NEW ISSUE - BOOK-ENTRY ONLY NO RATINGS In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the Community Facilities District (defined below), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Series 2007 Bonds (defined below) is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. In the further opinion ofBond Counsel, interest on the Series 2007 Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of or the accrual or receipt of interest on, the Series 2007 Bonds. See "CONCLUDING INFORMATION - Tax Exemption" herein. STATE OF CALIFORNIA COUNTY OF ORANGE $13,680,000 CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER) SPECIAL TAX BONDS, SERIES 2007 Dated: Date of Delivery Due: September 1, as shown below The City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007 (the "Series 2007 Bonds") are being issued under the Mello-Roos Community Facilities Act of 1982 (the "Act") and the Indenture, dated as of September 1, 2007 (the "Indenture"), by and between City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) (the "Community Facilities District") and Union Bank of California, N.A., as trustee (the "Trustee"), and are payable from the Net Special Tax Revenues (as defined herein) derived from the Special Taxes (as defined herein) levied on property within the Community Facilities District according to the rate and method of apportionment of the Special Taxes approved by the qualified electors of the Community Facilities District and by the City Council of the City of Tustin, California (the "City"). Pursuant to the Indenture, additional bonds (''.Additional Bonds") may be issued by the Community Facilities District for refunding purposes as set forth in the Indenture and as further described herein. The Series 2007 Bonds and any Additional Bonds are collectively referred to as the "Bonds." The Series 2007 Bonds are being issued to provide funds (a) to pay the cost and expense of acquisition and construction of certain public facilities necessary for the development of the Community Facilities District, (b) to fund a reserve fund for the Series 2007 Bonds and (c) to pay the costs of issuing the Series 2007 Bonds. See "ESTIMATED SOURCES AND USES OF FUNDS" herein. The Series 2007 Bonds are being issued in fully registered book-entry only form, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). Interest on the Series 2007 Bonds is payable semiannually on March 1 and September 1 of each year, commencing on March 1, 2008. Purchasers will not receive certificates representing their interest in the Series 2007 Bonds. Individual purchases will be in principal amounts of $5,000 or integral multiples thereof. Principal of and interest and premium, if any, on the Series 2007 Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants who are obligated to remit such payments to the beneficial owners of the Series 2007 Bonds. See Appendix F hereto - "Book-Entry Only System." The Series 2007 Bonds are subject to optional and mandatory redemption prior to maturity as described herein. See "THE SERIES 2007 BONDS - Redemption of the Series 2007 Bonds" herein. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF OTHER THAN THE COI\.IMUNITY FACILITIES DISTRICT TO THE LIMITED EXTENT DESCRIBED IN THE INDENTURE 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 NOR GENERAL OBLIGATIONS OF THE COMMUNITY FACILITIES DISTRICT, BUT ARE SPECIAL OBLIGATIONS OF THE COMMUNITY FACILITIES DISTRICT PAYABLE SOLELY FROM NET SPECIAL TAX REVENUES AND CERTAIN OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE, AS MORE FULLY DESCRIBED HEREIN. MATURITY SCHEDULE $3,295,000 Serial Series 2007 Bonds Maturity Date Principal Interest Maturity Date Principal Interest (September 1) Amount Rate Yield CUSIPNo.t (September 1) Amount Rate Yield CUSIP No. t

2009 $ 5,000 4.000% 4.200% 901047AY6 2018 $200,000 5.000% 5.200% 901047BH2 2010 25,000 4.000 4.300 901047AZ3 2019 230,000 5.125 5.300 901047BJ8 2011 40,000 4.125 4.400 901047BA7 2020 260,000 5.250 5.380 901047BK5 2012 60,000 4.250 4.500 901047BB5 2021 295,000 5.300 5.450 901047BL3 2013 80,000 4.500 4.600 901047BC3 2022 330,000 5.375 5.500 901047BM1 2014 100,000 4.625 4.750 901047BD1 2023 370,000 5.375 5.550 901047BN9 2015 120,000 4.750 4.900 901047BE9 2024 410,000 5.400 5.600 901047BP4 2016 145,000 5.000 5.000 901047BF6 2025 455,000 5.500 5.650 901047BQ2 2017 170,000 5.000 5.100 901047BG4 $10,385,000 6.000% Tenn Bonds due September 1, 2037 - Yield: 5.900%* CUSIP No.t 901047BRO t Copyright 2007, American Bankers Association. CUSIP numbers provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. CUSIP data herein are set forth for convenience of reference only. This data is not intended to serve as a database and does not in any way serve as a substitute for the CUSIP Service Bureau. The Community Facilities District and the Underwriter assume no responsibility for the accuracy of such data. Priced to an assumed first call on September 1, 2017. Investment in the Series 2007 Bonds involves risks which may not be appropriate for some investors. See "SPECIAL RISK FACTORS" for a discussion of certain risk factors that should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Series 2007 Bonds. This cover page contains information for quick reference only. It is not a complete summary of the Series 2007 Bonds. Investors should read the entire Official Statement to obtain information essential to the making of an informed investment decision. The Series 2007 Bonds are offered when, as and if issued and delivered to the Underwriter, subject to the approval as to their validity by Orrick, Herrington & Sutcliffe LLP, Bond Counsel, and subject to certain other conditions. Orrick, Herrington & Sutcliffe LLP is acting as disclosure counsel in connection with the Series 2007 Bonds. Certain legal matters will be passed upon for the Underwriter by its counsel, Ballard Spahr Andrews & Ingersoll, LLP, Salt Lake City, Utah, and for the City and the Community Facilities District by their counsel, Woodruff, Spradlin & Smart, A Professional Corporation, Orange, California. It is anticipated that the Series 2007 Bonds will be available for delivery in book-entry form through the facilities of DTC on or about September 11, 2007. Banc of America Securities LLC Dated: August 23, 2007 No dealer, broker, salesperson or other person has been authorized by the City, the Conununity Facilities District or the Underwriter to give any infonnation or to make any representations with respect to the City, the Conununity Facilities District or the Series 2007 Bonds other than the infonnation contained herein and, if given or made, such other infonnation or representation must not be relied upon as having been authorized by the City, the Conununity Facilities District or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Series 2007 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 of the Series 2007 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 a representation of facts.

Certain of the infonnation set forth herein has been obtained from sources which the City and the Conununity Facilities District believe to be reliable, but such infonnation is not guaranteed by the City or the Conununity Facilities District as to accuracy or completeness.

The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the infonnation in this Official Statement in accordance with, and as a 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 infonnation.

All summaries of the Indenture or other documents are made subject to the complete provisions thereof 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 Conununity Facilities District for further infonnation in connection therewith. This Official Statement is submitted in connection with the sale of the Series 2007 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.

In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the Series 2007 Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if conunenced, may be discontinued at any time. The Underwriter may offer and sell the Series 2007 Bonds to certain dealers and dealer banks and banks acting as agent at prices lower than the public offering prices stated on the cover page hereof and such public offering prices may be changed from time to time by the Underwriter. CITY OF TUSTIN, CALIFORNIA (Orange Connty, California)

CITY COUNCIL

Lou Bone, Mayor Jerry Amante, Mayor Pro Tern Doug Davert, Councilmember Tony Kawashima, Councilmember Jim Palmer, Councilmember

CITY STAFF

William A. Huston, City Manager George W. Jeffries, City Treasurer Christine A. Shingleton, Assistant City Manager Pamela Stoker, City Clerk Ronald A. Nault, Director of Finance Tim Serlet, Director of Public Works

PROFESSIONAL SERVICES

Bond Counsel Orrick, Herrington & Sutcliffe LLP Los Angeles, California

City Attorney Woodruff, Spradlin & Smart, A Professional Corporation Orange, California

Financial Advisor Gardner, Underwood and Bacon LLC Los Angeles, California

Trustee Union Bartle of California, N.A. Los Angeles, California

Special Tax Consultant David Taussig & Associates, Inc. Newport Beach, California

Appraiser Special Tax Administrator Harris Realty Appraisal MuniFinancial, Inc. Newport Beach, California Temecula, California [THIS PAGE INTENTIONALLY LEFT BLANK] TABLE OF CONTENTS

Page

INTRODUCTION ...... 1 THE SERIES 2007 BONDS ...... 3 Authority for Issuance ...... 3 Description of the Series 2007 Bonds ...... 3 Redemption of the Series 2007 Bonds ...... 4 Debt Service Schedule ...... 7 ESTIMATED SOURCES AND USES OF FUNDS ...... 8 THE PROJECT ...... 8 SECURITY FOR THE SERIES 2007 BONDS ...... 8 General ...... 8 The Special Taxes ...... 9 Special Tax Fund ...... 10 Reserve Fund ...... 10 Additional Bonds ...... 11 Covenant for Superior Court Foreclosure ...... 11 Property Values ...... 12 Direct and Overlapping Debt ...... 13 Estimated Value-to-Lien Ratios ...... 16 THE COMMUNITY FACILITIES DISTRICT ...... 17 General ...... 17 Tustin Legacy ...... 17 Summary of District Proceedings ...... 18 Rate and Method of Apportionment ...... 18 Former Marine Corps Air Station Tustin ...... 20 CEQA Compliance ...... 20 Disposition and Development Agreement ...... 21 Property Ownership and Development ...... 22 SPECIAL RISK FACTORS ...... 31 Concentration of Ownership and Leasehold Interests ...... 31 Risks Associated with Ongoing Ownership and Operation of "The District at Tustin Legacy" ...... 31 TABLE OF CONTENTS ( continued) Page

Risk of Changes in Market Conditions ...... 32 The Series 2007 Bonds are Limited Obligations of the Community Facilities District...... 32 The Special Taxes are not Personal Obligations of the Developer or Subsequent Property Owners ...... 32 Special Tax Delinquencies ...... 32 Bankruptcy ...... 33 Insufficiency of Special Taxes ...... 33 Disclosures to Future Purchasers ...... 33 Billing of Special Taxes ...... 34 Natural Disasters ...... 34 Soil Conditions in the District...... 34 Payments by FDIC or Other Federal Agencies ...... 35 Exempt Properties ...... 35 Cumulative Burden of Parity Taxes, Special Assessments ...... 36 Additional and Overlapping Debt ...... 36 Limitations on Remedies ...... 36 Right to Vote on Taxes Act ...... 37 Loss of Tax Exemption ...... 37 Limited Liquidity of the Series 2007 Bonds ...... 38 LITIGATION ...... 38 CONTINUING DISCLOSURE ...... 38 CONCLUDING INFORMATION ...... 39 Legal Opinions ...... 39 Financial Interest...... 39 Tax Exemption ...... 39 Underwriting ...... 41 No Ratings ...... 42 Miscellaneous ...... 42

11 TABLE OF CONTENTS ( continued) Page

APPENDIX A - APPRAISAL ...... A-1 APPENDIX B - RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX ...... B-1 APPENDIX C - PROPOSED FORM OF OPINION OF BOND COUNSEL ...... C-1 APPENDIX D - SUMMARY OF INDENTURE ...... D-1 APPENDIX E - FORMS OF CONTINUING DISCLOSURE AGREEMENTS ...... E-1 APPENDIX F - BOOK-ENTRY ONLY SYSTEM ...... F-1

111 [THIS PAGE INTENTIONALLY LEFT BLANK] ta 1ii\;;,"r>ti1:iif

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...... CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER)

Site Plan for "The District at Tnstin Legacy"

I II II Ill II II II

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1 i OFFICIAL STATEMENT

$13,680,000 CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER) SPECIAL TAX BONDS, SERIES 2007

INTRODUCTION

The purpose of this Official Statement, including the cover page, table of contents and the Appendices, is to provide certain information concerning the issuance of and sale by City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) (the "Community Facilities District") of $13,680,000 aggregate principal amount of its Special Tax Bonds, Series 2007 (the "Series 2007 Bonds").

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, including the cover page and Appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The sale and delivery of the Series 2007 Bonds to potential investors is made only by means of the entire Official Statement.

The Series 2007 Bonds are being issued pursuant to the Mello-Roos Community Facilities Act of 1982, constituting Section 53311 et seq. of the California Government Code (the "Act") and the Indenture, dated as of September I, 2007 (the "Indenture"), by and between the Community Facilities District and Union Bartle of California, N.A., as trustee (the 'Trustee"). Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Indenture.

The Series 2007 Bonds will be issued as fully registered bonds in denominations of $5,000 or any integral multiple thereof and will be dated as of and bear interest from the date of delivery, at the rates set forth on the cover page hereof.

In accordance with the provisions of the Indenture, and subject to the conditions specified therein, the Community Facilities District may issue additional bonds (the "Additional Bonds") but only for the purpose of providing funds to refund the Series 2007 Bonds. See "SECURITY FOR THE SERIES 2007 BONDS - Additional Bonds." The Series 2007 Bonds and any such Additional Bonds are collectively referred to herein as the "Bonds."

Pursuant to the Act, the qualified electors of the Community Facilities District approved the levy of a special tax (the "Special Tax") within the boundaries of the Community Facilities District. The Special Tax is comprised of a Special Tax A for facilities and a Special Tax B for services; however, only the Special Tax A is pledged to the payment of the Bonds. Unless expressly provided otherwise in this Official Statement, references to the Special Tax herein refer only to the Special Tax A pledged to the payment of the Bonds. See 'THE COMMUNITY FACILITIES DISTRICT - Summary of District Proceedings." The Bonds are payable from and secured by a pledge of Net Special Tax Revenues and certain other amounts held under the Indenture as described

I herein. See "SECURITY FOR THE SERIES 2007 BONDS" and Appendix D - "Sunnnary of Indenture."

The Connnunity Facilities District is located in the City of Tustin (the "City") and encompasses approximately 82.6 gross acres of land, of which approximately 44.3 acres are anticipated to be subject to the Special Tax. The Connnunity Facilities District consists of a shopping center !mown as 'The District at Tustin Legacy" that is being developed by Vestar/Kimco Tustin, L.P., a California limited partnership (the "Developer") and, upon development, is expected to be comprised of approximately 985,000 square feet of connnercial retail space. See 'THE COMMUNITY FACILITIES DISTRICT - Property Ownership and Development." See also the site plan for the Connnunity Facilities District at the forepart of this Official Statement for the relative location of each of the businesses expected to be located within the Connnunity Facilities District. Pursuant to the rate and method of apportionment for the Connnunity Facilities District (the "Rate and Method"), certain property in the Connnunity Facilities District referred to as Privately Owned Specific Retail Property will not be subject to the Special Tax. The Privately Owned Specific Retail Property consists of seven parcels improved or to be improved with a Costco, Target, Lowe's, Wells Fargo Bartle, In-N-Out Burger and Chick-Fil-A, as well as parking. See 'THE COMMUNITY FACILITIES DISTRICT - General" and Appendix B - "Rate and Method of Apportionment of Special Tax."

Grading in the Connnunity Facilities District began in January 2006 and approximately 90 percent of the construction within the Connnunity Facilities District was complete as of June 30, 2007. Construction is expected to be substantially complete by November 2007.

The Connnunity Facilities District represents the first connnerical phase of development of the former Marine Corps Air Station Tustin (the "Air Station"). The portion of the Air Station located in the City and an additional parcel is being developed as an approximately 1,533 gross acre master planned connnunity called Tustin Legacy ('Tustin Legacy"). Approximately 73 acres of the former Air Station are located in the City of Irvine. See 'THE COMMUNITY FACILITIES DISTRICT."

The proceeds from the sale of the Series 2007 Bonds will be used to (a) pay the cost and expense of the acquisition and construction of certain public facilities necessary for the development of the Connnunity Facilities District (see 'THE PROJECT"), (b) fund a reserve fund for the Series 2007 Bonds and (c) pay the costs of issuing the Series 2007 Bonds. See "ESTIMATED SOURCES AND USES OF FUNDS."

Certain risk factors should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the Series 2007 Bonds. See "SPECIAL RISK FACTORS."

Neither the faith and credit nor the taxing power of the City, the State of California (the "State") or any political subdivision thereof other than the Community Facilities District to the limited extent described in the Indenture 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 nor general obligations of the Community Facilities District, bnt are special obligations of the Community Facilities District payable solely from the Net Special Tax Revenues and certain other assets pledged therefor nnder the Indenture, as more fnlly described herein.

2 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 27 A of the United States Securities Exchange 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 "SECURITY FOR THE SERIES 2007 BONDS" and in Appendix A- "Appraisal."

Brief descriptions of the Series 2007 Bonds, the Indenture, the security for the Series 2007 Bonds, the Community Facilities District, the status of development within the Community Facilities District and certain other information are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. The descriptions herein of the Series 2007 Bonds, the Indenture and other documents are qualified in their entirety by reference to the forms thereof and the information with respect thereto included in the Series 2007 Bonds, the Indenture and other documents. Copies of such documents may be obtained from the office of the City Clerk of the City, at 300 Centennial Way, Tustin, California 92780, Attention: City Clerk.

THE SERIES 2007 BONDS

Authority for Issuance

The Bonds were authorized at a special election held in the Community Facilities District on June 19, 2007. The Series 2007 Bonds will be issued pursuant to the Act and the Indenture.

Description of the Series 2007 Bonds

The Series 2007 Bonds will be issued in fully registered form only, and when delivered, will be registered in the name of Cede & Co., as nominee ofDTC. DTC will act as securities depository for the Series 2007 Bonds. Ownership interests in the Series 2007 Bonds may be purchased in book­ entry form only, in denominations of $5,000 or any integral multiple thereof within a single maturity. The Series 2007 Bonds will be dated as of and bear interest from the date of delivery at the rates set forth on the cover page hereof

The principal of and premium, if any, on the Series 2007 Bonds will be paid in lawful money of the United States of America at the office of the Trustee upon presentation and surrender of the Series 2007 Bonds. The Series 2007 Bonds will mature as indicated on the cover hereof, and are subject to optional and mandatory redemption as set forth herein.

Interest on the Series 2007 Bonds will be paid semiannually on March I and September I ( each an "Interest Payment Date"), commencing on March I, 2008. Interest on the Series 2007 Bonds will be calculated on the basis of a 360-day year comprised of twelve 30-day months. Payment of interest on the Series 2007 Bonds will be made to the respective Owner by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date, to the Owner at his or her address as it appears on the registration books to be kept by the Trustee for the Series 2007 Bonds (the "Bond Register"), as of the close of business on the fifteenth day of the month preceding each Interest Payment Date, regardless of whether such day is a business day (the "Record Date"). So long as DTC or its nominee is the registered owner of the Series 2007 Bonds, interest payments will be made as described in Appendix F - "Book-Entry Only System."

3 Interest on the Series 2007 Bonds will be payable from the Interest Payment Date next preceding the date of authentication thereof unless (a) a Series 2007 Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event it will bear interest from such Interest Payment Date, (b) a Series 2007 Bond is authenticated on or before the first Record Date, in which event interest thereon will be payable from the date of delivery of such Series 2007 Bond, or ( c) interest on any Series 2007 Bond is in default as of the date of authentication thereof, in which event interest thereon will be payable from the date to which interest has previously been paid or duly provided for.

Redemption of the Series 2007 Bonds

Optional Redemption The Series 2007 Bonds are subject to optional redemption, in whole or in part, on any Interest Payment Date on or after September I, 2017, from any source of available funds, at a redemption price equal to the principal amount of the Series 2007 Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium.

Mandatory Redemption from Special Tax Prepayments The Series 2007 Bonds are subject to mandatory redemption, in whole or in part, on any Interest Payment Date on or after March I, 2008, from and to the extent of any prepayment of Special Taxes, at the following respective redemption prices ( expressed as percentages of the principal amount of the Series 2007 Bonds to be redeemed), plus accrued interest thereon to the date of redemption: Redemption Dates Redemption Price March I, 2008 through March I, 2016 102% September I, 2016 and March I, 2017 IOI September I, 2017 and thereafter 100

Mandatory Sinking Fund Redemption The Series 2007 Bonds maturing on September I, 2037, are subject to mandatory sinking fund redemption, in part, on September I in each year, commencing September I, 2026, at a redemption price equal to the principal amount of the Series 2007 Bonds to be redeemed, without premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts in the respective years as follows:

4 Sinking Fund Redemption Date Principal Amount ( September ]) to be Redeemed 2026 $ 500,000 2027 550,000 2028 610,000 2029 670,000 2030 735,000 2031 800,000 2032 875,000 2033 950,000 2034 1,035,000 2035 1,125,000 2036 1,215,000 2037* 1,320,000

* Maturity

If some but not all of the Series 2007 Bonds maturing on September I, 2037 are optionally redeemed, the principal amount of Series 2007 Bonds maturing on September I, 2037 to be subject to mandatory sinking fund redemption on any subsequent September I will be reduced, by $5,000 or an integral multiple thereof, as designated by the Community Facilities District in a Written Certificate of the Community Facilities District filed with the Trustee; provided, however, that the aggregate amount of such reductions shall not exceed the aggregate amount of Series 2007 Bonds maturing on September I, 2037 so optionally redeemed. If some but not all of the Series 2007 Bonds maturing on September I, 203 7 are redeemed from Special Tax prepayments, the principal amount of Series 2007 Bonds maturing on September I, 2037 to be subject to mandatory sinking fund redemption on any subsequent September I will be reduced by the aggregate principal amount of the Series 2007 Bonds maturing on September I, 2037 so redeemed from Special Tax prepayments, such reduction to be allocated among redemption dates as nearly as practicable on a pro rata basis in amounts of $5,000 or integral multiples thereof, as determined by the Trustee.

Selection ofSeries 2007 Bonds for Redemption If less than all of the Series 2007 Bonds outstanding are to be redeemed, the Trustee shall select the Series 2007 Bonds to be redeemed from all Series 2007 Bonds not previously called for redemption (a) with respect to any optional redemption, among maturities of Series 2007 Bonds as directed in a Written Request of the Community Facilities District, and (b) with respect to any redemption from Special Tax prepayments, among all maturities of the Series 2007 Bonds on a pro rata basis as nearly as practicable. For purposes of such selection, all Series 2007 Bonds will be deemed to be comprised of separate $5,000 denominations and such separate denominations will be treated as separate Series 2007 Bonds which may be separately redeemed.

Notice ofRedemption So long as DTC is acting as securities depository for the Series 2007 Bonds, notice of redemption, containing the information required by the Indenture, will be mailed by first class mail, postage prepaid, by the Trustee to DTC (not to the Beneficial Owners of any Series 2007 Bonds designated for redemption) at least 30 days but not more than 60 days prior to the redemption date. The Trustee must give notice of redemption to each of certain specified securities depositories and information services designated in the Indenture. The actual receipt by DTC (or any Owner of a

5 Series 2007 Bond in the event that the book-entry only system is discontinued) of such notice of redemption is not a condition precedent to redemption, and neither the failure to receive such notice nor any defect in such notice will affect the validity of the proceedings for redemption of the Series 2007 Bonds or the cessation of interest on the redemption date.

Partial Redemption ofSeries 200 7 Bonds Upon surrender of any Series 2007 Bonds to be redeemed in part only, the Community Facilities District will execute and the Trustee will authenticate and deliver to the Owner, at the expense of the Community Facilities District, a new Series 2007 Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Series 2007 Bonds surrendered, with the same interest rate and the same maturity.

Effect ofNotice ofRedemption Notice of redemption having been mailed as described above, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption, (a) the Series 2007 Bonds, or portions thereof, designated for redemption, will become due and payable at the redemption price thereof as provided in the Indenture, (b) upon presentation and surrender of such Series 2007 Bonds at the office of the Trustee, the redemption price of such Series 2007 Bonds, together with unpaid accrued interest to said redemption date, will be paid to the Owners thereof, ( c) at the redemption date the Series 2007 Bonds, or portions thereof so designated for redemption, will be deemed to be no longer outstanding and such Series 2007 Bonds, or portions thereof, will cease to bear further interest, and ( d) as of the date fixed for redemption, no Owner of any Series 2007 Bonds, or portions thereof so designated for redemption, will be entitled to any of the benefits of the Indenture or to any other rights, except with respect to payment of the redemption price and unpaid interest accrued to the redemption date from the amounts so made available.

6 Debt Service Schedule

The debt service schedule for the Series 2007 Bonds (including mandatory sinking fund redemption on their respective September I redemption dates) is set forth below:

Year Ending Total September I Principal Interest Debt Service 2008 $ 771,980.90 $ 771,980.90 2009 $ 5,000 794,037.50 799,037.50 2010 25,000 793,837.50 818,837.50 2011 40,000 792,837.50 832,837.50 2012 60,000 791,187.50 851,187.50 2013 80,000 788,637.50 868,637.50 2014 100,000 785,037.50 885,037.50 2015 120,000 780,412.50 900,412.50 2016 145,000 774,712.50 919,712.50 2017 170,000 767,462.50 937,462.50 2018 200,000 758,962.50 958,962.50 2019 230,000 748,962.50 978,962.50 2020 260,000 737,175.00 997,175.00 2021 295,000 723,525.00 1,018,525.00 2022 330,000 707,890.00 1,037,890.00 2023 370,000 690,152.50 1,060,152.50 2024 410,000 670,265.00 1,080,265.00 2025 455,000 648,125.00 1,103,125.00 2026 500,000 623,100.00 1,123,100.00 2027 550,000 593,100.00 1,143,100.00 2028 610,000 560,100.00 1,170,100.00 2029 670,000 523,500.00 1,193,500.00 2030 735,000 483,300.00 1,218,300.00 2031 800,000 439,200.00 1,239,200.00 2032 875,000 391,200.00 1,266,200.00 2033 950,000 338,700.00 1,288,700.00 2034 1,035,000 281,700.00 1,316,700.00 2035 1,125,000 219,600.00 1,344,600.00 2036 1,215,000 152,100.00 1,367,100.00 2037 1,320,000 79,200.00 1,399,200.00

TOTAL $13,680,000 $18,210,000.90 $31,890,000.90

7 ESTIMATED SOURCES AND USES OF FUNDS

The estimated sources and uses of funds with respect to the Series 2007 Bonds are set forth in the following table:

Sources: Principal Amount of Series 2007 Bonds $13,680,000.00 Plus: Net Original Issue Premium 30 382.55 Total Sources $13,710,382.55

Uses: Improvement Fund $11,934,401.05 Reserve Funal'l 1,329,981.50 Costs oflssuance(2J 446 000.00 Total Uses $13,710,382.55

(IJ Equals the Reserve Requirement for the Series 2007 Bonds. 2 < ) Includes Underwriter's discount, and legal fees, financial advisory fees and other issuance costs.

THE PROJECT

The Series 2007 Bonds are being issued, in part, to finance the acquisition and construction of certain public facilities necessary for the development of the Community Facilities District, which may include the acquisition and construction of all or a portion of street improvements, including grading, paving, curbs and gutters, sidewalks, street signalization and signage, street lights and parkway and landscaping related thereto, storm drains, utilities, public parks and recreation facilities, public library facilities, fire protection facilities and equipment and land, rights-of-way and easements necessary for any of such facilities. The Community Facilities District expects to use a portion of the proceeds from the sale of the Series 2007 Bonds to finance the acquisition from the Developer of those facilities to be constructed by the Developer as set forth in the Second Amendment to Infrastructure Construction and Payment Agreement, dated as of September I, 2007, by and between the City and the Developer. Such facilities consist of improvements to the Park Avenue Roadway from Tustin Ranch Road to Warner Avenue.

SECURITY FOR THE SERIES 2007 BONDS

General

Pursuant to the Act and the Indenture, the Bonds, including the Series 2007 Bonds, are payable from the Net Special Tax Revenues. "Net Special Tax Revenues" is defined under the Indenture to mean Special Tax Revenues less amounts required to pay Administrative Expenses. "Special Tax Revenues" is defined under the Indenture to mean the proceeds of the Special Taxes received by or on behalf of the Community Facilities District, including prepayments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes, which shall be limited to the amount of said lien and interest and penalties thereon. "Administrative Expenses" is defined under the Indenture to mean "costs directly related to the administration of the Community Facilities District, consisting of the costs of computing the Special Taxes and preparing the annual Special Tax schedules and the costs

8 of collecting the Special Taxes, the costs of remitting the Special Taxes to the Trustee, the fees and costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture, the costs incurred by the Community Facilities District in complying with the disclosure provisions of any continuing disclosure undertaking and the Indenture, including those related to public inquiries regarding the Special Tax and disclosures to Owners, the costs of the Community Facilities District related to an appeal of the Special Tax, any amounts required to be rebated to the federal govermnent in order for the Community Facilities District to comply with the Indenture, an allocable share of the salaries of the staff of the City providing services on behalf of the Community Facilities District directly related to the foregoing and a proportionate amount of general administrative overhead of the City related thereto, and the costs of foreclosure of delinquent Special Taxes." "Special Taxes" is defined under the Indenture to mean the special taxes levied as Special Tax A within the Community Facilities District pursuant to the Act, the Ordinance and the Indenture.

The payment of the principal of, premium, if any, and interest on the Bonds will be exclusively paid from the Net Special Tax Revenues and other amounts in the Special Tax Fund, the Bond Fund and the Reserve Fund. The amount of Special Taxes that the Community Facilities District may levy in any year is strictly limited by the maximum rates approved by the qualified electors within the Community Facilities District, as set forth in the Rate and Method. See 'THE COMMUNITY FACILITIES DISTRICT- Rate and Method of Apportionment." The full text of the Rate and Method is set forth in Appendix B hereto.

Net Special Tax Revenues deposited in the Rebate Fund and the Administrative Expense Fund are not pledged to the payment of any of the Bonds, and neither the Rebate Fund nor the Administrative Expense Fund will be construed as a trust fund held for the benefit of the Owners of any Bonds.

The Special Taxes

In the Indenture, the Community Facilities District has covenanted that, so long as any Bonds are outstanding, it will levy the amount of Special Taxes within the Community Facilities District in accordance with the Rate and Method and, subject to the limitations in the Rate and Method as to the maximum Special Tax that may be levied, in an amount sufficient, together with other amounts on deposit in the Special Tax Fund and available for such purpose, to pay the principal of and interest on the Bonds becoming due and payable during the calendar year commencing in such fiscal year, the Administrative Expenses estimated for such year, periodic costs on the Bonds, including but not limited to rebate payments, any amounts required to replenish the Reserve Fund to the Reserve Requirement and reasonably anticipated delinquent Special Taxes based on the delinquency rate for Special Taxes levied in the previous fiscal year or otherwise reasonably expected, less funds available pursuant to the Indenture (collectively, the "Special Tax Requirement for Facilities"). No assurance can be given that the amounts collected in any given year will, in fact, equal the Special Tax Requirement for Facilities due to a variety of factors, including the maximum Special Tax rates and the 45-year maximum term of the Special Tax levy on each parcel in the Community Facilities District imposed by the Rate and Method. See 'THE COMMUNITY FACILITIES DISTRICT - Rate and Method of Apportionment" and Appendix B hereto. Moreover, it is possible that under certain circumstances the maximum rates could be reduced from current levels. See "SPECIAL RISK FACTORS- Right to Vote on Taxes Act" below.

The Special Taxes will be payable and be collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable, and have the same

9 priority, become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the ad valorem taxes on real property. When received, such Special Taxes will be applied as follows: first, to the Administrative Expense Fund for the payment of Administrative Expenses; second, to the Bond Fund for payment of debt service on (including payment for redemption of) the Bonds; third, for deposit in the Reserve Fund to the extent needed to restore the balance therein to the Reserve Requirement; and fourth, for transfer to the Rebate Fund the amounts, if any, due and owing to the United States Treasury.

The Community Facilities District has covenanted that it will not initiate proceedings under the Act to modify the Rate and Method if such modification would adversely affect the security for the Bonds. The Community Facilities District has also covenanted that in the event any initiative or referendum measure is proposed that purports to modify the Rate and Method in a manner that would adversely affect the security for the Bonds, the Community Facilities District will, to the extent pennitted by law, commence and pursue reasonable legal actions to prevent the modification of the Rate and Method in a manner that would adversely affect the security for the Bonds.

Although the Special Taxes will be levied against, and constitute a lien against, taxable parcels within the Community Facilities District, they do not constitute a personal indebtedness of the respective property owners. There is no assurance that the Developer or subsequent 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. See "SPECIAL RISK FACTORS- Special Tax Delinquencies."

Special Tax Fund

The Special Tax Fund is created and established under the Indenture, and is maintained by the Trustee. Pursuant to the Indenture, as soon as practicable after the Community Facilities District receives any Special Tax Revenues, but in any event no later than the date ten Business Days prior to the Interest Payment Date after such receipt, the Community Facilities District will transfer such Special Tax Revenues to the Trustee for deposit in the Special Tax Fund; provided, however, that any portion of any such Special Tax Revenues that represents prepaid Special Taxes that are to be applied to the payment of the redemption of Series 2007 Bonds in accordance with the mandatory redemption from special tax prepayments provisions of the Indenture are required to be identified to the Trustee as such by the Community Facilities District and be deposited in the Redemption Fund. Pursuant to the Indenture, the Trustee will transfer amounts on deposit in the Special Tax Fund to the Administrative Expense Fund, the Bond Fund, the Reserve Fund and the other funds established under the Indenture on the dates, in the amounts and in the priority set forth in the Indenture. See Appendix D - "Summary of Indenture."

Reserve Fund

The Indenture provides that a Reserve Fund must be maintained in an amount equal to the Reserve Requirement. Upon the issuance of the Series 2007 Bonds, $1,329,981.50, an amount equal to the initial Reserve Requirement, will be deposited in the Reserve Fund. The Indenture provides that the Reserve Requirement means, as of any date of calculation, an amount equal to the least of (a) I 0% of the original aggregate principal amount of the Bonds (excluding any Bonds refunded with proceeds of Additional Bonds), (b) Maximum Annual Debt Service, and (c) 125% of average Annual Debt Service.

10 Moneys in the Reserve Fund will be used and withdrawn by the Trustee solely for the purpose of making transfers to the Bond Fund in the event of any deficiency at any time in the Bond Fund of the amount then required for payment of the principal of and interest on the Bonds or for the purpose ofredeeming Bonds. Transfers will be made from the Reserve Fund to the Bond Fund in the event of a deficiency in the Bond Fund, in accordance with the Indenture.

Whenever the balance in the Reserve Fund exceeds the amount required to redeem or pay the Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Trustee will, upon receipt of a Written Request of the Community Facilities District, transfer the amount in the Reserve Fund to the Bond Fund or Redemption Fund, as applicable, to be applied, on the next succeeding Interest Payment Date to the payment and redemption of all of the Outstanding Bonds.

In connection with an optional redemption of Bonds or a mandatory redemption of Bonds from Special Tax prepayments, a proportionate share of the amount on deposit in the Reserve Fund will, on the date on which amounts to redeem such Bonds are deposited in the Redemption Fund or otherwise deposited with the Trustee in connection with the defeasance of Bonds, be transferred by the Trustee from the Reserve Fund to the Redemption Fund or otherwise deposited with the Trustee and will be applied to the redemption of said Bonds; provided, however, that such amount shall be so transferred only if and to the extent that the amount remaining on deposit in the Reserve Fund will be at least equal to the Reserve Requirement ( excluding from the calculation thereof said Bonds to be redeemed). Such proportionate share shall be equal to the largest integral multiple of $5,000 that is not larger than the amount equal to the product of (a) the amount on deposit in the Reserve Fund on the date of such transfer, times (b) a fraction, the numerator of which is the principal amount of Bonds to be so redeemed and the denominator of which is the principal amount of Bonds to be Outstanding on the day prior to the date on which such Bonds are to be so redeemed.

Additional Bonds

The Indenture provides that the Community Facilities District may, at any time after the issuance and delivery of the Series 2007 Bonds, issue Additional Bonds payable from the Net Special Tax Revenues on a parity with all other Bonds issued under the Indenture. Additional Bonds may be issued solely for the purpose of providing funds to refund the Series 2007 Bonds. The issuance of Additional Bonds is subject to certain additional specific conditions precedent. See Appendix D - "Summary of Indenture."

Covenant for Superior Court Foreclosure

In the event of a delinquency in the payment of any installment of Special Taxes, the Community Facilities District is authorized by the Act to order institution of an action in the Superior Court of the State to foreclose any lien therefor. In such action the real property subject to the Special Taxes may be sold at a judicial foreclosure sale.

Such judicial foreclosure proceedings are not mandatory. However, in the Indenture, the Community Facilities District has covenanted for the benefit of the Owners of the Bonds that it will commence judicial foreclosure proceedings against parcels with delinquent Special Taxes; provided, however that the Community Facilities District is not required to order the commencement of foreclosure proceedings if (a) the total Special Tax delinquency in the Community Facilities District for such fiscal year is less than 5% of the total Special Tax levied in such fiscal year and (b) the

11 amount then on deposit in the Reserve Fund is equal to the Reserve Requirement. Notwithstanding the foregoing, if the Community Facilities District determines that any single property owner in the Community Facilities District is delinquent in excess of $5,000 in the payment of the Special Tax, then the Community Facilities District will diligently institute, prosecute and pursue foreclosure proceedings against such property owner. The Community Facilities District may, but is not obligated to, advance funds from any source of legally available funds in order to maintain the Reserve Fund at the Reserve Requirement. In a foreclosure proceeding the Community Facilities District is entitled to recover penalties and interest on the delinquent Special Taxes through the date that an order of sale is entered. Prompt commencement of foreclosure proceedings may not, in and of itself, result in a timely or complete payment of delinquent Special Taxes.

The ability of the Community Facilities District to foreclose the lien of delinquent unpaid Special Taxes may be limited in certain instances and may require prior consent of the obligee in the event the property is owned by or in receivership of the Federal Deposit Insurance Corporation. See "SPECIAL RISK FACTORS - Banlauptcy," "- Payments by FDIC or Other Federal Agencies" and "- Billing of Special Taxes."

If the Reserve Fund is depleted, there could be a default or a delay in payments to the Owners of the Bonds pending prosecution of foreclosure proceedings and receipt by the Community Facilities District of foreclosure sale proceeds, if any. However, within the limits of the Rate and Method, the Community Facilities District may adjust the Special Taxes levied on all taxable property within the Community Facilities District to provide an amount required to pay debt service, including defaulted interest and principal payments, on the Bonds and to replenish the Reserve Fund.

No assurances can be given that a judicial foreclosure action, once commenced, will be completed or that it will be completed in a timely manner. If a judgment of foreclosure and order of sale is obtained, the judgment creditor (the Community Facilities District) must cause a Notice of Levy to be issued. Under current law, a judgment debtor (property owner) has 120 days from the date of service of the Notice of Levy in which to redeem the property to be sold, which period may be shortened to 20 days for parcels other than those on which a dwelling unit for not more than four persons is located. If a judgment debtor fails to redeem and the property is sold, his only remedy is an action to set aside the sale, which must be brought within 90 days of the date of sale. If, as a result of such an action, a foreclosure sale is set aside, the judgment is revived and the judgment creditor is entitled to interest on the revived judgment as if the sale had not been made (Section 701.680 of the California Code of Civil Procedure). The constitutionality of the aforementioned legislation, which repeals the former one-year redemption period, has not been tested; and there can be no assurance that, if tested, such legislation will be upheld.

Property Values

An appraisal of the property in the Community Facilities District, dated June 14, 2007 (the "Appraisal"), was prepared by Harris Realty Appraisal (the "Appraiser"). The Appraisal was prepared to estimate the market value of the land in the Community Facilities District in its "as is" condition (the "Market Value"). Any land designated for park, open space or civic uses within the Community Facilities District was not included in the Appraisal, nor was property that is not subject to the Special Tax. The estimated value expressed in the Appraisal was stated as of June I, 2007. See the Appraisal included in Appendix A hereto for a description of the assumptions made and the valuation methodology used by the Appraiser.

12 The Appraiser has utilized the direct comparison approach to value the land in the Community Facilities District. As noted above, the Appraiser excluded the parcels defined in the Rate and Method as Privately Owned Specific Retail Property (i.e., the parcels that are not subject to the Special Tax) from the Appraisal. The land and improvements thereon were valued in their "as is" condition as of June I, 2007, the date of value. The Community Facilities District is essentially in a finished lot condition; however certain off-site improvements are still under construction but are expected to be substantially complete by November 2007.

Based on the direct comparison approach and the assumptions set forth in the Appraisal, the Appraiser estimated the Market Value of the property subject to the Special Tax within the Community Facilities District as of June I, 2007, to be approximately $140,000,000. Proceeds of Series 2007 Bonds of approximately $12,000,000 are expected to be used to reimburse the Developer for a portion of the approximately $190,000,000 in on-site and off-site improvements expended or to be expended by the Developer within the Community Facilities District.

Direct and Overlapping Debt

Contained within the Community Facilities District are overlapping local agencies providing public services. Some of such local agencies have outstanding bonds or authorization to issue bonds payable from taxes or special assessments.

Water District Debt

The property in the Community Facilities District receives water and sewer service from the Irvine Ranch Water District ("IRWD") and is located within IRWD's Improvement District Nos. 113 and 213 (collectively, the "IRWD Improvement Districts"). At an election held on August 31, 2004, IRWD received authorization to issue not to exceed $26,000,000 aggregate principal amount of general obligation bonds for Improvement District No. 113 and $87 ,000,000 aggregate principal amount of general obligation bonds for Improvement District No. 213. IRWD issued $1,500,000 aggregate principal amount of general obligation bonds for Improvement District No. 113 and $11, I 00,000 aggregate principal amount of general obligation bonds for Improvement District No. 213 in February 2006. IRWD issued additional general obligation bonds pursuant to such authorization for Improvement District No. 113 in the aggregate principal amount of $5,000,000 and for Improvement District No. 213 in the aggregate principal amount of$6,300,000 in July 2007.

IRWD Improvement District bonds are general obligation bonds payable from ad valorem taxes; the amount of the tax levy on each parcel is based on the assessed valuation of the land only. The Community Facilities District caunot predict the amount of authorized but unissued bonds for IRWD Improvement Districts that will ultimately be issued by IRWD, nor can it predict when such debt will be issued or the debt service payments thereon.

School District Debt

The Tustin Unified School District (the "School District") received authorization at an election held on November 5, 2002, by an affirmative vote of the eligible voters within the School District to issue bonds on behalf of School Facilities Improvement District No. 2002-1 of the School District (the "Improvement District") in an amount not to exceed $80,000,000 (the "School District Bonds"). The School District, on behalf of the Improvement District, issued School District Bonds in 2003 and 2006 in the aggregate principal amount of $15,000,000 and $17,350,000, respectively. As of August I, 2007, $47,650,000 of such authorized debt was unissued. The School District Bonds

13 are general obligation bonds of the School District, on behalf of the Improvement District, payable from ad valorem taxes; the amount of the tax levy on each parcel is based on the assessed valuation of the taxable property within the boundaries of the Improvement District. If, as property is developed and sold within the Community Facilities District, the assessed valuation of such parcels increases disproportionately to other parcels within the Improvement District, then such parcels' share of the general obligation bond debt of the School District would increase.

The City caunot predict the extent to which the School District will issue its authorized but currently unissued debt, the timing of any such issuances or the debt service payments thereon.

14 Direct and Overlapping Debt Summary

Set forth in the table below is a summary of the direct and overlapping debt payable from taxes or special assessments m the Community Facilities District.

Table 1 City of Tnstin Community Facilities District No. 07-1 (Tnstin Legacy/Retail Center) Direct and Overlapping Debt Summary

Amount ofLevy Percent ofLevy on Parcels in the on Parcels in the District Share 2006-2007 Community Facilities Community Facilities Total Debt ofTotal Debt Overlapping Districl1l Total Levy District District Outstanding(2l Outstanding

Metropolitan Water District G.O. Bonds $103,904,001 $7,367 0.00709%1 $359,115,000 $25,462 Tustin Unified SFID 2002-1 231,343 3,636 1.57188 21,954,947 345,106 IR\VD Improvement District No. 213 Bonds 806,436 220,898 27.39187 11,100,000 3,040,498 IR\VD Improvement District No. 113 Bonds 109,867 30,095 27.39190 1,500,000 410,878

Total Overlapping Debt $3,821,944 Plus: Series 2007 Bonds $13,680,000

Estimate Share ofDirect and Overlapping Debt Allocable to the Community Facilities District $17,501,944 3 Appraised Value ( ) $140,000,000

Estimated Appraised Value-to-Lien Ratio 8.00

(1) Includes ad valorem, general obligation, special taxes and standby charges that support any type of outstanding debt. 2 ( l As ofMay I, 2007, and as a result, does not include the bonds issued by IR\VD in July 2007. See "-Direct and Overlapping Debt- Water District Debt." In addition, the property in the Community Facilities District will be subject to a Special Tax B for services that is not reflected in this table. See Appendix B - "Rate and Method of Apportionment of Special Tax." 3 ( ) Based on the Appraisal. Source: David Taussig and Associates, Inc.; County of Orange/Controller's Office; IR\VD.

15 Other Potential Debt

The Community Facilities District has no control over the amount of additional debt payable from taxes or assessments levied on all or a portion of the property within the Community Facilities District which may be incurred in the future by other governmental agencies having jurisdiction over all or a portion of the property within the Community Facilities District. Furthermore, nothing prevents the owners of property within the Community Facilities District from consenting to the issuance of additional debt by other govermnental agencies which would be secured by taxes or assessments on a parity with the Special Taxes. To the extent such indebtedness is payable from assessments, other special taxes levied pursuant to the Act or taxes, such assessments, special taxes and taxes will be secured by liens on the property within the Community Facilities District on a parity with the lien of the Special Taxes.

Accordingly, the debt on the property within the Community Facilities District could increase, without any corresponding increase in the value of the property therein, and thereby severely reduce the estimated value-to-lien ratio that exists at the time the Series 2007 Bonds are issued. The imposition of such additional indebtedness could reduce the willingness and ability of the property owners within the Community Facilities District to pay the Special Taxes when due. See "SPECIAL RISK FACTORS - Cumulative Burden of Parity Taxes, Special Assessments."

Moreover, in the event of a delinquency in the payment of Special Taxes, no assurance can be given that the proceeds of any foreclosure sale of property with delinquent Special Taxes would be sufficient to pay the delinquent Special Taxes. See "SPECIAL RISK FACTORS - Appraised Values."

Estimated Value-to-Lien Ratios

The values, direct and overlapping debt and total tax burden on property vary among parcels within the Community Facilities District. The $13,680,000 principal amount of Series 2007 Bonds constitutes direct debt for the property in the Community Facilities District. As set forth in Table I under "Direct and Overlapping Debt - Direct and Overlapping Debt Summary" above, as of May I, 2007, there is approximately $3,821,944 of other outstanding public indebtedness applicable to property in the Community Facilities District. Thus, the estimated direct and overlapping debt allocable to the property in the Community Facilities District is approximately $17,501,944.

The market value of the property in the Community Facilities District as of June I, 2007, as estimated by the Appraiser in the Appraisal, was approximately $140,000,000, which is approximately 10.2 times the principal amount of the Series 2007 Bonds and 8.00 times the sum of the principal amount of the Series 2007 Bonds, plus the amount of all the other outstanding public indebtedness allocable thereto, under the assumptions described in Table I.

The foregoing value-to-lien ratios represent estimated averages for the property within the Community Facilities District only; the actual ratios for individual parcels of land within the Community Facilities District may vary significantly.

No assurance can be given that any of the foregoing value-to-lien ratios will be maintained during the period of time that the Series 2007 Bonds are Outstanding. The Community Facilities District has no control over future property values or the amount of additional indebtedness that may be issued in the future by other public agencies, the payment of which, through the levy of a tax or an

16 assessment, is on a parity with the Special Taxes. See "SPECIAL RISK FACTORS - Appraised Value" and "-Additional and Overlapping Debt."

THE COMMUNITY FACILITIES DISTRICT

General

The Community Facilities District was established in accordance with the Act and constitutes a legally constituted governmental entity separate and apart from the City. The Community Facilities District is located at the northwest comer of Barranca Parkway and Jamboree Road. An extension of Tustin Ranch Road from Walnut Avenue to Barranca Parkway will border the west side of the Community Facilities District. The Community Facilities District represents additional development of the 1,533 acre master planned community !mown as Tustin Legacy, which was formerly the Marine Corps Air Station Tustin and is the first phase of commercial development in Tustin Legacy. See "Former Marine Corps Air Station Tustin."

The Community Facilities District consists of approximately 82.6 gross acres of land, of which approximately 44.3 acres are anticipated to be subject to the Special Tax. The Community Facilities District will consist of a shopping center named 'The District at Tustin Legacy." The District at Tustin Legacy is intended to be the primary retail and entertainment component of Tustin Legacy. The District at Tustin Legacy is expected to include approximately 985,000 square feet of building area, including three "big box" buildings, freestanding retail and restaurant pads, inline retail tenant spaces, and a movie theater complex, with supporting parking facilities and landscaping. The movie theater complex contains 14 screens and approximately 3,000 stadium­ style seats. The three "big box" buildings will be occupied by Costco, Lowe's, and Target. Pursuant to the Rate and Method, Privately Owned Specific Retail Property is not subject to the Special Tax. The Privately Owned Specific Retail Property consists of seven parcels improved or to be improved with a Costco, Lowe's, Target, Wells Fargo Banlc, In-N-Out Burger and Chick-Fil-A. Costco and Lowe's own the property on which their buildings are situated. Target is leasing the property on which its building will be situated from the Developer. See "-Property Ownership and Development." See also the site plan for the Community Facilities District at the forepart of this Official Statement for the relative location of each of the businesses expected to be located within the Community Facilities District.

Grading in the Community Facilities District began in January 2006 and approximately 90 percent of the construction within the Community Facilities District was complete as of June 30, 2007. Construction is expected to be substantially complete by November 2007.

Tnstin Legacy

Tustin Legacy is an approximately 1,533 acre planned community in central Orange County. The Community Facilities District represents an additional phase of development of Tustin Legacy. Tustin Legacy is the City's proposed development for that portion of the former Marine Corps Air Station (MCAS) Tustin located in the City and an additional four acre parcel acquired from The Irvine Company, dba Irvine Community Development Company, LLC ('The Irvine Company"). Approximately 73 acres of the original Air Station are located in the City oflrvine and are not a part of Tustin Legacy.

17 Tustin Legacy is currently planned to include 4,210 residential units, schools, parks, and munerous business and conuuercial uses. Tustin Legacy is generally bounded by single-family residential and business park uses to the north, light industrial and research and development uses to the west, light industrial and conuuercial uses to the south, and residential uses to the east in the City of Irvine. The Tustin Legacy project area is bounded by the Costa Mesa, Santa Ana, Laguna and San Diego Freeways. Jamboree Road provides access to the Eastern Transportation Corridor.

Summary of District Proceedings

Pursuant to the Act, the City Council of the City adopted Resolution No. 07-35 on May I, 2007, stating its intention to establish the Conuuunity Facilities District and to authorize the levy of special taxes within the boundaries of the Conuuunity Facilities District. On the same date, the City Council of the City also adopted Resolution No. 07-36 stating its intention to have the Conuuunity Facilities District incur bonded indebtedness in an amount not to exceed $16,000,000.

Fallowing public hearings conducted pursuant to the provisions of the Act, the City Council of the City adopted Resolution No. 07-44 on June 19, 2007, establishing the Conuuunity Facilities District. The City Council of the City also adopted Resolution No. 07-45 determining the necessity to have the Conuuunity Facilities District incur up to $16,000,000 of bonded indebtedness. Both resolutions called for a special election to submit propositions to authorize the levy of the Special Tax and incurring of the bonded indebtedness to the qualified electors of the Conuuunity Facilities District.

At a special election held on June 19, 2007, the owners of the property within the boundaries of the Conuuunity Facilities District authorized the Conuuunity Facilities District to incur bonded indebtedness in an amount not to exceed $16,000,000 and approved the Rate and Method to pay the principal of and interest on all bonds issued by the Conuuunity Facilities District.

Rate and Method of Apportionment

The full text of the Rate and Method is set forth in Appendix B hereto. Capitalized terms used under this caption have the meanings ascribed thereto in the Rate and Method.

The Conuuunity Facilities District is legally authorized and has covenanted to cause the levy of the Special Taxes in an amount determined according to a methodology, i.e., the Rate and Method, which the City Council of the City and the qualified electors of the Conuuunity Facilities District have approved. The Rate and Method apportions the total amount of Special Taxes to be collected among the taxable parcels in the Conuuunity Facilities District as more particularly described herein. The Conuuunity Facilities District adopted the Rate and Method following a public hearing and an election conducted pursuant to the provisions of the Act.

The Rate and Method classifies the Special Taxes as Special Tax A and Special Tax B. The Rate and Method classifies Taxable Property as either Developed Property, Undeveloped Property or Public Property. The Rate and Method exempts Privately Owned Specific Retail Property and Public Property from the Special Tax A. The Special Tax A is the Special Tax levied to fund the Special Tax Requirement for Facilities and is pledged to the payment of the Bonds. The Special Tax Bis the Special Tax levied to fund the provision of certain services but is not pledged to the payment of the Bonds.

