Fontana City Council
September 24, 2024

Accordingly, assuming no additional building permits are obtained prior to May 1, 2025, 444 par cels will be classified as Developed Property and 40 parcels will be classified as Undeveloped Property for the Fiscal Year 2025-26 Special Tax levy. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” Water service to the property within the District will be s upplied by West Valley Water District and sewer service to the property within the District will be supplied by the City. Electricity will be supplied by Southern California Edison Company, gas by the Southern California Gas Company and schools by the Fontana Unified School District.

Like all of Southern California, the land within the District is subject to seismic activity. An Alquist- Priolo Earthquake Fault Zone encompasses a portion of the District due to the nearby Cucamonga fault, which is an active fault that crosses just to the north of the property within the District along the foot of the San Gabriel Mountains. However, a geotechnical report prepared by LGG Geotechnical, Inc. for the property within the District reports that no active geotechnical faults pass through the development within the District and no fault- related setbacks were required for the property within the District. In addition to the nearby Cucamonga fault, other faults that have the potential to generate the strongest ground shaking in the Fontana area include the San Jacinto (strike-slip fault) and the San Andreas (strike -slip) fault. The Lytle Creek Branch of the San Jacinto Fault is an active fault that crosses the extreme northeast portion of the City in a southeastern dir ection. There are several other faults that border the Lytle Creek alluvial basin, including the Chino, San Andreas and San Jacinto faults.
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In recent years, wildfires have caused extensive damage throughout the State. The last major wildfire in the vicinity of the City was the Grand Prix Fire in October 2003. There have been smaller fires, such as the 147-acre Sierra Fire that burned in November 2018, the 277-acre Karen Fire in July 2020 and the Sierra Fire that burned in June 2024. Per the City’s General Plan and Zoning Map, the site is within a fire overlay zone, which, per the State of California’s Fire Hazard Map, is within a Local Responsibility Area with the recommendation for the site to be partially in a high and partially in a very high fire seve rity zone. According to the California Public Utilities Commission, the property within the District is located in a High Fire Threat District —Tier 2.

There can be no assurances that wildfires will not occur within the District and if such wildfires do occur within the District there can be no assurance that residential property within the District will not be damaged or destroyed.

See “SPECIAL RISK FACTORS — Geologic, Topographic and Climatic Conditions.” The Federal Emergency Management Agency has determined that the District is located in a Zone “X” flood area (an area determined to be outside of the 0.2 percent annual chance floodplain), and flood insurance will not be required.

An aerial photo showing the taxable property within the District and a map showing the general location of the District and the surrounding area appears on the pages before page 1. More detailed information about the property therein is contained in Appendix B — “APPRAISAL REPORT,” and information about the ownership of such property is set forth under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” General information about the City is set forth in Appendix E. 542

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Assigned Special Tax and Development Summary
The following table sets forth the Assigned Special Tax that are projected to be levied on the property within the District at buildout of the development.

TABLE 1

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109 (NARRA HILLS)

SPECIAL TAX AND DEVELOPMENT SUMMARY
Rate and Method Land Use Classes
Number of
Permitted
Units/Acres
as of
May 1,
2024(1)
Number of
Additional
Permitted
Units/Acres
as of
August 1,
2024(2)
Remaining
Number of
Units/Acres(3)
Assigned
Facilities
Special Tax
Assigned
Facilities
Special Taxes
at Build-Out
Developed Property
Detached Residential Property (4,400 sq. ft. or greater) 0 0 0 $ 8,186 $ 0 Detached Residential Property (4,200 to less than 4,400 sq. ft.) 13 1 5 7,879 149,701 Detached Residential Property (4,000 to less than 4,200 sq. ft.) 0 0 0 7,736 0 Detached Residential Property (3,800 to less than 4,000 sq. ft.) 13 1 8 7,592 167,024 Detached Residential Property (3,600 to less than 3,800 sq. ft.) 17 8 7 7,238 231,616 Detached Residential Property (3,400 to less than 3,600 sq. ft.) 0 0 0 6,905 0 Detached Residential Property (3,200 to less than 3,400 sq. ft.) 22 3 7 6,551 209,632 Detached Residential Property (3,000 to less than 3,200 sq. ft.) 73 1 7 6,240 505,440 Detached Residential Property (2,800 to less than 3,000 sq. ft.) 2 0 0 6,103 12,206 Detached Residential Property (2,600 to less than 2,800 sq. ft.) 26 0 0 5,873 152,698 Detached Residential Property (2,400 to less than 2,600 sq. ft.) 31 0 0 5,666 175,646 Detached Residential Property (2,200 to less than 2,400 sq. ft.) 41 4 6 5,349 272,799 Detached Residential Property (2,000 to less than 2,200 sq. ft.) 64 0 0 5,118 327,552 Detached Residential Property (less than 2,000 sq. ft.) 0 0 0 4,876 0 Attached Residential Property (2,000 sq. ft. or greater) 0 0 0 4,074 0 Attached Residential Property (1,800 to less than 2,000 sq. ft.) 0 0 0 4,025 0 Attached Residential Property (1,600 to less than 1,800 sq. ft.) 39 17 0 3,762 210,672 Attached Residential Property (1,400 to less than 1,600 sq. ft.) 39 17 0 3,627 203,112 Attached Residential Property (1,200 to less than 1,400 sq. ft.) 9 3 0 3,445 41,340 Attached Residential Property (less than 1,200 sq. ft.) 0 0 0 3,320 0 Non-Residential Property 0.00 0.00 0.00 36,640 0 TOTAL 389 55 40 NA $ 2,659,438

(1) Represents the classification of 389 parcels of Taxable Property as Developed Property for Fiscal Year 2024-25, comprised of approximately

43.7 acres, based upon the building permits that had been obtained for such properties as of May 1, 2024. Furthermore, includes $3,151 in Facilities Special Taxes resulting from revised building permit issuances that shifted 23 parcels of Taxable Property from a Land Use Class 9 to Land Use Class 8 designation. These revised Land Use Class designations were not factored into the Fiscal Year 2024-25 Facilities Special Tax levy, but will be factored in the Facilities Special Tax levy commencing with Fiscal Year 2025-26. (2) Represents the projected Developed Property classification of 55 parcels of Taxable Property, comprised of approximately 5.1 acres that were classified as Undeveloped Property for Fiscal Year 2024-25, based upon the building permits that had been obtained for such properties between May 1, 2024 and August 1, 2024.
(3) Represents the projected Developed Property classification of 40 parcels of Taxable Property, comprised of approximately 11.1 acres that were classified as Undeveloped Property for Fiscal Year 2024-25, assuming such properties are constructed at the home sizes identified in the development plan submitted by the Developer.

Source: David Taussig and Associates, Inc. dba DTA.

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Direct and Overlapping Debt
The District is included within the boundaries of numerous overlapping local agencies providing governmental services. Some of these local agencies have outstanding bonds, and/or the authority to issue bonds, payable from taxes or assessments. The existing indebtedness payable from taxes and assessments that may be levied upon the property within the District is shown in Table 2 below. In addition to current debt, new community facilities districts and/or special assessment districts could be formed in the future encompassing all or a portion of the property within the District; and such districts or the agencies that formed them could issue more bonds and levy additional special taxes or assessments.

TABLE 2

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109 (NARRA HILLS)

DIRECT AND OVERLAPPING DEBT SUMMARY (TAXABLE PROPERTY)
Overlapping District
Percent of
Levy on
Taxable
Parcels in
the District(1)
Total Debt
Outstanding(2)
District Share
of Total Debt
Outstanding
Fontana Unified School District G.O. Bonds 0.67634% $280,752,610 $ 1,898,850 Chaffey Community College District G.O. Bonds 0.10986 278,160,000 305,590 Metropolitan Water District Mid-Valley G.O. Bonds 0.00332 19,215,000 640 Estimated Share of Overlapping Debt Allocable to District $ 2,205,080 Plus: The Bonds 37,000,000*
Estimated Share of Direct and Overlapping Debt Allocable to District $ 39,205,080*

* Preliminary, subject to change.
(1) Based on the District’s estimated share of the Fiscal Year 2023-2024 levy for each applicable overlapping district. (2) Based on overlapping tax and assessment debt as of August 1, 2024. Excludes debt secured by any tax or assessment established and levied on an individual Assessor’s Parcel pursuant to a contractual agreement or other voluntary consent by the owner thereof.

Source: David Taussig and Associates, Inc. dba DTA, San Bernardino County.

As shown in Table 3, the projected total effective tax rate for residential units within the District ranges from approximately 1.810% to approximately 1.926% based on the average minimum market value shown in the Appraisal for units that had closed to individual homeowners as of the date of value of the Appraisal. 544

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TABLE 3

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109 (NARRA HILLS)

PROJECTED TOTAL EFFECTIVE TAX RATES
Communities within Community Facilities District No. 109

DESCRIPTION CLEMENTINE STRATA WILDSTAR SKYELAND GOLDENPEAK Product Type DUPLEX CLUSTER DETACHED DETACHED DETACHED Number of Anticipated Units 124 127 78 84 71
Number of Units Sold(1) 24 58 45 25 17
Average Unit Size(1) 1,540 2,265 2,985 3,138 3,787
Average Minimum Market Value(1) $ 561,404 $ 684,840 $ 840,656 $ 909,997 $1,004,742 Less: Homeowner Exemption $ (7,000) $ (7,000) $ (7,000) $ (7,000) $ (7,000) Equals: Assumed Taxable Value(2) $ 554,404 $ 677,840 $ 833,656 $ 902,997 $ 997,742

AD VALOREM PROPERTY TAXES(3)
Property
Tax Rate
Projected
Amount
Projected
Amount
Projected
Amount
Projected
Amount
Projected
Amount
Base Property Tax 1.0000% $ 5,544 $ 6,778 $ 8,337 $ 9,030 $ 9,977 Fontana Unified School District G.O. Bonds 0.0354 196 240 295 320 353 Chaffey Community College District G.O. Bonds 0.0100 55 68 83 90 100 Metropolitan Water District G.O. Bonds 0.0035 19 24 29 32 35 Subtotal Ad Valorem Property Tax Rate/Taxes 1.0489 $ 5,814 $ 7,110 $ 8,744 $ 9,472 $ 10,465

PARCEL CHARGES, ASSESSMENTS AND SPECIAL TAXES(4)
Projected
Amount
Projected
Amount
Projected
Amount
Projected
Amount
Projected
Amount
Fontana Vector Control Charge $ 6 $ 6 $ 6 $ 6 $ 6 Metropolitan Water District Water Standby Charge 8 8 8 8 8 City of Fontana Sewer User Fee(5) NA NA NA NA NA
Fontana CFD No. 109 (Narra Hills) Services Special Tax(6) 718 718 744 744 744 Fontana CFD No. 109 (Narral Hills) Facilities Special Tax(7) 3,627 5,349 6,103 6,240 7,238 Subtotal Parcel Charges, Assessments and Special Taxes $ 4,359 $ 6,081 $ 6,861 $ 6,998 $ 7,996

PROJECTED TOTAL PROPERTY TAXES $ 10,173 $ 13,191 $ 15,605 $ 16,470 $ 18,461 PROJECTED EFFECTIVE TAX RATE (% OF MARKET VALUE) 1.812% 1.926% 1.856% 1.810% 1.837%

(1) Number of units sold, average unit size, and average minimum market value for units that have closed to individual homeowners based on the Appraisal. (2) Assumed Taxable Value and ad valorem taxes incorporate owner-occupied assessed value exemption of $7,000. (3) Based on the Fiscal Year 2023-24 ad valorem rates for the tax rate area(s) within the District. Rates subject to change in future years. (4) Represents special assessments, special taxes for any overlapping community facilities district(s), and any other taxes, fees and charges payable from and secured by the property as identified on the current property tax bill(s) for the project and discussions with overlapping taxing jurisdictions. Charges subject to change in future years. (5) Excluded from the effective tax rate determination pursuant to the City of Fontana Community Facilities and Assessment District Policy Guidelines. (6) Based on the levy of the applicable Assigned Services Special Tax. (7) Based on the levy of the applicable Assigned Facilities Special Tax.

Source: David Taussig and Associates, Inc. dba DTA, Kitty Siino & Associates, Inc., City of Fontana, County of San Bernardino.

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Property Values
Appraisal. In order to provide information with respect to the value of the land within the District, the District engaged Kitty Siino & Associates, Inc. to prepare the Appraisal. The principal of the Appraiser, who was actively involved in the preparation of the Appraisal, has an “MAI” designation from the Appraisal Institute and has prepared numerous appraisals for the sale of land secured municipal bonds. The Appraiser was selected by the District and has no material relationships with the City, the District o r the owners of the land within the District other than the relationship represented by the engagement to prepare the Appraisal and other similar engagements for the City. The City instructed the Appraiser to prepare its analysis and report in conformity with City-approved guidelines and the Appraisal Standards for Land Secured Financings published in 1994 and revised in 2004 by the commission now known as California Debt and Investment Advisory Commission. A copy of the Appraisal is included as Appendix B to this Official Statement.

The purpose of the Appraisal was to estimate the minimum market value of the fee simple estate, subject to special tax and special assessment liens, of the property within the District in its current condition. As of July 26, 2024, 169 residential units had been completed and conveyed to individual homeowners, the Developer owned 15 completed model units (none of which were in escrow), 25 homes over 95% complete (18 of which were in escrow), 76 homes under construction (21 of which were in escrow) and 73 finished pads (none of which were in escrow), and the Land Bank owned 126 finished pads (none of which were in escrow) . Subject to the contingencies, assumptions and limiting conditions set forth in the Appraisal, the Appraise r concluded that, as of July 26, 2024 , the minimum market value of the Taxable Property within the District was not less than $251,201,979, consisting of $ 130,854,505 for the 169 completed units conveyed to individual homeowners , $75,303,475 for the 40 completed or near completed homes and 149 homes under construction or finished pads owned by the Developer and $45,043,999 for the 126 finished pads owned by the Land Bank. See Appendix B — “APPRAISAL REPORT.”
Reference is made to Appendix B for a complete list and full discussion of the applicable contingencies, assumptions and limiting conditions and the methodology employed by the Appraiser. In the event that any of the contingencies, assumptions and limiting conditions are not actually realized, the value of the property within the District may be less than the amount reported in the Appraisal. In any case, there can be no assurance that any portion of the property within the District would actually sell for the amount indicated by the Appraisal.

The Appraisal merely indicates the Appraiser’s opinion as to the minimum market value of the property referred to therein as of the date and under the conditions specified therein. The Appraiser’s opinion reflects conditions prevailing in the applicable market as of the date of value. The Appraiser’s opinion does not predict the future value of the subject property, and there can be no assurance that market conditions will not adversely change in the future.

The Appraiser has specifically consented to the inclus ion of the Appraisal in this Official Statement.

Nevertheless, the Appraisal contains the following statement:

The acceptance of and/or use of this appraisal report by the client or any third party constitutes acceptance of the following conditions:

The liability of Kitty Siino & Associates, Inc. and the appraisers responsible for this report is limited to the client only and to the fee actually received by the appraisers. Further, there is no accountability, obligation or liability to any third -party. If the appraisal report is placed in the hands of anyone other than the client for whom this report was prepared, the client shall make such party and/or parties aware of all limiting conditions and assumptions of this assignment and related discussions. Any party who uses or relies upon any information in this report, without the preparer’s written consent, does so at his own risk.

If the client or any third party brings legal action against Kitty Siino & Associates, Inc. or the signer of the Appraisal and the appraisers prevail, the party initiating such legal action 546

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shall reimburse Kitty Siino & Associates, Inc. and/or the appraisers for any and all costs of any nature, including attorneys’ fees, incurred in their defense.

It is a condition precedent to t he issuance of the Bonds that the Appraiser deliver to the District a certification to the effect that nothing has come to the attention of the Appraiser subsequent to the date of value of the Appraisal that would cause the Appraiser to believe that the va lue of property in the District is less than the minimum value reported in the Appraisal. However, the Appraiser has not performed any procedures since the date of value to obtain knowledge of such events or occurrences nor is it obligated to do so in the future.

Value-to-Lien Ratios
The value of the property within the District is significant because, in the event of a delinquency in the payment of the Special Tax, the District may foreclose only against delinquent parcels. Likewise, the ratio of the value of a parcel to its “share” of the Bonds is important because it provides an indication of the extent of the relative burden imposed on each parcel by the applicable Special Tax. As indicated above, the minimum market value of the property within the Di strict is not less than $ 251,201,979. The ratio of that value to the $37,000,000 total principal amount of the Bonds is approximately 6.79*-to-1. This ratio does not include other overlapping general obligation debt within the District. At this time there is no other overlapping land secured special tax or assessment debt within the District. See “ — Direct and Overlapping Debt.” Taking the $37,000,000* principal amount of the Bonds and $2,205,080 in other overlapping general obligation debt within the District into account, the ratio of the minimum market value to the total amount of direct and overlapping bonded debt for the District of $39,205,080* is approximately 6.41*-to-1. Table 4 sets forth the minimum market value-to-lien ratios of all the taxable property within the District by development status as of July 26, 2024 based on the projected Fiscal Year 2025-26 Special Tax levy.

Each of the aforesaid value -to-lien ratios is for the entire District, however, the ratios of the value of individual lots within the District to their respective shares of the principal amount of the Bonds can be expected to vary substantially depending upon the selling price thereof. The following Table 5 sets forth the value-to-lien ratios within the District by land use class under the Rate and Method using the principal amount of the Bonds allocated based on the projected Fiscal Year 2025-26 Special Tax levy.

Additionally, the following Table 6 sets forth the stratification of value-to-liens of the parcels within the District, based on the appraised value of such parcels set forth in the Appraisal and such parcels’ respective shares of the principal amount of the Bonds (allocated to each parcel based upon its respective share of the total projected Fiscal Year 2025-26 Special Tax levy) and the ratio of the appraised value to its share of the Bonds.

Taxable property within the District will be classified as “Developed Property” for purposes of the Fiscal Year 2025-26 Special Tax levy if a building permit for such property was obtained by May 1, 2025. Based on the development status within the District as of August 1, 2024, building permits had been issued for 444 residential parcels of Taxable Property within the District ; accordingly, 444 residential parcels within the District will be classified as Developed Property and 40 residential parcels within the District will be classified as Undeveloped Property for purposes of the projected Fiscal Year 2025-26 Special Tax levy.

 Preliminary, subject to change.
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TABLE 4

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109 (NARRA HILLS)

ESTIMATED MINIMUM MARKET VALUE-TO-LIEN RATIOS BASED ON BONDS ONLY

ALLOCATED BY PROPERTY OWNER/DEVELOPMENT STATUS
(Projected Fiscal Year 2025-26 Special Tax Levy)
Property Owner /
Development Status(1)
Number
of
Taxable
Parcels
Projected
Fiscal Year
2025-2026
Facilities
Special Tax(2)
Percent of
Projected
Fiscal Year
2025-2026
Facilities
Special Tax
Pro Rata
Share of
Bonds(3)*
Minimum
Market
Value(1)
Estimated
Minimum
Market
Value-to-Lien
Ratios(4)*
LS-Fontana, LLC
Model Homes 15 $ 88,733 3.67% $ 1,357,054 $ 9,890,206 7.29 95%+ Completed Homes 25 152,469 6.30 2,331,812 15,926,000 6.83 Homes Under Construction 76 397,177 16.42 6,074,298 25,445,587 4.19 Finished Pads / Developed Property(5) 73 377,920 15.62 5,779,787 24,041,682 4.16 Subtotal 189 $1,016,299 42.01% $15,542,951 $ 75,303,475 4.84

Arroyo Cap II-6, LLC
Finished Pads / Developed Property(5) 86 $ 416,793 17.23% $ 6,374,299 $ 25,525,269 4.00 Finished Pads / Undeveloped Property(5) 40 32,290 1.33 493,833 19,518,730 39.52 Subtotal 126 $ 449,083 18.56% $ 6,868,132 $ 45,043,999 6.56

Individual Homeowners 169 $ 953,918 39.43% $14,588,917 $130,854,505 8.97 TOTAL 484 $2,419,300 100.00% $37,000,000 $251,201,979 6.79

* Preliminary, subject to change.
(1) Based on the Appraisal with a date of value as of July 26, 2024. (2) Based on the levy to fund Administrative Expenses and debt service on the Bonds, the building permits obtained as of August 1, 2024, and assumes no further development.
(3) There are currently no overlapping assessment districts and/or other community facilities districts encumbering the District with outstanding debt (excluding debt secured by any tax or assessment established and levied on an individual Assessor’s Parcel pursuant to a contractual agreement or other voluntary consent by the owner thereof). The Bonds are allocated based on a proportionate share of the projected Fiscal Year 2025-2026 Facilities Special Tax.
(4) Calculated by dividing the Minimum Market Value column by the Pro Rata Share of Bonds column. (5) Under the Rate and Method, parcels of Taxable Property are classified as Developed Property if a building permit has been obtained for such parcel by May 1 of the Fiscal Year preceding the Special Tax levy. For the Developer, all 73 parcels identified in the Appraisal as finished pads have obtained building permits prior to August 1, 2024 and all such lots will be classified as Developed Property for Fiscal Year 2025-

26. For the Land Bank, 86 parcels identified in the Appraisal as finished pads have obtained building permits prior to August 1, 2024 and such lots will be classified as Develop ed Property for the Fiscal Year 2025-26 Special Tax levy, 40 parcels identified in the Appraisal as finished pads have not obtained building permits prior to August 1, 2024 and such lots will be classified as Undeveloped Property for the Fiscal Year 2025-26 Special Tax levy assuming no further development.

Source: David Taussig and Associates, Inc. dba DTA.
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TABLE 5

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109 (NARRA HILLS)

ESTIMATED MINIMUM MARKET VALUE-TO-LIEN RATIOS BASED ON BONDS ONLY

ALLOCATED BY LAND USE CLASSES
(Projected Fiscal Year 2025-26 Special Tax Levy)
Rate and Method Land Use Classes
Number
of Units/
Acres(1)
Fiscal Year
2025-2026
Assigned /
Maximum
Facilities
Special Tax(2)
Special
Projected
Fiscal Year
2025-2026
Facilities
Special Tax(3)
Pro Rata
Share of
Bonds(4)*
Minimum
Market Value(5)
Estimated
Minimum
Market
Value-to-
Lien
Ratios(6)*
Developed Property
Detached Residential Property (4,400 sq. ft. or greater) 0 $ 0 $ 0 $ 0 $ 0 NA Detached Residential Property (4,200 to less than 4,400 sq. ft.) 14 110,306 110,306 1,686,985 11,292,056 6.69 Detached Residential Property (4,000 to less than 4,200 sq. ft.) 0 0 0 0 0 NA Detached Residential Property (3,800 to less than 4,000 sq. ft.) 14 106,288 106,288 1,625,535 10,736,167 6.60 Detached Residential Property (3,600 to less than 3,800 sq. ft.) 25 180,950 180,950 2,767,391 14,298,393 5.17 Detached Residential Property (3,400 to less than 3,600 sq. ft.) 0 0 0 0 0 NA Detached Residential Property (3,200 to less than 3,400 sq. ft.) 25 163,775 163,775 2,504,722 17,925,673 7.16 Detached Residential Property (3,000 to less than 3,200 sq. ft.) 74 461,760 461,760 7,062,010 51,753,613 7.33 Detached Residential Property (2,800 to less than 3,000 sq. ft.) 2 12,206 12,206 186,675 1,658,160 8.88 Detached Residential Property (2,600 to less than 2,800 sq. ft.) 26 152,698 152,698 2,335,314 16,880,632 7.23 Detached Residential Property (2,400 to less than 2,600 sq. ft.) 31 175,646 175,646 2,686,274 15,764,322 5.87 Detached Residential Property (2,200 to less than 2,400 sq. ft.) 45 240,705 240,705 3,681,265 24,329,488 6.61 Detached Residential Property (2,000 to less than 2,200 sq. ft.) 64 327,552 327,552 5,009,475 30,291,186 6.05 Detached Residential Property (less than 2,000 sq. ft.) 0 0 0 0 0 NA Attached Residential Property (2,000 sq. ft. or greater) 0 0 0 0 0 NA Attached Residential Property (1,800 to less than 2,000 sq. ft.) 0 0 0 0 0 NA Attached Residential Property (1,600 to less than 1,800 sq. ft.) 56 210,672 210,672 3,221,950 16,909,348 5.25 Attached Residential Property (1,400 to less than 1,600 sq. ft.) 56 203,112 203,112 3,106,330 16,466,929 5.30 Attached Residential Property (1,200 to less than 1,400 sq. ft.) 12 41,340 41,340 632,241 3,377,282 5.34 Attached Residential Property (less than 1,200 sq. ft.) 0 0 0 0 0 NA Non-Residential Property 0.0 0 0 0 0 NA
Subtotal 444 $ 2,387,010 $ 2,387,010 $36,506,167 $ 231,683,249 6.35

Undeveloped Property 11.1 $ 321,415 $ 32,290 $ 493,833 $ 19,518,730 39.52 TOTAL NA $ 2,708,425 $ 2,419,300 $37,000,000 $ 251,201,979 6.79

* Preliminary, subject to change.
(1) Based on the building permits obtained as of August 1, 2024, and assumes no further development. Under the Rate and Method, parcels of Taxable Property are classified as Developed Property if a building permit has been obtained for such parcel by May 1 of the Fiscal Year preceding the Special Tax levy.
(2) Based on the anticipated Assigned Special Tax revenues generated by residential dwelling units for which building permits have been obtained as of August 1, 2024, and the Maximum Special Tax revenues generated by 40 parcels of Taxable Property, comprised of approximately 11.1 acres that will be classified as Undeveloped Property for Fiscal Year 2025 -26, for which building permits have not been obtained as of August 1, 2024, and assumes no further development.
(3) Based on the levy to fund Administrative Expenses and debt service on the Bonds, the building permits obtained as of August 1, 2024, and assumes no further development.
(4) There are currently no overlapping assessment districts and/or other community facilities districts encumbering the District with outstanding debt (excluding debt secured by any tax or assessment established and levied on an individual Assessor’s Parcel pursuant to a contractual agreement or other voluntary consent by the owner thereof). The Bonds are allocated based on a proportionate share of the projected Fiscal Year 2025-2026 Facilities Special Tax.
(5) Based on the Appraisal with a date of value as of July 26, 2024. (6) Calculated by dividing the Minimum Market Value column by the Pro Rata Share of Bonds column.

Source: David Taussig and Associates, Inc. dba DTA.

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TABLE 6

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109 (NARRA HILLS)

ESTIMATED MINIMUM MARKET VALUE-TO-LIEN STRATIFICATION

BASED ON BONDS ONLY
(Projected Fiscal Year 2025-26 Special Tax Levy)
Estimated
Minimum Market
Value-to-Lien
Ratio Category
Number of
Parcels
Subject to
Facilities
Special Tax
Projected
Fiscal Year
2025-2026
Facilities
Special Tax(1)
Percent of
Projected
Fiscal Year
2025-2026
Facilities
Special Tax
Pro Rata Share
of Bonds(2)*
Minimum
Market Value(3)
Estimated
Minimum
Market
Value-to-Lien
Ratios(4)*

11.00:1 and above 40 $ 32,290 1.33% $ 493,833 $ 19,518,730 39.52

9.00:1 to 10.99:1 78 424,406 17.54 6,490,730 61,407,048 9.46

7.00:1 to 8.99:1 108 630,613 26.07 9,644,393 80,942,707 8.39

5.00:1 to 6.99:1 38 227,464 9.40 3,478,762 21,640,479 6.22

3.00:1 to 4.99:1 220 1,104,527 45.66 16,892,282 67,693,015 4.01 Less than 3.00:1 0 0 0.00 0 0 NA
TOTAL 484 $ 2,419,300 100.00% $ 37,000,000 $ 251,201,979 6.79

* Preliminary, subject to change.
(1) Based on the levy to fund Administrative Expenses and debt service on the Bonds, the building permits obtained as of August 1, 2024, and assumes no further development.
(2) There are currently no overlapping assessment districts and/or other community facilities districts encumbering the District with outstanding debt (excluding debt secured by any tax or assessment established and levied on an individual Assessor’s Parcel pu rsuant to a contractual agreement or other voluntary consent by the owner thereof). The Bonds are allocated based on a proportionate share of the projected Fiscal Year 2025-26 Facilities Special Tax.
(3) Based on the Appraisal with a date of value as of July 26, 2024. (4) Calculated by dividing the Minimum Market Value column by the Pro Rata Share of Bonds column.

Source: David Taussig and Associates, Inc. dba DTA.

Delinquency History
Fiscal Year 2023-24 was the first year in which Facilities Special Taxes were levied in the District. For Fiscal Year 2023-24, Facilities Special Taxes totaling $375,939 were levied on 62 dwelling units (encompassed within 2 taxable parcels that have since been subdivided) classified as Developed Property with respect to the Facilities Special Tax based on building permits obtained for such properties as of May 1, 2023. As of April 10, 2024, the entire $375,939 in Facilities Special Taxes has been paid. As of April 10, 2024, the entire Fiscal Year 2023-24 Services Special Tax levy in the amount of $45,608 has also been paid.

PROPERTY OWNERSHIP AND THE DEVELOPMENT
Representatives of the Developer have provided the information in this section regarding the Developer and its development in the District. Representatives of the Land Bank have also provided information in this section regarding the Land Bank. Neither the Underwriter nor the City has independently confirmed or verified the information in this section of the Official Statement nor does any such party make any repres entation as to accuracy or adequacy of this information. Further, there may be material adverse changes in this information after the date of this Official Statement.

The information in this section of the Official Statement regarding ownership of certain taxable property in the District has been included because it is considered relevant to an informed evaluation of the Bonds. The inclusion in this Official Statement of information related to the Developer and the Land Bank should not be construed to sug gest that the Bonds, or the Special Tax that will be used to pay the Bonds, are recourse obligations of the Developer, the Land Bank, or any other property owner in the District. A property owner may sell or otherwise dispose of land within the District or a development or any interest therein at any time. 550

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No assurance can be given that the proposed development within the District will occur as described below. As the proposed land development progresses and parcels are sold, it is expected that the ownership of the land within the District will become more diversified. No assurance can be given that development of the land within the District will occur in a timely manner or in the configuration or intensity described herein, or that any landowner described herein will obtain or retain ownership of any of the land within the District.

The Bonds and the Special Tax are not personal obligations of the Developer, the Land Bank, or any other current or subsequent property owners and, in the event that the Developer, the Land Bank, or any other current or subsequent property owner defaults in the payment of the Special Tax, the City may proceed with judicial foreclosure but has no direct recourse to the assets of the Developer, the Land Bank, or any other current or subsequent property owner. As a result, other than as provided in the Official Statement, no financial statements or information is, or will be, provided about the Developer, the Land Bank, or any other current or subsequent property owner. The Bonds are secured solely by the Net Special Tax Revenues and other amounts pledged under the Indenture. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS” and “SPECIAL RISK FACTORS.”
The Developer
LS-Fontana, LLC (previously defined as the “Developer”) is a Delaware limited liability company and an indirect wholly-owned subsidiary of Landsea Homes Corporation, a Delaware corporation (“Landsea Homes” or the “Company”), with headquarters in Newport Beach, California. The homes within the Community Facilities District are being marketed under the Landsea Homes brand. Landsea Homes is a residential homebuilder, publicly traded on The Nasdaq Capital Market (“Nasdaq”) under the symbol “LSEA” and presided over by Chief Executive Officer John Ho. The Company was formed in 2018 under the name of LF Capital Acquisition Corp. as a blank check company for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more busine sses. On January 7, 2021, the Company consummated a business combination and changed its name from LF Capital Acquisition Corp. to “Landsea Homes Corporation.” As a result of the business combination, the Company owns 100% of the outstanding common stock of Landsea Homes Incorporated, a California based homebuilder which commenced homebuilding operations in 2013. Landsea Homes, through its subsidiaries, designs and builds homes and sustainable master-planned communities in some of the nation’s most desirable markets. The Company has developed homes and communities in New York, Boston, New Jersey, Arizona, Florida, Texas and throughout California in Silicon Valley, Los Angeles and Orange County.

Landsea Homes is subject to the informational requirements of the Securities Exchange Act of 1934 (the “Exchange Act”) and in accordance therewith files reports, proxy statements, and other information, including financial statements, with the SEC. The SEC maintains an internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including Landsea Homes. The address of such internet web site is www.sec.gov. All documents subsequently filed by Landsea Homes pursuant to th e requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of Landsea Homes’ Annual Report and each of its other quarterly and current reports, including any a mendments, are available from its website at www.landseahomes.com.

The SEC maintains a website that contains reports, proxy and other information statements and other information regarding registrants that file electronically with the SEC, including Landsea Homes The address of such website is www.sec.gov. Copies of Landsea Homes’s Annual Report and related financial statements, prepared in accordance with generally accepted accounting standards, are available from Landsea Homes’s website at ir.landseahomes.com.

The foregoing website addresses are included for reference only, and the information on such websites and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the 551

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information contained on such websites. Neither the Developer nor Lan dsea Homes is obligated to advance funds for construction or development or to pay ad valorem property taxe s or the Special Taxes and investors should not rely on the information or financial statements contained on such websites in evaluating whether to buy, hold or sell the Bonds. The information contained on such websites may be incomplete or inaccurate and has not been reviewed by the City, the District or the Underwriter.

Development Plan
General. The District is being developed into a gated residential community known as “Narra Hills” by the Developer and is expected to consist of a total of 484 homes ac ross five neighborhoods known as “Clementine,” “ Strata,” “Wildstar,” “Skyeland” and “Goldenpeak.” The Narra Hills development is encompassed by Tract Maps 20010, 20069 and 20070 and subsequent condominium maps on Tracts 20069 and 20070 which subdivide the property into 484 residences.

The Developer is acquiring the property within the District in phased takedowns from the Land Bank pursuant to the Option Agreement, under which the Developer acquires lots in a finished lot condition as development progresses. The Land Bank acquired the property within the District on September 9, 2021 for $80,000,000 and the Developer began taking down lots in May 2022. As of July 26, 2024, the date of value of the Appraisal (defined herein), the Developer had taken down 35 8 of the 484 residential lots in the District.

Since July 26, 2024 and as of September 15, 2024, the Developer had acquired an additional 91 lots from the Land Bank. The Developer is scheduled to take down all of the remaining property to be developed as 35 residential units in the District by May 1, 2025. There is no guarantee that the Developer will acquire the remaining lots as planned. During the term of the Option Agreement, the Developer is contractually obligated to pay the Special Tax levied on the property subject to such agreement. However, in the event the Option Agreement is terminated prior to the Developer having acquired all of the lots thereunder, the Special Tax would continue to be levied on the property in the District owned by the La nd Bank. See the caption “ —Option Agreement and Construction Agreement.”
Closings to individual homeowners began within the District in November 2023 and, as of July 26, 2024, 169 residential units had been completed and conveyed to individual homeowners, the Developer owned 15 completed model units (none of which were in escrow), 25 homes over 95% complete (18 of which were in escrow), 76 homes under construction (21 of which were in escrow) and 73 finished pads (none of which were in escrow), and the Land Bank owned 126 finished pads (none of which were in escrow). As of September 15, 2024, within the District, _____ residential units had been completed and conveyed to individual homeowners, the Developer owned _____ completed model units (_____ of which were in escrow), _____ homes over 95% complete (_____ of which were in escrow), _____ residential units under construction (_____ of which were in escrow), and the Land Bank owned _____ finished pads (_____ of which were in escrow). Sales contracts are subject to cancelation and, therefore, homes currently in escrow may not result in closed escrows with the prospective homebuyers. Within the District, 444 building permits had been obtained as of July 26, 2024.

Accordingly, assuming no additional buildin g permits are obtained prior to May 1, 2025, 444 parcels will be classified as Developed Property and 40 parcels will be classified as Undeveloped Property for the Fiscal Year 2025-26 Special Tax levy.
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The following table describes the development and ownership status as of July 26, 2024 by floor plan within the development.

TABLE 7

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109 (NARRA HILLS)

DEVELOPMENT AND OWNERSHIP STATUS
(AS OF JULY 26, 2024)
Floor Plan
Plan
Square
Footage
Total
Units
Planned
Base Home
Prices(1)
Owned by
Individuals
Completed
Homes(2)
Homes
Under
Construction
Finished
Pads/Lots
Homes in
Escrow(3)
Clementine
1 1,372 12 $563,990 2 0 4 6 0
2 1,450 56 $558,990 11 1 15 29 3
3 1,661 56 $594,990 11 1 15 29 2
Total Clementine 124 24 2 34 64 5

Strata
1 2,099 32 $675,990 15 3 2 12 1
2 2,136 32 $707,990 15 3 2 12 0
3 2,311 32 $726,990 15 3 2 12 2
4 2,552 31 $739,990 13 5 2 11 3
Total Strata 127 58 14 8 47 6

Wildstar
1 2,747 26 $823,990 15 2 4 5 3
2 2,961 2 $849,990 2 0 0 0 0
2X (LG) 3,160 24 $849,990 12 3 4 4 2
3 3,079 26 $899,990 16 2 5 4 3
Total Wildstar 78 45 7 13 13 7

Skyeland
1 (75) 2,375 19 $889,990 5 1 1 12 2
1X (75) 3,010 1 $921,990 0 1 0 0 0
1XX (70) 3,080 13 $912,990 4 4 0 5 2
2 (70) 3,298 13 $953,990 8 1 0 4 1
2X (75) 3,339 19 $969,990 4 1 1 13 1
3 (75) 3,604 19 $995,990 4 1 1 13 1
Total Skyeland 84 25 9 3 47 7

Goldenpeak
1 (100) 3,159 17 $1,069,990 5 2 3 7 3
1X (85) 3,603 6 $1,059,990 0 0 4 2 0
2 (85) 3,757 7 $1,079,990 0 0 3 4 1
2X (100) 2,827 22 $1,154,990 6 3 4 9 6
3 (100) 4,248 19 $1,194,990 6 3 4 6 4
Total Goldenpeak 71 17 8 18 28 14

Grand Total 484 169 40 76 199 39

(1) Base sales prices are subject to change and exclude any lot premiums, options, upgrades, incentives, and any selling concessi ons, mortgage rate buydowns or price reductions currently being offered. The Developer is offering varying concessions, including rate buy downs, on a case-by-case basis. As of July 26, 2024, the net closing cost and rate buy down concessions for the 169 residential units conveyed to individual homeowners and the 39 residential units in escrow within the District ranged from $ 0 to $58,500, and averaged approximately $12,000 per residential unit.
(2) Includes two models homes for Clementine, four model homes for Strata, three model homes for Wildstar, three model homes for Skyeland and three model homes for Golden peak.
(3) Includes 18 completed homes and 21 homes under construction.

Source: The Developer.

Clementine. Clementine is made up of 12 proposed single -family detached homes on small lots and 112 proposed duplex homes. The Clementine floor plans range in size from 1,372 to 1,661 square feet, with the smallest floor plan the detached home s. The Clementine floorplans all are two stories with three to four 553

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bedrooms and two-car garages. The Clementine homes opened for sale in August 2023, with home closings beginning in March 2024. The Developer currently expects to complete construction of all of the homes within Clementine by _____ 20__.

Strata. Strata is proposed for 127 single-family detached homes on small lots in a cluster format. The Strata floor plans range in size from 2,099 to 2,552 square feet. The Strata floorplans are all two stories with three to four bedrooms and two -car garages. The Strata homes opened for sale in March 2023, with home closings beginning in November 2023. The Developer currently expects to complete construction of all of the homes within Strata by _____ 20__.

Wildstar. Wildstar is proposed for 78 single -family detached homes on 5,000 square foot minimum lots. The Wildstar floorplans range in size from 2,747 to 3,160 square feet. Wildstar Plan 2 has an option to change storage/garage space into a guest or “livegen” suite which increases the square footage from 2,961 to 3160 square feet (Plan 2X). The Wildstar floorplans all are two stories with four to five bedrooms and two to three-car garages. The Wildstar homes opened for sale in March 2023, with home closings beginning in October 2023. The Developer currently expects to complete construction of all of the homes within Wildstar by _____ 20__.

Skyeland. Skyeland is proposed for 84 single-family detached homes on 10,000 square foot minimum lots. Skyeland has five floorplans which range in size from 2,375 to 3,604 square feet. The floorplans include single and two stories with three to five bedrooms and two to three -car garages. The Skyeland homes opened for sale in May 2023, with home closings beginning in December 2023. The Developer currently expects to complete construction of all of the homes within Skyeland by _____ 20__.

Goldenpeak. Goldenpeak is proposed for 71 single -family detached homes on 10,000 square foot minimum lots. Goldenpeak has four floorplans which range in size from 3,159 to 4,248 square feet. The floorplans include single and two stories with four to six bedrooms with two plans having guest or “livegen” suites with all having three -car garages. The Goldenpeak homes opened for sale in May 20 23, with home closings beginning in December 2023. The Developer currently expects to complete construction of all of the homes within Goldenpeak by _____ 20__.

Required Infrastructure. All backbone infrastructure required to build-out all 484 residential units has been completed.

Entitlement Status. Other than certain permits required in the normal course of home construction, all discretionary entitlements required to complete the development and sales of homes in the District have been received. All environmental approvals have been secured in order to complete the development in the District.

Conditions of Approval . None of the remaining infrastructure improvements are required to be completed as a condition of receiving building or occupancy permits.

Except as described in this Official Statement and except for those consents, permits, authorizations, certifications and approvals of governmental entities required in the ordinary course of development, The Developer has no actual knowledge of any impediment to construction or obtaining land use entitlements which could be reasonably expected to have a material adverse effect on its ability to complete the planned development of its property within the District as described in the Official Statement.

