CFD 2004-3 Appraisal

APPRAISAL REPORT
COMMUNITY FACILITIES DISTRICT NO. 2004-3 CITY OF INDIO INDIO, CALIFORNIA
PREPARED FOR: CITY OF INDIO ROY STEPHENSON, CITY ENGINEER 100 CIVIC CENTER MALL INDIO, CALIFORNIA 92201
PREPARED BY: WILLIAM V. SHREWSBURY, MAI/SENIOR VICE PRESIDENT JAIME Z. BASSO/ASSOCIATE APPRAISER FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES APPRAISAL AND VALUATION DIVISION 1217 EAST NORMANDY PLACE SANTA ANA, CALIFORNIA 92705 PH: (714) 564-8982 / FAX: (714) 564-8985 DATE OF VALUE: JUNE 17, 2005 DATE OF REPORT: JULY 15, 2005
Copyright 2005 by First American Commercial Real Estate Services Appraisal and Valuation Division.. All rights reserved. Unless with the prior written permission of First American Commercial Real Estate Services Appraisal and Valuation Division, no part may be reproduced, recorded, stored in a database or retrieval system or transmitted by electronic, photocopy or any other means, whether in eye-readable or machine-readable form, microfilm or otherwise.
AIME'? i c
First American Commercial Real Estate Services. Inc.

File No. 614
July 15, 2005
City of Indio Roy Stephenson, City Engineer 100 Civic Center Mall Indio, CA 92201
Re:
Appraisal of Various Tracts of land (635 Lots within Phase One of the Terra Lago Master Planned Community) to be Developed Under Community Facilities District No. 2004-3 Located in the City of Indio, California
Dear Mr. Stephenson: In response to your authorization, we have prepared the following narrative appraisal report concerning the market value of the fee simple interest in the above-referenced real estate. Based on the investigation and analyses undertaken, our experience as real estate appraisers and subject to the definitions, assumptions and limiting conditions contained in this appraisal report, the following opinions have been formed based on the current market data as of June 17, 2005. The estimated value of the residential parcels, discounted for the time and cost of absorption, assuming the proposed Community Facilities District No. 2004-3 financing is in place and ready for funding, is as follows: SEVENTY ONE MILLION DOLLARS $71,000,000
Mr. Roy Stephenson July 15, 2005 Page Two The definitions of value are as such: Market Value As-Is: Means an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions or qualifications as of the date of inspection. Market Value: Means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) (2) (3) (4) (5) Buyer and seller are typically motivated; Both parties are well informed or well advised and acting in what they consider their own best interests; A reasonable time is allowed for exposure in the open market; Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
The narrative appraisal report which follows sets forth the results of our investigations and analyses, pertinent facts about the area and the property, comparable data and the reasoning which, in part, led to the conclusions set forth. This report is intended to be in conformance with and is subject to the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute, the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation and in compliance with CDIAC appraisal guidelines. Respectfully submitted,
\NA4u,..00.
William V. Shrewsbury, MAI Senior Vice President California OREA License No. AG004522
. 61.43.30 'e Z. o ciate praiser California OREA License No. AT031532 WVS:pa
SUMMARY OF SALIENT FACTS AND CONCLUSIONS EFFECTIVE DATE OF APPRAISAL: June 17, 2005 INTEREST APPRAISED: LEGAL DESCRIPTION: OWNERSHIP: SITE: Fee simple. See page 13 of this report See page 13 of this report Five tracts (zones) of land to be developed under Community Facilities District No. 20043 PA 1: PA 2: PA 3: PA 4: PA 5: Tract No. 31601-2 Tract No. 31601-3 Tract No. 31601-4 Tract No. 31601-5 Tract No. 31601-5 TOTAL LOCATION: ASSESSOR'S PARCEL NOS.: (178 Lots) (128 Lots) (86 Lots) (133 Lots) (110 Lots) 635 LOTS
Various parcels described in the report herein located in the City of Indio. CFD 2003-4 is comprised of Assessor's Parcel Numbers 601-290-003, 601-290-008 and portions of 601-270-013, 601-270-015, and 601-270-006. Riverside County, 5410-H5 and 5411-A5, A6, B5, and B6 Five separate tracts of land. Irregular None. See Site Description in this report. See Site Description in this report. Various residential uses. See Site Description in this report. See Property Tax Summary. Good location within a strong developing area of Indio and surrounding desert communities. None apparent.
THOMAS BROTHERS GRID: SITE: -Shape: -Earthquake Hazard: -Flood Hazard: -Environmental Issues: -Zoning: -Taxes: ADVANTAGES OF SUBJECT: DISADVANTAGES OF SUBJECT:
FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION 1217 NORMANDY PLACE SANTA ANA, CALIFORNIA 92705 PHONE 714.580-7056 FAX 714.550-7057 4
MARKETABILITY FOR SALE/ TYPICAL BUYER: MAJOR AREA INFLUENCE:
The most likely purchaser of the subject site is a large developer interested in bulk purchase of the entire parcel. The 10 Freeway Corridor, the City of Indio and the surrounding desert communities.
HIGHEST AND BEST USE: -"As Is" Vacant:
Developed as set forth in the proposed Master Plan for the Community Facilities District 20043. $71,000,000
FINAL VALUE ESTIMATE: Discounted Bulk Value
TABLE OF CONTENTS TRANSMITTAL LETTER SUMMARY OF FACTS AND CONCLUSIONS TABLE OF CONTENTS INTRODUCTION Purpose of the Report Intended Use of the Report Intended Users of the Report Scope of the Appraisal Dates of Inspection and Valuation Statement of Work Product/Dates of Report Preparation Premises, Assumptions and Limiting Conditions Special Limited Conditions Definitions and Reporting Standards Property Rights Appraised Property Identification Ownership Legal Description AREA DESCRIPTION Riverside County Overview City of Indio Summary NEIGHBORHOOD DATA Immediate Surroundings/Neighborhood Primary Neighborhood Access and Secondary Routes Distances and Directions from the Subject Neighborhood to Major Business Districts SITE DATA Site Analysis Location Important Site Characteristics Ingress/Egress and Exposure Utilities and Services Available to the Subject Properties' Neighborhood Size and Shape Adjacent Properties Topography Proposed Uses Soil and Subsoil Conditions Earthquake, Flood, and Other Nuisances and Hazards Street Improvements Easements, Restrictions and Encroachments 2 4 6 8 8 8 8 8 9 9 9 11 12 12 13 13 13 14 14 21 24 25 25 25 25 27 27 27 27 27 27 28 28 28 28 29 29 29 29
FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION

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Essential Zoning Provisions CC&Rs/Private Restrictions, Governing Use Functional Adequacy of Site Tax and Assessment Data MARKET CONDITIONS Physical and Locational Considerations Legal Considerations Market Feasibility Discounting HIGHEST AND BEST USE Highest and Best Use As Vacant VALUATION METHODOLOGY Basis of Valuation Valuation Approaches DIRECT COMPARISON APPROACH Introduction Analysis of Comparable Sales Single-Family Residential Land Sales Comparison Approach Analysis Reconciliation of Finished Lots Value Concluded Land Value DEVELOPMENTAL ANALYSIS Absorption General, Administrative, Taxes, Development Costs, Profit and Marketing Costs Discount Rate DISCOUNTED CASH FLOW ANALYSIS SUMMARY OF VALUATIONS VALUATION SUMMARY CERTIFICATION APPRAISER'S QUALIFICATIONS ADDENDUM -Absorption Study
29 29 29 29 37 37 38 38 42 44 45 48 48 48 49 49 50 56 58 59 59 59 60 62 67 68 69 71 70
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INTRODUCTION Purpose of the Report The purpose of this report is to estimate the market value of the fee simple interest in the following described real estate, subject to special tax levies pursuant to the Community Facilities Distiict Act of 1982, under the following valuation premises: The estimated "as is" value of the residential acreage discounted for the time and cost of absorption, assuming the proposed CFD funding is in place. The estimated retail market value of the subject property, assuming the proposed CFD Financing has been funded. Intended Use of the Report It is these appraisers' understanding that this appraisal report is to be used for CFD bond financing named CFD 2004-3. The opinions set forth are subject to the premises, assumptions and limiting conditions detailed below and throughout this report. This report is intended to be in conformance with and is subject to the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation. It is also made in conformance to the guidelines set out by CDIAC. Intended Users of the Report The intended users of the report are The City of Indio officials, underwriters, counsel and potential investors only. Scope of the Appraisal As a part of this appraisal, the appraisers made a number of independent investigations and analyses. Only the Direct Comparison Approach and a form of the Income Approach, known as the Discounted Cash Flow Analysis, have been utilized. The Cost Approach was felt inapplicable. The investigations and analyses undertaken include the following: 1. 2. 3. 4. Review of area demographic and economic information. Review and analysis of the market activity for the various components of the subject property as well as the market for master planned communities. Accumulation and confirmation of land sales similar in use to the parcels comprising the subject property. Discussions with City planners, buyers, developers and other knowledgeable persons in the area.
All conclusions reached are presented in a self-contained, fully documented narrative appraisal
FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION 1217 NORMANDY PLACE SANT_ ANA, CALIFORNIA 92705 PHONE 714.580-7056 FAX 714.550-7057 8
report. Dates of Inspection and Valuation The effective date of value in this report is June 17, 2005. No future valuation is expressed or implied by this report. The property was last inspected on June 17, 2005 by William V. Shrewsbury, MAI. Statement of Work Product/Dates of Report Preparation The data used in this report was collected, verified and analyzed by William V. Shrewsbury, MAI. This report was prepared between the dates of June 1, 2005 and July 15, 2005. Premises, Assumptions and Limiting Conditions The analyses and opinions set forth in this report are subject to the following assumptions and limiting conditions.
The valuation of the subject property is based, in part, on the conceptual specific land use plan proposed by the various developers. It is further assumed that all governmental approvals have been granted to allow such a plan. The "as is" condition is based upon the project being developed as defined in this report. We reserve the right to alter the conclusion of the estimated values contained in this report in the event that any change in the development costs occur or there is a change in the specific land use plan as to the number of dwelling units or acreage for any one of the defined land uses. The value contained in this report is further conditioned upon the project being developed as defined within the body of the Community Facilities District 2004-3. We assume no responsibility for matters legal in character, nor do we render any opinion as to title which is assumed to be good and marketable, and that the premises are assumed to be free and clear of all deeds of trust, leases, use restrictions and reservations, covenants, conditions, easements, cases or actions pending, tax liens and bonded indebtedness (unless otherwise specified). No survey, legal or engineering analysis of this property has been made by me. It is assumed that the legal description and area computations furnished are reasonably accurate. In the absence of a survey, no opinion is made nor responsibility taken for encroachments or undisclosed easements (if any). A current soils report was not furnished to this appraiser for review. Therefore, we assume that the soil conditions at the subject site are suitable for the existing development. This appraisers reserve the right to alter his conclusions of value if so warranted by a soils report for the subject property. OH, gas, mineral rights and subsurface rights were not considered in making this appraisal unless otherwise stated and are not a part of the appraisal, if any exist. This appraisers will not be required to give testimony or attendance in court or any other governmental hearing by reason of this appraisal unless arrangements have previously been made. In the event this appraiser is subpoenaed fora deposition, judicial or administrative proceeding and is ordered to produce this appraisal report and files, this appraiser will immediately notify the employer. This report has not been prepared for court testimony nor is the undersigned prepared for such testimony at this time. If court testimony becomes necessary, advance arrangements will have to be made and reasonable compensation for such additional services would have to be mutually agreed upon. The liability of First American Commercial Real Estate Services Inc. is limited to the client and to the fee actually received. There is no accountability, obligation or liability to any third party. If this report is placed in the hands of anyone other than the client, the client is responsible for making such third party aware of all limiting conditions and assumptions of the assignment and related discussions.
1217 NORMANDY
FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES APPRAISAL AND EVALUATION PLACE SANTA ANA, CALIFORNLA. 92705 PHONE 714.580-7056 FAX 714.550-7057 9
First American Commercial Real Estate Services, Inc. is not responsible for any costs incurred to discover or correct any deficiencies of any type in the subject property; physical, financial and/or legal. The client agrees that First American Commercial Real Estate Services Inc. and the analysts will be held harmless in the case of lawsuits involving limited partnerships, syndication or stock offerings in real estate (brought on by a lender, partner or part-owner, tenant or any other party), and the client will pay any and all awards, settlements of any type, regardless of the outcome. It has been assumed that the subject improvement suffers no structural damage or termite infestation and that Urea-Formaldehyde Foam (UFFI), asbestos or other hazardous materials may have been used in its construction. It is the responsibility of the client, lender or user of this report to check for these items. These appraisers will appear at the deposition, judicial or administrative hearing with his appraisal report and files and will answer all questions unless the employer provides the appraiser with legal counsel who then instructs him/her not to appear, instructs him/her not to produce certain documents or instructs him/her not to answer certain questions. These instructions will be overridden by proper court order which the appraisers will follow if legally required to do so. It shall be the responsibility of the employer to obtain a protective order. The appraisers assume no responsibility for any conditions not readily observable from his/her related customary inspection of the subject and which might affect the valuation excepting those items specifically mentioned in this report. No opinion is intended to be expressed regarding matters that require legal expertise or specialized investigation or knowledge beyond that customarily employed by the real estate appraiser. The date of value, for which the opinions of value are expressed in this report, is June 17, 2005. The dollar amount of this value opinion is based on the purchasing power of the United States dollar on that date. These appraisers assume no responsibility for changes in economic or physical conditions occurring after the date of this report that may affect the valuation opinion stated in this report. Maps, plats and exhibits included herein are for illustration only, as an aid for the reader in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other purpose, nor should they be removed from, reproduced or used apart from this report. No consideration has been given in this appraisal to personal property located on the premise; only the real estate has been considered unless otherwise specified. Information contained in this report has been gathered from sources which are believed to be reliable and. where feasible, has been verified. No responsibility is assumed for the accuracy of information supplied by others. Area calculations and dimensions used are for relative appraisal comparison purposes only. There is no such thing as a completely exact measurement and definitions can vary. Any sketch or identified survey of the property included in this report is only for the purpose of assisting the reader to visualize the property. This opinion of value is intended to be an opinion of value for a point estimate of time only. These appraisers, in rendering this opinion, assume no responsibility for subsequent management, economic or physical factors which may or may not affect said conclusions or opinion. The allocation of total value to land or to buildings, if shown in this report, is invalidated if used separately in conjunction with any other appraisal and, if a lease or partial interest valuation is given, the sum of the parts may or may not equal the entire fee simple interest in the real estate. This appraisers estimate that the marketing time to sell the property is within 12 months. The estimated income and expense estimates used in the Discounted Cash Flow Section do not constitute an audit of this project and should not be misconstrued as such. Estimated income and expenses shown are for appraisal purposes only and represent a combination of judgments based on marketing data, experience and estimated expenses. Expenses and income used are to be considered stabilized; actual income and expenses may be different. In this appraisal assignment, the existence of potentially hazardous materials and/or existence of toxic waste, which may or may not be present on the property, has not been considered. This appraiser has not been notified of the existence of any such items; however, the appraiser is not qualified to detect such substances. It is suggested that the reader consult with a qualified expert in the field for the possible presence of such materials and the potential cost of correction, if found.
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10
Flood zones have either been confirmed with the county or city of the property. If the flood zone has not been confirmed with the city, then the flood zone has been researched by looking at the National Flood Insurance Program's FIRM (Flood Insurance Rate Map). Although the FIRM panel has been researched, We are not a flood engineer and bear no responsibility for its accuracy. If there is any question as to the validity of the FIRM panel, then I suggest that the client do an independent search, confirming the subject and panel with the National Flood Insurance Program in Washington, D.C. The Americans with Disabilities Act (ADA) became effective January 26, 1992. We have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since 'we have no direct evidence relating to this issue, we did not consider possible noncompliance with requirements of ADA in estimating the value of the property. The signatory of this appraisal report is a member of the Appraisal Institute and is licensed by the State of California. The Bylaws and Regulations of the Institute require each member and candidate to control the uses and distribution of each appraisal report signed by such member or candidate. Therefore, except as hereinafter provided, the party for whom this appraisal report or evaluation was prepared may distribute copies of this appraisal or evaluation report in its entirety to such third parties as may be selected by the party for whom this appraisal report was prepared. However, selected portions of this appraisal report shall not be given to third parties without the prior written consent of the signatory of this appraisal report. (Nothing is to be removed, particularly conclusions of value. The entire report is to be presented at all times.) Further, neither all nor any part of this appraisal report shall be disseminated to the general public by the use of advertising media, public relations media, news media, sales media or other media for public communication without the prior written consent of the signatory of this appraisal report, particularly as to value conclusions, the identity of the appraiser or any reference to the Appraisal Institute or to the designations granted by the organization. Any future seismic earthquakes in the Southland may have a detrimental influence upon value. We have examined the property from the exterior to see if there are any structural problems. As a result, we cannot say whether the structure has been affected by any earthquakes. In addition, we do not know whether this structure can withstand another earthquake. Since we have no direct evidence relating to this issue, we did not consider possible structural damage in estimating the value of the property. Acceptance of and/or use of this report by the client or any third party constitutes acceptance of the above conditions. First American Commercial Real Estate Services Inc. and the analysts' liability extends only to the stated client, not subsequent parties or users, and is limited to the amount of the fee received. The appraisers assume that the flood information provided by the County of Riverside is accurate; however, if it is different, then the appraiser does not take responsibility.
Special Limited Conditions It should be noted that considerable weight has been considered in the absorption assumptions contained in the Market Absorption Study CFD 2004-3, City of Indio, dated July 2005, prepared by Market Profiles. Absorption assumptions set forth in the report call for the sale of finished properties to "end users." Our estimate refers to the sale of lots to developers or investors who will ultimately sell off to "end users." Also, the land development costs furnished by SunCal Companies represent the costs estimated at this time for developing the tract within the CFD 2004-3 development. Our value estimates reflect these assumptions. We reserve the right to amend our value estimate should they amend their absorption and/or development cost estimates. Definitions and Reporting Standards The terms "market value" and "fee simple estate," as used in this report, are defined below. The
FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES APPRAISAL AND EVALUATION 1217 NORMANDY PLACE SANTA ANA, CALIFORNIA 92705 PHONE 714.580-7056 FAX 714.550-7057 11
term "highest and best use" is defined in that section of this report. In addition, other standards are presented with respect to "personal property" and "self-contained appraisals."
Market Value' Means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (I) (2) (3) (4) (5) Buyer and seller are typically motivated; Both parties are well informed or well advised and acting in what they consider their own best interests; A reasonable time is allowed for exposure in the open market; Payment is made in terms of cash in U.S. Dollars or in terms of financial arrangements comparable thereto; and The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
Market Value As-Is Means an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions or qualifications as of the date of inspection' Fee Simple Estate' Absolute ownership unencumbered by any other interest or estate subject only to the four powers of government. Cash Equivalency Definition The definition of market value contains within it the concept of cash equivalency. The following paragraph elaborates on this concept as contained within the definition of market value used by the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC): In applying this definition of market value, adjustments to the comparables must be made for special or creative financing or sales concessions. No adjustments are necessary for those costs that are normally paid by sellers as a result of tradition or law in a market area; these costs are readily identifiable since the seller pays these costs in virtually all sales transactions. Special or creative financing adjustments can be made to the comparable property by comparisons to financing terms offered by a third-party financial institution that is not already involved in the property or transaction. Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession, but the dollar amount of any adjustment should approximate the market's reaction to the financing or concessions based on the appraiser's judgement.'
Property Rights Appraised The interest appraised in this report is considered to be the fee simple interest of the subject property described herein. This valuation is based on and explicitly assumes a total transfer of the real estate described whether it be in one lump total or in a series of component positions.
'Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C - Appraisals, 34.42 Definitions (f). 'Clarification: The property may be partially complete (only structural framework up and not enclosed); it may be physically complete but only partially leased up or sold out or it may already be "stabilized." 'The Dictionary of Real Estate Appraisal, Second Edition, published by the American Institute of Real Estate Appraisers, 1989, p. 120. 'Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC).
FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES APPRAISAL AND EVALUATION 1217 NORMANDY PLACE SANTA ANA, CALIFORNL-k. 92705 PHONE 714.580-7056 FAX 714.550-7057
l2
Property Identification/Ownership This property is an appraisal of the land and improvements located in the zones or tracts set forth 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
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, State of California, and is described in the addendum.
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AREA DESCRIPTION Riverside County Overview Riverside County consists of 24 individual cities and numerous unincorporated communities, as of 2005. Riverside County is typically grouped with adjacent San Bernardino County to form the Riverside-San Bernardino Metropolitan Statistical Area (MSA), and the area is commonly referred to as the Inland Empire. The major urbanized areas are located in the western portion of the county. The major incorporated cities include Riverside, Corona and Moreno Valley. Peripheral areas such as Temecula and Moreno Valley are the most active areas for new growth. The desert area of Riverside County, known as the Coachella Valley, includes such world-famous desert communities as Palm Springs, Rancho Mirage, Palm Desert and Indian Wells. Riverside County is bounded by Orange County to the west, San Bernardino County to the north, the state of Arizona to the east, and San Diego County and Imperial County to the south, as the map on the next page indicates. The following section summarizes the general population, employment, income and retail sales trends in Riverside County. Riverside County Population Trends As of January 2003, the countywide population stood at approximately 1,726,754 residents, in 2004 it was 1,807,858, and 2005 the population was 1,877,000. Annual population gains from natural increase and in-migration changed accounted for a 2.90% increase per year. The future rate of growth within the county will depend on a number of factors including availability of developable land, availability of water, the national and regional economic climates, and public policy toward growth. The areas within the county which will continue to experience the largest share of the new population growth will be the peripheral area between Corona and the Temecula Valley and the Moreno Valley area.
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RIVERSIDE COUNTY REGIONAL MAP

