NEW ISSUE NOT RATED In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the City, 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 2013 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. In the further opinion of Bond Counsel, Interest on the Series 2013 Bonds Is not a specific preference item for purposes of the federal Individual or corporate alternative minimum taxes, although Bond Counsel obsen/es 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 2013 Bonds. See "LEGAL MATTERS-Tax li/latters." $26,000,000 CITY OF SAN MATEO COMMUNITY FACILITIES DISTRICT NO. 2008-1 (BAY MEADOWS) SPECIAL TAX BONDS, SERIES 2013 Dated: Date of Delivery Due: September 1, as shown on the inside cover Authority for Issuance. The bonds captioned above (tiie "Series 2013 Bonds") are being issued under the Mello-Roos Community Facilities Act of 1982 (the "Law"), the Resolution of Issuance (as defined in this Official Statement), and a First Supplemental TrustAgreement, dated as ofJanuary 1, 2013, which supplements a TrustAgreement, dated as ofJanuary 1, 2012 (as supplemented, the "TrustAgreement"), by and between the City of San IViateo (the "City"), with respect to Community Facilities District No, 2008-1 (Bay IVIeadows), City of San Mateo, County of San Mateo, State of Califomia (the "Community Facilities District" or "District") and The Bank of New York Mellon Trust Company, N,A,, as trustee (the "Trustee"), Bond Terms. Interest on the Series 2013 Bonds is payable on September 1, 2013 and semiannually thereafter on each March 1 and September 1 (each, an "Interest Payment Date"), The Series 2013 Bonds will be issued in denominations or integral multiples of $5,000. The Series 2013 Bonds, when deliyered, will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the Series 2013 Bonds. See "THE SERIES 2013 BONDS - General Bond Terms" and "APPENDIX E - DTC and the Book-Entry' Only System." The record date of the Series 2013 Bonds is the 15th day of the calendar month next preceding the applicable Interest Payment Date, See "THE SERIES 2013 BONDS - General Bond Terms - Payments of Interest and Principal." Redemption. The Series 2013 Bonds are subject to mandatory sinking fund redemption, mandatory redemption from Special Tax prepayments and optional redemption prior to their respective maturities. See "THE SERIES 2013 BONDS - Redemption." Security and Sources ofPayment. The Series 2013 Bonds are secured by and payable from the special taxes to be levied within the Community Facilities District (the "Special Taxes"), certain funds and accounts established to hold Special Tax proceeds under the TrustAgreement and any investment earnings on such funds and accounts. See "SECURITY FOR THE SERIES 2013 BONDS." Existing and Future Additional Obligations Secured by Special Tax Revenues. The Series 2013 Bonds are being issued on a parity with the City's bonds captioned "$31,800,000 City of San Mateo Community Facilities District No, 2008-1 (Bay Meadows) Special Tax Bonds, Series 2012," which are currently outstanding in their original principal amount (the "Series 2012 Bonds"), See "FINANCING PLAN," The TrustAgreement authorizes the issuance of additional bonds secured by a pledge of the same security as that pledged to the Series 2012 Bonds and Series 2013 Bonds, subject to certain conditions. See "SECURITY FORTHE SERIES 2013 BONDS-Additional Obligations Secured by Special Taxes," The City Council of the City acting under authority conferred by the Community Facilities District, acting through its eligible landowner voters, has authorized the issuance of bonds In an aggregate principal amount not to exceed $92 million. See "THE SERIES 2013 BONDS -Authority for Issuance," Use of Proceeds. The Series 2013 Bonds are being issued to (1) finance the acquisition and construction of certain public capital improvements and pay for certain development fees, (ii) fund an increase in the reserve fund for the "Bonds" (as defined in this Official Statement), (iii) pay capitalized interest on the Series 2013 Bonds through September 1, 2014, (Iv).pay the costs of issuing the Series 2013 Bonds and (v) fund certain costs of administering the Community Facilities District, See "FINANCING PLAN - Facilities to be Financed with Proceeds ofthe Series 2013 Bonds" and "- Estimated Sources and Uses of Funds," THE SERIES 2013 BONDS ARE LIMITED OBLIGATIONS OF THE CITY THEIR PRINCIPAL, PREMIUM, IFANY, AND INTEREST ARE SECURED BY AND PAYABLE SOLELY FROM THE SPECIAL TAXES AND THE OTHER AMOUNTS PLEDGED FOR THEM UNDERTHE TRUSTAGREEMENT NONE OF THE CITY, THE STATE, ORANY OF THEIR RESPECTIVE POLITICAL SUBDIVISIONS (EXCEPT THE CITY, TO THE LIMITED EXTENT PROVIDED IN THE TRUST AGREEMENT) WILL IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF OR PREMIUM (IF ANY) OR INTEREST ON THE SERIES 2013 BONDS OR FOR THE PERFORMANCE OF ANY PLEDGE, OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER RELATING TO THE SERIES 2013 BONDS, NONE OF THE SERIES 2013 BONDS OR ANY OF THE CITY'S AGREEMENTS OR OBLIGATIONS WILL BE CONSTRUED TO CONSTITUTE AN INDEBTEDNESS OF, A PLEDGE OF THE FAITH AND CREDIT OF OR A LOAN OF THE CREDIT OF THE CITY, THE STATE ORANY OF THEIR RESPECTIVE POLITICAL SUBDIVISIONS (EXCEPT THE CITY, TO THE LIMITED EXTENT PROVIDED IN THE TRUST AGREEMENT) WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORYPROVISION. .
MATURITY SCHEDULE (see inside cover)
This cover page contains certain information for quick reference only. It is nota summaryofthe issue. Potential investors should read the entire Official Statement to obtain information essential to making an informed investment decision regarding the Series 2013 Bonds. Investment in the Series 2013 Bonds involves a high degree of speculative risk that may not be appropriate for some Investors. See "BOND OWNERS' RISKS" for a discussion of special risk factors that should be considered in evaluating their investment quality. The Series 2013 Bonds are offered when, as and if issued by the City and accepted by the Undenwriter, subject to approval as to their iegallty by Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Bond Counsel to the City and subject to certain other conditions, Jones Hall, A Professional Law Corporation, San Francisco, California, is acting as disclosure counsel to the City Nossaman LLP is acting as counsel to the UndenA/riter. Certain legal matters will be passed on for the City by the City Attorney, It is anticipated that the Series 2013 Bonds, in book-entry form, will be available for delivery on or about January 30, 2013. STONE &YOUNGBERG A DIVISION OF STIFEL NICOLAUS
The date ofthis Official Statement is: January 17, 2013. MATURITY SCHEDULE
(BaseCUSIP:t79901P) $10,565,000 Serial Series 2013 Bonds
Maturity Principal Interest Maturity Principal Interest (September 1) Amount Rate Yield cusipt (September 1) Amount Rate Yield CUSIP"
2015 $ 145,000 3.000% 1,900% AS7 2025 $560,000 4,250% 4,250% BCI 2016 170,000 3.000 2,270 AT5 2026 615,000 4,250 4,375 BD9 2017 210,000 3,000 2,650 AU2 2027 675,000 5.000 4,300 C BE7 2018 240,000 3.000 2,900 AVO 2028 745,000 ,5,000 4,380 C BF4 2019 275,000 4.000 3.180 AWS 2029 820,000 5,000 4,450 C BG2 2020 315,000 4.000 3,380 M6 2030 895,000 4,500 4.670 BHO 2021 360,000 4.000 3,580 AY4 2031 970,000 4.625 4,730 BJ6 2022 400,000 4.000 3,800 AZ1 2032 1,060,000 5.000 4,650 C BK3 2023 455,000 4,000 3,950 C BA5 2033 1,150,000 5.000 4,680 C BL1 2024 505,000 4,000 4,100 BB3
$15,435,000 5,000% Term Bond due September 1, 2042, Price; 100,982%C CUSlpt No, 79901P BMO
C: Priced to the first optional par call date of September 1, 2022. + Copyright 2013, American Bankers Association, CUSIP data in this Official Statement is provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, inc, Neitherthe City nor the Undenwriter is responsible for the accuracy of the CUSIP data. CITY OF SAN IVIATEO
CITY COUNCIL
David Lim, Mayor Robert Ross, Deputy Mayor, Council Member Maureen Freschet, Council Member Brandt Grotte, Council tdember Jack Matthews, Council Member
CITY STAFF
Susan M. Loftus, City Manager Matt Bronson, Assistant City Manager Larry Patterson, Public Works Director David P. Culver, City Treasurer/Finance Director Patricia Olds, City Clerk Shawn Mason, City Attomey
PROFESSIONAL SERVICES
BOND COUNSEL Orrick, Herrington & Sutcliffe LLP San Francisco, California
DISCLOSURE COUNSEL Jones Hall, A Professional Law Corporation San Francisco, California
FINANCIAL ADVISORS William Euphrat Municipal Finance, Inc. San Francisco, California
Kitahata & Company San Francisco, California
SPECIAL TAX CONSULTANT David Taussig & Associates Newport Beach, California
APPRAISER Seevers Jordan Ziegenmeyer Rocklin, California
TRUSTEE The Bank of New York Mellon Trust Company, N.A, San Francisco, California GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
No Offering May Be Made Except by this Official Statement. Neither the City nor the Undenvriter has authorized any dealer, broker, salesperson or other person to give any information or to make any representations with respect to the Series 2013 Bonds other than as contained in this Official Statement, If given or made, such information or representation should not be relied upon as having been authorized by the City or the Underwriter.
No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation.
Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale ofthe Series 2013 Bonds will, under any circumstances, create any Implication that there has been no change in the affairs of the City, the Community Facilities District, or any other parties described in this Official Statement, or in the condition of property within the Community Facilities District since the date ofthis Official Statement.
Use ofthis Official Statement. This Official Statement is submitted in connection with the sale ofthe Series 2013 Bonds referred to in this Official Statement and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract with the purchasers of the Series 2013 Bonds,
Preparation of this Official Statement. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness.
The Underwriter has provided the following sentence for inclusion in this Official Statement; The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Undenwriter does not guarantee the accuracy or completeness of such information.
Document References and Summaries. All references to and summaries of the Trust Agreement or other documents contained in this Official Statement are subject to the provisions of those documents and do not purport to be complete statements of those documents.
Stabilization of and Changes to Offering Prices. The Underwriter may overallot or take other steps that stabilize or maintain the market price of the Series 2013 Bonds at a level above that which might othenwise prevail in the open market. If commenced, the Underwnter may discontinue such market stabilization at any time.
The offering prices shown on the inside cover page of this Official Statement are the prices at which the Series 2013 Bonds were initially offered to the public. The Underwriter may offer and sell the Series 2013 Bonds to certain dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page ofthis Official Statement, and those public offering prices may be changed from time to time by the Underwriter,
Series 2013 Bonds are Exempt from Securities Law Registration. The issuance and sale of the Series 2013 Bonds have not been registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exemptions for the issuance and sale of municipal securities provided under Section 3(a)(2) of the Securities Act of 1933, as amended, and Section 3(a)(12) ofthe Securities Exchange Act of 1934, as amended.
Estimates and Projections. Certain statements included or incorporated by reference in this Official Statement constitute "fonward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E ofthe United States Securities Exchange Act of 1934, as amended, and Section 27Aof the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as "plan,:' "expect," "estimate," "budget" or other similar words.
The achievement of certain results or other expectations contained in such fonward-looking statements involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The City does not plan to issue any updates or revisions to those forward-looking statements if or when any expectations, events, conditions or circumstances on which such statements are based occur,
Internet Website. The City maintains an Internet website, but the information on the website is not incorporated in this Official Statement, The Official Statement includes information about the owners of the taxable property in the Community Facilities District, the master developer and other affiliated entities, and the development manager of the property owner; one or more of those entities maintain Internet websites, but the information on those websites is not incorporated in this Official Statement, TABLE OF CONTENTS
Page Page
INTRODUCTION 1 Proposed Development by the Master FINANCING PLAN 7 Developer 52 Facilities to be Financed with Proceeds Master Developer's Financing Plan 55 ofthe Series 2013 Bonds '..7 Proposed Development by TRI Pointe Estimated Sources and Uses of Funds 7 Homes 57 Debt Service Schedule 8 Proposed Development by Shea Homes ..57 THE SERIES 2013 BONDS 9 Proposed Development by The Nueva General Bond Terms 9 School..... 57 Authority for Issuance 10 BOND OWNERS' RISKS.. 58 Redemption 11 Limited Obligation ofthe City to Pay Debt Transfer and Exchange of Bonds 13 Service 58 SECURITY FORTHE SERIES 2013 BONDS. 15 Levy and Collection ofthe Special Tax .....58 General... 15 Payment of Special Tax is not a Personal Levy and Collection of the Special Tax 15 Obligation of Property Owners 59 Additional Obligations Secured by Appraised Values 59 Special Taxes 16 Property Values and Property Rate and Method 18 Development 60 Covenant to Foreclose 23 Concentration of Property Ownership 62 Special Tax Fund 25 Other Possible Claims Upon the Value of Expense Fund 25 Taxable Property 63 Redemption Fund 26 Exempt Properties 63 Reserve Fund 26 Depletion of Reserve Fund 64 Limited Obligation. 27 Bankruptcy and Foreclosure Delays 64 No Acceleration 27 Disclosure to Future Purchasers 66 THECITY 27 No Acceleration Provisions 66 THE COMMUNITY FACILITIES DISTRICT 28 Loss of Tax Exemption 67 General 28 Voter Initiatives 67 Infrastructure Development 32 Proposition 218 68 Entitlements 34 Limitations on Remedies 69 Environmental Conditions 40 Absence of Secondary Market for the Direct and Overiapping Governmental Series 2013 Bonds 69 Obligations 41 LEGAL MATTERS 69 Appraised Property Value 44 Legal Opinions .69 Appraised Value to Burden Ratio 46 Tax Matters 70 Projected Debt Service Coverage 47 No Litigation 72 PROPERTY OWNERSHIP AND PROPOSED CONCLUDING INFORMATION 72 DEVELOPMENT 48 No Ratings 72 Property Ownership 48 Underwriting 72 Professional Fees 73
APPENDIXA - Amended and Restated Rate and Method of Apportionment for Community Facilities District No. 2008-1 (Bay Meadows), City of San Mateo, County of San Mateo, State of California APPENDIXB Appraisal APPENDIXG Summary of Trust Agreement APPENDIX D General Information About the City and the County of San Mateo APPENDIX E DTC and the Book-Entry Only System APPENDIX F Form of Issuer Continuing Disclosure Certificate APPENDIXG Form of Master Developer Continuing Disclosure Certificate APPENDIX H Form of Opinion of Bond Counsel Zb BAY MEADOWS PHASE ll PHASED MAPPING AND OVERALL LOT PLAN;
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$26,000,000 CITY OF SAN MATEO COMMUNITY FACILITIES DISTRICT NO. 2008-1 (BAYMEADOWS) SPECIAL TAX BONDS, SERIES 2013
INTRODUCTION
This introduction is not a summary of this Official Statement. It is only a brief descnption of and guide to, and is qualified by, more complete and detailed Information contained in the entire Official Statement, including the cover page and attached appendices, and the documents that it summarizes or describes. A full review should be made of the entire Official Statement. Unless othen/^jise Indicated, capitalized terms used but not defined in this Official Statement have the respective meanings ascribed to them in the Trust Agreement (as that term Is defined below).
4 This Official Statement, including the cover page and attached appendices, is provided to furnish information regarding the bonds captioned above (the "Series 2013 Bonds") to be issued by the City of San Mateo (the "City") under authority conferred by its Community Facilities District No. 2008-1 (Bay Meadows), City of San Mateo, County of San Mateo, State of California (the "Community Facilities District").
The City. The City of San Mateo (the "City") is situated in the County of San Mateo (the "bounty"), and is located approximately 19 miles south of San Francisco and 30 miles north of |an Jose. The City is also located approximately 5 miles south of the San Frandsco International Airport and served by three major freeways; north-south U.S. 101 (Bayshore Freeway), north-south Interstate 280 and east-west California State Route 92. The City.is sen/ed by Caltrain, which is a commuter rail service that runs between San Francisco and the City of Gilroy.
The City is a California chartered city with a Council/Manager form of government, and the policies ofthe City Council (the "City Council") are administered by a City Manager, who is appointed by the City Council. The City Council consists of five members who are elected at large on a non-partisan basis for four-year staggered terms. The Mayor is selected annually by the City Council.
Information with respect to the City, including financial information and certain economic and demographic information, is provided in "APPENDIX D - General Information About the City and the County of San Mateo."
The Community Faciiities District. The Community Facilities District was established by the City Coundl under the Mello-Roos Community Facilities Act of 1982, as amended (the "Law"), pursuant to (i) its Resolution No. 85 (2008) adopted on August 11, 2008, following a public hearing, and (ii) a landowner election held on August 11, 2008, at which the then- qualified electors of the Community Facilities District authorized the Community Facilities District to incur bonded indebtedness and approved the levy of special taxes. See "THE SERIES 2013 BONDS - Authority for Issuance." The City undertook certain change proceedings to amend the original rate and method of apportionment of special tax and lower the authorized amount of bonded indebtedness forthe Community Facilities District, which were approved by the qualified electors at an election held on November 21, 2011, and a Resolution of Change adopted by the City Coundl on November 21, 2011.
The Community Fadlities District was formed to finance the acquisition and construction of certain public capital improvements and pay certain development fees necessaty for the proposed development within its boundaries.
The Community Facilities District consists of 49.978 net taxable acres (83.3 gross acres) that are entitled for mixed-use development. The property is a portion of the former Bay Meadows thoroughbred racetrack. See 'THE COMMUNITY FACILITIES DISTRICT."
Proposed Development. The land contained in the Community Fadlities District is entitled and currently planned for the following development (subject to change as described in this Official Statement);
• Residential: Entitled for 1,250 residential units and currentiy planned for 1,066 residential units. Ten percent of the residential units to be developed by "for profit" developers must be below-market rental or for-sale units ("BMR Units"); under the Development Agreement, the BMR Units must be constructed at approximately the same time as the market-rate units on a given block. Of the 1,066 planned residential unite: (i) 832 units are planned for development on residential parcels and (ii) 234 units are planned for development on mixed-use parcels. In addition, from 50 to 68 units are planned for development by the City, or a developer selected by the City, as below-market rental units on a 1-acre parcel; they are not subject to the Special Tax.
• Commercial; Entitled for 1,250,000 square feet of commerdal office space. Currently planned for 770,000 rentable square feet in five dass A office buildings and 31,500 square feet of professional space above ground floor retail. In addition, an approximately 135,000-square foot high school campus is planned on a site approved for up to 200,000 square feet of commercial. The school has obtained the City's Site Plan and Architectural Review approval. See "PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT - Proposed Development by The Nueva School."
• Retail; Entitled for 150,000 square feet of retail space, and currently planned for 85,000 square feet of retail. See 'THE COMMUNITY FACILITIES DISTRICT - Entitlements - Entitlement Status" for a description of certain conditions that will impact the timing of retail development.
The proposed development also includes approximately 16 acres of public streets and a public park system of approximately 15 acres, with individual parks ranging from 1.5 to 12 acres. For more information, see 'THE COMMUNITY FACILITIES DISTRICT - General" and "- Entitlements." No assurance can be given that development will occur as and when expected or under the current ownership. Authority for Issuance of the Series 2013 Bonds. The Series 2013 Bonds are issued pursuant to the following (see "THE SERIES 2013 BONDS - Authority for Issuance");
• the Law;
• certain resolutions adopted by the City Council, including the Resolution of Issuance adopted on January 7, 2013 (the "Resolution of Issuance"); and
• a First Supplemental Trust Agreement, dated as of January 1, 2013, which supplements a Trust Agreement, dated as of January 1, 2012 (as supplemented, the 'Trust Agreement"), by and between the City and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee").
The City Council, under authority conferred by the Community Facilities District, acting through its eligible landowner voters, has authorized the issuance of notto exceed $92 million of bonded indebtedness in the Community Facilities District. After issuing the City of San Mateo Community Fadlities District No. 2008-1 (Bay Meadows) Spedal Tax Bonds, Series 2012, which are currently outstanding in the amount of $31,800,000 (the "Series 2012 Bonds"), the City has remaining authority to issue $60,200,000 of bonded indebtedness.
Purpose of the Series 2013 Bonds. Proceeds of the Series 2013 Bonds will be used primarily to finance the acquisition and construction of certain public capital improvements to be owned and operated by the City and pay certain development fees that are necessary for the development of the Community Facilities District. Bond proceeds will also be used to fund an increase in the reserve fund for the "Bonds" (as defined in this Official Statement), pay capitalized interest on the Series 2013 Bonds, pay the costs of issuing the Series 2013 Bonds and fund certain costs of administering the Community Facilities District. See "FINANCING PLAN - Fadlities to be Financed with Proceeds of the Series 2013 Bonds" and "- Estimated Sources and Uses of Funds."
Security and Sources of Payment for the Series 2013 Bonds. Pursuant to the Trust Agreement, the Series 2013 Bonds are secured by and payable from the special taxes to be levied within the Community Facilities District (the "Special Taxes"), certain funds and accounts established to hold Spedal Tax proceeds under the Trust Agreement, and any investment earnings on such funds and accounts.
The City is only obligated to pay the Series 2013 Bonds from the proceeds ofthe Special Tax and the funds and accounts held by the Trustee under the Trust Agreement and pledged to the Series 2013 Bonds.
The Spedal Taxes will be levied within the Community Facilities District in accordance with the Amended and Restated Rate and Method of Apportionment for the Community Fadlities Distrid (the "Rate and Method"). See "SECURITY FOR THE SERIES 2013 BONDS."
The capital improvements financed with the proceeds of the Bonds are not in any way pledged as security for the Series 2013 Bonds.
The City has covenanted in the Trust Agreement to caUse foreclosure proceedings to be commenced and prosecuted against certain parcels with delinquent installments ofthe Special Tax. For a more detailed description of that covenant, see "SECURITY FOR THE SERIES 2013 BONDS - Covenant to Foreclose." Existing and Future Additional Obligations Payable From Special Tax Revenues. The Series 2013 Bonds are being issued on a parity with the Series 2012 Bonds. The Trust Agreement authorizes the City to issue additional bonds secured by the same security as that pledged to the Series 2012 Bonds and the Series 2013 Bonds, subjectto certain conditions (see "SECURITY FOR THE SERIES 2013 BONDS - Additional Obligations Secured by Spedal Taxes").
Property Ownership. When the Series 2012 Bonds were issued, all 83.3 gross acres of the property in the Community Facilities District were owned by Bay Meadows Main Track Investors, LLC, a limited liability company formed in the State of Delaware and registered to do business in California (the "Master Developer"). The Master Developer is owned by Bay Meadows Land Company, LLC, which is owned by Stockbridge Real Estate Fund, LP. The general partner of Stockbridge Real Estate Fund, LP, is Stockbridge Capital Partners, LLC, an affiliate of Stockbridge Capital Group, LLC. Stockbridge Capital Group, LLC, is a real estate investment management firm and registered investment advisor founded in 2003.
The Master Developer currently owns 78.44 acres, or 94%, of the original property. Shea Homes, Inc. ("Shea Homes"), purchased 1.82 acres for construction of 43 townhomes on April 27, 2012. It also has an option to purchase 1.91 additional acres for the construction of 50 townhomes, which is scheduled to close in April 2013. TRI Pointe Homes, LLC ("TRI Pointe Homes") purchased 3.04 acres, for construction of 63 townhomes, on April 10, 2012.
The Nueva School, a not-for-profit independent pre-kindergarten to 8th grade school located in Hillsborough, California, purchased MU 1 on Januaty 23, 2013. It plans to build a new high school campus on 2.75 acres of the parcel; the remaining acre of MUl is subject to a recorded offer of dedication to the City and may not be utilized by the school. See "THE COMMUNITY FACILITIES DISTRICT - Entitlements - Entittement Status - Design Review" and "PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT - Proposed Development by The Nueva School." The Nueva School's purchase occurred after January 17, 2013, the date on which the City and Underwriter entered into the bond purchase contract for the Series 2013 Bonds (and the date ofthis Official Statement), but before the delivery date ofthe Series 2013 Bonds. This Official Statement reflects the occurrence of The Nueva School's purchase, but in all other respects provides information dated January 17, 2013.
Redemption of Series 2013 Bonds Before Maturity. The Series 2013 Bonds are subject to mandatoty sinking fund redemption, extraordinary redemption from Spedal Tax prepayments and optional redemption. See "THE SERIES 2013 BONDS - Redemption."
Appraisal. An appraisal of the Taxable Property within the Community Facilities District, dated December 14, 2012 (the "Appraisal"), was prepared by Seevers Jordan Ziegenmeyer (the "Appraiser") in connection with issuance of the Series 2013 Bonds. The purpose of the Appraisal was to estimate the market value of the fee simple estate of the property within the Community Fadlities District that is subject to the Spedal Tax, i.e., the "Taxable Property" as defined in the Rate and Method. The Appraiser conduded thatthe market value of such fee simple estate as of November 15, 2012, was $269,690,000.
See 'THE COMMUNITY FACILITIES DISTRICT - Appraised Property Value" and "APPENDIX B - Appraisal" for further information about the Appraisal. The City makes no representation as to its accuracy or completeness. Risk Factors Associated with Purchasing the Series 2013 Bonds. Investment in the Series 2013 Bonds involves risks that may not be appropriate for some investors. See "BOND OWNERS' RISKS" for a discussion of certain risk factors that should be considered in determining the investment quality of the Series 2013 Bonds.
Professionals Involved in the Offering. The following professionals are participating in this financing;
• Orrick, Herrington & Sutdiffe LLP, San Francisco, California, is serving as Bond Counsel to the City.
• Jones Hall, A Professional Law Corporation, San Francisco, California, is acting as Disclosure Counsel to the City.
• Nossaman LLP is acting as counsel to the Undenwriter.
• William Euphrat Municipal Finance, Inc., San Francisco, California, and Kitahata & Company, San Francisco, California, are serving as financial advisors to the City.
• The Bank of New York Mellon Trust Company, N.A., San Francisco, California, will serve as the trustee forthe Series 2013 Bonds and will perform the functions required of it under the Trust Agreement.
» Seevers Jordan Ziegenmeyer, Rocklin, California, prepared the Appraisal.
' David Taussig & Associates, Newport Beach, California, acted as special tax consultant to the City and will act as initial administrator to the City in connection with annual Special Tax levies, and as dissemination agent for the City under the Issuer Continuing Disclosure Certificate described below.
Continuing Disclosure
The City. The City will covenant in a continuing disclosure certificate, the form ofwhich is set forth in "APPENDIX F - Form of Issuer Disclosure Certificate" (the "Issuer Continuing Disclosure Certificate"), for the benefit of holders and beneficial owners of the Series 2013 Bonds, to provide certain financial information and operating data relating to the Community Facilities District and the Series 2013 Bonds (the "Issuer Annual Report") by not later than nine months after the end of the City's fiscal year, resulting in a deadline of March 31 of each year, beginning with an initial deadline of March 31, 2013. The Issuer Continuing Disdosure Certificate also requires the City to provide notices of the occurrence of certain enumerated events. The initial Dissemination Agent under the Issuer Continuing Disclosure Certificate will be David Taussig & Associates.
The covenants of the City in the Issuer Continuing Disclosure Certificate will be made in order to assist the Underwriter to comply with Rule 15c2-12(b)(5) promulgated under the Securities Exchange Act of 1934, as amended (the "Rule").
A default under the Issuer Continuing Disdosure Certificate will not, by itself, constitute an Event of Default under the Trust Agreement, and the sole remedy under the Issuer Continuing Disdosure Certificate in the event of any failure of the City or the Dissemination Agent to comply will be an action to compel specific performance.
The City has not failed to comply, in any material respect, with an undertaking under the Rule in the past five years, except as follows;
» With respect to the City's 2011 annual report filing, the City sent a continuing disclosure report that consolidated all required continuing disdosure for its general obligation bonds. Joint Powers Financing Authority revenue bonds, sewer revenue bonds and redevelopment agency tax allocation bonds to its dissemination agent for filing. While the dissemination agent filed this report properiy for the City's general obligation bonds. Joint Powers Finandng Authority revenue bonds, and sewer revenue bonds, the report was not filed in connection with the redevelopment agency tax allocation bonds.
' Various notices of rating changes for several City bond issues, constituting material events, were not timely filed.
All the required filings have now been made to the Munidpal Securities Rulemaking Board's Electronic Municipal Market Access.
Master Developer. The Master Developer will covenant in a continuing disclosure certificate, the form of which is set forth in "APPENDIX G - Form of Master Developer Continuing Disdosure Certificate" (the "Master Developer Continuing Disclosure Certificate"), for the benefit of holders and beneficial owners of the Series 2013 Bonds, to provide (i) on a semi-annual basis, certain information relating to itself and the parcels it owns within the Community Fadlities District (each a "Master Developer Periodic Report"), and (ii) notices of the occurrence of certain enumerated events. The Master Developer will initially act as its own dissemination agent under the Master Developer Continuing Disdosure Certificate.
The obligations of the Master Developer under the Master Developer Continuing Disclosure Certificate will terminate on the eariier of (i) legal defeasance, prior redemption or payment in full of all the Series 2013 Bonds, (ii) the date on which its property in the Community Facilities District is no longer responsible for 10% or more of the annual Spedal Tax levy, (iii) the date on which the Master Developer prepays in full all the Spedal Taxes attributable to its property in the Community Facilities District or (iv) the date on which (A) the Master Developer completes construction of all buildings expected to be constructed within property it owns in the Community Facilities District and (B) each such building constructed and intended for lease by the Master Developer has been, since completion of construction, at least 80% occupied at one time or another.
A default under the Master Developer Continuing Disdosure Certificate will not, by itself, constitute an Event of Default under the Trust Agreement, and the sole remedy under the Master Developer Continuing Disdosure Certificate in the event of any failure of the Master Developer or the Dissemination Agent to comply will be an action to compel specific performance. The City has no obligation to enforce the continuing disclosure undertaking of the Master Developer.
An authorized representative of the Master Developer has represented, to its actual knowledge, that it is not aware of any material failures by the Master Developer or any affiliate of the Master Developer to comply with previous undertakings to provide periodic continuing disclosure reports or notices ofthe occurrence of enumerated events within the last five years.
FINANCING PLAN
Facilities to be Financed with Proceeds ofthe Series 2013 Bonds
Pursuant to the Resolution of Formation adopted by the City Council of the City on August 11, 2008, the Community Facilities District is authorized to flnance a variety of public capital improvements and pay certain development fees with proceeds of the Series 2013 Bonds, induding the improvemente described under 'THE COMMUNITY FACILITIES DISTRICT - Infrastructure Development" (the "Facilities"), all of which will be acquired by the City.
The City previously flnanced the acquisition of certain Facilities using a portion of the proceeds of the Series 2012 Bonds. The proceeds of the Series 2013 Bonds will be primarily used to flnance the acquisition of certain additional Facilifles.
Estimated Sources and Uses of Funds
The esflmated proceeds from the sale of the Series 2013 Bonds, as indicated below, will be deposited into the following funds established under the Trust Agreement, as described below;
SOURCES
Prindpal Amount ofSeries 2013 Bonds $26,000,000.00 Plus: Net Original Issue Premium 330,467.10 Less: Underwriter's Discount 233,800.00 Total Sources $26,096,667.10
USES
Deposit into Reserve Fund (1) $2,257,624.06 Deposit into Redemption Fund (2) 1,974,192.85 Deposit into Costs of Issuance Account (3) 275,000.00 Deposit into Acquisition and Construction Fund 21,584,850.19 Deposit into Expense Fund 5,000.00 Total Uses $26,096,667.10
(1) Equal to the increase in the Required Bond Reserve resulting from the Issuance of the Series 2013 Bonds, (2) Deposit represents capitalized interest on the Series 2013 Bonds through September 1, 2014, (3) Includes, among other things, the fees and expenses of Bond Counsel and Disclosure Counsel; the Financial Advisors' fees; the cost of printing the Preliminary Official Statement and Final Official Statement; fees and expenses of the Trustee; the cost of the Appraisal; and the fees of the Special Tax Consultant, Debt Service Schedule
The following table presents the annual debt service on the Series 2012 Bonds and the Series 2013 Bonds (induding sinking fund redemptions), assuming there are no opflonal redempflons or special mandatory redemptions from Special Tax prepayments.
Table 1 Scheduled Debt Service
Series 2012 Bonds Series 2013 Bonds Grand Year Ending Total September 1 Principal Interest <^* Total Principal Interest '^' Tofal Debt Service 2013 - $1,847,325,00 $1,847,325,00 - $ 729.517.85 $ 729,517.85 $2,576,842,85 2014 $65,000 1,847,325,00 1,912,325,00 - 1.244.675,00 1,244,675.00 3,157,000,00 2015 65,000 1,845,537,50 1,910,537.50 $ 145,000 1.244.675,00 1,389,675.00 3,300,212,50 , 2016 100,000 1,843,506,26 1,943,506.26 170,000 1.240.325,00 1,410,325.00 3,353,831,26 2017 140,000 1,840,131,26 1,980,131,26 210,000 1,235,225,00 1,445,225,00 3,425,356,26 2018 185.000 1,834,881,26 2,019.881,26 240,000 1,228,925,00 1,468,925,00 3,488,806,26 2019 235,000 1,827,481.26 2,062,481,26 275,000 1,221,725,00 1,496,725,00 3,559.206,26 2020 280,000 1,817,787,50 2,097,787,50 315,000 1,210,725,00 1,525,725.00 3,623,512,50 2021 335,000 1,805.537.50 2,140,537,50 360,000 1,198,125.00 1.558.125,00 3,698,662,50 2022 395,000 1,790,462.50 2,185,462.50 400,000 1,183,725,00 1.583,725,00 3,769,187,50 2023 460,000 1.771,700.00 2,231,700.00 455.000 1,167,725,00 1,622,725.00 3,854,425,00 2024 525,000 1,748,700,00 2,273,700,00 505.000 1,149,525.00 1.654.525.00 3,928,225.00 2025 600,000 1,721,793,76 2,321,793,76 560,000 1,129,325,00 1.689.325,00 4,011,118,76 2026 675,000 1,690,293,76 2,365,293.76 615,000 1,105,525,00 1,720,525,00 4,085,818,76 2027 755,000 1,654,012,50 2,409,012.50 675,000 1,079,387,50 1,754,387,50 4,163,400,00 2028 845,000 1,612.487,50 2,457,487.50 745,000 1,045,637,50 1,790,637,50 4,248,125.00 2029 945,000 1,562,843,76 2,507,843.76 820,000 1,008,387,50 1,828,387,50 4,336,231,26 2030 1,055,000 1,507.325,00 2,562,325.00 895,000 967,387.50 1.862,387.50 4,424,712,50 2031 1,160,000 1,445,343,76 2,605.343,76 970,000 927,112,50 1,897,112.50 4,502,456,26 2032 1,285,000 1,377.193.76 2.662.193,76 1,060,000 882,250,00 1,942,250.00 4.604,443,76 2033 1,415,000 1,301.700,00 2,716.700,00 1,150,000 829,250,00 1,979,250.00 4.695.950,00 2034 1,555,000 1,216,800,00 2,771,800,00 1.245.000 771,750.00 2,016.750.00 4,788,550,00 2035 1,705,000 1,123,500,00 2,828,500,00 1.350.000 709.500.00 2,059,500,00 4,888,000,00 2036 1,860,000 1,021.200,00 2,881,200,00 1,455,000 642.000,00 2,097,000.00 4.978,200,00 2037 2,035.000 909.600,00 2,944,600,00 1,570.000 569.250.00 2,139,250.00 5.083.850,00 2038 2,215.000 787.500,00 3,002.500,00 1.695.000 490,750.00 2,185,750.00 5.188.250,00 2039 2.405.000 654.600.00 3.059.600,00 1,825,000 406.000,00 2,231,000.00 5.290,600,00 2040 2,610,000 510,300,00 3,120,300,00 1,955,000 314.750.00 2,269.750,00 5,390,050,00 2041 2,830,000 353,700,00 3,183,700.00 2,095,000 217.000,00 2,312,000,00 5,495,700,00 2042 3.065,000 183.900.00 3,248,900,00 2,245,000 112,250,00 2,357,250,00 5,606,150.00 Total $31,800,000 $26,000,000
(1) Interest on the Series 2012 Bonds through September 1, 2013, was capitalized with a portion of their proceeds. Interest on the Series 2013 Bonds through September 1. 2014, will be capitalized with a portion of their proceeds. THE SERIES 2013 BONDS
General Bond Terms
Dated Date, Maturity and Authorized Denominations. The Series 2013 Bonds will be dated their date of delivety and will mature in the amounts and on the dates set forth on the inside ofthe cover page of this Official Statement. The Series 2013 Bonds will be issued in fulfy registered, book-entty onfy form, in denominaflons of $5,000 each or any integral mulflple of $5,000.
Interest. The Series 2013 Bonds will bear interest at the annual rates set forth on the inside of the cover page of this Offidal Statement, payable semiannually on each March 1 and September 1, commendng September 1, 2013 (each, an "Interest Payment Date"). Interest will be calculated on the basis of a 360-day year composed of twelve 30-day months.
DTC and Book-Entry Only System. DTC will act as securities depository for the Series 2013 Bonds. The Series 2013 Bonds will be issued as fully-registered securities registered iniflaify in the name of Cede & Co. (DTC's partnership nominee). See "APPENDIX E - DTC and the Book-Entty Only System." References in this Official Statement to the owners or holders of the Series 2013 Bonds means DTC, and not the beneficial owners ofthe Series 2013 Bonds.
Payments of Interest and Principal. For so long as DTC is used as depository for the Series 2013 Bonds, prindpal, premium, if any, and interest payments on the Series 2013 Bonds will be made solely to DTC or its nominee. Cede & Co., as registered owner of the Series 2013 Bonds, for distribution to the beneflcial owners of the Series 2013 Bonds in accordance with the procedures adopted by DTC.
Each Series 2013 Bond will bear interest from the Interest Payment Date next preceding its date of authenflcaflon, unless it is authenflcated on a day (i) during the period from the 16th d% of the calendar month next preceding an Interest Payment Date to such Interest Payment Date, both days inclusive, in which event it will bear interest from such Interest Payment Date, or (ii) on or before the 15th day ofthe month preceding the flrst Interest Payment Date, in which event it will bear interest from its date; provided, that if at the time of authenflcaflon of any Series 2013 Bond interest is then in default on the Series 2013 Bond, the Series 2013 Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment of interest on the Series 2013 Bond.
During any period in which the Series 2013 Bonds are not subject to DTC's book-entry system, payment of interest on the Series 2013 Bonds due on or before the maturity or prior redempflon thereof will be made onfy to the Holder whose name appears in the registration books required to be kept by the Trustee pursuant to the Trust Agreement at the close of business as ofthe 15th day ofthe calendar month preceding the month in which the applicable Interest Payment Date falls (referred to on the cover of this Official Statement as the "record . date"), such interest to be paid by check mailed by flrst dass mail on each such Interest Payment Date to such registered owner at his address as it appears on such books, except that in the case of a Holder of $1,000,000 or more in principal amount of Series 2013 Bonds then Outstanding, payment will be made at such Holder's option by wire transfer on any Interest Payment Date of immediately available funds to an account in a bank or trust company or savings bank that is a member of the Federal Reserve System and that is located in.the United States of America according to written instructions provided by such Holder to the Trustee at toast 15 days before each such Interest Payment Date. Payment of the prindpal of and redempflon premiums, if any, on the Series 2013 Bonds will be made only to the Holder whose name appears in the registraflon books required to be kept by the Trustee pursuant to the Trust Agreement, such prindpal and redemption premiums, if any, to be paid only on the surrender of the Series 2013 Bonds at the Principal Corporate Trust Office of the Trustee at maturity or on redemption prior to maturity.
Authority for Issuance
Community Facilities District Proceedings. The Series 2013 Bonds are issued pursuant to the Law, the Resoluflon of Issuance and the Trust Agreement. As required by the Law, the City Council of the City has taken the following acflons with respect to establishing the Community Fadlifles District and authorizing issuance of the Series 2013 Bonds;
Resolutions of Intention: On June 16, 2008, the City Coundl adopted Resolution No. 59 (2008) stating its intenflon to establish the Community Facilifles District and authorize the levy of a special tax in the Community Facilifles District to flnance the acquisition and construcflon of public fadlifles and certain governmental development fees. On June 16, 2008, the City Coundl adopted Resoluflon No. 60 (2008) staflng its intenflon to incur bonded indebtedness in the Community Facilifles District, induding an amount not to exceed $120 million, to flnance the acquisiflon and construction of public facilities and certain governmental development fees.
