Appraisal — Fontana City Council, April 11, 2023

APPRAISAL REPORT

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 99
(The Retreat)

City of Fontana, San Bernardino County, California
(Appraisers’ File No. 2023-1277)

Prepared For
City of Fontana
8353 Sierra Avenue
Fontana, California 92335

Prepared By
Kitty Siino & Associates, Inc.
115 East Second Street, Suite 100
Tustin, California 92780

KITTY SIINO & ASSOCIATES, INC.

REAL ESTATE APPRAISERS & CONSULTANTS

March 6, 2023

Jessica Brown, Chief Financial Officer
City of Fontana
8353 Sierra Avenue
Fontana, CA 92335

Reference: Appraisal Report
City of Fontana
Community Facilities District No. 99
The Retreat by Lennar
Northwest Corner of Beech Avenue and South Highland Avenue, South of Interstate 210, Fontana, California

Dear Ms. Brown:

At the request and authorization of the City of Fontana, we have completed an Updated Appraisal Report for The City of Fontana Community Facilities District No. 99 (“Fontana CFD No. 99”) which consists of a residential neighborhood known as The Retreat, in the City of Fontana. An appraisal was completed with a January 3, 2023 date of value; however, due to a time delay, the client requested an updated appraisal report. The Retreat includes a total of 194 residential units split between two product lines , The Villas at the Retreat (“Villas”) and Chateau at the Retreat (“Chateau”). Villas is proposed for 100 attached condominium units and Chateau is proposed for 94 single family detached cluster units. On May 25, 2021, Lennar Homes of California, LLC ("Lennar") and R -Hearthstone Lot Option Pool 02, L.P., a Delaware limited partnership (“Hearthstone”), entered into an agreement whereby Lennar conveyed the property to Hearthstone and Lennar was provided an exclusive option (but not an obligation) to acquire the property in several takedowns over time pursuant to an agreed-upon takedown schedule. Lennar is developing and marketing the property and the majority of these takedowns have occurred .

The Retreat offers two-story floorplans ranging in size from 1, 165 to 1,895 square feet as marketed for the Villas ( attached product ), and 1,724 to 2,046 square feet for the Chateau (detached cluster product).

Out of the 194 proposed units within the Retreat, 113 have closed to individual homeowners to date with an additional 29 in escrow which are due to close upon completion. The Lennar-owned property ranges from completed model homes to houses under construction while the Hearthstone owned property ranges from houses under construction to finished lots/pads.

The valuation method s used in this report are the Sales Comparison Approach, a Discounted Cash Flow Analysis and a Mass Appraisal Technique as defined within this report. The fee simple estate of the subject property has been valued, subject to the Fontana CFD No. 99 special tax lien. This report is written with the hypothetical condition that the subject propert y is enhanced by the improvements and/or fee credits to be funded by the Special Tax Bonds of Fontana CFD No. 99. As a result of our investigation, the concluded minimum market value for the subject property is shown below.

Hearthstone Ownership (45 pads) $ 8,002,778
Lennar Ownership (19 pads & 17 houses) $ 9,096,678
Individual Owners (113 houses) $ 50,977,573
Total Aggregate Value CFD No. 99 $ 68,077,029

115 East Second Street, Suite 100, Tustin, California 92780 (714) 544-9978 - Phone, (714) 544-9985 – Fax, E-Mail: [email protected] Jessica Brown
City of Fontana
March 6, 2023
Page Two

The values are stated subject to the Assumptions and Limiting Conditions of this report, the Appraiser’s Certification and as of February 16, 2023.

Some supporting documentation concerning the data, reasoning and analyses may be retained in the appraiser ’s files. The information contained in this report is specific to the needs of the client and for the intended use stated in this report. This Appraisal Report is intended to comply with both the Uniform Standards of Professional Appraisal Practice (“USPAP” January 2020) and with the Appraisal Standards of the California Debt and Investment Advisory Commission (“CDIAC”). The appraiser is not responsible for unauthorized use of this report.

This letter of transmittal is part of the attached report, which sets forth the data and analyses upon which our opinion of value is, in part, predicated.

Respectfully submitted,

KITTY SIINO & ASSOCIATES, INC.

Kitty S. Siino, MAI
California State Certified General
Real Estate Appraiser (AG004793)

TABLE OF CONTENTS

Assumptions and Limiting Conditions............................................................................... i Hypothetical Condition .................................................................................................... iii Extraordinary Assumption ............................................................................................... iii Aerial Photo of Fontana CFD No. 99 (The Retreat)......................................................... iv Purpose of the Appraisal ................................................................................................ 1 The Subject Property ...................................................................................................... 1 Intended Use of the Report ............................................................................................. 3 Definitions ...................................................................................................................... 3 Property Rights Appraised ............................................................................................. 5 Effective Date of Value ................................................................................................... 5 Date of Report ................................................................................................................ 6 Scope of Appraisal ........................................................................................................ 6 Regional Area Map.......................................................................................................... 8 County of San Bernardino Area Description ................................................................... 9 City of Fontana Area Map & Description ....................................................................... 18 Immediate Surroundings ............................................................................................... 23 Community Facilities District No. 99 ............................................................................. 25 Subject Property Description ......................................................................................... 28 Inland Empire Housing Market ...................................................................................... 36 Highest and Best Use Analysis ..................................................................................... 46 Valuation Analysis and Conclusions ............................................................................. 51 Appraisal Report Summary ........................................................................................... 76 Appraiser’s Certification ............................................................................................... 77

ADDENDA
Fontana CFD No. 99 Boundary Map
Tract Map No. 20228 and Condominium Maps
Discounted Cash Flow Analysis
Finished Lot Land Sales Map and Summary Chart
Improved Attached Residential Sales Map and Summary Chart Improved Detached Residential Sales Map and Summary Chart Appraiser’s Qualifications
_________________________________________________________________________________________________________ Appraisal Report
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ASSUMPTIONS AND LIMITING CONDITIONS

1. This report might not include full discussions of the data, reasoning and analyses that were used in the appraisal process to develop the appraiser’s opinion of value. Some supporting documentation concerning the data, reasoning and analyses may be retained in the appraiser’s files. The information contained in this report is specific to the needs of the client and for the intended use stated in this report. The appraiser is not responsible for unauthorized use of this report.

2. No responsibility is assumed for legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated in this report.

3. It is assumed that the subject property is subject to the special tax lien of Fontana CFD No. 99.

4. Responsible ownership and competent property management are assumed unless otherwise stated in this report.

5. The information furnished by others is believed to be reliable; however, no warranty is given for its accuracy.

6. All engineering is assumed to be correct. Any plot plans and illustrative material used in this report are included only to assist the reader in visualizing the property and may not be to scale.

7. It is assumed that there are no hidden or unapparent conditions of either property, subsoil or structures that would render them more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them.

8. It is assumed that there is full compliance with all applicable federal, state and local environmental regulations and laws unless otherwise stated in this report.

9. It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless nonconformity has been stated, defined and considered in this appraisal report.

10. It is assumed that all required licenses, certificates of occupancy or other legislative or administrative authority from any local, state or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report are based.

11. Any sketch or photograph included in this report may show approximate dimensions and is included only to assist the reader in visualizing the properties. Maps , photographs and exhibits found in this report are provided for reader reference purposes only. No guarantee regarding accuracy is expressed or implied unless _________________________________________________________________________________________________________ Appraisal Report
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Kitty Siino & Associates, Inc. Page ii
otherwise stated in this report. No survey has been made for the purpose of this report.

12. It is assumed that the utilization of the land and improvements (if any) are within the boundaries or property lines of the property described and that there is no encroachment or trespass unless otherwise stated in this report.

13. The appraiser is not qualified to detect hazardous waste and/or toxic materials. Any comment by the appraiser that might suggest the possibility of the presence of such substances should not be taken as confirmation of the presence of hazardous waste and/or toxic materials. Such determination would require investigation by a qualified expert relating to asbestos, urea- formaldehyde foam insulation or other potentially hazardous materials that may affect the value of the property. The appraiser’s value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value unless otherwise stated in this report. No responsibility is assumed for any environmental conditions or for any expertise or engineering knowledge required to discover them. The appraiser’s descriptions and resulting co mments are the result of the routine observations made during the appraisal process.

14. Proposed improvements, if any, are assumed to be completed in a good workmanlike manner in accordance with the submitted plans and specifications.

15. The distribution, if a ny, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings , if any, must not be used in conjunction with any other appraisal and are invalid if so used.

16. The Americans with Disabilities Act (“ADA”) became effective on January 26, 1992 and have been updated several times since then. The appraiser has made no specific compliance survey and analysis of the property to determine whether they conform to the various detailed requirements of the ADA, nor is the appraiser a qualified expert regarding the requirements of the ADA. It is possible that a compliance survey of the property, together with a 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 ADA. If so, this fact could have a negative effect upon the value of the property.

Since the appraiser has no direct evidence relating to this issue, a possible noncompliance with requirements of the ADA in estimating the value has not been considered.

17. It is assumed there are no environmental concerns that would slow or thwart development of the subject properties and that the soils are adequate to support the highest and best use conclusions.

18. Possession of this report, or a copy thereof, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of the appraiser, and in any event, only with proper qualification and only in its entirety. Permission is given for this appraisal to be published as a part of the Official S tatement or similar document for the Fontana CFD No. 99 special tax bonds

19. It is assumed that there are no conditions of approval or hindrances which could slow or thwart the obtaining of occupancy permits on the 194 subject residential units. This is the case per Lennar; however, we were unable to verify via the various conditions of approval.

20. For purposes of this report the square footage of the houses within The Villas are assumed to be the same as marketed and reported by Lennar.

HYPOTHETICAL CONDITION

1. It is assumed that all improvements and benefits to the subject properties, which are to be funded by the City of Fontana CFD No. 99 Special Tax Bond Proceeds are completed and in place.

EXTRAORDINARY ASSUMPTION

1. It is assumed that the sales information and remaining development costs as reported by the builder and summarized in the report are correct. Regarding sales, we have reviewed closed sales against public record when available. Dif ferences occur between the builder’s sales information and public record. It is the appraiser’s understanding that the differences equate to flooring and solar costs along with concessions which are given by the builder on a case- by-case basis. Regarding costs; while we have reviewed the remaining land development costs and fees and they appear reasonable; we are not experts in the field of construction estimation and are relying on the costs received in the valuation analysis.

PURPOSE OF THE APPRAISAL

The purpose of this appraisal report is to estimate the value of the fee simple interest of the subject property, subject to the lien of the Fontana CFD No. 99 Special Tax Bonds.

THE SUBJECT PROPERTY

The subject property consists of 194 proposed single-family homes being developed into a community known as The Retreat in the City of Fontana (“City”). The Retreat is located at the northwest corner of Beech Avenue and South Highland Avenue, adjacent south to Interstate 210 (“I-210”), and east of Interstate 15 (“I-15”). The Retreat is being built and sold by Lennar , and features two product lines: the Villas which includes 100 attached condominiums sized 1,165 to 1,895 square feet, and the Chateau which includes 94 detached cluster homes sized from 1,724 to 2,046 square feet. The subject community is encompassed by Tract Map 20228 and subsequent condominium maps , which subdivides the subject lands into 20 pads for 5-plex condominiums, and 94 detached lots arranged in motorcourts. Lennar has an agreement with Hearthstone owning the property and Lennar acquiring certain lots/pads as needed for development. Of the total 194 pads/lots, Lennar has taken down 149 of the lots/pads and has sold and closed on 113 of the completed houses to individuals. The remaining lots vary in status from completed models, to under homes construction to finished lots. The description, ownership and condition of the lands are detailed in the chart on the following page.

Lots Owner Product / Condition / Status
Villas at The Retreat (Attached Townhomes) Lot 1 of Tract 20228: Modules 1 -10 Units 0301, 0305 & 0405 of
Module 6; 0501-0505 & 0601-
0605 of Module 5; 0701- 0705 &
0801-0805 of Module 4; 0901-
0904 & 1001-1005 of Module 3;
1101-1105 & 1201-1205 of
Module 2; 1301-1305 & 1401-
1405 of Module1
52 Individuals Completed Homes
Units 6501-6505 of Module 10 5 Lennar Model Homes (0 in Escrow) Units 0302-0304 & 0401-0404 of
Module 6; 0905 of Module 3 8 Lennar Over 95% Complete (6 in Escrow) Units 0101-0105 & 0201-0205 of
Module 7 10 Lennar Under Construction (9 in Escrow)
Units 1501-1505 & 1601-1605 of
Module 9; 1701-1705 & 1801-
1805 of Module 8
20 Hearthstone
Land Bank Under Construction (2 in Escrow)
Units 6601-6605 of Module 10 5 Hearthstone
Land Bank Finished Lots (0 in Escrow)
Villas Subtotal: 100
Chateau at The Retreat (Small Lot Detached) Lot 1 of Tract 20228: Modules 11-19 Units 0019-0026 and 0100 &
0102-0105 of Module 15; Units
0027-0034 and 94-99 of Module
14; Units 0035-0042 and 88-93
of Module 13; Units 0043-0049
and 82-87 of Module 12; Units
0050-0056 of Module 11
61 Individuals Completed Homes
Units 0067-0069 of Module 19 3 Lennar Model Homes (0 in Escrow) Unit 0101 of Module 15 1 Lennar Over 95% Complete (1 in Escrow) Units 0106-0114 of Module 16 9 Lennar Under Construction (8 in Escrow) Units 0057-0064 of Module 18;
Units 0076-0081 of Module 17 14 Hearthstone
Land Bank Under Construction (3 in Escrow)
Units 0070-0075 of Module 19 6 Hearthstone
Land Bank Finished Lots (0 in Escrow)
Chateau Subtotal: 94
TOTAL CFD No. 99 194

INTENDED USE OF THE REPORT

It is the appraiser’s understanding that the client, the City of Fontana, will utilize this report in disclosure documents related to the sale of the Fontana CFD No. 99 Special Tax Bonds. This report may be included in the Official Statement or similar document to be distributed in connection with the marketing and offering of the bonds. It is the appraiser’s understanding that there are no other intended uses of this report.

DEFINITIONS

Market Value
The term “Market Value” as used in this report is defined as:

"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, 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 each acting in what he or she considers his or her own best interest;

3. a reasonable time is allowed for exposure in the open market;

4. payment is made in terms of cash in U.S. 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 Inherent in the Market Value definition is exposure time or the time the subject property would have been exposed on the open market prior to the appraisal in order to sell at the concluded values. In the case at hand and considering current market conditions , the exposure time for each individually owned property or the entire Lennar or Hearthstone owned properties,each in a bulk sale, is less than one year.

1 The Appraisal of Real Estate, 13th Edition
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Finished Lot/Pad
The term “Finished Lot/Pad” is defined as:
“A parcel which has legal entitlements created by a recorded subdivision or condominium map, whose physical characteristics are a fine graded level pad per lot /pad with infrastructure contiguous to each individual lot /pad, asphalt paved roads and the neces sary utilities. This term assumes the payment of all applicable development fees with the exception of building permit and plan check fees.”

Minimum Market Value
The term “Minimum Market Value” as used in this report is defined as:

“The base market value of a new home. That is, most buyers purchase some upgrades, options and/or lot premiums when purchasing a new home.

The sales price for the new home typically includes the base price for the plan, plus any upgrades, options or lot premiums, less concessions, if any, which were given or paid for by the builder. The concluded minimum market value is for the base value of the plan only, not taking into consideration any upgrades, options or premiums.”

Mass Appraisal Technique
The term “Mass Appraisal” as used in this report is defined as:
“The process of valuing a universe of properties as of a given date using standard methodology employing common data and allowing for statistical testing”
2 In the case at hand, the statistical testing included reviewing all original builder sales and reviewing the Multiple Listing Service (“MLS”) for any re -sales and/or current listings of each plan type. In addition, we have determined the actual range of sales prices for each plan type which will be utilized in the valuation process . The search of the MLS resulted in no resales and no current resale listings within the subject property.

Hypothetical Condition
The term “Hypothetical Condition” is defined by USPAP as:
“A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis”

2 USPAP 2018-2019 Edition
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The Hypothetical Condition within this report is that subject property is enhanced by the improvements and/or fee credits to be funded by bonds issued by Fontana CFD No. 99.

Extraordinary Assumptions
The term “Extraordinary Assumption” is defined by USPAP as:
“An assignment specific assumption as of the effective date regarding uncertain information used in an analysis which, if found to be false, could alter the appraiser’s opinions or conclusions”

There is one Extraordinary Assumption within this report which is that the sales information and the cost information as received from Lennar are true and accurate.

Regarding the sales information, differences occur between the builder’s sales information and public record which, it is the appraiser’s understanding, equates to flooring and solar costs, along with concessions which are given to the buyers on a case- by-case basis. Regarding costs, we have reviewed the remaining land development costs and fees and they appear reasonable ; however, we are not experts in the field of cost estimating. It should be noted that these costs were relied upon for the value conclusion and, if the remaining costs differ, it may change the value conclusion.

PROPERTY RIGHTS APPRAISED

The property rights being appraised are of a fee simple estate interest, subject to easements of record and subject to Fontana CFD No. 99. The definition of “fee simple estate” is defined as:
“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.”
3 EFFECTIVE DATE OF VALUE

The subject property is valued as of February 16, 2023.

3 The Appraisal of Real Estate, 13th Edition
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DATE OF REPORT

The date of this report is March 6, 2023.

SCOPE OF APPRAISAL

As previously stated, the purpose of this appraisal is to report the appraiser ’s best estimate of the market value for the subject propert y, Fontana CFD No. 99, which is known as the community of The Retreat. Lennar Homes of California LLC (“Lennar”) is the builder and is actively marketing the homes. The Retreat offers two- story floorplans ranging in size from 1,165 to 1,895 square feet as marketed for the Villas (attached product), and 1,724 to 2,046 square feet for the Chateau (detached cluster product) .

There are a total of 194 proposed homes within the subject. This appraisal will be presented in the following format:
• County of San Bernardino Description
• City of Fontana Description
• Immediate Surroundings Description
• Brief Description of Fontana CFD No. 99
• Subject Property Description
• Inland Empire Residential Market Analysis
• Highest and Best Use Analysis
• Valuation Procedure, Analysis and Conclusions
• Appraisal Report Summary

In valuing the subject propert y, the value estimates will be based upon the highest and best use conclusion using the Sales Comparison Approach. The Sales Comparison Approach to value is defined as:
“…a set of procedures in which a value indication is derived by comparing the property being appraised to similar properties that have been sold recently, then applying appropriate units of comparison and making adjustments to the sales prices of the comparables based on the elements of comparison. The Sales Comparison Approach may be used to value improved properties, vacant land or land being considered as though vacant; it is the most common and preferred method of land valuation when an adequate supply of comparables is available.” 4 4 Dictionary of Real Estate Appraisal, Fourth Edition, 2002 _________________________________________________________________________________________________________ Appraisal Report
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In the Sales Comparison Approach, market value is estimated by comparing properties similar to the subject that have recently been sold, are listed for sale or are under contract.

Neither a cost or income approach was utilized as they were not considered necessary to arrive at credible results. In addition, we have utilized a mass appraisal technique which included reviewing all builder sales and searching the MLS for any resales and/or resale listings.

The due diligence of this appraisal report included the following:

1. Compiled demographic information and related that data to the subject propert y to perform a feasibility/demand analysis.

2. Gathered and analyzed information on the subject marketplace, reviewed several real estate brokerage publications on historical and projected growth in the subject market and researched the micro- and macro- economic outlook within San Bernardino County and the Fontana area.

3. Inspected the subject property between December 20, 2022 and February 20, 2023.

4. Had the site flown by an aerial photographer on January 2, 2023.

5. Interviewed r epresentatives from Lennar and/or their representatives i n order to obtain project information.

6. Reviewed a preliminary title report on the subject property.

7. Searched the area for relevant comparable residential land sales , inspected and verified each sale with a buyer or seller or broker familiar with the transaction.

8. Searched the area for relevant comparable new home residential projects, including sales prices and concessions and interviewed representatives from each comparable project.

9. Reviewed the sales brochure and website for the subject community.

10. Reviewed developer sales information on each home within each neighborhood in the community along with reviewing public record on sample lots in each community.