While the information set forth in this Official Statement reflects the Developer’ current development expectations, no assurance can be given that final home construction and conveyance to individual home buyers will be carried out as described in this Official Statement. 554

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Option Agreement and Construction Agreement
Option Agreement and Construction Agreement . On May 21, 2021, Landsea Homes of California, Inc., a Delaware corporation, an affiliate of the Developer (the “Original Buyer”), entered into a Purchase and Sale Agreement Joint Escrow Instructions (as amended, the “Original PSA”) to acquire the property within the District (the “Property”) from American Superior Land, LLC; EPC Holdings 823, LLC; EPC Holdings 944, LLC; RMD Inland Investors, LCC; a nd Roseville Investments, LLC (the “Seller”). On September 9, 2021, concurrent with the execution of the Option Agreement (as described below), the Original Buyer nominated Arroyo Cap II -6 LLC (previously defined as the “Landbank”) as the buyer under the Original PSA and the Landbank acquired the Property from the Seller pursuant to the Original PSA.

On September 9,2021, the Landbank and the Developer entered into the Option Agreement regarding the Property, whereby the Developer has the option but not the obligation to purchase the 484 units in the District from the Landbank pursuant to an established takedown schedule. As of September 15, 2024, the Developer had acquired all of the property within the Wildstar development, and had yet to acquire 15 lots within the Golden peak development, 32 lots within the Skyland development, 23 lots within the Strata development and 29 lots within the Clementine development. The 99 lots owned by the Landbank as of September 15, 2024 are expected to be acquired pursuan t to the takedown schedule shown in the table below, although the Developer may acquire more units than scheduled and at earlier times so long as the cumulative number of units are acquired by the applicable takedown date. The failure to acquire the cumul ative number of units by the date required could result in termination of the Option Agreement. The Option Agreement expires on the earlier of May 1, 2025 or the date that the Developer has acquired all of the units in accordance with the terms of the Option Agreement.

TABLE 8

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109 (NARRA HILLS)

TAKEDOWN SCHEDULE
(AS OF SEPTEMBER 15, 2024)
Phase
Estimated Take
Down Date
Goldenpeak
Units
Skyeland
Units
Strata
Units
Clementine
Units Total
19 10/1/2024 3 3 -- -- 6
20 11/1/2024 4 -- 4 10 18
21 12/1/2024 -- 6 8 -- 14
22 1/1/2025 3 -- -- 11 14
23 2/1/2025 -- 6 7 -- 13
24 3/1/2025 1 6 4 8 19
25 4/1/2025 1 6 -- -- 7
26 5/1/2025 3 5 -- -- 8
Total 15 32 23 29 99

* Represents the actual takedown date.

Source: The Developer.

To the Developer’s actual knowledge, it is not in default under the Option Agreement. However, there is no guaranty that the Developer will acquire the remaining units from the Landbank as planned.

In addition to and concurrent with the Option Agreement, Landsea Holdings Corporation, a Delaware corporation (the “Contractor”), an affiliate of the Developer, entered into the Construction Agreement regarding the Property (the “ Construction Agreeme nt”), whereby the Landbank engaged the Contractor to construct improvements on and for the benefit of the property in the District necessary to bring the units into finished lot 555

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condition and reimburse the Contractor for such development costs up to a guar anteed maximum aggregate contract amount.

Under the terms of the Option Agreement, the Landbank agreed to provide the Developer the exclusive right and option to purchase all 484 units comprising the Property in consideration for (a) an initial option payment, which payment has been made to the Landbank; (b) the covenants of the Developer to timely pay the option payments under the Option Agreement on a monthly basis in arrears; and (c) upon exercise of the option, the payment of the purchase price for each set of units acquired.

In addition, pursuant to the Option Agreement and with some limitations, the Landbank has granted the Developer a license to enter upon the property to construct homes before it acquires the units from the Landbank.

All homes currently under construction are owned by the Developer.

The option under the Option Agreement expires on the earlier of (i) the last date permitted for the final takedown specified on the takedown schedule (May 1, 2025) and the expiration of any applicable cure period, or (ii) the date the Developer has acquired all of the units in accordance with the Option Agreement. The failure to timely acquire units could result in the termination of the option and the Developer will no longer have a right to purchase any of the remaining units under the Option Agreement. The Option Agreement does provide the Developer a one-time option to acquire all of the units at once. In the event that the Developer does not exercise its option, the Landbank being an investor only and not a homebuilder, would likely attempt to sell such units to another merchant builder. See the caption “—The Landbank” below.

Under the Construction Agreement, the Contractor has agreed to use commercially reasonable efforts to construct all of the on -site and off -site improvements and obtain the requisite governmental permits and approvals necessary to create finished units on the Property pursuant to a construction schedule and the Landbank has agreed to reimburse the Contractor for such development costs up to a guarantee d maximum aggregate contract amount. As of September 15, 2024, other than completion of certain common area and site development improvements, including the tot lot, park landscape, final paving lift and bond exoneration work, which is to be completed at build out of the Property, all of the work required by the Construction Agreement is substantially complete.

During the term of the Option Agreement and the Construction Agreement, the Developer is obligated to pay all property taxes and carry-costs related to the Property owned by the Landbank.

The Landbank. Arroyo Capital was formed in 2016 by Oaktree Capital Management, L.P. and its strategic partners to service the land and lot development needs of U.S. homebuilders through structured lot option arrangements, also known as “land banking.” Arroyo Cap II -6 LLC (previously defined as the “Land Bank”) is serving as a land bank for the Developer and is not a homebuilder. The Landbank’s sole member is Arroyo Capital II, LLC, which is the second fund under the Arroyo banner. Arroyo Capital through its subsidiary funds, has committed approximately $3 billion to date , with a total of approximately 98 projects located in Arizona, California, Colorado, Florida, Georgia, Idaho, Nevada, New Jersey, North Carolina , Oregon, South Carolina, Virginia, Washington and Texas. Arroyo Capital’s customers include both publicly -traded builders and larger, well-capitalized privately-held builders. In California, as of September 1, 2024, Arroyo Capital II through its subsidiary funds, has acquired approximately 8603 lots in 31 projects, 13 of which have sold out.

The principals of Arroyo Capital include (i) it’s President, Jeff Brouelette, a licensed CPA in the state of California (inactive), who founded Strategic Financial G roup, LLC, specializing in residential real estate consulting to homebuilders and private equity firms, and previously spent 11 years at Standard Pacific Homes (then CalAtlantic Group, Inc.), serving as Division Controller and then Director of Mergers and Acquisitions (ii) it’s Executive VP of Business Development Dan McCann, a former investment banker covering residential real estate for FBR Capital Markets who has advised or led the acquisition of over a dozen U.S. homebuilders worth several billion dolla rs, (iii) it’s Executive VP , Leigh Austin who has 3 3 years of experience in the for -sale residential sector as a business owner, investor, equity provider, banker and broker and who previously held 556

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senior positions at Saybrook Community Capital, KB Home, Community Bank, a Canadian based private equity firm, and Citicorp Real Estate, and (iii)
Through its subsidiary funds, Arroyo Capital provides capital to public and private homebuilders for residential land acquisition and development. Arroyo Capital is not a developer or a merchant builder.

Financing Plan
As of September 15, 2024 , the Developer had expended approximately $ ___________ on land acquisition, site development and home construction costs (exclusive of marketing, sales and other soft and carrying costs) related to its development within the District. The Developer expects to incur approximately $__________ on remaining site development costs and approximately $ __________ on remaining home construction costs (exclusive of marketing, sales and other soft and carrying costs) to complete its development within the District.

To date, the Developer has financed its land acquisition costs and various site development and home construction costs related to the property it owns in the District through internally generated funds, which may include borrowings under the Credit Facility (described below). The Developer expects to use the same sources of funds to complete its acquisition of land and development activities within the District. However, home sales revenue from the Developer’s project in the District is not segregated and set aside for completing its land acquisition and construction of homes in the District. Home sales revenue is accumulated and used to pay costs of operations for the Developer and its affiliates, to pay down debt and for other corporate purposes, and may be diverted to pay costs other than the costs of completing the Developer’s activities in the District at the discretion of management. Notwithstanding the foregoing, the Developer believes that it will have sufficient funds available to complete the proposed development activities in the District in accordance with the development timing described in this Official Statement.
[As of April 30, 2023, the Developer’s parent, Landsea Homes – WAB LLC, was a party to a $675 million secured revolving credit facility with Western Alliance Bank (the “Credit Facility”) which matures in February 2024. As the units in the Community Facilities District are acquired by the Developer, Landsea Homes – WAB LLC then decides if and when a new deed of trust that secures the Credit Facility is recorded against such units. Not only is the Credit Facility available to finance the construction of homes in the Community Facilities District, but it is also available to finance and be secured by projects under development by other subsidiaries of Landsea Homes – WAB LLC. In such cases, as property within the approved projects is sold and closed to homeowners, the lien of the deed of trust that secures the Credit Facility is removed from the property sold. The Credit Facility contains a borrowing base and certain covenants and conditions that may limit the amount that Landsea Home s – WAB LLC may borrow or have outstanding at any time. As of April 30, 2023, Landsea Homes – WAB LLC had drawn approximately $475 million under the Credit Facility and had an available amount of approximately $200 million. Western Alliance Bank has conf irmed as of May 9, 2023, that the Developer is in good standing under the line of credit.] Although the Developer expects to have sufficient funds available to complete its development in the District as described in this Official Statement, there can be no assurance that amounts necessary to finance the remaining development costs will be available to the Developer when needed. While Landsea Homes has made such internal funding available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither the Developer, nor any other entity or person is under any legal obligation of any kind to expend funds for the development of and construction of homes on the Developer’s property in the District or the payment of ad valorem property taxes or the Special Taxes. Any contributions by the Developer or any other entity or person to fund the costs of such development are entirely voluntary.

If and to the extent that the aforementioned sources are inadequate to pay t he costs to complete the planned development by the Developer within the District and other financing is not put into place, there could be a shortfall in the funds required to complete the planned development by the Developer or to pay ad valorem 557

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property taxes or Special Taxes related to the Developer’s property in the District, and the remaining portions of such development may not be completed. Many factors beyond the Developer’s control, or a decision by the Developer to alter its current plans, may cause the actual sources and uses to differ from the projections. See “SPECIAL RISK FACTORS” herein for a discussion of risk factors.” Although the information in this Official Statement reflects the current development expectations of the Developer, no assurance can be given that home construction and sales will be carried out on the schedule and according to the plans described herein, or that the home construction and sale plans or base prices set forth above will not change after the date of this Offici al Statement. The Developer reserves the right to change its development at any time without notice. Additionally, homes under contract to be sold may not result in closed escrows as sales contracts are subject to cancellation. See “SPECIAL RISK FACTORS — Concentration of Property Ownership” and “ — Failure to Develop Properties.”

SPECIAL RISK FACTORS
The principal source of payment of debt service on the Bonds will be payments of the Special Tax made with respect to the Taxable Property. As discussed under “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Special Tax,” the Special Tax is to be levied annually against all such Taxable Property either at the maximum rate authorized by the Rate and Method or at such lower rates as are determined by the District Administrator to raise sufficient funds to comply with the agreements, conditions, covenants and terms contained in the Indenture, and in accordance with the Act. The Special Tax is to be collected on the tax roll of the District at the same time and in the same manner as general ad valorem real property taxes are collected. The Special Tax cannot be levied at a tax rate higher than the maximum tax rate even if the maximum tax rate will not produce sufficient Net Special Tax Revenues to pay the principal and interest then payable with respect to the Bonds. See discussions below under “— Levy of the Special Tax” and “— Collection of the Special Tax.” Payment of the Special Tax levied on a parcel is secured by a continuing lien against such parcel. In the event an installment of the Special Tax included in the tax bill for a parcel of Taxable Propert y is not paid when due, the District has covenanted to institute foreclosure proceedings in court to cause the parcel to be sold in order to attempt to recover the delinquent amount from the sale proceeds. Foreclosure and sale may not always result in the recovery of the full amount of delinquent installments of the Special Tax. See “— Collection of the Special Tax.” The sufficiency of the foreclosure sale proceeds to cover the delinquent amount depends in part upon the market for and the value of the p arcel at the time of the sale. Sufficiency of the foreclosure sale proceeds to cover a delinquency may also depend upon the value of prior or parity liens and similar claims. Further, other governmental claims, such as hazardous substance claims, may aff ect the realizable value even though such claims may not rise to the status of liens. See “— Hazardous Substances.” Timely foreclosure and sale proceedings with respect to a parcel of Taxable Property may be forestalled or delayed by a stay in the event t he owner of the parcel becomes the subject of bankruptcy proceedings. Not only may foreclosure and sale proceedings be forestalled or delayed, but the sale of a parcel may also be similarly affected by a bankruptcy stay. Further, should the stay not be l ifted, payment of the Special Tax may be subordinated to bankruptcy law priorities. See “— Bankruptcy and Legal Delays.” Although bankruptcy proceedings may forestall or delay a foreclosure and sale or a tax sale of a delinquent parcel of Taxable Property, the Special Tax is secured by a lien which, assuming proper procedures are followed, may be enforced against the parcel. There may not be any recourse against a bankrupt property owner since the owner is not personally obligated to pay the Special Tax. Further, if proper disclosure of the authorization of the Special Tax is not made to the owner, the willingness or ability of an owner to pay the Special Tax may be adversely affected. See “— Payment of the Special Tax is Not a Personal Obligation of the Owners.”
The District is not obligated to advance funds to pay such debt service except from moneys on deposit in the Reserve Fund. See “— Bonds Are Limited Obligations.” 558

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Even if debt service is timely paid, interest on the Bonds may have to be included in the gross income of the owner of the Bonds by reason of some circumstance occurring subsequent to issuance of the Bonds, thereby reducing the after-tax yield. See “— Loss of Tax Exemption.” Risks of Real Estate Secured Investments Generally – Declines in Value Purchasers of the Bonds will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District, the supply of or demand for competitive properties in such area, and the market value of property in the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules and fiscal policies; and (iii) natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses. See the caption “— Increasing Mortgage Interest Rates” below.

No assurance can be given that the indivi dual property owners within the District will pay the Special Tax in the future or that they will be able to pay the Special Tax on a timely basis. See the caption “— Bankruptcy and Legal Delays” for a discussion of certain limitations on the District’s a bility to pursue judicial proceedings with respect to delinquent parcels within the District.

Levy of the Special Tax
The principal source of money with which to pay debt service on the Bonds is the proceeds derived from the annual levy and collection of the Special Tax applicable to the Taxable Property in the District. The amount of the Special Tax that can be levied is limited to the maximum tax rates authorized pursuant to the Rate and Method. Additionally, pursuant to Section 53321(d) of the Government Code, the Special Tax levied against any Assessor’s parcel for which an occupancy permit for private residential use has been issued shall not be increased as a consequence of delinquency or default by the owner of any other Assessor’s pa rcel within the District by more than ten percent above the amount that would have been levied in that fiscal year had there never been any such delinquencies or defaults. As a result, it is possible that the District may not be able to increase the tax levy to the Assigned Special Tax on residential parcels in all years. The levies cannot be made at higher rates even if the failure to do so would result in insufficient Net Special Tax Revenues to pay the principal of and interest on the Bonds as the same become due and payable.

The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of a particular parcel and the amount of the levy of the Special Tax against such parcel. Thus, there will rarely, if ever, be a uniform relationship between the value of a parcel and its proportionate share of the debt service on the Bonds. The Special Tax levied in any particular Fiscal Year on a parcel is based upon the revenue needs of the District and the application of the Ra te and Method. The application of the Rate and Method will, in turn, be dependent upon certain development factors with respect to each parcel by comparison with similar development factors with respect to the other parcels in the District. Thus, in addition to annual variations in the revenue needs of the District that must be met from the Special Tax, the following are some of the factors which might cause the levy of the Special Tax on any particular parcel to vary from the Special Tax that might otherwise be expected:

Reduction in the number of parcels of Taxable Property, for reasons such as acquisition of such parcels by a governmental entity and failure of the governmental entity to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof, immunity from taxation, thereby resulting in an increased tax burden on the remaining parcels of Taxable Property; and Failure of the owners of certain parcels of Taxable Property to pay the applicable Special Tax and delays in the collection of or inability to collect such Special Tax by tax sale or foreclosure and sale of the delinquent parcels, thereby resulting in an increased tax burden on the remaining parcels of Taxable Property. 559

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Collection of the Special Tax
The timely payment of the principal of and interest on the Bonds is ultimately dependent upon the timely payment of all of the Special Tax. Any money on deposit in the Reserve Fund can be used to make such payment in the event of delinquencies, but the replenishment of the Reserve Fund will be dependent on the recovery of such delinquencies. The Indenture provides that the Special Tax is to be collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable (or in such other manner as the City Council shall determine, including direct billing of the affected property owners) and, except as provided in the special covenant for foreclosure described under the caption “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Covenant for Superior Court Foreclosure” and in the Act, is to be subject to the same proportionate penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem taxes on real property.

Pursuant to the Act, in the event of any delinquency in the payment of the Special Tax, the District may order the institution of a superior court action to foreclose the lien therefor within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at judicial foreclosure sale. Such judicial foreclosure action is not mandatory. However, the District has covenanted for the benefit of the owners of the Bonds that it will institute foreclosure proceedings as authorized by the Act in order to enforce the lien of the delinquent installments of the Special Tax under certain circumstances. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Covenant for Superior Court Foreclosure.” In the event that foreclosur e proceedings are commenced, such foreclosure proceedings could be stayed by the commencement of bankruptcy proceedings by or against the owner of the property being foreclosed. In the event that sales or foreclosures of property are necessary, there coul d be a delay in payments to Owners of the Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the District of the proceeds of sale if the Reserve Fund is depleted.

The District may be unable to make full or timely payment of debt service on the Bonds if property owners in the District fail to pay installments of the Special Tax when due, if the Reserve Fund is depleted, or if the District is unable to sell foreclosed parcels for amounts sufficient to cover the delinquent installments of the Special Tax.

Failure to Develop Properties
Development of property within the District may be subject to unexpected delays, disruptions and changes which may affect the willingness and ability of the Developer, or any other property owner to pay the Special Tax prior to delinquency. Land development is subject to comprehensive federal, State and local regulations. Approval is required from various agencies in connection with the layout and design of developments, the nature and extent of improvements, construction activity, land use, zoning, school and health requirements, as well as numerous other matters. There is always the possibility that such approvals will not be obtained or, if obtained, will not be obtained on a timely basis. F ailure to obtain any such agency approval or satisfy such governmental requirements would adversely affect planned land development. Development of land in the District is also subject to the availability of water. Finally, development of land is subject to economic considerations.

As of July 26, 2024, 169 residential units had been completed and conveyed to individual homeowners, the Developer owned 15 completed model units (none of which were in escrow), 25 homes over 95% complete (18 of which were in escrow), 76 homes under construction (21 of which were in escrow) and 73 finished pads (none of which were in escrow), and the Land Bank owned 126 finished pads (none of which were in escrow).

As of September 15, 2024 , within the District, _____ residentia l units had been completed and conveyed to individual homeowners, the Developer owned _____ completed model units (_____ of which were in escrow), _____ homes over 95% complete (_____ of which were in escrow), _____ residential units under construction (_____ of which were in escrow), and the Land Bank owned _____ finished pads (_____ of which were in escrow). Sales contracts are subject to cancelation and, therefore, homes currently in escrow may not result in 560

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closed escrows with the prospective homebuyers. Within the District, 444 building permits had been obtained as of July 26, 2024. Accordingly, assuming no additional building permits are obtained prior to May 1, 2025, 444 parcels will be classified as Developed Property and 40 parcels will be classified as Undeveloped Property for the Fiscal Year 2025-26 Special Tax levy. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” No assurance can be given that the remaining proposed residential development will be partially or fully completed; and for purposes of evaluating the investment quality of the Bonds, prospective purchasers should consider the possibility that such parcels will remain vacant and unimproved.

Undeveloped or partially developed land is inherently less valuable than developed land and provi des less security to the Bond Owners should it be necessary for the District to foreclose on the property due to the nonpayment of the Special Tax. The failure to complete development in the District as planned, or substantial delays in the completion of the development may reduce the value of the property within the District and increase the length of time during which the Special Tax will be payable from undeveloped property, and may affect the willingness and ability of the owners of property within the District to pay the Special Tax prior to delinquency.

There can be no assurance that land development operations within the District will not be adversely affected by a future deterioration of the real estate market and economic conditions or future local , State and federal governmental policies relating to real estate development, an increase in mortgage interest rates, the income tax treatment of real property ownership, or the national economy. A slowdown of the development process and the absorption rate could adversely affect land values and reduce the ability or desire of the property owners to pay the annual Special Tax. In that event, there could be a default in the payment of principal of, and interest on, the Bonds when due.

Bond Owners should assume that any event that significantly impacts the ability to develop land in the District would cause the property values within the District to decrease substantially from those estimated by the Appraiser and could affect the willingness and ability of the owners of land within the District to pay the Special Tax prior to delinquency.

Concentration of Property Ownership
Based on the development and ownership status as of July 26, 2024, the Developer and the Land Bank are respect are expected to be responsible for approximately 42.01% and 18.56%, respectively, of the projected Fiscal Year 202 5-26 Special Tax levied within the District. The Developer reports that since such date, additional development and certain sales contracts for residential units have closed escrow to individual homeowners. Based on the development and ownership status as of September 15, 2024, the Developer and the Land Bank are respect are expected to be responsible for approximately _____% and _____%, respectively, of the projected Fiscal Year 2025-26 Special Tax levied within the District.

While the District includes 169 completed residential units owned by individual homeowners as of July 26, 2024, the inability or refusal of the Developer or the Land Bank to pay the Special Tax ap plicable to their respective property when due could result in the depletion of the Reserve Fund prior to reimbursement thereof from sale or foreclosure proceedings, and/or insufficient money with which to pay the principal of and interest on the Bonds as the same became due. Additionally, pursuant to the Act, the Special Tax levied in any fiscal year against any parcel of residential property in the District may not be increased as a consequence of delinquency or default by the owners of any other parcels within the District by more than 10% above the amount that would have been levied in that fiscal year had there never been any such delinquencies or default. As a result, while the Maximum Special Tax pursuant to the Rate and Method may be higher, the Maximum Special Tax on parcels of residential parcels cannot be greater than 110% of the projected actual Special Tax levy on such parcels.
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Exempt Properties
Certain properties are exempt from the Special Tax in accordance with the Rate and Method. In addition, the Act provides that p roperties or entities of the state, federal or local government are exempt from the Special Tax; provided, however, that property in the District acquired by a public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. In addition, the Act provides that if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax wit h respect to that property is to be treated as if it were a special assessment. The constitutionality and operation of these provisions of the Act have not been tested.

In particular, insofar as the Act requires payment of the Special Tax by a federal ent ity acquiring property in the District, it may be unconstitutional. If for any reason property in the District becomes exempt from taxation by reason of ownership by a nontaxable entity such as the federal government or another public agency, subject to t he limitation of the maximum authorized rates, the Special Tax will be reallocated to the remaining Taxable Properties in the District. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse i mpact upon the timely payment of the Special Tax.

Moreover, if a substantial portion of property in the District becomes exempt from the Special Tax because of public ownership, or otherwise, the Maximum Annual Special Tax which could be levied upon the r emaining acreage might not be sufficient to pay principal of and interest on the Bonds when due and a default would occur with respect to the payment of such principal and interest.

Constitutional Limitations on Taxation and Appropriations Articles XIIIA and XIIIB of the California Constitution. On June 6, 1978, California voters approved an amendment to the California Constitution, commonly known as Proposition 13 (the Jarvis/Gann Initiative), which added Article XIIIA to the California Constitution. The effect of Article XIIIA is to significantly limit the imposition of new ad valorem taxes, special taxes, transaction taxes, and sales taxes. On November 7, 1978, California voters approved Proposition 8, which made certain clarifications to Article XIIIA.

Article XIIIA of the California Constitution limits the amount of ad valorem taxes on real property to 1% of “full cash value” as determined by the county assessor. Article XIIIA defines “full cash value” to mean “the county assessor’s valuation of real property as shown on the 1975 -76 tax bill under ‘full cash value’ or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.” The “full cash value” is subject t o annual adjustment to reflect increases, not to exceed 2% per year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors.

Article XIIIA exempts from th e 1% tax limitation any taxes to repay indebtedness approved by the voters prior to July 1, 1978, and allows local governments to raise their property tax rates above the constitutionally mandated 1% ceiling for the purpose of paying off certain new genera l obligation debt issued for the acquisition or improvement of real property and approved by two-thirds of the votes cast by the qualified electorate. Article XIIIA requires a vote of two-thirds of the qualified electorate to impose special taxes on real property, while otherwise generally precluding the imposition of any additional ad valorem taxes, special taxes, transaction taxes, and sales taxes. In addition, Article XIIIA requires the approval of two-thirds of all members of the California Legislature to change any State laws resulting in increased tax revenues.

Enactment of Article XIIIA has reduced the amount of general property tax revenues received by the City. This reduction in such revenues makes it less likely that the City or the District wil l have surplus funds, other than the Reserve Fund for the Bonds, with which to advance funds to make any payments or to cure any deficiency in the Interest Account or Principal Account of the Special Tax Fund, should the City or the District, as applicable, in the exercise of its discretion, choose to do so. If there are additional delinquencies after exhaustion of funds in the Reserve Fund for the Bonds, none of the City or the District has any obligation to 562

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transfer into the Interest Account or Principal Account of the Special Tax Fund the amount of any such delinquencies out of any surplus moneys of the City.

On July 2, 1979, the Fifth District Court of Appeal rendered a 3 -0 decision in the case of County of Fresno v. Malmstrom (94 Cal.App.3d 974), that determined that special assessments are not subject to the limitations of Article XIIIA (Proposition 13). The Court held the one percent tax limitation imposed by California Constitution Article XIIIA on ad valorem taxes does not apply to special assessments levied pursuant to the Improvement Act of 1911 (Streets and Highways Code, Section 5000 et seq., the relevant portions of which are incorporated in the 1915 Act) and the 1913 Act. The Court further held that because special assessments pursuant to suc h acts are not within the definition of “special taxes” in Article XIIIA, the Constitution does not require the levy of assessments and the issuance of bonds to be approved by a two-thirds vote of the qualified electors in an assessment district. On Septe mber 12, 1979, the California Supreme Court refused to hear an appeal of the lower court’s decision.

At the November 6, 1979, general election, Proposition 4 (the Gann Initiative) was approved by the voters of California. Such proposition added Article XIIIB to the California Constitution.

Article XIIIB of the California Constitution limits the annual appropriations of the State and of any city, county, school district, authority, or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the governmental entity. The “base year” for establishing such appropriation limit is the fiscal year 1978-79 and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies.

Appropriations subject to Article XIIIB generally include the proc eeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance, and disability insurance funds. “Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to an entity of government from (i) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), and (ii) the investment of tax revenues. Article XIIIB includes a requirement that if an entity’s revenues in any year exceed the amounts permitted to be spent, the excess would have to be allocated to fund schools or be returned by revising tax rates or fee schedules over the subsequent two years.

On December 17, 1980, the Third District Court of Appeal rendered a 3 -0 decision in the case County of Placer v. Corin (113 Cal. App. 3d 443) that determined that special assessments are not subject to the limitation of Article XIIIB (Proposition 4). The Court held that the definition of “proceeds of taxes” imposed by California Constitution Article XIIIB does not apply to special assessments and improvement bonds issued pursuant to the 1915 Act and the 1913 Act. The decision of the Court was not appealed.

The enactment of Article XIIIA of the California Constitution (Proposition 13) and subsequent legislative enactments effectively repeal the otherwise mandatory duty on the part of the City, under the 1915 Act, to levy and collect a special tax (in an amount necessary to meet delinquencies, but not to exceed ten cents on each $100 of assessable property within the City in any one year) if other funds are not available to cover delinquencies.

In early 1990, the U.S. Supreme Court struck down as a violation of equal protection certain property tax assessment practices in West Virginia, which had resulted in vastly different assessments of similar properties. Since Article XIIIA provides that property may only be assessed up to 2%, per yea r, except upon change of ownership or new construction, recent purchasers may pay substantially higher property taxes than long-time owners of comparable property in a community. The Supreme Court in the West Virginia case expressly declined to comment in any way on the constitutionality of Article XIIIA. 563

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Based on this decision, however, property owners in California brought three suits challenging the acquisition value assessment provisions of Article XIIIA. Two cases involve residential property and one case involves commercial property. In all three cases, State trial and appellate courts have upheld the constitutionality of Article XIIIA’s assessment rules and concluded that the West Virginia case did not apply to California’s laws.

On June 3, 1991, the U.S. Supreme Court agreed to hear the appeal in the challenge relating to commercial property, but the plaintiff subsequently decided to drop the case.

On October 7, 1991, the U.S. Supreme Court granted the plaintiff’s petition for a writ of certiorari and agreed to hear the Nordlinger v. Lynch case. On June 18, 1992, the U.S. Supreme Court affirmed the Nordlinger decision (112 U.S. 2326) of the California Court of Appeal, Second Appellate District, which previously held that Article XIIIA does not violate the U.S. Constitution.

The City cannot predict whether any other pending or future challenges to the State’s present system of property tax assessment will be successful, when the ultimate resolution of any challenge will occur, or the ultimate effect any decision regarding the State’s present system of property tax assessment will have on the City’s revenues or on the State’s financial obligations to local governments.

Articles XIIIC and XIIID of the California Constitution . Proposition 218, a state ballot initiative known as the “Right to Vote on Taxes Act,” was approved by California voters on November 6, 1996.

Proposition 218 added Articles XIIIC and XIIID to the State Constitution, and, with the exception of certain provisions, Articles XIIIC and XIIID became effective on November 6, 1996.

Among other things, Proposition 218 imposed certain voting requirements and other limitations on the imposition of new or increased taxes, assessments, and property-related fees and charges. Under Proposition 218 (i) all taxes imposed by local governments are deemed to be either general taxes, or special taxes, (ii) no local government may impose, extend, or increase any general tax unless and until such tax is submitted to the electorate and approved by a majority vote, and (iii) no local government may impose, extend, or increase any special tax unless and until such tax is submitted to the electorate and approved by a two -thirds vote. Special purpose districts, including community facilities districts and assessment districts, have no power to levy general taxes. The City believes that the issuance of the Bonds does not require the conduct of further proceedings under the Refunding Act, the 1915 Act, the 1913 Act, the Mello -Roos Act, or Proposition 218, as ap plicable, other than as described herein.

Proposition 218 provides that the initiative power shall “not be prohibited or otherwise limited in matters reducing or repealing any local tax, assessment, fee or charge...” Thus, Proposition 218 removes limitations on the initiative power in matters of, among other things, the Special Tax. Consequently, it is conceivable that the voters of the City or the District could, by future initiative, repeal, reduce, or prohibit the future imposition or increase of any S pecial Tax, subject to overriding federal constitutional principles relating to impairment of contracts.

Although the provisions of Article XIIIC have not been interpreted by the courts, the City believes that the initiative power cannot be used to reduce or repeal the unpaid Special Tax that are pledged as security for payment of the Bonds or to otherwise interfere with the mandatory, statutory duty of the City and the County Auditor with respect to the unpaid Special Tax that are pledged as security for payment of the Bonds.

The Appellate District, Division One, issued its opinion in 2014 in City of San Diego v. Melvin Shapiro, et al. (228 Cal. App. 4th 756) (the “San Diego Decision”). The case involved a Convention Center Facilities District (the “CCFD”) established by the City of San Diego. The CCFD is a financing district much like a community facilities district established under the provisions of the Act. The CCFD is comprised of all of the real property in the entire City of San Diego. However, the special tax to be levied within the CCFD was to be levied only on hotel properties located within the CCFD. 564

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The election authorizing the special tax was limited to owners of hotel properties and lessees of real property owned by a governmental entity on which a hotel is located. Thus, the election was not a registered voter election. Such approach to determining who would constitute the qualified electors of the CCFD was modeled after Section 53326(c) of the Act, which generally provides that, if a special tax will not be apportioned in any tax year on residential property, the legislative body may provide that the vote shall be by the landowners of the proposed district whose property would be subject to the special tax. The Court held that the CCFD special tax election was invalid under the California Constitution because Article XIIIA, Section 4 thereof and Article XIIIC, Section 2 thereof require that the electors in such an election be the registered voters within the district.

The facts of the San Diego Decision show that there were hundreds of thousands of registered voters within the CCFD (viz., all of the registered voters in the City of San Diego). There were no registered voters in the District at the time of formation. In the San Diego Decis ion, the Court expressly stated that it was not addressing the validity of landowner voting to impose special taxes pursuant to the Act in situations where there are fewer than 12 registered voters. Thus, by its terms, the Court’s holding does not apply t o the Special Tax elections in the District. Moreover, Section 53341 of the Act provides that any “action or proceeding to attack, review, set aside, void or annul the levy of a special tax…shall be commenced within 30 days after the special tax is approved by the voters.” Similarly, Section 53359 of the Act provides that any action to determine the validity of bonds issued pursuant to the Act be brought within 30 days of the voters approving the issuance of such bonds. Voters in the District approved the Special Tax and the issuance of bonds on June 14, 2022. Based on Sections 53341 and 53359 of the Act and analysis of existing laws, regulations, rulings and court decisions, the City believes the Special Tax is being levied in accordance with the Rate and Method and the Act.

The interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination.

Ballot Initiatives
Under the California Constitution, the power of initiative is reserved to the voters for the purpose of enacting statutes and constitutional amendments. Articles XIII A, XIII B, XIII C, and XIII D of the California Constitution were adopted pursuant to measures qualified for the ballot pursuant to the State’s constitutional initiative process, including through Proposition 13 in 1978, Proposition 218 in 1996 and Proposition 26 in 2010.

From time to time, other initiat ive measures could be adopted by California voters. The adoption of any such initiative might place limitations on the ability of the State, the City, or other local agencies to increase revenues or to increase appropriations.

As described above, Proposit ion 218 was approved by California voters in 1996 and added Article XIII C to the California Constitution. On November 2, 2010, the voters of the State approved Proposition 26, known as the “Supermajority Vote to Pass New Taxes and Fees Act” (“Proposition 26”). Proposition 26, among other things, amends Article XIIIC to the California Constitution principally to define what constitutes a “tax” under the limitations and requirements of that provision. Article XIIIC imposes limitations on local governments when imposing certain taxes, including a requirement that the local government submit certain taxes to the electorate for its approval. Before Proposition 26, Article XIIIC did not define the term “tax.” Proposition 26 broadly defines a tax under Article XIIIC to include “any levy, charge, or exaction of any kind imposed by a local government.” Proposition 26 lists several exceptions to the definition of “tax,” which include (a) a charge for a specific benefit or privilege, which does not exceed the reaso nable costs of providing the benefit or privilege, (b) a charge for a government service or product, which does not exceed the reasonable costs of providing the service or product, (c) a charge for the reasonable regulatory costs of issuing licenses and permits, performing investigations, inspections, and audits, and the administrative enforcement thereof, (d) a charge for entrance to or use of local government property, or the purchase, rental, or lease of local government property, (e) a fine, penalty, or other monetary charge imposed as a result of a violation of law, (f) a charge 565

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imposed as a condition of property development, and (g) assessments and property -related fees imposed in accordance with the provisions of Article XIIID.

From time to time const itutional initiatives or other initiative measures may be adopted by California voters. The adoption of any such initiative might place limitations on the ability of the State or any political subdivision thereof, including the City, to increase revenues or to increase appropriations, or might affect the ability of the District to collect the Special Tax.

Maximum Special Tax
Within the limits of the Special Tax, the District may adjust the Special Tax levied on all property in the District to provide an amount required to pay interest on and principal of the Bonds, and the amount, if any, necessary to cure delinquencies and replenish the Reserve Fund to an amount equal to the Reserve Requirement for the respective Bonds and to pay Administrative Expenses. However, the amount of the Special Tax that may be levied against any property in the District is subject to the Maximum Special Tax applicable to it. There is no assurance that the Maximum Special Tax on the property in the District will be sufficient to pay the amounts required to be paid by the Indenture at all times. Additionally, pursuant to the Act, the Special Tax levied in any fiscal year against any parcel of residential property in the District may not be increased as a consequence of delinquency or default by the owners of any other parcels within the District by more than 10% above the amount that would have been levied in that fiscal year had there never been any such delinquencies or defaults. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Special Tax.” Payment of the Special Tax is Not a Personal Obligation of the Owners An owner of a parcel of Taxable Property is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation only against the parcel of Taxab le Property. If the value of a parcel is not sufficient, taking into account other obligations also payable thereby, to fully secure the Special Tax, the District has no recourse against the owner.

Disclosures to Future Purchasers
The District has recorded a notice of the Special Tax Lien in the Office of the County Recorder. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of a parcel of land, a home or a commercial or industrial facility in the District or the lending of money thereon. The Act requires the subdivider (or its agent or representative) of a subdivision to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a Mello–Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civil Code Section 1102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with the above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due.

Parity Taxes and Special Assessments
The ability or willingness of a property owner in the District to pay the Special Tax could be affected by the existence of other taxes and assessments imposed upon the property. The Special Tax and any penalties thereon will constitute a lien against the lots and parcels of land on which they will be annually imposed until they are paid. Such lien is on a parity with all special tax and special assessments levied by other agencies and is co-equal to and independent of the lien for general property taxes, other special taxes, and certain special assessments regardless of when they are imposed upon the same property. The Special Tax has priority over all existing and future private liens imposed on the property. In addition, other public agencies whose boundaries 566

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overlap those of the District could, with or in some circumstances without the consent of the owners of the land in the District, impose additional taxes or assessment liens on the property in th e District in order to finance public improvements to be located inside or outside of the District.

The District has no control over the ability of other entities and districts to issue indebtedness secured by special tax or assessments payable from all or a portion of the property in the District. In addition, the City is not prohibited itself from establishing assessment districts, community facilities districts or other districts which might impose assessments or taxes against property in the District. In the event any additional improvements are financed pursuant to the establishment of an assessment district, community facilities district or other district, any taxes or assessments levied to finance such improvements will have a lien on a parity with the lien of the Special Tax. The imposition of additional liens on a parity with the Special Tax could reduce the ability or willingness of the property owners to pay the Special Tax and increase the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Tax or the principal of and interest on the Bonds when due.

Depletion of Reserve Fund
The Reserve Fund is to be maintained at an amount equal to the Reserve Requirement. Money in said fund may be used to pay debt service on t he Bonds in the event the proceeds of the levy and collection of the Special Tax against property in the District are insufficient. If funds in the Reserve Fund are used to pay debt service on the Bonds, the funds can be replenished from the proceeds of t he levy and collection of the Special Tax that are in excess of the amount required to pay all amounts to be paid pursuant to the Indenture. However, no replenishment from the proceeds of a levy of the Special Tax can occur as long as the proceeds that ar e collected from the levy of the Special Tax at the maximum tax rates, together with other available funds, remain insufficient to pay all such amounts. Thus, it is possible that the Reserve Fund will be depleted by its use to pay such amounts and will not be replenished by the levy of the Special Tax. There is no assurance that the amount in the Reserve Fund will, at any particular time, be sufficient to pay all such amounts or that any amounts of the Reserve Requirement used for debt service on the Bonds will be fully replenished from the proceeds of the levy and collection of the Special Tax.

Bankruptcy and Legal Delays
The payment of the Special Tax and the ability of the District to foreclose the lien of a delinquent unpaid tax, as discussed in “SECUR ITY AND SOURCES OF PAYMENT FOR THE BONDS,” may be limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights or by the laws of the State of California relating to judicial foreclosure. In addition, the prosecution of a foreclosu re action could be delayed due to crowded local court calendars or delays in the legal process. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel’s approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases.

Although bankruptcy proceedings would not cause the obligation to pay the Special Tax to become extinguished, the bankruptcy of a property owner could result in a delay in prosecuting superior court foreclosure proceedings because federal bankruptcy laws may provide for an automatic stay of foreclosure and sale of tax sale proceedings. Any such delays could increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds and the possibility of delinquent tax installments not being paid in full. Moreover, if the value of the subject property is less than the lien of the Special Tax, such excess could be treated as an unsecured claim by the bankruptcy court. Further, should remedies be exercised under the f ederal bankruptcy laws against Taxable Property, payment of the Special Tax may be subordinated to bankruptcy law priorities.

Thus, certain claims may have priority over the Special Tax in a bankruptcy proceeding even though they would not outside of a bankruptcy proceeding.
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FDIC/Federal Government Interests In Properties
The ability of the District to collect interest and penalties specified by the Act and to foreclose the lien of delinquent Special Tax may be limited in certain respects with regard to parcels in which the Federal Deposit Insurance Corporation (the “FDIC”), or other federal government entities such as Fannie Mae or Freddie Mac, has or obtains an interest.

In the case of the FDIC, in the event that any financial institution making a loan wh ich is secured by parcels is taken over by the FDIC and the applicable Special Tax is not paid, the remedies available to the District may be constrained. The FDIC’s policy statement regarding the payment of state and local real property taxes (the “Policy Statement”) provides that taxes other than ad valorem taxes which are secured by a valid lien in effect before the FDIC acquired an interest in a property will be paid unless the FDIC determines that abandonment of its interests is appropriate. The Policy Statement provides that the FDIC generally will not pay installments of non-ad valorem taxes which are levied after the time the FDIC acquires its fee interest, nor will the FDIC recognize the validity of any lien to secure payment except in certain cases where the Resolution Trust Corporation had an interest in property on or prior to December 31, 1995. Moreover, the Policy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, the FDIC will not permit its lien to be foreclosed out by a taxing authority without its specific consent, nor will the FDIC pay or recognize liens for any penalties, fines or similar claims imposed for the non-payment of taxes.

The FDIC has taken a position similar to that expressed in the Poli cy Statement in legal proceedings brought against Orange County, California, in United States Bankruptcy Court and in Federal District Court.

The Bankruptcy Court issued a ruling in favor of the FDIC on certain of such claims. Orange County appealed that ruling, and the FDIC cross -appealed. On August 28, 2001, the Ninth Circuit Court of Appeals issued a ruling favorable to the FDIC except with respect to the payment of pre-receivership liens based upon delinquent property tax.