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Copyright 1988-2003 Microsoft Corp. and/or its suppliers. All rights reserved. http://www.microsoft.com/streets Copyright 20D2 by Geographic Data Technology, Int All rights reserved. 2002 Navigation Technologies. All rights reserved. This data includes information taken with permission from Canadian authorities e 1991-2002 Government of Canada (Statistics Canada and/or Geomatics Canada), all rights reserved.
Riverside County Employment Trends Employment data for Riverside County is compiled for the entire Riverside-San Bernardino MSA, which includes both Riverside County and San Bernardino County. These counties have a diverse economy with manufacturing, construction and tourism as the major industry groups. The most common measure of employment growth is the increase in non-agricultural employment. The following information in italics was taken from Market Profiles, Inc.'s Feasibility Report dated July 1, 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 ofthe 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 and 2003 and employment 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's continuously expanding employment base will result in substantial demand for new homes in the Coachella Valley. Locally, the Valley's economy has begun to benefitfrom new employment opportunities relating to the recent voter approval of Proposition IA 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
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EXHIBIT 11-2 EMPLOYMENT GROWTH RIVERSIDE-SAN BERNARDINO BI-COUNTY REGION AND SOUTHERN CALIFORNIA 1980 - 2006 Southern California Riverside & San Bernardino Counties Percent Total Increase/ Percent Increase/ Total Change Change Employment Decrease EmploymentDecrease 1,252,700 1,210,700 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 42,000 40,000 PROJECTED 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. 3.5% 3.4% 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. 8,464,400 8,296,400 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 5,755,100 168,000 135,100 122,000 (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. 2.0% 1.7% 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.
Year 2006 2005 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
Source: California Employment Department, Market Profiles
MARKET PROFILES, INC.
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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: The Augustine Casino, south of the City of Coachella, opened for business in 2004. The casino employs approximately 300 persons. The Morongo Band of Mission Indians recently completed construction of a $250 million casino resort hotel on a site located a few miles west of Palm Springs on the north side of Interstate 10. The project is expected to create 4,000 new fobs over the next five 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 opened in 2004 north of Rancho Mirage. The Aqua Caliente Band of Cahuilla Indians announced in January plans to expand the Aqua Caliente Casino by additional 65,000 square feet, add a new 14 story hotel with 400-rooms, and add 350,000 square feet of retail space. These various protects will be on the Aqua Caliente Reservation at the corner of 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 facility 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 10-story hotel, 290 condominium units, an 18-hole golf course, a 100,000 square foot shopping center, and 500,000 square feet of office space. In 2003, the growth of the Coachella Valley's economy was affected by 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 Valley. 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 protected 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 of 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 365,648 persons residing in the Valley. The population has grown at a strong pace of 4.1% per year since 2000. The Valley's population is projected to grow at a rate of 3.8% per
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 2.68 persons. 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 54 percent 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 Indio is 61,516 persons. At 3.46 persons, the average household size in the city is much larger than that of the Coachella Valley as a whole. The city has a much larger proportion 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 ofhouseholds 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 ofhouseholds in Indio is $39,477. Housing Profile Single family detached homes account for 46 percent 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 figure for 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 offive 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 Indio 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 2001 fell 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.
The geographic pattern of new home sales in the Coachella Valley has shifted over the past few years. Excluding the Indio-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 Indio-Coachella Submarket have consistently increased over the past three years. Sales jumped from 591 homes in 1999 to 1,217 in 2002 and 2,890 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 hasfluctuatedfrom 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 ofmodestly-priced homes located in the Indio-Coachella submarket area. The average price of new homes sold in the Indio-Coachella submarket during the first quarter of 2005, was $381,349. This figure is 40 percent higher than the average sale price for the first quarter of 2004 of $272,163. Sales are spread across a broad price spectrum ranging from under $200,000 to over S400,000. During 2004 and 2005, there is a clear pattern of decreasing sales of lower 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 Indio-Coachella submarket area dominated the sales of homes in the Coachella Valley in first quarter 2005 that were priced under $400,000. Projected 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 of4, 500 homes. However, it is projected that the pace of sales will moderate in 2005 and 2006.
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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, including pre-retirement buyers, are projected to account forjust over one quarter ofthe demand The great majority of the buyers that are active in the community of Indio 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 $400,000 price level. Riverside County Transportation Riverside County is served by a major airport, Ontario International, which is located in San Bernardino County. Several major airlines have flights into Ontario, providing national and international flight capabilities. Los Angeles International Airport is located approximately 60 miles west of Riverside. Also, Palm Springs has its own airport. 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 ski resorts. Worldfamous desert communities such as Palm Springs are also found in Riverside County. Riverside County Conclusion Riverside County is the fastest growing county in the Southern California region in terms of population and employment. The county remains poised for considerable expansion. It has become diversified with an ever-growing employment base which should be a positive factor on real estate values in general.
City of Indio The subject property is located within the incorporated limits of the City of Indio in Riverside County. Indio is located in the south-central region of the Coachella Valley. Indio is located approximately 78 miles southeast of the City of Riverside, which also serves as the County seat,
130 miles southeast of the City of Los Angeles and 529 miles south of San Francisco. The City of Indio was incorporated May 16, 1930. The city consists of approximately 24.8 square miles and is bounded by unincorporated Riverside County to the north and south, the City of La Quinta to the west and Coachella to the east. Please refer to the location map earlier in this section. Population The City of Indio has had dramatic population increases in the last 30 years. Growth from 1970 to 2000 has been from a population of 14,469 to 45,700 as of January 1, 2000, and four years later it was 66,118, reflecting a 22.7% increase. Population shifts from other suburban developments within the Coachella Valley have been a key factor in Indio's growth in recent years, as well as the progression in growth to the east away from Palm Springs. Most future growth in the city will be the development of the east and southern sections of the city. The Census showed that the city's overall median age for over 65 is 18.4%. The overall median household income stood at $35,555. There is considerable fluctuation between the winter and summer months in terms of population count, age and demographics as Indio becomes more of a winter retreat for many baby boomers and senior citizens. Indio's families have an average income and education compared to the county. Transportation The City of Indio has a variety of transportation facilities available. Rail is available by Union Pacific main line. Amtrak passenger rail service is available in Indio and Palm Springs. Truck transportation has two carriers for direct daily service to Los Angeles. Overnight delivery is offered to Los Angeles, San Francisco, San Diego, Phoenix and Mexicali. Air transportation is available. Palm Springs International Airport, 20 miles northwest, is served by nine airlines (Alaska being the largest), general facilities and an 8,500-foot runway. The Bermuda Dunes Airport, a private general aviation facility, is located in adjacent Bermuda Dunes. County-owned Desert Resorts Regional Airport, 7 miles southeast in Thermal, has general aviation facilities and a 5,000-foot runway. Bus transportation is available by Greyhound. The SunLine Transit Agency provides local bus service throughout the Coachella Valley from the Indio Transportation Center. The nearest ports are Los Angeles/Long Beach, 133 miles west, and San Diego, 130 miles southwest. Highways serving Indio are the I-10 west to Los Angeles and east to Phoenix; California 111 northwest/southwest; and California 86 (NAFTA Highway) south to Brawley and
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El Centro in Imperial County, Yuma, Arizona, and Mexicali and Mexico City, Mexico. Industrial There are 1,341 acres in the City limits zoned for industry. This is available in parcels ranging in size from '/2 to 200 acres. Included in this acreage total are 20 industrial parks. City-owned land is no longer available. Community Characteristics The city has numerous facilities available. In the health-related area Indio has one full-service hospital, with 130 beds; a 24-hour emergency care facility; and a base for paramedic service. Seventy-one physicians/surgeons, 18 dentists, 9 optometrists and 8 chiropractors practice in Indio. With regard to education, the Desert Sands Unified School District has 14 elementary schools, 5 middle schools, 3 high schools and 1 continuation school. The School District is planning to build a K-12 campus, near the subject property, north of Interstate 10 at Jefferson and Avenue 39. The high school should be completed in 2008. College of the Desert is opening up the Valley Education Center to expand educational opportunities in Indio. The facility will partner with several universities to offer distance learning on a "per class" basis. Chapman College; National University; California State University, San Bernardino; and University of Redlands offer programs in Palm Desert/Palm Springs leading to bachelor's and graduate degrees. Of cultural interest, the community has two direct TV channels and one cable system (MediaOne). Indio has 36 churches, 2 libraries, 1 daily newspaper, 3 weekly newspapers, 4 banks, 2 savings and loans, 7 parks, 1 sports complex, 1 theater with eight screens and 1 live performing arts center. Neighboring Coachella has 13 churches, 1 library, 1 bank, 1 boxing club, 1 radio station, 1 community center and 5 parks. Other regional recreational facilities include: over 90 public and private golf courses; 200-acre Lake Cahuilla Park (County); and Salton Sea for boating, waterskiing and fishing. Indio offers many recreational facilities including the Indio Municipal Golf Course, Heritage Palms, Indian Springs, President's Club at Indian Palms and Landmark Golf Club, among the city's seven public courses. Other recreational opportunities include equestrian, polo, swimming, tennis, mountain biking, hiking, four wheeling and off-roading. Indio provides a variety of activities for the outdoor enthusiast.
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The median sales price for new and existing homes is $377,449, according to the Desert Real Estate May 2005 Report. The medium and upper-medium housing stock is growing quickly. Indio has a number of newer developments where prices range from $300,000 to over $400,000, such as The Shadow Hills residential developments, such as the El Dorado Collection, the Ventanas, and Palazzo. There are also new homes being built in the Indio Ranchos area with many prices exceeding $300,000. There are 40 hotel/motels, with approximately 2,500 rooms in Indio. There are 20 mobile home parks, with 3,000 spaces, in the Cities of Coachella and Indio and surrounding unincorporated areas. Summary Indio is strategically located in the Coachella Valley as a service and retail center for a strong agribusiness and rapidly expanding resort and recreational economy. A major interstate highway (I10) and railroad (Union Pacific) offer excellent transportation service for an emerging industrial sector, all of which provide a healthy economy attractive for investment. Indio hosts several emerging industry sectors, including: golf industry manufacturing cluster, agricultural industry cluster and home improvement/home furnishings industry cluster. Recent developments include: relocation/ consolidation of county facilities, including courts, Dash Golf Carts, Matzie Golf, I-10 Auto Mall, Metropolitan 8 Theater, JFK Hospital expansion, East Valley Education Center and the new casinos being developed.
NEIGHBORHOOD DATA Immediate Surroundings/Neighborhood On the following page is a neighborhood map identifying the subject properties in relation to the City of Indio and surrounding areas. As can be seen on this neighborhood map, the subject properties are located in the north central section of the City of Indio. CFD 2004-3 is located north of Interstate 10, at the northeast corner of Golf Center Parkway and Avenue 43. The City of Indio has become a focal point of much of the residential, commercial and industrial expansion along the I-10 and Highway 111 Corridors within the southwestern Coachella Valley region in which the subjects are located. This expansion has absorbed much of the skilled labor pool and created demands for skills which are available only through training and importation from other areas. Unskilled and, for the most part, semi-skilled workers are available in adequate supply. The subject property is judged to be conducive to a single-family, detached housing development, competitive with similar developments within the immediate market areas of the subject development. At present, the commercial area is along Highway 111 and Jackson Street. Primary Neighborhood Access and Secondary Routes The primary access to this neighborhood is by automobile with some limited bus access. This is supported by the close proximity of the I-10 Freeway, located approximately 1 mile south of the subject property. Distances and Directions from the Subject Neighborhood to Major Business Districts Major urban areas in the vicinity of the subject property include the City of Riverside and County seat, located approximately 78 miles west of the subject property, and the City of Palm Springs, located approximately 15 miles northwest. The City of Ontario, which is home to the Ontario International Airport, is located approximately 100 miles northwest of the subject property. In summary, the immediate neighborhood is going through a transition from agricultural/desert land uses to residential and commercial uses. As previously mentioned, steady growth is expected to continue.
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 of Indio. 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 "ready to 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. Utilities and Services Available to the Subject Properties' Neighborhood: Utilities and services are furnished by the following agencies/companies: Imperial Irrigation District Electricity: Natural Gas: Southern California Gas Water: City of Indio Waste Water: Valley Sanitary District
Location:
Important Site Characteristics: Positive Site Characteristics: Negative Site Characteristics: Ingress/Egress and Exposure:
1217 NORMANDY PLACE SANTA ANA, CALIFORNIA 927050 PHONE 714.580-7056 FAX 714.550-7057 27
Telephone: Verizon County of Riverside Fire: Indio Police Department Police: Sun Line Transit Agency Transit: 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 lines proximate to or directly to the subject zones. Size and Shape: The zones of the CFD 2004-3 project consist of the 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
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: FAMES * Information obtained from Tract Maps **Information obtained from the Master Plan Map
The tracts are irregular in shape and will be identified as such in the CFD 2004-3. Adjacent Properties: 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:
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 Panel Number 0602550002, dated May 1, 1985.
Street Improvements: Easements, Restrictions and Encroachments:
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
Essential Zoning Provisions: CC&Rs/Private Restrictions, Governing Use:
Functional Adequacy of Site:
Tax and Assessment Data:
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.
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MARKET CONDITIONS Physical and Locational Considerations The physical and locational characteristics of the five planning areas of the subject CFD No. 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 complex, complete with clubhouse, pool and a tennis complex. In addition each tract will have it's own neighborhood park. The planning areas are currently surrounded, to a large degree, by undeveloped land. Currently, strong growth is seen as imminent surrounding the subject tracts as long as the economy stays stabilized as it presently is. As noted in the Site Description section of this report, the subject's sizes and topographies are adequate for residential development. Engineering and site work is necessary to accommodate the use outlined in the proposed development plans but from a physical and locational perspective, a variety of residential uses are physically possible. Access to all zones is considered good. Accessibility and location would allow for a variety of residential land uses to be developed on the zones as planned. As residential units are constructed and access roads are extended, the demand for residential and retail support use should increase, thereby increasing an already good economic environment. The five subject zones, as currently proposed, will consist of the following detached singlefamily units:
PA Lots
1 2 3 4 5
TOTAL
178 128 86 133 110

