homes in Phase 1 will be constructed by three homebuilders : Shea Homes, Davidson Communities, and Woodbridge Pacific Group. As will be discussed, the subject includes seven different residential land use categories with varying lot sizes; the homebuilders will offer multiple product lines designed to appeal to a range of homebuyers across multiple price points. As of the effective appraisal date, horizontal and backbone infrastructure, including the 24-acre Crystal Lagoon, is underway at the subject.
We have been requested to provide a market value of the appraised property, subject to the hypothetical condition certain public improvements and impact fees to be financed by the City of Rancho Mirage Community Facilities District No. 5 (Section 31), Improvement Area No. 1, Special Tax Bonds have been paid. The estimate of market value accounts for the impact of the lien of the Special Taxes securing the Bonds.
The appraisal conforms to the Uniform Standards of Professional Appraisal Practice (USPAP), the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute, and applicable state appraisal regulations . The Appraisal Report is also prepared in accordance with the Appraisal Standards for Land Secured Financing published by the California Debt and Investment Advisory Commission (CDIAC) (2004).
Standards Rule 2-2 (Content of a Real Property Appraisal Report) contained in the Uniform Standards of Professional Appraisal Practice (USPAP) requires each written real property appraisal report to be prepared as either an Appraisal Report or a Restricted Appraisal Report. This report is prepared as an Appraisal Report as defined by USPAP under Standards Rule 2-2(a), and incorporates practical explanation of the data, reasoning, and analysis that were used to develop the opinion of value.
Catino, of which the subject is a portion, represents Disney's first Storyliving community, with others planned across the nation. The physical centerpiece of the community is the under -development Crystal Lagoon that, once completed, will be the largest within the United States. Through our research, documented in the attached Appraisal Report, we have gathered market information that illustrates the market assigns a premium to lagoon communities when compared to other master-planned projects without this amenity . Our research also supports the notion that Disney's association with an array of consumer products and services places these products and services at the top of most rankings.
Overall, the lagoon and the Disney branding are concluded to offer value enhancements to the product lines proposed for Catino, a quantified measurement of the enhancement is one of the challenges involved in this valuation. Nonetheless, we have utilized market logic to both rank and estimate quantitative premiums attributable to the Crystal Lagoon and Disney's influence at the Catino project. As a condition ofthis assignment, the estimates of value provided herein are premised on the completion of the lagoon and Disney's involvement, which, as combined, creates a unique luxury targeted master planned community. Any revision to the completion of the lagoon and/or Disney's branding on the project is not considered in this analysis.
9-305
Kofi Antobam
City of Rancho Mirage
April 25, 2024
As it relates to the valuation of the subject's varied lot categories and condominium sites, we have once again looked to the market for the valuation models most broad ly applied in the valuation of master planned communities. It should be noted, land ownership has existing sale and builder agreements with Merchant Builders. According to the agreement with Shea Homes, the Merchant Builder acquires each lot from the Landowner as purchase agreements with homebuyers are executed. The home buyer then closes escrow with Shea Homes upon completion of home construction . The agreements with Davidson Communities and Woodbridge Pacific stipu late the homebuyer closes escrow on the lot from the Merchant Builder simultaneously with the Merchant Builder acquiring the lot from the Landowner prior to commencement of home construction. These in-place arrangements with the Builders have unique provisions relative to most market transactions and fundamenta lly represent an ongoing business relationship between the Master Developer and the Builders. Our valuation is based on the wide ly supported market model of outright transfers from the Developer to Builders on a fee simp le transfer of title.
Based on the valuation analysis in the accompanying report, and subject to the definitions, assumptions, and limiting conditions expressed in the report, the concluded opinion of value is as follows:
Market Value by Ownership
ECRM Residential, LP
Partially-Improved Residential Lots
Total - Ownership 1
Shea Homes
Improved Lots - S0's Collection
Improved Lots - 60's Collection
Total - Ownership 2
Aggregate Market Value, subject to a hypothetica l condition No. of Lots
~
649
1 2.
3 652
Value per
Component Market Value {Rd.)
$ 302,541,000
$ 302,541,000
$640,000 $ 640,000
$861,000 s l Z22 QQQ
$ 2,362,000
$ 304,903,000
9-306
Kofi Antobam
City of Rancho Mirage
April 25, 2024
Value Conclusion
Value Type & Appraisa I Premise
Market Value, Subject to a Hypothetical Condition
Interest Appraised Date of Va I ue Value Conclusion
Fee Simple March 6, 2024 $304,903,000
Extraordinary Assumptions and Hypothetical Conditions
The value con cl us ions are subject to the following extraordinary assumptions. An extraordinary assumption is 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 . (None)
The value conclusions are based on the fol I owing hypothetical conditions . A hypothetical condition is 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 .
1. The value derived herein is based on the hypothetica I condition that certain pub I ic improvements and impact fees to be financed by proceeds from the City of Rancho Mirage Community Facilities Di strict No. 5 (Section 31), Improvement Area No. 1, Special Tax Bonds have been paid .
The use of any extraordinary assumption or hypothetical condition may have affected the assignment result s.
If you have any questions or comments, please contact the undersigned . Thank you for the opportunity to be of service.
Respectfully submitted,
lntegra Realty Resources - Orange County
Kevin Ziegenmeyer, MAI
California Certified General Real Estate
Appraiser #AG013567
Telephone: 916.435 .3883, ext. 224
Email: [email protected]
-'.11,l,J l
Laura Diaz, MAI
California Certified General Real Estate
Appraiser #3005037
Telephone: 408.299 .0444
Email: ldiaz@irr .com
Eric Segal, MAI
California Certified General Real Estate
Appraiser #AG026558
Telephone: 916.435.3883, ext. 228
Email: [email protected]
9-307
Table of Contents
Executive Summary
Identification of the Appraisal Problem
Subject Description
Sale History
Pending Transactions
Appra isal Purpose
Value Type Definitions
Property Rights Definitions
Client and Intended User(s)
Intended Use
Applicable Requirements
Report Format
Prior Services
Appraiser Competency
Scope of Work
Economic Analysis
Area Analysis - Riverside County
Introduction
Population
Employment & Economy
Househo ld Income
Transportation
Recreation & Culture
Conclusion
Surround ing Area Analysis
Residential Market Analysis
Property Analysis
Land Descript ion and Analysis
Site Development Costs
Proposed Improvements Description
Real Estate Taxes
1 2
2 2
2 3
3 4
4 4
4 5
5 5
6 9
9 9
9 10
12 12
13 14
17 23
35 35
41 48
59 Highest and Best Use
Valuation
Valuat ion Methodo logy
Land Residual Analysis
Market Value, i n Bulk
Development Method
Conclusion of Value
61 64
64 66
Subdivision
93 103
Exposure Time 103
Marketing Time 104
Certification 105
Assumptions and Limiting Conditions 107
Addenda
A. Appra iser Qualificat ions
B. Definitions
C. Preliminary Tit le Report
City of Rancho M irage CFO No. 5 (Section 31) - Improvement Area No. 1 9-308
Executive Summary
Executive Summary
Property Na me
Address
Property Type
Owner of Record
Tax ID
Land Area
Zoning Designation
Highest and Best Use
Exposure Time; Marketing Period
Effective Date of the Apprai sal
Date of the Report
Property Interest Appraised
Market Va I ue Canel usi on
City of Rancho Mi rage CFD No. 5 {Section 31) - Improvement Area No. l
10 Danube Dr.
Rancho Mirage, Riverside County, Cal ifornia 92270
Proposed Master Planned Community
ECRM Residential, LP; Shea Homes
685-220-039, 685-220-016, 685-220-026 to 030, 685-220-
032, 685-220-039, 685-431-001 to 055, 685-441-001 to
025, 685-451-001 to 041, 685-461-001 to 048, 685-471-001 to 059, 685-481-001 to to 026, 685-491-001 to 032, 685- 501-001 to 039, 685-111-001 to 018, 685-521-001 to 028
239.64 acres; 10,438,893 SF
Section 31 Specific Plan, Large Lot/Conventional Lot/
Cluster Lot
Single family residential
9 - 12 months; 9 - 12 months
March 6, 2024
April 25, 2024
Fee Simple
$304,903,000
The values reported above are subject to th e definition s, assumption s, and limiting conditions set forth in the accompanying report of which thi s summary is a part. No party other th an City ofRancho Mira ge and associat ed finance te am may use or rely on th e informatio n, opini ons, and conclusions contained in the report. It is ass umed that th e users of th e report have read the entire report , including a II of the definitions, assumpt ions, and limi t ing conditions contain ed th erein.
Extraordinary Assumptions and Hypothetical Conditions
The value conclusions a re subject to the following extraordinary assumptions. An extraordinary assumption is 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 . (None)
The value cone I us ions a re based on the fol lowing hypothetica I conditions . A hypothetical condition is 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 .
1. The value derived herein is based on the hypothetical condition that certain public improvements and impact fees to be fi na need by proceeds from the City of Rancho Mi rage Community Faci Ii ties District No. 5 (Section 31), Improvement Area No. 1, Special Tax Bonds have been paid.
The use of any extraordinary assumption or hypothetica I condition may have affected the assignment results.
City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 1 9-309
Identification of the Appraisal Problem
Identification of the Appraisal Problem
Subject Description
The subject property represents all of the City of Rancho Mirage Community Facilities District No. 5 (Section 31), Improvement Area No. 1 ("CFD No. 5 (Section 31), IA 1"), which encompasses 239.64 ± acres of residentially zoned land. The subject property reflects Phase 1 of a master planned community known as Catino, a Storyliving by Disney community ("Catino"). The subject is proposed and entitled for development of 652 detached and attached single family residential homes; at final build out, Catino will include approximately 1,932 homes, a retail town center/mixed use core, 24- acre Crystal Lagoon, and extensive commun ity amenities. 2 Catino reflects the first ever branded Storyliving by Disney community; as such, Disney is heavily involved in the design and marketing of the project. Further discussion of Disney's influence on the project, as well as other unique features of the community, are provided in the body of this Appraisal Report. The master developer (DMB Development, LLC) is overseeing construction of horizontal improvements and amenities at the subject. The homes in Phase 1 will be constructed by three homebuilders: Shea Homes, Davidson Communities, and Woodbridge Pacific Group. As will be discussed, the subject includes seven different residential land use categories with varying lot sizes; the homebuilders will offer multiple product lines designed to appeal to a range of homebuyers across multiple price points. As of the effective appraisal date, horizontal and backbone infrastructure, including the 24-acre Crystal Lagoon, is underway at the subject.
A legal description of the property is provided in the addenda.
Property Identification
Property Na me
Address
Tax ID
Owner of Record
Sale History
City ofRancho Mi rage CFD No. 5 (Section 31) - Improvement Area No. 1 10 Danube Dr.
Rancho Mirage, California 92270
685-220-039, 685-220-016, 685-220-026 to 030, 68S-220-032, 685-220-039, 685-431- 001 to 055, 685-441-001 to 025, 685-451-001 to 041, 685-461-001 to 048, 685-471- 001 to 059, 685-481-001 to to 026, 685-491-001 to 032, 685-501-001 to 039, 685-111- 001 to 018, 685-521-001 to 028
ECRM Residential, LP; Shea Homes
As ofthe date of value, three ofthe subject's lots within two of the age qualified lot groupings have transferred to the builder, Shea Homes. The transfers reflect structured pricing, meaning partial payments of either $300,000 or $375,000 have been made for each lot; however, there is a lingering obligation from Shea to the master developer for the remaining portion of the lot pricing based upon the ultimate sale of the finished home to the home buyer.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-310
Identification of the Appraisal Problem 3
It should be noted these price points are based on an agreement between the master developer and Shea Homes. Based on traditional transactions between land developers and homebuilders, these agreements are somewhat unique. Typically, developers and builders transact on residential lots at price points reflective of the builder's assumption of market risk factors going forward (during the build out of the subdivision); whereas, in the subject's case, the complete transfer of market risk has not occurred as it relates to the overall agreement in place between the developer and Shea Homes.
In contrast to the more traditional transaction where the land developer sells at a set price and title transfers, and all remaining risk for development and construction shifts to the builder, the developer and Shea Homes maintain an ongoing relationship in which risk is shared between both parties. These transactions do not reflect the market value of the fee simple interest of the subject lots. In the upcoming analysis, the estimate of market value for the three lots owned by Shea Homes will be based upon the land residual analysis completed within the valuation section herein.
Pending Transactions
The appraised property, in bulk, is not subject to an agreement of sale or an option to buy, nor is it listed for sale, as ofthe effective appraisal date.
As it relates to the valuation of the subject's varied lot categories and condominium sites, we have once again looked to the market for the valuation models most broadly applied in the valuation of master planned communities . It should be noted, land ownership has existing sale and builder agreements with Merchant Builders. According to the agreement with Shea Homes, the Merchant Builder acquires each lot from the Landowner as purchase agreements with homebuyers are executed. The home buyer then closes escrow with Shea Homes upon completion of home construction. The agreements with Davidson Communities and Woodbridge Pacific stipulate the homebuyer closes escrow on the lot from the Merchant Builder simultaneously with the Merchant Builder acquiring the lot from the Landowner prior to commencement of home construction. These in place arrangements with the Builders have unique provisions relative to most market transactions and fundamentally represent an ongoing business relationship between the Master Developer and the Builders. Our valuation is based on the widely supported market model of outright transfers from the Developer to Builders on a fee simple transfer of title .
Appraisal Purpose
The purpose of the appraisal is to develop the following opinion(s) of value:
• The market value, subject to a hypothetical condition, of the fee simple interest in the subject property as ofthe effective date of the appraisal, March 6, 2024 The date of the report is April 25, 2024. The appraisal is valid only as ofthe stated effective date.
Value Type Definitions
The definitions of the value types applicable to this assignment are summarized below .
Market Value
The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 9-311
Identification of the Appraisal Problem 4
assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised, and acting in what they consider their own best interests;
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 offinancial arrangements comparable thereto; and
5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. 1 Property Rights Definitions
The property rights appraised which are applicable to this assignment are defined as follows.
Fee Simple Estate
Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.2 Client and Intended User(s)
The client is the City of Rancho Mirage. The intended users are the City of Rancho Mirage and its associated finance team. No party or parties beyond the clients associated finance team may use or rely on the information, opinions, and conclusions contained in this report; however, this appraisal report may be included in the offering document provided in connection with the issuance and sale of the Bonds.
Intended Use
The intended use of the appraisal is for bond underwriting purposes. The appraisal is not intended for any other use.
Applicable Requirements
This appraisal report conforms to the following requirements and regulations:
• Uniform Standards of Professional Appraisal Practice (USPAP); • Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute; • Applicable state appraisal regulations;
• lnteragency Appraisal and Evaluation Guidelines issued December 10, 2010; 1 Code of Federal Regulations, Title 12, Chapter I, Part 34.42[h]; also lnteragency Appraisal and Evaluation Guidelines, Federal Register, 75 FR 77449, December 10, 2010, page 77472 2 Appraisal Institute, The Dictionary of Real Estate Appraisal, 7th ed. (Chicago: Appraisal Institute, 2022) City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-312
Identification of the Appraisal Problem
• Appraisal Standards for Land Secured Financing published by the California Debt and Investment Advisory Commission (CDIAC) (2004).
Report Format
Standards Rule 2-2 (Content of a Real Property Appraisal Report) contained in the Uniform Standards of Professional Appraisal Practice (USPAP) requires each written real property appraisal report to be prepared as either an Appraisal Report or a Restricted Appraisal Report. This report is prepared as an Appraisal Report as defined by USPAP under Standards Rule 2-2(a), and incorporates practical explanation ofthe data, reasoning, and analysis used to develop the opinion of value.
Prior Services
USPAP requires appraisers to disclose to the client any other services they have provided in 5 connection with the subject property in the prior three years, including valuation, consulting, property management, brokerage, or any other services. We have performed no services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three -year period immediately preceding the agreement to perform this assignment.
Appraiser Competency
No steps were necessary to meet the competency provisions established under USPAP. The assignment participants have appraised several properties similar to the subject in physical, locational, and economic characteristics, and are familiar with market conditions and trends; therefore, appraiser competency provisions are satisfied for this assignment. Appraiser qualifications and state credentials are included in the addenda of this report .
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-313
Scope of Work
Scope of Work
Introduction
The appraisal development and reporting processes require gathering and analyzing information about the assignment elements necessary to properly identify the appraisal problem. The scope of work decision includes the research and analyses necessary to develop credible assignment results, given the intended use of the appraisal. Sufficient information includes disclosure of research and analyses performed and might also include disclosure of research and analyses not performed. 6 To determine the appropriate scope of work for the assignment, the intended use of the appraisal, the needs of the user, the complexity of the property, and other pertinent factors were considered. The concluded scope of work is described below .
Research and Analysis
The type and extent of the research and analysis conducted are detailed in individual sections of the report . Although effort has been made to confirm the arms-length nature of each sale with a party to the transaction, it is sometimes necessary to rely on secondary verification from sources deemed reliable.
Subject Property Data Sources
The legal and physical features of the subject property, including size of the site, flood plain data, seismic zone designation, property zoning, existing easements and encumbrances, access and exposure, and condition of the improvements (as applicable) were confirmed and analyzed. Numerous documents were provided for the appraisal, including: master developer's infrastructure budget, final maps, an estimate of homebuilder hard and soft costs, site plans, project renderings, and information regarding entitled land uses.
Inspection
Kevin Ziegenmeyer, MAI conducted an on-site inspection of the property on February 1, 2024. Eric Segal, MAI, and Laura Diaz, MAI, have not inspected the property.
Valuation Methodology
It is not uncommon for appraisers to be asked to appraise properties at atypical times, relative to when market participants most often transfer properties. The market recognizes typical points during the development process when master planned projects often transfer, such as upon obtaining entitlements, completion of spinal infrastructure and/or recordation of final subdivision maps. In valuation assignments that involve value scenarios that do not coincide with the typical transaction points along the development timeline, the appraiser must apply market logic to the particular stage of the project. Since the subject is at one of these atypical points, we have employed market logic in the valuation of the subject in its hypothetical condition.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-314
Scope of Work 7
Cotino, of which the subject is a portion, represents Disney's first Storyliving community, with others planned across the nation. The physical centerpiece of the community is the under -development Crystal Lagoon that, once completed, will be the largest within the United States. Through our research, documented in the attached Appraisal Report, we have gathered market information that illustrates the market assigns a premium to lagoon communities when compared to other master planned projects without this amenity . Our research also supports the notion that Disney's association with an array of consumer products and services places these products and services at the top of most rankings. Overall, the lagoon and the Disney branding are concluded to offer value enhancements to the product lines proposed for Cotino, a quantified measurement of the enhancement is one of the challenges involved in this valuation . Nonetheless, we have utilized market logic to both rank and estimate quantitative premiums attributable to the Crystal Lagoon and Disney's influence at the Cotino project . As a condition ofthis assignment, the estimates of value provided herein are premised on the completion of the lagoon and Disney's involvement, which, as combined, creates a unique luxury targeted master planned community. Any revision to the completion of the lagoon and/or Disney's branding on the project is not considered in this analysis.
As it relates to the valuation ofthe subject's varied lot categories and condominium sites, we have once again looked to the market for the valuation models most broadly applied in the valuation of master planned communities. It should be noted, land ownership has existing sale and builder agreements with Merchant Builders . According to the agreement with Shea Homes, the Merchant Builder acquires each lot from the Landowner as purchase agreements with homebuyers are executed. The home buyer then closes escrow with Shea Homes upon completion of home construction. The agreements with Davidson Communities and Woodbridge Pacific stipulate the homebuyer closes escrow on the lot from the Merchant Builder simultaneously with the Merchant Builder acquiring the lot from the Landowner prior to commencement of home construction . These in place arrangements with the Builders have unique provisions relative to most market transactions and fundamentally represent an ongoing business relationship between the Master Developer and the Builders. Our valuation is based on the widely supported market model of outright transfers from the Developer to Builders on a fee simple transfer of title.
The valuation begins by employing a land residual analysis, which is a form of discounted cash flow (DCF) analysis, for each of the subject's residential land use categories . A DCF analysis is a procedure in which a discount rate (present value factor) is applied to a projected revenue stream generated from the sale of the individual components of a project. In this method of valuation, the appraiser specifies the quantity, variability, timing and duration of the revenue streams and discounts each to its present value at a specified yield rate.
The revenue component of the DCF is based on the estimated sales price for a representative, or benchmark, home for each of the residential land use categories; these conclusions are based on our analysis of sales of new and recently constructed homes in the subject's market area, as well as comparable resales. The expense category considers hard and soft costs associated with development, as well as entrepreneurial incentive. In addition, the land residual analyses rely on a number of assumptions, including the forecast of absorption, or disposition, of the single-family homes.
The land residual analyses result in a conclusion of improved lot value for each of the subject's representative residential land categories. It is important to note the land residual analysis is an City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-315
Scope of Work 8
interim step in the overall valuation process; the purpose is to arrive at an estimate of improved lot revenue, which is utilized in the subdivision development method . As will be discussed, the subject is unique in that it reflects Disney's first ever Storyliving by Disney branded community; it also will include a 24-acre Crystal Lagoon, the largest Crystal Lagoon in the United States. As such, there are no truly comparable bulk lot transactions available for analysis; consequently, the sales comparison approach is not considered a credible approach to value for the subject property and is excluded from this analysis.
At the end of the analysis, the subdivision development method is employed to estimate the market value ofthe subject property, in bulk. The subdivision development method is a form of discounted cash flow analysis in which the expected revenue (which is determined via land residual analyses), absorption period, expenses, and internal rate of return associated with the development and sell-off of the various land use components comprising the subject property to end users are considered.
It is noted that three of the subject's improved lots are under the ownership of Shea Homes as of the effective appraisal date (one in the S0's collection and two in the 60's collection). Therefore, the market value for these lots is based upon the conclusions of improved lot value; these three lots are excluded from the subdivision development method and are appraised separately from the subject's remaining 649 lots.
Our analysis excludes a typical cost approach since the subject property represents land. However, costs associated with home construction were taken into consideration as part of the land residual analysis and determination of financial feasibility . Given the limited, if any, income producing potential ofthe land, an income approach was not utilized.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-316
Area Analysis - Riverside County
Economic Analysis
Area Analysis- Riverside County
Introduction
Riverside County is part of a region known as the Inland Empire of sout hern Ca liforn ia, southeast of Los Angeles. The count y is bordered by San Bernardino County to the north, Orange County to t he west, San Diego and Imperia l count ies to t he south, and the state of Arizona to t he east. Major cities 9 in the county include Riverside, Moreno Valley, Corona, Murr ieta and Temecula. In genera l, Riverside County is one of Californ ia's fastest growing metropo litan areas as new residents locate here from t he more expensive metropo litan areas of Los Angeles and San Diego.
Population
The county has a popu lation of 2.44 million and has grown at an average rate of 0.5% per year over the past five years. The follow ing tab le illustrates recent population trends for Riverside County.
Population Trends
City 2018 2019 2020 2021 2022 2023 %/ Yr (5-year)
Banning 31,014 31,068 30,621 30,592 30,856 31,250 0.2%
Beaumont 48,013 49,913 53,318 53,945 54,349 56,590 3.6% Blythe 19,772 19,530 18,586 17,376 17,417 17,265 -2.5%
Calimesa 8,959 9,015 10,028 10,588 10,950 10,962 4.5%
Canyon Lake 10,990 11,021 11,069 11,082 11,003 10,949 -0.1% Cathedra l City 53,148 53,308 51,356 51,599 51,621 51,433 -0.6% Coachella 46,697 47,318 41,900 41,931 41,935 42,462 -1.8% Corona 166,299 166,937 156,63 7 157,182 157,139 157,005 -1.1% Desert Hot Springs 29,823 30,019 32,415 32,351 32,389 32,608 1.9% Eastvale 65,509 65,735 69,742 70,457 69,978 69,514 1.2% Hemet 84,126 84,354 89,325 89,302 89,170 89,918 1.4%
Ind ia n We lls 5,314 5,351 4,759 4,791 4,785 4,774 -2.0% Indio 88,984 90,112 88,795 89,422 89,789 90,837 0.4%
Jur upa Va lley 104,645 106,056 104,828 105,131 105,154 104,983 0.1% Lake Elsinore 62,622 63,270 70,572 71,225 71,989 71,973 3.0% La Quinta 40,563 40,663 37,504 37,727 37,562 37,979 -1.3% Men ifee 92,110 94,710 102,466 104,323 107,411 110,034 3.9% Mo reno Va ll ey 205,450 207,190 208,237 208,387 208,302 208,289 0.3% Murrieta 112,352 113,207 110,702 111,024 110,592 109,998 -0.4% Norco 26,593 26,473 26,659 24,680 25,035 25,037 -1.2%
Palm Desert 53,554 53,695 50,696 50,683 50,626 50,615 -1.1% Palm Springs 47,253 47,410 44,206 44,312 44,165 44,092 -1.3% Perr is 77,649 78,095 78,614 78,867 78,474 78,948 0.3%
Rancho Mirage 18,257 18,397 16,588 16,692 16,854 17,012 -1.4% Riverside 325,916 327,076 316,307 309,598 314,818 313,676 -0.8% San Jacinto 48,536 49,655 53,835 54,186 54,303 54,103 2.3% Temecula 112,243 112,561 109,820 109,881 109,468 108,899 -0.6% Wildomar 36,436 36,878 36,720 36,713 36,438 36,336 -0.1% Unincorporated 374,835 380,040 391,880 394,680 398,404 401,693 1.4% Tota l 2,397,662 2,419,05 7 2,418,185 2,418,727 2,430,9 76 2,439,234 0.3% Source: California Department of Finance
City of Ra ncho Mir age CFD No. 5 (Section 31) - Improvement Area No. 1 9-317
Area Analysis - Riverside County
Riverside is the fourth most populous county in California, following Los Angeles, San Diego and Orange Counties. The majority of residents live within incorporated areas, the largest of which is the city of Riverside, with a population of just over 313,000.
Employment & Economy
10 The California Employment Development Department (EDD) has reported the following employment data for Riverside County over the past five years.
Employment Trends
2018 2019 2020 2021 2022 2023
Labor Force 1,090,100 1,108,100 1,121,100 1,133,000 1,152,100 1,157,900 Employment 1,041,700 1,061,500 1,008,000 1,050,000 1,104,100 1,102,300 Annual Employment Change 27,500 19,800 -53,500 42,000 54,100 -1,800 Unemployment Rate 4.4% 4.2% 10.1% 7.3% 4.2% 4.8%
Source: California Employment Development Department
Riverside County saw declining unemployment rates in 2004-2006, increases from 2007 to 2010, declines between 2011 and 2019, a significant increase in 2020 due to the pandemic followed by improvement in 2021 and 2022. A slowing economy has contributed to rising unemployment during 2023.
The California Employment Development Department reported an unemployment rate of 5.5% in Riverside County in January 2024, up from 4.5% a year ago and compared to 5.7% for California and
4.1% for the nation.
As of January 2024, it was reported 23,700 non-farm jobs were gained in the Riverside-San Bernardino-Ontario MSA year-over-year. Annual job growth has slowed in recent quarters. The greatest job growth was in the Private Education/Health Services sector with 22,300 jobs gained, followed by the Government sector with 12,400 jobs gained. The greatest job loss was in the Trade, Transportation/Utilities sector with a loss of 10,700 job s, followed by Leisure/Hospitality with a loss of 3,800 jobs. The following chart indicates the percentage of total employment for each sector in the metro as of January 2024.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-318
Area Analysis - Riverside County
EMPLOYMENT BY SECTOR
Trade/Tr ansport/ Utilities
Private Education/Health Services
Government
Leisure & Hospitality
Professional/Bu siness Services
Construction/Mining
Manufacturing
Other Services
Financial Activities
Farm
Information
--■
■
0.0% S.0% 10.0% 15.0% 20.0% 25.0"/o 30.0"/o
Source: California Employment Development Department
The region's largest employment sector, accounting for roughly 27% of total employment, is Trade/Transportation/Utilities, which includes wholesale and retail trade; followed by Private Education/Health Services (18%) and Government (16%).
The region's largest employers are listed in the following table.
City of Rancho Mi rage CFD No. 5 (Section 31) - Improvement Area No. 1 11 9-319
Area Analysis - Riverside County 12
Top Employers - Riverside County
Employer Location Description No. of Employees
County of Riverside Countywide County Government 25,366 Amazon Countywide E-commerce 14,317
March Air Reserve Base March ARB Military Reserve Base 9,600 Nestle UA Mira Loma General Line Grocery Merchant Wholesalers 8,874 University of California, Riverside Riverside University 8,623 State of California Countywide State Government 8,383
Walmart Countywide Retail 7,494
Moreno Valley Unified School District Moreno Valley School District 6,020 Kaiser Permanente Riverside Medical Center Riverside Hospital 5,817 Corona-Norco Unified School District Corona School District 5,478 Riverside Unified School District Riverside School District 5,431 Mt. San Jacinto College San Jacinto Community College District 4,638 Marie Callender Who lesalers, Inc. Corona Wholesale Trade 4,454 Temecula Valley Unified School District Temecula School District 4,022 Eisenhower Medical Center Rancho Mirage Hospital 4,001
Pechanga Resort & Casino Temecula Resort/Casino 4,000
Hemet Unified School District Hemet School District 3,960 Murrieta Valley Unified School District Murrieta School District 3,552 Starcrest of California Perris E-commerce 3,450
Palm Springs Unified School District Palm Springs School District 3,328 Stater Bros Countywid e Retail Grocery 3,297
Lake Elsinore Unified School District Lake Elsinore School District 3,267 Home Depot Countywide Retail 3,115
Jurupa Unified School District Jurupa Valley School District 2,749 McDonald s Countywide Restaurant 2,721
City of Riverside Riverside City Government 2,700
Target Countywid e Retail 2,631
Coachella Valley Unified School District Therma l School District 2,581 Albertsons/Sav -On Countywide Retail Grocery 2,231
Riverside Community College District Riverside Community College District 2,228 Hemet Valley Medical Center Hemet Hospital 2,214
Agua Caliente Band of Cahuilla Indians Rancho Mirage Tribal Government/ Casinos 2,200 Spa Resort & Casino Palm Springs Resort & Spa 2,120
Beaumont Unified School District Beaumont School District 2,053 Kroger (Ralphs & Vons) Countywide Retail Grocery 2,035
Abbott Vascular, Inc. Temecula Medical Device Manufacturing 2,008 Desert Regional Medica l Center Palm Springs Hospital 1,991 Alvord Unified School District Corona School District 1,936 Lowe's Home Improvement Countywide Retail 1,928
United Parcel Service Countywide Delivery Services 1,678 Source: Riverside County Economic Development Agency, with source cited as "Databa seUSA.com, Websites, and Public Records, 2023" Household Income
Med ian household income represents a broad stat istical measure of well-being or standard of living in a commun ity. The median income level c;livides households into two equa l segments with one half of households earning less than the median and the other half earning more. The median income is considered to be a better indicator than the average household income as it is not dramatically affected by unusually high or low va lues. According to Claritas Spotlight data reporting service, the median househo ld income estimated for Riverside County in 2024 is $84,882, which is lower than the state of California's median income of $92,191.
Transportation
Access to and through Riverside County is provided by several major routes, including Interstates 10, 15 and 215, as well as State Routes 60, 62, 74, 79, 86, 91, 111 and 243. Interstate 10 is the primary City of Rancho Mirage CFD No. 5 (Section 31 ) - Improvement Area No. 1 9-320
Area Analysis - Riverside County
east-west connector while Interstates 15 and 215 are the primary north -south highways. The 91 Freeway provides travel from the Inland Empire to Orange County via the 55 Freeway. 13 Interstate 10 is a major east-west route in Southern California, connecting the Pacific coast (Santa \ Monica) with the Arizona state line before traveling further east through the southern portion of Arizona, New Mexico, Texas, Louisiana, Mississippi, Alabama, and terminating in Jacksonville, Florida.
Interstate 10 links the major California cities of Santa Monica, Los Angeles, Ontario, Beaumont, Palm Springs, Indio and Blythe.
As a primary east-west connector, Interstate 15 connects the counties of San Bernardino, Riverside and San Diego. The route extends north through Nevada, Arizona, Utah, Idaho and Montana to the Canadian border . Interstate 15 is a major thoroughfare for traffic between San Diego and the Inland Empire, as well as between Southern California and Las Vegas, Nevada. Interstate 215 comprises approximately 55 miles of interstate highway in the Inland Empire. The southern terminus of Interstate 215 is at the junction of Interstate 15 in Murrieta in south Riverside County and travels through Perris before joining the 60 Freeway in Moreno Valley. This interstate provides an alternative to Interstate 15 for travel between Phoenix, Las Vegas, San Bernardino and the San Diego area.
Public transportation is provided by various agencies. Riverside Transit Agency serves the western third of Riverside County, Sunline Transit Agency serves Palm Springs and the Coachella Valley area, Palo Verde Valley Transit Agency serves Blythe near the Arizona border, Pass Transit serves the San Gorgonio Pass communities, and Corona Cruiser serves the community of Corona. In addition, Riverside County is also served by Greyhound buses and Amtrak passenger trains.
The county's main airport is the Palm Springs International Airport. This two-runway airport is located about two miles east of downtown Palm Springs and is highly seasonal, with most flights operating during the winter.
Recreation & Culture
Riverside County offers innumerable recreational and cultural opportunities, including many public parks, schools, golf courses, museums and performing arts venues. Popular attractions include the Botanical Gardens at the University of California, Riverside; the historic Mission Inn in downtown Riverside; March Field Air Museum, an aviation museum near Moreno Valley and Riverside, adjacent to the March Air Reserve Base; Temecula Valley, a tourist destination in the southern part of the county with numerous wineries, wine tasting rooms, bed and breakfast inns and wedding venues; and Castle Park, an amusement park. Annual events in the county include the Festival of Lights in Riverside, known for its display of nearly three million Christmas lights; Ghost Walk Riverside; Temecula Valley Balloon and Wine Festival; and Harvest Wine Celebration.
Riverside County is home to multiple higher education institutions including, but not limited to, the University of California Riverside, California Baptist University, California Southern Law School, California State University San Bernardino and Mt. San Jacinto College.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-321
Area Analysis - Riverside County 14
Conclusion
In general, Riverside County is one of the fastest growing areas in the state . New residents have been relocating here from the more expensive metropolitan areas of Los Angeles and San Diego. The region offers diverse employment opportunities, numerous colleges and universities, extensive transportation routes, shopping centers, public services, and recreational activities.
In recent years, market and economic conditions were strong, with unemployment rates falling to historical lows. Employment conditions declined sharply in 2020 after the onset of the pandemic and though market and economic conditions have since improved, current macroeconomic factors, specifically high inflation, and rising interest rates, have reintroduced uncertainty in the market.
Recovery in the market is expected to be gradual and the long-term outlook for the region is good.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-322
Area Analysis - Riverside County
Area Map
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City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-323
Area Analysis - Riverside County 16
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-324
Surrounding Area Analysis
Surrounding Area Analysis
Boundaries
The subject is located in Coachella Valley within the City of Rancho Mirage. The neighborhood boundaries can generally be defined as the Rancho Mirage city limits .
Access and Linkages
17 Rancho Mirage is located on the middle of the Coachella Valley about 115 miles east of Los Angeles on Interstate 10. Neighboring Coachella Valley cities include Cathedral City, Palm Springs, and Desert Hot Springs to the west, and Palm Desert, Indian Wells, La Quinta, Indio, and Coachella to the east.
Primary access to the area is provided by Interstate 10 {1-10), which runs along the north side of the Rancho Mirage. In addition, Highway 111 runs through the city and connects with 1-10 in Whitewater to the northwest . Access to the subject from 1-10 is provided via Bob Hope Drive approximately three miles north of the subject. Overall, vehicular access is average.
The closest airport with regularly -scheduled commercial passenger service is Palm Springs International Airport, about eight miles west of the subject. The city is also served by the local bus line Sunline Transit Agency ("Sun Bus"), which services much of the Coachella Valley.
Demographic Factors
A demographic profile of the surrounding area, including population, households, and income data, is presented in the following table.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-325
Surrounding Area Analysis 18
Surrounding Area Demographics
5-Minute Drive 10-Minute Drive 15-Minute Drive
2024 Estimates Time Time Time Riverside Coun!Y
Population 2020 4,570 64,242 151,706 2,418,185
Population 2024 4,882 66,067 156,742 2,500,920
Population 2029 5,291 68,970 164,448 2,623,551
Compound% Change 2020-2024 1.7% 0.7% 0.8% 0.8%
Compound% Change 2024-2029 1.6% 0.9% 1.0% 1.0%
Households 2020 2,157 28,091 65,201 763,283
Households 2024 2,313 29,170 67,850 791,632
Households 2029 2,512 30,709 71,621 832,792
Compound% Change 2020-2024 1.8% 0.9% 1.0% 0.9%
Compound % Change 2024-2029 1.7% 1.0% 1.1% 1.0%
Median Household Income 2024 $99,814 $68,788 $71,120 $84,882 Average Household Size 2.1 2.2 2.3 3.1
College Graduate% 44% 33% 33% 24%
Median Age 65 57 53 38
Owner Occupied% 83% 69% 67% 67%
Renter Occupied% 17% 31% 33% 33%
Median Owner Occupied Housing Value $839,617 $567,064 $554,552 $548,183 Median Year Structure Built 2000 1987 1986 1989
Average Travel Time to Work in Minutes 25 25 24 35
Source: Clarit as
As shown above, the current population within a 5-minute drive time of the subject is 4,882, and the average household size is 2.1. Population in the area has grown since the 2020 census, and this trend is projected to continue over the next five years. Compared to Riverside County overall, the population within a 5-minute drive time is projected to grow at a faster rate.
Median household income is $99,814, which is higher than the household income for Riverside County. Residents within a 5-minute drive time have a higher level of educational attainment than those of Riverside County, while median owner -occupied home values are also significantly higher.
Land Use
In the immediate vicinity of the subject, land uses are residential and recreational in nature. There are multiple country clubs and golf courses surrounding the subject, including Desert Island Country Club, Rancho Mirage Country Club, Sunnylands Center & Gardens, Suncrest Golf Course, Marriott's Shadow Ridge Golf Club, Desert Willow Golf Resort, Tama risk Country Club, The Club at Morningside, Thunderbird Country Club, Sunrise Country Club, and Mission Hills Country Club.
The subject is also proximate to Eisenhower Medical Center, the largest employer in Rancho Mirage .
The River at Rancho Mirage, a shopping mall with approximately 215,000 square feet of retail space, is approximately three miles south of the subject. The River features a Cinemark Century Theatres and City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-326
Surrounding Area Analysis 19
multiple restaurants, including Yard House, The Cheesecake Factory, Babe's Bar-B-Que & Brewery, and Dave & Buster's. The subject is also proximate to Costco, Walmart, and Gelsons.
The subject property is bordered by the 200-acre Annen berg Estate (and was formerly a part of the estate grounds), which includes a 25,000 square foot home, three cottages, eleven lakes, a tennis court, nine-hole golf course, nine-acre garden, and visitor center. The estate historically served as a retreat for heads of state, royalty, and celebrities, but was placed into a trust in 2001 with the intent the property be open to the public. After renovation and restoration work conducted from 2010 to 2012, a 15-acre portion of the property opened to the public in 2012 as Sunnylands Center & Gardens.
Sunnylands includes gardens and walking paths, as well as a center with rotating art exhibits, cafe, and gift shop.
Other land use characteristics in the area are summarized as follows :
Surrounding Area Land Uses
Character of Area
Predominant Housing Age
(Both Ownership and Rental)
Predominant Quality and Condition
Approximate Percent Developed
lnfrastructu re/Planning
Prospective Change in Land Use
Prevailing Direction of Growth
Subject's Immediate Surroundings
Suburban
New to SO+ years old
Good
80%
Average
Not likely except for infill development
Infill
North
South
East
West
Single family residential development
Single family residential, Rancho Mirage Country Club
Shadow Ridge Gold Club
Sunnylands Center & Gardens
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-327
Surrounding Area Analysis 20
Clarity Real Estate Advisors
19 Clarity Real Estate Advisors.
20 City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-328
Surrounding Area Analysis 21
Outlook and Conclusions
The area is in the mature stage of its life cycle. The subject is located in a suburban area with many outdoor recreation opportunities . Given the history of Rancho Mirage and the growth trends, it is anticipated that property values will remain stable in the near future and increase over the long term.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-329
Surrounding Area Analysis 22
Surrounding Area Map
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-330
Residential Market Analysis 23
Residential Market Analysis
In the following paragraphs, we examine supply and demand indicators for residential development in the subject's area.
As part of this land-secured financing, Clarity Real Estate Advisors ("Clarity") prepared a home price and absorption analysis, dated March 4, 2024, for the subject property. Additionally, the Developer provided for review and consideration a market analysis and strategic development recommendations for the Catino community, prepared by RCLCO, dated May 12, 2023. Pertinent information from both market studies will be referenced in this Residential Market Analysis section, with particular emphasis on market data from the Clarity report. In addition, the Appraisal Report presents research on new home projects and resale data in the market area utilizing a variety of sources, including the Multiple Listing Service (MLS).
The following market analysis will begin with a discussion of new home projects in the subject's market area, followed by data on resales of homes in resort communities. Due to the unique characteristics of the subject project and its extensive amenity offerings, resales of homes within resort communities are often better comparables than traditional new home projects in the area.
The presentation of comparable data will be followed by a profile ofthe subject property, followed by a conclusion of base sale pricing for a representative home within each of the subject's land use categories/product lines based on a comparison of the subject to the data available. Absorption rates are also forecast after considering the concluded benchmark pricing.
Submarket Overview
The subject is a portion of a master planned community located in Rancho Mirage. The area is suburban in nature and has good transportation linkages. Overall, Rancho Mirage appeals to buyers looking for vacation homes (or second/third homes), "snowbirds," empty nesters, and retirees; aside from those employed locally, the area draws buyers from San Diego, Los Angeles, and Orange Counties. Given the subject's unique qualities, specifically its Disney branding, it is also likely to attract buyers from throughout the United States; reportedly, the project has an extensive interest list.
