CLEVELAND-CUYAHOGA COUNTY PORT AUTHORITY Cultural Facility Revenue and Refunding Bonds, Series 2018 (Playhouse Square Foundation Project)

SUPPLEMENT DATED JUNE 5, 2018 TO PRELIMINARY OFFICIAL STATEMENT DATED MAY 21, 2018

$80,000,000* CLEVELAND-CUYAHOGA COUNTY PORT AUTHORITY Cultural Facility Revenue and Refunding Bonds, Series 2018 (Playhouse Square Foundation Project)

This Supplement supplements the Preliminary Official Statement, dated May 21, 2018, relating to the captioned bonds. Capitalized words and terms not otherwise defined in this Supplement have the meaning given to them in the Preliminary Official Statement. The information contained in this Supplement should be read in conjunction with the information contained in the Preliminary Official Statement.

The Preliminary Official Statement is supplemented and amended as follows:

1. The paragraph under the caption SECURITY AND SOURCES OF PAYMENT—Debt Service Coverage Ratio; Liquidity Covenant on page 9 is deleted and replaced with the following:

The Loan Agreement contains covenants of the Borrower with respect to debt service coverage, liquidity, insurance, litigation, taxes and certain other matters. Specifically, the Borrower has covenanted to set rates and charges for its facilities, services and products so that the Long-Term Debt Service Coverage Ratio, calculated at the end of each fiscal year, will not be less than 1.20 for such prior fiscal year. If the Borrower fails to meet the Long-Term Debt Service Coverage Ratio, it must retain a consultant and follow the consultant’s recommendations to the extent permitted by law and consistent with its status as a tax-exempt organization. If the Borrower follows the consultant’s recommendations, the Long-Term Debt Service Coverage Ratio requirement will be deemed to have been met so long as the ratio is greater than 1.00. In addition, the Borrower has covenanted to maintain no less than 50 Days Cash on Hand as of each June 30 and December 31, measured on a trailing 12-month period ending on each calculation date. So long as any of the Bonds remains outstanding, the Borrower will be required to comply with the terms of the provisions of the Loan Agreement. See APPENDIX C under THE AGREEMENT – Debt Service Coverage Ratio and – Liquidity Covenant.

2. On page A-20, the following is inserted at the end of the subcaption Key Financial Ratios—Debt Service Coverage Ratio:

The following table sets forth the historical and pro forma debt service coverage ratio of the Foundation:

* Preliminary, subject to change.

Historical and Pro Forma Debt Service Coverage Audited Financial Statements Pro Forma FYE June 30th: 2015 2016 2017 2018 2019 2020 2021 2022

Unrestricted Revenues 1 $ 76,740,443 $ 81,346,148 91,443,585$ $ 86,539,841 $ 91,147,368 $ 94,794,005 $ 98,609,001 $ 102,600,357

Operating Expenses 1 74,482,430 79,474,769 84,881,921 71,944,993 75,029,360 78,425,217 81,980,200 85,701,943

Less: Depreciation and Amortization Expense (14,488,472) (14,618,168) (14,348,378) - - - - - Interest Expense (4,222,840) (3,767,053) (3,872,949) - - - - - Adjusted Operating Expenses 55,771,118 61,089,548 66,660,594 71,944,993 75,029,360 78,425,217 81,980,200 85,701,943

Income Available for Debt Service $ 20,969,325 $ 20,256,600 24,782,991$ $ 14,594,848 $ 16,118,008 $ 16,368,788 $ 16,628,801 $ 16,898,414

Existing Facilities Debt Service 2,3 $ 7,818,149 7,110,940$ 5,812,793$ 3,415,447$ 385,569$ $ 386,382 387,207$ $ 378,864

Proposed Debt Service for 2018 Bonds - - - - 3,903,726 4,049,975 5,195,600 5,195,350

Debt Service for Existing Facilities and Series 2018 Bonds $ 7,818,149 7,110,940$ 5,812,793$ 3,415,447$ 4,289,295$ $ 4,436,357 5,582,807$ $ 5,574,214

Coverage for Existing Facilities and Series 2018 Bonds 2.68x 2.85x 4.26x 4.27x 3.76x 3.69x 2.98x 3.03x

Estimated Debt Service for Bank Loan 4,5 $ - -$ -$ -$ -$ $ 1,393,209 3,808,410$ $ 3,954,167

Debt Service for Existing Facilities, Series 2018 Bonds, and Bank Loan$ 7,818,149 7,110,940$ 5,812,793$ 3,415,447$ 4,289,295$ $ 5,829,566 9,391,217$ $ 9,528,381

Coverage for Existing Facilities, Series 2018 Bonds, and Bank Loan 2.68x 2.85x 4.26x 4.27x 3.76x 2.81x 1.77x 1.77x

(1) Foundation projections for Fiscal Years 2018 - 2022. (2) Historical (Fiscal Years 2013 - 2017) and pro forma (Fiscal Year 2018) Debt Service "Existing Facilities Debt Service" based on "Required Principal Payments" from the table above. (3) Pro forma "Existing Facilities Debt Service" includes PDDC, Ohio Energy, Fairfield Loans, Wyndham (2018 only), and three City of Cleveland forgivable loans desribed in Appendix B-1. (4) Interest amount paid during initial term of the Bank Loan is based upon a draw schedule provided by the development team. It is anticipated that there will be no draws during first 12 months. (5) Foundation guarantee is eliminated upon takeout of the Bank Loan with permanent financing (i.e. after construction and stabilization).

3. The definition of “Capital Addition” on page C-2 is deleted in its entirety.

4. The following definition is added to page C-5:

“Long-Term Indebtedness” means all obligations for borrowed money incurred or assumed by the Borrower, for an original term, or renewable at the option of the Borrower for a period from the date originally incurred, longer than one year.

5. The first paragraph under Debt Service Coverage Ratio on page C-19 is deleted and replaced with the following:

The Borrower covenants to set rates and charges for their facilities, services and products such that the Long-Term Debt Service Coverage Ratio, calculated at the end of each Fiscal Year, will not be less than 1.20 for such prior Fiscal Year. 6. In all other respects, the Preliminary Official Statement is unchanged. This Supplement, the Appendices, and the front portion of the Preliminary Official Statement together constitute the entire Preliminary Official Statement.

This Preliminary Official Statement and information contained in it are subject to change, completion or amendment without notice. These Bonds may not be sold and offers to buy may not be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy and there shall not be any sale of the Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, qualification or exemption under the securities laws of that jurisdiction. available fordeliverythroughDTC onoraboutJune___2018. Patton Boggs(US)LLP,andforthePort Authority byitscounsel,Wilkerson &AssociatesCo.,LPA.ItisexpectedthattheBondswillbe matters willbepasseduponfortheUnderwritersbytheircounsel, Calfee,Halter&GriswoldLLP,fortheBorrowerbyitscounsel,Squire “Underwriters”), subjecttothereceiptofapprovinglegal opinionofSquirePattonBoggs(US)LLP,BondCounsel.Certainlegal for itself,TheHuntingtonInvestmentCompanyd/b/a CapitalMarketsSMandPNCMarketsLLC(collectively,the the BondsbeforeconsideringapurchaseofBonds.SeeCERTAININVESTMENTCONSIDERATIONSANDRISK FACTORS. SUBDIVISION OFTHESTATEFORPAYMENTBOND SERVICECHARGES. EXCISES ORTAXESLEVIEDBYTHEPORTAUTHORITY, STATEORTHETAXINGAUTHORITYOFANYOTHERPOLITICAL MUNICIPALITY OROTHERLOCALAGENCYOFTHESTATE. THE HOLDERSOFBONDSWILLNOTHAVERIGHTTO OR TAXINGPOWEROFTHEPORTAUTHORITY,STATEOHIO(THE“STATE”)ANYPOLITICALSUBDIVISION, REPRESENT ORCONSTITUTEAGENERALOBLIGATION,BONDEDINDEBTEDNESS,PLEDGEOFTHE CREDIT BONDS —RedemptionPriortoMaturity. THE BONDS—Denomination,Payment,theBondsmaybeissuableindenominationsof$5,000andintegralmultiplesthereof. denominations of$100,000andanyintegralmultiple$5,000inexcessthereof.Upontheoccurrencecertaineventsdescribed under Interest ontheBondsispayableJune1andDecember1,commencing2018.Thewillbeinitially issuedin Interest each on Trustee the by transmitted be will interest Payment Datetotheregisteredownerasofrecorddateprecedingthatinterestpaymentdate,allmorefullydescribed herein. and Ohio, Cleveland, in Trustee the of office trust corporate designated BONDS —Book-Entry-OnlySystemandAPPENDIXE. See certificates. bond of delivery physical receive not will Bonds the of purchasers and Participants, Indirect or Participants DTC Bonds willbeissuableonlyunderthebook-entrysystemmaintainedbyDTCthroughbrokersanddealerswhoare,oract through, nominee ofTheDepositoryTrustCompany,NewYork,York(“DTC”),whichwillactassecuritiesdepositoryfortheBonds. The Loan AgreementbetweenthePortAuthorityandBorrower. a under Borrower, the to available sources and revenues all from “Borrower”), (the corporation nonprofit Ohio an Foundation, Square Revenues pledgedbythePortAuthorityunderTrustAgreement,whichincludeLoanPaymentsrequiredtobemade Playhouse Building, and(d)payingcertainissuancecostsinconnectionwiththeofBonds.TheBondswillbepayable fromthe Bonds”), (c) prepaying a portion of a loan entered into by the Borrower and its affiliate in 2016 to finance renovations to the Idea Center Authority’s CulturalFacilityRevenueandRefundingBonds,Series2014(PlayhouseSquareFoundationProject)(the“Refunded 2014 portion ofthecosts2018ProjectdescribedunderTHEPROJECTANDPLANOFFINANCE,(b)currentlyrefundingPort Port Authority and U.S. Bank National Associationastrustee (the “Trustee”).The Bonds are issued for the purposes of (a) paying a Authority (the“PortAuthority”)issuedpursuanttoaTrustIndenturedatedasofJune1,2018“TrustAgreement”),betweenthe Square FoundationProject)(the“Bonds”),when,asandifissued,willbespecialobligationsoftheCleveland-CuyahogaCountyPort Dated: DateofDelivery NEW ISSUE—BOOK-ENTRYONLY * Preliminary, subjecttochange. H of financial institutions, and the net worth base of the corporate franchise tax. Interest on the Bonds may be subject to certain to subject be federal taxesimposedonlyoncertaincorporations.Foramorecompletediscussionofthetaxaspects,seeTAXMATTERS. may Bonds the on Interest tax. franchise corporate the of base worth net the and institutions, financial of estate tax,thedomesticinsurancecompanydealersinintangiblestaxleviedonbasisoftotalequitycapital any profit made on the sale, exchange or other disposition of, the Bonds are exempt from all Ohio state and local taxation, except the corporate alternative minimum tax (applicable only to taxable years beginning before January 1, 2018), and (ii) interest on, and the Bondsisincludedincalculationofacorporation’sadjustedcurrentearningsforpurposesof,andthusmaybesubjectto, income taxpurposes,andisnotanitemofpreferenceforpurposesthefederalalternativeminimumtax;however,intereston certain covenantsandtheaccuracyofrepresentations,interestonBondsisexcludedfromgrossincomeforfederal read theentireOfficial Statementtoobtaininformation essentialtothemaking ofaninformedinvestmentdecision.

untington The Bondsareofferedwhen,asandifissuedbythePortAuthority andacceptedbyKeyBancCapitalMarketsInc.,asrepresentative An investmentintheBondsinvolvescertainrisks.Prospective purchasersshouldevaluatetherisksandmeritsofaninvestmentin THE BONDS,WHEN,ASANDIFISSUED,WILLBESPECIALOBLIGATIONSOFPORTAUTHORITY NOT The Bondsaresubjecttomandatory,optionalandextraordinaryredemptionpriormaturityasdescribedunder THE Principal ofandpremium,ifany,ontheBondswillbepayabletoregisteredowneruponpresentationsurrenderat the The BondsareissuableasregisteredbondswithoutcouponsandinitiallywillbeonlyinthenameofCede&Co., as The $80,000,000*Cleveland-CuyahogaCountyPortAuthorityCulturalFacilityRevenueandRefundingBonds,Series2018(Playhouse In theopinionofSquirePattonBoggs(US)LLP,BondCounsel,underexistinglaw(i)assumingcontinuingcompliancewith The dateofthis Official StatementisJune__,2018, andtheinformationspeaks onlyasofthatdate. This cover page contains certain information for quick reference only. It is not a summary of this Official Statement. Investors must C apital M

CLEVELAND-CUYAHOGA COUNTY PORT AUTHORITY Cultural FacilityRevenueandRefundingBonds,Series2018 arkets PRELIMINARY OFFICIAL STATEMENT DATED MAY 21, 2018

MATURITY SCHEDULEONINSIDECOVERPAGE (Playhouse SquareFoundationProject) $80,000,000* RATINGS: Standard&Poor’s“BB+” PNC CAPITALMARKETS LLC Due: AsShownontheInsideCover See RATING THE

MATURITY SCHEDULE* $80,000,000 CLEVELAND-CUYAHOGA COUNTY PORT AUTHORITY Cultural Facility Revenue and Refunding Bonds, Series 2018 (Playhouse Square Foundation Project)

$______Serial Bonds

Maturity Date Principal Interest Rate Yield Price CUSIP©† No. December 1 Amount 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2051 2052 2053

$______Term Bonds $______, _.___% Term Bond Due December 1, 20__, Yield: _.___%, Price: ___.___, CUSIP: ______

* Preliminary, subject to change. † CUSIP © is a registered trademark of the American Bankers Association. CUSIP Global Services is managed on behalf of the American Bankers Association by S&P Global Market Intelligence. CUSIP data appearing on the inside cover of this Official Statement is assigned by CUSIP Global Services, an independent company not affiliated with the Port Authority, the Borrower or the Underwriters. The Port Authority, the Borrower and the Underwriters are not responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness. These CUSIP numbers may also be subject to change after the issuance of the Bonds identified on the cover and the inside cover, and none of the Port Authority, the Borrower or the Underwriters have agreed to, and there is no duty or obligation to, update this Official Statement to reflect any change or correction to the CUSIP numbers.

REGARDING THIS OFFICIAL STATEMENT

This Official Statement does not constitute an offering of any security, other than the offering by the Cleveland-Cuyahoga County Port Authority (the “Port Authority”) of its Cultural Facility Revenue and Refunding Bonds, Series 2018 (Playhouse Square Foundation Project) (the “Bonds”). No person has been authorized by the Port Authority, Playhouse Square Foundation (the “Borrower”) or the Underwriters to give any information or to make any representations with respect to the Bonds, other than those in this Official Statement. This Official Statement does not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of, the Bonds by any person in any jurisdiction in which it is unlawful to make such offer, solicitation or sale.

The information and descriptions in this Official Statement do not purport to be comprehensive or definitive. Statements regarding specific documents (including the Bonds), instruments and statutes are descriptions of selected provisions of and subject to the detailed provisions of such documents, instruments and statutes, respectively, and are qualified in their entirety be reference to the full text of each such document, instrument or statute. Copies of the documents will be on file with KeyBanc Capital Markets Inc. and will be furnished upon request. The Port Authority has furnished the information under the headings THE PORT AUTHORITY and ABSENCE OF MATERIAL LITIGATION as it pertains to the Port Authority.

The Underwriters have reviewed the information in this Official Statement in accordance with, and as a part of, their responsibilities to investors under the federal securities laws applied to the facts and circumstances of this transaction, but the Underwriters do not guaranty the accuracy or completeness of such information. The information and expressions of opinion in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement not any sale made under this Official Statement will, under any circumstances, give rise to any implication that there has been no change in the affairs of the Port Authority, the Borrower, or DTC since its date. This Official Statement has been approved by the Borrower and its use and distribution for the purposes set forth above has been authorized by the Borrower and the Port Authority.

U.S. Bank National Association, by acceptance of its duties as Trustee under the Indenture, has not reviewed this Official Statement and has made no representations as to the information contained in this Official Statement, including but not limited to, any representations as to financial feasibility or related activities.

The information and expressions of opinion in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale made under this Official Statement will, under any circumstances, create any implication that there has been no change in the affairs of the parties referred to above or any related parties since the date of this Official Statement. The Official Statement does not constitute a contract between the Port Authority, the Borrower, or any one or more of the purchasers or registered owners of the Bonds.

In connection with this offering, the Underwriters may overallot or effect transactions that stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.

The Bonds are exempt from registration under the Securities Act of 1933, as amended, and from registration under the securities laws of the State. No dealer, broker, salesman or other person has been authorized by the Port Authority, the Borrower or the Underwriters to give any information or to make any representations with respect to the Bonds, other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the Port Authority, the Borrower or the Underwriters. The information contained in this

Official Statement has been obtained from the Port Authority (with respect to the Port Authority), the Borrower, DTC and other sources that are believed to be reliable, but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation of the Underwriters.

This Official Statement has been prepared in connection with the original offering for sale of the Bonds.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS IN THIS OFFICIAL STATEMENT

Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “anticipate,” “budget,” or other similar words. Such forward-looking statements include, among others, certain statements under Management Discussion of Financial Results in APPENDIX A to this Official Statement and certain statements under CERTAIN INVESTMENT CONSIDERATIONS AND RISK FACTORS.

The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance, or achievements described to be materially difference from any future results, performance, or achievements expressed or implied by such forward-looking statements. Neither the Borrower nor any other party plans to issue any updates or revisions to those forward-looking statements if or when their expectations, or events, conditions, or circumstances upon which such statements are based occur.

TABLE OF CONTENTS Page

INTRODUCTION ...... 1 Purpose of this Official Statement ...... 1 The Bonds ...... 1 Security and Source of Payment ...... 2 Financial and Additional Covenants ...... 2 Continuing Disclosure ...... 2 Bondholders’ Risks ...... 2 Appendices and Underlying Documents ...... 2 THE PORT AUTHORITY ...... 3 THE BORROWER ...... 3 THE PROJECT AND PLAN OF FINANCE ...... 3 ESTIMATED SOURCES AND USES OF FUNDS ...... 4 THE BONDS ...... 5 General Description of the Bonds ...... 5 Denomination; Payment ...... 5 Redemption Prior to Maturity ...... 5 Book-Entry-Only System ...... 7 Replacement Bonds ...... 7 Books ...... 7 Transfer and Exchange ...... 8 Nonpresentment of Bonds ...... 8 SECURITY AND SOURCES OF PAYMENT ...... 8 Bond Reserve Fund ...... 8 Loan Payments ...... 9 Debt Service Coverage Ratio; Liquidity Covenant ...... 9 Special Obligations ...... 10 ENFORCEABILITY OF REMEDIES ...... 10 ANNUAL DEBT SERVICE REQUIREMENTS ...... 11 CERTAIN INVESTMENT CONSIDERATIONS AND RISK FACTORS ...... 12 Limited Obligations ...... 12 Tax-Exempt Status of the Borrower and the Bonds ...... 12 Changes in Federal Law ...... 13 Uncertainty of Revenues ...... 13 Gifts, Grants and Bequests ...... 13 Endowment ...... 14 Certain Matters Relating to Enforceability ...... 14 Marketability ...... 14 Bond Ratings ...... 14 Risks Factors Generally Affecting Performing Arts Venues ...... 14 Risk Factors Generally Affecting Real Properties ...... 15 Bankruptcy and Creditor's Rights; Limits on Claims ...... 16 ABSENCE OF MATERIAL LITIGATION ...... 16 ELIGIBILITY UNDER OHIO LAW FOR INVESTMENT ...... 17 TAX MATTERS ...... 17

APPROVAL OF LEGAL PROCEEDINGS ...... 20 CONTINUING DISCLOSURE ...... 21 Event Notices ...... 22 Failure to Comply ...... 22 Amendment of Continuing Disclosure Undertaking ...... 23 Past Compliance with the Rule ...... 23 CERTAIN RELATIONSHIPS ...... 23 RATING ...... 23 UNDERWRITING ...... 24 INDEPENDENT AUDITORS...... 24 MISCELLANEOUS ...... 24

APPENDICES A - Playhouse Square Foundation B - Playhouse Square Foundation Audited Consolidated Financial Statements as of and for the Years Ended June 30, 2017 and 2016 and June 30, 2016 and 2015 (with Report of Independent Auditors) C - Certain Defined Terms and Summary of Certain Provisions of the Trust Agreement and the Loan Agreement D - Proposed Form of Approving Opinion of Bond Counsel E - Book-Entry System

$80,000,000* CLEVELAND-CUYAHOGA COUNTY PORT AUTHORITY Cultural Facility Revenue and Refunding Bonds, Series 2018 (Playhouse Square Foundation Project)

INTRODUCTION

This Introduction is subject in all respects to the more complete information contained elsewhere in this Official Statement. The offering of the Bonds to potential investors is made only by means of this entire Official Statement. The order and placement of materials in this Official Statement, including appendices, are not to be deemed to be a determination of relevance, materiality, or relative importance. All capitalized terms used in this Official Statement that are not defined in this Official Statement shall have the meanings given to them in APPENDIX C — CERTAIN DEFINED TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE TRUST AGREEMENT AND THE LOAN AGREEMENT.

Purpose of this Official Statement

This Official Statement, including the cover and inside cover page, the table of contents and the Appendices, is provided to furnish information in connection with the issuance by the Cleveland-Cuyahoga County Port Authority (the “Port Authority”) of its $80,000,000* Cultural Facility Revenue and Refunding Bonds, Series 2018 (Playhouse Square Foundation Project) (the “Bonds”).

The Bonds

The Bonds are being issued pursuant to a Trust Indenture dated as of June 1, 2018 (the “Trust Agreement”), between the Port Authority and U.S. Bank National Association, as trustee (the “Trustee”). The Bonds will be issued for the purposes of (a) paying a portion of the costs of certain facilities of Playhouse Square Foundation (the “Borrower”) or one of its affiliates, described in more detail under THE PROJECT AND PLAN OF FINANCE (the “2018 Project”), (b) currently refunding the Port Authority’s outstanding Cultural Facility Revenue and Refunding Bonds, Series 2014 (Playhouse Square Foundation Project), currently outstanding in the principal amount of $24,300,000 (the “Refunded 2014 Bonds”), (c) prepaying a portion of a loan entered into by the Borrower and its affiliate in 2016 to finance renovations to the Idea Center Building, which loan is currently outstanding in the principal amount of $5,479,863 (“Refunded Loan”), (d) paying certain issuance costs in connection with the issuance of the Bonds, and (e) such other uses as are permitted under the Loan Agreement described below and Sections 4582.01 through 4582.20 and 9.98 through 9.983 of the Ohio Revised Code (collectively, the “Act”). The proceeds of the Bonds will be loaned to Playhouse Square Foundation, an Ohio nonprofit corporation (the “Borrower”), pursuant to a Loan Agreement dated as of June 1, 2018 (the “Loan Agreement”), between the Port Authority and the Borrower. Under the Loan Agreement, the Borrower is obligated to make Loan Payments from all revenues and sources available to it.

The Bonds will be dated the date of delivery and will mature on the dates and bear interest at the rates set forth on the inside cover page of this Official Statement. The Bonds will be subject to redemption prior to maturity as described under THE BONDS — Redemption Prior to Maturity.

* Preliminary, subject to change.

Security and Source of Payment

The Bonds are special obligations of the Port Authority and the Bond Service Charges on the Bonds will be payable from the Revenues, including the Loan Payments to be made by the Borrower under the Loan Agreement from all available revenues and sources and moneys held by the Trustee in the Bond Fund, the Bond Reserve Fund and the Project Fund under the Trust Agreement, as described under SECURITY AND SOURCES OF PAYMENT.

The Bonds are secured by the Trust Agreement, which grants to the Trustee a security interest in the Revenues as described under SECURITY AND SOURCES OF PAYMENT.

The Borrower is required by the Loan Agreement to make payments equal to the principal of and premium, if any, and interest on the Bonds, whether at maturity, upon acceleration or upon prior redemption (the “Bond Service Charges”). Bond Service Charges due on the Bonds will be required to be paid by the Borrower as loan payments from all available revenues and sources (the “Loan Payments”) under the Loan Agreement. The Borrower’s obligations to make Loan Payments will be evidenced by a promissory note of the Borrower dated as of June 1, 2018, in the same principal amount as the Bonds (the “Series 2018 Note”).

Financial and Additional Covenants

The Loan Agreement contains covenants of the Borrower, some of which are summarized in APPENDIX C. Those covenants include provisions with respect to debt service coverage, liquidity, insurance, taxes and certain other matters. See SECURITY AND SOURCES OF PAYMENT for a description of the debt service coverage ratio and liquidity covenant. So long as the Bonds remain outstanding, the Borrower is required to comply with those covenants.

Continuing Disclosure

The Borrower will undertake, pursuant to a Continuing Disclosure Agreement, to provide or cause to be provided, in accordance with the requirements of Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (a) the audited financial statements and certain annual information of the Borrower and (b) timely notice of the occurrence of certain material events with respect to the Bonds. The Port Authority shall have no liability to the owners of the Bonds or any other person with respect to continuing disclosure requirements. See CONTINUING DISCLOSURE.

Bondholders’ Risks

An investment in the Bonds involves certain risks. Prospective purchasers should evaluate the risks and merits of an investment in the Bonds before considering a purchase of the Bonds. See CERTAIN INVESTMENT CONSIDERATIONS AND RISK FACTORS for a discussion of certain of those risks.

Appendices and Underlying Documents

Brief descriptions of the Port Authority, the Borrower, the Project, the Bonds, the Loan Agreement, the Series 2018 Note and the Trust Agreement are included in this Official Statement. The descriptions of the Bonds, the Loan Agreement, the Series 2018 Note and the Trust Agreement in this Official Statement are qualified in their entirety by reference to each of those documents. The description of the Borrower consists of certain information provided by it (as set forth in APPENDIX A) and certain

of its audited financial statements (as set forth in APPENDIX B). All descriptions are further qualified in their entirety by reference to laws and principles of equity relating to or affecting generally the enforcement of creditors' rights. Copies of the above described documents are available for inspection during the initial offering period at the principal office of KeyBanc Capital Markets Inc., 127 Public Square, Cleveland, Ohio 44114 and thereafter at the corporate trust office of the Trustee.

THE PORT AUTHORITY

The Port Authority is a political subdivision and body corporate and politic, duly created and validly existing under the laws of the State of Ohio. The Port Authority was created pursuant to Section 4582.02 of the Ohio Revised Code in 1968 pursuant to legislation adopted and an agreement entered into by the City of Cleveland, Ohio and the County of Cuyahoga, Ohio. It was created for the purposes set forth in Chapter 4582 of the Ohio Revised Code, including, without limitation, owning, leasing and operating real property, issuing bonds and creating or preserving jobs and employment opportunities, and improving the economic welfare of its financing jurisdiction including Cuyahoga County, Ohio. In addition, the Port Authority is authorized to finance educational, cultural and housing facilities under the Act.

THE BORROWER

Founded in 1973, the Borrower is an Ohio nonprofit corporation located in Cleveland, Ohio, and is the country’s largest performing arts center outside New York City. The Borrower is Northeast Ohio’s home for touring Broadway shows, concerts, comedy, opera, dance and children’s programming. In addition, the Borrower owns approximately one million square feet of property and manages over 2.2 million square feet of property. The mission of the Borrower is to present and produce a wide variety of quality performing arts, advance arts education and create a destination that is a superior location for entertainment, business and residential living, thereby strengthening the economic vitality of the region.

See APPENDIX A—PLAYHOUSE SQUARE FOUNDATION for a more complete description of the Borrower.

THE PROJECT AND PLAN OF FINANCE

The proceeds from the sale of the Bonds will be used to provide funds for the purposes, together with other available funds, of (a) paying costs of financing the 2018 Project, including the reimbursement for costs of the 2018 Project that have already been incurred, (b) currently refunding the Refunded 2014 Bonds, (c) prepaying a portion of the Refunded Loan, (d) paying certain issuance costs in connection with the issuance of the Bonds, and (e) such other uses as are permitted under the Loan Agreement and the Act (collectively, the “Project”).

The 2018 Project is expected to cost approximately $139 million and consists of the construction, equipping and improvement of facilities of the Borrower or one of its affiliates, constituting “port authority facilities” as defined in the Act. The 2018 Project specifically includes the construction of a 34-story residence tower and associated parking garage at the corner of Euclid Avenue and 17th Street in Cleveland, Ohio, which will include approximately 318 apartments, 530 parking spaces and 22,000 square feet of resident amenities. The Borrower broke ground on the 2018 Project in early April 2018. See APPENDIX A—THE PROJECT for additional information.

