 3-bedroom plans that in size from 1,720 to 2,778 square feet 2- a 4,990 for for $42 sold at a been ve a h 176 tract, mes in this hohomes 198 the Of Of ft.).ft.). sq.sq. .66 per per ($152.98 to $197.66 the 198 in this tract, 176 have been sold at a .98 to $197 ($152 k. wee es perper hom rate of 1.64 homes week. of 1.64 rate $394,990. 90 to to $294,9 from ranging pdces base es have The Estates II homes have base prices ranging from $294,990 $394,990. ates II hom a Est VillVilla The e feet ($144.42 squar 2,735 to to 1,302 from in si range room homes 4-bed These 3- and 4-bedroom homes range inze size from 1,302 2,735 square feet ($144.42 3- and These ve been sold at a hahave ision, 123 subdiv this in in homes 137 the OfOf ft.).ft.). sq. sq. $226.56 the 137 homes this subdivision, 123 been sold at a 6 perper $226.5 to to ek. weweek. es per hom rate 1.53 homes per 1.53 of of rate ently opened with four rec Indio theastern most nor avera in in Tal mmunity of of The new cocommunity Talavera northeastern most Indio recently opened with four new The h 12). The homes throug 9 9 #'s (map sale s forfor ring home sions offe new home subdivisions offering homes sale (map subdivi through 12). The homes #'s home new homes in the of of all all forfor size um lotlot minim 90. The 99 to $416,9 $299,9 range price from $299,999 to $416,990. The minimum size the homes in from price e in in rang are feet. squ lavera is 8,000 is 8,000 square feet. TaTalavera consist of 3- and avera. They ed in Tal ing offer allest bebeing sm e the s arare The Venecia homes the smallest offered in Talavera. They consist of 3-eand etia home Ven The with base pric s et e square f 1,947 to to 1,576 from size in in t range ns tha 4-bedroom plans that range size edroom pla from 1,576 1,947 square feet with base prices 4-b Twenty-five of the . ft.). r sqsq. .35 pe $190 .54 tOto 90 ($171 $333,9 99 to to $299,9 ranging from $299,999 $333,990 ($171.54 $190.35 per ft.). Twenty-five of the from ranging per week. es hom 1.76 te of of 1.76 homes arate ar at at e sold se wer ase relea t phphase firs the es in in 45 homes the first release were sold hom a per week. 45 size from 1,855 to 2,380 ge in in era ran Talav sion in in rencla subdivi FioHaremla The homes in the s in the home subdivision Talavera range size from 1,855 to 2,380 The .45 per sq. ft.). Of $179 to .46 ($155 00 $370,0 to 00 $330,0 from s ranging prices ranging from $330,000 to $370,000 ($155.46 to $179.45 per sq. ft.). Of se pdce th babase wiwith homes per week. 5.93 te ofof rarate aa at at e sold wer e, 26 st phas firfirst the s inin home the 44 homes the phase, 26 were sold 5.93 homes per week_ 44 the ans that range edroom plplans 5-b and 4-, 3-, nsist ofof mes co cante ho e Ali Talavera, Alicante homes consist 3-, 4-, and 5-bedroom that range avera, ththe Tal so in in AlAlso Two thirds of the 33 ft.). q. s per 5 $156.2 o t 68 . (130 90 $404,9 to 40 $389,5 from in size from $389,540 to $404,990 (130.68 to $156.25 per sq. ft.). Two thirds of the 33 in size s per week. e hom 61 . 3 of e rat a at old s n e e b e v a h phase first the in ed in the first phase have been sold at a rate of 3.61 homes per week. homes released s releas home ova subdivision. The Gen the se in in tho era are Talav ered in in g offoffered es bein The homes being Talavera are those the Genova subdivision. The rgest hom e lalargest Th and 5-bedroom 32-, for 90 $4t6,9 to 90 $396,9 from e ng a r es hom e s the es of of base prices these homes range from $396,990 to $416,990 for 2-, 3- and 5-bedroom se pric ba $139.39 per sq. ft.). 27.64 toto t ($1 are fee squ 3,280 to to 2,848 e from siz in in range plans that range size from 2,848 3,280 square feet ($127.64 $139.39 per sq. ft.). s that plan week. per s home 1.9 of rate a at ld so been e v a h es hom en e ght Eighteen homes have been sold at a rate of 1.9 homes per week. Ei LOPMENT HOME OSED NEW PROP PROPOSED NEW HOMEDEVE DEVELOPMENT subdivisions that are an 40 ore th hin m s wit 500 new ximately 7,7,500 There areappro approximately newhome homes within more than 40 subdivisions that are ere are Th projects are summarized in These Indio. of of City the pment inin re develo futu roposed for pproposed for future development the City Indio. These projects are summarized t in the Indio marke ted that projec is t i ty, activi sed propo of scale this With 6. 111 Exhibit III-6. With this scale of proposed activity, it is projected that the Indio market Exhibit ral years. However, seve next the nment for mpetitive enviro rience aaco areawill willexpe experience competitive environment for the next several years. However, area r development ned fo e plan ar mes that ho d the ndersupplied an rrently uundersupplied thema market iscu currently and the homes that are planned for development rket is the . It is projected that al years sever next the er over ased mann ph aa structed in e con will constructed in phased manner over the next several years. It is projected that ll bbe wi tly being experienced in ose curren e than ore intens be nditions will competitive conditions will bem more intense thanth those currently being experienced in mpetitive co co tions are demand-supply condi y demand-supply generally health however, generally marketplace, however, dio marketplace, the In Indio healthy conditions are the ained. e maint ted to projected tobbe maintained. projec

