3.26.10 Appraisal Filing Exhibit B

Case 8:09-bk-21712-TA Doc 217-2 Filed 03/26/10 Entered 03/26/10 18:41:32 Desc
Exhibit B - Part 1 Page 1 of 43
EXHIBIT B
S E L F -C O N T A I N E D R E P O R T
OF A
COMPLETE APPRAISAL
Valuation of a
Residential Subdivision
Brightwater Unsold Lots-Units and Units in Escrow
Brightwater Dr between Warner Ave and Bolsa Chica St
Huntington Beach (Orange County), California 92649
Prepared for
California Coastal Communities, Inc.
6 Executive Circle, Suite 250
Irvine, CA 92614
Effective Date of the Appraisal

February 1, 2010
Prepared by
D I S TEFANO C OMPANY
5020 Campus Drive
Newport Beach, California 92660
Phone 949-833-0880
D ISTEFANO C OMPANY
Real Estate Appraisal and Consulting
5020 Campus Drive Phone 949-833-0880
Newport Beach, CA 92660 Fax 949-833-9040
www.distef.com e-mail carld@distef.com
February 19, 2010

6 Executive Circle, Suite 250
Irvine, CA 92614
Attention: Mr. Raymond J. Pacini, CEO
Re: Self-Contained Report of a Complete Appraisal

Brightwater Unsold Lots-Units and Units in Escrow
Huntington Beach, CA 92649
Dear Mr. Pacini:
In response to the appraisal services agreement, I have completed an appraisal

regarding the referenced property.
The purpose of the appraisal is to estimate the market value of the property under
the following valuation premise: bulk value “as is” to a single buyer. The valuation
premise is defined on page 3 of the following appraisal report.
On the basis of my investigation and analysis, I have formed the opinion that, as of
the effective date of the appraisal, February 1, 2010, the value of the fee simple estate
in the subject property is as follows:
MARKET VALUE (BULK VALUE) “AS IS” $219,700,000
The value estimate contemplates an exposure time of 9 months. The value

estimate is predicated on the definitions stated on pages 2–3 of the report and the
assumptions and limiting conditions on pages 4–7.
D I S TEFANO C OMPANY , INC .

February 19, 2010
Page 2
The appraisal conforms to the Uniform Standards of Professional Appraisal Practice

(USPAP), the Financial Institutions Reform, Recovery, and Enforcement Act
(FIRREA), state and federal regulations concerning appraisals, and the Code of
Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal
Institute. A statement of my qualifications is attached as Appendix F.
This appraisal is intended to comply with the OCC’s amended Appraisal Rule,
effective June 7, 1994, as published in the Federal Register, Volume 59, No. 108, and
with the Interagency Appraisal and Evaluation Guidelines, dated October 27, 1994.
Sincerely,
D I S TEFANO C OMPANY
Carl DiStefano, MAI

Certified General Real Estate Appraiser
(California Certificate AG001517)
CONTENTS
EXECUTIVE SUMMARY 1
ORGANIZATION OF THE REPORT 2
APPRAISAL PREMISES 2
Definitions 2
Client, Intended User, and Intended Use 3
Purpose of the Appraisal 3
Property Interest Appraised 4
Effective Date of the Appraisal and Date of the Report 4
Scope of Work 4
Assumptions and Limiting Conditions 4
PROPERTY AND AREA DESCRIPTION 8
Property Identification 8
Owner of Record and Ownership History 8
Environmental Issues 10
Area Description 10
Neighborhood Description 16
Supply and Demand Analysis and Trends 19
Site and Improvement Description 27
Property Tax and Assessments 34
HIGHEST AND BEST USE 53
Highest and Best Use of the Property “As Is” 53
DESCRIPTION OF THE APPRAISAL PROCESS 54
VALUATION – BULK VALUE “AS IS” 56
Forecast Revenue 56
Retail Value of Completed Houses 57
Comparable Improved Data 57
Value Estimate - Sales Comparison Approach - Retail Values 78
Bulk Value Estimate – Discounted Cash Flow 80
Value Estimate – Bulk Value “As Is” 89
Exposure Time 90
CERTIFICATION 90
iii
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ILLUSTRATIONS
Orange County Coastal Zip Codes 26
Area Map 35
Neighborhood Map 36
Subject Photographs 38
Comparable Improved Data 59
APPENDIXES
Appendix A: Title Report Excerpts and Assessor’s Maps
Appendix B: Site Plan with Phases
Appendix C: MarketPointe Inventory
Appendix D: Unit List and Retail Values
Appendix E: Discounted Cash Flow Analysis – Bulk Value
Appendix F: Appraiser’s Qualifications
iv
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LOOKING WEST
Imperial Hwy
La Palma v
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EXECUTIVE SUMMARY Exhibit B - Part 1 Page 8 of 43 1
EXECUTIVE SUMMARY
subject property Brightwater residential subdivision (unsold lots-units
and units in escrow). Various addresses.
Brightwater Dr between Warner Ave and Bolsa Chica St
Huntington Beach (Orange County), CA 92649
assessor’s parcel(s) See Appendix A
site description Total Brightwater project: irregularly shaped,
approximately level tract totaling 105.3 acres, subdivided
into 356 single-family residential lots plus common area
parks and street frontages. Zoning: medium and low-
density single-family residential. Status of entitlements:
all in place. Density: 3.3 dwelling units per acre.
property appraised 276 units (11 units in escrow and 265 unsold units) to be
completed and sold. See unit list in Appendix D.
unit mix See page 30
hazardous substances None observed
flood zone FEMA Zone X (no flood insurance required), FEMA
Map 06059C0233H dated February 24, 2004.
unusual seismic hazards None
value estimate Bulk value “as is” $219,700,000
exposure/marketing time 9 months

value of personal property, Valuation includes future payments related to a sale of
fixtures, and intangibles the model units to a third-party investor.
included in the value estimate
highest and best use Single-family residential subdivision
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ORGANIZATION OF THE REPORT Exhibit B - Part 1 Page 9 of 43 2
ORGANIZATION OF THE REPORT
This appraisal report is organized as follows:

• Section 1 contains an executive summary and the appraisal premises,
definitions, and assumptions used in performing the appraisal
assignment as well as reporting the results of the assignment.
• Section 2 describes the general surroundings, the market area, and the
specific characteristics of the subject property.
• Section 3 contains an analysis of the highest and best use of the subject
property as well as a description of the appraisal methods used in
estimating the value.
• Section 4 contains the valuation of the bulk value.
• Section 5 contains the final value estimates and a certification.
• Section 6 includes appendixes of supplemental information.
APPRAISAL PREMISES
Definitions
Market Value
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. buyer and seller are typically motivated;