635
The subject properties will consist of predominately single-family residential developments. This appears to be a logical extension of the existing residential developments near the subject area. The land will physically accommodate the proposed density.
Legal Considerations The legal factors influencing the highest and best use of the subject properties are primarily governmental regulations such as zoning and building codes. The subject zones and tracts are zoned for residential uses within the Terra Lago Master Planned Community. There are no other existing entitlements other than current City of Indio building requirements for the tracts. There will be some conditions, covenants and restrictions associated with the tract developments; however, these are mostly cosmetic in nature and would not be expected to negatively affect the lot value. The developers' conceptual plan for the subject developments are currently being developed. Based on the ultimate approval of the developer's conceptual plan, which includes all residential use, the proposed development is assumed to be a legally conforming use. Market Feasibility In this section, market conditions that influence the subject property will be considered. The major factor requiring consideration is the attractiveness of the subject as a real estate investment or its financial feasibility. Financial feasibility is based, to a large degree, on market acceptance or market feasibility. The pathway of the growth in Riverside County has been concentrated in several growth "nodes." These nodes of growth include the Cities of Corona, Riverside, Hemet/San Jacinto, Murrieta and the Coachella Valley. The City of Indio has historically been known as primarily an affordable housing community. The area was characterized 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 NORALANDY 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. In valuing property such as the subject, we have endeavored to analyze the market conditions and compare the anticipated supportable development uses with the conceptual plan currently in place. Where possible, if the market conditions support the development of the product type proposed for the subject, it 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. Based on the data and analysis of the Market Profiles report for the land use, a determination is made as to whether the development plan for the subject site is the highest and best use of the land. This market-supported development plan is 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 marketing reports were reviewed to help in our analysis. The most important was the report prepared by Market Profiles, Inc. The following information in italics was taken from Market Profiles, Inc.'s Feasibility Report dated July 2005. New Home Competition During the first quarter of 2005 , there were 78 subdivisions marketing new detached homes in the Coachella Valley. The 78 projects 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 Indio-Coachella and the Indian Wells-LaQuinta submarkets had the largest number of active new home subdivisions during the first quarter period with 26 and 24 projects, respectively. The Indio-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-Indian Wells submarket. There were 26 new home subdivisions that were active in the Indio-Coachella Submarket during the first quarter of 2005. The 26 projects 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 and nine 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 Indian Palms Country Club, also in Indio.
FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION 1217 NORMANDY PLACE SANTA ANA, CALIFORNIA 92705 PHONE 714380-7056 FAX 714.550-7057 39
Inventory 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 Indio/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 0.08 to 7.9 homes per week. The average cumulative sales rate is 2.79 homes per week per project. 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 I-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.
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The 132-lot Sienna subdivision recently opened in Shadow Hills. The base prices of the homes range from $394, 990 to $447, 990 for 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.). The 263-lot Shadow Ranch subdivision by Family Development sold out its first phase of 30 homes at a rate of 3.0 homes per week These homes range in price from $394,990 to $489, 990 for 3-, 4-, and 5-bedroom plans that range in size from 3,185 to 3,247 square feet ($150.90 to $180.77 per sq. ft.) The residents pay a homeowners fee of $95 per month for green belt maintenance. The minimum lot size is 8,500 square feet. The Desert Collection is a gated subdivision of 142 homes. The base prices of these 3-bedroom homes range from $364,990 to $414, 990 for plans that range in size from 1,610 to 2,266 square feet ($183.13 to $226.70 per sq. ft). The residents pay a homeowners fee of $75 per month. The first 73 homes were sold at a rate of 3.31 homes per week. The minimum lot size is 7,200 square feet. There are two subdivisions still active within one private, gated neighborhood developed by Century Vintage Homes. The three subdivisions are The Ventana Collection, The El Dorado Collection, and Villa Estates II. The homeowners will pay dues of $50 per month for maintenance of the private streets, plus an assessment district fee. The Ventana Collection consists of 2- and 3-bedroom homes that range in size from 1,208 to 1,843 square feet with base prices ranging from $299,990 to $339,990 ($184.47 to $248.33 per sq. ft.). Of the 198 homes in this tract, 87 have been sold at a rate of 0.81 homes per week The base prices of the homes in The El Dorado Collection rangefrom $339,990 to $424, 990 for 2- and 3-bedroom plans that range in size from 1,720 to 2,778 square feet ($152.98 to $197.66 per sq. ft.). Of the 198 homes in the tract, 176 have been sold at a rate of 1.64 homes per week The Villa Estates II homes have base prices rangingftom S294,990 to $394,990. These 3- and 4-bedroom homes range in size from 1,302 to 2,735 square feet ($144.42 to $226.56 per sq. ft.). Of the 137 homes in the subdivision, 123 have been sold at a rate of 1.53 homes per week The new community of Talavera in northeastern most Indio recently opened with four new home subdivisions offering homes for sale. The homes range in priceftom $299,999 to $416,990. The minimum lot size for all of the homes in Talavera is 8,000 square feet. The Venecia homes are the smallest being offered in Talavera. They consist of3- and 4-bedroom plans that range in size from 1,576 to 1,947 square feet with base prices ranging from $299,999 to $333,990 ($171.54 to $190.35 per sq. ft.). Twenty-five of the 45 homes in the first phase release were sold at a rate of 1.76 homes per week The homes in the Florencia subdivision in Talavera range in size form 1,855 to 2,380 with base prices ranging from $330, 000 to $370,000 ($155.46 to $179.45 per sq. ft.). Of the 44 homes in the first phase, 26 were sold at a rate of 5.93 homes per week Also in Talavera, the Alicante homes consist of 3-, 4-, and 5-bedroom plans that range in size from $389,540 to $404,990 ($130.68 to $156.25 per sq. ft.). Two thirds of the 33 homes released in the first phase have been sold at a rate of 3.61 homes per week.
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The largest homes being offered in Talavera are those in the Genova subdivision. The base prices of these homes range from $396,990 to $416,990 for 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 Indio. 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 Indio marketplace, however, generally healthy demand-supply conditions are projected to be maintained. The majority of the new homes that will be constructed in Indio 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 Indio 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 I-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.
Discounting In order to obtain an "as is" value, the finished lots need to be analyzed considering the time it would take to sell them off. Consideration needs to be given to the costs to finish the lots and the various costs associated with marketing and holding the lots during this time period. Our absorption rate estimates are by land product which were compared to the estimated absorption rates from the Market Profiles Market Consultants report dated July 2005. Our absorption expectations are very similar to those outlined in that report. Our absorption estimate assumed a purchase of the subject tracts by a merchant builder. It appears the absorption rate projection advised by Market Profiles Market Consultants is within a reasonable range. Based on the tracts that are being analyzed, it is estimated that a period of one year would be
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required to sell the land associated with the proposed residential tracts. This includes a total of 635 residential lots. Our absorption estimate is tied to the developer's proforma and infrastructure costs as well as Market Profiles Consultants' absorption study.
HIGHEST AND BEST USE Highest and Best Uses is an appraisal concept which has been defined as follows: 1. 2. The reasonable and probable use that supports the highest present value of vacant land' 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.
3.
Implied in these definitions is that determination of highest and best use takes into account the contribution of a specific use to the community and community development goals as well as the benefits of that use to individual property owners. Hence, in certain situations the highest and best use of land may be for parks, greenbelts, preservation, conservation, wildlife habitats and 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 the land as legally permitted, as if vacant. Secondly, the highest and best use of the property, with their improvements, must be analyzed to consider any deviation of the existing improvements from the ideal. "For highest and best use of both land as though vacant and property as improved, a use must meet four criteria. The criteria are that the highest and best use must be (1) physically possible, (2) legally permissible, (3) financially feasible and (4) maximally productive. These criteria should usually be considered sequentially; it makes no difference that a use is financially feasible if it is physically impossible to construct an improvement or if such a use is not legally permitted."'
'The Appraisal of Real Estate, 9th Edition, published by the American Institute of Real Estate Appraisers, Chicago, IL, p. 269.
6The 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?
'The Appraisal of Real Estate, 9th Edition, published by the American Institute of Real Estate Appraisers, Chicago, IL, p. 274.
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Highest and Best Use As Vacant Physical Considerations Location/Topography/Size: As set forth previously, the subject parcel sizes are more than adequate for proposed single-family development. The parcel comprising the subject properties are regular in their configuration, however, it results in no significant development limitations. The properties should have adequate drainage when completed per City of Indio requisites. The location of the properties are situated within what should continue to be developing residential areas. Therefore, it would appear as though a planned residential type of land use would be feasible. Utilities/Flood Zone: The properties are located in areas designated with a flood zone risk. All of the planning areas are located within Flood Zone B, an area of minimal to moderate flood hazrd. The Community Panel is 0602550602 revised May 1, 1985. This is defined as areas between limits of the 100-year flood and 500-year flood; or certain areas subject to 100-year flooding with average depths less than one foot or where the contributing drainage area is less than one square mile; or areas protected by levees from the base flood and are no significant hazard. The parcels have access to public water, sewer, electricity, natural gas and telephone lines. Therefore, they appear to have no potential deficiency from a utility or flood zone development standpoint. Conclusion: No soils report has been reviewed by us. Overall, there appears to be no adverse soil conditions of which the appraisers are aware. The shape of the parcels are irregular, however, this results in no specific development limitation. From a physical standpoint, the sites are considered adequate for various types of residential development as regulated and dictated by the master plan zoning. The nature of the surrounding market is likely to support these uses.
Legally Permissible Legal Factors: The legal factors affecting a site and its potential uses are often the most restrictive. These would typically be governmental regulations such as zoning and building codes. The developers' proposed plans are based on residential developments. The existing zoning will permit residential and limited commercial use development. Considering the nature of the surrounding developments and the subject's zoning classifications, the
proposed developments appear to meet the legal criteria for highest and best use. Conclusion: 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
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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 of the sites makes development physically possible. Legal Considerations The legal factors influencing the highest and best use of the subject property are primarily government regulations, such as zoning and building codes. The tracts zoning allows development to residential as reported by the City of Indio. 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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VALUATION METHODOLOGY Basis of Valuation Valuation is based upon general and specific background experience; opinions of qualified, informed persons; consideration of all data gathered during the investigative phase of the appraisal; and analysis of all market data available to the appraiser. Valuation Approaches Three basic approaches to value are available to the appraiser: the Cost Approach, the Direct Comparison Approach and the Income Approach. Since the subject sites are essentially vacant land parcels, only the Direct Comparison Approach and a form of the Income Approach known as the Discounted Cash Flow Analysis have been utilized in estimating the market value of the "as if finished" fee simple value.
Cost Approach This approach calculates either the replacement or reproduction cost estimate of the subject property improvements new (maintaining comparable quality and utility). Losses in value are then subtracted from this value. Losses are sustained through depreciation, age, wear and tear, functionally obsolescent features and economic factors affecting the property. The net value is then added to the estimated land value to provide a total value estimate. The Cost Approach is not applicable in this particular appraisal. Direct Comparison Approach This approach is based upon the principle that the value of a property tends to be set by the price at which comparable properties have recently been sold or for which they can be acquired. This approach requires a detailed comparison of sales of comparable properties with the subject property. One of the main requisites, therefore, is that a sufficient number of transactions of comparable properties be available to provide an accurate indicator of value and that accurate information regarding price, terms, property description and proposed use be obtained through interview and observation. Income Approach This approach is based upon the theory that the value of property tends to be set by the expected income therefrom to the owner. It is, in effect, the capitalization of expected future income into present worth. This approach requires an estimate of net income, an analysis of all expense items, the selection of a capitalization rate and the processing of the net income stream into a value estimate. The Income Approach is applicable in this particular appraisal in a form known as a Discounted Cash Flow Analysis wherein projected sales of the subject portions to developers who will ultimately develop the land are discounted into a present value estimate. Methodology Due to the fact that the subject property consists of a vacant parcel of land, only the Direct CompariSon Approach and a form of the Income Approach (Discounted Cash Flow Analysis) have been utilized.
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DIRECT COMPARISON APPROACH Introduction The Direct Comparison Approach is based upon the premise that when a property is replaceable in the market, its value tends to be set by the purchase price necessary to acquire an equally desirable substitute property, assuming no costly delay is encountered in making the decision and the market is reasonably informed. In appraisal practice, this is known as the Principle of Substitution.8 A search was undertaken to identify recent sales of comparable properties. In our survey, we searched for comparable sales of small to medium-sized, bulk acreage transactions of singlefamily developments. In our survey, eleven single-family sales were uncovered. The area of the sales covered the northeastern portions of the Coachella Valley. The quality and quantity of the data was average. Of the sales uncovered, the most relevant were selected and are set forth in this report. A summary of the most comparable sales information is provided in the table on the 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).
Analysis of Comparable Sales For comparison, the comparable sales have been analyzed on a price per buildable lot basis. The comparables were compared to the subject and final conclusions were based upon price per lot. The following table summarizes the comparable sales used in the analysis. A more detailed description of each transaction is included in the pages following the table.
SINGLE-FAMILY RESIDENTIAL COMPARABLE SALES # I. 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 Mar 05 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 86 133 110 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. I
source. hate copyriiht 02004
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. 2
slihject
v.:12414 score image copy-fpIt fc.)2004
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.
Datum No. 3
The sale is within the subject development and is known as Planning Area 3 Tract No. 31601-4. The total price is $11,689,842 and is estimated at $152,000 per finished 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 within Tract No, 31601-4 and is located on Avenue 44, east of Golf Center Parkway, in the City of Indio.
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Datum No. 4
copy7 Ic1,20a4 sOuteirrege copy1 .gtlic)2004 A;,
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 of Indio. 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.
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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.
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Single-Family Residential Land Sales Comparison Approach Analysis Five comparable sales were used to estimate the value of the subject properties. The adjustments applied and derivation of each are set forth in the following grid.
LAND SALES ANALYSIS ADJUSTMENTS Sale 1 Unadjusted Price/SF Property Rights Subtotal Financing Terms Subtotal Conditions of Sale Subtotal Market Conditions Subtotal Other Adjustments Location Parcel Physical Characteristics Legal Encumbrances Availability of Utilities Zoning Highest and Best Use Amenities Total Other Adjustments Value Indication for Subject 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% 0% 0% 0% 0% 0% $141,000 $113,500 0% $113,500 0% $113,500 0% $113,500 0% $113,500 Sale 2 $132,000 0% $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 5 $141,000 0% $141,000 0% $141,000 0% $141,000 0% $141,000
Source: First American Commercial Real Estate Services
The adjustments made are discussed below: Property Rights Conveyed: 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. 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.
Financing:
Condition of Sale:
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All of the comparable sales occurred between March 2005 Date of Sale (Changes in Market Conditions): 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 ofother 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:
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Reconciliation of Finished Lots Value Concluded Land Value The adjusted land values concluded for the subject range from $113,500 to $152,000 per lot. The average or mean value is $137,900, while the median value is $132,750. The concluded estimate of land value for the subject is $137,000 per lot, which results in the following land value indicated for the subject:
SUM OF THE FINISHED LOT VALUES RECONCILIATION SUMMARY Estimated Lot Value Lots 635 $137,000 Indicated Value $86,995,000
We have concluded at $137,000 for a finished lot, that indicates a value of $86,995,000, or $87,000,000 Rounded.
DEVELOPMENTAL ANALYSIS Following is a summary of an estimated analysis of the costs of development and absorption for the subject property. The cash flow analysis takes into account the time and cost of absorption of the subject zones. 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 Facilities District No. 2004-3 at completion, prior to full absorption, and after full absorption. Absorption Market feasibility deals with market conditions which influence the subject property. The major factors in considering whether a development is feasible in the market are the potential finished lot values in relationship to the competition 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 opinion the subject lots could be sold out to initial purchasers or merchant builders over a proposed one year development time frame. For our cash flow we used 1 year. General, Administrative, Taxes, Development Costs, Profit and Marketing Costs We have estimated the overhead, real estate tax and marketing costs for the subject parcel. The category of "Overhead" covers all overhead and management, including the developer's office expenses, accountants, the management staff, along with supporting clerical/secretarial, field supervision personnel, insurance premiums, travel and vehicle expenses, and other miscellaneous expenses. Marketing expenses include not only sales commissions but also brochures, advertising, closing costs borne by the seller, and any other items required to attract and secure buyers to complete a successful transfer. We have utilized 2% for general and administration costs and 2% for marketing for costs based upon rates experienced by similar projects. The estimated Assessment District and ad valorem tax cost is not computed on an exact percentage formula, rather it is on a per acre or unit basis. The tax calculations have been
FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION 1217 NORMANDY PLACE *SANTA ANA, CALIFORNIA 92705* PHONE 714.580-7056 FAX 714.550-7057 59
approximated at a rate of 2% of the estimated value during the sell-off period, reflecting the bonds and finished condition of the land. Development cost proforma has been provided by SunCal Companies. The total costs for the subject tracts is $25,035,347 , the cost per lot is $39,425.74. The developer contribution is $3,168,656 or $4,990.01 per lot, leaving a residual for the bond of $21,866,691. Discount Rate 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 the land, which was added as a line item in our cash flow. The discount rate used in our analysis reflects time, risk and return for this development. Our experience with other similar developments indicates that the larger and more complex a property, the greater the discount rate required. It should be noted that the discounted cash flow assumptions have been undertaken 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 attached to the safest investments. A "safe" rate is represented by the return on U.S. Government Treasury rates, as of June 2005 was 4.37%. Another alternative, at higher risk, is corporate bonds. As of the effective date of this appraisal, long high-yield corporate bonds were selling at average yield rates of 5.40%. However, even high-yield corporate bonds are less risky than an investment in development land like the subject property. Bond investments can be much 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. Consequently, the discount rate should be higher than the yield rate on high-yield corporate bonds. According to the 2005 second quarter, Investor Survey published by Realtyrates.com, investor's in various types of improved real estate (incoming properties) required an average yield between 8.78% to 22.01% . The subject land is not an income property. It requires an enormous initial investment and it will require cash infusions to cover infrastructure construction, development overhead and carrying costs. It would be very difficult to find a buyer for a quick sale if the
property had to be liquidated. Therefore, the yield rate should be substantially higher than the average 12.0% return on income properties and, in fact, higher than the highest rate of return on income properties. According to Realtyrates.com, Developer 's Survey, subdivisions and PUD' s actual discount rates for 500+ units ranged between 14.07% to 34.62%. Banks are currently charging approximately 7.54% (prime rate 5.54%) plus 2% for loan costs. Considering loan costs, liquidity risks, property taxes and profit for the holding period before a sale could occur, a rate higher than any of the above in dictated yield would be required. In light of these facts and analysis, the appraisers believe it is reasonable to require at least 6% premium above the yield rate on secure income properties for an investment in development land like the subject property. A 6% premium on the 10.0% rate reported for secured income properties produces a discount rate of approximately 14%. It has been the appraisers' experience over the last several years that discount rates on vacant land have ranged from 12% to as much as 25%. In general, it is believed that a rate of 14.0% is appropriate for the subject. In order to run a single Discounted Cash Flow for the subject, it was necessary to make an analysis based on the estimated time period that the land development will be in place and that the number of lots projected by the developer coincides with the estimate by the Market Profiles absorption study estimate. As has been explained, the subject lots are projected to be absorbed in one year. The bulk lot sales are scheduled throughout the one year absorption period. This is consistent with Market Profiles "land take down" absorption estimates for all product types. Sales prices for the bulk lots sales are anticipated to remain stable for the first year and then are likely to increase. However, we have used a zero inflation assumption during our cash flow. A non-constant dollar assumption would have resulted in a higher discount rate selection. Please refer to the following page for our detailed Cash Flow Analysis. This analysis results in a discounted "as is" value of the land with the bond amount in place for the residential lots.
FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION 1217 NORMANDY PLACE 'SANTA ANA, CALIFORNLN. 92705* PHONE 714.580-7056 FAX 714.550-7057 61
DISCOUNTED CASH FLOW ANALYSIS