18 The amount of Special Taxes that the Community Facilities District may levy is limited by the Maximum Special Tax rates set forth in the Rate and Method. The Rate and Method sets forth the Maximum Special Tax A for each Lot of Developed Property. Under the Rate and Method, the Maximum Special Tax A for a parcel of Developed Property will be increased on each July I, commencing July I, 2008, by an amount equal to two percent of the amount in effect for the previous fiscal year.

Under the Rate and Method, the Maximum Special Tax A for Undeveloped Property is $26,051 per acre for fiscal year 2007-08, subject to escalation on each July I, commencing July I, 2008, by an amount equal to two percent of the amount in effect for the previous fiscal year.

Commencing with fiscal year 2007-08 and each following fiscal year, the City Council of the City, acting in its capacity as the legislative body of the Community Facilities District, will determine the Special Tax Requirement for Facilities and will levy the Special Tax A until the total Special Tax Levy A equals the Special Tax Requirement for Facilities. The Special Tax Requirement for Facilities is defined under the Rate and Method as the amount required to pay the sum of the principal of and interest on the Bonds becoming due and payable during the calendar year commencing in such fiscal year, the Administrative Expenses estimated for such year, periodic costs on the Bonds, including but not limited to rebate payments, any amounts required to replenish the Reserve Fund to the Reserve Requirement and reasonably anticipated delinquent Special Taxes based on the delinquency rate for Special Taxes levied in the previous fiscal year or otherwise reasonably expected, less funds available pursuant to the Indenture.

The City Council of the City levies the Special Tax A in the following order, until the amount of the levy equals the amount needed to be collected to satisfy the Special Tax Requirement for Facilities:

First: the Special Tax A is levied Proportionately on each assessor's parcel of Developed Property at up to 100% of the applicable Maximum Special Tax A; and

Second: if additional moneys are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, then the Special Tax A will be levied proportionately on each assessor's parcel of Undeveloped Property at up to 100% of the Maximum Special Tax A for Undeveloped Property.

The term "Proportionately" as used in the above steps means that the ratio of the actual Special Tax levy to the Maximum Special Tax is equal for all Lots of Taxable Property. A "Lot" is defined under the Rate and Method as a lot created by a final map for which building permits may or have been issued.

The Rate and Method also provides that the Special Tax A will be levied on each assessor's parcel for a period not to exceed 45 years commencing with fiscal year 2007-08. The Special Tax A obligation applicable to a lot within the Community Facilities District may be prepaid and the obligation to pay any Special Tax A for such lot may be fully or partially satisfied as described in the Rate and Method.

19 Former Marine Corps Air Station Tnstin

Tustin Legacy was formerly a part of the Marine Corps Air Station Tustin. The Air Station was in operation for approximately 50 years as a military base but was included in base closure actions taken by the United States Government in 1991, 1993 and 1995. In 1992, the City began preparing a reuse plan for the Air Station. In October 1996, the City Council of the City adopted the "MCAS Tustin Specific Plan/Reuse Plan" (the "Reuse Plan") which addressed transportation, housing, employment and recreational issues relating to the closure and subsequent reuse of the Air Station property. Such Reuse Plan was subsequently amended in September 1998. Pursuant to the Defense Base Closure and Realignment Act of 1990, the Air Station was closed on July 2, 1999.

In January 200 I, the City Council of the City adopted a general plan land use designation entitled "Marine Corps Air Station Tustin Specific Plan" for Tustin Legacy. The City also prepared a Specific Plan detailing plauning policies, regulations and implementation strategies to guide development within Tustin Legacy. Approximately I, 153 acres of the former Air Station were conveyed to the City pursuant to the "Agreement Between the United States of America and the City of Tustin, California for the Conveyance of a Portion of the Former Marine Corp Air Station Tustin" dated May 13, 2002. In February 2003, the City Council of the City adopted the Specific Plan. The Specific Plan sets forth the zoning and entitlement framework for the development of Tustin Legacy, which includes the Community Facilities District. The Specific Plan conforms to and implements the Reuse Plan and the City's General Plan. Since its adoption in 2003, the Specific Plan has been amended from time to time.

CEQA Compliance

The City (the lead agency responsible for processing and approving the master entitlement and environmental review documents for the Air Station) and the United States Government prepared a Joint Final Environmental Impact Statement and Environmental Impact Report for the Disposal and Reuse of Marine Air Corps Station Tustin ("FEIS/EIR") in accordance with the National Environmental Protection Act and the California Environmental Quality Act. The City adopted the FEIS/EIR on January 21, 2001 and certified a supplement to the FEIS/EIR in December 2004 and an addendum to the FEIS/EIR in April 2006 (as so supplemented from time to time, the "Final FEIS/EIR"). In March 200 I the United States Government issued a Record of Decision approving the FEIS/EIR and the Reuse Plan.

The Final FEIS/EIR is a program environmental impact report ("program EIR") under CEQA. By statute, additional future environmental review on any public or private development activity may be necessary if (i) substantial changes are proposed in the project, (ii) substantial changes occur with respect to the circumstances under which the project is undertaken, or (iii) new information becomes available that was not !mown at the time the environmental impact report was certified as complete. However, the program EIR may make subsequent, extensive environmental review uunecessary. CEQA guidelines establish that where an EIR has been prepared and certified for a program consistent with the requirements established thereby, any lead agency for a later project pursuant to or consistent with such program should limit the EIR or negative declaration on the later project to effects which (i) were not examined as significant effects on the environment in the prior EIR, or (ii) are susceptible to substantial reduction or avoidance by the choice of specific revisions in the project, by the imposition of conditions or other means.

20 The developers of property in Tustin Legacy, including the Conununity Facilities District, will be responsible for adhering to all applicable provisions of the FEIS/EIR and all requirements of CEQA that might apply to development activities by any such developer either on-site or off-site.

In conjunction with the approval of entitlements for the Conunuuity Facilities District, Twining Laboratories, Inc. (the "Environmental Consultant"), prepared a Phase I Environmental Site Assessment, dated October 6, 2004 (the "Phase I Report"), for the property included in the Conununity Facilities District. The Phase I Report concluded, among other things, that, with the exception of certain portions of the Conununity Facilities District property that were in the process of being remediated by the Department of the Navy at the time the Phase I Report was completed, the Conununity Facilities District property had been approved for "no further action" status by the responsible regulatory agencies. Since the date of the Phase I Report, all of the Conununity Facilities District property that was excepted from "no further action" status has been remediated. Accordingly, the City has determined that no further CEQA action is required in connection with the development within the Conununity Facilities District.

Disposition and Development Agreement

General. The Developer and the City have entered into the Tustin Legacy Disposition and Development Agreement (Retail Development), dated as of July 20, 2004, as amended by the First Amendment to Tustin Legacy Disposition and Development Agreement (Retail Development), dated as of March 25, 2005, as further amended by the Second Amendment to Tustin Legacy Disposition and Development Agreement (Retail Development), dated as of June 8, 2005 ( collectively, the "DDA"). The DDA establishes an agreement between the City and the Developer for the purchase from the City and the development by the Developer of most of the developable property within the Conununity Facilities District. The DDA contemplates that the Developer will construct three types of improvements within the Conununity Facilities District in connection with the Development: (1) "vertical improvements," consisting of buildings, other structures and landscaping; (2) "horizontal improvements," consisting of on-site and off-site infrastructure improvements, such as improvements to public streets, wet and dry utilities, and conunon areas and parks; and (3) Tustin Legacy Backbone Infrastructure Work Program Improvements (as defined in the DDA), including the widening and improvement of certain roads and intersections and other public backbone infrastructure surrounding the Conununity Facilities District.

The DDA includes default prov1s1ons that, among other things, permit the City to repurchase from the Developer all or any portion of the Developer's property within the Conununity Facilities District, together with the improvements thereon, at a price equal to such property's Fair Market Value (as defined in the DDA). The DDA also permits the City, under limited circumstances, to exercise a right of reversion in the event of uncured defaults by the Developer thereunder, which right of reversion permits the City to (a) terminate the DDA as to all or a portion of the Developer's Conununity Facilities District property and/or the improvements thereon, and (b) thereafter to re-enter the affected property and/or improvements and re-vest title thereto in the City, such title to be subject to any existing mortgages permitted under the DDA.

Status of the Development. Grading in the Conununity Facilities District began in January 2006. Approximately 90 percent of the construction within the Conununity Facilities

21 District was complete as of June 30, 2007. Construction is expected to be substantially complete by November 2007. Pursuant to the DDA, upon completion of all improvements required under the DDA, the Developer will submit a request to the City for a final certificate of compliance. Upon the approval of such request by the City, the City will issue the final certificate of compliance and will cause it to be recorded in the official records of the County.

Property Ownership and Development

The following information regarding ownership and planned development of the Community Facilities District has been provided by the Developer. The information provided under this caption has been included because it may be considered relevant to an informed evaluation and analysis of the Series 2007 Bonds and the Community Facilities District. No assurance can be given, however, that the proposed development of the property within the Community Facilities District will occur, or that it will occur in a timely manner or in the configuration described herein, or that the Developer or any other property owner described herein will or will not retain ownership of its property within the Community Facilities District. No representation is made by the City or the Community Facilities District as to the accuracy or adequacy ofsuch information provided by the Developer.

The Developer

The Developer, Vestar/Kimco Tustin, L.P ., is a California limited partnership. Vestar California XXX, L.L.C., an Arizona limited liability company ("Vestar California"), is the sole general partner of the Developer and Kimco Tustin, Inc., a Delaware corporation ("Kimco Tustin"), is the sole limited partner of the Developer.

The following entities own more than 5% membership interest in Vestar California: (i) Hanley Investments Limited Partnership, an Arizona limited partnership, (ii) Kuhle Investments II Limited Partnership, an Arizona limited partnership, (iii) Larcher Investments Limited Partnership, an Arizona limited partnership, (iv) Rhodes Investments IV Limited Partnership, an Arizona limited partnership, and (v) SPT Investments Limited Partnership, an Arizona limited partnership. Each of the foregoing entities is owned by or affiliated with the owners of Vestar Development Co., an Arizona corporation ("Vestar Development Co."). Kimco Tustin is affiliated with Kimco Realty Corporation, a publicly-traded real estate investment trust ("Kimco Realty Corporation").

The Developer is a single purpose entity that was formed in 2003 as a partnership between affiliates ofVestar Development Co. and Kimco Realty Corporation for the purpose of purchasing the property in the Community Facilities District and constructing the improvements thereon. Kimco Realty Corporation is one of the nation's largest owner and operator of neighborhood and community shopping centers with interests in more than 1,337 properties in 45 states, comprising over 174.4 million square feet of leaseable space. Vestar Development Co. was founded in 1989 by the five senior executives of the commercial division of a large Arizona homebuilder. Vestar Development Co., through affiliated entities and joint ventures ( collectively, "Vestar"), develops and manages commercial real estate across the United States, with significant holdings and development activities in the Phoenix, Los Angeles, and San Diego metropolitan areas. Vestar specializes in the development and management of large, unenclosed shopping and entertainment centers, also called "power centers," that serve as community focal points.

22 Experience of the Developer

Some ofVestar's most notable completed projects include the following:

Crossroads Towne Center. Crossroads Towne Center is a 140-acre, 1.3 million square­ foot regional entertainment and power center located in Chandler, Arizona. Completed in 2007, Crossroads Towne Center is anchored by Super-Target, Wal-Mart, Home Depot, Harkins Theaters, Ross Dress For Less, Michaels, PetsMart, Linens 'N Things, and Cost Plus. Crossroads Towne Center is one of the largest shopping centers in the Southeast Valley of the Phoenix Metropolitan Area.

Desert Ridge Marketplace. Desert Ridge Marketplace is a 1.2 million-square-foot regional entertainment, lifestyle, and power center located in northeast Phoenix, Arizona. Completed in 2001, Desert Ridge Marketplace occupies 110 acres and offers strategically integrated shopping, dining, and entertainment in a festive, pedestrian oriented, town center environment. Desert Ridge Marketplace is anchored by AMC Theaters, Target, 0 Id Navy, Kohl's, Albertson's, Barnes & Noble, Ross Dress For Less, PetsMart, and Marshall's. Over 17 million shoppers visited Desert Ridge Marketplace during its first year of operations.

Long Beach Towne Center. Long Beach Towne Center is a 1 million square-foot power center located in Long Beach, California. Completed in 2000, Long Beach Towne Center is anchored by Wal-Mart, Lowe's, Sam's Club, Barnes & Noble, Linens-N-Things, Staples, Ross Dress for Less, 0 Id Navy, Pier 1 Imports, and In-N-Out Burger.

Spectrum Towne Center. Spectrum Towne Center is an 830,000 square foot freeway­ oriented regional power center located in Chino, California. Completed in 2002, the Spectrum Towne Center is anchored by Wal-Mart, Sam's Club, Kohl's, Linens 'n Things, Marshalls, Nordstrom Rack, and Borders Books & Music.

Ahwatukee Foothills Towne Center. Ahwatukee Foothills Towne Center is a 950,000 square-foot power center located in Phoenix, Arizona. Completed in 1993, Ahwatukee Foothills Towne Center is anchored by Target, Mervyn's, AMC Theaters, Best Buy, Ross Dress For Less, Barnes & Noble, Babies R Us, Old Navy, and Pier 1 Imports.

College Grove Marketplace. College Grove Marketplace is a 650,000 square-foot power center located in San Diego, California. Completed in 1999, College Grove Marketplace was developed as a redevelopment project (the site was formerly a regional mall) and won unprecedented support from local residents.

Pico Rivera Towne Center. Pico Rivera Towne Center is a 629,000 square foot regional power center located in Pico Rivera, California. Completed in 2002, the Pico Rivera Towne Center is anchored by Wal-Mart, Lowe's, Borders Books & Music, Ross Dress for Less, Marshalls, Staples, and Walgreens, and includes in-line shops, specialty retailers, full-service and quick service restaurants, and pad retail users. Pico Rivera Towne Center is part of a 200-acre master planned development that includes over 3 million square feet of retail, office, research and development, and industrial uses.

23 Santee Trolley Square. Santee Trolley Square is a 438,072 square foot power center located in the heart of Santee, California. Completed in 2002, Santee Trolley Square is anchored by Target, 24 Hour Fitness, TJ Maxx, Bed Bath & Beyond, Barnes & Noble, Staples, PetsMart, and Old Navy. Santee Trolley Square also features retail, entertainment, and transportation elements and is distinguished by a unique design, which includes water features located at entries and gathering areas and more than 1,000 trees.

Among several projects in development, Vestar is currently constructing the Tempe Marketplace, a 1.3 million square foot regional retail center in Tempe, Arizona. The Tempe Marketplace and the Development constitute two of the largest retail developments currently under development in the western United States. The Tempe Marketplace will have significant lifestyle and entertainment components and, like the Development, will change the retail landscape in its community.

In addition to the Community Facilities District, Vestar had the following projects under construction as of June 30, 2007.

Table 2 City of Tnstin Commnnity Facilities District No. 07-01 (Tnstin Legacy/Retail Center) Vestar Projects Cnrrently Under Constrnction as of J nne 30, 2007

Estimated Name of Project Location Total Square Feet Completion Date

Tempe Marketplace Tempe,AZ 1,300,000 December 2007 Lake Pleasant Towne Center Peoria, AZ 630,000 December 2007 Oro Valley Marketplace Tucson, AZ 850,000 December 2007 Queen Creek Marketplace Queen Creek, AZ 900,000 June 2008 Sundance Towne Center Buckeye, AZ 650,000 December 2009 Total Square Footage Under Construction 4,330,000

Source: Developer.

Property Ownership in the Community Facilities District

The following tables set forth ownership information for the property in the Community Facilities District, the number of acres subject to the Special Tax per parcel and certain other information as of June 30, 2007. Table 4 indicates the assessed value as of January 1, 2007, and the maximum Special Tax for fiscal year 2007-08 applicable to each parcel owned by the Developer and expected to be subject to the Special Tax in the Community Facilities District. Table 5 describes the status of the leases with respect to property in the Community Facilities District subject to the Special Tax as of June 30, 2007. Note, however, that the obligation to pay the Special Taxes when due is ultimately the responsibility of the Developer or any future property owner, not the tenant. The lease terms for each tenant vary. See "SPECIAL RISK FACTORS - Concentration of Ownership and Leasehold Interests." See also the site plan for the Community Facilities District at the forepart of this Official Statement for the relative

24 location of each of the businesses expected to be located within the Community Facilities District.

Table 3 City of Tnstin Commnnity Facilities District No. 07-01 (Tnstin Legacy/Retail Center) Ownership within the Commnnity Facilities District as of J nne 30, 2007

2 Parcel (l) Acres Owner Lessee( >

APN 434-431-24 1.785 Costco NIA APN 434-441-12 0.918 Developer In-N-Out APN 434-441-16 9.044 Developer NIA APN 434-441-17 8.735 Developer NIA APN 434-441-18 3.887 Developer NIA LLA 2006-01 (Parcel 1) 0.920 Developer NIA LLA 2006-01 (Parcel 2) 10.001 Developer Target LLA 2006-02 (Parcel 1) 1.330 Developer NIA LLA 2006-02 (Parcel 2) 1.148 Developer Wells Fargo Bartle LLA 2006-03 (Parcels 2 and 3) 2.296 Developer NIA LLA 2006-03 (Parcel 4) 0.918 Developer Chick-Fil-A LLA 2006-04 (Parcels 1 and 2) 17.005 Developer NIA LLA 2006-05 (Parcel 1) 1.035 Developer NIA LLA 2006-07 (Parcel 1) 9.924 Lowe's NIA LLA 2006-07 (Parcel 2) 13.624 Costco NIA Total Acres 82.570

(l) Parcels are identified by the applicable assessor's parcel number ("APN") or by the applicable lot line adjustment (''LLA"). 2 < ) The property in the Community Facilities District owned by Costco and Lowe's and owned by the Developer but subject to leases with In-N-Out Burger, Target, Wells Fargo Bank and Chick-Fil-A is exempt from the lien of Special Tax. See Table 5 for the parcels of property in the Community Facilities District owned by the Developer that are subject to the lien of the Special Tax. Source: Developer.

25 Table 4 City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Assessed Values and Maximum Special Tax

Approx. Taxable Assessed Maximum Parcel (l) Acres Square Footage Owner Value(1> Special Tax('J

APN 434-441-16 9.044 247,001 Developer $ 9,378, 165 $ 409,774 APN 434-441-18 3.887 44,528 Developer 4,030,509 74,098 LLA 2006-01 (Parcel 1) 0.920 11,794 Developer 1,872,314 19,458 LLA 2006-02 (Parcel 1) 1.330 12,023 Developer 2,645,483 19,846 LLA 2006-03 (Parcel 2) 1.148 7,000 Developer 2,302,008 12,926 LLA 2006-03 (Parcel 3) 1.148 5,500 Developer 2,302,008 10,725 LLA 2006-04 (Parcel 1) 1.148 8,000 Developer 1,190,217 13,200 LLA 2006-04 (Parcel 2) 15.857 191,475 Developer 31,797,005 317,338 LLA 2006-05 (Parcel 1) 1.035 10,000 Developer 919,752 16,500 APN 434-441-li31 8.735 NA Developer 9,057,722 Total 44.252 537,321 $65,495,183 $893,865

(!J As of January 1, 2007. 2 ( ) Represents the maximum Special Tax for Developed Property assuming all parcels are classified as Developed Property for fiscal year 2007-08, except for APN 434-441-17, which is classified as Undeveloped Property under the Rate and Method, for fiscal year 2007-08. Pursuant to the Rate and Method, commencing July 1, 2008, and on July 1 of each fiscal year thereafter, the maximum Special Tax shall increase by an amount equal to two percent of the amount in effect for the previous fiscal year. (J) This parcel is classified as Undeveloped Property under the Rate and Method. Such parcel is used as a parking lot and as long as such parcel is used as a parking lot it will continue to be classified as Undeveloped Property under the Rate and Method. The Community Facilities District does not expect to levy the Special Tax on Undeveloped Property in order to pay debt service on the Series 2007 Bonds. Source: David Taussig & Associates, Inc.

26 Table 5 City of Tustin Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Expected Retail Uses of Parcels Subject to the Special Tax in the Community Facilities District

Approx. Square Lease Renewal Opening/Projected Tax Parcei<1l Owner/Lessee Footage Term Options Opening Date(2l

APN 434-441-16 AMC 68,000 20 yr 4 5-yr 7/12/2007 Strike 28,189 10 yr 3 5-yr 2/1/2008 DSW 24,030 10 yr 3 5-yr 9/1/2007 Borders 21,570 15 yr 3 5-yr 7/12/2007 Tilly's 10,000 10 yr 2 5-yr 7/12/2007 JT Schmid's 8,008 15 yr 2 5-yr 9/1/2007 Bluewater Grill 7,250 15 yr 3 5-yr 10/15/2007 The Auld Dubliner 5,000 10 yr 2 5-yr 10/15/2007 Available 4,964 10 yr 2 5-yr 2/1/2008 Panera Bread 4,600 10 yr 2 5-yr 7/12/2007 Gstage 4,500 10 yr 1 5-yr 8/1/2007 Ra Sushi 4,500 10 yr 2 5-yr 10/1/2007 Justice 4,056 10 yr 1 5-yr 7/12/2007 Finish Line 3,905 10 yr 1 5-yr 7/12/2007 Beach Bums 3,903 7 yr 1 7-yr 7/12/2007 MGMT 3,700 10 yr 2 5-yr 12/1/2007 Chaparosa Grill 3,542 10 yr 1 5-yr 8/1/2007 Zumiez 2,988 10 yr 2 5-yr 7/12/2007 Sharkey's 2,950 10 yr 2 5-yr 8/15/2007 Go Roma 2,650 10 yr 2 5-yr 7/12/2007 Blush 2,500 10 yr 2 5-yr 7/12/2007 Vans 2,412 10 yr 2 5 yr 11/15/2007 Johnny Rockets 2,200 10 yr 2 5-yr 7/12/2007 Heavenly Coutoure 1,800 10 yr 2 5-yr 11/15/2007 Peet' s Coffee 1,728 10 yr 2 5-yr 7/12/2007 Hot Topic 1,716 10 yr 2 5-yr 7/12/2007 Madison Bleu 1,663 5 yr 2 5-yr 8/15/2007 Tacone 1,555 10 yr 2 5-yr 7/12/2007 Thai Bamboo 1,530 10 yr 2 5-yr 7/12/2007 Red Brick Pizza 1,508 10 yr 2 5-yr 7/12/2007 No Fear 1,500 10 yr 2 5-yr 7/12/2007 Play N Trade 1,450 5 yr 1 5-yr 8/15/2007 The Cravery 1,157 10 yr 2 5-yr 8/15/2007 Sunglass Hut 1,157 10 yr 2 5-yr 7/12/2007 Claires 1,157 5 yr 1 5-yr 7/12/2007 Rocky Mountain Chocolate 1,067 10 yr 2 5-yr 7/12/2007 Ben & Jerry's 1,024 10 yr 2 5-yr 7/12/2007 Shimoni 822 5 yr 1 5-yr 2/1/2008 Lids 750 10 yr 2 5-yr 7/12/2007

APN 434-441-17 None (Par.king) NA NA NA

APN 434-441-18 Petsmart 20,087 15 yr 4 5-yr 7/1/2007 Office Depot 18,361 15 yr 3 5-yr 6/1/2007 Cingular 3,040 5 yr 1 5-yr 6/15/2007 Face Logic 1,267 5 yr 1 5-yr 9/1/2007 Finest Nails 1,773 10 yr 2 5-yr 6/15/2007

LLA 2006-01 (Parcel 1) Kinecta Credit Union 2,901 10 yr 2 5-yr 9/1/2007 ONO 1,495 10 yr 2 5-yr 9/1/2007

27 Approx. Square Lease Renewal Opening/Projected Tax Parcei< 1l Owner/Lessee Footage Term Options Opening Date(2l

Dry Cleaner 1,400 10 yr 2 5-yr 9/1/2007 Quiznos 1,083 10 yr 2 5-yr 6/15/2007 Juice It Up 1,055 10 yr 2 5-yr 6/15/2007 Daphnes 2,000 10 yr 2 5-yr 6/15/2007 Sport Clips 960 5 yr 1 5-yr 8/1/2007 UPS Store 900 5 yr 1 5-yr 8/1/2007

LLA 2006-02 (Parcel 1) Farmers and Merchants Bank 5,306 10 yr 2 5-yr 6/15/2007 Verizon Wireless 3,482 5 yr 1 5-yr 6/15/2007 Pei Wei 3,235 10 yr 2 5-yr 7/30/2007

LLA 2006-03 (Parcel 2 & 3) The Winery 7,000 20 yr 2 5-yr 8/1/2007 CPK 5,500 10 yr 2 5-yr 3/1/2008

LLA 2006-04 (Parcell& 2) Whole Foods 60,550 20 yr 4 5-yr 8/22/2007 TJ Maxx/Home Goods 56,658 10 yr 4 5-yr 7/1/2007 Best Buy 30,000 10 yr 3 5-yr 11/15/2007 Michaels 20,957 10 yr 3 5-yr 8/1/2007 Ulta Cosmetics 10,200 10 yr 2 5-yr 11/15/2007 West Italian Bistro 8,000 20 yr 2 5-yr 3/1/2008 Available 3,700 10 yr 2 5-yr 2/1/2008 Right Start 2,460 10 yr 2 5-yr 9/1/2007 Hush Baby 2,084 10 yr 2 5-yr 9/1/2007 Pinkberry Yogurt 1,500 10 yr 2 5-yr 11/1/2007 Aveda 1,495 10 yr 1 5-yr 2/1/2008 Shea Optometric 950 10 yr 2 5-yr 9/1/2007 Valentino Chocolate 921 10 yr 1 5-yr 9/1/2007

LLA 2006-05 (Parcel 1) Lucille's Smoke House 10 000 20 yr 4 5-yr 5/30/2007 Total 537,321

(l) Parcels are identified by the applicable assessor's parcel number ("APN") or by the applicable lot line adjustment ("LLA"). All parcels within the Community Facilities District, including parcels designated as Privately Owned Specific Retail Property in the Rate and Method, are subject to the Special Tax B for services. 2 < ) Costco, Lowe's, Target, Wells Fargo Bank and Chick-Fil-A have opened for business. In-N-Out Burger is expected to open in November 2007. The property upon which these business are situated is designated as Privately Owned Specific Retail Property in the Rate and Method and is not subject to the Special Tax A, which is pledged to the payment of the Bonds. Therefore, the properties owned or leased by these entities are not included in the foregoing table. Source: Developer.

The Developer's Financing Plan

Construction Loan. The Developer has obtained a construction loan (the "Construction Loan") from a consortium of banks led by Bank of America, NA, and JPMorgan Chase & Co. The Construction Loan is secured by a deed of trust that encumbers the property owned by the Developer in the Community Facilities District. The original committed amount to be borrowed under the Construction Loan was $221,675,000. The outstanding balance of the Construction Loan as of June 30, 2007, was approximately $163,702,662. The Construction Loan is subject to interest-only payments at interest only at a rate equal to the London Interbank Offered Rate ("LIB OR"), plus 1.75%. The principal of the Construction Loan is due and payable on June 1, 2008, subject to two one-year extensions.

28 In addition to the proceeds of the Construction Loan, the Developer has expended approximately $69,900,000 in available cash to pay for a portion of the construction costs related to the Community Facilities District.

Estimated Development Costs. As of June 30, 2007, the Developer estimates that it had expended approximately $223,656,000 in construction costs. After subtracting parcel sales of approximately $21,720,000 and development reimbursements of approximately $17,800,908, the net development costs were approximately $184,135,000 as of June 30, 2007. The following table describes the estimated construction budget as of June 30, 2007. There can be no assurance that there will not be changes in the budgeted amounts shown in the table below. Although the following table reflects the Developer's current projections, many factors beyond its control, or a decision by the Developer to alter its current plans, may cause the actual costs required to construct and complete the development in the Community Facilities District to differ from the projections set forth below.

The inclusion of the following budget in this Official Statement is not intended to guarantee a particular result, but rather to indicate that, based on expected revenues and expenditures, the Developer believes that the development described herein is feasible. Future changes in the Developer's financial projections are expected to be included in the continuing disclosure reports to be prepared by the Developer in accordance with the Continuing Disclosure Agreement to be executed by the Developer upon the issuance of the Bonds. See Appendix E - "Forms of Continuing Disclosure Agreements."

29 Table 6 City of Tustin Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Construction Budget (as of June 30, 2007)

Total Budgeted Expenditures Percent Cost Item Amount To Date Completed

Land Acquisition Costs Land Acquisition $33,414,170 $31,581,490 94.5% Land Sales (25,742,607) (21,720,177) 84.4 Total Land Acquisition Costs $ 7,671,563 $ 9,861,313 100.0%

Construction Costs Off-Site Improvements $ 83,447,660 $ 61,755,752 64.6% On-Site Improvements 50,216,890 43,645,679 80.2 Building Improvements 58,831,803 39,001,963 50.1 Tenant Improvement Allowances 10,061,293 2,149,861 17.9 Hard Cost Contingency 1,000,000 0 0.0 Total Construction Costs $203,557,646 $146,553,255 72.0%

Soft Costs Government Permits and Fees $ 7,256,773 $ 7,246,161 99.9% Utility Design and Construction Fees 399,073 293,974 73.7 Architecture and Engineering 10,153,144 8,944,116 88.1 Leasing and Sales Commissions 5,603,526 2,882,424 51.4 Legal and Accounting 1,554,499 1,330,143 85.6 Lender Legal 428,283 429,372 100.0 Title/Escrow, Inspections, Appraisal 212,520 215,629 100.0 Property Taxes and Insurance 3,658,576 3,579, 171 97.8 Marketing and Administration 2,011,796 1,587,802 78.9 Soft Cost Contingency 100,000 0 0.0 Total Soft Costs $31,378,190 $26,508, 792 84.5%

Financing Costs $14,617,677 $11,328,347 77.5%

Development Fees $9,352,262 $7,684,696 82.2%

Development Reimbursement Costs ($77,521,267) ($17,800,908) 23.0%

Total Development Costs $189,056,071 $184,135,495 97.4%

Source: The Developer.

As indicated above, the preceding description of expected development by the Developer is based on information provided to the Community Facilities District by the Developer for purposes of this Official Statement. No representation is made as to the experience, abilities or financial resources of the Developer or as to the likelihood that the Developer will be successful in developing

30 the Community Facilities District. The Community Facilities District has not made, nor will it make, any investigation of the Developer. See "SPECIAL RISK FACTORS - Failure to Develop. "

SPECIAL RISK FACTORS

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 Series 2007 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 Community Facilities District to pay their Special Taxes when due. Such a failure to pay Special Taxes could result in the inability of the Community Facilities District to make full and punctual payments on the Series 2007 Bonds.

Concentration of Ownership and Leasehold Interests

As of June I, 2007, the property within the Community Facilities District subject to the Special Tax was owned by the Developer. See 'THE COMMUNITY FACILITIES DISTRICT - Property Ownership and Development." The timely payment of debt service on the Series 2007 Bonds depends upon the willingness and ability of the Developer to pay the Special Tax installments when due. Conditions may affect the willingness of the Developer, or any other property owners, to pay Special Tax installments on property and there is no assurance that the owners will pay such Special Tax installments even if financially able to do so.

The initial terms of the leases are significantly shorter than the September I, 2037 maturity date of the Series 2007 Bonds. In the event that tenants do not execute lease extensions after the expiration of their initial lease terms, the Developer will be required to find new tenants. There can be no assurance that such tenants will exercise lease extensions after the initial terms of their respective leases, and if not, that the Developer can or will find replacement tenants. The failure of such tenants to extent their leases or the inability of the Developer to find replacement tenants could adversely effect the ability or willingness of the Developer to pay Special Tax installments on the property in the Community Facilities District. See 'THE COMMUNITY FACILITIES DISTRICT­ Property Ownership and Development-Table 3."

Risks Associated with Ongoing Ownership and Operation of "The District at Tustin Legacy"

The ability or willingness of the Developer to pay the Special Taxes could be adversely affected by the ability of the Developer to establish appropriate rental rates for, and the continuing ability to rent space in, The District at Tustin Legacy. In addition, in order to lease retail space, it may be necessary for the Developer to expend a significant amount of funds. There is no assurance that the Developer will have funds available for this purposes, or that it will choose to utilize available funds for this purpose as leases expire. Moreover, to the extent there are any expenditures required to maintain The District at Tustin Legacy that are not foreseen by the Developer, the only source of money to pay such unanticipated expenses would be the Developer, and there can be no assurance that the Developer would be willing or able to pay such additional expenditures. Any of the foregoing events may adversely affect the Developer's ability to generate sufficient rental income to pay the Special Tax installments when due.

31 Risk of Changes in Market Conditions

The financial viability of the commercial business in the Community Facilities District could be adversely affected as a result of changes in real estate market conditions and changes in general economic conditions. The leases provide that the tenants are responsible for the payment of the taxes on the space occupied by the tenant. If any tenant defaults in the payment of such taxes, the Developer or any subsequent owner is responsible for such payments. There can be no assurance that any such change in real estate market conditions or general economic conditions will not impact the ability of the tenants to pay their taxes when due, which in turn, may adversely affect the ability of the Developer to pay the Special Tax instalhnents when due.

The Series 2007 Bonds are Limited Obligations of the Community Facilities District

Funds for the payment of the principal of, and interest on, the Series 2007 Bonds are derived from Special Taxes levied in the Community Facilities District. The Special Taxes collected by the Community Facilities District could be insufficient to pay debt service on the Series 2007 Bonds due to non-payment of aunual Special Taxes or insufficient proceeds received from the sales of land within the Community Facilities District due to delinquencies. The Community Facilities District's obligation with respect to delinquent Special Taxes is limited to the institution of judicial foreclosure proceedings under the circumstances described in the Indenture. See "SECURITY FOR THE SERIES 2007 BONDS- Covenant for Superior Court Foreclosure."

The Special Taxes are not Personal Obligations of the Developer or Subsequent Property Owners

The obligation to pay Special Taxes levied within the Community Facilities District does not constitute a personal obligation of the Developer or subsequent owners of the property in the Community Facilities District. Enforcement of Special Tax payment obligations by the Community Facilities District is limited to judicial foreclosure in the Orange County Superior Court. See "SECURITY FOR THE SERIES 2007 BONDS - Covenant for Superior Court Foreclosure." There is no assurance that the Developer or any subsequent owner of a parcel subject to Special Taxes will be able to pay the Special Taxes, or that such owner will choose to pay such instalhnents even though financially able to do so.

Special Tax Delinquencies

The Special Taxes will be billed to properties within the Community Facilities District on the ad valorem property tax bills sent to owners of such properties, i.e., the Developer. Such Special Tax installments will be due and payable and bear the same penalties and interest for non-payment, as do ad valorem property tax installments.

Significant delinquencies in the payment of aunual Special Tax installments, or delays in the prosecution of foreclosure proceedings to collect such Special Taxes, could result in the depletion of the Reserve Fund and default in payment of debt service on the Series 2007 Bonds. See "SECURITY FOR THE SERIES 2007 BONDS - Covenant for Superior Court Foreclosure," for a discussion of the provisions that apply, and the procedures that the Community Facilities District is obligated to follow, under the Indenture in the event of delinquencies in the payment of Special Taxes. See "- Payments by FDIC or Other Federal Agencies" and "- Bankruptcy" below, for a discussion of the policy of the Federal Deposit Insurance Corporation regarding the payment of

32 special taxes and limitations on the Community Facilities District's ability to foreclose on the lien of the Special Taxes in certain circmnstances.

Bankruptcy

The payment of Special Taxes and the ability of the Community Facilities District to foreclose the lien of a delinquent Special Tax may be limited by bankruptcy, insolvency, or other laws generally affecting creditor's rights or by the laws of the State relating to judicial foreclosure.

The various legal opinions to be delivered concurrently with the delivery of Series 2007 Bonds (including Bond Counsel's approving legal opinion) will be qualified, as to the enforceability of the various legal instrmnents, by bankruptcy, reorganization, insolvency, or other similar laws affecting the rights of creditors generally.

Although banlauptcy proceedings would not cause the Special Taxes to become extinguished, the amount of any lien on property securing the payment of delinquent Special Taxes could be reduced if the value of the property were determined by the banlauptcy court to have become less than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the reduced lien would then be treated as an unsecured claim by the court. Further, banlauptcy of a property owner could result in a delay in prosecuting superior court foreclosure proceedings. Such a delay would increase the likelihood of a delay or default in payment of the principal of, and interest on, the Series 2007 Bonds and the possibility of delinquent tax instalhnents not being paid in full. The prosecution of foreclosure proceedings could also be delayed for other reasons, including crowded court calendars and procedural delaying tactics.

Insufficiency of Special Taxes

The Act provides that if any property within the Community Facilities District not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Taxes will continue to be levied on and enforceable against the public entity that acquired the property. In addition, the Act provides that if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operative effect of these provisions have not been tested in the courts. If for any reason property subject to the Special Tax becomes exempt from taxation by reason of ownership by a nontaxable entity such as the federal government, or another public agency, subject to the limitation of the max.immn Special Taxes, the Special Taxes will be reallocated to the remaining properties within the Community Facilities District. This would result in the owners of such properties paying a greater amount of the Special Tax and could have an adverse effect on the timely payment of the Special Tax.

Disclosures to Future Purchasers

The Community Facilities District has recorded a Notice of Special Tax Lien in the Office of the County Recorder of the County. 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 will consider such obligation for Special Taxes in the purchase of a parcel subject to the Special Tax or the lending of money secured thereby. Failure to disclose the existence of the Special Taxes or the full amount of the pro rata share of debt on the land in the Community Facilities District

33 may affect the willingness and ability of future owners of land within the Community Facilities District to pay the Special Taxes when due.

Billing of Special Taxes

A special tax formula can result in a substantially heavier property tax burden being imposed upon properties within a community facilities district than elsewhere in a city or county, and this in turn can lead to problems in the collection of the special tax. In some community facilities districts the taxpayers have refused to pay the special tax and have commenced litigation challenging the special tax, the community facilities district and the bonds issued by the community facilities district.

Under provisions of the Act, the Special Taxes are to be billed to the properties within the Community Facilities District which were entered on the Assessment Roll of the County Assessor by January I of the previous fiscal year on the regular property tax bills sent to owners of such properties. Such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. These Special Tax installment payments caunot be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or inability to make regular property tax payments and installment payments of Special Taxes in the future. See "SECURITY FOR THE SERIES 2007 BONDS - Covenant for Superior Court Foreclosure," for a discussion of the provisions which apply, and procedures which the Community Facilities District is obligated to follow, in the event of delinquency in the payment of installments of Special Taxes.

Natural Disasters

The Community Facilities District, like all California commun1tles, may be subject to unpredictable seismic activity, fires due to the vegetation and topography, or flooding in the wake of fires or in the event of unseasonable rainfall. 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 such an event. The occurrence of earthquakes, fires or flooding in or around the Community Facilities District could result in substantial damage to both property and infrastructure in the Community Facilities District which, in turn, could substantially reduce the ability or willingness of the Developer or any future property owner to pay their Special Taxes when due.

Soil Conditions in the District

The soils in the Community Facilities District are characterized as poorly drained soils in alluvial fans, flood plains or basins. The soils have slight to no erosion hazard but do have moderate to severe building site development limitations. Moderate limitations can be overcome or minimized through plauning and design. Severe limitations require a major increase in construction effort, design or maintenance and require remedial measures prior to construction to prevent damage to foundations, structures and infrastructure. Such remedial measures include soil import and amendment and have been completed in connection with the grading of the property within the Community Facilities District.

34 Payments by FDIC or Other Federal Agencies

The ability of the Community Facilities District to collect the Special Taxes and interest and penalties specified by State law, and to foreclose the lien of delinquent Special Taxes, may be limited in certain respects with regard to properties in which the Federal Deposit Insurance Corporation (the "FDIC") or other similar federal governmental agencies has or obtains an interest. On June 4, 1991, the FDIC issued a Statement of Policy Regarding the Payment of State and Local Property Taxes (the "1991 Policy Statement"). The 1991 Policy Statement was revised and superseded by a new Policy Statement effective January 9, 1997 (the "Policy Statement"). The Policy Statement provides that real 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 fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Act and a special tax formula which determines the special tax due each year, are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity.

The Community Facilities District is unable to predict what effect the FDIC's application of the Policy Statement would have in the event of a delinquency on a parcel within the Community Facilities District in which the FDIC has an interest, although prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale would reduce or eliminate the persons willing to purchase a parcel at a foreclosure sale. Owners of the Series 2007 Bonds should assume that the Community Facilities District will be unable to foreclose on any parcel owned by the FDIC. As of July 31, 2007, no property in the Community Facilities District was owned by the FDIC.

Exempt Properties

Certain properties are exempt from the Special Taxes in accordance with the Rate and Method (see Appendix B-"Rate and Method of Apportionment of Special Tax"). In addition, the Act provides that properties or entities of the federal, State or local government are exempt from the Special Tax; provided, however, that property within the Community Facilities District acquired by a

35 public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. Property acquired by a public entity following a tax sale or foreclosure based upon failure to pay taxes may become exempt from the Special Tax. In addition, although the Act provides that if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment. The constitutionality and operation of these provisions of the Act have not been tested. If additional property is dedicated to the City or other public entities, this additional property might become exempt from the Special Tax.

The Act further provides that no other properties or entities are exempt from the Special Tax unless the properties or entities are expressly exempted in a resolution of consideration to levy a new special tax or to alter the rate and method of apportionment of an existing special tax.

Cumulative Burden of Parity Taxes, Special Assessments

The Special Taxes constitute a lien against the parcels of land on which they have been levied. Such lien is on a parity with all special taxes 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 Community Facilities District does not have control over the ability of other entities to issue indebtedness secured by ad valorem taxes, special taxes or assessments payable from all or a portion of the property within the Community Facilities District. In addition, the owners of property within the Community Facilities District may, without the consent or lmowledge of the Community Facilities District, petition other public agencies to issue public indebtedness secured by ad valorem taxes, special taxes or assessments. Any such special taxes may have a lien on such property on a parity with the lien of the Special Taxes. See "SECURITY FOR THE SERIES 2007 BONDS - Direct and Overlapping Debt."

Additional and Overlapping Debt

The property in the Community Facilities District is subject to direct and overlapping tax and assessment debt as set forth herein under the caption "SECURITY FOR THE SERIES 2007 BONDS Direct and Overlapping Debt." The Developer and any subsequent owners of the property in the Community Facilities District subject to the Special Tax are required to pay the Special Taxes and any and all annual special assessments and general property tax levies. The Community Facilities District has no control over the amount of additional indebtedness that may be issued by other public agencies, the payment of which, through the levy of a tax or an assessment, is on a parity with the Special Taxes. See "- Cumulative Burden of Parity Taxes, Special Assessments" and "SECURITY FOR THE SERIES 2007 BONDS - Direct and Overlapping Debt." A decrease in the property value in the Community Facilities District or an increase in the parity liens on property in the Community Facilities District, or both, could reduce the ability or willingness of the Developer to pay the Special Taxes on the property in the Community Facilities District.

Limitations on Remedies

Remedies available to the Owners may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Series 2007 Bonds or to preserve the tax-exempt status of the Series 2007 Bonds.

36 Bond Counsel has limited its opinion as to the enforceability of the Series 2007 Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or others similar laws affecting generally the enforcement of creditor's rights, by equitable principles, by the exercise of judicial discretion and by limitations on remedies against public agencies in the State of California. Additionally, the Series 2007 Bonds are not subject to acceleration in the event of the breach of any covenant or duty under the Indenture. 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.

Right to Vote on Taxes Act

On November 5, 1996, the voters of the State approved Proposition 218, the so-called "Right to Vote on Taxes Act." Proposition 218 added Articles XIIIC ("Article XIIIC") and XIIID to the State Constitution, which contain a number of provisions affecting the ability of local agencies to levy and collect both existing and future taxes, assessments, fees and charges.

Among other things, Section 3 of Article XIII 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. Accordingly, although the matter is not free from doubt, it is likely that Article XIIIC 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 Series 2007 Bonds.

It may be possible, however, for voters or the Community Facilities District to reduce the Special Taxes in a mauner which does not interfere with the timely repayment of the Series 2007 Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. 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 Series 2007 Bonds.

The interpretation and application of Article XIIIC 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 afforded by the courts. See "SPECIAL RISK FACTORS - Limitations on Remedies."

Loss of Tax Exemption

As discussed under the caption "CONCLUDING INFORMATION -Tax Exemption," interest on the Series 2007 Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the Series 2007 Bonds were issued, as a result of acts or omissions of the Community Facilities District in violation of the Code. Should such an event of taxability occur, the Series 2007 Bonds are not subject to redemption and will remain Outstanding until maturity or until redeemed under the optional redemption or mandatory redemption provisions of the Indenture.

37 Limited Liquidity of the Series 2007 Bonds

The Community Facilities District has not applied for, and does not expect to receive, a rating on the Series 2007 Bonds from any nationally recognized rating organization. This fact, coupled with the fact that the Series 2007 Bonds are secured by Special Taxes payable by one landowner, may limit the secondary market for, and therefore the liquidity of, the Series 2007 Bonds.

LITIGATION

At the time of delivery of and payment for the Series 2007 Bonds, the Community Facilities District will certify that there is no action, suit, litigation, inquiry or investigation before or by any court, governmental agency, public board or body served, or to the best lmowledge of the Community Facilities District threatened, against the Community Facilities District in any material respect affecting the existence of the Community Facilities District or the titles of its officers to their respective offices or seeking to prohibit, restrain or enjoin the sale, execution or delivery of the Series 2007 Bonds or challenging directly or indirectly the proceedings to levy the Special Taxes or issue the Series 2007 Bonds.

CONTINUING DISCLOSURE

The Community Facilities District has covenanted for the benefit of the Owners of the Series 2007 Bonds to provide certain financial information and operating data relating to the Series 2007 Bonds, the Community Facilities District, ownership of the property in the Community Facilities District which is subject to the Special Tax, the occurrence of delinquencies in payment of the Special Tax, and the status of foreclosure proceedings, if any, respecting Special Tax delinquencies (the "District Disclosure Report"), and to provide notices of the occurrence of certain enumerated events, if material. The financial information and operating data will be provided annually. A form of the Community Facilities District's undertaking is included in Appendix E - "Forms of Continuing Disclosure Agreements." The annual reports are to be provided by the Community Facilities District not later than March I of each year, commencing March I, 2008. The Community Facilities District Disclosure Reports will be filed by the Community Facilities District with each Nationally Recognized Municipal Securities Information Repository and with each State Repository, if any. These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the "Rule"). The Community Facilities District has never failed to comply in all material respects with any previous undertakings with regard to said Rule to provide annual reports or notices of material events.

The Community Facilities District is a legally constituted governmental entity separate and apart from the City. However, pursuant to the Act, the City Council is the legislative body of the Community Facilities District. The City has never failed to comply in all material respects with any previous undertakings with regard to said Rule to provide annual reports or notices of material events.

Pursuant to au agreement (a "Developer Continuing Disclosure Agreement") with Union Bartle of California, N.A., in its capacity as Trustee and as Dissemination Agent, the Developer has covenanted for the benefit of the Owners of the Series 2007 Bonds to provide semi-annually certain financial information and operating data relating to it, its development plans and financing plans ( each a "Developer Disclosure Report"), and to provide notices of the occurrence of certain enumerated events, if material, until the Developer's obligation to so provide such information, data

38 and notices is otherwise terminated in accordance with the provisions of the Developer Continuing Disclosure Agreement. A form of the Developer Continuing Disclosure Agreement is included in Appendix E - "Forms of Continuing Disclosure Agreements." Such information is to be provided by the Developer not later than May I and November I of each year, commencing November I, 2007. The Developer Disclosure Reports are required to be filed by the Developer with each Nationally Recognized Municipal Securities Information Repository and with each State Repository, if any. These covenants have been made in order to assist the Underwriter in complying with the Rule. The Developer has not failed to comply in all material respects with any previous undertakings with regard to said Rule to provide annual reports or notices of material events.

CONCLUDING INFORMATION

Legal Opinions

The validity of the Series 2007 Bonds and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel. Orrick, Herrington & Sutcliffe LLP is acting as disclosure counsel in connection with the Series 2007 Bonds. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement and Bond Counsel expresses no opinion as to the matters set forth herein. A complete copy of the proposed form of Bond Counsel opinion is contained in Appendix C hereto and will accompany the Series 2007 Bonds. Certain legal matters will be passed upon for the Underwriter by Ballard Spahr Andrews & Ingersoll, LLP, Salt Lake City, Utah, and for the City and the Community Facilities District by Woodruff, Spradlin & Smart, A Professional Corporation, Orange, California.

Financial Interest

Payment of the fees and expenses of Bond Counsel and Underwriter's counsel is contingent upon the issuance and delivery of the Series 2007 Bonds. From time to time, Orrick, Herrington & Sutcliffe LLP represents Banc of America Securities LLC on matters unrelated to the Series 2007 Bonds.

Tax Exemption

In the opinion of Orrick, Herrington & Sutcliffe LLP, as bond counsel to the Community Facilities District ("Bond Counsel"), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Series 2007 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 ( the "Code") and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the Series 2007 Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. A complete copy of the proposed form of opinion of Bond Counsel is included herein as Appendix C.

To the extent the issue price of any maturity of the Series 2007 Bonds is less than the amount to be paid at maturity of such Bonds ( excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes "original issue discount," the

39 accrual of which, to the extent properly allocable to each beneficial owner thereof, is treated as interest on the Series 2007 Bonds which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For this purpose, the issue price of a particular maturity of the Series 2007 Bonds is the first price at which a substantial amount of such maturity of the Series 2007 Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Series 2007 Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Beneficial owners of the Series 2007 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Series 2007 Bonds with original issue discount, including the treatment of beneficial owners who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public.

Series 2007 Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) ("Premium Bonds") will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax­ exempt interest received, and a beneficial owner's basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such beneficial owner. Beneficial owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.

The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal tax purposes of interest on obligations such as the Series 2007 Bonds. The Community Facilities District has made representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Series 2007 Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Series 2007 Bonds being included in gross income for federal income tax purposes, possibly from the date of issuance of the Series 2007 Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine ( or to inform any person) whether any actions taken (or not taken) or events occurring ( or not occurring), or any other matters coming to Bond Counsel's attention, after the date of issuance of the Series 2007 Bonds may adversely affect the value of, or the tax status of interest on, the Series 2007 Bonds.

Although Bond Counsel is of the opinion that interest on the Series 2007 Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of the Series 2007 Bonds, or the accrual or receipt of interest on the Series 2007 Bonds, may otherwise affect a beneficial owner's federal, state or local tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the beneficial owner or the beneficial owner's other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences.

Future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Series 2007 Bonds to be subject, directly or indirectly, to federal income

40 taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. As one example, on May 21, 2007, the United States Supreme Court agreed to hear an appeal from a Kentucky state court which ruled that the United States Constitution prohibited the state from providing a tax exemption for interest on bonds issued by the state and its political subdivisions but taxing interest on obligations issued by other states and their political subdivisions. The introduction or enactment of any such future legislative proposals, clarification of the Code or court decisions may also affect the market price for, or marketability of, the Series 2007 Bonds. Prospective purchasers of the Series 2007 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.

The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel's judgment as to the proper treatment of the Series 2007 Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service ("IRS") or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the Community Facilities District, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The Community Facilities District has covenanted, however, to comply with the requirements of the Code.

Bond Counsel's engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Community Facilities District or the beneficial owners regarding the tax-exempt status of the Series 2007 Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than the Community Facilities District and its appointed counsel, including the beneficial owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the Community Facilities District legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Series 2007 Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Series 2007 Bonds, and may cause the Community Facilities District or the beneficial owners to incur significant expense.

Underwriting

The Series 2007 Bonds are being purchased by Banc of America Securities LLC (the "Underwriter"). Pursuant to a Bond Purchase Agreement between the Underwriter and the Community Facilities District (the "Purchase Agreement"), the Underwriter has agreed to purchase all of the Series 2007 Bonds for an aggregate purchase price of $13,539,382.55, subject to certain conditions set forth in the Purchase Agreement. The purchase price reflects an underwriter's discount of $171,000.00 and net original issue premium of $30,382.55. The initial offering prices stated on the cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Series 2007 Bonds to certain dealers (including dealers depositing Series 2007 Bonds into investment trusts), dealer banks, banks acting as agent and others at prices lower than said public offering prices.

41 No Ratings

The City has not made, and does not contemplate making, any application to any rating agency for the assignment of a rating to the Series 2007 Bonds.

Miscellaneous

The quotations from, and the summaries and explanations of the Indenture and other statutes and documents contained herein do not purport to be complete, and reference is made to such documents and statutes for the full and complete statements of their respective provisions.

This Official Statement is submitted only in connection with the sale of the Series 2007 Bonds by the Community Facilities District. This Official Statement does not constitute a contract with the purchasers of the Series 2007 Bonds.

Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized.

The execution and delivery of this Official Statement have been duly authorized by the Community Facilities District.

CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER)

By: ____~/~s~/ ~R~o~n~a~ld~A~. ~N~a~u~lt___ _ Finance Director of the City of Tustin

42 APPENDIX A

APPRAISAL [THIS PAGE INTENTIONALLY LEFT BLANK] APPRAISAL REPORT

CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 TUSTIN LEGACY/RETAIL CENTER SPECIAL TAX BONDS, SERIES 2007

Prepared for:

CITY OF TUSTIN 300 Centennial Way Tustin, CA 92780

James B. Harris, MAI Berri Cannon Harris Harris Realty Appraisal 5100 Birch Street, Suite 200 Newport Beach, CA 92660

June 2007 Harris Rea_lty Apprai~a~----~- --·~-~---- 5100 Birch Street, Suite 200 Newport Beach, California 92660 949-851-1227 FAX 949-851-2055 www.harris-appraisal.com

June 14, 2007

Mr. Ron Nault Finance Director CITY OF TUSTIN 300 Centennial Way Tustin, CA 92780

Re: Community Facilities District No. 07-1 (Tustin Legacy/Retail Center)

Dear Mr. Nault:

In response to your authorization, we have prepared a self-contained appraisal report which addresses the property within the boundaries of City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) ("CFO No. 07-1"). This appraisal includes an estimate of Market Value of the land under site and building construction within CFO No. 07-1, subject to a special tax levy. The commercial land subject to special tax is under the ownership of one developer; Vestar/Kimco Tustin, L.P. as of the date of value.

According to the specific guidelines of the California Debt and Investment Advisory Commission (CDIAC), CFO No. 07-1 is valued in bulk, representing a discounted value to the ownership as of June 1, 2007, the date of value. The aggregate of the bulk values of the various proposed uses represents Market Value of the entire property within CFO No. 07-1, subject to a special tax levy. Mr. Ron Nault June 14, 2007 Page Two

Based on the investigation and analyses undertaken, our experience as real estate appraisers, and subject to all the premises, assumptions and limiting conditions set forth in this report, the following opinion of Market Value is formed as of June 1, 2007.

CFD NO. 07-1 LEASED FEE VALUE

ONE HUNDRED FORTY MILLION DOLLARS

$140,000,000

The estimated value assumes bond proceeds of about $13,100,000 for eligible City of Tustin facilities and/or fees, as described in the Community Facilities Report, are available at the time of sale.

The self-contained report that follows sets forth the results of the data and analyses upon which our opinions of value are, in part, predicated. This report has been prepared for the City of Tustin for use in the sale of City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007. The intended users of this report are the City of Tustin. its underwriters, legal counsel, consultants, and potential bond investors. This appraisal has been prepared in accordance with and is subject to the requirements of the Appraisal Standards for Land Secured Financing as published by the California Debt and Investment Advisory Commission; the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation; and the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute.

We meet the requirements of the Competency Provision of the Uniform Standards of Professional Appraisal Practice. A statement of our qualifications appears in the Addenda.

Respectfully submitted, ~~~ Berri Cannon Harris Vice President AG009147

ames B. Harris, MAI President AG001846

SUMMARY OF FACTS AND CONCLUSIONS

EFFECTIVE DATE OF APPRAISAL June 1, 2007 DATE OF REPORT June 14, 2007

DISTRICT NAME City of Tustin Community Facilities District No. 07-1, (Tustin Legacy/Retail Center)

INTEREST APPRAISED Leased Fee Estate, subject to special tax and special assessment liens.

OWNERSHIPS, TRACT NAMES, AND Vestar/Kimco Tustin, L.P. LEGAL DESCRIPTIONS Tract No. 16695, Lots 1, 2, 4, 5, 6, 7, 8, 9, 10, 11, 12, 16, 18, and 19

SITE CONDITION CFO. No. 07-1 is a part of the Marine Corp Air Station (MCAS) Tustin Specific Plan/Reuse Plan project. In general, most off-site work is complete with the exception of Barranca Parkway fronting on a portion of CFO No. 07-1. The majority of the on-site streets for each retail parcel are also complete.

CFO No. 07-1, contains 82.57 acres and is proposed for approximately 985,000 square feet of retail space. The portion of the center subject to special tax contains 44.725 acres and is built-out with 541,700,:!: square feet.

HIGHEST AND BEST USE Continued development of the master planned shopping center known as The District. The District is proposed for approximately 985,000.:!: square feet of retail space.

VALUATION CONCLUSIONS CFO NO. 07-1 - $140,000,000

iv TABLE OF CONTENTS

Section

Transmittal Letter ......

Aerials ...... 111

Summary of Facts and Conclusions ...... 1v

Table of Contents ...... v

Introduction...... 1

Area Description ...... 15

Site Analysis ...... 39

Proposed Improvement Description ...... 53

Highest and Best Use and Feasibility Analysis ...... 55

Valuation Methodology ...... 61

Valuation of Shopping Center...... 63

Value Conclusions ...... 69

Certification ...... 70

Addenda Qualifications Site Development Cost Summary Taussig Tax Spreadsheet Rent Roll

v HRA

INTRODUCTION

Purpose of the Report The purpose of this appraisal is to estimate the Market Value for the leased fee estate, subject to special tax and special assessment liens for all the taxable property within City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center), (referred to herein as "CFD No. 07-1 "). The purpose of this appraisal is to estimate the "As Is" Market Value of the land subject to special tax under Vestar/Kimco ownership.

The opinions set forth are subject to the assumptions and limiting conditions set forth herein and the specific appraisal guidelines as set forth by the City of Tustin.

Function of the Report and Intended Use It is our understanding that this appraisal report is to be used for CFD bond financing purposes only. The subject property is described more particularly within this report. The bonds will be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended. The maximum authorized bond indebtedness for CFD No. 07-1 is $16,000,000.

Client and Intended Users of the Report This report was prepared for our client, the City of Tustin. The intended users of the report include the City of Tustin, its underwriters, legal counsel, consultants, and potential bond investors.

Scope of the Assignment According to specific instructions from the City and the CDIAC guidelines, the total value conclusion includes the "As Is" estimate of Market Value giving consideration to the leased fee estate within the boundaries of CFD No. 07-1. Any lands designated for park, open space or civic uses within CFD No. 07-1 and not subject to tax or special assessment are not included in this assignment.

CONSULTING REAL ESTATE APPRAISERS

1 HRA

The commercial land and any improvements are valued in their "As Is" condition as of the date of value. Based on physical inspection of CFO No. 07-1 and a review of the Vestar/Kimco's site budgets, the site is essentially in a physically finished site condition, but with significant off-site work still needed to be completed. Minimal in-tract paving, landscape and common area improvements within the project are still required. Significant off-site street improvements along Barranca Parkway are still required.

We have analyzed the subject property based upon the proposed uses and our opinion of its highest and best use. We have searched for sales of improved shopping centers and retail use land to estimate the value of the property. Only the direct comparison approach has been used to value CFO No. 07-1.

The following paragraphs summarize the process of collecting, confirming and reporting of data used in the analysis.

1. Gathered and analyzed demographic data from sources including the California Department of Finance (population data), Employment Development Department of the State of California (employment data), City of Tustin (zoning information, building permit trends), City of Tustin Chamber of Commerce (local demographic trends), CB Richard Ellis (retail rents and sales, inventory levels, and absorption), and brokers of comparable projects (market trends of land and improved sales). Subject information was gathered from the developers/builders and their consultants.

2. Inspected the subject's neighborhood and reviewed proposed product and similar products for consideration of Highest and Best Use of the proposed lots.

3. Gathered and analyzed comparable commercial land and improved sales within the Orange County market area, and shopping center absorption information, within the subject's primary and secondary market areas. Data was gathered from sources including, but not limited to, Comps.com, brokers, appraisers, and developers within the Southern California area. Where feasible, data were confirmed with both the buyer and seller.

CONSULTING R~L ESTATE APPRAISERS 2 HRA

Date of Value and Report The opinions of Market Value expressed in this report are stated as of June 1, 2007. The date of the appraisal report is June 14, 2007.

Date of Inspection The subject property was inspected on numerous occasions, with the most recent on June 13, 2007.

Property Rights Appraised The property rights appraised are those of the leased fee estate subject to special tax and special assessment liens of the real estate described herein.

Property Identification The subject property is a portion of the proposed "The District" shopping center. This shopping center, in total, will encompass 82.57 acres to be improved with 984,958 square feet of retail space. The six parcels to be improved with the Costco, Lowe's, Target, Wells Fargo Bank, ln-N-Out Burger and Chick-Fil-A are not subject to the Special Tax of CFO No. 07-1. The acreage subject to the Special Tax of CFO No. 07-1 is 44.725 acres. The 44.725 acres that are being developed will contain 541,737 square feet of retail space. Excluding the retailers not subject to the special tax, the taxable portion of CFO No. 07-1 will contain among others: Best Buy, Office Depot, Whole Foods, T.J. Maxx/Home Goods, Michaels, Petsmart, AMC theaters, Borders, Tillys, DSW, Strike Bowling, Pei Wai, The Winery, Lucille's BBQ, Ben & Jerrys, Cingular and Verizon.

CONSULTING REAL ESTATE APPRAISERS 3 :c :::c )>

,. 91.. z.._, . """ ------PROPOSED BOUNDARIES OF f:J SHEET 2 OF 2 CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY I RETAIL CENTER) COUNTY OF ORANGE STATE OF CALIFORNIA (_,,l_'.i\:_:; r -·------P~;~o-aed -B~u~d,riu ~f- City of --] - Tustin Community F"acilities i ...... District t,jo. 07-1 (Tustin Legacy' I ·i f\ete.il Center) i 8z ------_____ ,,_,] (/) c z'=i Gl JJ ~ [)l I s;! " '-j m 'r). ~ (';[. "~ (/) ii m JJ I (/)

Area Area Subject to Tax B: 434-431-24 434-441·12 LLA 2006-01 Parcel 2 LLA 2006-02 Parcel 2 LLA 2006-03 Parcel 4 LLA 2006-07 Parcels 1 and 2 All areas subject to Tax A HRA

According to the MCAS Tustin Specific Plan/Reuse Plan, CFD No. 07-1 is identified as Planning Areas 16, 17 and 19. Planning Areas 16 and 17 are proposed for commercial business development and Planning Area 19 is proposed for commercial development.

A report entitled "City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center)" (the "Community Facilities District report") prepared by the City's Special Tax Consultant David Taussig & Associates, Inc., stated that CFD No. 07-1 encompasses approximately 82.57 gross acres. Of the total acres, approximately 44.25 acres to be subject to special tax are situated within CFD No. 07-1.

Legal Description and Ownership As previously mentioned, the subject of this appraisal includes one ownership as of the valuation date. The subject property includes 82~ gross acres within Tract No. 16695, which includes a Future Annexation Area. The District's Special Tax Consultant estimates approximately 44.725 acres will be subject to special tax. The table on page 6 summarizes the legal descriptions, ownerships, and lot sizes as indicated on the Orange County Assessor Maps.

Property History The appraisers have been provided with two closing statements for the subject properties. Reportedly, Vestar/Kimco Tustin, L.P. purchased the property in two transactions. The first transaction recorded on June 9, 2005. The second recorded on November 3, 2006. The total purchase price was $33,400,000 for the 82~ acres. On November 3, 2006 Vestar/Kimco Tustin Partners, L.P. sold two parcels. Costco Wholesale purchased 14.851 acres for $12,384,927. Lowe's HIW purchased 9.711 acres for $9,335,250.

CONSULTING REAL ESTATE APPRAISERS 5 HRA

City Of Tustin CFO No. 07-1 Ownership

APN Owner Name Subdivision Lot Lot Acreage Lots F 434-441-03 Vestar/Kimco Tustin, L. P. 16695 16 0.619 26,963.64 434-441-04 Vestar/Kimco Tustin, L. P. 16695 19 0.623 27,137.88 434-441-05 Vestar/Kimco Tustin, L. P. 16695 16 0.301 13,111.56 434-441-07 Vestar/Kimco Tustin, L. P. 16695 19 0.885 38,550.60 434-441-08 Vestar/Kimco Tustin, L. P. 16695 5 1.148 50,006.88 434-441-09 Vestar/Kimco Tustin, L. P. 16695 12 12.088 526,553.28 434-441-10 Vestar/Kimco Tustin, L. P. 16695 7 5.099 222, 112.44 434-441-13 Vestar/Kimco Tustin, L. P. 16695 9 1.148 50,006.88 434-441-15 Vestar/Kimco Tustin, L. P. 16695 6 1.148 50,006.88 434-441-16 Vestar/Kimco Tustin, L. P. 16695 4 9.044 393,956.64 434-441-17 Vestar/Kimco Tustin, L. P. 16695 1 8.735 380,496.60 434-441-18 Vestar/Kimco Tustin, L. P. 16695 2 3.887 169,317.72 44.725 1.948,221.00

CONSULTING REAL ESTATE APPRAISERS 6 HRA

Definitions Market Value 1 The most probable price in terms of money which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (a) Buyer and seller are typically motivated. (b) Both parties are well informed or well advised, and each acting in what he considers his own best interest. (c) A reasonable time is allowed for exposure in the open market.

(d) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto.

(e) 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.

Assessed Value2 The value of a property according to the tax rolls in ad valorem taxation. May be higher or lower than market value, or based on an assessment ratio that is a percentage of market value.

Fee Simple Estate3 Absolute ownership unencumbered by any other interest or estate subject only to the four powers of government.

Leased Fee Estate4 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.

1 Part 563, subsection 563.17-1 a(b)(2), Subchapter D, Chapter V, Title 12, Code of Federal Regulations.

2 The Dictionary of Real Estate Appraisal, Third Edition, published by The Appraisal Institute, 1993, Page 22

3 Ibid, Page 140

4 Ibid, Page 204

CONSULTING REAL ESTATE APPRAISERS 7 HRA

Fee Simple Estate and Leased Fee Estate Subject to Special Tax and Special Assessment Liens Empirical evidence (and common sense) suggests that the selling prices of properties encumbered by such liens are discounted compared to properties free and clear of such liens. In new development projects, annual Mello-Roos special tax and/or special assessment payments can be substantial, and prospective buyers take this added tax burden into account when formulating their bid prices. Taxes, including special taxes, are legally distinct from assessments. Because fee simple ownership is subject to the governmental power of taxation, but not the power to levy assessments, appraisers sometimes treat special tax and assessment liens differently.

The Market Value included herein, reflects the value potential investors would consider given the special taxes and/or assessments of CFO No. 07- 1 by the City of Tustin.

Retail Value Retail value should be estimated for all fully improved and occupied properties. Retail value is an estimate of what an end user would pay for a finished property under the conditions requisite to a fair sale.

Bulk Sale Value5 Bulk sale value should be estimated for all vacant properties--both unimproved properties and improved or partially improved but unoccupied properties. Bulk sale value is derived by discounting retail values to present value by an appropriate discount rate, through a procedure called Discounted Cash Flow Analysis. A second method is to use bulk land sales. These are sales of numerous individual parcels sold to one buyer. Bulk sale value is defined as follows:

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 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 assuming that neither is under undue stress.

5 Appraisals Standard for Land-Secured Financings, published by CDIAC, 1004, Page 10

CONSULTING REAL ESTATE APPRAISERS 8 HRA

Finished Site6 Land that is improved so that it is ready to be used for a specific purpose. (Improvements include rough graded site, streets to the site boundary, utilities to the site boundary, and all fees required to pull building permits paid.)

Blue-top Graded Parcel Graded parcel to blue-top, which includes streets cut and padded lots with utilities stubbed to the site and perimeter streets in.

Mass-Graded Parcel/Superpad Parcel Mass-graded parcel with utilities stubbed to the site and perimeter streets in.

Contingencies, Assumptions and Limiting Conditions The analyses and opinions set forth in this report are subject to the following assumptions and limiting conditions:

Standards Rule ("S.R.") 2-1(c) of the "Standards of Professional Appraisal Practice" of the Appraisal Institute requires the appraiser to "clearly and accurately disclose any extraordinary assumption or limiting condition that directly affects an appraisal analysis, opinion, or conclusion." In compliance with S.R. 2-1 (c) and to assist the reader in interpreting the report, the following contingencies, assumptions and limiting conditions are set forth as follows:

Contingencies of the Appraisal

The appraisal is contingent upon the successful issuance of bonds by CFO No. 07-1 with construction proceeds (Master Infrastructure Fees) of approximately $13,100,000. The rate and method of apportionment are based on public reports prepared on behalf of the City of Tustin by David Taussig and Associates, Inc.

The Market Value reported in this report assumes a portion of the funding for the infrastructure improvements will be paid from the proceeds of this bond issuance of CFO No. 07-1. Public improvements subject to possible

6 Ibid, Page 334

CONSULTING REAL ESTATE APPRAISERS 9 HRA

reimbursement include street improvements, including grading, paving, curbs and gutters, sidewalks, street signalization and signage, street lights and parkway and related landscaping, storm drains, utilities, public parks and recreation facilities, public library facilities, fire protection facilities and equipment and land, rights-of way and easements necessary for any of such facilities. Please refer to the Community Facilities District report prepared by David Taussig & Associates, Inc., which identifies the potential CFO improvements and services.

The development site cost information was prepared by the developer's in­ house engineers. It is a contingency of this appraisal that the costs are all the costs associated with development of CFO No. 07-1 and that they satisfy the Conditions of Map Approval and the current development plans. These costs are assumed to be correct. We have not engaged an independent cost estimator or civil engineer to examine the reasonableness of the development cost estimates. Any variance in development costs could alter our value conclusion.

The developer has provided site cost and building construction costs for use in the appraisal. The direct construction costs and indirect construction costs used in the Valuation section of this report are considered the best information available as of the date of valuation. It is a specific contingency of this appraisal and value that the costs used in the valuation of CFO No. 07-1 are reasonable.

Assumptions and Limiting Conditions of the Appraisal No responsibility is assumed by your appraisers for matters which are legal in nature. No opinion of title is rendered, and the property is appraised as though free of all encumbrances and the title marketable. No survey of the boundaries of the property was undertaken by your appraisers. All areas and dimensions furnished to your appraisers are presumed to be correct.

The date of value for which the opinion of Market Value is expressed in this report is June 1, 2007. The dollar amount of this value opinion is based on the purchasing power of the United States dollar on that date.

Maps, plats, and exhibits included herein are for illustration only, as an aid for the reader in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other purpose, nor should they be removed from, reproduced, or used apart from this report.

Oil, gas, mineral rights and subsurface rights were not considered in making this appraisal unless otherwise stated and are not a part of the appraisal, if any exist.

CONSULTING REAL ESTATE APPRAISERS 10 HRA

The appraisers have not been provided with geotechnical reports for CFO No. 07-1. For purposes of this appraisal, the soil is assumed to be of adequate load-bearing capacity to support all uses considered under our conclusion of highest and best use.

The appraisers have been provided with several letters from various agencies regarding environmental issues on the former Marine Corps Air Station Tustin. To the best of our review, it appears that all environmental issues have been mitigated. However, the appraisers have not been provided with, nor have they reviewed, all of the documentation prepared for the District regarding environmental issues. For purposes of this appraisal, it is assumed that all environmental issues have been resolved and that the entire District is/or can be developed as currently planned.

The appraisers have been provided with one title insurance commitment for CFO No. 07-1 dated May 1, 2007, issued by First American Title Insurance Company. For purposes of this appraisal, we are not aware of any easements, encroachments or restrictions that would adversely affect the value of the subject property. A copy of the title policy is retained in the appraiser's work files.

Information contained in this report has been gathered from sources which are believed to be reliable, and, where feasible, has been verified. No responsibility is assumed for the accuracy of information supplied by others.

The parcel sizes have been calculated by the engineering firms of Development Resource Consultants as shown on the recorded tract maps. We have relied on their calculations in estimating acreage. Our value estimate is, in part, based on the accuracy of this information.

Since earthquakes are common in the area, no responsibility is assumed for their possible impact on individual properties, unless detailed geologic reports are made available.

Your appraisers inspected as far as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representations are made as to these matters unless specifically considered in the report.

The appraisers assume no responsibility for economic or physical factors which may occur after the date of this appraisal. The appraisers, in rendering these opinions, assume no responsibility for subsequent changes in management, tax laws, environmental regulations, economic, or physical factors which may or may not affect said conclusions or opinions.

CONSULTING REAL ESTATE APPRAISERS 11 HRA

No engineering survey, legal, or engineering analysis has been made by us of this property. It is assumed that the legal description and area computations furnished are reasonably accurate. However, it is recommended that such an analysis be made for exact verification through appropriate professionals before demising, hypothecating, purchasing or lending occurs.

Unless otherwise stated in this report, the existence of hazardous substances, including without limitation asbestos. polychlorinated biphenyls, petroleum leakage, or agricultural chemicals, which may or may not be present on the property, or other environmental conditions, were not called to the attention of nor did the appraisers become aware of such during the appraisers' inspection. The appraisers have no knowledge of the existence of such materials on or in the property unless otherwise stated. The appraisers, however, are not qualified to test for such substances or conditions.

The presence of such substances such as asbestos, urea formaldehyde, foam insulation, or other hazardous substances or environmental conditions may affect the value of the property. The value estimated herein is predicated on the assumption that there is no such condition on or in the property or in such proximity thereto that it would cause a loss in value. No responsibility is assumed for any such conditions, nor for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in the field of environmental impacts upon real estate if so desired.

The cost and availability of financing help determine the demand for and supply of real estate and therefore affect real estate values and prices. The transaction price of one property may differ from that of an identical property because financing arrangements vary.

Our forecasts of future events which influence the valuation process are predicated on the continuation of historic and current trends in the market.

The property appraised is assumed to be in full compliance with all applicable federal, state, and local environmental regulations and laws, and the property is in conformance with all applicable zoning and use ordinances/restrictions, unless otherwise stated.

We shall not be required, by reason of this appraisal, to give testimony or to be in attendance in court or any governmental or other hearing with reference to the property without prior arrangements having first been made with the appraisers relative to such additional employment.

CONSULTING REAL ESTATE APPRAISERS 12 HRA

In the event the appraisers are subpoenaed for a deposition, judicial, or administrative proceeding, and are ordered to produce their appraisal report and files, the appraisers will immediately notify the client.

The appraisers will appear at the deposition, judicial, or administrative hearing with their appraisal report and files and will answer all questions unless the client provides the appraisers with legal counsel who then instructs them not to appear, instructs them not to produce certain documents, or instructs them not to answer certain questions. These instructions will be overridden by a court order, which the appraisers will follow if legally required to do so. It shall be the responsibility of the client to obtain a protective order.

The appraisers have personally inspected the subject property; however, no opinion as to structural soundness of proposed improvements or conformity to City, County, or any other agency building code is made. No responsibility for undisclosed structural deficiencies/conditions is assumed by the appraisers. No consideration has been given in this appraisal to personal property located on the premises; only the real estate has been considered unless otherwise specified.

James B. Harris is a Member and Berri Cannon Harris is an Associate Member of the Appraisal Institute. The Bylaws and Regulations of the Institute require each Member and Associates to control the uses and distribution of each appraisal report signed by such Member or Associates. Except as hereinafter provided, possession of this report, or a copy of it, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of the appraiser and in any event only with properly written qualification and only in its entirety.

Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraisers or the firm with which they are connected, or any reference to the Appraisal Institute or the MAI designation) shall be disseminated to the public through advertising media, public relations, news media or any other public means of communication without the prior consent and approval of the undersigned. The City of Tustin, its underwriters and legal counsel may publish this report in the Preliminary and Final Official Statements for this Community Facilities District.

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

The liability of Harris Realty Appraisal and the appraisers responsible for this report is limited to the client only and to the fee actually received by the appraisers. Further,

CONSULTING REAL ESTATE APPRAISERS 13 HRA

there is no accountability, obligation or liability to any third party. If the appraisal report is placed in the hands of anyone other than the client for whom this report was prepared, the client shall make such party and/or parties aware of all limiting conditions and assumptions of this assignment and related discussions. Any party who uses or relies upon any information in this report, without the preparer's written consent, does so at his own risk.

If the client or any third party brings legal action against Harris Realty Appraisal or the signer of this report and the appraisers prevail, the party initiating such legal action shall reimburse Harris Realty Appraisal and/or the appraisers for any and all costs of any nature, including attorneys' fees, incurred in their defense.

CONSULTING REAL ESTATE APPRAISERS 14 HRA

AREA DESCRIPTION

The following section of this report will summarize the major demographic and economic characteristics such as population, employment, income and other pertinent characteristics for the Southern California region, Orange County, the City of Tustin and the subject market areas.

Southern California Regional Overview The Southern California region, as defined in this report, encompasses six individual counties including Los Angeles, Orange, Riverside, San Bernardino, San Diego, and Ventura Counties. The Southern California region extends from the California­ Mexico border on the south to the Tehachapi mountain range on the north and from the Pacific Ocean on the west to the California-Arizona border on the east. The region covers an estimated 38,242 square miles and embodies a diverse spectrum of climates, topography, and level of urban development. Please refer to the following page for a location map.

Population The Southern California region has added about 8.1 million new residents since 1980 as indicated in the table shown on page 17. According to the California Department of Finance, the most recent data available indicate that as of January 2007, the regional population stood at over 21.4 million. If the region were an individual state, it would rank as one of the most populous in the nation.

Since 1981, annual population gains from natural increase and immigration have ranged from a low of 131,400 persons in 2002 up to 568,645 persons in 1989. These figures represent annual gains of 0. 7% to 3.5%. During the past five years, the population of the six-county Southern California region grew by 1.2% to 1.9% per annum.

CONSULTING REAL ESTATE APPRAISERS 15 HRA

Omi 2 4 6 Copyright Cl and (P) 1986-2006 Microsoft Corporation andfor its suppliers. All rights reserved. http:Jtwww.microsoft.com/straetsJ Portions© 199~2006 lnstallShield Software Corporation. All rights re,s{lP(',!QcC;eritaiqi(T!?,PP~~ d~J:!~ ~r2.~?'llill~II rights reserved. Th_e Data for areas of Canada includes 1nfonnat1on taken with permission from Canadian authorities,~bK!dl~o!!-~es\ft!i'e-O~rltrtRtght'tttCari'lra~n·s Printer for Ontano. NAVTEQ and NAVTEQ ON BOARD are trademarks of NAVTEQ. © 2005 Tele Atlas North America, Inc. All rights reserved. Tele Atlas and Tele Atlas North America are trademarks of Tele Atlas, Inc. 16 HRA

As of January 2007 the population of the six-county area stood at 21,413,300 persons. Looking toward the future it is estimated that the region's population will continue to climb as new residents seek. out the southern California area. During the economic downturn from 1992 through 1996, and continuing through 2007, the population growth rate declined compared to the growth experienced in the late 1980s.

Population Trends 1980-2007 AVE!ra~An~a1¢blffl~·· iMl.lml;!er · · .Percen! 2.12,,t2 . ~~·~95 .~1\li~P. ,t~$4 ·aaa.090 ~12,j~v)· ,% {~i· 15. §~,>1.00 ·2:1'o/O 1l:l81 16 61:a 100 42$i®@ 1~fl 1s:021:i'!® ••· ·· ·~i

The future rate of growth will depend on a number of factors that may dramatically affect the region. Some of the major factors include availability of developable land, availability of water, national economic climate, and public policy toward growth and the

CONSULTING REAL ESTATE APPRAISERS 17 HRA

assimilation of a large number of new foreign immigrants. The continued growth of the population within the region, even during periods of economic slow down, provides a positive indicator as to the desirability of the Southern California region.

Employment In conjunction with the population growth, a key indicator of the region's economic vitality is the trend in employment. The most common measure of employment growth is the change in non-agricultural wage employment. The table below illustrates the non­ agricultural wage employment trends in Southern California.

Southern California Region Employment Trends 1983-20061 . .Y:e~r 1983 1~ 4.7!'1P · '19~ . 4.J:t·~·. .i~a .3])$> 1:00? . ·.4. .i~. ·.3:$%. •"~.s 19l\!'l 2\l'!lo . 1~· lf?:% t!'l91 (~.'5"h) 19~2 121.e~,• . . 4~3i. ·t1.,r1ov !1'994 .· o',5%·. lQ95. !J.9$ 1006 ti:$%• 1~~t 31o/ii 1,ll® ··3;.i% ,Qoo 22 •JJ)~ 21!.1,~ . ?.$•lo ·~i 9i'.11)!)0 fJl% \7,l\00) . ((!.Jo/~) .3• .2Il.91DP •·o:t,"k 2~ 1!24,l3UO . .t:~%. 2of,$ t5ti,.aWo 1c§.o/o .•2Qt;i!S 174;'10:lll Z:1"/o

1 2005 benchmark Source: Employment Development Department 3/07

CONSULTING REAL ESTATE APPRAISERS 18 HRA

In the Southern California region, average annual non-agricultural employment has grown from 5,691,000 jobs in 1983, to a then peak employment of 8,015,300 in 2001. Employment declined to 8,007,500 in 2002. This decline was mostly caused by a 46,800 job decrease in Los Angeles County. Each year between 2003 and 2006, Southern California employment climbed to a new record level, 8,481,600 in 2006. This was in spite of Los Angeles County only adding an additional 20,000.:!: net jobs in six years. This represents an increase of over 469,000 new jobs over the past five years in Southern California.

As the economy entered into an economic recession during the latter part of 1990, employment growth slowed. The average annual gain in 1990 was approximately 192,100 jobs or 2.7%. In 1992 when the full weight of the recession was felt, area employment suffered the highest annual decline in jobs registered in the last decade, losing nearly 204,000 jobs or a percentage decrease of 2.9%. This was followed by further employment declines of 102,600 jobs in 1993. It appears that by the middle of 1994, the economic recovery finally began to take hold in the Southern California region. The adverse employment issues experienced in the prior three years had abated. In 1998, total non-agricultural employment stood at 7.4 million, finally exceeding the prior high in 1990. As of year-end 2002, employment was over 8.0 million. Forecasts prior to September 11, 2001, indicate that job growth would continue to be positive in 2001 and increase moderately over the next one to two years. However, with the terrorist attack on the United States and the conflict with Iraq, most economists are saying we were in a flat to slightly declining economy, during 2002 and first half of 2003, but that we began recovery during the second half of 2003. 2003 showed a small increase over the previous high mark in 2001. 2004 had a moderate gain over 2003. Employment gains have recovered in 2005 with an additional 150,800 new jobs or a 1.8% increase. 2006 showed an even stronger economy with a gain of 171, 100 jobs, or a 2.1 % increase.

Employment among the individual industry categories reflects some fundamental regional changes in the economy during the past decade. The level of mining activity in Southern California continues to steadily decline as reflected in the consistent decrease in

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mining employment. Construction employment, as of 1989, was at a high level in response to the level of construction activity that had occurred in the region during the previous five years. During the period from 1991 through 1994, construction employment declined in response to decreased residential and commercial construction activity. From 1994 through 2006, as the economy rebounded, residential construction increased bringing back more than the construction jobs lost during the recession. Construction jobs have declined in the first quarter of 2007 as the residential market has weakened.

Total manufacturing employment in the region has exhibited little gain from the levels recorded in 1980. Due to the high labor, land, and capital costs in most of the Southern California region, some manufacturing firms have expanded or relocated their manufacturing operations outside of the area.

The Southern California economy, which historically depended heavily on aerospace and defense related employment, has been dealt a double blow. First from the reduction of the space program and reduced defense spending which affected manufacturers and suppliers, and second from the closure of several military bases which has had a ripple effect throughout the local economy. Areas heavily dependent on military spending will be impacted as the units are deployed abroad.

The finance, insurance, and real estate ("FIRE") employment category grew rapidly as the economy recovered from the 1981-1982 national recession. As the economy entered a new recessionary cycle, the FIRE employment sector exhibited little growth from 1991 through 1995. Over the last ten years, job growth in this sector has been significant. However, jobs declined in 2006 and continue to decline in 2007 as real estate loan demand declines. Some of the manufacturing and aerospace jobs permanently displaced from the economy were slowly being replaced with administrative, marketing and research employment. It is reasonable to assume that similar stagnant growth in this area will be experienced during the current economy.

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The employment group that has contributed most to the employment growth in the region is the service sector. Since 1980, the majority of all new jobs have been created in the service category. The service sector was the leader in new job growth during the last ten years.

Government employment tends to mirror the growth of the population that it services. It is expected that government employment will grow at a rate similar to the area population. The future employment growth in the Southern California region is expected to continue but at a level moderately lower than recent years. Factors that will affect employment growth include the direction of the national economy, wage levels, housing prices, and population trends. Given the national disaster of September 11, 2001, government should not experience layoffs; on the contrary, growth particularly in the defense sector should occur. However, the California state budget deficit has negatively impacted both state and local government employment.

Orange County Orange County, in some aspects, has mirrored the trends of the Southern California region, while other characteristics have charted a unique direction.

Orange County consists of 34 individual cities and numerous unincorporated communities. Orange County is bounded by the Pacific Ocean to the west, Los Angeles County to the north, Riverside County to the east, and San Diego County to the south. Orange County offers a wide variety of terrain from the Pacific Ocean beaches to foothill landscapes.

A strategic location and quality of life are the primary factors for Orange County's evolution from a rural, agricultural dominated economy, into a premier urbanized commercial center. Prior to 1959, the county was considered to be a bedroom community of Los Angeles County. During the 1950's and 1960's, improvements in the transportation network and economic growth in Los Angeles County gave rise to the suburbanization of Orange County. By the 1970's, the commercial and industrial development transformed Orange County into an urbanized commercial center. Today, despite the severe

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economic downturn of 1991-1996, the filing by the County of Orange for bankruptcy in December 1994 and the 2001-2002 recession, Orange County remains one of the most economically vibrant and diverse components of the Southern California region.

Population Orange County has added over 1, 100,000 new residents since 1980 as illustrated in the following table. The most recently released population data indicates that as of January 2007, the countywide population stood at 3,098,100 residents. Annual population gains from natural increase and immigration have ranged from 25,300 to 70,689 persons annually, since 2000. These gains represent annual changes of 0.8% to 2.6%.

Population Trends 1980-2007 1 . Averi,ge Annua!.C~~ · . Population · Num~r · · · fYercent ·· r;: ..1)9~.92t 1l)ll1 .. 1,914)591 .;• 4.!~1:o 2.2%

·· 1962 ·2 t024-2'1-3 '" t ",. . 49,,652 . 2.5% .Jlie3 2,065;305 41,062 2-@% 1984 2; 3]1~10 ·;1'8% 1~$ 2,1 . ;-;4032$ ,,, .. t:$\)19 1:986 2;t O 49,600·· 2/5% '1987 · 2,2!13;5QQ 5(1,300 2.3%

1988 2292300 ••'4$<8. -l 00 2,2%, . J969" 2i~)200 .51:.®0 2•3% · >1990 2.4.1!l,688 6&,468. 2,8"/o 1991 2,!14;3}$00 . 32,®2 f.4:% . 1992. 2,4!:\t'l,oOO . 45000t ,:, V~% 1993 2,533)100 t;a:%·· ~!)~ . 2.$~iK)(lo ~i: '1;4% t995 2,59"7,200 :te;200 lit%• 1'~'. ·_2,632,300 35,100 ..1;4%.

1997 2677,oOO-' .·-/·"-; .-.-. 45,200 1,1% 1998 . 2,122,300 #;800 1.7% 1999 .2;110,!;0ll . $3;:300 2,0o/o :r8462"il9 70,&89 · 4,6% 2.000 j /·.;. ,~::- • ; ; 2QQ1 ;l,680,200 33,911 1.29/o 2002 2,930;500 50,3,00 1'7% 200.3 f,918:.llQO 4e;:300 1.6",:'o' 2004 3,Qii',300 3&,51)0 .1'4% 20();5 3,041:,(l!lO "29}7QO 1.0% 20Q6 3;Q72,3GO 2s',:J,oo (l.l;lo/o

2QQ7. 3,09?,100 25$00.•.t ""· _, .0.:8%

1 April 1, 1980, 1990, and 2000, all other years January 1. Source: California Department of Finance, U.S. Census 5/07

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During the economic downturn from 1992 through 1996, the population growth rate declined compared to the growth experienced in the late 1980's. The future rate of growth within the County will depend on a number of factors. Some of the major factors include availability of developable land, availability of water, national and regional economic climate, and public policy toward growth and foreign immigration. As indicated on the preceding table, population increased 45,000± persons during 1997 and 1998, over 53,000 persons in 1999, and over 70,000 persons in 2000. This increase was the highest in over two decades. As expected due to the slowdown in the economy during 2001, the population increased by only 34,000± persons, then increased by almost 50,000± persons in 2002 and 2003. During the last two years, the increase was 25,300 persons and 25,800 persons, respectively. The high cost of housing in Orange County compared to other areas has slowed the number of people relocating to Orange County.

The areas within the County which will continue to experience the largest share of the new population growth will be the areas of Irvine and Tustin where former military bases are to be reused and developed with a multitude of uses including housing. It is expected that South Orange County will continue to provide housing opportunities as development continues south of the master planned community of Ladera Ranch.

Employment Orange County is one of the most diverse economies in the nation, with aerospace, financial services, research and development, and tourism as the major industry groups. In conjunction with the population growth experienced in the past decade, the employment base has continued to expand and diversify. The County is an employment center for surrounding areas, especially the inland areas of Riverside and San Bernardino Counties.

As of March 2007, Orange County had an unemployment rate of 3.4%, compared to the California rate of 5.1 %. The most common measure of employment growth is the increase in nonagricultural wage and salary employment. During the 1980's, the Orange County employment base expanded rapidly as the area became a financial and service center in the Southern California region.

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Total nonagricultural employment grew from 869,200 jobs in 1983 to 1,172,400 jobs in 1990. This represented an increase of approximately 300,000 new jobs created in the County during the period from 1983 through 1990. The annual average employment figure for 1991 fell by 28,700 jobs and a further 17,700 jobs in 1992, the steepest employment declines in over 20 years. During 1993, an additional 10,600 jobs disappeared. This sharp drop in the number of jobs was a direct result of the economic recession which hit the California market area in late 1990. The economic situation began to improve by mid-1994, and the 1994 annual average indicates an addition of 11,400 new jobs from the 1993 annual average. The 1995 annual average employment was up nearly 25,000 new jobs for a gain of 2.2%. During 1996, 32,100 new jobs were added bringing the total employment to 1, 184,300, which was higher than the previous high exhibited in 1990. During 1997, total employment increased to 1,233,800, a 4.2% growth. For 1998, total employment was 1,299,100, up 65,300 new jobs over 1997. This growth continued in 1999 with a total of 1,345,200, up 46, 100 new jobs from 1998. For 2000, employment increased 43,700 jobs, or 3.3%. Prior to the terrorist attack on the United States, the Chapman Report, prepared by Chapman University, predicted a 2.4% growth for 2001. However, the actual growth was only 1.8%, or 24,800 jobs. Clearly, job growth was negatively impacted, but not as much as other counties with less diversification. Job growth was negative in 2002, with a loss of 10,000 jobs. Job growth in 2003 increased 25,300 jobs. During 2004, the total non-farm employment was 1,456,700, an increase of 1.9% or 27,700 jobs. In 2005, the increase in job growth is currently reported at 2.4% or an increase of 34,300 jobs. Job growth slowed to 2.0% in 2006 or 29, 100 new jobs.

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Employment Trends 1983-20061 Ayerage AnnuarChange Year ·· l;mp!Qyment Number .Per.tent 1983 ·. 861.,200 1984 [132,@ 63AQl) .. 73% ,9$5 9]8,0QO ~.4litl 4,90/o 1986 1,022,(iOQ . 44,®0 4;;\% 1.987 .·1;oe9,1qo · 47.,f(io 46"A, )008 1,129;900 uOB®': '-->:: '5:7% 1989 1,156.100 26;$00. 24%

1~{) 1,172'400<,_1 ·, .. --, . . 1$7.00l:,-,C f.4% 1991 1,143,700' (2~;7()0) {24%) .. .1992 1;t26,®Q. (17;!QO) (1;ij%}; f99:3 1 .~ i}i,400. .(10,600) {OJlP/o) 19~ 1,l~,80CI 11,400 .1.• '0%' ·1995 1..1srt:too · 24,900 2.2% tW6 .1,t84,30{) . 82;600 . ts<>,1; 1997 1 2,$.Sist!O 4gi5Uli) 4',2"/t;. ~~ ·1;2eri)bo. u&:~oo · ;;:S"A,' 19$!:l . 1.345,200 ,46,1.00 Si5"1<, 2®0 1 3Ba9(j.() 43,70Q .. ~;3% 2001 1:413)()() . 24,SQO t.8'llo . 2()02 1.4~.1'.lilO . \10;()00) ('Q 7%) 20Cl3 1.,429,®0 2s;soo· 1.8% 2004 1.456,i'dO 21.700 f.9'1. 2CI05 ·1.4sr,®O ~.300 2A% 2006 . 1520100' ..,,, . ~.10!)' ~0% 1 2006 benchmark Source: Employment Development Department - 5/07

During the period from 1990 through 1994, the employment decline came at the expense of aerospace and defense related firms. Employment among the individual industry categories reflects fundamental changes in the Orange County economy during the past decade. Construction employment gains were substantial following the 1981- 1982 recession in response to the high level of construction activity which occurred in the County during the period from 1984 to 1989. As construction activity decreased due to the recession in 1990, construction employment declined significantly. Construction employment began to increase in 1994 as residential construction rebounded. The resurgence in residential construction was a result of renewed consumer confidence in the economy and lower interest rates. However, the December 1994 Orange County bankruptcy, now resolved, put an immediate halt to such resurgence. Starting in 1997, and continuing into 2005, consumer confidence returned and residential home sales continued to be strong, with continued price increases. Reportedly, home sales came to a

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near stop, in the immediate aftermath of the terrorist attack. However within Orange County, traffic of new home projects returned to near normal levels subsequent to the first month following the attack. During the four years since the attack, the market has continued to improve, with prices at record high levels and standing inventory at record low levels through mid-2005. The slow down in home buying that began around mid-2005 has continued through the present time causing inventories of unsold homes to rise. Due to the very limited supply of new homes in Orange County, most experts are predicting continuing near normal sales activity.

Since the peak manufacturing employment in 1988, the number of manufacturing jobs in Orange County declined nearly 20% as of 1995. Between 1995 and 2000, there was a 10% increase in jobs, including almost 25,000 new jobs. However, since 2000, manufacturing jobs have declined over 15%. Due to the high labor, capital, and housing costs, many Orange County manufacturing firms have expanded or relocated some of their manufacturing operations to adjoining areas such as Riverside, San Bernardino, and San Diego counties to take advantage of the labor force and lower land costs. In several cases, due to the perceived high cost of doing business in Orange County, firms have relocated outside of California. The majority of the manufacturing firms remaining in the County are small operations.

Transportation and public utilities employment tend to mirror population growth. Employment in the trade sector expanded rapidly following the recessions in 1986 and 1994. During the recent years, the trade sector has grown in response to the growth in retail activity within the County.

The finance, insurance, and real estate ("FIRE") sector has expanded by 35% during the last ten years. During the recession from 1991 to 1994, the FIRE sector reflected the decline in the financial services industry and the slowdown of the real estate market. Some manufacturing jobs which have left the County are being replaced with management, administrative and clerical employment.

Since 1990, almost 350,000 new jobs have been created in the service sector, with 132,900 jobs added since 2000. The service sector will continue to play a major role

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in employment growth during the next few years. Government employment is expected to grow at a rate proportionate to the area population. The Orange County bankruptcy had some minor negative impact on local government employment as County personnel were reduced as a cost savings measure, however, government jobs are up 20% since the bankruptcy.

The ten largest employers in Orange County are shown below.

The employment growth in Orange County resumed as the economy rebounded from the recession in 1996, but at a level moderately lower than during the late 1980s. Every year since 1996 had a new record employment level until 2002, which showed a slight decline. New record employment levels resumed in 2003 and continued to 2006, which represents the most current data available. Factors that will affect employment growth include the direction of the national and local economy, and consumer confidence. Due to the terrorist attack on September 11, 2001, and the Iraq conflict, consumer confidence has been negatively impacted. However, the impact to Orange County has been minimal. The County experienced a mild recession in 2002 and the first half of 2003, but the County began recovery during the second half of 2003 which has continued into 2007.

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Income The 2007 median household income in Orange County is estimated to be $69,494. These figures are significantly above the Southern California region average. The higher income level is due to the higher percentage of financial, insurance, real estate, and business service employment which typically have higher wage scales.

Orange County Household Income Distribution 2007 lnrome Range! Househotds Percehf 11 • · · L~ss'iharn$1:$,PP0 .6$,801 · 7,0'J% $1~.ouo;- $24,99.9 · @.132 7.0Qo/o 7'9;Q$3: $Pt%

Hl9.:4Ii,,::';\i<-' :'' 1g:no/o. · ·1~7)~0$ -141:175 t74,®8 947ia4 . 41',535. 4:24% '',' Total 987,250 100.Q%. Median. H¢11sel1Qld Income $69,497 .. .Ave(ageHouseti1:tljjJ~e • $9;1,,269 1I Percent of total distribution Source: Claritas 8/06

Approximately 44% of the County's households have annual income over $75,000. This high income level, in part, provides the financial means to support the continued demand in the residential market.

Retail Sales For Orange County, taxable retail sales have increased from $8.5 billion in 1980 to an estimated $37 .67 billion in 2005 (the most recent annual data available). During the period from 1987 to 1989, annual increases ranged from $1.1 to $1.3 billion, or 7.1% to 9.6%. As a result of the recession, retail sales declined by 4.4% during 1991. A slight gain of 0.6% occurred during 1992, and retail sales remained static at $16.8 billion in 1993. The 1994 data indicates sales were 4.4% higher. A similar gain is shown for 1995. Retail sales increased 6.5% in 1996 to $19.45 billion, and by 7.9% in 1997 to $20.90 billion. The 1994, 1995, and 1996 retail sales gains were the first significant increase in retail sales

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since 1989. The 1997 and 1998 taxable sales showed continued growth with a 7.9% increase, and a 7.0% increase, respectively. Sales for 1999 and 2000 increased 10.4% and 10.9%, respectively, to $27.49 billion. In 2001 the sales growth moderated to 3.8% or $28.52 billion. For 2002, sales increased 4.0%, up to $29.65 billion. During 2003, taxable retail sales totaled $32.28 billion, this was an 8.9% increase. This increase continued through 2004 with retail sales at $35.44 billion, which is a 9.8% increase. In 2005 the growth moderated to 6.3%, with sales at $37.67 billion.

Retail Sales Trends 1 1985-2005 · Ail~ ,a.i,nµa1 cbaqge · · .. Yea( ····~r{J· .fsao. 1986 .. 55%,. · 1@81 9,8"to 1.~8 i.:1%: ·}989 6.$% •199Q 0.2% 1J;i91 (4.4°/p) . 1992 Jlb6% . . ..19f)~. (lll;to/a) . :1!994. .4,4% . 1005' . iti% l.998 •.. ~.!>$ 1997 1JJo/• l.99fi · 7:0%. 19~·· lQ,4°4 _2

The retail sale data is not adjusted for inflation so the real decline in retail sales which occurred during the recessionary period is greater than the unadjusted numbers indicate.

CONSULTING REAL ESTATE APPRAISERS 29 HRA

The decline during the early 1990s recession was likely caused by several factors working in conjunction. First, consumer confidence fell sharply during the early 1990's recession due to increasing unemployment and uncertainty in the job market. Household appliance purchases and other big ticket item purchases were postponed. Secondly, the retail market had shifted from traditional malls anchored by "department stores" to specialized superstore, warehouse/club stores and "off-price" centers. These chain operations offer retail goods at reduced prices due to lower operating costs and lower profit margins. This may have contributed to the overall decline in the total retail sales figure. The resurgence in retail sales between 1994 and 2000 was a direct result in renewed consumer confidence. During the recent recession and the terrorists attack on the United States, consumer confidence weakened as evidenced by the lower retail sales growth during 2001 and 2002. The decline in the stock market also added to the decline in consumer wealth which directly impacts retail sales. In 2003, the sales increase in dollars was the second largest in history, only surpassed by 2004, which is the largest increase in dollars.

Real Estate During 1990, the slowdown in the national economy and the problems within the savings and loan industry resulted in slower sales activity in most Southern California real estate markets, including the Orange County area. Further declines occurred through 1991, 1992, and 1993 as lenders remained cautious and developers found financing for new projects difficult to obtain. Beginning in 1994, some homebuyers realized mortgage loan rates were at their lowest levels in over 20 years and entered the housing market.

As the national economy, and to a lesser degree the local economy, began an economic recovery, the Federal Reserve Bank increased the federal funds rate during 1994 and early 1995. Although the Federal Reserve kept the federal funds rate stable during most of 1995, short-term and long-term interest rates fluctuated during 1996. Rates remained stable in 1997, 1998, and early 1999. In mid-1999 and 2000, the Federal Reserve increased interest rates. However, rates declined rapidly between 2001 and 2004, to record low levels, although rates have increased from the record low levels.

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Recently, local mortgage rates are in the low 6% range, but they have been trending up. It appears that the motivation behind the monitoring of interest rates, to keep inflationary pressures in check, is working. Should the economic recovery accelerate above an "acceptable" growth rate, it is the Federal Reserve Board's contention that inflation will increase. Two to three percent increases in long term rates would have a dampening affect on home sales. However, given the recent events, a major increase in long-term rates is not likely for the next six to twelve months.

The table below shows Orange County in relation to the remaining Southern California counties for median price and number of dwellings sold.

During the period from 1988 through 1989, housing values appreciated at rates approaching an average of 15% per annum throughout much of Orange County and Southern California. During the period from 1990 through 1993 as the economic recession influenced all segments of potential homebuyers, the rate of house price appreciation fell dramatically with decreases of approximately 4% to 6% per annum. During 1996 home prices stabilized, and most new subdivisions experienced significant price increases from 1997 to mid-2005 with double digit appreciation. Over the past 12 to 18 months sales prices have generally stabilized or in some areas decreased. In all, 2,682 homes were reported to trade hands in April 2007, which is a decrease of 24.7% from April 2006. Over the past 12 months, the median sales price has remained relatively unchanged, according to DataQuick.

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31 HRA

City of Tustin The City of Tustin is located in central Orange County. It was incorporated on September 2, 1927, though the City's origins date back to the 1860's. It is adjacent to the City of Santa Ana to the west, the City of Irvine to the southeast and the City of Orange to the north. The more rural unincorporated areas of Orange County are located northeast of the City limits. Tustin is accessible from the Santa Ana Freeway (1-5) and the Costa Mesa Freeway (S-55), while the Garden Grove Freeway (S-22) and the Riverside Freeway (S-91) are within five minutes driving time. Please refer to the next page for a neighborhood map of the District.

Tustin has shared in the rapid growth of the region, particularly during the 1960's and 1970's. Nearly all of this population growth has been the result of people moving to the newer job markets in Orange County. Tustin's population in 2005 was reported at 68,393 according to the California Department of Finance. This is more than double the population in 1980 of 32,317. The primary cause of the population growth is home buyers attracted to the newer residential developments within the City's remaining vacant acreage. These areas have been located predominantly in the eastern portion of the City and include the community of Tustin Ranch and Tustin Legacy, which is the reuse areas of MCAS Tustin.

Population As of the 2000 Census, Tustin had a population of 67,504 persons or a 33% increase over its 1990 population. The State of California estimated the 2007 population at 70,350± persons for the City of Tustin, a 4.2% increase since 2000.

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Omi 0.5 1.5 2 2.5 Copyright© and (P) 1988-2006 Microsoft Corporation and/or its suppliers. All rights reserved. http:llwww.microsoft.com/streets/ Portions© 1990-2006 !nstallShield Software Corporation. All rights r,_serys!9.,. C!:lr!ain fl:ll!.P~~ i'ld 11.irJl.cµ<;tD,Jµta,.~~ ,N~AII nghts reserved The Data for areas of C.inada mdudss 1nformat1on taken with permission from Canadian authonties.J9Nlil:ig)to1Hfu!Ui3jlrt.tty:ftkie. ~hinl~l'n.bltcu\fadi'}~en's Printer for Ontano. NAVTEQ and NAVTEQ ON BOARD are trademarks of NAVTEQ © 2005 Tele Atlas North America, Inc. All rights reserved. Tele Atlas and Tele Atlas North America are trademarks of Tele A~as, Inc. 33 HRA

Income Levels The City of Tustin has an income distribution slightly lower than the countywide distribution. The median household income for Tustin is $66,044, which is just below the countywide figure. The average household income in the City is $84,753, which is moderately lower than the countywide figure.

City of Tustin Household Income Distribution 2007 14euseholds "1,5}~ .

