Staff Report - Waiver of City Code Section 4.04.020.C for the Agreements Pertaining to the City of Sacramento Railyards Community Facilities District No. 2018-01 (Improvements) Special Tax Bonds, Series 2022 (Two-Thirds Vote Required) and Authorize the Issuance of the City of Sacramento Railyards Community Facilities District No. 2018-01 (Improvements) Special Tax Bonds, Series 2022 and Related Actions — Sacramento City Council, August 23, 2022 (part 2 of 4)

Fiscal Year 2023-24 is expected to be the first Fiscal Year of the Special Tax levy, which levy will be in an amount necessary to fund estimated Expenses. Interest on the Bonds is being capitalized through September 1, 2024. The share of Bonds set forth in Ta ble 8 below is allocated based on each property’s share of the estimated Fiscal Year 2024-25 Special Tax levy based on building permits issued as of August 15, 2022, assuming no further transfers of property or development within the District. Table 7 below shows the estimated principal amount of the Bonds and overlapping debt allocable to the parcels and the estimated value- to-lien ratios for the parcels in the District based upon pr operty values as of the Date of Value as set forth in the Appraisal Report and property ownership in the District as of July 1, 2022. See “DEVELOPMENT PLAN.”
In the City Reports provided pursuant to the City Continuing Disclosure Certificate, Table 7 will not be updated based on appraised value, but similar information will be provided based on current assessed value.

The assessor parcel numbers referenced in Table 7 below are shown on the project map on page 62 above.

* Preliminary, subject to change.

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TABLE 7

CITY OF SACRAMENTO
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01
(IMPROVEMENTS)

VALUE-TO-LIEN RATIOS BASED ON OWNERSHIP
Landowner(1)
Assessor’s Parcel
Number(2)
Taxable
Acres
Fiscal Year
2024-25
Maximum
Annual
Special Tax
Estimated
Fiscal Year
2024-25
Special Tax
Levy(3)
Percent
of Total
Appraised
Value(4)
CFD
No. 2018 -01
Special Tax
Lien(5) *
Other
Overlapping
Debt(6) Total Lien *
Value-to-
Lien*
Developed Parcels(7)
Sacramento 695, LP 002-0010-069-000 2.88 $ 61,457 $ 61,457 2.7% $ 66,000,000 $ 819,872 $ 52,743 $ 872,614 75.63:1 Wong Center at Railyards, L.P.(8) 002-0010-077-000 2.66 56,762 50,616 2.3 0 675,243 7,805 683,047 0.00:1 Subtotal, Developed Parcels 5.54 $ 118,219 $ 118,219 5.3% $ 66,000,000 $ 1,577,115 $ 60, 547 $ 1,637,662 40.30:1

Undeveloped Parcels(8)
Downtown Railyard Venture, LLC 001-0064-011-000 (9) 0.11 $ 2,347 $ 2,093 0.1% $ 0 $ 27,924 $ 496 $ 28,419 0.00:1 001-0064-012-000 (9) 0.09 1,921 1,713 0.1 0 22,847 397 23,243 0.00:1 001-0064-013-000 0.07 1,494 1,332 0.1 44,521 17,770 312 18,082 2.46:1 002-0010-074-000 29.28 624,812 557,152 24.8 15,452,541 7,432,746 72,226 7,504,972 2.06:1 002-0010-075-000 58.77 1,254,105 1,118,301 49.7 30,481,180 14,918,801 322,681 15,241,481 2.00:1 002-0010-076-000 6.83
145,747 129,964 5.8 6,021,759 1,733,800 23,521 1,756,321 3.42:1 Subtotal, Downtown Railyard Venture, LLC 95.15 $ 2,030,425 $ 1,810, 555 80.5% $ 52,000,000 $24, 153,886 $ 418,632 $ 24,572, 518 2.12:1

Kaiser Foundation Hospitals 002-0270-001-000 1.14 $ 24,327 $ 21,692 1.0% $ 2,268,028 $ 289,390 $ 48,305 $ 337,694 6.72:1 002-0270-002-000 3.50 74,687 66,599 3.0 6,963,244 888,477 96,060 984,537 7.07:1 002-0270-003-000 3.31 70,633 62,984 2.8 6,585,239 840,246 90,901 931,147 7.07:1 002-0270-004-000 4.17 88,984 79,349 3.5 8,296,208 1,058,557 114,380 1,172,937 7.07:1 002-0270-005-000 0.68 14,511 12,939 0.6 1,352,859 172,618 21,045 193,663 6.99:1 002-0270-006-000 0.76 16,218 14,462 0.6 1,512,019 192,927 23,330 216,256 6.99:1 002-0270-007-000 2.32 49,507 44,146 2.0 4,615,636 588,933 66,137 655,070 7.05:1 002-0270-008-000 1.26
26,887 23,976 1.1 2,506,768 319,852 34,626 354,478 7.07:1 Subtotal, Kaiser Foundation Hospitals 17.14 $ 365,754 $ 326,147 14.5% $ 34,100,000 $ 4,351,000 $ 494,784 $ 4,845,783 7.04 :1

Subtotal, Undeveloped Parcels 112.29 $ 2,396,179 $ 2,130,555 94.7% $ 86,100,000 $ 28,422,885 $ 913,416 $ 29,669,302 2.93:1

Totals 117.83 $ 2,514,398 $ 2,248,775 100.0% $ 152,100,000 $ 30,000,000 $ 973,964 $ 30,973,964 4.91:1

* Preliminary, subject to change.
(1) Ownership status as of July 1, 2022.
(2) The location of each assessor parcel num ber is shown on the map on page 62 above. (3) Interest on a portion of the Bonds is be ing capitalized through September 1, 2024. (4) As of the Date of Value as set forth in the Appraisal Report.

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(5) Allocated based on the estimated Special Tax levy for Fiscal Year 2024-25 and assu mes no further development or transfer of pr operty within the District. Amounts reflect a levy on Developed Parcels at 100% of the Maximum Annual Special Tax Rate and a levy on Undeveloped Parcels at 89% of the Maximum Annual Special Tax Rate. Parcels owned by Sacramento 695, LP and Wong Center at Railyards, L.P. will be classified as Developed Parcels for purposes of the Fiscal Year 2024-25 Special Tax levy, based on building permits issued as of August 15, 2022.
(6) Includes land-secured overlapping special tax and assessment lien debt as of March 1, 2022 that is applicable to the Taxable L and in the District. See “— Direct and Overlapping Indebtedness” above.
(7) Under the Rate and Method, De veloped Parcels refer to parcel s for which a building permit for residential use or nonresidentia l use has been issued before June 1 of the preceding Fiscal Year.
(8) The Appraiser has assigned zero value to the property owned by the Wong Center, which is planned for a 150-unit affordable hou sing project, as described below. See “— Appraisal” above.
(9) Parcels were not assigned value in the Appr aisal Report due to the fact that such pa rcels are expected to be public property. Such parcels are currently taxable as Undeveloped Parcels under the Rate and Method.

Source: Economic & Planning Systems Inc. (EPS).

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Debt Service Coverage from Special Tax Revenues
The Bonds have been sized so that the projected Special Tax revenues based on a levy at the Maximum Annual Special Tax rates on Taxable Property will be equal to at least 110% of debt service on the Bonds in each year. Interest due on the Bonds through September 1, 2024 will be paid from capitalized interest. Assuming the requirements under the Indentur e are met, among other factors, the City expects to issue Parity Bonds to finance additional eligible facilities, which, if issued, could reduce coverage below the levels set forth in Table 8 below. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Issuance of Parity Bonds.”
TABLE 8
RAILYARDS CFD NO. 2018-01 (IMPROVEMENTS)
SPECIAL TAX COVERAGE OF DEBT SERVICE BY FISCAL YEAR*
Fiscal
Year
Ending
Maximum
Annual
Special Tax
Administrative
Expenses(1)
Net Annual
Special Tax
Total Debt
Service
Capitalized
Interest(2)
Net Debt
Service
Special Tax
Coverage of
Debt Service
2023 $2,416,761 $ (35,000) $2,381,761 $1,530,833 $ (1,530,833) $ 0 n/a 2024 2,465,096 (36,050) 2,429,046 1,650,000 (1,650,000) 0 n/a 2025 2,514,398 (37,132) 2,477,267 2,250,000 0 2,250,000 110.1% 2026 2,564,686 (38,245) 2,526,441 2,292,000 0 2,292,000 110.2 2027 2,615,980 (39,393) 2,576,587 2,339,875 0 2,339,875 110.1 2028 2,668,299 (40,575) 2,627,725 2,338,075 0 2,338,075 112.4 2029 2,721,665 (41,792) 2,679,874 2,339,075 0 2,339,075 114.6 2030 2,776,099 (43,046) 2,733,053 2,342,600 0 2,342,600 116.7 2031 2,831,621 (44,337) 2,787,284 2,338,375 0 2,338,375 119.2 2032 2,888,253 (45,667) 2,842,586 2,341,675 0 2,341,675 121.4 2033 2,946,018 (47,037) 2,898,981 2,341,950 0 2,341,950 123.8 2034 3,004,939 (48,448) 2,956,490 2,339,200 0 2,339,200 126.4 2035 3,065,037 (49,902) 3,015,136 2,338,425 0 2,338,425 128.9 2036 3,126,338 (51,399) 3,074,939 2,339,350 0 2,339,350 131.4 2037 3,188,865 (52,941) 3,135,924 2,341,700 0 2,341,700 133.9 2038 3,252,642 (54,529) 3,198,113 2,340,200 0 2,340,200 136.7 2039 3,317,695 (56,165) 3,261,530 2,339,850 0 2,339,850 139.4 2040 3,384,049 (57,850) 3,326,199 2,340,375 0 2,340,375 142.1 2041 3,451,730 (59,585) 3,392,145 2,341,500 0 2,341,500 144.9 2042 3,520,764 (61,373) 3,459,392 2,337,950 0 2,337,950 148.0 2043 3,591,180 (63,214) 3,527,966 2,339,725 0 2,339,725 150.8 2044 3,663,003 (65,110) 3,597,893 2,341,275 0 2,341,275 153.7 2045 3,736,263 (67,064) 3,669,200 2,342,325 0 2,342,325 156.6 2046 3,810,989 (69,076) 3,741,913 2,337,600 0 2,337,600 160.1 2047 3,887,208 (71,148) 3,816,061 2,342,100 0 2,342,100 162.9 Totals $77,409,579 $ (1,276,074) $76,133,504 $56,866,033 $ (3,180,833) $ 53,646,843

* Preliminary, subject to change.
(1) The amount for Priority Administrative Expenses is $35,000 in Fiscal Year 2022-23. This amount is projected to increase by three percent annually.
(2) Interest earnings on capitalized interest will be applied to pay debt service on the Bonds.

Source: The Underwriter; the City; Economic & Planning Systems Inc. (EPS).

Delinquency History
Interest on a portion of the Bonds will be capitalized through September 1, 2024. Fiscal Year 2023-24 is expected to be the first Fiscal Year of the Special Tax levy, which levy will be in an amount necessary to fund estimated Expenses. Therefore, no delinquency history exists at this time. In each Fiscal Year, the first installment and second installment of the Special Tax le vy become delinquent on December 10 and April 10, respectively, if not paid. The District is currently incl uded in the County’s Teeter Plan and, as a result, the City will receive 100% of the Special Tax levy with respect to the District, without regard to the actual amount

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of collections. See “SOURCES OF PAYMENT FO R THE BONDS—Teeter Plan” and “SPECIAL RISK FACTORS—Teeter Plan Termination.”

SPECIAL RISK FACTORS
Concentration of Ownership
As described under “DEVELOPMENT PLAN,” the Developer currently owns the substantial majority of the property in the District. Based on the ownership st atus of the property within the District as of July 1, 2022, the estimated Fiscal Year 2024-25 Special Tax levy would be levied approximately 80.5% on property owned by the Developer, approximately 14.5% on property owned by Kaiser Foundation Hospitals, 2.7% on property owned by Sacramento 695, L.P. and 2.3% on property owned by the Wong Center. The Developer’s long-term plans with respect to the property that it currently owns in the District include sale of portions of such property, retention of portions of such property for its own devel opment and portfolio or joint venture partnerships for the development thereof. Therefore, th ere can be no assurance that ownership of the property within the District will be widely diversified.

The receipt of the Special Tax is dependent on the owners of the property in the District paying the Special Tax when due, and could be adversely affected by the inability to complete the development within the District or the ability to lease any portion of the improvements, if completed, due to market demand, commercial downturns or high vacancy rates. Accordingly, the willingness of the property owners to pay the Special Tax may be dependent, in part, on the success of the proposed projects in the District.

Failure of the Developer, Kaiser Foundation Hospitals, Sacramento 695, L.P., the Wong Center or any future developers within the District, or any of their successor(s) to pay the Special Tax when due could result in a draw on the Bond Reserve Fund, and ultimately a default in payments of the principal of, and interest on, the Bonds, when due. No assurance can be given that the Developer, Kaiser Foundation Hospitals, Sacramento 695, L.P. or any future developers within the District, or their successors, will complete the remaining intended construction and development in the District. See “— Failure to Develop Properties.” No assurance can be given that the Deve loper, Kaiser Foundation Hospitals, Sacramento 695, L.P., the Wong Center or any future builders that purchase property within the District will pay the Special Tax in the future or that they will be able to pay such Special Tax on a ti mely basis. See “— Bankruptcy and Foreclosure” for a discussion of certain limitations on the City’s ability to pursue judicial proceedings with respect to delinquent parcels.

Risks of Real Estate Secured Investments Generally
The Bond owners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the Dist rict, the supply of or demand for competitive properties in such area, and the market value of property or buildi ngs and/or sites in the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; (iii) natural disasters (including, without limitation, earthquakes, fires and floods), which may result in uninsured losses; and (iv) high rate of inflation, rising interest rates and other economic trends that adversely affects consumers, whether cyclical or resulting from geopolitical events.

No assurance can be given that the Developer, or any current or future developers or any future property owners within the District will pay Special Taxe s in the future or that they will be able to pay such Special Taxes on a timely basis. See “— Bankruptcy and Foreclosure” below, for a discussion of certain limitations on the City’s ability to pursue judicial proceedings with respect to delinquent parcels.

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Failure to Develop Properties
Development of property within the District may be subject to unexpected delays, disruptions and changes which may affect the willingness and ability of the Developer, Kaiser Foundation Hospitals, Sacramento 695, L.P., the Wong Center or any future developers or property owners to pay the Special Tax when due. Land development is subj ect to comprehensive federal, State and local regulations. Approval is required from various agencies in connection with the layout and design of developments, the nature and extent of improvements, construction activity, land use, zoning, school and health requirements, as well as numerous other matters. There is always the possibility that such approvals will not be obtained or, if obtained, will not be obtained on a timely basis. See “DEVELOPMENT PLAN—Status of Infrastructure.” Failure to obtain any such agency approval or satisfy such governmental requirements would adversely affect planned land development. Development of land in the District is also subject to the availability of infrastructure that may be required for that particular parcel. Finally, development of land is subject to economic considerations.

As of the Date of Value, the property owned by the Developer, the Wong Center and Kaiser Foundation Hospitals consisted solely of undeveloped land with certain backbone infrastructure in place.

Based on development status as of July 1, 2022, and assuming no further development in the District, approximately 94.7% of the estimated Fiscal Year 2024-25 Special Tax would be levied on Undeveloped Parcels.

No assurance can be given that the remaining proposed development will be partially or fully completed; and for purposes of evaluating the investment quality of the Bonds, prospective purchasers should consider the possibility that such parcels will remain unimproved.

Undeveloped or partially developed land is inherently less valuable than developed land and provides less security to the Holders should it be necessary for the City to foreclose on the property due to the nonpayment of the Special Tax. The failure to complete development in the District as planned, or substantial delays in the completion of the development due to litigation or other causes may reduce the value of the property within the District and increase the length of time during which the Special Tax will be payable from undeveloped property, and may affect the willingness and ab ility of the owners of property within the District to pay the Special Tax when due.

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

Holders should assume that any event that significantly impacts the ability to develop land in the District would cause the property values within the Di strict to decrease substant ially from those estimated by the Appraiser and could affect the willingness and ability of the owners of land within the District to pay the Special Tax when due.

The City expects to levy the Special Tax on Undeveloped Parcels in Fiscal Year 2024-25 and in future fiscal years until the Special Tax levied on Developed Parcels is sufficient to fund the Special Tax Requirement. Undeveloped property is less valuab le per unit of area than property with improvements thereon, especially if ther e are no plans to develop such land or if there are severe restrictions on the development of such land. Undeveloped property also provides less security to the Holders should it be necessary for the City to foreclose on such undeveloped property due to the nonpayme nt of the Special Tax.

Furthermore, an inability to develop the land within the District as currently proposed will make the Holders

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dependent upon timely payment of the Special Tax levied on Undeveloped Parcels. A slowdown or stoppage in the continued development of the District could reduce the willingness and ability of the Developer, Kaiser Foundation Hospitals, Sacramento 695, L.P. an d the Wong Center to make Special Tax payments on undeveloped property that they own and could greatly reduce the value of such property in the event it has to be foreclosed upon. See “— Property Values.”
Limited Obligations
The Bonds are not payable from the general funds of the City. Except with respect to the Net Special Tax Revenues, neither the full faith and credit nor the taxing power of the City is pledged for the payment of the Bonds or related interest, and, except as provided in the Indenture, no owner of the Bonds may compel the exercise of any taxing power by the City or force th e forfeiture of any City property. The principal of, premium, if any, and interest on the Bonds are not a debt of the City or a legal or equitable pledge, charge, lien or encumbrance upon any of the City’s property or upon any of the City’s income, receipts or revenues, except the Net Special Tax Revenues and other amounts pledged under the Indenture.

Insufficiency of Special Tax
In order to pay debt service on the Bonds, it is necessary that the Special Tax be paid in a timely manner. The City will establish and fund upon the issuance of the Bonds a Bond Reserve Fund in an amount equal to the Required Bond Reserve to pay debt service on the Bonds to the extent other funds are not available. See “SOURCES OF PAYMENT FOR THE B ONDS — Bond Reserve Fund.” The City will covenant in the Indenture to maintain in the Bond Reserve Fund an amount equal to the Required Bond Reserve, subject, however, to the limitation that the City may not levy the Special Tax in the District in any fiscal year at a rate in excess of the maximum amount s permitted under the Rate and Method. In addition, pursuant to the Act, under no circumstances will the Spec ial Tax levied in any Fiscal Year against property within the District for which an occu pancy permit for private residential use has been issued be increased as a consequence of delinquency or default by the owner of any other property within the District by more than 10% above the amount that would have been levied in such Fiscal Year had there never been any such delinquencies or defaults. As a result, if a significant number of delinquencies occur, the City could be unable to replenish the Bond Reserve Fund to the Required Bond Reserve due to the limitations on the maximum Special Tax. If such defaults were to continue in successive years, the Bond Reserve Fund could be depleted and a default on the Bonds could occur.

The City will covenant in the Indenture that, under certain conditions, it will institute foreclosure proceedings to sell any property with a delinquent Special Tax in order to obtain funds to pay debt service on the Bonds. If foreclosure proceedings were ever instituted, any mortgage or deed of trust holder could, but would not be required to, advance the amount of the delinquent Special Tax to protect its security interest. See “SOURCES OF PAYMENT FOR THE BONDS — Special Tax — Foreclosure Covenant ” for provisions which apply in the event of such foreclosure and which the City is required to follow in the event of delinquencies in the payment of the Special Tax.

In the event that sales or foreclosur es of property are inst ituted, there could be a delay in payments to owners of the Bonds (if the Bond Reserve Fund has been depleted) pending such sales or the prosecution of such foreclosure proceedings and receipt by the City of the proceeds of sale. The City may adjust the future Special Tax levied on Taxable Land in the District, subj ect to the limitation on the maximum Special Tax, to provide an amount required to pay interest on, principal of, and redemption premiums, if any, on the Bonds, and the amount, if any, necessary to replenish the Bond Reserve Fund to an amount equal to the Required Bond Reserve and to pay all current expenses. There is , however, no assurance that the total amount of the Special Tax that could be levied and collected against Taxable Land in the District will be at all times sufficient to pay the amounts required to be paid by the Indenture, even if the Special Tax is levied at the maximum Special Tax rates. See “—Bankruptcy and Foreclosure” for a discussion of potential delays in foreclosure actions.

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The Rate and Method governing the levy of the Special Tax provides that no Special Tax shall be levied on any Public Parcel and any ot her Parcel (as such terms are defined in the Rate and Method) that in its entirety, is or is intended to be, publicly owned that is normally exempt from the levy of general ad valorem property taxes under California law, including public streets, schools, parks, public drainageways, public landscaping, wetlands, greenbelts, common areas, and public open space. See APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” If fo r any reason property within the District becomes exempt from taxation by reason of ownership by a non-taxable entity such as the federal government or another public agency, subject to the limitations of the maximum authorized rates, the Special Tax will be reallocated to the remaining taxable pr operties within the District. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon the ability and willingness of the owners of such property to pay the Special Tax when due.

The Act provides that, if any property within the District not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Tax will continue to be levied on and enforceable against the public entity that acquired the property. In addition, the Act provides that, if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with resp ect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Act have not been tested in the courts. Due to problems of collecting taxes from public agencies, if a substantial portion of land within th e District was to become owned by public agencies, collection of the Special Tax might become more difficult and could result in collections of the Special Tax which might not be sufficient to pay principal of and interest on the Bonds when due and a default could occur with respect to the payment of such principal and interest.

Prevailing Wage Requirement
As described under “DEVELOPMENT PLAN — Infrastructure Financing Plan,” a substantial portion of the remaining infrastructure costs within the Sacramento Railyards is expected to be funded from public funding sources, including grants from the State and proceeds of the Bonds. In addition, the vertical construction projects that are underway or soon to be underway (i.e. The AJ and the Wong Center apartment buildings) received substantial funding through federal and State tax credits and proceeds of bonds issued by municipal housing authorities. The Developer may seek additional public funding sources in the future to fund the cost of infrastructure or other vertical improvement projects in the Sacramento Railyards. In the absence of a statutory exception that applies, receipt of public funding could result in all projects, public or private, within the Sacramento Railyards being subject to the prevailing wage requirements under the California Labor Code.

Such an outcome can be expected to make the development within the Sacramento Railyards, including private improvements, more expensive than they would have been in the absence of such requirement. In addition, this requirement may make the Sacramento Railyards less attractive to potential purchasers of portions of the property therein who would want to construct their own proj ects and who will have to satisfy this requirement.

The Developer, and any future developers, are obligated to comply with all requirements under the California Labor Code with respect to the construction of improvem ents in the Sacramento Rail yards that are applicable as a result of public funding. The City makes no assurances that the Developer or any future developer within the Sacramento Railyards, will comply with such requir ements under the California Labor Code, to the extent applicable.

Teeter Plan Termination
The County has implemented its Teeter Plan as an alternate procedure for the distribution of certain property tax and assessment levies on the secured roll. Pursuant to its Te eter Plan, the County has elected to provide local agencies and taxing ar eas, including the District, with full tax and assessment levies instead of actual tax and assessment collections. In return, the County is entitled to retain all delinquent tax and assessment payments, penalties and interest. Thus, the County’s Teeter Plan may protect the Holders of the Bonds from the risk of delinquencies in the payment of the Special Tax. However, the County is entitled, and

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under certain circumstances could be re quired, to terminate its Teeter Plan with respect to all or part of the local agencies and taxing areas covered thereby. A termin ation of the Teeter Plan w ith respect to the District would eliminate such protection from delinquencies in the payment of the Special Tax. See “SOURCES OF PAYMENT FOR THE BONDS — Teeter Plan.”
COVID-19 (Coronavirus) Pandemic
Since mid-March 2020, based on guidance and directives from the State and public health agencies, the City, the County and other public agencies within the County have undergone varying degrees of closure and reopening of public buildings and businesses as a result of the spread of strains of coronavirus that cause a disease commonly referred to as COVID-19 (“COVID-19”).

The impacts of the COVID-19 pandemic on the economy and residential and nonresidential real estate markets are uncertain. Such impacts could include, among others, (i) potential supply chain slowdowns or shutdowns resulting from the unavailability of workers in locations producing construction materials; (ii) slowdowns or shutdowns by local governmental agencies in providing governmental permits, inspections, title and document recordation, and other services and activities associated with real estate development; (iii) delays in construction where one or more member s of the workforce becomes infected with COVID-19; (iv) fluctuations in financial markets and contraction in available liquidity; (v) extensive job losses and declines in business activity across important sectors of the economy; (vi) declines in business and consumer confidence that negatively impact economic conditions; and (vii) the failure of gove rnment measures such as fiscal stimulus to counteract the economic impact of the pandemic. The ultimate effects of the COVID-19 outbreak could have a material adverse effect on the ab ility to complete the development in the District as planned.

Natural Disasters
The market value of the property within the District can be adversely affected by a variety of factors that may affect public and private improvements. Those additional factors include, without limitation, geologic conditions (such as earthquakes), topographi c conditions (such as earth movements) and climatic conditions (such as droughts, fire hazard, and floods). The property within the District is not located within an Alquist-Priolo Earthquake Fault Zone.

With respect to geologic conditions, building codes require that some of these factors be taken into account in the design of private impr ovements of the parcels, and the C ity has adopted the Uniform Building Code standards with regard to seismic standards. Design criteria are established upon the basis of a variety of considerations and may change, leaving previously designed improvements unaffected by more stringent subsequently established criteria. In general, design criteria reflect a balance at the time of establishment between the present costs of protection and the future costs of lack of protection, based in part upon a present perception of the probability that the condition will occur and the seriousness of the condition should it occur.

Consequently, neither the absence of, nor the establishmen t of, design criteria with respect to any particular condition means that the applicable governmental agency has evaluated the condition and has established design criteria in the situations in which the criteria are needed to preserve value, or has established the criteria at levels that will preserve value. To the contrary, the City expects that one or more of such conditions may occur and may result in damage to improvements of varying seriousness; that the damage may entail significant repair or replacement costs; and that repair or replacement may never occur because of the cost, because repair or replacement will not facilitate habi tability or other use, or because other considerations preclude repair or replacement. Under any of these circumstances, the actual value of the parcels might depreciate or disappear, notwithstanding the establishment of design criteria for any such condition.

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Flood Hazard
Based on FEMA’s current mapping, the property in the District is currently designated “Zone X,” which means it is in a 500-year flood zone. However, as described below, all of the City is subject to the ULOP (as defined below) requirement and development in the District is therefore subject to federal and State requirements regarding the restoration of protection against flood hazards (e.g., levees).

The Central Valley Flood Protection Act of 2008 requires that cities and counties within the California Central Valley (including the City) make certain findings with respect to flood protection before approving development agreements, tentative maps, discretionary permits, and ministerial permits for new residences.

One of those findings is that the local flood-management agency has made “adequate progress” on the construction of a flood-protection system that will prov ide an Urban Level of Flood Protection (“ULOP”) by 2025. An ULOP is the level of flood protection needed to withstand a flood event that has a 0.5% chance of occurring in a year (i.e., a 200-year flood).

The Sacramento Area Flood Control Agency (“SAFCA” ) is the local flood-management agency that serves the area within the City. In 2016, SAFCA prep ared its ULOP plan, which the City accepted in June 2016. When making the adequate-progress finding, the City has relied on annual progress reports prepared by SAFCA, which demonstrate that the project involving the strengthening of 24 miles of levees surrounding the portion of the City known as the “Natomas Basin” (t he “Levee Project”) is meeting specified development milestones toward providing an ULOP by 2025. If construction of the Levee Project is delayed so that the City is unable to make a finding of adequate progress toward an ULOP, then the City might not be able to approve either or both of the following: a discretionary permit or other discretionary entitlement for construction of a new building or construction that would result in an increase in allowed occupancy for an existing building; or a ministerial permit for construction of a new residence. The City currently does not expect any delays with respect to the Levee Project that would cause this to occur.

The Corps began construction of the Levee Project in 2017 and the Levee Project is currently estimated to be complete in 2025. To date, 18 miles have been completed and construction of the remaining 24 miles began in 2019. The Corps will need to acquire additional land and obtain additional approvals and permits in order to complete the Levee Project.

Hazardous Substances
The presence of hazardous substances on a parcel may result in a reduction in the value of a parcel. In general, the owners and operators of a parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the taxed parcels be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming the owner, will become obligated to remedy the condition just as is the seller.

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

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the value of a parcel that is realiz able upon a delinquency and the willingness or ability of the owner of any parcel to pay the Special Tax installments.

The value of the taxable property within the District, as set forth in the various tables in this Official Statement, does not reflect the presence of any future hazardous substance or the possible liability of the owner (or operator) for the remedy of a future hazardous substance condition of the property. The Appraiser considered the environmental remediation and monitoring requirements within the District in its analysis set forth in the Appraisal Report. As described above under the caption “DEVELOPMENT PLAN — Environmental Matters,” significant environmental remediation work has been undertaken in order to allow the development within the District to proceed as descri bed in this Official Statement and certain ongoing remediation and monitoring obligations exist. The Developer has represented to the City that it is not aware of any hazardous substance condition of th e property within the District that has not been remediated in order to allow for such development to proceed. The City has not independently determined whether any owner (or operator) of any of the parcels within the District has such a current liability with respect to any such parcel; nor is the City aware of any owner (or operator) who has such a liability. However, it is possible that such liabilities do currently exist and that the City is not aware of them.

Payment of the Special Tax is not a Personal Obligation of the Property Owners An owner of a Taxable Parcel is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation which is secured only by a lien against the Taxable Land. If the value of a Taxable Parcel is not sufficient, taking into account other liens imposed by public agencies, to secure fully the Special Tax, the City has no recourse against the property owner.

Property Values
The value of the property within th e District is a critical factor in determining the investment quality of the Bonds. If a property owner is delinquent in the payment of the Special Tax, the City’s only remedy is to commence foreclosure pr oceedings against the delinquent parcel in an atte mpt to obtain funds to pay the Special Tax. Reductions in property values due to a downturn in the economy, physical events such as earthquakes, fires or floods, stricter land use regulations , delays in development or other events will adversely impact the security underlying the Special Tax. See “THE DISTRICT — Value-to-Lien Ratios.” The Appraisal Report does not reflect any possible negative impact which could occur by reason of future slow or no growth voter initiatives, an economic downturn, any potential limitations on development occurring due to time delays, an inability of any landowner to obtain any needed development approval or permit, the presence of hazardous substances or other adverse soil conditions within the District, the listing of endangered species or the determination that habitat fo r endangered or threatened species exists within the District, or other similar situations.

Prospective purchasers of the Bonds should not a ssume that the land and improvements within the District could be sold for the amount stated in the A ppraisal Report at a foreclosure sale as a result of delinquencies in the Special Tax. In arriving at the estimate of market value by ownership, the Appraiser assumes that any sale will be sold in a competitive market after a reasonable exposure time; the Appraiser also assumes that neither the buyer or seller is under duress, which is not always true in a foreclosure sale. See APPENDIX B — “APPRAISAL REPORT” for a description of other assumptions made by the Appraiser and for the definitions and limiting conditions used by the Appraiser. Any event which causes one of the Appraiser’s assumptions to be untrue could result in a reduction of the value of the land within the District below what was estimated by the Appraiser.

The assessed values set forth in th is Official Statement do not represent market values arrived at through an appraisal process and generally reflect only the sales price of a parcel when acquired by its current owner, adjusted annually by an amount determined by the County Assessor, generally not to exceed an

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increase of more than 2% per fiscal year. No assurance can be given that a parcel could actually be sold for its assessed value.

No assurance can be given that any bid will be received for a parcel with delinquencies in the Special Tax offered for sale at foreclosure or, if a bid is received, that such bid will be sufficient to pay all delinquencies in the Special Tax. See APPENDI X F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE — Covenants of the City — Foreclosure of Special Tax Liens.” Parity Taxes and Special Assessments
Property within the District is subject to taxes and assessments imposed by other public agencies also having jurisdiction over the land within the Distri ct. See “THE DISTRICT — Direct and Overlapping Indebtedness.”
The Special Tax and any penalties thereon will constitute a lien against the lots and parcels of land on which they will be annually imposed until they are paid. Such lien is on a parity with all special taxes and special assessments levied by other agencies and is co-equal to and independent of the lien for general property taxes regardless of when they are imposed upon the same property. The Special Tax has priority over all existing and future private liens imposed on the property except, possibly, for liens or security interests held by the Federal Deposit Insurance Corporation. See “— Bankruptcy and Foreclosure.” The City has no control over the ability of other entities and districts to issue indebtedness secured by special taxes, ad valorem taxes or assessments payable from all or a portion of the property within the District. In additi on, the landowners within the District may, without the consent or knowledge of the City, petition other public agenci es to issue public indebtedness secured by special taxes and ad valorem taxes or assessments. Any such special taxes or assessments may have a lien on such property on a parity with the Special Tax a nd could reduce the estimate d value-to-lien ratios for the property within the District described herein. See “SOURCES OF PAYMENT FOR THE BONDS” and “THE DISTRICT — Direct a nd Overlapping Indebtedness” and “—Value to Lien Ratios.” Disclosures to Future Purchasers
The willingness or ability of an owner of a Taxabl e Parcel to pay the Special Tax may be affected by whether the owner (1) was given due notice of the Special Tax authorization when the owner purchased the Parcel; (2) was informed of the amount of the Special Tax on the Parcel should the Special Tax be levied at the maximum tax rate, and the risk of such a levy; and (3) has the ability at the time of such a levy to pay it as well as pay other expenses and obligations. The City has caused a notice of the Special Tax to be recorded in the Office of the Clerk/Recorder for the Co unty against each Parcel. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of a property within the District or lending of money thereon.

The Act requires the subdivider (or its agent or representative) of a subdivision to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a special tax under the Act of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civil Code Section 1102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with the above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due.

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Special Tax Collections
Under provisions of the Act, the Special Tax, from which funds necessary for the payment of principal of, and interest on, the Bonds are derived, will be billed to the properties within the District on the regular ad valorem property tax bills sent to owners of such properties by the County Tax Collector. The Act currently provides that such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do ad valorem property tax installments.

See APPENDIX F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE — Covenants of the City — Foreclosure of Special Tax Lien s” for a discussion of the provisions which apply, and procedures which the City is obligated to follow under the Indenture, in the event of delinquencies in the payment of the Special Tax. See “— Bankruptcy and For eclosure” for a discussion of the policy of the Federal Deposit Insurance Corporation regarding the payment of special taxes and assessment and limitations on the City’s ability to foreclosure on the lien of the Special Tax in certain circumstances.

FDIC/Federal Government Interests in Properties
General. The ability of the City to foreclose the lien of delinquent unpaid Special Tax installments may be limited with regard to properties in which the Federal Deposit Insurance Corporation (the “FDIC”), the Drug Enforcement Agency, the Internal Revenue Service, or other federal agency has or obtains an interest.

The supremacy clause of the United States Constitution reads as follows: “This Constitution, and the Laws of the United States which shall be made in Purs uance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding.”
This means that, unless Congress has otherwise provided, if a federal governmental entity owns a parcel that is subject to the Special Tax within the District but does not pay taxes and assessments levied on the parcel (including the Special Tax), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.

Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the City wishes to foreclose on the pa rcel as a result of delinquencies in the payment of the Special Tax, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Tax and preserve the federal government’s mortgage interest. In Rust v. Johnson (9th Circuit; 1979) 597 F.2d 174, the United States Court of Appeal, Ninth Circuit held that the Federal National Mortgage Association (“FNMA”) is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States.

The City has not undertaken to determine whether any federal governmental entity currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the parcels subject to the Special Tax within the District, and therefore expresses no view co ncerning the likelihood that the risks described above will materialize while the Bonds are outstanding.

FDIC. If any financial institution making any loan which is secured by real property within the District is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, resulting in ownership of the property by the FDIC, then the ability of the City to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid amounts of the Special Tax may be limited. The FDIC’s policy statement regarding the payment of state and local real prop erty taxes (the “Policy Statement”) provides that property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property’s value, and that the FDIC is immune from real property taxes assessed

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on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the or derly administration of the institution’s affairs, unless abandonment of the FDIC’s interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC-owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC’s consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC’s consent.

The Policy Statement states that the FDIC generally will not pay non- ad valorem taxes, including special assessments, on property in which it has a fee intere st unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. The special taxes imposed under the Act and a special tax formula which determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC’s federal immunity. The Ninth Circuit has issued a ruling on August 28, 2001 in which it determin ed that the FDIC, as a federal agency, is exempt from special taxes under the Act.

The City is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency in the payment of the Special Tax on a parcel within the District in which the FDIC has or obtains an interest, although prohibiting the lien of the Special Tax to be foreclosed out at a judicial foreclosure sale could reduce or elim inate the number of persons willing to purchase a parcel at a foreclosure sale. Such an outcome could cause a draw on the Bond Reserve Fund and perhaps, ultimately, if enough property were to become owned by the FDIC, a default in payment on the Bonds.

Bankruptcy and Foreclosure
Bankruptcy, insolvency and other laws generally affecting creditors’ rights could adversely impact the interests of owners of the Bonds. The payment of property owners’ taxes and the ability of the City to foreclose the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursue judicial foreclosure proceedings may be limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights or by the laws of the State relating to judicial for eclosure. See “SOURCES OF PAYMENT FOR THE BONDS— Special Tax— Foreclosure Covenant.” In addition, the prosecution of a foreclosure could be delayed due to many reasons, including crowded local court calendars or lengthy procedural delays.

Although a bankruptcy proceeding would not cause the Special Tax to become extinguished, the amount of any Special Tax lien could be modified if the value of the property falls below the value of the lien.

If the value of the property is less than the lien, such excess amount could be treated as an unsecured claim by the bankruptcy court. In addition, bankruptcy of a property owner could result in a delay in prosecuting Superior Court foreclosure proceedings. Such delay would increase the likelihood of a delay or default in payment of delinquent Special Tax installments and the possibility of delinquent Special Tax installments not being paid in full.

On July 30, 1992, the United States Court of Appeals for the Ninth Circuit issued its opinion in a bankruptcy case entitled In re Glasply Marine Industries. In that case, the court held that ad valorem property taxes levied by Snohomish County in the State of Washington after the date that the property owner filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on the property.

Although the court upheld the priority of unpaid taxes imposed before the bankruptcy petition, unpaid taxes imposed after the filing of the bankruptcy petition were declared to be “administrative expenses” of the

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bankruptcy estate, payable after all secured creditors. As a result, the secured creditor was able to foreclose on the property and retain all the proceeds of the sale except the amount of the pre-petition taxes.

The Bankruptcy Reform Act of 1994 (the “Bankruptcy Reform Act”) included a provision which excepts from the Bankruptcy Code’s automatic stay provisions, “the creation of a statutory lien for an ad valorem property tax imposed by . . . a political subdivision of a state if such tax comes due after the filing of the petition [by a debtor in bankruptcy cour t].” This amendment effectively makes the Glasply holding inoperative as it relates to ad valorem real property taxes. However, it is possible that the original rationale of the Glasply ruling could still result in the treatment of post-petition special taxes as “administrative expenses,” rather than as tax liens secured by real property, at least during the pendency of bankruptcy proceedings.

According to the court’s ruling, as administrative expenses, post-petition taxes would be paid, assuming that the debtor had sufficient assets to do so. In certain circumstances, payment of such administrative expenses may be allowed to be deferred. Once the property is transferred out of the bankruptcy estate (through foreclosure or otherwise), it would at that time become subject to current ad valorem taxes.

The Act provides that the Special Tax is secured by a continuing lien which is subject to the same lien priority in the case of delinquency as ad valorem taxes. No case law exists with respect to how a bankruptcy court would treat the lien for the Special Tax levied after the filing of a petition in bankruptcy court. Glasply is controlling precedent on bankruptcy courts in the State. If the Glasply precedent was applied to the levy of the Special Tax, the amount of the Special Tax received from parcels whose owners declare bankruptcy could be reduced.

The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel’s approving legal opinion) will be qualif ied, as to the enforceability of the various legal instruments, by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally.

No Acceleration Provision
The Bonds do not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Indenture or in the event interest on the Bonds becomes included in gross income for federal income tax purposes. Pursuant to the Indenture, the Trustee is given the right for the equal benefit and protection of all Holders of the Bonds similarly situated to pursue certain remedies described in APPENDIX F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE — Events of Default and Remedies.”
Loss of Tax Exemption
As discussed under the caption “TAX MATTERS,” interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the Bonds were issued as a result of future acts or omissions of the City in violation of its covenants in the Indenture with respect to compliance with certain provisions of the Internal Revenue Code of 1986. Should such an event of taxability occur, the Bonds are not subject to early redemption and will remain outstanding until maturity or until redeemed under the redemption provisions contained in the Indenture.

Limited Secondary Market
There can be no guarantee that there will be a s econdary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any pa rticular price. Although the City has committed to provide certain statutorily required financial and operating information, there can be no assurance that such information will be available to Holders on a timely basis. See “CONTINUING DISCLOSURE.” Any failure to provide annual financial information, if required, does not give rise to monetary damages but merely an

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action for specific performan ce. Occasionally, because of general market conditions, lack of current information, the absence of a credit rating for the Bond s or because of adverse history or economic prospects connected with a particular issue, secondary marketin g practices in connection w ith a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price.

Proposition 218
An initiative measure commonly referred to as the “Right to Vote on Taxes Act” (the “Initiative”) was approved by the voters of the State at the November 5, 1996 general election. The Initiative added Article XIIIC and Article XIIID to th e California Constitution. Accordin g to the “Title and Summary” of the Initiative prepared by the California Attorney General, the Initiative limits “the authority of local governments to impose taxes and property-related assessments, fees and charges.” The provisions of the Initiative as they may relate to community facilities districts are subject to interpretation by the courts. The Initiative could potentially impact the Special Tax available to the City to pay the principal of and interest on the Bonds as described below.

Among other things, Sect ion 3 of Article XIIIC states that “. . . the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.” The Act provides for a procedure which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, a bill was signed into law by the Governor of the State enacting Government Code Section 5854, which states that:
“Section 3 of Article XIIIC of the Calif ornia Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initi ative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution.” Accordingly, although the matter is not free from doubt, it is likely that the Initiative has not conferred on the voters the power to repeal or reduce the Special Tax if such reduction would interfere with the timely retirement of the Bonds.

It may be possible, however, for voters or the Ci ty Council to reduce the Special Tax in a manner which does not interfere with the timely repayment of the Bonds, but which does reduce the maximum amount of the Special Tax that may be levied in any year below the existing levels. Furthermore, no assurance can be given with respect to the future levy of the Special Ta x in amounts greater than th e amount necessary for the timely retirement of the Bonds. Therefore, no assurance can be given with respect to the levy of the Special Tax for Expenses.

The interpretation and app lication of Article XIII C and Article XIII D will u ltimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determinat ion or the timeliness of any remedy afforded by the courts. See “SPECIAL RISK FACTORS — Limitations on Remedies.” Litigation with Respect to Community Facilities Districts Shapiro. The California Court of Appeal, Fourth Appellate District, Division One, issued its opinion in City of San Diego v. Melvin Shapiro (2014) 228 Cal.App.4th 756 (the “San Diego Decision”). The case

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involved a Convention Center Facilities District (the “CCFD”) established by the City of San Diego (“San Diego”). The CCFD is a financing district much like a community facilities dist rict established under the provisions of the Act. The CCFD is comprised of all of the real property in San Diego. However, the special tax to be levied within the CCFD was to be levied only on hotel properties located within the CCFD.

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

Horizon. The Sacramento County Superior Co urt had issued a tentative ruling in Horizon Capital Investments, LLC v. City of Sacramento et al . (Case No. 34-2017-80002661). That ruling subsequently became the court’s final order. As described below, this case involved an election to approve the levy of a special tax within a community facilities district (“CFD”) formed under the Act.

In 2017, the City initiated proceedings to form a CFD to finance certain costs to operate and maintain a streetcar line. As permitted by the Act, the propos ed district included non-contiguous parcels of non- residential property. Because there were fewer than 12 registered voters residing within the territory of the proposed CFD, the City Council submitted the special ta x proposed to be levied within the proposed CFD to the owners of land within the proposed CFD, as requir ed by the Act. The proposed special tax received the requisite two-thirds vote in the landowner election.

Petitioners Horizon Capital Investments, LLC et al. filed a writ of mandate and complaint for reverse validation and declaratory relief. Petitioners argued, and the superior court agreed in its final ruling, that under section 4(a) of Article X IIIA of the California Consti tution (which provides that “Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district [sic], may impose special taxes on such district…”) the phrase “qualified electors” means the regi stered voters of the entire City and not just the owners of the property within the boundaries of the proposed CFD. Citing the San Diego Decision, the ruling states that the phrase “qualified electors of the district” refers to the registered voters of the entity imposing the special tax, which in this case was the City. Because the vote within the proposed CFD was by landowners only and not by all registered voters in the City, the final ruling states that the special tax is invalid.

The superior court’s final ruling is not binding upon other courts within the State and does not directly apply to the District, the Special Tax, or the Bonds. Although the City disagrees with the final ruling on a number of grounds, the City decided not to appeal.

The Special Tax Election in the District . With respect to the San Dieg o Decision, the facts of such case show that there were thousands of registered voters within the CCFD ( viz., all of the registered voters in San Diego). The elections held in the District had less th an 12 registered voters at the time of the election to authorize the Special Tax. In the San Diego Decision, the court expressly stated that it was not addressing the validity of landowner voting to impose special taxes pursuant to the Act in situations where there are fewer than 12 registered voters. Thus, by its terms, the court’s holding in the San Diego Decision does not apply to the Special Tax election in the District. Moreover, Section 53341 of the Act provides that any “action or proceeding to attack, review, set aside, void or annul the levy of a special tax…shall be commenced within 30 days after the special tax is approved by the voters.” Similarly, Section 53359 of the Act provides that any action to determine the validity of bonds issued pursuant to the Act be brought within 30 days of the voters approving the issuance of such bonds. The petitioners in Horizon filed the writ of mandate within 30 days of the landowner election. Landowners in the District approved the Special Tax and the issuance of bonds on

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August 15, 2018. Based on Sections 53341 and 53359 of the Act and analysis of existing laws, regulations, rulings, and court decisions, the City believes that no successful challenge to the Special Tax being levied in accordance with the Rate and Method may now be brought . In connection with the issuance of the Bonds, Bond Counsel expects to deliver its opinion in the proposed form attached hereto as APPENDIX D.

Ballot Initiatives
Articles XIII A, XIII B, XIII C and XIII D were adopte d pursuant to measures qu alified for the ballot pursuant to California’s constitutional initiative process and the State Legislature has in the past enacted legislation which has altered the spending limitations or established minimum funding provisions for particular activities. On March 6, 1995, in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiatives. From time to time, other initiative measures could be adopted by California voters or legislation enacted by the legislature. The adoption of any such initiative or legislation might place limitations on the ability of the State, the City, or local districts to increase revenues or to increase appropriations or on the ability of the current or future owner of property in the District to complete the remaining proposed development within the District.

Limitations on Remedies
Remedies available to the owners of the Bonds may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of interest on the Bonds.

Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or other simila r laws affecting generally the enforcement of creditor’s rights, by equitable principles and by the exercise of judicial di scretion and by limitations on remedies against public agencies in the State of California. The Bonds are not subject to acceleration. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the owners.

Potential Early Redemption of Bonds from Prepayments or Bond Proceeds Property owners within the District, including the Developer and any future property owner, are permitted to prepay their Special Ta x obligation at any time. Such prepayments could also be made from the proceeds of bonds issued by or on behalf of an over lapping community facilities di strict. Such prepayments will result in a redemption of the Bonds on the Interest Payment Date for which timely notice may be given under the Indenture following the receipt of the prepayment. The resulting redemption of Bonds that were purchased at a price greater than par could reduce the otherwise expected yield on such Bonds. See the caption “THE BONDS—Redemption— Extraordinary Redemption from Special Tax Prepayments.” Cybersecurity
The City relies on computers and technology to conduct its operations. The City and its departments face cyber threats from time to time, including but not lim ited to hacking, viruses, malware, and other attacks on computers and other sensitive digital networks and systems. In late-2019, the City experienced a cyber event relating to a fraudulently misdirected payment of a substantial amount. The City has recovered almost all of the payment, and has instituted procedures intended to prevent a reoccurrence.

No assurances can be given that the City’s security and operational control measures will guard against all cyber threats and attacks. The results of any attack on the City’s computer and information- technology systems could adversely affect the City’s operations and damage its digital networks and systems,

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and potential losses from such attacks, as well as the costs of defending against future attacks, could be substantial. The City is also reliant on other entities and service providers in connection with the administration of the Bonds, including without limitation the County tax collector for the levy and collection of Special Tax and the Trustee. No assurance can be gi ven that the City and these other entities will not be affected by cyber threats and attacks in a manner that may affect the Bond owners.

CONTINUING DISCLOSURE
City Continuing Disclosure
The City will execute a continuing disclosure certificate (the “Continuing Disclosure Certificate”) for the benefit of the Holders and Beneficial Owners of th e Bonds to provide certain financial information and operating data relating to the District and to provide notices of the occurrence of certain enumerated events (the “Listed Events”). The City, as the initial dissemination agent under the Continuing Disclosure Certificate, will file the City Reports and notices of Listed Events with EMMA. The specific nature of the information to be included in the City Reports and the notices of Listed Events is set forth in APPENDIX G — “FORM OF CONTINUING DISCLOSURE CERTIFICATE OF THE CITY .” The City will sign and deliver to the Underwriter the Continuing Disclosure Certificate to assist the Underwriter in complying with the Rule. The City will file the City Reports with EMMA no later than nine months after the end of the City’s fiscal year, which is currently June 30. The first Annual Report will be due March 31, 2023.

The City has previously entered into a number of continuing disclosure undertakings under the Rule in connection with the issuance of long-term obligations and has provided annual financial information and event notices in accordance with those undertakings. Certain continuing disclosure filings during the past five years were made after the required filing date, such as the City ’s annual reports for one of the past five fiscal years with respect to a certain prior issue, and certain requ ired information supplementing the City’s annual reports for certain prior issues (including the actuarial valuation reports for the Sacramento City Employees’ Retirement System and the City’s Public Employees’ Retirement System plans for two prior issues). The City did not file notices of late filings in the past five years. On two occasions, the City filed annual reports with tables determined later not to be entirely accurate. The City subsequently filed corrected tables.

The City believes it has established processes to ensure that in the future it will make its continuing disclosure filings as required.

The City is required to file certain financial statements with the City Reports. This requirement has been included in the Continuing Disclosure Certificate solely to satisfy the requirements of the Rule. The inclusion of this information does not mean that the Bonds are secured by any resources or property of the City other than as described in this Official Statem ent. See “SOURCES OF PAYMENT FOR THE BONDS” and “SPECIAL RISK FACTORS.” The list of significant events the City has agreed to report includes items that have absolutely no application whatsoever to the Bonds. These items have been included in the list solely to satisfy the requirements of the Rule. Thus, any implica tion from the inclusion of these items in the list to the contrary notwithstanding, there are no credit enhancements applicable to the Bonds and there are no credit or liquidity providers with respect to the Bonds.

Developer Continuing Disclosure
To provide updated information with respect to the development within the District, the Developer will execute a Developer Continuing Disclosure Certificate (the “Developer Continuing Disclosure Certificate, and will covenant to provide the Developer Reports annually not later than March 1 of each year beginning March 1, 2023, until satisfaction of certain condition s set forth in the Developer Continuing Disclosure Certificate. The Developer Reports provided by the Developer will contain updates regarding the development within the District as outlined in Section 4 of the Developer Continuing Disclosure Certificate attached as

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APPENDIX H. In addition to its Developer Reports, the Developer will agree to provide notices of certain events set forth in the Developer Continuing Disclosure Certificate.

TAX MATTERS
In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the City (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Code and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the Bonds is not a specific preference item for purposes of the federal individual alternative minimum tax. Bond Counsel observes that, for tax years beginning after December 31, 2022, interest on the Bonds included in adjusted financial statement income of certain corpor ations is not excluded from the federal corporate alternative minimum tax. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or th e amount, accrual, or receipt of intere st on, the Bonds. A complete copy of the proposed form of opinion of Bond Counsel is set forth in APPENDIX D hereto.

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

Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at th eir earlier call date) (“Premium Bonds”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.

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

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

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Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters.

Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of amounts tr eated as interest on, the Bonds may otherwise affect a Beneficial Owner’s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences.

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

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

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

Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obli gated to defend the City or the Beneficial Owners regarding the tax-exempt status of the Bonds in the event of an audit examination by the IRS. Under current procedures, Beneficial Owners would have little, if any, right to participate in the audit examination process.

Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the City legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Bonds, and may cause the City or the Beneficial Owners to incur significant expense.

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

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LEGAL MATTERS
The validity of the Bonds and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the City. A complete copy of the proposed form of Bond Counsel opinion is attached hereto as APPENDIX D. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain legal matters will be passed upon for the City by the Office of the City Attorney.

Stradling Yocca Carlson & Rauth, a Professional Corporation, is serving as Disclosure Counsel to the City.

ABSENCE OF LITIGATION
In connection with the issuance of the Bonds, the Office of the City Attorney will deliver an opinion to the effect that, to its actual knowledge as of the date of delivery of the Bonds, the City has not been served with process in, and has not been overtly threatened with, any action, suit, proceeding, inquiry or investigation before or by any court, public board or body (a) that co ntests in any way the completeness or accuracy of this Official Statement; (b) that seeks to contest the validity of the Special Tax or to restrain or enjoin the collection of the Special Tax; (c) in which an unfavorable decision, ruling or finding is likely to have a material adverse effect on the City’s ability to complete the transactions contemplated by the Bonds, the Indenture or this Official Statement; or (d) in which an unfavorable decision, ruling or finding is likely to have a material adverse effect on the validity or enforceability of the Bonds or the Indenture.

MUNICIPAL ADVISOR
The City has retained Fieldman, Rolapp & Associat es, Inc. (the “Municipal Advisor”), as municipal advisor in connection with the issuance and sale of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information cont ained in this Official Statement or any of the other legal documents, and further the Municipal Advisor does not assume any responsibility for the information, covenants and representations with respect to the federal income tax status of the Bonds, or the possible impact of any current, pending or future actions taken by any legislative or judicial bodies or rating agencies.

NO RATING
The City has not made and does not contemplate ma king application to any rating agency for the assignment of a rating to the Bonds.

UNDERWRITING
The Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated. The Underwriter has agreed to purchase the Bonds at a price of $________, being $_________ aggregate principal amount thereof, plus net original issue premium of $__________ and less Underwriter’s discount of $__________. The purchase contract relating to the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased. The obligation to make such purchase is subject to certain terms and conditions set forth in the purchase contract, the approval of certain legal matters by counsel and certain other conditions.

The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page of this Official Statement. The offering prices may be changed from time to time by the Underwriter.

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FINANCIAL INTERESTS
The fees being paid to the Underwriter, Bond Counsel, the Municipal Advisor, the Trustee and Underwriter’s Counsel are contingent upon the issuance and delivery of the Bonds. A portion of the fees being paid to Disclosure Counsel is contingent upon the issuance and delivery of the Bonds. The fees being paid to the Appraiser and to the Special Tax Consultant are not contingent upon the issuance and delivery of the Bonds. From time to time, Bond Counsel and Disclo sure Counsel represent th e Underwriter on matters unrelated to the Bonds.

PENDING LEGISLATION
The City is not aware of any significant pending legislation which would have material adverse consequences on the Bonds or the ability of the City to pay the principal of and interest on the Bonds when due.

ADDITIONAL INFORMATION
So far as any statements made in this Official Statement involve matters of opinion, assumptions, projections, anticipated events or estimates, whether or not expressly stated, they are set forth as such and not as presentations of fact, and actual results may differ substantially from those set forth therein. Neither this Official Statement nor any statement that may have been made orally or in writing is to be construed as a contract with the Holders of the Bonds.

The summaries of certain provisions of the Bond s, statutes and other documents or agreements referred to in this Official Statement do not purport to be complete, and reference is made to each of them for a complete statement of their provisions. Copies are available for review by making requests to the City.

The appendices are an integral part of this Official Statement and must be read together with all other parts of this Official Statement.

The distribution of this Official Statement has been authorized by the City.