Resolution of Formaflon; Following a noticed public hearing on August 11, 2008, the City Council adopted Resolution No. 85 (2008) (the "Resolution of Formation") on the same date, which established the Community Fadlities District and, subject to the approval ofthe qualifled electors ofthe Community Facilities District, authorized the levy of a special tax within the Community Facilities District.
Resolution of Necessity: On August 11, 2008, the City Council adopted Resolution No. 86 (2008), dedaring the necessity to incur bonded indebtedness in an aggregate amount not to exceed $120 million for the Community Fadlities District
Landowner Election and Dedaration of Results; On August 11, 2008, an election was held within the Community Facilities District in which the then-qualifled electors approved a ballot proposition authorizing the Community Fadlities District to incur bonded indebtedness, induding an amount not to exceed $120 million, and the levy of a spedal tax. On the same date, the City Council adopted Resolution No. 88 (2008), pursuant to which the City Council approved the canvass ofthe votes.
Spedal Tax Lien and Levy: A Noflce of Special Tax Lien encumbering property in the Community Facilities District was recorded in the real property records of the County on August 15, 2008, as Document No. 2008-093410.
Ordinance Levying Special Taxes; On September 2, 2008, the City Council, acting under the authority conferred by the Community Facilities District, adopted Ordinance No. 2008-13 levying the Special Tax within the Community Facilifles District beginning with flscal year 2009-10.
10 Change Proceedings; Following formaflon of the Community Fadlifles District, the City undertook the following change proceedings in order to (i) amend the rate and method of apportionment of special tax and (ii) decrease the maximum principal amount of authorized bonded indebtedness for the Community Facilities District to $92 million;
Resolution of Consideration: On October 3, 2011, the City Coundl adopted Resolution No. 113 (2011), dedaring the City's intent to undertake change proceedings.
Resolution Calling Special Election: Immediately following a noticed public hearing, on November 21, 2011,. the City Council adopted Resoluflon No. 140 (2011), calling an election by the qualifled electors within the Community Facilifles District for the same date on the proposed changes.
Resolution of Change: On November 21, 2011, an election was held within the Community Facilifles District in which the qualifled landowner electors within the Community Fadlifles District approved a ballot proposition authorizing the proposed changes. On the same date, the City Coundl adopted Resolution No. 141 (2011) under which the City Council approved the canvass of the votes and dedared the proposed changes effective.
Amended Notice of Special Tax Lien: An Amended Noflce of Special Tax Lien was recorded in the real property records of the County of San Mateo on December 6, 2011, as Document No. 2011-148721 CONF.
Ordinance Levyina Special Taxes: On January 3, 2012, the City Coundl adopted Ordinance No. 2012-1 levying the Special Tax within the Communities Facilities District according to the Rate and Method beginning with flscal year 2012- 13.
Resolution Authorizing Issuance ofthe Series 2013 Bonds: On January 7, 2013, the City Council adopted Resolution No. 11 (2013) approving the issuance ofthe Series 2013 Bonds.
City's Goals and Policies. As required by the Law, on June 16, 2008, the City adopted "local goals and polides" pursuant to Resolution No. 58. The City has determined that issuance ofthe Series 2013 Bonds conforms with the local goals and polides.
Redemption
Mandatory Sinking Fund Redemption. The Series 2013 Bonds maturing on September 1, 2042, are subject to mandatory sinking fund redempflon on the dates and in the amounts as set forth in the following schedule (except that if any Series 2013 Bonds maturing on September 1, 2042, are redeemed prior to those dates as described in "Redemption from Special Tax Prepayments" or "Optional Redempflon" below, the amounts of the 2042 Mandatory Sinking Account Payments will be reduced proportionately by the prindpal amount of all such Series 2013 Bonds so redeemed).
11 Series 2013 Bonds Maturing on September 1, 2042
Payment Minimum Date Sinking Account (SeDtemberl) Account Pavment 2034 $1,245,000 2035 1,350,000 2036 1,455,000 2037 1,570,000 2038 1,695,000 2039 1,825,000 2040 1,955,000 2041 2,095,000 2042* 2,245,000
*Maturity Date.
The Series 2013 Bonds that are subject to mandatory sinking fund redemption (the 'Term Series 2013 Bonds") are subject to purchase in lieu of redempflon as described in the Trust Agreement. See Appendix C.
Redemption from Special Tax Prepayments. The Series 2013 Bonds are subject to redempflon as a result of property owner prepayments of toe Special Tax obligation prior to their respective maturity dates as a whole or in part on any date solely from money derived by the City from prepayments ofthe Special Tax underthe Law, upon mailed noflce as provided in the Trust Agreement, at the following redemption prices (computed upon the prindpal amount ofthe Bonds or portions thereof called for redemption) together with accrued interest to the date of redempflon;
102% if redeemed on any date prior to or on September 1, 2022; and
100% if redeemed on any date after September 1, 2022, and prior to maturity.
Optional Redemption. The Series 2013 Bonds are not subject to optional redemption prior to September 1, 2022. Thereafter, the Series 2013 Bonds are subject to opflonal redemption by the City prior to their respective maturity dates as a whole or in part on any date from money derived by the City from any source other than Mandatory Sinking Account Payments or property owner prepayments of the Special Tax obligaflon, upon mailed notice as provided in the Trust Agreement, at a redemption price of 100% of the principal amount of the Bonds or portions thereof called for redemption, without premium, togetherwith accrued interest to the date of redemption.
Selection of Bonds for Redemption. If less than all the Outstanding Series 2013 Bonds are to be redeemed at any one time pursuant to the Trust Agreement, then the City will give instructions in writing at least 45 days prior to the date fixed for redemption, in which it will select the maturity dates from which the Series 2013 Bonds will be redeemed in such a manner as to attain, as nearly as possible, an equally proportional Debt Service reduction in each year; and if less than all the Outstanding Series 2013 Bonds of any one maturity date are to be redeemed at any one time, the Trustee will select the Series 2013 Bonds or the portions thereof of such maturity date to be redeemed in integral multiples of $5,000 by lot in any manner that it deems appropriate.
12 Notice of Redemption. The Trustee will mail by flrst class mail a notice of redemption, not less than 30 days nor more than 60 days prior to the date fixed for redempflon, and OthenA/ise pursuant to the Trust Agreement, to the respective Holders of all Series 2013 Bonds selected for redemption in whole or in part and to all securities depositories and securities information services selected by the City to comply with custom or the rules of any securities exchange or commission or brokerage board or othenwise as may be determined by the City in its sole discretion and to the original undenwriter ofthe Series 2013 Bonds, but neither failure to receive any such mailed notice nor any immaterial defect contained therein will affect the sufficiency or validity of any such proceedings for redemption. Upon written direction of the City, the Trustee will rescind, cancel and annul a noticed redemption by giving notice of the resdssion, cancellation and annulment at least 7 days prior to the redemption date.to the same persons and in the same manner as the original redemption notice.
Partial Redemption of Bonds. Upon surrender of any Series 2013 Bond redeemed in part only, the City will execute and the Trustee will authenticate and deliver to the registered owner of that Bond at the expense of the City a new Series 2013 Bond or Series 2013 Bonds of the same maturity date and of authorized denominations equal in aggregate prindpal amount to the unredeemed portion of the Bond surrendered.
Effect of Redemption of Series 2013 Bonds. If notice of redemption has been duly given as provided above, and has not been rescinded as provided above, and money for the payment of the prindpal of and redemption premiums, if any, on, together with interest to the redemption date on, the Series 2013 Bonds or portions thereof so called for redemption is held by the Trustee, then on the redempflon date designated in such notice such Series 2013 Bonds or such portions thereof will become due and payable, and from and after the date so designated interest on the Series 2013 Bonds or such portions thereof so called for redemption will cease to accrue, and the holders ofsuch Series 2013 Bonds will have no rights in respect thereof except to receive payment of the principal or such portions thereof and the redemption premiums, if any, and the interest accrued to the redemption date.
Transfer and Exchange of Bonds
The following provisions regarding the exchange and transfer of the Series 2013 Bonds apply only during any period in which the Senes 2013 Bonds are not subject to DTC's book- entry system. While the Series 2013 Bonds are subject to DTC's book-entry system, their exchange and transfer will be effected through DTC and the Participants and will be subject to the procedures, rules and requirements established by DTC. See "APPENDIX E- DTC and the Book-Entry Only System."
The Trustee will keep at its Principal Corporate Trust Office sufficient books for the transfer and exchange of the Series 2013 Bonds, which books will at all times during normal business hours with reasonable prior notice be open to inspection by the City or by any Holder. Any Series 2013 Bond may, in accordance with its terms, be transferred or exchanged on such books by the person in whose name it is registered, in person or by his duly authorized attorney, upon payment by the Holder requesting such transfer or exchange of any tax or other governmental charge required to be paid with respect to such transfer or exchange and upon surrender of such Series 2013 Bond for cancellation accompanied by delivery of a duly executed written instrument of transfer or exchange in a form acceptable to the Trustee.
13 Whenever any Series 2013 Bond or Series 2013 Bonds will be surrendered for transfer or exchange, the City will execute and the Trustee will authenticate and deliver a new Series 2013 Bond or Series 2013 Bonds ofthe same maturity date and of authorized denominations for the same aggregate principal amount, except that neither the City nor the Trustee will be required (i) to transfer or exchange any Series 2013 Bonds during the 15-day period prior to the selection of any Series 2013 Bonds for redemption under the Trust Agreement, or (ii) to transfer or exchange any Series 2013 Bond which has been selected for redemption in whole or in part, except the unredeemed portion of such Series 2013 Bond selected for redemption in part, from and after the day that such Series 2013 Bond has been selected for redemption in whole or in part under the Trust Agreement.
14 SECURITY FORTHE SERIES 2013 BONDS
General
Except for money held in the Acquisition and Construction Fund, the Prepayment Fund, the Services Fund, the Expense Fund, the Surplus Fund and the Rebate Fund, all the Special Taxes, all funds and accounts established to hold Special Tax proceeds under the Trust Agreement, and any investment earnings on such funds and accounts, are pledged to, and will constitute a trust fund for, the payment of the principal of and interest on the Series 2012 Bonds, the Series 2013 Bonds and any additional bonds issued pursuant to the Trust Agreement (the "Additional Bonds"; and together with the Series 2012 Bonds and the Series 2013 Bonds, the "Bonds"). See "- Additional Obligations Secured by Special Taxes" below.
So long as the prindpal of and interest on the Bonds remain unpaid, the Special Taxes, the funds and accounts established to hold Special Tax proceeds under the Trust Agreement, and any investment earnings thereon will not be used for any other purpose, except as othenwise permitted by the Trust Agreement, and will be held in trust for the benefit of the owners of the Bonds and will be applied pursuant to the Trust Agreement. The Prepayment Fund is pledged for the payment of principal and redemption premiums, if any, on the Bonds in accordance with the Trust Agreement, but is pledged to pay interest on the Bonds only to the extent of accrued interest included in the calculaflons of the prepayment amounts under the Rate and Method and in accordance with the Trust Agreement.
The City is only obligated to pay the Bonds from the proceeds ofthe Spedal Tax and the other funds and accounts described above.
Levy and Collection of the Special Tax
The City, so long as any Bonds are Outstanding, will annually levy the Spedal Tax against all Taxable Property in the Community Fadlifles District and make provision for the collection of the Spedal Tax in amounts which will be suffident, after making reasonable allowances for contingencies and errors in the estimates, to (i) yield proceeds equal to the amounts required for compliance with the agreements, conditions, covenants and terms contained in the Trust Agreement, (ii) pay interest on, prindpal of, all Mandatory Sinking Account Payments for, and redemption premiums, if any, on the Bonds as they become due and payable, and (iii) pay all current "Expenses" (as deflned in the Trust Agreement) as they become due and payable in accordance with the provisions and terms ofthe Trust Agreement.
The Spedal Tax will be collected in the same manner as ordinary ad valorem property taxes and, except as othenwise provided in the Trust Agreement and in the Law, will be subject to the same penalfles and collecflon procedure, sale, and lien priority in case of delinquency as is provided for ad valorem property taxes. However, see "- Covenant to Foreclose - Teeter Plan."
Because the Special Tax levy is limited to the maximum Special Tax rates provided in the Rate and Method, no assurance can be given that, in the event of Special Tax delinquencies, the receipts of Special Taxes will, in fact, be collected in sufficient amounts In any given year to pay debt service on the Bonds. See "BOND OWNERS' RISKS," induding the subsecflon entitied "- Other Possible Claims Upon the Value of Taxable Property," for a discussion of factors that could impact the amount of Special Taxes collected by the City and
15 the amount, if any, to be realized by owners of the Bonds as a result of a foreclosure sale in respect of delinquent Special Taxes.
Additional Obligations Secured by Special Taxes
The Trust Agreement authorizes the City to incur additional obligations secured by Special Taxes ("Additional Bonds") that are payable on a parity basis with the Series 2012 Bonds and Series 2013 Bonds, as described below.
Conditions for Issuance of Additional Bonds. The City may issue Additional Bonds only upon satisfaction of certain conditions established by the Trust Agreement. The City's issuance ofthe Series 2013 Bonds complies with the conditions, which are, among others, the following;
(i) The Additional Bonds may be used only to flnance or reflnance the acquisition and construction of the Fadlities or the payment of the authorized development fees, including related inddental expenses;
(ii) The principal on the Additional Bonds must be payable on September 1 and the interest must be payable on March 1 and September 1;
(iii) The Reserve Fund must be increased to an amount at least equal to the Required Bond Reserve;
(iv) The City must be in compliance with all agreements, conditions, covenants and terms contained in the Trust Agreement and in all Supplemental Trust Agreements required to be observed or performed by it, and no default under the Trust Agreement may have occurred and then be conflnuing;
(v) The Master Developer shall not be delinquent with respect to the payment of any Special Taxes on property owned by the Master Developer;
(vi) The Special Tax revenue available to the City if the Spedal Taxes were to be levied and collected at the maximum rate and amount in accordance with the Rate and Method on all Taxable Property in the Community Fadlities District during each Fiscal Year that any Bonds of such Series will be Outstanding would produce a sum: (1) equal to at least 110% ofthe annual Debt Service during the Bond Year which begins in such Fiscal Year; and (2) equal to at least 100% of the annual Debt Service plus the estimated Expenses during each such Bond Year; all as shown by a certiflcate of an Independent Certifled Public Accountant or naflonally recognized, independent municipal flnance consultant on flie with the Trustee;
(vii) The aggregate Value-to-Lien Ratio of all Taxable Property and the aggregate Value-to-Lien Ratio of all Undeveloped Property, must, as to each such categoty, be at least 3:1. For the purposes of this paragraph, the term "Value" means either the current assessed valuation of a parcel of Taxable or Undeveloped Property or the appraised value of a parcel of Taxable or Undeveloped Property determined by an MAI appraiser. The term "Lien," for purposes of Undeveloped Property, means the percentage of all Spedal Taxes, that would be levied on Undeveloped Property if the Special Taxes were being
16 levied at the time of the certiflcate referred to below, applied to the aggregate principal amount of all Bonds that will be Outstanding after the issuance of such Series of Additional Bonds plus the aggregate principal amount of all other assessment bonds and bonds issued under the Law reasonably allocable to the Undeveloped Property, as shown by a certiflcate of an Independent Certifled Public Accountant or nationally recognized, independent municipal flnance consultant on flie with the Trustee. The term "Value-to-Lien Ratio" for purposes of Undeveloped Property means the ratio of the Value of all Undeveloped Property to the "Lien. The term "Value-to-Lien Ratio" for purposes of Taxable Property means the ratio of the Value of all Taxable Property to the aggregate principal amount of all Bonds that will be Outstanding after the issuance of such Series of Additional Bonds plus the aggregate principal amount of all other assessment bonds and bonds issued under the Law reasonably allocable to Taxable Property.
Procedure for Issuance of Additional Bonds. A series of Additional Bonds may be issued upon receipt by the Trustee ofthe following, documents or money, among others;
(i) a certifled copy of the Supplemental Trust Agreement authorizing the issuance of the Additional Bonds;
(ii) an Opinion of Counsel, as described in the Trust Agreement.
(iii) a Certiflcate of the City containing such statements as may be reasonably necessaty to show compliance with the conditions for issuance of Addiflonal Bonds contained in the Trust Agreement; and
(iv) the proceeds of sale of such Addiflonal Bonds.
Refunding Bonds. The Trust Agreement authorizes the issuance of "Refunding Bonds" (as deflned in the Trust Agreement) if the City has delivered or caused to be delivered to the Trustee the following:
(i) a certifled copy of the Supplemental Trust Agreement authorizing the issuance of the Refunding Bonds;
(ii) the proceeds of sale of the Refunding Bonds;
(iii) a Certiflcate of the City stating that the City is not in default in the performance of any of the agreements, conditions, covenants or terms contained in the Trust Agreement;
(iv) directions as to the use of proceeds of the Refunding Bonds to refund Outstanding Bonds under the Trust Agreement or to fund capitalized interest; and
(v) an Opinion of Counsel nationally recognized in the fleld of municipal flnance addressing the validity and tax exempt status of the Refunding Bonds, subject to reasonable and appropriate exceptions.
17 Rate and Method
General. The Special Tax will be levied and collected according to the Rate and Method, which provides the means by which the City, or its designee, may annually levy the Spedal Taxes within the Community Fadlifles District, up to the "Maximum Special Tax" (as deflned in the Rate and Method). In addition, the Rate and Method provides the formula to determine the amount of the Spedal Tax that will need to be collected each Fiscal Year from the "Taxable Property" (as defined in the Rate and Method) within the Community Facilities District.
The following is a summaty of the provisions of the Rate and Method, which should be read in conjuncflon with the complete text of the Rate and Method, which is attached to this Offidal Statement as "APPENDIX A - Rate and Method of Apportionment of Special Tax." The meaning of each deflned term used in this secflon is as provided in Appendix A. This section provides only a summary of the Rate and Method and is qualified by more complete and detailed information contained In the entire Rate and Method attached to this Official Statement as Appendix A.
Assignment to Land Use Categories. Each Fiscal Year, all Taxable Property within the Community Fadlifles District will be dassifled as Developed Property, Taxable Public Property, Taxable Property Owner Association Property or Undeveloped Property, and will be subject to Special Taxes in accordance with, and determined pursuant to, the Rate and Method.
The Rate and Method includes the following deflnltions, among others:
"Developed Property" means, for each Fiscal Year, all Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, for which the Final Subdivision was recorded on or before Januaty 1 of the prior Fiscal Year and a building permit was issued after Januaty 1, 2011 and on or before May 1 of the Fiscal Year preceding the Fiscal Year for which the Special Taxes are being levied.
'Taxable Public Property" means all Assessor's Parcels of Public Property that are not exempt pursuant to the Rate and Method (see "Exemptions" below).
"Taxable Property Owner Association Property" means all Assessor's Parcels of Property Owner Association Property that are not exempt pursuant to the Rate and Method (see "Exemptions" below).
"Public Property" means property within the boundaries of the Community Facilities District owned by, or irrevocably offered or dedicated to, the federal government, the State, the County, the City, or any local government or other public agency, provided that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Law will not be considered Public Property and will be taxed and classifled according to its actual use, with the exception of Affordable Rental Property, which will retain its exemption from the Special Tax.
"Final Subdivision" means a subdivision of property by recordation of a flnal map, parcel map, or lot line adjustment, approved by the County pursuant to the Subdivision Map Act (California Government Code Secflon 66410 et seq.) or recordation of a condominium plan pursuant to California Civil Code 1352 that, in either case, creates individual lots for which building permits may be issued without further subdivision. Maximum Special Tax. The Rate and Method assigns the following Maximum Spedal Tax to each of the various land use categories:
Developed Property. Developed Property will be assigned to Land Use Classes, as specifled in the Rate and Method. The Maximum Special Tax for each Assessor's Parcel dassifled as Developed Property will be the greater of (i) the amount derived by applicaflon of the Assigned Special Tax for the relevant Land Use Class (see "-Assigned Special Tax" below) or (ii) the amount derived by application of the Backup Spedal Tax. The Backup Special Tax is dependent upon the manner in which a property develops. See "- Backup Spedal Tax" below.
The Fiscal Year 2011-2012 Assigned Spedal Tax and the Fiscal Year 2011-2012 Fiscal Year Backup Spedal Tax, although not levied by the City, will increase annuaify, commendng on Jufy 1, 2012 and on July 1 of each Fiscal Year thereafter, by an amount equal to 2% of the amount in effect for the previous Fiscal Year.
In some instances, an Assessor's Parcel of Developed Property may contain more than one Land Use Class. The Maximum Special Tax levied on an Assessor's Parcel in such case will be the sum of the Maximum Special Tax for all Land Use Classes located on that Assessor's Parcel. The City's allocation to each type of property will be flnal in the absence of manifest error.
19 Assigned Special Tax. The Rate and Method establishes the following Assigned Spedal Taxes for Fiscal Year 2011-2012. As mentioned above, the Maximum Spedal Tax is the greater of the Assigned Spedal Tax and the Backup Special Tax.
Table 2 Assigned Special Tax for Developed Properi:y Fiscal Year 2011-2012
RosidentinI Floor Assigned Land Use Glass Description A.i-ca Special Tax ,
1 Residential Property > 2,300 sq. ft,. $5,405 per unit
2 Residential Property 2,151 - 2,300 sq, ft. $5,288 per unit
3 Residential Property 2,001 - 2,150 sq, ft. $4,989 per unit
4 Residential Property 1,851 - 2,000 sq, ft. $4,973 per unit
5 Residential Property 1.701 - 1.850 sq,fL $4,917 per unit
6 Residential Property 1.551 - 1.700 sq, ft $4,557 per unit
7 Residential Property 1.401 - 1,550 sq, ft. $4,069 per unit
8 Residential Property 1,251 - 1,400 sq, ft. $3,701 per unit
9 Residential Property 1,101 - 1,250 sq,fL $3,482 per unit
10 Residential Property 951 - 1,100 sq. ft. $3,158 per unit
11 Residential Property 801 - 950 sq, ft,. $2,572 per unit
12 Residential Property <= 800 sq, ft. $2,332 per unit
> 1,400 sq.ft. 13 BMR Units $1,344 per unit
801 - 1.400 sq.fL 14 BMR Units $1,344 per unit
15 <= 800 sq. ft BMR Units $1,139 per unit $60,000 per acre of Apartment NA 16 Apartment Property (1) Property Development
$1,769 persq, ft. of Non 17 Non-Residential Property - Office NA Floor Area Residential Floor Area
$0,520 persq, ft, of Non 18 Non-Residential Property, - Retail NA Floor Area Residential Floor Area
(1) Pursuant to the Rate and Method, any Assessor's Parcels or portions of Assessor's Parcels that would ordinarily be classified as Apartment Property that are created after the first 5,306 Acres of Apartment Property have already been established will be classified as Residential Property with Condominium Units or BMR Units located on them, and each dwelling unit located on such Residential Property will be subject to the same Assigned Special Taxes and Backup Special Tax rates as are assigned to Condominium Units or BMR Units, as applicable.
20 Backup Special Tax. The Fiscal Year 2011-2012 Backup Spedal Tax attributabte to a Final Subdivision will equal $124,695 mulflplied by the Acreage of all Taxable Property, exclusive of any Taxable Property Owner Association Property and Taxable Public Property, therein. As mentioned above, the Maximum Spedal Tax is the greater ofthe Assigned Special Tax and the Backup Special Tax.
The Backup Special Tax for each Assessor's Parcel of Residential Property other than Apartment Property will be computed by dividing the Backup Spedal Tax attributable to the applicable Final Subdivision by the number of Residential Lots within that Final Subdivision.
The Backup Special Tax for each Assessor's Parcel of Non-Residenflal Property will be computed by multiplying the Backup Special Tax by the Acreage ofsuch Assessor's Parcel.
There is no Backup Special Tax on Apartment Property.
ff a Final Subdivision indudes Assessor's Parcels of Taxable Property for which building permits for both residential and non-residenflal construcflon have been issued, exdusive of Apartment Property, Taxable Property Owner Assodaflon Property and Taxable Public Property, then the Backup Spedal Tax for each residenflal dwelling unit will be calculated according to the following formula:
Residential Dwelling Unit Backup Spedal Tax = ((Backup Spedal Tax) X (Acreage of Assessor's Parcel) X (Residential Floor Area/(Residential Floor Area plus Non- Residential Floor Area)) / Number of Residential Dwelling Units)
In this case, the Backup Special Tax for each square foot of Non-Residential Floor Area will be calculated according to the following formula:
Non-Residential Square Foot Backup Special Tax = ((Backup Spedal Tax) X (Acreage of Assessor's Parcel) X (Non-Residential Floor Area/(Residential Floor Area plus Non- Residential Floor Area)) / Non-Residential Square Footage)
Notwithstanding the foregoing, if all or any portion of the Final Subdivision(s) described in the preceding paragraphs is subsequently changed or modifled by recordation of a lot line adjustment or similar instrument, and onfy if the City determines that such change or modiflcation results in a decrease in the number of Residenflal Lots within the Final Subdivision, then the Backup Special Tax for each Assessor's Parcel of Developed Property that is affected by the lot line adjustment or similar instrument for such Final Subdivision will be a rate per Acre as calculated below. The Backup Special Tax previously determined for an Assessor's Parcel of Developed Property that is not affected by the lot line adjustment or similar instrument for such Final Subdivision will not be recalculated.
1. Determine the total Backup Spedal Tax antidpated to apply to the changed or modifled Final Subdivision area priorto the change or modiflcation.
2. The result of paragraph 1 above will be divided by the Acreage of Taxable Property which is ultimately expected to exist in such changed or modifled Final Subdivision area, as reasonably determined by the City.
21 3. The result of paragraph 2 above will be the Backup Special Tax per Acre, which will be applicable to Assessor's Parcels of Developed Property in such changed or modifled Final Subdivision area for all remaining Fiscal Years in which the Special Tax may be levied.
Taxable Propertv Owner Assodaflon Propertv, Taxable Public Propertv and Undeveloped Property. The Fiscal Year 2011-2012 Maximum Special Tax for each Assessor's Parcel of Taxable Property Owner Assodation Property, Taxable Public Property and Undeveloped Property will be $132,693 per Acre, and will increase annually thereafter, commendng on July 1, 2012 and on July 1 of each Fiscal Year thereafter, by an amount equal to 2% of the Maximum Special Tax for the previous Fiscal Year.
Method of Apportionment of the Special Tax. Commencing with flscal year 2011- 2012 and for each following fiscal year, the City will determine the Special Tax Requirement and, as necessaty, levy the Special Tax as follows:
First; The Special Tax will be levied on each Assessor's Parcel of Developed Property in an amount equal to 100% of the applicable Assigned Spedal Tax;
Second: If additional monies are needed to satisty the Special Tax Requirement after the flrst step has been completed, the Spedal Tax will be levied Proportionately on each Assessor's Parcel of Undeveloped Property at up to 100% ofthe Maximum Spedal Tax for Undeveloped Property;
Third; If additional monies are needed to satisty the Special Tax Requirement after the flrst two steps have been completed, then the levy of the Special Tax on each Assessor's Parcel of Developed Property whose Maximum Special Tax is determined through the application ofthe Backup Spedal Tax will be increased in equal percentages from the Assigned Special Tax up to the Maximum Special Tax for each such Assessor's Parcel;
Fourth: ff additional monies are needed to satisfy the Spedal Tax Requirement after the flrst three steps have been completed, then the Special Tax will be levied Proportionately on each Assessor's Parcel of Taxable Public Property and Taxable Property Ovvner Association Property at up to 100% of the Maximum Special Tax for Taxable Public Property and Taxable Property Owner Assodaflon Property.
Notwithstanding the above, the City may, in any flscal year, levy Proportionately less than 100% of the Assigned Special Tax in step First (above), when (i) the Spedal Tax is no, longer required to be levied pursuant to steps Second and Third above in order to meet the Special Tax Requirement and (ii) all authorized bonds have already been issued for the Community Fadlities District or the City Council has covenanted that it will not issue any additional bonds for the Community Fadlities District (except refunding bonds) to be supported by the Special Tax.
Further notwithstanding the above, under no circumstances will the Special Tax levied against any Assessor's Parcel of Residential Property, for which a Certiflcate of Occupancy has been issued, be increased by more than 10% above the amount that would have been levied in that flscal year had there never been any such delinquencies or defaults as a consequence of delinquency or default by the owner of any other Assessor's Parcel within the Community Facilities District.
22 Exemptions. No Special Tax will be levied on up to 34.6 Acres of Public Property and/or Property Owner Association Property in the Community Facilities District. In addition, no Special Tax will be levied on up to 1.0 Acre that the City has identifled and designated as Affordable Rental Property. Tax-exempt status will be assigned by the City in the chronological order in which property in the Community Facilities District becomes Public Property or Property Owner Association Property. However, should an Assessor's Parcel no longer be classifled as Public Property, Property Owner Assodation Property, or Affordable Rental Property, it will become subject to the Special Tax.
Public Property or Property Owner Association Property that is not exempt from the Special Tax will be subject to the levy of the Special Tax and will be taxed Proportionately as part ofthe step Fourth in "Manner of Apportionment ofthe Special Tax" above, at up to 100% of the applicable Maximum Spedal Tax for Taxable Public Property or Taxable Property Owner Assodaflon Property.
Manner of Collection of Special Taxes. The Special Tax will be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that the City may directly bill the Special Tax, and/or may collect Spedal Taxes at a different flme or in a different manner if necessaty to meet its flnancial obligaflons, and may covenant to foreclose and may actually foreclose on delinquent Assessor's Parcels.
Prepayment of Special Taxes. The Rate and Method permits prepayment of Special Taxes subject to certain restricflons. See "APPENDIX A - Rate and Method of Apporflonment of Special Tax" for more detailed information about such restrictions and the manner in which the amount of Special Tax prepayments will be calculated.
Duration of the Special Tax Levy. The Special Tax may be levied until flscal year 2061-62; the Spedal Tax will cease to be levied in an eariier flscal year if the City determines that all required interest and prindpal payments on the Bonds have been paid.
Covenant to Foreclose
Foreclosure Under the Law. Under Section 53356.1 of the Law, if any delinquency occurs in the payment of the Spedal Tax, the City may order the instituflon of a Superior Court action to foreclose the lien therefore within specifled time limits. In such an action, the real property subject to the delinquent Special Tax levy may be sold at judicial foreclosure sale.
City's Foreclosure Covenant. On or before August 15 of each year, the City will review the public records of the County of San Mateo relating to the collection of the Special Tax in order to determine the amount of the Special Tax collected in the prior Fiscal Year, and on the basis of such review the City will:
(i) not later than the following November 1, institute foreclosure proceedings as authorized by the Law against each parcel that is delinquent in the payment of , Spedal Taxes in the amount of $6,000 or more, and against each parcel that is delinquent in the payment of more than 2 installments of Spedal Taxes in order to enforce the lien of delinquent installments of the Special Tax, and will diligently prosecute and pursue the foreclosure proceedings to judgment and sale; and
23 (ii) if total delinquencies exceed 3%, the City will diligentiy prosecute and pursue foredosure proceedings to judgment against all delinquent parcels without regard to the amount of delinquency.
Sufficiency of Foreclosure Sale Proceeds; Foreclosure Limitations and Delays. No assurances can be given that the real property subject to a judidal foredosure sale will be sold or, if sold, that the proceeds of sale will be suffident to pay any delinquent Spedal Tax installment. The Law does not require the City to purchase or otherwise acquire any lot or parcel of property foreclosed upon if there is no other purchaser at such sale. See "BOND OWNERS' RISKS," induding the subsection entifled "Other Possible Claims Upon the Value of Taxable Property," for a discussion of factors that could impact amounts, if any, to be realized by Bond owners as a result of a foreclosure sale.
Secflon 53356.6 of the Law requires that property sold pursuant to foreclosure under the Law be sold for not less than the amount of judgment in the foredosure action, plus post- judgment interest and authorized costs, unless the consent of the owners of 75% of the outstanding Series 2013 Bonds is obtained. However, under Section 53356.5 of the Law, the City, as judgment creditor, is entitled to purchase any property sold at foreclosure using a "credit bid," where the City could submit a bid crediting all or part of the amount required to satisfy the judgment for the delinquent amount of the Special Tax. If the City becomes the purchaser under a credit bid, the City must pay the amount of its credit bid into the redemption fund established for the Series 2013 Bonds, but this payment may be made upto 24 months after the date of the foreclosure sale. The City has no obligation whatsoever to make any credit bid or purchase any property subject to delinquent Special Taxes and has no Intention to do so.
Foreclosure by court action is subject to normal litigation delays, the nature and extent of which are largely dependent on the nature of the defense, if any, put forth by the debtor and the Superior Court calendar. In addition, the ability of the City to foredose the lien of delinquent unpaid Spedal Taxes may be substantially delayed by bankruptcy court proceedings, may be limited in certain other drcumstances and may require prior consent ofthe property owner ifthe property is owned by or in receivership of the Federal Deposit Insurance Corporation (the "FDIC"). See "BOND OWNERS' RISKS - Bankruptcy and Foredosure Delays."
Teeter Plan. The County Board of Supervisors utilizes the alternative method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan"), as provided for in section 4701 et seq. of the California Revenue and Taxation Code. Generally, the Teeter Plan provides for a tax distribution procedure in which secured roll taxes and assessments are distributed to taxing agencies within the County on the basis of the tax and assessment levy, rather than on the basis of actual tax and assessment collections. The County then receives all future delinquent tax and assessment payments and penalties. Pursuant to the Teeter Plan, the County establishes a tax and assessment losses resen/e fund and a tax resources account, and each entity levying or entitled to receipt of property taxes in the County may draw on the amount of uncollected taxes and assessments credited to its fund, in the same manner as ifthe amount credited had been collected.
So long as the Teeter Plan is in place, the City is expected to be credited with 100% of the Special Taxes, regardless of any delinquencies in payment of the taxes. However, the County Board of Supen/isors may discontinue the Teeter Plan at any time.
24 Special Tax Fund
Deposit of Special Tax Collections in the Special Tax Fund. Under the Trust Agreement, the Trustee will establish and maintain a fund to be known as the "Bay Meadows Community Fadlifles District Special Tax Fund" (the "Special Tax Fund"), which fund will be held and maintained in trust under the Trust Agreement by the Trustee, and the City has agreed and covenanted that all Spedal Tax collecflons (induding any prepayments thereof and including any amounts, net of any costs of collection and enforcement, received as a result of foreclosure of the lien securing the Special Taxes or other acflons by the City to collect delinquent Special Taxes), when and as received, will be immediately transferred to the Trustee. The Trustee has agreed and covenanted to deposit all such transfers in the Special Tax Fund.
Allocation of Money in the Special Tax Fund. All prepayments of the Special Tax will be immediately deposited by the Trustee in the Prepayment Fund. All other money in the Special Tax Fund will be set aside by the Trustee in the following respective funds in the following order of priority, and all money in each fund will be applied, used and withdrawn only for the purposes authorized in the Trust Agreement, namely;
(1) Expense Fund (limited deposit; see "-Expense Fund" below),
(2) Redemption Fund (see "- Redemption Fund" below),
(3) Reserve Fund (see "- Reserve Fund" below),
(4) Rebate Fund (see Appendix C fora summaty of the purpose of this fund),
(5) Services Fund (see Appendix C for a summary of the purpose of this fund),
(6) Expense Fund (seeondaty deposit if necessaty; see "- Expense Fund" below), and
(7) Surplus Fund (see Appendix C for a summary of the purpose of this fund).
Expense Fund
The Trustee will establish and maintain a fund to be known as the "Bay Meadows Community Fadlities District Expense Fund" (the "Expense Fund"). The Trust Agreement contemplates the possibility of two deposits in each flscal year to the Expense Fund from the Special Tax Fund;
Initial Limited Deposit: On or before each Februaty 15, the Trustee will, from the money in the Spedal Tax Fund, transfer to and deposit in the Expense Fund a sum equal to the amount required to increase the amount in the Expense Fund to $40,000.
Secondary Deposit. To the extent moneys remain in the Special Tax Fund dn September 1 of each year after the Trustee has made the deposits described in clauses (1)-(5) of "Special Tax Fund - Allocation of Money in the Special Tax Fund" above, the Trustee may deposit additional Special Taxes in the Expense Fund if amounts previously deposited are or appear to be insufficient to pay the City's Expenses during the one-year period beginning on the immediately preceding Februaty 15.
25 Redemption Fund
The Trustee will establish and maintain a fund to be known as the "Bay Meadows Community Fadlifles District Redemption Fund" (the "Redemption Fund"), and within the Redemption Fund the Series 2013 Sinking Accounts.
All money in the Redemption Fund will be used and withdrawn by the Trustee solely to pay the interest on the Series 2013 Bonds as it will become due and payable (including accrued interest on any Series 2013 Bonds purchased or redeemed prior to maturity) plus the prindpal of the Series 2013 Bonds as they will mature or upon the prior redemption thereof, except that any money in any Sinking Account will be used only to purchase or redeem or retire the Term Series 2013 Bonds for which such Sinking Account was established as provided in this Trust Agreement or in any Supplemental Trust Agreement.
Reserve Fund
In connection with the issuance of the Series 2012 Bonds, the Trustee established and maintains a fund known as the "Bay Meadows Community Fadlities District Resen/e Fund" (the "Reserve Fund") into which is deposited an amount equal to the "Required Bond Reserve." Subject to certain provisions of the Trust Agreement, moneys in the Resen/e Fund will be used solely for the purpose of paying the principal of and interest on the Bonds (i.e., the Series 2012, the Series 2013 Bonds and any Additional Bonds) in the event that the moneys in the Redemption Fund are insufficient, and for that purpose the Trustee will withdraw from the Reserve Fund, for deposit in the Redemption Fund, moneys necessary for such purpose.
The Trustee will, on or before the flrst day in September in each year, from the then- remaining money in the Special Tax Fund, deposit into the Reserve Fund the amount of money that is required to restore the Reserve Fund to an amount equal to the Required Bond Reserve. For this purpose, each investment in the Reserve Fund will be valued on or before September 1 of each year at its face value if it matures within twelve months from the date of valuaflon. If it matures more than twelve months from the date of valuation, it will be valued at the price at which it is redeemable by the holder at his option, if it is redeemable, or the lesser of its (i) cost or (ii) market value, if it is not redeemable. In making any such valuaflon, the Trustee may use and rely on computerized securities pricing services that may be available to it, including those available through its regular accounting system.
Amounts in the Reserve Fund will be withdrawn to pay principal and interest on the Bonds; provided, that if the amount on deposit in the Reserve Fund is less thah the Required Bond Reserve, the Trustee will notify the City of the amount needed to replenish the Resen/e Fund to the Required Bond Reserve and the City will collect the deflciency by including it in the next annual Special Tax levy, to the extent permitted by law and as necessary.
26 The "Required Bond Reserve" is deflned in the Trust Agreement to mean, as of any date of calculaflon, an amount equal to the least of:
(a) Maximum Annual Debt Service,
(b) 10% of the proceeds (within the meaning of Section 148 of the Code) of all Outstanding Bonds, or
(c) 125% of Average Annual Debt Service.
If, as a result of any of the valuations specifled in the Trust Agreement, it is determined that the amount of money in the Resen/e Fund exceeds the Required Bond Resen/e, the Trustee will withdraw the excess and deposit it in the Redemption Fund.
See "APPENDIX C - Summaty of Trust Agreement" for a descripflon of the timing, purpose and manner of disbursements from the Reserve Fund.
Limited Obligation
All obligaflons of the City under the Trust Agreement and the Series 2013 Bonds are special obligaflons ofthe City, payable solely from Special Taxes and other moneys identified in the Trust Agreement.
No Acceleration
The principal of the Series 2013 Bonds is not subject to acceleration under the Trust Agreement as a result of a default under the Trust Agreement or the Series 2013 Bonds.
THECITY
For general informaflon about the City see "APPENDIX D - General Information About the City and the County of San Mateo."
27 THE COMMUNITY FACILITIES DISTRICT
General
Location. The 170.5-acre site of the former Bay Meadows thoroughbred racetrack is situated in the City of San Mateo. It is adjacent to the Caltrain rail corridor and located at the intersection of US Highway 101 and Highway 92, which are major north-south and east-west roadways. The Highway 101 and 92 interchange is a major intersection for travelers crossing the San Mateo Bridge from the East Bay to the Peninsula.
The Community Facilifles District, as described more completely below, consists of a portion of the former Bay Meadows site.
The enflre Bay Meadows site was acquired in July 1997 under the direcflon of certain members of the existing management team of Stockbridge Capital Group, LLC, during its previous employment at PaineWebber Incorporated and UBS Warburg (after it acquired the former).