1632,,,,: "; •9\1 2,049:. .• 9.• 3\$:~lJ }§:~ .... ···51~· 2t:tllZ!in, · i$7:'f,~~~ . ',,IC'/,:;,' $ • . . ,-,$99;~99 . 3,~7 J3,ijs~1~· $100•oo.Q.i$149009 ' ' ''/_,,;.,}'' :,,:',/',,,, ,,-,'_' --',' '.":,',,:; 4.!l® $1.!iO,OPO· ... $24@;999 ·2.124 '::i~.~3.11%· ~2501000 or more · 916 T~~1· ·24;705 .1~0.0% Med1~:t!Ptis~1Kitcl .lncerTte $6e,~· . ~v.er~~·l,foos.~h.Qlci lnctiJlvlei $~7.993 Source: Claritas 10/06

Retail Sales In 2005, the City generated retail sales of $1,489,704,000 or 4.0% of the County's total retail sales. The retail sales increased 24.7% from the City's 2000 level, while the County increased 37.1% during the same period. During the first two quarters of 2006, the City of Tustin sales were down 2.3% from the first two quarters of 2005 sales.

Employment The City of Tustin has a reported labor force of 42,500 persons. The unemployment rate for this area is 3.5%, the same as the countywide rate. The top five employers (2006) in the City are shown on the following table.

CONSULTING REAL ESTATE APPRAISERS 34 HRA

Source: City of Tustin 10/06

Transportation Tustin has very good freeway access provided by State Highway 55 (Costa Mesa Freeway), which is contiguous with the west City limits, and Interstate 5 (Santa Ana Freeway), the major north/south freeway in California. These major freeways intersect at an interchange situated in the west portion of the City. From here, the Costa Mesa Freeway extends north to the Riverside Freeway providing access into Riverside and San Bernardino counties and west into Los Angeles. The Costa Mesa Freeway continues southwest from Tustin to Costa Mesa and Newport Beach. The Santa Ana Freeway generally bisects the City. It extends northwest to Los Angeles and further to Ventura County and central California. To the south, it provides access to San Clemente and ultimately to San Diego and the international border with Mexico.

Also available is the Eastern Transportation Corridor, a toll road that runs from the Riverside Freeway near Anaheim to Tustin, merging into Jamboree Road just north of the subject. This provides access to the major employment centers of Central and Coastal Orange County.

Jamboree Road is classified as an eight-lane major arterial from the SCRRNCTA Railroad, north of Edinger Avenue, to Barranca Parkway. Jamboree Road forms the transition area for the southerly terminus of the west leg of the Eastern Transportation Corridor (ETC). There is a grade-separated interchange at Edinger Avenue. Currently, Jamboree Road has an average daily traffic volume between 74,300 and 81,600 cars. Barranca Parkway has a volume of 30,400 cars. Barranca Parkway will be improved to Major Arterial standards.

CONSULTING REAL ESTATE APPRAISERS 35 HRA

Immediate Neighborhood Tustin Legacy/MCAS Tustin is located in Southern California near the center of Orange County, and is approximately 40 miles southeast of downtown Los Angeles. The MCAS Tustin Specific Plan/Reuse Plan project area encompasses approximately 1,606 gross acres. The majority of the Plan area, 1,511 acres, lies in the southern portion of the City of Tustin and is know as Tustin Legacy. Approximately 95 acres, consisting of former military family housing and vacant land, lies within the City of Irvine. The City of Santa Ana borders the site to the southwest.

The MCAS Tustin Specific Plan encompasses an area bounded by four freeways: the Costa Mesa (SR-55), Santa Ana (1-5), Laguna (SR-133), and San Diego (1-405) Freeways. The major roadways which border the project area include Red Hill Avenue on the west, Edinger Avenue/Irvine Center Drive on the north, Harvard Avenue on the east and Barranca Parkway on the south. Jamboree Road transects the site and provides access to the Eastern Transportation Corridor. John Wayne Airport is located approximately three miles to the southwest, and a Metrolink Commuter Rail station providing daily passenger service to employment centers in Orange, Los Angeles, Riverside, and San Diego counties is located immediately to the north of the project area.

Virtually an island in a highly urbanized location, the Specific Plan area is generally bounded by single-family residential uses and business park uses to the north, light industrial and research and development uses to the west, light industrial and commercial uses to the south, and residential uses to the east of Harvard Avenue in the City of Irvine. Tustin Legacy is one of the largest remaining tracts of developable land in central Orange County. Its locational advantages in terms of proximity to transportation facilities, community services, and regional commercial and cultural facilities make it a prime location for urban development.

CFO No. 07-1 is located at the northwest corner of Barranca Parkway and Jamboree Road, and is currently under construction. The shopping center is to be built on 88 acres within the MCAS Tustin Specific Plan/Reuse Plan area. The extension of Tustin

CONSUlrlNG REAL ESTATE APPRAISERS 36 HRA

Ranch Road from Walnut Avenue to Barranca Parkway will border the west side of the center. "The District" is proposed to consist of just under 1-million square feet of retail space. "The District" is envisioned to consist of three distinct areas to be known as The Lifestyle and Entertainment Village, Promotional Retail District and a Regional District. The Lifestyle and Entertainment Village is proposed to be anchored by a 14-screen multiplex theater along Barranca Parkway. The Promotional Retail District is proposed to feature specialty shops along Jamboree Road. The Regional District will include big box warehouse stores along Tustin Ranch Road. On May 17, 2007 the first of more than 70 stores opened at The District. Costco is scheduled to open on June 7, 2007. In addition to Costco, The District is also planned to include T J Maxx, Office Depot, Target and Lowes.

CFO No. 07-1 consists of one site within the proposed development of Tustin Legacy. CFO No. 07-1 is located at the northwest corner of Barranca Parkway and Jamboree Road. To the east and south are industrial areas within the City of Irvine. To the immediate east is Jamboree Road, a "super street" which is at street grade with the surface level of CFO No. 07-1. West and north of CFO No. 07-1 is the remainder of the future Tustin Legacy project continuing to Red Hill Avenue.

Conclusions of Area Analysis The strength of the economy for Orange County is evident in the relatively stable employment and, correspondingly, population of the County. While the employment and population figures have shown continued growth, local unemployment has consistently been below the national and state averages. The rebound from the past recession has shown significant gain in population and employment numbers. Most economists predict a continuation of the overall expansion for one to two years to come, although at a more moderate pace.

As the economy moved out of the previous recession mode, a return to growth and economic stability for the County occurred. This was due, in part, to the diverse economic base for the area. Additionally, the availability of developable land in the

CONSULTING REAL ESTATE APPRAISERS 37 HRA

County, receptiveness of local communities to new business, a strong labor pool, and the mild climate have in the past attracted new residents and business.

The retail market is related to the residential market. In Orange County and Tustin the recent decline in the residential market, which began in 2006, will negatively impact the retail market. It is projected that the residential market will continue to decline in 2007 and 2008, and then remain flat for several years. The future demand for new retail space could decline.

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SITE ANALYSIS

Location CFO No. 07-1 is located at the northwest corner of Jamboree Road and Barranca Parkway in the City of Tustin within the MCAS Tustin Specific Plan/Reuse Plan known as Tustin Legacy. The MCAS Tustin Specific Plan/Reuse Plan project area encompasses approximately 1,606 gross acres. The MCAS Tustin Specific Plan/Reuse Plan covers an area bounded by four freeways: the Costa Mesa (SR-55), Santa Ana (1-5), Laguna (SR- 133), and San Diego (l-405) Freeways. The major roadways which border the project area include Red Hill Avenue on the west, Edinger Avenue/Irvine Center Drive on the north, Harvard Avenue on the east and Barranca Parkway on the south. Jamboree Road transects the site and provides access to the Eastern Transportation Corridor.

Tustin Legacy The Tustin Legacy Specific Plan envisions a collection of neighborhoods which will have their own characteristics within Tustin Legacy. A neighborhood may be comprised of more than one land use designation. The neighborhoods of Tustin Legacy are intended to establish a community structure and provide the basis for the range of land uses, intensity of development and urban design characteristics.

The Tustin Legacy Specific Plan contains eight neighborhoods. A statistical summary of the land uses contained in each neighborhood is shown on Page 42. The land uses are according to the MCAS Tustin Specific Plan/Reuse Plan adopted February 3, 2003 and amended and adopted on April 17, 2006.

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Neighborhood A - Education Village Neighborhood A is located along the west edge of Tustin Legacy. The Education Village will be an important anchor for the community with a range of public-serving uses within a walkable campus setting. By virtue of its uses and operation, the Education Village will be linked to many other uses and activities within Tustin Legacy. Its primary functions are to provide education, training, and specific social service functions.

Neighborhood B - Village Housing Neighborhood B is located in the northwestern quadrant of Tustin Legacy. Through reuse or new development of a range of housing types, Neighborhood B is expected to offer basic, affordable housing. The housing will be complemented by commercial services that will meet the daily shopping needs of residents, employees and visitors to the site. The neighborhood will also have a supporting function as a transition or buffer area between existing residential neighborhoods north of Edinger Avenue, which are not part of Tustin Legacy, and the Education Village and Community Core uses.

Neighborhood C - Urban Regional Park Neighborhood C is located near the center of Tustin Legacy, bordered by North Loop Road (extension of Valencia Avenue) on the north and Armstrong Avenue on the west. The Urban Regional Park will be a significant public amenity that will not only serve regional needs, but provide a buffer between the living environment and commercial and business areas. This area will serve a number of functions including open space conservation, recreation, community resource services, concession commercial supportive to the park, and historic preservation and/or display.

CONSULTING REAL ESTATE APPRAISERS 40 HRA • Plan Description Neighborhoods

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.. NEIGHBORHOOD A - LEAANING VILLAGE • NEIGHBORHOOD B • VUAGE HOIJSm. • HElQl-fBORHOOO C • REGIONM. PARK - NOGHBORHOOD O - C(Mr,U{ITY CARE

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41 HRA

Neighborhood Summary Land Use Gross Acreage Range of Dwelling Units Neiahborhood A Education Village/Elementary School - 10 acres 128.3 Community Park 24.1 Transitional/Emergency Housing hl Subtotal 157.5 Neiahborhood B Low Density Residential 54.2 1 - 7 du/acre Medium Density Residential 51.7 8 - 15 du/acre Village Services 20.7 Subtotal 126.6 925 Dwelling Units Max. ·- Neiahborhood C Urban Regional Park 84.5 Subtotal 84.5 Neiahborhood D Community Core 310.6 Medium-High Density Residential 16 - 25 du/acre High School - 40 acres Subtotal 310.6 891 Dwellina Units Max. Neiahborhood E Commercial Business 117.5 Subtotal 117.5 Neiahborhood F /The District) Commercial 55.3 Military-16.7 Commercial Business 47.3 Subtotal 102.6 Neiahborhood G Residential Core 275.1 Low Density Residential -112.6 acres 1 - 7 du/acre Medium Density Residential - 51.8 acres 8 - 15 du/acre Medium High Density Residential - 83 acres 16 - 25 du/acre Commercial - 29.3 acres Parks/Open Space - 63.1 Elementary School - 10 acres Low Density 127.1 1 - 7 du/acre Medium High Density Residential 29.4 16-25 du/acre Subtotal 431.6 2,383 Dwellina Units Max. Neighborhood H Medium Density Residential - Irvine 73.4 8 - 15 du/acre Elementary School K-8 - 20 acres Subtotal 73.4 402 Dwelling Units Max. Riaht-of-Wav Roadways 173.4 Drainage {Flood Control and Storm Drains) 28.5 Subtotal 201.9 GRAND TOTAL 1,606.5 4,601 Dwelling Units Max.

CONSULTING REAL ESTATE APPRAISERS 42 HRA

Neighborhood D - Community Core Neighborhood D encompasses the central area of Tustin Legacy. This neighborhood will provide an opportunity for one or more unique, large-scale development proposals that would complete the Specific Plan area. The primary functions of Neighborhood D include: maintaining long-range flexibility as a major opportunity area, providing opportunities for mixed-use development (which includes medium-high density residential projects), and revenue generation to offset especially high infrastructure and demolition costs.

Neighborhood E - Employment Center Neighborhood E is located in the southwest quadrant of Tustin Legacy. This neighborhood will be an employment center for the community. It will provide a business park setting for a full range of professional offices, research and development. and commercial business uses.

Neighborhood F - Regionally-Oriented Commercial District Neighborhood F is located on the southeast quadrant of Tustin Legacy. This neighborhood will be an auto-oriented, regional level commercial center. Desired commercial uses will include regional commercial and retail uses. specialty merchandising, wholesale, and commercial businesses.

Neighborhood G - Residential Core Neighborhood G is located on the northeastern portion of Tustin Legacy. The Residential Core is intended to function as the primary residential enclave within the community. The Residential Core will provide a range of housing types including transitional family units, entry-level units, higher-end housing and commercial opportunities. This neighborhood will also include recreationally-based amenities. It will provide the opportunity to tie existing housing to the community through uses. access and design. Neighborhood G will also provide a desirable transition to existing Tustin and Irvine residential neighborhoods to the north and east.

CONSULTING REAL ESTATE APPRAISERS 43 HRA

Neighborhood H - Irvine Residential Neighborhood Neighborhood H is in the southeast corner of Tustin Legacy. The family housing will provide a buffer between Irvine residential neighborhoods to the east and business uses to the west. It will also contain an elementary school and park facilities as needed to support residents in the vicinity.

The District, CFO No. 07-1, which is designated as Planning Areas 16, 17 and 19 of the Specific Plan and is within Neighborhood F - Commercial and Commercial Business.

Current Site Condition As of the date of value of this appraisal, CFO. No. 07-1 is in a near finished on­ site condition with on-site streets and on-site utilities installed. Significant off-site work remains to be completed. Vestar/Kimco has estimated the cost to finish at $36,000,000 .

.f;)ff,ls1tes W:eq~~t.1ltlgatioo. pi,~ites Total..·

Size and Shape The overall shape of CFO No. 07-1 is irregular and contains 82.57± gross acres, according to the CFO Report. Tract No. 16695 contains 111. 781 gross acres and 87 .31 net acres. Six parcels to be developed with Costco, Target, Lowe's, Wells Fargo Bank, Chick-Fil-A and ln-N-Out Burger are not subject to the Special Tax of CFO No. 07-1 and not included in this appraisal. These six retailers encompass 15 assessor parcels totaling 37.647 acres.

CONSULTING REAL ESTATE APPRAISERS 44 HRA

Tract No. 16695

SHEC J Of" 9 SHEETS ~ ::.:tTATI,,.- llOsACl<£SNfl TRACT MAP NO. 16695 ~~;~\~Ti" ;~ IN THE CITY OF TUSTIN, COUNTY OF ORANGE, STATE OF CALIFORNIA WARREN W. 'MLLIAMS, .F., LS. 7038 DEVELOPMENT RESOURCE CONSULTANTS DAT[ or SUR'IEY: SEPTD..IBER 2003-JULY 2004 BOUNDARY ESTABLISHMfNT

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CONSULTING REAL ESTATE APPRAISERS 45 HRA

Soils and Geology No soils report was provided for the appraiser's review. All of CFO No. 07-1 has been graded and improved to a near finished site condition. The appraisers assume that the soil conditions allow all of the proposed development as discussed in the Highest and Best Use section of this report and as proposed by the builder.

The appraisers have previously reviewed the Environmental Impact Report (EIR) for Tustin Legacy prepared in 1999. The EIR reported that there are generally five soil types found on the total Specific Plan area. The majority of Tustin Legacy, including all of the northern and central area and a portion of the southern area, is covered with Chino silty clay loam, drained. The area adjacent to the Peters Canyon Channel is covered with Chino silty clay loam. Soil classified as Omni clay and Omni clay drained can be found in the former military housing area along Harvard Avenue, along with Sorrento sandy loam.

All of the soils in the Tustin Legacy area are characterized by being poorly drained soils in alluvial fans, flood plains, or basins. The on-site soils have only a slight erosion hazard, but do have a moderate to severe building site development limitation. A moderate limitation (Chino silty clay loam, drained; Chino silty clay loam; Sorrento sandy loam) indicates that soil properties and site features are unfavorable for urban use, but the limitations can be overcome or minimized by special planning and design. A severe limitation (Omni clay and Omni clay, drained) indicates that one or more soil properties or site features are so unfavorable or difficult to overcome that a major increase in construction effort, special design, or intensive maintenance is required. Remedial measures must be taken prior to construction to prevent damage to foundations, structures, and infrastructure.

The subject parcels have been graded to a finished site or a near finished site condition and improved with all major streets throughout the shopping center. For purposes of this appraisal assignment, we assume the soil conditions are suitable for the proposed highest and best uses. The appraisers are not experienced in determining the

CONSULTING REAL ESTATE APPRAISERS 46 HRA

suitability of soil conditions; therefore, it is suggested that the client contact a professional soil expert to determine the suitability of the soil conditions of the land.

This appraisal is based on the specific assumption that the property is suitable for development as proposed and supported by our highest and best use analysis. This appraisal report is also based on the fact that there are no hazardous materials contaminating the soil. No representation is made by the appraisers concerning the soil conditions.

Topography/Drainage CFO No. 07-1 is mostly level. Drainage is via natural sheet flow and percolation. There are storm drains serving the subject properties. On-site storm drain capacity for the subject was constructed during the site development process. Off-site storm drains remain to be completed. During our inspection of the site, we observed no drainage problems that would not be cured by the proposed development of the site.

Zoning The District is currently zoned SP - Specific Plan, by the City of Tustin. Allowed uses include: residential, commercial, retail, office, entertainment retail, mixed use, and institutional.

Tract No. 16695, consists of Planning Areas 16, 17 and 19 of the Tustin Legacy Specific Plan. This tract map has an approved zoning of CB-Commercial Business and C­ Commercial.

CFO No. 07-1, Tract No. 16695 is proposed for 984,589 square feet of retail space. The indicated overall density for Tract No. 16695 is 11,593 square feet per acre, which appears to be within the allowable densities.

CONSULTING REAL ESTATE APPRAISERS 47 HRA

Tract Map No. 16695 recorded on June 9, 2005 as Document No. 2005000445846 and is proposed for a development of a 984,589 square foot regional shopping center with three primary uses.

Access and Circulation Regional access to the area is provided by the Santa Ana (1-5) Freeway. Interstate 5 runs in a southeasterly direction from Los Angeles through Orange County, bisecting the Saddleback Valley and continuing southeast to San Diego. Access to the subject's immediate area is via Jamboree Road and Barranca Parkway. Jamboree Road is a major north/south thoroughfare traversing the Tustin, Irvine, and Newport Beach communities. Jamboree Road has a full interchange with the 1-5 Freeway about two miles north of the subject. Barranca Parkway is a major east/west thoroughfare which connects to full interchange facilities with the S-55 Freeway, to the west. Full freeway interchange facilities with S-55 are three miles to the west.

The primary access to CFO No. 07-1 is Barranca Parkway. CFO No. 07-1 is located on the north side of Barranca Parkway, west of Jamboree Road. Tustin Ranch Road is adjacent to the west and northwest sides of CFO No. 07-1.

It appears that the interior streets will offer adequate access to the retail buildings and minimize traffic. The streets within the development are asphalt paved, with concrete curbs and gutters. Direct access is provided from main entrances on Barranca Parkway.

With the completion of the Eastern Transportation Corridor (S-261 ), additional regional access is available. This link from the S-91 Freeway to the 1-5 Freeway is complete.

Easements The appraisers have reviewed one current title policy for CFO No. 07-1. There are over 100 exceptions listed in this title report. The report was prepared by First American Title and dated May 1, 2007. A copy of the title report is retained in the

CONSULTING REAL ESTATE APPRAISERS 48 HRA

appraisers' work files. This appraisal is contingent upon the fact that there are no easements, encroachments, or conditions that would adversely affect the value of the property.

Utilities As of the date of this appraisal, all of the utilities are available or currently under construction to both zones. The utilities required to support the subject property to its highest and best use are provided by the following companies/agencies:

Electricity: Southern California Edison Natural Gas: Southern California Gas Company Telephone: AT&T/Cox Fire: Orange County Fire Authority Police: City of Tustin Transit: Orange County Transit District Water: Irvine Ranch Water District Sewer: Irvine Ranch Water District

Earthquake, Flood Hazards, and Nuisances The subject property, as of the date of valuation, was not located in a designated Earthquake Study Zone as determined by the State Geologist. However, all of Southern California is subject to seismic activity. In addition, the subject property is located in a Zone "X" flood designated area according to Federal Emergency Management Agency Community Panel No. 06059C0279H, effective date February 18, 2004. This designation references an area of minimal flooding, which is outside the 0.2% annual change flood plain. Flood insurance is not required.

Hazardous Materialrroxic Waste Physical inspection of the subject property did not indicate evidence of on-site hazardous materials and/or toxic waste. All of CFO No. 07-1 has been graded to finish­ graded condition. All but two of the buildings are under construction or completed.

The appraisers have been provided with a Phase 1 Environmental Site Assessment Report for CFO No. 07-1, dated October 6, 2004, prepared by Twining Laboratories, Inc. Based on the information provided and the current physical condition

CONSULTING REAL ESTATE APPRAISERS 49 HRA

of the parcels, it appears that development as proposed and as it exists is allowed. A specific assumption of the report and values is that the soil is suitable for development as proposed and no evidence of hazardous materials or toxic waste exist.

Environmental Issues The subject site was formerly military use lands. No rare or threatened species were observed on the subject sites.

Transportation Vital to an area's growth and economic expansion are its transportation facilities for both business and residents. The following is a summary of the existing transportation facilities available in the area.

Rail: Amtrak stops in Tustin.

Truck: 11 major trucking lines serve Orange County.

Air: John Wayne Airport (3 miles), Los Angeles International Airport (50 miles)

Bus: Orange County Transit District, Dial-A-Ride, Park-N-Ride.

Water: Long Beach Harbor/Port of Los Angeles (40 miles).

Highways: Santa Ana Freeway (Interstate 5) San Diego Freeway (Interstate 405) Costa Mesa Freeway (State 55)

Eastern Transportation Corridor (S-241 ).

Taxes and Special Assessments Pursuant to Proposition 13, passed in California in 1978, current assessed values may or may not have any direct relationship to current market value. Except in limited circumstances, real estate tax increases are limited according to Proposition 13 to a maximum of 2% per year. If the property is sold, real estate taxes are normally subject to modification to the then current market value.

CONSULTING REAL ESTATE APPRAISERS 50 HRA

The basic levy for the properties is 1%. In addition, there are taxes and assessments for Metropolitan Water District, Tustin Unified School District, Irvine Ranch Water District and Vector Control. The subject parcels will be subject to CFO 07-1 Special Taxes. The developed projected total tax rate is estimated not to exceed 1.8% of the initial base sales prices of the individual homes. David Taussig & Associates, Inc. has estimated the Special Taxes on the undeveloped land within CFO No. 07-1.

The subject property is identified by numerous Orange County Assessor Parcel Numbers. A summary of the assessor parcels within the District is shown on the following page.

It is a specific assumption and condition of this appraisal that all of the property taxes due are paid in full and that there are no delinquencies within the District.

CONSULTING REAL ESTATE APPRAISERS 51 HRA

City Of Tustin CFO No. 07-1 Assessed Values & Taxes

APN AssmtYr Land Value Imp. Value Total Value Prop. Tax Tax Area 434-441-03 2006-07 $1,377,000 $0 $1,377,000 $14,285.90 13157 434-441-04 2006-07 $1,377,000 $0 $1,377,000 $14,285.90 13157 434-441-05 2006-07 $27,529 $0 $27,529 $331.34 13157 434-441-07 2006-07 $80,945 $0 $80,945 $962.66 13157 434-441-08 2006-07 $2,295,000 $0 $2,295,000 $26,806.62 13157 434-441-09 2006-07 $23,460,000 $0 $23,460,000 $273,904.80 13157 434-441-10 2006-07 $1,020,000 $0 $1,020,000 $11,977.96 13157 434-441-13 2006-07 $2,295,000 $0 $2,295,000 $26,806.62 13157 434-441-15 2006-07 $2,295,000 $0 $2,295,000 $26,806.62 13157 434-441-16 2006-07 $17,748,000 $0 $17,748,000 $207,229.30 13157 434-441-17 2006-07 $17,340,000 $0 $17,340,000 $202,464.72 13157 434-441-18 2006-07 $7,752,000 lQ $7,752,000 $90,534.76 13157 $77,067,474 $0 $77,067,474 $896,397.20

CONSULTING REAL ESTATE APPRAISERS 52 HRA

PROPOSED IMPROVEMENT DESCRIPTION

General The portion of CFO No. 07-1 subject to Special Tax is proposed for development of a 541,700.:':. square foot shopping center on 44.725 acres. The majority of the center is either under construction or completed. On-site utility and parking lot construction is near completion as of the date of value.

General The buildings are single-tenant and multi-tenant retail buildings configured to accommodate one to multiple users as a retail shopping center. The improvements are designed primarily for retail use.

General Specifications Foundation: Concrete slab will be on grade with continuous perimeter and pad footings extending 12 to 24 inches below finished grade. There will be 4 inch to 7 inch reinforced concrete slabs on insulation and 4 inches of aggregate base.

Structural Frame: Concrete block with 8 inch interior steel-type columns supporting glu-lam beams and roof structures; steel frame interior construction.

Exterior Finish: Concrete block walls will be approximately 15 to 30 feet in height with painted exterior surfaces. Recessed retail entrances will have glass and anodized aluminum frames.

Roof: Three-ply, built-up roof system with mineral cap over plywood sheeting.

Doors: Retail entrances will be tempered glass in anodized aluminum frames.

Insulation: R-11 wall and R-19 fiberglass ceiling insulation adjacent to retail space, with foil ceiling insulation in warehouse area.

Interior Finish: General retail areas consist of carpet and vinyl tile on the floors, drywall partitions, suspended acoustic ceiling with flush fluorescent lighting and air conditioning. Ceiling height varies

CONSULTING REAL ESTATE APPRAISERS 53 HRA

from 8 to 9 feet with pre-finished laminated doors in metal frames.

Restrooms: There are adequate restrooms for retail facilities of their size.

Electrical: Electrical service will be 200 to 600 amps, which is adequate for these properties.

Site Improvements: The sites will be configured with asphalt paved parking areas at the front, side and rear portions of the buildings. Parking is provided for an adequate number of car and truck spaces.

Condition: The subject properties will be new and in an excellent condition. Typical life expectancy for good quality retail buildings is 30 to 40 years.

Functional Adequacy: The physical characteristics of the improvements will be suited for retail uses.

CONSULTING REAL ESTATE APPRAISERS 54 HRA

HIGHEST AND BEST USE

The term highest and best use is an appraisal concept that has been defined as follows:

The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity. 6

The determination of highest and best use, therefore, requires a separate analysis for the land as legally permitted, as if vacant. Next. the highest and best use of the property with its improvements must be analyzed to consider any deviation of the existing improvements from the ideal. "The highest and best use of both land as though vacant and property as improved must meet four criteria. The highest and best use must be: legally permissible, physically possible, financially feasible, and maximally productive. These criteria are often considered sequentially."7 The four criteria interact and, therefore, may also be considered in concert. A use may be financially feasible, but it is irrelevant if it is physically impossible or legally prohibited.

Legally Permissible Use The legal factors affecting the site and its potential uses are often the most restrictive. These would typically be government regulations such as zoning and building codes.

CFO No. 07-1 is located in the City of Tustin. The subject is zoned for commercial development, under the C Zone and CB Zone. These designations allow for a shopping center use with up to 1, 100,000 square feet of retail space. The proposed and existing uses are considered legal and conforming uses and have been approved by the City of Tustin.

6 The Dictionary of Real Estate Appraisal, 4th Edition, Pub. by the Appraisal Institute, Chicago, IL., P. 135.

7 The Appraisal of Real Estate, 10'" Edition, Pub. By the Appraisal Institute, Chicago, IL., P. 280.

CONSULTING REAL ESTATE APPRAISERS 55 HRA

Physically Possible Use The site is located in the southern area of the City of Tustin. The parcels have a level topography. The land was previously used for a military base. CFO No. 07-1 is bounded by the new Tustin Legacy master-planned community, a small military reserve facility and industrial uses.

All normal utilities are available to serve the subject site. Utility and street improvements have been completed to all parcels as of the date of value, except for significant off-site improvements, mostly on Barranca Parkway. Access is considered to be adequate via Jamboree Road, Barranca Parkway, Tustin Ranch Road, the 1-5 Freeway and the S-55 Freeway. This appraisal considers the benefits and/or improvements that are to be funded by CFO No. 07-1.

The size, access, and topography of the subject property make it physically suited for several types of development; however, the zoning which has occurred on the site is for shopping center use. Additionally, the land has been graded to a finished site condition, with most of the center under construction and some of the center complete.

Based on the physical analysis, the subject property appears to be viable for several types of development based on its size and topography; however, the current site condition would suggest that the land has a primary use of a commercial shopping center due to its location and site development.

Financial Feasibility and Market Conditions The financial feasibility of the development of the subject property is based on its ability to generate sufficient income and value in excess of the costs to develop the property to its highest and best use. Please refer to the Valuation of this report, which gives support to the financial feasibility of the proposed "The District" within the Tustin Legacy Specific Plan.

CONSULTING REAL ESTATE APPRAISERS 56 HRA

Prior to discussion of the specific retail market in Orange County and the Central County submarket, the following general comments apply.

The shopping center anchors, Target, Lowe's and Costco, are situated immediately to the north of the future taxable buildings in CFD No. 07-1; the anchors will generate a significant amount of traffic; however, they are not subject to the Special Tax of CFD No. 07-1 and not included in this appraisal.

For the County of Orange as well as the City of Tustin, there has been a strong correlation between residential development and the corresponding level of retail development. Accordingly, the recent on-going slowdown for the real estate market result in less residential development, and this will cause a moderation in the amount of retail development as well.

Additionally, higher level of mortgage payments, due to adjustable rate loans as well as mortgage resets, are expected to dampen the amount of consumer spending for retail products. (Note: A significant amount of demand for retail products during the past several years has been driven by households utilizing their housing equity gains). "

CB Richard Ellis in their 2007 First Quarter Market review summarizes the Orange County retail market as follows. CFO No. 07-1 is located in the Central Market Area.

"Continuing its strong retail market over the last 2 to 3 years, the Orange County retail market continued to expand in the first quarter of 2007. Constant levels of demand for retail space resulted in a positive 120,936 square feet of net absorption. This increased demand resulted in a decreased overall vacancy rate of 3.0%. Conversely, the average asking lease rate climbed one additional cent to stand at $2.52 per square foot.

Currently, over 3.2 million square feet of retail space is under construction and include such projects as Orchard Hills Village Center, The Strand in Huntington Beach, and The District at Tustin Legacy. The Promenade at San Clemente neighborhood center totaling approximately 75,000 square feet was the first project to break ground in 2007. Woodbury Town Center in Irvine completed construction, adding an additional 430,000 square feet to the Central Coast submarket.

Retail spending slowed in the first part of the year, which is typical when following a strong holiday season. According to a government report, retail sales fell across the board. Furniture sales declined 1.7% in February, clothing sales fell 1.8% and department stores reported a sales decline of 1.6%. However, not all retailers experienced declines. Sales of automobiles rose 0.9%, food and

CONSULTING REAL ESTATE APPRAISERS

57 HRA

beverage retailers reported a 0.6% sales increase, while sales at gas stations rose 1.2%. Consumer confidence has improved to 112.5, which is up from 110.2 in the start of 2007. According to the Conference Board Consumer Research Center, current improving business and employment conditions have combined to lift consumers' spirits. Overall, it appears the pace of economic growth exhibited at the end of 2006 is being carried over into early 2007, even gaining a little momentum."

Vacancy Following a steady pace, the Orange County overall vacancy rate decreased to 3.0% in the first quarter. While the Central, North and West Counties experienced declined vacancy rates, Central Coast and South Orange County remained unchanged. This latest decline positions the North Orange County market to hold the tightest rate of 1. 7%, while South Orange County now carries the highest rate of 4.4%. Of the center types, Specialty centers continue to possess the highest vacancy level, declining to 3.8% this quarter, while Strip and Power centers hold the lowest vacancy rates of 2.8% and 1.9%, respectively.

Net Absorption The first quarter of the year witnessed increased demand and posted a positive 120,936 square feet of net absorption. Across the board, all submarkets within the region experienced positive absorption. Central Orange County experienced the highest level of demand with 71,779 square feet of positively absorbed space, which was concentrated in its Power Centers. Overall, Neighborhood Centers in Orange County posted 49,897 square feet of positive net absorption with Power Centers following close behind with 41,261 square feet of positive absorption. Some negative absorption

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58 HRA

occurred within the Strip Center sector which witnessed decreased levels of demand with 5,225 square feet of negatively absorbed space.

Construction The fourth quarter witnessed one center completion, of the 430,000 square foot Woodbury Town Center located in Irvine. One new center totaling 75,000 square feet broke ground this quarter in San Clemente as the Promenade at San Clemente began the construction phase. This new project has brought the total of under construction space to 3.2 million square feet. Retail centers still slated for construction include the Rancho Marketplace. The Commons Phase II in Irvine and Orangefair Marketplace, which will add an additional 450,000 square feet to the marketplace over the next four years.

The following table shows the market trend over the last year for the County of Orange and its submarkets in vacancy and rents.

Orange County First Quarter 2007

Source: CBRE 102007

Maximally Productive In considering what use would be maximally productive for the subject property, we must consider the previously stated legal considerations. We are assuming the land uses allowed under the development agreement with the City are the most productive uses that will be allowed at the present time. Current zoning and approved uses indicate that other alternative uses are not feasible at this time.

CONSULTING REAL ESTATE APPRAISERS 59 HRA

Conclusion Legal, physical, and market considerations have been analyzed to evaluate the highest and best use of the subject property. This analysis is presented to evaluate the type of uses which will generate the greatest level of future benefits possible from the land.

After reviewing the alternatives available and considering this and other information, it is the opinion of the appraisers that the highest and best use for the subject property, as vacant and as improved, is for retail shopping center development. The proposed project appears to have the location, features, and pricing structure to obtain an acceptable rental rate under normal financing and market conditions.

As Vacant After reviewing the alternatives available and considering this and other information, it is these appraisers' opinion that ultimate development of a shopping center is considered the highest and best use of the subject property.

As Proposed/Built The proposed and built uses of the properties are legal uses and the value of the properties as improved far exceeds the value of the sites if vacant. This means that the proposed retail improvements would contribute substantial value to the sites. Based on these considerations, it is our opinion that the proposed retail improvements constitute the highest and best use of the subject property.

CONSULTING REAL ESTATE APPRAISERS 60 HRA

VALUATION METHODOLOGY

Basis of Valuation Valuation is based upon general and specific background experience, opinions of qualified informed persons, consideration of all data gathered during the investigative phase of the appraisal, and analysis of all market data available to the appraiser.

Valuation Approaches Three basic approaches to value are available to the appraiser:

Cost Approach

This approach entails the preparation of a replacement or reproduction cost estimate of the subject property improvements new (maintaining comparable quality and utility) and then deducting for losses in value sustained through age, wear and tear, functionally obsolescent features, and economic factors affecting the property. This is then added to the estimated land value to provide a value estimate.

Income Approach

This approach is based upon the theory that the value of the property tends to be set by the expected net income therefrom to the owner. It is, in effect, the capitalization of expected future income into present worth. This approach requires an estimate of net income, an analysis of all expense items, the selection of a capitalization rate, and the processing of the net income stream into a value estimate.

Direct Comparison Approach

This approach is based upon the principle that the value of a property tends to be set by the price at which comparable properties have recently been sold or for which they can be acquired. This approach requires a detailed comparison of sales of comparable properties with the subject property. One of the main requisites, therefore, is that sufficient transactions of comparable properties be available to provide an accurate indicator of value and that accurate information regarding price, terms, property description, and proposed use be obtained through interview and observation.

CONSULTING REAL ESTATE APPRAISERS 61 HRA

The subject property is being improved with a large regional shopping center. All three approaches to value, direct comparison, income and cost approaches can be used to value improved properties. Because of the stage of development and various types of tenancies, we have relied on the direct comparison approach to value CFD 07-1.

CONSULTING REAL ESTATE APPRAISERS 62 HRA

VALUATION - SHOPPING CENTER

General The developed parcels within CFD No. 07-1 include land in finished condition with recorded parcel maps, and over 540,000.± square feet of retail buildings nearing completion or complete.

Included in this portion of the appraisal is all the property owned by Vestar/Kimco Tustin, L. P. The taxable net acres total 44.725 acres, within the taxable boundaries of CFD No. 07-1. Net acreages shown are as reflected on Tract Map 16695 and lot line adjustments 2006-1 to 2006-07.

Tract Map No. 16695 contains 87.31 acres in its entirety. CFD No. 07-1 comprises only 82.37 acres of Tract No. 16695. A parcel containing 9.711 acres has been sold to Lowe's. A second parcel containing 14.951 acres has been sold to Costco. Neither of these parcels are subject to the Special Tax of CFD No. 07-1. Four leased parcels including Target at 10.001 acres, Wells Fargo at 1.148 acres, Chick-Fil-A at 0.918 acres and ln-N-Out Burger at 0.918 acres are not subject to the Special Tax of CFD No. 07-1. None of these parcels are included in this valuation of CFD No. 07-1. The remaining 44.725 acres of Tract Map No. 16695 are the only portion of Tract Map No. 16695 subject to the Special Tax of CFD No. 07-1.

Direct Comparison Approach The direct comparison approach is based upon the premise that, when a property is replaceable in the market, its value tends to be set by the purchase price necessary to acquire an equally desirable substitute property, assuming no costly delay is encountered in making the decision and the market is reasonably informed. In appraisal practice, this is known as the Principle of Substitution.

This approach is a method of analyzing the subject property by comparison of actual sales of similar properties. These sales are evaluated by weighing both overall

CONSULTING REAL ESTATE APPRAISERS

63 HRA

comparability and the relative importance of such variables as time, terms of sale, location of sale property, and lot characteristics. For the purpose of this report, the unit of comparison utilized is the price per square foot of net usable area for the improved shopping centers.

Finished Value - Shopping Center Uses Due to the low activity within the subject's immediate area, we have included transfers of similar shopping center properties in Orange and Los Angeles Counties during 2006 and 2007. The following table summarizes the seven sales considered most helpful in valuing the shopping center use within CFO No. 07-1. All of the sales were based on a completed shopping center condition.

CONSULTING REAL ESTATE APPRAISERS 64 HRA

Market Data Summary Improved Shopping Centers

Data Name Building Site Sale Sale Price Number Location ~ Sq.Fl Acres Date Price /Sq. Ft. 1 Bella Terra Regional 772.000 58.01 10/16/2006 $224.000.000 $290.16 Huntington Beach Mall

2 Amerige Heights Town Center Community 156,717 26.92 12/1/2006 $44,000,000 $280.76 Fullerton Center

3 Lake Forest Village Neighborhood 120,884 6.25 9/25/2006 $32,925,000 $272.37 Lake Forest Center

4 Downey Landing Power 376,683 33.50 5/5/2006 $110,000,000 $292.02 Downey Center

5 Crossroads Marketplace Power 263,757 34.07 3/9/2007 $73,500,000 $278.67 Chino Hills Center

6 Villa Marina Marketplace Power 419,518 18.90 6/15/2006 $187,000,000 $445.75 Marina Del Rey Center

7 Empire Center Power 614,494 51.72 12/31/2005 $163,600,000 $266.24 Burbank Center

CONSULTING REAL ESTATE APPRAISERS 65 HRA

Value - Shopping Center Analysis We have reviewed and inspected all of the data items. The adjustments considered for the data items were for financing, economic changes between date of value and recorded sale date, location, site characteristics and special taxes.

Property Rights All the data cited involve a 100% transfer of the leased fee interest in the properties from the seller to the buyer. As a result, no adjustment for property rights is necessary to the data.

Financing All the data cited were cash transactions or cash down payments followed by acquisition and development loans. These terms result in essentially all cash paid to the seller. Thus, for these transactions, adjustments for financing terms are not required.

Conditions of Sale Conditions of sale are those motivational factors affecting either the buyer or the seller. Though a transaction may be "arms-length," a buyer or seller may have extenuating circumstances that impact the sales price. No additional adjustments are necessary.

Market Conditions An investigation into the general market pricing trends and consideration based upon interviews and surveys of developers and other market participants was conducted. All of the sales have occurred within the last 12-14 months. Based on the overall shopping center market which has historically low cap rates for the last 18 months, prices appear to be stabilized. No adjustment over the last 18 months is necessary.

CONSULTING REAL ESTATE APPRAISERS 66 HRA

Location The location of the subject property is comparable to most of the data analyzed. Although it is not possible to extract an exact numerical adjustment for location this element is considered in arriving at the value estimate using the price per square foot method.

Occupancy at Sale Occupancy for the Shopping Center is assumed to be stabilized. All of the data were sold at stabilized occupancies, not requiring adjustments.

Quality and Condition Most of the data are of similar construction and of more-or-less equivalent quality, but the subject requires an adjustment for being a new retail center with an excellent mix of tenants.

Size Assuming all other factors are similar, larger properties typically tend to sell for less on a per square foot basis, than smaller sites due to economies of scale. There is also a smaller market for larger and more expensive land parcels, thus limiting the marketability of the site. However, based on a review of the seven sales, no adjustment is required.

Special Taxes The subject property has special taxes above the typical ad valorem tax. The special taxes are approximately $1.65 per square foot of building. Since none of the sales are in CFDs, downward adjustment is needed for all seven comparables.

Conclusion of Shopping Center Site Values The most common unit of comparison for shopping center properties is the price per square foot of rentable area, with the determining factor being the average income level of the lease agreements. The market data relates to seven sales of larger shopping center properties, ranging in rentable area from approximately 120,000 to 770,000 square

CONSULTING REAL ESTATE APPRAISERS 67 HRA

feet. The transactions occurred in a time period considered reasonably indicative of current market conditions.

Sales prices generated from the data range widely from approximately $270.00 to $450.00 per square foot of net rentable area with the lower price per square foot indications generated from Data No. 3, being a small, older neighborhood corner with lower average rents. The most comparable data for subject property are Market Data Nos. 1, 4, 5, and 6 involving transactions involving retail properties with a multiple of major tenants and smaller tenant at premium rental rates.

Conclusions of Market Value Based upon an analysis of the compiled data, considering date and conditions of sales, location, improvement age and design, income earning capabilities, and other factors influencing value, it is our opinion that the taxable portions of CFO No. 07-1 has a present day stabilized market value as follows:

CONSULTING REAL ESTATE APPRAISERS 68 HRA

VALUATION CONCLUSION

Based on the investigation and analyses undertaken, our experience as real estate appraisers and subject to all the premises, assumptions and limiting conditions set forth in this report, the following opinion of Market Value is formed as of June 1, 2007.

ONE HUNDRED FORTY MILLION DOLLARS $140,000,000

The estimated value assumes bond proceeds of about $13, 100,000 for eligible City of Tustin facilities and/or fees, as described in the Community Facilities Report, are available at the time of sate.

CONSULTING REAL ESTATE APPRAISERS 69 HRA

CERTIFICATION

We hereby certify that during the completion of this assignment, we personally inspected the property that is the subject of this appraisal and that, except as specifically noted:

We have no present or contemplated future interest in the real estate or personal interest or bias with respect to the subject matter or the parties involved in this appraisal.

To the best of our knowledge and belief, the statements of fact contained in this appraisal report, upon which the analyses, opinions, and conclusions expressed herein are based, are true and correct.

Our engagement in this assignment was not contingent upon developing or reporting predetermined results. The compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. •

The appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan.

The reported analyses, opinions, and conclusions were developed, and this report has been prepared. in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice.

As of the date of this report, James B. Harris has completed the requirements of the continuing education program of the Appraisal Institute.

The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased professional analyses, opinions, and conclusions.

No one provided professional assistance to the persons signing this report.

The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. In furtherance of the aims of the Appraisal Institute to develop higher standards of professional performance by its

CONSULTING REAL ESTATE APPRAISERS 70 HRA

Members, we may be required to submit to authorized committees of the Appraisal Institute copies of this appraisal and any subsequent changes or modifications thereof.

Respectfully submitted, ~~,~ Berri Cannon Harris Vice President AG009147

ames B. Harris, MAI resident AG001846

CONSULl ING REAL ESTATE APPRAISERS 71 HRA

ADDENDA

CONSULTING REAL ESTATE APPRAISERS L1=i1i~C /!C

HARRIS REAL TY APPRAISAL 5100 Birch Street, Suite 200 Newport Beach, CA 92660 (949) 851-1227 QUALIFICATIONS OF JAMES B. HARRIS, MAI

PROFESSIONAL BACKGROUND

Actively engaged as a real estate analyst and consulting appraiser since 1971. President and Principal of Harris Realty Appraisal, with offices at:

5100 Birch Street, Suite 200 Newport Beach, California 92660

Before forming Harris Realty Appraisal, in 1982, was employed with Real Estate Analysts of Newport, Inc. (REAN) as a Principal and Vice President. Prior to employment with REAN was employed with the Bank of America as the Assistant Urban Appraisal Supervisor. Previously, was employed by the Verne Cox Company as a real estate appraiser.

PROFESSIONAL ORGANIZATIONS

Member of the Appraisal Institute, with MAI designation No. 6508 Director, Southern California Chapter - 1998, 1999 Chair, Orange County Branch, Southern California Chapter-1997 Vice-Chair, Orange County Branch, Southern California Chapter - 1996 Member, Region VII Regional Governing Committee- 1991 to 1995, 1997, 1998 Member, Southern California Chapter Executive Committee - 1990, 1997 to 1999 Chairman, Southern California Chapter Seminar Committee - 1991 Chairman, Southern California Chapter Workshop Committee - 1990 Member, Southern California Chapter Admissions Committee - 1983 to 1989 Member, Regional Standards of Professional Practice Committee -1985 - 1997

Member of the International Right-of-Way Association, Orange County Chapter 67.

California State Certified Appraiser, Number AG001846

EDUCATIONAL ACTIVITIES

B.S., California State Polytechnic University, Pomona, 1972.

Successfully completed the following courses sponsored by the Appraisal Institute and the Right-of­ Way Association:

Course I-A Principles of Real Estate Appraisal Course 1-B Capitalization Theory Course II Urban Properties Course IV Litigation Valuation Course VI Investment Analysis Course VIII Single-Family Residential Appraisal Course SPP Standards of Professional Practice Course 401 Appraisal of Partial Acquisitions

Has attended numerous seminars sponsored by the Appraisal Institute and the International Right­ of-Way Association. TEACHING AND LECTURING ACTIVITIES

Seminars and lectures presented to the Appraisal Institute, the University of California-Irvine, UCLA, California Debt and Investment Advisory Commission, Stone & Youngberg and the National Federation of Municipal Analysts.

MISCELLANEOUS

Member of the Advisory Panel to the California Debt and Investment Advisory Commission, regarding Appraisal Standards for Land Secured Financing (March 2003 through June 2004)

LEGAL EXPERIENCE

Testified as an expert witness in the Superior Court of the County of Los Angeles and the County of San Bernardino and in the Federal Bankruptcy Courts five times concerning the issues of Eminent Domain, Bankruptcy, and Specific Performance. He has been deposed numerous times concerning these and other issues. This legal experience has been for both Plaintiff and Respondent clients. He has prepared numerous appraisals for submission to the IRS, without having values overturned. He has worked closely with numerous Bond Counsel in the completion of 175 Land Secured Municipal Bond Financing appraisals over the last five years.

SCOPE OF EXPERIENCE

Feasibility and Consultive Studies

Feasibility and market analyses, including the use of computer-based economic models for both land developments and investment properties such as shopping centers, industrial parks, mobile home parks, condominium projects, hotels, and residential projects.

Appraisal Projects

Has completed all types of appraisal assignments from San Diego to San Francisco, California. Also has completed out-of-state appraisal assignments in Arizona, Florida, Georgia, Hawaii, Nevada, New Jersey, Oklahoma, Oregon, and Washington.

Residential

Residential subdivisions, condominiums, planned unit developments, mobile home parks, apartment houses, and single-family residences.

Commercial

Office buildings, hotels, motels, retail store buildings, restaurants, power shopping centers, neighborhood shopping centers, and convenience shopping centers.

Industrial

Multi-tenant industrial parks, warehouses, manufacturing plants, and research and development facilities.

Vacant Land

Community Facilities Districts, Assessment Districts, master planned communities, residential, commercial and industrial sites; full and partial takings for public acquisitions. QUALIFICATIONS OF BERRI CANNON HARRIS

PROFESSIONAL BACKGROUND

Actively engaged as a real estate appraiser since 1982. Vice President of Harris Realty Appraisal, with offices at:

5100 Birch Street, Suite 200 Newport Beach, California 92660

Before joining Harris Realty Appraisal was employed with Interstate Appraisal Corporation as Assistant Vice President. Prior to employment with Interstate Appraisal was employed with Real Estate Analysts of Newport Beach as a Research Assistant.

PROFESSIONAL ORGANIZATIONS

Candidate of the Appraisal Institute for the MAI designation. Co-Chair, Southern California Chapter Hospitality Committee - 1994 - 1998 Chair, Southern California Chapter Research Committee - 1992, 1993

Women in Commercial Real Estate, Member Orange County Chapter. Chair, Special Events - 1998, 1999, 2000, 2001, 2002, 2003 Second Vice-President - 1996, 1997 Treasurer-1993, 1994, 1995 Chair, Network Luncheon Committee - 1991, 1992

California State Certified Appraiser, Number AG009147

EDUCATIONAL ACTIVITIES

B.S.B.A., University of Redlands, Redlands, California

Successfully completed the following courses sponsored by the Appraisal Institute:

Principles of Real Estate Appraisal Basic Valuation Procedures Capitalization Theory and Techniques - A Capitalization Theory and Techniques - B Report Writing and Valuation Analyses Standards of Professional Practice Case Studies in Real Estate Valuation

Has attended numerous seminars sponsored by the Appraisal Institute. Has also attended real estate related courses through University of California-Irvine. LECTURING ACTIVITIES

Seminars and lectures presented to UCLA, California Debt and Investment Advisory Commission, and Stone & Youngberg.

MISCELLANEOUS

Member of the Advisory Panel to the California Debt and Investment Advisory Commission, regarding Appraisal Standards for Land Secured Financing (March 2003 through June 2004)

SCOPE OF EXPERIENCE

Appraisal Projects

Has completed all types of appraisal assignments from San Diego to San Francisco, California. Also has completed out-of-state appraisal assignments in Arizona and Hawaii.

Residential

Residential subdivisions, condominiums, planned unit developments, mobile home parks, apartment houses, and single-family residences.

Commercial

Office buildings, retail store buildings, restaurants, neighborhood-shopping centers, strip retail centers.

Industrial

Multi-tenant industrial parks, warehouses, manufacturing plants, and research and development facilities.