11. Reviewed Multiple Listing Service information to determine if there are any resales, pending resales or listings of resale homes.

REGIONAL AREA MAP

COUNTY OF SAN BERNARDINO AREA DESCRIPTION

Location
The subject property is located in the southwestern portion of San Bernardino County, in the northern portion of the City of Fontana . More specifically, The Retreat is located adjacent south of Interstate 210 (“I-210”), 1.4 miles east of Interstate 15 (“I-15”), at the northwest corner of Beech Avenue and South Highland Avenue.

San Bernardino County (the “County”) is the largest county in the United States by area containing over 20,100 square miles, and includes large expanses of undeveloped deserts, valleys, canyons and mountains with deserts comprising about 90 percent of the acreage. The County is a major beneficiary of outward urban pressure from Los Angeles, Orange and Riverside Counties. Although located at the periphery of most urban activity in Southern California, the southwestern portion of San Bernardino County has been a major growth area and is perceived by most observers as an area expected to continue to grow. Riverside and San Bernardino Counties are considered distinct from Los Angeles and Orange Counties , and belong to the same Metropolitan Statistical Area (“MSA”). This area, consisting of San Bernardino and Riverside Counties, is commonly referred to as the Inland Empire.

Transportation
The subject property is situated just south of I-210, about one- and one-half miles east of I-15, and approximately 4.8 miles north of Interstate 10 (“I-10”). The I-210 is the nearest interstate providing access to the subject via Cherry Avenue or Citrus Avenue. There’s also access directly from t he I -15 to the subject via the Beech/Summit Avenue. I-15 travels in a northerly/southerly direction and provides access to Barstow and Nevada to the north and San Diego to the south. I-10 begins from the west in Los Angeles and provides access into Arizona to the east. In the vicinity of the subject, I -210 provides additional east/west access about two miles north of I -10 beginning in Santa Clarita in Los Angeles County and provides access near the City of San Bernardino. The subject is located two miles north of the historical Route 66, the original Los Angeles to Chicago cross country route.
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The County is served by Amtrak and Metrolink as well as several rail -freight lines. The Ontario International Airport provides regional international air service and is located approximately eight miles southwest of the subject property. San Bernardino International Airport is located approximately 13 miles southeast of the subject. In addition, the County has extensive trucking corridors along the previously referred to interstates, highways and state freeways.

Population
The County has experienced population growth for several decades and is anticipated to continue to do so in the foreseeable future. Per the California Department of Finance, the January 1, 2022 (latest available) County population was 2.188 million. This represents a one-year increase of 0. 2 percent. This compares to an average annual growth rate over the past 20 years of 2.1 percent. Current projections for San Bernardino County per the California Department of Finance suggest the population i s anticipated to reach approximately 2.32 million by 2030, indicating an average annual increase of approximately 0.75 percent over the next eight years. The current near zero growth rate is lower than the previous 20- year annual average of 2.1 percent, li kely due to the disruption of the COVID pandemic. The future growth of 0.75 percent annually was predicted assuming a more stable market than was seen prior to the Great Recession, however doesn’t take into effect the COVID pandemic.

Economy
The U.S. economy experienced what is now known as the COVID recession beginning in late February 2020 as the COVID pandemic began. The Federal, State, County and City Governments (“Governments”) originally shut down non-essential businesses and areas where social gatherings occur in order to slow the spread of the virus. This created a strain on small and large businesses alike. Restaurants and hotels were hit hard and travel reduced drastically as citizens were urged to stay home. Layoffs occurred with reports of 40 million people filing for unemployment the first few months of the pandemic.

The Governments attempted to curtail the job losses and hardships with the approval of _________________________________________________________________________________________________________ Appraisal Report
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legislation while the Federal Reserve Board (“Board”) reduced interest rates and started quantitative easing by buying bonds.

Between March 2020 and the end of 2021, the Governments approved legislation providing for over $5.6 trillion in COVID relief to our nation including the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, Federal Reserve COVID loans and the American Rescue Plan Act. This legislation helped shore up the U.S. economy; however, due to the significant amount of new money introduced into the economy, inflation began occurring at a rate not seen for 40 years. As of January 2023, the national inflation r ate was 6.4 percent, down from the peak in June 2022 of 9.1 percent and compared to a 4.7 percent annual inflation rate for 2021, 1.24 annual percent rate for 2020 and an average of 1.74 percent annual rate for the previous ten years. Whether it is a resul t of the Russian/Ukraine war, supply chain issues due to COVID or from the additional money entering the economy, inflation is hitting Americans hard. The Russian invasion of Ukraine created significant volatility in gas prices which affected the economy. In an effort to curb inflation the Federal Reserve Board began raising interest rates. Since March 2022, there have been eight interest rate increases rising the Federal Funds Rate from 0.25 – 0.50 percent to 4.5 – 4.75 percent. The increases have begun to slow inflation which has made the last two rate hikes lower than most of the past 12 months . T he December 2022 increase was slightly lower than the previous four 0.75 percent increases at 0.50 percent while the January 2023 increase was 0.25 percent . The increases over the past 12 months have increased a typical 30- year fixed mortgage rate from 2.98 percent as of November 10, 2021, to 7.08 percent as of November 10, 2022; however, the rate has dropped to 6.32 percent as of February 16, 2023 (per Federal Reserve Economic Data - St. Louis). This steep increase has significantly affected the real estate market.

In addition to increasing the Federal Reserve Rate (“FRR”), the Board began tapering off buying Treasury Bonds and Mortgage- Backed Securities (“MBS”). Along with dropping the interest rate at the beginning of the pandemic, the Board began quantitative easi ng by buying $80 billion Treasury Bonds and $40 billion MBS each month which put more new money into the economy. Towards the end of 2021, the Board began tapering off the _________________________________________________________________________________________________________ Appraisal Report
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purchases and in June 2022, began quantitative tightening which allows investments t o mature and be removed from the marketplace. This reduced the size of the Board’s balance sheet and further restrict ed credit activity in an effort to slow inflation. In September 2022, the monthly amount of quantitative tightening doubled, which is estimated to be equivalent to additional interest rate increases on the economy.

The COVID disruption to the economy also caused extreme volatility in the stock market with the Dow Jones Industrial Average (“DJIA”) dropping from 29,398 in February 2020 to 19,174 in March, 2020, a drop of 37 percent. The Government interventions resulted in a bounce back in the DJIA to 27,111 by June 2020 with the stock market then climbing up to an all-time high of 36,799 in January 2022. In February 2022 Russia began invading Ukraine which caused volatility in world economics and, more recently, U.S. inflation has hit historical highs, resulting in the Board raising interest rates. Both factors have caused a drop in the DJIA of over eight percent over the past 12 months (to 33,696.85 as of February 16, 2023).

The significant increase in mortgage rates over the past year is just one part of the puzzle demonstrating the impact of housing on the broader economy. Additional risks include both existing and new supply chain challenges, companies trying to find balanced inventory levels, both wage and price spirals, and persistent inflation. Over the past 25 years, the Inland Empire economy has had significant cycles with home prices almost doubling from 1995 to 2005, then falling by over 50 percent during the Great Recession, taking prices back to 2002 levels. Home values appeared to hit bottom in 2009 then remained essentially flat for two to three years with the majority of the Inland Empire housing market seeing an improvement beginning in mid-2012. Contrary to homebuilder’s original thoughts of a slowdown due to the pandemic, new home buyers stepped up in the spring of 2020 and new home sales were significantly higher during the second half of 2020 versus the previous year and continued extremely strong throughout 2021. This exceptional activity in new home sales was the one bright spot in the COVID recession and is thought to be due to several factors including: a tight supply of re -sale homes; historically low interest rates; millennials finally buying homes; and, the work from home _________________________________________________________________________________________________________ Appraisal Report
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factor which began during the pandemic and allowed residents to live in more suburban areas without long commutes. However, the past year has seen a significant slowdown in sales and softening of prices with the Inland Empire showing a year over year decrease in sales as of January 2023 of 49 percent.

While most jobs have come back, job losses were significant during the COVID recession with the Nation’s unemployment rate going from 3.5 percent in Febr uary 2020 to 14.4 percent in April 2020 with the December 2022 National unemployment rate (latest available) at 3.3 percent ( Employment Development Department ). The Congressional Budget Office (“CBO”) Forecast for the U.S. Economy (published February 2023) stated that the federal budget deficit will be $1.4 trillion in 2023, then will average $2.0 trillion per year for the following nine years. They forecast that Real GDP growth will come to a halt in 2023 then will average 2.4 percent from 2024 to 2027 and then 1.8 percent between 2028 to 2033. The CBO states they expect unemployment rates to rise through early 2024 reflecting the slowdown in economic growth. They are concerned by the debt ceiling which was reached in January of 2023; however, the Treasury is taking extraordinary measures which will be exhausted this summer. If the ceiling is not raised or suspended before the extraordinary measures are exhausted, the government would have to delay making payments for some activities or default on i ts debt obligations. In summation for 2023 the CBO projects stagnant output, rising unemployment, gradually slowing inflation and interest rates to remain at or above their current levels. They believe that in 2023 noninterest spending substantially exceeds revenues with rising interest rates driving up the cost of borrowing which results in the government debt steadily increasing. Over the long term, they suggest changes in fiscal policy to address the rising costs of interest and mitigate other adverse consequences of high and rising debt.

Prior to the COVID-19 pandemic, the Nation was experiencing a strong economy. As with the rest of the Nation, the Inland Empire experienced a strong multi-year recession, now referred to as the Great Recession, between 2006 and 2012. The MSA, which had strong employment over the ten previous years saw unemployment rates increase significantly between December 2006 and early 2010, at which time a leveling off occurred followed by continued employment growth (generally since July 2011) until the pandemic hit. _________________________________________________________________________________________________________ Appraisal Report
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The unemployment rate for the MSA was estimated at 3.6 percent (as of December 2022 per the Employment Development Department). This reflects a decrease from the peak during the Great Recession of 15.1 percent in 2010 and a decrease from the peak during COVID of 14.9 percent. As of December 2022, San Bernardino County’s unemployment rate was 3.6 and Riverside County had a 3.7 percent unemployment rate. The current unemployment rate for the MSA of 3.6 percent is simil ar to the California rate at 3.7 percent and slightly higher than the December 2022 National rate of 3.3 percent. Below is a table comparing San Bernardino County’s unemployment rate to the unemployment rates of the surrounding counties as of December 2022.

Jurisdiction As of Unemployment Rate*
Los Angeles County 12/22 4.4%
Riverside County 12/22 3.7%
San Bernardino County 12/22 3.6%
Orange County 12/22 2.5%
San Diego County 12/22 2.9%
Source: State of California E.D.D.; *Not Seasonally Adjusted

The latest UCLA Anderson Forecast (“Forecast”) was issued December 7 , 2022 and stated that the potential action by the Federal Reserve will determine whether the nation continues to grow or experiences a mild, short-lived recession in 2023. They believe the economy is at a recession- related fork in the road with one path leading to continued economic growth (although slower than the recent 2.4 percent growth rate) and the other would lead to a mil d short-lived recession. Whether the economy slips into recession or not will depend largely on inflation stickiness and the additional actions the Federal Reserve takes to bring down inflation. The Forecast states that if the Federal Reserve moderates its aggressive tightening, economic growth is expected to slow in first quarter 2023 and be virtually nonexistent in the second quarter, followed by an increase in GDP in the last six months of 2023. If the Federal Reserve keeps aggressively tightening, a mild recession will occur with the economy contracting at an annual rate of 2 to 3 percent in both the second and third quarters then be flat in the last three months of 2023, followed by a slight rebound in 2024. The Forecast states under both scenarios, consumer resilience is the key factor with consumption staying flat the first two quarters, contracting modestly during the next two quarters, and beginning to grow again in 2024. They believe _________________________________________________________________________________________________________ Appraisal Report
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both outcomes will include declining home prices with slightly larger declines in the recession scenario. In both cases, inflation is anticipated to ease at about the same rate through mid-2023.

The UCLA Forecast for California is more positive than the overall Nation due to the rapid job creation that has occurred in logistics , technology and health care. A t time of the Forecast, the state’s non-farm payroll jobs exceeded its February 2020 (pre- pandemic) levels by 31,000 jobs although many of the new jobs are in different sectors. About 170,000 payroll jobs in leisure and hospitality and other service sectors have not returned but logistics, technology and healthcare have had rapid job creation with those jobs being higher-income sectors making California’s GDP growth higher than that of the Nation.

The increase in interest rates have led to a downturn in California’s housing markets with the median price of single- family homes in the state declining 8.4 percent below its previous peak. However, the California housing market is not overbuilt which will offset the decrease in the housing market. Overall, the Forecast believes that California will have a more moderate slowing or, in the case of a recession, a milder downturn than the U.S. overall.

As a final indicator of overall economic activity for the region, we have reviewed the rise and fall of TEUs (Twenty-foot Equivalent Units – i.e., containers) being processed in the local ports. This is especially important for the Inland communities, as it represents much of the growth in development of west coast distribution centers and warehouses in the Inland Empire linked to supply -chain nodes in the Pacific Rim. The chart below shows TEU activity at the Port of Long Beach. Generally, there has been increases since 2009 with the exception of a slight dip in 2016 and again in 2019 which ended with a 5.6 percent downturn. The 2022 calendar year saw a decrease of 2.6 percent from the previous year.

January 2023 is running 28 percent below January of 2022 (573,772 versus 800,943 total TEUs). It should be noted that January 2022 was a time when the back -up at the ports was still occurring due to supply chain issues. Per the Orange County Register (Lack of product demand hurts drivers, October 31, 2022) consumer demand has cooled recently leaving fewer TEUs needing to be driven from the ports. They are stating shipments have _________________________________________________________________________________________________________ Appraisal Report
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slowed due to American demand finally waning after the pandemic coupled with some major retailers bypassing the California ports for East Coast ports to avoid a possible upheaval by West Coast dockworkers as they negotiate a new contract. It appears that the slowdown in work for the dray operators (drivers who ship containers in and out of the ports) may be resulting from a slowdown in overall TEU demand.

Education
The subject area is served by the Etiwanda School District (“ESD”) and the Chaffey Joint Union High School District (“CJUHSD”) . ESD serves children elementary and middle school age while CJUHSD serves high school and beyond. The subject is assigned to Cecilia Lucero Solorio (“Solorio”) Elementary School (K-5), Heritage Intermediate School (6-8), and Etiwanda High School. ESD and CJUHSD are highly r ated and are seen as stronger districts than neighboring Fontana Unified School District. Community Colleges are available near the subject at Chaffey College in Rancho Cucamonga (six miles northwest), at Chaffey College’s Fontana campus (3.6 miles southeast of the subject in Fontana), and San Bernardino Community College ( 12 miles southeast). Higher education is available approximately nine miles northwest of the subj ect at California State University San Bernardino, about 14 miles southeast is University of California at Riverside, 1 3 miles southwest in the private Claremont Colleges ( which include

4.0 5.0

6.0 7.0

8.0 9.0

10.0 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 TEU's (millions)
Year
Port of Long Beach TEUs
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Claremont McKenna College, Pitzer College, Harvey Mudd College, Pomona College and Scripps College) and 20 miles to the southwest at Cal Poly Pomona.

Conclusion
Population in the County has increased over the past 30 years with predictions for continued population growth. The Nation’s economy stalled during the COVID Recession in March 2020 with housing the one bright spot in the economy during the pandemic. The region’s relative affordability, coupled with the rising prices in the coastal market and the need for new housing, set up a boom in the Inland Empire. Beginning the second half of 2020 through the first three months of 2022, Inland Empire new home sales skyrocketed, in par t due to residents leaving urban areas for more suburban areas due to COVID factors coupled with historically low interest rates. The government interventions, while helping to shore up the economy, introduced a significant amount of new money into the system contributing to severe inflation, which is at the highest it has been in four decades leading to the Federal Reserve Board increasing interest rates. The FRR has gone from zero to 4.75 percent in the past nine months. Current concerns for the Inland Em pire economy include inflation, the high prices of homes, rising interest rates, supply chain issues, and the Russian invasion of Ukraine, which are all creating volatility in both local and global financial markets. In conclusion, the County is expected to continue to grow in population due to its Southern California location, the availability of land and the relatively lower land and housing prices in comparison to adjacent Orange, Los Angeles and San Diego Counties. However, due to inflation, rising interest rates, falling consumer confidence and other factors, there are some bumpy roads anticipated ahead.

CITY OF FONTANA DESCRIPTION

General Area
The subject property is located in the northern portion of the City of Fontana (“City”) and in southwestern San Bernardino County. The City is situated at the base of the San Gabriel Foothills, east of the cities of Rancho Cucamonga and Ontario, north of Jurupa Valley, west of the City of Rialto and the community of Bloomington, and south of the San Bernardino Mountains. The City encompasses an estimated 43 square miles with generally the northern border the San Gabriel Mountains and the southern border the Jurupa Mountains. The black star on the below map shows the approximate location of Fontana CFD No. 99 within the City limits.

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History
Fontana was founded in 1913 and is the second largest city in San Bernardino County and the 20th largest city in the State of California. The area was a rural farming community with citrus orchards, vineyards and chicken ranches that ran along U.S. Route 66 which is now known as Foothill Boulevard. The historic Route 66, which was built in 1926 to connect Los Angeles to Chicago, is a commercial corridor that runs east/west through the City. During World War II, Henry J. Kaiser opened the Kaiser Steel Mill near Fontana, the only steel mill west of the Mississippi River, which brought industrial employm ent to the area during the war. To provide for the worker’s health needs, Kaiser constructed the Fontana Kaiser Permanente Medical Facility which now employs more than 5,000 people.

In 1994 the San Bernardino Freeway, which later became Interstate 10, was completed connecting Los Angeles to San Bernardino and making accessibility to Fontana relatively easy. This led to substantial growth as Fontana became an industrial hub for the County.

In the 1950s and 1960s the area of Fontana was home to a drag racing strip which served as a significant venue in the National Hot Rod Association (“ NHRA”) circuit. In 1997 , Roger Penske built the Fontana Speedway, now known as the Auto Club Speedway , which became a major NASCAR sanctioned tract. In 2006 , the Auto Club Speedway opened a new NHRA sanctioned drag strip on site to resurrect Fontana’s drag racing heritage. The Auto Club Speedway was purchased by NASCAR in 2019 and hosts at least one major NASCAR race each year. It was recently announced the existing raceway will close due to the redevelopment of the lands; however, a smaller short -track will be developed on a portion of the lands keeping car racing in the area of Fontana.

Population
The January 2022 population of Fontana (per the California Department of Finance, latest information available) is 212,809, which represents an increase of 1.4 percent over the previous year. The 2000 population was 128,928, suggesting the population has increased 65 percent over the past 22 years. The City population represents 9.7 percent of the County population. The City has several new home communities currently under construction, especially in the northern portion of the City. Per the U.S. Census Bureau, _________________________________________________________________________________________________________ Appraisal Report
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the average household size in Fontana is 3. 75 persons while in overall San Bernardino County the average household size is 3.26 persons. Over 78 percent of the population of the City are high school graduates and over 28 percent of the population of the City are under 18 years old.

Housing
According to the Southern California Association of Governments (“SCAG”), the City of Fontana has an estimated 52,592 housing units as of 2020 (latest data available), with a growth rate of 54.6 percent since the year 2000. This compares to the County’s housing growth rate of 22.2 percent during this time. This further illustrates Fontana’s growth spurt due to land available for development over the past 20 years. Fontana hosts 8.1 percent of the total nu mber of households in the County. Below is a graph showing residential units permitted in Fontana between 2000 and 2021.