CITY OF SACRAMENTO
By:

City Treasurer

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APPENDIX A

RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
The following sets forth the Rate and Method of Apportionment for the levy and collection of the Special Tax of Railyards Community Facilities District No. 2018-01, City of Sacramento, County of Sacramento (the “District”). An Annual Special Tax shall be levied on and collected in the District each Fiscal Year, in an amount determined through the application of the Amended and Restated Rate and Method of Apportionment described below. All of the real prope rty in the District, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent, and in the manner herein provided.

1. Basis of Special Tax Levy
A Special Tax authorized under the Mello-Roos Community Facilities Act of 1982 applicable to the land in the City of Sacramento Railyards Community Facilities Di strict No. 2018-01 (Improvements) of the City of Sacramento shall be levied and coll ected according to the tax liability determined by the City through the application of the appropriate amount or rate, as described below.

2. Definitions
“Acre” or “Acreage” means the land area of an Assessor’s Parcel as shown on an Assessor’s Parcel Map or, if the land area is not shown on an Assessor’s Parcel Ma p, the land area shown on the applicable records of the City or the County.
“Act” means the Mello-Roos Community Facilities Act of 1982, as amended, Sections 53311 and following of the California Government Code.
“Administrative Expenses” mean the actual or reasonably estimated costs related to the administration of the CFD, including, but not limited to, the following items:
a. Costs of computing Special Taxes and preparing annual Special Tax collection schedules (whether by the City or any City designee).
b. Costs of collecting, auditing, and accounting for the Special Taxes (whether by the County, the City, or otherwise), including costs related to collection of delinquent Special Taxes and foreclosure proceedings.
c. Costs of remitting the Special Taxes to the Trustee. d. Costs of any Trustee (including its legal counsel) in the discharge of the duties required of it under any indenture for any Bonds.
e. Costs to the City or to any City designee of complying with arbitrage rebate requirements. f. Costs to the City or to any City designee of complying with ongoing continuing-disclosure requirements with respect to the Bonds for the City or any obligated persons. g. Costs associated with preparing di sclosure statements for any Bonds. h. Costs incurred in responding to public inquiries regarding the Special Tax. i. Costs to the City or to any City designee related to any appeal of the Special Tax.

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j. Costs associated with the release of funds from an escrow account, if any. k. Costs to the City for the issuance and sale of Bonds authorized by the CFD that are not recovered through the proceeds of the Bond sale. Such costs may include some of the cost of services provided by City staff.
l. Costs to the City for any other administrative pur poses, including attorney’s fees for legal advice and attorney’s fees and other cost s related to collection of the Special Taxes and commencing and pursuing to completion any foreclosure of delinquent Special Taxes. Such costs include the cost of services provided by City staff.
“Administrator” means the official of the City, or designee th ereof, responsible for determining the Annual Costs and providing for the levy and collection of the Special Tax. “Annual Costs” mean, for any Fiscal Year, the total of the following after excluding any capitalized interest available to pay Debt Service that is due in the subs equent calendar year (i.e., January 1 to December 31) following the beginning of a Fiscal Year (i.e., July 1) ; any available earnings on, or surplus balances in, the reserve fund for Bonds or the Special Tax fund for the CFD; and any other available revenues of the City that relate to the CFD and may be lawfully used to pay Annual Costs for such Fiscal Year:
a. Debt Service that is due in the subsequent calenda r year (i.e., January 1 to December 31) following the beginning of a Fiscal Year (i.e., July 1).
b. The amount needed to replenish the reserve fund for Bonds to the level required under any indenture for any Bonds, to the extent not included in a computation of Annual Costs in a previous Fiscal Year. c. Administrative Expenses for the Fiscal Year.
d. To the extent permitted by the Act, the amount needed to fund (1) unpaid Special Tax delinquencies from previous Fiscal Years, to the extent not previously levied, and (2) anticipated delinquencies for the current Fiscal Year on any Parcel which has no outstanding delinquent Special Taxes. Collections from prior delinquencies should be used to offset the amount needed for current and future delinquencies if available.
e. Authorized Facilities funded on a Pay-As-You-Go Basis. “Anticipated Constr uction Proceeds ” mean the amount anticipated to be available through the CFD for acquiring or constructing Authorized Facilities, which is equal to $30 million at formation of the CFD. This amount is increased on July 1 of the current Fiscal Year by the increase in the ENR- CCI. In the event there is a decrease or no change in the ENR- CCI between Fiscal Years, there sh all be no change in the updated Anticipated Construction Proceeds. As determined by th e City, once all Authorized Facilities costs, including Authorized Facilities costs funded on a Pay-As-You-Go Basis, have been funded, the City may stop escalating the Anticipated Construction Proceeds.
“Assessor’s Parcel” or “Parcel” means a lot or Parcel with an assi gned Assessor’s Parcel Number and which is shown on an Assessor’s Parcel Map.
“Assessor’s Parcel Map” means an official map of the County Assessor designating Parcels by Assessor’s Parcel Number.
“Assessor’s Parcel Number” means the number assigned to a Parcel by the County Assessor on the equalized tax roll.

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“Authorized Facilities” mean those facilities to be financed, as identified in the resolution forming the CFD. “Base Year” means the Fiscal Year beginning July 1, 2018, and ending June 30, 2019. “Benefit Share” means, for any Fiscal Year, the Maximum An nual Special Tax for a Parcel divided by the Maximum Annual CFD Special Tax Revenue.
“Bond Share” means the share of Outstanding Bonds assigned to a Parcel as the term is used in Section 6 hereof.
“Bond(s)” mean(s) any bond(s) issued by the City for the CFD under the Act and any other debt, as defined in the Act, used to acquire or construct Authorized Facilities. “Building Permit ” means a permit issued by the City or other permitting agency, such as the State of California, for the construction of a structure on a Taxable Parcel. “CFD” means the City of Sacramento Railyards Community Facilities District No. 2018-01 (Improvements) of the City of Sacramento, Sacramento County, California. “City” means the City of Sacramento in Sacramento County, California. “Condominium Plan” means the plan created for each Condominium Structure that is defined in Civil Code Section 4120 and described in Civil Code Section 4285.
“Condominium Structure ” means a residential, commercial, or mixed-use structure consisting of two or more units that share common walls and are capable of being offered as for-sale residential condominium units or for-sale nonresidential condominium units, with each such unit having its own separate Assessor’s Parcel Number. Condominium Structures incl ude such structures that met the statutory definition of a condominium contained in Civil Code Section 4125.
“Condominium Unit” means an airspace residential unit or nonr esidential unit in a Condominium Structure which has been assigned its own separate Assessor’s Parcel Number. “Condominium Unit Building Area ” means the square footage of a Co ndominium Unit as shown on the Condominium Plan.
“Council” means the City Council of the City acting for the CFD under the Act. “County” means the County of Sacramento, California.
“County Auditor-Controller” means the Auditor-Controller of the County. “Debt Service” means, for any period, the total amount of principal of, interest on, scheduled sinking fund payments for, and other regularly scheduled payments on the Outstanding Bonds for the period. “Developed Parcel” means, in any Fiscal Year, a Parcel for wh ich a Building Permit for residential use or nonresidential use has been issued before June 1 of the pr eceding Fiscal Year. Once a Parcel is classified as a Developed Parcel, it shall remain a Developed Parcel.
“ENR-CCI” means the year-over-year change in the Engineering News Record—Construction Cost Index for San Francisco (March to March).
“Fiscal Year” means the period starting July 1 and ending the following June 30.

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“Full Prepayment ” means the complete fulfillment of a Parcel’s Special Tax obligation, as determined by following the procedures in Section 6.
“Lot Number ” means a numbered lot identified on Map 2, which illustrates the anticipated Parcels to be created upon further subdivision of Original Parcels.
“Maximum Annual Special Tax ” means the greatest amount of Special Tax that can be levied against a Parcel in a given Fiscal Year, as shown in Attachments 1 and 2. “Maximum Annual Special Tax Rate” means the rate of Maximum Annual Special Tax charged per Acre, as shown in Attachments 1 and 2.
“Maximum Annual Special Tax Revenue ” means the greatest amount of re venue that can be collected in total from a group of Parcels (such as Developed Parcels) by levying the Maximum Annual Special Tax. “Maximum Annual CFD Special Tax Revenue” means the sum of the Maximum Annual Special Tax levied on all Taxable Parcels in the CFD in a Fiscal Year.
“Original Parcel” means a Parcel identified in Attachment 1 at formation of the CFD and shown on Map 1. “Outstanding Bonds” mean the total principal amount of Bonds that have been issued and not fully repaid, optionally redeemed, or legally defeased.
“Partial Prepayment” means the partial fulfillment of a Parcel’s Special Tax obligation, as determined by following the procedures in Section 6.
“Pay-As-You-Go Basis” means the use of Special Tax revenues to di rectly fund the acquisition, construction, and improvement of Authorized Facilities as part of an acquisition agreement with the City. “Prepayment” means the complete or partial fulfillment of a Parcel’s Special Tax obligation, as determined by following the procedures in Section 6.
“Proportionately” means that the ratio of the actual Special Ta x levy to the Maximum Annual Special Tax is equal for all Developed Parcels. For Undeveloped Parcels, “Proportionately” means that the ratio of the actual Special Tax levy to the Maximum Annual Special Tax is equal for all Undeveloped Parcels. “Public Agency” means the City, State of California, the County, the federal government, other governmental agencies, the Sacramento City Unified School District, or other special district. “Public Parcel” means any Parcel, in its entirety, that is or is intended to be publicly owned that is normally exempt from the levy of general ad valorem property taxes under California law, including public streets, schools, parks, public drainageways, public landscaping, wetlands, greenbelts, and public open space. Any such Parcel is a Tax-Exempt Parcel.
“Remaining Facilities Funding Requirement ” means the amount of Anticipated Construction Proceeds less construction proceeds from previous CFD Bond issuances and costs of Authorized Facilities funded on a Pay- As-You-Go Basis from the levy of the Special Tax.
“Remaining Facilities Funding Requirement Share ” means the Remaining Facilities Funding Requirement multiplied by the Benefit Share.
“Reserve Fund” means any Debt Service reserve fund established pursuant to the indenture for the Bonds.

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“Reserve Fund Requirement” means the amount required to be held in any Reserve Fund in accordance with the indenture for the Bonds.
“Reserve Fund Share” means the amount on deposit in any Reserv e Fund, but in any event not to exceed the Reserve Fund Requirement, multiplied by the Benefit Share for a given Parcel. “RMA” means this Rate, Method of Apportionment, and Manner of Collection of Special Tax. “Special Tax(es)” mean(s) any tax levy under the Act in the CFD. “Subdivision” or “Subdivided” means a division of a Parcel into two or more Parcels through the Subdivision Map Act process. A Subdivision may also include the merging of two or more Parcels to create new Parcels. “Successor Parcel” means a Parcel created by the Subdivision of an Original Parcel or a Successor Parcel. “Tax Collection Schedule ” means the document prepared by the Administrator for the County Auditor- Controller to use in levying and collecting the Special Taxes each Fiscal Year. “Tax Escalation Factor ” means a factor of 2 percent in each Fisc al Year following the Base Year by which the Maximum Annual Special Tax for the previous Fiscal Year will be increased. “Taxable Acreage ” means that area of a Parcel determined by the Administrator anticipated to become a Taxable Parcel or Parcels upon Subdivision.
“Taxable Parcel” means any Parcel that is not a Tax-Exempt Parcel. “Tax-Exempt Parcel” means any Public Parcel and any other Parcel that in its entirety, is or is intended to be, publicly owned that is normally exempt from the levy of general ad valorem property taxes under California law, including public streets, schools, parks, public drainageways, public landscaping, wetlands, greenbelts, common areas, and public open space.
“Total Condominium Unit Building Area ” means the sum of all Condominium Unit Building Areas for all Condominium Units in a Condominium Structure as shown on a Condominium Plan. “Trustee” means a national banking association organized and existing under the laws of the United States. “Undeveloped Parcel” means a Taxable Parcel that is not a Developed Parcel.

3. Duration of the Special Tax
The Special Tax will be levied and collected for as long as it is needed to pay Annual Costs; however, in no event shall the Special Tax be levied on any Parcel in the CFD after Fiscal Year 2063-64.

When the costs of all Authorized Facilities have been funded (as determined by the Administrator) and other Annual Costs incurred by the CFD have been paid, the Special Taxes shall cease to be levied. The City shall direct the County Recorder to record a Notice of Cessa tion of Special Tax. Such notice will state that the obligation to pay the Special Tax has ceased and that th e lien imposed by the Notice of Special Tax Lien is extinguished. In addition, the Notice of Cessation of Special Tax shall identify the book and page of the Book of Maps of Assessment and Community Facilities Distri cts where the map of the boundaries of the CFD is recorded.

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4. Administrative Tasks
Tasks required annually of the Administrator are discussed below:
a. Classification of Parcels. By June 30 of each Fi scal Year, for purposes of the next Fiscal Year tax levy, the Administrator shall use the Parcel records of the Assessor’s Secured Tax Roll as of January 1 of the preceding Fiscal Year, and other City development approval records, and cause:

1. Each Parcel to be classified as a Taxable Parcel or a Tax-Exempt Parcel.

2. Each Taxable Parcel to be classified as a Developed Parcel or an Undeveloped Parcel. b. Annual Special Tax Escalation. The Administrator shall increase the Maximum Annual Special Tax by the Tax Escalation Factor in each Fiscal Year following the Base Year. c. Assignment of the Maximum Annual Special Tax to Original Parcels. All Original Parcels at formation of the CFD are identified by Assessor’s Parcel Number and are shown in Attachment 1 and Map 1. A Maximum Annual Special Tax is assigned to each Original Parcel in Attachment 1 by multiplying the Taxable Acreage for each Lot Number within such Original Parcel anticipated to include Taxable Acreage by the Maximum Annual Sp ecial Tax per Acre. The sum of the Maximum Annual Special Tax calculated for Lot Numbers anticipated to include Taxable Acreage within each Original Parcel equals the Maximum Annual Special Tax for that Original Parcel. Each Original Parcel has one or more Lot Numbers assigned corresponding to the Lot Numbers shown in Map 2 and Attachment 1. As Parcels are Subdivided, Successor Parcel s are anticipated to be created similar to the Lot Numbers shown in Map 2. Using the procedures described below, the Maximum Annual CFD Special Tax Revenue shall not be reduced because of Subdivision.

As noted in Attachment 1, there are several Lot Numbers that are located within two Assessor’s Parcels 002-0010-049-0000 and 002-010-068-000. At CFD formation, the Maximum Annual Special Tax on these two Assessor’s Parcels has been assigned to the Original Parcels as shown on Attachment 1. If these two Assessor’s Parcels Subdivid e as anticipated, the Maximum Annual Special Tax would be assigned to each Successor Pa rcel as indicated by fo r each Lot Number shown on Attachment 1.
d. Assignment of the Maximum Annual Special Tax to Successor Parcels if Original Parcels are Subdivided into Parcels like Lot Numbers displayed on Attachment 1. If Original Parcels are Subdivided and Successor Parcels are created substant ially in the size and configuration as shown in Map 2 and in Attachment 1, assign the Maximum Annual Special Tax to each Successor Parcel as shown in Attachment 1.
e. Assignment of the Maximum Annual Special Tax to Successor Parcels if Original Parcels are Subdivided in a manner different th an anticipated by Lot Numbers in Attachment 1. As Original Parcels and Successor Parcels are Subdivided cr eating new Successor Parcels, the Maximum Annual Special Tax per Successor Parcel will be assigned using the following procedures:

1. The Administrator shall identify the Taxable Acreage for each Successor Parcel created from an Original Parcel.

2. Multiply the Taxable Acreage of each Succes sor Parcel by the Maximum Annual Special Tax Rate per Acre (as escalated by the Tax Escalation Factor).

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3. If the sum of Maximum Annual Special Taxes from all Successor Par cels from an Original Parcel equals or exceeds the Maximum Annual Special Tax for that Original Parcel, assign the Maximum Annual Special Tax for each Successor Parcel as calculated in Section 4.e.2.

4. If the sum of Maximum Annual Special Taxes from all Successor Par cels from an Original Parcel is less than the Maximum Annual Special Tax for that Original Parcel being Subdivided, use the procedures below to assign the Maximum Annual Special Tax to each Successor Parcel.

A. Identify the Maximum Annual Special Tax (as increased by the Tax Escalation Factor) assigned to the Taxable Parcel(s) being Subdivided.

B. Determine the Taxable Acreage assigned to each Successor Parcel.

C. Sum the Taxable Acreage for all Successor Parcels determined in Section 4.e.4.B.

D. Divide the Taxable Acreage for each Successor Parcel determined in Section 4.e.4.B by the sum of the Taxable Acreage for all Su ccessor Parcels of an Original Parcel determined in Section 4.e.4.C.

E. Multiply the result fo r each Successor Parcel from Section 4.e.4.D by the Maximum Annual Special Tax identified in Section 4.e.4.A.

F. Assign the Maximum Annual Special Tax calculated in Section 4.e.E to each Successor Parcel.
f. Assignment of the Maximum Annual Special Tax to Each Condominium Unit Within a Condominium Structure. For Condominium Units, the Maximum Annual Special Tax must be assigned to improvements on the Parcel rather than the la nd. Assign the Maximum Annual Special Tax to Condominium Units using the following procedures:

1. Identify the Maximum Annual Special Tax (as increased by the Tax Escalation Factor) assigned to the Taxable Parcel(s) being subdivided by the Condominium Plan.

2. Determine the Total Condominium Unit Building Area for the applicable Successor Parcel as identified on the Condominium Plan.

3. Determine the Condominium Unit Building Area for each Condominium Unit.

4. Divide the Condominium Unit Building Area determined in Section 4.f.3 by the Total Condominium Unit Building Area determined in Section 4.f.2.

5. Multiply the result for each Condominium Unit from Section 4.f.4 by the Maximum Annual Special Tax identified in Section 4.f.1.

6. Assign the Maximum Annual Special Tax calculated in Section 4.f.5 to each Condominium Unit.

7. Once a Condominium Unit has been assigned th e Maximum Annual Special Tax identified in Section 4.f.6, this amount shall not change for future building permits or for additions or changes to the Condominium Unit.

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g. Conversion of a Tax-Exempt Parcel to a Taxable Parcel. If a Tax-Exempt Parcel is converted to a taxable use or transferred to a private owner as a Taxable Parcel, it shall become subject to the Special Tax. The Maximum Annual Special Tax for such a Parcel shall be determined using the provisions of Section 4.c. through 4.f. Once a Parcel has been identified as a Taxable Parcel, it shall remain a Taxable Parcel, except for Parcels transferred under Section 4.h. h. Taxable Parcels Acquired by a Public Agency. A Taxable Parcel that is acquired by a Public Agency after the CFD is formed will remain subject to the applicable Special Tax unless the Special Tax obligation is satisfied pursuant to Section 53317.5 of the Act. An exception to this may be made if a Public Parcel, such as a school site, is relocated to a Taxable Parcel, in which case the previously Tax- Exempt Parcel of comparable Acreage becomes a Taxable Parcel and the Maximum Annual Special Tax from the previously Taxable Parcel is transferre d to the new Taxable Parcel. This transfer of a Parcel from a Taxable Parcel to a Public Parcel will be permitted to the extent there is no net loss in Maximum CFD Special Tax Revenue and the transfer is agreed to by the owners of the Parcels involved in the transfer and the Administrator.

At CFD formation, the City has identified the possib ility of up to, but not to exceed, 5 acres of land that initially is considered Taxable Acreage that may become Tax-Exempt Parcels. In priority order, 5 acres of Taxable Acreage may be converted to Tax- Exempt parcels for (1) a fire station, (2) a police station, and (3) a public school site without requiring any transfers of Maximum Annual Special Tax or Prepayment of the obligation. Attachment 2 shows the adjusted Maximum Annual CFD Revenue for the Base Year if up to 5 Taxable Acres were to be converted to Tax-Exempt Parcels. In whole or in part, the City, in its sole discretion, can release this reservation to permit up to 5 acres to be converted from Taxable Acreage to Tax Exempt Parcel s. The Administrator shall annually document whether any of this reservation of up to 5 Taxable Acres has been converted to one or more Tax- Exempt Parcels.
i. Transfer of the Maximum Annual Special Tax amongst Taxable Parcels. As Taxable Parcels are Subdivided, the Maximum Annual Special Tax (on a per Taxable Acreage basis) may become greater or less than other similar Parcels. As long as no vertical construction has occurred on Parcels proposed for a transfer of Maximum Annual Special Tax, owners of such Parcels may request that the City allow a transfer of the Maximum Annual Special Tax amongst two or more Taxable Parcels to remedy such differences between Taxable Parcels. All allowed transfers shal l only occur such that there is no reduction in the Maximum Annual Special Tax Revenue of all Taxable Parcels included in such transfers and the Administrator and property owner agree to the transfer(s). j. Release of Special Tax Lien for Lot Number 51b. At CFD formation, the planned Lot Number 51b, with a Maximum Annual Special Tax of $0, was incl uded in a larger Assesso r’s Parcel and therefore could not be excluded from the CFD boundary. If a Parcel is created consistent with the Lot Number 51b identified in Map 2 and Attachment 1, the City shall file a Notice of Release of the Special Tax lien for that Parcel. Once the notice is filed, that Parcel will no longer be subject to a Maximum Annual Special Tax under this RMA.

5. Calculating Annual Special Taxes
Each Fiscal Year, the Administrator will compute the Annual Costs and determine the annual Special Tax levy for each Taxable Parcel based on the assignment of the Special Tax in Section 4. The Administrator then will determine the Special Tax levy for each Taxable Parcel using the following process:
a. Compute the Annual Costs of the CFD.

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b. For all Taxable Parcels, calculate the Special Tax levy for each using the following steps:

Step 5.b.1. The Special Tax shall be levied Prop ortionately on all Parcels of Developed Property up to the amount of the Annual Costs or up to 100 percent of the Maximum Special Tax for each Developed Parcel, whichever is lower.

Step 5.b.2. If additional revenue is needed after Step 5.b.1, the Special Tax shall be levied Proportionately on each Undeveloped Parcel until the revenue from the Special Tax levy in this step, when added to the levy amounts determined in Step 5.b.1, equals the Annual Costs, or up to 100 percent of the Maximum Annual Special Tax for all Undeveloped Parcels.
c. Levy on each Taxable Parcel the amount calculated above. d. Prepare the Tax Collection Schedule and, unless an alternative method of collection has been selected pursuant to Section 8, send it to the County Auditor-Controller requesting that it be placed on the general, secured property tax roll for the Fiscal Year. The Tax Collection Schedule will not be sent later than the date required by the County Auditor-Controller for such inclusion.

The Administrator will make every effort to calculate the Special Tax correctly for each Parcel. It will be the burden of the taxpayer to correct any errors in determining which Parcels are subject to the tax and the Special Tax assignments.

6. Prepayment of the Special Tax Obligation
A property owner may permanently or partially satisfy the Maximum Annual Special Tax for a Taxable Parcel by a Prepayment as permitted under Government Code Section 53344. An owner of an Assessor’s Parcel intending to prepay the Special Tax obligation shall provide the City with written notice of intent to prepay.

Within 45 days of receipt of such written notice and paym ent of any required fee, the City or its designee shall notify such owner of the Prepayment amount for such Parcel. Prepayment must be made no fewer than 75 days before any redemption date for Bonds to be redeemed with the proceeds of such prepaid Special Taxes.

Full Prepayment is permitted only under the following conditions:
 The City determines that the Full Prepayment of the Special Tax does not jeopardize its ability to make timely payments of Debt Service on Outstanding Bonds and maintain a 110-percent Special Tax coverage of Debt Service plus Administrative Expenses in all years where there will be Outstanding Bonds.  The property owner prepaying the Special Tax on a Parcel has paid any delinquent Special Taxes and penalties on that Parcel before Full Prepayment.
 Amounts in the Reserve Fund are equal to or greater than the Reserve Fund Requirement. When permitted, the Administrator shall calculate Full Prepayment using the following steps:
a. The Full Prepayment amount before any issuance of CFD Bonds shall be calculated using the following procedures (see Table 1 for a sample of Full Prepayment):

1. Determine the Maximum Annual Special Tax for the Taxable Parcel for which the Special Tax is to be prepaid using the provisions of Section 4.

2. Divide the amount from Step 6.a.1 by the Maximum CFD Annual Special Tax Revenue to determine the Benefit Share for the Full Prepayment Parcel.

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3. Multiply the Remaining Facilities Funding Requirement by the Benefit Share to determine the Full Prepayment amount.

4. Add to the amount determined in Step 6.a.3 any costs to the City associated with the preparation of the Full Prepayment calculation.
b. The Full Prepayment amount af ter issuance of the initial CFD Bonds shall be calculated using the following procedures (see Table 2 for a sample of Full Prepayment):

1. Determine the Maximum Annual Special Tax for the Taxable Parcel for which the Special Tax is to be prepaid using the provisions of Section 4.

2. Divide the amount from Step 6.b.1 by the Maximum CFD Annual Special Tax Revenue to determine the Benefit Share for the Parcel.

3. Multiply the Benefit Share by the total amount of Outstanding Bonds to determine the Bond Share for the Full Prepayment Parcel.

4. Multiply the Benefit Share by the Remaining Facilities Funding Requirement to determine the Remaining Facilities Funding Requirement Share for the Full Prepayment Parcel.

5. Determine the total amount of Bonds to be called by rounding the amount summed in Step 6.b.3 down to the nearest $5,000.

6. Multiply the amount calculated in Step 6.b.5 by the call premium, if applicable, for the next available call date.

7. Determine the Reserve Fund Share for the Full Prepayment Parcel by multiplying the Reserve Fund Requirement by the Benefit Share.

8. Determine the Full Prepayment amo unt by adding the amounts calculated in Steps 6.b.4,

6.b.5, and 6.b.6 and then subtracting the Rese rve Fund Share calculated in Step 6.b.7, provided the amount in the Reserve Fund equals the Reserve Fund Requirement after reduction. Add to the amount just determined any interest to the next Bond call date not covered by Special Taxes already levied and collected for the prepaying Parcel, plus any expenses incurred by the City in connection with the Full Prepayment calculation or the application of the proceeds of the Full Prepayment to the call of Outstanding Bonds.

9. If the Special Taxes have already been levied, but not collected, the Parcel shall not become a Full Prepayment Parcel until the owner of the Parcel has paid the Special Taxes included on the current property tax bill in addition to the Full Prepayment amount. c. Partial Prepayments are only allowed for Parcels owned by a property owner before the issuance of the initial Building Permit. A Partial Prepayment can occur only once per Assessor’s Parcel. The City may allow a Partial Prepayment if it is determined that the Partial Prepayment will not jeopardize its ability to make timely payments of Debt Service and maintain a 110-percent Special Tax coverage of Debt Service plus Administrative Expenses in all years where there will be Outstanding Bonds.

The amount of any Partial Prepayment must be either 25 percent or 50 percent of the Full Prepayment amount determined in Step 6.b.8 . A Partial Prepayment may be made in an amount equal to 25 percent or 50 percent of the Full Pr epayment desired by the party making a Partial Prepayment, except that the full amount of administrative fees and expenses determined in Step 6.b.8 shall be included in the Partial Prepayment. The Maximum Annual Special Tax that can be levied on

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a Parcel after a Partial Prepayment is made is equal to the Maximum Annual Special Tax that could have been levied before the Prepayment, reduced by the percentage of the Full Prepayment that the Partial Prepayment represents, all as determined by or at the direction of the Administrator. For example, if the Partial Prepayment is equal to 25 percent, the Maximum Annual Special Tax applied to the Parcel would be 75 percent of the Maximum Annual Special Tax.

7. Interpretation, Applicatio n, and Appeal of Special Tax Formula and Procedures Any taxpayer who feels the amount of the Special Tax assigned to a Parcel is in error may file a notice with the Administrator appealing the levy of the Special Tax. The Administrator then will promptly review the appeal and, if necessary, discuss it with the applicant. If the Ad ministrator verifies that the tax should be modified or changed, the Special Tax levy will be corrected and, if applicable, a credit or refund will be granted.

Interpretations may be made by the City, without resolution or ordinance of the Council, for purposes of clarifying any vagueness or ambiguity as it relates to the Special Tax rate, the method of apportionment, the classification of properties, or any definition applicable to the CFD.

Without Council approval, the Administrator may make minor, non-substantive administrative and technical changes to the provisions of this RMA that do not materially affect the rate, method of apportionment, and manner of collection of the Special Ta x for purposes of administ rative efficiency or convenience or to comply with new applicable federal, state, or local law.

8. Manner of Collection
The Special Tax will be collected in the same manner and at the same time as ad valorem property taxes, provided, however, the Administrator or their designee may directly bill the Special Tax and may collect the Special Tax at a different time, such as on a monthly or other periodic basis, or in a different manner, if necessary, to meet the City’s financial obligations.

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Attachment 1
Railyards Community Facilities District No. 2018-01 (Improvements) Maximum Annual Special Tax per Original Parcel - Base Year (Fiscal Year 2018-19) Lot
Number Original Parcel
Original
Total
Acres
Original
Taxable
Acres
Swapped
Acres
New
Taxable
Acreage
Maximum
Annual
Special Tax
per Acre (1)
Maximum
Annual
Special Tax
Lot Number
458 N B 001-0064-011-0000 0.11 0.11 $18,948.60 $ 2,084.35 464 N B 001-0064-012-0000 0.09 0.09 18,948.60 1,705.37 468 N B 001-0064-013-0000 0.07 0.07 18,948.60 1,326.40 2e portion 002-0010-049-
0000**

0.77 (0.09) 0.68 18,948.60 12,885.05
2f portion 002-0010-049-
0000**

0.85 (0.09) 0.76 18,948.60 14,400.94
2g portion 002-0010-049-
0000**

2.41 (0.09) 2.32 18,948.60 43,960.75
2h 002-0010-049-0000 1.26 1.26 18,948.60 23,875.24
Subtotal 5.29 (0.27) 5.02 95,121.98
1 002-0010-068-0000 0.00 0.00 18,948.60 0.00
2a 002-0010-068-0000 1.14 1.14 18,948.60 21,601.40
2b 002-0010-068-0000 3.50 3.50 18,948.60 66,320.10
2c portion 002-0010-068-0000* 3.31 3.31 18,948.60 62,719.87 2d portion 002-0010-068-0000* 4.17 4.17 18,948.60 79,015.66 3a 002-0010-068-0000 0.94 0.94 18,948.60 17,811.68
3b 002-0010-068-0000 0.91 0.91 18,948.60 17,243.23
3c 002-0010-068-0000 0.79 0.79 18,948.60 14,969.39
3d 002-0010-068-0000 0.76 0.76 18,948.60 14,400.94
4a portion 002-0010-068-0000* 0.83 0.83 18,948.60 15,727.34 4b portion 002-0010-068-0000* 0.94 0.94 18,948.60 17,811.68 4c 002-0010-068-0000 0.80 0.80 18,948.60 15,158.88
4d 002-0010-068-0000 0.93 0.93 18,948.60 17,622.20
4e 002-0010-068-0000 0.00 0.00 18,948.60 0.00
5 portion 002-0010-068-0000* 0.66 0.66 18,948.60 12,506.08 5a portion 002-0010-068-0000* 0.00 0.00 18,948.60 0.00 6a 002-0010-068-0000 1.11 1.11 18,948.60 21,032.95
6b portion 002-0010-068-0000* 1.13 1.13 18,948.60 21,411.92 6c 002-0010-068-0000 1.01 1.01 18,948.60 19,138.09
6d 002-0010-068-0000 1.03 1.03 18,948.60 19,517.06
7a 002-0010-068-0000 0.92 0.92 18,948.60 17,432.71
7b 002-0010-068-0000 0.85 0.85 18,948.60 16,106.31
7c 002-0010-068-0000 0.87 (0.52) 0.35 18,948.60 6,632.01 7d 002-0010-068-0000 0.77 0.77 18,948.60 14,590.42
8a 002-0010-068-0000 0.76 0.76 18,948.60 14,400.94
8b 002-0010-068-0000 1.17 1.17 18,948.60 22,169.86
8c 002-0010-068-0000 0.87 0.87 18,948.60 16,485.28
9a 002-0010-068-0000 0.85 0.85 18,948.60 16,106.31
9b 002-0010-068-0000 0.83 0.83 18,948.60 15,727.34
9c 002-0010-068-0000 0.24 0.24 18,948.60 4,547.66
10 002-0010-068-0000 0.00 0.00 18,948.60 0.00
12a 002-0010-068-0000 0.94 0.94 18,948.60 17,811.68
12b 002-0010-068-0000 0.81 0.81 18,948.60 15,348.37
15a 002-0010-068-0000 0.77 0.77 18,948.60 14,590.42
15b 002-0010-068-0000 0.67 0.67 18,948.60 12,695.56
15c 002-0010-068-0000 0.76 0.76 18,948.60 14,400.94
15 d 002-0010-068-0000 0.65 0.65 18,948.60 12,316.59 17 002-0010-068-0000 1.74 1.74 18,948.60 32,970.56
18 002-0010-068-0000 0.38 0.38 18,948.60 7,200.47
19 002-0010-068-0000 0.31 0.31 18,948.60 5,874.07
20 002-0010-068-0000 1.55 1.55 18,948.60 29,370.33

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Lot
Number Original Parcel
Original
Total
Acres
Original
Taxable
Acres
Swapped
Acres
New
Taxable
Acreage
Maximum
Annual
Special Tax
per Acre (1)
Maximum
Annual
Special Tax
Lot Number
21a 002-0010-068-0000 0.65 0.00 0. 65 0.65 18,948.60 12,316.59 21b 002-0010-068-0000 2.38 0.00 1. 90 2.38 18,948.60 45,097.67 21c 002-0010-068-0000 0.66 0.00 0. 52 0.66 18,948.60 12,506.08 22 002-0010-068-0000 0.19 0.19 18,948.60 3,600.23
23 002-0010-068-0000 0.27 0.27 18,948.60 5,116.12
24 002-0010-068-0000 0.62 0.62 18,948.60 11,748.13
25 002-0010-068-0000 1.04 1.04 18,948.60 19,706.54
26 002-0010-068-0000 0.46 0.46 18,948.60 8,716.36
27 002-0010-068-0000 0.86 0.86 18,948.60 16,295.80
28 002-0010-068-0000 0.00 0.00 18,948.60 0.00
30 002-0010-068-0000 0.00 0.00 18,948.60 0.00
31 002-0010-068-0000 0.00 0.00 18,948.60 0.00
32 002-0010-068-0000 0.00 0.00 18,948.60 0.00
33a 002-0010-068-0000 0.73 (0.73) 0.00 18,948.60 0.00 33b 002-0010-068-0000 1.17 (1.17) 0.00 18,948.60 0.00 33c 002-0010-068-0000 1.06 1.06 18,948.60 20,085.52
33d 002-0010-068-0000 1.03 1.03 18,948.60 19,517.06
33e 002-0010-068-0000 0.00 0.00 18,948.60 0.00
34 002-0010-068-0000 0.00 0.00 18,948.60 0.00
35 002-0010-068-0000 3.14 3.14 18,948.60 59,498.60
42 002-0010-068-0000 0.00 0.00 18,948.60 0.00
47a 002-0010-068-0000 1.47 1.58 18,948.60 29,938.79
47b 002-0010-068-0000 1.61 1.61 18,948.60 30,507.25
48a 002-0010-068-0000 2.88 2.88 18,948.60 54,571.97
48b 002-0010-068-0000 0.00 0.00 18,948.60 0.00
49a 002-0010-068-0000 0.94 0.94 18,948.60 17,811.68
49b 002-0010-068-0000 2.68 2.68 18,948.60 50,782.25
50 002-0010-068-0000 1.52 1.52 18,948.60 28,801.87
51a 002-0010-068-0000 3.36 3.36 18,948.60 63,667.30
51b 002-0010-068-0000 0.00 0.00 18,948.60 0.00
52a 002-0010-068-0000 2.99 2.99 18,948.60 56,656.31
52b 002-0010-068-0000 2.27 2.27 18,948.60 43,013.32
52c 002-0010-068-0000 2.24 2.24 18,948.60 42,444.86
52 d 002-0010-068-0000 4.21 4.21 18,948.60 79,773.61 52e 002-0010-068-0000 2.91 2.91 18,948.60 55,140.43
53 002-0010-068-0000 0.00 0.00 18,948.60 0.00
56a 002-0010-068-0000 0.56 0.56 18,948.60 10,611.22
56b 002-0010-068-0000 0.73 0.73 18,948.60 13,832.48
56c 002-0010-068-0000 0.73 0.73 18,948.60 13,832.48
56d 002-0010-068-0000 0.87 0.87 18,948.60 16,485.28
57a 002-0010-068-0000 0.00 0.00 18,948.60 0.00
57b 002-0010-068-0000 0.45 0.45 18,948.60 8,526.87
57c 002-0010-068-0000 0.74 0.74 18,948.60 14,021.96
57d 002-0010-068-0000 0.72 0.72 18,948.60 13,642.99
57e 002-0010-068-0000 0.74 0.74 18,948.60 14,021.96
58a 002-0010-068-0000 0.00 0.00 18,948.60 0.00
58b 002-0010-068-0000 0.87 0.87 18,948.60 16,485.28
58c 002-0010-068-0000 0.91 0.91 18,948.60 17,243.23
59a 002-0010-068-0000 0.63 0.63 18,948.60 11,937.62
59b 002-0010-068-0000 0.65 0.65 18,948.60 12,316.59
59c 002-0010-068-0000 0.61 0.61 18,948.60 11,558.65
59d 002-0010-068-0000 0.64 0.64 18,948.60 12,127.10
60 002-0010-068-0000 0.00 0.00 18,948.60 0.00
65 002-0010-068-0000 0.00 0.00 18,948.60 0.00
68 002-0010-068-0000 0.00 0.00 18,948.60 0.00
69a 002-0010-068-0000 0.72 0.72 18,948.60 13,642.99
69b 002-0010-068-0000 1.11 1.11 18,948.60 21,032.95
69c 002-0010-068-0000 0.58 0.58 18,948.60 10,990.19

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Lot
Number Original Parcel
Original
Total
Acres
Original
Taxable
Acres
Swapped
Acres
New
Taxable
Acreage
Maximum
Annual
Special Tax
per Acre (1)
Maximum
Annual
Special Tax
Lot Number
69d 002-0010-068-0000 0.86 0.86 18,948.60 16,295.80
70a 002-0010-068-0000 1.08 1.08 18,948.60 20,464.49
70b 002-0010-068-0000 1.06 1.06 18,948.60 20,085.52
70c 002-0010-068-0000 0.00 0.00 18,948.60 0.00
70d 002-0010-068-0000 1.36 1.36 18,948.60 25,770.10
71 002-0010-068-0000 1.82 1.82 18,948.60 34,486.45
72 002-0010-068-0000 0.00 0.00 18,948.60 0.00
73a 002-0010-068-0000 1.34 1.34 18,948.60 25,391.12
73b 002-0010-068-0000 1.57 1.57 18,948.60 29,749.30
Subtotal 101.67 0.65 103.05 1,952,653.26
40 002-0010-063-0000 1.86 1.86 18,948.60 35,244.40
43a 002-0010-063-0000 1.26 1.26 18,948.60 23,875.24
43b 002-0010-063-0000 1.34 1.34 18,948.60 25,391.12
44 002-0010-063-0000 1.65 1.65 18,948.60 31,265.19
45 002-0010-063-0000 0.00 0.00 18,948.60 0.00
46a 002-0010-063-0000 1.93 1.93 18,948.60 36,570.80
46b 002-0010-063-0000 1.45 1.45 18,948.60 27,475.47
Subtotal 9.49 9.49 179,822.22
n/a 002-0010-052-0000 0.00 0.00 18,948.60 0.00
Totals 116.72 0.38 117.83 $2,232,713.58

(1) The Maximum Annual Special Tax shall be escalated by the Tax Escalation Factor in each year following the Base Year. * Portion of Lot Number may be within 002-0010-049-0000. ** Portion of Lot Number may be within 002-0010-068-0000.

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Attachment 2
Railyards Community Facilities District No. 2018-01 (Improvements) Maximum Annual Special Tax Per Acre - Base Year (Fiscal Year 2018-19) Item Acres
Maximum Annual Special
Tax per Taxable Acre(1) Amount
Total Taxable Acres 116.72 $18,948.60 $2 ,211,680.62

Allowable Tax-Exempt Acreage 5.00 $18,948.60 $94,743.00

Maximum Annual Special Tax for Debt Service $2,116,937.62

(1) The Maximum Annual Special Tax shall be escalated by the Tax Escalation Factor in each year following the Base Year.

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Table 1
Railyards Community Facilities District No. 2018-01 (Improvements) Full Prepayment Calculation Before Bond Issuance (with Pay-As-You-Go Example) Item
RMA
Reference Formula Amount
Parcel Maximum Annual Special Tax(1) 6.a.1 a $18,948.60 Maximum Annual CFD Special Tax Revenue(2) 6.a.2 b $2,117,695.57 Benefit Share for the Prepayment Parcel 6.a.2 c = a / b 0.895% Base Year Anticipated Construction Proceeds Definition d $30,000,000.00 Pay-As-You Go Funded Authorized Facilities(3) Definition e $50,000.00 Remaining Facilities Costs Definition f= d-e $29,950,000.00 Base Year ENR-CCI Definition g 9,000.00
ENR-CCI in Example Fiscal year n/a h 9,275.00
ENR-CCI Adjustment Factor n/a i= g/h 103.1%
Adjusted Remaining Facilities Cost n/a j=f*i $30,865,138.89 Total Facility Cost Share for Prepayment Parcel 6.a.3 k=c*j $276,173.39 City Costs 6.a.4 l $500.00
Total Prepayment n/a m=j+k+l $276,673.39

(1) Example assumes prepaying Parcel is 1.0 acres.
(2) Maximum Annual CFD Revenue is amount from Attach ment 2 net of Allowable Tax-Exempt Acreage. (3) Example assumes $50,000 has been levied for aut horized facilities on a pay-as-you-go basis.

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Table 2
Railyards Community Facilities District No. 2018-01 (Improvements) Full Prepayment Calculation After Bond Issuance (with Pay-As-You-Go Example) Item
RMA
Reference Formula Amount
Parcel Maximum Annual Special Tax(1) 6.b.1 a $18,948.60 Maximum Annual CFD Special Tax Revenue(2) 6.b.2 b $2,117,695.57 Benefit Share for the Prepayment Parcel 6.b.2 c = a / b 0.895% Base Year Anticipated Construction Proceeds Definition
d $30,000,000.00
Total Bonds Issued n/a e $20,000,000.00
Proceeds from CFD Bonds Issued to Date n/a f $16,500,000.00 Pay-As-You Go Funded Authorized Facilities
(3) Definition g $50,000.00
Bond Principal Paid(4) n/a h $100,000.00
Total Bonds Outstanding n/a i=e-h $19,900,000.00
Outstanding Bond Share for Prepayment Parcel 6.b.3 j=c*i $178,060.13 Remaining Facility Costs Definition k=
d-f-g $13,450,000.00
Base Year ENR-CCI Definition l 9,000.00
ENR-CCI in Example Fiscal yea
r n/a m 9,500.00
ENR-CCI Adjustment Factor n/a n=m/l 105.6%
Adjusted Anticipated Remaining Construction Proceeds n/a o=k* n $14,197,222.22 Remaining Facility Cost Share for the Prepayment Parcel 6.b.4 p=c*o $127,033.12 Bonds called due to prepayment 6.b.5 q= Rounddown(j/5000,0)*5000 $175,000.00 Bond Call Premium(5) 6.b.6 r=q*.02 $3,500.00
Reserve Fund Requirement Definition s $2,500,000.00
Less Reserve Fund Share 6.b.7 t=s*c ($22,369.36)
City Costs 6.b.8 u 500.00
Total Prepayment 6.b.8 v=p+q+r+t+u $283,663.76

(1) Example assumes prepaying parcel is 1.0 acres.
(2) Maximum Annual CFD Revenue is amount from Attach ment 2 net of Allowable Tax-Exempt Acreage. (3) Example assumes $50,000 has been levied for authorized facilities on a pay-as-you-go basis. (4) Assumes principal amount of $100,000 has been paid. (5) Assumes two percent bond call premium, see the bond documents fo r the premium to apply at the time of prepayment. Remaining Facilities Cost calculation needs to net out the Pay-as-you-go levy amounts.

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APPENDIX B

APPRAISAL REPORT

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APPENDIX C

APPRAISAL REVIEW REPORT

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APPENDIX D

PROPOSED FORM OF OPINION OF BOND COUNSEL

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APPENDIX E

GENERAL INFORMATION ABOUT THE CITY OF SACRAMENTO AND THE

COUNTY OF SACRAMENTO
The following information is included only for the purpose of supplying general information regarding the City of Sacramento (the “City”) and the County of Sacramento (the “County”). This information is provided only for general informational purposes and provides prospective investors limited information about the City and the County and their economic base. The Bonds are not a debt of the County or the State or any of its political subdivisions, and the County, and the State and its political subdivisions are not liable therefor.

The Bonds are special limited obligations of the City payable solely from the Special Tax (as defined in the Official Statement) and other amounts as set forth in the Indenture.

General
The City is located at the confluence of the Sacr amento and American Rivers in the south-central portion of the Sacramento Valley, a part of the State’s Central Valley. Although the City is approximately 75 air miles northeast of San Francisco, its temperature ra nge is more extreme than that of most Northern California coastal cities, ranging from a daily average of 45 degrees Fahrenheit in January to 85 degrees Fahrenheit in July. Average elevation of the City is 30 feet above sea level.

Population
The following table lists population figures for the City, the County and the State as of January 1 for 2017 through 2021.

CITY AND COUNTY OF SACRAMENTO
Population Estimates
Calendar
Year
City of
Sacramento
County of
Sacramento
State of
California
2017 494,785 1,511,390 39,352,398
2018 500,872 1,525,099 39,519,535
2019 507,490 1,538,054 39,605,361
2020 513,626 1,553,157 39,648,938
2021 515,673 1,561,014 39,466,855

Source: State Department of Finance estimates (as of January 1).

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Industry and Employment
The unemployment rate in the Sacramento—Arden -Arcade—Roseville, CA Metropolitan Statistical Area (“Sacramento MSA”), which includes Sacramento, Placer, El Dorado, and Yolo Counties, was 6.4% in 2021. The table below provides information about employment rates and employment by industry type for the Sacramento MSA for calendar years 2017 through 2021. As of March 2022, the unemployment rate in the Sacramento MSA was 3.7%.

SACRAMENTO MSA
Civilian Labor Force, Employment and Unemployment
Calendar Years 2017 through 2021
Annual Averages
2017 2018 2019 2020 2021
Civilian Labor Force (1) 1,074,000 1,088,300 1,100, 800 1,091,700 1,099,300 Employment 1,024,800 1,046,900 1,060,300 994,000 1,028,800 Unemployment 49,200 41,500 40,500 97,700 70,500
Unemployment Rate 4.6% 3.8% 3.7% 9.0% 6.4%
Wage and Salary Employment (2)
Agriculture 9,800 9,100 8,700 8,300 9,000
Natural Resources and Mining 400 500 500 600 700
Construction 58,700 64,500 69,400 70,200 74,100
Manufacturing 35,700 36,000 36,800 36,100 37,500
Wholesale Trade 26,500 28,400 28,600 26,500 26,400
Retail Trade 101,400 102, 000 100,500 95,200 101,100
Transportation, Warehousing and
Utilities
27,400 29,500 32,200 34,300 37,100
Information 12,600 12,400 11,900 10,200 10,000
Finance and Insurance 37,400 36,700 35,200 34,800 34,300 Real Estate and Rental and Leasing 15,200 16,800 17,300 16,900 17,400 Professional and Business Services 132,400 136,000 137,400 132,500 136,700 Educational and Health Services 153,600 159,800 166,600 164,000 168,400 Leisure and Hospitality 103,300 106,200 109,600 83,900 92,900 Other Services 33,000 34, 200 35,400 31,000 32,600
Federal Government 14,200 14,100 14,200 14,800 14,500
State Government 118,400 120,400 121,900 121,700 126,800 Local Government 102,600 103,500 105,300 98,900 98,000 Total, All Industries 982,500 1, 009,900 1,031,400 979,700 1,017,200

(1) Labor force data is by place of residence; includes self-e mployed individuals, unpaid fa mily workers, household domestic workers, and workers on strike.
(2) Industry employment is by place of work; excludes self-e mployed individuals, unpaid fa mily workers, household domestic workers, and workers on strike.

Source: State of California Employment Development Department.

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Major Employers
The following table shows the largest employers located in the County as of fiscal year 2021.

COUNTY OF SACRAMENTO

PRINCIPAL EMPLOYERS
As of June 30, 2021
Rank Name of Company
Number of
Employees
Percentage
of Total City
Employment

1. UC Davis Health Syste m 14,618 2.18%

2. Kaiser Permanente 12,078 1.80

3. Dignity/Mercy Healthcare 10,888 1.63

4. Sutter/California Health Services 10,764 1.61

5. Intel Corporation 5,992 0.90

6. Raley’s Inc./Bel Ai
r 3,394 0.51

7. VPS Global 2,834 0.42

8. Sacramento Municipal Utility 2,099 0.31

9. Siemens Mobility Inc. 2,000 0.30

10. Safeway 1,823 0.27

Source: County of Sacramento Annual Comprehensive Financial Report for the year ending June 30, 2021.

The following table shows the largest employers located in the City as of fiscal year 2021.

CITY OF SACRAMENTO

PRINCIPAL EMPLOYERS
As of June 30, 2021
Rank Name of Company
Number of
Employees
Percentage
of Total City
Employment

1. State of Californi a 82,076 12.39%

2. UC Davis Health Syste m 14,618 2.21

3. Sacramento County 12,585 1.90

4. Kaiser Permanente 12,078 1.82

5. U.S. Government 11,752 1.77

6. Dignity Health 10,888 1.64

7. Sutter Health 10,764 1.63

8. Intel Corporation 5,992 0.90

9. California State University, Sacramento 5,283 0.80

10. San Juan Unified School District 4,962 0.75

11. City of Sacramento 4,883 0.74%

Source: City of Sacramento Annual Comprehensive Financial Report for the year ending June 30, 2021.

Personal Income
Personal income is the income that is received by all persons from all sources. It is calculated as the sum of wage and salary disbursements, supplements to wages and salaries, proprietors’ income with inventory valuation and capital consumption adjustments, rental income of persons with capital consumption adjustment,

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personal dividend income, personal interest income, and personal current transfer receipts, less contributions for government social insurance.

The personal income of an area is the income that is received by, or on behalf of, all the individuals who live in the area; therefore, the es timates of personal income are presen ted by the place of residence of the income recipients.

The following table summarizes the personal income for the County of Sacramento, the State and the United States for the period 2016 through 2020.

COUNTY OF SACRAMENTO
Personal Income
2016 through 2020
Year Sacramento County California United States
2016 $72,128,370 $2,218,457,774 $16,092,713,000
2017 75,062,017 2,318,644,417 16,845,028,000
2018 78,804,776 2,431,821,953 17,681,159,000
2019 82,669,864 2,544,234,978 18,402,004,000
2020 90,908,707 2,763,311,977 19,607,447,000

Note: Dollars in Thousands.

Source: U.S. Department of Commer ce, Bureau of Economic Analysis.

The following table summarizes per capita personal income for the County of Sacramento, the State and the United States for 2016-2020. This measure of income is calculated as the personal income of the residents of the area divided by the resident population of the area.

PER CAPITA PERSONAL INCOME
County of Sacramento, State of California and the United States 2016 Through 2020
Year Sacramento County California United States
2016 $47,723 $56,667 $49,812
2017 49,125 58,942 51,811
2018 51,187 61,663 54,098
2019 53,278 64,513 56,047
2020 58,307 70,192 59,510

Source: U.S. Department of Commerce, Bureau of Economic Analysis.

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Commercial Activity
A summary of historic taxable sales within the City for 2017-2021 is shown in the following table.

CITY OF SACRAMENTO
Taxable Transactions
(dollars in thousands)
Retail Stores Total All Outlets
Number of
Permits
Taxable
Transactions
Number of
Permits
Taxable
Transactions
2017 9,422 $4,679,961 14,258 $6,792,197
2018 9,839 4,904,555 15,421 7,157,368
2019 10,006 4,999,470 15,970 7,463,634
2020 11,088 4,430,901 17,722 6,839,199
2021 10,362 5,401,724 16,793 8,118,898

Source: State Board of Equalization.

A summary of historic taxable sales within the County for 2017-2021 is shown in the following table.

COUNTY OF SACRAMENTO
Taxable Transactions
(dollars in thousands)
Retail Stores Total All Outlets
Number of
Permits
Taxable
Transactions
Number of
Permits
Taxable
Transactions
2017 24,501 $16,934,872 37,317 $24,610,617
2018 24,853 17,593,375 39,066 25,443,669
2019 25,530 18,195,302 40,858 26,836,365
2020 28,055 18,488,106 45,361 27,173,406
2021 25,936 23,700,364 42,482 33,783,460

Source: State Board of Equalization.

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Building and Construction
Provided below are the building permits and valuations for the City and the County for calendar years 2016 through 2020.

CITY OF SACRAMENTO
Total Building Permit Valuations
(valuations in thousands)
2016 2017 2018 2019 2020
Permit Valuation
New Single-family $ 288,236.6 $ 432,659.8 $ 406,973.1 $ 400,648.4 $ 254,127.0 New Multi-family 181,997.4 158,324.1 106, 149.2 176,862.7 465,623.0 Res. Alterations/Additions 99,166.2 113,843.3 97,761.1 140,240.6 174,415.1 Total Residential $ 569,400.2 $ 704, 827.2 $ 610,883.4 $ 717,751.7 $ 894,165.1 New Commercial $ 125,112.7 $ 143,368. 7 $ 133,602.0 $ 540,144.9 $ 154,484.2 New Industrial 150.0 0. 0 2,489.1 31,485.4 31,155.0
New Other 34,081.1 76,890.9 71, 153.7 427,661.2 302,114.6 Com. Alterations/Additions 238,524.2 120,410.0 242,928.6 491,148.7 230,448.0 Total Nonresidential $ 397,868.0 $ 340,669. 6 $ 450,173.4 $ 1,490,440.2 $ 718,201.8

New Dwelling Units
Single-Family 995 1,723 1,608 1,552 956
Multiple Family 601 1,076 813 1,487 2,855
TOTAL 1,596 2,799 2,421 3,039 3,811

Source: Construction Industry Research Board, Building Permit Summary.

COUNTY OF SACRAMENTO
Total Building Permit Valuations
(valuations in thousands)
2016 2017 2018 2019 2020
Permit Valuation
New Single-family $ 611,073.6 $ 744,006.3 $ 1,069,568 .3 $ 1,108,399.8 $ 1,088,390.6 New Multi-family 83,282.9 242,222.8 158, 638.0 265,188.8 467,418.7 Res. Alterations/Additions 255,821.8 214,028.1 276,723.5 293,210.5 262,864.6 Total Residential $ 950,178.3 $ 1,200,257.2 $ 1,504,929.8 $ 1,666,799.1 $ 1,818,673.9 New Commercial $ 482,772.0 $ 270,736. 7 $ 292,766.9 $ 639,170.3 $ 411,058.0 New Industrial 150.0 3,026. 0 14,151.1 31,851.4 31,155.0 New Other 418,862.1 265,276.7 137, 414.6 131,286.6 113,793.0 Com. Alterations/Additions 85,354.4 140,367.2 518,663.2 700,603.9 335,458.0 Total Nonresidential $ 987,138.5 $ 679,406. 6 $ 962,995.8 $ 1,502,912.2 $ 891,464.0

New Dwelling Units
Single-Family 2,676 3,174 3,589 3,981 3,588
Multiple Family 609 1,761 1,272 2,008 2,868
TOTAL 3,285 4,935 4,861 5,989 6,456

Source: Construction Industry Research Board, Building Permit Summary.