Bay Meadows Phase I. In the same year, the City adopted a plan to rezone and redevelop approximately 87 acres of the Bay Meadows site at the location of the previous practice track, known as "Bay Meadows Phase 1." Now complete, the 87-acre Bay Meadows Phase I includes a mixed-use development consisting of the following uses; apartments; townhouses; single-family homes; an office campus clustered around three mixed-use retail blocks; a linear park and two other parks; and three parcels that were sold off to third parties and are now the locaflon of the Franklin Templeton headquarters, the City of San Mateo Police Station and a Kaiser medical offlce building. Bay Meadows Phase I is not in the Community Facilities District.
Bay Meadows Phase II. The remaining 83.3-acres ofthe former Bay Meadows property are the site of the former main racetrack and collectively known as "Bay Meadows Phase 11." The Community Facilities District consists of the property intended for development as Bay Meadows Phase II.
Bay Meadows Main Track Investors, LLC (deflned as the "Master Developer" in this Offlcial Statement) purchased the Bay Meadows Phase II property from PW Acquisitions IV, LLC, in April 2003 for $77.8 million. For information about the current ownership of property in the Community Fadlities District, see "PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT" below.
Condition of Property in the Community Facilities District. Demolition of the former racetrack improvements in the Community Facilities District was completed in Februaty 2009, and public infrastructure development is approximately 64% complete. See "- Infrastructure Development" below. In addition, certain vertical development is underway. See "PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT - Proposed Development by TRI Pointe Homes."
Proposed Development in the Community Facilities District. The Community Facilities District consists of 83.3 gross acres, of which 49.978 net (taxable) acres are entitled for the following development (subject to change as described in "- Entitlements" below):
28 • Residential: Entitled for 1,250 residential units and currently planned for 1,066 residential units. Ten percent of the residential units to be developed by "for profit" developers must be below-market rental or for-sale units ("BMR Units"); under the Development Agreement for the proposed development, the BMR Units must be constructed at approximately the same flme as the market-rate units on a given block. Of the 1,066 planned residential units; (i) 832 units are planned for development on residential parcels and (ii) 234 units are planned for development on mixed-use parcels. In addition, from 50 to 68 units are planned for development by the City, or a developer selected by the City, as below- market rental units on a 1-acre parcel; they are not subject to the Special Tax.
• Commercial: Entitled for 1,250,000 square feet of commerdal office space. Currently planned for 770,000 square feet in five class A office buildings and 31,500 square feet of professional space above ground floor retail. In addition, an approximately 135,000-square foot high school campus is planned on a site approved for up to 200,000 square feet of commercial. The school has obtained the City's Site Plan and Architectural Review approval. See "PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT - Proposed Development by The Nueva School."
;;. • Retail; Entitled for 150,000 square feet of retail space, and currently planned for 85,000 square feet of retail. See 'THE COMMUNITY FACILITIES DISTRICT - Entiflements' - Entitlement Status" for a description of certain conditions that will impact the timing of retail development.
The proposed development also includes approximately 16 acres of public streets and a public park system of approximatefy 15 acres, with individual parks ranging from 1.5 to 12 acres. ffe The proposed development is divided into two primaty districts; the Staflon/Mixed-Use district and the Residential district These districts are further subdivided into development blocks;
• 5 station blocks ("STA");
' 4 mixed-use blocks ("MU"); and
• 9 residential blocks ("RES").
Buildings on the station blocks are designed with ground floor active uses or facades designed and articulated to enhance the pedestrian experience; rear elevaflons visible from Caltrain and the Hillsdale Caltrain Staflon are designed to a level of detail and quality similar to other elevations. The Hillsdale Caltrain Staflon is expected to be moved approximately 3 blocks north from its present location, which will place it near the middle of the proposed Bay Meadows Phase II development.
A table and a map showing the details of the proposed development in the Community Fadlities District are shown on the following pages. For additional information, see "PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT" below.
29 Table 3 Bay Meadows Phase 11 Proposed Product Mix
1 MAX. DENSITY/PRODUCT MIX ON FINAL MAP (1) SPAR (2) APPROVED PRODUCT MIX SPA Block Final Map Block Lot Office Sq. Ft. Retail Sq. Ft. Use Name No. (3) Number Number Acres +/- Density Units Office Sq. Ft. Retail Sq. Ft. Density Units Commercial (school) MU 1 1 10 N/A 2.758 49 184 200,000 4,000 - - 135,000 - Residential RES1 1 1 N/A 2.156 50 108 - - 50 108 - - Residential RES 2 1 2 N/A 2.999 27 80 - - 27 80 - - Residential RES 3 1 3 N/A 6.775 23 156 - - 23 156 - - Residential RES 4 2 4 N/A 1.649 43 71 - - 43 71 - - Residential RES 5 2 5 .1 3.864 20 76 - - 20 76 - - Residential RES 6 2 6 N/A 1.089 50 54 - - 50 54 - - Residential RES 8 2 8 1 3.571 21 74 - - 21 74 - - Residential MU4 3 13 1 0.857 50 70 25,000 15,000 50 70 - 7,711 Office, Retail MU4 3 13 2 0.189 _ - - - - - 4,527 . 4,929 Residential RES 7 3 7 1 2.397 50 158 - 6,000 50 158 - - Residential RES 9a 3 9 1 1.619 19 31 - - 19 31 - - Residential RES 9b 3 9 2 3.069 8 24 - - 8 . 24 - - Residential MU2a 4 11 1 1.352 50 88 125,000 20,000 50 88 - - Oflice, Retail MU2b 4 11 2 0.396 ------14,713 13,841 Residential MUSa 4 12 1 1.167 50 76 125,000 15,000 50 76 - - Office, Retail MU3b 4 12 2 0.344 ------12,214 11,023 Office, Retail STA1 4 14 N/A 2.767 _ - 100,000 15,000 - - 95,910 5,794 Office, Retail STA 2a 4 15 1 2.366 - - 200,000 20,000 - - 166,126 6,009 Retail STA 2b 4 15 2 0.211 - - - - . - - - 7,423 Office, Retail STA 3a 4 16 1 2.147 - - 175,000 20,000 - - 154,846 6,561 Retail STA 3b 4 16. 2 0.164 ------5,653 Office, Retail STA 4a 4 17 1 2.147 - - 200,000 20,000 - - 184,659 3,477 Retail STA 4b 4 17 2 0.243 ------8,855 Office, Retail STA 5a 4 18 1 1.432 - - 100,000 15,000 - - 91,230 4,098 1,250 1,250,000 150,000 1,066 728,225 85,374 Derby Avenue . . _ _ - - Master Association Property Extension 2 5 2 0.516 Master Association Property View Corridor 3 7 2 0.561 ------Master Association Property . Town Square 3 7 3 0.192 ------Master Association Property View Corridor 2 8 2 0.617 ------Master Association Prooertv Town Square 3 13 3 0.354 ------1 Total Taxable Property 49.978 0 0 0 0 0 0 City BMR MU1 1 10 N/A 1.000 - - - - - 50 - - City Park Community Pari< 1 LOTA N/A 12.011 ------Neighborhood . . _ _ , - - - City Park . Park 2 LOTB N/A 1.518 City Park Linear Park 3 LOTC 01 0.670 _ ------City Park Linear Pari< 3 LOTC 02 0.553 ------City Park Linear Pari< 3 LOTC 03 0.290 ------JPB Land STA 5b 4 18 2 1.204 _ ------Public Streets 16.158 ------~ Total Non-Taxable (Public) Property 33.404 0 0 0 50 0 0 GRAND TOTALS 83.382 1 1,250 1,250,000 150,000 1 1,116 728,225 85,374
(1) The maximum density is over the entire block and not designated to a specific lot on the block. The plans are taken to schematic level design. See ' (2) SPAR is the Site Plan and Architectural Review, which is a discretionary Planning Commission review of the architectural and site plan for a building. Entitlements - Design Review." (3) See"- Entitlements - Vesting Tentative Map; Final Maps." 30 BAY MEADOWS PHASE 11 PHASED MAPP ING AND OVERALL LOT PLAN
SOUTH DELAW/lRESmEEr
F£N1I«UIA Jaw FJUffiS BCKilJ .'"MBL WEISS, MC. DATE -JUNE ,23,20.11 707 Sm Jiiie./£A 'aSIU
31 Infrastructure Development
Arup, a civil engineer retained by the Master Developer, has designed the infrastructure for the proposed development including grading, utility infrastructure, road and curb construction and all other aspects of the proposed development of base infrastructure. The Site Development Permit Application was submitted in April 2007 and unanimously approved by the Planning Commission on October 23, 2007. The Site Development Permit was issued on May 13,2008.
Bond-Financed Public Infrastructure. The following table represents cost estimates that were included in the Acquisiflon Agreement at the time of the formation of the Community Facilities District. Because the table reflects estimated costs only, there is an overall miscellaneous contingency of approximately $4.8 million to cover any overages realized when contracting for the public improvements. The estimated costs contained in this table may not match summaries of actual costs included elsewhere in this Official Statement, induding the two paragraphs that follow the table.
32 The Master Developer expects a portion of the following public infrastructure improvements to be acquired by the City with proceeds of the Series 2013 Bonds. The following table identifles the improvements that may be flnanced by the Community Facilities Distrid and their esflmated cost as of the flme of formaflon of the Community Fadlities District.
Table 4 Bond-Financed Public Infrastructure, Soft Costs and Fees
Authorized Applicable Estimated Improvement Final Map Construction Status Cost Delaware Street Map 1 95% complete Map 4 30% complete $6,657,565 Baze Road Map 1 95%) complete Map2 95% complete 3,340,455 Franklin Parkway Map 2 95% complete Map 3 95% complete 2,615,529 East 28'" Avenue Map 1 95% complete Map4 40% complete 4,309,678 Derby Avenue Map 1 95% complete Map 3' 30% complete Map 4 30% complete 1,117,600 Landing Avenue Map 2 60% complete Map 3 30 % complete Map 4 30% complete 851,752 East 31" Avenue Map 4 25% complete 530,909 Kyne Street Map 1 95% complete Map 2 95% complete Map 3 25% complete 1,480,291 Maiden Way Map 2 95% complete 564,921 Saratoga Drive Off site 99% complete 651,928 Community Park Map 1 40% complete 1,513,810 Storm Detention Pond Map 1 100% complete 2,286,226*'' Norfolk Sanitary Sewer Connection Off site 2013 start 1,110,845 Sanitary Sewer Pump Staflon Off site 5% complete 1,305,000 Linear Park Map 3 2013 start 2,278,587 Neighborhood Park Map 2 25% complete 2,699,881 Private utility facilifles All Maps Ongoing 4,100,493 Property Acquisiflon Off site $1,268M acquisition complete; remaining acquisition will be complete in 2013 1,504,522 Mitigation Fees/Soft Costs All Maps Ongoing 45,745,874 Misc. All Maps Ongoing 4.833,923 Total $89,499,791
(1) Reflects actual cost. Work Completed as of September 2012. As of September 2012, approximately 64% of the allowable public infrastrudure work was completed at an actual cost of $20.3 million (which amount does not indude an estimated $21 million of soft costs and mitigation fees paid by the Master Developer). The completed work consists of rough grading, sanitary sewer system
33 installation, storm drain system installation, street light installation, signalization, curb and gutter, and a/c paving. Improvements through April 2012 were flnanced with the Master Developer's equity and, then, purchased by the City from the Master Developer with the proceeds of the Series 2012 Bonds.
Remaining Public Infrastructure Work. The remaining approximately 36% of public infrastructure (which is expected to cost $11.7 million (exclusive of remaining soft costs and mitigaflon fees) based on the existing construcflon contract) is expected to be completed in 2014. The Master Developer expects to flnance the remaining public infrastructure costs with a combinaflon of land sales proceeds and proceeds of a construcflon loan obtained in May 2012. The Master Developer anticipates that the public infrastructure completed through April 2013 will be acquired by the City with the proceeds ofthe Series 2013 Bonds and, subsequently, the remaining infrastructure will be acquired by the City with proceeds from future sales of Bonds.
Entitlements
No assurances can be made that the Master Developer or any other current or future owner of property within the Community Facilities District will have the resources, willingness or ability to successfully complete development activities on the property within tlie Community Facilities District. No representation Is made by the City as to the ability (financial or otherwise) of the Master Developer or any other owner of property within the Community Facilities District to complete the property development as currently planned.
Entitlement Status. The property in the Community Facilities District is fully-entitled for development, as described below.
Speciflc Plan Amendment; The City approved a Speciflc Plan Amendment on November 7, 2005 (Resolution No. 111). The Speciflc Plan Amendment amended the Bay Meadows Speciflc Plan that the City Coundl adopted on April 22, 1997.
At the same flme, the City Coundl approved a Mitigation Monitoring and Reporting Program ("MMRP"), pursuant to which the Master Developer is responsible for compliance with the miflgaflon measures adopted as part ofthe certiflcaflon ofthe Final Environmental Impact Report for the proposed development.
The Speciflc Plan Amendment allows a general maximum of 1,250 residenflal units, 1,250,000 square feet of offlce/commercial space and 150,000 square feet of retail space. In recognition of the possibility pf changed market conditions over the life of the development, however, the Speciflc Plan Amendment also includes a formula for allowing a limited conversion of the permitted uses within the combined maximum program at the developer's discreflon. The formula allows the conversion of a maximum of 250 units of housing to 250,000 square feet of office/commercial, a ratio of 1 unit per 1,000 square feet of office/commercial space. Similariy, up to 250,000 square feet of the maximum of 1,250,000 square feet of office/commercial can be converted to 250 units of housing, using the same 1,000 square feet of office/commerdal to 1 residenflal unit ratio. The following table shows the maximum land use opflons;
Commercial (sq. ft.) Residential (units) Retail (square feet) Base Program 1,250,000 1,250 150,000 Maximized Commercial 1,500,000 1,000 150,000 Maximized Residenflal 1,000,000 1,500 150,000
34 A minimum of 1,000 residential units and a minimum of 500,000 square feet of office space must be provided at buildout. This provision is enforced in the design process and in connection with the processing of building permits.
Development Agreement; The City approved a Development Agreement between the City and Bay Meadows Land Company, a Delaware corporation, on November 21, 2005 pursuant to Ordinance No. 2005-17 (the "Development Agreement"). Under the Development Agreement, the Master Developer agrees to provide certain public benefits in consideration for receiving assurances that the City will grant permits and approvals required for the proposed development authorized by the Speciflc Plan Amendment over the project's estimated 18-year development horizon. The Development Agreement expires on December 20, 2023, and includes a number of conditions that must be satisfled by the Master Developer; failure to satisty the conditions could result in termination ofthe Development Agreement.
Vesting Tentative Map; Final Maps: The Planning Commission of the City approved a Bay Meadows Phase II Site Development Permit and Vesting Tentative Subdivision Map on October 3, 2007. A vesting tentative map allows a property owner to proceed with a proposed development in substantial compliance with local ordinances, polides and standards in effect at the time the application for approval of the vesting tentative map is deemed complete. The Vesting Tentative Subdivision Map is valid until the expiration ofthe Development Agreement.
The Master Developer expects there will be approximately four flnal maps for the entire development. The City approved Final Map No. 1 in June 2010 (recorded on August 25, 2010), which provides for the maximum density and number of units for four blocks as described in Table 3 above and on the Phased Mapping and Overall Lot Plan Map above (although the flnal map provides for reallocation among blocks).
Final Map No. 1 requires recordation of covenants, conditions and restrictions to implement certain project approvals. To satisfy this requirement, the Master Developer executed a Declaration of Covenants, Conditions and Restricflons, and Resen/aflon of Easements for Bay Meadows Phase II dated June 21, 2010 ("CC&Rs").
Final Map No. 2 was recorded on September 28, 2011, and provides for the maximum density and number of units for four blocks as described above in Table 3 and on the Phased Mapping and Overall Lot Plan Map (although the flnal map provides for the possibility of a reallocation among blocks).
Final Map No. 3 is expected to be recorded in the flrst quarter of 2013, and provides for the maximum density and number of units for three blocks as described above in Table 3 and on the Phased Mapping and Overall Lot Plan Map (although the flnal map provides for reallocation among blocks).
Final Map No. 4 is expected to be recorded in the flrst quarter of 2013, and provides for the maximum density and number of units for seven blocks as described above in Table 3 and on the Phased Mapping and Overall Lot Plan Map (although the flnal map provides for reallocaflon among blocks).
Design Review; The Planning Commission approved Bay Meadows Phase II Design Guidelines and Development Standards (the "Design Guidelines") on December 12, 2006, which established the framework for design review ofthe vertical development.
35 The vertical design of the buildings to be constructed on the site is subject to the City's Site Plan and Architectural Review ("SPAR") process, a discretionaty review by the City's Planning Commission. The Master Developer has secured the following SPAR approvals;
• Bay Meadows Phase II SPAR Application #1, approved by the City Council on April 21, 2008. This application covered nine blocks (STA 1, STA 2, STA 3, STA 4, STA5, MU 2, MU 3, MU 4 and RES 7), the Town Square, western portion of the View Corridor and the Linear Park.
• Bay Meadows Phase II SPAR Application #2, approved by the Planning Commission on October 14, 2008. This application covered five blocks (RES 4, RES 5, RES 6, RES 8 and RES 9), the Neighborhood Park and the eastern portion of the View Corridor.
• Bay Meadows Phase II SPAR Application #3, approved by the Planning Commission on December 9, 2008. This application covered three blocks (RES 1, RES 2 and RES 3) and the Community Park.
» Pursuant to the Development Agreement, the Master Developer is obligated to dedicate 1 acre of land to the City (or to a public or non-profit housing developer chosen by the City), to be developed by the City, or the designated public or non proflt agency, solely for low, very low, or moderate income housing, and designed in accordance with the Specific Plan Amendment and Design Guidelines. The location ofthe 1-acre site will be a portion of MU 1. On January 23, 2013, The Nueva School purchased MU 1 from the Master Developer, subject to a recorded offer to dedicate the 1-acre site to the City. The remaining 2.75 acres is the locaflon of The Nueva School's planned new high school campus. The City has approved the SPAR applicaflon for The Nueva School's proposed new high school. See "PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT - Property Ownership - General" and "- Proposed Development by The Nueva School."
See the map on the following page for a graphic presentaflon ofthe SPAR approvals.
36 Bay Meadows Phase I! Development Program
SPARl
STAl MUl
08,0.'i'.l 50-68 BMR Units Office Proposed 450-student G.SG-S it 135,000 sf School Rot/Acl Use
RESI STA 2 MUZ 88 Condos 176,915 sf 15,509 sf V/'m-V:: Office 'Cbndos' Office 10,883 sf I 11,8 L-l Ri;l/Ac.l Use I .i.OSO sf I I Rot/Act UiC Rr.st,iur;int j .•^,000 sf Robtnuiaiit
STA 3 i MU3 , ;: ':>9,.11.'S sf i RES 4 /G Condos I niticL' 71 L2,906sf • «,7G9 sf Condos Rot/Act UsH Oflice 3,281 sf 12,3(^1 Rostauiant I Ret/A<.t Use •
STA 4 ••• MU 4 "j KES6 186,690 sf I 70 Condos 54 Office .,07tsfOffic;.' • indos 8,027 sf j 8,9.17 sl , PROGRAM RotMct Uso i R(jt/Act Use ! 3,-r;7 .sf ; 5,000 sf SPAR 1 Approved 750,350 sf Office RestaiiKint I |tC|'Stnu"rji RES 7 ~~~^ 4/21/08 75,342 sf Retail/Active Use 17,808 sf Restaurant 392 Residential Units Linear Park/Town Square Western View Corridor STA 5 SPAR 2 Approved 330 Residential Units 9'.,/^Ssi ; 10/14/08 Neighborhood Park Eastern View Corridor Oil ico RES 9 '1,098 .•.! 344. Residential Units Rc!i:/Act Us(! 24:Single-Famlly Homes SPARS Approved 12/9/08 _31 Condbs/Towhhpuses
SPAR4 Not Submitted 50-68 BMR Units (City) - -and- Approved Proposed 450-Stud6nt, Note: The'Fbor Ar^a'numbers contained herein match the SPAR 1 plan submittals 12/11/12 135,000 sf School dated March ;10, 2()68,'the SP'AR'2 submitilals'clated August 1272008 and the SPAR 3, plan'suhmittais dated September 17, 2008, , ",. '. LLli_j ^ LJ \ L \ Traffic Management Plan. The Speciflc Plan Amendment, Development Agreement and CC&Rs indude land use, transportation demand management, trip reduction, parking and monitoring standards and conditions applicable to the proposed development. The CC&Rs establish a menu of "trip budgets" depending upon whether the Peninsula Corridor Joint Powers Board (the "Joint Powers Board") has commenced construction of grade separated crossings at either or both of 28th and 31st Avenues.
As part of the Environmental Impact Report described in "- Environmental Conditions - CEQA Review" below, the City prepared a phasing analysis that determined the level of development that could be sustained, without impact, prior to completion of either or both proposed grade separated crossings at 28th or 31st Avenues. The analysis assumed growth as a result of the proposed development of Bay Meadows Phase II, as well as throughout the City and San Mateo County, and yielded a "trip budget" of 1,127 net new trips, or 1,562 total trips (assuming a credit for the existing racing uses), before any grade separation was required to mitigate traffic.
The "trip budget" will affect the Master Developer's ability to complete the proposed development; the City or the Traffic Management Assodation will monitor car trips as the property is developed and, once the "trip budget" is reached, no further development will be allowed unless one or both grade separations are constructed or the Master Developer achieves trip reduction so that the "trip budget" is not exceeded. The Master Developer is required to pay approximately $9.9 million in transportation impact fees to provide a portion of the funding for the City's local share ofthe cost to implement additional rail grade separations at streets connecting the proposed development to the City's street grid; the Joint Powers Board is responsible for constructing either or both grade separations and funding the remainder of the costs.
The Master Developer anticipates that the proximity to Caltrain, available connections to the Bay Area Rapid Transit and Valley Transit Authority systems, mixed-use character of the proposed development and other available strategies (carpools, commuter vans, etc.) will contribute to trip reductions. Based on the Bay Meadows II Traffic Management Plan prepared by Kimley-Horn and Assodates, Inc. dated March 17, 2008 and updated on December 4, 2012, the Master Developer believes that it will be able to construct 1,066 residential units, a 450- student school, approximately 770,000 square feet of commercial offlce space and approximately 37,000 square feet of retail and restaurant space within the pre-grade "trip budget" At full build-out after grade separated crossings have been installed at 28"" or 31^' Avenues, the proposed development program, as of October 2012, indudes approximately 805,000 square feet of office, approximately 92,000 square feet of retails and restaurants, 1,116 residenflal dwelling units, and a 450-student high school.
Fees and other Pavment Obligations: The Master Developer expects to pay approximately $45 million in soft costs and mitigation fees in connection with the proposed development, induding the fees listed below. It estimates that it has spent approximately $21 million of this amount as of September 2012. The fees payable by the Master Developer under the Development Agreement were subject to an annual CPI increase beginning December 21, 2011.
The following fees will be paid by a permit applicant at the time its building permit is issued. The only building permits that have been issued to date were to TRI Pointe Homes on October 5, 2012 and Shea Homes on November 21, 2012.
38 School Fees. The San Mateo-Foster City School Distrid ("SMFCSD") collects fees to help flnance expansion of existing schools, construction of new schools and the rental of temporary dassroom facilities. The fees are $1.28 per square foot of residential development and $0.20 per square foot of commercial/industrial development.
The San Mateo Union High School District ("SMUHSD") cdlects fees to help flnance expansion of existing schools, construction of new schools and the rental of temporaty classroom fadlities. The fees are $0,856 per square foot of residential development and $0,136 per square foot of commerdal/industrial development.
Transportation Fees. The Master Developer is required to pay approximately $9.9 million in transportation impact fees to provide a source of funding for the City's local share of the cost to implement additional rail grade separations at streets connecting the proposed development to the City's street grid.
Utilities. It is expected that utility sen/ices for the property in the Community Fadlities District will be provided by the entities listed below.
» Water; Water service for the proposed development will be provided by California Water Sen/ice Company ("CalWater"). In a letter dated March 22, 2007, CalWater indicated that a preliminary water layout provided by the Master Developer and certain proposed improvements would be adequate to provide water,service to the proposed development.
Sanitan/ Sewer; The City will provide sanitaty sewer sen/ice to the proposed development as outiined in the Speciflc Plan Amendment, CC&Rs and Development Agreement. The sanitary sewer connection fee as well as the US 101 Sanitaty Sewer undercrossing. fee has been credited to the Master Developer pursuant to Exhibit D of the Development Agreement. The Master Developer is required to install certain sanitaty sewer system upgrades to the overall City system that will exceed the customaty required fees. Therefore, no future sanitary sewer connecflon fees will be required. There is a Waste Water Treatment Plant Impact Fee pursuant to the Development Agreement (which has been subject to an annual CPI increase starting on December 21, 2011). As noted above, this fee is payable by each permit applicant upon issuance of a building permit for its property. The cumulaflve expected payment amount for the permit is $2,093,880 over the life of the proposed development.
Stormwater Drainage: The City will provide stormwater drain sen/ice to the proposed development as outlined in the Entitlements.
Electricitv and Gas: Paciflc Gas & Electric will provide electric and gas service to the proposed development. On March 9, 2007, PG&E communicated to the Master Developer that it will be able to provide both gas and electric sen/ice to the proposed development.
Telecommunications: AT&T will provide telephone sen/ice to the proposed development and Comcast Cable will provide cable service.
39 Environmental Conditions
Provided in the following paragraphs are summaries of environmental issues applicable to the proposed development in the Community Facilifles District
CEQA Review. The City examined the environmental effects of both the proposed development and a San Mateo Rail Corridor Plan (part of a planned effort to promote the redevelopment ofthe City's rail corridor according to transit-oriented development principles) in an Environmental Impact Report (the "EIR"). The City Coundl certifled the EIR at a public hearing on April 18, 2005, and re-certified the EIR on June 6, 2005 and November 7, 2005. .
Phase I Environmental Site Assessments. Erier & Kalinowski, Inc. prepared a Phase I Environmental and Site Assessment dated June 23, 2008 for the proposed development ("Phase 1"). The Phase I identifled a handful of recognized environmental conditions on the site, some potential impacts from neighboring sites and additional flndings (e.g., approx. 2 to 8 feet of artiflcial flII was on the property). The Phase I did not recommend any speciflc actions to be taken, except it suggested that certain conditions (including the artiflcial flII) be monitored in connection with demoliflon and grading work on the site. The Master Developer, which has completed demolition and grading, has represented to the City that it is aware of no hazardous conditions that would adversely impact its ability to complete the proposed development on the proposed schedule.
Geologic Conditions. According to the California Seismic Safety Commission, there are two seismic zones in California; Zone 4 and Zone 3.
Zone 4 is assigned to areas of major faults; Zone 3 is assigned to areas with more moderate seismic activity. According to the Appraiser, the property in the Community Facilities District is located within Zone 4. Property in Zone 4 can be developed, but only in compliance with more restrictive standards imposed by the California Building Code. In addiflon, the property in the Community Facilities District is located within an Earthquake Fault Zone (formeriy referred to as an Alquist-Priolo Special Study Zone), as deflned by Special Publication 42 (revised January 1994) of the California Department of Conservation, Division of Mines and Geology. Cities must withhold development permits for sites within an Earthquake Fault Zone until geologic investigaflons demonstrate that the sites are not threatened by surface displacement from future faulting.
The EIR conduded that fault rupture in the area of the proposed development is not anflcipated and implementation of seismic design standards of the current Uniform Building Code would reduce the risk of seismic-related injury and property damage to a less than signiflcant level. The EIR required a design-level geotechnical study and implementation of appropriate miflgaflon methods to reduce the risk of seismically-induced ground failure, including liquefaction and lateral spreading.
Treadwell & Rollo prepared a "Final Geotechnical Investigation for Infrastructure Improvements; Bay Meadow- Phase 2" dated September 24, 2008 (the "Geotechnical Report") for the purpose of developing flnal design recommendations for the infrastructure design for the proposed development and recommendations forthe proposed buildings.
The Geotechnical Report reports that the San Andreas (3.4 miles from the project site), San Gregorio (11.2 miles from the project site), Hayward (15 miles from the project site) and Calaveras (22.4 miles from the project site) Faults are the major (but not the only) active faults
40 in the region. The Geotechnical Report condudes that, during a major earthquake on a segment of one of the nearby faults, strong shaking could result in ground failure such as that associated with soil liquefaction, lateral spreading and differential compaction. However, no known active or potentially active faults exist on the site, and the Geotechnical Report concludes that the risk of surface faulflng and consequent secondary ground failure is very low. Therefore, the- Geotechnical Report concludes that (i) the soil and other geotechnical condiflons at the site are suitable for the proposed, development, (ii) the risk of fault offset at the site from a known active fault is low, (iii) the potential for liquefaction and lateral spreading is low and (iv) sand above the water table was generally not encountered but, when encountered, it was sufficiently dense to resist differential compaction.
The Geotechnical Report made a number of design recommendations relating to foundation design, earthwork, dewatering (to address the fact that proposed excavations will extend below the groundwater level), seismic design, and pavement design, and the Master Developer is obligated by its land use approvals to comply with these recommendations. The Geotechnical Report concluded that additional studies would be necessary before flnal design recommendaflons could be made for the buildings. The builders of vertical improvements will undertake block-speciflc geotechnical studies.
Wetlands/Jurisdictional Waters. The Speciflc Plan Amendment provides that the Master Developer is responsible for obtaining all necessaty approvals (including from Caltrans, the California Department of Fish and Game and/or the Army Corps of Engineers) to facilitate the construction of the Norfolk Street Sewer Connection in the vicinity of the 19* Avenue Channel (Borel Creek). This requirement was vvritten into the Speciflc Plan Amendment prior to the flnal determination of the routing for the Norfolk Street Sewer Connection. The flnal routing does not impact the 19th Avenue Channel, and no additional permits are necessary.
NPDES. A National Pollutant Discharge Elimination System permit was issued in August 2008 concurrent with the commencement of demolition on the site.
Clean Water Act Section 401/404 Permit. No 401 Certiflcaflon or 404 Permit was required for development of the property.
Biological Resources. The EIR concluded that there were no occurrences of special- status species in the vicinity of the proposed development or areas immediately adjacent to the proposed development. Therefore, it concluded, the proposed development would not result in any adverse effects to special-status species.
Direct and Overiapping Governmental Obligations
Taxes, Charges and Assessments. The base tax rate on property in the Community Fadlifles District is 1.0%. However, property in the Community Facilities District is also subject, or will be subject, to additional annual charges and assessments (which are billed to property owners on a semi-annual basis). The following table shows tax bill amounts for a representative sampling of property types in the Community Facilities District.