Single-Family Building Permits
Single-family building permits for the city of Rancho Mirage as well as Riverside County totals are shown in the following table.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-331
Residential Mark et Analysis 24
Single-Family Building Permits
City of Rancho
Year Mirage County of Riverside
2014 38 5,058
2015 39 4,325
2016 47 5,136
2017 24 5,827
2018 195 7,327
2019 194 6,267
2020 224 8,344
2021 323 7,428
2022 183 8,211
2023 91 8,349
Source: SOCDS Buildin g Permit s Monthly Request
Active New Home Projects Pricing and Absorpti on
Active and recent ly sold out new home projects in Coachella Valley are summar ized in the fo llowing table, along with a summary of project amenitie s, based on data from February 2024. These projects are considered most competitive with the subject property given their locations and lot sizes.
Active & Recently Sold Out Projects
Avg. Home Average Typical Lot Units Units Units Sales per Project Name Master Plan Communi!Y: Develoeer Averase Price Size {SF) Pri ceLSF Size (SF! Planned Sold Unsold Month Elan (detached homes) Palm Springs Fa r W est Industrie s $1,384,567 2,421 $S71.90 5,250 56 26 30 1.3 Del Webb at Rancho Mirage Ra ncho Mirage Del Webb $71 1,090 2,031 $350. 12 S,500 1,029 1,028 1 15.0 Gallery at Mir alon Miralon Palm Springs Gal lery Homes $1,1S6,763 2,6S4 $435.86 6,000 so 32 18 1.3 Escena II Escena Palm Springs Toll Brothers $1,371,2SO 2,614 $524 .58 7,150 90 90 2.7 Mon tage Pa lm Desert GHA Companies $1,l S0,000 2,422 $474.81 8,12S 63 61 3.7 Coral Mounta in at PGA West La Quinta Al ta Verde Group $1,S14,S80 2,828 $53S.57 8,160 41 40 1.4 Point Happy La Quinta Willam s Homes $1,163,900 2,984 $390 .0S 8,840 29 16 13 1.2 Pa lo Verd e La Quinta W ill ams Homes $1,134,970 3,177 $3S7.2S 10,125 37 32 0.7 Stone Creek Ranch La Quinta Toll Brothers $1,631 ,000 3,589 $454.44 10,800 70 67 2.3 Revell e Rancho Mirage Blackstone $2,644,000 3,6SO $724 .38 12,500 13 11 0.5 Andalusia at Coral Mounta in La Quinta Drummo nd Company $2,278,000 4,427 $514.57 14,162 SOD 362 138 1.7 Elan (townhomes) Pa lm Springs Fa r West Industri es $943 ,182 1,998 $472.06 Attached 2S 2S Cody Place Palm Spri ngs Toll Brothers $1,140,7SO 2,173 $S24.97 Attached 102 102 0 2 .7 Min imum $711 ,090 1,998 $3S0.12 5,2SO 0.5
Maximum $2,644,000 4,427 $724.38 14,162 15.0
Average $1,401,850 2,844 $486.97 8,783 2.9
Source: Cla rit y Re al Estate Advisors
City of Rancho Mir age CFD No. 5 (Section 31) - Improvement Area No. 1 9-332
Residential Market Analysis
Amenity Summary
Project Name Master Pl an Community Developer Ameniti es Elan (detached homes) Palm Springs Fa r West Industries Homes include a pool and casita Del Webb at Rancho Mirage Rancho Mirage Del Webb Gated entry, recreation center, pool, fitness center, tennis courts; age qualified Gall ery at Mira Ion Miralo n Palm Springs Gallery Homes Ga ted entry, private club with pools, bar, yoga/fitness studio, cafe, parks, trail s, open Escena II
Montage
Escena
space
Gated entry, golf course, clubh ouse, trails, homes inclu de private pools Park, some homes include a pool
25 Coral Mountain at PGAWest
Pa lm Springs
Palm Desert
La Quinta
Toll Brothers
GHACompanies
Alta Verde Group Multiple golf courses, clubhouses, private clubs, tennis courts, pickleball courts, olympic swimmi ng pool, fitn ess/sports facility
Point Happy
Palo Verde
Stone Creek Ranch
Revelle
Andalusia at Coral Mountain
Elan (townhomes)
Cody Place
Source: Clar ity Real Estate Advisors, IRR Research
La Quinta Willams Homes Homes includ e a pool
La Quinta Willams Homes Homes include a pool
La Quinta Toll Brothers Gated entry
Rancho Mir age Blackstone Gated entry, homes include attached casita La Quinta Drummond Company Golf course, fitn ess center, full-service sports club, restaurant/l ounge Palm Springs Far West Industries Homes includ e private decks Palm Springs Toll Brothers Gated entry, pool, clubhouse, dog park Overall, absorption at the projects has ranged from 0.5 to 15.0 sales per month, with an average of 2.9 sales per month; though, the higher end of that range is a Del Webb age-restircted (55+) community .
Excluding this project, the absorption statistics range between 0.5 and 3.7 sales per month.
Two of the projects in La Quinta, Coral Mountain at PGA West and Andalusisa at Coral Mountain, reflect resort -style communities with golf courses and membership clubs. Coral Mountain offers golf courses, clubhouses, private clubs, tennis courts, pickleball courts, olympic swimming pool, and fitness/sports facility. Andalusia at Coral Mountain includes golf course, fitness center, full-service sports club, and restaurant/lounge. Sales have averaged 1.4 homes per months at Coral Mountain at PGA West, though the active portion of the community by Alta Verde Group is approaching sell-out, and sales at Andalusia at Coral Mountain (one of the projects at the top of the price point range) have averaged 1.7 sales per month .
Two of the communities in Palm Springs, Mira Ion and Escena, are master planned communities.
Mira Ion is planned for 1,150 homes and includes a private club with pool, full service bar, yoga/fitness studio, cafe, parks, walking trails, and open spaces. Escena includes 455 homes within five neighborhoods and offers a golf course and swimming pool. Gallery at Mira Ion has averaged 1.3 sales per month, while Escena II averaged 2.7 sales per month.
Other notable projects in the previous table inlude the aforementioned Del Webb Rancho Mirage, and Revelle, the two communities located in Rancho Mirage. Del Webb Rancho Mirage is an age-restricted 55+ community planned for 1,100 homes. Amenities include a recreation center, pool, tennis courts, and fitness center. Base pricing at the projects starts in the high $500,000's to the high $800,000's, placing it toward the lower end of the competitive product price range; sales at Del Webb have averaged 15 homes per month . Revelle is a small gated community in Rancho Mirage with no other community amenities, though homes include swimming pools. Price points are toward the top end of the competitive product range. The project has averaged 0.50 sales per month; however, as a small infill community, the pace of sales is expected to be slower than those at master planned communities similar to the subject.
Two of the competitive projects, Elan and Cody Place, reflect attached town home projects; sales at Cody Place averaged 2.7 homes per month, while Elan just recently began sales.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-333
Residential Market Analysis
Proposed Projects
There are also several proposed resort projects planned in the Coachella Valley area, which summarized below.
26 DSRT Surf in Palm Desert -this project is proposed for 83 homes, a 92-room hotel, fitness center, and a 5.5-acre surf lagoon. The project is approved but construction has not yet commenced.
Thermal Beach Club in Thermal - this is a proposed 326-home community with a 20-acre Endless Surf lagoon. In addition to the surf pool, the project also includes a village with waterfront dining, rock climbing, spa/lounge area, fitness center, and lawn for events and gatherings. Pricing has not yet been released. Also located in Thermal is the Thermal Club, a community centered around a private racetrack.
TALUS in La Quinta - this project commenced construction in 2021 with the intent to offer 84 single family homes and condominiums, two branded luxury hotels, a spa, and conference center. However, construction has stalled at the project due to financing issues.
Coral Mountain in La Quinta - Finally, it is noted a proposal for a half-mile wave surfing basin at the approximately 400-acre master planned resort community of Coral Mountain was rejected by the City of La Quinta.
Resale Pricing
Given the extensive amenity package Catino will offer, a search of resales within Coachella Valley resort communities was also conducted. The transactions went into contract in 2024 and are summarized on the following page.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-334
Residential M arket Analysis 27
Resales
Living Area Last List Sa les Days on Lot Size
Address Sa l e Date jSFl Sa le Price Price PriceLSF Sa lelUst Year Built Market jSFI Cit:£ Neighborhood 74119 DesertTenaja Tra il 1/23/2024 2,559 $1,925,000 $2,037,000 $752 94.50% 2000 38 11,326 India n Wells The Reserve 74339 Desert Tenaja Trail 2/16/2024 2,498 $2,050,000 $2,095,000 $821 97.85% 1999 32 Indian Well s The Reserve 74339 Desert Tenaja Trai l 2/16/2024 2,498 $2,050,000 $2,095,000 $821 97 .85% 1999 64 11,326 India n Welts The Reserve 74295 Desert Tenaja Trai l 1/29/2024 3,220 $2,375,000 $2,575,000 $738 92.23% 1999 56 12,632 Indian Wel ls The Reserve 50210 Desert Arr oyo Trail 2/27/2024 4,008 $3,650,000 $3,795,000 $911 96.18% 2007 81 19,166 Indian Wells The Reserve 74381 Desert Bajada Trail 2/15/2024 4,569 $3,500,000 $3,997,000 $766 87.57% 2000 126 19,602 Indian Wells The Reserve 76450 Via Uzzano 1/8/2024 3,724 $2,450,000 $2,650,000 $658 92.45% 2007 30 13,939 Indian Well s Toscana 43212 Via Lucca 1/16/2024 3,260 $2,900,000 $2,900,000 $890 100.00% 2004 60 12,632 India n Wells Toscana 75734 Via Livorn o 2/26/2024 3,108 $2,980,000 $2,995,000 $959 99.50% 2019 18 11,76 1 Indian Wells Toscana 76247 Via Sovana 2/23/2024 3,682 $3,740,000 $3,895,000 $1,016 96.02% 2022 33 12,632 Indian Well s Tosca na 76464 Via Fi renze 2/6/2024 6,500 $4,000,000 $4,295,000 $615 93.13% 2008 75 22,216 India n Wells Toscana 76369 Via Chia nti 1/12/2024 4,995 $4,875,000 $5,295,000 $976 92.07% 2002 71 18,295 India n Welts Toscana 411 Eagle RDG 2/29/2024 3,378 $3,400,000 $3,500,000 $1,007 97.14% 2004 0 15,705 Pa l m Desert Bighorn 404 Vista CRK 3/6/2024 3,376 $4,050,000 $4,500,000 $1,200 90 .00% 2004 67 14,810 Pa lm Desert Bighorn 58485 Mijas 2/28/2024 3,029 $1,995,000 $1,995,000 $659 100.00% 2006 73 10,454 La Quinta Andalusia at Coral Mountain 58440 Mijas 2/14/2024 3,177 $1,875,000 $2,045,000 $590 91.69% 2006 68 10,019 La Quinta Andalu sia at Coral Mou nta in 58061 Carmona 2/29/2024 4,365 $3,105,000 $3,295,000 $711 94.23% 2006 100 20,038 la Quinta Andalu sia at Coral Mountain 81575 Ca rboneras 2/22/2024 4,184 $3,600,000 $3,600,000 $860 100.00% 2021 14 17,424 la Quinta Andalusia at Coral Mountain 81845 Andalus ia 2/7/2024 4,126 $3,995,000 $3,995,000 $968 100.00% 91 16,553 La Quinta Andalusia at Coral Mounta in 59895 Seville 2/16/2024 4,768 $4,300,000 $4,595,000 $902 93.58% 2020 134 20,038 la Quinta Andalusia at Coral Mounta in 78221 Deacon DR 1/10/2024 3,529 $3,150,000 $3,395 ,000 $893 92.78% 2002 13,068 la Quinta Traditi on 53240 De1 Gato DR 2/15/2024 5,066 $3,625,000 $3,599,000 $716 100.72% 2002 215 20,909 la Quinta Traditio n 78562 Talking Rock Turn 1/9/2024 6,477 $4,725,000 $4,995,000 $730 94.59% 1999 173 25,265 la Quinta Tradition 53630 Del Gato DR 1/5/2024 5,712 $6,499,000 $6,499,000 $1,138 100.00% 2021 43 11,344 la Quinta Traditi on 80717 Via Savona 1/10/2024 2,883 $2,000,000 $2,295,000 $694 87.15% 2003 32 9,148 la Quinta Hideaway 80806 Via Pessaro 2/29/2024 4,676 $3,150,000 $3,395 ,000 $674 91.78% 2008 103 13,504 la Quinta Hideaway 53568 Via Bellagio 1/30/2024 3,190 $3,500,000 $3,600,000 $1,097 97.22% 2014 24 15,246 la Quinta Hi deaway 80860 Via Portofi no 2/14/2024 4,453 $3,900,000 $3,999,000 $876 97.52% 2022 33 16,117 la Qui nta Hideaway 53110 Vi a Dona 1/ 12/2024 5,082 $5,175,000 $5,499,000 $1,018 94.11% 2023 90 15,246 la Quin ta Hideaway 52455 Via Savona 1/22/2024 6,890 $6,700,000 $6,950,000 $972 96.40% 2013 70 21,780 la Qui nta Hideaway Total Sales 30 4,099 $3,507,967 $3,679,167 $854 95 .31% 2008 67 15,938 (avg.) ( avg.) ( avg.) (avg.) ( avg.) ( avg.) (avg.) ( avg.) Source:LocalMul tiplelislingService(MLS)
The comparab les have an average construct ion year of 2008 and an average lot size of 15,938 square feet . With sa le prices ranging from $1,875,000 to $6,700,000 ($590 to $1,200 per square foot), the majority of resales reflect higher price points than active ly selling new home communities; however, the resales are also characterized by larger homes and lot sizes, and superior amenity packages compared to the actively selling projects, as we ll as upgrades such as backyard development/amen ities not captured in base pricing.
Subject Positioning
Summ ary of Product
The subject reflect s Phase 1 of an approximately 618-acre master planned commun ity that, at final build out, wil l include 1,932 residentia l units, up to 175,000 square feet of retai l space within a town center, and a hotel with up to 400 resort/hotel keys. The subject wi ll be segmented into multip le product lines featuring a variety of home/ lot sizes and price points in order to appeal to a variety of homebuyers. The fo llow ing tab le summarizes the number of lots for Improvement Area No. 1 of Cotino (the subject property) by land use category.
City of Rancho M irage CFD No. 5 (Section 31) - Improvement Area No. 1 9-335
Residential Market Analysis 28
Summary of Lot Categories
Land Use Description Type Dimensions Size (SF) No. of Lots Builder Large Lot 135's Multi -Generationa I 135 X 200 27,000 22 Davidson Large Lot 120's Multi -Generationa I 120 X 150 18,000 33 TBD Large Lot 90's Multi-Generational 90 X 140 12,600 43 Woodbridge Conventional Lot 70's Age-Qualifi ed & Multi- Generational 70x 130 9,100 120 Davidson Conventional Lot 60's Age-Qualified & Multi - Generational 60 X 120 7,200 100 Shea Conventional Lot so's Age-Qualified & Multi- Generational 50 X 90 & 50 X 110 5,000 184 Shea Condos 2,000 .l.S..Q TBD
652
The subject's large lots range from 12,600 to 27,000 square feet; conventional lots range from 5,500 to 9,100 square feet. The 50's collection also includes a cluster lot designation, with a typical lot size of 4,500 square feet (dimensions of 50 ft by 90 ft). However, it is noted both the cluster and conventional lots within the 50's collection have lot widths of 50 feet; these lots are part of Shea's Cottage Collection, and the offered floor plans are the same for both land use categories. Therefore, in the upcoming analysis, we will utilize a representative lot size of 5,000 square feet in the valuation of Shea's Cottage Collection. In addition, the subject will also include 150 condominium units within two or three neighborhoods, many of which will have Crystal Lagoon frontage. The master developer is reportedly actively engaged in discussions with potential condominium developers regarding development options, and is conducting market research and engaging with specialists to determine optimal product. The master developer expects to enter into one or more agreements this year with condom inium developers for the sale, partnership, or similar agreement to develop the condominium sites. For purposes of this analysis, the condo units are considered as two separate product lines intended to appeal to two different buyer segments- a luxury product with Crystal Lagoon frontage and a standard product without Lagoon frontage.
Shea is the only builder actively selling homes at the project. A summary of current base pricing by floor plan is provided in the tables below. As of the effective appraisal date, ten sales are pending.
Floor Plan Summary - 50' s Cottage Collection
No. of Living Typical Lot Developer's Base
Builder Floor Plan Units
1 Area (SF) Unit Mix Bedroom Bathroom Stories Garage Size (SF) Price Shea Ateli er 184 2,262 35 2 2.5 1 2-car 5,000 $1,659,990 Atelier II 2,275 32 2 2.5 1 2 -car $1,679,990
Palmera 2,322 24 2 2.5 1 2-car $1,699,990
Palmera II 2,282 30 2 2.5 1 2-car $1,719,990
Moderne 2,821 63 2 3.0 2 2-car $1,854,990
Weighted Ave rage 2,467
1 Age qualified and multi~generationaf units. 78 age-qualified units in total.
City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 9-336
Residential Market Analysis
Floor Plan Summary- GO's Grand Collection
No. of Living Typical lot Developer's Base
Builder Floor Plan Units
1 Area (SF) Unit Mix Bedroom Bathroom Stories Garage Size (SF) Price Shea Sonora 100 2,782 23 3 3.5 1 2-car 7,200 $2,109,990 Melodia 2,925 25 3 3.5 1 2-car $2,184,990
Aerion 3,393 29 3 3.5 2 2-car $2,309,990
Panora mica 3,720 23 3 3.5 2 2 -car $2,439,990
Weighted Average 3,211
1 Age-qualifi ed and multi -generational units. Thereare45 age-qualified units in total.
Further details on proposed floor plans for the remaining product lines will be provided later in this report. However, a summary of the representative home sizes utilized in the upcoming analysis are provided below.
Summary of Representative Homes by Product Line
Typical Typical Lot
Product Line Home SF SF
SO's Cottage Collection 2,470 5,000
60's Grand Collection 3,200 7,200
70's Grand Collection 3,420 9,100
90's Estate Collection 3,900 12,600
120's Estate Collection 4,160 18,000
135's Estate Collection 5,730 29,700
Condo - No lagoon Frontage 1,900 Attached
Condo - lagoon Frontage 2,100 Attached
Discussion of Amenities
29 The project will include extensive community amenities, many of which will be unique to the area; as such, the subject is positioned at the top end of the competitive market and is expected to command substantial premiums over other communities in the area. The following is a summary of Cotino's community amenities:
Disney Branding - The subject reflects the first-ever Storyliving by Disney branded community. As such, there are no directly comparable communities available to define the impact of the Disney branding. The Clarity market study notes Disney is "among the most well known and respected brands in the world," and states the subject will benefit from Disney's visibility, reputation, community theming, and skillful placemaking. The market study also delineates three components associated with Disney branding that will contribute to premiums achieved by the subject, as summarized in the following excerpts from the report:
"Walt Disney lmagineering: The imagineering team is heavily involved in the theming and design of Catino. This highly creative team has incorporated the history and natural attributes of the Coachella Valley into the design of the community. As proven at Disney properties throughout the world (theme parks, hotels, etc.), Disney has a tremendous track record for exceptional placemaking.
Disney Service: Disney is internationally recognized for exceptional service at its theme parks and hospitality properties. Programming and operations at Catino will be led by Disney, providing an expected high-level of service.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-337
Residential Market Analysis 30
Disney Leverage: Catino will benefit from Disney's massive library of entertainment and content which will be used in events and programming . This unique attribute will set Cotino apart from competitive communities in the valley and provide a sense of exclusiveness." To forecast premiums associated Disney branding, the Clarity market study analyzed home sales within the Celebration by Disney community in Orlando (homes constructed between 1996 and 2017) with two nearby non-branded residential communities (homes constructed between 1992 and 2023).
The market study found branding premiums of approximately 25% at Celebration after adjusting for other factors, such as lot size and amenities .
For comparison, the RCLCO market study estimates a 14.5% premium for Disney branding over other resort communities in Coachella Valley, but approximately 25% over traditional communities with few amenities.
Crystal Lagoon - Crystal Lagoons are man-made lagoons with crystalline waters, created by the Crystal Lagoon company with patented technology; there are currently 71 operational Crystal Lagoons worldwide . At 24-acres, the Crystal Lagoon, proposed for the subject will reflect the largest in the United States. The Lagoons offer turquoise waters and white sand beaches and provide opportunities for swimming and other water sports.
The Clarity market study report considered Crystal Lagoon communities throughout the United States and compared them to other projects without Crystal Lagoons (though, some still had lagoon/water features); four projects with Crystal Lagoons (three in Florida and one in Texas) were compared to new, actively selling, non-Lagoon master planned communities. The market study concluded that communities with Crystal Lagoons commanded premiums of 2% to 3% of new home base pricing compared to non-Crystal Lagoon projects with otherwise similar amenities; premiums of 8% to 14% were found compared to communities with no lagoon features (though, these projects often had fewer overall amenities as well) . Given the large size of the Crystal Lagoon proposed for the subject, the Clarity study reconciles to a premium of 5% for Catino, compared to other projects in the area.
The RCLCO market study estimates a Crystal Lagoon premium of 15% to 25% compared to projects with no Crystal Lagoon. However, given the projected starting prices at Catino are much higher than the prices at the other Crystal Lagoon communities analyzed, the study concludes to a premium of 10% for Catino over other projects in the area.
Additional Community Amenities : Other community amenities include optional Artisan Club memberships available for purchase, which will feature access to the Parr House (a multifunctional venue and event space), a beachfront clubhouse with fitness center, swimming pool, pickleball courts, and restaurant, and curated Disney events (including performances and seasonal celebrations). It is noted a portion of the Crystal Lagoon will have private beaches for Artisan Club members. In addition, Catino will include a Town Center, which will offer shopping, entertainment, and activity locations, as well as an open-air market featuring artists. Finally, the project will include a collection of parks and walking paths throughout the community.
A number of the described amenities are under construction as part of Phase 1. These include the Crystal Lagoon, Phase 1 parks, the private club, public beach, and approximately 45,000 square feet of City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 9-338
Residential Market Analysis 31
the Town Center. Please note, the Crystal Lagoon and Town Center are not within the boundaries of Improvement Area No. 1; the remaining community amenities within Improvement Area No. 1 are not subject to the Special Tax.
The extensive amenity offerings at Cotino are expected to command premiums in home pricing above other projects in the area. Overall, the Clarity market study is projecting premiums of 35% of base pricing over other master planned communities in Coachella Valley. The RCLCO market study fo recasts a premium of 14.5% over non-branded resort communities, but 35% over non-resort projects in the area.
Conclusion of Representative Price Points
The Clarity and RCLCO market studies posit Cotino will command premiums of 35% over other master planned communities in the area due to overall superior amenities. The active and recently sold out projects in Coachella Valley are most useful for considering the subject's 50's, 60's, 70's, and condominium collection of homes. However, due to the larger home and lot sizes ofthe remaining land use categories, the resale data is given greater weight in determining the representative price point for these lots.
The active and recently sold out competitive projects range from approximately $350 to $724 per square foot; considering a 35% premium results in adjusted sale prices of $472 to $977 per square foot, with an average of $657 per square foot.
The resales of homes within resort communities reflect minimum and maximum sale prices of $590 to $1,200 per square foot, respectively, with an average of $854 per square foot. Given these homes are located within projects with more extensive communities than the majority of active projects, a lesser premium of 15% is considered . This results in an adjusted price per square foot of $678 to $1,200, with an average of $982 per square foot.
Based on available home sales data from competitive projects, we conclude to a representative price point for the subject's benchmark homes within each lot category as follows.
Summary of Representative Homes by Product Line
Typical Typical Lot Concluded Base
Product Line Home SF SF Pricing Price per SF
50' s Cottage Collection 2,470 5,000 $1,740,000 $704
60's Grand Collect ion 3,200 7,200 $2,250,000 $703
70's Grand Collection 3,420 9,100 $2,650,000 $775
90's Estate Collection 3,900 12,600 $3,160,000 $810
120's Estate Collection 4,160 18,000 $3,850,000 $925
135's Estate Collect ion 5,730 29,700 $5,400,000 $942
Condo - No Lagoon Frontage 1,900 Attached $1,390,000 $732 Condo - Lagoon Frontage 2,100 Attached $1,860 ,000 $886 Please note, the conclusions reflect base pricing, net of options, upgrades, and incentives. While options, upgrades, and incentive are common in the local market - and expected at the subject property (it is noted Shea is currently offering $35,000 in incentives for design center upgrades and use oftheir in-house lender) - the upcoming valuation considers base pricing. The subject is expected City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 9-339
Residential Marke t Analysis 32
to achieve pricing at the top of the Coachella Valley market due to its extensive amenity package and Disney branding.
Conclusion of Absorption Rate
The average pace of sales is expected to fluctuate among produ ct lines, as homes with lower price points typically average more sales per month than those with higher price points . Master planned communities often benefit from coordinated marketing efforts and enjoy momentum and drawing power that smaller infill projects do not have. Disney is heavily involved in sales and marketing at Cotino.
The following table is courtesy of the Clarity market study and summarizes the absorption conclusions for the subject property.
Clarity• Estimated Absor ption Schedule
CFD No. 5 (Secllon 31), Improvement Area No. 1 I 2024 2025 I 2026 I 2027 I 2028 Neighborhood P';ct 8111der U'1S = SalesStart 01 Q2 OJ 04 1 01 02 OJ 04 01 Q2 OJ 04 01 Q2 OJ Q4 01 02
50" - Cottage SFD Shea 29 4.0 Jul-24 12 12 5
50" - Cottage (AO) SFD Shea 155 4.0 Feb-24 8 12 12 12 12 12 12 12 12 12 12 12 12 3 60" - Grand SFD Shea 55 3.0 Feb-24 6999994
60" - Grand (AO) SFD Shea 45 3.0 Jul-24 9 9 9 9 9
70' - Grand SFD D.rvidson 67 2.5 Jui>-24 2 7 8 7 8 8 7 8 5 70' - Grand (AQ) SFD Davidson 53 25 Jt11>-24 278 7 88 7 6 90"- Eslale SFD WPG 43 20 Jun-24 2666666
120' - Estate SFD TBD 33 2.0 Sep-24 2 6 6 6 6 6
135' - Estate SFD 03Vldson 22 1.5 Jul-24 4 5 4 5 4
Condos - Non-Lagoon Condo TBD 75 3.5 J ul-26 10 11 10 11 10 11 10 2 Condos - Lagoon Condo TBD 75 3.5 Jul-26 10 11 'IO 11 ·10 1 1 10 2 Quarterly T otol
lilmualTotnl _ _ _1_84 _ _ I__ -~ __ 1 _ 1~ _ 1 _ 99 _ _L 24 _ Stabilized absorption rates are projected as follows: 4.0 sales per month for 50's Cottage line, 3.0 sales per month for 60's Grand line, 2.5 sales per month for 70's Grand line, 2.0 sales per month for 90's and 120's Estate line, and 1.5 sales per month for 135's Estate line. Condo sales are forecast at 3.5 sales per month .
Absorption at the previously presented active and recently sold out projects ranged from 0.50 to 15.0 sales per month, with an average of 2.9 sales per month. As noted, Shea recently commenced sales of the Cottage and Grand product lines and has 10 homes in-contract as of the effective appraisal date.
Based on the pace of sales data at competitive properties, the data presented in the Clarity report, and the influence of Disney on the marketing process at Cotino, our conclusions of absorption are as follows:
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-340
Residential Market Analysis 33
Summary of Representative Homes by Product Line
Typical Typical Lot Concluded Base Concluded Sales Sales per 6 Product Line Home SF SF Pricing Price per SF per Month Month Period 50's Cottage Collection 2,470 5,000 $1,740,000 $704 4 24 60's Grand Collection 3,200 7,200 $2,250,000 $703 3 18
70's Grand Collection 3,420 9,100 $2,650,000 $775 2 to 3 16 90's Estate Collection 3,900 12,600 $3,160,000 $810 2 12 120's Estate Collection 4,160 18,000 $3,850,000 $925 2 12 135's Estate Collection 5,730 29,700 $5,400,000 $942 1 to 2 8 Condo - No Lagoon Frontage 1,900 Attached $1,390,000 $732 3 to 4 21 Condo - Lagoon Frontage 2,100 Attached $1,860,000 $886 3 to 4 21 Ability to Pay
The subject project wi ll include at least three homebui lders (the 120's Estate collection and condominiums do not have designated builders yet ) offer ing a variety of floor plans. In this section, we will examine the ability to pay among prospect ive buyers for the representative high and low price point at the project. First, we wi ll estimate the required annual househo ld income based on typica l mortgage parameters in the subject's market area. Specifically, we wi ll employ a loan-to-va lue rat io of 80% (down payment of 20%), mortgage interest rate of 6.50%, 360 month ly payments, and a 40% ratio for the housing costs as a percent of month ly income (inclusive of principal, interest, all taxes and insurance). Property tax payments are accounted for in the analysis as well as homeowner's insurance. The following tab le shows the estimate of the annual household income that wou ld be requ ired to afford homes priced at the representative price point.
Income Required
Home Price $1,390,000 $5,400,000
Loan% of Price (Loan to Va lue) 80% 80%
Loan Amount $1,112,000 $4,320,000
Interest Rate 6.50% 6.50%
Mortgage Payment $7,029 $27,305
Property Taxes $1,566 $5,892 Based on 1.294430% and direct charges of $800 City of Rancho Mirage CFD No. $273 $942
25 (Section 31), IA 1
Homeowner's Association Fee $650 $448
Property Insurance $290 $1,125
Total Month ly Obligation $9,807 $35,712
Mortgage Payment% of Income 40% 40%
Month ly Income $24,517 $89,279
Annual Income $294,204 $1,071,346
Generally, interest rates have an inverse relationship on the affordability of a home. In short, all else being equal, higher interest rates lower the price point for buyers based on income. Over the past several years, interest rates have remained historica lly low, often at or below 3.0%. Current mortgage interest rates more closely resemb le histor ic rates and for the most part the home buyer pool appears to recognize that the 3% mortgage rate environment was the anoma ly and rates around the 6% to 7% level are most likely into the foreseeable future.
City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 9-341
Residential Market Analysis 34
As noted, Catino is a community with unique amenities and the first Storyliving by Disney project . The subject has an extensive interest list and is expected largely draw homebuyers from outside the Coachella Valley area. Many buyers will be those searching for second homes from the Southern California Coast (Orange County, Los Angeles, and San Diego). In addition, the subject will likely generate interest from buyers throughout the United States. Given the buyer profile, many may also pay cash for their homes, and will thereby not be influenced by interest rates.
Conclusions
Demand for homes in the subject's market area is considered to be strong at the current time as indicated by the overall trend of building permit activity, new home sales prices, and activity in recent quarters as well as the absorption rate within new home projects in the subject's area.
City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 9-342
Land Description and Analysis
Property Analysis
Land Description and Analysis
Location
The Catino project is bound by Gerald Ford Drive to the north, Monterey Avenue to the east, Frank Sinatra Drive to the south, and Bob Hope Drive to the west.
Land Area
The following table summarizes the subject's (Improvement Area No. 1) land area.
Land Area Summary
Tax ID
685-220-039, 685-220-016, 685-220-026 to 030, 685-
220-032, 685-220-039, 685-431 -001 to 055, 685-441-
001 to 025, 685-451-001 to 041 , 685-461-001 to 048,
685-471-001 to 059, 685-481-001 to to 026, 685-491-
001 to 032, 685-501-001 to 039, 685-111-001 to 018,
685-521-001 to 028
SF Acres
10,438,893 239.64
The subject's lot segmentation is presented below with typical lot sizes.
Summary of Lot Categories
Land Use Description Type Dimensions
Large Lot 135's Multi-Generali ona I 135 X 200
Large Lot 120's Multi -Generali ona I 120 X 150
Large Lot 90's Multi -Generali ona I 90 X 140
Convention al Lot 70's Age-Qualified & Multi- Generational 70 X 130 Conventional Lot 60's Age-Qualified & Multi- Generational 60 X 120 Conventional Lot so's Age-Qualified & Multi - Generational 50 X 90 & 50 X 110 Condos
Shape and Dimensions
Size (SF) No. of Lots
27,000 22
18,000 33
12,600 43
9,100 120
7,200 100
5,000 184
2,000 ill
652
Builder
Davidson
TBD
Woodbridge
Davidson
Shea
Shea
TBD
The overall Catino project is generally rectangular in shape, as are many of the individual lots. Site utility based upon shape and dimensions is average.
Topography
The site is generally level and at street grade. The topography does not result in any particular development limitations .
Off-site & On-Site Improvements
As of the effective appraisal date, backbone infrastructure and construction of certain amenities (including the Crystal Lagoon) was underway. According to the master developer, approximately 327 City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 35 9-343
Land Description and Analysis
of the subject's lots are in finished lot condition . The remaining lots and condominium pads are expected to be in finished lot condition in mid -2024. As of the effective appraisal date, the sales center and guard building have been constructed and model homes are under development by Shea Homes.
Drainage
No particular drainage problems were observed or disclosed at the time of field inspection. This appraisal assumes that surface water collection, both on-site and in public streets adjacent to the subject, is adequate.
Flood Hazard Status
The following table provides flood hazard information.
Flood Hazard Status
Community Panel Number
Date
Zone
Description
Ins ura nee Required?
Environmental Hazards
06065C1595G
August 28, 2008
X
Outside of 500-year floodplain
No
A Phase I environmental report dated December 14, 2016 was prepared for the subject by MSA Consulting, Inc. for the Catino site overall. The report "revealed no evidence of recognized environmental conditions requiring public agency remediation." Ground Stability
36 A soils report was not provided for our review . Based on our inspection of the subject and observation of development on surrounding and nearby sites, there are no apparent ground stability problems.
However, we are not experts in soils analysis. It is assumed that the subject's soil bearing capacity is sufficient to support the existing improvements.
Streets, Access, and Frontage
The subject property reflects a portion (Improvement Area No. 1) of the overall Catino master planned community. Details pertaining to street access and frontage to the overall site are provided in the following table.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-344
Land Description and Analysis
Streets, Access and Frontage
Street
Paving
Curbs
Sidewal ks
Lanes
Direct ion ofTraff ic
Condition
Traffic Levels
Signals/Traffic Control
Access/Curb Cuts
Visibility
Utilitie s
Gera Id Ford Dr
Average
Yes
No
2 way, 2 lanes ea ch way
East/West
Good
Modera te
None
One
Good
Mont erey Ave Fran k Si natra Dr
Average Average
Yes Yes
No No
2 way, 3 lanes each way 2 way, 2 lanes each way
North/South East/West
Good Good
Moderate Moder ate
None None
None None
Good Good
The availability of uti lities to the subject is summarized in the fo llowing table.
Utilities
Service
Water
Sewer
Electricity
Natural Gas
Local Phone
Zoning
Provider
Coachella Valley Water District
Coachella Valley Water District
Southern California Edison
Southern California Gas
Various Providers
37 Bob Hope Dr
Average
Yes
No
2 way, 2 lanes ea ch way
North/South
Goood
Moderate
None
None
Good
The subject is within the Section 31 Specific Plan, which was exclusively created for the Cotino project .
Within the Specific Plan, the subject includes Large Lot, Conventional Lot, and Cluster Lot designations by City of Rancho Mirage. The fo llow ing table summarizes our understand ing and interpretation of the zoning requirements that affect the subject, followed by zoning requirements specific to the subject's land uses.
Zoning Summary
Zani ng Jurisdiction
Zoning Designation
Description
Legally Conforming?
Zoning Change Likely?
Permitted Uses
City of Rancho Mirage
Section 31 Specific Plan
Large Lot/ Conventi ona I Lot/ Cluster Lot
Appears to be legally conforming
No
Singlefami ly residentia l
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-345
Land Description and Analysis 38
TABLE 15 RESIDENT IAL CLUSTER DEVEL OPMENT STANDARD S
0 CLUSTER
Standar d Small Lot Oetach<!d Townhouse Small Courtyard Ouplox Triplex Court Multi -Family Beach Club Target Density 9-13 du/ac 15-22 du/ac 12-15du/3C 10-14 du/ac 12-lSdu /ac 12-20du /ac 10-30d u/ac N/A Min. Lot Size (wld l h x depth) '10x76' 24'x80' 40'x80 ' 70'x120' 100-11120· N/A N/ A N/A Min. Corner L ot Size (width x depth) 44X76' 30'K80' 45'x80' 8ff xl20' llO'xl20 ' N/A N/A N/A Min. Lot Area {square feet) 3,000sf l ,920s f 3,200sf 8,400s f 1 2,ooos f 2,ooosf N/ A N/A Min. Building Separation N/A N/A N/A N/A N/A NIA JS' N/A Max. Buildin g Coverage 60% N/A N/A 60% 60% 70% 70% 50% Max. Building Height (stories/ feet) 3/40' 3/40' 2/35' 3/40' 2/40' 3/ 40' 4/50' 65' Front Setbacks
Buildin gs& Side Facing Garages 5' 8' 5' 10' 10' 8' 20' 10' Front faci ng Garages 8' N/A N/A 20' 20' 20' N/A N/A
Poo l/Spa N/A I N/A N/A JO' 10' 10' I N/A N/A
1nlerlor Slde Setbacks
Building 3' I O' O' I S' I 3' I 5' I 10' 10'
Pool/ Spa 2' I O' O' I o· I O' I O' I S' 10'
Corner Side Setbacks
Porch 5' 5' s· I 8' I 8' 8' 10' N/A
Building 7' 5' 5' I 8' I 8' I 8' I 15' 10'
Pool/Spa O' o· O' I O' I o· O' N/A N/A
Rear Setbacks
Build ing (Not Alley Loaded ) 15' ,I 12' 12' 'I' 12' 'I 12' I 12' 11 10' 10' AlleyGar<1ge 5' S' 5' 5' 5' 5' N/A N/A
Pool/Spa 5' 5' 5' 5' 5' 5' 5' 5'
Parkin g
Garage/Covered Spaces (1 bed roorn /2 bed room) 2 2 2 2 2 2 1/ 2 N/A Guest Spaces (on-site or on-street) 0.5 0.25 0.25 o.s o.s o.s 0.5 N/A Driveway
Min . Driveway Width 14' 14' 14' 14' 14' 14' 14' 14'
City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 9-346
Land Description and Analysis 39
TABLE 14 RESIDENTIAL CONVENTIONAL DEVELOPMENT STANDARDS
CONVENTIONAL
Standard 10,000SFD 8,000 SFD 5,500 SFD
Target Density 4 du/ac 5 du/ac 7 du/ac
Min. Lot Size (width x depth) 90'xll0 ' 70'x110' 50'xll0 Min. Corner Lot Size (width x depth) lO0'xll0 ' 77'xl10' 55'xll0 ' Min. Lot Area (square feet) 10,000 8,000 5,500
Max. Lot Coverage 40% 45% 50%
Max. Building Height (stor ies/feet ) 2/35 2/35 2/35
Front Setbacks
Porch/Veranda 15' 15' 10'
Building s 25' 20' 20'
Side Facing Garages/Pools/Spas 15' 15' 15'
Front Facing Garages 20' 20' 20'
Interior Side Setbacks
Building 10' 7.5' 5'
Pool/Spa S' 5' 2'
Corner Side Setbacks
Porch/Veranda 12' 12' 10'
Building 15' 12' 10'
Garage (Facing) 20' 20' 20'
Pool/ Spa 5' 5' 5'
Rear Setbacks
Building 20' 15' 15'
Alley Garage 5' 5' 5'
Pool/Spa 5' 5' O'
Parking
Garage Spaces 2 2 2
Guest Spaces (on-site or on-street) 2 2 2
Driveway
Min. Driveway Width 14' 14' 14'
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-347
Land Description and Analysis
TABLE 13 RESIDENT IAL LARGE LOT DEV ELOPME NT STANDARDS
LARGE LOT
Standard 29,000 SFD 18,000 SFD 12,500 SFD
Target Density l du/ac 2 du/ac 3 du/ac
Min. Lot Size (width x dep th) 170'xl70' l20 'xl40' 105'xl 20' Min. Corner Lot Size (width x dept h) 180'xl70 ' 130'xl40' 115'xl 20' Min. Lot Area (square feet ) 29,000 18,000 12,500
Max. Lot Coverage 30% 35% 35%
Max. Building Height (stories/feet) 1/2 0' 1/20' 1/ 20' Front Setbacks
Porch/Veranda 30' 25' 20'
Buildings 40' 30' 25'
Side Facing Garages/Pools/Spas 25' 25' 20'
Front Facing Garages 30' 30' 25'
Interior Side Setbacks
Building 20' 10' 10'
Pool/Spa 20' 10' 10'
Corner Side Setbacks
Porch/Veranda 30' 20' 15'
Building 30' 20' 20'
Garage (Facing) 25' 25' 20'
Pool/Spa 20' 15' 10'
Rear Setbacks
Building 25' 25' 20'
Alley Garage 5' 5' 5'
Pool/Spa 10' 10' 10'
Parking
Garage Spaces 2 2 2
Guest Spaces (on-site or on-stree t) 2 2 2
Driveway
Min. Driveway Width 14' 14' 14'
According to the City of Rancho Mirage, there are no pending or prospective zoning changes. It appears the proposed use of the site is a legally conforming use.
We are not experts in the interpretation of zoning ordinances. An appropriately qualified land use attorney should be engaged if a determination of compliance is required.
Other Land Use Regulations
We are not aware of any other land use regulations that would affect the property.
Easements, Encroachments and Restrictions
We have reviewed a preliminary title report prepared by First American Title Company and dated January 26, 2024. The report identifies exceptions to title, which include various utility and access City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 40 9-348
Land Descript ion and Analysis 41
easements that are typical for a property of this type. Such exceptions would not appear to have an adverse effect on value. Our valuation assumes no adverse impacts from easements, encroachments or restrictions and further assumes the subject has clear and marketable tit le.