The proceeds of the Refunded 2014 Bonds and the Refunded Loan were used to finance the costs of certain office buildings, theatres, parking facilities, outdoor improvements and related facilities.

The Project will be financed with (a) the proceeds of the Bonds, (b) an approximately $65,000,000 construction loan provided by KeyBank National Association and The Huntington National Bank, along with additional syndicate members (the “Bank Loan”), (c) a $1,000,000 grant from the State, (d) a $1,000,000 loan from the City of Cleveland, Ohio, $200,000 of which is forgivable, and (e) available funds of the Borrower. The Bank Loan is expected to close in late June 2018. The Borrower’s obligations to make loan payments under the Bank Loan will be secured by a note issued pursuant to a loan agreement and a mortgage on the 2018 Project. The Bonds are not secured by a mortgage on any property of the Borrower. In addition, the Bank Loan may contain covenants and provisions as the Borrower and the lenders determine. The Bank Loan is also payable from all available revenues and sources of the Borrower.

The proceeds of the Bonds that will be used to currently refund the Refunded 2014 Bonds will be deposited, together with other available funds, in the Refunded Bonds Account of the Project Fund created under the Indenture. The Trustee will then transfer all money in the Refunded Bonds Account to the bond fund created under the indenture for the Refunded 2014 Bonds for the redemption of the Refunded 2014 Bonds on the closing date of the Bonds.

The proceeds of the Bonds that will be used, together with other funds of the Borrower, to prepay the Refunded Loan will deposited in the Refunded Loan Account of the Project Fund created under the Indenture and transmitted to the agent of the lenders providing the Refunded Loan for prepayment on or about the closing date of the Bonds.

ESTIMATED SOURCES AND USES OF FUNDS*

The following are the estimated sources and uses of funds to be derived from the sale of the Bonds, the Bank Loan, and other available funds:

Sources of Funds Par Amount of Bonds Net Original Issue Premium/Discount Borrower Contribution for Bond Reserve Fund Borrower Contribution

Total Sources of Funds

Uses of Funds Payment of Certain Costs of the 2018 Project Refunding of the Refunded 2014 Bonds Prepayment of the Refunded Loan Deposit to Bond Reserve Fund Costs of Issuance(1)

Total Uses of Funds

(1) Includes Underwriters’ discount, legal fees, trustee fees, rating agency fees, printing and other costs of issuance.

* Preliminary, subject to change.

THE BONDS

The following is a summary of certain terms and provisions of the Bonds. Reference is made to the Bonds and the provisions with respect to the Bonds in the Trust Agreement and the Loan Agreement for the detailed terms and provisions of those documents.

General Description of the Bonds

The Bonds will be issued in the aggregate principal amount of $80,000,000*, will be dated the date of their initial issuance and delivery, and will mature as shown on the inside cover page, subject to prior redemption as provided in the Trust Agreement and as described below. The Bonds will bear interest at the rates shown on the inside cover page from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, then from the dated date of the Bonds, until payment of the principal is made or provided for, whether at maturity, upon prior redemption, acceleration or otherwise. Interest on the Bonds will be paid each June 1 and December 1, commencing December 1, 2018 (the “Interest Payment Dates”). Interest on the Bonds will be calculated on the basis of a 30-day month and a 360-day year.

Denomination; Payment

The Bonds will be issued as fully registered bonds without coupons in denominations of $100,000 and any integral multiple of $5,000 in excess thereof; provided, however, that if any of the Bonds are subsequently rated in a rating category not lower than “BBB-” or “Baa3” (as applicable) by S&P Global Ratings, Moody’s Investors Service, Inc. or any other nationally-recognized statistical rating service, then those Bonds will be issuable in denominations of $5,000 and integral multiples thereof (“Authorized Denominations”). Interest is to be paid by check or draft mailed to the person in whose name that Bond is registered (the “Holder” or “Bondholder”) on the registration books (the “Register”) maintained by the Trustee as registrar (the “Registrar”) at the close of business on the 15th day of the calendar month next preceding each Interest Payment Date (the “Regular Record Date”). Principal of and premium, if any, on the Bonds will be payable when due upon presentation and surrender of the Bonds at the designated corporate trust office of the Trustee.

If and to the extent there is a default in the payment of interest on any Bonds on any Interest Payment Date, that interest in default will cease to be payable to the person who was the Holder of that Bond as of the close of business on the applicable Regular Record Date. When money becomes available for the payment of the defaulted interest, the Trustee will establish a special record date for the payment of that defaulted interest (the “Special Record Date”), which will not be more than 15 nor fewer than 10 days prior to the date of the proposed payment, and the Trustee will cause notice of the proposed payment and Special Record Date to be mailed by first class mail, postage prepaid, to each Holder at its address as it appears on the Register not fewer than 10 days before the Special Record Date. Such notice having been so mailed, the defaulted interest will be payable to the persons who are the Holders of the Bonds at the close of business on that Special Record Date.

Redemption Prior to Maturity*

The Bonds are subject to redemption as described below:

* Preliminary, subject to change.

Mandatory Sinking Fund Redemption. The Bonds due December 1, 20____ are subject to mandatory sinking fund redemption prior to maturity, on December 1 in the following years in the following principal amounts (with principal amount due on December 1, 20___ being the amount remaining to be paid at stated maturity), at a redemption price equal to 100% of the principal amount to be redeemed, plus interest accrued to the redemption date:

Year Amount

*Maturity

Optional Redemption. The Bonds maturing on or after December 1, 20__ are subject to optional redemption by the Port Authority, at the direction of the Borrower, prior to maturity in whole or in part on any business day, on or after December 1, 20___, at a redemption price equal to 100% of the principal amount redeemed, plus interest accrued thereon to the redemption date.

Extraordinary Optional Redemption. The Bonds are subject to extraordinary redemption prior to maturity by and at the option of the Port Authority, at the direction of the Borrower, at a redemption price of 100% of the principal amount redeemed, plus interest accrued to the redemption date, (a) in whole at any time upon the occurrence of any of the events described in Section 6.2 of the Loan Agreement relating to damage or destruction of the Project, the taking of all or substantial portion of the Project by eminent domain or certain changes in law affecting the enforceability of the Loan Agreement or the operation of the Project, or (b) in part at any time upon the occurrence of events permitting such partial redemption as described in Section 6.2 of the Loan Agreement relating to the taking of a portion of the Project.

Mandatory Redemption Upon a Determination of Taxability. Upon the occurrence of a Determination of Taxability (as defined in APPENDIX C), the Bonds are subject to mandatory redemption in whole at a redemption price equal to 100% of the outstanding principal amount of the Bonds, plus interest accrued to the redemption date, on a date that is not later than 45 days following receipt by the Trustee of notice of the Determination of Taxability. The occurrence of a Determination of Taxability with respect to the Bonds will not constitute an Event of Default under the Indenture and the sole remedy of holders of the Bonds will be mandatory redemption of the Bonds.

Selection of Bonds for Redemption. If less than all Bonds outstanding are to be redeemed, the Bonds are to be selected for redemption in inverse order of the maturities of the Bonds. If less than all the Bonds of a single maturity are to be redeemed, the Bonds from within a maturity are to be selected by the Trustee in any manner which the Trustee may determine, provided that the Trustee must not redeem any portion of a Bond that would result in a Bond which is less than an Authorized Denomination. If less than all of an outstanding Bond of one maturity in a book-entry system is to be redeemed, the Trustee must give notice to the Depository and the selection of beneficial interest in that Bond to be redeemed will be at the sole discretion of the Depository and its participants.

Notice of Redemption. The Trustee will mail by first class mail or electronically to the Holders of all Bonds to be redeemed, at the address shown on the Register, notice of redemption at least 30 days and not more than 60 days prior to the redemption date (except in the case of a mandatory redemption upon a determination of taxability, such notice must be given at least five days and not more than 15 days prior to the redemption date). Each notice of redemption of the Bonds will identify the Bonds or portions thereof to be redeemed and will state, among other things, the date of the issue of the Bonds, CUSIP numbers of

Bonds being redeemed, redemption price, the redemption date, the place where the redemption price is payable and that on the redemption date such Bonds called for redemption (provided funds for the redemption of such Bonds are on deposit at the place of payment) will cease to bear interest. In addition, the notice of redemption may provide that the redemption is conditioned upon the deposit with the Trustee of funds sufficient and available to redeem the Bonds on the redemption date. The failure of a Holder to receive notice by mailing or any defect in that notice regarding any Bond will not affect the validity of the proceedings for the redemption of the Bonds.

Book-Entry-Only System

The Depository Trust Company, New York, New York (DTC), will act as securities depository for the Bonds. The Bonds will be initially issued and issuable only as one fully-registered Bond for each maturity registered in the name of Cede & Co., as partnership nominee of DTC, or such other name as may be requested by an authorized representative of DTC. Payment of the principal of and interest on the Bonds will be made directly to DTC or its nominee, Cede & Co., by the Trustee. See Book-Entry-Only System under this section and APPENDIX E.

Payment of principal of and interest on the Bonds will be made directly to DTC or its nominee, Cede & Co., by the Trustee. The ownership of one fully-registered Bond for each maturity in the aggregate principal amount of such maturity will be registered in the name of Cede & Co., as nominee for DTC.

So long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, references in this Official Statement to the Holders of the Bonds or the Bondholders shall mean Cede & Co. and do not mean the Beneficial Owners. The Trustee will treat Cede & Co. as the only Holder of Bonds for all purposes under the Trust Agreement.

For a discussion of the book-entry system and the replacement of Bonds if the book-entry system is discontinued, see APPENDIX E.

Replacement Bonds

If any Depository determines not to continue to act as a Depository for the Bonds for use in a book-entry system the Port Authority may attempt to have established a securities depository/book-entry system relationship with another qualified Depository under the Trust Agreement. If the Port Authority does not or is unable to do so, the Port Authority and the Trustee, after the Trustee has made provision for notification of the owners of beneficial interests in the Bonds by appropriate notice to the then Depository, shall permit withdrawal of the Bonds from the Depository, and authenticate and deliver Bond certificates in fully registered form to the assignees of the Depository or its nominee. Such withdrawal, authentication and delivery shall be at the cost and expense, including costs of printing or otherwise preparing, and delivering, such replacement Bonds, of the Borrower.

Books

The Port Authority shall cause books for the registration of the Bonds as provided in the Trust Agreement to be kept by the Registrar. The Trustee is designated under the Trust Agreement as the initial Registrar. The Registrar shall maintain and keep, at the designated office of the Registrar, books for the registration and registration of transfer of the Bonds, which at all reasonable times shall be open for inspection by the Port Authority, the Trustee and the Borrower. Upon presentation of any Bond entitled to registration or registration of transfer at the designated office of the Registrar, the Registrar shall register or register the transfer of the Bond in the registration books. The Registrar shall make all necessary

provisions to permit the exchange or registration of transfer of Bonds at the designated office of the Registrar.

Transfer and Exchange

The Bonds shall be transferred and exchanged as provided in the Trust Agreement, provided that none of the Port Authority, the Registrar or any authenticating agent will be required to make any exchange or transfer of a Bond selected for redemption, in whole or in part.

Nonpresentment of Bonds

In the event that any Bond is not presented for payment when the principal thereof becomes due in whole or in part, either at stated maturity or by redemption, or check for interest is uncashed, if money sufficient to pay the principal then due of that Bond or if such check has been made available to the Trustee for the benefit of its Holder, all liability of the Port Authority to that Holder for such payment of the principal then due on the Bonds or of such check or draft thereupon shall cease and be discharged completely. Thereupon, it shall be the duty of the Trustee to hold that money, without liability for interest thereon, in a separate account in the Bond Fund for the exclusive benefit of the Holder, who shall be restricted thereafter exclusively to that money for any claim of whatever nature on its part under the Trust Agreement or on, or with respect to, the principal then due of that Bond or of such check. Any money that shall be so held by the Trustee and that remains unclaimed by the Holder of a Bond not presented for payment or check not cashed for a period of five years after the due date thereof, shall be paid to the Borrower. Thereafter, the Holder of that Bond shall look only to the Borrower for payment and then only to the amounts so received by the Borrower without any interest thereon, and the Trustee shall not have any responsibility with respect to that money.

SECURITY AND SOURCES OF PAYMENT

Bond Service Charges due on the Bonds are payable equally and ratably solely from (a) the Loan Payments paid by the Borrower under the Loan Agreement, (b) all other moneys received or to be received by the Port Authority or the Trustee in respect of repayment of the Loan, (c) all moneys and investments in the Bond Fund, (d) all amounts on deposit in the Bond Reserve Fund, (e) any amounts on deposit in the Project Fund, and (f) all income and profit from the investment of the foregoing (collectively, the “Revenues”). The payment of Bond Service Charges shall be secured by the assignment to the Trustee by the Port Authority of all of the Port Authority's rights to, and interest in, the Revenues, the Loan Agreement (except for the Unassigned Issuer Rights) and the Series 2018 Note. The Borrower is obligated to make Loan Payments from all available revenues and sources of the Borrower, on a parity with the Bank Loan.

Bond Reserve Fund

The Trust Agreement establishes the Bond Reserve Fund for the Bonds to be funded at the time of delivery of the Bonds. The Bond Reserve Fund is to be funded in an amount equal to the Bond Reserve Requirement (as defined in APPENDIX C) for the Bonds. The Bond Reserve Fund will be held by the Trustee, and applied solely as provided in the Trust Agreement if money in the Bond Fund is insufficient to pay Bond Service Charges on the Bonds. Any payments to be made by the Borrower to restore the Bond Reserve Fund are to be made directly to the Trustee for deposit to the Bond Reserve Fund. See APPENDIX C under THE INDENTURE – Bond Reserve Fund. The Bond Reserve Fund will be initially funded by a deposit by the Borrower from its own funds.

Loan Payments

In accordance with the Loan Agreement, the Borrower must, on or before the first day of each month (each a “Loan Payment Date”), commencing July 1, 2018, pay directly to the Trustee Loan Payments in the following amounts:

(a) the greater of (i) one-sixth of the interest to accrue on the Bonds on the next Interest Payment Date, calculated on the basis of a 360-day year of 30-days each, and (ii) the amount of money necessary for the Trustee to effect interest payments on the Bonds when due and payable, as required by the Indenture if such date is before the next Loan Payment Date;

(b) the greater of (i) one-twelfth of the principal amount of the Bonds to be paid by mandatory sinking fund redemption or at maturity within the next twelve months, and (ii) the amount of money required to pay the principal of the Bonds to be mandatorily redeemed or paid at maturity, as required by the Indenture, if such date is before the next Loan Payment Date;

In addition, the Loan Agreement requires the Borrower to pay the following Loan Payments directly to the Trustee:

(a) any amount required by the Indenture to be deposited in the Bond Reserve Fund under the Indenture to cause the balance in that Fund to at least equal the corresponding Bond Reserve Requirement;

(b) any amount required by the Indenture to be deposited in the Bond Fund for the mandatory redemption of the Bonds upon a Determination of Taxability; and

(c) the aggregate amount which may be required to pay all amounts payable under the Loan Agreement in the event that all Loan Payments are accelerated in accordance with the Loan Agreement.

Further, the Borrower agreed in the Loan Agreement to make any Loan Payments on any other date on which any Bond Service Charges on the Bonds are due and payable, whether at maturity, upon acceleration, call for redemption or otherwise in an amount equal to those Bond Service Charges.

Debt Service Coverage Ratio; Liquidity Covenant

The Loan Agreement contains covenants of the Borrower with respect to debt service coverage, liquidity, insurance, litigation, taxes and certain other matters. Specifically, the Borrower has covenanted to set rates and charges for its facilities, services and products so that the Long-Term Debt Service Coverage Ratio, calculated at the end of each fiscal year, will not be less than 1.20 for such prior fiscal year. If the Borrower, however, incurs long-term indebtedness to acquire or construct a capital improvement, the long-term debt service requirement with respect thereto is not required to be taken into account in calculating the Long-Term Debt Service Coverage Ratio until the first fiscal year beginning after the occupation or utilization or of such capital improvement unless the long-term debt service requirement with respect thereto is required to be paid from sources other than the proceeds of such long-term indebtedness prior to such fiscal year. If the Borrower fails to meet the Long-Term Debt Service Coverage Ratio, it must retain a consultant and follow the consultant’s recommendations to the extent permitted by law and consistent with its status as a tax-exempt organization. If the Borrower follows the consultant’s recommendations, the Long-Term Debt Service Coverage Ratio requirement will

be deemed to have been met so long as the ratio is greater than 1.00. In addition, the Borrower has covenanted to maintain no less than 50 Days Cash on Hand as of each June 30 and December 31, measured on a trailing 12-month period ending on each calculation date. So long as any of the Bonds remains outstanding, the Borrower will be required to comply with the terms of the provisions of the Loan Agreement. See APPENDIX C under THE AGREEMENT – Debt Service Coverage Ratio and – Liquidity Covenant.

Remedies

Under existing law, the remedies specified by the Trust Agreement, Loan Agreement and the Series 2018 Note may not be readily available or may be limited. A court may decide not to order the specific performance of the covenants contained in those documents. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by State and federal laws, rulings and decisions affecting remedies and by bankruptcy, reorganization or other laws affecting the enforcement of creditors' rights or the application of general principles of equity. See ENFORCEABILITY OF REMEDIES.

Special Obligations

The Bonds, when, as and if issued, will be special obligations of the Port Authority and will not represent or constitute a general obligation, bonded indebtedness, or a pledge of the general credit or taxing power of the Port Authority, the State or any political subdivision, municipality or other local agency of the State. The Holders of the Bonds will not have the right to have excises or taxes levied by the Port Authority, the State or the taxing authority of any other political subdivision of the State for the payment of Bond Service Charges.

ENFORCEABILITY OF REMEDIES

Enforcement of the security interest in the Revenues and the remedies specified by the Trust Agreement, Loan Agreement and the Series 2018 Note may be limited by the application of federal bankruptcy laws or other laws relating to creditors' rights generally. A court may decide not to order the specific performance of the covenants contained in these documents.

The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by State and federal laws, rulings and decisions affecting remedies and by bankruptcy, reorganization or other laws affecting the enforcement of creditors' rights generally.

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ANNUAL DEBT SERVICE REQUIREMENTS*

The following table sets forth, for each fiscal year ending June 30, the estimated annual amounts required to be made available in each year for payment of the debt service on the Bonds and other indebtedness of the Borrower.

Series 2018 Bonds Total Estimated Debt Other Debt Service Requirements Year Principal Interest(a) Total Service(a)(b) 2019 $385,569 2020 1,779,591 2021 4,195,617 2022 4,333,031 2023 4,576,944 2024 4,599,688 2025 4,574,118 2026 4,575,611 2027 4,579,323 2028 4,598,190 2029 4,396,706 2030 4,221,133 2031 4,221,304 3032 4,235,358 2033 4,219,101 2034 4,218,119 2035 4,218,082 2036 4,233,846 2037 4,216,536 2038 4,217,811 2039 4,217,625 2040 4,227,482 2041 4,220,777 2042 4,218,608 2043 4,220,356 2044 4,224,492 2045 4,217,436 2046 4,218,653 2047 4,220,874 2048 4,223,653 2049 4,217,120 2050 4,219,247 2051 4,220,604 2052 4,218,660 Totals 139,681,266

(a) Interest and debt service columns include de minimus rounding adjustments. (b) Excludes debt service on the Refunded 2014 Bonds and a portion of the Refunded Loan. Includes the portion of the Refunded Loan not being refunded by the Bonds and estimated debt service on the Bank Loan and other indebtedness of the Borrower.

* Preliminary, subject to change.

CERTAIN INVESTMENT CONSIDERATIONS AND RISK FACTORS

The following is a discussion of certain risks that could affect payments to be made by the Borrower with respect to the Bonds. Such discussion is not, and is not intended to be, exhaustive and should be read in conjunction with all other parts of this Official Statement and should not be considered as a complete description of all risks that could affect such payments. Prospective purchasers of the Bonds should analyze carefully the information contained in this Official Statement, including the appendices, and additional information in the form of the complete documents summarized in this Official Statement including APPENDIX C, copies of which are available as described in this Official Statement.

Limited Obligations

The Bonds are special obligations of the Port Authority, payable solely from the Revenues, and the payment of Bond Service Charges shall be secured by the assignment to the Trustee by the Port Authority of all of the Port Authority's rights to, and interests in, the Revenues, the Loan Agreement (except for the Unassigned Issuer Rights) and the Series 2018 Note.

The Bonds do not and shall not pledge the general credit or taxing power of the Port Authority or of the State or of any political subdivision, municipality or other local agency of the State and shall not constitute a general obligation or bonded indebtedness of the Port Authority, the State or any political subdivision of the State. Except for the use of Revenues as provided in the Trust Agreement, neither the general resources of the Port Authority nor of those of the State shall be required to be used, nor the general credit or taxing power of the Port Authority pledged, for the performance of any duty under the Bond Legislation, the Bonds or the Trust Agreement. The Holders of Bonds do not have the right to have excises or taxes levied by the Port Authority or by the State or by the taxing authority of any other political subdivision for the payment of Bond Service Charges, and the Port Authority is obligated to pay the Bonds only from the Revenues. See SECURITY AND SOURCES OF PAYMENT.

Tax-Exempt Status of the Borrower and the Bonds

The Internal Revenue Service (the “IRS”) has determined that the Borrower is an organization described in Section 501(c)(3) of the Code, and accordingly is exempt from federal income taxation. As a tax-exempt organization, the Borrower is subject to a number of requirements affecting its operations. In recent years the IRS has devoted more resources to auditing organizations described in Section 501(c)(3) of the Code (“Tax-Exempt Organizations”), particularly with respect to certain business arrangements entered into by such Tax-Exempt Organizations. The Borrower believes it has not undertaken transactions of the type receiving greater scrutiny from the IRS, and the Borrower has not been notified of any violations that would jeopardize its tax-exempt status. However, no assurance can be given that the IRS will not pursue an action against the Borrower on account of any particular arrangements.

The IRS and state and local taxing authorities may undertake audits and reviews of the operations of Tax-Exempt Organizations with respect to the generation of unrelated business taxable income (“UBTI”). The Borrower may participate in activities that generate UBTI. An investigation or audit could lead to a challenge that could result in taxes, interest and penalties with respect to UBTI and, in some cases, ultimately could affect the tax-exempt status of the Borrower, as well as the exclusion from gross income for federal income tax purposes of the interest payable on the Bonds.

The failure of the Borrower to remain qualified as a Tax-Exempt Organization could cause the inclusion of interest on the Bonds in gross income for federal income tax purposes retroactive to the 12

date of issuance of the Bonds. See TAX MATTERS. The Trust Agreement does not provide for the payment of any additional interest or penalty in the event of the taxability of the interest on the Bonds.

The Code imposes a number of requirements that must be satisfied for interest on obligations such as the Bonds to be excludable from gross income for federal income tax purposes. These requirements include, among other things, limits on the use of bond proceeds, investment earnings of bond proceeds, a requirement that, in some instances, certain investment earnings on bond proceeds be paid periodically to the United States Treasury, and a requirement that the Port Authority file an information report with the IRS. The Borrower has agreed in the Loan Agreement that it will comply with such requirements. Future failure by the Borrower to comply with the requirements provided in the Code and in related regulations, rulings and policies may result in the treatment of the interest on the Bonds as taxable, and in some cases retroactive to the date of issuance. The Port Authority has covenanted in the Indenture that it will do all things necessary, to the extent possible, to maintain the exclusion from gross income from federal income taxation of the interest on the Bonds. See TAX MATTERS.

Changes in Federal Law

From time to time, there are legislative proposals in the Congress that, if enacted, could alter or amend the federal tax matters referred to above or adversely affect the market value of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to bonds issued prior to enactment. Purchasers of the Bonds should consult their tax advisors regarding any pending or proposed tax legislation. The opinions expressed by Bond Counsel are based upon existing law as of the date of issuance and delivery of the Bonds, and Bond Counsel has expressed no opinion as of any date subsequent to the date of issuance and the delivery of the Bonds or with respect to any pending legislation.

Uncertainty of Revenues

As noted elsewhere, the Bonds will be payable solely from Loan Payments made by the Borrower under the Loan Agreement. The ability of the Borrower to make Loan Payments and to pay Bond Service Charges on the Bonds is dependent upon the generation by the Borrower of revenues in the amounts necessary to pay Bond Service Charges on the Bonds, as well as other operating and capital expenses. The realization of future revenues and expenses is subject to, among other things, the managerial capability of Borrower’s management, government regulation, and future economic and other conditions that are unpredictable and may affect revenues and payment of Bond Service Charges on the Bonds. No representation can be made or assurance can be provided that revenues will be realized by the Borrower at times or in amounts sufficient to make the required payments of Bond Service Charges on the Bonds.

Gifts, Grants and Bequests

The Borrower initiated a $100 million fundraising campaign to, among other things, renovate and maintain its theatres, increase its endowment, enhance community engagement and education programs, and establish a production fund. The Borrower has received approximately $95.3 million of pledges in support of the campaign, with approximately $38.8 million of pledges received in cash. There can be no assurance that the remaining amounts pledged but not yet paid will be received by the Borrower, or that such amounts will be received at the times or in the amounts anticipated. See APPENDIX A—FUNDRAISING AND ENDOWMENT.

Endowment

The Borrower invests the endowment funds pursuant to an investment policy. A portion of the endowment funds are subject to restrictions requiring that the principal be maintained and invested in perpetuity and that the income be utilized, either for donor-specified purposes or general corporate purposes. See APPENDIX A—FUNDRAISING AND ENDOWMENT. All investments contain a degree of risk. Such risks include, but are not limited to, a lower rate of return than expected, loss of market value, and loss or delayed receipt of principal. The endowment funds, and the investment earnings thereon, are a significant source of revenue for the Borrower.

Certain Matters Relating to Enforceability

The remedies available upon a default under the Trust Agreement, the Loan Agreement or the Series 2018 Note will, in many respects, be dependent upon judicial actions, which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including the United States Bankruptcy Code and state laws concerning the use of assets of charitable organizations, the remedies specified in the Trust Agreement, the Loan Agreement or the Series 2018 Note may not be readily available or may be limited. The various legal opinions to be delivered in connection with the issuance of the Bonds will be expressly subject to the qualification that the enforceability of the Trust Agreement, the Loan Agreement, the Series 2018 Note and other legal documents is limited by bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the rights of creditors and by the exercise of judicial discretion in appropriate cases.

Marketability

The Underwriters may engage in secondary market transactions with respect to the Bonds but they are under no obligation to do so. The Underwriters are not obligated to repurchase Bonds from any owner of the Bonds. There is no assurance that a secondary market for the Bonds will develop or that owners of the Bonds who wish to sell such Bonds before maturity will be able to do so.

Bond Ratings

There is no assurance that one or more ratings assigned to the Bonds at the time of issuance will not be lowered or withdrawn at any time, which could adversely affect the market price for and marketability of the Bonds. See RATING.

Risks Factors Generally Affecting Performing Arts Venues

The following factors, which are not all-inclusive, may adversely affect the operations of theatres, such as the theatres owned and operated by the Borrower, to an extent that cannot be determined at this time:

(a) reduced demand for the shows, plays and other events at Borrower’s facilities arising from a change in demographics or from adverse or declining economic conditions in areas from which the Borrower draws a portion of its demand and revenues;

(b) changes in law affecting the deductibility of charitable donations;

(c) failure to sustain the Borrower’s current national, regional and local reputation as a leading producer and presenter of the performing arts;

(d) damages from fire, flood or other natural disasters, deliberate acts of destruction or various facilities system failures;

(e) cost increases without corresponding increases in revenue that could result from occurrences such as increases in salaries, wages, and fringe benefits of theatre employees and inflation;

(f) competition from theatres located elsewhere in the region, some of which may offer lower ticket prices than those charged by the Borrower, which may decrease the demand for the productions at Borrower’s facilities;

(g) future legislation and regulations affecting nonprofit corporations involving in the performing arts and their tax-exempt status could adversely affect operations of the Borrower; and

(h) labor union contracts with the actors, directors, producers, stage hands and other members of the production team are periodically negotiated and could result in strikes or temporary work stoppages that could affect the ability of the Borrower to continue the presentation of one or more of its productions or could result in an increase in the Borrower’s operating costs.