2. both parties are well informed or well advised, and acting in what
they consider their best interests;
3. a reasonable time is allowed for exposure in the open market;
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APPRAISAL PREMISES Exhibit B - Part 1 Page 10 of 43 3
4. payment is made in terms of cash in United States dollars or in

terms of financial arrangements comparable thereto; and
5. 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.1
Fee Simple Estate

Absolute ownership unencumbered by any other interest or estate subject only
to the limitations imposed by the governmental powers of taxation, eminent
domain, police power, and escheat.2
Valuation Premise
market value (bulk value) “as is.” The “as is” condition reflects the actual
physical, legal, economic, and political status of the land as of the effective date
of the appraisal. For this appraisal, the “as is” value estimate represents the
bulk value to a single buyer intending to complete the construction and
marketing of the project. The bulk value reflects a discount from aggregate
retail value to cover expenses of building and marketing unsold units.
Client, Intended User, and Intended Use
The client and intended user is California Coastal Communities, Inc. The
report is intended for the client’s use in connection with asset valuation.
Purpose of the Appraisal
The purpose of the appraisal is to estimate the market value per the definition
on page 2.
1 Source: OCC, 12 CFR, Part 34, Subpart C-Appraisals 34.42 Definitions (g).
2 Ibid., 140.
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Property Interest Appraised
The property interest appraised is the fee simple estate in the subject property,
including the future value of profit sharing related to the model units owned
by a third-party investor.
Effective Date of the Appraisal and Date of the Report
The effective date of the appraisal is February 1, 2010. The date of the report is
February 19, 2010, which is the date of the transmittal letter and the date when
the analysis and report were completed.
Scope of Work
The appraisal assignment represents a complete appraisal reported in a self-

contained report format as defined in the Uniform Standards of Professional
Appraisal Practice. In conducting the appraisal, I performed the following
activities:
1. Inspected the subject property and its surroundings. Reviewed the plans,
title report, and related information regarding the subject property.
Researched the zoning.
2. Collected information regarding area demographics, supply and demand
of competitive properties, sales of land and improved properties,
construction costs, and investor criteria in the market.
3. Confirmed and analyzed the data as described in the report to arrive at a
final value estimate.
Assumptions and Limiting Conditions
The value estimate stated in this report is subject to the following assumptions
and limiting conditions:
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Specific Assumption Regarding the Subject Property
1. The value estimates assume that all improvements will be completed

substantially as described in this report.
Definition and Timing of the Value Estimate
2. The estimate of market value is based on the definition of value that

appears on page 2 of the report.
3. The opinions and conclusions apply as of the effective date of the
appraisal. The dollar amount of any value estimate is based on the
purchasing power of the United States dollar on the effective date of the
appraisal.
4. The appraiser accepts no responsibility for economic or physical factors
that may affect the value estimate and that occur after the date of the letter
of transmittal.
5. The appraiser necessarily relied on information contained in documents
and expressed in interviews. The appraiser presumes the information is
reliable, however gives no warranty for its accuracy. The appraiser accepts
no responsibility for information relied upon but later found inaccurate.
The appraiser reserves the right to make adjustments to the analyses,
opinions, and conclusions in this report based on new or more reliable
information that may become available.
Legal and Physical Characteristics of the Subject Property
6. The appraiser expresses no opinion concerning topics that require legal

expertise or other specialized knowledge not customarily employed by real
estate appraisers.
7. The appraiser expresses no opinion concerning title to the property. The
appraiser assumes that the ownership and legal description shown in the
title report are correct and that title is marketable and free of all liens,
encumbrances, easements, and restrictions except those discussed in the
report. The property is appraised assuming it is available for its highest and
best use, with responsible ownership and competent management.
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8. The appraiser assumes that no unapparent conditions exist in the property

or subsoil that may affect the value of the property. The appraiser accepts
no responsibility for obtaining engineering, geologic, or environmental
studies to detect such conditions.
9. The appraiser assumes that there is no encroachment of real property
improvements, unless otherwise stated. The appraiser has made no
engineering survey.
10. The appraiser expresses no opinion regarding the value of subsurface oil,
gas, or mineral rights, or surface entry rights, unless otherwise stated.
11. The appraiser assumes that subsoil conditions are adequate to support the
improvements. Earthquakes are not uncommon in the area, and the
appraiser accepts no responsibility for their possible effect.
12. The appraiser was not provided with information regarding toxic or
hazardous materials at the property, and did not become aware of such
materials during the investigation of the property unless otherwise stated.
The value estimate in this report assumes that no toxic or hazardous
materials exist at the subject property, or in proximity to it, that would
affect the value. The appraiser assumes that the property complies with all
governmental regulations concerning the environment, unless otherwise
stated.
13. The appraiser assumes that the property complies with all zoning and use
regulations, unless otherwise stated.
14. The appraiser assumes that all consents and authorities required by any
governmental or private entity are available for any use on which the value
estimate is based, unless otherwise stated.
15. The appraiser was not provided with a compliance survey regarding
conformity with the Americans with Disabilities Act (“ADA”). Should a
survey by a qualified professional reveal that the subject property does not
comply with the ADA, the value may be negatively affected. The value
estimate does not consider any consequences of ADA non-compliance.
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Appraisal Assignment and Report
16. The appraisal report includes maps, sketches, and exhibits solely as aids in
illustrating topics discussed in the report. Such aids should not be
considered as surveys, or be relied on for any other purpose, or be
reproduced, or be used apart from the report.
17. The appraiser assumes that the assignment does not include testimony or
attendance in court with reference to the appraisal, unless prior
arrangements are made regarding additional employment.
18. The distribution, if any, of the final value estimate between land and
improvements applies only for the stated use, and the distribution is
invalid if used with any other appraisal.
19. The possession of this report does not include the right of publication. The
report is intended for the sole use of the client. Without the written
consent of the appraiser, the report may not be used for any purpose by
anyone other than the client to whom it is addressed.
DISTEFANO COMPANY
PROPERTY AND AREA DESCRIPTION Exhibit B - Part 1 Page 15 of 43 8
PROPERTY AND AREA DESCRIPTION
Property Identification
address Various addresses within the Brightwater subdivision (unsold lots-

units and units in escrow)
South side Warner Ave and Los Patos Ave between Pacific Coast
Hwy and Bolsa Chica St
Huntington Beach (Orange County), CA 92649
assessor’s parcel(s) See assessor’s maps in Appendix A
legal description See title report in Appendix A
Owner of Record and Ownership History
The Uniform Standards of Professional Appraisal Practice require the appraiser to analyze
any sales of the property that have occurred within 3 years of the effective date of the
appraisal or any current purchase agreements, options, or listings for the property.
According to the title report, the current owner of the fee estate in the subject property is
Signal Landmark. The current owner, or related entities, has owned the land since the 1970s.
The owner is developing a 356-unit, single-family residential subdivision on the property as
described in this report. The owner has built and will continue to build all the homes in the
project. No lots have been, or are, offered for sale to other builders.
The owner filed a Chapter 11 bankruptcy petition in October 2009 and is in the process of
preparing a plan of reorganization.
Unit Status
The status of the entire Brightwater project, and property appraised is as follows as of the
effective date of the appraisal:
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Number
of
Status Units
Subject Property
Production units unsold (14 speculative units under construction and 251
vacant lots to be improved with single-family residences) 265
Production units in escrow scheduled to close Mar-10 through Sep-10 on
completion of construction 11
Subtotal subject property 274
Not a Part
Production units sold to individual buyers from Dec-07 through Jan-10 (not a
part of the subject property) 63
Model units sold to an investor in Dec-08 (not a part of the property appraised
except for future payments to the owner of the subject property, included in
the valuation as personal property) 17
Subtotal sold units 80
Total Brightwater 356
A unit list in Appendix D shows the status of each unit. Sold units were all sold for cash
without seller financing. Buyers are required to live in the unit as their principal residence for
18 months (anti-speculation clause).
Model Sale Leaseback

