NEW ISSlJE - BOOK-ENTRY-ONLY NO RATING In the opinion of Stradling Y1Jcca Carlson & Rauth, a Professional Corporation, Newport Beach, ("Bond Counsel''), under existing statutes, regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements described morefully herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of' tax preference purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. in the .further opinion of Bond Counsel. interest (and original issue discount) on the Bonds is exempt .from State California personal income tax. The difference between the issue price of a Bond (the first price at which a substantial amount of Bonds maturiry are to be sold 10 the puhlic) and the stated rede1nption price at m.aturity 1vith respect to such Bond constitutes original issue discount. See "TlL'.( EXEMPTION" herein.

County of Ventura State of California $8,800,000 COMMUNITY .FACILITIES DISTRICT NO. 2004-1 (TOWN CENTER PROJECT) 011' THE CITY OF SIMI VALLEY 2005 SPECIAL TAX BONDS

Dated: Date of Delivery Due: September 1, as shown on the inside page The Community Facilities District No. 2004-1 (Town Cemer Project) of the City of Simi Valley 2005 Special Tax Bonds (the '·Bonds") are being issued and delivered lo finance various public improvements needed to develop property located within Community Facilities District No. 2004-1 of the City of Simi Valley (the "District"). The District is located in the City of Simi Valley ( the "City"), County of Ventura, California. The Bonds are authorized to be issued pursuant to the Mello-Rous Community Facilities Act of 1982, as amended (Sections 53311 ct seq. of r.he Government Code of the State of California), and pursuant to an Indenture, dated as of January 1, 2005 (the "Indenture"), by and between the District and The Bank of New York TrnstCompany, N.A., as fiscal agent (the "Fiscal Agent"). Interest on the Bonds will be capitalized through February l, 2006. Tbe Bonds are special limited obligations of the District and are payable solely from revenues derived from certain annual Special Taxes (as defined herein) to be levied on and collected from the owners of the taxable land within the District and from certain other funds pledged under the Indenture, all as further described herein. The Special Taxes are to be levied according to the rates and method of apportionment approved by the City Council of the City and the qualified elector within the District. See ''SOURCES OF PAYMENT FOR THE BONDS - Rate and Method of Apportionment" and APPENDIX A-- "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES." The City Council of tbe City is the legislative body of the District. The Bonds are issuable in fully registered form and when issued will be registered in the name of Cede & Co., as nominee of The Depository TrnstCompany, New York, New York ( "DIC"). Individual purchases may he made in principal amounts of $5,000 and integral multiples thereof and v:ill he in book-entry form only. Purchasers of Bonds will not receive certificates representing their benefo:ipJ ownership of the Bonds but will receive credit balances on !he booh of their re�pective nominees. The Bonds will not be transferable or exchangeable except for transfer to another nominee of DTC or as otherwise described herein. Interest on 1he Bonds will be payable on March l, 2005 and semiannually thereafter on each September l and March 1. Principal of and interest on the Bonds will be paid by the Fiscal Agent to DTC for subsequent disbursement to DTC Participants who are obligated to remit such payments to the beneficial owners of the Bonds. See "THE BONDS -- Description of the Bonds" and APPENDIX G - "BOOK-ENTRY-ONLY SYSTEM" herein. Neither the faith and credit nor the taxing power of the City, the County of Ventura, the State of California or any political subdivision f thereo is pledged to the payment of the Bonds. Except for the Special Taxes. no other taxes are pledged to the payment of the Bonds. The Bonds are special limited tax: obligations of the District payable solely from Special Taxes and other amounts held under the Indenture as more fully described herein. The Bonds are subject to optional redemption and mandatory sinking fund redemption prior to maturity as set forth herein. See "THE BONDS - Redemption" herein. CERTAIN EVENTS COULD AFFECT THE ABILITY OF THE DISTRICT TO PAY THE PRINCIPAL OF AND INTEREST ON THE BONDS WHEN DUK AS A RESULT, THE BONDS INVOLVE SIGNIFICANT RISKS, AND THE BONDS ARE NOT SUITABLE INVESTMENTS FOR ALL INVESTORS. SEE THE SECTION OF THIS OF.FICIAL STATEMENT ENTITLED "SPECIAi, RISK }?ACTORS" FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD HE CONSIDERED, IN ADDITION TO THE OTHER MATTERS SET FORTH HEREIN, lN EVALUATING THE INVESTMENT QUALITY OF THE BONDS. 1bis cover page contains certain information for general reference only. It is not intended to be a summary of the security or terms of this issue. Investors are advised to read the entire OfficialStatement to obtain infmmmion essential to tbc making of an infomiedinvestment decision.

fvlATURITY SCHEDULE (See Inside Cover Page)

The Bonds are when, as and if issued and accepted by the Underwriter, subject to appmval as to their legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, Nev,,port Beach, California, Bond Counsel, and sul�ject to certain other conditions. Certain legal matters will be passed on for the City and the District by David H. Hirsch, in his capacity as City lHtorney. It is anticipated that the Bonds in book-·enrry form will be available for delivery w DTC in New York, New York, on or about February 17, 2005. STONE & YOUNGBERG LLC

Dated: January 26. 2005 MATURITY SCHEDULE (Base CUSIPt: 828630)

Maturity Date Principal Interest Maturity Date Principal Interest (September I) Amount Rate Yield CUSIPf (September I) Amount Rate Yield CUSIPf 2006 $ 25,000 2.50% 2.50% AAS 2016 $160,000 4.65% 4.65% AL 1 2007 35,000 2.85 2.85 AB 3 2017 180,000 4.75 4.75 AM9 2008 45,000 3.20 3.20 AC 1 2018 200,000 4.85 4.85 AN7 2009 55,000 3.45 3.45 AD9 2019 220,000 4.95 4.95 AP2 2010 70,000 3.75 3.75 AE7 2020 245,000 5.05 5.05 AQO 2011 80,000 4.00 4.00 AF4 2021 270,000 5.15 5.15 AR8 2012 95,000 4.15 4.15 AG2 2022 295,000 5.20 5.20 AS6 2013 110,000 4.35 4.35 AHO 2023 325,000 5.25 5.25 AT4 2014 125,000 4.45 4.45 AJ6 2024 355,000 5.30 5.30 AU 1 2015 140,000 4.55 4.55 AK3 2025 390,000 5.35 5.35 AV9

$1,930,000 5.40% Term Bonds due September 1, 2029 Price: 99.325, CUSIPf 82863U AZ O $3,450,000 5.50% Term Bonds due September 1, 2034 Price: 100.000, CUSIPf 82863U BE 6

f Copyright 2004, American Bankers Association. CUSIP data herein is provided by Standard & Poor's, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. Neither the Underwriter nor the District takes any responsibility for the accuracy of such data. CITY OF SIMI VALLEY COUNTY OF VENTURA STATE OF CALIFORNIA

CITY COUNCIL Paul Miller, Mayor Barbra Williamson, Mayor Pro Tern Glen T. Becerra, Council Member Steven T. Sojka, Council Member Michelle S. Foster, Council Member

CITY OFFICIALS Mike Sedell, City Manager David H. Hirsch, City Attorney Steve Elam, Director of Administrative Services Timothy P. Nanson, Director of Public Works Dan Paranick, Deputy City Manager Alice Redondo, Assistant City Clerk

BOND COUNSEL REAL ESTATE APPRAISER Stradling Yocca Carlson & Rauth, Cushman & Wakefield, Inc. a Professional Corporation Portland, Oregon Newport Beach, California

SPECIAL TAX CONSULTANT FISCAL AGENT David Taussig & Associates, Inc. The Bank of New York Trust Company, N.A. Newport Beach, California Los Angeles, California Except where otherwise indicated, all information contained in this Official Statement has been provided by the City and the District. No dealer, broker, salesperson or other person has been authorized by the City, the District, the Fiscal Agent or the Underwriter to give any information or to make any representations in connection with the offeror sale of the Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the City, the District, the Fiscal Agent or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offerto buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.

This Official Statement is not to be construed as a contract with the purchasers or Owners of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. This OfficialStatement, including any supplement or amendment hereto, is intended to be deposited with a nationally recognized municipal securities depository.

The Underwriter has provided the followingsentence forinclusion in this OfficialStatement:

The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

The information set forth herein has been obtained from sources which are believed to be reliable but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the City, the District, the Fiscal Agent or the Underwriter. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the District or any other parties described herein since the date hereof. All summaries of the Indenture or other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City forfurther information in connection therewith.

All information considered material to the making of an informed investment decision with respect to the Bonds is contained in this Official Statement. While the City maintains an Internet website for various purposes, none of the information on its website is incorporated by reference into this Official Statement. Any such information that is inconsistent with the information set forth in this Official Statement should be disregarded.

Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as "plan," "expect," "estimate," "project," "budget" or other similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information under the caption "THE COMMUNITY FACILITIES DISTRICT" and "THE DEVELOPMENT AND PROPERTY OWNERSHIP."

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 DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENT SET FORTH IN THIS OFFICIAL STATEMENT.

IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH 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 HA VE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HA VE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. [THIS PAGE INTENTIONALLY LEFT BLANK] Table of Contents

INTRODUCTION ...... 1 The District ...... 1 Authority for Issuance ...... 2 Appraisal ...... 2 Property Ownership and Development Status ...... 3 Sources of Payment for the Bonds ...... 5 Description of the Bonds ...... 6 Tax Matters ...... 7 Professionals Involved in the Offering ...... 7 Continuing Disclosure ...... 7 Bond Owners' Risks ...... 8 Other Information ...... 8 Update of Certain Information Since the Date of the Preliminary Official Statement...... 8 ESTIMATED SOURCES AND USES OF FUNDS ...... 9 THE BONDS ...... 9 Authority for Issuance ...... 9 Purpose of the Bonds ...... 10 Description of the Bonds ...... 10 Redemption ...... 11 Selection of Bonds for Redemption ...... 11 Notice of Redemption ...... 12 Registration, Transfer and Exchange ...... 12 Debt Service Schedule for the Bonds ...... 13 SOURCES OF PAYMENT FOR THE BONDS ...... 13 Special Taxes ...... 14 Rate and Method of Apportionment ...... 14 Estimated Special Tax Proceeds ...... 17 Prepayment of Special Taxes ...... 19 Collection and Application of Special Taxes ...... 19 Proceeds of Foreclosure Sales ...... 20 Reserve Fund ...... 21 Parity Bonds ...... 21 THE COMMUNITY FACILITIES DISTRICT ...... 21 General Description of the District ...... 21 Description of Acquisition Improvements ...... 21 Principal Taxpayers ...... 24 Direct and Overlapping Debt ...... 25 Estimated Appraised Value-to-Lien Ratio ...... 26 Estimated Assessed Value-to-Lien Ratio ...... 26 District Map Overview ...... 28 THE DEVELOPMENT AND PROPERTY OWNERSHIP...... 29 General Description and Location of the District ...... 29 The Developers ...... 30 The Development Plans ...... 32 Land Use Approvals Regarding the Developments ...... 36 InfrastructureRequirements and Construction Status ...... 37 Estimated Sources and Uses of Funds ...... 37 Appraisal ...... 40 SPECIAL RISK FACTORS ...... 41 Concentration of Ownership ...... 41 Table of Contents (continued)

Impact of Zone Allocations ...... 42 Limited Obligations ...... 43 Insufficiency of Special Taxes ...... 43 Failure to Develop Properties ...... 44 SBl 14 ...... 46 Endangered Species ...... 48 Natural Disasters ...... 48 Hazardous Substances...... 49 Parity Taxes, Special Assessments and Land Development Costs ...... 49 Disclosures to Future Purchasers ...... 50 Special Tax Delinquencies ...... 50 Non-Cash Payments of Special Taxes ...... 51 Payment of the Special Tax is not a Personal Obligation of the Owners ...... 51 Land Values ...... 51 FDIC/Federal Government Interests in Properties ...... 52 Bankruptcy and Foreclosure ...... 52 No Acceleration Provision ...... 54 Loss of Tax Exemption ...... 54 Limitations on Remedies ...... 54 Limited Secondary Market ...... 54 Proposition 218 ...... 54 Ballot Initiatives ...... 55 CONTINUING DISCLOSURE ...... 56 TAX EXEMPTION ...... 56 LEGAL MATTERS ...... 58 LITIGATION...... 58 NO RATING ...... 58 UNDERWRITING ...... 58 FINANCIAL INTERESTS ...... 58 PENDING LEGISLATION ...... 58 ADDITIONAL INFORMATION...... 58

APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES ...... A-1 APPENDIX B APPRAISAL REPORT ...... B-1 APPENDIX C SUMMARY OF INDENTURE ...... C-1 APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE CITY ...... D-1 APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE DEVELOPERS ...... E-1 APPENDIX F FORM OF OPINION OF BOND COUNSEL ...... F-1 APPENDIX G BOOK-ENTRY-ONLY SYSTEM ...... 0-1

ii

[THIS PAGE INTENTIONALLY LEFT BLANK] $8,800,000 COMMUNITY FACILITIES DISTRICT NO. 2004-1 (TOWN CENTER PROJECT) OF THE CITY OF SIMI VALLEY 2005 SPECIAL TAX BONDS

INTRODUCTION

This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described herein. A fu ll review should be made of the entire Official Statement. The sale and delivery of Bonds to potential investors is made only by means of the entire Official Statement. All capitalized terms used in this Official Statement and not defined shall have the meaning set forth in APPENDIX C-"SUMMARY OF INDENTURE" herein.

The purpose of this Official Statement, which includes the cover page, the table of contents and the attached appendices (collectively, the "Official Statement"), is to provide certain information concerning the issuance by Community Facilities District No. 2004-1 (Town Center Project) of the City of Simi Valley (the "District") of the $8,800,000 Community Facilities District No. 2004-1 (Town Center Project) of the City of Simi Valley 2005 Special Tax Bonds (the "Bonds"). The proceeds of the Bonds will be used to construct and acquire various public improvements needed with respect to the proposed development within the District, to fund the Reserve Fund securing the Bonds, to provide capitalized interest on the Bonds and to pay costs of issuance of the Bonds.

The Bonds are authorized to be issued pursuant to the Act (as defined herein), and pursuant to an Indenture (the "Indenture") by and between the District and The Bank of New York Trust Company, N.A. (the "Fiscal Agent"). The Bonds are secured under the Indenture by a pledge of and lien upon Special Taxes (as defined herein) and all moneys in the Special Tax Fund ( other than the Administrative Expense Account therein) as described in the Indenture.

The District

The District is located in the western portion of the City, north of the 118 Freeway between Erringer Road and First Street. The District currently consists of approximately 97 gross acres of undeveloped land, approximately 76 taxable acres of which are expected to be developed into approximately 1,055,106 square feet of commercial-retail and residential space consisting of approximately 625, 106 square feet of commercial space and approximately 430,000 square feet of residential apartment space. See "-Property Ownership and Development Status" below. The commercial-retail and residential space in the District will be subject to the levy of Special Taxes pursuant to the Rate and Method (defined below). See APPENDIX A-"THE RATE AND METHOD OF APPORTIONMENT." The Bonds are payable from and secured by Special Taxes levied only on the taxable property within the District pursuant to the Rate and Method.

The Rate and Method divides the taxable property within the District into three zones ("Zone 1," "Zone 2" and "Zone 3," respectively; each referred to herein as a "Zone" and, collectively, as the "Zones") and, for purposes of determining the amount of the Special Taxes to be levied in each Zone in the District, allocates a portion of the outstanding Bonds to each Zone in the District. Each Zone in the District is responsible only for debt service on the portion of outstanding Bonds allocated to such Zone, and Special Taxes may not be levied in one Zone of the District in order to provide for amounts to pay debt service on outstanding Bonds allocated to another Zone in the District.

1 Authority forIs suance

The District was formed on July 19, 2004 pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the GovernmentCode of the State of California) (the "Act"). The Act was enacted by the California legislature to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State. Any local agency (as defined in the Act) may establish a community facilities district to provide for and financethe cost of eligible public facilities and services. Generally, the legislative body of the local agency which forms a community facilities district acts on behalf of such district as the District's legislative body. Subj ect to approval by two-thirds of the votes cast at an election and compliance with the other provisions of the Act, a legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such district to repay such indebtedness.

Pursuant to the Act, the City Council adopted the necessary resolutions stating its intent to establish the District, to authorize the levy of Special Taxes on taxable property within the boundaries of the District, and to have the District incur bonded indebtedness. Following a public hearing conducted pursuant to the provisions of the Act, the City Council adopted resolutions establishing the District and calling special elections to submit the levy of the Special Taxes and the incurring of bonded indebtedness to the qualified voters of the District. On July 19, 2004, at an election held pursuant to the Act, Simi Valley Mall, LLC, a California limited liability company ("Simi Valley Mall"), as the sole landowner entitled to vote within the District at the time of formation of the District, authorized the District to incur bonded indebtedness in the aggregate principal amount not to exceed $9,500,000 and approved the rates and method of apportionment of the Special Taxes for the District (the "Rate and Method") to pay the principal of and interest on the bonds of the District. A copy of the Rate and Method is set forth in APPENDIX A hereto. The City Council of the City acts as the legislative body of the District.

Appraisal

Cushman & Wakefield, Inc., Portland, Oregon (the "Appraiser") has conducted an appraisal (the "Appraisal") of the taxable land within the District and has concluded, based upon the assumptions and limiting conditions contained in the Appraisal, that, as of March 1, 2004, the value of Taxable Property (as defined in the Rate and Method) within the District was estimated to be $32,500,000, assuming the public improvements to be financed by the Bonds and a City contribution in the amount of $15,518,000 (the "City Contribution") are complete. The Appraiser has provided a letter stating that, as of October 15, 2004, the value of the property within the District subject to Special Tax in accordance with the Rate and Method (the "Taxable Property") within the District was not less than $32,500,000. Of the total aggregate appraised value of $32,500,000, $9,300,000 of appraised value is allocated to the proposed 500-unit multi-family residential parcel ("Jefferson at Simi Valley"), $14,200,000 of appraised value is allocated to the proposed regional mall project ("Simi Valley Town Center") and $9,000,000 is allocated to the proposed retail center project ("Town and Country"). See "THE DEVELOPMENT AND PROPERTY OWNERSHIP - Appraisal" and APPENDIX B - "APPRAISAL REPORT." Actual values of each parcel within Zone 2 and Zone 3 will vary based on the timing and nature of development of such parcels. See "THE DEVELOPMENTS AND PROPERTY OWNERSHIP - The Development Plans."

The Appraiser makes certain assumptions in arriving at the appraised value of the Taxable Property within the District. The Appraiser assumes that the Acquisition Improvements ( as defined under the heading "THE COMMUNITY FACILITIES DISTRICT-Description of Acquisition Improvements" herein) are constructed and/or installed in a timely manner. The Appraiser also assumes that the cost information concerning the development of the Simi Valley Town Center, Town and Country and Jefferson at Simi Valley provided by the Developers (as defined herein) is accurate. The Appraiser also assumes that the Macy's (as defined herein) and May (as defined herein) department stores within Simi Valley Town Center will be

2 constructed as planned. For a full description of the assumptions of the Appraiser in completing the Appraisal, see APPENDIX B - "APPRAISAL REPORT."

Property Ownership and Development Status

The District has been vacant land for many years and was once farming and livestock grazing land. The proposed development of the land within the District has been a planned cooperative project among the City of Simi Valley (the "City"), the Community Development Agency of the City of Simi Valley (the "Agency") and Simi Valley TownCenter, LLC, a California limited liability company ("SVTC LLC"), a development entity owned by two entities owned and controlled by John M. Gilchrist, Jr., Albert A. Corti and Wayne J. Finley. See "THE DEVELOPMENT AND PROPERTY OWNERSHIP." The City and the Agency have been considering the development of the District into a mix of commercial and residential uses for many years.

In 2000, the City and the Agency entered into exclusive negotiations with the Corti Gilchrist Partnership, LLC, a California limited liability company ("Corti Gilchrist") to develop the District into a mix of commercial and residential uses. The principals of Corti Gilchrist are John M. Gilchrist, Jr. and Albert A. Corti. Subsequently, Corti Gilchrist identifiedand contacted Forest City Enterprises, Inc., an Ohio corporation and publicly traded company ("Forest City"), a commercial retail developer, and JPI Lifestyle Apartment Communities, L.P., a Delaware limited partnership ("JPILAC"), a residential apartment complex developer.

SVTC LLC transferred its right to acquire the then privately owned land in the District from an unrelated third party to Simi Valley Mall.

At the time of formation of the District, Simi Valley Mall was the sole landowner within the District entitled to vote on formation of the District pursuant to the Act. At the time the Bonds are issued, all Taxable Property within the District will be owned by the following three landowners: (1) Simi Valley Mall, which owns approximately 44.8 gross acres, of which 27.11 are taxable acres within Zone 2, comprising Simi Valley Town Center, (2) SVTC LLC, which owns approximately 23.17 taxable acres within Zone 1 which SVTC LLC expects to transfer to Jefferson at Simi Valley, L.P., a Delaware limited partnership ("Jefferson") on or before March, 2005, and (3) Simi Valley Town and Country, Inc., a California corporation ("Town and Country, Inc."), which will own prior to the issuance of the Bonds approximately 27.8 gross acres, of which approximately 25.51 are taxable acres within Zone 3, comprising Town and Country. The approximately 27.8 gross acres in the District which will be owned by Town and Country, Inc. is currently owned by the Agency (the "Agency Site") and is expected to be conveyed to Town and Country, Inc. in January 2005 as a condition of the closing of the Bonds.

Pursuant to existing agreements among the parties 1t 1s expected that the basic grading and construction of basic public infrastructure for the entire District will be accomplished by Town and Country, Inc., a subsidiary of Forest City. Forest City also has the option to purchase the Simi Valley Town Center from Simi Valley Mall, and its current business plan is to exercise such option. However, Forest City may elect not to exercise such option, in which event, SVTC LLC may purchase Simi Valley Town Center fromSimi Valley Mall pursuant to a separate option. Jefferson at Simi Valley is planned to be owned and developed by Jefferson, an unrelated third party, as described below under "-Zone 1." See "THE DEVELOPMENT AND PROPERTY OWNERSHIP." The development plans of the expected developers of the District are described below and under the caption "THE DEVELOPMENT AND PROPERTY OWNERSHIP."

Zone 1. Jefferson at Simi Va lley. Zone 1 of the District consists of approximately 23.17 acres subject to Special Taxes pursuant to the Rate and Method and 1.37 acres of public property to be owned by the City upon completion of certain Acquisition Improvements (as defined under the heading "THE COMMUNITY FACILITIES DISTRICT- Description of Acquisition Improvements" herein). The property within Zone 1 is planned to be developed into approximately 430,000 square feet of residential apartment space consisting of

3 500 residential one, two and three bedroom apartment units and associated leasing offices and recreational facilities in a development known as "Jeffersonat Simi Valley."

Jeffersonhas entered into an Amended and Restated Purchase and Sale Agreement and Joint Escrow Instructions with SVTC LLC, dated January 14, 2004 (the "Jefferson Purchase Agreement"). Pursuant to the JeffersonPurchase Agreement, Jefferson has agreed to purchase approximately 23.17 taxable acres of property within Zone 1 of the District upon the satisfaction of certain conditions. See "THE DEVELOPMENT AND PROPERTY OWNERSHIP." Upon the transfer of such property within Zone 1 of the District to Jefferson pursuant to the Jefferson Purchase Agreement, Jefferson is expected to develop Jefferson at Simi Valley (Simi Valley Mall, Town and Country, Inc. and Jefferson are sometimes collectively referred to herein as the "Developers"). Jefferson is 99% owned by JPILAC. Jefferson's current business plan is to complete construction of Jefferson at Simi Valley and lease the residential apartment space therein to residential tenants.

Zone 2. Simi Va lley Town Center. Zone 2 of the District consists of approximately 44.8 gross acres, of which approximately 27.11 acres will be subject to Special Taxes pursuant to the Rate and Method, and which are planned to be developed into 383,156 square feet of commercial-retail and entertainment uses. The commercial retail development within Zone 2 is planned to be an open-air shopping center known as "Simi Valley Town Center." Simi Valley Mall is the developer of the Simi Valley Town Center. Simi Valley Mall is a wholly-owned subsidiary of AEC Development III, Inc., a Massachusetts corporation ("AEC"). See "THE DEVELOPMENT AND PROPERTY OWNERSHIP - The Developers." Upon completion of Simi Valley Town Center, Simi Valley Mall's current business plan is to retain ownership of the approximately 383,156 square feet of commercial-retail and entertainment space within Zone 2 and lease it to commercial-retail users, subject to certain rights of Forest City and SVTC LLC. See "THE DEVELOPMENT AND PROPERTY OWNERSHIP - the Developers."

A significant portion of the land located in Simi Valley Town Center is not subject to the Special Taxes serving the Bonds. Land not subject to Special Taxes within Simi Valley Town Center includes approximately 2.662 acres of land intended for public infrastructure, an approximately 7.654 acre site owned by Macy's West, Inc., an Ohio corporation ("Macy's") and an approximately 7.554 acre site owned by The May Department Stores Company, a New York corporation ("May"). The Macy's and May sites are not within Zone 2 of the District, or any other Zone of the District, and are not subject to Special Taxes.

All information in this Official Statement concerning Macy's and May and their respective proposed developments of property within Simi Valley Town Center has been provided by Simi Valley Mall. Such informationhas not been independently confirmedby the District.

Zone 3. Town and Country. Zone 3 of the District consists of approximately 27.8 gross acres, of which approximately 25.51 acres will be subject to Special Taxes pursuant to the Rate and Method. Town and Country, Inc. anticipates that, at full build out, all of Zone 3 will be developed into approximately 242,943 square feet of commercial-retail space at full build-out to be known as "Town and Country." Town and Country, Inc. is the master developer of Town and Country. Town and Country, Inc. does not own the Agency Site within the District as of the date of this Preliminary Official Statement, but it is required to own all of the Taxable Property in Zone 3 prior to the issuance of the Bonds. Town and Country, Inc. is a wholly owned subsidiary of Forest City. Town and Country, Inc. 's current business plan includes the construction by Town and Country, Inc. of approximately 24,250 square feet of commercial retail space with the balance of Town and Country being sold or ground leased to commercial retail end users for development. Pursuant to a Ground Lease (the "Lowe's Ground Lease") by and between Town and Country, Inc. and Lowe's HIW, Inc. ("Lowe's"), Lowe's has agreed to lease approximately 13 acres of land in Town and Country on which Lowe's has agreed to build a minimum of 110,000 square feet of commercial-retail space. Lowe's is a chain of commercial retail home improvement stores. The Lowe's Ground Lease has been executed and is in escrow subject only to the transfer of the Agency Site to Town and Country, Inc. Pursuant to the Lowe's Ground

4 Lease, Lowe's has the option to purchase the property leased to it under the Lowe's Ground Lease. See "THE DEVELOPMENT AND PROPERTY OWNERSHIP - The Development Plans - Town and Country."

Development Status. As of the date hereof, the property in the District is substantially undeveloped and vacant. Town and Country, Inc. commenced rough grading in the entire District as well as with respect to the Acquisition Improvements (as defined under the heading "THE COMMUNITY FACILITIES DISTRICT-Description of Acquisition Improvements" herein) within the District in June, 2004 and expects to commence construction of the balance of the Acquisition Improvements upon the issuance of the Bonds and/or the availability of the City Contribution. As of the date hereof, the Project (as defined under the caption "THE DEVELOPMENT AND PROPERTY OWNERSHIP") requires additional grading, infrastructure construction, building permits and building construction. See "THE DEVELOPMENT AND PROPERTY OWNERSHIP" herein. Other elements of the development of land within the District are in varying stages of planning, construction and financing. See "THE DEVELOPMENT AND PROPERTY OWNERSHIP." No assurance can be given that the proposed development or that infrastructure components, such as the freeway off ramp anticipated to be built on property owned by the State of California Department of Transportation ("CalTrans") adjacent to the District, will be partially or fully completed. Failure to complete the proposed development or infrastructure components may affect the willingness or ability of the property owners within the District to pay Special Taxes when due. See "SPECIAL RISK FACTORS-Failure to Develop Properties."

Sources of Payment for the Bonds

Special Taxes. As used in this Official Statement, the term "Special Tax" is that tax which has been authorized to be levied against certain land within the District pursuant to the Act and in accordance with the Rate and Method. See "SOURCES OF PAYMENT FOR THE BONDS - Special Taxes" and APPENDIX A - "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES." Under the Indenture, the District has pledged to repay the Bonds from the Special Tax revenues remaining after the payment of certain annual Administrative Expenses of the District (up to the Administrative Expenses Cap (as defined in the Indenture)) (the ''Net Taxes") and amounts on deposit in the Special Tax Fund (other than the Administrative Expense Account therein) established under the Indenture.

The Special Taxes are the primary security for the repayment of the Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Fiscal Agent in the Special Tax Fund (other than the Administrative Expense Account therein), including amounts held in the Reserve Fund. See "SOURCES OF PAYMENT FOR THE BONDS - Reserve Fund."

Each Zone in the District is responsible only for debt service on the portion of outstanding Bonds allocated to such Zone, and Special Taxes may not be levied in one Zone in the District in order to provide for amounts to pay debt service on outstanding Bonds allocated to another Zone in the District. Further, Special Taxes may be levied within a Zone in the District for the purpose of replenishing the Reserve Fund only if and to the extent amounts were withdrawn from the Reserve Fund as a result of delinquencies in such Zone.

Foreclosure Proceeds. The City has covenanted (the "Foreclosure Covenant") in the Indenture that on or before March 1 and June 1 of each Fiscal Year, the City will review the public records of the County of Ventura ( the "County") in connection with the Special Taxes levied in such Fiscal Year to determine the amount of Special Taxes actually collected in such Fiscal Year. If the City determines that (a) any single parcel subject to the Special Taxes is delinquent in the payment of Special Taxes in the aggregate of $3,000 or more or (b) any single parcel or parcels under common ownership which are subject to the Special Taxes are delinquent in the payment of Special Taxes in the aggregate of $10,000 or more, the City shall, not later than forty-five (45) days after such determination, cause to be sent a notice of delinquency (and a demand for

5 immediate payment thereof) to the property owner. The City shall cause judicial foreclosureproceedings to be commenced and filedin the Superior Court not later than ninety (90) days after such determination against any parcel for which a notice of delinquency was given and for which the Special Taxes remain delinquent. With respect to aggregate delinquencies throughout the District in the case of the Bonds, if the City determines that it has collected less than 90% of the Special Taxes levied in the such Fiscal Year, then the City shall, not later than forty-five (45) days of such determination, send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the owner of each delinquent parcel (regardless of the amount of such delinquency). The City will cause judicial foreclosure proceedings to be commenced and filed in the Superior Court not later than ninety (90) days after such determination against any parcel for which a notice of delinquency was given and for which the Special Taxes remain delinquent. See "SOURCES OF PAYMENT FOR THE BONDS - Special Taxes - Proceeds of Foreclosure Sales" herein.

In the event the City obtains title to property within the District pursuant to a foreclosure proceeding, there is no assurance that the property within the District can be sold for the appraised value or assessed value described herein, or for a price sufficient to pay the principal of and interest on the Bonds in the event of a default in payment of Special Taxes by the current or future landowners within the District. See "SPECIAL RISK FACTORS - Land Values" and APPENDIX B - "APPRAISAL REPORT" herein.

EXCEPT FOR THE SPECIAL TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE SPECIAL, LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM SPECIAL TAXES AND AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN.

Parity Bonds and Liens. The District may, without the consent of the Beneficial Owners of the Bonds, issue additional indebtedness secured by the Net Taxes on a parity with the Bonds ("Parity Bonds"); provided, however, that Parity Bonds may only be issued for the purpose of refunding all or a portion of the Bonds or any Parity Bonds then Outstanding. See "SOURCES OF PAYMENT FOR THE BONDS - Parity Bonds." and APPENDIX C - "SUMMARY OF INDENTURE" herein. The Bonds are secured under the Indenture by a pledge of and lien upon Special Taxes (as definedherein) and all moneys in the Special Tax Fund (other than the Administrative Expense Account therein) as described in the Indenture. The Special Taxes constitute a lien on the property within the District. Other taxes and/or special assessments with liens equal in priority to the continuing lien of the Special Taxes have been levied and may also be levied in the future on the property within the District which could adversely affect the willingness of the landowners to pay the Special Taxes when due. See "SPECIAL RISK FACTORS - Parity Taxes, Special Assessments and Land Development Costs" herein.

Description of the Bonds

The Bonds will be issued and delivered as fully registered Bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ("DTC"), and will be available to actual purchasers of the Bonds (the "Beneficial Owners") in the denominations of $5,000 or any integral multiple thereof, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. In the event that the book-entry-only system described herein is no longer used with respect to the Bonds, the Bonds will be registered and transferred in accordance with the Indenture. See APPENDIX G - "BOOK-ENTRY-ONLY SYSTEM" herein.

Principal of, premium, if any, and interest on the Bonds is payable by the Fiscal Agent to DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the BeneficialOwners is the responsibility of DTC Participants.

6 The Bonds are subject to optional redemption and mandatory sinking fund redemption as described herein. For a more complete description of the Bonds and the basic documentation pursuant to which they are being sold and delivered, see "THE BONDS" and APPENDIX C - "SUMMARY OF INDENTURE" herein.

Tax Matters

In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, based on existing statutes, regulations, rulings and judicial decisions and assuming compliance with certain covenants and requirements described herein, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. It is the further opinion of Bond Counsel that interest on the Bonds is exempt from State of California personal income tax. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount, and, in the opinion of Bond Counsel, the amount of original issue discount that accrues to the owner of the Bond is excluded from gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt fromState of California personal income tax. See "TAX EXEMPTION" herein.

Professionals Involved in the Offering

The Bank of New York Trust Company, N.A., Los Angeles, California, will act as Fiscal Agent under the Indenture and as the initial Dissemination Agent under the Continuing Disclosure Agreements to be entered into by the City and each Developer. Stone & Youngberg LLC is the Underwriter of the Bonds. All proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel. Certain legal matters will be passed on for the City and the District by David H. Hirsch in his capacity as City Attorney. Other professional services have been performed by David Taussig & Associates, Inc., Newport Beach, California, as Special Tax Consultant and Cushman & Wakefield, Inc., Portland, Oregon, as Appraiser. Certain legal matters will be passed upon for Jefferson by McManemin & Smith, P.C., Dallas, Texas, for SVTC LLC by Gleason & Gleason, Solana Beach, California, for Simi Valley Mall by Bingham McCutchen LLP, San Francisco, California and Dowdall & Associates P.C., Boston, Massachusetts, and for Town and Country, Inc. by the general counsel's office of Forest City and Latham & Watkins LLP, Los Angeles, California.

For information concerning respects in which certain of the above-mentioned professionals, advisors, counsel and agents may have a financial or other interest in the offering of the Bonds, see "FINANCIAL INTERESTS" herein.

Continuing Disclosure

The City, for and on behalf of the District, and each of SVTC LLC and the Developers have agreed to provide, or cause to be provided, to each nationally recognized municipal securities information repository and any public or private repository or entity designated by the State as a state repository for purposes of Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission ("Rule 15c2-12") certain annual financial information and operating data. However, Jefferson will not be obligated to provide any information until, and unless, it becomes a landowner within the District as planned. The City has further agreed to provide, in a timely manner, notice of certain material events. The City is obligated to provide annual reports commencing March 1, 2005. Each of the Developers is obligated to file annual reports commencing March 1, 2005 and semi-annual reports commencing September 1, 2005. The foregoing covenants have been made in order to assist the Underwriter in complying with Rule 15c2-12. See "CONTINUING DISCLOSURE" herein and APPENDIX D - "FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE CITY" and

7 APPENDIX E - "FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE DEVELOPERS" hereto for (i) a description of the specific nature of the annual reports to be filedby the City and the annual and semi-annual reports to be filed by Simi Valley Mall, SVTC LLC (until such time as it transfersits property to Jefferson), Jefferson (upon the acquisition of property within the District by Jefferson from SVTC LLC), and Town and Country, Inc., (ii) notices of material events and (iii) the terms of the continuing disclosure agreement pursuant to which such annual reports are to be made.

Bond Owners' Risks

Certain events could affect the timely repayment of the principal of and interest on the Bonds when due. See the section of this Official Statement entitled "SPECIAL RISK FACTORS" for a discussion of certain factors which should be considered, in addition to other matters set forth herein, in evaluating an investment in the Bonds. The Bonds are not rated by any nationally recognized rating agency. The purchase of the Bonds involves significant risks, and the Bonds may not be appropriate investments for certain types of investors. See "SPECIAL RISK FACTORS" herein.

Other Information

This Official Statement speaks only as of its date, and the information contained herein is subject to change.

Brief descriptions of the Bonds and the Indenture are included in this Official Statement. See "THE BONDS" and APPENDIX C - "SUMMARY OF INDENTURE" hereto. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Indenture, the Bonds and the constitution and laws of the State as well as the proceedings of the City, acting as the legislative body of the District, are qualified in their entirety by references to such documents, laws and proceedings, and with respect to the Bonds, by reference to the Indenture. All capitalized terms used in this Official Statement and not definedshall have the meaning set forth in APPENDIX C - "SUMMARY OF INDENTURE" herein.

Copies of the Indenture, the Continuing Disclosure Agreements and other documents and information referredto herein are available for inspection and (upon request and payment to the City of a charge forcopying, mailing and handling) for delivery from the City at 2929 Tapo Canyon Road, Simi Valley, California 93063, Attention: Assistant City Clerk.

Update of Certain Information Since the Date of the Preliminary Official Statement

This Official Statement includes certain changes since the date of the Preliminary Official Statement. Since the date of the Preliminary OfficialStatement, published reports appeared in major financialpublications that the parent company of Macy's was in negotiations to purchase May. See "THE DEVELOPMENT AND PROPERTY OWNERSHIP - The Development Plans." The square footage information with respect to Town and Country has been revised. See "INTRODUCTION - Property Ownership and Development Status" and "THE DEVELOPMENT AND PROPERTY OWNERSHIP - Estimated Sources and Uses of Funds." The description of the projected Fiscal Year 2005-06 Special Tax levy set forth in Table 1 has been revised. See Table 1 herein. The description of the Appraisal and certain extraordinary assumptions therein has been revised. See "INTRODUCTION - Appraisal" and "THE DEVELOPMENT AND PROPERTY OWNERSHIP - Appraisal." Since the date of the Preliminary Official Statement, Simi Valley Mall closed on the Mall Construction Loan (as defined herein). The description of the Mall Construction Loan (as defined herein) has been revised accordingly. See "THE DEVELOPMENT AND PROPERTY OWNERSHIP - Estimated Sources and Uses of Funds." The description regarding case law applicable to SB 114 (defined herein) has been revised. See "SPECIAL RISK FACTORS - SB 114."

8 ESTIMATED SOURCES AND USES OF FUNDS

The following table sets forth the expected uses of Bond proceeds:

Sources of Funds Bond Par Amount $ 8,800,000.00 (Original Issue Discount) (13,027.50) TOTAL SOURCES $ 8,786,972.50

Uses of Funds Acquisition and Construction Fund $ 7,109,213.38 Underwriter's Discount 132,000.00 Reserve Fund 803,864.35 Cost of Issuance Fund([) 262,000.00 Capitalized Interest<2l 439,894.77 Administrative Expense Account of the Special Tax Fund 40,000.00 TOTAL USES $ 8,786,972.50

(1) Costs of Issuance include Bond Counsel fees, Fiscal Agent fees, fees for printing this Official Statement and other miscellaneous fees. (2) Represents interest on the Bonds through February 1, 2006.

THE BONDS

Authority for Issuance

The Bonds in the aggregate principal amount of $8,800,000 are authorized to be issued by the District under and subject to the terms of the Indenture, the Act and other applicable laws of the State of California.

Resolutions of Intention: On June 14, 2004, the City Council of the City adopted a resolution stating its intention to establish the District and to authorize the levy of a special tax, and a resolution declaring its intention to incur bonded indebtedness in an amount not to exceed $9,500,000.

Resolutions of Formation: Immediately following a noticed public hearing conducted on July 19, 2004, the City Council of the City adopted resolutions which established the District, authorized the levy of a special tax within the District, and declared the necessity to incur bonded indebtedness within the District in an amount not to exceed $9,500,000.

Resolution Calling Election: The resolutions adopted by the City Council of the City on July 19, 2004 also called for an election by the landowners in the District for the same date on the issues of the levy of the Special Tax, the incurring of bonded indebtedness in the District, and the establishment of an appropriations limit.

Landowner Election and Declaration of Results: On July 19, 2004, an election was held at which Simi Valley Mall, as the sole landowner entitled to vote within the District at the time of the election, approved a ballot proposition authorizing the issuance of up to $9,500,000 of bonds to finance the acquisition and construction of various public facilities, the levy of the Special Tax and the establishment of an appropriations limit for the District. On July 19, 2004, the City Council adopted a resolution approving the canvass of the votes and declaring the District to be fully formed with the authority to levy the Special Taxes, to incur the bonded indebtedness, and to have the established appropriations limit.

9 Special Tax Lien and Levy: A Notice of Special Tax Lien for the District was recorded in the real property records of the County on July 29, 2004, as a continuing lien against the property in the District.

Ordinance Levying Sp ecial Taxes: On July 26, 2004, the City Council adopted Ordinance No. 1062 levying the Special Tax within the District.

Purpose of the Bonds

The Bonds are being issued to provide funds to: (i) finance the costs of constructing and acquiring certain public facilities within the District (see "THE COMMUNITY FACILITIES DISTRICT - Description of Acquisition Improvements"); (ii) pay costs related to the issuance of the Bonds; (iii) fund the Reserve Fund for the Bonds; and (iv) fund capitalized interest on the Bonds. "ESTIMATED SOURCES AND USES OF FUNDS."

Description of the Bonds

The Bonds will be issued as fully registered bonds in denominations of $5,000 and any integral multiple thereof (not exceeding the principal amount maturing at any one time), and shall be dated the date of delivery thereof. The Bonds will be issued in book-entry only form and DTC will act as securities depository for the Bonds. So long as the Bonds are held in book-entry only form, principal of, premium, if any, and interest on the Bonds will be paid directly to DTC for distribution to the beneficial owners of the Bonds in accordance with the procedures adopted by DTC. See APPENDIX G - "BOOK-ENTRY ONLY SYSTEM" herein. The Bonds will mature on September 1, in the years and principal amounts, and bearing rates of interest, as shown on the inside cover of this Official Statement.

Interest on the Bonds will be payable semiannually on March 1 and September 1 of each year, commencing March 1, 2005 (each, an "Interest Payment Date"). Interest will be calculated on the basis of a 360-day year comprised of twelve 30-day months. Interest on any Bond will be payable from the Interest Payment Date next preceding the date of authentication of that Bond, unless (i) such date of authentication is an Interest Payment Date, in which event interest will be payable from such date of authentication; (ii) the date of authentication is after a Record Date but prior to the immediately succeeding Interest Payment Date, in which event interest will be payable from the Interest Payment Date immediately succeeding the date of authentication; or (iii) the date of authentication is prior to the close of business on the first Record Date, in which event interest will be payable from the date of the Bonds; provided, however, that if at the time of authentication of a Bond, interest is in default, interest on that Bond will be payable from the last Interest Payment Date on which the interest has been paid or made available for payment.

Interest on any Bond will be paid to the person whose name appears as its owner in the registration books held by the Fiscal Agent on the close of business on the Record Date preceding the Interest Payment Date. Interest will be paid by check of the Fiscal Agent mailed by first class mail, postage prepaid, to the Beneficial Owner of the Bonds at its address on the registration books. Pursuant to a written request prior to the Record Date of a Beneficial Owner of at least $1,000,000 in aggregate principal amount of Bonds, payment will be made by wire transfer in immediately available funds to a designated account in the United States.

The principal of the Bonds and any premium on the Bonds are payable in lawful money of the United States of America by check of the Fiscal Agent upon surrender of such Bonds at the Principal Office of the Fiscal Agent. All Bonds paid by the Fiscal Agent will be canceled by the Fiscal Agent.

10 Redemption

Optional Redemption. The Bonds maturing on or after September 1, 2015 are subject to redemption prior to their stated maturity dates on September 1, 2014 or any Interest Payment Date thereafter, on a pro rata basis among maturities (and by lot within any one maturity), in integral multiples of $5,000, at the option of the District from moneys derived by the District from any source, including without limitation Special Tax Prepayments (as defined in the Rate and Method), at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest to the date of redemption, without premium.

Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 2029 are subject to mandatory sinking fund redemption, on September 1, 2026, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date of redemption, without premium, as follows:

Redemption Date Sinking (September 1) Payment 2026 $425,000 2027 460,000 2028 500,000 2029 (Maturity) 545,000

The Bonds maturing on September 1, 2034 are subject to mandatory sinking fund redemption, on September 1, 2030, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date of redemption, without premium, as follows:

Redemption Date Sinking (September 1) Payment 2030 $590,000 2031 635,000 2032 685,000 2033 740,000 2034 (Maturity) 800,000

The amount of Outstanding Bonds to be redeemed pursuant to the foregoing schedule shall be reduced by the District pro rata among redemption dates, in order to maintain substantially level debt service as a result of any prior or partial optional redemption of the Bonds.

Purchase of Bonds. In lieu of payment at maturity or redemption, moneys deposited in the Redemption Account may be used to purchase Outstanding Bonds. Purchases of Outstanding Bonds may be made by the District at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys set aside for an optional redemption, the premium applicable at the next following call date according to the premium schedule established in the Indenture.

Selection of Bonds for Redemption

If less than all the Bonds Outstanding are to be redeemed, the portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or a multiple thereof, and, in selecting portions of such Bonds for redemption, the Fiscal Agent shall treat each such Bond as representing

11 the number of Bonds of $5,000 denomination which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000.

Whenever provision is made in the Indenture for the redemption of less than all of the Bonds of a maturity or any given portion thereof, the Fiscal Agent shall select the Bonds of such maturity to be redeemed, from all Bonds of such maturity or such given portion thereof not previously called for redemption, by lot within a maturity, in any manner which the Fiscal Agent in its sole discretion shall deem appropriate.

Notice of Redemption

The Fiscal Agent is obligated to mail, at least 30 days but not more than 45 days prior to the date of redemption, notice of intended redemption, by first-class mail, postage prepaid, to the respective registered Owners of the Bonds at the addresses appearing on the Bond Register. The notice of redemption must: (i) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the Bonds selected for redemption; (ii) state the date fixed for redemption and surrender of the Bonds to be redeemed; (iii) state the redemption price; (iv) state the place or places where the Bonds are to be redeemed; (v) in the case of Bonds to be redeemed only in part, state the portion of such Bond which is to be redeemed; (vi) state the date of issue of the Bonds as originally issued; (vii) state the rate of interest borne by each Bond being redeemed; and (viii) state any other descriptive information needed to identify accurately the Bonds being redeemed as shall be specified by the Fiscal Agent. The notice must also state that on the date fixed for redemption, there shall become due and payable on each Bond or portion thereof called for redemption, the principal thereof, together with any premium, if any, and interest accrued to the redemption date, and that from and after such date, interest thereon shall cease to accrue and be payable.

So long as notice by first class mail has been provided as set forth above, the actual receipt by the Owner of any Bond of notice of such redemption is not a condition precedent to redemption, and failure to receive such notice will not affect the validity of the proceedings for redemption of such Bonds or the cessation of interest on the date fixedfor redemption.

Effe ct of Redemption. When notice of redemption has been given, and when the amount necessary for the redemption of the Bonds called for redemption is set aside for that purpose in the Redemption Account, the Bonds designated for redemption will become due and payable on the date fixed for redemption, and upon presentation and surrender of the Bonds at the place specified in the notice of redemption, will be paid as set forth in such notice. No interest will accrue on the Bonds called for redemption fromand after the redemption date, and the Owners of the redeemed Bonds, after the redemption date, may look for the payment of principal and premium, if any, of such Bonds or portions of Bonds only to the Redemption Account and shall have no rights, except with respect to the payment of the redemption price from the Redemption Account.

Registration, Transfer and Exchange

Registration. The Fiscal Agent will keep sufficient books for the registration and transfer of the Bonds. The ownership of the Bonds will be established by the Bond registration books held by the Fiscal Agent.

Transfe r or Exchange. Whenever any Bond is surrendered for registration of transfer or exchange, the Fiscal Agent will authenticate and deliver a new Bond or Bonds of the same maturity, for a like aggregate principal amount of authorized denominations; provided that the Fiscal Agent will not be required to register transfers or make exchanges of (i) Bonds for a period of 15 days next preceding the date of any selection of the Bonds to be redeemed, or (ii) any Bonds chosen for redemption.

12 Debt Service Schedule for the Bonds

The following table presents the annual debt service on the Bonds (including sinking fund redemptions), assuming that there are no optional redemptions from Special Tax Prepayments. See "THE BONDS - Redemption."

Period Ending Total (September 1) Principal Interest Debt Service 2005 $ $ 248,080.19 $ 248,080.19 2006 25,000 460,355.00 485,355.00 2007 35,000 459,730.00 494,730.00 2008 45,000 458,732.50 503,732.50 2009 55,000 457,292.50 512,292.50 2010 70,000 455,395.00 525,395.00 2011 80,000 452,770.00 532,770.00 2012 95,000 449,570.00 544,570.00 2013 110,000 445,627.50 555,627.50 2014 125,000 440,842.50 565,842.50 2015 140,000 435,280.00 575,280.00 2016 160,000 428,910.00 588,910.00 2017 180,000 421,470.00 601,470.00 2018 200,000 412,920.00 612,920.00 2019 220,000 403,220.00 623,220.00 2020 245,000 392,330.00 637,330.00 2021 270,000 379,957.50 649,957.50 2022 295,000 366,052.50 661,052.50 2023 325,000 350,712.50 675,712.50 2024 355,000 333,650.00 688,650.00 2025 390,000 314,835.00 704,835.00 2026 425,000 293,970.00 718,970.00 2027 460,000 271,020.00 731,020.00 2028 500,000 246,180.00 746,180.00 2029 545,000 219,180.00 764,180.00 2030 590,000 189,750.00 779,750.00 2031 635,000 157,300.00 792,300.00 2032 685,000 122,375.00 807,375.00 2033 740,000 84,700.00 824,700.00 2034 800,000 44,000.00 844,000.00

SOURCES OF PAYMENT FOR THE BONDS

The Bonds are special, limited obligations of the District payable only from amounts pledged under the Indenture and from no other sources.

The Special Taxes are the primary security for the repayment of the Bonds. Under the Indenture, the District has pledged to repay the Bonds from Net Taxes (which are Special Tax revenues remaining after the payment of the annual Administrative Expenses of up to the Administrative Expenses Cap) and from amounts held in the Special Tax Fund (other than amounts held in the Administrative Expense Account therein) established under the Indenture. Special Tax revenues include the proceeds of the Special Taxes received by the District, including any scheduled payments and Special Tax Prepayments thereof and the net proceeds, of

13 the redemption of delinquent Special Taxes or sale of property sold as a result of foreclosure of the lien of delinquent Special Taxes to the amount of said lien.

NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE SPECIAL TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT ARE SPECIAL OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM THE SPECIAL TAXES AND OTHER AMOUNTS PLEDGED UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN.

Special Taxes

The City Council, as the legislative body of the District, has covenanted in the Indenture that it will determine and direct the County to levy Special Taxes up to the maximum rates permitted under the Rate and Method, and subject to Zone allocations, in the amount required for the payment of principal of and interest on any Outstanding Bonds becoming due and payable during the ensuing calendar year, including any necessary replenishment of the Reserve Fund and the amount estimated to be sufficient to pay the Administrative Expenses during such calendar year.

The Special Taxes levied in a Zone in any fiscal year may not exceed the maximum rates for such Zone authorized pursuant to the Rate and Method. See APPENDIX A - "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES" hereto. There is no assurance that the Special Tax proceeds will, in all circumstances, be adequate to pay the principal of and interest on the Bonds when due. See "SPECIAL RISK FACTORS - Insufficiency of Special Taxes" herein. Each Zone in the District is responsible only for debt service on the portion of the principal amount of outstanding Bonds allocated to such Zone, and Special Taxes may not be levied in one Zone in the District in order to provide for amounts to pay the portion of debt service on outstanding Bonds allocated to another Zone in the District. Further, Special Taxes may be levied within a Zone in the District forthe purpose of replenishing the Reserve Fund only if and to the extent such amounts were withdrawn from the Reserve Fund as a result of delinquencies in the same Zone.

Rate and Method of Apportionment

The District is legally authorized, and has covenanted in the Indenture, to cause the levy of the Special Taxes within the District, and each Zone therein, in accordance with the Rate and Method. The Rate and Method apportions the total amount of Special Taxes to be levied among the Taxable Property within each Zone as more particularly described therein. The full text of the Rate and Method is set forth in APPENDIX A hereto. Capitalized terms used under the heading "- Rate and Method of Apportionment" and not defined have the meaning set forth in the Rate and Method.

The Rate and Method provides that for each Fiscal Year all parcels in each Zone in the District not otherwise exempt are to be classified as either Developed Property, Undeveloped Property, Taxable Property Owner Association Property or Taxable Public Property. "Developed Property" is defined as all Taxable Property, exclusive of Taxable Property Owner Association Property and Taxable Public Property, for which a building permit for new construction, other than the construction of a garage, parking lot, parking structure or street, was issued prior to March 1 of the previous Fiscal Year. "Undeveloped Property" is definedto include all Taxable Property in the District not classifiedas Developed Property, Taxable Property Owner Association Property or Taxable Public Property. "Taxable Property Owner Association Property" is defined as all Property Owner Association Property which is not exempt from the Special Tax pursuant to the Rate and Method. "Taxable Public Property"is definedas all Public Propertywhich is not exempt from the Special Tax pursuant to the Rate and Method. The Rate and Method exempts up to 1.05 acres of Property Owner

14 Association Property and/or Public Property in Zone 1, up to 17.58 acres of Property Owner Association Property and/or Public Property in Zone 2 and up to 2.21 acres of Property Owner Association Property and/or Public Property in Zone 3. In addition, the Rate and Method exempts up to 0.29 acres of Privately Owned Exempt Property in Zone 2. See APPENDIX A - "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES" hereto.

Under the Rate and Method, the Maximum Special Tax to be levied on each taxable parcel in the District classified as Developed Property will be the greater of the Assigned Special Tax or the Backup Special Tax. Assigned Special Taxes by Zone forDeveloped Property for Fiscal Year 2004-2005 are as follows:

Sp ecial Tax Land Use Category Assigned Sp ecial Tax Classification

Zone 1 Not Applicable $5,580 per Acre II I I Zone 2 Residential Property $14,326 per Acre

$1.0055 per square foot of Zone 2 Non-Residential Property Non-Residential Floor Area

Zone 3 Residential Property $6,552 per Acre I $0.6939 per square foot of Zone 3 Non-Residential Property Non-Residential Floor Area

The Backup Special Taxes for Developed Property in each Zone are equal to the Maximum Special Taxes for Taxable Property Owner Association Property, Taxable Public Property and Undeveloped Property as follows:

Special Tax Maximum Sp ecial Tax Classification

Zone 1 $6,565 per Acre

Zone 2 $16,854 per Acre

Zone 3 I $7,708 per Acre

The Assigned Special Tax rates and Maximum Special Tax rates escalate each year by an amount equal to two percent (2%) of the amount in effectfor the previous Fiscal Year.

Commencing with Fiscal Year 2005-2006 and for each following Fiscal Year, the City Council will determine the Special Tax requirement by Zone (each a "Special Tax Requirement") and will levy the Special Tax on all Assessor's Parcels of Taxable Property in each Zone until the aggregate amount of Special Taxes equals the respective Zone Special Tax Requirement. The Special Tax will be levied in Zone 1, Zone 2 or Zone 3 for each Fiscal Year as follows:

15 First: The Special Tax shall be levied on all Assessor's Parcels of Developed Property in the applicable Zone in an amount equal to 100% of the Assigned Special Tax forDeveloped Property;

Second: If additional Special Taxes are needed to satisfy the Special Tax Requirement after the first step has been completed, the Special Tax will be levied Proportionately on all Assessor's Parcels of Undeveloped Property in the applicable Zone up to 100% of the Maximum Special Tax;

Third: If additional Special Taxes are needed to satisfy the Special Tax Requirement after the second step has been completed, the Special Tax will be increased Proportionately from the Assigned Special Tax up to the Maximum Special Tax on all Assessor's Parcels of Developed Property in the applicable zone whose Maximum Special Tax is determined through the application of the Backup Special Tax; and

Fourth: If additional Special Taxes are needed to satisfy the Special Tax Requirement after the third step has been completed, the Special Tax will be levied Proportionately on all Assessor's Parcels of Taxable Property Association Property and Taxable Public Property in the applicable Zone up to 100% of the Maximum Special Tax.

Determination of Zone Sp ecial Tax Requirement

Pursuant to the Rate and Method, the amount of the Special Tax to be levied in each Fiscal Year is determined separately for each Zone within the District. In accordance with the Rate and Method, the City Council, acting as the legislative body of the District, will levy the Special Tax each Fiscal Year on the Taxable Property in each Zone until the amount of the Special Tax levied on such property is equal to the Special Tax Requirement foreach Zone (the "Zone Special Tax Requirement"). The Special Tax Requirement for a Zone, for each Fiscal Year, is equal to the sum of (a) the Zone Allocation for such Zone times the applicable Administrative Special Tax Requirement, (b) the amount required to (i) pay regularly scheduled debt service on all such Outstanding Zone Bonds for such Zone due in the calendar year beginning in such Fiscal Year, (ii) subject to certain limits, accumulate funds to pay directly for the construction of Authorized Facilities, and (iii) pay the Zone Delinquency Amount, if any, (c) less a credit for funds available to reduce the Special Tax levy within such Zone, as determined by the CPD Administrator pursuant to the Indenture. See APPENDIX A-"RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES" hereto.

For purposes of the preceding paragraph, the capitalized terms used therein will mean:

"Zone Allocation" means, with respect to a Zone, the percentage of Bonds allocated to such Zone based upon such Zone's share of the cost of the Authorized Facilities to be financed from the proceeds of Bonds. The Zone Allocations are as follows: the Zone 1 Allocation is 19.156%, the Zone 2 Allocation is 56.307% and the Zone 3 Allocation is 24.537%.

"Administrative Special Tax Requirement" means, for any Fiscal Year, the amount estimated to be required to: (i) pay periodic costs on the Bonds other than regularly scheduled debt service, including but not limited to, credit enhancement and rebate payments on such Bonds as described in the applicable Indenture due in the calendar year beginning in such Fiscal Year, and (ii) pay Administrative Expenses. The Indenture establishes the Administrative Special Tax Requirement to be an amount equal to $40,000 for Fiscal Year 2004-2005 escalated at 2% per year thereafter.

"Outstanding Zone Bonds" means, with respect to a Zone, (a) the product of (i) the original principal amount of Bonds minus the principal amount of Bonds that have been paid at maturity, or have been redeemed or defeased other than from the prepayments of Special Taxes and (ii) the Zone Allocation, minus (b) the principal amount of Bonds that have been redeemed or defeased as a result of the prepayment of Special Taxes by the owners of Taxable Property within such Zone.

16 "Zone Delinquency Amount" means, with respect to a Zone, forany Fiscal Year, the amount required to (a) replenish the Reserve Fund for the Bonds in an amount equal to the amount withdrawn therefrom as a result of the delinquency in the payment of Special Taxes levied in such Zone, as reasonably determined by the CPD Administrator, and (b) pay for reasonably anticipated delinquent Special Taxes in such Zone based on the delinquency rate forthe Special Taxes levied in such Zone in the previous Fiscal Year.

The effect of the provisions of the Rate and Method described above is that each Zone is responsible only for debt service on the outstanding Bonds allocable to such Zone. Thus, Special Taxes may not be levied in one Zone in order to provide amounts to pay debt service on Bonds allocable to another Zone. No assurance can be given that the amounts collected in Zone in any given year will, in fact, equal the applicable Zone Special Tax Requirement, due to a variety of factors, including the unwillingness or inability of property owners in such Zone to pay the Special Taxes, the Maximum Special Tax rates, or the maximum term of the levy of the Special Taxes.

For a discussion of the impact of the zone allocation methodology pursuant to the Rate and Method, see "SPECIAL RISK FACTORS - Impact of Zone Allocations."

Estimated Special Tax Proceeds

Table 1 below shows the projected Fiscal Year 2005-2006 Special Tax levy allocable to each parcel in Zone 1, Zone 2 and Zone 3 of the District, respectively, assuming that the Developers accomplish all of their projected development goals, as described in this Official Statement. Table 1 also demonstrates what the Fiscal Year 2005-2006 Special Tax levy allocation will be for each parcel in the District in the event no additional building permits are issued in the District prior to March 1, 2005. The amounts set forth in Table 1 are projections only, provided for comparison of only two possible scenarios, and investors should assume that actual Special Tax levies may vary from projected amounts.

In preparing the column headed "Fiscal Year 2005-2006 Special Taxes Assuming Projected Development" in Table 1 below, the Special Tax Consultant has assumed the following first quarter of 2005 development schedule for Zone 1, Zone 2 and Zone 3 based on the representations of the Developers. Jefferson projects that building permits will be issued for the construction of 500 apartments in Jefferson at Simi Valley in Zone 1 between March 1, 2005 and March, 1, 2006. A building permit was issued for the construction of the western half of the main building of Simi Valley Town Center in Zone 2 in December, 2004, and Simi Valley Mall expects that a building permit for the remainder of the main building in Simi Valley Town Center will be issued in January, 2005. Simi Valley Mall projects the Simi Valley Town Center will contain approximately 383,156 square feet of commercial retail and entertainment space at build out. Town and Country, Inc. expects that building permits will be issued for approximately 134,574 square feet of commercial retail and entertainment space in Zone 3 on or before March 1, 2005.

As of the date hereof, building permits have not been issued forany of Town and Country or Jefferson at Simi Valley. All remaining building permits are subject to further City approvals. "THE DEVELOPMENT AND PROPERTY OWNERSHIP - Land Use Approvals Regarding the Developments." No assurance can be given that the Developers will be able to obtain building permits in a timely manner or that the proposed developments will be completed on schedule, or completed at all. Failure to complete the proposed developments or infrastructure components may affect the willingness or ability of the property owners within the District to pay Special Taxes when due. See "SPECIAL RISK FACTORS - Failure to Develop Properties."

Under the Developers' proposed construction schedule described above, approximately 80.8% of the Special Taxes projected to be levied in Fiscal Year 2005-2006 would be payable from Developed Property, and approximately 19.2% of the Special Taxes projected to be levied in Fiscal Year 2005-2006 would be payable from Undeveloped Property. Undeveloped Property is inherently less valuable than Developed

17 Property. In the event the Developers do not realize their development goals, a much greater percentage of Special Taxes will be levied against Undeveloped Property and will be obligations of the Developers. Failure to meet the construction schedule described above may affect land values in the District. See "SPECIAL RISK FACTORS - Failure to Develop Properties."

TABLE 1 City of Simi Valley Community Facilities District No. 2004-1 Fiscal Year 2005-2006 Special Tax Projections

Anticipated Fiscal Year 2005- Fiscal Year 2005- Development 2006 Projected 2006 Projected Taxable Current Status as of Sp ecial Tax Levy Sp ecial Tax Levy Parcel Parcel Development March i, Assuming Projected based on Current 2 Zone No. Acreag/1> Status< > 2005<3> Developmenl4> Development Status<4> 15 23.17 Undeveloped Undeveloped $ 53,327 $ 53,327

2 1 22.02 Developed Developed $ 156,745 $ 156,745 3 2.75 Undeveloped Undeveloped 5 0.63 Undeveloped Undeveloped 6 1.02 Undeveloped Undeveloped 7 0.69 Undeveloped Undeveloped Subtotal 27.11 $ 156,745 $ 156,745

3 8 2.58 Undeveloped Undeveloped $ $ 6,908 9 1.05 Undeveloped Undeveloped 2,811 10 1.29 Undeveloped Undeveloped 3,454 11 1.18 Undeveloped Undeveloped 3,160 12 2.75 Undeveloped Undeveloped 7,363 13 2.83 Undeveloped Undeveloped 7,578 14 12.82 Undeveloped Developed 68,306 34,327 16 _l._Q_l_ Undeveloped Undeveloped 2 704 Subtotal 25.51 $ 68,306 $ 68,306

Total 75.79 $ 27 8,378 $ 278,378

(1) Based on recorded Final Tract Map No. 5430. (2) As of December 16, 2004, a building permit for the western portion of the main building in Simi Valley Town Center had been issued. (3) Based on development information provided by Simi Valley Mall for Zone 2, Town and Country, Inc. for Zone 3 and Jefferson in Zone 1. Simi Valley Mall expects to pull remainingbuilding permits to constructthe main building of the Simi Valley Town Center by March 1, 2005. Improvements by the lessees to the leased space within Simi Valley Town Center are expected to commence in July, 2005. Town and Country, Inc. expects building permits to be pulled for the construction of approximately 134,574 squarefeet of commercial retail space by March 1, 2005. (4) Assumes capitalizedinterest on the Bonds through February1, 2006. Source: David Taussig & Associates, Inc.

At the time of District formation, Zone 1 was expected to include 1.05 acres of publicly owned property and, forthis reason, the Rate and Method exempts 1.05 acres of publicly owned property within Zone 1 from the obligation to pay Special Taxes. Due to adjustments in parcel configuration in the finaltract map for the Development, the City is expected to own approximately 1.37 acres within Zone 1 upon completion of Acquisition Improvements therein, rather than 1.05 acres. Special Taxes will not be levied against any publicly owned property and, therefore, investors should assume that should it become necessary to levy additional Special Taxes to cover debt service on the Bond and Administrative Expenses up to the maximum

18 rates permitted under the Rate and Method, Special Taxes attributable to such 0.32 acres could be allocated to the remainder of the property within Zone 1, up to the maximum rates permitted under the Rate and Method. In such event, the increase in Special Taxes could have an adverse impact upon the ability and willingness of the owners or tenants of such property in Zone 1 to pay Special Taxes when due. See APPENDIX A - "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES" hereto.

Prepayment of Special Taxes

The Rate and Method provides that a property owner of Developed Property or Undeveloped Property for which a building permit has been issued may prepay and satisfy the Special Tax obligation of an Assessor's Parcel of Developed Property or Undeveloped Property for which a building permit has been issued, in whole or in part, upon the terms set forth in the Rate and Method. Additionally, the Rate and Method requires an owner of Property Owner Association Property or Public Property which is not exempt from the Special Tax to prepay the Special Tax obligation as calculated pursuant to the Rate and Method. See APPENDIX A - "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES" hereto.

To date, no parcels within the District have elected to prepay Special Taxes. In the event that a prepayment of Special Taxes occurs in the future, the net proceeds of such prepayment will be applied to effect an optional redemption of the Bonds. See "THE BONDS - Redemption" herein.

Collection and Application of Special Taxes

The Special Taxes are levied and collected by the Treasurer-Tax Collector of the County in the same manner and at the same time as ad valorem property taxes, unless otherwise determined in accordance with the Rate and Method.

The District has made certain covenants in the Indenture for the purpose of ensuring that the current maximum Special Tax rates and method of collection of the Special Taxes are not altered in a manner that would impair the City's ability to collect sufficient Special Taxes to pay debt service on the Bonds and Administrative Expenses when due. First, the District has covenanted that, to the extent it is legally permitted to do so, it will not reduce the maximum Special Tax rates and will oppose the reduction of maximum Special Tax rates by initiative where such reduction would reduce the maximum Special Taxes payable from Developed Property (as defined in the Rate and Method) to less than 110% of Maximum Annual Debt Service on Outstanding Bonds plus Administrative Expenses. See "SPECIAL RISK FACTORS - Proposition 218." Second, the District has covenanted not to exercise its rights under the Act to waive delinquency and redemption penalties related to the Special Taxes or to declare a special tax penalties amnesty program if to do so would materially and adversely affect the interests of the owners of the Bonds or to permit the tender of Bonds in payment of any Special Taxes except upon receipt of a certificate of an Independent Financial Consultant that to accept such tender will not result in the District having insufficient Special Tax revenues to pay the principal of and interest on the Bonds remaining Outstanding following such tender. See "SPECIAL RISK FACTORS - Non-Cash Payment of Special Taxes."

Although the Special Taxes constitute liens on taxable parcels within the District, they do not constitute a personal indebtedness of the owners of property within the District. Moreover, other liens for taxes and assessments already exist on the property located within the District (See "THE COMMUNITY FACILITIESDISTRICT - Direct and Overlapping Debt") and others could come into existence in the future in certain situations without the consent or knowledge of the City or District or the landowners therein. See "SPECIAL RISK FACTORS - Parity Taxes, Special Assessments and Land Development Costs" herein. There is no assurance that property owners will be financially able to pay the annual Special Taxes or that they will pay such taxes even if financially able to do so, all as more fully described in the section of this Official Statement entitled "SPECIAL RISK FACTORS. "

19 Under the terms of the Indenture, all Special Tax revenues received by the District are to be deposited in the Special Tax Fund. Prepayments shall be deposited in the Redemption Account of the Special Tax Fund. Special Tax revenues deposited in the Special Tax Fund are to be applied by the Trustee under the Indenture in the following order of priority: (i) to deposit up to $40,000 to the Administrative Expense Fund to pay Administrative Expenses; (ii) to pay the interest on the Bonds when due; (iii) to pay the principal of the Bonds when due; (iv) to pay any scheduled Sinking Fund Payment; (v) to replenish the Reserve Account to the Reserve Requirement; (vi) to pay Administrative Expenses in excess of the $40,000 deposited in the Administrative Expense Fund pursuant to (i) above, (vii) to make any required transfers to the Rebate Fund; and (viii) to the Surplus Fund forthe purposes outlined in the Indenture. See APPENDIXC - "SUMMARY OF INDENTURE."

Proceeds of Foreclosure Sales

The net proceeds received following a judicial foreclosure sale of land within the District resulting from a landowner's failure to pay the Special Tax when due are pledged to the payment of principal of and interest on the Bonds.

Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of any Special Tax or receipt by the District of Special Taxes in an amount which is less than the Special Tax levied, the City Council, as the legislative body of the District, may order that Special Taxes be collected by a superior court action to foreclose the lien within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at a judicial foreclosure sale. Under the Act, the commencement of judicial foreclosure following the nonpayment of a Special Tax is not mandatory. However, the City has covenanted in the Indenture that on or beforeMarch 1 and June 1 of each Fiscal Year, the City will review the public records of the County in connection with the Special Taxes levied in such Fiscal Year to determine the amount of Special Taxes actually collected in such Fiscal Year. If the City determines that (a) any single parcel subject to the Special Taxes is delinquent in the payment of Special Taxes in the aggregate of $3,000 or more or (b) any single parcel or parcels under common ownership subject to the Special Taxes are delinquent in the payment of Special Taxes in the aggregate of $10,000 or more, the City shall, not later than forty-five (45) days after such determination, send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner. The City shall cause judicial foreclosure proceedings to be commenced and filedin the Superior Court not later than ninety (90) days after such determination against any parcel for which a notice of delinquency was given and for which the Special Taxes remain delinquent. With respect to aggregate delinquencies throughout District in the case of the Bonds, if the City determines that it has collected less than 90% of the Special Taxes levied in the such Fiscal Year, then the City shall, not later than forty-five (45) days after such determination, send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the owner of each delinquent parcel (regardless of the amount of such delinquency). The City will cause judicial foreclosure proceedings to be commenced and filed in the Superior Court not later than ninety (90) days after such determination against any parcel for which a notice of delinquency was given and for which the Special Taxes remain delinquent. See APPENDIX C­ "SUMMARY OF INDENTURE - Other Covenants of the City" herein.

If foreclosure is necessary and other funds (including amounts in the Reserve Fund) have been exhausted, debt service payments on the Bonds could be delayed until the foreclosure proceedings have ended and foreclosure sale proceeds have been received. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actions, involvement by agencies of the federal government and other factors beyond the control of the City. See "SPECIAL RISK FACTORS - Bankruptcy and Foreclosure" herein. Moreover, no assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosuresale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. See "SPECIAL RISK FACTORS - Land Values" herein. Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not impose on the District or the City any obligation to purchase or

20 acquire any lot or parcel of property sold at a foreclosure sale if there is no other purchaser at such sale. The Act provides that, in the case of a delinquency, the Special Tax will have the same lien priority as is provided for ad valorem taxes.

Reserve Fund

In order to secure further the payment of principal of and interest on the Bonds, the City is required, upon delivery of the Bonds, to deposit $803,864.35 into the Reserve Fund and thereafter to maintain the Reserve Fund an amount equal to the Reserve Requirement. Special Taxes may be levied within a Zone in the District for the purpose of replenishing the Reserve Fund only if and to the extent amounts were withdrawn from the Reserve Fund as a result of delinquencies in such Zone. Subject to the foregoing limitation and the limits on the maximum annual Special Tax which may be levied within each Zone in the District, as described in APPENDIX A, the City has covenanted to levy Special Taxes in an amount that is anticipated to be sufficient, in light of the other intended uses of the Special Tax proceeds, to maintain the balance in the Reserve Fund at the Reserve Requirement. Amounts in the Reserve Fund are to be applied to (i) pay debt service on the Bonds, to the extent other monies are not available therefor, (ii) redeem the Bonds in whole or in part, and (iii) pay the principal and interest due in the final year of maturity of the Bonds. See APPENDIX C - "SUMMARY OF INDENTURE - Reserve Fund" herein.

Parity Bonds

The City has covenanted not to issue additional Bonds except for the purpose of refunding Outstanding Bonds pursuant to the Indenture. See APPENDIX C-"SUMMARY OF INDENTURE" herein.

THE COMMUNITY FACILITIES DISTRICT

General Description of the District

The District consists of approximately 97 gross acres (76 taxable acres) and is located in the western portion of the City, north of the 118 Freeway between Erringer Road to the east and First Street to the west. Approximately 11.5 acres of retail and health club uses, in addition to the parcels owned by May and Macy's, are located adjacent to the District but are not included in the District and are not subject to the levy of Special Taxes securing the Bonds. Based on current land use approvals and projections, the land within the District is being planned to be developed in three Zones with approximately 1,055,106 square feet of commercial-retail and residential space.

Description of Acquisition Improvements

The facilities authorized to be acquired or constructed by the City with the proceeds of the Bonds consist of various Improvements described in Table 2 below (the "Acquisition Improvements"), to serve property within and adjacent to the District. In addition to or in substitution for the facilities listed below, the District and the Developers may agree to finance similar, but different eligible facilities. In addition to Bond proceeds, the City Contribution will be available on the Closing Date and expended fromtime to time for the purpose of financing the Acquisition Improvements. The City Contribution was authorized by Ordinance No. 1059, adopted by the City on July 19, 2004 and includes authorization to pay for land owned by Simi Valley Mall, Town and Country, Inc. and SVTC LLC which will comprise part of the Acquisition Improvements. To the extent that Bond proceeds and the City Contribution are insufficient to fund the infrastructure required to complete the development of the Project, Town and Country, Inc. will have to fund such infrastructure from other sources.

The City and Town and Country, Inc. have entered into a Funding, Construction and Acquisition, Option and Purchase Agreement (the "Acquisition Agreement") for the purpose of providing terms for

21 construction by Town and Country, Inc., and City acquisition, of certain of the Acquisition Improvements. The City may elect to construct the Acquisition Improvements itself under certain circumstances described in the Acquisition Agreement. Pursuant to the Acquisition Agreement, Town and Country, Inc. is entitled to construct all of the Acquisition Improvements listed in Table 2 below and, in such event, the City will reimburse the contracting party from Bond proceeds in the Acquisition and Construction Fund and/or City Contribution amounts, to the extent such funds are available. As provided in the Acquisition Agreement, the City will pay forcompleted improvements, or serviceable discrete components thereof, upon acceptance by the City or CalTrans with respect to the CalTrans Facilities (as defined below). The City agrees to pay for specific land components related to the Acquisition Improvements in accordance with an agreed schedule in an amount up to its appraised value. In the event Town and Country, Inc. does not construct any of the indicated improvements in accordance with the Acquisition Agreement, the City is entitled to use self-help to complete such improvements, and to access amounts in the Acquisition and Construction Fund, and in the Project Fund (the "City Contribution Fund") established under the Trust Agreement dated as of August 1, 2004 by and among the City, the Simi Valley Public Financing Authority and the Trustee, as successor in interest to BNY Western Trust Company, as trustee, in connection with the $25,955,000 Series 2004 Certificates of Participation executed and delivered on September 2, 2004 (the "2004 Certificates of Participation"), for such purposes, although the City is not obligated to construct or complete any of the Acquisition Improvements and in no event is responsible for expending any moneys other than amounts available in the Acquisition and Construction Fund and in the City Contribution Fund for such purpose. See "THE DEVELOPMENT AND PROPERTY OWNERSHIP - Infrastructure Requirements and Construction Status" herein for a discussion of the status of the various public improvements, including in part the Acquisition Improvements, required to develop the various commercial retail and residential projects within the District.

22 TABLE 2 Community Facilities District No. 2004-1 (Town Center Project) of the City of Simi Valley AUTHORIZED DISTRICT FACILITIES COST ESTIMATE Facilities Total Cost Land for Acquisition Improvements $ 3,819,179

City Facilities in Lieu of Fees PW Water/Sewer Impact Facilities $ 578,065 PW Plan Check Inspection Fee 539 398 Subtotal $ 1,117,463

Public On-Site (A&B St., Retention) Earthwork $ 2,900,163 Water 1,010,424 Sanitary Sewer 422,594 Storm Sewer 4,839,044 Streets 904,393 Landscaping 1,245,616 Street Lighting 346,780 Retaining Walls 395,508 Subtotal $12,064,522

Public Off-Site(1 st & Erringer) Earthwork $ 2,112,209 Water 37,746 Sanitary Sewer 23,439 Storm Sewer 75,066 Streets 389,439 Street Lighting 59,790 Traffic Signalization 124,561 Subtotal $ 2,822,250

Cal-Trans Streets $ 805,534 Traffic Signalization 373,685 Retaining Walls 1,515,367 Subtotal $ 2,694,586

Grand Total $ 22,518,000

Source: Forest City.

The Acquisition Improvements listed in Table 2 above include certain water facilities which the District is authorized to finance pursuant to that certain Joint Community Facilities Agreement entered into by the City and Waterworks District No. 8, respectively, on July 19, 2004. The Acquisition Improvements listed in Table 2 above also include certain offramp, street and signage facilities (the "CalTrans Facilities") which

23 must be accepted by CalTrans. In particular, the CalTrans Facilities include construction of an on ramp and off ramp to the 118 Freeway on land adjacent to the District owned by CalTrans. Town and Country, Inc. reports that CalTrans is aware of the planned development of the Simi Valley Town Center and Town and Country and Town and Country, Inc.' s intention to build the CalTrans Facilities. The City, Simi Valley Mall and Town and Country, Inc. believe the construction of the CalTrans Facilities and acceptance thereof by CalTrans will be completed by the opening of the Simi Valley Town Center. However, there can be no assurance that CalTrans will issue building permits to construct the CalTrans Facilities on a timely basis, if at all, or that the CalTrans Facilities will be accepted by CalTrans on a timely basis, if at all. See "SPECIAL RISK FACTORS - Failure to Develop Properties."

Pursuant to the Acquisition Agreement, Town and Country, Inc. has agreed to construct and/or install the Acquisition Improvements, free of all defectsand liens, and in compliance with all applicable laws. Forest City has provided to the City a Completion Guaranty (the "Completion Guaranty"), which will be dated the date of the Acquisition Agreement, pursuant to which Forest City has guaranteed, subject to the availability of the balance of the proceeds of the Bonds and the City Contribution, as the 100% parent corporation of Town and Country, Inc., (i) the completion of the Acquisition Improvements under the terms of the Acquisition Agreement required to develop the property in the District as described herein, (ii) completion of construction of Simi Valley Town Center (other than construction of the Macy's and Robinson's May department stores or development of Parcels 3, 5, 6, and 7 within Simi Valley Town Center; See "- District Map Overview"), subject to the availability of proceeds under the Mall Construction Loan (as defined herein), and (iii) completion of certain land improvements by Town and Country, Inc. which are lessor's obligations under the Lowe's Ground Lease and under the Best Buy Lease (as definedherein).

Principal Taxpayers

All Taxable Property within the District is currently owned by Simi Valley Mall, SVTC LLC and the Agency, and the Agency intends to transfer the Agency Site in the District to Town and Country, Inc. in January, 2005 prior to and as a condition of the closing of the Bonds. SVTC LLC expects to convey its property within the District to Jefferson under the Jefferson Purchase Agreement upon completion of certain improvements to the property in Zone 1 and the satisfaction of certain other closing conditions. Simi Valley Mall, SVTC LLC, and Town and Country, Inc. will be the sole taxpayers within the District at the date of the issuance of the Bonds. See "SPECIAL RISK FACTORS - Concentration of Ownership" herein. Simi Valley Mall intends to retain ownership of its Taxable Property in the District, subject, however, to Forest City's and SVTC LLC's options to purchase Simi Valley Town Center from Simi Valley Mall. Forest City's current business plans include exercising its option to purchase Simi Valley Town Center from Simi Valley Mall. However, Forest City may elect not to exercise such option, in which event, SVTC LLC has a separate option to purchase Simi Valley Town Center from Simi Valley Mall. Property taxes and Special Taxes to be levied on a taxable parcel within Zone 2 are generally expected to be allocated pro rata to the commercial retail tenants that lease space within Simi Valley Town Center. See "THE DEVELOPMENT AND PROPERTY OWNERSHIP - The Developers" and "- The Development Plans."

Town and Country, Inc. 's current business plan includes the construction by Town and Country, Inc. of approximately 24,250 square feet of commercial retail space which it intends to own and lease, with the balance of the land in Town and County being sold or ground leased to commercial retail end users for development. Ground leases within Town and Country may contain options to purchase such leased parcels. Property taxes and Special Taxes to be levied on a taxable parcel within Zone 3 are generally expected to be allocated pro rata to the tenant that leases such parcel. See "THE DEVELOPMENT AND PROPERTY OWNERSHIP - The Developers" and "- The Development Plans." Upon the acquisition of property within the District from SVTC LLC, Jefferson intends to commence and complete construction of Jefferson at Simi Valley and lease the residential apartment space therein to residential tenants.

24 If interest on the Bonds is not funded from Bond proceeds, Undeveloped Property owned at closing of the issuance of the Bonds by Simi Valley Mall, SVTC LLC, and Town and Country, Inc. will be responsible for all of the Fiscal Year 2005-2006 Special Tax levy, totaling $229,525. Further, if development does not occur as projected, Simi Valley Mall, Town and Country, Inc. and SVTC LLC or Jefferson, depending upon whether the transfer of property to Jefferson takes place, will be responsible for all or a portion, depending upon the extent of development, of actual Special Tax payments commencing in Fiscal Year 2005-2006. See "SPECIAL RISK FACTORS - Failure to Develop Properties" and "- Concentration of Ownership" herein.

Direct and Overlapping Debt

The ability of the current owners or future owners of land within the District to pay the Special Taxes could be affected by the existence of other taxes and assessments imposed upon such land. Certain of these taxes relate to direct and overlapping tax and assessment debt set forth in Table 3 below (the "Debt Report"). The Debt Report excludes the principal amount of the Bonds.

The Debt Report has been derived from data assembled and reported to the District by David Taussig & Associates, Inc., as of October 26, 2004. Neither the District nor the Underwriter has independently verified the informationin the Debt Report and do not guarantee its completeness or accuracy.

The assessed value of the land within the District for Fiscal Year 2004-2005 is $5,065,686. Such assessed value includes areas within the District to be used as streets and easements and other nontaxable uses. As a result, Bondowners should not rely on this assessed valuation to reflect the current value of parcels subject to the Special Tax. The Debt Report sets forth those entities which have issued debt and does not include entities which only levy or assess fees, charges, ad valorem taxes or other special taxes not securing debt. The Debt Report is included for general information purposes only.

TABLE 3 Direct and Overlapping Debt Summary City of Simi Valley Community Facilities District No. 2004-1

Amount of Percent of District Fiscal Year Levy on Levy on Share of 2004-2005 Parcels in Parcels in the Total Debt Tota/Debt Overlapping Districl1> Total Levy the District District Outstanding<2> Outstanding Metropolitan Water $ 100,114,039 $ 293.81 0.00029% $ 447,475,000 $ 1,313 District (MWD) Simi Valley Unified 7,621,012 3,333.22 0.04374 76,149,000 33,305 School District Ventura County 9,746,401 658.54 0.00676 69,200,000 4,676 Community College District Total Overlapping Debt $ 39,294 Plus: CPD NO. 2004-1 Bonds 8,800,000 Estimate Share of Direct and Overlapping Debt $ 8,839,294 Appraised Value $ 32,500,000 Estimated Appraised Value to Lien 3.68

(1) Includes ad valorem, general obligation, special taxes, and standby charges that support any type of outstanding debt. (2) As of October 26, 2004. Source: David Taussig & Associates, Inc.

25 Estimated Appraised Value-to-Lien Ratio

The estimated appraised value-to-lien ratio for the taxable property within the District based on the $32,500,000 appraised value estimated by the Appraiser as of October 15, 2004 and the $8,800,000 principal amount of the outstanding Bonds and the $39,294 in direct and overlapping debt reflectedin Table 3, results in an appraised value-to-lien ratio of approximately 3.68 to 1 forthe District as a whole and 5.48 to 1 forZone 1, 2.86 to 1 for Zone 2 and 4.15 to 1 for Zone 3. See "- Direct and Overlapping Debt" above. Although the Appraisal provides an appraisal value of the taxable property within the District, the value of individual parcels within Zone 2 and Zone 3 may vary based on the timing and nature of development of such parcels. See "THE DEVELOPMENT AND PROPERTY OWNERSHIP - The Development Plans."

Estimated Assessed Value-to-Lien Ratio

The assessed value of the land within the District for Fiscal Year 2004-2005 is $5,065,686. Dividing the assessed value by the $8,800,000 principal amount of the Bonds and the $39,294 of additional direct and overlapping debt which is payable from taxes and assessments levied on property within the District as set forth in Table 3 above, results in an estimated assessed value-to-lien ratio for all of the District of approximately 0.57 to 1.

26 [INSERT MAP OF DISTRICT]

27 District Map Overview

The following description of Zone 1, Zone 2 and Zone 3 corresponds to the map of Final Tract Map No. 5430 on the previous page (the "District Map"). Parcel No. 15 on the District Map describes all of the taxable property within Zone 1 and is the planned location of Jefferson at Simi Valley. Parcels 1, 3, 5, 6 and 7 are within Zone 2 and describe the location of Simi Valley Town Center and buildings appurtenant thereto. Parcel 1 contains the primary multi-tenant building for Simi Valley Town Center currently planned for construction by Simi Valley Mall, plus sites for two future buildings in Parcel 1 located in between Parcels 3 and 4. Such future buildings in between Parcels 3 and 4 are expected by Simi Valley Mall each to contain approximately 6,000 square feet of commercial retail space at full build out. While Simi Valley Mall is in discussions with possible users forthese parcels, no agreements for such use have been entered into.

Parcels 2 and 4 are the planned locations of Robinson's May and Macy's, respectively, and are not included within the District. Parcel 3 is currently planned to be a parking lot for Simi Valley Town Center, although it may be developed in the future into a department store containing up to approximately 216,000 square feet of commercial retail space, upon satisfaction of certain conditions under the REA ( as defined herein). See "THE DEVELOPMENT AND PROPERTY OWNERSHIP - Development Plans." However, Simi Valley Mall has not identified a commercial retail end user for such parcel, and development of such parcel is not within its current business plans and is not included within the description of Simi Valley Town Center. Parcels 5, 6 and 7 are the planned locations of three banks within Zone 2 planned to each contain 5,000 to 6,000 square feet of commercial retail space. While Simi Valley Mall is in discussions with possible users for these parcels, no agreements for such use have been entered into.