Permit s and Fees
Impact fees reported by the master developer are detailed in the fo llow ing table for various product segments.
Per Unit Amounts Total CFD
50s - 90s 120s / 135s Condos Fees Eligible
Units 447 55 150 652
CVWD Fees $ 10,895 $ 14,371 $ 10,895 $ 7,294,72 0 $7 ,294,720 CVWD Credits $ (6,505} $ (6,505) $ (6.505) $ (4,24 1.260) $ - DIF $ 7,338 $ 7 ,363 $ 7,335 $ 4,785 ,195 $ 1,999,684
Avg School Fees $ 10,955 $ 22,935 $ 9,580 $ 7,595,068 $ - Total $ 22,682 $ 3-8,164 $ 21,305 $15,433,722 $9,294,404 Approximately $14,255 per lot ($9,294,404) in impact fees are eligible to finance through bond proceeds. The remaining net impact fees will be uti lized in the upcoming analysis as indicated in the fo llowing tab le; overall, remaining net impact fees average $9,415 per lot over the subject's 652 lots.
A building permit budget was requested but not provided. Therefore, building permits are estimated based on other projects in the Coachella Valley and the broader Southern California region.
Estimate of Building Permits & Impact Fees
Typical Impact Less CFD Net Impact Building
Product Line Home SF Fees Proceeds Fees Permits
S0's Cottage Coll ection 2,470 $22,682 ($14,255) $8,427 $3,705 60's Grand Collection 3,200 $22,682 ($14,255) $8,427 $4,800 70's Grand Collection 3,420 $22,682 ($14,255) $8,427 $5,130 90's Estate Col I ecti on 3,900 $22,682 ($14,255) $8,427 $5,850 120's Estate Collection 4,160 $38,164 ($14,255) $23,909 $6,240 135's Estate Coll ection 5,730 $38,164 ($14,255) $23,909 $8,595 Condo - No Lagoon Frontage 1,900 $21,305 ($14,255) $7,050 $2,850 Condo - Lagoon Frontage 2,100 $21,305 ($14,255) $7,050 $3,150 Reported ly, homebuilder Shea has pulled three building permits for mode l homes as of the effective appraisa l date.
Site Development Costs
Per information provided by the master developer, the subject's remaining site development costs are estimated at $41,500,000 for backbone infrastructure and in-tracts, net of improvements funded by the city of Rancho Mirage . In addition, $12,776,027 in bond proceeds are available to fund eligib le public imp rovements . Therefore, remaining site development costs, net of CFD proceeds, are estimated at $28,723,973, as detailed in the fo llowing table.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-349
Land Description and Analysis 42
Remaining Costs to Complete
Direct Construction Total Costs Ci!)/ Funded Net Costs CFO Eli gible Net of CFO Water and Sewer Improvements 10,512,695 1,500,000 9,012,695 9,012,695 - Street Improvements 8,968,864 8,968,864 8,968,864
Peri mter Wall 2,126,333 2,126,333 2,126,333
Dry Utilit ies 3,171,040 3,171,040 2,000,000 1,171,040
Offsite Wire Underground ing 3,130,554 2,000,000 1,130,554 1,130,554 - Landscap ing 13,725,450 13,725,450 13,725,450
Erosion Control/Temp Power/Fencing/Ot her 1,416,200 1,416,200 1,416,200 Tota l 43,051,134 3,500,000 39,551,134 12,143,248 27,407,886 Indirect Construction 1,948,866 - 1,948,866 632,778 1,316,088 TOTAL 45,000,000 3,500,000 41,500,000 12,776,027 28,723,973 As noted, the Cotino project will include a 24-acre Crystal Lagoon, the largest in the United States. The master developer is incurring substantial development costs associated with the Crystal Lagoon and other planned amenities that will benefit the entire Cotino community. As of the effective appraisal date, remaining amenity costs for the entire Cotino project are estimated at $85,000,000. Of this, approximately $20,079,710 is allocated to Improvement Area No. 1 (the subject property) on a pro rata share basis.
Conclusion of Site Analysis
Overall, the physical characteristics of the site and the availability of utilities result in functional utility suitable for a variety of uses including those permitted by zoning. Uses permitted by zoning include single family residential . We are not aware of any other particular restrictions on development .
City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 9-350
Land Description and Analysis
Site Plans
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City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 43 9-351
Land Description and Analysis
■
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LE:Grno
COTTAG[ COLL[CTION
Home Site, Approx. SO'
GRAND COLL[CTION
Home Site, Approx. 60' & 70'
[STAT[ COLL[CTION
Homo Site, Approx. 90', 120' & 135'
rnTUR[ CONDOMINIUMS
•Park accessible lo residents of Longtable Pa rk only
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 44 9-352
Land Description and Analysis
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45 9-353
Land Description and Analysis
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46 LEGEND
□ CONDO SITE - 2.87 ACRES
rTIE ACREAGE IEPRESENTS PROPERTY
LIWTS, NOT BUILDAIH.E AREA, Afrl>
NCU,l)E8 EASEMENTS FOR PUBLIC
U11..111E8, LAhl)SCAPf.kl. Atl) ACCEas,
□ CONDO SITE - 4.89 ACRES
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NCLUDES EASEMENTS FOR PUBLIC
UTII-ITleS, l.ANDSCAPfNQ, Ate> ACCESS!
MSA CONSULTING, INC.
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The subject's three condo sites are highlighted above. For the purposes of this analysis, two product lines are assumed: a luxury product with Crystal Lagoon frontage and a non-luxury product without Lagoon frontage.
City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 9-354
Land Description and Analysis
Final Map
TRACl MAP NO . .!756.3
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City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 47 SHEET 5 Of 22 SHEETS
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9-355
Proposed Improvements Description
Proposed Improvements Description
Overview
48 As previously discussed, the subject property comprises Phase 1 of master planned community Catino, a Storyliving by Disney community, which is proposed and entitled for development of 652 detached and attached single family residential homes. The Catino project will also include a retail town center/mixed use core, 24-acre Crystal Lagoon, and extensive community amenities. The homes in Phase 1 are being developed by three homebuilders: Shea Homes, Davidson Communities, and Woodbridge Pacific Group. It is noted the builders for the 120's Estate Collection and the condominiums have not yet been selected .
While complete details on interior finishes were not available for all homes at this time, the subject homes will be positioned at the top of the competitive new home market and are expected to reflect very good construction quality .
The following tables summarize the proposed improvements by product line.
Floor Plan Summary - 50' s Cottage Collection
No. of Living Typical Lot Developer's Base
Builder Floor Plan Units
1 Area (SF) Unit Mi x Bedroom Bathroom Stories Garage Size (SF) Price Shea Atelier 184 2,262 35 2 2.5 1 2-car 5,000 $1,659,990 Atelier II 2,275 32 2 2.5 1 2 -car $1,679,990
Palmera 2,322 24 2 2.5 1 2-car $1,699,990
Palmera II 2,282 30 2 2.5 1 2-car $1,719,990
Moderne 2,821 63 2 3.0 2 2 -car $1,854,990
Weighted Average 2,467
1 Age qualified and multi•generational units. 78 age-qualified units in total.
Floor Plan Summary- GO's Grand Collection
No. of Living Typical Lot Developer's Base
Builder Floor Plan Units
1 Area (SF) Unit Mix Bedroom Bathroom Stories Garage Size (SF) Price Shea Sonora 100 2,782 23 3 3.5 2-car 7,200 $2,109,990
Melodia 2,925 25 3 3.5 2-car $2,184,990
Aerion 3,393 29 3 3 .5 2 2-car $2,309,990
Panor a mica 3,720 23 3 3.5 2 2-car $2,439,990
Weighted Average 3,211
1 Age-qualified and multi-generational units. Thereare45 age-qualified units in total.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-356
Proposed Improvements Description 49
Floor Plan Summary - 70' Grand Collection
No. of Living Typica l Lot Developer's Base
Buil der Floor Plan Units' Area (SF) Unit Mix Bedroom Bathroom Stories Garage Size (SF) Price Davidson Plan 1 67 3,003 13 3 3 .5 1 3-car 9,100 NA
Plan 2 3,100 13 3 3.5 1 3-car
Plan 3 3,263 14 3 3.5 1 3-car
Plan lX 3,453 9 4 4.5 2 3-car
Plan 2X 3,600 9 4 4.5 2 3-car
Plan 3X 3,763 9 4 4.5 2 3-car
AQ- Plan 1 53 3,298 9 3 3.5 3-car
AQ - Plan 2 3,347 13 3 3.5 3-car
AQ-P lan 3 3,470 10 3 3.5 1 3-car
AQ - Plan lX 3,749 6 4 4.5 2 3-car
AQ-Plan 2X 3,802 9 4 4.5 2 3 -car
AQ- Plan 3X 3,900 6 4 4.5 2 3-car
Weighted Average 3,420
1 Total of 6 7 multi -generational units and 53 age-qualified units.
Floor Plan Summary - 90' Estate Collection
No. of Living Typica l Lot Developer's Base
Builder Floor Plan Units Area (SF) Unit Mix Bedroom Bathroom Stories Garage Size (SF) Price Woodbridge Plan 1 43 3,475 6 3 3.5 3-car 12,600 NA
Plan 2 3,567 6 3 3.5 3-car
Plan 3 3,807 6 3 3.5 1 3 -car
Plan 4 4,177 6 3 3.5 +.05 3-car
Plan 5 3,719 5 3 3.5 3-car
Plan lX 3,974 3 4 4.5 2 3-car
Plan 2X 3,996 3 4 4.5 2 3-car
Plan 4X 4,557 4 4 4.5 +.05 2 3-car
Plan 5x 4,193 4 4 4.5 2 3-car
Weighted Average 3,899
Floor Plan Summary-120' Estate Collection
No. of Li ving Typical Lot Developer's Base
Builder Floor Plan Units Area (SF) Uni t M ix Bedroom Bathroom Stories Garage Size (SF) Price TBD Pl an 1 33 3,800 10 4 4.5 4-car 18,000 NA
Plan 2 4,200 10 4 4.5 1 4-ca r
Plan lX 4,200 6 5 4.5 2 4-car
Plan 2X 4,600 7 5 4.5 2 4-car
Weighted Average 4,164
Floor Plan Summary - 135' Estate Collection
No. of Living Typica l Lot Developer's Base
Builder Floor Plan Units Area (SF) Unit Mix Bedroom Bathroom Stories Garage Size (SF) Price Davidson Plan 1 22 4,750 6 4 4.5 3-car 27,000 NA
Plan 2 5,520 4 5 5.5 3-car
Plan lX 6,030 11 5 5.5 4-car
Plan 2X 9,247 1 5 5.5 4-car
Weighted Average 5,734
City of Rancho Mirage CFD No. 5 (Section 31 ) - Improvement Area No. 1 9-357
Proposed Improvements Description so
Floor Plan Summary - Condo without Lagoon Frontage
No. of Living Typical Lot Developer's Base
Builder Floor Plan Units
1 Area (SF) Unit Mi x Bedroom Bathroom Stories Garage Si ze (SF) Pric e TBD Plan 1 75 1,700 25 2 2.5 2-car Attached NA
Pl an 2 1,900 25 3 2.5 2-car
Plan 3 2,100 25 3 2.5 2-car
Weighted Average 1,900
1 Condo fl oor plans and product reflect preliminary assumptions; no product details were provided by the Developer.
Floor Plan Summary - Condo with Lagoon Frontage
No. of Livin g Typi cal Lot Develop er's Base
Builder Floor Plan Units ' Area (SF) Unit Mi x Bedroom Bathroom Stories Garage Si ze (SF) Price TBD Plan 1 75 1,900 25 2 2.5 1 2-car Attached NA
Plan 2 2,100 25 3 2.5 1 2-car
Pl an 3 2,300 25 3 2.5 1 2-car
Weighted Average 2,100
1 Condo floor plans and product reflect preliminary assumptions; no product details were provided by the Developer.
It is noted that the subject property will have a Homeowner's Association (HOA) that will be responsible for common area maintenance, landscaping, and the subject's extensive amenities. The master developer estimates that dues will be approximately $448 per home, per month, for detached homes with an additional $71 per month for age qualified homes. For the S0's, 60's, and 70's collections, which include an age qualified component, this upcoming analysis assumes monthly HOA fees of $480 per month, to be paid by future homeowners. HOA dues for the 90's, 120's, and 135's collections assume a monthly HOA of $448 per home. HOA dues for the condominiums are estimated at $650 per month . In addition, residents will have the option of joining the private club at the project; annual private club dues are approximately $915 per month. For comparison, monthly HOA fees for new and recently constructed projects in the area are presented below. The subject's HOA estimate falls within the comparable range.
HOA Comparables
Pro·ect HOA
Revelle $380
Del Webb at Rancho Mirage $250
Point Happy $304
Palo Verde $299
Stone Creek Ranch $183
Coral Mountain at PGA West $300
Andalusia at Coral Mountain $1,175
Elan SFD $278
Elan TH $315
Gallery at Mira Ion $450
Escena II $180
Cody Place $164
Montage $248
For the reader's reference, select renderings and elevations are shown on the following pages.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-358
Proposed Improvements Description 51
City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 9-359
Proposed Improvemen ts Description 52
Community Amenities
Crystal Lagoon
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-360
Proposed Improvements Description 53
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-361
Proposed Improvements Description 54
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-362
Proposed Improvements Description 55
Elevation Rendering s
EXTERIOR: COT/NO COACHELLA COLLECTION
Shea Homes
EXTERIOR: COT/NO COACH ELLA COLLECTION
Shea Homes
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-363
Proposed Improvements Description 56
Shea Homes
Shea Homes
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-364
Proposed Improvements Description 57
Subject Photographs
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-365
Proposed Improvement s Description 58
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-366
Real Estate Taxes
Real Estate Taxes
The property tax system in California was amended in 1978 by Article XIII to the State Constitution, commonly referred to as Proposition 13. It provides for a limitation on property taxes and for a procedure to establish the current taxable value of real property by reference to a base year value, which is then modified annually to reflect inflation (if any). Annual increases cannot exceed 2% per year.
59 The base year was set at 1975-76 or any year thereafter in which the property is substantially improved or changes ownership. When either of these two conditions occurs, the property is to be re appraised at market value, which becomes the new base year assessed value. Proposition 13 also limits the maximum tax rate to 1% of the value of the property, exclusive of bonds and direct charges.
Bonded indebtedness approved prior to 1978, and any bonds subsequently approved by a two -thirds vote of the district in which the property is located, can be added to the 1% tax rate.
The subject has an ad valorem tax rate of 1.294430%. As the definition of market value presumes a sale, and because substantial infrastructure and on-site development has taken place, the existing assessed values are of nominal consequence in this appraisal. Direct assessments for the subject are estimated at $800 per home based on other residential projects in the area. However, it is noted that several of the direct assessments are not triggered until building permits are obtained . Therefore, in the upcoming Subdivision Development Method, which considers the sell-off of the subject's lots, direct assessments are estimated at $70 per lot.
Special Tax rates for the 2023/2024 fiscal year are reported on the following page; it is noted Special Taxes increase 2% annually.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-367
Real Estate Taxes
Special Tax Table (Fiscal Year 2023-2024}
Land Use Category
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Detached Property
Single-Family Attached Property
Single-Family Attached Property
Single-Family Attached Property
Single-Family Attached Property
Single-Family Attached Property
Waterfront Property
Waterfront Property
Waterfront Property
Waterfront Property
Waterfront Property
Multi-Family Property
Hotel Property
Commercial Property
Other Non-Res i den ti a I Property
Square Footage Category
Greater than 5,900 SF
5,701 - 5,900 SF
5,501 - 5,700 SF
5,301 - 5,500 SF
5,101 - 5,300 SF
4,901 - 5,100 SF
4,701 - 4,900 SF
4,501 - 4,700 SF
4,301 - 4,500 SF
4,101 - 4,300 SF
3,901 - 4,100 SF
3,701 - 3,900 SF
3,501 - 3,700 SF
3,301 - 3,500 SF
3,101 - 3,300 SF
2,901 - 3,100 SF
2,701 - 2,900 SF
2,501 - 2,700 SF
2,301 - 2,500 SF
2,101 - 2,300 SF
1,901 - 2,100 SF
Less than or eq ua I to 1,900 SF
Greater than 2,050 SF
1,851 to 2,050 SF
1,651 to 1,851 SF
1,451 to 1,650 SF
Less than or equal to 1,450 SF
Greater than 2,050 SF
1,851 to 2,050 SF
1,651 to 1,851 SF
1,451 to 1,650 SF
Less than or equa I to 1,450 SF
Assigned Special Tax
$11,611 per unit
$11,299 per unit
$10,985 per unit
$10,672 per unit
$10,194 per unit
$9,716 per unit
$9,206 per unit
$8,933 per unit
$8,660 per unit
$8,080 per unit
$7,530 per unit
$7,249 per unit
$6,969 per unit
$6,025 per unit
$5,679 per unit
$5,271 per unit
$5,016 per unit
$4,692 per unit
$4,134 per unit
$3,759 per unit
$3,376 per unit
$2,987 per unit
$3,511 per unit
$3,271 per unit
$2,954 per unit
$2,590 per unit
$2,210 per unit
$4,214 per unit
$3,925 per unit
$3,545 per unit
$3,108 per unit
$2,653 per unit
$510 per unit
$306 per room
$3.06 per SF
$3.06 per SF
Source : Rate and Method of Apportionment of Special Taxes; taxes increase 2% annua lly City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 60 9-368
Highest and Best Use
Highest and Best Use
Process
61 Before a property can be valued, an opinion of highest and best use must be developed for the subject site, both as if vacant, and as improved or proposed. By definition, the highest and best use must be:
• Legally permissible under the zoning regulations and other restrictions that apply to the site. • Physically possible.
• Financially feasible.
• Maximally productive, i.e., capable of producing the highest value from among the permissible, possible, and financially feasible uses.
Highest and Best Use As If Vacant
Legally Permissible
The subject is within the Section 31 Specific Plan, which was exclusively created for the Cotino master planned community . Improvement Area No. 1 of Section 31 permits single family residential uses of varying densities. To our knowledge, there are no legal restrictions such as easements or deed restrictions that would effectively limit the use of the property . The subject property has an approved final map for 502 detached single-family homes on individual lots and 150 condominium units and associated improvements. The subject's present entitlements are the result of significant planning and review, and any rezone or land use different than currently approved is unlikely. Given prevailing land use patterns in the area, only single family residential is given further consideration in determining highest and best use of the site, as though vacant .
Physically Possible
The physical characteristics of a site that affect its possible use(s) include, but are not limited to, location, street frontage, visibility, access, size, shape, topography, availability of utilities, off-site improvements, easements and soil and subsoil conditions . The physical characteristics are examined to see if they are suited for the legally permissible use.
Locational considerations include the compatibility and position of the subject property with respect to surrounding uses. Based on our physical inspection of the subject property, we know of no reason why the property would not support development. The size, shape and topography of the subject property appear adequate for development, similar to other projects currently developing in the immediate area.
The subject is not located within a floodplain. In addition, the property is not located within a Fault Rupture Hazard Zone. All utility services are available to the parcels, and evidence of development in the immediate area provides additional support for the possibility of development.
Based on the physical characteristics of the subject property, residential development is considered physically possible and most appropriate.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-369
Highest and Best Use 62
Financially Feasible
Financial feasibility depends on supply and demand influences . With respect to financial feasibility of single-family residential development, consideration to the current state of the residential housing market and its impact on the residential land market is necessary. As previously discussed in the Residential Market Analysis section, the significant rise in mortgage interest rates had an inverse relationship on the affordability of a home. Prior to the second half of 2022, interest rates remained historically low, often at or below 3.0%. Conversations with sales agents in multiple new home projects noted there was a slowing in demand for new residential homes in the second half of 2022, with some buyers priced out of entry-level (lower-priced) homes. Current mortgage interest rates more closely resemble historic rates and for the most part the home buyer pool appears to recognize that the 3% mortgage rate environment was the anomaly and rates around the 6% to 7% level are most likely into the foreseeable future. Though, it is worth noting, the subject property's market segment has historically been less affected by mortgage interest rates, as the target market is a multi home (second, third, or more) homebuyer.
Recent market conditions for new homes, constraints on new home inventory, appears to have reversed this trend; the lack of supply of re-sale home inventories has led to a recovery in the new home market despite higher mortgage interest rates, suggesting the contraction in new home prices in 2023 may have been short -lived. This growing homebuyer demand has prompted many national homebuilders to, once again, increase their inventory of developable lots.
Current market conditions support development of partially improved and unimproved residential lots. Due to depleting existing lot inventories for many builders, additional land and lot acquisitions may be the maximally productive use of vacant land.
Maximally Productive
Legal, physical and market conditions have been analyzed to evaluate the highest and best use of the subject property as vacant. The analysis is presented to evaluate the type of use(s) that will generate the greatest level of future benefits possible to the property. Based on the factors previously discussed, the maximally productive use ofthe subject (as vacant) is for near term single-family residential development. The probable buyer of the subject property as vacant would be a national land developer, in conjunction with merchant and custom home builders, familiar with the regional market and overarching Storyliving by Disney project theme.
As Improved (Proposed)
As with the highest and best use as though vacant, the four tests of highest and best use must also be applied to the subject property considering the proposed improvements. Consideration must be given to the continued as-is use of the subject, as well as alternative uses for the property. The potential alternative uses consist of demolition, expansion, conversion, or renovation.
As of the date of inspection the subject consists of subdivision land with horizontal improvements and custom community amenities (24-acre Crystal Lagoon) significantly underway; in addition, Shea Homes has commenced construction on model homes and the Cotino sales office is complete .
Currently, it is considered reasonable to continue construction of homes, as dictated by demand. The existing and partially completed improvements provide contributory value and are necessary to City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-370
Highest and Best Use
complete the subdivision project . Conversion is not currently possible given the planned land uses.
Renovation is not warranted, as the improvements are new . The highest and best use of the subject property, as improved, is for continuation of construction of homes, as dictated by demand.
Most Probable Buyer
63 Taking into account the functional utility of the site and area development trends, the probable buyer ofthe improved and partially improved residential lots (and condominium sites) is a homebuilder .
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-371
Valuation Methodology
Valuation
Valuation Methodology
Appraisers usually consider three approaches to estimating the market value of real property. These are the cost approach, sales comparison approach and the income capitalization approach. 64 The cost approach assumes that the informed purchaser would pay no more than the cost of producing a substitute property with the same utility. This approach is particularly applicable when the improvements being appraised are relatively new and represent the highest and best use of the land or when the property has unique or specialized improvements for which there is little or no sales data from comparable properties.
The sales comparison approach assumes that an informed purchaser would pay no more for a property than the cost of acquiring another existing property with the same utility. This approach is especially appropriate when an active market provides sufficient reliable data . The sales comparison approach is less reliable in an inactive market or when estimating the value of properties for which no directly comparable sales data is available. The sales comparison approach is often relied upon for owner -user properties.
The income capitalization approach reflects the market's perception of a relationship between a property's potential income and its market value. This approach converts the anticipated net income from ownership of a property into a value indication through capitalization. The primary methods are direct capitalization and discounted cash flow analysis, with one or both methods applied, as appropriate. This approach is widely used in appraising income -producing properties.
Additional analyses often undertaken in the valuation of subdivisions include extraction, land residual analysis, and the subdivision development method.
Reconciliation of the various indications into a conclusion of value is based on an evaluation of the quantity and quality of available data in each approach and the applicability of each approach to the property type .
The methodology employed in this assignment is summarized as follows:
The valuation begins by employing a land residual analysis, which is a form of discounted cash flow (DCF) analysis, for each of the subject's residential land use categories. A DCF analysis is a procedure in which a discount rate (present value factor) is applied to a projected revenue stream generated from the sale of the individual components of a project . In this method of valuation, the appraiser specifies the quantity, variability, timing and duration of the revenue streams and discounts each to its present value at a specified yield rate .
The revenue component of the DCF is based on the estimated sales price for a representative, or benchmark, home for each ofthe residential land use categories; these conclusions are based on our analysis of sales of new and recently constructed homes in the subject's market area, as well as City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-372
Valuation Methodology 65
comparable resales. The expense category considers hard and soft costs associated with development, as well as entrepreneurial incentive . In addition, the land residual analyses rely on a number of assumptions, including the forecast of absorption, or disposition, of the single-family homes.
The land residual analyses result in a conclusion of improved lot value for each of the subject's representative residential land categories. It is important to note the land residual analysis is an interim step in the overall valuation process; the purpose is to arrive at an estimate of improved lot revenue, which is utilized in the subdivision development method. As will be discussed, the subject is unique in that it reflects Disney's first ever Storyliving by Disney branded community; it also will include a 24-acre Crystal Lagoon, the largest Crystal Lagoon in the United States. As such, there are no truly comparable bulk lot transactions available for analysis; consequently, the sales comparison approach is not considered a credible approach to value for the subject property and is excluded from this analysis.
At the end of the analysis, the subdivision development method is employed to estimate the market value of the subject property, in bulk. The subdivision development method is a form of discounted cash flow analysis in which the expected revenue (determined via the land residual analyses), absorption period, expenses, and internal rate of return associated with the development and sell-off of the various land use components comprising the subject property to end users are considered.
It is noted that three of the subject's improved lots are under the ownership of Shea Homes as of the effective appraisal date (one in the S0's collection and two in the 60's collection) . Therefore, the market value for these lots is based upon the conclusions of improved lot value; these three lots are excluded from the subdivision development method and are appraised separately from the subject's remaining 649 lots.
Our analysis excludes a typical cost approach since the subject property represents land. However, costs associated with home construction were taken into consideration as part ofthe land residual analysis and determination of financial feasibility. Given the limited, if any, income producing potential ofthe land, an income approach was not utilized .
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-373
Land Residual Analysis 66
Land Residual Analysis
The land residual analysis is employed to arrive at an opinion of market value for the subject's lots, by land use. This valuation method is used in estimating land value when subdivision and development are the highest and best use of the land being appraised. All direct and indirect costs are deducted from an estimate of the anticipated gross sales price of the completed homes; the resultant net sales proceeds are then discounted to present value at an anticipated rate over the development and absorption period to indicate the value of the land. The land residual analysis is conducted on a quarterly basis. As a discounted cash flow analysis, the land residual analysis consists of four primary components summarized as follows:
Revenue - the gross income is based on the revenue associated with the sell-off of completed homes to individual homebuyers.
Absorption Analysis - the time frame required for sell off. Of primary importance in this analysis is the allocation of the revenue over the absorption period - including the estimation of an appreciation factor (if any).
Expenses - the expenses associated with the sell-off are calculated in this section - including direct and indirect construction costs, administration, marketing, and commission costs, as well as ad valorem taxes and special taxes.
Builder's Incentive (profit) and Discount Rate - builder incentive (profit) and discount rate are derived employing a variety of data.
Discussions of these four concepts follows below, with the discounted cash flow analysis offered at the end of this section. A separate land residual analysis will be presented for each of the subject product lines. It is important to note the land residual analysis is an interim step in the valuation process. It is utilized to derive an improved lot value of the subject's lots, which serves as the revenue component in the upcoming subdivision development method (SDM); the SDM considers the sell-off of the subject's lots, in bulk.
Revenue
The projected sales price for the average unit within the project will vary, as the ultimate sales price is affected by unit size, location within the project, site influences, construction costs, anticipated premiums achievable at the point of retail sale, as well as external influences such as adjacent land uses.
As presented earlier in this Appraisal Report, typical, or representative, home and lot sizes for each of the subject's product lines is reported in the following table, along with the conclusions of base pricing for a representative home .
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-374
Land Residual Analysis 67
Summary of Representative Homes by Product Line
Typical Typical Lot Concluded Base
Product Line Home SF SF Pricing Price per SF
50's Cottage Collection 2,470 5,000 $1,740,000 $704
60's Grand Collection 3,200 7,200 $2,250,000 $703
70's Grand Collection 3,420 9,100 $2,650,000 $775
90's Estate Collection 3,900 12,600 $3,160,000 $810
120's Estate Collection 4,160 18,000 $3,850,000 $925
135's Estate Collection 5,730 29,700 $5,400,000 $942
Condo - No Lagoon Frontage 1,900 Attached $1,390,000 $732 Condo - Lagoon Frontage 2,100 Attached $1,860,000 $886
As discussed, the subject project is expected to be positioned at the top of the competitive market for new home projects in the area, commanding home price premiums for its extensive community amenities, the largest Crystal Lagoon in the United States, and the first-ever community with Storyliving by Disney branding. To achieve these premiums, substantial upfront site development costs must be incurred by the master developer, including the construction of the 24-acre Crystal Lagoon. Conversations with various master developers support the premise that home pricing premiums should also flow to the land (finished lot pricing), due to the considerable investment required by the developer to support the premiums paid by future homeowners.
Closing Projections
The typical time required for the construction of detached units is estimated at approximately six to twelve months from start to closing, depending on the product type and location. It is assumed that initial closings will occur within six to twelve months of the date of sale. The premise is that the builder constructs efficiently as homes are sold. These assumptions are reflected in the projected construction schedule shown in the land residual models at the end of this section. Since the detached land residual analyses are conducted on a semi-annual (6-month) basis, closings are reflected in the following period, as most construction will be substantially completed prior to initiation of sales.
The land residual analyses for the condominium homes vary from the detached homes because closings of units cannot occur until the improvements are complete. Therefore, pre-sales occur throughout the construction process. Close of escrow for all units is forecasted in the last two periods of the cash flow.
Changes in Market Conditions (Price Increases or Decreases) Based on market surveys, responses are mixed whether market participants trend revenues and expenses. Generally, market participants prefer not to price trend, but sometimes they will trend when trying to justify a sale price when there is strong competition for land. Or, participants have indicated they may trend if the sell-off period is anticipated to be protracted. Given current market conditions, and the timeframe ofthe disposition period, price appreciation is considered speculative no trending is applied.
Absorption
Typically, multiple product lines would be marketed in a subdivision to create characteristics appealing to as many potential purchasers as possible. Offering home products within a subdivision to different City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 9-375
Land Residual Analysis 68
market segments is done with th e aim of increasing absorption and reducing the overall development holding period for a project. As noted, Catino has mu ltip le product lines w ith at least three homebui lders.
Based on the typ ical market ing and absorpt ion rate data presented in the Residentia l Market overv iew, coupled with analyses and conclusions presented in the Home and Price Absorption Analysis, prepared by Clarity Real Estate Advisors, our conclusions of absorption rates for the subject are as fo llows:
Summary of Representative Homes by Product Line
Typical Typical Lot Concluded Base Concluded Sales Sales per 6 Product Line Home SF SF Pricing Price eer SF eer Month Month Period 50's Cottage Coll ection 2,470 5,000 $1,740,000 $704 4 24 60's Grand Coll ection 3,200 7,200 $2,250,000 $703 3 18 70's Grand Coll ection 3,420 9,100 $2,650,000 $775 2 to 3 16 90's Estate Collection 3,900 12,600 $3,160,000 $810 2 12 120's Estate Collection 4,160 18,000 $3,850,000 $925 2 12 135's Estate Collection 5,730 29,700 $5,400,000 $942 lto 2 8 Condo - No Lagoon Frontage 1,900 Attached $1,390,000 $732 3 to 4 21 Condo - Lagoon Frontage 2,100 Attached $1,860,000 $886 3 to 4 21 Expense Projection s
As part of an ongoing effort to assemble market information , the tab le below reflects survey responses and developer budget informat ion for numerous detached and attac hed single-fami ly residentia l subdivisions t hroughout Californ ia region.
Detached Subdivis ion Budgets
Budget No.o f Avg.Home Typical lot G&A%o f Mkt&Sa les%o f Direct Indirect Indirect %of , .. Perm it s& Profit %of Developer Classlfkatlon
°'''
Units Qualit y Size (SF) Size Revenue Revenue Cost s/SF Cost s/SF Direct Costs Costs/l ot FHs/ Unit Revenue IRR Local 2024 11 Good 3,122 12,209 N/Av 5.5% $165.00 $40.75 25.0'/4 $186,803 $67,461 15.2% 35.0% Nationa l 2023 19 Goo d 3,165 6,720 N/Av N/Av $115.00 $10.93 9.5% $216,684 $69,000 12.0% N/Av local 2023 31 Good 2,560 3,695 2.5% 4.0% $137.00 $6.85 5.0'/4 N/Av $43,610 7.rt'/4 N/Av Nationa l 2023 27 Good 2,246 N/Av N/Av N/Av $152.00 N/Av N/Av $240,018 $50,668 N/Av N/Av Regional 2023 83 Good 1,975 N/Av N/Av N/Av $135.00 N/Av N/Av $240,018 $47,937 N/Av N/Av Regional 2023 55 Good 3,359 7,150 N/Av N/Av $117.00 N/Av N/Av $229,608 $51,500 N/Av N/Av Regional 2023 89 Good 4,415 43,560 3.0% 4.6% $152.00 N/Av N/Av $450,724 $72,500 N/Av 14.0% Local 2023 49 Good 2,300 N/Av N/Av N/Av $378.00 N/Av N/Av N/Av $66,723 N/Av N/Av Local 2022 12 Good 3,925 40,000 N/Av N/Av $159.00 N/Av N/Av N/Av $62,130 13.0¾ N/Av Regional 2022 27 Good 3,179 10,100 3.0¾ 1.1% $115.00 $13.13 11.0% $200,111 $70,470 15.7% N/Av Local 2022 22 Good 2,700 12,000 N/Av N/Av $115.26 N/Av N/Av $220,317 $67,876 22.0% N/Av Local 2022 19 Good 2,950 15,200 N/Av N/Av $140.00 N/Av N/Av N/Av $66,508 8.(1'/4 N/Av National 2022 919 Good 1,877 4,782 3.0¾ 3.0% $143.00 N/Av N/Av N/Av $78,522 N/Av 25.0'/4 Regional 2022 55 Good 3,428 11,000 2.0% 2.CJ'/4 $148.00 N/Av N/Av $218,004 $31,420 11.0'/4 20.0¾ Local 2021 36 Good 2,533 3,450 5.5% 6.6% $112.26 $5.53 4.9% N/Av $55,497 15.0'/4 N/Av Local 2021 12 Good 1,909 3,450 N/Av 1.4% $189.48 $31.64 16.7% $96,162 $36,270 20.CJ% N/Av Local 2021 26 Good 3,375 43,560 N/Av N/Av $176.00 N/Av N/Av $111,538 $95,610 N/Av N/Av Local 2020 17 Good 1,611 9,424 N/Av N/Av $142.88 N/Av N/Av $192,701 $55,092 N/Av N/Av Local 2020 22 Good 1,692 2,200 N/Av N/Av $170.00 $34.00 20.(1'/4 $101,441 $25,850 N/Av N/Av Regional 2020 20 Good 2,670 1,824 N/Av N/Av $160.00 $28.80 18.0% $187,280 $40,872 N/Av N/Av Regional 2020 6 Excellent 3,736 9,566 N/Av 2.5% $609.51 N/Av N/Av $366,455 $25,000 N/Av N/Av Minimum 6 1,611 1,824 2.0% 1.1% $112.26 $5.53 4.9% $96,162 $25,000 7.0% 14.0% Maximum 919 4,415 43,560 5.5% 6.6% $609.51 $40.75 25.0'/4 $450,724 $170,000 22.0% 35.0% Avera1e 74 2,797 15,129 3.2% 3.4% $177.69 $21.45 13.8% $217,191 $56,215 13.9% 23.5% City of Rancho Mirage CFO No. 5 (Section 31) - Impro vement Area No. 1 9-376
Land Residual Analysis 69
Attached Residential Bud ets
Budge t No. of Avg. Unit Size G& A %of Mkt &Sa les%o f Direct Indirect Indire ct %o f Sit e Permit s& Profit %of Deve lope r Classificati on Dat e Unit Qualit y (SF) Revenue Revenue Costs/SF Costs/SF Direct Cost s Costs/Unit Fees/Unit Revenue IRR Regional 2023 94 Good 1,462 N/Av N/Av $158.00 N/Av N/Av $240,018 $45,432 N/Av N/Av Nationa l 2023 76 Good 1,666 N/Av N/Av $150.00 N/Av N/Av $240,018 $47,546 N/Av N/Av National 2023 80 Good 1,843 N/Av N/Av $116.00 N/Av N / Av $240,018 $47,295 N/Av N/Av Local 2022 17 Good 1,536 N/Av N/Av $250. 11 N/Av N/Av $119,821 $53,247 N/Av N/Av Regional 2022 46 Good 1,727 2.4% 2.So/4 $199.00 $37.81 1 9% $67,604 $59,935 N/Av N/Av Regional 2021 101 Good 1,586 3.5% 1.2% $171.32 $19.76 12% $107,339 $42,985 8.9% 12.5% Local 2021 58 Good 1,540 1.()C'/4 4.9% $294.96 $38.34 13% N/Av $37,600 9.6% N/Av Local 2021 18 Good 1,841 N/Av N/Av $225.47 $47.06 21% $33,860 $31,393 N/Av N/Av Regional 2021 15 Good 1,678 4.So/4 1.3% $223.00 $37.91 17% $108,667 $40,000 10.9% N/Av Regional 2020 29 Good 1,364 N/Av N/Av $210.00 $21.00 l ()'/4 $90,074 $49,244 N/Av N/Av Local 2020 13 Excellent 1,518 2.6% 4.9'/4 $478.57 $109.42 23% $84,038 $70,666 12.4% N/Av Local 2020 34 Excellent 1,133 N/Av N/Av $441.00 $79.38 18% $55,649 $27,520 N/Av N/Av Regional 2020 134 Good 1,707 N/Av N/Av $180.00 $28.80 16% $187,280 $27,365 N/Av N/Av Regional 2020 68 Good 2,007 N/Av N/Av $205.00 $32.80 16% $187,280 $31,645 N/Av N/Av Regional 2020 64 Good 2,111 N/Av N/Av $205.00 $20.50 l ()'/4 $80,058 $31,370 N/Av N/Av Regional 2020 60 Good 2,019 N/Av N/Av $188.00 $18.80 l()'/4 $80,058 $30,150 N/Av N/Av Mi nimum 13 1,133 l .()'/4 1.2% $116.00 $18.80 10.0"/o $33,860 $27,365 8.9'/4 12.5% Maxi mum 134 2,111 4.8% 4.9'/4 $478.57 $109.42 23.()'/4 $240,018 $70,666 12.4% 12.5% Aver age 57 1,671 2.9"/4 3.()'/4 $230.96 $40.96 15.4% $128,119 $42,087 10.5% 12.5% Informat ion from t he survey above will contribute to t he estimate of development expenses classified as fo llows.
General and Administrative
These expenses consist of manageme nt fees, liability and fi re insurance, inspection fees, appraisal fees, legal and account ing fees and copying or publication costs. This expense categor y typically ranges from 2.5% to 4.0%, depe nding on length of project and if all of t he categor ies are inclu ded in a builder's budget. We have used 3.0% for general and admin istrati ve expenses.
Marketing and Sale
These expenses typically consist of advert ising and pro mot ion, closing costs, sa les operat ions, and sa les com missions. The expenses are expressed as a percentage of t he gross sa les revenue. The range of market ing and sa les expenses typically fo und in projects within the subject's market area is 5.0% to
6.5%.
However, the subject 's sales and marketi ng expenses are projected to be higher at t he subject propert y. Disney is heavily involved in t he sa les and marketi ng process at Cotino and has crafte d a sa les/ mar ket ing experience highly curated to t he personal prefere nces of each homebu yer. The master developer estimates sa les and marketing expenses at 9.0% of revenue for t he subject. Given t hat t he subject refl ects t he top of t he competit ive market in t he area, and considering the Disney branding and persona lized sales experience buyers interested in a Story livi ng commu nity will likely expect, it is our opi nion t he projected sales and mar keting expenses at 9.0% of sa les revenue is reasonable and approp riate.
Property Taxes (Ad Valorem and Special Taxes)
The subject is located wit hin an area w ith an effect ive tax rate of 1.294430%. This amount is applied to the estimated market values and divided by t he tota l number of units to yield an estimate of ad valorem taxes/u nit/year for each phase. The tax amounts are applied to unclosed inventor y over t he sell-off period. Property taxes are increased by 2% per year. The subject is wit hin t he boundar y of t he City of Rancho Mi rage CFD No, 5 (Section 31), Improvement Area No. 1. Assigned Special Taxes for t he representat ive home size wit hin each prod uct line for t he current tax year are summa rized in t he City of Ra ncho Mi rage CFD No. 5 (Section 31) - Improvement Area No. 1 9-377
Land Residual Analysis 70
following table. In addition, additional direct charges are estimated at $800 per unit based on other homes in the area. The total tax expense is gradually reduced over the absorption period, as the land components are sold off.
Special Taxes per Representative Unit
Typical Typical Lot Special Taxes
Product Line Home SF SF per Unit
S0's Cottage Collection 2,470 5,000 $4,134
60's Grand Collection 3,200 7,200 $5,679
70's Grand Collection 3,420 9,100 $6,025
90's Estate Col I ecti on 3,900 12,600 $7,249
120's Estate Collection 4,160 18,000 $8,080
135's Estate Collection 5,730 29,700 $11,299
Condo - No Lagoon Frontage 1,900 Attached $3,271
Condo - Lagoon Frontage 2,100 Attached $4,050
HOA
A homeowner's association is planned for the subject. The master developer estimates that dues will be approximately $448 per home, per month, for detached homes with an additional $71 per month for age qualified homes. For the S0's, 60's, and 70's collections, which include an age qualified component, this upcoming analysis assumes monthly HOA fees of $480 per month, to be paid by future homeowners . HOA dues for the 90's, 120's, and 135's collections assume a monthly HOA of $448 per home. HOA dues for the condominiums are estimated at $650 per month.
While this is higher than many new home projects in the area, it reflects the ongoing costs associated with maintaining the aforementioned market -leading amenities (including the 24-acre Crystal Lagoon), at the subject.
Remaining Site Development Costs
For the purposes of this analysis, all site development is presumed to be complete.
Permits and Fees
It is important to again note which fees the local market includes in the definition of an improved lot.
The local market recognizes water fees, school fees, and developer impact fees as part of an improved lot value. Building permits are excluded from the improved lot value.