41 Table 5 Overiapping Taxes, Charges and Assessments
Percent Estimated Amount of Total Market Rate Market Rate Market Rate Market Rate Assessed Unit Unit Unit Unit BMR Unit BMR Unit Estimated Assessed Valuation and Property Taxes Value > 2,300 SF 1,851-2,000 SF 1,251-1,400 SF <= 800 > 1,400 SF <= 800
Estimated Home Price '•''^ $946,091 $874,385 $662,884 $435,225 $271,000 $237,000 Less: Homeowner's Exemption (7,000) (7,000) (7.000) (7.000) (7.000) (7,000) Estimated Net Assessed Value 939,091 867,385 655,884 428,225 264,000 230,000
AD VALOREM PROPERTY TAXES ^^' Base Property Tax Rate 1.00000% $9,391 $8,674 $6,559 $4,282 $2,640 $2,300 San Mateo City Debt - Library Project 0.01290 121 112 85 55 34 30 San Mateo - Foster City Elementary SD Bonds 0.03380 317 293 222 145 89 78 San Mateo High SD Bonds 0.03810 358 330 250 163 101 88 San Mateo Junior College Bonds 0.01940 182 168 127 83 51 45
Total General Property Taxes 1.10420% $10,369 $9,578 $7,242 $4,728 $2,915 $2,540
ASSESSMENTS, SPECIAL T/0 Total Assessments, Special Taxes, and Parcel Charges $5,835 $5,395 $4,097 $2,701 $1,693 $1,484 PROJECTED TOTAL PROPERTY TAXES $16,205 $14,972 $11,340 $7,429 $4,608 $4,024 Projected Total Effective Tax Rate (as % of Assessed Value) 1.7128% 1.7123% 1.7106% 1.7070% 1.7005% 1.6978% (1) Based on pricing data provided by Wilson Meany L.P. Subject to change. (2) Based on fiscal year 2012-13 ad valorem rates. Rates subject to change. (3) Based on fiscal year 2012-13 assessment rates. Rates subjectto change. Source: David Taussig and Associates, Inc.; City of San Mateo; and County of San Mateo Auditor/Controller's Office. 42 Overlapping Debt. The dired and overiapping debt obligations of local agencies ^^^f/^S^^he property in the Con^^^^^^^^ Fadlities Sf as of August i, 2012 are shown in the following table. The table was prepared by David Taussig & Associates and rsin^ded for genial informatiin purposes onfy. The City has not reviewed this report for completeness or accuracy and makes no representation to that effect. Tables Direct and Overiapping Governmental Obligations Amount of Percent of Levy Levy District Share of Total Debt on Parcels in on Parcels in Total Debt 2012-2013 Outstanding (2) the District the District Outstanding '^' Overiapping Districts'''' Total Levy $2,106,483 T7020 0.3332% $28,240,000 $94,105 San Mateo City Debt - Library Project 18392 0.2339 160,795,007 376,043 San Mateo - Foster City Elementary SD Bonds 7.864,455 17,683.546 20'732 0.1172 379,871,699 445,359 San Mateo High SD Bonds 26.944,005 10;556 0.0392 595.269,994 233.223 San Mateo Junior College Bonds Total Overlapping Debt $ 1,148,730 Pius: Series 2012 Bonds 31,800,000 Plus: Series 2013 Bonds 26,000,000 Estimated Share of Direct and Overlapping Debt Allocable to tiie District 58,948.730 Assessed Value ^' $54,414,848 Estimated Assessed Value-to-Lien Ratio 0.92:1 (1) (2) provided by the County of San Mateo. (3) As ofAugust 1,2012. - ' (4) Raqed on Countv Assessor's roll equalized as of January 1, ^ui^. ^.^ ^ r. .« • Source: STauSg and Associates, Inc; County of San Mateo Auditor/Controller's Office; City of San Mateo 43 Appraised Property Value The following Is a summary of certain provisions of the Appraisal, which should be read in conjunction with the full text of the Appraisal attached as Appendix B. The City makes no representation as to the accuracy or completeness of the Appraisal. The Appraisal. An appraisal of the Taxable Property within the Community Facilities District dated December 14, 2012 (the "Appraisal"), was prepared by Seevers Jordan Ziegenmeyer (the "Appraiser") in connection with issuance of the Bonds. The purpose of the Appraisal was to estimate the market value of the fee simple estate of the property within the Community Facilities District that is subject to the Special Tax, i.e., the "Taxable Property" as deflned in the Rate and Method, as of November 15, 2012. Conditions and Assumptions. The Appraisal was based on certain assumptions and limiflng conditions set forth in Appendix B, including the following; • The Appraisal assumes a sale after reasonable exposure in a competitive market under conditions required for a fair sale. • The Appraiser assumed no adverse soil conditions, toxic substances or other environmental hazards that may interfere with or inhibit development of the subject property. » The Appraiser relied on development cost and fee information provided by the Master Developer. The Appraisal notes that these costs could change and that the Appraiser assumed the accuracy ofthe Master Developer's cost information. « The Appraisal values the subject property in its "as is" condition. Valuation Methods. The Appraiser used a discounted cash flow analysis (summarized below) to estimate the value of the Taxable Property in the Community Facilities District owned by the Master Developer, but used the sales comparison approach (described below) to estimate the value of the Taxable Property in the Community Facilities District owned by both TRI Pointe Homes and Shea Homes. In each case, the Appraiser assumed the property would sell in a single bulk transaction. Please see Appendix B for a complete description of each approach to value. Discounted Cash Flow Analysis. A discounted cash flow analysis is a procedure in which a discount rate is applied to a projected revenue stream generated from the sale of individual components of a project. As noted above, the Appraiser used the discounted cash flow analysis to estimate the value of Taxable Property owned by the Master Developer. The following paragraphs briefly summarize the various components of the discounted cash flow analysis. Revenue: The revenue component was derived by valuing the individual land use components using the sales comparison approach to value. The Appraiser identifled eight comparable sales of residential property (some of which occurred as eariy as 2009) and nine comparable sales of office/commercial property (some of which occurred as eariy as October 2007). See Appendix B for further information about the comparable sales. The Appraiser concluded that the available sales comparison data was sufficient for the purpose of valuing the subject property and pertinent to the valuation of the subject land. 44 Absorption Period: The Master Developer estimated it would require a four-year disposition period in order to sell the vanous land use components of the Master Developer's property and manage development within the project. However, the Appraiser surveyed other developers of master planned communities and concluded a sell-off of the subject property over a 30-month period is also within market parameters and reasonable in light of the unique and favorable market position of the Taxable Property. In light of the condiflon ofthe subject property, as well as the interest in the flrst release of developable Blocks within the Community Facilities District, the Appraiser undertook its discounted cash flow analysis based on a 36-month absorption period. Discount Rate: The Appraisal reports that, based on a sun/ey of residential, office and industrial developments by a leading publication in the appraisal industty, discount rates for land development projects (free and clear of flnancing, inclusive of developer's profit, and assuming entitlements are in place) ranged from 15% to 30%, with an average of 20.42%, during the second quarter of 2012 (down 58 basis points from the second quarter of 2011, but up 17 basis points from the Fourth Quarter 2011). The Appraisal concludes as follows: "Given the subject property is on track for development in the near term, coupled with the existing entitlements and SPAR approval for vertical construction, as well as its prime location in San Mateo, an IRR of 15% is considered reasonable for the subject under current market conditions given the duration of the absorption period (36 months). This discount rate, inclusive of developer's incentive (proflt), reflects the subject's characterization as one ofthe preeminent inflll developments in California." Remaining Expenses: The Appraisal considers the improvements in place on the Taxable Property owned by the Master Developer as of the date of value and deducts the remaining public infrastructure costs ($11,700,000) in the discounted cash flow analysis. Sales Comparison Approach. The sales comparison approach is based on the premise that the value of a property is directly related to the prices being generated for comparable, competitive properties in the marketplace. The Appraiser states in the Appraisal that this approach has broad applicability and is particulariy persuasive when there has been an adequate volume of recent, reliable transacflons of similar properties that indicate value patterns or trends in the market. As noted above, the Appraiser used the sales comparison approach to estimate the value of Taxable Property owned by Shea Homes and TRI Pointe Homes. The approach is identical to the one described above under the heading entitied "- Discounted Cash Flow Analysis - Revenue." Value Estimate. The Appraiser's estimate of the market value of the property within the Community Fadlities District, as ofthe November 15, 2012, date of value, is shown in the table below. It is subject to the various assumptions and conditions set forth in the Appraisal. Esflmated Market Value as of Owner Blocks November 15,2012 Master Developer RES 1, 2, 3.1b, 4, 5, 6, 7, 8 and 9; MU 1,2, 3 and 4; STA 1,2,'3, 4 and 5 $233,700,000 Shea Homes RES 3.1a 13,480,000 TRI Pointe Homes RES 3.2 22,510,000 Total $269,690,000 45 Confidential Information. In preparing the Appraisal, the Appraiser was provided the purchase prices for the parcels that the Master Developer's representatives sold to Shea Homes and TRI Pointe Homes. The Appraiser kept that information confidential at the request of the Master Developer (which continues to market other parcels to vertical developers), however the Appraisal included the following representation: The Appraiser does not believe it is necessary to indude in the appraisal the information it has been asked to keep confidential by the [Master] Developer's representatives for the appraisal to 1) clearly and accurately set forth our opinion of value in a manner that will not be misleading to the intended users ofthe appraisal - namely potenfial investors in the Bonds issued for the [Community Facilities] District; 2) contain sufficient informaflon to enable the intended users of the Appraisal to understand' the report properly and 3) dearly and accurately disclose any extraordinary assumpflon, hypothetical condiflon or limiting condition that directly affects the appraisal and indicate its impact on value. In addition, in connection with the closing of the Series 2013 Bonds, the Appraiser will certify the accuracy and completeness of the statements made in this Official Statement, in all material respects, regarding the Appraisal and the value of property within the Community Facilities District. Appraised Value to Burden Ratio The projected value to burden ratio for the Taxable Property in the Community Facilities District based on the appraised value set forth in the Appraisal ($269,690,000) and the outstanding prindpal amount of the Series 2012 Bonds ($31,800,000) and initial prindpal amount of the Series 2013 Bonds ($26,000,000) is 4.67:1. No assurance can be given that the appraised value will be realized in the event of a foreclosure action following delinquency In the payment of the Special Taxes. See "BOND HOLDERS' RISKS - Property Values and Property Development." 46 Projected Debt Service Coverage The following table shows projected debt service coverage on the Series 2012 Bonds and Series 2013 Bonds based on the assumptions described in the footnotes to the table. Table? Projected Debt Service Coverage Fiscal Year Series 2012 and Ending Maximum Administrative Available for Series 2013 Debt Debt Service June 30 Special Taxes *^* Expenses Debt Service <^* Service <^' Coverage 2013 $5,057,441 $(45,000) $5,012,441 $2,576,842.85 194.52% ^" 2014 5,158,590 (45,900) 5,112,690 3,157,000.00 161.95 ''" 2015 5,261,762 (46,818) 5,214,944 3,300,212.50 158.02 2016 5,366,997 (47,754) 5,319,243 3,353,831.26 158.60 2017 5,474,337 (48,709) 5,425,628 3,425,356.26 158.40 2018 5,583,824 (49,684) 5,534,140 3,488,806.26 158.63 2019 5,695,500 (50,677) 5,644,823 3,559,206.26 158.60 2020 5,809,410 (51,691) 5,757,719 3,623,512.50 158.90 . 2021 5,925,598 (52,725) 5,872,874 3,698,662.50 158.78 2022 6,044,110 (53,779) 5,990,331 3,769,187.50 158.93 2023 6,164,993 (54,855) 6,110,138 3,854,425.00 158.52 2024 6,288,293 (55,952) 6,232,341 3,928,225.00 158.66 2025 6,414,058 (57,071) 6,356,987 4,011,118.76 158.48 2026 6,542,340 (58,212) 6,484,127 4,085,818.76 158.70 2027 6,673,186 (59,377) 6,613,810 4,163,400.00 158.86 2028 6,806,650 (60,564) 6,746,086 4,248,125.00 158.80 2029 6,942,783 (61,775) 6,881,008 4,336,231.26 158.69 2030 7,081,639 (63,011) 7,018,628 4,424,712.50 158.62 2031 7,223,271 (64,271) 7,159,000 4,502,456.26 159.00 2032 7,367,737 (65,557) 7,302,180 4,604,443.76 158.59 2033 7,515,092 (66,868) 7,448,224 4,695,950.00 158.61 2034 7,665,393 (68,205) 7,597,188 4,788,550.00 158.65 2035 7,818,701 (69,569) 7,749,132 4,888,000.00 158.53 2036 7,975,075 (70,960) 7,904,115 4,978,200.00 158.77 2037 8,134,577 (72,380) 8,062,197 5,083,850.00 158.58 2038 8,297,268 (73,827) 8,223,441 5,188,250.00 158.50 2039 8,463,214 (75,304) 8,387,910 5,290,600.00 158.54 2040 8,632,478 (76,810) 8,555,668 5,390,050.00 158.73 2041 8,805,128 (78,346) 8,726,782 5,495,700.00 158.79 2042 8,981,230 (79,913) 8,901,317 5,606,150.00 158.78 (1) Based on the levy of the M aximum Special Tax against all Developed Property assuming ftil l development. (2) Maximum Special Taxes less Administrative Expenses. (3) Based on the scheduled debt service on the Series 2012 Bonds z md Series 2013 Bonds. Represents debt service on the Series 2012 Bonds and Series 2013 Bonds for the indicated year ending September 1, (4) Interest on the Series 2012 Bonds through September 1, 2013, was capitalized with a portion of ttieir proceeds. Interest on the Series 2013 Bonds through September 1, 2014, will be capitalized with a portion of their proceeds. Source: David Taussig and Associates, Inc; Stone & Youngberg, 47 PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT The information about the Master Developer and its properties and proposed development contained in this Official Statement has been provided by representatives of the Master Developer and has not been independently confirmed or verified by the UndenA/riter or the City. Neither the Underwriter nor the City makes any representation as to the accuracy or adequacy of the information contained in this section. No assurance can be given that the ownership of the Master Developer's properties will not change or that the proposed development will occur at all, will occur in a timely manner or will occur as presently anticipated and described below. There may be material adverse changes In this Information after the date of this Official Statement. Property Ownership General. The table below shows the ownership of property in the Community Facilities District as of Januaty 23, 2013. The Nueva School purchased MU 1 on January 23, 2013. See "PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT - Proposed Development by The Nueva School." This occurred after the date on which the City and Underwriter entered into the bond purchase contract for the Series 2013 Bonds (and the date ofthis Official Statement), but before the delivery date of the Series 2013 Bonds. This Official Statement, including the table below, reflects the occurrence of The Nueva School's purchase, but in all other respects provides information dated January 17, 2013. Table 8 Propertv Ownership as of Januarv 23, 2013 Projected Appraised Fiscal Year Share of Series % of Total Projected Planned Value as of 2012-13 2012 Bonds Projected Aggregate Property Residential Gross November 15, Maximum and Series Maximum Value-to-Lien (3) Owner Units Acres 2012 <^' Special Tax'^' 2013 Bonds Special Tax Ratio Bay Meadow Main Track Investors, LLC 694 5.79 $224,207,822,29 $4,407,101 $50,367,452,39 87.14% 4,45 Shea Homes 43 1,82 13,480,000,00 170,484 1,948,412,18 3.37 6,92 TRI Pointe Homes 63 3.04 22,510,000,00 243,482 2,782,689.42 4.81 8,09 The Nueva School '''"^' N/A 2,75 9,492,177.71 236,374 2,701,446.01 4.67 3,51 Totals: 800 83.40 $269,690,000,00 $5,057,441 $57,800,000,00 100,00% 4,67 (1) See "THE COMMUNITY FACIUTIES DISTRICT - Appraised Property Value - Confidential Information," (2) Development Information and projections as provided by the Master Developer. Maximum Special Taxes assumes buildout, as projected by the Master Developer, (3) The Share of Bonds allocation is based on the Projected Fiscal .Year 2012-13 Maximum Special Tax, the $26,000,000 Initial prinoipal amount of the Series 2013 Bonds and the $31,800,000 outstanding principal amount of the Series 2012 Bonds. (4) See "THE COMMUNITY FACILITIES DISTRICT - Appraised Property Value - Confidential Information," Due to the confidential nature of certain transactions, specific details and values were excluded from the Appraisal. Also, as each component was not individually valued, certain values have been extrapolated as the product of (1) the Total Aggregate Retail Value/Sales Revenue for the Master Developer components (as shown in the Appraisal) and (ii) a projected discounted cash flow factor of approximately 0,72, reflecting the ratio of the Master Developer's Value by Discounted Cash Flow Analysis over Its Total Aggregate Retail Value/Sales Revenue ($233,700,000 divided by $325,480,000, In each case as shown in the Appraisal), The Appraiser believes this Is a reasonable basis for extrapolating the values. (5) See"- Proposed Development by The Nueva School," The planned development Is expected to consist of approximately 135,000 square feet of class and administration space and approximately 38,000 square feet of subterranean garage space. The Special Tax Consultant has concluded that the garage space Is not counted in calculating the Special Tax for this property. Source: David Taussig and Associates, Inc.; Stone & Youngberg; SJZ Appraisals; Master Developer. 48 The table below shows the projected ownership of property in the Community Facilities District assuming that all property currently scheduled to be transferred by April 2013 is, in fact, transferred. The scheduled transfers are based on the following: • Shea Homes has an option to purchase 1.91 additional acres for the construction of 50 townhomes, which is scheduled to dose in April 2013. See "- Proposed Development by Shea Homes." A "request for proposal" for block RES 5 (entitied for 76 tuck-under townhouses) has been issued, and the Master Developer expects to commence the transfer to the successful bidder in the flrst quarter of 2013. See "- Proposed Development by Master Developer." • In early 2013, RES 1 is expected to be transferred to a new ownership venture that would most likely have the same ownership as the Master Developer. See "- Proposed Development by Master Developer." There can be no assurance that any of these transfers will occur within the time frame indicated above, or at all. 49 Table 9 Proiected Propertv Ownership Through April 2013 Projected Appraised Fiscal Year Share of Series % of Total Projected Planned Value as of 2012-13 2012 Bonds Projected Aggregate Property Residential Gross November 15, Maximum and Series Maximum Value-to-Lien Owner Units Acres 2012 (1) Special Tax '^' 2013 Bonds'^' Special Tax Ratio Bay Meadow Main Track Investors, LLC 568 67,34 $182,045,895,29 $3,760,699 $42,979,917,70 74,36% 4,24:1 Shea Homes '•" 93 3,73 23,632,752,86 365,763 4,180,201.57 7.23 5,65:1 TRI Pointe Homes 63 3,04 22,510,000,00 243,482 2,782,689.42 4.81 8,09:1 The Nueva School'''' NA 2.75 9,492,177,71 236,374 2,701,446.01 4,67 3.51:1 Owner of RES 5 <"' 76 4.38 20,542,451,15 319,175 3,647,759,78 6,31 5,63:1 Owner of RES 1 "' NA 2.16 11,466,722,99 131,947 1,507.985,52 2.61 7.60:1 Totals: 800 83.40 $269,690,000,00 $5,057,441 $57,800,000,00 100.00% 4,67:1 (1) See "THE COMMUNITY FACIUTIES DISTRICT - Appraised Property Value - Confidential Information," Due to the confidential nature of certain transactions, specific details and values were excluded from the Appraisal, Also, as each component was not individually valued, certain values have been extrapolated as the product of (I) the Total Aggregate Retail Value/Sales Revenue for the Master Developer components (as shown In the Appraisal) and (11) a projected discounted cash flow factor of approximately 0.72, reflecting the ratio of the Master Developer's Value by Discounted Cash Flow Analysis over Its Total Aggregate Retail Value/Sales Revenue ($233,700,000 divided by $325,480,000, In each case as shown In the Appraisal). The Appraiser believes this Is a reasonable basis for extrapolating the values. (2) Development Information and projections as provided by the Master Developer. Maximum Special Taxes assumes buildout, as projected by the Master Developer. (3) The Share of Bonds allocation Is based on the Projected Fiscal Year 2012-13 Maximum Special Tax, the $26,000,000 iniiial principal amount of the Series 2013 Bonds and the $31,800,000 outstanding principal amount of the Sedes 2012 Bonds. (4) See"- Proposed Development by Shea Homes." (5) See"- Proposed Development by The Nueva School," The planned development Is expected to consist of approximately 135,000 square feet of class and administration space and approximately 38,000 square feet of subterranean garage space. The Special Tax Consultant has concluded that the garage space Is not counted In calculating the Special Tax for this property, (6) See"- Proposed Development by Master Developer." (7) See"- Proposed Development by Master Developer." RES 1 Is comprised of 108 apartment units, but Is taxed per acre (not per unit) under the Rate and Method. Source; David Taussig and Associates, Inc.; Stone & Youngberg; SJZ Appraisals; Master Developer, The Master Developer. The Master Developer is a limited liability company formed in Delaware and registered to do business in California. See "- Proposed Development by the Master Developer." The Master Developer is 100% owned by Bay Meadows Land Company, LLC ("BMLC"), which is 100% owned by Stockbridge Real Estate Fund, LP ("Stockbridge Fund I"). The general partner of Stockbridge Fund I is Stockbridge Capital Partners, LLC, an affiliate of Stockbridge Capital Group, LLC ("Stockbridge"). Stockbridge is a real estate investment management flrm and registered investment advisor founded in 2003. The flrm and its affiliated advisor manage both commingled funds and separate accounts primarily on behalf of institutional investors, and also provide strategic advisory services with respect to real estate assets and portfolios. The flrm's portfolio comprises assets across the investment risk spectrum, including core, value-added and opportunistic strategies. Stockbridge and its afflliated advisor have approximately $5.2 billion of assets under management (as of September 2012) spanning all major real estate property types throughout the United States. The flrm provides a full complement of experflse in acquisitions, disposiflons, portfolio and asset management, flnance, capital markets and accounflng & reporting. Stockbridge is headquartered in San Francisco with offices in Chicago, New York and Los Angeles. Stockbridge maintains a website atwww.sbfund.com. This Internet address is Included for reference only, and the information on it is neither a part of nor Incorporated by reference Into this Official Statement. TRI Pointe Homes. TRI Pointe Homes, LLC operates as a homebuilding company. The company's services range from entitlement and land development to the construction and sale of individual single-family homes, and multi-use inflll and master-planned communities in Northern and Southern California. It has projects in San Mateo, San Jose, San Marcos, Morgan Hill, Riverside, La Habra, Oceanside,.Simi Valley, and Azusa. The company was incorporated in 50 2010 and is based in Irvine, California. It also has division offices in San Ramon, California, and (as of late 2012) Denver, Colorado. See "- Proposed Development by TRI Pointe Homes." Shea Homes. Shea Homes, a division of the J.F. Shea Co., Inc., is one of the United States' largest privately owned homebuilders. Headquartered in Walnut, California, the company develops new home communities in Arizona, California, Colorado, Florida, Nevada and Washington. Its communities offer home designs that include condominiums, townhomes, traditional single-family detached homes and luxuty residences. See "- Proposed Development by Shea Homes." The Nueva SchooL The Nueva School is a not-for-profit independent pre-kindergarten to 8th grade school located in Hillsborough, California in Hillsborough, California. See "- Proposed Development by The Nueva School." Development Manager. Wilson Meany L.P. ("Wilson Meany") has a long-standing relationship with Stockbridge as its development manager. Wilson Meany was founded in 2003 by development partners of William Wilson & Assodates, Wilson Meany LLC and Wilson/Equity Office. Collectively, Wilson Meany's partners and professionals have developed more than 10 million square feet. In addition to the proposed development in the Community Facilities District, Wilson Meany is also the development manager for several other high profile Stockbridge development projects in California, most notably Treasure Island and Hollywood Park. Wilson Meany maintains a website at www.wilsonmeany.com. This Internet address is included for reference only, and the information on it is neither a part of nor incorporated by reference Into this Official Statement. 51 Development Experience. Recent development experience of Wilson Meany and Stockbridge is illustrated by the following completed and in-progress projects: No. ofSq, No. of Lots Ft. No. OfSq, Ft Proiect Name City (Res) (Ofc) (Retail) Owner / Developer Status The Ferry Building San Francisco, n/a 175,000 65,000 Wilson Meany Completed in CA 2002 Shipley Square San Francisco, 78 units 8,000 Wilson Meany Completed in CA 2004 One Powell San Francisco, 44 units 40,000 Wilson Meany Completed in CA 2005 350 Jackson San Francisco, 9 luxury 2,400 Stockbridge/Wilson Completed in CA units Meany 2006 Hollywood Park Inglewood, CA 2,995 units 75,000 620,000 Stockbridge / Entitlements Wilson Meany complete. Infrastructure construction commences in summer 2013. Treasure Island San Francisco. 8,000 units 100,000 207,000 retail -i- Stockbridge / Entitlements CA 244,000 Other Wilson Meany complete. retail Infrastructure (entertainment / commences community) = in mid-2013. 451,000 total 1595 Pacific San Francisco, 41 units 2,934 Wilson Meany Completion CA estimated March 2013. 140 New San Francisco, 280,000 Stockbridge / Completion Montgomery CA Wilson Meany estimated September 2013 Catalina Burbank, CA 475,000 Stockbridge Completed in 2009, Add'l 475,000 entitled. Centennial Towers S, San Francisco, 322,000 Stockbridge Completed in CA 2009, Add'l 373,000 SF entitled. The 88 San Jose, CA 197 units 31,000 Stockbridge / Completed in Wilson Meany 2009, 80% of units have been sold. Central Park West Orange County, 1,078 units 20,000 Stockbridge 256 units CA completed. Sales underway, Add'l 819 units entitled. Proposed Development by the Master Developer General. The Community Facilities District consists of 83.3 gross acres, ofwhich 49.978 net (taxable) acres are entitled for the following development (subject to change as described in "THE COMMUNITY FACILITIES DISTRICT - Entitiements" above); " Residential: Entitied for 1,250 residential units and currently planned for 1,066 residential units. Ten percent of the residential units to be developed by "for profit" developers must be below-market rental or for-sale units ("BMR Units"); under the Development Agreement, the BMR Units must be constructed at 52 approximately the same time as the market-rate units on a given block. Of the 1,066 planned residential units: (i) 832 units are planned for development on. residential parcels and (ii) 234 units are planned for development on mixed-use parcels. In addition, from 50 to 68 units are planned for development by the City, or a developer selected by the City, as below-market rental units on a 1-acre parcel; they are not subject to the Special Tax. • Commerdal; Entitled for 1,250,000 square feet of commercial office space. Currently planned for 770,000 square feet in five class A office buildings and 31,500 square feet of professional space above ground fioor retail. In addition, an approximately 135,000-square foot high school campus is planned on a site approved for up to 200,000 square feet of commercial. The school has obtained the City's Site Plan and Architectural Review approval. See "- Proposed Development by The Nueva School." • Retail; Entitled for 150,000 square feet of retail space, and currently planned for 85,000 square feet of retail. See "THE COMMUNITY FACILITIES DISTRICT - Entitiements - Entitlement Status" for a description of certain conditions that will impad the timing of retail development. The proposed development also includes 16 acres of public streets and a public park system of approximately 15 acres, with individual parks ranging from 1.5 to 12 acres. Development Schedule. The timing of development of residential and non-residential development in the Community Fadlities District will be determined by market conditions and the entitlement conditions described above. The current and anticipated schedule for the next five years assumes transactions as indicated on Table 3. A map showing the location of each of the product types is located following Table 3. No assurance can be given that construction will be carried out on the schedule and according to the plans outlined below, or that the Master Developer's construction and sale plans will not change after the date of this Official Statement. Residential Development. The Master Developer generally expects to sell superpads (a parcel with legal entitlements created by a recorded subdivision map; the pad is mass graded; internal streets have not been cut and lot terracing has not been completed; utilities have been installed to the lot line) to home builders, who will complete the in-tract grading and utilities, construction and sale processes. With respect to the stacked flats (i.e., for-rent apartments or for-sale condominiums, at the builder's opflon), the Master Developer or Wilson Meany may build one or more of the buildings. In 2012, portions of RES 3 (entifled for 63 tuck-under townhouses and 93 on- grade townhouses) were sold to two homebuilders; Shea Homes and TRI Pointe Homes. Both builders commenced private infrastructure development in the summer of ,2012. TRI Pointe Homes began vertical construction in October 2012, and Shea Homes began vertical construcflon in November 2012. A "request for proposal" for block RES 5 (entitled for 76 tuck-under townhouses) has beeh issued, and the Master Developer expects to commence the transfer to the successful bidder in the flrst quarter of 2013; home construction is expected to commence later in 2013. The Master Developer also anflcipates that, in early 2013, RES 1 will be transferred to a new ownership venture that will most likely have the same ownership as the Master Developer. It will build RES 1 (108 for-rent apartment units) 53 commendng in 2013. Construcflon documents were submitted to the City for a building permit in November 20, 2012. The current and anflcipated schedule for future land sales and resulting home construction is based on projected home sales. The Master Developer projects the following land sales and resulting construction in 2013: RES 5 (76 townhouses), RES 2 (80 townhomes), MU 2 (88 flats), MU 4 (70 flats) and RES 7 (158 apartments); in 2014; RES 8 (74 townhouses) and MU 3 (76 flats); and in 2015; RES 9.1 (24 single famify homes), RES 9.2 (31 townhouses), RES 4 (71 flats) and RES 6 (54 flats). Non-Residential Development. The Master Developer expects to build the commercial and retail buildings and to own/lease them on a long term basis, subject to market conditions. The Master Developer is currently markeflng the office buildings planned for blocks STA 2, STA 3 and STA 4 for lease and expects to construct them when they are substantially leased. In light of current market condiflons, the Master Developer has completed construction documents on office buildings planned for blocks STA 2, STA 3 and STA 4 and has submitted for a foundation permit; if construcflon were started in 2013, the building(s) could be completed in 2014. The land for the office buildings will be transferred into a new ownership venture (which would most likely have the same ownership as the Master Developer) prior to construction. The Master Developer expects to transfer STA 1 into a new ownership venture in 2016 and STA 5 into a new ownership venture in 2015 (in both cases, under the same ownership as the transferring venture). Also, on Januaty 23, 2013, the Master Developer sold MU 1 to The Nueva School, which plans to construct an approximately 135,000-square foot high school campus on 2.75 acres of the parcel. The remaining acre of MU 1 is subject to a recorded offer of dedication to the City and may not be utilized by the school. See "THE COMMUNITY FACILITIES DISTRICT - Entitiements - Entiflement Status - Design Review." See "- Property Ownership - General" and "- Proposed Development by The Nueva School." 54 The Master Developer has only provided a five-year development schedule (Table 10) and a four-year proposed flnancing plan (Table 11) to the City for this Offidal Statement because the pace and nature of development in the Community Facilifles District is subject to market demand, and flnancing will be identifled when appropriate and as needed. Table 10 Anticipated Sales/Development Schedule Block Date RES 3.1a and 3.2 2012 02 MU 1 2013 01 RESI 2013 Ql RES 3.1b 2013 02 RES 5 2013 02 STA 2 2013Q3 STA 3 2013 Q3 STA 4 2013 03 MU2 2013 Q3 RES 2 2013 04 MU4 2013 04 RES 7 2013 Q4 RES 8 2014 02 MU3 2014 03 RES 9.2 2015 01 RES 6 2015Q1 RES 9.1 2015 Ql STA 5 2015Q2 RES 4 2015Q4 STAl 2016 Q2 The Master Developer expects to flnance construction of the non-residenflal buildings with a combination of equity and bank flnancing. The Master Developer has not yet begun to apply for bank flnancing. See "-Financing Plan" below. Master Developer's Financing Plan The Master Developer has spent approximately $111.1 million on the proposed development to date, including the Site Plan and Architectural Review process, but not including the purchase price of the property. As of October 2012, it esflmates that it will bear remaining costs of $42.9 million in order to complete its development plan. The Master Developer provided the projected schedule of sources and uses provided on the following page for the proposed development. The Master Developer has provided no assurances to the City that the sources of financing that will actually be available to the Master Developer will be sufficient to complete its currently projected property development and project construction. 55 Table 11 Proposed Financing Plan Bay Meadows Phase II Calendar Years 2013 through 2016 Total 12/31/2013 12/31/2014 12/31/2015 12/31/2016 Sources: Equity $ 4,900,000 $ 4,600,000 $ 300,000 Bond Proceeds 44,185,000 21,585,000 22,600,000 Net Residenflal Land Sales Proceeds 182,900,000 75,900,000 41,800,000 $65,200,000 Net Office & Retail Land Sales Proceeds 85,800,000 35,300,000 24,000,000 9,200,000 $17,200,000 Infrastructural Loan 15,000,000 15,000,000 Total Sources $332,685,000 $152,385,000 $88,700,000 $74,400,000 $17,200,000 Uses: Infrastructure Hard Costs $11,600,000 $6,100,000 $ 4,100,000 $ 1,500,000 . Infrastmcture Soft Costs 7,700,000 4,000,000 2,700,000 1,000,000 Interest Expense 800,000 800,000 Repayment of Infrastructure Loan 35,000,000 35,000,000 - - - Total Uses $55,100,000 $45,900,000 $ 6,800,000 $ 2,400,000 Net Gash Flow $277,585,000 $106,485,000 $81,900,000 $72,000,000 $17,200,000 History of Property Tax Payments; Loan Defaults; Bankruptcy. The Master Developer, Stockbridge Capital Partners, LLC, and Wilson Meany have each represented as follows; To its actual knowledge, it (and, in the case of Stockbridge Capital Partners, LLC, Stockbridge Real Estate Fund, LP) has never defaulted, after noflce and lapse of any applicable cure period, to any material extent in the payment of ad valorem taxes, special taxes or assessments in connection with the Community Facilities District or any other property in California within the past five years. To its actual knowledge, it (and, in the case of Stockbridge Capital Partners, LLC, Stockbridge Real Estate Fund, LP) is not currently in default, after noflce and lapse of any applicable cure period, on any loans, lines of credit or other obligation, the result of which could materially adversely affect the development of property owned by the Master Developer in the Community Facilities District. It (and, in the case of Stockbridge Capital Partners, LLC, Stockbridge Real Estate Fund, LP) is solvent and, to its actual knowledge, no proceedings are pending or overtly threatened in which it (and, in the case of Stockbridge Capital Partners, LLC, Stockbridge Real Estate Fund, LP) may be adjudicated as bankrupt or become the debtor in a bankruptcy proceeding, or discharged from all of its respective debts or obligaflons, or granted an extension of time to pay its respective debts or a reorganization or readjustment of its respective debts. To its actual knowledge, there is no litigation or administrative proceeding of any nature in which it (or, in the case of Stockbridge Capital Partners, LLC, Stockbridge Real Estate 56 Fund, LP) has been served, or that is pending or overtly threatened, that, if successful, would materially adversely affect the ability of the Master Developer to complete the development and sale of its property within the Community Facilities District, or pay the Special Taxes or ordinaty ad valorem property tax obligations when due on its property within the Community Facilities District, or that challenges or questions the validity or enforceability of the Bonds, the Trust Agreement, the Master Developer Continuing Disclosure Certiflcate or the Bond Purchase Contract. Proposed Development by TRI Pointe Homes General. On April 10, 2012, TRI Pointe Homes purchased 3.04 acres of property in the Community Facilifles District, where it plans to build Amelia, a project consisting of 10 buildings containing a total of 63 townhomes. Development Schedule. Construcflon ofthe project commenced in October 2012, and TRI Pointe Homes anticipates completion in June 2014, flrst occupancy in June 2013 and sell out in June 2014. Financing Plan. TRI Pointe Homes estimates that its construction costs will be between $10 million and $15 million and plans to flnance that cost using a combination of the debt secured by the property and its available equity. Proposed Development by Shea Homes General. On April 27, 2012, Shea Homes purchased 1.82 acres for the construction of 43 townhomes. It also has an option to purchase 1.91 additional acres for the construction of 50 townhomes, which is scheduled to close in April 2013. The project, in the aggregate, would consist of a total of 93 townhomes in 12 buildings. Development Schedule. Land development for the project is undenway, with streets recently paved. Model home and first production building has also begun, and sales are anticipated to commence in early 2013. Closings of the individual townhouses are expected to begin in mid-2013, and project completion is expected in late 2015. Financing Plan. Shea Homes estimates that its total project construction costs for both the land development and vertical building construction will be approximately $18 million, it plans to finance those costs using its available equity or by obtaining debt, which may be secured by the property. Proposed Development by The Nueva School General. On January 23, 2013, The Nueva School purchased MU 1. It plans to build a multi-building, multi-level, approximately 1.35,000-square foot high school campus (excluding a subterranean parking garage, which the Special Tax Consultant has conduded is not subject to the Special Tax) on 2.75 acres of the parcel. The remaining acre of MU 1 is subject to a recorded offer of dedication to the City and may not be utilized by the school. See '.'THE COMMUNITY FACILITIES DISTRICT - Entitiements - Entitiement Status - Design Review." Development Schedule. The project's development is scheduled to occur in two phases. The initial phase is planned to consist of approximately 125,000 square feet of construction, with occupancy targeted for the fall of 2014. It will result in a fully-operational high 57 school facility and include an approximately 38,000 square-foot subterranean parking garage (see "- General" above). The timing of future phases is still to be determined. The development schedule is currentiy subject to obtaining the City's requisite construction permits. The Nueva School has obtained the City's SPAR approval. See 'THE COMMUNITY FACILITIES DISTRICT - Entitiements - Entitiement Status - Design Review." Financing Plan. The Nueva School estimates that its construction costs will be between $40 million and $50 million and plans to finance that cost using a combination of debt, secured by the property, and amounts pledged to it that it plans to collect during the project construction period. BOND OWNERS' RISKS The purchase of the Series 2013 Bonds described in this Official Statement involves a degree of risk that may not be appropriate for some Investors. The following includes a discussion of some of the risks, in no particular order of importance, which should be considered before making an Investment decision. Limited Obligation ofthe City to Pay Debt Service The City has no obligation to pay principal of and interest on the Series 2013 Bonds if Special Tax collections are insufficient for that purpose, other than from amounts, if any, on deposit in the Reserve Fund. The City is not obligated to advance its own funds to pay debt sen/ice on the Series 2013 Bonds. Levy and Collection ofthe Special Tax The prindpal source of payment of principal of and interest on the Series 2013 Bonds is the proceeds of the annual levy and collection of the Spedal Tax against Taxable Property within the Community Fadlities District. The annual levy of the Special Tax is subject to the Maximum Spedal Tax rate authorized in the Rate and Method. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Spedal Tax, together with other available funds, will not be sufficient to pay debt sen/ice on the Series 2013 Bonds. Because the Special Tax formula set forth in the Rate and Method is not based on property value, the levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular parcels of Taxable Property and the amount of the levy of the Special Tax against those parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of the parcels of Taxable Property and their proportionate share of debt sen/ice on the Series 2013 Bonds, and certainly not a direct relationship. The following are some of the factors that might cause the levy of the Special Tax on any particular parcel of Taxable Property to vary from the Spedal Tax that might othenA/ise be expected; Reduction in the number of parcels of Taxable Property for such reasons as acquisition of Taxable Property by a governmental entity and failure of the government to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or 58 federal agency, immunity from taxation, thereby resulting in an increased tax burden on the remaining taxed parcels. Failure of the owners of Taxable Property to pay the Special Tax and delays in the collection of or inability to collect the Spedal Tax by tax sale or foredosure and sale of the deliniquent parcels, thereby resulting in ah increased tax burden on the remaining parcels. Development of other parcels of Taxable Property less rapidly than expected, thereby resulting in delay in application of development factors in the Special Tax formula to the other parcels of Taxable Property and resulting in an increased tax burden on the parcel of Taxable Property. Except as set forth above under "SECURITY FOR THE SERIES 2013 BONDS - Special Taxes" and " - Rate and Method," the Trust Agreement provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described in "SECURITY FOR THE SERIES 2013 BONDS - Covenant to Foreclose" and in the Law, is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ordinary ad valorem property taxes. Under these procedures, ff taxes are unpaid for a period of five years or more, the property is subject to sale by the County. If sales or foreclosures of property are necessaty, there could be a delay in payments to owners of the Series 2013 Bonds pending such sales or the prosecuflon of foredosure proceedings and receipt by the City of the proceeds of sale if the IReserve Fund is depleted. See "SECURITY FOR THE SERIES 2013 BONDS - Covenant to Foreclose." Payment of Special Tax is not a Personal Obligation of Property Owners An owner of Taxable Property is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligaflon only against the parcels of Taxable Property. If, after a default in the payment of the Spedal Tax and a foreclosure sale by the City, the resulting proceeds are insufficient to pay the delinquent Special Taxes, taking into account other obligations also constituting a lien against the parcels of Taxable Property, the City has no recourse against the owner. Appraised Values The Appraisal attached in Appendix B estimates the market value of the taxable property within the Community Facilities District This market value is merely the present opinion of the Appraiser, and is subject to the assumptions and limiting conditions stated in the Appraisal. The City has not sought the present opinion of any other appraiser of the value of the taxed parcels. A different present opinion of value might be rendered by a different appraiser. The opinion of value relates to sale by a willing seller to a willing buyer, each having similar information and neither being forced by other drcumstances to sell or to buy. Consequently, the opinion is of limited use in predicting the selling price at a foreclosure sale, because the sale is forced and the buyer may not have the beneflt of full informaflon. In addition, the opinion is a present opinion, based upon present facts and circumstances. Differing facts and drcumstances may lead to differing opinions of value. The 59 appraised value is not evidence of future value because future facts and circumstances may differ signiflcantly from the present. No assurance can be given that any ofthe Taxable Property in the Community Facilities District could be sold for the estimated market value contained in the Appraisal if that property should become delinquent in the payment of Special Taxes and be foreclosed upon. Property Values and Property Development The value of Taxable Property within the Community Facilifles District is a critical factor in determining the investment quality of the Series 2013 Bonds, ff a property owner defaults in the payment ofthe Special Tax, the City's only remedy is to foredose on the delinquent property in an attempt to obtain funds with which to pay the delinquent Special Tax. Land development and land values could be adversely affected by economic and other factors beyond the City's control, such as a general economic downturn, adverse judgments in future litigation that could affect the scope, timing or viability of development, relocation of employers out of the area, stricter land use regulations, shortages of water, electricity, natural gas or other utilities, destruction of property caused by earthquake, flood or other natural disasters, environmental pollution or contamination, or unfavorable economic condiflons. The City has not evaluated development risks. Because these are largely business risks of the type that property owners customarily evaluate individually, and Inasmuch as changes in land ownership may well mean changes in the evaluation with respect to any particular parcel, the City is issuing the Series 2013 Bonds without regard to any such evaluation. Thus, the creation of the Community Facilities District and the issuance of the Series 2013 Bonds In no way imply that the City has evaluated these nsks or the reasonableness of these risks. The following is a discussion of specific risk factors that could affect the timing or scope of property development in the Community Fadlifles District or the value of property in the Community Facilifles District. Land Development. Land values are influenced by the level of development in the area in many respects. First, undeveloped or partially developed land is generally less valuable than developed land and provides less security to the owners ofthe Series 2013 Bonds should it be necessary for the City to foredose on undeveloped or parflally developed property due to the nonpayment of Special Taxes. Second, failure to complete development on a timely basis could adversely affect the land values of those parcels that have been completed. Lower land values would result in less security for the payment of principal of and interest on the Series 2013 Bonds and lower proceeds from any foreclosure sale necessitated by delinquencies in the payment of the Special Tax. See "THE COMMUNITY FACILITIES DISTRICT - Appraised Value to Burden Ratios." No assurance can be given that the proposed development within the Community Fadlifles District will be completed, and in assessing the investment quality of the Series 2013 Bonds, prospective purchasers should evaluate the risks of non-compleflon. Risks of Real Estate Investment Generally. Continuing development of land within the Community Fadlities District may be adversely affected by changes in general or local economic conditions, fluctuations in or a deterioration of the real estate market, increased 60 construction costs, development, flnancing and marketing capabilifles of individual property owners, water or electricity shortages, and other similar factors. Development in the Community Facilifles District may also be affected by development in surrounding areas, which may compete with the Community Facilities District. In addition, land development operations are subjectto comprehensive federal, state and local regulations, including environmental, land use, zoning and building requirements. There can be no assurance that proposed land development operations within the Community Facilities District will not be adversely affected by future government policies, including, but not limited to, governmental policies to restrict or control development, or future growth control initiatives. There can be no assurance that land development operations within the Community Facilities District will not be adversely affected by these risks. Disasters. The value ofthe Taxable Property in the future can be adversely affected by a variety of natural occurrences, particularly those that may affect infrastructure and other public improvements and private improvements on the Taxable Property and the continued habitability and enjoyment of such private improvements. The areas in and surrounding the Community Facilities District, like those in much of California, may be subject to unpredictable seismic activity. Other natural disasters could include, without limitation, landslides, floods, droughts or tornadoes. One or more natural disasters could occur and could result in damage to improvements of vatying seriousness. The damage may entail signiflcant repair or replacement costs and that repair or replacement may never occur either because of the cost, or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances there could be signiflcant delinquencies in the payment of Special Taxes, and the value of the Taxable Property may well depreciate or disappear. Speciflcalfy with respect to seismic issues, see "THE COMMUNITY FACILITIES DISTRICT - Environmental Condiflons." Speciflcally with respect to flood issues, the EIR explains that the land in the Community Facilities District lies within the area of potential inundation in the event of failure of one of two nearby dams. However, because of the low probability of dam failure and the dispersed nature of flooding that would occur, the EIR concludes that the impacts associated with the risk of dam failure are not signiflcant. The Appraisal reports that the property in the Community Fadlities District lies in Flood Zone X, which are areas determined to be outside of the 500-year flood plain. Legal Requirements. Other events that may affect the value of Taxable Property include changes in the law or application of the law. Such changes may indude, without limitation, local growth control initiatives, local utility connection moratoriums and local application of statewide tax and governmental spending limitation measures. Hazardous Substances. One of the most serious risks in terms of the potential reduction in the value of Taxable Property is a claim with regard to a hazardous substance. In general, the owners and operators of Taxable Property may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Superfund Act," is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also 61 stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the Taxable Property be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. As described in 'THE COMMUNITY FACILITIES DISTRICT - Appraised Property Value," the Appraisal assumes that no toxic waste or groundwater contamination problems exist on the property. Accordingly, the Appraisal does not take into account the possible reduction in marketability and value of any of the Taxable Property by reason of the possible liability of the owner or operator for the remedy of a hazardous substance condition of the parcel. Although the City is not aware that the owner or operator of any of the Taxable Property has such a current liability with respect to any of the Taxable Property, it is possible that such liabilities do currentiy exist and that the City is not aware of them. Further, it is possible that liabilities may arise in the future with respect to any of the Taxable Property resulting from the existence, currently, on the parcel of a substance presently classifled as hazardous but that has not been released or the release of which is not presently threatened, or may arise in the future resulflng from the existence, currentiy on the parcel of a substance not presentiy classifled as hazardous but that may in the future be so classifled. Further, such liabilifles may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could signiflcantly affect the value of Taxable Property that is realizable upon a delinquency. See "THE COMMUNITY FACILITIES DISTRICT - Environmental Condiflons." Endangered and Threatened Species. It is illegal to harm or disturb any plants or animals in their habitat that have been listed as endangered spedes by the United States Fish & Wildlife Sen/ice under the Federal Endangered Species Act or by the California Fish & Game Commission under the California Endangered Spedes Act without a permit. Although the Master Developers believes that no federally listed endangered or threatened species would be affected by the proposed development within the Community Fadlifles District without a permit, the discovety of an endangered plant or animal could delay development of vacant property in the Community Fadlities District or reduce the value of undeveloped property. See "THE COMMUNITY FACILITIES DISTRICT - Environmental Conditions." Concentration of Property Ownership As of the date of issuance of the Series 2013 Bonds, four entities own all the Taxable Property in the Community Fadlities District Failure of any property owner to pay installments of the Special Tax when due could result in the depletion of the Resen/e Fund prior to reimbursement from the resale of foreclosed property or payment of the delinquent Spedal Tax and, consequently, an insuffidency of Special Tax proceeds to meet obligations under the Trust Agreement. In that event, there could be a delay or failure in payments of the principal of and interest on the Series 2013 Bonds. Failure of any property owner to complete development as proposed on its property in the Community Facilities District for any reason could increase the chances that it would not pay installments of Special Taxes when due (see "- Property Values and Property Development" above). 62 Other Possible Claims Upon the Value of Taxable Property While the Spedal Taxes are secured by the Taxable Property, the security only extends to the value of such Taxable Property that is not subject to priority and parity liens and similar claims. The table in the section entitied "THE COMMUNITY FACILITIES DISTRICT - Dired and Overiapping Governmental Obligations" shows the presently outstanding amount of governmental obligations (with stated exclusions), the tax or assessment for which is or may become an obligation of one or more of the parcels of Taxable Property, The table also states the additional amount of general obligation bonds the tax for which, if and when issued, may become an obligation of one or more of the parcels of Taxable Property. The table does not speciflcally identify which of the governmental obligaflons are secured by liens on one or more of the parcels of Taxable Property. In addition, other governmental obligations may be authorized and undertaken or issued in the future, the tax, assessment or charge for which may become an obligation of one or more of the parcels of Taxable Property and may be secured by a lien on a parity with the lien of the Special Tax securing the Series 2013 Bonds. In general, as long as the Spedal Tax is collected on the County tax roll, the Special Tax and all other taxes, assessments and charges also collected on the tax roll are on a parity, that is, are of equal priority. Questions of priority become signiflcant when collecflon of one or more of the taxes, assessments or charges is sought by some other procedure, such as foreclosure and sale. Although the Special Taxes will generally have priority over non-governmental liens on a parcel of Taxable Property, regardless of whether the non-governmental liens were in existence at the time of the levy of the Special Tax, this result may not apply in the case of bankruptcy. See "- Bankruptcy ahd Foreclosure Delays" below. Purchasers at a foreclosure sale will purchase the property subject to the obligation to pay any Special Taxes that will be levied in the future. Special Tax revenues include proceeds of a foreclosure sale and, therefore, if amounts held under the Trust Agreement are not suffident to pay debt sen/ice on the Series 2013 Bonds and delinquencies in Special Tax payments by property owners have occurred, owners of the Series 2013 Bonds will be paid following foreclosure of the lien in respect of the delinquent Special Taxes from Special Tax revenues, ifany, collected in any such foredosure action. Exempt Properties Certain properties are exempt from the Special Tax in accordance with the Rate and Method and the Law, which provides that properties or entities of the state, federal or local government are exempt from the Spedal Tax; provided, however, that property within the Community Facilities District acquired by a public entity through a negotiated transaction or by gift or devise, which is not othenA/ise exempt from the Special Tax, will continue to be subject to the Spedal Tax. See "SECURITY FOR THE SERIES 2013 BONDS - Rate and Method." In addition, although the Law 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 Law have not been tested, meaning that such property could become exempt from the Special Tax. 63 The Law further provides that no other properties or entities are exempt from the Spedal 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 or method of apportionment of an existing special tax. Depletion of Reserve Fund The Resen/e Fund is to be maintained at an amount equal to the Required Bond Reserve. See "SECURITY FOR THE SERIES 2013 BONDS - Resen/e Fund." Funds in the Reserve Fund may be used to pay principal of and interest on the Bonds if insufficient funds are available from the proceeds of the levy and collection of the Spedal Tax against property within the Community Facilities District. If funds in the Resen/e Fund for the Bonds are depleted, the funds can be replenished from the proceeds of the levy and collection of the Special Tax that are in excess of the amount required to pay all amounts to be paid to the Bond holders pursuant to the Trust Agreement. However, no replenishment from the proceeds of a Special Tax levy can occur as long as the proceeds that are collected from the levy of the Spedal Tax against property within the Community Facilities District at the maximum Special Tax rates, together with other available funds, remains insufficient to pay all such amounts. Thus it is possible that the Reserve Fund will be depleted and not be replenished by the levy ofthe Special Tax. Bankruptcy and Foreclosure Delays Bankruptcy. The payment of the Special Tax and the ability of the City to foredose the lien of a delinquent unpaid tax, as discussed in "SECURITY FOR THE SERIES 2013 BONDS," may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State of California relating to judicial foreclosure. The various legal opinions to be delivered concurrentiy with the delivety ofthe Series 2013 Bonds (induding Bond Counsel's approving legal opinion) will be qualifled as to the enforceability ofthe various legal instruments by bankruptcy, insolvency, reorganizaflon, moratorium and other similar laws affecting creditors' rights, by the applicaflon of equitable prindples and by the exercise of judidal discretion in appropriate cases. Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, bankruptcy of a property owner or any other person claiming an interest in property subject to the Special Taxes coijld result in a delay in superior court foreclosure proceedings and could result in the possibility of Special Tax installments not being paid in part or in full. Such a delay would increase the likelihood of a delay or default in payment of the principal of and interest on the Series 2013 Bonds. To the extent that property in the Community Facilities District continues to be owned by a limited number of property owners, the chances are increased that the Reserve Fund established for the Series 2013 Bonds could be fully depleted during any such delay in obtaining payment of delinquent Special Taxes. As a result, sufflcient moneys would not be available in the Resen/e Fund for transfer to the Bond Fund to make up shortfalls resulflng from delinquent payments of the Special Tax and thereby to pay principal of and interest on the Series 2013 Bonds on a timely basis. Federal Government Interests in Properties. The ability of the City to foreclose the lien of delinquent unpaid Special Tax installments may be limited with regard to properties in which the Federal Deposit Insurance Corporaflon (the "FDIC"), the Drug Enforcement Agency, the Internal Revenue Service, or other federal agency has or obtains an interest. Federal courts have held that, based on the supremacy dause of the United States Constitution, in the absence of Congressional intent to the contraty, a state or local agency 64 cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest. The supremacy clause of the United States Constitution reads as follows; "This Constitution, and the Laws ofthe United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in evety State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding." This means that, unless Congress has othenA/ise provided, if a federal governmental entity owns a parcel that is subject to Special Taxes within the Community Fadlities District but does not pay taxes and assessments levied on the parcel (including Special.Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the City wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government's mortgage interest. In Rust v. Johnson (9th Circuit; 1979) 597 F.2d 174, the United States Court of Appeal, Ninth Circuit held that the Federal National Mortgage Association ("FNMA") is a federal instrumentality for purposes ofthis doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States. The City has not undertaken to determine whether any federal governmental entity currentiy has, or is likely to acquire, any interest (including a mortgage interest) in any of the parcels subject to the Spedal Taxes within the Community Facilities District, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the Series 2013 Bonds are outstanding. FDIC. In the event that any flnancial institution making any loan which is secured by real property within the Community Facilities District is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, resulting in ownership of the property by the FDIC, then the ability of the Community Facilities Districtto collect interest and penalties specifled by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited. The FDIC's policy statement regarding the payment of state and local real property taxes (the "Policy Statement") provides that property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderiy administraflon of the insfltuflon'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 flnes 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 65 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 foredosure without the FDIC's consent. The Policy Statement states that the FDIC generalfy 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 Law and a special tax formula which determines the special tax due each year are speciflcally identifled in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity. The Ninth Circuit has issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from special taxes levied pursuant to the Law. The City is unable to predict what effect the applicaflon of the Policy Statement would have in the event of a delinquency in the payment of Special Taxes on a parcel within the Community Fadlities District in which the FDIC has or obtains an interest, although prohibiting the lien of the Spedal Taxes tb be foreclosed out at a judicial foreclosure sale could reduce or eliminate the number of persons willing to purchase a parcel at a foredosure sale. Such an outcome could cause a draw on the Resen/e Fund and perhaps, ultimately, ff enough property were to become owned by the FDIC, a default in payment on the Series 2013 Bonds. Disclosure to Future Purchasers The City has recorded a notice of the Special Tax lien in the Office of the County Recorder. While title companies normally refer to such notices in tifle reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such spedal tax obligaflon in the purchase of a parcel of land or a home in the Community Fadlifles District or the lending of money secured by property in the Community Facilifles District. The Law and the Goals and Polides require the subdivider of a subdivision (or its agent or representative) to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a Mello-Roos special tax of the existence and maximum amount of such spedal tax using a statutorily prescribed form. California Civil Code Section 1102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with these requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Spedal Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due. No Acceleration Provisions The Series 2013 Bonds do not contain a provision allowing for the acceleration of the Series 2013 Bonds in the event of a payment default or other default under the terms of the Series 2013 Bonds or the Trust Agreement. Under the Trust Agreement, a Bond holder is given the right for the equal benefit and protection of all Bond holders similarly situated to pursue certain remedies. See "APPENDIX C - Summaty of Trust Agreement." 66 Loss of Tax Exemption As discussed under the caption "LEGAL MATTERS - Tax Matters," interest on the Series 2013 Bonds might become includable in gross income for purposes of federal income taxation retroactive to the date the Series 2013 Bonds were issued as a result of future acts or omissions of the City in violation of its covenants in the Trust Agreement. In addition, Congress has considered in the past, and may consider in the future, legislative proposals, including some that carty retroactive effective dates, that, if enacted, would alter or eliminate the exclusion from gross income for federal income tax purposes of interest on municipal bonds, such as the Series 2013 Bonds. Prospective purchasers of the Series 2013 Bonds should consult their own tax advisors regarding any pending.or proposed federal tax legislation. The City can provide no assurance that federal tax law will not change while the Series 2013 Bonds are outstanding or that any such changes will not adversely affect the exclusion of interest on the Series 2013 Bonds from gross income for federal income tax purposes. The Trust Agreement does not contain a special redemption feature triggered by the occurrence of an event of taxability. As a result, if interest on the Series 2013 Bonds were to be includable in gross income for purposes of federal income taxation, the Series 2013 Bonds would continue to remain outstanding until maturity unless eariier redeemed pursuant to optional or mandatory redemption or redemption upon prepayment of the Special Tax. See "THE SERIES 2013 BONDS - Redemption." If the exclusion of interest on the Series 2013 Bonds from gross.income for federal income tax purposes were amended or eliminated, it is likely that the market price for, or marketability of, the Series 2013 Bonds would be adversely impacted. Voter Initiatives Under the California Constitution, the power of initiative is resen/ed to the voters for the purpose of enacting statutes and constitutional amendments. Since 1978, the voters have exerdsed this power through the adoption of Proposition 13 and similar measures, the most recent of which was approved as Proposition 218 in the general election held on November 5, 1996. Any such initiative may affect the collection of fees, taxes and other types of revenue by local agencies such as the Community Facilities District. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter- approved initiatives, possibly to the extent of creating cash-flow problems in the payment of outstanding obligations such as the Series 2013 Bonds. Proposition 218—Voter Approval for Local Government Taxes—Limitation on Fees, Assessments, and Charges—Initiative Constitutional Amendment added Artides XlllC and XIIID to the California Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property-related fees and charges. The Spedal Taxes and the Series 2013 Bonds were each authorized by not less than a two-thirds vote of the landowners within the Community Facilities District who constituted the qualifled.electors of the Community Fadlifles District at the time of such voted authorization. The City believes, therefore, that issuance of the. Series 2013 Bonds does not require the 67 conduct of further proceedings under the Law, Proposition 218 or any other provision of California law requiring a two-thirds vote to levy taxes (such as Proposition 26 adopted by the California's voters on November 2, 2010). Proposition 218 As noted above, Proposition 218 added Article XlllC and Article XIIID to the California Constitution. According to the "Titie and Summaty" of Proposition 218 prepared by the California Attorney General, Proposition 218 limits "the authority of local governments to impose taxes and property-related assessments, fees and charges." Provisions of Proposition 218 have been and will continue to be interpreted by the courts. Proposition 218 could potentially impact the Special Taxes otherwise available to the Community Facilities District to pay the principal of and interest on the Series 2013 Bonds as described below. Among other things. Section 3 of Artide XlllC states, "...the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge." The Law 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 Law prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any spedal tax pledged to repay any debt incurred pursuant to the Law unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, the Governor of the State signed a bill into law enacting Government Code Section 5854, which states that: Section 3 of Artide XlllC ofthe California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneflcial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Secflon 10 of Article I ofthe United States Constitution. Accordingly, although the matter is not free from doubt, it is likely that Article XlllC 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 2013 Bonds. It may be possible, however, for voters or the City, acting under authority conferred by the Community Fadlities District, to reduce the Special Taxes in a manner that does not interfere with the timely repayment of the Series 2013 Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessaty for the timely retirement of the Series 2013 Bonds. Therefore, no assurance can be given with respect to the levy of Special Taxes for Expenses (as deflned in the Trust Agreement). Nevertheless, the City has covenanted that it will annually levy the Spedal Tax against all Taxable Property in the Community Fadlities District and make provision for the collecflon of the Special Tax, in amounts that will be sufficient, after making reasonable allowances for conflngencies and errors in the estimates, to yield proceeds equal to the amounts required for compliance with the agreements, condiflons, covenants and terms contained in the Trust 68 Agreement, and that in any event will be sufficient to pay the interest on and principal of and all Mandatoty Sinking Account Payments for, and redemption premiums, if any, on the Series 2013 Bonds as they become due and payable, and to pay all current Expenses as they become due and payable in accordance with the provisions and terms of the Trust Agreement. However, no assurance can be given as to the enforceability of the foregoing covenant. The interpretation and application of Article XlllC and Article XIIID 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 "—Limitations on Remedies." Limitations on Remedies Remedies available to the owners of the Series 2013 Bonds may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Series 2013 Bonds orto presen/e the tax-exempt status ofthe Series 2013 Bonds. Bond Counsel has limited its opinion as to the enforceability of the Series 2013 Bonds and of the Trust Agreement to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or other similar laws affecting generally the enforcement of creditors' rights, by equitable principles, by the exercise of judicial discretion and by limitations on remedies against municipalities in the State of California. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modiflcation ofthe rights ofthe owners ofthe Series 2013 Bonds. Absence of Secondary Market for the Series 2013 Bonds No application has been made for a credit rating on the Series 2013 Bonds, and it is not known whether a credit rating could be secured for the Series 2013 Bonds either now or in the future. There can be no assurance that there will ever be a secondary market for purchase or sale of the Series 2013 Bonds. From flme to time there may be no market for them, depending upon prevailing market condiflons, the flnancial condition or market position of flrms who may make the seeondaty market, the flnancial condition and results of operations of the owners of property located within the boundaries ofthe Community Fadlities District, and the extent ofthe proposed development of parcels within the Community Facilities District. The Series 2013 Bonds should, therefore, be considered long-term investments in which funds are committed to maturity, subject to redempflon prior to maturity as described in this Official Statement. LEGAL MATTERS Legal Opinions The validity of the Series 2013 Bonds and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe, LLP, Bond Counsel to the City. A complete copy ofthe proposed form of Bond Counsel opinion is contained in Appendix H. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Jones Hall, A Professional Law Corporation, San Francisco, California is serving as Disdosure Counsel to the City. 69 Tax Matters In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the City ("Bond Counsel"), based upon an analysis of existing laws, regulations, rulings and court dedsions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Series 2013 Bonds is exduded from gross income for federal income tax purposes under Section 103 of the Intemal 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 2013 Bonds is not a spedflc preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel obsen/es that such interest is induded in adjusted current earnings when calculaflng corporate alternative minimum taxable income. A complete copy ofthe proposed form of opinion of Bond Counsel is set forth in Appendix H. To the extent the issue price of any maturity of the Series 2013 Bonds is less than the amount to be paid at maturity of such Series 2013 Bonds (exduding amounts stated to be interest and payable at least annuaify over the term of such Series 2013 Bonds), the difference constitutes "original issue discount," the accrual of which, to the extent properly allocable to each Beneflcial Owner thereof, is treated as interest on the Series 2013 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 parflcular maturify of the Series 2013 Bonds is the flrst price at which a substantial amount of such maturity of the Series 2013 Bonds is sold to the public (exduding Series 2013 Bond houses, brokers, or similar persons or organizaflons acting in the capacity of undenA/riters, placement agents or wholesalers). The original issue discount with resped to any maturity ofthe Series 2013 Bonds accrues daily over the term to maturity of such Series 2013 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 Series 2013 Bonds to determine taxable gain or loss upon disposition (induding sale, redemption, or payment on maturity) of such Series 2013 Bonds. Benefldal Owners of the Series 2013 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Series 2013 Bonds with original issue discount, induding the treatment of Benefldal Owners who do not purchase such Series 2013 Bonds in the original offering to the public at the flrst price at which a substantial amount of such Series 2013 Bonds is sold to the public. Series 2013 Bonds purchased, whether at original issuance or othenwise, for an amount higher than their prindpal amount payable at maturity (or, in some cases, at their eariier call date) ("Premium Series 2013 Bonds") will be treated as having amortizable bond premium. No deducflon is allowable for the amortizable bond premium in the case of bonds, like the Premium Series 2013 Bonds, the interest on which is exduded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneflcial Owner's basis in a Premium Series 2013 Bond, will be reduced by the amount of amortizable bond premium properiy allocable to such Beneflcial Owner. Benefldal Owners of Premium Series 2013 Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their parflculardrcumstances. The Code imposes various restricflons, conditions and requirements relaflng to the exdusion from gross income for federal income tax purposes of interest on obligaflons such as the Series 2013 Bonds. The City has made certain representations and covenanted to compfy with certain restrictions, conditions and requirements designed to ensure that interest on the 70 Series 2013 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 2013 Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Series 2013 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 afterthe date of issuance ofthe Series 2013 Bonds may adversely affect the value of, orthe tax status of interest on, the Series 2013 Bonds. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Although Bond Counsel is of the opinion that interest on the Series 2013 Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Series 2013 Bonds may otherwise affect a Beneflcial Owner's federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner's other items of income or deducflon. Bond Counsel expresses no opinion regarding any such other tax consequences. Current and future legislative proposals, if enacted into law, clariflcation of the Code or court decisions may cause interest on the Series 2013 Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneflcial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clariflcation of the Code or court decisions may also affect the market price for, or marketability of, the Series 2013 Bonds. Prospective purchasers of the Series 2013 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislaflon, regulations or liflgation, as to which Bond Counsel expresses no opinion. Th,e 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 2013 Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service ("IRS") orthe courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the City, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The City has covenanted, however, to comply with the requirements of the Code. Bond Counsel's engagement with respect to the Series 2013 Bonds ends with the issuance of the Series 2013 Bonds, and, unless separately engaged. Bond Counsel is not obligated to defend the City or the Beneflcial Owners regarding the tax-exempt status of the Series 2013 Bonds in the event of an audit examinaflon by the IRS. Under current procedures, parties other than the City and their appointed counsel, including the Beneficial Owners, would have liftle, if any, right to participate in the audit examinaflon process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the City legitimately disagrees, may not be practicable. Any acflon ofthe IRS, induding but not limited to selection ofthe Series 2013 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 2013 Bonds, and may cause the City or the Beneflcial Owners to incur signiflcant expense. 71 No Litigation At the time of delivery of the Series 2013 Bonds, the City will certify that there is no action, suit, proceeding, inquity or investigation, at law or in equity, before or by any court, public agency or body, pending with respect to which the City has been sen/ed with process or known to be threatened, which: in any way questions the powers of the City Council or the Community Facilities District, or in any way questions the validity of any proceeding taken by the City Council in connection with the issuance of the Series 2013 Bonds, or if there is an unfavorable decision, ruling or flnding, could materially adversefy affect the transactions contemplated by the Bond Purchase Contract, or in any way, could adversely affect the validity or enforceability of the resoluflons of the City Coundl adopted in connecflon with the formation of the Community Fadlities District orthe issuance ofthe Series 2013 Bonds, the Series 2013 Bonds, the Trust Agreement, the Issuer Continuing Disclosure Certiflcate or the Bond Purchase Contract, or in any way questions the exdusion from gross income of the recipients thereof of the interest on the Series 2013 Bonds for federal income tax purposes, or in any other way quesflons the status of the Series 2013 Bonds under State tax laws or regulaflons. CONCLUDING INFORMATION No Ratings The Series 2013 Bonds have not been rated by any securifles rating agency. Underwriting The Series 2013 Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated dba Stone & Youngberg a Division of Stifel Nicolaus (the "Underwriter"), at a purchase price of $26,096,667.10 (which represents the aggregate prindpal amount of the Series 2013 Bonds ($26,000,000), plus a net original issue premium of $330,467.10, and less an UndenA/riter's discount of $233,800). The purchase agreement relating to the Series 2013 Bonds provides that the UndenA/riter will purchase all of the Series 2013 Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in such purchase agreement. The UndenA/riter may offer and sell Series 2013 Bonds to certain dealers and others at prices lower than the offering price stated on the cover page hereot The offering prices may be changed from time to time by the UndenA/riter. 72 Professional Fees In connection with the issuance of the Series 2013 Bonds, fees or compensation payable to certain professionals are contingent upon the issuance and delivery of the Series 2013 Bonds. Those professionals include: • Orrick, Herrington & Sutcliffe LLP, as Bond Counsel; • Jones Hall, A Professional Law Corporation, as Disclosure Counsel; • Nossaman LLP, as counsel to the UndenA/riter; • David Taussig and Associates, Inc., as Special Tax Consultant; • the UndenA/riter; and • William Euphrat Municipal Finance, Inc., and Kitahata & Company, as Financial Advisors. 73 Execution The execution and delivery of the Official Statement by the City has been duly authorized by the City Coundl, acting as the legislative body ofthe Community Facilities District. CITY OF SAN MATEO By: Isl David P. Culver Finance Director 74 Execution The execution and delivety of the Official Statement by the City has been duly authorized bythe City Council, acting as the legislative body ofthe Community Facilities District. CITY OF SAN MATEO By; d^ Jfii^c>V? L.&ia>^^ AMENDED AND RESTATED RATE AND METHOD OF APPORTIONMENT FOR COMMUNITY FACILITIES DISTRICT NO. 2008-1 (BAY MEADOWS), CITY OF SAN MATEO, COUNTY OF SAN MATEO, STATE OF CALIFORNIA A-1 (THIS PAGE INTENTIONALLY LEFT BLANK) AIMENDED AND RESTATED RATE AND METHOD OF APPORTIONJWENT FOR COIMJMUNITY FACILITIES DISTRICT NO. 2008-l(BAY IMEADOWS) CITY OF SAN JMATEO COUNTY OF SAN IVIATEO, STATE OF CALIFORNIA , A Special Tax shall be levied on all Assessor's Parcels of Taxable Property in City of San Mateo Community Facilities District No. 2008-1 (Bay Meadows) City of San Mateo, County of San Mateo, State of California ("CFD No. 2008-1") and collected each Fiscal Year, commencing in Fiscal Year 2011-2012, in an amount determined through the application ofthis Amended and Restated Rate and Method of Apportionment as described below. All of the real property in CFD No. 2008-1, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS The terms hereinafter set forth have the following meanings; "Acreage" means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan, or other map or plan recorded with the County. The square footage of an Assessor's Parcel is equal to the Acreage of such parcel multiplied by 43,560. "Act" means the Mello-Roos Community Facilities Act of 1982, being Chapter 2.5, Part 1, Division 2 of Title 5 ofthe California Governnient Code. "Administrative Expenses" means the actual or reasonably estimated costs directly related to the administration of CFD No. 2008-1, including but not limited to; the costs of computing the Special Taxes and preparing the aimual Special Tax collection schedules (whether by the City or designee thereof or both); the costs of collecting the Special Taxes (whether by the City or otherwise); the costs of remitting the Special Taxes to the Trustee; the costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, CFD No. 2008-1 or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, CFD No. 2008-1 or any designee thereof of complying with disclosure requirements of the City, CFD No. 2008-1 or obligated persons associated with applicable federal and state securities laws and the Act; the costs associated with preparing Special Tax disclosure statements and responding to pubUc inquiries regarding the Special Taxes; the costs ofthe City, CFD No. 2008-1 or any designee thereof related to an appeal ofthe Special Tax; the costs associated with the release of funds from an escrow account; and the City's annual administration fees and third party expenses. Administrative Expenses shall also include amounts estimated by the City or advanced by the City or CFD No. 2008-1 for any other administrative purposes of CFD No. 2008-1, including attorney's fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes. "Affordable Owner-Occupied Property" means Affordable Rental Property on which BMR Units (i) have been constructed, and (ii) as ofMay 1 ofthe Fiscal Year preceding the Fiscal Year for which the Special Taxes are being levied, are owned and occupied exclusively by affordable income-qualified homebuyers. Affordable Owner-Occupied Property shall be subject to taxation under the same special tax structure as BMR Units, as listed in Table 1 of Section C, below. "Affordable Rental Property" means up to one acre of Public Property that is identified and designated by the City as Affordable Rental Property. Affordable Rental Property shall be exempt from the Special Tax unless it (i) is converted into Affordable Owner-Occupied Property, or (ii) as ofMay 1 ofthe Fiscal Year preceding the Fiscal Year for which the Special Taxes are being levied, is sold or leased to one or more persons for any use other than affordable rental units that meet the affordable housing restrictions promulgated under Section 5.12 ofthe Bay Meadows Phase II Development Agreement, dated November 21, 2005, by and between the City and Bay Meadows Land Company, and pursuant to City Municipal Code Section 27.16.050 and Resolution 41 (1999). "Apartment Property" means the first 5.306 Acres of Residential Property on which is located a structure or structures with multiple residential dwelling units, all of which are offered for rent and are not available for sale to individual owners. Apartment Property status shall be assigned to Residential Property by the CFD Administrator in the chronological order in which propeity in CFD No. 2008-1 is classified as Apartment Property. For purposes ofthis Rate and Method of Apportiomnent, dwelling units located on.the first 5.306 Acres of Apartment Property shall not be classified as Single Family Detached Units, Townhome Units, Condominium Units, or BMR Units. However, any Assessor's Parcels or portions of Assessor's Parcels that would ordinarily be. classified as Apartment Property that are created after the first 5.306 Acres of Apartment Property have already been established shall be classified as Residential Property with Condominium Units or BMR Units located on them, and each dwelling unit located on such Residential Property shall be subject to the same Assigned Special Taxes and Backup Special Tax rates as are assigned to Condominium Units or BMR Units, as applicable. If Residential Property previously classified as Apartment Property ceases to meet the requirements ofthis definition (such as by the conversion of the dwelling units thereon into Condominium Units or BMR Units), such property shall be reclassified as Residential Property with Condominium Units and/or BMR Units, as long as the Assigned Special Tax applied to such Residential Property after the reclassification is not less than the Assigned Special Tax applied to such Residential Property prior to the reclassification. The Special Taxes to be levied on such Condominium Units and/or BMR Units shall be determined on the basis ofthe Land Use Classes 1 through 15 as set forth in Table 1. Furthermore, should such reclassification occur, any other Parcel or portion thereof that would have been designated as Apartment Property but for the limitation on the total amount of Acres that can be so classified shall be re-classified as Apartment Property if and to the extent that (a) such reclassification does not resuh in more than 5.306 Acres of Apartment Property and (b) the aggregate amount ofthe Assigned Special Taxes applicable to all Taxable Property after the reclassifications of (i) the applicable Apartment Property to Condominium Units and/or BMR Units and (ii) the applicable Condominium Units and/or BMR Units to Apartment Property, is not less than the aggregate amount ofthe Assigned Special Taxes applicable to all Taxable Property before such reclassifications occuiTcd. "Assessor's Parcel" means a lot or parcel to which an Assessor's parcel number is assigned as determined from an Assessor Parcel Map or the applicable assessment roll. "Assessor's Parcel Map" means an official map ofthe County Assessor designating parcels by Assessor's Parcel number. "Assigned Special Tax" means the Special Tax for each Land Use Class of Developed Property, as determined in accordance with Section C.l.(b) below. "Authorized Facilities" means those facilities eligible to be funded by CFD No. 2008-1. "Authorized Services" means those services ehgible to be funded by CFD No. 2008-1. 2 "Backup Special Tax" means the Special Tax applicable to each Assessor's Parcel of Developed Property, as determined in accordance with Section C.l.(c) below. "Below Market Rate Units" or "BMR Units" means (a) all residential dwelling units located on Affordable Owner-Occupied Property and (b) up to 110 residential dwelhng units located on one or more Assessor's Parcels of Residential Property that are subject to affordable housing restrictions as called for under Section 5.12 of the Bay Meadows Phase II Development Agreement, dated November 21, 2005, by and between the City and Bay Meadows Land Company, and pursuant to City Municipal Code Section 27.16.050 and Resolution 41 (1999). Units constructed within the CFD that qualify shall be designated as BMR Units by the City in the chronological order in which the building permits for such units are issued. However, excluding those BMR units located on Affordable Owner-Occupied Property, ifthe total number of dwelling units constructed that would otherwise qualify as BMR Units exceeds 110, then the units exceeding such total shall not be considered BMR Units for special tax levy purposes, and shall be assigned to a Land Use Class based on the type of use and Residential Floor Area for each such unit. "Certificate of Occupancy" means a certificate issued by the City that authorizes the actual occupancy of a dwelling unit for habitation by one or more residents. "City" means the City of San Mateo. "City Council" means the City Council ofthe City of San Mateo. "CFD Administrator" means the Person designated by CFD No. 2008-1 to administer the Special Tax according to this RMA. "CFD No. 2008-1" means City of San Mateo Community Facilities District No. 2008-1 (Bay Meadows), City of San Mateo, County of San Mateo, State of California. "CFD No. 2008-1 Bonds" means any bonds or other debt (as defmed in Section 53317(d) ofthe Act), whether in one or more series, issued or incurred by the City for CFD No. 2008-1. "Condominium Unit" means (1) a residential condominium as described in Civil Code Section 1351(f) and (2) any residential dwelling that is not a Single Family Detached Unit, a Townhome Unit, a BMR Unit, or a dwelling unit located on Apartment Property, as determined by the CFD Administrator^ "County" means the County of San Mateo. "Developed Property" means, for each Fiscal Year, aU Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, for which the Final Subdivision was recorded on or before January 1 of the prior Fiscal Year and a building permit was issued after January 1, 2011 and on or before May 1 ofthe Fiscal Year preceding the Fiscal Year for which the Special Taxes are being levied. "Final Subdivision" means a subdivision of property by recordation of a final map, parcel map, or lot line adjustment, approved by the County pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) or recordation of a condominium plan pursuant to California Civil Code 1352 that, in either case, creates individual lots for which building permits may be issued without further subdivision. "Fiscal Year" means the period starting July 1 and ending on the following June 30. 