While the current numbers are not at pre-Great Recession numbers, they are the highest in the past 15 years. Per SCAG , 82.2 percent of the homes are single-family and 15 percent are multi-family units. Only 22 percent of the housing stock in the City was built before 1970 and 78 percent was built since that time. There are three residential projects in final planning or under construction: a 489-unit community known as Nara Hills, northwest of I-15 and Duncan Canyon; a 257-unit project at Duncan Canyon and I-15 and a 189-unit project at Duncan Canyon and Citrus. These are in addition to 777 new single- family residential permits and 405 multi-family residential that were issued in 2021. Per the City’s 2022 annual report, there are four projects in the planning stage: Courtplace which includes 106 affordable units; Sobrato which includes 143 attached an detached 1,427
1,908
1,545
1,025
209 306 270 261 419 498 865
1,182
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2021 Fontana Residential Building Permits
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units and Citrus E ast (75 cluster units) and Citrus West (85 cluster units). It is our understanding the Citrus East and Citrus West buyer has cancelled both escrows, however entitlements are ongoing on these two sites. Per the 2022 annual report, there were 629 new single- family residential permits and 400 multi -family residential permits issued. Per SCAG, the median home price in the City went from $129,000 in 2000 to a peak of $450,000 in 2006 and a low of $200,000 in 2009. According to Redfin Market Trends, the January 2023 (latest available) median home price in Fontana was $590,000, which represents a 5.6 percent decrease year-over-year from January 2022. It should be noted that per Redfin, the median home price in Fontana was over $600,000 between December 2021 through August 2022.

Current new homes communities selling within Fontana include: The Retreat by Lennar (subject), Aurora Park by Tri Pointe with two neighborhoods, Highland Park by Richmond American with two neighborhoods, Shady Trails with two neighbor hoods by Richmond American and Tri Pointe, Gabion Ranch by Lennar with one actively selling neighborhood, The Arboretum by Lennar (currently sold out but future phases coming), and Monterado with two neighborhoods by Lennar. Per Realtor.com there are currently 427 existing homes for sale within the City with the median listing price of $589 ,000 and the median sold home price of $587,500 (February 22, 2023). Within the subject’s zip code of 92336, the median listing home price is currently $6 50,000 and the median sold home price is $640,000. This is in-line with the recent shift of current resale trends in the Inland Empire of homes selling for lower than their list price.

Access
Fontana has good access with I -15 generally forming the northwest border of the City.

The 210 Freeway provides east -west access through the upper third of the City; Route 66 (also known as Foothill Boulevard) provides east -west access through the approximate middle of the City and the I-10 provides east-west access through the bottom third of the City. Major on/off ramps to the City from I- 15 include Foothill Boulevard, Baseline Avenue, the 210 Freeway, The Retreat Avenue, Duncan Canyon Road and Sierra Avenue. On/off ramps from the 210 Freeway within the City include Cherry Avenue, Citrus Avenue and Sierra Avenue. Route 66/ Foothill Boulevard has stop lights at major _________________________________________________________________________________________________________ Appraisal Report
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intersections while the major on/off ramps from I-10 in the City include Etiwanda Avenue, Cherry Avenue, Citrus Avenue and Sierra Avenue. Access to the subject is via Cherry Avenue or Citrus Avenue, to South Highland Avenue.

Economy
Existing commercial property within the City of Fontana is generally along the major thoroughfares including I -10, Route 66/Foothill Boulevard, Sierra Avenue and the 210 Freeway. There are several large shopping centers including Sierra Lakes Marketplace and Falcon Ridge Town Center, both which serve the subject property. The City is home to an Amazon Distribution Ce nter, a Target Distribution Center and a FedEx transfer station. The intersection of the I-10 and I-15 is a major industrial hub which extends into the City of Fontana with generally industrial use south of I -10. The Auto Club Speedway is located along Cherry Avenue north of I -10 and the Metrolink station is located along Sierra Avenue. The top-ten employers in the City (from 2018 – latest available per City’s website) include the following:

Employer No. of
Employees
Kaiser Hospital 5,430
Fontana Unified School District 5,000
City of Fontana 1,030
Target Distribution Center 621
Costco Wholesale 333
U S F Reddaway 320
Estes West 317
Sierra Aluminum Company 312
Crown Technical systems 297
Walmart Store (Foothill Blvd) 290

Summary
Fontana is located at the base of the San Gabriel Mountains and was incorporated over 100 years ago as a rural farming community. Kaiser Steel brought jobs to the area during World War II and the opening of the I-10 Freeway in the 1950s made it an easy commute to Los Angeles and Orange Counties. Almost 80 percent of the housing stock within the City was built since 1970. In 2020, 2021 and the first few months of 2022 residential building permits gr ew significantly after a lull in the first 10 years since the Great Recession. In the past year permits have slowed due to slowing sales. The area has _________________________________________________________________________________________________________ Appraisal Report
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excellent access via three major freeways and the historic Route 66. The area’s central location, reasonable land prices and the availability of land for development combine to make the area a prime area for future growth.

IMMEDIATE SURROUNDINGS

The subject property is located along the south side of I-210, at the northwest corner of Beech Avenue and South Highland Avenue, about one and one-half miles east of I-15, in the City of Fontana. The subject has convenient freeway access to the I -210 via the Cherry Avenue or Citrus Avenue on/off ramps or I-15 via Beech/Summit exits.

The subject lands are generally surrounded by residential lands on all sides. To the north, directly past I-210 is a Park and Ride parking lot and an existing residential neighborhood, previously known as CalAtlantic at Stonehaven. Stonehaven was built in 2018 and features lots sized roughly 5,000 square feet. To the east is another existing residential neighborhood, this one a bit older, with homes built in the late 1990s on lots sized 5,000 to 6,000 square feet. The residential neighborhood adjacent south to the subject was also built in the late 1990s on slightly larger lots. To the west of the subject lands across Hemlock Avenue (which creates the subject’s western boundary) is the Inland Valley Islamic Society, a small building and parking lot, beyond which is Richmond American’s new Highland Park community, a new home community currently under construction and actively selling. Highla nd Park includes two neighborhoods: Cascade and Talise.

Cascade grand opened in December of 2022 while Talise just grand opened in mid- February 2023. Both Cascade and Talise feature detached two story homes, similar to the subject’s Chateau product line. Highland Park is the nearest comparable in proximity to the subject property (discussed later in the Valuation Analysis section of this report).

Less than one-half mile south of the subject at the northeast corner of Hemlock Avenue and Walnut Street is Cec ilia Lucero Solorio (“Solorio”) Elementary School, which is part of the Etiwanda School District and serves the subject. The Etiwanda School District also serves the subject for middle school, and the subject is assigned to Heritage Intermediate _________________________________________________________________________________________________________ Appraisal Report
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school, located less than two miles southwest of the subject at Baseline Avenue and South Heritage Circle in Fontana. For high school, the subject falls in the boundar ies of the Chaffey Joint Union High School District, and the highly ranked Etiwanda High School.

Etiwanda High School is located in Rancho Cucamonga, just two miles southwest of the subject, southwest of the I-210 and I-15 intersection.

There are several parks within close proximity to the subject. One block south of the subject at the northeast corner of Beech Avenue and Walnut Street is Koehler Park, a public recreational park with large fields, basketball courts, tennis courts, play structures, covered tables and restrooms. Just 1.25 miles northeast of the subject, at the corner of Summit Avenue and Lytle Creek Road, is a large public park facility that serves the City and surrounding neighborhoods. This park facility includes the Fontana Park and Aquatic Center, along with a large dog park, and skat e park. Th is park facility is adjacent to Summit High School, which does not serve the subject’s residents.

There are several shopping centers within one mile of the subject, the closest being about one mile east of the subject at Sierra Lakes Parkway and Citrus Avenue, just north of I - 210. This stretch of retail starts at Citrus Avenue and continues along Sierra Lakes Parkway through the Sierra Avenue on/offramp, and includes a Home Depot, Ralphs Grocery Store, Walgreens, Costco, LA Fitness, Lowes Home I mprovement and more.

Located just over one mile northwest of the subject on the southwest corner of Beech Avenue and Summit Avenue is an additional shopping center, known as Summit Heights Gateway, which includes a Kohl’s, PetSmart, Aldi grocery store, a P lanet Fitness, and several smaller retail stores and restaurants. Directly across from Summit Heights Gateway is the larger Falcon Ridge Town Center. Falcon Ridge Town Center is located at the corner of Beech Avenue and Summit Avenue on the east side of I -15, and is anchored by a Stater Brothers Market, Target, Michael’s craft store, Ross Dress for Less, CVS, and 24-Hour Fitness. The center also offers a multitude of dining options.

We have reviewed the City of Fontana CFD Report for Community Facilities District No. 99 (The Retreat) dated June 30, 2020 as prepared by David Taussig & Associates, Inc .

The CFD Report provides a brief description of Fontana CFD No. 99, a brief description of the facilities to be funded, a description of the boundaries and an estimate of the cost of financing the bonds used to pay for the facilities. Resolution No. 2020-043 was adopted on June 9, 2020 and approved the intention to establish Fontana CFD No. 99.

The exterior boundaries of Fontana CFD No. 99 per the Proposed Boundar y map are shown below.

Per the CFD Report, at time of formation, Fontana CFD No. 99 encompassed approximately 14.83 gross acres and consist ed of 194 proposed residential units, comprised of 100 single family attached units ranging in size from 1,300 to 1,800 square feet and 94 detached units ranging in size from 1,649 to 1,973 square feet. Per the C FD Report, the types of facilities to be eligible for funding are streets, including grading,

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paving, curbs and gutters, sidewalks, street signalization and signage, street lights and parkway and landscaping related thereto, sewers, storm drains, fire protection facilities, police facilities, public facilities, landscaping, library facilities, park and recreat ional facilities and land, rights-of-way and easements necessary for any of such facilities. The types of public facilities proposed to be purchased as completed facilities by CFD No. 99 are streets, including grading, paving, curbs and gutters, sidewalks, street signalization and signage, street lights and parkway and landscaping related thereto, sewers, storm drains, landscaping and land, rights -of-way and easements necessary for any of such facilities. Incidental expenses also included are the cost of planning and designing public facilities to be financed, including the cost of environmental evaluations of those facilities; the costs associated with the creation of CFD No. 99, issuance of bonds, determination of the amount of taxes, collection of taxes, payment of taxes, or costs otherwise incurred in order to carry out the authorized purposes of CFD No. 99; and, any other expenses incidental to the construction, completion, and inspection of the authorized work.

Per the Rate and Method, the Assigned Facilities Special Tax for Developed Property for Fontana CFD No. 99 (The Retreat) is as follows:

Land Use
Class

Description

Sq. Ft.

Special Tax
1 Detached Residential Property 2,000 or greater $2,273 per unit 2 Detached Residential Property 1,850 to less than 2,000 $2,230 per unit 3 Detached Residential Property 1,700 to less than 1,850 $2,187 per unit 4 Detached Residential Property Less than 1,700 $2,151 per unit 5 Attached Residential Property 1,850 or greater $2,204 per unit 6 Attached Residential Property 1,700 to less than 1,850 $1,948 per unit 7 Attached Residential Property 1,550 to less than 1,700 $1,825 per unit 8 Attached Residential Property 1,400 to less than 1,550 $1,552 per unit 9 Attached Residential Property 1,250 to less than 1,400 $1,349 per unit 10 Attached Residential Property Less than 1,250 $1,203 per unit 11 Non-Residential Property N/A $67,080 per acre

The estimated cost of public facilities at the time the Fontana CFD No. 99 Report was created were estimated as:

PUBLIC FACILITIES AMOUNT
Park and Recreational Facility $1,273,522
Circulation Facility Improvements $889,896
Storm Drain Facility Improvements $298,073
Inclusionary Housing Improvements $192,700
Sewer Facility Improvements $170,062
Local Transportation Facility Improvements $152,048
Police Facility Improvements $90,608
Public Facility Improvements $85,450
Local Arterial Facility Improvements $85,062
Fire Facility Improvements $70,826
Flood Control Facility Improvements $64,401
Landscape Facility Improvements $53,566
Traffic Signal Facility Improvements $26,338
Library Facility Improvements $19,006
Additional Capital Facilities Infrastructure Improvements $867,890 TOTAL ESTIMATED COSTS $4,339,448

The maximum bonded indebtedness for CFD No. 99 is $ 5,500,000. Per the latest sources and uses of funds (dated March 1, 2023) for the proposed bond issuance, there will be an estimated $4,640,000 in Bond Par Amount and a Net Original Issue Discount of $(15,287) for a total bond fund deposit of $4,624,713 with $3,927,134 going to the project fund, $381,555 in debt service reserve fund and capitalized interest and $316,025 in underwriter’s discount and cost of issuance (all amounts subject to change). A larger copy of the Fontana CFD No. 99 boundary map is located in the Addenda for your review.

SUBJECT PROPERTY DESCRIPTION

The subject propert y consists of 194 proposed units being developed as Villas at t he Retreat and Chateau at the Retreat, both being built and marketed by Lennar. The subject site is described below.

Location: Northwest corner of South Highland Avenue and Beech Avenue, south of I-210, Fontana, California
Legal Property
Description: Lot 1 of Tract No. 20228 in the City of Fontana, County of San Bernardino, State of California.

Property Owner: Villas: Individual Owners as Units 0301, 0305 & 0405 of Module 6; 0501-0505 & 0601- 0605 of Module 5; 0701- 0705 & 0801- 0805 of Module 4; 0901-0904 & 1001-1005 of Module 3; 1101-1105 & 1201- 1205 of Module 2; 1301 -1305 & 1401- 1405 of Module1 of Lot 1 of Tract 20228.

Lennar Homes of California, LLC as to Units 0101- 0105 and 0201- 0205 of Module 7; Units 0302-0304 and 0401-0404 of Module 6; Unit 0905 of Module 3; Units 6501-6505 of Module 10 of Lot 1 of Tract 20228.

R-Hearthstone Lot Option Pool 02, L.P. as to Units 1501- 1505 and 1601-1605 of Module 9; Units 1701-1705 and 1801-1805 of Module 8; Units 6601-6605 of Module 10 of Lot 1 of Tract 20228.

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Chateau: Individual Owners as to Units 0019-0026 and Units 0100 & 0102-0105 of Module 15; Units 0027- 0034 and Units 0094-0099 of Module 14; Units 0035- 0042 and Units 0088- 0093 of Module 13; Units 0043- 0049 and Units 0082- 0087 of Module 12; Units 0050- 0056 of Module 11 of Lot 1 of Tract 20228.

Lennar Homes of California LLC as to Units 0067-0069 of Module 19; Units 0101 of Module 15; Units 0106-0114 of Module 16 of Lot 1 of Tract 20228.

R-Hearthstone Lot Option Pool 02, L.P. as to Units 0057- 0064 of Module 18; 0070-0075 of Module 19; 0076-0081 of Module 17 of Lot 1 of Tract 20228.

Assessors
Parcel Nos.: The subject covers the following APNs: 0228-252-06 through - 85; 0228-253-01 through -66; and 0228-253-01 through -48.

Property Taxes: We have reviewed the property tax invoice for sample parcel 0228- 252-51-0000. The parcel has an assessed value of $86,753 as the land value only. The property taxes include $ 867.53 for the general levy, $1,382.00 for the Etiwanda School District CFD 10, and $77.32 in miscellaneous charges. The tax invoice (as of February 27, 2023 per the County of San Bernardino Tax Collector) shows the first installment paid. It should be noted this parcel is now improved. The subject Fontana CFD No. 99 is not shown on this tax invoice and the current tax invoice is based on an unimproved property.

Three-Year
Sales History: Per Lennar, they purchased the subject property for $16,500,000 on May 4, 2021, based on an estimated finished lot value of $160,000.

On May 25, 2021, Lennar Homes of California, LLC ("Lennar") and R-Hearthstone Lot Option Pool 02, L.P., a Delaware limited partnership (“Hearthstone”) and Owner, entered into an agreement whereby Lennar conveyed the property to Hearthstone and Lennar was provided an exclusive option (but not an obligation) to acquire the property in several takedowns over time pursuant to an agreed- upon takedown schedule. To date Lennar has taken down 149 of the lots/pads with the next take -down anticipated for Lots 76- 81 on February 17, 2023. Lennar began closing homes within the subject to individual owners in May 2022, and has closed 113 houses between May 16, 2022 and February 15, 2023.

Size and Shape: Tract Map 20228 is generally rectangular in shape and contains

18.453 gross acres and 14.387 net acres per the recorded map which subdivides the subject into one numbered lot and four lettered lots. While the CFD Report states the net acreage at 14.83 acres, we will use the engineered acreage of 14.387 acres in our analysis. Per the condominium plan the lot was subdivided into 19 numbered _________________________________________________________________________________________________________ Appraisal Report
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modules and four lettered modules.

Zoning: Per the current City of Fontana General Plan Land Use Map and the current Zoning Map, the site is designated as R-3 (or Multiple Family

12.1-24 du/acre) . The subject lands fall within the California Landings Specific Plan, which denotes the subject as “Detached & Attached Cluster Residential” with no listed minimum lot size.

Entitlements: The subject is entitled by Tract Map No. 20228 which was recorded on March 30, 2021 and divides the subject into one numbered lot .

Two subsequent condominium maps further divide the subject: the Villas at the Retreat Condominium Map was recorded September 14, 2021, and the Chateau at the Retreat Condominium Plan was recorded September 20, 2021. A copy of Tract Map No. 20228 and subsequent condominiums maps are located in the Addenda for your review.

Home Owner’s
Association: The Retreat HOA fee is estimated by Lennar representatives as $333 per month for the worst -case scenario. The HOA covers maintenance of the community gate, swimming pool, community center and restrooms, community park, as well as all walkways and community landscaping. The Lennar website currently quotes the monthly HOA fee at $361, which is more conservative than the DRE budget provided. Per Lennar representatives, the Villas (attached homes) includes an additional $91.60 per month supplemental fee due to their added benefits from the HOA which include the building exteriors, as typical for attached homes.

Topography: The subject lands are generally flat and at grade with streets on the east, west and south borders . The adjacent I -210 freeway (to the north) sits above the subject and there is a landscaped slope between the freeway and the subject. The subject has been fully graded with the lots and pads generally level with the internal streets.

Soils Condition: We have reviewed a “Geotechnical Investigation” for the subject site dated August 28, 2020, prepared by Leighton and Associates, Inc. of Rancho Cucamonga. The Report presents a summary of the observation and testing services provided by Leighton and Associates as well as their findings and suggestions for developing the site into Tract 20228. The Report concludes that the proposed development is geotechnically feasible, provided that the recommendations contained in the report are incorporated into the design and earthwork construction of the project as was currently planned.

It is an assumption of this appraisal that the soils are adequate to support the highest and best use conclusion and that all recommendations made within any and all reports were adhered to _________________________________________________________________________________________________________ Appraisal Report
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during construction. The appraiser is not a soils expert and it is recommended that any concerns relating to soils should be addressed to the appropriate experts.

Seismic
Information: Per San Bernardino County’s Geological Hazard Overlay map, the subject property is not located within a County Designated Fault Zone or an Earthquake Fault Zone Boundary.

Environmental
Concerns: We have reviewed a “Phase I and Limited Phase II Environmental Site Assessment ” (“ESA”) dated September 2, 2020 , prepared by Leighton and Associates, Inc. of Ranc ho Cucamonga. The ESA concluded that the subject propert y was previously used for a residence and later as a chicken ranch. There was also a presence of fill materials/stockpiles on the site from 2000s onward. Historical usage of the site for agriculture and stockpiles presents a moderate concern with regards to possible residual pesticides, however soil samples were tested and all detected concentrations of petroleum hydrocarbons were below the acceptable residential screening levels. Overall, the ESA foun d no evidence of environmental conditions that would prohibit residential use. The appraiser refers the reader to the Environmental Checklist Form - Initial Study and the Phase I and Limited Phase II ESA for additional information.

It is an assumption of this report that there are no environmental issues which would slow or thwart development of the subject property. This is evidenced by construction of homes on the site and City inspectors on site during construction.

Flood Information: Per FEMA Map No. 06071C7915H dated August 28, 2008 the property is shown as being located in Zone X, designated as an area of minimal flood hazard.

Easements and
Encumbrances: We have reviewed a Preliminary Title Report prepared by First American Title Com pany as Order Number NHSC -6222114 (29) dated June 1, 2020 issued on Tentative Tract Map 20228.