In the upcoming land residual analyses, only building permits will be deducted because impact fees are included in the definition of an improved lot. A budget for building permits was requested but not provided. Therefore, estimated building permits and fees are estimated based on other new home projects throughout Coachella Valley and Southern California. Later in this appraisal, remaining impact fee costs will be considered in the final valuation of the subject lots.
A table summarizing the estimate of building permits and fees, as well as other costs, is provided at the end of the expense section .
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-378
Land Residual Analysis 71
Direct and Indirect Construction Costs
Construction costs are generally classified into direct and indirect costs. Direct costs reflect the cost of labor and materials to build the project. Direct costs generally are lower per square foot for larger floor plans, all else being equal, due to economies of scale. Indirect items are the carrying costs and fees incurred in developing the project and during the construction cycle. Construction quality and market-segment are significant factors that affect direct construction costs. In addition, national/public builders, which are able to achieve lower costs due to the larger scale in which orders are placed, routinely achieve lower direct costs.
The master developer has noted an average anticipated construction cost applicable to the subject of between $210 and $300 per square foot for detached product and $280 per square foot for attached product . The developer's estimate falls within the range of expense comparables . Given that the subject is positioned at the top end of the market in Coachella Valley, the master developer's estimate of costs is considered reasonable. The table on the following page summarizes the conclusion of direct costs.
Regarding indirect costs, the following list itemizes some of the typical components that generally comprise indire ct costs:
• Architectural and engineering fees for plans, plan checks, surveys and environmental studies • Appraisal, consulting, accounting and legal fees
• The cost of carrying the investment in land and contract payments during construction. If the property is financed, the points, fees or service charges and interest on construction loans are considered
• All-risk insurance
• The cost of carrying the investment in the property after construction is complete, but before sell-out is achieved
• Developer fee earned by the project coordinator
• Interest reserve
Conversations with homebuilders indicate the indirect costs generally range anywhere from 10% to 15% of the direct costs (excluding marketing, sales, general and administrative expenses, taxes, which are accounted for separately). An estimate of 10% is considered reasonable for the subject.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-379
Land Residual Analysis
Summary of Costs
Indirects/ Building Permits
Product Line Directs/ SF SF HOA / Unit
50's Cottage Collection $210 10.0% $480 $3,705
60's Grand Collection $210 10.0% $480 $4,800
70's Grand Collection $230 10.0% $480 $5,130
90's Estate Collection $230 10.0% $448 $5,850
120's Estate Collection $275 10.0% $448 $6,240
135's Estate Collection $330 10.0% $448 $8,595
Condo - No Lagoon Frontage $280 10.0% $650 $2,850
Condo - Lagoon Frontage $280 10.0% $650 $3,150
1 Direct costs exfcude permits and impact fees. Impact fees are included in the improved fat value and are therefore not deducted as a cost in the land residual analysis. Building permits , however, are considered as a cost. 2 Indirects exclude safes and marketing, general/administrative, property taxes, and HOA fees, which areaccaunted for separately.
Model Complex
The upcoming analyses assumes three model homes for each detached product segment. Model upgrade expenses can vary widely depending upon construction quality, targeted market, and anticipated length oftime on the market. These upgrades, exterior and interior, including furniture, can range from $20,000 per model to over $250,000 per model for executive homes.
Based on the quality of the subject's proposed improvements and the targeted buyer segment, a model upgrade cost of $150,000 per model is considered reasonable for the subject's lots. Of this amount approximately 30% will be recaptured with the sale of the models reflecting a total model recapture of $135,000. Model costs amounts will be applied over the initial period, while revenue is distributed evenly throughout the cash flow.
Summary
The following charts summarize the revenue and expenses discussed on the preceding pages.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 72 9-380
Land Residual Analysis
Revenue & Expense Summary - SO's Cottage Collection
REVENUE SUMMARY
Floor Plan
Average Unit
Model Recapture
EXPENSES SUMMARY
General and Administrative
Marketing and Sales
Ad Valorem Taxes
Direct Charges
Special Taxes/Assessments
Homeowner's Association Fees
Model Costs
Permits and Fees
Subtotal:
(@ 30% of cost)
Direct Construction Costs (Before Appreciation)
Average/Typical Floor Plan
Indirect Construction Costs
Subtotal :
No.of
Units
184
Unit
Size (SF)
2,470
$/SF
$704
Base Retail
Value Per Unit
$1,740,000
Extension
$320,160,000
$135 000
Total Revenue Before Appreciation: $ 320,295,000
$1,740,734 /unit
3.0% of total revenue
9.0% of total revenue
$8,282 /unit/year
$800 /unit/year
$4,134 /unit/year
$480 /un it/mon th
3 models
~ .!.in.ill.
2,470 184
10% of Direct Costs
Total Revenue After Appreciation: $ 320,295,000
$1,740,734 /un it
Total Over Sell-Off Period
$ 9,608,850
$ 28,826,5 50
$ 3,387,895 (from cash flow)
$ 327,272 (from cash flow)
$ 1,691,203 (from cash flow)
$ 2,304,000 (from cash flow)
$ 450,000 $150,000 (per model)
$ 681,720 $3,705 (per unit)
$ 47,277,490
.clillill .Ex.tensiQn
$210.00 $ 95,440,800 $518,700 /unit
$ 9 544 080 $51,870 /unit
$ 104,984,880
Total Expenses Before Appreciation: $ 152,262,370
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 73 9-381
Land Residual Analysis
Revenue & Expense Summary - 60's Grand Collection
REVENUE SUMMARY
Floor Plan
Average Unit
Model Recapture
EXPENSES SUMMARY
General and Administrative
Marketing and Sales
Ad Valorem Taxes
Direct Charges
Special Taxes/Assessments
Homeowner's Association Fees
Model Costs
Per mi ts and Fees
Subtotal :
(@30 %o fco st)
Di reel Construction Costs (Before Appreciation)
Average/Typica l Floor Plan
Indirect Construction Costs
Subtotal:
No.of
Units
100
Unit
Size (SF)
3,200
$/SF
$703
Base Retai l
Value Per Unit
$2,250,000
Extension
$225,000,000
$135,000
Total Revenue Before Appreciation: $ 225,135,000
$2,251,350 /unit
3.0% of total revenue
9 .0% of tota I revenue
$11,144 /unit/year
$800 / unit/yea r
$5,679 /unit/year
$480 /unit/month
3 models
,SE .!.ini.h
3,200 100
10% of Direct Cos ts
Total Revenue After Appreciation: $ 225,135,000
$2,251,350 /unit
Total Over Sell-Off Period
$ 6,754,050
$ 20,262,150
$ 1,867,398 (from cash flow)
$ 134,059 (from cash flow)
$ 951,711 (from cash flow)
$ 950,400 (from cash flow)
$ 450,000 $150,000 (per model )
$ 480 000 $4,800 (per unit)
$ 31,849,768
.w2.S..tfil .wmwm
$210.00 $ 67,200,000 $672,000 /unit
$ 6,720,000 $67,200 /unit
$ 73,920,000
Total Expenses Before Appreciation: $ 105,769,768
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 74 9-382
Land Residual Analysis
Revenue & Expense Summary - 70's Grand Collection
REVENUE SUMMARY
Floor Plan
Average Unit
Model Recapture
EXPENSES SUMMARY
General and Administrative
Marketing and Sales
Ad Va I orem Taxes
Direct Charges
Special Taxes/Assessments
Homeowner's Association Fees
Model Costs
Permits and Fees
Subtotal:
(@ 30%of cost)
Direct Construction Costs (Before Appreciation)
Average/Typical Floor Plan
Indirect Construction Costs
Subtotal:
No.of
Units
120
Unit
Size (SF)
3,420
Base Retail
$/SF Value Per Unit Extension
$775 $2,650,000 $318,000,000
$135 000
Total Revenue Before Appreciation: $ 318,135,000
$2,651,125 /unit
3.0% of total revenue
9.0% of total revenue
$12,792 /unit/year
$800 /un it/year
$6,025 /unit/year
$480 /unit/month
.s.E
3,420
3 models
~
120
10% of Di reel Costs
Total Revenue After Appreciation: $ 318,135,000
$2,651,125 /unit
~
$230.00
Total Over Sell-Off Period
s 9,544,050
s 28,632,150
s 3,347,453
s 209,343
s 1,576,617
s 1,474,560
s 450,000
$ 615,600
s 45,849,773
~
$ 94,392,000
$ 9,439,200
$ 103,831,200
(from cash flow)
(from cash flow)
(from cash flow)
(from cash flow)
$150,000 (per model )
$5,130 (per unit)
$786,600 /unit
$78,660 /un it
Total Expenses Before Appreciation: $ 149,680,973
City of Rancho M irage CFO No. 5 (Section 31) - Improvement Area No. 1 75 9-383
Land Residual Analysis
Revenue & Expense Summary - 90's Estate Collection
REVENUE SUMMARY
Floor Plan
Average Unit
Model Recapture
EXPENSES SUMMARY
General and Administrative
Marketing and Sa les
Ad Valorem Taxes
Direct Charges
Special Taxes/Assessments
Homeowner's Association Fees
Model Costs
Per mi ts and Fees
Subtotal:
(@ 30% of cost)
Direct Construction Cos ts ( Before Appreciation )
Average/Typical Floor Plan
Indirect Construction Costs
Subtotal:
No.of
Units
43 Unit
Size (SF)
3,900
$/SF
$810
Base Retail
Value Per Unit
$3,160,000
Extension
$135,880,000
$135,000
Total Revenue Before Appreciation: $ 136,015,000
$3,163,140 /unit
3.0% of total revenue
9.0% of total revenue
$16,117 /unit/year
$800 /unit/year
$7,249 / unit/year
$448 /unit/month
3 models
~ Uo.i..ts.
3,900 43
10% of Direct Costs
Total Revenue After Appreciation: $ 136,015,000
$3,163,140 /uni t
Total Over Sell-Off Period
$ 4,080,450
$ 12,241,350
$ 813,143 (from cash flow)
$ 40,362 (from cash flow)
$ 365,727 (from cash flow)
$ 268,800 (from cash flow)
$ 450,000 $150,000 (per model)
$ 251,550 $5,850 (per un it)
$ 18,511,381
lJ2s.lill ~
$230.00 $ 38,571,000 $897,000 /unit
$ 3,857,100 $89,700 /unit
$ 42,428,100
Total Expenses Before Appreciation : $ 60,939 ,481
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 76 9-384
Land Residual Analysis
Revenue & Expense Summary-120's Estate Collection
REVENUE SUMMARY
Floor Plan
Average Unit
Model Recapture
EXPENSES SUMMARY
General and Administrative
Marketing and Sales
Ad Valorem Taxes
Direct Charges
Special Taxes/Assessments
Homeowner's Association Fees
Model Costs
Permits and Fees
Subto tal:
(@ 30% of cost)
Direct Construction Costs (Before Appreciation)
Average/Typical Floor Plan
Indirect Construction Costs
Subtotal:
No.of
Units
33 Unit
Size (SF)
4,160
Base Retai I
$/SF Va lue Per Unit Extension
$925 $3,850,000 $127,050,000
$135,000
Total Revenue Before Appreciation: $ 127,185,000
$3,854,091 /unit
3.0% of total revenue
9.0% of total revenue
$19,279 /unit/year
$800 /unit/y ea r
$8,080 /unit/year
$448 /unit/month
3 models
~ .!.iolli.
4,160 33
10% of Direct Costs
Total Revenue After Appreciation: $ 127,185,000
$3,854,091 /unit
Total Over Sell-Off Period
$ 3,815,550
$ 11,446,650
$ 611,062 (from cash flow)
$ 25,356 (from cash flow)
$ 256,099 (from cash flow)
$ 169,344 (from cash flow)
$ 450,000 $150,000 (per model)
$ 205,920 $6,240 (per unit)
$ 16,979,981
~ ~
$275.00 $ 37,752,000 $1,144,000 /unit
$ 3,775,200 $114,400 /unit
$ 41,527,200
Total Expenses Before Appreciation: $ 58,507,181
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 77 9-385
Land Residua l Analysis
Revenue & Expense Summary· 135's Estate Collection
REVENUE SUMMARY
Floor Plan
Average Unit
Model Recapture
EXPENSES SUMMARY
General and Administrative
Marketing and Sales
Ad Va lorem Taxes
Direct Charges
Special Taxes/Assessments
Homeowner
1 s Association Fees
Model Costs
Permits and Fees
Subtotal:
(@ 30% of cost)
Direct Construction Costs (Before Appreciation)
Average/Typical Floor Plan
Indirect Constructio n Costs
Subtotal:
No.of
Units
22 Unit
Size {SF)
5,730
$/SF
$942
Base Retail
Value Per Unit Extension
$5,400,000 $118,800,000
$135,000
Total Revenue Before Appreciation: $ 118,935,000
$5,406,136 /unit
3.0% of tota l revenue
9.0% of total revenue
$23,259 /unit/year
$800 /unit/year
$11,299 /unit/ye ar
$448 /unit/month
3 models
~ !lnili
5,730 22
10% of Direct Cos ts
Total Revenue After Appreciation: $ 118,935,000
$5,406,136 /unit
Total Over Sell -Off Period
$ 3,568,050
$ 10,704,150
$ 491,460 (from cash flow)
$ 16,904 (from cash flow)
$ 238,751 (from cash flow)
$ 112,896 (from cash flow)
$ 450,000 $150,000 (per model)
$ 189,090 $8,595 (per unit)
$ 15,771,302
lli.tLSf. w=i2n
$330.00 $ 41,599,800 $1,890,900 /unit
$ 4,159,980 $189,090 /unit
$ 45,759, 780
Total Expenses Before Appreciation: $ 61,531,082
City of Rancho M irage CFD No. 5 (Section 31 ) - Improvement Area No. 1 78 9-386
Land Residual Analysis
Revenue & Expense Summary (Attached) - Condo No Lagoon Frontage
REVENUE SUMMARY
Floor Plan
Average Unit
EXPENSES SUMMARY
General and Administrative
Marketing and Sales
Ad Valorem Taxes
Direct Charges
Special Ta xes/Assessments
Homeowner
1 s Association Fees
Permits and Fees
Subtotal :
Direct Construction Costs (Before Appreciat ion)
Average/Typical Floor Plan
Indirect Construction Costs
Subtotal :
No.of
Units
75 Unit
Size (SF)
1,900
Base Retai I
$/SF Value Per Unit Extension
$732 $1,390,000 $104,250,000
Total Revenue Before Appreciation: $ 104,250,000
$1,390,000 /unit
3.0% of total revenue
9.0% of tota I revenue
$5,104 /unit/year
$800 /unit/year
$3,271 /unit/year
$650 / unit/month
.s.E !infil
1,900 75
10% of Direct Cos ts
Total Revenue After Appreciation: $ 104,250,000
$1,390,000 /unit
Total Over Sell-Off Period
$ 3,127,500
$ 9,382,500
$ 643,865 (from cash flow)
$ 100,929 (from cash flow)
s 412,674 (from cash flow)
s 971,100 (from cash flow)
s 213,750 $2,850 (per unit)
$ 14,852,318
.(;Q,\_Jfil ~
$280.00 $ 39,900,000 $532,000 /unit
s 3,990,000 $53,200 /unit
s 43,890,000
Total Expenses Before Appreciation: $ 58,742,318
City of Rancho M irage CFD No. 5 (Section 31 ) - Improvement Area No. 1 79 9-387
Land Residual Analysis
Revenue & Expense Summary (Attached) - Condo Lagoon Frontage
REVENUE SUMMARY
Floor Plan
Average Unit
EXPENSES SUMMARY
No. of
Units
75 Unit
Size (SF)
2,100
Base Retail
$/SF Value Per Unit Extension
$886 $1,860,000 $139,500,000
Total Revenue Before Appreciation : $ 139,500,000
$1,860,000 /unit
Total Revenue After Appreciation : $ 139,500,000
$1,860,000 /unit
Tota I Over Sel I-Off Period
80 General and Administrative
Marketing and Sa I es
3.0% of Iota I revenue $ 4,185,000
Ad Valor em Taxes
Di reel Charges
Special Taxes/Assessments
Homeowner's Association Fees
Permits and Fees
Subtotal:
Direct Construction Costs (Before Appreciation)
Average/Typical Floor Plan
Indirect Construction Costs
Subtotal:
9 .0% of tota I revenue
$8,122 /unit/year
$800 /unit/year
$4,050 /unit/year
$650 /unit/month
S.E
2,100
!l!J.ili
75 10% of Direct Costs
~
$280.00
$ 12,555,000
$ 1,024,697
$ 100,929
$ 510,953
$ 971,100
$ 236,250
$ 19,583,929
~
$ 44,100,000
$ 4,410,000
$ 48,510,000
Total Expenses Before Appreciation: $ 68,093,929
Developer's Incentive and Discount Rate
Developer's Incentive
(from cash flow)
(from cash flow)
(from cash flow)
(from cash flow)
$3,150 (per unit)
$588,000 /unit
$58,800 /unit
When employing a land residual analysis, most market participants (homebuilders) analyze projects based on an expected increment of profit and a cost-of-funds discount rate. The developer's profit is expressed as a percent of sales revenue and is included as an expense deduction. The cost-of-funds rate is used to discount each year of net income to present value . This methodology differs from the subdivision development method, in which most market participants (typically land developers) employ a yield rate or internal rate of return (IRR) inclusive of developer's profit, and do not deduct profit as a line item expense.
According to industry sources, developer's incentive (profit) historically has ranged anywhere from 5% to 25%, with a predominate range of 5% to 15%. This is consistent with our survey presented earlier in this section, which ranged from 7.0% to 22.0% for detached product and 8.9% to 12.4% for attached product . Profit is based on the perceived risk associated with the development . Low profit expectations are typical for projects focused on more affordable product with faster sales rates.
Higher profit expectations are common in projects with more risk such as developments where sales rates are slower, project size produces an extended holding period, or the product type is considered weak or untested.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-388
Land Residual Analysis 81
Elements affecting profit include location, supply/demand, anticipated risk, construction time frame and project type. Another element considered in profit expectations is for the development stage of a project. First phases typically generate a lower profit margin due to cautious or conservative pricing, as new subdivisions in competitive areas must become established to generate a fair market share.
Additionally, up front development costs on first phases can produce lower profit margins.
The prior table at the beginning of the Expense Projections discussion includes survey results for profit expectations of active home builders in the region.
Developer's Incentive Survey
Data Source Year Profit Expectations
National Builder 2023 12.0% for 19 unit infill project with 6,720 SF lots Local Builder 2023 7.0% for 31 unit project with 3,695 SF lots Local Builder 2023 12.0% for 53 unit project with 6,750 SF lots National Builder 2023 10.0% for 63 unit project with 3,995 SF lots Local Builder 2022 13.0% for 12 unit project with 40,000 SF lots Local Builder 2022 10.0% for 91 unit project with 5,475 SF lots Local Builder 2022 8.0% for 19 unit project with 15,200 SF lots Local Builder 2021 20.0% for 12 unit project with 3,450 SF lots National Builder 2021 18.0% for 54 unit project with 3,600 SF lots National Builder 2021 10.0% for a 357 unit project with attached and detached (small lot) homes Regional Builder 2021 10.9% for 15 unit project
Local Builder 2021 9.6% for 58 unit project (duets)
Regional Builder 2020 10.0% for a 233 unit project
Local Builder 2020 20.0% for a 51 unit project with 7,500 SF lots National Builder 2020 16.1% for a 48 unit project
Regional Builder 2020 13.2% for a 112 unit project with 6,300 lots National Builder 2020 7.6% for age-restricted project
Regional Builder 2020 12.2% for a 30 unit project with 5,000 SF lots Regional Builder 2020 8.0% for a 145 unit project with 5,500 SF lots National Builder 2019 18.8% for a 121 unit project
Regional Builder 2019 12.6% for a 159 unit, small lot project Local Builder 2019 12.6% for a 52 unit project with 7,000 SF lots Local Builder 2019 17.6% for a 24 unit project with 8,500 SF lots National Builder 2019 18.9% for a 9 unit project with 39,763 SF lots Regional Builder 2019 12.6% for age-restricted project
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-389
Land Residual Analysis
Based on the preceding discussion and developer surveys, an estimate of developer's incentive is concluded as follows:
-S0's, 60's, 70's Collections: 10%
-90's, 120's, 135's Collections : 12%
-Condos: 8% for non-waterfront units, 10% for waterfront units Discount Rate
A discount rate will be employed to convert future cash flows to present value, thus reflecting the time value of money. A discount rate (present value factor) of 5.0% is employed in the land residual analysis.
82 Positive attributes of the subject property include steady demand in the market area and limited new construction. "Negative" attributes associated with the subject are limited to the potential for deterioration in market conditions in the residential sector that would result from a change in macroeconomic factors (ex. continued high inflation, unemployment rates, interest rates, etc.).
The upcoming detached land residual analyses have implied internal rates of return between 12.9% to
23.4%. For comparison, Realty Rates provides expected Developer IRRs for California developments as follows:
California/Pacific Islands: Condominiums & Co-Ops
Actua I Rates Pro-Forma Rates
Min Max Avg Min Max Avg
Primary Residential 13.44% 21.62% 16.86% 12.45% 20.75% 16.10% Hi-Rise/Urban Townhouse 13.66% 21.61% 17.28% 13.11% 20.74% 16.59% Garden/Suburban Townhouse 13.44% 20.76% 16.42% 12.91% 19.93% 15.76% Mixed Use 13.53% 21.62% 16.87% 12.45% 20.75% 15.94%
Resort & Second Home 14.48% 23.43% 17.67% 13.90% 22.50% 16.96% Hi -Rise 14.57% 23.43% 18.62% 13.99% 22.50% 17.88%
Ga rd en/Townhouse 14.48% 20.35% 16.72% 13.90% 19.53% 16 .05% Commercia l/Industrial 12.05% 22.62% 16.20% 11.56% 21.72% 15.55% Urban Office 12.68% 20.77% 16.39% 12.17% 19.94% 15.74%
Suburban Office 12.16% 20.69% 15.77% 11.67% 19.86% 15.14% Retail 12.54% 22.62% 16.88% 12.04% 21.72% 16.20%
Industrial 12.05% 20.77% 15.75% 11.56% 19.94% 15.12%
*3 rd Quarter 2023 Data
Realty Rates Developers Survey 2023 Q4
California/Pacific Islands: CA, Guam, HI
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-390
Land Residual Analysis 83
California/Pacific Islands: Subdivisions & PUDs
Actual Rates Pro-Forma Rates
Min Max Avg Min Max Avg
Site-Bui lt Resident ial 17.62% 38.09% 25.85% 16.92% 36.57% 24.82% -100 Units 17.62% 32.84% 24.72% 16.92% 31.52% 23.74%
100-50 0 Units 18.06% 36.12% 26.01% 17.34% 34.68% 24.97% 500+ Units 18.50% 37.76% 26.44% 17.76% 36.25% 25.39%
Mixed Use 18.94% 38.09% 26.24% 18.18% 36.57% 25.19%
Manufactured Housing 17.99% 41.65% 27.66% 17.27% 39.98% 26.55% -100 Units 17.99% 36.22% 26.56% 17.27% 34.77% 25.50%
100 -500 Units 18.44% 39.84% 27.97% 17.70% 38.25% 26.85% 500+ Units 18.89% 41.65% 28.45% 18.13% 39.98% 27.31%
Business Parks 17.97% 38.68% 26.31% 17.25% 37.13% 25.26% -100 Acres 17.97% 33.63% 25.28% 17.25% 32.29% 24.27%
100-500 Acres 18 .42% 37.00% 26.60% 17.68% 35.52% 25.53% 500+ Acres 18.87% 38.68% 27.05% 18.11% 37.13% 25.96%
Industria l Parks 18.05% 33.56% 24.04% 17.33% 32.22% 23.08% -100 Acres 18.05% 29 .18% 23.14% 17.33% 28.02% 22.22%
100-500 Acres 18.50% 32.1 0% 24.29% 17.76% 30.82% 23.32% 500+ Acres 18.95% 33.56% 24.68% 18.19% 32.22% 23.69%
*3rd Quarter 2023 Data
Realty Rates Developers Survey 2023 Q4
Ca li forn ia/ Pacific Islands: CA, Guam, HI
Conclusion
The land residua l analysis is presented as fo llows:
City of Rancho M irage CFD No. 5 (Section 31) - Impro vement Area No. 1 9-391
Land
Residual
Analysi
s
84 Land
Residual
Analysis
-SO's
Cottage
Collection
Semiannual
(6
Months)
:
o
4 g
9 Total
ABSORPTION Sales
24 24
24 24
24 24
24 16
184
Close
of
Escrow
(COE)
0 24
24 24
24 24
24 24
16 184
Unsold
Inventory
184
160
136
112
88 64
40 16
0 0
Sales
Revenue
(Before
Apprecia
tion)
41 ,777
,60
9 41,777,609 41,777,609
$
41,777,609 41,777,609
41,777,609 41,777,609
27 ,8S
l,739
Annual
Appreciation
Factor
0%
1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
Sales
Revenue
{After
Appreciation)
41,777,609 41,777,609
41,777,609
41,777,609
41,777,609
$
41,777,609
41,777,609
$
27,851,739
$
320,295,000
Total Sales
Revenue
(at
Cl
ose
of Escr
ow)
41,777,609
$
41,777,609
$
41,777
,6
09 41,777,609
$
41,777,609
41,777,609
$
41,777,6
09 27,851,739
$
320,29
5,000
EXPEN
SE
S AND
CA
SH
FLOWS
General
and
Admin
istrative
3.0%
(1,067,650)
$
(1,067,650) (1,067,650)
(1,067,650)
$
(1,067,650) (1,067,650)
(1,067,650)
$
(1,067,650)
(1,067,650)
$
(9,608,850)
Marketing
and
Sales
9.0%
$
(3,759,985)
$
(3,759,985)
(3,759,985)
$
(3,759,985)
(3,759,985)
(3,759,985)
$
(3,759,985)
(2,506,657)
$
(28,826,550)
Ad
Valorem
Taxes
($/unit/yr)
$8,282
(761,901)
$
(669,148)
$
(574,464)
(477,819)
$
(379,183)
(278,527) (175,820)
$
(71,031)
$
(3,387,895)
Di
reel
Cha
rges
($/un
it/yr)
$800
(73,600)
$
(64,640)
$
(55,493) (46,157)
$
(36,629)
(26,906) (16,984)
$
(6,862)
$
(327,272)
Special
Taxes/Assessments
($/unit/yr)
$4,134
(380,334)
$
(334,032)
$
(286,767)
(238,522)
$
(189,284)
(139,038)
(87,768)
$
(35,458)
$
(1,691,203)
Homeowner's
Assoc
iation
Fees
($/unit/mo)
$480
(5
29,920)
$
(460,800)
$
(391,680) (322,560)
$
(253,440)
(184,320)
(115,200)
$
(46,080)
$
(2,304,000)
Model
Costs
(450,000)
$
$
$
$
$
(450,000)
Permits
and
Fees
s
!88,920}
s
188,920}
s
188,920}
!88,920}
s
188,920}
188,920}
188,920}
$
!59,280}
$
!681,720}
Subtotal
:
$
(3,352,325)
$
(6,445,175)
$
(6,224,959)
(6,001,613)
$
(5,775,092)
$
(5,545,346)
(5,312,327)
$
(5,046,346)
{3,574,307)
$
(47,277,490)
Direct
Construct
ion
Costs
(6,224,400)
$
(12,448,800)
$
(12,448,800)
$ (12,448,800)
$ (12,448,800)
$
(12,448,800)
$ (12,448,800)
$
(10
,374,
000)
(4,149
,600)
Annual
Apprec
iat
ion
Factor
0%
1.0000
1.0000
1.0000 1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
Direct
Construction
Costs
(Appreciated)
(6,224,400)
$ (1
2,448,800)
$ (12,448,800)
$ (12,448,800)
$ (12,448,800)
$ (12,448,800)
$ (12,448,800)
$
(10,374,000)
(4,149,600)
$
(95,440,800)
Ind
irect
Construction
Costs
10 %
1622,440}
s
!1,244,880}
$
11,244,880}
s
!1,244,8801
s
11,244,880}
s
!1,244,880}
s
!1,244
,880}
$
11,037,4001
1414,960}
$
19,544,0801
Subtotal:
(6,846,840)
$
(13,693,680)
$
(13,69
3,680)
$ {13,693,680)
$ (13,693,680)
$
(13,693,680)
$ (13,693,680)
$
(11,411,400)
{4,564,560)
$ (104,984,880)
Total
Expenses
$
(10,1
99,165)
$
(2
0,138,855)
$
(19,918,639)
$
{19,695,293)
$
(19,468,772)
$
(19
,23
9,
026)
$
(19,006,007)
$
(16,4
57,746)
(8,138,867)
$
(152,262,370)
NET
INCOME
BEFORE
DEVELOPER
'S
INCENTIVE
$
{10,199,165)
$
21,638,754
$
21,858,970
$
22 ,082,315
$
22 ,308
,837
$
22 ,538
,583
$
22,771
,601
$
25 ,319
,863
$
19 ,712,873
$
168,032,630
Developers
Incentive
10.00%
-
$
(4,177,761)
$
(4,177,761)
$
(4,177,761)
$
(4,177,761)
$
(4,177,761)
$
{4,177,761)
$
(4,177,761)
$
{2,785,174)
$
(32,029,500)
NET
INCOME
BEFORE
DISCOUNTING
$ (10,199
,165)
$
17,460
,993
$
17 ,681,209
$
17 ,904,555
$
18,131
,076
$
18 ,360,822
$
18,593
,841
$
21,142
,102
$
16 ,927,699
$
136
,003,130
Present
Value
Factors
Discount
Rate
Discoun
ted
Cash
Flow
Net
Present
Val
ue
(Rounded)
5.00%
0.97561
0.95181
!9,950,4051
16,619
,624
0.92860
16,418,761
0.90595
0.88385
16 ,220,643
$
16,025,229
City
of
Rancho
Mira
ge
CFO
No.
5 (Se
ction
31)
-Improvem
ent
Ar
ea
No
. 1
0.86230
15,832,479
0.84127
15,642,352
0.82075
0.80073
17,352,308
$
13,554,488
$
117,715,479
$
117,720,000
per
unit:
$639,783
9-392
Land
Residual
Analysis
85 Land
Residual
Analysis
-60's
Grand
Collection
Semiannual
(6
Months)
:
0 1
2 3
4 5
6 7
Total
ABSORPTION Sales
18 18
18 18
18 10
0 100
Close
of
Escrow
(COE)
0 18
18 18
18 18
10 100
Unsold
Inventory
100
82 64
46 28
10 0
0 Sales
Revenue
(Before
Apprec
iati
on)
$
40 ,524,300
$
40 ,524,300
$
40,524,300
$
40,S24,300
$
40,S24,300
$
22,513,500
$
Annual
Appreciation
Factor
0%
1.0000 1.0000 1.0000 1.0000 1.0000
1.0000
1.0000
Sales
Revenue
(After
Appreciation)
$
40 ,524,300
$
40,524,300
$
40,524
,300
$
40,524,300
$
40,S24,300
$
22,513,500
$
$
225,135,000
Total
Sales
Revenue
(at
Close
of
Escrow)
$
$
40,524,300
$
40,524,300
$
40,S24,300
$
40,524,300
$
40,524,300
$
22,513,500
$
22 5,13
5,000
EXPENSES
AND
CASH
FLOWS
General
and
Administrative
3.0%
$
(964,864)
$
(964,864)
$
(964,864)
$
(964,864)
$
(964,864)
$
(964,864)
$
(964,864)
$
(6,754,050)
Marketing
and
Sa
I es
9.0%
$
$
(3
,647
,187)
$
(3,647,187)
$
(3,647,187)
$
(3,647,187)
$
(3,647,187)
$
(2,026,215)
$
(20,262,150)
Ad
Valorem
Taxes
($/unit/yr)
$11,144
$
(S57,187)
$
(461,463)
$
(363,768)
$
(264,073)
$
(162,347)
$
(58,561)
$
$
(1
,867,398)
Direct
Charges
($/unit/yr)
$800
$
(40,000)
$
(33,128)
$
(26,115)
$
(18,958)
$
(11,655)
$
(4,204)
$
$
(134,0
59)
Special
Taxes/Assessments
($/unit/yr)
$5,679
$
(283,968)
$
(235,182)
$
(185,392)
$
(134,583)
$
(82,740)
$
(29,845)
$
$
(9Sl,711)
Homeowner
's Association
Fees
($/unit/mo)
$480
$
(288,00
0)
$
(236,160)
$
(184,320)
$
(132,480)
$
(80,640)
$
(28,800)
$
$
(9S0,400)
Model
Costs
$
(450,000)
$
$
$
$
$
$
(450,000)
Permits
and
Fees
$
(86,400)
$
(86,400)
$
(86,400)
$
(86
,400)
$
(86,400)
$
(48,000)
$
$
(480,000)
Subtotal:
$
(2,670,420)
$
(S,664,384)
$
(5,4S8,046)
$
(5,248,545)
$
(5,035,833)
$
(4,781,462)
$
(2,991,079)
$
(31,849,768)
Direct
Construction
Costs
$
(6,048,000)
$
(12,096,000)
$
(12,096,000)
$
(12,096,000)
$
(12,096,000)
$
(9,408,000)
$
(3,360,000)
Annual
Appreciat
ion
Factor
0%
1.0000
1.0000
1.0000
1.0000
1.0000 1.0000
1.0000
Direct
Construction
Costs
(Appreciated)
$
(6,048,000)
$
(12,096,000)
$
(12,096,000)
$
(12,096,000
)
$
(12,096,000)
$
(9,408
,000)
$
(3
,360
,000)
$
(67,200,000)
Indirect
Construct
ion
Costs
10%
$
(604,800)
$
(1
,209,600)
$
(1,209,600)
$
(1,209,600)
$
(1,209,600)
$
(940,800)
$
(336,000)
$
(6,720,000)
Subtota
I:
$
(6,652,800)
$
(13,305,600)
$
(13,305,600)
$
(13,305,600)
$
(13,305,600)
$
(10,348,800)
$
(3,696,000)
$
(73,920,000)
Total
Expenses
$
(9,323,220)
$
(18,969,984)
$
(18,763,646)
$
(18,S
S4,145)
$
(18,341,433)
$
(15,130,262)
$
(6,687,079)
$
(105,769,768)
NET
INCOME
BEFORE
DEVELOPER'S
INCENTIVE
$
(9,323
,220)
$
21 ,554,316
$
21,760,654
$
21,970,155
$
22,182,867
$
25 ,394
,038
$
15 ,826,421
$
119
,365,232
Developers
Incentive
10.00%
$
-
$
(4,052,430)
$
(4,0S2,430)
$
(4,052,430)
$
(4,052,430)
$
(4,052,430)
$
(2,251,3S0)
$
(22,513,500)
NET
INCOME
BEFOREDISCOUNTING
$
(9,323,220)
$
17,501
,886
$
17 ,708,224
$
17 ,917,725
$
18,130,437
$
21,341,608
$
13,575
,071
$
96 ,851,732
Present
Value
Factors
Discount
Rate
Discounted
Cash
Flow
Net
Present
Value
(Rounded)
5.00%
0.97561
$
(9,095,824)
0.95181
0.92860
$
16,658,547
$
16,443,846
City
of
Rancho
Mirage
CFD
No.
5 (Section
31)
-Improvement
Area
No.
1 0.90595
$
16,232,575
0.88385
0.86230 0.84127
$
16,024,665
$
18,402,802
$
11,420,235
$
86,086,846
$
86,090,000
per
unit:
$860,900
9-393
Land
Residual
Analysis
86 Land
Residual
Analysis•
70 's Grand
Collect
ion
Semiannual
(6
Months}:
0 4
8 9
Total
ABSORPTION Sales
16 16
16 16
16 16
16 8
0 120
Close
of
Es
crow
(COE)
0 16
16 16
16 16
16 16
120
Unsold
Invento
ry
120
104
88 72
56 40
24 Sa
les
Revenue
(Befo
reApprec
iationl
s
42,418,000 42,418,000 42,418,000
42,418,000
42,418,000
42,418,000
42,418,000
21,209,000
Annual
Appreciation
Factor
0%
1.0000
1.0000
1.0000
1.0000
1.0000 1.0000
1.0000
1.0000
1.0000
Sales
Revenue
(After
Appreciation)
42,418,000
$
42,418,000
42,418,000
42,418,000 42,418,000 42,418,000 42,418,000
21 ,209
,000
$
318,135,000
Total
Sales
Revenue
{at
Close
of
Escrow)
$
42,418,000 42,418,000
$
42,418,000
$
42 ,418,000
$
42,418,000 42,418,000
42,418,000
21,209,000
$
318,135,000
EXPENSES
AND
CASH
FLOWS
General
and
Administrative
3.0%
(1,060,450)
(1,060,450)
(1,060,450)
$
{1,060,450)
$
{1,060,450)
S
(1,060,450)
$
{1,060,450)
$
(1,060,450)
$
(1,060,4SO)
$
(9,544,050)
Marketing
and
Sales
9.0%
(3,817,6
20)
(3,817,620)
$
(3,817,620)
$
(3,817,620)
$
(3,817,620)
S
{3,81
7,620)
s
(3,817,620)
S
(1,908,810)
$
(28,632,150)
Ad
Valorem
Taxes
($/unit/yr)
$12,792
(767,532)
(671,847)
(574,170)
$
(474,474)
$
(372,725)
$
(268,895)
S
(162,950)
$
{54,860)
$
$
(3,347,453)
Direct
Charges
($/unit/yr)
$800
(48,000)
(42,016)
(35,908)
$
(29,673)
$
(23,310)
$
{16,816)
$
(10,191)
$
(3,431)
$
$
(209,343)
Special
Taxes/Assessments
($/uni
t/yr)
$6,025
(361,500)
{316,433)
(270,429)
$
{223,472)
$
{175,550
)
$
{126,64
7)
$
(76,748)
$
(25,838)
$
$
(1,S
76,617)
Homeowner's
Association
Fees
($/unit/mo)
$480
(345,600)
(299,520)
(253,440)
$
{207,360)
$
{161,280)
$
(115,200)
$
(69,120)
$
(23,040)
$
$
(1,474,560)
Model
Costs
(450,000)
$
$
$
$
$
$
$
(450,000)
Permits
and
Fees
(82,080)
(82,080)
(82,080}
$
(82,080)
$
(82,080)
$
(82,0801
$
(82,080)
$
(41,0401
$
$
(615,600)
Subtotal:
(3,llS,162)
S
(6,289,966)
(6,094,096)
$
(5,895,129)
$
(5,693,015)
$
(5,487,708)
S
{5,279,159)
$
(5,026,279)
S
(2,969,260)
$
{45,849,773)
Direct
Construction
Costs
(6,292,800)
$ (12,585,600)
$ (12,585,600)
$ (12,585,600)
$ (12,585,600)
$
(12,585,600)
$
(12,585,600)
(9,439,200)
$
(3,146,400)
Annua
l Appreciation
Factor
0%
1.0000
1.0000
1.0000 1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
Direc
t Construction
Costs
(A
ppreciated)
(6,292,800)
$
(12,585,600)
$
(12,585,600)
$
(12,585,600)
$
(12,585,600)
$ (12,585,600)
$
(12,58S,600)
$
(9,439,200)
$
(3,146,400)
(94,392,000)
Indirect
Construction
Costs
10%
(629,280)
$
(1,258,560)
$
(1,258,560)
$
(1,258,560)
$
! 1,258,560)
$
(1,258,560)
$
(1,258,560)
$
(943,920)
(314,640)
(9,439,200}
Su
btotal
:
16,922,0801
$
(13,844,160)
$ (13,844,160)
$
(13,844,1601
$
(13,844,1601
$ (13,844,160)
$ (13,844,160)
$ (10,383,1201
(3,461,040)
$
(103,831,2001
Total
Expenses
$
{10,037,242)
$
{20,134,126)
$
{19,938,256)
$
{19,739,289)
$
{19,537,175)
$
{19,331,868)
$
{19,123,319)
$
{1
5,409,399)
{6,430,300)
$
(149,680,973)
NET
INCOME
BEFORE
DEVELOPER
'S
INCENTIVE
$
{10,037,242)
$
22,283,874
$
22,479
,744
$
22 ,678
,711
$
22 ,880,825
$
23,086,132
$
23,294,681
$
27 ,008,601
$
14,778,700
$
168,454
,027
Deve
lopers
Incentive
10.00%
• $
(4,241,800)
$
{4,241,800)
$
(4,241,800)
$
(4,241,800)
$
(4,241,800)
$
(4,241,800)
$
(4,241,800)
$
{2,120,900)
$
(31,813,500)
NET
INCOME
BEFORE
DISCOUNTING
$
{10
,037,242)
$
18,042,074
$
18,237
,944
$
18,436
,911
$
18 ,639
,025
$
18 ,844,332
$
19 ,052,881
$
22 ,766,801
$
12,657
,800
$
136,640,527
Pre
sent
Value
Factors
Discount
Rate
Discounted
Cash
Flow
Net
Present
Value
{Rounded)
5.00%
0.97561
0.95181
(9,792,431)
$
17,172,706
0.92860
16,935,744
0.90595
16,702,932
City
of
Rancho
Mira
ge
CFO
No.
5 (Se
ction
31)
-Improvement
Area
No.