Parcels 8 through 16, except for Parcel 15, is the planned location of Town and Country within Zone 3. Town and Country, Inc. plans to build on Parcel 8 an approximately 24,250 square foot multi-tenant commercial retail building. Town and Country, Inc. plans to ground lease Parcel 9 to a restaurant, which will contain approximately 5,500 square feet of commercial retail space at build out. While Town and Country, Inc. is in discussions with possible users for these parcels, no agreements have been entered into. Island's restaurant has signed a ground lease with respect to Parcel 10 which is expected to contain approximately 5,900 square feet of restaurant space at build out (the "Island's Ground Lease"). Town and Country, Inc. is in negotiations with another restaurant to ground lease Parcel 11 which is expected to contain approximately 6,452 square feet at build out. Town and Country, Inc. has signed a ground lease with Best Buy to lease Parcel 12 (the "Best Buy Lease"), which is planned to contain a building of approximately 30,000 square feet of commercial retail space at build out. Town and Country, Inc. is in negotiations to ground lease Parcel 13 to a specialty commercial retail store, which is planned to contain approximately 30,767 square feet of commercial retail space at build out. Parcel 14 is the planned location of Lowe's, which has signed the Lowe's Ground Lease to construct approximately 134,574 square feet of commercial-retail space. See "THE DEVELOPMENT AND PROPERTY OWNERSHIP - The Development Plans - Town and Country." Town and Country, Inc. plans to ground lease Parcel 16 to a commercial retail end user which has not been identified as of January 6, 2005. Town and Country, Inc. expects Parcel 16 to contain approximately 5,500 square feet of commercial-retail space at build out.

The development of the above parcels are in various stages of development. See "THE DEVELOPMENT AND PROPERTY OWNERSHIP" for further information regarding the Project. No assurance can be given that the proposed development of the Project will be partially or fully completed. See the captions "SPECIAL RISK FACTORS - Concentration of Ownership" and "- Failure to Develop Properties."

28 THE DEVELOPMENT AND PROPERTY OWNERSHIP

Simi Va lley Mall and Town and Country, Inc. have provided the information in this Official Statement concerning themselves, their ownership, their fi nancing plans and the development of Simi Valley Town Center and Town and Country, respectively. Jefferson has provided the information in this Official Statement concerning itself, itsownershi p, its fi nancing plans and the development of Jeffersonat Simi Va lley.

The information herein regarding ownership of property in the District has been included because it is considered relevant to an informed evaluation of the Bonds and the investment risks related thereto. The inclusion in this Official Statement of information related to the existing owners of all of the property within the District should not be construed to suggest that the Bonds, or the Sp ecial Taxes that will be used to pay the Bonds, are recourse obligations of such property owners. A property owner may sell or otherwise dispose of land within the District or a development or any interest therein at any time.

No assurance can be given that the proposed development within the District will occur as described below. Although planning fo r the development of the District is at an advanced stage, actual construction of improvements is as described below under the captions "The Development Plan " and "Infrastructure Requirements and Construction Status. " No assurance can be given that development of the land within the District will continue to completion, or that it will occur in a timely manner or in the configuration or intensity described herein, or that the Developers or SVTC LLC will retain ownership of any of the land within the District. Th e Bonds and the Sp ecial Taxes are not personal obligations of any landowners in the District and, in the event that a landowner defaults in the payment of the Sp ecial Taxes, the District may proceed with judicial fo reclosure but has no direct recourse to the assets of any landowner other than the property upon which the Sp ecial Tax is levied. The Bonds are secured solely by the Special Taxes and other amounts pledged under the Indenture as described in this Official Statement. See "SOURCES OF PA YMENT FOR THE BONDS" and "SPECIAL RISK FA CTORS. "

General Description and Location of the District

The City is located in the southeastern portion of the County. The City is a relatively young community, having been incorporated on October 10, 1969. The Simi Valley area was relatively undeveloped until 1960. The City encompasses an area of approximately 39 square miles.

The District consists of approximately 97 gross acres. The District is located in the City along the north side of Freeway 118, between Erringer Road to the east and First Street to the west. The property within the District was vacant and unimproved for over 20 years prior to the Developers commencing planning and development of the Project (as definedbelow).

The District is planned to consist primarily of a shopping center known as "Simi Valley Town Center," a multi-family residential development known as "Jefferson at Simi Valley" and a retail center known as "Town & County" (Simi Valley Town Center, Jefferson at Simi Valley and Town and Country are sometimes collectively referred to herein as the "Project"). The retail centers are planned to consist of a "main street" or "village" type development that will comprise an open-air, regional mall and mixed-use commercial environment with a blend of retail tenants, specialty commercial uses, restaurant and entertainment outlets.

The Simi Valley Town Center is planned to contain approximately 383,156 square feet of commercial-retail and entertainment space located on approximately 44.8 gross acres. The Simi Valley Town Center is planned to be anchored by Macy's and May department stores. By arrangement with Simi Valley Mall (described below), Macy's has taken ownership of a 7.654 acre site within the Simi Valley Town Center and May has taken ownership of a 7.554 acre site within the Simi Valley Town Center. The Macy's and May sites are not within the District and are not subject to Special Taxes. Simi Valley Mall has provided all

29 information herein regarding Macy's and May and such information has not been reviewed or confirmed by Macy's or May.

Town and Country is planned to contain, at full build out, approximately 242,943 square feet of commercial-retail space located on approximately 27.8 gross acres planned to be anchored by Lowe's. Lowe's is a chain of commercial retail home improvement stores. Lowe's has agreed to lease approximately 13 acres of land in Town and Country pursuant to the Lowe's Ground Lease. The Lowe's Ground Lease is in escrow subject only to the transferof the Agency Site to Town and Country, Inc. Jeffersonat Simi Valley is planned to contain approximately 430,000 square feet of residential apartment space consisting of 500 residential one, two or three bedroom apartment units located on approximately 23.17 taxable acres, and associated leasing officesand recreational facilities. See "- The Development Plans."

Town and Country, Inc. expects to construct all of the Acquisition Improvements required for the Project pursuant to the Acquisition Agreement and by agreement with Simi Valley Mall (subject to the City's option to construct certain Acquisition Improvements under certain conditions pursuant to the Acquisition Agreement).

The Developers

The developer of the Simi Valley Town Center is Simi Valley Mall. Simi Valley Mall was formed in 2004 forthe sole purpose of holding title to and developing the Simi Valley Town Center upon the acquisition of land within Zone 2 of the District. Simi Valley Mall has assumed the obligations of SVTC LLC under the Development Agreement No. DA-03-3 between SVTC LLC and the City, dated October 21, 2003 (the "Simi Valley Mall Development Agreement"). Town and Country, Inc. has assumed Simi Valley Mall's obligation to construct its portion of the Acquisition Improvements under the Simi Valley Mall Development Agreement. Simi Valley Mall is a wholly-owned subsidiary of AEC. AEC is owned by the owners of Atlantic Exchange Company, which specializes in "Section 1031 exchanges."

Forest City, or a wholly-owned subsidiary thereof, and SVTC LLC, have been granted irrevocable options by AEC and Simi Valley Mall to acquire, respectively, either all of the membership interests in Simi Valley Mall or the Simi Valley Town Center for a period of time not to exceed 18 months following the date of Simi Valley Mall's acquisition of the Simi Valley Town Center, which occurred on July 1, 2004. Forest City's current business plans include exercising its option to purchase Simi Valley Town Center from Simi Valley Mall. However, Forest City may elect not to exercise such option, in which event, SVTC LLC has a separate option to purchase Simi Valley Town Center fromSimi Valley Mall.

The developer of Town and Country is Town and Country, Inc. Town and Country, Inc. was formed in 2004 for the purpose of holding title to and developing Town and Country and the infrastructure related to the Project. Town and Country, Inc. is a wholly-owned subsidiary of Forest City. Forest City is a publicly traded company listed on the New York Stock Exchange (traded under the symbols "FCEA" and "FCEB") principally engaged in the ownership, development, acquisition and management of commercial and residential real estate in 20 states across the United States and the District of Columbia. Forest City was founded in 1920 and has been publicly traded since 1960. Forest City operates three strategic business units. Forest City's Commercial Group, its largest strategic business unit, owns, develops, acquires and operates regional malls, specialty/urban retail centers, office buildings, hotels and mixed-use projects. Forest City has developed retail projects for more than 50 years and office and mixed use projects for more than 30 years. As of January 31, 2004, the retail portfolio of the Commercial Group of Forest City consisted of 13 regional malls with an aggregate gross leasable area of 4.4 million square feet and 29 specialty retail centers with an aggregate gross leasable area of 5.5 million square feet. As of January 31, 2004, Forest City had approximately $5.9 billion in consolidated assets.

30 Forest City's Annual Report on Form 10-K for the year ended December 31, 2003, and Forest City's Quarterly Report on Form 10-Q forthe quarter ended October 31, 2004 as filed by Forest City with the Securities and Exchange Commission (the "Commission") pursuant to the Securities Exchange Act of 1934, as amended, set forth certain data relative to the consolidated financial position of Forest City and its subsidiaries as of those dates. The Commission maintains an Internet website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission, including Forest City. The address of such Internet website is http://www.sec._gov.

Forest City is not obligated to pay any Special Taxes within the District, or contribute capital to develop Simi Valley Town Center or Town and Country, except to the extent provided in the Completion Guaranty and the guaranty of completion provided to the Mall Construction Lender (as defined herein).

The currentowner of Jefferson at Simi Valley is SVTC LLC. Finley Group, LLC, a Californialimited liability company ("Finley Group") and Corti Gilchrist are the members of SVTC LLC. The principals of Corti Gilchrist are John M. Gilchrist, Jr. and Albert A. Corti. SVTC LLC is the entity with which the City and the Agency has entered into the development agreements which provide the basic entitlement and project plans which form the basis of the Project. Corti Gilchrist specializes in the development and leasing of regional, community and entertainment based retail properties. Mr. Gilchrist and Mr. Corti collectively have more than 60 years of experience in the development of shopping centers. Mr. Gilchrist is the former president and chief executive officer of The Hahn Company, and Al Corti is the former executive vice president of The Hahn Company. Under their management, The Hahn Company participated in the development, leasing and operations of more than 75 real property development projects ranging from $10 million to more than $200 million in value.

Corti Gilchrist has experience in all aspects of the shopping center development business, with a background and experience in the following areas: (i) project planning and negotiations with cities and redevelopment agencies, (ii) relationships with national developers, department stores, major retail specialty chains and financial institutions, (iii) shopping center development leasing and management, (iv) asset and third-party management and (v) acquisition and disposition of land and retail properties.

Wayne J. Finley is the principal of Finley Group. Wayne Finley has over 30 years of experience in the development of regional shopping centers. Mr. Finley is the former senior vice-president and director of development for The Hahn Company, and has participated in the development of such regional shopping centers as University Towne Centre in San Diego, California, Valley Fair in San Jose, California, Townson Town Center in Baltimore, Maryland, and Park Meadows near Denver, Colorado.

The property on which Jeffersonat Simi Valley is planned to be located is currently owned by SVTC LLC. Pursuant to the Jefferson Purchase Agreement, SVTC LLC is obligated to transferthe Jeffersonat Simi Valley property to Jefferson once SVTC LLC has rough graded the property, installed certain wet and dry utilities and construction improvements, and satisfied certain other closing conditions. SVTC LLC plans to transfer the property to Jefferson on or before March, 2005. No assurance can be given that such transfer will occur as planned, or at all. In the event that the transfer of property on which Jefferson at Simi Valley is planned to be located does not take place pursuant to the Jefferson Purchase Agreement, SVTC LLC has no plans to develop the property within Zone 1 itself. See "- The Development Plans."

The planned developer of Jefferson at Simi Valley is Jefferson. Jefferson is 99% owned by JPILAC. JPILAC is a privately held multifamily housing developer founded in 1997, with predecessor organizations dating back to 1989. JPILAC is an experienced, fully integrated real estate firm that specializes in the acquisition, development, construction and management of residential communities. JPILAC operates in markets throughout the United States. Since 1989, JPILAC and its affiliates or predecessors have developed approximately 191 apartment projects consisting of approximately 63,443 units. JPILAC currently has over

31 1, 100 employees throughout the United States and Canada with an aggregate work in progress of approximately $2.5 billion among 25 metropolitan areas and 40 cities. JPILAC is headquartered in Irving, Texas.

JPILAC is not obligated to pay any Special Taxes within the District, or contribute capital to develop Jeffersonat Simi Valley.

The Development Plans

Each property owner's plans with respect to future ownership of its property in the District are different. SVTC LLC expects to sell the Jefferson at Simi Valley property on or before March, 2005 to Jefferson, upon completion of certain milestones, but no assurance can be given such sale will occur. If it does not occur, SVTC LLC would expect to market the property to another developer for development of multifamily housing in accordance with the Development Agreement No. DA-03-4 between SVTC LLC and the City, dated October 21, 2003 (the "Jefferson Development Agreement"). Jefferson will be obligated to assume the Jefferson Development Agreement as a condition to the transfer of the Jefferson at Simi Valley property to Jefferson. Town and Country, Inc. anticipates completion of all the Acquisition Improvements for the Project in accordance with the Acquisition Agreement, and to either construct and/or ground lease and/or sell to others fordevelopment portions of Town and Country, as described more fully below.

Simi Valley Mall plans to lease space within Simi Valley Town Center to various commercial-retail and entertainment tenants pursuant to the terms of modified gross leases whereby each tenant is generally responsible to pay its pro rata share of ad valorem taxes and Special Taxes. Simi Valley Mall represents that the leases will vary as to term of lease, pricing, and other business terms as well. As of October 26, 2004, Simi Valley Mall had signed leases totaling approximately 120,740 square feet. Additionally, as of October 26, 2004, Simi Valley Mall has signed letters of intent or leases out for review on an additional approximately 116,274 square feet. Simi Valley Mall plans to market the remaining approximately 146,139 square feet. The Simi Valley Mall leases are subject to certain conditions precedent and are not a guarantee of occupancy.

See Tables 5, 6 and 7 below for projected sources and uses of funds for the development of the Simi Valley Town Center, Town and Country and Jefferson at Simi Valley, respectively.

Simi Valley Town Center.

The Simi Valley Town Center is expected to be anchored by a Macy's and a Robinson's May department store. Macy's owns a 7.554 acre site adjacent to the District but within the Simi Valley Town Center. May owns a 7.538 acre site adjacent to the District but within the Simi Valley Town Center, although Macy's and May are not included in the District and will not be subject to Special Taxes. The Construction, Operation and Reciprocal Easement Agreement entered into by and among Macy's, May and Simi Valley Mall, dated December 6, 2004 (the "REA"), requires Simi Valley Mall to develop and operate the Simi Valley Town Center into an open-air, regional shopping center with a blend of retail tenants, specialty commercial uses, restaurant and entertainment outlets, all in accordance with the REA. Under the REA, and subject to certain conditions, Macy's has agreed to construct an anchor retail store with an initial planned floor area of approximately 102,600 square feet, and May has agreed to construct an anchor retail store with an initial planned floor area of approximately 134,400 square feet. Under the REA, Simi Valley Mall has agreed to construct the common area of the Simi Valley Town Center (the "Common Area") and other retail stores with an initial planned floorarea of approximately 352,499 square feet (the "Retail Stores").

Rough grading of the Simi Valley Town Center commenced June, 2004. Under the REA, subject to certain conditions, Simi Valley Mall will complete the Retail Stores and Common Area, Macy's will complete its store and May will complete its store on or before October 13, 2005 (the "Scheduled Opening Date"), which may be extended pursuant to the REA. If Simi Valley Mall fails to substantially complete all the work

32 required in connection with any of the construction milestones under the REA, Macy's and May may, by unanimous consent, delay the Scheduled Opening Date to a date in Spring 2006 by giving written notice of the rescheduled opening date to Simi Valley Mall. The Scheduled Opening Date may be delayed again by unanimous vote of Macy's and May for an additional six months if Simi Valley Mall fails to substantially complete all the work required in connection with any of the construction milestones under the REA. Simi Valley Mall expects to complete its improvements by the Scheduled Opening Date, and believes Macy's and May will complete their respective stores by the Scheduled Opening Date. However, there can be no assurance that the Simi Valley Town Center, or the Macy's and Robinson's May department stores therein, will be completed by the Scheduled Opening Date. See "SPECIAL RISK FACTORS - Failure to Develop Properties."

On January 20, 2005, published reports appeared in major financial publications that the parent company of Macy's was in negotiations to purchase May, although neither May nor Macy's has confirmed that such negotiations are ongoing or that any agreement had been reached. Under the REA, both Macy's and May are obligated to open and operate their respective stores for a minimum of ten years under the trade names "Macy's" and "Robinsons-May," respectively, or such other trade name as such company is doing business in Southern California in a majority of its retail stores with a minimum of at least 100,000 square feet. In the event Macy's and May merge, the property owned by the merged entity in Simi Valley Town Center will still be subject to the requirements of the REA, which was recorded against such property. Macy's and/or May may be released from their respective obligations under the REA if certain conditions are not met, both before and after opening. There is no assurance that such conditions to obligate Macy's and May under the REA will be met, or, if met, will continue to be met. Additionally, Macy's and/or May may choose not to perform under the REA, whether or not a merger occurs. In such event, there is no assurance that Simi Valley Mall would be able to collect damages sufficient to offset the loss of one or two major tenants. See "SPECIAL RISK FACTORS - Failure to Develop Properties."

The City, the District, Simi Valley Mall, Macy's and May are parties to a Non-Disturbance Agreement (the "Non-Disturbance Agreement") pursuant to which the District acknowledges the REA and that the rights of Macy's and May thereunder will not be interrupted in the event the District forecloses on property currently owned by Simi Valley Mall in the event of a Special Tax delinquency. Additionally, under the Non-Disturbance Agreement, Macy's and May acknowledge that the District will not be subject to any obligations of Simi Valley Mall under the REA in the event the District becomes an owner of all or a portion of Simi Valley Mall's property in the District by way of foreclosurein the event of a Special Tax delinquency.

33 Table 4 below is represented by Simi Valley Mall to describe the current signed leasing status and tenant information for the Simi Valley Town Center as of October 26, 2004. The leasing summaries shown below are based on Simi Valley Mall's current plans. These plans may change to respond to changes in economic or market conditions. Approximately 146, 139 square feetof planned commercial retail space within Simi Valley Town Center remained unleased as of October 26, 2004.

TABLE 4 Summary of Leasing/Tenant Status Simi Valley Town Center (As of October 26, 2004) Tenant Use Size Abercrombie & Fitch Retail 8,712 Academy Optical Retail 1,075 American Eagle Outfitters Retail 5.600 Bath & Body Works Retail 3,523 Beach Bums Retail 4,094 The Body Shop Retail 1,197 Brooks Shoes Retail 1,198 Brookstone Restaurant 3,657 Cingular Wireless Retail 1,234 Claire's Retail 1,000 Coldwater Creek Retail 5,850 EB Games Retail 1,214 Express Retail 7,504 Fashion Nail & Day Spa Retail 1,622 Finish Line Retail 5,649 Fragrenza Retail 640 Gloria Jean Coffee Restaurant 1,077 Gymboree Retail 2.083 Haagen Daz Restaurant 1,086 Hallmark Retail 3,123 Hollister Retail 7,281 Hot Dog on a Stick Restaurant 585 Hot Topic Retail 1,800 Jamba Juice Restaurant 1,528 Jos. A Bank Retail 4,100 Journey's Retail 2,078 Lenscrafters Retail 2,987 No Fear Retail 2,091 Numo Int'l Skincare Retail 2,407 NY & Co Retail 5,623 Pacific Sunwear Retail 4,030 Picture People Retail 2,058 Quizno's Restaurant 795 Red Robin Restaurant 6,804 Select Comfort Retail 1,077 Starbucks Restaurant 1,219 Sunglass Hut/Watch Station Retail 1,072 Verizon Retail 1,500 Victoria's Secret Retail 7,270 Vitamin World Retail 1,100 Wetzel' s Pretzels Restaurant 513 Zales Retail 1,684 Total Signed Leases 120,740

Source: Simi Valley Mall.

34 Town and Country.

The Agency owns the Agency Site, which is an approximately 27.8 gross acre site within Zone 3 on which Town and Country is planned to be located. The Agency Site is located within the merged Tapo Canyon Community Development Project and the West End Community Development Project, adopted and amended by the City pursuant to California Health and Safety Code Sections 33000, et seq. as the same now exists or may hereafter be amended. The Agency Site is located within SpecificPlan No. SP-5-26 approved by the Planning Commission of the City on September 17, 2003 and the City Council on September 29, 2003 ( the "SpecificPlan").

Pursuant to the Disposition and Development Agreement by and between the City and SVTC LLC, dated as of October 20, 2003 (the "DDA"), assigned to Town and Country, Inc. by SVTC LLC pursuant to an Assignment and Assumption of Disposition and Development Agreement dated June 30, 2004, the Agency will convey, in accordance with the terms of the DDA, the Agency Site to Town and Country, Inc., as successor in interest to SVTC LLC, as a condition of and before the closing of the Bonds.

In consideration for such conveyance, Town and Country, Inc. has agreed to construct or cause to be constructed the Developer Improvements (as defined below) and be bound by the covenants and restrictions set forth in the DDA. "Developer Improvements" on the Agency Site are defined to include a minimum of 145 ,000 square feet of retail, office and commercial uses as permitted under the Specific Plan, of a quality and tenant mix/type generally comparable to the shopping centers at Valencia Town Center, Porter Ranch, and The Esplanade in Oxnard. The initial phase of Developer Improvements on the Site will include an anchor tenant. Lowe's is anticipated to be the anchor tenant of Town and Country. Pursuant to the Lowe's Ground Lease, Lowe's has agreed to lease approximately 13 acres of land in Town and Country on which Lowe's has agreed to build a minimum of 110,000 square feet of commercial retail space. Pursuant to the Lowe's Ground Lease, Lowe's has the option to purchase the property leased to it. Under the Lowe's Ground Lease, Lowe's is required to build the commercial retail building and open a fully stocked Lowe's store forat least one day.

Town and Country, Inc. has also signed the Best Buy Lease with Best Buy which is in escrow pending the transfer of the Agency Site to Town and Country, Inc. and the completion of certain land improvements. Best Buy is a commercial electronics retail store chain. Under the Best Buy Lease, Town and Country, Inc. will provide financial assistance to Best Buy to use toward the costs of construction of an approximately 30,000 square foot commercial retail building. Construction of the Best Buy building is expected to begin March 1, 2005 and is expected to be completed in October, 2005. Town and Country, Inc. has also signed the Island's Ground Lease with Island's restaurant which is in escrow pending the transfer of the Agency Site to Town and Country, Inc. and the completion of certain land improvements. Pursuant to the Island's Ground Lease, Island's plans to construct an approximately 5,900 square foot restaurant. Ground leases for an approximately 6,452 square foot restaurant and an approximately 30,767 square foot specialty commercial retail store are currently in negotiations. Town and Country, Inc. has entered into negotiations for other uses within Town and Country, however no agreements for such other uses have been entered into. The Lowe's Ground Lease, the Best Buy Lease and the Island's Ground Lease are the only leases (or purchase contracts) signed for the development of Town and Country as of January 6, 2005. Town and Country, Inc. 's current business plan includes the construction by Town and Country, Inc. of a building within Town and Country of approximately 24,250 square feet of multi-tenant commercial retail space on Parcel 8. See "- District Map Overview." Town and Country, Inc. plans to sell or ground lease the balance of the property within Town and Country to commercial retail end users for development, and is currently marketing such space.

Pursuant to the Development Agreement No. DA 03-05 by and between the City and Town and Country, Inc., as successor in interest to SVTC LLC, effective as of September 29, 2003 (the "Town and Country Development Agreement") the Cityand Town and Country, Inc. agreed that Town and Country, Inc. has the right to develop the Agency Site in accordance with the land use regulations of the City in place on September 29, 2003, provided that such development is consistent with the Development Plan (as defined in

35 the Town and Country Development Agreement). As of October 15, 2004, the property forthe construction of Town and Country was being graded.

Town and Country, Inc. has entered into a management agreement with Forest City Commercial Management, Inc. dated June 7, 2004 pursuant to which Forest City Commercial Management will manage the daily operations of Town and Country.

Jefferson At Simi Va lley.

Jefferson at Simi Valley is planned to contain approximately 430,000 square feet of residential apartment space consisting of 500 residential one, two and three bedroom apartment units located on approximately 23.17 acres, and associated leasing offices and recreational facilities. As of October 15, 2004, the property for the construction of Jefferson at Simi Valley was being graded. Assuming the transfer of the Jefferson at Simi Valley property from SVTC LLC to Jefferson pursuant to the Jefferson Purchase Agreement occurs in a timely manner, Jefferson anticipates commencing construction of Jefferson at Simi Valley in approximately June, 2005 with build out occurring in January, 2007. In the event that the transfer of property on which Jefferson at Simi Valley is planned to be located does not take place pursuant to the Jefferson Purchase Agreement, SVTC LLC does not plan, or expect to have the ability, to develop the property within Zone 1 itself. In such event, SVTC LLC would attempt to findanother developer for the property within Zone 1. There can be no assurance that SVTC LLC would be successful in finding another developer for the property within Zone 1 in the event Jefferson does not purchase such property under the Jefferson Purchase Agreement.

Land Use Approvals Regarding the Developments

All property within the City is subject to the policies and requirements of the City's General Plan. The District has a General Plan land use designation of "Regional Commercial." The purpose of this designation is to accommodate a major commercial center that serves the City. Such centers are typically anchored by two or more major department stores with intervening specialty stores. The General Plan of the City also requires a Specific Plan to provide specific development standards for the District. The District is located within Specific Plan No. SP-5-26 (the "Town Center Specific Plan") which was approved by the Planning Commission of the City on September 17, 2003 and the City Council on September 29, 2003. The Town Center Specific Plan divides the District into three areas consistent with Zone 1, Zone 2 and Zone 3. Under the Town Center Specific Plan, Zone 1 may consist of up to 500 multi-family units, Zone 3 may consist of an approximately 117 ,000 square foot "big box" commercial retail store and up to 328,000 of commercial retail/office space, and Zone 2 may consist of 840,000 square feet of commercial retail space in a regional mall, and up to 280,000 additional square feet of common area in such mall.

A Final Environmental Impact Report dated September, 2003, prepared by the City with the assistance of Rincon Consultants, Inc. in connection with the adoption of the Town Center Specific Plan was certified in September, 2003 by the City Council (the "Environmental Impact Report"). The Environmental Impact Report recommended a number of mitigation measures required to be taken by the Developers prior to development of the Project. Such mitigation measures included certain hydrologic, geologic, air quality, traffic, biological and noise mitigation efforts be undertaken. Town and Country, Inc. is in the process of complying with such mitigation measures. Final Tract Map No. 5430 was recorded on November 22, 2004 encompassing the entire Project.

Each portion of the Project within the Town Center Specific Plan also requires development plan approval by the City (a "Planned Development Permit"). On September 29, 2003, Planned Development Permits were approved for development of the Simi Valley Town Center and Jefferson at Simi Valley. Planned Development Permits are compartmentalized by each portion of the development within Town and Country. A Planned Development Permit has been approved with respect to the Lowe's development in Town

36 and Country. Planned Development Permits with respect to the remainder of the planned Town and Country development were approved December 8, 2004.

Architectural plans for each portion of the Project must be approved before building permits may be issued by the City. Approval of the architectural designs of the Project are in various stages. Architectural designs for the construction of Macy's, Robinson's May, Simi Valley Town Center (and common area therein), Lowe's and Jefferson at Simi Valley have been submitted to the City. The architectural plans for Macy's have been approved. The architectural plans for construction of the western half of the main building in Simi Valley Town Center have been approved and a building permit has been issued for the construction thereof. The architectural plans forthe remainder of the main building in Simi Valley Town Center have been submitted to the City and Simi Valley Mall expects to obtain a building permit for the remainder of the main building in Simi Valley Town Center in January, 2005. The architectural plans forRobinson 's May have been submitted to the City and Simi Valley Mall expects such plans to be approved in January, 2005. The architectural plans for Lowe's and Jefferson at Simi Valley are expected to be approved in January, 2005. Architectural plans for the construction of Best Buy, Islands and the balance of Town and Country to be constructed by Town and Country, Inc. as part of its initial business plan have not been submitted to the City as of the date hereof.

The District is also located within the Merged Tapo Canyon/West End Community Development Project of the Agency. This area was annexed to the West End Community Development Project in 1991 and the West End and Tapo Canyon Community Development Project were merged in 1993. The Merged Tapo Canyon/West End Community Development Project is consistent with the City's General Plan. The Merged Tapo Canyon/West End Community Development Project was amended in 2001. A Final Environmental Impact Report for the amendment to the West End and Tapo Canyon Community Development Project was certifiedin June 2001 by the City Council. There are no unique requirements associated with the development of the Project within the West End and Tapo Canyon Community Development Project.

InfrastructureRequirements and Construction Status

The development of the Project will require the construction of significant public and private infrastructure, including the Acquisition Improvements. Approximately $7,109,213 of the proceeds of the Bonds will be used to finance the construction of the Acquisition Improvements. Additionally, the City has contributed an additional $15,518,000 which amounts are on deposit in the City Contribution Fund held by the Trustee for the 2004 Certificates of Participation to reimburse Town and Country, Inc. for costs of the acquisition and construction of the Acquisition Improvements, upon acceptance by the City of serviceable segments thereof, as determined by the City in its sole discretion, and acceptance by CalTrans of the CalTrans facilities. As of December 1, 2004, the property underlying the Acquisition Improvements was being rough graded.

Estimated Sources and Uses of Funds

The full development of property in the District requires the expenditure of substantial amounts both directly related to the District property and for other infrastructure improvements located outside the District. Table 5 below has been provided by Simi Valley Mall to indicate its their present projection of the sources and uses of funds associated with the development of Simi Valley Town Center. Table 6 below has been provided by Town and Country, Inc. to indicate its present projection of the sources and uses of funds associated with the development of Town and Country and the Acquisition Improvements. Table 7 below has been provided by Jefferson to indicate its present projection of the sources and uses of funds associated with the development of Jefferson at Simi Valley. SVTC LLC has no current plans to expend sums in connection with the development of Jefferson at Simi Valley, except in connection with consummating the sale to Jefferson, or another third party.

37 Simi Va lley Town Center. Table 5 summarizes the actual investment of Simi Valley Mall in the development of Simi Valley Town Center through September 30, 2004 and the projected sources and uses of funds to complete the development of the Simi Valley Town Center as proposed by Simi Valley Mall. Simi Valley Mall has received a loan commitment dated June 25, 2004 for up to $96 million from U.S. Bank National Association, as lender and administrative agent (the "Mall Construction Lender"), together with other lenders, to fund a portion of the costs associated with the design, development, construction and installation of Simi Valley Town Center (the "Mall Construction Loan"). The Mall Construction Loan closed in January 2005. Conditions precedent to the initial disbursement of the Mall Construction Loan are currently being negotiated and will include evidence of the availability of Bond proceeds, but Simi Valley Mall expects that the initial disbursement of the Mall Construction Loan will be permitted in February, 2005. Town and Country, Inc. will pledge its rights and obligations under the Acquisition Agreement to the Mall Construction Lender as part of the security forthe Mall Construction Loan.

The unaudited, projected sources and uses of funds for Simi Valley Mall is set forth in Table 5 below. Although Table 5 reflects Simi Valley Mall's current projections, many factors beyond Simi Valley Mall's control, or a decision by Simi Valley Mall to alter its current plans, may cause the actual sources and uses to differ from the projections. Table 5 is presented to show that expected sources and uses of funds demonstrate that the development as proposed is financially feasible to construct, and not to guarantee a particular cash flow to, Simi Valley Mall. Future changes to Simi Valley Mall's financial projections will be shown in the Annual Report to be prepared by Simi Valley Mall pursuant to the Continuing Disclosure Agreement of Simi Valley Mall. See APPENDIX E - "FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE DEVELOPERS."

TABLE S Simi Valley Mall's Projected Sources and Uses of Funds As of January 6, 2005

Paid Th rough 1/4/2005 to 611/2005 to 1/3/2005 5/31/2005 Buildout Total

Sources: ! Construction Loan ( ) $ $ 11,392,240 $ 84,607,760 $ 96,000,000 Equity Contributions 26,592,03 1 5,457,969 32,050,000 Tenant Reimbursement 1 299 000 1 299 000 Total Sources: $ 26,592,031 $ 16,850,209 $ 85,906,760 $ 129,349,000

Uses: Land Acquisition and Prior Expenses $ 9,608,608 $ 121,392 $ $ 9,730,000 Building Construction 3,211,734 11,266,333 24,785,933 39,264,000 Site Work 5,854,971 2,458,759 5,409,270 13,723,000 Soft Costs 7,916,718 3,003,725 54,412,557 65,333,000 Repayment of Equity Contributions 1 299 000 1 299 000 Total Uses: $ 26,592,031 $ 16,850,209 $ 85,906,760 $ 129,349,000

(1) The Mall Construction Loan will be repaid fromrevenues generated fromoperations of Simi Valley Town Center. Source: Simi Valley Mall.

Town and Country. Table 6 summarizes the actual investment in the development of Town and Country and the Acquisition Improvements through September 30, 2004 and the projected sources and uses of funds to complete the development of Town and Country as proposed by Town and Country, Inc. and construction of the Acquisition Improvements. Based on Town and Country, Inc. 's current business plan, Town and Country, Inc. anticipates either obtaining a construction loan or equity funding for the construction of an approximately 24,250 square footbuilding for lease to retail tenants in the aggregate principal amount of approximately $10,890,000. As of January 6, 2005, Town and Country, Inc. had not obtained such construction loan or equity funding.

38 The unaudited, projected sources and uses of funds forTown and Country, Inc. is set forth in Table 6 below. As described above, Town and Country, Inc.' s sources and uses of funds in Table 6 anticipates additional construction loan financing which Town and Country, Inc. has not yet obtained, and may not obtain. There can be no assurance that Town and Country, Inc. will have timely access to the sources of funds (as shown below) which will be necessary to complete the proposed development of Town and Country and the Acquisition Improvements or that there will be no substantial changes in the sources and uses of funds shown below. Town and Country, Inc. expects the proceeds of the Bonds and the City Contribution to be adequate in time and amount to complete the Acquisition Improvements.

Although Table 6 reflects Town and Country, Inc. 's current projections, many factors beyond Town and Country, Inc.' s control, or a decision by Town and Country, Inc. to alter its current plans, may cause the actual sources and uses to differ from the projections. Table 6 is presented to show that expected sources and uses of funds demonstrate that the initial development of Town and Country and the construction of the Acquisition Improvements as proposed are financially feasible to construct, and not to guarantee a particular cash flow to, Town and Country, Inc. Future changes to Town and Country, Inc.'s financial projections will be shown in the Annual Report to be prepared by Town and Country, Inc. pursuant to the Continuing Disclosure Agreement of Town and Country, Inc. See APPENDIX E - "FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE DEVELOPERS."

TABLE 6 Town and Country, Inc.'s Projected Sources and Uses of Funds As of January 6, 2005

Paid Th rough 1/4/2005 to 611/2005 to 1/3/2005 5/31/2005 Buildout Total

Sources: ! Construction Loan ( ) $ $ $ 9,057,000 $ 9,057,000 Equity Contributions 9,668,293 9,668,293 Bond Proceeds/City Contribution 17,606,424 4,911,576 22,518,000 Tenant Reimbursement 4 419 000 4 419 000 Total Sources: $ 9,668,293 $ 17,606,424 $ 18,387,576 $ 45,662,293

Uses: Land Acquisition and Prior Expenses $ 3,820,000 $ $ $ 3,820,000 Building Construction 3,544,000 1,772,000 5,316,000 Site Work 4,618,891 8,283,424 8,231,985 21,134,300 Soft Costs 1,229,402 1,868,000 2,5 17,598 5,615,000 Repayment of Construction Loans 4,418,700 4,418,700 Repayment of Equity Contributions 3 911 000 1 447 293 5,358,293 Total Uses: $ 9,668,293 $ 17,606,424 $ 18,387,576 $ 45,662,293

Cl) If obtained, such loan will be repaid from sales and ground leasing revenues generated by Town and Country. Town and Country, Inc. may choose to use equity funding in lieu of a construction loan. Source: Town and Country, Inc.

Jefferson at Simi Valley. Table 7 summarizes the actual investment in the development of Jefferson at Simi Valley through October 15, 2004 and the projected sources and uses of funds to complete the development of Jefferson at Simi Valley as proposed by Jefferson. Jefferson anticipates obtaining a construction loan in the aggregate principal amount of approximately $66,998,250. However, as of January 6, 2005, Jefferson had not obtained such construction loan.

The unaudited, projected sources and uses of funds for Jefferson at Simi Valley is set forth in Table 7 below. As described above, Jefferson's sources and uses of funds set forth in Table 7 anticipates additional construction loan financing which Jefferson has not yet obtained. There can be no assurance that Jefferson will have timely access to the sources of funds (as shown below) which will be necessary to complete the

39 proposed development or that there will be no substantial changes in the sources and uses of funds shown below.

Although Table 7 reflectsJefferson 's current projections, many factors beyond Jefferson's control, or a decision by Jefferson to alter its current plans, may cause the actual sources and uses to differ from the projections. Table 7 is presented to show Jefferson's anticipated investment in the development of Jefferson at Simi Valley and not to guarantee a particular cash flow to Jefferson. Future changes to Jefferson's sources and uses of funds with respect to Jefferson at Simi Valley will be shown in the Annual Report to be prepared by Jefferson pursuant to the Continuing Disclosure Agreement of Jefferson. See APPENDIX E - "FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE DEVELOPERS."

TABLE 7 Jefferson's Projected Sources and Uses of Funds As of October 15, 2004

Through 10116/04 to 111/2005 to 6/1/05 to 10/15/04 12/31/04 5/31/2005 Buildout Total

Sources: Construction Loan $ $ (19,106,083) $ 32,120,631 $ 53,983,702 $ 66,998,250 Equity Contributions 2,755,000 19 577 750 22,332,750 Total Sources: $ 2,755,000 $ 471,667 $ 32,120,631 $ 53,983,702 $ 89,331,000

Uses: Land Acquisition and Construction $ 1,300,000 $ $ 29,934,136 $ 47,006,864 $ 79,602,000 Soft Costs 1,455,000 471,667 326,314 777,104 3,030,085 Contingency 495,000 1,683,000 2,178,000 Capitalized Property Tax 41,000 41,000 Commissions 50,000 50,000 Capitalized Interest 495,800 1,983,200 2,479,000 LoanFees 640,915 640,915 Operating Costs 137 466 I 172 534 I 310 000 Total Uses: $ 2,755,000 $ 471,667 $ 32,120,631 $ 59,983,702 $ 89,331,000

Source: Jefferson.

Appraisal

The Appraiser valued the property within the District primarily based upon a sales comparison approach with a discounted cash flow analysis. The Appraiser's estimate of value is based upon a number of assumptions and limiting conditions contained in the Appraisal as set forth in APPENDIX B. The sale comparison approach involves analyzing sites of comparable utility adjusted fordifferences, to indicate a value for the District. Valuation is typically accomplished using a unit of comparison such as price per square foot or acre. Adjustments are applied to the units of comparison from an analysis of comparable sales, and the adjusted unit of comparison is then used to derive a total value. The reliability of the sales comparison approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; and (d) the absence of non-typical conditions affecting the sales price. See APPENDIX B - "APPRAISAL REPORT."

After determining the retail land value of the subject property, the next step is performinga discounted cash flow analysis, or land "sell-out" projection during which time the sites will be sold. This approach makes certain assumptions regarding the absorption of property, and the resulting revenues to be generated through the sale of the property. Expenses are deducted from this revenue stream to account for reasonable and typical costs associated with the sell-off and development of property (land only), including the infrastructure costs associated with the development, marketing and administrative costs and real estate taxes.

40 The finalstep involves discounting net revenues into a present value for the property in its current, "as is" condition, assuming infrastructure improvements are installed, including the improvements paid with proceeds fromthe Bonds. Based on these approaches, the Appraiser is of the opinion that the market value of the property in the District as of October 15, 2004, assuming the completion of all improvements to be financed with proceeds of the Bonds was not less than $32,500,000, including $14,200,000 appraised value of the Simi Valley Town Center, $9,000,000 appraised value of Town and Country and $9,300,000 appraised value of Jefferson at Simi Valley.

In arriving at its statement of value, the Appraiser assumes that there are no hidden or unapparent conditions of the property or subsoil that render it more or less valuable, that all required licenses, certificates of occupancy or other legislative or administrative authorizations from governmental agencies or private entities or organizations have been or can be obtained, that no hazardous waste and/or toxic materials are located on the property within the District that would affect the development process, that the improvements to be funded with the Bonds are completed and that the proposed development is constructed in a timely manner with no adverse delays (i.e., construction will proceed as proposed with no limitations on development occurring). See APPENDIX B - "APPRAISAL REPORT" herein.

No assurance can be given that the assumptions made by the Appraiser will, in fact, be realized, and, as a result, no assurance can be given that the property within the District could be sold at the appraised values included in the Appraisal. Actual values of each parcel within Zone 2 and Zone 3 will vary based on the timing and nature of development of such parcels. See "THE DEVELOPMENT AND PROPERTY OWNERSHIP - The Development Plans."

The Appraiser makes certain assumptions in arriving at the appraised value of the District. The Appraiser assumes that the Acquisition Improvements are constructed and/or installed in a timely manner. The Appraiser assumes that the cost information concerning the development of the Simi Valley Town Center, Town and Country and Jefferson at Simi Valley provided by the Developers is accurate. The Appraiser also assumes that the Macy's and May department stores within Simi Valley Town Center will be constructed as planned. For a full description of the assumptions of the Appraiser in completing the Appraisal, see APPENDIX B - "APPRAISAL REPORT."

SPECIAL RISK FACTORS

The purchase of the Bonds involves a high degree of investment risk and, therefore,the Bonds are not appropriate investments for many types of investors. The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the Bonds. This discussion does not purport to be comprehensive or definitive. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the District to pay their Special Taxes when due. Such failures to pay Special Taxes could result in the inability of the District to make full and punctual payments of debt service on the Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the District. See "- Land Values" and "- Limited Secondary Market" below.

Concentration of Ownership

Property ownership in the District is currently highly concentratedand can be expected to remain so. Upon the issuance of the Bonds, all of the Taxable Property within the District is expected to be owned by Simi Valley Mall, SVTC LLC, and Town and Country, Inc. SVTC LLC intends to transfer its property within the District to Jefferson upon completion of grading and certain improvements to its property within the District, and the satisfaction of certain other closing conditions. Simi Valley Mall intends, pursuant to its current business plan, to maintain ownership of the Simi Valley Town Center and lease to commercial retail users. However, Forest City (or a wholly owned subsidiary) has the option to acquire Simi Valley Town

41 Center from Simi Valley Mall, and under Forest City's current business plan, Forest City intends to exercise such option. However, Forest City may elect not to exercise such option, in which event, SVTC LLC may purchase Simi Valley Town Center from Simi Valley Mall pursuant to a separate option. Town and Country, Inc. currently intends to sell offor ground lease parcels within Town and Country to commercial retail users, and Lowe's has the option to purchase the property it is leasing within Town and Country pursuant to the Lowe's Ground Lease.

At the closing of the Bonds, Simi Valley Mall, SVTC LLC, and Town and Country, Inc. will be responsible for 100% of the Special Tax Levy. For the owners of commercial retail space, the terms of commercial leases may mitigate the effect of concentration to the extent ad valorem taxes and Special Taxes are a part of a commercial tenant's rental obligation. The receipt of the Special Taxes is dependent on the willingness and the ability of the Taxable Property owners to pay the Special Taxes when due and could be adversely effected by the inability of such Taxable Property owners to lease or sell, as applicable, the property within the District due to commercial downturns or high vacancy rates. Failure of such parties, or any successor, to pay the annual Special Taxes when due could result in a default in payments of the principal of, and interest on, the Bonds, when due. See "- Failure to Develop Properties" below.

No assurance can be given that SVTC LLC will transfer its property to Jefferson or that the Developers, or their successors, will complete the intended construction and development in the District. "­ Failure to Develop Properties" below. As a result, no assurance can be given that SVTC LLC or the Developers and their successors will continue to pay Special Taxes in the future or that they will be able to pay such Special Taxes on a timely basis. See "- Bankruptcy and Foreclosure" below, for a discussion of certain limitations on the District's ability to pursue judicial proceedings with respect to delinquent parcels. Furthermore, with respect to the commercial/retail leases, the terms of the commercial leases will generally be shorter than the term on the Bonds. Property owners may not be able to extend such leases or find suitable commercial tenants at the end of such leases, which could affect the ability of the Developers to pay future Special Taxes when due. See "THE DEVELOPMENT AND PROPERTY OWNERSHIP."