Item Nos. 1, 1A, 2 and 3 refer to property taxes and special assessments including Etiwanda School District CFD No. 10, however not the subject CFD . Item No s. 4, 5 and 6 refer to easements for Crawford Canyon Mutual Water Company (recorded July 19, 1940), for street, highway and public utilities and incidental purposes for the City of Fontana (recorded August 29, 1996) and for pipelines and incidental purposes for San Gabriel Valley Mutual Water Company (recorded May 13, 1997). Item No. 7 refers to the terms and provisions contained in the School Facilities and Funding Agreement recorded November 25, 2019 on the site.
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It is an assumption of this appraisal report that the subject lands are free and clear of any liens and/or encumbrances other than Fontana CFD No. 99, the above referenced CFD No. 10 and the easements noted above. The appraiser is not a title expert and it is recommended that any concerns relating to title should be addressed to the appropriate experts.

Utilities: All normal utilities are available to serve the subject site by the following companies:

Electrical: Southern California Edison Company
Natural Gas: SoCal Gas
Sewer: Inland Empire Utilities Agency
Water: Fontana Water Company
Schools: Etiwanda School District and Chaffey Joint
Union High School District

Streets/Access: Access to the subje ct property is convenient via I -15 to exit 116 Beech Avenue/Summit Avenue, eas t and stay on Beech as it turns south for 1.4 miles to South Highland Avenue; the subject has entrances from both Beech Avenue and South Highland Avenue.

Access is also convenien t via the I-210 exit 64B Cherry Avenue, south on Cherry and immediate east on South Highland Avenue where the subject is located three-quarters of a mile east of Cherry.

I-210 access is also possible from exit 66 Citrus Avenue, south on Citrus and immediat e west on South Highland Avenue, where the subject is one mile west of Citrus Avenue.

I-15 (1.3 miles west of the subject) is a major north/south freeway, which provides access to both international borders with Mexico and Canada.

I-210 (adjacent north of the subject) is an east/west freeway. It begins in Santa Clarita in Los Angeles County and ends near downtown San Bernardino. I-210 provides additional access parallel to I-10 which gets congested at commuting times.

I-10 (4.75 miles south of the subject) is a major east/west freeway in San Bernardino across Los Angeles and San Bernardino Counties.

I-10 provides access to Los Angeles to the west and through San Bernardino County and Riverside County to Arizona to the east. I-10 is an interstate providing a southern route across the U.S. to Florida

Summit Avenue is a smaller local arterial that provides east/west access to the subject and to Falcon Ridge Town Center at the Beech Avenue/I-15 intersection.

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Beech Avenue is a smaller local arterial that turns from east/west to north/south, just east of I -15. Beech A venue turns into Wilson Avenue west of I-15, and provides access into the Rancho Fontana neighborhood where it terminates 1.75 miles south of the subject.

Beech Avenue picks up again at Foothill Boulevard/Route 66 and provides access throughout Fontana where it terminates south of I -

10. South Highland Avenue is a smaller local arterial providing east/west access. It begins less than one mile west of the subject at Cherry Avenue and continues paralleling the I -210 and providing access to the commercial centers along I -210. It becomes West Renaissance Parkway approximately 2.5 miles east of the subject.

Cherry Avenue has on/off ramps at I -10 and I -210 and provides access into central and south Fontana. Cherry Avenue turns into Duncan Canyon Road in the H unter’s Ridge neighborhood, approximately two miles northwest of the subject and ends at Mulberry Avenue, in the southwest industrial park area of Fontana, approximately seven miles southwest of the subject.

Citrus Avenue has on/off ramps at I -10 and I -210 and provides access into central and south Fontana. Citrus Avenue’s northern terminus is at Duncan Canyon Road, just over two miles northeast of the subject.

Internal streets within the subject include: Wild Lane, Rid ge Lane, Horizon Street, Reserve Lane, and Park Lane. The main entrance is from Wild Lane off of South Highland Street, directly across from the community pool and recreation center. The models are located at the southeast corner of the subject at Ridge Lane and Reserve Lane.

Current Condition: The subject is being developed into 194 single-family homes consisting of pads for 100 condominiums and 94 small lots/pads for detached cluster homes . Upon our inspection, 130 of the homes were over 95 percent complete including 113 individually owned homes, eight model homes, and nine additional production homes owned by the builder ( seven in escrow). In addition, there were 53 homes under construction (less than 95 percent complete, 22 in escrow) and 11 additional finished lots/pads (none in escrow).

Costs to Complete: The subject property has been developed into 194 finished lots/pads with internal streets complete and utilities stubbed to each lot. Per Lennar’s representative they have paid all of the fees and there are an estimated $1,390,000 in remaining costs for the pool, clubhouse, landscaping and other common area improvements. It is our understanding that these costs are the builder’s responsibility and _________________________________________________________________________________________________________ Appraisal Report
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will be spread between the Lennar and Hearthstone owned lots as the individual owners are not responsible. Out of the total 194 lots/pads, 113 are individually owned leaving 81 lots, pads or homes owned by Lennar and Hearthstone. Lennar owns 36 which includes eight models, nine houses over 95 percent complete and 19 houses under construction. Hearthstone owns 34 houses under construction (under 95 percent complete) and 11 lots/pads. Dividing the $1,390,000 by the 81 lots results in remaining land development costs of $17,160.49 per lot/pad.

Improvement
Description: The Retreat is a gated community with two product lines. The Villas are attached condominiums arranged in five-plexes and features five floorplans sized 1,165 to 1,895 square feet . It should be noted that the building permits for the Villas reflect slightly larger home sizes, which are from 1,252 to 2,024 square feet. The two smallest sized plans are carriage units with the first floor being their garage and a stairwell and all of the living area upstairs. Per Lennar, the marketed home sizes are the smaller home sizes consisting of 1,165 to 1,895 square feet which is what we will reflect in this appraisal. Chateau features detached homes on small lots in a cluster format and has four floorplans sized 1,724 to 2,046 square feet which also reflects the permitted square footage. The models of the community are located at the south end of the subject at the intersection of Ridge Lane and Reserve Lane. The Retreat features two to three-bedroom floorplans featuring attached two-car garages, with some floorplans featuring an additional covered car port . Home exteriors feature Early California, Cottage, and Italian- influenced architectural detailing, dual glazed low-E windows, and insulated roll-up sectional garage doors. The Retreat homes offer Shaw vinyl and carpet floor coverings (with Emser Tile ceramic tile at entry) , bullnose drywall corners, two-panel interior doors and prewiring for light fixtures or ceiling fans in bedrooms and dining room. Kitchens include solid stone countertops (granite at Villas, choice of granite or quartz at Chateau), GE stainless steel appliances, and eat in islands. Homes at Chateau feature shaker style cabinetry in maple or thermofoil, while homes at Villas off er flat panel thermofoil cabinetry. All floorplans offer two car garages, with some side by side and other split with two single car garages (those with split car garages also offer a covered carport ). All homes include tankless water heaters, Wi-Fi heat mapping with Eero Pro 6 mesh Wi-Fi system, Honeywell smart thermostat, Schlage Encode smart Wi -Fi deadbolt, and Ring alarm security kit . One hundred and thirteen of the proposed 194 homes in the subject property have closed to individuals with closing dates between May 16, 2022 and February 15, 2023. Per Lennar, actual closed sales prices (including premium, upgrades, options and incentives) have ranged from $355,790 to $ 604,395. Current reported base asking prices range from $435,450 to $562,680 while _________________________________________________________________________________________________________ Appraisal Report
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grand opening base asking prices in November 2021 ranged from $448,000 to $596,000. Our search of the MLS revealed no resales and no current resale listings. Our physical search noted all homes appear to be in excellent condition. It should be noted that the seller is offering varying concessions including some rate buy downs, on a case-by-case basis. The incentives have ranged from $2,409 to $103,470 with an average amount of $36 ,976 per home for the 142 home sales to date. The houses which are over 95 percent complete are detailed below.

*Each asterisk designates one model home per that plan. “C” denotes carriage unit (first floor only holds garage and stairwell, all living and bedroom space on second floor). “CP” denotes a covered car port in addition to the garage.

In addition to the above, there are 53 homes under construction ( 30 at Villas and 23 at Chateau) and an additional 11 finished lots/pads (5 at Villas and 6 at Chateau).

The Retreat by Lennar

Plan

Bed/Bath
Floors/
Parking
Marketed
Sq. Ft.

Ind.

Owned
Bldr.

THE INLAND EMPIRE HOUSING MARKET

In analyzing the area’s housing market, population growth and economic conditions need to first be considered.

Population
The San Bernardino County population showed minimal 0.2 percent growth between January 2021 and January 2022, and an average of 2.1 percent the previous 20 years.

The stagnant growth during this time is thought to be due to the disruption during COVID.

Prior to the COVID pandemic, predictions were for the County to grow at an average annual rate of 0.75 percent over the next eight years. This equates to an increase of approximately 20,000 residents per year suggesting the need for about 7,000 homes per year within the County. The COVID influence is still unknown on the County’s population growth. New home sales in most cities in the County in 2020 and 2021 were higher than the coastal communities due to affordability, the work from home factor, and the fact that millennials are finally entering the housing market. These factors may increase actual County population growth in 2022.

Economic Conditions
Over the past twenty-five years the Inland Empire has seen various cycles in the housing market. The Great Recession impacted the Inland Empire significantly and resulted in a longer recovery period than that of other Southern California regions. The rise and then fall of housing prices in the Inland Empire between 2004 and 2009 was considerably steeper than almost anywhere in the State. Unfortunately, this meant that the people who bought near the peak of the market likely faced significant negative equity. After essentially remaining flat for a few years, housing prices began to increase in late 2012 through January 2020. Once the COVID pandemic hit in March 2020, the economy entered what is now known as the COVID Recession. The housing market slowed down significantly early on, but by May 2020, new homes were going under contract and selling at well above average absorption rates from May 2020 through Spring of 2022 in the region. Since May 2022, the new home market has seen a slowdown in absorption rates _________________________________________________________________________________________________________ Appraisal Report
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due to the increasing interest rates, the high prices of homes, and the high rate of inflation which is shaking consumer confidence.

Economic growth in the Inland Empire was strong generally between 2015 (after the Great Recession), and until the economic shutdown due to COVID. The second half of 2020 and all of 2021 saw economic growth, however the first two quarters of 2022 saw GDP shrinking while the third and fourth quarters saw minimal growth with the advanced estimate for the year 2022 at 2.1 percent. The most recent unemployment rate for the County is 3.6 percent (per the December 2022 EDD report – most recent published), lower than the County’s pre-COVID unemployment rate in February 2020 of 3.7 percent.

While unemployment rates are at historical lows, the inflation factor is significantly affecting the economy.

The housing market played a large role in the past two recessions. In the Great Recession, due to increased interest rates and rising h ome prices between June 2004 and mid-2006, the market reaction was to create non-conventional financing alternatives, such as sub- prime and non- conventional mortgages, to artificially maintain the boom housing market of 2004 and 2005. By 2007, the housing market saw a shake-up due to the problems in the sub- prime and non-conventional mortgage markets, which played a role in the 2008 upheaval of Wall Street and contributed significantly to the U.S. economic downturn of the Great Recession. Due to stricter i ncome verification on new loans and the lack of available credit, coupled with job losses and declining home prices, sales of new homes slowed for the next few years and essentially remained flat until mid- 2012 when home prices began a steady climb.

During the COVID recession, new home sales were one of the brightest spots in both the local and national economies. While new home sales slowed in March and April 2020 due to the onset of the COVID pandemic, prices did not appear to change in the County. Some builders increased concessions in March 2020, but by May 2020 concessions were back to where they were prior to COVID, and prices increased significantly until spring 2022 .

Per the Zonda National Economic and Housing Market Update (January 20, 2023), during _________________________________________________________________________________________________________ Appraisal Report
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their most recent survey of over 300 homebuilders nationwide, 94 percent of the builders stated they plan to slow housing starts or at least watch current sales to asses future starts. The rising interest rates alone did not seem to slow sales in Spring 2022. However, a combination of increasing home prices and falling consumer confidence, added to the significant interest rate increases h ave slowed home sales significantly. With the recent higher interest rates and increased home prices, the average monthly mortgage payment is up over 50 percent year-over-year.

Per the Zonda survey, as of mid-January 2023, over 75 percent of the new home builders in the Nation surveyed were stating they anticipate lower home prices in 2023 as compared to 2022 with about 20 percent thinking a decrease of 10- 20 percent and over 40 percent thinking a decrease of 5- 10 percent. D emand has slowed and is causing concern. Over 87 percent of builders are offering incentives (typically closing costs and rate buy -downs, however some incentives tied to options and upgrades), with Inland Empire projects averaging over $10,000 or about 3.2 percent. The builders’ largest concerns relate to: (1) interest rates, (2) consumer confidence, (3) inflation, (4) new home affordability, (5) economic uncertainty, (6) land prices, (7) materials cost, and (8) materials availability. The past year has seen a slowdown in both traffic and absorption due to the high inflation rates and resulting interest rate hikes.

Home loan mortgage rates have been and are still playing a huge part in the housing market. The Board held mortgage rates at all -time lows after the Great Recession and again after the COVID Recession in an attempt to assist the housing market’s recovery.

Low rates helped home sales during this time. However, first-time buyers are now having a hard time entering the housing market due to rising prices and rising interest rates. Per FRED, the average 30-year fixed mortgage has gone from 2.65 percent in January 2021 to 7.08 percent as in October 2022 with a decrease since then with current rates at 6.12 percent as of February 9, 2023. Mortgage applications had been spiking in late 2020 and 2021 due to the low rates, and the fear that they were going to start ticking up, which we are now seeing occur in real time. In March 2022, the Federal Reserve Board increased the rate 0.25 percent, followed by a 0.50 percent increase in May 2022, historical 0.75 _________________________________________________________________________________________________________ Appraisal Report
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percent increases in each of June, July, September, and Nov ember, a 0.50 percent increase in December 2022 and a 0.25 percent increase in February 2023 . This has increased the Federal Reserve rate from 0-0.25 percent to 4.5 – 4.75 percent in the past 12 months. The Board has recently stated they anticipate additio nal increases later this year. The Federal Reserve Rate increases are supposed to help slow the high inflation rate in the Nation. Per John Burns, a real estate consulting firm, 75 percent of builders nationwide are offering rate buy -downs in order to keep escrows closing. These include either buying down the interest rate for the entire 30- year term (32 percent of builder’s surveyed) or temporarily reducing the first two years of the rates (30 percent). These buydowns equate to incentives from one to six percent of the sales price which equates to costing the builders $6,000 to $36,000 on a $600,000 new home. Per Zonda’s Southern California Update for First Quarter 2023, their survey of public builders found they are now offering up to $75,000 in incentives with the majority in the $30,000 - $50,000 range.

Residential Land Development
While there had been little land development going on in most of the Inland Empire during the years 2008- 2011, the second half of 2012 saw a resurgence in the more coveted areas such as Ontario, Rancho Cucamonga, Fontana, Chino and Chino Hills in Southwest San Bernardino County. The increase in housing prices since 2012 combined with the limited availability of supply made land development feasible once again for homebuilders. It is thought that the increase in regulations, which has significantly increased the timeline for processing entitlements, limited the master developers’ further entitlement of developable land in California. While prior to the recession it was not unusual to see numerous large master-planned communities selling lots to builders, there are fewer currently available in the Inland Empire. The majority of land sales over the past few years include individual tracts sold by a master developer within a master plan, single tracts of land with maps ready to record (such as the subject site) , or a public builder buying a larger piece of land, but developing the land for its own use.

Land sales in the Inland Empire slowly grew from 2012 up to a peak in 2017, with 2018 and 2019 showing lower land transactions. Once home sales exploded in May 2020, _________________________________________________________________________________________________________ Appraisal Report
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residential land sales followed with a significant number of residential land sales to builders in the Inland Empire durin g the second half of 2020 and throughout 2021. The beginning of 2022 continued with strong residential land sales until May when sales began to fall sharply. According to Zonda’s survey of builders regarding residential land purchases, as of January 2023 only two percent of the builders surveyed are “full steam ahead” with 52 percent “cautiously moving forward;” 17 percent “bidding lower on land” and 29 percent “pausing transactions.” In addition, many are delaying take- downs whenever possible. Currently there is a disconnect in the seller’s expectations as they are still hoping for March 2022 land prices, however builders have seen new home prices dropping from 5- 20 percent in the Inland Empire. As new home pricing drops, the construction costs do not, thus the majority of the decrease typically falls to the land value.

New Home Sales and Pricing
We have researched new single- family homes within the subject’s market in order to reflect residential trends. It should be noted these sales numbers and prices p ertain to new home sales while later in this section we discuss existing home sales. In reviewing new home sales in the Inland Empire market area, per the February 19, 2023 Ryness Report, the year -to-date average sales rate ( 3.6 sales per month) is approxi mately 33 percent lower than the same time period of the previous year (5.4 sales per month). While it is early in the new year, the trend of a significant drop off in sales rates from the previous year has continued. New home sales rates started to level off in late Spring 2022, likely due to the increase in mortgage interest rates. As rates go down, purchasing power becomes larger, which gives new-home buying a boost. However, the flip side is that as interest rates rise, purchasing power becomes lower and therefore fewer people purchase new homes. Along with home sales comes a demand for appliances, furniture, building materials and services such as insurance, mortgage services, inspections, interior designers, and landscapers, all contributing to the area economy.

When comparing the February 19, 2023 Inland Empire Ryness Report to one year prior, there are 57 additional projects ( 182 in February 2022 and 239 in February 2023) and sales are nearly 35 percent lower year -to-date than the previous year. This does not _________________________________________________________________________________________________________ Appraisal Report
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appear to be due to limited inventory as there are additional projects, but rather because of an actual slowdown in sales activity likely due to the increase in interest rates. It should be noted that current sales rates are being compared to early 2022, which was a hugely successful time for the housing market, prior to the shifting market of Spring of 2022. To put this in perspective, when comparing year to date average new home sales from February 2022 to February 2023, average sales numbers in the Inland Empire are down 33 percent (per the Ryness Report dated February 19, 2023); however, when comparing year to date average new home sales from January 2020 (prior to the pandemic) to February 2023, sales are actually a little stronger (2.2 sales per week year -to-date average in January 2020 versus 3. 6 sales per week year -to-date average in February 2023).

New single -family home pricing (combines both attached and detached) in the Inland Empire has also seen changes. The median new home price in the Inland Empire changed from the peak value of $437,200 in the third quarter of 2006 to $268,155 in early 2009 (decrease of 39 percent) while the current Inland Empire median new home price is $603,000 which is down from a record high of $646,000 in July 2022 per Zonda’s latest market report (Riverside-San Bernardino-Ontario, CA CBSA January 2022). This reflects an increase of over 140 percent from the bottom of the cycle and an increase of nearly 38 percent over its peak during the Great Recession, however a decrease from the 2022 peak of 6.6 percent. New home sale prices fluctuate based on the land value and competition more than on the cost of building the home. While finishes and sizes of homes can change, the basic costs on a per square foot basis typically do not fluctuate as much as land values, however there have been inflationary increases in construction costs adding to this increase.

We have reviewed Empire Economics’ Price Point Review Study on Fontana CFD No. 99 (The Retreat) dated March 6, 2023. Empire Economics did an original Price Point Study on the project in April 2020 in order to determine their market value for the various plans within the Retreat. The “Review Study” is to ascert ain if the prices have increased or decreased since the original Study. The Empire Economics Price Point Review Study _________________________________________________________________________________________________________ Appraisal Report
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concluded that, in all cases, the current market value of the homes was, on average, 17 percent higher than the original market values in 2020.

Within our search for the most comparable actively selling new home communities, we searched the subject’s city of Fontana along with the neighboring cities of Jurupa Valley, Rialto, Ontario and Upland . We have two sets of comparable communities: one of attached communities most comparable to the Villas at the Retreat, and one of detached communities most comparable to Chateau at the Retreat. We found five additional attached communities comparable to th e Villas. The attached comparables have base prices ranging from $371,150 to $726,990, and the Villas current base pricing falls within this range from $435,450 to $527,750. We found eight additional detached communities comparable to the Chateau product l ine. The detached comparables have base prices ranging from $499,990 to $771,544, and Chateau’s current base pricing falls within this range from $540,490 to $562,280.