CR/200,3 PlanorgArs I
Property Types: RES. IMP. LOTS
0 of loULuel Price For unit 173 $137,000
Tolal 824.336.000.00
SUBTOTAL
173 $137.000 124.384.000.00
TOTAL
DISCOUNT RATE.
324.3313.1300,00
14,00%
ElDEIMOL_ DEVELOPMENT COSTS G 8 A COSTS REAL ESTATE TAXES MARNETiNG COSTS
088.200 2.00% 2.00% 2.00%
YEARS RES. IMP LOTS
1 ITS
2 0
3 0
10
11
11
13
14
15
16 TOTAL YEARS 178
TOTAL LOTS TOTAL ACRES I TOTAL REVENUE/YEAFt EXPENSES DEVELOPMENT COSTS G 8 A COSTS REAL TAXES MARKETING COSTS
171.00 824.388 000 00 $0.00 50.00 10 00 $0.00 50.00
50 00
$0.00
$000
50.00
90.00
$000
:0 00
$0.00
574080,000 00
38118,200.00 $447.720.00 $0.00 $487,720.00 $0.00 0 0
aoo
30 00 $0.00 30 00 $OCO SO $0
0.00
50.00 $.0.00 $0.00 $0.00 SO
0.00
5000 5-0.00 10.00
000 soon
1-000 $0.00
$0 50 00
1-000 $0 00 80.00 50
so
$000 1-0.00 $D.00 5000 50
$0
$0.00 540.00 saoo 80.00 SD
so
$0.00 5-0.00 00.00 $0.00 SO
So
S0.00 0-0.00 Saco $0.00 So
so
50.00
SO
$0.00
$0
50.00
50,00
Saco $0.00 $0
5-ow
$0.00 50 00 so
s-o.00
WOO $0.00 SO
$0 saoo 1-ov0
$0.00 $0.00 SO
so s000 s-000
$0.00 90.00 So
50 $0.00
889180000 S487,720 00
s-o.ca
$0.00 50.00 $0
s000
5487,72000 50 00 $0.00
$0.00
SO
$000
50
0
!TOTAL EXPENSES Nel Cash Flaw. Present Value Facie,.
Present Value al Cash Flow.
So
Woo SO 0.000000% $0
so $0
50.00 $0 0.000030% $0
so So
50.00 $0 0.000000% SO
so so
$0 00 $0 0.000039% SO
so so
80.00 $0 0.000000% $0
so $0
$0.00 50 0.000000% SO
so so
Saw 50 0.000000% $0
so so
80.00 So 0000000% 10
so so
50.00 90 0.000000% SO
so $0
50.00 $0 00000001; $0
so so
$aw So 0.00e000% $0
so so
50.00 $0 0000000% SO
so so
$aoo $0 0.000000%. SO
so so
$0.00 $0 0_009000% $0
so
So $0.00 80 0.000000% So
saw
Saco 51,803,640.00 122.522,360 1000000% 519.758,456
51.8634140.00 $22,522,360 0.877193% $19,756,456
Indicated Net Present Value
II
519,756,476
Sauce. F101 American Commercial Real Eelale Services