In December 2008, the owner of the subject property sold the 17 model units to an investor
under a sale-leaseback agreement until models are ultimately sold to individual buyers on
project sell-out. For appraisal purposes, the pertinent terms of the purchase, sale, and lease
agreement are as follows:
date of agreement December 29, 2008

close of escrow December 31, 2008
buyer⁄ seller Brightwater Models LLC / Signal Landmark
property 17 completed model homes including furnishings
price $25,000,000 to be paid as follows
$22,500,000 in cash at close of escrow (December 31, 2008)
$2,000,000 deferred payment payable December 2010
$500,000 to reimburse seller for converting the models to habitable
residences
Continued on following page.
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lease of model homes Seller to lease-back the property from buyer

lease term 36 months from close of escrow (expires December 31, 2011)
extension options Two, 1-year extension options
rent Per schedule attached to the lease
expenses Net lease. Seller-tenant to pay all property taxes, insurance, utilities,
maintenance, and repair expenses
disposition of models Seller to have exclusive right to sell each model for 90 days at 5%
commission.
additional purchase Buyer to pay Seller 75% of difference between the retail selling prices
price to individual buyers and the Buyer’s cost plus 16% internal rate of
return on Buyer’s costs.
Environmental Issues
No environmental information was provided for review. The appraisal assumes that no
environmental issues exist that would influence the value.
Area Description
The Los Angeles metropolitan area covers parts of five Southern California counties: Los
Angeles, Orange, San Bernardino, Riverside, and Ventura.
The subject property is in the city of Huntington Beach in north coastal Orange
County about 26 miles southeast of downtown Los Angeles, 3 miles northwest of
downtown Huntington Beach, and ¼ mile inland from the Pacific Coast.
Huntington Beach (incorporated in 1909) covers an area of 26.4 square miles and is
the third largest city in Orange County in terms of population. The city is known for its
long beach (8.5 miles), mild climate, and excellent surfing.
Population
The following table shows the trend in population growth.
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POPULATION GROWTH
Average Average Average
Metropolitan Annual Orange Annual Huntington Annual
Year Los Angeles Change County Change Beach Change
1970 9,976,000 — 1,432,000 — 115,960 —
1980 11,426,000 1.4% 1,945,000 3.1% 170,505 3.9%
1990 14,630,000 2.5% 2,424,000 2.2% 181,519 0.6%
2000 16,554,900 1.2% 2,867,800 1.7% 190,300 0.5%
2009 18,536,885 1.3% 3,139,017 1.0% 202,480 0.7%
Source: California Department of Finance.
Population growth in Huntington Beach is limited by the relative lack of developable

land.
Economy
The Southern California economy, along with the national economy, has begun a
recovery from the most severe recession since WWII. The recession began in fall 2007
with the collapse of sub-prime residential lenders and then spread throughout the
economy. The bankruptcy of Lehman Bros. in September 2008 was the catalyst for a
worldwide financial panic now largely abated. The fourth quarter 2008 and first quarter
2009 saw the worst of the recession, including a severe credit crunch, declining house
prices, and a declining stock market. Unprecedented government intervention has
stabilized the economy and is expected to result in a gradual recovery that will gain
strength in the last half of 2010 and thereafter. The stock market appears to have
bottomed in March 2009, and house prices appear to have started recovering currently.
u.s. gross domestic product. Gross domestic product (GDP) measures the output of
goods and services produced by labor and property located in the United States. The
following table shows the trend in GDP.
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Annualized change %
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
1980q3
1981q2
1982q1
1982q4
1983q3
1984q2
1985q1
1985q4
1986q3
1987q2
1988q1
1988q4
1989q3
1990q2
1991q1
1991q4
1992q3
1993q2
1994q1
1994q4
1995q3
1996q2
1997q1
1997q4
1998q3
1999q2
2000q1
2000q4
2001q3
2002q2
2003q1
2003q4
2004q3
2005q2
2006q1
2006q4
2007q3
2008q2
2009q1
2009q4
Source: U.S. Bureau of Economic Analysis.
U.S. GROSS DOMESTIC PRODUCT BY QUARTER
U.S. gross domestic product grew in the third and fourth quarters of 2009 after severe
declines in the preceding four quarters.
consumer trends. Consumer confidence levels reflect people’s feelings about general
business conditions, employment opportunities, and their own income prospects. The
following table shows the trend in consumer sentiment as measured by the Consumer
Confidence Index.
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Consumer Confidence Index (1985=100)

160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
Jan-80
Jan-81
Jan-82
Jan-83
Jan-84
Jan-85
Jan-86
Jan-87
Jan-88
Jan-89
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Source: The Conference Board, New York (www.conference-board.org).
INDEX OF CONSUMER CONFIDENCE
The consumer confidence index declined to 25 in February 2009, its lowest point since the
inception of the index in 1967. The index has since recovered somewhat, although is still
very low (55.9 as of January 2010).
pmi index. The Institute of Supply Management publishes the Purchasing Managers
Index that is considered one of the best leading indicators marking the end of a recession.
The index measures the breadth of economic distress or success across firms. When the
index turns up decisively, an expansion is typically one to four months away, although in
some cases the index has turned up as long as a year before the end of a recession.
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ISM PMI Composite Index ISM PMI Composite Index

90 90
80 80
70 70
60 60
50 50
40 40
30 30
20 20
10 10
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-48
Jan-51
Jan-54
Jan-57
Jan-60
Jan-63
Jan-66
Jan-69
Jan-72
Jan-75
Jan-78
Jan-81
Jan-84
Jan-87
Jan-90
Jan-93
Jan-96
Jan-99
Jan-02
Jan-05
Jan-08
Source: The Institute of Supply Management.
PURCHASING MANAGERS INDEX
The Purchasing Managers Index fell to 32.9 in December 2008 to a level seen only in the
worst recessions since World War II. The index recovered to 58.4 as of the latest figure
(January 2010), giving some hope for better conditions ahead.
Job Growth
Job growth is a good indicator of overall economic activity and strongly influences the
real estate markets. The following table shows the trend in job growth.
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J OB G ROWTH – O RANGE C OUNTY PMSA