The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency with respect to parcels in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed out at a judicial foreclosu re sale would prevent or delay the foreclosure sale.

In the case of Fannie Mae and Freddie Mac, in the event a parcel of Taxable Property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, or in the event a private deed of trust secured by a parcel of Taxable Property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or to collect delinquent Special Tax may be limited. Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or ass essments if foreclosure would impair the federal government interest. This means that, unless Congress has otherwise provided, if a federal government entity owns a parcel of Taxable Property but does not pay taxes and assessments levied on the parcel (in cluding the Special Tax), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.

Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Tax, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Tax and preserve the federal government’s mortgage interest.

The District’s remedies may also be limited in the case of delinquent Special Tax with respect to parcels in which other federal agencies (such as the Internal Revenue Service and the Drug Enforcement Administration) have or obtain an interest.
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Geologic, Topographic and Climatic Conditions
The District, like all California communities, may be subject to unpredictable seismic activity, fires, flood, or other natural disasters. Southern California is a seismically active area. Seismic activity represents a potential risk for damage to buildings, roads, bridges and property within the District. In addition, land susceptible to seismic activity may be subject to liquefaction during the occurrence of such event.

Like all of Southern California, the land within the District is subject to seismic activity. An Alquist - Priolo Earthquake Fault Zone encompasses a portion of the District due to the nearby Cucamonga fault, which is an active fault that crosses just to the north of the property within the District along the foot of the San Gabriel Mountains. However, a geotechnical report prepared by LGG Geotechnical, Inc. for the property within the District reports that no active geotechnical faults pass through the development within the District and no fault- related setbacks were required for the property within the District. In addition to the nearby Cucamonga fault, other faults that have the potential to generate the strongest ground shaking in the Fontana area include the San Jacinto (strike-slip fault) and the San Andreas (strike -slip) fault. The Lytle Creek Branch of the San Jacinto Fault is an active fault that crosses the extreme northeast portion of the City in a southeastern direction. Th ere are several other faults that border the Lytle Creek alluvial basin, including the Chino, San Andreas and San Jacinto faults.

In recent years, wildfires have caused extensive damage throughout the State. The last major wildfire in the vicinity of the City was the Grand Prix Fire in October 2003. There have been smaller fires, such as the 147-acre Sierra Fire that burned in November 2018, the 277-acre Karen Fire in July 2020 and the Sierra Fire that burned in June 2024. Per the City’s General Plan and Zoning Map, the site is within a fire overlay zone, which, per the State of California’s Fire Hazard Map, is within a Local Responsibility Area with the recommendation for the site to be partially in a high and partially in a very high fire severity zone. According to the California Public Utilities Commission, the property within the District is located in a High Fire Threat District—Tier 2.

A Fire Protection Plan was prepared for the residential development within the District in 2021, which recommended, among other things: (1) the preparation of a construction fire prevention plan designed to reduce the risk of ignition during the construction of the project; (2) the use of ignition resistant construction materials and the use of automatic fi re sprinkler systems based on the latest Fontana Fire Protection District (“FFPD”) building and fire codes; (3) the use of 100-foot wide fuel modification around the perimeter of the development, which is to be maintained by the homeowners association, as well as the use of landscaping which has not been found to be highly flammable; (4) the provision of fire apparatus access roads through the community, in compliance with FFPD and San Bernardino County Fire Department requirements; (5) the provision of wat er capacity and delivery sufficient for a reliable water source for operations and during emergencies requiring extended fire flow; and (6) the preparation of a site -specific evacuation plan. The Developer reports that the development within the District complies with the Fire Protection Plan. Notwithstanding the foregoing mitigation measures, there can be no assurances that wildfires will not occur within the District and if such wildfires do occur within the District there can be no assurance that residential property within the District will not be damaged or destroyed.

The Federal Emergency Management Agency has determined that the District is located in a Zone “X” flood area (an area determined to be outside of the 0.2 percent annual chance floodplain ), and flood insurance will not be required.

Some commentators believe that climate change will lead to even more frequent and more damaging wildfires in the future. Property damage due to wildfire could result in a significant decrease in the market value of property in the District and in the ability or willingness of property owners to pay the Special Tax.

In the event of a severe earthquake, fire, flood or other natural disaster, there may be significant damage to both property and infrastructure in the District. As a result, a substantial portion of the property owners may be unable or unwilling to pay the Special Tax when due. In addition, the value of land in the District could be 569

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diminished in the aftermath of one or more of such events, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Tax.

Hazardous Substances
While governmental taxes, assessments, and charges are a common claim against the value of a parcel of Taxable Property, other less common claims may be relevant. One example is a claim with regard to a hazardous substance.

In general, the owners and operators of a parcel of Taxable Property may be required by law to remedy conditions of the parcel relating to releases or threat ened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condition of property whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the Taxable Property be affected by a hazardous substance is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the p urchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of the property that is realizable upon a delinquency and foreclosure.

While the District is not aware that the owner (or operator) of any of Taxable Property has such a current liability with respect to any of the Taxable Property, it is possible that such liabilities do currently exist and that the District is not aware of them. The Developer has also represented to the District that it is not aware of any substances currently classified as hazardous by the federal government or the State located on its property within the District.

Further, it is possible that liabilities may arise in the future with respect to any of the Taxable Property resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently, on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of a parcel of Taxable Property that is realizable upon a delinquency.

No Acceleration Provision
The Indenture does not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Indenture.

Bonds Are Limited Obligations
Neither the faith and credit nor the taxing power of the District (except to the limited extent set forth in the Indenture), the City, the State or any political subdivision thereof is pledged to the payment of the Bonds or any Additional Bonds. The Bonds are limited obligations of the District; and, except as provided in the Indenture, they are payable solely from Net Special Tax Revenues and the other assets pledged therefore under the Indenture. Net Special Tax Reven ues could be insufficient to pay debt service on the Bonds as a result of delinquencies in the payment of the Special Tax or the insufficiency of proceeds derived from the sale of land within the District following a delinquency in the payment of the appli cable Special Tax. The District has no obligation to pay debt service on the Bonds in the event of insufficient Net Special Tax Revenues, except to the extent that money is available for such purpose in the Reserve Fund. The District’s only obligation with respect to delinquent Special Tax is to pursue judicial foreclosure proceedings under the circumstances described in the 570

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Indenture. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Covenant for Superior Court Foreclosure.”
Loss of Tax Exemption
As discussed under “TAX MATTERS,” interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of issuance, as a result of acts or omissions of the District subsequent to the issuance of the Bonds in violation of the District’s covenants with respect to the Bonds.

Should interest become includable in gross income, the Bonds are not subject to redemption by reason thereof and will remain outstanding until maturity or unless earlier redeemed pursu ant to optional or mandatory redemption or redemption upon prepayment of the Special Tax.

Potential Early Redemption of Bonds from Special Tax Prepayments Property owners within the District are permitted to prepay their Special Tax at any time. Such payments will result in a mandatory redemption of Bonds from Special Tax prepayments on the Interest Payment Date for which timely notice may be given under the Indenture following the receipt of such Special Tax prepayment. The resulting redemption of Bonds purchased at a price greater than par could reduce the otherwise expected yield on such Bonds. See “THE BONDS — Redemption — Mandatory Redemption from Special Tax Prepayments.”
Cybersecurity
The City, like many other public and private entities, relies on a large and complex technology environment to conduct its operations. As a recipient and provider of personal, private, or sensitive information, the City is subject to multiple cyber threats including, but not limited to, hacking, viruses, malware and o ther attacks on computer and other sensitive digital networks and systems. Entities or individuals may attempt to gain unauthorized access to the City’s digital systems for the purposes of misappropriating assets or information or causing operational disruption and damage. To date, the City has not experienced an attack on its computer operating systems which resulted in a breach of its cybersecurity systems that are in place. However, no assurances can be given that the City’s efforts to manage cyber threats and attacks will be successful or that any such attack will not materially impact the operations or finances of the City.

In May 2021, a public facing web server of the City that was responsible for building permit and inspection scheduling was compromised. The system contained vendor and database account credentials that were promptly changed. An investigation revealed that the credentials had not been used since the compromise and that changing the credentials prevented any further unauthorized access. All traces of the compromise were removed. Mitigation measures, including a web application firewall and Secure Sockets Layer (SSL) decryption, were put into place to prevent future compromises and additional prevention measures have been implemented.

No data was lost and no damage to any systems, financial or otherwise, occurred. There were no costs associated with remediation.

Impact of Economic Conditions on the Development in the District Certain events and factors which negatively affect the regional, State and national economies could have an adverse effect on the pace at which the Developer is able to complete and sell homes and demand by and the ability of individuals to purchase homes within the District. Such events and factors could include rising inflation and interest rates, persistent supply chain issues, further impacts of the COVID-19 pandemic and global market instability caused by the war in Ukraine. Any adverse impact of the foregoing and other economic factors on the projects in the District and the real estate market in general cannot be predicted.

Amid an unexpected run on deposits, the Federal Deposit Insurance Corporation (the “FDIC”) announced on March 10, 2023 that it had been appointed as receiver for Silicon Valley Bank (“SVB”), a large 571

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California bank and the 16th largest bank in the United States, and was liquidating SVB as a going concern.

Additionally, on March 12, 2023, the FDIC announced that it had been appointed as receiver for Signature Bank, another large regio nal bank. However, the United States Treasury Department, the Federal Reserve and the FDIC issued a joint statement that all deposits at both institutions would be honored, regardless of dollar amount.

On March 26, 2023, First Citizens BancShares announc ed that it would acquire SVB. On May 1, 2023, the FDIC announced that it had been appointed as receiver for First Republic Bank and reached a purchase and assumption agreement with JPMorgan Chase Bank, National Association, to assume all of the deposits a nd substantially all of the assets of First Republic Bank. Due to the failures of SVB, Signature Bank, and First Republic Bank, there has been uncertainty and concern in the financial markets that there may be additional bank liquidity issues.

The Developer expects to use internally generated funds (which may include home sales proceeds and funding from its parent company, Landsea Homes) to complete its development in the District. However, the uncertainty in the financial markets may affect homebuyers’ willingness or ability to obtain financing for the purchase of new homes within the District, which, in turn, could impact the Developer’s ability or determination to complete its development in the District in the budget and timeframe described herein. S ee “PROPERTY OWNERSHIP AND THE DEVELOPMENT.”

CONTINUING DISCLOSURE
Community Facilities District
Pursuant to a Continuing Disclosure Agreement (the “District Continuing Disclosure Agreement”) with U.S. Bank Trust Company, National Association, in its capacity as Trustee and in its capacity as dissemination agent, the District has agreed to provide, or cause to be provided, to the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found on the Internet at www.emma.msrb.org (“EMMA”), on an annual basis certain financial information and operating data concerning the District. The District has further agreed to provide notice to EMMA of certain listed events. The District’s covenants have been made in order to assist the Underwriter in complying with the Rule.

The District has not previously entered into any undertaking with respect to the Rule. However, the City, as well as the Fontana Public Financing Authority (the “Authority”), the Fontana Public Facilities Financing Authority (the “Facilities Authority”), the Successor Agency to the Fontana Redevelopment Agency (the “Successor Agency”) and various community facilities districts within the City (each, a “CFD”), all of which are entities with the City Council as the legislative body, have entered into numerous continuing disclosure undertakings.

Except as described below, within the last five years, the City and its related entities have complied in all material respects with its undertakings under the Rule: ( i) the Authority and the Facilities Authority with respect to their respective bond issues and 12 CFDs with respect to each such CFD’s bond issue(s) filed the City’s Fiscal Year 2019-20 audited financial statements late and failed to file unaudited financial statements on or before the deadlines therefore; (ii) 12 CFDs with respect to each such CFDs’ bond issue(s) and the Facilities Authority with respect to its bond issues filed unaudited financial statements for Fiscal Year 2020-21 but did so after the de adline for meeting those continuing disclosure obligations; the audited financial statement s were subsequently filed to EMMA when they became available; (iii) the Successor Agency with respect to its bonds filed unaudited financial statements for Fiscal Year 2020-21 prior to the deadline therefore and posted audited financial statements when such document became available; (iv) the Successor Agency with respect to its bonds filed its Fiscal Year 2022 audited financial statements late and failed to file unaudited financial statements on or before the deadline therefore; (v) with respect to its Fiscal Year 2021-22 disclosure, the Facilities Authority filed unaudited financial information when its audited financial statements were not available, but such filing excluded certain required information typically included in audited financial statements; the Fiscal Year 2021-22 audited financial statements were subsequently posted to EMMA when they became available; (vi) a CFD failed to file one annual report for one issue of bonds for which the official statement relating to such bonds contained all of 572

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the information required to be contained in such report; (vii) the Facilities Authority with respect to two bond issues filed the City’s Fiscal Year 2022-23 audited financial statements six days late and failed to file unaudited financial statements on or before the deadlines therefor; and (viii) the District is aware that not all of the required information was included with respect to a number of annual report fil ings by the City, the Authority, the Successor Agency and several CFDs, including required tabular information.

The City has since made filings on behalf of itself and its related entities to correct material omissions with respect to the filings that were required to have been made within the past five years and has adopted written procedures to ensure future compliance with the City’s disclosure undertakings and those of its related entities.

Except as disclosed in this Official Statement, within the last five years, the City, the Successor Agency, the Facilities Authority and the Authority have not failed to timely comply with their respective prior continuing disclosure obligations under the Rule in all material respects. The full text of the form of the District Continuing Disclosure Agreement is set forth in Appendix G.

The Developer
General. Although the Underwriter has concluded that the Developer is not an obligated person under Rule 15c2-12, pursuant to the Developer Continuing Disclosure Certificate, the Developer has agreed to provide, or cause to be provided, to EMMA, on a semi -annual basis certain information concerning the Developer and the property it owns or has under option with the Land Bank within the District. The Developer has further agreed to provide notice to EMMA of certain listed events, including certain events relating to the Land Bank.

The Developer’s obligation to provide semi -annual reports and notices of certain listed events will terminate upon the earlier to occur of certain events, including at such time as the Developer owns or has under option no more than _____ of the residential lots in the D istrict subject to the Special Tax levy. A default under the Developer Continuing Disclosure Certificate will not, in itself, constitute an Event of Default under the Indenture, and the sole remedy under the Developer Continuing Disclosure Certificate in the event of any failure of the Developer or the dissemination agent, as applicable, to comply with the Developer Continuing Disclosure Certificate will be an action to compel performance. See APPENDIX H — “FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFIC ATE” for a description of the specific nature of the semi -annual reports to be filed by the Developer and notices of listed events to be provided by the Developer.

Neither the District nor the City has considered, or reached any conclusion as to, whether o r the Developer is an obligated person under Rule 15c2 -12 and takes no responsibility for any such conclusion.

Additionally, neither the District nor the City has participated in the preparation, negotiation or implementation of the Developer Continuing Disclosure Certificate or in discussions regarding the form or content thereof. The District and the City take no responsibility for such form or content or for the adequacy of the Developer Continuing Disclosure Certificate for its intended purpose.

None of the District, the City or the Trustee is a party to the Developer Continuing Disclosure Certificate, and none of the District, the City or the Trustee has any obligation or responsibility to monitor, nor any right or obligation to enforce, compliance by the Developer with its undertaking pursuant to the Developer Continuing Disclosure Certificate, and none of the District, the City or the Trustee will be so monitoring or enforcing such compliance.

Developer Continuing Disclosure Compliance . To the actual knowledge of the Developer, the Developer has not failed to comply in any material respect with its previous undertakings by it to provide periodic continuing disclosure reports or notices of listed events with respect to community facilities distri ct or assessment district bond issues in southern California within the past five years. 573

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TAX MATTERS
In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the District (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”) and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the Bonds is not a specific preference item for purposes of the federal individual alternative minimum tax. Bond Counsel observes that interest on the Bonds included in adjusted financial statement income of certain corporations is not excluded from the federal corporate alternative minimum tax.

Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Bonds. A complete copy of the proposed form of opinion of Bond Counsel is set forth in APPENDIX D hereto.

To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes and exempt from State of California personal income taxes. For this purpose, t he issue price of a particular maturity of the Bonds is the first price at which a substantial amount of such maturity of the Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight -line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon trade or business disposition (including sale, redemption, or payment on maturity) of such Bonds. Beneficial Owners of the Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of Beneficial Owners who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public.

Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, a t their earlier call date) (“Premium Bonds”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income f or federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner.

Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.

The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. The District has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Bonds being included in gross income for federal income tax purposes, possibly from the date o f original issuance of the Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants.

Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel’s attention after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds.

Accordingly, the opinion of Bond Co unsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters.
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Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt fro m State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Bonds may otherwise affect a Beneficial Owner’s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences.

Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income tax ation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perh aps significantly, the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.

The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts.

Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the District, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The District has covenanted, however, to comply with the requirements of the Code.

Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the District or the Beneficial Owners regarding the tax-exempt status of the Bonds in the event of an audit examination by the IRS. Under current procedures, Beneficial Owners would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax -exempt bonds is difficult, obtaining an independent review of IRS positions with which the District legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of bon ds presenting similar tax issues may affect the market price for, or the marketability of, the Bonds, and may cause the District or the Beneficial Owners to incur significant expense.

Payments on the Bonds generally will be subject to U.S. information reporting and possibly to “backup withholding.” Under Section 3406 of the Code and applicable U.S. Treasury Regulations issued thereunder, a non-corporate Beneficial Owner of Bonds may be subject to backup withholding with respect to “reportable payments,” which include interest paid on the Bonds and the gross proceeds of a sale, exchange, redemption, retirement or other disposition of the Bonds. The payor will be required to deduct and withhold the prescribed amounts if (i) the payee fails to furnish a U.S. taxpayer identification number (“TIN”) to the payor in the manner required, (ii) the IRS notifies the payor that the TIN furnished by the payee is incorrect, (iii) there has been a “notified payee underreporting” described in Section 3406(c) of the Code or (iv) the payee fails to certify under penalty of perjury that the payee is not subject to withholding under Section 3406(a)(1)(C) of the Code. Amounts withheld under the backup withholding rules may be refunded or credited against a Beneficial Owner’s federal income tax liability, if any, provided that the required information is timely furnished to the IRS. Certain Beneficial Owners (including among others, corporations and certain tax-exempt organizations) are not subject to backup withholding. The failure to comply with the backup withholding rules may result in the imposition of penalties by the IRS.

ABSENCE OF LITIGATION
In connection with the issuance of the Bonds, the City Attorney of the City will deliver a certificate to the effect that, to the best of the City Attorney’s knowledge, after due inquiry and investigation, there is no 575

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action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending or threatened, or any unfavorable decision, ruling or finding, against or affecting the City or the District, which would adversely impact the ability of the City or the District to complete the transactions described in, or contemplated by, the Indenture or this Official Statement, restrain or enjoin the collection of the Special Tax, or in any way contest or affect the validity of the Bonds, the Indenture, the Special Tax, or the transactions described herein.

ABSENCE OF RATINGS
The District has not made, and does not contemplate making, application to any rating organization for a rating on the Bonds.

CERTAIN LEGAL MATTERS
Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the District, will render an opinion with respect to the validity and enforceability of the Indenture and as to the validity of the Bonds. A copy of the form of such approving opinion is attached hereto as Appendix D. Bond Counsel has not undertaken any responsibility for the accuracy, completeness or fairness of the Official Statement or other offering materials relating to the Bonds and expresses no opinion relating thereto. Certain legal matters will be passed upon for the City by the City Attorney and by Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, as Disclosure Counsel.

Certain legal matters will be passed upon for the Underwriter by its counsel, Kutak Rock LLP, Irvine, California.

Although it is serving as Bond Counsel to the District in connection with the issuance and sale of the Bonds, Bond Counsel represents the Underwriter in connection with other financin gs and matters unrelated to the Bonds. Disclosure Counsel and the City Attorney also represent the Underwriter in connection with other financings and matters unrelated to the Bonds.

UNDERWRITING
The Bonds are being purchased by Piper Sandler & Co. (the “Underwriter”). The Underwriter has agreed to purchase the Bonds at a price of $ __________, being the $__________ principal amount, [plus/less] [net] original issue [premium/discount] of $__________ and less an Underwriter’s discount of $ __________).

The Bond Purchase Agreement relating to the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions.

The Underwriter’s compensation is contingent upon the successful issuance of the Bonds.

Under certain circumstances, the Underwriter may offer and sell Bonds to certain dealers and others at prices lower than the offering prices stated on the inside front cover page hereof. The offering prices may be changed from time to time by the Underwriter.

FINANCIAL INTERESTS
The fees being paid to the Municipal Advisor, Bond Counsel, Discl osure Counsel, Underwriter, and Underwriter’s Counsel are contingent upon the issuance and delivery of the Bonds.

MUNICIPAL ADVISOR
The District has retained CSG Advisors Incorporated, San Francisco, California, as municipal advisor (the “Municipal Advisor”) for the sale of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement. 576

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CSG Advisors Incorporated is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities.

ADDITIONAL INFORMATION
The purpose of this Official Statement is to supply information to prospective buyers of the Bonds.

Quotations and summaries and explanations of the Bonds and documents contained in this Official Statement do not purport to be complete, and reference is made to such documents for ful l and complete statements and their provisions.

The execution and delivery of this Official Statement by the City Manager of the City has been duly authorized by the City Council of the City of Fontana acting in its capacity as the legislative body of the District.

CITY OF FONTANA COMMUNITY FACILITIES
DISTRICT NO. 109 (NARRA HILLS)
By:

City Manager

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APPENDIX A

RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
-----------------------------------------

RATE AND METHOD OF APPORTIONMENT FOR
CITY OF FONTANA COMMUNITY FACILITIES DISTRICT NO. 109
(NARRA HILLS)

A Special Tax as hereinafter defined shall be levied on all Assessor ’s Parcels of Taxable Property in City of Fontana Community Facilities District No. 109 (Narra Hills) (“CFD No. 109”) and collected each Fiscal Year, in an amount determined by the City Coun cil of the City of Fontana, through the application of the Rate and Method of Apportionment as described below. All of the real property in CFD No. 109, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided.

A. DEFINITIONS
The terms hereinafter set forth have the following meanings:
“Acre” or “Acreage” means the land area expressed in acres of an Assessor’s Parcel as shown on an Assessor’s Parcel Map, or if the land area is not shown on an Assessor’s Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan, or other recorded County map or the land area calculated to the reasonable satisfaction of the CFD Administrator using the boundaries set forth on such map or plan. For residential dwelling units within a condominium plan, the Acres applicable to each residential dwelling unit shall be determined by dividing (i) the Acres of the underlying lot or parcel on which the residential dwelling unit is constructed or to be constructed, by (ii) the total number of residential dwelling units constructed or to be constructed on such lot or parcel. The square footage of an Assessor ’s Parcel is equal to the Acreage of such parcel multiplied by 43,560.
“Act” means the Mello -Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2 of Title 5 (commencing with Section 53311) of the California Government Code. “Administrative Expenses” means the following actual or reasonably e stimated costs directly related to the administration of CFD No. 109, including but not limited to : the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the City or designee thereof or both); the costs of collecting the Special Taxes (whether by the County or otherwise); the costs of remitting the Special Taxes to the Trustee; the costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, CFD No. 109 or any designee thereof of complying with arbitrage rebate requirements with respect to the Special Tax and CFD No. 109 Bonds; the costs to the City, CFD No. 109 or any designee thereof of complying with disclosure requirem ents of the City, CFD No. 109 or obligated persons associated with applicable federal and state securities laws and the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the City, CFD No. 109, or any designee thereof related to the reduction of the Assigned Facilities Special Tax and Backup Facilities Special Tax in accordance with Section C.1 herein; the costs of the City, CFD No. 109 or any designee thereof related to an appeal of the Special Tax; and the City ’s annual administration fees and third party expenses related to CFD No. 109 Bonds. Administrative Expenses shall also include amounts estimated or advanced by the City or CFD No. 109 for any other administrative purposes of CFD No. 109, including attorney’s fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes.
“Assessor” means the Assessor of the County.
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“Assessor’s Parcel” means a lot or parcel to which an Assessor’s parcel number is assigned as determined from an Assessor’s Parcel Map or the applicable assessment roll. “Assessor’s Parcel Map ” means an official map of the Assessor designating parcels by Assessor ’s Parcel number.
“Assigned Facilities Special Tax ” means the Facilities Special Tax for each Land Use Class of Developed Property, as determined in accordance with Section C.1.a.(2) below. “Assigned Services Special Tax” means the Services Special Tax, determined in accordance with Section C.2.b herein, that can be levied in any Fiscal Year on any Assessor’s Parcel of Developed Property. “Attached Residential Property” means Assessor’s Parcels of Developed Property for which building permits have been issued for a residential dwelling unit that shares, or will share, an inside wall with another residential dwelling unit.
“Authorized Facilities” means those facilities eligible to be funded by CFD No. 109. “Authorized Services” means those services eligible to be funded by CFD No. 109 in accordance with the Act, including, but not limited to, fire protection and suppression services, maintenance and lighting of parks, parkways, streets, roads and open space, flood and storm protection services and maintenance and operation of any real property or other tangible property with an estimated useful life of five or more years that is owned by the City.
“Backup Facilities Special Tax ” means the Facilities Special Tax applicable to each Assessor ’s Parcel of Developed Property, as determined in accordance with Section C.1.a.(3) below. “Buildout” means, for CFD No. 109, that all expected building permits for residential dwelling units and /or non-residential development to be constructed within CFD No. 109 have been issued, as determined by the CFD Administrator.
“CFD Administrator” means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement for Facilities and the Special Tax Requirement for Services, providing for the levy and collection of the Special Taxes, and performing other duties as set forth herein. “CFD No. 109” means City of Fontana Community Facilities District No. 109 (Narra Hills). “CFD No. 109 Bonds” means any bonds or other debt (as defined in Section 53317(d) of the Act), whether in one or more series, issued by CFD No. 109 and secured by the Facilities Special Tax levy on property within the boundaries of CFD No. 109 under the Act.
“City” means the City of Fontana, California.
“Contractual Impositions ” means (a) a voluntary contractual assessment established and levied on an Assessor’s Parcel pursuant to Chapter 29 of Part 3 of Division 7 of the California Streets and Highways Code (commencing with Section 5898.10 et seq.), as amended from time to time, (b ) a special tax established and levied on an Assessor ’s Parcel pursuant to Section 53328.1 of the California Government Code and relate d provisions of the Act, as amended from time to time, and (c) any other fee, charge, tax or assessment established and levied on an individual Assessor’s Parcel pursuant to a contractual agreement or other voluntary consent by the owner thereof.
“Council” means the City Council of the City acting as the legislative body of CFD No. 109. 579

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“County” means the County of San Bernardino.
“Detached Residential Property” means Assessor’s Parcels of Developed Property for which building permits have been issued for a residential dwelling unit that is or is expected to be surrounded by freestanding walls and that does not share an inside wall with any other residential dwelling unit. “Developed Property” means, for each Fiscal Year, (i ) with respect to the Facilities S pecial Tax, all Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, for which a building permit for new construction, other than the construction of a garage, parking lot, or parking structure, was issued after January 1, 2022 and on or before May 1 of the Fiscal Year preceding the Fiscal Year for which the Facilities Special Taxes are being levied, and (ii ) with respect to the Services Special Tax, all Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, (a) for which the Final Residential Subdivision was recorded prior to the Fiscal Year for which the Services Special Taxes are being levied, or (b) for which a building permit has been issued with respect to Non-Residential Property on or before May 1 of the Fiscal Year preceding the Fiscal Year for which the Services Special Taxes are being levied. “Facilities Special Tax” means the special tax to be levied in each Fiscal Year on each Assessor ’s Parcel of Taxable Property within CFD No. 109 to fund the Special Tax Requirement for Facilities , as set forth in Section C.1 herein.
“Final Residential Subdivision ” means a Final Subdivision that creates indi vidual lots for which building permits may be issued for residential dwelling units without further subdivision of such property. “Final Subdivision” means (i) a subdivision of property by recordation of a final map , parcel map, or lot line adjustment approved by the City pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) that creates individual lots or parcels for which building permits may be issued, or (ii) for condominiums, a final map approved by the City and a condominium plan recorded pursuant to California Civil Code Section 4285 that creates an individual lot(s) for which a building permit(s) may be issued without further subdivision. The term “Final Subdivision” shall not include any Assessor’s Parcel Map or sub division map or portion thereof that does not create individual lots for which a building permit may be issued, including Assessor’s Parcels that are designated as remainder parcels . Notwithstanding the above, a condominium plan for which one or more buil ding permits have been issued, but no individual lots have been created for such building permits, shall be considered a Final Subdivision, and the portion of the condominium plan for which building permits have been issued shall be defined as Developed Property. “Fiscal Year” means the period starting July 1 and ending on the following June 30. “Indenture” means the indenture, fiscal agent agreement, trust agreement, resolution or other instrument pursuant to which CFD No. 109 Bonds are issued, as modified, amended and/or supplemented from time to time. “Land Use Class” means any of the classes listed in Table 1, Table 4, or Table 5 herein. “Lower Income Households Welfare Exemption Property” means, for each Fiscal Year, an Assessor’s Parcel within the boundaries of CFD No. 109 that is entitled to a welfare exemption under subdivision (g) of Section 214 of the California Revenue and Taxation Code (or any successor statute), as indicated in the County’s assessment roll finalized as of the last preceding January 1. “Maximum Facilities Special Tax” means the maximum Facilities Special Tax, determined in accordance with Section C.1 herein, that can be levied in any Fiscal Year on any Assessor’s Parcel of Taxable Property. “Maximum Services Special Tax” means the maximum Services Special Tax, determined in accordance with Section C.2 herein, that can be levied in any Fiscal Year on any Assessor’s Parcel of Developed Property. 580

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“Minimum Sale Price” means the minimum price at which parcels of a given Land Use Class have sold or are expected to be sold in a normal marketing environment and shall not include prices for such parcels that are sold at a discount to expected sales prices for the purpose of stimulating the initial sales activity with respect to such Land Use Class.
“Non-Residential Property” means all Assessor’s Parcels of Developed Property for which a building permit(s) has been issued by the City permitting the construction of one or more non-residential structures or facilities. “Outstanding Bonds” means all CFD No. 109 Bonds which are outstanding under the Indenture. “Planning Area” means an area designated with the letters “P.A.” as shown on Exhibit B. “Price Point Consultant ” means any consultant or firm of such consultants selected by CFD No. 109 that (a) has substantial experience in performing price point studies for residential dwelling units within community facilities districts or otherwise estimating or confirming pricing for residential dwelling units in community facilities districts, (b) has recognized expertise in analyzing economic and real estate data that relates to the pricing of residential dwelling units in community facilities districts, (c) is in fact independent and not under the control of CFD No. 109 or the City, (d) does not have any substantial interest, direct or indirect, with or in (i) CFD No. 109, (ii) the City, (iii) any owner of real property in CFD No. 109, or (iv) any real property in CFD No. 109, and (e) is not connected with CFD No. 109 or the City as an officer or employee thereof, but who may be regularly retained to make reports to CFD No. 109 or the City. “Price Point Study” means a price point study or a letter updating a previous price point study prepared by the Price Point Consultant pursuant to Section C herein.
“Property Owner Association Property” means, for each Fiscal Year, (i) any property within the boundaries of CFD No. 109 for which the owner of record, as determined from the County’s assessment roll for the Fiscal Year in which the Special Tax is being levied, is a property owner ’s association, including any master or sub - association, or (ii) any property located in a Final Subdivision that was recorded as of the January 1 preceding the Fiscal Year in which the Special Tax is being levied and which, as determined from such Final Subdivision, is or will be open space, a common area recreation facility, or a private street. Notwithstanding the foregoing, any property previously classified as Developed Property and subsequently owned in fee or by easement, or dedicated to, a property owner association, including any master or sub -association, shall remain classified as Developed Property.
“Proportionately” means that the ratio of the actual Facilities Special Tax levy to the Assigned Facilities Special Tax is equal for all Assessor ’s Parcels of Developed Property, and that the ratio of the actual Services Special Tax levy to the Assigned Services Special Tax is equal for all Assessor ’s Parcels of Developed Property. For Undeveloped Property, “Proportionately” means that the ratio of the actual Facilities Special Tax levy per Acre to the Maximum Fa cilities Special Tax per Acre is equal for all Assessor ’s Parcels of Undeveloped Property.

The term “Proportionately” shall similarly be applied to other categories of Taxable Property as listed in Section D herein.
“Public Property” means, for each Fisca l Year, any property within the boundaries of CFD No. 109 that is (i) owned by, irrevocably offered or dedicated to the federal government, the State, the County, the City, or any local government or other public agency, provided , however, that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be taxed and classified according to its use; or (ii) encumbered by a public utility easement making impractical its use for any purpose other than that set forth in the easement.
“Rate and Method of Apportionment” means this Rate and Method of Apportionment for CFD No. 109. 581

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“Residential Floor Area” means all of the square footage of living area within the perimeter of a residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area. The determination of Residential Floor Area for an Assessor ’s Parcel shall be as set forth in the building permit(s) issued for such Assessor’s Parcel and/or as set forth in the appropriate records kept by the Building and Safety Department of the City, or other applicable City department, as determined by the CFD Administrator. “Residential Property” means all Assessor’s Parcels of Developed Property for which a building permit(s) has been issued by the City permitting the construction thereon of one or more residential dwelling units. “Services Special Tax ” means the special tax to be levied in each Fiscal Year on each Assessor ’s Parcel of Developed Property with in CFD No. 109 to fund the Special Tax Requirement for Services , as set forth in Section C.2 herein.
“Special Tax” means the Facilities Special Tax and/or Services Special Tax, as applicable. “Special Tax Requirement for Facilities” means, for any Fiscal Year, that amount required, after taking into account available amounts held in the funds and accounts under the Indenture, for the following items: (i) debt service on all Outstanding Bonds due in the calendar year commencing in such Fiscal Year; (ii) periodic costs with respect to the CFD No. 109 Bonds, including but not limited to, costs of credit enhancement and federal rebate payments due in the calendar year commencing in such Fiscal Year; (iii ) pay all or a portion of Administrative Expenses ; (iv ) any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) without duplicating any amounts described in clause (iv), above, reasonably anticipated Facilities Special Tax delinquencies based on the delinquency rate for the Facilities Special Tax in the previous Fiscal Year, as said levy for delinquencies shall be limited by the Act; and (vi) pay directly for the acquisition or construction of Authorized Facilities, provided that the inclusion of s uch amount does not increase the Facilities Special Tax levy beyond the first step in Section D.1 herein. “Special Tax Requirement for Services” means that amount required in any Fiscal Year for CFD No. 109 to (i) pay directly for the Authorized Services; (ii) pay Administrative Expenses not funded through the Special Tax Requirement for Facilities as determined by the CFD Administrator ; (iii) pay for reasonably anticipated Services Special Tax delinquencies based on the delinquency rate for the Services Sp ecial Tax levy in the previous Fiscal Year; less (iv ) a credit for funds available to reduce the annual Services Special Tax levy, as determined by the CFD Administrator, so long as the amount required is not less than zero. “State” means the State of California.
“Taxable Property” means all of the Assessor’s Parcels within the boundaries of CFD No. 109 which are not exempt from the Special Tax pursuant to applicable law or Section E herein. “Taxable Property Owner Association Property ” means all Assessor ’s Parcels of Property Owner Association Property that are not exempt pursuant to Section E herein. “Taxable Public Property” means all Assessor’s Parcels of Public Property that are not exempt pursuant to Section E herein.
“Total Tax Burden” means, for a parcel of residential property within a Land Use Class, for the Fiscal Year in which Total Tax Burden is being calculated, the sum of (a ) the Assigned Facilities Special Tax for such Fiscal Year, plus (b) the Assigned Services Special Tax for such Fiscal Y ear, plus (c) the ad valorem property taxes, special assessments, special taxes for any overlapping community facilities districts, and any other governmental fees, charges (other than fees or charges for services such as sewer and trash), taxes and assessments (which, for purposes of clarity, do not include Contractual Impositions) collected by the County on ad valorem tax bills and that the CFD Administrator estimates would be levied or imposed on such residential property in such Fiscal 582

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Year if the residential dwelling unit thereon or therein had been completed and sold, and was subject to such fees, charges, taxes and assessments in such Fiscal Year.
“Trustee” means the trustee or fiscal agent under the Indenture. “Undeveloped Property ” means, for each F iscal Year, all Taxable Property not classified as Developed Property, Taxable Public Property or Taxable Property Owner Association Property.

Please refer to additional definitions in Section H herein relating to the Prepayment of Facilities Special Tax.

B. ASSIGNMENT TO LAND USE CATEGORIES
Each Fiscal Year, commencing with Fiscal Year 2022-2023, all Taxable Property within CFD No. 109 shall be classified as Developed Property, Undeveloped Property, Taxable Public Property or Taxable Property Owner Association Property, and shall be subject to Special Taxes in accordance with this Rate and Method of Apportionment determined pursuant to Sections C and D herein.

C. MAXIMUM SPECIAL TAX RATE

1. Facilities Special Tax
At least 30 days prior to the issuance of the first series of CFD No. 109 Bonds, the Assigned Facilities Special Tax on Developed Property (set forth in Table 1) shall be analyzed in accordance with and subject to the conditions set forth in this Section C. At such time, the CFD Administrator shall request the Price Point Consultant to prepare a Price Point Study setting forth the Minimum Sale Price of residential property within each Land Use Class. If based upon such Price Point Study the CFD Administrator calculates that the Total Tax Burden applicable to one or more Land Use Classes of residential property constructed or to be constructed within CFD No. 109 shall exceed 1.95% of the Minimum Sale Price of such residential property constructed or to be constructed within CFD No. 109, the CFD Administrator shall reduce the Assigned Facilities Special Tax to the extent necessary to cause the Total Tax Burden that shall apply to residential property within such Land Use Class(es) to not exceed 1.95% of the Minimum Sal e Price of such residential property. Each Assigned Facilities Special Tax reduction for a Land Use Class shall be calculated separately, and it shall not be required that such reduction be proportionate among Land Use Classes. In connection with any reduction in the Assigned Facilities Special Tax, the CFD Administrator shall also reduce the Backup Facilities Special Tax in accordance with Section C.1.a.(3) herein. Upon determining the reductions, if any, in the Assigned Facilities Special Tax and Backup Facilities Special Tax required pursuant to this Section C, the CFD Administrator shall complete the Certificate to Amend Facilities Special Tax substantially in the form attached hereto as Exhibit A (the “Certificate to Amend”) and shall execute such completed Certificate to Amend and shall deliver such Certificate to Amend to CFD No. 109. Upon receipt thereof, if in satisfactory form, CFD No. 109 shall execute such Certificate to Amend. The reduced Assigned Facilities Special Tax and Backup Facilities Special Tax specified in such Certificate to Amend shall become effective upon the execution of such Certificate to Amend by CFD No. 109. The Assigned Facilities Special Tax and Backup Facilities Special Tax reductions permitted pursuant to this Section C shall be reflected in an amended notice of Special Tax lien which CFD No. 109 shall cause to be recorded with the San Bernardino County Recorder as soon as practicable after execution of the Certificate to Amend by CFD No. 109. If based upon such Price Point Study the CFD Administrator calculates that the Total Tax Burden applicable to each Land Use Class of residential property constructed or to be constructed within CFD No. 109 does not exceed 1.95% of the Minimum Sale Price of each such Land Use Class of residential property constructed or to be constructed within CFD No. 109, then there shall be no reduction in the Assigned Facilities Special Tax, nor shall there be a reduction in the Backup Facilities Special Tax. a. Developed Property
(1). Maximum Facilities Special Tax
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The Maximum Facilities Special Tax for each Assessor’s Parcel classified as Developed Property shall be the greater of (i) the amount derived by application of the Assigned Facilities Special Tax or (ii) the amount derived by application of the Backup Facilities Special Tax. (2). Assigned Facilities Special Tax
Residential Property shall be assigned to Land Use Classes 1 through 20 as listed in Table 1 below based on the type of use and the Residential Floor Area for each residential dwelling unit. Non -Residential Property shall be assigned to Land Use Class 21. The Assigned Facilities Special Tax that shall be levied in any Fiscal Year for each Land Use Class is shown below in Table 1.

Table 1
Assigned Facilities Special Tax for Developed Property
City of Fontana CFD No. 109 (Narra Hills)
Land
Use
Class Description
Residential Floor
Area (square feet)
Assigned
Facilities
Special Tax
1 Detached Residential Property 4,400 or greater $8,186 per unit 2 Detached Residential Property 4,200 to less than 4,400 $7,879 per unit 3 Detached Residential Property 4,000 to less than 4,200 $7,736 per unit 4 Detached Residential Property 3,800 to less than 4,000 $7,592 per unit 5 Detached Residential Property 3,600 to less than 3,800 $7,238 per unit 6 Detached Residential Property 3,400 to less than 3,600 $6,905 per unit 7 Detached Residential Property 3,200 to less than 3,400 $6,551 per unit 8 Detached Residential Property 3,000 to less than 3,200 $6,240 per unit 9 Detached Residential Property 2,800 to less than 3,000 $6,103 per unit 10 Detached Residential Property 2,600 to less than 2,800 $5,873 per unit 11 Detached Residential Property 2,400 to less than 2,600 $5,666 per unit 12 Detached Residential Property 2,200 to less than 2,400 $5,349 per unit 13 Detached Residential Property 2,000 to less than 2,200 $5,118 per unit 14 Detached Residential Property Less than 2,000 $4,876 per unit 15 Attached Residential Property 2,000 or greater $4,074 per unit 16 Attached Residential Property 1,800 to less than 2,000 $4,025 per unit 17 Attached Residential Property 1,600 to less than 1,800 $3,762 per unit 18 Attached Residential Property 1,400 to less than 1,600 $3,627 per unit 19 Attached Residential Property 1,200 to less than 1,400 $3,445 per unit 20 Attached Residential Property Less than 1,200 $3,320 per unit 21 Non-Residential Property NA $36,640 per Acre

(3). Backup Facilities Special Tax
The Backup Facilities Special Tax for an Assessor ’s Parcel of Developed Property within a Planning Area shall equal the lesser of (a) the Backup Facilities Special Tax applicable for such Planning Area set forth in Table 2 below, or (b) in connection with any reduction in the Assigned Facilities Special 584

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Tax as set forth in Section C.1 herein, the amount per Acre calculated for each Planning Area pursuant to the formula below:

BFST = AFST  ATP
These terms have the following meaning:

BFST = the reduced Backup Facilities Special Tax for Developed Property within a Planning Area
AFST = The total estimated Assigned Facilities Special Tax levy within such Planning Area based on the reduced Assigned Facilities Special Tax es for Developed Property permitted pursuant to Section C.1 herein which could be levied on all expected development within such Planning Area assuming Buildout of CFD No. 109.