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few years he next ver tthe dio o structed in e con t will omes tha ew h he n The majority oftthe new homes that will b be constructed in In Indio over next few years ajority of he m T ate 10 Interst of north d e unity locat adow Hills d the nd aroun ated in will be beloc located inaand around the Sh Shadow Hills comm community located north of Interstate 10 will ped within the subject e develo ai will ,400-plus homes n to Freeway. In additio to the the 1 1,400-plus homes th that willb be developed within the subject addition eway. In Fre that are planned for homes 2,700 than more are there unity, comm Terra Lago community, there are more than 2,700 homes that are planned for erra Lago T ajority of these homes nity. The s commu adow Hill the sewhere inin construction theSh Shadow Hills community. The m majority of these homes struction elelsewhere con of the 2,723 homes ry a summ A . s r a ye four to e e thr next the ver o tructed will be constructed over the next three to four years. A summary of the 2,723 homes ons e c ill b w sented in Text s pre VSD iis istrict 2004ssessment D ity of e C that will b be part of of th the City of Indio Indio A Assessment District 2004-VSD presented in Text e part at will th in the Shadow Hills located in be will s home e es th of All . ge a p ing follow the Table III-1 on the following page. All of these homes will be located the Shadow Hills II1-1 ble Ta of the homes will s e pric e Th unity. comm Lago a Terr e th of t es w e th o community mmunity t to the west of the Terra Lago community. The prices of the homes will co by Family subdivisions by twosubdivisions Thetwo 00. The 00 and between $350,0 generally range between $350,000 and $500,0 $500,000. Family erally range gen es (see Exhibit 111-4). hom lling e s ly e ctiv a are nd a n tructio s on c nder u are t opmen Development are under construction and are actively selling homes (see Exhibit III-4). Devel that will Ranch that eas Ranch e Andr reeway is e 1-10 F orth of Also located north of th the Freeway is the the site site of of th the Andreas will include d n Also locate of Avenue north ted a loc is rty e prop s Thi unity. comm ted a g te, a priv 937 homes gated community. This property is located north of Avenue within a private, homes within Street. Jefferson Street. at Jefferson 38 at include

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II1-1 TABLE 111-1 TEXT TEXT TABLE ES SED HOM RY OF SUMMA SUMMARY OF PROPO PROPOSED HOMES _ ASSE ASSESSMENT DISTRICT 2104-V8D

!
!

Tract #

li

S t.)