Vacant Land

Residential sites, commercial sites, industrial sites, large multi-unit housing, master planned unit developments, and agricultural acreage. Specializing in Community Facilities District and Assessment District appraisal assignments. PARTIAL LIST OF CLIENTS

Lending Institutions

Bank of America NationsBank Bank One Preferred Bank Commerce Bank Santa Monica Bank Downey S&L Assoc. Takai Bank Fremont Investment and Loan Union Bank Institutional Housing Partners Wells Fargo Bank

Public Agencies

Army Corps of Engineers City of Palm Springs California State University City of Perris Caltrans City of Riverside City of Aliso Viejo City of San Marcos City of Beaumont City of Tustin City of Corona City of Victorville City of Costa Mesa County of Orange City of Encinitas County of Riverside City of Fontana County of San Bernardino City of Fullerton Eastern Municipal Water District City of Hesperia Orange County Sheriffs Department City of Honolulu Ramona Municipal Water District City of Huntington Beach Rancho Santa Fe Comm. Services District City of Indian Wells Capistrano Unified School District City of Irvine Hemet Unified School District City of Lake Elsinore Hesperia Unified School District City of Loma Linda Romoland School District City of Los Angeles Saddleback Valley Unified School District City of Moreno Valley Santa Ana Unified School District City of Newport Beach Val Verde Unified School District City of Oceanside Yucaipa-Calimesa Unified School District

Developers and Landowners

DMB - Ladera Lennar Homes Foothill Ranch Company Rancho Mission Viejo Hon Development Co. Santa Margarita Company Irvine Apartment Communities Shapell Industries The Irvine Company. Sterling Development

Law Firms

Arter & Hadden McClintock, Weston, Benshoof, Bronson, Bronson & McKinnon Rochefort & MacCuish Bryan, Cave, McPheeters & McRoberts Palmiri, Tyler, Wiener, Wilhelm, & Waldron Richard Clements Sonnenschein Nath & Rosenthal Cox, Castle, Nicholson Strauss & Troy Gibson, Dunn & Crutcher Wyman, Bautzer, Rothman, Kuchel & Hill, Farrer & Burrill Silbert SITE DEVELOPMENT COST SUMMARY DISTRICT AT TUSTIN LEGACY (630) VEST AR KIMCO TUSTIN PROJECT COST COMMITMENT DETAIL 4/26/2007

PROJECT EXPENDITURES

COST TO Y,COMPL COST CODE .1.CCOUNT NAME TOTAL COMM. eAfD 'I' 'IOTALCOSTS COMPLETE (COMM)

Off-Site Improvements 150901 Off-Site Contract 0 0 0 0 0 0.0% ,, - Hard Cost Contract 0 0 0 0 0 0.0% 150910 B=o.Pa:rkwa)' 7 ,%3,366 3,076,671 0 3,076,671 4,286,695 41.8% 150911 Tmtin Iwich Road 7 ,077 ,807 6,4-03,582 0 6,403,582 674,225 90.5°/, 150912 Park Ave (Formerly South Loop Road} 14,543,220 11,328,201 0 11,328,WI 3,215,019 11!)% 150913 Warne,, Ave 4,386,493 488,070 0 488,070 3,898,423 11.1% 150914 Jamboree Road 500,000 0 0 0 500,000 0.1}'/, 150915 Bananca Parkway Stoan Drain 6,924,998 3,696,347 0 3,696,347 3,228,651 53.4'/, 150916 BPSE - San Joaguin Channel Extension 5,815,062 0 0 0 5,815,062 0.0% 1S0917 Warner Ave Storm Drain 4,024,093 4,024,093 0 4,024,093 0 100.0% 150917 Warner Ave S1orm Drain - Irvine Section 8,313,623 5,696,60B 0 5,696,608 2,617,015 68-5'/, 150918 Southern Cal Edisoa Pole Relocat1011 0 0 0 0 0 0.0% 150919 Ban:anca Parb,1y - IR'iVD 1,923,534 515,006 0 515,006 1,408,528 26.8'% J 50920 T ustia Ranrh RDad - IRWD 2,876,926 2,641,517 0 2,641,517 235,409 91.8% 150921 Park Ave· IR'iVD 3,927,038 3,927 ,038 0 3,927,038 0 100.0% 150922 Temp 18" Sewer To Armstrong 747,063 613,682 0 613,682 13},381 82.1% 150923 Traffic Signal Improvements 2,005,800 788,423 0 788,423 1,217,377 39.3% 150924 ROW Acquisition 500,000 57 ,250 0 57,250 442,750 11.5% 150940 B . Professional Services 4,255,983 4,205,983 50,000 4,255,983 0 100.0% 150950 c Conlr.lct Services 2,42L,979 l,491,406 55,000 1,546,406 875,572 63.8% 150960 D . Construction Admin1sttarion 4,285,663 4,285,663 0 4,285,663 0 100.0% I )0970 E - Contin~ncy 1,807,211 199,157 0 199,157 1,608,054 11.0% Total Off-Sitcwork 83,699,859 53,438,696 105,000 53,543,696 30,156,163 64.0%

1509M Misc. Off-Site Improvements 1509MO Off-Site Wetlands Migration 665,000 0 0 0 665,000 0.0% 1509Ml Utilttics 0 0 0 0 0 0.0% 1509M2 Smet Tmprovements 0 0 0 0 0 0.0% l509M4 Freeway Improvements 0 0 0 0 0 0.0% 1509J\19 Other 0 0 0 0 0 0.0% Total Misc. Off-S;te lmpmvemenls 665,000 0 0 0 66),000 0.0%

1511 On-Site Improvements 151101 On-Site Contra.cl - Mercer 19,424,003 16,698,767 0 16,698,767 2,725,236 86.0% CO #1 PVC Pipe Increase (Sewer 16" PVC) 40,12! 38,115 0 38,115 2.006 95.0% CO #2 Rough Gndmg Bond Premium 29,736 28,249 0 28,249 1,487 95.0% CO #3 Misc. Revisions 709,256 673,792 0 673,792 35,464 95.0% CO #4 12" PVC Increase & Misc. 211,824 201,233 0 201,233 10,591 95.0% CO #5 Surcharge Pad & Demo 219,301 208,336 0 208,336 10,965 95.0% CO #6 16" Watcrhnc Reio 332,376 315,758 0 315,758 16,618 95.0% CO #7 Buildings Bid Package #2 (See 151201) 0 0 0 0 0 0.0% CO #8 Schedule Changes 0 0 0 0 (} 0.0% CO #9 Storm Drain Changes 723,171 687 ,013 0 687,013 36,lSS 95.0% CO #10 Pad Surcharge & Demo 900,309 855,293 0 855,293 45,016 95.0% CO #11 Paving Credit (166,000) (151,939) 0 (151,939) (14,061) 91.5% C0#12COR41-59R 251,053 238,501 0 238,501 12,553 95.0% CO#lSAnnyBasc 269,180 255,722 0 255,722 13,458 95.0% CO #16 Electrical Site 412,291 391,676 0 391,676 20,615 95.0% CO #17 Water, Sewer & Stonn Line 902,887 857,743 0 857,743 45,144 95.0% CO #19 Whole Foods Dug Bank 15,764 14,976 0 14,976 788 95.0% CO #20 Traffic Signal & Secunty 241,766 137,807 0 137,807 103,960 57.0% CO #21 M1sc. On-Site Utility Cha,tges 168,270 159,856 0 159,856 8,413 95.0% CO #22 M,sc. On-Site 120,938 114,891 0 114,891 6,047 95.0% CO #25 Electrical, Temp Power 439,975 417,976 0 417,976 21,999 95.0% CO #26 Curb Repair, Benn., Environmental 491,031 452,486 0 452,486 38,546 92.2% CO #27 Underground, O,•ertime 114,115 108,409 0 108,4-09 5,706 95.0% CO #30 Revised Electric-al & Gas Drawings 296,202 281,392 0 281,392 14,810 95.0% CO #31 Add AGG Base 191,741 182,154 0 182,154 9,587 95.0% CO #32 Surcharge Removal of Ge,i~rator 511,681 486,D97 0 486,097 25,584 95.0% CO #33 Luidscape Changes & Soil 439,591 250,567 0 250,567 189,024 57.0"/,

Page 1 4/30/2007 DISTRICT AT TUSTIN LEGACY (630) VESTAR KIMCO TUSTIN PROJECT COST COMMITMENT DETAIL 4/26/2007

PROJECT EXPENDITURES

COSTTQ % COMPL COST CODE ACCOUNT NAME TOTAL COMM. PAID "' TOTAL COSTS COMPLETE {COMM) CO #34 BH Requirements Cor Utility 663,530 630,353 0 630,353 33,176 95.0% CO #35 Sewer& Water Changes 240,812 228,771 0 228,771 12,041 95.0% CO #36 SCE Changes & CCfV 178,858 169,915 0 169,915 8,943 95.0°/, CO #37 Misc. Utihty Changes 559,159 531,201 0 531,201 27,

Page 2 4/30/2007 DISTRICT AT TUSTIN LEGACY (630) VESTAR KIMCO TUSTIN PROJECT COST COMMITMENT DETAIL 4/26/2007

PROJECT EXPE1'."I>ITURES

COST TO %COMPL COST CODE ACCOUNT NAME TOTAL COMM ,,un Al' TOTAL COSTS COMPLETE (COMM)

On-Site Improvements - Lifestyle Main Water Feature - AdVllllced Aquatic Tech (A#1) 458,310 301,348 0 301,348 156,962 65.8% Lifestyle S,te - 357,144 sf 0 0 0 0 0 0.0'/, Lyle P:u:ks,Jr 3,468,738 151,661 0 151,661 3,117,077 4.4% Fount,.ins (JMA 02-12--05) 0 0 0 0 0 0.0% AMC Plaza -AdV\UJ.ced Aquati,;; Tech (A#l) 319,900 188,668 0 188,668 131,232 59.0% Pop Jet -Advanced Aquatic Tech (A#!) 282,100 120,905 0 120,905 161,195 42.9% Valet Feature -Advanced Aquatic Tech (A#l) 137,600 89,614 0 89,614 47,986 65.1% Pending Fountain Changes 100,000 43,279 0 43,279 56,721 43.3% Kai Pond Tunnd Dome Fountain - Advanced Aquatic Tech 96,660 38,668 0 38,668 57,992 40.0% Site Elements (IMA 02-12-05) 0 0 0 0 0 0.0% Graphics / Llgbting / Direction / Sails / Pots 400,000 92,353 0 92,353 307,647 23.1% Vendor Carts 320,000 162,965 0 162,965 157,035 50.9% Other 44,600 0 0 0 44,600 0.0% Site Fumirure (fMA 02-12-05) 300,000 0 0 0 300,000 0.0% 151101 Other (12,393) (12,393) 0 (12,393) 0 100.0% Total On-Site [mprovements - Lifestyle 5,915,515 1,177,066 0 1,177,066 4,738,449 19.9%

Misc. On-Site Improvements 1511MO Weduids Mitigati011 - Onsite 1,235,000 5,233 0 5,233 1,229,767 G.4% 1511M1 Temporary Utilities/ Vesw Field Trailer 128,770 64,977 25,000 89,977 38,793 69.9% 1511M2 Signagc & Graphics 80,348 80,348 0 80,348 0 100.0% Pylons TFN (Pylons & Monuments) I Lifestyle Images 1,603,385 1,102,762 0 1,102,762 500,623 68.8% Monuments 0 0 0 0 0 0.0% Fluoresco 399,083 53,876 0 53,876 345,2{)7 13.5% t511M3 Site Fumishmgs 111,522 1tt,'i22 0 ltt,522 0 100.0% 1511M4 Mist System 0 0 0 0 0 O.Go/, 15ttM5 Sound System 68,26() 28,260 0 28,260 40,000 41.4°/, 1511M6 Surveillance System 60,000 0 0 0 60,000 0.0% 1511M9 Othn 100,000 49,903 0 49,903 50,097 49.9% 1511MC Mail / Knox Boxes 45,000 10,708 0 10,708 34,292 23.8o/, Total Misc. S,tework 3,831,367 1,507,588 25,0GO 1,532,588 2,298,779 4G.0%

Hard Costs - Off-Site Tota.I 84,364,859 53,438,696 105,000 53,543,6% 30,821,163 63.5% Hard Cost:1; - On-Site Total 49,741,023 37,803,422 25,000 37,828,422 11,912,601 76.1% Total Hard Costs 134,105,883 91.,242,118 130,000 91,372,118 42,733,764 68.1%

1519 Government Permits & Fees 151910 Off-Site Pennits & Fees 0 0 0 0 0 0.0% 151911 Off-Site Plan Rev,e,,, 0 0 0 0 0 0.0% 151912 Off.Site Penmts 0 0 0 0 0 0.0% 151913 Off-Site Impact/ Ruy-in Fees 14,100 14,100 [) 14,100 0 t(l0.0% 151920 On-Site Pemuts & Fees 0 0 0 0 0 0.0% 151921 On.Site Plan Review 365,953 H0,953 25,000 365,953 0 100.0% 151922 On-Site Peanits 175,485 125,485 50,000 175,485 [) 100.0% 151923 On-Site Impact / Buy-in Fees 57 ,633 57,633 0 57,633 0 100.0%

Page 3 4/30/2007 DISTRICT AT TUSTIN LEGACY (630) VESTAR KIMCO TUSTIN PROJECT COST COMMITMENT DETAIL 4/26/2007

PROJECT EXPENDITURES

COST TO %COMP!. COST CODE .\.CCOUNT NAME TOTAL COMM. ,Mo A/' TOTAL COSTS COMPLETE (COMM)

A:!:!;;hi!l:tlU(a! &. f:1Jgi!l!:J:ring 1521 Planning / Predevelopment 152100 Architect 1,021,6118 1,021,688 0 1,021,688 0 100.0% 152110 Civil Engineer 0 0 0 0 0 0.0% 15211 \ Professional Se,:v1ces 209,370 209,370 0 209,370 0 Hl0.0% 152112 Parcel maps 15,500 15,500 0 15,500 0 100.0% 152t13 ALT A/Survey~ 29,626 29,626 0 29,626 0 100.0'/, 152120 Landscape Design 64,817 64,817 [) 64,817 0 100.0% 152130 EIR / En

1522 Architectw:e & Engineering - Off-Site 152200 Arch,tect 0 0 0 0 0 0.0% 152210 Civil Engineer 0 0 0 0 0 0.0% 152220 Landscape Design 0 0 0 0 0 0.0% 152225 Native Plant lnventoi:y / Salvage Plan 0 0 0 0 0 0.0% 152230 EIR / Env,ronmental Studies 34,727 34,727 0 34,727 0 100.0% 152235 Archeological Survey 0 0 0 0 0 0.0'/, !52240 Geotechnical 0 0 0 0 0 0.0'/, 152245 Testing & Inspections 0 0 0 0 0 0.0% 152250 Signage 0 0 0 0 0 0.0% 152260 T nffic Engmecr 0 0 0 0 0 0.0% 152265 Street Lghts 0 0 0 0 0 0.0% 152270 Project Managemcnc 0 0 0 0 0 0.0°/, 152280 Utilicy Design 0 0 0 0 0 0.0% 15229() Blue-printing & Design [) 0 [) 0 0 0.0% 152295 Genenl Contnctor 0 0 0 0 0 0.0% 152299 Other 0 0 0 0 0 0.0%

1523 Architecture & Engineering - Site Arch,tect 0 0 0 0 0 0.00/i, 152301 Basic Services (I) 9,366 9,366 0 9,366 0 100.0% 152302 Construction Administration 0 0 0 0 0 0_0% 152303 Misc. Site Planning 0 0 0 0 0 0.0% 152304 Lease Plans 0 0 0 0 0 0.0% 152305 Renderings / Models 0 0 0 0 0 0.0% 152308 Tenant Corrdiflatlon 0 0 0 0 0 0.0% 152309 Additional Services 43,000 32,850 0 32,850 10,150 76.4% Civil Engineer 152311 Bas,c Services (2) 763,745 668,336 0 668,336 95,409 87.5% 152312 Construction Administration 25,000 0 0 0 25,000 0.0% 152319 Puce! Maps & Monuments 25,000 0 0 0 25,000 0.0% Landscape Design 152321 Bas,c Services 262,240 262,240 0 262,240 0 100.0% 152322 Construcllon Admin,stration 4,383 4,383 0 4,383 0 100.0% 152325 Native Plant lnventoi:y / Salvage Plan 0 0 0 0 0 0.0% 152329 Additional Scf',ces 187,770 187,770 0 187,770 0 100.0% Environmental 152331 Basic Ser,,ices 269,773 79,918 0 79,918 189.855 29.6% 152332 Field Monitoring Services 62,390 34,662 0 34,662 27,728 55.6% 152334 Additiooal Service~ 243,359 243,3S9 0 243,3)9 0 100.0%

Page 4 4/30/2007 DISTRICT AT TUSTIN LEGACY (630) VESTAR KIMCO TUSTIN PROJECT COST COMMITMENT DETAIL 4/26/2007

PROJECT EXl'ENDITURES

COST TO '!.COMPL COST CODE ACCOUN"r NAME TOTAL COMM, PA!D ,1, TOTAL COSTS COMPLETE (COMM)

Archeological Survey 152336 Basic Services 0 0 0 0 0 0.0% 152337 Field Monitoring Scrviccs 0 0 0 0 0 0.0% 152339 Additional Services 0 0 0 0 0 0.0% G cotechnical 152341 Basic Servius 229,585 228,963 0 228,963 621 99.7% 152342 Field Monitoring Serv:ices 0 0 0 0 0 0.0% 152344 Additional Services 0 0 0 0 0 0.0% 152345 Testing & Inspections 700,000 623,912 0 623,912 76,088 89.1% Sign / Graphic Des,gn 152351 Bas,c Setv1ces 45,000 40,943 0 40;143 4,058 91.0% 152359 Addirional Scrvict's 270,000 133,001 0 133,001 136,999 49.3% T nffic Engineer 152361 Basic Services 37,500 17 ,539 0 17,539 19,%1 46.8% 152369 Additional Setvtccs 20,000 10,671 0 10,671 9,329 53.4% Project Management 152371 Basic Service, 672,006 399,554 0 399,554 272,452 59.5% 152379 Additional Services 0 0 0 0 0 0.0% Utility Deslgll 152381 Basir Servires 0 0 0 0 0 OJ)% 1s23g9 Additional Services 0 0 0 0 0 0.0% 152390 Blueprinting & Reiroburoableo 175,557 175,557 0 175,557 0 100.0% 152395 Aenal Photography 8,371 8,371 0 8,371 0 100.0% 152399 Other 0 0 (I 0 0 0.0%

Soft Costs - Off-Site Total 48,827 48,827 0 48,827 0 100.0%, Soft Costs - On-Sile Total 6,626,765 5,659,115 75,000 5,734,115 892,650 86.S%

Soft Cosis - Total 6,67S.S92 S,707,942 75,000 S,782,942 892,650 86.6"/o

Off-Site Improvements Total 84,413,686 53,487,523 105,000 53,592,523.26 30,821,163 63.5% On-Site Improvements Total 56,367,788 43,462,537 100,000 43,562,537.14 12.,805,251 77.3%

Page 5 4/30/2007 TAUSSIG TAX SPREAD SHEETS TAX SPREAD: TAX SPREAD NO. 5 PROJECTED SPECIAL TAXES AND BONDED INDEBTEDNESS DRAFT © DAVID TAUSSIG AND ASSOCIATES, INC. CITI OF TUSTIN COMMUNITY FACILITIES DISTRICT

26-Apr.07 09:J4AM !'JO. 07-1 (TUSTIN LEGACY/ RETAIL CENTER) "2"/o Escalating Debt Service and Special Taxes*

I MiP llS.f ASSUMPTIONS BONO ASSBMPTIONS BUILDOUT PERIOD {YEARS FROM 2007) AVERAGE COUPON ==5.00% BONDTERM {YEARS) COSTS OF ISSUANCE I DISCOUNT S 00%" PEYFI OPMENI PROJECJJONS 111 541,737 RESERVE FUND 8.39% PARCEL 2 NON-RESIDENTIAL PROPERTY (BLDG SF) 44,908 CAPITALIZED INTEREST (2 MONTHS) 0.80% PARCEL 16 NON-RESIDENTIAL PROPERTY (BLDG SF) 11,793 PARCEL 4 NON-RESIDENTIAL PROPERTY (BLDG SF) 248,348 OTHF'.R ASSIJMPDONS PARCEL 19 NON-RESIDENTIAL PROPERTY (BLDG SF) 10,000 REINVESTMENT INTEREST RA TE 3.50% PARCEL 5 NON-RESIDENTIAL PROPERTY (BLDG SF) 8,000 DISCOUNT RATE FOR NPV ANALYSIS 6.00% PARCEL 7 NON-RESIDENTIAL PROPERTY (BLDG SF) 7,834 PROPERTY INFLATION RATE 2.00% PARCEL 6 NON-RESIDENTIAL PROPERTY (BLDG SF) 6;500 ADMINISTRATION EXPENSE INFLATIOt, RATE 2.00% PARCEL 9 NON-RESIDENTIAL PROPERTY (BLDG SF] 12,028 INlllAL -YEAR'S ADMINIS1RATION (FY 2007-2008) $30,000 PARCEL 12 NON-RESIDENTIAL PROPERTY (BLOG SF) 192,326

ACREAGE SUMMARY [11 SPECIAL TAX A ASSUMPTIONS (FY 2007-2008' MINIMUM Of BI SER YI CE COYE RAGE GROSS ACREAGE 4425 UNDEVELOPED SPECIAL TAX PER ACRE GROSS DEBT SERVICE COVERAGE 110.03% LESS: EXEMPT PUBLIC AND ASSOCIATION ACREAGE BACKUP SPECIAL TM PEP. ACRE $26,051" NET DEBT SERVICE COVERAGE 113.68% NET TAXAl3LE SQUARE FEET 541,737"' % SPECIAL TAX INCREASE 2..00'!.

SUMMARY OF TAX COMPlJTATIONS

ESTIMATED ESTIMATED PROCEED ASSIGNED SPl:CIAL TAX A VALUE BOND AMOUNT AMOUNT (FISCAL YEAR 2001-08) SPEC!A! TAX Cl ASS fiUE ""-"' ""'-"' SPECIAi TAX A PARCEL2 $296.33 $28.36 $14.U. $1.65 PARCEL 16 $296.33 $28.36 $24.34 $H;S PARCEL4 $296.33 $28.36 $24.34 $1.65 PARCEL 19 $296.33 S28.36 $24.34 $1.85 PARCELS $29633 $28.36 $24 34 $1.65 PARCEL 7 $296.33 $28.36 $24.M $1.65 PARCELS $296.33 $28.36 $24.34 $1.65 PARCELS $296.33 $28.36 $24.34 $1.65 PARCEL 12 $296.33 $28.36 $24.34 $1.65 $1.65

NOTES: E.T.R -Effective Tax Rate MAJOR CONCLUSIONS

[1]Based"" infom!a/iOn provided by the C!ly. (2] Bonded indebl

K:\CUENTS2\TUSTIN.ClnTUSTINMCAS\VEST ARITAXSPREADS\VEST AR CAPACITY NO. 5. 123 City of Tustin CFO No. 07-1 (Tustin Legacy/ Retail Center) Draft-Unaudited Page 2 Capacity No. 5

FISCAL YEAR • COLLECTION OF TAXES 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 CALENDAR YEAR· PAYMENTS TO BOND HOLDERS 2007 2008 2009 2010 2011 2012 2013

I. CFO BOND§D INDEBTEDNESS "July 2007" TOTAL BONDED INDEBTEDNESS $15,365,000 $0 $0 $0 $0 $0 $0 LESS: COST OF ISSUANCE I DISCOUNT ($768,250) $0 $0 $0 $0 $0 $0 LESS: RESERVE REQUIREMENT ($1,289,547) $0 $0 $0 $0 $0 $0 LESS: CAPITALIZED INTEREST ($122,612) $0 $0 $0 $0 $0 $0 ------TOTAL BOND FINANCED FACIUTIES $13, 184,590 $0 $0 $0 $0 $0 $0

II. ABSORPTION - BPs (as of Sl1)_ UNDEVELOPED PROPERTY REMAINING UNDEVELOPED ACREAGE 00 0.0 0.0 0.0 0.0 0.0 0.0

DEVELOPED PROPERTY PARCEL 2 44,908 44,908 44,908 44,908 44,908 44,908 44,908 PARCEL 16 11,793 11,793 11,793 11,793 11,793 11,793 11,793 PARCEL 4 248,348 248,348 248,348 248,348 248,348 248,348 248,348 PARCEL 19 10,000 10,000 10,000 10,000 10,000 10.000 10,000 PARCELS 8,000 8,000 8,000 8,000 8,000 8,000 8,000 PARCEL 7 7,834 7,834 7,834 7,834 7,834 7,834 7,834 PARCELS 6,500 6,500 6,500 6,500 6,500 6,500 6,500 PARCEL9 12,028 12,028 12,028 12,028 12,028 12,028 12,028 192,326 192,326 192,326 192,326 192,326 192,326 192,326 ------PARCEL12 ------TOTAL BLOG. SF 541,737 541,737 541,737 541,737 541,737 541,737 541,737

Ill SPECIAL TAX A b.f;VY UNDEVElOPED PROPERTY SPECIAL TAXES $0 $0 $0 $0 $0 $0 $0

DEVELOPED PROPERTY SPECIAL TAXES PARCEL 2 $0 $63,278 $65,253 $66,632 $68,038 $69,472 $70,935 PARCEL16 $0 $16,617 $17,136 $17,498 $17,867 $18,244 $18,628 PARCEL 4 $0 $349,939 $360,861 $368,484 $376,259 $384, 190 $392,279 PARCEL19 $0 $14,091 $14,530 $14,837 $15,150 $15,470 $15,796 PARCEL 5 $0 $11,273 $11,624 $11,870 $12,120 $12,376 $12,636 PARCEL 7 $0 $11,039 $11,383 $11,624 $11,869 $12,119 $12,374 PARCEL 6 $0 $9,159 $9,445 $9,644 $9,848 $10,055 $10,267 PARCEL 9 $0 $16,948 $17,477 $17,846 $18,223 $18,607 $18.999 PARCEL 12 $0 $271,000 $279,458 $285,362 $291,383 ______$297,525 .,______$303,789 ------·------~------TOTAL SPECIAL TAX A LEVY $0 $763,344 $787,169 $803,797 $820,757 $838,057 $855,703 Page 3 City of Tustin CFO No. 07-1 (Tustin Legacy/ Retail Center) Drai-Unaudited Capacity No. 5

2010-11 2011-12 2012-13 FISCAL YEAR • COLLECTION OF TAXES 2006-07 2007-08 2008-09 2009-10 2011 2012 2013 CALENDAR YEAR- PAYMENTS TO BOND HOLDERS 2007 2008 2009 2010

IV. CFO BOND STR!JCTURE $0 $0 $0 NEWBONDEOINDEBTEDNESS $15,365,000 $0 $0 $0 $0 $0 $0 $0 NEW RESERVE FUND $1.289,547 $0 $0 $721,816 $718,152 $714,816 $711.812 SERIES 2007 INTEREST PAYMENT $0 $915,948 $720,800 $95,000 $115,000 $135,000 $155,000 SERIES 2007 PRINCIPAL PAYMENT $0 $0 $80,000 ------···--·------·-···· -----·-······------$833,152 $849,816 $866,812 ANNUAL GROSS DEBT SERVICE $0 $915,948 $800,800 $816,816 $31,212 $31,836 $32,473 $33, 122 CFO ADMINISTRATION $0 $30,000 $30,600 ($44,231) ($44,231) ($44,231) RESERVE FUND INTEREST (2% DELINQUENCY) $0 ($44,231) ($44,231) ($44,231) $0 $0 $0 CAPITALIZED INTEREST $0 ($138,372) $0 $0 ------·····-· ····------···· -----····-··· ··········-··-··· ------·-········- $820,757 $838,057 $855,703 NET ANNUAL DEBT SERVICE $0 $763,344 $787,169 $803,797 $0 $0 $0 ANNUAL SURPLUS/(DEFICIT) $0 $0 $0 $0 $0 $0 $0 CUMULATIVE SURPLUS/(DEFICIT) $0 $0 $0 $0 -- DEBTSF.RVICESCHEDl!LFASS'I_JMESMARCH I Al'DSf:.'l'TEMBFR I BON/J /'AYMENTS ··

V. AVERA!,E ANN!JAL SP~CIAL TAX A $0.0000 $0.0000 $0.0000 $0.0000 UNDEVELOPED PROPERTY $0.0000 $0.0000 $0.0000

DEVELOPED PROPERTY $1.4837 $1.5150 $1.5470 $1.5796 PARCEL2 $0.0000 $1.4091 $1 4530 $1.4837 $1.5150 $1.5470 $1.5796 PARCEL16 $0.0000 $1.4091 $1.4530 $1.4837 $1.5150 $1.5470 $1.5796 PARCEL 4 $0.0000 $1.4091 $1.4530 $1.4837 $1.5150 $1.5470 $1.5796 PARCEL19 $0.0000 $1.4091 $1.4530 $1.4837 $1.5150 $1.5470 $1.5796 PARCEL 5 $0.0000 $1.4091 $1.4530 $1.4837 $1.5150 $1.5470 $1.5796 PARCEL 7 $0.0000 $1.4091 $1 4530 $1.4837 $1.5150 $1.5470 $1.5796 PARCEL 6 $0.0000 $1.4091 $1.4530 $1.4837 $1.5150 $1.5470 $1.5796 PARCEL 9 $0.0000 $1.4091 $1.4530 $1.4837 $1.5150 $1.5470 $1.5796 PARCEL 12 $0.0000 $1.4091 $1.4530 86.53% 86.62% 86.71% LEVY AS A PERCENTAGE OF MAXIMUM NA 85.40% 86.34% 86.43%

VI MAXIMUM SPECIAL TAX A $0 $0 $0 UNDEVELOPED PROPERTY $0 $0 $0 $0

DEVELOPED PROPERTY $75,580 $77,092 $78,634 $80,206 $81,810 PARCEL 2 $0 $74,098 $20,245 $20,649 $21,062 $21,484 PARCEL 16 $0 $19,458 $19,848 $426,329 $434,856 $443,553 $452,424 PARCEL4 $0 $409,774 $417,970 $17,167 $17,510 $17,860 $18,217 PARCEL 19 $0 $16,500 $16,830 $13,733 $14,008 $14,288 $14,574 PARCEL 5 $0 $13,200 $13.464 $13,185 $13,448 $13,717 $13,992 $14,271 PARCEL 7 $0 $12,926 $10.940 $11,158 $11,381 $11,609 $11,841 PARCEL6 $0 $10,725 $20,648 $21,061 $21,482 $21,912 PARCELS $0 $19,846 $20.243 $0 $317,338 $323,685 $330,158 $336,762 $343,497 $350,367 PARCEL 12 ------··------····------·------·------$929,978 $948,578 $967,549 $986,900 TOTAL MAXIMUM SPECIAL TAXES $0 $893,866 $911,743

VII. DEBT SERVICE COV~RAGE 110.03% 110.03% 110.03% GROSS DEBT SERVICE COVERAGE• NA 111.10% 11003% 110.03% 115.34% 115.24% 115.14% NET DEBT SERVICE COVERAGE•• NA 116.79% 115.56% 115.45% • MAXJMUMSl'EC/AL TAXES LESS CFD ADMINISTRATION PLl!SCAPITAUZED /NTERES,'. DIVIDED BY GROSS DEBT SERVICE •• MAXJJ\IUM SPEGAL TAXES LESSCFD AD,WlNJSTRATION PLUS RESEii VF EARMNGS, DIVJDED BY GROSS DEBI' SERVICE Page 4 City of Tustin CFO No. 07-1 (Tustin Legacy/ Retail Center) Draft-Unaudited Capacity No. 5

2016-17 2017-18 2018-19 2019-20 FISCAL YEAR - COLLECTION OF TAXES 2013-14 2014-15 2015-16 2018 2019 2020 CALENDAR YEAR - PAYMENTS TO BONO HOLDERS 2014 2015 2016 2017

/. CFD BONDED INDEBTEDNESS $0 $0 $0 TOTAL BONDED INDEBTEDNESS $0 $0 $0 $0 $0 $0 $0 $0 LESS: COST OF ISSUANCE I DISCOUNT $0 $0 $0 $0 $0 $0 LESS: RESERVE REQUIREMENT $0 $0 $0 $0 $0 $0 $0 LESS: CAPITALIZED INTEREST $0 $0 $0 $0 ------$0 $0 $0 TOTAL BONO FINANCED FACILfflES $0 $0 $0 $0

II, ABSORPTION - BPs (as of 5/1) UNDEVELOPED PROPERTY 0.0 0.0 REMAINING UNDEVELOPED ACREAGE 0.0 0.0 0.0 0.0 0.0

DEVELOPED PROPERTY 44,908 44,908 44,908 44.908 44,908 PARCEL 2 44,908 44,908 11,793 11.793 11,793 11.793 PARCEL 16 11,793 11,793 11,793 248,348 248,348 248,348 248,348 248,348 PARCEL4 248,348 248,348 10,000 10,000 10,000 10,000 PARCEL19 10,000 10,000 10,000 8,000 8,000 8,000 8,000 PARCEL 5 8.000 8,000 8,000 7,834 7,834 7,834 7,834 7,834 PARCEL 7 7.834 7,834 6,500 6,500 6,500 6,500 PARCEL 6 6,500 6,500 6,500 12,028 12,028 12,028 12,028 12.028 PARCEL9 12,028 12,028 192,326 192,326 192,326 192,326 192,326 192,326 192,326 ------PARCEL 12 ------541,737 541,737 541,737 541,737 TOTAL BLDG. SF 541,737 541,737 541,737

111, SPECIAL TAX A LEVY $0 $0 $0 UNDEVELOPED PROPERTY SPECIAL TAXES $0 $0 $0 $0

DEVELOPED PROPERTY SPECIAL TAXES $75,501 $77,084 $78,699 $80,346 $82,027 PARCEL 2 $72,427 $73,948 $20,243 $20,667 $21,099 $21,541 PARCEL 16 $19,019 $19,419 $19,827 $426,287 $435,218 $444.328 $453,620 PARCEL4 $400,530 $408,946 $417,531 $17,165 $17,525 $17,891 $18,266 PARCEL 19 $16,128 $16,467 $16,812 $13,732 $14,020 $14,313 $14,612 PARCEL 5 $12,902 $13,173 $13,450 $13,447 $13,729 $14,016 $14,309 PARCEL7 $12,635 $12,900 $13,171 $11,157 $11,391 $11,629 $11,873 PARCEL 6 $10,483 $10,703 $10,928 $20,646 $21,079 $21.520 $21,970 PARCEL 9 $19,398 $19,806 $20,222 $310,179 $316,697 $323,345 $330,126 $337,042 $344,097 $351,293 ------PARCEL 12 ------$929,886 $949,369 $969,241 $989,510 TOTAL SPECIAL TAX A LEVY $873,701 $892,060 $910,786 Page 5 City of Tustin CFD No. 07-1 (Tustin Legacy/ Retail Center) Dra't-Unaudited Capacity No. 5

2016-17 2017-18 2018-19 2019-20 FISCAL YEAR- COLLECTION Of TAXES 2013-14 2014-15 2015-16 2018 2019 2020 CALENDAR YEAR· PAYMENTS TO BONO HOLDERS 2014 2015 2016 2017

IV. CFD BOND STRUCTURE $0 $0 $0 $0 NEW BONDED INDEBTEDNESS $0 $0 $0 $0 $0 $0 $0 NEW RESERVE FUND $0 $0 $0 $688,265 $682,030 $671,171 $660,694 SERIES 2007 INTEREST PAYMENT $709,148 $701,831 $694,868 $250,000 $275,000 $305,000 $335,000 SERIES 2007 PRINCIPAL PAYMENT $175,000 $200,000 $225,000 ------$938,265 $957,030 $976,171 $995,694 ANNUAL GROSS DEBT SERVICE $884,148 $901 ,831 $919,868 $35,853 $36,570 $37,301 $38,047 CFD ADMINISTRATION $33,785 $34,461 $35,150 ($44,231) ($44,231) ($44,231) RESERVE FUND INTEREST (2% DELINQUENCY) ($44,231) ($44,231) ($44,231) ($44,231) $0 $0 $0 CAPITALIZED INTEREST $0 $0 $0 $0 ------$929,886 $949,369 $969,241 $989,510 NET ANNUAL DEBT SERVICE $873,701 $892,060 $910,786 $0 $0 $0 ANNUAL SURPLUS/(DEFICIT) $0 $0 $0 $0 $0 $0 $0 CUMULA.TIVE SURPLUS/(DEFICIT) $0 $0 $0 $0 -· DEBT SERJIJCE SCHEDULE ASSUMES MARCH I Af'D SEPTEMBER I /lOND PAYMENTS-·

V. AVEMGE ANN!.!I\L SPECIAL TAX A $0.0000 $0.0000 $0.0000 $0.0000 UNDEVELOPED PROPERTY $0.0000 $0.0000 $0.0000

DEVELOPED PROPERTY $1.6812 $1.7165 $1.7525 $1.7891 $1.8266 PARCEL2 $1.6128 $1.6467 $1.7165 $1.7525 $1.7891 $1.8266 PARCEL16 $1.6128 $1.6467 $1.6812 $1.7165 $1.7525 $1.7891 $1.8266 PARCEL 4 $1.6128 $1.6467 $1.6812 $1.7165 $1.7525 $1.7891 $1.8266 PARCEL 19 $1.6128 $1 6467 $1.6812 $1.7165 $1.7525 $1.7891 $1.8266 PARCEL 5 $1.6128 $1.6467 $1.6812 $1.7165 $1.7525 $1.7891 $1.8266 PARCEL 7 $1.6128 $1.6467 $1.6812 $1.6812 $1.7165 $1.7525 $1.7891 $1.8266 PARCEL 6 $1.6128 $1.6467 $1.7165 $1.7525 $1.7891 $1.8266 PARCEL 9 $1.6128 $1.6467 $1.6812 $1.6812 $1.7165 $1.7525 $1.7891 $1.8266 PARCEL 12 $1.6128 $1.6467 87.13% 87.21% 87.29% LEVY AS A PERCENTAGE OF MAXIMUM 86.79% 86.88% 86.96% 87.05%

VI. MAXIMUM SPECIAb TAX A $0 $0 $0 UNDEVELOPED PROPERTY $0 $0 $0 $0

DEVELOPED PROPERTY $86,818 $88,554 $90,325 $92, 132 $93,974 PARCEL2 $83,447 $85,116 $23,255 $23,720 $24,194 $24,678 PARCEL 16 $21,913 $22,352 $22.799 $480,116 $489,718 $499.512 $509,503 $519,693 PARCEL4 $461,472 $470,702 $19,332 $19,719 $20,113 $20,516 $20,926 PARCEL 19 $18,582 $18,953 $15,466 $15,775 $16,091 $16,413 $16,741 PARCEL 5 $14,865 $15, 163 $15,145 $15,448 $15,757 $16,072 $16,393 PARCEL 7 $14,557 $14,848 $12,566 $12,817 $13,074 $13,335 $13,602 PARCEL 6 $12,078 $12,320 $23,718 $24,192 $24,676 $25,170 PARCELS $22,350 $22,797 $23,253 $379,248 $386,833 $394,570 $402,461 PARCEL 12 $357,374 $364,521 $371,812 ------·· ------·· ------$1,089,618 $1,111,410 $1,133,638 TOTAL MAXIMUM SPECIAL TAXES $1,006,638 $1,026,771 $1,047,307 $1,068,253

VII. D~BT SERVICE COVERAGE 110.03% 110.03% 110.03% GROSS DEBT SERVICE COVERAGE• 110.03% 110.03% 110.03% 110.03% 114.75% 114.65% 114.56% 114.48% NET DEBT SERVICE COVERAGE .. 115.04% 114.94% 114.84% • MAXIMUM SPECJAL TAXES t,ESS CFV ADMIN!STRJ.TJON, DIJIJDED IJY GROSS DERT SfiRVJCE •• MAXJMUM SPECJAL TAXLS LESS CFD AD.'<1JN!.\l'MTION PLUS RESERVE FARJ,-fNG,\: [i!V/DED BY GROSS !)£BT SERVICE City of Tustin CFD No 07-1 (Tustin Legacy/ Retail Center) Draft-Unaudited Page 6 Capacity No. s

FISCAL YEAR • COLLECTION OF TAXES 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 CALENDAR YEAR· PAYMENTS TO BOND HOLDERS 2021 2022 2023 2024 2025 2026 2027

I. CFD BQNDED INDEBTEDNES§ TOTAL BONDED INDEBTEDNESS $0 $0 $0 $0 $0 $0 $0 LESS: COST OF ISSUANCE I DISCOUNT $0 $0 $0 $0 $0 $0 $0 LESS: RESERVE REQUIREMENT $0 $0 $0 $0 $0 $0 $0 LESS: CAPITAL1ZED INTEREST $0 $0 $0 $0 $0 $0 $0 ------TOTAL BOND FINANCED FACILITIES $0 $0 $0 $0 $0 $0 $0

II. ABSORPTION - BPs {as of 5/1) UNDEVELOPED PROPERTY REMAINING UNDEVELOPED ACREAGE 0.0 0.0 00 0.0 00 0.0 00

DEVELOPED PROPERTY PARCEL 2 44,908 44,908 44,908 44,908 44,908 44,908 44,908 PARCEL 16 11,793 11,793 11,793 11,793 11,793 11,793 11,793 PARCEL4 248.348 248,348 248,348 248,348 248,348 248,348 248,348 PARCEL 19 10,000 10,000 10,000 10,000 10,000 10,000 10,000 PARCELS 8,000 8,000 8,000 8,000 8,000 8,000 8,000 PARCEL 7 7,834 7,834 7,834 7,834 7,834 7,834 7,834 PARCEL 6 6,500 6,500 6,500 6,500 6,500 6,500 6,500 PARCEL 9 12,028 12,028 12,028 12,028 12,028 12,028 12,028 192,326 192,326 192,326 192,326 192,326 192,326 192,326 ------·------PARCEL 12 ------TOT AL BLDG. SF 541,737 541,737 541,737 541,737 541,737 541,737 541,737

Ill. SPEQ[AL TA)I A LEVY UNDEVELOPED PROPERTY SPECIAL TAXES $0 $0 $0 $0 $0 $0 $0

DEVELOPED PROPERTY SPECIAL TAXES PARCEL2 $83,741 $85,489 $87,272 $89,091 $90,946 $92,838 $94,768 PARCEL16 $21,991 $22,450 $22,918 $23,396 $23,883 $24,380 $24,886 PARCEL4 $463,098 $472,766 $482,627 $492,685 $502,944 $513,408 $524,082 PARCEL19 $18,647 $19,036 $19,433 $19,838 $20,252 $20,673 $21,103 PARCEL 5 $14,918 $15,229 $15,547 $15,871 $16,201 $16,538 $16,882 PARCEL 7 $14,608 $14,913 $15,224 $15,541 $15,865 $16,195 $16,532 PARCELS $12,121 $12,374 $12,632 $12,895 $13,164 $13,437 $13,717 PARCEL 9 $22.429 $22,897 $23,375 $23,862 $24,359 $24,865 $25,382 PARCEL 12 $358,633 $366,120 $373,756 $381,545 $389,490 $397594 $405,860 ------TOTAL SPECIAL TAX A LEVY $1,010,185 $1,031,273 $1,052,783 $1,074,724 $1,097, 103 $1,119,929 $1,143,213 Page 7 City of Tustin CFO No. 07-1 (Tustin Legacy/ Retail Center) Draft-Unaudited Capacity No. 5

2023-24 2024-25 2025-26 2026-27 FISCAL YEAR-COLLECTION OF TAXES 2020-21 2021-22 2022-23 2024 2025 2026 2027 CALENDAR YEAR - PAYMENTS TO BOND HOLDERS 2021 2022 2023

IV. CFO BOND STRUCTURE $0 $0 $0 NEW BONDED INDEBTEDNESS $0 $0 $0 $0 $0 $0 $0 $0 NEW RESERVE FUND $0 $0 $0 $602,772 $579,327 $556,314 $533,740 SERIES 2007 INTEREST PAYMENT $645,608 $635,920 $616,639 $475,000 $520.000 $565.000 $610,000 SERIES 2007 PRINCIPAL PAYMENT $370,000 $400,000 $440,000 ·------$1,077,772 $1,099,327 $1.121,314 $1,143,740 ANNUAL GROSS DEBT SERVICE $1,015,608 $1,035,920 $1,056,639 $41,184 $42,007 $42.847 $43,704 CFO ADMINISTRATION $38,808 $39,584 $40,376 ($44,231) ($44,231) ($44,231) ($44,231) RESERVE FUND INTEREST (2% DELINQUENCY) ($44,231) ($44,2311 ($44,231) $0 $0 $0 $0 CAPITALIZED INTEREST $0 $0 $0 ------$1,074,724 $1,097,103 $1,119,929 $1, 143,213 NET ANNUAL DEBT SERVICE $1,010,185 $1,031,273 $1,052,783 $0 $0 $0 ANNUAL SURPLUSl(DEFlCIT) $0 $0 $0 $0 $0 $0 $0 CUMULATIVE SURPLUS/(DEFICIT) $0 $0 $0 $0 -- DEBT SER VJ Ci:, SC'HFDUJ,E ASSUMES MARCH I A.VD SEPTEMBf.R I BONfJ PA YMfJVTS ·•

V. ,BVERAGI; AN~UAL SPECIAL TAX A $0.0000 $0.0000 $0.0000 $0.0000 UNDEVELOPED PROPERTY $0.0000 $0.0000 $0.0000

DEVELOPED PROPERTY $1.9433 $1.9838 $2.0252 $2.0673 $2.1103 PARCEL 2 $1.8647 $1.9036 $1.9838 $2.0252 $2.0673 $2.1103 PARCEL16 $1.8647 $1.9036 $1.9433 $1.9433 $1.9838 $2.0252 $2.0673 $2.1103 PARCEL4 $1.8647 $1.9036 $1.9838 $2.0252 $2.0673 $2.1103 PARCEL19 $1.8647 $1.9036 $1.9433 $1.9433 $1.9838 $2.0252 $2.0673 $2.1103 PARCELS $1.8647 $1.9036 $1.9433 $1.9838 $2.0252 $2.0673 $2.1103 PARCEL 7 $1.8647 $1.9036 $1.9838 $2.0252 $2.0673 $2.1103 PARCELS $1.8647 $1.9036 $1.9433 $1.9838 $2.0252 $2.0673 $2.1103 PARCEL9 $1.8647 $1.9036 $1.9433 $1.9433 $1.9838 $2.0252 $2.0673 $2.1103 PARCEL12 $1.8647 $1.9036 87.85% 87.72% 87.79% LEVY AS A PERCENTAGE OF MAXIMUM 87.38% 87.44% 87.51% 87.58%

VI. MAXIMUM SPECIAL !AX A $0 $0 $0 UNDEVELOPED PROPERTY $0 $0 $0 $0

DEVELOPED PROPERTY $99,726 $101,721 $103,755 $105,830 $107,947 PARCEL2 $95,854 $97,771 $26,712 $27,247 $27,791 $28.347 PARCEL16 $25, 172 $25_,675 $26,189 $562,532 $573,783 $585,258 $596,964 PARCEL4 $530,067 $540,688 $551,502 $22,207 $22,651 $23, 104 $23,566 $24,037 PARCEL 19 $21,345 $21,771 $17,765 $18,121 $18,483 $18,853 $19,230 PARCELS $17,076 $17,417 $17,745 $18,100 $18,462 $18,831 PARCEL 7 $16,721 $17,056 $17,397 $14,723 $15,018 $15,318 $15,624 PARCELS $13,874 $14,151 $14.434 $26,710 $27,245 $27,789 $28,345 $28,912 PARCELS $25,673 $26,187 $427,095 $435,637 $444,350 $453,237 $462,301 PARCEL12 $410,510 $418,721 ·------·------·------·------·--- $1,227 ,087 $1,251,628 $1,276,661 $1,302,194 TOTAL MAXIMUM SPECIAL TAXES $1,156,311 $1,179,437 $1,203,026

VII. DEBT SERVICE COVERAGE 110.03% 110.03% 110.03% GROSS DEBT SERVICE COVERAGE • 110.03% 110.03% 110.03% 110.03% 114.30% 114.22% 114.14% 114.06% 113.98% 113.90% NET DEBT SERVICE COVERAGE H 114.39% • MAXIMUM SPECIAL 1AXES LESS CFIJ AVMJN!Sl'F.ATJON. DIVIDED BY GROSS DEIJT SER VJ CF. •• MAXIMUM SJ'ECJAL TAXES LE,'>S (FD ADM1Nf!:,7Rll.1JON PLUS RESERVE EAJ/NINGS. D!VIDEJJ BY GROSS DEBTSFRVICE Page 8 City of Tustin CFO No. 07-1 (Tustin Legacy/ Retail Center) Draft-Unaudited Capacity No. 5

2031-32 2032-33 2033-34 FISCAL YEAR • COLLECTION OF TAXES 2027-28 2028-29 2029-30 2030-31 2032 2033 2034 CALENDAR YEAR· PAYMENTS TO BOND HOLDERS 2028 2029 2030 2031

1. CFD BONDED INDEBTEDNESS $0 $0 $0 TOTAL BONDED INDEBTEDNESS $0 $0 $0 $0 $0 $0 $0 $0 LESS: COST OF ISSUANCE I DISCOUNT $0 $0 $0 $0 $0 $0 LESS: RESERVE REQUIREMENT $0 $0 $0 $0 $0 $0 $0 LESS: CAPITALIZED INTEREST $0 $0 $0 $0 ------$0 $0 $0 TOTAL BOND FINANCED FACILITIES $0 $0 $0 $0

II. ABSORPTION - !;!Ps (as of 511) UNDEVELOPED PROPERTY 0.0 0.0 REMAINING UNDEVELOPED ACREAGE 0.0 0.0 0.0 0.0 0.0

DEVELOPED PROPERTY 44,908 44,908 44,908 44,908 PARCEL2 44,908 44,908 44,908 11,793 11,793 11,793 11,793 PARCEL 16 11,793 11,793 11,793 248,348 248,348 248,348 248,348 PARCEL4 248,348 248,348 248,348 10,000 10,000 10,000 10,000 PARCEL19 10,000 10,000 10.000 8,000 8,000 8,000 PARCEL 5 8,000 8.000 8,000 8,000 7,834 7,834 7,834 7,834 PARCEL 7 7,834 7,834 7,834 6,500 6,500 6,500 6,500 PARCEL 6 6,500 6,500 6,500 12,028 12,028 12,028 12,028 PARCEL9 12,028 12,028 12,028 192,326 192,326 192,326 192,326 192,326 192,326 192,326 ------PARCEL12 ------541,737 541,737 541,737 TOTAL BLDG. SF 541,737 541,737 541,737 541,737

II\. SPECIAL TAX A LEVY $0 $0 UNDEVELOPED PROPERTY SPECIAL TAXES $0 $0 $0 $0 $0

DEVELOPED PROPERTY SPECIAL TAXES $102,882 $105,013 $107,187 $109,404 PARCEL 2 $96,737 $98,745 $100,793 $27,017 $27,577 $28,148 $28,730 PARCEL16 $25,403 $25,931 $26,469 $580,739 $592,760 $605,020 PARCEL4 $534,969 $546,074 $557,401 $568,955 $22,910 $23,384 $23,868 $24,362 PARCEL 19 $21,541 $21,988 $22,444 $18,328 $18,707 $19,094 $19,489 PARCEL 5 $17,233 $17,591 $17,955 $17,947 $18,319 $18,698 $19,085 PARCEL 7 $16,875 $17,226 $17,583 $14,891 $15,200 $15,514 $15,835 PARCEL 6 $14,002 $14,292 $14,589 $27,556 $28, 126 $28,709 $29,302 PARCEL 9 $25,910 $26,447 $26,996 $422,891 $431,663 $440,611 $449,737 $459,046 $468,541 PARCEL12 $414,292 __, ______------·------·------$1,266,803 $1,293,024 $1,319,769 TOTAL SPECIAL TAX A LEVY $1, 166,962 $1,191,185 $1,215,894 $1,241,096 City of Tustin CFO No. 07-1 {Tustin Legacy/ Retail Center) Draft-Unaudited Page 9 Capacity No. 5

2033-34 FISCAL YEAR - COLLECTION OF TAXES 2027-28 2028-29 2029-30 2030-31 2031-32 2032-33 2034 CALENDAR YEAR· PAYMENTS TO BONO HOLDERS 2028 2029 2030 2031 2032 2033

IV. CFD BOND STRUCTURE $0 NEW BONDED INDEBTEDNESS $0 $0 $0 $0 $0 $0 NEW RESERVE FUND $0 $0 $0 $0 $0 $0 $0 $253,798 SERIES 2007 INTEREST PAYMENT $506,615 $474,947 $443,746 $403,021 $352,781 $308,037 $1,060.000 SERIES 2007 PRINCIPAL PAYMENT $660,000 $715,000 $770,000 $835,000 $910,000 $980,000 ------··-···------·------·-----·· ------$1,313,798 ANNUAL GROSS DEBT SERVICE $1, 166,615 $1,189,947 $1,213,746 $1,238,021 $1,262,781 $1,288,037 $50,203 CFO ADMINISTRATION $44,578 $45,470 $46,379 $47,307 $48,253 $49,218 RESERVE FUND INTEREST (2% DELINQUENCY) ($44,231) ($44.231; ($44,231) ($44,231) ($44,231) ($44,231) ($44,231) CAPITALIZED INTEREST $0 $0 $0 $0 $0 $0 $0 ------·· ------· ------· $1,319,769 NET ANNUAL DEBT SERVICE $1,166,962 $1,191,185 $1,215,694 $1,241,096 $1,266,803 $1,293,024

ANNUAL SURPLUS/(DEFICIT) $0 $0 $0 $0 $0 $0 $0 CUMUL,A,TIVE SURPLUS/(DEFICIT) $0 $0 $0 $0 $0 $0 $0 -· fJFBT SER VJ CE SCHEDU!,E ASSUMES MARCH I AND SFPT EMBER I BOND PA YMFN"!S -

V. AVERAGE ANN!,!AL SPECIAL TAX A UNDEVELOPED PROPERTY $0 0000 $0_0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000