Risk Factors Generally Affecting Real Properties

There are many risks associated with any investment and management of real estate which may have a substantial bearing on the profitability of the Borrower. Those risks include, but are not limited to:

(a) adverse changes in national, regional and local economic climate, including reductions in property values;

(b) local conditions, including over-supply of, or reduction in demand for, similar real property and apartment units as owned, operated or managed by the Borrower;

(d) changes in market rental rates;

(e) the need to periodically pay for costs to repair, renovate and re-let space;

(f) the ability of tenants and resident theatre companies to pay rent;

(g) competition from other available properties to attract and retain tenants;

(h) changes in operating costs, including costs for maintenance and insurance;

(i) population decreases;

(j) changes in laws and governmental rules and regulations, including those governing usage, zoning, environment and taxes;

(k) acts of God and physical and weather-related damage to properties;

(l) the risk of functional obsolescence of properties over time; and

(m) bankruptcy of tenants.

Bankruptcy and Creditor's Rights; Limits on Claims

Bankruptcy, insolvency and similar laws and usual equity principles may limit any attempt by the Trustee to enforce remedies against or seek payment from the property of the Borrower. While the Borrower is not subject to involuntary bankruptcy as a Tax-Exempt Organization, the Borrower does have the right voluntarily to file a petition in bankruptcy. Bankruptcy proceedings by the Borrower could have adverse effects on Bondholders that might reduce or delay payments on the Bonds. Federal bankruptcy law also permits adoption of a reorganization plan without the approval of the Bondholders if they are provided with the benefit of their original security or the “indubitable equivalent.” The effect of these and other provisions of federal bankruptcy laws cannot be predicted and may be significantly affected by judicial interpretation.

Courts may restrict the ability of the Trustee to compel the liquidation of the property of the Borrower to pay a judgment against it for payment of the Bonds because it is a nonprofit corporation carrying out charitable purposes.

In the event of bankruptcy of the Borrower, there is no assurance that certain covenants, including tax covenants, contained in the Bond Documents or other documents would survive. Accordingly, the Borrower as a debtor in possession or a bankruptcy trustee appointed by a bankruptcy court could take action that might adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes.

There exists common law authority under certain statutes for courts to terminate the existence of a nonprofit corporation or undertake supervision of its affairs on various grounds, including a finding that such corporation has insufficient assets to carry out its stated charitable purposes. Such court action may arise on the court's own motion or pursuant to a petition by the Ohio Attorney General or other persons who have interests different from those of the general public, pursuant to the common law and statutory power to enforce charitable trusts and to see to the application of their funds to their intended charitable uses.

ABSENCE OF MATERIAL LITIGATION

To the knowledge of the appropriate officials of the Port Authority and the Borrower, there is no litigation or administrative action or proceeding pending or threatened, restraining or enjoining, or seeking to restrain or enjoin, the issuance and delivery of the Bonds, the Trust Agreement, the Loan Agreement or the Series 2018 Note or contesting or questioning the validity of the Bonds or the proceedings and authority under which the Bonds have been authorized and are to be issued or delivered, or the pledge or application of any money or security provided for the payment of the Bonds under the Trust Agreement, the Loan Agreement or the Series 2018 Note. A no-litigation certificate to such effect with respect to the Bonds will be delivered to the Underwriters at the time of the original delivery of the Bonds.

The Borrower from time to time may be a party to various legal proceedings seeking damages or injunctive relief which are generally incidental to its operations, and unrelated to the Bonds, the security for the Bonds, or the Project. The administration of the Borrower does not believe that the outcome of any such litigation will materially adversely affect the financial position, operations or cash flows of the Borrower. 16

ELIGIBILITY UNDER OHIO LAW FOR INVESTMENT

Under the authority of Section 4582.18 of the Ohio Revised Code and to the extent investments of the following are subject to Ohio law, the Bonds are lawful investments of banks and trust companies with approval of the superintendent of banks, of savings and loan associations, of the bond retirement funds or the sinking funds of municipal corporations, boards of education, port authorities, and counties, of the administrator of workers' compensation, of the retirement board of the State teachers retirement system, of the retirement board of the State public school employees retirement system, of the retirement board of the public employees retirement system, and of domestic life insurance companies and domestic insurance companies other than life, an shall be acceptable as security for the deposit of public money.

TAX MATTERS

In the opinion of Squire Patton Boggs (US) LLP, Bond Counsel, under existing law: (i) interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and is not an item of tax preference for purposes of the federal alternative minimum tax; however, interest on the Bonds is included in the calculation of a corporation’s adjusted current earnings for purposes of, and thus may be subject to, the corporate alternative minimum tax (applicable only to taxable years beginning before January 1, 2018); and (ii) interest on, and any profit made on the sale, exchange or other disposition of, the Bonds are exempt from all Ohio state and local taxation, except the estate tax, the domestic insurance company tax, the dealers in intangibles tax, the tax levied on the basis of the total equity capital of financial institutions, and the net worth base of the corporate franchise tax. Bond Counsel expresses no opinion as to any other tax consequences regarding the Bonds.

The opinion on federal tax matters will be based on and will assume the accuracy of certain representations and certifications, and continuing compliance with certain covenants, of the Port Authority and the Borrower contained in the transcript of proceedings and that are intended to evidence and assure the foregoing, including that the Bonds are and will remain obligations the interest on which is excluded from gross income for federal income tax purposes. Failure of the Borrower to maintain its status as an organization described in Section 501(c)(3) of the Code, or to operate the facilities financed by the Bonds in a manner that is substantially related to the Borrower’s exempt purpose under Section 513(a) of the Code, may cause interest on the Bonds to be included in gross income retroactively to the date of the issuance of the Bonds. Bond Counsel will not independently verify the accuracy of the Port Authority’s and the Borrower’s certifications and representations or the continuing compliance with the Port Authority’s and the Borrower’s covenants.

The opinion of Bond Counsel is based on current legal authority and covers certain matters not directly addressed by such authority. It represents Bond Counsel’s legal judgment as to exclusion of interest on the Bonds from gross income for federal income tax purposes but is not a guaranty of that conclusion. The opinion is not binding on the Internal Revenue Service (“IRS”) or any court. Bond Counsel expresses no opinion about (i) the effect of future changes in the Code and the applicable regulations under the Code or (ii) the interpretation and the enforcement of the Code or those regulations by the IRS.

The Code prescribes a number of qualifications and conditions for the interest on state and local government obligations to be and to remain excluded from gross income for federal income tax purposes, some of which require future or continued compliance after issuance of the obligations. Noncompliance with these requirements by the Port Authority or the Borrower may cause loss of such status and result in the interest on the Bonds being included in gross income for federal income tax purposes retroactively to 17

the date of issuance of the Bonds. The Borrower and, subject to certain limitations, the Port Authority have each covenanted to take the actions required of it for the interest on the Bonds to be and to remain excluded from gross income for federal income tax purposes, and not to take any actions that would adversely affect that exclusion. After the date of issuance of the Bonds, Bond Counsel will not undertake to determine (or to so inform any person) whether any actions taken or not taken, or any events occurring or not occurring, or any other matters coming to Bond Counsel’s attention, may adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or the market value of the Bonds.

Interest on the Bonds is included in the calculation of a corporation’s adjusted current earnings for purposes of, and thus may be subject to, the federal corporate alternative minimum tax (applicable only to taxable years beginning before January 1, 2018). In addition, interest on the Bonds may be subject to a federal branch profits tax imposed on certain foreign corporations doing business in the United States and to a federal tax imposed on excess net passive income of certain S corporations. Under the Code, the exclusion of interest from gross income for federal income tax purposes may have certain adverse federal income tax consequences on items of income, deduction or credit for certain taxpayers, including financial institutions, certain insurance companies, recipients of Social Security and Railroad Retirement benefits, those that are deemed to incur or continue indebtedness to acquire or carry tax- exempt obligations, and individuals otherwise eligible for the earned income tax credit. The applicability and extent of these and other tax consequences will depend upon the particular tax status or other tax items of the owner of the Bonds. Bond Counsel will express no opinion regarding those consequences.

Payments of interest on tax-exempt obligations, including the Bonds, are generally subject to IRS Form 1099-INT information reporting requirements. If a Bond owner is subject to backup withholding under those requirements, then payments of interest will also be subject to backup withholding. Those requirements do not affect the exclusion of such interest from gross income for federal income tax purposes.

Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Port Authority, the Borrower or the owners of the Bonds regarding the tax status of interest thereon in the event of an audit examination by the IRS. The IRS has a program to audit tax-exempt obligations to determine whether the interest thereon is includible in gross income for federal income tax purposes. If the IRS does audit the Bonds, under current IRS procedures, the IRS will treat the Port Authority as the taxpayer and the beneficial owners of the Bonds will have only limited rights, if any, to obtain and participate in judicial review of such audit. 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 other obligations presenting similar tax issues, may affect the market value of the Bonds.

Prospective purchasers of the Bonds upon their original issuance at prices other than the respective prices indicated on the inside cover of this Official Statement, and prospective purchasers of the Bonds at other than their original issuance, should consult their own tax advisors regarding other tax considerations such as the consequences of market discount, as to all of which Bond Counsel expresses no opinion.

Risk of Future Legislative Changes and/or Court Decisions

Legislation affecting tax-exempt obligations is regularly considered by the United States Congress and may also be considered by the State legislature. Court proceedings may also be filed, the outcome of which could modify the tax treatment of obligations such as the Bonds. There can be no assurance that legislation enacted or proposed, or actions by a court, after the date of issuance of the 18

Bonds will not have an adverse effect on the tax status of interest or other income on the Bonds or the market value or marketability of the Bonds. These adverse effects could result, for example, from changes to federal or state income tax rates, changes in the structure of federal or state income taxes (including replacement with another type of tax), or repeal (or reduction in the benefit) of the exclusion of interest on the Bonds from gross income for federal or state income tax purposes for all or certain taxpayers.

For example, the recent federal tax legislation that was enacted on December 22, 2017 reduces corporate tax rates, modifies individual tax rates, eliminates many deductions, repeals the corporate alternative minimum tax (for taxable years beginning after December 31, 2017) and eliminates tax- exempt advance refunding bonds, among other things. Additionally, investors in the Bonds should be aware that future legislative actions may increase, reduce or otherwise change (including retroactively) the financial benefits and the treatment of all or a portion of the interest on the Bonds for federal income tax purposes for all or certain taxpayers. In all such events, the market value of the Bonds may be affected and the ability of holders to sell their Bonds in the secondary market may be reduced. The Bonds are not subject to special mandatory redemption, and the interest rates on the Bonds are not subject to adjustment, in the event of any such change in the tax treatment of interest on the Bonds.

Investors should consult their own financial and tax advisors to analyze the importance of these risks.

Original Issue Discount / Original Issue Premium

Certain of the Bonds (“Discount Bonds”) may be offered and sold to the public at an original issue discount (“OID”). OID is the excess of the stated redemption price at maturity (the principal amount) over the “issue price” of a Discount Bond. The issue price of a Discount Bond is the initial offering price to the public (other than to bond houses, brokers or similar persons acting in the capacity of underwriters or wholesalers) at which a substantial amount of the Discount Bonds of the same maturity is sold pursuant to that offering. For federal income tax purposes, OID accrues to the owner of a Discount Bond over the period to maturity based on the constant yield method, compounded semiannually (or over a shorter permitted compounding interval selected by the owner). The portion of OID that accrues during the period of ownership of a Discount Bond (i) is interest excluded from the owner’s gross income for federal income tax purposes to the same extent, and subject to the same considerations discussed above, as other interest on the Bonds, and (ii) is added to the owner’s tax basis for purposes of determining gain or loss on the maturity, redemption, prior sale or other disposition of that Discount Bond. The amount of OID that accrues each year to a corporate owner of a Discount Bond is included in the calculation of the corporation’s adjusted current earnings for purposes of, and thus may be subject to, the federal corporate alternative minimum tax (applicable only to taxable years beginning before January 1, 2018). A purchaser of a Discount Bond in the initial public offering at the issue price (described above) for that Discount Bond who holds that Discount Bond to maturity will realize no gain or loss upon the retirement of that Discount Bond.

Certain of the Bonds (“Premium Bonds”) may be offered and sold to the public at a price in excess of their stated redemption price at maturity (the principal amount). That excess constitutes bond premium. For federal income tax purposes, bond premium is amortized over the period to maturity of a Premium Bond, based on the yield to maturity of that Premium Bond (or, in the case of a Premium Bond callable prior to its stated maturity, the amortization period and yield may be required to be determined on the basis of an earlier call date that results in the lowest yield on that Premium Bond), compounded semiannually. No portion of that bond premium is deductible by the owner of a Premium Bond. For purposes of determining the owner’s gain or loss on the sale, redemption (including redemption at maturity) or other disposition of a Premium Bond, the owner’s tax basis in the Premium Bond is reduced 19

by the amount of bond premium that is amortized during the period of ownership. As a result, an owner may realize taxable gain for federal income tax purposes from the sale or other disposition of a Premium Bond for an amount equal to or less than the amount paid by the owner for that Premium Bond. A purchaser of a Premium Bond in the initial public offering who holds that Premium Bond to maturity (or, in the case of a callable Premium Bond, to its earlier call date that results in the lowest yield on that Premium Bond) will realize no gain or loss upon the retirement of that Premium Bond.

Owners of Discount and Premium Bonds should consult their own tax advisors as to the determination for federal income tax purposes of the existence of OID or bond premium, the determination for federal income tax purposes of the amount of OID or bond premium properly accruable or amortizable in any period with respect to the Discount or Premium Bonds, other federal tax consequences in respect of OID and bond premium, and the treatment of OID and bond premium for purposes of state and local taxes on, or based on, income.

APPROVAL OF LEGAL PROCEEDINGS

Legal matters incident to the issuance of the Bonds and with regard to the tax-exempt status of the interest thereon (see TAX MATTERS) are subject to the legal opinion of Squire Patton Boggs (US) LLP, Bond Counsel. A signed copy of that opinion, dated and speaking only as of the date of the original delivery of the Bonds, will be delivered to the Underwriters.

The proposed text of the legal opinion is set forth in APPENDIX D. The legal opinion to be delivered may vary from that text if necessary to reflect facts and law on the date of delivery. The opinion will speak only as of its date, and subsequent distribution of it by recirculation of the Official Statement or otherwise shall create no implication that Bond Counsel has reviewed or expresses any opinion concerning any of the matters referred to in the opinion subsequent to its date.

While Bond Counsel has participated in the preparation of portions of this Official Statement, it has not been engaged to confirm or verify, and expresses and will express no opinion as to, the accuracy, completeness or fairness of any statements in this Official Statement, or in any other reports, financial information, offering or disclosure documents or other information pertaining to the Borrower or the Bonds that may be prepared or made available by the Borrower, the Underwriters, or otherwise to the bidders for or holders of the Bonds or others.

In addition to rendering the legal opinion, Bond Counsel will assist in the preparation of and advise the Port Authority and the Borrower concerning documents for the bond transcript.

Certain legal matters in connection with the Bonds will be passed upon for the Borrower by Squire Patton Boggs (US) LLP, for the Underwriters by Calfee, Halter & Griswold LLP and for the Port Authority by Wilkerson & Associates Co., LPA. The Borrower has retained Calfee, Halter & Griswold LLP, from time to time, on matters unrelated to the issuance and sale of the Bonds.

CONTINUING DISCLOSURE

The Port Authority has determined that no financial or operating data concerning the Port Authority is material to an evaluation of the offering of the Bonds or to any decision to purchase, hold or sell the Bonds and the Port Authority will not provide any such information. The Borrower has undertaken all responsibilities for continuing disclosure to owners of the Bonds as described below and in the Continuing Disclosure Agreement, and the Port Authority shall not have any liability to the owners of the Bonds or any other person with respect to Securities and Exchange Commission Rule 15c2-12 (the “Rule”) adopted under the Exchange Act.

In accordance with the Rule and so long as the Bonds are outstanding, the Borrower has agreed in a Continuing Disclosure Agreement to be delivered on the date of delivery of the Bonds, to provide the following information:

(a) Annual Information for each fiscal year (beginning with fiscal year 2018) not later than December 31 after the close of the Borrower’s fiscal year (or, if that is not a business day, the next business day), consisting of annual financial information and operating data of the type included in this Official Statement under the captions THEATRE—General, FUNDRAISING AND ENDOWMENT—Historical Donations and –Endowment, FINANCIAL AND OPERATING INFORMATION—Key Financial Ratios and – Investments, and Tables A-1 through A-6 and A-8 in the attached APPENDIX A. The Borrower expects to directly provide the Annual Information.

(b) Audited financial statements of the Borrower for fiscal year 2018 and each subsequent fiscal year not later than December 31 after the closing of Borrower’s fiscal year (or, if that is not a business day, the next business day), provided, however, that if audited financial statements of the Borrower are not available by such date, they will be provided as soon as they become available. The Borrower expect such financial statements to be prepared and available separately from the Annual Information. All such financial information must be prepared using generally accepted accounting principles, provided, however, that the Borrower may change the accounting principles used for the preparation of such financial information so long as Borrower includes as information provided to the public a statement to the effect that different accounting principles are being used, stating the reason for such change and how to compare the financial information provided by the differing financial accounting principles.

(d) Notice of the failure of the Borrower to provide the Annual Information or the audited financial statements by the dates required.

The Annual Information, notices of the enumerated events, and notices of the failure to timely provide the reports will be filed in electronic format as prescribed by the Municipal Securities Rulemaking Board (the “MSRB”) by the Borrower with the Electronic Municipal Market Access system (“EMMA”) of the MSRB. These covenants have been made in order to assist the Underwriters and registered brokers, dealers, and municipal securities dealers in complying with the requirements of the Rule.

Event Notices

The Borrower will provide to the MSRB through the EMMA system notice of the occurrence of any of the following events with respect to the Bonds, within the meaning of the Rule, within 10 business days of the occurrence of the event:

1. Principal and interest payment delinquencies

2. Non-payment related defaults, if material

3. Unscheduled draws on any debt service reserves reflecting financial difficulties

4. Unscheduled draws on credit enhancements reflecting financial difficulties

5. Substitution of credit or liquidity providers, or their failure to perform

6. Adverse tax opinions, the issuance by the IRS of proposed or final determinations of taxability, Notice of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax-exempt status of the Bonds

7. Modifications to rights of registered owners or Beneficial Owners, if material

8. Bond calls, if material, and tender offers (except for mandatory scheduled redemptions not otherwise contingent upon the occurrence of an event)

9. Defeasances

10. Release, substitution, or sale of property securing repayment of the Bonds, if material

11. Rating changes

12. Bankruptcy, insolvency, receivership or similar event of the obligated person

13. 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, or the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material

14. Appointment of a successor or additional trustee or the change of name of a trustee, if material

Failure to Comply

If the Borrower fails to comply with any provision of the Continuing Disclosure Agreement, where such failure continues for 30 days following a notice of default given in writing to the Borrower by a beneficiary thereof (defined as the Port Authority, the Underwriters or the bondholders), any such beneficiary may, and at the request of the Underwriters or the holders of at least 25% aggregate principal amount of outstanding Bonds, the non-defaulting party shall, enforce the obligations of the Borrower under the Continuing Disclosure Agreement; provided, however, the sole remedy available in any 22

proceeding to enforce the Continuing Disclosure Agreement shall be an action in mandamus, for specific performance or similar remedy to compel performance. A failure by the Borrower to comply with the Continuing Disclosure Agreement will not constitute an event of default under the Trust Agreement or the Loan Agreement.

Amendment of Continuing Disclosure Undertaking

The Borrower may amend the Continuing Disclosure Agreement and any provision of the Continuing Disclosure Agreement may be waived, if such amendment or waiver is supported by an opinion of nationally recognized bond counsel or counsel expert in federal securities laws acceptable to the Borrower to the effect that such amendment or waiver would not, in and of itself, cause the undertakings in the Continuing Disclosure Agreement to violate the Rule if such amendment or waiver had been effective on the date of the Continuing Disclosure Agreement but taking into account any subsequent change in or official interpretation of the Rule, as well as change in circumstance.

Past Compliance with the Rule

The Borrower has not entered into, and was not required to enter into, any continuing disclosure agreements in connection with its outstanding indebtedness. Accordingly, the Borrower has not failed to comply, in all material respects, with any continuing disclosure agreement in the past five years.

CERTAIN RELATIONSHIPS

David S. Goodman serves on the Board of Trustees of the Borrower and is a partner of Squire Patton Boggs (US) LLP, which firm is acting as Bond Counsel in connection with the issuance of the Bonds.

Brent D. Ballard serves as on the Board of Trustees of the Borrower and is a partner of Calfee, Halter & Griswold LLP, which firm is acting as counsel to the Underwriters in connection with the issuance of the Bonds.

Amy G. Brady, Chief Information Officer of KeyCorp., is the Vice Chair of Development on the Foundation’s Board of Trustees.

The Borrower has existing investment, commercial banking and other relationships with affiliates of KeyBanc Capital Markets Inc., PNC Capital Markets LLC and The Huntington Investment Company, including but not limited to the Bank Loan. In addition, KeyBank N.A., PNC Bank, National Association and The Huntington National Bank have historically and continue to support the Borrower philanthropically and through event sponsorships.

RATING

The Bonds will be assigned a rating of “BB+” by S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC. The Borrower furnished to such rating agency the information contained in this Official Statement and certain other materials and information about the Borrower. Generally, rating agencies base their ratings on such materials and information, as well as separate investigations, studies and assumptions.

A rating reflects only the view of the agency giving such rating and is not a recommendation to buy, sell or hold the Bonds. An explanation of the significance of such rating may only be obtained from the rating agency. Such rating may be changed at any time, and no assurance can be given that it will not 23

be revised downward or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds. The Borrower undertakes no responsibility either to bring to the attention of the owners of the Bonds any proposed change in or withdrawal of such rating or to oppose any such revision or withdrawal.

UNDERWRITING

KeyBanc Capital Markets, Inc., The Huntington Investment Company d/b/a/ Huntington Capital MarketsSM, and PNC Capital Markets LLC have agreed, subject to certain conditions, to purchase the Bonds from the Port Authority at a purchase price of $______(which amount is equal to the principal amount of the Bonds, plus net original issue premium of $______and less an Underwriters' discount of $______). The Underwriters may offer and sell the Bonds to certain dealers (including dealers depositing such Bonds into investment trusts) and others at prices lower than the public offering prices stated on the inside cover page. The public offering price set forth on the inside cover page may be changed after the initial offering by the Underwriters. The Bond Purchase Agreement provides that the Underwriters will purchase all the Bonds if any are purchased, and requires the Borrower to indemnify the Underwriters and the Port Authority against losses, claims, damages and liabilities arising out of any incorrect statements or information including the omission of material facts, contained in this Official Statement pertaining to the Borrower and other specified matters.

PNC Capital Markets LLC and PNC Bank, National Association are both wholly-owned subsidiaries of PNC Financial Services Group, Inc. PNC Capital Markets LLC is not a bank, and is a distinct legal entity from PNC Bank, National Association. PNC Bank, National Association has other banking and financial relationships, including credit relationships, with the Borrower.

INDEPENDENT AUDITORS

The consolidated financial statements of the Borrower and its subsidiaries as of and for the years ended June 30, 2017 and 2016 and June 30, 2016 and 2015 appended as APPENDIX B to this Official Statement, have been audited by RSM US LLP, independent auditors, as stated in their reports appearing in APPENDIX B.

The unaudited summary financial information of the Borrower and its subsidiaries as of and for the nine-month period ended March 31, 2018 and 2017 included in APPENDIX A have been prepared by management of the Borrower and have not been audited or reviewed by any firm of independent auditors and, accordingly, no opinion on such information is expressed in this Official Statement.

MISCELLANEOUS

The Borrower has furnished all information in this Official Statement relating to the Borrower. Any statements herein involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact, and no representation is made that any of such statements will be realized. Neither this Official Statement nor any statement which may have been made orally or in writing is to be construed as a contract with the beneficial owner of any Bond.

All of the summaries of the provisions of the Bonds, the Trust Agreement, the Loan Agreement and the Series 2018 Note set forth in this Official Statement, and all other summaries and references to such other materials not purporting to be quoted in full, are only brief outlines of certain provisions of those documents and are made subject to all of the detailed provisions if those documents, to which

reference is made for further information, and do not purport to be complete statements of any or all such provisions of such documents.

To the extent that any statements made in this Official Statement involve matters of opinion of estimates, whether or not expressly stated to be such, they are made as such and not as representations of fact or certainty and no representation is made that any of those statements have been or will be realized. Information in this Official Statement has been derived by the Borrower from official and other sources and is believed by the Borrower to be accurate and reliable. Information other than that obtained from official records of the Borrower has not been independently confirmed or verified by the Borrower and its accuracy is not guaranteed.

The information set forth in this Official Statement, including the Appendices, should not be construed as representing all of the conditions affecting the Borrower.

A complete transcript of proceedings and no-litigation certificate (as described above) will be delivered by the Port Authority upon delivery of the Bonds to the Underwriters. At that time, the Borrower will furnish to the Underwriters a certificate relating to the accuracy and completeness of this Official Statement (including matters set forth in or contemplated by it), and to its being a “final Official Statement” in the Borrower's judgment for purposes of SEC Rule 15c2-12(b)(3).

The use of this Official Statement has been authorized by the Port Authority and approved by the Borrower.

CLEVELAND-CUYAHOGA COUNTY PORT AUTHORITY

By: President

Approved:

PLAYHOUSE SQUARE FOUNDATION

By: President and Chief Executive Officer

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APPENDIX A

Playhouse Square Foundation

[THIS PAGE INTENTIONALLY LEFT BLANK] PLAYHOUSE SQUARE FOUNDATION GENERAL DESCRIPTION Overview

Playhouse Square Foundation (“Playhouse Square” or the “Foundation”), located in downtown Cleveland, Ohio, is the “world’s largest theater restoration project,” and the country’s largest performing arts center outside New York City. It is Northeast Ohio’s home for touring Broadway shows, plays, concerts, comedy, opera, dance and children’s programming. Utilizing the arts, Playhouse Square engages and educates individuals of all ages and attracts more than one million guests to over 1,000 events annually. These audiences serve as the catalyst for economic growth and vitality within the region. In addition, Playhouse Square owns and develops real property, as well as manages property owned by third parties.

The Foundation is a nonprofit corporation organized under the laws of the State of Ohio and is an organization described under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”). The Foundation’s purpose is to operate and sustain on a financially viable basis a performing arts and entertainment center presenting and producing works of artistic excellence for the benefit of all citizens. The Foundation is committed in its actions to enhancing and developing that portion of downtown Cleveland known as “Playhouse Square” by (a) restoring, renovating, and operating theaters in the Playhouse Square District located between Chester and Prospect Avenues from East 13th Street to East 17th Street in downtown Cleveland, Ohio (the “District”), (b) presenting diverse arts programs, and educational activities that develop new audiences and enhance connections with existing audiences within the Northeast Ohio region, and (c) renovating and developing complimentary commercial and retail properties in the District.

The map on the following page shows the District, along with the buildings and other structures located within the District.

[Remainder of page intentionally left blank]

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History

Playhouse Square’s original five venues (Ohio, Connor Palace, KeyBank State, Allen and Hanna Theatres) were constructed from 1921-22. Impacted by the rise of television and population flight to suburbia, by 1968-69 all but the Hanna were eventually boarded up, as entertainment also moved to the suburbs. The threatened razing of the Ohio and KeyBank State theatres in 1972 galvanized community leaders, including politicians, activists, funders, businessmen, and the Junior League, who obtained a “stay of execution” for the theatres. To save the historic theaters, a grass-roots campaign was developed and the Foundation was formed on August 6, 1973. In succeeding years, limited repair and renovation allowed for sporadic staging of productions as money was raised for complete restoration. The musical revue “Jacques Brel Is Alive and Well and Living in Paris” opened in the KeyBank State Theatre lobby in 1973 with expectations of a three-week run. It would play for two years, setting an Ohio performance record. The Playhouse Square Association, the predecessor to the Foundation, restored and re-opened the theaters one by one, ushering in a new era of downtown revitalization, which was heralded by the media as “one of the top 10 successes in Cleveland history.” Bolstered by such artistic successes, the preservationists continued to: stave off demolition, assemble a professional management team and raise $40 million in a spirit of public/private partnership. Restoration began in earnest, and culminated with the July 1982 re-opening of the Ohio Theatre. By the end of the 1980s, the curtain had risen again in both the KeyBank State and Connor Palace theaters. The Allen remained on the endangered list until 1993, when “Playhouse Square Foundation,” the nonprofit organization that operated the center, rented the theater with an agreement to purchase it. The purchase was consummated in 1997, and the restored Allen reopened in October 1998 with a weekend-long celebration. In 1999, Playhouse Square agreed to acquire the historic Hanna Building, a move that brought control of the Hanna Theatre as well as significant street-level retail opportunities.