3 "Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which CFD No. 2008-1 Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. "Land Use Class" means any ofthe classes listed in Table 1, below. "Maximum Special Tax" means the maximum Special Tax, determined in accordance with Section C below, that can be levied in any Fiscal Year on any Assessor's Parcel of Taxable Property. "Non-Residential Floor Area" means the total building square footage of the non-residential building(s) or the non-residential portion of a building with both residential and non-residential areas located on an Assessor's Parcel of Developed Property, measured from outside wall to outside wall, exclusive of overhangs, porches, patios, carports, or similar spaces attached to the building but generally open on at least two sides. The determination of Non-Residential Floor Area shall be made by reference to the building permit(s) issued for such Assessor's Parcel and/or to the appropriate records kept by the City's Building Division, as reasonably determined by the City. "Non-Residential Property" means all Assessor's Parcels of Developed Property for which a building permit permitting the construction thereon of one or more non-residential facilities has been issued by the City. "Office Floor Area" means all Non-Residential Floor Area, other than Retail Floor Area. "Outstanding Bonds" means all CFD No. 2008-1 Bonds which are outstanding under an Indenture. "Person" means an individual, a corporation, a partnership, an association, a joint stock company, a trust, a limited Habihty company, an unincorporated organization, or a govermnent or political subdivision thereof "Property Owner Association Property" means, for each Fiscal Year, (i) any property within the boundaries of CFD No. 2008-1 that was owned by a property owner association, including any master or sub-association, as ofJanuary 1 ofthe prior Fiscal Year, (ii) any property located in a Final Subdivision that was recorded as of the May 1 preceding the Fiscal Year in which the Special Tax is being levied and which, as determined from such Final Subdivision, is or will be open space, a common area recreation facility, or a private street, or (iii) any property which, as of the May 1 preceding the Fiscal Year for which the Special Tax is being levied, has been conveyed, irrevocably dedicated, or irrevocably offered to a property owner's association, including any master or sub-association, provided such conveyance, dedication, or offer is submitted to the City Council by May 1 preceding the Fiscal Year for which the Special Tax is being levied. "Proportionately" means, for Developed Propeify, that the ratio ofthe actual Special Tax levy to the Assigned Special Tax is equal for all Assessor's Parcels of Developed Property. For Undeveloped Propeify, "Proportionately" means that the ratio of the actual Special Tax levy per Acre to the Maximum Special Tax per Acre, is equal for all Assessor's Parcels of Undeveloped Property. The term "Proportionately" may similarly be applied to other categories of Taxable Property, as listed in Section D below. "Public Property" means property within the boundaries of CFD No. 2008-1 owned by, or irrevocably offered or dedicated to, the federal government, the State, the County, the City, or any local government or other public agency, provided that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 ofthe Act shall not be considered Public Property and shall be taxed and classified according to its actual use, with the exception of Affordable Rental Property, which shall retain its exemption from the Special Tax. "Rate and Method of Apportionment" or "RMA" means this Amended and Restated Rate and Method of Apportionment of Special Tax. "Residential Floor Area" means all ofthe square footage of living area within the perimeter of a residential structure located on Residential Property or Affordable Owner-Occupied Property, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area and not including any Non-Residential Floor Area. The determination of Residential Floor Area for an Assessor's Parcel shaU be made by reference to the building permit(s) issued for such Assessor's Parcel. "Residential Lot" means an Assessor's Parcel for which a building permit has been, or under law and City planning decisions, could be issued for a residential structure. "Residential Property" means all Assessor's Parcels 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. Residential Property includes, but is not hmited to, Single Family Detached Units, Townhome Units, Condominium Units, BMR Units, and Apartment Property. "Retail Floor Area" means all Non-Residential Floor Area for which a building permit(s) permitting the construction of one or more non-residential facilities has been issued by the City which is primarily used for the sale of general merchandise, hard goods, personal services, and other items directly to consumers for any purpose other than resale in the regular course of business. "Single Family Detached Unit" means an individual residential dwelling unit that does not share a common wall with another residential dwelling unit. "Special Tax" means the special tax to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property within CFD No. 2008-1 to fund the Special Tax Requirement. "Special Tax Requirement" means that amount required in any Fiscal Year, commencing in Fiscal Year 2011-12, for CFD No. 2008-1 to; (i) pay debt service on ah Outstanding Bonds due in the calendar year commencing in such Fiscal Year; (ii) pay periodic costs with respect to the CFD No. 2008-1 Bonds, including but not limited to, costs of credit enhancement and federal arbitrage rebate payments due in the calendar year commencing in such Fiscal Year; (iii) pay Administrative Expenses payable or expected to be payable in the calendar year commencing in such Fiscal Year; (iv) pay any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) replace revenue the City reasoriably expects not to receive due to anticipated Special Tax delinquencies, if and to the extent deemed necessary and supported by a written explanation and calculation; (vi) pay directly for Authorized Services in an amount equal to $30,000 increased by two percent (2%) on July 1, 2012 and each July 1 thereafter; (vii) pay directly for the acquisition or construction of Authorized Facilities and/or Authorized Services to the extent that the inclusion of such amount does not require a Special Tax levy on Undeveloped Property; less (viii) a credit for funds available to reduce the amiual Special Tax levy. "State" means the State of California. "Taxable Property" means all ofthe Assessor's Parcels within the boundaries of CFD Na 2008-1 which are not exempt from the Special Tax pursuant to applicable law or Section E below. "Taxable Property Owner Assodation Property" means all Assessor's Parcds of Property Owner Association Property that are not exempt pursuant to Sedion E below. "Taxable Public Property" means aU Assessor's Parcels ofPublic Property that are not exempt pursuant to Section E below. "Townhome Unit" means an individual residential dwelling unit that (i) shares one or more common wafts with another residential dwelling unit, (ii) is physicaUy attached to the land underneath the unit, and (iii) the fee simple land underneath the unit is or wdl be conveyed with each such unit. "Trustee" means the trustee or fiscal agent under the Indenture. "Undeveloped Property" means, for each Fiscal Year, aU Taxable Property not dassified as Developed Property, Taxable Property Owner Association Property, or Taxable Public Property. B. ASSIGNMENT TO LAND USE CATEGORIES Each Fiscal Year, aU Taxable Property within CFD No. 2008-1 shaft be classified as Developed Property, Taxable PubHc Property, Taxable Property Owner Association Property or Undeveloped Property, and shall be subject to Spedal Taxes in accordance with this Rate and Method of Apportioimient ddermined pursuant to Sections C and D below. C. MAXIMUM SPECIAL TAX RATE Developed Property shaU be assigned to Land Use Classes 1 tiirough 18 as listed in Table 1 below. 1. Developed Property (a). Maximum Special Tax The Maximum Special Tax for each Assessor's Parcel classified as Developed Property shall be the greater of (i) the amount derived by application ofthe Assigned Special Tax or (ii) the aniount derived by appHcation of the Backup Special Tax. (b). Assigned Special Tax The Fiscal Year 2011-2012 Assigned Special Tax for each Land Use Class is shown in Table 1, below. TABLE 1 Assigned Special Tax for Developed Property within Community Facilities District No. 2008-1 Fiscal Year 2011-2012 l.and Use Residential I'loor Assigned Class Description /\rca Special Tax 1 Residential Property > 2,300 sq. ft. $5,405 per unit 2 Residential Property 2,151-2,300 sq.ft.. $5,288 per unit 3 Residential Property 2,001-2,150 sq.ft. $4,989 per unit 4 Residential Property 1,851-2,000 sq.ft. $4,973 per unit 5 • Residential Property 1,701-1,850 sq.ft. $4,917 per unit 6 Residential Property 1,551-1,700 sq. ft $4,557 per unit 7 Residential Property 1,401-1,550 sq.ft. $4,069 per unit 8 Residential Properly 1,251 - 1,400 sq. ft. $3,701 per unit 9 Residential Property 1,101 - 1,250 sq. ft. $3,482 per unit 10 Residential Property 951-1,100 sq.ft. $3,158 per unit 11 Residential Property 801-950 sq.ft. ' $2,572 per unit 12 Residential Property <= 800 sq. ft. $2,332 per unit 13 BMR Units > 1,400 sq. ft. $1,344 per unit 14 BMR Units 801 - 1,400 sq. ft. $1,344 per unit 15 BMR Units <= 800 sq. ft $1,139 per unit $60,000 per acre of 16 Apartment Property NA Apartment Pronertv Non-Residential Property - $1.769persq. ft. ofNon 17 NA Office Floor Area Residential Floor Area $0,520 per sq. ft. ofNon 18 Non-Residential Property - NA Retaft Floor Area Residential Floor Area (c). Backup Special Tax The Fiscal Year 2011-2012 Backup Special Tax attributable to a Final Subdivision will equal $124,695 multiplied by the Acreage of all Taxable Property, exclusive of any Taxable Property Owner Association Property and Taxable Public Property, therein. The Backup Special Tax for each Assessor's Parcel of Residential Property other than Apartment Property shall be computed by dividing the Backup Special Tax attributable to the applicable Final Subdivision by the number of Residential Lots within that Final Subdivision. The Backup Special Tax for each Assessor's Parcel of Non-Residential Property shall be computed by multiplying the Backup Special Tax by the Acreage of such Assessor's Parcel. There shall be no Backup Special Tax on Apartment Property. If a Final Subdivision includes Assessor's Parcels of Taxable Property for which building permhs for both residential and non-residential construction have been issued, exclusive of Apartment Property, Taxable Property Owner Association Property and Taxable Public Property, then the Backup Special Tax for each residential dwelling unit shall be calculated according to the following formula; Residential Dwelling Unit Backup Special Tax = ((Backup Special Tax) X (Acreage of Assessor's Parcel) X (Residential Floor Area/(Residential Floor Area plus Non- Residential Floor Area)) / Number of Residential Dwelling Units) In this case, the Backup Special Tax for each square foot of Non-Residential Floor Area shall be calculated according to the following formula; Non-Residential Square Foot Backup Special Tax = ((Backup Special Tax) X (Acreage of Assessor's Parcel) X (Non-Residential Floor Area/(Residential Floor Area plus Non- Residential Floor Area)) / Non-Residential Square Footage) Notwithstanding the foregoing, if all or any portion ofthe Final Subdivision(s) described in the preceding paragraphs is subsequently changed or modified by recordation of a lot line adjustment or similar instrument, and only ifthe City determines that such change or modification resuhs in a decrease in the number of Residential Lots within the Final Subdivision, then the Backup Special Tax for each Assessor's Parcel of Developed Property that is affected by the lot line adjustment or similar instrument for such Final Subdivision shall be a rate per Acre as calculated below. The Backup Special Tax previously determined for an Assessor's Parcel of Developed Property that is not affected by the lot line adjustment or similar instrument for such Final Subdivision shall not be recalculated. 1. Determine the total Backup Special Tax anticipated to apply to the changed or modified Final Subdivision area prior to the change or modification. 2. The result of paragraph 1 above shall be divided by the Acreage of Taxable Property which is ultimately expected to exist in such changed or modified Final Subdivision area, as reasonably determined by the City. 3. The result of paragraph 2 above shall be the Backup Special Tax per Acre which shall be applicable to Assessor's Parcels of Developed Property in 8 such changed or modified Final Subdivision area for all remaining Fiscal Years in which the Special Tax may be levied. (d). Increase in the Assigned Special Tax and Backup Special Tax The Fiscal Year 2011-2012 Assigned Special Tax, identified in Table l,above, and the Fiscal Year 2011-2012 Fiscal Year Backup Special Tax shall increase annually, commencing on July 1, 2012 and on July 1 ofeach Fiscal Year thereafter, by an amount equal to two percent (2%) ofthe amount in effect for the previous Fiscal Year. (e). Multiple Land Use Classes In some instances an Assessor's Parcel of Developed Property may contain more than one Land Use Class. The Maximum Special Tax levied on an Assessor's Parcel in such case shall be the sum of the Maximum Special Tax for all Land Use Classes located on that Assessor's Parcel. The City's allocation to each type of property shall be final in the absence of manifest error. 2. Taxable Property Owner Association Property, Taxable Public Property and Undeveloped Property Maximum Special Tax The Fiscal Year 2011-2012 Maximum Special Tax for each Assessor's Parcel of Taxable Property Owner Association Property, Taxable Public Property and Undeveloped Property shall be $132,693 per Acre, and shall increase annually thereafter, commencing on July 1, 2012 and on July 1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) ofthe Maximum Special Tax for the previous Fiscal Year. D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX Commencing with Fiscal Year 2011-2012 and for each following Fiscal Year, the City shall determine the Special Tax Requirement and levy the Special Tax as follows; First; The Special Tax shall be levied on each Assessor's Parcel of Developed Property in an amount equal to 100% ofthe applicable Assigned Special Tax; Second; If additional monies are needed to satisfy the Special Tax Requirement after the first step has been completed, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property at up to 100% ofthe Maximum Special Tax for Undeveloped Property; Third: If additional monies are needed to satisfy the Special Tax Requirement after the first two steps have been completed, then the levy of the Special Tax on each Assessor's Parcel of Developed Property whose Maximum Special Tax is determined through the application of the Backup Special Tax shall be increased in equal percentages from the Assigned Special Tax up to the Maximum Special Tax for each such Assessor's Parcel; Fourth; If additional monies are needed to satisfy the Special Tax Requirement after the first three steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor's Parcel of Taxable Public Property and Taxable Property Owner Association Property at up to 100% ofthe Maximum Special Tax for Taxable Public Propeity and Taxable Property Owner Association Property. Notwithstanding the above, the City may, in any Fiscal Year, levy Proportionatefy less than 100% ofthe Assigned Spedal Tax in step one (above), when (i) the Special Tax is no longer required to be levied pursuant to steps two and three above in order to meet the Special Tax Requirement and (ii) all authorized CFD No. 2008-1 Bonds have already been issued or the City Council has covenanted that it will not issue any additional CFD No. 2008-1 Bonds (except refunding bonds) to be supported by the Special Tax. Further notwithstanding the above, under no chcumstances will the Special Tax 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 above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaufts as a consequence of delinquency or defauh by the owner of any other Assessor's Parcel within CFD No. 2008-1. E. EXEMPTIONS No Special Tax shall be levied on up to 34.6 Acres ofPublic Propeity and/or Propeity Owner Association Property in CFD No. 2008-1. In addition, no Spedal Tax shall be levied on up to 1 0 Acre that the City has identified and designated as Affordable Rental Property. Tax-exempt status will be assigned by the City in the chronological order in which property m CFD No. 2008-1 becomes PubHc Property or Property Owner Association Property. However, should an Assessor's Parcel no longer be classified as Public Propeity, Propeity Owner Association Property, or Affordable Rental Propeity, it shall become subject to the Special Tax. Public Property or Property Owner Association Property that is not exempt fiom the Special Tax under this sedion shall be subject to the levy of the Special Tax and shall be taxed Proportionatefy as part ofthe fouith step in Section D above, at up to 100% ofthe applicable Maximum Special Tax for Taxable Public Propeity or Taxable Propeity Owner Association Property. F. MANNER OF COLLECTION The Special Tax shall be coUeded in the same mamier and at the same time as ordinaiy ad valorem property taxes; provided, however, that the City may dhectty bill the Special Tax, and/or may collect Special Taxes at a different time or in a different manner if necessaiy to meet its financial obligations, and may covenant to foreclose and may actualty foreclose on delinquent Assessor's Parcels. G. APPEALS AND INTERPRETATIONS Any propeity owner who feels that the aniount ofthe Special Tax levied on his Assessor's Parcel is in error may submft a written appeal to the City. The City shall review the appeal and ifthe City concurs, the amount of the Special Tax levied shall be appropriatety modified through an adjustment to the Special Tax levy in the following Fiscal Year. No refunds shall be given m the current Fiscal Year. The City may interpret this Rate and Mdhod of Apportionment for purposes of clarifying any ambiguity and make determinations relative to the amiual administiation of the Special Tax and any landowner or resident appeals. Any decision ofthe City shall be final and binding as to all persons. 10 H. PREPAYMENT QF THE SPECIAL TAX The following additional definitions apply to this Section H; "Buildout" means, for CFD No. 2008-1, that all expected building permfts for dwelling umts and non-residential facilities to be constructed in CFD No. 2008-1 have been issued, as reasonably determined by the City. "CFD Public Facilities Costs" means either $54,060,000 in 2011 doftars, which shaft increase by the Construction Inflation Index on July 1, 2012, and on each July 1 thereafter, or such lower number as (i) shall be determined by the City as sufficient to provide funding for aU of the Authorized Facilities, or (ii) shall be determined by the City concurrently with a covenant that it will not issue any more CFD No. 2008-1 Bonds (except refunding bonds) to be supported by the Special Tax levy under this Rate and Method of Apportionment as described in Section D. "Construction InHation Index" means the annual percentage change in the Engineering News Record Building Cost Index for the City of San Francisco, measured as of the calendar year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the City that is reasonably comparable to the Engineering News Record Building Cost Index for the City of San Francisco. "Future Facilities Costs" means the CFD Public Facilities Costs minus (i) costs of Authorized Facilities previously paid from the Improvement Fund, (ii) moneys currently on deposft in the Improvement Fund available to pay costs of Authorized Facilities, (iii) moneys currently on deposft in an escrow fund that are expected to be available to finance the cost of Authorized Facilities, and (iv) the amount the City reasonably expects to derive fiom the reinvestment of these funds. "Improvement Fund" means a fund or account specifically identified in the Indenture to hold fiinds which are currently available for expenditure to acquire or constiuct Authorized Facilities. "Previously Issued Bonds" means, for any Fiscal Year, aft Outstanding Bonds that are stiU outstanding under the Indenture after the principal payment date foHowing the cun-ent Fiscal Year. 1. Prepayment in Full The obligation ofthe Assessor's Parcel to pay the Special Tax may be prepaid and permanently satisfied as described under the Prepayment in Full definition, above, provided that a prepayment may be made only for Assessor's Parcels of Developed Property, or an Assessor's Parcel of Undeveloped Propeity for which a building permft has been issued, and only if there are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Pared intending to prepay the Spedal Tax obHgation shall provide the City with wiitten notice of intent to prepay. Within 30 days of receipt of such written notice, the City shall notify such owner of the prepayment amount for such Assessor's Parcel. The City may charge such owner a reasonable fee for providing this service. Prepayment must be made not less than 30 days prior to the next occurring date that notice of redemption of CFD No. 2008- 1 Bonds fiom the proceeds of such prepayment may be given, by the Trustee pursuant to the Indenture. The Special Tax Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below): 11 Bond Redemption Amount plus Redemption Premium plus Future Facilities Amount plus Defeasance Amount plus Prepayment Fees and Expenses less Reserve Fund Credit less Capftalized Interest Credit Total; equals Special Tax Prepayment Amount As of the proposed date of prepayment, the Special Tax Prepayment Amount shall be calculated as follows; 1. Confirm that no Special Tax delinquencies apply to such Assessor's Parcel. 2. For Assessor's Parcels of Developed Propeity, compute the Assigned Special Tax and Backup Special Tax. For Assessor's Parcels of Undeveloped Propeity for which a building permft has been issued, compute the Assigned Special Tax and Backup Special Tax for that Assessor's Parcel as though ft were already designated as Developed Property, based upon the building permit which has already been issued for such Assessor's Parcel. 3. (a) Divide the Assigned Special Tax computed pursuant to paragraph 2 by the total estimated Assigned Special Tax levy for the entire CFD No. 2008-1 based on the Developed Property Special Tax which could be levied in the current Fiscal Year on all expected development tiirough Buildout of CFD No. 2008-1, excluding any Assessor's Parcels which have been prepaid, and (b) Divide the Backup Special Tax computed pursuant to paragraph 2 by the total estimated Backup Special Tax at Buildout for the entire CFD No. 2008-1, excluding any Assessor's Parcels for which Special Taxes have been prepaid in full. 4. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the Previously Issued Bonds to compute the amount of Previously Issued Bonds to be retired and prepaid (the "Bond Redemption Amounf). 5. Multiply the Bond Redemption Amount computed pursuant to paragraph 4 by the applicable redemption preniium (e.g., the redemption price-100%)), if any, on the Previously Issued Bonds to be redeemed (the "Redeniption Premium"). 6. Compute the current Future Facilities Costs. 7. Muhiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the amount determined pursuant to paragraph 6 to compute the amount of Future Facilities Costs to be prepaid (the "Future Facilities Amount"). 8. Compute the amount needed to pay interest on the Bond Redemption Amount from the bond principal payment date following the current Fiscal Year until the earHest redemption date for the Previously Issued Bonds. Notwithstanding the above, if the Previousty Issued Bonds may be redeemed in the cun-ent Fiscal Year, but after the date of prepayment, the amount needed to pay the interest under this step shall equal zero. 9. Determine the Special Tax levied on the Assessor's Parcel in the current Fiscal Year which has not yet been paid. 12 10. Compute the minimum amount the City reasonably expects to derive from the reinvestment of the Special Tax Prepayment Amount less the Future Facilities Amount and the Prepayment 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. 11. Add the amounts computed pursuant to paragraphs 8 and 9 and subtract the amount computed pursuant to paragraph 10 (the "Defeasance Amount"). 12. The prepayment fees and expenses of CFD No. 2008-1 are as calculated by the City and include the costs of computation ofthe prepayment, the costs to invest the prepayment proceeds, the costs of redeeming CFD No. 2008-1 Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the "Prepayment Fees and Expenses"). 13. The reserve fund credft (the "Reserve Fund Credft") 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 resuft ofthe 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 resuft 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 Credft shall be granted if the amount then on deposft in the reserve fund for the Previously Issued Bonds is below the reserve requirement (as defined in the Indenture). 14. If any capitalized interest for the Previously Issued Bonds is projected to remain unexpended as of the date immediately following the principal payment following the current Fiscal Year, a capftalized interest credft shall be calculated by multiplying the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the expected balance in the capftalized interest fund or account on such date (the "Capftalized Interest Credft"). 15. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 11 and 12, less the amounts computed pursuant to paragraphs 13 and 14 (the "Special Tax Prepayment Amount"). From the Special Tax Prepayment Amount, the amounts computed pursuant to paragraphs 4, 5, 11,13 and 14 shall be deposhed into the appropriate fund as established under the Indenture and be used to retke CFD No. 2008-1 Bonds or make debt service payments. The amount computed pursuant to paragraph 7 shall be deposhed into the Improvement Fund. The amount computed pursuant to paragraph 12 shall be retained by the City. Upon confirmation of the payment of the current Fiscal Year's Special Tax levy as determined under paragraph 9 (above), the City shall remove the current Fiscal Year's Special Tax levy for such Assessor's Parcel from the County tax rolls. With respect to any Assessor's Parcel that is prepaid, the City Council shall cause a suhable notice to be recorded in compliance with the Act, to indicate the prepayment of the Special Tax and the release of the Special Tax lien on such Assessor's Parcel, and the obHgation of such Assessor's Parcel to pay the Special Tax shall cease. Notwithstanding the foregoing, no Special Tax prepayment shall be allowed unless, at the time of such proposed prepayment, the amount of Maximum Special Tax that may be levied on Taxable Property within CFD No. 2008-1 (after excluding in the property exempted under 13 Section E) after the proposed prepayment is at least equal to the sum of (i) the Administiative Expenses, as defined in Section A above, and (ii) .1.10 times amiual debt service, m each remaining Fiscal Year on the Outstanding Bonds. 2. Prepayment in Part The obligation of the Assessor's Parcel to pay the Special Tax may be partially prepaid as described herein, provided that a partial prepayment may be made onty for Assessor s Parcels ot Developed Property, or an Assessor's Parcel of Undeveloped Propeity for which a bmlding permft has been issued, and onty if there are no ddinquent Special Taxes wfth resped to such Assessor's Parcel at the time of partial prepayment. The amount of the prepayment shall be calculated as in Section H.l; except that a partial prepayment shall be calculated according to the following formula; PP = [(PE - PFE) X D j + A These ternis have the following meaning; PP = the partial prepayment. c • u i PE = the Special Tax Prepayment Amount calculated according to Section H.l. D = the percentage, expressed as a decimal, by which the owner of the Assessor's Parcel is partially prepaying the Special Tax. PFE = the Prepayment Fees and Expenses calculated according to Section H. 1. The owner of any Assessor's Parcel who desires such prepayment shall notify the City of such owner's intent to partialty prepay the Special Tax and the percentage by which the Special Tax shall be prepaid The City shall provide the owner with a statement of the amount required tor the partial prepayment ofthe Special Tax for an Assessor's Parcel within 30 days ofthe request and may charge a reasonable fee for providing this service. With respect to any Assessor s Parcel that is partialty prepaid, the City shall (i) distribute or cause to b« distributed the funds remitted to ft according to Section H.l, and (ii) indicate in the records of CFD No. 2008-1 that there has been a partial prepayment ofthe Special Tax and that a poition ofthe Special Tax with respect to such Assessor's Parcel, equal to the outstanding percentage (1.00 - F) of the remaimng Maximum Special Tax, shall continue to be levied on such Assessor's Parcel pursuant to Section D. I. TERM OF SPECIAL TAX The Special Tax shall be levied for a period not to exceed fifty years commencing with Fiscal Year 2011-2012, provided however that the Special Tax wift cease to be levied m an earlier Fiscal Year ifthe City has determined that all required interest and principal payments on the CFD No. 2008-1 Bonds have been paid. K:\CLIENTS2\San MateoMlMAVRevised Bay Meadows RMA 8-31-1 l.doc 14 APPENDIX B APPRAISAL B-1 (THIS PAGE INTENTIONALLY LEFT BLANK) Self-Contained Appraisal Report City of San IViateo Community Facilities ' District No. 2008-1 (Bay Meadows) H.:-}--.- -an-: '•r'¥vi''...^'J ^>:t'> ^uit^^::^'-' West of Saratoga Drive, at the terminus of South i.f« - • 1- •' • •' Delaware Street San Mateo, California 94403 ^ . [ic, ..'• '•"',' .' * ^ . s - •' • -, Date of Report: December 14, 2012 Prepared For: Mr. David Culver, Finance Director City of San Mateo 330 West 20"* Avenue San Mateo, California 94403 Prepared By: Kevin K. Ziegenmeyer, Appraiser Eric A. Segal, Appraiser ~ Seevers _ Ziegenmeyer Seevers Real Estate Appraisal & Consultation Ziegenmeyer December 14, 2012 Mr. David Culver, Finance Dkector City of San Mateo 330 West 20.t"h Avenue San Mateo, California 94403 RE: City of San Mateo Comniunity Facilities Distiict No. 2008-1 (Bay Meadows) San Mateo, California 94403 Dear Mr. Culver; At your request and authorization, Seevers « Jordan,- Ziegenmeyer has prepared an appraisal report and analyzed market data for the pui-pose of estimating the market value (fee simple estate) ofthe propeities within the boundaries ofthe City of San Mateo Commmiity Facilities Distiid No. 2008-l_ (Bay Meadows), by ownersliip, as well as the cumulative, or aggregate, value ofthe Distrid properties under the conditions and assumptions sd forth in the aftached report. Within the repoit, the subject wiH also be refened to as CFD No. 2008-1 (Bay Meadows). The subject property^ compnses Phase II ot the Bay Meadows Racetrack redevelopment. The appraisal report has been conduded in accordance with appraisal standards and guidelines found in the Uniform Standards of Professional Appraisal Practice (USPAP) and the Appraisal Standards for Land Secured Financing published by the Califomia Debt and Investment Advisoi-y Commission (2004). This document is presented in a Self Contained Report Format, which is intended to compty with the reporting requkements set forth under Standards Rule 2-2(a) of USPAP. The appraised property, which represents the taxable land areas situated within the boundaries of - CFD No 2008-1 (Bay Meadows), is located at the southern terminus of South Delaware Stieet, north of Hillsdale Boulevard and west of Saratoga Drive, within the city of San Mateo, San Mateo County, California. The second CFD No. 2008-1 (Bay Meadows) Bond issuance is scheduled to reimburse the developer for constiuction of certain portions ofthe public improvements requked for the development of 49 978± developable acres proposed for the development of five mid-rise office buildings (Station Component)- four mid-rise, mixed-use residential/retail/office buildings (Mixed-Use Component); nine parcels designated for attached, for-rent and for-sale residential buildings; and one parcel designated for a combination of attached and ddached residential homes (Residential Component). In total, the subject property, as presentty proposed, is entitied for 1,250 residential units and currentty planned for 1,066 residential unfts, ten percent ofwhich will be developed for below- market rental or for-sale unfts under the Development Agreement. Ofthe 1,066 planned residential unfts, 832 unfts are planned for the Residential Component Blocks and 234 unfts are planned for development on the Mixed Use Blocks. 3825 Atherton Road, Suite 500 | Rocklin, CA 95765 | Phone: 916.435.3883 | Fax; 916.435.4774 Mr. David Culver December 14,2012 Page 2 The commercial component ofthe Bay Meadows development is entitied for 1,250,000 square feet of office space ofwhich 770,000 square feet is cunentiy planned in five class A office buftdings and 31,500 square feet of professional space above ground floor retail. In addition, an approximately 135,000 square foot high school campus has been proposed on a site approved for up to 200,000 square feet of commercial space. Though, the school has not yet obtained the City's Site Plan and Architectural Review approval (scheduled for December 21,2012). Bay Meadows II is also entitied for 150,000 square feet of retail space and is cunentiy planned for 85,000 square feet as part ofthe Station and Mixed Use Blocks. The remaining 33.40 acres of Bay Meadows II are dedicated to parks, right away and one acre dedicated to the City for approximately 50 - 68 below-market rate (BMR) residential units on Mixed Use Block 1, which will be exempt from the Lien ofthe Special Tax securing the Bonds. The general description ofthe improvements and services to be financed by the community facilities district include street improvements, sewers, storm drains, monuments, utilities, public parks and recreation facilities, detention ponds, mitigations, development impact fees, soft costs, maintenance and lighting of parks, parkways, stieets, roads, and open space, and maintenance and replacement of flood and storm protection services. All improvements or services to be financed are detailed in the Community Facilities Distiict Report, dated July 22, 2008, prepared by David Taussig 8c Associates, Inc. The effective date of value is November 15,2012. As a resuft of our analysis, ft is our opinion the market values, by ownership, ofthe appraised property, subject to the Lien of the Special Tax securing the City of San Mateo CFD No. 2008-1 (Bay Meadows) Bonds, in accordance with the definitions, certifications, assumptions, hypothetical condftions and significant factors set forth in the attached document (please refer to pages 10 through 12), is ... ,iri>»-|i::-il-;i''!'. RES 1, 2, 3.1b, 4, 5, 6,7, Bay MeadoTO Main Track Investor, LLC 8, 9; MU 1,2, 3, 4; STA 42.87 $233,700,000 1,2, 3, 4 and S Shea Homes of Northem Califomia RES 3.1a 1.82 $13,480,000 TRI Pointe Homes, LLC RES 3.2 3.04 SM^SlOjOOO Cumulative (Aggregate) Value ofthe District $269,690,000 The value estimates assume a tiansfer that reflects a cash ttansaction or terms considered to be equivalent to cash. The estimates are also premised on an assumed sale after reasonable exposure in a competftive market under all conditions requisite to a fair sale, with buyer and seller each acting prudently, knowledgeably, for their own self interest and assuming neither is under duress. Mr. David Culver December 14, 2012 Page 3 This letter must remain attached to the report, which contains 118 pages plus related tables, exhibfts and Addenda, in order for the value opinion set forth herein to be considered valid. We hereby certify the subject propeity has been inspected and we have impartially considered all data collected in the investigation. Further, we have no past, present or anticipated future interest in the property. The subject property does not have any signiflcant natural, cultural, recreational or scientific value. The appraisers certify this appraisal assignment was not based on a requested minimum valuation, a specific valuation or the approval of a loan. Thank you for the opportunity to work with your office on this assignnient. Sincerely, Kevin K. Ziegenmeyer, Appraiser Eric A. Segal, Appraiser State Certification No.; AGO 13567 State Certification No.; AG026558 Expiration Date; Jime 4,2013 Expires; February 18,2013 /jab 12-525 TABLE OF CONTENTS Summary oflmportant Facts and Conclusions 1 Introduction Property Description and History 4 Type and Definition of Value 6 Client, Intended User and Intended Use of the Appraisal Property Rights Appraised Appraisal Report Format Dates of Inspection, Value and Report ^ Scope of Work ^ Extraordinary Assumptions, Significant Factors and Hypothetical Condftions 11 General Assumptions and Limiting Conditions 12 Certification Statements '•^ Market Area San Mateo County Regional Overview 16 Neighborhood Overview ^1 Housing Market Overview ^4 Apartment Market Overview 31 Office Market Overview ^" Retail Market Overview ^^ Subject Property Propeity Identification and Legal Data 42 Site Description Project Descriptiori Facilities to be Funded by the Bond Issuance 55 Subject Photographs 57 Highest and Best Use Analysis ^1 Valuation Analysis Approaches to Value Appraisal Methodology ^^ Valuation - Discounted Cash Flow Analysis 71 Summary and Conclusion 11° Addenda Community Facilities District Report Amended and Restated Rate and Method of Apportionment Preliminaiy Titie Report Readdressing/Reassigning Appraisal Reports Glossary of Terms Qualifications of Appi-aiser(s) SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS Property Name: The appraised propeity comprises the taxable land areas situated within the boundaries of City of San Mateo Community Fadlities Distrid (CFD) No. 2008-1 (Bay Meadows). Property Location: The subject property is located at the southern terminus of South Delaware Street, north of Hillsdale Boulevard and west of Saratoga Drive, within the city of San Mateo, San Mateo County, California. Assessor' s Parcel Numbers: 040-030-250; -260; -270; -280; -290; -310; -320; 330; -340 and -350 Owner of Record: APN-040-030-250 Bay Meadows Main Track Investors, LLC APN-040-030-260 Bay Meadows Main Track Investors, LLC APN - 040-030-270 ptn. (3.1b) Bay Meadows Main Track Investors, LLC APN - 040-030-270 ptn. (3.1a) Shea Homes of Northern California APN - 040-030-270 ptn. (3.2) TRI Pointe Homes, LLC APN-040-030-280 Bay Meadows Main Track Investors, LLC APN-040-030-290 Bay Meadows Main Track Investors, LLC APN - 040-030-310 Bay Meadows Main Track Investors, LLC APN-040-030-320 Bay Meadows Main Track Investors, LLC APN-040-030-330 Bay Meadows Main Track Investors, LLC APN - 040-030-340 Bay Meadows Main Track Investors, LLC APN - 040-030-350 Bay Meadows Main Track Investors, LLC Property Type/Current Use: The subject propeity comprises Phase II ofthe Bay Meadows Racetrack redevelopment and consists of 49.978± developable acres proposed for the development of five mid-rise office buildings (Station Component); four mid- rise, mixed-use residential/retail/office buildings (Mixed- Use Component); nine parcels designated for attached, for- rent and for-sale residential buildings and one parcel designated for a combination of attached and detached residential homes (Residential Component). In total, the subject property, as presently proposed, will contain 770,000 square feet of office space cunentty planned in five class A office buildings and 31,500 square feet of professional space above ground floor retak, as well as a proposed 135,000 square foot high school campus; approximately 85,000 square feet of retail space and 1,066 residential housing unfts, with 832 residential housing units being developed on the Residential Land Component and the balance (234 units) to be developed as part ofthe Mixed-Use Component. The remaining 33.40 acres of Bay Meadows II are dedicated to parks, right away and one acre dedicated to the City for approximately 50-68 below- - Seevers • Jordan • Ziegenmeyer market rate (BMR) residential units on Mixed Use Block 1, which wiH be exempt ftom the Lien ofthe Special Tax securing the Bonds. Zoning/Land Use: BM-SP - Bay Meadows Specific Plan; the subject is designated for a mix of office, retaft, residential and mixed- use development commensurate withthe Site Plan and Architectural Review (SPAR) planning applications adopted by the City of San Mateo. For a more detafted description of BM-SP zoning ordinance, please refer to the Property Identification and Legal Data section of this report. Flood Zone X - areas determined to be outside ofthe 500- Flood Zone: year flood plain Earthquake Zone: According to the Seismic Safety Commission, the subject is located within Zone 4, which is assigned to areas near major fauhs. The existence within this zone does not prevent development. There are only two zones in California. Zone 4 is assigned to areas of major faufts. Zone 3 is assigned to areas with more moderate seismic activity. In addition, the subject is located within a Fault- Rupture Hazard Zone (formerly referred to as an Alquist- Priolo Special Study Zone), as defined by Special Publication 42 (revised January 1994) ofthe California Department of Conservation, Division of Mines and Geology. Land Area by Land Use: Developable - Office 11.48± acres Developable - Mixed-Use 7.071± acres Developable - Residential 29.18± acres Master Association Propeity 2.240± acres Total Developable (Taxable) 49.97± acres Public Space - (Non-Taxable) 33.40± acres Total (Gross) 83.38± acres Highest and Best Use: Phased development in accordance with the approved entitlements Date of Inspection: November 15, 2012 Effective Date of Value: November 15, 2012 Date of Report: December 14,2012 Property Rights Appraised: Fee simple estate -Seevers • Jordan • Ziegenmeyer- Prepared For: Mr. David Culver, Director of Finance, City of San Mateo Prepared By: Kevin K. Ziegenmeyer, Appraiser Eric A. Segal, Appraiser Conclusion of Value: As a result of our analysis, it is our opinion the market value ofthe appraised property, subject to the Lien ofthe Special Tax securing the City of San Mateo CFD No. 2008-1 (Bay Meadows) Bonds, in accordance with the assumptions, hypothetical, significant factors, and limiting condftions set forth on pages 10 through 12 ofthis report, as of November 15, 2012, is shown in the following table. W^m RES 1,2, 3.1b, 4, 5, 6, 7, Bay MeadoTO Main Track Investor, LLC 8, 9; MU 1,2,3, 4; STA 42.87 $233,700,000 1, 2, 3, 4 and 5 Shea Homes of Northern Califomia RES 3.1a 1.82 $13,480,000 TRI Pointe Homes, LLC RES 3.2 3.04 $22,510,000 Cumulative (Aggregate) Value ofthe Distiict $269,690,000 -Seevers * Jordan • Ziegenmeyer - INTRODUCTION Property Description and History ^? •^^] The appraised property represents ^^B a' 83.38± gross acres of land area situated within the boundaries ofthe W. ^: City of San Mateo CFD No. 2008-1 m^M (Bay Meadows). The property is '?-\^r.--'\ '•>?.;• located at the southern terminus of Sf-t \ South Delaware Street, north of •y i)>i Hillsdale Boulevard and west of •l^ ^^ '• Saratoga Drive, within the city of % V-JO* •4m ^f San Mateo, San Mateo County, -^Ur •^M ^ California. Ofthe approximate 83.38 %. Afi^V'A acres of gross land area, the ,^>» developable land equates to 52.18± mm acres proposed for development of five mid-rise office buildings (Station Component); four mid-rise, mixed-use residential/retail/office buildings (Mixed-Use Component); nine parcels designated for attached, for-rent and for-sale residential buildings and one parcel designated for a combination of attached and detached residential homes (Residential Component). In total, the subject property, as presently proposed, will contain 770,000 square feet of office space cmtently planned in five class A office buildings and 31,500 square feet of professional space above ground fioor retail, as weft as a proposed 131,000 square foot high school campus; approximately 85,000 square feet of retail space and 1,066 residential housing unfts, with 832 residential housing unfts being developed on the Residential Land Component and the balance (234 unfts) to be developed as part ofthe Mixed-Use Component. The - remaining 33.40 acres of Bay Meadows II are dedicated to parks, right away and one acre dedicated to the City for approximately 50 - 68 below-market rate (BMR) residential unfts on Mixed Use Block 1, which will be exempt from the Lien ofthe Special Tax securing the.Bonds. In terms of propeity history, the subject property is the second phase ofthe two-phase redevelopment ofthe former Bay Meadows Racetiack, located southwest ofthe Highway 101/92 interchange. Adopted in 1997 and completed in 2002, Phase 1 ofthe redevelopment is situated adjacent to the subject propeity to the east and contained approximately 75 acres of land for the development of approximately 900,000 square feet of office/commercial space (300,000 square feet, which will be the second phase ofthe Franldin Templeton campus, has yet to be developed), 734 residential unfts and 300,000 square feet of retail space. Phase II, the subject property, is the site of the former race tiack (Main Track), was initially not going to be redeveloped; however, a specific plan amendment was submitted for the Bay Meadows Specific Plan in 2005 proposing for the -Seevers* Jordan* Ziegenmeyer redevelopment ofthe Main Track area with a mix of residential, office and commercial development. A vesting tentative map for the subject property was approved by the City of San Mateo Planning Conimission on October 23, 2007. A map depicting the development program for Bay Meadows Phase II is shown below. - Seevers • Jordan • Ziegenmeyer - 'Note: The Floor Area riumbefscontalned herein match the SPAR 1 plan submittals ida'ted March 10, ZOOS, the SPAR 2 submittals dated August 12, ZOOa and the SPAR3 I&Latuyhtrii!|tttd3tM5ept®ibetl7, zopa: k ^^ - Seevers ® Jordan ® Ziegenmeyer - Information regarding recent transfers of parcels within the District was provided for review, and the Appraisers physically inspected the Appraised Parcels, consuhed public records for sales history, and evaluated information provided by the Developer's representatives as to the purchase prices for the specific parcels sold, which the Appraiser was asked to keep confidential. The Appraiser compared the information provided by the Developer's representatives, and analyzed information pertaining to other similar land sales in the region that are not present in the District, and which are presented herein for purposes of estimating market values for the developable parcels within the District. The Appraiser does not believe it is necessary to include in the appraisal the information it has been asked to keep confidential by the Developer's representatives for the appraisal to 1) clearly and accurately set forth our opinion of value in a manner that will not be misleading to the intended users ofthe appraisal - namely potential investors in the Bonds issued for the District; 2) contain sufficient information to enable the intended users ofthe Appraisal to understand the report properly and 3) clearly and accurately disclose any extraordinary assumption, hypothetical condition or limiting condftion that directly affects the appraisal and indicate its impact on value. Pursuant to the comments above, the representatives ofthe developer confirmed Residential Block 3 (3.1 and 3.2) was offered for sale to merchant builders, with ten offers having been received. Two offers were accepted. Shea Homes of Northern California acquired the 93-unit Landsdowne community (Res. Block 3.1) in a two-phase takedown, with 1.82 acres (43 units) acquired in the first phase (Res. Block 3.1a), and the option to acquire 1.91 acres (50 units) in the second phase (Res. Block 3.1b). TRI Pointe Homes, LLC acquired the site for 63 tuck-under townhomes (Res. Block 3.2). Due to the confidential nature ofthe transactions, the specific details are excluded from this repoit; however, the purchase prices and details ofthe purchases were provided for use in our analysis and have been considered as part ofthe valuation ofthe District. Both communities (Blocks 3.1 and 3.2) are currently under construction, with a significant amount of on-site improvements in place. It's also worth noting a 2.75-acre portion of Block MU 1 (mixed-use) is under contract for acquisition by a school (The Nueva School). Again, due to the confidential nature ofthe transaction, the specific details are excluded from this repoit; though, the purchase price and details ofthe purchase were provided and considered for use in our analysis. Additionally, the developer is marketing three ofthe Office Blocks (Stations 2, 3 and 4) for lease, as the developer intends to construct these buildings and retain ownership in the near term. Residential Block 5 is currently being marketed for sale. According to the developer, seven offers were recently received and are currently being evaluated. Type and Definition of Value The purpose ofthis appraisal is to estimate the market value ofthe subject property, wliich is defined as foHows; Market value: The most probable price which a propeity should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and Seevers • Jordan • Ziegenmeyer 7 seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date andthe passing of title from seller to buyer under conditions whereby: (1) Buyer and seller are typically motivated; (2) Both parties are well informed or well advised, and acting in what they consider their own best interests; (3) A reasonable time is allowed for exposure in the open market; (4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.^ In light ofthe fact the improvements to be financed by the second bond issuance were in place as of the date of inspection, the value estimate derived herein is the as-is market value. Please refer to the Glossary of Terms in the Addenda to this report for the definition oi value as-is. Client, Intended User and Intended Use of the Appraisal The client and intended user ofthis appraisal repoit is the City of San Mateo and its finance team. The appraisal report is intended for use as an aid in bond underwi-iting. Seevers • Jordan • Ziegenmeyer authorizes the reproduction of this appraisal report for inclusion in the Preliminary Official Statement (POS) and Official Statement (OS) for the express purpose of marketing the Bonds. Property Rights Appraised The market value estimated herein is for the fee simple estate, defined as follows: Fee Simple Estate: absolute ownership unencumbered by any other interest or estate, subject only to the limftations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. The rights appraised are also subjectto the Extraordinary Assumptions, Hypothetical and Limiting Conditions, diXiA General Assumptions contained in this report, as well as any exceptions, encroachments, easements and rights-of-way recorded. Appraisal Report Format This document is presented in a Self-Contained Appraisal Report format, which is intended to comply with.the reporting requirements set forth under Standards Rule 2-2(a) ofthe Uniform ' Code of Federal Regulations, Title 12, Section 34.42 (55 Federal Register 34696, Aug, 24, 1990; as amended at 57 Federal Register 12202, Apr, 9, 1992; 59 Federal Register 29499, June 7, 1994), ^The Dictionary of Real Estate Appraisal. 