DEVELOPED PROPERTY $2.4362 PARCEL 2 $2.1541 $2.1988 $2.2444 $2.2910 $2.3384 $2.3868 $2.4362 PARCEL16 $2.1541 $2.1988 $2.2444 $2.2910 $2.3384 $2.3868 $2.4362 PARCEL4 $2.1541 $2.1988 $2.2444 $2.2910 $2.3384 $2.3868 $2.4362 PARCEL19 $2.1541 $2.1988 $2.2444 $2.2910 $2.3384 $2.3868 $2.3868 $2.4362 PARCELS $2.1541 $2.1988 $2.2444 $2.2910 $2.3384 $2.4362 PARCEL 7 $2.1541 $2.1988 $2.2444 $2.2910 $2.3384 $2.3868 $2.4362 PARCEL 6 $2.1541 $2.1988 $2.2444 $2.2910 $2.3384 $2.3868 $2.3868 $2.4362 PARCEL 9 $2.1541 $2.1988 $2.2444 $2.2910 $2.3384 $2.4362 PARCEL12 $2.1541 $2.1988 $2.2444 $2.2910 $2.3384 $2.3868 LEVY AS A PERCENTAGE OF MAXIMUM 87.86% 87.92% 87.99% 88.05% 88.11% 88.17% 88.23%

VI. MAXIM\.!M SPECIAL TAX A UNDEVELOPED PROPERTY $0 $0 $0 $0 $0 $0 $0

DEVELOPED PROPERTY $121,566 $123.997 PARCEL2 $110,106 $112,308 $114,554 $116,845 $119,182 $32,562 PARCEL 16 $28,914 $29,493 $30,082 $30,684 $31,298 $31.924 PARCEL 4 $608,903 $621,061 $633,503 $646,173 $659,096 $672,278 $685,724 $27,611 PARCEL19 $24,518 $25,008 $25,509 $26,019 $26,539 $27,070 $22,089 PARCELS $19,615 $20,007 $20,407 $20,815 $21,231 $21,656 $21,631 PARCEL7 $19,208 $19,592 $19,983 $20,383 $20,791 $21.207 $17,947 PARCEL 6 $15,937 $16,256 $16,581 $16,912 $17,250 $17,595 $32,560 $33,211 PARCEL 9 $29,490 $30,080 $30,682 $31,295 $31,921 $531,039 PARCEL 12 $471,547 $480,978 $490,598 $500,410 $510.418 $520,626 ------· ------·------TOTAL MAXIMUM SPECIAL TAXES $1,328,238 $1,354,803 $1,381,899 $1,409,537 $1,437,727 $1,466,482 $1,495,812

VII. DEBT SERVICE COVEBl\GE GROSS DEBT SERVICE COVERAGE* 110.03% 110.03% 110.03% 110.03% 110.03% 110,03% 110.03% NET DEBT SERVICE COVERAGE•• 113.82% 113.75% 113.68% 113.61% 113.54% 113.47% 113.40% • MAXIMUM S!'ECJAL TAXES LE~'.\' C}D ADMlNJST'RATJON, DiVJDED /JY GROSS DEBT SERVICE •• MAXIMUM SPEGAL TAXES LESS CFD ADMINJ!>TFATJON PLUS RESER VE EARNJNG~. DJVJDED BY GROSS DEBT SERVICE City of Tustin CFO No. 07-1 (Tustin Legacy/ Retail Center) Draft-Unaudited Page 10 Capacity No. 5

FISCAL YEAR - COLLECTION OF TAXES 2034-35 2035-36 2036-37 TOTAL CALENDAR YEAR- PAYMENTS TO BONO HOLDERS 2035 2036 2037

I. CFD BQNDED INDEBTEDNESS TOTAL BONDED INDEBTEDNESS $0 $0 $0 $15,365,000 LESS: COST OF ISSUANCE I DISCOUNT $0 $0 $0 ($768,250) LESS: RESERVE REQUIREMENT $0 $0 $0 ($1,289,547) LESS: CAPITALIZED INTEREST $0 $0 $0 ($122,612) ------·------TOTAL BONO FINANCED FACILITIES $0 $0 $0 $13,184,590

II. ABSORPTION - BPs {as of 511} UNDEVELOPED PROPERTY REMAINING UNDEVELOPED ACREAGE 0.0 0.0 0.0 0.0 DEVELOPED PROPERTY PARCEL 2 44,908 44,908 44,908 NA PARCEL16 11,793 11.793 11,793 NA PARCEL4 248,348 248,348 248,348 NA PARCEL19 10,000 10,000 10,000 NA PARCEL 5 8,000 8,000 8,000 NA PARCEL 7 7,834 7,834 7,834 NA PARCEL6 6,500 6,500 6,500 NA PARCEL 9 12,028 12,028 12,028 NA PARCEL12 192,326 192,326 192,326 NA ------·----·------~---- ··------TOTAL BLOG_ SF 541,737 541.737 541,737 NA

Ill. SPECIAL TAX A LEVY UNDEVELOPED PROPERTY SPECIAL TAXES $0 $0 $0 $0 DEVELOPED PROPERTY SPECIAL TAXES PARCEL2 $111,665 $113,972 $9,426 $2,523,609 PARCEL 16 $29.324 $29.929 $2,475 $662,709 PARCEL4 $617,526 $630,282 $52,127 $13,955,936 PARCEL19 $24,865 $25,379 $2,099 $561,951 PARCELS $19,892 $20,303 $1.679 $449,561 PARCEL 7 $19,480 $19,882 $1,644 $440,232 PARCELS $16,162 $16,496 $1,364 $365,268 PARCEL9 $29,908 $30,526 $2,525 $675,914 PARCEL 12 $478,226 $488,104 $40,369 $10,807,775 ------·------· ------·------TOTAL SPECIAL TAX A LEVY $1,347,049 $1,374,874 $113,709 $30,442,954 City of Tustin CFD No. 07-1 (Tustin Legacy/ Retail Center) Draft-Unaudited Page 11 Capacity No. 5

FISCAL YEAR· COLLECTION OF TAXES 2034-35 2035-36 2036-37 TOTAL CALENDAR YEAR - PAYMENTS TO BONO HOLDERS 2035 2036 2037

IV. CFO BOND STRUCTURE NEW BONDED !NDEBTEDNESS $0 $0 ($15,365,000) $15,365,000 NEW RESERVE FUND $0 $0 ($1,289,547) $1,289,547

SERIES 2007 INTEREST PAYMENT $200,073 $131,875 $59,212 $16,424,688 SERIES 2007 PRINCIPAL PAYMENT $1, 140,000 $1,235,000 $1,335,000 $15,365,000 ------·------·------ANNUAL GROSS DEBT SERVICE $1,340,073 $1,366,875 $1,394,212 $3' ,980,775 CFO ADMINISTRATION $51,207 $52.231 $53,275 $' ,217,042 RESERVE FUND INTEREST (2% DELINQUENCY) ($44,231) {$44,231) ($44,231) {$1,326,944) CAPITALIZED INTEREST $0 $0 $0 ($138,372) ------··-·------· NET ANNUAL DEBT SERVICE $1,347,049 $1,374,874 $113,709 $30,442,954

ANNUAL SURPLUSf(DEFICfT) $0 $0 $0 NA CUMULATIVE SURPLUS/(OEFICIT) $0 $0 $0 NA -- DEBT SF.J/V!C£ SCffEDULf' ASSUMESMAR('ff I AND SEJ'TEMBF:R I BOND !'AYMF.NTS -·

V. AVERAGE ANNUAL SPECIAL TAX A UNDEVELOPED PROPERTY $0.0000 $0.0000 $0.0000 NA DEVELOPED PROPERTY PARCEL 2 $2.4865 $2.5379 $0.2099 NA PARCEL 16 $2.4865 $2.5379 $0.2099 NA PARCEL4 $2.4865 $2.5379 $0.2099 NA PARCEL19 $2.4865 $2.5379 $0.2099 NA PARCELS $2.4865 $2.5379 $0.2099 NA PARCEL? $2.4865 $2.5379 $0.2099 NA PARCEL 6 $2.4865 $2.5379 $0.2099 NA PARCEL9 $2.4865 $2.5379 $0.2099 NA PARCEL12 $2.4865 $2.5379 $0.2099 NA LEVY AS A PERCENTAGE OF MAXIMUM 88.29% 88.35% 7.16% NA VI. MAXIMUM SPECIAL TAX A UNDEVELOPED PROPERTY $0 $0 $0 NA DEVELOPED PROPERTY PARCEL 2 $126,477 $129,007 $131,587 NA PARCEL 16 $33,213 $33,878 $34,555 NA PARCEL 4 $699.438 $713.427 $727,695 NA PARCEL19 $28,164 $28,727 $29,301 NA PARCELS $22,531 $22,982 $23.441 NA PARCEL 7 $22,063 $22.505 $22,955 NA PARCELS $18,306 $18,672 $19,046 NA PARCEL9 $33,875 $34,553 $35,244 NA PARCEL12 $541,660 $552,493 $563,543 NA ----··--- ·----·····------TOTAL MAXIMUM SPECIAL TAXES $1,525,728 $1,556,242 $1,587,367 NA VII. DEBT SERVICE COVERAGE GROSS DEBT SERVICE COVERAGE· 110.03% 110.03% 110.03% NA NET DEBT SERVICE COVERAGE H 113.33% 113.27% 113.21% NA • MAXIMUM SPECIAL TAXES LESS CFD ADMJNI.ITRATI0/'-1 DIVIDED BY GROSS DHBT SERVICE •• MAXJMUM SPECIAL TAXES LES:. CFD AD!>11NISTRATI01'' /'LUS II.ESE.RYE EARNINGS, DIVIDED BY GROSS DEBT SERVICE RENT ROLL The District@ Tustin Legacy 412612007 RENT ROLL proJecled Lease Status npenrng date Location Tenant GLA Rent Per sJ. Annual Rent T,m Options Rental Increases % Rent TI's Maior Tenants·Parcel Sales NIA Executed 711/2007 MAJORS Costcc 160,417 "'-' NIA E~cuted 71112007 MAJOR9 Lowes 138,134 MC<

Maior Tenants·Leases

J2%ornylyrs 2.0% $50.00 "sf over raw shell Executed 121!12007 Utta Cosmetics 10,000 $29.00 $290,000 10 yr 2 5-yr MAJOR3 \21112007 3 5-yr 12%e,,erySyrs e/a Executed MAJOR4 Bes! Buy 30,000 $27.00 $810,000 10 10%ovay)yr;s 1.0% SJOOOpsf E~cuted 91112007 MAJOR 5 Whole feeds eo.ooo $25.63 $1,549,800 4 5-vr '°~ $1.00ovo')· l yrs 2.0% BTS Executed 6/1/2007 MAJOR 6 TJ Maxx/Homt Goods 56,850 $18.iO $1,074,465 10~ 10%everylyrs 30% BTS Executed 611512007 MAJOR7 Michaels 20,900 $15.00 $313,500 10 yr 3 5-vr JO% "'CIJ' !O yrs NIA Executed 811/2007 MAJOR 10 TargBI 135,2a5 G.C $810,2!6 5 5-YT $J.50overylJ"" 8.0"/o $241.00 psf; Reve~ BTS Executed 8/112007 MAJOR 11 68,000 $40.05 $2,723,400 ,,,,"" 4 5-)T 10%overylyrs 3.5% $30.00 osf Executed 8/l/2007 MAJOR 12 '"'r11!d, 10,000 $22.50 $225,000 W·- 2 5-n 15 .. , 10%c:vcrySyrs Executed 81!/2007 MAJOR 13 Borders 21,570 $24.50 $528 465 3 5-vr NIA ll%overySyrs 2% w/ 4% break-oint $300,000.00 Executed 9/1/2007 MAJOR 14 osw 24,030 $16.00 $432 540 10·- 3 5-vr 10'!.ovcry !yrs 3.0% BTS Executed 2!1/2008 MAJOR 15 Str1ke 2B,1B9 114.00 $394,646 w~ Flatfint!Oyrs:!S%lnc. yrll NIA BTS Executed (>/1/2007 MAJOR 16 P"1!m.o.rt 20,067 $25.72 $516638 4 S·vr "·- Flot fin! JO yr,; l0%lnc. yr 11 BTS Executed 61!/2007 MAJOR 17 Oftlca Depot 18,361 $25.00 $459,025 ,;- :15-;T NIA

MujorTenant's Sub Total 503,273 10,!27,695

Pad Tenants 10%cve,ylyrs 3.0'Y. Ground lease Executed 61112007 e,c,, ChlckF1l·A 4,600 G.L. $132,500 4 5-)T 12%everySyrs NIA Ground lease Executed 9/112007 e,,,, In N Oll\ 3,200 G.L. $140,000 20"" yr 3 5-vr 2 5-yr l0%cverySyrs 5.0% S20.00 osf Executed 9/112007 PA03-A Pel Wai 3,235 ,,,.,, $129,400 IO·- 10"/.< Wells Fargo Bank 5,000 G.L."""" $1150.000 4 5-vr !Oo/ooverySyrs NIA 4.0'Y, $!25 osf LOI 6/1/2008 emo Marmalade Cafe 5,500 $46.50 $255,750 "'10·- 2 5-vr 10%y-r6; U'Y.y-rll,!6 $40.00osf E>

Pad Tenant's Sub Total 55,223 S2,155)22

Shon Tenants 2% every...,. 1st five then 2.5% 60% $18.00 osf Executed 8/112007 Shops 1 SharMy's 2,950 $45.50 $134,225 10- 2 5-)T 15% ev= 5vrs 7.0% $!0.00 osf Executed 7/15/2007 Shcps 1 Red Bnck Pizza 1,508 $47.50 $71,630 10~ 2 5-vr 15% every yrs 6.0% $20.00 psf Executed 7/15/2007 Shops 2 Ga Roma 2,650 $47.50 $125,875 10" 2 5-vr 5 2 5-)T every 5 )TS 8 0''/o $30.00 psf Executed 8/112007 ShO!)S 2 Ban &Jer,y's 1,024 $70.00 $71,680 10 ' J 5% 12% every vr:; 7.0'% $25.00 nsf Executed 8/1/2007 Shops 2 Rocky Mountain Chocolate 1,067 $51.53 $54,983 lOyr 2 5-vr 5 15% ever, 5 vrs 6.0% $20 00 nsf Executed 8/1/2007 Shops 3 Ch,pamsa Gnll 3,542 $42.00 $148,764 10,, 1-5 vr 1 7-yr 12% everv 5 yrs 6.0"/o $25 00 nsf Executed 7/151200? Shops 3 !;leach aums 3,903 $37.00 $144,411 25 )TS 4-7,26 VT5 8-JO 5.0"/o $87.00 osf Executed 811/2007 Shopa 3 Hot Tc pie 1,716 $24.00 $41,184 10·-'" 2 5-)T $2.00 increase every 5 yrs 5.0"/, $58 00 oaf Executed 7/15/2007 SOOps3 Finish Line 3,905 $22.00 $85,910 10·- 1-5 vr 12% everv )TS 6.0% $75,000 Executed 711512007 Shops 3 Johnny Rockets 2,200 $4S.20 $106,040 2 5-vr 5 ' 2 5-)T l5%cverv 5 yrs 6.0% Executed 7/15/2007 Shops 3 Thai Bamboo 1,530 $51.00 $18,030 10"' m ' 15% everu 6.0% $35.00 osf Executed 811/2007 Shops 3 JTSchmld's 8,00S $36.00 $288,288 '5 ·- 2 5-yr 5 =s 2-5 yr l2%everu 5 ..,,., 6.0% J0.00 osf Executed 9/1/2007 Shops 3 The Crav~ry 1,157 $50.00 $57,850 10- $54for=6-!0 6.0% $20.00 psf Executed 7/1512007 Shops 3 Sungla.s Hut 1,157 $47.00 $54,379 w- 2-5vr $40.00 ontioo 6.0% $10 00 psf Executed 7115.12007 Shopa 3 Clalnu 1,157 $35.00 $40,495 1·5 yr 15"/oeverv yrs 60"/o s:w.oonsf Executed 9/112007 Shops 3 Madlacn Bleu 1,663 $79,824 '"5 2·5vr 5 6.0% $10.00nsf LO< 911/2007 ShOpo 3 F'layNTrade 1.~50 ""·"'sss.oo $79,750 1-5 VT 15%everv5vrs 15% every yrs SMps 3 Avellable 5,083 $24.00 $121,992 10,,'" 2-5yr 5 6.Wo 2 5-yr 10"/o eV'""' 5 vrs 5.0"/o $20.00 psf Executed 8/)/2007 Shops 4 Panera Bread 4.600 $36.00 $165,600 10- rs 6-JO 6.0"/o $50.00 osf Executed 711512007 Shops 4 Justlca 4,056 $25.00 $101,400 !Oyr 1 5-vr $27 l%~nmrnllv 6.0% Executed 7115/2007 snopa 4 !llu~II 2,600 $46.00 $112,500 10, 2 5-vr 12% 5 yrs 6.0% $] 8.00 ~sf Executed 7/1512007 Shops 4 Gstage 4,500 $32.50 $146,250 10 ·- J-5yr "' 10'/o wmuall 6.0% $65.00 osf Executed 7/15/2007 Shop• 4 Zumif!z 2,sas $20 00 $59,760 10,, 2·5vr

OPS = Out Fm S,pturo: LOI ~ l.otte- 2 5-yr 6.0% $10.00 ps.f Executed 6/1/2007 ShOps 9-G Juice It Up 1,055 $51.00 $53,805 10~ 2 5-vr 15% everv 5 yrs 60% $25 over raw shell Executed 6/1/2007 Shep• 9-H Daphne• 1,000 $50.00 $50,000 10 2 5-yr 15% every 5 "'" 2 5-vr 15%everv 5 vrs 6.0% $25 over raw shell Executed 6/112007 ShOp• 9-J Daphnes 1,000 $50.00 $50,000 10~ 6.0% $10.00 osf Executed 9/1/2007 Shop$10-A Hush Baby 2.084 $50.00 $104,200 10 2 5-yr 15% everv 5 yrs 6.0% $0 Executed 9/112007 Shops 10-B V~lentlno Chccola\e $50.00 $46,050 10~ 1-Syr 15% everv 5 yrs "' 6.0% $!0.00 osf Executed 9/1/2007 Shops 10.C S!leaOptomeMc $50.00 $47,500 10~ 2 5-yr 15% every 5 yrs 5.0'% $22.50 osf OFS 9/1/2007 Shops 10.D Right start 2,460''° $60.00 $123,000 IC'" 2 5-yr 15% every 5 vrs 6.0% $20.00 osf LOI 11/112007 Shops 10.E Available 1,495 $50.00 $74,750 10 yr 2 5-yr l 5% every 5 ~rs Shops 11 AVillSble 5,200 $48,00 $249,600 6.0% $27 over raw shell LOI 121\/2007 MGMT Comedy Club 3,700 $28.50 $]05,450 10~ 2 5-yr 15% every 5 yrs

Shop Tenant's Sub Total 126,315 $40.73 $5,144,398

PHASE I TOTAL: 684,811 $ 17,427,414

Summary of Leases Summary of Leases-Including Parcel Sales 'Y.«fTotal %ofTotsJ %ofT<>llll __ filA %ofTota! Rffi< 92.5(>% 653,622""" 95.45% 16,131,220 92.56% Executed 952,173 96.83% $ 16,IJl,220 E""'"" 0.38% 186,350 1.07% OFS 3,727 0.54% -186,350 1.07% OFS 3,727 17,179 1.75% 738,252 4.24% LOI 17,179 2.51% 738,252 4.24% LOI 0.00% 0.00% Neg. LOI 0.00% 0 00"/o Neg LOI l 05% 371 592 2.13% Available 10 283 150% 371 592 213% Available 10283

100.00% $ 17,427,414 100.00% Tora! 684,811 100.00% $ 17,427,414 100.00% Total 983,362

ATM, 144,000 ILOI ha• boon ,,.cul&d • Con~acl drolled. Tustin Auto Mall Sponsonhin '$ ]40,400 lsig"9Cl/f,ral hies & Billboards 82,000 Odm '$ Soda Vendina 10,800 Video Wall '$ 72,331 Kiosks & Carts $ 75,850

Miscellaneous Income TOTAL: 525,381

Total Project $17,952,795

4126f.!OG7 OFS ~ CM For Signat=, LO!~ ],oUOc 6flnton! [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIXB

RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX [THIS PAGE INTENTIONALLY LEFT BLANK] RATE AND METHOD OF APPORTIONMENT FOR CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT No. 07-01 (TUSTIN LEGACY/ RETAIL CENTER)

A Special Tax shall be levied and collected on all Assessor's Parcels located within the boundaries of City of Tustin Community Facilities District No. 07-01 (Tustin Legacy I Retail Center) ("CFD No. 07-01 "). The amount of Special Tax to be levied in each Fiscal Year on an Assessor's Parcel in CFD No.07-01, commencing in Fiscal Year 2007-2008, shall be detennined through the application of this Rate and Method of Apportionment as described below. All of the real property in CFD No. 07-01, 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

In addition to the capitalized terms set forth in the preceding paragraph, capitalized terms used in this Section A shall 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 recorded County parcel map. The square footage of an Assessor's Parcel is equal to the Acreage of such parcel multiplied by 43,560.

"Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2 of Title 5 of the Government Code of the State of California.

"Administrative Expenses" means the actual or reasonably estimated costs directly related to the administration of CFD No. 07-01, including but not limited to the following: (i) the costs of computing the Special Taxes and of preparing the annual Special Tax collection schedules (whether by the CFD Administrator or designee thereof, or both); (ii) the costs of collecting the Special Taxes (whether by the City, County, or otherwise); (iii) the costs of remitting the Special Taxes to the fiscal agent or Trustee for any Bonds; (iv) the costs of commencing and pursuing to completion any foreclosure action arising from delinquent Special Taxes; (v) the costs of the fiscal agent or Trustee (including its legal counsel) in the discharge of the duties required ofit under any Indenture; (vi) the costs of the City, or its designee of complying with arbitrage rebate and disclosure requirements of applicable federal and State of California securities laws, the Act, and the California Government Code, including property owner or Bond owner inquiries regarding the Special Taxes; (vii) the costs associated with the release of funds from any escrow account; (viii) the costs of the City, or its designee related to any appeal of a Special Tax; and (ix) an allocable share of the salaries of the City staff and City overhead expense directly relating to the foregoing. Administrative Expenses shall also include amounts advanced by the City or the City for any administrative purposes ofCFD No. 07-01.

"Assessor's Parcel" or "AP" means a lot or parcel shown on an Assessor's Parcel Map with an assigned Assessor's parcel number.

City of Tustin April 26, 2007 Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Pagel "Assessor's Parcel Map" means an official map of the County Assessor designating parcels by Assessor's Parcel number.

"Anthorized Facilities" means those authorized facilities proposed to be financed by CFD No. 07-01 pursuant to the Act and listed in Exhibit A to this Rate and Method of Apportionment.

"Anthorized Services" means those authorized services proposed to be financed by CFD No. 07-01 pursuant to the Act and listed in Exhibit A to this Rate and Method of Apportionment.

"Bonds" means any bonds or other debt (as defined in Section 53317(d) of the Act), whether in one or more series, issued by CFD No. 07-01 under the Act.

"CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement for Facilities and the Special Tax Requirement for Services and providing for the levy and collection of the Special Taxes.

"CFD No. 07-01" means City of Tustin Community Facilities District No. 2007-01 (Tustin Legacy/ Retail Center).

"City" means the City of Tustin, California.

"Conncil" means the City Council of the City, acting as the legislative body of CFD No. 07-01.

"Connty" means the County of Orange, California.

"Developed Property" means for a Fiscal Year, all Taxable Property (i) which was within a Final Map that was recorded prior to January 1 of the previous Fiscal Year, and (ii) 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, 2005, but prior to January 1 of the previous Fiscal Year.

"Exempt Property" means any Lot located within the boundaries of CFD No.07-01 which is exempt from the Special Tax pursuant to law or Section G below.

"Final Map" means a final map, lot line adjustment, or parcel map, or portion thereof, approved by the City pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) and recorded with the County Recorder that creates individual Lots for which building pennits may be issued. The term "Final Map" shall not include any Assessor's Parcel Map or subdivision map or portion thereof that does not create individual Lots for which a building pennit may be issued.

"Fiscal Year" means the twelve month period starting on July 1 of any calendar year and ending the following June 30.

City of Tustin April 26, 2007 Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Page2 "Floor Area" or "FA" for Residential or Non-residential Property means the total of the gross area of the floor surfaces within the exterior wall of the building, not including space devoted to stairwells, basement storage, required corridors, public restrooms, elevator shafts, light courts, vehicle parking and areas incident thereto, mechanical equipment incidental to the operation of such building, and covered public pedestrian circulation areas, including atriums, lobbies, plazas, patios, decks, arcades and similar areas, except such public circulation areas or portions thereof that are used solely for commercial purposes. The deterruination of Floor Area shall be made by reference to appropriate records kept by the Department of City Planning or Department of Building and Safety. Notwithstanding the above, for purposes of deterruining the square footages of Floor Area for the Original Parcels in order to determine the allocation of Special Tax A to Successor Parcels, the square footages listed in Table 3 shall apply.

"Fntnre Pnblic Property" means Taxable Property at the time of formation of CFD No. 07- 01 that becomes Public Property at some point thereafter.

"lndentnre" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time.

"Land Use" means the classification of Taxable Property, as identified in Section B below.

"Lot" means a lot created by a Final Map for which building permits may or have already been issued for either residential or non-residential structures.

"Maximnm Special Tax" means the Maximum Special Tax A and/ or Maximum Special Tax B, as applicable.

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

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

"Non-residential Property" means all Lots of Developed Property for which a building perruit permitting the construction of one or more non-residential buildings or facilities has been issued by the City.

"Original Parcel" means a Lot which was valid for Fiscal Year 2007-2008, as listed in Table 1 and Table 3 of Section C below.

City of Tustin April 26, 2007 Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Page3 "Privately Owned Specific Retail Property" means property consisting of the following Lots: Instrument Number Lot Lot Line Adjustment (Recording Date) 2006000276405 Parcel 2 2006-01 (4/25/06) 2006000744979 Parcel 1 2006-07 (11/13/06) 2006000744979 Parcel 2 2006-07 (11/03/06) 2006000419431 Parcel 2 2006-02 (6/22/06) 2006000419912 Parcel 4 2006-03 (6/23/06) AP: 434-431-24 NA NA AP: 434-441-12 NA NA

"Proportionately" means that the ratio of the actual Special Tax levy to the Maximum Special Tax is equal for all Lots of Taxable Property.

"Public Property" means (i) any Assessor's Parcel for which the owner of record, as detennined from the County Assessor's secured tax roll for the Fiscal Year in which the Special Tax is being levied, is the federal government, the State of California, the County, the City, or any local government or other governmental agency, (ii) any property within a Final Map that is located within the boundaries of CFD No. 07-01 and was recorded as of the January 1 preceding the Fiscal Year in which the Special Tax is being levied and which, as detennined from such Final Map, is or will be a public street, or (iii) any Assessor's Parcel which, as of the April 1 preceding the Fiscal Year for which the Special Tax is being levied, has been conveyed, irrevocably dedicated to, or irrevocably offered to the federal government, the State of California, the County, the City, or any local government or other governmental agency, provided such conveyance, dedication, or offer is submitted to the CFD Administrator prior to the May 1 preceding the Fiscal Year for which the Special Tax is being levied.

"Remainder Lot" means Successor Parcels designated as a remainder lot by the CFD administrator for which a no building permit will be issued for a Taxable Property use ( e.g., Public Property).

"Residential Property" means all Lots of Developed Property for which a building permit permitting the construction thereon of one or more residential dwelling units has been issued by the City.

"Special Tax" means the Special Tax A and/or Special Tax B, as applicable.

"Special Tax A" means the special taxes to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property to fund the Special Tax Requirement for Facilities. City of Tustin April 26, 2007 Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Page4 "Special Tax B" means the special taxes to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property to fund the Special Tax Requirement for Services.

"Special Tax Reqnirement for Facilities" means (a) that amount with respect to CFD No. 07-01 required in any Fiscal Year to pay (i) for annual debt service on all outstanding Bonds due in the calendar year which commences in such Fiscal Year; (ii) periodic costs on the Bonds, including, but not limited to, the costs of remarketing, credit enhancement, and liquidity facility fees (including such fees for instruments that serve as the basis of a reserve fund in lieu of cash related to any such Bonds) and rebate payments; (iii) the Administrative Expenses; (iv) any reasonably anticipated delinquent Special Taxes based on the delinquency rate for Special Taxes levied in the previous Fiscal Year or otherwise reasonably expected; (v) any amounts required to establish or replenish any reserve funds established for the Bonds, and less (b) available funds as directed under the Indenture.

"Special Tax Reqnirement for Services" means the amount required in any Fiscal Year for CFD No. 07-01 to (i) pay directly for Authorized Services due in the calendar year commencing in such Fiscal Year, (ii) pay a proportionate share of Administrative Expenses; less (iii) a credit for funds available to reduce the annual Special Tax B levy, as determined by the CFD administrator.

"State" means the State of California.

"Snccessor Parcel" means a Lot created by a Final Map, lot line adjustment, or similar instrument that is not an Original Parcel.

"Taxable Property" means all Lots which are not exempt from the Special Tax pursuant to law or Section G below.

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

"Undeveloped Property" means, for each Fiscal Year, all Taxable Property not classified as Developed Property or Public Property.

B. ASSIGNMENT TO LAND USE CATEGORIES

Each Fiscal Year, commencing with Fiscal Year 2007-2008, all Taxable Property shall be classified as either Developed Property, Undeveloped Property, or Public Property and shall be subject to Special Taxes in accordance with this Rate and Method of Apportionment determined pursuant to Sections C, D, and E below.

City of Tustin April 26, 2007 Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Page5 C. MAXIMUM SPECIAL TAX

1. Special Tax A

Only the Lots identified in Table 1 below are subject to Special Tax A.

a. Developed Property

The Maximum Special Tax A for each Lot of Developed Property shall be the applicable Maximum Special Tax A identified in Table 1 below.

Table 1 Fiscal Year 2007-2008 Maximnm Special Tax A Commnnity Facilities District No. 07-01

Recording Date Maximnm Special Tax A Lot (Instrument Number)

2006-07 APN 434-441-18 NA $74,098

06/22/2006 Parcel 1 ofLLA No. 2006-01 $19,458 (No.2006000419431)

2006-07 APN 434-441-16 NA $409,774

11/03/2006 Parcel 1 ofLLA No. 2006-05 $16,500 (No.2006000744977) 06/23/2006 Parcel 1 ofLLA No. 2006-04 $13,200 (No. 2006000421177) 06/23/2006 Parcel 2 ofLLA No. 2006-03 $12,926 (No.2006000419912) 06/23/2006 Parcel 3 ofLLA No. 2006-03 $10,725 (No.2006000419912) 06/22/2006 Parcel 1 ofLLA No. 2006-02 $19,846 (No.2006000419431) 06/23/2006 Parcel 2 ofLLA No. 2006-04 $317,338 (No. 2006000421177)

The Fiscal Year 2007-2008 Maximum Special Tax A, identified in Table 1 above, shall increase, commencing on July 1, 2008 and on July 1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year.

City of Tustin April 26, 2007 Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Page 6 b. Undeveloped Property

The Fiscal Year 2007-2008 Maximum Special Tax A for each Assessor's Parcel of Undeveloped Property shall be $26,051 per Acre, and shall increase, commencing on July 1, 2008 and on July 1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) of the Maximum Special Tax A for the previous Fiscal Year.

2. Special Tax B

All Assessor's Parcels of Developed Property within CFD No. 07-01 will be subject to Special Tax B, unless exempted pursuant to Section G below.

a. Maximum Special Tax B

The Fiscal Year 2007-2008 Maximum Special Tax B shall be $0.06 per square foot of Floor Area.

b. Increase in the Maximum Special Tax B

The Fiscal Year 2008-2009 Maximum Special Tax B for Developed Property shall be $0.12 per square foot of Floor Area. The Fiscal Year 2009-2010 Maximum Special Tax B for Developed Property shall be $0.18 per square foot of Floor Area. The Fiscal Year 2010-2011 Maximum Special Tax B for Developed Property shall be $0.25 per square foot of Floor Area. On each July 1, commencing July 1, 2011, after the Maximum Special Tax B has been increased to $0.25 per square foot of Floor Area, the Maximum Special Tax B shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year.

Table 2 Maximnm Special Tax B 2007- 08 thron2 h 2011 -12 Maximum Fiscal Year Special Tax B 2007-08 $0.06 2008-09 $0.12 2009-10 $0.18 2010-11 $0.25 Escalates by 2011-12 2% annually

City of Tustin April 26, 2007 Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Page 7 D. ALLOCATION OF MAXIMUM SPECIAL TAX A

1. Original Parcels

Square footage of Floor Area for the Original Parcels is shown in Table 3 below.

Table 3 FA of Original Parcels Community Facilities District No. 07-01

Square Footage Original Parcels of Floor Area* 2006-07 APN 434-441-18 44,908 Parcel 1 ofLLA No. 2006-01 11,793 2006-07 APN 434-441-16 248,348 Parcel 1 ofLLA No. 2006-05 10,000 Parcel 1 ofLLA No. 2006-04 8,000 Parcel 2 ofLLA No. 2006-03 7,834 Parcel 3 ofLLA No. 2006-03 6,500 Parcel 1 ofLLA No. 2006-02 12,028 Parcel 2 ofLLA No. 2006-04 192,326

*Square footage amounts contained herein are for the purpose of setting Special Tax A rates and may not conform to the square foot amounts as shown on a building permit. The square foot amounts contained herein will govern for purposes of implementing this Rate and Method of Apportionment.

2. Methodology for Allocating Maximum Special Tax A to Successor Parcels

If any Original Parcel reflected in Table 3 above is subsequently changed or modified by the recordation of a Final Map, lot line adjustment or similar instrument, the total Maximum Special Tax A for all of the newly created Successor Parcels affected by such Final Map, lot line adjustment or similar instrument, excluding any Lot classified as a Remainder Lot, shall be equal to the Maximum Special Tax A of the Original Parcel(s). Maximum Special Tax for Successor Parcels shall be computed as follows:

a. Determine the square footage of Floor Area for each Lot and Remainder Lot located within the Final Map, lot line adjustment or similar instrument that created the Successor Parcels.

City of Tustin April 26, 2007 Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Page8 b. Divide the square footage of Floor Area for each newly created Lot by the aggregate square footage of Floor Area of all Lots of Taxable Property calculated in paragraph "a," to determine the percentage of the aggregate square footage of Floor Area to be allocated to each such Lot.

c. Multiply the percentages(s) computed in paragraph "b" by the Maximum Special Tax A of the Original Parcel to detennine the Maximum Special Tax A for each Lot. The aggregate Special Tax for the Lots will be levied on the corresponding Assessor's Parcels.

E. METHOD OF APPORTIONMENT OF THE SPECIAL TAX

1. Special Tax A

Commencing with Fiscal Year 2007-2008 and for each following Fiscal Year, the Council shall determine the Special Tax Requirement for Facilities and shall levy the Special Tax A until the total Special Tax A levy equals the Special Tax Requirement for Facilities. The Special Tax A shall be levied each Fiscal Year as follows:

First: The Special Tax A shall be levied Proportionately on each Assessor's Parcel of Developed Property at up to 100% of the applicable Maximum Special Tax A for Developed Property;

Second: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Special Tax A shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property at up to 100% of the applicable Maximum Special Tax A for Undeveloped Property.

Notwithstanding the above, under no circumstances will the Special Tax A levied against any Assessor's Parcel of Residential Property for which a certificate of occupancy 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 CFD No. 07-01.

2. Special Tax B

Commencing with Fiscal Year 2007-2008 and for each following Fiscal Year, the Council shall levy the Special Tax B until the total Special Tax B levy equals the Special Tax Requirement for Services. The Special Tax B shall be levied each Fiscal Year as follows:

The Special Tax B shall be levied Proportionately on each Assessor's Parcel of Developed Property within CFD No. 07-01 atupto 100% ofthe applicable Maximum Special Tax B for such parcel.

City of Tustin April 26, 2007 Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Page9 F. FUTURE PUBLIC PROPERTY

If any of the Original Parcels identified in Table 1 are acquired by a public entity through negotiated transaction, by gift, or devise, the present owner of that Parcel will be required to prepay and permanently satisfy the Special Tax A associated with such Parcel.

G. EXEMPTIONS

1. Special Tax A

No Special Tax A shall be levied on Privately Owned Specific Retail Property or Public Property.

2. Special Tax B

No Special Tax B shall be levied on Public Property or Undeveloped Property.

H. MANNER OF COLLECTION

The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes and shall be subject to the same penalties, the same procedure, sale and lien priority in the case of delinquency; provided, however, that the Special Tax may be billed directly and/or may be collected at a different time or in a different manner if necessary or convenient to meet the financial obligations of CFD No. 07-01, or as otherwise detennined by the CFD Administrator. The foreclosure remedies provided for in the Indenture shall apply upon the nonpayment of Special Tax A.

I. REVIEWS AND APPEALS

Any taxpayer may file a written appeal of the Special Tax levied on his/her property with the CFD 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 CFD Administrator shall review the appeal, meet with the appellant if the CFD Administrator deems necessary, and advise the appellant of its detennination. If the CFD Administrator agrees with the appellant, the CFD Administrator shall grant a credit to eliminate or reduce future Special Taxes on the appellant's property. No refunds of previously paid Special Taxes shall be made.

J. PREPAYMENT OF SPECIAL TAX A

1. Prepayment in Fnll

The obligation of an Assessor's Parcel to pay the Special Tax A may be prepaid and permanently satisfied as described herein; provided that a prepayment may be made only for Assessor's Parcels of Developed Property, or an Assessor's Parcel ofUndeveloped Property for which a building permit has been issued, and only if there are no delinquent Special City of Tustin April 26, 2007 Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Page 10 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 A obligation shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner of the prepayment amount of such Assessor's Parcel. The CFD Administrator may charge a reasonable fee for providing this service. Prepayment must be made not less than 45 days prior to the next occurring date that notice ofredemption of Bonds from the proceeds of such prepayment may be given to the Trustee pursuant to the Indenture.

The following additional definitions apply to this Section J:

"Bnildont" means, for CFD No. 07-01, that all expected building pennits have been issued.

"Previously Issned Bonds" means, for any Fiscal Year, all Outstanding Bonds that are deemed to be outstanding under the Indenture after the first interest and/or principal payment date following the current Fiscal Year.

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

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, detennine the Maximum Special Tax A. For Assessor's Parcels ofUndeveloped Property for which a building pennithas been issued, compute the Maximum Special Tax A for that Assessor's Parcel as though it was already designated as Developed Property, based upon the building permit which has already been issued for that Assessor's Parcel.

3. Divide the Maximum Special Tax A computed pursuant to paragraph 2 by the total estimated Maximum Special Tax A for the entire CFD No. 07-01 based on the Developed Property Special Tax A which could be levied in the current Fiscal Year on all expected development through Buildout of CFD No. 07-01, excluding any Assessor's Parcels which have been prepaid.

City of Tustin April 26, 2007 Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Page 11 4. Multiply the quotient computed pursuant to paragraph 3 by the amount of Previously Issued Bonds to compute the amount of Previously Issued Bonds to be retired and prepaid (the "Bond Redemption Amount").

5. Multiply the Bond Redemption Amount computed pursuant to paragraph 4 by the applicable redemption premium (e.g., the redemption price-100%), if any, on the Previously Issued 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 not covered by the current Fiscal Year Special Taxes until the earliest redemption date for the Previously Issued Bonds.

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

8. Compute the minimum amount the CFD Administrator reasonably expects to derive from the reinvestment of the Prepayment Amount less the Administrative Fees and Expenses ( defined below) from the date of prepayment until the redemption date for the Previously Issued Bonds to be redeemed with the prepayment.

9. Add the amounts computed pursuant to paragraphs 6 and 7 and subtract the amount computed pursuant to paragraph 8(the "Defeasance Amount").

10. The administrative fees and expenses of CFD No. 07-01 are as calculated by the CFD Administrator and include the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the costs of redeeming Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the "Administrative Fees and Expenses").

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

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

City of Tustin April 26, 2007 Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Page 12 13. The Special Tax A prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 9, and 10, less the amounts computed pursuant to paragraphs 11 and 12 (the "Prepayment Amount").

From the Prepayment Amount, the amounts computed pursuant to paragraphs 4, 5, 9, 11 and 12 shall be deposited into the appropriate fund as established under the Indenture and be used to retire Previously Issued Bonds or to make scheduled debt service payments or to pay administrative expenses related to the prepayment of the Special Tax. The amount computed pursuant to paragraph 10 shall be retained by CFD No. 07-01.

The Special Tax A Prepayment Amount may be insufficient to redeem a full $5,000 increment of 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 Bonds or to make debt service payments.

Upon confirmation of the payment of the current Fiscal Year's Special Tax A levy as detennined under paragraph 7 (above), the CFD Administrator shall remove the current Fiscal Year's Special Tax A levy for such Assessor's Parcel from the County tax rolls. With respect to any Assessor's Parcel that is prepaid, the Council shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of the Special Tax A and the release of the Special Tax A lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay the Special Tax A shall cease.

Notwithstanding the foregoing, no Special Tax A prepayment shall be allowed unless, at the time of such proposed prepayment, the amount of Maximum Special Tax A that may be levied on Taxable Property within CFD No. 07-01 ( after excluding Privately Owned Specific Retail Property and Public Property that are exempt from the Special Tax as set forth in Section G. l) both prior to and after the proposed prepayment is at least 1.1 times the maximum annual debt service on all Previously Issued Bonds, plus the Administrative Expenses.

2. Prepayment in Part

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

PP~ [(PE-A)xF] + A

These terms have the following meaning:

PP ~ the partial prepayment PE~ the Special Tax A Prepayment Amount calculated according to Section J. l A~ the Administrative Fees and Expenses calculated according to Section J. l F ~ the percentage, expressed as a decimal, by which the owner of the Assessor's Parcel is partially prepaying the Special Tax A

City of Tustin April 26, 2007 Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Page13 The owner of any Assessor's Parcel who desires such prepayment shall notify the CFD Administrator of such owner's intent to partially prepay the Special Tax A and the percentage by which the Special Tax A shall be prepaid. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax A for an Assessor's Parcel within 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 Council shall (i) distribute the funds remitted to it according to Section J.l, and (ii) indicate in the records of CFD No. 07-01 that there has been a partial prepayment of the Special Tax A and that a portion of the Special Tax A withrespectto such Assessor's Parcel, equal to the outstanding percentage (1.00 - F) of the remaining Maximum Special Tax A, shall continue to be levied on such Assessor's Parcel pursuant to Section E.1.

K. PREPAYMENT OF SPECIAL TAX B

No prepayment of Special Tax Bis allowed for any Assessor's Parcel within CFD No. 07- 01.

L. TERM OF SPECIAL TAX

The Special Tax A shall be levied for a period not to exceed forty-five years commencing with Fiscal Year 2007-2008. The Special Tax B shall be levied as long as necessary to meet the Special Tax Requirement for Services.

City of Tustin April 26, 2007 Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Page14 EXHIBIT A

TYPES OF FACILITIES AND SERVICES

Facilities

The types of facilities to be financed by the Connnunity Facilities District are street improvements, including grading, paving, curbs and gutters, sidewalks, street signalization and signage, street lights and parkway and landscaping related thereto, storm drains, utilities, public parks and recreation facilities, public library facilities, fire protection facilities and equipment and land, rights-of-way and easements necessary for any of such facilities.

Services

The types of services to be financed by the Connnunity Facilities District are police protection services, fire protection services, ambulance and paramedic services, recreation program services, maintenance of parks, parkways and open space and flood and storm protection services.

City of Tustin April 26, 2007 Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) PageA-1 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIXC

PROPOSED FORM OF OPINION OF BOND COUNSEL

Upon delivery of the Series 2007 Bonds, Orrick, Herrington & Sutcliffe LLP, Bond Counsel, proposes to render its final approving opinion with respect to the Series 2007 Bonds in substantially the following form:

[Date of Delivery]

City of Tustin Connnunity Facilities District No. 07-1 (Tustin Legacy/Retail Center) 300 Centennial Way Tustin, California City of Tustin Connnunity Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007 (Final Opinion)

Ladies and Gentlemen:

We have acted as bond counsel to the City of Tustin Connnunity Facilities District No. 07-1 (Tustin Legacy/Retail Center) (the "Connnunity Facilities District") in connection with the issuance by the Connnunity Facilities District of its Special Tax Bonds, Series 2007 (the "Series 2007 Bonds"), in the aggregate principal amount of $13,680,000, pursuant to the provisions of the Mello­ Roos Connnunity Facilities Act of 1982 (being Sections 53311 et seq. of the California Government Code) and an Indenture, dated as of September I, 2007 (the "Indenture"), by and between the Connnunity Facilities District and Union Bank of California, N.A., as trustee (the 'Trustee"). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture.

In such connection, we have reviewed the Indenture, the Tax Certificate of the Connnunity Facilities District, dated the date hereof (the 'Tax Certificate"), opinions of counsel to the Connnunity Facilities District and the Trustee, certificates of the Connnunity Facilities District, the Trustee and others and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein.

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Accordingly, this opinion is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Our engagement with respect to the Series 2007 Bonds has concluded

C-1 with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the Community Facilities District. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Indenture and the Tax Certificate, including, without limitation, covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause the interest on the Series 2007 Bonds to be included in gross income for federal income tax purposes. In addition, we call attention to the fact that the rights and obligations under the Series 2007 Bonds, the Indenture and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors' rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies against govermnental entities such as the Community Facilities District in the State of California. We express no opinion with respect to any indenmification, contribution, penalty, choice of law, choice of forum, choice of venue, waiver or severability provisions contained in the foregoing documents, nor do we express any opinion with respect to the plans, specifications, maps, reports or other engineering or financial details of the proceedings, or upon the Rate and Method or the validity of the Special Tax levied upon any individual parcel. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Series 2007 Bonds and express no opinion with respect thereto.

Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:

I. The Series 2007 Bonds constitute valid and binding special obligations of the Community Facilities District, payable solely from Net Special Tax Revenues and other assets pledged therefor under the Indenture.

2. The Indenture has been duly executed and delivered by, and constitutes a valid and binding obligation of, the Community Facilities District.

3. Interest on the Series 2007 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. Such interest is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although we observe that it is included in adjusted current earnings when calculating corporate alternative minimum taxable income. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Series 2007 Bonds.

Faithfully yours,

C-2 APPENDIXD

SUMMARY OF THE INDENTURE

The following is a briefsummary ofcertain provisions ofthe Indenture. Additional provisions of the Indenture are summarized in the body of the Official Statement. This summary does not purport to be complete and is qualified in its entirety by reference to the Indenture.

Definitions

"Act" means the Mello-Roos Community Facilities Act of 1982, constituting Sections 53311 et seq. of the California Government Code.

"Additional Bonds" means Bonds other than Series 2007 Bonds issued under the Indenture in accordance with the provisions thereof.

"Administrative Expense Fund" means the fund by that name established and held by the Trustee pursuant to the Indenture.

"Administrative Expenses" means costs directly related to the administration of the Community Facilities District, consisting of the costs of computing the Special Taxes and preparing the annual Special Tax schedules and the costs of collecting the Special Taxes, the costs of remitting the Special Taxes to the Trustee, the fees and costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture, the costs incurred by the Community Facilities District in complying with the disclosure provisions of any continuing disclosure undertaking and the Indenture, including those related to public inquiries regarding the Special Tax and disclosures to Owners, the costs of the Community Facilities District related to an appeal of the Special Tax, any amounts required to be rebated to the federal government in order for the Community Facilities District to comply with its tax covenants, an allocable share of the salaries of the staff of the City providing services on behalf of the Community Facilities District directly related to the foregoing and a proportionate amount of general administrative overhead of the City related thereto, and the costs of foreclosure of delinquent Special Taxes.

"Annual Debt Service" means, for each Bond Year, the sum of (a) the interest due on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as scheduled (including by reason of mandatory sinking fund redemptions), and (b) the principal amount of the Outstanding Bonds due in such Bond Year (including any mandatory sinking fund redemptions due in such Bond Year).

"Auditor" means the auditor of the County of Orange.

"Authorized Representative" means, with respect to the Community Facilities District, the Finance Director of the City, and any other Person designated as an Authorized Representative of the Community Facilities District in a Written Certificate of the Community Facilities District filed with the Trustee.

"Average Annual Debt Service" means the average of the Annual Debt Service for all Bond Years, including the Bond Year in which the calculation is made.

D-1 "Bond Connsel" means a finn of nationally recognized bond connsel selected by the Community Facilities District.

"Bond Fund" means the fund by that name established and held by the Trustee pursuant to the Indenture.

"Bond Year" means each twelve-month period beginning on September 2 in each year and extending to the next succeeding September I, both dates inclusive, except that the first Bond Year shall begin on the Closing Date and end on September I, 2008.

"Bonds" means the City of Tnstin Commnnity Facilities District No. 07-1 (Tnstin Legacy/Retail Center) Special Tax Bonds issned nnder the Indenture, and includes the Series 2007 Bonds and any Additional Bonds.

"Book-Entry Bonds" means the Bonds of a Series registered in the name of the nominee of DTC, or any successor securities depository for snch Series of Bonds, as the registered owner thereof pursuant to the terms and provisions of the Indenture.

"Business Day" means a day which is not (a) a Saturday, Snnday or legal holiday in the State of California, (b) a day on which banking institutions in the State of California, or in any state in which the Office of the Trustee is located, are required or authorized by law (including executive order) to close, or ( c) a day on which the New York Stock Exchange is closed.

"Cede & Co." means Cede & Co., the nominee of DTC, and any successor nominee of DTC with respect to a Series of Book-Entry Bonds.

"City " means the City of Tnstin, a general law city organized and existing nnder the laws of the State of California, and any successor thereto.

"City Council" means the City Conncil of the City.

"Closing Date" means the date npon which the Series 2007 Bonds are delivered to the Original Purchaser, being September 11, 2007.

"Code" means the Internal Revenue Code of 1986.

"Community Facilities District" means City of Tnstin Community Facilities District No. 07-1 (Tnstin Legacy/Retail Center), a community facilities district organized and existing nnder the laws of the State of California, and any successor thereto.

"Costs of Issuance" means all items of expense directly or indirectly payable by or reimbursable to the Commnnity Facilities District relating to the authorization, issuance, sale and delivery of the Bonds, including bnt not limited to printing expenses, rating agency fees, filing and recording fees, initial fees, expenses and charges of the Trustee and its connsel, including the Trustee's first annnal administrative fee, fees, charges and disbursements of attorneys, financial advisors, acconnting firms, consultants and other professionals, fees and charges for preparation, execution and safekeeping of the Bonds and any other cost, charge or fee in connection with the original issuance of the Bonds.

D-2 "Costs of Issuance Fund" means the fund by that name established and held by the Trustee pursuant to the Indenture.

"Developer" means Vestar/Kimco Tustin, L.P., a limited partnership organized and existing under the laws of the State of California, and its successors.

"Developer Continuing Disclosure Agreement" means the Continuing Disclosure Agreement, dated as of September I, 2007, by and between the Developer and the Trustee, as originally executed and as it may be amended from time to time in accordance with the terms thereof

"District Continuing Disclosure Agreement" means the Continuing Disclosure Agreement, dated as of September, 2007, by and between the Community Facilities District and the Trustee, as originally executed and as it may be amended from time to time in accordance with the terms thereof

"OTC" means The Depository Trust Company, a limited-purpose trust company organized under the laws of the State of New York, and its successors as securities depository for any Series of Book-Entry Bonds, including any such successor appointed pursuant to the Indenture.

"Federal Securities" means (a) direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), and (b) obligations of any agency, department or instrumentality of the United States of America the timely payment of principal of and interest on which are fully guaranteed by the United States of America.

"Fiscal Year" means the period beginning on July I of each year and ending on the next succeeding June 30, or any other twelve-mouth period hereafter selected and designated as the official fiscal year period of the Community Facilities District.

"Improvement Fund" means the fund by that name established and held by the Trustee pursuant to the Indenture.

"Indenture" means the Indenture, as originally executed and as it may be amended or supplemented from time to time by any Supplemental Indenture.

"Independent Consultant" means any consultant or finn of such consultants selected by the Community Facilities District and who, or each of whom (a) is generally recognized to be qualified in the financial consulting field, (b) is in fact independent and not under the domination of the Community Facilities District or the City, (c) does not have any substantial interest, direct or indirect, with or in the Community Facilities District or the City, or any owner of real property in the Community Facilities District, or any real property in the Community Facilities District, and (d) is not connected with the Community Facilities District or the City as au officer or employee thereof, bnt who may be regularly retained to malce reports to the Community Facilities District or the City.

"Infrastructure Agreement" means the Infrastructure Construction and Payment Agreement, dated as of June 8, 2005, as amended and supplemented by the First Amendment to Infrastructure Construction and Payment Agreement, dated July 26, 2007 and the Second Amendment to Infrastructure Construction and Payment Agreement, dated as of September I, 2007, each by and between the City and the Developer, as the same may be amended from time to time in accordance with its terms.

D-3 "Interest Payment Dates" means March I and September I of each year, commencing March I, 2008, so long as any Bonds remain Outstanding.

"Maximum Annual Debt Service" means the largest Annual Debt Service for any Bond Year, including the Bond Year the calculation is made.