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Transportation
Sacramento’s strategic location and broad transpor tation network have contributed to the City’s economic growth. The City is traversed by the main east-west and north-south freeways serving northern and central California. Interstate 80 connects Sacramento with the San Fr ancisco Bay Area, Reno, Nevada, and points east. U.S. 50 carries traffic from Sacramento to the Lake Tahoe area. Interstate 5 is the main north- south route through the interior of California, running from Mexico to Canada. State Route 99 parallels Interstate 5 through central California and passes through Sacramento.

The Union Pacific Railroad, a transcontinental line, has junctions in Sacramen to and is connected to the Burlington Northern Santa Fe Railway via the Central California Traction Company. Passenger rail service is provided by AMTRAK. Bus lines offering intercity as well as local service include Greyhound and the Sacramento Regional Transit District. The Sacramento Regional Transit District also provides light-rail service within the City. The Port of Sacramento, lo cated 79 nautical miles northeast of San Francisco, provides direct ocean-freight service to all major United States and world ports. Via a deep-water channel, ships can reach Sacramento from San Francisco in less than eight hours. The major rail links serving Sacramento connect with the port, and Interstate 80 and Interstate 5 are immediately adjacent to it.

Trucking services are offered through facilities of interstate common carriers operating terminals in the area and by contract carriers of general commodities. Greyhound Bus Lines also has passenger and package-service stations in the City.

Sacramento International Airport, about 12 miles northwest of the City’s downtown, is served by 13 major carriers and 1 commuter carrier. Sacramento Ex ecutive Airport, about 6 miles south of the City’s downtown, is a full-service, 540-acre facility serving gene ral aviation and providing a wide array of facilities and services
.

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APPENDIX F

SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
The following is a summary of certain provisions of the Indenture. This summary does not purport to be complete or definitive and is qualified in its entirety by reference to the full terms of the Indenture.

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APPENDIX G

FORM OF CONTINUING DISCLOSURE CERTIFICATE

OF THE CITY
This Continuing Disclosure Certificate dated as of September 1, 2022 (this “ Certificate”), is executed and delivered by the City of Sacramento, a California municipal corporation and charter city (the “ Issuer”), in connection with the issuance of the City of Sacramento Railyards Community Facilities District No. 2018-01 (Improvements) Special Tax Bonds, Series 2022 (the “Bonds”). The Bonds are being issued under Resolution No. 2022-____ adopted by the Sacramento City Council on _______, 2022, and a Master Indenture, dated as of September 1, 2022, as supplemented by a First Supplemental Indenture dated as of September 1, 2022 (collectively, the “Indenture”), each between the Issuer and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).

The Issuer hereby covenants as follows:

1. Purpose of this Certificate . This Certificate is being executed and delivered for the benefit of the Holders and Beneficial Owners of the Bonds and to assist the Participating Underwriter in complying with the Rule.

2. Definitions. In addition to the definitions set forth in the Indenture and the Rate and Method of Apportionment, which apply to any capitalized term used in this Certificate unless the term is otherwise defined in this section 2, the following capitalized terms have the following meanings:
 “Annual Report” means any annual report that meets the crit eria in section 4 and is provided by the Issuer under section 3.
 “Beneficial Owner ” means any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bond (including a person holding Bond through a nominee, depository, or other intermediary); or (b) is treated as the owner of any Bond for federal income-tax purposes.
 “Dissemination Agent ” initially means the Issuer, and thereafter it means any successor Dissemination Agent the Issuer designates in writing.
 “District” means the City of Sacramento Railyards Community Facilities District No. 2018-01 (Improvements).
 “EMMA” means the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found at www. emma.msrb.org, or any other repository of disclosure information the Securities and Exchange Commission may designate in the future.  “Fiscal Year” means the Issuer’s fiscal year, which begins on July 1 and ends the following June 30.
 “Listed Event” means any of the events listed in section 5 below.  “MSRB” means the Municipal Securities Rulemaking Board.  “Official Statement” means the Issuer’s official statement with respect to the Bonds.  “Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated.

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 “Rate and Method of Apportionment ” means the Rate and Method of Apportionment of Special Tax for the District approved by the Resolution of Formation.  “Resolution of Formation ” means the Resolution adopted by the Sacramento City Council on August 14, 2018, and designated as Resolution No. 2018-0339, by which the City formed the District.
 “Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as it may be amended from time to time.

The Dissemination Agent may conclusively rely upon the Issuer’s certification and will have no duty or obligation to review the Annual Report.
(c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to EMMA by the date required in section 3(a), then the Dissemination Agent shall send a notice in a timely manner to EMMA, in the form required by EMMA.
(d) If the Dissemination Agent is other than the Issuer, then the Dissemination Agent shall— (1) determine each year, before the date for providing the Annual Report, the name and address of the repository if other than the MSRB through EMMA; and (2) file a report with the Issuer, promptly after receipt of the Annual Report, certifying that the Annual Report has been provided to EMMA and the date it was provided. (e) Notwithstanding any other provision of this Certificate, all filings must be made in accordance with the EMMA system or in another manner approved under the Rule.

Thereafter, the Annual Reports shall contain or incorporate by reference the following:
(a) Financial Statements . The Issuer’s audited financial statem ents for the most recent Fiscal Year then ended. If audited financial statements are not available by the time the Annual Report is required to be filed by section 3, then the Annual Report must contain unaudited financial

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statements, and the audited financial statements mu st be filed in the same manner as the Annual Report when they become available.
(b) Financial and Operating Data . The Annual Report must contain or incorporate by reference the following information except to the extent the information is included in the Issuer’s audited financial statements or in a report to the California Debt and Investment Advisory Commission that has been uploaded to EMMA:
(1) Balances in each of the following funds established under the Indenture as of the close of the prior fiscal year:
(A) The Bond Redemption Fund (with a statement of the debt-service requirement to be discharged by the fund before the receipt of expected additional Special Tax revenue, i.e., the Debt Service due on the following September 1). (B) The Bond Reserve Fund.
(2) The aggregate land assessed valuation and the aggregate improvement assessed valuation within the District.
(3) A statement of the debt-service requirements for the Bonds for the prior Fiscal Year. (4) An update of the information in Table 7 of the Official Statement based on the assessed valuation of the Taxable Property within the Dist rict for the Fiscal Year in which the Annual Report is filed, except that the information with respect to overlapping debt, total lien, and value-to-lien need not be included.
(5) A statement of the actual Special Tax levy and co llections for the District for the prior Fiscal Year.
(6) The following information (to the extent that it is no longer reported in the Issuer’s annual filings with the California Debt and Investment Advisory Commission regarding the Bonds):
(A) The Required Bond Reserve for the prior Fiscal Year. (B) A statement as to the status of any forecl osure actions with respect to delinquent payments of the Special Tax.
(C) A statement of any discontinuance of the Co unty’s Teeter Plan with respect to any Taxable Parcel.
(c) Any or all of the items listed in section 4(a) or 4(b) may be included by specific reference to other documents (including official statements of debt issu es of the Issuer or related public entities) that have been submitted to EMMA or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available through EMMA. The Issuer shall clearly identify each document included by reference.

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(3) Unscheduled draws on credit enhancements reflecting financial difficulties. (4) Substitution of credit or liquidity providers, or their failure to perform. (5) Adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Pr oposed Issue (IRS Form 5701-TEB), or other material notices or determinations with respect to the tax status of the Bonds. (6) Defeasances.
(7) Tender offers.
(8) Bankruptcy, insolvency, receivership, or similar proceedings.

Note: For the purposes of the event identified in s ection 5(a)(8), the event is considered to occur when any of the following occur: if a recei ver, fiscal agent, or similar officer is appointed for the Issuer 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 Issuer; or if such jurisdiction has been assumed by le aving the existing governmental body and officials or officers in possessi on but subject to the supervision and orders of a court or governmental authority; or if an order confirming a plan of reorganization, arrangement, or liquidation is entered by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Issuer. (9) Ratings changes.
(10) Default, event of acceleration, termination ev ent, modification of terms, or other similar events under the terms of a financial obligation of the obligated person, any of which reflect financial difficulties.
(b) Additionally, the Issuer shall give or cause the Dissemination Agent to give notice to the MSRB, through EMMA, not more than ten business days after the occurrence of any of the following events with respect to the Bonds, if material:
(1) Unless described in section 5(a)(5), other notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other events affecting the tax status of the Bonds.
(2) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, 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 under its terms.
(3) Appointment of a successo r or additional fiscal agent or the change of the name of a fiscal agent.
(4) Nonpayment related defaults.
(5) Modifications to the rights of Holders.
(6) Bond calls.
(7) Release, substitution, or sale of property securing repayment of the Bonds.

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(8) Incurrence of a financial obligation of the obligated person, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the obligated person, any of which affect Holders.
(c) For purposes of the events identified in section 5(a )(10) or 5(b)(8), “financial obligation” means a (1) debt obligation; (2) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (3) guarantee of (1) or (2). “Financial obligation” does not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule. (d) If the Issuer’s Fiscal Year changes, then the Issu er shall report or shall instruct the Dissemination Agent to report the change in the same manner and to the same parties as a Listed Event would be reported under this section 5.
(e) The undertaking set forth in this Certificate is the Issuer’s responsibility. The Dissemination Agent, if other than the Issuer, is not responsible for determining whether the Issuer’s instructions to the Dissemination Agent under this section 5 comply with the Rule.

6. Termination of Reporting Obligation . The obligations of the Issuer and the Dissemination Agent under this Certificate terminate upon the legal defeasance, prior redemption, or payment in full of all of the Bonds. If termination occurs before the final maturity of the Bonds, then the Issuer shall give notice of the termination in the same manner as for a Listed Event under section 5.

7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Certificate and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Issuer will be the initial Dissemination Agent. The Dissemination Agent may resign by providing 30-days’ advance written notice to the Issuer, with the resignation effective upon appointment of a new Dissemination Agent.

8. Amendment.
(a) The Issuer may amend this Certificate without the consent of the Holders, and any provision of this Certificate may be waived, if all of the following conditions are satisfied:
(1) The amendment or waiver is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law, or a change in the identity, nature, or status of the Issuer or the type of business the Issuer conducts. (2) The undertakings in this Certificate as so amended or waived would have complied, in the opinion of a nationally recognized bond counsel, wi th the requirements of the Rule as of the date of this Certificate, after taking into account any amendments or interpretations of the Rule as well as any change in circumstances.
(3) The amendment or waiver either (A) is approv ed by the Holders of the Bonds in the same manner as provided in the Indenture for amendm ents to the Indenture with the consent of Holders or (B) does not, in the determination of the Issuer, materially impair the interests of the Holders or Beneficial Owners of the Bonds.
(b) To the extent any amendment to this Certificate results in a change in the type of financial information or operating data provided under this Certificate, the first Annual Report provided after the change must include a narrative explan ation of the reasons fo r the amendment and the effect of the change on the type of operating data or financial information being provided. (c) If an amendment is made to the basis on which financial statements are prepared, the Annual Report for the year in which the change is made must present a comparison between the financial

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statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting pr inciples. The comparison must include both a quantitative discussion and, to the extent reasonably feasible, a qualitative discussion of the differences in the accounting principles and the effect of the change in the accounting principles on the presentation of the financial information.

9. Additional Information. This Certificate does not prevent th e Issuer (a) from disse minating any other information, using the means of dissemination set forth in this Certificate or any other means of communication; or (b) from including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that required by this Certificate. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that specifically required by this Certificate, then the Issuer will have no obligation under this Certificate to update the information or include it in any future Annual Report or notice of occurrence of a Listed Event.

10. Default. If the Issuer or the Dissemination Agent fails to comply with any provision of this Certificate, then any Holder or Beneficial Owner of the Bonds may take any necessary and appropriate actions, including seeking mandate or specific performance by court order, to cause the Issuer and the Dissemination Agent to comply with their obligations under this Certificate. A default under this Certificate will not be an Event of Default under the Indenture, and the sole remedy under this Certificate in the event of any failure of the Issuer or the Dissemination Agent to comply with this Certificate is an action to compel performance.

11. Duties, Immunities, and Liabilities of Dissemination Agent. (a) Where an entity other than the Issuer is acting as the Dissemination Agent, the Dissemination Agent will have only the duties expressly set forth in this Certificate, and the Issuer shall indemnify and save the Dissemination Agent and it s officers, directors, employees, and agents harmless against all losses, expenses, and liabilitie s that arise out of, or in the exercise or performance of, their powers and duties under this Cert ificate, including reasonable attorney’s fees and other expenses of defending against any claim of liability, but excluding losses, expenses, and liabilities due to the Dissemination Agent’s negligence or willful misconduct. (b) Except as provided in section 11(a), the Issuer shall pay any Dissemination Agent (1) compensation for its services provided under this Certificate in accordance with an agreed- upon schedule of fees; and (2) all expenses, legal fees, and advances made or incurred by the Dissemination Agent in the performance of its duties under this Certificate. (c) The Dissemination Agent has no duty or obligatio n to review any information the Issuer provides to it under this Certificate. The Issuer’s obligations under this section 11 will survive the Dissemination Agent’s resignation or removal and payment of the Bonds. No person has any right to commence any action against the Dissemination Agent for any remedy other than specific performance of this Certificate. The Disseminatio n Agent is not liable under any circumstances for monetary damages to any person for any breach under this Certificate.

12. Beneficiaries. This Certificate inures solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriter, and Holders and Benefici al Owners from time to time of the Bonds, and it creates no rights in any other person or entity.

13. Merger. Any person succeeding to all or substantially all of the Dissemination Agent’s corporate trust business will be the successor Dissemination Agent without the filing of any paper or any further act.

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14. Effective Date. This Certificate is effective as of the date and year set forth above in the preamble.

CITY OF SACRAMENTO
By:

John P. Colville Jr., City Treasurer

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APPENDIX H

FORM OF CONTINUING DISCLOSURE CERTIFICATE

OF THE DEVELOPER
This Developer Continuing Disclosure Certificate, dated as of September 1, 2022 (the “Disclosure Certificate”), is executed and delivered by Downtown Railyard Venture, LLC, a Delaware limited liability company (the “Developer”) in connection with the issuance by the City of Sacramento (the “Issuer”) of its City of Sacramento Railyards Community Facilities District No. 2018-01 (Improvements) Special Tax Bonds, Series 2022 (the “Bonds”). The Bonds are being issued pursuant to Master Indenture, dated as of September 1, 2022, as supplemented by a First Supplemental Indenture, dated as of September 1, 2022, each between the Issuer and U.S. Bank Trust Company, National Association, as trustee (collectively, the “Indenture”).

The Developer covenant and agree as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Developer to assist the Underwriter in the marketing of the Bonds.

SECTION 2. Definitions. In addition to the definitions set forth in the Indenture or parenthetically defined herein, which apply to any capitalized terms used in this Disclosure Certificate unless otherwise defined in this section, the following capitalized terms shall have the following meanings:
“Affiliate” of another Person means (a) a Person direct ly or indirectly owning, controlling, or holding with power to vote, 25% or more of the outstanding voting securities of such other Person, (b) any Person 25% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other Person, and (c) any Person directly or indirectly controlling, controlled by, or under common control with, such other Pe rson; for purposes hereof, control means the power to exercise a controlling influence over the management or policies of a Person, unless such power is solely the result of an official position with such Person.
“Annual Report” means any Annual Report provided pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.
“Annual Report Date” means the date that is two mont hs after the end of the Developer’s fiscal year, which fiscal year currently ends on December 31. The first Annual Report Date shall be March 1, 2023. “Assumption Agreement” means an agreement betwee n a Major Developer, or an Affiliate thereof, and the Dissemination Agent containing terms substantially similar to this Disclosure Certificate, whereby such Major Developer or Affiliate agrees to provide Annua l Reports, and notices of Listed Events with respect to the portion of the Property owned by such Major Developer and its Affiliates. “Bond Counsel” means an attorney or a firm of atto rneys whose experience in matters relating to the issuance of obligations by the states and their political subdivisions and the tax-exempt status of the interest thereon is recognized nationally.
“Community Facilities District” means City of S acramento Railyards Community Facilities District No. 2018-01 (Improvements).
“Dissemination Agent” means, initially, Goodwin Consulting Group, Inc., acting in its capacity as the Dissemination Agent hereunder, or any successor Dissemination Agent (which may be the Developer) designated in writing by the Developer and which has filed with the Issuer a written acceptance of such designation.

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“EMMA” shall mean the MSRB’s Elec tronic Municipal Market Access system, which is currently available on the Internet at http://emma.msrb.org.
“Event of Bankruptcy” means, with respect to a Person, that such Person files a petition or institutes a proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of bankruptcy or insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any similar capacity, wherein or whereby such Person asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or all of such Person’s debts or obligations, or offers to such Person’s creditors to effect a co mposition or extension of time to pay such Person’s debts or asks, seeks or prays for reorganization or to effect a plan of reorganization, or for a readjustment of such Person’s debts, or for any other similar relief, or if any such petition or any such proceedings of the same or similar kind or character is filed or instituted or taken against such Person and the same shall remain undismissed for a period of sixty days, or if a receiver of the business or of the property or assets of such Person is appointed by any court, or if such Person makes a general assignment for the benefit of such Person’s creditors. “Listed Event” means any of the events listed in Section 5(a) of this Disclosure Certificate. “Major Developer” means, as of any date, any Property Owner, including the Developer, which owns a portion of the Property the sum of the Maximum Annual Special Tax (as defined in the RMA) then applicable to which, plus the Maximum Special Tax then applicable to all portions of the Property that are owned by Affiliates of such Property Owner, is equal to or greater than 20% of the total Maximum Annual Special Tax then applicable to all of the Property.
“MSRB” shall mean the Municipal Securities Rulema king Board and any successor entity designated under the Rule as the repository for filings made pursuant to the Rule. “Official Statement” means the Official Statement, dated ________, 2022, relating to the Bonds. “Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated. “Person” means an individual, a corporation, a partnership, an association, a joint stock company, a trust, a limited liability company, any unincorporated or ganization or a government or political subdivision thereof.
“Property” means the parcels within the boundaries of the Community Facilities District subject to Special Taxes.
“Property Owner” means any Person that owns fee title to any portion of the Property. “RMA” means the Rate and Method of Apportionment of Special Tax for the Community Facilities District approved by the qualified elec tors of the Community Facilities District , as originally in effect or as it may be modified.
“Rule” means Rule 15c2-12(b)(5) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time.
“SEC” shall mean the United States Securities and Exchange Commission.

SECTION 3. Provision of Annual Reports.
(a) If the Dissemination Agent is other than the Developer, not later than five (5) business days prior to each Annual Report Date, the Developer shall provide to the Dissemination Agent an Annual Report which is consistent with the requirements of Section 4 hereof and which is in a form suitable for filing with the

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MSRB through EMMA. The Annual Report may be submitted as a single document or as separate documents comprising a package and may cross-re ference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the Developer (if required) 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 the audited financial statements are not available by that date. Not later than five (5) business days after its receipt of the foregoing material from the Developer, the Dissemination Agent shall file a copy thereof with the MSRB through EMMA and each Particip ating Underwriter. The Developer shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the Developer and shall have no duty or obligation to review such Annual Report.
(c) If the Dissemination Agent is other than the Developer and the Dissemination Agent has not received a copy of the Annual Report by the date require d in subsection (a) hereof, the Dissemination Agent shall notify the Developer of such failure to receive the applicable report. If the Dissemination Agent is unable to verify that an Annual Report has been filed with the MSRB through EMMA and with each Participating Underwriter by the date required in subsection (a) hereof, the Dissemination Agent shall send a notice to the MSRB in substantially the form attached as Exhibit “A.” (d) The Dissemination Agent shall:
(i) file any Annual Report received by it with the MSRB through EMMA and with each Participating Underwriter, as provided herein; and
(ii) if it has provided the applicable report pursuant to paragraph (i) above, file a report with the Issuer and the Developer certifying that it provided the Annual Report pursuant to this Disclosure Certificate, stating the date it was filed.

SECTION 4. Content of Annual Reports. If the annual operating data provided in an Annual Report is amended pursuant to the provisions hereof, the first Annual Report filed pursuant hereto containing the amended operating data shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data being provided. (a) The Developer’s Annual Re ports shall contain or incorporate by reference the following information:

1. An update to the status of infrastructure supporting the development in the Community Facilities District as described under the caption “DEVELOPMENT PLAN — Status of Infrastructure — Remaining Infrastructure Needs” in the Official Statement.

2. A description of any material changes in the financing plan for the Community Facilities District as described under th e caption “DEVELOPMENT PLAN — Infrastructure Financing Plan” in the Official Statement.

3. An update to Table 1 in the Official St atement since the later of the date of the Official Statement or the most recent Annual Report.

4. An update to Table 2 in the Official Statement showing the total quantity (i.e. by square feet, number of dwelling units, or room ke ys) of each product type for which building permits have been issued. The projected quantity by year for each product type need not be updated.

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5. An update of any sale of Taxable Land within the Community Facilities District since the most recent Annual Report which is responsible for 5% or more of the Special Tax levy, and a narrative of the planned development on such property.

6. Any changes to the Railyards Specific Plan which materially revises the allowable land uses as described under “DEVELOPMENT PLAN — Entitlement Process — Railyard Specific Plan Land Use Areas.”

7. Any major legislative, administrative and judicial challenges known to the Developer that materially adversely affects the Community Facilities District. (b) The Developer’s Annual Report shall contai n or incorporate by re ference the following information with respect to each Major Developer that has not entered into an Assumption Agreement pursuant to Section 6 below and has provided the required in formation to Developer after reasonable inquiry by Developer:
(i) A description of any change in the ownership structure of the Major Developer and/or the financial condition of the Major Developer or any of its Affiliates if such change in ownership structure and/or financial condition could materially interfere with the Major Developer’s ability to pay installments of Special Taxes when due.
(iii) Any amendments to land use entitlement s for any portion of the Property owned by a Major Developer that could have a material adverse effect on the ability of such Major Developer, or any Affiliate of such Major Developer, to pay installments of Special Taxes when due. (iii) Any precondition to commencement or continuation of development on any portion of the Property owned by a Major Developer imposed by a governmental entity after the date of issuance of the Bonds which has not been previously disclosed and which could have a material adverse effect, or any change in the status of any such precondition that was previously disclosed in the Official Statement, or an Annual Report, which could have a material adverse effect on the ability of such Major Developer, or any Affiliate of such Major Developer, to pay installments of Special Taxes when due.
(c) In addition to any of the information expressly required to be provided under subsection (a) of this section, the Developer shall provide such further 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.

Major Developers that are Affiliates of each othe r may file either separate Annual Reports or combined Annual Reports covering all such entities. Any or all of the items listed above may be included by specific reference to other documents which have been submitted to EMMA 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 Developer shall clearly identify each such other document so included by reference.

SECTION 5. Reporting of Significant Events. (a ) The following events are Listed Events for purposes of this Agreement (the Developer shall not be responsible for filing notices of any Listed Events with respect to any Major Developer that has entered into an Assumption Agreement pursuant to Section 6 below):
(i) Any conveyance by a Major Developer of any portion of the Property owned by such Major Developer to an entity that is not an Affilia te of such Major Developer, the result of which conveyance is to cause the transferee to become a Major Developer;

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(ii) Any failure of a Major Developer, or an y Affiliate of such Major Developer, to pay when due taxes or Special Taxes with respect to any portion of the Property owned by such Major Developer or Affiliate;
(iii) Any refusal to provide funds pursuant to or any termination of, or any event of default under, any line of credit, loan or other arrangement to provide funds to a Major Developer or its Affiliate or any other loss of a source of funds that could have a material adverse effect on the ability of such Major Developer, or any Affiliate of such Major Developer, to pay installments of Special Taxes when due;
(iv) The occurrence of an Event of Bankruptcy with respect to a Major Developer or any Affiliate of such Major Developer that owns any portion of the Property; (v) The filing of any lawsuit against a Major Developer which, if decided against the Major Developer, in the reasonable judgment of the Major Developer, would materially adversely affect the financial condition of such Major Developer, or the ability of such Major Developer or any Affiliate of such Major Developer, to pay installments of Special Taxes when due; and. (vi) The assumption of any obligations by a Major Developer pursuant to Section 6 hereof.
(b) Whenever the Developer obtains knowledge of the occurrence of a Listed Event, the Developer shall promptly (i) determine whether such event would be material under applicable federal securities laws and (ii) if the Developer determines that such event would be material under applicable federal securities laws, notify the Dissemination Agent and the Issuer in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (c) hereof and shall be in a format suitable for reporting to the MSRB through EMMA.
(c) If the Dissemination Agent has been instructed by the Developer to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the MSRB through EMMA and with each Participating Underwriter.

SECTION 6. Assumption of Obligations. If a portion of the Property owned by the Developer, or any Affiliate of the Developer, is conveyed to a Person that, upon such conveyance, will be a Major Developer, the obligations of the Developer hereunder with respect to the Property owned by such Major Developer and its Affiliates may be assumed by such Major Developer or by an Affiliate thereof. In order to effect such assumption, such Major Developer or Affiliate shall enter into an Assumption Agreement.

SECTION 7. Termination of Reporting Obligation . The Developer’s obligations hereunder shall terminate (except as provided in Section 12 hereof) upon the earliest to occur of (a) the legal defeasance, prior redemption or payment in full of all the Bonds, (b) the first date on which no Property Owner is a Major Developer or (c) the first date on which the Developer (i) is no longer a Major Developer and (ii) has no obligations hereunder with respect to any property because such obligations have been assumed by one or more Major Developers or Affiliates thereof pursuant to an Assumption Agreement. The Developer’s obligations under this Disclosure Certificate with respect to a Person that purchased Property from the Developer and that became a Major Developer as a result thereof shall terminate upon the earliest to occur of (w) date on which such Person is no longer a Major Developer, (x) the date on which the Developer’s obligations with respect to such Person are assumed under an Assumption Agreement entered into pursuant to Section 6 hereof, and (y) the date on which all Special Taxes applicable to the portion of the Property owned by such Major Developer and its Affiliates are prepaid in full; provided however, until the occurrence of any of the events described in clauses (w) through (y), the Developer’s obligations hereunder with respect to each other Major Developer, if any, shal l remain in full force and effect. Upon the occurrence of any such

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termination prior to the final maturity of the Bonds, the Developer shall cause the Dissemination Agent to give notice of such termination in the same manner as for a Listed Event under Section 5(c) hereof.

SECTION 8. Dissemination Agent. The Developer may, from time to time, discharge the Dissemination Agent with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing thirty (30) days’ written notice to the Developer and the Issuer. If at any time there is no other designated Dissemination Agent, the Developer shall be the Dissemination Agent. If the Dissemination Agent is an entity other than the Developer, the Developer shall be responsible for paying the fees and expenses of such Dissemination Agent for its services provided hereunder.

SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Developer may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that (a) if the ame ndment or waiver relates to Sections 3(a), 4 or 5(a) hereof, such amendment or waiver is made in connection with a change in legal requirements, change in law or change in the identity, nature, or status of the Developer or the type of business conducted; and (b) the amendment or waiver either (i) is approved by the Holders in the same manner as provided in the Indenture for amendments to the Indenture with the consent of Holders, or (ii) does not, in the opinion of the Issuer or Bond Counsel, materially impair the interests of the Holders or beneficial owners of the Bonds.

SECTION 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Developer from disseminating any other informat ion, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Developer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Developer shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 11. Default. In the event of a failure of the Developer or the Dissemination Agent to comply with any provision of this Disclosure Certificate, the Dissemination Agent may (and, at the written request of the Participating Underwriter or the Owners of at least 25% of the aggregate principal amount of Outstanding Bonds, and upon being indemnified to its r easonable satisfaction agains t the costs, expenses and liabilities to be incurred in compliance with such request, shall), or the Participating Underwriter or any Holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Developer or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an event of default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the Developer or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance.

SECTION 12. Duties, Immunities and Liabilities of Dissemination Agent. If the Dissemination Agent is other than the Developer, the Dissemination Agent shall not have any responsibility for the content of any Annual Report or notice of a Listed Event. The Di ssemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Developer agrees to indemnify and save the Dissemination Agent, including its officers, directors, employees and agents (each, an “Indemnified Party”), harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding losses, expenses and liabilities due to such Indemnified Party’s negligence or willful misconduct. The obligations of the Developer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

If the Dissemination Agent is other than the Developer, the Dissemination Agent will not, without the Developer’s prior written consent, settle, compromise or consent to the entry of any judgment in any pending

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or threatened claim, action or proceeding in respect of which indemnification may be sought hereunder unless such settlement, compromise or consent includes an unconditional release of the Developer and its Affiliates from all liability arising out of any such claim, action or proceedings. A request by the Dissemination Agent for the Developer’s written consent shall be answered within a reasonable amount of time to allow the Dissemination Agent to act in a timely manner. If any claim, action or proceeding is settled with the consent of the Developer or if there is a judgment (other than a stipulated final judgment without the approval of the Developer) for the plaintiff in any such claim, action or proceeding, with or without the consent of the Developer, the Developer agrees to indemnify and hold harmless the Dissemination Agent to the extent described herein.

SECTION 13. Notices. Any notices or communications to or among any of the parties to this Disclosure Certificate may be given as follows:

Issuer: City of Sacramento
Historic City Hall
915 I Street, 3rd Floor
Sacramento, California 95814
Attn: City Treasurer
Email: [email protected]
Email: [email protected]

Initial Dissemination Agent: Goodwin Consulting Group, Inc. 333 University Avenue, Suite 160
Sacramento, California 95825

Developer: Downtown Railyards Venture, LLC
3140 Peacekeeper Way
McClellan, CA 95652
Attn: Frank Myers

Participating Underwriter: Stifel, Nicolaus & Company, Incorporated One Montgomery Street, 35
th Floor
San Francisco, CA 94104
Attn: Public Finance Department

SECTION 14. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Developer, the Participating Underwriter and Holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.

SECTION 15. Assignability. The Developer shall not assign this Disclosure Certificate or any right or obligation hereunder except to the extent permitted to do so under the provisions of Section 6 hereof. The Dissemination Agent may, with prior written notice to the Developer and the Issuer, assign this Disclosure Certificate and the Dissemination Agent’s rights and obligations hereunder to a successor Dissemination Agent.

SECTION 16. Merger. Any person succeeding to all or substantially all of the Dissemination Agent’s business shall be the successor Dissemination Agent without the filing of any paper or any further act.

SECTION 17. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof.

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SECTION 18. Governing Law. The validity, interpretation and performance of this Disclosure Certificate shall be governed by the laws of the State of California.

DOWNTOWN RAILYARDS VENTURE, LLC, a
Delaware limited liability company, as Developer

By:

Its:

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EXHIBIT A

NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO

FILE ANNUAL REPORT

Name of Obligated Person: Downtown Railyards Venture, LLC

Name of Bond Issue: City of Sacramento Railyards Community Facilities District No. 2018-01 (Improvements) Special Tax Bonds, Series 2022

Date of Issuance: _________, 2022

NOTICE IS HEREBY GIVEN that Downtown Railyards Venture, LLC has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Developer Continuing Disclosure Certificate, dated as of ________, 2022. Downtown Railyards Venture, LLC anticipates that the required report will be filed by ______________.

Dated: ______________

GOODWIN CONSULTING GROUP, INC., as
Dissemination Agent

By:

cc: City of Sacramento

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APPENDIX I

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

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

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provis ions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. an d non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also 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 Par ticipants 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”). DT CC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companie s, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of “AA+.” The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Di rect and Indirect Participants ’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing deta ils of the transaction, as well as pe riodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Benefi cial Owners. Beneficial Owners w ill not receive Bonds representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts

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4817-9609-0100v10/022536-0022
such Bonds are credited, which may or may not be the Benefi cial 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 comm unications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indire ct Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Beneficial Owners of Bonds may wish to take certain st eps to augment the transmission to them of notices of significant events with respect to the Bonds, such as pr epayments, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the 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.

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

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Partic ipant in accordance with DT C’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Dist rict as soon as possible after the r ecord date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds, distributions, a nd dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized re presentative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DT C’s receipt of funds and corresponding deta il information from th e District or the Trustee, on payable date in accordan ce with their respective ho ldings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by stan ding instructions and custom ary practices, as is the case with securities held for the accounts of customers in bear er form or registered in “s treet name,” and will be the responsibility of such Participant and not of DTC, the Trust ee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

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

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

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

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

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

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

VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.

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4817-9609-0100v10/022536-0022

APPENDIX J

MARKET ABSORPTION STUDY

Stradling Yocca Carlson & Rauth
Draft dated August 16, 2022

4894‐0874‐5514v2/022536‐0022
CONTINUING DISCLOSURE CERTIFICATE
CITY OF SACRAMENTO

This Continuing Disclosure Certificate dated as of September 1, 2022 (this “Certificate”), is executed and delivered by the City of Sacramento, a California municipal corporation and charter city (the “Issuer”), in connection with the issuance of the City of Sacramento Railyards Community Facilities District No. 2018‐01 (Improvements) Special Tax Bonds, Series 2022 (the “Bonds”). The Bonds are being issued under Resolution No. 2022‐____ adopted by the Sacramento City Council on _______, 2022, and a Master Indenture, dated as of September 1, 2022, as supplemented by a First Supplemental Indenture dated as of September 1, 2022 (collectively, the “Indenture”), each between the Issuer and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).

The Issuer hereby covenants as follows:

1. Purpose of this Certificate. This Certificate is being executed and delivered for the benefit of the Holders and Beneficial Owners of the Bonds and to assist the Participating Underwriter in complying with the Rule.

2. Definitions. In addition to the definitions set forth in the Indenture and the Rate and Method of Apportionment, which apply to any capitalized term used in this Certificate unless the term is otherwise defined in this section 2, the following capitalized terms have the following meanings:
 “Annual Report” means any annual report that meets the criteria in section 4 and is provided by the Issuer under section 3.
 “Beneficial Owner” means any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bond (including a person holding Bond through a nominee, depository, or other intermediary); or (b) is treated as the owner of any Bond for federal income‐tax purposes.  “Dissemination Agent” initially means the Issuer, and thereafter it means any successor Dissemination Agent the Issuer designates in writing.
 “District” means the City of Sacramento Railyards Community Facilities District No. 2018‐01 (Improvements).
 “EMMA” means the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found at www.emma.msrb.org, or any other repository of disclosure information the Securities and Exchange Commission may designate in the future.
 “Fiscal Year” means the Issuer’s fiscal year, which begins on July 1 and ends the following June 30.
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 “Listed Event” means any of the events listed in section 5 below.  “MSRB” means the Municipal Securities Rulemaking Board.  “Official Statement” means the Issuer’s official statement with respect to the Bonds.  “Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated.  “Rate and Method of Apportionment” means the Rate and Method of Apportionment of Special Tax for the District approved by the Resolution of Formation.  “Resolution of Formation” means the Resolution adopted by the Sacramento City Council on August 14, 2018, and designated as Resolution No. 2018‐0339, by which the City formed the District.
 “Rule” means Rule 15c2‐12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as it may be amended from time to time.

3. Provision of Annual Reports.
(a) Beginning with the Fiscal Year ending June 30, 2022, the Issuer shall provide to EMMA, or shall cause the Dissemination Agent to provide to EMMA, in either case not later than March 31 after the end of the Fiscal Year, an Annual Report that is consistent with the requirements of section 4 of this Certificate. The Annual Report may be submitted as a single document or as separate documents composing a package and may include by reference other information as provided in section 4 of this Certificate, except that the Issuer’s audited financial statements may be submitted separately from, and later than, the balance of the Annual Report if they are not available by the date required above for the filing of the Annual Report.
(b) If the Dissemination Agent is an entity other than the Issuer, then the provisions of this section 3(b) will apply. The Issuer shall provide the Annual Report to the Dissemination Agent, in a form suitable for filing with EMMA, not later than 15 business days before the date specified in section 3(a) for providing the Annual Report to EMMA. If the Dissemination Agent has not received a copy of the Annual Report by the 15th business day before the date for providing the Annual Report, then the Dissemination Agent shall contact the Issuer to determine if the Issuer will be filing the Annual Report in compliance with section 3(a). The Issuer shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that the Annual Report constitutes the Annual Report required to be furnished by it under this Certificate. The Dissemination Agent may conclusively rely upon the Issuer’s certification and will have no duty or obligation to review the Annual Report. (c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to EMMA by the date required in section 3(a), then the Dissemination Agent shall send a notice in a timely manner to EMMA, in the form required by EMMA. 3 4894‐0874‐5514v2/022536‐0022
(d) If the Dissemination Agent is other than the Issuer, then the Dissemination Agent shall—
(1) determine each year, before the date for providing the Annual Report, the name and address of the repository if other than the MSRB through EMMA; and (2) file a report with the Issuer, promptly after receipt of the Annual Report, certifying that the Annual Report has been provided to EMMA and the date it was provided.
(e) Notwithstanding any other provision of this Certificate, all filings must be made in accordance with the EMMA system or in another manner approved under the Rule.

4. Content of Annual Reports.  The first Annual Report due on March 31, 2023 shall consist of the Official Statement and the Issuer’s audited financial statements as described in Section 4(a) below.   Thereafter, the Annual Reports shall contain or incorporate by reference the following:
(a) Financial Statements.   The Issuer’s audited financial statements for the most recent Fiscal Year then ended.  If audited financial statements are not available by the time the Annual Report is required to be filed by section 3, then the Annual Report must contain unaudited financial statements, and the audited financial statements must be filed in the same manner as the Annual Report when they become available. (b) Financial and Operating Data.   The Annual Report must contain or incorporate by reference the following information except to the extent the information is included in the Issuer’s audited financial statements or in a report to the California Debt and Investment Advisory Commission that has been uploaded to EMMA:
(1) Balances in each of the following funds established under the Indenture as of the close of the prior fiscal year:
(A) The Bond Redemption Fund (with a statement of the debt‐service requirement to be discharged by the fund before the receipt of expected additional Special Tax revenue, i.e., the Debt Service due on the following September 1).
(B) The Bond Reserve Fund.
(2) The aggregate land assessed valuation and the aggregate improvement assessed valuation within the District.
(3) A statement of the debt‐service requirements for the Bonds for the prior Fiscal Year.
(4) An update of the information in Table 7 of the Official Statement based on the assessed valuation of the Taxable Property within the District for the Fiscal Year 4 4894‐0874‐5514v2/022536‐0022
in which the Annual Report is filed, except that the information with respect to overlapping debt, total lien, and value‐to‐lien need not be included. (5) A statement of the actual Special Tax levy and collections for the District for the prior Fiscal Year.
(6) The following information (to the extent that it is no longer reported in the Issuer’s annual filings with the California Debt and Investment Advisory Commission regarding the Bonds):
(A) The Required Bond Reserve for the prior Fiscal Year. (B) A statement as to the status of any foreclosure actions with respect to delinquent payments of the Special Tax.
(C) A statement of any discontinuance of the County’s Teeter Plan with respect to any Taxable Parcel.
(c) Any or all of the items listed in section 4(a) or 4(b) may be included by specific reference to other documents (including official statements of debt issues of the Issuer or related public entities) that have been submitted to EMMA or the Securities and Exchange Commission.   If the document included by reference is a final official statement, it must be available through EMMA.  The Issuer shall clearly identify each document included by reference.

5. Reporting of Significant Events.
(a) The Issuer shall give or cause the Dissemination Agent to give notice to the MSRB, through EMMA, not more than ten business days after the occurrence of any of the following events with respect to the Bonds:
(1) Principal and interest payment delinquencies.
(2) Unscheduled draws on debt‐service reserves reflecting financial difficulties. (3) Unscheduled draws on credit enhancements reflecting financial difficulties. (4) Substitution of credit or liquidity providers, or their failure to perform. (5) Adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701‐TEB), or other material notices or determinations with respect to the tax status of the Bonds.
(6) Defeasances.
(7) Tender offers.
(8) Bankruptcy, insolvency, receivership, or similar proceedings. 5 4894‐0874‐5514v2/022536‐0022
Note: For the purposes of the event identified in section 5(a)(8), the event is considered to occur when any of the following occur: if a receiver, fiscal agent, or similar officer is appointed for the Issuer 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 Issuer; 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 if an order confirming a plan of reorganization, arrangement, or liquidation is entered by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Issuer.
(9) Ratings changes.
(10) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the obligated person, any of which reflect financial difficulties.
(b) Additionally, the Issuer shall give or cause the Dissemination Agent to give notice to the MSRB, through EMMA, not more than ten business days after the occurrence of any of the following events with respect to the Bonds, if material:
(1) Unless described in section 5(a)(5), other notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other events affecting the tax status of the Bonds.
(2) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, 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 under its terms. (3) Appointment of a successor or additional fiscal agent or the change of the name of a fiscal agent.
(4) Nonpayment related defaults.
(5) Modifications to the rights of Holders.
(6) Bond calls.
(7) Release, substitution, or sale of property securing repayment of the Bonds. (8) Incurrence of a financial obligation of the obligated person, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the obligated person, any of which affect Holders. 6 4894‐0874‐5514v2/022536‐0022
(c) For purposes of the events identified in section 5(a)(10) or 5(b)(8), “financial obligation” means a (1) debt obligation; (2) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (3) guarantee of (1) or (2). “Financial obligation” does not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule.
(d) If the Issuer’s Fiscal Year changes, then the Issuer shall report or shall instruct the Dissemination Agent to report the change in the same manner and to the same parties as a Listed Event would be reported under this section 5. (e) The undertaking set forth in this Certificate is the Issuer’s responsibility. The Dissemination Agent, if other than the Issuer, is not responsible for determining whether the Issuer’s instructions to the Dissemination Agent under this section 5 comply with the Rule.

6. Termination of Reporting Obligation. The obligations of the Issuer and the Dissemination Agent under this Certificate terminate upon the legal defeasance, prior redemption, or payment in full of all of the Bonds. If termination occurs before the final maturity of the Bonds, then the Issuer shall give notice of the termination in the same manner as for a Listed Event under section 5.

7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Certificate and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Issuer will be the initial Dissemination Agent. The Dissemination Agent may resign by providing 30‐days’ advance written notice to the Issuer, with the resignation effective upon appointment of a new Dissemination Agent.

8. Amendment.
(a) The Issuer may amend this Certificate without the consent of the Holders, and any provision of this Certificate may be waived, if all of the following conditions are satisfied:
(1) The amendment or waiver is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law, or a change in the identity, nature, or status of the Issuer or the type of business the Issuer conducts.
(2) The undertakings in this Certificate as so amended or waived would have complied, in the opinion of a nationally recognized bond counsel, with the requirements of the Rule as of the date of this Certificate, after taking into account any amendments or interpretations of the Rule as well as any change in circumstances.
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(3) The amendment or waiver either (A) is approved by the Holders of the Bonds in the same manner as provided in the Indenture for amendments to the Indenture with the consent of Holders or (B) does not, in the determination of the Issuer, materially impair the interests of the Holders or Beneficial Owners of the Bonds. (b) To the extent any amendment to this Certificate results in a change in the type of financial information or operating data provided under this Certificate, the first Annual Report provided after the change must include a narrative explanation of the reasons for the amendment and the effect of the change on the type of operating data or financial information being provided.
(c) If an amendment is made to the basis on which financial statements are prepared, the Annual Report for the year in which the change is made must present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison must include both a quantitative discussion and, to the extent reasonably feasible, a qualitative discussion of the differences in the accounting principles and the effect of the change in the accounting principles on the presentation of the financial information.

9. Additional Information. This Certificate does not prevent the Issuer (a) from disseminating any other information, using the means of dissemination set forth in this Certificate or any other means of communication; or (b) from including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that required by this Certificate. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that specifically required by this Certificate, then the Issuer will have no obligation under this Certificate to update the information or include it in any future Annual Report or notice of occurrence of a Listed Event.

11. Duties, Immunities, and Liabilities of Dissemination Agent. (a) Where an entity other than the Issuer is acting as the Dissemination Agent, the Dissemination Agent will have only the duties expressly set forth in this Certificate, and the Issuer shall indemnify and save the Dissemination Agent and its officers, directors, employees, and agents harmless against all losses, expenses, and liabilities that arise out of, or in the exercise or performance of, their powers and duties under this 8 4894‐0874‐5514v2/022536‐0022
Certificate, including reasonable attorney’s fees and other expenses of defending against any claim of liability, but excluding losses, expenses, and liabilities due to the Dissemination Agent’s negligence or willful misconduct. (b) Except as provided in section 11(a), the Issuer shall pay any Dissemination Agent (1) compensation for its services provided under this Certificate in accordance with an agreed‐upon schedule of fees; and (2) all expenses, legal fees, and advances made or incurred by the Dissemination Agent in the performance of its duties under this Certificate.
(c) The Dissemination Agent has no duty or obligation to review any information the Issuer provides to it under this Certificate. The Issuer’s obligations under this section 11 will survive the Dissemination Agent’s resignation or removal and payment of the Bonds.

No person has any right to commence any action against the Dissemination Agent for any remedy other than specific performance of this Certificate. The Dissemination Agent is not liable under any circumstances for monetary damages to any person for any breach under this Certificate.

12. Beneficiaries. This Certificate inures solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriter, and Holders and Beneficial Owners from time to time of the Bonds, and it creates no rights in any other person or entity.

14. Effective Date. This Certificate is effective as of the date and year set forth above in the preamble.

CITY OF SACRAMENTO
By:

John P. Colville Jr., City Treasurer

Railyards Community Facilities District No. 2018-01
Railyards Boulevard & 6th Street
Sacramento, California 95811

BBG File #0121008666

Prepared For
Mr. Bill Sinclair
City of Sacramento
915 I Street, Second Floor,
Sacramento, CA 95814

Report Date
August 5, 2022

Prepared By
BBG, Inc., Sacramento Office
1708 Q Street
Sacramento, CA 95811
916-554-6492

Client Manager: Scott Beebe, MAI
[email protected]

RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL August 5, 2022

Mr. Bill Sinclair
City of Sacramento
915 I Street, Second Floor,
Sacramento, CA 95814
Re: Appraisal of Real Property

Railyards Community Facilities District No. 2018-01
Railyards Boulevard & 6th Street
Sacramento, California 95811
BBG File #0121008666

Dear Mr. Sinclair:

BBG, Inc. – Northern California is pleased to submit the accompanying appraisal of Railyards Community Facilities District No. 2018-01 or commonly referred to in this report as “the CFD.” This report is written in conformance with the requirements set forth under Standards Rule 2-2(a) of the Uniform Standards of Professional Appraisal Practice (USPAP) and the Appraisal Standards for Land Secured Financing, published by the California Debt and Investment Advisory Commission (CDIAC).

The intended user of the appraisal is the City of Sacramento and the CFD finance team. The intended use is for bond financing. The appraisal is not intended for any other use or users.

The CFD has been established to create a land -secured funding mechanism for authorized f acilities. The Railyards Community Facilities District No. 2018 -01, as proposed, issue bonds that will generate net proceeds used to reimburse for eligible facilities completed by Downtown Railyard Venture, LLC (DRV).

The subject property is a portion of the Sacramento Railyards, a redevelopment project located north of the Central Business District in the city of Sacramento California. The subject property consists of 16 assessor parcels totaling 187.705 gross acres. The taxable acreage is 117.83 acres. The site is situated adjacent to the Sacramento Valley Station. Major site development infrastructure has been underway for the past decade to convert the former Union Pacific railyards into a n urban downtown mixed -use neighborhood. Public sources indicate that $369 million i n development infrastructure has been completed in the Railyards since it was transferred in 2006 from Union Pacific to private ownership. The developers and prior owners of the Railyards secured numerous land use entitlements for development of a high -density office, retail, lodging entertainment and residential project. The planned density is expected to be 5 and 6 story buildings, which is a slightly lower overall density to the adjacent Central Business District.

In the center of the Railyards are the Central Shops. These are historic designated buildings planned for redevelopment for retail and entertainment uses. Live Nation has signed a long-term lease as an anchor tenant in the Paint building which is e xpected to undergo renovation in 2023 . A p edestrian tunnel connects the Sacramento Valley Station to the Central Shops. The California State Parks plans to renovate two adjacent shop buildings for a new California State Railroad Museum.

Mr. Sinclair
August 5, 2022

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RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL The CFD property is made up by four property owners. Down town Railyard Venture, LLC, (“DRV”) the developer of the project has ownership of six assessor parcels totaling 1 64.76 acres. Included in their parcels are five historic train shop buildings (“Central Shops”) that are planned for renovation and adaptive reuse. Kaiser Foundation Hospital is the owner of eight vacant parcels having a combined land area of 17. 407 gross acres per assessor maps (or 17.14 taxable acres per tentative map). Sacramento 695, LP, the owner of one parcel, is under construction with a 6-story, 345-unit multi-family and ground floor retail project known as The AJ. This $140 million dollar project is the first new development in the Railyards and will include 69 affordable housing units. The project is under construction with a reported $74 million in construction completed. Wong Center at the Railyard, L.P. is the owner of one vacant parcel of 2.658 acres , planned to be developed with 150 affordable residential units . Please note the gross acres addressed above are different from the taxable acres cited in the report.

Substantial on and off-site back-bone improvements have been completed at the Railyards. These improvements were completed by various owners of the Railyards. The improvements include several major roads and utility infrastructure. Currently under construction is the $34 million stormwater outfall and pump station. The buildout of the Railyards will require significant ly more infrastructure, much of which is expected to be funded from various public sources. DRV continues to move forward with infrastructure projects and the completion of the stormwater outfall project will allow for vertical development projects to continue. One of the major development obstacles continues to be funding sources. The State of California and the City of Sacramento have been instrumental in securing grants and other funds to assist DRV and prior ownerships in the development of the various infrastructure projects.

This public and private collaborative efforts will continue as the Railyards is viewed both as a historically important property and a strategically located site for expansion of Sacramento’s Central Business District.

The historical use of the property as a railyard, locomotive construction, repair, and maintenance facility for over 100 years resulted in soil contamination. Union Pacific Railroad Company (“UPRR”), the responsible party for clean-up has over the past several decades completed substantial soil remediation on the property. Closure of the past soil contamination has occurred as signified by the recordation of (i) Land Use Covenant s and Agreement Environmental Restrictions entered into by Downtown Railyard Venture, LLC and (ii) the State of California Department of Toxics Substances Control in February 2015.

Ongoing ground water remediation within the project is continuing with UPRR being the sole responsible party for remediation of any historic contamination (soil, groundwater soil vapor) as of December 28, 2006, at the Railyards. The majority of the soil at the Railyards has been certified as closed as evidenced by recorded l and use covenants (“LUC”) . DRV (or its successor owners ) is responsible for (i) the transportation and disposal of soil which it moves on its owned parcel(s), (ii) the construction dewatering of excavations occurring during development (UPRR must treat such water to a standard accepted by the regional sanitary sewer system), and (iii) installation of passive vapor intrusion systems on new buildings to the extent required by LUCs (UP RR is responsible for such passive systems in the historical buildings).

A total of 7.2 acres within the CFD is not subject to a LUC. This area will be encumbered by a LUC when remedial action by UPRR is complete, estimated to be eligible in 2024.

The values estimated herein are based on a hypothetical condition. USPAP de fines a hypothetical condition as “a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results but is used for the purpose of analysis.” As of the date of value, the Bonds had not been sold. The market value is based on the hypothetical condition that, as of the date of value, the Bonds had just been sold and the property was Mr. Sinclair
August 5, 2022

Page 3 ends

RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL encumbered by Special Taxes as described herein. The market value accounts for the impact of the lien of the Special Tax securing the Bonds.

Based on our inspection of the property and the investigation and the analysis undertaken, we have developed the following value opinion(s) as of July 1, 2022.

Note: Our opinion of market value is subject to the following Extraordinary Assumptions and/or Hypothetical Conditions:

Ownership Description Value by Ownership
Downtown Railyard Venture, LLC 95.152 Taxable Acres with Five Central Shop Buildings $52,000,000 Kaiser Foundation Hospital 17.14 Taxable Acres $34,100,000 Sacramento 695, L.P. 2.88 Taxable Acres with Building Improvements $66,000,000 Wong Center at the Railyard, L.P. 2.658 Taxable Acres $0 Total $152,100,000

VALUATION

EXTRAORDINARY ASSUMPTIONS AND HYPOTHETICAL CONDITIONS

1. We relied on land development costs and fees provided by the Master Developer and the Finance Plan. The budgeted site costs and fees appear reasonable relative to costs at other projects in the area (and costs of comparables analyzed). It is an extraordinary assumption that the costs and fees are reasonably true and correct. Any substantial changes in costs and fees could have an effect on the value conclusions and the feasibility of development. We assume that competent and professional engineering has been completed and that the cost estimates were prepared by a qualified, professional service.

2. As of the date of value, the Bonds have not been sold. Under Appraisal Standards for Land-Secured Financing, as published by Debt and Investment Advisory Commission (CDIAC), improvements financed through special taxes and assessments levied on the property should consider funding of these improvements from the proceeds of the CFD. Therefore, it is an extraordinary assumption that the bond proceeds will be used to partially fund the construction cost of the storm drain project currently under construction.

3. The City of Sacramento is the beneficiary of several State of California grants and other public funding sources that are earmarked for construction of certain improvements in the Railyards. These include Natural Resource Grant, Transit and Intercity Rail Capital Program (TIRCP), Owner Participation Agreement and Enhanced Infrastructure Financing District. It is an extraordinary assumption of this appraisal that a buyer of the DRV owned property would be the recipients of these grants/funds to partially offset infrastructure construction costs.

4. LDK Ventures, the parent company of DRV is the recipient of a $15.3 million AHSC grant that will fund certain infrastructure at the Railyards. Housing and Community Development, the agency in charge of this grant pays out a draw request to LDK Ventures for approved expenditures and then LDK Ventures transfers the funds to DRV. We make an extraordinary assumption that the AHSC grant proceeds provided to LDK Ventures would be assignable to DRV or a prospective buyer of the property.

5. The City of Sacramento is out of compliance with the HCD Grant requiring the delivery of the number of affordable housing units by a certain time which has already passed. The State of California has been silent to this issue as the AJ (an affordable project) is under construction and moving forward to satisfy this issue. There are no formal agreements in place to forgive this non-compliance. It is an extraordinary assumption that the non-compliance will not jeopardize these funds being received.

Extraordinary Assumptions: The value conclusions are subject to the following extraordinary assumptions that may affect the assignment results. 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.

Mr. Sinclair
August 5, 2022

Page 4 ends

RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

This letter must remain attached to the report, which should be transmitted in its entirety, in order for the value opinion set forth to be considered valid.

Our firm appreciates the opportunity to have performed this appraisal assignment on your behalf. If we may be of further service, please contact us.

Sincerely,

BBG, Inc.

Scott Beebe, MAI
California Certified General Appraiser
No. AG 015266
Ph: (925) 588-7641
Email: [email protected]

EXTRAORDINARY ASSUMPTIONS AND HYPOTHETICAL CONDITIONS

6. A structured 1,421 space parking garage is proposed for Lot 17. This structure will benefit the Foundry, the Central Shops, the two Marriott Hotels and other nearby developments. The initial projects in the Railyard will be dependent on this garage. We consider development of this garage the responsibility of the developer of the subdivision. We have valued the proposed parking garage and estimated the construction cost for the development. The extraordinary assumptions related to this development include: a) the quality and design will be similar to what was provided from the preliminary plans, b) the timing of the development of the garage is consistent to the schedule estimated, c) the construction cost are consistent with estimates provided and d) the eventual sale of the garage assumes the developer would execute parking leases running with title to accommodate those projects that are dependent of the garage.

7. Sacramento 695, L.P. is under construction with a 345-unit apartment project known as the AJ. We make an extraordinary assumption that a buyer of this property would continue to use the existing contractor to complete the project. We also assume the construction of the project would experience no construction defect issues or encounter material delays due to construction supply shortages.

1. As of the date of value, the CFD Bonds had not been sold. The market value estimated herein is based on the hypothetical condition that, as of the date of inspection, the Bonds had just been sold and the property was encumbered by Special Taxes, as described herein. The value accounts for the impact of the lien of the Special Tax securing the Bonds.

Hypothetical Conditions: The value conclusions are based on the following hypothetical conditions that may affect the assignment results. 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 purpose of analysis.

RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

TABLE OF CONTENTS
Subject Property .................................................................................................................................................... 1 Summary of Salient Facts ....................................................................................................................................... 4 Subject Photographs .............................................................................................................................................. 6 General Information ............................................................................................................................................ 10 Scope of Work ..................................................................................................................................................... 15 Regional Analysis ................................................................................................................................................. 17 Neighborhood Analysis ........................................................................................................................................ 25 History of the Sacramento Railyards .................................................................................................................... 31 Site Description ................................................................................................................................................... 39 Marketing and Development Status .................................................................................................................... 77 Property Tax Analysis .......................................................................................................................................... 85 Apartment Market Analysis ................................................................................................................................. 89 Office Market Analysis ....................................................................................................................................... 107 Hospitality Market Analysis ............................................................................................................................... 123 Parking Garage Market Analysis ........................................................................................................................ 132 Highest and Best Use ......................................................................................................................................... 140 Valuation Process .............................................................................................................................................. 150 DRV Property Value West of 7th Street .............................................................................................................. 152 Sales Comparison Approach – Benchmark Land Values – DRV Lots .................................................................... 153 Land Residual Analysis – DRV Lots ..................................................................................................................... 176 Land Value Conclusions – DRV – West of 7th Street ............................................................................................ 194 Subdivision Development Method – DRV Ownership West of 7th Street ............................................................ 199 Lot 17 Parking Garage Valuation - DRV ............................................................................................................. 229 Valuation of DRV Property East of 7th Street ...................................................................................................... 248 Final Valuation of DRV Property East & West of 7th Street ................................................................................. 266 Valuation of Kaiser Foundation Hospital Site ..................................................................................................... 268 Valuation of Railyards Sacramento 695, LP - The AJ ........................................................................................... 278 Valuation of Wong Center at the Railyard, L. P. ................................................................................................. 293 Reconciliation and Final Value ........................................................................................................................... 298 Certification ....................................................................................................................................................... 300 Standard Assumptions and Limiting Conditions ................................................................................................. 301 Addenda ............................................................................................................................................................ 306 SUBJECT PROPERTY 1
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

SUBJECT PROPERTY

Red Outlined – Downtown Railyard Venture, LLC
Green Shaded – Sacramento 695, LP
Pink Shaded – Kaiser Foundation Hospital
Orange Shaded – Wong Center at the Railyard, L.P.

2 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

LOCATION MAP

SUBJECT PROPERTY 3
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

CFD MAP

These Lots Are Not Part of the CFD

SUMMARY OF SALIENT FACTS 4
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

SUMMARY OF SALIENT FACTS
Property The subject property is 16 assessor parcels totaling 1 87.705 acres. The property has an approved tentative map for 119 lots totaling 151.64 gross acres or 117.83 taxable acres. Ownership consists of four property owners. Downtown Railyard Venture, LLC (“DRV”), the developer of the project owns six assessor parcels totaling 1 64.76 gross acres per the assessor maps .

Included in their parcels are seven historic train shop buildings that are planned for renovation. Kaiser Foundation Hospital is the owner of eight assessor parcels having a combined land area of 17.14 taxable acres. Sacramento 695, LP , the owner of one

2.88-acre parcel, is under constru ction with “The AJ”, a 6-story, 345-unit multi-family and ground floor retail. Wong Center at the Railyard, L.P. is the owner of one vacant parcel of 2.658 acres .

The land summary is as follows:

Location The subject project is located immediately n orth of the Sacramento Central Busines s District. It is located at Railyards Boulevard and 5 th Street within the city of Sacramento, Sacramento County, California 95811.

Assessor Parcel Numbers Please refer to the Property Analysis section for a complete list of Assessor parcel numbers.

Ownership Downtown Railyard Venture, LLC, Kaiser Foundation Hospital , Sacramento 695, L.P. and Wong Center at the Railyard, L.P.

Zoning C-3- SPD, Central Business District; H-SPD, Hospital; and R5-SPD, Residential

Category/Ownership No Lots Acres
DRV Vacant Land 76 85.782
DRV Owned Historic Shops & Open Space 12 9.37
Kaiser Vacant Land 8 17.14
The AJ 1 2.88
Wong Center 1 2.658
Taxable Acres 98 117.83
Storm Drain Parcel 1 0.52
Lots Comprised of Future Streets 2 2.14
Parks and Open Space 18 31.15
Non-Taxable Lots 21 33.81
Lots Under Tentative Map 119 151.64
Proposed Streets in T-Map 36.07
Total Lots/Gross Acres 187.705
Land Area Summary
SUMMARY OF SALIENT FACTS 5
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Entitlements The Railyards Specific Plan Update indicates the plan area is entitled up to 10,000 residential units, 4.1 million square feet of office, 895,000 SF of retail, 1,100 hotel rooms, 1.2 million square feet of hospital, 180,000 square feet of historic museum and a 25,000-seat sports stadium. The plan has a sliding scale in relationship between office and residential, which would allow up to 10,000 residential units wi th office use decreasing commensurately.

Flood Zone Zone X – Outside the 100-year floodplain

Highest and Best Use Mixed-use development consistent with Updated Railyards Specific Plan

Exposure Time 12 months

Marketing Time 12 months

Property Rights Appraised Fee Simple Estate

Effective Date of Value: July 1, 2022

Market Value Indications:

The values reported above are subject to the extraordinary assumptions, hypothetical conditions, standard assumptions and limiting conditions set forth in the accompanying report of which this summary is a part. No party other than the client and stated intended users may use or rely on the information, opinions and conclusions contained in the report.

VALUATION
SUBJECT PHOTOGRAPHS 6
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

SUBJECT PHOTOGRAPHS

Central Shops East View From Central Shops Land

Railyards Boulevard North View of 5th Street

SUBJECT PHOTOGRAPHS 7
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Central Shops Central Shops

Central Shops Central Shops with Views of the CBD

Central Shops Central Shops

SUBJECT PHOTOGRAPHS 8
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

The AJ Central Shops

The AJ North View of the CBD

Kaiser Hospital Site Land East of 7th Street

SUBJECT PHOTOGRAPHS 9
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

North View of 5th Street South View of 5th Street

East View of the Railyards North View of the Railyards

West View of the Central Shops South View of the Railyards

GENERAL INFORMATION 10
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

GENERAL INFORMATION

IDENTIFICATION OF THE SUBJECT PROPERTY
The subject property is 16 parcels of land north of the Central Business District and the Sacramento Valley Station in downtown Sacramento. The property includes 187.705 gross acres and net land area of 117.83 taxable acres. A summary of the assessor parcels is as follows:

Please note the acres shown in the above chart are land sizes derived from the assessor parcel maps. In some cases these land areas differ from the taxable land area derived from the tentative map.

PROJECT HISTORY
The Railyards, a 244-acre property is located immediately north of the Sacramento Central Business District. The property was for merly the Southern Pacific Railyards which was developed in 1855. The property was used for railyard maintenance. The shops in the Railyards were used for locomotive repairs, general maintenance and, occasionally, creation. The yards steadily expanded, becoming the biggest railroad facility west of the Mississippi River and employing approximately one -third of all Sacramento area workers in the early decades of the 20th century.

Over the past decade there has been planning and redevelopment of the 244 -acre Railyards site into a mixed-use, transit-oriented development. A complete project history is shown later in the report.

The subject is only a portion of the Railyards as it consists of 187.7 acres of the larger 244- acre Railyards property.

Parcel No. Parcel From Title Report Ownership Land Area 001-0064-011 6 Downtown Railyard Venture, LLC 0.110
001-0064-012 7 Downtown Railyard Venture, LLC 0.090
001-0064-013 8 Downtown Railyard Venture, LLC 0.070
002-0010-069 3 Railyards Lot 48, LLC 2.880
002-0010-074 1 Downtown Railyard Venture, LLC 42.290
002-0010-075 2 Downtown Railyard Venture, LLC 112.900
002-0010-076 4 Downtown Railyard Venture, LLC 9.300
002-0010-077 5 Wong Center at the Railyards, L.P. 2.658 002-0270-001 9 Kaiser Foundation Hospital 1.139
002-0270-002 9 Kaiser Foundation Hospital 3.500
002-0270-003 9 Kaiser Foundation Hospital 3.310
002-0270-004 9 Kaiser Foundation Hospital 4.169
002-0270-005 9 Kaiser Foundation Hospital 0.769
002-0270-006 9 Kaiser Foundation Hospital 0.850
002-0270-007 9 Kaiser Foundation Hospital 2.410
002-0270-008 9 Kaiser Foundation Hospital 1.260
Total 187.705
Assessor Parcel Summary
GENERAL INFORMATION 11
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

CURRENT OWNERSHIP AND SALES HISTORY
The property is under ownership of four entities. These are summarized as follows:

Downtown Railyard Venture, LLC (DRV): This entity is owner of six parcels totaling 164.76 acres. A related entity of DRV purchased an interest in the subject property from Mainline Holdings (IVTP) September 30, 2015. Details of this sale were disclosed confidentially. On June 24, 2019, IVTP liquidated all interests in Downtown Railyard Venture, LLC, in exchange for cash consideration. Details of this sale were disclosed confidentially. The sale was analyzed and considered for the appraisal. There has been no other sale of the subject property in the past three years.

Kaiser Foundation Hospital: This entity is owner of eight parcels totaling 17.407 gross acres (from assessor maps) or 17.14 taxable acres (tentative maps) . Kaiser purchased this property from DRV on January 24, 2019, for $33,370,000. Kaiser Foundation Hospital purchased the property to develop a 1.2 million square foot regional hospital. The property was delivered as a finished site to the buyer. There has been no other sale of this property in the past three years. Since acquiring the property Kaiser has completed little entitlement work with the City of Sacramento or with the California Department of Health Care Access and Information. The timing and certainty of Kaiser’s development plans on this site are unknown.

Sacramento 695, LP: This entity own s one parcel. This parcel was purchased in July 2020 from DRV for $100. The entity is a joint venture with USA Properties and DRV for the development of a 6-story, mixed use multi-family over street retail. The project will have 69 units restricted fo r affordable units. The project helps satisfy the affordable housing requirement in the Railyards. There has been no other sale of this property in the past three years.

Wong Center at the Railyard, L.P.: This entity owns one parcel. This parcel was purchased in June 2022 from a related entity known as Mutual Housing California, a non-profit public benefit corporation. Mutual Housing purchased the property on the same day from Downtown Railyard Venture, LLC for $100. The property is planned to be developed with 150 affordable housing units to help meet the Railyard’s mixed- income housing obligation. The nominal consideration paid is typical of other land sales involving affordable housing developments that satisfy affordable housing project requirements. There has been no other sale of this property in the past three years.

Lot 43 A and B are in escrow to a developer. This contract is dated June 8, 2022. Terms of this contract were disclosed confidentially.

FACILITIES TO BE FINANCED BY THE DISTRICT
The bonds will assist with the financing of capital improvements, the costs of issuance, capitalized interest and fund a debt service fund . Specifically, per City of Sacramento Resolution No. 201 8-0339, the Resolution of Formation for Railyards CFD No. 2018-01, the authorized facilities include roadways, sewer, storm drainage, water and park and open space improvements. Other such bond related expenses such as administrative fees, reimbursement of costs of CFD formation, and costs and incidental expenses related to eligible facilities are costs of the issuance. These improvements have already been constructed.

The proceeds from the bond sale will be used to finance some of the development costs of the storm water outfall project currently estimated to have a remaining cost of $15.8 million.

GENERAL INFORMATION 12
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Principal and interest on the Bonds will be paid by a Special Tax levied against the subject property. This report is based on a hypothetical condition that the Bonds have just been sold and the subject properties are encumbered by the Special Tax. The City of Sacramento has authorized the issuance up to $75 million in bonds. The current bond issuance is expected to achieve approximately $20,450,000 in net bond proceeds.

INTENDED USER AND INTENDED USE
The intended user of the appraisal is the City of Sacramento and the CFD finance team. The intended use is for bond financing. The appraisal is not intended for any other use or users.

PRIOR SERVICES
USPAP requires appraisers to disclose to the client any other services they have provided in connection with the subject property in the prior three years, including valuation, consulting, property management, brokerage, or any other services. We have performed prior service, as an appraiser regarding a portion of the property that is the subject of this report within the three -year period immediately preceding acceptance of this assignment.

PURPOSE OF THE APPRAISAL
The purpose of the appraisal is to esti mate the Market Value of the subject property as of July 1, 2022.

The value is subject to a hypothetical condition that the CFD Bonds have sold. The appraisal is valid only as of the stated effective date. The date of the report is August 5, 2022, which is the date this report was delivered to the client.

PROPERTY RIG HTS APPRAISED
As stated above, our analysis pertains to the fee simple interest in the subject property. This is defined as follows:

Fee simple: “Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed b y the governmental powers of taxation, eminent domain, police power, and escheat.”
Source: Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed. (Chicago: Appraisal Institute, 2015)

GENERAL INFORMATION 13
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

DEFINITION OF MARKET VALUE

DEFINITIONS
Pertinent definitions, including the definition of market value, are included in the glossary, located in the Addenda to this report. The following definition of market value is used by agencies that regulate federally insured financial institutions in the United States:

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 are 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 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. [1]

LEVEL OF REPORTING DETAIL
Standards Rule 2 -2 (Real Property Appraisal, Reporting) contained in 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. An Appraisal Report must at a minimum summarize the appraiser’s analysis and the rationale for the conclusions. This format is considered most similar to what was formerly known as a Self-Contained Appraisal Report in prior versions of USPAP.

COMMON TERMS USED IN THE APPRAISAL
Net Buildable Land or Lots: This term is used to describe the land area (usually acres) or lots that can be developed with improvements.

Sacramento Railyards: This term has several meanings: 1) Sacramento Railyards is the 244-acre land area of which the subject is only a portion, 2) Railyards Specific Plan Area is the special planning area that focuses on the entire 244-acres, 3) The Railyards is the name of the Tentative Subdivision Map, which is a portion of the Sacramento Railyards. The subject property is all land and lot area of the Tentative Map, except for Lot 29, which is an out parcel owned by the State of California.

[1] (Interagency Appraisal and Evaluation Guidelines; December 10, 2010, Federal Register, Volume 75 Number 237, Page 77472) GENERAL INFORMATION 14
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

APPLICABLE REQUIREMENTS
This appraisal is intended to conform to the requirements of the following:

• Uniform Standards of Professional Appraisal Practice (USPAP); • Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute;
• Applicable state appraisal regulations;
• Appraisal Standards for Land Secured Financing, published by the California Debt and Investment Advisory Commission.

LEVEL OF REPORTING DETAIL AND APPLICABLE REQUIREMENTS
Standards Rule 2 -2 (Real Property Appraisal, Reporting) contained in 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 which, at a minimum, must summarize the appraiser’s analysis and the rationale for the conclusions.

This appraisal report was prepared to conform with the requirements of the Uniform Standards of Professional Appraisal Practice (USPAP), the Code of Ethics and the Standards of Professional Practice of the Appraisal Institute, as well as any additional standards of the client and intended users.

APPRAISER COMPETENCY
No steps were necessary to meet the competency provisions established under USPAP. We have appraised several properties similar to the subject in physical, locational, and economic characterist ics, and are familiar with market conditions and trends; therefore, we have adequate experience and qualifications to appraise the subject. Appraiser certifications and qualifications are included in the Addenda of this report.

SIGNIFICANT PROFESSIONAL ASSISTANCE
No one provided significant real property appraisal assistance to the person signing this certification.

SCOPE OF WORK 15
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

SCOPE OF WORK
The intended use and intended user(s) of this appraisal report, characteristics and complexity of the subject property, market conditions, widely accepted methods and practices within the appraisal profession, and other pertinent factors were all considered in our determination of scope of work, which is detailed in the following sections.

VALUATION METHODOLOGY
Appraisers typically consider utilizing the cost, sales, and/or income capitalization approach in developing an opinion of value. The applicability of each approach is determined by the economic characteristics of the property, the availability of reliable data, and the common practice of market participants that reflect the most likely purchaser of the subject property.

In the valuation of the subject property, we utilize the sales comparison and the income capitalization approach, which, for subdivision properties, is commonly referred to as the subdivision development method. The sales comparison approach considers vacant parcel sales, with adjustments applied accordingly relative to the subject. In support to the sales comparison approach we perform a land residual analysis. The subdivision development method is a discounted cash flow analysis that reflects anticipated lot prices and costs over an absorption period, leading to an estimate of residual land value.

The projected cash flows have a finite life that corresponds with the sellout of th e project. A traditional cost approach for the subject lots is not applicable.

RESEARCH AND ANALYSIS
In preparing this appraisal and over the course of this assignment, we performed extensive research and analysis of the subject, its competitors, and t he broader market factors that impact value. The type and extent of our research and analysis is described throughout the report as it pertains to each section. In summary:

• Researched the legal and physical attributes of the subject property including: a physical inspection of the property was completed and serves as the basis for the site description contained in this report; the sales history was verified by consulting public records (Parcelquest); zoning and various entitlement information was obtained from the developer; the subject’s deed restrictions; the subject’s earthquake zone, flood zone and utilities were verified with applicable public agencies; property tax information for the current tax year was obtained from the Sacramento County Tax Collector’s Office.

• Analyzed and documented data relating to the subject’s neighborhood and surrounding market areas. This information was obtained through personal inspections of portions of the neighborhood and market areas, newspaper articles and interviews with various market participants.
• Determined the highest and best use of the subject property as though vacant, based on the four standard tests (legal permissibility, physical possibility, financial feasibility, and maximum productivity). As will be shown in the Highest and Best Use Analysis section, the highest and best SCOPE OF WORK 16
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL use of the subject property is for development of mixed-use project consisting of office, retail, hotel, and residential properties.
• Gathered information on comparable properties and confirmed comparable transactions. We also relied on comparable information (sales, costs, permits and fees) that we had retained in our appraisal files, and which may have resulted from prior interviews with market participants. The type and extent of our research and analysis is detailed in individual sections of the report.

Although we make an effort 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.
• Reviewed the Strategic Market Absorption Analysis report prepared by RCLCO dated May 17, 2022, to assist in determining the absorption estimate for the subject lots. • Reviewed a parking garage study performed by City of Sacramento parking professionals for Lot

17. This study was originally prepared in December 2021 to assist in a possible bond financing of the construction of the garage by the City of Sacramento. The study was then updated in March 2022 and again in June 2022.
• Interviewed key market participants associated with the Railyard, including individuals with Live Nation, Cushman and Wakefield, Marriott and DRV representatives. • Estimated reasonable exposure and marketing times associated with the market value estimates.

INSPECTION DETAILS
Scott Beebe, MAI conducted several inspections of the property with the last inspection occurring on July 1, 2022.

REGIONAL ANALYSIS 17
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

REGIONAL ANALYSIS

SACRAMENTO MSA
The Sacramento-Roseville-Arden Arcade Metropolitan Statistical Area is comprised of El Dorado, Placer, Sacramento, and Yolo Counties, hereinafter called the Sacramento MSA. Sacramento is the capital of the State of California and th e seat of Sacramento County. The city is located towards the north the California’s expansive Central Valley and has an estimated population of just over 500,000, making it the sixth most -populous city in California. The four -county Sacramento MSA has 2.38 million residents, making it the largest MSA in the Central Valley and the fourth largest in California behind greater Los Angeles, the San Francisco Bay Area and San Diego.

Situated approximately 85 miles northeast of San Francisco, Sacramento is at the intersection of two major interstate freeways (I-5 and I-80) and at the confluence of the Sacramento and American rivers. The area is also served by a number of rail lines including the Amtrak Capital Corridor. This, in addition to convenient access to ai rports, rail and a deep -water port, makes Sacramento well connected both regionally and nationally. Sacramento is increasingly regarded as a leading business location due to its growing, well-educated population, affordable cost of living, plentiful amenities, and overall high quality of life.

REGIONAL ANALYSIS 18
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

ECONOMIC OVERVIEW
Consistent with national and statewide trends, the regional economy had performed very well after rebounding from the “Great Recession”. The region experienced strong job growth across private and public sectors; however, job growth as of early 2020 had started to slow and performance across industries was mixed in pre-COVID 19 affected data.

Employment losses in Sacramento soared during early to mid-2020 thanks to the coronavirus pandemic.

In May 2020, employment losses totaled nearly 150,000 and the unemployment spiked to 14%; however jobs gradually returned as the economy reopened later in the year. As of May 2022, over 160,000 of the lost jobs have returned and the unemployment rate has declined to 3.2%.

The following excepts are from a Moody’s Analytics for the Sacramento region dated November 2021, the most recent report available.

Recent Performance

Sacramento-Roseville-Arden-Arcade’s recovery lags that of the nation but is a mong the strongest in the state. About three-fourths of jobs lost last year are back, well ahead of most large California economies.

Leisure/hospital is leading the way in recent job growth, mirror ing the national trend. State government has per formed re markably well throughout the pandemic, with employment now exceeding its pre - pandemic level. Meanwhile, healthcare and retail have made little progress this year. The unemployment rate has not budged in the last six months and is further from its prerecession rate than the nation.

State Government

The expansion in state government employment is well -entrenched and payrolls will advance further in the months ahead. University of California-Davis consistently ranks among the top colleges in the U.S. and is a magnet for federal grants and venture capital, supporting research and development and start ups.

The return of on-campus learning and the largest first-year class in history have led the university to rehire some support staff. Further, an increase in state funding will bolster the university’s coffers. The combination of more students in classrooms and strong finances will increase spending on educators and support staff and will boost demand for local consumer services.

Meanwhile, better-than-expected income gains have boosted California’s tax collections, and this, along with federal funds from the American Rescue Plan, will give California an opportunity to strengthen safety- net programs and boost spending on state agencies based in SAC.

Healthcare

SAC’s healthcare industry will be a reliable driver of the metro area’s recovery. Job gains were faster than the nation’s prior to the pandemic and the blow to employment was shallower than nationally. Hospitals played a key role in the industry’s pre-pandemic growth, fueled in part by an outsize senior population.

From 2010 to 2020, the 65-and-older cohort grew about five times as fast as the overall population. How- ever, the industry has been slow to recover jobs, as infection fears have reduced d emand for non-COVID- 19-related examinations and procedures. Fortunately, employment will ramp back up as the pandemic subsides. For example, UC Davis Medical Center is investing $3.5 billion to replace and expand existing REGIONAL ANALYSIS 19
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL patient care facilities. The hospital network’s growing footprint and ability to deliver specialty services will attract a larger pool of patients, some of whom will be from outside the metro area.

Consumers

Private services will continue to recover in the coming year. Following a larger-than-average decline at the beginning of the pandemic, leisure/hospitality employment has risen steadily but still has a long way to go. For tunately, office reopenings will allow restaurants, retailers, and other businesses to gain momentum in the next phase of recovery given that SAC is a net recipient of commuters who live in other locales but work in SAC. However, a full recovery in consumer -reliant industries will take longer than nationally because the increase in remote work has permanently reduced the time that commuters spend in SAC. Furthermore, there is downside risk that business travel, which has been slow to recover, could suffer as firms hold off on returning to in -person operations and limit nonessential travel because of the Omicron variant.

Overall

Sacramento-Roseville-Arden-Arcade’s recovery will extend into next year. State government and healthcare will add jobs. Consumer industries are looking up, but weak business travel is a concern. Longer term, low costs, and strong demographics, including a highly skilled workforce, will help SAC excel.

PO PU LA TI ON
The Sacramento MSA has an estimated 2021 population of 2,383,795, which represents a compound annual increase of 0.9% over the 2010 census. This is down from the early to mid- 2000’s when the region was growing in excess of 2% annually. Population growth trends within the region are summarized as follows:

Looking forward, Sacramento MSA’s population is projected to increase at a 0.7% annual rate from 2021- 2026, equivalent to the addition of an average of approximately 17,253 residents per year.

EMP L OY MEN T
Sacramento’s ability to attract and retain quality talent is largely attributed to its two higher -education institutions, the University of California, Davis and California State University, Sacramento. These facilities also help to foster organic growth within the labor force and produce a highly educated workforce for many of the region’s leading companies as well as businesses that are relocating from the Bay Area for the relatively affordable space and living costs. As the Bay Area becomes increasingly less affordable and

REGIONAL ANALYSIS 20
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL congested, Sacramento will continue to provide a viable opportunity for a better quality of life to much of that labor force. As a result, the city has begun to attract the employers that desire to be close to this labor pool.

Historical employment trends for the region versus California are summarized in the following table.

Average annual unemployment rates for the region have been lower than the state for the past decade.

Over the past decade, the average annual unemployment rate for the Sacramento MSA was 6.9%, compared to 7.6% for California.

The unemployment rate spiked early in the pandemic (April 2020) to 14% for the Sacramento MSA and 16% for California as a result of mass layoffs. The unemployment rate has gradually moved downward since and as of May 2022, the unemployment rate was 2.9% for the Sacramento MSA and 4.3% for California.

Unemployment Rate (Annual Avg.)
Year Sacramento MSA % Change California % Change Sacramento MSA California 2010 914,007 -1.0% 16,125,892 0.9% 12.4% 12.2%
2011 931,957 2.0% 16,423,914 1.8% 11.0% 11.7%
2012 945,585 1.5% 16,817,255 2.4% 9.5% 10.4%
2013 956,324 1.1% 17,081,350 1.6% 7.7% 8.9%
2014 978,549 2.3% 17,527,359 2.6% 6.2% 7.5%
2015 1,002,135 2.4% 17,841,873 1.8% 5.3% 6.2%
2016 1,013,762 1.2% 18,113,717 1.5% 4.8% 5.4%
2017 1,041,760 2.8% 18,402,974 1.6% 3.8% 4.2%
2018 1,066,068 2.3% 18,704,962 1.6% 3.7% 4.2%
2019 1,057,500 -0.8% 18,786,800 0.4% 3.6% 4.0%
2020 1,005,900 -4.9% 16,958,600 -9.7% 7.6% 9.1%
April -2022 1,081,300 7.5% 17,452,000 2.9%
Overall Change 2010-2020 91,893 10.1% 832,708 5.2%
Avg. Unemp. Rate 2010-2020 6.9% 7.6%
Unemployment Rate - April 2022 3.2% 4.6%
Employment Trends
Total Employment (Year End)
Source: Labor M arket Information for the State of California from Employment Development Department. The figures are not seasonally adjusted.

REGIONAL ANALYSIS 21
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

The following tables provide an overview and illustration of the major industry sectors within Sacramento MSA and the California. Total employment is broken down by major employment sector and ranked from largest to smallest based on the percentage of Sacramento MSA jobs in each category.

REGIONAL ANALYSIS 22
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

GOVERN M EN T E MP L OY MEN T
As the capital of California, a large portion of Sacramento’s employment has historically been dominated by the State government and other public-sector employers. Today, State, and local government accounts for 23% of the region’s labor pool (±230,000 EE’s), which is a very large share by national norms.

With a GDP of $3. 35 trillion in 2021, California moved to 5th place in the IMF world economy rankings (California is the only state on the list of nations). As California continues to becom e more of a global player, Sacramento will continue to grow in significance as a city and the seat of the legislative body that governs the state.

PRIVA TE SECT OR EM PL O YMEN T
Government will always play a significant role in the region’s economic base; however, as the population of Sacramento has grown, the economy has become increasingly diverse, attracting major employers in many private sector industries such as professional services, healthcare, education and trade, transportation, and utilities. Sacramento has also provided a welcoming environment to many green and clean technology companies. This is largely due to California’s progressive environmental policies but also in the provision of the opportunity to influence these policies from within the California state capital.

The strength of the region’s labor force coupled with the availability of land, relatively affordable cost of living and ease of access to other major employment hubs continues to make Sacramento a desirable place to conduct business. Major private sector companies that have maintained a strong local presence and continue to have a positive impact on the region’s economy are summarized in the following table.

HI GHER EDU CAT I ON
The University of California at Davis, situated 15 miles west of Sacramento, is one of the nation’s top public research universities and is ranked tenth amongst public universities nationwide by U.S. News and World Report. The UC Davis School of Medicine is ranked fourth amongst U.S. medical schools in researc h funding. Currently, more than 35,000 students are enrolled in over 100 undergraduate and 90 graduate programs at UC Davis. An additional 30,000 students are enrolled at California State University,

REGIONAL ANALYSIS 23
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Sacramento which offers 58 undergraduate and 40 graduate programs. Both schools make a significant impact on the higher-education levels of the local labor pool.

HOU SEH O LD I NC O ME
The median household income for the overall Sacramento MSA is slightly above the statewide average.

Within the region, median househ old income is the highest in Placer and El Dorado Counties. The 2020 median income levels are summarized in the following table.

Areas of concern for the Sacramento region are the slower pace of income growth and an increase in income inequality. House hold income distribution in the region comparted to the State of CA is summarized below.

REGIONAL ANALYSIS 24
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

CO NC LUS I ON
The region has experienced several economic cycles over the past 25 years. The growth periods were largely attributed to the area's quality of life, affordable housing costs and proximity to the San Francisco Bay region. The abundance of available land in the region however contributed to high speculation which resulted in wide swings in development cycles and real estate prices. The most recent down cycle was attributed partly to widespread economic factors for the United States related to greatly reduced economic activity resulting from measures enacted to slow the spread of the coronavirus pandemic. Going forward, the region will still be vulnerable to large economic swings primarily because the economy is not as diversified as many MSA’s due to a heavy reliance on government jobs.

The mid -to-long term outlook for the region remains encouraging due to strong fundamentals. The region’s affordability and attractiveness with respect to business in -migration, population growth, and development opportunities are considered embedded long -range assets. The Sacramento region experienced growth in the number of jobs over the past five years, and it is re asonable to assume that growth in employment as well as population will continue to occur in the future.

Employment regionwide has exhibited strong growth amid the pandemic, offsetting almost all of the losses experienced during the pandemic. As of May 2022, Sacramento's unemployment rate was trending at pre-pandemic levels. While the distribution of COVID -1 9 vaccines is promising in further improving unemployment and the health of the economy, the declining U.S. and world GDP due to the Ukraine/Russia conflict, looming supply chain constraints on merchandise, inflation, rising interest rates and reduced monetary stimulus present headwinds that may temper with the region’s pace of recovery on a short basis.

On a long-term basis, it is anticipated that t he Sacramento MSA will continue to grow and prosper. This future growth should provide an economic base that supports continued demand for real estate of all types on a long-term basis.

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RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

NEIGHBORHOOD ANALYSIS

LOCATION
The subject neighborhood is considered the Railyards Specific Plan Area . This neighborhood is located just north of Central Business District of Sacramento and south of the River District. The area once served as the western terminus of the 1860s Transcontinental Ra ilroad. Over the past decade there has been planning and redevelopment of the 244 -acre Railyards Specific Plan Area into a mixed -use, transit - oriented development.

NEIGHBORHOOD ANALYSIS 26
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Land Use
The Sacramento Railyards is a large urban tract of land adjacent to Sacramento’s Central Business District.

It is a redevelopment project that was formerly the Southern Pacific Railyards. The 244-acre site is planned for five distinct land use areas. The map below is an overview of these areas.

At the southern end of the Railyards is the Depot District . The Southern Pacific Depot, an intermodal facility provides a civic front to the Railyards area and is the most familiar feature in this district. This area is anchored by Sacramento Valley Station, which is an Amtrak railway station. The City of Sacramento used $40 million in federal funds, as well as $31 million in State and Local funds to move tracks to improve access and to make room for the intermodal development. To the east of the Sacramento Valley Station is several city blocks that are planned for high -density office development. The Sacramento County Superior Courthouse, a $493 million, 538,000 square foot project is under development on one of these blocks. Construction commenced in November 2020 a nd the estimated completion date is December 2023. Immediately south of the Depot District is a Federal Courthouse, County of Sacramento buildings and office buildings in the Central Business District.

Located immediately north of the Depot District is the Central Shops District. The Central Shops District is improved with seven large concrete, brick, and metal industrial buildings containing over 300,000 square feet. The buildings have historic designation and are planned for redevelopment for re tail, entertainment and creative office uses. A pedestrian tunnel connects the Sacramento Valley Station to the Central Shops. The California State Park’s Railroad Technology Museum plans to occupy two of the shop buildings.

The Riverfront District is l ocated adjacent to the Sacramento River and is planned for ± 600 room hotel project and a 2.0-acre park. Interstate Highway 5 is elevated at this area runs north/south through this area. This land is undeveloped.

NEIGHBORHOOD ANALYSIS 27
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL The West End District is largely vacant land. Railyards Boulevard is constructed and connects with 5th, 6th, and 7th Streets. The AJ, a 345-unit apartment project is under construction in this area. This $140 million project will be a 5 and 6-story project with ground floor retail. The project will feature 69 units set aside for affordable housing. The project received several grants and subsidies including an $4.5 million tax- exempt bond, a $15 million State grant and $ 30 million in tax cre dits to help with the feasibility of the project.

Kaiser Foundation Hospital is the owner of 17.407 gross acres per assessor parcel maps (or 17.14 taxable acres) in the West End District. Kaiser purchased the property to develop a 1.2 million square foot regional hospital on the site. There has been little predevelopment activity on the property since acquiring the property. The development of this property as a hospital or medical campus remains uncertain at this time.

The East End District is vacant land. The area east of 7th Street is the site where there had been discussions and negotiations with Sacramento Republic for development of an MLS soccer stadium. City officials knowledgeable of the situation indicate low chances of an MLS franc hise being awarded to Sacramento Republic after years of planning . As a back -up plan, the developer and Sacramento Republic are discussing a much smaller stadium for their United Soccer League (USL) play . The development of this land for any soccer stadium is uncertain and has not been considered in our analysis.

The soccer stadium site was planned on 15 acres. As part of the planning purposes, the City planned the area for a Soccer Stadium. As w as discussed above , the planned soccer s tadium is uncertain. As an alternative, there is a Land Use Variant in place would accommodate construction of 750 residential units, 30,700 sf of retail, and 46,050 sf of flex space should a soccer stadium not be built. A 5.0-acre public park is planned for the northern area of this district. The anticipated build -out of this area is expected a 5-6 story office and residential projects.

A land use map of the Railyards is shown below. The map is outdated as it still shows the MLS soccer stadium, whic h is not likely to happen. No consideration has been given to any possible stadium development for this appraisal.

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RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

The Sacramento Railyards is generally flat, reflecting the historic filling of the land over the past century.

It is situated on alluvial deposits of the Sacramento and American Rivers. Near the surface and to depths of 30 to 50 feet are deposits of silt and sand, including fill placed over the area in the past 130 years. The majority of the Railyards area is 5 to 10 fee t above the 100 -year floodplain and the elevation of the downtown and Richards Boulevard area. The Riverfront area highlighted in purple in the map above is owed by DRV. The State of California owns the land immediately adjacent to Sacramento River.

A century of industrial activities within the Railyards resulted in soil contaminations in the surface, subsurface soils as well as the groundwater. Since 1984, Southern Pacific Transportation Company (SPTCo) has been in the process of cleaning up soils an d ground water contamination through an Enforcement Agreement between SPTCo and the State Department of Toxic Substances Control (DTSC). Remediation will continue in a phased manner, based on a schedule and standards of clean-up dictated by DTSC.

Access and Linkages
The Sacramento Railyards is connected to the existing downtown street grid at 5th, 6th, and 7th Streets, North B, F and G Streets, as well as Jibboom Street and Bercut Drive. Access from the Railyards to I-5 is either from the I Street on -ramp at 3 rd Street or the Richards Boulevard on -ramp. Both of these access points to I-5 are either heavily congested and/or not conveniently located to the Railyards. While the overall linkage within the Railyards is good it is constrained as it has belo w average linkages to I -5 and West Sacramento.

The Sacramento Railyards is connected to West Sacramento via the I Street Bridge which was built in 1911.

This bridge has rail on the lower level and pedestrian and automotive lan es on the upper level . The existing I Street Bridge is 110-years old, and the lanes are too narrow to serve buses . The current daily traffic on this bridge is 12,730 cars.

The cities of West Sacramento and Sacramento have been working on a replacement bridge over the past decade. This is needed as the expected daily demand is projected to grow considerably over the next several decades. Without a new bridge the demand will be 25,410 cars per day in 2040. With a new bridge the expected demand would rise to 33,030 car s per day in 2040. The proposed new bridge has construction design complete, and it received NEBA clearance in 2019. The project’s estimated $200 million cost will likely be funded from local, state, and federal sources. The City of Sacramento and West Sacramento have been working with Caltrans to find a funding solution but at the present time there remains no clear path to receiving funding for the start of the project.

In January 2022 the U.S. Department of Transportation launch ed the nation's largest bridge repair program funded by money included in President Biden's infrastructure package recently approved by Congress. Leaders in Sacramento and West Sacramento are working with Caltrans to approve the replacement of the I Street Bridge as one of the first projects to benefit from this new funding.

While local representatives believe the new Bridge has a high certainty of occurring the timing is far from certain today. The scheduled construction start date of 2023 however appears to be in jeopardy. The new I Street Bridge is considered an important linkage for the Railyards especially later in the development cycle. Planning officials at the City of Sacramento indicate the new bridge is a not a condition of approvals for development of the Railyards. The uncertainty of the new bridge is considered a development risk which has been considered in the valuation of the property.

NEIGHBORHOOD ANALYSIS 29
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

The Sacramento Valley Station is located along the southern end of the Railyards. This station serves as an intermodal hub for Amtrack train, bus service, light rail, and freight rail. A pedestrian tunnel from the Sacramento Valley Station is in place and will connect/open to the Central Shops when these historic buildings are renovated.

Demand Generators
The Sacramento Railyards is adjacent to the Downtown/Central Business District (“CBD”) which contains the highest concentration of office space within the Sacramento region. The State Capitol grounds is located several blocks south of the Sacramento Railyards at Capitol Mall and 10th Street. Most of the major state agencies are lo cated south and east of the State Capitol where there are 24 state owned buildings containing approximately 6.9 million square feet. There are three new state office project s either under construction or recently completed. The new 21-story California Natural Resources building at P and 7th streets was designed for 4,400 employees. An 11-story building at O and 10th streets is being made for 1,286 employees. And the 1,250,000 square foot Richards Boulevard Complex will be home to another 4,650 state workers, according to figures provided by the state Department of General Services.

In addition to the state office buildings, there are Sacramento City and Sacramento County complexes as well as several federal buildings. Government, particularly the state of California agencies, has a large impact on real estate in the subject neighborhood. The total office inventory, excluding the government

NEIGHBORHOOD ANALYSIS 30
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL owned office buildings is approximately 21 million square feet. The CBD and Midtown are largely built out and new development would be from redevelopment of older properties in those submarkets.

Outlook and Conclusions
The Sacramento Railyards is one of the largest urban in -fill development sites in the United States. It is adjacent to the Sacramento CBD, which is the most intensely developed area in the region consisting of mid and high-rise office buildings, several large hotels, a variety of retail projects and the State Capitol.

Government, particularly the State of California, is by far the largest and most influential property user in the adjacent neighborhood. The CBD and Midtown area has seen many redevelopment and new real estate projects constructed over the past decade. The central area of the City of Sacramento is considered one of the most desirable sub -markets in the region. The Sacramento Railyards, being adjacent to this area is expected to see greater development opportunities in the coming decades given the largely built- out status of the adjacent CBD. In the interim, the CBD and Midtown markets wi ll continue to be negatively impacted by the pandemic. This is the result of slower office leasing activity, high percentage of workers working from remote and lower foot traffic which has impacted the retail establishments.

Looking ahead over the next co uple of decades , the Railyards is expected to see significant new construction activity in the city of Sacramento downtown area.

HISTORY OF THE SACRAMENTO RAILYARDS 31
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

HISTORY OF THE SACRAMENTO RAILYARDS
The Sacramento Railyards, a 244-acre property is located immediately north of the Sacramento CBD. The property was formerly the Central Pacific Railyards which was developed in 1855. The property was used for railyard maintenance. The shops in the Railyards were used for locomotive repairs, general maintenance and, occasionally, creatio n. The yards steadily expanded, becoming the biggest railroad facility west of the Mississippi River and employing approximately one -third of all Sacramento area workers in the early decades of the 20th century. Below is a summary of some of the milestones in the Railyards over the past two decades.

TRA N SFE R O F R AIL YA R DS TO THO M A S E NTE RP RI SE S In 2006 the Railyards property was sold to Thomas Enterprises who under took entitlement work to transform the 244 -acre site into a high -density urban development. At the same time, Parcel A was transferred concurrently to the City of Sacramento, who had plans for expanding the existing train station into an intermodal facility. Around 2010 Thomas Enterprises defaulte d on a loan and Inland America, the lender, foreclosed on the property.

S AC R AM E N TO TR A IN S T A TIO N
Located along the southern portion of the Sacramento Railyards is the Train Station which was a terminal of the Central Pacific Railroad. The present building, designed by the San Francisco architectural firm of Bliss and Faville for the Southern Pacific Railroad, was built in 1926 in the Renaissance Revival style.

Decorative features include a red tile roof and terracotta trim, as well as large arches on the main facade.

Inside, the waiting room has a mural by artist John A. MacQuarrie that depicts the celebration of the groundbreaking for the First Transcontinental Railroad on January 8, 1863, in the City of Sacramento. With the creation of Amtrak on May 1, 1971, the station became Amtrak-only. The station was listed on the National Register of Historic Places in 1975 as Southern Pacific Railroad Company's Sacramento Depot.

After the City’s purchase of the 33-acre site, they embarked on renovation plans to create a 21 st century intermodal facility. The station remodel with new platforms and rail lines were substantially completed in 2017. The City has further construction plans for the Sacramento Valley Station, but most are still under review and years away from construction start. Today, t he Sacramento Valley Station serves as an intermodal hub for Amtrak train and bus service, Sacramento Regional Transit light rail, regional bike trail and pedestrian connections, and as the future station for California High Speed Rail. It is the seventh busiest Amtrak station in the country, and the second busiest in the Western United States with thousands of riders a day and over a million passengers per year. It is served by 38 daily Amtrak and Amtrak California trains and many Amtrak Thruway Motorcoaches. It is also the wester n terminus of the Sacramento RT Gold Line light rail system and the Route 30 bus serving Sacramento State University.

TRA N SFE R O F R AIL YA R DS TO DO W N TO W N R AIL Y A R DS VE NT URE LLC Inland American, the owner of the Railyards from 2010 to 2015 continued to compl ete environmental clean-up and completed several major roads including the extension of 5 th, 6th, and 7th Streets over and under the relocated rail lines. In 2014 they sold a city block of the Railyards to the State of California for a new courthouse (now under construction). In 2015 Inland American and Larry Kelly, a prominent HISTORY OF THE SACRAMENTO RAILYARDS 32
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Sacramento area developer entered into a joint venture with Inland to develop the property. The new entity known as Downtown Railyard Venture, LLC was formed to take the Railyards to the next level. Mr.

Kelley’s early vision of the site included not only transforming the Railyards into a major urban neighborhood but also possibly landing a Major League Soccer franchise which would entail a new stadium to be built in the Railyards. In 2019, Mr. Kell ey’s group bought out Inland’s interest in the property and brought in a new locally based investor group. DRV has been successful in achieving several major notable milestones. Some of these include:

• Completion of over $70 million in infrastructure work , including commencement of the $34 million Storm Drain Outfall project.

• Continued refinement of entitlement work , including the Sacramento Railyards Specific Update Plan in 2016.

• Completed major land sale to Kaiser Hospital in 2019.

• Commencement of construction as a JV partner of The AJ, a six-story 345-unit mixed use project with a 2022/2023 completion date. A total of $74.2 million in construction costs have been incurred and paid.

• Parking Garage Design (Lot 1 7), a 1, 421-stall garage is anticipated to commence construction within the next 3 years, however there can be no assurance that milestone is met. Delays to the construction of the parking garage will impact development in the CFD. Tentatively scheduled to open to correspond with the termination of the temporary surface parking lots.

• Design of Historic Shops, including a signed lease to Live Nation as an anchor tenant.

• Design of The Foundry, a proposed 6 -story, 2 building, 313K SF office project (Lots 12 A&B). A prominent brokerage company is marketing the space to local and Bay area firms.

• Design and approvals of Wong Center, a proposed 150-unit low-income project (Lot 46A). This is a j oint venture with Mutual Housing and has secured a $3.5 million loan from the City of Sacramento as well as $21.3 million in tax credits. This $55 million project has recently commenced construction.

• Franchised two hotel projects on Lots 15 A & C. 356 total rooms with an uncertain start date.

• Design & negotiations with Sacramento Republic FC for development of a soccer stadium on Lots 52a through 52e.

ENT ITL E M E NT WO R K AT T HE R AIL Y A RD S
The Railyards is equivalent in size to the existing downtown CBD and holds significant historical and cultural importance to the City of Sacramento. The project features the preservation and partial reuse of the "Central Shops" buildings originally used for railroad maintenance and the former Southern Pacific Sacramento Depot; now known as Sacramento Valley Station.

HISTORY OF THE SACRAMENTO RAILYARDS 33
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL The Central Shops consist of the existing seven historic railyard buildings from the original Central Pacific Railroad Yard, constructed between 1868 and 1917. In December 2007 the City of Sacramento listed the Central Shops Historic District as a Historic District on the Sa cramento Register of Historic & Cultural Resources. Five of the shop buildings are planned for renovation by DRV. These buildings total 247,832 square feet and will include open plazas on a 9-acre site. Adjacent to the DRV shop buildings are two railyard buildings owned by the State of California. These are planned to be restored and used a as railyard museum. More details of the Central Shops are shown later in the report.

The new ownership was able to revise the existing entitlements of the pro ject. In October 2016 , the Sacramento Railyards Specific Update Plan was approved. This plan superseded the original Railyards Specific Plan. The Railyards Specific Update Plan is the overarching policy document that guides development within the Railyard s Plan Area, but it works together with three other documents that provide specific guidance on matters relating to urban design, development regulations, and permitting:
the Railyards Design Guidelines, the Railyards Special Planning District Ordinance (S PD), and the Central Shops Historic District Ordinance.

The plan for the Railyards project is to expand the role of the Central City as Sacramento’s regional destination for employment; commerce; government; sports and entertainment; housing; and education, culture, and tourism and to create a transit‐oriented mixed‐use district as an integral extension of the Central Business District. DRV’s plan of the Railyards is to create a dynamic 24‐hour mixed‐use, urban environment that provides a range of complem entary uses, including cultural, office, hospitality, sports and entertainment, retail, healthcare, educational, and open space; and a mixture of housing products, including affordable housing. The plan will transform the Railyards from an underutilized an d environmentally contaminated industrial site into a transit‐oriented mixed‐use urban environment. In October 2016, the City Council approved planning entitlement for the Sacramento Railyards. The project includes the following land use approvals:

▪ 6,000-10,000 dwelling units
▪ 514,270 square feet of retail
▪ 2,757,027 - 3,857,027 square feet of office use
▪ 771,405 square feet of flexible mixed use
▪ 1,228,000 square feet of medical campus
▪ 1,100 hotel rooms
▪ 485,390 square feet of historic and cultural uses
▪ 33 acres of open space.
▪ A soccer stadium with 19,621 seats, and potential to expand to approximately 25,000 seats.

A land use/zoning map of the Railyards is shown below.

HISTORY OF THE SACRAMENTO RAILYARDS 34
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Zoning/Land Use Map

Note: The land immediately adjacent to the Sacramento River is owned by the State of California.

HISTORY OF THE SACRAMENTO RAILYARDS 35
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

RE C E NT L A N D S AL E DE VE L O PM E NT S
The development of the Railyards ha d been advanced by several announcements. In 2019 Kaiser Foundation Hospital purchased 17.407 gross acres (or 17.14 taxable acres) in the Railyards. They plan to develop a 1.2 million square foot regional hospital and medical center. There has been no entitlement work on the hospital, and it is uncertain if or when the hospital and/or medical center will get built.

Another announcement back in 2016 was the plan to sell a site east of 7th Street to Sacramento Republic FC, who plan ned to build a 21,000 -seat sports soccer stadium. In February 2021, there was a set -back when it was announced that Ron Burkle, the lead investor in the soccer club announced he was backing out on the deal citing Covid issues and overall cost of the investment. In December 2021, another set- back occurred when it was announced that another city had been given the MLS franchise. The chances of a soccer stadium being built to the size and scope as originally planned is very low.

Kaiser Land
Site of Possible Soccer Stadium
The AJ
Wong Center
Out-Parcel – Future Railroad Museum

HISTORY OF THE SACRAMENTO RAILYARDS 36
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Dated Image showing the proposed MLS Soccer Stadium. Changes in land use for that site are likely.

August 2006 Aerial with Train Tracks at Original Location

HISTORY OF THE SACRAMENTO RAILYARDS 37
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

August 2012 – Train Tracks Being Relocated & Start of bridge construction of 5th and 6th Streets. 7th Street underpass and extension to Richard Boulevards completed.

January 2015 - Tracks relocated and 5, 6, & 7th Streets completed

HISTORY OF THE SACRAMENTO RAILYARDS 38
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

The photograph above is from 1923-1926

The image above is an Artist Rendition (not an illustration of future build-out)

SITE DESCRIPTION 39
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

SITE DESCRIPTION

INTRODUCTION
The description of the site is based upon our physical inspection of the property, information available from the client, and public sources.

The subject property consists of 16 existing assessor parcels totaling 187.705 gross acres of land of which 117.83 acres are taxable acres. Below is a summary of the subject land area.

The subject is a portion of the Sacramento Railyards. Below is a summary of the subject parcels.

Category/Ownership No Lots Acres
DRV Vacant Land 76 85.782
DRV Owned Historic Shops & Open Space 12 9.37
Kaiser Vacant Land 8 17.14
The AJ 1 2.88
Wong Center 1 2.658
Taxable Acres 98 117.83
Storm Drain Parcel 1 0.52
Lots Comprised of Future Streets 2 2.14
Parks and Open Space 18 31.15
Non-Taxable Lots 21 33.81
Lots Under Tentative Map 119 151.64
Proposed Streets in T-Map 36.07
Total Lots/Gross Acres 187.705
Land Area Summary
Parcel No. Parcel From Title Report Ownership Land Area 001-0064-011 6 Downtown Railyard Venture, LLC 0.110
001-0064-012 7 Downtown Railyard Venture, LLC 0.090
001-0064-013 8 Downtown Railyard Venture, LLC 0.070
002-0010-069 3 Railyards Lot 48, LLC 2.880
002-0010-074 1 Downtown Railyard Venture, LLC 42.290
002-0010-075 2 Downtown Railyard Venture, LLC 112.900
002-0010-076 4 Downtown Railyard Venture, LLC 9.300
002-0010-077 5 Wong Center at the Railyards, L.P. 2.658 002-0270-001 9 Kaiser Foundation Hospital 1.139
002-0270-002 9 Kaiser Foundation Hospital 3.500
002-0270-003 9 Kaiser Foundation Hospital 3.310
002-0270-004 9 Kaiser Foundation Hospital 4.169
002-0270-005 9 Kaiser Foundation Hospital 0.769
002-0270-006 9 Kaiser Foundation Hospital 0.850
002-0270-007 9 Kaiser Foundation Hospital 2.410
002-0270-008 9 Kaiser Foundation Hospital 1.260
Total 187.705
Assessor Parcel Summary
SITE DESCRIPTION 40
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

SUBJECT LOCATION
The subject is a part of a 244‐acre Plan Area is located immediately north of the C BD, east of the Sacramento River, south of North B Street and west of the federal courthouse and the Alkali Flat neighborhood. The site sits between the confluence of the Sacramento and American Rivers, where the initial settlement of the City of Sacramento was founded in 1849 along the banks of the Sacramento River.

The Railyards is in close proximity to Old Sacramento, Downtown, Chinatown, the federal courthouse and local government offices, the Richards Boulevard industrial district (River District), and the historic Alkali Flat neighborhood. A key element of this Plan is to knit the surrounding areas to the new districts and neighborhoods in the Railyards and allow for the downtown circulation grid to extend northward connecting to Richards Boulevard and the River District.

SITE DESCRIPTION 41
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

SITE DESCRIPTION 42
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

SITE DESCRIPTION 43
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

RAI L YARD S TEN TA TIVE MAP
The Railyards T entative Map was approved on November 10, 2016. There are numerous conditions of approval for achieving a Final Subdivision Map. These conditions of approval are typical for subdivision maps and are on-going with the final mapping. The following lot schedule is from the tentative map.

The tentative map was approved subject to numerous conditions of approval being met prior to final map approval. The developer has completed many of the conditions of approval and others remain to be completed. There has been 1 final map approved for the Railyards. Final Map 409 BM 1, Unit No. 2 was approved in January 2019. The map is for Lots 1 -8, being portion of Parcel 2, also known as the Kaiser Hospital property. The tentative map expiration coincides with the Development Agreement (“DA”) term of 20 years dated November 10, 2016. Section 5.3 of the Development Agreement establishes that the tentative map (and all related entitlements) is valid for the term of the DA. The development agreement has two 5-year extensions subject to meeting certain development milestones. A complete list of the conditions of approval as well as the development agreement are contained in the addendum of this report.

Lot # Gross Acres Taxable Acres Comment Lot Gross Acres Taxable Acres Comment Lot Gross Acres Taxable Acres Comment 1 0.56 0 Future Park 15 d 0.65 0.65 52 b 2.27 2.27 Possible Stadium Site 2 a 1.14 1.14 Kaiser Site 17 1.74 1.74 Planned Parking Garage 52 c 2.24 2.24 Possible Stadium Site 2 b 3.5 3.5 Kaiser Site 18 0.38 0.38 Open Space for Shops 52 d 4.21 4.21 Possible Stadium Site 2 c 3.31 3.31 Kaiser Site 19 0.31 0.31 Open Space for Shops 52 e 2.91 2.91 Possible Stadium Site 2 d 4.17 4.17 Kaiser Site 20 1.55 1.55 Historic Shop 53 0.5 0 Open space 2 e 0.77 0.68 Kaiser Site 21 b 2.38 2.38 Open Space for Shops 56 a 0.56 0.56 2 f 0.85 0.76 Kaiser Site 21 a 0.65 0.65 Open Space for Shops 56 b 0.73 0.73 2 g 2.41 2.32 Kaiser Site 21 c 0.66 0.66 Open Space for Shops 56 c 0.73 0.73 2 h 1.26 1.26 Kaiser Site 22 0.19 0.19 Open Space for Shops 56 d 0.87 0.87 3 a 0.94 0.94 23 0.27 0.27 Open Space for Shops 57 a 0.24 0 Open space 3 b 0.91 0.91 24 0.62 0.62 Historic Shop 57 b 0.45 0.45 3 c 0.79 0.79 25 1.04 1.04 Historic Shop 57 c 0.74 0.74 3 d 0.76 0.76 26 0.46 0.46 Historic Shop 57 d 0.72 0.72 4 a 0.83 0.83 27 0.86 0.86 Historic Shop 57 e 0.74 0.74 4 b 0.94 0.94 28 2.32 0 Historic Shop 58 a 0.58 0 Open Space 4 c 0.8 0.8 30 4.77 0 Future Park 58 b 0.87 0.87
4 d 0.93 0.93 31 2.14 0 Future Park 58 c 0.91 0.91
4 e 0.08 0 Water Tower 32 0.88 0 Future Park 59 a 0.63 0.63 5 0.66 0.66 33 a 0.73 0 Future Park 59 b 0.65 0.65
5 a 0.64 0 Future Street 33 b 1.17 0 Future Park 59 c 0.61 0.61 6 a 1.11 1.11 33 c 1.06 1.06 Freeway/Possible Parking 59 d 0.64 0.64 6 b 1.13 1.13 33 d 1.03 1.03 Freeway/Possible Parking 60 0.42 0 Future Park 6 c 1.01 1.01 34 1.11 0 Future Park 65 0.41 0 Future Park 6 d 1.03 1.03 35 5.14 3.14 2.0 Acres of Park 68 1.51 0 Future Park 7 a 0.92 0.92 40 1.86 1.86 69 a 0.72 0.72
7 b 0.85 0.85 43 a 1.26 1.26 69 b 1.11 1.11
7 c 0.87 0.35 Storm Drain 43 b 1.34 1.34 69 c 0.58 0.58 7 d 0.77 0.77 44 1.65 1.65 69 d 0.86 0.86
8 a 0.76 0.76 45 0.22 0 Open Space 70 a 1.08 1.08
8 b 1.17 1.17 46 2.66 2.66 Proposed Wong Center 70 b 1.06 1.06 8 c 0.87 0.87 46 b 0.72 0.72 Remnant of Wong 70 c 0.55 0 Future Park 9 a 0.85 0.85 47 a 1.58 1.58 70 d 1.36 1.36
9 b 0.83 0.83 47 b 1.61 1.61 71 1.82 1.82
9 c 0.24 0.24 48 a 2.88 2.88 The AJ 72 9.28 0 Future Park 10 1.5 0 Future Street 49 a 0.94 0.94 73 a 1.34 1.34
12 a 0.94 0.94 Foundry Office 49 b 2.68 2.68 73 b 1.57 1.57 12 b 0.81 0.81 Foundry Office 50 1.52 1.52 458 N B 0.11 0.11 15 a 0.77 0.77 Planned Hotel 51 a 3.36 3.36 464 N B 0.09 0.09 15 b 0.67 0.67 51 b 1.65 0 Police/Fire Station 468 N B 0.07 0.07 15 c 0.76 0.76 Planned Hotel 52 a 2.99 2.99 Possible Stadium Site Total 151.88 117.83 Subject by Lot No.