Existing Homes Sales and Pricing
While the previous section looked at new home sales and pricing, this section refers to existing homes in the Inland Empire. According to the California Association of Realtors’ most recent data, within overall Southern California, the median price paid for an existing single-family home in January 2023 ($738,250) reflects a decrease of 0. 7 percent from the previous month and 0.2 decrease year-over-year from $ 740,000 in January 20222.

Existing home sales in Southern California overall were down 41.1 percent year-over- year as of January 2023. The overall Southern California numbers compare to San Bernardino County with $446,900 as the median price paid for an existing home in the County in January 2023, down 4.3 percent from the previous month and 0.7 percent year over year ($45 0,000). Sales of existing homes in the County were down 53.6 percent year-over-year due to higher mortgage rates and high home prices. It is interesting to note that San Bernardino County has had the most significant drop in year -over-year sales, but is still generally in line with what’s happening in the Southern California market.

The slower sales rates in the existing home sales market is reflective of homeowners not ready to sell due to the changing market. Historically, the new home market captures around 20 percent of the overall home sales; however, in the past year, new home sales _________________________________________________________________________________________________________ Appraisal Report
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are capturing over 30 percent of total home sales. Below is a table showing the sales and prices for the Southern California area by County per the Cali fornia Association of Realtors.

Southern California Existing Home Sales
County
January
2023
December
2022
January
2022
Price MTM
% Change
Price YTY
% Change
Sales YTY
% Change
Los Angeles $778,540 $799,670 $800,960 -2.6% -2.8% -38.2% Orange $1,194,500 $1,131,760 $1,195,000 5.5% 0.0% -35.6% Riverside $585,000 $575,000 $590,000 1.7% -0.8% -46.5%
San Bernardino $446,900 $466,940 $450,000 -4.3% -0.7% -53.6% San Diego $824,950 $850,000 $875,000 -2.9% -5.7% -35.1% Ventura $815,000 $818,000 $850,000 -0.4% -4.1% -40.4%
Southern Calif. $738,250 $743,180 $740,000 -0.7% -0.2% -41.1% Source: California Association of Realtors

Based on January 2023 median existing homes prices, in comparison to all of the surrounding counties, San Bernardino County has a definite price advantage. The “San Bernardino County Advantage” (price difference between San Bernardino and surrounding counties) is $138,100 as c ompared to Riverside County, $331,640 as compared to Los Angeles County, $348,100 as compared to Ventura County, $378,050 as compared to San Diego County and $747,600 as compared to Orange County. That is, in January 2023 , the median priced home in San Ber nardino County was $ 747,600 less than the median priced home in Orange County ($1,194,500). Typically, as the price advantage widens, homebuyers are more open to commuting to further out areas. With the current work-from-home concept, the suburban areas have seen more growth which put pressure on home prices in the Inland Empire. It’s worth noting that late 2022 actually saw the San Bernardino County advantage lower compared to previous months. It’s also important to note that June of 2022 was the first mon th where the majority of Southern California counties showed median price decreases from the previous month. Most counties were seeing substantial month- to-month median price increases over the past two years, and the widespread decrease appears to be a sign that the market has turned and the pricing run up has come to an end.

In a separate attempt to capture the amount of increase in home prices, the resale activity of existing homes in the subject’s immediate area (per Redfin.com) has been reviewed. _________________________________________________________________________________________________________ Appraisal Report
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The number of sales and sale prices of existing homes within market areas sur rounding the subject are shown in the table below.

Community
Name
Location
To Subject
No. of
Sales
Jan. ‘23
Sales %
Change from
Jan. ‘22
Jan. ‘23
Median Sale
Price
Price % Change
from Jan. ‘22
North Fontana Larger Subject Vicinity 44 N/A $639,000 -2.4% Etiwanda West 19 -42.4% $1,080,000 10.2%
Rancho Fontana South 6 -76.9% $619,500 0.6%
Citrus Heights South Northeast 2 -71.4% $732,500 -3.0%
Walnut Village Immediate East 8 -46.7% $555,000 -0.89%
Rialto Far East 30 -47.4% $537,000 3.3%
Summit Heights North 5 -44.4% $748,000 3.2%
Sierra Lakes Northeast 12 -47.8% $680,000 1.5%
West End Southwest 20 -33.3% $627,500 -2.6%
Source: Redfin Housing Market Trends January 2023
The median home price of a detached resale home in the subject’s vicinity of North Fontana in January 2023 was $639,000, which is within the range of the resale detached home prices in the subject area. The low -end of the range relates to the Walnut Village and Rialto areas, which have older homes, while the high- end of the range relates to Etiwanda. Etiwanda is an upscale Rancho Cucamonga neighborhood on the west side of I-15, and stands as an outlier in the subject’s marketplace . This is because of Rancho Cucamonga’s more desirable address as well as Etiwanda’s highly ranked public schools.

The above price fluctuations from year-to-year relate to the California Department of Real Estate’s overall San Bernardino County detached home resale price decrease of 0.7 percent year -over-year from January 2022 to January 2023. This s uggests that the subject’s immediate marketplace is largely outperforming the County as a whole.

According to the Ryness Report dated February 19, 2023 , there are currently 21 new home projects in the subject’s Central-East San Bernardino submarket, with the City of Fontana housing 11 of them (including the subject’s two).

The Retreat - Sales and Pricing
The Retreat is comprised of 194 single family homes with marketed sizes from 1,165 to 2,046 square feet. The Retreat grand opened on November 13, 2021, with opening base pricing ranging from $448,000 to $596,000. Current base pricing at The Retreat ranges _________________________________________________________________________________________________________ Appraisal Report
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Kitty Siino & Associates, Inc. Page 45
from $435,450 to $562,680 which is 2.8 to 5.5 percent lower than opening base prices.

Actual closed prices, including options, upgrades , premiums and concessions , have ranged from $355,790 to $604,395. The difference between the base pricing and the actual pricing is options, upgrades and premiums paid by the buyer offset by concessions given by the builder. The net concessions for the 142 sales within the subject property average $36,976 per unit. These concessions are decided on a case by case basis and have increased over the past eight months due to fluctuating mortgage rates. Within the subject, Lennar has sold and closed 113 homes to individuals, with an additional 29 homes in escrow which are due to close at completion. The total of 142 sales equates to an absorption rate of 9.5 sales per month spread across the two product types (4.6 sales per month for Villas and 4.9 sales per month for Chateau) . This is considered to be a strong absorption rate for t he subject marketplace. It should be noted that the strong absorption rate is partially due to the generous concessions being offered. Per the Ryness Report, a new home tracking service, as of February 19, 2023 the year-to-date average sales per project per month in the Inland Empire is 3.6 homes.

Summary

The Inland Empire had seen substantial increases in pricing since 2012 with most areas, including the subject, showing astronomical increases from mid-2020 through early 2022.

While existing home sales were originally down when COVID began in spring/early summer 2020, new home sales subsequently shot up due to the existing home market supply being constrained and interest rates hitting all -time lows. The latest statistics indicate a slowdown in sales as interest rates have risen substantially. The Fontana new- home submarket is performing well above market, resulting in strong sales rates within the Retreat. The subject market area saw an increase in pricing consistent with most of Southern California throughout 2020 and 2021, and appeared to be continuing in the beginning of 2022. The past few months have seen sales slow and pricing beginning to soften. Despite uncertainty hitting the market due to rising interest rates and inflation, most observers agree that the Inland Empire housing market is healthy and population growth is still estimated to occur in the area. It is believed that as the population continues to increase, housing growth will also continue, despite a slowdown. _________________________________________________________________________________________________________ Appraisal Report
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HIGHEST AND BEST USE ANALYSIS

The highest and best use is a basic concept in real estate valuation due to the fact that it represents the underlying premise (i.e., land use) upon which the estimate of value is based. In this report, the highest and best use is defined as:

"the reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value”5

Proper application of this analysis requires the subject properties to first be considered “As If Vacant” in order to identify the “ideal” improvements in terms of use, size and timing of development. The existing improvements (if any) are then compared to the “ideal” improvements to determine if the use should be continued, altered or demolished preparatory to redevelopment of the site with a more productive or ideal use.

“As If Vacant”
In the following analysis, we have considered the sites probable uses, or those uses which are physically possible; the legality of use, or those uses which are allowed by zoning or deed restrictions; the financially feasible uses, or those uses which generate a positive return on investment; and the maximally productive uses, or those probable permissible uses which combine to give the owner of the land the highest net return on value in the foreseeable future.

Physically Possible Uses
The subject property is rectangular in shape, consists of 18.453 gross acres and 14.387 net acres per recorded Tract Map No. 20228. The site is located in the northern portion of the City of Fontana, at the northwest corner of South Highland Avenue and Beech Avenue, adjacent to the south of I -210. The lands are generally at street grade of surrounding streets and below the adjacent I-210, with the Interstate to the nort h, and existing residential homes to the east and south. To the west is the Inland Valley Islamic

5 The Appraisal of Real Estate, 11th Edition
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Kitty Siino & Associates, Inc. Page 47
Center which separates the subject from another new home community: Highland Park by Richmond American which is currently marketing homes.

The subject site has been graded for 194 single family homes: 20 pads for 100 condominiums and 94 small lots for detached homes. The condominiums are arranged in five-plex buildings in a motorcourt formation, and the small lots are also arranged in a motorcourt style and c ontain approximately 3,000 square feet each. We have reviewed an Environmental Site Assessment along with a Soils Report on the subject site. All reports reviewed concluded that the development of the site into single-family residential use is feasible; however, all mitigation measures recommended within the reports should be adhered to during construction. It is an assumption of this report that the soils are adequate to support the highest and best use, and that there are no environmental issues which would slow or thwart development of the property. This is evidenced by existing homes on the site which were recently built with City inspectors on site during construction.

An engineered drainage system appears to have been designed into a street drainage system for the entire tract. All standard utilities are available to serve the subject property.

The site has good access via I-15, exit Beech/Summit Avenue to South Highland Drive; or from I-210 exit Cherry Avenue or Citrus Avenue to South Highland Driv e. There is a regional shopping within one mile of the subject at Sierra Lakes Parkway and Citrus Avenue.

Based on the physical analysis, the size and access make the subject property physically suited for numerous types of development; however, the grading that has occurred on the site suggests residential development.

Legality of Use
The subject property is located within the City of Fontana in the County of San Bernardino.

Per the City’s General Plan, the subject site is shown as R-3, or Multiple Family 12.1-24 du/acre. The subject lands fall within the California Landings Specific Plan, which denotes the subject as “Detached & Attached Cluster Residential” with no specified minimum lot _________________________________________________________________________________________________________ Appraisal Report
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size. In addition to the General Plan and Specific Plan zoning, the subject is covered by recorded Tract Map No. 20228 (recorded March 30, 2021) which subdivide s the subject property into a single lot along with condominium maps (recorded September 13, 2021 and September 20, 2021) which divide the property into 194 single-family units (pads for 100 attached condominiums and lots of 94 detached homes) along with a community center and pool, tot lot, setback areas and internal streets.

Based on the legality of us e analysis, the type of development for which the subject properties can be utilized is narrowed to residential use. This is consistent with the findings of the physically possible uses.

Feasibility of Development
The third and fourth considerations in the highest and best use analysis are economic in nature, i.e., the use that can be expected to be most profitable. As discussed under the Inland Empire Housing Market section earlier within this report, the market showed strong increases in both sales and pricing in 2020, 2021 and the beginning of 2022. The second half of 2022 and the beginning of 2023 reflected a slowdown in sales and a softening in prices as interest rates have risen substantially. Within Fontana C FD No. 99, out of 194 proposed houses, there have been 142 home sales to date including 113 home closings.

All structures appear to be in excellent condition with no physical depreciation apparent.

Within the new home market in the greater Fontana area, we found five projects to be comparable to the subject ’s Villas (attached) product line, and eight projects to be comparables to the subject’s Chateau (detached) product line. Homebuilding had not been able to keep up with the demand in 2020 and 2021 due to several factors including:
historically low interest rates, millennials joining the home buying market and the work from home factor all adding to the demand. While the market softened in the second half of 2022, the Inland Empire is still seeing demand and new homes are still selling. Our search for land s ales found 12 land sales in the market area that we consider to be comparable. Population growth is still occurring in the area and will continue to create the need for housing.

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Based on the above analysis, the highest and best use for the subject property appears to be for single-family detached residential development at the right price points.

Maximum Productivity
Based on the market activity of residential lands in the immediate area, we have concluded there is a need/demand for residential lands.

Highest and Best Use Conclusion – “As If Vacant”
The final determinant of highest and best use, as if vacant, is the interaction of the previously discussed factors (i.e., physical, legal, financial feasibility and maximum productivity considerations). Based upon the foregoing analysis, it is our opinion that the highest and best use for the subject property is for residential land use.

Highest and Best Use – “As Improved”
The subject property consists of Villas at the Retreat and Chateau at the Retreat with 194 proposed homes which are currently being marketed by Lennar. The Retreat began selling in November 2021 and has sold 142 homes, reflecting a sales rate of approximately 9.5 sales per month spread across the two product lines . Independently the Villas has an average absorption rate of 4. 6 sales per month while Chateau has an average absorption rate of 4.9 homes per month. Base prices at The Retreat have decreased slightly since grand opening from 2.8 to 5.5 percent per floorplan, with current base pricing ranging from $4 35,450 to $562,680. In marketing the homes the builder is offering concessions on a case by case basis. These concessions have ranged from $2,409 to $103,470 with an average of $36,976 on the 142 sales to date. While the incentives are showing a softening market, per Empire Economics’ Price Point Review Study, the plan pricing has increased on average 17 percent between proposed pricing in 2020 and current pricing. The decrease in pricing from late 2021 to late 2022 and the current incentives being given are consistent with the Inland Empire market. The sales absorption rate within The Retreat is considered to be strong . As discussed under the Inland Empire Housing Market section, within the Inland Empire, the year-to-date average sales per project is 3.6 homes per month, which the subject is outperforming. All of the homes are of good design and appear to be of good quality workmanship. It appears that _________________________________________________________________________________________________________ Appraisal Report
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The Retreat is being well received and the neighborhood is selling at the correct price points for the area. Based on the above information, it is concluded that the highest and best use for the subject property, is for the continued use, as improved. _________________________________________________________________________________________________________ Appraisal Report
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Kitty Siino & Associates, Inc. Page 51

VALUATION ANALYSIS AND CONCLUSIONS

The Sales Comparison Approach will be used to value the subject property. This approach compares similar properties that have recently sold or are in escrow. In determining the value for the property, a unit of comparison needs to be addressed. For both attached and small lot cluster residential lands, they are typically sold on the basis of a finished pad for a townhome unit or finished lot for a detached unit. That is, the sales price is determined by a finished pad or lot value and then the remaining costs to develop the property to a finished condition are taken into account in the sales price. Therefore, in determining a current market value for the lands, the current condition of the lots will be considered. Our search revealed several projects similar to the subject in that they have some attached and some cluster lots. These transactions are typically looked at on a blended price per unit, taking into consideration the overall density of the project.

In the case of the compl eted home valuations , a single new -home sale is the unit of comparison. Our search will include all new home projects within the subject’s immediate and surrounding market area to find comparable new homes for sale. In determining the value for each house , a base value will be concluded for each plan which will be considered a minimum market value as most buyers typically purchase some premiums, upgrades or options which increase the price of the home.

For the completed (over 95 percent complete) builder -owned models and production houses, the homes will be valued using the Sales Comparison Approach to conclude on a retail value for each plan, followed by a Discounted Cash Flow (“DCF”) Analysis due to the single ownership. The DCF will take into account the fair market value of the completed homes (utilizing the Sales Comparison Approach), remaining development costs (if any), the marketing and carrying costs associated with selling off the homes, a profit due to the developer of the homes, and a discount rate reflecting both the risk associated with selling off the homes along with the time value of money during the estimated absorption period. A home under construction (under 95 percent complete) will be valued as a finished lot rather than attribute value to a partially complete improvement. _________________________________________________________________________________________________________ Appraisal Report
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Kitty Siino & Associates, Inc. Page 52
In the case of the individually owned homes, the concluded base value will be used for each plan and a mass appraisal technique will be addressed. In determining the concluded base value, new home sales in the area will be reviewed and compared with sales of the subject completed homes using standard methodology and statistical testing.

All of the value conclusions will take into consideration improvements and/or benefits to be funded by the Fontana CFD No. 99 Special Tax Bonds and their lien. A summary of the final value conclusions will be reported at the end of this valuation section.

Market Data Discussion – Residential Lots

Within The Retreat, there are 194 lots/pads in a physically finished condition, with 113 completed homes individually owned, 17 Lennar-owned homes that are complete or nearly complete (including 8 model homes), 53 Lennar or Hearthstone-owned homes that are under construction (under 95 percent complete), and 11 additional finished lots/pads owned by Hearthstone. As we are valuing a home under construction (under 95 percent complete) on the basis of a finished lot/pad, we will be valuing 64 lots/pads in our analysis; 19 owned by Lennar and 45 owned by Hearthstone. Please refer to Page 2 of this Appraisal Report to see the detailed ownership per unit.

We have searched the area and found the 12 transactions summarized in the Addenda to be most comparable to the subject property. The sales are reported both on a purchase price basis and on a finished lot basis. The actual purchase price is typically less, depending on the condition of the land (lots or pads) at the time the property was acquired.

Although some sales refer to “finished lots/pads,” they are typically physically finished lots/pads with some fees remaining to be paid to be considered true finished lots/pads.

Below are the details of each of the comparable land sales along with a discussion of each transaction in relationship to the subject property.

Land Sale No. 1 refers to the purchase of proposed townhomes located at the northwest corner of Pine and Meadowhouse Avenues within the master planned community of the Preserve, located in Chino about fifteen miles southwest of the subject. The Preserve is a successful master planned community with significant amenities which has been _________________________________________________________________________________________________________ Appraisal Report
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offering lots to homebuilders over the past 10 years. Beazer Homes purchased the site in June 2022 for $19,952,500 or $133,909 for each of the 149 units based on a reported finished lot price of $205,000. The product consists of 2 and 3-story attached townhomes with an overall density of 14 dwelling units per acre. The lands closed in an unimproved condition with an approved tentative tract map. In comparison to the subject property, this transaction is considered to be inferior due to the higher density and the fact that this product is for all attached units versus the subject’s attached and detached product. In addition, this sale is considered to be superior due to closing in June 2022, prior to the majority of the softening in the subject market along with no freeway frontage.

Land Sale No. 2 pertains to the Meritage Homes purchase of an assemblage of land in Redlands, northwest of Texas Street and Domestic Avenue about 15 miles east of the subject site. The parcels were all raw land at time of sale. The site was in the East Valley Corridor Sp ecific Plan designated for science research park; however, in May 2021, Meritage Homes processed the Bergamot Specific Plan which was approved by the City along with a change of zoning allowing for 317 dwelling units including: 53 single-family detached (“SFD”) lots with a minimum square footage of 7,200; 144 SFD lots with a minimum size of 3,500 square feet; and, 120 motor-court cluster SFD lots with a density of 10 dwelling units per acre. Meritage assembled and purchased the parcels from four landowners and closed between April 13
th and June 8 th, 2022. The lands were tied up
over one-year prior. The total price for the lands was $16,657,000 and the finish lot price (blended for all three products) equated to $193,000. In comparison to the subject property this location is considered to be superior due to no freeway frontage, the lot size is considered superior (7,200, 3,500 and 2,000 square feet versus the subject’s attached and cluster units) along with the fact this transaction was negotiated in early 2021, prior to a substantial amount of appreciation in the subject marketplace. The condition of the lands for this transaction is considered to be significantly inferior as they were in a raw land state and the buyer changed the zoning and processed the mapping as compared to the subject finished lots, ready to build. While the costs are accounted for in the estimated finished lot price, the risk of development, processing time and market conditions are not considered.
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Land Sale No. 3 is known as Planning Area 2 of Paradise Knolls and is located in the southwest portion of the City of Jurupa Valley at the corner of Limonite Avenue and Beach Street, just north of the Santa Ana River about ten miles south of the subject. Century Communities purchased 155 units which included 120 two story townhome units and 35 detached cluster motorcourt units. They purchased the site from Lansing Companies in March 2022 for $8,761,000, or $56,523 per unit based on an estimated finished pad of $140,000 (blended for both products). The site closed in an unimproved condition with final engineering in process. The site was the old Paradise Knolls Golf Course which was rezoned for residential development, with Richmond American Homes currently selling their successful Bridle Path at Paradise Knolls in Planning Area 1. This transaction is considered to be superior to the subject in date of sale and no freeway frontage; however, inferior in comparison to the subject due to overall density and condition at time of sale.