Impact of Zone Allocations

The Rate and Method divides the property in the District into three Zones and allocates a portion of the Outstanding Bonds to each Zone. Each Zone is responsible only fordebt service on the Bonds allocable to such Zone, and Special Taxes cannot be levied in one Zone within the District in order to provide amounts to pay debt service on Bonds allocable to another Zone in the District. Therefore, in the event that the District Special Taxes collected within a Zone are insufficientto pay debt service on the Bonds allocated to such Zone, the Special Tax levy in the remaining Zones within the District cannot be increased in order to offset such insufficiency ( even if the Special Taxes are being levied in such remaining Zones at less than the maximum special tax rates) and, upon depletion of the Reserve Fund, there could be a default in the payment of the Bonds. See "SOURCES OF PAYMENT FOR THE BONDS- Rate and Method of Apportionment - Determination of Zone Tax Requirement."

Pursuant to the Indenture, a single Reserve Fund is established forthe Bonds. Moneys on deposit in the Reserve Fund are available for paying the debt service on the Bonds in the event that there are insufficient amounts for such purpose in the Special Tax Fund. A draw on the Reserve Fund could occur as the result of Special Tax delinquencies in any Zone within the District. However, pursuant to the Rate and Method, Special Taxes may be levied within a Zone in the District forthe purpose of replenishing the Reserve Fund only if and to the extent that amounts were withdrawn from the Reserve Fund as a result of delinquencies in such Zone. Therefore, if a draw on the Reserve Fund were to occur as the result of District Special Tax delinquencies in one Zone, the Special Tax levy in the other Zones in the District could not be increased in order to replenish the Reserve Fund (even if the Special Taxes were being levied in such remaining Zones at less than the maximum special tax rates). See "SOURCES OF PAYMENT FOR THE BONDS - Rate and Method of Apportionment-Determination of Zone Tax Requirement."

42 The amount of the Special Tax Requirement for a Zone in the District is a function of, among other things, the amount of Outstanding Bonds allocated to such Zone pursuant to the Rate and Method. The allocation of Outstanding Bonds to a Zone in the District pursuant to the Rate and Method is based on (a) such Zone's share of the cost of the Acquisition Improvements financedfrom Bond proceeds and (b) the amount of Bonds, if any, that have been redeemed or defeased as a result of the prepayment of Special Taxes on parcels in such Zone. Therefore, the amount of Outstanding Bonds allocated to a Zone within the District, and the share of debt service on the Outstanding Bonds for which such Zone is responsible, will change if Special Taxes are prepaid. However, the Special Tax Consultant has certified to the District that Maximum Special Taxes levied in each Zone will equal at least 110% of gross debt service on the Bonds plus the sum of the estimated Administrative Expenses allocated to such Zone in each Fiscal Year while the Bonds are Outstanding. See "SOURCES OF PAYMENT FOR THE BONDS - Rate and Method of Apportionment - Determination of Zone Tax Requirement."

Limited Obligations

The Bonds and interest thereon are not payable from the general funds of the City. The Bonds are limited obligations of the District payable solely from Net Taxes derived from Special Taxes. Except with respect to the Special Taxes, neither the credit nor the taxing power of the District or the City is pledged for the payment of the Bonds or the interest thereon, and, except as provided in the Indenture, no Owner of the Bonds may compel the exercise of any taxing power by the District or the City or force the forfeiture of any City or District property. Neither the credit nor the taxing power of the County, the State of California or any political subdivision thereof is pledged to the payment of the Bonds. The principal of, premium, if any, and interest on the Bonds are not a debt of the City, the County or the State of California, or any political subdivision thereof, or a legal or equitable pledge, charge, lien or encumbrance upon any property of such entities or upon any of such entities' income, receipts or revenues.

Insufficiency of Special Taxes

Under the Rate and Method, the annual amount of Special Tax to be levied on each taxable parcel in the District will generally be based on whether such parcel is categorized as Undeveloped Property or as Developed Property and on the land use class to which a parcel of Developed Property is assigned. See APPENDIX A - "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES" and "SOURCES OF PAYMENT FOR THE BONDS - Rate and Method of Apportionment."

The Rate and Method governing the levy of the Special Tax expressly exempts up to 20.84 acres of property association-owned and publicly-owned property within the District. See APPENDIX A - "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES" hereto. In addition, the Rate and Method exempts up to 0.29 acres of Privately Owned Exempt Property in Zone 2. If forany reason property within the District becomes Exempt Property, including, but not limited to, publicly owned property which is exempt from taxation under California law, including, but not limited to, schools, streets, parks, storm drainage facilities, urban runoff facilities and fire and police stations, subject to the limitations of the maximum authorized rates, the Special Tax will be reallocated to the remaining taxable properties within the District. This would result in the owners of such property paying a greater amount of the Special Tax, up to the Maximum Special Tax, and could have an adverse impact upon the ability and willingness of the owners or tenants of such property to pay the Special Tax when due. Additionally, owners of property may elect to prepay their Special Tax obligations in accordance with the formula set forth in Section H of the Rate and Method. See APPENDIX A-"RATES AND METHOD OF APPORTIONMENT OF SPECIAL TAXES" hereto. Such prepayments could raise the percentage of Bonds paid by property in one or more Zones. However, the Special Tax Consultant has certified to the District that Maximum Special Taxes levied in each Zone will equal at least 110% of the sum of the estimated Administrative Expenses and gross debt service on the Bonds allocated to such Zone in each Fiscal Year while the Bonds are Outstanding.

43 Moreover, if a substantial portion of land within the District became exempt from the Special Tax because of public ownership, or otherwise, the Maximum Special Tax which could be levied upon the remaining property within the District might not be sufficient to pay principal of and interest on the Bonds when due and a defaultcould occur with respect to the payment of such principal and interest.

Failure to Develop Properties

Currently, all of the property in the District is substantially undeveloped. Under the construction schedule provided by the Developers and described herein, approximately 80.8% of the Special Taxes projected to be levied in Fiscal Year 2005-2006 would be payable from Developed Property, and approximately 19.2% of the Special Taxes projected to be levied in Fiscal Year 2005-2006 would be payable fromUndeveloped Property.

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

Land development is subject to comprehensive federal, State and local regulations. Approval is required from various agencies in connection with the layout and design of developments, the nature and extent of improvements, construction activity, land use, zoning, school and health requirements, as well as numerous other matters. There is always the possibility that such approvals will not be obtained or, if obtained, will not be obtained on a timely basis. Failure to obtain any such agency approval or satisfy such governmental requirements would adversely affectplanned land development. Finally, development of land is subject to economic considerations.

As of November 15, 2004, none of the major infrastructure required for the District is complete and grading is approximately 75% completed. No assurance can be given that the proposed development will be partially or fully completed, and it is possible that cost overruns will be incurred which will require additional funding, which may or may not be available.

The installation of the necessary infrastructure improvements and the construction of the proposed development are subject to the receipt of ministerial and discretionary approvals from a number of public agencies concerning the layout and design of the proposed development, the nature and extent of the improvements, land use, health and safety requirements and other matters. In particular, the construction of a freeway offramp is subject to the approval of CalTrans in all material respects. See "THE DEVELOPMENT AND PROPERTY OWNERSHIP - Infrastructure Requirements and Construction Status" and "- Land Use Approvals Regarding the Developments." The failure to obtain any such approval could adversely affect the planned land development within the District. Moreover, there can be no assurance that land development operations within the District will not be adversely affectedby future governmentalpolicies, including, but not limited to, governmental policies to restrict or control development. However, Forest City has provided to the City the Completion Guaranty, pursuant to which Forest City has guaranteed, subject to the availability of the balance of the proceeds of the Bonds and the City Contribution, as the 100% parent corporation of Town and Country, Inc., (i) the completion of the Acquisition Improvements under the terms of the Acquisition Agreement required to develop the property in the District as described herein, (ii) completion of construction of Simi Valley Town Center (other than construction of the Macy's and Robinson's May department stores or development of Parcels 3, 5, 6, and 7 within Simi Valley Town Center; See "- District Map Overview"), subject to the availability of proceeds under the Mall Construction Loan, and (iii) completion of certain land

44 improvements by Town and Country, Inc. which are lessor's obligations under the Lowe's Ground Lease and under the Best Buy Lease. See "THE COMMUNITY FACILITIES DISTRICT - Description of Acquisition Improvements" and "THE DEVELOPMENT AND PROPERTY OWNERSHIP - The Developers."

In the event that the transfer of property on which Jefferson at Simi Valley is planned to be located does not take place pursuant to the JeffersonPurchase Agreement, SVTC LLC does not plan, or expect to have the ability, to develop the property within Zone 1 itself. In such event, SVTC LLC would attempt to find another developer for the Jefferson at Simi Valley. There can be no assurance that SVTC LLC would be successful in findinganother developer for Jefferson at Simi Valley in the event Jefferson does not purchase the Jefferson at Simi Valley property under the JeffersonPurchase Agreement. No assurance can be given that SVTC LLC will transfer its property to Jefferson or that the Developers, or their successors, will complete the intended construction Jefferson at Simi Valley. As a result, no assurance can be given that SVTC LLC or their successors will continue to pay Special Taxes in the future or that they will be able to pay such Special Taxes on a timely basis. See THE DEVELOPMENT AND PROPERTY OWNERSHIP - The Development Plans."

Additionally, not all commercial retail or entertainment end users forparcels within Simi Valley Town Center and Town and Country have been identified. However, Simi Valley Mall and Town and Country, Inc. are in negotiations with certain commercial retail or entertainment end users for Simi Valley Town Center and Town and Country, respectively. See THE DEVELOPMENT AND PROPERTY OWNERSHIP - The Development Plans." In the event commercial retail or entertainment end users are not identified, negotiations are not finalized or signed leases implemented, such parcels may not be developed according to the current business plans of Simi Valley Mall and Town and Country, Inc. No assurance can be given that development of such parcels beyond rough grading will take place and failure to develop such parcels may affect the willingness and ability of Simi Valley Mall and Town and Country, Inc. to pay the Special Taxes when due. See THE DEVELOPMENT AND PROPERTY OWNERSHIP - The Development Plans."

Additionally, in the event the Special Tax burden of property within Simi Valley Town Center and Town and Country is passed along to tenants or ground lessors pursuant to the terms of their respective leases, additional Special Tax burden caused by the failure to develop property within Simi Valley Town Center and Town and Country may affect the willingness and ability of such tenants or ground lessors to pay the Special Taxes when due.

Under current California law, it is generally accepted that proposed development is not exempt from future land use regulations until building permits have been properly issued, substantial work has been performed and substantial liabilities have been incurred in good faith reliance on such permits.

In the past, a number of communities in Southern California have placed on the ballot initiative measures intended to control the rate of future development. It is possible that future initiatives could be enacted, could become applicable to the proposed development and could negatively impact the ability of the current landowners, and their successors, to complete the proposed development. The application of future land use regulations to the proposed development could cause significant delays and cost increases in the completion of the development and could cause the land values within the District to decrease substantially fromthose estimated by the Appraiser.

There can be no assurance that land development operations within the District will not be adversely affected by a future deterioration of the real estate market and economic conditions or future local, State and federal governmental policies relating to real estate development, the income tax treatment of real property ownership, the direct and indirect consequences of military and/or terrorist activities in this country or abroad or the national economy. A slowdown of the development process and the absorption rate could adversely affect land values and reduce the ability or desire of any of the Developers to pay the annual Special Taxes. In that event, there could be a default in the payment of principal of, and interest on, the Bonds when due.

45 Bondowners should assume that any event that significantly impacts the ability to develop land in the District would cause the property values within the District to decrease substantially from those estimated by the Appraiser and could affect the willingness and ability of the owners of land within the District to pay the Special Taxes when due.

Except for the capitalized interest funded with the Bond proceeds, the payment of 100% of the annual principal of and interest on the Bonds depends upon the receipt of Special Taxes levied on property owned by the property owners, most of which is currently undeveloped property. Undeveloped property is less valuable per unit of area than developed land. The undeveloped property also provides less security to the Bondowners should it be necessary for the District to foreclose on undeveloped property due to the nonpayment of the Special Taxes. Furthermore, an inability to develop the land within the District as currently proposed will make the Bondowners dependent upon timely payment of the Special Taxes levied on undeveloped property for a longer period of time than projected. A slowdown or stoppage in the continued development of the District could reduce the willingness and ability of the property owners to make Special Tax payments on undeveloped property and could greatly reduce the value of such property in the event it has to be foreclosed upon. See "- Land Values" below.

SB114

Both the Simi Valley Town Center and Town and Country projects involve improvements and financial assistance which might implicate a state law ("SB114") designed to prevent local agencies from providing financial assistance to big box retailers to induce relocation fromone jurisdiction to another within a common market area. (California Government Code Section 53084 and California Health and Safety Code Section 33426.7.) Simi Valley Mall, Town and Country, Inc. and the City believe no violation will occur, but if a violation is asserted and found to occur, the impact on the projects could be significant. SB 114 and its impact on Simi Valley Town Center and Town and Country are described below.

SB 114 was enacted into law in October 2003, after the City's adoption of the Simi Valley Mall Development Agreement, and became effective on January 1, 2004. The law prohibits a local agency (including a city and redevelopment agency) from providing "any form of financial assistance" to a "big box retailer, or business entity that sells or leases land to a ... big box retailer, that is relocating from the territorial jurisdiction of one local agency to the territorial jurisdiction of another local agency but within the same market area." The statute defines most of its operative terms. A "big box retailer" means a store of greater than 75,000 square feet of gross buildable area that will generate sales tax. "Market area" means a geographical area that is described in independent and recognized commercial trade literature, recognized business policies or practices, or publications of recognized independent research organizations, "as being an area that is large enough to support the location of the. . . specific big box retailer that is relocating." "Relocating" is defined in the statute as the closing of a big box retailer in one location and the opening of a big box retailer in another location "within a 365-day period when a person or business entity has an ownership interest in both the big box retailer that has closed or will close and the one that is opening." Relocating does not include the closing of a big box retailer as a consequence of the big box retailer having been acquired.

"Financial assistance" includes most forms of assistance, including sale of real property at a cost that is less than fair market value, but does not include the construction by a local agency of public improvements that serve the local agency and "that are not required to be constructed as a condition of approval of the big box retailer", or "for a development other than ...the big box retailer."

There are within Simi Valley Town Center and Town and Country three proposed projects which will meet the definition of big box retailer for purposes of SBl 14. The proposed Macy's and May stores in the Simi Valley Town Center, and the proposed Lowe's store in Town and Country will each involve more than 75,000 square feet. If financial assistance is being provided by the City or Agency within the meaning of the

46 statute in a manner for which no exception applies, and if one of these three entities relocates within the same market area within a 365-day period of the opening of its Simi Valley store, the statute may be violated.

Pursuant to the Simi Valley Mall Development Agreement, the City agreed to consider the formation of the District and to contribute up to $17,100,000 to the cost of the Acquisition Improvements. Of the three big box retailers to be located within the District, Lowe's has covenanted with Town and Country, Inc. to not relocate any store within the relevant market area within the one year period specified in SB 114 prior to or after the opening of the Lowe's store in Town and Country, nor take any action in violation of SBl 14. Lowe's further agreed to indemnify Town and Country, Inc. against any liabilities arising out of any violation of SB 114. The owners of May and Macy's are under no contractual obligation to provide any such covenant and, upon request of Simi Valley Mall, have declined to do so. While the statute did not become effective until 2004, a specific section of the law indicates that it does not apply to contracts entered into before December 31, 1999, the day before the effective date of a predecessor statute. Thus, it is not clear whether the section applies to any assistance being provided pursuant to the agreements between the City and the Agency and the developers, but such sections may be found to be applicable.

Although a predecessor statute has been addressed in case law, none of the City, Town and Country, Inc. or Simi Valley Mall are aware of any published cases which address the scope of SB 114 or applicable remedies in the event of its violation. Each of the City, Town and Country, Inc. and Simi Valley Mall believe no violation of SB 114 will occur with respect to the Simi Valley project for a host of reasons.

First and foremost, the parties believe the "market area" of the mall for purposes of SB 114 does not include any existing stores of Macy's, May or Lowe's and therefore, based on current circumstances, no such store could relocate from one area to another within the same market area for purposes of SBl 14. This view is based on an analysis of existing independent research and recognized commercial trade literature.

However, the precise scope and identity of the relevant market area or areas is not free from doubt. The Appraisal and the environmental impact report for the Project each identify a trade area from which customers will be drawn to the commercial improvements within the District extending into areas that include Thousand Oaks, Woodland Hills and Canoga Park, each areas in which existing May and Macy's stores exist. If the market area for purposes of SB 114 were foundto include these areas, a "relocating" could occur if May or Macy's closed a store in those locations within one year of the opening of its Simi Valley store.

Second, even if the market area were determined to encompass stores of the planned major tenants, none of the City, Town and Country, Inc. or Simi Valley Mall are aware of any plan by Macy's or May (or Lowe's) to relocate, or of any incentive to do so. While Macy's and May have declined to covenant not to close stores within the relevant period, Simi Valley Mall and Town and Country, Inc. believe the market characteristics and the current, apparent economic condition of these stores make any closings in the foreseeable future highly unlikely. The parties are aware of plans by the owner of the Thousand Oaks Mall and the City of Thousand Oaks for a major remodel of that mall. These plans currently involve the merger of a Robinson's store and a May store into a single store under one roof. While this would involve the "closing" of a store, May has reported to Simi Valley Mall that it does not expect its gross square footage in the Thousand Oaks Mall to decline or for its sales tax generation to be reduced as a result of the reorganization. Rather, an increase in sales is contemplated such that such reorganization would arguably not constitute a closing for purposes of SB114.

Third, SB 114 may not be applicable to the financial assistance being provided by the City to the respective Developer because these entities have no ownership interest in the big box retailers. The City is in receipt of a letter dated June 23, 2004, from Senator Tom Torlakson which concludes that the City's financial assistance constitutes "financial assistance" for purposes of the statute, but there would be no "relocating" even if Macy's or Robinson's May close a store in the same market area within 365 days of opening a store in the new Simi Valley shopping center. The letter states in conclusion "Because Corti-Gilchrist does not have

47 an "ownership interest" in the Macy's or Robinson's May stores, the arrangement does not violate Government Code Section 53084." Senator Torlakson is the principal author of SBl 14, and the chair of the principal Assembly policy committee which reviewed the section. The parties believe his interpretation of the statute would be entitled to weight in any court action, but would not be dispositive.

Finally, the parties may argue that the City's payment forthe cost of public improvements should not be considered financial assistance within the meaning of SB 114 because this commitment, entered into at the time of approval of the Simi Valley Mall Development Agreement, constitutes a determination by the City that these public improvements should not be made conditions of developments of the Simi Valley Town Center for which Simi Valley Mall would be responsible. That is to say, while these improvements for which the financial assistance is provided were stated to be conditions of development, they should not be considered conditions of the Simi Valley Mall's development for purposes of SB114, in that the City agreed to pay for them at the same time that it imposed the conditions.

Despite the conclusion of Simi Valley Mall, Town and Country, Inc. and the City that SBl 14 will not be violated even if Macy's, May or Lowe's relocate within one year from one of its existing stores, the matter cannot be free from doubt. Existing facts related to planned major retailers and related stores in neighboring areas could change. Also, there are no published cases interpreting SB 114 and a court could conclude the City's and the Agency's involvement in the transactions involving the development of the property in the District constitutes financial assistance to or for a big box retailer in a manner which would cause the statute to be violated, if one of the big box retailers closes a store within one year of its Simi Valley store opening.

If a violation is asserted and found to have occurred following litigation on the matter, the impact of such a violation on the Project is unclear. Presumably, a litigant could seek injunctive relief, money damages or other remedies which would delay construction of the Project, depending on the times such violation is asserted. Such remedies could also affect the moneys available for construction of the Acquisition Improvements, or for completion of the Project. Relief could be sought from the City, the Agency, SVTC LLC, the Developers or others at a time, and in a manner which the parties cannot predict. Remedies asserted against the City could have a financial impact on the City. The City cannot predict the outcome of any such challenge or the context in which it may be raised.

Endangered Species

During the last several years, there has been an increase in activity at the State and federal level related to the possible listing of certain plant and animal species found in the Southern California area as endangered species. An increase in the number of endangered species is expected to curtail development in a number of areas. At present, the unimproved property within the District is not known to be inhabited by any plant or animal species which either the California Fish and Game Commission or the United States Fish and Wildlife Service has listed or has proposed for listing on the endangered species list. Notwithstanding this fact, new species are proposed to be added to the State and federal protected lists on a regular basis. Any action by the State or federal governments to protect species located on or adjacent to the property within the District could negatively impact the ability of an owner of the undeveloped land within the District, to complete the remaining development planned within the District. This, in turn, could reduce the likelihood of timely payment of the Special Taxes and would likely reduce the value of the land estimated by the Appraiser and the potential revenues available at a foreclosure sale for delinquent Special Taxes. See "- Failure to Develop Properties" and "- Land Values" below.

Natural Disasters

The District, like all California communities, may be subject to unpredictable seismic activity, fires, floods or other natural disasters. The District abuts open space grassland, which periodically experiences brushfires which threaten structures and development, the most recent of which was in October 2003. The

48 City is in a seismically active area. Property in the City, including City owned property, has been substantially damaged by earthquakes in the past and is within Seismic Zone Four of the 1997 Uniform Building Code. The nearest known fault to the City is the Simi-Santa Rosa Fault. A portion of the fault is located within the City limits and has not been active in historic times. The Northridge earthquake of 1994 caused significantdamage in the City. Several other major faults, that are located within sixty (60) miles of the City have had earthquake activity on the Richter scale of 5.0 or greater twelve (12) times since 1810 that have caused seismic shaking in the City. Seismic activity from these or other faults represents potential risk for damage to buildings, roads, bridges and property within the District in the event of an earthquake. There is significant potential for destructive ground-shaking during the occurrence of a major seismic event. In addition, land susceptible to seismic activity may be subject to liquefaction during the occurrence of such an event.

In the event of a severe earthquake, fire, flood or other natural disaster, there may be significant damage to both property and infrastructure in the District. As a result, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in the District could be diminished in the aftermath of such a natural disaster, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes.

Hazardous Substances

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

Further, it is possible that liabilities may arise in the future with respect to any of the parcels resulting from the existence currently on the parcel of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affectthe value of a parcel that is realizable upon a delinquency. The City, SVTC LLC, Simi Valley Mall and Town and Country, Inc. do not have any knowledge of any hazardous substances currently located on the property within the District. Jefferson is not aware of any hazardous substances being located on the Jefferson at Simi Valley property.

Parity Taxes, Special Assessments and Land Development Costs

The Special Taxes and any penalties thereon will constitute a lien against the lots and parcels of land on which they will be annually imposed until they are paid. Such lien is on a parity with all special taxes and special assessments levied by other agencies and is co-equal to and independent of the lien for general property taxes regardless of when they are imposed upon the same property. The Special Taxes have priority over all existing and future private liens imposed on the property, except potentially for liens or security interests held by the Federal Deposit Insurance Corporation (the "FDIC"). See "- FDIC/Federal Government Interests in Properties" and "- Bankruptcy and Foreclosure" below.

49 Development of land within the District is contingent upon construction or acquisition of major public improvements such as arterial streets, freeway access, water distribution facilities, sewage collection and transmission facilities, drainage and flood protection facilities, gas, telephone and electrical facilities, and street lighting, as well as local in-tract improvements and on-site grading and related improvements, none of which are complete as of the date hereof. There can be no assurance that the remaining improvements will be constructed or will be constructed in time for development to proceed as currently expected. The cost of these improvements plus the public and private in-tract, on-site and off-site improvements could increase the public and private debt for which the land within the District is security. This increased debt could reduce the ability or desire of the property owners to pay the annual Special Taxes levied against the property. In that event there could be a default in the payment of principal of, and interest on, the Bonds when due.

Neither the City nor the District has control over the ability of other entities and districts to issue indebtedness secured by special taxes or assessments payable fromall or a portion of the property within the District. In addition, the landowners within the District may, without the consent or knowledge of the City, petition other public agencies to issue public indebtedness secured by special taxes or assessments. Any such special taxes or assessments may have a lien on such property on a parity with the Special Taxes and could reduce the estimated value-to-lien ratios for property within the District described herein.

Disclosures to Future Purchasers

The willingness or ability of an owner of a parcel to pay the Special Tax even if the value of the parcel is sufficient may be affected by whether or not the owner was given due notice of the Special Tax authorization at the time the owner purchased the parcel, was informed of the amount of the Special Tax on the parcel should the Special Tax be levied at the maximum special tax rate and the risk of such a levy and, at the time of such a levy, has the ability to pay it as well as pay other expenses and obligations. The City has caused a notice of the Special Tax lien to be recorded in the Officeof the Recorder forthe County against each parcel. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of a property within the District or lending of money thereon.

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

Special Tax Delinquencies

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

See "SOURCES OF PAYMENT FOR THE BONDS-Proceeds of Foreclosure Sales" for a discussion of the provisions which apply, and procedures which the District is obligated to follow under the Indenture, in the event of delinquencies in the payment of Special Taxes. See "- Bankruptcy and Foreclosure" below, for a discussion of the policy of the FDIC regarding the payment of Special Taxes and

50 assessments and limitations on the District's ability to foreclosure on the lien of the Special Taxes in certain circumstances.

Non-Cash Payments of Special Taxes

Under the Act, the City Council, acting as the legislative body of the District, as the legislative body of the District, may reserve to itself the right and authority to allow the owner of any taxable parcel to tender a Bond in full or partial payment of any installment of the Special Taxes or the interest or penalties thereon. A Bond so tendered is to be accepted at par and credit is to be given for any interest accrued thereon to the date of the tender. Thus, if Bonds can be purchased in the secondary market at a discount, it may be to the advantage of an owner of a taxable parcel to pay the Special Taxes applicable thereto by tendering a Bond. Such a practice would decrease the cash flow available to the District to make payments with respect to other Bonds then outstanding; and, unless the practice was limited by the District, the Special Taxes paid in cash could be insufficient to pay the debt service due with respect to such other Bonds. In order to provide some protection against the potential adverse impact on cash flows which might be caused by the tender of Bonds in payment of Special Taxes, the Indenture includes a covenant pursuant to which the District will not authorize owners of taxable parcels to satisfy Special Tax obligations by the tender of Bonds unless the District shall have first obtained a report of an Independent Financial Consultant certifying that doing so would not result in the District having insufficient Special Tax Revenues to pay the principal of and interest on all Outstanding Bonds when due.

Payment of the Special Tax is not a Personal Obligation of the Owners

An owner of a taxable parcel is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation which is secured only by a lien against the taxable parcel. If the value of a taxable parcel is not sufficient, taking into account other liens imposed by public agencies, to secure fully the Special Tax, the City has no recourse against the owner.

Land Values

The value of the property within the District is a critical factor in determining the investment quality of the Bonds. If a property owner is delinquent in the payment of Special Taxes, the City's only remedy is to commence foreclosure proceedings in an attempt to obtain funds to pay the Special Taxes. Reductions in property values due to a downturn in the economy, physical events such as earthquakes, fires, floods or military or terroristactivities, stricter land use regulations, delays in development or other events will adversely impact the security underlying the Special Taxes. See "THE COMMUNITY FACILITIES DISTRICT - Estimated Appraised Value-to-Lien Ratio" and "- Estimated Assessed Value-to-Lien Ratio" herein.

The Appraiser has estimated, on the basis of certain definitions, assumptions and limiting conditions contained in the Appraisal, that as of March 1, 2004 the value of the land within the District was $32,500,000. The Appraiser has provided a letter stating that, as of October 15, 2004, the value of the land within the District was not less than $32,500,000.

The Appraisal is based on the assumptions as stated in APPENDIX B-"APPRAISAL REPORT." The Appraisal does not reflect any possible negative impact which could occur by reason of future slow or no growth voter initiatives, any potential limitations on development occurring due to time delays, an inability of the Developers to obtain any needed development approval or permit, the presence of hazardous substances within the District, the listing of endangered species or the determination that habitat for endangered or threatened species exists within the District, or other similar situations.

Prospective purchasers of the Bonds should not assume that the land within the District could be sold for the appraised amounts described above at a foreclosure sale fordelinquent Special Taxes. In arriving at the

51 estimates of value, the Appraiser assumes that any sale will be unaffected by undue stimulus and will occur following a reasonable marketing period, which is not always present in a foreclosure sale. See the Appraisal Report attached hereto as APPENDIX B - "APPRAISAL REPORT" for a description of other assumptions made by the Appraiser and forthe definitionsand limiting conditions used by the Appraiser.

No assurance can be given that, should a parcel with delinquent Special Taxes be foreclosedupon and sold for the amount of the delinquency, any bid will be received for such property or, if a bid is received, that such bid will be sufficient to pay all delinquent Special Taxes. See "SOURCES OF PAYMENT FOR THE BONDS - Proceeds of Foreclosure Sales."

FDIC/Federal Government Interests in Properties

The ability of the District to foreclose the lien of delinquent unpaid Special Tax installments may be limited with regard to properties in which the FDIC has an interest. In the event that any financial institution making any loan which is secured by real property within the District is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, then the ability of the District to collect interest and penalties specifiedby State law and to foreclose the lienof delinquent unpaid Special Taxes may be limited.

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

The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixedat the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Mello-Roos Act and a special tax formula which determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and thereforecovered by the FDIC's federal immunity.

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

Bankruptcy and Foreclosure

Bankruptcy, insolvency and other laws generally affecting creditors rights could adversely impact the interests of owners of the Bonds in at least two ways. First, the payment of property owners' taxes and the

52 ability of the District to foreclose the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursue judicial foreclosure proceedings may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. See "SOURCES OF PAYMENT FOR THE BONDS - Proceeds of Foreclosure Sales" herein. In addition, the prosecution of a foreclosure could be delayed due to many reasons, including crowded local court calendars or lengthy procedural delays.

Secondly, the Bankruptcy Code might prevent moneys on deposit in the Special Tax Fund and the Reserve Fund from being applied to pay interest on the Bonds and/or to redeem Bonds if bankruptcy proceedings were brought by or against the current landowner or its successors and if the court found that any of such landowners had an interest in such moneys within the meaning of Section 54l(a)(l) of the Bankruptcy Code.

Although a bankruptcy proceeding would not cause the Special Taxes to become extinguished, the amount and priority of any Special Tax lien could be modified if the value of the property falls below the value of the lien. If the value of the property is less than the lien, such excess amount could be treated as an unsecured claim by the bankruptcy court. In addition, bankruptcy of a property owner could result in a delay in procuring Superior Court foreclosure proceedings. Such delay would increase the likelihood of a delay or default in payment of the principal of, and interest on, the Bonds and the possibility of delinquent tax installments not being paid in full.

On July 30, 1992, the United States Court of Appeals for the Ninth Circuit issued its opinion in a bankruptcy case entitled In re Glasply Marine Industries. In that case, the court held that ad valorem property taxes levied by Snohomish County in the State of Washington after the date that the property owner filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on the property. Although the court upheld the priority of unpaid taxes imposed before the bankruptcy petition, unpaid taxes imposed after the filing of the bankruptcy petition were declared to be "administrative expenses" of the bankruptcy estate, payable after all secured creditors. As a result, the secured creditor was able to foreclose on the property and retain all the proceeds of the sale except the amount of the pre-petition taxes.

The Bankruptcy Reform Act of 1994 (the "Bankruptcy Reform Act") included a provision which excepts from the Bankruptcy Code's automatic stay provisions, "the creation of a statutory lien for an ad valorem property tax imposed by ...a political subdivision of a state if such tax comes due after the filing of the petition by a debtor in bankruptcy court." This amendment effectively makes the Glasply holding inoperative as it relates to ad valorem real property taxes. However, it is possible that the original rationale of the Glasply ruling could still result in the treatment of post-petition special taxes as "administrative expenses," rather than as tax liens secured by real property, at least during the pendency of bankruptcy proceedings.

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

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

The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel's approving legal opinion) will be qualified, as to the enforceability of the various legal

53 instruments, by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally.

No Acceleration Provision

The Bonds do not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the Bonds or the Indenture.

Loss of Tax Exemption

As discussed under the caption "TAX EXEMPTION," the interest on the Bonds could become ineluctable in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds as a result of a failure of the District to comply with certain provisions of the Internal Revenue Code of 1986, as amended. Should such an event of taxability occur, the Bonds are not subject to early redemption and will remain outstanding to maturity or until redeemed under the optional redemption provisions of the Indenture.

Limitations on Remedies

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

Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or other similar laws affectinggenerally the enforcement ofcreditors' rights, by equitable principles and by the exercise of judicial discretion. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the owners of the Bonds.

Limited Secondary Market

There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Although the City and the Developers have committed to provide certain statutorily-required financial and operating information, there can be no assurance that such information will be available to Bondowners on a timely basis. See "CONTINUING DISCLOSURE." The failure to provide the required annual financial information does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information, or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially differentfrom the original purchase price.

Proposition 218

An initiative measure entitled the "Right to Vote on Taxes Act" (the "Initiative") was approved by the voters of the State at the November 5, 1996 general election. The Initiative added Article XIIIC and Article XIIID to the California Constitution. According to the "Title and Summary" of the Initiative prepared by the California Attorney General, the Initiative limits "the authority of local governments to impose taxes and property-related assessments, fees and charges." Provisions of the Initiative have been and will continue to be interpreted by the courts. The Initiative could potentially impact the Special Taxes otherwise available to the District to pay the principal of and interest on the Bonds as described below.

54 Among other things, Section 3 of Article XIIIC states that " ... the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge." The Act provides for a procedure, which includes notice, hearing, protest and voting requirements to alter the Rate and Method of Apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, a bill was signed into law by the Governor of the State enacting Government Code Section 5854, which states that:

Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution.

Accordingly, although the matter is not free from doubt, it is likely that the Initiative has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the Bonds.

It may be possible, however, for voters or the District or the City acting as the legislative body of the District to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the Bonds. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Nevertheless, to the maximum extent that the law permits it to do so, the District has covenanted that it will not initiate proceedings under the Act to reduce the maximum Special Tax rates on parcels of Developed Property (as defined in the Rate and Method) within the District to less than an amount equal to 110% of Maximum Annual Debt Service on the Outstanding Bonds plus Administrative Expenses. In connection with the foregoing covenant, the District has made a legislative finding and determination that any elimination or reduction of Special Taxes below the foregoing level would interfere with the timely retirement of the Bonds. The District also has covenanted that, in the event an initiative is adopted which purports to alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. However, no assurance can be given as to the enforceability of the foregoingcovenants.

The interpretation and application of the Initiative will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy affordedby the courts. See "- Limitations on Remedies" herein.

Ballot Initiatives

Article XIII A, Article XIII B and Proposition 218 were adopted pursuant to measures qualified for the ballot pursuant to California's constitutional initiative process. On March 6, 1995 in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiatives. From time to time, other initiative measures could be adopted by California voters. The adoption of any such initiative might place limitations on the ability of the State, the City or local districts to increase revenues or to

55 increase appropriations or on the ability of the landowners within the District to complete the remaining proposed development. See "SPECIAL RISK FACTORS - Failure to Develop Properties" herein.

CONTINUING DISCLOSURE

Pursuant to a Continuing Disclosure Agreement with the Fiscal Agent, as dissemination agent (the "Disclosure Agreement"), the City, for and on behalf of the District, has agreed to provide, or cause to be provided, to each nationally recognized municipal securities information repository and any public or private repository or entity designated by the State as a state repository for purposes of Rule 15c2-12 (each, a "Repository") certain annual financial information and operating data concerning the District. The Annual Report to be filedby the City for and on behalf of the District is to be filednot later than March 1 of each year, beginning March 1, 2005, and is to include audited financial statements of the City. The requirement that the City file its audited financial statements as a part of the Annual Report has been included in the Disclosure Agreement solely to satisfy the provisions of Rule 15c2-12. The inclusion of this information does not mean that the Bonds are secured by any resources or property of the City other than as described hereinabove. See "SOURCES OF PAYMENT FOR THE BONDS" and "SPECIAL RISK FACTORS - Limited Obligations." The City has never failed to comply in all material respects with any previous undertakings with regard to Rule 15c2-12 to provide annual reports or notices of material events. The full text of the Disclosure Agreement is set forthin APPENDIX D.

To assist the Underwriter in complying with Rule 15c2-12(b)(5), Simi Valley Mall, Town and Country, Inc. and SVTC LLC will enter into a Continuing Disclosure Agreement (each a "Developer Disclosure Agreement") covenanting prior to the termination of the Developer Disclosure Agreement to provide an Annual Report not later than March 1 of each year beginning March 1, 2005 and a Semiannual Report not later than September 1 of each year, commencing September 1, 2005. The Annual Reports provided by each developer executing a Developer Disclosure Agreement will contain audited financial statements, if any, and the additional financial and operating data outlined in Section 4 of the Developer Disclosure Agreement, a form of which is attached in APPENDIXE. However, the Developer Disclosure Agreement being executed by Jefferson will not become effective until, and unless, Jefferson becomes a landowner in the District as planned, and Jefferson will not be obligated to provide any information until such time as it becomes a landowner in the District. In addition to the information expressly required to be provided pursuant to a Developer Disclosure Agreement, each developer executing a Developer Disclosure Agreement is also required to provide such further information, if any, as may be necessary to make the specifically required statements of such Developer contained in this Official Statement, in the light of the circumstances under which they are made, not misleading. SVTC LLC and each Developer has represented that it has never failed to comply in all material respects with all previous undertakings with regard to Rule 15c2-12, if any.

The Developer Disclosure Agreement will inure solely to the benefit of the City, any Dissemination Agent, the Underwriter and owners or beneficial owners fromtime to time of the Bonds.

TAX EXEMPTION

In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California ("Bond Counsel"), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest on the Bonds is excluded fromgross income forfederal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income which may affect the alternativeminimum tax liability of such corporations.

56 The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of the same series and maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the Bond Owner will increase the Bond Owner's basis in the Bond. In the opinion of Bond Counsel, the amount of original issue discount that accrues to the owner of the Bond is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax.

Bond Counsel's opinion as to the exclusion fromgross income of interest (and original issue discount) on the Bonds is based upon certain representations of fact and certifications made by the District and others and is subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended ( the "Code"), that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become ineluctable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has covenanted to comply with all such requirements.

The amount by which a Bond Owner's original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond Owner's basis in the applicable Bond (and the amount of tax­ exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premium.

The Internal Revenue Service (the "IRS") has initiated an expanded program for the auditing of tax­ exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affectedas a result of such an audit of the Bonds ( or by an audit of similar bonds).

Bond Counsel's opinions may be affectedby actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the Tax Certificate relatingto the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the exclusion from gross income of interest (and original issue discount) on the Bonds for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Y occa Carlson & Rauth.

Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the Bonds is excluded fromgross income for federal income tax purposes provided that the District continues to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest (and original issue discount) with respect to the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds.

A copy of the proposed form of opinion of Bond Counsel is attached hereto as APPENDIX F.

57 LEGAL MATTERS

The legal opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, approving the validity of the Bonds in substantially the form set forth as APPENDIX F hereto, will be made available to purchasers at the time of original delivery. A copy of the legal opinion for the Bonds will be provided with each definitivebond. Certain legal matters will be passed upon for the City and the District by David H. Hirsch, as the City Attorney.

LITIGATION

No litigation is pending or threatened concerning the validity of the Bonds or the pledge of Special Taxes to repay the Bonds and a certificate of the City to that effect will be furnished to the Underwriter at the time of the original delivery of the Bonds. The City is not aware of any pending or threatened litigation which questions the existence of the District or the City or contests the authority of the City to levy and collect the Special Taxes or to issue and retire the Bonds.

NO RATING

The City has not made and does not contemplate making application to any rating agency for the assignment of a rating of the Bonds.

UNDERWRITING

The Bonds are being purchased by Stone & Youngberg LLC (the "Underwriter"). The Underwriter has agreed to purchase the Bonds at a price of $8,654,972.50 (being $8,800,000.00 aggregate principal amount thereof, less Underwriter's discount of $132,000.00 and less original issue discount of $13,027.50). The purchase agreement relating to the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased. The obligation to make such purchase is subject to certain terms and conditions set forth in such purchase agreement, the approval of certain legal matters by counsel and certain other conditions.

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

FINANCIAL INTERESTS

The fees being paid to the Underwriter, Underwriter's Counsel and Bond Counsel are contingent upon the issuance and delivery of the Bonds. A portion of the fees paid to the Financial Advisor are contingent upon the issuance and delivery of the Bonds. From time to time, Bond Counsel represents the Underwriter on matters unrelated to the Bonds.

PENDING LEGISLATION

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

ADDITIONAL INFORMATION

The purpose of this OfficialStatement is to supply informationto prospective buyers of the Bonds. Quotations and summaries and explanations of the Bonds and documents contained in this OfficialStatement

58 do not purport to be complete, and reference is made to such documents for full and complete statements and their provisions.

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

COMMUNITY FACILITIES DISTRICT NO. 2004-1 (TOWN CENTER PROJECT) OF THE CITY OF SIMI VALLEY

By: /s/ Mike Sedell City Manager of the City of Simi Valley, which is acting in its capacity as the legislative body of the Community Facilities District No. 2004-1 (Town Center Project) of the City of Simi Valley

59 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX A

RA TE AND METHOD OF APPORTIONMENT FOR COMMUNITY FACILITIES DISTRICT NO. 2004-1 (TOWN CENTER PROJECT) OF THE CITY OF SIMI VALLEY

A Special Tax as hereinafter definedshall be levied on all Assessor's Parcels in CommunityFacilities District No. 2004-1 ("CFD No. 2004-1") and collected each Fiscal Year commencing in Fiscal Year 2004-05, in an amount determined by the Council through the application of the appropriate Special Tax within each Zone for "Developed Property,""Taxable Property Owner Association Property,""Taxable Public Property," and "Undeveloped Property" as described below. All of the real property in CFD No. 2004-1, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided.

A. DEFINITIONS

The terms hereinafter set forth have the following meanings:

"Acre or Acreage" means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan, or other map or plan recorded with the County. The square footage of an Assessor's Parcel is equal to the Acreage of such parcel multiplied by 43,560.

"Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Division 2 of Title 5 of the GovernmentCode of the State of California.

"Administrative Expenses" means the followingactual or reasonably estimated costs directly related to the administration of CPD No. 2004-1: the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the City, a designee thereof or both); the costs of collecting the Special Taxes (whether by the County or otherwise); the costs of remitting the Special Taxes to the Trustee; the costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, CPD No. 2004-1 or any designee of either thereof of complying with arbitrage rebate requirements; the costs to the City, CPD No. 2004-1 or any designee of either thereof of complying with City, CPD No. 2004-1 or obligated persons disclosure requirements; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the City, of CPD No. 2004-1 or any designee of either thereof related to an appeal of the Special Tax; and any other City annual administration fees and third party expenses not listed above. Administrative Expenses shall also include amounts estimated or advanced by the City or CPD No. 2004-1 for any other administrative purposes of CPD No. 2004-1, including attorney's fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes.

"Administrative Special Tax Requirement" means, for any Fiscal Year, that amount estimated to be required to: (i) pay periodic costs on the CPD No. 2004-1 Bonds other than regularly scheduled debt service, including but not limited to, credit enhancement and rebate payments on the CPD No. 2004-1 Bonds as described in the Indenture and due in the calendar year beginning in said Fiscal Year; and (ii) pay Administrative Expenses.

A-1 "Assessor's Parcel" means a lot or parcel shown in an Assessor's Parcel Map with an assigned Assessor's Parcel number.

"Assessor's Parcel Map" means an officialmap of the Assessor of the County designating parcels by Assessor's Parcel number.

"Assigned Special Tax" means the Special Tax applicable to each Assessor's Parcel of Developed Property, as determined in accordance with Section C below.

"Authorized Facilities" means those improvements, as listed on Exhibit "A" to the Resolution of Formation.

"Backup Special Tax" means the Special Tax applicable to each Assessor's Parcel of Developed Property, as determined in accordance with Section C below.

"CFD Administrator" means an officialof the City, or designee thereof, responsible fordetermining the Special Tax Requirement foreach Zone and providing forthe levy and collection of the Special Taxes.

"CFD No. 2004-1" means Community Facilities District No. 2004-1 of the City of Simi Valley (Town Center Project), as identified on the boundary map for CPD No. 2004-1.

"CFD No. 2004-1 Bonds" means any bonds or other debt (as definedin Section 53317(d) of the Act), whether in one or more series, issued by CPD No. 2004-1 and secured solely by Special Taxes levied on property within the boundaries of CPD No. 2004-1 under the Act.

"City" means the City of Simi Valley.