Annual % Change
Increase/ from Previous
Jobs Decrease Year
Dec-83 910,600
Dec-84 970,400 59,800 6.6%
Dec-85 1,015,300 44,900 4.6%
Dec-86 1,061,300 46,000 4.5%
Dec-87 1,118,400 57,100 5.4%
Dec-88 1,173,100 54,700 4.9%
Dec-89 1,184,700 11,600 1.0%
Dec-90 1,186,600 1,900 0.2%
Dec-91 1,146,100 -40,500 -3.4%
Dec-92 1,139,900 -6,200 -0.5%
Dec-93 1,136,600 -3,300 -0.3%
Dec-94 1,161,800 25,200 2.2%
Dec-95 1,184,800 23,000 2.0%
Dec-96 1,217,800 33,000 2.8%
Dec-97 1,280,300 62,500 5.1%
Dec-98 1,339,400 59,100 4.6%
Dec-99 1,381,100 41,700 3.1%
Dec-00 1,424,800 43,700 3.2%
Dec-01 1,419,500 -5,300 -0.4%
Dec-02 1,437,100 17,600 1.2%
Dec-03 1,460,300 23,200 1.6%
Dec-04 1,492,300 32,000 2.2%
Dec-05 1,523,200 30,900 2.1%
Dec-06 1,543,800 20,600 1.4%
Dec-07 1,515,900 -27,900 -1.8%
Dec-08 1,466,900 -49,000 -3.2%
Dec-09 1,417,600 -49,300 -3.4%
Source: California Employment Development Department.
Jobs have declined for the past 3 years. As of its latest forecast (December 2009),
Chapman University forecasts that Orange County will experience essentially flat job
growth in 2010, with a weaker first half and stronger second half 2010.
unemployment. The following chart shows the trend in unemployment rates in

California and Southern California Counties.
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U.S. Orange County

Unemployment rate California Riv.-San Bern. Counties
Los Angeles County
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
1980
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
Jan-10
Source: U.S. Department of Labor and California Department of Labor.
UNEMPLOYMENT RATES
Current unemployment rates are at levels exceeding the 1982 and 1992 recessions,
reflecting the severity of the recent downturn. Unemployment is a lagging indicator, not
expected to start improving until late 2010. The Orange County unemployment rate
(10.1% as of January 2010) is at an all-time high, although is the lowest among
California’s major areas. The U.S. Federal Reserve Board forecasts that unemployment
nationally will decline from 9.5% in 2010 to 8.5% in 2011.
Regional Summary
The economy appears to have begun an up-cycle, with GDP growth in the third and
fourth quarters of 2009, bringing to an end the worst recession since WWII. Job growth is
expected to be weak however, so that the recovery will be relatively moderate in
comparison to previous recoveries.
Neighborhood Description
Boundaries
The term neighborhood is defined as a group of complementary land uses. The
neighborhood of the subject property is bounded by the Pacific Coast on the south and
west, by the Garden Grove Freeway (State Route 22) and the San Diego Freeway (I-405)
on the north and northeast, and by Beach Boulevard on the east.
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Land Use
Land use includes a mix of suburban residential tracts, the original coastal downtown and
pier, a large light-industrial park in the northwest section of the city, and retail-office-
commercial uses concentrated on Beach Boulevard along its length from the coast to the
San Diego Freeway.
Transportation
In the vicinity of the subject property, Pacific Coast Highway (California Highway 1) is
the major north-south arterial street. Warner Avenue is the major east-west arterial street.
The closest freeway intersections to the subject property are at Warner Avenue and the
San Diego Freeway, 5 miles east, and at Bolsa Chica Road and the San Diego Freeway, 5
miles north. The John Wayne Orange County Airport is 11 miles east. Long Beach Airport
is 10 miles northwest.
Subject Property Immediate Surroundings – Bolsa Chica Wetlands

In the 1960-70s the real estate subsidiary of Signal Oil Co. assembled approximately 1,900
acres of vacant coastal mesa, wetlands, and oilfield land and proposed developing a
marina and 6,000 residential units. In 2005, after years of entitlement negotiations, the
subject Brightwater project (356 units on approximately 106 acres) was approved for the
upper mesa overlooking the lower-lying wetlands. The balance of the site was sold or
donated in stages to the State of California for what is now the Bolsa Chica Ecological
Preserve operated by the California Department of Fish and Game. Starting in 2004, a
variety of public agencies began gradually restoring the Preserve as a wetlands ecological
habitat (primarily for coastal birds) and for light public use (hiking, photography, and
bird watching) but no further development allowed, thus permanently preserving ocean
views from the subject property. An Interpretive Center and hiking-running trail runs
along the southerly boundary of the subject Brightwater project.
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West of the Ecological Preserve across Pacific Coast Highway is the Bolsa Chica State
Beach running along 3 miles of coast from Sunset Beach to Huntington State Beach.
Northwest of the subject property along the coast is Huntington Harbour, an area of
expensive housing on navigable water channels developed in the 1960s-70s. North and
east of Brightwater is single-family residential development, with neighborhood-serving
commercial-retail development along arterial streets.
A 50-acre site across Bolsa Chica Street east of the subject property is owned by Shea
Homes and proposed for 111 high-end single-family homes (Parkside Estates).
Entitlements have not been granted, and it appears unlikely that this project, if built,
would come on stream in time to compete with the subject development.
Neighborhood Summary
The life cycle of a neighborhood usually involves four stages, varying only in intensity and
duration: growth, stability, decline, and revitalization. The neighborhood of the subject
property is an attractive, established coastal district in a long stage of stability. The
location close to the coast will support continued demand in the neighborhood as the
economy recovers.
DISTEFANO COMPANY
Supply and Demand Analysis and Trends
The Southern California residential real estate market, along with the national market, is
recovering from a sharp correction that began in 2007 after a period of extraordinary
growth in 1999-2006. During the boom, prices increased at unsustainable rates, in many
cases more than doubling. The collapse of subprime lending beginning in fall 2007 and
consequent catastrophes in the credit markets precipitated a dramatic bust that is now
largely abated. Some observers indicate that prices have over-corrected to the downside,
with the market now in the early stages of a new up-cycle that will gradually gain
momentum to a new peak in 2016-18.
Demand
Housing demand depends primarily on job growth, the relation of housing prices to
incomes, availability of financing, mortgage interest rates, and consumer sentiment. The
interplay of these factors influences the absorption of new residential construction, as well
as existing home sales.
job growth. Chapman University forecasts that Orange County will experience
essentially flat job growth in 2010, with a weaker first half and stronger second half 2010.
Future job growth and unemployment declines are expected to be relatively modest
compared with previous recoveries.
affordability. The following table shows the trend in housing affordability as measured
by the California Association of Realtors’ Housing Affordability Index.
DISTEFANO COMPANY
Traditional Housing Affordability Index
80
70
60
California
50
United States
Los Angeles
40
Orange County
30 Riverside/SBernardino
San Diego
20
10
0
Q1 1988
Q4
Q3
Q2
Q1 1991
Q4
Q3
Q2
Q1 1994
Q4
Q3
Q2
Q1 1997
Q4
Q3
Q2
Q1 2000
Q4
Q3
Q2
Q1 2003
Q4
Q3
Q2
Q1 2006
Q4
Q3
Q2
Q1 2009
Source: California Association of Realtors.
H OUSING A FFORDABILITY I NDEX
The Housing Affordability Index tracks the percent of households that can afford to
purchase a median-priced home. With the decline in prices and interest rates,
affordability is back to levels last seen in the 1990s, although affordability has recently
hooked down as prices have begun increasing again.
The median price paid for a Southern California home was $289,000 in December
2009, up 4% from December 2008. The median price has increased after falling to a 7-
year low of $247,000 in April 2009. The median peaked at $505,000 in mid 2007. Changes
in the median do not necessarily correspond to changes in home values in the current,
atypical sales environment. Adjusting for shifts in market mix, it now appears that over
the past two years homes in older, more costly neighborhoods have come down in value
by about half as much as homes in newer, more affordable neighborhoods. Prices also fell
sharply in some lower-cost, older communities where the use of risky subprime loans was
high, triggering relatively high foreclosure rates. The median price is likely to rise as
“jumbo” and adjustable-rate financing becomes more available again, given that those
loan types fuel sales of homes priced above the Southland’s mid-point.
orange county household income. Orange County average household income is