CFO 2004.3 Plannnq Nee 2
Preferle Types: RES. IMP. LOTS
a of 10Uwil Price per WI 128 5137.000
Total $17.538,0043.00
SUBTOTAL
128 5137,000 $17,636,000.00
TOTAL DISCOUNT RATE:
S11.5311.000.00 14.00%
EstaNSIKE_ DEVELOPMENT COSTS O BA COSTS REAL ESTATE TAXES MARKETING COSTS
$838,721 2.00% 2.00% 2.00%
YEARS RES. IMP LOTS
2 128
3 0
4 0
10
11
12
13
11
15
16 TOTAL YEARS 1113
TOTAL LOTS TOTAL ACRES TOTAL REVENUE/YEAR EXPENSES DEVELOPMENT COSTS G 6 A COSTS REAL TAXES MARKETING COSTS
128.00 $17,536.000.00 $0.00 $O 00 sax so oo so oo sow 3000 50 00 0 0 SO 00 10 00 80.00 $0.00 $0.00 117,538,000 00
$638,721.00 $350,720.00 SOW 9350,720.00 $0.00 0
0.00 $0.00 $0.00 80.00 $0.00 SO
0.00 $0.00 1-000 10.00 $OW SO
0.00 $0.00 $.0.00 $0.00
$000
$0
coo $0.00 8-000 $0.00 VICO 50
so $0.00 1-0.00 50E0 $0.00 SO
so $0.00 S-0.00 $000 $0 00 SO
0 0
I TOTAL EXPENSES Net Cash Flow. Preset,' Value Factor. Preseel Value 01 Cash Flow: $1,340,161.00 S18,195,839 0817193% $NOWsnt
$0 $0.00 5-000 $0.00 $0.00 SO
so S0.00 8-000 50.00 8000 SO
so so
$0.00 $0 0M0000% So
so $0.00 S-ODE 50.00 50 00 $0
SO $0.00 5-0.00 $0.00 50.00 SO
50 $0 00 9-0.00 $0.00 50 00 $0
$0
$OM $0.00 s000 $0.00 10
so
$0.00 1.0.00 $000 $000 $0
$0
$0.00 5-0.00 Sao $0.00 SO
SO $0.00 1-000 $0.00 5000 SO
$638,111.00 $350,720.00 $000 8350,710.00 $000 30 00
so so
$0.00 SO 0.000000% SO
so $0
$0.00 SO OMMM% SO
so so
$0.00 SO acemoots So
so so
$0.00 SO amm00% 10
so so
sopa SO acomm% $0
so $0
saoo SO ammo% $0
so $0
$0.00 $0 aocemass 80
so so
saoo SO ammo% $0
so so
50.00 $0 ammo% $0
so so
50.00 SO ammo" SO
so 50
50 00 SO atom% $0
so $0
50.00 $0 ammo% 50
so so
$ozo SO pomace% 10
so
80 $0.00 SO ac000no% 00
so.o0
$0.00 81,340,10100 $16.195.839 toommis $14,206,876
InclIcated Net Present Value
8 14.21)6,176
Sawa: Fret American Ccenmercial Real Estella Senuces