ATP = The sum of the Acreage of all Taxable Property within a Final Subdivision (assuming Buildout of CFD No. 109) within such Planning Area (after excluding Public Property and Property Owner Association Property as set forth in Section E.1 herein) multiplied by 85%.

Table 2
Backup Facilities Special Tax for Developed Property
City of Fontana CFD No. 109 (Narra Hills)
Planning
Area
Backup
Facilities
Special Tax
P.A. 1 $28,860 per Acre
P.A. 2 $52,010 per Acre
P.A. 3 $70,530 per Acre
P.A. 4 $69,890 per Acre

Furthermore, all Assessors ’ Parcels within CFD No. 109 shall be relieved simultaneously and permanently from the obligation to pay and disclose the Backup Facilities Special Tax if the CFD Administrator calculates that (i ) the annual debt service required for the Outstanding Bonds, when compared to the Assigned Facilities Special Tax that shall be levied against all Assessors ’ Parcels of Developed Property in CFD No. 109 results in 110% debt service coverage (i.e., the Assigned Facilities Special Tax that shall be levied against all Developed Property in CFD No. 109 in each remaining Fiscal Year based on the then existing development is at least equal to the sum of (a) 1.10 times the debt service necessary to support the remaining Outstanding Bonds in each corresponding Fiscal Year, and (b) Administrative Expenses), and (ii) all authorized CFD No. 109 Bonds have already been issued or the Council has covenanted that it shall not issue any additional CFD No. 109 Bonds (except refunding bonds) to be supported by the Facilities Special Tax in CFD No. 109. (4). Multiple Land Uses
In some instances an Assessor ’s Parcel may contain both Developed Property and Undeveloped Property. In such cases , the Acreage of the Assessor’s Parcel shall be allocated between Developed Property and Undeveloped Property based on the portion of the Assessor’s Parcel for which building permits had been issued prior to May 1 of the prior Fiscal Year and the portion of the Assessor’s Parcel for which building permits had not been issued prior to May 1 of the prior Fiscal Year. 585

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Furthermore, Developed Property may contain more than one Land Use Class. In such cases, the Acreage that is considered Developed Property shall be allocated between Residential Property and Non-Residential Property based on the amount of Acreage designated for each land use as determined by reference to the site plan approved for such Assessor’s Parcel. The Maximum Facilities Special Tax that can be levied on such Assessor’s Parcel shall be the sum of the Maximum Facilities Special Tax that can be levied on each type of property located on that Assessor’s Parcel.

The CFD Administrator’s allocation to each type of property shall be final. b. Undeveloped Propert y, Taxable Public Property , and Taxable Property Owner Association Property
The Maximum Facilities Special Tax for each Assessor ’s Parcel of Undeveloped Property, Taxable Public Property, and Taxable Property Owner Association Property within a Planning Area shall be the applicable amount for such Planning Area set forth in Table 3 below. The Maximum Facilities Special Tax for Undeveloped Property, Taxable Public Property, and Taxable Property Owner Association Property shall not be subject to escalation and shall therefore remain the same in every Fiscal Year.

Table 3
Maximum Facilities Special Tax for Undeveloped Property, Taxable Public Property and Taxable Property Owner Association Property City of Fontana CFD No. 109 (Narra Hills)
Planning
Area
Maximum
Facilities
Special Tax
P.A. 1 $28,860 per Acre
P.A. 2 $52,010 per Acre
P.A. 3 $70,530 per Acre
P.A. 4 $69,890 per Acre

2. Services Special Tax
For purposes of the Services Special Tax, an Assessor(s) Parcel of Developed Property within a Final Residential Subdivision shall be assigned to Land Use Classes 1 through 4, as identified in Table 4 and Table 5 below, based on the Planning Area associated with such Assessor ’s Parcel. Non -Residential Property shall be assigned to Land Use Class 5. Furthermore, the Services Special Tax levied against each Assessor ’s Parcel within a Final Residential Subdivision shall be based on the number of residential dwelling units for which building permits have been issu ed or are expected to be issued for such Assessor ’s Parcel, as determined by the CFD Administrator based on such Final Residential Subdivision or other available documents. a. Maximum Services Special Tax
The Fiscal Year 2022-2023 Maximum Services Special Tax for each Land Use Class of Developed Property is shown below in Table 4.
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Table 4
Maximum Services Special Tax for Developed Property
City of Fontana CFD No. 109 (Narra Hills)
Fiscal Year 2022-2023
Land
Use
Class
Planning
Area Description
Maximum
Services
Special Tax
1 P.A. 1 Final Residential Subdivision $1,040 per unit
2 P.A. 2 Final Residential Subdivision $1,040 per unit
3 P.A. 3 Final Residential Subdivision $1,005 per unit
4 P.A. 4 Final Residential Subdivision $1,005 per unit
5 NA Non-Residential Property $6,830 per Acre

b. Assigned Services Special Tax
The Fiscal Year 2022-2023 Assigned Services Special Tax for each Land Use Class of Developed Property is shown below in Table 5.

Table 5
Assigned Services Special Tax for Developed Property
City of Fontana CFD No. 109 (Narra Hills)
Fiscal Year 2022-2023
Land
Use
Class
Planning
Area Description
Assigned
Services
Special Tax
1 P.A. 1 Final Residential Subdivision $744 per unit
2 P.A. 2 Final Residential Subdivision $744 per unit
3 P.A. 3 Final Residential Subdivision $718 per unit
4 P.A. 4 Final Residential Subdivision $718 per unit
5 NA Non-Residential Property $4,880 per Acre

c. Increase in the Maximum Services Special Tax
On each July 1, commencing on July 1, 2023, the Maximum Services Special Tax shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year. d. Increase in the Assigned Services Special Tax
The Assigned Services Special Tax above shall be applicable for Fiscal Year 2022-2023, and shall increase thereafter, commencing on July 1, 2023, and on each July 1 thereafter in an amount estimated to fund the Special Tax Requirement for Services for the Fiscal Year commencing on such July 1.

However, in no case shall the Assigned Services Special Tax for an Assessor ’s Parcel of Developed 587

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Property exceed the applicable Maximum Services Special Tax for such Assessor’s Parcel of Developed Property in any Fiscal Year.
e. Multiple Land Uses
In some instances an Assessor’s Parcel of Developed Property may contain more than one Land Use Class. In such cases, the Acreage of Developed Property shall be allocated between Residential Property and Non -Residential Property based on the amount of Acreage designated for e ach land use as determined by reference to the site plan approved for such Assessor’s Parcel. The Maximum Services Special Tax that can be levied on such Assessor ’s Parcel shall be the sum of the Maximum Services Special Tax that can be levied on each typ e of property located on that Assessor ’s Parcel. The CFD Administrator’s allocation to each type of property shall be final.

D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX

1. Facilities Special Tax
Commencing with Fiscal Year 2022-2023, and for each following Fiscal Year, the CFD Administrator shall determine the Special Tax Requirement for Facilities and shall provide for the levy of the Facilities Special Tax each Fiscal Year as follows:

First: The Facilities Special Tax shall be levied on each Assessor’s Parcel of Developed Property in an amount equal to 100% of the applicable Assigned Facilities Special Tax; Second: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the F acilities Special Tax shall be levied Proportionately on each Assessor ’s Parcel of Undeveloped Property at up to 100% of the Maximum Facilities Special Tax for Undeveloped Property; Third: If additional monies are needed to satisfy the Special Tax Require ment for Facilities after the first two steps have been completed, then the levy of the Facilities Special Tax on each Assessor’s Parcel of Developed Property whose Maximum Facilities Special Tax is determined through the application of the Backup Facilities Special Tax shall be increased in equal percentages from the Assigned Facilities Special Tax up to the Maximum Facilities Special Tax for each such Assessor’s Parcel; Fourth: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first three steps have been completed, then the Facilities Special Tax shall be levied Proportionately on each Assessor ’s Parcel of Taxable Public Property and Taxable Property Owner Association Property at up to 100% of the Maximum Facilities Special Tax for Taxable Public Property and Taxable Property Owner Association Property, as needed to satisfy the Special Tax Requirement for Facilities.

Notwithstanding the above, the CFD Administrator shall, in any Fiscal Year, calculate a levy Proportionately less than 100% of the Assigned Facilities Special Tax in step one (above), when (i) the CFD Administrator is no longer required to provide for the levy of the Facilities Special Tax pursuant to steps two through four above in order to meet the Special Tax Requirement for Facilities; and (ii) all authorized CFD No. 109 Bonds have already been issued or the Council has covenanted that it shall not issue any addition al CFD No. 109 Bonds (except refunding bonds) to be supported by the Facilities Special Tax.

Further notwithstanding the above, under no circumstances shall the Facilities Special Tax levied in any Fiscal Year against any Assessor’s Parcel of Residential Property for which an occupancy permit for private residential use has been issued (in accordance with Section 53321(d)(3) of the California Government Code), be increased as a consequence of delinquency or default by the owner of any other Assessor’s Parcel within CFD No. 109 by more than ten percent above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults. To the extent that the levy of the Facilities Special Tax on Residential 588

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Property is li mited by the provision in the previous sentence, the levy of the Facilities Special Tax on each Assessor’s Parcel of Non-Residential Property shall continue in equal percentages up to 100% of the applicable Maximum Facilities Special Tax.

2. Services Special Tax
Commencing with Fiscal Year 2022-2023 and for each following Fiscal Year, the CFD Administrator shall determine the Special Tax Requirement for Services and shall provide for the levy of the Services Special Tax until the total Services Special Tax levy equals the Special Tax Requirement for Services. The Services Special Tax shall be levied each Fiscal Year as follows:

First: The Services Special Tax shall be levied Proportionately each Fiscal Year on each Assessor ’s Parcel of Developed Property a t up to 100% of the applicable Assigned Services Special Tax as needed to satisfy the Special Tax Requirement for Services;
Second: If additional monies are needed to satisfy the Special Tax Requirement for Services after the first step has been completed, then the levy of the Services Special Tax on each Assessor’s Parcel of Developed Property shall be increased in equal percentages from the Assigned Services Special Tax up to the Maximum Services Special Tax for each such Assessor’s Parcel.

E. EXEMPTIONS

1. Facilities Special Tax
No Facilities Special Tax shall be levied on up to the applicable Acreage limit of Public Property and/or Property Owner Association Property established for each Planning Area as set forth in Table 6 below. Tax-exempt status shall be assigned by the CFD Administrator in the chronological order in which property within a Planning Area becomes Public Property or Property Owner Association Property . However, should an Assessor ’s Parcel no longer be classified as Public Property or Property Owner Association Property, it shall, from that point forward, be subject to the Facilities Special Tax.

Table 6
Exempt Acreage Limits
City of Fontana CFD No. 109 (Narra Hills)
Planning
Area
Exempt
Acreage
Limit
P.A. 1 64.08 Acres
P.A. 2 0.00 Acres
P.A. 3 0.00 Acres
P.A. 4 0.00 Acres

Notwithstanding the above, an Assessor’s Parcel within a Planning Area that is transferred to a public agency or property owner’s association prior to the issuance of the first series of CFD No. 109 Bonds that causes the Acreage of Public Property and Property Owner Association Property within such Planning Area to exceed the applicable Acreage limit that can be designated by the CFD Administrator under this Section E.1 shall also be exempted from paying the Special Tax.
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Public Property or Property Owner Association Property that is not exempt from the Facilities Special Tax under this Section E.1 shall be subject to the levy of the Facilities Special Tax and shall be taxed Proportionately as part of the fourth step in Section D herein, at up to 100% of the applicable Maximum Facilities Special Tax for Taxable Public Property and Taxable Property Owner Association Property.

In addition, no Facilities Special Tax shall be levied on Lower Income Households Welfare Exemption Property, provided that if, in any Fiscal Year, applicable law does not require that an Assessor ’s Parcel that is Lower Income Households Welfare Exemption Property be exempt from the Facilities Special Tax, then the Facilities Special Tax shall be levied on such Assessor’s Parcel in accordance with this Rate and Method of Apportionment as if such Assessor’s Parcel were not classified as Lower Income Households Welfare Exemption Property.

2. Services Special Tax
No Services Special Tax shall be levied on Undeveloped Property , Taxable Public Property, Taxable Property Owner Association Property, Public Property, or Property Owner Association Property.

In addition, no Services Special Tax shall be levied on Lower Income Households Welfare Exemption Property, provided that if, in any Fiscal Year, applicable law does not require that an Assessor ’s Parcel that is Lower Income Households Welfare Exemption Property be exempt from the Services Special Tax, then the Services Special Tax shall be levied on such Assessor’s Parcel in accordance with this Rate and Method of Apportionment as if such Assessor’s Parcel were not classified as Lower Income Households Welfare Exemption Property.

F. MANNER OF COLLECTION
The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that CFD No. 109 may directly bill the Special Tax, and/or may collect Special Taxes at a different time or in a different manner if necessary to meet financial obligations, and, to the extent of the Facilities Special Tax, may covenant to foreclose and may actually foreclose on delinquent Assessor’s Parcels.

G. APPEALS AND INTERPRETATIONS
Any landowner or resident who feels that the amount of the Special Tax levied on his/her Assessor ’s Parcel is in error may submit a written appeal to the CFD Administrator, provided that the appellant is current in his/her payment of Special Taxes. During the pendency of an appeal, all Special Taxes previously levied must be paid on or before the payment date established when the levy was made. The CFD Administrator shall review the appeal, meet with the appell ant if the CFD Administrator deems necessary, and advise the appellant of its determination. If the CFD Administrator agrees with the appellant, a cash refund shall not be made (except for the last year of levy), but the amount of the Special Tax levied s hall be appropriately modified through an adjustment to the Special Tax levy in the following Fiscal Year. If the CFD Administrator disagrees with the appellant and the appellant is dissatisfied with the determination, the appellant then has 30 days in wh ich to appeal to the Council by filing a written notice of appeal with the City Clerk, provided that the appellant is current in his/her payment of Special Taxes. This second appeal must specify the reasons for its disagreement with the CFD Administrator’s determination.

The CFD Administrator shall interpret this Rate and Method of Apportionment for purposes of clarifying any ambiguity and make determinations relative to the annual administration of the Special Tax and any landowner or resident appeals. Any decision of the CFD Administrator shall b e subject to appeal to the Council whose decision shall be final and binding as to all persons.

H. PREPAYMENT OF FACILITIES SPECIAL TAX
Under this Rate and Method of Apportionment, an Assessor’s Parcel within CFD No. 109 is permitted to prepay the Facilities Special Tax. The obligation of the Assessor’s Parcel to pay the Facilities Special Tax may be fully 590

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or partially prepaid and permanently satisfied as described herein, provided that a prepayment may be made only for Assessor’s Parcels of Developed Property, or for an Assessor’s Parcel of Undeveloped Property for which a building permit has been issued after January 1, 2022, and only if there are no delinquent Special Taxes with respect to such Assessor ’s Parcel at the time of prepayment. An owner of an Assessor’s Parcel intending to prepay the Facilities Special Tax obligation shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner of the prepayment amount for such Assessor’s Parcel. The CFD Administrator may charge such owner a reasonable fee for providing this service. If there are Outstanding Bonds, prepayment must be made not less than 30 days prior to a date that notice of redemption of CFD No. 109 Bonds from the proceeds of such prepayment may be given by the Trustee pursuant to the Indenture that is specified in the report of the Facilities Special Tax Prepayment Amount (defined below).

The following additional definitions apply to this Section H:
“CFD Public Facilities Costs ” means either $ 37,115,500 in 2022 dollars, which shall increase by the Construction Inflation Index on July 1, 2023, and on each July 1 thereafter, or such lower number as (i) shall be determined by the CFD Ad ministrator as sufficient to provide funding for the Authorized Facilities under the authorized bonding program for CFD No. 109, or (ii) shall be determined by the Council concurrently with a covenant that it shall not issue any more CFD No. 109 Bonds (except refunding bonds) to be supported by the Facilities Special Tax levy under this Rate and Method of Apportionment. “Construction Inflation Index” means the annual percentage change in the Engineering News Record Building Cost Index for the City of Los Angeles, measured as of the month of December in the calendar year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the CFD Administrator that is reasonably comparable to the Engineering News Record Building Cost Index for the City of Los Angeles. “Future Facilities Costs ” means the CFD Public Facilities Costs minus (i ) costs of Authorized Facilities previously paid from the Improvement Fund, (ii) moneys currently on deposit in the Improvement Fund available to pay costs of Authorized Facilities, and ( iii) the amount the CFD Administrator reasonably expects to derive from the reinvestment of these funds.
“Improvement Fund” means a fund or account specifically identified in the Indenture (or prior to the issuance of the first series of CFD No. 109 Bonds a fund or account held by the City) to hold funds which are currently available for expenditure to acquire or construct Authorized Facilities. “Previously Issued Bonds” means, for any Fiscal Year, all Outstanding Bonds that are outstanding under the Indenture after the first interest and/or principal payment date following the current Fiscal Year.

1. Prepayment in Full
The Facilities Special Tax Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below):

Bond Redemption Amount
plus Redemption Premium
plus Future Facilities Amount
plus Defeasance Amount
plus Administrative Fees and Expenses
less Reserve Fund Credit
less Capitalized Interest Credit
Total: equals Facilities Special Tax Prepayment Amount
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As of the proposed date of prepayment, the Facilities Special Tax Prepayment Amount shall be calculated according to the following paragraphs:

1. Confirm that no Special Tax delinquencies apply to such Assessor’s Parcel.

2. For Assessor’s Parcels of Developed Property, compute the Assigned Facilities Special Tax and Backup Facilities Special Tax for the Assessor’s Parcel to be prepaid. For Assessor’s Parcels of Undeveloped Property for which a building permit has been issued after January 1, 2022, compute the Assigned Facilities Special Tax and Backup Facilities Special Tax for that Assessor ’s Parcel as though it was already designated as Developed Property, based upon the building permit which has already been issued for such Assessor’s Parcel.

3. (a) Divide the Assigned Facilities Special Tax computed pursuant to paragraph 2 by the total estimated Assigned Facilities Special Tax levy for CFD No. 109 based on the Assigned Facilities Special Taxes for Developed Property which could be levied on all expected development assuming Buildout of CFD No. 109, excluding any Assessor’s Parcels which have been prepaid, and (b) Divide the Backup Facilities Special Tax computed pursuant to paragraph 2 by the total estimated Backup Facilities Special Taxes at Buildout for the entire CFD No. 109, excluding any Assessor’s Parcels which have been prepaid.

4. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the Previously Issued Bonds to compute the amount of Previously Issued Bonds to be redeemed (the “Bond Redemption Amount”).

5. Multiply the Bond Redemption Amount computed pursuant to paragraph 4 by the applicable redemption premium (e.g., the redemption price minus 100%), if any, on the Previously Issued Bonds to be redeemed (the “Redemption Premium”).

6. Compute the current Future Facilities Costs.

7. Multiply the larger quotient computed pursuant to paragraph 3 (a) or 3(b) by the amount determined pursuant to paragraph 6 to compute the amount of Future Facilities Costs to be prepaid (the “Future Facilities Amount”).

8. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the redemption date for the Previously Issued Bonds specified in the report of the Facilities Special Tax Prepayment Amount.

9. Determine the Facilities Special Tax levied on the Assessor ’s Parcel in the current Fiscal Year which has not yet been paid.

10. Compute the minimum amount the CFD Administrator reasonably expects to derive from the reinvestment of the Facilities Special Tax Prepayment Amount, less any interest earnings attributed to the Future Facilities Amount, and less any interest earnings attributed to the Administrative Fees and Expenses (defined below) from the date of prepayment until the redemption date for the Previously Issued Bonds to be redeemed with the prepayment.

11. Add the amounts computed pursuant to paragraphs 8 and 9 and subtract the amount computed pursuant to paragraph 10 (the “Defeasance Amount”).

12. The administrative fees and expenses of CFD No. 109 are as calculated by the CFD Administrator and include the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the 592

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costs of redeeming CFD No. 109 Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the “Administrative Fees and Expenses”).

13. The reserve fund credit (the “Reserve Fund Credit”) shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Previously Issued Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Previously Issued Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero. No Reserve Fund Credit shall be granted if the amount then on deposit in the reserve fund for the Previously Issued Bonds is below 100% of the reserve requirement (as defined in the Indenture).

14. If any capitalized interest for the Previously Issued Bonds will not have been expended as of the date immediately following the first interest and/or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the expected balance in the capitalized interest fund or account under the Indenture after such first interest and/or principal payment date (the “Capitalized Interest Credit”).

15. The Facilities Special Tax prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 11 and 12, less the amounts computed pursuant to paragraphs 13 and 14 (the “Facilities Special Tax Prepayment Amount”).

2. Prepayment in Part
The amount of the prepayment shall be calculated as in Section H.1; except that a partial prepayment shall be calculated according to the following formula:

PP = [(PE – A) x F] + A
These terms have the following meaning:

PP = the partial prepayment.

PE = the Facilities Special Tax Prepayment Amount calculated according to Section H.1.

F = the percentage, expressed as a decimal, by which the owner of the Assessor ’s Parcel is partially prepaying the Facilities Special Tax.

A = the Administrative Fees and Expenses calculated according to Section H.1.

3. General Provisions Applicable to the Prepayment of Facilities Special Tax (a). Use of the Facilities Special Tax Prepayment Amount The Facilities Special Tax Prepayment Amount, less the Administrative Fees and Expenses calculated according to Section H.1 which shall be retained by CFD No. 109, and less the Future Facilities Amount calculated according to Section H.1 which shall be deposited into the Improvement Fund, shall be deposited into spec ific funds established under the Indenture, to fully or partially redeem as many Outstanding Bonds as possible, and, if amounts are less than $5,000, to make debt service payments on the Outstanding Bonds.
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(b). Full Prepayment of Facilities Special Tax
Upon confirmation of the payment of the current Fiscal Year’s entire Facilities Special Tax obligation, the CFD Administrator shall remove the current Fiscal Year ’s Facilities Special Tax levy for such Assessor’s Parcel from the County tax rolls. With respec t to any Assessor ’s Parcel that is prepaid in accordance with Section H.1, the CFD Administrator shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of the Facilities Special Tax and the release of the Facilities Special Tax lien on such Assessor ’s Parcel, and the obligation of such Assessor ’s Parcel to pay the Facilities Special Tax shall cease.
(c). Partial Prepayment of Facilities Special Tax
With respect to any Assessor’s Parcel that is partially prepaid, the CFD Administrator shall (i) distribute or cause to be distributed the funds remitted to it according to Section H.3.(a) and (ii) indicate in the records of CFD No. 109 that there has been a partial prepayment of the Facilities Special Tax and that a portion of the Facilities Special Tax with respect to such Assessor ’s parcel, equal to the outstanding percentage (1.00 – F) of the remaining Maximum Facilities Special Tax, shall continue to be levied on such Assessor’s Parcel pursuant to Section D herein.
(d). Debt Service Coverage
Notwithstanding the foregoing, no prepayment of the Facilities Special Tax shall be allowed unless the amount of Facilities Special Tax that may be levied on Taxable Property (assuming Buildout) within CFD No. 109 in each future Fiscal Year (after excluding Public Property and Property Owner Association Property as set forth in Section E.1 herein), after the proposed prepayment, is at least equal to the sum of (i) 1.10 times the debt service necessary to support the remaining Outstanding Bonds in each corresponding Fiscal Year, and (ii) Administrative Expenses.

I. TERM OF SPECIAL TAX
The Facilities Special Tax shall be levied for a period not to exceed fi fty years commencing with Fiscal Year 2022-2023. The Services Special Tax shall be levied in perpetuity to fund the Special Tax Requirement for Services.

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EXHIBIT A

CERTIFICATE TO AMEND FACILITIES SPECIAL TAX
CFD NO. 109 CERTIFICATE

1. Pursuant to Section C.1 of the Rate and Method of Apportionment (the “Rate and Method ”) for City of Fontana Community Facilities District No. 109 (Narra Hills) (“CFD No. 109”), the Assigned Facilities Special Tax and the Backup Facilities Special Tax for Developed Property within CFD No. 109 has been reduced as described herein.
(a) The information in Table 1 of the Rate and Method relating to the Assigned Facilities Special Tax for Developed Property within CFD No. 109 shall be modified as follows:

Land
Use
Class Description
Residential Floor
Area (square feet)
Original
Assigned
Facilities
Special Tax
Modified
Assigned
Facilities
Special Tax
1 Detached Residential
Property
4,400 or greater $8,186 per unit $[____] per unit
2 Detached Residential
Property
4,200 to less than
4,400
$7,879 per unit $[____] per unit
3 Detached Residential
Property
4,000 to less than
4,200
$7,736 per unit $[____] per unit
4 Detached Residential
Property
3,800 to less than
4,000
$7,592 per unit $[____] per unit
5 Detached Residential
Property
3,600 to less than
3,800
$7,238 per unit $[____] per unit
6 Detached Residential
Property
3,400 to less than
3,600
$6,905 per unit $[____] per unit
7 Detached Residential
Property
3,200 to less than
3,400
$6,551 per unit $[____] per unit
8 Detached Residential
Property
3,000 to less than
3,200
$6,240 per unit $[____] per unit
9 Detached Residential
Property
2,800 to less than
3,000
$6,103 per unit $[____] per unit
10 Detached Residential
Property
2,600 to less than
2,800
$5,873 per unit $[____] per unit
11 Detached Residential
Property
2,400 to less than
2,600
$5,666 per unit $[____] per unit
12 Detached Residential
Property
2,200 to less than
2,400
$5,349 per unit $[____] per unit
13 Detached Residential
Property
2,000 to less than
2,200
$5,118 per unit $[____] per unit
14 Detached Residential
Property
Less than 2,000 $4,876 per unit $[____] per unit
15 Attached Residential
Property
2,000 or greater $4,074 per unit $[____] per unit
16 Attached Residential
Property
1,800 to less than
2,000
$4,025 per unit $[____] per unit
17 Attached Residential
Property
1,600 to less than
1,800
$3,762 per unit $[____] per unit
18 Attached Residential
Property
1,400 to less than
1,600
$3,627 per unit $[____] per unit
19 Attached Residential
Property
1,200 to less than
1,400
$3,445 per unit $[____] per unit
20 Attached Residential
Property
Less than 1,200 $3,320 per unit $[____] per unit
21 Non-Residential Property NA $36,640 per
Acre
$[____] per
Acre
(b) The Backup Facilities Special Tax for Developed Property within a Planning Area, set forth in Table 2 within Section C.1.a.(3) of the Rate and Method, shall be modified as follows:
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Planning
Area
Original
Backup
Facilities
Special Tax
Modified
Backup
Facilities
Special Tax
P.A. 1 $28,860 per Acre $[____] per Acre
P.A. 2 $52,010 per Acre $[____] per Acre
P.A. 3 $70,530 per Acre $[____] per Acre
P.A. 4 $69,890 per Acre $[____] per Acre

2. The Assigned Facilities Special Tax and the Backup Facilities Special Tax for Developed Property may only be reduced prior to the first issuance of CFD No. 109 Bonds.

3. Upon execution of the certificate by CFD No. 109, CFD No. 109 shall cause an amended notice of Special Tax lien for CFD No. 109 to be recorded reflecting the reductions set forth herein.

All capitalized terms used herein shall have the meanings set forth in the Rate and Method.

By: Date:

CFD Administrator
By execution hereof, the undersigned acknowled ge, on behalf of CFD No. 109, receipt of this certificate and modification of the Rate and Method as set forth in this certificate.

CITY OF FONTANA COMMUNITY FACILITIES DISTRICT No. 109 (NARRA HILLS) By: Date:

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EXHIBIT B

PLANNING AREAS
Planning
Area (P.A.) Legal Description
P.A. 1 The land area within CFD No. 109 which is not located within P.A. 2, P.A. 3, or P.A. 4
P.A. 2 Lots 156 through 233, inclusive, of Tentative Tract Map No. 20010 P.A. 3 Lots 234 and 235 of Tentative Tract Map No. 20010 P.A. 4 Lot 236 of Tentative Tract Map No. 20010
Reference is hereby made to Tentative Tract Map No. 20010 approved by City Council on February 26, 2019 for a description of the lines and dimensions of the lots listed above. The area geographically identified within the boundaries of an applicable Planning Area may be amended from time-to-time or modified pursuant to a final map or precise site p lan for such property only at the discretion of the CFD Administrator provided that such change will not reduce the amount of Maximum Facilities Special Tax below the amount required to equal at least 1.1 times the maximum annual debt service on all Outsta nding Bonds, plus the Administrative Expenses.

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APPENDIX B

APPRAISAL REPORT

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APPENDIX C

UPDATED PRICE POINT STUDY

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APPENDIX D

FORM OF OPINION OF BOND COUNSEL

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APPENDIX E

GENERAL INFORMATION CONCERNING

THE CITY OF FONTANA
This appendix sets forth general information about the City of Fontana (“Fontana”) including information with respect to its finances. The following information concerning Fontana, the County of San Bernardino (the “County”) and the State of California (the “State”) are included only for general background purposes. The Bonds are not obligations of the City, County or State or any political subdivision thereof and neither the faith and credit nor the taxing power of the City, County or the State, or any political subdivision thereof, is pledged to the payment of the Bonds or any Additional Bonds.

General
The City of Fontana encompasses approximately 42.4 square miles of land and has an estimated population in 2023 of approximately 213,851. The City is located 50 miles east of Los Angeles, and approximately 10 miles west of the cities of Riverside and San Bernardino. Founded in 1913, Fontana is the second largest city in San Bernardino County, and the 20th largest in the State. The Riverside-San Bernardino area is often referr ed to as Southern California’s “Inland Empire.” As one of the cities in the Inland Empire, Fontana is part of a region whose population base exceeds 4.4 million people.

The earliest recorded landowner in the Fontana area was Don Antonio Maria Lugo, who received a land grant in 1813. A second grant, in 1842, secured the land known as Rancho de San Bernardino for his sons. The Lugo sons sold a portion of their land, which included part of what is now Fontana, to a group of Mormon settlers in 1851. The Mor mon settlers eventually returned to Salt Lake City, and the Semi -Tropical Land & Water Company gained control of the Rancho. Active development of the area, however, did not begin until the early 1900’s when the Fontana Development Company acquired the acreage and began a community called Rosena - a name that was changed to Fontana in 1913.

Fontana quickly became a diversified agricultural area, with citrus, grain, grapes, poultry, and swine being the leading agricultural commodities. The community faced a transition beginning in 1942 when the Fontana area was selected as the site for a steel mill. Fontana incorporated in 1952 and the area became Southern California’s leading producer of steel and steel related products.

The steel industry dominated the City’s economy from the time the mill was built until the mid-1980’s.

In the late 1970’s, however, Kaiser Steel began to cut down on production and manpower, and the steel mill closed in 1984. The mill site, located outside of City limits, is in the process of being developed into an integrated community of transportation-related industrial, commercial and business park uses to take advantage of the site’s excellent highway and rail access. The plate steel and rolling mill plant was acquired by California Steel Industries, which continues to produce steel products. In addition, railroad and trucking operations and a number of industrial facilities and warehousing/distribution centers are located in Fontana because of its convenient geographical location and excellent transportation network.

City Government
The City was incorporated as a general law city in 1952 and is governed by a Mayor and four council members elected by geographical district to serve four -year terms. The City operates under the Council - Manager form of government. Effective July 1, 2008, the Fontana City Council established the Fontana Fire Protection District, which is governed by the same members who comprise the City Council, and which provides fire and related services to the City and certain adjacent unincorporated areas by means of contract with the San Bernardino County Fire Department. The City Council appoints the City Manager who is responsible for the day-to-day administration of City business and the coordination of all departments of the City. 601

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The City of Fontana provides police protection, street sweeping, park maintenance, building inspection, library, sewer, storm drain and sanitation services. Numerous hospitals and health care facilities are located near Fontana.

Population
Fontana has been one of the most rapidly growing cities in Southern California. The population in Fontana increased approximately 5. 12% from 2014 to 2024. The population growth in the City, County and State is shown on the following chart.

POPULATION ESTIMATES
City of Fontana, County of San Bernardino and State of California 2015-2024
Year City of Fontana
County of San
Bernardino State of California
2015 203,790 2,112,187 38,865,532
2016 205,180 2,122,579 39,103,587
2017 208,003 2,139,520 39,352,398
2018 209,113 2,150,017 39,519,535
2019 211,123 2,165,876 39,605,361
2020 208,482 2,181,654 39,538,223
2021 210,389 2,179,006 39,327,868
2022 212,741 2,179,845 39,114,785
2023 212,772 2,172,694 39,061,058
2024 214,223 2,181,433 39,128,162

Source: State of California, Department of Finance, E-4 Population Estimates for Cities, Counties, and the State, 2011-2020, with 2010 Census Benchmark . Sacramento, California, May 2022 for 2015 -2019; State of California, Departm ent of Finance, E -4 Population Estimates for Cities, Counties, and the State, 2021 -2024, with 2020 Census Benchmark. Sacramento, California, May 2024 for 2020 -2024.

Transportation
The City of Fontana is strategically located in the hub of surface, rail and air transportation facilities.

Union Pacific and Burlington Northern/Santa Fe rail lines provide rail service to Fontana. Switch yards and multi-modal terminals are located nearby.

Major interstate freeways and state highways provide direct acce ss to the City, making shipping and transportation to and from seaports, North American Free Trade Agreement ports of entry, and the rest of the nation highly dependable. Interstate 10 traverses the southern section of the City, Interstate 15 borders the western portion of the City, and Interstate 210, which is the extension of Route 30, opened in November 2002, links the San Bernardino Valley with the San Fernando Valley and traverses the northern portion of the City.

State freeways 57, 60 and 91 are minutes from Fontana.

The LA/Ontario International Airport is a medium -hub, full-service airport, which offers more than 70 daily flights to cities in the U.S., Mexico and Taiwan and is served by nine commercial carriers. The airport is owned and operated by Ontario International Airport Authority, a joint powers agency, and is served by AeroMexico, Alaska Airlines, American Airlines, Delta Air Lines, Southwest Airlines, United Airlines/United Express, US Airways and Volaris. Various airlines provide freight services at Ontario International Airport.

With approximately 570,000 square feet and 26 passenger gates within two terminals, Ontario International Airport is the Western States Regional Terminal for United Parcel Service. In 2023 approximately 602

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6.4 million passengers used the airport. The passen ger count included approximately 6 million domestic travelers and 417,000 international passengers, increases of 8.4% and 113.5% over 2022, respectively.

Transit services are provided by Metrolink commuter rail service to Los Angeles with connections to the numerous surrounding cities provided by Omnitrans bus service, Dial -a-Ride, Yellow Cab Company and Bell Cab Company.

Education
Five school districts serve students in the City of Fontana. There are thirty public elementary schools, seven middle schools, five high schools, three alternative high schools, seven private elementary/middle schools, one School of Language Development and one adult school. Local colleges and universities include Universal Technical Institute of California Inc., Chaffey Colle ge, San Bernardino Valley College, California State University-San Bernardino, Riverside Community College, Westech College and the University of California - Riverside.
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Employment
The following table summarizes the labor force, employment and unemployment f igures for the years 2019 through 2023 for the City, the County, the State and the United States.

CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT RATE
City of Fontana, San Bernardino County, State of California and United States 2019 through 2023(1)
Year and Area Labor Force Employment(2) Unemployment(3) Unemployment
Rate (%)

2019
City of Fontana 99,400 95,800 3,600 3.6%
San Bernardino County 965,400 928,100 37,400 3.9
State of California 19,385,000 18,589,600 795,700 4.1
United States 163,539,000 157,538,000 6,001,000 3.7

2020
City of Fontana 100,500 91,100 9,400 9.4%
San Bernardino County 972,800 879,300 93,500 9.6
State of California 18,958,600 17,037,000 1,921,600 10.1 United States 160,742,000 147,795,000 12,947,000 8.1

2021
City of Fontana 102,200 95,000 7,300 7.1%
San Bernardino County 990,000 916,600 73,500 7.4
State of California 18,956,600 17,568,700 1,387,800 7.3 United States 161,204,000 152,581,000 8,623,000 5.3

2022
City of Fontana 103,500 99,600 4,000 3.8%
San Bernardino County 1,003,000 961,200 41,700 4.2
State of California 19,169,300 18,348,900 820,400 4.3
United States 164,287,000 158,291,000 5,996,000 3.6

2023
City of Fontana 104,800 100,100 4,600 4.4%
San Bernardino County 1,013,700 966,500 47,200 4.7
State of California 19,308,300 18,388,300 920,000 4.8
United States 167,116,000 161,037,000 6,080,000 3.6

Note: Data is not seasonally adjusted.
(1) Annual averages, unless otherwise specified.
(2) Includes persons involved in labor-management trade disputes. (3) The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded figures in this table.

Source: U.S. Department of Labor – Bureau of Labor Statistics, California Employment Development Department. March 2023 Benchmark.
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Listed below are the major employers in the City.

CITY OF FONTANA - MAJOR EMPLOYERS – 2023
Employer Number of Employees
Kaiser Permanente 9,677
Fontana Unified School District 5,983
Amazon.com Services LLC 3,145
St Bernardine Medical Center 1,775
Target Stores T 553 1,297
City of Fontana (includes part-time employees) 1,143
Walmart D C #6060 CD Drop Yard 1,004
Walmart #6060 1,004
Saia Motor Freight Line LLC 349
Legendary Staffing, Inc. 325

Source: City of Fontana Fiscal Year Ending June 30, 2023 Annual Comprehensive Financial Report.

Listed below are the major employers in the County.

PRINCIPAL EMPLOYERS
San Bernardino County
Fiscal Year 2022-23
Rank Name of Business
Approximate No. of San
Bernardino County
Employees(1)
1 County of San Bernardino 10,000+
2 Loma Linda University Medical Center 1,000-4,999
3 Ontario International Airport 1,000-4,999
4 Amazon 1,000-4,999
5 Burlington Distribution Corp 1,000-4,999
6 California State University, San Bernardino 1,000-4,999 7 Dignity Health Community Hospital of San Bernardino 1,000-4,999 8 Environmental Systems Research Institute 1,000-4,999
9 Fedex Ground 1,000-4,999
10 Inland Empire Health Plan 1,000-4,999

(1) Data represents estimated number of employees.
(1) Due to confidentiality of reporting number of employees, ranges have been provided.

Source: San Bernardino County Annual Comprehensive Report for the year ending June 30, 2023.

(1) Due to confidentiality of reporting number of employees, ranges have been provided.

Source: San Bernardino County Annual Comprehensive Financial Report for the year ending June 30, 2023. 605

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Industries
Residents of the City find employment throughout the Riverside-San Bernardino-Ontario Labor Market Area. This labor market area, as defined for reporting purposes by the California Employment Development Department, has boundaries coterminous with those of Riverside and San Bernardino Counties. The following table sets forth certain employment data for the Riverside - San Bernardino-Ontario Metropolitan Statistical Area and the County for the period from 2019 through 2023.

RIVERSIDE-SAN BERNARDINO-ONTARIO METROPOLITAN STATISTICAL AREA

INDUSTRY EMPLOYMENT & LABOR FORCE - BY ANNUAL AVERAGE
2019 2020 2021 2022 2023
Civilian Labor Force 2,071,600 2,091,700 2,120,600 2,148,700 2,171,500 Civilian Employment 1,987,500 1,885,400 1,964,300 2,058,400 2,068,800 Civilian Unemployment 84,000 206,200 156,300 90,200 102,700 Civilian Unemployment Rate 4.1% 9.9% 7.4% 4.2% 4.7%

Total Farm 15,400 14,100 13,700 13,800 13,100
Total Nonfarm 1,552,700 1,495,800 1,575,100 1,659,800 1,679,800 Total Private 1,291,500 1,247,800 1,333,100 1,409,800 1,418,900 Goods Producing 209,700 202,200 207,700 216,300 216,100 Mining & Logging 1,200 1,300 1,400 1,500 1,500
Construction 107,200 104,900 110,100 114,700 115,700
Manufacturing 101,300 96,000 96,100 100,000 98,900
Service Providing 1,343,000 1,293,700 1,367,400 1,443,500 1,463,700 Trade, Transportation & Utilities 395,100 406,900 443,200 464,900 456,500 Wholesale Trade 67,700 65,600 67,400 69,500 68,700
Retail Trade 180,700 168,800 177,000 181,000 182,700
Transportation, Warehousing & Utilities 146,600 172,500 198,800 214,400 205,100 Information 14,100 12,400 12,500 13,000 13,300
Financial Activities 45,000 44,100 45,200 46,000 44,900 Professional & Business Services 155,300 152,100 166,600 173,900 164,800 Educational & Health Services 250,300 248,800 254,300 267,500 287,500 Leisure & Hospitality 175,900 141,300 160,200 180,900 186,500 Other Services 46,200 40,200 43,600 47,400 49,300
Government 261,200 248,000 242,000 250,000 260,900 Total, All Industries 1,568,100 1,509,900 1,588,800 1,673,500 1,692,900

Note: Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households and persons involved in labor -management trade disputes. Employment reported by place of work. Items may not add to total due to independent rounding. The “Total, All Industries” data is not directly compar able to the employment data found in this Appendix E.