1 0.88385
16,474,182
0.86230
0.84127
0.82075
16,249,409
$
16,028,527
$
18,685,774
0.80073
10,135,459
$
118,592,301
$
118,590,000
per
unit:
$988,250
9-394
Land
Residual
Ana
lysis
87 Land
Residual
Analys
is -
90 's Cottage
Co
llection
Semiannual
(6
Months):
0 1
2 3
4 5
Total
ABSORPTION Sales
12 12
12 7
0 43
Close
of
Escrow
(COE)
0 12
12 12
7 43
Unsold
Inventory
43 31
19 7
0 0
Sales
Revenue
(Before
Apprec
iation)
$
37 ,957
,674
s
37 ,957
,674
$
37,957,674
$
22 ,141,977
s
Annual
Appreciation
Factor
0%
1.0000 1.0000 1.0000 1.0000
1.0000
Sales
Revenue
(After
Apprec
iation)
s
37 ,957
,674
$
37,957,674
s
37,957
,674
s
22 ,141,977
s
$
136,015,000
Total
Sales
Re
venue
(at
Close
of
Escrow)
$
$
37,957,674
$
37 ,957
,674
$
37,957
,674
$
22,141
,977
$
136,015,000
EXPENSES
AND
CAS
H
FLOWS
General
and
Administrative
3.0%
s
{816
,090)
s
{816,090)
s
(816,090)
s
{816
,090)
s
{816
,090)
$
(4
,080,450)
Marketing
and
Sa
les
9.0%
s s
{3,416,191)
s
{3,416,191)
s
{3
,4
16,19
1)
s
{1
,992
,778)
s
(12
,241,350)
Ad
Valorem
Taxes
($/unit/yr)
$16,117
s
(346,519)
s
(252,314)
$
(156,191)
$
(58,119)
$
$
(813,143)
Direct
Charges
($/unit/yr
)
$800
s
(17
,200)
s
(12
,524)
s
(7
,753)
$
(2
,885
) $
s
(40,362)
Special
Taxes/Assessments
($/unit/yr)
$7,249
s
{155,854)
s
(113,483)
$
(70,250)
$
(26,140)
$
s
(365,727)
Homeowner's
Association
Fees
($
/unit/mo)
$448
s
(115,584)
s
{83
,328)
s
(51
,072)
$
(18
,816)
s
s
(268
,800)
Model
Costs
s
(450,000)
s
$
$
$
s
(450,000)
Permits
and
Fees
s
(70
,200)
s
(70,200)
s
(70,200)
s
(40,950)
s
s
(251,550)
Subtotal
:
s
(1
,971,446)
$
(4
,76
4,
130)
$
(4,
587
,74
6)
$
(4,379,191)
$
(2
,808,868)
$
(18
,511,381)
Di
reel
Construction
Costs
$
(5
,382
,000)
$
(10,764,000)
$
(10,764,000)
s
(8,521
,500)
$
{3,139,500)
Annual
Apprec
iation
Factor
0%
1.0000 1.0000 1.0000
1.0000 1.0000
Di
reel
Construct
ion
Costs
(Appreciated)
s
(5,382,000)
$
(10,764,000)
$
(10,764,000)
$
(8,521,500)
$
(3,139,500)
s
{38
,571,000)
Indirect
Construct
ion
Costs
10 %
s
(538
,200)
s
(1,076,400)
$
(1,076
,400)
$
(852
,150)
s
(313
,950)
s
(3
,857,100)
Subtotal:
s
(5,920,200
)
$
(11,840,400)
$
(11,840,400)
$
(9,373,650)
s
(3
,453,450)
s
(42,428,100)
Total
Expenses
$
(7,891,646)
$
(16,604,530)
$
(16,428,146)
$
(13,752,841)
$
(6,262
,318)
$
(60,939,481)
NET
INCOME
BEFORE
DEVELOPER'S
INCENTIVE
$
(7,891,646)
$
21,353
,145
$
21,529,529
$
24,204,833
$
15,879,659
$
75 ,075,519
Developers
Incentive
12.00%
s
- $
(4,55
4,921)
$
(4,554,921)
$
(4,554
,921)
$
(2,657,037)
$
(16
,321,800)
NET
INCOME
BEFORE
DISCOUNTING
$
(7,891,646)
$
16,798,224
$
16,974,608
$
19,649,912
$
13,222,622
$
SS,753,719
Present
Value
Factors
Discount
Rate
Discounted
Cash
Flow
Net
Present
Value
(Rounded)
5.00 %
0.97561
s
(7
,699
,167)
0.95181
s
15,988,791
s
City
of
Rancho
Mirage
CFD
No
. 5
(Section
31)
-Improvement
Area
No.
1 0.92860
15,762,611
0.90595
0.88385
s
17,801,851
s
11,686,871
s
53 ,540,956
$
53,540,000
per
unit:
$1
,245,116
9-395
Land Residual Analysis 88
Land Residual Analysis - 120's Estate Collection
Semiannual (6 Months): 0 1 2 3 4 Total
ABSORPTION
Sales 12 12 9 0 33
Close of Escrow (COE) 0 12 12 9 33
Unsold Inventory 33 21 9 0 0
Sales Revenue (Before Appreciation) $ 46,249,091 $ 46,249,091 $ 34,686,818 $ Annual Appreciation Factor 0% 1.0000 1.0000 1.0000 1.0000 Sales Revenue (After Appreciation) $ 46,249,091 $ 46,249,091 $ 34,686,818 $ $ 127,185,000 Total Sales Revenue (at Close of Escrow) $ $ 46,249,091 $ 46,249,091 $ 34,686,818 $ 127,185,000
EXPENSES AND CASH FLOWS
General and Administrative 3.0% $ (953,888) $ (953,888) $ (953,888) $ (953,888) $ (3,815,550 ) Marketing and Sales 9.0% $ $ (4,162,418) $ (4,162,418) $ (3,121,814) $ (11,446,650) Ad Valorem Taxes ($/unit/yr ) $19,279 $ (318,106 ) $ (204,456) $ (88,500) $ $ (611,062) Direct Charges ($/unit/yr) $800 $ (13,200) $ (8,484) $ (3,672) $ $ (25,356) Special Taxes/Assess ments ($/unit/yr) $8,080 $ (133,320) $ (85,688) $ (37,091) $ $ (256,099} Homeowner's Association Fees ($/unit/mo) $448 $ (88,704) $ (56,448) $ (24,192) $ $ (169,344) Model Costs $ (450,000) $ $ $ (450,000)
Permits and Fees $ (74,880) $ (74,880) $ (56,160) $ $ (205,920) Subtotal: $ (2,032,098) $ (5,546,262) $ (5,325,921) $ (4,075,701) $ (16,979,981) Direct Construction Costs $ (6,864,000) $ (13,728,000) $ (12,012,000} $ (5,148,000) Annual Appreciation Factor 0% 1.0000 1.0000 1.0000 1.0000 Dir ect Construction Costs (Appreciated) $ (6,864,000) $ (13,728 ,000} $ (12,012 ,000} $ (5,148,000) $ (37,752,000) lndi rect Construction Costs 10% $ (686,400) $ (1,372,800) $ (1,201,200) $ (514,800) $ (3,775,200) Subtotal: $ (7,550,400) $ (15,100,800) $ (13,213,200) $ (5,662,800) $ (41,527,200) Total Expenses $ (9,582,498 ) $ (20,647,062 ) $ (18,539,121 ) $ (9,738,501 ) $ (58,507,181 ) NET INCOME BEFOREDEVELOPER'S INCENTIVE $ (9,582,498) $ 25,602,029 $ 27,709,970 $ 24,948,317 $ 68,677,819 Developers Incentive 12.00% $ - $ (5,549,891) $ (5,549,891) $ (4,162,418) $ (15,262,200) NET INCOME BEFORE DISCOUNTING $ (9,582,498) $ 20,052 ,138 $ 22,160,079 $ 20,785 ,899 $ 53,415 ,619 Present Value Factors
Discount Rate
Discounted Cash Flow
Net Present Value (Rounded)
5.00% 0.97561
$ (9,348,778)
0.95181 0.92860
$ 19,085,914 $ 20,577,836
City of Rancho Mirage CFD No. 5 (Section 31 ) - Improv ement Area No. 1
0.90595
$ 18,830,998 $ 49,145,971
$ 49,150,000
per unit: $1,489,394
9-396
Land Residual Analysis 89
land Residual Analysis - 13S's Estate Collection
Semiannual !6 Months): 0 1 2 3 4 Total
ABSORPTION
Sales 8 8 6 0 22
Close of Escrow (COE) 0 8 8 6 22
Unsold Inventory 22 14 6 0 0
Sales Revenue (Before Appreciation) $ 43,249,091 $ 43,249,091 $ 32,436,818 $ Annual Appreciation Factor 0% 1.0000 1.0000 1.0000 1.0000 Sales Revenue (After Appreciation) $ 43,249,091 $ 43,249,091 $ 32,436,818 $ $ 118,935,000 Total Sales Revenue (at Close of Escrow) $ $ 43,249,091 $ 43,249,091 $ 32,436,818 $ 118,935,000
EXPENSES AND CASH FLOWS
General and Administrative 3.0% $ (892,013) $ (892,013) $ (892,013 ) $ (892,013) $ (3,568,050) Marketing and Sales 9.0% $ $ (3,892,418) $ (3,892,418) $ (2,919,314) $ (10,704,150) Ad Valorem Taxes ($/unit/yr) $23,259 $ (255,844) $ (164,438) $ (71,178) $ $ (491,460) Direct Charges ($/unit/yr) $800 $ (8,800) $ (5,656) $ (2,448) $ $ (16,904) Special Taxes/Assessments ($/unit/yr) $11,299 $ (124,289) $ (79,884) $ (34,578) $ $ (238,751) Homeowner's Association Fees ($/unit/mo) $448 $ (59,136) $ (37,632) $ (16,128) $ $ (112,896) Model Costs $ (450,000) $ $ $ (450,000)
Permits and Fees $ (68,760) $ (68,760) $ (51,570) $ $ (189,090) Subtotal: $ (1,858,842) $ (5,140,801) $ (4,960,333) $ (3,811,326) $ (15,771,302) Direct Construction Costs $ (7,563,600) $ (15,127,200) $ (13,236,300) $ (5,672,700) Annual Appreciation Factor 0% 1.0000 1.0000 1.0000 1.0000 Direct Construction Costs (Appreciated) $ (7,563,600) $ (15,127,200) $ (13,236,300) $ (5,672,700) $ (41,599,800) Indirect Construction Costs 10% $ (756,360) $ (1,512,720) $ (1,323,630) $ (567,270) $ (4,159,980) Subtotal : $ (8,319,960) $ (16,639,920) $ (14,559,930) $ (6,239,970) $ (45,759,780) Total Expenses $ (10,178,802) $ (21,780,721) $ (19,520,263) $ (10,051,296) $ (61,531,082) NET INCOME BEFOREDEVELOPER'S INCENTIVE $ (10,178,802) $ 21,468,370 $ 23,728,828 $ 22,385,522 $ 57,403,918 Developers Incentive 12.00% $ - $ (5,189,891) $ (5,189,891) $ (3,892,418) $ (14,272,200) NET INCOME BEFORE DISCOUNTING $ (10,178,802) $ 16,278,479 $ 18,538,937 $ 18,493,104 $ 43,131,718 Present Value Factors
Discount Rate
Discounted Cash Flow
Net Present Value (Rounded)
5.00% 0.97561 0.95181 0.92860 0.90595
$ (9,930,538) $ 15,494,091 $ 17,215,246 $ 16,753,839 $ 39,532,638 $ 39,530,000
per unit: $1,796,818
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-397
Land Residual Analysis 90
Land Residual Analysis (Attached) - Condo No Lagoon Frontage Semiannual f6 Months): 0 4 Total
ABSORPTION
Pre-Sales 0 21 21 21 12 75
Close of Escrow (COE) 0 0 0 63 12 75
Unsold Inventory 75 75 54 33 12 0
Sales Revenue (Before Appreciation) 29,190,000 29,190,000 29,190,000 16,680,000 Annual Appreciation Factor 0% I.DODO I.ODDO I.DODO I.DODO I.DODO I.DODO Sales Revenue (After Appreciation) 29,190,000 29,190,000 $ 29,190,000 16,680,000 $ $104,250,0 00 Total Sales Revenue (at Close of Escrow) 87,570,000 16,680,000 $ 104,250,000
EXPENSES AND CASH FLOWS
General and Administrative 3.0% $ (521,250) $ (521,250) $ (521,250) $ (521,250) $ (521,250) $ ( 521,250) $ (3,127,500) Marketing and Sa les 9.0% $ $ $ $ $ (7,881,300) $ (1,501,200) $ (9,382,500) Ad Valorem Taxes ($/unit/yr) $5,104 $ (191,381) $ (1 93,295) $ (140,564) $ (86,759) $ (31,864) $ $ (643,865) Direct Charges ($/ unit /yr) $BOO $ (30,000) $ (30,300) $ (22,034) $ (13,600) $ (4,995) $ $ (100,929) Special Taxes/Assessments ($/unit/yr) $3,271 $ (122,663) $ (123,889) $ (90,092) $ (55,607) $ (20,423) $ $ (412,674) Homeowner's Association Fees ($/unit/mo) $650 $ (292,500) $ (292,500) s (210,600) $ (128,700) $ (46,800) $ $ (971,100) Permits and Fees ~ ~ 159,850) ~ 159,850) ~ {59,850) ~ l34,2DDI ~ ~ 1213,750I Subtotal : $ (1,157,794) $ (1,221,084) $ (1,044,391) $ (865,766) $ (8,540,832) $ (2,022,450) $ (14,852,318) Direct Construction Costs (% Complete) 25% 35% 30% 10%
Direct Construction Costs ($ Incurr ed) (9,975,000) $ (13,965,000 ) $ (11,970,000) (3,990,000) $ $ Annual Appreciation Factor 0% I.DODO I.DODO I.DODO I.DODO I.DODO I.DODO Direct Construction Costs (Appreciated) (9,975,000) $ (13,965,000) $ (11,970,000) $ (3,990,000) $ $ $ (39,900,000) lndi rect Construction Cos ts 10% 1997,500I ~ 11,396,500) ~ {1,197,DDDI 1399,DDDI ~ ~ ~ 13,990,DDDI Subtota l: $ (10,972,500) $ (15,361,500) $ (13,167,000) (4,389,000) $ $ $ (43,890,000) Total Expenses $ (12,130,294) $ (16,582,584) $ (14,211,3 91) (5,254,766) $ (8,540,832) $ (2,022,450) $ (58,742,318) NET INCOME BEFORE DEVELOPER'S INCENTIVE $ (12,130,294) $ (16,582,584) $ (14,211,391) $ (5,254,766) $ 79,029,168 $ 14,657,550 $ 45,507,682 Total Project Incentive 8.00% $ $ . $ (7,005,600) $ (1,334,400) (8,340,000) NET INCOME (BEFORE DISCOUNTING) $ (12,130,294) $ (16,582,584) $ (14,211,391) $ (5,254,766) $ 72,023,568 13,323,150 37,167,682 Present Value Factors
Discount Rate (Cost of Borrowed Funds) 5.00% 0.97561 0.95181 0.92860 0.90595 0.88385 0.86230 Discounted Cash Flow s 111,B34,433I $115,783,543I $ {13,196,689) $ 14,760,559) $ 63,658,339 11,488,510 $ 29,571,626 Net Present Value (Rounded) $ 29,570,000
per unit: $394,267
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-398
Land Residual Analysis 91
Land Residual Analysis (Attached) - Condo Lagoon Frontage Semiannual (6 Months): 0 4 Total
ABSORPTION
Pre-Sales 0 21 21 21 12 0 75
Close of Escrow (COE) 0 0 63 12 75
Unsold Inventory 75 75 54 33 12
Sal es Revenue (Before Appreciation) 39,060,000 39,060,000 39,060,000 22,320,000 An nual Appreciation Factor 0% I.DODO 1.0000 I.ODDO I.ODDO I.DODO I.DODO Sales Revenue (After Appreciation) 39,060,000 39,060,000 39,060,000 22,320,000 $ 139,500,000 Total Sales Revenue {at Close of Escrow) $ $117,180,000 $ 22,320,000 $ 139,500,000
EXPENSES AND CASH FLOWS
General and Administrative 3.0% $ (697,500) $ (697,500) $ (697,500) $ (697,500) (697,500) (697,500) $ (4,185,000) Marketing and Sales 9.0% $ $ $ $ $ (10,546,200) $ (2,008,800) $ (12,555,000) Ad Valorem Taxes ($/unit/yr) $8,122 $ (304,579) $ (307,625 ) $ (223,705 ) $ (138,076) $ (50,711) $ $ (1,024,697) Direct Charges ($/unit/yr) $800 $ (30,000) $ (30,300) $ (22,034) $ (13,600) $ (4,995) $ $ (100,929) Special Taxes/Assessments ($/unit/yr) $4,050 $ (151,875) $ (153,394) $ (111,548) $ (68,850) $ (25,287) $ $ (510,953) Homeowner's Association Fees ($/unit/mo) $650 $ (292,500) $ (292,500) $ (210,600) $ (128,700) $ (46,800) $ $ (971,100) Permits and Fees ~ $ !66,1501 $ (66,1501 $ !66,15D1 $ !37,8001 s $ !236,25D1 Subtota l: $ (1,476,454) $ (1,547,469) $ (1,331,537) $ (1,112,876) $ (11,409,293) $ (2,706,300) $ (19,583,929) Direct Construction Costs(% Complete) 25% 35% 30% 10%
Direct Construction Costs{$ Incurred) $ (11,025,000) $ (15,435,000) $ (13,230,000) (4,410,000) $ Annual Appreciation Factor 0% 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 Direct Construction Costs (Appreciated) $ (11,025,000) $ (15,435,000) $ (13,230,000) (4,410,000) $ $ (44,100,000) Indirect Construction Costs 10% ~ 11,102,5001 ~ 11,543,5001 ~ !1,323,000 1 !441,000) ~ 14,410,0001 Subtota l : s 112,12115001 s 116197815001 $1141553,000j 14,851,0001 s $ l48,510,0001 Total Expenses $ (13,603,954) $ (18,525,969) $ (15,884,537) s (5,963,876) $ (11,409,293) (2,706,300) $ {68,093,929) NET INCOME BEFORE DEVELOPER'S INCENTIVE $ (13,603,954) $ {18,525,969) $ (15,884,537) $ {5,963,876) $ 105,770,707 $ 19,613,700 $ 71,406,071 Total Project Incentive 10.00% $ $ (11,718,000) $ (2,232,000) $ (13,950,000) NET INCOME (BEFORE DISCOUNTING) $ (13,603,954) $ (18,525,969 ) $ (15,884,537) $ (5,963,876) $ 94,052,707 $ 17,381,70 0 $ 57,456,071 Present Value Factors
Discount Rate (Cost of Borrowed Funds) 5.00% 0.9756 1 0.9518 1 0.92860 0.90595 0.88385 0.86230 Discounted Cash Flow $ (13)72,151) s 111,633,284I $ !14,750,372) (5,402,977I s 83,128,888 14,988,185 $ 47,058,291 Net Present Value (Rounded) $ 47,060,000
per unit: $627,467
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-399
Land Residual Analysis
Conclusion of Improved Lot Value
The following table summarizes the conclusions of improved lot value for each product segment .
Summary of Improved Lot Value
No. of Lots Va I ue per Lot/
Land Use Component Lot Size (SF) /Units Units
S0's Collection 5,000 184 $640,000
60's Collection 7,200 100 $861,000
70's Collection 9,100 120 $988,000
90's Collection 12,600 43 $1,245,000
120's Collection 18,000 33 $1,489,000
135's Collection 27,000 22 $1,797,000
Condo - No Lagoon Frontage Attached 75 $394,000
Condo - Lagoon Frontage Attached 12 $627,000
The above improved lot values are utilized to determine the revenue component in the following subdivision development method. In addition, the values per improved lot for the SO's and 60's collections will be relied upon to estimate the market value of the three improved lots under the ownership of Shea Homes.
City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 92 9-400
Market Value, in Bulk - Subdivision Development Method 93 Market Value, in Bulk - Subdivision Development Method
In order to estimate the market value of the subject, a second discounted cash flow analysis will be employed. However, in this method of valuation, the quantity, variability, timing, and duration of the sell off ofthe various lot components to merchant builders/developers is discounted to present value at a specified yield rate. This analysis also accounts for the remaining development costs (including development impact fees) associated with delivering improved lots to the merchant builders, as determined in the preceding lot valuation section.
As a discounted cash flow analysis, the subdivision development method consists of four primary components summarized as follows:
Revenue - the gross income is based on the individual component values.
Absorption Analysis - the time frame required for sell off. Of primary importance in this analysis is the allocation of the revenue over the absorption period - including the estimation of an appreciation factor (if any).
Expenses - the expenses associated with the sell-off are calculated in this section - including infrastructure costs, administration, marketing, and commission costs, as well as taxes and special taxes.
Discount Rate - an appropriate discount rate is derived employing a variety of data.
Discussions ofthese four concepts follows below, with the discounted cash flow analysis offered at the end of this section.
Revenue
The revenue component associated with the subject includes the concluded lot value for the different typical lot sizes within the development. The value conclusion is based on the lots in an as improved lot state; therefore, remaining development costs will be accounted for within the expenses. The revenue is summarized in the following table.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-401
Market Value, in Bulk - Subdivision Development Method
Discounted Cash Flow Revenue
No. of Lots Value per Lot/
Land Use Com~onent Lot Size !SF) /Units Units Extension Single Family Lots 5,000 183 $ 640,000 $ 117,120,000
7,200 98 $ 861,000 $ 84,378,000
9,100 120 $ 988,000 $ 118,560,000
12,600 43 $ 1,245,000 $ 53,535,000
18,000 33 $ 1,489,000 $ 49,137,000
27,000 22 $ 1,797,000 $ 39,534,000
Condo - No Lagoon Frontage Attached 75 $ 394 ,000 $ 29,550,000 Condo - Lagoon Frontage Attached 1.5. $ 627,000 $ 47,025,000 Single Family Subtotal 649 $ 830,260 $ 538,839,000
TOTAL $ 538,839,000
Please note, the above table excludes 1 model home lot within the S0's collection (typical lot size of 5,000 square feet) and 2 model home lots within the 60's collection (typical lots size of 7,200 square feet); these three lots are under ownership of Shea Homes as of the effective appraisal date. A separate allocation of value for these three lots is provided in the following section.
Absorption
94 Absorption rates are best measured by looking at historic absorption rates for similar properties in the region. In developing an appropriate absorption period for the disposition ofthe parcels, we have considered historic absorption rates for similar properties and also attempted to consider the impacts of present market conditions, as well as the anticipated changes in the market . Real estate is cyclical in nature, and it is difficult to accurately forecast specific demand over a projected absorption period.
In attempting to estimate the exposure time that would be required for the disposition of the lots comprising the subject, both historical exposure times and projected economic conditions have been considered. A number of assumptions are made in the discounted cash flow analysis, not the least of which is the forecast of absorption, or disposition, of the various land use components comprising the subject properties. It is common for surveys of market participants to reveal different estimations of anticipated absorption periods for the sell-off of multiple components comprising a master planned development, or large land holding, with some developers preferring to hasten the holding period in favor of mitigating exposures to fluctuations in market conditions; whereas, other developers prefer to manage the sell-off of the property over an extended period of time so as to minimize direct competition of product within the master planned project- most often associated with large residential developments.
In the analysis that follows, total absorption (sell-off) period of 42 months, or three and a half years, is concluded for the holdings. To accommodate the pace of sales previously discussed, it is estimated 30% of lots will sell over the first two periods (one year) and 35% will sell in Periods 3 and 4. The pace of sales will then drop to 20% in Year 3 (Periods 5 and 6), with the remaining lots selling in Period 7. An inflation factor of 1% is applied.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-402
Market Value, in Bulk - Subdivision Development Method 95 Expense Projections
As part of an ongoing effort to assemble market inform ation, the tab le below reflects survey responses and developer budget information for numerous single-family residential subdivisions throughout Ca lifornia.
Detached Subdi vision Bud ets
6ud1et No.of Av1, Home Typical Lot G&A%of Mkt &Sales%of Direct Indirect lndirect%of Sito Permits& Profit %of Developer Clesslflcatlon °'"
Units Quallty Slze(SF) Size Revenue Revenue Costs/SF Costs/SF Direct Costs Costs/ l ot Fus/Unit Revenue IRR Local 2024 11 Good 3,122 12,209 N/Av 5.5% $165.00 $40.75 25.0'/4 $186,803 $67,461 15.2% 35.0% National 2023 19 Good 3,165 6,720 N/Av N/Av $115.00 $10.93 9.5% $216,684 $69,000 12.0% N/Av Local 2023 31 Good 2,560 3,695 2.5% 4.0% $137.00 $6.85 5.0% N/Av $43,610 7.Cf'lo N/Av National 2023 27 Good 2,246 N/Av N/Av N/Av $152.00 N/Av N/Av $240,018 $50,668 N/Av N/Av Regiona l 2023 83 Good 1,975 N/Av N/Av N/Av $135.00 N/Av N/Av $240,018 $47,937 N/Av N/Av Regional 2023 55 Good 3,359 7,150 N/Av N/Av $117.00 N/Av N/Av $229,608 $51,500 N/Av N/Av Regional 2023 89 Good 4,415 43,560 3.0% 4.6% $152.00 N/Av N/Av $450,724 $72,500 N/Av 14.00/o local 2023 49 Good 2,300 N/Av N/Av N/Av $378.00 N/Av N/Av N/Av $66,723 N/Av N/Av Local 2022 12 Good 3,925 40,CXX) N/Av N/Av $159.00 N/Av N/Av N/Av $62,130 13.0% N/Av Regional 2022 27 Good 3,179 10,100 3.0% 1.1% $115.00 $13.13 11.0'/4 $200,111 $70,470 15.7% N/Av Local 2022 22 Good 2,700 12,000 N/Av N/Av $115.26 N/Av N/Av $220,317 $67,876 22.CJ'/4 N/Av Local 2022 19 Good 2,950 15,200 N/Av N/Av $140.00 N/Av N/Av N/Av $66,508 8.0% N/Av National 2022 919 Good 1,877 4,782 3.CJ'/4 3.0% $143.00 N/Av N/Av N/Av $78,522 N/Av 25.0'/4 Regional 2022 55 Good 3,428 11,CXX) 2.0'/4 2.CJ'/4 $148.00 N/Av N/Av $218,004 $31,420 11.(J¼ 20.0'/4 Local 2021 36 Good 2,533 3,450 5.5% 6.6% $112.26 $5.53 4.9¼ N/Av $55,497 15.CJ'/4 N/Av Local 2021 12 Good 1,909 3,450 N/Av 1.4% $189.48 $31.64 16.7% $96,162 $36,270 20.CJ'/4 N/Av Local 2021 26 Good 3,375 43,560 N/Av N/Av $176.00 N/Av N/Av $111,538 $95,6 10 N/Av N/Av Local 2020 17 Good 1,611 9,424 N/Av N/Av $142.88 N/Av N/Av $192,701 $55,092 N/Av N/Av Local 2020 22 Good 1,692 2,200 N/Av N/Av $170.00 $34.00 20.0¼ $101,441 $25,850 N/Av N/Av Regional 2020 20 Good 2,670 1,824 N/Av N/Av $160.00 $28.80 18.0% $187,280 $40,872 N/Av N/Av Regional 2020 Excellent 3,736 9,566 N/Av 2.5% $609.51 N/Av N/Av $366,455 $25,000 N/Av N/Av Minimum 1,611 1,824 2.0% 1.1% $ 112.26 $5.53 4.9% $96,162 $25,000 7.0% 14.0% Maximum 919 4,415 43,560 5.5% 6.6% $609.51 $40.75 25.0'/4 $450,724 $170,000 22.0% 35.0% Averaie 74 2,797 15,129 3.2% 3.4% $177.69 $21.45 13.8% $217,191 $56,215 13.9% 23.5% Att ached Residenti al Bud ets
Budget No.of Avg. Unit Size G&A%of Mkt&Sales%of Direct Indirect lndirect%of Site Permits& Profit %of Developer Classification Date Unft Quality (SF) Revenue Revenue Costs/SF Costs/SF Direct Costs Costs/Unit Fees/Unit Revenue IRR Regional 2023 94 Good 1,46 2 N/Av N/Av $158.00 N/Av N/Av $240,018 $45,432 N/Av N/Av Nation al 2023 76 Good 1,666 N/Av N/Av $150.00 N/Av N/Av $240, 018 $47,546 N/Av N/Av National 2023 80 Good 1,843 N/Av N/Av $116.00 N/Av N/Av $240,018 $47,295 N/Av N/Av Local 2022 17 Good 1,536 N/Av N/Av $250.11 N/Av N/Av $119,821 $53,247 N/Av N/Av Regional 2022 46 Good 1,727 2.4% 2.8% $199.00 $37.81 19% $67,604 $59,935 N/Av N/Av Regiona l 2021 101 Good 1,586 3.5% 1.2% $171.32 $19.76 12% $107,339 $42,985 8.9% 12.5% Local 2021 58 Good 1,540 1.0% 4.9% $294.96 $38.34 13% N/Av $37,600 9.6% N/Av Local 2021 18 Good 1,841 N/Av N/Av $225.47 $47.06 21% $33,860 $31,393 N/Av N/Av Regiona l 2021 15 Good 1,678 4.8% 1.3% $223.00 $37.9 1 17% $108,667 $40,000 10.9% N/Av Regiona l 2020 29 Good 1,364 N/Av N/Av $210.00 $21.00 10% $90,074 $49,244 N/Av N/Av Local 2020 13 Excell ent 1,518 2.6% 4.9% $478.57 $109.42 23% $84,038 $70,666 12.4% N/Av Local 2020 34 Excell ent 1,133 N/Av N/Av $441.00 $79.38 18% $55,649 $27,520 N/Av N/Av Regiona l 2020 134 Good 1,707 N/Av N/Av $180.00 $28.80 16% $187,280 $27,365 N/Av N/Av Region al 2020 68 Good 2,007 N/Av N/Av $205.00 $32.80 16% $187,280 $31,645 N/Av N/Av Region al 2020 64 Good 2,111 N/Av N/Av $205.00 $20.50 10'/4 $80,058 $31,370 N/Av N/Av Re~ional 2020 60 Good 2,019 N/Av N/Av $188.00 $18.80 10'/4 $80,058 $30,150 N/Av N/Av Minimum 13 1,133 UY% 1.2% $116.00 $18.80 10.0% $33,860 $27,365 8.9% 12.5% Maximum 134 2,111 4.8% 4.9% $478.57 $109.42 23.0% $240, 018 $70,666 12.4% 12.5% Average 57 1,671 2.9% 3.0% $230.96 $40.96 15.4% $128, 119 $42,087 10.5% 12.5% Inform ation from the surveys above will contribute to the estimate of development expenses classified as follows.
General and Administrative
The general and admin istrative expense category covers the various administrative costs associated with managing the overall development. This would include management, legal and account ing fees and other professional services common to a development project . For purposes of this analysis, we have estimated this expense at 2% of the total gross sale proceeds. This expense is spread evenly over the entire sellout period.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-403
Market Value, in Bulk - Subdivision Development Method
Marketing and Sale
The costs associated with marketing, commissions and closing costs relative to the disposition of the subjects' components are estimated at 2% of the total gross sale proceeds . Although this rate is somewhat negotiable, it is consistent with current industry trends. Larger transactions, such as the subject, typically have a lower sales commission as a percentage of sale price.
Property Taxes (Ad Valorem and Special Taxes)
This appraisal is predicated on, and assumes, a sale of the appraised property in bulk. Interim ad valorem real estate taxes are based on a tax rate of 1.294430%. This rate is applied to the estimated market value (in bulk) and divided by the total number of lots to yield an estimate of ad valorem taxes/lot/year . The ad valorem taxes are appreciated by 2% per year and the total tax expense is gradually reduced over the absorption period, as the land components are sold off. 96 The subject is within the boundary of the City of Rancho Mirage CFD No. 5 (Section 31), Improvement Area No. 1. Special Taxes associated with the District are calculated using the most current tax year amount to $17,809 acre (max tax), which will be appreciated by 2% per year within our analysis; though, the maximum special tax is reduced to reflect only the initial series of Bonds assumed for this analysis. A ratio between the debt service offered and the maximum allowable Special Taxes is applied to calculate the Special Tax obligation over the disposition period. In addition, $70 of additional direct charges per unit are also accounted for in this analysis. The total tax expense is gradually reduced over the absorption period, as the land components are sold off.
As parcels are sold off, the Special Tax obligations will be assumed by the buyer. The purpose of this analysis is to estimate the market value ofthe underlying land, which serves as the collateral to the Bond issuance. As components of the appraised properties are sold off in this analysis, the balance of the Special Tax obligations necessary to service the debt associated with the bonds are presumed to be collected from the new owners (buyers of the various land parcels) in the CFD.
Remaining Site Development Costs
The subject's remaining site development costs are estimated at $41,500,000 for backbone infrastructure and in-tracts, net of improvements funded by the city of Rancho Mirage. In addition, $12,776,027 in bond proceeds are available to fund eligible public improvements. Therefore, remaining site development costs, net of CFD proceeds, are estimated at $28,723,973 . As noted, the Cotino project will include a 24-acre Crystal Lagoon, the largest in the United States. The master developer is incurring substantial development costs associated with the Crystal Lagoon and other planned amenities that will benefit the entire Cotino community. As of the effective appraisal date, remaining amenity costs for the entire Cotino project are estimated at $85,000,000. Of this, approximately $20,079,710 is allocated to Improvement Area No. 1 (the subject property) on a pro rata share basis.
In addition, net impact fees are estimated at $9,415 per lot.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-404
Market Value, in Bulk - Subdivision Development Method
Holding Costs and General Expenses
General & Administrative
Marketing and Commissions
Backbone Infra structure, In-Tracts
Amenities
Impact Fees
Ad Valorem Tax Table
Annual Increase in Property Taxes
First Year Annual Taxes per Single Family Lot
Special Assessments
Single Family Lots
Other Charges, Assmts. & Special Taxes
CFO No. S {Section 31), IA 1
Tax Rate 1.294430%
2.0%
2.0%
$28,723,973
$20,079,710
$9,415 /lot
2%
$6,034
$70 /lot
$2,291 /lot
Max. Escalation
2%
2%
97 Special tax is $17,809 per arce; the total Special Tax has been divided over the subject's lots. However, the property will not immediately be subject to the full special tax during the dispostion period . Based on the debt service offered, special taxes are estimated based on a ratio between the debt service and the maximum special tax.
Discount Rate
The project yield rate is the rate of return on the total un-leveraged investment in a development, including both equity and debt. The leveraged yield rate is the rate of return to the "base" equity position when a portion ofthe development is financed. The "base" equity position represents the total equity contribution. The developer/builder may have funded all of the equity contribution, or a consortium of investors/builders as in a joint venture may fund it. Most surveys indicate that the threshold project yield requirement is about 20% to 30% for production home type projects. Instances in which project yields may be less than 20% often involve profit participation arrangements in master planned communities where the master developer limits the number of competing tracts.
According to a leading publication within the appraisal industry, the PwC Real Estate Investor SurveyC11 , discount rates for land development projects ranged from 12.00% to 30.00%, with an average of 19.20% during the Fourth Quarter 2023, which is 95 basis points higher than six months ago, and assumes entitlements are in place. Without entitlements in place, certain investors will increase the discount rate an average of 125 basis points .
According to the data presented in the survey prepared by PwC, the majority of those respondents who use the discounted cash flow (DCF) method do so free and clear offinancing. Additionally, the participants reflect a preference in including the developer's profit in the discount rate, versus a separate line item for this factor. As such, the range of rates presented above is inclusive of the developer's profit projection .
The discount rates are based on a survey that includes residential, office, retail and industrial Ill PwC Real Estate Investor Survey, PricewaterhouseCoopers, 4th Quarter 2023.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-405
Market Value, in Bulk - Subdivision Development Method 98 developments. Participants in the survey indicate the highest expected returns are on large-scale, unapproved developments. The low end of the range was extracted from projects where certain development risks had been lessened or eliminated. Several respondents indicate they expect slightly lower returns when approvals/entitlements are already in place.
Excerpts from recent PwC surveys are copied below.
"When looking at macro development prospects for the five major commercial real estate (CRE) sectors included in Emerging Trends, only the retail sector shows an improvement in its rating from last year. .. From a micro standpoint, the top five property types for development prospects in 2024 are data centers, single-family rental housing, lower-income apartments, manufacturing, and moderate income/workforce apartments." In terms of development issues, respondents stated that construction labor costs, construction material costs, construction labor availability, land costs, and operating costs were among the top 5 most important factors. (Fourth Quarter 2023) "Development land investors continue to search for opportunities, especially in the apartment and industrial sectors of the industry. They note, however, that holding costs are dramatically higher due to the rise in interest rates over the past year, which could change their strategies for the near term and keep their acquisitions to a minimum. 'Deals are requiring further due diligence to meet projected returns,' states an investor. Unfortunately, the current stress in the financial sector is adding additional challenges. 'We are looking closely at our banking relationships,' says another.
Growth rates for development expenses, such as amenities, real estate taxes, advertising, and administration, range from 0.00% to 10.00% and average 4.71%. For lot pricing, investors indicate a range from 2.00% to 5.00%; the average growth rate is 3.13%." (Second Quarter 2023) "Confronted with inflation, rising interest rates, economic uncertainty, and a slowdown in tenant demand, it is not surprising that most surveyed investors expect property values to decline over the next 12 months ... When looking at macro development prospects for the five major commercial real estate sectors included in Emerging Trends, only the hotel sector shows an improvement in its rating from last year ... Although the industrial/distribution and multi-family sectors boast the highest ratings for 2023, they both slip this year among respondents ... From a micro standpo int, the top -five property types for development prospects in 2023 are datacenters, fulfillment, moderate-income/workforce apartments, life-science facilities, and single-family rental housing." Labor costs and availability as well as material costs are among the top three reported development issues for 2023. (Fourth Quarter 2022) "Based on our Survey results, the industrial and multifamily sectors of the U.S. commercial real estate industry offer the best development land investment opportunities due to strong tenant demand. Investors also see opportunities in the single-family residential sector ... However, many are mindful that rising interest rates could dampen demand even though U.S. homebuilding unexpectedly rose in March 2022. Still, record low housing supply should continue to support homebuilding this year ... Over the next 12 months, surveyed investors are mostly optimistic regarding value trends for the national development land market. Their expectations range from a decline of 5.0% to growth of 25.0% with an average expected value change of+ 7.0%. This average City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-406
Market Value, in Bulk - Subdivision Development Method
is better than where it is was both six month s ago, as well as a year ago (+5.8% for both time periods) ." (Second Quarter 2022)
99 "Compared to five years ago, both the apartment and industrial sectors show strong gains in their ratings, while the other three sectors [retail, office, hotel] see their ratings decline ... From a micro standpoint, the top five property types for development prospects in 2022 are fulfillment, life science facilities, warehouse, single-family rental housing, and moderate -income/workforce apartments." Among the top five development issues as reported among Emerging Trends Respondents are construction material costs, construction labor costs, construction labor availability, land costs and state & local regulations. (Fourth Quarter 2021) "2020 revealed that where people work and where people live can be very far apart," says a development land participant. This philosophy is a driving force behind a resurgence of new-home construction in the United States. In the nonresidential sector, each segment reported year-over year declines in spending as of March 2021. Over the next 12 months, surveyed investors are most optimistic regarding value trends for the national development land market. Their expectations range from a decline of 5.0% to growth of 25.0% with an average expected value change of +5.8%.
This average is better than where it was six months ago (+4.9%), as well as a year ago (-6.9%). (Second Quarter 2021)
For 2021, most Emerging Trends respondents (53.0%) believe that debt capital for development and redevelopment will be undersupplied. This percentage is more than twice the figure from last year's report and is likely due to the uncertainty tied to the pandemic . Interestingly, the percentage of respondents that feel debt capital for such projects will be "in balance" drops this year to 35.0% - down from 57.0% in 2020. (Fourth Quarter 2020) Amid the COVID-19 crisis, participants in the national development land market are looking to reduce leverage, lessen their holding costs, and preserve cash flow. "These are highly uncertain times, and we are moving in a direct ion no one thought we'd be headed a few months ago," shares a participant. Although some investors are looking to acquire distressed properties, it is difficult to ascertain pricing amid such uncertainty. For now, most investo rs are content to wait on the sidelines for a clearer path to emerge before they formulate new strategies for the rest of 2020 and beyond. (Second Quarter 2020)
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-407
Market Value, in Bulk - Subdivision Development Method 100 Project Yield Rate Survey
Data Source
PwC Real Estate Investor Survey -
Fourth Quarter 2023 (updated semi-annually)
National Builder
Regional Builder
National Builder
Developer
Developer
Land Management Company
Land Developer
Land Developer
Real Estate Consulting Firm
Land Developer
Regional Builder
National Builder
Regional Builder
Regional Builder
Land Developer
Regional Builder
Yield / IRR Expectations (Inclusive of Profit)
Range of 12.0% to 30.0"/4, with an average of 19.20%, on an unleveraged basis, for land development (national average)
20% to 25% for entitled lots
18% to 25%. Longer term, higher risk projects on higher side of the range, shorter term, lower risk projects on the lower side of the range. Long term speculation properties (10 to 20 years out) often closer to 30%. 18% minimum, 20% target
Minimum IRR of 20-25%; for an 8 to 10 year cash flow, mid to upper 20% range
25% IRR for land development is typical {no entitlements); slightly higher for properties with significant infrastructure costs
20% to 30% IRR for land development deals on an uni eve raged basis 35% for large land deals from raw unentitled to tentative map stage, unleveraged or leveraged . 25% to 30% from tentative map to pad sales to merchant builders, unleveraged
18% to 22% for land with some entitlements, unleveraged . 30% for raw unentitled land
Low 20% range yield rate required to attract capital to longer-term land holdings
Merchant builder yield requirements in the 20% range for traditionally financed tract developments . Larger land holdings would require 25% to 30%. Environmentally challenged or politically risky development could well run in excess of 35%.
10% discount rate excluding profit for single -family subdivisions 10% to 40% for single-family residential subdivisions with 1-2 year development timelines
15% to 20% IRR
No less than 20% IRR for land development, either entitled or unentitled 20% to 30% for an unentitled property; the lower end of the range would reflect those properties close to tentative maps
No less than 30% when typical entitlement risk exists
There are several attributes associated with the subject property that we consider in our selection of a discount rate, including (but not necessarily limited to):
• Location in Rancho Mirage
• Entitlement status of the subject property (final mapped lots) • Disney branding
• Extensive community amenity package, including Crystal Lagoon • Good product segmentation with multiple lot and home sizes across varying price points Even though entitlement risk has been mitigated, there is risk associated with estimating the timing that the subject components will be sold off, especially when the market is transitioning from declining to expansion . In addition, there is risk associated with unforeseen factors such as broad City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-408
Market Value, in Bulk - Subdivision Development Method 101 economic declines and job losses. Finally, while the subject will benefit from Disney branding and extensive amenities, it remains this is the first Storyliving by Disney community in the United States; there is some risk associated with being the first product of this kind in the market.