"Council" means the City Council of the City of Simi Valley, acting as the legislative body of CPD No. 2004-1.

"County" means the County of Ventura.

"Developed Property" means, for each Fiscal Year, all Taxable Property exclusive of Taxable Property Owner Association Property or Taxable Public Property, for which a building permit for new construction, other than the construction of a garage, parking lot, parking structure or street, was issued after January 1, 2004 but prior to March 1 of the previous Fiscal Year.

"Fiscal Year" means the period starting July 1 and ending on the followingJune 30.

"Indenture" means the indenture, fiscal agentagreement, resolution or other instrument pursuant to which CPD No. 2004-1 Bonds are issued, as modified, amended and/or supplemented from time to time.

"Maximum Special Tax" means the maximum Special Tax, determined in accordance with Section C below, that can be levied in any Fiscal Year on any Assessor's Parcel.

"Non-Residential Floor Area" means the total building square footage of the nonresidential building(s) located on an Assessor's Parcel, measured from outside wall to outside wall, exclusive of overhangs, porches, patios, carports, or similar spaces attached to the building but generally open on at least two sides. The determination of Non-Residential Floor Area shall be made by reference to the building permit(s) issued for such Assessor's parcel.

A-2 "Non-Residential Property" means all Assessor's Parcels of Developed Propertyfor which a building permit has been issued for a non-residential use.

"Outstanding Zone 1 Bonds" means (a) the product of (i) the original principal amount of the CPD No. 2004-1 Bonds minus the principal amount of the CPD No. 2004-1 Bonds that have been paid at maturity, or been redeemed or defeased other than fromprepayments of Special Taxes; and (ii) the Zone 1 Allocation, minus (b) the principal amount of the CPD No. 2004-1 Bonds that have been redeemed or defeased as a result of the prepayment of Special Taxes by the owners of Assessor's Parcels located in Zone 1.

"Outstanding Zone 2 Bonds" means (a) the product of (i) the original principal amount of the CPD No. 2004-1 Bonds minus the principal amount of the CPD No. 2004-1 Bonds that have been paid at maturity, or been redeemed or defeased other than fromprepayments of Special Taxes; and (ii) the Zone 2 Allocation, minus (b) the principal amount of the CPD No. 2004-1 Bonds that have been redeemed or defeased as a result of the prepayment of Special Taxes by the owners of Assessor's Parcels located in Zone 2.

"Outstanding Zone 3 Bonds" means (a) the product of (i) the original principal amount of the CPD No. 2004-1 Bonds minus the principal amount of the CPD No. 2004-1 Bonds that have been paid at maturity, or been redeemed or defeased other than fromprepayments of Special Taxes; and (ii) the Zone 3 Allocation, minus (b) the principal amount of the CPD No. 2004-1 Bonds that have been redeemed or defeased as a result of the prepayment of Special Taxes by the owners of Assessor's Parcels located in Zone 3.

"Privately Owned Exempt Property" means the land area consisting of up to 0.29 Acres in Zone 2 as geographically identifiedand specifically defined in Exhibit B to this Rate and Method of Apportionment.

"Property Owner Association Property" means any property within the boundaries of CPD No. 2004-1 that is owned by or dedicated to a property owner association, including any master or sub-association.

"Proportionately" means forDeveloped Property in a particular Zone that the ratio of the actual Special Tax levy in such Zone to the Assigned Special Tax forsuch Zone is equal for all Assessor's Parcels of Developed Property within such Zone, or where the Backup Special Tax is being levied in a particular Zone that the ratio of the actual Special Tax levy in such Zone to the Maximum Special Tax for such Zone is equal for all Assessor's Parcels upon which a Backup Special Tax is being levied within such Zone. For Undeveloped Property in a particular Zone, "Proportionately" means that the ratio of the actual Special Tax levy per Acre in such Zone to the Maximum Special Tax per Acre for such Zone is equal for all Assessor's Parcels of Undeveloped Property within such Zone. The term "Proportionately" may similarly be applied to other categories of Taxable Property as listed in Section D below.

"Public Property" means any property within the boundaries of CPD No. 2004-1 that is used for rights-of-way or any other purpose and is owned by or irrevocably offered for dedication to the federal government,the State, the County, the City or any other public agency, provided however that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be taxed and classified in accordance with its use.

"Residential Property" means all Assessor's Parcels of Developed Property for which a building permit has been issued for purposes of constructing one or more residential dwelling units.

A-3 "Resolution of Formation" means the Resolution of Formation for CPD No. 2004-1.

"Special Tax" means the special tax to be levied in each Fiscal Year on each Assessor's Parcel of Developed Property, Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property to fund the Zone 1 Special Tax Requirement, the Zone 2 Special Tax Requirement, or the Zone 3 Special Tax Requirement.

"State" means the State of California.

"Taxable Property" means all of the Assessor's Parcels within the boundaries of CFD No. 2004-1 which are not exempt from the Special Tax pursuant to law or Section E below.

"Taxable Property Owner Association Property" means all Assessor's Parcels of PropertyOwner Association Property that are not exempt pursuant to Section E below.

"Taxable Public Property" means all Assessor's Parcels of Public Property that are not exempt pursuant to Section E below.

"Trustee" means the trustee or fiscal agent under the Indenture.

"Undeveloped Property" means, foreach Fiscal Year, all Taxable Property not classifiedas Developed Property, Taxable Property Owner Association Property or Taxable Public Property.

"Zone" means Zone 1, Zone 2, or Zone 3, as applicable.

"Zone 1" means the land area consisting of approximately 24.54 Acres as geographically identified in Tentative Tract Map No. 5430 approved by the Council on September 29, 2003, pursuant to Resolution No. 2003-75, as amended from time-to time or modifiedpursuant to a finaltract map or precise site plan for such property, and listed in Exhibit A to this Rate and Method of Apportionment.

"Zone 1 Allocation" means the percentage of CPD No. 2004-1 Bonds allocated to Zone 1 based on Zone 1 's share of the cost of the Authorized Facilities to be financedfrom theproceeds of such bond issue(s). The Zone 1 Allocation is 19.156%.

"Zone 1 Delinquency Amount" means, for any Fiscal Year, the amount required to (i) replenish any reserve funds for CPD No. 2004-1 Bonds in an amount equal to the amount withdrawn therefromas a result of delinquent Zone 1 Special Taxes, as reasonably determined by the CPD Administrator, and (ii) pay for reasonably anticipated delinquent Zone 1 Special Taxes based on the delinquency rate for Special Taxes levied in Zone 1 in the previous Fiscal Year.

"Zone 1 Special Tax Requirement" means, for any Fiscal Year, the sum of (i) the Zone 1 Allocation times the Administrative Special Tax Requirement; and (ii) the amount required to (a) pay regularly scheduled debt service on all Outstanding Zone 1 Bonds due in the calendar year beginning in said Fiscal Year, (b) accumulate funds to pay directly for the construction of Authorized Facilities to the extent that the inclusion of such amount does not increase the Special Tax levy on Undeveloped Property, and (c) pay the Zone 1 Delinquency Amount, if any; (iii) less a credit for funds available to reduce the annual Special Tax levy within Zone 1, as determined by the CPD Administrator pursuant to the Indenture.

"Zone 2" means the land area consisting of approximately 44.77 Acres as geographically identified in Tentative Tract Map No. 5430 approved by the Council on September 29, 2003, pursuant to

A-4 Resolution No. 2003-75, as amended from time-to time or modifiedpursuant to a finaltract map or precise site plan for such property, and listed in Exhibit A to this Rate and Method of Apportionment.

"Zone 2 Allocation" means the percentage of CPD No. 2004-1 Bonds allocated to Zone 2 based on Zone 2's share of the cost of the Authorized Facilities to be financedfrom theproceeds of such bond issue(s). The Zone 2 Allocation is 56.307%.

"Zone 2 Delinquency Amount" means, for any Fiscal Year, the amount required to (i) replenish any reserve funds for CPD No. 2004-1 Bonds in an amount equal to the amount withdrawn therefromas a result of delinquent Zone 2 Special Taxes, as reasonably determined by the CPD Administrator, and (ii) pay for reasonably anticipated delinquent Zone 2 Special Taxes based on the delinquency rate for Special Taxes levied in Zone 2 in the previous Fiscal Year.

"Zone 2 Special Tax Requirement" means, for any Fiscal Year, the sum of (i) the Zone 2 Allocation times the Administrative Special Tax Requirement; and (ii) the amount required to (a) pay regularly scheduled debt service on all Outstanding Zone 2 Bonds due in the calendar year beginning in said Fiscal Year, (b) accumulate funds to pay directly for the construction of Authorized Facilities to the extent that the inclusion of such amount does not increase the Special Tax levy on Undeveloped Property, and (c) pay the Zone 2 Delinquency Amount, if any; (iii) less a credit for funds available to reduce the annual Special Tax levy within Zone 2, as determined by the CPD Administrator pursuant to the Indenture.

"Zone 3" means the land area consisting of approximately 27.84 Acres as geographically identified in Tentative Tract Map No. 5430 approved by the Council on September 29, 2003, pursuant to Resolution No. 2003-75, as amended from time-to time or modifiedpursuant to a finaltract map or precise site plan for such property, and listed in Exhibit A to this Rate and Method of Apportionment.

"Zone 3 Allocation" means the percentage of CPD No. 2004-1 Bonds allocated to Zone 3 based on Zone 3 's share of the cost of the Authorized Facilities to be financedfrom theproceeds of such bond issue(s). The Zone 3 Allocation is 24.537%.

"Zone 3 Delinquency Amount" means, for any Fiscal Year, the amount required to (i) replenish any reserve funds for CPD No. 2004-1 Bonds in an amount equal to the amount withdrawn therefromas a result of delinquent Zone 3 Special Taxes, as reasonably determined by the CPD Administrator, and (ii) pay for reasonably anticipated delinquent Zone 3 Special Taxes based on the delinquency rate for Special Taxes levied in Zone 3 in the previous Fiscal Year.

"Zone 3 Special Tax Requirement" means, for any Fiscal Year, the sum of (i) the Zone 3 Allocation times the Administrative Special Tax Requirement; and (ii) the amount required to (a) pay regularly scheduled debt service on all Outstanding Zone 3 Bonds due in the calendar year beginning in said Fiscal Year, (b) accumulate funds to pay directly for the construction of Authorized Facilities to the extent that the inclusion of such amount does not increase the Special Tax levy on Undeveloped Property, and (c) pay the Zone 3 Delinquency Amount, if any; (iii) less a credit for funds available to reduce the annual Special Tax levy within Zone 3, as determined by the CPD Administrator pursuant to the Indenture.

B. ASSIGNMENT TO LAND USE CATEGORIES

Each Fiscal Year, all Taxable Property within Zone 1, Zone 2, and Zone 3 of CPD No. 2004- 1 shall be classified as Developed Property, Taxable Property Owner Association Property, Taxable Public Property or Undeveloped Property, and shall be subject to Special Taxes in accordance with the rate and method of apportionment determined pursuant to Sections C and D below.

A-5 C. MAXIMUM SPECIAL TAX RATE 1. Developed Property Maximum Special Tax The Maximum Special Tax for each Assessor's Parcel of Developed Property within Zone 1, Zone 2, and Zone 3 shall be the greater of the applicable Assigned Special Tax or Backup Special Tax, all as determined pursuant to this Section C.

2. Developed Property Assigned Special Tax

The Fiscal Year 2004-2005 Assigned Special Tax for each Assessor's Parcel of Developed Property within each Zone is shown in Table 1.

TABLE 1

Community Facilities District No. 2004-1 Assigned Special Taxes Fiscal Year 2004-2005

Sp ecial Tax Classification Land Use Category Assigned Sp ecial Tax Zone 1 Not Applicable $5,580 per Acre Zone 2 Residential Property $14,326 per Acre Zone 2 Non-Residential Property $1.0055 per square foot of Non­ Residential Floor Area Zone 3 Residential Property $6,552 per Acre Zone 3 Non-Residential Property $0.6939 per square foot of Non­ Residential Floor Area

3. Annual Increase in Assigned Special Tax

On each July 1, commencing on July 1, 2005, the Assigned Special Tax rates shall be increased by an amount equal to two percent (2 % ) of the amount in effectfor the previous Fiscal Year.

4. Backup Special Tax

The Backup Special Tax for each Assessor's Parcel of Developed Property within each Zone shall equal the Maximum Special Tax for Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property identified for eachZone in Section C.6 and Section C. 7 below.

5. Multiple Land Use Categories

In some instances an Assessor's Parcel of Developed Propertymay contain both Residential Property and Non-Residential Property. The Assigned Special Tax levied on such an Assessor's Parcel shall be the sum of the Assigned Special Taxes for all Residential Properties and Non-Residential Properties located on that Assessor's Parcel. Furthermore, for an Assessor's Parcel that contains both Residential Property and Non-Residential

A-6 Property, the Acreage of such Assessor's Parcel shall be allocated to each typeof property based on the amount of Acreage designated for each land use as determined by reference to the site plan approved forsuch Assessor's Parcel. The CFD Administrator's allocation to each type of property shall be final. 6. Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property Maximum Special Tax

The Fiscal Year 2004-2005 Maximum Special Tax for each Assessor's Parcel of Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property within each Zone is shown in Table 3.

TABLE 3

Community Facilities District No. 2004-1 Maximum Special Taxes Fiscal Year 2004-2005

Sp ecial Tax Classification Maximum Sp ecial Tax Zone 1 $6,565 per Acre Zone 2 $16,854 per Acre Zone 3 $7,708 per Acre

7. Annual Increase in Maximum Special Tax On each July 1, commencing on July 1, 2005, the Maximum Special Tax rates forTaxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property shall be increased by an amount equal to two percent (2%) of the amount in effectfor the previous Fiscal Year.

D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX

1. ZONE 1

Commencing with Fiscal Year 2004-05 and for each following Fiscal Year, the Council shall determine the Zone 1 Special Tax Requirement and levy the Special Tax in Zone 1 until the amount of Special Taxes levied in Zone 1 is equal to the Zone 1 Special Tax Requirement. The Special Tax shall be levied in Zone 1 each Fiscal Year as follows:

First: The Special Tax shall be levied on each Assessor's Parcel of Developed Property in Zone 1 in an amount equal to 100% of the Assigned Special Tax for Developed Property;

Second: If additional monies are needed to satisfy the Zone 1 Special Tax Requirement after the firststep has been completed, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property in Zone 1 at up to 100% of the Maximum Special Tax for Undeveloped Property;

Third: If additional monies are needed to satisfy the Zone 1 Special Tax Requirement after the firsttwo steps have been completed, then the levy of the Special Tax on each

A-7 Assessor's Parcel of Developed Property in Zone 1 whose Maximum Special Tax is determined through the application of the BackupSpecial Tax shall be increased Proportionately from the Assigned Special Tax up to the Maximum Special Tax foreach such Assessor's Parcel;

Fourth: If additional monies are needed to satisfy the Zone 1 Special Tax Requirement after the firstthree steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor's Parcel of Taxable Property Owner Association Property and Taxable Public Property in Zone 1 at up to the Maximum Special Tax for Taxable Property Owner Association Property or Taxable Public Property.

Notwithstanding the above, the Council may in any Fiscal Year levy Proportionately less than 100% of the Assigned Special Tax in step one (above) when the Council no longer must levy a Special Tax in Zone 1 pursuant to steps two through four above, and (i) all authorized CPD No. 2004-1 Bonds have already been issued, or (ii) the Council has covenanted that it will not issue any additional CPD No. 2004-1 Bonds (except refunding bonds) to be supported by Special Taxes levied under this Rate and Method of Apportionment.

Further notwithstanding the above, under no circumstances will the Special Tax levied against any Assessor's Parcel of Residential Property for which an occupancy permit for private residential use has been issued be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor's Parcel within Zone 1, except for those Residential Properties whose owners are also delinquent or in default on their Special Tax payments forone or more other properties within Zone 1.

2. ZONE 2

Commencing with Fiscal Year 2004-05 and for each following Fiscal Year, the Council shall determine the Zone 2 Special Tax Requirement and levy the Special Tax in Zone 2 until the amount of Special Taxes levied in Zone 2 is equal to the Zone 2 Special Tax Requirement. The Special Tax shall be levied in Zone 2 each Fiscal Year as follows:

First: The Special Tax shall be levied on each Assessor's Parcel of Developed Property in Zone 2 in an amount equal to 100% of the Assigned Special Tax for Developed Property;

Second: If additional monies are needed to satisfy the Zone 2 Special Tax Requirement after the firststep has been completed, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property in Zone 2 at up to 100% of the Maximum Special Tax for Undeveloped Property;

Third: If additional monies are needed to satisfy the Zone 2 Special Tax Requirement after the firsttwo steps have been completed, then the levy of the Special Tax on each Assessor's Parcel of Developed Property in Zone 2 whose Maximum Special Tax is determined through the application of the Backup Special Tax shall be increased Proportionately from the Assigned Special Tax up to the Maximum Special Tax foreach such Assessor's Parcel;

Fourth: If additional monies are needed to satisfy the Zone 2 Special Tax Requirement after the firstthree steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor's Parcel of Taxable Property Owner Association Property and Taxable Public Property in Zone 2 at up to the Maximum Special Tax for Taxable Property Owner Association Property or Taxable Public Property.

A-8 Notwithstanding the above, the Council may in any Fiscal Year levy Proportionately less than 100% of the Assigned Special Tax in step one (above) when the Council no longer must levy a Special Tax in Zone 2 pursuant to steps two through four above, and (i) all authorized CPD No. 2004-1 Bonds have already been issued, or (ii) the Council has covenanted that it will not issue any additional CPD No. 2004-1 Bonds (except refunding bonds) to be supported by Special Taxes levied under this Rate and Method of Apportionment.

Further notwithstanding the above, under no circumstances will the Special Tax levied against any Assessor's Parcel of Residential Propertyfor which an occupancy permit for private residential use has been issued be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor's Parcel within Zone 2, except for those Residential Properties whose owners are also delinquent or in default on their Special Tax payments forone or more other properties within Zone 2.

3. ZONE 3

Commencing with Fiscal Year 2004-05 and for each following Fiscal Year, the Council shall determine the Zone 3 Special Tax Requirement and levy the Special Tax in Zone 3 until the amount of Special Taxes levied in Zone 3 is equal to the Zone 3 Special Tax Requirement. The Special Tax shall be levied in Zone 3 each Fiscal Year as follows:

First: The Special Tax shall be levied on each Assessor's Parcel of Developed Property in Zone 3 in an amount equal to 100% of the Assigned Special Tax for Developed Property;

Second: If additional monies are needed to satisfy the Zone 3 Special Tax Requirement after the firststep has been completed, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property in Zone 3 at up to 100% of the Maximum Special Tax for Undeveloped Property;

Third: If additional monies are needed to satisfy the Zone 3 Special Tax Requirement after the firsttwo steps have been completed, then the levy of the Special Tax on each Assessor's Parcel of Developed Property in Zone 3 whose Maximum Special Tax is determined through the application of the Backup Special Tax shall be increased Proportionately from the Assigned Special Tax up to the Maximum Special Tax foreach such Assessor's Parcel;

Fourth: If additional monies are needed to satisfy the Zone 3 Special Tax Requirement after the firstthree steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor's Parcel of Taxable Property Owner Association Property and Taxable Public Property in Zone 3 at up to the Maximum Special Tax forTaxable Property Owner Association Property or Taxable Public Property.

Notwithstanding the above, the Council may in any Fiscal Year levy Proportionately less than 100% of the Assigned Special Tax in step one (above) when the Council no longer must levy a Special Tax in Zone 3 pursuant to steps two through four above, and (i) all authorized CPD No. 2004-1 Bonds have already been issued, or (ii) the Council has covenanted that it will not issue any additional CPD No. 2004-1 Bonds (except refunding bonds) to be supported by Special Taxes levied under this Rate and Method of Apportionment.

Further notwithstanding the above, under no circumstances will the Special Tax levied against any Assessor's Parcel of Residential Propertyfor which an occupancy permit for private residential use has been issued be increased by more than ten percent as a

A-9 consequence of delinquency or default by the owner of any other Assessor's Parcel within Zone 3, except for those Residential Properties whose owners are also delinquent or in default on their Special Tax payments forone or more other properties within Zone 3.

E. EXEMPTIONS

1. ZONE 1

No Special Tax shall be levied on up to 1.05 Acres of Property Owner Association Property and/or Public Property in Zone 1. Tax-exempt status will be assigned by the CPD Administrator in the chronological order in which property in Zone 1 becomes Property Owner Association Property or Public Property. However, should an Assessor's Parcel no longer be classified as Property Owner Association Property or Public Property, its tax­ exempt status will be revoked.

Property Owner Association Property or Public Property in Zone 1 that is not exempt from Special Taxes under this section shall be subject to the levy of the Special Tax and shall be taxed Proportionately as part of the fourth step in Section D.1 above, at up to 100% of the applicable Maximum Special Tax forTaxable Property Owner Association Property or Taxable Public Property in Zone 1.

After the limit of 1.05 exempt Acres has been reached forZone 1, the Maximum Special Tax obligation for any additional Property Owner Association Property or Public Property shall be prepaid in full pursuant to Section H.3, prior to the transfer/dedication of such property. Until the Maximum Special Tax obligation for such property is prepaid, the property shall continue to be subject to the levy of Special Tax as Taxable Property Owner Association Property or Taxable Public Property.

2. ZONE 2

No Special Tax shall be levied on up to 17.58 Acres of Property Owner Association Property and/or Public Property in Zone 2. Tax-exempt status will be assigned by the CPD Administrator in the chronological order in which property in Zone 2 becomes Property Owner Association Property or Public Property. However, should an Assessor's Parcel no longer be classified as Property Owner Association Property or Public Property, its tax­ exempt status will be revoked.

Property Owner Association Property or Public Property in Zone 2 that is not exempt from Special Taxes under this section shall be subject to the levy of the Special Tax and shall be taxed Proportionately as part of the fourth step in Section D.2 above, at up to 100% of the applicable Maximum Special Tax forTaxable Property Owner Association Property or Taxable Public Property in Zone 2.

After the limit of 17 .58 exempt Acres has been reached for Zone 2, the Maximum Special Tax obligation for any additional Property Owner Association Property or Public Property shall be prepaid in full pursuant to Section H.3, prior to the transfer/dedication of such property. Until the Maximum Special Tax obligation for such property is prepaid, the property shall continue to be subject to the levy of Special Tax as Taxable Property Owner Association Property or Taxable Public Property.

In addition, no Special Tax shall be levied on up to 0.29 Acres of Privately Owned Exempt Property in Zone 2.

A-10 3. ZONE 3

No Special Tax shall be levied on up to 2.21 Acres of Property Owner Association Property and/or Public Property in Zone 3. Tax-exempt status will be assigned by the CPD Administrator in the chronological order in which property in Zone 3 becomes Property Owner Association Property or Public Property. However, should an Assessor's Parcel no longer be classified as Property Owner Association Property or Public Property, its tax­ exempt status will be revoked.

Property Owner Association Property or Public Property in Zone 3 that is not exempt from Special Taxes under this section shall be subject to the levy of the Special Tax and shall be taxed Proportionately as part of the fourth step in Section D.3 above, at up to 100% of the applicable Maximum Special Tax forTaxable Property Owner Association Property or Taxable Public Property in Zone 3.

After the limit of 2.21 exempt Acres has been reached forZone 3, the Maximum Special Tax obligation for any additional Property Owner Association Property or Public Property shall be prepaid in full pursuant to Section H.3, prior to the transfer/dedication of such property. Until the Maximum Special Tax obligation for such property is prepaid, the property shall continue to be subject to the levy of Special Tax as Taxable Property Owner Association Property or Taxable Public Property.

F. REVIEW/APPEAL COMMITTEE

Any taxpayer may filea written appeal of the Special Tax on his/her property with the CPD Administrator, provided that the appellant is current in his/her payments of Special Taxes. During the pendency of an appeal, all Special Taxes previously levied must be paid on or before the payment date established when the levy was made. The appeal must specify the reasons why the appellant claims the Special Tax is in error. The CPD Administrator shall review the appeal, meet with the appellant if the CPD Administrator deems necessary, and advise the appellant of its determination. If the CPD Administrator agrees with the appellant, the amount of the Special Tax shall be appropriately modified.

The Council may interpret this Rate and Method of Apportionment of Special Tax for purposes of clarifying any ambiguity and make determinations relative to the annual administration of the Special Tax and any landowner or resident appeals. Any decision of the Council shall be finaland binding as to all persons.

G. MANNER OF COLLECTION

The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that CPD No. 2004-1 may directly bill the Special Tax, may collect Special Taxes at a differenttime or in a different manner if necessary to meet its financialobligations, and may covenant to forecloseand may actually foreclose on delinquent Assessor's Parcels as permitted by the Act.

H. PREPAYMENT OF SPECIAL TAX

1. Payment in Full

Only an Assessor's Parcel of Developed Property, or Undeveloped Property for which a building permit has been issued, may be prepaid. The Special Tax obligation applicable to an

A-11 Assessor's Parcel in CPD No. 2004-1 may only be prepaid after all authorized CPD No. 2004-1 Bonds have already been issued, or after the Council has covenanted that it will not issue any additional CPD No. 2004-1 Bonds (except refunding bonds) to be supported by Special Taxes levied under this Rate and Method of Apportionment. The obligation of the Assessor's Parcel to pay any Special Tax may be permanently satisfied as described herein, provided that a prepayment may be made with respect to a particular Assessor's Parcel only if there are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax obligation shall provide the CPD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CPD Administrator shall notify such owner of the prepayment amount of such Assessor's Parcel. Prepayment must be made not less than 45 days prior to any redemption date for the CPDNo. 2004-1 Bonds to be redeemed with the proceeds of such prepaid Special Taxes.

The Prepayment Amount ( defined below) shall be calculated as summarized below ( capitalized terms as definedbelow):

Bond Redemption Amount Plus Redemption Premium Plus Defeasance Amount Plus Administrative Fees and Expenses Less Reserve Fund Credit Less Capitalized Interest Credit Total: equals Prepayment Amount

As of the proposed date of prepayment, the Prepayment Amount (defined below) shall be calculated as follows:

Paragraph No.:

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

2. For Assessor's Parcels of Developed Property, compute the Maximum Special Tax for the Assessor's Parcel to be prepaid. For Assessor's Parcels of Undeveloped Property forwhich building permits have already been issued, compute the Maximum Special Tax forthe Assessor's Parcel to be prepaid as though it were already designated as Developed Property, based upon the building permit which has been issued for that Assessor's Parcel.

3. Divide the Maximum Special Tax computed pursuant to paragraph 2 by the estimated Maximum Special Taxes forthe entire Zone in which the Assessor's Parcel is located based on the Developed Property Special Taxes which could be charged in the current Fiscal Year on all expected development in such Zone, excluding any Assessor's Parcels in such Zone which have been prepaid; and

4. (a) For Assessor's Parcels in Zone 1, multiply the quotient computed pursuant to paragraph 3 by the Outstanding Zone 1 Bonds to compute the amount of Outstanding Zone 1 Bonds to be retired and prepaid; or

A-12 (b) For Assessor's Parcels in Zone 2, multiply the quotient computed pursuant to paragraph 3 by the Outstanding Zone 2 Bonds to compute the amount of Outstanding Zone 2 Bonds to be retired and prepaid: or

(c) For Assessor's Parcels in Zone 3, multiply the quotient computed pursuant to paragraph 3 by the Outstanding Zone 3 Bonds to compute the amount of Outstanding Zone 3 Bonds to be retired and prepaid (in either (a), (b), or (c) above, the "Bond Redemption Amount").

5. Multiply the Bond Redemption Amount forthe appropriate Zone computed pursuant to paragraph 4 by the applicable redemption premium (e.g., the redemption price - 100%), if any, on the Outstanding Zone 1, Zone 2, or Zone 3 Bonds to be redeemed (the "Redemption Premium").

6. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date forthe Outstanding Zone 1, Zone 2, or Zone 3 Bonds, as applicable.

7. Determine the Special Taxes levied on the Assessor's Parcel in the current Fiscal Year which have not yet been paid.

8. Compute the amount the CPD Administrator reasonably expects to derive from the reinvestment of the Prepayment Amount less the Administrative Fees and Expenses fromthe date of prepayment until the redemption date for the Outstanding Zone 1, Zone 2, or Zone 3 Bonds, as applicable, to be redeemed with the prepayment.

9. Add the amounts computed pursuant to paragraphs 6 and 7 and subtract the amount computed pursuant to paragraph 8.

10. Compute the net present value of the amount computed pursuant to paragraph 9, using as a discount rate the rate of return reasonably assumed by the CPD Administrator in paragraph 8 (the "Defeasance Amount").

11. The administrative fees and expenses of CPD No. 2004-1 are as calculated by the CPD Administrator and include the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the costs of redeeming CPD No. 2004-1 Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the "Administrative Fees and Expenses").

12. The reserve fund credit (the "Reserve Fund Credit") shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Outstanding Zone 1, Zone 2, or Zone 3 Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement ( as defined in the Indenture) in effect after the redemption of Outstanding Zone 1, Zone 2, or Zone 3 Bonds, as applicable, as a result of the prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero. No Reserve Fund Credit shall be granted if the amount then on deposit in the reserve fund for the Outstanding Zone 1, Zone 2, or Zone 3 Bonds, as applicable, is below 100% of the reserve requirement ( as definedin the Indenture).

A-13 13. If any capitalized interest for the Outstanding Zone 1, Zone 2, or Zone 3 Bonds, as applicable, will not have been expended as of the firstbond interest and/or principal payment date following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the quotient computed pursuant to paragraph 3 by the expected balance in the capitalized interest fund after such first interest and/or principal payment (the "Capitalized Interest Credit").

14. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 10, and 11, less the amounts computed pursuant to paragraphs 12 and 13 (the "Prepayment Amount").

From the Prepayment Amount, the amounts computed pursuant to paragraphs 4, 5, 10, 12 and 13 shall be deposited into the appropriate fund as established under the Indenture and be used to redeem Outstanding Zone 1, Zone 2, or Zone 3 Bonds, as applicable, or make debt service payments. The amount computed pursuant to paragraph 11 shall be retained by CPD No. 2004-1.

The Prepayment Amount may be sufficient to redeem other than a $5,000 increment of CPD No. 2004-1 Bonds. In such cases, the increment above $5,000 or integral multiple thereof will be retained in the appropriate fund established under the Indenture to be used with the next prepayment of CPD No. 2004-1 Bonds or to make debt service payments.

Upon confirmation of the payment of the current Fiscal Year's Special Tax levy as determined under paragraph 7 (above), the CPD Administrator shall remove the current Fiscal Year's Special Tax levy forsuch Assessor's Parcel fromthe County tax rolls. With respect to any Assessor's Parcel forwhich the Special Tax obligation is prepaid in full in accordance with this Section H.1., the Council shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of Special Taxes and the release of the Special Tax lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay the Special Tax shall cease. Notwithstanding the foregoing, no Special Tax prepayment shall be allowed unless the amount of Maximum Special Taxes that may be levied within the entire Zone in which the Assessor's Parcel's Special Tax obligation is prepaid both prior to and after the proposed prepayment is at least 1.1 times the maximum annual debt service on all Outstanding Zone 1, Zone 2, and Zone 3 Bonds, as applicable.

2. Prepayment in Part

The Special Tax on an Assessor's Parcel of Developed Property and an Assessor's Parcel of Undeveloped Property for which a building permit has been issued may be partially prepaid. The amount of the prepayment shall be calculated as in Section H.1; except that a partial prepayment shall be calculated according to the following formula:

These terms have the following meaning:

PP = the partial prepayment

PE = the Prepayment Amount calculated according to Section H.1 F = the percentage by which the owner of the Assessor's Parcel(s) is partially prepaying the Special Tax.

A-14 The owner of any Assessor's Parcel who desires such prepayment shall notifythe CFD Administrator of (i) such owner's intent to partially prepay the Special Tax, and (ii) the percentage by which the Special Tax shall be prepaid, and (iii) the company or agency that will be acting as the escrow agent, if any. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax for an Assessor's Parcel within thirty (30) days of the request and may charge a reasonable fee for providing this service.

With respect to any Assessor's Parcel that is partially prepaid, the City shall (i) distribute the funds remitted to it according to Section H.1, and (ii) indicate in the records of CFD No. 2004-1 that there has been a partial prepayment of the Special Tax and that a portion of the Assigned Special Tax and Maximum Special Tax with respect to such Assessor's Parcel, equal to the outstanding percentage (1.00 - F) of each, respectively, shall continue to be levied on such Assessor's Parcel pursuant to Section D.

3. Prepayment of Property Owner Association Property or Public Property

An Assessor's Parcel, or portion of an Assessor's Parcel, of Property Owner Association Property or Public Property within any Zone that is not exempt fromSpecial Taxes pursuant to Section E shall be required to prepay the Special Tax obligation applicable to such Assessor's Parcel as calculated according to the followingsteps :

1. Determine the annual Maximum Special Tax to be levied on such Assessor's Parcel of additional Property Owner Association Property or Public Property for each future Fiscal Year through Fiscal Year 2033-34.

2. Determine the amount of Special Tax delinquencies that apply to such Assessor's Parcel.

3. Determine the Special Taxes levied on such Assessor's Parcel in the current Fiscal Year which have not yet been paid.

4. Verify the administrative feesand expenses of CFD No. 2004-1, including the costs of computation of the prepayment, the costs to invest the prepayment proceeds and the costs of recording any notices to evidence the prepayment and the redemption.

5. Determine the prepayment amount by calculating the sum of the following; (i) the net present value of the flowof annual Maximum Special Tax revenues as determined under step 1, using a discount rate equivalent to the average interest rate being paid on the CPD No. 2004-1 Bonds, or such other interest rate as determined by the CFD Administrator, (ii) the amount of Special Tax delinquencies as determined under step 2, (iii) the unpaid current Fiscal Year Special Taxes as determine under step 3, and (iv) the administrative feesand expenses as determined under step 4. This prepayment amount shall be deposited into the appropriate fund as established under the Indenture and be used to redeem Outstanding Zone 1, Zone 2, or Zone 3 Bonds, as applicable, or make debt service payments.

Upon confirmation of the payment of the current Fiscal Year's Special Tax levy as determined under paragraph 3 (above), the CFD Administrator shall remove the current Fiscal Year's Special Tax levy forsuch Assessor's Parcel fromthe County tax rolls. With respect to any Assessor's Parcel for which the Special Tax obligation is prepaid in full in accordance with this Section H.3, the Council shall cause a suitable notice to be recorded in compliance

A-15 with the Act, to indicate the prepayment of Special Taxes and the release of the Special Tax lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay the Special Tax shall cease.

I. TERM OF SPECIAL TAX

The Special Tax shall be levied for a period not to exceed 50 years commencing with Fiscal Year 2004-05, provided however that Special Taxes will cease to be levied in an earlier Fiscal Year if the CPD Administrator has determined (i) that all required interest and principal payments on the CPD No. 2004-1 Bonds have been paid; and (ii) all Authorized Facilities have been constructed.

A-16 EXHIBIT A

LIST OF PARCELS WITHIN ZONE 1

Parcels 15, B and C of Tentative Tract Map No. 5430

LIST OF PARCELS WITHIN ZONE 2

Parcels 1 through 7, 16, A, and portion of A&B Street* of Tentative Tract Map No. 5430 (Exclusive of that area contained in Parcel 2 of Lot Line Adjustment No. 04-04 recorded as Instrument Number 20040609-0161744) The portion of A&B Street not included in the boundary map for CFD No. 2004-1 is not included within Zone 2.

LIST OF PARCELS WITHIN ZONE 3

Parcels 8 through 14, D, and 1st Street of Tentative Tract Map No. 5430

A-17 EXHIBIT A

PRIVATELY OWNED EXEMPT PROPERTY

A-18 Simi Valley Towncenter Simi Valley, CA June 18, 2004

LEGAL DESCRIPTION PORTION OF PARCEL 1 OF LLA NO. 04-04 TO BE RELINQUISHED TO EADINGTON TRACT

THAT PORTION OF PARCEL 1 IN THE CITY OF SIMI VALLEY, COUNTY OF VENTURA, STA TE OF CALIFORNIA AS DESCRIBEDIN THAT CERTIFICATE OF APPROVAL FOR LOT LINE ADJUSTMENT NO. 04-04 RECORDED JUNE 9, 2004 AS DOC. NO. 20040609-0161744 OF OFFICIAL RECORDS IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, ALSO BEING A PORTION OF PARCEL 3 AS DESCRIBED IN THAT CERTIFICATE OF APPROVAL FOR LOT LINE ADJUSTMENT NO. 98-22 RECORDED JULY 12, 1999 AS DOC. NO. 99-131781 OF OFFICIAL RECORDS IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

COMMENCING AT THE WESTERLY TERMINUS OF THAT 9rn COURSE OF SAID PARCEL 3 DESCRIBED AS "SOUTH 89° 59' 00" EAST 164.74 FEET" IN SAID DOC. NO. 99-131781; THENCE ALONG THE SOUTHERLY LINE OF SAID PARCEL 3, SOUTH 89°34'3511 EAST, 38.39 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING ALONG SAID SOUTHERLY LINE OF PARCEL 3 THE FOLLOWING THREE (3) COURSES: l sT: SOUTH 89°34'3511 EAST, 126.58 FEET TO A TANGENT CURVE, CONCAVE TO THE NORTH, HAVINO A RADIUS OF 852.00 FEET,

2ND: EASTERLY ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 04°27'0611 AN ARC DISTANCE OF 66.20 FEET TO A TAN GENT LINE, AND ,

3RD: NORTH 85°58'1911 EAST, 471.17 FEET; THENCE LEAVING SAID SOUTHERLY LINE OF PARCEL 3,

4rn: NORTH 89°35'5011 WEST, 284.03 FEET; THENCE,

5rn: SOUTH 66°40'3211 WEST, 24.85 FEET; THENCE,

6rn: NORTH 89°35'5011 WEST, 127.93 FEET; THENCE,

7rn: NORTH 65°50'1911 WEST, 24.82 FEET; THENCE,

8rn: NORTH 89°35'5011 WEST, 44.32 FEET TO A TANGENT CURVE, CONCAVE TO THE SOUTH, HAVINO A RADIUS OF 351.50 FEET; THENCE,

9rn: WESTERLY ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 27°12'3911 AN ARC DISTANCE OF 166.93 FEET TO THE TRUE POINT OF BEGINNING. ,

CONTAINING AN AREA OF 12,454 SQUARE FEET, MORE OR LESS.

A-19 r fi: . ;·J fc � t.1:� ;:::;\.

= "1''1.i'! il8 w�··r .:. .fi ·" ..li.� �

A-20 APPENDIX B

APPRAISAL REPORT

B-1 (THIS PAGE INTENTIONALLY LEFT BLANK)

B-2 11111-� CUSHMAN & 1tJ l,t WAKEFIELD® Cushman & Wakefield of Oregon, Inc. 200 S.W. Market Street. Suite 200 Portland, OR 97201 (503) 279- 1700 http://valuation .cushwake.com October 16, 2004

Mr. Mike Sedell City Manager City of Simi Valley 2929 Tapo Canyon Road Simi Valley, California 93063

Re: Recertification of Appraised Value Simi Valley Town Center Community Facilities District No. 2004-01 Freeway 118, First Street, & Erringer Road City of Simi Valley, Ventura County, California 93065

Dear Mr. Sedell: In accordance with our engagement for the appraisal of Community Facilities District 2004-01, which encompasses areas of the proposed Simi Valley Town Center, this correspondence is to serve as a recertification of the value set forth in our appraisal report dated July 12, 2004, which indicated a market value estimate of $32,500,000 as of July 11, 2004 (herein the "Original Appraisal Report" which is incorporated into this report by reference). It should be clearly understood that this report constitutes a Restricted Appraisal as per Advisory Opinion SMT-4 of the Uniform Standards of Professional Appraisal Practice (USPAP). The report is an update of the appraisal report referenced above, which, as noted, is incorporated herein by reference. The report is subject to and contingent upon the Assumptions and Limiting Conditions and the Certification contained therein, as well as any Extraordinary Assumptions or Hypothetical Conditions set forth in the Original Report. The scope of this Recertification of Value has included the review of any potential changes in market conditions that have been observed since the original date of our market research (see Original Report). To the extent that the information differs from the expectations set forth in the previous value estimate, causing a change in the Market Value estimate as defined in the Original Report, those changes are set forth herein with the corresponding variances in the estimate of Market Value Based on the analysis as outlined herein, we are of the opinion that the market value of the fee simple estate of the referenced property, subject to special tax and special assessment liens, and subject to the assumptions, limiting conditions, certifications, and definitions, "as-is" on October 15, 2004, was: THIRTY TWO MILLION FIVE HUNDRED THOUSAND DOLLARS $ 32,500,000

B-3 October 16, 2004 Page 2

The components of this value may be allocated as fo llows:

Component Proposed Use Value Multi-Family Residential Parcel Apartments $ 9,300,000 Regional Mall Parcel Regional Mall $ 14,200,000 Town & Country Parcel Retail Center $ 9,000,000 Gateway District Parcel Retail/Health Club Not Included Public Streets/Detention Areas Streets/Open Not Included egate Total Value $ 32,500,000

This Market Value estimate does not differ from the value estimate presented in the original appraisal report. This letter is invalid as an opinion of value without the benefit of the Original Report, which contains the text, exhibits, and Addenda. Please refer to the complete list of assumptions, limiting conditions, extraordinary assumptions, and hypothetical conditions included within the Original Report Please do not hesitate to contact us if clarification is warranted Respectfully submitted, CUSHMAN & WAKEFIELD OF OREGON, INC.

Jay F. Booth, MAI Steven A. Zenker, MAI Senior Director Senior Director Retail Industry Group Retail Industry Group Advisory Services Advisory Services California Certified General Appraiser: Permit No. #AG001948

VALUATION SERVICES ADVISORY GROUP AcusHMAN& 'cJWA KEFIELD,

B-4 COMPLETE APPRAISAL OF REAL PROPERTY

Simi Valley Town Center Community Facilities District No. 2004-01 Freeway 118, First Street, & Erringer Road Simi Valley, Ventura County, California 93065

IN A SELF-CONTAINED APPRAISAL REPORT

As of March 1 , 2004

PREPARED FOR: City of Simi Valley 2929 Tapo Canyon Road Simi Valley, Califo rnia 93063

Client File ID: CFO 2004-01

PREPA RED BY: Cushman & Wakefield of Oregon, Inc. Valuation Services, Advisory Group 200 SW Market Street, Suite 200 Portland, Oregon 97201

C&W File ID: 04-34001-9009

B-5 (THIS PAGE INTENTIONALLY LEFT BLANK)

B-6 Cushman & Wakefield of Oregon, Inc. 200 SW Market Street, Suite 200 Portland,Oregon 97201 (503) 279-1700 http://valuation.cushwake.com March 1, 2004

Mr. Mike Sedell City Manager City of Simi Valley 2929 Tapo Canyon Road Simi Valley, California 93063

Re: Complete Appraisal of Real Property In a Self Contained Report Simi Valley Town Center Community Facilities District No. 2004-01 Freeway 118, First Street, & Erringer Road City of Simi Valley, Ventura County, California 93065

Dear Mr. Sedell: In fulfillment of our agreement as outlined in the Letter of Engagement, we are pleased to transmit our complete appraisal estimating the market value for the above referenced property. The results of our analysis are being presented in this self-contained report. At the request and authorization of the City of Simi Valley, we have prepared the attached appraisal concerning property located within Community Facilities District No. 2004-01 (herein "CFO 2004-01" or "CFO"). The CFD encompasses an area known as Simi Valley Town Center, which consists of approximately 129.07± gross acres of land proposed for commercial/retail and multi-family uses. Net site area (as defined herein) totals 76.01 ± acres, excluding certain parcels that will not be subject to special assessment in the CFO. The value opinion(s) reported herein are qualified by certain assumptions, limiting conditions, certifications, and definitions, which are set forth in the report. We particularly call your attention to the special assumptions presented in the Summary of Salient Facts and Conclusions. Extraordinary Assumptions: This appraisal employs certain extraordinary assumptions pertaining to the regional mall site. Please refer to discussion within the report, as well as the Summary of Salient Facts and Conclusions and Assumptions and Limiting Conditions. Hypothetical Conditions: This appraisal employs no hypothetical conditions.