Affresoo resco Aff 401 32 32401


aguna Vista Laguna ista L V 32402 32402 Paradiso aradiso P

ilington R Rilington mmunities Co Communities Horton D.R. D.R. Horton osa Ponder Ponderosa ennar L Lennar 's Ashbrook Corn Ashbrook Com's

275 275 363 363 1B5 185 25 2 225 111 111 47 2 247 132 132 59 59 123 123 263 263

- 3,100 1,900 1,900-3,100 0-3,600 2,20 2,200-3,600 00-3,500 2,7 2,700-3,500 ,600 2,000-2 2,000-2,600 .176-2,902 2 2,176-2,902 1,512-2,513 1,512-2,513 2;520-3,130 2,520-3,130 1,870-2,586 1,870-2,586 2,700-3,800 2,700-3,800

31815 31815 Desert Trace Desert Trace 30643 30643


Sandhurst Sandhurst 30778 30778 323O4 32304 Ranch Shadow Ranch 9 4 321 32149 Haciendas Haciendas 31686 31686 31974 31974 31975 31975 Bella Tierra Bella Tierra 30605 30605

KB Home Home Ryland Ryland Homes ev Desert D J.D. Desert J.D. Dev.

Dev Family Dev. Family Homes Beazer Homes Beazer

Dev. Family Dev. Family Group Alpine Group Alpine Lots, Total Lots. Total

147 147 I O2 102 137 137 56 56 298 298 2,723 2,723

2,000-3,000 2,000-3,000

1,900-2,600 1,900-2,600 1,500-2,600 1,500-2,600

Vineyards Vineyards 31562 31562 **Preliminary data_ Preliminarydata


Profiles Markot Source Market Source. Profiles

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EXHIBITIll,1 EXHIBIT 111-1 SIJMMARYOF NEW HOME InLrVELOPAqENTS SUMMARY OF NEW HOME DEVELOPMENTS DETACHED PRODUCT DETACHED PRODUCT COACHEUI.AVJI,_ COACHELLA VALLEY FIRST QUARTER 2_S

FIRST QUARTER 2005

Mti.1
TT. AO ASHBROOK COMMUNITIES ALTA DEVC,ON CONSTRICTION AMALFI COLLECTION 10 TUSCANA SUNRISE COMPANY AMATISTA CAPRI STONEERIDGE DEVELOPN ENT AZURE MISSION SHORES DSTINGUIS.aEO HOMES BELLA CANTO 1,LINGTO sl COMMUN. TIES BELLA010 COLLECTION sTIJSCANA SUNRISE COMPANY ORENNA fa CAPRI STONEBRIDGE DEVELOPMENT CASA SELLA 6 INDIAN PALMS COUNTRY CLUB FIRST PACIFICA DEVELOPMENT CORP CORAL COLLECTION* TRILDG Y SHEA HOMES CORTONA COLLECTION a TUSCANA SUNRISE COMPANY DESERT VIEW ESTATES II *MOUNTAIN VIEW SIX IUDS OEVE-OPMENT DESERT WILLOWS LTV BUILDER DEVELOPERS. INC. EL DORADO COLLECTION. MOUNTAINGATE 1311 CENTURY VINTAGE HOMES ELEMENTS 131 RIO DEL SOL DAMON SIS <IN ESPANA .1110 CIEL SOL DAMON SISKIN ESPERANEA el DESERT RIVER ESTATES LENNAR HOMES FIORE ft RENAISSANCE TRANS WEST HOUSING FOUR SEASONS CANYON COLLECTION K. HOVNANIANWOREGAST HOMES lg..

r 73 18 77 '30 56 172 6 11 17 3 6 16 9 9 4 1 7 5 -12


7

F'err an 7 0 0 1 5 3 D 1 CI 3 9 a 7 23 4 7 1 3 9 0 56 49 133 0 38 0 174 35 108 125 83 29 64 70 69 36 49 6 203 RA MIRAG SANTO TON:s PALM SPRINGS STANCLA_ONE INDANIAELIS l'uSCANA CC PA_M DESERT CAPRI RANCHO MIRAGE MISSION SHORES COAC4ELLA STAND-ALONE INDIAN WE_LS TUSCANA CC PALM OESERT CAPRI iNCIO I NDIAN PALMS COUNTRY CLUB LA OUI NIA TRILOGY INDIAN JELLS TUSCANA COUNTRY C.Uf3 DESERT H07 SPRINGS STAND-ALONE DESERT H07 SPRINGS STANDALONE PALM SPRINGS MOUNTAIN; GATE CATHEDRAL CITY RIO DEL SOL CATHEDRAL CITY RIO DEL SOL INDIO DESERT RIVER ESTATES LA UINTA STAND-ALONE PALM SPRINGS FOUR SEASONS