CFO 2004-3 Planning Mea 3
Properly TSper RES. IMP. LOTS
a of loUunil Price per uMI 86 $137,000
Total $11,762,000.00
SUBTOTAL
44 $137,000 511,782,000.00
TOTAL
DISCOUNT RATE:
$14,762,000.00 14.00%
UMW DEVELOPMENT COSTS & A COSTS REAL ESTATE TAXES MARKETING COSTS
$429,141 2.00% 2.00% 2.00%
YEARS RES, IMP LOTS
1 66
2 0
4 0
10
12
13
14
16 TOTAL YEARS 86
TOTAL LOTS TOTAL ACRES 1 TOTAL REVENUE/YEAR EXPE NSES 0E0LOPMENT COSTS 06 & A COSTS REAL TAXES MARKETING COSTS
86.00 $11,782,000.00 50.00 50.00 $0.00
$0.00
50 00
$0 00
50.00
50.03
$0.00
$0.00
50.00
$0.00
$0.00
311,782,00000
$429,141.00 S235%40,00
0.00 $0.00
0.00
0.00
0.00
30
SO
SO
SO
SO
SO
SO
$0.00
1235,640.00 $0.00 0 0 0
$aoo $eoo
50.00 SO SO SO $0.00 SO 0.000000% SO
$0.00 s-o.00
$0.00 $0.00 SO 10 30 $0.00 $0 0000000% SO
$ac() 0-0.00
70.00 S0.00 SO SO SO 10.00 SO 0.000000% SO .
$0.00 5.0.00
$0.00 $0.00 SO SO SO 50.00
$0.00
0-0410 10.00 $0.00 50 SO SO 50.00
$0.00
0-0.00 50.00 S0.00 SO SD SO
$0.00
5-0.00 S0.00
moo
5-0.00 70.00
$0.00
S-0.00 $0.00
$0.00
$-0.00 $0.00
taw
3-0,00 30.00 $0.00 SO SO SO
SO 5300 8-0.00 $0.00 30.00 SO SO $0 50,00
SO $000 5-0.00 $0.00 50.00 SO SO SO 50 00
SO $0.00 8-0.00 $0.00 00.00 SO $0 SO $0.00
$0.00 $0 8-0.00 50,00 50.00 SO SO SC $0.00 SO
5129,241.00 122 39 5,154 1400 0 7.00 $0.00 6235,640.00 $0.00 $0.00 $0.00 $0.00 3900,421 .00 S10,981,570
50.00
SO SO SO
saw
SI3 SO 50
saw
SO SO SO
50.00
SO SO SO
TOTAL EXPENSES: Net Carah Flow: Present Value Factor. PresenI Value ol Cash Flow:
$9110,421.00 510,681,579 0.877193% 19.545.245
woo So
0.000000%
saw SO 0.000000% SO
$oap So a000000x SO
saw So 0.000000% SO
$oao SO
0000000%
$ot* So
0.000000%
So
0000000%
So
0.000000%
So
0000000%
So ammo% So
So 0000000% SO
0.000000s
SO
1.000000%
59,545,245
So
SO
So
SO
So
SO
;:Indicated Net Present Value
II
59,$-19.2.0
Space. Feat kneucan Commercal Re& Estate Services