Responses to surveys by developers indicate a range of values which correspond to a development project without site development or completed entitlement work. The subject is entitled with site development and amenity work underway. Considering these factors, and the positive and negative characteristics previously described, we estimate a discount rate of 22%.
Conclusion
The subdivision development method is presented as follows:
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-409
Valuation
102
Subdivision
Deve
lopment
Method
Semiannual
16 Months):
0 2
3 4
6 7
Total
ABSORPTION Single
Family
Lot
Revenue
Sales
(lots/Units):
98 98
114
114
65 65
95 649
End
of
Period
Inventory
551
453
339
225
160
95 0
Total
Period
Inventory
649
551
453
339
225
160
95 SFR
Lot
Revenue
Unappreciated
81,365,519
81,365,519
94 ,649,686
$
94,649,686
$
53,966,926
53,966,926
78,874,738
$
538,839,000
Annual
Appreciation
Factor
1%
1.0000
1.0050
1.0100
1.0151
1.0202
1.0253
1.0304
SFR
lot
Revenue
Appreciated
81,365,519
81,772,347
95,598,549
$
96,076,542
$
55,054,387
$
55,329,659
81,270,756
$
546
,467,758
Total
Sales
Revenue
$
81,365,519
$
81 ,7
72,347
9S,598
,S49
$
96,076
,S42
$
55,054,387
$
55,329
,659
81,270,756
$
546,467,758
EXPENSES
AND
CASH
FLOWS
All
Categories
General
&
Administrative
(1,561,336)
$
(1,561
,3
36)
(1,561,336)
$
(1,561,336)
$
(1,5
61,336)
$
(1,561,336) (1,561,336)
$
(10,929,355)
Ma
rketi
ng/Commiss
i ens
(1,627,
310)
$
(1,635,447) (1,911,971)
$
(1,921,531)
$
(1,101,088)
$
(1,106,593) (1,625,415)
$
(10,929,355)
Backbone
Infrastructure,
In-Tracts(%
Complete)
40%
30%
20%
10%
0%
0%
0%
100%
Backbone
Infrastructure
, In-Tracts($
Incurred)
(11,489,589)
(8,617
,1
92)
(5,744,795) (2,872,397)
$
$
$
(28,723,973)
Amenities(%
Complete)
10%
40%
30%
20%
0%
0%
0%
100%
Amenities($
Incurred)
(2,007,971)
$
(8,031,884)
(6,023,913)
(4,015,942)
$
$
$
(20
,079,710)
Impact
Fees
(922,670)
$
(922,670)
(1,073,310)
$
(1,073,310)
$
(611,975)
(611,975) (894,425)
(6,110,335)
Single
Family
Lots
Ad
Valorem
Taxes
$
(3,916,066)
$
(3,357,981)
$
(2,788,343)
$
(2,107,507)
$
(1,412,776)
$
(1,014,687)
$
(608,495)
$
(15,205,857)
Other
Charges,
Assmts.
&
Special
Taxes
$
(45,430)
$
(38,956)
$
(32,347)
$
(24,449)
$
(16,390)
$
(11,771)
$
(7,059)
$
(176,402)
CFO
No.
S (Section
31),
IA
1 $
(1,486,924)
$
(446,238)
$
(370,539)
$
(280,064)
$
(187,742)
$
(134,840)
$
(80,862)
$
(2,987,209)
Total
Expenses
(23,0S7,297)
$
(24,611,704)
$
(19,506,SSS)
$
(13,856,537)
(4,891,307)
$
(4,441,203)
$
(4,777,593)
(95,142,196)
NETINCOME
$
58,308,222
$
57,160
,643
$
76,091,994
$
82,220,005
$
50,163,080
$
50,888,455
$
76,493,163
$
451
,325
,562
Internal
Rate
of
Return
22.00%
Discounted
Cash
Flow
Net
Present
Value
Conclusion
of
Value
by
Discounted
Cash
Flow
Analysis
(Rounded)
0.90090
52,529
,930
302,541,432
0.81162 0.73119
46,392,860
55,637,810
City
of
Rancho
Mirage
CFD
No.
5 (Section
31)
-Improvement
Area
No.
1 0.65873
0.59345
0.53464
0.48166
54,160,864
$
29,769,346
27,207,046
36,843,575
$
302,541,432
$
302
,541,000
9-410
Valuation 103
Conclusion of Value
Based on the preceding valuation analysis and subject to the definitions, assumptions, and limiting conditions expressed in the report, our opinion of value is as follows . The three residential lots under ownership of Shea Homes as of the effective appraisal date are reported separately, based upon the previously discussed improved lot conclusions for the SO's and 60's land use categories.
Market Value by Ownership
Value per
No. of Lots Component Market Value (Rd.)
ECRM Residential, LP
Pa rtia I ly-lmproved Residentia I Lots .6..49. $ 302,541,000 Total - Ownership 1 649 $ 302,541,000
Shea Homes
I mp roved Lots - S0's Col I ecti on 1 $640,000 $ 640,000 I mp roved Lots - 60's Col I ecti on I $861,000 s 1 722,QQQ Total - Ownership 2 3 $ 2,362,000
Aggregate Market Value, subject to a hypothetical condition 652 $ 304,903,000 Value Conclusion
ValueType&Appraisal Premise lnterestAppraised DateofValue Value Conclusion Market Value, Subject to a Hypothetical Condition Fee Simple March 6, 2024 $304,903,000 Extraordinary Assumptions and Hypothetical Conditions
The va I ue conclusions a re subject to the following extraordinary assumptions. An extraordinary assumption is an assignment-specific assumption as of the effective date regarding uncertain information used in an analysis which, if found to be fa I se, could alter the appraiser's opinions or conclusions . (None)
The value conclusions a re based on the fol lowing hypothetical conditions. A hypothetical condition is 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.
1. The va I ue derived herein is based on the hypothetical condition that certain public improvements and impact fees to be fi na need by proceeds from the City ofRancho Mi rage Community Faci Ii ties District No. 5 (Section 31), Improvement Area No.1, Special Tax Bonds have been paid .
The use of any extraordinary assumption or hypothetica I condition may have affected the assignment results.
Exposure Time
Exposure time is the length of time the subject property would have been exposed for sale in the market had it sold on the effective valuation date at the concluded market value. Exposure time is always presumed to precede the effective date of the appraisal. Based on our review of recent sales transactions for similar properties and our analysis of supply and demand in the local land market, it is our opinion that the probable exposure time for the subject at the concluded market value stated previously is 9 - 12 months.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-411
Valuation 104
Marketing Time
Marketing time is an estimate of the amount of time it might take to sell a property at the concluded market value immediately following the effective date of value. As we foresee no significant changes in market conditions in the near term, it is our opinion that a reasonable marketing period for the subject in bulk is likely to be the same as the exposure time. Accordingly, we estimate the subject's marketing period at 9 - 12 months.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-412
Certification 105
Certification
We certify that, to the best of our 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 our personal, impartial, and unbiased professional analyses, opinions, and conclusions .
3. We have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved.
4. We have performed no services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three -year period immediately preceding the agreement to perform this assignment .
5. We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.
6. Our engagement in this assignment was not contingent upon developing or reporting predetermined results.
7. Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.
8. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice as well as applicable state appraisal regulations.
9. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute .
10. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives .
11. Kevin Ziegenmeyer, MAI, made a personal inspection of the property that is the subject of this report . Eric Segal, MAI, and Laura Diaz, MAI, have not personally inspected the subject .
12. No one provided significant real property appraisal assistance to the person(s) signing this certification.
13. We have experience in appraising propertie s similar to the subject and are in compliance with the Competency Rule of USPAP.
14. As of the date of this report, Kevin Ziegenmeyer, MAI, Eric Segal, MAI, and Laura Diaz, MAI, have completed the continuing education program for Designated Members of the Appraisal Institute.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-413
Certification
Kevin Ziegenmeyer, MAI
Certified General Real Estate Appraiser
California Certificate# AG013567
Laura Diaz, MAI
Certified General Real Estate Appraiser
California Certificate# 3005037
Eric Segal, MAI
Certified General Real Estate Appraiser
California Certificate# AG026558
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 106
9-414
Assumptions and Limiting Conditions
Assumptions and Limiting Conditions
This appraisal and any other work product related to this engagement are limited by the following standard assumptions, except as otherwise noted in the report:
1. The title is marketable and free and clear of all liens, encumbrances, encroachments, easements and restrictions. The property is under responsible ownership and competent management and is available for its highest and best use. 107
2. There are no existing judgments or pending or threatened litigation that could affect the value of the property .
3. There are no hidden or undisclosed conditions of the land or of the improvements that would render the property more or less valuable. Furthermore, there is no asbestos in the property.
4. The revenue stamps placed on any deed referenced herein to indicate the sale price are in correct relation to the actual dollar amount of the transaction .
5. The property is in compliance with all applicable building, environmental, zoning, and other federal, state and local laws, regulations and codes.
6. The information furnished by others is believed to be reliable, but no warranty is given for its accuracy.
This appraisal and any other work product related to this engagement are subject to the following limiting conditions, except as otherwise noted in the report:
1. An appraisal is inherently subjective and represents our opinion as to the value ofthe property appraised.
2. The conclusions stated in our appraisal apply only as of the effective date of the appraisal, and no representation is made as to the effect of subsequent events .
3. No changes in any federal, state or local laws, regulations or codes (including, without limitation, the Internal Revenue Code) are anticipated.
4. No environmental impact studies were either requested or made in conjunction with this appraisal, and we reserve the right to revise or rescind any of the value opinions based upon any subsequent environmental impact studies . If any environmental impact statement is required by law, the appraisal assumes that such statement will be favorable and will be approved by the appropriate regulatory bodies.
5. Unless otherwise agreed to in writing, we are not required to give testimony, respond to any subpoena or attend any court, governmental or other hearing with reference to the property without compensation relative to such additional employment .
6. We have made no survey of the property and assume no responsibility in connection with such matters . Any sketch or survey of the property included in this report is for illustrative purposes only and should not be considered to be scaled accurately for size. The appraisal City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-415
Assumptions and Limiting Conditions
covers the property as described in this report, and the areas and dimensions set forth are assumed to be correct.
108
7. No opinion is expressed as to the value of subsurface oil, gas or mineral rights, if any, and we have assumed that the property is not subject to surface entry for the exploration or removal of such materials, unless otherwise noted in our appraisal.
8. We accept no responsibility for considerations requiring expertise in other fields . Such considerations include, but are not limited to, legal descriptions and other legal matters such as legal title, geologic considerations such as soils and seismic stability; and civil, mechanical, electrical, structural and other engineering and environmental matters. Such considerations may also include determinations of compliance with zoning and other federal, state, and local laws, regulations and codes.
9. The distribution ofthe total valuation in the report between land and improvements applies only under the reported highest and best use of the property. The allocations of value for land and improvements must not be used in conjunction with any other appraisal and are invalid if so used. The appraisal report shall be considered only in its entirety. No part of the appraisal report shall be utilized separately or out of context .
10. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraisers, or any reference to the Appraisal Institute) shall be disseminated through advertising media, public relations media, news media or any other means of communication (including without limitation prospectuses, private offering memoranda and other offering material provided to prospective investors ) without the prior written consent of the persons signing the report.
11. Information, estimates and opinions conta ined in the report and obtained from third-party sources are assumed to be reliable and have not been independently verified.
12. Any income and expense estimates contained in the appraisal report are used only for the purpose of estimating value and do not constitute predictions of future operating results.
13. If the property is subject to one or more leases, any estimate of residual value contained in the appraisal may be particularly affected by significant changes in the condition of the economy, of the real estate industry, or of the appraised property at the time these leases expire or otherwise terminate.
14. Unless otherwise stated in the report, no consideration has been given to personal property located on the premises or to the cost of moving or relocating such personal property; only the real property has been considered.
15. The current purchasing power of the dollar is the basis for the values stated in the appraisal; we have assumed that no extreme flu ctuat ions in economic cycles will occur.
16. The values found herein are subject to these and to any other assumptions or conditions set forth in the body of this report but which may have been omitted from this list of Assumptions and Limiting Conditions .
17. The analyses contained in the report necessarily incorporate numerous estimates and assumptions regarding property performance, general and local business and economic City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-416
Assumptions and Limiting Conditions 109
conditions, the absence of material changes in the competitive environment and other matters. Some estimates or assumptions, however, inevitably will not materialize, and unanticipated events and circumstances may occur; therefore, actual results achieved during the period covered by our analysis will vary from our estimates, and the variations may be material.
18. The Americans with Disabilities Act (ADA) became effective January 26, 1992. We have not made a specific survey or analysis of the property to determine whether the physical aspects of the improvements meet the ADA accessibility guidelines. We claim no expertise in ADA issues, and render no opinion regarding compliance of the subject with ADA regulations.
Inasmuch as compliance matches each owner's financial ability with the cost to cure the non conforming physical characteristics of a property, a specific study of both the owner's financial ability and the cost to cure any deficiencies would be needed for the Department of Justice to determine compliance .
19. The appraisal report is prepared for the exclusive benefit of the Client, its subsidiaries and/or affiliates. It may not be used or relied upon by any other party. All parties who use or rely upon any information in the report without our written consent do so at their own risk.
20. No studies have been provided to us indicating the presence or absence of hazardous materials on the subject property or in the improvements, and our valuation is predicated upon the assumption that the subject property is free and clear of any environment hazards including, without limitation, hazardous wastes, toxic substances and mold. No representations or warranties are made regarding the environmental condition of the subject property. lntegra Realty Resources - Orange County, lntegra Realty Resources, Inc., lntegra Strategic Ventures, Inc. and/or any of their respective officers, owners, managers, directors, agents, subcontractors or employees (the "lntegra Parties"), shall not be responsible for any such environmental conditions that do exist or for any engineering or testing that might be required to discover whether such conditions exist. Because we are not experts in the field of environmental conditions, the appraisal report cannot be considered as an environmental assessment of the subject property.
21. The persons signing the report may have reviewed available flood maps and may have noted in the appraisal report whether the subject property is located in an identified Special Flood Hazard Area. We are not qualified to detect such areas and therefore do not guarantee such determinations . The presence of flood plain areas and/or wetlands may affect the value of the property, and the value conclusion is predicated on the assumption that wetlands are non existent or minimal.
22. lntegra Realty Resources - Orange County is not a building or environmental inspector. lntegra Orange County does not guarantee that the subject property is free of defects or environmental problems. Mold may be present in the subject property and a professional inspection is recommended.
23. The appraisal report and value conclusions for an appraisal assume the satisfactory completion of construction, repairs or alterations in a workmanlike manner.
24. It is expressly acknowledged that in any action which may be brought against any of the lntegra Parties, arising out of, relating to, or in any way pertaining to this engagement, the City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-417
Assumptions and Limiting Conditions 110
appraisal reports, and/or any other related work product, the lntegra Parties shall not be responsible or liable for any incidental or consequential damages or losses, unless the appraisal was fraudulent or prepared with intentional misconduct. It is further acknowledged that the collective liability of the lntegra Parties in any such action shall not exceed the fees paid for the preparation of the appraisal report unless the appraisal was fraudulent or prepared with intentional misconduct. Finally, it is acknowledged that the fees charged herein are in reliance upon the foregoing limitations of liability.
25. lntegra Realty Resources - Orange County, an independently owned and operated company, has prepared the appraisal for the specific intended use stated elsewhere in the report. The use of the appraisal report by anyone other than the Client is prohibited except as otherwise provided . Accordingly, the appraisal report is addressed to and shall be solely for the Client's use and benefit unless we provide our prior written consent . We expressly reserve the unrestricted right to withhold our consent to your disclosure of the appraisal report or any other work product related to the engagement (or any part thereof including, without limitation, conclusions of value and our identity), to any third parties. Stated again for clarification, unless our prior written consent is obtained, no third party may rely on the appraisal report (even if their reliance was foreseeable) .
26. The conclusions of this report are estimates based on known current trends and reasonably foreseeable future occurrences. These estimates are based partly on property information, data obtained in public records, interviews, existing trends, buyer-seller decision criteria in the current market, and research conducted by third parties, and such data are not always completely reliable. The lntegra Parties are not responsible for these and other future occurrences that could not have reasonably been foreseen on the effective date of this assignment . Furthermore, it is inevitable that some assumptions will not materialize and that unanticipated events may occur that will likely affect actual performance. While we are of the opinion that our findings are reasonable based on current market conditions, we do not represent that these estimates will actually be achieved, as they are subject to considerable risk and uncertainty. Moreover, we assume competent and effective management and marketing for the duration of the projected holding period of this property.
27. All prospective value opinions presented in this report are estimates and forecasts which are prospective in nature and are subject to considerable risk and uncertainty . In addition to the contingencies noted in the preceding paragraph, several events may occur that could substantially alter the outcome of our estimates such as, but not limited to changes in the economy, interest rates, and capitalization rates, behavior of consumers, investors and lenders, fire and other physical destruction, changes in title or conveyances of easements and deed restrictions, etc. It is assumed that conditions reasonably foreseeable at the present time are consistent or similar with the future.
28. The appraisal is also subject to the following:
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-418
Assumptions and Limiting Conditions 111
Extraordinary Assumptions and Hypothetical Conditions
The value cone I us ions a re subject to the following extraordinary assumptions. An extraordinary assumption is an assignment-specific assumption as of the effective date regarding uncertain information used in an analysis which, if found to be fa I se, could alter the appraiser's opinions or cone I us ions. (None)
The value cone I us ions are based on the following hypothetical conditions. A hypothetica I condit ion is 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 .
1. The value derived herein is based on the hypothetical condition that certain public improvements and impact fees to be fi na need by proceeds from the City of Rancho Mi rage Community Faci Ii ties District No. 5 (Section 31), Improvement Area No. 1, Special Tax Bonds have been pa id.
The use of any extraordinary assumption or hypothetical condition may have affected the assignment results .
City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 9-419
Addenda
Addendum A
Appraiser Qualifications
City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 9-420
Kevin Ziegenmeyer, MAI
Experience
Mr. Ziegenmeyer is a Certified General real estate appraiser and holds the Appraisal lnstitute's MAI designation. In 1989, Mr. Ziegenmeyer began his career in real estate as a controller for a commercial and residential real estat e development corporation. In 1991 he began appraising and continued to be involved in appraisal assignments covering a wide vari ety of properties , including office, retail, industrial, residential income and subdivisions throughout the state of California, and Northern Nevada. Mr. Ziegenmeyer handles many of the firm's master -planned property appraisals and over the past two decades has developed expertise in the valuation of Community Facilities Districts and Assessment Districts .In fact, Mr. Ziegenmeyer was one of five appraisers to collaborate with other professionals in developing the appraisal guidelines for the California Debt and Investment Advisory Commission (Recommended Practices in the Appraisal of Real Estate for Land-Secured Financing - 2004). He has developed th e experience and background necessary to deal with complex assignments covering an array of property types, with a particular focus on urban redevelopment in the cities and counties of San Francisco, Dublin , Monterey , Newport Beach, Alameda, Napa and San Mateo . In early 2015, Mr. Ziegenmeyer obtained the Appraisal lnstitute's MAI designation.
Licenses
California, Ca lifornia Certified General Real Estate Appraiser, AG013567, Expires June 2025
Education
Academic:
Bachelor of Science in Accounting, Azusa Pacific University, California Appraisal and Real Estate Courses:
Standards of Professional Practice, Parts A, B & C
Basic Valuation Procedures
Real Estate Appraisal Principles
Capitalization Theory and Techniques, Part A
Advanced Income Capitalization
Report Writing and Valuation Analysis
Advanced Applications
IRS Valuation Summit I & II
2008, 2009, 2010 & 2011 Economic Forecast
Business Practices and Ethics
Contemporary Apprais al Issues with Small Business Administration Financing General Demonstration Appraisal Report Writing Seminar
7-Hour National USPAP Update Course
Valuation of Easements and Other Partial Interests
2009 Summer Conference
Uniform Appraisal Standards for Federal Land Acquisitions (Yellowbook) 2008 Economic Update
Valuation of Conservation Easements
Subdivision Valuation
2005 Annual Fall Conference
General Comprehensive Exam Module I, II, Ill & IV
Advanced Income Capitalization
[email protected] - 916.435 .3883 x224
lnteg ra Realty Resources -
Sacramento
590 Menlo Drive
Suite 1
Rocklin, CA 95765
T 916.435.3883
F 916.435.4774
irr.com
9-421
Kevin Ziegenmeyer, MAI
Education (Cont'd)
Advanced Sales Comparison & Cost Approaches
2004 Central CA Market Update
Computer-Enhanced Cash Flow Modeling
Forecast 2000, 2001, 2002, 2003 & 2004
Land Valuation Assignments
Land Valuation Adjustment Procedures
Highest & Best Use and Market Analysis
Entitlements, Land Subdivision & Valuation
Real Estate Value Cycles
El Dorado Hills Housing Symposium
Federal Land Exchanges
M & S Computer Cost-Estimating, Nonresidential
[email protected] - 916.435.3883 x224
lntegra Realty Resources -
Sacramento
590 Menlo Drive
Suite 1
Rocklin, CA 9576S
T 916.435.3883
F 916.435.4774
irr.com
tEJ
9-422
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Effective
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• Date
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June
5,
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June
4, 2025
9-423
Eric Segal, MAI
Experience
Mr. Segal is a Certified General real estate appraiser and holds the Appraisal lnstitute's MAI designation . In 1998, Mr. Segal began his career in real estate as a research analyst/appraiser trainee for Richard Seevers and Associates. By 1999, he began writing narrative appraisal reports covering a variety of commercial properties, with an emphasis on residential master planned communities and subdivisions. Today, Mr. Segal is a partner in the firm and is involved in appraisal assignments covering a wide variety of properties including office, retail, industrial, multifamily housing, master planned communities, and specializes in the appraisal of Mello-Roos Community Facilities Districts and Assessment Districts for land-secured municipal financings, as well as multifamily developments under the U.S. Department of Housing and Urban Development's Multifamily Accelerated Processing (MAP) Guide . He has developed the experience and background necessary to deal with complex assignments covering an array of property types, with a particular focus on urban redevelopment in the cities of San Francisco, Oakland, Monterey , Alameda and San Mateo . He has developed the experience and background necessary to deal with complex assignments covering an array of property types. Eric is currently Senior Managing Director of the lntegra-Los Angeles office , and Managing Director of the lntegra-Orange County, lntegra-San Francisco and lntegra-Sacramento offices .
Professional Activities & Affiliations
MAI Designation, Appraisal Institute Appraisal Institute, January 2016 Licenses
California, Certified General Real Estate Appraiser, AG026S58, Expires February 2025 Nevada, Certified General, A.0207666-CG, Expires January 2025 Arizona, Certified General, CGA - 1006422, Expires January 2026 Washington, Certified General, 20100611, Expires June 2025 Education
Academic:
Bachelor of Science in Business Administration (Concentrations in Finance and Real Estate & Land Use Affairs), California State University, Sacramento
Appraisal and Real Estate Courses:
Uniform Standards of Professional Appraisal Practice
Appraisal Principles
Basic Income Capitalization
Highest & Best Use and Market Analysis
Advanced Income Capitalization
Report Writing and Valuation Analysis
Self-Storage Economics and Appraisal Seminar
Appraisal Litigation Practice and Courtroom Management
Hotel Valuations: New Techniques for today's Uncertain Times Computer Enhanced Cash Flow Modeling
Advanced Sales Comparison & Cost Approaches
Advanced Applications
Subdivision Valuation
Appraisal of Self-Storage Facilities
Appraisal of Fast Food Facilities
Appraisal of Limited Service Hotels
How Tenants Create or Destroy Value: Leasehold Valuation and its Impact on Value Appraisal of Manufactured Homes Featuring Next Generation Manufactured Homes [email protected] - 213.948.4425 x228
lntegra Realty Resources - Los
Angeles
12100 Wilshire Boulevard
Suite 800
Los Angeles, CA 90025
T 213.948.4425
F 916.435.4774
irr.com
9-424
Eric Segal, MAI
Appraisal and Real Estate Courses {cont'd) :
Business Practices and Ethics
IRS Valuation Update
[email protected] - 213.948.4425 x228
lntegra Realty Resources - Los
Angeles
12100 Wilshire Boulevard
Suite 800
Los Angeles, CA 90025
T 213.948.4425
F 916.435.4774
irr.com
9-425
Business,
Consumer
Services
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BUREAU
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REAL
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APPRAISERS
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BREA
APPRAISER
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NUMBER:
3069186
AG
026558
Effective
Date:
Date
Expires:
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2023
February
18,
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Laura Diaz, MAI
Experience
Ms. Diaz is a licensed certified general real estate appraiser . She began her career in real estate in 2013 as a research analyst with lntegra - Kentucky-Southern Indiana as she pursued her Master of Urban Planning degree . In 2017, Ms. Diaz relocated to the San Francisco Bay Area and joined the lntegra - San Francisco office . She has experience writing narrative appraisal reports for a variety of property types , including office, retail, industrial, multifamily housing, and commercial and agricultural land . She has also worked with special-purpose properties, including self-storage facilities , religious facilities, student housing projects, data centers, hotels, and airport properties . In addition, Ms. Diaz has experience in multifamily market analysis, including development and analysis of survey techniques and models of demand for proposed multifamily projects . She specializes in the appraisal of residential subdivisions and master planned communities, as well as Mello Roos and Assessment Districts for land-secured municipal financings .
Licenses
California, Certified General Real Estate Appraiser , 3005037, Expires January 2026 Education
Academic :
Bachelor of Arts in English, University of Louisville
Master of Urban Planning, University of Louisville
Graduate Certificate in Real Estate Development, University of Louisville Appraisal and Real Estate Courses:
Uniform Standards of Professional Appraisal Practice
Basic Appraisal Principles
Basic Appraisal Procedures
Real Estate Finance Statistics and Valuation Modeling
Site Valuation and Cost Approach
General Market Analysis and Highest and Best Use
Sales Comparison Approach
Basics Income Capitalization
General Appraiser Report Writing and Case Studies
Expert Witness for Commercial Appraisers
Quantitative Analysis
Advanced Market Analysis and Highest and Best Use
Advanced Income Capitalization
Advanced Concepts and Case Studies
Business Practice and Ethics
[email protected] - 408.299.0444
lntegra Realty Resources
San Francisco
555 Meridian Avenue
Suite C
San Jose, CA 95126
T 408.299.0444
F 408.299.0449
irr.com
9-427
Business,
Consumer
Services
&
Housing
Agency
BUREAU
OF
REAL
ESTATE
APPRAISERS
REAL
ESTATE
APPRAISER
LICENSE
Laura
B.
Diaz
has
successfully
met
the
requirements
for
a license
as
a residential
and
commercial
real
estate
appraiser
in
the
State
of
California
and
is,
therefore,
entitled
to
use
the
title:
"Certified
General
Real
Estate
Appraiser"
This
license
has
been
issued
in
accordance
with
the
provisions
of
the
Real
Estate
Appraisers'
Licensing
and
Certification
Law.
BREA
APPRAISER
IDENTIFICATION
NUMBER
:
3074214
3005037 Effective
Date:
Date
Expires:
January
3,
2024
January
2,
2026
9-428
About IRR
lntegra Realty Resources, Inc. (IRR) provides world -class commercial real estate valuation, counseling, and advisory services. Routinely ranked among leading property valuation and consulting firms, we are now the largest independent firm in our industry in the United States, with local offices coast to coast and in the Caribbean.
IRR offices are led by MAI -designated Senior Managing Directors, industry leaders who have over 25 years, on average, of commercial real estate experience in their local markets. This experience, coupled with our understanding of how national trends affect the local markets, empowers our clients with the unique knowledge, access, and historical perspective they need to make the most informed decisions.
Many of the nation's top financial institutions, developers, corporations, law firms, and government agencies rely on our professional real estate opinions to best understand the value, use, and feasibility of real estate in their market.
Local Expertise ... Nationally!
• 1rr.com
9-429
Addenda
Addendum B
Definitions
City of Rancho Mirage CFD No. 5 (Section 31) - Improv ement Area No. 1 9-430
Addenda
Definitions
The source of the following definitions is the Appraisal Institute, The Dictionary of Real Estate Appraisal, 7th ed. (Chicago: Appraisal Institute, 2022), unless otherwise noted .
As Is Market Value
The estimate of the market value of real property in its current physical condition, use, and zoning as ofthe appraisal date.
Disposition Value
The most probable price that a specified interest in property should bring under the following conditions:
1. Consummation of a sale within a specified time, which is shorter than the typical exposure time for such a property in that market .
2. The property is subjected to market conditions prevailing as of the date of valuation.
3. Both the buyer and seller are acting prudently and knowledgeably.
4. The seller is under compulsion to sell.
5. The buyer is typically motivated.
6. Both parties are acting in what they consider to be their best interests .
7. An adequate marketing effort will be made during the exposure time.
8. Payment will be made in cash in U.S. dollars (or the local currency) or in terms of financial arrangements comparable thereto.
9. 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.
This definition can also be modified to provide for valuation with specified financing terms.
Effective Date
1. The date on which the appraisal opinion applies. (SVP)
2. The date to which an appraiser's analysis, opinions, and conclusions apply; also referred to as date of value. (USPAP, 2020-2021 ed.)
3. The date that a lease goes into effect.
Entitlement
In the context of ownership, use, or development of real estate, governmental approval for annexation, zoning, utility extensions, number of lots, total floor area, construction permits, and occupancy or use permits.
City of Rancho Mirage CFO No. 5 (Section 31) - Improvement Area No. 1 9-431
Addenda
Entrepreneurial Incentive
The amount an entrepreneur expects or wants to receive as compensation for providing coordination and expertise and assuming the risks associated with the development of a project. Entrepreneurial incentive is the expectation of future reward as opposed to the profit actually earned on the project.
Entrepreneurial Profit
1. A market -derived figure that represents the amount an entrepreneur receives for his or her contribution to a past project to compensate for his or her time, effort, knowledge, and risk; the difference between the total cost of a property (cost of development) and its market value (property value after completion), which represents the entrepreneur's compensation for the risk and expertise associated with development. An entrepreneur is motived by the prospect of future value enhancement (i.e., the entrepreneurial incentive). An entrepreneur who successfully creates value through new development, expansion, renovation, or an innovation change of use is rewarded by entrepreneurial profit. Entrepreneurs may also fail and suffer losses.
2. In economics, the actual return on successful management practices, often identified with coordination, the fourth factor of production following land, labor, and capital; also called entrepreneurial return or entrepreneurial reward.
Exposure Time
1. The time a property remains on the market.
2. An opinion, based on supporting market data, of the length of time that the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal.
Fee Simple Estate
Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.
Floor Area Ratio (FAR)
The relationship between the above-ground floor area of a building, as described by the zoning or building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area.
Highest and Best Use
1. The reasonably probable use of property that results in the highest value . The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity.
2. The use of an asset that maximizes its potential and that is possible, legally permissible, and financially feasible. The highest and best use may be for continuation of an asset's existing use or for some alternative use. This is determined by the use that a market participant would have in mind for the asset when formulating the price that it would be willing to bid. (ISV) City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-432
Addenda
3. The highest and most profitable use for which the property is adaptable and needed or likely to be needed in the reasonably near future. (Uniform Appraisal Standards for Federal Land Acquisitions)
Investment Value
1. The value of a property to a particular investor or class of investors based on the investor's specific requirements . Investment value may be different from market value because it depends on a set of investment criteria that are not necessarily typical of the market.
2. The value of an asset to the owner or a prospective owner given individual investment or operational objectives (may also be known as worth). (IVS) Lease
A contract in which rights to use and occupy land, space, or structures are transferred by the owner to another for a specified period of time in return for a specified rent .
Leased Fee Interest
The ownership interest held by the lessor, which includes the right to receive the contract rent specified in the lease plus the reversionary right when the lease expires.
Leasehold Estate
The right held by the lessee to use and occupy real estate for a stated term and under the conditions specified in the lease.
Liquidation Value
The most probable price that a specified interest in real property should bring under the following conditions:
1. Consummation of a sale within a short time period .
2. The property is subjected to market conditions prevailing as of the date of valuation.
3. Both the buyer and seller are acting prudently and knowledgeably.
4. The seller is under extreme compulsion to sell.
5. The buyer is typically motivated.
6. Both parties are acting in what they consider to be their best interests.
7. A normal marketing effort is not possible due to the brief exposure time.
8. Payment will be made in cash in U.S. dollars (or the local currency) or in terms of financial arrangements comparable thereto .
9. 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.
This definition can also be modified to provide for valuation with specified financing terms.
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-433
Addenda
Marketing Time
An opinion of the amount of time to sell a property interest at the concluded market value or at a benchmark price during the period immediately after the effective date of an appraisal. Marketing time differs from exposure time, which precedes the effective date of an appraisal.
Market Value
The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
• buyer and seller are typically motivated;
• both parties are well informed or well advised, and acting in what they consider their own best interests;
• a reasonable time is allowed for exposure in the open market; • payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
• the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. (Source: Code of Federal Regulations, Title 12, Chapter I, Part 34.42[h]; also lnteragency Appraisal and Evaluation Guidelines, Federal Register, 75 FR 77449, December 10, 2010, page 77472} Prospective Opinion of Value
A value opinion effective as of a specified future date. The term does not define a type of value.
Instead, it identifies a value opinion as being effective at some specific future date. An opinion of value as of a prospective date is frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy.
Retrospective Value Opinion
A value opinion effective as of a specified historical date. The term retrospective does not define a type of value . Instead, it identifies a value opinion as being effective at some specific prior date. Value as of a historical date is frequently sought in connection with property tax appeals, damage models, lease renegotiation, deficiency judgments, estate tax, and condemnation. Inclusion of the type of value with this term is appropriate, e.g., "retrospective market value opinion." City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-434
Addenda
Addendum C
Preliminary Title Report
City of Rancho Mirage CFD No. 5 (Section 31) - Improvement Area No. 1 9-435
Cl TA Preliminary Report Form
(Rev. 11/06)
Order Number: DTR-7081056 (MA)
Page Number: 1
First American TitleTM
Customer Reference:
Order Number:
Title Officer:
Phone:
Fax No.:
E-Mail:
Escrow Officer:
Phone:
Fax No.:
E-Mail:
Buyer:
First American Title Company
1250 Corona Pointe Court, Suite 200
Corona, CA 92879
Lots 159, 160, 161, 162, 163, 164 (for the 60s)
DTR-7081056 (MA)
Manolo Acevedo
(951 )256-5866
[email protected]
Karina Sandoval
(858)410-1317
(866)898-0113
[email protected]
PRELIMINARY REPORT
In response to the above referenced application for a policy of title insurance, this company hereby reports that it is prepared to issue, or cause to be issued, as of the date hereof, a Policy or Policies of Title Insurance describing the land and the estate or interest therein hereinafter set forth, insuring against loss which may be sustained by reason of any defect, lien or encumbrance not shown or referred to as an Exception below or not excluded from coverage pursuant to the printed Schedules, Conditions and Stipulations of said Policy forms.
The printed Exceptions and Exclusions from the coverage and Limitations on Covered Risks of said policy or policies are set forth in Exhibit A attached. The policy to be issued may contain an arbitration clause. When the Amount of Insurance is less than that set forth in the arbitration clause, all arbitrable matters shall be arbitrated at the option of either the Company or the Insured as the exclusive remedy of the parties. Limitations on Covered Risks applicable to the CLTA and ALTA Homeowner's Policies of Title Insurance which establish a Deductible Amount and a Maximum Dollar Limit of Liability for certain coverages are also set forth in Exhibit A. Copies of the policy forms should be read. They are available from the office which issued this report.
Please read the exceptions shown or referred to below and the exceptions and exclusions set forth in Exhibit A of this report carefully. The exceptions and exclusions are meant to provide you with notice of matters which are not covered under the terms of the title insurance policy and should be carefully considered.
It is important to note that this preliminary report is not a written representation as to the condition of title and may not list all liens, defects, and encumbrances affecting title to the land.
Please be advised that any provision contained in this document, or in a document that is attached, linked or referenced in this document, that under applicable law illegally discriminates against a class of individuals based upon personal characteristics such as race, color, religion, sex, sexual orientation, gender identity, familial status, disability, national origin, or any other legally protected class, is illegal and unenforceable by law.
First American Title
9-436
Order Number: DTR-7081056 (MA)
Page Number: 2
This report (and any supplements or amendments hereto) is issued solely for the purpose of facilitating the issuance of a policy of title insurance and no liability is assumed hereby. If it is desired that liability be assumed prior to the issuance of a policy of title insurance, a Binder or Commitment should be requested.
First American Title
9-437
Order Number: DTR-7081056 (MA)
Page Number: 3
Dated as of January 26, 2024 at 7:30 A.M.
The form of Policy of title insurance contemplated by this report is:
To Be Determined
A specific request should be made if another form or additional coverage is desired.
Title to said estate or interest at the date hereof is vested in:
ECRM RESIDENTIAL, LIMITED PARTNERSHIP, A DELAWARE LIMITED PARTNERSHIP The estate or interest in the land hereinafter described or referred to covered by this Report is:
Fee
The Land referred to herein is described as follows :
(See attached Legal Description)
At the date hereof exceptions to coverage in addition to the printed Exceptions and Exclusions in said policy form would be as follows:
1. General and special taxes and assessments for the fiscal year 2024-2025, a lien not yet due or payable.
2. General and special taxes and assessments for the fiscal year 2023-2024 Lot ~PN rrRA 1st Half, STATUS Penalty 2nd half, STATUS Penalty 159 685-471-035 017-046 $35.36, PAID $0.00 $35.36, OPEN $0.00 160 685-471-036 017-046 $35.36, PAID $0.00 $35.36, OPEN $0.00 161 685-471-037 017-046 $35.36, PAID $0.00 $35.36, OPEN $0.00 162 685-471-038 017-046 $35.36, PAID $0.00 $35.36, OPEN $0.00 163 685-471-039 017-046 $35.36, PAID $0.00 $35.36, OPEN $0.00 164 685-471-040 017-046 $35.36, PAID $0.00 $35.36, OPEN $0.00 First American Title
9-438
Order Number: DTR-7081056 (MA)
Page Number: 4
3. The lien of special tax assessed pursuant to Chapter 2.5 commencing with Section 53311 of the California Government Code for Community Facilities District 5 (Section 31), as disclosed by Notice of Special Tax Lien recorded December 27, 2021 as Instrument No. 2021-0756562 and amended November 3, 2023 as Instrument No. 2023-0331416 both of Official Records.
4. The lien of special tax assessed pursuant to Chapter 2.5 commencing with Section 53311 of the California Government Code for Community Facilities District 1 (Police and Fire) Annexation No. 187 Section 31, Phase 1, as disclosed by Notice of Special Tax Lien recorded December 30, 2021 as Instrument No. 2021-0766052 of Official Records.
5. The lien of supplemental taxes, if any, assessed pursuant to Chapter 3.5 commencing with Section 75 of the California Revenue and Taxation Code.
6. Covenants, conditions, restrictions and easements in the document recorded December 08, 1977 as Instrument No. 244810 of Official Records, which provide that a violation thereof shall not defeat or render invalid the lien of any first mortgage or deed of trust made in good faith and for value, but deleting any covenant, condition, or restriction, if any, indicating a preference, limitation, or discrimination based on race, color, religion, sex, gender, gender identity, gender expression, sexual orientation, familial status, marital status, disability, handicap, veteran or military status, genetic information, national origin, source of income as defined in subdivision (p) of Section 12955, or ancestry, to the extent that such covenants, conditions or restrictions violate applicable state or federal laws. Lawful restrictions under state and federal law on the age of occupants in senior housing or housing for older persons shall not be construed as restrictions based on familial status.
Document(s) declaring modifications thereof recorded March 08, 1985 as Instrument No. 47409 of Official Records.
Terms and provisions of that certain "First Amended and Restated Covenant Agreement" dated December 18, 2017, recorded March 27, 2018 as Instrument No. 2018-0115512 of Official Records.
7. The terms and provisions contained in the document entitled "Statutory Development Agreement" recorded February 05, 2020 as Instrument No. 2020-0055580 of official records.
The terms and provisions contained in the document entitled "Partial Assignment and Assumption Agreement" recorded January 22, 2021 as Instrument No. 2021-0044247 of official records.
The terms and provisions contained in the document entitled Certificate of Compliance - Statutory Development Agreement By and Between The City of Rancho Mirage and EC Rancho Mirage Holdings Limited Partnership recorded May 23, 2023 as Instrument No. 2023-0147438 of Official Records.
8. A financing statement recorded January 07, 2021 as Instrument No. 2021-0008278 of official records.
Debtor:
Secured party:
Affects:
ECRM Residential, Limited Partnership
Romspen California Mortgage Limited Partnership
The land and other property.
9. The terms and provisions contained in the document entitled "Special Domestic Water System and Sanitation System Installation Agreement" recorded March 04, 2021 as Instrument No. 2021- 0141208 of official records.
First American Title
9-439
Order Number: DTR-7081056 (MA)
Page Number: 5
10. An easement shown or dedicated on the map filed or recorded December 15, 2021 as Tract Map No. 37856 in Book 481, Pages 68-87 of Maps
For: Public utilities, landscape, irrigation, storm drain and incidental purposes.
11. The terms and provisions contained in the document entitled "Maintenance Covenant for Required Landscaping and Integrated Architectural Features" recorded December 30, 2021 as Instrument No. 2021-0766213 of Official Records.
12. The terms and provisions contained in the document entitled "Covenant Requiring Notification of Default, Foreclosure or Bankruptcy" recorded December 30, 2021 as Instrument No. 2021-0766214 of Official Records.