5* ed, (Chicago: Appraisal Institute, 2010), 78, Seevers • Jordan • Ziegenmeyer i standards of Professional Appraisal Practice (USPAP). This appraisal report is also prepared in accordance with the Appraisal Standards for Land Secured Financing published by the California Debt and Investment Advisory Commission (2004). Dates of Inspection, Value and Report An inspection ofthe subject property was completed onNovember 15, 2012, which represents the effective date of value. This appraisal report was completed and assembled on December 14, 2012. Scope of Work This appraisal report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP). This analysis is intended to be an "appraisal assignment," as defined by USPAP; the intention is the appraisal service be performed in such a manner that the resuft ofthe analysis, opinions, or conclusion be that of a disinterested third party. Several legal and physical aspects ofthe subject property were researched and documented. A physical inspection of the property was completed and serves as the basis for the site description contained in this report. Interviews were conduded with representatives of Wilson Meany, on behalf ofthe property ownership, regarding project information, infrastructure costs and fees, and the project histoiy. The sales history was verified by consulting public records. We were also provided several documents for use in this appraisal, including tentative subdivision maps, final maps, development costs, archftectural renderings and a copy ofthe Community Facilities Distiict Report. Zoning and entitiement information was provided by the City of San Mateo Conimunity Development Department on-line resources. The subjeds' earthquake zones, flood zones and utilities were verified with the applicable public agencies. Property tax information for the cunent tax year was obtained fiom the County of San Mateo Tax Collector's Office. Data relating to the subject's neighborhood and sunounding market area were anatyzed and documented. This information was obtained through personal inspections of portions ofthe neighborhood and market area; newspaper articles; real estate conferences; and interviews with various market participants, including property owners, property managers, brokers, developers and local government agencies. In this appraisal, the highest and best use of the subject property as though vacant was determined .based on the four standard tests (legal permissibility, physical possibility, financial feasibility and maximum productivity). -Seevers • Jordan • Ziegenmeyer- The appraised property consists of all the taxable real property within City of San Mateo Community Facilities District No. 2008-1 (Bay Meadows). The estimate of market value, by ownership, comprises 49.978± acres proposed for the development of five mid-rise office buildings (Station Component); four mid-rise, mixed-use residential/retail/office buildings (Mixed-Use Component); nine parcels designated for attached, for-rent and for-sale residential buildings and one parcel designated for a combination of attached and detached residential homes (Residential Component). It is not uncommon for land secured financings to involve valuations at atypical points in time during the development process. The market recognizes typical points during the development process when master planned projects often transfer, such as upon obtaining entitlements, completion of spinal infrastructure and/or recordation of final subdivision maps, for instance. It is often the case with the valuation of master planned projects for purposes of land secured financing to employ market logic to situations that aie not typical transition points for developments. More often than not large development projects that transfer with partial site development complete, as is the current condition ofthe subject property, reflect situations of duress. Recognizing that there is not duress, and yet a valuation is needed for purposes ofthe bond issuance at this time, we have employed market logic for the valuation of master planned communities and applied that logic to the physical condition reflected by the subject. Therefore, in, this analysis, the market value ofthe master developer-owned potion ofthe subject propeity in bulk, accounting for the impact ofthe Lien ofthe Special Tax securing the City of San Mateo CFD No. 2008-1 (Bay Meadows) Bonds, wftl be estimated by employing the use ofa discounted cash flow analysis (DCF); whereby, the expected revenue, absorption period, expenses and discount rate associated with the development and sell-off ofthe residential and commercial land components will be taken into account. A DCF analysis is a procedure in which a discount rate is applied to a projected revenue stream generated from the sale of individual components of a project. In this method of valuation, the appraiser specifies the quantity, variability, timing and duration ofthe revenue streams and discounts each to its present value at a specified yield rate. The revenue component ofthe DCF was derived by valuing the individual land use components outlined above using the sales comparison approach to value. A number of assumptions are made in the discounted cash flow analysis, not the least ofwhich is the forecast of absorption, or disposition, ofthe various land use components comprising the subject propeify. ft is common for surveys of market participants to reveal different estimations of anticipated absorption periods forthe sell-off of multiple components comprising a master planned development, with some developers preferring to hasten the holding period in favor of mitigating exposures to ftuctuations in market conditions; whereas, other developers prefer to manage the sell-off of the property over an extended period oftime so as to minimize direct competition of product within the master planned project. Sm-veys suggest a forecasted disposition period for the subject propeity may be as aggressive as two years or as long as five years. -Seevers ® Jordan ® Ziegenmeyer 10 In light ofthe fact two ofthe residential Blocks (3.1a and 3.2) have transfened ownership to merchant bmlders, the estimates of market value for these components were not included in the discounted cash fiow analysis, which derived an estimate of market value for the components held by the master developer. Instead, the estimate of market value derived via the sales comparison approach to value, which was the method employed to estimate the underlying land value for the various land use components owned by the master developer, was solely relied upon to estimate the market value ofthe components held by Shea Homes of Northern California and TRI Pointe Homes, LLC. This appraisal report has been conducted in accordance with appraisal standards and guidelines found in the Uniform Standards of Professional Appraisal Practice (USPAP) and the Appraisal Standards for Land Secured Financing, published by the California Debt and Investment Advisory Commission (2004). The individuals involved in the preparation ofthis appraisal include Kevin K. Ziegenmeyer and Eric A. Segal, Appraisers. Mr. Segal inspected the subject property; coHected and confirmed data related to the subject property, comparables and the neighborhood/market area; analyzed market data; and prepared a draft report with a preliminary estimate of value. Mr. Ziegemneyer also inspected the subject propeity, offered professional guidance and instraction, reviewed the draft report and made necessary revisions. - Seevers ® Jordan • Ziegenmeyer — 11 EXTRAORDINARY ASSUMPTIONS, SIGNIFICANT FACTORS & HYPOTHETICAL CONDITIONS It is noted the use of an extraordinary assumption or hypothetical condition can impact the results of an appraisal. Extraordinary Assumptions and Significant Factors 1. It is assumed that there are no adverse soil conditions, toxic substances or other environmental hazards that may interfere or inhibit development ofthe subject property. If, at some future date, items are discovered that are determined to have a detrimental impact on value, the appraiser reserves the right to amend the opinion of yalue stated herein. 2. Draft copies ofthe Final Maps for Bay Meadows Phase II were provided to us for use in the appraisal and were prepared by JMH Weiss, Inc., dated May 2007 (Job No. 4542). We have relied upon these maps/site plans to determine the land areas for each land use component ofthe subject. It is assumed these plans are trae and accurate. 3. The value conclusion contained in this repoit is based, in part, on development cost and fee information provided by the developer. Any significant change in these cost/fee projections could have a direct impact on the value estimate concluded in this report. Onsite development costs provided to us are cunent as ofthe date ofthis report and there is a possibility for these costs to change as development progresses. The appraisers specifically assume the cost information provided is accurate. Hypothetical Conditions None -Seevers • Jordan® Ziegenmeyer 12 GENERAL ASSUMPTIONS AND LIMITING CONDITIONS 1. No responsibility is assumed for the legal description provided or for matters peitaining to legal or titie considerations. Titie to the property is assumed to be good and marketable unless otherwise stated. 2. No responsibility is assumed for matters of law or legal interpretation. 3. The property is appraised free and clear of any or all liens or encumbrances unless otherwise stated. 4. The information and data furnished by others in preparation ofthis report is believed to be reliable, but no warranty is given for its accuracy. 5. It is assumed there are no hidden or unapparent conditions ofthe propeity, subsoil, or structures that render it more or less valuable. No responsibility is assumed for such conditions or for obtaining the engineering studies that may be required to discover them. 6. It is assumed the property is in full compliance with all applicable federal, state, and local environmental regulations and laws unless the lack of compliance is stated, described, and considered in the appraisal repoit. 7. It is assumed the property conforms to all applicable zoning and use regulations and restrictions unless nonconformity has been identified, described and considered in the appraisal repoit. 8. It is assumed all required licenses, ceitificates of occupancy, consents, and other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this repoit is based. 9. It is assumed the use of the land and improvements is confined within the boundaries or property Hnes ofthe property described and there is no eiicroaclmient or trespass unless noted in the repoit. 10. Unless otherwise stated in this report, the existence of hazardous materials, which may or may not be present on the property, was not observed by the appraiser. The appraiser has no knowledge ofthe existence ofsuch materials on or in the propeity. The appraiser, however, is not qualifled to detect such substances. The presence of substances such as asbestos, urea- formaldehyde foam insulation and other potentially hazardous materials may affect the value of the property. The value estimated is predicated on the assumption there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for such conditions or for any expertise or engineering loiowledge required to discover them. The intended user of this report is urged to retain an expert in this field, if desired. 11. The Americans with Disabihties Act (ADA) became effective Januaiy 26, 1992.1 (we) have not made a specific survey or analysis ofthis property to determine whether the physical aspects of the improvements meet the ADA accessibility guidelines. Since compliance matches each owner's financial ability with the cost-to cure the property's potential physical characteristics, the real estate appraiser cannot comment on compliance with ADA. A brief summary ofthe subject's physical aspects is included in this repoit. It in no way suggests ADA compliance by Seevers ^ Jordan * Ziegenmeyer 13 the cunent owner. Given that comphance can change with each owner's financial ability to cure non-accessibility, the value ofthe subject does not consider possible non-compliance^ Specific • study of both the owner's finandal ability and the cost-to-cure any deficiencies would be needed for the Department of Justice to determine compliance. 12. The appraisal is to be considered in fts entkety and use of onty a portion thereof wift render the appraisal invalid. 13. Possession of this report or a copy thereof does not cany with ft the right of pubHcation nor may ft be used for any purpose by anyone other than the client without the previous written consent ot Seevers ® Jordan • Ziegenmeyer. 14. Neither all nor any part ofthe contents ofthis report (espedalty any conclusions as to v^lue^^ identity ofthe appraiser, or the firm with which the appraiser is comiected) shall be d ssem mated to the pubhc through advertising, public relations, news, sales, or any other media without the prior written consent and approval of Seevers « Jordan « Ziegenmeyer. Seevers « Jordan « Ziegemneyer authorizes the reproduction ofthis document to aid m bond underwriting and m the issuance of bonds. 15 The Habflity of Seevers « Jordan • Ziegenmeyer and fts employees/subcontractors for enors/ • omissions, if any, in this work is limited to the amount of fts compensation for the work performed in this assignment. 16. Acceptance and/or use ofthe appraisal report constitutes acceptance of all assumptions and limiting conditions stated in this repoit. 17 An inspection ofthe subjed revealed no apparent adverse easements, encroaclnneiits or other • conditions, which currentty impact the subject. However, the exact locations of typical roadway and utflity easements, or any additional easements, which are referenced m the preliminaiy tftle repoit, were not provided to the appraiser. The appraiser is not a surveyor nor qualified to determine the exact location of easements, ft is assumed typical easements do not have an impact on the opinion (s) of value as provided in this report. If, at some future date, any easements are determined to have a detiimental impact on value, the appraiser reserves the nght to amend the opinion (s) of value. 18 This appraisal report is prepared for the exclusive use ofthe appraiser's dient. No third parties • are authorized to rety upon this report without the express consent of the appraiser, except investors in the Bonds. 14 -Seevers • Jordan • Ziegenmeyer CERTIFICATION STATEMENT I certify that, to the best of my knowledge and belief 9 The statements of fact contained in this report are true and correct. ® The reported analyses, opinions, and conclusions are limfted only by the reported assumptions and limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions. 9 I have no present or prospective interest in the property that is the subject ofthis report and no personal interest with respect to the parties involved. 9 Ihave performed appraisal services regarding the property that is the subject ofthis repoit within the three-year period immediately preceding acceptance ofthis assignment. 9 I have no bias with respect to the property that is the subject ofthis report or to the paities involved with this assignment. 9 My engagement in this assignment was not contingent upon developing or reporting predetermined results. • My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause ofthe client, the amount ofthe value opinion, the attainment of a stipulated resuft, or the occurrence ofa subsequent event directly related to the intended use ofthis appraisal. • My analyses, opinions, and conclusions were developed, and this repoit has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. • The reported analyses, opinions, and conclusions were developed, and this repoit has been prepared, in conformity with the Code of Professional Ethics and Standards of Professional Appraisal Practice ofthe Appraisal Institute. • I have made a personal inspection ofthe property that is the subject ofthis report. 9 Eric A. Segal, Appraiser, provided significant real property appraisal assistance to the person . signing this certification. 9 The use ofthis report is subject to the requirements ofthe Appraisal Institute relating to review by its duly authorized representatives. ® I certify that my State of California real estate appraiser license has never been revoked, suspended, cancelled, or restricted. ® I have the Icnowledge and experience to complete this appraisal assignment. Please see the Qualifications of Appraiser(s) poition of the Addenda to this repoit for additional information. • As ofthe date ofthis repoit, I have completed the Standards and Ethics Education Requirement ofthe Appraisal Institute for Associate Members. December 14,2012 KEVIN K. ZIEGENMEYER, APPRAISER DATE State Certification No.: AG013567 (June 4, 2013) Seevers • Jordan ® Ziegenmeyer 15 CERTIFICATION STATEMENT I certify that, to the best of my knowledge and belief: 9 The statements of fact contained in this report are true and conect. • The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions. 9 I have no present or prospective interest in the property that is the subject ofthis report and no personal interest with respect to the parties involved. • I have performed appraisal services regarding the property that is the subject ofthis report within the three-year period immediately preceding acceptance of this assignment. 9 I have no bias with respect to the property that is the subject ofthis report or to the parties involved with this assignment. • My engagement in this assignment was not contingent upon developing or reporting predetermined results. • My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause ofthe client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use ofthis appraisal. • My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. • The reported analyses, opinions, and conclusions were developed, and this repoit has been prepared, in conformity withthe Code of Professional Ethics and Standards of Professional Appraisal Practice ofthe Appraisal Institute. 9 I have made a personal inspection ofthe property that is the subject ofthis repoit. 9 The use ofthis report is subject to the requirements ofthe Appraisal Institute relating to review by its duly authorized representatives. ® I certify that my State of California real estate appraiser license has never been revoked, suspended, cancelled, or restricted. 9 I have the knowledge and experience to complete this appraisal assignment. Please see the Quahfications of Appraiser(s) poition ofthe Addenda to this report for additional information. • As ofthe date ofthis repoit, I have completed the Standards and Ethics Education Requirement ofthe Appraisal Institute for Associate Members. December 14.2012 ERIC A. SEGAL, APPRAISER DATE State Ceitification No.: AG026558 (February 18, 2013) -Seevers • Jordan ® Ziegenmeyer —• 16 SAN MATEO COUNTY REGIONAL OVERVIEW i 01*10 • L\ (Bvl parh • D»nviii» ?¥5 San Frqnifflc-k '•"/ ' •' ^l/^•^^'"''^i . • j/anmonl'^t , Kl 5/',^.,,U,„ar Oaly ^^ 4y.l«.r.. j;ri«lr« v'alloy 'if^lWSJ' Dfo,i!jn.cB*Mi' ,,UV6trtior« ^ louih SaS WiiSI&iSf Se Pleasanlor^ ' '%g^^^»P«i.r cur '^^^fl ,:v -i :^T^^avASi%?ij" "'"r^^#m^*Sife?i^S-:^ Pf^iida 10 -y • i' '• .'(.OS GaloB D.-isIn' ,' R '• ;~, ' Morgan HIII • .San Martin^ / ''STDB'iMLlHEcom i\-.mj Introduction San Mateo County is located between San Francisco and Santa Clara Counties on the San Francisco Bay. The County covers 531 square miles and boasts 54 miles of spectacular coastiine bluffs and beaches. About three-fourths of fts land is in agricultural use, watershed, open space, wetiands or parks. Mild climate, abundant natural resources, picturesque foothills, creeks and old redwoods best describe San Mateo County, making ft an attiactive community for residents and businesses. As one of several counties significantly contiibuting to the economy ofthe San Francisco Bay Area, San Mateo County is stiategically located in proximity to world-renowned research universities - University of Califomia at Berkeley and San Francisco and Stanford University. As a resuft, many leading industry employers, such as medical therapeutic leader Genentech, Fortune 500 Oracle Corporation, gaming leader Electronic Arts, and Academy Award winner PDI DreamWorks, all call San Mateo County home. Consistently, San Mateo County boasts among the highest incomes and among the lowest unemployment rates in both the state and the nation. -Seevers • Jordan • Ziegenmeyer- 17 Population The county has a population of nearly 730,000, and has grown at a moderate rate of 0.8% per year for the past five years. The vast majority of county residents live in incorporated areas, the largest of which are Daly City, San Mateo and Redwood City. The following table illustiates recent population trends for areas within San Mateo County over the past few years. POPULATION TRENDS 1 |l»«s|itfily;:g|||i !*iiipfi':' fl|{)08'l^;'5 ":?;206||^'% wfiji2010.As| AioiLv^r?; '''^ '2oM%:V'An^i/Vyf::. ] Atherton 6,917 6,940 6,898 6,921 6,890 6,888 -0.1% Belmont 25,189 25,427 25,634 25,821 25,923 26,123 0.7% Brisbane 3,948 4,065 4,185 4,268 4,310 4,347 2.0% Burlingame 28,020 28,306 28,556 28,784 28,888 29,106 0.8% Colma 1,684 1,725 1,756 1,786 1,797 1,789 1.2% Daly City 100,131 100,156 100,692 101,235 101,493 102,593 0.5% East Palo Alto 28,703 28,595 28,464 . 28,281 28,247 28,467 -0.2% Foster City 29,868 30,042 30,270 30,542 30,660 30,895 0.7% Half Moon Bay 11,408 11,396 11,403 11,360 11,373 11,478 0.1% Hillsborough 10,526 10,656 10,750 10,821 10,880 11,006 0.9% Menlo Park 30,732 31,207 31,688 31,986 32,201 32,513 1.2% Millbrae 20,468 20,947 21,136 21,521 21,625 22,069 1.6% Pacifica 36,702 36,940 37,153 37,267 37,367 37,658 0.5% Portola Valley 4,323 4,328 4,341 4,358 4,373 4,411 0.4% Redwood City 75,080 75,525 76,198 76,766 77,299 78,244 0,8% San Bruno 39,592 40,773 40,993 41,157 41,663 42,451 1,4% San Carlos 27,642 27,923 28,152 28,393 • 28,494 28,719 0.8% San Mateo 94,344 95,050 96,170 97,106 97,557 98,298 0.8% South San Francisco 60,491 61,701 62,999 63,623 63,827 64,307 1.3% Woodside 5,202 5,244 5,261 5,288 5,313 5,386 0.7% Unincorporated 60,868 60,874 61,119 61,330 62,192 62,695 0.6% Total 701,838 707,820 713,818 718,614 722,372 729,443 0.8% Source: Califomia Departmen t ofFinance The Bay Area consistently has among the highest housing costs in the state and nation. In the year 2011, the median home price in San Mateo County was $575,000, down about 6% from 2010 (as reported by DataQuick Information Systems). Among all of California's counties, only Marin and San Francisco had higher median prices. The lack of affordable housing is one ofthe impediments to further gro-wth in the region. Transportation The San Mateo County area is well served by State Highway 101. This freeway runs in a north-south direction and tiavels thi-ough the center ofthe county, ft provides access to the city and county of San Francisco to the north. To the south. State Highway 101 provides access to San Jose and other areas of Santa Clara County. Further south, State Highway 101 tiavels through Salinas and then onto —• — Seevers • Jordan • Ziegenmeyer — 1^ the Central Coast of California. Another major arterial in the County is Interstate 280, which commences in San Francisco near the San Francisco-Oakland Bay Bridge at Highway 101, and then bisects the County and the peninsula before terminating at Interstate 880 in San Jose. The Pacific Coast Highway (Highway 1) also travels through San Mateo County, tln-ough Daly City, Pacifica, and Half Moon Bay. To the north ofthe County, Highway 1 eventually crosses the Golden Gate Bridge, providing access to Marin County to the north of San Francisco. Access to East Bay Area is most proximately accessible via the San Mateo-Hayward Bridge in Foster City and the Dumbarton Bridge (Highway 84) in the Menlo Park/East Palo Alto area, both ofwhich connect to Interstate 880 across the bay. San Mateo County offers extensive public transportation. In June 2003, the Bay Area Rapid Transft (BART) opened the Millbrae/SFO extension, which included four new stations - South San Francisco, San Bruno, San Francisco International Airport (SFO) and Millbrae. In June 2004, Caltrain launched the Baby Bullet train service, which provides express service including travel between San Francisco and San Jose in less than an hour. In 2005, Caltrain doubled the number of Baby Bullet trains (from 10 to 22). San Francisco International Airpoit (SFO) is located in an unincorporated area ofthe county. According to the Airports Council International of North America, SFO is consistently one ofthe top 15 busiest airports in the nation in terms of both passenger and cargo volume. The airport is accessed along State Highway 101, between the cities of Millbrae and San Bruno. The Redwood City Port is also located in the county. The Port has a deep-water channel and handles bulk and specialty cargo including lumber, scrap metal and liquid cargos. Each year, the Port handles about 2 milHon metric tons of cargo. Employment & Economy The California Employment Development Depaitment has reported the following employment data for San Mateo County over the past few years. EMPLOYMENT TRENDS 20or> 2007 200S 2009 2010 2011 Labor Force 364,900 370,100 373,000 374,100 374,900 380,300 Employment 351,500 355,900 • 354,900 342,700 342,100 350,200 Annual Job Growth n/a 4,400 (1,000) (12,200) (600) 8,100 Unemployment Rate 3.7% 3.8% 4.9% 8.4% 8.7% 7.9% Source California Employment Development Department - Seevers • Jordan • Ziegenmeyer - 19 The unemployment rate in San Mateo County was 6.4% in September 2012, which compares to rates of 10.2% for Califomia and 7.8% for the U.S. For most areas within the state and nation, including San Mateo County, unemployment declined from 2004 through 2006, increased from 2007 to 2010, and declined in 2011 and into 2012. Employment conditions have shown improvement in 2011 and into 2012, and this trend is expected to continue over the next few years. The latest employment gro-wth forecast from Beacon Economics predicts that over 300,000 jobs will be created in the greater San Francisco Bay Area region through 2015 - including 78,000 jobs in San Francisco and San Mateo Counties. Technology companies in San Mateo County are performing very well and are expected to grow in the near term. San Mateo County has a diverse economy, with no one sector accounting for a majority ofthe employment in the region. The following chart indicates the percentage oftotal employment for each sector within the county. EMPLOYMENT BY SECTOR Trade/Transport/Utilities Profess/Business Seivices Manuf/Construction Leisure/Hospitality Education/Health Services Government Financial Activities Information Other Services Agriculture 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Source: California Employment Development Department As can be seen in the chart above, San Mateo County's largest employment sectors are Trade/Transportation/Utilities (including retail and wholesale trade). Professional and Business Services, and Manufacturing/Consttuction. Combined, these sectors account for just over half of all employment in the county. Some ofthe county's largest private employers include Unfted Airlines, Oracle Corporation, Genentech, Kaiser Permanente, Safeway, Visa and Electronic Arts. -Seevers ® Jordan ^Ziegenmeyer • 20 Household Income Median household income represents abroad statistical measure of well-being or standard of living in a community. The median income level divides households into two equal segments with one half of households earning less than the median and the other half eaming more. The median income is considered to be a better indicator than the average household income as ft is not dramaticalfy affected by unusualty high or low values. In the year 2010 (most recent data available fiom the U.S. Census), San Mateo County's median household income was $82,413, which was significantty higher than the state of Califomia's median income of $57,664. The county's income is the second highest among California counties, hailing only Santa Clara County. Recreation & Culture The County operates 17 regional parks in a wide variety of natural settings including a coastal marine reserve, a bayside recreational area, coastal mountain woodland areas, and urban sites. Northem San Mateo County is home to eight parks including Coyote Point, Coyote Point Marina, Crystal Springs, Fitzgerald Marine Reserve, Junipero Sena, San Bruno Mountain, San Mateo Fishing Pier, and San Pedro Valley Park. Mid- and southern county parks include Edgewood Park, Flood Park, Huddart Park, Wunderiich Park, Herftage Grove, Memorial Park, Pescadero Creek, and Sam McDonald Park. The county is also laiown for fts extensive tiail system. San Mateo County hosts an annual County Fair each summer, located near the intersection of U.S. Highway 101 and State Highway 92. Conclusion San Mateo County is one of California's most affluent regions, with income and home prices among the highest in the state. Among the county's most notable advantages are fts cential location in the San Francisco Bay Area, picturesque sunoundings, mild climate and diverse employment opportunities. The area also boasts good quality tiansportation routes, stiong schools, and abundant shopping centers, public services and recreational activities. The region is showing signs of improvement in employment and economic conditions, and the long-term outiook is for relative stability and continued economic gro-wth. - Seevers • Jordan • Ziegenmeyei ^ 1 NEIGHBORHOOD OVERVIEW Introduction This section ofthe repoit provides an analysis of the observable data that indicate patterns of growth, structure and/or change that may enhance or detract from property values. For the purpose ofthis analysis, a neighborhood is defined as "a group of complementary land uses; a congruous grouping of inhabitants, buildings or business enterpi-ises."^_ - Neighborhood Boundaries The boundaries of a neighborhood identify the physical area that infiuences the value ofthe subject property. These boundaries may coincide with observable changes in prevailing land use or occupant characteristics. Physical features such as the type of development, street patterns, terrain, vegetation and parcel size tend to identify neighborhoods. Roadways, waterways and changing elevations can also create neighborhood boundaries. The subject property is located at the southern terminus of S. Delaware Stieet, south of Highway 92, within the city of San Mateo, San Mateo County, California. The neighborhood boundaries can generally be described as the San Mateo city limits. ' The Dictionary of Real Estate Appraisal. 5"" ed. (Chicago: Appraisal Institute, 2010), 133, Seevers • Jordan • Ziegenmeyer 22 Demographics According to demographic reports, the city of San Mateo has a population of 96,738 persons, with a projected increase to 99,046 persons by 2015. The median age is 40.0 years and the average household size is 2.47 persons. The median household income in the area is $89,068 per year. Ofthe 39,942 housing units in the neighborhood, approximately 51.8%) are owner-occupied, 44.7% are renter-occupied, while the remainder are vacant. Top employers in San Mateo include the San Mateo County Community College District, San Mateo Medical Center, San Mateo-Foster City School District, Franklin Templeton Investments, and San Mateo Union High School District. The city is home to the College of San Mateo, a community college. Transportation The subject property is located at the southern terminus of S. Delaware Street, north of Hillsdale Boulevard. S. Delaware Street is a north-south four-lane surface street that connects the subject with State Highway 92 to the north. In an easterly direction. State Highway 92 becomes the San Mateo Bridge and connects to Interstate 880 in Alameda County. In a westerly direction, State Highway 92 travels to the coastal city of Half Moon Bay. State Highway 92 also connects to U.S. Highway 101, approximately one-half mile east ofthe subject. In a northerly direction. Highway 101 travels through San Francisco and various coastal communities of California, Oregon and Washington; in a southerly direction, the highway travels tln-ough San Jose and eventually ends in the Los Angeles Area. San Francisco International Airport is located about six miles north ofthe subject property, in Millbrae. The main public transportation services in the area are provided by SamTrans, AC Transit and Caltrain. The Caltrain is a railroad line owned and operated by the Peninsula Conidor Joint Powers Board, which consists of representatives from San Francisco, San Mateo and Santa Clara counties and linlcs Gilroy (Santa Clara County) in the south with San Francisco in the north. The train service is an integral part of linlcing the employment centers ofthe Peninsula and Silicon Valley with average weekly ridership as of February 2011 (reported amiually each year) of 41,442. Land Uses Land uses in the subject's neighborhood are varied, and include a variety of retail, office, light industrial, single-family and multifamily residential development. One ofthe most prominent retail uses in the area is the Hillsdale Shopping Center, which is located just southwest ofthe subject propeity. This mall is anchored by Nordstrom, Macy's, Sears and Forever 21, with another 120 stores and restaurants. -Seevers • Jordan • Ziegenmeyer 23 North of the subject propei'ty along South Delaware Street are a variety of uses, including the San Mateo County Events Center, the home ofthe annual San Mateo County Fair, apartment complexes, a self-storage facility and single-family residential development. El Camino Real (State Highway 82), which rans in a north-south direction and is located just west ofthe subject, is improved with a variety of retail, office, auto commercial, fast food and motel properties. Most propeities appear to have been constructed in the 1960's and 1970's and are in average condition. North ofthe subject property along Delaware Street, on the north side of State Highway 92, are shopping centers that include a Ross department store, Big K, TJ Maxx, Michaels, and other smaller retail and office uses. Immediately east ofthe subject property, which is Bay Meadows Phase I, is the corporate headquarters for Franklin Templeton Investments. East of Franklin Templeton is a Whole Foods grocery store, mixed-use residential and retail development (both for sale and for rent) and a Kaiser Permanente medical office, all ofwhich was developed as part ofthe first phase of the Bay Meadows redevelopment. The subject property is located within the San Mateo Rail Corridor Transit Plan ofthe City of San Mateo. According to the City of San Mateo Planning Department, the intent ofthis Plan is to allow, encourage, and provide guidance for the creation of world class transit-oriented development (TOD) within a half-mile radius ofthe HiHsdale and Hayward Park Caltrain station areas, while maintaining and improving the quality of life of those who already live and work in the area. The Plan encourages significant redevelopment of blighted properties, and seeks to spur growth of quality residential and commercial projects in the area. In addition to the subject property, which comprises Phase II of Bay Meadows (the redevelopment of the Bay Meadows horse racing facility), other redevelopment projects/plans within San Mateo include El Camino Real Master Plan (from State Highway 92 to the Belmont city limfts); and the Hillsdale Station Area Plan (redevelopment ofthe area for transit-oriented development). A number of residential and mixed use projects have been approved by the City of San Mateo, or are currently in the approval process. In general, the subject's neighborhood is considered to be in a period of revitalization. Conclusion In summary, the subject propeity is located in the city of San Mateo, within the Bay Meadows Specific Plan. Proposed constraction intennixed with rehabihtation projects in the area will likely create an attractive business environment for the public and private sectors. The subject also benefits from its good access to and from State Highway 92 and U.S. Highway 101, the main tiansportation arterials in the area. Demand for residential and commercial product within the area is projected to grow. -Seevers ® Jordan ® Ziegenmeyer 24 HOUSING MARKET OVERVIEW In this section, we will begin with an analysis ofthe legal, physical and location attributes ofthe subject property and a delineation ofthe subject's competitive market area. Then, we will analyze demand and supply for similar product within the defined market area, leading to conclusions for expected absorption. Regional Home Pricing and Sales Activity The subject property is situated in central San Mateo County in a region commonly known as "the Peninsula," which also includes portions of Santa Clara County to the southeast. The region is primarily built-out, but has been accepting of new development on previously developed sites. Because ofthe similarfties in terms of demographics and employment base between these two counties, we will look at regional pricing trends and sales activity within both San Mateo County and Santa Clara County in order to analyze current residential market conditions. The Gregory Group surveys active new home projects in California and Nevada. The table below and the accompanying chart on the following page depict price trends among active single-family residential projects in San Mateo and Santa Clara Counties over the past three years. This data includes both attached and detached projects. San Mateo & Santa Clara County New Home Prices % Change Net Net Average Price - Average Average Average % Change Net 12 Month Moving Average Number of Quarter Price Price Incentive Average Price Average Home Size Projects 3Q 2009 $704,293 $698,855 $5,438 - - 1,672 68 4Q 2009 $687,672 $684,230 $3,442 -2.1% - 1,679 54 1Q2010 $697,656 $693,580 $4,076 1.4% - 1,702 47 2Q 2010 $667,372 $663,131 $4,241 -4.4% - 1,606 37 3Q2010 $671,387 $667,520 $3,867 0.7% -1.1% 1,669 32 4Q 2010 $601,386 $597,380 $4,006 -10.5% -3.2% 1,596 21 1Q2011 $608,585 $604,520 $4,065 1.2% -3.3% 1,606 20 2Q2011 $645,378 $641,915 $3,463 6.2% -0.6% 1,702 21 3Q2011 $687,573 $684,187 $3,386 6.6% 0.9% 2,060 31 4Q2011 $671,626 $667,598 $4,028 -2.4% 2.9% 2,090 31 1Q2012 $636,511 $632,838 $3,673 -5.2% 1.3% 2,002 30 2Q 2012 $642,523 $638,861 $3,662 1.0% 0.0% 2,002 29 3Q 2012 $676,179 $672,190 $3,989 5.2% -0.4% 2,093 22 Source: The Gregory Group -Seevers • Jordan • Ziegenmeyer 25 San Mateo & Santa Clara County New Home Prices $800,000 $775,000 $750,000 $725,000 $700,000 $675,000 60 $650,000 •g $625,000 S $600,000 $575,000 $550,000 $525,000 $500,000 Source: The Gregory Group Within the two counties, the average net price generally tiended downward in 2008 thi-ough 2010, but reached bottom around the end of 2010 and has trended upward in 2011-2012. This is a positive sign for these counties, which are experiencing a recoveiy in the housing market prior to outlying growth areas like the East Bay Area, Sacramento, and the San Joaquin Cential Valley (Stockton/ Modesto). Over the three-year period fiom Thkd Quarter 2009 to Third Quarter 2012, the average net price declined by 3.8%, while the average net price per square foot declined by 23.2%). The table on the following page shows unsold inventoiy levels per project per month. Standing inventory generally fluctuated during 2008, declined in 2009, increased for most of 2010, and declined again in 2011-2012. The unsold inventory as of Third Quarter 2012 equated to 2.0 homes per proj ect per month, which has been following a downward tiend as home sales continue to increase and inventories decline. -Seevers 9 Jordcm • Ziegenmeyer- 26 San Mateo & Santa CTar a County New Home Inventory Unsold Inventory Unsold Per Inventory Proiect Per Units Units Unoffered Unsold Per Project Ouarter Planned Offered Units Sold Total Inventory Inventory Inventory Ouarter Per Month 3Q2009 6,451 5,568 4,534 1,917 883 1,034 15.2 5.1 4Q2009 5,799 5,004 4,075 1,724 795 929 17.2 5.7 1Q2010 5,250 4,737 3,905 1,345 513 832 17.7 5.9 2Q2010 4,409 3,996 3,284 1,125 413 712 19.2 6.4 3Q2010 3,798 3,400 2,751 1,047 398 649 20.3 6.8 4Q 2010 2,697 2,395 1,973 724 302 422 20.1 6.7 1Q2011 2,792 2,413 2,051 741 379 362 18.1 6.0 2Q2011 2,696 2,351 2,071 625 345 280 13.3 4.4 3Q2011 3,551 2,745 2,333 1,218 806 ,412 13.3 4.4 4Q2011 3,246 2,505 2,193 1,053 741 312 10.1 3.4 1Q2012 3,409 2,693 2,359 1,050 716 334 11.1 3.7 2Q2012 3,367 2,877 2,660 707 490 217 7.5 2.5 3Q2012 2,667 2,352 2,222 445 315 130 5.9 2.0 Source: The Gregoiy Group Recent sales activity is shown in the table and accompanying chart on the following page. During the Third Quarter 2012, there were 3.9 sales per project per month, which was unchanged from the previous quarter, but up from 2.8 a year ago (third quarter of 2011), and up significantly from 1.1 two years ago (third quarter of 2010). Absorption rates (homes sold per project per month) have generally increased in 2011-2012. -Seevers « Jordan ® Ziegenmeyer - 27 San Mateo & Santa Clara County New Home Sales Sold Per SoldPer Proiect Project SoldPer Per Month 12- Ouarter Number of Per Project Per Month Movine Ouarter Sold Projects Ouarter Month Average 3Q2009 849 68 12,5 42 2.1 4Q2009 209 54 3,9 1.3 2.2 1Q2010 287 47 6,1 2.0 2.3 2Q 2010 145 37 3,9 1.3 22 3Q2010 101 32 3,2 1.1 1.4 4Q2010 106 21 5,0 1.7 1.5 1Q2011 92 20 4,6 1.5 1.4 2Q2011 124 21 5,9 2.0 1.6 3Q2011 259 31 8.4 2.8 2.0 4Q2011 221 31 7.1 2.4 1.8 1Q2012 327 30 10.9 3.6 2.1 2Q 2012 340 29 11.7 3.9 2.6 3Q2012 259 22 11.8 3.9 2.9 Source: The Gregory Group New Home Sales per Project per Month 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 ON o o .—I T—I .—I o o o o o o o o O O o o O Source: The Gregory Group -Seevers • Jordan 9 Ziegenmeyer 28 Project Pricing and Inventory Analysis As reported by The Gregory Group, an enterprise that surveys active new home projects in California and Nevada, there are currently 22 single-family residential developments (both attached and detached) actively marketing new homes in the region encompassing San Mateo and Santa Clara Counties. Data for the projects is summarized in the table below based on information published by The Gregory Group for Third Quarter 2012. ft is noted all but one ofthe projects are located in Santa Clara County; the only project in San Mateo County is Cedar Mills in San Bruno. , "- Jisn'i. ItllSI- .\!>v. Ilium- I. Overall Minimiun $372,500 818 $455.38 /SF Overall Maximum $1,889,580 3,747 $504.29 /SF Overall Average $660,160 2,086 $316.51 /SF Based on The Gregory Group survey, the total unsold and unoffered inventory levels are determined for the purpose of estimating the supply of new homes in the market area that could be simflar to a product line at the subject. It is noted ofthe approximatety 2,352 unfts offered for sale, 2,222 units have been sold. Therefore, the total unsold unfts offered for sale is 130 unfts. Considering this, along with the planned but unoffered inventory of 315 units, the total inventoiy at active projects equates to 445 unfts. It is noted there are a few projects not tracked by The Gregoiy Group. In Redwood City, 231 units are planned in a mixed-use development known as One Marina, which will also include community parks and retafl space. As of late August 2012, 92 ofthe 231 planned unfts had been completed, and 24 townhomes had been sold. Prices at the project range from $499,000 to the low $700,000s. -Seevers • Jordan ® Ziegenmeyer - 29 In March 2012, ToU Brothers began marketing homes at the Ridge, a 71-home subdivision in Brisbane on the edge ofthe San Bruno Mountain Habftat Conservation Area. High atop the Brisbane hilftop, homes at the Ridge range from 2,098 square feet to 3,416 square feet, with pricing starting in the mid-$750,000s and climbing to above $950,000. In terms of future supply additions, a 50-unft townhouse project in Daly City known as Garden Valley is planned, with construction expected to begin around the end of 2012. In addition, MG Property Group recently acquired the 72-unft Pacifica Place property in Daly City. The development was originally intended for condos, was changed to apartments in 2011, but the new owner intends to change it back to condos as the market strengthens. Project Absorption Rates Previously, we profiled 22 residential communities actively marketing new homes in San Mateo and Santa Clara Counties. The following table summarizes absorption rates for these projects. AvK. ISiiso \;!,e. ilium- I'nils Ciiils lotiil Siili-s iQZan M)W12 "oiiimiihilyS I'iiii- Si/i- (S|-) I'Liiiiii-il Siilil Hiitt/Mi). Siilcs K:ittf/.Mii. Aviana Gilroy K Hovnanian Homes $537,923 2.473 108 74 3.77 27 9.00 AXIS San Jose KT Properties $663,750 1.129 329 252 4.33 21 7.00 Boulevard Santa Clara Shea Homes $579,500 1,592 130 130 3.29 3 1.00 Cedar Mills San Bruno Lennar Homes $823,950 1.968 14 14 2.25 4 1.33 Celadon San Jose Warmingon Homes $487,600 1,566 86 38 4.20 18 6.00 Cimarron Gilroy DeNova Homes $518,400 2.334 66 66 4.46 7 2.33 CityHeiglits San Jose Barry Swenson $372,500 884 124 124 1.91 9 3.00 Creekside-Eagle Ridge Gilroy Shapell Industries $716,650 3.192 118 110 1.52 5 1.67 Dakota Gilroy DR Horton $544,740 2.498 92 89 4.42 20 6.67 Fusion Sunnyvale O'Brien Hoines $521,801 1.457 228 221 14,51 47 15.67 Genoa at Milano Morgan Hill KB Home $582,500 2.545 32 7 0.65 1 0.33 Hamilton Square Campbell Pulte Homes $737,157 1.813 21 19 3.03 7 2.33 Maplewood Lane Gilroy Meritage Homes $397,323 1.771 51 51 3.85 6 2,00 Mesa Ridge Gilroy K Hovnanian Homes $557,157 3.133 49 43 3.20 20 6.67 Mission Ranch Morgan Hill Dividend Homes $787,250 2,864 328 243 1.47 2 0.67._ Mondrian Mountain View Shea Hoines $772,467 1.592 151 151 3.46 2 0.67 Morgan Glen-Capriano Morgan Hill DR Horton $789,990 3.747 54 52 1.69 3 1.00 Pepper Lane San Jose Pulte Homes $552,240 1,604 157 79 6.97 31 10.33 Slierimar Ranch Morgan Hill KB Home $710,222 2.636 114 64 4.42 17 5,67 The 88 San Jose Wilson Meany Sullivan $449,000 818 197 • 177 3.38 14 4.67 The Enclave-Waverly Park Mountain View SuininerhGI Honies $1,889,580 2,780 53 53 3.07 1 0.33 Tlie Terraces-Willow Glen San Jose Toll Brothers $531^828 1,490 165 165 2.73 1 0.33 Overal! Minimum 0.65 0.33 Overall Maximum 14.51 15.67 Overall Average 3.75 4.03 Absorption rates have increased in the subject's market area in recent quarters. During the Third Quaiter 2012, the absorption rates among the active projects within the subject's market area exhibited a tendency toward about 2-4 sales per month (average of 4.03 and median of 2.33). Most ofthe active projects have experienced higher absorption rates in 2012 compared to the previous year. This is a trend occurring throughout the Bay Area region as the housing market recovers. -Seevers • Jordan ® Ziegenmeyer 30 The project located in San Mateo County - Cedar Mills in San Brano - has had a total absorption rate of 2.25 sales per month since opening in March 2012. Conclusion Overall, the housing market in the San Mateo-Santa Clara County region is improving, with increases in both sales and prices in many areas as demand strengthens. Over the next 12 months, prices and sales volume should continue on their upward trends. Tightened lending restrictions in the market for existing homes will continue to influence sales rates. Job growth is expected to increase over the next several years, which should fuel demand for new homes, if appropriately priced; however, too much development too quickly could saturate the market in the near term. -Seevers ® Jordan ® Ziegenmeyer 31 APARTMENT MARKET OVERVIEW National/Regional Market Conditions In most ofthe nation's markets, apartment market conditions have improved in 2010-2012, with rising rental rates, declining vacancy rates and falling capitalization rates. During the years 2008 and 2009, apartment market conditions declined amid falling demand due to rising unemployment, and increasing supply due to growing competition from single-family homes and condominiums available for rent. According to the PwC Real Estate Investor Survey, dated 3"^ Quarter 2012, the national apartment market "remains firmly planted in the expansion phase of the real estate cycle, characterized by strong demand, robust rent gro-wth, and new supply." While rental rates declined in the year 2009, they increased by about 2% in 2010 and nearly 4% in 2011. Apartment sales volume also increased in 2010 and 2011. Demand for apartments has improved due to job gro-wth and ongoing struggles in the single-family home market. Nationally, vacancy has fallen to fts lowest level in more than 10 , years. Amid the increasing sales volume and recovering market fundamentals, overall capitalization rates have fallen over the past year. For the 3rd quarter, the PwC survey respondents indicated a cap rate range of 3.75% to 10.0%), with an average of 5.74% for multifamily properties. The average was down from 5.98%) a year ago. San Mateo County - Introduction The apartment market in San Mateo County has been improving for the past few years and exhibfts extremely tight vacancy of less than 5%). Rental rates in the region have been increasing since the beginning of 2010. Based on our research, the two brokerages who pubhsh the most detailed information for Bay Area apartment markets are Cassidy Turiey and Marcus & Millichap. Cassidy Turiey provides the most thorough data for San Mateo County and thus we will rety primarily on their most recent report: Apartment Market Report, San Mateo County, Third Quarter 2012, Vacancy Rates In San Mateo County, the apartment market vacancy rate as of Third Quaiter 2012 was 4.5% among projects wfth 100+ units, and 2.2%o among projects with 99 unfts or less (according to Cassidy Turiey). Vacancy has been trending downward for nearly four years since peaking in early 2009. The chart on the following page shows historical vacancy rates for San Mateo County. -Seevers ® Jordan ® Ziegenmeyer — 32 San Mateo County Historical Vacancy 6.5% 5.5% 4,5% 3,5% 2,5% 1.5% o\ o ,—1 o o o o o o o Ol ol ol o^ r^ I I Ol r-t Ol Tf I ro ^ .