The majority of these units are attached with an overall density of 16 dwelling units per acre while the subject has an overall density of around 1 2 dwelling units per acre. This site was also sold in an unimproved condition while the subject is finished lots/ pads with no risk of development remaining.

Data No. 4 pertains to the January 2022 purchase of 56 units located at the southwest corner of Bonnie View Drive and Willow Avenue in Rialto, about six miles southeast of the subject site. Century Communities p urchased the property from Koba Properties for $3,290,000 or $58,750 per unit based on a reported finished lot estimated at $188,000 per brokers familiar with the transaction. The site was unimproved at time of sale with an approved Tentative Tract Map and entitlements for 56 units with an overall density of 12 dwelling units per acre. In comparison to the subject site, while the density is similar, the Rialto location is considered to be inferior to the subject’s Fontana location; however, superior due to the date of sale along with no freeway frontage.

Land Sale No. 5 refers to the December 2021 purchase of 254 lots known as Appaloosa Springs, located southwest of Limonite Avenue and Clay Street in central Jurupa Valley, about 11 miles south of the subject site. The property was purchased by DR Horton from _________________________________________________________________________________________________________ Appraisal Report
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Kitty Siino & Associates, Inc. Page 55
Inland Harbor for $22,200,000 or $87,402 per lot. The lots have a minimum lot size of 3,600 square feet , however many are up to 5,000 square feet and are mapped as conventional lots . According to brokers familiar with the transaction, the lands were purchased based on a finished lot price of $205,000. The property closed in an unimproved condition with an approved tentative tract map on the site. P er the city web site, the property is now going through final approvals. In comparison to the subject the date of sale, no freeway frontage and lot size /overall density are considered to be superior; however, the condition at time of sale is considered inferior.

Land Sale No. 6 refers to the sale of 526 lots which are known as the Gardens at Arboretum. Lennar purchased the acreage which is located 2.5 miles northeast of the subject site, from Lewis Group of Companies (North Fontana Investment Company) in December 2021 for $91,935,500 per public record. The purchase included at total of 526 units made up of 69 triplex units, 99 cluster lots with a minimum size of 2,200, 109 cluster lots with a minimum size of 2,600, 97 lots with a minimum lot size of 4,000 square feet, 88 lots with a minimum lot size of 4, 100 square feet and 64 lots with a minimum lot size of 6,000 square feet. We were unable to obtain finished lot/pad estimates on each product however brokers familiar with the transaction reported the blended finished lot price is estimated at $274,000. In comparison to the subject property, this transaction is considered to be superior in date of sale, no freeway frontage and lot size/overall density as it includes a blended price with about one-half (275 of the 526 total unit) similar in size to the subject lots (triplex, 2,200 and 2,600 square foot lots); however, the additional 251 lots are conventional lots from 4,000 square feet to 6,000 square feet. It should be noted that this transaction is considered a bulk sale due to the number of lots/pads which would have commanded a discount, making this transaction inferior to the subject when looking at number of pads/lots.

Land Sale No. 7 pertains to the purchase of 107 lots located at the northeast corner of San Savaine Road and South Highland Avenue in Fontana, adjacent to the west of the subject property. Richmond American purchased the lands which had approvals for 46 alley loaded lots and 61 motorcourt cluster lots from the Stratham Group in December _________________________________________________________________________________________________________ Appraisal Report
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2021 for $18,691,821 based on a reported blended finished lot price of $285,000. The site is adjacent to the 210 Freeway , as is the subject . Richmond American Homes is currently selling their Cascade at Highlands project is on the conventional small lots with homes from 1,860 to 2,060 square feet and current base pricing from $560,990 to $596,990 and their Talise product with sizing from 1,410 to 1,950 square feet with current base pricing from $499,990 to $573,990. The overall density of this transaction is 10 dwelling units per acre, while the subject’s area of The Retreat has a density of about 12 dwelling units per acre. The subject has about one- half attached units while this transaction is for all detached units.

Land Sale No. 8 refers to the purchase by Landsea Homes of 489 units located about

2.5 miles north of the subject northwest of Duncan Canyon Road and Interstate 15.

Landsea purchased the site in September 2021 from R ichland Communities who had entitled and processed engineering on the site. The site is raw land with mapping for 129 townhomes, 127 motorcourt cluster lots, 79 lots with a minimum size of 5,000 square feet, and 154 lots with a minimum lot size of 10,000 s quare feet. The property was reportedly purchased for $42,736,000 or a blended per unit price of $87,394 , based on a blended finished lot/pad price of $2 85,000. The significant cost to develop the lots/pads (almost $200,000 per unit) is due to the hillside condition of a portion of the site. In comparison to the subject property, this transaction is considered to be superior due about one-half of the lots being minimum 5,000 and minimum 10,000 square feet. In addition, this transaction is considered to be i nferior due to the number of lots (considered a bulk purchase) and due to the amount of grading needed on the property. While the actual costs of land development are taken into consideration, there is risk associated with the development (both time of development and grading risk) , while the subject lots are all graded and finished.

Land Sale No. 9 refers to the July 2021 purchase of 215 units known as Emerald Ridge South, located northwest of State Route 60 and Rubidoux Road about nine miles southeast of the subject property. Century Communities purchased the site from Signature Builder for $13,920,000 , or $64,744 unit for 118 attached townhomes and 97 _________________________________________________________________________________________________________ Appraisal Report
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motor court cluster lots with a minimum lot size of 3,500 square feet. Per brokers familiar with the transaction, the price was based on a blended per unit finished price of $165,000; however the detached cluster lots were reportedly based on a finished lot value of $200,000. The site has an overall density of 8.43 dwelling units per acre. The lands were unimproved at time of sale with approved maps and final engineering in process. In comparison to the subject property, the overall density is slightly lower than the subject’s 12 dwelling units per acre making this transaction slightly superior.

Land Sale Nos. 10 , 11 and 12 refer to three separate sales within the Ontario Ranch which is located about ten miles southwest of the subject property. Ontario Ranch covers about 8,200 acres with about half of the area now approved for over 16 specific plans containing new home communities. While the original planning occurred well over a decade ago, the synergy and home sales have been generally since the great recession or in the past ten years. The Ontario Ranch is consistently shown as one of the m ost successful master planned communities in the nation by way of sales. It is different in that it is not a single developer, but rather several developers of various specific plans. Land Sale No. 7 is in regards to KB Home purchasing 432 proposed units ( 149 cluster units, 174 attached townhomes and 145 courtyard townhomes ) within the Esperanza Specific Plan with an overall density of 10 dwelling units per acre. The lands were purchased in July 2021 for $68,500,000 based on a reported blended per unit price of $239,000. The property closed in an unimproved condition with mapping in place and final engineering in process. Land Sale No. 9 refers to Shea Homes purchase of 224 proposed units (87 cluster lots and 137 townhome pads) located in the Rich Haven Specific Plan which is adjacent to the north of the Esperanza Specific Plan. Shea purchased the site in July 2021 for $21,645,500 based on a blended finished lot/pad value of $185,000. Shea is now selling their Oleander and Olive neighborhoods with pricing from the $550,000’ s to the upper $700,000’s. Land Sale No. 10 refers to Lennar’s purchase of 73 proposed units located within the Subarea 29 S pecific Plan in Ontario Ranch, just southwest of Land Sale Nos. 8 and 9. Lennar paid $7,076,287 for the site based on a reported finished lot price of $195,000. The site sold in an unimproved condition with a tentative tract map for 73 proposed cluster lots. In comparison to the subject site, the location of Ontario Ranch _________________________________________________________________________________________________________ Appraisal Report
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is considered to be slightly superior due to its closer proximity to LA and Orange Counties with excellent access for commuters.

The chart below summarizes the considerations used in adjusting the market data to the subject property.

Data
No. Location Date of
Sale
Lot Size /
Density
Finished
Lot Price Comparison to Subject
1 Chino 6/22
14 du/ac
Attached

$205,000
Superior o- Amenities, Date of Sale,
No Freeway Frontage
Inferior – Density / all attached
2 Redlands 4 / 22
7,200
3,500
Cluster

5.3 du/ac
$193,000
Blended
Superior – Overall density, Date of
Sale & No Freeway Frontage
Inferior – Condition
3 Jurupa Valley 3 / 22
Attach &
Cluster

14.7 du/ac
$140,000
Blended
Superior – Date of Sale & No
Freeway Frontage
Inferior – Density & Condition

4 Rialto 1/22 12 du/ac $188,000
Superior – Date of Sale, No Freeway
Frontage
Inferior - Location
5 Jurupa Valley 12 / 21 Cluster

3.7 du/ac $205,000
Superior – Date of Sale, Density &
No Freeway Frontage
Inferior - Condition

6 Arboretum,
Fontana 12 / 21
Triplex up to
6,000 sf / 4
du/ac
$274,000
Superior – Date of Sale & No
Freeway Frontage
Inferior – Number of Lots & Condition

7 Fontana 12 / 21 Small Lot /

10.3 du/ac $285,000 Superior – Density (no attached)

8 Fontana 9 / 21
Attach to
10,000 sf /
N/A
$285,000
Superior – Lot size & Density (no
attached)
Inferior – Number of Lots & Condition

9 Jurupa Valley 7 / 21
Attach &
Cluster /

8.4 du/ac
$165,000 Superior – Density
Inferior – Condition
10 Ontario Ranch 7 / 21
Attach &
Cluster / 8.7
du/ac
$239,000 Superior – Location
11 Ontario Ranch 7 / 21
Attach &
Cluster /

12.9 du/ac
$185,000

Superior - Location

12 Ontario Ranch 6/21 Cluster /
12 du/ac $195,000 Superior - Location

As discussed under the Inland Empire County Housing Market section earlier within this report the Inland Empire real estate market rose significantly between January 2020 and June 2022 and since then has decreased. Median home pricing rose approximately fifty percent between January 2020 and June 2022, however an over eight percent decrease has been seen since that time (according to the California Association of Realtor’s). The increases were 19.6 percent in 2020; 17.5 percent in 2021, 9.6 percent the first six months _________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 59
of 2022 and an 8.6 percent decline since then. While the new home price fluctuations do affect the quality of the home (higher finishes with higher prices), most of the price fluctuations fall to the land value.

The above market data depicts a wide range of overall finished lot/pad price range from $140,000 to $285,000 with the low end being for a higher density product with about 80 percent of the units attached and the high-end all having a lower density. The subject was purchased in May 2021 based on a finished lot value estimate of $160,000, however this was prior t o significant appreciation in the marketplace. It is interesting to note that the adjacent property sold eight months later based on a $285,000 finished lot, however it did have a slightly lower density (all small lot detached units). During this time span , land transactions were becoming sparce as homes were selling at increased rates due to the low interest rates and work from home factor; thus builders, at times, paid a premium for the land. In the past six months, land sale closings have become sparse as new home prices have fallen with no new closings in the subject market since June 2022. New homebuilders had purchased land based on the higher new home sales rates and now that sales have slowed significantly, they are bui lding out the land purchased ov er the past year or two much slower than originally anticipated.

Our search of the subject area resulted in two escrows for similar density projects in Fontana which were cancelled in the past six months. These were located at the northeast and northwest corner of Citrus and Summit Avenues in Fontana. These two transactions had gone into escrow in 2021 and were anticipated to close in late 2022 based on finished lots of $215,000 for the 9.3 du/acre site and $225,000 for the 8.1 du/acre site. This would have set the top of our market value but the buyers backed out of both escrows.

Based on the market data, we have concluded that the subject lots/pads have a blended finished price of $195,000. There are 25 homes under construction (under 95 percent complete), of which 19 are owned by Lennar and six are owned by Hearthstone. In addition, Hearthstone owns 39 remaining finished pads/lots. Based on the above and _________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 60
considering the remaining costs as discussed in the Property Description section, the land value is calculated as follows:

Lennar Ownership of Lots/Pads:
19 Lots/Pads x $195,000 $3,705,000
Less: Remaining Costs ($17,160.49 x 19) ( 326,049)
Current Value of 19 Lots/Pads $3,378,951
Hearthstone Ownership:
45 Lots/Pads x $195,000 $8,775,000
Less: Remaining Costs ($17,160.49 x 45) ( 772,222) Current Value of 45 Lots/Pads $8,002,778

Retail House Valuation – The Retreat
Within The Retreat , there are 113 individually owned homes and 17 homes over 95 percent complete owned by Lennar. The builder-owned homes over 95 percent complete include nine production homes and eight model homes.

Due to the single ownership of multiple houses ( 17 homes) by the builder within the subject property, a Discounted Cash Flow (“DCF”) analysis is needed in order to arrive at a bulk value for the homes within each neighborhood. First, a retail value for each plan within The Retreat will be concluded followed by a DCF for the builder owned homes which will take into account the absorption time to sell off the homes, the costs associated with selling off the homes and any remaining costs owed by the builder, if any. The resulting revenue will be discounted usin g an appropriate rate to determine the builder - owned bulk value for the builder -owned homes. The DCF builder -owned final value will be followed by a reporting of the concluded values for the individually owned homes within each neighborhood using the concl uded base retail value for each plan with a separate check of the analysis utilizing a mass appraisal technique based on actual sales prices of the homes.

Below is a summary of the floor plans within The Retreat, with both the Villas and Chateau product lines. A listing of the improved residential comparable properties is located in the Addenda of this report. All new home comparables are located within Fontana and the _________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 61
neighboring areas of Jurupa Valley, Rialto, Ontario, and Upland. For the detached (Chateau) comparables, we were able to focus the majority of comparables in the subject’s City, as Fontana currently houses a multitude of detached actively selling projects. However, for the attached (Villas) comparables, we had to broaden our scope to include Ontario and Upland as there were only two comparable attached communities currently selling in the subject’s city of Fontana including the subject. Our search of the subject property and the local Multiple Listing Service (MLS) has resulted in no re-sales or current resale listings within either the Villas or Chateau at The Retreat . It should be noted that the building permits for the Villas indicate a larger home square footage. However; per Lennar the difference is unhabitable area, thus they are marketing the smaller square footage which will be used in our analysis. The floorplans are detailed below.

In addition to the above, there are 53 homes under construction (30 at Villas and 23 at Chateau) and an additional 11 finished lots/pads (5 at Villas and 6 at Chateau).

The most appropriate new home comparable data for Villas at The Retreat Plan 1 are shown as follows.

The Retreat by Lennar

Plan

Bed/Bath
Floors/
Parking
Marketed
Sq. Ft.

Ind.

Owned
Bldr.

Owned
Villas at the Retreat (Attached Condos)
1C 2 / 2 2 / 2 1,165 11 2*
2C 2 / 2 2 / 2 1,243 11 2*
3 3 / 3 2 / 2 1,687 10 3*
4 3 / 3 2 / 2 1,771 10 3*
5 3 / 3 2 / 2 1,895 10 3*
Villas Subtotals: 52 13
Chateau at the Retreat (Small Lot Detached Condos)
1 3 / 3 2 / 2 + CP 1,724 17 2*
2 3 / 2.5 2 / 2 + CP 1,961 13 0
3 3 / 2.5 2 / 2 + CP 1,987 13 1*
4 3 / 2.5 2 / 2 2,046 18 1*
Chateau Subtotals: 61 4
The Retreat Total: 113 17
_________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 62
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 1C 2 / 2 2 / 2 1,165 --
A1 2C 2 / 2 2 / 2 1,243 $356.64
A2 1C 2 / 2 2 / 2 1,309 $329.26
A3 2 2 / 2.5 2 / 2T 1,391 $331.06
A3 3 3 / 3 2 / 2 1,324 $326.66
A4 1C 1 / 1.5 2 / 1 972 $431.74
A4 2 2 / 2.5 2 / 2T 1,110 $457.03
A5 1C 2 / 2 2 / 2 1,216 $429.19
A6 1 2 / 2.5 3 / 2T 1,360 $400.73
• “C” denotes “Carriage” unit (first floor only holds garage and stairwell, all living and bedroom space on second floor)
• “A” stands for “Attached” home
• “T” denotes for “Tandem” garage

The comparable communities are located in Fontana, Upland and Ontario, as our search was expanded in order to include attached product communities with floorplans sized similar to the subject. All are of similar quality, design and appeal. Adjustments were considered (when applicable) for location, school districts, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $329.26 to $457.03 per square foot. Villas Plan 1 is shown as 1,252 square feet on the building permit however is marketed as 1,165 square feet. We will use the marketed square footage in our analysis. The Retreat Villas Plan 1 has a current base asking price of $376.35 per square foot. There have been 11 closings of Villas Plan 1 with sales prices ranging from $305.40 to $366.78 per square foot. There are three current escrows of Villas Plan 1 with a sales price range of $311.62 to $385.41 per square foot. It should be noted that the reported sales prices include upgrades, premiums and options along with any concessions given by the builder , while the concluded value relates to a base price for the plan including concessions. The builder is currently giving concessions which may include an interest rate buy-down. For Villas Plan 1 the concessions range from $8,170 to $69,611 or from $7.01 to $59.75 per square foot. It should also be noted that the escrow prices are lower than the closed sales, suggesting a decreasing market. It has been concluded that Villas Plan 1 has a base current market value of $310.00 per square foot. This calculates as follows:

1,165 sf x $310.00 = $361,150

_________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 63
The most appropriate new home comparable data for Villas at The Retreat Plan 2 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 2C 2 / 2 2 / 2 1,243 --
A1 1C 2 / 2 2 / 2 1,165 $376.35
A2 1C 2 / 2 2 / 2 1,309 $329.26
A3 2 2 / 2.5 2 / 2T 1,391 $331.06
A3 3 3 / 3 2 / 2 1,324 $326.66
A4 2 2 / 2.5 2 / 2T 1,110 $457.03
A5 1C 2 / 2 2 / 2 1,216 $429.19
A5 2 3 / 2.5 2 / 2 1,389 $410.30
A6 1 2 / 2.5 3 / 2T 1,360 $400.73
• “C” denotes “Carriage” unit (first floor only holds garage and stairwell, all living and bedroom space on second floor)
• “A” stands for “Attached” home
• “T” denotes for “Tandem” garage

The Retreat Villas Plan 2 has a current base asking price of $356.64 per square foot. There have been 11 closings of Villas Plan 2 with sales prices ranging from $335.33 to $385.92 per square foot. There are four current escrows of Villas Plan 2 with a sales price range of $312.13 to $328.81 per square foot. It should be noted that the reported sales prices include upgrades, premiums and options along with any concessions given by the builder, while the concluded value relates to a base price for the plan including concessions. The builder is currently giving concessions which may include an interest rate buy-down. For Villas Plan 2 the concessions range from $2,409 to $51,514 or from $1.94 to $41.44 per square foot. It _________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 64
should also be noted that the escrow price range is lower than the closed sales, suggesting a decreasing market. It has been concluded that Villas at The Retreat Plan 2 has a base current market value of $310.00 per square foot. This calculates as follows:
1,243 sf x $310.00 = $385,330

The most appropriate new home comparable data for Villas at The Retreat Plan 3 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 3 3 / 3 2 / 2 1,687 --
A1 4 3 / 3 2 / 2 1,771 $290.88
A2 3 3 / 2.5 2 / 2 1,604 $307.98
A3 4 3 / 2.5 2 / 2 1,652 $305.18
A3 5 3 / 2.5 2 / 2 1,826 $277.93
A4 4 3 / 2.5 2 / 2 1,692 $340.89
A4 5 3 / 2.5 2 / 2 1,722 $351.36
A4 6 3 / 2.5 2 / 2 1,799 $337.98
A5 3 3 / 2.5 2 / 2 1,628 $375.86
A6 3 3 / 3.5 3 / 2 1,654 $397.21
• “A” stands for “Attached” home

The Villas Plan 3 has a current base asking price of $298.93 per square foot. There have been 10 closings of Villas at the Retreat Plan 3 with sales prices ranging from $258.76 to $306.46 per square foot. There are three current escrows of Villas Plan 3 with a sales price _________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 65
range of $266.63 to $272.63 per square foot. It should be noted that the reported sales prices include upgrades, premiums and options along with any concessions given by the builder, while the concluded value relates to a base price for the plan including concessions.