among the highest in the nation, particularly along the coast. The following table shows
DISTEFANO COMPANY
typical minimum household income needed to afford a home in the price range of the
subject units.
Home price $800,000 $1,500,000 $2,500,000

Down payment 20% 160,000 300,000 500,000
Loan amount $640,000 $1,200,000 $2,000,000
Annual debt service, 30-yr
amortization, 6.5% interest $48,543 $91,018 $151,696
Typical debt to income ratio 30% 30% 30%
Required minimum income $161,809 $303,393 $505,654
The following table shows the number of households in Orange County with average
incomes exceeding $150,000.
Number of
Households
Income Range 2009 2014
$150,000-$199,000 79,008 94,522
$200,000-$249,000 37,248 51,901
$250,000-$499,000 33,628 47,037
$500,000 or more 16,010 23,448
Total 165,894 216,908
Source: Claritas
As sentiment improves, there are ample households with average incomes sufficient to
afford the subject units.
financing and interest rates. After the collapse of the sub-prime lending market,
underwriting standards have been tightened, thus reducing the number of potential
buyers. Loans above $417,000 – formerly the definition of a jumbo loan – accounted for
nearly 40% of all home purchases before the credit crunch hit 2 years ago. In December
2009 they accounted for 18.7% of purchases.
jumbo loans. The maximum loan amount for “conforming” loans purchased or
guaranteed by Federal agencies (Fannie May, Freddie Mac, FHA) was increased from
$417,000 to $729,750 in February 2008. Loans up to $417,000 are the easiest to obtain and
have the lowest interest rates; “conforming jumbos” from $417,000 to $729,750 are
somewhat more difficult to obtain and have slightly higher interest rates. The market for
true jumbo loans over $729,750 became very difficult during the credit freeze in late 2008-
early 2009, although the market has improved substantially since then, which directly
DISTEFANO COMPANY
benefits the subject property - particularly the higher priced units. Interest rate spreads
have declined from 1.7% in early 2009 to less than 1% currently for jumbo versus
conforming loans. Now that home prices appear to be stabilizing, the supply of mortgage
financing should increase as investors seeking yield become more willing to invest in
securitized mortgages.
Mortgage interest rates remain low as shown in the following chart.
Mortgage interest rates are forecast to remain low at least until a recovery in the
residential market becomes more obvious.
market sentiment. One measure of consumer sentiment is the number of home sales.
According to DataQuick, an estimated 22,328 new and resale houses and condos sold in
Southern California in December 2009, up 12.1% from December 2008. The December
2009 sales figure is 11.2% below the December average. Sales have been buoyed by a
federal tax credit of up to $8,000 for first-time buyers.
The National Association of Home Builders index remains very low at 19 as of
January 2010. Index readings below 50 indicate negative sentiment. The last time the
index was above 50 was April 2006.
DISTEFANO COMPANY
Investor sentiment regarding future homebuilder earnings, as evidenced by the

homebuilder ETF (XHB), appears to indicate that the worst is over, as shown in the
following chart.
Supply
new construction. The following table shows the trend in new residential construction
as measured by building permits.
New residential permits (in units) Multi-family

18,000
Single-family
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
1980
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
Dec-09
Source: Construction Industry Research Board, Los Angeles.
O RANGE C OUNTY B UILDING P ERMITS - R ESIDENTIAL P ROPERTIES
DISTEFANO COMPANY
The chart reflects the real estate market cycles. New single-family construction has been
declining since the late 1990s because of relatively little developable residential land in
Orange County and high land and construction costs, and more recently the dearth of
financing. An additional source of supply is the shadow inventory of foreclosed houses,
which is expected to burn off in about 18 months.
Price Trends
The following chart shows the trends in house price appreciation/depreciation as
measured by the S&P/Case Shiller Index.
% Price change year over year LA Orange San Diego