Today, Playhouse Square owns and operates 11 performance spaces that it, its resident companies, and other partners use throughout the District. Playhouse Square is not only a tourist destination, economic development engine, entertainment presenter and producer and a District real estate developer, but has also become a national leader in arts education, creating the nationally-acclaimed and much-copied “Partners in Performance” bus subsidy program that, as of 2009, has funded the bussing of 60,000-plus students to shows.

Playhouse Square has sustained and expanded its operations since its founding. Meanwhile, it has reduced reliance on financial assets of the community through pioneering collaborations, income-generating ventures in area development, and conservative fiscal management. Playhouse Square has been able to capitalize on a unique business model centered on real estate services supporting its arts operations.

Mission

Playhouse Square’s mission is to present and produce a wide variety of quality performing arts, advance arts education and create a destination that is a superior location for entertainment, business and residential living, thereby strengthening the economic vitality of the region.

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CORPORATE GOVERNANCE AND LEADERSHIP

Board of Trustees

The Foundation is currently governed by a Board of Trustees (the "Board") which establishes policies, oversees implementation of such policies, provides strategic direction to the Foundation and carries out its fiduciary responsibilities. The Bylaws provide that the Board shall be comprised of not less than three nor more than 75 trustees. There are currently 55 trustees on the Board. The Board elects trustees for three-year, renewable terms. The current trustees are listed below.

Board of Trustees’ Executive Committee Trustee Officer Community Affiliation James A. Ratner Chairman of the Board of Trustees Forest City Realty Trust Chairman and Director Art J. Falco President and Chief Executive Officer Playhouse Square Foundation Mark D. Ross Vice Chair, Community Engagement and Education PricewaterhouseCoopers Lake Erie Market Managing Partner Amy G. Brady Vice Chair, Development KeyCorp Chief Information Officer Heather Lennox Vice Chair, Finance Jones Day Partner-in-Charge

Paul J. Dolan Vice Chair, Government Affairs Cleveland Indians Chairman & Chief Executive Officer Lawrence H. Hatch Vice Chair, Nominating and Governance Glenmede Trust Managing Direct - Regional Director Daniel P. Walsh, Jr. Co-Vice Chair, Real Estate Development Citymark Capital Chief Executive Officer Neil C. Weinberger Co-Vice Chair, Real Estate Development JND Properties President Chris Connor Vice Chair, Sales and Marketing Sherwin-Williams Former Executive Chairman Kurt C. Treu Vice Chair, Strategic Planning Business & Executive Growth Coach Brent D. Ballard Secretary Treasurer Calfee, Halter, and Griswold LLP Managing Partner Thomas W. Adler - Playhouse Square Real Estate Services Advisor Warren E. Anderson - Anderson-DuBose Company President and General Manager

Scott Chaikin - Dix & Eaton Executive Chairman John G. Chapman, Sr. - SIFCO Industries Inc. Former Independent Director

David S. Goodman - Squire Patton Boggs (US) LLP

Mary Lynn Laughlin - Northern Trust Former Senior Vice President

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Jon H. Outcalt - Federal Process Corporation Chairman K.K. Sullivan - Philanthropist

Trustees (not on Executive Committee) Terry Adelman Louis G. Joseph Sara Ellen Stashower Himanshu Amin Margaret M. Judd David J. Strauss John D. Andrica Edward J. Largent Robert J. Tomsich Ronald M. Berkman Paul Mancino III Leila L. Vespoli Rick Buoncore James Merlino Dominic A. Visconsi Paul H. Carleton James R. Pender Mort Weisberg Richard H. Fearon Deborah Z. Read Denise G. Wells Uleto Fuentes Monte C. Repasky Debra A. Wert Amy C. Held Sean Richardson Vanessa L. Whiting A.J. Hyland Luci Schey Jeffrey J. Wild David C. Jacobs William R. Seelbach Darrell A. Young Alex Johnson Daniel I. Simon, MD

Life Trustees Glenn R. Brown Oliver C. Henkel, Jr. Rena Olshansky Edward H. deConingh, Jr. William B. Lawrence Victor J. Scaravilli victor gelb John F. Lewis Lawrence J. Wilker Forrest D. Hayes Julien L. McCall James B. Wolf, Jr. Lindsay J. Morgenthaler

Executive Management

Art J. Falco, President and Chief Executive Officer. Mr. Falco is President and CEO of both Playhouse Square Foundation and its Playhouse Square Real Estate Services Division. Mr. Falco joined Playhouse Square as Finance Director in 1985 and became President and CEO in 1991. Mr. Falco holds a Bachelor of Science Degree in Accounting from Bowling Green State University and is a Certified Public Accountant. He is a member of the Broadway League and is a Tony voter. He is a trustee of Downtown Cleveland Alliance and Destination Cleveland-Convention and Visitors Bureau. Mr. Falco is also treasurer of the Playhouse Square District Development Corporation, the first special improvement district in the City of Cleveland. During his tenure as Playhouse Square President and CEO, Mr. Falco has accepted numerous awards, both for his personal achievements and on behalf of Playhouse Square. Some of the awards include:

• Honorary Doctor of Fine Arts, Cleveland State University • The Cleveland Foundation’s Homer C. Wadsworth Award • Governor’s Award for the Arts - Arts Administration • The President’s Medal (Cleveland State University & Foundation) • The Ruth Ratner Miller Award • Diversity Center Humanitarian Award • Cleveland Restoration Society’s Preservation Award • Leadership in Nonprofit Management Award from the Mandel Center • Cleveland Arts Prize (Special Prize: Idea Center)

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Patricia Gaul, Vice President of Business and General Counsel. Miss Gaul joined the Foundation in 1984 following work in the United States Senate, offices of Senators Edward Kennedy and Bill Bradley. She is a graduate of Cleveland-Marshall College of Law (1993 J.D.) and Georgetown University (1980, B.S.B.A., Accounting). An attorney and member of the Cleveland Bar Association, the Ohio State Bar Association, and the Association of Corporate Counsel, Miss Gaul is also a C.P.A. and member of the Ohio Society of Certified Public Accountants (OSCPA), as well as a member of CFO Arts, an industry group from the disciplines of ballet, orchestra, opera, and museums and entertainment centers. Miss Gaul is on the Audit Committee and Finance Committee for the Downtown Cleveland Alliance and serves on the Audit Committee for Greater Cleveland Partnership. She is a Board Member of Willowood Manor, a senior living community in Fairview Park; a Leadership Cleveland Alumnus, Class of 2012; and a Life Member of the Ohio Eighth Judicial District Conference. Miss Gaul was named Crain’s Cleveland Business 2008 CFO of the Year for Nonprofits: Philanthropy/Arts & Culture, and was named Crain’s Cleveland Business 2014 General and In-House Counsel of the Year for Nonprofits.

Allen K. Wiant, Playhouse Square Real Estate Services – Vice President Strategic Development. For over 30 years, Allen Wiant has been a commercial broker, tenant representative, and strategic real estate counselor. As a licensed Ohio Real Estate Broker, he co-founded Playhouse Square’s Real Estate Advisory Group in 2010 which supports the Downtown Cleveland Alliance. Prior to joining Playhouse Square in 2010, Mr. Wiant was a Senior Vice President and Director at CB Richard Ellis. In that role, he was awarded accolades such as Cleveland’s Top Overall Producer from 2007 – 2009 for CBRE, Winner of four NAIOP “Deal of the Year” honors, and NAIOP “Office Broker of the Year in 2008, 1997, and 1991; further, he was among CBRE’s top 225 producers in North America in 2008 and 2009.

Corporate Structure and Affiliates

The general organizational structure of Playhouse Square and its subsidiaries is depicted on the chart below, with additional information describing certain subsidiaries following the chart.

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Playhouse Square Development Corporation (“PSDC”). A real estate holding company which owns or holds leasehold interest in several properties in the Playhouse Square area. PSDC is exempt from federal income taxes under Section 501(c)(2) of the Code.

PSF Management Company, LLC. A management company formed to manage and lease real property.

Playhouse Square Holding Company, LLC (“PSHC”). A real estate holding company formed to hold investments in PSC Hanna Building LLC and PSC Bulkley Building LLC.

PSC Bulkley Building LLC (“Bulkley”). An entity formed to own and operate a commercial real estate building in the District.

Playhouse Square Hotel Limited Partnership (the “Hotel”). An entity formed to operate a luxury hotel in the District. The Hotel is owned 99% by PSDC and 1% by the Foundation.

PSF LL1 LLC. An entity formed as the leveraged lender in conjunction with the Middough Project described under PROPERTIES AND PROPERTY MANAGEMENT – General below.

PSF 1901 LLC. A real estate holding company formed to hold an investment in 1901 East 13th LLC in conjunction with the Middough Project.

Allen Project LLC. An entity formed in connection with the new market tax credit financing for the Allen Theatre Project described under Historic Theatres below.

Allen Project Lender LLC. An entity formed as the leveraged lender in conjunction with the Allen Theatre Project.

PSF Blocker LLC. An entity formed to hold an investment in Hanna Annex Manager LLC. In September 2012, PSC Hanna Building LLC (a former subsidiary owned by the Foundation) sold substantially all of the real estate known as the Hanna Annex (excluding the Hanna Theatre) to a residential housing developer who converted the real estate into 102 apartment units. Hanna Annex Manager LLC was formed as part of the tax credit project to hold the managing membership interest in Hanna Annex LLC. The Foundation acquired a 25% membership interest in Hanna Annex LLC for $750,000.

Playhouse Square Hotel, LLC. An entity formed in connection with the conversion of the Wyndham hotel to a Crowne Plaza hotel described under PROPERTIES AND PROPERTY MANAGEMENT – General below.

The Foundation is also a controlling member of the following new market and historic rehabilitation tax credit entities:

PSC Hanna Building LLC (“Hanna”). An entity formed to own and operate a commercial real estate building in the District. In September of 2008, Parker-Hannifin Corporation (Investor Member) was admitted as the 99.9% member of Hanna. Under the new structure, the profits, losses, and tax credits are allocated to the Foundation (Managing Member) and the Investor Member as defined in Hanna’s operating agreement.

PS 1305 Limited Partnership. An entity formed to rehabilitate, develop, own, and operate the Cowell and Hubbard Building located in the District. In February of 2001, the Parker-Hannifin Corporation (Investor Member) was admitted as the 99.9% Limited Partner. Under the new structure, the A-8

profits, losses, and tax credits are allocated to the Foundation (Managing General Partner) and the Limited Partner as defined in the entity’s partnership agreement.

1901 East 13th LLC. An entity formed to acquire and operate the Middough Building. The entity is owned 0.01% by PS 1901 LLC (Managing Member) and 99.99% by the Parker-Hannifin Corporation (Investor Member). Profits, losses, and tax credits are allocated to the Managing Member and the Investor Member as defined in the entity’s operating agreement.

PS 1317 LLC. An entity formed to operate the Haig Building. The entity is owned 0.1% by the Foundation (Managing Member) and 99.9% by the Lincoln Electric Company (Investor Member). Profits, losses, and tax credits are allocated to the Managing Member and the Investor Member as defined in the entity’s operating agreement.

OPS, LLC (“OPS”). An entity formed to lease and sublease the Idea Center Building, located adjacent to the performing arts center. In January of 2003, OPS entered into a lease agreement with the Foundation to lease the land and building associated with the Idea Center Building for a 75-year lease period, with a 75-year renewal option. Payments of rent, taxes, and utilities to the Foundation, which began on January 1, 2005, eliminate in consolidation. OPS was owned 49.9% by the Foundation (Managing Member) and 50.1% by ideastream, an Ohio nonprofit corporation. Effective June 30, 2017, the members agreed to transfer the assets and liabilities to OPS to OPS investors.

One Playhouse Square Investors Limited Partnership (“OPS Investors”). An entity established to renovate the Idea Center Building as a historical tax credit project. Effective January 2003, OPS Investors entered into a sublease of the land and building from OPS to operate the Idea Center Building for a 75-year lease period, with a 75-year renewal option. Payments of rent, taxes, and utilities to OPS, which began on January 1, 2005, eliminate in consolidation. The Foundation had a 1% ownership interest (Managing General Partner) in the Partnership. In December 2013, the Foundation entered into an Assignment and Assumption Agreement whereby the limited partners exercised an option to assign their partnership interests to the Foundation for nominal consideration. Concurrently, the Foundation entered into a Second Amended and Restated Limited Partnership Agreement (Partnership Agreement) to admit OPS, LLC as a 1% Limited Partner with the Foundation retaining control as the 99% Managing General Partner. OPS Investors’ profits and losses are allocated between the Foundation and the limited partner as defined by the Partnership Agreement. Effective June 30, 2017 and concurrent with the assumption of OPS’s assets and liabilities, a Third Amended and Restated Limited Partnership Agreement was executed by which the Foundation maintains 50% ownership as the 1% Managing General Partner and 49% Limited Partner, and ideastream attains a 50% noncontrolling interest (see discussion below) as a Limited Partner. The lease between OPS and the Foundation was assumed by OPS Investors. All agreements between OPS and OPS Investors have been terminated and all intercompany balances have netted as of June 30, 2017.

A noncontrolling interest as a limited partner represents the tax credit investor’s net investment in the tax credit entity. Once the tax credit period ends, the Investor will exit the partnership by either selling its partnership interest for a nominal value or donating its interest to the Foundation. This transaction will have no impact on the financial statements other than a transfer from noncontrolling interest to unrestricted net assets.

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THEATRE General

As Northeast Ohio’s home for great entertainment, Playhouse Square offers the best of touring Broadway, plays, children’s theater, concerts, comedy, and dance performances. For the Fiscal Year ended June 30, 2017, Playhouse Square hosted 1,008 events, including children’s theater, concerts, comedy and dance performances, bringing over 1 million attendees to its 11 performing arts spaces. Historical Attendance Fiscal Year Ended June 30: 2017 2016 2015 2014 2013

Total Attendees 1,054,203 1,040,858 969,573 1,016,373 897,844

Historic Theatres and Additional Performance Spaces

Currently, the Foundation owns and operates 11 performing arts spaces. There are five historic theatres, the construction of which dates back to the 1920’s. In addition, there are six adaptable production spaces, which are primarily used for smaller performances and other mediums of entertainment (film, among others).

Historic Theatres

KeyBank State Theatre (1519 Euclid Avenue). The KeyBank State Theatre, the first and largest of the Playhouse Square theaters, had the distinction of being the venue with “the world’s longest theater lobby” when it premiered February 5, 1921. The lobby also displayed four murals by American modernist James Daugherty. Opened as a movie/vaudeville house, the KeyBank State Theatre attracted such legendary performers as Abbott & Costello, Fred Astaire, Judy Garland, Jack Benny and The Marx Brothers. It was closed in February 1969 and reopened in June 1984. In its current 3,200-seat capacity, the KeyBank State Theatre has presented musical extravaganzas such as Disney’s “The Lion King” and “Phantom of the Opera.”

Ohio Theatre (1511 Euclid Avenue). The Ohio Theatre’s opening night, February 14, 1921, revealed one of Playhouse Square’s most elaborate lobbies with a breathtaking frescoed ceiling, stately Corinthian columns and three large murals, all of which were lost to a devastating lobby fire in 1964 and then re-created in 2016. In addition to legitimate theater productions, such musical greats as Sophie Tucker, Benny Goodman and Ozzie Nelson would play at the Ohio Theatre. The venue also boasted a brief (1935-36) incarnation as the Mayfair Casino, an elegant supper club featuring both a circular lobby bar and a circular performance stage. It was closed in February 1969 and reopened in July 1982. Today, the intimate Ohio Theatre seats 1,000.

Hanna Theatre (2067 East 14th Street). Originally seating 1,397 for legitimate theater, the Hanna Theatre opened March 28, 1921, and has hosted such stage and film luminaries as Al Jolson, Katherine Hepburn, Henry Fonda, Ethel Barrymore, Ginger Rogers, Helen Hayes, Mary Martin and Yul Brynner. It was closed in 1988 and reopened in September 1997. Playhouse Square assumed management of the Hanna in August 1999 following its purchase of the Hanna Office Building, which houses the theatre. In 2008, the Hanna underwent a renovation to add a thrust stage, re-work its seating to 550 and become the main performance space for Playhouse Square’s long-time constituent, Great Lakes Theater.

Allen Theatre (1407 Euclid Avenue). The Allen Theatre’s April 1, 1921 opening night attracted more patrons than its 3,080-seat capacity. Originally built as an opulent silent movie house, the Allen required no backstage facilities (dressing rooms, storage, etc.). It was closed in May 1968 and reopened in November 1994. To later accommodate legitimate theater presentations, it was necessary to build a A-10

“stage house” onto the venue during restoration in preparation for its reopening October 3, 1998, when it began to host long-running, touring Broadway productions and concerts. The Cleveland Ballet’s move to San Jose made the KeyBank State Theatre available for the Broadway series, and use of the Allen decreased, paving the way for Playhouse Square to invite new resident companies to the District.

In August of 2010, the Allen was closed to undergo a dramatic reconfiguration from an historic theater with 2,500 seats to an intimate, 500-seat contemporary theater nestled in historic environs. The transformed Allen Theatre reopened in September of 2011. Two new theaters, the flexible 300-seat Outcalt Theatre and the 150-seat Helen Rosenfeld Lewis Bialosky Lab Theatre, opened 2012 to complete the Allen Theatre Complex, shared by Playhouse Square, Cleveland Play House, Cleveland State University’s (“CSU”) Department of Theatre and Dance and Case Western Reserve University’s Masters of Fine Arts in Acting Program.

Connor Palace Theatre (1615 Euclid Avenue). The last of the five principal Playhouse Square theaters, the Palace Theatre, renamed Connor Palace in 2014, opened Nov. 6, 1922 as the flagship of B.F. Keith’s vaudeville chain. The sign atop its building advertising the Connor Palace was “the world’s largest electrical sign” circa 1921. The Connor Palace’s elegant lobby was highlighted by a million-dollar art collection and another “world’s largest…”: the largest woven-in-one-piece carpet. The venue showcased the likes of Fanny Brice, Bing Crosby, Houdini, Bob Hope, Frank Sinatra and The Three Stooges before changing over to films. It was closed in July 1969 and reopened in April 1988. In its current role, the Connor Palace seats 2,800.

Additional Performance Spaces

Upper Allen (1407 Euclid Avenue). The Upper Allen is the original balcony of the Allen Theatre constructed in 1921. It has been converted into space for film, lectures and intimate performances.

Westfield Insurance Studio Theatre (1375 Euclid Avenue). Opened in 2005 as a key component of the Idea Center, the Westfield Insurance Studio Theatre seats 300 within a highly flexible “black box” space with state-of-the-art performance and television broadcast capabilities: collapsible and portable seating systems, specialized floor construction (suitable for TV production and presentation theater), and dual lighting systems for theater/television production instruments. Westfield Insurance Studio Theatre is one of the largest production studios in Ohio.

Helen Rosenfeld Lewis Bialosky Lab Theatre (1407 Euclid Avenue). At just 150 seats, the Helen Rosenfeld Lewis Bialosky Lab Theatre (the “Helen”) is used for CSU and Case Western Reserve University student productions, as well as children’s theater, readings and other events. Opened February 1, 2012, the Helen offers the flexibility for experimental programs, as well as technical learning opportunities for students.

Outcalt Theatre (1407 Euclid Avenue). One of only three such theater spaces in the country, the adaptability of the Outcalt Theatre can be reconfigured to present events in Thrust, Arena, End-stage or Runway modes, with capacities ranging from 259 to 334. Debuting January 13, 2012, this contemporary designed and technically state-of-the-art venue offers superb facilities for learning and experimentation for both artists and technical theater students.

Kennedy’s Theatre (1501 Euclid Avenue). Located beneath the lobby of the Ohio Theatre, the intimate Kennedy’s Cabaret (with a maximum capacity of 100) is unique to the Playhouse Square family of venues. The space still sports its original 1921 exposed-brick walls. It opened as a performance space November 15, 1975 and now plays host to a variety of one-man shows, plays and other cabaret entertainment. Kennedy’s is also available for private events.

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Resident Companies

Playhouse Square is the home of the following six resident companies:

Cleveland Play House. Cleveland Play House (“CPH”), recipient of the 2015 Regional Theatre Tony Award® and founded in 1915, is America's first professional regional theatre. Throughout its rich history, CPH has remained dedicated to its mission to inspire, stimulate and entertain diverse audiences in Northeast Ohio by producing plays and theatre education programs of the highest professional standards. CPH has produced more than 100 world and/or American premieres, and over its long history more than 12 million people have attended over 1,600 productions. Today, under the leadership of Artistic Director Laura Kepley and Managing Director Kevin Moore, CPH is an artist-driven theater that serves the Greater Cleveland community.

Cleveland Ballet. The mission of the new Cleveland Ballet is to present world class dance on stage through classical and new works and to ensure that classical and neoclassical ballet is accessible and relevant to audiences of all ages and backgrounds. Cleveland Ballet will create dance and outreach programs of the highest levels of excellence, reaching deeply into the hearts of our community to inspire audiences. It is the Foundation’s newest resident company, joining in May 2017.

Cleveland State University. Founded in 1964, CSU is a public research institution that provides a dynamic setting for engaged learning where students and ideas connect in the classroom, the real world and beyond. With an enrollment of more than 17,000 students, nine colleges and more than 200 academic programs, CSU is consistently listed among America’s best colleges by U.S. News & World Report. Playhouse Square is home to CSU's Arts Campus, housing CSU’s Theatre and Dance and Art departments. This collaboration among CSU, Playhouse Square and the Cleveland Play House enables undergraduate students to hone their skills alongside working professionals.

The CSU Department of Theatre and Dance productions are performed in the state-of-the-art Allen Theatre Complex, showcasing a varied season of both contemporary and traditional works featuring CSU students, faculty, and guest artists.

The Galleries at CSU, located at 1307 Euclid Avenue, features three distinct exhibition spaces, a multi-purpose media space, a resource library, a meeting area, state-of-the-art lighting, surround sound and new-media capabilities.

DANCECleveland. DANCECleveland, founded originally as Cleveland Modern Dance Association in 1956, celebrates its 61st season as a presenter and more. Northeast Ohio’s premiere dance presenter and one of only a handful of stand-alone dance presenters in the country, DANCECleveland brings renowned modern and contemporary dance companies from around the world to perform on the stages of northeast Ohio through their annual dance series. The organization also acts as a commissioner of new works and a resource to the community by offering free master classes with visiting dance companies for local dancers of all ages and abilities.

Great Lakes Theater. Great Lakes Theater (“GLT”), Northeast Ohio’s professional classic theater since 1962, is one of the nation’s preeminent regional theaters and the first resident company of Playhouse Square. GLT features a resident company of artists and brings the world’s greatest plays to life each season in its revolutionary and intimate home at the re-imagined Hanna Theatre. GLT also presents the region’s annual production of “A Christmas Carol” each year at the Ohio Theatre. On its mainstage and through its extensive educational programming, GLT positively impacts over 100,000 adults and students each season.

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Tri-C JazzFest. Each summer, the Tri-C JazzFest comes to Playhouse Square with ticketed concerts inside the theaters, and free music and dancing outdoors day and night on U.S. Bank Plaza. Presented by Cuyahoga Community College, the mission of the festival is to connect Northeast Ohio audiences with world-class artists who keep the jazz tradition alive. JazzFest also presents workshops for high school and college students during April, celebrates International Jazz Day, and schedules pop-up shows and master classes throughout the year.

KeyBank Broadway Series

In the last year, Playhouse Square has expanded its KeyBank Broadway Series from two to three weeks. It is one of only five performing arts centers that present Broadway shows for three weeks or longer. During 2017, Playhouse Square has increased its season ticket holders to over 45,000 for its KeyBank Broadway Series, versus almost 36,000 for 2016.

The KeyBank Broadway Series showcases the following performances for the 2017-18 season: Waitress, On Your Feet!, Love Never Dies, Rent, The Humans, Aladdin, and Hamilton. The year also includes Huntington Featured Performances such as Wicked, STOMP, Riverdance, and Beautiful. The Foundation has announced that the upcoming 2018-19 season’s schedule will be Miss Saigon, Dear Evan Hansen, Hello, Dolly!, A Bronx Tale, School of Rock, Come From Away, and Les Misérables. There will also be Huntington Featured Performances during the 2018-19 season but have yet to be announced

Educational Programming

Presenting educational activities that cultivate new audiences and enhance connections with existing audiences is an essential component of the Foundation’s business model. Since its inception in 1998, the Community Engagement & Education Department of Playhouse Square has offered thousands of events, workshops, classes and more, most with minimal or no fees, to people of all ages from across Northeast Ohio. Nationally-recognized programs enable school children to experience the performing arts, both as audience members and as performers. The Foundation values the education that it can provide to students, educators, aspiring artists and performing arts professionals with its programming, and commits $1.0 million annually to this business segment.

PROPERTIES AND PROPERTY MANAGEMENT

General

The Foundation started its work in developing real estate in the District in 1993 when it partnered with the Wyndham Hotel Group to develop the 205-room Wyndham Cleveland Hotel, now the Crowne Plaza Cleveland at Playhouse Square (the “Hotel”). The Foundation currently owns 100% of the Hotel and manages it under a license agreement with Crowne Plaza Hotels & Resorts – InterContinental Hotels Group. In 1998, the Foundation created Cleveland’s first business improvement district, Playhouse Square District Development Corporation, a shared-services blueprint now applied to the city-wide Downtown Cleveland Alliance.

As a result of its growing interest in the real estate in the District, Playhouse Square Real Estate Services Division (the “Division”) was founded in 1999 to manage and develop Playhouse Square’s mix of historic and commercial real estate properties. The Division is now a full-service and deeply-experienced regional commercial real estate operation. Its leadership team has more than 80 years of combined expertise in Northeast Ohio’s commercial real estate markets, and manages approximately one million square feet of commercial real estate owned by the Foundation and more than one million additional square feet of office space and retail space in the region for third parties. A-13

In addition to the theatres described under Historic Theatres above, the Foundation owns the following properties:

1305 Euclid. This two-story, 30,000-square foot building has two tenants: Kent State Cleveland Urban Design Collaborative and Cowell & Hubbard – A Zach Bruell Restaurant. It is fully leased at this time.

Kent State University Cleveland Urban Design Collaborative (“CUDC”). In 2010, CUDC relocated to the second story of the historic Cowell & Hubbard building, located on the northeast corner of Euclid Avenue and East 13th Street.

Cowell & Hubbard– A Zach Bruell Restaurant. Named after one of Cleveland’s famous jewelry stores, Cleveland-based chef Zack Bruell assumed the first floor of the building in February 2012 for the restaurant.

1317 Euclid. This is a two-story, 30,000 square-foot building and home to the headquarters of Dwellworks since April 2012. It is fully leased at this time.

The Idea Center® at Playhouse Square (1375 Euclid Avenue). As a partnership between Playhouse Square and ideastream (WCPN and WVIZ), this historic building is home to television and radio stations along with several other businesses. The 243,000 square-foot building has six stories with roughly 36,700 rentable square feet per floor. The technology contained in the building is extensive and desirable to the office tenants who require sophisticated infrastructure. CSU selected this building for its expanding Film School and it has entered into a long-term lease while beginning the work to create the studios, classrooms and labs necessary for use by CSU. CSU has invested more than $4 million in this space. Playhouse Square/ideastream occupies 42% of building and CSU occupies 16.2% of the building. It is 86% leased at this time.

Bulkley Building (1501 Euclid Avenue). This nine-story, 157,000 square-foot office building houses the offices of Playhouse Square and has 6,000 to 20,300 rentable square feet per floor. In addition, the law firm of Gallagher Sharp has been in the building since it was built in 1922. Gallagher Sharp currently occupies approximately 40% of the building and Playhouse Square occupies 14% of the building. It is 85% leased at this time.

Hanna Building (1422 Euclid Avenue). Built in 1921, this 16-story office building was added to the National Historic Register in 1978. The building encompasses over 337,000 square feet with up to 24,000 rentable square feet per floor. The building’s tenants include Turner Construction, Van Auken Akins Architects, DLR Architects, Nexus, Driftwood, Great Lakes Publishing and The Cleveland Foundation. Hanna has a diverse tenant mix and is an attractive floorplate for some of the city’s smaller to mid-size companies. The Cleveland Foundation, Nexus, DLR, Driftwood, and Great Lakes Publishing represent approximately 40% occupancy of the building. It is 85% leased at this time.

Crowne Plaza at Playhouse Square (1260 Euclid Avenue). The Playhouse Square Hotel opened in 1995, and consists of 13 stories, 205 rooms and 167,186 square feet. The Hotel includes restaurant, lounge, fitness center, pool and over 13,000 square feet of meeting space. The Hotel had a $6 million renovation in 2017 and the flag was changed to a Crowne Plaza.