This report has been prepared for the City of Simi Valley ("Client") and is intended only for its specified use. It may be distributed to the Client's attorneys, advisors, investors, lenders, potential mortgage participants, and rating agencies, and may be appended to the Official Statement for the CBD bonds. It may not be distributed to or relied upon by other persons or entities without written permission of Cushman & Wakefield of Oregon, Inc.

VALUATION SERVICES ADVISORY GROUP .&CUSHMAN� '9WAk EFU:Uh

B-7 Cityof Simi Valley March 1, 2004 Page 2

It is our understanding that this appraisal will provide a basis of market value for the underwriting of the Community Facilities District bond issue. The bond issue will, in turn, provide financing fo r the proposed public improvements and fees associated with development, and will become a lien against the property within the District. This appraisal report has been prepared in accordance with our interpretation of FIRREA, the Uniform Standards of Professional Appraisal Practice (USPAP), including the Competency Rule, and the appraisal guidelines set fo rth by the Califo rn ia Debt Advisory Commission regarding Appraisal Standards for Land-Secured Financings (dated May 1994). The property has been inspected by Jay F. Booth, MAI. The report has been prepared by Jay F. Booth, MAI and Steven A. Zenker, MAI. This appraisal employs the Sales Comparison and Developmental Approaches to value. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that these approaches would be considered necessary and applicable for market participants. Based on our Complete Appraisal as defined by the Uniform Standards of Professional Appraisal Practice, we have formed an opinion that the market value of the fee simple estate of the referenced property, subject to special tax and special assessment liens, and subject to the assumptions, limiting conditions, certifications, and definitions, "as-is" on March 1, 2004, was: THIRTYTWO MILLION FIVE HUNDRED THOUSAND DOLLARS $ 32,500,000

The components of this value may be allocated as fo llows:

Component Proposed Use Value Multi-Family Residential Parcel Apartments $ 9,300,000 Regional Mall Parcel Regional Mall $ 14,200,000 Town & Country Parcel Retail Center $ 9,000,000 Gateway District Parcel Retail/Health Club Not Included Public Streets/Detention Areas Streets/Open Not Included Aggregate Total Value $ 32,500,000

Based upon transactions that have occurred in the marketplace, as well as discussions with knowledgeable market participants, exposure time would have required approximately twelve (12) months. Furthermore, a marketing period of approximately twelve (12) months will be reasonable fo r properties such as the subject.

VALUATION SERVICES ADVISORY GRO UP .ACUSHMAN& • WAkEFl£U)�

B-8 Cityof Simi Valley March 1, 2004 Page 3

This letter is invalid as an opinion of value if detached from the report, which contains the text, exhibits, and Addenda. Respectfully submitted, CUSHMAN & WAKEFIELD, INC.

Jay F. Booth, MAI Steven A. Zenker, MAI Senior Director Senior Director Retail Industry Group Retail Industry Group Advisory Services Advisory Services California Temporary Certified General California Certified General Appraiser: Appraiser Permit No. #AG001948

C&W File ID: 04-34001 -9009

VALUATION SERVJCES ADVISORY GROCP &CUSHMAN & 'i.iJIWAK EFIEU)\

B-9 (THIS PAGE INTENTIONALLY LEFT BLANK)

B-10 SUMMARY OF SALIENT FACTS

Common Property Name: Simi Valley Town Center Property Type: Community Facilities District No. 2004-01 (apartments, regional mall, retail center) Location: Freeway 118, First Street, & Erringer Road, City of Simi Valley, Ventura County, Califo rnia 93065 The subject site is generally located along the north side of Freeway 118, between Erringer Road (east) and First Street (west), in the City of Simi Valley, Ventura County, California; part of the Greater Los Angeles Basin CMSA. Assessor's Parcel Number(s): See Real Estate Taxes & Assessments Section Interest Appraised: Fee Simple Estate, subject to special tax and special assessment liens Date of Value: March 1, 2004 Date of Inspection: February 16, 2004 Ownership: Various (see discussion within report)

Site Description Land Area: The overall development consists of approximately 1 29.07± gross acres, or 5,622,246± square feet. Net site area, excluding parcels/sites not included in the CFO, totals 76.01 ± acres, or 3,310,778± square feet. The fo llowing chart presents an overview of the property: Site Area Net Site Area * Proposed (Gross (Net (Net District/Parcel Description Use Acres) Sq/Ft) * Acres) * Community Facilities District No. 2004-01 Multi-Family Residential Parcel Apartments 23.488± AC 1,023, 137± SF 23.488± AC Regional Mall Parcel Regional Mall 42.290± AC 1,17 1,416± SF 26.892± AC Town & Country Parcel Retail Center 25.625± AC 1,11 6,225± SF 25.625± AC Additional Parcels (Not Included) Gateway District Parcel Retail/Health Club 1 1 .699± AC 0± SF 0.000± AC Public Streets/Detention Areas Streets/Open 25.967± AC 0± SF 0.000± AC Total 129.07± AC 3,310,778± SF 76.01± AC * Net site area excludes sites/parcels that will not be included in the CFO (i.e. public property, exempted sites, etc.)

Zoning: RCC(SP} Regional Commercial Center

VALUATION SERVICES ADVISORY GROUP .&CUSHMAN& i.U,iWAK EFIEUl,

B-11 SUMMARY OF SALIENT FACTS

Current Property Taxes * Assessed Value-Land: $ 5,836,644 Assessed Value-lmRrovements: I Q Total Assessed Value: $ 5,836,644 2003/04 PropertyTaxes: $ 62,704.04

NOTE: Does not include all property components. Parcel(s) currently owned by City are not subject to taxation. See Real Property Taxes and Assessments section.

Highest and Best Use: Mixed-use commercial retail development to the highest density possible.

Extraordinary Assumptions and Hypothetical Conditions

ExtraordinaryAss umRtions An extraordinary assumption is defined by the Uniform Standards of Professional Appraisal Practice (2000 Edition, Appraisal Foundation ASB, 1/1/2000, page 11) as "an assumption, directly related to a specific assignment, which, if fou nd to be false, could alter the appraiser's opinions or conclusions. Extraordinary assumptions presume as fact otherwise uncertain info rmation about physical, legal or economic characteristics of the subject property or about conditions external to the property, such as market conditions or trends, or the integrity of data used in an analysis." As noted, this appraisal employs certain extraordinary assumptions pertaining to the regional mall site. Specifically, the component(s) to be included in the CFO relate to land underlying proposed non-anchor mall areas, excluding department store sites, streets, and drainage, detention and ponding areas. In order for the mall to be a viable, operating center, however, department stores and other common areas must be provided to the mall shops (i.e. streets and drainage/detention areas). As such, in valuing the land to be included in the CFO, this appraisal specifically assumes that the full site assemblage is provided and available for development, with drainage areas and department store sites provided on adjacent parcels in conjunction with the mall; despite the fact that department store areas, public streets, and non-building parcels are to be excluded from the CFO. The valuation of the "included" mall site is highly reliant upon these circumstances. Without these features, marketability of the "included" site would be diminished, having a negative impact on the value conclusion(s) herein.

Hypothetical Conditions A hypothetical condition is defined by the Uniform Standards of Professional Appraisal Practice (2000 Edition, Appraisal Foundation ASB, 1/1/2000, page 11) as "that which is contrary to what exists, but is supposed for the purpose of analysis. Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property or about conditions external to the property, such as market conditions or trends, or the integrity of data used in an analysis." This appraisal employs no hypothetical conditions.

VALUATION SERVICES ADVISORY GROUP �& CUSHMAN&WAKEfl£U). B-12 SUMMARY OF SALIENT FACTS

Special Assumptions Affecting Valuation: The following special assumptions have been considered for the analysis at hand, and are in addition to the assumptions and limiting conditions following the report: • Throughout this analysis, we have relied on information provided by the Client, its consultants, and property owners that we assume to be accurate. Such information may include, but is not limited to: site area measurements, infrastructure/construction cost estimates, special tax forecasts, and other property specific info rmation. Should any information received be subsequently shown to be erroneous or incorrect, we reserve the right to amend the value conclusions herein. • We have made a visual inspection of subject property and local environs in the process of this analysis. Our comments are limited to those items that were readily observable and apparent to such an inspection. • As noted, this appraisal employs certain extraordinary assumptions regarding the mall site. Please refer to discussion within the report for additional details. • The values reported herein have been based upon cost estimates, bond obligations, financing, and payment schedules provided by various parties. This data is assumed to be accurate. Should subsequent info rmation be provided showing material variances from these schedules, we reserve the right to amend the valuation. • This appraisal assumes that all improvements to the subject property, which are to be funded by the special tax bonds of the community facilities district, are completed in a timely manner using quality materials as per the plans provided. The "retail" value estimates developed herein assume that these improvements are completed and in-place. • The forecasts of income and expenses contained herein are not predictions of the future. Rather, they are our best estimates of current market thinking relative to future income, expenses, growth rates , and demand. No warranty or representation is made with regard to materialization of these fo recasts. • Please refer to our complete list of Assumptions and Limiting Conditions at the end of this report.

VALUATION SERVICES ADVISC)RY GROUP A CUSHMAN& 9 WAK EFIEU>,

B-13 SUBJECT PHOTOGRAPHS

Aerial view of subject site.

Additional aerial view of subject site.

VALUATION SERVICES ADVISORY GROUP ,4..CUSHMAN& \UfWAK EFIELD<>

B-14 SUBJECT PHOTOGRAPHS

Looking east along Freeway 118 (Ronald Reagan Freeway) from First Street overpass; subject at left.

View of subject property along north side of Freeway 118, facing east from First Street overpass.

VALUATION SERVICES ADVISORY GROUP AcusHMAN& i!lfWA K£FH!LD.

B-15 SUBJECT PHOTOGRAPHS

Easterly view toward subject site from First Street.

Westerly view at subject site from Oakridge Athletic Club (situated adjacent east of subject).

VALUATION SERVICES ADVISORY GRO UP AcusHMAN& 8 W.AKEFtEU>,

B-16 TABLE OF CONTENTS

INTRODUCTION ...... 1 Identification of Property ...... 1 Property Ownership and Recent History ...... 1 Legal Description ...... 2 Purpose and Intended Use and Users of the Appraisal ...... 2 Dates of Inspection and Valuation ...... 2 Property Rights Appraised ...... 2 Scope of the Appraisal...... 2 Definitions of Value, Interest Appraised and Other Terms ...... 3 Exposure Time and Marketing Time ...... 5 REGIONAL ANALYSIS ...... 8 Introduction ...... 8 Environmental Characteristics ...... 8 Social Forces ...... 9 Economic Forces ...... 13 Real Estate Market Trends ...... 23 Summary/Conclusion ...... 35 LOCAL AREA ANALYSIS ...... 37 RETAIL MARKET ANALYSIS ...... 45 Trade Area Overview ...... 45 Competitive Shopping Centers ...... 46 GLA Per Capita ...... 49 Market Rental Rates ...... 51 Market Vacancy ...... 51 Typical Market Lease Terms ...... 51 Anchor Store Profiles ...... 52 Trade Area Analysis ...... 53 Retail Sales Potential...... 58 Market Share Analysis ...... 60 Summary/Observations/Conclusions ...... 65 PROPERTY DESC RIPTION ...... 70 Site Description ...... 70 Real Property Taxes & Assessments ...... 78 Zoning ...... 78 Community Facilities District No. 2004-01 ...... 79 HIGHEST AND BEST USE ...... 81 VALUATION PROCESS ...... 86 LAND VALUATION (RETAIL/ FINISHED LOT VA LUES) ...... 87 Methodology ...... 87 Regional Mall Component (Zone 2) ...... 87 Apartment Component (Zone 1) ...... 102 Town & Country Site (Zone 3) ...... 109 DEVELOPMENTAL APPROACH (AS IS VALUATION) ...... 111 Methodology ...... 111 Discussion of Subject Sites ...... 111 Projected Absorption Period ...... 113 Price Appreciation ...... 114 Interim Holding Costs ...... 115 Selection of Discount Rate ...... 118 "As Is" Market Value Conclusions ...... 118

VALUATION SERVICES ADVISC)RYGR O UP A.CUSHMAN& � WAKEFIELD,.

B-17 TABLE OF CONTENTS

RECONCILIATION AND FINAL VALUE OPINION ...... 122 ASSUMPTIONS AND LIMITING CONDITIONS ...... 123 CERTIFICATION OF APPRAISAL ...... :...... 127 ADDENDA ...... 128

VALUATION SERVICES .:\DVTSORY GROU P A CUSHMAN& \11WAK EFl£U>.

B-18 INTRODUCTION

Identification of Property Common Property Name: Simi Valley Town Center Location: Freeway 118, First Street, & Erringer Road, City of Simi Valley, Ventura County, California 93065 The subject site is generally located along the north side of Freeway 118, between Erringer Road (east) and First Street (west), in the City of Simi Valley, Ventura County, California; part of the Greater Los Angeles Basin CMSA. Property Description: The property encompassing the CFO consists of 129.069± gross acres. Net site area contains 76.01 ± acres of land, which excludes certain portions ofthe CFO that will not be subject to special taxes and assessments (i.e. public land, exempted properties,et c.) As proposed, properties within the CFO will include a variety of uses, including apartments, an open-air regional retail center, retail sites, and a big-box/power retail center. Assessor's Parcel Number: See Real Estate Taxes & Assessments Section

Property Ownership and Recent History Current Ownership: City of Simi Valley (Parcel # 612-0-01 1-190) New Age Development LLC (612-0-01 1 -020, and -220) Sale History: To the best of our knowledge, based upon our review of public records and the preliminary title report provided (Stewart Title of California Inc. Order No. 040 1 88883 dated November 6, 2003), there have been no transfers of the property within the past three years. The City of Simi Valley Community Development Agency acquired the westerly parcel (612-0-011 -190) in December 1993 for a reported $3.5 million, with the intent to assist in developing the two adjacent parcels with a mixed-use/regional commercial approach. Current Disposition: At this writing, we are advised that all of the parcels located within the CFO are being acquired, or are under option purchase agreement, by various parties. Parcels 020 and 220 are part of a purchase option between The Corti Gilchrist Partnership LLC (buyer) and New Age Development LLC c/o Kam Sang Co. Inc. (seller). The option, dated June 25, 2001 , has a term running from May 16, 2001 to July 15, 2005, during which time the buyer has stipulated option prices for the land, which comprises some 81.81 ± acres. During the first year of the agreement, the sale price is $7.5 million. The second year reflects a price of $8.25 million. If exercised between March 16, 2003 and July 15, 2004, the option price is $10.0 million. The next and final option period (July 16, 2004 to July 15, 2005) carries a negotiated price of $1 1.0 million.

VALUATION SERVICES ADVJSORY CROUP AcusHMAN& 'l!f1WAK EFIELD.

B-19 INTRODUCTION

Parcel 190 is subject to a "Funding, Construction and Acquisition Agreement" between the City of Simi Valley , Simi Valley Towncenter LLC, and Forest City Development, together with Towncenter LLC. The agreement, dated February 1, 2004, provides for the development of all three parcels, coupled with fu nding for certain infrastructure improvements, which, in part, are to be funded through a bond issuance (Mello Roos). No sale price for Parcel 190 has been reported.

Legal Description We have reviewed a complete metes and bounds legal description of the subject property as prepared by Paller-Roberts Engineering. The property can generally be described as being Tentative Tract Map No. 5430, situate in the southeast quarter of Section 4, Township 2 North, Range 18 West, Rancho Simi Base and Meridian, City of Simi Valley, Ventura County, State of California. Please see Real Property Taxes and Assessments section for additional parcel/account numbers.

Purpose and Inte nded Use and Users of the Appraisal The purpose of this appraisal is to estimate the market value of the fee simple estate in the subject property, subject to special tax and special assessment liens. The function of this appraisal is to provide an independent valuation and analysis for bond underwriting purposes. The report is intended for the exclusive use of City of Simi Valley in evaluating a potential bond financing transaction for the defined community facilities district. It may be distributed to the client's attorneys, accountants , advisors, investors, lenders, potential mortgage participants and rating agencies, and may be appended to the Official Statement for the CFO bonds. All other uses and users are unintended.

Dates of Inspection and Valuation The "as is" market value conclusion reported herein is as of March 1, 2004. On that date, Jay F. Booth, MAI inspected the subject property and it surrounding environs.

Property Rights Appraised This appraisal concerns the fee simple interest in the subject property, subject to special tax and special assessment liens.

Scope of the Appraisal This is a complete appraisal presented in a self-contained report, intended to comply with the reporting requirements set forth under the Uniform Standards of Professional Appraisal Practice (USPAP) for a Self Contained Appraisal Report. In addition, the report has also been prepared to conform to the requirements of the Code of Professional Ethics of the Appraisal Institute and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) , Title XI Regulations. The appraisal has also been prepared in accordance with the appraisal guidelines set forth by the California Debt Advisory Commission regarding Appraisal Standards for Land­ Secured Financings (dated May 1994).

VALUATION SERVICES 2 .\ DVISORY GROUP •CUSHMAN& WAKEFI ELD.

B-20 INTRODUCTION

In preparation of this appraisal, we have investigated a wide array of comparable sales in the subject's market, and considered the input of buyers, sellers, brokers, property developers and public officials. Additionally, we have investigated the general region and neighborhood economy, as well as other specific details and trends of the subject's market area. The scope of this appraisal has required collecting primary and secondary data relative to the subject property. The depth of the analysis is intended to be appropriate in relation to the significance of the appraisal issues as presented herein. This data has been analyzed and confirmed with sources believed to be reliable, whenever possible, leading to the value conclusions set forth in this report. In the context of completing this report, we have made a physical inspection of the subject property and its potential competition. The valuation process has involved utilizing market­ derived and supported techniques and procedures considered appropriate to the assignment. This appraisal report is intended to be an "appraisal assignment," as defined by the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation; i.e., the intention being that the appraisal service has been performed in such a manner that the results of the analysis, opinion, or conclusion be that of a disinterested third party. The scope of this analysis, and the analysis contained herein, is reflective of the intended use of the report by an entity knowledgeable of the real estate evaluation process for this type of property. This appraisal employs the Sales Comparison and Developmental Approaches to value. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that these approaches would be considered necessary and applicable for market participants.

Definitions of Value, Interest Appraised and Other Terms The following definitions of pertinent terms are taken from the Dictionary of Real Estate Appraisal, Third Edition (1993), published by the Appraisal Institute, Appraisal Standards For Land-Secured Financings, published by the California Debt Advisory Commission, as well as other sources.

Market Va lue Market value is one of the central concepts of the appraisal practice. Market value is differentiatedfrom other types of value in that it is created by the collective patterns of the market. A current economic definition agreed upon by agencies that regulate federal financial institutions in the United States of America follows, taken from the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed fo r exposure in the open market;

VALUATION SERVICES 3 ADVIS()RY GROUP •CUSHMAN& WAKEFIELD,

B-21 INTRODUCTION

4. Payment is made in terms of cash in US dollars or in terms of financial arrangements comparable thereto; and 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Market Value, as defined by the California Debt Advisory Commission, is as follows: The most probable price in cash or in terms equivalent to cash for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress.

Fee Simple Estate Absolute ownership unencumbered by any other interest or estate, subject to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.

Leased Fee Estate An ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.

Leasehold Estate The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.

Cash Equivalent A price expressed in terms of cash, as distinguished from a price expressed totally or partly in terms of the face amounts of notes or other securities that cannot be sold at their face amounts.

Market Value As Is on Appraisal Date The value of specific ownership rights to an identified parcel of real estate as of the effective date of the appraisal; related to what physically exists and is legally permissible and excludes all assumptions concerning hypothetical market conditions or possible rezoning.

Retail Value Retail value is an estimate of what an end user would pay for a finished property under the conditions requisite to a fair sale 1 .

1 Appraisal Standards For Land-Secured Financings, California Debt Advisory Commission, May 1994, Page 9.

VALUATION SERVICES 4 AD,,. ISORY CROUP AcusHMAN& \ff.iWAK EFIELD0

B-22 INTRODUCTION

Bulk Sale Value The most probable price, in a sale of all parcels within a tract or development project, to a single purchaser or sales to multiple buyers, over a reasonable absorption period discounted to present value, as of a specified date, in cash, or in terms equivalent to cash, for which the property rights should sell after reasonable exposure, in a competitive market under all conditions requisite to a fair sale, with buyer and seller each acting prudently, knowledgeably, and for self-interest, and 2 assuming that neither is under undue stress .

Raw Land Land on which no improvements have been made; land in its natural state before grading, construction, subdivision, or the installation of utilities.

Finished Lot A parcel which has legal entitlements created by a recorded subdivision map; the physical condition being a graded level pad with infrastructure contiguous to each individual lot and consisting of asphalt paved roads in addition to the necessary utilities.

Dedication A voluntary gift of private property made by the owner for some public use, e.g., the dedication of land fo r streets and schools in a development. "Dedicated" refers to "property in public use, e.g., a roadway, that was originally obtained from the fee owner; also describes land acquired and dedicated to burial purposes."

Exposure Time and Marketing Time

Exposure Time Under Paragraph 3 of the Definition of Market Value, the value opinion presumes that "a reasonable time is allowed for exposure in the open market." Exposure time is defined as the length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at the market value on the effective date of the appraisal. Exposure time is presumed to precede the effective date of the appraisal. The reasonable exposure period is a function of price, time and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions. As noted above, exposure time is always presumed to precede the effective date of appraisal. It is the estimated length of time th e property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. Exposure time is therefore a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient and reasonable time, but adequate, sufficient and a reasonable marketing effort. Exposure time and conclusion of value are therefore interrelated.

2 Ibid, Page 9.

VALUATION SERVICES 5 ADVJSORY GROCP &CUSHMAN« 'ffl1WAK EFIELD.

B-23 INTRODUCTION

Based on discussions with market participants and information gathered during the sales verification process, a reasonable exposure time for the subject property at the value concluded within this report would have been approximately twelve (12) months. This assumes an active and professional marketing plan would have been employed by the current owner.

Marketing Time Marketing time is an opinion of the time that might be required to sell a real property interest at the appraised value. Marketing time is presumed to start on the effective date of the appraisal. (Marketing time is subsequent to the effective date of the appraisal and exposure time is presumed to precede the effective date of the appraisal). The opinion of marketing time uses some of the same data analyzed in the process of estimating reasonable exposure time and it is not intended to be a prediction of a date of sale. We believe, based on the assumptions employed in our analysis, as well as our selection of investment parameters for the subject, that our value conclusion represents a price achievable within twelve (12) months.

VALUATION SERVICES 6 ADVISORY GROUP .&CUSHMAN& • WAKEFIEU>,

B-24 REGIONAL MAP

REGIONAL MAP

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B-25 REGIONAL ANALYSIS

Introduction Real estate is influenced by a variety of factors and forces that interact within a given region. Regional analysis serves to identify those forces that affect property and the role they play within the region. The four primary forces that influence real property include environmental factors, government forces, social characteristics, and economic trends. These forces determine the supply and demand for real property. Following is an overview of the Ventura PMSA I Los Angeles CMSA region, which focuses on such topics as demographic and economic trends, employment, income levels, retail sales, transportation, and real estate markets.

Environmental Characteristics The primary environmental forces that influence a region include physical location, geography, and infrastructure. These characteristics provide a basis fo r the region's stability and describe the area's overall locational bearing. Both natural and man-made environmental forces infl uence real property values and are best understood in relation to the subject property's location.

General Overview/Location/Area Definition The subject property is located in Simi Valley, California, which is situated within Ventura County. Ventura County comprises the Ventura Primary Metropolitan Statistical Area (PMSA), which is bounded by Kern County on the north, Los Angeles County and the Pacific Ocean to the south, Los Angeles County to the east, and Santa Barbara County to the west. The Ventura PMSA is part of the larger Los Angeles Consolidated Metropolitan Statistical Area (CMSA), which is comprised of fo ur PMSAs (Los Angeles County, Orange County, Ventura County, and Riverside-San Bernardino). Los Angeles CMSA and Component PMSAs

In terms of population, the Los Angeles-Long Beach PMSA (Los Angeles County) is the largest of the four PMSAs, encompassing some 4,060± square miles and more than 88 independent cities, towns, and municipalities. The City of Los Angeles is the largest incorporated area within

VALUATION SERVICES 8 ADVISORY GROUP •CUSHMAN& WAKEFll:1.0.

B-26 REGIONAL ANALYSIS

Los Angeles County. The Los Angeles PMSA's central Southern California location provides an extensive transportation network that includes major north-south and east-west interstate highways, four major airports, including Los Angeles International (LAX), and the Port of Los Angeles-Long Beach - respectively, the third busiest airport and the third busiest port in the world. While the four economies of the PMSAs that comprise the regional CMSA are intertwined with each other, each PMSA is also distinguished by its demographic and economic characteristics. Among the region's four PMSAs, Los Angeles is by far the largest in terms of gross metro product (GMP), total employment, and population. In fact, Los Angeles is the largest metro economy in California and the third largest metro economy in the nation - trailing only New York and Chicago in terms of GMP. In terms of total employment, Los Angeles ranks third, again trailing New York and Chicago. Los Angeles accounts for 3.7 percent of the U.S. GDP, 3.4 percent of its population, and 3.1 percent of its total employment. Orange County is the CMSA's second largest economy in terms of GMP and employment. It is also the region's most diverse economy, with a growing high-tech sector that includes well­ positioned aerospace and satellite telecommunications industries. Trade is also a key component of its economy, as many foreign producers have marketing and distribution centers in Orange County. Riverside-San Bernardino is the second most populous PMSA within the Basin, but ranks a distant third in employment, indicating that many of its residents commute outside of the metro area to their places of employment. Wage earners living in the Riverside-San Bernardino PMSA are likely to work in Los Angeles County or Orange County. While construction and retail trade are major economic drivers, the government sector is also an important component, as public school teachers, who are classified as local government employees, are a large component of the PMSA's employment base. Ventura is a significantly smaller economy in terms of its GMP, total employment, and population, and serves primarily as a bedroom community to Los Angeles. Ventura's key economic drivers are the military and an expanding biotech industry.

Transportation/Access/Linkage The Ventura region is generally well served by an integrated transportation system. The central portion of the region contains a majority of the area's transportation links, supported by surrounding federal and state highways and local routes. U.S. Highway 101, Freeway 118, and Freeway 126 are the primary highway linkages to the Ventura County region, connecting with Los Angeles County (to the east). Each ru ns an east-west direction through the county. Air service to Ventura County is primarily via the Bob Hope Burbank/Glendale/Pasadena Airport and Los Angeles International Airport located in Los Angeles County. Other regional/municipal air services can be fo und at the Van Nuys Airport and Santa Barbara. Ventura County is served by rail, bus and truck service. The Metrolink Commuter Rail service and Amtrak provide rail service with Los Angeles.

Social Forces Real estate values are influenced to a large degree by social issues impacting the region, including population trends, income levels, the profile of workers in the area, and other quality of life issues. The demographic composition of the population reveals the potential, basic demand for real estate services.

VALUATION SERVICES 9 ADVISORY CROL;P &CUSHMAN� \VJWAkEFU :.LO�

B-27 REGIONAL ANALYSIS

Population Trends The population and its geographic distribution are basic determinants of the need for real estate. Aggregate population growth is distributed among regions in response to changing economic opportunities, while the demand for real estate is created by a population's demand for the goods and services to be produced or distributed within the region. Thus, population and demographic trends can influence the demand for services provided by property. Ventura County experienced stable population growth over the past decade. Development in the region reflects a continuing suburbanization of the Southern California region, which has occurred as a direct result of increasing urbanization and associated higher business costs (including real estate) in each of Los Angeles and Orange Counties. While much of this recent growth has occurred in Riverside and San Bernardino Counties, growth to the north of Los Angeles has also been seen. Between 1990 and 2002, Ventura County's population increased from 669,016± to 771 ,922±, indicating annual growth of 1.20 percent per annum; a rate of growth that is essentially on par with growth of the Los Angeles CMSA components. The highest growth has been evident in the Riverside-San Bernardino PMSA. The following chart presents a summary of recent population trends for the region:

Population Trends

CAGR CAGR CAGR 1980 1990 2000 2002 2007 1980-90 1990-02 2002-07

Ventura County 529,174 669,016 753,197 771,922 817,801 2.37% 1.20% 1.16% Los Angeles County 7.477,506 8.863,128 9,519,338 9,774,284 10,346,884 1.71 % 0.82% 1.15% Orange County 1,932,710 2,410,592 2,846,289 2,933,481 3,150 ,897 2.23% 1.65% 1.44% San Bernardino County 895,016 1,418,380 1.709,434 1,760,862 1,892 ,159 4.71% 1.82% 1.45% Riverside County 663,166 1,17 0,413 1,545,387 1,600,822 1,748,602 5.85% 2.64% 1.78% Los Angeles CMSA 11,497,572 14,531,529 16,373,645 16,841,371 17,956,343 2.37% 1.24% 1.29% State of California 23,667,910 29,760.021 33,871,648 34.876.614 37,286,835 2.32% 1.33% 1.35% United States 226.545,856 248,709.873 281,421 ,906 286.815, 107 300,539,027 0.94% 1.20% 0.94% Source. Claritas Inc.

Over the next five years, population growth for the reg ion is expected to moderate somewhat, to an annual rate of about 1.16 percent per year. Continuing the trend, Riverside and San Bernardino are expected to lead growth within the Southern California region.

Age Distribution Age distribution within the Ventura region is generally similar to the state and U.S., overall, with a slightly younger population evident.

VALUATION SERVICES 10 ,\ D V I S () R Y G R O C P ACUSHMANtl W WAKEFIELD, B-28 REGIONAL ANALYSIS

Age Distribution

Ventura LA Orange San Bern. Riverside LA State of United County County County County County CMSA California States

Age 0 9 15.51% 15.85% 15.43% 17.61% 16.56% 16.02% 15.08% 13.82% Age 10 14 8.13% 7.77% 7.31 % 9.47% 8.85% 8.00% 7.75% 7.44% Age 15 19 7.40% 7.20% 6.85% 8.29% 7.77% 7.33% 7.26% 7.20% Age 20 24 6.38% 7.65% 6.91% 7.35% 6.44% 7.33% 7.27% 6.94% Age 25 34 13.41% 16.10% 15.91 % 13.75% 12.80% 15.43% 14.95% 13.72% Age 35 44 16.30% 15.41% 16.24% 15.42% 15.18% 15.62% 15.65% 15.51% Age 45 54 14.13% 12.53% 13.15% 12.37% 11.82% 12.66% 13.26% 13.88% Age 55 59 5.04% 4.47% 4.90% 4.17% 4.37% 4.52% 4.72% 5.21% Age 60 64 3.58% 3.36% 3.52% 3.08% 3.65% 3.37% 3.53% 4.01% Age 65 74 5.20% 5.04% 5.07% 4.63% 6.52% 5.07% 5.42% 6.33% Age 75 84 3.61% 3.41% 3.43% 2.91% 4.63% 3.42% 3.77% 4.34% Age 85 Older 1.31% 1 .22% 1.27% 0.95% 1.42% 1.21% 1.33% 1.60% Source: Claritas Inc.

The median age for Ventura is currently estimated at 34.4, slightly lower than that of the U.S., as shown in the following chart:

Average and Median Age

Ventura LA Orange San Bern. Riverside LA State of United County County County County County CMSA California States

Median AQe 34.38 32.16 33.49 30.30 33.11 32.33 33.46 35.57 Average Age 34.96 33.99 34.71 32.37 34.88 34.00 34.91 36.52 Source: Claritas Inc

Household Formation Trends Household formation is an important component of demographic analysis, which helps to identify changing patterns or shifts within the population. A household consists of all people occupying a single housing unit, thus providing significant sociological info rmation about a region. Household formation also has a significant influence on demand fo r real estate. Households, combined with effective purchasing power, provide the basic demand fo r housing and household needs, thereby transforming needs into effective demand for real estate improvements. Between 1980 and 1990, the number of households in the subject region grew at an annual growth rate of about 2.32 percent per year. The past decade, household fo rmation trending has moderated from that pace, showing increases of 1.14 percent per annum. The current estimate includes 249,058± households.

VALUATION SERVICES 11 ADVISORY GROUP ..&.CUSHMAN& .WAKEA£LD.

B-29 REGIONAL ANALYSIS

Household Formation

CAGR CAGR CAGR 1980 1990 2000 2002 2007 1980-90 1990-02 2002-07

Ver1tura Cour1ty 172,781 217,298 243,234 249,058 263,439 2.32% 1.14% 1.13% Los Angeles County 2,730,469 2,989,542 3,133,774 3,207, 177 3,367,298 0.91% 0.59% 0.98% Orange County 686,267 827,076 935,287 958,216 1,014,650 1.88% 1.23% 1.15% San Bernardino County 308.643 464,737 528,594 540,349 569,737 4.18% 1.26% 1.06% Riverside County 242,937 402,067 506,218 521 ,222 560,879 5.17% 2.19% 1.48% Los Ar1geles CMSA 4,141 ,097 4,900,720 S,347,107 5,476,022 5,776,003 1.70% 0.93% 1.07% State of California 8,629,867 10,381,206 11,502,870 11,803,522 12,511 ,538 1.86% 1.08% 1.17% United States 80,389,688 91 ,947,410 1 05,480, 1 01 107,753,802 113,567,685 1.35% 1.33% 1.06%

Source: Claritas Inc

Projections for the next five years indicate household growth at a rate of 1.13 percent per annum within Ventura County, fairly consistent with CMSA projections.

Income Levels Income levels in the subject region tend to be above national and statewide levels. Average household income within Ventura is reported by Claritas, Inc. at $84,232. This compares with the CMSA average of $73,212, California's average of $75,361 , and the U.S. average of $64,338. Between 1990 and 2002, Claritas Inc. reports that Ventura's average household income increased by 55.1 percent, indicating a 3.72 percent compound annual growth rate. This rate was slightly lower than both national and statewide trends for the same period, but was second only to Orange County among the CMSA.

Average Household Income

CAGR CAGR 1990 2002 2007 1990-02 2002-07

Ventura County $ 54,314 $ 84,232 $ 97,707 3.72% 3.01% Los Angeles County $ 47,328 $ 71,353 $ 81,669 3.48% 2.74% Orange County $ 57,434 $ 90,490 $ 105,050 3.86% 3.03% San Bernardino County $ 40, 152 $ 59,253 $ 67, 174 3.30% 2.54% Riverside County $ 41,529 $ 60,999 $ 69, 166 3.26% 2.54% Los Angeles CMSA $ 48,194 $ 73,212 $ 84,019 3.55% 2.79% State of California $ 46,330 $ 75,364 $ 89,264 4.14% 3.44% United States $ 38,472 $ 64,338 $ 77,794 4.38% 3.87% I Source: Claritas lr1c. I

Through 2007, Claritas Inc. forecasts an annual increase in average household income of 3.01 percent per year for the subject region, continuing to fall behind California's projected growth rate of 3.44 percent.

VALUATION SERVICES 12 ADVIS()RY GROUP •CUSHMAN& WAKEf'U:U>,

B-30 REGIONAL ANALYSIS

Economic Forces Economic forces are significant to real property value. The fu ndamental relationships between current and anticipated supply and demand and the economic ability of the population to satisfy its wants, needs, and demands through purchasing power are tantamount to such an analysis. Some of the specific market characteristics considered in economic analysis include employment trends, the economic base of the region, expansion and new development, and the overall economic health of the area.

General Overview As noted, development in the subject region has reflected a continuing suburbanization of the Southern California region. It has occurred as a direct result of increasing urbanization and associated high business costs (including real estate) in Los Angeles and Orange Counties. The transition of Ventura from a bedroom community into an expanding business center has generated additional development in support of the rising population and increasing number of businesses locating to the region. Los Angeles County is the economic focal point of the Southern California region and has facilitated growth in the Inland Empire, Orange County, and Ventura. As a result, an overview of Ventura County, by necessity, requires some comment on Los Angeles County. The Greater Los Angeles Area has been the fastest growing large U.S. urban area for nearly the entire post-World War II period. Some of the most important factors explaining the region's relatively rapid growth rate include the nation's defense buildup that began in the late-1 970s, and major in-migration from Mexico and Asia. Los Angeles County traditionally has had a strong manufacturing base, particularly in high technology related durable goods (such as aerospace products). Originally drawn by climate and good weather (which allowed largely unlimited test flights), aerospace firms became entrenched in the region. This encouraged subcontractors and ancillary firms to also locate in the region. In the post World War II period, particularly during the Cold War, the manufacturing sector accelerated its expansion. This allowed for an increased expansion and diversification of other, non-manufacturing industries. The economic growth and diversification was also supported by an increasing population base. Supporting the strong manufacturing sector, Los Angeles County has one of the larger deep­ water ports on the west coast. With the growing emergence and influence of Pacific Rim trade since the 1970s, port activity has increased substantially. In fact, the joint Ports of Long Beach and Los Angeles are now the largest on the west coast and have consistently shown increases in tonnage shipped. Related to the increased port activity, numerous foreign and multinational firms have located in the region as a result of their increased trade volumes. Currently, Los Angeles County (and the Southern California region) is in recovery from the last economic contraction. This contraction was partially attributed to the associated national recession, but was also caused by factors specific to the region that were the result of the prior ra pid economic expansion. These factors included substantial increases in real estate prices for residential, commercial, and industrial properties, which raised direct business costs in each of Los Angeles and Orange Counties. Other indirect business costs, particularly related to environmental and worker's compensation issues, also increased significantly.

VALUATION SERVICES 13 ADVISORY C ROt:P A.CUSHMAN& 'UWAK EFIELD.

B-31 REGIONAL ANALYSIS

Economic Profi le The fo llowing profile of the Ventura PMSA has been developed by Economy.com, a leading provider of economic, financial, and industry info rmation. Economy.corn's core assets of proprietary editorial and research content, as well as economic and financial databases, are a source of information on national and reg ional economies, industries, financial markets, and demographics. The company is staffed with economists, data specialists, programmers, and online producers who create a proprietary database. Economy.corn'sapp roach to the analysis of the U.S. economy consists of building a large-scale, simultaneous-equation econometric model, which they simulate and adjust with local market info rmation, creating a model of the U.S. macro economy that is both top-down and bottom-up. As a result, those variables that are national in nature are modeled nationally, while those that are regional in nature are modeled regionally. Thus, interest rates, prices, and business investment are modeled as national variables; key sectors such as labor markets (employment, labor force), demographics (population, households, and migration), and construction activity (housing starts and sales) are modeled regionally and then aggregated to national totals. This approach allows local information to influence the macroeconomic outlook. Therefore, changes in fiscal policy at the national level (changes in tax rates, for example) are translated into their corresponding effects on state economies. At the same time, the growth patterns of large states, such as California, New York, and Texas, play a major role in shaping the national outlook. In addition, on a regional basis, the modeling system is explicitly linked to other states through migration flows and unemployment rates. Economy.corn's model structure also takes into account migration between states.

VALUATION SERVICES 14 ADVISORY GROUP AcusHMAN� \9WAK EFl£l.D.