40.0%
30.0%
20.0%
10.0%
0.0%
-10.0%
-20.0%
-30.0%
-40.0%
Jan-88
Jan-89
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Source: Standard & Poor’s.
S&P/C ASE S HILLER P RICE I NDEX (R ATE OF I NCREASE /D ECREASE FROM P REVIOUS 12 M ONTHS )
The index measures the change in same-sale house prices from the price 12 months
earlier. As of the latest figures (November 2009), the index is at or near the zero line and
looks about to cross it in the next month or two, when prices will begin increasing again
after 3 years of declines.
The Case-Shiller indexes are broad measures and do not break down into smaller
geographic areas. In general areas close to the coast have seen lower price declines
compared with inland areas.
As of its December 2009 forecast, Chapman University indicates that the residential
price low occurred in first quarter 2009 and forecasts a 5.0% price increase for detached
DISTEFANO COMPANY
resale houses in 2010 with moderate increases going forward because the economic
recovery will be moderate.
The market is bottoming sequentially by price range. Prices for the lowest priced
houses have clearly turned up with multiple offers pushing prices above asking price.
Mid-priced houses are also turning up. Highest priced houses, which did not decline as
dramatically, may not have begun an upturn as of yet. The slope of any future uptrend
will depend primarily on the rate of job growth and consumer sentiment.
DataQuick reports the following regarding prices and sales for Southern California
counties, with greater detail shown for coastal zip codes in Orange County:
S OUTHERN C ALIFORNIA N EW AND R ESALE S INGLE -F AMILY H OME S ALES AS OF D ECEMBER 2009
% chg
Zip Number Median from Price
Code of Sales Price Dec 08 /Sq Ft
Southern California Counties
Los Angeles 5,343 $340,000 6.3% $239
Riverside 3,463 $190,000 -5.0% $100
San Bernardino 2,549 $148,000 -12.8% $94
San Diego 2,185 $365,000 9.8% $208
Orange 1,833 $500,000 17.6% $289
Orange County Coastal Zip Codes1
Capistrano Beach 92624 6 $555,000 -25.6% $328
Corona del Mar 92625 15 $1,242,000 -57.5% $680
Dana Point 92629 14 $790,000 23.2% $380
Huntington Beach 92646 34 $660,000 10.0% $355
Huntington Beach 92648 32 $738,000 -2.5% $349
Huntington Beach (subject) 92649 18 $987,000 7.7% $471
Laguna Beach 92651 34 $1,293,000 29.3% $1,019
Newport Beach 92660 36 $1,085,000 -10.7% $493
Newport Beach 92661 2 $2,163,000 10.9% $1,307
Newport Beach 92663 11 $940,000 -21.7% $905
Newport Coast 92657 14 $1,975,000 16.2% n/a
Balboa Island 92662 1 $1,645,000 -0.3% $1,689
San Clemente 92672 21 $810,000 10.2% $441
Seal Beach 90740 7 $849,000 17.9% $875
Source: DQNews.com
Median prices have been influenced downward by foreclosure pricing as evidenced by the
extremely low prices per sq ft in the Inland Empire counties (Riverside-San Bernardino),
which have the highest number of foreclosures. Orange County has the highest average
median prices because of relatively fewer foreclosures as well as its attractive location.
Coastal prices per sq ft are significantly higher than the overall county average, as would
be expected.
1 See map on page 26.
DISTEFANO COMPANY
O RANGE C OUNTY C OASTAL Z IP C ODES
Chapman University forecasts that median resale single-family home prices will show
an increase of 1.6% in Orange County in 2010, after a 17.9% decline in 2009, for the
following reasons:
• As sales activity shifts from lower-priced homes to higher-priced tiers, the median
price will be pulled up.
• The ratio of median home prices to median income will reach 5.6 in 2010, near its
historical average of 5.7.
DISTEFANO COMPANY
• The ratio of Orange County to U.S. home prices will be at 2.3, also near its
historical average ratio of 2.4.
Subject Property Immediate Competition

There are no directly competitive subdivisions along the Orange County coast. Data
regarding the most competitive properties are described in the sales comparison analysis
starting on page 58. The proposed Marblehead subdivision in San Clemente (300+ lots,
32 miles south and not directly competitive) is delayed by the bankruptcy of the financial
partner, Lehman Brothers.
Summary – Residential Supply and Demand

The current consensus of forecasts is that the down-cycle in the “for-sale” residential
market is past the bottom and in the early stages of a recovery. New construction is
minimal, interest rates remain low, and prices have reached a level of affordability not
seen since the 1990s. A shadow inventory of foreclosed houses still needs to work through
the market, which may take another 12 to 18 months.
The subject property offers a an attractive combination of master-planned
environment, coastal location and views, and relatively affordable prices compared with
more upscale areas such as Newport Beach. The project came on stream at the wrong time
in the real estate cycle. Going forward, the dearth of meaningful competition and
improving economy should result in a successful completion of the project.
Site and Improvement Description
Maps and photographs for the subject property appear starting on page 35.
The subject property consists of the 276 units (11 units in escrow and 265 unsold
units) in the Brightwater single-family residential subdivision (total 356 lots-units). A
unit schedule is attached in Appendix D. A site plan is included in Appendix C.
The project is divided into four “neighborhoods” each with its own product mix and
model complex: The Trails, The Sands, The Cliffs, and The Breakers.
The project opened in August 2007, and is being built in small phases (see phasing
plan in Appendix B). The basic infrastructure and common areas are complete. What
remains is installation of some streets, finishing of some lots, and construction of
individual houses.
DISTEFANO COMPANY
The owner intends to build out the project through the completion and sale of all
units. No lots are available for sale to developers. The valuation assumes that all
construction will be completed as proposed.
Access and Street Improvements

Brightwater Drive is the main backbone street running through the project connecting
with Bolsa Chica Street on the east and Warner Avenue on the west. Access to the
individual lots is via circulation streets off Brightwater Drive. Streets have asphalt paving,
concrete curbs, gutters, and storm drains, and overhead street lighting. Ultimately all the
streets in Brightwater will be public streets but privately maintained by the Brightwater
homeowners association.
Shape, Topography, and Drainage

The total site has an irregular shape consisting of lots to be finished. The topography is
basically level with slopes along the south and west boundary overlooking the Bolsa Chica
Ecological Preserve. Surface water run-off is directed to the streets.
Soils Conditions
No soils information was provided for review. The appraisal assumes that soils are stable
and adequate to support any proposed improvements.
Flood Zone and Earthquake Zone

The site is in Flood Zone X (outside any flood zone with no flood insurance required) per
FEMA map 06059C0233H dated February 24, 2004. The site is not within an Alquist-
Priolo special studies earthquake zone, although all of California is subject to earthquake
shaking.
Utilities
All public utilities and services are available to the site, with electrical service
underground.
DISTEFANO COMPANY
Nuisances and Hazards

I noticed no obvious nuisances or hazards that might influence the appeal or
marketability of the subject lots.
Zoning
Entitlements were originally processed through the California Coastal Commission and
the Orange County Planning Department while the property was in unincorporated
county land. In 2008 the entire property was annexed into the City of Huntington Beach,
which created a new specific plan, the Brightwater Specific Plan, incorporating the county
entitlements. All entitlements are in place. The zoning designation for the Trails and
Sands sections of the property are RM-15-SP (Residential Medium Density). The zoning
designation of the Cliffs and Breakers sections of the property are RL-7-SP (Residential
Low Density). The south periphery of the project and the native habitat along Los Patos
Avenue are zoned OS (Open Space).
Status of Entitlements
All entitlements to development are in place. The appraisal assumes that no entitlement
risk exists for the property.
Easements, Encumbrances, and Encroachments