Source: State of California, Employment Development Department, March 2023 Benchmark. 606

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Tax Levy and Tax Collection
Below is a chart which indicates the tax levy and collection records for the City for fi scal years 2014 through 2023.

Fiscal Year
Percent of Levy
Collected to Date
Total Tax Collections
to Tax Levy to Date
2014 101.55% $100,966,890
2015 106.51 115,888,404
2016 101.77 116,422,050
2017 104.24 125,264,871
2018 106.48 135,757,922
2019 107.57 154,079,402
2020 103.19 160,025,650
2021 103.78 172,050,509
2022 106.23 188,891,255
2023 107.07 215,154,745

Note: The amounts presented include City property taxes and the Former Redevelopment Agency of the City of Fontana (the “Redevelopment Agency”) tax increment. This schedule also includes amounts collected by the City and Redevelopment Agency that were passed-through to other agencies.

Source: City of Fontana Fiscal Year Ending June 30, 2023 Annual Comprehensive Financial Report.

Largest Taxpayers
The principal property taxpayers in the City for 2023 are as follows:

Taxpayer
2023 Assessed
Valuation
% of Total
Assessed
Valuation
San Gabriel Valley Water Company $355,028,013 1.31%
Duke Realty LP 243,765,176 0.90
GLC Fontana LLC 219,604,656 0.81
LBA RV – Company LLC 174,942,701 0.65
USPP Jurupa LLC 170,313,480 0.63
Idil West Valley Logistics Center LLC 159,120,000 0.59
Rexford Industrial Realty LP 153,756,226 0.57
Vintage Park LLC 138,146,361 0.51
Target Corporation 134,224,954 0.50
Lit Industrial LP 115,123,474 0.43
Intex Properties Inland Empire Corporation -- --
TOTAL: $ 1,864,025,041

Source: City of Fontana Fiscal Year Ending June 30, 2023 Annual Comprehensive Financial Report. 607

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Taxable Sales
The table below presents taxable sales for the years 2019 through 2023 for the City.

TAXABLE SALES
City of Fontana
2019 through 2023
(Dollars in Thousands)
Year
Retail and Food
Permits
Retail and Food
Taxable
Transactions Total Permits
Total Outlets
Taxable
Transactions
2019 4,101 $2,688,599 5,870 $3,713,486
2020 4,467 2,768,279 6,543 3,637,135
2021 3,997 3,393,088 5,969 7,374,359
2022 4,209 3,569,599 6,197 4,804,617
2023 4,170 3,450,192 6,183 4,653,260

Source: Taxable Sales in California, California Department of Tax and Fee Administration.

The table below presents taxable sales for the years 2019 through 2023 for the County.

TAXABLE SALES
San Bernardino County
2019 through 2023
(Dollars in Thousands)
Year
Retail and Food
Permits
Retail and Food
Taxable
Transactions Total Permits
Total Outlets
Taxable
Transactions
2019 40,964 $27,585,905 64,771 $41,768,747
2020 44,330 28,745,277 71,145 43,265,512
2021 40,801 38,345,912 66,585 55,378,096
2022 41,690 40,048,058 68,480 59,992,846
2023 40,632 38,103,699 67,336 57,475,069

Source: Taxable Sales in California, California Department of Tax and Fee Administration.

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Personal Income
The following tables show the personal income and per capita personal income for the City, County, State of California and United States from 2018 through 2022.

PERSONAL INCOME(1)
City of Fontana, County of San Bernardino, State of California, and United States 2018-2022
Year
City of
Fontana
County of
San Bernardino California United States
2018 4,444,518 $ 83,514,331 $2,411,055,100 $17,514,402,000 2019 4,775,796 89,182,422 2,537,950,600 18,343,601,000
2020 5,061,439 100,359,889 2,767,521,400 19,609,985,000 2021 5,432,476 108,700,135 3,013,676,900 21,392,812,000 2022 (n/a) 108,081,645 3,006,647,300 21,820,248,000

Note: Dollars in Thousands.

Source: U.S. Department of Commerce, Bureau of Economic Analysis and City of Fontana Annual Comprehensive Financial Report for the year ending June 30, 2022.

PER CAPITA PERSONAL INCOME(1)(2)
City of Fontana, County of San Bernardino, State of California, and United States 2018-2022
Year
City of
Fontana
County of
San Bernardino California United States
2018 20,965 $38,663 $60,984 $53,309
2019 22,519 41,079 64,174 55,547
2020 23,763 45,698 70,061 59,153
2021 25,392 49,570 76,991 64,430
2022 (n/a) 49,270 77,036 65,470

(1) Per capita personal income is the total personal income divided by the total mid-year population estimates of the U.S. Bureau of the Census. All dollar estimates are in current dollars (not adjusted for inflation).

Source: City of Fontana Comprehensive Annual Financial Report for the year ending June 30, 2022 , Bureau of Economic Analysis for County, State and U.S.

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Construction Trends
Below is a table indicating residential and non-residential building permits valuations for the City.

CITY OF FONTANA

BUILDING PERMIT VALUATION
(in thousands of dollars)
Type 2019 2020 2021 2022 2023
Valuation ($000’s)
Residential: $ 241,481 $ 311,547 $ 216,978 $ 211,710 $ 349,920 Non-Residential: 290,767 149,761 126,814 363,353 111,182 Total Valuation: $ 532,248 $ 461,308 $ 343,792 $ 575,063 $ 461,102

New Housing Units:

Single Family 642 848 670 509 1,068
Multi Family 202 234 382 562 678
Total Units: 844 1,082 1,052 1,071 1,746

Note: Totals may not add to sums because of independent rounding.

Source: Construction Industry Research Board.

Recreation
The City of Fontana maintains over 40 parks, tot lots, sports facilities and other facilities in the community. The City of Fontana operates eight centers throughout the community. The Center Stage Theatre was originally built in 1937 as a single screen movie theatre and was remodeled in 2008 and re-opened as the premiere performing arts venue in the City of Fontana. The Center Stage Theatre was remodeled again beginning in 2022 and re-opened again in June 2024 as Stage Red.

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APPENDIX F

SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE

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APPENDIX G

FORM OF DISTRICT CONTINUING DISCLOSURE AGREEMENT
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APPENDIX H

FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE
613

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APPENDIX I

INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY

AND ITS BOOK-ENTRY SYSTEM
The information in this section concerning DTC and DTC’s book-entry only system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, accreted value and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC to the District which the District believes to be reliable, but the District and the Underwriter do not and cannot make any independent representations concerning these matters and do not take responsibility for the accuracy or completeness thereof. Neither the DTC, Direct Participants, Indirect Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters but should instead confirm the same with DTC or the DTC Participants, as the case may be.

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited through the facilities of DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilita tes the post trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Dep ository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of “AA+.” The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in tu rn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
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To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as prepayments, tende rs, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alterna tive, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being prepaid, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direc t Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Pa rticipants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disb ursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect de livery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book- entry credit of tendered Bonds to the Trustee’s DTC account.

DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered.

The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered to DTC. 615

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THE TRUSTEE, AS LONG AS A BOOK -ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY

FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY

ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT

THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF

THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.
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APPRAISAL REPORT

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109
(Narra Hills)

City of

Fontana
, San Bernardino

County, California

(Appraisers’ File No. 2024-1299)

Prepared For
City of Fontana
8353 Sierra Avenue
Fontana

, C
alifornia 92335

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

617

KITTY SIINO & ASSOCIATES, INC.

REAL ESTATE APPRAISERS & CONSULTANTS

August 28, 2024

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

Reference: Appraisal Report
City of Fontana Community Facilities District No. 109 (Narra Hills) Both sides of Coyote Canyon Rd. between Hawk Ridge Ave. and Lytle Creek Rd.

Fontana, California

Dear Ms. Brown:

At the request and authorization of the City of Fontana, we have completed an Appraisal Report for The City of Fontana Community Facilities District No. 109 (Narra Hills) (“Fontana CFD No. 109”) which consists of a gated residential community known as Narra Hills, located in the City of Fontana. Narra Hills includes a total of 484 proposed homes being built-out into five neighborhoods by Landsea Homes. The five neighborhoods include Clementine, Strata, Wildstar, Skyeland and Goldenpeak, all at Narra Hills. Clementine is proposed for 124 duplex and small lot detached homes, Strata is proposed for 127 cluster detached homes, Wildstar is proposed for 78 single-family detached homes on minimum 5,000 square foot lots while Sky eland and Goldenpeak are proposed for 84 and 71 single-family detached homes (respectively) on minimum 10,000 square foot lots. All are being developed by LS-Fontana, LLC, a related entity to Landsea Homes. O ut of the total 484 proposed units within Narra Hills, 169 have closed to individual homeowners to date with an additional 39 in escrow which are due to close upon completion. The remaining property is held by LS -Fontana, LLC (“Landsea”) and Arroyo Cap II-6, LLC (“Arroyo Cap”), a landbank company for Landsea. The builder-owned property ranges from completed model homes to houses under construction to physically finished lots and/or pads to a few partially finished lots.

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. 109 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. 109. As a result of our investigation, the concluded minimum market value for the subject property is shown below.

Narra Hills:

Landsea (149 lots/pads & 40 houses) $ 75,303,475
Arroyo Cap (126 lots) $ 45,043,999
Individual Owners (169 houses) $ 130,854,505
Total Aggregate Value CFD No. 109 $ 251,201,979

The values are stated subject to the Assumptions and Limiting Conditions of this report, the Appraiser’s Certification and as of July 26, 2024.

115 East Second Street, Suite 100, Tustin, California 92780 (714) 544-9978 - Phone, (714) 544-9985 – Fax, E-Mail: [email protected] 618

Jessica Brown
City of

Fontana

August 28, 202

4 Page Two

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 2020/2022

) 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)

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TABLE OF CONTENTS

Assumptions and Limiting Conditions............................................................................... i Hypothetical Condition .................................................................................................... iii Extraordinary Assumption ............................................................................................... iii Aerial Photo of Fontana CFD No. 109 (Narra Hills) ......................................................... iv Purpose of the Appraisal ................................................................................................ 1 The Subject Property ...................................................................................................... 1 Intended Use of the Report ............................................................................................. 2 Definitions ...................................................................................................................... 3 Property Rights Appraised ............................................................................................. 6 Effective Date of Value ................................................................................................... 6 Date of Report ................................................................................................................ 6 Scope of Appraisal ........................................................................................................ 6 Regional Area Map.......................................................................................................... 9 County of San Bernardino Area Description ................................................................. 10 City of Fontana Area Map & Description ....................................................................... 19 Immediate Surroundings ............................................................................................... 24 Community Facilities District No. 109 ........................................................................... 26 Subject Property Description ......................................................................................... 30 Inland Empire Housing Market ...................................................................................... 44 Highest and Best Use Analysis ..................................................................................... 57 Valuation Analysis and Conclusions ............................................................................. 62 Appraisal Report Summary ......................................................................................... 103 Appraiser’s Certification ............................................................................................. 104

ADDENDA
Fontana CFD No. 109 Boundary Map
Tract Map Nos. 20010 and 20069 and 20070 & Site Plans
California Fire Hazard Map
Discounted Cash Flow Analysis
Finished Lot Land Sales Map and Summary Chart
Improved Residential Sales Map and Summary Chart
Appraiser’s Qualifications
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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. 109.

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 621

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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 comments are the result of the routine observations made during the appraisal process.

14. P roposed 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 any, 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 propert ies and that the soils are adequate to support the highest and best use conclusions.

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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 Statement or similar document for the Fontana CFD No. 109 special tax bonds

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. 109 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 samples of closed sales against public record when available; however, we have not reviewed escrow documents on each sale. Regarding costs, while we have not received detailed remaining land development costs and fees and are relying on the builder and their representatives as we are not experts in the field of construction estimation. If actual costs differ, it may change the value conclusions.

2. It is assumed that homebuyers and the homeowner’s associations within Fontana CFD No. 109 can obtain fire insurance. The property is within both a recommended High Fire Severity Zone and Very High Fire Severity Zone by CalFire. While fire breaks and fire roads have been incorporated into the development, recently insurance companies have been leaving California high fire zones. It is the appraiser’s understanding fire insurance is currently available on the subject homes.

Due to the current insurance atmosphere in California, it is an extraordinary assumption that fire insurance will continue to be available.

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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 special tax lien of Fontana CFD No. 109.

THE SUBJECT PROPERTY

The subject property consists of 484 proposed single-family homes being developed into a gated community known as Narra Hills in the City of Fontana (“City”). Narra Hills is located along the west side of I-15 just north of Duncan Canyon Road. The community is being built and sold by Landsea and features five product lines. Clementine includes 124 proposed duplex homes along with one plan, a small lot detached home, sized from 1,372 to 1,661 square feet. Strata includes 127 proposed single- family detached homes on cluster lots with a size range of 2,099 to 2,552 square feet. Wildstar is proposed for 78 single family detached homes on minimum 5,000 square foot conventional lots with sizes ranging from 2,747 to 3,079 square feet. Skyeland is proposed for 84 single-family detached homes on minimum 10,000 square foot lots with home sizes from 2,375 to 3,604 square feet and Goldenpeak is proposed for 71 single family detached homes, also on 10,000 square foot minimum lots with a home size range of 3,160 to 4,248 square feet.

Narra Hills is encompassed by Tract Maps 20010, 20069 and 20070 and su bsequent condominium maps on Tracts 20069 and 20070 which subdivide the property into 484 residences. The lots vary in status from completed models and production homes , to homes under construction to generally finished lots/pads. The description, ownership and condition of the lands are detailed in the chart below.

Description / Name

No.

Units

Owner

Product / Condition /
Status
Clementine (Duplex & Small Lot Detached) Lots 1-8 of Tract 20070 – Units 1-124 Units 1-18 and 25-30 24 Individuals Completed Homes
Units 99-100 2 Landsea Model Homes (0 in escrow)
N/A 0 Landsea Homes over 95% Complete
Units 19-24 and 31-58 34 Landsea Homes Under Construction (5 in escrow)
Units 59-73 and 113-124 27 Landsea Finished Pads/Lots (0 in escrow)
Units 74-98 and 101-112 37 Arroyo Cap Finished Pads/Lots Subtotal Clementine 124

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Strata (Cluster Lots Detached) Lots 1-17 of Tract 20069 – Units 1-127 Units 1-53, 56-57, 59-60 and 67 58 Individuals Completed Homes Units 89-92 4 Landsea Model Homes
Units 54, 55, 58 and 61-66 and 68 10 Landsea Homes over 95% Complete (6 in escrow)
Units 69-76 8 Landsea Homes Under Construction
Units 77-84 and 120-127 16 Landsea Finished Pads/Lots
Units 85-88 and 93-119 31 Arroyo Cap Finished Pads/Lots Subtotal Strata 127
Wildstar (5,000 sf SFD lots) Lots 156-233 of Tract 20010 Lots 156-170, 185-187, 194, 196-
217 and 222-225
45 Individuals Completed Homes
Lots 231-233 3 Landsea Model Homes
Lots 188-190 and 195 4 Landsea Homes over 95% Complete
(3 in escrow)
Lots 171-175, 180-184 and 191-
193
13 Landsea Homes Under Construction
(4 in escrow)
Lots 176-179, 218-221 and 226-
230
13 Landsea Finished Pads/Lots
Subtotal Wildstar 78
Skyeland (10,000 sf SFD lots) Lots 24-56, 95-100, 108-112, 114-122, 125-155 of Tract 20010.

Lots 24, 26-29, 31-35, 37-48, 138
and 154-155
25 Individuals Completed Homes
Lots 49-51 3 Landsea Model Homes
Lots 25, 30, 36, 139-140 and 153 6 Landsea Homes over 95% Complete (4 in escrow)
Lots 121-122 and 125 3 Landsea Homes Under Construction (3 in escrow)
Lots 97-100, 126-131 10 Landsea Finished Lots
Lots 52-56, 95-96, 108-112, 114-
120, 132-137, 141-152
37 Arroyo Cap Lots
Subtotal Skyeland 84
Goldenpeak (10,000 sf SFD lots) Lots 1-23, 57-94, 101-107, 113, 123-124 of Tract 20010 Lots 7-23 17 Individuals Completed Homes
Lots 4-6 3 Landsea Model Homes
Lots 60-62 and 77-78 5 Landsea Homes over 95% Complete
(5 in escrow)
Lots 57-59, 74-76, 79-81, 87-88,
102-106, 123-124
18 Landsea Homes Under Construction
(9 in escrow)
Lots 71-73, 89-91, 101 7 Landsea Finished Lots
Lots 1-3, 63-70, 82-86, 92-94, 107,
113
21 Arroyo Cap Lots
Subtotal Goldenpeak 71
TOTAL CFD No. 109 484

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. 109 Special Tax Bonds. This report may be included in the Official Statement or similar document to be 626

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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 co nsummation 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.”
0F
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 Landsea or Arroyo Cap owned properties, in a bulk sale, is less than one year.

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 necessary utilities. This term assumes the

1 The Appraisal of Real Estate, 13th Edition
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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 and taking into consideration all concessions.”

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”
1F
2 In the case at hand, the statistical testing included reviewing all original builder sales and reviewing the Multiple Listing Service (“MLS”) for any resales 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”

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. 109.

2 USPAP 2018-2019 Edition
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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 are two Extraordinary Assumptions within this report . The first is that the sales information and the cost information received from Landsea and/or their representatives are true and accurate. Regarding the sales information, we have reviewed sample closings against public record and the information appears reasonable, however we have not reviewed escrow documents on the sales. Regarding costs, we have received a high summarized cost with no detail to review from the builder. 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.

The second Extraordinary Assumption is that fire insurance will continue to be available for all property within the district. The property is within both a recommended High Fire Severity Zone and Very High Fire Severity Zone by CalFire. While fire breaks and fire roads have been incorporated into the development, recently insurance companies have been leaving California high fire zones. It is the appraiser’s understanding fire insurance is currently available on the subject homes. Due to the current insurance atmosphere in California, it is an extraordinary assumption that fire insurance will continue to be available.

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PROPERTY RIGHTS APPRAISED

The property rights being appraised are of a fee simple estate interest , subject to easements of record and the special tax lien of Fontana CFD No. 109. 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.”
2F
3 EFFECTIVE DATE OF VALUE

The subject property is valued as of July 26, 2024.

DATE OF REPORT

The date of this report is August 28, 2024.

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 property, Fontana CFD No. 109 , which is known as the community of Narra Hills . Landsea is the builder and is actively marketing five neighborhoods of homes . Narra Hills offers one and two-story floorplans ranging in size from 1,372 to 4,248 square feet with product types ranging from duplexes to single- family detached homes on 10,000 square foot minimum lots. T here are a total of 484 proposed homes within Narra Hills . 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. 109
• Subject Property Description
• Inland Empire Residential Market Analysis
• Highest and Best Use Analysis
• Valuation Procedure, Analysis and Conclusions
• Appraisal Report Summary

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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.” 3F
4 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 July 1, 2024, and July 26, 2024.

4. Had the site flown by an aerial photographer on July 29, 2024.

5. Interviewed representatives from Landsea and/or their consultants in 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.

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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 brochures and websites for the subject communities.

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.

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9 REGIONAL AREA MAP

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COUNTY OF SAN BERNARDINO AREA DESCRIPTION

Location
The subject property is located in the southwestern portion of San Bernardino County, in the northwesternmost portion of the City of Fontana, along the west side of Interstsate 15 (“I-15”) north of Duncan Canyon Road.

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 mountains and 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 Bernardin o 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 along the west side of I-15, approximately three miles north of its intersection with the 210 Freeway, five miles south of the intersection with I - 215, and about ten miles north of Interstate 10 (“I-10”). The I-15 and I-10 are the nearest interstates providing access to the subject from the employment areas of Orange, Los Angeles and Riverside Counties . From I-15 there is good access from Duncan Canyon Road, west 0.10 mile to Coyote Canyon Road and north 0.25 miles to the subject. 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 C ity of San Bernardino. The subject 634

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is located about six miles north of the historical Route 66, the original Los Angeles to Chicago cross country route.

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 eleven miles southwest of the subject property. San Bernardino International Airport is located approximately 1 4 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, 2024 (latest available) County population was 2.182 million. This represents a one-year increase of 0. 4 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 is anticipated to reach approximately 2. 257 million by 2030, indicating an average annual increase of approximately 0.57 percent over the next six years. The current 0.4 percent growth rate is lower than the previous 20- year annual average of 2.1 percent, likely due to the disruption of the COVID pandemic. The future growth of 0. 57 percent annually was predicted assuming a more stable market than was seen prior to the Great Recession.

Economy
The U.S. economy in the past few years has experienced challenging times due to reactions from the COVID disruption. These economic challenges include significant inflation, increasing interest rates, banks’ instability and reaching an agreement on the debt ceiling. During COVID, 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 635

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drastically as citizens were urged to stay home. Layoffs occurred with reports of 40 million people filing for unemployment in the first few months of the pandemic. The Governments attempted to curtail the job losses and hardships with the approval of over 5.6 trillion in COVID relief to our nation. In addition, the Federal Reserve Board (“Board”) reduced interest rates and started quantitative easing by buying bonds. 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 June 2024, the national inflation rate was at 3.0 percent; up from a low of 2.97 in July 2023, and down from the peak in June 2022 of 9.1 percent. This compares to a 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 result of world turmoil, supply chain issues due to COVID or from the additional money entering the economy, inflation has been hitting Americans hard.

In an effort to curb inflation, the Federal Reserve Board (“Board”) began raising interest rates. Between March 2022 and August 2023, there were eleven interest rate increases rising the Federal Funds Rate (“FFR”) from 0.25 – 0.50 percent to 5.25 – 5.50 percent.

The Board has not increased rates since July 2023, due to the decrease in inflation coupled with other mostly positive signs in the economy. While the eleven increases appeared to help slow inflation, the quick, significant increases strained bank b alance sheets. Three major banks failed in early 2023 with the government taking unprecedented action to help shore them up. At the most recent Board meeting ( July 2024) they continued to pause the increases for the eighth meeting in a row and continued to suggest there still could be interest rate cuts later this year. The FFR increases over the past couple years increased a typical 30- year fixed mortgage rate from 2.98 percent as of November 10, 2021, to the high of 7.79 percent as of October 2023; however, the rate has dropped to 6.73 percent as of August 1, 2024 (per Federal Reserve Economic Data- St. Louis). The recent decrease in mortgage rates appears to be due to the anticipation of an FFR decrease in the next few months. This steep increase in mortgage rates over the past two years has significantly affected the real estate market. 636

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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 a peak of 36,799 in January 2022. In February 2022, Russia began invading Ukraine which caused volatility in world economics followed by U.S. inflation, interest rate increases and instability in the U.S. due to the debt ceiling being reached. In addition, Israel declared war on Hamas on October 7, 2023, which added to the strain. All of these factors caused a drop in the DJIA of over ten percent from January 2022 to the low on October 27, 2023 (32,418); however, the Federal Reserve Board’s notes from June coupled with generally strong economic news, brought the stock market to a new all-time high of 41,198 (July 17, 2024). It appears the Board’s decision not to increase rates further and their suggestion that decreases may occur in the next five months has been well received by investors. Current concerns on the U.S. economy include the upcoming election and the nation’s debt limit which can only be increased through government approvals. The current partisanship in our government caused a stand- off in increasing the debit limit which has been in danger of being reached numerous times with several temporary deals being reached, however, no permanent agreements at this time.

The significant increase in mortgage rates over the past two years is just one part of the puzzle affecting the impact of new housing on the broader economy. Additional risks include homebuilders trying to find balanced inventory levels, supply chain issues, both wage and price increases, 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 COVID 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 637

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activity in new home sales was the one bright spot in the COVID disruption and is thought to be due to several factors, including: a tight supply of resale homes; historically low interest rates; millennials finally buying homes; and the work from home fac tor which began during the pandemic and allowed residents to live in more suburban areas without long commutes. As rates began increasing in early 2022, there was a significant slowdown in sales within the Inland Empire. The high mortgage rates have signif icantly slowed existing homeowners from moving. The limited availability of existing homes on the market has resulted in new homes capturing a much larger share of the total home sales.

While most jobs have come back, job losses were significant during the COVID recession as the Nation’s unemployment rate went from 3.5 percent in February 2020 to 14.4 percent in April 2020, with the June 2024 National unemployment rate at 4.3 percent (Employment Development Department, not seasonally adjusted). The unemployment rate for the MSA was estimated at 5. 3 percent (as of June 2024 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 June 2024, Riverside County’s unemployment rate was 5. 4 and San Bernardino County had a 5. 2 percent unemployment rate. The current unemployment rate for the MSA of 5. 3 percent is similar to the California rate at 5.3 percent and higher than the June 2024 National rate of 4.3 percent. Below is a table comparing San Bernardino County’s unemployment rate to the unemployment rates of the surrounding counties as of June 2024.

Jurisdiction As of Unemployment
Rate*
Los Angeles County June-2024 5.9%
Riverside County June-2024 5.4%
San Bernardino County June-2024 5.2%
Orange County June-2024 4.0%
San Diego County June-2024 4.5%
Source: State of California E.D.D.; *Not Seasonally Adjusted 638

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The latest UCLA Anderson Forecast (“Forecast”) was issued June 6 , 2024, and stated that the slowing of the economy does not suggest a national recession; however, they are predicting two more quarters of sub- trend growth for summer and fall of 2024. They state the predicted recession has been silenced due to expansionary fiscal policy, new national industrial policy and robust consumer spending. They believe inflation is slowly finding new equilibrium in the 2.2 to 2.7 percent range (kept higher by resident ial rents, automobile repair and higher health insurance premiums) and they expect the Federal Reserve to take a neutral stance, while economic growth rebounds to trend rates. The risks to their forecast are stated as a possible government shutdown, geopolitical events and a radically different economic policy after the November elections. Due to these uncertainties, the Forecast predicts weaker business investment in the third and fourth quarters of 2024, corresponding to a wait-and-see approach by some firms until after the November elections.

The UCLA Forecast for California mentions the uncommon conditions in the housing market. While typically higher mortgage rates should lower housing prices, the absence of inventory and pent -up demand by households has resulted in an increase in median home prices. With existing home sales at depression levels, builders should be responding with new developments, however they believe the wet winter resulted in no significant growth in building permits. This slow start to new home construction has been factored into the forecast with weaker housing in 2024 and a resurgence in 2025. The Forecast also predicts an increase of goods passing through California ports in the coming year after a downturn due to unsettled labor issues at West Coast ports (now settled). The three-year forecast for California is for the state to grow faster than the U.S., however not by much after 2024. The unemployment rate for the second quarter of the year is anticipated to average 5.2 percent with the averages for 2024, 2025 and 2026 expected to be 5.1%, 4.5% and 4.2% respectively. The Forecast believes that in spite of the higher interest rates, the continued demand for a limited housing stock, coupled with state policies inducing new home building, should result in the beginning of a recovery for the housing market in 2024, followed by solid growth in new home production thereafter.

The expectation is for 110,000 net new units to be permitted in 2024, growing to 152,000 639

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by the end of 2026. These numbers are down from the March Forecast from 123,000 in 2024, growing to 159,500 by the end of 2026.

One bright spot in the current economy is sales of new homes. While existing homeowners are reluctant to put their houses on the market due to their under -four percent mortgages, new home sales continue. Even with rates in the seven percent range, new homes are still selling. This is partially due to the extremely limited availability of existing homes on the market, coupled with homebuilders offering to buy-down interest rates to help new home buyers. While new homes historically captured 10 – 13 percent of total home sales; over the past year new homes are capturing over 30 percent of total home sales. This rush to new home purchases has put pressure on pricing, even while interest rates have soared. During the Great Recession median housing prices (existing) in San Bernardino County dropped from a high of $350,288 in March 2006 to a low of $120,406 in May 2009. Median prices surpassed the pre- recession high in September 2020 and hit a peak in June 2024 at $522,500. The median home price had been bouncing generally between $475,000 and $500,000 over the past six months (all statistics per the California Association of Realtors). The median home price in San Bernardino County is up 6.9 percent year over year, which will be discussed further in the Inland Empire Housing Market section later within this report.

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 had 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; however, 2023 saw the largest percentage decrease of 12.2 percent year over year (8,018,668 versus 9,133,657 total TEUs). It should be noted that consumer demand 640

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cooled in mid- 2022 leaving fewer TEUs needed. For the calendar year 2024, thus far TEUs are up over 15 percent.

Government

A Board of Supervisors oversees the County as the governing body of the County, certain County special districts, and the County Housing Authority. The Supervisors enact ordinances and resolutions, adopt the annual budget, approve contracts, and appropriate funds, determine land use zoning for unincorporated areas, and appoint certain County officers and members of various boards and commissions. The Board of Supervisors is elected from five different districts within the County.

Education
The subject area is served by the Fontana Unified School District (“FUSD”). FUSD serves students with five high schools, seven middle schools and 30 elementary schools along with three alternative schools and one adult school. The subject is assigned to Sierra Lakes Elementary School , Ruble Middle School and Summit High School . Community Colleges are available near the subject at Chaffey College in Rancho Cucamonga (seven miles west), at Chaffey College’s Fontana campus, (five miles south), and San Bernardino Valley College (10 miles southeast). Higher education is available approximately seven miles east of the subject at California State University San Bernardino, about 15 miles southeast is University of California at Riverside, 1 5 miles southwest in the private Claremont Colleges (which include Claremont McKenna College, Pitzer College, Harvey Mudd College, Pomona College, and Scripps College) and 22 miles to the southwest at Cal Poly Pomona.

4.0 6.0

8.0 10.0
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 TEU's (millions)
Year
Port of Long Beach TEUs
641

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Conclusion
Population in the County has increased over the past 2 0 years with predictions for continued population growth. The Nation’s economy has been slowing after the Board increased the FFR over five percent to fight historical inflation which began during COVID.

One bright spot during COVID was housing; the region’s relative affordability and low interest rates, coupled with the rising prices in the coastal market and the demand for housing, set up a new housing boom. This was followed by a significant drop in existing home sales due to existing homeowners being unwilling to give up their low -rate mortgages, which turned out to be a boon for new homes. Current concerns for the Inland Empire economy include stubborn inflation, the high prices of homes, higher interest rates, supply chain issues, possible government shutdowns along with the Russian/Ukraine and Israel/Palestine conflicts, 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, Riverside and San Diego Counties.

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City of

Fontana
CFD No. 109

(
Narra Hills) - by Landsea Homes
Kitty Siino & Associates, Inc.

Page

19 CITY OF FONTANA DESCRIPTION

General Area
The subject property is located in the north western portion of the City of Fontana (“City”) 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. 109 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 originally 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 industr ial employment 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, also 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 2024 population of Fontana (per the California Department of Finance) was 214,223, which represents an increase of 0. 7 percent over the previous year. The 2000 population of Fontana was 128,928, suggesting the population has increased 66 percent over the past 24 years or an average rate of 2. 1 percent per year. The City population represents 9.8 percent of the County population. The 0.7 percent growth compares to an 644

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increase of 0.4 percent in the County year -over-year and a growth of 0. 2 percent in the State year-over-year. This is the first year that California has shown positive population growth since 2020. The City has several new home communities currently under construction, especially in the northern portion of the City. Per the U.S. Census Bureau, 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 55,632 housing units as of 2021 (latest data available), with a growth rate of 56 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 over eight percent of the total number of households in the County. Below is a graph showing residential units permitted in Fontana between 2002 and 2022 (2023 not yet available).

While the current numbers are not at pre-Great Recession numbers, they are the highest in the past 15 years. Per SCAG, 68 percent of the housing stock is owner occupied and 32 percent are renters. Only 22 percent of the housing stock in the City was built before 1970 and 78 percent was built since that time. There are several residential projects currently under construction including the subject 484-unit community of Narra Hills; 1,908
1,545
1,025
209 306 270 261 419 498 865
1,182 1,029
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2021 2022 Fontana Residential Building Permits
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Ventana at Duncan Canyon a mixed-use neighborhood proposed for 842 residential units along with retail, office and hotel uses; Citrus Heights North (within Shady Trails), Highland Park; the Summit at Rosena Specific Plan which is ongoing and will eventually create 850 new homes, and the Arboretum Specific Plan which is also ongoing and will eventually create 3,500 new homes. In addition, new home proposed communities include Mountain View Homes which is proposed for 156 residential units; Lennar’s Citrus West which is proposed for 86 attached units; Cypress a multi-family housing project and two senior living communities. There are additional planned projects according to the City.

Per the 2023 annual report, there were 709 new single-family residential permits and 42 multi-family residential permits issued (unit number not included in the City’s data) .

According to Redfin Market Trends, the June 2024 median home price in overall Fontana was $667,500 (median of 84 homes) which is 8.5 percent higher than one year prior while the median home price in North Fontana was $715,000 (median of 48 homes) which was

3.5 percent higher than one year prior.

Current new homes communities selling within Fontana include: Narra Hills (the subject property) with five neighborhoods currently being marketed by Landsea Homes, Arboretum by Lennar with six neighborhoods currently selling, Monterado with two neighborhoods by Lennar (nearly sold- out), Aurora Park by Tri Pointe with two neighborhoods ( nearing sell -out), Highland Park by Richmond American with two neighborhoods (nearing sellout).

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, Summit 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 646

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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 I- 15 to Baseline Road, to Cherry Avenue or San Sevaine Road, north to Highland Avenue and east to the subject. Additional access is via I -210 to Citrus, south to Highland and west to the subject.

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. There is planned retail across Citrus Avenue from the subject in the Ventana Specific Plan. The City is home to an Amazon Distribution Center, 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 Fontana Speedway is located along Cherry Avenue north of I -10 and the Metrolink station is located along Sierra Avenue.

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. Between April 2020 and March 2022 residential building permits grew significantly after a lull in the first 10 years since the Great Reces sion. In the past year permits slowed as sales decreased due to increasing rates. The area has excellent access via I-15. The area’s central location, reasonable land prices and the availability of land for development combine to make the location a prime area for future growth.

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IMMEDIATE SURROUNDINGS

The subject property is located just north of the quadrant of I-15 and Duncan Canyon Road, in the northern portion of the City of Fontana. The subject has convenient freeway access to the I-15 via Duncan Canyon Road with both on and offramps to I-15.

The subject lands are immediately surrounded by mountainous vacant lands to the north and west along with some existing residential to the west of the southern portion of the site, a new distribution industrial building to the northeast (on the west side of the I -15). the I-15 to the southeast and Coyote Canyon Park (a regional part) to the south.

The subject lands are just north of Hunter’s Ridge, a successful master planned community in Fontana which houses 1,725 residential units on 595 acres built out in the late 1990’s and early 2000s. The distribution building to the northeast is an Amazon distribution center, however access is off Sierra Avenue (one exit north of Duncan Canyon Road) so truck traffic shouldn’t be an issue for the subject site. Just north of the distribution center is some retail which includes two gas stations and a few fast-food chain restaurants which are within one mile of the subject . Neighborhood and more regional shopping is available at Summit Avenue (one exit south from the subject) with two major shopping centers including anchors of Kohl’s, Target, Stater Bros. M arket and many national chains.

Across I-15 from the subject the development of Ventana is underway. Ventana is a mixed-use master plan proposed for residential, retail and hotel land uses. There are 852 planned residential units with Varsari at Ventana, a 257- luxury apartment complex developed and leasing. Beyond Ventana is Monterado, a Lennar community of small lot detached homes which is nearing build-out.

There are several parks within close proximity to the subject. Immediately south of the subject across Duncan Canyon Road is Coyote Canyon Park which includes three baseball fields, barbeque areas, picnic shelters, playground, restrooms and trails. Within one mile is Hunter’s Ridge Park which includes a baseball diamond and a playground 648

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while within two miles is San Sevaine Park which includes Tennis Courts, Volleyball , Playgrounds and restrooms. Schools that serve Narra Hills include Summit High School (about one mile south), Ruble Middle School (about three miles southeast), and, Sierra Lake Elementary (about 1.5 miles southeast).

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_________________________________________________________________________________________________________ Appraisal Report
City of

Fontana
CFD No. 109

(
Narra Hills) - by Landsea Homes
Kitty Siino & Associates, Inc.

Page

26 FONTANA CFD NO. 109 (NARRA HILLS)

We have reviewed the City of Fontana CFD Report for Community Facilities District No. 109 (Narra Hills) dated

May 20, 2022

, as prepared by David Taussig & Associates, Inc.

The CFD Report provides a brief description of Fontana CFD No. 109, a brief description of the facilities to be funded

along with an estimate, a description of the boundaries and an estimate of the cost of financing the bonds used to pay for the facilities.

The City
Council of the City of Fontana adopted a resolution of intention

for Fontana CFD No. 109
(Narra Hills) on April 12, 2022.

The exterior boundaries of

Fontana
CFD No. 109 per the Proposed Boundary map are
shown below.

Per the CFD Report, at time of formation,

Fontana
CFD No. 109 encompassed
approximately 137.33 gross acres of which 73.25 are estimated to be taxable. There

were

originally 489 proposed single-family homes at time of report which are now mapped for 650

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484 units. They are comprised of 129 single-family attached townhome units ranging in size from 1,316 to 1,855 square feet (now mapped for 124 units), 127 single- family detached cluster units ranging in size from 2,100 to 2,555 square feet and 233 single- family detached units ranging in size from 2,387 to 4,249 square feet.

Per the CFD Report, the types of facilities to be eligible for funding are streets, including grading, paving, curbs and gutters, sidewalks, street signalization and signage, streetlights and parkway and landscaping related thereto, sewers, storm drains, fire protection facilities, police facilities, public facilities, landscaping, library facilities, park and recreational facilities and land, rights -of-way, and easements necessary for any of such facilities. The types of public facilities proposed to be eligible for funding or purchased as completed facilities by CFD No. 109 are streets, including grading, paving, curbs and gutters, sidewalks, street signalization and signage, streetlights and parkway and landscaping related thereto, sewers, storm drains, fire protection facilities, police facilities, public facilities, landscaping, library facilities, park and recreational facilities, flood control facilities consisting of the relocation and construction of the Hawker Crawford flood control channel, water d istribution, treatment and storage facilities and land, rights of way and easements necessary for any such facilities. The types of public services to be financed by CFD No. 109 are fire protection and suppression services, maintenance and lighting of parks, parkways, streets, roads and open space, flood and storm protection services and maintenance and operation of any real property or other tangible property with an estimated useful life of five or more years that is owned by the City. 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. 109 , 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. 109 ; and, any other expenses incidental to the construction, completion, and inspection of the authorized work.

The estimated cost of public facilities at the time the Fontana CFD No. 109 Report was created were estimated as:
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PUBLIC FACILITIES AMOUNT
Acquisition Facilities: $25,138,983(1)
Hawker-Crawford Channel Backbone Improvements 11,648,004 Lytle Creek Road Water System Improvements 4,392,549
Sewer Improvements 3,098,823
Storm Drain Improvements 2,854,302
Circulation Improvements 1,559,159
Traffic Signal Improvements 843,125
Street Light Improvements 446,056
Storm drain Improvements 296,965

Other Public Facilities: $12,234,515(2)
Water System Capacity Improvements 6,566,419
Park Facility Improvements 2,398,236
Traffic Circulation Facility Improvements 1,283,620
Storm Drain Improvements 0
Housing Facility Improvements 570,882
Sewer Improvements 0
Police Facility Improvements 281,240
Public Facility Improvements 332,877
Fire Flow Protection Improvements 246,788
Landscape Facility Improvements 251,310
Fire Service Protection Improvements 80,196
Library Facility Improvements 222,947

Additional Capital Facilities Infrastructure Improvements $6,595,323

TOTAL ESTIMATED COSTS $43,968,821
(1) Estimates provided by Project Developer and subject to review and confirmation. (2) Estimated amount of permit fees AFTER the application of anticipated City fee credits.

Per the Rate and Method, the Assigned Facilities Special Tax for Developed Property for Fontana CFD No. 109 (Narra Hills) annual assigned facilities special tax ranges from $3,320 to $8,186 per unit based on the size of the home. The Maximum Services Special Tax is estimated between $1,005 to 1,040 per unit based on the Planning Area while the Assigned Services Special Tax is estimated at $718 to $744 per unit. The Services taxes are expected to finance annual costs to provide fire protection and suppression services, maintenance and lighting of parks, parkways, streets, roads and open space, flood and storm protection services and maintenance and operation of any real propert y or other tangible property with an estimated useful life of five or more years owned by the City.

The maximum bonded indebtedness for CFD No. 109 is $50,000,000.

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Per the latest sources and uses of funds (dated July 24, 2024) for the proposed bond issuance, there will be an estimated $36,170,000 in Bond Par Amount and a Premium of $707,810 for a total bond fund deposit of $ 36,877,810 with $33,891,886 going to the Project Fund, $2,376,750 in Debt Service Reserve Fund and $609,174 in Underwriter’s Discount and C ost of Issuance (all amounts subject to change). A larger copy of the Fontana CFD No. 109 boundary map is located in the Addenda for your review.

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_________________________________________________________________________________________________________ Appraisal Report
City of

Fontana
CFD No. 109

(
Narra Hills) - by Landsea Homes
Kitty Siino & Associates, Inc.

Page

30 SUBJECT PROPERTY DESCRIPTION

The subject property consists of 484 proposed units be

ing
developed as

Narra Hills within
five communities. The communities include Clementine, a duplex and small lot detached product; Strata, a cluster detached lot project; Wildstar a detached product o

n
5,000
square foot minimum lots and

Skyeland

and Goldenpeak, both

detached products on
10,000 square foot minimum lots. The subject site is shown on the below

aerial
and
described as follows.