"Moody's" means Moody's Investors Service, Inc., a corporation duly organized and existing under the laws of the State of Delaware, and its successors and assigns, except that if such entity shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency selected by the Community Facilities District.

"Net Special Tax Revenues" means Special Tax Revenues, less amounts required to pay Administrative Expenses.

"Office of the Trustee" means the principal corporate trust office of the Trustee in Los Angeles, California, or such other office as may be specified to the Community Facilities District by the Trustee in writing.

"Ordinance" means any ordinance adopted by the City Council levying the Special Taxes.

"Original Purchaser" means the original purchaser of the Series 2007 Bonds from the Community Facilities District.

"Outstanding" means, when used as of any particular time with reference to Bonds, subject to the provisions of the Indenture relating to disqualified Bonds, all Bonds theretofore, or thereupon being, authenticated and delivered by the Trustee under the Indenture except (a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation, (b) Bonds with respect to which all liability of the Community Facilities District shall have been discharged in accordance with the Indenture, including Bonds ( or portions of Bonds) disqualified, and (c) Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds shall have been authenticated and delivered by the Trustee pursuant to the Indenture.

"Owner" means, with respect to a Bond, the Person in whose name such Bond is registered on the Registration Books.

"Participant" means any entity which is recognized as a participant by DTC in the book-entry system of maintaining records with respect to Book-Entry Bonds.

"Participating Underwriter" has the meaning ascribed thereto in the District Continuing Disclosure Agreement and each Developer Continuing Disclosure Agreement.

"Permitted Investments" means the following, to the extent that such securities are otherwise eligible legal investments of the Community Facilities District:

(a) Federal Securities;

(b) any of the following direct or indirect obligations of the following agencies of the United States of America: (i) direct obligations of the Export-Import Baulc; (ii) certificates of beneficial ownership issued by the Farmers Home Administration;

D-4 (iii) participation certificates issued by the General Services Administration; (iv) mortgage­ backed bonds or pass-through obligations issued and guaranteed by the Government National Mortgage Association, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation or the Federal Housing Administration; ( v) project notes issued by the United States Department of Housing and Urban Development; and (vi) public housing notes and bonds guaranteed by the United States of America;

( c) interest-bearing demand deposit accounts or time deposits (including certificates of deposit) in a federal or state chartered bank (including the Trustee and its affiliates) or a state licensed branch of a foreign bank or a state or federal association (as defined in Section 5102 of the California Financial Code), provided that (i) the unsecured short-term obligations of such commercial bank or savings and loan association shall be rated Al or better by S&P, or (ii) such demand deposit accounts or time deposits shall be fully insured by the Federal Deposit Insurance Corporation;

(d) commercial paper rated in the highest short-term rating category by S&P, issued by corporations which are organized and operating within the United States of America, and which matures not more than 180 days following the date of investment therein;

( e) bankers acceptances, consisting of bills of exchange or time drafts drawn on and accepted by a commercial bank whose short-term obligations are rated in the highest short-term rating category by S&P, which mature not more than 270 days following the date of investment therein;

( f) obligations the interest on which is excludable from gross income pursuant to Section I 03 of the Code and which are rated A or better by S&P;

(g) obligations issued by any corporation organized and operating within the United States of America having assets in excess of $500,000,000, which obligations are rated A or better by S&P;

(h) money market funds which are rated Am or better by S&P, including funds for which the Trustee and its affiliates provide investment advisory or other management services;

(i) an investment agreement or guaranteed investment contract with, or guaranteed by, a financial institution or corporation, the long-term unsecured obligations of which are or, in the case of an insurance company, the long term financial strength of which is, rated "AA-" or better by S&P at the time of initial investment; provided, that the investment agreement shall be subject to a downgrade provision with at least the following requirements:

(I) the agreement shall provide that within ten Business Days after the financial institution's long-term unsecured credit rating has been withdrawn, suspended, or reduced below "AA-" by S&P (such events referred to as "rating downgrades") the financial institution shall give notice to the Community Facilities District and the Trustee and, within such ten-day period, and for as long as the rating downgrade is in effect, shall deliver in the name of the Community Facilities District or the Trustee

D-5 Federal Securities with an aggregate current market value equal to at least 105% of the principal amount of the investment agreement invested with the financial institution at that time, and shall deliver additional Federal Securities as needed to maintain an aggregate current market value equal to at least 105% of the principal amount of the investment agreement within three days after each evaluation date, which shall be at least weekly, and

(2) the agreement shall provide that, if the financial institution's long-term unsecured credit rating is reduced below "A-" by S&P, the financial institution shall give notice of the downgrade to the Community Facilities District and the Trustee within five Business Days, and the Trustee may, upon five Business Days' written notice to the financial institution, withdraw all amounts invested pursuant to the investment agreement, with accrued but unpaid interest thereon to the withdrawal date, and terminate the agreement.

(j) repurchase agreements with (i) any domestic bank, or domestic branch of a foreign bank, the long-term debt of which is rated at least "A" by S&P and Moody's; (ii) any broker-dealer with "retail customers" or a related affiliate thereof, which broker-dealer has, or the parent company (which guarantees the provider) of which has, long-term debt rated at least "A" by S&P and Moody's, which broker-dealer falls under the jurisdiction of the Securities Investors Protection Corporation; or (iii) any other entity ( or entity whose obligations are guaranteed by an affiliate or parent company) rated at least "A" by S&P and Moody's, provided that:

(I) the market value of the collateral is maintained at levels and upon such conditions as would be acceptable to S&P and Moody's to maintain an "A" rating in an "A" rated structured financing (with a market value approach);

(2) the Trustee or a third party acting solely as agent therefor or for the Community Facilities District (the "Holder of the Collateral") has possession of the collateral or the collateral has been transferred to the Holder of the Collateral in accordance with applicable state and federal laws ( other than by means of entries on the transferor's books);

(3) the repurchase agreement shall state and an opinion of counsel shall be rendered at the time such collateral is delivered that the Holder of the Collateral has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in possession);

(4) all other requirements of S&P and Moody's in respect of repurchase agreements shall be met; and

( 5) the repurchase agreement shall provide that if during its term the provider's rating by either S&P or Moody's is withdrawn or suspended or falls below "A-" or "A3" respectively, the provider must immediately notify the Community Facilities District and Trustee and the provider must, at the direction of the Community Facilities District or the Trustee, within 10 days of receipt of such direction, repurchase

D-6 all collateral and tenninate the agreement, with no penalty or premmm to the Community Facilities District or Trustee.

"Person" means an individual, corporation, limited liability company, finn, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof

"Project" means the facilities authorized to be financed by the Community Facilities District, as more particularly described in the Resolution of Formation.

"Rate and Method" means the rate and method of apportiomnent of the Special Taxes approved by the qualified electors of the Community Facilities District.

"Rebate Fund" means the fund by that name established and held by the Trustee pursuant to the Indenture.

"Rebate Requirement" has the meaning ascribed thereto in the Tax Certificate.

"Record Date" means the 15th calendar day of the month preceding each Interest Payment Date, whether or not such day is a Business Day.

"Redemption Fund" means the fund by that name established and held by the Trustee pursuant to the Indenture.

"Redemption Price" means the aggregate amount of principal of and premium, if any, on the Bonds upon the redemption thereof pursuant to the Indenture.

"Registration Books" means the records maintained by the Trustee for the registration of ownership and registration of transfer of the Bonds pursuant to the Indenture.

"Representation Letter" means the Letter of Representations from the Community Facilities District to DTC, or any successor securities depository for any Series of Book-Entry Bonds, in which the Community Facilities District malces certain representations with respect to issues of its securities for deposit by DTC or such successor depository.

"Reserve Fund" means the fund by that name established and held by the Trustee pursuant to the Indenture.

"Reserve Requirement" means, as of the date of any calculation, the least of (a) 10% of the original aggregate principal amount of the Bonds ( excluding Bonds refunded with the proceeds of subsequently issued Bonds), (b) Maximum Annual Debt Service, and (c) 125% of Average Annual Debt Service.

"Resolution of Formation" means Resolution No. 07-44, adopted by the City Council on June 19, 2007, as originally adopted and as it niay be amended or supplemented from time to time.

"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., a corporation duly organized and existing under the laws of the State of New York, and its successors and assigns, except that if such entity shall be dissolved or liquidated or shall no longer

D-7 perform the functions of a securities rating agency, then the term "S&P" shall be deemed to refer to any other nationally recognized securities rating agency selected by the Community Facilities District.

"Series" means the initial series of Bonds executed, authenticated and delivered on the date of initial issuance of the Bonds and identified pursuant to the Indenture as the Series 2007 Bonds, and any Additional Bonds issued pursuant to a Supplemental Indenture and identified as a separate Series of Bonds.

"Series 2007 Bonds" means the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007, issued under the Indenture.

"Special Tax Fund" means the fund by that name established and held by the Trustee pursuant to the Indenture.

"Special Tax Revenues" means the proceeds of the Special Taxes received by or on behalf of the Community Facilities District, including any prepayments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes, which shall be limited to the amount of said lien and interest and penalties thereon.

"Special Taxes" means the special taxes described in the Rate and Method as "Special Tax A" levied within the Community Facilities District pursuant to the Act, the Ordinance and the Indenture.

"Supplemental Indenture" means any supplemental indenture amendatory of or supplemental to the Indenture, but only if and to the extent that such Supplemental Indenture is specifically authorized under the Indenture.

"Tax Certificate" means the Tax Certificate executed by the Community Facilities District at the time of issuance of the Series 2007 Bonds relating to the requirements of Section 148 of the Code, as originally executed and as it may be amended from time to time in accordance with the terms thereof

"Trustee" means Union Banlc of California, N.A., a national banlcing association organized and existing under the laws of the United States of America, or any successor thereto as Trustee under the Indenture, appointed as provided in the Indenture.

"Written Certificate" and "Written Request" of the Community Facilities District mean, respectively, a written certificate or written request signed in the name of the Community Facilities District by an Authorized Representative. Any such certificate or request may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument.

The Bonds

Transfer and Exchange of Bonds. Any Bond may, in accordance with its terms, be transferred upon the Registration Books by the Person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. Whenever any Bond or Bonds shall be surrendered for transfer, the Community Facilities District shall execute and the Trustee shall authenticate and shall deliver a new Bond or Bonds of the same Series and maturity in a like aggregate principal amount, in any authorized denomination. The Trustee shall require the

D-8 Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer.

The Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of Bonds of the same Series and maturity of other authorized denominations. The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange.

The Trustee shall not be obligated to make any transfer or exchange of Bonds of a Series during the period established by the Trustee for the selection of Bonds of such Series for redemption, or with respect to any Bonds of such Series selected for redemption.

Registration Books. The Trustee shall keep or cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer of ownership of the Bonds, which shall be open to inspection during regular business hours and upon reasonable notice by the Community Facilities District; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the Bonds as hereinbefore provided.

Temporary Bonds. The Bonds of a Series may be issued in temporary form exchangeable for definitive Bonds of such Series when ready for delivery. Any temporary Bonds may be printed, lithographed or typewritten, shall be of such authorized denominations as may be determined by the Community Facilities District, shall be in fully registered form without coupons and may contain such reference to any of the provisions of the Indenture as may be appropriate. Every temporary Bond shall be executed by the Community Facilities District and authenticated by the Trustee upon the same conditions and in substantially the same mauner as the definitive Bonds. If the Community Facilities District issues temporary Bonds of a Series it shall execute and deliver definitive Bonds of such Series as promptly thereafter as practicable, and thereupon the temporary Bonds of such Series may be surrendered, for cancellation, at the Office of the Trustee and the Trustee shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of such Series and maturities in authorized denominations. Until so exchanged, the temporary Bonds of such Series shall be entitled to the same benefits under the Indenture as definitive Bonds of such Series authenticated and delivered under the Indenture.

Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Community Facilities District, at the expense of the Owner of said Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor and Series in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be canceled by it and delivered to, or upon the order of, the Community Facilities District. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence and indemnity satisfactory to the Trustee shall be given, the Community Facilities District, at the expense of the Owner, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor and Series in lieu of and in replacement for the Bond so lost, destroyed or stolen ( or if any such Bond shall have matured or shall have been selected for redemption, instead of issuing a replacement Bond, the Trustee may pay the same without surrender thereof). The Community Facilities District may require payment by the Owner of a sum not exceeding the actual cost of preparing each replacement Bond and of the expenses which may be incurred by the Community Facilities District and the Trustee. Any Bond of a Series issued in lieu of any Bond of

D-9 such Series alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the Conuuunity Facilities District whether or not the Bond so alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be entitled to the benefits of the Indenture with all other Bonds of such Series secured by the Indenture.

Book-Entry Bonds. (a) Prior to the issuance of a Series of Bonds, the Conuuunity Facilities District may provide that such Series of Bonds shall initially be issued as Book-Entry Bonds and, in such event, the Bonds of such Series for each maturity shall be in the form of a separate single fully registered Bond (which may be typewritten). The Series 2007 Bonds shall initially be issued as Book-Entry Bonds.

Except as provided in (c), the registered Owner of all of the Book-Entry Bonds shall be DTC and the Book-Entry Bonds shall be registered in the name of Cede & Co., as nominee of DTC. Notwithstanding anything to the contrary contained in the Indenture, payment of interest with respect to any Book-Entry Bond registered as of each Record Date in the name of Cede & Co. shall be made by wire transfer of same-day funds to the account of Cede & Co. on the payment date for the Book­ Entry Bonds at the address indicated on the Record Date for Cede & Co. in the Registration Books or as otherwise provided in the Representation Letter.

(b) The Trustee and the Conuuunity Facilities District may treat DTC ( or its nominee) as the sole and exclusive Owner of the Book-Entry Bonds registered in its name for the purposes of payment of the principal, premium, if any, or interest with respect to the Book-Entry Bonds, selecting the Book-Entry Bonds or portions thereof to be redeemed, giving any notice pennitted or required to be given to Owners of Book-Entry Bonds under the Indenture, registering the transfer of Book-Entry Bonds, obtaining any consent or other action to be taken by Owners of Book-Entry Bonds and for all other purposes whatsoever, and neither the Trustee nor the Conuuunity Facilities District shall be affected by any notice to the contrary. Neither the Trustee nor the Conuuunity Facilities District shall have any responsibility or obligation to any Participant, any person claiming a beneficial ownership interest in the Book-Entry Bonds under or through DTC or any Participant, or any other person which is not shown on the Registration Books as being an Owner, with respect to the accuracy of any records maintained by DTC or any Participant, the payment by DTC or any Participant of any amount in respect of the principal, premium, if any, or interest with respect to the Book-Entry Bonds, any notice which is permitted or required to be given to Owners of Book-Entry Bonds under the Indenture, the selection by DTC or any Participant of any person to receive payment in the event of a partial redemption of the Book-Entry Bonds, or any consent given or other action taken by DTC as Owner of Book-Entry Bonds. The Trustee shall pay all principal, premium, if any and interest with respect to the Book-Entry Bonds, only to DTC, and all such payments shall be valid and effective to fully satisfy and discharge the Conuuunity Facilities District's obligations with respect to the principal, premium, if any, and interest with respect to the Book-Entry Bonds to the extent of the sum or sums so paid. Except under the conditions of ( c ), no person other than DTC shall receive an executed Book-Entry Bond for each separate stated maturity. Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in the Indenture with respect to record dates, the term "Cede & Co." in the Indenture shall refer to such new nominee of DTC.

( c) In the event (i) DTC, including any successor as securities depository for a Series of Bonds, determines not to continue to act as securities depository for such Series of Bonds, or (ii) the Conuuunity Facilities District determines that the incumbent securities depository shall no longer so act, and delivers a written certificate to the Trustee to that effect, then the Conuuunity Facilities

D-10 District will discontinue the book-entry system with the incumbent securities depository for such Series of Bonds. If the Community Facilities District determines to replace the incumbent securities depository for such Series of Bonds with another qualified securities depository, the Community Facilities District shall prepare or direct the preparation of a new single, separate fully registered Bond of such Series for the aggregate outstanding principal amount of Bonds of such Series of each maturity, registered in the name of such successor or substitute qualified securities depository, or its nominee, or make such other arrangement acceptable to the Community Facilities District, the Trustee and the successor securities depository for the Bonds of such Series as are not inconsistent with the terms of the Indenture. If the Community Facilities District fails to identify another qualified successor securities depository for such Series of Bonds to replace the incumbent securities depository, then the Bonds of such Series shall no longer be restricted to being registered in the Registration Books in the name of the incumbent securities depository or its nominee, but shall be registered in whatever name or names the incumbent securities depository for such Series of Bonds, or its nominee, shall designate. In such event the Community Facilities District shall execute, and deliver to the Trustee, a sufficient quantity of Bonds of such Series to carry out the transfers and exchanges provided in the Indenture. All such Bonds of such Series shall be in fully registered form in denominations authorized by the Indenture.

(d) Notwithstanding any other provision of the Indenture to the contrary, so long as any Book-Entry Bond is registered in the name of DTC, or its nominee, all payments with respect to the principal, premium, if any, and interest with respect to such Book-Entry Bond and all notices with respect to such Book-Entry Bond shall be made and given, respectively, as provided in the Representation Letter.

(e) In connection with any notice or other communication to be provided to Owners of Book-Entry Bonds pursuant to the Indenture by the Community Facilities District or the Trustee with respect to any consent or other action to be taken by Owners, the Community Facilities District or the Trustee, as the case may be, shall establish a record date for such consent or other action and give DTC notice of such record date not less than 15 calendar days in advance of such record date to the extent possible.

Additional Bonds

Conditions for the Issuance of Additional Bonds. The Community Facilities District may at any time issue one or more Series of Additional Bonds (in addition to the Series 2007 Bonds) payable from Net Special Tax Revenues as provided in the Indenture on a parity with all other Bonds theretofore issued under the Indenture, but only subject to the following conditions, which are made conditions precedent to the issuance of such Additional Bonds:

(a) The issuance of such Additional Bonds shall have been authorized under and pursuant to the Act and under and pursuant to the Indenture and shall have been provided for by a Supplemental Indenture which shall specify the following:

(I) The purposes for which the proceeds of such Additional Bonds are to be applied, which purposes may only include one or more of (A) providing funds to refund any Bonds issued under the Indenture, (B) providing funds to pay Costs of Issuance incurred in connection with the issuance of such Additional Bonds, and (C) providing funds to malce any deposit to the Reserve Fund required pursuant to paragraph ( 6) below;

D-11 (2) The principal amount and designation of such Series of Additional Bonds and the denomination or denominations of the Additional Bonds;

(3) The date, the maturity date or dates, the interest payment dates and the dates on which mandatory sinking fund redemptions, if any, are to be made for such Additional Bonds; provided, that (A) the serial Bonds of such Series of Additional Bonds shall be payable as to principal aunually on September I of each year in which principal falls due, and the term Bonds of such Series of Additional Bonds shall have aunual mandatory sinking fund redemptions on September I, (B) the Additional Bonds shall be payable as to interest semiaunually on March I and September I of each year, except that the first installment of interest may be payable on either March I or September I and shall be for a period of not longer than twelve months and the interest shall be payable thereafter semiannually on March I and September I, ( C) all Additional Bonds of a Series of like maturity shall be identical in all respects, except as to number or denomination, and (D) serial maturities of serial Bonds or mandatory sinking fund redemptions for term Bonds, or any combination thereof, shall be established to provide for the redemption or payment of such Additional Bonds on or before their respective maturity dates;

(4) The redemption premiums and terms, if any, for such Additional Bonds;

(5) The form of such Additional Bonds;

( 6) The amount, if any, to be deposited from the proceeds of sale of such Additional Bonds in the Reserve Fund; provided, that the amount on deposit in the Reserve Fund at the time that such Additional Bonds become Outstanding shall be at least equal to the Reserve Requirement; and

(7) Such other provisions that are appropriate or necessary and are not inconsistent with the provisions of the Indenture;

(b) Upon the issuance of such Additional Bonds, no default shall have occurred and be continuing under the Indenture; and

(c) Annual Debt Service in each Bond Year, calculated for all Bonds to be Outstanding after the issuance of such Additional Bonds, shall be less than or equal to Annual Debt Service in such Bond Year, calculated for all Bonds Outstanding immediately prior to the issuance of such Additional Bonds.

Nothing contained in the Indenture shall limit the issuance of any special tax bonds payable from Special Taxes if, after the issuance and delivery of such special tax bonds, none of the Bonds theretofore issued under the Indenture will be Outstanding.

Procedure for the Issuance of Additional Bonds. At any time after the sale of any Additional Bonds in accordance with the Act, such Additional Bonds shall be executed by the Community Facilities District for issuance under the Indenture and shall be delivered to the Trustee and thereupon shall be authenticated and delivered by the Trustee, but only upon receipt by the Trustee of the following:

D-12 (a) A certified copy of the Supplemental Indenture authorizing the issuance of such Additional Bonds;

(b) A Written Request of the Community Facilities District as to the delivery of such Additional Bonds;

( c) A Written Certificate of the Community Facilities District stating that the conditions precedent to the issuance of such Additional Bonds specified in the Indenture have been satisfied;

( d) An opinion of Bond Counsel substantially to the effect that (i) the Indenture and all Supplemental Indentures have been duly authorized, executed and delivered by, and constitute the valid and binding obligations of, the Community Facilities District, enforceable in accordance with their terms ( except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights and by the application of equitable principles and by the exercise of judicial discretion in appropriate cases and subject to the limitations on legal remedies against political subdivisions in the State of California), (ii) such Additional Bonds constitute valid and binding special obligations of the Community Facilities District payable solely from Net Special Tax Revenues as provided in the Indenture and are enforceable in accordance with their terms (except as enforcement may be limited by banlauptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights and by the application of equitable principles and by the exercise of judicial discretion in appropriate cases and subject to the limitations on legal remedies against political subdivisions in the State of California), and (iii) the issuance of such Additional Bonds, in and of itself, will not adversely affect the exclusion of interest on the Bonds Outstanding prior to the issuance of such Additional Bonds from gross income for federal income tax purposes;

( e) The proceeds of the sale of such Additional Bonds; and

( f) Such further documents or money as are required by the provisions of the Indenture or by the provisions of the Supplemental Indenture authorizing the issuance of such Additional Bonds.

Additional Bonds. So long as any of the Bonds remain Outstanding, the Community Facilities District shall not issue any Additional Bonds or obligations payable from Net Special Tax Revenues on a parity with the Bonds. So long as any of the Bonds remain Outstanding, the Community Facilities District shall not issue any obligations payable from Net Special Tax Revenues on a basis senior or subordinate to the Bonds.

Funds and Accounts

Costs of Issuance Fund. The Trustee shall establish and maintain a separate fund designated the "Costs of Issuance Fund." The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee from time to time to pay the Costs of Issuance upon submission of a Written Request of the Community Facilities District stating (a) the Person to whom payment is to be made, (b) the amount to be paid, (c) the purpose for which the obligation was incurred, ( d) that such payment is a proper charge against the Costs of Issuance Fund, and (e) that such amounts have not

D-13 been the subject of a prior disbursement from the Costs of Issuance Fund, in each case together with a statement or invoice for each amount requested under the Indenture.

Improvement Fund. The Trustee shall establish and maintain a separate fund designated the "Improvement Fund." On the Closing Date, the Trustee shall deposit in the Improvement Fund the amount required to be depositing therein pursuant to the Indenture.

The moneys in the Improvement Fund shall be used and withdrawn by the Trustee from time to time to pay the costs of the Project upon submission to the Trustee of a Written Request of the Community Facilities District stating (i) the Person to whom payment is to be made, (ii) the amount to be paid, (iii) the purpose for which the obligation was incurred, (iv) that such payment constitutes a cost of the Project and is a proper charge against the Improvement Fund, (v) that such amounts have not been the subject of a prior disbursement from the Improvement Fund, and (vi) whether or not such costs of the Project are to be paid pursuant to the Infrastructure Agreement, in each case together with a statement or invoice for each amount requested thereunder.

Upon the filing of a Written Certificate of the Community Facilities District stating (i) that the portion of the Project to be financed from the Improvement Fund has been completed and that all costs of such Project have been paid, or (ii) that such portion of the Project has been substantially completed and that all remaining costs of such portion of the Project have been determined and specifying the amount to be retained therefor, the Trustee shall (A) if the amount remaining in the Improvement Fund (less any such retention) is equal to or greater than $25,000, transfer the portion of such amount equal to the largest integral multiple of $5,000 that is not greater than such amount to the Redemption Fund, to be applied to the redemption of Bonds, and (B) after malcing the transfer, if any, required to be made pursuant to the preceding clause (A), transfer all of the amount remaining in the Improvement Fund (less any such retention) to the Bond Fund, to be applied to the payment of interest on the Bonds. Upon malcing such transfer or transfers, as the case may be, the Improvement Fund shall be closed.

Special Tax Fund. The Trustee shall establish and maintain a separate fund designated the "Special Tax Fund." As soon as practicable after the receipt by the Community Facilities District of any Special Tax Revenues, but in any event no later than the date ten Business Days prior to the Interest Payment Date after such receipt, the Community Facilities District shall transfer such Special Tax Revenues to the Trustee for deposit in the Special Tax Fund; provided, however, that any portion of any such Special Tax Revenues that represents prepaid Special Taxes that are to be applied to the payment of the Redemption Price of Bonds in accordance with the provisions of the Indenture shall be identified to the Trustee as such by the Community Facilities District and shall be deposited in the Redemption Fund.

Upon receipt of a Written Request of the Community Facilities District, the Trustee shall withdraw from the Special Tax Fund and transfer to the Administrative Expense Fund the amount specified in such Written Request of the Community Facilities District as the amount necessary to be transferred thereto in order to have sufficient amounts available therein to pay Administrative Expenses.

On the Business Day immediately preceding each Interest Payment Date, after having made any requested transfer to the Administrative Expense Fund, the Trustee shall withdraw from the Special Tax Fund and transfer, first, to the Bond Fund, Net Special Tax Revenues in the amount, if any, necessary to cause the amount on deposit in the Bond Fund to be equal to the principal and interest due on the Bonds on such Interest Payment Date, and, second, to the Reserve Fund, Net

D-14 Special Tax Revenues in the amount, if any, necessary to cause the amount on deposit in the Reserve Fund to be equal to the Reserve Requirement.

Bond Fund. The Trustee shall establish and maintain a separate fund designated the "Bond Fund." The Trustee shall deposit in the Bond Fund from time to time the amounts required to be deposited therein pursuant to the Indenture. There shall additionally be deposited in the Bond Fund the portion, if any, of the proceeds of the sale of Additional Bonds required to be deposited therein under the Supplemental Indenture pursuant to which such Additional Bonds are issued.

On each Interest Payment Date, the Trustee shall withdraw from the Bond Fund for payment to the Owners of the Bonds the principal, if any, of and interest on the Bonds then due and payable, including principal due and payable by reason of mandatory sinking fund redemption of such Bonds.

In the event that, on the Business Day prior to an Interest Payment Date, amounts in the Bond Fund are insufficient to pay the principal, if any, of and interest on the Bonds due and payable on such Interest Payment Date, including principal due and payable by reason of mandatory sinking fund redemption of such Bonds, the Trustee shall withdraw from the Reserve Fund, to the extent of any funds therein, the amount of such insufficiency, and shall transfer any amounts so withdrawn to the Bond Fund.

Redemption Fund. The Trustee shall establish and maintain a special fund designated the "Redemption Fund." As soon as practicable after the receipt by the Community Facilities District of prepaid Special Taxes, but in any event not later than ten Business Days after such receipt, the Community Facilities District shall transfer such prepaid Special Taxes to the Trustee for deposit in the Redemption Fund. Additionally, the Trustee shall deposit in the Redemption Fund amounts received from the Community Facilities District in connection with the Community Facilities District's exercise of its rights to optionally redeem Series 2007 Bonds and any other amounts required to be deposited therein pursuant to the Indenture or pursuant to any Supplemental Indenture.

Amounts in the Redemption Fund shall be disbursed therefrom for the payment of the Redemption Price of Series 2007 Bonds and to pay the Redemption Price of Additional Bonds redeemed under the Supplemental Indenture pursuant to which such Additional Bonds are issued.

Reserve Fund. The Trustee shall establish and maintain a special fund designated the "Reserve Fund." There shall additionally be deposited in the Reserve Fund, in connection with the issuance of Additional Bonds, the amount required to be deposited therein under the Supplemental Indenture pursuant to which such Additional Bonds are issued.

Except as otherwise provided in below, all amounts deposited in the Reserve Fund shall be used and withdrawn by the Trustee solely for the purpose of maldng transfers to the Bond Fund in the event of any deficiency at any time in the Bond Fund of the amount then required for payment of the principal of and interest on the Bonds or for the purpose of paying or redeeming Bonds. Transfers shall be made from the Reserve Fund to the Bond Fund in the event of a deficiency in the Bond Fund, in accordance with the Indenture.

Whenever Bonds are to be redeemed, a proportionate share, determined as provided below, of the amount on deposit in the Reserve Fund shall, on the date on which amounts to redeem such Bonds are deposited in the Redemption fund or otherwise deposited with the Trustee pursuant to the Indenture, be transferred by the Trustee from the Reserve Fund to the Redemption Fund or to such deposit held by

D-15 the Trustee and shall be applied to the redemption of said Bonds; provided, however, that such amount shall be so transferred only if and to the extent that the amount remaining on deposit in the Reserve Fund will be at least equal to the Reserve Requirement ( excluding from the calculation thereof said Bonds to be redeemed). Such proportionate share shall be equal to the largest integral multiple of $5,000 that is not larger than the amount equal to the product of (a) the amount on deposit in the Reserve Fund on the date of such transfer, times (b) a fraction, the numerator of which is the principal amount of Bonds to be so redeemed and the denominator of which is the principal amount of Bonds to be Outstanding on the day prior to the date on which such Bonds are to be so redeemed.

Whenever the balance in the Reserve Fund exceeds the amount required to redeem or pay the Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Trustee shall, upon receipt of a Written Request of the Community Facilities District, transfer the amount in the Reserve Fund to the Bond Fund or Redemption Fund, as applicable, to be applied, on the next succeeding Interest Payment Date to the payment and redemption of all of the Outstanding Bonds.

If, as a result of the scheduled payment of principal of or interest on the Bonds, the Reserve Requirement is reduced, the Trustee shall transfer an amount equal to the amount of such reduction to the Bond Fund.

Rebate Fund. (a) The Trustee shall establish and maintain a special fund designated the "Rebate Fund." There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Tax Certificate, as specified in a Written Request of the Community Facilities District. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy the Rebate Requirement, for payment to the United States of America. Notwithstanding defeasance of the Bonds pursuant to the Indenture or anything to the contrary contained therein, all amounts required to be deposited into or on deposit in the Rebate Fund shall be governed exclusively by these paragraphs and by the Tax Certificate (which is incorporated in the Indenture by reference). The Trustee shall be deemed conclusively to have complied with such provisions if it follows the written directions of the Community Facilities District, and shall have no liability or responsibility to enforce compliance by the Community Facilities District with the terms of the Tax Certificate. The Trustee may conclusively rely upon the Community Facilities District's determinations, calculations and certifications required by the Tax Certificate. The Trustee shall have no responsibility to independently malce any calculation or determination or to review the Community Facilities District's calculations.

(b) Any funds remaining in the Rebate Fund after payment in full of all of the Bonds and after payment of any amounts described in above, shall, upon receipt by the Trustee of a Written Request of the Community Facilities District, be withdrawn by the Trustee and remitted to the Community Facilities District.

Administrative Expense Fund. The Trustee shall establish and maintain a special fund designated the "Administrative Expense Fund." The Trustee shall deposit in the Administrative Expense Fund the amounts transferred from the Special Tax Fund and required to be deposited therein pursuant to the Indenture.

The moneys in the Administrative Expense Fund shall be used and withdrawn by the Trustee from time to time to pay the Administrative Expenses upon submission of a Written Request of the Community Facilities District stating (a) the Person to whom payment is to be made, (b) the amount to

D-16 be paid, ( c) the purpose for which the obligation was incurred and that such purpose constitutes an Administrative Expense, (d) that such payment is a proper charge against the Administrative Expense Fund, and (e) that such amounts have not been the subject of a prior disbursement from the Administrative Expense Fund; in each case together with a statement or invoice for each amount requested tunder the Indenture.

Investment of Monevs. Except as otherwise provided in the Indenture, all moneys in any of the funds or accounts established pursuant to the Indenture and held by the Trustee shall be invested by the Trustee solely in Permitted Investments, as directed in writing by the Community Facilities District two Business Days prior to the making of such investment. Moneys in all funds and accounts held by the Trustee shall be invested in Permitted Investments maturing not later than the date on which it is estimated that such moneys will be required for the purposes specified in the Indenture; provided, however, that Permitted Investments in which moneys in the Reserve Fund are so invested shall mature no later than the earlier of five years from the date of investment or the final maturity date of the Bonds; provided, further, that if such Permitted Investments may be redeemed at par so as to be available on each Interest Payment Date, any amount in the Reserve Fund may be invested in such redeemable Pennitted Investments maturing on any date on or prior to the final maturity date of the Bonds. Absent timely written direction from the Community Facilities District, the Trustee shall invest any funds held by it in Permitted Investments described in clause (h) of the definition thereof; provided, however, that any such investment shall be made with due regard for the Trustee's obligations and responsibilities as a fiduciary under the Indenture.

Subject to certain provisions of the Indenture, all interest, profits and other income received from the investment of moneys in any fund or account established pursuant to the Indenture (other than the Reserve Fund) shall be retained therein. Subject to certain provisions of the Indenture, all interest, profits or other income received from the investment of moneys in the Reserve Fund shall, prior to the date on which a Written Certificate of the Community Facilities District is delivered to the Trustee, be transferred to the Improvement Fund and, thereafter, shall be deposited in the Bond Fund; provided, however, that, notwithstanding the foregoing, any such transfer shall be made only if and to the extent that, after such transfer, the amount on deposit in the Reserve Fund is at least equal to the Reserve Requirement.

Permitted Investments acquired as an investment of moneys in any fund or account established under the Indenture shall be credited to such fund or account. For the purpose of determining the amount in any fund or account, all Permitted Investments credited to such fund shall be valued by the Trustee at the market value thereof, such valuation to be performed not less frequently than semiannually on or before each February 15 and August 15. The Trustee may utilize and rely upon securities pricing services available to it for such valuations, including those available through the Trustee's accounting system.

The Trustee may act as principal or agent in the making or disposing of any investment. Upon the Written Request of the Community Facilities District, the Trustee shall sell or present for redemption any Permitted Investments so purchased whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund to which such Pennitted Investments is credited, and the Trustee shall not be liable or responsible for any loss resulting from any investment made or sold pursuant to the Indenture. For purposes of investment, the Trustee may commingle moneys in any of the funds and accounts established under the Indenture. The Community Facilities District aclmowledges that the to extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Community Facilities District the right to receive brokerage

D-17 confinnations of security transactions as they occur, the Community Facilities District specifically waives receipt of such confinnations to the extent pennitted by law. The Trustee will fumish the Community Facilities District periodic cash transaction statements which include detail for all investment transactions made by the Trustee under the Indenture.

Certain Covenants

Collection of Special Tax Revenues. The Community Facilities District shall comply with all requirements of the Act so as to assure the timely collection of Special Tax Revenues, including without limitation, the enforcement of delinquent Special Taxes.

Prior to August I of each year, the Community Facilities District shall ascertain from the Orange County Assessor the relevant parcels on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then cunent year. The Community Facilities District shall effect the levy of the Special Taxes each Fiscal Year in accordance with the Ordinance by each August IO that the Bonds are Outstanding, or otherwise such that the computation of the levy is complete before the final date on which the Auditor will accept the transmission of the Special Tax amounts for the parcels within the Community Facilities District for inclusion on the next real property tax roll. Upon the completion of the computation of the amounts of the levy, the Community Facilities District shall prepare or cause to be prepared, and shall transmit to the Auditor, such data as the Auditor requires to include the levy of the Special Taxes on the next real property tax roll.

The Community Facilities District shall fix and levy the amount of Special Taxes within the Community Facilities District in each Fiscal Year in accordance with the Rate and Method and, subject to the limitations in the Rate and Method as to the maximum Special Tax that may be levied, in an amount sufficient to yield Special Tax Revenues in the amount required for (a) the payment of principal of and interest on any Outstanding Bonds becoming due and payable during the Bond Year commencing in such Fiscal Year, (b) any necessary replenishment of the Reserve Fund, and (c) the payment of Administrative Expenses estimated to be required to be paid from such Special Tax Revenues, taldng into account the balances in the funds and accounts established under the Indenture.

The Special Taxes shall be payable and be collected in the same mauner and at the same time and in the same installment as the general taxes on real property are payable, and have the same priority, become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the ad valorem taxes on real property.

Foreclosure. Pursuant to Section 53356.1 of the Act, the Community Facilities District covenants with and for the benefit of the Owners of the Bonds that it will determine or cause to be detennined, no later than August 15 of each year, whether or not any owners of property within the Community Facilities District are delinquent in the payment of Special Taxes and, if such delinquencies exist, the Community Facilities District will order and cause to be commenced no later than October I, and thereafter diligently prosecute, an action in the superior court to foreclose the lien of any Special Taxes or installment thereof not paid when due; provided, however, that the Community Facilities District shall not be required to order the commencement of foreclosure proceedings if (a) the total Special Tax delinquency in the Community Facilities District for such Fiscal Year is less than 5% of the total Special Tax levied in such Fiscal Year, and (b) the amount then on deposit in the Reserve Fund is equal to the Reserve Requirement. Notwithstanding the foregoing, if the Community Facilities District detennines that any single property owner in the Community Facilities District is delinquent in excess of $5,000 in the payment of the Special Tax,

D-18 then the Connnunity Facilities District will diligently institute, prosecute and pursue foreclosure proceedings against such property owner.

Punctual Payment. The Connnunity Facilities District shall punctually pay or cause to be paid the principal, premium, if any, and interest to become due in respect of all the Bonds, in strict conformity with the terms of the Bonds and of the Indenture, according to the true intent and meaning thereof, but only out of Net Special Tax Revenues and other assets pledged for such payment as provided in the Indenture and received by the Connnunity Facilities District or the Trustee.

Extension of Pavment of Bonds. The Connnunity Facilities District shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of any claims for interest by the purchase of such Bonds or by any other arrangement, and in case the maturity of any of the Bonds or the time of payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default under the Indenture, to the benefits of the Indenture, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest thereon which shall not have been so extended. Nothing shall be deemed to limit the right of the Connnunity Facilities District to issue Bonds for the purpose of refunding any Outstanding Bonds, and such issuance shall not be deemed to constitute an extension of maturity of the Bonds.

Against Encumbrances. The Connnunity Facilities District shall not create, or permit the creation of, any pledge, lien, charge or other encumbrance upon the Special Tax Revenues and other assets pledged under the Indenture while any of the Bonds are Outstanding, except as permitted by the Indenture.

Accounting Records and Financial Statements. The Trustee shall at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with prudent corporate trust industry standards, in which accurate entries shall be made of all transactions made by it relating to the proceeds of the Bonds, the Special Tax Revenues and all funds and accounts established by it pursuant to the Indenture. Such books of record and account shall be available for inspection by the Connnunity Facilities District, during regular business hours and upon reasonable notice and under reasonable circumstances as agreed to by the Trustee. The Trustee shall deliver to the Connnunity Facilities District a monthly accounting of the funds and accounts it holds under the Indenture; provided, however, that the Trustee shall not be obligated to deliver an accounting for any fund or account that (a) has a balance of zero, and (b) has not had any activity since the last reporting date.

Tax Covenants. (a) The Connnunity Facilities District shall not take any action, or fail to take any action, if such action or failure to take such action would adversely affect the exclusion from gross income of interest on the Series 2007 Bonds under Section 103 of the Code. Without limiting the generality of the foregoing, the Connnunity Facilities District shall comply with the requirements of the Tax Certificate, which is incorporated in the Indenture as if fully set forth therein. This covenant shall survive payment in full or defeasance of the Series 2007 Bonds.

(b) In the event that at any time the Connnunity Facilities District is of the opinion that it is necessary or helpful to restrict or limit the yield on the investment of any moneys held by the Trustee in any of the funds or accounts established under the Indenture, the Connnunity Facilities District shall so instruct the Trustee in writing, and the Trustee shall take such action as may be necessary in accordance with such instructions.

D-19 (c) Notwithstanding any other provision of the Indenture, if the Connnunity Facilities District shall provide to the Trustee an opinion of Bond Counsel to the effect that any specified action required is no longer required or that some further or different action is required to maintain the exclusion from federal income tax of interest on the Series 2007 Bonds, the Trustee may conclusively rely on such opinion in complying with the requirements of the Indenture and of the Tax Certificate, and the covenants under the Indenture shall be deemed to be modified to that extent.

Continuing Disclosure. The Connnunity Facilities District and the Trustee shall comply with and carry out all of the provisions of the District Continuing Disclosure Agreement. Notwithstanding any other provision of the Indenture, failure of the Connnunity Facilities District or the Trustee to comply with the District Continuing Disclosure Agreement shall not be considered an Event of Default; provided, however, that the Trustee may (and, at the written direction of any Participating Underwriter or the holders of at least 25% aggregate principal amount of Outstanding Series 2007 Bonds, and upon indenmification of the Trustee to its reasonable satisfaction, shall) or any holder or beneficial owner of the Series 2007 Bonds may, take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order.

The Developer and the Trustee have entered into the Developer Continuing Disclosure Agreement. Notwithstanding any other provision of the Indenture, failure of the Developer or the Trustee to comply with the Developer Continuing Disclosure Agreement shall not be considered an Event of Default; provided, however, that the Trustee may (and, at the written direction of any Participating Underwriter or the holders of at least 25% aggregate principal amount of Outstanding Series 2007 Bonds, and upon indenmification of the Trustee to its reasonable satisfaction, shall) or any holder or beneficial owner of the Series 2007 Bonds may, take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order.

Non-Cash Payments of Special Taxes. The Connnunity Facilities District shall not authorize owners of taxable parcels within the Connnunity Facilities District to satisfy Special Tax obligations by the tender of Bonds unless the Connnunity Facilities District shall have first obtained a report of an Independent Consultant certifying that doing so would not result in the Connnunity Facilities District having insufficient Special Tax Revenues to pay the principal of and interest on all Outstanding Bonds when due.

Reduction in Special Taxes. The Connnunity Facilities District shall not initiate proceedings under the Act to modify the Rate and Method if such modification would adversely affect the security for the Bonds. If an initiative or referendum measure is proposed that purports to modify the Rate and Method in a mauner that would adversely affect the security for the Bonds, the Connnunity Facilities District shall, to the extent permitted by law, connnence and pursue reasonable legal actions to prevent the modification of the Rate and Method in a manner that would adversely affect the security for the Bonds.

Further Assurances. The Connnunity Facilities District shall make, execute and deliver any and all such further agreements, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of the Indenture and for the better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in the Indenture.

D-20 Events of Defanlt; Remedies

Events of Defanlt. The following events shall be Events of Default:

(a) Failure to pay any installment of principal of any Bonds when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption or otherwise.

(b) Failure to pay any installment of interest on any Bonds when and as the same shall become due and payable.

( c) Failure by the Community Facilities District to observe and perform any of the other covenants, agreements or conditions on its part in the Indenture or in the Bonds contained, if such failure shall have continued for a period of 60 days after written notice thereof, specifying such failure and requiring the same to be remedied, shall have been given to the Community Facilities District by the Trustee or the Owners of not less than 5% in aggregate principal amount of the Bonds at the time Outstanding; provided, however, if in the reasonable opinion of the Community Facilities District the failure stated in the notice can be corrected, but not within such 60 day period, such failure shall not constitute an Event of Default if corrective action is instituted by the Community Facilities District within such 60 day period and the Community Facilities District shall thereafter diligently and in good faith cure such failure in a reasonable period of time.

(d) The Community Facilities District or the City shall commence a voluntary case under Title 11 of the United States Code or any substitute or successor statute.

Foreclosure. If any Event of Default shall occur then, and in each and every such case during the continuance of such Event of Default, the Trustee may, or at the written direction of the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding, and upon being indenmified to its satisfaction therefor, shall, commence foreclosure against any parcels of land in the Community Facilities District with delinquent Special Taxes, as provided in Section 53356.1 of the Act; provides, however, that the Trustee need not Commence any such foreclosure if such foreclosure has been commenced by the Community Facilities District.

Other Remedies. If an Event of Default shall have occurred, the Trustee shall have the right:

(a) by mandamus, suit, action or proceeding, to compel the Community Facilities District and its officers, agents or employees to perform each and every term, provision and covenant contained in the Indenture and in the Bonds, and to require the carrying out of any or all such covenants and agreements of the Community Facilities District and the fulfillment of all duties imposed upon it by the Indenture and the Act;

(b) by suit, action or proceeding in equity, to enjoin any acts or things which are unlawful, or the violation of any of the Trustee's or Owner's rights; or

( c) by suit, action or proceeding in any court of competent jurisdiction, to require the Community Facilities District and its officers and employees to account as if it and they were the trustees of an express trust.

D-21 Application of Net Special Tax Revennes After Defanlt. If an Event of Default shall occur and be continuing, all Net Special Tax Revenues and any other funds thereafter received by the Trustee under any of the provisions of the Indenture shall be applied by the Trustee as follows and in the following order:

(a) To the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Owners of the Bonds and payment of reasonable fees, charges and expenses of the Trustee (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under the Indenture;

(b) To the payment of the principal of and interest then due with respect to the Bonds (upon presentation of the Bonds to be paid, and stamping thereon of the payment if only partially paid, or surrender thereof if fully paid) subject to the provisions of the Indenture, as follows:

First: To the payment to the Persons entitled thereto of all installments of interest then due in the order of the maturity of such installments and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the Persons entitled thereto, without any discrimination or preference; and

Second: To the payment to the Persons entitled thereto of the unpaid principal of any Bonds which shall have become due, whether at maturity or by call for redemption, with interest on the overdue principal at the rate borne by the respective Bonds on the date of maturity or redemption, and, if the amount available shall not be sufficient to pay in full all the Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the Persons entitled thereto, without any discrimination or preference; and

( c) Any remaining funds shall be transferred by the Trustee to the Special Tax Fund.

Power of Trustee to Enforce. All rights of action under the Indenture or the Bonds or otherwise may be prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in the name of the Trustee for the benefit and protection of the Owners of such Bonds, subject to the provisions of the Indenture.

Owners Direction of Proceedings. Anything in the Indenture to the contrary notwithstanding, the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have the right, by an instrument or concurrent instruments in writing executed and delivered to the Trustee, and upon indenmification of the Trustee to its reasonable satisfaction, to direct the method of conducting all remedial proceedings talcen by the Trustee under the Indenture, provided that such direction shall not be otherwise than in accordance with law and the provisions of the Indenture, and that the Trustee shall have the right to decline to follow any such direction which in the opinion of the Trustee would be unjustly prejudicial to Owners not parties to such direction.

Limitation on Owners' Right to Sue. No Owner shall have the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy

D-22 under the Indenture, the Act or any other applicable law with respect to such Bonds, unless (a) such Owner shall have given to the Trustee written notice of the occurrence of an Event of Default, (b) the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name, ( c) such Owner or said Owners shall have tendered to the Trustee indenmity against the costs, expenses and liabilities to be incurred in compliance with such request, and ( d) the Trustee shall have refused or omitted to comply with such request for a period of 60 days after such written request shall have been received by, and said tender of indenmity shall have been made to, the Trustee.

Such notification, request, tender of indemnity and refusal or omission are declared, in every case, to be conditions precedent to the exercise by any Owner of any remedy under the Indenture or under law; it being understood and intended that no one or more Owners shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of the Indenture or the rights of any other Owners, or to enforce any right under the Bonds, the Indenture, the Act or other applicable law with respect to the Bonds, except in the mauner provided in the Indenture, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner therein provided and for the benefit and protection of all Owners of the Outstanding Bonds, subject to the provisions of the Indenture.

Absolute Obligation. Nothing in any other provision of the Indenture or in the Bonds contained shall affect or impair the obligation of the Community Facilities District, which is absolute and unconditional, to pay the principal of and interest on the Bonds to the respective Owners at their respective dates of maturity, or upon call for redemption, as provided in the Indenture, but only out of the Net Special Tax Revenues and other assets pledged therefor and received by the Community Facilities District or the Trustee, or affect or impair the right of such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the contract embodied in the Bonds.

Termination of Proceedings. In case any proceedings talcen by the Trustee or any one or more Owners on account of any Event of Default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee or the Owners, then in every such case the Community Facilities District, the Trustee and the Owners, subject to any determination in such proceedings, shall be restored to their former positions and rights under the Indenture, severally and respectively, and all rights, remedies, powers and duties of the Community Facilities District, the Trustee and the Owners shall continue as though no such proceedings had been talcen.

Remedies Not Exclusive. No remedy conferred upon or reserved to the Trustee or to the Owners is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative and in addition to any other remedy given under the Indenture or now or hereafter existing at law or in equity or otherwise.

No Waiver of Default. No delay or omission of the Trustee or of any Owner to exercise any right or power arising upon the occurrence of any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein, and every power and remedy given by the Indenture to the Trustee or to the Owners may be exercised from time to time and as often as may be deemed expedient.

D-23 The Trustee

Duties and Liabilities of Trustee. (a) Duties of Trustee Generally. The Trustee shall, prior to au Event of Default, and after the curing or waiver of all Events of Default which may have occurred, perform such duties and only such duties as are expressly and specifically set forth in the Indenture. The Trustee shall, during the existence of any Event of Default which has not been cured or waived, exercise such of the rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.

(b) Removal of Trustee. The Community Facilities District may, upon 30 days' prior written notice to the Trustee, remove the Trustee at any time unless au Event of Default shall have occurred and then be continuing, and shall remove the Trustee if at any time requested to do so by au instrument or concurrent instruments in writing signed by the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing) or ifat any time the Trustee shall cease to be eligible in accordance with (e), or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any public officer shall talce control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, in each case by giving written notice of such removal to the Trustee and thereupon shall appoint a successor Trustee by au instrument in writing.

(c) Resignation of Trustee. The Trustee may at any time resign by giving written notice of such resignation by first class mail, postage prepaid, to the Community Facilities District, and to the Owners at the respective addresses shown on the Registration Books. Upon receiving such notice of resignation, the Community Facilities District shall promptly appoint a successor Trustee by au instrument in writing. The Trustee shall not be relieved of its duties until such successor Trustee has accepted appointment.

(d) Appointment of Successor Trustee. Any removal or resignation of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee; provided, however, that under any circumstances the successor Trustee shall be qualified as provided in (e ). If no qualified successor Trustee shall have been appointed and have accepted appointment within 45 days following giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any Owner (on behalf of himself and all other Owners) may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under the Indenture shall signify its acceptance of such appointment by executing and delivering to the Community Facilities District and to its predecessor Trustee a written acceptance thereof, and after payment by the Community Facilities District of all unpaid fees and expenses of the predecessor Trustee, then such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee in the Indenture; but, nevertheless at the Written Request of the Community Facilities District or the request of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and coufinning to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under the Indenture and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions therein set forth. Upon request of the successor Trustee, the Community Facilities District

D-24 shall execute and deliver any and all instruments as may be reasonably required for more fully and certainly vesting in and confinning to such successor Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon acceptance of appointment by a successor Trustee as provided in this subsection, the Community Facilities District shall mail or cause the successor Trustee to mail, by first class mail postage prepaid, a notice of the succession of such Trustee to the trusts under the Indenture to each rating agency which then maintains a rating on the Bonds and to the Owners at the addresses shown on the Registration Books. If the Community Facilities District fails to mail such notice within 15 days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Community Facilities District.

(e) Qualifications of Trustee. The Trustee shall be a trust company or bank having trust powers in good standing in or incorporated under the laws of the United States or any state thereof, having (or if such bank or trust company is a member of a bank holding company system, its parent bank holding company shall have) a combined capital and surplus of at least $75,000,000, and subject to supervision or examination by federal or state agency. If such bank or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining agency above referred to, then for the purpose of this subsection the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

In case at any time the Trustee shall cease to be eligible in accordance with the provisions of (e ), the Trustee shall resign immediately in the manner and with the effect specified in the Indenture.

Merger or Consolidation. Any bank or trust company into which the Trustee may be merged or converted or with which it may be consolidated or any bank or trust company resulting from any merger, conversion or consolidation to which it shall be a party or any baulc or trust company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such baulc or trust company shall be eligible under the Indenture shall be the successor to such Trustee, without the execution or filing of any paper or any further act, anything in the Indenture to the contrary notwithstanding.