Category/Ownership No Lots Acres West of
7th St.

East of
7th St.

DRV Vacant Land 76 85.782 56.502 29.28
Historic Shops & Open Space 12 9.37 9.37 0
Kaiser 8 17.14 17.14
AJ 1 2.88 2.88
Wong 1 2.658 2.658
Buildable/Taxable Acres 98 117.83 88.55 29.28
Buildable Land Area Summary
SITE DESCRIPTION 44
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL 51b

Kaiser Site DRV Parcels
AJ Apartments Not Part of Property
Open Space/Parks Central Shops
Wong Parcel
SITE DESCRIPTION 45
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

SI TE CH ARAC TERI ST IC S
The Railyards area is generally flat, reflecting the historic filling of the land over the past century. It is situated on alluvial deposits of the Sacramento and American rivers. Near the surface, and to a depth of 30 to 50 feet, are deposits of silt and sand. Geotechnical analysis indicates that conditions within the site are unlikely to pose significant constraints to development. It is anticipated that the kinds of foundations required for the different building types in the Railyards will be similar to those required elsewhere in downtown Sacramento.

Since the majority of the site has long been used for railroad and industrial uses, it is mostly devoid of vegetation with the exception of riparian vegetation along the Sacramento River. A century of industrial activity within the Railyards site has resulted in extensive soil and groundwater contamination. Significant efforts have been undertaken over the past decades to document the nature and extent of contamination, and to remediate the contaminants to a level that will allow for redevelopment of the site for a variety of land uses, subject to certain development standards. In 2010, the Central Shops buildings were largely abated of lead, asbestos, and PCBs.

CENTRA L SH O PS
The Central Shops District represents the historic core of the Railyards site. The Central Shops consist of the existing seven historic railyard buildings from the original Central Pacific Railroad Yard, constructed between 1868 and 1917, the turntable st ructure and a water tower. The Central Shops served as the principal shops of the Pacific Lines of the Central Pacific system (later merged into Southern Pacific system) between 1868 and 1990, overseeing subsidiary shops from Portland, Oregon, and Ogden, Utah, to San Francisco and Los Angeles, California. During its first 80 years or so the Central Shops complex had been recognized as the largest integrated industrial complex west of the Rocky Mountains. As late as World War II they retained industrial capabilities found nowhere else in the West, such as the ability to produce the giant metal rollers for the wartime Kaiser steel plant built at Fontana in Southern California. The Central Shops were by far the largest single employer in the Sacramento regio n until after World War Il, with workers playing a major part in the economic, social, cultural, and political life and development of the Sacramento region.

Architecturally, the shop buildings qualify as being representative examples of typical mid -19th century to late Victorian industrial architecture, some portions were rebuilt in the early 20th century. They feature classic samples of decorative and architectural details from their various periods of construction. In December 2007 the City of Sacrame nto listed the Central Shops Historic District as a Historic District on the Sacramento Register of Historic & Cultural Resources.

There are 5 central shops on the subject property. Two other shop buildings are in the Sacramento Railyards are owned by the State of California and not included in the CFD. The total building area of the shops is 247,832 square feet. These buildings have historical significance for the region and are planned to be restored. Below is a summary of the buildings.

SITE DESCRIPTION 46
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

The 2018 Updated Financing Plan and DRV expect historic tax credits and New Market Tax credits will be awarded to help fund the construction costs.

Building Size
Building 1 - Car Machine Shop 27,670
Building 2 - Planning Mill 62,965
Building 3 - Car Shop 68,434
Building 4 - Blacksmith Shop 27,738
Building 5 - Paint Shop 61,025
Intermodel Entrance
Total 247,832
Central Shop Buildings

SITE DESCRIPTION 47
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

PAI NT SH O P BU I LDI N G DIA GRA M

SITE DESCRIPTION 48
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

TRANS P ORTA TI O N A ND ROADWA Y S
The area includes the recently built Railyards Boulevard, which runs east-west through the center of the site up until 7 th Street. Other roads constructed into the Railyards includes 5th, 6th, and 7th Streets .

Portions of 5th and 6th Streets still need to be improved north of Railyards Boulevard.

There are several roads planned within the Tentative Map that need to be constructed. Roadways that will be extended, expanded, or modified to provide direct access within the Railyards site include Bercut Drive, Jibboom Street, F Street, G Street, as well as North B Street, 8th Street, and North 10th Street. The map below shows existing and proposed roadways.

Roads Constructed Roads to be Constructed

In addition to providing imp roved circulation within the site and to adjacent neighborhoods, the local roadway network that will serve to connect the Railyards site include the following:

Interstate 5: Runs north‐south through the western end of the site. I-5 is accessible from I Street on- ramp or Richards Boulevard on-ramp. Off-ramps from I-5 include Richards Boulevard or J Street.

7th Street: Provides main access to the site from I Street (south) or Richards Boulevard (north).

5th and 6th Streets: These roads link the Railyards to I Street. Future extensions of these roads will link to North B Street

Jibboom Street and Bercut Drive will also provide alternate riverfront access from the Richards Boulevard/I-5 Freeway interchange, connecting directly to the west end of Railyards Boulevard.

Bercut Drive, an existing roadway, is primary a western outlet for Railyards Boulevard. The street, which currently begins near its future intersection with Railyards Boulevard and extends north of Richards Boulevard, runs along the eastern edge of Interstate 5, which is elevated as it travels through the Plan

SITE DESCRIPTION 49
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Area. Bercut Drive will be extended southward to provide access to the Riverfront and Central Shops districts.

UT IL IT IE S
Existing water service in the Central City area, including the Railyards site, is provided by the City of Sacramento. Recent expansions of the two City Water Treatment Plants have increased the maximum capacity of these facilities and well field and planned future water supply is estimated to be adequate to serve the planned level of development in the Railyards area. Existing water supply infrastructure is in place along 5th Street, 6th Street, 7th Street, Railyards Boulevard, and into the Sacramento Valley Station and the Central Shops, however most of the Railyards site lacks a water distribution system. Both existing and proposed transmission mains will support the distribution system. The City recently constructed a new 42-inch transmission main that traverses through the west side of the Railyard property. This pipeline is a critical conduit for water delivery from the water treatment plant, located to the north of the Railyards, to the downtown area. Resolution 2016-0390 is the approval of water supply assessment for the Railyards.

Sanitary sewage from most of the site will be conveyed to the vicinity of 3rd and I Streets, where it will enter a proposed new sewer on 3rd Street. A small area along 7th Street, south of the relocated main line railroad tracks will continue discharging into the existing combined sewer flowing east to 7th Street. This existing sewer serves the existing Sacramento Valley Station but will not be used for the new Sacramento Valley Station. All sewage will flow to 3rd S treet, except for a small portion of the site in the low area along 7th Street and H Street, which will flow to the existing combined sewer in 7th Street.

Shown on the following pages are existing and proposed water and sewer lines.

SITE DESCRIPTION 50
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Existing Water Lines

Proposed Water Lines

SITE DESCRIPTION 51
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Existing Sanitary Water Lines

Proposed Sanitary Water Lines

SITE DESCRIPTION 52
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

ST ORM WATER DRA IN
The stormwater outfall and pump station are the largest utility infrastructure required for the build -out of the Railyards. This project is currently under construction at a cost of $34 million. Included in this cost is the construction of the adjacent Bercut Road. The outfall and pump station are located on a portion of Lot 7C. Resolution 2016-0392 is the approval of stormwater outfall facility plans.

FIRE STA TI O N
The Railyards Specific Plan indicates that the probable fire station would likely be part of a multi -story mixed use structure. A City of Sacramento Planner confirmed there has been no change to this plan. No lots have been designated for a fire station.

SCH O O L SI TE
According to the Railyards Specific Plan, traditional school site s are not likely to be developed at the Railyards due to environmental issues and high cost of the land. Reportedly, in place of school site dedications the Railyards Specific Plan will be charged in-lieu fees. School mitigation fees are part of the Railyards development fees.

PARK SITE S
The subject property has a number of lots that will dedicated for public parks or Exclusive Recreation Easement (“ERE”). The Exclusive Recreation Easement (“ERE”) park lots will be owned in fee by DRV with the City of Sacramento holding a perpetual recreation easement that provides for the park use. The public use of these areas is generally consistent with other city parks. The City Park District will be responsible for maintenance and insurance.

ENVIR ON MEN TA L CO NCE RNS & HAZ ARD OUS SU B ST ANCE S The Railyards site up until the late 1990’s had experienced continuous industrial use since the 1860s as a locomotive and railroad car assembly, building, repair, and refurbishing facility. In carrying out these functions, the site ha d supported a multitude of industrial activities related to the railway, including foundry and machine work, wheel truing, forging, blacksmithing, painting, sandblasting, cleaning, and degreasing, lubricating, metal part fabrication, battery reconditioning, and fabric and upholstery work.

Many of these activities involved the use of substances and materials that are now known to be toxic or otherwise hazardous.

The first subsurface environmental investigations at the Railyards began in 1982 as a result of a Division of Occupational Safety and Health inspection. The matter was referred to DTSC’s predecessor agency, the Department of Health Services (DTSC). Under DTSC’s oversight, g roundwater monitoring wells were installed. In 1983, DTSC and the United States Environmental Protection Agency conducted a joint investigation of the Railyards site and identified several violations of the state hazardous waste control laws and the Resour ce Conservation and Recovery Act (“RCRA”). As a result, in 1984 DTSC and the Southern Pacific Transportation Company entered into a Settlement Agreement, which focused on remedial actions in the northern part of the Railyards. In January 1988, DTSC listed the Railyards as a State Superfund site.

Significant soil, soil vapor and groundwater cleanup activities have been implemented throughout the Railyards. Union Pacific Rail road (UPRR) is the responsible party for cleanup activities under a 1988 SITE DESCRIPTION 53
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Enforceable Agreement with DTSC. Soil remediation activities in the majority of the Railyards Plan Area have been completed. Groundwater remediation by UPRR is continuing under a DTSC‐approved plan and expected to be completed in 20‐30 years. The areas where soil and soil vapor (soil gas) remediation have been completed have been certified by DTSC. As part of the certification process, a DTSC‐approved land use covenant (LUC) has been recorded against the certified area. A LUC provides the terms, conditions, and criteria for development and use of the certified area.

A LUC between DTSC and the Downtown Railyard Venture, LLC, the current majority property owner, was recorded against most of the Railyards Plan Area on September 30, 2015. The 2015 LUC requires compliance during construction activities with a Railyards‐specific soil and groundwater management plan approved by DTSC. The DTSC‐approved 2015 LUC generally includes the following:

• All proposed land uses, including construction and maintenance of utility corridors and street rights‐of‐way, are allowed subject to compliance with the stated terms and conditions.

• A requirement for a DTSC‐approved soil and groundwater management plan prior to any development activities.

• A property owner, at its initiation , may remediate specific areas of the site to standards that provide for less restrictive uses.

The LUC runs with the land and is binding on all owners and occupants of the property. In 2019 and 2021 two additional LUC were established for the Railyards. The prohibited use restriction for all LUC’s are as follows:

For any improvements which allowed uses include, but are not limited to, commercial, retail, industrial, hospital, school, daycare, mixed use, residential or park use, include areas in which direct human exposure to native Soil remains possible , the o wner or occupant shall install, keep and maintain a top layer of environmentally compliant soil of a thickness and composition to prevent exposure to such Native Soil which is reasonably satisfactory to the Department as being protective of human healthy and the environment.

Brad Satterwhite, the City of Sacramento’s former Environmental Manager indicated that the Railyards soils has been remediated and as a result the earlier LUC’s recorded in the early 2000’s has been replaced with the September 30, 2015, which is descr ibed above. Mr. Satterwhite reported that for each development site a Vapor Intrusion Mitigation Management plan is required to be approved by Department of Toxic Substances Control (DTSC). Mr. Satterwhite reported this process is usually a 2 - month process, the action process straightforward with the DTSC being responsive to vapor plan approval requests.

SITE DESCRIPTION 54
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL DRV reported the following environmental comments.

• Ongoing ground water remediation within the project is continuing with UPRR being the sole respons ible party for remediation of any historic contamination (soil, groundwater soil vapor) as of December 28, 2006, at the Railyards. The majority of the soil at the Railyards has been certified as closed as evidenced by recorded land use covenants (“LUC”). DRV (or its successor owners) is responsible for (i) the transportation and disposal of soil which it moves on its owned parcel(s), (ii) the construction dewatering of excavations occurring during development (UP RR must treat such water to a standard acc epted by the Regional San sanitary sewer system), and (iii) installation of passive vapor intrusion systems on new buildings to the extent required by LUCs (UP RR is responsible for such passive systems in the historical buildings). A total of 7.2 acres within the CFD is not subject to a LUC. This area will be encumbered by a LUC when remedial action by UPRR is complete, estimated to be eligible in 2024.

• There have been no notices of default by any party to the 2015 Railyards Agreement. They state all parties are in compliance with the 2015 Railyards Agreement and there have been no failures by any party to comply.

• There is a Memorandum of Understanding between DRV and DTSC. The purpose of the Memorandum of Agreement (“MOA”) is to address the admini strative burden on DTSC created by receiving annual reports on compliance with LUCs from each owner (and its separate consultant) of a parcel within the Railyards by permitting DRV, on behalf of all such owners, to perform such administrative task and submit a single annual report from a single consultant on LUC compliance within the Railyards for that year. Such DRV obligation is expressly an administrative accommodation on behalf of the owners and does not relieve any owner from such annual task if DRV f ails to perform nor create any damages liabilities or penalties as a result thereof.

DRV’s obligations under the MOA are intended to be assigned to the Master Association established under the existing MASTER DECLARATION OF COVENANTS, CONDITIONS AND RESTR ICTIONS AN EASEMENT AGREEMENT FOR THE RAILYARDS (“Master CC&R”). Upon such assignment, DRV shall be relieved of any further obligations under the MOA. The estimated DTSC cost for managing the MOA is $39,005 per year total, indefinitely. This cost is payable/reimbursed through the assessment process paid by owners.

• The premise of the LUCs is that a significant majority of the Railyards will be improved and hard scaped (concrete, asphalt and building improvements) covering the historic raw dirt surface . If, after such improvements are completed, there remains direct access to the historic raw dirt surface (referred to as “Native Soil”), the LUCs require that a top layer of environmentally compliant soil of thickness and composition approved by DTSC be maintained on the Native Soil. The presence of Native Soil, after buildout of the Railyards, is expected to be limited.

• The v apor intrusion barrier is a seamed and welded membrane system installed subsurface below the entirety of a building foundation an d covered by a specified thickness of a sprayed layer of impermeable material that covers and further seals the entirety of the membrane. Such systems are passive systems (air exhaust without active mechanical pump systems) but can support being converted to an active mechanical system if needed based upon requirements of DTSC due to evaluation of indoor air. Following the completion of building construction, two to three tests are conducted to evaluate indoor air quality. If, after the completion of suc h testing, indoor air quality requires addressing (e.g. more stringent air criteria is imposed), the customary process is to attach a mechanical pump system to exhaust points of exiting a passive system on the outside of the building. The estimated cost o f installing the vapor intrusion barrier is $4.00 to $6.00 per land foot of each area on which an enclosed building is located and constructed on grade. The on-going cost for the monitoring of such system is estimated at $5,000 to $10,000 per building per year. These costs will not likely affect the marketability of the land but will have a small impact on land value. This has been addressed in the valuation of the subject land.

SITE DESCRIPTION 55
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

SITE DESCRIPTION 56
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

FL O OD PL AI N
The Railyards is located in FEMA Map’s 06067C0160J and Map 06067C0180J dated June 16, 2015.

The following is from the conditions of approval for the tentative map: Flood Protection State Law (SB 5) and City Code Chapter 17.810 require that the City make specific findings prior to approving certain entitlements for projects within a flood hazard zone. The purpose is to ensure that new development will have protection from a 200 -year flood event or will achieve that protection by 2025. The project site is within a flood hazard zone and is an area covered by SAFCA’s Improvements to the State Plan of Flood Control System, and specific findings related to the level of protection have been incorporated as part of this project. Even though the project site i s within a flood hazard zone, the local flood management agency, SAFCA, has made adequate progress on the construction of a flood protection system that will ensure protection from a 200 -year flood event or will achieve that protection by 2025. This is bas ed on the SAFCA Urban level of flood protection plan, adequate progress baseline report, and adequate progress toward an urban level of flood protection engineer’s report that were accepted by City Council Resolution No. 2016-0226 on June 21, 2016.

SITE DESCRIPTION 57
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

ALT A SUR VEY
An ALTA Survey is a detailed land survey showing existing improvements, boundary lines, land areas, easements, contours, right -of-way, etc. The Railyards ALTA is a portion of the subject property was completed by Baker-Williams Engineering Group. This survey dated December 2019 and includes eight parcels totaling 173.798 gross acres. The survey does not include the Kaiser Foundation Hospital sites and a few of the parcels have changed since the survey was completed. For the parcels that ha ve not changed, the land sizes match up with the assessor records. Our review of the survey shows easements that correspond to the title report. Copies of the survey have been included in the addendum of the report.

The Railyards ALTA Survey is consistent with our visual inspection of the property in regards the legal and physical characteristics as described in this site analysis. No areas of inconsistency were noted from review of the survey.

EASE MEN TS , EN CRO ACH ES & RES TRIC TI O N S
A preliminary title report was prepared by Fidelity National Title Company, dated February 17, 2022.

The parcels included in this report correspond to the chart on page 39. The complete title report is included in the addendum. The title report cites the following ownership:

Downtown Railyard Venture, LLC, a Delaware limited liability company as to Parcels 1, 2, 4, 5, 6, 7, and 8.; Sacramento 695, L.P., a California limited partnership, as to Parcel 3; and Kaiser Foundation Hospitals, a California nonprofit public benefit corporation, as to Parcel 9.

The title report list numerous exceptions. These are addressed as follows:

Exceptions 1-31: These relate to existing and proposed taxes and assessments. The exceptions regarding taxes are shown in the Real Estate Tax section of this report and have been considered in the valuation. The assessments include Railyards Maintenance Community Facilities District No. 2014-04 and City of Sacramento Railyards Community Facilities District No. 2018-01. These have also been addressed in the Tax section and considered in the appraisal. The subject has no assessments from the Sacramento Streetcar Community Facilities District No. 2014-01.

Exceptions 32-34: This relates to dedicated right away in the Railyards. This land area is within the CFD district and has been accounted for in the appraisal.

Exceptions 35-36: This relates to submerged land and easements in the Sacramento River. This land area is within the CFD district and has been accounted for in the appraisal.

Exceptions 37-38: This relates to adverse claim or right, title or interest based upon the assertion that the "Sacramento Downtown Railyards Title Settlement and Exchange Agreement" between the City of Sacramento, California State Lands Commission, California Department of Parks and Recreation and IA Sacramento Holdings, L.L.C. as disclosed by that certain Quitclaim Deed, recorded January 25, 2018. These claim/rights have been accounted for in the appraisal.

Exception 39: This relates to Water rights, claims or title to water, whether or not disclosed by the public records. These are non-value impacting claims.

SITE DESCRIPTION 58
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Exception 40: This relates to a deed in 1910. This is a non-value impacting encumbrance.

Exceptions 41, 42, 45-46, 48-51, 54, 55, 58-61: These are recorded easements which show up in the tentative map and ALTA survey. These are typical public utility easements, right-of-way easements, right-of-way grants and have been reviewed and considered in the valuation.

Exception 47: This relates to abandonment of certain roads. This is a non -impacting encumbrance.

Exception 53: This relates to a Covenant to Restrict Use of Property dated May 6, 1994. Updated agreements supersede this agreement.

Exception 56: This relates to a Development Agreement dated December 13, 1995. Updated agreements supersede this agreement.

Exceptions 57 and 65: Th ese relate to a Covenant to Restrict Use of Property dated July 11, 2001, and August 31, 2009. Updated agreements supersede this agreement.

Exception 62: This relates to a Covenant to Restrict Use of Property deed in December 2010, December 28, 2006, and February 12, 2015. The 2015 agreement supersedes prior agreements.

The agreement states certain restricted uses but allows such uses upon a Department approved State Land Use Covenant (SLUC). The updated and amended LUC is addressed elsewhere in the appraisal and has been considered in the appraisal.

Exceptions 63 and 64: This relates to Development Agreement for Sacramento Railyards Project dated December 11, 2007, and Regulatory Agreement dated May 13, 2008. U pdated agreements supersede these agreements.

Exceptions 66-81: These are recorded easements which show up in the tentative map and survey. These are typical public utility easements, slope and wall easements, and pedestrian and bicycle tunnel easements. These have been considered in the appraisal.

Exception 82: This relates to a Memorandum of Agreement dated July 18, 2014. This has been considered in the appraisal.

Exceptions 83 -87, 92 -98, 104 , 111 : These are recorded easements which show up in the tentative map and survey. These are typical public utility easements, ingress and egress easements and wall easements. These have been considered in the appraisal.

Exception 88: This relates to a Land Use Covenant (LUC) dated August 28, 2015. The agreement summarizes various remedial action plans (RAP) that have been completed on the property.

The soils were not remediated to level protective for unrestricted land use thus this LUE was necessary. The prohibited uses relate to any improvements which allowed uses include, but are not limited to, commercial, retail, industrial, hospital, school, daycare, mixed use, residential or SITE DESCRIPTION 59
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL park use, include areas in which direct human exposure to Native Soil remains possible, the owner or occupant shall install, keep and maintain a top layer of environmentally compliant soil of a thickness and composition to prevent exposure to such Native Soil which is reasonably satisfactory to the Department as being protective of human healthy and the environment. This LUC runs with the land in perpetuity. The LUC has provisions that waives this requirement if demonstrated that the native soils will not pose unaccepted risk to humas health and safety.

Exceptions 89 and 90: This relates to a Declaration of Restrictive Covenants for the Development and Operation of Affordable Housing dated September 30, 2015, and market rate housing dated September 15, 2015 . The covenant relating to market rate housing relates to Proposition 1C grant that was provided to the owners of the Railyard. It says 844 units to be built on Lots 58, 59, and 69 within 8 years. The owner is not in compliance with the development timing. Remedies and Injunctive relief are legal matters and related ri sk associated with this non-compliance has been taken into account in the appraisal. Please refer to known risk level reported later in the report.

Exception 91: This relates Quitclaim Deed dated April 28, 2016. This is a non -value impacting exception.

Exception 99: This relates to an Amended Development Agreement for Sacramento Railyards Project dated January 6, 2017. One change of this amended agreement is the term of development agreement to 20 years plus addition of two 5 -year extensions based on permitting/development schedule. T his agreement modifies the has been considered in the appraisal.

Exception 100: This relates to interest in lan d dated October 24, 2017. This is a non -value impacting exception.

Exceptions 101 and 102: This relates to adverse claims in land dated January 25, 2018. These are non-value impacting exceptions.

Exception 103: This is a Grant of Easement for Access and Related Park System Purposes. This easement has been considered in the appraisal.

Exception 105: This relates to Non-Disturbance and Attornment Agreement dated January 25, 2018. This is a non-value impacting exception.

Exceptions 106: This relates to a pending court action dated April 11, 2018. This is a non-value impacting exception.

Exceptions 107: This relates to a title exchange agreement dated April 6, 2011. This is a non - value impacting exception.

SITE DESCRIPTION 60
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Exception 108: This is CC&R’s dated January 11, 2019. This CC&R has typical use restrictions of other CC&R’s. One specific restriction relates to limitation of certain medical uses outside of the hospital lots. These CC&R’s have been considered in the appraisal.

Exceptions 109 & 110: This relates to subdivision improvement agreement and bike path access dated January 16, 2019. These are typical agreements and have been considered in the appraisal.

Exception 112: This relates to a Land Use Covenant dated February 21, 2019. This exception relates only to the Central Shops land area. This covenant has similar restrictions as the LUC for the whole Railyards.

Exception 114: This relates to assignment of Net Tax Increment Payments Under the O PA Agreement. This exception is addressed elsewhere in the report and has been considered in the appraisal.

Exception 115: This relates to rights, interest or claims disclosed in the survey dated May 17, 2019. These have been considered in the report.

Exceptions 116 and 117: The se are typical public utility easements and ingress and egress easements. These have been considered in the appraisal.

Exception 118: This relates to a Regulatory Agreement For Residential Rental Property and Declaration of Restrictive Covenants Affect ing Real Property dated July 24, 2020. This agreement is for 69 units of the AJ property located on Lots 48A and 48B. This agreement has been considered in the appraisal.

Exceptions 119, 120 and 122 : These are deeds of trust and financing statements. These have not been considered in the appraisal.

Exception 121: This relates to an Agreement Deferring and Waiving Sewer Impact Fees For Affordable Residential Development Project. This has been considered in the appraisal.

Exceptions 123 & 125: This relates to an Offer To Dedicate Exclusive Easement For Park and Recreational Purposes. This has been considered in the appraisal.

Exception 124: This is a slope maintenance easement. This is a non-value impacting easement.

Exception 126: This a lien for delinquent utilities. This has not been considered in the appraisal.

Exceptions 127-130: These are covenants, conditions and restrictions dated July 15, 2021. These have been considered in the appraisal.

SITE DESCRIPTION 61
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Exception 131: This is a t ypical public utility easements. This have been considered in the appraisal.

Exception 132: This relates to a Land Use Covenant dated September 29, 2021. This have been considered in the appraisal.

Exceptions 133-134: These relate to some delinquent taxes. These are non-value impacting.

Exception 135: This a title company review of ownership records related North B Street Properties, LLC. This is a non-value impacting exception.

Exception 136: This related to assumption of several leases dated September 15, 2015. These are non-value impacting exceptions.

Exception 137: This relates to a title company review of rights not disclosed in public records.

This is a non-value impacting exception.

Exception 138: This a title company review of owners hip records related Downtown Railyard Venture, LLC. This is a non-value impacting exception.

Exception 139: This a title company review of ownership records related Kaiser Foundation Hospitals. This is a non-value impacting exception.

Exception 140: This a title company review of ownership records related Sacramento 695, L.P.

This is a non-value impacting exception.

Exception 141: This related to title company review and approval of the Company’s Corporate Underwriting Department. This is a non-value impacting exception.

A review of the preliminary title indicates the subject property has typical utility easements. There were no adverse easements, encroachments, or adverse conditions in connection with the subject property.

Mixed Income Housing Requirement
Railyards is subject to the requirements of the Mixed Income Housing Ordinance, City of Sacramento City Code Chapter 17.712, adopted September 1, 2015. The Mixed Income Housing Ordinance requires that proposed residential projects in excess of 100 gross acres obtain City Council approval of a “mixed income housing strategy” that demonstrates how the project provides housing for a variety of incomes and household types consistent with Housing Element policy. The City of Sacramento adopted Resolution No. 2016-0391 on November 10, 2016 approving the Sacramento R ailyards Mixed Income Strategy. For a 6,000-unit housing density the Railyards must set-aside 500 units for affordable housing. The following is the schedule of affordable housing that is required in the Railyards.

SITE DESCRIPTION 62
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Phase Housing Units
Per Phase
Affordable Units
Developed
(at 40% to 60% AMI) or
land dedicated
Potential Cumulative
Housing Units
Developed
1 3,000 300 units 3,000
2 1,500 100 units and/or land
dedication 4,500
3 1,500 100 units and/or land
dedication 6,000
4 2,000 100 units and/or land
dedication 8,000
5 2,000 10,000
Note: Current plans for the build-out are for at least 6,000 housing units.

The AJ is under construction and will have 69 affordable units. The next affordable project is the Wong Center expected to be constructed on Lot 46A. and a portion of Lot 46B. Mutual Housing is the developer of this project. This 150 -unit project will be 100% affordable. This $55 million project has already received City of Sacramento financial assistance to assist in the funding of this project. Land for the Wong Center was sold to the Mutual Housing in June 2022 at $100 cost. Site work for the construction of the Wong Center has recently commenced.

Earthquake Zone
Given the presence of several active f aults throughout the State of California, nearly all properties in California are subject to some degree of seismic risk. The Alquist-Priolo Earthquake Fault Zoning Act was passed in 1972 in order to regulate development of structures intended for human oc cupancy on the surface trace of active faults. While the Alquist-Priolo Act only addresses surface rupture risk, the Seismic Hazards Mapping Act, passed in 1990, considers non-surface earthquake hazards, such as liquefaction and landslides. These laws require the State Geologist to establish regulatory zones based on seismic risk and distribute maps to agencies for affected areas for use in planning and development. Structures cannot be constructed over the trace of a fault, and a setback from the fault is typically required. Properties that are not located within a fault zone but are at increased risk for seismic damage due to their location within affected cities can be subject to additional government -imposed requirements, such as seismic or soft - story retrofitting, and lenders and/or institutional investors will often require property owners/operators to carry earthquake insurance.

Based on our review of the current Alquist -Priolo Fault Zone and Seismic Hazard Zone Maps, the City of Sacramento is not affected by a nearby fault, and the subject property is not within a special studies zone.

ZO NIN G & EN TI TLE MEN T S
The Railyards has received several entitlements over the years. In 2007 the City of Sacramento approved the 2007 Railyards Specific Plan (RSP). This plan was updated in 2016. The Railyards Specific Plan Update (RSPU) provides a flexible development regulatory framework and does not indicate any particular mix of uses within each category or block within the RSP Area . Under the RSPU, the following land use/zonings apply:

SITE DESCRIPTION 63
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL C-3 SPD: A total of 102.68 acres in the Railyards has this zoning. The C-3 SPD land use designation allows residential densities up to 450 units per acre, and nonresidential development between a Floor Area Ratio (FAR) of 3.0 and 15.0. The C-3 SPD would allow all uses normally permitted in the C -3 zone with the exception that the following uses would be prohibited: auto – service, repair; check -cashing center; correctional facility; and gas station. A sports complex is allowable as a conditional use in the C -3 SPD.

There would be no height limits, except as specified on certain parcels around the Depot, the Central Shops Historic District, the Riverfront, and adjacent to the Alkali Flat neighborhood.

R-5 SPD: A total of 18.16 acres of the RSP Area is designated R -5 SPD. The R-5 SPD land use designation allows residential densities between 61 and 450 units per acre, and non-residential uses on ground floors.

The R-5 SPD allow all uses normally permitted in the R-5 zone with the exception that the following uses would be prohibited: cemetery, check -cashing center, correctional facility, golf course, driving range, mobile home park, mortuary, and crematory. There is a height limit in the R-5 SPD zone of 250 feet. The maximum lot coverage in the R-5 SPD zone is 80% but there are no minimum setbacks required.

SITE DESCRIPTION 64
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

H SPD. A total of 17.8 acres of the RSP Area is designated H SPD. The H SPD hospital land use designation allows residential densities from 24 to 250 units per acre pursuant to a conditional use permit, and non - residential and mixed-use development with a minimum FAR of 0.5 and up to a maximum FAR of 8.0. The H SPD allow all uses normally permitted in the H zone with the addition of the following uses are permitted uses: (1) a major medical facility Phase 1 with (i) a hospital not in excess of 658,000 sf (420 beds), (ii) up to 210,000 sf of medical office building(s), (iii) central utilities building up to 60,000 sf, (iv) 1,500 stall parking structure , and (v) at least 200 stalls of surface parking; and (2) nonresidential care facilities; produce stand; outdoor market; athletic clubs; fitness studios; commercial services; restaurants; and retail stores not exceeding 6,400 sf and a residential care faci lity located on specifically identified parcels fronting on 5th Street. There would be no maximum height in the H SPD zone.

C-1 SPD. A total of 9.63 acres of the RSP Area is designated C-1 SPD. The C -1 SPD land use designation allows non-residential development up to an FAR of 1.0. The C-1 SPD allow all uses normally permitted in the C-1 zone with the exception that the following uses would be prohibited: bed and breakfast inns; cemeteries; check -cashing centers; correctional facilities; dormitorie s; drive -in theaters; self -service laundromats; mobile home parks; offices; and superstores. There is a maximum height limit of 35 feet.

SITE DESCRIPTION 65
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

C-2 SPD. A total of 5.14 acres of the RSP Area is designated C-2 SPD. The C -2 SPD land use designation allows residential densities up to 60 units per acre, and non -residential and mixed-use development up to an FAR of 2.0 with a maximum height of 120’. The C-2 SPD allow all uses normally permitted in the C- 2 zone with the exception that the following uses would be prohibited: sales, storage, rental of automobiles; auto service and repair; drive -in theaters; drive-through restaurants; equipment rental or sales yards; gas stations; mini storage; sales or storage of mobile homes.

City of Sacramento Planner confirm that allowable land uses, and development standards are set forth in the Railyards Specific Plan dated 10/11/16 and Chapter 17.44 Railyards Special Planning of the zoning ordinance. Excerpts of the Railyards Special Pla nning Code are shown in the addendum of this report.

The allowable uses from this zoning code matches the tables from the Railyards Specific Plan summarized above.

A zoning map of the Railyards is shown on the following page.

SITE DESCRIPTION 66
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Zoning Map

SITE DESCRIPTION 67
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Table 3-2 from the RSPU summarizes the assumed amount of each type of development at project build out, within each zoning district, and for the Railyards overall, to plan for estimated carrying capacity related to infrastructure, traffic, and services and to address potential project-related impacts.

The plan has a sliding scale in relationship between office and residential, which would allow up to 10,000 residential units with office use decreasing commensurately.

There are two other document sources that list the estimated development potential for the RSPU. These include the Subsequent Environmental Impact Report (SEIR) dated June 2016 and the Updated Railyards Finance Plan (URFP) dated August 7, 2018. While each are slightly different, they both correspond to the assumed development potential as stated in the chart above from the RSPU.

For our analysis we have elected to utilize the development potential build -out from the Updated Railyards Finance Plan (URFP) with a variant described in the SEIR. The variant from the SEIR replaces alternate land use in case MLS Stadium is not built. This variant is as follows:

Alternate Use of Soccer Stadium: Instead of the 25,000 -attendee Soccer Stadium, the Land Use Variant would accommodate construction of 750 residential units, 30,700 sf of retail, and 46,050 sf of flex space.

For analysis purposes, we have considered the Land Use Variant as any soccer stadium in the Railyards is speculative.

For the residential component there is no requirement for for-rent or owner-occupied units. In the RCLCO report, they estimated 5,396 of renter occupied units and 1, 604 owner-occupied units. RCLCO’s absorption forecast factored in the possible variation of the owner-occupied units. Analysis and review of the RCLCO report is addressed later in the report.

Below is the estimated buildout as reported in the URFP with the variant from the SEIR. The second column reports the buildout of th e DRV owned land. The last column reports the buildout of the DRV owned land and excluding the AJ project.

SITE DESCRIPTION 68
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Note: The last column is an estimation of the Variant Land Use total for only the DRV Land. It excludes the AJ site and assumes no stadium.

Buildout -All Railyards Variant/No MLS Variant/No Stadium, No AJ -
DRV Land Only
Residential (units) 6,000 6,750 6,405
Office (SF) 3,457,027 3,457,027 3,457,027
Office Flex 578,554 624,604 624,604
Historic & Cultural Flex 107,149 107,149 107,149
Total Office 4,142,730 4,188,780 4,188,780
Courthouse 538,000
Kaiser Medical (SF) 1,168,003 1,168,003
Retail (SF) 702,511 733,211 733,211
Flex Retail 192,851 192,851 192,851
Total Retail 895,362 926,062 926,062
Historic Museum (SF) 180,000 180,000 180,000
MLS Stadium 25,000
Hotel (rooms) 1,100 1,100 1,100
Development Buildout Railyards Specific Plan
SITE DESCRIPTION 69
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

BUI LD - OUT POTE NT IA L F OR DRV VACA NT LA ND
DRV owns 85.782 taxable acres of vacant land. This excludes the Central Shops land area. To determine the amount of land necessary to achieve the reported overall development potential we have completed an analysis using typical densities for land uses. We have utilized the V ariant/No stadium, No AJ /DRV Land as the potential buildout for the DRV land. We have subtracted 247,832 SF to eliminate the Central Shop space as this analysis only concerns the vacant DRV land. The table below shows at our estimated density, the total land area needed for DRV is 86.054 acres. This compares to actual taxable area of 85.782 acres. The land differences (actual DRV vacant land vs. land needed for build -out) is minor and insignificant. Based on this analysis, the achievable density as set forth in the Variant/No stadium/DRV Land category is reasonable.

DRV Land/No
MLS/No Shops Assumed Density Estimated
Land Area
Allocated
West of 7th
Street
Allocated to
East of 7th
Street
Residential (units) 6,405 120 units per acre 50.72 30.422 20.30 Office (SF) 3,457,027
Office Flex 624,604
Less: Historic & Cultural Office 156,281
Total Office 3,925,350 4.0 FAR 22.53 15.09 7.44
Retail (SF) 733,211
Flex Retail 192,851
Less: Historic & Cultural Retail 91,551
Total Retail 834,511 3.5 FAR 5.47 3.66 1.55
Hotel (rooms) 1,100 150 units per acre 7.33 7.33 0

86.054
Actual DRV Useable Land 85.782
Total Acres Needed at Estimated Density
DRV Vacant Land Area Allocation By Use
Category/Ownership No Lots Acres West of
7th St.

East of
7th St.

DRV Vacant Land 76 85.782 56.502 29.28
Historic Shops & Open Space 12 9.37 9.37 0
Buildable/Taxable Acres 88 95.152 65.872 29.28
Buildable Land Area Summary - DRV
SITE DESCRIPTION 70
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

DEVEL O PER RE S PO N SI B L E INFR AS TRUC TURE
The developer provided a remaining construction cost budget of $1 72.2 million, which reflects $ 18.2 million completed for the drain pump station. The itemized budget shown on the following page totals $162.3 million. The difference between the itemized total and the developer’s budget is a credit of $9.9 million in CFD reimburseme nts for the storm drain. These are current day cost s and include soft and contingency estimates.

As a secondary source for construction cost, we have reviewed the Updated Railyards Finance Plan (“URFP”) dated June 2022, which was recently approved by th e City of Sacramento . The finance plan shows an estimated remaining cost of $345.4 million. This differs from the developer’s costs schedule in the following areas:

• The URFP includes $117.4 million in cost for such items as schools, fire stations, library, parks, and other public projects. Most of these are likely to be constructed and funded by the public. The exception is $18.9 million to be funded by the developer. This requires a deduction of $98.5 million from the URFP total.

• The URFP includes $52.3 million in cost for such items as I -5/Richards Boulevard, Freeways, and other Sanitary Sewer. These are to be funded likely to be constructed and funded by the public.

This requires a deduction from the URFP total.

• The developer’s budget i ncludes $15.8 million (reflects $18.2 million completed) for the storm drain improvements, whereas the URFP shows $ 35.3 million. This requires a $18.2 deduction from the URFP total.

Adjusting for the above referenced differences the URFP would have a remaining cost estimate of $176.4 million. This estimate is within a reasonable range of the developer provided cost of $172.2 million. Based on review of the cost sources, the developer provided infrastructure costs are deemed reliable and have been relied upon in our valuation.

The only infrastructure project under construction in the Railyards is the Drainage Pump Station. DRV reported that approximately $18.2 of the Drainage Pump Station costs had been expended as of July 1, 2022. Detailed accounting of these costs is contained within our files. Except for the Drainage Pump Station all of the costs are current date estimates with all soft cost and contingen cies included . A discussion of the remaining CFD funds is shown later in the report. Below is our estimate of the remaining storm drain cost reflecting funds spent to-date along with the remaining CFD Funds.

Original Cost $34,000,000
Less: Funding/Spent To-Date $18,170,000
Less: Remaining CFD Funds ($20,450,000 - $10,570,000) $9,880,000 Net Remaining Cost $5,950,000
Storm Drain Remaining Cost
SITE DESCRIPTION 71
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Description Total Remaining West of 7th Street East of 7th Street Drainage Pump Station - Remaining Cost (net of Remaining Proceeds) 5,950,000 5,950,000 - Berm Replacement Contour & 7th Street Gate (Flood wall/gate) 2,302,300 2,302,300 - N B Street 7th Street to 8th Street 2,277,900 - 2,277,900 N B Street 8th to 10th 2,427,400 - 2,427,400 S Park 6th to 7th 2,860,950 2,860,950 - 6th Street Railyards to NB 7,052,450 7,052,450 - Railyards Blvd 7th Street to 10th Street 6,624,400 - 6,624,400 South Park Paseo (Public) 313,950 - 313,950 South Park Paseo (Private) 1,814,450 - 1,814,450 7 Street pump station 553,150 - 553,150 10th Street To Boundary 2,672,100 - 2,672,100 Dos Rios Road Striping 254,500 - 254,500 East RT Station 3,915,675 3,915,675 - 7Th Street Widening (NOTA 7th Street) 6,082,250 6,082,250 - 6th Street Buffered Bike Lane and Bike Lane Easement 1,919,100 1,919,100 - 7Th Street Water Line 867,100 867,100 - Camille & Stevens 5th to 6th (NOTA I-C) 5,315,000 5,315,000 - 5th Street Railyards to N B street (roadway/finish) 2,308,000 2,308,000 - Stanford and Stevens Private Streets -Public funding TBD 6,744,000 6,744,000 - Stanford Bercut to Camille 3,139,500 3,139,500 - Stanford Intersection Relocation at railyards 822,250 822,250 - Lot 21b (east) 4,610,650 4,610,650 - Camille Bercut to 5th 9,452,000 9,452,000 - Intermodal Tunnel Entrance 3,300,000 3,300,000 - Judah Street 2,053,500 2,053,500 - Lot 21a 2,795,650 2,795,650 - Lot 21c 2,801,700 2,801,700 - Huntington Street 1,805,000 1,805,000 - Trunk Sewer 7 Street To The End Of 10 Street. 1,166,100 - 1,166,100 8th Street 5,288,350 - 5,288,350 Shift Lanes Railyards 852,150 - 852,150 Lot 1 Under I-5 experience 2,284,874 2,284,874 - Lot 31Under I-5 experience 3,333,071 3,333,071 - Lot 33a Under I-5 experience 1,136,982 1,136,982 - Lot 33b Under I-5 experience 1,822,286 1,822,286 - Lot 60 Vista Connector to 4Way 268,809 268,809 - Vista Park 10,247,433 10,247,433 - Park Lot 58A 1,174,209 1,174,209 - Park Lot 57A 352,550 352,550 - Park Lot 68 1,269,436 1,269,436 - Park Lot 70 245,249 245,249 - N B Street 6th to 7th 1,829,400 1,829,400 - N B Street 5th to 6th 3,473,900 3,473,900 - South Park 5th to 6th 3,927,900 3,927,900 - South Park Storm Drain 5th to 6th 523,250 523,250 - Lot 32 Plaza (State Parks Museum) 4,551,177 4,551,177 - Lot 30 (State Parks Museum ERE Portion) 3,421,840 3,421,840 - Railyards Blvd 10 Street to 12 Street 3,025,400 - 3,025,400 Lot 34 Riverfront Park 738,924 738,924 - Lot 35 Sac River Connection 3,795,549 3,795,549 - Lot 21b (west) 1,973,400 1,973,400 - Lot 21b (interior plaza and South) 4,440,150 4,440,150 - Lot 53- open space along RY Blvd from 10th to 12th 167,347 - 167,347 Bercut from Camille to End 2,403,000 2,403,000 - Extension Of 10th Street 1,446,200 - 1,446,200 Drain Line SOTA & Water Transmission 4,110,900 4,110,900 - Total 162,304,762 133,421,365 28,883,397 Sacramento Railyards Infrastructure Schedule and Budget SITE DESCRIPTION 72
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

CO MP LETE D PR O JECT S T HAT SERVE THE RA IL YAR DS
The construction projects listed on the prior page above do not include numerous other projects completed in the Railyards by DRV and prior property owners. Some of the completed projects include the following:
• Railyards Boulevard from 7th Street to Bercut Drive, including major water transmission, trunk sewer, and other utilities.
• 5th Street Extension from H Street to Railyards Boulevard, including major water transmission and other utilities.
• 6th Street Extension from H Street to Railyards Boulevard. • Other minor street improvements to 6th Street, 7th Street, F Street, and G Street. • Interim improvements to the Interstate 5 (I-5)/Richards Boulevard Interchange. • Light Rail Extension and Track Relocation.
• Sacramento Valley Station Depot improvements, including rehabilitation and retrofit and acquisitions.
• Trunk sewer from Bercut Drive to 7th Street.

The financing plan indicates that approximately $ 369 million of improvement projects identified have been completed. The projects listed above, and their corresponding costs benefit numerous other properties and are not solely specific to the Railyards as they improve other properties outside of the Railyards.

Source: Excerpt from June 2022 Updated Railyards Financing Plan

SITE DESCRIPTION 73
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

FINA NC IN G O F DEVE L O P MEN T
To redevelop the Railyards site, substantial private sector investment will be necessary remediation, infrastructure and land development and construction. The construction of backbone infrastructure and other public improvements will be funded by a variety of private and public financing mechanisms. Below is a summary of some of the public funding sources.

Federal and State Funds - Certain Federal and State funds have been made available to assist with certain public infrastructure components of the Rai lyards, specifically the Sacramento Valley Station , interim improvements to the Richards Blvd/I‐5 freeway interchange, roadway improvements within the Railyards, and preliminary rehabilitation of the Central Shops

City Funds - The City previously committed local funding for certain public facilities in the Railyards, some of which has already been spent. The City has pledged some of the additional property taxes received given the dissolution of the redevelopment agency.

Transportation Funding - A large portion of the infrastructure investment needed for development of the Plan Area is related to transportation. The City will apply for federal, state, and local funding of the street and interchange improvements through the Sacramento Area Council of Governments (SACOG) and the Sacramento Transportation Authority (STA). The STA manages the allocation and disbursement of local transportation sales tax and Measure A funds for transportation projects.

Development Impact Fees - The City has previously adopted a set of Development Impact Fees to finance capital improvements within the Railyards and River District Specific Plan and these fees will be updated as part of the implementation of the Financing Plan. Certain Railyards Plan Area backbone improvements and public facilities will be funded by development outside of the Railyards site that will benefit from such improvements. The City will impose certain impact fees in those areas to fund their pro‐ rata share of the necessary public improvements that will serve those areas as well as the Railyards site.

Tax Increment Financing -The Specific Plan site is within a redevelopment project area that was formerly administered by the Redevelopment Agency. The City of Sacramento, se rving as the Redevelopment Agency Successor Agency, inherits the limited authority, and has the duty to pay the Agency’s debts and other obligations previously vested with the Redevelopment Agency. This includes the payment of tax increment revenues received from the County Auditor -Controller, based on the Recognized Obligations Payment Schedule (ROPS) as approved by RASA’s Oversight Board and the State Department of Finance.

The tax increment revenue generated from the Railyards will be used to pay the Ini tial Phase OPA obligations to provide reimbursement to the landowner for the costs of infrastructure and other improvement projects in the Railyards.

Community Facilities District - Mello-Roos Community Facilities District (CFD) funding will also be used to help fund the construction or acquisition of backbone infrastructure and facilities in the Plan Area. These funds would be repaid by property tax assessments or other revenue sources.

Further details on these funding sources and the developer’s estimate are shown later in the report.

SITE DESCRIPTION 74
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

OPP ORTU NI TY ZO NE
The Railyards is in an Opportunity Zone. As shown in the map below, some of the downtown and midtown areas are also within an Opportunity Zone. The Federal Opportunity Zones program allows each state’s governor to nominate up to 25 percent of the qualifying low-income Census tracts as Opportunity Zones.

It was created under a provision of the Tax Cuts and Jobs Act, which was signed into law December of 2017. Investors who reinvest capital gains monies i n Opportunity Zone funds will receive reductions on capital gains taxes relative to the years of their investment.

Eligibility Requirements

1. The investment must be made via a Qualified Opportunity Fund. An Opportunity Fund is a privately managed investment vehicle organized as a corporation or a partnership for the purpose of investing in qualified Opportunity Zone Businesses. The fund must hold at least 90 percent of its assets in such property.

2. The investment must be derived from a gain in another investment and transferred into an Opportunity Fund within 180 days of realizing the gain.

Tax Benefits

1. If the investment is held for a minimum of five years, the taxable amount of the capital gains reinvested is reduced by 10%.

2. If the investment is held for seven years, the taxable amount of capital gains reinvested is reduced by an additional 5%, bringing the total reduction to 15%.

3. After holding for ten years, there is a permanent exclusion from taxable income on the capital gains from the investment in the Opportunity Fund.

Opportunity Zone Map

SITE DESCRIPTION 75
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

BUI LDI N G EN TI T LEME NT S
The following information was provided by the City of Sacramento’s Planning Departments. This listing shows entitlement progress for proposed, existing or under construction project in the Railyard.

Kaiser
▪ Medical center campus
▪ No development application has been filed
▪ No pre-development discussions have occurred

MLS
▪ 25,000-seat outdoor stadium
▪ Entitlements approved under File No. P15-040
▪ Building permits submitted under File No. COM-1024719 ▪ Review on hold

Lot 48
▪ Mixed-use with 345 dwelling units
▪ Entitlements approved under File Nos. P17-069 & DR20-054 ▪ Building permits issued under File Nos. COM-1924220 & COM-2009855 ▪ Under construction
▪ Marketing name – The AJ

Lot 12
▪ 300,000 square foot offices
▪ Entitlements approved under File No. P18-086
▪ Building permits have not been filed
▪ Marketing name – The Foundry

Lot 46
▪ 150 multi-unit dwellings
▪ Entitlements approved under File Nos. DR19-199 & DR20-188 ▪ Building permits have not been filed
▪ Marketing name – Wong Center

Central Shops Plaza & Live Entertainment & Pavilion
▪ Central Shops Plaza – plaza & open space
▪ Live Entertainment – 5,000-person indoor venue with retail & restaurant & offices ▪ Pavilion – 12,500 square foot retail & restaurant
▪ Entitlements in progress under File No. PB20-049

A map on the following page identifies the location of these projects.

SITE DESCRIPTION 76
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

MARKETING AND DEVELOPMENT STATUS 77
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

MARKETING AND DEVELOPMENT STATUS
There are four property owners within the CFD. A summary of the marketing and development status for each is discussed below.

Downtown Railyard Venture, LLC (DRV)

This entity is owner of six assessor parcels totaling 164.76 acres. Under the tentative map, they own 110 tentative mapped lots of which 76 are vacant lots that are taxable and 12 lots that contain the five central shop buildings totaling 247,832 square feet of improved building area.

Up until early 2022 DRV reported they had not been marketing the lots for sale and had planned to retain almost all property for development. In 2022 during a brief marketing effort they received two offers from developers to acquire Lot 43 for a disclosed confidential amount. In June 2022 they entered into a purchase and sale agreement to sell Lot 43 for the development of an apartment projec t. Confidential details of this sale were disclosed. Lot 46 was sold in June 2022 to the Wong Center at the Railyards, L.P for development of a 150-unit affordable housing project (see discussion below).

Central Shops: The Central Shops contain a net rentable area of 247,832 square feet and are located on parcels totaling 9.37 acres. The Central Shops contain five buildings. The first building planned to be renovated is the Paint Shop Building, a planned cultural and retail/entertainment building. This 61,025 SF building is expected to be finished for 47,801 SF for entertainment and 13,224 SF of retail and office space.

The construction completion for the Paint Shop building is reported to be late 2023. DRV ’s projection reflects starting construction on a new Central Shop building every two years, so the next start date would be 2025.

Live Nations Status

Live Nation has executed a lease for a 47,374 SF space in the Paint Shop building. The Live Nation lease details have been provided but are confidential and are not reported. Parking for the Live Nation tenant will be from a temporary 1,000 space surface parking interspersed around and north of the Central Shops.

The existing Conditional Use Permit (CUP) has an expiration date of December 31, 2029, of when the temporary parking agreement would no longer be allowed. A permanent parking garage will need to be constructed by that date.

DRV will be seeking an Amendment to the Development Agreement to extend the expiration date of the temporary surface parking to December 31, 2030. This Amendment will require approval by Ordinance which requires public hearings. If approved, the Amendment would take precedence over the CUP. The Amendment is in a draft format today and hearings are expected to commence in the next few months.

In regard to the Amendment, there is no certainty that it would be approved. The agreement by the existing CUP is the only reasonable and valid assumption that can be made regarding the expiration of the temporary parking. Therefore, we have utilized the existing expiration date of December 31, 2029, in our analysis of the DRV property.

MARKETING AND DEVELOPMENT STATUS 78
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL A November 5, 2021, interview was conducted with Liam Thorton, Executive Vice-President, Development with Live Nation Entertainment as well as representatives from DRV. Mr. Thorton reported the following information as of November 5, 2021:

Status of Lease: Confirmed in November 2021 it was in final draft form and is expected to be executed. (The lease is now executed).

Events that would foresee lease not being executed: Reported no events from Live Nation that would preclude it from being executed.

When would Live Nation take occupancy: Deferred question to DRV who reported Spring of 2024.

Any Cancellation Provisions in Lease: Confirmed that there is no provision to cancel for performance of their business operations. Reported lease had standard cancellation provisions due to obligations on the lessor.

What state will DRV deliver the space: Mr. Thornton and DRV reported the space will be handed over in finished state whereby Live Nations will only be installing their specialized improvements.

Where will Patrons Park: A parking garage will be constructed on Lot 17 and will be the long-term parking accommodations for Live Nation events. In the interim, DRV and Live Nation have a plan to use a 1,000- space surface parking to accommodate their needs. The interim surface parking agreement allows the surface site to be replaced with another lot should there be a need to sale a lot. The agreement with the City is that the interim parking will be allowed up until 2029, after which the future garage will utilized.

No. of Events per Year: Mr. Thompson described in detail some of their business plans including capacity levels, no of events and ticket sales per year, number of non-music events where they could rent space (3rd Party operators) and amount of sponsorship revenue. The responses are deemed confidential and not reported here.

What draw will Live Nation have on nearby Properties: He reported Live Nation venues provide area wide lift to properties. He described in detail benefits to retail , office and lodging properties. He cited a couple of Live Nation properties that could be used as case studies for the Railyards location. Follow-up email produced this information from CBRE:

Toyota Music Factory – Irving Texas: Trade area from venue increases by 3x. This is the number customers who would never travel to and spend at this location without the music venue. This Live Nation venue is the most visited concert venue in Dallas/Ft. Worth and the 4 th visited venue when normalized for land size. 712,000 visitors per year with 10% year over year growth. Venue creates cross shopping with restaurants, bars, and hotels.

Coca-Cola Roxy – Atlanta, Georgia: Trade area from venue increases by 1.5x. 596,292 visitors (2019 to 2021) per year. Venue creates cross shopping with restaurants, bars, and hotels.

The Fillmore – Philadelphia, Pennsylvania: Trade area from venue increases by 1.5x. 757,000 visitors (January 2019 to 2021). Venue creates cross shopping with restaurants, bars, and hotels.

MARKETING AND DEVELOPMENT STATUS 79
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Have any locations ended up different in respect to performance: No, as he stated that their core business is based on achieving the target venue capacity, so they spend a lot of time up front with the developers and officials to make sure they achieve the desired occupancy in the main hall.

Terms of the Lease: Mr. Thompson confirmed the accuracy of the deal terms as reported by DRV. These are confidential and not reported here. The lease term is long-term and longer than other lease terms at their other sites. The combined all-in rent is commensurate to higher quality retail anchor spaces in the Sacramento region.