13. The terms and provisions contained in the document entitled Memorandum of Master Project Agreement recorded February 08, 2022 as Instrument No. 2022-0064577 of Official Records.
14. The Terms, Provisions and Easement(s) contained in the document entitled Declaration of Easements recorded February 08, 2022 as Instrument No. 2022-0064578 of Official Records.
The location of the easement cannot be determined from record information.
15. The terms and provisions contained in the document entitled Initial Development and Royalty Covenant recorded February 08, 2022 as Instrument No. 2022-0064579 of Official Records.
16. A deed of trust to secure an original indebtedness of $144,150,000.00 recorded February 08, 2022 as Instrument No. 2022-0064582 of Official Records.
Dated: February 1, 2022
Trustor: ECRM Residential, Limited Partnership, ECRM Resort, Limited Partnership, and ECRM Commercial, Limited Partnership, each a Delaware limited partnership
Trustee:
Beneficiary:
Affects:
First American Title Insurance Company, a Nebraska corporation Romspen California Mortgage Limited Partnership, an Ontario limited partnership
The land and other property .
a. If this deed of trust is to be eliminated in the policy or policies contemplated by this report/commitment, the company will require the following for review prior to the recordation of any documents or the issuance of any policy of title insurance:
i. Original note and deed of trust.
ii. Payoff demand statement signed by all present beneficiaries. iii. Request for reconveyance or substitution of trustee and full reconveyance must be signed by all present beneficiaries and must be notarized by a First American approved notary.
b. If the payoff demand statement or the request for reconveyance is to be signed by a servicer, we will also require a full copy of the loan servicing agreement executed by all present beneficiaries.
First American Title
9-440
Order Number: DTR-7081056 (MA)
Page Number: 6
c. If any of the beneficial interest is presently held by trustees under a trust agreement, we will require a certification pursuant to Section 18100.5 of the California Probate Code in a form satisfactory to the Company.
The above deed of trust states that it secures an equity line/revolving line of credit.
The terms and provisions contained in the document entitled "Subordination and Attornment Agreement" recorded February 08, 2022 as Instrument No. 2022-0064586 of Official Records.
17. The terms and provisions contained in the document entitled Amended and Restated Pledge and Collateral Assignment of Economic Incentives recorded February 08, 2022 as Instrument No. 2022- 0064584 of Official Records.
18. A deed of trust to secure the performance of an agreement or other obligation, recorded February 08, 2022 as Instrument No. 2022-0064587 of Official Records.
Dated: February 1, 2022
Trustor : ECRM Residential, Limited Partnership, a Delaware limited partnership
Trustee: First American Title Insurance Company
Beneficiary: Stanley Living at RM, LLC, a Delaware limited liability company Affects: The land and other property.
The above deed of trust states that it is a construction deed of trust. a. If this deed of trust is to be eliminated in the policy or policies contemplated by this report/commitment, the company will require the following for review prior to the recordation of any documents or the issuance of any policy of title insurance:
i. Original note and deed of trust.
ii. Payoff demand statement signed by all present beneficiaries. iii. Request for reconveyance or substitution of trustee and full reconveyance must be signed by all present beneficiaries and must be notarized by a First American approved notary.
b. If the payoff demand statement or the request for reconveyance is to be signed by a servicer, we will also require a full copy of the loan servicing agreement executed by all present beneficiaries. c. If any of the beneficial interest is presently held by trustees under a trust agreement, we will require a certification pursuant to Section 18100.5 of the California Probate Code in a form satisfactory to the Company.
19. Any statutory lien for labor or materials arising by reason of a work of improvement, as disclosed by a document recorded February 08, 2022 as Instrument No. 2022-0064587 of Official Records.
20. The terms and provisions contained in the document entitled "Standard Domestic Water System and Sanitation System Installation Agreement" recorded October 13, 2022 as Instrument No. 2022- 0427305 of Official Records.
First American Title
9-441
Order Number: DTR-7081056 (MA)
Page Number: 7
21. The following matters shown or disclosed by the filed or recorded map referred to in the legal description: WE HEREBY RETAIN FOR LANDSCAPE, IRRIGATION AND STORM DRAIN PURPOSES, THE 15', 17' AND 23' WIDE EASEMENTS SHOWN AS "A", FOR THE SOLE USE OF OURSELVES, OUR SUCCESSORS, ASSIGNEES AND LOT OWNERS WITHIN THIS MAP. SAID RIGHTS ARE SUBSERVIENT
TO AFOREMENTIONED PUBLIC UTILITY EASEMENT DEDICATION TO THE CITY OF RANCHO MIRAGE AND COACHELLA VALLEY WATER DISTRICT.
22. An easement for facilities and incidental purposes, recorded February 14, 2023 as Instrument No. 2023-0040913 of Official Records.
In Favor of:
Affects:
Southern California Gas Company, a California
corporation, its successors and assigns
As described therein
The location of the easement cannot be determined from record information.
23. The terms and provisions contained in the document entitled "Operating Memorandum No. 1 to Statutory Development Agreement" recorded December 1, 2023 as Instrument No. 2023-0359828 of Official Records.
24. Water rights, claims or title to water, whether or not shown by the Public Records.
25. Rights of parties in possession.
26. Any facts, rights, interests or claims which would be disclosed by a correct ALTA/NSPS survey.
Prior to the issuance of any policy of title insurance, the Company will require:
27. With respect to ECRM RESIDENTIAL, LIMITED PARTNERSHIP, a Delaware limited partnership:
a. A copy of its partnership agreement and any amendments thereto; b. Evidence that the limited partnership is properly formed and is in good standing in the state of its domicile;
c. Other requirements which the Company may impose following its review of the material required herein and other information which the Company may require.
28. An ALTA/NSPS survey of recent date which complies with the current minimum standard detail requirements for ALTA/NSPS land title surveys.
First American Title
9-442
Order Number: DTR-7081056 (MA)
Page Number: 8
INFORMATIONAL NOTES
Note: The policy to be issued may contain an arbitration clause. When the Amount of Insurance is less than the certain dollar amount set forth in any applicable arbitration clause, all arbitrable matters shall be arbitrated at the option of either the Company or the Insured as the exclusive remedy of the parties. If you desire to review the terms of the policy, including any arbitration clause that may be included, contact the office that issued this Commitment or Report to obtain a sample of the policy jacket for the policy that is to be issued in connection with your transaction.
1. The property covered by this report is vacant land.
2. According to the public records, there has been no conveyance of the land within a period of twenty four months prior to the date of this report, except as follows:
None
3. It appears that a work of improvement is in progress or recently completed on the land. The Company will require various documents and information, including but not limited to a completed mechanics' lien risk analysis, construction contract(s), lien waivers, loan agreement, disbursement information, executed indemnity agreement and current financial information from proposed indemnitors, in order to determine whether mechanics' lien insurance can be issued. Other requirements may be made following the review of such documents and information.
The map attached, if any, may or may not be a survey of the land depicted hereon. First American expressly disclaims any liability for loss or damage which may result from reliance on this map except to the extent coverage for such loss or damage is expressly provided by the terms and provisions of the title insurance policy, if any, to which this map is attached.
First American Title
9-443
LEGAL DESCRIPTION
Order Number: DTR-7081056 (MA)
Page Number: 9
Real property in the City of Rancho Mirage, County of Riverside, State of California, described as follows:
Lots 159 through 164, inclusive, of AMENDED TRACT MAP NO. 37856, as per map filed in Book 487, Pages 53 through 74, inclusive of Maps, in the City of Rancho Mirage, County of Riverside, State of California, in the Office of the County Recorder of said County.
APN: 685-471-035 through 685-471-040
First American Title
9-444
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9-445
NOTICE
Order Number: DTR-7081056 (MA)
Page Number: 11
Section 12413.1 of the California Insurance Code, effective January 1, 1990, requires that any title insurance company, underwritten title company, or controlled escrow company handling funds in an escrow or sub escrow capacity, wait a specified number of days after depositing funds, before recording any documents in connection with the transaction or disbursing funds. This statute allows for funds deposited by wire transfer to be disbursed the same day as deposit. In the case of cashier's checks or certified checks, funds may be disbursed the next day after deposit. In order to avoid unnecessary delays of three to seven days, or more, please use wire transfer, cashier's checks, or certified checks whenever possible.
First American Title
9-446
Order Number: DTR-7081056 (MA)
Page Number: 12
EXHIBIT A
LIST OF PRINTED EXCEPTIONS AND EXCLUSIONS (BY POLICY TYPE) CLTA/ AL TA HOMEOWNER'S POLICY OF TITLE INSURANCE [(07-01-2021) v. 01.00]
EXCLUSIONS FROM COVERAGE
The following matters are excluded from the coverage of this policy and We will not pay loss or damage, costs, attorneys' fees, or expenses that arise by reason of:
1. a. any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) that restricts, regulates, prohibits, or relates to:
i. the occupancy, use, or enjoyment of the Land;
ii. the character, dimensions, or location of any improvement on the Land; iii. the subdivision of land; or
iv. environmental remediation or protection.
b. any governmental forfeiture, police, or regulatory, or national security power. c. the effect of a violation or enforcement of any matter excluded under Exclusion 1.a. or 1.b.
Exclusion 1 does not modify or limit the coverage provided under Covered Risk 8.a., 14, 15, 16, 18, 19, 20, 23, or 27.
2. Any power to take the Land by condemnation. Exclusion 2 does not modify or limit the coverage provided under Covered Risk 17.
3. Any defect, lien, encumbrance, adverse claim, or other matter :
a. created, suffered, assumed, or agreed to by You;
b. not Known to Us, not recorded in the Public Records at the Date of Policy, but Known to You and not disclosed in writing to Us by You prior to the date You became an Insured under this policy; c. resulting in no loss or damage to You;
d. attaching or created subsequent to the Date of Policy (Exclusion 3.d. does not modify or limit the coverage provided under Covered Risk 5, 8.f., 25, 26, 27, 28, or 32); or
e. resulting in loss or damage that would not have been sustained if You paid consideration sufficient to qualify You as a bona fide purchaser of the Title at the Date of Policy.
4. Lack of a right:
a. to any land outside the area specifically described and referred to in Item 3 of Schedule A; and b. in any street, road, avenue, alley, lane, right-of -way, body of water, or waterway that abut the Land.
Exclusion 4 does not modify or limit the coverage provided under Covered Risk 11 or 21.
5. The failure of Your existing structures, or any portion of Your existing structures, to have been constructed before, on, or after the Date of Policy in accordance with applicable building codes. Exclusion 5 does not modify or limit the coverage provided under Covered Risk 14 or 15.
6. Any claim, by reason of the operation of federal bankruptcy, state insolvency, or similar creditors' rights law, that the transfer of the Title to You is a:
a. fraudulent conveyance or fraudulent transfer;
b. voidable transfer under the Uniform Voidable Transactions Act; or c. preferential transfer:
i. to the extent the instrument of transfer vesting the Title as shown in Schedule A is not a transfer made as a contemporaneous exchange for new value; or
ii. for any other reason not stated in Covered Risk 30.
7. Contamination, explosion, fire, flooding, vibration, fracturing, earthquake, or subsidence.
8. Negligence by a person or an entity exercising a right to extract or develop oil, gas, minerals, groundwater, or any other subsurface substance.
9. Any lien on Your Title for real estate taxes or assessments imposed or collected by a governmental authority that becomes due and payable after the Date of Policy. Exclusion 9 does not modify or limit the coverage provided under Covered Risk 8.a. or 27.
10. Any discrepancy in the quantity of the area, square footage, or acreage of the Land or of any improvement to the Land.
LIMITATIONS ON COVERED RISKS
Your insurance for the following Covered Risks is limited on the Owner's Coverage Statement as follows:
For Covered Risk 16, 18, 19, and 21 Your Deductible Amount and Our Maximum Dollar Limit of Liability shown in Schedule A.
The deductible amounts and maximum dollar limits shown on Schedule A are as follows:
Covered Risk 16:
Covered Risk 18:
Covered Risk 19:
Covered Risk 21:
Your Deductible Amount
1 % of Policy Amount Shown in Schedule A or $2,500
( whichever is less)
1 % of Policy Amount Shown in Schedule A or $5,000
( whichever is less)
1 % of Policy Amount Shown on Schedule A or $5,000
(whichever is less)
1 % of Policy Amount Shown on Schedule A or $2,500
(whichever is less)
First American Title
Our Maximum Dollar Limit of Liability
$10,000
$25,000
$25,000
$5,000
9-447
Order Number: DTR-7081056 (MA)
Page Number: 13
ALTA OWNER'S POLICY ((07-01-2021) V. 01.00]
CLTA STANDARD COVERAGE OWNER'S POLICY ((02-04-22) V. 01.00]
EXCLUSIONS FROM COVERAGE
The following matters are excluded from the coverage of this policy, and the Company will not pay loss or damage, costs, attorneys' fees, or expenses that arise by reason of:
l. a. any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) that restricts, regulates, prohibits, or relates to:
i. the occupancy, use, or enjoyment of the Land;
ii. the character, dimensions, or location of any improvement on the Land; iii. the subdivision of land; or
iv. environmental remediation or protection.
b. any governmental forfeiture, police, regulatory, or national security power. c. the effect of a violation or enforcement of any matter excluded under Exclusion 1.a. or l.b.
Exclusion 1 does not modify or limit the coverage provided under Covered Risk 5 or 6.
2. Any power of eminent domain. Exclusion 2 does not modify or limit the coverage provided under Covered Risk 7.
3. Any defect, lien, encumbrance, adverse claim, or other matter :
a. created, suffered, assumed, or agreed to by the Insured Claimant; b. not Known to the Company, not recorded in the Public Records at the Date of Policy, but Known to the Insured Claimant and not disclosed in writing to the Company by the Insured Claimant prior to the date the Insured Claimant became an Insured under this policy;
c. resulting in no loss or damage to the Insured Claimant; d. attaching or created subsequent to the Date of Policy (Exclusion 3.d. does not modify or limit the coverage provided under Covered Risk 9 or 10); or
e. resulting in loss or damage that would not have been sustained if consideration sufficient to qualify the Insured named in Schedule A as a bona fide purchaser had been given for the Title at the Date of Policy.
4. Any claim, by reason of the operation of federal bankruptcy, state insolvency, or similar creditors' rights law, that the transaction vesting the Title as shown in Schedule A is a:
a. fraudulent conveyance or fraudulent transfer;
b. voidable transfer under the Uniform Voidable Transactions Act; or c. preferential transfer :
i. to the extent the instrument of transfer vesting the Title as shown in Schedule A is not a transfer made as a contemporaneous exchange for new value; or
ii. for any other reason not stated in Covered Risk 9.b.
5. Any claim of a PACA-PSA Trust. Exclusion 5 does not modify or limit the coverage provided under Covered Risk 8.
6. Any lien on the Title for real estate taxes or assessments imposed or collected by a governmental authority that becomes due and payable after the Date of Policy. Exclusion 6 does not modify or limit the coverage provided under Covered Risk 2.b.
7. Any discrepancy in the quantity of the area, square footage, or acreage of the Land or of any improvement to the Land.
NOTE: The 2021 ALTA Owner's Policy may be issued to afford either Standard Coverage or Extended Coverage. In addition to variable exceptions such as taxes, easements, CC&R's, etc., the Exceptions from Coverage in a Standard Coverage policy will also include the Western Regional Standard Coverage Exceptions listed below as numbers 1 through 7. The 2021 CLTA Standard Coverage Owner's Policy will include the Western Regional Standard Coverage Exceptions listed below as numbers 1 through 7.
EXCEPTIONS FROM COVERAGE
Some historical land records contain Discriminatory Covenants that are illegal and unenforceable by law. This policy treats any Discriminatory Covenant in a document referenced in Schedule B as if each Discriminatory Covenant is redacted, repudiated, removed, and not republished or recirculated. Only the remaining provisions of the document are excepted from coverage.
This policy does not insure against loss or damage and the Company will not pay costs, attorneys' fees, or expenses resulting from the terms and conditions of any lease or easement identified in Schedule A, and the following matters:
l. (a) Taxes or assessments that are not shown as existing liens by the records of any taxing authority that levies taxes or assessments on real property or by the Public Records; (b) proceedings by a public agency that may result in taxes or assessments, or notices of such proceedings, whether or not shown by the records of such agency or by the Public Records.
2. Any facts, rights, interests, or claims that are not shown by the Public Records but that could be ascertained by an inspection of the Land or that may be asserted by persons in possession of the Land.
3. Easements, liens or encumbrances, or claims thereof, not shown by the Public Records.
4. Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the Title that would be disclosed by an accurate and complete land survey of the Land and not shown by the Public Records.
5. (a) Unpatented mining claims; (b) reservations or exceptions in patents or in Acts authorizing the issuance thereof; (c) water rights, claims or title to water, whether or not the matters excepted under (a), (b), or (c) are shown by the Public Records.
6. Any lien or right to a lien for services, labor or material unless such lien is shown by the Public Records at Date of Policy.
7. Any claim to (a) ownership of or rights to minerals and similar substances, including but not limited to ores, metals, coal, lignite, oil, gas, First American Title
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uranium, clay, rock, sand, and gravel located in, on, or under the Land or produced from the Land, whether such ownership or rights arise by lease, grant, exception, conveyance, reservation, or otherwise; and (b) any rights, privileges, immunities, rights of way, and easements associated therewith or appurtenant thereto, whether or not the interests or rights excepted in (a) or (b) appear in the Public Records or are shown in Schedule B.
2006 ALTA OWNER'S POLICY (06-17-06)
EXCLUSIONS FROM COVERAGE
The following matters are expressly excluded from the coverage of this policy, and the Company will not pay loss or damage, costs, attorneys' fees, or expenses that arise by reason of:
1. (a) Any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting, or relating to
(i) the occupancy, use, or enjoyment of the Land;
(ii) the character, dimensions, or location of any improvement erected on the Land; (iii) the subdivision of land; or
(iv) environmental protection;
or the effect of any violation of these laws, ordinances, or governmental regulations. This Exclusion l{a) does not modify or limit the coverage provided under Covered Risk 5.
(b) Any governmental police power. This Exclusion l{b) does not modify or limit the coverage provided under Covered Risk 6.
2. Rights of eminent domain. This Exclusion does not modify or limit the coverage provided under Covered Risk 7 or 8.
3. Defects, liens, encumbrances, adverse claims, or other matters (a) created, suffered, assumed, or agreed to by the Insured Claimant; (b) not Known to the Company, not recorded in the Public Records at Date of Policy, but Known to the Insured Claimant and not disclosed in writing to the Company by the Insured Claimant prior to the date the Insured Claimant became an Insured under this policy;
(c) resulting in no loss or damage to the Insured Claimant; (d) attaching or created subsequent to Date of Policy (however, this does not modify or limit the coverage provided under Covered Risk 9 and 10); or
(e) resulting in loss or damage that would not have been sustained if the Insured Claimant had paid value for the Title.
4. Any claim, by reason of the operation of federal bankruptcy, state insolvency, or similar creditors' rights laws, that the transaction vesting the Title as shown in Schedule A, is
(a) a fraudulent conveyance or fraudulent transfer; or
(b) a preferential transfer for any reason not stated in Covered Risk 9 of this policy.
5. Any lien on the Title for real estate taxes or assessments imposed by governmental authority and created or attaching between Date of Policy and the date of recording of the deed or other instrument of transfer in the Public Records that vests Title as shown in Schedule A.
NOTE: The 2006 ALTA Owner's Policy may be issued to afford either Standard Coverage or Extended Coverage. In addition to variable exceptions such as taxes, easements, CC&R's, etc., the Exceptions from Coverage in a Standard Coverage policy will also include the Western Regional Standard Coverage Exceptions listed below as numbers 1 through 7.
EXCEPTIONS FROM COVERAGE
This policy does not insure against loss or damage, and the Company will not pay costs, attorneys' fees or expenses, that arise by reason of:
The above policy form may be issued to afford either Standard Coverage or Extended Coverage. In addition to the above Exclusions from Coverage, the Exceptions from Coverage in a Standard Coverage policy will also include the following Exceptions from Coverage:
1. (a) Taxes or assessments that are not shown as existing liens by the records of any taxing authority that levies taxes or assessments on real property or by the Public Records; (b) proceedings by a public agency that may result in taxes or assessments, or notices of such proceedings, whether or not shown by the records of such agency or by the Public Records.
2. Any facts, rights, interests, or claims that are not shown by the Public Records at Date of Policy but that could be (a) ascertained by an inspection of the Land, or (b) asserted by persons or parties in possession of the Land.
3. Easements, liens or encumbrances, or claims thereof, not shown by the Public Records at Date of Policy.
4. Any encroachment, encumbrance, violation, variation, easement, or adverse circumstance affecting the Title that would be disclosed by an accurate and complete land survey of the Land and not shown by the Public Records at Date of Policy.
5. (a) Unpatented mining claims; (b) reservations or exceptions in patents or in Acts authorizing the issuance thereof; (c) water rights, claims or title to water, whether or not the matters excepted under (a), (b), or (c) are shown by the Public Records.
6. Any lien or right to a lien for services, labor, material or equipment unless such lien is shown by the Public Records at Date of Policy.
7. Any claim to (a) ownership of or rights to minerals and similar substances, including but not limited to ores, metals, coal, lignite, oil, gas, uranium, clay, rock, sand, and gravel located in, on, or under the Land or produced from the Land, whether such ownership or rights arise by lease, grant, exception, conveyance, reservation, or otherwise; and (b) any rights, privileges, immunities, rights of way, and easements associated therewith or appurtenant thereto, whether or not the interests or rights excepted in (a) or (b) appear in the Public Records or are shown in Schedule B.
First American Title
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APPENDIXC
MARKET ABSORPTION STUDY
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APPENDIXD
CITY OF RANCHO MIRAGE ECONOMIC AND
DEMOGRAPHIC INFORMATION
The following information regarding the City of Rancho Mirage (the "City") and the surrounding area of Riverside County (the "County") is presented as general background data. Additional information is included in APPENDIX B - "APPRAISAL REPORT" under the headings "Economic Analysis -Area Analysis - Riverside County" and "- Surrounding Area Analysis" and in APPENDIX C - "MARKET ABSORPTION STUDY" The Series 2024 Bonds are payable solely from, and are secured by, the Special Tax Revenues (as defined in this Official Statement), and from amounts on deposit in the accounts of the Reserve Fund established under the Indenture and other accounts and funds pledged under the Indenture.
The taxing power of the City, the County, the State of California or any political subdivision thereof, or the Community Facilities District in any area other than Improvement Area No. 1, is not pledged to the payment of the Series 2024 Bonds. See the information under the caption "SECURITY FOR THE BONDS." General
The City was incorporated on August 3, 1973 and became a Charter City on December 25, 1997.
The City is located in Riverside County, California, and has a boundary of approximately 24.8 square miles.
The City operates under the Council-Manager form of government. The five City Council members, including the Mayor, are elected at large to four year terms on alternate slates every two years. The Mayor, appointed every year by the City Council from among its members on a rotational basis, serves a one-year term, presides over the meetings and has one vote. The City Council appoints a City Manager, the City Attorney and the City Clerk.
Population
The estimated permanent population of the City had increased approximately 8% from 20 I 0 through January 2020. The California Department of Finance reports a decline in population between January 2020 and January 2021. In addition to the permanent population, another approximately [9,275] people live in the City during the winter season. The following chart shows the annual population estimates of the City for the years 20 IO through 2023:
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CITY OF RANCHO MIRAGE
Annual Population Estimates
(2010-2023)
City of Percent County of Percent
Year Rancho Mirage Change Riverside Change
2010· 17,218 2,189,641
2011 17,471 1.47% 2,215,620 1.19%
2012 17,624 0.88 2,244,472 1.30
2013 17,696 0.41 2,268,660 1.08
2014 17,772 0.43 2,290,907 0.98
2015 17,889 0.66 2,315,547 1.08
2016 18,020 0.73 2,342,612 1.17
2017 18,180 0.89 2,374,555 1.36
2018 18,257 0.42 2,397,662 0.97
2019 18,397 0.77 2,419,057 0.89
2020 18,611 1.16 2,440,719 0.90
2021 t 16,692 -10.31 2,418,727 -0.90
2022 16,854 0.97 2,430,976 0.51
2023 17,012 0.94 2,439,234 0.34
* Census numbers for 20 IO are as of April I~. All other years are as of January 1st. t The City is not aware of a major shift in permanent population in the City during this time period and believes that the decline in population indicated in the Department of Finance statistics could be associated with its collection methodology.
Source: State of California Department of Finance.
Riverside is the fourth most populous county in California, following Los Angeles, San Diego and Orange Counties. The majority of residents live within incorporated areas, the largest of which is the city of Riverside, with a population of just over 313,000.
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Largest Taxpayers
A list of the top ten property taxpayers in the City is set forth below:
CITY OF RANCHO MIRAGE
Top Ten Property Taxpayers
(As of June 30, 2023)
Property Owner
Eisenhower Medical Center Inc.
KSL RLP Holdings/Omni Rancho Las Palmas*
Cheer Land The River*
ECRM Residential
Porcupine Properties
Newage Rancho Mirage
OC Mission Hills Project Owner LLC
Mission Hills Country Club Inc. *
G and I IX Rancho
Indigo Properties Rancho Mirage *
* Pending appeals on parcels .
Primary
Land Use
Commercial
Commercial
Commercial
Vacant
Residential
Commercial
Commercial
Commercial
Commercial
Commercial
Taxable
Assessed
Value
$ 84,646,476
84,638,287
75,846,300
69,127,983
68,213,360
62,930,349
51,976,604
51,231,604
44,529,502
38,085,799
$631,226,264
Source: City of Rancho Mirage Annual Comprehensiv e Financial Report, Year Ended June 30, 2022.
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% of Total
Assessed
Value
0.79%
0.79 0.71
0.65 0.64
0.59 0.49
0.48 0.42
0.36 5.91%
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Assessed Valuation
The City is a non-tax municipality, in that it generally does not receive property taxes directly from property owners. The City did not have a property tax rate prior to the enactment of Proposition 13, and it legislatively is restricted from imposing one. The following is a schedule of assessed value of property in the City for the fiscal years 2013-14 through 2022-23:
CITY OF RANCHO MIRAGE
Schedule of Assessed Valuation
Fiscal Years 2013-14 through 2022-23
Year
Ended Secured Unsecured SBE Net Total
June 30 Property Property Non unitary Valuation
2014 $7,236,675,152 $101,877,646 $1,206,604 $ 7,339,759,402 2015 7,546,223,218 95,581,717 1,206,604 7,643,011,539
2016 7,828,064,961 103,642,342 1,206,604 7,932,913,907
2017 8,045,875,869 107,179,121 1,206,604 8,154,261,594
2018 8,261,389,878 108,388,709 1,206,604 8,370,985,191
2019 8,543,095,822 110,985,678 1,980,000 8,656,061,500
2020 8,863,316,087 108,972,915 1,980,000 8,974,269,002
2021 9,185,389,567 107,164,538 1,980,000 9,294,534,105
2022 9,641,855,198 110,131,512 1,980,000 9,753,966,710
2023 10,549,702,109 126,853,522 990,000 10,677,545,63 1 Source: City of Rancho Mirage Annual Comprehensive Financial Report, Year Ended June 30, 2022.
Commercial Activity
A summary of taxable transactions in the City is set forth below:
CITY OF RANCHO MIRAGE
Valuation of Taxable Transaction 2019-2023
(Taxable Transactions in $000's)
Retail and Food Services Total All Outlets
Number Taxable Percent Number Taxable Percent
of Outlets Transactions Change of Outlets Transactions Change 2019 415 $393,808 670 $552,846
2020 422 313,643 -20.36% 699 437,220 -20.91%
2021 425 423,989 35.18 699 548,912 25.55
2022 424 479,552 13.10 713 627,021 14.23
2023 437 338,313 * 740 450,483*
[* As of the date hereof, transaction data is available through the third quarter of2023 only.] Source: California Department a/Tax and Fee Administration.
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Personal Income
The table below summarizes personal income and per capita personal income for the County, the State and the United States for 2018 through 2022.
COUNTY OF RNERSIDE, STATE OF CALIFORNIA AND
UNITED STATES PERSONAL INCOME
(Not adjusted for inflation)
Personal Income Per Capita Personal
Area (000's) Income*
2018
Riverside County $ 96,994,918 $40,584
California 2,411,055,136 60,984
United States 17,514,402,000 53,309
2019
Riverside County $ 103,614,307 $43,073
California 2,537,950,599 64,174
United States 18,343,601,000 55,547
2020
Riverside County $ 116,939,915 $48,265
California 2,767,521,379 70,061
United States 19,609,985,000 59,153
2021
Riverside County $ 126,261,006 $51,468
California 3,013,676,929 76,991
United States 21,392,812,000 64,430
2022
Riverside County $ 127,195,983 $51,415
California 3,006,647,281 77,036
United States 21,820,248,000 65,470
• Per capita personal income was computed using Census Bureau midyear population estimates.
Source: U.S. Department of Commerce, Bureau of Economic Analysis.
Drought Conditions
In recent years, California and the southwest United States have experienced worsening drought conditions , particularly as concerns supplemental supplies of water from the Colorado River. A severe drought, over time, could adversely affect businesses and reduce the economic development within the City and the County. Among other things, agricultural production in the County may be impacted by drought conditions.
Education
The Palm Springs Unified School District serves the Community Facilities District. The Palm Springs Unified School District operates fifteen elementary schools, five middle schools and four high D-5
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schools as well as three alternative schools. Higher education is available in the region at the University of California campuses at Riverside and Irvine, at the California State University campuses in San Bernardino, San Marcos, Fullerton and Pomona, and at several additional private colleges . The closest community colleges include College of the Desert, Mt. San Jacinto Community College, Copper Mountain Community College, Crafton Hills College, Moreno Valley College and Riverside City College.
INDUSTRY AND EMPLOYMENT
The following table summarizes the historical numbers of workers in the Riverside -San Bernardino-Ontario Metropolitan Statistical Area over the period 2019 through 2023 by industry.
RIVERSIDE -SAN BERNARDINO-ONTARIO
METROPOLITAN STATISTICAL AREA
Industry Employment and Labor Force - Annual Average
Industry 2019 2020 2021 2022 2023
Farm 15,400 14,100 13,700 13,800 13,100
Mining and 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
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 and 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 and Business Services 155,300 152,100 166,600 173,900 164,800 Private Education and Health Services 250,300 248,800 254,300 267,500 287,500 Leisure and 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<1l 1,568,100 1,509,900 1,588,800 1,673,500 1,692,900 (I) Data may not add due to rounding. Not seasonally adjusted.
Source: State of California Employment Development Department , Labor Market Iriformation Division.
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The table below summarizes the labor force, employment and unemployment figures over the period 2019 through 2023 for the County and the State.
COUNTY OF RIVERSIDE AND STATE OF CALIFORNIA
Labor Force, Employment And Unemployment
Yearly Average
Unemployment
Year• and Area Labor Force Employment Unemployment Rate 2019
Riverside County 1,108,100 1,061,500 46,600 4.2%
California 19,413,000 18,617,900 795,300 4.1
2020
Riverside County 1,121,100 1,008,000 113,000 I 0.1
California 18,971,600 17,047,600 1,924,000 10.1
2021
Riverside County 1,133,000 1,050,000 83,000 7.3
California 18,973,400 17,586,300 1,387,100 7.3
2022
Riverside County 1,152, I 00 1,104,100 48,000 4.2
California 19,252,000 18,440,900 811,100 4.2
2023
Riverside County 1,157,900 1,102,300 55,600 4.8
California 19,308,300 18,388,300 920,000 4.8
* 2024 Information is as of January 2024. 2020 through 2023 data are annual averages.
Source : California Employment Development Department. Not seasonally acijusted.
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APPENDIXE
SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
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APPENDIXF
PROPOSED FORM OF OPINION OF BOND COUNSEL
Upon the delivery of the Series 2024 Bonds, Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the Community Facilities District, proposes to render its.final approving opinion with respect to the Series 2024 Bonds in substantially the following form:
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APPENDIXG
DTC AND THE BOOK ENTRY SYSTEM
The following information concerning The Depository Trust Company ("DTC") and DTC's book entry system has been obtained from sources that the Community Facilities District and the Underwriters believe to be reliable. The Community Facilities District and the Underwriters undertake no responsibility for and make no representations as to the accuracy or completeness of, such information.
NEITHER THE COMMUNITY FACILITIES DISTRICT NOR THE TRUSTEE WILL HA VE
ANY RESPONSIBILITY OR OBLIGATION TO DIRECT PARTICIPANTS, TO INDIRECT
PARTICIPANTS OR TO ANY BENEFICIAL OWNER WITH RESPECT TO (A) THE ACCURACY OF
ANY RECORDS MAINTAINED BY DTC, ANY DIRECT PARTICIPANT OR ANY INDIRECT PARTICIPANT; (B) ANY NOTICE THAT IS PERMITTED OR REQUIRED TO BE GIVEN TO THE OWNERS OF THE SERIES 2024 BONDS UNDER THE INDENTURE; (C) THE SELECTION BY DTC
OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY PERSON TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE SERIES 2024 BONDS; (D) THE
PAYMENT BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT TO THE OWNERS OF THE SERIES 2024 BONDS; (E) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS THE OWNER OF SERIES 2024 BONDS; OR (F) ANY OTHER MATTER REGARDING DTC.
The Depository Trust Company, New York, New York, will act as securities depository for the Series 2024 Bonds. The Series 2024 Bonds will be issued as full-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 full-registered Series 2024 Bond certificate will be issued for each maturity of the Series 2024 Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC or held by the Trustee.
DTC 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 17 A of the Securities Exchange Act of 1934. OTC holds and provides asset servicing for over 3.5 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 OTC. OTC also facilitates 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 Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for OTC, 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 OTC 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"). OTC has a Standard & Poor's rating of "AA+." The OTC 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. The information on such website is not incorporated by reference herein.
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Purchases of the Series 2024 Bonds under the OTC system must be made by or through Direct Participants, which will receive a credit for the Series 2024 Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2024 Bond ("Beneficial Owner") is in tum to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from OTC 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 Series 2024 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 or certificates representing their ownership interests in the Series 2024 Bonds, except in the event that use of the book-entry system for the Series 2024 Bonds is discontinued.
To facilitate subsequent transfers, all Series 2024 Bonds deposited by Direct Participants with OTC 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 OTC. The deposit of the Series 2024 Bonds with OTC and their registration in the name of Cede & Co. or such other OTC nominee do not effect any change in beneficial ownership. OTC has no knowledge of the actual Beneficial Owners of the Series 2024 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2024 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 OTC 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 the Series 2024 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2024 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Indenture and the Facility Lease. For example, Beneficial Owners of the Series 2024 Bonds may wish to ascertain that the nominee holding the Series 2024 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
While the Series 2024 Bonds are in the book-entry-only system, redemption notices will be sent to OTC. If less than all of the Series 2024 Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither OTC nor Cede & Co. (nor any other OTC nominee) will consent or vote with respect to the Series 2024 Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, OTC mails an Omnibus Proxy to the Community Facilities District, as issuer, as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Series 2024 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal of and interest payments on the Series 2024 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of OTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Community Facilities 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 ofDTC, the Community Facilities District, or the Trustee, subject to any statutory or regulatory requirements as G-2
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may be in effect from time to time. Payment of redemption proceeds, principal and interest to Cede & Co. ( or such other nominee as may be requested by an authorized representative of OTC) is the responsibility of the Community Facilities District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of OTC and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
OTC may discontinue providing its services as depository with respect to the Series 2024 Bonds at any time by giving reasonable notice to the Community Facilities District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Series 2024 Bond certificates are required to be printed and delivered.
The Community Facilities District may decide to discontinue use of the system of book-entry-only transfers through OTC (or a successor securities depository) . DTC's procedures provide that upon receipt of a withdrawal request from an issuer, OTC will take the following actions: (1) OTC will issue an Important Notice notifying its participants of the receipt of a withdrawal request from the issuer reminding participants that they may utilize DTC's withdrawal procedures if they wish to withdraw their securities from OTC; and (2) OTC will process withdrawal requests submitted by participants in the ordinary course of business, but will not effectuate withdrawals based upon a request from the issuer. In that event, Series 2024 Bond certificates will be printed and delivered to OTC.
The information in this Appendix G concerning OTC and DTC's book-entry system has been obtained from sources that the Community Facilities District believes to be reliable, but the Community Facilities District takes no responsibility for the accuracy thereof.
BENEFICIAL OWNERS WILL NOT RECEIVE PHYSICAL DELIVERY OF SERIES 2024
BONDS AND WILL NOT BE RECOGNIZED BY THE TRUSTEE AS OWNERS THEREOF, AND
BENEFICIAL OWNERS WILL BE PERMITTED TO EXERCISE THE RIGHTS OF OWNERS ONLY INDIRECTLY THROUGH OTC AND THE PARTICIPANTS .
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APPENDIXH
FORM OF DISTRICT CONTINUING DISCLOSURE AGREEMENT
THIS CONTINUING DISCLOSURE AGREEMENT (this "Disclosure Agreement"), dated as of June 1, 2024, is by and between the City of Rancho Mirage Community Facilities District No. 5 (Section 31) (the "Community Facilities District"), and Willdan Financial Services, as disclosure dissemination agent (the "Dissemination Agent" as defined below).
WITNESSETH:
WHEREAS, pursuant to the Indenture, dated as of June 1, 2024 (the "Indenture") by and between the Community Facilities District and U.S. Bank Trust Company, National Association, as trustee (the "Trustee"), the Community Facilities District has issued its Improvement Area No. 1 of City of Rancho Mirage Community Facilities District No. 5 (Section 31) Special Tax Bonds, Series 2024A (Tax-Exempt) in the aggregate principal amount of $ ____ and its Improvement Area No. 1 of City of Rancho Mirage Community Facilities District No. 5 (Section 31) Special Tax Bonds, Series 2024B (Federally Taxable) in the aggregate principal amount of$ ____ (collectively, the "Series 2024 Bonds"); and WHEREAS, this Disclosure Agreement is being executed and delivered by the Community Facilities District and the Dissemination Agent for the benefit of the Owners and Beneficial Owners of the Series 2024 Bonds and in order to assist the underwriter of the Series 2024 Bonds in complying with Securities and Exchange Commission Rule 15c2-12(b)(S);
NOW, THEREFORE, for and in consideration of the mutual promises and covenants herein contained, the receipt whereof is hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Unless the context otherwise requires, the terms defined in this Section shall for all purposes of this Disclosure Agreement have the meanings herein specified. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Indenture. "Annual Report" means any Annual Report provided by the Community Facilities District pursuant to, and as described in, Sections 2 and 3 hereof.
"Annual Report Date" means the date in each year that is the first day of the month following the ninth month after the end of the Community Facilities District's fiscal year, which date, as of the date of this Disclosure Agreement, is April 1.
"Community Facilities District" means City of Rancho Mirage Community Facilities District No. 5 (Section 31 ).
"Disclosure Representative" means the Director of Administrative Services of the City or his or her designee, or such other officer or employee of the City as the City shall designate in writing to the Dissemination Agent from time to time.
"Dissemination Agent" means Willdan Financial Services, acting in its capacity as Dissemination Agent hereunder, or any successor dissemination agent appointed to act as Dissemination Agent in accordance with this Disclosure Agreement.
"Financial Obligation" means [(a) a debt obligation of Improvement Area No. 1, (b) a derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing H-1
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or planned debt obligation of Improvement Area No. 1, or (c) a guarantee of (i) a debt obligation of Improvement Area No. 1, or (ii) a derivative instrument described in clause (b), above; provided, however, that the term "Financial Obligation" shall not include "municipal securities" (as such term is defined in the Securities Exchange Act of 1934, as amended) as to which a "final official statement" (as such term is defined in the Rule) has been provided to the MSRB consistent with the Rule.] ["Financial Report" means, for each Fiscal Year, the special purpose financial report reflecting the financial position of the Improvement Area for such Fiscal Year, including (a) for each fund and account of the Improvement Area, the beginning balance, as of the first day of such Fiscal Year, for such fund or account, and the ending balance, as of the last day of such Fiscal Year, for such fund or account, and (b) a statement of revenues of the Improvement Area for such Fiscal Year (including Special Tax Revenues, investment earnings and any other revenues), expenses of the Improvement Area for such Fiscal Year (including Administrative Expenses, debt service payments and any other expenses) and changes in the balances in each fund and account of the Improvement Area for such Fiscal Year, setting forth the transfers in to such fund or account, and the source of such transfers, for such Fiscal Year, and the transfers out of such fund or account, and the use of such transfers out, for such Fiscal Year, which financial report shall be prepared on a cash basis and which financial report shall be unaudited; provided, however, that, if financial statements of the Improvement Area are prepared as audited financial statements, then Financial Report means such audited financial statements.]
"Improvement Area" means Improvement Area No. 1 of City of Rancho Mirage Community Facilities District No. 5 (Section 31 ), a portion of the District designated by the City Council pursuant to the Act.
"Indenture" means the Indenture, dated as of June 1, 2024 by and between the Community Facilities District and U.S. Bank Trust Company, National Association, as trustee, as originally executed and as it may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Listed Events" means any of the events listed in subsection (a) or subsection (b) of Section 4 hereof.
"MSRB" means the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb .org.
"Official Statement" means the Official Statement, dated ____ _ , 2024, relating to the Series 2024 Bonds.
"Participating Underwriter" means the original underwriter[ s] of the Series 2024 Bonds required to comply with the Rule in connection with the offering of the Series 2024 Bonds. "Rule" means Rule l 5c2-12(b )(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "Trustee" means U.S. Bank Trust Company, National Association, as trustee under the Indenture, or any successor thereto as Trustee thereunder, substituted in its place as provided therein.