The builder is currently giving concessions which may include an interest rate buy-down.

For Villas Plan 3 the concessions range from $8,000 to $92,075 or from $4.74 to $54.58 per square foot. It should also be noted that some escrow prices are lower than the closed sales, suggesting a decreasing market. It has been concluded that Villas Plan 3 has a base current market value of $260.00 per square foot. This calculates as follows:
1,687 sf x $260.00 = $438,620

The most appropriate new home comparable data for Villas at the Retreat Plan 4 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 4 3 / 3 2 / 2 1,771 --
A1 3 3 / 3 2 / 2 1,687 $298.93
A1 5 3 / 3 2 / 2 1,895 $278.50
A2 3 3 / 2.5 2 / 2 1,604 $307.98
A2 4 3 / 3 2 / 2 1,900 $277.37
A3 4 3 / 2.5 2 / 2 1,652 $305.18
A3 5 3 / 2.5 2 / 2 1,826 $277.93
A4 4 3 / 2.5 2 / 2 1,692 $340.89
A4 5 3 / 2.5 2 / 2 1,722 $351.36
A4 6 3 / 2.5 2 / 2 1,799 $337.98
A5 3 3 / 2.5 2 / 2 1,628 $375.86
A6 3 3 / 3.5 3 / 2 1,654 $397.21
• “A” stands for “Attached” home

The Villas at the Retreat Plan 4 has a current base asking price of $290.88 per square foot.

There have been 10 closings of Villas Plan 4 with sales prices ranging from $239.35 to $320.72 per square foot. There are four current escrows of Villas Plan 4 with a sales price range of $245.98 to $268.34 per square foot. It should be noted that the reported sales prices include upgrades, premiums and options along with any concessions given by the builder, while the concluded value relates to a base price for the plan including concessions.

The builder is currently giving concessions which may include an interest rate buy-down.

For Villas Plan 4 the concessions range from $2,657 to $103,470 or from $1.50 to $58.42 per square foot. It should also be noted that some escrow prices are lower than the closed sales, suggesting a decreasing market. It has been concluded that Villas Plan 4 has a base current market value of $245.00 per square foot. This calculates as follows:
1,771 sf x $245.00 = $433,895

The most appropriate new home comparable data for The Retreat Villas Plan 5 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 5 3 / 3 2 / 2 1,895 --
A1 4 3 / 3 2 / 2 1,771 $290.88
A2 4 3 / 3 2 / 2 1,900 $277.37
A2 5 4 / 3 2 / 2 1,922 $286.16
A3 5 3 / 2.5 2 / 2 1,826 $277.93
A4 6 3 / 2.5 2 / 2 1,799 $337.98
A6 4 4 / 3.5 3 / 2 2,202 $330.15
• “A” stands for “Attached” home

The comparable communities are located in Fontana, Upland and Ontario, as our search was expanded in order to include attached product communities with floorplans sized similar to the subject. All are of similar quality, design and appeal. Adjustments were considered (when applicable) for location, school districts, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $277.37 to $337.98 per square foot. Villas Plan 5 is shown as 2,024 square feet on the building permit however is marketed as 1,895 square feet. We will use the marketed square _________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 67
footage in our analysis. The Villas at the Retreat Plan 5 has a current base asking price of $278.50 per square foot. There have been 10 closings of Villas Plan 5 with sales prices ranging from $207.62 to $282.03 per square foot. There are three current escrows of Villas Plan 5 with a sales price range of $241.60 to $266.23 per square foot. It should be noted that the reported sales prices include upgrades, premiums and options along with any concessions given by the builder, while the concluded value relates to a base price for the plan including concessions. The builder is currently giving concessions which may include an interest rate buy-down. For Villas Plan 5 the concessions range from $3,956 to $95,552 or from $2.09 to $50.42 per square foot. It should also be noted that some escrow prices are lower than the closed sales, suggesting a decreasing market. It has been concluded that Villas Plan 5 has a base current market value of $2 35.00 per square foot. This calculates as follows:
1,895 sf x $235.00 = $445,325

The most appropriate new home comparable data for Chateau at The Retreat Plan 1 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 1 3 / 3 2 / 2 + CP 1,724 --
D1 2 3 / 2.5 2 / 2 + CP 1,961 $286.77
D2 1 3 / 2.5 2 / 2 1,860 $301.61
D3 2 3 / 2.5 2 / 2 1,650 $319.99
D3 3 3 / 2.5 2 / 2 1,710 $313.44
D4 1 3 / 2.5 2 / 2 1,879 $284.73
D6 1 3 / 2.5 2 / 2 1,795 $306.99
D6 2 3 / 2.5 2 / 2 1,832 $297.48
D7 1 3 / 2.5 2 / 2 1,822 $298.47
D9 2 3 / 2.5 2 / 2 1,705 $318.07
D9 3 3 / 2.5 2 / 2 1,843 $306.30
• “D” stands for “Detached” home
• “CP” denotes a covered “Car Port” in addition to garage(s)

The majority of the comparable communities are located in Fontana; however, our search was expanded to the surrounding cities of Jurupa Valley and Rialto in order to include comparables with lots sized similar to the subject. Adjustments were considered (when applicable) for location, lot size, school districts, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage _________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 68
space and other amenities. The new home comparables have a base price range from $284.73 to $319.99 per square foot. Chateau at The Retreat Plan 1 has a current base asking price of $313.51 per square foot. There have been 17 closings of Chateau Plan 1 with sales prices ranging from $268.86 to $345.17 per square foot. There are three current escrows of Chateau Plan 1 with a sales price range of $278.93 to $292.10 per square foot.

It should be noted that the reported sales prices include upgrades, premiums and options along with any concessions given by the builder, while the concluded value relates to a base price for the plan including concessions. The builder is currently giving concessions which may include an interest rate buy-down. For Chateau Plan 1 the concessions range from $4,729 to $89,167 or from $2.74 to $51.72 per square foot. It should also be noted that the current escrows are near the bottom of the closed sales, suggesting the market is not appreciating. It has been concluded that Chateau Plan 1 has a base current market value of $270.00 per square foot. This calculates as follows:
1,724 sf x $270.00 = $465,480

The most appropriate new home comparable data for Chateau at The Retreat Plan 2 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 2 3 / 2.5 2 / 2+ CP 1,961 --
D1 1 3 / 3 2 / 2 + CP 1,724 $313.51
D1 3 3 / 2.5 2 / 2 + CP 1,987 $282.66
D2 1 3 / 2.5 2 / 2 1,860 $301.61
D2 2 3 / 2.5 2 / 3 1,930 $297.92
D3 4 4 / 3 2 / 2 1,950 $294.35
D4 2 3 / 2.5 2 / 3 1,997 $280.77
D5 1 3 / 3 2 / 2 2,006 $344.25
D6 2 3 / 2.5 2 / 2 1,832 $297.48
D6 3 3 / 2.5 2 / 2 2,007 $281.65
D7 2 3 / 2.5 2 / 2 1,932 $290.91
D8 1 3 / 2 1 / 2 2,080 $278.84
D9 3 3 / 2.5 2 / 2 1,843 $306.30
• “D” stands for “Detached” home
• “CP” denotes a covered “Car Port” in addition to garage(s)

The majority of the comparable communities are located in Fontana; however, our search was expanded to the surrounding cities of Jurupa Valley and Rialto in order to include comparables with lots sized similar to the subject. Adjustments were considered (w hen _________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 69
applicable) for location, lot size, school districts, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $278.84 to $344.25 per square foot. Chateau at The Retreat Plan 2 has a current base asking price of $286.77 per square foot. There have been 13 closings of Chateau Plan 2 with sales prices ranging from $249.19 to $307.78 per square foot. There is one current escrow of a Chateau Plan 2 with a sales price of $246.84 per square foot. It should be noted that the reported sales prices include upgrades , premiums and options along with any concessions given by the builder, while the concluded value relates to a base price for the plan including concessions. The builder is currently giving concessions which may include an interest rate buy -down. For Chateau Plan 2 the concessions range from $4,848 to $88,336 or from $2.47 to $45.05 per square foot. It should also be noted that the current escrows are near the bottom of the closed sales, suggesting the market is not appreciating.

It has been concluded that Chateau Plan 2 has a base current market value of $245.00 per square foot. This calculates as follows:
1,961 sf x $245.00 = $480,445

The most appropriate new home comparable data for Chateau at The Retreat Plan 3 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 3 3 / 2.5 2 / 2+ CP 1,987 --
D1 2 3 / 2.5 2 / 2 + CP 1,961 $286.77
D1 4 3 / 2.5 2 / 2 2,046 $275.01
D2 1 3 / 2.5 2 / 2 1,860 $301.61
D2 2 3 / 2.5 2 / 3 1,930 $297.92
D2 3 4 / 3 2 / 3 2,065 $290.55
D3 4 4 / 3 2 / 2 1,950 $294.35
D4 2 3 / 2.5 2 / 3 1,997 $280.77
D5 1 3 / 3 2 / 2 2,006 $344.25
D6 3 3 / 2.5 2 / 2 2,007 $281.65
D7 2 3 / 2.5 2 / 2 1,932 $290.91
D8 1 3 / 2 1 / 2 2,080 $278.84
D8 2 3 / 2.5 2 / 2 2,180 $242.20
D9 4 4 / 3 2 / 2 2,064 $286.58
• “D” stands for “Detached” home
• “CP” denotes a covered “Car Port” in addition to garage(s)

_________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 70
The majority of the comparable communities are located in Fontana; however, our search was expanded to the surrounding cities of Jurupa Valley and Rialto in order to include comparables with lots sized similar to the subject. Adjustments were considered (when applicable) for location, lot size, school districts, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $242.20 to $344.25 per square foot. Chateau at The Retreat Plan 3 has a current base asking price of $282.66 per square foot. There have been 13 closings of Chateau Plan 3 with sales prices ranging from $262.51 to $303.11 per square foot. There are three current escrows of Chateau Plan 3 with a sales price range of $249.34 to $262.87 per square foot.

It should be noted that the reported sales prices include upgrades, premiums and options along with any concessions given by the builder, while the concluded value relates to a base price for the plan including concessions. The builder is currently giving concessions which may include an interest rate buy-down. For Chateau Plan 3 the concessions range from $3,959 to $64,140 or from $1.99 to $32.28 per square foot. It should also be noted that the current escrows are near the bottom of the closed sales, suggesting the market is not appreciating. It has been concluded that Chateau Plan 3 has a base current market value of $248.00 per square foot. This calculates as follows:
1,987 sf x $248.00 = $492,776

The most appropriate new home comparable data for Chateau at The Retreat Plan 4 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 4 3 / 2.5 2 / 2 2,046 --
D1 2 3 / 2.5 2 / 2 + CP 1,961 $286.77
D1 3 3 / 2.5 2 / 2 + CP 1,987 $282.66
D2 3 4 / 3 2 / 3 2,065 $290.55
D3 4 4 / 3 2 / 2 1,950 $294.35
D4 2 3 / 2.5 2 / 3 1,997 $280.77
D5 1 3 / 3 2 / 2 2,006 $344.25
D6 3 3 / 2.5 2 / 2 2,007 $281.65
D7 2 3 / 2.5 2 / 2 1,932 $290.91
D7 3 3 / 2.5 2 / 2 2,207 $268.21
D8 1 3 / 2 1 / 2 2,080 $278.84
D9 4 4 / 3 2 / 2 2,064 $286.58
• “D” stands for “Detached” home
• “CP” denotes a covered “Car Port” in addition to garage(s) _________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 71
The majority of the comparable communities are located in Fontana; however, our search was expanded to the surrounding cities of Jurupa Valley and Rialto in order to include comparables with lots sized similar to the subject. Adjustments were considered (when applicable) for location, lot size, school districts, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $242.20 to $344.25 per square foot. Chateau at The Retreat Plan 4 has a current base asking price of $275.01 per square foot. There have been 18 closings of Chateau Plan 4 with sales prices ranging from $260.57 to $295.40 per square foot. There are five current escrows of Chateau Plan 4 with a sales price range of $247.83 to $270.89 per square foot.

It should be noted that the reported sales prices include upgrades, premiums and options along with any concessions given by the builder, while the concluded value relates to a base price for the plan. The builder is currently giving concessions which may include an interest rate buy-down. For Chateau Plan 4 the concessions range from $7,151 to $78,388 or from $3.50 to $38.31 per square foot. It should also be noted that some escrow prices are lower than the closed sales, suggesting a decreasing market. It has been concluded that Chateau Plan 4 has a base current market value of $ 245.00 per square foot. This calculates as follows:
2,046 sf x $245.00 = $501,270

Builder Owned Retail Value – The Retreat

Within the subject property, there are 17 Lennar-owned houses over 95 percent complete, eight of which are models. Per interviews with builders, upgrades and landscape/hardscape of up to $100,000 are installed in the model homes, however, the builders generally consider this a marketing cost and do not anticipate recovering this investment on a dollar -for-dollar basis. Based on historical information, home sizes and fixtures, actual model home sales within the subject area and the current real estate market, a consideration of a $40,000 premium has been included with each of the model homes. As con cluded above, the retail base value conclusions for the builder -owned homes within The Retreat are calculated as follows:

_________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 72
Villas Plan 1 (2 x $361,150) $ 722,300
Villas Plan 2 (2 x $385,330) 770,660
Villas Plan 3 (3 x $438,620) 1,315,860
Villas Plan 4 (3 x $433,895) 1,301,685
Villas Plan 5 (3 x $445,325) 1,335,975
Chateau Plan 1 (2 x $465,480) 930,960
Chateau Plan 2 (0 x $480,445) 0
Chateau Plan 3 (1 x $492,776) 492,776
Chateau Plan 4 (1 x $501,270) 501,270
Model Upgrades (8 x $40,000) 320,000
Total Retail Value $7,691,486

Absorption Period
In order to arrive at an absorption period for the 17 builder-owned homes, the absorption rate for the subject neighborhood along with the surrounding developments has been reviewed. The Retreat grand opened in November 2021 and consists of 194 homes. There have been 142 sales since November 2021 suggesting an average absorption of 9.5 homes per month across the two product lines, which is considered to be very good for the subject area with the subject’s price points. When looking at each product line individually, the Villas have averaged a sales pace of 4.6 sales per month while Chateau has averaged a sales pace of 4.9 sales per month. It is interesting to note that Chateau’s sales rate has slowed considerably with the past four months averaging 2.0 sales per month. Taking into consideration the product, concluded sales prices and current escrows, along with the current unstable interest rates, it has been concluded that the 17 builder-owned homes will be absorbed within a five-month period at the concluded values.

Remaining Costs
As disc ussed under the remaining costs section earlier within this report, there are $17,160.49 per lot in remaining land development costs associated with the builder - owned homes, which equates to a total of $ 291,728 for the subject 17 homes. It is an assumption of this analysis that the remaining costs will be spread evenly over the five- month absorption time period.

Expenses
In determining an expense rate, several builders in the subject area have been interviewed as to their expenses on selling existing inventory. Expenses include marketing and general _________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 73
administrative costs. These costs typically range from six to ten percent depending on varying factors such as absorption period, intensity of marketing, etc. Due to the volatile market, we are considering e ight percent for marketing expenses and two percent for general and administrative costs for a total of ten percent in expenses for this analysis.

Profit
Several interviews with merchant builders in the area were conducted in order to determine an appropriate profit percentage for the subject properties. In the early 2000s, developers typically attempted to achieve a 10 to 12 percent profit based on gross sales proceeds. During the early great recession, this range was lowered considerably to six to 10 percent with some builders drastically lowering their profit potential in order to maintain their work force. A ten percent profit is considered appropriate in the analysis for this project.

Discount Rate
In selecting a discount rate, the following was completed:

1. Interviews with merchant builders in the San Bernardino area

2. Review of current market conditions including current market rates as well as yields reflected in other markets (i.e., municipal bonds, corporate bonds, etc.)

3. The quality, construction, historical sales and product on the subject property

The homes within The Retreat began selling in November 2021 with the product being well received in the marketplace with a 9.5 sales per month average across the two product lines.

While Chateau home sales have slowed in the past three months, the Villa home sales have stayed steady the past three months. Based on the sales rate within both communities in the subject project, the competition, the product and location, and current market conditions, a 10 percent discount rate is considered appropriate for this analysis.

Discounted Cash Flow Summary
The discounted revenue (see DCF Analyses in addenda) for the builder -owned homes within The Retreat is $5,717,727.

19 Lots/Pads owned by Lennar $ 3,378,951
17 Houses (including 8 models) Lennar-owned 5,717,727 Total Lennar Ownership $ 9,096,678

The Retreat – Hearthstone Ownership

45 Lots/Pads owned by Hearthstone $ 8,002,778

Individual Owners Value Conclusion – The Retreat
There are 113 individually owned homes within the subject property. Based on the concluded value for each plan, the individually owned homes within the subject property have a minimum market value of:

Villas Plan 1 (11 x $361,150) $ 3,972,650
Villas Plan 2 (11 x $385,330) 4,238,630
Villas Plan 3 (10 x $438,620) 4,386,200
Villas Plan 4 (10 x $433,895) 4,338,950
Villas Plan 5 (10 x $445,325) 4,453,250
Chateau Plan 1 (17 x $465,480) 7,913,160
Chateau Plan 2 (13 x $480,445) 6,245,785
Chateau Plan 3 (13 x $492,776) 6,406,088
Chateau Plan 4 (18 x $501,270) 9,022,860
Total Individual Owned $50,977,573

In an additional review, we have reviewed the original builder sales prices for the homes within the subject property. Closings for the 113 homes occurred between May 16, 2022 and February 15, 2023. The reported closing prices by the builder for the 113 individually owned homes total $57,778,049, which is 13.3 percent higher than the concluded value.

The builder’s reported prices include premiums, upgrades and purchased options as well as took into consideration the concessions given by the builder, which would typically be higher than the base pricing. However, in the past year public builders have increased concessions with rate buy -downs occurring which have totaled up to $100,000 in concessions with an average of over $36,000 per sale within the Retreat. When reviewing the amount of concessions, the sales prior to May 2022 (when the market began softening due to increasing interest rates) had an average concession of $20,901 per unit while the sales since May 1, 2022 have an average concession of $46,264 or over twice the amount _________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 75
in early 2022. The current market and most recent sales not only reflect higher incentives, but also lower pricing. Opening base prices in November 2021 ranged from $448,000 to $531,000 for the Villas while the Chateau opening base prices were from $570,900 to $596,000. December base pricing for the Villas was from $418,000 to $515,000 and $546,900 to $574,000 for the Chateau. C urrent base prices are from $435,450 to $527,750 for the Villas and from $540,490 to $562,680 for Chateau. This shows the adjusting of prices to meet the market and suggests that pricing has been decreasing.

The decreasing market and the increasing incentives have been taken into account in our analysis. The above valuation is for the minimum market v alue as it takes into consideration the base plan price only and does not take into account any options, premiums or upgrades which were purchased by the buyers ; however it does take concessions into consideration. It is our conclusion that the original builder sales prices further substantiate the concluded minimum market value for the individually owned homes

APPRAISAL REPORT SUMMARY

The appraisal assignment was to value the subject property within Fontana CFD No. 99 which consists of 194 proposed residential units. The 194 units are known as The Retreat, being marketed and sold by Lennar, and are located in the northern portion of the City of Fontana. The subject includes two product lines: The Villas are attached units and comprises 100 of the 1 94 units, and Chateau which are small lot detached units and comprise 94 of the 194 total units. As of February 17, 2023, individuals have pur chased and closed on 113 of the total 194 proposed houses, with an additional 29 homes in escrow which are due to close upon completion. The community has enjoyed good sales rates, however a slowdown in the absorption has been seen within the Chateau product line over the last few months. All structures appear to be in excellent condition with no visible depreciation. We have reviewed builder sales and reviewed the local MLS for current listings or resales and found none.