Other Central Shop Space

DRV has entered into an exclusive negotiation agreement with Q-Factor, the developers of creative office space in historic structures with projects branded a s “Industry” creative offices. Th e agreement covers the Car Machine Shop, Planing Mill, Car Shop, Blacksmith Shop, and lot 9B. The vision for these buildings is development in the “Industry” style to provide a place making, flexible, creative office and mixed-use environment that can accommodate a variety of tenants . No leasing activity has commenced for the buildings under the Q-Factor agreement.

DRV provided a letter and e-mail dated October 13, 2021, from JD Lumpkin, Executive Managing Director with Cushman and Wakefield. An excerpt from this letter is as follows:

“One publicly traded tech company’s CPO put it nicely on a tour recently: “We are looking for a building and environment that will help us rebuild our company culture and get our employees excited to be physically back together again.” The relative cost of the real estate vs. the essential benefit to the enterprise is negligible, thus there is very limited price sensitivity. Companies are demonstrating that they are willing to pay up for the best in order to create a compelling office experience that their employees can’t replicate at home. As discussed, we feel the Central Shops and the greater environment at The Railyards can be just such a compelling and differentiated place and d estination for talent.”

An excerpt from Mr. Lumpkin’s e-mail dated October 13, 2021:

“…According to my survey, that project is leasing 30% above the class A avg for the submarket and 11% higher than the very best existing buildings in the submarket. Thought you would find this letter of interest - further reinforcing what tenants want and that they are willing to pay a premium for it. This is a national trend and by-product of the pandemic. Nobody wants to go back to the same office space and think about working the same way they had before the pandemic.”

Foundry

DRV is planning a 289,674 SF office project on Lot 12a and 12b. They plan to start construction in 2024.

The Foundry is being marketed by Ron Thomas, Executive Director and Mark Tabak, Director both with Cushman and Wakefield. The project will be four stories and will have creative office features including heavy timber interior features. Interviews with Mr. Thomas and Mr. Tabak revealed the following information:

Office leasing activity has slowed significantly due the Pandemic. They expect it to slowly improve in the short-term with a substantial rebound in a couple of years.

MARKETING AND DEVELOPMENT STATUS 80
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

The Foundry will be like no other office in the Sacramento area. It will have creative architectural features that will include raw materials such as heavy and mass timbers, which is a desir able construction improvement and will be unique to the Sacramento CBD. They expect leasing prospects will react positive to the design and location of the property.

Formal leasing activity for the Foundry is 3-5 months out. No leasing offers have been submitted. No leases have been signed.

Cushman and Wakefield plan to concentrate their marketing efforts on technology firms presently based in the San Francisco area. In addition to the bay area leasing prospects, they have identified a handful of local tenants to pursue. They originally had planned to kick-off the leasing with a 100,000 SF user but have lowered that to 50,000 SF.

Mr. Thomas expects office rents to be around $60.00 per square foot annually, full service for terms starting in 3 years with a tenant improvement allowance of $75 per SF. Mr. Tabak reported that the asking rent is still influx as construction have risen lately and they don’t want to preset the rate ahead of possible further increases in costs. As will be shown later in the report, we estimate a lower market rent for office space as supported from existing office buildings in the CBD.

Lot 17 Parking Garage

A 1,421-space structured parking garage will be constructed on Lot 17 by DRV. This structure will benefit the proposed developments including Foundry, the Central Shops and other nearby developments.

Under existing and pending entitlements, DRV can only use the temporary 1,000 space gravel surface lots up until December 31, 2029.

Matt Eierman, the City’s Parking Manager, and his financial analyst performed a detailed parking garage pro-forma on the proposed garage on Lot 17. Their analysis (updated 6-24-22) provides revenue and expenses for the period of 2027 through 2031.

There are multiple uses of the garage, including several properties outside of the railyards. Matt indicated the garage will be unique in the respect it would have the demand of up to 3 possible turnovers in a given 24-hour period (i.e. office users in the am, lunch users midday, entertainment users and residential users in the evening).

The parking structure will be the replacement of the temporary surface parking estimated to be 1,000 spaces. The temporary parking will encumber 8.6 acres of buildable lots. Lot 15 is (proposed hotel) one of the lots, but if the hotel is developed, they can shift the parking to another lot. The structure will be needed for the two proposed hotels and other DRV projects planned. Except for Live Nation, the City will not approve development for temporary use of the proposed surface parking lots.

The cost of the garage is $53.8 million. The cost of the garage would be an obligation on the developer of the subdivision. The City has indicated that they will not subsidize or assist in any public financing for the garage. A mortgage banking professional reached out to three lenders to get an idea of interest for financing. Two came back and said they would be interested because it would serve multiple demand users (no interest in financing for single use). Typical terms would be lower of 65% loan to costs or 65% loan to value, 10 yr. term, 30 yr. am, 150—160 over 10 yr. treasury rate.

MARKETING AND DEVELOPMENT STATUS 81
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Despite the lending interest and the unique aspects of Lot 17, financing is still expected to be a challenge. We are only aware of one parking garage constructed in last 20 yrs. in downtown/midtown that received traditional bank financing.

Development of the two hotels is not likely to start construction until the parking garage is close to commencement of construction. If the garage has not started construction within the next two years, it could delay lot sales and/or development projects. Under the best-case scenario, the parking garage could be completed by the end of 2025 with the worst case being early 2029. This development risk has been considered in RCLCO’s Absorption Models. The financial impact of the development of the garage has been quantified and is part of the valuation of the DRV owned property.

MARKETING AND DEVELOPMENT STATUS 82
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Marriott Hotels

Two Marriott branded hotels are proposed for Lots 15a and 15c. DRV will be the owner and developer of the hotel s and has secured franchise agreement s with Marriott International (“Marriott”). Marriott’s Tributary brand will operate a 149-key hotel and their Residence Inn brand will operate a 155-key hotel.

An interview with Nate Siehr and Robert Sanger with the Marriott revealed the following business terms, conditions, and outlook for the future operations at the Railyards.

The Franchisee Agreements with DRV have been executed with franchise fees being received. The terms of the Franchise agreements are 30 years with standard royalty fees and reimbursements being in place.

The agreement has a current construction start date of January 1, 2023, and an opening date of January 1, 2025. DRV reported that site plan submittal to the City has not been in itiated as they are waiting on other events happening . Both DRV and Marriott representatives reported the business relationship is symbiotic and unless there are no significant material delays the parties would continue to modify the agreement to keep the project on course.

Marriott is aware of possible delays in the construction of the Kaiser Hospital which may or not happen at the Railyards. They reported this was an earlier condition of the agreement, but their walk -away provision relating to the timing of Kaiser’s campus has expired.

Marriott reported the Railyard location as being very desirable for their lodging business and that they would continue to go forward even without Kaiser being committed to constructing a hospital at the Railyards. They cited several demand drivers such as being within a mixed-use urban development, close proximity to downtown Sacramento and the business community as being sufficient going forward with or without Kaiser.

Marriott reported that the Tributary and Residence Inn are upper echelon Brands of Marriott and were selected as testament to their high regard s for the Railyards location. They reported both are right -fit model brands which have flexibility in adopting to changes in the business environment.

The Pandemic has negatively impacted lodging market including the limited-service sector. They reported hotels under 200 rooms have fared best during the pandemic and believe stabilized operations for the lodging industry will occur in 2023/2024. In terms of financial performance, they could only cite national averages and believe California hotels as a whole will exceed their national 2019 (pre-covid) statistics of $182 in ADR and 79% occupancy rate.

There are typical and construction performance clauses in the franchise agreements that would allow Marriott to cancel the agreements. They also retain “Red Zone” clauses in the agreement which would allow them to cancel the franchise. The Red-Zone clauses relate to customer satisfaction criteria and not any financial performance of the hotel.

As far as being catalyst for other development in under -developed mixed-use areas, Marriott reported there is some case stories of that happening. They cited the Drover Hotel in Stockyards of Ft. Worth and a Residence Inn in Northgate Mall area of Seattle as examples where their hotel presence spurred other development.

MARKETING AND DEVELOPMENT STATUS 83
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Telegrapher
DRV is planning a 340-unit apartment project on Lot s 3a, 3b, 3c and 3d . The T elegrapher would have units ranging from 360-square-foot micro-apartments to two-bedroom townhome units of 1,120 square feet. The project would be within two buildings being fiv e and seven stories. The construction start date is by the end of 2022. The units will be market rate and smaller units' sizes particularly in the five - story building, as well as the emphasis on shared spaces, are designed to increase overall affordabili ty.

The project has been submitted to the city for initial site plan approval. DRV shared details of the financial development model of the Telegrapher . These details are confidential and not reported.

Kaiser Foundation Hospital

This entity is owner of eight parcels totaling 17.407 acres. Kaiser purchased this property from DRV with the intent to develop a 1.2 million square foot regional hospital on the site. The following are 2022 responses from Kaiser response regarding questions posed from the City of Sacramento regarding the timing of their project:

When does Kaiser expect to break ground on the medical campus in the Railyards? Construction of the medical campus (the “Project”) is subject to internal approval, including approval by the Kaiser Foundation Hospitals Board of Directors (“Board”), which has not been granted yet. Construction will commence following internal and Board approval and the completion of planning, space programming, and design, and after securing City of Sacramento development approvals and all required permits. Kaiser currently plans to start construction on the Project once all necessary approvals are obtained and planning, space programming and design is completed.

Has Kaiser encountered any development obst acles (environmental or otherwise) as part of its due diligence efforts?
There have been no development obstacles as part of due diligence efforts, but the COVID pandemic has and continues to impact health care priorities and operations. Costs remain unce rtain in the construction markets and Kaiser cannot make any representation that it will not encounter development obstacles in the future.

A construction start date could not be confirmed from Kaiser. An assumption of this report is that Kaiser has unknown development plans for their site and there is a possibility that they may not develop the hospital at the Railyards.

Sacramento 695, LP

This entity owns one parcel. This parcel was purchased in July 2020 from DRV for $100. The entity is a joint venture with USA Properties and DRV for the development of the AJ, a 6-story, mixed use multi - family over street retail. The project will have 69 units restricted for affordable units. The project helps satisfy the affordable housing requirement in the Railyards. The project is under construction with approximately $74.2 million in construction completed. The construction costs have been verified with CitiBank, the lender on the project. No leasing activity was reported for the AJ. The contributory value of the partially completed improvements is shown later in the report.

Wong Center

MARKETING AND DEVELOPMENT STATUS 84
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Wong Center at the Railyard, L.P. purchased 2.658 acres in June 2022 for $100. The property included Lot 46a and a portion of 46b. The property is planned to be developed with 150 affordable housing units to help meet DRV’s affordable housing obligation. The nominal consideration paid is typical of other land sales involving affordable housing developments that satisfy affordable housing project requirements.

The Wong Center commenced construction in June 2022.

PROPERTY TAX ANALYSIS 85
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

PROPERTY TAX ANALYSIS

PROPERTY ASSESSME NT AND TAX DATA
The property tax structure in California underwent a tremendous change in 1978 when the voters approved the Jarvis-Gann Amendment, popularly known as “Proposition 13”. Under this law, the property tax for any property cannot exceed one percent of the sale price plus any bonded indebtedness for special assessments (road improvements, sewer lines, or other previously existing or voter -approved debt).

Another provision of the law was the reduction of the assessed value for all properties to t he levels of 1975. The maximum annual increase in assessed value, under the law, is limited to two percent of the assessed value for the previous year and properties are reassessed to current market value only at times of construction or sale.

Due to California’s method of property taxation, tax rates generally vary between 1-2% of assessed value; but annual tax bills vary widely from property to property. The subject’s current ad valorem taxes would not be considered relevant for this analysis because as previously mentioned, California law requires that properties be reassessed at their market value upon sale. The general tax rate and special assessments would, however, be relevant for this analysis as this rate is constant regardless of the assessed val ue of the property. This appraisal is predicted on the assumption that the property would be reassessed upon transfer and property taxes have been reconstructed upon the market value of the property as estimated herein, using the current tax rate, plus direct assessments.

Shown on the following page are the assessed values and taxes for the property. There are two bond districts for the subject properties. These are identified as follows:

Railyards Maintenance CFD 2014-04: This CFD was formed for maintenance issues of the Railyard streets and common areas. The maximum tax for this CFD on vacant land is $0.42 per square foot of land area.

The authorized services to be funded include: 1) Inspection, repair, and maintenance, including utility costs, of roadway facilities, transit facilities, and bike and pedestrian paths. 2 ) Inspection, repair, and maintenance, including utility costs, of parks, parkways, bike trails, and open space. 3) Inspection, repair, and maintenance, including utility costs, of water -quality facilities, stormwater drainage facilities, water fountains, and other water features. 4 ) Capital repair and maintenance of the area known as the West Tunnel and appurtenances. 5) Miscellaneous costs related to any of the items described above, including planning, engineering, and legal and administration costs and 6) The levy of special taxes to accumulate funds for anticipated future repair or replacement costs of facilities maintained by the CFD, as determined by the CFD administrator. The Central Shops Land Area for any Parcel fully or partly within the boundary of the Historic District Parcel is exempt from the Special Tax. Parcels 011, 012 and 013 are not in the CFD 2014-04 district.

Railyards CFD 2018-01: This CFD was formed to fund certain infrastructure improvements. The maximum tax for this CFD is $0.435 per square foot of land area. The tax applied only to developable or public parcels.

The following table summar izes the subject’s real property taxation and our projection of real property taxes. The effective tax rate inclusive of direct assessments from the ownership group ranges from 1.13% to 2.27% on the current assessed land value. These effective rates wil l decline when improvements are constructed. Overall, the tax burden of the property is similar to other commercial areas of Sacramento. 86 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Parcel No. Ownership Assessed
Value Tax Rate Direct Assessments Landscaping &
Lighting River District PBID SAFCA Library Service Tax American River Flood Flood Control Railyard Maintenance
2014-04 CFD Total Taxes
001-0064-011 Downtown Railyard Venture, LLC $35,039 1.11670% $121.52 $0.00 $96.68 $1.50 $1.52 $8.20 $13.62 $0.00 $512.80 001-0064-012 Downtown Railyard Venture, LLC $27,825 1.11670% $109.36 $0.00 $11.14 $16.40 $1.24 $1.50 $79.08 $0.00 $420.08 001-0064-013 Downtown Railyard Venture, LLC $21,641 1.11670% $89.04 $0.00 $61.52 $1.50 $0.96 $16.40 $8.66 $0.00 $330.71 002-0010-074 Downtown Railyard Venture, LLC $4,138,324 1.11670% $3,163.86 $0.00 $0.00 $1,465.70 $1,105.44 $16.40 $576.32 $0.00 $49,376.52 002-0010-075 Downtown Railyard Venture, LLC $11,581,576 1.11670% $18,953.92 $1,772.22 $0.00 $15,443.02 $96.48 $16.40 $1,625.80 $0.00 $148,285.38 002-0010-076 Downtown Railyard Venture, LLC $1,312,373 1.11670% $2,722.27 $1,772.22 $0.00 $428.72 $69.44 $16.40 $408.46 $106,964.56 $124,342.10 DRV Totals $17,116,778 1.11670% $8,158,981.25 $1,600,314.66 $50,971.34 $5,233,462.92 $398,668.48 $27,601.70 $839,826.12 $41,058,928.40 $108,589,985.43 002-0010-077 Wong Center at the Railyard, L.P. $546,822 1.11670% $1,946.28 $1,772.22 $0.00 $30.08 $49.40 $16.40 $78.18 $29,443.84 $37,496.48 002-0010-069 Railyards Lot 48, LLC $3,763,989 1.11670% $4,925.06 $0.00 $0.00 $114.80 $4,681.02 $16.40 $112.84 $38,596.78 $85,554.31 002-0270-001 Kaiser Foundation Hospital $2,251,224 1.14690% $226.42 $0.00 $0.00 $42.28 $21.98 $16.40 $16.86 $0.00 $26,045.71 002-0270-002 Kaiser Foundation Hospital $6,915,105 1.11670% $306.98 $0.00 $0.00 $132.12 $67.56 $16.40 $107.30 $0.00 $77,527.96 002-0270-003 Kaiser Foundation Hospital $6,544,101 1.11670% $290.58 $0.00 $0.00 $124.58 $63.88 $16.40 $85.72 $0.00 $73,368.56 002-0270-004 Kaiser Foundation Hospital $8,234,231 1.11670% $361.84 $0.00 $0.00 $156.96 $80.48 $16.40 $108.00 $0.00 $92,313.50 002-0270-005 Kaiser Foundation Hospital $1,514,933 1.11670% $70.76 $0.00 $0.00 $28.56 $15.56 $16.40 $11.40 $0.00 $16,988.02 002-0270-006 Kaiser Foundation Hospital $1,679,824 1.11670% $76.84 $0.00 $0.00 $31.62 $16.40 $16.40 $12.42 $0.00 $18,835.43 002-0270-007 Kaiser Foundation Hospital $4,761,220 1.11670% $753.24 $0.00 $0.00 $90.70 $46.50 $16.40 $35.66 $0.00 $53,921.78 002-0270-008 Kaiser Foundation Hospital $2,493,972 1.11670% $104.70 $0.00 $0.00 $45.92 $24.32 $16.40 $18.06 $0.00 $27,954.89 Kaiser Totals $34,394,610 1.11670% $2,191.36 $0.00 $0.00 $652.74 $336.68 $131.20 $395.42 $0.00 $386,955.84 Real Estate Taxes
MARKET ANALYSIS 87
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

MARKET ANALYSIS
COV ID -19
Covid-19 vaccines in the US were initially a resounding success, as death and new case rates were plummeting through mid-year 2021; however, case rates began to escalate in July 2021, largely among the unvaccinated and also as a result of the expansion of the more contagious Delta Variant of the virus.

In late April 2022, the BA.5 variant, a sister of Omicron strain began occurring in the United States.

Covid BA.5 is currently the predominant strain of the virus in the United States. It is more contagious as previous variants.

On January 2, 2022, the United States hit a new record of new cases with the 7 -day average exceeding any other time period since the start of the pandemic. Since January, the rate of cases has dropped dramatically, however many covid cases are not showing up as people are self-testing.

Despite recent setbacks, Americans are traveling again, and mobility should continue to increase as consumers spend more money. Strong economic growth is expected into 2022 as rates are expected to remain near historical lows. Give n recent bond yield increases, investors have expressed worries over upward pressure on interest rates; however, rates remain well below historical norms.

New Covid cases in the United States and California had been on a decline in the spring and early summer of 2021. This was the result of the successful roll out of the vaccinations. Beginning around the end of June and continuing into September, the 7-day average cases of Covid had been on a rise. For California, new Covid cases hit a summer peak in the middle of August. The arrival of the Omicron in late November caused records cases in late December and early January. More recently, there has been a spike in cases from the BA.5 variant.

The rise in cases spurred more restrictions for retailer s and office users. As a result of the rising cases, some of the larger companies in Northern California announced extensions of remote working into 2022.

Discussions with market participants indicate the office sector has been one of the hardest hit property types due to pandemic. Office real estate brokers report that leasing activity throughout 2021 and into 2022 has been very slow, consistent with th e results that had been happening since beginning of the pandemic.

MARKET ANALYSIS 88
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Over the short -term office properties will continue to be most negatively impacted by Covid. Office demand has faced downward pressures due to remote working trends and elevated lev els of unemployment, which are declining.

INTERE ST RA TE & I NF LA TI ON IM PAC TS
Interest rates have been increasing since the beginning of March 2022. This has been the result of changing federal monetary policy due to inflation fears. The Federal Reserve has announced multiple interest rate increases throughout 2022 and beyond. In its May meeting, they increased the federal funds rate by 50 bps to 0.75%-1.00%. The move was anticipated by financial market participants, but that does not diminish the fact that it was the first 50 bps rate hike from the Federal Reserve in 22 years. These rate hikes have led to higher interest rates for residential and commercial projects. In January 2022 mortgage rates were in the low 3.0%’s. By the end of June 2022, mortgage interest rates were in the high 5.0%’s.

With continued rate hikes expected by the Federal Reserve to combat inflation, future interest rate increases are likely to occur.

Interest rate increases negatively impacts most real estate property types. Higher rates are already slowing down price appreciation of for-sale residential properties. Affordability issues will continue and there could be a spill -over with higher demand to rental housing and apartments if prices and interest rates continue to rise. Retail and hospitality properties will be impacted by inflation issues, as deposable income levels diminish due to higher prices . Development opportunities for office properties could decline due to rising rates.

ECO N OM Y
Employment levels continue to recover in the Sacramento MSA as the economy gradually reopens. Total employment over the last year has averaged 1,080,000 jobs, above the five-year average of 990,000.

Correspondingly, the unemployment rate has fallen to 2.9% ( May 2 022), as historical averages show equilibrium around 6.8%. Employment growth has been concentrated in cyclical job sectors like leisure and construction but strong figures from office sector jobs have bolstered the economy as well.

Office employment overall is trending upwards as well, recording an increase of 6.1% year over year, bringing the number of office-using jobs to 190,000. While Government remains the metro's largest office- using employer, it has only grown by 0.2% during the same period of time. Private sector office jobs have been respons ible for nearly all recent growth with professional services, information services, and education/health services all seeing gains of 7.6%, 5.3%, and 4.6%, respectively.

Sacramento MSA's affordability has remained one of its biggest draws. Bay Area and Southern California residents have shown interest in the Sacramento area to escape exorbitant housing costs, and the pandemic has only accelerated that trend. With many people working from home, and the expectation that they will be able to do so on at least a part-time basis once the virus has been contained, apartment vacancies have fallen to an all-time low, while the single-family home market has seen inventory fall and prices increase quickly.

Employment regionwide has exhibited strong growth amid the pandemic, offsetting almost all of the losses experienced during the pandemic. While the economy has largely rebounded from the pandemic, the declining U.S. and world GDP due to the Ukraine/Russia conflict, continuing supply chain constraints on merchandi se, inflation, rising interest rates and reduced monetary stimulus may temper with the region’s pace of recovery on a short basis.

APARTMENT MARKET ANALYSIS 89
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

APARTMENT MARKET ANALYSIS
Costar is the source for the following data. The data reflects conditions of 2022 1Q (to date), the most recent data available. The initial discussion provides information on the overall Sacramento MSA Multi- Family market, followed by the subject’s submarket. The subject is part of the Downtown Sacramento submarket, which will be discussed later in this report.

Costar rates multi-family properties using a star rating, in which 1 and 2-star properties generally equate to the more traditional Class C rating; 3 -star properties generally equate to Class B; and 4 and 5 -star properties generally equate to Class A. For discussion of the building classes, we will use conventional classification of Class A, B and C ratings.

SACRAMENTO (MSA ) APARTMENT MARKET
Key apartment market statistics and five-year projections are summarized in the following table.

KEY TAKE AWA YS
• The Sacramento MSA apartment market has experienced increased demand due to stronger in-migration from the Bay Area (and other coastal markets) during the Covid-19 pandemic, as increased teleworking prompted employees to relocate to more affordable and suburban areas.

Period
Vacancy
Rate
Avg Asking
Rent/Unit
Annual Rent
Growth
Inventory
Units
Under
Constr Units
Under Constr %
of Inventory
12 Mo
Absorp Units
Avg Sale
Price/Unit
Market Cap
Rate
2026 4.8% $2,155 2.9% 141,525 - - 393 $307,210 4.6%
2025 4.4% $2,095 3.6% 140,596 - - 439 $300,388 4.6%
2024 4.5% $2,021 4.3% 140,308 - - 832 $291,444 4.6%
2023 4.6% $1,938 5.8% 139,540 - - 1,309 $281,701 4.5%
2022 3.8% $1,832 7.7% 137,078 - - 1,951 $268,537 4.5%
2022 YTD 4.1% $1,761 7.9% 133,863 4,448 3.3% 1,000 $266,649 4.3% 2021 Q4 3.8% $1,713 11.3% 133,455 4,809 3.3% 1,717 $254,311 4.4% 2021 Q3 3.5% $1,702 12.8% 134,402 5,820 4.3% 1,923 $247,046 4.6% 2021 Q2 3.5% $1,663 12.7% 133,941 5,913 4.4% 2,917 $238,751 4.6% 2021 Q1 3.7% $1,571 8.4% 133,445 5,228 3.9% 2,940 $228,591 4.6% 2020 Q4 4.0% $1,528 6.3% 133,443 4,126 3.1% 3,009 $222,368 4.6% 2020 Q3 4.0% $1,509 5.3% 133,070 3,404 2.6% 2,305 $216,951 4.6% 2020 3.9% $1,523 6.3% 131,600 3,631 2.8% 3,051 $220,838 4.6% 2019 5.2% $1,432 4.0% 130,127 2,091 1.6% 783 $199,407 4.9% 2018 4.5% $1,377 4.8% 128,343 2,670 2.1% 913 $178,656 5.1% 2017 4.2% $1,314 6.7% 127,079 2,694 2.1% 267 $158,127 5.4% 2016 3.9% $1,231 8.1% 126,367 1,117 0.9% 480 $144,035 5.6% 2015 4.2% $1,139 9.3% 126,208 996 0.8% 1,138 $131,894 5.8% 2014 4.8% $1,042 4.2% 125,859 437 0.3% 996 $118,955 6.0% 2013 5.4% $1,000 2.8% 125,537 711 0.6% 1,550 $110,543 6.2% 2012 6.6% $973 1.5% 125,557 256 0.2% (4) $109,220 6.2%
2011 6.6% $958 1.2% 125,597 193 0.2% (167) $109,550 6.1%

APARTMENT MARKET TRENDS & PROJECTIONS - SACRAMENTO MSA
APARTMENT MARKET ANALYSIS 90
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL • The Sacramento MSA apartment market has maintained consistently positive rental growth, low vacancy rates and healthy net absorption.
• New construction is at a decade high level and demand remains strong. Vacancy and rents are not expected to be impacted due to supply drive pressure.
• Robust market fundamentals and growing investor interest continue to place upward pressure on pricing .

Recent interest rate increases so far have not materially impacted capitalization rates on Class A assets.

OVERVIEW
Sacramento MSA multifamily vacancies f ell to an all -time low in 2021. As in the wider U.S., metro unemployment remains low, with interest from homebound workers and Bay Area residents, demand remains elevated. This is particularly true in pricier markets with large units and areas with an abundance of affordable product.

While still modest, the construction pipeline has risen to a post -Great Recession peak in 2021, after the metro gained more than 1,000 units for a third consecutive year in 2020. When construction has occurred, projects have mostly been concentrated in Downtown Sacramento, resulting in significant supply -driven pressure for that area, and in affluent suburban cities like Elk Grove, Folsom, Roseville, and Rocklin.

Thanks to new jobs and strong in-migration, plus home prices that have become increasingly unaffordable for many metro residents, outsized rent hikes have been the rule here for many years: Over the past decade, the average apartment rent in Sacramento MSA has increased 80.1%. And with vacancies falling to a new low, annual rent growth is approaching the all-time peak.

With occupancy and rents increasing and only modest supply -driven pressure on the horizon, investor interest has soared; deal flow in 2021 surpass ed 2020’s modest figure. Class C communities typically dominate metro sales, and these assets often trade for a significant premium over their purchase prices.

APARTMENT MARKET ANALYSIS 91
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

ABS OR PT I ON
The market experienced record absorption (±3,000 units) during 2020 and 2021 was achieved close to 2,000 units.

Historical and projected net absorption trends are shown in the following graph.

VACA NC Y
Sacramento MSA 's apartment market began 20 22 with vacancies near an all -time metro low . The previous trough, of 3.8%, had stood since 2000. A lack of new construction, population growth that was nearly double the U.S. norm, and a solid economy propelled significant occupancy gains over the past decade. Furthermore, after the onset of the coronavirus pandemic and ensuing recession, demand soared to almost unprecedented levels, and it remained strong in the new year. California's eviction moratorium, stimulus checks, and enhanced unemployment benefit s initially buttressed occupancy, but interest in both cheaper submarkets and suburban areas with larger units have helped push vacancies even lower.

Looking ahead, near-term demand is expected to remain healthy as the economy continues to improve.

Rising home prices and a lack of inventory on the market will also likely propel apartment demand, and the renewed stimulus funds should help low-income households stay current on rent. Bay Area residents with the option to work from home, whether on a part- or full-time basis, may also continue relocating to the Sacramento region. Supply-driven pressure is on the horizon, but the construction pipeline is below most major U.S. markets, and the bulk of units are projected to deliver in 2022 and 2023.

APARTMENT MARKET ANALYSIS 92
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Historical and projected vacancy rate trends are shown in the following graph.

APARTMENT MARKET ANALYSIS 93
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

REN TA L RATE S
Apartment rents continu ed to soar in 2021 and into 2022 . With vacancies falling to a record -low, the average rent has increased 7.9% over the past 12 months. While rents declined at the start of the pandemic before staging a remarkable comeback, outsized rent growth is nothing new in Sacramento MSA. Over the past five years, annual gains have averaged 6.8%.

The cost of renting an apartment surged in 202 1. G iven Sacramento's relatively limited development pipeline coupled with rising home prices, it appears leverage will remain on the side of local landlords.

Historical and projected rent growth are shown in the following graphs.

APARTMENT MARKET ANALYSIS 94
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

INVEN TOR Y & C O N STRU CTI O N
In 2021, Sacramento MSA's development pipeline ascended to a post -Great Recession peak. Currently, around 4,500 units are under construction, a significant increase to most recent years, and Downtown Sacramento continues to lead the metro on an absolute basis.

Sacramento MSA's apartment inventory only increased by about 3% this past decade, but in 202 1, the metro gained more than 1,665 new units, a third consecutive year of 1,000 units or more growth. The last time 1,000 or more units delivered in three consecutive years here was from 2004–06.

High construction costs, lengthy and difficult approval processes, and uncertainty of de mand to support high-end rents have deterred many developers. Before breaking ground, entitlement costs for apartment projects often top $50,000/unit, depending on a variety of factors. Those entitlement costs were only slightly less than the average price per unit for existing product in Sacramento MSA from 2010–13. As a result, construction in the past decade was largely confined to Class A projects in the metro's more affluent areas.

Historical and projected construction trends are shown in the following graphs.

APARTMENT MARKET ANALYSIS 95
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

APARTMENT MARKET ANALYSIS 96
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

SA LES & CA PI TA LIZ AT I O N RATE S
Sacramento MSA's multifamily investment market experienced a late -year surge in 2020, and that has carried into 2021. Deal flow picked up in 2021 and prices followed with rising average sale prices. In 2020, the average transactional price rose to $229,000/unit, the highest figure on record at that time . The previous peak, recorded in 2019, was $166,000/unit. For the past 12 months, prices increase d further recording at $266/unit. Transactional cap rates, as they have for several years, are trending in the mid - 4% range.

The Sacramento region does attract institutional capital. However, the bulk of investment originates from private buyers, typically from within the metro. Investors from other parts of California, have been active as well. In the past decade, about 35% of all sales originated from Bay Area cities.

APARTMENT MARKET ANALYSIS 97
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

SACRA MEN T O MSA A PA RTMEN T MAR KET OU T L O OK
The Sacramento MSA apartment market has maintained consistently positive rental growth, low vacancy rates and healthy net absorption over the past decade and this trend is expected to continue. The average regional vacancy rate over the past decade is near 5% and the current vacancy rate (4.1%) is near an all- time low. Rent growth has remained strong, averaging near 5% annually over the past decade and the current ( 7.9% YOY) rate is near a record high level. Overall, market fundamental remain solid and pending/future additions to supply are not expected to outweigh demand. Future gains in rent growth are expected to moderate to historic levels going forward and vacancy rates are projected to remain at or below the 5% level. Overall, the outlook is clearly positive of the regional apartment market.

APARTMENT MARKET ANALYSIS 98
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

DOWNTOWN APARTMENT MARKET
The boundaries of the Downtown submarket, as defined by CoStar, are shown below.

Key apartment market statistics and five -year projections for the Downtown apartment market are summarized in the following table.

APARTMENT MARKET TRENDS & PROJECTIONS - SACRAMENTO MSA
APARTMENT MARKET ANALYSIS 99
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

OVERVIEW
Downtown Sacramento encompasses a wide geography and diverse renter base. The submarket includes the Capitol Park and Midtown Sacramento neighborhoods, as well as East Sacramento.

Numerous residents choose Capitol Park and Midtown Sacramento because of their proximity to nearby jobs, as well as the opportunity to live in a major city's urban core and the lifestyle that offers. Both neighborhoods have gained a number of new communities in recent years, and units lease for well above the metro average. East Sacramento, on the other hand, is characterized by an inventory that is largely decades old, and rents come at a considerable discount to the Sacramento MSA norm.

Net absorption was positive in nearly every year of the past decade and demand has been strong since the start of the coronavirus pandemic. Vacancies, however, have been prone to volatility thanks to supply- driven pressure, and that has been especially true since the onset of the pandemics. Downtown Sacramento gained a record number of new units last year and the vacancy rate soared to an all-time high of 10.5% in Q2 2020 (although strong absorption of this new inventory has resulted in vacancy returning to the current ±4% level). One of the few metro areas in California that has consistently gained product in recent years, inventory has expanded by almost 15% since 2015.

While vacancies have notably compressed, the mark still sits well above the Sacramento MSA average and more supply-driven pressure is on the horizon: As of 22Q1, there were over 2,000 units under construction in downtown.

The local sales market has seen little activity since the start of the pandemic. Deal flow fell to its lowest level in a decade last year . Still, 2020 proved to be a record -breaking year. The Press, one of Midtown Sacramento's newest projects, sold just a few months after its completion for a metro -record sale price and pushed submarket investment volume to a new all-time high.

APARTMENT MARKET ANALYSIS 100
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

ABS OR PT I ON
Absorption has largely been tied to the delivery of new units within this submarket. Absorption increased considerably in 2020 and over the past 12 month a total of 165 units were absorbed. Going forward, CoStar projects that average absorption will be approximately 590 units annually from 2022-2026.

VACA NC Y
Downtown’s apartment market is continuing to rebound from 2020. Vacancies in 20Q2 soared to an all- time high of 10.5%, but the market was approximately 370 basis points lower (6.8%) at 2022Q1.

In 2021 , the submarket was inordinately impacted by supply -driven pressure and the coronavirus pandemic. Deliveries soared to a new peak and stabilized properties realized a notable decline in occupancy; the virus steered demand to some of the metro's more outlying areas. Local resi dents likely sought out more space, especially those working from home, and at a lower rent per SF.

Sacramento's urban core has slowly been improving during 2021 and into 2022. After peaking in 20Q2, the stabilized vacancy rate has compressed, and new projects are continuing to lease up. Renters may be envisioning the return of Downtown Sacramento's live/work/play environment, especially in Midtown Sacramento. That neighborhood has boasted the tightest vacancies, likely due to the large millennial population who are attracted to the coffee bars and cafes during the day and the abundance of restaurants, breweries, and bars in the evenings.

Bay Area residents working from home on a permanent or part-time basis may also be boosting demand.

Since the onslaugh t of the virus, vacancies in San Francisco, San Jose, and the East Bay skyrocketed; residents sought out cheaper housing. In Downtown Sacramento, a unit can be secured in a new, highly amenity community for about a 25% discount to the average rent in San Francisco.

APARTMENT MARKET ANALYSIS 101
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

REN TA L RATE S
Since spring of 2021, momentum returned for Downtown Sacramento apartment landlords. Rents fell during 2020 but have gained approximately moderately over the past 12 months.

The average asking rent has only changed by 2.9% over the past 12 months, compared to the metro average of 7.9%. Rents fell dramatically as California's lockdown took effect, and that same dynamic played out across the Sacramento MSA. But in most submarkets, rents returned to the pre-pandemic peak before the end of 20Q2 and continued to soar.

Rent growth that trails the metro norm is not a new trend here. Peak submarket gains this past cycle came in at about 5%, while rent growth in the wider metro topped out at 10%. Inventory here has increased by almost 15% since 2015, resulting in supply-driven pressure. In contrast, inventory region wide has grown by less than 5% since 2015, making supply-driven pressure almost nonexistent.

High-end properties receive a hefty premium over the rest of inventory —rents for Class A product are approximately 35% higher than the submarket average. Virtually all of the upper -tier inventory is in the Capitol Park and Midtown Sacramento neighborhoods.

Rents for high -end product in this area are pricey for long -time Sacramento MSA area residents, but a bargain for those migrating from the Bay Area. Assuming a renting household wants to spend no more than 30% of gross pay on rent, the average Class A one-bedroom would require a ye arly income of approximately $85,000; higher than the metro median, but below the Bay Area median.

APARTMENT MARKET ANALYSIS 102
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

APARTMENT MARKET ANALYSIS 103
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

DOW NT OW N - NEW /C L AS S A OVERV IEW
The major apartment projects delivered in the central urban area during the past decade are summarized in the following table.

As summarized above, the new apartment projects are averaging rental rates near $2,300 per month or $3.00 per square foot. Directly across the river from Downtown, West Sacramento is emerging as a hot spot for new development with rental rates slightly trailing those in Downtown and Midtown.

INVEN TOR Y & C O N STRU CTI O N
Supply-driven pressure has been the norm in Downtown Sacramento recently and that trend will continue. During 21Q2, the submarket development pipeline was at its highest l evel on record. As of today, the level of construction is still near an all-time high at 2,049 units under construction in downtown.

There are 10 market rate apartments under construction totaling 1,534 units.

One of the largest projects under construction is Weidner Apartment Homes' Sacramento Commons, a 436-unit community in the Capitol Park neighborhood. Weidner, based in Kirkland, Washington, is a national developer and owner in many major markets throughout the U.S. and Canada, but Sacramento Commons is the company's first metro project. Located two blocks south of Capitol Mall and just around the corner from the California State Capitol, the community is expected to deliver in 2022.

APARTMENT MARKET ANALYSIS 104
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL SKK Developments is making its presence known in Downtown Sacramento. The company is building The Mansion, a 1 86-unit project in the Mansion Flats neighborhood, and Eleanor Apartments, a 95 -unit property in the Boulevard Park neighborhood. The Mansion deliver ed in late 2021, but Eleanor Apartments could wrap up construction in early 2022. Moreover, last year SKK delivered The Press, a 277- unit community that is part of Midtown Quarters, as well as H16, a 95-unit community in Boulevard Park.

In West Sacramento, the West a 286-unit project recently commenced construction.

This submarket has an extensive pipeline of projects, thanks to what has been a rapidly growing population and employment base. While these trends may be challenged in the near-term, a study by the Sacramento Area Council of Governments projected that there will be a major emphasis on urban infill in the coming years, rather than suburban growth, and the proposed pipeline backs it up. New plans for projects in both Capitol Park and Midtown Sa cramento largely focus on the abundance of underutilized parcels in these neighborhoods. Still, the economic slowdown could put some projects on hold.

The following table summarizes the most notable projects presently under construction.

Downtown

APARTMENT MARKET ANALYSIS 105
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

SA LES & CA PI TA LIZ AT I O N RATE S
The local investment market has seen a limited amount of activity since the start of the coronavirus pandemic. In 2020 deal flow came in at the lowest level in a decade, but transaction volume picked up for 2021.

From 2015–19, annual sales volume averaged approximately $106 million, or almost double the submarket's long-term norm, mainly due to rising prices. Market pricing during this time frame, which is based on the estimated price movement of all properties in the market, informed by actual transactions, was roughly $210,000/unit. By comparison, the average market price from 2010 –14 was only about $140,000/unit. As of late, pricing has further increased, due in large part to the sale of The Press. Currently, the average market price sits at $ 337,000/unit. The average market cap rate, which has been trending below 5% since 2018, is currently 4.2%. Increases in interest rates will likely impact Class B& C properties the greatest.

One notable recent transaction in downtown sub-market is the sale of 1430 Q Street that closed in March 2022 for $57.1 million or $761,333 per unit. This 75 -unit, 8-story project with ground floor retail is the highest price per unit on record in the Sacramento region. The reported capitalization rate was 4.7%.

Downtown

APARTMENT MARKET ANALYSIS 106
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

DOW NT OW N AP ART MEN T MARKE T OU TL O O K
Consistent with regional trends, the Downtown Sacramento apartment market has maintained consistently positive rental growth, low vacancy rates and healthy net absorption over the past decade and this trend is expected to continue. The average submarket vacancy rate over the past decade is near 5% and the current vacancy rate ( 6.8%) is slightly high due to recent completions. Overall, market fundamental remain solid and pending/future additions to supply are not expected to outweigh demand, although occupancy rates and rent concessions will vary as new projects are delivered and absorbed.

Future gains in rent growth are expected to moderate to historic levels going forward. Overall, the outlook remains positive of the Downtown apartment market.

OFFICE MARKET ANALYSIS 107
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

OFFICE MARKET ANALYSIS
Costar is the source for the following data. The data reflects conditions of 2022 1Q (to date). The initial discussion provides information on the overall Sacramento MSA Office market, followed by the subject’s submarket. The subject is part of the Downtown submarket, which will be discussed later in this report.

Costar rates office properties using a star rating, in which 1 and 2-star properties generally equate to the more traditional Class C rating; 3-star properties generally equate to Class B; and 4 and 5-star properties generally equate to Class A. For discussion of the building classes, we will use conventional classification of Class A, B and C ratings.

SACRAMENTO (MSA ) OFFICE MARKET
Key office market statistics and five-year projections are summarized in the following table.

KEY TAKE AWA YS
• The market vacancy rate has increased for four of the last six quarters. The direct vacancy rate and the overall availability rate are up 100 and 300 basis points, respectively, from the pre -pandemic lows in Q1 2020.
• The trailing 12 -month net absorption has been positive for the past two quarters and the current trailing 12-month net absorption is almost 800,000 square feet.
• Asking rental rates peaked in Q1 2020 and have remained relatively stable thereafter. • Sales volume remains at about half of the five-year trailing average. • Colliers International reports Sacramento is an emerging market for Life Science office users.

Period
Vacancy
Rate
Availability
Rate
Market
Rent/SF
Annual Rent
Growth Inventory SF
Under Constr
SF
Under Constr %
of Inventory
12 Mo Net
Absorp SF
Market Sale
Price/SF
Market
Cap Rate
2026 10.9% - $31.38 1.7% 112,198,656 - - 567,226 $243 7.3% 2025 10.8% - $30.85 2.2% 111,325,684 - - 658,796 $240 7.3% 2024 10.6% - $30.19 3.1% 110,362,253 - - 835,532 $236 7.3% 2023 10.6% - $29.28 3.0% 109,470,506 - - 583,581 $230 7.2% 2022 10.9% - $28.44 2.6% 109,156,269 - - 710,234 $224 7.2% 2022 YTD 10.1% 13.6% $27.48 1.7% 107,933,039 1,573,635 1.5% 795,346 $226 7.2% 2020 Q4 10.0% 13.7% $27.48 1.7% 107,933,039 1,539,575 1.5% 116,991 $225 7.2% 2021 Q3 10.0% 14.0% $27.71 1.2% 106,946,917 2,394,659 2.2% (759,569) $220 7.2% 2021 Q2 9.9% 13.3% $27.53 -0.0% 106,643,860 2,758,909 2.6% (892,550) $219 7.2% 2021 Q1 9.9% 13.0% $27.41 -0.4% 106,618,894 2,508,875 2.4% (1,136,234) $218 7.2% 2020 Q4 9.3% 12.5% $27.38 2.1% 106,659,679 2,037,725 1.9% (219,226) $217 7.2% 2020 Q3 8.6% 11.4% $27.37 3.2% 106,127,879 2,554,525 2.4% 241,938 $216 7.3% 2020 9.3% 12.6% $27.31 1.8% 106,635,521 2,041,525 1.9% (264,632) $214 7.3% 2019 8.7% 10.6% $26.84 5.9% 106,170,747 2,674,815 2.5% 1,426,010 $208 7.4% 2018 9.7% 11.6% $25.34 4.8% 105,667,439 1,411,832 1.3% 592,166 $199 7.4% 2017 10.1% 12.1% $24.18 5.5% 105,567,340 720,199 0.7% 569,082 $196 7.2% 2016 10.6% 13.0% $22.93 3.8% 105,510,090 76,071 0.1% 1,419,830 $191 7.1% 2015 11.6% 14.8% $22.08 6.1% 105,086,944 381,367 0.4% 1,608,308 $186 7.1% 2014 13.2% 15.4% $20.81 0.9% 105,175,429 216,331 0.2% 1,273,843 $174 7.2% 2013 14.5% 17.0% $20.63 2.1% 105,255,584 164,789 0.2% 1,181,169 $168 7.3% 2012 15.4% 17.8% $20.22 -1.5% 104,950,491 471,378 0.4% 1,262,475 $161 7.5% 2011 16.5% 18.8% $20.53 -5.1% 104,812,839 317,567 0.3% (246,591) $162 7.6%

OFFICE MARKET TRENDS & PROJECTIONS - SACRAMENTO MSA
OFFICE MARKET ANALYSIS 108
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

OVERVIEW
Sacramento MSA’s office market is continuing to undergo a significant transformation. The market saw the 12-month net absorption to top out at -1,100,000 SF in Q1 2021 as companies adapt ed to remote work and hybrid work models. That being said, t he Sacramento MSA office market is beginning to show signs of improvement. The current vacancy rate of 10. 1% is near the five -year average of 9.7%, having increased by 60 basis points over the past 12 months. Demand fundamentals, however, have yet to recover, as annual net absorption totals are still well below average. Market activity has improved over the past two quarters as tenants have a better idea of their future real estate needs, and there are early signs of some demand recovering.

Asking rents, typically the last indicator to react to market conditions, have been firm. The market asking rate is near $27.48 per square foot and annual rent growth sits at 1.7% over the last year.

Colliers International reports Sacramento is an emerging market for Life Science office users. They report Bay Area -based life science firms continue to target Sacramento with 212,000 square feet leased or purchased in the second half of 2021. They report driven by strong STEM talent and top tier research from UC Davis, the continued expansion Bay Area -based companies across the biotechnology, pharmaceutical, agriculture-technology, and medical device sectors has created a vibrant life science ecosystem across Sacramento. Some of the recent leases deals include the following:

• Alameda-based medical device manufacturer Penumbra expanded in Roseville, leasing 96,505 square feet, and growing its footprint to more than 250,000 square feet.

• Menlo Park-based Orca Bio, a clinical stage biotechnology company, pre-leased 94,442 square feet in Metro Air Park.

• Singapore-based biotech startup TurtleTree opened a 23,478 square foot R&D facility in West Sacramento and announced a $30 million Series A funding round.

• Richmond, CA-based pharmaceutical firm JOINN Biologics purchased 4070 Truxel Road in North Natomas, a 20,923 square foot property formerly occupied by CSPC Dophen with existing lab space and lab equipment.

Prior to the pandemic, employment growth came primarily from defensive labor sectors, specifically government, education, and healthcare. While that helped to limit the number of layoffs during the pandemic, these typically grow slowly. Nevertheless, they are driving market activity. Additionally, there is good employment growth in the financial services, professional services, and information technology sectors. All of these industries have shown year-over-year increases, of 2.3%, 5.3%, and 7.6%, respectively.

Job growth, particularly for private-sector office jobs, is one of the region's best indicators of economic improvement as tenants are showing early signs of expansion.

The local sales got off to a modest start in 2021, but there is increasing momentum with total volume reaching $825 million, on pace to easily surpass last year's total of $936 million. The largest deal of 2021 was the sale of the Ziggurat building in West Sacramento. The 374,000 SF property is entirely leased to the State of California's Department of General Service s and sold to Nome Capitol for $90 million and $241/SF. So far in 2022, office sales activity in the region has been low.

OFFICE MARKET ANALYSIS 109
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

ABS OR PT I ON
Historical and projected net absorption trends are shown in the following graph.

Demand for office space is beginni ng to return, as net absorption has been positive over the past 2 quarters. While tenants are active throughout the market, most that are interested in seeking new space are only willing to relocate if lease rates and concessions are favorable. With landlords largely hesitant to move much on pricing, the most economical option is often a short- to medium-term renewal or possibly a downsize.

CoStar reported net absorption totaled 795,000 SF for the past twelve month, with the vacancy rate sitting at 10.1% as of 1Q 2022. Tenant demand for space in the urban core remains, albeit in a smaller footprint.

With that said, there are likely to be some large new blocks of space entering the market in the near to mid-term as the State of California government offices move out of privately held buildings and into its new construction beginning in 2022.

As expected, when tenants are reevaluating their square footage needs, large deals have been sparse during the year. Despite the setbacks that came with the pandemic, Sacramento MSA's fundamentals remain strong compared to much of the national office market, with the state government as the cornerstone of a large, stable tenant base. Additionally, the region is well-positioned to take advantage of possible incoming tenants at the Railyards in Downtown, for a traditional office user, or at Aggie Square in East Sacramento, if lab space is required. With that said, unless another large company relocates to the Sacramento area, recovery will likely be slow for the remainder of 2022 and into 2023.

OFFICE MARKET ANALYSIS 110
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

VACA NC Y
Historical and projected vacancy rate trends are shown in the following graph.

Costar reports that t he Sacramento MSA office market has a vacancy rate that sits at 10.1%, which is a slight increase from pre-pandemic period. The space that has returned to market is largely a result of firms downsizing and shifting towards a hybrid real estate strategy. Much of the vacancy is among Class B properties which is currently 11.5%, while Class A properties, which compare favorably, with vacancy of only 7.4%.

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RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Sublease space, which has been flooding neighboring markets like San Francisco, has had limited impact on fundamentals, as the current sublease availability rate sits at 1.2%, close to the five -year average of

0.7%.

Colliers International report ed a vacancy rate of 16.7% (excludes public sector office buildings) for the Sacramento region with annual net absorption being -1.47 million feet in 20 21. They report market vacancy rate has increased for seven consecutive quarters and finished 2021 at 16.7%, its highest point since Q3 2015. They report the road to recovery is beginning even as tenants continue to downsize and consolidate, but the lack of new supply, swelling labor po ol, diversifying employment base , escalating migration, and spiking capital funding of local companies should aid in the market’s return to form by the second half of 2022.

REN TA L RATE S
Sacramento MSA office rents suffered the same shock as the rest of the nation at the onset of the pandemic. However, initial pricing decreases have largely leveled off with annual rent growth of 1.7%, beating the national figure of -0.9%. High -quality assets have seen t he biggest decreases, as Class A properties have seen rates fall by -2.6% in the last year. However, these are offset by gains of 1.3% and

1.5% by Class B and C properties, respectively.

With the extended work from home experiment, tenants have recognize d a continued need for office space, albeit sometimes with a reduced footprint. The resulting increase in vacancy has put downward pressure on lease rates, particularly in areas with a large percentage of high -quality product like Downtown and Roseville/Rocklin.

Downtown still commands a sizeable pricing premium over the balance of the market with its abundance of quality product and strong leasing prior to the pandemic. Historically, the submarket has drawn consistent demand for corporate and professional service users. However, the extent to which they will fully return to the office remains to be seen.

Despite the short -term hardship, lease rate trends have been positive over the past three years with average annual growth of 1.2% and 5.9% over the last three years. Given the lack of supply built during the prior economic cycle, Sacramento MSA is in a better position for a recovery once workers start going back to the office.

Historical and projected market rent grown is shown in the following graph.

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CO NS TRUC TI ON
Sacramento MSA has seen very little large -scale office construction over the past 10 years. Most of the construction that is taking place is build -to-suit with various government agencies slated to occupy the majority of th e 3.0 million SF under construction. The three largest of these projects are all located downtown, highlighted by the 21-story, 838,000-SF California Natural Resources building on P St, which is expected to deliver in 2022 and will house the California Nat ural Resources Agency, Department of Fish and Wildlife, Department of Conservation, and others.

The new construction will not have a direct effect on market vacancy, which currently rests at 10. 1%.

However, there will be significant downstream impact. For example, the Department of Conservation (mentioned above) currently occupies 151,021 SF at 801 K St. in Downtown Sacramento.

Another project that will likely result in new space on the market is the 275,000-SF CALSTRS expansion at 100 Waterfront Place in West Sacramento, slated for completion in 2022. While there are no planned availabilities in that building, CalSTRS is planning to vacate 199,000 SF in its current headquarters to move into the new project next door.

During the past decade, almost no spe culative office construction was delivered. Exceptions include the very successful Ice Blocks mixed -use project in Midtown and the 90,000 SF (2555 Natomas Park Dr) in South Natomas, which completed in early 2020. A victim of poor timing, as 22Q1, the property remained vacant and for lease.

The lack of speculative product in the current development pipeline is in stark contrast to the past cycle.

Overbuilding was prevalent prior to 2010, resulting in an excess of supply leaving local developers hesitant to add speculative product to the inventory. This lack s private sector office construction, however, has positioned Sacramento MSA for a turnaround relative to the global financial crisis.

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SA LES & CA PI TA LIZ AT I O N RATE S
Sacramento MSA's office sales market is off to a slow start in 2022. Economic uncertainty continues to keep buyers on the sidelines, and questions surrounding the long -term real estate strategy of occupiers could be giving some investors pause. Recent investment sales are primarily for fully leased assets with stable government tenants.

Sales volume in 2021 totaled $280 million, while the market is not setting any records, strategic buyers are taking long -term growth positions, betting on the market's strong overall f undamentals. As an example, over the past 12 months, the average transactional sale price is $188/SF, compared to the five- year average of $176/SF. Transactional cap rates have landed in the mid-6% to low-7% range since 2014.

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SACRA MEN T O MSA O F F ICE MARKE T OU T LO O K
Sacramento MSA ’s office market is evolving to meet the needs of a workforce with a wide array of preferences. Many recent lease transactions have been short -term renewals since Q2 2020, but more long-term leases have been signed as clarity began to emerge from a chaotic business climate due to work at home trends. Though working from home is certainly here to stay in some capacity, it is expected that most employees will return to the office at least 2 -3 times a week by the end of 202 2. Employers are starting to make more long-term decisions relating to office space needs. For 2022, the Sacramento office market is expected to have relatively stable occupancy, minimal rent growth and positive absorption.

The Covid-19 pandemic has led to significant in -migration to Sacramento MSA from the Bay Area and there is a growing belief that technology companies will open satellite offices in the Sacramento area to be closer to their shifting employee base. If this t ranspires, it will undoubtedly have a lasting positive impact on the local office market.

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DOWNTOWN OFFICE MARKET
The boundaries of the Downtown submarket, as defined by CoStar, are shown below.

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RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Key office market statistics and five-year projections for the Downtown office market are summarized in the following table.

KEY TAKE AWA YS
• The market vacancy rate has increased for three of the past six quarters. The direct vacancy rate and the overall availability rate are up 130 and 250 basis points, respectively, from the pre -pandemic lows in Q1 2020.
• Trailing 12- month net absorption has been positive for three of the past six quarters and the current trailing 12-month net absorption is a positive 1,026,000 square feet. • Asking rental rates peaked in Q1 2020 but have not seen significant decline despite reduced demand over the past five quarters.
• The 946,500 square feet presently under construction is build -to-suit for two State of California office buildings.
• Leasing activity was up significantly during 2021, reaching the highest point since 2012 and surpassing the 800,000-SF threshold for only the second time in the last 20 years. More than half of that number is due to the State of California moving into 472,000 SF of new construction at 1201 O St. The difference of roughly 350,000 SF is still more than double the 2020 totals. The adjusted total reflects an increase in tenant interest in Downtown, but significant room for growth remains.

OVERVIEW
Downtown is Sacramento MSA's largest and most prominent office submarket. About half of the area's 21 million SF of inventory is Class A , and it is home to an abundance of government and corporate occupiers. But since the onslaught of the coronavirus pandemic, demand in Downtown has been soft but rents have remained steady.