Middough Building (1901 East 13th Street). The Middough Building, a 300,000-square foot, five-story building was purchased from Middough, an architectural and management firm, and renovated by Playhouse Square in 2010. This was done through various new market tax credits and other capital sources. The Foundation leases the entire building to CSU. CSU subleases the third and fourth floors back A-14

to Middough with the balance of space, save for most of the first-level parking garage, being used by CSU and CPH. CPH subleases their space from CSU. The spaces dedicated to CPH and CSU included renovated office, classroom/studio and other support space. The Foundation, CSU, and CPH also renovated the nearby Allen Theatre into a new joint home as well as the CSU visual-arts department at that time. The spaces include renovated administrative offices, classroom / studio, scene shop, and shared rehearsal spaces. It is fully leased at this time.

Managed Property

In addition to the one million square feet of owned commercial space, the Division manages over 1.3 million square feet of properties throughout Northeast Ohio. These properties are third-party owned and serve a mix of retail and commercial tenants.

The Real Estate Division offers its first-hand experience in rebuilding Playhouse Square, along with decades of representing owners, tenants and developers with its following core services:

- Owner Representation - Tenant Representation - Asset Management - Financial Deal Structuring - Facility Management - Property Management - Consulting - Construction Project Management - Nonprofit Real Estate

Select Recent Projects

Playhouse Square District Development Corporation. In 1998, the District became the first Business Improvement District in downtown Cleveland and since then, new investment of more than $60 million has occurred throughout the District. In addition, the District championed safety patrols and beautification efforts throughout the neighborhood and elevated U.S. Bank Plaza – the area’s outdoor urban park – to one of Cleveland’s premiere places to visit with free events and concerts.

Dazzle the District. In May 2014, Playhouse Square unveiled a $16-million neighborhood transformation that features the world’s largest outdoor chandelier, the GE Chandelier. The makeover included: (i) revamping all surrounding streetscape and signage; (ii) constructing four 35-foot gateway arches to welcome guests to the District; (iii) renovating a small common area featuring a food kiosk; (iv) replacing “Playhouse Square Center” sign with energy-efficient “blade” sign; (v) updating marquee signs for better visibility and LED lighting; and (vi) introducing “stick built” retro sign.

Conversion of Wyndham Cleveland Hotel into Crowne Plaza Cleveland at Playhouse Square. Following a $6 million renovation, the 205 room Wyndham Cleveland at Playhouse Square was converted into the Crowne Plaza® Cleveland at Playhouse Square in September 2017. Crowne Plaza is part of the InterContinental Hotels Group® (IHG), one of the world’s leading hotel companies. The renovation encompassed all guest rooms, the restaurant, common areas, pool, fitness center and upgraded internet connectivity. The Crowne Plaza is owned and managed by Playhouse Square.

The Lumen. See THE PROJECT below for a description of current residential and parking development in the District.

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FUNDRAISING AND ENDOWMENT

Fundraising Campaigns

Advancing the Legacy Campaign

The Foundation is currently underway with its Advancing the Legacy Campaign, which has a goal of $100 million, the Foundation’s largest campaign to date. The purpose of Advancing the Legacy is to fund capital improvements, endowment growth, neighborhood transformation, educational programming, and new productions. The Foundation is currently on track to hit that goal with $95.3 million in pledges since the Campaign’s launch in 2014. Of that $95.3 million in commitments, $21.0 million is in the form of planned gifts and $74.3 million is in the form of committed cash, of which $38.8 million has already been paid in cash. There has been widespread support for the Campaign; total gifts received to-date have been from almost 150 unique donors.

The following table shows the estimated expected cash payment schedule of the Advancing the Legacy Campaign: Advancing the Legacy Expected Cash Payment Schedule Calendar Year 2018 2019 2020 2021 2022-2026 $20,738,998 $5,919,735 $3,376,275 $2,640,058 $2,882,179

Past Campaigns

Power of Three Campaign. The Allen Theatre Project was the theme of The Power of Three Campaign undertaken in partnership between Playhouse Square, Cleveland Play House and Cleveland State University. The Campaign raised $32 million with the following goals: to renovate the Allen Theatre; design and construct two new theaters – the Outcalt Theatre and The Helen Theatre; and design and construct a new, enclosed walkway from the existing Playhouse Square garage to the theaters. The Campaign realized 11 lead donations totaling $11.5 million.

Idea Center Campaign. The Idea Center Campaign was completed in September 2006, realizing total contributions of $29.3 million, surpassing the Campaign’s $27.4 million goal. The Campaign’s objective was to raise funds to renovate the National Historic Register landmark building at 1375 Euclid Avenue built in 1912 as “Idea Center.” WVIZ/PBS and 90.3 WCPN ideastream and Playhouse Square partnered to develop Idea Center, a technology-based hub for ideastream and Playhouse Square’s arts education programs. The space was designed to integrate digital multiple media and public broadcast communication with performing arts and arts education.

Annual Giving

The Foundation relies on the generous support of foundations, corporations and individuals to meet its annual need of more than $6 million. Last year, the Foundation recruited 1,400 new donors ($50 or more), creating roughly $1.0 million in new donations.

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Historic Donations Membership and Donations Fiscal Year Ended June 30 2015 2016 2017

Individual Donors 4,567 4,580 5,137 Average Donation ($) $ 468 $ 495 $ 529

Donor, Level 1(a) Donors (#) 1,684 1,719 2,276

Donor, Level 2(b) Donors (#) 2,892 2861 2,861

(a) Donations of greater than or equal to $600 per annum. (b) Donations of greater than or equal to $50 and less than $600 per annum.

Endowment As of June 30, 2017, the Foundation had $24,081,098 in its board-designated and donor restricted endowment. Of this total amount, $4,286,988 consisted of permanently restricted funds, $3,532,133 consisted of cumulative endowment earnings, and $16,261,977 consisted of board-designated endowment funds. Since June 30, 2017, the total amount in the Foundation’s endowment has increased $225,000 as a direct result of the Advancing the Legacy Campaign with the ultimate goal of increasing the endowment to approximately $60.0 million. It is estimated that for the quarter ended March 31, 2018 (unaudited), the endowment comprises $4,786,988 of permanently restricted funds, $3,847,712 of temporarily restricted funds, and $17,265,760 of unrestricted funds, aggregating to a total of $25,900,460.

The Foundation has an endowment and other investment income. In the Fiscal Year ended June 30, 2017, the Foundation received a total of $5,758,363 from earnings on its endowment and other investments: $1,320,993 of this total figure is comprised of temporarily restricted funds, and $4,437,370 of this total figure is comprised of unrestricted funds. Of the total unrestricted funds directed to operating revenue, $3,256,803 and $1,180,567 are allocated to the general enterprise and real estate operations, respectively. See Table A-1. The total amount received by the Foundation from its endowment and from other investment income has increased when compared to each of the previous two Fiscal Years due to higher income from improved equity market. A breakdown of the total receipt figures into unrestricted receipts and temporarily or permanently restricted receipts for the 2017, 2016, and 2015 Fiscal Years is shown on Tables A-1, A-2 and A-3, respectively. Refer to Table A-4 for comparable figures from the 2013 Fiscal Year through the 2017 Fiscal Year. Further, the Foundation has not drawn on any endowment funds since its inception.

A-17

The table below describes the endowment funds as of Fiscal Years ending June 30, 2015, 2016 and 2017.

Endowment Funds

Fiscal Year Ended June 30 2015 2016 2017

Endowment Funds Donor-Restricted Temporarily Restricted $ 3,124,292 $ 2,532,349 $ 3,532,133 Permanently Restricted 4,786,988 4,286,988 4,286,988 Donor-Restricted Endowment Funds $ 7,911,280 $ 6,819,337 $ 7,819,121

Board-designated Endowment Funds Unrestricted $ 13,638,855 $ 13,622,751 $ 16,261,977

Total Endowment Funds $ 21,550,135 $ 20,442,088 $ 24,081,098

THE PROJECT Description

Playhouse Square broke ground on the development of The Lumen in April 2018. The Lumen is anticipated to be a 34-story, mixed-use building on a 1.1-acre parcel in at the southwest corner of Euclid Ave. and East 17th Street in the heart of the District, consisting of 318 apartment units and a public/private 530-unit parking structure (the “2018 Project”). Expected final completion is anticipated to be in July 2020. The site benefits from excellent accessibility via the Health Tech Corridor, a dedicated bus rapid transit line, and access to three major highways within a half mile of the property. The development will transform what is now a surface parking lot into an exclusive, high-end apartment complex. The plans call for approximately 306 standard units, ranging from 537 to 1,173 square feet and 12 penthouse-style units (floors 32 and 33) with options for 1,243 to 1,854 square feet. The parking structure will incorporate two levels of subterranean private parking along with four levels of above-grade parking to support residents, guests, and Playhouse Square’s theater operations, offices, and retail entities.

Community amenities include a yoga studio, fitness center, pool, grill areas, fire pits, business center, concierge entrance and ground floor reception lobby along with a well-appointed 5th floor main lobby and Residents Club.

Project Budget

Estimated total cost of the 2018 Project is anticipated to be $138.9 million. A portion of the 2018 Project is anticipated to be financed with an approximately $65 million construction loan arranged by KeyBank Real Estate Capital and The Huntington National Bank, anticipated to close concurrently with the Bonds. The balance of the financing cost is expected to be funded by the Bonds, equity from Playhouse Square, a $1 million grant from the State of Ohio, and a $1 million loan from the City of Cleveland, $200,000 of which is forgivable.

A-18

Project Budget - Entire Project* Total Per SF Acquisition Costs $ 600,000 $ 1.01 Financing Costs 4,766,250 8.03 Development Costs 6,400,000 10.78 Reserves and Pre-Opening Expenses 600,000 1.01 Taxes/Insurance/Permits 590,000 0.99 Furniture, Fixtures, & Equipment and Interior Design 930,000 1.57 Construction Costs 122,104,677 205.73 Additional Hard Costs 2,956,741 4.98 Total Development Costs $ 138,947,668 $ 234.11 *Project Budget as of May 2018 Construction Manager and General Contractor The following parties are involved in the Project’s planning, construction, completion and management. Hines Interest Limited Partnership (“Hines”), Development Manager. Hines is a privately-held, global real estate investment, development and management firm headquartered in Houston, Texas. Hines was founded in 1957, and has a presence in 201 cities in 24 countries. Hines has 108 developments currently underway around the world, and historically has developed, redeveloped or acquired 1,295 properties, totaling over 422 million square feet.

Hines’ current property and asset management portfolio includes 506 properties, representing over 210 million square feet. With extensive experience in investments across the risk spectrum and all property types, and a pioneering commitment to sustainability, Hines is one of the largest real estate organizations in the world. For additional information about Hines, see www.hines.com.

Soloman, Cordwell, Buenz & Associates (“SCB”), Architect. SCB is a national architecture, interior design, and planning firm based in Chicago, Illinois with an additional office in San Francisco, California founded in 1931.

SCB’s approximately 250 design professionals work with clients across the country, with over 600 completed projects. For additional information, see www.scb.com.

Gilbane Residential Construction, LLC (“Gilbane LLC”), General Contractor. Gilbane LLC is part of the family of companies of Gilbane, Inc. (“Gilbane”). Gilbane was founded in 1873 and is headquartered in Providence, Rhode Island, and has a global footprint of 46 office locations around the world and the resources of more than 2,600 people. Gilbane has an office in Cleveland, Ohio, and its history in Cleveland spans over 50 years with over $2 billion in construction volume. Gilbane was ranked #1 Top Commercial Construction Contractor in 2017 by Crain’s Cleveland Business. Recent significant projects in Cleveland, Ohio area are described at www.gilbaneco.com/locations/cleveland- ohio.

Gilbane provides global integrated construction and facility management services. For more information, visit www.gilbaneco.com.

Greystar Real Estate Partners, LLC (“Greystar”), Property Manager. Greystar was founded in 1993 and is one the largest and most experienced property managers in the world. Headquartered in Charleston, South Carolina, Greystar has offices in more than 40 cities serving over 150+ markets globally, with nearly 425,000 units and student beds under management, with an aggregate estimated value of approximately $80 billion. Greystar ranks first among the 2018 Top 50 U.S. Apartment A-19

Managers by the National Multifamily Housing Council (“NMHC”)—which is Greystar’s eighth consecutive year with the number one ranking. In addition, Greystar was also recognized as the top apartment developer in NMHC’s 2018 25 Largest Apartment Developer report for the second consecutive year.

Greystar also has an institutional investment management platform that manages capital on behalf of a global network of investors with over $23 billion in gross assets under management, including more than $8 billion of developments that are either underway or already completed. To learn more about Greystar, see www.greystar.com.

FINANCIAL AND OPERATING INFORMATION

Key Financial Ratios

Debt Service Coverage Ratio

The following table sets forth the debt service coverage ratio of the Foundation for years ended June 30, 2015, 2016 and 2017:

Fiscal Year Ended June 30 2015 2016 2017 Change in Unrestricted Net Assets $2,258,013 $1,871,379 $6,561,664

Add: Depreciation and Amortization Expense 14,488,472 14,618,168 14,348,378 Add: Interest Expense 4,222,840 3,767,053 3,872,949 20,969,325 20,256,600 24,782,991

Interest Expense 4,222,840 3,767,053 3,872,949 Required Principal Payments(a) 3,595,309 3,343,887 1,939,844 $7,818,149 $7,110,940 $5,812,793

Debt Service Coverage Ratio 2.68x 2.85x 4.26x

(a) Required Principal Payments – the covenanted amortization amount payable per annum as defined in the governing loan documents.

A-20

Liquidity

The following table sets forth the liquidity position of the Foundation at Fiscal Year ended June 30, 2015, 2016 and 2017: Fiscal Year Ended June 30 2015 2016 2017 Cash and cash equivalents $6,657,867 $5,539,538 $9,509,834 Investments, at fair value 27,093,476 26,273,958 44,735,654

Less: Cumulative endowment earnings (3,124,292) (2,532,349) (3,532,133) Less: Permanently restricted funds (4,786,988) (4,286,988) (4,286,988) 25,840,063 24,994,159 46,426,367

Operating Expenses 74,482,430 79,474,769 84,881,921

Less: Depreciation and amortization expense (14,488,472) (14,618,168) (14,348,378) Less: Interest expense (4,222,840) (3,767,053) (3,872,949) 55,771,118 61,089,548 66,660,594

Daily Cash Operating Expenses 152,798 167,369 182,632

Days Cash on Hand 169 149 254

Management Discussion of Financial Results Unaudited Nine-Months Ended March 31, 2018 as Compared to Unaudited Nine-Months Ended March 31, 2017

The Foundation reported change in unrestricted net assets of $22.3 million in the first nine months of Fiscal Year 2018, which is a $19.3 million increase compared to the $3 million change in unrestricted net assets in the first nine months of Fiscal Year 2017. The increase in unrestricted net assets was primarily attributable to release of restricted pledges of $19.5 million as the Foundation received payments on the Advancing the Legacy Pledges. In addition, net theatre activity increased by $3.8 million, excluding the change in net assets released from restrictions.

Total revenues, gains and other support was $73.9 million in the first nine months of Fiscal Year 2018, and total theatre-related expenses (excluding depreciation and amortization expense) were $41.9 million in the first nine months of Fiscal Year 2018, for a change in unrestricted net assets of $32 million. This compares to revenues, gains and other support of $47.8 million, theatre-related expenses (excluding depreciation and amortization expense) of $34.6 million, for a change in unrestricted net assets of $13.2 million for the first nine months of Fiscal Year 2017. The increase over 2018 is attributable to release of restricted pledges of $19.5 million and increase in net theatre activity by $3.8 million, excluding the change in net assets released from restrictions, mainly attributable to success of the Broadway Series and the run of Wicked.

Total attendees were 849,000 for the first nine months of Fiscal Year 2018, which is a 64,000 increase from the first nine months of Fiscal Year 2017.

Net operating income from real estate activities (excluding depreciation and amortization expense) was $947,352 in the first nine months of Fiscal Year 2018, compared to $659,474 in the first nine months of Fiscal Year 2017. This positive variance over prior year was attributable to lower

A-21

operating expenses for the Idea Center and PS 1305 Buildings and the lower expenses associated with Allen Project LLC and 1901 East 13th LLC.

Year Ended June 30, 2017 as Compared to Year Ended June 30, 2016 The Foundation reported a net change in unrestricted net assets of $6.8 million for the Fiscal Year ended June 30, 2017, which is a $4.9 million increase compared to the $1.9 million change in unrestricted net assets for the Fiscal Year ended June 30, 2016. The increase in the change in unrestricted net assets was primarily attributable to a $2.6 million increase in contributions released from restrictions due to payments on the Advancing the Legacy campaign and $1.9 million increase in net theatre activity, excluding the change in net assets released from restrictions.

Total revenues, gains and other support was $70.5 million for the Fiscal Year ended June 30, 2017, and total theatre-related expenses were $55.2 million, for a change in unrestricted net assets related to theatre operations of $15.2 million for the Fiscal Year ended June 30, 2017. This compares to revenues, gains and other support of $57.9 million, theatre-related expenses of $49.9 million, for a change in unrestricted net assets related to theatre operations of $8.0 million for the Fiscal Year ended June 30, 2016. The increase in 2017 is attributable to increase in contributions released from restrictions and $1.9 million increase in net theatre activity, excluding the change in net assets released from restrictions.

Total attendees were 1,054,203 for the Fiscal Year ended June 30, 2017, which is a 13,345 increase from the Fiscal Year ended June 30, 2016.

Decrease in net assets from acquired real estate operations was ($8.7) million for the Fiscal Year ended June 30, 2017, compared to ($6.2) million for the Fiscal Year ended June 30, 2016. This decrease was attributable to decrease of $1.3 million from the Idea Center Building and $652,000 from hotel operations both primarily due to lower revenues.

Investments

The following table sets forth Playhouse Square’s investment portfolio in recent years.

Fair Value Measurements of Investments Fiscal Year Ended June 30 2015 2016 2017 Investments Domestic Common Stock $ 178,039 $ 146,554 $ 194,195 Foreign Preferred Stock* 75,000 20,000 - Mutual Funds: Fixed Income 5,759,917 3,793,347 17,902,673 Equity 20,439,280 21,672,817 26,117,580

Investment in Hanna Annex Manager LLC 641,240 641,240 521,206 $27,093,476 $26,273,958 $44,735,654

*Represents a "Level 3" Investment

Outstanding Indebtedness and Related Commitments

The Foundation has leveraged various types of financing vehicles in order to realize the most economical and practical financing for its strategic priorities. For the Fiscal Year ended June 30, 2017, the Foundation had $131,640,913 of outstanding notes and bonds payable. Of that amount, the Foundation

A-22

categorizes the indebtedness into distinct tranches: (a) Debt Related to Real Estate Holdings; (b) Forgivable Debt; and (c) New Market Tax Credit Project Debt. This is detailed in Table A-8.

Debt Related to Real Estate Holdings. For the Fiscal Year ended June 30, 2017, the Foundation had $35,560,790 outstanding in the form of tax-exempt bonds, bank term loans, and other short-term facilities with private parties. This indebtedness is full recourse to the Foundation.

Forgivable Debt. For the Fiscal Year ended June 30, 2017, the Foundation had $2,130,123 outstanding in the form of loans from the City of Cleveland. These loans pertain to the Foundation itself as well as its real estate subsidiary, PS 1317 LLC.

New Market Tax Credit Project Debt. For the Fiscal Year ended June 30, 2017, the Foundation had $93,950,000 outstanding in the form New Market Tax Credit debt facilities for its Allen Theatre and Middough Projects in the amounts of $37,500,000 and $56,450,000, respectively. This indebtedness is non-recourse to the Foundation, secured by the offsetting Notes Receivable (see Note 5: Notes Receivable in the Foundation’s Fiscal Year 2017 audited financial report).

Future Financings

The Foundation has no material debt issuance plans other than the issuance of the Bonds and the bank facility to finance a portion of the 2018 Project. The Foundation has never failed to timely pay all amounts due for principal and interest on its indebtedness.

OTHER INFORMATION

Derivatives

The Foundation is a party to two interest-rate swap transactions, each with the same counterparty, PNC Bank. The aggregate termination value of those swap transactions as of May 14, 2018 is $69,141 payable to Playhouse Square Foundation.

Employees and Employee Relations

As of June 30, 2017, the Foundation had 462 full-time and part-time employees. Full-time employees are eligible for benefits. Playhouse Square believes that its employee relations are good. The Foundation has six collective bargaining units that represent 19 full-time equivalent employees, including: International Alliance of Theater Stage Employees (Local 27), Theatrical Wardrope Union – ITATSE (Local 883), Studio Mechanics Local – IATSE (Local 209), International Alliance of Theater Stage Employee – Moving Pictures Technician (Local 160), American Federation of Musicians (Local 4), and Teamsters Truck Driver Union (Local 407). There has never been a work stoppage by the Foundation’s employees.

Insurance

Playhouse Square maintains commercial insurance with respect to its property, the operation itself, and its business against casualties, contingencies and risks, in amounts that are deemed appropriate for an entity engaged in the same or similar activities and similarly situated. Playhouse Square believes that such insurance is adequate to protect its property and operations, and Playhouse Square reviews its insurance coverage annually.

Litigation

The Foundation is not subject to pending or threatened material litigation. A-23

Table A-1: Playhouse Square Foundation Consolidated Statement of Activities Year Ended June 30, 2017

Table A-1 Table A-2: Playhouse Square Foundation Consolidated Statement of Activities Year Ended June 30, 2016

Table A-2

Table A-3: Playhouse Square Foundation Consolidated Statement of Activities Year Ended June 30, 2015

Table A-3

Table A-4: Playhouse Square Foundation Comparable Consolidated Statements of Unrestricted Net Asset Activities Years Ended June 30, 2013 through 2017

Table A-4

Table A-5: Playhouse Square Foundation Comparable Consolidated Statements of Financial Position As of June 30, 2013 through 2017

Table A-5

Table A-6: Playhouse Square Foundation

Consolidated Statements of Financial Position As of March 31, 2018 and 2017—Unaudited

March 31, 2018 March 31, 2017 Variance Assets Cash and cash equivalents $31,159,803 $23,635,277 $7,524,526 Restricted cash 1,138,244 1,121,796 16,448 Accounts receivable, net 5,053,595 6,224,829 (1,171,234) Pledges receivable, net 16,708,671 31,266,155 (14,557,484) Prepaid assets and other current assets 2,056,057 3,084,518 (1,028,461) Investments 47,994,728 28,025,283 19,969,445 Property and Equipment 194,973,451 190,832,895 4,140,556 Notes receivable 48,893,000 48,893,000 - Other assets 1,596,687 1,663,622 (66,936) Total Assets $349,574,235 $334,747,375 $14,826,860

March 31, 2018 March 31, 2017 Variance Liabilities and Net Assets Accounts payable-trade $3,220,112 $3,254,801 ($34,689) Advance theater ticket sales 25,275,275 20,408,864 4,866,411 Deferred revenue 8,047,473 7,288,874 758,599 Notes and bonds payable, net 128,633,703 130,475,889 (1,842,186) Other liabilities 12,908,089 13,770,856 (862,767) Total Liabilities 178,084,652 175,199,284 2,885,368

Net Assets Unrestricted 151,980,513 120,723,437 31,257,076 Temporary restricted 18,883,836 33,265,691 (14,381,855) Permanent restricted 4,992,488 4,786,988 205,500 Noncontrolling interests (4,367,254) 771,975 (5,139,229) Total Net Assets 171,489,583 159,548,091 11,941,492

Total liabilities and net assets $349,574,235 $334,747,375 $14,826,860

Table A-6

Table A-7: Playhouse Square Foundation Consolidated Statements Activities—Unrestricted As of March 31, 2018 and 2017—Unaudited

March 31, 2018 March 31, 2017 Variance Revenues, gains and other support: Theatre ticket revenues $35,385,423 $25,435,024 $9,950,399 Real Estate revenues 1,064,781 1,018,131 46,650 Interest and investment gains (losses) 2,564,739 1,438,324 1,126,415 Other operating revenues 8,705,635 8,711,396 (5,761) Contributions 6,742,284 6,819,944 (77,660) Net assets released from restrictions 19,455,550 4,336,897 15,118,653 Total revenue, gains and other support 73,918,412 47,759,716 26,158,696

Theatre related expenses: Theatre 36,272,672 28,948,475 (7,324,197) Management, general and fundraising 4,340,183 4,333,272 (6,911) Interest 432,692 420,882 (11,810) Depreciation and amortization 3,915,990 4,005,395 89,405 Operating 884,567 938,528 53,961 Total expense 45,846,104 38,646,552 (7,199,552)

Change in net theatre operations 28,072,308 9,113,164 18,959,144

Revenues from acquired real estate operations: Real estate revenues 14,370,412 15,038,031 (667,619) Interest and investment income 975,901 1,044,446 (68,545) Total revenues from acquired real estate operations 15,346,313 16,082,477 (736,164)

Expenses from acquired real estate operations: Management and general 2,317,169 2,603,410 286,241 Depreciation and amortization 6,675,844 6,728,562 52,718 Interest Expense 2,442,614 2,479,211 36,597 Other Expenses 9,639,178 10,340,382 701,204 Total expenses from acquired real estate operations 21,074,805 22,151,565 1,076,760

Change in net assets from acquired real estate activities (5,728,492) (6,069,088) 340,596

Change in net assets $22,343,816 $3,044,076 $19,299,740

Table A-7 Table A-8: Playhouse Square Foundation Consolidated Debt Service Schedule As of the Fiscal Year Ended June 30, 2017

Aggregate Debt Service

Debt Service by Type Gross Debt Service

Debt Related to Real Estate Holdings Forgivable Debt New Market Tax Credit Project Debt

FYE 6/30: Principal Interest Debt Service Principal Interest Debt Service Principal Interest Debt Service Principal Interest Debt Service 2018 2,343,297$ 1,072,150$ $ 3,415,447 -$ -$ -$ $ 200,000 2,619,889$ $ 2,819,889 $ 2,543,297 $ 3,692,039 $ 6,235,337 2019 1,709,943 850,890 2,560,833 1,000,000 120,000 1,120,000 50,114,352 1,537,179 51,651,531 52,824,295 2,508,069 55,332,365 2020 6,667,477 719,644 7,387,121 1,130,123 146,412 1,276,535 1,443,944 616,270 2,060,214 9,241,544 1,482,326 10,723,870 2021 1,484,406 594,598 2,079,004 - - - 1,460,551 616,270 2,076,821 2,944,957 1,210,868 4,155,825 2022 1,479,567 561,066 2,040,633 - - - 1,476,968 616,270 2,093,238 2,956,535 1,177,336 4,133,871 2023 1,471,707 527,714 1,999,421 - - - 39,254,185 605,159 39,859,344 40,725,892 1,132,873 41,858,765 2024 1,462,244 494,874 1,957,118 ------1,462,244 494,874 1,957,118 2025 1,465,676 462,246 1,927,922 ------1,465,676 462,246 1,927,922 2026 1,469,141 429,613 1,898,754 ------1,469,141 429,613 1,898,754 2027 1,472,641 396,952 1,869,593 ------1,472,641 396,952 1,869,593 2028 1,476,176 364,266 1,840,442 ------1,476,176 364,266 1,840,442 2029 1,298,630 332,233 1,630,863 ------1,298,630 332,233 1,630,863 2030 1,120,008 301,534 1,421,542 ------1,120,008 301,534 1,421,542 2031 1,120,008 271,506 1,391,514 ------1,120,008 271,506 1,391,514 2032 1,120,008 241,478 1,361,486 ------1,120,008 241,478 1,361,486 2033 1,120,008 211,449 1,331,457 ------1,120,008 211,449 1,331,457 2034 1,120,008 181,421 1,301,429 ------1,120,008 181,421 1,301,429 2035 1,120,008 151,393 1,271,401 ------1,120,008 151,393 1,271,401 2036 1,120,008 121,364 1,241,372 ------1,120,008 121,364 1,241,372 2037 1,120,008 91,336 1,211,344 ------1,120,008 91,336 1,211,344 2038 1,120,008 61,308 1,181,316 ------1,120,008 61,308 1,181,316 2039 1,120,008 31,280 1,151,288 ------1,120,008 31,280 1,151,288 2040 559,804 4,379 564,183 ------559,804 4,379 564,183 TOTAL 35,560,790$ 8,474,694$ 44,035,484$ 2,130,123$ $ 266,412 2,396,535$ 93,950,000$ 6,611,039$ $ 100,561,039 $ 131,640,913 $ 15,352,145 $ 146,993,058

Table A-8 [THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX B-1

Playhouse Square Foundation 2017 Audited Consolidated Financial Statements

[THIS PAGE INTENTIONALLY LEFT BLANK] Playhouse Square Foundation and Subsidiaries

Consolidated Financial Report June 30, 2017

Contents

Independent Auditor's Report 1-2

Financial Statements

Consolidated Statements of Financial Position 3

Consolidated Statements of Activities 4-5

Consolidated Statements of Functional Expenses 6

Consolidated Statements of Changes in Net Assets and Noncontrolling Interests in Subsidiaries 7

Consolidated Statements of Cash Flows 8

Notes to Consolidated Financial Statements 9-28

Supplementary Information

Consolidating Statements of Financial Position 29-30

Consolidating Statements of Activities 31-32

Independent Auditor's Report

Board of Trustees Playhouse Square Foundation Cleveland, Ohio

Report on the Financial Statements We have audited the accompanying consolidated financial statements of Playhouse Square Foundation and Subsidiaries (the Foundation), which comprise the consolidated statements of financial position as of June 30, 2017 and 2016, and the related consolidated statements of activities, functional expenses, changes in net assets and noncontrolling interests in subsidiaries and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Playhouse Square Foundation and Subsidiaries as of June 30, 2017 and 2016, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

1 Independent Auditor’s Report (Continued)

Other Matter Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating information is presented for purposes of additional analysis rather than to present the financial position and results of operations of the individual companies and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The consolidating information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole.