042 ' 63 1 13 0.21 0.42 1.03 0.60 060 0 30 007 046 3. 33 -912 0.50 0.13 0.53 1.57 0.78 1.07

1.04 1.63 193 1.32 0.75 1.e6 0.55 0 ?9 025 '.95 3.45 1713 0.61 1.05 0.12 0.64 1.60 0.91 1.32

9301060 5720,020 51,030 203 51,930303 51.047010 51,207.230 3305,930 1515030 5539.600 $642,ECG 5237.58. 3327.392 5%350,030 51,4E2,030 3515900 3590000 3390.9E13 5439 990 5352.990 5441.990 $2,019.033 12,201,003 5304060 5345.900 $231,630 5273.020 $359,990 5463 532 3629.990 3809,990 1380.990 $434590 1675,990 5749.990 $630.030 $690,000 3424.369 3485.999

2.393 2 356 3.100 3 305 2 793 3.545 1.914 2511 1.9213 2.235 1.369 2, 019 3,575 4.114 2.302 3,13.1 1,704 2.10! 1.365 1,712 4,916 5,433 1.585 1,993 1.200 1.403 1,518 2 778 2 31:0 3.003 1 500 TECO 3156 4.002 2,462 zan 2,258 2,825

3252 10 330196 3302 57 3333 33 5340 47 5375.26 S183.11 5215.57 S273.53 8267.65 $152.45 1178.26 3354323 $372.26 3112.16 5256.47 1209.41 $229.45 525663 3260.50 3405.11 1410E9 8182.07 3183.91 51930D 319500 5166 85 3239 16 3269 99 527390 525399 5271.85 5187.40 3213.35 5240.16 5255.35 5150.43 1162.30

1 r.a03 15-Jan-05 1-Sep-t0 16-May-03 3-Nau-03 5-.Ji..I03 1 Sap-03 1 5-M11-123 26,11,1-4..%4 24-Aug-02 1.-Sep-03 1-De0-03 1-0a-03 12-J01-03 9-Dec-04 7-Dec.-04 21-May-04 1 INA0r-04 13-Dec,03

9 200 14:09 10 303 10000 7.030 6,600 12030 10,030 4,503 4.303 , 13.803 7.600 3 603 B 200 7 203 4503 21 793 6,060 6,030

136 67 2,5 131 99 175 221 124 '2' 403 122 153 140 250 68

4T
79 10 356 33 126 49 175 2 11 B1 45 PO

2 a 22 11 1!

48
133 60 2a6

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EXHIBIT II1-1 EXHIBITD III-1 EVELOPMENTS SUMMARYOF MEWHOME SUMMARY 0 F NEW ROME DEVELOPMENTS T ROD4JC ED P DETACH DETACHEDVA PRODUCT COACNELL.A LLE_ COACHELLA VALLEY RTER 2NS EJRST CILIA FIRST QUARTER 2965
R,,IP' , c., I :.t, .. 1,10 r- 4 ,t

POUR SEASONS - PALM COLLECTION K. HOVNANANiFOR.ECAST HOMES FOXSTONE KB HOME HERMOSA RYLAND HOMES LA COLONL4 RP.' DEVELOPMENT IA MORADA LENNAR HOMES LA. PALOMA K. HCVNLANIANNFORECAS - HOMES LA PALOMA ESTATES K. HOW...AKAN/FORECAST HOMES LA PASADA - UNITED EDITION FAR WEST DEVELOPMENT LA QUINTA DEL ORO LENNAR HON ES LANDAU