Liability of Trustee. (a) The recitals of facts in the Indenture and in the Bonds contained shall be talcen as statements of the Community Facilities District, and the Trustee shall not assume responsibility for the correctness of the same, or make any representations as to the validity or sufficiency of the Indenture or of the Bonds or shall incur any responsibility in respect thereof, other than as expressly stated therein in connection with the respective duties or obligations therein or in the Bonds assigned to or imposed upon it. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the Bonds. The Trustee malces no representations as to the validity or sufficiency of the Indenture or of any Bonds, or in respect of the security afforded by the Indenture and the Trustee shall incur no responsibility in respect thereof. The Trustee shall be under no responsibility or duty with respect to the issuance of the Bonds for value, the application of the proceeds thereof except to the extent that such proceeds are received by it in its capacity as Trustee, or the application of any moneys paid to the Community Facilities District or others in accordance with the Indenture. The Trustee shall not be liable in connection with the perforruance of its duties under the Indenture, except for its own negligence or willful misconduct. The Trustee shall not be liable for any action talcen or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by the Indenture. The Trustee may become the Owner of Bonds with the same rights it would have if it were not Trustee, and, to the extent permitted by law, may act as depository for and permit any of its

D-25 officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Owners, whether or not such committee shall represent the Owners of a majority in aggregate principal amount of the Bonds then Outstanding.

(b) The Trustee shall not be liable for any error of judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts.

( c) The Trustee shall not be liable with respect to any action talcen or omitted to be talcen by it in good faith in accordance with the direction of the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under the Indenture.

( d) No provision of the Indenture shall require the Trustee to risk or advance its own funds. The Trustee may execute any of its powers or duties under the Indenture through attorneys, agents or receivers and shall not be answerable for the actions of such attorneys, agents or receivers if selected by it with reasonable care.

( e) The Trustee shall not be deemed to have lmowledge of an Event of Default under the Indenture unless it has actual lmowledge thereof

(f) The Trustee shall have no responsibility with respect to any information, statement, or recital in any official statement or any other disclosure material prepared or distributed with respect to the Bonds.

Right to Rely on Documents. The Trustee shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, opinion, bonds or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel of or to the Community Facilities District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action talcen or suffered by it under the Indenture in good faith and in accordance therewith.

Whenever in the administration of the duties imposed upon it by the Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action under the Indenture, such matter (unless other evidence in respect thereof be specifically prescribed in the Indenture) may be deemed to be conclusively proved and established by a Written Certificate of the Community Facilities District, and such Written Certificate shall be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of the Indenture in reliance upon such Written Certificate, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as it may deem reasonable.

Amendments to Indenture

Amendments Permitted. (a) The Indenture and the rights and obligations of the Community Facilities District, the Owners of the Bonds and the Trustee may be modified or amended from time to time and at any time by a Supplemental Indenture, which the Community Facilities District and the Trustee may enter into with the written consent of the Owners ofa majority

D-26 in aggregate principal amount of all Bonds then Outstanding, which shall have been filed with the Trustee. No such modification or amendment shall (i) extend the fixed maturity of any Bonds, reduce the amount of principal thereof or the rate of interest thereon, alter the redemption provisions thereof or extend the time of payment thereof, without the consent of the Owner of each Bond so affected, or (ii) reduce the aforesaid percentage of Bonds the consent of the Owners of which is required to effect any such modification or amendment, without the consent of the Owners of all of the Bonds then Outstanding, or (iii) pennit the creation of any lien on the Net Special Tax Revenues and other assets pledged under the Indenture prior to or on a parity with the lien created by the Indenture or deprive the Owners of the Bonds of the lien created by the Indenture on such Net Special Tax Revenues and other assets ( except as expressly provided in the Indenture), without the consent of the Owners of all of the Bonds then Outstanding. It shall not be necessary for the consent of the Owners to approve the particular form of any Supplemental Indenture, but it shall be sufficient if such consent shall approve the substance thereof.

(b) The Indenture and the rights and obligations of the Community Facilities District, the Trustee and the Owners of the Bonds may also be modified or amended from time to time and at any time by a Supplemental Indenture, which the Community Facilities District and the Trustee may enter into without the consent of any Owners for any one or more of the following purposes:

(i) to add to the covenants and agreements of the Community Facilities District in the Indenture contained other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds (or any portion thereof), or to surrender any right or power in the Indenture reserved to or conferred upon the Community Facilities District;

(ii) to malce such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision contained in the Indenture;

(iii) to provide for the issuance of one or more Series of Additional Bonds, and to provide the terms and conditions under which such Series of Additional Bonds may be issued, subject to and in accordance with the provisions of the Indenture;

(iv) to modify, amend or supplement the Indenture in such manner as to permit the qualification thereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute;

( v) to modify, amend or supplement the Indenture in such manner as to cause interest on the Bonds to be excludable from gross income for purposes of federal income taxation by the United States of America; and

(vi) in any other respect whatsoever as the Community Facilities District may deem necessary or desirable, provided that such modification or amendment does not materially adversely affect the interests of the Owners under the Indenture.

(c) Promptly after the execution by the Community Facilities District and the Trustee of any Supplemental Indenture, the Trustee shall mail a notice (the form of which shall be furnished to the Trustee by the Community Facilities District), by first class mail postage prepaid, setting forth in

D-27 general terms the substance of such Supplemental Indenture, to the Owners of the Bonds at the respective addresses shown on the Registration Books. Any failure to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Indenture.

Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture, the Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under the Indenture of the Community Facilities District, the Trustee and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced under the Indenture subject in all respects to such modification and amendment, and all the terms and conditions of any such Supplemental Indenture shall be deemed to be part of the terms and conditions of the Indenture for any and all purposes.

Defeasance

Discharge of Indenture. If the Community Facilities District shall pay or cause to be paid or there shall otherwise be paid to the Owners of all Outstanding Bonds the principal thereof and the interest and premium, if any, thereon at the times and in the manner stipulated therein, then the Owners of such Bonds shall cease to be entitled to the pledge of the Net Special Tax Revenues and the other assets as provided in the Indenture, and all agreements, covenants and other obligations of the Community Facilities District to the Owners of such Bonds under the Indenture shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Trustee shall execute and deliver to the Community Facilities District all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay over or deliver to the Community Facilities District all money or securities held by it pursuant to the Indenture which are not required for the payment of the principal of and interest and premium, if any, on such Bonds.

Subject to the provisions of the above paragraph, when any of the Bonds shall have been paid and if, at the time of such payment, the Community Facilities District shall have kept, performed and observed all of the covenants and promises in such Bonds and in the Indenture required or contemplated to be kept, performed and observed by the Community Facilities District or on its part on or prior to that time, then the Indenture shall be considered to have been discharged in respect of such Bonds and such Bonds shall cease to be entitled to the lien of the Indenture and such lien and all covenants, agreements and other obligations of the Community Facilities District under the Indenture shall cease, terminate become void and be completely discharged as to such Bonds.

Notwithstanding the satisfaction and discharge of the Indenture or the discharge of the Indenture in respect of any Bonds, those provisions of the Indenture relating to the maturity of the Bonds, interest payments and dates thereof, exchange and transfer of Bonds, replacement of mutilated, destroyed, lost or stolen Bonds, the safekeeping and cancellation of Bonds, non-presentment of Bonds, and the duties of the Trustee in connection with all of the foregoing, shall remain in effect and shall be binding upon the Trustee and the Owners of the Bonds and the Trustee shall continue to be obligated to hold in trust any moneys or investments then held by the Trustee for the payment of the principal of and interest and premium, if any, on the Bonds, to pay to the Owners of Bonds the funds so held by the Trustee as and when such payment becomes due. Notwithstanding the satisfaction and discharge of the Indenture or the discharge of the Indenture in respect of any Bonds, those provisions of the Indenture relating to the compensation of the Trustee shall remain in effect and shall be binding upon the Trustee and the Community Facilities District.

D-28 Bonds Deemed To Have Been Paid. If moneys shall have been set aside and held by the Trustee for the payment or redemption of any Bonds and the interest thereon at the maturity or redemption date thereof, such Bonds shall be deemed to have been paid within the meaning and with the effect provided in the Indenture. Any Outstanding Bonds shall prior to the maturity date or redemption date thereof be deemed to have been paid within the meaning of and with the effect expressed in the Indenture if (a) in case any of such Bonds are to be redeemed on any date prior to their maturity date, the Community Facilities District shall have given to the Trustee in form satisfactory to it irrevocable instructions to mail, on a date in accordance with the provisions of the Indenture, notice of redemption of such Bonds on said redemption date, said notice to be given in accordance therewith, (b) there shall have been deposited with the Trustee either (i) money in an amount which shall be sufficient, or (ii) Federal Securities that are not subject to redemption other than at the option of the holder thereof, the interest on and principal of which when paid will provide money which, together with the money, if any deposited with the Trustee at the same time, shall, as verified by an independent certified public accountant, be sufficient to pay when due the interest to become due on such Bonds on and prior to the maturity date or redemption date thereof, as the case may be, and the principal of and premium, if any, on such Bonds, which sufficiency shall be verified in a report of an independent firm of nationally recognized certified public accountants, and ( c) in the event such Bonds are not by their terms subject to redemption within the next succeeding 60 days, the Community Facilities District shall have given the Trustee in form satisfactory to it irrevocable instructions to mail as soon as practicable, a notice to the owners of such Bonds that the deposit required by clause (b) above has been made with the Trustee and that such Bonds, are deemed to have been paid and stating the maturity date or redemption date upon which money is to be available for the payment of the principal of and premium, if any, on such Bonds.

Payment of Bonds After Discharge of Indenture. Notwithstanding any provisions of the Indenture, to the extent permitted by law, any moneys held by the Trustee in trust for the payment of the principal of, or premium or interest on, any Bonds and remaining unclaimed for two years after the date of deposit of such moneys, shall be repaid to the Community Facilities District free from the trusts created by the Indenture, and all liability of the Trustee with respect to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the Community Facilities District as aforesaid, the Trustee may (at the cost of the Community Facilities District) first mail, by first class mail postage prepaid, to the Owners of Bonds which have not yet been paid, at the respective addresses shown on the Registration Books, a notice, in such form as may be deemed appropriate by the Trustee with respect to the Bonds so payable and not presented and with respect to the provisions relating to the repayment to the Community Facilities District of the moneys held for the payment thereof.

Miscellaneous

Special Obligations. All obligations of the Community Facilities District under the Indenture shall be special obligations of the Community Facilities District, payable solely from Special Tax Revenues and the other assets pledged therefor under the Indenture; provided, however, that all obligations of the Community Facilities District under the Bonds shall be special obligations of the Community Facilities District, payable solely from Net Special Tax Revenues and the other assets pledged therefor under the Indenture. Neither the faith and credit nor the taxing power of the Community Facilities District (except to the limited extent set forth in the Indenture), the City, or the State of California, or any political subdivision thereof, is pledged to the payment of the Bonds.

D-29 Successor Is Deemed Included in All References to Predecessor. Whenever in the Indenture either the Community Facilities District or the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in the Indenture contained by or on behalf of the Community Facilities District or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not.

Limitation of Rights. Nothing in the Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any Person other than the Trustee, the Community Facilities District and the Owners of the Bonds, any legal or equitable right, remedy or claim under or in respect of the Indenture or any covenant, condition or provision therein contained, and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Trustee, the Community Facilities District and the Owners of the Bonds.

Severability of Invalid Provisions. If any one or more of the provisions contained in the Indenture or in the Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in the Indenture and such invalidity, illegality or uneuforceability shall not affect any other provision of the Indenture, and the Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained therein.

Evidence of Rights of Owners. Any request, consent or other instrument required or pennitted by the Indenture to be signed and executed by Owners may be in any number of concurrent instruments of substantially similar tenor and shall be signed or executed by such Owners in Person or by au agent or agents duly appointed in writing.

The fact and date of the execution by any Person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take aclmowledgmeuts of deeds, certifying that the Person signing such request, consent or other instrument aclmowledged to him the execution thereof, or by au affidavit of a witness of such execution duly sworn to before such notary public or other officer. The ownership of Bonds shall be proved by the Registration Books. Any request, consent, or other instrument or writing of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner of every Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Community Facilities District in accordance therewith or reliance thereon.

Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under the Indenture, Bonds which are !mown by the Trustee to be owned or held by or for the account of the Community Facilities District, or by any other obligor on the Bonds, or by any Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Community Facilities District or any other obligor on the Bonds, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination. Bonds so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Bonds and that the pledgee is not a Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Community Facilities District or any other obligor on the Bonds. In case of a dispute as to such

D-30 right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee.

Money Held for Particular Bonds. The money held by the Trustee for the payment of the interest, principal or premium due on any date with respect to particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books and held in trust by it for the Owners of the Bonds entitled thereto, subject, however, to the provisions of the Indenture relating to defeasance but without any liability for interest thereon.

Pavment on Non-Business Davs. In the event any payment is required to be made under the Indenture on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day with the same effect as if made on such non-Business Day.

Waiver of Personal Liability. No member, officer, agent or employee of the Community Facilities District or the City shall be individually or personally liable for the payment of the principal of or premium or interest on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof; but nothing contained in the Indenture shall relieve any such officer, agent or employee from the performance of any official duty provided by law or by the Indenture.

Conflict with Act. In the event of any conflict between any provision of the Indenture and any provision of the Act, the provision of the Act shall prevail over the provision of the Indenture.

Governing Laws. The Indenture shall be governed by and construed in accordance with the laws of the State of California.

D-31 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIXE

FORMS OF CONTINUING DISCLOSURE AGREEMENTS

CONTINUING DISCLOSURE AGREEMENT

by and among

CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER)

and

UNION BANK OF CALIFORNIA, N.A., AS TRUSTEE

and

UNION BANK OF CALIFORNIA, N.A., AS DISSEMINATION AGENT

Dated as of September 1, 2007

City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007

E-1 CONTINUING DISCLOSURE AGREEMENT

THIS CONTINUING DISCLOSURE AGREEMENT (this "Disclosure Agreement"), dated as of September I, 2007, is by and among CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER), a community facilities district organized and existing under the laws of the State of California (the "Community Facilities District"), and UNION BANK OF CALIFORNIA, N.A., a national banking association organized and existing under the laws of the United States of America (the "Bank"), in its capacity as trustee (the 'Trustee") and in its capacity as Dissemination Agent (the "Dissemination Agent").

WIT N E S S E T H:

WHEREAS, pursuant to the Indenture, dated as of September I, 2007 (the "Indenture"), by and between the Community Facilities District and the Trustee, the Community Facilities District has issued the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007 (the "Series 2007 Bonds") in the aggregate principal amount of $13,680,000; and

WHEREAS, this Disclosure Agreement is being executed and delivered by the Community Facilities District and the Bank for the benefit of the holders and beneficial owners of the Series 2007 Bonds and in order to assist the underwriters of the Series 2007 Bonds in complying with Securities and Exchange Commission Rule 15c2-12(b)(5);

NOW, THEREFORE, for and in consideration of the mutual premises and covenants herein contained, the parties hereto agree as follows:

Section 1. Definitions. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Indenture. In addition, the following capitalized terms shall have the following meanmgs:

"Annual Report" means any Aunual Report provided by the Community Facilities District pursuant to, and as described in, Sections 2 and 3 hereof

"Annual Report Date" means the date in each year that is eight months after the end of the Community Facilities District's fiscal year, which date, as of the date of this Disclosure Agreement, is March I.

"Disclosure Representative" means the Finance Director of the City of Tustin, or his or her designee, or such other person as the Community Facilities District shall designate in writing to the Trustee from time to time.

"Dissemination Agent" means the Bank, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Community Facilities District and which has filed with the Trustee a written acceptance of such designation.

"Listed Events" means any of the events listed in Section 4(a) hereof

"National Repository" means any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The Nationally Recognized Municipal Securities Information

E-2 Repository for purposes of the Rule are identified in the Securities and Exchange Commission website located at http://www.sec.gov/info/municipal/nrmsir.htm.

"Official Statement" means the Official Statement, dated August 23, 2007, relating to the Series 2007 Bonds.

"Participating Underwriter" means any of the original underwriters of the Series 2007 Bonds required to comply with the Rule in connection with the offering of the Series 2007 Bonds.

"Repository" means each National Repository and each State Repository.

"Rule" means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

"State Repository" means any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Agreement, there is no State Repository.

Section 2. Provision of Annnal Reports. (a) The Community Facilities District shall, or, upon furnishing the Annual Report to the Dissemination Agent, shall cause the Dissemination Agent to, provide to each Repository an Annual Report which is consistent with the requirements of Section 3 hereof, not later than the Annual Report Date, commencing with the report for the 2006-07 fiscal year. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 3 hereof; provided, however, that the audited financial statements of the Community Facilities District, if any, may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if not available by that date. If the Community Facilities District's fiscal year changes, it shall instruct the Dissemination Agent to give notice of such change in the same manner as for a Listed Event under Section 4(f) hereof.

(b) Not later than 15 business days prior to the date specified in subsection (a) for providing the Annual Report to Repositories, the Community Facilities District shall provide the Annual Report (in a form suitable for reporting to the Repositories) to the Dissemination Agent and the Trustee (if the Trustee is not the Dissemination Agent). If by such date, the Trustee has not received a copy of the Annual Report, the Trustee shall contact the Disclosure Representative and the Dissemination Agent to inquire if the Community Facilities District is in compliance with the first sentence of this subsection (b).

(c) If the Trustee is unable to verify that an Annual Report has been provided to the Repositories by the date required in subsection (a), the Trustee shall send a notice to the Municipal Securities Rulemaking Board and the appropriate State Repository, if any, in substantially the form attached as Exhibit A.

(d) The Dissemination Agent shall:

(i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and each State Repository, if any;

E-3 (ii) provide any Annual Report received by it to each Repository, as provided herein; and

(iii) file a report with the Connnunity Facilities District and (if the Dissemination Agent is not the Trustee) the Trustee certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided.

Section 3. Content of Annual Reports. The Connnunity Facilities District's Annual Report shall contain or incorporate by reference the following:

(a) The Connnunity Facilities District's audited financial statements, if any, prepared in accordance with generally accepted accounting principles as promulgated to apply to govermnental entities from time to time by the Govermnental Accounting Standards Board. If the Connnunity Facilities District's audited financial statements, if any, are not available by the time the Annual Report is required to be filed pursuant to Section 2(a) hereof, the Annual Report shall contain unaudited financial statements in a format similar to that used for the Connnunity Facilities District's audited financial statements, and the audited financial statements, if any, shall be filed in the same mauner as the Annual Report when they become available.

(b) The following information:

(i) The principal amount of Series 2007 Bonds Outstanding as of the September 30 next preceding the Annual Report Date.

(ii) The principal amount of Bonds Outstanding as of the September 30 next preceding the Annual Report Date.

(iii) The balance in the Reserve Fund, and a statement of the Reserve Requirement, as of the September 30 next preceding the Annual Report Date.

(iv) The total assessed value of all parcels within the Connnunity Facilities District on which the Special Taxes are levied, as shown on the assessment roll of the Orange County Assessor last equalized prior to the September 30 next preceding the Annual Report Date, and a statement of assessed value-to-lien ratios therefor, either by individual parcel or by categories (e.g. "below 3:1", "3:1 to 4:1" etc.).

( v) The Special Tax delinquency rate for all parcels within the Connnunity Facilities District on which the Special Taxes are levied, as shown on the assessment roll of the Orange County Assessor last equalized prior to the September 30 next preceding the Annual Report Date, the number of parcels within the Connnunity Facilities District on which the Special Taxes are levied and which are delinquent in payment of Special Taxes, as shown on the assessment roll of the Orange County Assessor last equalized prior to the September 30 next preceding the Annual Report Date, the amount of each delinquency, the length of time delinquent and the date on which foreclosure was connnenced, or similar information pertaining to delinquencies deemed appropriate by the Connnunity Facilities District; provided,

E-4 however, that parcels with aggregate delinquencies of $2,000 or less ( excluding penalties and interest) may be grouped together and such information may be provided by category.

(vi) The status of foreclosure proceedings for any parcels within the Community Facilities District on which the Special Taxes are levied and a summary of the results of any foreclosure sales as of the September 30 next preceding the Annual Report Date.

(vii) The identity of any property owner representing more than 5% of the annual Special Tax levy who is delinquent in payment of such Special Taxes, as shown on the assessment roll of the Orange County Assessor last equalized prior to the September 30 next preceding the Annual Report Date.

( viii) A land ownership sunnnary listing property owners responsible for more than 5% of the annual Special Tax levy, as shown on the assessment roll of the Orange County Assessor last equalized prior to the September next preceding the Annual Report Date.

(ix) An update of Table I in the Official Statement, entitled "Direct and Overlapping Debt Sunnnary."

(c) In addition to any of the information expressly required to be provided under paragraphs (a) and (b), above, the Community Facilities District shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Community Facilities District or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The Community Facilities District shall clearly identify each such other document so included by reference.

Section 4. Reporting of Significant Events. (a) Pursuant to the provisions of this Section, the Community Facilities District shall promptly give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series 2007 Bonds, if material:

(i) Principal and interest payment delinquencies.

(ii) Non-payment related defaults.

(iii) Unscheduled draws on debt service reserves reflecting financial difficulties.

(iv) Unscheduled draws on credit enhancements reflecting financial difficulties.

(v) Substitution of credit or liquidity providers, or their failure to perform.

(vi) Adverse tax opinions or events affecting the tax-exempt status of the security.

E-5 (vii) Modifications to rights of security holders.

(viii) Contingent or unscheduled bond calls.

(ix) Defeasances.

(x) Release, substitution, or sale of property securing repayment of the securities.

(xi) Rating changes.

(b) The Trustee shall, within five business days of obtaining actual lmowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event, and request that the Community Facilities District promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (f). The Trustee shall have no responsibility for determining the materiality of any of the Listed Events.

( c) Whenever the Community Facilities District obtains lmowledge of the occurrence of a Listed Event, whether because of a notice from the Trustee pursuant to subsection (b) or otherwise, the Community Facilities District shall as soon as possible determine if such event would be material under applicable Federal securities law.

( d) If the Community Facilities District determines that lmowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, and there is no Dissemination Agent, the Community Facilities District shall file a notice of such occurrence with the Municipal Securities Rulemaking Board and each State Repository. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(viii) and (ix) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Series 2007 Bonds pursuant to the Indenture. If the Community Facilities District determines that lmowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, and there is a Dissemination Agent, the Community Facilities District shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (f). The Community Facilities District shall provide the Dissemination Agent with a form of notice of such event in a format suitable for reporting to the Municipal Securities Rulemaking Board and each State Repository, if any.

(e) If in response to a request under subsection (b), the Community Facilities District determines that the Listed Event would not be material under applicable Federal securities law, the Community Facilities District shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection (f).

(f) If the Dissemination Agent has been instructed by the Community Facilities District to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the Municipal Securities Rulemaking Board and each State Repository. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(viii) and (ix) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Series 2007 Bonds pursuant to the Indenture.

Section 5. Electronic Filing. Submission of Aunual Reports and notices of Listed Events to DisclosureUSA.org or another "Central Post Office" designated and accepted by the Securities and

E-6 Exchange Commission shall constitute compliance with the requirement of filing such reports and notices with each Repository hereunder, and the Community Facilities District may satisfy its obligations hereunder to file any notice, document or information with a Repository by filing the same with any dissemination agent or conduit, including DisclosureUSA.org or another "Central Post Office" or similar entity, assuming or charged with responsibility for accepting notices, documents or information for transmission to such Repository, to the extent permitted by the Securities and Exchange Commission or Securities and Exchange Commission staff or required by the Securities and Exchange Commission. For this purpose, permission shall be deemed to have been granted by the Securities and Exchange Commission staff if and to the extent the agent or conduit has received an interpretive letter, which has not been revoked, from the Securities and Exchange Commission staff to the effect that using the agent or conduit to transmit information to the Repository will be treated for purposes of the Rule as if such information were transmitted directly to the Repository.

Section 6. Termination of Reporting Obligation. The Community Facilities District's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Series 2007 Bonds. If such termination occurs prior to the final maturity of the Series 2007 Bonds, the Community Facilities District shall give notice of such termination in the same manner as for a Listed Event under Section 4(f) hereof.

Section 7. Dissemination Agent. The Community Facilities District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing 30 days' written notice to the Community Facilities District and the Trustee. The Dissemination Agent shall have no duty to prepare the Annual Report. The Dissemination Agent shall be paid compensation by the Community Facilities District for its services provided hereunder in accordance with its schedule of fees as amended from time to time, as agreed to between the Dissemination Agent and the Community Facilities District, and all reasonable expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder.

Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Community Facilities District, the Trustee and the Dissemination Agent may amend this Disclosure Agreement ( and the Trustee and the Dissemination Agent shall agree to any amendment so requested by the Community Facilities District, so long as such amendment does not adversely affect the rights or obligations of the Trustee or the Dissemination Agent), and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied:

(a) if the amendment or waiver relates to Sections 2(a), 3 or 4(a) hereof, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Series 2007 Bonds, or type of business conducted;

(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

E-7 (c) the proposed amendment or waiver (i) is approved by holders of the Series 2007 Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of holders.

If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial statements or information, in order to provide information to investors to enable them to evaluate the ability of the Community Facilities District to meet its obligations, including its obligation to pay debt service on the Series 2007 Bonds. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section 4(f) hereof.

Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Community Facilities District from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Community Facilities District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Community Facilities District shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

Section 10. Default. In the event of a failure of the Community Facilities District or the Trustee to comply with any provision of this Disclosure Agreement, the Trustee may (and, at the written direction of any Participating Underwriter or the holders of at least 25% aggregate principal amount of Outstanding Series 2007 Bonds, shall, upon receipt of indenmification reasonably satisfactory to the Trustee), or any holder or beneficial owner of the Series 2007 Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Community Facilities District or the Trustee, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Community Facilities District or the Trustee to comply with this Disclosure Agreement shall be an action to compel performance.

Section 11. Duties, Immunities and Liabilities of Trustee and Dissemination Agent. Article VIII of the Indenture is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Indenture, and the Trustee and

E-8 the Dissemination Agent shall be entitled to the protections, limitations from liability and indenmities afforded to the Trustee thereunder. The Dissemination Agent and the Trustee shall have only such duties hereunder as are specifically set forth in this Disclosure Agreement. This Disclosure Agreement does not apply to any other securities issued or to be issued by the Community Facilities District. The Dissemination Agent shall have no responsibility for the preparation, review, form or content of any Aunual Report or any notice of a Listed Event. No provision of this Disclosure Agreement shall require or be construed to require the Dissemination Agent to interpret or provide an opinion concerning any information disclosed hereunder. The Dissemination Agent may conclusively rely on the determination of the Community Facilities District as to the materiality of any event for purposes of Section 4 hereof. Neither the Trustee nor the Dissemination Agent make any representation as to the sufficiency of this Disclosure Agreement for purposes of the Rule. The Community Facilities District's obligations under this Section shall survive the termination of this Disclosure Agreement.

Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Community Facilities District, the Trustee, the Dissemination Agent, the Participating Underwriters and holders and beneficial owners from time to time of the Series 2007 Bonds, and shall create no rights in any other person or entity.

Section 13. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

E-9 IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written.

CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER)

Ronald A. Nault, Finance Director of the City of Tustin

UNION BANK OF CALIFORNIA, N.A., AS TRUSTEE

Authorized Officer

UNION BANK OF CALIFORNIA, N.A., AS DISSEMINATION AGENT

Authorized Officer

E-10 EXHIBIT A

NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT

Name oflssuer: City of Tustin Conuuunity Facilities District No. 07-1 (Tustin Legacy/Retail Center)

Name of Bond Issue: City of Tustin Conuuunity Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007

Date oflssuance: September_, 2007

NOTICE IS HEREBY GIVEN that City of Tustin Conuuunity Facilities District No. 07-1 (Tustin Legacy/Retail Center) (the "Conuuunity Facilities District") has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement, dated as of September I, 2007, by and among the Conuuunity Facilities District and Union Bartle of California, N.A., in its capacity as Trustee and in its capacity as Dissemination Agent. [The Conuuunity Facilities District anticipates that the Annual Report will be filed by .]

UNION BANK OF CALIFORNIA, N.A., as Trustee, on behalf of the City of Tustin Conuuunity Facilities District No. 07-1 (Tustin Legacy/Retail Center)

cc: City of Tustin Conuuunity Facilities District No. 07-1 (Tustin Legacy/Retail Center)

E-11 CONTINUING DISCLOSURE AGREEMENT

by and among

VESTAR/KIMCO TUSTIN, L.P.

and

UNION BANK OF CALIFORNIA, N.A., AS TRUSTEE

and

UNION BANK OF CALIFORNIA, N.A., AS DISSEMINATION AGENT

Dated as of September 1, 2007

City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007

E-12 CONTINUING DISCLOSURE AGREEMENT

THIS CONTINUING DISCLOSURE AGREEMENT (this "Disclosure Agreement"), dated as of September I, 2007, is by and among VESTAR/KIMCO TUSTIN, L.P., a California limited partnership (the "Developer"), and UNION BANK OF CALIFORNIA, N.A., a national banking association organized and existing under the laws of the United States of America ( the "Bank"), in its capacity as trustee (the 'Trustee") and in its capacity as Dissemination Agent (the "Dissemination Agent").

WIT N E S S E T H:

WHEREAS, pursuant to the Indenture, dated as of September I, 2007 (the "Indenture"), by and between City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) (the "Community Facilities District") and the Trustee, the Community Facilities District has issued the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007 (the "Bonds") in the aggregate principal amount of$13,680,000;

WHEREAS, the Bonds are payable from and secured by special taxes levied on certain of the property within the Community Facilities District;

WHEREAS, the Developer is developing a portion of the property within the Community Facilities District; and

WHEREAS, this Disclosure Agreement is being executed and delivered by the Developer and the Bank for the benefit of the holders and beneficial owners of the Bonds and in order to assist the underwriter of the Bonds in complying with Securities and Exchange Commission Rule I 5c2- 12(b )(5);

NOW, THEREFORE, for and in consideration of the mutual premises and covenants herein contained, the parties hereto agree as follows:

Section 1. Definitions. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Indenture. In addition, the following capitalized terms shall have the following meanmgs:

"Affiliate" of another Person means (a) a Person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of such other Person, (b) any Person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other Person, and ( c) any Person directly or indirectly controlling, controlled by, or under common control with, such other Person; for purposes hereof, control means the power to exercise a controlling influence over the management or policies of a Person, unless such power is solely the result of an official position with such Person.

"Assumption Agreement" means an agreement between a Major Developer, or an Affiliate thereof, and the Trustee containing terms substantially similar to this Disclosure Agreement, whereby such Major Developer or Affiliate agrees to provide Semi-Annual Reports and notices of significant events with respect to the portion of the Property owned by such Major Developer or its Affiliates, and with respect to the improvements or payments necessary to cause the Planned Development

E-13 Stage to be reached that such Major Developer, or au Affiliate thereof, intends or 1s obligated ( contractually or otherwise) to make or cause to be made.

"Development Plan" meaus, with respect to a Major Developer, the specific improvements such Major Developer intends to make, or cause to be made, in order for the Planned Development Stage to be reached, the time frame in which such improvements are intended to be made aud the estimated costs of such improvements; the Developer's Development Plan, as of the date hereof, is described in the Official Statement under the captions "THE COMMUNITY FACILITIES DISTRICT - Disposition aud Development Agreement" aud 'THE COMMUNITY FACILITIES DISTRICT - Property Ownership aud Development - The Developer's Financing Plan."

"Disclosure Representative" meaus a mauager of the general partner of the Developer or such other person as the Developer shall designate in writing to the Trustee from time to time.

"Dissemination Agent" means the Baulc, acting in its capacity as Dissemination Agent hereunder, or auy successor Dissemination Agent designated in writing by the Developer and which has filed with the Trustee a written acceptauce of such designation.

"Event of Bankruptcy" meaus, with respect to a Person, that such Person files a petition or institutes a proceeding under auy act or acts, state or federal, dealing with or relating to the subject or subjects of baulcruptcy or insolvency, or under auy amendment of such act or acts, either as a baulcrupt or as au insolvent, or as a debtor, or in any similar capacity, wherein or whereby such Person asks or seeks or prays to be adjudicated a banlcrupt, or is to be discharged from auy or all of such Person's debts or obligations, or offers to such Person's creditors to effect a composition or extension of time to pay such Person's debts or asks, seeks or prays for reorgauization or to effect a plau of reorgauization, or for a readjustment of such Person's debts, or for auy other similar relief, or if auy such petition or any such proceedings of the same or similar kind or character is filed or instituted or taken against such Person aud the same shall remain undismissed for a period of 60 days, or if a receiver of the business or of the property or assets of such Person is appointed by auy court, or if such Person makes a general assignment for the benefit of such Person's creditors.

"Financing Plan" meaus, with respect to a Major Developer, the method by which such Major Developer intends to finance its Development Plau, including specific sources of funding for such Development Plau; the Developer's Finaucing Plau, as of the date hereof, is described in the Official Statement under the caption 'THE COMMUNITY FACILITIES DISTRICT - Property Ownership aud Development- The Developer's Financing Plan."

"Financial Statements" meaus, with respect to a Major Developer, the full finaucial statements, special purpose finaucial statements, project operating statements or other reports reflecting the finaucial position of each entity, enterprise, fund, account or other person ( other thau a finaucial institution acting as a lender in the ordinary course of business) identified in such Major Developer's Financing Plau as a source of funding for such Major Developer's Development Plau; provided, however, that, if such finaucial statements or reports are otherwise prepared as audited finaucial statements or reports, then Financial Statements meaus such audited financial statements or reports.

"First Report Date" meaus the date in each year that is four months after the end of the Developer's fiscal year, which date, as of the date of this Disclosure Agreement, is May I.

E-14 "Listed Events" means any of the events listed in Section 4(a) hereof.

"Major Developer" means, as of any date, any Property Owner, including the Developer, that owns Property that has not reached the Planned Development Stage that, together with Property that has not reached the Planned Development Stage owned by Affiliates of such Property Owner, is subject to 20% or more of the Special Tax levy for the then current Fiscal Year.

"National Repository" means any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The Nationally Recognized Municipal Securities Information Repositories for purposes of the Rule are identified in the Securities and Exchange Commission website located at http://www.sec.gov/info/municipal/nrmsir.htm.

"Official Statement" means the Official Statement, dated August 23, 2007, relating to the Bonds.

"Participating Underwriter" means any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds.

"Person" means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof.

"Planned Development Stage" means, with respect to any portion of the Property, the stage of development to which the Developer intends to develop such property, as described in the Official Statement, which is the stage at which certificates of occupancy have been issued for the building improvements constructed on such portion of the Property and such portion of the Property has been leased or sold to a Person that is not an Affiliate of the Developer.

"Property" means the real property within the boundaries of the District that is not exempt from the Special Taxes.

"Property Owner" means any Person that owns a fee interest in any Property.

"Report Date" means, as applicable, the First Report Date or the Second Report Date.

"Reporting Period" means, with respect to the Semi-Annual Report that is required to be provided by not later than the First Report Date, the six-month period ending on the last day of the second month after the end of the Developer's fiscal year, which day, as of the date of this Disclosure Agreement, is February 28 or 29, as applicable, and, with respect to the Semi-Annual Report that is required to be provided by not later than the Second Report Date, the six-month period ending on the last day of the eighth month after the end of the Developer's fiscal year, which day, as of the date of this Disclosure Agreement, is August 31.

"Repository" means each National Repository and each State Repository.

"Rule" means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

"Second Report Date" means the date in each year that is ten months after the end of the Developer's fiscal year, which date, as of the date of this Disclosure Agreement, is November I.

E-15 "Semi-Annnal Report" means any Semi-Annual Report provided by the Developer pursuant to, and as described in, Sections 2 and 3 hereof

"State Repository" means any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Agreement, there is no State Repository.

Section 2. Provision of Semi-Annnal Reports. (a) The Developer shall, or, upon furnishing the Semi-Annual Report to the Dissemination Agent, shall cause the Dissemination Agent to, provide to each Repository a Semi-Annual Report which is consistent with the requirements of Section 3 hereof, not later than the Report Date, commencing November I, 2007. The Semi-Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 3 hereof; provided, however, that the audited financial statements of the Developer, if any, may be submitted separately from the balance of the Semi-Annual Report that is to be provided no later than the First Report Date, and later than the date required above for the filing of such Semi-Annual Report if not available by that date. If the Developer's fiscal year changes, it shall instruct the Dissemination Agent to give notice of such change in the same manner as for a Listed Event under Section 4(c) hereof

(a) Not later than 15 business days prior to the date specified in subsection (a) for providing the Semi-Annual Report to Repositories, the Developer shall provide the Semi-Annual Report (in a form suitable for reporting to the Repositories) to the Dissemination Agent and the Trustee (if the Trustee is not the Dissemination Agent). Ifby such date, the Trustee has not received a copy of the Semi-Annual Report, the Trustee shall contact the Disclosure Representative and the Dissemination Agent to inquire if the Developer is in compliance with the first sentence of this subsection (b ).

(b) If the Trustee is unable to verify that a Semi-Annual Report has been provided to the Repositories by the date required in subsection (a), the Trustee shall send a notice to either the Municipal Securities Rulemaking Board and the appropriate State Repository, if any, or the Repositories, in substantially the form attached as Exhibit A.

(c) The Dissemination Agent shall:

(i) determine prior to each Report Date the name and address of each National Repository and each State Repository, if any;

(ii) provide any Semi-Annual Report received by it to each Repository, as provided herein; and

(iii) file a report with the Developer and (if the Dissemination Agent is not the Trustee) the Trustee certifying that the Semi-Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided.

Section 3. Content of Semi-Annnal Reports. The Developer's Semi-Annual Report shall contain or incorporate by reference the following:

E-16 (a) With respect only to the Semi-Annual Report that is required to be provided no later than the First Report Date, Financial Statements for each Major Developer prepared in accordance with generally accepted accounting principles, as in effect from time to time. If audited Financial Statements are required to be provided, and such audited Financial Statements are not available by the time such Semi-Annual Report is required to be filed pursuant to Section 2(a) hereof, such Semi-Annual Report shall contain unaudited Financial Statements, and the audited Financial Statements shall be filed in the same manner as the Semi-Annual Report when they become available. Such Financial Statements shall be for the most recently ended fiscal year for the entity covered thereby.

(b) The following information with respect to each Major Developer:

(i) If information regarding such Major Developer has not previously been included in a Semi-Annual Report or in the Official Statement, the Development Plan of such Major Developer or, if information regarding such Major Developer has previously been included in a Semi-Annual Report or in the Official Statement, a description of the progress made in the Development Plan of such Major Developer since the date of such information or during the most recently ended Reporting Period, as applicable, and a description of any significant changes in such Development Plan and the causes or rationale for such changes or, if such Development Plan has been completed, a statement to that effect.

(ii) If information regarding such Major Developer has not previously been included in a Semi-Annual Report or in the Official Statement, the Financing Plan of such Major Developer or, if information regarding such Major Developer has previously been included in a Semi-Annual Report or in the Official Statement, a description of any significant changes in the Financing Plan of such Major Developer during the most recently ended Reporting Period and the causes or rationale for such changes or, if such Financing Plan has been completed, a statement to that effect.

(iii) A description of any sales of portions of such Major Developer's Property that has not reached the Planned Development Stage during the most recently ended Reporting Period, including the identification of each buyer and the number of acres sold.

(iv) A description of the number of building permits issued with respect to such Major Developer's Property during the most recently ended Reporting Period.

(v) A description of the number of certificates of occupancy issued with respect to such Major Developer's Property during the most recently ended Reporting Period.

(vi) a description of (A) which portions of the Property owned by such Major Developer had building improvements completed thereon during the most recently ended Reporting Period, together with a description of such improvements, (B) which portions of such Property had building improvements thereon for which certificates of occupancy were issued during the most recently ended Reporting

E-17 Period, together with a description of such improvements, and (C) which portions of such Property that had building improvements thereon for which certificates of occupancy were issued had been leased or sold to Persons that are not Affiliates of such Major Developer during the most recently ended Reporting Period, together with a description of such improvements, such lessees and such purchasers.

(vii) A statement as to whether or not such Major Developer and all of its Affiliates paid, prior to their becoming delinquent, all Special Taxes levied on the Property owned by such Major Developer and such Affiliates payable during the most recently ended Reporting Period, and if such Major Developer or any of such Affiliates is delinquent in the payment of such Special Taxes, a statement identifying each entity that is so delinquent, specifying the amount of each such delinquency and describing any plans to resolve such delinquency.

(viii) A description of the remaining capacity, as of the last day of the most recently ended Reporting Period, in any lines of credit or other credit facilities identified in the Financing Plan of such Major Developer as a source of funding for such Major Developer's Development Plan.

(ix) An update of Table 5 in the Official Statement entitled "Expected Retail Uses of Parcels Subject to the Special Tax in the Community Facilities District."

(x) An update of the status of any previously reported Listed Event described in Section 4 hereof.

(c) In addition to any of the information expressly required to be provided under paragraphs (a) and (b), above, the Developer shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

Major Developers that are Affiliates of each other may file a single Semi-Annual Report covering all such entities. Any or all of the items listed above may be included by specific reference to other documents which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The Developer shall clearly identify each such other document so included by reference.

Section 4. Reporting of Significant Events. (a) Pursuant to the provisions of this Section, the Developer shall promptly give, or cause to be given notice of the occurrence of any of the following events with respect to each Major Developer:

(i) Any conveyance by such Major Developer of Property owned by such Major Developer to an entity that is not an Affiliate of such Major Developer, the result of which conveyance is to cause the transferee to become a Major Developer.

(ii) Any failure of such Major Developer, or any Affiliate of such Major Developer, to pay prior to their becoming delinquent general property taxes, Special Taxes or assessments with respect to its Property.

E-18 (iii) Any denial or tennination of credit, any denial or termination of, or default under, any line of credit or loan or any other loss of a source of funds that could have a material adverse affect on such Major Developer's most recently disclosed Financing Plan or Development Plan or on the ability of such Major Developer, or any Affiliate of such Major Developer, to pay Special Taxes when due.

(iv) The occurrence of an Event of Bankruptcy with respect to such Major Developer, or any Affiliate of such Major Developer, that could have a material adverse affect on such Major Developer's most recently disclosed Financing Plan or Development Plan or on the ability of such Major Developer, or any Affiliate of such Major Developer, to pay Special Taxes when due.

(v) Any significant amendments to land use entitlements for such Major Developer's Property, if material.

(vi) Any previously undisclosed governmentally-imposed preconditions to commencement or continuation of development on such Major Developer's Property, if material.

(vii) Any previously undisclosed legislative, administrative or judicial challenges to development on such Major Developer's Property, if material.

(viii) Any changes, if material, in the alignment, design or likelihood of completion of significant public improvements affecting such Major Developer's Property, including major thoroughfares, sewers, water conveyance systems and similar facilities.

(ix) The assumption of any obligations by a Major Developer pursuant to Section 5 hereof.

(b) Whenever the Developer obtains lmowledge of the occurrence of a Listed Event, if there is no Dissemination Agent, the Developer shall promptly file a notice of such occurrence with the Trustee, the Community Facilities District and either the Municipal Securities Rulemaking Board and each State Repository or the Repositories. Whenever the Developer obtains lmowledge of the occurrence of a Listed Event, if there is a Dissemination Agent, the Developer shall promptly notify the Dissemination Agent, the Trustee and the Community Facilities District in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (c ). The Developer shall provide the Dissemination Agent with a form of notice of such event in a format suitable for reporting to either the Municipal Securities Rulemaking Board and each State Repository, if any, or the Repositories.

(c) If the Dissemination Agent has been instructed by the Developer to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with either the Municipal Securities Rulemaking Board and each State Repository or the Repositories.

Section 5. Assumption of Obligations. If a portion of the Property owned by the Developer, or any Affiliate of the Developer, is conveyed to a Person that, upon such conveyance, will be a Major Developer, the obligations of the Developer hereunder with respect to the Property owned by such Major Developer and its Affiliates, and with respect to the improvements or payments necessary to cause the Planned Development Stage to be reached that such Major

E-19 Developer, or an Affiliate thereof, intends or is obligated ( contractually or otherwise) to make or cause to be made, may be assumed by such Major Developer or by an Affiliate thereof and shall tenninate with respect to the Developer. In order to effect such assumption, such Major Developer or Affiliate shall enter into an Assumption Agreement.

Section 6. Electronic Filing. Submission of Semi-Annual Reports and notices of Listed Events to DisclosureUSA.org or another "Central Post Office" designated and accepted by the Securities and Exchange Commission shall constitute compliance with the requirement of filing such reports and notices with each Repository hereunder, and the Developer may satisfy its obligations hereunder to file any notice, document or information with a Repository by filing the same with any dissemination agent or conduit, including DisclosureUSA.org or another "Central Post Office" or similar entity, assuming or charged with responsibility for accepting notices, documents or information for transmission to such Repository, to the extent pennitted by the Securities and Exchange Commission or Securities and Exchange Commission staff or required by the Securities and Exchange Commission. For this purpose, permission shall be deemed to have been granted by the Securities and Exchange Commission staff if and to the extent the agent or conduit has received an interpretive letter, which has not been revoked, from the Securities and Exchange Commission staff to the effect that using the agent or conduit to transmit information to the Repository will be treated for purposes of the Rule as if such information were transmitted directly to the Repository.

Section 7. Termination of Reporting Obligation. The Developer's obligations under this Disclosure Agreement shall terminate upon the earliest to occur of (a) the date on which the Planned Development Stage has been reached, (b) the date on which (i) the Developer is no longer a Major Developer, and (ii) the Developer no longer has any obligations under this Disclosure Agreement with respect to any Major Developer as a result of such obligations having been assumed under one or more Assumption Agreements entered into pursuant to Section 5 hereof, or ( c) the date on which all of the Bonds have been legally defeased, redeemed, or paid in full; upon such tennination, the Developer shall have no obligation to provide any Semi-Annual Report that it would otherwise have been obligated to provide after the date of such termination. The Developer's obligations under this Disclosure Agreement with respect to a Major Developer shall terminate upon the earliest to occur of (x) the date on which such Major Developer is no longer a Major Developer, as defined herein, or (y) the date on which the Developer's obligation with respect to such Major Developer are assumed under an Assumption Agreement entered into pursuant to Section 5 hereof; upon such termination, the Developer shall have no obligation to provide any Semi-Annual Report with respect to such Major Developer that it would otherwise have been obligated to provide after the date of such tennination, provided, however, that upon the occurrence of any of the events described in clauses (x) or (y), the Developer's obligations hereunder with respect to each other Major Developer, if any, shall remain in full force and effect. Upon the occurrence of any such termination prior to the final maturity of the Bonds, the Developer shall give notice of such tennination in the same manner as for a Listed Event under Section 4 hereof.

Section 8. Dissemination Agent. The Developer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing 30 days' written notice to the Developer and the Trustee. The Dissemination Agent shall have no duty to prepare the Semi­ Annual Report. The Developer shall be responsible for paying the fees and expenses of the Dissemination Agent.

E-20 Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Developer, the Trustee and the Dissemination Agent may amend this Disclosure Agreement (and the Trustee and the Dissemination Agent shall agree to any amendment so requested by the Developer, so long as such amendment does not adversely affect the rights or obligations of the Trustee or the Dissemination Agent), and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied:

(a) if the amendment or waiver relates to Sections 2(a), 3 or 4(a) hereof it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted;

(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) the proposed amendment or waiver (i) is approved by holders of the Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of holders.

If the financial information or operating data to be provided in the Semi-Annual Report is amended pursuant to the provisions hereof, the first financial information containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the Semi-Annual Report in which such financial statements are first included shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial statements or information, in order to provide information to investors to enable them to evaluate the ability of the Major Developer to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section 4 hereof.

Section 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Developer from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Semi-Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Developer chooses to include any information in any Semi-Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Developer shall have

E-21 no obligation under this Disclosure Agreement to update such information or include it in any future Semi-Annual Report or notice of occurrence of a Listed Event.

Section 11. Default. In the event of a failure of the Developer or the Trustee to comply with any provision of this Disclosure Agreement, the Trustee may ( and, at the written direction of any Participating Underwriter or the holders of at least 25% aggregate principal amount of Outstanding Bonds, shall, upon receipt of indemnification reasonably satisfactory to the Trustee), or any holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Developer or the Trustee, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Developer or the Trustee to comply with this Disclosure Agreement shall be an action to compel performance.

Section 12. Duties, Immunities and Liabilities of Trustee and Dissemination Agent. The Dissemination Agent and the Trustee shall have only such duties hereunder as are specifically set forth in this Disclosure Agreement. The Developer agrees to indenmify and save each of the Trustee and the Dissemination Agent, and their respective officers, directors, employees and agents, hannless against any loss, expense and liabilities which it or they may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Trustee's or the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall have no responsibility for the preparation, review, form or content of any Semi-Annual Report or any notice of a Listed Event. No provision of this Disclosure Agreement shall require or be construed to require the Dissemination Agent to interpret or provide an opinion concerning any information disclosed hereunder. The Dissemination Agent may conclusively rely on the determination of the Developer as to the materiality of any event for purposes of Section 4 hereof. Neither the Trustee nor the Dissemination Agent make any representation as to the sufficiency of this Disclosure Agreement for purposes of the Rule. The Developer's obligations under this Section shall survive the termination of this Disclosure Agreement.

Section 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Developer, the Trustee, the Dissemination Agent, the Participating Underwriters and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.

Section 14. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

E-22 IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written.

VESTAR/KIMCO TUSTIN, L.P.

By: Vestar California XXX, L.L.C. Its: General Partner

By:~~~~~~~~~~~ Name:~~~~~~~~~~~~ Title: Manager

UNION BANK OF CALIFORNIA, N.A., AS TRUSTEE

Authorized Officer

UNION BANK OF CALIFORNIA, N.A., AS DISSEMINATION AGENT

Authorized Officer

E-23 EXHIBIT A

NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE SEMI-ANNUAL REPORT

Name oflssuer: City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center)

Name of Bond Issue: City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007 Date oflssuance: September _, 2007

NOTICE IS HEREBY GIVEN that Vestar/Kimco Tustin, L.P. (the "Developer") has not provided a Semi-Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement, dated as of September I, 2007, by and among the Developer and Union Bartle ofCalifomia, N.A., in its capacity as Trustee and in its capacity as Dissemination Agent. [The Developer anticipates that the Semi-Annual Report will be filed by .]

UNION BANK OF CALIFORNIA, N.A., as Trustee, on behalf of Vestar/Kimco Tustin, L.P.

cc: Vestar/Kimco Tustin, L.P. City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center)

E-24 APPENDIXF

BOOK-ENTRY ONLY SYSTEM

The following description of the procedures and record-keeping with respect to beneficial ownership interests in the Series 2007 Bonds, payment ofprincipal, interest and other payments on the Series 2007 Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in such Series 2007 Bonds, other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the following information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.

DTC will act as securities depository for the Series 2007 Bonds. The Series 2007 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered bond certificate for each maturity of the Series 2007 Bonds will be issued for the Series 2007 Bonds in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that its participants ("Direct Participants") deposit with DTC. DTC also facilitates post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U. S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation and Emerging Markets Clearing Corporation (NSCC, FICC and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange, LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of the Series 2007 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2007 Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2007 Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive

F-1 written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2007 Bonds are to be accomplished by entries made on the books of direct and indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Series 2007 Bonds is discontinued.

To facilitate subsequent transfers, all Series 2007 Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2007 Bonds with DTC and their registration in the name of Cede & Co. do not effect any change in beneficial ownership. DTC has no lmowledge of the actual Beneficial Owners of the Series 2007 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Redemption notices shall be sent to Cede & Co. If less than all of the Series 2007 Bonds within a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Series 2007 Bonds unless authorized by a Direct Participant in accordance with DTC 's procedures. Under its usual procedures, DTC mails an Onmibus Proxy to the issuer of securities registered to Cede & Co. as soon as possible after the record date. The Onmibus Proxy assigns Cede & Co.' s consenting or voting rights to those Direct Participants to whose accounts the Series 2007 Bonds are credited on the record date (identified in a listing attached to the Onmibus Proxy).

Principal, premium, if any, and interest payments with respect to the Series 2007 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail, information from the Community Facilities District on a payable date in accordance with their respective holdings shown on DTC records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of each Participant and not of DTC or its nominee, the Trustee, or the Community Facilities District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. ( or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Trustee, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.

F-2 DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, bond certificates are required to be printed and delivered.

NOTWITHSTANDING THE FOREGOING, THE TRUSTEE, AS LONG AS A BOOK­ ENTRY-ONLY SYSTEM IS USED FOR THE SERIES 2007 BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES ONLY TO CEDE & CO., OR ITS SUCCESSOR AS DTC'S PARTNERSHIP NOMINEE. ANY FAILURE OF CEDE & CO., OR ITS SUCCESSOR AS DTC'S PARTNERSHIP NOMINEE TO ADVISE ANY PARTICIPANT, OR OF ANY PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OR SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE SERIES 2007 BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.

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CITY OF TUSTIN • COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER) SPECIAL TAX BONDS, SERIES 2007

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