CFO 20043 Mannino Ara.
Newly Tepee:
X ot loUttrel Price per unit 133 8137,000
Total 818.221,000.00
RES. PAR LOTS
l SUBTOTAL
133
$137,000
$15,221,000.00
!TOTAL
DISCOUNT RATE.
$18,221,000.00 14.00%
Em010.9018_ DEVELOPMENT COSTS G I A COSTS REAL ESTATE TAXES MARKETING COSTS
$683,671 2.00% 2.00% 203%
YEARS RES. IMP LOTS
1 133
2 0
3 0
10
13
14
15
16 TOTAL YEARS 133
TOTAL LOTS TOTAL ACRES TOTAL REVENUFJYEAR EXPENSES DEVELOPMENT COSTS OS A COSTS
13300 S16,221,000 00 $000 $0.D0 $0.00 $0,00 $0.00 $000
$0.00
50.00
30 00
30 00
50 00
$0 00
$0.00
618,221,000.00
$883,671.00 $384,420.00 $0.00 5364,420.00 $0.00 0 0 0 51,392,51100 $16,628,485 0.877193% 514.781,1512
0.00 $000 50.00 50.00 50.00 $0 1 0 $0 $0.00 50 0.000000% 00
0.00 $0.00 5-0.00 $0.00 $000 50 $0 SO $0.00 $0 0,000000% 50
0.00 50.00 1-000 30.00 $0.00 50 $0 SO $0.00 $0 0000000% SO
0.00 $0.00 5-000 60.00 $000 80 $0 $0 $000 SO 0.000000% SO
SO $000 $000 $0.00 $0.00 50 $O 80 $000 $0 0.000000% SO
SO $000 5-000
$0
SO
$0
SD
SO
SO
$0
$0
$0 $0.00 5-000 50.00 $000 SO SO 50 50.00 50 0000000% $0
$663.671.00 9364.420.00 10.00 $164,420.00 $0.00 $ODO $000 1000 51,352,51100 $15,828,489 1,000000% $14,761,832
REAL TAXES
MARKETING COSTS
$aw
$0.00
saw
3-0.00 $0.00 $0.00 $0 SO SO $000 50 0.000000% 30
$aoo
5.000 $0.00 $0.00 $0 $0 50 5000 50 0000000% 50
sato
5-000 $0.00 $0.00 SO $0 SD
saw
5000 $0.00 $0.00 $0 $0 SO
$0.00
$000 $0.00 $0.00 SO
$ae
$-0.00 50.00 60.00 $0 $0 $0 50.00 SO 0000000%
soao
5-0.00 $0 00 30 00 SO $0 $0 $000 SO 0.000000% SO
$aw
$000 10 $0 SO $0.00 $0 0.000000% 50
$0.00
$0.00 $0 $0 SO 50 00 $0 0008000% SO
$0
SO 50.00 $0 0000000% SO
TOTAL EXPENSES: NA Cash Flow Present Value Factor: Present Value el Cash Flow,
5000
$0 0.000000% SO
$0.00
SD 0000000% SO
SO
Indicated Net Present Value
31.1.761,832
Source. First Arnencan Commeroal Real Estate Services

CFO 2004.3 !Winning Area 6
Properly Typos: RES. IMP. LOTS
N ot IoVONI Price par mil
Tolal $15,070.000.00
110
8137,000
!SUBTOTAL
110 $137,000 515.070,000.00
TOTAL
DISCOUNT RATE:
815,070,000.00 14.00%
ES111011LIL
DEVELOPMENT COSTS 01 A COSTS REAL ESTATE TAXES MARKETING COSTS 1541901 2.00% 2.00% 2.00%
!YEARS RES. IMP LOTS
1 110
2 0
3 0
4 0
ID
13
14
15
06 TOTAL YEARS 1 110
TOTAL LOTS TOTAL. ACRES TOTAL REVENUE/YEAR
110.00 $15,070,000.00 $0.00 5100
50.00
$0.00
50.00
$ow
sow
1000
$000
$0.00
50.00
$0.00
$0.00
115,070,000.00
EXPENSES
DEVELOPMENT COSTS G 1 A COSTS REAL TAXES MARKETING COSTS 1541901.0D 0.00 0.00 $0.00 5-0.00 10.00 10.00 50 $D SO $0.00 $0 0.000003% SO 0.00 80.00 $.0.00 $000 $0.00 50 $0 SO $0.00 $0 0.000000% SO
$301,400.00
$0.00 $301,400.00 $000 0 0
moo moo
5000 $0.00 SO SO $O $0.00 $0 0.000000% SO
0.00 50 00 3-0.00 $0.00 50.00 50 SO $0 5000 SO 0.000000% SO
SD $aoo saoo 60.00 $0 00 SO $0 50 $0.00 $0 0.000000% SO
SO $0.00 8-0.00 $0.00 $0.00 SO $0 10 10.00 So 0000000% $0
SO $0.00 1-oz0 50.00 $0.00 50 $0
so $0.00 So.00 $0.00 $0.00 SO $0
SO
SO
SO
s0
SD
SO
SO $0.00 1-0.00 50.00 $0.00 50 SD
5540.901.00 $301,400.00 50 00 5301.400.00 50.00 $0.00 $0.00
$oli()
1-0too $0.00 $0.00 SO $0
60.00
s-o.00 $0.00 $0.00 SO $0
60.00
$0.00 $ow $0.00 SO $0
50.00
3-0.00 $0.00 WM SO $0
$0.00
1-0.00 50.00 $0.00 SO SO
$opa
S-0.00 sow $0.00 SO SO
TOTAL EXPENSES: NM Cub Flow: Praaanl Value Faclor. Pres.) Value of Cash Flow,
0 $1,151,701.00 $13,918,299 0.877193% $12,209,034
so
00.00 10 0.000000% SO
so
$000 30 ct00000m $0
so
$0.00 SO 0000000% $0
so
S0.00 50 o oc0000r. $0
so
5000 SO 0.000000% SD
so
$0.00 SO 0.000000% SO
so
00.00 SO 0.000030% SO
$0
50.00 50 0.000200% SO
$0
SOHO SO 0.000030% SO
$0.00
$1,151.701.00 113.918,299 1.000000% $12,209,034
i,Indicated Net Present Value
512.29.034
Source: P11,1 American Commeroal Real Estate SeAnces
Summary of Valuations:
SUM OF THE VALUES CONCLUSION Discounted Bulk Value $19,757,000 $14,207,000 $9,545,000 $14,762,000 $12,209,000 570,408,000 $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
FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES APPRAISAL AND EVALUATION 1217 NORMANDY PLACE *SANTA ANA, CALIFORNIA 92705 PHONE 714.580-7056 FAX 714.550-7057
67
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 for the time and cost of absorption, assuming the proposed Assessment District Financing is in place and ready for funding, is as follows: SEVENTY ONE MILLION DOLLARS S71,000,000
FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION 1217 NORMANDY PLACE *SANTA ANA, CALIFORNIA 92705 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 valuation, specific valuation or the approval of a loan. ~~ 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 and conclusions concerning real estate that are set forth in this appraisal report.
~~ 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 of the Appraisal Institute relating to review by its duly authorized representatives.
FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION 1217 NORMANDY PLACE *SANTA ANA, CALIFORNLk 927050 PHONE 714.580-7056 FAX 714.550-7057 69
~~ We are competent 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 by the Bylaws and Regulations of the Appraisal Institute. The Appraisal Institute conducts voluntary programs of continuing education for its designated members. MAIs who meet the minimum standards of this program are awarded periodic educational certification. As of the date of this report, William V. Shrewsbury has completed the requirements of the continuing education program of the Appraisal Institute. Respectfully s> btted,
William V. Shrewsbury, MAI Senior Vice President California Certification No. AG004522
le Z. :01 ociate e aiser ifornia License No. AT031532
FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION 1217 NORMANDY PLACE 'SANTA ANA, C.,-U1FORNIA 92705* PHONE 714.580-7056 FAX 714.550-7057 70
QUALIFICATIONS OF WILLIAM V. SHREWSBURY, MAI PROFESSIONAL BACKGROUND Actively engaged as a real estate appraiser and consulting appraiser with forty years experience. I am Senior Vice President, Real Estate Appraisal/Commercial Division, of First American Commercial Real Estate Services located at: 1217 Normandy Place Santa Ana, California 92705 Previously engaged as President of Interstate Appraisal Corporation and Director of Real Estate Appraisal with The Irvine Company. PROFESSIONAL ORGANIZATIONS Member of the Appraial Institute with MAI designation. Licensed Real Estate Appraiser, State of California, "Certified General Real Estate Appraiser". Member of the International Association of Assessing Officers with the Accredited Assessment Evaluation (CAE) designation. I am also a member of the Orange County Assessment Appeals Board. A licensed California Real Estate Broker. EDUCATION Real Estate Special Courses: Essentials of Residential Design and Structure Intermediate Real Estate Appraisal, Courses I, II, III, IV, V Real Estate Principles Commercial Investment Property Advanced Real Estate Appraisal Real Estate Law Real Estate Practices Real Estate Finance Subdivision Analysis Engineering
Qualifications of William V. Shrewsbury, MAI Page Two 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 QUALIFICATIONS Qualified as an expert witness. SCOPE OF APPRAISAL EXPERIENCE 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 dwellings, condominiums and mobile home parks throughout Southern 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. 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 E MARKET ABSORPTION STUDY
E- I

CFD 2004-3 Appraisal

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APPRAISAL REPORT

COMMUNITY FACILITIES DISTRICT NO. 2004-3 CITY OF INDIO INDIO, CALIFORNIA

First American Commercial Real Estate Services. Inc.

July 15, 2005

MARKETABILITY FOR SALE/ TYPICAL BUYER: MAJOR AREA INFLUENCE:

HIGHEST AND BEST USE: -"As Is" Vacant:

FINAL VALUE ESTIMATE: Discounted Bulk Value

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION

178 Lots 128 Lots 86 Lots 133 Lots 110 Lots

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION

RIVERSIDE COUNTY REGIONAL MAP

Adelant Victolrville fi pple Valley

Amboy Twentynine PalMs Marine Corps Base SAN -1, BERNARD.INO

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SUBJECT PROPERTY Des4rt-110i. Spring CFD 2004-3 TERRA LAGO

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Source: California Employment Department, Market Profiles

MARKET PROFILES, INC.

CFD 2004-3 TERRA LAGO CALIF OR/dIA

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FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION

Total Residential Acreage** 33.05 33.95 24.25 17.60 26.9 135.75

47.09 36.58 25.67 41.56 26.01 176.91

178 128 86 133 110 635

Topography: Proposed Uses:

Soil and Subsoil Conditions:

Earthquake, Flood, and Other Nuisances and Hazards:

Street Improvements: Easements, Restrictions and Encroachments:

Essential Zoning Provisions: CC&Rs/Private Restrictions, Governing Use:

Functional Adequacy of Site:

Tax and Assessment Data:

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION

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