B-32 Relative Employment Performance (1991=100)

-U.S. ,, Ventura "',. --

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07

16.4 17.2 18.2 20.3 22.3 21.6 22.6 Gross Metro Product, C$8 23.0 23.7 24.5 25.6 26.5 0.0 5. 1 5. 7 11.6 9.8 -2.7 4.3 % Change 2. 1 2. 9 3.5 4.3 3.5 237.9 242.7 252.3 263.6 275.0 279.9 280.3 Total Employment (000) 275.1 276.5 283.4 291.7 298.0 0. 3 2.0 3.9 4.5 4.3 1.8 0. 1 % Change -1.9 0. 5 2.5 2.9 2. 1 7.1 6.6 5.6 4.8 4.5 4.6 5.5 Unemployment Rate 5.2 4.8 4.5 4.1 4.0 3.0 6.3 4.8 7.3 9.4 2.6 1.3 Personal Income Growth 1.1 4.8 6.0 6.1 5.9 710.2 721 .1 730.8 743.4 756.8 770.3 783.9 Population (000) 794.9 801.6 813.1 829.4 842.9 2,075 2,097 2,930 3,636 2,984 3,168 2,249 Single-Family Permits 2,750 3,376 3,075 3,159 3, 132 246 232 368 782 976 285 276 Multifamily Permits 1,249 556 539 645 719 219.5 221 .8 229.8 240.6 261 .0 283.1 315.2 Existing Home Price ($Ths) 352.8 372.7 387.5 398.7 412.0 3,473 4,125 8,175 7,139 5,238 11,508 14,203 Mortgage Originations ($Mil) 18,626 6,935 4,325 4,628 4,975 -0.9 3.6 2.9 5.6 6.5 6.9 6.8 Net Migration (000) 3.8 1.1 4.1 8.6 5.5 3,684 4,457 4,510 3,350 2,506 2,831 2,666 Personal Bankruptcies 2,284 1,850 1,633 1,595 1,664 STRENGTHS & WEAKNESSES ANALYSIS STRENGTHS Recent Performance. Ventura's economy has strengthened in 2003 compared to the previous •Attractive, less urban, quality of life. yet to emerge from its slump. Most industries year, although a full-fledged pickup has not yet • Proximity to Los Angeles. have continued to see sluggish or decliningem­ occurred. Going forward, renewed job growth • Expanding biotech industry. ployment in recent months. In fact, retail trade in VEN, particularly in office-using industries, • Positive migration trends. is the sole industry e)..1)eriencing any substan­ such as business/professional services, and • Favorable rate of educational attainment. tive gains. Even so, some encouraging signs can the accompanying rise in business confidence still be discerned, such as the fact that the pace will result in further improvement. \'EN's va­ WEAKNESSES of the job cuts has slowed from the sharp losses cancy rate is expected to fall considerably over • High costs of doing business. that were recorded duringfirst halfof 2003. Em­ the next year, as Economy.com forecasts that • High costs and uncertaintydue to complex ployment in several key industries, including office building will still remain somewhat tem­ building permit process. business services and manufacturing, is show­ pered until 2005. • Low housing affordability. ing tentative signs of stabilization. Moreover, un­ Diversity. While still relatively diverse com­ derlying health in the local economy is implied pared to the median for allmetro areas, the in­ by sturdy household and business finances. dustrial diversity of VEN's economy has fallen CURRENT EMPLOYMENT TRENDS \'EN's below average personal bankruptcy rate rapidly through the past decade. Among the November 2003 Employment Growth has been declining even as the national rate reasons for the metro area's falling industrial climbs, while business bankruptcy filings remain diversity is strong growth in retail trade and % Ch ange Year Ago near a historical low, despite a modest increase financial activities payrolls during this time,

Total during the third quarter. making these industries much more prevalent Construction -9 7 Manufacturing. VEN's high-tech manufactur­ in the local economy. One drawback to this Manufacturing ers are benefiting from the natiomvide upturn in change in the industrial mLx has been an ero­ Trade T rans/Utili lies business spending that is currentlyunder way. sion of VEN's still above average per capita in· Information With improving corporate profitability, tax in­ come relative to the U.S. Financial Activities centives, and the beginnings of a replacement Ventura's economy will regain its footing Prof & Business Svcs Edu & Health Svcs cycle for aging equipment, U.S. fLxed investment in the coming months, with job growth re· leisure & Hospitality is gaining traction. The metro area's contingent suming in early 2004 and then accelerating Oher Ser,.,ices 2.6 Governmenl of chipmakers is gaining from this and from a in the second half of the year. Improvement �����"'l!!!'!'l!!I!! �����9 recovering global economy, with worldwide in a wide range of industries, especially -15 -1 2 -9 -6 -3 0 3 6 9 12 semiconductor sales now rising steadily. The manufacturing, business services, and lei· strengthening in business demand v.111comple­ sure/hospitality, will support the expected ment still-resilient consumer demand. As a re­ rebound. Longer term, above average popu· sult, these high-tech firms are poised to fare sig­ lation growth, a skilled labor force, and a UPSIDE nificantly better going forward. Already, indus­ prime location will be VEN's main compara· • Port of Hueneme expansion results in greater trial production in VEN has risen sharply in re­ tive advantages. The metro area's technol­ foreign trade through VEN. cent months, and the length of the average ogy base, which includes biotech, electron· • Increased defense spending boosts local tech manufacturing workweek is also showingsigns ics, and defense firms, will be among the and defense companies. of life. As such, manufacturing payrolls should drivers of growth. The expansions of the • VEN emerges as center of biotech research stabilize and rebound in the latter half of 2004. port area and the fledgling Channel Islands and production. Officespace. VEN's market for office space is branch of Cal State also have the potentialto DOWNSIDE starting to slowly make progress. The local of­ pay dividends in the coming years. As a result, • Increased environmental regulations stymie fice vacancy rate has fallen from 13.9% to 8.8% VEN is expected to be an above average per­ development. over the past two quarters even as the U.S. va­ former over the extended forecast horizon. • Tight state and local budgets hurtgovernment cancy rate, now at nearly 17%, continues to rise. Steven D. Frankel employment in VEN. Permit issuance for new office construction December 2003 Precis METRO © 2003 Economy.com, Inc. • 600 Willowbrook Lane, Suite 600 • West Chester, PA 19382 • 610.696.8700 • 61 0.696.0875 fax • www.economy.com For the confidential use of subscribers. Although the information in this report has been obtained from sources that Economy.com, Inc. believes to be reliable, we do not guarantee its accuracy, and such information may be incomplete or condensed. This publication is available through the Internetat Economy.com. B-33 EMPLOYMENT & INDUSTRY • TOP EMPLOYERS Into Ventura Number Median of Migrants Income Naval Base Ventura County/Point Mugu NAS 6,236 Boeing Co.-Rocketdyne 5,400 Amgen, Inc. 3,523 WellPoint Health Networks 3,442 Verizon Communications. Inc. 3,200 Countrywide Home Loans 2,247 Ventura County Health Care Agency 2, 100 St. John's Regional Medical Center 1.852 Comm. Memorial Hos.of San Buenawntura 1,510 Tec hnicolor Video Se™ces 1 ,457 Farmers Insurance 1,350 Blue Cross and Blue Shield Association 1,323 Los Robles Regional Medical Center 1,255 Telradyne 1,250 Ka"1ico 1,15 0 Harbor Freight Too ls 1,089 Simi Valley Hospital & Health Care 1,000 State Farm Insurance Company 906 Haas Automation 810 Las Possas Berry Farms 600

Sources: Simi Va lley Chamber of Commerce, December 2002 The 200 1 Ventura County Ec onomic Outlook, February 2002 & Thousand Oaks-Wes tlake Vi llage Regional Chamber of Commerce, March 2003 Public Federal ...... 7,941 State ...... 2,016 Local ...... 35,41 3

2002 1,019 2,851 ! COMPARATIVE EMPLOYMENT AND INCOME % of Total Employment Average Annual Earnings Sector VEN CA us VEN CA us Net Migration, VEN Construction 5.5% 5.3% 5.2% $38,766 $47,877 $39,845 7,000 Manufacturing 13.5% 11.3% 12.0% $67,713 $55,970 $48,756 Durable 65.8% 64.3% 62. 0% nd $63, 121 $50,404 6,000 Nondurable 34.2% 35. 7% 38. 0% nd $42,646 $45, 969 5,000 Transport/Utilities 2.1% 3.4% 3.6% $36,439 $47,311 $44,972 4,000 Wholesale Trade 4.2% 4.5% 4.4% $47,206 $52,350 $51 ,842 Retail Trade 12.2% 10.9% 11.7% $24,79 1 $27,420 $22,635 3,000 Information 3.0% 3.4% 2.6% $54,163 $83,422 $69,569 2,000 Financial Activities 7.7% 5.9% 6.0% $33,448 $40,394 $41 ,740 1,000 Prof. & Business Services 13.1% 14.7% 12.4% $33, 177 $48,046 $43,053 Education & Health Services 9.3% 10.4% 12.5% $33,848 $36, 158 $34,032 0 1998 1 999 2000 2001 2002 Leisure & Hospitality Services 9.6% 9.5% 9.0% $17,694 $23,238 $19,135 Domestic Foreign Total Other Services 3.4% 3.5% 3.9% $20,614 $2 1 ,695 $19,842 1998 -1.795 4,700 2,904 Government 16.2% 16.9% 16.2% $50,893 $48,959 $42,939 1999 1,366 4,245 5,611 Source: Percent of total employment - Economy. com, BLS,2002; Average annual earnings - BEA, 2001 2000 1,539 4,916 6,454 2001 1,493 5,383 6,876 HOUSE PRICES LEADING INDUSTRIES 2002 1,431 5,356 6,787 260 NAICS Industry Employees (000) VEN ! Source: IRS (top), 2002; Census Bureau & 240 -u.s. 11.4 Economy.com, 2002 FR Farms I 5613 10.9 220 Employment Sen,ces PER CAPITA INCOME GVF Federal Gol.l'lrnmenl 7.9 / ML 7.0 200 Military Personnel 32,232 32,655 3344 Semi. & Other Elec. Component Manut. 6.2 180 5222 Nondepository Credit Intermediation 6. 1 5241 Insurance Carriers 5.6 160 3254 Pharmaceu1ical and Medicine Manufacturing 4.7 PH Pri;ate Household Workers 3.8 140 2383 Building Finishing Cont ractors 3.4 441 1 Au1omobile Dealers 3.2 120 5413 Architectural, Engineering, & Related Sen,ces 3.2 2381 2.9 100 Foundation, Struc., & Bldg. Ext. Contractors 8111 Automotive Repair and Maintenance 2.8 87 89 91 93 95 97 99 01 03 7139 Other Amusement and Recreation Industries 2.5 Source: OFHEO, 198701 = 100, NSA High-tech employment 24.2 As % of total employment 8.0 OVEN !illCA Iii US Source: BLS, Economy. com, 2002 Source: Bureau of Economic Analysis, 200 1

Precis METRO © 2003 Economy.com, Inc. • 600 Willowbrook Lane, Suite 600 • West Chester, PA 19382 • 610.696.8700 • 610.696.0875 fax • www.economy.com For the confidential use of subscribers. Although the information ,n this reporthas been obtained from sources that Economy.com, Inc. believes to be reliable, we do not guarantee its accuracy, and such information may be incomplete or condensed. This publication is available through the Internet at Economy.com. B-34 Public Sector Suffering Is Evident in Ventura Robust Commercial ·Construction

8 �--�------� 38.0 14�------� Government employment Permits, .commercial buildings, Ths. 3 mo MA (R} $ mil, 4 mo MA 6 1 2 +------'lt------�------1 37.5 4

37.0 2

0 36.5

-2 36.0 -4 % change year ago (L)

-6 �------�--+------'- 35.5 00 01 02 03

Local and state budget woes remain a concern for VEN, \\ith Strengthening population growth and resilient consumer public sector payrolls e:-.-pected to be stagnant throughout most of activity throughout the slowdown have supported commercial 2004. While state govermnent employment has gone flat, the greatest building activity in VEN during the past two years. Permitting for effect of the state's budget crisis will result from the reduced commercial establishments has been above its historical trend transfers to local governments that are i1mninent. Municipal payrolls, during this time. Moreover, with expectations for brisk population which account for 80% of public employment in VEN, have already growth and above average income gains, consumer activity, and as been steadily declining for the past two years amid tight local a result the construction of retail and entertainment finances. In addition, proposed midyear budget cuts make it likely establishments, will remain robust in the coming years. For that the CSU-Channel Islands campus will have to trim its enrollment, example, one project that is set to get under way in the spring is temporarily stifling growth at the fledgling university. a S40 million complex of shops and restaurants in Thou sand Oaks.

Housing Shortage Is Worse For Multifamily Office Rents Compare Well to Rest of SouthernCalifornia

20�------� Months of housing supply 1 20 Cost of ooing business index, office rents, -s_o_u_r c_e_: E_ c_o_n _o_m�y_.c_om_ U.S.=100,2002 16 +------4-"�------1 110 * Negative value indicates shortage

100

90

80

Single-family 70 '74+--- �--��"--"-:i>�--�c--" ...... ------= �- -· -----�Multifamily 60 ""�· ·"'"'"':!!!'''"'""'''-""""", 50 -12 -f--+--f----1---+--+--+---+--+--+--+-+--+-----+--+---+--+---+---t---+-�-+---+--,---+---+-+--' . Bakersfield Los Orange Ventura San Luis Santa 90 91 92 93 94 95 96 97 98 99 00 01 02 03 Angel as County Obispo Barbara

Growth control laws and strict residential density limits are Below average office rents confer an advantage to the local among the primary factors that will continue to result in a shortage economy. While overall business costs in VEN are well above the of housing in VEN, reducing affordability and increasing the metro national average, they compare favorably to those in nearby metro area's cost of living. While stocks of single-family and multifalnily areas in southern California, with only Santa Barbara having housing have both been consistently insufficient, the shortage of significantly lower business costs. Office rents play a large role in multifamily residences has been the more severe of the two. This is this. As a result, VEN competes well with the surrounding areas in because the building restrictions are especially strict for apartments attracting businesses. Of particular importance, the lower costs, and condolniniums. While some efforts are under way to increase along with a less congested and more pristine environment, help housing in the downto·wn area and nearby hillsides, building activity to lure firms from neighboring Los Angeles. will still not be able to keep up with demand.

Precis METRO © 2003 Economy.com, Inc. • 600 Willowbrook Lane, Suite 600 • West Chester, PA 19382 • 610.696.8700 • 610.696.0875 fax • www.economy.com For the confidential use of subscribers. Although the information in this report has been obtained from sources that Economy.com, Inc. believes to be reliable, we do not guarantee its accuracy, and such information may be incomplete or condensed. This publicatjon is available through the Internet at Economy.cam. B-35 REGIONAL ANALYSIS

Employment Growth Between 1991 and 2003, non-agricultural employment growth for Ventura has averaged approximately 1.7 percent per year; higher than the rate of growth for the U.S. as a whole (1.5% per annum), and more than the state (1.3%). Over the past five years, between 1998 and 2003, non-agricultural employment growth for the subject region has accelerated to an average annual pace of about 2.4 percent per year; significantly higher than the rate of growth for California (1 .2% per annum) , and more than the U.S. as a whole (0.6%). The chart on the Following Page presents a summary of employment trends for the subject region as compared to the State and United States.

Employment Growth

Ventura County Los Angeles CMSA State of California United States

CAGR CAGR CAGR CAGR CAGR CAGR CAGR CAGR CAGR CAGR CAGR CAGR CAGR CAGR CAGR CAGR 1991- 1998- 2000- 2002- 1991· 1998· 2000. 2002. 1991- 1998- 2000- 2002- 1991- 1998- 2000. 2002. 2003 2003 2003 2003 2003 2003 2003 2003 2003 2003 2003 2003 2003 2003 2003 2003

Total Non-Farm Emp:loyment 1.7% 2.4% 1.0% 0.6% 09% 1.3% 0.3'% 0.2% 1.3% 1.2% -02% -0.3% 1.5% 0.6% -0 5ll-/o -0.3% Natural Resources & Mining -10 3% �12.9% ,9.1% �14.3% -5 1%, -2-4% 1.1'% 0.0% ·3.7% -44% ·6.0% -4.8% -2 1% -24% -1.6% -2.1% Construction 2.6% 4.8% 23% 5.7% 25% 5 0%- 2.7% 3.1% 2.9% 5.1% 26% 2.0% 29% 18% -0 3% 0.1'% Manufacturing 11% -0.4% -3 5% -2.4% -2 1% -3 7% -5 6% -5.3% ·1.6% -3.6% -6.0% -5.7% -1 3% -3 7% -5 6% -4.8% Tracie. Transportation. Utilities 18% 2.8'% 1.5% 0.6% 1.0%. 1 4% 0 6%. 0.5% 1.1% 1 0% 0.0% -0.1% 11% 0 1% -1 2% -0.9% Wholesal,e Trade 3.7% 6.0% 4.9% 1.7% 1.0% 1.0%- 0.5%, 0.2% 1.4% 1.2% 0.3% -0.1% 0.7% -0.7% -1 9% -0.8% Retail Trade 16% 22% 07% 0.6% 1.0%. 2 0%. 14% 1-2'% 1.1% 15% 0.6% 0.5% 1.2% 04% -0 8% -0.8% Transportation & Utilities 0.2% 11% 0.6% -3.4% 10% 0.2%, -1 6%. -1.2% 0.8% -0.7% -2.4% -2.1% 10% -0 1% -1 7% -1.3% Information 0.1% 0.0% -35% -12.3% 0 8% -1.1% -5 8% --4.4% 1.5% -05% -6.4% -5.2% 1.:5% -0. 1% -4. 1% ·5.8% F1nanc1al Act,v1t1es 45% 99% 11.9% 5.4% 0 4%, 3.1% 4.7% 5.4% 0.8% 2.8% 3.7% 4.0% 1.6% 1.3% 1.2% 1.6% Professional & Business Services 24% 0.8% -2.5% 0.0% 20% 1.1% -0 4% 0.5% 2.8% 0.7% -2 1% -0.3% 3.4% 11% -1.4% 0.1% Education & Health Services 31% 3.7% 4.9% 6.1% 2.2% 3 2% 36% 3.0% 2.4% 2.9% 3.2% 2.5% 3.1% 28% 31% 2.3% Leisure & Hospitality 2.4% 4.4% 31% 1.1% 1.9% 27% 2.5% 2.1% 19% 2.0%, 1.6% 1.1% 23% 1.5% 0.7% 1.2% Other Services 2.1% 2.9% 2.7% 2.9% 13% 22% 1.9% 0.8% 1.6% 1.9% 1.3% 0.0% 20% 16% 14% 0.4% Government -0.1% 0.7% 0.2% -1.5% 1.3% 2 4%, 1.5% �1.0'% 1.2% 2.3% 15% -0.8% 13% 1.6% 12% 0.3% Federal Government ·3.7% -2.2% -1.3% -1.3% -2.0% -0.7% -1.7% 1.8% -2.4% -1.0% -1.8% 1.9% -1.Q% -Q. 1% -1.3% .().4% 0- State Government -4.2% 4.1% 90% 10.0 10 1.5% 28% 22% 0.4% 17% 27% 2.1% --0.1% 12% 17% 16% -0.2% Local Government 1.5% 1.3% 0.2% -2.Jll-/o 1.7% 28% 1 8% -1.5% 1.9% 28% 1.9% -1.5% 1.8% 20% 1.7% 0.6%

• Los Angeles CMSA includes Los AngelesCounty, Orange Cm111ty Riverside Counly San BernardinoCounty, and Venlura County

As shown, non-farm employment growth for the region over the past five years has been led by Financial Activities (9.9% per year), Wholesale Trade (6.0% per annum), Construction (4.8%), Leisure and Hospitality (4.4%), State Government (4.1 %), and Education and Health Services (3.7%).

Employment Distribution As of this writing, the largest sectors of non-farm employment in Ventura include Manufacturing (1 3.1 % of non-agricultural employment), Professional and Business Services (accounting for 12.9% of non-farm employment), Government (1 5.7%), Retail Trade (12.1 %), Education and Health Services (9.8%), and Leisure and Hospitality (9.7%). The following chart presents this data as compared to the Los Angeles CMSA, State, and U.S.

VALUATION SERVICES 18 ADV ISORY GROlJP .A,CUSHMAN& '(VJ WAKEFl£U),

B-36 REGIONAL ANALYSIS

Employment Distribution Ventura County Los Angeles CMSA State of California United States

1991 1995 2000 2003 1991 1995 2000 2003 1991 1995 2000 2003 1991 1995 2000 2003

Total Non.FannEmp�oyment 100% 100% 100% 100'%, 100% 100% 100% 100% 100% 100% 100% 100% 100% 100°/o 100% 100% Natural Resources & Mining 08% 0 8% 0 3%- 0.2'%, 0.2% 01% 01% 0.1% 0 3% 02% 0.2% 0.2% 07% 05% 0.5% 0.4% Construction 7.0% 4.7% 5.6%- 5.9'%, 4.1% 3.7% 4.5% 4.9% 4.5% 4.0% 5.0% 5.5% 4 4°/,,, 4.5% 5 2% 5.2% Manufacturing 14.6% 13.3%, 15.0% 13.1% 17 7% 15.8% 14 7% 12.3% 15.3% 13.8% 12.8% 10.7% 15 7% 14.7% 13.1% 11.2% Trade. Transportation, Ut1l1t1es 18.1% 18.3% 18 0%, 18.3%, 19 5% 19 6% 19.4°/r, 19.6% 19.3% 19.3% 18.8% 18.9% 20 6°/o 20.3% 19.9% 19.5% Wholesale Trade 34% 3 6% 37% 4,2'% 52% 5.2%, 52% 5.2% 45% 4 5% 45% 4.5% 4.8% 4.6% 4.5% 4.3% Retail Trade 12.4% 12 3% 12.3% 12.1·% 107% 106% 10 4% 10.8% 11.2% 11 1% 10.8% 11.0% 11.9% 11.8% 11.6% 11.5% Transport ation & Utilities 2.2% 24% 2.0% 2.0% 36% 3.8% 3 8°/o 3.6% 3.5% 3 7.Yo1 3.6% 3.3% 3.9% 3.8% 3 8% 3.7% Information 3.5% 26% 2.9% 2.5% 3 So/o 4.0% 4.5% 3.7% 32% 33% 4.0% 3.3% 2.5% 24% 28% 2.5% Financial Aclivil1es 5.3% 54% 6.1% 8.3% 6 7"/.., 6.1% 5.5% 6.3% 6.5% 6.0% 5.5% 6.2% 6.1% 5.8% 5.8% 6.1% Professional & Business Services 11 5% 14.2°/o 14.4% 12.9% 12.6% 13 6% 146% 14.3% 12.2% 13 4°/o 15.5% 14.6% 9.9·% 10 9% 12 6% 12.3% Education & Health Services 7 9% 9.4% 8.8% 9.8% 9.2% 98% 97% 10.7% 9.3% 10 0% 96% 10.7% 10.6% 11.3°/o 115% 12.8% Leisure & Hosp1tal1ty 8.8% 9.4% 9 1% 9.7% 8.6% 91% 91% 9.7% 91% 9.5% 92% 9.7% 85% 9.0% 9.0% 9.3% Other Services 3.2% 3.6% 3.5%, 3.7% 3.4% 3.5% 3.4%, 3.6% 3.4% 3.5% 3 4'.1/.., 3,5% 3.9% 3.9% 3.9% 4.2% Government 19 2% 18 1% 16.1%, 15.7% 14.3% 14 7% 143% 14.9% 16.9% 17.0% 16.0% 16.8% 17.1% 16.6% 15.8% 16.6% Federal Government 5.3% 4.3% 2 9% 2.8% 19% 18% 1.4% 1.4% 2.8% 2.5% 1.9% 1.8% 2.9% 2.5% 2.2% 2.1% State Government 1.6% 1.4% 0 6% 0.8% 19% 20% 19% Z.0% 3 1% 3.2% 3. 1% 3.3% 4.0% 4.0% 3.6% 3.9% Local Government 12.3% 12.3% 12 5% 12.2%. 10 5% 10 9% 11.0% 11.5% 11 0% 11.2% 11.1% 11.8% 10.2% 10.1% 10.0% 10.6%

' Los Angeles CMSA in.-ludes Los Angeles Co.inly, Orange County, Riverside County, San BernardinoCounly. and Ventura Counly

Unlike the nation as a whole, Manufacturing still accounts fo r a fairly similar percentage of employment in the region as it did a decade ago, decreasing only slightly from a 14.1 percent share in 1991, to 13.1 percent today. Nationally, this sector comprises some 11.2 percent of employment, having declined from 15.7 percent in 1991 . By comparison, then, this translates into a "location quotient" of 1.17 fo r Manufacturing within Ventura (12.3% 7 11.2% = 1.17). Location quotient analysis compares employment for the region by sector, with those figures for the nation. The quotient is arrived at by dividing the percentage of employment by sector for the region, by the corresponding national percentage. In situations where the quotient is less than one (1.00), the region is considered to be less dependent upon that particular industry. Obviously, then, if it is greater than one (1.00), the region is more dependent. Broadly speaking, the figures also suggest whether the region is a net importer or exporter of these skills or services.

Location Quotient Summary Ventura County Los Angeles CMSA State of California United States

1991 1995 2000 2003 1991 1995 2000 2003 1991 1995 2000 2003 1991 1995 2000 2003

Total Non-Farm Employment ------Natural Resources & Mining 1.40 1 39 0 64 0.48 0 28 024 020 0.21 0.41 0.38 0 40 0.35 1 00 1.00 1 00 1.00 Construction 1 20 1 05 1.09 1.13 0.92 0.83 0 88 0.94 1.03 0.89 0 98 1.06 1.00 1.00 1 00 1.00 Manufacturing 0.89 0.90 1.15 1.17 1.12 1.08 1.12 1.10 0.97 0 94 0.98 0.96 1 00 1 00 1 00 1,00 Trade. Transportation. Utilities 0 88 0.90 0.91 0.94 0.95 0.97 0.98 1.01 0.94 0 95 0 94 0.97 1.00 1 00 1.00 1.00 Wholesale Trade 0.70 0.77 0.83 0.97 1 09 1.12 1.15 1.21 0.94 0.97 0.99 1.05 1.00 1.00 1.00 1.00 Retail Trade 1.04 1.04 1 06 1.06 0.90 0.90 0.90 0.94 0.94 0 94 0 93 0.96 1 00 1.00 1 DO 1.00 Transportation & Ut1l1t1es 0 62 0 63 0 53 0.54 0.92 1.00 1.00 0.98 0.92 0 96 0.94 0.91 1.00 1 OD 1 00 1.00 Information 1.23 1.08 1.04 1.02 1 54 1.66 1.65 1.52 1.30 1 38 1.44 1.33 1 00 1 00 1 OD 1.00 Financial Activ1t1es 0 99 0.93 1.04 1.34 1.10 1.04 0.95 1.02 1.08 1 03 0 94 1.00 1.00 1 00 1 OD 1.00 Professional & Business Services 1 20 1 29 114 1.05 1.27 1.24 1.16 1.16 1.24 1.23 1.23 1.19 1.00 1 00 1 00 1.00 Education & Health Services 0 79 0.83 0 77 0.77 0 87 0.86 0.85 0.84 0.88 0 88 0.84 0.84 1 00 1.00 1 00 1.00 Leisure & Hospitality 1 05 1.05 1.01 1.04 1 01 1.01 1.01 1.04 1 06 1 06 1 02 1.04 1.00 1 00 1 OD 1.00 Other Services 0 91 0.92 0.90 0.89 0 86 0.89 0.87 0.86 0 86 0 89 0 86 0.85 1.00 1 00 1 00 1.00 Government 1.14 1.09 1 02 0,95 0 84 0 89 0.91 0.90 099 1.02 1.01 1.01 1 00 1.00 1 00 1.00 Federal Government 1.85 1 73 1.36 1.30 0 67 0.72 0.66 0.64 0 98 1.00 0.87 0.85 1.00 1.00 1 00 1.00 State Government 0 40 0 36 0 17 0.20 0 47 0 50 0.52 0.52 0 78 0 82 0.84 0.85 1.00 1.00 1.00 1.00 Local Government 1.22 1.22 1.26 1.15 1 03 1 08 1.10 1.08 1.07 1.11 1.11 1.11 1.00 1.00 1.00 1.00

# • Los Angeles CMSA includes Los Angeles County. Orange County, R1vers1de County, Sar'Bernard ino County, and Venlura County

VALUATION SERVICES 19 ADVISORY GR()UP AcusHMAN& 'i,VJWA KEFIEt.O.

B-37 REGIONAL ANALYSIS

In general, it is evident that Ventura has a fairly broad base of industries that it is dependent upon, showing diversification in the region's economic base over the past 10 to 20 years. Retail Trade is a segment that clearly remains an important sector of employment for the region, with a location quotient that falls above national levels. Retail Trade, which accounts for 12.1 percent of non-farm employment, suggests a location quotient of 1.06 when matched against the national benchmark of 11.5 percent. Similar to national trends, the general "Services" categories have increased their share of employment in the region over the past decade. For example, Professional Services has risen from an 11.9 percent share of non-farm employment in 1991, to 12. 9 percent as of 2003. This level of employment is fairly similar to the national norm of 12.3 percent, indicating a location quotient of 1.05. The location quotient analysis also clearly suggests that the subject region is much more dependent upon Financial Activities sectors of employment as compared to the national benchmark. With 8.3 percent of employment in the region, a location quotient of 1.34 percent is developed when matched against the national share of 6.1 percent. Owing to its status as a regional government center, one of Ventura's other key employment categories is Federal, State, and Local Government. All combined, this is the largest sector of employment, with 15.7 percent of the workforce, lower than its national rate of 16.6 percent. Government's impact on the local economy can help to mitigate some of the volatile economic swings seen in regions that depend more heavily on one particular industry.

Unemployment Rates Unemployment rates in the Ventura County region have historically been below that of the adjacent Los Angeles County, as well as State and national figures. Mirroring national and statewide trends, unemployment peaked in 1992/93, coinciding with recessionary trends. The rate has generally shown a declining trend since this time, ending 2001 with an average of 4.6 percent, th e first increase since 1994. The following table presents historical unemployment rates for the region as compared to California and the U.S.

Historic Unemployment Rates

City of Ventura Los Angele! Orange San Bern. Riverside State of United Year Simi Valley County County County County County California States

1994 6.8% 7.8% 9.4% 5.7% 8.6% 10.5% 8.6% 6.1% 1995 6.5% 7.5% 7.9% 5.1% 7.9% 9.5% 7.8% 5.6% 1996 6.2% 7.1% 8.2% 4.1% 7.3% 8.2% 7.2% 5.4% 1997 5.7% 6.5% 6.8% 3.3% 6.3% 7.5% 6.3% 4.9% 1998 4.8% 5.5% 6.5% 2.9% 5.6% 6.6% 5.9% 4.5% 1999 4.1% 4.8% 5.9% 2.6% 4.8% 5.4% 5.2% 4.2% 2000 3.9% 4.5% 5.3% 2.5% 4.7% 5.5% 4.9% 4.0% 2001 4.0% 4.6% 5.6% 3.0% 4.8% 5.2% 5.4% 4.7% 2002 4.7% 5.5% 6.8% 4.1% 5.7% 6.1% 6.7% 5.8% 2003 (p) 4.7% 5.4% 6.8% 3.8% 5.8% 6.1% 6.7% 6.0%

Source: Bureau of Labor Statistics

(P) Preliminary average based on unemployment rates through December

Similar to national and statewide trends, unemployment within Ventura increased from late­ Summer 2001 and into early-2002 , as a brief recession, followed by a slow economy, have impacted the region.

VALUATION SERVICES 20 ADVISORY GR()LTP &CUSHMAN& � WAKEFIELD�

B-38 REGIONAL ANALYSIS

Among the Los Angeles Basin counties, Ventura and Orange were the only two to see a decline in unemployment during 2003. For the year, Ventura registered an annual average of 5.4 percent as compared to 5.5 percent for 2002. This rate is lower than that reported for the CMSA, State, and U.S. as a whole. The following chart presents preliminary results for the 12 months of 2003:

Recent Unemployment Rate Trends

City of Ventura Los Angele� Orange San Bern . Riverside State of United Simi Valley County County County County County California States

Year 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 January 4.9% 4.9% 5.6% 5.7% 6.9% 6.8% 4.0% 4.0% 5.5% 5.8% 5.7% 5.9% 7.0% 7.3% 6.3% 6.5% February 4.3% 4.6% 5.0% 5.3% 6.8% 6.7% 4.0% 4.0% 5.4% 5.6% 5.7% 5.9% 6.9% 7.1% 6.1% 6.4% March 4.2% 4.3% 4.8% 5.0% 6.8% 6.4% 4.0% 3.9% 5.4% 5.6% 5.4% 5.8% 6.9% 7.0% 6.1 % 6.2% April 4.0% 4.2% 4.6% 4.9% 6.8% 6.5% 4.0% 3.8% 5.4% 5.7% 5.3% 5.8% 6.6% 6.8% 5.7% 5.8% May 3.9% 4.1 % 4.5% 4.8% 6.7% 6.5% 3.9% 3.7% 5.3% 5.6% 5.3% 5.5% 6.3% 6.5% 5.5% 5.8% June 4.4% 4.5% 5.1% 5.2% 7.1% 7.1% 4.3% 4.0% 6.0% 6.3% 6.0% 6.2% 6.8% 6.9% 6.0% 6.5% July 5.0% 4.8% 5.7% 5.6% 7.6% 7.6% 4.6% 4.1% 6.3% 6.4% 7.2% 6.8% 7.1% 7.2% 5.9% 6.3% August 5.4% 5.1% 6.2% 5.9% 7.0% 7.2% 4.3% 3.9% 5.9% 6.1% 7.0% 6.9% 6.6% 6.7% 5.7% 6.0% September 5.3% 4.8% 6.1% 5.6% 6.7% 6.9% 4.3% 3.7% 5.9% 5.6% 6.9% 6.4% 6.5% 6.4% 5.4% 5.8% October 5.0% 5.0% 5.8% 5.8% 6.5% 7.0% 4.3% 3.8% 6.0% 5.8% 6.9% 6.6% 6.5% 6.5% 5.3% 5.6% November 5.3% 5.0% 6.1% 5.7% 6.3% 6.7% 4.1% 3.7% 5.7% 5.6% 6.4% 6.1% 6.7% 6.5% 5.6% 5.6% December 5.0% 4.5% 5.8% 5.3% 6. 1% 6.1% 3.9% 3.2% 5.4% 5.0% 5.9% 5.4% 6.4% 6.2% 5.7% 5.4% 4.7% 4.7% 5.5% 5.4% 6.8% 6.8% 4.1% 3.8% 5.7% 5.8% 6.1% 6.1% 6.7% 6.7% 5.8% 6.0%

abor Statistics

Although it is too soon to know how the year 2004 will develop, it appears that the fluctuating unemployment rate for Ventura toward mid- to late-2003 has stabilized, with a declining trend during the last two months of th e year. With a continued slow economy, it is likely that unemployment rates may not improve materially in the near-term until both the national and local economies rebound to a more significant pace.

Retail Sales Another measure of the economic health of a region is retail sales patterns. Consumers drive the economy by creating demand for goods and services and, in turn , generate the need for housing, office space, retail centers, and warehouse/distribution facilities. It is estimated that consumer spending accounts for two-thirds of all economic activity in the United States today. As such, retail sales patterns have become an important indicator of the economic health of a region. The following chart presents a summary of recent total taxable sales trends within the subject's region, with comparison to the State as a whole. As shown, taxable sales (in all outlets) have increased at a compound annual rate of about 6.3 percent per year in the Ventura PMSA since 1994. This compares with statewide growth of 5.6 percent per annum, and annual growth of 5.5 percent per year for the Los Angeles CMSA. Growth has been highest in each of Riverside, San Bernardino, and Ventura, coinciding with generally higher population, income and employment growth, as well as expansion of the retail market in each of these counties.

VALUATION SERVICES 21 ADVISORY GROUP A-CUSHMAN& .WAK&FlaA

B-39 REGIONAL ANALYSIS

Taxable Sales Trends (All Outlets Totals -- $Mil)

City of Los San Los Simi % Ventura % Angeles % Orange % Bernardino % Riverside % Angeles % State of % Period Valley 11 County 11 County 11 County 11 county 11 County 11 CMSA 11 California fJ..

1994 -- $ 6.026.2 - $ 76.898.7 -- $ 28.276 3 - $ 11.643.5 $ 9.814 5 $ 132.859 1 $ 285.974.7 1995 -- $ 6.245 8 3.6% $ 79,068.2 28% $ 29.946 5 5.9% $ 12.482 3 54% $ 10,320 6 52% $ 138,063 5 3.9% $ 300,956.4 52% 1996 -- $ 6.544.6 4.8% $ 82.620.9 4.5% $ 32.533.2 8.6% $ 13,126.5 5 2% $ 11.138.9 7.9% $ 145,964 1 5.7% $ 321 .076.3 6.7% 1997 791 7 5 7.042.7 7.6% $ 86.397.9 4.6% $ 34.921.4 7.3% $ 14.005.0 6.7% $ 11,972.4 7.5% $ 154,3-39.3 5.7% $ 341,091.6 62% - 1998 828.0 4 6% $ 7.4709 6.1% $ 90.205.6 4.40;., $ 37.108.4 63% $ 15,002.3 7.1% $ 13.140.9 98% $ 162,928 0 56% $ 358,858.4 5.2% 1999 :933.7 12.8% $ 8.339.2 11_6% $ 97.316.8 7 9%. $ 40.366 1 88% $ 16,787.4 11 9% $ 15,076.9 14.7% $ 177.886 4 92% $ 394,736.2 10 0% 2000 1,042.5 11.7% $ 9.096 1 9. 1% $ 106,673.5 96% $ 44,462.5 10.1% $ 113,1385.4 12.5% $ 16,9794 12.6% $ 196,0-97 O 102% $ 441 ,854.4 11.9% 2001 1,128 0 8.2% $ 9,533 0 4 8% $ 107.426.7 07% $ 44,595.3 03% $ 19.684.1 4 2% $ 18.231 6 7.4% $ 199,470 7 1.7% $ 441 517.6 -0 1%, 2002 1.162.4 3.1% $ 9,803.5 2.8% $ 108,753 1 12% $ 44,869.2 06% $ 20 849 5 5.9% $ 19.499.0 7.0% $ 203,774.2 22% $ 440.950 1 -0 1%

CAGR 94-02 6.3% 4.4% 5.9% 7.3% 9.0% 5.5% 5.6% CAGR 97.02 8.0% 6.8% 4.7% 5.1% 8.3% 10.2% 5.7% 5.3% CAGR 00-02 5.6% 3.8% 1.0% 0.5% 5.1% 7.2% 1.9% -0.1%

Year-to-date figures through the first quarter of 2003 suggest a continuation of this trend, with surrounding counties such as Riverside, San Bernardino, and Ventura showing higher increases than, say, Los Angeles County. The following chart presents this data.

Taxable Sales Trends (All Outlets Totals -- $Mil)

City of Los San Los Simi % Ventura % Angeles % Orange % Bernardino % Riverside % Angeles % State of % Period Valley lJ. County h. County h. County 11 County 11 County 11 CMSA lJ. Califomia lJ.

2000 01 230 3 -- $ 2,035 2 -- $ 24,725.2 -- $ 10,110 7 - $ 4,273 4 -- $ 4.018.1 $ 45, 162.6 $ 99,900 6 2001 01 251 9 9 4% $ 2,144.5 5.4% $ 25,349.5 2.5% '$ 10.491 2 3.8% $ 4.563 9 68% $ 4,294 5 6.9% $ 46,843 5 3 7% $ 104,176.2 4.3% 2002 01 256.9 2.0% $ 2,223,6 3.7% $ 25,057.8 �1 .2%, '$ 10,270.7 -2.1% $ 4,714.0 3.3% $ 4,560.0 6 2% $ 46,826 2 0,0% $ 100,957.4 -3.1% 2003 01 284.4 10.7% $ 2.320.3 4.3% $ 26,202.6 4.6%, '$ 10,692 6 41% $ 5.134.6 8.9% $ 4,977 4 9.2% $ 49.327 6 53% $ 104,452.6 3.5%

CAGR 00-03 7.3% 4.5% 2.0% 1.9% 6.3% 7.4% 3.0% 1.5%

Source California Slate Board of Equal1zal1on

Similar trends have been seen in retail store taxable sales, which are summarized on the following chart:

Taxable Sales Trends (Retail Store Totals -- $Mil)

City of Los San Los Simi % Ventura % Angeles % Orange % Bernardino % Riverside % Angeles % State of % Period Valley lJ. County lJ. County lJ. County lJ. County lJ. County lJ. CMSA lJ. California lJ.

1994 -- $ 4.336.7 -- $ 49,765.B -- $ 17.554.3 -- $ 8,133 5 -- $ 7,131.2 -- $ -86,941.5 -- $ 18-7.088.0 1995 - $ 4,447.2 2.5% $ 51 ,028 5 2 5% $ 18.269.2 41% I 8 484.9 4.3% $ 7,4354 4.3% $ 89.665.2 3.1% $ 194.378-.1 3 9% 1996 -- $ 4.628 9 4.1% $ 53,304.5 45% $ 19.450 8 65% $ 8,916.1 5.1% $ 8,003.1 7 6% $ 94,303.3 5.2%, $ 205.746 8 5 8% ° 1997 608.4 -- $ 4.891,6 5.7% $ 55,283 4 3 7% $ 20,983 3 7 9'% $ 9,359.6 5.0% $ 8 508.0 6 3 /o $ 99.025.9 50% $ 217.248.7 5 6% 1998 633.3 4.1% $ 5,227.6 6.9% $ 57,500 5 40% $ 22.456 1 70% $ 9 974 9 6.6% $ 9.276.4 9 0%, $ 104,435.6 5.5% $ 229.406 5 5 6% 1999 739.1 16.7% $ 5,879.4 12 5% $ 63,271 1 10 0% $ 24,768.6 104% $ 11,335.8 13.6% $ 10.685 7 15 2% $115,960 6 110% $ 255.569 4 11 4% ° 2000 638.2 13.4 /o $ 6,503.7 10.6% $ 70.321.4 11 1% $ 27.465.0 10.9% $ 12,801.4 12 9% $ 12.190 5 14.1% $ 129.301.9 11.5% $ 287.067 7 12 3% 2001 911.0 8.7% $ 6,848.0 5.3% $ 71.834 6 2.2% $ 28,518 7 3.8% $ 13,525.4 5.7% $ 13,173 3 81% $ 133,899 9 3,6% $ 293.956.5 2.4% 2002 939.8 3.2% $ 7,153.3 4.5% i 74,548 0 3.8% $ 29,646.8 4.0% $ 14,319.5 5.9% $ 14.250.7 8.2% $ 139,916.3 4.5% $ 301.612.3 2.6%

CAGR 94-02 6.5% 5.2% 6.8% 7.3% 9.0% 6.1% 6.2% CAGR 97-(12 9.1% 7.9% 6,;:!:"/1t 7.2% B.9% 10.9% 7.2% 6.8% CAGR 00-02 5.9% 4.9% 3.0% 3.9% 5.8% B.1% 4.0% 2.5%

Source CaliforniaState Board of Equal1:zat1or,

As with total taxable sales, retail store sales have also shown continued improvement through the first quarter of 2003. This data is shown in the following chart:

VALUATION SERVICES 22 ADVISORY GROCP AcusHMAN& \VJWA KEFIEU),.

B-40 REGIONAL ANALYSIS

Taxable Sales Trends (Retail Store Totals -- $Mil)

City of Los San Los Simi % Ventura % Angeles % Orange % Bernardino % Riverside % Angeles % State of % Period Valley County County County County County CMSA California:

t, t, t, t, t, t, t, t, 2000 Q1 $ 185 7 -- $ 1,452.3 -- I 16,140 4 -- ! 6,218 4 -- ! 2,921 8 -- ! 2,867.5 -- $ 29,620.3 -- I 64,614.6 2001 Q1 s 201 2 84% $ 1,527.8 5.2% $ 16,787 9 4.0% $ 6.506 7 4.6% $ 3,093 6 5.9% $ 3,095 2 7.2% $ 31 ,01 1,2 4.7%, $ 68.069 3 5 3% 2002 Q1 207 1 3 0% $ 1 591 .J 4.2% $ 17,071 6 1.7% $ 6,629 5 1.9% $ 3.212.8 3.9% $ 3,322 2 7.3% $ 31 827 3 2.6"/o I 68,341 2 0.4% 2003 Q1 227 5 9 8% $ 1.707.9 7.3% $ 18,059 5 5.8%, $ 7.155 1 7.9% $ 3,589 6 11.7% $ 3,6728 10.6% $ 34,184 8 74% $ 72.086 5 5 5%

CAGR00-03 7.0% 5.6% 3.8% 4.8% 7.1% 8.3'% 4.9% 3.7%

Source· Cal1forma Slate Board of Equalimt1or1

The higher rate of growth for taxable sales in Ventura County and the Inland Empire (Riverside and San Bernardino) is directly attributable to population growth trends for these portions of the region, coupled with the opening of additional shopping alternatives for residents in these areas. The following table summarizes retail sales growth projections for the subject region in comparison to California and the U.S. as a whole:

Sales Projections

Total Retail Total Retail Sales (000) Sales (000) CAGR Year 2002 2007 2002-07

Ventura County $ 10,838,258 $ 14,888,626 6.56% San Bernardino County $ 18,704,271 $ 24 ,980,134 5.96% Riverside County $ 20,758,089 $ 29,226,940 7.08% Los Angeles County $ 111,864,575 $ 147,651 ,264 5.71 % Orange County $ 47,221 ,052 $ 67,001 ,408 7.25% Los Angeles CMSA $ 209,386,245 $ 283,748,372 6.27% State of California $ 449,526,620 $ 623,41 8,815 6.76% Pacific U.S. Region $ 602,918,642 $ 827,988,900 6.55% United States $ 3,627,218,024 $ 4,655,296,699 5.12%

Source: Sales & Marketing Management Survey of Buying Power

Over the next five years, S&MM is projecting sales to increase at a rate of nearly 6.6 percent per year for the subject reg ion, above the national growth rate, which is forecasted to be around 5.1 percent. This rate of growth is also slightly higher than the CMSA trend. Overall, this bodes well forthe region, which is expected to see retail sales growth at a rate that exceeds inflationary trends into the foreseeable future. As noted, this growth is largely attributable to the population growth of the subject region.

Real Estate Market Trends

General Overview The recent impacts of recession and slump on job creation have impacted the subject region's real estate markets, though not nearly as much as other areas of the Los Angeles Basin. Continued stability in population and job growth for Ventura County are expected to have a positive influence on real estate market trends, with a generally stable outlook into the foreseeable future.

VALUATION SERVICES 23 AD\'TSORY GROUP AILCUSHMAN& \v1WAK EFIELD,

B-41 REGIONAL ANALYSIS

While some areas of the county have exhibited anti-growth/anti-development postures in recent years, other communities have focused on careful long-range planning. Such is the case with Simi Valley, wherein the subject's pending development has been planned for over a decade, along with adjacent lands that have been planned for development for some time. Continued population and employment growth throughout the region appear to be influencing real estate development trends, particularly in the residential market. These trends have impacted virtually every aspect of the region's real estate markets, including new residential communities, improved commercial/industrial occupancy rates, increasing rental rate trends, and new development. The following is a brief overview of Ventura County's major real estate markets, including office, industrial, retail, and multi-family residential. Most data has been compiled from REIS Inc., an economic forecasting and real estate research firm that utilizes both primary research and third­ party surveys in their analysis of the local market. REIS's metropolitan and submarket surveys are performed quarterly, with analysts tempering the data th rough a comparison to multiple local sources (i.e. other real estate firm surveys}. All data and statistics are reconciled during a validation process that includes an automated exception and deviation report. Where possible/applicable, REIS data has been compared with other surveys, including Cushman & Wakefield market reports .

Office Market Trends Traditionally, growth patterns in Southern California follow a four-step progression. The first cycle of development typically involves single-family homes built for families migrating for lower priced housing. Th is residential growth, in turn, attracts retailers. Later, industrial facilities are developed for companies seeking larger, less expensive projects. Finally, the office inventory is developed as corporate operations follow the higher-end workers. Ventura County's office sector appears to be categorized in this final stage. Historically, the Ventura County has not been one of Greater Los Angeles's prime office locations, which are primarily centered in Los Angeles and Orange Counties. The Ventura market, rather, serves typically smaller, local tenant needs and back-office requirements for companies operating in the Coastal Counties. Thus, with a total office inventory of 7 .1± million square feet, Ventura is not considered a large market. [Note: depending upon the source, the region's office market ranges from 7.0± to 8.0± million square feet. Some sources include portions of Ventura County with the North Los Angeles market, while others combine Ventura County with the San Fernando Valley] While modest in comparison to the impetus seen in the late-1990s, gains and improvements during 2003, combined with a general lack of new office construction tightened the office market significantly in Southern California, dropping the regional vacancy rate to within a range of 13.5± to 13.7± percent by year-end. And despite ongoing economic challenges and geopolitical situations with the State, most office markets within the Los Angeles Basin saw improvement. According to Cushman & Wakefield, the Los Angeles Office Market, which primarily includes Los Angeles County, but also portions of eastern Ventura County-saw vacancy decline from 17.6± percent at year-end 2002, to 17.4± percent at year-end 2003. The Suburban portion of this market experienced the greatest improvement, with vacancy dropping from 18.7 percent to 17.0 percent, mostly due to leasing velocity, a number of large transactions, and the absorption of sublease space, particularly in the Los Angeles West market. The Los Angeles North submarket ended the year at 13.7 percent.