The title report (Appendix A) references utility easements with no influence on value. The
project has no Mello-Roos or other infrastructure special assessment districts.
Project Amenities
The project has extensive landscaping, arbors, and signage at each major entrance: off
Warner Avenue and Bolsa Chica Street. Brightwater Drive also has extensive landscaping
along its entire frontage. There are four small parks with arbors and tot lots along
Brightwater Drive and a larger park and undeveloped natural habitat between The Trails
and The Sands. The mesa trail, which runs along the southerly project boundary
overlooking the Ecological Preserve, has landscaping, signage and interpretive kiosks off
Warner Avenue and off Bolsa Chica Street. A glass wall runs along the entire southerly
boundary of the project. The Los Patos Avenue and Bolsa Chica Street frontages have a
stucco wall and setback landscaping along the entire length. The project does not have a
community clubhouse or pool.
DISTEFANO COMPANY
Unit Mix
The project has four distinct “neighborhoods” of single-family detached homes (see site
plan on page 37) with unit mix as follows.
Unit Areas (Sq Ft)

Min Max BR BA Gar Base Price Ocean View
The Trails
Plan 1 1,710 3 2½ 2 $810,450
Plan 2 1,755 3 2½ 2 $850,000
Plan 3 1,843 1,953 4 2½ 2 $950,000
Total Trails 1,769
The Sands
Plan 1 1,927 4 2½ 2 $925,000
Plan 2 1,988 4 3 2 $950,000
Plan 3 2,161 4 2½ 2 $990,000
Total Sands
The Cliffs
Plan 1 2,724 2,928 4 3½ 2 $1,275,000
Plan 2 3,120 3,400 5 4½ 3 $1,395,000 $2,295,000
Plan 3 3,278 3,543 4 4 3 $1,495,000 $2,398,000
Plan 4 3,474 3,590 4-6 4 2 $1,550,000 $2,325,000
The Breakers
Plan 1 3,162 3,557 4 3½-4 2 $1,500,000
Plan 2 3,548 3,785 5 4½ 3 $1,650,000
Plan 3 3,939 4,080 4-5 4-5 3 $1,840,000 $3,016,500
Plan 4 4,076 4,339 5-6 4 2 $1,900,000 $3,200,000
The Trails has the smallest and least expensive units, followed by the Sands, the Cliffs, and
the Breakers.
DISTEFANO COMPANY
Unit Count and Total Areas

Unit Area (Sq Ft) Lot Area (Sq Ft)
Project summary Models Sold Escrows Unsold Total Min Max Total Min Max Total
Trails
Plan 1 1 12 2 7 22 1,710 2,835 4,144
Plan 2 1 10 1 7 19 1,755 2,835 3,651
Plan 3 2 7 12 21 1,843 1,953 2,835 4,179
Subtotal Trails 4 29 3 26 62 1,793 avg 111,142 3,113 avg 192,977
Sands
Plan 1 1 5 1 18 25 1,927 2,831 4,674
Plan 2 2 4 17 23 1,988 3,222 4,942
Plan 3 1 7 23 31 2,161 3,258 8,552
Subtotal Sands 4 16 1 58 79 2,037 avg 160,890 4,243 avg 335,182
Cliffs no view
Plan 1 1 4 22 27 2,724 2,948 4,717 8,896
Plan 2 1 1 2 15 19 3,120 3,400 4,982 8,465
Plan 3 1 2 15 18 3,278 3,543 5,039 8,184
Plan 4 1 2 17 20 3,474 3,590 5,000 8,672
Subtotal Cliffs no view 4 9 2 69 84
Cliffs view
Plan 1 5 5 2,724 2,948 4,715 6,445
Plan 2 1 4 5 3,120 3,400 5,128 5,769
Plan 3 1 5 6 3,278 3,543 5,667 8,713
Plan 4 1 8 9 3,474 3,590 5,264 8,756
Subtotal Cliffs view 0 0 3 22 25
Total Cliffs 4 9 5 91 109 3,219 avg 350,823 6,113 avg 666,348
Breakers no view
Plan 1 2 1 15 18 3,162 3,557 6,500 10,898
Plan 2 1 16 17 3,548 3,785 6,243 8,455
Plan 3 1 13 14 3,939 4,080 6,231 9,052
Plan 4 1 20 21 4,076 4,339 5,995 11,075
Subtotal Breakers no view 0 4 2 64 70
Breakers view
Plan 1 1 1 4 6 3,162 3,557 6,500 9,079
Plan 2 1 5 6 3,548 3,785 6,725 8,722
Plan 3 1 1 6 8 3,939 4,080 6,300 8,546
Plan 4 2 3 11 16 4,076 4,339 6,300 11,958
Subtotal Breakers view 5 5 0 26 36
Total Breakers 5 9 2 90 106 3,852 avg 408,307 7,583 avg 803,832
Total Brightwater 17 63 11 265 356 2,897 avg 1,031,162 5,613 avg 1,998,339
A unit schedule is attached in Appendix D.
DISTEFANO COMPANY
Standing Inventory and Construction Status

The following table summarizes the construction status of the 265 unsold units, and 11
units in escrow. Standing inventory is held to a minimum to reduce carrying costs.
Unit
Area
Product Lot Plan (Sq Ft) Construction Status
Speculative Unsold
1 Breakers 20 3 3,940 85% complete
4 Cliffs 61 2 3,308 100% complete
5 Cliffs 62 1 2,940 100% complete
6 Sands 46 1 1,927 70% complete
10 Trails 4 3x 1,953 100% complete
11 Trails 34 3 1,941 60% complete
14 Trails 39 3x 1,953 60% complete
Homes in Escrow Order Date