The subject properties were valued utilizing the Sales Comparison Approach to value, a Discounted Cash Flow Analysis, and a Mass Appraisal Technique for the individually owned homes. A minimum value was determ ined by concluding at a base value for the individually owned homes. The valuation took into account the improvements/benefits to be funded by the special tax Fontana CFD No. 99 bond proceeds along with the Fontana CFD No. 99 special tax lien. The concluded aggregate value for the subject properties, subject to their respective special tax lien, is:

The Retreat:

Hearthstone Ownership (45 pads) $ 8,002,778
Lennar Ownership (19 pads & 17 houses) $ 9,096,678
Individual Owners (113 houses) $ 50,977,573
Total Aggregate Value CFD No. 99 $ 68,077,029

The above values are stated as of said date of value and subject to the attached Assumptions and Limiting Conditions and Appraiser’s Certification. _________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 77
APPRAISER’S CERTIFICATION

The appraiser certifies that to the best of his knowledge and belief:

1. The statements of fact contained in this report are true and correct.

2. The reported analyses, opinions and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased, professional analyses, opinions and conclusions.

3. The appraiser has no present or prospective interest in the property that is the subject of this report, and no personal interest or bias with respect to the parties involved.

4. The appraiser’s compensation is 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 estimate, the attainment of a stipulated result or the occurrence of a subsequent event.

5. This appraisal was not based on a requested minimum valuation, a specific valuation or the approval of a loan.

6. The analyses, opinions and conclusions were developed, and this report was prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.

7. Kitty Siino has made a personal inspection of the property that is the subject of this report.

8. Kitty Siino has performed any appraisal services on the subject property in the past three years. In January 2023 an appraisal was completed with a date of value of January 3, 2023. Due to a time delay, an update was needed which is this report.

9. No other appraisers have provided significant professional as sistance to the persons signing this report.

10. The reported analyses, opinions and conclusions were developed, and this report was prepared, in conformity with the requirements of the Appraisal Institute’s Code of Professional Ethics and Standards of Pr ofessional Appraisal Practice, which include the Uniform Standards of Professional Appraisal Practice.

11. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

12. As of the date of this report, Kitty Siino has completed the requirements of the continuing education program of the Appraisal Institute.

Kitty S. Siino, MAI
State Certified General
Real Estate Appraiser (AG004793)

ADDENDA

FONTANA CFD NO. 99 BOUNDARY MAP

TRACT MAP No. 20228
& Condominium Maps

DISCOUNTED CASH FLOW ANALYSIS

Fontana CFD 99 The Retreat - Lennar-Owned Houses Disc. Cash Flow Analysis

MONTH Months MONTH 1 MONTH 2 MONTH 3 MONTH 4 MONTH 5 TOTAL 5 INCOME:

Retail Sales 7,691,486 $1,538,297 $1,538,297 $1,538,297 $1,538,297 $1,538,297 $7,691,486

TOTAL INCOME $1,538,297 $1,538,297 $1,538,297 $1,538,297 $1,538,297 $7,691,486

EXPENSES:

Remaining Costs ($58,345) ($58,346) ($58,345) ($58,346) ($58,346) ($291,728) Marketing & Carrying Expenses 10% ($153,830) ($153,830) ($153,830) ($153,830) ($153,830) ($769,149) Profit 10% ($153,830) ($153,830) ($153,830) ($153,830) ($153,830) ($769,149)

TOTAL EXPENSES ($366,004) ($366,005) ($366,004) ($366,005) ($366,005) ($1,830,025)

NET CASH FLOW $1,172,293 $1,172,292 $1,172,293 $1,172,292 $1,172,292 $5,861,461 Discount Factor 10% 0.9917 0.9835 0.9754 0.9673 0.9594

DISCOUNTED CASH FLOW $1,162,604 $1,152,995 $1,143,467 $1,134,016 $1,124,644 $5,717,727

CUMULATIVE DISCOUNTED $1,162,604 $2,315,599 $3,459,067 $4,593,083 $5,717,727 $5,717,727

CASH FLOW

FINISHED LOT LAND SALES MAP
& SUMMARY CHART

FINISHED LOT LAND SALES MAP

FINISHED LOT LAND SALES SUMMARY CHART

Data
No. Location / APN / Buyer / Seller Sales
Date
#
Lots Lot Size Sales Price /
Price per Lot
Est.

Finished
Lot Price
Comments
1 Zinnia at the Preserve, NE/W of Pine
Avenue & Meadowhouse Avenue,
Chino / 1057-041-13, 1057-061-12 /
Beazer Homes / Lewis Group of
Companies
Jun-22 149 14 du/ac

$19,952,500 /
$133,909

$205,000
Closed in unimproved condition with an
approved tentative tract map. This project
consists of 2/3-story attached townhomes.
2 Bergamont, NW of Texas Street &
Domestic Avenue, Redlands / 0167-
031-02 / Meritage Homes / Various
Investors (Assemblage)
Apr-22 –
June 22 317
7,200
3,500
10 du/ac
$16,657,000 / $193,000
(blended)
Closed in unimproved condition with an
approved Specific Plan, Environmental Impact
Report, and Tentative Tract Map. It consists of
three planning areas:
- PA 1: 53 lots, SFD, 7,200 sf
- PA 2: 144 lots, SFD, 3,500 sf
- PA 3: 120 lots, Motorcourt Cluster, 10 du/ac
$52,546
3 Planning Area 2 of Paradise Knolls,
SWC & SEC of Limonite Avenue &
Beach Street, Jurupa Valley / 162-230-
012, -014 / Century Communities /
Lansing Companies
Mar-22 155 16 du/acre
(blended)
$8,761,000 / $140,000
(blended)
Closed in unimproved condition with final
engineering in process. Consists of 120 two
story townhomes and 35 detached motorcourt
cluster units.
$56,523
4 The Depot, SWC Bonnie View Dr and
willow Avenue, Rialto / 0131-021-36,
37 and 38 / Century Communities /
Koba Properties
Jan-22 56 12 du/ac

$3,290,000 /
$58,750 $188,000 Closed in an unimproved condition with an approved TTM
5 Appaloosa Springs, SW of Limonite
Avenue & Clay Street, Jurupa Valley /
163-400-001, -052 / DR Horton /
Inland Harbor
Dec-21 254 3,600 $22,200,000 / $205,000
Closed in unimproved condition with an
approved tentative tract map. Single product
line SFD with lots ranging 3,600-5,000 sf $87,402
6 Gardens at Arboretum, NWC of Sierra
Avenue & Casa Grande Avenue,
Fontana / 0239-131-45 / Lennar /
Lewis Group of Companies
Dec-21 526
4 du/ac
(blended)
Triplex up
to 6,000 sf

$91,935,447 /
$174,782

$274,000
(blended)
Gardens at Arboretum was closed in
unimproved condition with an approved
tentative tract map. It consists of six (6) product
lines:
• Triplex, 69 Units
• SFD (2,200 sf), 99 Lots
• SFD (2,600 sf), 109 Lots
• SFD (4,000 sf), 97 Lots
• SFD (4,990 sf), 88 Lots
• SFD (6,000 sf), 64 Lots

7 Highland, NW of Beech Avenue &
South Highland Avenue, Fontana /
0228-021-09 / Richmond American
Homes / Stratham Group
Dec-21 107
10 du/ac
(blended)
Small
Detached
$18,691,821 / $285,000
(blended)
Highland was closed in unimproved condition
with final engineering in process. It consists of
two (2) product lines:
• Alley-Load, 46 Lots
• Motorcourt Cluster, 61 Lots
$174,690
8 Monarch Hills (Narra Hills), NW of
Duncan Canyon Road & Interstate 15,
Fontana / 0226-075-18 / Landsea
Homes / Richland Communities
Sept-21 489 Varies $42,736,000 / $285,000*
*Represents blended price for townhomes,
cluster, 5,000 sf lots and 10,000 sf lots. Sold in
unimproved condition. Portion is hillside
allowing for views.
-PA1, 154 lots, 10,000 sf ($360,000 FLV)
- PA 2, 79 lots, 5,000 sf ($295,000 FLV)
-PA 3, 127 lots, cluster product ($245,000 FLV)
-PA 4, 129 units, townhomes ($175,000 FLV)
$87,395*
9 Emerald Ridge South, NW of State
Route 60 & Rubidoux Road, Jurupa
Valley / 178-191-01, 02, 04 & 15 /
Century Communities / Signature
Builder
July-21 215 12 du/ac
3,500
$13,920,000 / $165,000
(blended)
Closed in unimproved condition with final
engineering in process.

Emerald Ridge South consists of two product
lines:
• 118 townhomes, 12 du/ac
• 97 lots, 3,500 sf ($200,000 FLV)
$64,744
10 Esperanza, SEC of Edison Avenue &
Scholar Way, Ontario / 0218-252-08 /
KB Home / Richland Communities
July-21 432 10 du/ac
(blended)
$68,500,000 / $239,000
(blended)
Closed in unimproved condition with final
engineering in process. Esperanza consists of
149 cluster units, 174 townhomes, and 145
courtyard townhomes.
$158,565
11 Gateway Ontario, NWC of Clifton
Avenue & Edison Avenue, Ontario /
0218-211-12 / Shea Homes / GDC
Communities
July-21 224 12 du/ac
(blended)
$21,645,500 / $185,000
(blended)
Closed in unimproved condition with final
engineering in process. Gateway Ontario
consists of 87 cluster units and 137 townhomes.
$96,632
12 Planning Area 27 of Subarea 29, SW
of Sumner Avenue and Merrill Avenue,
Ontario / 1073-171-16 / Century /
Lewis Group of Companies
June-21 73 12 du/ac
$7,076,287 / $195,000
Closed in unimproved condition with an
approved tentative tract map. PA 27 consists of
cluster product. $96,935

IMPROVED ATTACHED RESIDENTIAL

SALES MAP & SUMMARY CHART

IMPROVED RESIDENTIAL SALES SUMMARY MAP – ATTACHED HOMES

IMPROVED RESIDENTIAL SALES SUMMARY CHART – ATTACHED HOMES

Data
No.

Project Name
Location/Developer Plan Room
Count
Floors/
Parking Size (SF) Product Type /
Absorption Base Sales Price Price/SF
A1
(Subj.)
Villas at The Retreat, South
Highland Avenue and
Beech Avenue, Fontana /
Lennar
1C 2 / 2 2 / 2 1,165 $435,450 $376.35
2C 2 / 2 2 / 2 1,243 Motorcourt $443,300 $356.64
3 3 / 3 2 / 2 1,687 Attached $504,300 $298.93
4 3 / 3 2 / 2 1,771 4.6 sales/mo $515,150 $290.88
5 3 / 3 2 / 2 1,895 $527,750 $278.50
A2
Birch Bend at Shady Trails,
Citrus Avenue and
Parkhouse Drive, Fontana /
Tri Pointe Homes
1C 2 / 2 2 / 2 1,309 $431,000 $329.26
2 2 / 2.5 2 / 2 1,556 Row $489,000 $314.27
3 3 / 2.5 2 / 2 1,604 Townhomes $494,000 $307.98
4 3 / 3 2 / 2 1,900 4.6 sales/mo $527,000 $277.37
5 4 / 3 2 / 2 1,922 $550,000 $286.16
A3
Woodridge at Gabion
Ranch, Sierra Avenue and
Summit Avenue, Fontana /
Lennar
1C 1 / 1.5 2 / 1 849 $361,150 $425.38
2 2 / 2.5 2 / 2T 1,391 Motorcourt $460,500 $331.06
3 3 / 3 2 / 2 1,324 Townhomes $432,500 $326.66
4 3 / 2.5 2 / 2 1,652 6.2 sales/mo $504,150 $305.18
5 3 / 2.5 2 / 2 1,826 $507,500 $277.93
A4
Citrus at Canvas Park,
NEC Haven Avenue and
Ontario Ranch Road,
Ontario / Brookfield
1C 1 / 1.5 2 / 1 972 $419,650 $431.74
2 2 / 2.5 2 / 2T 1,110 Motorcourt $507,299 $457.03
3 2 / 2 2 / 2T 1,459 Townhomes $515,890 $353.59
4 3 / 2.5 2 / 2 1,692 6.0 sales/mo $576,783 $340.89
5 3 / 2.5 2 / 2 1,722 $605,042 $351.36
6 3 / 2.5 2 / 2 1,799 $608,029 $337.98
A5
Ventana, NWC Haven
Avenue and Eucalyptus,
Ontario / PLC Communities
1C 2 / 2 2 / 2 1,216 Motorcourt $521,900 $429.19
2 3 / 2.5 2 / 2 1,389 Townhomes $569,900 $410.30
3 3 / 2.5 2 / 2 1,628 1.9 sales/mo $611,900 $375.86
A6
Nuvo Piedmonte / SW
Milliken Avenue and Fourth
Street, North Ontario / The
New Home Company
1 2 / 2.5 3 / 2T 1,360 Motorcourt $544,990 $400.73
2 3 / 2.5 3 / 2T 1,494 3-Story $590,990 $395.58
3 3 / 3.5 3 / 2 1,654 Townhomes $656,990 $397.21
4 4 / 3.5 3 / 2 2,202 3.7 sales/mo $726,990 $330.15
• “C” denotes “Carriage” unit (first floor only holds garage and stairwell, all living and bedroom space on second floor) • “T” denotes for “Tandem” garage

IMPROVED DETACHED RESIDENTIAL

SALES MAP & SUMMARY CHART

IMPROVED RESIDENTIAL SALES SUMMARY MAP – DETACHED HOMES

IMPROVED RESIDENTIAL SALES SUMMARY CHART – DETACHED HOMES

Data
No.

Project Name
Location/Developer Plan Room
Count
Floors/
Parking Size (SF) Product Type /
Absorption
Base Sales
Price Price/SF
D1
(Subj.)
Chateau at The Retreat, South
Highland Avenue and Beech
Avenue, Fontana / Lennar
1 3 / 3 2 / 2 + CP 1,724 $540,490 $313.51
2 3 / 2.5 2 / 2 + CP 1,961 3,000 sf lots $562,365 $286.77 3 3 / 2.5 2 / 2 + CP 1,987 4.9 sales/mo $561,645 $282.66 4 3 / 2.5 2 / 2 2,046 $562,680 $275.01
D2
Cascade at Highland Park, South
Highland Avenue and San Servaine
Road, Fontana / Richmond
American
1 3 / 2.5 2 / 2 1,860 4,000 sf lot $560,990 $301.61
2 3 / 2.5 2 / 3 1,930 1.2 sales/mo $574,990 $297.92
3 4 / 3 2 / 3 2,065 $599,990 $290.55
D3
Talise at Highland Park, South
Highland Avenue and San Servaine
Road, Fontana / Richmond
American
1 3 / 2.5 2 / 2 1,410 $499,990 $354.60
2 3 / 2.5 2 / 2 1,650 Det. Cluster lots $527,990 $319.99 3 3 / 2.5 2 / 2 1,710 Grand Opening $535,990 $313.44
4 4 / 3 2 / 2 1,950 $573,990 $294.35
D4
Sienna at Aurora Park, Victoria
Street and Kestral Drive, Fontana /
TRI Pointe Homes
1 3 / 2.5 2 / 2 1,879 7,200 sf lots $535,000 $284.73
2 3 / 2.5 2 / 3 1,997 2.6 sales/mo $560,700 $280.77
3 4 / 3 2 / 3 2,264 $586,000 $258.83
D5
Goldenrod at Aurora Park, Victoria
Street and Kestral Drive, Fontana /
TRI Pointe Homes
1 3 / 3 2 / 2 2,006 7,200 sf lots $690,570 $344.25
2 4 / 3 2 / 2 2,292 2.3 sales/mo $713,562 $311.33
3 5 / 4 2 / 3 2,743 $771,544 $281.28
D6
Rivello at Monterado, Citrus Avenue
and Duncan Canyon Road, Fontana
/ Lennar
1 3 / 2.5 2 / 2 1,795 7,200 sf lots $551,050 $306.99
2 3 / 2.5 2 / 2 1,832 4.2 sales/mo $544,990 $297.48
3 3 / 2.5 2 / 2 2,007 $565,280 $281.65
D7
Salerno at Monterado, Citrus
Avenue and Duncan Canyon Road,
Fontana / Lennar
1 3 / 2.5 2 / 2 1,822 7,200 sf lots $543,820 $298.47
2 3 / 2.5 2 / 2 1,932 3.5 sales/mo $562,040 $290.91
3 3 / 2.5 2 / 2 2,207 $591,940 $268.21
D8
Seasons at Acacia, SE of East
Merrill Avenue and South Sycamore
Ave, Rialto / Richmond American
Homes
1 3 / 2 1 / 2 2,080 $579,990 $278.84
2 3 / 2.5 2 / 2 2,180 3,700 sf lots $527,990 $242.20
3 3 / 2.5 2 / 2 2,380 2.1 sales/mo $554,990 $233.19
4 4 / 2.5 2 / 2 2,640 $574,990 $217.80

D9
Discovery at Shadow Rock / NE of
Pacific Avenue & La Canada Drive,
Jurupa Valley / Lennar
1 3 / 2 1 / 2 1,547 $535,120 $345.91
2 3 / 2.5 2 / 2 1,705 4,700 sf lots $542,305 $318.07
3 3 / 2.5 2 / 2 1,843 5.3 sales/mo $564,510 $306.30
4 4 / 3 2 / 2 2,064 $591,510 $286.58

• “CP” denotes a covered “Car Port” in addition to garage(s)

APPRAISER’S QUALIFICATIONS

QUALIFICATIONS OF KITTY S. SIINO, MAI

Education

Bachelor of Arts in Business Administration, Financial Investments, California State University, Long Beach, California (1980)

Post-Graduate Study, Real Estate Development, University of California, Irvine, California

Appraisal Institute Classes: Uniform Standards of Professional Appraisal Practice, A & B; Appraisal Principles; Appraisal Procedures; Basic Income Capitalization; Advanced Income Capitalization; Narrative Report Writing; Advanced Applications, Case Studies.

Successfully completed all classes in addition to successfully completing the writing of a Demonstration Report and taking the Comprehensive Exam. Became a Member of the Appraisal Institute in December 1996. Have completed over 100 hours of continuing education through the Appraisal Institute every five years.

Employment

1988 - Present:

Self-Employed Real Estate Appraiser. Duties include the appraisal of various types of properties such as commercial, retail, industrial and vacant land. More complex assignments include easements, right-of-ways and special assessment districts. From 1996 to present, specialized in special assessment districts and community facilities districts appraisals for public entities, including Jurupa Community Services District, Corona Norco Unified School District, City of Corona, City of Chula Vista, City of San Marcos and City of Moreno Valley.

1986-1988:

Project Manager of Development for Ferguson Partners, Irvine, California. Duties included land acquisitions; review of fee appraisals and valuations; analysis of proposed development; planning and design; and management of development, construction and lease-up. The types of properties developed were commercial and industrial. Duties ranged from raw, vacant site development through property management of recently developed projects.

1981 - 1986
Manager of Finance, Construction for Community Development Division, The Irvine Company, Irvine, California. Duties included originating and managing a newly formed division of finance to bridge between the accounting functions and project management functions. Worked with analysis and budgets for Community Development Division. Coordinated with cities in forming new Assessment Districts and Community Facilities Districts to finance major infrastructure improvements.

Types of properties were apartments and single- family residential lots on a for sal e basis to apartment and homebuilders.

1980 - 1981
Investment Counselor, Newport Equity Funds, Newport Beach, California. Duties included obtaining private financing for residential properties, working with appraisals of properties and analyzing the investments.

Licenses
Real Estate Sales Person, State of California, 1980
Certified General Appraiser, State of California (#AG004793)

Organizations
MAI #11145 - The Appraisal Institute

Public Financing
CASTOFF Meetings, 2006, 2007, 2008, 2009, 2010, 2011, 2013, 2014, 2015, 2016, 2017, 2018, 2019 and 2022

Speaker, Mello- Roos & Special Assessment Financing, UCLA Extension Publi c Policy Program, February 2009 and March 2011

Fontana City CouncilApril 11, 2023

Fontana City Council
April 11, 2023