VALUATION SERVICES 24 ,\ D V I S O R Y G R O U P •CUSHMAN& WAKEFIELD�

B-42 REGIONAL ANALYSIS

Los Angeles Office Market Statistics

Overall Direct Total Wtd. Avg. Market/ No. of Inventory Vacancy Vacancy Leasing Under l::onstructio1 Net Class A Submarket Bldgs (Sq/Ft) Rate Rate Activity Constructio1Co mpletiom Absorption Rent/SF

Simi Valley 6 191 ,607 1.6% 1.6% 6,851 0 0 60 .. Thousand Oaks 20 1,161.838 15.8% 14.9% 255.189 0 0 (7,368) $ 27.00 Los Angeles North 361 26,899,778 13.7% 12.9% 2,366,472 179,342 179,336 148,215 $ 25.20 Non·CBD Total 1,346 153,285,401 17.0% 15.0% 11,819,524 704,339 1,114,336 190,429 $ 28.31 Los Angeles Total 1,410 183,446,813 17.4% 15.1% 13,463,718 704,339 1, 1 14,336 314,327 $ 27.84 I Source: Cushman & Wakefield, Inc. I

According to REIS Inc., the Ventura County office market experienced a vacancy decline during 2003, declining from a 2002 rate of 12.3 percent, to a year-end rate of 10.8 percent. This improvement was seen in virtually all Ventura County submarket areas, the exception being Thousand Oaks, whose vacancy rate increased from 12.5 percent in 2002, to 13.2 percent in 2003. CBRE-whose survey of Ventura County is similar in size of inventory to REIS-reports that Ventura County witnessed positive net absorption of 11,524± square feet during 2003, with an average asking rent of $19.08 per square foot, full service gross.

Ventura County Office Market Overview & Trends Cushman & Wakefield, Inc

Metro Mark et Submarket Ventura County Thous Oaks/Camarillo Vent1.ua County Office Market

Inventory 7,067,000 Units 4, 736,000 Units $21.40 -----·------�, 14 0% Properties 137 Properties 96 Properties $21.20 ------+ 12.0% Unit % Unit % Rate Rate Jl Jl 10.{)% [ $20.80 _ - : t Asking Rent ..";' $20.6{) -- ! 1999 20.19 21.02 1, "' 2000 20.51 1.6% 21.76 3.5% � $20.40 2001 21.23 3.5% 22.20 2.0% -1.0% !i $20 20 2002 21.02 22.03 -0.7% · 4.0% >; 2003 21.31 1.4% 22.51 2.2% =- - -;-0% 2 Vacancy Rate a: :�: :: 1-� - � 1999 10.8% 7. 1% $19 60 -- I-j-�-- - 0.0% 2000 10.3% -4.6% 6.4% -10.3% 1999 2000 2001 2002 2003 2001 11.7% 13.6% 10.1% 58.9% 5. 1% - 2002 12.3% 12.1% 20.1% 1111111111111 Asking Renl �Vacancy Rale \' ------2003 10.8% -12.2% 12.0% -1.4% __

Source: REIS Inc Note REIS does not survey Simi Valley Office Market due to 1ls smaller size. We have combined Thou Oaks & Camarillo for analysis

Colliers Seeley, who classifies the Ventura County office market with the San Fernando Valley in Los Angeles County, reports that net absorption was moderately strong in the SFVNentura market during 2003 {389,300± square feet). This pace of absorption was second only to Orange County {729,600± square feet). Consequently, as of year-end 2003, office vacancy rates for the Los Angeles Basin are lowest in the SFVNentura County office market (12.4% as compared with 16.7 percent at year-end 2002). Long-term, Colliers expects the SFVNentura County market to maintain its historical pace of net absorption, ranging from 900,000± to 1.3± million square feet per year. Most of the space in the SFVNentura office market is relatively new. According to Colliers, about 66.0± percent of space has been built within the past 20 years. It is predominantly a low­ rise market, with 60.0± percent of all space in low-rise buildings.

VALUATION SERVICES 25 ADVISORY GROUP .ACUSHMAN& \\fJWAKE FH:1.0,

B-43 REGIONAL ANALYSIS

Users attracted to the market have included tenants fo llowing population and housing growth, such as banks, health care providers, and real estate firms, but also insurance and financial activities sector employers. According to Colliers, in Ventura County, firms are predominantly from the professional, financial, high-tech, and insurance services sectors. Needless to say, based on the data, the Ventura market managed to avoid the scourge of negative absorption that plagued many of the nation's office markets in 2001 and 2002. Affordability, quality of life, and stable employment growth have been key assets. New office construction in the Ventura region has been fairly moderate and paced, allowing for continued improvement in vacancy.

Industrial Market Trends The Los Angeles industrial market is generally illustrative of the economic recovery now underway from the recession of 2001 and slow economic growth of 2002/2003. In comparison to the office market, which only recently has begun to show signs of improvement, the industrial market has shown a more rapid pace of recovery. Many suburban areas of the Los Angeles Basin have become significant distribution and warehousing hubs (the Inland Empire, in particular) . This outgrowth from the Los Angeles County market has been due to a sophisticated transportation network, vast amounts of available land for future development (primarily in Riverside and San Bernardino Counties), and new buildings at lower asking rents than the balance of Southern California. Demand for industrial space in the region has been described as constant; the result showing positive-to-strong net absorption trends over the past several years. Despite this absorption, new construction in several markets has outpaced demand, with industrial vacancy rates increasing in several areas during the past th ree to four years (namely the Inland Empire). Other parts of the region, on the other hand, have seen declining vacancy rates. In fact, according to Cushman & Wakefield Research Services, the Los Angeles County industrial markets posted the lowest vacancy rates in the country during 2003. This market area includes all of Los Angeles County, as well as a majority of Ventura County. At the end of fourth quarter, the overall vacancy rate in the Los Angles industrial market dropped to an impressive 3.1 percent, down from a respectable 5.1 percent at year-end 2002. Solid leasing activity across most markets, coupled with rapid sales activity, drove the market despite an uncertain economy. At the same time, positive net absorption improved dramatically.

Los Angeles Industrial Market Statistics

Overall Total Direct Wtd Avg Net Rent/Sf Market/ No. of Inventory Vacancy Leasing Under �onstructio, Net Submarket Bid gs (Sq/Ft) Rate Activity onstructio ..ompletiorn Absorption HT Mfg WID OS Simi Va lley/Moorpark 270 11,661,015 7.2% 9,710 0 71,767 (166,565) $ 0.76 $ 0.62 $ 0.72 ·- Thousand Oaks 188 8,209,793 5.6% 26,447 0 21,302 (93,164) $ 0.83 -· $ 0.61 -- Westlake Village 64 4.165,618 2.7% 0 0 0 (112,000) $ 0.88 ...... Camarillo 257 11.183,380 1.6% 89.644 0 106,500 33,072 $ 0.72 $ 0.55 $ 0.64 $ 0.68 Oxnard 354 13,213,1 13 2.0% 58,886 0 87,211 (66,304 $ 0.58 $ 0.59 $ 0.51 -- Ventura 336 9,242,483 3.7% 171,663 0 50,098 (198,980) - $ 0.49 $ 0.52 -· Agoura Hills 15 963,744 0.0% -- 0 0 0 -· .. -· -- Ventura County • 1,484 58,639,146 3.7% 356,350 0 336,878 (603,941) $ 0.75 $ 0.56 $ 0.60 $ 0.68 Los Angeles North 5.609 212.344.805 2.8% 1,706,114 50,000 493,116 (377,395) $ 071 $ 0 60 $ 0.59 $ 071 Los Angeles Total 20,950 1,025,451 ,594 3.1% 18,718,714 5,309,860 4,074,458 2,804,564 $ 0.50 $ 0.51 $ 0.53 $ 0.50

Source: Cushman & Wakefield, Inc * Ventura County subtotal calculated based on 7 submarkets included.

VALUATION SERVICES 26 ADVISORY CROUP &CUSHMAN& \tf.lWAK EFIELD-.

B-44 REGIONAL ANALYSIS

As shown from the chart, many areas in Ventura County experienced negative net absorption during 2003, opposite the trend of the entire region. That being said, the Ventura portion of the survey ended the year with an overall vacancy rate of only 3.7 percent. The highest vacancy rate is shown to be in the Simi Valley/Moorpark submarket (7.2%). Note that all of the Ventura County submarkets are part of the Los Angeles North survey area, which also includes San Fernando Valley, Burbank, North Hollywood, and Santa ClaritaNalencia/Newhall. Despite negative net absorption in the Ventura market area for the year, a stabilizing trend has been noted, with very few changes in the fourth quarter as compared to trends throughout the year. Looking forward , recent trends have left signs of a possible susta ined recovery for the region. Leasing activity, for example, has been improving, with a number of large tenants returning to the market. At the Pacific Prime Industrial Center in Ventura, for example, Federal Express leased 144,000± square feet of The Gap lnc.'s former 240,600±-square foot Western Region distribution center. Pacific Prime Properties purchased the building during fourth quarter 2002 for $10.9 million and spent several months subdividing the property into multi-tenant parcels. Another large fourth quarter Ventura County deal involved a major sublease transaction in which Amgen, the largest biotech company in the world, moved into the former Intel space at 2300 Corporate Center Drive. The 88,000±-square foot high-tech/flex building is conveniently located close to Amgen's headquarters at the Conejo Spectrum. According to the CBRE survey, Ventura County's industrial market includes some 57,479, 141± square feet, posting a year-end vacancy rate of 6.5 percent. This is clearly differentiated from C&W's year-end vacancy rate calculation of approximately 3.7 percent. CBRE also notes positive net absorption of 4 7, 140± square feet for the year. Colliers Seeley combines the Ventura County industrial market with San Fernando Valley. Based upon their survey, the SFVNentura region contains 164,486, 100± square feet, with a year-end direct vacancy of 3.9 percent, and an overall vacancy rate of 4.4 percent. Colliers cites positive net absorption of 681 ,200± square feet for the SFVNentura industrial market during 2003. Regardless of the source, it is apparent that the Los Angeles industrial market has shown an improving trend over the past quarter, if not the past year. Overall, the Los Angeles North industrial market appears to have weathered the storm, with many looking sanguinely ahead to 2004 and beyond.

Retail Market Overview Retail trends in the Ventura County region have been influenced by the stable population and employment growth, and related residential development. As rooftops have sprouted around the region, so too have the retailers followed. Buoyed by ever-increasing population and job expansion, retail development opportunities and tenant interest have remained fairly steady. That being said, it is clear that this reg ion has been hurt by a softer market over the past year as vacancy rates have inched upward, coupled with a higher rate of new completions from 2000 to 2003. During the 1990s, retail deliveries in Ventura County averaged about 468,000± square feet per year. Over the past three years, this pace accelerated to approximately 613,000± square feet per annum.

VALUATION SERVICES 27 ADVISORY GROUP " &CUSHMAN& \VJWAK EFIEl.D,

B-45 REGIONAL ANALYSIS

Retail Market Overview Greater Los Angeles Basin Cushman & Wakefield, Inc, Greater Ventura Los Angeles Orange Riverside- Los Angeles County County County San Bemnardino Basin

MarketInvento ry GLA < 400,000 SF !2.AX; iTr 7?)"1 ! ,250 41 ,B31,58i 46.22,,.1 3Gt� 173,255 383 GLA 400,000-799,999 3.674,610 19,880,848 8,399,007 8,488,893 40.443.358 GLA 800,000-999,999 800,000 8.796,860 3.439,925 1,770,805 14,807,590 GLA > 1,000,000 2,345,080 19,667,946 12.022,888 10,627,081 44,662,995 \ Total GLA \�,2(;1 86! 121 .0F. 400,000 SF 6,319 690 ,lf:!,845,654 23,86"1.820 2(';_ 886,779 g9,913,943

Construction Activity Total GLA Built 1990-1999 4,680,000 24,271,000 14,341,000 25, 1 87,000 68,479,000 Total GLA Built 2000-2003 2.452.000 9,712,000 6.1 88,000 7,023,000 25,375,000 Avg GLA Per Year 1990-1999 46fj (100 '.2 427,100 1,434. iOO '.i.j1H,i'O(J 6,(�47.9()() Avg GLA Per Year 2000-2003 613.000 2.428,DOQ 1,547.000 1,755,750 G,343,750 Planned/Proposed GLA 1,277,621 2,023.098 425,000 2,351,461 6,077,180 New Construction GLA 12,000 699,000 1,335,000 1,756,000 3,802,000 Expanding GLA 845,932 6,512,677 388,000 1,636,398 9,383,007 Renovating GlA 1 97, 191 3,276,41 7 2.404,350 952,108 6,830,066 Expanding & Renovating 0 145,000 1.476,120 870,805 2,491,925 Total 2 3'.�2 1· ,14 ·12.656.197 C,0)8.470 7.566,Ti'? 28,584, i ?8

Demographic Statistics 2003 Population 792,260 9,911,51 9 2,984,743 3,493,937 17,1 82,459 2003 Households 255.400 3,240,855 969,033 1,096,714 5,562,002 Average Household Income 83,263 66,128 84,984 59,614 68,916 Median Household Income 65,726 46,105 64,590 46,407 GLA Per Capita 24.29 12.21 22 01 i0.23 15.90 GLA Per Household: 75.36 37 35 67,79 61 .25 49 .11 GLA Per Capita > 400,000 f 61 ,, 88 7 '19 5.8B 5 3·1 2003 Retail Sales (ODO) 10, 157,594 100.073,611 44, 1 1 7,225 37,776,564 192, 124,994 2003 Retail Sales Per Household 39,771 3D.B79 45.527 2.4.445 34,542

5-Year Growth Projections CAGR 2003-08 - Population 'l 5.1�< I 22'oo 1.53% 2.16�< 148% CAGR 2003-08 - Households 1 49% G.98%, 1 14% 1.73"% 1.19% CAGR 2003-08 - Avg HH Income 2.JG% 1 fl6'1, 212% £_14% 1.9!B�, CAGR 2003-08 - Median HH Income 1 �n�,,\ '1.t�h� i.80% 1.85�{ CAGR 2003-08 - Retail Sales 4.99% 3.80S'· 5_19:X 4.65""([, 4.36% 1 CAGR 2003-08 • Retail Sales Per HH 345% 2 78'/c 4 00% 2.f'.7S, 3 130!,;.

Source National Research Bureau, Clantas Inc

By comparison to other components of the CMSA, Ventura County has a higher retail GLA per capita (24.3± square feet) than any other County/PMSA, and shows a higher overall vacancy rate (6.0%) than the balance of the region. As noted, partof this trend has been attributed to a higher rate of construction deliveries over the past three years, during which the regional economy has been hampered by slower job growth. Nevertheless, the comparison chart above also notes that Ventura County is expected to be among the fastest growing portions of the region over the next five years, with population and household growth being similar to the CMSA, as a whole, but retail sales and household income figures growing at a faster rate than the CMSA norm. It is also noted that the GLA per capita figures for Ventura County already include GLA proposed at the Simi Valley Town Center, an 800,000± square foot project that is not expected to be completed until late 2005. Excluding this GLA, the per capita figure is 23.3± square feet, which is more in-line with statistics for Orange County. Moreover, the calculation includes The Village at Newbury Park, which is reported at 750,000± square feet, but which is not fully built­ out to this level at this time.

VALUATION SERVICES 28 ADVISORY GROUP •CUSHMAN& WAKEFIELO�

B-46 REGIONAL ANALYSIS

Retail Market Overview &Trends Cushman & Wakefield, Inc. Submarket Metro Market Metro Market Metro Market Metro Market Market Area Simi Valley I Ventura Los Angeles Orange Riverside Los Angeles Moorpark County County County San Bernardino CMSA

Inventory 2,225,000 Sq/Ft 10,819,000 Sq/Ft 58,162,000 Sq/Ft 38,794,000 Sq/Ft 39,334,000 Sq/Ft 147,109,000 Sq/Ft

Unit % Unit % Unit % Unit % Unit % Unit % Rate A Rate A Rate A Rate A Rate A Rate A

Asking Rent Survey Mean 1999 $ 17.85 -- $ 20.55 -- $ 19.97 -- $ 21 .52 -- $ 15.21 -- $ 19.31 -- 2000 $ 18.49 3.6% $ 21.15 2.9% $ 20.87 4.5% $ 22.67 5.3% $ 15.78 3.7% $ 20.12 4.2% 2001 $ 18.13 -1.9% $ 21.68 2.5% 5 21.46 2.8% $ 23.42 3.3% $ 16.31 3.4% $ 20.72 3.0% 2002 $ 17.79 -1.9% $ 22.14 2.1% $ 22.13 3.1% $ 24.29 3.7% $ 16.77 2.8% $ 21.33 3.0% 2003 $ 18.82 5.8% $ 22.96 3.7% $ 23.25 5.1% $ 25.28 4.1% $ 17.22 2.7% $ 22.18 4.0%

Net Absorption Exel Ventura 1999 Nia Nia Nia Nia 2,357,000 4.2% 291,000 0.8% 1,017.000 2.8% 3,665,000 2.8% 2000 Nia Nia Nia Nia 903,000 1.6% 863,000 2.3% 850.000 23% 2,616,000 2.0% 2001 Nia Nia Nia Nia 242,000 0.4% 146,000 0.4% 1,560,000 4.1% 1,948,000 1.5% 2002 Nia Nia Nia Nia 820.000 1.4% 504.000 1.3% 871,000 2.2% 2,19 5,000 1.6% 2003 Nia Nia Nia Nia 288.000 0.5% 67.000 0.2% 317,000 0.8% 672,000 0.5%

Average Nia Nia Nia Nia 922,000 1.6% 374,200 1.0% 923,000 2.4% 2,219,200 1.7%

Vacancy Rate 1999 7.7% -- 5.2% -- 4.3% -- 3.9% -- 7.9% -- 5.2% - 2000 8.4% 9.1% 4.4% -15.4% 3.7% -14.0% 3.5% -10.3% 6.6% -16.5% 4.5% -13.9% 2001 6.7% -20.2% 4.6% 4 5% 4.3% 16.2% 4.2% 20.0% 6.0% ·9.1% 4.8% 6.6°/o 2002 6.8% 1.5% 5.6% 21,7% 4.2% -2.3% 4.0% -4.8% 5.2% -13.3% 4.5% -4.7% 2003 5.5% -19.1% 6.0% 7.1% 4.1% -2.4% 4.3% 7.5% 5.6% 7.7% 4.7% J.4°/o

Source: RE IS Inc * Calculated nel absorption squarefeel as percentage of total inventory square feet.

The Ventura County retail market is an "expansion" market of REIS Inc. As such, not all data or statistical measurements are available at this writing. REIS does report all statistics for Los Angeles, Orange, Riverside, and San Bernardino Counties, as shown in the chart. [Note: the REIS data includes neighborhood and community shopping centers only, excluding strip centers, freestanding units, and regional malls.] Regardless, it is fairly clear from the data that the retail market softened somewhat between 2000 and 2002, as net absorption moderated (but remained positive) and vacancy edged upward. Outside of Ventura County, each of the other metro areas saw vacancy decline again in 2002, with Los Angeles County declining again in 2003; Ventura, Orange, and Riverside-San Bernardino all saw slight upticks in vacancy during 2003.

Ventura County Retail Market Overview & Trends Cushman & Wakefield, Inc. Metro Market Submarket Ventura County Simi Valley/Moorpark Ventura County Reta ii Market Inventory 10,819,000 Sq/Ft 2,225,000 Sq/Ft $23.50 7 0% Properties 88 Properties 19 Properties $23.00 ------j 60% Unit % Unit % $22.50 Rate 11 Rate 11 5.0% � ... $22.00 Asking Rent i 4.0% � 1999 20.55 17.85 a: a: >, 2000 21.15 2.9% 18.49 3.6% ' 3.0% � 2001 21,68 2.5% 18.13 -1 .9% $20.50 2002 22.14 2.1% 17.79 -1.9% a:l 2.0% > 2003 22.96 37% 18.82 5.8% $20 00 -;- Vacancy Rate $19.50 1999 5.2% 7.7% $19.00 0.0% 2000 4.4% -15.4%, B.4% 9.1% 1999 2000 2001 2002 2003 2001 4.6% 4.5% 6.7% �20.2% 2002 5.6% 21.7% 68% 1.5% 2003 6.0% 7.1% 5.5% -19.1%

Source RE:ISInc

VALUATION SERVICES ADVISORY GROUP 29 •CUSHMAN& WAKEFl£J..D.

B-47 REGIONAL ANALYSIS

The subject's submarket area (Simi Valley/Moorpark) has experienced better performance in recent years as compared to the balance of Ventura County. As noted in the previous chart, vacancy has generally declined in the subject's submarket since 2000, ending 2003 at 5.5 percent. This is a fairly small submarket, comprising 2.23± million square feet, or 20.6 percent of the Ventura County retail market. Although new delivery totals have been moderating/decreasing, the subject's market area will see a significant increase in retail GLA upon completion of the Simi Valley Town Center project. This mixed-use regional retail center is slated for completion in late-2005. Despite this increase, however, only a few developers are taking risks on speculative projects . In the current market, most new construction will require strong pre-leasing prior to commencement. Looking fo rward, demand for retail space in Ventura County should remain stable, particularly with continued population and employment growth. We would expect vacancy levels to remain fairly stable in 2004 and 2005, with a potential increase in 2006 following completion of Simi Valley Town Center, among other proj ects. Still, the shakeout among several national retail chains may pose a challenge to a number of local shopping centers. An improving economy, coupled with the continually changing retail climate, however, should produce enough new demand to keep absorption positive in 2004. All told, the basic underlying market dynamics concerning employment and population growth in the Ventura County region will continue to support additional retail requirements into the foreseeable future, both on the development and leasing side of transactions. A major demand driver will continue to be housing growth, coinciding with population gains. This will be an important factor drawing both new retail development and tenants from the more established coastal communities. The limited availability of developable land will continue to force developers to become more creative. In turn, mixed-use development concepts have become more common in many cities throughout the Greater Los Angeles Basin, as local governments seek to avoid large housing complexes that fail to accommodate the needs of new residents. To this end, the City of Simi Valley and Forest City Enterprises are moving ahead on a new mixed-use/retail/residential project along the 118 Freeway that will feature an 800,000± square foot, open-air regional mall component, 500± multi-family units, and an adjacent big-box/power retail center. The "village" or "main street" type development will be anchored by Macy's and Robinsons-May. Similarly, Forest City is constructing new $200± million open-air mixed-use center in Rancho Cucamonga. The project, known as Victoria Gardens, will feature a 1.2± million square foot reg ional center designed as a "main street" shopping mall, anchored by three department stores (Macy's, Robinsons-May, and JCPenney). The mixed-use setting will also include a 500-seat performing arts center, banquet/meeting facility, and library, with 20-acre apartment site to help with the supply/demand imbalance in the multi-family housing sector. An adjacent power center site will reportedly be anchored by the region's first Sears Grand store. National retailer Kohl's has been another recent example of new retail players entering the market. This discount retailer is aggressively entering the Southern California marketplace, with 25 to 30 stores opening simultaneously in March 2003, and additional stores having opened since.

VALUATION SERVICES 30 ADVISORY GROUP AcusHMAN& i.V1WAKE F1ELD*

B-48 REGIONAL ANALYSIS

Early successes at some of the region's mixed-use projects and retail developments outside of the coastal communities of Los Angeles and Orange Counties, as well as the commitment of Macy's and Robinsons-May at the planned Simi Valley Town Center, are being cited as indicators that retailers are highly interested in this marketplace, particularly in the communities located closest to the Los Angeles Basin-Upland, Rancho Cucamonga, Ontario, and Fontana in San Bernardino County, San Fernando Valley and Santa Clarita (Los Angeles County), and Simi Valley, Moorpark, and Thousand Oaks (Ventura County).

Apartment Market Overview Residential development has, for years, been key in the growth of Southern California. This development, however, has been dominated by the single-family sector-the Inland Counties have been virtually the only Southern California market able to provide relatively affordable single-family homes, with apartment development taking a distant second place. And despite the lack of a strong economic resurgence over the past year, Greater Los Angeles' relentless housing shortage, coupled with historically low interest rates, have continued to fuel a booming single-family residential market. Through third quarter 2003, the number of home sales in Ventura County was up 9.0 percent over year-ago levels, with the median home price being up nearly 25.0 percent. As a result, home affordability in Ventura County declined to about 22.0 percent as compared to 30.0 percent the year prior. A scant amount of homes available for purchase, along ever-declining affordability, has enabled local apartment properties to post tighter vacancy rates, though rent growth has moderated over the past year.

Southern California Home Price Trends (In Thousands)

Median Median Price Price Percent County Sep-02 Sep-03 Change

Los Angeles $ 269 $ 336 24.9% Ventura $ 333 $ 415 24.6% Riverside $ 215 $ 261 21.4% San Bernardino $ 168 $ 199 18.5% Orange $ 368 $ 431 17.1 % San Diego $ 346 $ 390 12.7%

According to Hendricks and Partners, increased leasing activity has highlighted the L.A. NorthNentura County apartment market over the past year, with 736 units being absorbed during the third quarter, more than double the absorption of 350 units in the third quarter of 2002. New construction added 280 units to the market, with 208 in Valencia, of the Santa Clarita submarket, and 72 in Pasadena, of the Tri-Cities submarket. Of the nearly 4,700 units underway or planned for northern Los Angeles County, about 1,400 are slated for Pasadena, followed by 800 in each of North Hollywood and Valencia; 600 each in Glendale and Woodland hills; 340 in Agoura Hills; 200 in Sherman Oaks; and just over 100 in each of Encino and Burbank. REIS lnc.'s Fourth Quarter/Year-End 2003 data suggests that, among the CMSA counties of the Los Angeles Basin, Ventura County has the lowest apartment vacancy rate (2.3% at year end), and second highest average rents ($1 ,240 per month per unit).

VALUATION SERVICES 31 ADVISORY CROUP \UfAcu sHMAN& WAKEFIELD.

B-49 REGIONAL ANALYSIS

Apartment Market Overview & Trends Cushman & Wakefield, Inc.

Sub market Metro Market Metro Market Metro Market Metro Market Market Area Simi Valley / Ventura Los Angeles Orange Riverside - Los Angeles Moorpark County County County San Bernardino CMSA

Inventory 3,662 Units 19 ,430 Units 740,1 16 Units 194,495 Units 119,457 Units 1,073,498 Units Units/Capita 0.024 0.074 0.065 0.032 0.062 Units/Household 0.075 0.226 0.198 0.103 0.189

Unit % Unit % Unit % Unit % Unit % Unit % Rate lJ. Rate lJ. Rate lJ. Rate lJ. Rate lJ. Rate lJ.

Asking Rent SurveyMean 1999 $ 981 00 -- $ 956.00 -- $ 894.00 -- $ 1.017.00 -- $ 661.00 -- $ 882.00 - 2000 $1,134.00 15.6% $ 1,091.00 14.1% $ 1,000.00 11.9% $ 1, 122.00 10.3°/o $ 709.00 7.3% $ 980.50 11.2% 2001 $1,162.00 2.5% $1,145.00 4.9% $ 1.069.00 6.9% $1,177.00 4.9% $ 773.00 9.0% $ 1,041.00 6.2% 2002 $ 1.237.00 6.5% $ 1.208.00 5.5% $ 1.110.00 3.8% $ 1.217.00 3A% $ 821.00 6.2% $ 1,089.00 4.6% 2003 $ 1,323.00 7.0% $ 1.240.00 2.6% $ 1.161.00 4.6% $ 1,246.00 2.4% $ 870.00 6.0% $ 1,129.25 3.7%

Net Absorption Exel Venlura 1999 Nia Nia Nia Nia 7.879 1.1% 2,127 1.1% 1.029 0.9% 11,Q35 1.1% 2000 Nia Nia Nia Nia 8,747 1.2% 2,755 1.5% 2,156 1.9% 13,658 1.3% 2001 Nia Nia Nia Nia -4,384 -0.6% -1 ,089 -0.6% 1,143 1.0% -4,330 -0.4% 2002 Nia Nia Nia Nia 1.490 0.2% 2.857 1.5% 590 0.5% 4,937 0.5% 2003 Nia Nia Nia Nia 1.517 0.2% 1,476 0.8% 1.507 1.3% 4,500 0.4%

Average Nia Nia Nia Nia 3,050 0.4% 1,625 0.9% 1.285 1.1% 5,960 0.6%

Vacancy Rate 1999 1.8% -- 2.1% -- 2.9% 2.8% -- 4.3% -- 3.0% -- 2000 2.6% 44.4% 2.1% 0.0% 2.1% -27.6% 2.0% -28.6% 3.3% -23.3% 2.2% -27.4% 2001 1.7% -34.6% 2.4% 14.3% 3.1% 47.6% 3.9% 95.0% 3.3% 0.0% 3.3% 50.3% 2002 1.7% 0.0% 2.5% 4.2% 3.3% 6.5% 4,1% 5.1% 3.8% 15.2% 3.5% 6.6% 2003 2.6% 52.9% 2.3% -8.0% 3.6% 9.1% 4.2% 2.4% 4.3% 13.2% 3.7% 7.3%

Source· REIS Inc * Calcvl

Some counties and submarkets in the region have seen a slight increase in vacancy over the past year or so. Much of this increase has been attributed to the luxury market, which saw some weakness due to renters jumping into homeownership. In fact, historically low interest rates have been cited as steering buyers to single-family home purchases in record numbers over the past several years. This has, in turn, reduced the number of potential apartment dwellers. This trend, however, is expected to soften as home prices in the region continue to increase, and the number of young professionals expands within the market-residents who are typically viewed as renters. Future potential increases in interest rates will also contribute.

Ventura County Apartment Market Overview & Trends Cushman & Wakefield, Inc.

Metro Market Sub market Ventura County Simi Valley/Moorpark Ventura County Apartment Market

Inventory 19,430 Units 3,662 Units $1.400 00 ------3.0% Properties 148 Properties 18 Properties $1 200.00 Unit % Unit % Rate b. Rate b. $1,000.00 2.0o/o l Asking Rent �i $800.00 1999 956.00 981 .00 1.5% 2000 1,091 .00 14.1% 1,134.00 15.6% i $600.00 l 2001 1,145.00 4.9%- 1.162.00 2.5% I 1.0% 2002 1,208.00 5.5% 1,237.00 6.5% � 2003 1.240.00 2.6% 1.323.00 7.0% 0.5% Vacancy Rate 1999 2.1% 1.8% $- 2000 2.1% 00% 2.6% 44.4% 1999 2000 2001 2002 2003 2001 2.4% 14.3% 1.7% -34.6% 2002 2.5% 4.2% 1.7% 0.0% ski Rent �Vacan Rate i �� �� _ �Y_ 2003 2.3% -8.0% 2.6% 52.9%

Source: REIS Inc

Despite the slight increase in vacancy, the current rate, which hovers around 4.0 percent across the Los Angeles Basin, is still considered to be below or near equilibrium.

VALUATION SERVICES 32 ADVISORY GROUP •CUSHMAN& WAKEFl£U>.

B-50 REGIONAL ANALYSIS

The other statistic of note is the number of apartment units on a per capita basis, calculated in the previous chart. For the CMSA, an average of 0.062 units per capita is calculated. At 0.024, then, Ventura County is clearly below the benchmark set for the region. Although deliveries are rising, relatively few apartments have been built in the Ventura County region during the past decade because the single-family home market has been so strong. A number of new retail developments are beginning to take shape in this market area, however, that could provide additional impetus to the multi-family market. In Simi Valley, officials have recently approved plans fo r the city's first mall, a $300± million project that could include up to 840,000± square feet of retail space, 445,000± square feet of other commercial space, and 500 apartments. In North Hollywood, a $180± million mixed-use project is beginning construction­ NoHo Commons will include over 700± apartments, and 80,000± square feet of retail. In Agoura Hills of the Western Valley submarket, a developer has proposed a 350,000± square foot upscale specialty retail center, while in Thousand Oaks, The Oaks mall has redevelopment plans to bring the center into more of an upscale position (adding Nordstrom), with peripheral development that could include multi-family residential. Overall, the multi-family housing market in Southern California is viewed as being one of the strongest investment opportunities due to supply and demand fundamentals. With demand outpacing supply by a wide margin, apartment housing has become one of the most popular investments in the Los Angeles Basin. Contributing to this segment's strength has been the lack of affordable single-family housing-particularly in Los Angeles and Orange Counties. Even with historically low interest rates, the price of a home is still beyond the reach of many residents of the Southern California market. While this degree of price disparity has not reached the Riverside-San Bernardino market to such levels, it is clear that rising home prices and moderate apartment development bode well for the multi-family market in the Inland Empire. And although home prices in Ventura are high, by comparison, this market appears under-served in terms of multi-family units. With Southern Califo rn ia expected to post some of the strongest population growth in the state, the gap between supply and demand will only widen before any major improvement in the current imbalance will occur.

Real Estate Market Summary/Conclusion Southern California real estate markets have clearly shown strong growth, both in supply and demand, over the past decade, with forecasts expecting similar trends into the fo reseeable future. Development has been spawned by strong population and employment growth, coupled with the locational advantages cited. Affordable land has been a benefit and market driver fo r some of the region's surrounding communities, particularly in the Inland Empire. This portion of the region is viewed as a strong growth market. Not even the current lingering economic slump has done much to dampen rates of employment and population growth here. This, in turn, has resulted in similarly strong performance of Riverside-San Bernardino's real estate markets. All expectations, barring the unforeseen, are for continued above-average growth in this section of the region. For Ventura County, where population and employment growth has been more moderate, but clearly stable, supply and demand for real estate has also been steady. The real estate market, led by the single-family sector, has grown fairly significantly over the past decade. The attributes of quality housing, employment opportunity, a good quality of life, transportation infrastructures, and locational advantages are expected to continue as major factors in attracting new growth to this already expanding region.

VALUATION SERVICES 33 ADV ISORY GROUP AcusHMAN& \WWAKEFIE�

B-51 REGIONAL ANALYSIS

The opening of new residential developments have drawn additional population growth, while lower affordability in the single-family market has been a benefit to the apartment market. Citing population growth and income, retail development has also been fairly active in the county. Real estate market forecasts fo r 2004 are anticipated to be similar to 2003 results, with continued development in the region's growing residential, office, industrial and retail markets, all of which are being spurred by continued stable population and employment growth, coupled with comparatively higher costs of living and doing business in the coastal communities of the Los Angeles Basin. Today, Southern California's housing prices are dictating that many younger technicians, professionals, and executives must migrate to areas such as the Inland Empire or North Los Angeles in order to afford upscale housing. This trend is occurring, with these new residents bringing their skills with them. Coinciding this trend, demand for a more broad range of retail product is in evidence. Among the amenities generally available in prosperous communities is a full range of specialty, boutique and sophisticated retailers and restaurants. This is an arena in which the Inland Empire and, to some extent Ventura County, have been lacking, as many operations of this type have chosen to serve the reg ion from outlets in Southern California's coastal communities. Recent development, though, indicates that the Ventura County and Riverside-San Bernardino retail markets are changing to fulfill the needs of residents. As noted, numerous national retail outlet chains are entering this region. With continued projections for population and employment growth, demand fo r retail real estate is expected to remain positive into the foreseeable future. The circular nature of a growing job base attracting people, and a growing population spurring job creation, manifests itself discernibly in the Southern California market for single-family homes. While the market is largely in balance at this writing, the pace of household formations is beginning to surpass that of permit issuance, indicating that demand for homes is outpacing the supply. Another indication of under-supply can be seen in the substantial increases seen in the median price of single-family homes over the past several years; despite economic uncertainty. With supply expected to fall short of demand, at least over the short-run, home prices are expected to continue rising. This trend will undoubtedly influence demand for multi­ family proj ects in the region as well. On balance, the outlook for the subject region's real estate markets is positive. Growth projections in both population and employment suggest a continued demand for all segments of the economy. Relatively low costs of doing business and land prices, the climate, and favorable business conditions are contributing factors to its growth . Constraining leap-frog development into undeveloped and rural areas appears to be a land planning and environmental trend that will ultimately place limits on so-called urban sprawl. This, in turn, is placing more economic pressure on land development in the incorporated areas where general plans for urban-type development and higher densities are already in-place (such as the City of Simi Valley). This trend may mean more sustained real estate development in urbanizing areas as opposed to the more volatile ups and downs of the economic cycle. In the end, the short- and long-term outlook for the Ventura County real estate market is for relative stability, with stable population and employment growth projections into the foreseeable future. Long-term, the region should see increasing real estate values.

VALUATION SERVICES 34 ADVISORY Ci RO UP .ACUSHMAN & � WA KEFIEI.D.

B-52 REGIONAL ANALYSIS

Summary/Conclusion Each of the market forces discussed works to influence the economic growth and stability of the area, with a resultant effect on property values. For the past decade, it is clear that the subject region has been the recipient of fairly strong growth, both in terms of population and employment. This growth is expected to continue into the foreseeable future, albeit at a slightly more moderate pace than that experienced in recent years. Ventura County's generally level terrain (in the Valley areas), minimal physical boundaries {other than surrounding mountain areas, urban areas of the Los Angeles Basin to the east, and Pacific Ocean to the south/southwest), the area's climate, and adequate transportation infrastructure appear capable of attracting both population growth and a diverse industry base into the foreseeable future. As land becomes increasingly unavailable in Los Angeles and Orange Counties, surrounding counties appear fairly well positioned to benefit from an economy that continues to move primarily to the east {into the Riverside-San Bernardino PMSA), but also to the north (northern portions of Los Angeles County and Ventura County), both along the interstate highways and rail lines serving these portions of the region. All necessary governmental and social services, such as utilities, education, and cultural resources are available and appear in sufficient form and supply to enable continued growth within the region. The real estate market, led by the single-family sector, has grown significantly over the past decade. The attributes of employment opportunity, generally affordable housing, and a good quality of life are expected to continue as major factors in attracting new growth to this already expanding portion of the region. Real estate market forecasts for 2004 are anticipated to be similar to 2003 results, with an improved outlook on the horizon and continued development in the reg ion's growing residential, office, industrial, and retail markets, all of which are being spurred by continued population growth and desirable quality of life issues. Over the short-run, economic growth may continue to remain somewhat slower when compared with recent historical trends, pulled down by national and statewide events, as well as the normal ebb and flow of the business cycle. With the near-term outlook muddied somewhat by a national economic slow-down, many market participants are looking for slower growth in the local economy during the early to middle part of 2004. Overall, the outlook for Ventura is generally positive. Continued growth projections in both population and employment suggest a continued demand for all segments of the economy. Relatively inexpensive land prices, a moderate climate, and generally favorable business conditions should be contributing factors to this continued growth. In the end, the short- and long-term outlook for Ventura and its surrounding region is for relative stability, with moderate-to-strong population and employment growth projections into the foreseeable future. Following some short-term slowing, we are relatively optimistic that the region should experience an improved economic during mid- to late-2004. Long-term, the region should see stability and moderate-good growth, with increasing real estate values.

VALUATION SERVICES 35 ADVISORY GROUP &CUSHMAN& i.lfJWAKE FIEW.

B-53 LOCAL AREA MAP

LOCAL AREA MAP

VALUATION SERVICES 36 ADVISORY GROUP &CUSHMAN& U WAKEF1£U>.

B-54 LOCAL AREA ANALYSIS

Overview/Definition A local market area (neighborhood) is defi ned as a grouping of complimentary land uses affected by similar operations of the social, economic, governmental, and environmental fo rces that influence property value. The area most closely surrounding the subject, whether it contains residential property, or a mixture of commercial and residential properties, is called a neighborhood.

General Neighborhood Area: City of Simi Valley Location: The subject property is generally situated along the north side of the 118 Freeway (Ronald Reagan Freeway), between First Street (west) and Erringer Road (east), in the City of Simi Valley, situate in the southeasterly portion of Ventura County. In relation to other major cities of the region, Simi Valley is about 32.0± miles northwest of Downtown Los Angeles, 25.0± miles west of Burbank, 29.0± miles east of Ventura, 56.0± miles east of Santa Barbara , 8.0± miles north of Thousand Oaks, and 14.0± miles southwest of Santa Clarita. The City of Simi Valley encompasses about 39.2± square miles and is bordered by the Santa Susana Mountains (on the north), the Simi Hills, Santa Monica Mountains National Recreation Area, and the Cities of Thousand Oaks and Agoura Hills (to the south), the Los Angeles County line and San Fernando Valley (on the east), and the City of Moorpark (on the west). With Southern California's economy continuing to expand over the past two years, despite national difficulties, the City of Simi Valley's location along the 118 Freeway and quality of life amenities, are among its principal advantages. Character: Simi Valley is primarily an east-west oriented valley bounded to the north and south by mountains and hills. Topography of the area is varied, consisting of a relatively flat valley floor, surrounded by steeply sloped hills and canyons to the north and south. The City of Simi Valley, as a whole, is both a commuter/ bedroom community to Los Angeles, as well as an economic base. Population growth has been spurred by newer housing stock, better schools, lower crime, and greater control of land use decisions through master­ planned communities, and general view that the area has a superior quality of life .

VALUATION SERVICES 37 ADVISORY GROCP AcuSHMAN& � WA KEflEU),

B-55 LOCAL AREA ANALYSIS

Major employers in Simi Valley include Boeing/ Rocketdyne (aerospace), Countrywide Home Loans (financing), Farmers Insurance (regional office), Simi Valley Unified School District, Simi Valley Hospital, and Gerwin Vega. The general area surrounding the subject site has a mix of commercial and retail uses (primarily along Los Angeles Avenue and the major interchanges along the 118 Freeway), as well as residential communities and commercial/business uses. Most commercial/retail development is situated along the area's major arterials and at major intersections. Residential development can be fo und throughout the local area, primarily to the south of the 118 Freeway. Upon completion, the subject property will act as a commercial/retail hub for the area, anchoring retail/commercial development in the City. At this writing, the subject's immediate surroundings are largely undeveloped (along the north side of 118 between First Street and Erringer).

Neighborhood Boundaries North: Santa Susana Mountains South: East Los Angeles Avenue East: Tapo Canyon Drive West: Highway 23

Transportation/Access/Linkage General: The subject has good access from the Ronald Reagan Freeway (118), which runs the length of the City's east and west borders, connecting the local area with other major freeways in the Los Angeles Basin. Interstate 405 is approximately 17.0± miles east of the subject property, connecting with Interstate 5 and other Los Angeles freeways. U.S. Highway 101 is approximately 9.5± miles south of the subject's local area, linked to Simi Valley via Highway 23. Highways & Freeways: Freeway 118 (east-west route) Highway 23 (north-south route connecting 118 with U.S. Highway 101) Major North/South Arterials: First Street; Erringer Road; Sycamore Drive; Madera Road; Tapo Canyon Road Major East/West Arterials: 118 Freeway; East Los Angeles Avenue

VALUATION SERVICES 38 ,\ DV TSORY CROUP &CUSHMAN& � WAKEfll:U),

B-56 LOCAL AREA ANALYSIS

Other Transportation: Public mass transit (bus); Metrolink and Amtrak rail service connecting with Los Angeles; Bob Hope Burbank/Glendale/ Pasadena Airport (23.0± miles east).

Land Use Patterns General: Simi Valley is a primarily residential community, characterized by largely single-family residential development (approximately 82.1 ± percent of the City's housing stock) . The valley floor is largely developed with suburban uses, while the hillsides and some of the canyons that ring the valley remain undeveloped. Primary Land Uses: Planned commercial, business and retail uses at the interchanges of First Street, Erringer Road, and the 118 Freeway, including the proposed subject property (Simi Valley Town Center). Secondary Land Uses: Residential areas surround the subject to the south, east, and west (planned to the north). Adjacent Uses (to the subject) North: Undeveloped hillside land/terrain, portions of which are used for grazing and dryland farming. Ongoing and planned development will ultimately transform this area into a mix of residential, business park, recreational, and institutional uses. At this writing, areas to the north, northwest and northeast are largely planned for residential and business park development. South: 118 Freeway, followed by a mix of commercial and residential development. Single-family residential is the predominant land use, though multi-family uses and small commercial uses are also present. Several auto dealerships are sited along First Street, near Cochran. East: Oakridge Athletic Club, followed by Erringer Road and single- and multi-family residential development. Lands along the north side of 118 are largely developed with densities of four to six residential units per acre. Several retail projects/neighborhood shopping centers can be found along the south side of 118 at both Erringer Road and Sycamore, as well as at the northwest quadrant of 118 and Tapo Canyon. West: First Street, followed by light industrial/business park development. A nursery at the northwest corner of First and 118 is planned for office development. This site is followed by the Grand Vista Hotel and light industrial/ business park development. Special Hazards: None noted. Adverse Influences: None noted.

VALUATION SERVICES 39 ADVISORY GROPP £CUSHMAN& WWAKEFl£1.D,

B-57