Location: West side of I-15 north of Duncan Canyon Road, Fontana, California

Legal Property
Description: Lots 1

-
8 of Tract

20070
– Units 1 -124 (Clementine), Lots 1

-
17 of
Tract 200 69 – Units 1 -127 (Strata), Lots 156

-
233 of Tract 20010
(Wildstar) and lots 1

-
155 of Tract 20010 (Skyeland and Goldenpeak),
all located in

the
City of Fontana, County of San Bernardino,

State of
California

Property Owner: Clementine:

Individual Owners as Units 1- 18 and 25 - 30 of Tract 20070 . LS- Fontana, LLC, a Delaware limited liability company (a related entity to Landsea Homes) as to

U
nits 19

-
24 and 31

-
73 and 99

-
100 and
113

-
124 of Tract 20070. Arroyo Cap

II

-
6 LLC, a Delaware limited
liability company as to Units 74

-
98 and 101

-
112 of tract 20070.
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Strata:

Individual Owners as Units 1-53, 56-57, 59-60 and 67 of Tract 20069.

LS Fontana, LLC as to Units 54-55, 58, 61-66, 68-85, 89-92 and 120- 127 of Tract 20069. Arroyo Cap II -6 LLC as to Units 85- 88 and 93- 119 of Tract 20069.

Wildstar:

Individual Owners as Lots 156-170, 185-187, 194, 196-217 and 222- 225 of Tract 20010. LS Fontana, LLC as to Lots 171- 184, 188-193, 195, 218-221 and 226-233 of Tract 20010.

Skyeland :

Individual Owners as Lots 24, 26-29, 31-35, 37-48, 138 and 154-155 of Tract 20010. LS Fontana, LLC as to Lots 25, 30, 36, 49- 51, 97- 100, 121-122, 145-131, 139-140 and 153 of Tract 20010. Arroyo Cap II-6 LLC as to Lots 52 -56, 95-96, 108-112, 114-120, 132-137 and 141-152 of Tract 20010

Goldenpeak:

Individual Owners as Lots 7-23 of Tract 20010. LS Fontana, LLC as to Lots 4- 6, 57 -62, 71 -81, 87- 91, 101- 106 and 123- 124 of Tract 20010. Arroyo Cap II-6 LLC as to Lots 1-3, 63-70, 82-86, 92-94, 107 and 113 of Tract 20010
Assessors
Parcel Nos.: Clementine: 0226-755-05 thru 16; 0266-755-018 thru 25; 0266-755- 27 thru 34; 0226-755-36 thru 37; 0226-756-04 thru 14; 0226-756-16 thru 20; 0226-756-22 thru 31; 0226-756-33 thru 42; 0226-756-44 thru 53; 0226-763-05 thru 14; 0226-763-16 thru 21; 0226-763-23 thru 31; 0226-763-33 thru 40; 0226-763-42thru 51; 0226-763-53 thru 57.

Strata: 0226-753-16 thru 23; 0226-753-25 thru 32; 0226-753-34 thru 40; 0226-753-42 thru 45; 0226-753-47 thru 54; 0226-753-56 thru 63; 0226-754-11 thru 18; 0226- 754-20 thru 27; 0226- 754-29 thru 36; 0226-754-38 thru 45; 0226- 754-47 thru 54; 0266- 754-56 thru 63; 0226-754-65 thru 72; 0227- 754-74 thru 77; 0226- 762-07 thru 14; 0226-762-16 thru 23; 0226-762-25 thru 32.

Wildstar: 0226-742-01 thru 31; 0226-743-01 thru 47.

Skyeland & Goldenpeak: 0226-702-01thru 30; 0226-712-01 thru 54; 0226-722-01 thru 60; 0226-732-01 thru 11.

Property Taxes: We have not been able to review property taxes on any of the above assessor parcel numbers. Our review of t he Assessor’s Office does 655

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not yet show any taxes on the subdivided parcels. It is an assumption of this report that the overall property taxes and special assessments are not over two percent.

Three-Year
Sales History: Per Landsea representatives, Arroyo Cap II -6 LLC (a land bank company) purchased the subject property on September 9, 2021 for $80,000,000. LS Fontana LLC (a related entity to Landsea) began taking down lots in May 2022. They have completed 16 take- downs totaling 358 lots as of July 26, 2024. The next scheduled take- down is anticipated for August 1. There are 126 total lots remaining to be taken down in 10 take-downs with the final take-down estimated for May 2025. . Landsea (or a related entity) began closing homes within the subject property to individual owners in November 2023, and has closed 169 houses between November 2023, and July 26, 2024.

Size and Shape: The subject site is irregular in shape and contains 121.279 gross and

73.444 net acres per Tract Map 20010 which subdivides the site into 233 residential lots and three large lots that were further subdivided into Tract 20069 (Lots 234 and 235 totaling 11.25 of the total net acres) and Tract 20070 (Lot 236 which totals 8.08 net acres).

Zoning: We have reviewed a letter from the Planning Division of Fontana dated March 18, 2019 , which states Resolution No. 2019- 31 was adopted certifying the project EIR, Resolution No. 2019- 32 was approved for General Plan Amendment No. 16- 001 to change the General Plan Land Use Map; Ordinance No. 1798 was approved for Zone Change No. 16- 001 to change the Zoning District Map; a nd Resolution No. 2019-33 was approved for TTM 20010, TTM 20069 and TTM 20070, Planned Unit Development (CUP No. 18- 001) Design Re view No. 16 -025 and Design Review for 16- 026. In addition, Ordinance No. 1799 was approved for Development Agreement No. 16- 001. Th ese actions by the Planning Division of the City of Fontana approved development of Narra Hills for a total of 489 residential units which, once finalized became the subject 484 residential units.

Per the current City of Fontana General Plan, the subject is shown as R-PC (Residential Planned Community with 3 to 6.4 dwelling units per acre allowed), R -M (Medium Density Residential with 5.1 – 12 dwelling units per acre allowed), R-MF (Multi-Family Residential with

12.1 to 24 dwelling units per acre allowed), PR (Recreational Facilities) for the clubhouse area. The current City of Fontana Zoning Map is consistent with the General Plan.

Entitlements: The subject is entitled by t hree Tract Maps. Tract Map No. 20010 recorded April 26, 2023, and subdivided 121.279 gross acres and 656

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73.444 net acres into 236 lots with 233 single family lots (78 lots with a minimum lot size of 5,000 square feet and 155 lots with a minimum lot size of 10,000 square feet) and Lots 234, 235 and 236 being identified for condominium purposes. Tract Map 20069 recorded July 23, 2023, and subdivided Lots 234 and 235 into 17 lots which were subsequently divided into 127 small cluster lots per condominium maps. Tract Map 20070 recorded July 28, 2023, and subdivided Lot 236 into eight lots for condominium purposes which were divided into 124 duplex and small detached lots. A copy of the three maps along with the site plans are located in the Addenda for your review.

Home Owner’s
Association: Per Landsea representatives, Narra Hills has a master Home Owner’s Association which has dues of $192 per month at build-out.

In addition, Strata has an additional $57 per month (due to their cluster format) and Clementine has an additional $41 per month (due to the duplex homes and their shared driveways). The HOA covers maintenance of the community gates, swimming pool, spa, barbeques, clubhouse and restrooms, community park s, as well as all walkways and community landscaping. The pool, spa, clubhouse and park areas looked complete with the pool planned to open the first week in August.

Topography: The subject lands were originally sloping from the freeway up to the foothills of the adjacent San Gabriel Mountains but have been graded into 484 residential lots and pads. The northern portion (north of Coyote Canyon Road) has been graded into the foothills and allows for views from the majority of the lots. The southern portion is near grade of both Lytle Creek Road and I -15 (adjacent to the southeast of the site). Per the Soils Report (referenced below), Debris basins and storm drain inlet areas are within the upper reaches of the northern portion of the site which will intersect with existing drainages from the foothills above the site. The drainage areas will have a debris basin and storm drain inlet or a diversion channel to a basin with maintenance roads to access each. The Hawker -Crawfor Channel originally traversed the site. Th e subject has been fully mass graded and developed into two condominium lots along with 233 single family lots. The condominium lots have been graded into 127 cluster format lots and 112 duplex lots and 12 small, detached lots. The majority of the 233 single family lots have been graded to level pads with sloping streets allowing for some significant views on the northern portion of the site. There are a few lots at the northeast corner of the site which are not finished with grading (utilities have been stubbed to each). It appears they are depositing the excess dirt from construction of the homes within the Narra Hills community on these lots and will finish-grade them at a later date. It appears there is an engineered street drainage system which has been constructed 657

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on site to alleviate any runoff issues. This is suggested by the City approvals for the construction of the homes.

Fire Hazard Zone: Per the City’s General Plan and Zoning Map, the site is within a fire overlay zone. Per the State of California’s Fire Hazard Map, the site is within a LRA (Local Responsibility Area) with the recommendation for the site to be partially in a high and partially in a very high fire severity zone. A copy of the CalFire Fire Hazard Zone map is located in the Addenda. It is an extraordinary assumption of this report that all Fire Safety Conditions which are required by code have been incorporated into both the construction of the homes and the development of the lands and that the homebuyers are able to obtain fire insurance.

Soils Condition: We have reviewed a “Geotechnical Grading Plan Review ” for the subject site dated May 6, 2016, prepared by LGC Geotechnical Inc. of San Clemente, California. The Report concluded that construction of the proposed residential development is feasible from a geotechnical standpoint provided their conclusions and geotechnical recommendations are incorporated into the design of the project.

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 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: Within the above referenced Geotechnical Report, a review of a seismic evaluation by Albus -Keefe & Associates (report dated September 8, 2003) was discussed, and it was concluded no active fault exists on the site. Per the above reference Geotechnical Report, the subject site is located within a State of California Earthquake Fault Zone, however, extensive fault trenching as reported by the Albus-Keefe & Associated Report showed no strands of the Cucamonga Fault exist within the proposed development zone and that no fault-related setbacks are required. The appraiser is not an earthquake expert, and it is recommended that any concerns relating to earthquake faults should be addressed to the appropriate experts.

Environmental
Concerns: We have not received an environmental report to review. We have reviewed the Planning Division approvals which adopted and certified the EIR for Narra Hills. It is an assumption of this report that there are no environmental issues which would slow or thwart development of the subject property and that all proposed mitigation 658

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efforts were completed. 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 in Zone X which states areas determined to be outside of the 0.2 percent annual chance floodplain.

Easements and
Encumbrances: We have reviewed three Preliminary Title Reports prepared by First American Title which cover the three recorded tract maps that encompass the subject property. They are Report Order Number NHSC-6716718, dated June 18, 2024, covering Tract 20070; Report Order Number NHSC -6649385 updated August 8, 2024, covering Tract 20010; and Report Order Number NHSC-6716692 dated June 27, 2024, covering Tract No. 20069. While the exceptions appear typical for subject -type lands, i t is an assumption of this appraisal report that the subject lands are free and clear of any liens and/or encumbrances other than CFD No. 109. The appraisers are not title experts, 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: City of Fontana
Water: West Valley Water District
Schools: Fontana Unified School District

Streets/Access: Access to the subject property is convenient via I -15 to Duncan Canyon Road, west one-quarter mile to Coyote Canyon Road and north one- quarter mile to the entrance of Narra Hills. The gated entrances are on both the southeast and northwest side of Coyote Canyon Road which is open to the public.

I- 15 is a major north/south freeway, which provides access to both international borders with Mexico and Canada.

Duncan Canyon Road is an east/west access road with on/off ramps to I-15. To the east Duncan Canyon currently terminates at Sierra Avenue, about 1.5 miles east of I -15, providing access to North Fontana. To the west Duncan Canyon Road is the main entrance into Hunter’s Ridge, a master plan southwest of the subject. As Duncan Canyon Road winds through Hunter’s Ridge and turns south, it changes its name to Cherry Avenue, a main north/south access road through the northern portion of the City of Fontana.

Cherry Avenue terminates at the I-210 Freeway.
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Coyote Canyon Road begins at Lytle Creek Road to the north of the subject and provides access through the Narra Hills community and the existing residential neighborhood southwest of Narra Hills where it crosses Duncan Canyon Road. On the south side of Duncan Canyon Road Coyote Canyon Road provides access to Coyote Canyon Park then becomes a frontage road to I -15 for about a mile until it turns west and becomes Bridlepath Drive in the community of Hunter’s Ridge.

Coyote Canyon Road divides Narra Hills into the northwestern portion and the southeastern portion with Skyeland and Goldenpeak in the northwestern portion and Clementine, Strata and Wildstar in the southeastern portion. Internal streets within the northwestern portion include Habitat Drive (gated entrance), Butterfly Drive, Skippers Lane, Papilio Court, Conservatory Drive and Pipevine Lane (gated entrance). Internal Streets in the southeastern portion include Caterpillar Drive, Swallowtail Lane, Morpho Lane, Paulina Lane and Habitat Drive, Milkweed Court, Blue Copper Way and Pipevine Lane along with cluster driveways and alley loaded streets within Clementine and Strata.

Current Condition: The subject is being developed into 124 duplex and small-lot homes (Clementine), 127 single-family detached homes in a cluster format (Strata), 78 single -family detached lots with a minimum lot size of 5,000 square feet (Wildstar) and 155 single-family homes on 10,000 square foot lots (Skyeland and Goldenpeak) . The majority of the grading on the property is complete with a few of the northern most large lots being used as a dump area for fill dirt from the remainder of the community. These lots will need to be re- graded and certified upon completion. All internal streets are in place (with the exception of some duplex alleys and cluster driveways. Upo n our inspection, 209 of the 484 proposed homes were over 95 percent complete including 169 individually owned homes, 15 model homes, 25 production homes ( 18 in escrow) 76 homes under construction ( 21 in escrow) and 199 remaining finished pads/lots, 73 owned by Landsea and 126 owned by Arroyo Cap.

Costs to Complete: The subject property has been developed into 484 generally finished lots/pads with internal streets generally complete and utilities stubbed to each lot. Per Landsea representatives, the remaining hard costs include $620,000 in remaining land development costs (includes final streets and grading on the few lots accepting fill and landscaping/hardscaping). In addition, there is $ 3,170,000 in remaining fees which are not included in the CFD (this appraisal assumes the bonds are in place). Adding the remaining hard costs 660

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Fontana
CFD No. 109

(
Narra Hills) - by Landsea Homes
Kitty Siino & Associates, Inc.

Page

37 and the remaining fees results in total remaining costs of $3,790,000.

It is our understanding that these costs are the builder’s responsibility and will be spread between

the builder and investor

owned lots as
the individual owners are not responsible. Out of the total

484

lots/pads, 169 are individually owned leaving

315

lots, pads, lots or
homes owned by the builder and/or investor. Dividing the $3,790,000

by the

315
homes/lots/pads results in remaining land development
costs of $12,031.75

p
er lot/pad.

Improvement
Description: Below is a site plan followed by a brief description for each of the neighborhoods.

Clementine:

Clementine is made up of 12

proposed
single-family detached
homes on small lots and 112

proposed
duplex homes. The plans
range in size

from
1,372 to 1,661 square feet with the smallest plan
the detached home

.

The floorplans all

are
two stories with three to
four bedrooms and two

-
car garages. Features include Home
Automation including Apple Home pod mini, Kwikset Halo Wi -Fi enabled door lock and Honeywell Pro Smart thermostat. Energy Savings include Dual -glazed windows, tankless water heater,

LED
lighting, HALO whole home air purifier and solar system with lease.

Exteriors include Spanish inspired architecture, two hose bibbs and rain gutters at en

t
ry along with Lift Master garage door with openers.

The interiors have nine

-
foot ceilings, two panel interior doors, tile at
select locations and Shaw carpeting. Gourmet Kitchen includes Samsung appliances, qu

a
rtz kitchen counters, kitchen islands, white
thermofoil flat panel cabinets, a double

-
basin sink and USB outlets.

The Primary Suite has subway tile shower fiberglass unit with Bella Marble counters, white thermofoil cabinets, walk-in closets and Moen bathroom accessories. The models are located on Cosmos Way at Caterpillar Drive. There are two models, Plan 2 and 3. Twenty-four of the homes have closed escrow to homebuyers and there

is
no
standing inventory. There are 34 homes under construction with five of tho

s

e in escrow. The project opened for sale in August 2023 with base pricing $529,990 to $569,990 while current base pricing is $558,990 to $594,990. The homes began closing

March 22, 2024

,
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CFD No. 109

(
Narra Hills) - by Landsea Homes
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Page

38 with actual closed net sales prices (as reported by the builder) ranging from $535,910 to $641,149. These reported prices include all premiums, options and incentives. Our search of the

MLS
revealed no resales and

no
current resale listing

s.

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 total incentives
including closing cost/rate buy down

s
have ranged fro

m
zero to
$22,127. The houses which are over 95 percent complete are

shown
in the table following the descriptions.

Strata

Strata is proposed for 127 single

-
family detached homes on small
lots in a cluster format. The plans range in size

from 2,099
to 2,552

square feet . The floorplans all are two stories with three to four bedrooms and two

-
car garages. Features include Home Automation
including Apple Home pod mini, Kwikset Halo Wi

-
Fi enabled door
lock and Honeywell Pro Smart thermostat. Energy Savings include Dual-glazed windows, tankless water heater, LED lighting, HALO whole home air purifier and solar system with lease. Exteriors include Mid-Century Modern, Modern

Spanish
and California Modern
inspired

architecture, two hose bibbs and rain gutters at en try along with Lift Master garage door with openers. The interiors have nine

-
foot ceilings, two panel interior doors, tile at select locations and Shaw carpeting. Gourmet Kitchen includes Samsung appliances, quartz kitchen counters, kitchen islands, white thermofoil flat panel cabinets, a double

-
basin sink and USB outlets. The Primary Suite
has subway tile shower fiberglass unit with Bella Marble counters, white thermofoil cabinets, walk -in closets , medicine cabinets and Moen bathroom accessories. The models are located on

Habitat
Drive just south of Caterpillar Drive. There are

four
models, one for
each plan. Fifty-eight of the homes have closed escrow to 662

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CFD No. 109

(
Narra Hills) - by Landsea Homes
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Page

39 homebuyers. There are ten production homes over 95 percent complete (six in escrow) and an additional eight homes under construction. The project opened for sale in March 2023 with base pricing $609,990

to $649,990 while current base pricing is $

675,990

to $739,990. The homes began closing November 16

, 202
3, with
actual closed net sales prices (as reported by the builder) ranging from $ 613,714

to $ 808,477

.

These reported prices include all
premiums, options and incentives. 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 total incentives including
closing cost/rate buy downs have ranged from zero to $

15,333
. The
houses which are over 95 percent complete are shown below in the table

.

Wildstar

Wildstar is proposed for 78 single-family detached homes on 5,000 square foot minimum lots. The plans range in size

from
2,747 to
3,160

square feet. Plan 2 has an option to change storage/garage space into a

Live
Gen suite which increases the square footage from
2,961 to 3160 square feet. We will name the home with the option Plan 2X in the appraisal. The floorplans all are two stories with

four
to five bedrooms and two to three

-
car garages. Features include
Home Automation including Apple Home pod mini, Kwikset Halo Wi- Fi enabled door lock and Honeywell Pro Smart thermostat. Energy Savings include Dual -glazed windows, tankless water heater, LED lighting, HALO whole home air purifier and solar system with lease.

Exteriors include Mid

-
Century Modern, Modern Spanish and
California Modern inspired architecture, two hose bibbs and rain gutters at entry along with Lift Master garage door with openers. The interiors have nine

-
foot ceilings, two panel interior doors, tile at select 663

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CFD No. 109

(
Narra Hills) - by Landsea Homes
Kitty Siino & Associates, Inc.

Page

40 locations and Shaw carpeting. Gourmet Kitchen includes Samsung appliances with a built -in gas cooktop, quartz kitchen counters, kitchen islands, white Shaker style thermofoil cabinets, a double - basin sink and USB outlets. The Primary Suite has subway tile shower fiberglass unit with Bella Marble counters, white thermofoil cabinets, walk -in closets, medicine cabinets and Moen bathroom accessories. The models are locat ed at the corner of Habitat Drive and Caterpillar Drive, across from the Strata models. There are

three

models, one for each plan. Forty-five of the homes have closed escrow to homebuyers. There are

four
production homes over 95
percent complete ( three

in escrow) and an additional

13 homes
under construction

(four in escrow). The project opened for sale in
March 2023 with base pricing $ 754,990

to $

784,990
while current
base pricing is $

823,990

to $899,990. The homes began closing
October 24

, 2023, with actual closed net sales prices (as reported by the builder) ranging from $

782,389

to $ 992,967. These reported
prices include all premiums, options and incentives. 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 total
incentives including closing cost/rate buy downs have ranged from zero to $23,474. The houses which are over 95 percent complete are shown below in the table

.

Skyeland

Skyeland is proposed for 84 single

-
family detached homes on
10,000 square foot minimum lots and are shown as the various colored or grey homes on the site plan above with the tan homes being Goldenpeak. Skyeland has five plans which

range in size from
2,375

to 3,604 square feet. The floorplans include single and

two
stories with

three

to five bedrooms and two to three

-
car garages.
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Fontana
CFD No. 109

(
Narra Hills) - by Landsea Homes
Kitty Siino & Associates, Inc.

Page

41 Features include Home Automation including Apple Home pod mini, Kwikset Halo Wi

-
Fi enabled door lock and Honeywell Pro Smart
thermostat. Energy Savings include Dual -glazed windows, tankless water heater, LED lighting, HALO whole home air purifier and solar system with lease. Exteriors include Mid

-
Century Modern, Modern
Spanish and California Modern inspired architecture, two hose bibbs and rain gutters at entry along with Lift Master garage door with openers. The interiors have

ten
-foot ceilings, two panel

interior
doors, tile at select locations and Shaw carpeting. Gourmet Kitchen includes Samsung appliances with a built -in gas cooktop

and wall
oven

, quartz kitchen counters, kitchen islands, white thermofoil Shaker-style cabinets, a double

-
basin sink and USB outlets. The
Primary Suite has a tiled shower and free

-
standing tub, Bella Marble
counters, white thermofoil

Shaker
-style cabinets, walk-in closets,

36”
medicine cabinets and Moen bathroom accessories. The models are located on the north side of Butterfl y Drive at Habitat Drive . There are three models, a Plan 1, a Plan 2X and a Plan 3

.

Twenty-five of
the homes have closed escrow to homebuyers. There are

six

production homes over 95 percent complete (four in escrow) and an additional three homes under construction ( all

in escrow). The
project opened for sale in Ma

y
2023 with base pricing $

835,000

to
$905,000 while current base pricing is $

889,990

to $995,990. The
homes began closing December 20, 2023, with actual closed net sales prices (as reported by the

builder) ranging from $

870,920

to
$1,307,063. These reported prices include all premiums, options and incentives. 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 total incentives including closing cost/rate buy downs have ranged from zero to $58,500

. The houses which are
over 95 percent complete are shown below in the table

.

Goldenpeak

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Goldenpeak is proposed for 71 single- family detached homes on 10,000 square foot minimum lots and are shown as the various colored or grey homes on the site plan above with the tan homes being Skyeland. Goldenpeak has four plans which range in size from 3,159 to 4,248 square feet . The floorplans include single and two stories with four to six bedrooms with two plans having guest or “livegen” suites with all having three-car garages. Features include Home Automation including Apple Home pod mini, Kwikset Halo Wi- Fi enabled door lock and Honeywell Pro Smart thermostat. Energy Savings include Dual -glazed windows, tankless water heater, LED lighting, HALO whole home air purifier and solar system with lease.

Exteriors include Mid- Century Modern, Modern Spanish and California Modern inspired architecture, two hose bibbs and rain gutters at entry along with Lift Master garage door with openers. The interiors have ten-foot ceilings, two panel interior doors, tile at select locations and Shaw carpeting. Gourmet Kitchen includes Samsung appliances with a built-in gas cooktop and wall oven, quartz kitchen counters, kitchen islands, white thermofoil Shaker -style cabinets, a double-basin sink and USB outlets. The Primary Suite has a tiled shower and free- standing tub, Bella Marble counters, white thermofoil Shaker -style cabinets, walk- in closets, 36” medicine cabinets and Moen bathroom accessories. The models are located on the north side of Butterfly Drive at Habitat Drive. There are three models, a Plan 1, a Plan 2X and a Plan 3. Seventeen of the homes have closed escrow to homebuyers. There are five production homes over 95 percent complete (all in escrow) and an additional 18 homes under construction ( nine in escrow). The project opened for sale in May 2023 with base pricing $ 925,000 to $1,064,990 while current base pricing is $1,059,990 to $1,194,990. The homes began closing December 20, 2023, with actual closed net sales prices (as reported by the builder) ranging from $980,305 to $1,362,618. These reported prices include all premiums, options and incentives. 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 total incentives including closing cost/rate buy downs have ranged from zero to $25,400 . The houses which are over 95 percent complete are shown below in the table.

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*One of each of these plans is a model home. LG stands for LiveGen, representing a floorplan that features a first-floor suite while + represents a loft, bonus room, or office. There are an additional 76 homes under construction, and 199 additional pads/ lots with 73 owned by Landsea and 126 owned by Arroyo Cap (not shown on the above table).

Narra Hills by Landsea

Plan

Bd/Ba
Floors/
Parking

Sq. Ft.

Ind.

Owned
Bldr.

Owned
Clementine
1 3 / 2.5 2 / 2 1,372 2 0
2 3 / 2.5 2 / 2 1,450 11 1*
3 4 / 2.5 2 / 2 1,661 11 1*
Subtotal Clementine 24 2
Strata
1 3+ / 2.5 2 / 2 2,099 15 3*
2 4+ / 3 2 / 2 2,136 15 3*
3 4+ / 3 2 / 2 2,311 15 3*
4 4+ / 3 2 / 2 2,552 13 5*
Subtotal Strata 58 14
Wildstar
1 4+ / 3.5 2 / 2 2,747 15 2*
2 4+ / 4 2 / 2 2,961 2 0
2X (LG) 5 / 4.5 2 / 2 3,160 12 3*
3 5+ / 4.5 2 / 3 3,079 16 2*
Subtotal Wildstar 45 7
Skyeland
1 (1(75)) 3+ / 3 1 / 2 2,375 5 1
1X (1(75) 4 / 4 2 / 3 3,010 0 1*
1XX (1(70)) 4+ / 3.5 2 / 3 3,080 4 4
2 (2(70))LG 5+/ 4.5 2 / 3 3,298 8 1
2X (2(75)) 5+ / 4.5 2 / 3 3,339 4 1*
3 (3(75)) 5+ / 4.5 2 / 3 3,604 4 1*
Subtotal Skyeland 25 9
Goldenpeak
1 (1R (100)) 4 / 3.5 1 / 3 3,159 5 2*
1X (1(85))LG 4 /4.5 2 / 3 3,603 0 0
2 (2(85)) 5 / 4.5 2 / 3 3,757 0 0
2X (2R(100)) 4+ / 3.5 2 / 3 3,827 6 3*
3 (100) 6+ / 4.5 2 / 3 4,248 6 3*
Subtotal Goldenpeak 17 8
Total Narra Hills 169 40
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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 grew 0.4 percent between January 202 3 and January 2024, and an average of about two percent the previous 20 years. Projections for the County’s growth over the next six years is currently about 0.6 percent per year.

This equates to an increase of approximately 13,000 residents per year suggesting the need for about 3,500 homes per year within the County. New home sales in most cities in the County since 2020 have been higher than the coastal communities due to affordability, the work from home factor, and the fact that millennials are finally entering the housing market.

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 were 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 equi ty. 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 disruption. 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. Beginning in mid-2022, the new home market saw a slowdown in absorption rates due to the increasing interest rates, the high prices of homes, and the high rate of inflation which was shaking consumer confidence.

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Median housing prices (all types) in the County increased almost 300 percent from $120,406 at the lowest point in 2009 to the June 2024, price of $522,500 per the California Association of Realtors. This is 6.9 percent higher than one year ago.

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. The most recent unemployment rate for the County is 5.2 percent (per the June 2024 EDD report). The end of 2022 saw lower unemployment rates than the County’s pre-COVID unemployment rate in February 2020 of 4.0 percent, however 2023 saw unemployment rising from 3.6 to a high of 5.5 percent. This past month unemployment has increased about one percent. While unemployment rates are still near historical lows, the inflation factor has significantly affected 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 home 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 because of 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 income 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 disruption, 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, both sales and prices increased significantly due to strong demand from May 2020 throughout COVID until spring 2022 when interest rate increases began affecting the home-buying market. The rising interest rates alone did not 669

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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, slowed new home sales significantly beginning in mid- 2022. Due to the significantly higher mortgage interest rates, existing homeowners are not moving which has stifled the existing home market, making the new home market the only option for some. In the Inland Empire there were 44, 087 existing homes closings in the past 12 months (down

17.8 percent from one year ago) and 9,072 new home closings in the past 12 months (down 9.7 percent from the previous year), all information as of May 2024, per Zonda Research, a new home market research company. In January 2022, mortgage rates were

3.22 percent (for a typical 30- year fixed conventional mortgage) while as of August 1, 2024, the rate for the same loan is 6.73 percent which is down from the high of 7.63 percent in October 2023. On a $600,000 mortgage, the current monthly payment for this loan has increased from $2,595 to $3,862 or almost 50 percent which has hit homebuyers hard.

Per the Zonda National Economic and Housing Market Update in March 2024, the rate of growth of new home sales is off from COVID highs but up from 2022 sales numbers, suggesting a healthy market. Per their survey of over 300 new-home builders nationally, the builders are stating sales are continuing but report they had to adjust pricing and incentives to “find the market.” In the January 2023 survey, 50 percent of builders surveyed were lowering their prices and the remaining 50 percent stated their pricing was flat. In March 2024, the survey resulted in 50 percent of the builders stating their pricing was increasing a little, 46 percent of builders stating their pricing was flat and 4 percent dropping prices. This is a very different dynamic than in January 2023 which was partly due to builder’s readjusting concessions (interest rate buy-downs), and partly due to the market accepting the mortgage rate increases. In today’s market over 60 percent of new- home builders in the U.S. are offering either full-term or temporary interest rate buy-downs (John Burns Research and Consulting) which is helping to sustain new home sales. Per Zonda, in March 2024, 80 percent of new home builders in the Inland Empire are offering incentives.

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The larger public homebuilders began offering significant interest rate buy-downs in early 2023 in order to keep absorption rates steady, which reportedly cost between $30,000 and $100,000 in incentives. The builders are attempting to find the “sweet spot” in incentives. In their September 2023, survey of 300 builders nationwide, Zonda asked builders to check all that they were offering and found 70 percent of builders surveyed were offering rate buydowns, 60 percent were offering funds towards closing cost s, 33 percent were offering flex dollars, 22 percent were offering lower home prices and 20 percent were offering funds toward options and upgrades. In the subject communities , per Landsea representatives, the concessions have ranged from zero to $58,500, lower than some projects in the area. The question is, how long can builders continue to offer these significant incentives. As rates go higher, the extent that builders can buy-down the mortgage rates goes down.

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.

Mortgage applications had been spiking in late 2020 and 2021 due to the low r ates and the fear rates were going to start ticking up, which began happening in March 2022. The Board increased the rate eleven times between March 2022 and August 2023, which increased the FFR from 0-0.25 percent to 5.25-5.50 percent. At the latest Board meeting in July 2024, they paused the FFR increases for the seventh time and suggested a decrease may come at the next meeting in September 2024. The financial markets had been anticipating a possible March 2024 decrease which caused volatility in the financial markets. The stock market hit an all-time high in late July on the anticipation of a decrease later this year. The FFR increases are supposed to help slow the high inflation rate in the Nation, which appears to be occurring as the latest reports are showing inflation in June 2024 at 3.0 percent, significantly down from a high of 9.1 percent in June 2022.

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While new home builders slowed production as sales slowed in 2022, the spring of 2023 brought optimism to builders once again. Sales were up month over month as buyers adjusted to higher mortgage rates and the existing home inventory is at all -time lows.

Existing homeowners that are locked into a 3 percent mortgage are not moving up due to the current almost seven percent rates. This is creating a supply issue for existing homes.

New home sales are benefiting from this supply issue as in some cases, the only option for homebuyers are new homes. Per Zonda, historically, new homes captured 10 to 13 percent of all home sales; however, due to the limited supply of existing homes currently on the market, new homes are capturing closer to 25 percent of all homes sales in the Inland Empire.

Residential Land Development
While there had been little land development going on in most of the Inland Empire during the Great Recession years 2008-2011, the second half of 2012 saw a resurgence in the more coveted areas of the Inland Empire. 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, has 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 various builders, there are few currently available in the subject area. The majority of land sales over the past few years include single tracts of land with maps ready to record (such as Richmond American’s Highland Park and Lennar’s Monterado) or a public builder buying a larger piece of land but develops the land for its own use, such as Narra Hills by Landsea (subject property) and Gardens at the Arboretum by Lennar.

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, land sales followed with a significant number of residential land sales to builders in the Inland Empire during the second half of 2020 and throughout 2021. In late 2021 and early 2022, prior to the F FR increases, builders were paying significantly more for residential land 672

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that was ready to develop as demand was up and supply was shrinking. The beginning of 2022 continued with residential land sales going under contract until May, when new home sales began to fall sharply. According to Zonda’s survey of builders regarding residential land purchases, as of January 2023 only 2 percent of builders surveyed were “full steam ahead,” and almost 40 percent were pausing transactions or bidding lower on land transactions. As of March 2024, these percentages had changed drastically with 49 percent stating they are going “full steam ahead” and 4 6 percent moving “cautiously forward.” The increase in optimism from new home builders outlook is partially due to the extreme slowdown of existing home inventory which is fueling new home sales. Per Zonda in the first quarter 2024 there were about 11,478 vacant developed lots in the Inland Empire, which is down 23 percent from the previous year.

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 pertain 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 July 28, 2024, Ryness Report, the year-to-date average sales rate (4.1 sales per month) is slightly higher than the same time period of the previous year ( 4.0 sales per month). The market comment ary within this Ryness Report on the entire U.S. new housing market states that both new and existing home sales softened in June. They believe the high rates are discouraging would-be buyers and that buyers expectations for lower rates are keeping buyers on the sidelines. New home sales overall in the Country slipped 0.6 percent in June to its lowest point since last November with new homes for sale increasing for the third consecutive month in June amounting to 9.3- month supply at the current sales pace. The Inland Empire has an average number of sales per month decreasing by one percent year over year; however, within the subject’s submarket of Central San Bernardino (included Fontana, Rialto and Bloomington) sales year to date are down about 16 percent from the same time period in 2023 (604 sales year to date in 23 projects in 2024 and 727 sales year to date in 25 projects in 2023). It should be noted however, of the 23 active projects reported by Ryness, five are nearing completion, thus there are closer to 18 active 673

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projects selling new homes in the Central San Bernardino submarket. Surprisingly, even with the high pricing and mortgage rates, sales of new homes are still occurring, however at a slower rate than last year. This is partially due to the extremely limited supply of existing homes which is creating more demand for new homes. 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 July 28, 2024, Inland Empire Ryness Report to one year prior, there are 22 less projects (244 in July 2023 and 222 in July 2024) and sales are one percent higher with the monthly average year to date at 4.1 sales per month per project. Looking back, in 2022 the Inland Empire average sales rate was 4.3 homes per month; in 2021 the average sales rate was 4.9 homes per month, in 2020 the average sales rate in the Inland Empire was 4.1 sales per month, similar to the current absorption rate and in 2019, prior to the COVID disruption, the average sales rate was 3.4 sales per month. Th e similar sales rate to 2020 suggests new home buyers can weather the higher mortgage rates. However, the reader should note existing home listings are over 30 percent lower than in 2020 which increases the amount of new home buyers.

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 $625,614 for a detached home and $557,568 for an attached home, nearing the peak which was obtained in 2022. 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. Construction materials have increased an estimated 40 percent since 2019.
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We have reviewed Empire Economics’ Price Point Review Study on Fontana CFD No. 109 (Highland) dated July 26, 2024. Empire Economics did an original Price Point Study on the project in February 2022 in order to determine their price points for the various plans within Narra Hills. The “Review Study” is to ascertain if the prices have increased or decreased since the original Study. The Empire Economics Price Point Review Study concluded that the three plans within Strata (cluster product) had current base price conclusions which were below the original base price conclusions in February 2022 while the remainder of the plans has price points above the conclusions in February 2022. The three plans that showed decreases ranged from 1.1 to 3.5 percent while the remaining 27 plans in the Review Study showed increases ranging from 0.2 to 11.7 percent. Overall, the plans averaged a 4.9 percent increase from the original February 2022 Price Point Study. The Review Study took into account the concessions which are included in their net prices even though some are not included in the reported sales prices. That is, interest rate buy-downs and closing cost incentives are not reported in the sales prices, however, are considered in both the Price Point Review Study and in the appraisal analysis.

Within our search for the most comparable actively selling new home communities, we searched the subject area of North Fontana, which currently features a multitude of actively selling new home communities. Due to the large lot size of Skyeland and Goldenpeak, we expanded our search to include a large lot project in Rialto. W e found 17 communities comparable to the homes at Narra Hills . The comparables have current base prices ranging from $529,900 to $1,194,990. The Narra Hills new homes have a wide range of base prices from $5 58,990 to $1,194,990, which falls within the range of comparable new homes in the area and includes the top of the price range on their large lot homes.

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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 June 2024 ($875,000) is 0.6 percent lower than the month prior median home price ($880,000), however up 5.8 percent year-over-year from $825,000 in June 2023. These overall Southern California numbers compare to San Bernardino County with $522,500 as the median price paid for an existing home in the County in June 2024, up 6.9 percent from the previous month ($488,900), and up 11.2 percent on a year- over-year basis ($ 488,900). Below is a table showing the sales and prices for the Southern California area by County per the CAR.

Southern California Existing Home Sales
County June 2024 May 2024 June 2023
Price MTM
% Change
Price YTY
% Change
Sales YTY
% Change
Los Angeles $889,180 $811,610 $832,310 9.6% 6.8% -15.5% Orange $1,450,000 $1,422,500 $1,260,000 1.9% 15.1% -11.9% Riverside $643,500 $650,000 $628,000 -1.0% 2.5% -13.5%
San Bernardino $522,500 $488,900 $470,000 6.9% 11.2% -12.6% San Diego $1,054,180 $1,025,000 $958,250 2.8% 10.0% -1.9% Ventura $964,500 $925,000 $927,500 4.3% 4.0% -5.7%
Southern Calif. $875,000 $880,000 $815,000 -0.6% 7.4% -11.5% Source: California Association of Realtors

Based on June 2024 median existing homes prices, in comparison to the majority of the surrounding counties, San Bernardino has a definite price advantage. The “San Bernardino County Advantage” (price difference between San Bernardino and surrounding counties) is $1 21,000 as compared to Riverside County, $3 66,680 as compared to Los Angeles County, $4 02,000 as compared to Ventura County, $5 31,680 as compared to San Diego County and $9 27,500 as compared to Orange County. That is, in June 2024, the median priced home in San Bernardino County ($ 522,500) was $927,500 less than the median priced home in Orange County ($1, 450,000). Typically, as the price advantage widens, homebuyers are more open to commuting to further out areas. Recently the San Bernardino County “price advantage” has widened for the coastal counties and been reduced within both Riverside and Los Angeles. With the current work- 676

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from-home concept, the suburban areas have seen more growth which put pressure on home prices in San Bernardino County.

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.

The number of sales and sale prices of both new and existing single family detached homes within market areas surrounding the subject are shown in the table below.

Source: Redfin Housing Market Trends June 2024

The median home price of a detached home in the subject’s vicinity of North Fontana in June 2024 was $725,000, which is near the high end of the range of the detached home prices in the subject area. All of the new homes currently selling in Fontana are in the northern area of the city. The low end of the range relates to the area which includes all of Fontana including the southern portion that includes older homes and the Rialto area which also has older homes. 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 increase of 11.2% percent year-over-year from June 2023 to June 2024.

According to the Ryness Report dated July 28 , 2024, there are currently 23 new home projects in the subject’s Central San Bernardino submarkets, with the City of Fontana housing 16 of them (including the subject’s five).

Narra Hills - Sales and Pricing
Narra Hills is comprised of 484 proposed single-family homes with marketed sizes from 1,372 to 4,249 square feet with products ranging from attached duplex homes to single- family detached homes on minimum 10,000 square foot lots . Narra Hills began sales in Community
Name
Location
To Subject
No. of
Sales
June ‘24
June ‘24
Median
Sale Price
Price %
Change
Y-O-Y
North Fontana Larger Subject Vicinity 49 $725,000 8.6%
All of Fontana Subject and South 84 $684,000 7.9%
Rialto East 48 $590,000 7.3%
Rancho Cucamonga West 93 $866,250 3.4%
Jurupa Valley South 47 $677,245 1.0%
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both Wildstar and Strata in March 2023, in Goldenpeak and Skyeland in May 2023 and in Clementine in August 2023. They have sold a total of 208 homes suggesting an average sales rate of 12.2 homes per month since March 2023. Base pricing has increased zero to 18.4 percent depending on the home type and plan with no price reductions.

Clementine
Within Clementine they have sold 29 homes resulting in an average absorption rate of

2.4 homes per month with pricing increasing from 4.4 to 5.5 percent depending on the plan. Original base pricing was from $534,990 to $569,990 while current base pricing is from $563,990 to $594,990. Actual sales prices on closed homes range from $550,662 to $641,149 (these prices include all premiums, options and a deduction of all incentives).

Strata
Within Strata they have sold 64 homes resulting in an average absorption rate of 3. 7 homes per month with pricing increasing from 10.8 to 15.1 percent depending on the plan.

Original base pricing was $609,990 to $649,990 while current base pricing is $675,990 to $739,990. Actual sales prices on closed homes within Strata range from $613,714 to $808,477 (again including all premiums, options and a deduction for all incentives).

Wildstar
Within Wildstar they have sold 52 homes resulting in an average absorption rate of 3. 1 homes per month with pricing increasing from 9.1 to 14.6 percent depending on the plan.

Original base pricing was $754,990 to $784,990 while current base pricing is $823,990 to $899,990. Actual sales prices on closed homes within Wildstar range from $613 ,714 to $808,477 (again including all premiums, options and a deduction for all incentives).