Cleveland, Ohio December 8, 2017

Playhouse Square Foundation and Subsidiaries

Consolidated Statements of Financial Position June 30, 2017 and 2016 2017 2016 Assets Cash and cash equivalents $ 9,509,834 $ 5,539,538 Restricted cash 1,101,519 1,637,289 Accounts receivable, net 4,453,800 6,554,570 Pledges receivable, net 30,821,378 32,529,122 Prepaid and other current assets 2,201,301 2,335,658 Investments 44,735,654 26,273,958 Notes receivable 48,893,000 48,893,000 Other assets 1,539,046 1,599,017 Property and equipment, net 190,652,170 195,743,266

Total assets $ 333,907,702 $ 321,105,418

Liabilities and Net Assets Accounts payable - trade $ 4,679,606 $ 5,042,428 Accounts payable - construction 10,492 779,736 Advance theatre ticket sales 18,416,466 15,128,076 Deferred revenue 6,347,421 6,616,425 Other liabilities 11,209,822 11,362,933 Interest rate swap liability 73,639 330,078 Notes and bonds payable, net 130,218,334 124,755,905 Total liabilities 170,955,780 164,015,581

Net Assets Unrestricted 125,686,069 114,486,609 Temporarily restricted 32,895,491 33,851,509 Permanently restricted 4,786,988 4,786,988 Noncontrolling interests (416,626) 3,964,731 Total net assets 162,951,922 157,089,837

Total liabilities and net assets $ 333,907,702 $ 321,105,418

See notes to consolidated financial statements.

Playhouse Square Foundation and Subsidiaries

Consolidated Statement of Activities Year Ended June 30, 2017

Temporarily Permanently Unrestricted Restricted Restricted Total Revenues, gains and other support: Theatre ticket revenues $ 35,840,287 $ - -$ $ 35,840,287 Real estate revenues 1,392,073 1,392,073 Interest and investment gains 3,256,803 1,320,993 4,577,796 Other operating revenues 11,684,580 11,684,580 Contributions 8,556,845 7,487,953 16,044,798 Net assets released from time restrictions 9,764,964 (9,764,964) - Total revenues, gains and other support 70,495,552 (956,018) - 69,539,534

Theatre related expenses: Theatre expenses 39,787,404 39,787,404 Management, general and fundraising 6,201,887 6,201,887 Depreciation and amortization 5,588,209 5,588,209 Interest expense 615,675 615,675 Operating expense 3,086,861 3,086,861 Total theatre related expenses 55,280,036 - - 55,280,036

Change in net assets related to theatre operations 15,215,516 (956,018) - 14,259,498

Revenues from acquired real estate operations: Real estate revenues 19,767,466 19,767,466 Interest and investment income 1,180,567 1,180,567 Total revenues from acquired real estate operations 20,948,033 - - 20,948,033

Expenses from acquired real estate operations: Operating expense 13,727,412 13,727,412 Management and general 3,857,030 3,857,030 Depreciation and amortization 8,760,169 8,760,169 Interest expense 3,257,274 3,257,274 Total expenses from acquired real estate operations 29,601,885 - - 29,601,885

Change in net assets from acquired real estate operations (8,653,852) - - (8,653,852)

Change in net assets before other income 6,561,664 (956,018) - 5,605,646

Other income: Change in fair value of interest rate swap liability 256,439 256,439 Total other income 256,439 - - 256,439

Change in net assets $ 6,818,103 $ (956,018) -$ $ 5,862,085

See notes to consolidated financial statements.

Playhouse Square Foundation and Subsidiaries

Consolidated Statement of Activities Year Ended June 30, 2016

Temporarily Permanently Unrestricted Restricted Restricted Total Revenues, gains and other support: Theatre ticket revenues $ 31,366,138 $ - $ - $ 31,366,138 Real estate revenues 1,129,281 1,129,281 Interest and investment losses (663,885) (197,542) (861,427) Other operating revenues 11,206,864 11,206,864 Contributions 7,737,838 6,410,780 14,148,618 Net assets released from time restrictions 7,135,072 (7,135,072) - Total revenues, gains and other support 57,911,308 (921,834) - 56,989,474

Theatre related expenses: Theatre expenses 36,796,527 36,796,527 Management, general and fundraising 5,771,746 5,771,746 Depreciation and amortization 5,549,948 5,549,948 Interest expense 568,466 568,466 Operating expense 1,133,239 1,133,239 Total theatre related expenses 49,819,926 - - 49,819,926

Change in net assets related to theatre operations 8,091,382 (921,834) - 7,169,548

Revenues from acquired real estate operations: Real estate revenues 22,133,571 22,133,571 Interest and investment income 1,301,269 1,301,269 Total revenues from acquired real estate operations 23,434,840 - - 23,434,840

Expenses from acquired real estate operations: Operating expense 13,708,417 13,708,417 Management and general 3,679,619 3,679,619 Depreciation and amortization 9,068,220 9,068,220 Interest expense 3,198,587 3,198,587 Total expenses from acquired real estate operations 29,654,843 - - 29,654,843

Change in net assets from acquired real estate operations (6,220,003) - - (6,220,003)

Change in net assets before other income 1,871,379 (921,834) - 949,545

Other income (expense): Debt forgiveness 187,500 187,500 Change in fair value of interest rate swap liability (182,775) (182,775) Total other income (expense) 4,725 - - 4,725

Change in net assets $ 1,876,104 $ (921,834) $ - $ 954,270

See notes to consolidated financial statements.

Playhouse Square Foundation and Subsidiaries

Consolidated Statements of Functional Expenses Years Ended June 30, 2017 and 2016 2017 2016 Theatre expenses: Presentation expenses for Foundation productions $ 23,833,328 $ 21,857,854 Depreciation and amortization 5,588,209 5,549,948 Promotion and advertising 4,039,840 3,445,089 Other operating expenses 3,086,861 1,133,239 Maintenance 1,894,412 1,802,583 Concessions 1,633,179 1,653,465 Ticket office 1,378,108 1,349,792 Community engagement 1,213,356 1,138,385 Front of house and security 1,164,681 1,068,519 Programming 1,081,437 1,023,131 Theatre occupancy 1,027,912 1,083,808 Garage 915,410 916,588 Interest 615,675 568,466 Technical 527,497 479,590 Special events 456,517 395,652 Theatre operations 361,298 380,384 Volunteers 260,429 201,687 Total theatre expenses 49,078,149 44,048,180

Real estate program expenses: Acquired real estate operations 13,727,412 13,708,417 Depreciation and amortization 8,760,169 9,068,220 Interest 3,257,274 3,198,587 Total real estate program expenses 25,744,855 25,975,224

Total program expenses 74,823,004 70,023,404

Management and general expenses - theatre related: Finance department 1,476,172 1,388,993 Marketing department 1,136,356 1,131,442 President's office 798,908 747,300 General 524,326 531,375 MIS department 352,316 309,796 Board 68,049 61,930 Occupancy 4,034 3,295 Total management and general expenses - theatre related 4,360,161 4,174,131

Management and general expenses - acquired real estate operations: Real estate administration 2,643,566 2,445,947 Hotel administration 1,213,464 1,233,672 Total management and general expenses - acquired real estate operations 3,857,030 3,679,619

Total management and general expenses 8,217,191 7,853,750

Fundraising expenses: Development department 1,841,726 1,597,615

Total expenses $ 84,881,921 $ 79,474,769

See notes to consolidated financial statements.

Playhouse Square Foundation and Subsidiaries

Consolidated Statements of Changes in Net Assets and Noncontrolling Interests in Subsidiaries Years Ended June 30, 2017 and 2016

Noncontrolling Controlling Interest Interests Temporarily Permanently Total Unrestricted Restricted Restricted Controlling Unrestricted Net Assets Net Assets Net Assets Interest Net Assets T otal

Net assets, July 1, 2015 $ 108,003,541 $ 34,773,343 $ 4,786,988 $ 147,563,872 $ 8,571,695 $ 156,135,567

Change in net assets 1,876,104 (921,834) - 954,270 - 954,270

Noncontrolling interests in consolidated subsidiaries 4,606,964 - - 4,606,964 (4,606,964) -

Net assets, June 30, 2016 114,486,609 33,851,509 4,786,988 153,125,106 3,964,731 157,089,837

Change in net assets 6,818,103 (956,018) - 5,862,085 - 5,862,085

Noncontrolling interests in consolidated subsidiaries 4,381,357 - - 4,381,357 (4,381,357) -

Net assets, June 30, 2017 $ 125,686,069 $ 32,895,491 $ 4,786,988 $ 163,368,548 $ (416,626) $ 162,951,922

See notes to consolidated financial statements.

Playhouse Square Foundation and Subsidiaries

Consolidated Statements of Cash Flows Years Ended June 30, 2017 and 2016 2017 2016 Cash flows from operating activities: Change in net assets $ 5,862,085 $ 954,270 Adjustments to reconcile change in net assets to net cash provided by operating activities: Unrealized (appreciation) depreciation in investments (4,581,730) 819,518 Loss on OPS restructuring (Note 1) 2,279,249 - Gain from debt forgiveness - (187,500) (Gain) loss from interest rate swap (256,439) 182,775 Loss on write-off of debt issuance costs - 10,000 Loss from investment in Hanna Annex Manager LLC 120,034 - Depreciation and amortization 14,348,378 14,618,168 Contributions received for capital and long-term purposes (450,000) (620,000) Change in operating assets and liabilities: Accounts receivable 840,770 (910,450) Pledges receivable (26,675) 320,992 Prepaid and other current assets 134,357 (657,414) Accounts payable - trade (362,822) 2,113,992 Advance theatre ticket sales 3,288,390 2,139,885 Deferred revenue and other liabilities 293,055 2,452,125 Net cash provided by operating activities 21,488,652 21,236,361

Cash flows from investing activities: Decrease in restricted cash 535,770 1,378,250 Purchase of investment securities (14,000,000) - Increase in other assets (348,275) (39,182) Net purchases of property and equipment (8,319,569) (15,082,668) Decrease in accounts payable - construction (769,244) (410,622) Net cash used in investing activities (22,901,318) (14,154,222)

Cash flows from financing activities: Proceeds from issuance of debt 6,971,496 1,009,015 Payments on debt (1,939,844) (9,819,483) Payment of debt issuance costs (98,690) (10,000) Contributions received for capital and long-term purposes 450,000 620,000 Net cash provided by (used in) financing activities 5,382,962 (8,200,468)

Increase (decrease) in cash and cash equivalents 3,970,296 (1,118,329)

Cash and cash equivalents: Beginning 5,539,538 6,657,867

Ending $ 9,509,834 $ 5,539,538

Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 3,858,993 $ 3,717,853

See notes to consolidated financial statements.

8 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Activities and Summary of Significant Accounting Policies Organization: Playhouse Square Foundation (the Foundation) is a non-profit corporation organized under the laws of the State of Ohio and is generally exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. The Foundation’s purpose is to operate and sustain on a financially viable basis a performing arts and entertainment center presenting and producing works of artistic excellence for the benefit of all citizens. The Foundation is committed in its actions to enhance and develop that portion of downtown Cleveland known as “Playhouse Square” by restoring, renovating, and operating theaters in the Playhouse Square District (the District); by presenting diverse arts programs, and educational activities that develop new audiences and enhance connections with existing audiences within the Northeast Ohio region; and by renovating and developing complimentary commercial and retail properties in the Playhouse Square District.

Principles of consolidation: The consolidated financial statements include the accounts of the Foundation and its wholly-owned subsidiaries:

 Playhouse Square Development Corporation (PSDC) – a real estate holding company which owns or holds leasehold interest in several properties in the Playhouse Square area. PSDC is exempt from federal income taxes under section 501(c)(2) of the Internal Revenue Code;

 PSF Management Company, LLC – a management company formed to manage and lease real property;

 Playhouse Square Holding Company, LLC (PSHC) – a real estate holding company formed to hold investments in PSC Hanna Building LLC and PSC Bulkley Building LLC;

 PSC Bulkley Building LLC (Bulkley) – an entity formed to own and operate a commercial real estate building in the Playhouse Square area;

 Playhouse Square Hotel Limited Partnership (the Wyndham) – an entity formed to operate a luxury hotel (Wyndham Hotel) in the Playhouse Square area. The Wyndham is owned 99% by PSDC and 1% by the Foundation;

 PSF LL1 LLC – an entity formed as the leveraged lender in conjunction with the Middough Project (Note 2);

 PS 1901 LLC – a real estate holding company formed to hold an investment in 1901 East 13th LLC in conjunction with the Middough Project (Note 2);

 Allen Project LLC – an entity formed in connection with the new market tax credit financing for the Allen Theatre Project (Note 2);

 Allen Project Lender LLC – an entity formed as the leveraged lender in conjunction with the Allen Theatre Project (Note 2);

 PSF Blocker LLC – an entity formed to hold an investment in Hanna Annex Manager LLC;

 Ideal Parking LLC – an entity formed to own and operate a parking lot. During the year ended June 30, 2017, this entity was dissolved and its assets were transferred to the Foundation;

 Playhouse Square Hotel, LLC – an entity formed in connection with the conversion of the Wyndham hotel to a Crowne Plaza hotel (Note 16).

9 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Activities and Summary of Significant Accounting Policies (Continued) The consolidated financial statements also include the accounts of the entities in which the Foundation is the controlling member:

 PSC Hanna Building LLC (Hanna) – an entity formed to own and operate a commercial real estate building in the Playhouse Square area. In September of 2008, Parker-Hannifin Corporation (Investor Member) was admitted as the 99.9% member of PSC Hanna Building LLC. Under the new structure, the profits, losses and tax credits are allocated to the Foundation (Managing Member) and the Investor Member as defined by the Operating Agreement.

 PS 1305 Limited Partnership – an entity formed to rehabilitate, develop, own and operate the Cowell and Hubbard Building. In February of 2010, the Parker-Hannifin Corporation was admitted as the 99.9% Limited Partner. Under the new structure, the profits, losses and tax credits are allocated to the Foundation (Managing General Partner) and the Limited Partner as defined by the Partnership Agreement.

 1901 East 13th LLC – an entity formed to acquire and operate the Middough Building (Note 2). The entity is owned .01% by PS 1901 LLC (Managing Member) and 99.99% by Parker-Hannifin Corporation (Investor Member). Profits, losses and tax credits are allocated to the Managing Member and the Investor Member as defined by the Operating Agreement.

 PS 1317 LLC – an entity formed to operate the Haig Building. The entity is owned 0.1% by the Foundation (Managing Member) and 99.9% by Lincoln Electric Company (Investor Member). Profits, losses and tax credits are allocated to the Managing Member and the Investor Member as defined by the Operating Agreement.

 OPS, LLC (OPS) – an entity formed to lease and sublease the Idea Center Building, located adjacent to the performing arts center. In January 2003, OPS entered into a lease agreement with the Foundation to lease the land and building associated with the Idea Center Building for a 75-year lease period, with a 75-year renewal option. Payments of rent, taxes, and utilities to the Foundation, which began on January 1, 2005, eliminate in consolidation. OPS was owned 49.9% by the Foundation (Managing Member) and 50.1% by ideastream, an Ohio non-profit corporation. Effective June 30, 2017, the members agreed to transfer the assets and liabilities of OPS to OPS Investors.

 One Playhouse Square Investors Limited Partnership (OPS Investors) – an entity established to renovate the Idea Center Building as a historical tax credit project. Effective January 2003, OPS Investors entered into a sublease of the land and building from OPS to operate the Idea Center Building for a 75-year lease period, with a 75-year renewal option. Payments of rent, taxes, and utilities to OPS, which began on January 1, 2005, eliminate in consolidation. The Foundation had a 1% ownership interest (Managing General Partner) in the Partnership. In December 2013, the Foundation entered into an Assignment and Assumption Agreement whereby the limited partners exercised an option to assign their partnership interests to the Foundation for nominal consideration. Concurrently, the Foundation entered into a Second Amended and Restated Limited Partnership Agreement (Partnership Agreement) to admit OPS, LLC as a 1% Limited Partner with the Foundation retaining control as the 99% Managing General Partner. OPS Investors’ profits and losses are allocated between the Foundation and the limited partner as defined by the Partnership Agreement. Effective June 30, 2017 and concurrent with the assumption of OPS’ assets and liabilities, a Third Amended and Restated Limited Partnership Agreement was executed by which the Foundation maintains 50% ownership as the 1% Managing General Partner and 49% Limited Partner, and ideastream attains a 50% noncontrolling interest as a Limited Partner. The lease between OPS and the Foundation was assumed by OPS Investors. All agreements between OPS and OPS Investors have been terminated and all intercompany balances have been netted as of June 30, 2017.

The amounts of net assets allocated to the noncontrolling members in the above entities are reflected as noncontrolling interests in the consolidated financial statements. All significant intercompany accounts and transactions have been eliminated. 10 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Activities and Summary of Significant Accounting Policies (Continued) Basis of presentation: The Foundation recognizes contributions, including unconditional promises to give, as revenue in the period received. Net assets, revenues, and gains and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the Foundation and changes therein are classified and reported as follows:

 Unrestricted - Net assets that are not subject to donor-imposed restrictions or were derived from operations of the Foundation.

 Temporarily restricted - Net assets subject to donor-imposed restrictions that may or will be met either by actions of the Foundation and/or the passage of time. As the restrictions are satisfied, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the accompanying consolidated financial statements as net assets released from restrictions.

 Permanently restricted - Net assets subject to donor-imposed restrictions that the resources be maintained in perpetuity by the Foundation. The donors of these assets permit the Foundation to use all or part of the income earned on related investments for general or specific purposes.

The consolidated statements of financial position are presented in an unclassified manner but in order of liquidity.

Cash and cash equivalents: Cash and cash equivalents include cash on hand, certificates of deposit, and short-term investments with original maturities of three months or less. The Foundation has cash on hand at financial institutions which may, at times, exceed federally insured amounts. As a result, the Foundation is subject to custodial credit risk.

Restricted cash: The Foundation has restricted cash related to the following as of June 30:

2017 2016

Construction and bank fees - Middough Project $ 764,121 $ 895,494 Construction and bank fees - Allen Theatre Project 337,398 589,648 Ohio Energy Loan escrow - 2,147 Other - 150,000 $ 1,101,519 $ 1,637,289

Accounts receivable: The Foundation’s accounts receivable consist mainly of trade receivables generated during the normal course of business and amounts due on the Foundation’s fixed step rental agreements that are recognized on a straight-line basis.

Allowance for uncollectible accounts receivable: The Foundation uses the allowance method to account for uncollectible accounts. Management performs a monthly review of outstanding receivables, which includes a review of the age of the total receivables as well as an analysis of individual balances which are dated. Accounts which are deemed uncollectable will be sent to collection based on specific identification. The Foundation does not charge interest on past due receivables. Based on management’s review of amounts outstanding and historical collection, an allowance for doubtful accounts receivable of $191,059 and $243,062 has been recorded at June 30, 2017 and 2016, respectively.

11 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Activities and Summary of Significant Accounting Policies (Continued) Pledges and contributions: Unconditional contributions received are recognized as revenue when the donor’s commitment is received and are recorded at the estimated present value of the future cash flows, net of allowances. Promises made that are designated for future periods or restricted by the donor for specific purposes are reported as temporarily or permanently restricted support. Conditional promises are recorded when donor restrictions are substantially met.

Except for volunteer services, the estimated value of contributed services and facilities is recorded as contributions in kind and is included with revenues and expenses. Volunteer services are neither recorded as contributions nor included in expenses because their value is not determinable and do not meet the requirements for recognition.

Contributions concentration: Contributions received from single donors during the years ended June 30, 2017 and 2016 amounted to $2,500,000 and $2,000,000, respectively, which represent approximately 16% and 14% of total contributions, respectively.

Investments: Investments in equity securities with readily determinable fair values and in debt securities are measured at fair value in the consolidated statements of financial position based on quoted market prices. Gains and losses on such investments are reported in the consolidated statements of activities as increases or decreases in unrestricted net assets unless their use is temporarily or permanently restricted by donor-imposed restrictions.

Investments in area development: In September 2012, PSC Hanna Building LLC sold substantially all of the real estate known as the Hanna Annex (excluding the Hanna Theatre) to a residential housing developer who converted the real estate into 102 apartment units. Hanna Annex Manager LLC was formed as part of this tax credit project to hold the managing membership interest in Hanna Annex, LLC. The Foundation acquired a 25% membership interest in Hanna Annex Manager LLC for $750,000. The Foundation’s investment is accounted for using the equity method of accounting. During the years ended June 30, 2017 and 2016, the Foundation recognized a loss of $120,034 and $0, respectively from this investment. The Foundation made no cash contributions and received no cash distributions from Hanna Annex Manager LLC during the years ended June 30, 2017 or 2016. Summarized financial information as of June 30 is as follows: 2017 2016

Assets $ 9,284,402 $ 9,652,011 Liabilities 3,975,328 3,974,428 LLC Member capital 5,309,074 5,677,583 Net loss (369,379) (2,220)

Income on investments is recorded when earned.

Property and equipment: The costs of buildings, leasehold improvements, and equipment are capitalized. Depreciation is computed using the straight-line method, based on the estimated useful lives of the assets. Estimated lives range from 30 years for buildings, 5 years for building improvements, 5-30 years for theatre improvements, 3-15 years for equipment and improvements, and 5-31 years for the garage. Upon disposal of an asset, the cost of the asset and the related accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of activities. Expenditures for repairs and maintenance are charged to expense when incurred. Assets donated are recorded at estimated fair value at the date of contribution.

12 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Activities and Summary of Significant Accounting Policies (Continued) Valuation of long-lived assets: The Foundation reviews long-lived assets and certain identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the estimated fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell. No impairment issues were identified by management during the years ended June 30, 2017 and 2016.

Other assets and other liabilities: Included in other assets are leasing commissions, which are amortized over the lives of the associated leases beginning in the year the respective lease agreement becomes effective. Other liabilities include acquired below market leases, which are amortized over the remaining terms of the acquired leases.

Debt issuance costs: The Foundation has incurred debt issuance costs totaling $4,296,972 and $4,198,282 as of June 30, 2017 and 2016, respectively, that are being amortized over the terms of the related debt agreements. The remaining unamortized debt issuance costs are presented as a reduction of the principal balance on the related notes and bonds payable and totaled $1,422,579 and $1,853,356 at June 30, 2017 and 2016, respectively.

Income taxes: The Internal Revenue Service (IRS) has determined the Foundation to be exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code.

The Foundation adopted the Accounting for Uncertainty in Income Taxes Topic of the Accounting Standards Codification (ASC), which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. Under this guidance, the Foundation may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. At June 30, 2017 and 2016, management has evaluated the Foundation’s tax positions and has concluded that the Foundation has taken no uncertain tax positions that require adjustment to the consolidated financial statements to comply with provisions of this guidance.

Tax returns filed by the Foundation are subject to examination by the IRS up to three years from the filing date of each return. Forms 990 and 990T filed by the Foundation are no longer subject to examination for the years 2013 and prior.

Revenues: Revenues from ticket sales are recognized when the related performance occurs. Cash received in advance of performances is presented as advance theatre ticket sales in the consolidated statements of financial position. Other operating revenues are recognized when the related service is performed. Rental revenue is principally derived from commercial leases, which are accounted for as operating leases. Accordingly, rental revenue is recorded for the period of occupancy using the effective monthly rent, which is the average monthly rent during the term of the lease. Revenues from the Wyndham are derived from room rentals, banquet and conference facilities, and other related food and beverage services. Revenue is recognized when rooms are occupied or after services have been rendered.

Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. 13 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Activities and Summary of Significant Accounting Policies (Continued) Financial instruments: The Foundation is required to disclose fair value information about financial instruments, whether or not recognized on the consolidated statements of financial position. The Foundation’s management believes that the carrying values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses are reasonable estimates of their fair value due to the short-term nature of these financial instruments. The Foundation has debt instruments with favorable terms resulting from tax credit financing and other incentives. The Foundation’s management believes these debt instruments would not be otherwise available at comparable terms and the fair value of the long-term debt would be significantly less than the carrying value based upon currently available terms from a traditional lender.

Derivative instruments: The Foundation has entered into interest rate swap agreements to reduce the costs of and exposure to significant, unanticipated fluctuations caused by interest-rate volatility on certain variable rate debt. The Foundation’s goal is to lower (whenever possible) the cost of its borrowed funds. In accordance with the Accounting for Derivative Instruments and Hedging Activities Topics of the ASC, the Foundation recognizes its derivative financial instruments as either assets or liabilities at fair value in the consolidated statements of financial position. The fair values of the interest rate swaps reflect the present value of the future potential gains or losses if settlement were to take place on the statement of financial position date. The derivative instruments are not designated as a hedging instruments and, therefore, gains and losses on the derivative instruments are recorded as other income (expense) in the consolidated statements of activities during the period of change.

Conduit bond obligor: The Foundation has evaluated guidance issued by the Financial Accounting Standards Board (FASB) on the Applicability of Certain Disclosure and Interim Reporting Requirements for Obligors for Conduit Debt Securities. This guidance extended the reach and clarified the definition of a public business enterprise to certain nonpublic or not-for-profit entities that meet the definition of a public business enterprise under this guidance. Among other requirements, the guidance requires the adoption of certain FASB standards in accordance with public company practices. Management has determined that the Foundation does meet the definition of a public business enterprise under this guidance as of and for the years ended June 30, 2017 and 2016.

Recently issued accounting standards: In May 2014, the FASB issued Accounting Standard Update (ASU) 2014-09, “Revenue from Contracts with Customers (Topic 606)”. This ASU provides a robust framework for addressing revenue recognition issues and, upon its effective date, replaces almost all existing revenue recognition guidance, including industry-specific guidance, in current U.S. GAAP. In August 2015, the FASB issued ASU 2015-14 which defers the effective date of ASU 2014-09 by one year. This ASU is effective for fiscal years beginning after December 15, 2017. The Foundation is currently evaluating the impact this statement will have on its consolidated financial statements beginning with the fiscal year ending June 30, 2019. Early adoption is not permitted.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the statement of financial position for all leases with terms longer than 12 months, along with additional qualitative and quantitative disclosures. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of activities. This ASU is effective for fiscal years beginning after December 15, 2018. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements, with certain practical expedients available. The Foundation is currently evaluating the impact this statement will have on its consolidated financial statements beginning with the fiscal year ending June 30, 2020. Early adoption is permitted.

14 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Activities and Summary of Significant Accounting Policies (Continued) In August 2016, the FASB issued ASU 2016-14, “Not-for-Profit Entities, (Topic 958) Presentation of Financial Statements of Not-for-Profit Entities”. The objective of this statement is to improve the current net asset classification requirements and information presented in financial statements and notes about an organization’s liquidity, financial performance and cash flows. This ASU is effective for fiscal years beginning after December 15, 2017. The Foundation is currently evaluating the impact this statement will have on its consolidated financial statements beginning with the fiscal year ending June 30, 2019. Early adoption is permitted.

In November 2016, the FASB issued ASU 2016-18 “Statement of Cash Flows (Topic 213): Restricted Cash (a consensus of the FASB Emerging Issues Task Force).” This ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and the amounts generally described as restricted cash or restricted cash equivalents. This ASU is effective for fiscal years beginning after December 31, 2017, and interim periods within fiscal years. The Foundation is currently evaluating the impact this statement will have on its consolidated financial statements beginning with the fiscal year ending June 30, 2019. Early adoption is permitted, and retrospective application is required.