1 Breakers - March 65 1 3,496 1Q10 95% complete
2 Breakers - contingent 30 4 4,100 Q309 100% complete
3 Cliffs - March 75 2 3,305 1Q10 95% complete
4 Cliffs - March 35 3 3,416 1Q09 100% complete
5 Cliffs - Aug 34 4 3,477 Q309 slabs only
8 Sands - Sept 54 1 1,988 1Q10 slabs only
9 Trails - April 40 1 1,710 Q309 60% complete
10 Trails - April 38 1 1,710 Q409 60% complete
11 Trails - April 35 2 1,763 1Q10 60% complete
The remaining 251 unsold lots are in vacant, finished and semi-finished condition (265
total unsold less 14 speculative units shown above). Costs to fully complete all the units
are included in the bulk value analysis.
DISTEFANO COMPANY
Unit Amenities
The Trails The Sands The Cliffs The Breakers
Exteriors Type V wood-frame Type V wood-frame Type V wood-frame Type V wood-frame
construction, Hampton construction, Hampton construction, Hampton, construction, Hampton
Cottage, Craftsman, Cottage, Craftsman, Craftsman, Traditional Cottage, Craftsman,
Tradition, Victorian styles Tradition, Victorian styles styles Traditional styles
Cedar siding, brick, stone Cedar siding, brick, stone Cedar siding, brick, stone Cedar siding, brick, stone
accents, hand-troweled accents, hand-troweled accents, hand-troweled accents, hand-troweled
stucco stucco stucco stucco
50-year composite shingle 50-year composite shingle 50-year composition tile 50-year composition tile
roof with gutters roof with gutters roof with gutters roof with gutters
Dual-pane windows Dual-pane windows Dual-pane windows Dual-pane windows
Paver driveways Paver driveways
Front yard landscaping Front yard landscaping
Block rear and side Block rear and side Block rear and side
fencing fencing (tempered glass on fencing (tempered glass on
view lots) view lots)
Interiors Ceiling ht: 10' first floor- Ceiling ht: 10' first floor- Ceiling ht: 10' first floor- Ceiling ht: 10' first floor-
9' second floor 9' second floor 9' second floor 9' second floor
Smoke detectors and fire Smoke detectors and fire Smoke detectors and fire Smoke detectors and fire
sprinklers sprinklers sprinklers sprinklers
Pre-wired for computer Pre-wired for computer Pre-wired for computer Pre-wired for computer
networks and cable networks and cable networks and cable networks and cable
Security system Security system Security system Security system
Home theater in family Home theater in family Home theater in family Home theater in family
room room room room
50-gallon water heater 50-gallon water heater 75-gallon water heater, 75-gallon water heater,
recirculating recirculating
Heating and air- Heating and air- Dual heating and air- Dual heating and air-
conditioning conditioning conditioning conditioning
Finished garages: painted Finished garages: painted Finished garages: painted Finished garages: painted
drywall with openers drywall with openers drywall with openers drywall with openers
Wood and gas burning Wood and gas burning Wood and gas burning Wood and gas burning
fireplaces fireplaces fireplaces fireplaces
Interior laundry with Interior laundry with Interior laundry with Interior laundry with
cabinets cabinets cabinets cabinets
Kitchens Granite counters Granite counters Granite counters Granite counters
Viking appliances built-in Viking appliances built-in Subzero built-in Subzero built-in
refrigerator, gas cook top, refrigerator, gas cook top, refrigerator, Wolf gas refrigerator, Wolf gas
convection oven and convection oven and range, convection- range, convection-
microwave oven, microwave oven, microwave over, Asko microwave over, Asko
dishwasher, disposal dishwasher, disposal dishwasher dishwasher
Bathrooms Kohler sinks, tub faucets Kohler sinks, tub faucets Kohler sinks, tub faucets Kohler sinks, tub faucets
Caesarstone counters Caesarstone counters Caesarstone counters Caesarstone counters
Frameless shower door Frameless shower door Frameless shower door Frameless shower door
A variety of upgrades is offered including upgraded faucets and fixtures, additional

fireplaces, exterior hardscape and landscape. Some plans allow a flexible configuration for
home offices, dens, extra bedrooms/baths. The project has a tie-in with Restoration
Hardware featuring their products in some models.
DISTEFANO COMPANY
Models
Models are open seven days a week with in-house sales staff. Sales offices and design
centers are located in each model complex. The models will be restored as residences and
sold as the production units sell out.
Homeowners Association
The Brightwater Maintenance Association maintains common areas, parks, and entries.
Monthly dues are $177.
Improvement Comments
This is an attractive single-family subdivision of upscale to luxury homes, some with
ocean views, offering a wide range of unit sizes and amenities. The project is laid out with
the biggest units and lots in the south part of the project with the best views. The floor
plans offer a variety of distinctive features and options including loft-lookouts, media
rooms, outdoor living rooms with fireplaces, wine rooms, preparation kitchens, home
offices, and casitas. The units are well designed and have all the features expected by the
market.
Property Tax and Assessments
The property tax rate is estimated at 1.04%of the sales price. Brightwater does not have
any Mello-Roos supplemental assessments.
DISTEFANO COMPANY
A REA M AP
DISTEFANO COMPANY
N EIGHBORHOOD M AP
DISTEFANO COMPANY

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Case 8:09-bk-21712-TA Doc 217-2 Filed 03/26/10 Entered 03/26/10 18:41:32 Desc

Exhibit B - Part 1 Page 1 of 43

Effective Date of the Appraisal

February 19, 2010

California Coastal Communities, Inc.

Attention: Mr. Raymond J. Pacini, CEO

Re: Self-Contained Report of a Complete Appraisal

Dear Mr. Pacini:

In response to the appraisal services agreement, I have completed an appraisal

MARKET VALUE (BULK VALUE) “AS IS” $219,700,000

The value estimate contemplates an exposure time of 9 months. The value

D I S TEFANO C OMPANY , INC .

California Coastal Communities, Inc.

The appraisal conforms to the Uniform Standards of Professional Appraisal Practice

Carl DiStefano, MAI

value estimate Bulk value “as is” $219,700,000

exposure/marketing time 9 months

ORGANIZATION OF THE REPORT

This appraisal report is organized as follows:

1. buyer and seller are typically motivated;

4. payment is made in terms of cash in United States dollars or in

Fee Simple Estate

Client, Intended User, and Intended Use

Purpose of the Appraisal

Property Interest Appraised

Effective Date of the Appraisal and Date of the Report

The appraisal assignment represents a complete appraisal reported in a self-

Assumptions and Limiting Conditions

Specific Assumption Regarding the Subject Property

1. The value estimates assume that all improvements will be completed

Definition and Timing of the Value Estimate

2. The estimate of market value is based on the definition of value that

Legal and Physical Characteristics of the Subject Property

6. The appraiser expresses no opinion concerning topics that require legal

8. The appraiser assumes that no unapparent conditions exist in the property

Appraisal Assignment and Report

PROPERTY AND AREA DESCRIPTION

address Various addresses within the Brightwater subdivision (unsold lots-

assessor’s parcel(s) See assessor’s maps in Appendix A

legal description See title report in Appendix A

Owner of Record and Ownership History

Model Sale Leaseback

date of agreement December 29, 2008

Continued on following page.

lease of model homes Seller to lease-back the property from buyer

Population growth in Huntington Beach is limited by the relative lack of developable

U.S. GROSS DOMESTIC PRODUCT BY QUARTER

Consumer Confidence Index (1985=100)

INDEX OF CONSUMER CONFIDENCE

ISM PMI Composite Index ISM PMI Composite Index

PURCHASING MANAGERS INDEX

J OB G ROWTH – O RANGE C OUNTY PMSA

unemployment. The following chart shows the trend in unemployment rates in

U.S. Orange County

Subject Property Immediate Surroundings – Bolsa Chica Wetlands

Supply and Demand Analysis and Trends

Traditional Housing Affordability Index

H OUSING A FFORDABILITY I NDEX

orange county household income. Orange County average household income is

Home price $800,000 $1,500,000 $2,500,000

Investor sentiment regarding future homebuilder earnings, as evidenced by the

New residential permits (in units) Multi-family

Source: Construction Industry Research Board, Los Angeles.