Skyeland
Within Skyeland they have sold 32 homes resulting in an average absorption rate of 2.1 homes per month with pricing increasing from 3.3 to 10.1 percent depending on the plan.

Original base pricing was $835,000 to $905,000 while current base pricing is $889,990 to 678

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$995,000. Actual sales prices on closed homes within Skyeland range from $870,920 to $1,307,063 (again including all premiums, options and a deduction for all incentives).

Goldenpeak
Within Goldenpeak they have sold 31 homes resulting in an average absorption rate of

2.1 homes per month with pricing increasing from zero to 18.4 percent depending on the plan. Original base pricing was $925,000 to $1,064,990 while current base pricing i s $1,059,990 to $1,194,990. Actual sales prices on closed homes within Goldenpeak range from $980,305 to $1,362,618 (again including all premiums, options and a deduction for all incentives).

The sales rates for the five communities range from 2.1 to 3.7 sales per month, which is below the average of the various projects in both the Inland Empire and in the subject submarket. Per the Ryness Report, a new home tracking service, as of July 28 , 2024, year-to-date average sales per project per month in the Inland Empire is 4.1 homes while within the subject’s submarket of Central San Bernardino the year-to-date average sales per project per month is 3.6. While the subject neighborhood generally have a lower sales rate than the averages in the area, homes are still selling, and they have increased base pricing.

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 possible slowdown in sales as interest rates have risen substantially; however, buyers appear to be resilient to the increases. The Fontana new -home submarket is performing slightly below the Inland Empire market as a whole with the subject’s five communities all experiencing a slower absorption rate than the average; however, prices have still increased. Builders’ optimism appears to have returned with builders generally 679

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believing prices will increase slightly in 2024 or remain flat. Despite uncertainty hitting the market due to 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 possible economic slowdown.
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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”
4F
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 irregular in shape, consisting of 121.279 gross acres per recorded Tract Map No. 20010. The site is in the northwestern portion of the City of Fontana, along the northwest side of I-15 northeast of Duncan Canyon Road. The lands were originally sloping with the northern boundary at the foothills of the San Gabriel Mountains and the southern border generally at the elevation of I -15 and Lytle Creek Road. The site is bounded by mountainous undeveloped lands (San Gabriel Mountains) to the northwest, existing homes and Duncan Canyon Road beyond which is Coyote Canyon Park to the

5 The Appraisal of Real Estate, 11th Edition
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southwest beyond which is Hunter’s Ridge, a large master planned community built -out in the early 2000s, and I -15 along the entire southeastern border. Northeast is vacant land and a recently completed distribution building which is leased to Amazon.

The subject site has been graded for 484 single-family homes: 155 detached lots with a minimum lot size of 10,000 square feet; 78 detached lots with a minimum lot size of 5,000 square feet and two condominium lots, one graded for 127 cluster detached homes and the other for 124 duplex and single-family detached small lots. We have reviewed a Soils Report on the subject site which concluded that the development of the site into single- family residential use is feasible; however, all mitigation measures recommended within the report should be adhered to during construct ion. We have not received an environmental report to review. It is an assumption of this report that the soil is adequate to support the highest and best use, and that there are no soils or 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 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 excellent access via I-15, exit Duncan Canyon Road. There are two neighborhood shopping centers within two miles of the subject at I- 15 and Beech Avenue/Summit Avenue exit, one anchored by Target and Stater Bros. and one by Kohls.

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.

We have reviewed a letter from the Planning Division of Fontana which allowed for Tract Map 20010 for 233 single-family detached lots and two condominium lots along with Tract 682

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20069 and 20070 which subdivided the two condominium lots into 251 units for a total of 484 residential units. Ordinance No. 1798 approved a zone change, Resolution No. 2019- 31, 32 and 33 adopted and approved the project EIR, the General Plan Amendment and the mapping.

Based on the legality of use 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 had shown strong increases in both sales and pricing since COVID until late 2022 when high home prices and increasing interest rates began to slow sales. Overall home sales have slowed down significantly, partially due to existing homeowners not moving due to the higher interest rates, which is stifling the existing home market, at times leaving new homes the only option for homebuyers. Within Narra Hills there have been 208 sales to date with the first sale occurring in March 2023, suggesting an overall sales rate between the five communities of 12.2 sales per month with actual per project absorption rates between

2.1 and 3.2 homes per month which is below the average year to date sales per month in the Inland Empire (4.1) and below the average sales per month in the subject’s submarket (3.6). While the absorption rates are below the average of surrounding projects, all structures appear to be in excellent condition with no physical depreciation apparent.

Within the new home market in Fontana and Rialto, we found 17 projects (including the five subject neighborhoods) to be most comparable to the subject property. The subject area in Fontana is priced higher than the homes in the older area of Fontana and Rialto (adjacent to the south and east). 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 sales found 13 land sales within the past year that we consider to be comparable.

Population growth is still occurring in the area and will continue to create the need for 683

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housing. 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 five neighborhoods within the community of Narra Hills with a total of 484 proposed homes which are currently being marketed by Landsea. Narra Hills began selling in March 2023 and has sold 208 homes to date, reflecting a sales rate of 12.2 sales per month spread across the five product lines. Independently, Clementine has a sales rate of 2.4 homes per month, Strata has an average sales rate of 3.7 homes per month, Wildstar has an average sales rate of 3.1 homes per month and Skyeland and Goldenpeak each have an average sales rate of 2.1 homes per month. The Skyeland and Goldenpeak communities are the high- end of the project with homes on 10,000 minimum square foot lots. Base prices at Narra Hills have generally increased since grand-opening on all communities with base price increases ranging from zero to 18.4 percent depending on the plan and no price decreases. While the absorption rates at the subject communities is generally slower than the average absorption rate per project in the overall Inland Empire and in the submarket, the homes are still selling, and prices have been increasing. Builders are offering concessions to increase absorption rates in the area. In marketing Narra Hills, the builder is offering concessions, including rate buy- downs and help with closing costs, on a case -by-case basis. These concessions have ranged from $0 to $58,500 with an average of $11,655 per closed sale and an average 684

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of $18,346 on the 39 homes currently in escrow. Some builders in the area are offering higher concessions in order to maintain higher absorption rates . While the incentive increases are suggesting a softening market, per Empire Economics’ Price Point Review Study, the plan pricing (including incentives being offered) has decreased on three plans however increased on the remaining plans with an average increase of 4.9 percent between proposed pricing in 2022 and current pricing. The sales absorption rate within Narra Hills is considered to be below the average in the market area. All of the homes are of good design and appear to be of good quality workmanship. While the homes at Narra Hills are selling slower than the average in the subject market, it appears the pr oduct is being well received and the neighborhood is selling at or near 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. 685

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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 subject lands, a unit of comparison needs to be addressed.

For single family detached lots, cluster residential lands and duplex and small lot lands , all are typically sold on the basis of a finished pad/lot per 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 true 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/pads will be considered. Our search revealed several transactions similar to the subject in that they include either single-family detached lots or some detached cluster lots along with some attached product . At tim es, the cluster and attached transactions are typically looked at on a blended price per unit , taking into consideration the overall density of the neighborhood. Thus, we will value each of the lot-types separately.

In the case of the completed home valuations , a single new home 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 . The minimum market value also includes all concessions given by the builder including mortgage closing costs and buy-downs (which are not included in the reported sales prices), if applicable.

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 686

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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 /pad rather than attribute value to a partially complete improvement. In the case of the individually owned homes, the concluded minimum market 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. 109 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 Narra Hills there are 484 lots/pads in a generally physically finished condition. The lands include 155 single- family detached lots with a minimum lot size of 10,000 square feet, some with good to excellent views; 78 single- family detached lots with a minimum lot size of 5,000 square feet; and two condominium maps, one with 127 cluster lots and the other with 124 duplex lots. For the 10,000 square foot minimum lots (includes both Skyeland and Goldenpeak), there are 58 owned by Arroyo Cap. , 17 owned by Landsea, and 21 homes under construction owned by Landsea. A home under construction (under 95 percent complete) wil l be valued as a finished lot rather than attribute value to a partially complete improvement, thus we will value 38 lots with a minimum lot size of 10,000 square feet under Landsea ownership. For the 5,000 square foot minimum lots (Wildstar) there are 13 lots owned by Landsea and 13 homes under construction (under 95 percent complete), also owned by Landsea, thus we will value 26 lots with a minimum size of 5,000 square feet. For the cluster lots (Strata) there are 31 pads owned by Arroyo Cap, 16 pads owned by Landsea and eight units under construction (under 95 percent complete) owned by Landsea. As we are valuing the homes under construction as finished lots, we will value 24 cluster pads under the Landsea ownership. Finally, there are 37 duplex pads owned by Arroyo Capital, 27 pads owned by Landsea and 34 units 687

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which are under construction (under 95 percent complete). As we are valuing a unit under construction as a finished lot, we will value 61 pads under Landsea ownership.

We have searched the area and found the 13 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,” these 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 pertains to the most recent closed transaction in our search. The site is located at the southwest corner of Eucalyptus Avenue and Haven Avenue in Ontario Ranch about 15 miles southwest of the subject site. KB Home purchased 351 units from Richland Communities in June 2024 for $85,000,000 or $242,165 per unit based on a reported blended finished lot price of $380,000. The 351 proposed units are located on about 46 acres, however there is a high- wire Edison ea sement bisecting the site. The overall density of the site equates to about eight dwelling units per acre. There are three proposed products on the site which include 4,500 square foot convention al lots, detached cluster units and attached townhomes. Per brokers familiar with the transaction, the townhomes estimated finished unit price is $280,000, the cluster product finished pad price is $410,000 while the 4,500 square foot lots are estimated at a finished lot of $560,000. This is higher than previous sales in the area. Ontario Ranch is considered to be superior due to being located closer to Orange, Los Angeles and Riverside County employment centers for commuters. In addition, these lands do not have any freeway noise which is considered superior, however the high wire easement is considered to be inferior to the subject.

Land Sale No. 2 is located in Jurupa Valley along the north side of the 60 Freeway at Pacific Avenue about eleven miles south of the subject property. Richmond American 688

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Homes purchased the site in April 2024 for $9,351,000 or $194,813 per lot based on an estimated finished lot price of $308,000. The lands were purchased in a rough graded condition with approved mapping in place. The site is known as Sequanota Heights and is proposed for 48 homes on 6,300 square foot minimum sized lots. In comparison to the subject property this site is considered to be inferior to the subject detached lots as these do not have the amenities associated with Narra Hills.

Land Sale No. 3 refers to the most recent closing our search located within the City of Fontana. KB Home purchased the site proposed for 255 units in April 2024. KB Home purchased the property from New Bridge Homes for $31,100,000 or $121,961 per unit based on a blended finished lot price of $252,000. This site is located about nine miles south of the subject at Cherry and Live Oak Avenues. The lands were sold in an unimproved condition with an approved tentative tract map. The proposed product is for detached 8-pack cluster homes and detached alley -load small lots. The overall density for this site is estimated at eight dwelling units per acre. In comparison to the subject property, this transaction is considered inferior due to the density when compared to the single-family detached lots and similar to the duplex and cluster product. This site is considered inferior when compared to the significant amenities located in Narra Hills, however superior due to no freeway frontage.

Land Sale No. 4 refers to the January 2024 purchase of a site located in Rancho Cucamonga about four miles southwest of the subject. This site is located at the southeast corner of Etiwanda and Highland Avenues. Manning Homes purchased the in- fill site in January 2024 for $4,063,000. The site was unimproved and had a final map in process for 22 lots, with a 12,500 square foot minimum lot size. The site is located adjacent to a water tank and an approximate five-acre parcel owned by the Cucamonga Valley Water District. The purchase price equates to $184,682 per lot with an estimated finished lot price of $550,000. This is the only other large single-family detached lot sale our search located. This property is superior to the subject 5,000 and 10,000 square foot lots due to size, and it is located in Rancho Cucamonga, a slightly superior location. This site will not have the significant amenities that Narra Hills residents will enjoy. 689

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Land Sale No. 5 refers to the January 2024 closing of a site located in North Fontana, about 2.5 miles northeast of the subject along both sides of Garden Street along the east side of Cypress Avenue. The site had tentative mapping and grading plans approved for 174 units on 18.66 acres. Richmond American Homes purchased the site in January 2024 from Lewis for $28,789,500 or $165,457 per lot based on a reported finished lot estimate of $279,465. The product will be 4-pack and 6-pack alley loaded detached condominiums.

The overall density of this project equates to 9.32 units per acre. There are two small parks in the site plan to serve the community. In comparison to the subject property this transaction is considered to be similar in location, however superior as it does not have freeway frontage and has a slightly lower density than the subject’s Duplex (15 du/ac) and cluster (11 du/ac) products.

Land Sale No. 6 is located about 15 miles southwest of the subject, in Ontario Ranch, near Land Sale No. 1. Lennar purchased the land proposed for 236 units from Lewis Companies in December 2023 for $35,177,500 or $149,057 based on an estimated finished lot blended price of $250,000. The property had been mass graded at time of sale and the final map was in process. The products are both two- and three-story cluster products with an overall density of 16 dwelling units per acre. The reported finished lot price is a blended price for the two products. In comparison to the subject this location is considered to be slightly superior (closer into employment for commuters) and due to no freeway frontage, however inferior to the larger lots and the cluster product in density.

Land Sale No. 7 pertains to the purchase of an infill site located along Route 66 in Rancho Cucamonga about eleven miles southwest of the subject site. Lennar purchased the property in December 2023 for $8,700,000 or for $49,714 per unit. The site closed in an unimproved condition with approved mapping for 175 townhomes with an overall density of 12 dwelling units per acre. Per brokers familiar with the transaction, the finished pad was estimated at $250,000. This property is adjacent to the south of the Red Hill Country Club and golf course and surrounds the historic Sycamore Inn, a famous restaurant along Route 66 that dates back to the 1800s. In comparison to the subject site, this property is 690

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considered to be slightly superior due to the Rancho Cucamonga address and no freeway frontage and similar in density to the subject cluster product and superior to the subject duplex product.

Land Sale No. 8 is in regard to the Pulte Homes’ purchase of 333 proposed units along the west side of Hamner, north of Eucalyptus Avenue within the Esperanza Specific Plan about ten miles southwest of the subject in the master planned community of Ontario Ranch. The overall density on the site is 11 dwelling units per acre. Pulte purchased the site in December 2023 for $72,527,499 or $217,800 per unit. Per the approved site plan there are 156 attached townhomes, 82 small , detached cluster lots and 95 large, detached cluster lots. Per brokers familiar with the transaction, the r eported blended finished lot/unit price is $315,000 which is broken down as $258,000 for the attached townhomes, $315,000 for the small cluster lots and $401,000 for the large cluster lots.

The site is also known as Planning Area 3 and 4 of the Esperanza Specific Plan. In comparison to the subject property this transaction is considered similar in overall density, however inferior of number of lots (333 would be considered a bulk sale) and superior in location with Ontario Ranch closer in to the employment centers of Los Angeles, Orange and Riverside. In addition, this site is superior due to it having no freeway frontage.

Land Sale No. 9 refers to the Woodside Homes purchase of 41 lots in Eastvale, about 16 miles southwest of the subject site. Eastvale is essentially built-out with this being one of the last in-fill parcels within the city. The site was unimproved at time of sale however surrounding infrastructure was in place and the site was generally at street grade of the surrounding streets. Woodside Homes processed the entitlements and mapping on the site during escrow. The site is located along the south side of Schleisman Road just west of Scholar Way, adjacent to Eastvale Elementary School , River Heights Intermediate School and Eleanor Roosevelt High School. Woodside purchased the site for $7,500,000 or $182,927 per lot based on a finished lot cost of $360,000. The site is mapped for 41 lots with a 5,000 square foot minimum lot size. The sale closed in November 2023, however, was negotiated over one year prior. The site is known as Magnolia Ranch. In comparison to the subject site this location is considered to be superior due to it being 691

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closer in for commuters, however it is inferior in amenities when compared to Narra Hills pool and clubhouse and gathering areas. The lot size is similar to the subject 5,000 square foot lots.

Land Sale No. 10 refers to the Lennar purchase of 23 acres along the west side of Archibald Avenue, south of Riverside Drive within the Countryside Specific Plan in Ontario Ranch, about 14 miles southwest of the subject property. The site is mapped for 265 units which creates an overall density of about 12 dwelling units per acre. The proposed product includes townhomes, cluster product and small detached lots. Lennar purchased the site in October 2023 for $49,559,000 or $187,01 5 per unit based on an estim ated blended finished lot price of $297,000. Per brokers familiar with the transaction the finished lot values at time of purchase were estimated at $260,000 for the townhomes, $315,000 for the cluster detached lots and $365,000 for the detached small conventional lots. In comparison to the subject site this transaction is considered to be slightly superior in location and due to no freeway frontage.

Land Sale No. 11 pertains to the sale of a residential site located in Fontana at Lytle Creek Road and Sierra Lakes Parkway, about two miles south of the subject site, fronting the northern side of the I-210 Freeway. D.R. Horton purchased the property in September 2023 for $9,850,000 or for $68,881 per unit based on an estimated finished lot blended price of $220,000. The site is mapped for 143 units which includes 96 attached units and 47 detached cluster units. Final engineering was underway at time of sale. This property rears to I-210 and has an overall density of 13.9 dwelling units per acre. When compared to the subject property, this site is considered to be inferior in density when compared to the single-family detached lots and similar due to the proximity of the I-210 Freeway. This site is also inferior in amenities.

Land Sale No. 12 refers to another D.R. Horton land purchase in Fontana about 2.5 miles south of the subject property . This site is located along the east side of Citrus Avenue, south of Highland Avenue, and is mapped for 68 attached townhome units. The overall density of the site allows for 15.7 dwelling units per acre which is higher than the subject’s 692

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10.63 dwelling units per acre density. D.R. Horton purchased the property from 6997 Citrus LLC in August 2023 for $6,300,000 or $92,647 per unit based on an estimated finished pad price of $21 9,000. The site was sold in an unimproved condition with tentative mapping in place. In comparison to the subject property this site is considered to be inferior in density (these are attached) and amenities while it is considered superior due to no freeway frontage.

Land Sale No. 13 is in regard to the purchase of another residential site by D. R. Horton.

This property is located at the northwest corner of Citrus and Summit Avenues, about 1.2 miles south of the subject property. The site has approved mapping for 85 detached cluster units and sold for $9,850,000 or $115,882 per unit based on an estimated finished lot value of $2 72,000. The overall density of this property is 9.4 dwelling units per acre.

D.R. Horton purchased the site in July 2023 from AKY LLC. In comparison to the subject property, this sale is considered to be inferior in amenities and superior due to no freeway frontage.

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 Ontario Ranch 6 / 24 8 du/ac
$380,000
($560,000/
$410,000/
$280,000)
Superior – Location, No freeway
Inferior – Highwire Easement

2 Jurupa Valley 4 / 24 6,300 sf $308,000 Inferior – Amenities 3 North Fontana 4 / 24 8 du/ac $252,000 Superior – No Freeway Frontage Inferior – Amenities
4 Rancho
Cucamonga 1 / 24

12,000 sf

$550,000 Superior – Location
Inferior – Amenities
5 North Fontana 1 / 24 10 du/ac $279,465 Superior – No freeway frontage Inferior – Amenities

6 Ontario Ranch 12 / 23 16 du/ac $250,000 Superior – Location & no freeway Inferior – Density

7 Rancho
Cucamonga 12 / 23 12 du/ac $250,000 Superior – Location and no freeway Inferior – Amenities

8 Ontario Ranch 12 / 23 11 du/ac
$315,000
(401,000/
$315,000
$258,000)
Superior – Location, no freeway
Inferior – Amenities
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9 Eastvale 11 / 23 5,000 sf $360,000
Superior – Location and no freeway
Inferior – Amenities & Date of
Transaction

10 Ontario Ranch 10 / 23 12 du/ac
$297,000
($365,000/
$315,000/
$260,000)
Superior – Location and no freeway
Inferior – Amenities

11 North Fontana 10 / 23 14 du/ac $220,000 Inferior – Location

12 North Fontana 8 / 23 16 du/ac $219,000 Superior – No freeway Inferior – Amenities

13 North Fontana 7 / 23 9 du/ac $272,000 Superior – No freeway Inferior- Amenities

All 13 of the market data have closed within the past year and it is considered to be good and plentiful. The above reported finished lot values depict a wide range of lot/pad price from $219,000 to $550,000 with the majority of the differences being due to lot size and/or density on each site and location. We will review the most relevant sales for each product type below.

Clementine encompasses 112 duplex pads and 12 single family detached small lots.

Tract Map 20070 contains 8.08 acres and is mapped for 124 units which equates to an overall density of 15.34 dwelling units per acre. For this site the best comparables are Data No. (for attached product), Data Nos. 3, 5, 6, 7, 8 (the townhomes), 10, 11, 12 and

13. These Data have a finished lot range from $219,000 to $280,000 per finished pad with generally the lower prices (Data Nos. 11 and 12) for the higher densities. The subject is along Interstate 15, however is within a gated community with significant amenities including a pool, pickle ball courts and social club. The most recent North Fontana sales (Data Nos. 3 and 5) each have lower overall densities and sold for $252,000 and $279,465 per unit. We have concluded that the Clementine pads have a finished pad value of $240,000.

Strata includes 127 cluster pads on 11.25 acres (per Tract Map 20069) which equates to an overall density of 11.28 dwelling units per acre. The best comparable are Data Nos. 3, 5, 8 (for cluster), 10 (for cluster) and 13 which have a range from $252,000 to $315,000 per finished pad. The majority of the cluster lots within Strata are set back from I -15, 694

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however still have the freeway noise. We have concluded that the Strata pads has a finished pad value of $280,000.

Wildstar includes 78 single family detached lots with a minimum lot size of 5,000 square feet. While there is a buffer zone, the lots are affected by the noise from I -15. There are few conventional single family detached lot sales as most are higher density in the Ontario Ranch/North Fontana markets. The best comparables are Data No. 1 (single- family detached lots), Data Nos. 2, 4 and 9 with finished lot sales prices ranging from $308,000 to $560,000. Data No. 1 at $560,000 refers to 4,500 square foot minimum lots within Ontario Ranch, a superior location. Data No. 2 at $308,000 refers to slightly larger lots, 6,300 square feet, however the site is located in Jurupa Valley with frontage on the 60 Freeway and does not have the amenities associated with Narra Hills. Data No. 4 at $550,000 refers to larger lots (12,000 square foot minimum) and is located in Rancho Cucamonga, considered a superior address. Data No. 9 at $ 360,000 refers to 5,000 square foot lots located in Eastvale which is considered a superior location, however the buyer process entitlements on the site which was under option for more than a year. We have concluded that the subject 5,000 square foot minimum lots within Wild star have a finished lot value of $420,000.

Skyeland and Goldenpeak includes 155 single family detached lots with a minimum lot size of 10,000 square feet, many which have good to excellent views, the majority of which are in a true, physically finished lot condition. The market data is the same as for Wildrose, however Data No. 4 would be the most comparable with 12,000 square foot minimum lots. We have concluded that the 10,000 square foot lots have a finished lot value of $500,000.

The lots are not yet in a true finished lot condition. As discussed under Pro perty Description section, there are remaining costs to get to a true finished lot which equate to $12,031.75 per lot. The costs were not available for each community; thus, we have averaged the costs over all of the builder -owned property . The land values per neighborhood are calculated as follows.
695

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Clementine
The concluded value for the Clementine pads in a finished condition is $240,000. There are 37 lots owned by Arroyo Cap and 61 lots owned by Landsea (34 under construction).

The value is calculated as follows:

Landsea Ownership
61 pads x $240,000 $14,640,000
Less: $12,031.75 x 61 ( 733,937)
As is Value 61 Clementine Pads $13,906,063

Arroyo Cap Ownership
37 pads x $240,000 $ 8,880,000
Less: $12,031.75 x 37 ( 445,175)
As is Value 37 Clementine Pads $ 8,434,825

Strata
The concluded value for the Strata pads in a finished condition is $280,000. There are 31 lots owned by Arroyo Cap and 24 lots owned by Landsea (eight under construction). The value is calculated as follows:

Landsea Ownership
24 Pads x $280,000 $ 6,720,000
Less: $12,031.75 x 24 ( 288,762)
As is Value 24 Strata Pads $ 6,431,238

Arroyo Cap Ownership
31 Pads x $280,000 $ 8,680,000
Less: $12,031.75 x 31 ( 372,984)
As is Value 31 Strata Pads $ 8,307,016

Wildstar
The concluded value for the Wildstar lots in a finished condition is $42 0,000. There are no lots owned by Arroyo Cap and 26 lots owned by Landsea (12 under construction). The value is calculated as follows:

696

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Landsea Ownership
26 Lots x $420,000 $ 10,920,000
Less: $12,031.75 x 26 ( 312,825)
As is Value 26 Wildstar Lots $ 10,607,175

Skyeland and Goldenpeak
The concluded value for the Skyeland and Goldenpeak lots in a finished condition is $500,000. There are 58 lots owned by Arroyo Cap and 38 lots owned by Landsea (21 under construction). The value is calculated as follows:

Landsea Ownership
38 Lots x $500,000 $ 19,000,000
Less: $12,031.75 x 38 ( 457,207)
As is Value 38 - 10,000 sf Lots $ 18,542,793

Arroyo Cap Ownership
58 Lots x $500,000 $ 29,000,000
Less: $12,031.75 x 58 ( 697,842)
As is Value 58 – 10,000 sf Lots $ 28,302,158

Land Valuation Conclusions
There are currently 76 homes under construction owned by Landsea and 199 remaining lots/pad with 73 lots/pads owned by Landsea and 126 lots/pads owned by Arroyo Cap.

The homes under construction (under 95 percent complete) will be valued as a finished lot rather than attribute value to a partially complete improvement. T he final land values are calculated as follows.

Landsea Ownership:

Clementine (61 pads) $ 13,906,063
Strata (24 pads) 6,431,238
Wildstar (26 lots) 10,607,175
Skyeland & Goldenpeak (38 lots) 18,542,793
Landsea Land Value (149 lots/pads) $ 49,487,269

697

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Arroyo Cap Ownership:

Clementine (37 pads) $ 8,434,825
Strata (31 pads) 8,307,016
Wildstar (0 lots) 0
Skyeland & Goldenpeak (58 lots) 28,302,158
Arroyo Cap Land Value (126 lots/pads) $ 45,043,999

Retail House Valuation – Narra Hills
Within Narra Hills there are five neighborhoods with 169 individually owned homes , 40 homes over 95 percent complete owned by Landsea. The builder-owned homes over 95 percent complete include 25 production homes (18 in escrow) and 15 model homes.

Due to the single ownership of multiple houses (40 houses) 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. This will be further discussed below.

Below is a summary of the floor plans within each neighborhood followed by a valuation for each plan. A listing of the improved residential comparable properties is located in the Addenda of this report. All new home comparables are located within the City of Fontana, which currently houses a multitude of actively selling new home communities or the neighboring city of Rialto. Our search of the subject property and the local Multiple Listing Service (MLS) has resulted in no resales and no current resale listings within Narra Hills.

Clementine

*One of each of these plans is a model home. There are an additional 34 homes under construction, and 64 additional pads with 27 owned by Landsea and 37 owned by Arroyo Cap (not shown on the above table).

Narra Hills by Landsea

Plan

Bd/Ba
Floors/
Parking

Sq. Ft.

Ind.

Owned
Bldr.

Owned
Clementine
1 3 / 2.5 2 / 2 1,372 2 0
2 3 / 2.5 2 / 2 1,450 11 1*
3 4 / 2.5 2 / 2 1,661 11 1*
Subtotal Clementine 24 2
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The most appropriate new home comparable data for Clementine Plan 1 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 1 3 / 2.5 2 / 2 1,372 --
1 2 3 / 2.5 2 / 2 1,450 $385.51
1 3 4 / 2.5 2 / 2 1,661 $358.21
8 1 3 / 2.5 2 / 2 1,651 $365.62
12 1 4 / 3 2 / 2 1,563 $339.03
12 2 3 / 2 2 / 2 1,582 $310.94
16 1 3 / 2.5 2 / 2 1,410 $414.60
16 2 3 / 2.5 2 / 2 1,650 $366.26

The comparable communities are all located in Fontana. All are of similar quality, design, and appeal. Plan 1 within Clementine is a detached home, surrounded by duplex homes.

There is no other duplex product selling, thus we included zero lot line, cluster and alley- load homes which are considered similar. Adjustments were considered (when applicable) for location, school districts, lot size, 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 $310.94 to $414.60 per square foot, with generally the smaller homes at the higher end of the range. This is typical due to the economies of scale obtained during construction of the homes. Clementine Plan 1 is the smallest sized home in the area and has a current base asking price of $411.07 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance). There have been two closings of Clementine Plan 1 with sales prices ranging from $401.36 to $417.45 per square foot. There are no current escrows of Clementine Plan 1. It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Clementine Plan 1 has a base current market value of $400.00 per square foot. This calculates as follows:

1,372 sf x $400.00 = $548,800

699

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The most appropriate new home comparable data for Clementine Plan 2 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 2 3 / 2.5 2 / 2 1,450 --
1 1 3 / 2.5 2 / 2 1,372 $411.07
1 3 4 / 2.5 2 / 2 1,661 $358.21
8 1 3 / 2.5 2 / 2 1,651 $365.62
12 1 4 / 3 2 / 2 1,563 $339.03
12 2 3 / 2 2 / 2 1,582 $310.94
16 1 3 / 2.5 2 / 2 1,410 $414.60
16 2 3 / 2.5 2 / 2 1,650 $366.26

The comparable communities are all located in Fontana. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, com mon area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $310.94 to $414.60 per square foot, with generally the smaller homes at the higher end of the range. This is typical due to the economies of scale obtained during construction of the homes. Clementine Plan 2 has a current base asking price of $385.51 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance). There have been 11 closings of Clementine Plan 2 with sales prices ranging from $369.59 to $399.55 per square foot. There are three current escrows of Clementine Plan 2 with a sales price range from $395.36 to $399.46 per square foot. It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Clementine Plan 2 has a base current mark et value of $ 375.00 per square foot. This calculates as follows:
1,450 sf x $375.00 = $543,750

The most appropriate new home comparable data for Clementine Plan 3 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
700

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City of Fontana CFD No. 109 (Narra Hills) - by Landsea Homes Kitty Siino & Associates, Inc. Page 77
Subj. 3 4 / 2.5 2 / 2 1,661 --
1 2 3 / 2.5 2 / 2 1,450 $385.51
1 3 4 / 2.5 2 / 2 1,661 $358.21
2 1 3 / 2.5 2 / 2 2,099 $322.05
6 1 3 / 2.5 2 / 2 1,822 $345.15
8 1 3 / 2.5 2 / 2 1,651 $365.62
8 2 3 / 2.5 2 / 2 1,761 $345.99
12 3 4 / 3 2 / 2 1,669 $339.07
16 2 3 / 2.5 2 / 2 1,650 $366.26
16 3 3 / 2.5 2 / 2 1,710 $344.09

The comparable communities are all located in Fontana. All are of similar quality, design, and appeal. There is no other duplex product selling, thus we included zero lot line, cluster and alley-load homes which are considered similar. Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new home com parables have a base price range from $322.05 to $385.51 per square foot, with generally the smaller homes at the higher end of the range. This is typical due to the economies of scale obtained during construction of the homes. Clementine Plan 3 has a current base asking price of $358.21 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy -downs or closing cost assistance). There have been 11 closings of Clementine Plan 3 with sales prices ranging from $348.26 to $386.00 per square foot. There are two current escrows of Clementine Plan 3 with a sales price range from $369.20 to $373.08 per square foot. It should be noted that the reported sales prices include upgrades, premiums , and options along with a ll concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home . It has been concluded that Clementine Plan 3 has a base current market value of $350.00 per square foot. This calculates as follows:
1,661 sf x $350.00 = $581,350

Strata

Plan

Bd/Ba
Floors/
Parking

Sq. Ft.

Ind.

Owned
Bldr.

Owned
701

_________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 109 (Narra Hills) - by Landsea Homes Kitty Siino & Associates, Inc. Page 78

*One of each of these plans is a model home. There are an additional eight homes under construction, and 47 additional pads with 16 owned by Landsea and 31 owned by Arroyo Cap (not shown on the above table).

The most appropriate new home comparable data for Strata Plan 1 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 1 3 / 2.5 2 / 2 2,099 --
1 3 4 / 2.5 2 / 2 1,661 $358.21
2 2 4 / 3 2 / 2 2,136 $331.46
6 2 3 / 2.5 2 / 2 1,932 $332.11
6 3 3 / 2.5 2 / 2 2,207 $306.75
8 4 4 / 3 2 / 2 1,970 $325.88
14 1 3 / 2.5 2 / 2 2,006 $350.88
15 3 4 / 3 2 / 3 2,065 $316.22

The comparable communities are all located in Fontana. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, com mon area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $306.75 to $358.21 per square foot, with generally the smaller homes at the higher end of the range. This is typical due to the economies of scale obtained during construction of the homes. Strata Plan 1 has a current base asking price of $322.05 per square foot, which is within the range of the comparables.

It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy -downs or closing cost assistance). There have been 15 closings of Strata Plan 1 with sales prices ranging from $292.38 to $339.49 per square foot.

There is one current escrow of Strata Plan 1 with a reported sales price of $353.79 per square foot.. It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of Strata
1 3+ / 2.5 2 / 2 2,099 15 3*
2 4+ / 3 2 / 2 2,136 15 3*
3 4+ / 3 2 / 2 2,311 15 3*
4 4+ / 3 2 / 2 2,552 13 5*
Subtotal Strata 58 14
702

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City of Fontana CFD No. 109 (Narra Hills) - by Landsea Homes Kitty Siino & Associates, Inc. Page 79
selling the home. It has been concluded that Strata Plan 1 has a base current market value of $310.00 per square foot. This calculates as follows:
2,099 sf x $310.00 = $650,690

The most appropriate new home comparable data for Strata Plan 2 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 2 4 / 3 2 / 2 2,136 --
2 1 3 / 2.5 2 / 2 2,099 $322.05
2 3 4 / 3 2 / 2 2,311 $314.58
6 2 3 / 2.5 2 / 2 1,932 $332.11
6 3 3 / 2.5 2 / 2 2,207 $306.75
7 1 3 / 2.5 2 / 2 2,213 $292.84
15 3 4 / 3 2 / 3 2,065 $316.22
16 4 4 / 3 2 / 2 1,950 $329.39

The comparable communities are all located in Fontana. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, com mon area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $292.84 to $332.11 per square foot, with generally the smaller homes at the higher end of the range. This is typical due to the economies of scale obtained during construction of the homes. Strata Plan 2 has a current base asking price of $331.46 per square foot, which is at the high end of the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance). There have been 15 closings of Strata Plan 2 with sales prices ranging from $298.84 to $365.40 per square foot. There are no current escrows of Strata Plan 2. It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Strata Plan 2 has a base current market value of $310.00 per square foot. This calculates as follows:
2,136 sf x $310.00 = $662,160

703

_________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 109 (Narra Hills) - by Landsea Homes Kitty Siino & Associates, Inc. Page 80
The most appropriate new home comparable data for Strata Plan 3 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 3 4 / 3 2 / 2 2,311 --
2 2 4 / 3 2 / 2 2,136 $331.46
2 4 4 / 3 2 / 2 2,552 $289.96
6 3 3 / 2.5 2 / 2 2,207 $306.75
7 1 3 / 2.5 2 / 2 2,213 $292.84
7 2 3 / 2.5 2 / 2 2,358 $289.25
14 2 4 / 3 2 / 2 2,303 $315.73
15 3 4 / 3 2 / 3 2,065 $316.22

The comparable communities are all located in Fontana. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, com mon area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $289.25 to $331.46 per square foot, with generally the smaller homes at the higher end of the range. This is typical due to the economies of scale obtained during construction of the homes. Strata Plan 3 has a current base asking price of $314.58 per square foot which is within the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance). There have been 15 closings of Strata Plan 3 with sales prices ranging from $286.17 to $342.22 per square foot. There are two current escrows of Strata Plan 3 with a sales price range of $329.51 to $330.16 per square foot. It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Strata Plan 3 has a base current market value of $305.00 per square foot. This calculates as follows:
2,311 sf x $305.00 = $704,855

The most appropriate new home comparable data for Strata Plan 4 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 4 4 / 3 2 / 2 2,552 --
704

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City of Fontana CFD No. 109 (Narra Hills) - by Landsea Homes Kitty Siino & Associates, Inc. Page 81
2 4 4 / 3 2 / 2 2,552 $289.96
3 1 4 / 3.5 2 / 2 2,747 $299.96
6 3 3 / 2.5 2 / 2 2,207 $306.75
7 3 4 / 2.5 2 / 2 2,472 $283.69
9 1 4 / 3 2 / 2 2,449 $303.79
14 2 4 / 3 2 / 2 2,303 $315.73
14 3 5 / 4 2 / 3 2,777 $294.04

The comparable communities are all located in Fontana. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, com mon area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $283.25 to $315.73 per square foot, with generally the smaller homes at the higher end of the range. This is typical due to the economies of scale obtained during construction of the homes. Strata Plan 4 has a current base asking price of $289.96 per square foot which is within the range of the comparables.

It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy -downs or closing cost assistance). There have been 13 closings of Strata Plan 4 with sales prices ranging from $254.50 to $316.80 per square foot.

There are three current escrows of Strata Plan 4 with a sales price range of $293.50 to $313.37 per square foot. It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Strata Plan 4 has a base current market value of $285.00 per square foot. This calculates as follows:

2,552 sf x $285.00 = $727,320

705

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City of Fontana CFD No. 109 (Narra Hills) - by Landsea Homes Kitty Siino & Associates, Inc. Page 82
Wildstar

*One of each of these plans is a model home. There are an additional 13 homes under construction, and 13 additional lots owned by Landsea (not shown on the above table).

The most appropriate new home comparable data for Wildstar Plan 1 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 1 4 / 3.5 2 / 2 2,747 --
2 4 4 / 3 2 / 2 2,552 $289.96
3 2 4 / 4 2 / 2 2,961 $287.06
7 3 4 / 2.5 2 / 2 2,472 $283.69
9 2 4 / 3 2 / 2 2,666 $293.40
9 3 4 / 3 2 / 2 2,877 $282.87
10 2 5 / 3 2 / 2 2,985 $280.90
14 2 4 / 3 2 / 2 2,303 $315.73
14 3 5 / 4 2 / 3 2,777 $294.04

The comparable communities are all located in Fontana. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, com mon area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $280.90 to $315.73 per square foot, with generally the smaller homes at the higher end of the range. This is typical due to the economies of scale obtained during construction of the homes. Wildstar Plan 1 has a current base asking price of $299.96 per square foot, which is within the range of the comparables.

It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy -downs or closing cost assistance). There have been 15 closings of Wildstar Plan 1 with sales prices ranging from $284.82 to $329.88 per square foot. There are three current escrows of Wildstar Plan 1 with a sales price range of $319.73 to $ 328.95 per square foot . The escrow prices versus the closed prices shows the appreciation which has occurred within Wildstar. It should be noted that the reported sales

Plan

Bd/Ba
Floors/
Parking

Sq. Ft.

Ind.

Owned
Bldr.

Owned
Wildstar
1 4+ / 3.5 2 / 2 2,747 15 2*
2 4+ / 4 2 / 2 2,961 2 0
2X (LG) 5 / 4.5 2 / 2 3,160 12 3*
3 5+ / 4.5 2 / 3 3,079 16 2*
Subtotal Wildstar 45 7
706

_________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 109 (Narra Hills) - by Landsea Homes Kitty Siino & Associates, Inc. Page 83
prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Wildstar Plan 1 has a base current market value of $290.00 per square foot. This calculates as follows:
2,747 sf x $290.00 = $796,630

The most appropriate new home comparable data for Wildstar Plan 2 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 2 4 / 4 2 / 2 2,961 --
2 4 4 / 3 2 / 2 2,552 $289.96
3 1 4 / 3.5 2 / 2 2,747 $299.96
3 3 5 / 4.5 2 / 3 3,079 $292.30
4 1XX 4 / 3.5 2 / 3 3,080 $296.43
9 3 4 / 3 2 / 2 2,877 $282.87
10 2 5 / 3 2 / 2 2,985 $280.90
11 2 5 / 4 2 / 2 3,251 $257.91
14 3 5 / 4 2 / 3 2,777 $294.04

The comparable communities are all located in Fontana. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, com mon area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $257.91 to $296.43 per square foot.

Wildstar Plan 2 has a current base asking price of $287.06 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance).

There have been 2 closings of Wildstar Plan 2 with sales prices ranging from $267.38 to $291.57 per square foot. There are no current escrows of Wildstar Plan 2. It should be noted that the reported sales prices include upgrades, premiums , and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It is concluded Wildstar Plan 2 has a base current market value of $280.00 per square foot. This calculates as follows:
707

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City of Fontana CFD No. 109 (Narra Hills) - by Landsea Homes Kitty Siino & Associates, Inc. Page 84
2,961 sf x $280.00 = $829,080

The most appropriate new home comparable data for Wildstar Plan 2X are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 2X 5 / 4.5 2 / 2 3,160 --
2 4 4 / 3 2 / 2 2,552 $289.96
3 2 4 / 4 2 / 2 2,961 $287.06
4 1XX 4 / 3.5 2 / 3 3,080 $296.43
9 3 4 / 3 2 / 2 2,877 $282.87
10 2 5 / 3 2 / 2 2,985 $280.90
11 2 5 / 4 2 / 2 3,251 $257.91
14 3 5 / 4 2 / 3 2,777 $294.04

The comparable communities are all located in Fontana. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, com mon area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $257.91 to $296.43 per square foot.