Section 2. Provision of Annual Reports. (a) The Community Facilities District shall, or shall cause the Dissemination Agent to, provide to the MSRB an Annual Report that is consistent with the H-2
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requirements of Section 3 hereof, not later than the Annual Report Date, commencing with the report for the 2023-24 Fiscal Year (which is due no later than April 1, 2025). The Annual Report may include by reference other information as provided in Section 3 hereof; provided, however, that the audited financial statements of the Community Facilities District, if any, may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if they are not available by that date. If the Community Facilities District's fiscal year changes, it shall, or it shall instruct the Dissemination Agent to, give notice of such change in a filing with the MSRB. (b) Not later than 15 business days prior to the date specified in subsection (a) of this Section for the providing of the Annual Report to the MSRB, the Community Facilities District shall provide the Annual Report to the Dissemination Agent and the Trustee (if the Trustee is not the Dissemination Agent).
If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the Community Facilities District and the Dissemination Agent to determine if the Community Facilities District is in compliance with the first sentence of this subsection (b). (c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to the MSRB by the date required in subsection (a) of this Section, the Dissemination Agent shall, in a timely manner, send a notice to the MSRB in substantially the form attached as Exhibit A. (d) The Dissemination Agent shall:
(i) provide each Annual Report received by it to the MSRB, as provided herein; and (ii) file a report with the Community Facilities District and (if the Dissemination Agent is not the Trustee) the Trustee certifying that such Annual Report has been provided pursuant to this Disclosure Agreement and stating the date it was provided to the MSRB.
Section 3. Content of Annual Reports. The Community Facilities District's Annual Report shall contain or incorporate by reference the following:
(a) [The Financial Report for the Improvement Area for the most recent fiscal year ending prior to the Annual Report Date.][The Community Facilities District's audited financial statements, if any, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the Community Facilities District's audited financial statements, if any, are not availabl~ by the time the Annual Report is required to be filed pursuant to subsection (a) of Section 2 hereof, the Annual Report shall contain unaudited financial statements, in a format similar to that used for the Community Facilities District's audited financial statements, and the audited financial statements, if any, shall be filed in the same manner as the Annual Report when they become available.]
(b) The following information with respect to the Series 2024 Bonds:
(i) The principal amount of Series 2024 Bonds Outstanding as of the December 31 next preceding the Annual Report Date;
(ii) The principal amount of Bonds Outstanding as of the December 31 next preceding the Annual Report Date;
(iii) The principal amount of additional bonds payable on a parity with the Series 2024 Bonds, if any, outstanding as of the December 31 next preceding the Annual Report Date; H-3
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(iv) The balance in the Reserve Fund established under the Indenture, and a statement of the Reserve Requirement, as of the December 31 next preceding the Annual Report Date; (c) The following information with respect to Improvement Area No. 1:
(i) [The total assessed value of all parcels within Improvement Area No. 1 on which the special taxes of Improvement Area No. 1 are levied as shown on the assessment roll of the Riverside County Assessor last equalized prior to the December 31 next preceding the Annual Report Date;]
(ii) [A five year summary of special tax collections for Improvement Area No. 1 and delinquencies for all parcels within Improvement Area No. 1 ;] (iii) [An update of the information for Improvement Area No. 1 contained in the table entitled "Direct and Overlapping Debt" in the Official Statement, for the most recently completed fiscal year];
(iv) [An update of the information for Improvement Area No. 1 contained in the table entitled "Value-to-Lien by Development Status as of July 1, 20_" in Exhibit B, for the most recently completed fiscal year];
(v) [An update of the information for Improvement Area No. 1 contained in the table entitled "Value-to-Lien by Ownership Status" in Exhibit B, for the most recently completed fiscal year];
(vi) An update of the information for Improvement Area No. 1 contained in the table entitled "Value-to-Lien by Production Type of Home" in the Official Statement and also in Exhibit B, for the most recently completed fiscal year;
(vii) [An update of the information for Improvement Area No. 1 contained in the table entitled "Value-to-Lien by Production Type of Home" in Exhibit B, for the most recently completed fiscal year];
(viii) [An update of the information for Improvement Area No. 1 contained in the table entitled "Value-to-Lien Stratification Based Upon Development Status as of July 1, 20_ " in Exhibit B, for the most recently completed fiscal year]; (ix) [An update of the information for Improvement Area No. 1 contained in the table entitled "Maximum Special Tax and Series 2024 Bond Debt Service Coverage" in Exhibit B, for the most recently completed fiscal year];
(x) [An update of the information for Improvement Area No. 1 contained in the table entitled "Status of Planned Residential Development as of July 1 20 _" in Exhibit B, for the most recently completed fiscal year];
(xi) The status of foreclosure proceedings and a summary of the results of any foreclosure sales with respect to parcels within Improvement Area No. 1 as of the December 31 next preceding the Annual Report Date;
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(xii) The identity of any property owner representing more than 5% of the special tax levy for Improvement Area No. 1 delinquent in payment of such special taxes as of the December 31 next preceding the Annual Report Date; and
(xiii) A land ownership summary listing property owners responsible for more than 5% of the annual special tax of Improvement Area No. 1, as shown on the assessment roll of the Riverside County Assessor last equalized prior to the December 31 next preceding the Annual Report Date and a summary of any pending assessed value appeals to parcels owned by each one.
Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Community Facilities District or related public entities, that have been made available to the public on the MSRB's website. The Community Facilities District shall clearly identify each such other document so included by reference .
Section 4. Reporting of Significant Events. (a) Pursuant to the provisions of this Section, the Community Facilities District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series 2024 Bonds in a timely manner not later than ten business days after the occurrence of the event:
(i) Principal and interest payment delinquencies .
(ii) Unscheduled draws on debt service reserves reflecting financial difficulties. (iii) Unscheduled draws on credit enhancements reflecting financial difficulties. (iv) Substitution of credit or liquidity providers, or their failure to perform. (v) Adverse tax opinions or issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB). (vi) Tender offers.
(vii) Defeasances.
(viii) Rating changes.
(ix) Bankruptcy, insolvency, receivership or similar event of the Community Facilities District.
(x) Default, event of acceleration, termination event, modification of terms or other similar events under the terms of a Financial Obligation, any of which reflect financial difficulties. [For purposes of the event identified in paragraph (ix) of this subsection, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the Community Facilities District in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Community Facilities District, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Community Facilities District.] H-5
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(b) Pursuant to the provisions of this Section, the Community Facilities District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series 2024 Bonds, if material, in a timely manner not later than ten business days after the occurrence of the event:
(i) Unless described in paragraph (v) of subsection (a) of this Section, material notices or determinations by the Internal Revenue Service with respect to the tax status of the Series 2024 Bonds or other material events affecting the tax status of the Series 2024 Bonds. (ii) Modifications to rights of holders of the Series 2024 Bonds. (iii) Series 2024 Bond calls.
(iv) Release, substitution, or sale of property securing repayment of the Series 2024 Bonds.
(v) Non-payment related defaults.
(vi) [The consummation of a merger, consolidation, or acquisition involving the Community Facilities District or the sale of all or substantially all of the assets of the Community Facilities District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms.]
(vii) Appointment of a successor or additional trustee or the change of name of a trustee. (viii) Incurrence of a Financial Obligation, or agreement to covenants, events of default, remedies, priority rights or other similar terms of a Financial Obligation, any of which affect holders of the Series 2024 Bonds.
( c) The Dissemination Agent shall, within one business day of obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative and inform such person of the event.
( d) If a Listed Event described in subsection (b) of this Section occurs, the Community Facilities District shall determine if such event would be material under applicable Federal securities law. (e) If a Listed Event described in subsection (a) of this Section occurs, or if the Community Facilities District determines that knowledge of a Listed Event described in subsection (b) of this Section would be material under applicable Federal securities law, the Community Facilities District shall, or shall cause the Dissemination Agent to, file a notice of the occurrence of such Listed Event with the MSRB, in a timely manner not later than ten business days after the date of such occurrence. (f) Notwithstanding the foregoing, notice of Listed Events described in paragraph (iii) of subsection (b) of this Section need not be given any earlier than the notice (if any) of the underlying event is given to holders of affected Series 2024 Bonds pursuant to the Indenture.
Section 5. Format for Filings with MSRB. Any report or filing with the MSRB pursuant to this Disclosure Agreement must be submitted in electronic format, accompanied by such identifying information as is prescribed by the MSRB.
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Section 6. Termination of Reporting Obligation. The Community Facilities District's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Series 2024 Bonds. If such termination occurs prior to the final maturity of the Series 2024 Bonds, the Community Facilities District shall give, or cause to be given, notice of such termination in a filing with the MSRB.
Section 7. Dissemination Agent. The Community Facilities District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing 30 days' written notice to the Community Facilities District, such resignation to become effective upon the appointment of a successor Dissemination Agent. The Dissemination Agent shall have no duty to prepare the Annual Report nor shall the Dissemination Agent be responsible for filing any Annual Report not provided to it by the Community Facilities District in a timely manner and in a form suitable for filing.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Community Facilities District and the Dissemination Agent may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the Community Facilities District; provided, however, that the Dissemination Agent shall not be obligated to enter into any amendment increasing or affecting its duties or obligations), and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied:
(a) if the amendment or waiver relates to the provisions of subsection (a) of Section 2 hereof, Section 3 hereof or subsection (a) or (b) of Section 4 hereof, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Series 2024 Bonds, or the type of business conducted;
(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Series 2024 Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and
(c) the proposed amendment or waiver (i) is approved by Owners of the Series 2024 Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of Owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of Owners or Beneficial Owners of the Series 2024 Bonds.
In the event of any amendment or waiver of a provision of this Disclosure Agreement, the Community Facilities District shall describe such amendment or waiver in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type ( or in the case ofa change of accounting principles, on the presentation) of financial information or operating data being presented by the Community Facilities District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements (i) notice of such change shall be given in a filing with the MSRB, and (ii) the Annual Report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.
Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Community Facilities District from disseminating any other information, using the means of H-7
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dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice required to be filed pursuant to this Disclosure Agreement, in addition to that which is required by this Disclosure Agreement. If the Community Facilities District chooses to include any information in any Annual Report or notice in addition to that which is specifically required by this Disclosure Agreement, the Community Facilities District shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event or any other event required to be reported.
Section 10. Default. In the event of a failure of the Community Facilities District or the Dissemination Agent to comply with any provision of this Disclosure Agreement, as provided in the Indenture, the Trustee may (and, at the written direction of any Participating Underwriter or the Owners of at least 25% of the aggregate principal amount of Outstanding Series 2024 Bonds, shall, upon receipt of indemnification reasonably satisfactory to the Trustee), or any Owner or Beneficial Owner of the Series 2024 Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Community Facilities District, or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Community Facilities District or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance.
Section 11 . Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall not be responsible for the form or content of any Annual Report or notice of Listed Event. The Dissemination Agent shall receive reasonable compensation for its services provided under this Disclosure Agreement. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement to the extent permitted by law, the Community Facilities District agrees to indemnify and save the Dissemination Agent, and its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur in the exercise or performance of its powers and duties hereunder , including the costs and expenses (including attorneys ' fees) of defending against any claim of liability, and which are not due to its negligence or its willful misconduct. The obligations of the Community Facilities District under this Section shall survive resignation or removal of the Dissemination Agent and the termination of this Disclosure Agreement.
Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Community Facilities District, the Dissemination Agent, the Participating Underwriter and the Owners and Beneficial Owners from time to time of the Series 2024 Bonds, and shall create no rights in any other person or entity.
Section 13. Governing Laws. This Disclosure Agreement shall be governed by and construed in accordance with the laws of the State of California.
Section 14. Electronic Signature. Each of the parties hereto agrees that the transaction consisting of this Disclosure Agreement may be conducted by electronic means. Each party agrees and acknowledges that it is such party's intent, that if such party signs this Disclosure Agreement using an electronic signature, it is signing, adopting and accepting this Disclosure Agreement and that signing this Disclosure Agreement using an electronic signature is the legal equivalent of having placed the undersigned officer's handwritten signature on this Disclosure Agreement on paper. Each party acknowledges that it is being provided with an electronic or paper copy of this Disclosure Agreement in a usable format.
Section 15. Counterparts. This Disclosure Agreement may be executed in several counterparts , each of which shall be an original and all of which shall constitute but one and the same instrument.
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The Community Facilities District and the Dissemination Agent have caused this Disclosure Agreement to be executed, on the date first written above, by their respective officers duly authorized.
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CITY OF RANCHO MIRAGE COMMUNITY
FACILITIES DISTRICT NO. 5 (SECTION 31)
By: _____________ _
Disclosure Representative
WILLDAN FINANCIAL SERVICES, as
Dissemination Agent
By: ____________ _
Authorized Representative
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Obligor:
Name oflssue:
Date of Issuance:
EXHIBIT A
NOTICE TO MSRB OFF AIL URE TO FILE ANNUAL REPORT
City of Rancho Mirage Community Facilities District No. 5 (Section 31) (the "Community Facilities District")
Improvement Area No. 1 of City of Rancho Mirage Community Facilities District No. 5 (Section 31) Special Tax Bonds, Series 2024A (Tax-Exempt) and Series 2024B (Federally Taxable)
June_, 2024
NOTICE IS HEREBY GIVEN that the Community Facilities District has not provided an Annual Report with respect to the above-named Bonds as required by the Disclosure Agreement, dated as of June 1, 2024, between the Community Facilities District and Willdan Financial Services, as Dissemination Agent. [The Community Facilities District has notified the Dissemination Agent that it anticipates that the Annual Report will be filed by ______ .]
Dated:
cc: Disclosure Representative
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WILLDAN FINANCIAL SERVICES, as
Dissemination Agent, on behalf of the
Community Facilities District
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EXHIBITB
[ADDITIONAL ANNUAL REPORT TABLES]
Improvement Area No. 1 of City of Rancho Mirage Community Facilities District No. 5 (Section 31) Value-to-Lien by Development Status as of July 1, 20_
Parcel
Count<1>
Assessed
Property
Value
Assigned
Special Tax
Levy<2>
Principal of the Value-to-
Development Status Series 2024 Bonds<3> Lien Ratio
Developed Property<4>
Approved PropertyC5l
Undeveloped Property
Totals
0 > Includes 652 residential lots within the boundaries of Improvement No. I comprised of I residential unit each. <2> Represents the Assigned Special Tax to be levied on parcels classified as Developed Property for Fiscal Year 20_ -_ and a Special Tax levy on Approved Property sufficient to meet the revenue requirements of the Series 2024 Bonds, assuming no further development beyond July I, 20_.
<3> Pro-rata allocation based on percentage of Estimated Assigned Special Tax Levy. <4> Parcels for which a Building Permit was issued prior to May !st of the Fiscal Year preceding the Fiscal Year for which the Special Tax is being levied become Developed Property, as more particularly provided in the Rate and Method. <5> Assessor's Parcels of Taxable Property: (i) that are included in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax is being levied, and (ii) for which a Building Permit has not been issued on or prior to the May !st preceding the Fiscal Year in which the Special Tax is being levied Source: Willdan Financial Services.
Improvement Area No. 1 of City of Rancho Mirage Community Facilities District No. 5 (Section 31) Value-to-Lien by Ownership Status
Ownership Status
Individuals
Shea Homes
Landowner (95% Complete Homes)
Landowner (Under Construction)
Landowner (Finished Lots )C5l
Totals
Parcel
Count<1>
Assessed
Property
Value
Estimated
Assigned
Special Tax
Levy<3>
Principal
of the
Series 2024
Bonds<4>
0 > Includes 652 residential lots within the boundaries of Improvement No. I comprised of I residential unit each.
Value-to
Lien
Ratio
<2> Represents the Assigned Special Tax to be levied on parcels classified as Developed Property for Fiscal Year 20_-_ and a Special Tax levy on Approved Property sufficient to meet the revenue requirements of the Series 2024 Bonds, assuming no further development beyond July 1, 20_ .
<3> Pro-rata allocation based on percentage of estimated Assigned Special Tax Levy. <4> As of July I, 20 _, building permits had been issued for __ of these lots.
Source: Wil/dan Financial Services.
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1. (I) (2) (3) *
Improvement
Area
No.1
of
City
of
Rancho
Mirage
Community
Facilities District
No.
5 (Section
31)
Allocation
of
Special
Tax
by
Lot
Type
at
Fiscal
Year
20 _-
20 _
Lot
Type
50's
Cottage
Collection
60's
Grand
Collection
70's
Grand
Collection
90's
Estate
Collection
120's
Estate
Collection
135's
Estate
Collection
Condo
-No
Lagoon
Frontage
Condo
-
Lagoon
Frontage
TotaJ<
3>
Typical
Home
SF
Fiscal
Year
20 -20
Number
of
Maximum
Units
Special
Tax<
1>
Based
on
projected
product
mix,
home
sizes
and
premiums
at
build-out
using
Fiscal
Year
20_-20_
Special
Tax
Rates.
Excludes
overlapping
debt.
Totals
may
not
add
due
to
rounding.
Preliminary,
subject
to
change
.
H-12
Percentage Allocable
to
Principal Amount
of
Series
2024
Bonds<
2>
Allocable Principal Amount
of
Series
2024
Bonds
4160
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Improvement Area No. 1 of City of Rancho Mirage Community Facilities District No. 5 (Section 31) Value-to-Lien by Production Type of Home
Production Type of
Homes
50's Cottage Collection
60's Grand Collection
70's Grand Collection
90's Estate Collection
120's Estate Collection
135's Estate Collection
Condo - No Lagoon
Frontage
Condo - Lagoon
Frontage
[Condo Parcel I)
[Condo Parcel 2)
[Condo Parcel 3)
Totals
Developed
Property
Units
Total
Residential
Units
Assessed
Property
Value<1>
Estimated
Assigned
Special Tax
Levy<2>
Percentage
of Special
Tax Levy<3>
Principal
of the Series
2024
Bonds<3>
CI) Based on the Appraisal with a date of value of July I, 20_ with assessed, retail and bulk values allocated to individual lots by Willdan. c2> Represents the Assigned Special Tax to be levied on parcels classified as Developed Property for Fiscal Year 20_- _ and a Special Tax levy on Approved Property sufficient to meet the revenue requirements of the bonds, assuming no further development beyond July I, 20 _ . <3> Pro-rata allocation based on percentage of estimated Assigned Special Tax levy.
Source: Willdan Financial Services.
Value
to-Lien
Ratio
Improvement Area No. 1 of City of Rancho Mirage Community Facilities District No. 5 (Section 31) Value-to-Lien Stratification Based Upon Development Status as of July 1, 20_ Value-to-Lien
Category
Greater than 18.00
12.01 to 18.00
9.01 to 12.00
6.01 to 9.00
0.0 to 6.00
Number of
Units
Average
Assessed
Property
Value<1>
Estimated
Assigned
Special Tax
Levy<2>
Percentage
of Special
Tax Levy
Principal
of Series
2024
Bonds<3>
Value-to
Lien
Ratio
0 > Based on the Appraisal with a date of value of July I, 20_ with assessed, retail and bulk values allocated to individual lots by Willdan.
Assumes development status as of July I, 20_.
<2> Represents the Assigned Special Tax to be levied on parcels classified as Developed Property for Fiscal Year 20_-_ and a Special Tax levy on Approved Property sufficient to meet the revenue requirements of the bonds, assuming no further development beyond July I, 20_ . <3> Pro-rata allocation based on percentage of estimated Assigned Special Tax Levy.
Source: Willdan Financial Services.
H-13
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Improvement Area No. 1 of City of Rancho Mirage Community Facilities District No. 5 (Section 31) Maximum Special Tax and Series 2024 Bond Debt Service Coverage Maximum
Special Tax
From Units
With Building
Permits<1>
Maximum
Special Tax at
Buildout
O) Building pennit data as of July I, 20_.
Source: Wil/dan Financial Services.
Maximum
Annual Debt
Service
Priority
Administration
Expense
Coverage
From Lots
With Building
Permits<1>
Total Debt
Service
Coverage
Improvement Area No. 1 of City of Rancho Mirage Community Facilities District No. 5 (Section 31) Status of Planned Residential Development
Plan
Description
50's Cottage Collection
60's Grand Collection
70's Grand Collection
90's Estate Collection
120's Estate Collection
135's Estate Collection
Condo - No Lagoon Frontage
Condo - Lagoon Frontage
[Condo Parcel I]
[Condo Parcel 2]
[Condo Parcel 3]
Total
Base
Plan
Square
Footage
As of July 1, 20_
Base
Price(!>
Closed
Homes
Under
Construction
Completed
Not Closed
Finished
Lots Total
Ol Base sales prices are as of July I, 20_ or as of the date of sale of the last available plan. Base sales prices are exclusive of any premiums, options, upgrades, incentives and any selling concessions or prior reductions currently being offered. There can be no assurance that base sales prices in the future will not differ from the estimated/actual base sales prices set forth in the table. <2l 1As of October I, 20 _, the Landowner had closed __ homes to homeowners and owns __ homes in various stages of construction L__ of which were in escrow) and __ finished lots L__ of which were in escrow). Homes under contract may not result in closed escrows as sales contracts are subject to cancellation.]
Source: The Landowner and Willdan Financial Services.
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APPENDIX I
FORM OF LANDOWNER CONTINUING DISCLOSURE CERTIFICATE
This Landowner Continuing Disclosure Certificate (the "Disclosure Certificate") dated as of June 1, 2024 is executed and delivered by ECRM Residential, Limited Partnership, a Delaware limited partnership (the "Landowner") in connection with the execution and delivery by City of Rancho Mirage Community Facilities District No. 5 (Section 31) (the "District") of its $ ____ Improvement Area No. 1 of City of Rancho Mirage Community Facilities District No. 5 (Section 31) Special Tax Bonds, Series 2024A (Tax-Exempt) and its $ ____ Improvement Area No. 1 of City of Rancho Mirage Community Facilities District No. 5 (Section 31) Special Tax Bonds, Series 2024B (Federally Taxable) ( collectively, the "Series 2024 Bonds"). The Series 2024 Bonds are being issued pursuant to a resolution adopted on May _, 2024, by the City Council of the City of Rancho Mirage, acting as the legislative body of the District, and an Indenture, dated as of June 1, 2024 by and between the District and U.S. Bank Trust Company, National Association, as trustee (the "Trustee") . The Landowner covenants and agrees as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Landowner to assist the Participating Underwriter in the marketing of the Series 2024 Bonds.
Section 2. Definitions. Unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
"Affiliate" shall mean, with respect to the Landowner, any person directly (or indirectly through one or more intermediaries) that exercises managerial control over the Landowner or that is under managerial control of the Landowner, and about whom information could be material to potential investors in their investment decision regarding the Series 2024 Bonds (including without limitation information relevant to the proposed development of the Property, or to the Landowner's ability to pay the applicable Special Tax obligation levied on the Property owned by it when due). "Assumption Agreement" means an agreement among a [Merchant Builder and/or a] purchaser of Property within Improvement Area No. 1, or an Affiliate thereof and the Landowner containing terms substantially similar to this Disclosure Certificate, whereby such purchaser or Affiliate agrees to provide Semi-Annual Reports and notices of significant events with respect to the portion of the Property owned by such purchaser or its Affiliates.
"Beneficial Owner" shall mean any person which has or shares the power, directly or indirectly, to make investment decisions concerning ownership of the Series 2024 Bonds (including persons holding Series 2024 Bonds through nominees, depositories or other intermediaries). "Dissemination Agent" shall mean initially the Landowner, and any successor Dissemination Agent designated in writing by the Landowner and which has filed with the Landowner and the District a written acceptance of such designation.
"District" shall mean City of Rancho Mirage Community Facilities District No. 5 (Section 31 ). "EMMA" shall mean the Electronic Municipal Market Access system of the MSRB. "Equity Securities" of any Person shall mean (a) all common stock, preferred stock, participations, shares, general partnership interests or other equity interests in and of such person (regardless of how 1-1
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designated and whether or not voting or non-voting) and (b) all warrants, options and other rights to acquire any of the foregoing.
"Government Authority" shall mean any national, state or local government, any political subdivision thereof, any department, agency , authority or bureau of any of the foregoing, or any other Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
"Improvement Area" means Improvement Area No. 1 of City of Rancho Mirage Community Facilities District No. 5 (Section 31 ), a portion of the District designated by the City Council pursuant to the Act.
"Listed Event" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. "MSRB" shall mean the Municipal Securities Rulemaking Board . "Obligated Owner" shall mean, as of the date of any Semiannual Report, an owner of _ _ or more Taxable Parcels in Improvement Area No. 1.
"Official Statement" shall mean the Official Statement, dated ____ ., 2024, relating to the Series 2024 Bonds.
"Participating Underwriter" means the original underwriter[ s] of the Series 2024 Bonds required to comply with the Rule in connection with the offering of the Series 2024 Bonds. "Person" shall mean any natural person, corporation , partnership, firm, association, Government Authority or any other Person whether acting in an individual fiduciary, or other capacity. "Property " shall mean the parcels within the boundaries of Improvement Area No. 1 subject to Special Taxes.
"Repository" shall mean the MSRB or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Unless otherwise designated by the MSRB or the Securities and Exchange Commission , filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org.
"Rule" shall mean Rule l 5c2- l 2(b )(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "Semiannual Report" shall mean any report to be provided by the Landowner on or prior to [June 15 and December l 5][March 15 and September 15] of each year, commencing ___ 15, 2024, pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "State" shall mean the State of California.
Section 3. Provision of Semiannual Report.
(a) Until such time as the Landowner ' s reporting requirements terminate pursuant to Section 8 below, the Landowner shall, or upon receipt of the Semiannual Report from the Landowner the Dissemination Agent (if the Landowner is not the Dissemination Agent) shall, not later than [June 15 or 1-2
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December 15] [March 15 or September 15] of each year, commencing ___ 15, 2024, provide to the Repository a Semiannual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. If, in any year, [June 15 or December 15][March 15 or September 15] falls on a Saturday, Sunday or a holiday, such deadline shall be extended to the next following day that is not a Saturday, Sunday, or holiday. The Semiannual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate.
(b) Not later than fifteen (15) calendar days prior to the date specified in subsection (a) for providing the Semiannual Report to the Repository, the Landowner (i) shall provide the Semiannual Report to the Dissemination Agent or (ii) shall provide notification to the Dissemination Agent that the Landowner is preparing, or causing to be prepared, the Semiannual Report and the date which the Semiannual Report is expected to be filed. Ifby such date, the Dissemination Agent has not received a copy of the Semiannual Report or notification as described in the preceding sentence, the Dissemination Agent shall notify the Landowner of such failure to receive the report.
(c) If the Dissemination Agent is not the Landowner and the Dissemination Agent is unable to provide a Semiannual Report to the Repository by the applicable [June 15 or December 15][March 15 or September 15] or to verify that a Semiannual Report has been provided to the Repository by the Landowner by the applicable [June 15 or December l 5][March 15 or September 15], the Dissemination Agent shall send a notice to the Repository in the form required by the Repository . If the Landowner is the Dissemination Agent, the Landowner shall file such notice with the Repository. (d) If the Landowner is not the Dissemination Agent, the Dissemination Agent shall:
(i) determine each year prior to the date for providing the Semiannual Report the name and address of the Repository; and
(ii) promptly after receipt of the Semiannual Report file a report with the Landowner (if the Landowner is not the Dissemination Agent) and the District certifying that the Semiannual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided to the Repository.
(e) Notwithstanding any other provision of this Disclosure Certificate, any of the required filings hereunder shall be made in accordance with the MSRB's EMMA system.
Section 4. Content of Semiannual Report.
(a) The Landowner's Semiannual Report shall contain or include by reference the information which is updated through a date which shall not be more than 60 days prior to the date of the filing of the Semiannual Report relating to the following:
1. An update (if any) to the information relating to the Landowner and its Affiliates under the captions in the Official Statement entitled "INTRODUCTION - The Development," " Key Development Parties," "- Status of Development in Improvement Area No. 1," "- Summary of Planned Development in Improvement Area No. 1" (including an update to the table entitled "Summary of Representative Homes by Lot Type") and "- Landowner's Financing Plan" and "PROPERTY OWNERSHIP AND THE DEVELOPMENT." Such updates shall include, but not be limited to, the status of construction on the property in Improvement Area No. 1 currently owned by the Landowner and its Affiliates [ or a Merchant Builder not otherwise obligated pursuant to 1-3
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Section 6 hereof and/or under an Assumption Agreement] (collectively, the "Landowner Improvements").
2. An update of the information for Improvement Area No. 1 contained in the table entitled "Summary of Representative Homes by Lot Type" in the Official Statement, for the most recently completed fiscal year, noting a tally of lots subject to sales contracts with home buyers, lots subject to contracts with merchant builders, lots subject to options for purchase with merchant builders.
3. An update of the information for Improvement Area No. 1 contained in the table entitled "Appraiser's Estimated Pricing by Lot Type" in the Official Statement, for the most recently completed fiscal year, replacing the Appraiser's estimates with estimated or average market prices, and otherwise updating the information since the last Semiannual Report filed ( or for the first Semiannual Report since the Official Statement).
4. An update of the number of building permits filed since the last Semiannual Report filed (or for the first Semiannual Report since the Official Statement);
5. An update of the merchant builders involved in the construction of units within Improvement Area No. 1.
6. An update of the status of the condominium projects within Improvement Area No. 1.
7. An update of the status of the completion of the amenities within Improvement Area No. 1 and within the Development as described in the Official Statement.
8. An update of the information for Improvement Area No. 1 contained in the table entitled "Improvements Costs - Improvement Area No. 1" in the Official Statement, for the most recently completed fiscal year, updating the information since the last Semiannual Report filed ( or for the first Semiannual Report since the Official Statement).
9. An update of the status of completion of the Improvements within Improvement Area No. including, but not be limited to, an update of the status, if any, of the public improvements to satisfy the Landowner's obligation to the Water District, and the estimated remaining cost of the Landowner and its Affiliates to complete the construction of the Improvements.
10. An update of the number of units completed for sale, in escrow, and sold since the last Semiannual Report filed (or for the first Semiannual Report since the Official Statement).
11. The number of homes conveyed by the Landowner to individual homeowners in Improvement Area No. 1 since the last Semiannual Report filed ( or for the first Semiannual Report since the Official Statement) and the number of homes and lots owned by the Landowner or any Affiliates within Improvement Area No. 1.
12. Any significant amendments to land use entitlements that are known to the Landowner with respect to the Property.
13. Status of Special Tax payments with respect to the Property. 1-4
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14. [A description of any changes to the Landowner's plan of finance for completion of the development of Improvement Area No. 1, any material financial difficulties, underperforming amenities or technological or functional problems with public or private systems in Improvement Area No. 1.]
15. In addition to any of the information expressly required above, provide such further material information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. (b) Any and all of the items listed above may be included by specific reference to other documents, including official statements of debt issues which have been submitted to the Repository or the Securities and Exchange Commission . If the document included by reference is a final official statement, it must be available from the MSRB. The Landowner shall clearly identify each such other document so included by reference.
Section 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the Landowner shall give, or cause to be given, notice of the occurrence of any of the following events, if material under clauses (b) and ( c) as soon as practicable after the Landowner obtains knowledge of any of the following events:
1. Failure to pay any real property taxes, special taxes or assessments levied within Improvement Area No. 1 on Property owned by the Landowner or any Affiliate;
2. Material default by the Landowner or any Affiliate on any loan with respect to the construction or permanent financing of the Landowner Improvements to which the Landowner or any Affiliate has been provided a notice of default;
3. Material default by the Landowner or any Affiliate on any loan secured by Property within Improvement Area No. 1 owned by the Landowner or any Affiliate to which the Landowner or any Affiliate has been provided a notice of default;
4. Payment default by the Landowner or any Affiliate on any loan of the Landowner or any Affiliate (whether or not such loan is secured by property within Improvement Area No. 1) which is beyond any applicable cure period in such loan and, in the reasonable judgment of the Landowner, such payment default will adversely affect the completion of the development of parcels owned by the Landowner or its Affiliates within Improvement Area No. 1, or would materially adversely affect their respective ability to pay the applicable special tax obligation on the Property owed by it when due or their respective ability to complete development of Property within Improvement Area No. 1 as described in the Official Statement;
5. The filing of any proceedings with respect to the Landowner in which the Landowner may be adjudicated as bankrupt or discharged from any or all of its debts or obligations or granted an extension of time to pay debts or a reorganization or readjustment of its debts;
6. The filing of any proceedings with respect to an Affiliate in which the Affiliate may be adjudicated as bankrupt or discharged from any or all of its debts or obligations or granted an extension of time to pay its debts or a reorganization or readjustment of its debts, if such adjudication will adversely affect the completion of the development of parcels owned by the Landowner or its Affiliates within Improvement Area No. 1, or would materially adversely affect their respective ability to pay the applicable special tax obligation on the Property owed by it when 1-5
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due or their respective ability to complete development of Property within Improvement Area No. 1 as described in the Official Statement.
7. The filing of any lawsuit against the Landowner or any of its Affiliates (for which the Landowner has actual notice, as through receipt of service of process) which, in the reasonable judgment of the Landowner, will adversely affect the completion of the development of the Property, or litigation which if decided against the Landowner, or any of its Affiliates, in the reasonable judgment of the Landowner, would materially adversely affect their respective ability to pay the applicable special tax obligation on the Property owed by it when due or materially adversely affect the financial condition of the Landowner or its Affiliates and their respective ability to complete development of the Property within Improvement Area No. 1 as described in the Official Statement.
8. Unless disclosed in the Official Statement or a prior Semi-Annual Report, any conveyance by the Landowner of any of its Property to an entity that is not an Affiliate of the Landowner, the result of which conveyance is to cause the transferee to own __ or more, or 20% or more, of the residential lots within Improvement Area No. 1. Notwithstanding the foregoing, the Landowner shall have no obligation to provide notice of the transfer of Property from the Landowner to an Affiliate of the Landowner.
(b) Whenever the Landowner obtains knowledge of the occurrence of a Listed Event, the Landowner shall as soon as possible determine if such event would be material under applicable federal securities laws. If the Landowner is not the Dissemination Agent, the Dissemination Agent shall have no responsibility to determine the materiality of any of the Listed Events. ( c) If the Landowner determines that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the Landowner shall promptly (i) file a notice of such occurrence with the Dissemination Agent (if the Landowner is not the Dissemination Agent) which shall then distribute such notice to the Repository, with a copy to the District, or (ii) file a notice of such occurrence with the Repository, with a copy to the Dissemination Agent (if the Landowner is not the Dissemination Agent) and the District.
Section 6. Assumption of Landowner's Obligations. If any portion of the Property owned by the Landowner is conveyed to a Person such that, upon such conveyance, such Person that is not an Affiliate of the Landowner, the result of which conveyance is to cause any such transferee to [be obligated for 20% or more of an annual Special Tax levy within Improvement Area No. 1 or own more than_ residential lots (or parcels planned to be developed with more than_ residential units) within Improvement Area No. 1 subject to the Special Tax], the Landowner shall cause such transferee to assume the Landowner's obligation to provide certain financial information and operating data with respect to the portion of the property transferred on a semi-annual basis and to provide notices of the occurrence of certain enumerated events during which time such transferee shall [be obligated for 20% or more of an annual Special Tax levy within Improvement Area No. 1 or own more than_ residential lots (or parcels planned to be developed with more than_ residential units) within Improvement Area No. 1 subject to the Special Tax]. In order to effect such assumption, such transferee shall enter into an Assumption Agreement. A copy of the Assumption Agreement shall be provided to the Dissemination Agent, the Trustee, the Participating Underwriter and the District as set forth in Section 5(a)(7) in the manner provided in S(b) and (c).
Notwithstanding the foregoing, there shall be no requirement that a transferee enter into an Assumption Agreement if the transferee is an Affiliate of the Landowner.
Section 7. Obligations With Respect to Certain Transferees. [Upon the conveyance by the Landowner of any of its Property to an entity that is not an Affiliate of the Landowner, the result of which 1-6
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conveyance is to cause the transferee to be [obligated for 20% or more of an annual Special Tax levy or to own 20% or more of the residential units developed or planned for development within Improvement Area No. 1, the Landowner shall cause such transferee to assume that portion of the Landowner's obligation to provide certain financial information and operating data on a semi-annual basis and to provide notices of the occurrence of certain enumerated events for all times that such transferee shall own transferee to own __ or more, or 20% or more, of the residential lots within Improvement Area No. 1 or otherwise continue to make such reports on behalf each of such transferee].
Section 8. Termination of Reporting Obligation. The Landowner's obligations under this Disclosure Certificate shall terminate upon the earlier to occur of the following events:
(a) the legal defeasance, prior redemption or payment in full of all of the Series 2024 Bonds, or
(b) at such time as the Landowner and its Affiliates, in the aggregate (i) are responsible for less than 20% of the annual Special Tax levy within Improvement Ara No. I or (ii) own less than_ residential lots (or parcels planned to be developed with less than_ residential units) within Improvement Area No. 1 subject to the Special Tax, or (c) with respect to Property conveyed to another entity, the date on which the Landowner ' s obligations under this Di~closure Certificate are assumed under an Assumption Agreement.
If such termination occurs prior to the final maturity of the Series 2024 Bonds, the Landowner shall give notice of such termination in the same manner as for a Listed Event hereunder.
If a portion of the Property owned by the Landowner, or any Affiliate of the Landowner, is conveyed to a Person that, upon such conveyance, will be an Obligated Owner, the obligations of the Landowner hereunder with respect to the property in Improvement Area No. 1 owned by such Obligated Owner and its Affiliates may be assumed by such Obligated Owner or by an Affiliate thereof, and the Landowner's obligations hereunder with respect to such property will be terminated.
Section 9. Dissemination Agent. The Landowner may from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. If the Dissemination Agent is not the Landowner, the Dissemination Agent shall not be responsible in any manner for the form or content of any notice or report prepared by the Landowner pursuant to this Disclosure Certificate. The Dissemination Agent may resign by providing (i) thirty days written notice to the Landowner and the Dissemination Agent and (ii) upon appointment of a new Dissemination Agent hereunder.
Section 10. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Landowner may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:
(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5, it may only be made in connection with a change in circumstances that arises from a change in legal requirements or a change in law;
(b) The amendment or waiver either (i) is approved by the owners of the Series 2024 Bonds in the same manner as provided in the Resolution with the consent of owners of the Series I-7
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2024 Bonds, or (ii) does not, in the opinion of nationally recognized bond counsel addressed to the District and the Dissemination Agent, materially impair the interests of the owners or Beneficial Owners of the Series 2024 Bonds; and
( c) the Landowner, or the Dissemination Agent, shall have delivered copies of the amendment and any opinions delivered under (b) above to the District and the Trustee.
In the event of any amendment or waiver of a provision of this Disclosure Certificate, the Landowner shall describe such amendment in the next Semiannual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver.
Section 11. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Landowner from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Semiannual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Landowner chooses to include any information in any Semiannual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Landowner shall have no obligation under this Disclosure Certificate to update such information or include it in any future Semiannual Report or notice of occurrence of a Listed Event.
The Landowner acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and Rule l0b -5 promulgated under the Securities Exchange Act of 1934, may apply to the Landowner, and that under some circumstances compliance with this Disclosure Certificate, without additional disclosures or other action, may not fully discharge all duties and obligations of the Landowner under such laws.
Section 12. Default. In the event of a failure of the Landowner or the Dissemination Agent to comply with any provision of this Disclosure Certificate, the Participating Underwriter or any owner or Beneficial Owner of the Series 2024 Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Landowner or the Dissemination Agent to comply with its obligations under this Disclosure Certificate. Notwithstanding the foregoing sentence, the sole remedy under this Disclosure Certificate in the event of any failure of the Landowner or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance . Neither the Landowner nor the Dissemination Agent shall have any liability to any holder or beneficial owner of the Bonds or any other party for monetary damages or financial liability of any kind whatsoever arising from or relating to this Disclosure Certificate; provided, however, that nothing in this agreement is intended to limit in any way whatsoever any liability with respect to the Securities Act of 1933, as amended, or any other state or federal securities laws.
Section 13. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the Landowner, the Participating Underwriter, owners of the Series 2024 Bonds or Beneficial Owners or any other party. The Dissemination Agent may rely and shall be protected in acting or refraining from acting upon a direction from the Landowner or an opinion of nationally recognized bond counsel. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Certificate. The Dissemination Agent may conclusively rely upon the Semiannual Report provided to it by the Landowner as constituting the Semiannual Report required of the Landowner in accordance with this Disclosure Certificate and shall have no duty or obligation to review such Semiannual Report. The Dissemination Agent shall have no duty to prepare the Semiannual Report nor shall the Dissemination Agent be responsible for filing any Semiannual Report not provided to it by the Landowner in a timely manner in a form suitable for filing with the Repository. Any company succeeding 1-8
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to all or substantially all of the Dissemination Agent's business shall be the successor to the Dissemination Agent hereunder without the execution or filing of any paper or any further act. The provisions of this Section 13 shall not apply to the Dissemination Agent if the Dissemination Agent is the Landowner.
Section 14. The Landowner as Independent Contractor. In performing under this Disclosure Certificate, it is understood that the Landowner is an independent contractor and not an agent of the District.
Section 15. Notices. Notices should be sent in writing by electronic mail, regular mail or overnight mail to the addressees as provided in connection with this Disclosure Certificates.
Section 16. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Landowner, the District, the Dissemination Agent, the Participating Underwriter and owners of the Series 2024 Bonds and Beneficial Owners from time to time of the Series 2024 Bonds and shall create no rights in any other person or entity.
Section 17. California Law. The validity, interpretation and performance of this Disclosure Certificate shall be governed by the laws of the State of California.
Section 18. Electronic Signature. Each of the parties hereto agrees that the transaction consisting of this Disclosure Certificate may be conducted by electronic means. Each party agrees and acknowledges that it is such party's intent, that if such party signs this Disclosure Certificate using an electronic signature, it is signing, adopting and accepting this Disclosure Certificate and that signing this Disclosure Certificate using an electronic signature is the legal equivalent of having placed the undersigned officer's handwritten signature on this Disclosure Certificate on paper. Each party acknowledges that it is being provided with an electronic or paper copy of this Disclosure Certificate in a usable format.
Section 19. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
The Landowner has caused this Disclosure Certificate to be executed, on the date first written above, by its officer duly authorized.
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ECRM RESIDENTIAL, LIMITED
PARTNERSHIP, a Delaware limited partnership
By: EC Rancho Mirage Holdings GP Corp., a
Delaware corporation, its sole General Partner
By: _____________ _
[Name/Title]