Note 2. Tax Credit Projects In 2011, the Foundation commenced reconfiguration of the Allen Theatre and construction of two new theatres for use by The Cleveland Playhouse and Cleveland State University’s Department of Theater and Dance (Allen Theatre Project). In addition, the Foundation purchased and commenced renovation of the Middough Building (Middough Project). The costs incurred in connection with the Allen Theatre Project and the Middough Project qualify for federal tax credits under the New Markets Tax Credit Program as well as state tax credits under the State Historic Rehabilitation Tax Credit Program. As a result of the structure of these transactions, multiple layers of debt have been obtained between the Foundation, tax credit entities and the related entities in which the projects reside. The accounting standards do not provide for a right of offset of these layers of debt and, accordingly, the debt related to these transactions has resulted in notes receivable and notes payable in an equal amount of $48,893,000 at June 30, 2017 and 2016.

In order to qualify for new markets and historic rehabilitation tax credits, the Foundation must comply with various federal and state requirements governing the tax credit programs during a defined compliance period. Failure to meet all such requirements may result in generating a lesser amount of tax credits than the expected amount or recapture of tax credits that have been previously claimed. The Foundation is subject to certain indemnification provisions with the various tax credit entities should an event of recapture occur.

Note 3. Pledges Receivable and Commitments During 2014, the Foundation commenced an ‘Advancing the Legacy’ Campaign to raise $100 million for capital improvements, endowment growth, neighborhood transformation, educational programming and new productions. At June 30, 2017 and 2016, the outstanding gross Campaign pledges were approximately $34.882 million and $34.380 million, respectively. In addition to this campaign, the Foundation also receives pledges from various sources for general and specific purposes. Pledges to be received beyond one year are discounted for the time value of money. Based on management’s review of the outstanding pledge balances and historical collection rates, an allowance for uncollectible pledges has been deemed unnecessary at June 30, 2017 and 2016.

15 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 3. Pledges Receivable and Commitments (Continued) The following represents a schedule of anticipated collection for pledges receivable at June 30:

2017 2016

In one year or less $ 18,008,168 $ 18,151,388 One to five years 8,014,426 9,908,085 Over five years 10,441,980 9,725,000 Greater than five years 36,464,574 37,784,473 Less discount to present value (5,643,196) (5,255,351)

$ 30,821,378 $ 32,529,122

Note 4. Investments The carrying value of the Foundation’s investments consisted of the following at June 30:

2017 2016

Common stock $ 194,195 $ 146,554 Preferred stock - 20,000 Fixed income mutual funds 17,902,673 3,793,347 Equity mutual funds 26,117,580 21,672,817 Investment in Hanna Annex Manager LLC 521,206 641,240 $ 44,735,654 $ 26,273,958

The above table includes the value of the Foundation’s permanently restricted investments of $4,286,988 at June 30, 2017 and 2016.

Note 5. Notes Receivable Notes receivable consisted of the following at June 30:

2017 2016 Allen Theatre Project Allen Theatre Investment Fund 18: 1.371%, due May 2041 $ 12,766,000 $ 12,766,000 Allen Theatre NMTC Investment Fund LLC: 1.339%, due May 2041 14,940,000 14,940,000 Middough Project 5/3 Middough NMTC Investment Fund LLC: 4.36%, due December 2018 10,729,500 10,729,500 5/3 Middough NMTC Investment Fund II LLC: 4.36%, due December 2018 3,576,500 3,576,500 Huntington Middough Investment Fund, LLC: 4.36%, due December 2018 6,881,000 6,881,000 $ 48,893,000 $ 48,893,000

The Allen Theatre Project notes initially require quarterly interest-only payments, with principal payments beginning July 2018 through maturity in May 2041. The Middough Project notes require interest-only payments with balloon payments due at maturity in December 2018. The notes are secured by the borrowers’ membership interests in the underlying tax credit community development entities (CDE).

16 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 6. Other Assets Other assets consisted of the following at June 30: 2017 2016

Lease commissions $ 3,579,390 $ 4,210,134 Other 519,059 267,254 Tenant relocation costs 74,321 75,863 4,172,770 4,553,251 Accumulated amortization (2,633,724) (2,954,234)

$ 1,539,046 $ 1,599,017

Amortization expense of $408,246 and $479,476 was recognized in 2017 and 2016, respectively.

Note 7. Property and Equipment Property and equipment consisted of the following at June 30: 2017 2016

Land $ 15,627,787 $ 15,626,787 Buildings 64,315,392 63,349,681 Building improvements 57,290,534 56,534,407 Theater improvements 112,308,134 113,252,883 Equipment and improvements 82,434,179 82,267,678 Garage 8,656,759 8,756,222 Construction in progress 3,527,460 697,696 344,160,245 340,485,354 Accumulated depreciation (153,508,075) (144,742,088)

$ 190,652,170 $ 195,743,266

Depreciation expense of $13,410,665 and $13,235,860 was recognized in 2017 and 2016, respectively.

Note 8. Other Liabilities Other liabilities consisted of the following at June 30: 2017 2016

Acquired below market leases $ 5,550,885 $ 4,683,992 Accrued real estate taxes 1,154,519 1,272,797 Accrued payroll and related liabilities 2,589,959 2,612,180 Other accrued expenses 1,914,459 2,793,964 $ 11,209,822 $ 11,362,933

17 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 9. Notes and Bonds Payable The Foundation’s notes and bonds payable consisted of the following at June 30:

2017 2016 Operating Debt Cleveland-Cuyahoga County Port Authority Tax Exempt Bonds: 72% of LIBOR plus 2.275%; due December 2039 $ 25,199,980 $ 26,319,988 Ohio Development Services Agency: .75%, due September 2028 3,907,711 4,354,000 City of Cleveland: 4.00%, due January 2019 (1) 1,000,000 829,015 City of Cleveland: 4.00%, due August 2019 (1) 950,123 - Fairfield Investments: 2.60%, due January 2022 94,716 113,924 PlayhouseSquare District Development Corporation: 4.00%, due July 2023 65,508 74,834 Wyndham Hotels and Resorts, LLC: 0%, due July 2017 637,500 787,500

PS 1317 Building City of Cleveland: 6.00%, due December 2019 (1) 180,000 180,000

Idea Center Building Idea Center Building Loan, LIBOR plus 3.00%, due December 2019 5,655,375 -

Allen Theatre Project National City QLICI Loan A: 1.00%, due May 2041 5,846,000 5,846,000 National City Loan B: 1.00%, due May 2041 2,154,000 2,154,000 NEODF IV LLC Loan C: 1.00%, due May 2041 6,920,000 6,920,000 NEODF IV LLC Loan D: 1.00%, due May 2041 2,580,000 2,580,000 Key Community Dev Loan E: 1.00%, due May 2041 14,940,000 14,940,000 Key Community Dev Loan F: 1.00%, due May 2041 5,060,000 5,060,000

Middough Project Taxable Lease Revenue Bond: 4.36%, due December 2018 26,947,458 26,947,458 Huntington Mortgage: 4.36%, due December 2018 552,542 552,542 FTNM-2 CDE Loan A: 3.49%, due December 2018 10,729,500 10,729,500 FTNM-2 CDE Loan B: 3.49%, due May 2023 3,820,500 3,820,500 NEODF VII LLC Loan A: 3.90%, due December 2018 6,881,000 6,881,000 NEODF VII LLC Loan B: 3.90%, due July 2023 2,819,000 2,819,000 CNMIF II (F), LLC Loan E: 3.40%, due December 2018 3,576,500 3,576,500 CNMIF II (F), LLC Loan F: 3.40%, due July 2023 1,123,500 1,123,500 131,640,913 126,609,261 Less debt issuance costs (1,422,579) (1,853,356)

$ 130,218,334 $ 124,755,905

(1) These notes are forgivable over time as the Foundation meets certain requirements as outlined in the respective loan agreements and disclosed below.

Amortization expense of $529,467 and $902,832 related to debt issuance costs was recognized in 2017 and 2016, respectively.

18 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 9. Notes and Bonds Payable (Continued) The annual maturities of long-term debt for each of the next five years and thereafter are as follows:

2018 $ 2,543,297 2019 52,824,295 2020 9,241,544 2021 2,944,957 2022 2,956,535 Thereafter 61,130,285 $ 131,640,913

Operating Debt In December of 2014, the Cleveland-Cuyahoga County Port Authority issued $28,000,000 of Cultural Facility Revenue and Refunding Bonds, Series 2014 on behalf of the Foundation. The Series 2014 bonds bear interest at 72% of LIBOR plus 2.275% (3.03% and 2.46% at June 30, 2017 and 2016, respectively), and require monthly principal payments of $93,334 over the 25-year term. In addition, the Foundation entered into a revolving credit facility with a maximum commitment of $14,000,000. The revolving credit facility bears interest at LIBOR plus 3.00% or the Base rate. The Base rate is the highest of (1) the Prime rate, (2) the Federal Funds Open rate plus .5%, and (3) the daily LIBOR rate plus 1.00%. The revolving credit facility also provides a swing loan commitment up to $1,500,000, provided any draws would not cause the Foundation to exceed the aggregate maximum commitment of $14,000,000. In September 2016, the revolving credit facility was amended to reduce the aggregate maximum commitment to $8,000,000 while any portion of the Idea Center Building loan is outstanding. No funds were drawn on the line of credit or the swing loan at June 30, 2017 and 2016. The initial term of the revolving credit facility is five years with an annual option to extend for an additional year. The revolving credit facility is collateralized by most of the assets of the Foundation, except for the endowment fund, the real and tangible personal property related to all theatres, and all assets of certain subsidiaries as defined in the agreement. The revolving credit facility requires the Foundation to meet certain covenants such as minimum fixed charge coverage and maximum leverage ratios as defined in the agreement.

In June of 2015, the Foundation entered into two interest rate swap agreements with PNC Bank with original notional amounts of $5,000,000 each, which decrease over the terms of the respective swap agreements. The swap agreements effectively modify the Foundation’s exposure to interest rate risk by converting certain of the Foundation’s floating-rate debt to a fixed rate. Under the terms of one of the interest rate swaps, which expires in December 2019, the Foundation pays a fixed interest rate of 3.618% based on a current notional amount of $4,591,834. Under the terms of the other interest rate swap, which expires in June 2025 with an early termination option available in December 2019, the Foundation pays a fixed interest rate of 4.25% based on a current notional amount of $4,591,834. The Foundation receives a variable rate equivalent to 72% of LIBOR plus 2.275% under both swap agreements. The differential to be paid or received is settled monthly as interest rates change. The Foundation is exposed to credit loss in the event of nonperformance by the counterparty to the interest rate swap agreements. The fair values of the interest rate swaps at June 30, 2017 and 2016 totaled $73,639 and $330,078, respectively, and are included in the consolidated statements of financial position as a liability. Although these derivatives are interest rate hedges, the Foundation has chosen not to designate the hedges as effective, and therefore a gain of $256,439 and a loss of $182,775 relating to the changes in fair values of these swap agreements was recognized in the consolidated statements of activities for the years ended June 30, 2017 and 2016, respectively.

19 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 9. Notes and Bonds Payable (Continued) In September of 2013, the Foundation entered into a $4.354 million loan with the Ohio Development Services Agency using funds awarded by the U.S. Department of Energy to construct steam boiler plants and other improvements benefiting four buildings owned by the Foundation. Proceeds from the loan were disbursed from escrow as project costs were incurred and were reflected as restricted cash in the consolidated statements of financial position. The loan was initially non-interest bearing until November 2015. Thereafter, the loan bears interest at .75% plus a .25% servicing fee and requires semi-annual principal and interest payments beginning in March 2016 through maturity in September 2028. The Foundation is also required to achieve an adjusted annual costs savings as defined in the loan agreement over the term of the loan. The loan is secured by an assignment of an annual special assessment, as defined in the loan agreement, which can be levied upon an event of default under the terms of the loan agreement.

In January of 2016, the Foundation entered into a $1 million unsecured forgivable loan with the City of Cleveland (Urban Development Action Grant Repayment Forgivable Loan Agreement). The proceeds reimbursed the Foundation for costs related to the restoration of the Ohio Theater lobby. The loan bears interest at a fixed rate of 4.00%. All principal and interest payments are deferred and payable at maturity in January 2019. If the Foundation meets certain job retainage and other requirements, the loan and all deferred interest will be forgiven at maturity. The Foundation has received loan proceeds totaling $1,000,000 and $829,015 as of June 30, 2017 and 2016, respectively.

In August of 2016, the Foundation entered into a $950,123 unsecured forgivable loan with the City of Cleveland (Urban Development Action Grant Repayment Forgivable Loan Agreement). The proceeds were used for renovation and restoration of the restrooms at the Ohio, State, and Connor Palace Theatres. The loan bears interest at a fixed rate of 4.00%. All principal and interest payments are deferred and payable at maturity in August 2019. If the Foundation meets certain job retainage and other requirements, the loan and all deferred interest will be forgiven at maturity. The Foundation received the total loan proceeds during the year ended June 30, 2017.

In March of 2012, the Foundation entered into a $193,048 unsecured note to finance tenant improvements to the Cowell and Hubbard Building. The loan requires monthly principal and interest payments through January 2022 and bears interest at a fixed rate of 2.60%.

In August of 2013, the Foundation entered into a $100,000 unsecured note with PlayhouseSquare District Development Corporation to provide additional financing for the District redesign project. The note requires monthly principal and interest payments through July 2023 and bears interest at a fixed rate of 4.00%.

In November of 2007, the Foundation entered into an unsecured promissory note with Wyndham Hotels and Resorts, LLC under which it borrowed $1.5 million. The note was interest free and payable up to $150,000 per year based on a cash flow formula. The unpaid balance of the note was due and was paid in full upon termination of the management agreement between Wyndham Hotels and Resorts, LLC and the Foundation in August 2017.

In November of 2007, the Foundation entered into a development incentive unsecured note with Wyndham Hotels and Resorts, LLC. The Foundation borrowed $1.5 million for the Capital Improvement Project of the hotel property. The obligation was interest free and one-eighth of the principal was forgiven without payment on each anniversary date if the management agreement between Wyndham Hotels and Resorts, LLC and the Foundation remained in effect. The Foundation recognized a gain from debt forgiveness in the amount of $187,500 in 2016. The obligation was fully forgiven at June 30, 2016.

20 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 9. Notes and Bonds Payable (Continued) PS 1317 Building In December of 2014, the Foundation entered into a $180,000 forgivable loan agreement with the City of Cleveland under its Vacant Property Initiative Program. The proceeds were designated for renovation of the PS 1317 Building and were received during the year ended June 30, 2016. The loan bears interest at a fixed rate of 6.00%. All principal and interest payments are deferred and payable at maturity in December 2019. If the Foundation meets certain job retainage and other requirements, the loan and all deferred interest will be forgiven at maturity. The loan is secured by a certificate of deposit pledged to the lender.

Idea Center Building In September of 2016, the Foundation and OPS Investors entered into a $5.850 million loan with four banks with PNC Bank as agent and lead arranger (the Idea Center Building Loan). The loan bears interest at the Base Rate Option (equal to the Base Rate plus 3.00%) or the LIBOR Option (equal to LIBOR plus 3.00%) as selected by the Foundation (4.06% at June 30, 2017). The Base Rate is the highest of (1) the Prime rate, (2) the Federal Funds Open Rate plus .5%, or (3) the daily LIBOR Rate plus 1.0%. The Foundation may elect to apply either the Base Rate Option or LIBOR Option in total, or apply different Options to different borrowing tranches with the four banks. The loan requires monthly principal and interest payments with a balloon payment due at maturity in December 2019. The loan is secured by the land and building associated with the Idea Center Building project, an assignment of rents and leases related to the Idea Center Building, selected investment funds from the Foundation’s endowment, and a guarantee from the Foundation. The loan also requires the Foundation to meet certain covenants as required by the revolving credit facility.

Allen Theatre Project The Allen Theatre Project includes six notes issued by three organizations associated with new market tax credits. National City NMTC No. 18 issued notes for $5.846 million and $2.154 million, NEODF IV LLC issued notes for $6.920 million and $2.580 million, and Key Community Development New Markets II LLC issued notes for $14.940 million and $5.060 million. All six notes require interest-only payments at 1.00% with principal payments starting after the seven year tax credit compliance period to fully amortize the principal balance by maturity in May 2041. The notes are secured by the leasehold estates for the Allen Theatre and selected land associated with the Project and a guarantee from the Foundation.

Middough Project The purchase and renovation of the Middough Building was financed by issuance of Taxable Lease Revenue Bonds for $26,947,458. The Bonds require interest-only payments at 4.36% with a balloon payment due at maturity in December 2018. The Bonds are secured by Cleveland State University’s lease for the building. The Bond Trustee, Huntington Bank, also issued a mortgage for $552,542. The mortgage requires interest-only payments at 4.36% with a balloon payment due at maturity in December 2018. The mortgage is secured by the Middough Building.

The Middough Project also includes six notes issued by three organizations associated with new market tax credits. FTNM-2 CDE LLC issued notes for $10.729 million and $3.820 million, NEODF VII LLC for $6.881 million and $2.819 million and CNMIF II (F), LLC for $3.576 million and $1.123 million for the Middough Building purchase and rehabilitation. All six notes require interest-only payments with the principal due in full at maturity in December 2018 or July 2023. All six notes are secured by second and third mortgages on the Middough Building.

Interest expense related to long-term debt for the years ended June 30, 2017 and 2016 was $3,872,949 and $3,767,053, respectively.

21 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 10. Net Assets Net assets are comprised of the following at June 30: 2017 2016 Unrestricted net assets: Net investment in property and equipment $ 107,904,257 $ 118,027,005 Operating 1,519,835 (17,163,147) Board designated endowment 16,261,977 13,622,751 $ 125,686,069 $ 114,486,609 Temporarily restricted net assets: Advancing the Legacy campaign - time restriction $ 29,238,358 $ 29,124,901 Idea Center Project campaign - time restriction - 1,738,419 Power of 3 campaign - time restriction 100,000 384,286 Cumulative endowment earnings - capital preservation of theatres 3,532,133 2,532,349 Other purpose restrictions 25,000 71,554 $ 32,895,491 $ 33,851,509 Permanently restricted net assets: Permanent endowment - capital preservation of theatres 4,286,988 4,286,988 Other restrictions - education 500,000 500,000 $ 4,786,988 $ 4,786,988

Noncontrolling interests $ (416,626) $ 3,964,731

Note 11. Pension Plans Defined contribution plan: The Foundation had a 403(b) defined contribution plan. Under the plan, the Foundation could contribute up to 7.5% of all eligible full-time employees’ annual salaries. Employees became fully vested in the plan after three years of service. Expense for the 403(b) plan for the year ended June 30, 2016 was $540,081. During the year ended June 30, 2016, the Foundation adopted a resolution to terminate the existing 403(b) defined contribution plan effective July 1, 2016, at which time all contributions to the 403(b) defined contribution plan ceased and all participants became 100% vested. The Foundation concurrently adopted a resolution to establish a new 401(k) defined contribution plan that was effective beginning July 1, 2016.

Under the new 401(k) plan, the Foundation will make a 3% safe harbor contribution and a 4.5% nonelective employer contribution of all eligible full-time employees’ annual salaries. Expense for the 401(k) plan for the year ended June 30, 2017 was $547,907.

Defined benefit plan: The Foundation has a non-contributory defined benefit pension plan that covers eligible Category 1 and Category 2 employees as defined by specific job titles. Annual contributions are actuarially determined based upon compensation and bonuses.

The measurement dates used for the valuation of all assets and obligations related to the defined benefit pension plan were June 30, 2017 and 2016. The Plan assets of $1,922,484 and $1,829,488 as of June 30, 2017 and 2016, respectively, are comprised of cash and level 1 investments whose fair values are based on quoted market prices. The accumulated benefit obligation at June 30, 2017 and 2016 totaled $1,928,461 and $1,789,713, respectively. The net periodic pension cost charged to operations was $96,614 and $169,284 for the years ended June 30, 2017 and 2016, respectively.

22 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 11. Pension Plans (Continued) The net unfunded pension liability totaled $5,977 at June 30, 2017 and is recorded in other liabilities in the consolidated financial statements. The net funded pension asset totaled $39,775 at June 30, 2016 and is recorded in prepaid expenses in the consolidated financial statements. The Foundation expects to contribute at least the amount needed to satisfy the as-of-yet undetermined minimum funding requirement for the year ended June 30, 2017.

Calculation of the accumulated benefit obligation and net periodic pension cost is prepared by an actuary using actuarial assumptions, including adjustments to reflect the time value of money (through discounts for interest), rates of return on Plan assets and market performance, mortality assumptions, and the probability of payment between the valuation date and expected date of payment. Significant assumptions underlying the actuarial computations at June 30, 2017 include (a) expected long-term rate of return on plan assets of 2.89%; (b) mortality rates projected from RP-2014 with MP-2016 projection table; and (c) discount rate of 3.20%.

Note 12. Fair Value Measurements The Foundation adopted the provision of the Fair Value Topic of the ASC which provides a framework for measuring fair value under generally accepted accounting principles and requires expanded disclosure summarizing fair value estimates. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Foundation uses various methods including market, income and cost approaches. Based on these approaches, the Foundation often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Foundation utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Foundation is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values.

Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1 — Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 — Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or similar assets or liabilities.

Level 3 — Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

In determining the appropriate levels, the Foundation performs a detailed analysis of the assets and liabilities that are subject to the fair value measurements. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level of any input that is significant to the fair value measurement in its entirety. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.

23 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 12. Fair Value Measurements (Continued) For the fiscal years ended June 30, 2017 and 2016, the application of valuation techniques applied to similar assets and liabilities has been consistent. The following is a description of the valuation methodologies used for instruments measured at fair value:

Common stocks: Valued at the closing price reported on the active market on which the fund is traded.

Preferred stocks: Valued at acquisition cost which approximates fair value due to the limited market activity of the instrument.

Mutual funds: Valued at the net asset value of shares held at year-end.

Interest rate swap liability: Provided by valuation experts using externally developed models that consider observable and unobservable market parameters due to limited market activity of the instruments.

Fair value on a recurring basis: The table below presents the balances of investments measured at fair value on a recurring basis as of June 30: 2017 Total Level 1 Level 2 Level 3 Assets: Domestic common stock $ 194,195 $ 194,195 -$ $ - Mutual funds: Fixed income Corporate and U.S. government short-term bonds 17,902,673 17,902,673 - - Equity: Domestic large blend 10,873,883 10,873,883 - - Foreign large blend 10,334,861 10,334,861 - - Domestic mid-cap blend 4,908,836 4,908,836 - - 44,214,448 $ 44,214,448 $ - $ - Investment in Hanna Annex Manager LLC 521,206 Total investments $ 44,735,654

Liabilities: Interest rate swap liability $ 73,639 $ - $ 73,639 $ - Total liabilities $ 73,639 $ - $ 73,639 $ -

24 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 12. Fair Value Measurements (Continued) 2016 Total Level 1 Level 2 Level 3 Assets: Domestic common stock $ 146,554 $ 146,554 -$ $ - Foreign preferred stock 20,000 - - 20,000 Mutual funds: Fixed income Corporate and U.S. government short-term bonds 3,793,347 3,793,347 - - Equity: Domestic large blend 9,543,758 9,543,758 - - Foreign large blend 7,964,629 7,964,629 - - Domestic mid-cap blend 4,164,430 4,164,430 - - 25,632,718 $ 25,612,718 $ - $ 20,000 Investment in Hanna Annex Manager LLC 641,240 Total investments $ 26,273,958

Liabilities: Interest rate swap liability $ 330,078 $ - $ 330,078 $ - Total liabilities $ 330,078 $ - $ 330,078 $ -

In 2011, the Foundation acquired $75,000 in Level 3 investments. The value of this investment was written down to $20,000 during the year ended June 30, 2016, and written off during the year ended June 30, 2017.

Note 13. Endowment Funds The Foundation’s endowment consists of individual donor-restricted endowment funds established for a variety of purposes. Its endowment includes both donor-restricted endowment funds and funds designated by the Board of Trustees to function as endowments. As required by generally accepted accounting principles, net assets associated with endowment funds are classified and reported based on the existence of donor-imposed restrictions.

25 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 13. Endowment Funds (Continued) Interpretation of relevant law: The Foundation has interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Foundation classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Foundation in a manner consistent with the standard prudence prescribed by UPMIFA. In accordance with UPMIFA, the Foundation will consider the following factors in making a determination to appropriate or accumulate donor restricted endowment funds:

(1) The duration and preservation of the fund (2) The purposes of the donor-restricted endowment fund (3) General economic conditions (4) The possible effect of inflation and deflation (5) The expected total return from income and appreciation of investments (6) Other resources of the Foundation (7) The investment policies of the Foundation

Funds with deficiencies: From time to time, the fair value of assets associated with individual donor- restricted endowment funds may fall below the level that the donor requires the Foundation to retain as a fund of perpetual duration. There are no deficiencies of this nature that are reported in unrestricted net assets as of June 30, 2017 and 2016.

Return objectives and risk parameters: The Foundation has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Foundation must hold in perpetuity. Under this policy, as approved by the Board of Trustees, the endowment assets are invested in a manner that is intended to grow in excess of the spending rate in a conservative manner.

Strategies employed for achieving objectives: To satisfy its long-term rate-of-return objectives, the Foundation relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Foundation targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints.

Spending policy and how the investment objectives relate to spending policy: The Foundation has a policy of appropriating for distribution each year an amount not to exceed 5 percent of the three year rolling average of the endowment fund market value. The Board of Trustees approved a resolution to reduce the maximum allowable appropriation to 4 percent of the three year rolling average of the endowment fund market value effective July 1, 2016. Distribution of funds in excess of the maximum annual pay-out is only permitted if 1) the cumulative total investment return over five consecutive years is in excess of the actual amounts paid-out plus the rate of inflation as measured by the Consumer Price Index and 2) approval of two-thirds of the Foundation’s Trustees who are present at two specifically convened meetings.

26 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 13. Endowment Funds (Continued) Endowment net asset composition by type of fund as of June 30:

2017 Temporarily Permanently Unrestricted Restricted Restricted Total

Donor-restricted endowment $ - $ 3,532,133 $ 4,286,988 $ 7,819,121 Funds functioning as endowment 16,261,977 - - 16,261,977 Total endowment funds $ 16,261,977 $ 3,532,133 $ 4,286,988 $ 24,081,098

2016 Temporarily Permanently Unrestricted Restricted Restricted Total

Donor-restricted endowment $ - $ 2,532,349 $ 4,286,988 $ 6,819,337 Funds functioning as endowment 13,622,751 - - 13,622,751 Total endowment funds $ 13,622,751 $ 2,532,349 $ 4,286,988 $ 20,442,088

Changes in endowment net assets for the years ended June 30:

Temporarily Permanently Unrestricted Restricted Restricted Endowment Endowment Endowment Total

Balance at July 1, 2015 $ 13,638,855 $ 3,124,292 $ 4,786,988 $ 21,550,135 Net depreciation in investments (410,505) (197,542) - (608,047) Appropriations 394,401 (394,401) - - Transfers - - (500,000) (500,000) Balance at June 30, 2016 13,622,751 2,532,349 4,286,988 20,442,088 Net appreciation in investments 2,318,017 1,320,993 - 3,639,010 Appropriations 321,209 (321,209) - - Balance at June 30, 2017 $ 16,261,977 $ 3,532,133 $ 4,286,988 $ 24,081,098

Note 14. Operating Leases Certain tenant leases provide for fixed step rent increases and revenue is recognized for such increases on a straight-line basis over the related lease terms while billings to tenants are based on required minimum rentals in accordance with the related lease agreements. Cumulative revenue recognized in excess of amounts billed to tenants was $814,986 and $1,149,655 as of the years ended June 30, 2017 and 2016, respectively. These amounts are included in accounts receivable and accounts payable in each respective year.

27 Playhouse Square Foundation and Subsidiaries

Notes to Consolidated Financial Statements

Note 14. Operating Leases (Continued) Future minimum rentals to be received under non-cancelable portions of the operating leases for each of the next five years and thereafter are as follows:

2018 $ 9,154,820 2019 35,294,680 2020 6,339,830 2021 4,017,100 2022 3,642,520 Thereafter 23,055,480 $ 81,504,430

The Foundation leases the Connor Palace Theatre under a 133-year lease, which commenced in June 1986 with an annual rental of $10,000 plus payment of a portion of the taxes and insurance. The Connor Palace Theatre is owned by private investors.