Wildstar Plan 2X has a current base asking price of $275.52 per square foot (Plan 2 base price plus the option amount for the LiveGen Suite) , which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance). There have been 12 closings of Wildstar Plan 2X with sales prices ranging from $ 277.46 to $335.35 per square foot. There are two current escrows of Wildstar Plan 2X with a sales price range of $308.08 to $320.50. It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It is concluded Wildstar Plan 2X has a base current market value of $275.00 per square foot. This calculates as follows:

3,160 sf x $275.00 = $869,000

The most appropriate new home comparable data for Wildstar Plan 3 are shown below. 708

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City of Fontana CFD No. 109 (Narra Hills) - by Landsea Homes Kitty Siino & Associates, Inc. Page 85

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 3 5 / 4.5 2 / 3 3,079 --
2 4 4 / 3 2 / 2 2,552 $289.96
3 2 4 / 4 2 / 2 2,961 $287.06
4 1XX 4 / 3.5 2 / 3 3,080 $296.43
9 3 4 / 3 2 / 2 2,877 $282.87
10 2 5 / 3 2 / 2 2,985 $280.90
11 2 5 / 4 2 / 2 3,251 $257.91
14 3 5 / 4 2 / 3 2,777 $294.04

The comparable communities are all located in Fontana. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, com mon area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $257.91 to $296.43 per square foot.

Wildstar Plan 3 has a current base asking price of $292.30 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance).

There have been 16 closings of Wildstar Plan 3 with sales prices ranging from $273.45 to $322.09 per square foot. There are two current escrows of Wildstar Plan 3 with a sales price range of $299.21 to $326.49 per square foot. The escrow prices versus the closed prices shows the appreciation which has occurred within Wildstar. It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Wildstar Plan 3 has a base current market value of $280.00 per square foot. This calculates as follows:
3,079 sf x $280.00 = $862,120

709

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City of Fontana CFD No. 109 (Narra Hills) - by Landsea Homes Kitty Siino & Associates, Inc. Page 86
Skyeland

*One of each of these plans is a model home. There are an additional three homes under construction, and 10 additional lots owned by Landsea and 37 lots owned by Arroyo Cap (not shown on the above table).

The most appropriate new home comparable data for Skyeland Plan 1 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 1 3 / 3 1 / 2 2,375 --
3 1 4 / 3.5 2 / 2 2,747 $299.96
4 1XX 4 / 3.5 2 / 3 3,080 $296.43
5 1 3 / 3.5 1 / 3 3,159 $338.71
10 1 3 / 2 1 / 2 1,905 $383.97
11 1 4 / 2 1 / 2 2,215 $334.94
17 1 3 / 2 1 / 2 2,140 $312.14

The comparable communities are all located in Fontana or Rialto. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, 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 $296.43 to $383.97 per square foot with the highest priced per square foot home being the smallest. This is due to economies of scale obtained during construction. It s hould be noted that Skyeland and Goldenpeak homes are on 10,000 square foot minimum lots which are the largest single family detached lots of all the comparables. Skyeland Plan 1 has a current base asking price of $374.73 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance). There have been five closings of Skyeland Plan 1 with sales prices ranging from $ 366.70 to $3 92.38 per square foot. There are t wo current escrows of Skyeland Plan 1 with a sales price range of $449.89 to $480.43 per square foot. The escrow

Plan

Bd/Ba
Floors/
Parking

Sq. Ft.

Ind.

Owned
Bldr.

Owned
Skyeland
1 (1(75)) 3+ / 3 1 / 2 2,375 5 1
1X (1(70)) 4 / 4 2 / 3 3,010 0 1*
1XX (1(70)) 4+ / 3.5 2 / 3 3,080 4 4
2 (2(70))LG 5+/ 4.5 2 / 3 3,298 8 1
2X (2(75)) 5+ / 4.5 2 / 3 3,339 4 1*
3 (3(75)) 5+ / 4.5 2 / 3 3,604 4 1*
Subtotal Skyeland 25 9
710

_________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 109 (Narra Hills) - by Landsea Homes Kitty Siino & Associates, Inc. Page 87
prices versus the closed prices is partially due to homesite premiums on the two escrows with premiums of over $150,000 on one and over $250,000 on the other. It should be noted that the reported sales prices include upgrades, premiums , and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home . It has been concluded that Skyeland Plan 1 has a base current market value of $360.00 per square foot.

This calculates as follows:
2,375 sf x $360.00 = $855,000

The most appropriate new home comparable data for Skyeland Plan 1X are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 1X 4 / 4 2 / 3 3,010 --
3 1 4 / 3.5 2 / 2 2,747 $299.96
4 1 3 / 3 1 / 2 2,375 $374.73
4 2 5 / 4.5 2 / 3 3,298 $289.26
5 1 3 / 3.5 1 / 3 3,159 $338.71
5 1X 4 / 4.5 2 / 3 3,603 $294.20
9 3 4 / 3 2 / 2 2,877 $282.87
10 2 5 / 3 2 / 2 2,985 $280.90
10 3 4 / 3 2 / 2 3,105 $263.87
17 2 4 / 2.5 2 / 3 2,809 $268.78

The comparable communities are all located in Fontana or Rialto. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, 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 $263.87 to $374.73 per square foot with the highest priced per square foot home being the smallest. This is due to economies of scale obtained during construction. It s hould be noted that Skyeland and Goldenpeak homes are on 10,000 square foot minimum lots which are the largest single family detached lots of all the comparables. Skyeland Plan 1X has a current base asking price of $306.30 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance). There have been no closings of Skyeland Plan 1X and there are 711

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no escrows. The model is the only plan 1X at this time, thus we have reviewed Plan 1XX sales information. It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Skyeland Plan 1X has a base current market value of $292.00 per square foot. This calculates as follows:
3,010 sf x $292.00 = $878,920

The most appropriate new home comparable data for Skyeland Plan 1XX are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 1XX 4 / 3.5 2 / 3 3,080 --
3 1 4 / 3.5 2 / 2 2,747 $299.96
4 1 3 / 3 1 / 2 2,375 $374.73
4 2 5 / 4.5 2 / 3 3,298 $289.26
5 1 3 / 3.5 1 / 3 3,159 $338.71
5 1X 4 / 4.5 2 / 3 3,603 $294.20
9 3 4 / 3 2 / 2 2,877 $282.87
10 2 5 / 3 2 / 2 2,985 $280.90
10 3 4 / 3 2 / 2 3,105 $263.87
17 2 4 / 2.5 2 / 3 2,809 $268.78

The comparable communities are all located in Fontana or Rialto. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, 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 $263.87 to $374.73 per square foot with the highest priced per square foot home being the smallest. This is due to economies of scale obtained during construction. It should be noted that Skyeland and Goldenpeak homes are on 10,000 square foot minimum lots which are the largest single family detached lots of all the comparables. Skyeland Plan 1XX has a current base asking price of $296.43 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance). There have been four closings of Skyeland Plan 1XX with sales prices ranging from $308.10 to $326.46 per square foot. There are two current escrows of 712

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Skyeland Plan 1XX with a sales price range of $317.99 to $318.35 per square foot. It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home . It has been concluded that Skyeland Plan 1XX has a base current market value of $292.00 per square foot. This calculates as follows:
3,080 sf x $292.00 = $899,360

The most appropriate new home comparable data for Skyeland Plan 2 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 2 5 / 4.5 2 / 3 3,298 --
3 3 5 / 4.5 2 / 3 3,079 $292.30
4 1XX 4 / 3.5 2 / 3 3,080 $296.43
4 2X 5 / 4.5 2 / 3 3,339 $290.50
5 1 3 / 3.5 1 / 3 3,159 $338.71
5 1X 4 / 4.5 2 / 3 3,603 $294.20
10 2 5 / 3 2 / 2 2,985 $280.90
10 3 4 / 3 2 / 2 3,105 $263.87
11 2 5 / 4 2 / 2 3,251 $257.91
11 3 4 / 3.5 2 / 2 3,339 $266.45
17 2 4 / 2.5 2 / 3 2,809 $268.78

The comparable communities are all located in Fontana or Rialto. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The subject plan includes a LiveGen Suite for an extended family member. The new home comparables have a base price range from $ 257.91 to $338.71 per square foot with the highest priced per square foot home being a single story which typically commands a premium. It should be noted that Skyeland and Goldenpeak homes are on 10,000 square foot minimum lots which are the largest single family detached lots of all the comparables.

Skyeland Plan 2 has a current base asking price of $289.26 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance). 713

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There have been eight closings of Skyeland Plan 2 with sales prices ranging from $288.91 to $334.40 per square foot. The wide range relates to the homesite premiums which range from $30,000 to $64,000. There is one current escrow of Skyeland Plan 2 with a sales price of $303.67 per square foot . It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including clos ing cost concessions.

Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Skyeland Plan 2 has a base current market value of $280.00 per square foot. This calculates as follows:
3,298 sf x $280.00 = $923,440

The most appropriate new home comparable data for Skyeland Plan 2X are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 2X 5 / 4.5 2 / 3 3,339 --
3 3 5 / 4.5 2 / 3 3,079 $292.30
4 2 5 / 3.5 2 / 3 3,298 $289.26
4 3 5 / 4.5 2 / 3 3,604 $276.36
5 1X 4 / 4.5 2 / 3 3,603 $294.20
5 2 5 / 4.5 2 / 3 3,757 $287.46
10 3 4 / 3 2 / 2 3,105 $263.87
11 2 5 / 4 2 / 2 3,251 $257.91
11 3 4 / 3.5 2 / 2 3,339 $266.45
17 3 5 / 3.5 2 / 2 3,325 $251.67

The comparable communities are all located in Fontana or Rialto. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, 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 $ 251.67 to $294.20 per square foot. It should be noted that Skyeland and Goldenpeak homes are on 10,000 square foot minimum lots which are the largest single family detached lots of all the comparables. Skyeland Plan 2X has a current base asking price of $290.50 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance). There have been four closings of Skyeland Plan 2X with sales prices ranging from $ 277.97 to $ 360.70 714

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however the one that closed at $360.70 had over $150,000 in homesite premium with the next highest closing at $289.44 per square foot. There is one current escrow of Skyeland Plan 2X with a sales price of $ 361.62 per square foot, however this site has a $250,000 homesite premium. It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Skyeland Plan 2X has a base current market value of $278.00 per square foot. This calculates as follows:

3,339 sf x $278.00 = $928,242

The most appropriate new home comparable data for Skyeland Plan 3 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 3 5 / 4.5 2 / 3 3,604 --
3 3 5 / 4.5 2 / 3 3,079 $292.30
4 2 5 / 3.5 2 / 3 3,298 $289.26
4 2X 5 / 4.5 2 / 3 3,339 $290.50
5 1X 4 / 4.5 2 / 3 3,603 $294.20
5 2 5 / 4.5 2 / 3 3,757 $287.46
10 3 4 / 3 2 / 2 3,105 $263.87
11 3 4 / 3.5 2 / 2 3,339 $266.45
17 3 5 / 3.5 2 / 2 3,325 $251.67
17 4 5 / 3.5 2 / 3 4,122 $229.67

The comparable communities are all located in Fontana or Rialto. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, 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 $229.67 to $294.20 with the largest home being at the low-end of the scale. This is due to the economies of scale typically obtained during construction. It should be noted that Skyeland and Goldenpeak homes are on 10,000 square foot minimum lots which are the largest single family detached lots of all the comparables. Skyeland Plan 3 has a current base asking price of $276.36 per square foot, which is within the range of the comparables. It should be noted that the base prices do not 715

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take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance). There have been four closings of Skyeland Plan 3 with sales prices ranging from $256.43 to $362.67 however the one that closed at $362.67 had almost $150,000 in homesite premium with the next highest closing at $276.71 per square foot. There is one current escrow of Skyeland Plan 3 with a sales price of $375.92 per square foot, however this site has a $250,000 homesite premium. It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Skyeland Plan 3 has a base current market value of $262.00 per square foot. This calculates as follows:
3,604 sf x $262.00 = $944,248

Goldenpeak

*One of each of these plans is a model home. There are an additional 18 homes under construction, and seven additional lots owned by Landsea and 21 lots owned by Arroyo Cap (not shown on the above table).

The most appropriate new home comparable data for Goldenpeak Plan 1 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 1 4 / 3.5 1 / 3 3,159 $338.71
3 3 5 / 4.5 2 / 3 3,079 $292.30
4 1 3 / 3 1 / 2 2,375 $374.73
4 1XX 4 / 3.5 2 / 3 3,080 $296.43
5 1 3 / 3.5 1 / 3 3,159 $338.71
10 1 3 / 2 1 / 2 1,905 $383.97
11 1 4 / 2 1 / 2 2,215 $334.94
17 1 3 / 2 1 / 2 2,140 $312.14

Plan

Bd/Ba
Floors/
Parking

Sq. Ft.

Ind.

Owned
Bldr.

Owned
Goldenpeak
1 (1R (100)) 4 / 3.5 1 / 3 3,159 5 2*
1X (1(85))LG 4 /4.5 2 / 3 3,603 0 0
2 (2(85)) 5 / 4.5 2 / 3 3,757 0 0
2X (2R(100)) 4+ / 3.5 2 / 3 3,827 6 3*
3 (100) 6+ / 4.5 2 / 3 4,248 6 3*
Subtotal Goldenpeak 17 8
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The comparable communities are all located in Fontana or Rialto. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, 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 $292.30 to $383.97 per square foot with the highest priced per square foot home being the smallest. This is due to economies of scale obtained during construction. It should be noted that Skyeland and Goldenpeak homes are on 10,000 square foot minimum lots which are the largest single family detached lots of all the comparables. Goldenpeak Plan 1 has a current base asking price of $338.71 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance). There have been five closings of Goldenpeak Plan 1 with sales prices ranging from $310.32 to $382.84 per square foot with the highest priced home having a $98,000 homesite premium. There are three current escrows of Goldenpeak Plan 1 with a sales price range of $417.43 to $498.29 per square foot. The escrow prices versus the closed prices is partially due to homesite premiums on the three escrows with premiums of up to $300,000 . It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Goldenpeak Plan 1 has a base current market value of $300.00 per square foot. This calculates as follows:

3,159 sf x $300.00 = $947,700

The most appropriate new home comparable data for Goldenpeak Plan 1X are shown below.

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Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 1X 4 / 4.5 2 / 3 3,603 $294.20
3 3 5 / 4.5 2 / 3 3,079 $292.30
4 2X 5 / 4.5 2 / 3 3,339 $290.50
4 3 5 / 4.5 2 / 3 3,604 $276.36
5 1 3 / 3.5 1 / 3 3,159 $338.71
5 2 5 / 4.5 2 / 3 3,757 $287.46
10 3 4 / 3 2 / 2 3,105 $263.87
11 3 4 / 3.5 2 / 2 3,339 $266.45
17 3 5 / 3.5 2 / 2 3,325 $251.67
17 4 5 / 3.5 2 / 3 4,122 $229.67

The comparable communities are all located in Fontana or Rialto. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The subject plan includes a LiveGen Suite which may house an extended family member. The new home comparables have a base price range from $229.67 to $338.71 with the highest price being for a single story home which typically commands a premium. It should be noted that Skyeland and Goldenpeak homes are on 10,000 square foot minimum lots which are the largest single family detached lots of all the comparables. Goldenpeak Plan 1X has a current base asking price of $294.20 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance). There have been no closings of Goldenpeak Plan 1X. There are no current escrows of Goldenpeak Plan 1X.

It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Goldenpeak Plan 1X has a base current market value of $262.00 per square foot. This calculates as follows:

3,603 sf x $262.00 = $943,968

The most appropriate new home comparable data for Goldenpeak Plan 2 are shown below.

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Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 2 5 / 4.5 2 / 3 3,757 --
3 3 5 / 4.5 2 / 3 3,079 $292.30
4 2X 5 / 4.5 2 / 3 3,339 $290.50
4 3 5 / 4.5 2 / 3 3,604 $276.36
5 1 3 / 3.5 1 / 3 3,159 $338.71
5 2X 4 / 3.5 2 / 3 3,827 $301.80
10 3 4 / 3 2 / 2 3,105 $263.87
11 3 4 / 3.5 2 / 2 3,339 $266.45
17 3 5 / 3.5 2 / 2 3,325 $251.67
17 4 5 / 3.5 2 / 3 4,122 $229.67

The comparable communities are all located in Fontana or Rialto. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, 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 $229.67 to $338.71 with the largest home being at the low-end of the scale. This is due to the economies of scale typically obtained during construction. It should be noted that Skyeland and Goldenpeak homes are on 10,000 square foot minimum lots which are the largest single family detached lots of all the comparables. Goldenpeak Plan 2 has a current base asking price of $287.46 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance). There have been no closings of Goldenpeak Plan 2. There is one current escrow of Goldenpeak Plan 2 with a sales price of $336.55 however it includes a homesite premium of $150,000. It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Goldenpeak Plan 2 has a base current market value of $260.00 per square foot. This calculates as follows:

3,757 sf x $260.00 = $976,820

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The most appropriate new home comparable data for Goldenpeak Plan 2X are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 2X 4 / 3.5 2 / 3 3,827 --
3 3 5 / 4.5 2 / 3 3,079 $292.30
4 2X 5 / 4.5 2 / 3 3,339 $290.50
4 3 5 / 4.5 2 / 3 3,604 $276.36
5 2 5 / 4.5 2 / 3 3,757 $287.46
5 3 5 / 4.5 2 / 3 4,248 $281.31
11 3 4 / 3.5 2 / 2 3,339 $266.45
17 3 5 / 3.5 2 / 2 3,325 $251.67
17 4 5 / 3.5 2 / 3 4,122 $229.67

The comparable communities are all located in Fontana or Rialto. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, 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 $229.67 to $292.30. It should be noted that Skyeland and Goldenpeak homes are on 10,000 square foot minimum lots which are the largest single family detached lots of all the comparables. Goldenpeak Plan 2X has a current base asking price of $301.80 per square foot, which is higher than the range of the comparables. This is due to the large lot size within Goldenpeak. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance). There have been six closings of Goldenpeak Plan 2X with prices ranging from $278.59 to $342.12 with the higher sales having significant site premiums.

There are six current escrows of Goldenpeak Plan 2X with prices ranging from $326.40 to $416.80 however these all include site premiums which range from $85,000 up to $243,000.

It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Goldenpeak Plan 2X has a base current market value of $260.00 per square foot. This calculates as follows:
3,827 sf x $260.00 = $995,020

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The most appropriate new home comparable data for Goldenpeak Plan 3 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 3 6 / 4.5 2 / 3 4,248 --
3 3 5 / 4.5 2 / 3 3,079 $292.30
4 2X 5 / 4.5 2 / 3 3,339 $290.50
4 3 5 / 4.5 2 / 3 3,604 $276.36
5 2 5 / 4.5 2 / 3 3,757 $287.46
5 2X 4 / 3.5 2 / 3 3,827 $301.80
11 3 4 / 3.5 2 / 2 3,339 $266.45
17 3 5 / 3.5 2 / 2 3,325 $251.67
17 4 5 / 3.5 2 / 3 4,122 $229.67

The comparable communities are all located in Fontana or Rialto. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, 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 $229.67 to $301.80. It should be noted that Skyeland and Goldenpeak homes are on 10,000 square foot minimum lots which are the largest single family detached lots of all the comparables. Goldenpeak Pla n 3 is the largest plan available in the subject marketplace. It has a current base asking price of $281.31 per square foot. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance).

There have been six closings of Goldenpeak Plan 3 with prices ranging from $261.72 to $320.77 with the highest sale having a site premium of $170,000. There are four current escrows of Goldenpeak Plan 3 with prices ranging from $324.29 to $359.83 however these all include site premiums which range from $103,000 up to $268,000. It should be noted that the reported sales prices include upgrades, premiums , and options along with a ll concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home . It has been concluded that Goldenpeak Plan 3 has a base current market value of $250.00 per square foot. This calculates as follows:
4,248 sf x $250.00 = $1,062,000

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Discounted Cash Flow Analysis
Due to the single ownership of multiple houses (40 houses) 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. F irst, a retail value for each plan within Narra Hills 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 using 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 concluded 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.

Builder Owned Retail Value – Narra Hills

Within the subject property, there are 40 builder-owned houses over 95 percent complete, 15 of which are decorated 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 $50,000 premium has been included with each of the model homes. As concluded above, the retail base value conclusions for the builder -owned homes within Narra Hills are calculated on the following page:

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Clementine Plan 1 (0 x $548,800) $ 0
Clementine Plan 2 (1 x $543,750) 5 43,750
Clementine Plan 3 (1 x $581,350) 581,350
Strata Plan 1 (3 x $650,690) 1,952,070
Strata Plan 2 (3 x $662,160) 1,986,480
Strata Plan 3 (3 x $704,855) 2, 114,565
Strata Plan 4 (5 x $727,320) 3,636,600
Wildstar Plan 1 (2 x $796,630) 1,593,260
Wildstar Plan 2 (0 x $829,080) 0
Wildstar Plan 2X (3 x $869,000) 2,607,000
Wildstar Plan 3 (2 x $862,120) 1,724,240
Skyeland Plan 1 (1 x $855,000) 855,000
Skyeland Plan 1X (1 x 878,920) 878,920
Skyeland Plan 1XX (4 x $899,360) 3,597,440
Skyeland Plan 2 (1 x $923,440) 923,440
Skyeland Plan 2X (1 x $928,242) 928,242
Skyeland Plan 3 (1 x $944,248) 944,248
Goldenpeak Plan 1 (2 x $947,700) 1,895,400
Goldenpeak Plan 1X (0 x $943,968) 0
Goldenpeak Plan 2 (0 x $976,820) 0
Goldenpeak Plan 2X (3 x $995,020) 2,985,060
Goldenpeak Plan 3 (3 x $1,062,000) 3,186,000
Model Upgrades (15 x $50,000) 750,000
Total Retail Value $ 33, 683,065

Absorption Period
In order to arrive at an absorption period for the 40 builder-owned homes, the absorption rate for the subject neighborhoods along with the surrounding developments has been reviewed. Narra Hills began sales in March 2023 and consists of 484 proposed homes.

There have been 208 sales suggesting an average absorption of 12.23 homes per month across the five product lines, which is considered to be below average for the subject area.

When looking at each product line individually, Clementine has averaged a sales pace of

2.4 sales per month, Strata has averaged 3.7 sales per month, Wildstar has averaged 3.1 sales per month, Skyeland has averaged 2.1 sales per month and Goldenpeak has averaged 2.1 sales per month. The market comparables have a range of 2.1 to 4.9 sales per month. Taking into consideration the product, concluded sales prices and current escrows, along with the current interest rates, it has been concluded that the 40 builder- owned homes will be absorbed within a five-month time period at the concluded values.

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Remaining Costs
As discussed under the remaining costs section earlier within this report, there is $12,031.75 per home/lot/pad in remaining land development costs associated with the builder-owned homes, which equates to a total of $481,270 for the subject 40 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 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 Narra Hills began selling in March 2023 with the product being nominally well received in the marketplace with a 12.2 sales per month average across the five product 724

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City of Fontana CFD No. 109 (Narra Hills) - by Landsea Homes Kitty Siino & Associates, Inc. Page 101
lines with the averages per community ranging from 2.1 and 3.7 sales per month. This compares to the overall Inland Empire average sales rate per community of 4.1 sales per month (year to date as of July 28, 2024). The subject is performing below the average of the overall market. The slower absorption rate is thought to be due to the freeway frontage coupled with the minimal mortgage rate/closing cost buydowns. Based on the sales rate within the five communities in the subject project, the competition, the product and location, and current market conditions, a ten 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 Narra Hills is $25,816,206
.

Narra Hills – Landsea Ownership

149 Lots/Pads owned by Landsea $ 49,487,269
40 Houses (including 15 models) Builder-owned 25,816,206 Total Landsea Ownership $ 75,303,475

Narra Hills – Arroyo Cap Ownership

126 Lots/Pads owned by Arroyo Cap $ 45,043,999

Individual Owners Value Conclusion – Narra Hills
There are 169 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:

Clementine Plan 1 (2 x $548,800) $ 1,097,600
Clementine Plan 2 (11 x $543,750) 5,981,250
Clementine Plan 3 (11 x $581,350) 6,394,850
Strata Plan 1 (15 x $650,690) 9, 760,350
Strata Plan 2 (15 x $662,160) 9,932,400
Strata Plan 3 (15 x $704,855) 10,572,825
Strata Plan 4 (13 x $727,320) 9, 455,160
Wildstar Plan 1 (15 x $796,630) 1 1,949,450
725

_________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 109 (Narra Hills) - by Landsea Homes Kitty Siino & Associates, Inc. Page 102
Wildstar Plan 2 (2 x $829,080) 1,658,160
Wildstar Plan 2X (12 x $869,000) 10,428,000
Wildstar Plan 3 (16 x $862,120) 13, 793,920
Skyeland Plan 1 (5 x $855,000) 4, 275,000
Skyeland Plan 1X (0 x 878,920) 0
Skyeland Plan 1XX (4 x $899,360) 3,597,440
Skyeland Plan 2 (8 x $923,440) 7, 387,520
Skyeland Plan 2X (4 x $928,242) 3, 712,968
Skyeland Plan 3 (4 x $944,248) 3,776,992
Goldenpeak Plan 1 (5 x $947,700) 4, 738,500
Goldenpeak Plan 1X (0 x $943,968) 0
Goldenpeak Plan 2 (0 x $976,820) 0
Goldenpeak Plan 2X (6 x $995,020) 5, 970,120
Goldenpeak Plan 3 (6 x $1,062,000) 6, 372,000
Total Individual Owned Value $ 130,854,505

In an additional review, we have reviewed the original builder sales prices for the homes within the subject property. Closings for the 169 homes occurred between November 9, 2023, and July 26, 2024. The reported closing prices by the builder for the 169 individually owned homes total $139,018,750, which is 6.2 percent higher than the concluded value.

The builder’s reported prices include premiums, upgrades and purchased options as well as took into consideration all concessions given by the builder , including closing costs and mortgage buydowns. Base pricing has increased since the project opened; however, builders have also increased concessions with rate buy -downs occurring which have totaled within Narra Hills up to $56,100. Opening base prices in March 2023 for the homes within Narra Hills ranged from $529,990 to $1,064,990 with current base pricing ranging from $558,990 to $1,194,990 resulting in increases from zero to 18.4 percent depending on the plan. This suggests prices have increased, however the concessions, at times, offset the increases in order to meet the market. The current market and the current incentives have been taken into account in our analysis . The above valuation is for the minimum market value, 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 all 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.
726

_________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 109 (Narra Hills) - by Landsea Homes Kitty Siino & Associates, Inc. Page 103

APPRAISAL REPORT SUMMARY

The appraisal assignment was to value the subject property within Fontana CFD No. 109 which consists of 484 proposed residential units. The 484 units are known as Narra Hlls, being marketed, and sold by Landsea, and are located in the northern portion of the City of Fontana. The subject includes five product lines: Clementine, 124 duplex and small lot detached product; Strata, 127 detached cluster condominiums; Wildstar, 78 single-family detached homes on 5,000 square foot minimum lots and Skyeland and Goldenpeak, 155 single-family detached homes on 10,000 square foot minimum lots. As of July 26, 2024, individuals have purchased and closed 169 of the total 484 proposed houses, with an additional 39 homes in escrow which are due to close upon completion. The community has sold at a below average sales pace. 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 determined 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. 109 bond proceeds along with the Fontana CFD No. 109 special tax lien. The concluded aggregate value for the subject properties, subject to their respective special tax lien, is:

Narra Hills:

Landsea (149 lots/pads & 40 houses) $ 75,303,475
Arroyo Cap (126 lots/pads) $ 45,043,999
Individual Owners (169 houses) $ 130,854,505
Total Aggregate Value CFD No. 109 $ 251,201,979

The above values are stated as of said date of value and subject to the attached Assumptions and Limiting Conditions and Appraiser’s Certification. 727

_________________________________________________________________________________________________________ Appraisal Report
City of

Fontana
CFD No. 109

(
Narra Hills) - by Landsea Homes
Kitty Siino & Associates, Inc.

Page

104
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

not
performed any appraisal services on the subject property in the past three years.

9. No other appraisers have provided significant professional assistance 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 Professional 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)
728

ADDENDA

729

FONTANA CFD NO. 109

BOUNDARY MAP

730

731

TRACT MAP Nos. 20010, 20069 and 20070
And SITE PLANS

732

733

734

735

Planning Area 1 & 2 – Skyeland and Goldenpeak

736

Planning Area 2 - Wildstar

737

Planning Area 3 - Strata

738

Planning Area 4 - Clementine
739

California Fire Hazard Map

740

California Fire Hazard Map – Approximate Location of Narra Hills Outlined in Blue

741

DISCOUNTED CASH FLOW ANALYSIS

742

Narra Hills Builder-Owned Houses Discounted Cash Flow Analysis

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

Retail Sales 33,683,065 $6,736,613 $6,736,613 $6,736,613 $6,736,613 $6,736,613 $33,683,065

TOTAL INCOME $6,736,613 $6,736,613 $6,736,613 $6,736,613 $6,736,613 $33,683,065

EXPENSES:

Remaining Costs ($96,254) ($96,254) ($96,254) ($96,254) ($96,254) ($481,270) Marketing & Carrying
Expenses 10% ($673,661) ($673,661) ($673,661) ($673,661) ($673,661) ($3,368,307) Profit 10% ($673,661) ($673,661) ($673,661) ($673,661) ($673,661) ($3,368,307)

TOTAL EXPENSES ($1,443,577) ($1,443,577) ($1,443,577) ($1,443,577) ($1,443,577) ($7,217,883)

NET CASH FLOW $5,293,036 $5,293,036 $5,293,036 $5,293,036 $5,293,036 $26,465,182 Discount Factor 10% 0.9917 0.9835 0.9754 0.9673 0.9594

DISCOUNTED CASH FLOW $5,249,292 $5,205,910 $5,162,886 $5,120,217 $5,077,901 $25,816,206

CUMULATIVE DISCOUNTED $5,249,292 $10,455,202 $15,618,088 $20,738,305 $25,816,206 $25,816,206

CASH FLOW

743

FINISHED LOT LAND SALES MAP
& SUMMARY CHART
744

FINISHED LOT LAND SALES MAP

745

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 Ontario 351, SWC Eucalyptus Ave
and Haven Ave, Ontario / 1073-171-
02 / KB Home / Richland
Communities
June 2024 351 8
du/acre
$85,000,000 /
$380,000
Closed in unimproved condition
with approved TTM. Blended FLV
- KB Home paid approximately
$560,000 FLV for 4,500 sf lots,
$410,000 FLV for cluster product,
and $280,000 FLV for
townhomes.
$242,165
2 Sequanota Heights, 60 Freeway and
Pacific Avenue, Jurupa Valley / 177-
130-007 / Richmond American
Homes / JPMB Investments
April 2024 48 6,300
sf
$9,351,000 / $308,000
Closed in a rough graded
condition with approved final
map.
$194,813
3 The Heights at Southridge, SE Live
Oak Ave and Cherry Ave, Fontana /
0237-411-13 / KB Home / New Bridge
Homes
April 2024 255 8
du/acre
$31,100,000 / $252,000
Closed in unimproved condition
with approved TTM. Blended FLV
- consists of two product types,
including a detached 8-pack
cluster and detached alley-load.
$121,961
4 Etiwanda Classics at Highland, SEC
Highland Avenue and Etiwanda
Avenue, Rancho Cucamonga / 0227-
051-03 / Manning Homes / Li Hailin
January
2024 22 12,000
sf lots
$4,063,000 / $550,000
Closed in an unimproved
condition with final map in
process.
$184,682
5 Gardens at Arboretum, SEC Duncan
Canyon Road and Cypress Ave,
Fontana / 1118-421-01 / Richmond
American Homes / Lewis Group of
Companies
January
2024 174 10
du/acre
$28,789,500 / $279,465
Closed in an unimproved
condition with final map in
process.
$165,457
6 Parkside II, NWC Eucalyptus and
Archibald, Ontario / 0218-053-05 /
Lennar / Lewis Group of Companies
December
2023 236
16 du/acre
$35,177,500 / $250,000
Closed in an unimproved
condition with a final map in
process. Blended finished lot
value number- Product will be
three two- and three-story cluster
products.
$149,057
746

7 Sycamore Heights, North of Rte 66,
East of Red Hill Country Club Dr,
Rancho Cucamonga / 0207-101-13 /
Lennar / RY Properties
December
2023 175 12
du/acre
$8,700,000 / $250,000 Closed in an unimproved
condition with approved TTM.
$49,714
8 Pietersma PA 3 & 4 (W/S Hamner
north of Eucalyptus Avenue),
Esperanza Specific Plan, Ontario
Ranch / 0218-312-06 / Pulte Homes /
Richland
December
2023 333 11
du/ac
$72,527,499 /
$315,000
Blended price, estimated F/L
values are $258,000 for 156
townhomes; $315,000 for 82
small detached cluster lots and
$401,000 for 95 large detached
cluster lots. PA 3 & 4 of
Esperanza SP
$217,800
9 Magnolia Ranch, South of
Schleisman Rd and west of Scholar
Way, Eastvale / 152-040-003 /
Woodside Homes / Kirschner Family
Trust
November
2023 41 4 du/ac
$7,500,000 / $360,000 Closed in an unimproved
condition with an approved TTM. $182,927
10 Barth Farms (West side Archibald),
S/O Riverside Drive N/O Chino,
Countryside Spec. Plan, Ontario
Ranch / 0218-111-60 / Lennar /
Landmark Co.

October
2023 265 12
du/ac
$49,559,000 / $297,000
Blended price, estimated F/L
values are $260,000 for
townhomes; $315,000 for Cluster
and $355,000 for detached lots.

Within Countryside SP
$187,015
11 Lytle Creek, SEC Sierra Lakes
Parkway and Lytle Creek Road,
Fontana /1108-052-05 / DR Horton /
The Sobrato Family Foundation
September
2023 143 14
du/ac
$9,850,000 / $220,000
Closed in an unimproved
condition with final map in
process. Blended FLV - consists
of attached motorcourt units and
detached motorcourt units
$68,881
12 Citrus Lane, SE of Citrus Avenue and
South Highland Avenue, Fontana /
0240-011-17 / DR Horton / 6997
Citrus LLC
August
2023 68 16
du/acre
$6,300,000 / $219,000 Closed in an unimproved
condition with an approved TTM.
$92,647
13 Citrus West, NWC Citrus Avenue and
Summit Avenue, Fontana / 1107-262-
37 / DR Horton / Lynn Chao
July 2023 84 9 du/ac
$9,850,000 $272,000
Closed in an unimproved
condition with final map in
process.
$117,262

747

IMPROVED RESIDENTIAL

SALES MAP & SUMMARY CHART

748

IMPROVED RESIDENTIAL SALES SUMMARY CHART

749

IMPROVED RESIDENTIAL SALES SUMMARY CHART

Data
No.

Project Name
Location/Developer Plan Room
Count
Floors/
Parking
Size
(SF)
Lot Size /
Absorption
Base Sales
Price Price/SF
1 Clementine at Narra Hills, Lytle Creek
Road and Duncan Canyon Road,
Fontana / Landsea
1 3 / 2.5 2 / 2 1,372 Paired Homes $563,990 $411.07
2 3 / 2.5 2 / 2 1,450 2.4 sales/mo $558,990 $385.51
3 4 / 2.5 2 / 2 1,661 $594,990 $358.21
2 Strata at Narra Hills, Lytle Creek Road
and Duncan Canyon Road, Fontana /
Landsea
1 3 / 2.5 2 / 2 2,099 2,700 sf lots $675,990 $322.05
2 4 / 3 2 / 2 2,136 (Det. Cluster) $707,990 $331.46
3 4 / 3 2 / 2 2,311 3.7 sales/mo $726,990 $314.58
4 4 / 3 2 / 2 2,552 $739,990 $289.96
3 Wildstar at Narra Hills, Lytle Creek Road
and Duncan Canyon Road, Fontana /
Landsea
1 4 / 3.5 2 / 2 2,747 5,000 sf lots $823,990 $299.96
2 4 / 4 2 / 2 2,961 3.1 sales/mo $849,990 $287.06
3 5 / 4.5 2 / 3 3,079 $899,990 $292.30
4 Skyeland at Narra Hills, Lytle Creek
Road and Duncan Canyon Road,
Fontana / Landsea
1 3 / 3 1 / 2 2,375 $889,990 $374.73
1X 4 / 3.5 2 / 3 3,080 10,000 sf lots $912,990 $296.43
2 5 / 4.5 2 / 3 3,298 2.1 sales/mo $953,990 $289.26
2X 5 / 4.5 2 / 3 3,339 $969,990 $290.50
3 5 / 4.5 2 / 3 3,604 $995,990 $276.36
5 Goldenpeak at Narra Hills, Lytle Creek
Road and Duncan Canyon Road,
Fontana / Landsea
1 3 / 3.5 1 / 3 3,159 $1,069,990 $338.71
1X 4 / 4.5 2 / 3 3,603 10,000 sf lots $1,059,990 $294.20 2 5 / 4.5 2 / 3 3,757 2.1 sales/mo $1,079,990 $287.46
2X 4 / 3.5 2 / 3 3,827 $1,154,990 $301.80
3 5 / 4.5 2 / 3 4,248 $1,194,990 $281.31
6 Salerno at Monterado, Citrus Avenue
and Duncan Canyon Road, Fontana /
Lennar
1 3 / 2.5 2 / 2 1,822 3,000 sf lots $628,860 $345.15
2 3 / 2.5 2 / 2 1,932 (Det. Cluster) $641,635 $332.11 3 3 / 2.5 2 / 2 2,207 4.1 sales/mo $676,990 $306.75
750

7 Acacia at Arboretum, Sierra Avenue and
Casa Grande Avenue, Fontana / Lennar
1 3 / 2.5 2 / 2 2,213 2,500 sf lots $648,060 $292.84
2 3 / 2.5 2 / 2 2,358 4.3 sales/mo $682,060 $289.25
3 4 / 2.5 2 / 2 2,472 $701,290 $283.69
8 Blue Sage at Arboretum, Sierra Avenue
and Casa Grande Avenue, Fontana /
Lennar
1 3 / 2.5 2 / 2 1,651 2,000 sf lots $603,646 $365.62
2 3 / 2.5 2 / 2 1,761 (Zero Lot Line) $609,290 $345.99
3 4 / 2.5 2 / 2 1,969 4.3 sales/mo $622,590 $316.20
4 4 / 3 2 / 2 1,970 $641,990 $325.88
9 Silverberry at Arboretum, Sierra Avenue
and Casa Grande Avenue, Fontana /
Lennar
1 4 / 3 2 / 2 2,449 4,000 sf lots $743,980 $303.79
2 4 / 3 2 / 2 2,666 4.9 sales/mo $782,210 $293.40
3 4 / 3 2 / 2 2,877 $813,830 $282.87
10 Wildrose at Arboretum, Sierra Avenue
and Casa Grande Avenue, Fontana /
Lennar
1 3 / 2 1 / 2 1,905 6,000 sf lots $731,462 $383.97
2 5 / 3 2 / 2 2,985 4.3 sales/mo $838,490 $280.90
3 4 / 3 2 / 2 3,105 $819,325 $263.87
11 Azalea at Arboretum, Sierra Avenue and
Casa Grande Avenue, Fontana / Lennar
1 4 / 2 1 / 2 2,215 5,500 sf lots $741,900 $334.94
2 5 / 4 2 / 2 3,251 3.5 sales/mo $838,465 $257.91
3 4 / 3.5 2 / 2 3,339 $889,670 $266.45
12 Dayflower at Arboretum, Sierra Avenue
and Casa Grande Avenue, Fontana /
Lennar
1 4 / 3 2 / 2 1,563 Det. Cluster $529,900 $339.03
2 3 / 2 2 / 2 1,582 4.0 sales/mo $491,900 $310.94
3 4 / 3 2 / 2 1,669 $565,900 $339.07
13 Sienna at Aurora Park, Victoria Street
and Kestral Drive, Fontana / TRI Pointe
Homes
1 3 / 2.5 2 / 2 1,879 2,000 sf lots $775,000 $412.45
2 3 / 2.5 2 / 3 1,997 (Alley-load) $849,000 $425.14
3 4 / 3 2 / 3 2,264 2.6 sales/mo $879,000 $388.25
14 Goldenrod at Aurora Park, Victoria
Street and Kestral Drive, Fontana / TRI
Pointe Homes
1 3 / 2.5 2 / 2 2,006 2,000 sf lots $703,871 $350.88
2 4 / 3 2 / 2 2,303 (Det. Cluster) $727,126 $315.73
3 5 / 4 2 / 3 2,777 2.7 sales/mo $816,547 $294.04
15 Cascade at Highland Park, South
Highland Avenue and San Servaine
Road, Fontana / Richmond American
1 3 / 2.5 2 / 2 1,860 5,000 sf lot $638,883 $343.49
2 3 / 2.5 2 / 3 1,930 2.2 sales/mo $676,487 $350.51
3 4 / 3 2 / 3 2,065 $652,990 $316.22
751

16 Talise at Highland Park, South Highland
Avenue and San Servaine Road,
Fontana / Richmond American
1 3 / 2.5 2 / 2 1,410 $584,584 $414.60
2 3 / 2.5 2 / 2 1,650 5,000 sf lots $604,325 $366.26
3 3 / 2.5 2 / 2 1,710 3.1 sales/mo $588,392 $344.09
4 4 / 3 2 / 2 1,950 $642,315 $329.39
17 Stonecreek at River Ranch, NE of River
Ranch Parkway and Havasu Way, Rialto
/ Lennar
1 3 / 2 1 / 2 2,140 $667,990 $312.14
2 4 / 2.5 2 / 3 2,809 9,000 sf lots $754,990 $268.78
3 5 / 3.5 2 / 2 3,325 3.0 sales/mo $836,800 $251.67
4 5 / 3.5 2 / 3 4,122 $946,680 $229.67

752

APPRAISER’S QUALIFICATIONS

753

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 Sa n 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 sale 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 754

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
755