Period
Vacancy
Rate
Availability
Rate
Market
Rent/SF
Annual Rent
Growth Inventory SF
Under Constr
SF
Under Constr %
of Inventory
12 Mo Net
Absorp SF
Market Sale
Price/SF
Market
Cap Rate
2026 9.2% - $38.90 1.8% 24,654,660 - - 408,892 $278 7.2% 2025 9.2% - $38.22 2.2% 24,191,311 - - 433,378 $275 7.2% 2024 9.1% - $37.40 3.1% 23,684,010 - - 404,587 $270 7.2% 2023 9.0% - $36.26 3.1% 23,212,066 - - 209,919 $263 7.2% 2022 9.1% - $35.18 2.7% 23,022,798 - - 818,465 $257 7.1% 2022 YTD 8.7% 8.4% $34.20 1.1% 22,107,187 946,500 4.3% 1,026,699 $259 7.1% 2021 Q4 8.0% 8.7% $33.26 -99.7% 22,107,187 946,500 4.3% 86,346 $251 7.1% 2021 Q3 8.0% 9.9% $34.26 0.3% 21,263,442 1,784,500 8.4% 86,346 $251 7.2% 2021 Q2 8.5% 9.2% $34.10 -1.2% 20,974,869 2,144,500 10.2% (295,065) $252 7.1% 2021 Q1 8.3% 9.3% $33.88 -2.3% 20,974,869 2,144,500 10.2% (293,349) $250 7.1% 2020 Q4 7.6% 8.5% $34.02 1.3% 20,974,869 1,670,000 8.0% (162,818) $249 7.2% 2020 Q3 7.2% 7.7% $34.16 3.2% 20,974,869 1,670,000 8.0% 15,318 $248 7.2% 2020 7.2% 8.4% $34.14 1.3% 20,928,112 1,670,000 8.0% (162,818) $244 7.3% 2019 6.7% 6.6% $33.71 7.9% 20,982,144 1,670,000 8.0% 163,936 $239 7.2% 2018 7.5% 9.2% $31.24 4.9% 20,982,144 360,000 1.7% 239,079 $230 7.2% 2017 8.9% 10.0% $29.79 5.3% 21,041,895 - - 17,052 $224 7.0% 2016 9.0% 9.4% $28.30 3.3% 21,047,895 - - 158,524 $225 6.9% 2015 9.8% 10.7% $27.39 9.2% 21,047,895 - - 22,682 $225 6.8% 2014 9.9% 11.3% $25.09 -0.3% 21,062,871 - - 154,347 $207 7.0% 2013 11.2% 12.6% $25.17 2.6% 21,196,814 - - (297,611) $200 7.1% 2012 9.8% 11.3% $24.52 -1.2% 21,196,814 - - (13,619) $192 7.3% 2011 10.3% 11.7% $24.81 -4.5% 21,324,457 - - (44,761) $192 7.3%

OFFICE MARKET TRENDS & PROJECTIONS - DOWNTOWN SUBMARKET OFFICE MARKET ANALYSIS 117
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A lack of inventory growth, coupled with positive demand nearly every year in the past decade, has consistently held vacancies below the Sacramento MSA norm. As in the wider metro, new supply, particularly of th e spec variety, was rare this past cycle. While the vacancy rate remains below the Sacramento MSA average, vacancy expanded in 2021, after increasing last year for the first time since 2013. Rents remain steady, but office product here is easily the priciest in Sacramento MSA, thanks to its locale and wealth of high-end inventory.

After many years of limited inventory growth, office supply has been increasing lately. Sacramento MSA's most conspicuous office developments in more than a decade are underway , in the form of four government buildings. In 2022, two state office projects totaling 1.2 million feet were completed. There are two other state office project under construction that will add 946,000 SF in 2022 and 2023.

The local sales market experienced a notable pullback starting in 2020. Few projects sold in 2021, after deal flow last year was only about half of what was recorded in 2018–19. Still, the number of trades most years is limited. While Downtown contains more square footage than any other metro submarket, many assets are government -owned. In recent years, several of the area's most visible assets have changed hands, and the lofty prices those high -end properties command is what typically drives investment volume, rather than outsized transaction volume.

ABS OR PT I ON
Net absorption over the past 12 month in downtown totaled 1,026,000 SF, with the vacancy rate sitting at 8.7% as of 1Q 2022. Tenant demand for space in the urban core remains, albeit in a smaller footprint.

With that said, there are likely to be some large new blocks of space entering the market in the near to mid-term as the State of California government offices move out of p rivately held buildings and into its new construction beginning in 2022.

OFFICE MARKET ANALYSIS 118
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Downtown's office fundamentals have slowly been improving since 3Q 2021. This is a change from one of its weakest years on record in 2020 when there was negative absorption . Leasing activity has been tepid, after coming in at an all-time low and just a fraction of what is typical last year. However, trailing 12-month net absorption is now positive after several quarters of having negative trailing 12 -month absorption. In contrast, annual net absorption had been positive each year here since 2013, and 2018 – 19 marked the strongest back-to-back years of demand during the past cycle.

Historical and projected net absorption trends for the Downtown submarket are shown in the following graph.

VACA NC Y
As is typical, Downtown vacancies are below the metro average. However, the vacancy rate is up 200 basis points from 2019. T he types of corporate tenants that typically occupy high -end space transitioned to working from home almost seamlessly, and while some employees have returned to the office, a number of workers may continue working remotely on at least a part-time basis after the virus has been contained.

The government sector, which is the main driver of office activity Downtown, can typically be counted on to buttress occupancy during economic downturns, but a number of agencies have similarly reevaluated their office footprints. In one of the area's largest recent move-outs, the California State Auditor vacated three floors totaling 62,400 SF at the U.S. Bank Tower. And more government move-outs could be on the horizon. According to the Bureau of Labor Statistics, gover nment employment in Sacramento MSA has decreased since last May, when the wider job market bottomed, while virtually every other sector has added workers.

Looking ahead, a lack of supply-driven pressure could keep vacancies in check; no spec projects are under construction. And many government occupiers own their properties or are under long-term leases, which may mitigate move-outs, at least in the near-term. Another positive is sublet space has remained limited, which is in stark contrast to wider Sacramento MSA. Still, the pandemic-induced economic uncertainty is not likely to abate any time soon, and CoStar is forecasting that vacancies will continue to fall in 2022.

Historical and projected vacancy trends for the Downtown submarket are shown in the following graph.

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SUB - LE T VACA NCY – D O WNT OW N CBD

REN TA L RATE S
Downtown office rents had been on a decline but started reversing for 21Q3 and 21Q4. The average rent has increased 1.1% over the past 12 months. In contrast, annual gains averaged 4.2% over the past three years. Moreover, Downtown rent growth at the start of 2020 was among the strongest in the nation among all office submarkets.

The average asking rent is $34. 20/SF, or approximately 25% greater t han the metro average. Compared to neighboring submarkets, rents here exceed those of Midtown by around 20% and South Natomas by about 10%. Midtown primarily consists of low -rise buildings, and upper -tier supply is limited. South

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RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Natomas, on the other hand, offers an abundance of high-end inventory: Nearly two-thirds of submarket product is Class A.

Downtown tenants pay a significant premium for high-end buildings. Before the pandemic and recession, demand for high -quality space was easily outpacing that o f low- and mid-tier assets, and rent growth consequently beat that of other slices. As a result, the average asking rent for Class A assets are approximately 40% higher than those of Class B.

Moreover, the spread between rents for Class A product Downtown and rents for Class A product in the wider metro had expanded in recent years. Downtown Class A rents are about 20% higher than rents for similar product in the greater metro.

Historical and projected market rent grown is shown in the following graph.

INVEN TOR Y & C O N STRU CTI O N
Currently, 946 thousand SF is under construction Downtown, which will increase submarket inventory by

4.3%. This is in stark contrast to recent years; since 2010, supply Downtown has actually decreased. A number of office buildings were demolished to make way for the Golden 1 Center, while the only notable delivery during the past cycle was a new 155,000 -SF headquarters for the California State Lottery Commission, which completed construction in 2011.

The only projects currently u nderway or recently completed are government buildings , which are summarized below.

• 715 P Street – 838,000 SF: Building will be new home to the California Natural Resources Agency. Located on P Street, the 21-story building was completed in late 2022. • 1021 O Street – 472,000 SF: Building will serve as swing space for the Capitol Annex. This building is under construction.

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RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL • 1215 O Street – 360,000 SF: 11-story building will house workers from various State agencies; completed in in 2022.
• 344 N 7 th Street – 1,250,000 SF: Known as the Richards Boulevard Office Complex (RBOC), construction commenced in 2020 and is slated for completion in 2024. The project will include office space for roughly 4,650 employees and include approximately 200,000 SF of amenity space (multipurpose center, auditorium, retail, wellness center, childcare, food services and support spaces). The first phase of this project at 474,700 SF is under construction.

While office projects have yet to break ground, the Sacramento Railyards, a 240-acre redevelopment site, is finally coming to fruition after many starts and stops. Envisioned as a mixed -use, regional destination, the Railyards gained momentum when Kaiser Permanente closed on 18 acres of land for its long-awaited hospital. The timing and certainty of this hospital however remains in doubt today. The Sacramento County Courthouse (19-stories, 538,000 SF, 53 courtrooms), SMUD Museum of Science and Curiosity and a multifamily project are underway in the Railyards.

Outside of the Railyards, developable office land is sparse. While there is vacant land located north of the Sacramento Railyards in the River District, most of this land is earmarked for other uses than office. As a result, any new projects here are usually redevelopments, and supply gains are expected to remai n limited.

SA LES ACT IVI TY
Sales volume in the downtown market has declined as only 17 office properties totaling $47.5 million sold over the past 12 months. On average, the Downtown Sacramento market averages about $215 million in office sales annually over the past five years. Downtown typically sees a limited number of office trades, but that trend has been even more pronounced since the start of the pandemic. Approaching th is year's halfway point, few deals of note had occurred, after only a single -digit number of transactions recorded in 2022. In contrast, this submarket has averaged 17 trades annually over the past five years.

Prior to the pandemic, annual investment volume was strong which is attributed to a number of Downtown's most notable assets. In 2020, Singapore-based Prime US REIT picked up Park Tower and two associated parking structures for $165.5 million; in 2019, a joint venture of The Evergreen Company and United Auburn Indian Community purchased Emerald Tower for $127 million ($329/SF); and in 2018, San Francisco-based Shorenstein Properties acquired the U.S. Bank Tower for $181 million ($439/SF).

Despite Downtown's downturn in the beginning of the pandemic, valuations have remained healthy. Over the past 12 months, the average market sale price, which is based on the estimated price movement of all properties in the market, informed by actual transactions, is $259/SF. The average market cap rate is

7.1%, virtually unchanged from the past couple of years.

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DOW NT OW N O FF ICE MA RKET OU T LO O K
The downtown submarket continues to be the largest and strongest office submarket in the region. The attractiveness of this market results fro m its central location and the excellent highway system that surrounds the market area, as well as the location of the state Capitol. Most of the major state agencies are located near the state Capitol where there are 24 state owned buildings containing ap proximately seven million square feet. In addition to the state office buildings, there are Sacramento City and Sacramento County complexes as well as several federal buildings. Even during periods of weak economic conditions, the presence of the Capitol and associated government offices has acted as a stabilizing factor for the downtown submarket. The City has a strong commitment to keeping the downtown area vital and growing. This was most demonstrated in the City’s participation and support of the development of the Golden 1 Sports & Entertainment Center.

Consistent with regional trends, occupancy levels and effective rental rates in the submarket will continue to be impacted by the pandemic in the short term; however, market condition has been e dging back toward some improvement that began in the latter half of 2021. Long-term demand, rents and values are expected to increase at rates slightly higher than those for the region as a whole. While there will likely be changing office footprint space demands by tenants due to the remote working trend, some tenants are anticipated to increase office space per employee going forward. In summary, the short and mid- term outcome of the office demand in downtown will likely be soft with stagnant rents and level occupancy. Most participants believe any chance of a more robust recovery is beyond 2022.

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HOSPITALITY MARKET ANALYSIS

SACRAMENTO (MSA ) HOSPITALITY MARKET

OVERVIEW
The Sacramento MSA market comprises roughly 380 hotel properties, which contain around 30,000 total rooms. The typical hotel in the area is a bit smaller than the norm. The average building has around 78 rooms, compared to 90 rooms per building nationally.

COVID-19 severely impacted the entire U.S. hospitality sector, the Sacramento MSA hotel market included. At the low point, occupancies collapsed to a monthly rate of 34.5% in April of 2020. But with the worst of the pandemic now in the rearview mirror, conditions are improving. Around 18,000 rooms were sold in the month of April 2022, a massive +200% increase compared to the same month the prior year.

Twelve-month RevPAR is up on a year-over-year basis, by 57.6% as of April 2022.

The 1,663 rooms currently underway in the Sacramento MSA market represent a s ignificant expansion relative to size of the market. This new supply follows a material amount of recent development: Around 1,500 rooms have delivered in the past three years. The impact on the hotel inventory was offset by demolition activity, which took around 840 rooms off the market over the same timeframe.

Sacramento MSA houses an active market for hotel investment and recorded about 31 hotel trades over the past year—consistent with the number of trades that typically close in a given year.

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RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Key hospitality market statistics and five -year projections for the Sacramento MSA market are summarized in the following tables and graphs.

Source: Costar

The following exhibits summarize tends and projections for the regional hospitality market.

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DOWNTOWN HOSPITALITY MARKET
Sacramento CBD houses 33 of the Sacramento MSA market's 380 hotel properties and contains about 4,200 rooms in total. Unlike the broader market, Sacramento CBD is characterized by very large hotels relative to the national norm. The average property has 128 rooms, which is much higher than the 78 - room-per-building market-wide average. Those two figures are on either side of the national norm of about 90 rooms per building.

High-end hotels are common here. Over 40% of the rooms are Luxury or Upper Upscale, a proportion that only exists in about one in ten U.S. submarkets (mostly downtown areas). Likewise, the Sacramento MSA market as a whole has a larger proportion of high-end lodging than the typical U.S. market.

COVID-19 severely impacted the entire U.S. hospitality sector, the Sacramento CBD hotel submarket included. At the low point, occupancies collapsed to a monthly rate of 25.4% in April of 2020. But with the worst of the pandemic now in the rearview mirror, conditions are improving. Current 12 -month occupancy is 64.4%, up from 43% one year earlier.

Revenue per Available Room (RevPAR) is up on a year-over-year basis, most recently by 111.7% as of April 2022. All performance indicators for the past 12 months are up from the prior year period.

The 307 rooms currently under construction in the Sacramento CBD represent a substantial expansion relative to the size of the submarket. While this is not the only construction the submarket has seen in recent memory, it does represent a turnabout from the overall trend.

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The following exhibits summarize tends and projections for the Downtown hospitality market.

Period
Inventory
Rooms
Avg Rooms
Per Building
12 Mo Delivered
Rooms
12 Mo Inventory
Growth
Under Constr
Rooms
12 Mo
Occupancy
12 Mo
Occupancy Chg
12 Mo
ADR
12 Mo ADR
Chg
12 Mo
RevPAR
12 Mo
RevPAR Chg
Market Sale
Price/Room
Market
Cap Rate
Apr 2027 4,713 131 0 0.0% - 76.7% -0.5% $181.46 2.5% $139.13 1.9% $221,250 7.0% Apr 2026 4,713 131 0 0.0% - 77.1% 0.1% $177.11 2.6% $136.48 2.7% $218,738 7.0% Apr 2025 4,713 131 0 0.0% - 77.0% 2.1% $172.59 2.8% $132.91 5.0% $211,668 7.0% Apr 2024 4,713 131 495 11.7% - 75.4% 9.0% $167.95 5.2% $126.63 14.7% $204,487 6.9% Apr 2023 4,218 128 128 3.1% - 69.2% 7.4% $159.61 9.5% $110.41 17.5% $196,081 6.9% Apr 2022 4,090 128 272 4.6% 307 64.4% 49.7% $145.82 41.4% $93.94 111.7% $184,318 6.9% Apr 2021 3,912 126 105 -1.6% 400 43.0% -37.3% $103.09 -27.9% $44.38 -54.8% $186,190 6.9% Apr 2020 3,976 128 0 -5.6% 377 68.7% -10.3% $143.08 -0.9% $98.26 -11.1% $204,986 7.1% Apr 2019 4,214 132 0 0.1% - 76.6% 1.8% $144.41 4.4% $110.56 6.3% $202,515 7.3% Apr 2018 4,211 132 250 6.3% - 75.2% 2.4% $138.26 6.0% $103.98 8.6% $180,721 7.5% Apr 2017 3,961 128 0 0.0% 250 73.4% 2.0% $130.39 5.7% $95.73 7.8% $157,367 7.8% Apr 2016 3,960 128 0 0.1% 250 72.0% 1.0% $123.37 7.1% $88.80 8.2% $135,552 8.1% Apr 2015 3,958 128 0 0.1% - 71.3% 3.7% $115.14 7.4% $82.04 11.4% $119,648 8.2% Apr 2014 3,956 128 0 -0.1% - 68.7% 3.6% $107.17 4.0% $73.66 7.7% $107,679 8.4% Apr 2013 3,958 128 0 -0.0% - 66.3% 2.6% $103.08 3.8% $68.38 6.5% $98,051 8.5% Apr 2012 3,959 128 0 -0.1% - 64.7% 4.6% $99.28 0.9% $64.20 5.5% $91,356 8.4%

HOSPITALITY MARKET TRENDS & PROJECTIONS - DOWNTOWN SCRAMENTO

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NATIONAL PARKING LOT AND GARAGE OVERVIEW
The following is a summary of Parking Lot and Garage trends in the US as reported by IBISWorld (November 2021).

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RETAIL MARKET

The Railyards is expected to have some retail space. This space is significantly smaller in size to the predominant land uses (office and multi -family) that are expected to occur. The retail space will be an ancillary use within the Railyards and therefore a market overview of this property type is not warranted.

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HIGHEST AND BEST USE

INTRODUCTION
The highest and best use is the reasonable, probable, and legal use of vacant land or an improved property that is physically possible, legally permissible, appropriately supported, financially feasible and that results in the highest value. These criteria are often considered sequentially. The tests of legal permissibility and physical possibi lity must be applied before the remaining tests of financial feasibility and maximal productivity. A financially feasible use is precluded if it is legally prohibited or physically impossible. If a reasonable possibility exists that one of the prior, unacc eptable conditions can be changed, is it appropriate to proceed with the analysis with such an assumption.

HIGHEST AND BEST USE CRITERIA
The highest and best use for each ownership group has been analyzed both as vacant and as improved .

In all cases, the property’s highest and best use must meet four criteria: (1) legally permissible; (2) physically possible; (3) financially feasible; and (4) maximally productive.

HIGHEST AND BEST USE AS VACANT – DRV OWNERSHIP PROPERTY The site’s highest and best use is analyzed both as vacant and as improved, and if improvements are proposed then an as proposed analysis is required. In all cases, the property’s highest and best use must meet four criteria: (1) legally permissible; (2) physically possible; (3) financially feasible; and (4) maximally productive.

LEG AL L Y PERMI S SI B LE
The subject is part of the Railyards Specific Plan which has an approved tentative map. Many entitlements have been achieved for the project for use of high -density office, residential, retail and hotel land uses.

The legally permissible uses are those described in the Railyards Specific Plan Update (RSPU).

PHY S ICA L LY PO SS IB LE
The subject development has been developed with several roads connecting it to the downtown Central Business District. There are no physical characteristics that would preclude it from being developed with the intended uses as allowed by the specific plan. Overall, the physical site attributes result in good utility, and with continued development of the major infrastructure the property could be developed with a variety of legally conforming uses as currently entitled. Given the surrounding uses and location, the site is best suited for high density office, residential, retail uses and lodging uses.

FINA NC IA L LY FEA SI BLE
Financial feasibility is determined by the relationship of supply and demand for the legally probable land uses versus the cost to create them. The subject development will require significant infrastructure to create the finished lots as designed in the tentative map. The owner’s budget shows that over the next 20-year period the capital expenditures for just the site work and obligatory improvements (excluding renovation of the central shops) will be near $1 72.2 million. DRV has identified various sour ces of grants/reimbursements, etc. to fund the capital improvements related to site work and required project HIGHEST AND BEST USE141
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL improvements. As discussed earlier, t he State of California and the City of Sacramento have been instrumental in securing grants and other funds to assist DRV and prior ownerships in the development of the various infrastructure projects. This public and private effort will continue as the Railyards is viewed important development property for future expansion of the Central Business District.

From various sources we have identified $78.2 million in reimbursements that have very high certainty of receiving. All of these reimbursements relate to improvements for the DRV property west of 7 th Street.

At issue is the uncertainty of the future grants and reimbursements and the timing of receiving such funds.

Without significant financial assistance from grants and reimbursements the project is not feasible for completing the backbone infrastructure and site work for the sale of lots.

For financial feasibility analysis we break out the property into West of 7 th Street and East of 7 th Street.

This break-out is necessary as the two components of the property have vastly different absorption/build- out periods as well as significant differences in secured public funds to off-set construction costs.

DRV Property West of 7th Street

The property west of 7th Street consists of central shops containing 247,832 square feet of building area.

Live Nation has leased 47,374 SF of this space for 30 years. Later in the report we have analyzed the financial viability of redevelopment of these buildings. Our residu al models shown later in the report indicate a positive value $16,900,000 for the central shop buildings. Based on our analysis, the central shops are financially feasible for redevelopment. This is also the maximally productive use as there are no alternative uses that would result in any greater value. Therefore, the highest and best use of the central shops is for near term redevelopment of the Live Nation central shop building and phased redevelopment of the remaining shops over a 4–6-year period.

The property west of 7 th Street also consists of 59.16 net acres of land that is partially developed with road, utility, and drainage infrastructure. As shown earlier, the remaining infrastructure buildout for this land is $133.4 million of which $78.2 million has been identified for reimbursements. The sell-out period of this land is estimated to be 16 years. Considering an obligation to build a parking parage on one of the lots the land residual value of this property (inclusive of the central shops) is a positive $46 million. Based on our analysis, the land west of 7 th street is financially feasible for redevelopment. This is also the maximally productive use as there are no alternative uses that would result in any greater value .

Therefore, the highest and best use of the land west of 7th Street is for near term development and sell- off the land for residential, office and retail use.

DRV Property East of 7th Street
The property east of 7th Street consists of 42.285 gross acres per the Alta Survey. Deducting the right-of- way for 7th street and Lot 51B (non-taxable lot) the adjusted gross acres is 36.135 acres. The property is part of the Railyard’s tentative map and has 29.28 net acres. The property is an irregular shaped property and presently does not have utilities or any completed infrastructure. The land is considered to be in a raw state with no infrastructure.

Much of the land east of 7 th Street was planned for an MLS soccer stadium. Those plans have stalled as there is no indications that Sacramento would be awarded an MLS franchise. DRV’s business plan for this land is to continuing pursuing the soccer stadium or seek a n office campus user (public or private) for some or all of the property.

HIGHEST AND BEST USE142
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Analysis of East Land Under Tentative Map No Reimbursements

As a starting point for the financial feasibility test, we analyze the land residual under the existing tentative land use plan. The sell and build-out of this land under same ownership of land west of 7 th Street would not commence until well into the sell-out of the land west of 7th Street. This is reasonable for a couple of reasons. First, ownership of west and east land would want an orderly development path with the focus being the land around and near the central shops. The land west of 7th Street is viewed as being superior located to the land east of 7th Street. Second, ownership would hold out possibilities that a large user may arise for buildout of much or all the land east of 7th Street. Finally, the land east of 7th has no committed reimbursements to off-set construction. Any future reimbursements that may come along would likely be committed west of 7th as there is still a funding gap. From RCLCO’s Market Study and our analysis, the earliest we project a land sale absorption east of 7th Street would be in year 8. Extending this period using the RCLCO’s conclusions results in an 18-year sell-out period for land east of 7th Street.

In terms of construction costs, the land east of 7th has a budgeted infrastructure cost $28,883,397 with no identified reimbursements that are guaranteed. The estimated retail value of the developable lots east of 7 th Street total $79,375,032. Excluding a m ixed-income housing dedication the net lot revenue is $74,888,499. As shown on the following pages, the land residual of the land east of 7 th Street without any reimbursements is a negative $20. 1 million. Clearly, under these assumptions and scenario the development of the land east of 7th Street is not financially feasible.

Analysis of East Land Under Tentative Map with $27M in Reimbursements An alternative land residual is performed using the same inputs as above, except assuming $27.2 million in reimbursements of the infrastructure costs. This DCF shown later in the report indicated a land value of $1,800,000 for the 29.28 net acres east of 7th Street. This scenario is considered a pessimistic projection as it assumes no upside potential for a possible large user acquisition.

Analysis of East Land Under Tentative Map with Large Acquisition for Lot 52 a-e in year 6 Another alternative land residual is performed assuming a 14.62 -acre site is sold to a larger user in year

6. This DCF shown later in the report indicated a land value of $9,400,000 for the 29.28 net acres east of 7th Street. This scenario is considered slightly optimistic projection as it assumes a buyer for a large tract of urban land which is not as common in the downtown market.

Analysis of East Land Under Hold For Development
The final option considered is hold the property for future developme nt. Under this plan DRV would be holding the property for either: 1) either a change in market conditions that would alter the land absorption or 2) holding out for a large-user acquisition of some or all of the property. This plan could be developing infrastructure as planned and selling a finished site to large user or selling the property in its as condition. Later in the report we estimate a 7-year hold period for these options with a detailed cash flow. Considering all holding costs, this scenario indicated a land value of $6,000,000. The reader’s attention is directed later in the report for complete details and assumptions regarding this plan.

Conclusion
Of the alternative scenarios considered, hold for future development with anticipation of either changes in market conditions or selling to a large user is yields the highest value. This plan could be for future development under the existing tentative map or some alternative plan.

HIGHEST AND BEST USE143
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

AS-IS MARKET VALUATION - EAST OF 7TH - NO REIMBURSEMENTS - EXISTING TENTATIVE MAP PLAN Period Ending Jun-23 Jul-22 Jul-23 Jul-24 Jul-25 Jul-26 Jul-27 Jul-28 Jul-29 Jul-30 Yr Yr Yr. Yr Yr Yr Yr Yr Yr
ABSORPTION ESTIMATES 12 mos/period 1 2 3 4 5 6 7 8 9
Office & Retail - East of 7th Street 8.99 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.30 0.32 Residential - East of 7th Street 20.30 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.70 0.69 Total Lots Sold (excludes Mixed-use Income land dedication): 29.29 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00 1.01 Total Period Inventory Beginning: - 29.29 29.29 29.29 29.29 29.29 29.29 29.29 28.29 27.28 Remaining Acres 29.3 29.3 29.3 29.3 29.3 29.3 29.3 28.3 27.3

LOT VALUE ESTIMATES
Office, Retail Hotel & Residential - East of 7th Street $62.23 $64.10 $66.02 $68.00 $70.04 $72.15 $74.31 $76.54 $78.84

TOTAL LOT REVENUE
Office, Retail Hotel & Residential - East of 7th Street $0 $0 $0 $0 $0 $0 $0 $3,334,060 $3,468,423 TOTAL REVENUE $119,430,530 $0 $0 $0 $0 $0 $0 $0 $3,334,060 $3,468,423

EXPENSES AND CASH FLOWS
GENERAL AND ADMINISTRATIVE 3.0% $4,732,285 $150,000 $154,500 $159,135 $163,909 $168,826 $173,891 $179,108 $100,022 $104,053 MARKETING/COMMISSIONS 3.0% $3,582,916 $0 $0 $0 $0 $0 $0 $0 $100,022 $104,053 AD VALOREM $739,143 $53,923 $53,923 $53,923 $53,923 $53,923 $53,923 $53,923 $52,082 $50,222 RAILYARDS MAINTENANCE CFD No. 2014-04 $4,666,008 $0 $0 $0 $0 $0 $535,866 $535,866 $517,571 $499,093 RAILYARDS CFD No. 2018-1 $7,607,673 $555,004 $555,004 $555,004 $555,004 $555,004 $555,004 $555,004 $536,056 $516,918 CAPITALIZED CFD INTEREST ($1,110,009) ($555,004) ($555,004) $0 $0 $0 $0 $0 $0 $0 HORIZONTAL CONSTRUCTION COSTS $34,732,070 $0 $0 $0 $0 $0 $9,138,973 $9,412,663 $9,651,968 $222,456 REIMBURSEMENTS $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
TOTAL EXPENSES $54,950,087 $203,923 $208,423 $768,062 $772,836 $777,754 $10,457,658 $10,736,565 $10,957,721 $1,496,795 NET INCOME $64,480,444 ($203,923) ($208,423) ($768,062) ($772,836) ($777,754) ($10,457,658) ($10,736,565) ($7,623,661) $1,971,628 PRESENT VALUE FACTOR 20.0% 0.83333 0.69444 0.57870 0.48225 0.40188 0.33490 0.27908 0.23257 0.19381 Safe Rate 2.5% 0.97561 0.95181 0.92860 0.90595 0.88385 0.86230 0.84127 0.82075 0.80073 DISCOUNTED CASH FLOW at 20% ($20,144,926) ($198,949) ($198,380) ($713,222) ($700,152) ($687,421) ($9,017,606) ($9,032,299) ($6,257,094) $382,115 INDICATED VALUE -$20,144,926
ROUNDED -$20,100,000
HIGHEST AND BEST USE144
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

AS-IS MARKET VALUATION - EAST OF 7TH - NO REIMBURSEMENTS - EXISTING TENTATIVE MAP PLAN Period Ending Jun-23 Jul-31 Jul-32 Apr-33 Apr-34 Apr-35 Apr-36 Apr-37 Apr-38 Apr-39 Yr Yr Yr Yr Yr Yr Yr Yr Yr
ABSORPTION ESTIMATES 12 mos/period 10 11 12 13 14 15 16 17 18 Office & Retail - East of 7th Street 8.99 0.33 0.37 0.38 0.41 0.73 1.70 1.67 1.64 1.14 Residential - East of 7th Street 20.30 0.69 0.47 0.70 2.79 2.75 2.79 2.79 2.88 3.05 Total Lots Sold (excludes Mixed-use Income land dedication): 29.29 1.02 0.84 1.08 3.20 3.48 4.49 4.46 4.52 4.19 Total Period Inventory Beginning: - 26.26 25.42 24.34 21.14 17.66 13.17 8.71 4.19 0.00 Remaining Acres 26.3 25.4 24.3 21.1 17.7 13.2 8.7 4.2 0.0

LOT VALUE ESTIMATES
Office, Retail Hotel & Residential - East of 7th Street $81.20 $83.64 $86.15 $88.73 $91.39 $94.13 $96.96 $99.87 $102.86

TOTAL LOT REVENUE
Office, Retail Hotel & Residential - East of 7th Street $3,607,846 $3,060,303 $4,052,715 $12,368,286 $13,854,026 $18,411,125 $18,836,754 $19,662,868 $18,774,124 TOTAL REVENUE $119,430,530 $3,607,846 $3,060,303 $4,052,715 $12,368,286 $13,854,026 $18,411,125 $18,836,754 $19,662,868 $18,774,124

EXPENSES AND CASH FLOWS
GENERAL AND ADMINISTRATIVE 3.0% $4,732,285 $108,235 $91,809 $121,581 $371,049 $415,621 $552,334 $565,103 $589,886 $563,224 MARKETING/COMMISSIONS 3.0% $3,582,916 $108,235 $91,809 $121,581 $371,049 $415,621 $552,334 $565,103 $589,886 $563,224 AD VALOREM $739,143 $48,345 $46,798 $44,810 $38,919 $32,512 $24,246 $16,035 $7,714 $0 RAILYARDS MAINTENANCE CFD No. 2014-04 $4,666,008 $480,432 $465,064 $445,305 $386,761 $323,093 $240,948 $159,351 $76,657 $0 RAILYARDS CFD No. 2018-1 $7,607,673 $497,590 $481,673 $461,209 $400,573 $334,632 $249,553 $165,042 $79,395 $0 CAPITALIZED CFD INTEREST ($1,110,009) $0 $0 $0 $0 $0 $0 $0 $0 $0 HORIZONTAL CONSTRUCTION COSTS $34,732,070 $1,703,285 $1,529,735 $1,565,037 $1,507,952 $0 $0 $0 $0 $0 REIMBURSEMENTS $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
TOTAL EXPENSES $54,950,087 $2,946,123 $2,706,889 $2,759,524 $3,076,302 $1,521,479 $1,619,414 $1,470,634 $1,343,537 $1,126,447 NET INCOME $64,480,444 $661,724 $353,414 $1,293,191 $9,291,984 $12,332,547 $16,791,711 $17,366,120 $18,319,331 $17,647,677 PRESENT VALUE FACTOR 20.0% 0.16151 0.13459 0.11216 0.09346 0.07789 0.06491 0.05409 0.04507 0.03756 Safe Rate 2.5% 0.78120 0.76214 0.74356 0.72542 0.70773 0.69047 0.67362 0.65720 0.64117 DISCOUNTED CASH FLOW at 20% ($20,144,926) $516,937 $269,352 $145,040 $868,465 $960,540 $1,089,874 $939,297 $825,712 $662,865 INDICATED VALUE -$20,144,926
ROUNDED -$20,100,000
HIGHEST AND BEST USE145
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

MAXI MA L LY PR ODUC TI V E

The final test of highest and best use of the site as vacant is that the use be maximally productive, yielding the highest return to the land. Most of the land within the Railyards is not financially feasible mainly due to cost issues. Over time, the project is expected to be in demand for development and will likely receive funding to off-set site development costs.

The highest and best use conclusion is for continued planning for a phased development. Given the size of the project it will likely be many years for the sell-out and development of the project.

MOS T PRO B AB LE PURCH ASER
The most probable purchaser of the DRV land is a national or regional developer who would sell lots to other users or development groups.

DRV business model is to retain fee simple ownership of most of the land and Central Shops properties.

They plan to redevelop the Central Shops and build out the vacant land with office, residential and retail properties. DRV’s business plan is inconsistent with the most probable buyer who would likely undertake a land/lot sale program as the investment strategy.

HIGHEST AND BEST USE146
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL HIGHEST AND BEST USE AS VACANT – KAISER FOUNDATION SITE

LEG AL L Y PERMI S SI B LE
The Kaiser Foundation site is part of the Railyards Specific Plan which has an approved tentative map. The property is zoned H SPD. The H SPD hospital land use designation allows residential densities from 24 to 250 units per acre pursuant to a conditional use permit, and non-residential and mixed-use development with a minimum FAR of 0.5 and up to a maximum FAR of 8.0 . The legally permissible uses are those described in the Railyards Specific Plan Update (RSPU).

PHY S ICA L LY PO SS IB LE
Kaiser Foundation Hospital is the owner of eight parcels totaling 17.4 acres. The site is located along the north side of Railyards Boulevard between Bercut Drive and 5 th Street. All streets surrounding the property are in place and all utilities serve the property. Overall, the physical site attributes result in good utility. Given the surrounding uses and location, the site is best suited for the uses allowed under in the Railyards Specific Plan Update (RSPU).

FINA NC IA L LY FEA SI BLE
Financial feasibility is determined by the relationship of supply and demand for the legally probable land uses versus the cost to create them. Based on review supply and demand characteristics, development of the Kaiser site with any of the legally permissible uses is not financially feasible today.

MAXI MA L LY PR ODUC TI V E

The final test of highest and best use of the site as vacant is that the use be maximally productive, yielding the highest return to the land. The Kaiser site is not financially feasible for development today. Hold for future development is the maximally productive use.

MOS T PRO B AB LE PURCH ASER
The most probable purchaser of the Kaiser land is a developer or a medical user who would build a project consistent with the land use entitlements.

HIGHEST AND BEST USE147
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL HIGHEST AND BEST USE AS VACANT – LOT 48 – THE AJ

LEGALLY PERMISSIBLE
Lot 48 is zoned C-3-SPD, Central Business District/Special Planning District. Many entitlements have been achieved for the project for use of high-density office, residential, retail and hotel land uses. The legally permissible uses are those described in the Railyards Specific Plan Update (RSPU).

PHY S ICA L LY PO SS IB LE
The subject site is comprised of a single parcel. Its shape is rectangular, and its topography is generally level and at street grade. Access and infrastructure are adequate. Overall, the physical site attributes result in average utility, and the property could be developed to a variety of uses per the provisions of its zoning designation, and with the approval of the local planning department.

FINA NC IA L LY FEA SI BLE
Financial feasibility is determined by the relationship of supply and demand for the legally probable land uses versus the cost to create them. Based on review supply and demand characteristics, development of the Lot 48 with any of the legally permissible uses is not financially feasible today.

MAXI MA L LY PR ODUC TI V E

The final test of highest and best use of the site as vacant is that the use be maximally productive, yielding the highest return to the land. Lot 48 is not financially feasible for development today. Hold for future development is the maximally productive use.

HIGHEST AND BEST USE148
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL HIGHEST AND BEST USE AS IMPROVED – LOT 48 – THE AJ

LEGALLY PERMISSIBLE
Lot 48 is under development with a 6-story, mixed-use multifamily over street retail building. This project known as the AJ is being developed with 345 residential dwelling units and 5,996 square feet of ground floor retail space. The proposed use is legally conforming.

PHY S ICA L LY PO SS IB LE

The AJ is under construction with approximately 58% of the projected completed. Use of the improvements as planned is physically possible after completion of construction.

FINA NC IA L LY FEA SI BLE
The AJ has received tax credits and other funding assistance to assist in the financial feasibility. With the funds already received, the project as planned is financial feasibility.

MAXI MA L LY PR ODUC TI V E
The final test of highest and best use of the site as vacant is that the use be maximally productive, yielding the highest return to the land. The maximally productive use of Lot 48 is for continued development of a mixed-use project as planned.

MOS T PRO B AB LE PURCH ASER
The most probable purchaser of the AJ property is an apartment developer.

HIGHEST AND BEST USE149
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL HIGHEST AND BEST USE AS VACANT – LOT 46 – WONG CENTER

LEGALLY PERMISSIBLE
Lots 46 is zoned C-3-SPD, Central Business District/Special Planning District. Lot 46a and a portion of Lot 46b were recently sold for $100 with the condition it must be developed with a 150 -unit affordable housing project. From a legal permissible use only an affordable housing use would be allowed.

PHY S ICA L LY PO SS IB LE
The Wong Center site is irregular in shape and its topography is generally level and at street grade.

Access and infrastructure are adequate. Overall, the physical site attributes result in average utility, and the property could be developed with the 150-unit project as planned.

FINA NC IA L LY FEA SI BLE
Financial feasibility is determined by the relationship of supply and demand for the legally probable land uses versus the cost to create them. The Wong Center has received substantial funding including $21.3 million in tax credits, and various favorable or forgivable (soft) loans. Altogether, these funds are sufficient to support construction costs. Excluding the soft loans, the project is not financially feasible. Considering the continued financial support from private and public sources, near-term development of the proposed project is deemed financially feasible.

MAXI MA L LY PR ODUC TI V E

The final test of highest and best use of the site as vacant is that the use be maximally productive, yielding the highest return to the land. Near-term development of 150-unit affordable housing project is the maximally productive use.

MOS T PRO B AB LE PURCH ASER
The most probable purchaser of the Wong Center property is a non-profit apartment developer.

VALUATION PROCESS150
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

VALUATION PROCESS
Valuation in the appraisal process generally involves three techniques, including the Cost Approach, Sales Comparison Approach, and the Income Capitalization Approach. These three valuation methods are defined in the following table:

VALUATION METHODS DEFINITION
Cost Approach In this approach, value is based on adding the contributing value of any improvements (after deductions for accrued depreciation) to the value of the land as if it were vacant based on its highest and best use. If the interest appraised is other than fee simple, additional adjustments may be necessary for non -realty interest and/or the impact of existing leases or contracts.

Sales Comparison Approach In this approach, recent sales of similar properties in the marketplace are compared directly to the subject property. This comparison is typically accomplished by extracting “units of comparison”, for example, price per square foot, and then analyzing these units of comparison for differences between each compara ble and the subject. The reliability of an indication found by this method depends on the quality of the comparable data found in the marketplace.

Income Capitalization Approach In this approach, a property is viewed through the eyes of a typical investor, whose primary objective is to earn a profit on the investment principally through the receipt of expected income generated from operations and the ultimate resale of the property at the end of a holding period.

VALUATION PROCESS151
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

VALUATION METHODS UTILIZED
We have considered the physical and economic characteristics of the property, as well as the most probable purchaser concluded in the analysis of Highest and Best Use, to determine the appropriate valuation methodology.

Downtown Railyard Venture, LLC Land: DRV is the owner of 85.782 developable acres consisting of 76 vacant parcels (excludes Central Shops). There are different highest and best uses for the DRV vacant land. These are analyzed as follows:

Vacant Land West of 7th Street (56.502 net acres): The valuation of this property will be from a subdivision development method. A sales comparison approach and land residual analysis will be used to estimate finished lot values. We then utilize a discounted cash flow analysis . This analysis takes in to account the potential revenue from the sale of lots, the expected a bsorption period, development costs for infrastructure, holding and sales costs as well as profit expectations of a buyer for the property.

Vacant Land East of 7th Street (36 gross acres): The valuation of this property will be from a Sales Comparison Approach using large acreage commercial land sales. The extended hold period of this property prior to development will be analyzed in a discounted cash flow.

DRV Owned Central Shops: This property consists of 12 parcels totaling 9.37 acres with five buildings having a total building area of 247,832 square feet of net rentable area. Due to the uniqueness of this property a land residual analysis was performed to value this property.

Kaiser Foundation Hospital: This property consists of 8 parcels t otaling 17.407 gross acres (17.14 taxable acres). A Sales Comparison Approach will be utilized to value this land.

Sacramento 695, LP : This entity is the owner of 2.88 acres that is under construction with a six -story apartment project with ground leve l retail and a parking garage. The project has 69 units with rents at 50% of average monthly income (AMI). The value of this parcel will be from a traditional Residual Analysis.

The value of this parcel will be from two approaches to value: 1) Build -up method using land value, plus construction completed, minus value detriment associated with below market rents and 2) Traditional Residual Analysis. Standard Rule 1 -4 (f) of USPAP states: “When analyzing anticipated public or private improvements, located on or off the site, the appraiser must analyze the effect on value, if any, of such anticipated improvements to the extent they are reflected in market actions. ” Since significa nt construction has been completed on the AJ building, the market would recognize value of the improvements completed on the site. The USPAP Standard Rule 1-4 (f) is also consistent with the CDIAC guidelines.

Wong Center at the Railyard, L.P.: This entity is the owner of 2.658 acres. A Land Residual Analysis will be performed to value this land.

For each component analyzed, we reconcile the value indications of each approach to value. The reliability of each approach, and resulting emphasis given in the final reconciliation, is determined based upon the quantity, quality, and overall reliability of its data.

DRV PROPERTY VALUE – WEST OF 7TH STREET152
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL DRV PROPERTY VALU E – WEST OF 7 TH STREET
Downtown Railyard Venture, LLC is the owner of 65.872 taxable/buildable acres of which there are 12 lots or 9.37 acres being the historic shops and open space. Below is a summary of the DRV owned lots West of 7th Street.

The valuation of the DRV property west of 7 th Street will be estimated from a subdivision development approach. The intent of the DRV property valuation is to arrive at a single value for a bulk market sale to a third party. The following are the steps to arrive at value for this ownership.

1. Estimate Benchmark Land Value (as finished lots) for major property uses w ithin the DRV ownership. These include land values for office, multi-family, retail, and hotel vacant land uses.

The Benchmark land values will be derived using a Sales Comparison Approach for the different land use types as well as a Land Residual Analy sis as additional support. While we can estimate the total land area for the specific land use types (i.e. office, retail, etc.) the individual lots are not designated with specific land uses. Therefore, the final Benchmark Land Value will be a composite value of the various land uses (weighted average land value of the retail, office, multi-family, etc.).

2. Using the Composite Benchmark Land Value we apply specific adjustments to the individual lots for such factors as location, land size and estimated densities.

3. Estimate the value of the Central Shops from a Land Residual Analysis.

4. The next section of the DRV value is performing a discounted cash flow analysis considering: 1) the aggregate Retail Land/Building Value from Steps 2 and 3 above wi ll be major inputs into the next section, 2) the e stimated absorption of the DRV lots/Central Shop buildings with consideration given to the Strategic Market Absorption Analysis report prepared by RCLCO dated May 17, 2022. 3) the estimated construction costs for buildout of the horizontal infrastructure, 4) the estimated funding sources to pay for some of the infrastructure, 5) the estimated holding and sales costs for sell-out of the lots/Central Shop buildings and 6) the selection of an appropriate discount rate to account for the profit and risk factors.

Category/Ownership No Lots Acres
DRV Vacant Land 64 56.502
Historic Shops & Open Space 12 9.37
Buildable/Taxable Acres 76 65.872
Buildable Land Area Summary - DRV - West of 7th Street SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS 153 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL SALES COMPARISON APPROACH – BENCHMARK LAND
VALUES – DRV LOTS

METHODOLOGY
The Sales Comparison Approach is employed to develop an opinion of land value. In the Sales Comparison Approach, we developed an opinion of value by comparing similar, recently sold sites in the surrounding or competing area to the subject property. In order to determine the value of the subject property, these comparable sales and/or listings are then evaluated and adjusted based on their differences when compared to the subject property. Inherent in this approach is the principle of substitution, which states that when a property is replaceable in the market, its value tends to be set at the cost of acquiring an equally desirable substitute property, assuming that no costly delay is encountered in making the substitution.

The Sales Comparison Approach to value requires the following sequential steps:

Unit of Comparison The most widely used and market -oriented unit of comparison for properties with characteristics similar to those of the subject is sale price per square foot.

Search for Sales Research must be done to locate comparable sales, listings and contracts of sites that are similar to the subject. Similarities may include size, utility, zoning, physical characteristics, location and the date of the sale.

Confirmation All sales must be confirmed to verify that the data used is accurate, and that all of the sales, listings or contracts represent arm’s -length transactions.

Comparison Each of the sales that are chosen for this valuation is considered generally similar to the subject. Therefore, each difference between the comparables and the subject must be identified, and then adjusted for the various differences. All adjustments are made to the comparables as they relate to the subject property.

Reconciliation Once all of the comparables have been adjusted, a single-value must be concluded based on the indications produced from the analysis of the comparables.

The following section will include the valuation of the following:

Benchmark Value of a Multi-Family Lot: A typical 1.0-acre lot for multi-family use will be analyzed. The unit of comparison will be value per achievable unit. The estimated multi-family density is 120 units per acre.

Benchmark Value of an Office Lot: A typical 1.0-acre lot for office will be analyzed. The unit of comparison will be value per achievable building area. The estimated office density is a 4.0 floor-to-area ratio. Due to the lack of office land sales we utilized some mixed -use land properties wh ere office use could have been an appropriate use.

SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS154 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

MULTI -FAMILY LAND SALE MAP

SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS155 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Sale 1 Comments: The property is fully entitled for
a 286 -unit mixed -use multi -family property. The
anticipated completion date is 2023. The proposed
five-story property will include retail along the
entire length of the buildings Riverfront Street
frontage and residential stoops along Ballpark Drive
and State Street. The buyer was Chicago based
developer.

Sale 2 Comments: Project was entitled at closing
for 140 affordable housing units within two 5-story
buildings with 3,500 SF of ground floor commercial
space (buyer had started processing entitlements
in early 2020 and originally submitted plans for 150
units). The actual sale price of $5,600,000 is
adjusted upward for estimated demolition costs
($140,000 based on $5/SF) of existing vacant office
building (28,415 SF).
"

Sale 3 Comments: August 2020 sale of five
contiguous lots totaling 22,500 SF (150' x 150')
located on the south side of Q Street, midblock
between 12th and 13th Streets. The westerly 60%
of the site was improved with a surface parking lot
and an (1931 built) shop/warehouse building. The
site was entitled for a 51 -unit project by the prior
owner and the buyer (Portland based Urban
Development Partners) plans to develop the 51 -
unit apartment project, consisting of primarily
studio and one-bedroom units. The buyer may keep
the existing shop building and incorporate into
project as parking garage (consistent with existing
entitlements). We estimate the existing
improvements have little or no contributory value,
or either an detriment to the property.

SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS156 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Sale 4 Comments: This is the second transaction
of a double escrow. Sotiris Kolokotronis, owner
of the property, formed a new partnership and
contributed the property at a price of
$7,500,000 (in the initial transaction on the
same day the property was acquired for
$6,500,000 when SKK bought out Grupe's
interest). The partnership plans to develop a 5 -
story, 190 -unit apartment project on the
property. Mr. Kolokotronis reported the $7.5M
contribution price as being close to market value
for the land.

Sale 5 Comments: This property is the 5th
phase of The Mill at Broadway. The land was in
an opportunity zone. The buyer plans to develop
444 one - and two -bedroom apartments , a
complex known as Broadway Apartments.

Development will be completed in two phases
the first ph ase will be 360 units. There is a
warehouse on the property that will be
incorporated into the project as leasing office
and covered parking. We estimate the existing
improvements have little or no contributory
value or either an detriment to the property.

SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS157 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Sale 6 Comments: Property consists of five
contiguous C -2 zoned parcels along the south
side of S Street, east of 15th Street. The seller
had secured entitlements for a 5 -story project
with 123 apartment units and up to 12,800 SF of
ground floor retail for a total building area of
151,630 SF; however, the buyer reportedly
intends to pursue their own development plan
for the site to include residential and
commercial uses. Estimated demolition costs of
$50,000 are added to the purchase price
($5,100,000) to arrive at the effective price
$5,150,000.

Sale 7 Comments: C-2 zoned site at hard corner
(NEC) of 16th and J Streets in Midtown. Property
was listed in November 2020 (asking price was
$3.8 million) and placed under contract in
December 2020; however, closing was extended
to Jan -2022 while buyer worked on
entitlements. The property was improved as a
surface parking lot. The site is located across the
street from Memorial Auditorium. Buyer is an
active multifamily developer in the
Downtown/Midtown area. The property is
planned for a 5-story, 68,918 square foot, mixed
use apartment building with 73 dwelling units.

Sale 8 Comments: Site is located at the NEC of
21st and J Streets in Midtown. The buyer
reportedly intends to demolish the existing
structure (former "House of Fashion Bridal"
building - 10,000 SF, built 1970) and
development the site with multifamily over
ground floor retail. The site did not have specific
entitlements in place for the proposed use at
the time of sale. Estimated demolition costs of
$50,000 are added to the sale price ($2,500,000)
to arrive at the effective price of $2,550,000.

Based on other nearby proje cts, we estimate a
density of 50 units and 51,200 SF of building
area.

SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS 158 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

COMPARABLE LAND SALES SUMMARY

SUMMARY OF PRIMARY LAND SALES - MULTI-FAMILY
No. Property / Location
Date of
Sale
Transaction
Status
Site Size
(Ac)
Site Size
(SF) Zoning Property Use
Est.

FAR
Units per
Acre No Units
Buildable
Area (SF) Sale Price
Price
per Acre
Price
per Land SF
Price per
Buildable SF
Price Per
Unit
1 805 Riverfront Street
805 Riverfront Street
West Sacramento, CA
12/04/2020 Closed 4.41 192,100 WF, Multi-Family 1.64 64.9 286 314,600 $10,050,000 $2,278,907 $52.32 $31.95 $35,140 2 1901 Broadway
1901 Broadway
Sacramento, CA
09/23/2020 Closed 1.27 55,321 C4, General
Commercial Multi-Family 2.85 110.2 140 157,500 $5,740,000 $4,519,701 $103.76 $36.44 $41,000 3 12th & Q
1208-1220 Q Street
Sacramento, CA
08/17/2020 Closed 0.52 22,500

RMX-SPD,
Residential
Mixed-Use
Multi-Family 1.64 98.7 51 37,003 $3,000,000 $5,808,000 $133.33 $81.07 $58,824 4 700 16th Street
700 16th Street
Sacramento, CA
10/07/2019 Closed 1.18 51,200 C-2, General
Commercial Multi-Family 2.38 161.6 190 121,600 $7,500,000 $6,380,859 $146.48 $61.68 $39,474 5 Broadway Apartments
2570 3rd
Sacramento, CA
10/11/2019 Closed 7.07 307,969 R4 & C-2, Multi-Family 1.51 62.8 444 464,000 $20,500,000 $2,899,578 $66.57 $44.18 $46,171 6 SEC S & 15th Land
1500-1522 S Street
Sacramento, CA
07/01/2019 Closed 0.73 32,000 C-2, General
Commercial Multi-Family 4.74 167.4 123 151,630 $5,150,000 $7,010,438 $160.94 $33.96 $41,870 7 NEC 16th & J
1611 J Street
Sacramento, CA
01/28/2022 Closed 0.42 18,400 C-2, General
Commercial Multi-Family 3.75 172.8 73 68,918 $3,700,000 $8,759,348 $201.09 $53.69 $50,685 8 21st & J
2101 J Street
Sacramento, CA
01/21/2022 Closed 0.29 12,800
C-2 SPD,
General
Commercial
Multi-Family 4.00 170.2 50 51,200 $2,550,000 $8,677,969 $199.22 $49.80 $51,000 Subj.

Railyards Community Facilities
District No. 2018-01
Railyards Boulevard & 6th Street
Sacramento, California

1.00 Multi-Family 3.50 120.0
SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS159 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL DISCUSSION OF ADJUSTMENTS – MULTI -FAMILY LAND SALES

PRO PERT Y RI GH TS C ONV EYED
This adjustment accounts for any impact that the property rights transferred to the buyer may have on sale price. For leased fee properties, the length of leases in place and the relationship of market to contract rent could impact value. Some properties m ay have stronger appeal to an owner -user or an investor, resulting in a premium or discount associated with fee simple property rights.

All of the comparables were considered similar to the subject and no adjustments were required for this category.

FIN A NC IA L TERM S
This category accounts for differences in financing terms associated with the transaction. Financing arrangements that may require an adjustment include mortgage assumptions (at favorable interest rates), seller buydowns, installment sales, wrap-around loans, or any other atypical financing arrangements that do not represent cash-equivalent terms.

All of the comparables were considered similar to the subject and no adjustments were required for this category.

CO NDI TI O NS OF SA LE
Adjustments for conditions of sale typically reflect various motivations of the buyer and/or seller. This may include such factors as seller distress (short sale, REO, auction) or buyer motivation (assemblage, etc.). In some situations, the conditions of sale may significantly affect transaction prices. Properties that are listed for sale may require adjustments herein to account for any disparity between asking prices and the achievable sale price anticipated. All of the comparables were considered similar to the sub ject and no adjustments were required for this category.

EXPEND ITURE S I MMED IA TEL Y A FTER SA LE
In order to arrive at the effective sale price, the actual sale price of each comparable is adjusted to account for any expenditures planned by the buyer immedia tely after sale, such as capital expenditures, cost to cure deferred maintenance, or lease-up costs.

Sales 2 and 6 were adjusted upward for demolition costs. The remaining sales were considered similar to the subject and no adjustments were required for this category.

MAR KET CO ND IT IO N S
The sales included in this analysis transacted between July 2019 to January 2022. As reported in the Multi- family market overview section, m arket conditions have been positive and improving during this time period. We apply an upward adjustment of 3% annually to account for increasing land values.

SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS160 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

PROPERTY ADJUSTMENTS

LO CA TI ON
The appeal of a property’s location to users of and/or investors in a particular property type can influence value significantly. This factor b roadly considers the impact of demographics, geographical attributes, access to transportation networks and local land use trends on pricing. Comparisons of location can often be derived, or even quantified, by examining rent, vacancy, capitalization rate, and land value trends in the subject and directly competitive areas.

The subject benchmark multi-family site is assumed to have an average location within the Railyards. The comparable sales have average locations within central area of city of Sacramento/West Sacramento. The Railyards is considered slightly inferior to the sales in respect to location. This is primarily attributed to the lack of development and services within the district at this point. The location rating of the Railyards will improve over time as it is built out.

Sale 1 is located in West Sacramento overlooking the Sacramento River and downtown Sacramento. This is a superior location and is adjusted down by 10%.

Sales 2 and 5 are located along Broadway Avenue and rate slightly superior in location. These sales are adjusted down by 5%. Sales 3, 4 & 6 -8 have superior locations in the Midtown area and are adjusted down by 10%.

SI TE SIZE
The subject area being analyzed here is a 1.0 -acre size lot. Sales 1 and 5 are larger sites and deserve an upward adjustment for size. The remaining sales are comparable in size and no adjustments apply.

ZO NIN G / IN TEN DED USE
The value of vacant l and is largely contingent upon its potential use. This factor considers the uses permitted by the applicable development standards, per the subject’s zoning designation. The maximum density to which a property can be developed typically impacts total value positively; however, depending upon property type, location, and type of construction higher permitted densities can have an inverse relationship to pricing on a per-unit or per-square-foot basis.

The subject is zoned and entitled for high density use. The typical multi-family density for the subject is 120 units per acre. No specific entitlements for a multi-family project are assumed.