The Foundation also leases certain other office equipment and vehicles under various operating leases. Rental expense for the operating leases amounted to $253,948 and $260,622 for the years ended June 30, 2017 and 2016, respectively. Future minimum rental payments for non-cancelable operating leases for each of the next five years and thereafter are as follows:

2018 $ 260,080 2019 254,020 2020 249,120 2021 159,080 2022 42,540 Thereafter 960,000 $ 1,924,840

Note 15. Commitments and Contingencies The Foundation has outstanding construction commitments of approximately $1,071,000 and $129,000 at June 30, 2017 and 2016, respectively.

In June 2017, the Foundation announced the development of a $135 million mixed-use project, consisting of a 34-story apartment tower and adjacent parking garage, within the District. The project is currently in the pre-development phase, and construction is expected to commence during the year ending June 30, 2018. There are no capital construction commitments related to this project as of June 30, 2017.

Note 16. Subsequent Events The Foundation has evaluated subsequent events for potential recognition and/or disclosure through December 8, 2017, the date the consolidated financial statements were available to be issued. Management is disclosing the following subsequent events after June 30, 2017:

 Effective September 2017, the Foundation terminated its management agreement with Wyndham Hotels and Resorts, LLC, and entered into a new agreement with Crowne Plaza. The transition to Crowne Plaza also resulted in capital improvements featuring newly renovated rooms, public spaces, and a new restaurant. The rebranded Crowne Plaza hotel will be self-managed by the Foundation under a newly created entity, Playhouse Square Hotel, LLC.

Supplementary Information

Playhouse Square Foundation and Subsidiaries OK OK OK OK OK OK OK OK OK OK OK OK Consolidating Statement of Financial Position 36 June 30, 2017

Playhouse PSF One Playhouse Square Playhouse Square PSC Hanna PSC Bulkley Management Square Allen Allen Project Foundation Hotel LP Building LLC Building LLC Company LLC Investors LP PS 1305 LP PS 1317 LLC Project LLC Lender LLC 1901 E 13th LLC PSF LL1 LLC PSF Blocker LLC Eliminations Total Assets Cash and cash equivalents $ 8,543,161 $ 2,703 $ - $ - $ - $ 86,054 $ 265,033 $ 253,281 $ - $ 331 $ 333,650 $ 25,621 $ - $ - $ 9,509,834 Restricted cash ------337,398 - 764,121 - - - 1,101,519 Accounts receivable, net 2,310,633 214,440 744,059 137,845 211,391 448,675 51,203 188,827 - 93,741 - 51,772 - 1,214 4,453,800 Accounts receivable - intercompany 114,731,693 - 1,019,455 - 5,927,062 - - - 1,423,521 - 2,219,579 6,408,805 - (131,730,115) - Pledges receivable, net 30,821,378 ------30,821,378 Prepaid and other current assets 1,744,216 201,860 123,552 35,397 - 73,343 11,432 11,501 ------2,201,301 Investments 73,478,342 ------521,206 (29,263,894) 44,735,654 Notes receivable ------27,706,000 - 21,187,000 - - 48,893,000 Other assets 377,212 104,594 710,040 147,629 - 166,729 18,302 247,306 - - 536,051 - - (768,817) 1,539,046 Property and equipment, net 52,191,398 15,534,036 30,957,072 8,951,791 35,994 28,161,517 5,324,902 3,710,442 28,567,761 - 27,630,311 - - (10,413,054) 190,652,170

Total assets $ 284,198,033 $ 16,057,633 $ 33,554,178 $ 9,272,662 $ 6,174,447 $ 28,936,318 $ 5,670,872 $ 4,411,357 $ 30,328,680 $ 27,800,072 $ 31,483,712 $ 27,673,198 $ 521,206 $ (172,174,666) $ 333,907,702

Liabilities and Net Assets Accounts payable - trade $ 3,411,823 $ 119,060 $ 325,212 $ 353,970 $ 11,734 $ 364,727 $ 45,709 $ 47,256 $ 65,000 $ - $ - $ - $ - $ (64,885) $ 4,679,606 Accounts payable - construction 10,492 ------10,492 Accounts payable - intercompany 7,380,899 17,209,452 40,649,174 10,532,348 90,914 1,047,724 7,451,634 3,736,317 3,254,660 27,768,411 11,741,526 - 867,056 (131,730,115) - Advance theatre ticket sales 18,416,466 ------18,416,466 Deferred revenue 6,347,421 ------6,347,421 Other liabilities 2,379,269 1,711,397 582,242 212,563 101,582 271,737 183,805 78,406 50,000 - 5,638,821 - - - 11,209,822 Interest rate swap liability 73,639 ------73,639 Notes and bonds payable, net 30,463,479 637,500 - - - 5,581,990 160,224 180,000 37,500,000 - 28,685,183 26,947,458 - 62,500 130,218,334 Total liabilities 68,483,488 19,677,409 41,556,628 11,098,881 204,230 7,266,178 7,841,372 4,041,979 40,869,660 27,768,411 46,065,530 26,947,458 867,056 (131,732,500) 170,955,780

Net Assets Unrestricted 178,032,066 (3,619,776) (8,002,450) (1,826,219) 5,970,217 21,670,140 (2,170,500) 369,378 (10,540,980) 31,661 (14,581,818) 725,740 (345,850) (40,025,540) 125,686,069 Temporarily restricted 32,895,491 ------32,895,491 Permanently restricted 4,786,988 ------4,786,988 Noncontrolling interests ------(416,626) (416,626) Total net assets 215,714,545 (3,619,776) (8,002,450) (1,826,219) 5,970,217 21,670,140 (2,170,500) 369,378 (10,540,980) 31,661 (14,581,818) 725,740 (345,850) (40,442,166) 162,951,922

Total liabilities and net assets $ 284,198,033 $ 16,057,633 $ 33,554,178 $ 9,272,662 $ 6,174,447 $ 28,936,318 $ 5,670,872 $ 4,411,357 $ 30,328,680 $ 27,800,072 $ 31,483,712 $ 27,673,198 $ 521,206 $ (172,174,666) $ 333,907,702

Playhouse Square Foundation and Subsidiaries OK OK OK OK OK OK OK OK OK OK OK OK Consolidating Statement of Financial Position 36 June 30, 2016

Playhouse PSF One Playhouse Square Playhouse Square PSC Hanna PSC Bulkley Management Square Allen Allen Project Ideal Foundation Hotel LP Building LLC Building LLC Company LLC Investors LP OPS LLC PS 1305 LP PS 1317 LLC Project LLC Lender LLC 1901 E 13th LLC PSF LL1 LLC PSF Blocker LLC Parking LLC Eliminations Total Assets Cash and cash equivalents $ 4,716,763 $ 323,923 $ - $ - $ - $ 173,938 $ 35,717 $ 17,868 $ 228,532 $ - $ 117 $ 17,338 $ 25,342 $ - $ - $ - $ 5,539,538 Restricted cash 2,147 ------150,000 - 589,648 - 895,494 - - - - 1,637,289 Accounts receivable, net 2,652,918 498,462 793,920 165,392 158,241 1,541,071 87 94,997 166,753 - 93,742 336,000 51,773 - - 1,214 6,554,570 Accounts receivable - intercompany 118,708,263 - 1,039,969 - 5,605,463 574,264 27,326,648 - - 1,896,021 - 2,187,915 6,433,649 - 17,823 (163,790,015) - Pledges receivable, net 32,529,122 ------32,529,122 Prepaid and other current assets 2,030,706 260,935 39,310 - 1,344 110 1,350 953 950 ------2,335,658 Investments 56,908,932 ------641,240 - (31,276,214) 26,273,958 Notes receivable ------27,706,000 - 21,187,000 - - - 48,893,000 Other assets 246,729 461 574,182 195,668 - 203,867 - 3,218 283,607 - - 755,555 - - - (664,270) 1,599,017 Property and equipment, net 51,871,400 13,181,633 31,484,837 9,324,317 49,408 25,666,673 4,143,963 6,004,811 4,042,844 29,733,500 - 29,135,871 - - 2,008,820 (10,904,811) 195,743,266

Total assets $ 269,666,980 $ 14,265,414 $ 33,932,218 $ 9,685,377 $ 5,814,456 $ 28,159,923 $ 31,507,765 $ 6,271,847 $ 4,722,686 $ 32,219,169 $ 27,799,859 $ 33,328,173 $ 27,697,764 $ 641,240 $ 2,026,643 $ (206,634,096) $ 321,105,418

Liabilities and Net Assets Accounts payable - trade $ 4,087,581 $ 89,325 $ 389,271 $ 230,888 $ 13,493 $ 205,873 $ - $ 13,777 $ 12,105 $ 65,000 $ - $ - $ - $ - $ - $ (64,885) $ 5,042,428 Accounts payable - construction 779,736 ------779,736 Accounts payable - intercompany 7,977,883 14,329,779 39,110,827 10,716,057 126,516 35,661,591 251,444 7,434,445 3,976,317 3,816,710 27,768,198 11,777,564 - 842,684 - (163,790,015) - Advance theatre ticket sales 15,128,076 ------15,128,076 Deferred revenue 6,616,425 ------6,616,425 Other liabilities 2,105,011 2,013,567 742,062 218,516 34,147 1,100,396 - 229,599 60,438 93,749 - 4,765,448 - - - - 11,362,933 Interest rate swap liability 330,078 ------330,078 Notes and bonds payable, net 30,809,096 787,500 - - - - - 188,758 180,000 37,500,000 - 28,249,343 26,947,458 - - 93,750 124,755,905 Total liabilities 67,833,886 17,220,171 40,242,160 11,165,461 174,156 36,967,860 251,444 7,866,579 4,228,860 41,475,459 27,768,198 44,792,355 26,947,458 842,684 - (163,761,150) 164,015,581

Net Assets Unrestricted 163,194,597 (2,954,757) (6,309,942) (1,480,084) 5,640,300 (8,807,937) 31,256,321 (1,594,732) 493,826 (9,256,290) 31,661 (11,464,182) 750,306 (201,444) 2,026,643 (46,837,677) 114,486,609 Temporarily restricted 33,851,509 ------33,851,509 Permanently restricted 4,786,988 ------4,786,988 Noncontrolling interests ------3,964,731 3,964,731 Total net assets 201,833,094 (2,954,757) (6,309,942) (1,480,084) 5,640,300 (8,807,937) 31,256,321 (1,594,732) 493,826 (9,256,290) 31,661 (11,464,182) 750,306 (201,444) 2,026,643 (42,872,946) 157,089,837

Total liabilities and net assets $ 269,666,980 $ 14,265,414 $ 33,932,218 $ 9,685,377 $ 5,814,456 $ 28,159,923 $ 31,507,765 $ 6,271,847 $ 4,722,686 $ 32,219,169 $ 27,799,859 $ 33,328,173 $ 27,697,764 $ 641,240 $ 2,026,643 $ (206,634,096) $ 321,105,418

Playhouse Square Foundation and Subsidiaries

Consolidating Statement of Activities Year Ended June 30, 2017

Theatre related expenses: Theatre expenses 40,305,789 ------(518,385) 39,787,404 Management, general and fundraising 6,470,427 ------(268,540) 6,201,887 Depreciation and amortization 4,572,559 ------1,165,740 - - - - - (150,090) 5,588,209 Interest expense 315,196 ------375,000 - - - - - (74,521) 615,675 Operating expense 5,317,761 ------(2,230,900) 3,086,861 Total theatre related expenses 56,981,732 ------1,540,740 - - - - - (3,242,436) 55,280,036

Change in net assets related to theatre operations 13,610,690 ------(1,540,740) - - - - - 2,189,548 14,259,498

Revenues from acquired real estate operations: Real estate revenues - 8,461,791 4,756,143 2,554,039 1,470,672 2,175,033 90,834 542,900 661,363 465,000 - 554,108 - - - (1,964,417) 19,767,466 Interest and investment income - - 24,372 - 193,178 470 - - - 787 374,964 627 1,174,909 (120,034) - (468,706) 1,180,567 Total revenues from acquired real estate operations - 8,461,791 4,780,515 2,554,039 1,663,850 2,175,503 90,834 542,900 661,363 465,787 374,964 554,735 1,174,909 (120,034) - (2,433,123) 20,948,033

Expenses from acquired real estate operations: Operating expense - 6,349,325 2,700,028 1,459,729 - 2,666,883 116,678 295,228 239,541 ------(100,000) 13,727,412 Management and general - 1,213,464 824,232 201,961 1,313,650 181,116 - 33,531 35,581 209,737 - 194,813 475 - - (351,530) 3,857,030 Depreciation and amortization - 1,112,503 2,335,365 946,829 20,283 1,376,405 256,332 691,964 372,179 - - 2,177,640 - - - (529,331) 8,760,169 Interest expense - 451,518 613,398 291,655 - 213,067 - 97,945 138,510 - 374,964 1,299,918 1,199,000 24,372 - (1,447,073) 3,257,274 Total expenses from acquired real estate operations - 9,126,810 6,473,023 2,900,174 1,333,933 4,437,471 373,010 1,118,668 785,811 209,737 374,964 3,672,371 1,199,475 24,372 - (2,427,934) 29,601,885

Change in net assets from acquired real estate operations - (665,019) (1,692,508) (346,135) 329,917 (2,261,968) (282,176) (575,768) (124,448) 256,050 - (3,117,636) (24,566) (144,406) - (5,189) (8,653,852)

Change in net assets before other income 13,610,690 (665,019) (1,692,508) (346,135) 329,917 (2,261,968) (282,176) (575,768) (124,448) (1,284,690) - (3,117,636) (24,566) (144,406) - 2,184,359 5,605,646

Other income Debt forgiveness - - - - - 1,544,100 221,800 ------(1,765,900) - Change in fair value of interest rate swap liability 256,439 ------256,439 Total other income 256,439 - - - - 1,544,100 221,800 ------(1,765,900) 256,439

Change in net assets $ 13,867,129 $ (665,019) $ (1,692,508) $ (346,135) $ 329,917 $ (717,868) $ (60,376) $ (575,768) $ (124,448) $ (1,284,690) $ - $ (3,117,636) $ (24,566) $ (144,406) $ - $ 418,459 $ 5,862,085

Playhouse Square Foundation and Subsidiaries

Consolidating Statement of Activities Year Ended June 30, 2016

Theatre related expenses: Theatre expenses 37,259,765 ------(463,238) 36,796,527 Management, general and fundraising 6,022,793 ------(251,047) 5,771,746 Depreciation and amortization 4,156,207 ------1,543,831 - - - - - (150,090) 5,549,948 Interest expense 208,516 ------431,464 - - - - - (71,514) 568,466 Operating expense 1,598,239 ------(465,000) 1,133,239 Total theatre related expenses 49,245,520 ------1,975,295 - - - - - (1,400,889) 49,819,926

Change in net assets related to theatre operations 8,811,839 ------(1,975,295) - - - - - 333,004 7,169,548

Revenues from acquired real estate operations: Real estate revenues - 9,412,015 4,746,483 2,540,301 1,309,442 3,575,385 102,622 530,052 643,161 465,000 - 554,108 - - 38,118 (1,783,116) 22,133,571 Interest and investment income - - 24,372 - 167,964 2,029 - - - 308 374,964 215 1,174,909 - - (443,492) 1,301,269 Total revenues from acquired real estate operations - 9,412,015 4,770,855 2,540,301 1,477,406 3,577,414 102,622 530,052 643,161 465,308 374,964 554,323 1,174,909 - 38,118 (2,226,608) 23,434,840

Expenses from acquired real estate operations: Operating expense - 6,667,823 2,514,561 1,398,516 - 2,503,453 155,293 304,579 243,933 - - - - - 20,295 (100,036) 13,708,417 Management and general - 1,233,672 883,199 220,286 1,130,087 254,314 - 41,048 53,309 197,409 - 52,896 428 - - (387,029) 3,679,619 Depreciation and amortization - 1,092,285 2,516,792 925,289 21,663 1,557,199 249,993 698,974 333,540 - - 2,177,640 - - 3,500 (508,655) 9,068,220 Interest expense - 431,658 552,147 276,759 - 246,240 - 90,567 145,656 - 374,964 1,297,051 1,199,000 24,372 - (1,439,827) 3,198,587 Total expenses from acquired real estate operations - 9,425,438 6,466,699 2,820,850 1,151,750 4,561,206 405,286 1,135,168 776,438 197,409 374,964 3,527,587 1,199,428 24,372 23,795 (2,435,547) 29,654,843

Change in net assets from acquired real estate operations - (13,423) (1,695,844) (280,549) 325,656 (983,792) (302,664) (605,116) (133,277) 267,899 - (2,973,264) (24,519) (24,372) 14,323 208,939 (6,220,003)

Change in net assets before other income 8,811,839 (13,423) (1,695,844) (280,549) 325,656 (983,792) (302,664) (605,116) (133,277) (1,707,396) - (2,973,264) (24,519) (24,372) 14,323 541,943 949,545

Other income (expense) Debt forgiveness - 187,500 ------187,500 Change in fair value of interest rate swap liability (182,775) ------(182,775) Total other income (expense) (182,775) 187,500 ------4,725

Change in net assets $ 8,629,064 $ 174,077 $ (1,695,844) $ (280,549) $ 325,656 $ (983,792) $ (302,664) $ (605,116) $ (133,277) $ (1,707,396) $ - $ (2,973,264) $ (24,519) $ (24,372) $ 14,323 $ 541,943 $ 954,270

32 [THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX B-2

Playhouse Square Foundation 2016 Audited Consolidated Financial Statements

[THIS PAGE INTENTIONALLY LEFT BLANK] Playhouse Square Foundation and Subsidiaries

Consolidated Financial Report June 30, 2016

Contents

Independent Auditor's Report 1-2

Financial Statements

Consolidated Statements of Financial Position 3

Consolidated Statements of Activities 4-5

Consolidated Statements of Functional Expenses 6

Consolidated Statements of Changes in Net Assets and Noncontrolling Interests in Subsidiaries 7

Consolidated Statements of Cash Flows 8

Notes to Consolidated Financial Statements 9-28

Supplementary Information

Consolidating Statements of Financial Position 29-30

Consolidating Statements of Activities 31-32

Independent Auditor's Report

Board of Trustees Playhouse Square Foundation Cleveland, Ohio

Report on the Financial Statements We have audited the accompanying consolidated financial statements of Playhouse Square Foundation and Subsidiaries (the Foundation), which comprise the consolidated statements of financial position as of June 30, 2016 and 2015, and the related consolidated statements of activities, functional expenses, changes in net assets and noncontrolling interests in subsidiaries and cash flows for the years then ended, and the related notes to the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Playhouse Square Foundation and Subsidiaries as of June 30, 2016 and 2015, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

1 Independent Auditor’s Report (Continued)

Cleveland, Ohio October 24, 2016

Playhouse Square Foundation and Subsidiaries

Consolidated Statements of Financial Position June 30, 2016 and 2015 2016 2015 Assets Cash and cash equivalents $ 5,539,538 $ 6,657,867 Restricted cash 1,637,289 3,015,539 Accounts receivable, net 6,554,570 5,644,120 Pledges receivable, net 32,529,122 32,850,114 Prepaid and other current assets 2,335,658 1,678,244 Investments 26,273,958 27,093,476 Notes receivable 48,893,000 48,893,000 Other assets 1,599,017 2,039,311 Property and equipment, net 195,743,266 193,896,458

Total assets $ 321,105,418 $ 321,768,129

Liabilities and net assets Accounts payable - trade $ 5,042,428 $ 2,928,436 Accounts payable - construction 779,736 1,190,358 Advance theatre ticket sales 15,128,076 12,988,191 Deferred revenue 6,616,425 5,359,179 Other liabilities 11,362,933 10,168,054 Interest rate swap liability 330,078 147,303 Notes and bonds payable, net 124,755,905 132,851,041 Total liabilities 164,015,581 165,632,562

Net assets Unrestricted 114,486,609 108,003,541 Temporarily restricted 33,851,509 34,773,343 Permanently restricted 4,786,988 4,786,988 Noncontrolling interests 3,964,731 8,571,695 Total net assets 157,089,837 156,135,567

Total liabilities and net assets $ 321,105,418 $ 321,768,129

See notes to consolidated financial statements.

Playhouse Square Foundation and Subsidiaries

Consolidated Statement of Activities Year Ended June 30, 2016

Temporarily Permanently Unrestricted Restricted Restricted Total Revenues, gains and other support: Theatre ticket revenues $ 31,366,138 $ - -$ $ 31,366,138 Real estate revenues 1,129,281 1,129,281 Interest and investment losses (663,885) (197,542) (861,427) Other operating revenues 11,206,864 11,206,864 Contributions 7,737,838 6,410,780 14,148,618 Net assets released from time restrictions 7,135,072 (7,135,072) - Total revenues, gains and other support 57,911,308 (921,834) - 56,989,474

Change in net assets related to theatre operations 8,091,382 (921,834) - 7,169,548

Change in net assets from acquired real estate operations (6,220,003) - - (6,220,003)

Change in net assets before other income 1,871,379 (921,834) - 949,545

Other income (expense) Debt forgiveness 187,500 187,500 Change in fair value of interest rate swap liability (182,775) (182,775) Total other income (expense) 4,725 - - 4,725

Change in net assets $ 1,876,104 $ (921,834) -$ $ 954,270

See notes to consolidated financial statements.

Playhouse Square Foundation and Subsidiaries

Consolidated Statement of Activities Year Ended June 30, 2015

Temporarily Permanently Unrestricted Restricted Restricted Total Revenues, gains and other support: Theatre ticket revenues $ 26,720,476 $ - $ - $ 26,720,476 Real estate revenues 684,538 684,538 Interest and investment gains 580,381 261,588 841,969 Other operating revenues 10,530,686 10,530,686 Contributions 7,004,066 22,922,636 29,926,702 Net assets released from time restrictions 7,787,179 (7,787,179) - Total revenues, gains and other support 53,307,326 15,397,045 - 68,704,371

Theatre related expenses: Theatre expenses 32,379,860 32,379,860 Management, general and fundraising 5,475,377 5,475,377 Depreciation and amortization 5,105,623 5,105,623 Interest expense 704,496 704,496 Operating expense 733,345 733,345 Total theatre related expenses 44,398,701 - - 44,398,701

Change in net assets related to theatre operations 8,908,625 15,397,045 - 24,305,670

Revenues from acquired real estate operations: Real estate revenues 22,132,457 22,132,457 Interest and investment income 1,300,660 1,300,660 Total revenues from acquired real estate operations 23,433,117 - - 23,433,117

Expenses from acquired real estate operations: Operating expense 13,701,133 13,701,133 Management and general 3,481,403 3,481,403 Depreciation and amortization 9,382,849 9,382,849 Interest expense 3,518,344 3,518,344 Total expenses from acquired real estate operations 30,083,729 - - 30,083,729

Change in net assets from acquired real estate operations (6,650,612) - - (6,650,612)

Change in net assets before other income 2,258,013 15,397,045 - 17,655,058

Other income (expense) Debt forgiveness 187,500 187,500 Write-off of debt issuance costs (735,465) (735,465) Change in fair value of interest rate swap liability (147,303) (147,303) State tax credit proceeds 8,835,198 8,835,198 Total other income (expense) 8,139,930 - - 8,139,930

Change in net assets $ 10,397,943 $ 15,397,045 $ - $ 25,794,988

See notes to consolidated financial statements.

Playhouse Square Foundation and Subsidiaries

Consolidated Statements of Functional Expenses Years Ended June 30, 2016 and 2015 2016 2015 Theatre expenses: Presentation expenses for Foundation productions $ 21,857,854 $ 19,015,094 Depreciation and amortization 5,549,948 5,105,623 Promotion and advertising 3,445,089 2,868,858 Maintenance 1,802,583 1,730,173 Theatre occupancy 1,083,808 1,119,966 Ticket office 1,349,792 1,231,101 Community engagement 1,138,385 1,034,459 Concessions 1,653,465 1,375,785 Garage 916,588 888,237 Programming 1,023,131 961,622 Front of house and security 1,068,519 779,283 Interest 568,466 704,496 Other operating expenses 1,133,239 733,345 Special events 395,652 455,665 Technical 479,590 431,133 Theatre operations 380,384 343,004 Volunteers 201,687 145,480 Total theatre expenses 44,048,180 38,923,324

Real estate program expenses: Acquired real estate operations 13,708,417 13,701,133 Depreciation and amortization 9,068,220 9,382,849 Interest 3,198,587 3,518,344 Total real estate program expenses 25,975,224 26,602,326

70,023,404 65,525,650

Management and general expenses - theatre related: Finance department 1,388,993 1,330,045 Marketing department 1,131,442 1,062,719 President's office 692,300 801,367 General 586,375 594,234 Occupancy 3,295 3,295 MIS department 309,796 242,800 Board 61,930 63,556 Total management and general expenses - theatre related 4,174,131 4,098,016

Management and general expenses - acquired real estate operations: Real estate administration 2,445,947 2,211,728 Hotel administration 1,233,672 1,269,675 Total management and general expenses - acquired real estate operations 3,679,619 3,481,403

Total management and general expenses 7,853,750 7,579,419

Development department 1,597,615 1,377,361

Total expenses $ 79,474,769 $ 74,482,430

See notes to consolidated financial statements.

Playhouse Square Foundation and Subsidiaries

Consolidated Statements of Changes in Net Assets and Noncontrolling Interests in Subsidiaries Years Ended June 30, 2016 and 2015

Noncontrolling Controlling Interest Interests Temporarily Permanently Total Unrestricted Restricted Restricted Controlling Unrestricted Net Assets Net Assets Net Assets Interest Net Assets Total

Net assets, July 1, 2014 $ 92,875,702 $ 19,376,298 $ 4,786,988 $ 117,038,988 $ 8,220,060 $ 125,259,048

Change in net assets 10,397,943 15,397,045 - 25,794,988 - 25,794,988

Noncontrolling interests in consolidated subsidiaries 4,729,896 - - 4,729,896 (4,729,896) -

Transfer - -

Contributions - - - - 5,081,531 5,081,531

Net assets, June 30, 2015 108,003,541 34,773,343 4,786,988 147,563,872 8,571,695 156,135,567

Change in net assets 1,876,104 (921,834) - 954,270 - 954,270

Noncontrolling interests in consolidated subsidiaries 4,606,964 - - 4,606,964 (4,606,964) -

Net assets, June 30, 2016 $ 114,486,609 $ 33,851,509 $ 4,786,988 $ 153,125,106 $ 3,964,731 $ 157,089,837

See notes to consolidated financial statements.

Playhouse Square Foundation and Subsidiaries

Consolidated Statements of Cash Flows Years Ended June 30, 2016 and 2015 2016 2015 Cash flows from operating activities: Change in net assets $ 954,270 $ 25,794,988 Adjustments to reconcile change in net assets to net cash provided by operating activities: Unrealized (depreciation) appreciation in investments 819,518 (760,369) Gain from debt forgiveness (187,500) (187,500) Loss from interest rate swap 182,775 147,303 Loss on write-off of debt issuance costs 10,000 735,465 Depreciation and amortization 14,618,168 14,488,472 Contributions received for capital and long-term purposes (620,000) (759,154) Change in operating assets and liabilities: Accounts receivable (910,450) 68,350 Pledges receivable 320,992 (16,604,806) Prepaid and other current assets (657,414) (202,223) Accounts payable - trade 2,113,992 (890,559) Advance theatre ticket sales 2,139,885 3,928,343 Deferred revenue and other liabilities 2,452,125 4,280,101 Net cash provided by operating activities 21,236,361 30,038,411

Cash flows from investing activities: Decrease in restricted cash 1,378,250 3,768,079 Purchase of investment securities - (7,352,500) Proceeds from investment by noncontrolling interest - 5,081,531 Note receivable issued to Brauhaus Cleveland, LLC - (100,000) Proceeds from Brauhaus Cleveland, LLC note receivable - 450,000 (Increase) decrease in other assets (39,182) 26,369 Net purchases of property and equipment (15,082,668) (9,920,501) Decrease in accounts payable - construction (410,622) (210,956) Net cash used in investing activities (14,154,222) (8,257,978)

Cash flows from financing activities: Proceeds from issuance of debt 1,009,015 28,000,000 Payments on debt (9,819,483) (45,130,980) Payment of debt issuance costs (10,000) (685,448) Contributions received for capital and long-term purposes 620,000 759,154 Net cash used in financing activities (8,200,468) (17,057,274)

(Decrease) increase in cash and cash equivalents (1,118,329) 4,723,159

Cash and cash equivalents: Beginning 6,657,867 1,934,708

Ending $ 5,539,538 $ 6,657,867

Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 3,717,853 $ 4,265,553