Comparable sales 4-6 have similar zonings and no entitlements. Sales 1-3 and 7 were fully entitled and rate superior. These sales were adjusted down by 5% for their entitlements. No other adjustments for zoning/use are necessary.

SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS161 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

INFRA S TRUCTURE C OS T S
This section considers the building fees and estimated bond debt for the Railyards as compared to the comparable sales. The following information are estimates from EPS regarding these cost burdens.

Railyard infrastructure burden is higher than the Central City and similar to the Bridge District. The adjustment for this characteristic is based on the difference in fees from the Railyards to the comparable sales. This adjustment is applied for each of the sale comparable.

SHA PE /C O NF IGUR AT I ON
The comparable sales are similar in respect to subject. No adjustments are necessary.

DEN SI TY
The subject is being analyzed with a density of 120 units per acre. Typically, lower density projects sell at higher prices primarily due to lower construction costs. Sales 1 and 5 have considerably lower densities as compared to the subject. These are rated slightly superior and are adjusted downward by 5%. The remaining sales have smaller differences in densities with no adjustments deemed necessary.

UT IL IT IE S/I N FRA S TRUCT URE /O FF -SI TE O B LI GA TI ON S The subject site being analyzed is for a finished lot with all off-site improvements in-place. The comparable sales were also finished sites with little or no off -site obligations on the buyers. The comparable sales and the subject are similar in respect to these characteristics.

ENVIR ON MEN TA L I S SUE S
The subject property has a Land Use Covenant (LUC). The owner/buyer of a parcel is responsible for (i) the transportation and disposal of soil which it moves on its owned parcel, (ii) the construction of dewatering of excavations occurring during development and (iii) installation of passive vapor intrusion systems on new buildings to the extent required by LUCs. Items i and ii are typical costs incurred for most other projects. The cost for the vapor intrusion barrier was reported to be $4.00 to $6.00 per square foot of land area and the on -going cost for monitoring was reported to be $5,000 to $10,000 annually per project. The cost on a per square foot of building area for a vapor intrusion is $1.00 to $1.50 per square foot. The on-going monitoring costs is negligible for the expected size of the project.

The comparable land sales were not known to have any environmental issues. Based on the estimated higher development costs at the Railyards for environmental issues, we adjust the comparable sales down by 5%.

Railyards Central City River District Bridge District
(1st Tier)
City/County Fees $12,694 $13,361 $12,971 $8,812
Plan Area Fees $6,716 $2,226 $3,624 $5,370
Mitigation Fees $4,229 $3,024 $3,411 $3,672
Bond Debt of Special Taxes $3,401 $190 $190 $8,375
Total Infrastructure Cost per Unit $27,040 $18,801 $20,196 $26,229 Source: EPS 8/6/2021
Infrastructure Cost Burden - Multi-Family - Per Unit
SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS162 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

OPP ORTU NI TY ZO NE
The subject is located in an Opportunity Zone. This zone provides tax benefits when improvements are constructed. Sales 1, 3 and 5 are also located in an Opportunity Zone. While this is a benefit to the property, there is no market evidence showing any premium. Rather than making an adjustment, we will consider this benefit in the reconciliation.

TOWN HO ME /C O ND O MI NIUM
The RCLCO Market Study report that approximately 17% of the residential multi -family inventory could be made up from owner -occupied multi-family housing in the Railyards. The comparable multi -family land sales shown herein were for -rental multi-family development. The Sacramento downtown market has not experienced any condominium development at the density projected (120 units per acre) it our analysis. In general, same density multi-family projects with similar locations have shown any land value differences for for-rental verses for-same product type. We believe the for-sale housing units cited in the RCLCO report warrant no land value difference from the comparable land sales utilized herein.

MIXED -I NC OME HOU SI N G STRA TE GY

The subject development must comply with Sacramento’s Mixed-Income Housing Strategy. For the first 3,000 units developed in the Railyards, the developer either has to have constructed 300 units or provide a land dedication to a third-party developer. With the AJ under construction with 69 affordable units and the dedication of land of the Wong Center for 150 units, there is 219 of the 300 units for the first 3,000 units secured. For the subject’s estimated 6,000-unit multi-family build-out a total of 500 units would need to be set -aside. Under RCLLC absorption projection, the following is the most probable dates for future land dedication:

Year 10 – Yr. 2031: 81 units to be set-aside
Year 15 - Yr. 2036: 100 units to be set-aside
Year 19 – Yr. 2040: 100 units to be set-aside

The comparable land sales are also subject to Mixed-Income Housing Strategy. In the City of Sacramento stand-alone multi-family projects satisfy this requirement by paying an in-lieu fee. Projects with 40 units per acre or greater however are exempt from set-asides or fees. In West Sacramento they have reduced fees which is already reflected in the building permit burden shown earlier . Considering the sale comparables have greater density more than 40 units per acre or that fees are already reflected in fees, no adjustments are required.

The land sale analysis here assumes no adjustment for the subject’s Mixed-Income Housing Strategy land dedication encumbrance. We elect to account for this requirement is future land dedication within the discounted cash flow analysis shown later in the report.

ADDIT I ON AL SA LE C OM P ARAB LE
In October 2021 a 2.56-acre property located at Capitol Mall, N and 3rd Street sold. This high identity site sold for $16,750,000 or $150.04 per square foot of land. The site is proposed for a 28 -story, 225-unit SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS163 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL apartment complex and 80,000 SF office buildi ng. The property is substantially superior to the subject property and has been included for informational purposes.

CONCLUSION OF LAND VALUE – MULTI -FAMILY BENCHMARK VALUE After adjustments, the comparable land sales reflect a range from $27,662 to $40,702 per achievable unit.

Sale 3 is an outlier and is given lower weight. The average of the remaining sales is $30,678 per unit.

We apply most weight to Sales 1-2 and 4-8 which have an average of $30,678 per unit. We conclude to a Benchmark Value of $30,000 per achievable unit. Utilizing a density of 120 units per acre, the value is $82.64 per square foot of land area. Utilizing an FAR of 3.5, the value per achievable building area is $23.61 per square foot.

SALES SUMMARY UNADJUSTED ADJUSTED
Minimum $36,194.06 $27,662.32
Maximum $61,176.47 $40,702.18
Average $46,915.37 $31,930.79
SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS164 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL COMPARABLE LAND SALES ADJUSTMENT GRID – BENCHMARK MULTI -FAMILY SITE

COMPARABLE LAND SALE ADJUSTMENTS (MULTI-FAMILY)
Subject Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Comp 6
Property / Location Railyards Community
Facilities District No.
2018-01
Railyards Boulevard &
6th Street
Sacramento,
California
805 Riverfront Street
805 Riverfront Street
West Sacramento, CA
1901 Broadway
1901 Broadway
Sacramento, CA
12th & Q
1208-1220 Q Street
Sacramento, CA
700 16th Street
700 16th Street
Sacramento, CA
Broadway Apartments
2570 3rd
Sacramento, CA
SEC S & 15th Land
1500-1522 S Street
Sacramento, CA
Transaction Status ----- Closed Closed Closed Closed Closed Closed Date of Sale ----- 12/04/2020 09/23/2020 08/17/2020 10/07/2019 10/11/2019 07/01/2019 Site Size (Acres) 1.00 4.41 1.27 0.52 1.18 7.07 0.73
Units Per Acre 120.0 64.9 110.2 98.7 161.6 62.8 167.4
Sale Price ----- $10,050,000 $5,740,000 $3,000,000 $7,500,000 $20,500,000 $5,150,000 Zoning C-3 WF, C4, General
Commercial
RMX-SPD, Residential
Mixed-Use
C-2, General
Commercial
R4 & C-2, C-2, General
Commercial
Density Per Acre 120.0 64.9 110.2 98.7 161.6 62.8 167.4 Unadjusted Price per Unit ----- $35,140 $41,000 $58,824 $39,474 $46,171 $41,870 Transactional Adjustments
Property Rights Conveyed Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Adjustment -$ -$ -$ -$ -$ -$ Financing
Adjustment -$ -$ -$ -$ -$ -$ Terms/Conditions of Sale
Adjustment -$ -$ -$ -$ -$ -$ Expenditures After Sale
Adjustment -$ -$ -$ -$ -$ -$ Market Conditions Jan-22 12/04/2020 09/23/2020 08/17/2020 10/07/2019 10/11/2019 07/01/2019 Adjustment 3% 4% 4% 7% 7% 8%
Total Transactional Adjustments 3% 4% 4% 7% 0% 8%
Adjusted Price per SF (Net) $36,194 $42,640 $61,176 $42,237 $46,171 $45,220 Property Adjustments
Location -10% -5% -10% -10% -5% -10%

1.00 4.41 1.27 0.52 1.18 7.07 0.73
Net Site Size (Ac) 5% 0% 0% 0% 5% 0%
Zoning / Entitlements -5% -5% -5% 0% 0% -5%
$27,040 $26,229 $18,801 $18,801 $18,801 $18,801 $18,801 Infrastructure Cost Burden -2% -19% -13% -20% -18% -18% Shape / Configuration 0% 0% 0% 0% 0% 0%
Density -5% 0% 0% 0% -5% 0%
Utilities / Infrastructure 0% 0% 0% 0% 0% 0%
Environmental Issues -5% -5% -5% -5% -5% -5%
Total Property Adjustments -22% -34% -33% -35% -28% -38% Indication for Subject $28,144 $28,005 $40,702 $27,662 $33,315 $27,937

SALES SUMMARY UNADJUSTED ADJUSTED
Minimum $35,139.86 $27,662.32
Maximum $58,823.53 $40,702.18
Average $43,746.36 $30,960.90
SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS165 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

OFFICE LAND SALE MAP

SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS166 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Sale 6 Comments: Property consists of five
contiguous C-2 zoned parcels along the south side of
S Street, east of 15th Street. The seller had secured
entitlements for a 5 -story project with 123
apartment units and up to 12,800 SF of ground floor
retail for a total building area of 151,630 SF;
however, the buyer reportedly intends to pursue
their own development plan for the site to include
residential and commercial uses. Estimated
demolition costs of $50,000 are added to the
purchase price ($5,100,000) to arrive at the effective
price $5,150,000.

Sale 7 Comments: C-2 zoned site at hard corner
(NEC) of 16th and J Streets in Midtown. Property was
listed in November 2020 (asking price was $3.8
million) and placed under contract in December
2020; however, closing was extended to Jan -2022
while buyer worked on entitleme nts. The property
was improved as a surface parking lot. The site is
located across the street from Memorial
Auditorium. Buyer is an active multifamily developer
in the Downtown/Midtown area. The property is
planned for a 5-story, 68,918 square foot, mixed use
apartment building with 73 dwelling units.

Sale 9 Comments: Downtown development site at the
southwest corner of 11th and J Streets. The property was acquired by Canada based Anthem Properties, who is known for developing high -rise residential projects. The site ha d entitlements in place for a 25 -story mixed -use condominium tower (242 residential condos over 12,000 SF of ground floor retail). Per a news article (SBJ 9/17/18) the buyers ultimate plan for the site was "still being dete rmined" as of the acquisition date; however, a buyer representative reported that "the project will definitely be mostly residential, with the possibility of first-floor office or retail space, or even an events center given its proximity to the state Capitol." The four parcels are improved with vacant two -story buildings totaling approximately 45,000 SF. Demolition costs estimated at $250,000. The actual sale price of $5,000,000 is adjusted upward by this amount to arrive at the effective price. The build able area of the project is 190,500 SF.

SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS167 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Sale 10 Comments: Prime development site situated on the east side of 6th Street between Capitol Mall and L Street, directly south of the new Golden One Center. The site is well positioned for future development of a high -density mixed-use residential tower, hotel, retail o r office project. The project has an active entitlement for a 38-story tower of 262 condominium units above parking and 14,000 SF of retail space (formerly known as Aura); entitlements were originally secured in 2005 and in 2016 the City approved and exten sion through February 2022. The site is presently developed with a surface parking lot (50 stalls). The property was originally placed in contract in November 2017.

Prior to closing, the City of Sacramento approved a request by the buyer to change conditio ns requiring a high -rise to allowing a mid-rise residential and retail project on the site. Months after closing, the buyer announced plans for an 8 -story project. The buildable area of the project is 311,776 SF.

Sale 1 1 Comments:This property was previously
owned and managed by CalPERS. This transfer
reflects CalPERS bringing in a managing partner (CIM)
under a management contract for several properties
in the area. The properties are now held in a fund
structure and the managing partner has a min or
ownership interest. CalPERS commissioned
independent appraisals prior to the transfer which
established the transfer prices. The estimated FAR is

4.0. Sale 1 2 Comments: The property is situated at the northwest corner of 9th and L Streets within the CBD.

The site contains 27,200 SF and is zoned C -3-SPD,
which can accommodate a variety of dense
commercial uses. The site was improved with a
50,000 SF building (built 1965) that has two levels
(ground floor and basement), each containing 25,000
SF and a rooftop parking deck (±50 spaces). The
building was vacant at the time of sale and the buyer
has not yet announced adative plans for either re-use
or new development on the site. Demolition costs
estimated at $250,000. The actual sale pr ice of
$5,000,000 is adjusted upward by this amount to
arrive at the effective price. The estimated FAR is 8.0

SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS168 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Sale 13 Comments: The property represents the city
block at the southeast corner of The Railyards
Specific Plan, bound by H Street t o the south, G
Street to the north, 5th Street to the west and 6th
Street to the east. The property was selected as the
"preferred site" for the new Sacramento Criminal
Courthouse in April 2011. Over a dozen sites were
investigated and this site was select ed and put
under contract in mid -2012. In January 2013, the
Judicial Council had indefinitely delayed the project
due to the State's fiscal crisis and continuing cuts in court construction funds. In the State's Fiscal Year
2014-2015 Budget, the Legislature allocated $40
million in one -time cash for court construction
projects and $27 million was appropriated for
architectural design of the new criminal courthouse
for the Sacramento region. The legislation was
approved October 2014 and the State then closed
escrow on this site. The proposed courthouse would
contain approximately 405,000 SF (16 stories) and
would provide 44 courtrooms as well as parking.

Funds for construction of this $390 million project
had yet to be legislated at closing. This transaction closed in 2014. It is a relevant comparable sale as it one of the few Railyards land sales and still reflective of the market for office properties.

SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS169 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL No. Property / Location
Date of
Sale
Transaction
Status
Site Size
(Ac)
Site Size
(SF) Zoning
Est.

FAR
Buildable
Area (SF) Sale Price
Price
per SF
Price per
Buildable SF
6 SEC S & 15th Land
1500-1522 S Street
Sacramento, CA
07/01/2019 Closed 0.73 32,000 C-2, General
Commercial 4.74 151,630 $5,150,000 $160.94 $33.96
7 NEC 16th & J
1611 J Street
Sacramento, CA
01/28/22 Closed 0.42 18,400 C-2, General
Commercial 6.00 110,400 $3,700,000 $201.09 $33.51
9 Cathedral Square Site
1018 J Street
Sacramento, CA
09/11/2018 Closed 0.66 28,800
C-3, Central
Business
District

6.61 190,500 $5,250,000 $182.29 $27.56
10 601 Capitol Mall
601 Capitol Mall
Sacramento, CA
04/06/2018 Closed 0.89 38,972
C-3 SPD,
Central
Business
District

8.00 311,776 $7,000,000 $179.62 $22.45
11 Thompson Diggs Parking
1801 3rd Street
Sacramento, CA
01/03/2018 Closed 2.50 108,800

RMX-SPD,
Residential
Mixed Use,
Special
Planning

4.00 435,200 $12,800,000 $117.65 $29.41
12 831 L Street
Sacramento, CA
01/13/2017 Closed 0.62 27,200
C-3, Central
Business
District

8.00 217,600 $5,250,000 $193.01 $24.13
13 Courthouse Site
501 H Street
Sacramento, CA
10/03/2014 Closed 2.42 105,415
C-3, Central
Business
District

3.84 405,000 $10,000,000 $94.86 $24.69
Railyards Community Facilities
District No. 2018-01
Railyards Boulevard & 6th Street
Sacramento, California

1.75 , 4.00

COMPARABLE OFFICE LAND SALES
SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS 170 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL DISCUSSION OF ADJUSTMENTS – OFFICE LAND SALES

PRO PERT Y RI GH TS C ONV EYED
This adjustment accounts for any impact that the property rights transferred to the buyer may have on sale price. For leased fee properties, the length of leases in place and the relationship of mark et to contract rent could impact value. Some properties may have stronger appeal to an owner -user or an investor, resulting in a premium or discount associated with fee simple property rights.

All of the comparables were considered similar to the subject and no adjustments were required for this category.

FINA NC IA L TERM S
This category accounts for differences in financing terms associated with the transaction. Financing arrangements that may require an adjustment include mortgage assumptions (at favorable interest rates), seller buydowns, installment sales, wrap-around loans, or any other atypical financing arrangements that do not represent cash-equivalent terms.

All of the comparables were considered similar to the subject and no adjustments were required for this category.

CO NDI TI O NS OF SA LE
Adjustments for conditions of sale typically reflect various motivations of the buyer and/or seller. This may include suc h factors as seller distress (short sale, REO, auction) or buyer motivation (assemblage, etc.). In some situations, the conditions of sale may significantly affect transaction prices. Properties that are listed for sale may require adjustments herein to account for any disparity between asking prices and the achievable sale price anticipated.

All of the comparables were considered similar to the subject and no adjustments were required for this category.

EXPEND ITURE S I MMED IA TEL Y A FTER SA LE
In order to arrive at the effective sale price, the actual sale price of each comparable is adjusted to account for any expenditures planned by the buyer immediately after sale, such as capital expenditures, cost to cure deferred maintenance, or lease-up costs.

Sales 6, 9 and 12 were adjusted upward for demolition costs. The remaining comparables were considered similar to the subject and no adjustments were required for this category.

MAR KET CO ND IT IO N S
The sales included in this analysis transacted between October 2014 to January 2022. As reported in the office market overview section, m arket conditions for office properties have been relatively stable over the past 5-7 years. This is evidenced from the lack of new office development and low absorption rates.

We believe no market condition adjustments are necessary for the office land valuation.

SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS171 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

PROPERTY ADJUSTMENTS

LO CA TI ON
The appeal of a property’s location to users of and/or investors in a particular property type can influence value significantly. This f actor broadly considers the impact of demographics, geographical attributes, access to transportation networks and local land use trends on pricing. Comparisons of location can often be derived, or even quantified, by examining rent, vacancy, capitalizatio n rate, and land value trends in the subject and directly competitive areas.

The subject benchmark office site is assumed to have an average location within the Railyards. The comparable sales have average to good locations within central/CBD area of the city of Sacramento. The comparable sales have superior locations in established areas of the CBD. Interviews with market participants indicate that office rents would likely be lower in the Railyards verses the CBD. Downward adjustments from -10% to -15% were applied to the sales.

SI TE SIZE
The subject area being analyzed here is a 1.75-acre size lot. The comparable sizes range from 0.42 to 2.5 acres. The sales are rated similar with no adjustments apply.

ZO NIN G / IN TEN DED USE

The value of vacant land is largely contingent upon its potential use. This factor considers the uses permitted by the applicable development standards, per the subject’s zoning designation. The maximum density to which a property can be developed typically impacts total value positively; however, depending upon property type, location, and type of construction higher permitted densities can have an inverse relationship to pricing on a per-unit or per-square-foot basis.

The subject is zoned and entitled for high density use. The typical office density for the subject is a floor- to-area of 4.0. No specific entitlements for an office use are assumed.

Sales 9, 10 and 11 were purchased for multi-family development. The location of these sales is urban in nature and generally similar to office sites in the CBD. Despite the different intended use of these sites, they are reflective of CBD office locations.

The comparable sales have no entitlements for office use and they all have similar zonings. No adjustments for zoning/use are necessary.

SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS172 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

SHA PE /C O NF IGUR AT I ON
The comparable sales are similar in respect to subject. No adjustments are necessary.

ACCES S /VI SI BI L IT Y
The comparable sales are similar in respect to subject. No adjustments are necessary.

UT IL IT IE S/I N FRA S TRUCT URE /O FF -SI TE O B LI GA TI ON S The subject site being analyzed is for a finished lot with all off-site improvements in-place. The comparable sales were also finished sites with little or no off-site obligations on the buyers. The comparable sales and the subject are similar in respect to these characteristics.

ENVIR ON MEN TA L I S SUE S
The comparable land sales were not known to have any environmental issues. Based on the estimated higher development costs at the Railyards for environmental issues, we adjust the comparable sales down by 5%.

OPP ORTU NI TY ZO NE
The subject is located in an Opportunity Zone. This zone provides tax benefits when improvements are constructed. Sales 1 1 and 13 are also located in an Opportunity Zone. While this is a benefit to the property, there is market evidence showing any pre mium. Rather than making an adjustment, we will consider this benefit in the reconciliation.

Railyards Central City River District Bridge District
(1st Tier)
City/County Fees $13.71 $15.93 $14.92 $8.07
Plan Area Fees $7.32 $3.83 $6.37 $4.85
Bond Debt of Special Taxes $1.38 $0.01 $0.06 $9.29
Total Infrastructure Cost per SF $22.41 $19.77 $21.35 $22.21 Source: EPS 8/6/2021
Infrastructure Cost Burden - Office - Per Sf of Bldg. Area SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS173 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

COMPARABLE LAND SALE ADJUSTMENTS - OFFICE
Subject Comp 6 Comp 7 Comp 8 Comp 9 Comp 10 Comp 11 Comp 12 Property / Location Railyards Community
Facilities District No.
2018-01
Railyards Boulevard &
6th Street
SEC S & 15th Land
1500-1522 S Street
Sacramento, CA
NEC 16th & J
1611 J Street
Sacramento, CA
Cathedral Square Site
1018 J Street
Sacramento, CA
601 Capitol Mall
601 Capitol Mall
Sacramento, CA
Thompson Diggs
Parking
1801 3rd Street
Sacramento, CA
831 L Street
Sacramento, CA
Courthouse Site
501 H Street
Sacramento, CA
Transaction Status ----- Closed Closed Closed Closed Closed Closed Closed Date of Sale ----- 07/01/2019 Jan-22 09/11/2018 04/06/2018 01/03/2018 01/13/2017 10/03/2014 Site Size (Acres) 1.75 0.73 0.42 0.66 0.89 2.50 0.62 2.42 Site Size (SF) 76,230 32,000 18,400 28,800 38,972 108,800 27,200 105,415 FAR 4.00 4.74 6.00 6.61 8.00 4.00 8.00 3.84
Sale Price ----- $5,150,000 $3,700,000 $5,250,000 $7,000,000 $12,800,000 $5,250,000 $10,000,000 Zoning , C-2, General
Commercial
C-2, General
Commercial
C-3, Central Business
District
C-3 SPD, Central
Business District
RMX-SPD, Residential
Mixed Use, Special
Planning District
C-3, Central Business
District
C-3, Central Business
District
Unadjusted Price per SF (Net) ----- $33.96 $33.51 $27.56 $22.45 $29.41 $24.13 $24.69 Transactional Adjustments
Property Rights Conveyed
Adjustment -$ -$ -$ -$ -$ -$ -$ Financing
Adjustment -$ -$ -$ -$ -$ -$ -$ Terms/Conditions of Sale
Adjustment -$ -$ -$ -$ -$ -$ -$ Expenditures After Sale
Adjustment -$ -$ -$ -$ -$ -$ -$ Market Conditions Jan-22 07/01/2019 Jan-22 09/11/2018 04/06/2018 01/03/2018 01/13/2017 10/03/2014 Adjustment 0% 0% 0% 0% 0% 0% 0%
Total Transactional Adjustments 0% 0% 0% 0% 0% 0% 0%
Adjusted Price per SF (Net) $33.96 $33.51 $27.56 $22.45 $29.41 $24.13 $24.69 Property Adjustments
Location -10% -10% -15% -15% -10% -15% -10%

1.75 0.73 0.42 0.66 0.89 2.50 0.62 2.42
Net Site Size (Ac) 0% 0% 0% 0% 0% 0% 0%
Zoning / Entitlements 0% 0% 0% 0% 0% 0% 0%
$22.41 $19.77 $19.77 $19.77 $19.77 $19.77 $19.77 $19.77 Infrastructure Cost Burden -8% -8% -10% -12% -9% -11% -11% Shape / Configuration 0% 0% 0% 0% 0% 0% 0%
Density 0% 5% 0% 0% 0% 0% 0%
Utilities / Infrastructure 0% 0% 0% 0% 0% 0% 0%
Environmental -5% -5% -5% -5% -5% -5% -5%
Total Property Adjustments -23% -18% -30% -32% -24% -31% -26% Indication for Subject $26.23 $27.52 $19.41 $15.32 $22.36 $16.66 $18.35

SALES SUMMARY UNADJUSTED ADJUSTED
Minimum $22.45 $15.32
Maximum $33.96 $27.52
Average $27.96 $20.84
SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS174 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL CONCLUSION OF LAND VALUE – OFFICE BENCHMARK VALUE
After adjustments, the comparable land sales reflect a range from $15.32 to $27.52 per achievable gross building area. The average of the sales is $20.84 per achievable gross building area.

Sale 6 and 7 are the most recent comparables and have the highest adjusted prices. We apply equal weight to the sales and conclude to Benchmark Value of $ 20.00 per square foot of achievable gross building area. Utilizing an FAR of 4.0, the value is $80.00 per square foot of land area.

SALES SUMMARY UNADJUSTED ADJUSTED
Minimum $22.45 $16.44
Maximum $33.96 $29.20
Average $27.80 $22.09
SALES COMPARISON APPROACH – BENCHMARK LAND VALUES – DRV LOTS 175 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

RETAIL LAND VALUE
The subject project has entitlements for up to 514,270 SF of retail space, not including the central shop buildings. The entitlements under the Variant Plan whereby the MLS site is not developed, a total retail potential of 637,070 SF is allowed. The majority of the retail space will be on the ground floor of the office and multi-family properties. The retail space is likely to produce similar rental rates commensurate to the multi-family and office sites. The final value of the multi-family and office sites were $23.61 and $20.00 per square foot of buildable area , respectively. Without dedicated parking structure w e use the lower indication and conclude to a value of $ 20.00 per square foot of achievable buildable area for the retail space.

HOTEL LAND VALUE
The subject project has entitlements for up to 1,100 hotel rooms. The break -out is 650 Select Service rooms and 450 High -end Hotel Rooms. The reported buildable area is 1,100,000 square feet. At an average density of 150 units per acre the approximate land area is 7.3 acres within the Railyards. This indicates an FAR of 3.44, which is similar to our multi -family density. There few land sales purchased in the downtown area purchased for hotel development. The only land sale transaction known in the CBD or Midtown is the following:

Hotel Sale 1: A 0.31 site located at 17th Street and I Street in downtown Sacramento sold for $3,500,000 in February 2020. This site was planned for an 8 -story hotel for 179 room with 95,250 square feet of buildings area indicating an FAR of 7.0 . The sale price was $19,553 per room, $36.75/SF o f achievable building area or of $260.03 per square foot of land area.

The CBD hotel site cited above has a sale price metric higher than our concluded office or multi -family benchmark values. This is reasonable as this site has a superior location, no CFD burden and lower development fees. The price per achievable unit is concluded to be the best indicator based on the data available. We conclude the hotel land to have a value similar to the range from our value conclusions for the office and multi-family site. An estimate of $20.00 per square of achievable building area is concluded for the hotel land use. This indicates a value of $ 20,000 per achievable room or a value of $68.90 per square foot of land (1,100 rooms @ $20,000/7.33 acres).

LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET176 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL LAND RESIDUAL AN ALYSIS – DRV LOTS – WEST OF 7 TH STREET The Land Residual Analysis is a secondary approach for the land value estimate. The approach is not as accurate as the Sales Comparison Approach as it requires several inputs. In addition, while buyers of land perform this analysis they do so primarily as a test of financial feasibility of development. Despite its weakness, the approach deserves some weight. The steps necessary for this approach are as follows:

1. Determine a hypothetical development that represent s the highest and best use of the site as though vacant.

2. Estimate the net operating income of the hypothetical development.

3. Apply an appropriate capitalization rate to the net operating income to arrive at the improved value of the hypothetical development.

4. Estimate development cost and profit incentive of the development.

5. Deduct the lease-up cost and profit incentive from the value of the development to arrive at a land value estimate.

We have developed four land residual analys es. These include a typical office development , an apartment/mixed use development, a hotel development and another for the Central Shops (office and retail).

LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET177 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Office Land Residual Analysis

For the office residual analysis we utilize a typical parcel size of 1.75 acres and a typical FAR of 4.0 . The hypothetical office development results in a gross building area of 304,920 square feet with 95% or 289,674 square feet being net rentable area. The development has no on -site parking and assumes parking will be accommodated by nearby developed parking garages.

A representative image of the typical office development is shown below. One of the initial office developments will be The Foundry. This will be a two building, 5 -story project totaling 313,350 gross building square feet on a 1.75-acre site. The indicated FAR is 4.11. DRV shared financial pro -forma for this project, including construction costs. This information is confidential but has been considered this land residual analysis.

The quality of the office development is assumed to be similar to Class A office buildings in the CBD. The development is assumed to be a substantially pre -leased or build-to-suit and not a speculative office project. A one-year planning and two-year con struction period is estimated. The following are the necessary inputs for development:

Rent Range - High Rent Range - Low
300 Capitol Mall $42.00 $42.00
400 Capitol Mall $34.20 $44.40
500 Capitol Mall $39.00 $43.20
621 Capitol Mall $44.40 $44.40
555 Capitol Mall $40.20 $54.00
980 9th Street $39.60 $43.20
801 K Street $40.20 $42.00
1215 K Street $42.00 $43.20
915 L Street $42.00 $42.00
1415 L Street $43.80 $46.20
Class A Office Rents
LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET178 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Rents from the Class A office properties in the CBD range from $34.00 to $54.00 per square foot. Ron Thomas and Mark Tabak with Cushman and Wakefield will be marke ting office space in the Foundry project in the Railyards. They reported initial asking rent of $60.00 per square foot, reflective of rates in three years. The Railyards has a slightly inferior location , and the estimate d rent today would be $45.00 per square foot. Considering construction planning timing, a rent of $ 48.00 per square foot is estimated in 3 years when the project would be completed.

Net Operating Income Estimate: Class A office properties in the CBD today are achieving rents near $48 per square foot. A 5% vacancy rate and $12 per square foot operating expenses yields a net operating income of $33.60 per square foot or total of $9,733,046.

Capitalized Value: Sales of Class A office properties in downtown city of Sacramento are in the high

6.0%’s and low 7.0%’s. Most of the sales occurred in 2018 and 2019 when capitalization rates were higher. According to PwC 1Q 2022 capitalization rates for CBD market is 5. 64%. A 6.25% capitalization rate is deemed appropriate for a new office project in the Railyards. The estimated market value of a stabilized office property is estimated to be $ 537.60 per square foot.

Comp 1 Comp 2 Comp 3 Comp 4
Name High Rise High Rise High Rise High Rise
Address CBD CBD CBD CBD
City Sacramento Sacramento Sacramento Sacramento
State CA CA CA CA
Year Built 1992 1984 1984 1971
SF 185,950 169,893 382,774 387,130
Expense Basis Full Service Full Service Full Service Full Service Operating Data Type Actual Actual Actual Actual
Year 2017 2020 2016 2019
Real Estate Taxes $1.92 $3.30 $3.36 $4.13
Insurance $0.20 $0.43 $0.44 $0.66
Utilities $2.14 $1.41 $1.70 $2.39
Repairs/Maintenance $2.38 $3.88 $1.92 $2.04
Cleaning/Janitorial $0.95 $1.40 $1.35 $1.54
Grounds $0.06 $0.15 $0.13 $0.15
Security $1.09 $1.66 $0.43 $0.82
General/Administrative $0.38 $1.28 $1.23 $0.56
Management $0.67 $0.66 $0.73 $1.56
Total Expenses $9.79 $14.17 $11.29 $13.85

PER SQUARE FOOT

COMPARABLE EXPENSE DATA
Comp Data
LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET179 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Building costs were derived from Marshall & Swift Valuation as shown below:

Hard & Soft Development Cost: We estimate a building cost of $ 282 per square foot and a 13.5% contingency to account for rising costs. Total hard development cost of $327 (inclusive of site costs) for a similar development. Total soft and indirect cost are estimated to be approximately 35% of hard costs.

The total development costs are estimated to be $ 443 per square foot.

Residual Land Value: The final step is to ded uct the development cost and profit to indicate a residual land value estimate. Entrepreneurial profit is estimated to be 1 2% of total development costs. A land residual estimate of $63.18 per square foot of land or $15.79 per square foot of building area is indicated.

Shown on the following page is the Office Land Residual results. The highlighted cells indicate major inputs to the analysis.

Marshall & Swift Valuation - Office
Class B
Section 15/Page 17 (Avg/Good) $226.00
Current Cost Multiplier 0.99
Local Multiplier 1.26
Adjusted Cost $281.91
LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET180 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Parcel Size 1.75 76,230
Density - FAR 4.0
Gross Building Area 304,920
Net Rentable Area 289,674
Pro-Forma
Income SF $/SF/Yr
Potential Office Income 289,674 48.00$ 13,904,352$
Less Office V/C Loss 5% (695,218)$
Effective Gross Income 13,209,134$
Less Operating Expenses $12.00 SF (3,476,088)$
Net Operating Income 9,733,046$
Capitalization Rate 6.25%
Market Value As Stabilized 155,728,742$
Value per SF 537.60$
Rounded 156,000,000$
Hard Costs SF Cost/SF
Construction Cost Office (Building Shell & TI's) 304,920 282.00$ 85,987,440$ Construction Cost Site 2,000,000$
Contingency/Cost Escalation 13.5% 11,878,304$
Total Hard Construction Cost 327.51$ 99,865,744$
Soft Cost
Indirect Costs 10.0% 9,986,574$
Financing 4.0% 3,994,630$
Development Fees $21.03 6,412,468$
Development Overhead 5.0% 4,993,287$
Lease Commissions 4.0% 5 year lease 2,780,870$
Rent Loss for Lease-up 12 months 6,952,176$
Total Soft Cost 35.2% 35,120,005$
Total Costs 442.69$ per GBA 134,985,750$
Market Value As Stabilized 156,000,000$
Less Total Costs (134,985,750)$
Less: Profit 12.0% of cost (16,198,290)$
Residual Land Value 4,815,960$
Indicated Land Value per Land SF 63.18$
Indicated Land Value Per GBA 15.79$
Return on Land & Cost (NOI/total cost plus land, exc. profit) 7.87% Land Residual Analysis - Office Development
LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET181 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Mixed-Use Land Residual Analysis

This residual analysis is for an apartment building with ground floor retail. We utilize a typical parcel size of 2.88 acres and a typical density of 120 units per acre. The hypothetical mixed -use development results in an apartment size of 345 units with 5,996 square feet of retail sp ace. This land and building area are the same as the AJ which is currently under construction. The development also has on -site parking for 276 spaces. The overall FAR of the project is 3.5. A representative image of the typical mixed-use development is shown below.

The quality of the mixed-use development is assumed to be similar to Class A apartment buildings in the CBD/Midtown. A one-year planning and two-year construction period is estimated. The following are the necessary inputs for development:

Net Operating Income Estimate: Class A apartment p roperties in the Midtown and CBD today are achieving rents from $2,000 to $3,500 per unit depending on unit type. Support for the estimated market rents and expenses is shown later in the report. We utilize the AJ unit mix and arrive at an overall market rent of $2,280 per unit or $3.31 per square foot as shown below.

Other income inputs include retail rent of $4.00 per square foot, parking rate of $150 per space, expense reimbursement of $125 per unit and miscellaneous income of $100 per unit. A 5% vacancy rate and $10,124 per unit in operating expenses yields a net operating income of $ 20,9706 per unit or total of $7,234,707.

Type Size No. Mkt Rent Rent/SF Annual
Studio 534 48 $1,900 $3.56 $1,094,400
1/1 612 171 $2,100 $3.43 $4,309,200
1/1 706 67 $2,400 $3.40 $1,929,600
2/2 971 14 $2,900 $2.99 $487,200
2/2' 1,041 45 $3,000 $2.88 $1,620,000
Total 345 $2,280 $3.31 $9,440,400
LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET182 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Capitalized Value: Sales of Class A apartment office properties in Sacramento MSA are in the low 4.0%’s.

According to PwC 1Q 2022 capitalization rates for apartments 4.4%. A 4.5% capitalization rate is deemed appropriate for a new apartment project in the Railyards. The estimated market value of a stabilized apartment project is estimated to be approximately $4 66,004 per unit or $464 per square foot . This value is reasonable considering the following Midtown apartment sales.

Building costs were derived from Marshall & Swift Valuation as shown below:

Hard & Soft Development Cost: We estimate a building cost of $2 40 per square foot, $60 per square foot for parking garage and a 13.5% contingency. Total soft and indirect cost are estimated to be approximately 31% of hard costs. The total development costs are estimated to be $392 per square foot.

This cost is higher than the owner’s budget cost for the AJ as construction costs have increased.

Consideration was also given to DRV’s construction cost of their proposed Telegrapher project.

Shown on the following page is the Mixed-Use Land Residual results. The highlighted cells indicate major inputs to the analysis.

Real Estate Taxes $5,344 $1,843,780
Insurance 350 $120,750
Utilities 1,000 $345,000
Repairs/Maintenance 800 $276,000
Payroll/Benefits 1,000 $345,000
Advertising & Marketing 100 $34,500
General/Administrative 100 $34,500
Management 3.0% $319,190
Replacement Reserves 250 $86,250
Total $9,869 $3,404,970

OPERATING EXPENSES
Property Date of Sale Yr Built Price/Unit Price/SF Capitalization Rate 16 Powerhouse, Sacramento Mar-18 2015 $650,000 $615.81 4.63% 1430 Q Street Mar-22 2021 $761,333 $598.15 4.70%
Evia Midtown, Sacramento Jan-17 2016 $449,153 $541.56 4.91% Q 19, Sacramnento Apr-19 2018 $394,118 $606.54 4.66%
The Press Sep-20 2020 $425,993 $588.19 N/A
Marshall & Swift Valuation - Apartments
Class B
Section 11/Page 18 $165.00
Story Multiplier 1.03
Current Cost Multiplier 1.14
Local Multiplier 1.24
Adjusted Cost $240.24
LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET183 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Parcel Size 2.88 125,453
No. Units 345 120
Units NRA 238,025
Retail 5,996
Parking 276
Apt/Retail GBA 346,186
Parking GBA 93,030
Total GBA 439,216
Overall FAR 3.50
Pro-Forma
Income Units $/Unit /Mo.

Potential Apartment Income 345 3.31$ 9,440,400$ Potential Retail Income 5,996 4.00$ 287,808$ Parking Income 260 150.00$ 468,000$
Expense Reimbursement 345 125.00$ 517,500$
Other Income 345 100.00$ 414,000$
Total Potential Income 11,199,660$
Less V/C Loss 5% (559,983)$
Effective Gross Income 10,639,677$
Less Operating Expenses $9,869 Unit (3,404,970)$
Net Operating Income 20,970.17$ 7,234,707$
Capitalization Rate 4.50%
Market Value As Stabilized 160,771,268$
Value per Unit 466,004$
Rounded 161,000,000$
Hard Costs SF Cost/SF
Construction Cost - Apts/Retail 346,186 240.00$ 83,084,640$ Construction Cost - Garage 93,030 60.00$ 5,581,800$ Construction Cost - Site 2,500,000$
Contingency/Cost Escalation 13.5% 12,307,469$
Total Hard Construction Cost 103,473,909$
Soft Cost
Indirect Costs 10.0% 10,347,391$
Financing 3.0% 3,104,217$
Development Fees $23,640.00 unit 8,155,800$
Development Overhead 5.0% 5,173,695$
Rent Loss for Lease-Up (Assumes gradual lease-up over 9 months) 12.0 months 5,599,830$ Total Soft Cost 31.3% 32,380,934$
Total Costs 392.43$ per GBA 135,854,843$
Market Value As Stabilized 161,000,000$
Less Total Costs (135,854,843)$
Less: Profit 12.0% of cost (16,302,581)$
Residual Land Value 8,842,576$
Indicated Land Value per Unit 25,631$
Indicated Land Value per Land SF 70.49$
Indicated Land Value Per GBA 20.13$
Return on Land & Cost (NOI/total cost plus land, exc. profit) 7.54% Land Residual Analysis - Mixed-Use Development
LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET184 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Limited-Service Hotel Land Residual Analysis

This residual analysis is for a hotel property with a parking garage. We utilize a typical parcel size of

0.667 acres and a typical density of 1 50 units per acre. The hypothetical hotel size is 100 units. The development is also assumed to have an on-site parking garage for 100 spaces. The overall FAR of the project is 3.5.

The quality of the limited-service hotel development is assumed to be the Sutter Hotel which is the last hotel development in the Midtown/CBD area. An image of this building is as follows:

A one-year planning and two-year construction period is estimated. The following are the ne cessary inputs for development:

Net Operating Income Estimate: Current ADR’s in downtown Sacramento are around $127 per room per Costar. Interviews with Marriott representative indicate an average ADR of $1 82 and 79% occupancy. 2022 ADR’s for higher e nd hotels such as the Sutter are close to $200. In three years when this hypothetical development is completed, we believe an ADR of $ 195 per room and 7 5% occupancy is achievable. Other income inputs $2,500 per room. An estimate of $ 33,844 per room in operating expenses yields a net operating income of $ 22,037 per unit or total of $2,203,725.

LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET185 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Capitalized Value: Costar reports a market capitalization rate of 6.8% for Sacramento MSA. According to PwC 4Q 2021 capitalization rates for hotel is 7.35%. A 7.0% capitalization rate is deemed appropriate for a new hotel project in the Railyards. The estimated market value of a stabilized hotel project is approximately $314,818 per room.

Hard & Soft Development Cost: We estimate a building cost of $2 45 per square foot and a 13.5% contingency. Total hard development cost of $2 45 per square foot is reported by Marshall & Swift Valuation for a similar hotel development. Total soft and indirect cost are estimated to be approximately 36% of hard costs. The total development costs are estimated to be $ 255 per square foot.

Residual Land Value: The final step is to deduct the development cost and profit to indicate a residual land value estimate. Entrepreneurial profit is estimated to be 12% of total development costs. A land residual estimate of $24,162 per room, $83.16 per square foot of land or $ 23.74 per square foot of building area is indicated.

Shown on the following page is the Limited-Service Hotel Land Residual results. The highlighted cells indicate major inputs to the analysis.

2020 HOST Report Sacramento Hotel
2022 Pro-forma
Rooms 26% 21% per room revenue
Other $2,036 $458 per room
G&A 8.10% 9.00% per total revenue
Mkt & Franchise 8.50% 14.10% per total revenue
Property Operations 4.2% 2.9% per total revenue
Utility Cost 2.9% 2.6% per total revenue
Mgmt 3.5% 3.0% per total revenue
Taxes 3.8% 6.0% per total revenue
Insurance $683 $1,069 per room
Reserves 2.5% 1.9% per total revenue
Hotel Expense Support
Rooms 24% per room revenue $1,281,150
Other $500 per room $50,000
G&A 8.00% per total revenue $447,050
Mkt & Franchise 10.00% per total revenue $558,813
Property Operations 3.5% per total revenue $195,584
Utility Cost 3.0% per total revenue $167,644
Mgmt 3.0% per total revenue $167,644
Taxes $3,704 based on M.V. $370,406
Insurance $800 per room $80,000
Reserves 3.0% per total revenue $66,112
Total $33,844 $3,384,402
Hotel Expense Projections
LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET186 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Parcel Size 0.667 29,055
No. Units 100
Hotel 58,200
Parking Garage 43,582
Total GBA 101,782
Overall FAR 3.50
Pro-Forma
Income Units $/Room Occupancy
Potential Rooms Revenue 100 195 75.00% 5,338,125$
Other Income 100 2,500 250,000$
Total Potential Income 5,588,125$
Less Operating Expenses $33,844 Unit 3,384,400$
Net Operating Income 22,037.25$ 2,203,725$
Capitalization Rate 7.00%
Market Value As Stabilized 31,481,786$
Value per Unit 314,818$
Rounded 31,500,000$
Hard Costs SF/Units Cost/SF/Unit
Construction Cost - Hotel 58,200 245.00$ 14,259,000$ Construction Cost - Site 750,000$
Personal Property 100 20,000.00$ 2,000,000$
Contingency/Cost Escalation 13.5% 2,026,215$
Total Hard Construction Cost 187.02$ 19,035,215$ Soft Cost
Indirect Costs 10.0% 1,903,522$
Financing 4.0% 761,409$
Development Fees $23,640.00 unit 2,364,000$
Development Overhead 10.0% 1,903,522$
Total Soft Cost 36.4% 6,932,452$
Total Costs 255.13$ per GBA 25,967,667$
Market Value As Stabilized 31,500,000$
Less Total Costs (25,967,667)$
Less: Profit 12.0% of cost (3,116,120)$
Residual Land Value 2,416,213$
Indicated Land Value per Unit 24,162$
Indicated Land Value per Land SF 83.16$
Indicated Land Value Per GBA 23.74$
Return on Land & Cost (NOI/total cost plus land, exc. profit) 12.02% Land Residual Analysis - Limited Service Hotel
LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET187 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Central Shops

The Central Shops consist of five buildings and will c ontain a net rentable area of 247,832 square feet.

The buildings will be connected with Pedestrian Paseos and will be adjacent to sites p lanned for new office and apartments buildings. The Shops also have a direct link to the Sacramento Valley Station via an existing underground tunnel. A summary of the Central Shop Buildings is as follow:

Paint Shop Building: This building is 61,025 SF in size. Live Nation has signed a lease for 47,374 SF. The balance of the space will be retail and office space. The Paint Shop Building will be the first building to restored and renovated. The construction completion for the Paint Shop building is reported to be late 2023. Images of the Paint Shop Building are shown below.

LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET188 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Other Shop Buildings: There are four other Central Shop Buildings under DRV ownership. These range from 27,670 to 68,434 SF for a total of 186,807 SF. The developer plans to phase in the construction of these buildings with each being approximately two years apart. Images of the Other Shop Buildings are shown below.

From discussion with the leasing agents associated with the project, the predominate use will be creative office space with some retail for breweries, coffee shops, restaurants, and retail establishments.

Developer renderings of the shop buildings (at full build-out) are shown on the following page.

LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET189 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET190 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Separate Residual Analysis will be performed for the Paint Building and Other Shop Buildings. These are shown as follows:

Paint Shop Building

Net Operating Income Estimate: Details of the Live Nation lease are confidential, and a market rent has been input for this space. Market rents for good quality retail properties in the Midtown and CBD are in the $36.00 -$48.00 per square foot range, triple net. This range is from a Midtown project of which confidential lease rates were provided. For the anchor retail space, a market rent of $ 25.00 per square foot, triple net is concluded. For the smaller speculative retail, a market rent of $36.00 per square foot is concluded. For the office space in the Central Shops , a marke t rent of $45.00 per square foot is concluded in 3 years when the initial office space is completed. This rent is slightly lower than the land residual office model as the Central Shop office space is considered slightly inferior to a new office project.

The Paint Shop Building will have open space, some of which is likely to be outdoor dini ng and entertainment area. We apply an Outdoor rental income of 3% retail building revenue. A 5% vacancy rate (only on spec space) , $12.00 per square foot expenses for the office portion and consideration of non-reimbursable expenses for anchor space yields a net operating income of $ 1,682,687.

Capitalized Value: Sales of higher quality retail properties with anchor spaces in for long-term leases are in the low 5.0% and low 6.0% range. A 5.5% capitalization rate is deemed appropriate for historic renovated retail project in the Railyards with a major long-term anchor. The estimated market value of a stabilized retail project is estimated to be approximately $ 501 per square foot.

Hard & Soft Development Cost: We have reviewed the developer’s development and renovation costs.

Based on the budgets, a renovation cost of $530 per square foot is concluded (includes a credit from anchor tenant per the Live Nation lease ). This is inclusi ve of tenant improvement costs. We include a 20% contingency or $ 106 per square foot. For the Live Nation lease, D RV must construct a temporary parking lot on an adjacent property at a cost of $1,000,000. Total soft and indirect cost are estimated to be approximately 26% of hard costs. The total development costs are estimated to be $ 825 per square foot.

Residual Land Value: The final step is to deduct the development cost and profit to indicate a residual land value estimate. Entrepreneurial prof it is estimated to be 1 2% of total development costs. The project will likely qualify for Historic Tax Credits (State and Federal) and New Market Tax Credits. Federal Historic Tax Credits are estimated at 20% of hard and soft costs, less 20% for issuance and closing costs.

State Historic Tax Credits are estimated at 20% of hard and soft costs, less 20% for issuance and closing costs. New Market Tax Credits a re estimated at 39% of hard costs, less 20% for issuance and closing costs. Finally, we have considered the present value of the surface parking income over three years which is estimated to be $ 1,420,000. This estimate is partially based on City of Sacr amento’s Parking study for the proposed parking garage on Lot 17 regarding Live Nation’s parking demands. A land residual estimate of $4,600,000 or $58.02 per square foot of land or $ 75.38 per square foot of building area is indicated.

Shown on the following page is the Paint Shop Land Residual results. The highlighted cells indicate major inputs to the analysis.

LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET191 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL

Parcel Size 1.82 79,279
Density - FAR 0.8
Gross Building Area 61,025
Net Rentable Area 61,025
Pro-Forma
Income SF $/SF/Yr
Potential Office Income
Anchor - Live Nation - Market Rent Applied 47,374 25.00$ 1,184,350$ Speculative - Retail - NNN 8,551 36.00$ 307,836$
Speculative - Office - Full Service 5,100 45.00$ 229,500$ Outdoor Rentals @3% 51,651$
Total 1,773,337$
Less: V/C Loss - Speculative Space 5% (29,449)$
Effective Gross Income 1,743,887$
Less: Expenses for Office $12 61,200$
Less: Expenses Unreimbursed by Live Nation (above their Cap) None estimated -$ Net Operating Income 1,682,687$
Capitalization Rate 5.50%
Market Value As Stabilized 30,594,314$
Value per SF 501.34$
Rounded 31,000,000$
Hard Costs SF Cost/SF
Construction & TI Cost (less Credit from tenant for work overage) 61,025 530.00$ 32,343,250$ Temporary Surface Parking Lot 1,000,000$
Contingency 20.0% 106.00$ 6,668,650$
Total Hard Construction Cost 655.66$ 40,011,900$
Soft Cost
Indirect Costs 10.0% 4,001,190$
Financing 4.0% 1,600,476$
Development Fees $34.00 2,074,850$
Development Overhead 5.0% 2,000,595$
Rent Loss 24 months 537,336$
Lease Commissions 4.0% 5 year lease 107,467$
Total Soft Cost 25.8% 10,321,914$
Total Costs 824.81$ per GBA 50,333,814$
Market Value As Stabilized 31,000,000$
Plus: Federal Historic Tax Credits 20% of Hard & Soft Costs (less 20%) 8,053,410$ Plus: New Market Tax Credits 39% of Hard Cost (less 20%) 12,483,713$ Plus: State Historic Credits 20% of Hard & Soft Cost (less 20%) 8,053,410$ Plus: PV of Parking Income 1,420,000$
Less Total Costs (50,333,814)$
Less: Profit 12.0% of cost (6,040,058)$
Residual Land Value 4,636,661$
Rounded 4,600,000$
Indicated Land Value per Land SF 58.02$
Indicated Building Value Per GBA 75.38$
Land Residual Analysis - Paint Shop
LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET192 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Remaining Central Shop Buildings

The following are the necessary inputs for development:

Net Operating Income Estimate: These buildings are estimated to be a combination of office and retail tenants. An allocation of 25% retail and 75% office is forecast. A market of $36.00 per square foot, triple net for the retail and $45.00 per square foo t, full service for the office is concluded in 3 years when the initial space is completed. This rent is slightly lower than the land residual office model as the Central Shop office space is considered slightly inferior to a new office project.

The buildings will have approximately open space, some of which is likely to be outdoor dining and entertainment area. We apply an Outdoor rental income of 3% retail building revenue. A 5% vacancy rate (only on spec space), $12.00 per square foot expenses for the office portion yields a net operating income of $6,036,323.

Capitalized Value: Sales of higher quality office and retail low 6.0% range. A 6.25% capitalization rate is deemed appropriate for historic renovated retail /office project in the Railyards . The estimated market value of a stabilized retail project is estimated to be approximately $ 517 per square foot.

Hard & Soft Development Cost: We have reviewed the developer’s development and renovation costs for the Paint Shop Building. Ther remaining buildings are less specialized and a renovation cost of $500 per square foot is concluded. This is inclusive of tenant improvement costs. We include a 20% contingency or $108 per square foot. Total soft and indirect cost are estimated to be approximately 33% of hard costs. The total development costs are estimated to be $ 801 per square foot.

Residual Land Value: The final step is to deduct the development cost and profit to indicate a residual land value estimate. Entrepreneurial profit is estimated to be 12% of total development costs. The project will likely qualify for Historic Tax Credits (State and Federal) and New Market Tax Credits. Federal Historic Tax Credits are estimated at 20% of hard and soft costs, l ess 20% for issuance and closing costs.

State Historic Tax Credits are estimated at 20% of hard and soft costs, less 20% for issuance and closing costs. New Market Tax Credits are estimated at 39% of hard costs, less 20% for issuance and closing costs. A land residual estimate of $ 12,300,000 or $37.40 per square foot of land or $ 65.84 per square foot of building area is indicated.

Shown on the following page is the residual results for the remaining Central Shop Buildings . The highlighted cells indicate major inputs to the analysis.

LAND RESIDUAL ANALYSIS – DRV LOTS – WEST OF 7TH STREET193 RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL Parcel Size 7.55 328,878
Density - FAR 0.6
Gross Building Area 186,807
Net Rentable Area 186,807
Pro-Forma
Income SF $/SF/Yr
Potential Office Income
Speculative - Retail - NNN 16,417 36.00$ 591,012$
Speculative - Office - Full Service 170,390 45.00$ 7,667,550$ Outdoor Rentals @3% 247,757$
Total 8,506,319$
Less: V/C Loss - Speculative Space 5% (425,316)$
Effective Gross Income 8,081,003$
Less: Expenses for Office Full Service $12 (2,044,680)$ Net Operating Income 6,036,323$
Capitalization Rate 6.25%
Market Value As Stabilized 96,581,167$
Value per SF 517.01$
Rounded 97,000,000$
Hard Costs SF Cost/SF
Construction & TI Cost 186,807 500.00$ 93,403,500$
Contingency 20.0% 100.00$ 18,680,700$
Total Hard Construction Cost 600.00$ 112,084,200$
Soft Cost
Indirect Costs 10.0% 11,208,420$
Financing 4.0% 4,483,368$
Development Fees $34.00 6,351,438$
Development Overhead 5.0% 5,604,210$
Rent Loss 24 months 8,258,562$
Lease Commissions 4.0% 5 year lease 1,651,712$
Total Soft Cost 33.5% 37,557,710$
Total Costs 801.05$ per GBA 149,641,910$
Market Value As Stabilized 97,000,000$
Plus: Federal Historic Tax Credits 20% of Hard & Soft Costs (less 20%) 23,942,706$ Plus: New Market Tax Credits 39% of Hard Cost (less 20%) 34,970,270$ Plus: State Historic Credits 20% of Hard & Soft Cost (less 20%) 23,942,706$ Less Total Costs (149,641,910)$
Less: Profit 12.0% of cost (17,957,029)$
Residual Land Value 12,256,742$
Rounded 12,300,000$
Indicated Land Value per Land SF 37.40$
Indicated Building Value Per GBA 65.84$
Land Residual Analysis - Remaining Central Shops
LAND VALUE CONCLUSIONS – DRV – WEST OF 7TH STREET 194
RAILYARDS COMMUNITY FACILITIES DISTRICT NO. 2018-01 APPRAISAL LAND VALUE CONCLUSIONS – DRV – WEST OF 7 TH STREET
Benchmark land values estimates for each of the property use classifications were estimated in the Sales Comparison Approach. Land Residual Analysis was completed as secondary support for value and given lower weight. The following is a summary of these conclusions:

Sacramento City CouncilAugust 23, 2022

Sacramento City Council
August 23, 2022