—* cy a (y a a Ol a a a cy a Source: Cassidy Turiey Rental Rates The average rental rate for an apartment in San Mateo County as of Third Quarter 2012 was $1,728 for unfts within projects containing fewer than 100 unfts; and $2,220 for unfts within projects with 100 or more unfts. According to Cassidy Turiey, rental rates in the region peaked during the third quarter of 2008, declined for five consecutive quarters before bottoming out in the fourth quarter of 2009, and have increased since the first quarter of 2010. Further, the pace and sttength of rental rate gro-wth has reportedly accelerated in recent quarters. Over the past year, the average rent has increased by 15% at projects with 100 or more units, and 16% at projects wfth fewer than 100 unfts. The following chart shows the average rental rates by unft type as of Third Quarter 2012. -Seevers 9 Jordan • Ziegenmeyer 33 San Mateo County Average Rental Rates ,. Rent % Change Avg. Rent % Change cts with from Projects with from H0 Units Year Ag 100+Units Year Ago Sttidio $1,099 12% $1,491 14% 1 Bed / 1 Bath $1,597 14% $1,997 15% 2 Bed / 1 Bath $1,967 16% $2,244 18% 2 Bed/2 Bath $2,226 14% $2,690 13% 3 Bed/2 Bath $3,294 6% $3,276 17% Average overaE $1,728 16% $2,220 15% Source: Cassidy Turiey, 3rd Quarter 2012 Sales Activity The following chart summarizes recent trends in apartment sales. San Mateo County Apartment Sales Trends 2g-2(»ii 3g-2(IM 4g-2 Source: Cassidy Turiey The previous chart shows that transaction volume has been up and down over the past several quarters. With rental rates increasing, many owners are not looking to sell. Brokers indicate there is a shortage of quality properties available for sale - this supply limftation has put downward pressure on sales volume even though demand among potential investors has been very high. Given the strong market conditions, multifamily propeities are in very high demand among investors. Demand is particularly strong for Class A and B properties; however, most ofthe properties on the market are Class C. Prices are increasing, although the figures in the previous table do not always illustrate the trend. The average price-per-unit and price-per-square-foot figures are dependent on the size, quality and condition ofthe propeities that happened to sell in any given quarter. Most ofthe sale activity within the marketplace has focused on older and smaller Class B/C projects. Cap rates have trended -Seevers f Jordan ® Ziegenmeyer- 34 downward over the past couple of years for nearly all property types, with an average of 5.27%) in San Mateo County in the third quarter. New Construction The following chart shows the number of multifamily permfts (within projects with 5 or more unfts) issued over the recent past in San Mateo County. It is noted these figures include for-rent apartments and for-sale condominiums. San Mateo County Multifamily Building Permits 800 639 600 543 483 491 400 221 181 200 128 45 37 2004 2005 2006 2007 2008 2009 2010 2011 2012 thru AuE Source: U.S, Census SOCDS Building Peimits Database Development of multifamily projects has been up and down over the past several years. Recently a decline was seen in 2009 and 2010 after a relatively large number of permfts were issued in 2008. The increase in permit activity in 2011 indicates new construction will likely increase in the near term. This makes sense given the recent declines in vacancy and growth in rental rates. According to Cassidy Turiey, there were no new major projects delivered in San Mateo County during the second quarter of 2012. In the third quarter, a 109-unit project was delivered at 636 El Camino Real in South San Francisco. Sares Regis has three apartment projects in the works throughout San Mateo County, including the 307-unit Plaza apartment complex in Foster City scheduled to open in the first quarter of 2013. The company has also begun construction on a 132-unit apartment complex at 333 Main Street in Seevers • Jordan • Ziegenmeyer ^ 35 Redwood City, and also recently closed a deal to develop 155 apartments at 888 San Mateo Drive in San Mateo. A 264-unit, six-story apartment building is planned at 640 Veterans Boulevard in Redwood City. Construction is slated to begin in late 2012 or early 2013, with leasing starting about two years after construction begins. Conclusion The apartment market is showing signs of sustained recovery across the U.S. and in San Mateo County as well. In this market area, vacancy has decHned and rental rates have increased since early 2010, and both of these trends are expected to continue over the next 12 months, especially considering that job growth is expected to improve in the region. Overall the market fundamentals are very strong and favorable to propeity owners, and demand among investors is very high for good quality multifamily projects. - Seevers • Jordan ® Ziegenmeyer 3 6 OFFICE MARKET OVERVIEW Introduction The office market in San Mateo County saw considerable improvement in 2010-2011. Market conditions have slowed thus far in 2012, but vacancy has been relatively steady in the range of about 13-14% over the past 12 months. Through the first three quarters of 2012, net absorption was slightly negative, but brokers report that demand continues to be stiong in the region with many tenants actively looking for space. Based on our research, multiple brokerages currently publish surveys for the office market in San Mateo County or "the Peninsula." The two most in-depth reports are from Cassidy Turiey and Colliers International. In this market overview, we will rely primarily on Cassidy Turiey's most recent report; Office Market Snapshot, San Mateo County, Third Quarter 2012, Vacancy & Absorption The following charts show recent trends in vacancy and net absorption in the market area. San Mateo County Office Market Vacancy 20.0% - A.^ .„ -. . 18.0% - /^ ^^^_ / 16.0% - / / \ 14.0% - y V- ^ 12.0% - ^ 1 1 1 10.0% - o (N CN) o O <-H 1—1 1—1 1 6 1 2Q-1 1 4Q-0 8 2Q-0 8 6 4Q-0 7 a a a a a Source: Cassidy Turiey ro -Seevers • Jordan • Ziegenmeyer - 37 San Mateo County Office Market Net Absorption (SF) 1,250,000 1,000,000 750,000 500,000 250,000 0 -250,000 -500,000 -750,000 j -1,000,000 2006 2007 2008 2009 2010 2011 2012 YTD Source: Cassidy Turiey The overall vacancy rate for the office market was 13.9% in Third Quarter 2012, up slightly from 13.2% atthe end of 2011. The market recorded positive net absorption in the years 2010 and 2011 of about 375,000 and 1.1 mftlion square feet, respectively. Through the first tht-ee quarters of 2012, net absorption was negative 240,300 square feet. However, Cassidy Turiey reports that "this is despite the fact that demand is actually on the increase. We are currently tracking just under 2.6 million square feet of user requirements in the marketplace that could translate into deals over the next 24 months. This number has increased by 18% over the past thi-ee months." Most of the demand is - coming from tech users, including software/internet companies and life science businesses. Part of the reason that absorption has been slow even though demand in the market is high, is that most users are seeking larger blocks of space (10,000 square feet or more); however, 82% ofthe available space inthe market consists of office suites smaller than 10,000 square feet. In addition, many tech companies are looking for downtown creative space ideally situated near public transportation, but this type of space is also in short supply. The major downtown submarket vacancies are at a remarkably low 7.6%. This has resufted in companies relocating elsewhere inthe Bay Area (primarily San Francisco) as they look to markets that can accommodate their growth needs. The table on the following page summarizes recent market data by submarket. -Seevers • Jordan • Ziegenmeyer - 38 San Mateo County Office Submarket Data Total Renlahle Vacancy YTD Net Avg. Asking Rent sr 30 2012 Absorption (SF) (Full Seivice) Daly City 942,138 27.4% (71,393) $1.94 Brisbane 793,474 53.1% (122,960) $3.16 S. SanFrancisco 2,328,468 23.4% 168,322 $3.35 San Bruno/Millbrae 1,644,218 8.9% (30,090) $3.06 Burlingame 2,041,785 13.4% (49,447) $2.12 North County Totals 7,750,083 21.2% (105,568) $2.85 San Mateo 6,966,547 11.7% 132,566 $2.84 Foster City 2,936,369 8.3% 21,841 $3.30 Redwood Shores 5,945,106 9.0% (215,964) $3.22 Central County Totals 15,848,022 10.1% (61,557) $3.04 Belmont/San Carlos 1,075,988 21.5% (84,545) $2:85 Redwood City 3,365,282 16.7% (8,216) $3.49 Menlo Park 3,115,009 9.2% 19,586 $7.72 South County Totals 7,556,279 14.3% (73,175) $4.47 TOTAL COUNTY 31,154,384 13.9% (240,300) $3.33 Source: Cassidy Turiey Lease Rates According to Cassidy Turiey, the average asking rental rate for office space was $3.33 psf/month (full service) as of Third Quarter 2012. This represents an increase of about 5.4% from year-end 2011 when the average rate was $3.16. Recent rates reflect a significant improvement over the post- recession low of $2.52 reached during the first quaiter of 2010. For Class A space, the average was $3.61 in the third quarter; and for Class B space, $2.76 psf/month. New Construction There are currently no office buildings under construction in San Mateo County. However, in light of improving market conditions over the past two to three years, market paiticipants expect to see some speculative construction return to the market during the next 12 months. In terms of planned projects, the two most notable are Bay Meadows and the 320,000 square foot Depot Circle in downtown Redwood City, which is planned for delivery in the first quarter of 2015. Conclusion & Forecast The coming year is expected to be one of continued improvement for the San Mateo County office market. Vacancy has held relatively steady for the past 12-18 months but is expected to decline over the next 12 months due to strong demand and no significant changes to supply. Rental rates have increased over the past three years and the upward trend is expected to continue, particularly in light of the shortage of large blocks of office space. -Seevers •Jordan • Ziegenmeyer - 39 RETAIL MARKET OVERVIEW Introduction In San Mateo County, the retail market has sho-wn signs of continued strength over the past several quarters. Although vacancy has ticked up slightly in 2012, it has remained extremely tight at less than 4% for nearly two years. Based on our research, several brokerages currently publish surveys for the retail market in San Mateo County or "the Peninsula," including Terranomics, Grubb & Ellis and Marcus & Millichap. Tenanomics provides the most in-depth data and thus we will rely primarily on their most recent report; San Mateo County Shopping Centers Report Q3-2012. Vacancy & Absorption The following charts show recent trends in vacancy and net absorption in the market area. San Mateo County Retail Market Vacancy 6.0% 5.0% 4.0% 3.0% 2.0% 4 1.0% 0.0% 00 00 0\ Os o-l o 1—I o o CO o I I I I I cy cy a cy a a cy a a (N a a ro CA Source: Terranomics - Seevers • Jordan • Ziegenmeyer - 40 San Mateo County Retail Market Net Absorption (SF) 300,000 250,000 - 200,000 - 150,000 - 100,000 • jO,Ut)U " ' 0 - cr\ AAA _ -100,000 2008 2009 2010 2011 2012 YTD Source: Terranomics The overall vacancy rate for the retail market was 3.6% in Third Quarter 2012, up from 3.0% in the previous quarter. The market vacancy rate has been in the range of 3-4%) for about two years, after having increased in 2008 and 2009. Although net absorption has been negative thus far this year, brokers repoit that demand continues to be strong among retailers, and the lack of available quality space is negatively impacting gro-wth in the market. The Terranomics report stated, "With vacancy rates this low, options for retailers remain few and far between. Much ofthe remaining space available is in weaker centers. The shortage of available shopping center space has thwarted growth." Demand is strongest for first-tier shopping centers (typically anchored centers in urban locations with high visibility), which are seeing the highest levels of deal activity. The table on the following page summarizes recent vacancy and rental rates by submarket and by type of shopping center. North County includes the communities of Daly City, Brisbane, South San Francisco, San Bruno, Millbrae and Burlingame. Central County includes San Mateo and Foster City. South County includes Belmont, San Carlos, Redwood City and Menlo Park. -Seevers ® Jordan • Ziegenmeyer 41 San Mateo County Detail Total Rentable Vacancy YTD Net Avg. Asking Rent 3Q2012 Absorption (SF) Shop Space (NNN) SUBMARKET North County 4,613,054 3.3% (7,987) $2.32 South County 2,845,226 2.2% (1,616) $1.81 Central County 3,152,753 5.2% (60,983) $2.29 Total 10,611,033 3.6% (70,586) $2.20 CENTER TYPE Neighborhood & Community 5,977,945 3.4% (9,868) $2,27 Strp 1,436,466 5.5% (18,136) $2,14 Power & Regbnal 3,196,622 3.1% (42,582) $2,08 Total 10,611,033 3.6% (70,586) $2.20 Source: Terranomics New Construction . No new shopping centers were completed in 2009 or 2010 in San Mateo County. In 2011, the first phase ofa Safeway center in Burlingame added about 47,000 square feet to the market. With vacancy continuing to be extremely tight, especially among first- and second-tier properties, developers are beginning to be active again, with multiple projects in the planning stages. One ofthe more notable planned projects is Daly City Partners' Gellert Marketplace - this 140,000 square foot community center is slated for delivery in 2014 and will be anchored by Sprouts Farmers Market and Bed Bath & Beyond. Conclusion & Forecast The coming year is expected to be one of continued strength for the San Mateo County retail market. Although vacancy has increased slightly in 2012, ft remains very tight (less than 4%) and brokers report that demand continues to be high, particularly for first- and second-tier centers. The market has a shortage of quality available space, which is severely limiting the number of lease deals. According to Terranomics, "Look for inline leasing activity to remain soft in the coming months, simply because there is nowhere to go." With demand strong and supply very limited, an increase in new development is expected over the next several quarters. -Seevers ® Jordan • Ziegenmeyer 42 PROPERTY IDENTIFICATION AND LEGAL DATA Location The appraised property, which represents the taxable land areas within the boundaries of City of San Mateo Community Facilities District No. 2008-1 (Bay Meadows), is located at the southern terminus of South Delaware Street, north of Hillsdale Boulevard and west of Saratoga Drive, within the city of San Mateo, San Mateo County, Califomia. Assessor's Parcel Number The subject is identified by San Mateo County Assessor's parcel numbers 040-030-250; -260; -270; -280;-290;-310;-320; 330;-340 and-350. Owner of Record Title to the subject property is presently vested with the following entities; APN-040-030-250 Bay Meadows Main Track Investors, LLC APN-040-030-260 Bay Meadows Main Track Investors, LLC APN - 040-030-270 ptn. (Block 3.1b) Bay Meadows Main Track Investors, LLC APN - 040-030-270 ptn. (Block 3.1a) Shea Homes of Northern California APN - 040-030-270 ptn. (Block 3.2) TRI Pointe Homes, LLC APN-040-030-280 Bay Meadows Main Track Investors, LLC APN-040-030-290 Bay Meadows Main Track Investors, LLC APN-040-030-310 Bay Meadows Main Track Investors, LLC APN-040-030-320 Bay Meadows Main Track Investors, LLC APN-040-030-330 Bay Meadows Main Track Investors, LLC APN-040-030-340 Bay Meadows Main Track Investors, LLC APN-040-030-350 Bay Meadows Main Track Investors, LLC Legal Description A legal description ofthe subject property is included in the preliminary title repoit, which has been reproduced and included in the Addenda to this report. Property Taxes The property tax system in Califomia was amended in 1978 by Article XIII to the State Constitution, commonly referred to as Proposition 13. It provides for a limitation on property taxes and for a procedure to establish the current taxable value of real propeity by reference to a base year value, which is then modified annually to reflect inflation (ifany). Annual inflationary increases caimot -Seevers • Jordan ® Ziegenmeyer- 43 exceed 2% per year. The base year was set at 1975-76 or any year thereafter in which the property is substantially improved or changes ownership. When either of these two conditions occurs, the property is to be re-appraised at market value, which becomes the new base year assessed value. Proposition 13 also limfts the maximum tax rate to 1% ofthe value ofthe property, exclusive of bonds and supplemental assessments. Bonded indebtedness approved prior to 1978, and any bonds subsequently approved by a two-thirds vote ofthe political jurisdiction in which the property is located, can be added to the 1%) tax rate. Tax rates are determined amiually and are based upon $100 of assessed value. Tax information on the subject parcels are identified in the following table for the 2012-2013 property tax year. APN: 040-030-250 040-030-260 040-030-270 040-030-280 040-030-290 Assessed Land Yalue $ 1,623,208 $ 2,292,436 $ 5,170,626 $ 9,062,066 $ 2,905,897 Assessed Improvement Value $ - $ - $ - $ - $ - Total Assessed Value $ 1,623,208 $ 2,292,436 $ 5,170,626 $ 9,062,066 $ 2,905,897 Tax Rate Area 12-001 12-001 12-001 12-001 12-001 iv' Tax Rate 1,10420% 1,10420% 1.10420% 1.10420% 1.10420% Taxes on Assessed Value $ 17,923.46 $ 25,313,06 $ 57,094.04 $ 100,063.32 $ 32,086,90 Detail Special Charges NPDES Storm Drain Fee $ 1.72 $ 1,72 $ 1.72 $ 1.72 $ 1,72 SMC Mosquito Abate Dis $ 3.74 $ 3,74 $ 3.74 $ 3.74 $ 3.74 SMCCCD 2010-2013 $ 34,00 $ 34,00 $ 34.00 $ 34.00 $ 34.00 : SMFCSD Measure A 2010 Ptax $ 188,88 $ 188,88 $ 188.88 $ 188.88 $ 188.88 SM FCSD Measure B 1991 Ptax $ 93,96 $ 93.96 $_ 93.96 l_ 93.96 $_ 93.96 L 322,30 L 322,30 L 322.30 L 322.30 L 322.30 Total Property Taxes $18,245.76 $ 25,635.36 $ 57,416.34 $100,385.62 $ 32,409.20. -Seevers ® Jordan • Ziegenmeyer - 44 SMBiMSS APN: 040-030-310 040-030-320 040-030-330 040-030-340 040-030-350 Assessed Land Value $ 1,245,532 $ 2,918,582 $ 822,540 $ 2,697,271 $ 25,676,690 Assessed ImprovemenItt Value $ $ $ $ $ Total Assessed Valule $ 1,245,532 $ 2,918,582 $ 822,540 $ 2,697,271 $ 25,676,690 Tax Rate Area 12-001 12-001 12-001 12-001 12-001 Tax Rate 1.10420% 1.10420% 1.10420% 1.10420% 1.10420% Taxes on Assessed Value $ 13,753.16 $ 32,226.98 $ 9,082.48 $ 29,783.26 $ 283,522.00 Detail Special Charges NPDES Storm Drain Fee $ 1.72 $ 1.72 $ 1.72 $ 1.72 $ 1.72 SMC Mosquito Abate Dis $ 3.74 $ 3.74 $ 3.74 $ 3,74 $ 3.74 SMCCCD 2010-2013 $ 34.00 $ 34.00 $ 34.00 $ 34,00 $ 3400 SMFCSD Measure A 2010 Ptax $ 188.88 $ 188.88 $ 188.88 $ 188,88 $ 188.88 SM FCSD Measure B 1991 Ptax $$ 93.96 $_ 93.96 $ 93.96 $ 93,96 $ 93.96 $ 322.30 L 322.30 $ 322.30 $ 322.30 $ 322.30 Total Property Taxes $14,075.46 $ 32,549.28 $ 9,404.78 $ 30,105.56 $283,844.30 The subject parcels are located in tax code area 12-001, which includes addftional forms of indebtedness, authorized by the votei-s increasing the total ad valorem tax rate to 1.1058% for the 2012/13 tax year. The existing ad valorem taxes are of nominal consequence in this appraisal, primarily due to the fact these taxes will be adjusted substantially once the new infrastiucture and propeity improvements are. completed and in consideration ofthe definition of market value employed in this appraisal, which assumes a sale ofthe appraised propeity. Special Taxes The subject property is sftuated within the boundaries of a Community Facilities District identified as CFD No. 2008-1 (Bay Meadows), with the foUowing proposed spedal tax obHgations. These figures were provided by the Amended and Restated Rate and Method of Apportionment, which was approved on November 21, 2011. On each Juty 1, commencing on Juty 1,2012, the maximum special tax identified in the table on tlie following page will be increased by 2% ofthe amount in effect for the previous fiscal year. Interest on the first series of Bonds thi-ough September 1,2013 was funded from Bond proceeds ofthe first issuance and the owners of undeveloped propeity are not expected to have to pay a special tax on the first series of Bonds untft December 10, 2013. Similarly, interest on the second series of Bonds tiuough September 1, 2014 is being funded from Bond proceeds ofthe second issuance and the owners of undeveloped property are not expeded to have to pay a special tax on the second series of Bonds until December 10, 2014. According to the Special Tax Consultant, David Taussig & Assodates, Inc., the CFD is required to levy $1,855,294 in Special Tax for tax year 2013/2014, which wftl be accounted for in the valuation ofthe master devdoper- owned property later in this repoit. —-. Seevers • Jordan ® Ziegenmeyer — 45 Special p nfiffif m ^^m 1 Residential Property > 2,300 sq. ft. $5,405 per unit 2 Residential Property 2,152-2,300 sq.ft. $5,288 per unit 3 Residential Property 2,001 -2,150 sq.ft. $4,989 per unit 4 Residential Property 1,851-2,000 sq.ft. $4,973 per unit 5 Residential Property 1,701- 1,850 sq.ft. $4,917 per unit 6 Residential Property 1,551 - 1,700 sq. ft. $4,557 per unit 7 Residential Property 1,401 - 1,550 sq. ft. $4,069 per unit 8 Residential Property 1,251 - 1,400 sq. ft. $3,701 per unit 9 Residential Property 1,101 - 1,250 sq. ft. $3,482 per unit 10 Residential Property 951-1,100 sq. ft $3,158 per unit 11 Residential Property 801 - 950 sq. ft $2,572 per unit 12 Residential Property <= 800 sq. ft. $2,332 per unit 13 BMR Units > 1,400 sq. ft $1,344 per unit 14 BMR Units 801 - 1,400 sq. ft $1,344 per unit 15 BMR Units <= 800 sq.ft. $1,139 per unit 16 Apartment Propeity N/A $60,000 per acre 17 Non-Residential Property • Oflice Floor Area N/A $1,769 per SF 18 Non-Residential Property Retail Floor Area N/A $0,520 per SF 19 Back-Up Special Tax N/A $124,695 per acre The appraised property is also subject to a number of direct levies, which in total represent only nominal assessments. The bond indebtedness and these direct levies will be considered in the valuation portion ofthis analysis. Conditions of Title A preliminary titie report prepared by First American Titie Insm-ance Company, dated September 28, 2011, was provided for use in this appraisal and is included in the Addenda to this report. While the appraiser has reviewed the conditions of titie and has determined no apparent adverse impact on value, the appraiser assumes no negative title restiictions have been recorded since the date ofthe preliminary titie repoit. The appraiser accepts no responsibility for matters pertaining to titie. Zoning Source; City of San Mateo Community Development Depaitment Zoning; BM-SP - Bay Meadows Specific Plan [27.88] -Seevers ® Jordan • Ziegenmeyer- 46 Description/Entitiements; Bay (Vleadow/s Phase II Development Program 7»,150ilOfr«t 391 Otijiltfiiisl OnSt Ur-iMf*ryio«n'S7«»'t , W«il»niy*^Cct'ridot • ^'^ ." r«rtnflV«wCoirW=r n JNirfc; jhoFkwf ATOniinfbcis'ftintalncilhctclnmaUhttwSf'Ml pipfil^ • ''llfitcd>.Uftli 10, ZOOa, ihc it^Mtl w6rnl|t'o!silii!ciJ Augijjl 12,?d03 fli-d tW SPAR 3 , iplansubmlllilidatcdSeplCnvt^i;!?, 2l»3,,i ,_ , ,_ The Bay Meadows Specific Plan District (BMSP) is established to assure that the Bay Meadows Race Track, Practice Track, and Barn Area are developed in a comprehensively planned manner, compatible with adjacent residential neighborhoods and consistent with the City's quality of life goals. The approved base program is for the development of 1,250 residential units, 1,250,000 square feet of office space and 150,000 square feet of retail space. As set forth in the Bay Meadows Specific Plan Amendment, approved November 7, 2005, which encompasses Phase II (subject property), the goals for the Specific Plan Amendment are to; 1. Transit Oriented Development " Create a mixed use and walkable new neighborhood in San Mateo that maximizes the use of transportation alternatives to the private automobile, especially public mass transit associated with the proposed relocated Caltrain Station, while minimizing impacts to residents. - Seevers • Jordan • Ziegenmeyer - 47 • Create a new neighborhood at Bay Meadows that justifies the provision of an express stop Caltrain Station. 2. Land Use and Community Design » Provide a complementary mix of land uses and amenities including employment, housing, commercial services, civic open space and facilities, and transit. » Provide extraordinary open space amenities, both passive and active, to serve the neighborhood and the broader San Mateo community. • Concentrate neighborhoods and bring within walking distance most daily activities to enhance community lifCj efficiently utilize land resources, and reduce reliance on the private automobile. • Create a safe and attractive neighborhood through the design of streets, parks, buildings and buffers. • Protect the character of surrounding residential neighborhoods with adequate landscaping, setbacks and buffers while providing pedestrian connections. Provide a variety of housing types consistent with transit oriented development that include both o-wnership and rental opportunities. "> Enhance the potential ofthe Expo Site. • Provide neighborhood serving retail that enhances access to goods and services adjacentto nearby neighborhoods. 3. Transportation • Complete the City's street grid and General Plan connections to enhance traffic conditions thi-oughout the City. " Reduce reliance on the private automobile by enhancing " opportunities for transit ridership, walking and biking. ' Maximize utilization of the train station by integrating it into the development, and providing complementary adjacent land uses that make its use attractive and convenient. ' Build an interconnected street and pedestrian access network that establishes direct routes to the new neighborhoods from local destinations, gives an appropriate scale to the development, and knits Phase II into surrounding neighborhoods. • Reduce traffic compared to other development by providing a mix of commercial and residential uses in proximity to transit. • Balance creation of neighborhood streets with the need to accommodate neighborhood traffic and the sharing of city-wide traffic. -Seevers ® Jordan ® Ziegenmeyer 48 • Encourage transft UtUization by existing adjacent neighborhoods. 4. Economic Development • Provide workforce housing to assist the City's goal of a housing/jobs balance. • Provide for a new corporate commercial area thereby supplying the existing and future space needs for employers in San Mateo. • Insure j ob and tax base retention, economic development and growth for San Mateo and the region. 5. Infrastructure • Provide adequate infrastructure services to the Specific Plan Area, while avoiding negative effects on existing services and facilities. » Provide new neighborhood express stop. The master developer completed all Site Plan & A-chitectural Reviews (SPAR) for the subject propeify maldng development of the subject propeity easier for vertical builders, as each parcel is now fully entitled and veitical construction can occur commensurate with the SPAR approval without any discretionaiy approvals. Inclusionaiy Housing Pursuant to the Bay meadows Phase II Development Agreement, Requirement; fmalizedonNovember 4, 2005 [section 5.12], the owner/developer is obligated to set aside a minimum of ten percent (10%) of the residential units on a Block-by-Block basis for occupancy by, and being affordable to, moderate or lower income households - below market rate (BMR). The BMR unfts are to be spread thi-oughout each product type, provided that at the owner's election, up to 250 newly constructed residential unfts may have theft associated BMR Units located in a different building or parcel on that same Block, but spread throughout those bufldings on the same Block. Additionally, the owner/developer is providing to the City of San Mateo approximately one acre of land, located in a Mixed-Use Block (a portion of MU Block 1), to be developed by the City, or designee, solely for low, very low or moderate income housing. Due to the fact the one acre parcel set aside for the City to constract low income housing is not subject to the lien ofthe Special Tax securing the Bonds, ft is not a part ofthe appraised property. Reportedly, one third of all localities in Califomia (approximately 170 cities and counties) use the inclusionaiy housing program to -Seevers ® Jordan ® Ziegenmeyer 49 reseive a certain percentage of housing units for lower-income households in new residential developments. The municipal requirements for inclusionary housing on new developments is prevalent throughout northem Cahfomia; though, some municipalities allow developers to mitigate inclusionaiy housing requirements through impact (in heu) fees or constracting low- income housing elsewhere in the city or county. Conclusion; The subject property consists of 49.978+ developable acres proposed for the development of five mid-rise office buildings (Station Component); four mid-rise, mixed-use residential/retail/office buildings (Mixed-Use Component); nine parcels designated for attached, for-rent and for-sale residential buildings and one parcel designated for a combination of attached and detached residential homes (Residential Component). Flood Zone Source: F.I.R.M - Flood Insurance Rate Map Flood Zone: Flood Zone X - areas determined to be outside ofthe 500-year flood plain Map Panel: 0603280004B Panel Date; October 19, 2001 Flood Insurance: Not likely required on the developable portion ofthe subject Earthquake Zone According to the Seismic Safety Commission, the subject is located within Zone 4, which is assigned to areas near major faufts. The existence within this zone does not prevent development. There are only two zones in California. Zone 4 is assigned to areas of major faults. Zone 3 is assigned to areas with more moderate seismic activity. In addftion, the subject is located within a Fault-Rupture Hazard Zone (formerly referred to as an Alquist-Priolo Special Study Zone), as defined by Special PubHcation 42 (revised Januaiy 1994) of the California Depaitment of Conservation, Division of Mines and Geology. Eaithquake insurance may be necessary for vertical improvements. -Seevers ® Jordan • Ziegenmeyer 50 Easements An inspection ofthe subject property revealed no apparent adverse easements, encroachments or other conditions currently impacting the subject. Please refer to the preliminary title report for information regarding potential easements, as the appraiser is not a surveyor nor qualified to determine the exact location of any easements. It is assumed that any easements noted in a preliminary title report do not have an impact on the opinion of value set forth in this report. If at some future date, any easements are determined to have a detrimental impact on value, the appraiser reserves the right to amend the opinion of value contained herein. Assessor's Parcel Map r/l/r.cppC .1,?£Vta.-^.-_i_i^'; A BAyMeAocivsPHAS^!/fiozmk 117/73-61 A^AiPMCet mp VOL r5/l9^£f,^^m^ A $Ay Afssisofi! f^^fi cmmy pr SM M.irEdZ!;'S'" ''"''"'"" ' ""'' "'/''-'' ® A mc^t. IMP VOL 7^/^-T A BAY mAOOWS NO. I ffW I19/47-S7 - Seevers • Jordan • Ziegenmeyer - 51 SITE DESCRIPTION Improvements are under construction within the Bay Meadows Phase II development as part of infrastructure to be financed by the City of San Mateo Community Facilities Distiict No. 2008-1 (Bay Meadows) Bond issuance. Information on infrastructure improvements is summarized as follows. Size and Shape: In total, the land areas comprising the City of San Mateo Community Facilities District No. 2008-1 (Bay Meadows) contain a gross land area of approximately 83.38 acres. The parcels are contiguous and boundaries are inegularly shaped, but not so irregular as to inhibft development. Land Area by Land Use: Developable - Office 11.48+ acres Developable - Mixed-Use 7.071+ acres Developable - Residential 29.18+acres Master Association Property 2.240+ acres Total Developable (Taxable) 49.97+ acres Public Space - (Non-Taxable) 33.40+ acres Total (Gross) 83.38+.acres Assessor's Parcel Numbers: 040-030-250;-260;-270;-280; -290;-310;-320; 330;-340 and-350 Topography: Generally level Drainage: Based on the development plan, our physical inspection of the subject property and assuming typical grading and paving work will be completed, upon completion ofthe proposed development, adequate drainage appears to be provided. Frontage/Visibility: Frontage is provided along the east and west side ofthe extension of South Delaware Street, as well as the north and south side ofEast 28* Avenue. A poition ofthe subject propeity offers visibility and frontage along the west line of S arato ga Drive. Upon completion of infrastructure development, visibility and frontage will also be provided from the western extension of Franklin Parkway. A network of interior streets will be completed to provide access within Bay Meadows Phase II. Existing, partially completed streets include Kyne Street, Maiden Way, Baze Road and Derby Avenue, in addition to the aforementioned East 28* Avenue and southern extension of South Delaware Street. Landing Avenue and East 31 '* Avenue will also be a part of the interior street system. Access: Primary access to the subject property is provided from the - Seevers • Jordan • Ziegenmeyer 52 southem extension of South Delaware Street and from Saratoga Drive, via East 28 Avenue. Upon completion of development, primary access will also be available from the extension of Franklin Parkway. Utilities: All public utilities and services are available to the subject propeity. Services are fiimished by the following providers: Water; California Water Service (Cal Water) Sewage Disposal: City of San Mateo Refuse: Recology of San Mateo County Electricity: PG&E Gas: PG&E Telephone: AT&T Cable: Comcast Soil: Based on the existence of residential and commercial structures on surrounding and nearby parcels, it appears the subject property possesses adequate load-bearing capacity for development. Environmental Issues: At the time of inspection, the appraiser did not observe the existence of hazardous material, which may or may not be present, on the subject property. The appraiser has no knowledge of the existence ofsuch materials on the propeities. However, the appraiser is not qualified to detect such substances. The presence of potentially hazardous materials could affect the value ofthe property. The value estimate is predicated on the assumption there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering Icnowledge required to discover them. Adjacent Uses: North San Mateo Expo/Fairgrounds South Single-family residential development East Franlclin Templeton Investments Corporate Campus West Caltrain, retail and industrial development Functional Adequacy/Site Influences: Based on the subject's existing physical attributes and the existing and future infrastructure improvements to serve the various components comprising City of San Mateo Community Facilities District No. 2008-1 (Bay Meadows), the overall functional utility ofthe subject propei-ty is expected to be good for the proposed development. In terms of she influences outside ofthe confines ofthe appraised properties, the proximity ofthe office and -Seevers • Jordan ® Ziegenmeyer 53 residential land uses within the District to a new Caltrain station should bode well for the development in terms of providing non-vehicular access to employment centers within the Bay Meadows Phase II development, as well as areas outside the neighborhood. Conclusion: The configuration and size ofthe subject is considered adequate for development. - Seevers • Jordan ® Ziegenmeyer — 54 PROJECT DESCRIPTION The appraised property represents 83.38+ acres of gross land area comprising the boundaries ofthe City of San Mateo CFD No. 2008-1 (Bay Meadows). The developable land equates to 49.978+ acres proposed for the development of five mid-rise office buildings (Station Component); four mid-rise, mixed-use residential/retail/office buildings (Mixed-Use Component); nine parcels designated for attached, for-rent and for-sale residential buildings; and one parcel designated for a combination of attached and detached residential homes (Residential Component). In total, the subject propeity, as presently proposed, will contain 770,000 square feet of office space cunentiy planned in five class A office buildings and 31,500 square feet of professional space above ground floor retail, as well as a proposed 131,000 square foothigh school campus; approximately 85,000 square feet of retail space and 1,066 residential housing unfts, with 832 residential housing unfts being developed on the Residential Land Component and the balance (234 units) to be developed as part ofthe Mixed-Use Component. The remaining 33.40 acres of Bay Meadows II are dedicated to parks, right away and one acre dedicated to the City for approximately 50-68 below-market rate (BMR) residential unfts on Mixed Use Block 1, which will be exempt from the Lien ofthe Special Tax securing the Bonds. .1,11-...r I. .fr-. \ i±4v.f vff i '4; • I m.* !• -iSTA f) 1; '•yS:i'~ '• '. '•• *•"*•'•''%'• •V---'••.:'.:...... -^- ; '•:\[«..h.«:.,: 1,.---,i'\,'.;V--'j.'i{r;ili-'ii*.'i'M , 1 .,„•. .i..|.MK ^•"l -Seevers • Jordan • Ziegenmeyer - 55 FACILITIES TO BE FUNDED BY THE BOND ISSUANCE The boundaries of Conimunity Facilities District No. 2008-1 (Bay Meadows) are exhibited below. SHEET a DF 2 PROPOSED BOUNDARIES OF CITY OF SAN MATEO C0riWJN3;tY FACILITIES DtSTMCT NO, 2008-1 (SAV MEADOWS) COUNTY OF SAH f^lATEO STATE OF CALIFORNXA !lufC"''um)4' i,« hut-yt)^i \nwn to tha /'Jisfi.3ao»- mufrs uf ihu County of asn liatpatnr'e destir'ApUo^ of tho linus H,it| dlm6nBtori3 ai Ldosa papaaXs. ' LrcEND Pj-apuseil pttipflririf. I) RJI'V ot ((.»-( U UL-ILA ZS £i.i %s ^ U01CI6 C^3Ei^L!^lL|f F:iL-UJnE'^ til'*ir-lRf Hil, 'iUBfl.l (Bav ,fca.;it46), Cs-imt 11 •aan UotiiQ, 3tatfi.it r.'.lttnrnis om-tm-nn JiMp'Jr-ii- PFiriivil fJunbEir ibllt t Iff ciD (In. -2c-:itt.1. .ioilB S nt apD flu, :?DiJiit 3 nr tipn (|n, iVMi\ Ati5n...6^r Piircrit LLItn • Seevers • Jordan • Ziegenmeyer - 56 All public infrastructure improvements or services to be financed by the CFD are detailed in the Community Facilities Distiict Report, dated July 22, 2008, prepared by David Taussig & Associates, Inc. A copy ofthis document has been reproduced and included in the Addenda to this report. The general description ofthe improvements and services to be financed by the community facilities district include street improvements, sewers, storm drains, monuments, utihties, public parks and recreation facilities, detention ponds, mitigations, development impact fees, soft costs, maintenance and lighting of parks, parkways, streets, roads, and open space, and maintenance and replacement of flood and storm protection services. The total amount of net proceeds to be generated from the second series of Bonds is projected to be approximately $20.0 million. The second Bond issuance will be used to reimburse the master developer for infrastructure improvements completed to date. The total amount of Bonds authorized for CFD No. 2008-1 (Bay Meadows) is $92 million, which is projected to be generated over three issuances, the first ofwhich generated $24.4 milHon of net proceeds. The cited list of facilfties includes other expenses associated with the formation of CFD No. 2008-1 (Bay Meadows) including, but not limfted to, the following: bond related expenses including underwrfters discount, appraisal fees, reserve fund, capitalized interest, letter of credit fees and expenses, financial advisor fees and expenses, bond and disclosure counsel fees and expenses, fees and expenses ofthe City Attomey, bond remarketing costs and all other incidental expenses. Other expenses include administrative fees ofthe City and the bond trastee or fiscal agent related to CFD No. 2008-1 (Bay Meadows); and reimbursement of costs advanced by the City, the land owner in the District, or any party related to any foregoing that relate to the formation ofthe District or that relate to costs for facilities, capital related fees or other purposes or costs of CFD No. 2008-1. (Bay Meadows). -Seevers • Jordan • Ziegenmeyer 57 SUBJECT PHOTOGRAPHS '•i '• .-V •' .' .' }'?^k. m^ •1 •' ^, %"-•• •- , •; • '. , -1, 5>; • ••••' -i-^,-.-: '• ^'l* -J ji..-.i^rC:ai:l_vll. fti,"-i-i./.-I Looking west along East 28* Avenue from Looking east along East 28* Avenue towards Saratoga Drive Saratoga Drive 1 ;.^ •Vl;-;',!' •'-i: -. —^rr '•"«»-" I' • '"-V Looking north across open space area from East Easterly view across Residential 28* Avenue Block 3.1 (on-site improvements) .-.* Tl'.'• i-f .rs/Ji.}-.' —,!,•, . , Southeasterly view across Residential Southwesterly view across Residential Block 3.1 (on-site improvements) Block 3.2 (on-site improvements) - Seevers • Jordan • Ziegenmeyer - 58 SUBJECT PHOTOGRAPHS wm' M-i^mm Westerly view across Residential Southwesterly view across Residential Block 3.2 (on-sfte improvements) Block 3.2 (on-site improvements) ..iv'M,...".v:,i,. /'"•• '1.T-'in-.-'.'..-.:-. J/-,••; Vt.. .,".'- ' " %Hv^V^7f" Northerly view across community park Southwesterly view along Baze Road from East 28*Avenue BteEtfsair Northerly view across community park Southerly view across Residential Block 2 -Seevers • Jordan • Ziegenmeyer - 59 SUBJECT PHOTOGRAPHS I i I .^tLi^safe Southwesterly view towards Landing Green park Looking south along Kyne Stieet from East 28t h Avenue •t. ll? 'T -t" , . i •.n-. •--;" •:• '-l.-'i^^yi;^'' • •»• , • :-% -T'i- ----^ •• Northerly view across Mixed-Use Block 1 Southwesterly view a—"•-•-.'-•-t Station Bloc' ,•'-'„ kir 2"v. - •' ..,«...-Ji.. -;'V .-'..i" • v\.\-1 ..r-^-.-^-i/- '.^'•Vv5i r ;:il"^W^^••":-l>.•|A- •~t Looking south along Delaware Street from East Station Block 1 site 28*Avenue -Seevers ® Jordan ® Ziegenmeyer 60 SUBJECT PHOTOGRAPHS Loolcing north along Delaware Street Residential Block 4 i^t ..^. -»i..,.>-.r>t,../7iifr^^*--i-r-=>4--' .;.i '!,!., Southwesterly view towards Mixed Use Block 4 Southerly view at Residential Block 7 a t ...... • I-, r -.. . .!,'iln-;v,,L:'/j;^^';-- i Looking north along Baze Road ftom Residential Looking northwest along Saratoga Drive ft-om Block 8 East 28* Avenue -Seevers* Jordan ® Ziegenmeyer- 61 HIGHEST AND BEST USE ANALYSIS The term "highest and best use," as used in this report, is defined as follows: The reasonably probable and legal use of vacant land or an improved property that 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. Alternatively, the probable use of land or improved property - specific with respect to the user and timing of the use - that is adequately supported and results in the highest present value. Two analyses are typically required for highest and best use. The first analysis is highest and best use ofthe land as though vacant. The second analysis is the highest and best use ofthe land as improved, which is not applicable, since the subject is vacant land. (Definitions of these terms are provided in the Glossary of Terms in the Addenda to this report.) Highest and Best Use as though Vacant w- In accordance with the defimtion of highest and best use, ft is appropriate to analyze the subject site as though vacant as it relates to legal permissibility, physical possibility, financial feasibility and maximum productivity. Legal Permissibility The legal factors infiuencing the highest and best use ofthe subject propeity are primarily government regulations such as zoning and building codes. According to the City of San Mateo Community Development Department, the subject is zoned BM - SP - Bay Meadows Specific Plan, which was esfciblished to assure that the Bay Meadows Race Track, Practice Track, and Barn Area .. are developed in a comprehensively planned manner, compatible with adjacent residential neighborhoods and consistent with the City's quality of life goals. As set forth in the Bay Meadows Specific Plan Amendment, approved November 7, 2005, which encompasses Phase II (subject property), the goals for the Specific Plan Amendment are to provide for transft oriented development; land use and community design; transportation; economic development and infrastructure. The subject property consists of 49.978+ developable acres proposed for the development of five mid-rise office buildings (Station Component); four mid-rise, mixed-use residential/retail/office buildings (Mixed-Use Component); nine parcels designated for attached, for- rent and for-sale residential buildings and one parcel designated for a combination of attached and detached residential homes (Residential Component). Overall, the legally permissible use is to develop the subject property in accordance with the existing enthlements for the above-mentioned mix of residential, retaft and office development. ' The DictionaiV of Real Estate Appraisal. 5* ed. (Chicago: Appraisal Institute, 2010), 93, Seevers • Jordan ® Ziegenmeyer— 62 Physical Possibility The physical characteristics ofthe subject including shape, size, topography, accessibility and availability of utilities were all given consideration. The subject's physical orientation was also considered. At this point in the analysis the physical characteristics are examined to see if they are suited for the legally permissible uses. Based on our physical inspection ofthe subject property, we know of no reason why the site would not support any legal development. The property is located within Zone 4, which is assigned to areas near major faufts. However, the existence within this zone does not prevent development. Evidence of residential and commercial construction in the immediate area provides additional support for the possibility of development. Typical roadway and utility easements exist, or will exist upon completion, of the infrastructure to be completed, but are not known to be unusual in any way. It is assumed any easements do not adversely affect the subject's potential for development. At the time of inspection, the appraiser did not observe the existence of hazardous material, which may or may not be present on the propeity. The appraiser has no Icnowledge ofthe existence ofsuch materials on the propeity. However, the appraiser is not qualified to detect such substances. The presence of potentially hazardous materials could affect the value ofthe property. The value estimate herein is predicated on the assumption that there is no material on or in the property that would cause a loss of value. No responsibility is assumed for any such conditions or for any expertise or engineering Icnowledge required to discover them. In conclusion, ft appears as ifthe legally permissible uses ofthe subject property are physically possible. Financial Feasibility The feasibility ofthe allowable uses is dependent on the supply and demand conditions, which could influence the competitive posftion ofeach proposed type of propeify use comprising the subject, including both for-rent and for-sale residential, office and retail development. The feasibility of residential development is dependent on the area supply and demand condftions. Sales of new homes in the subject's market area have been healthy recently. In fact, the supply of new housing does not appear to exceed the cunent demand. This is highlighted by the strong demand experienced by the One Marina development in Redwood City. As of late August 2012, 92 ofthe 231 planned units had been completed, and 24 townhomes had been sold. Prices at the project range from $499,000 to the low $700,000s. In March 2012, ToU Brothers began marketing homes at the Ridge, a 71-home subdivision in Brisbane on the edge ofthe San Bruno Mountain Habitat Seevers • Jordan ® Ziegenmeyer 63 Conservation Area. High atop the Brisbane hilftop, homes at the Ridge range from 2,098 square feet to 3,416 square feet, with pricing starting in the mid-$750,000s and climbing to above $950,000. DataQuick Information Systems reported "the median price paid for a Bay Area home rose to its highest level in more than four years in September, the result of a slowly improving economy, low mortgage interest rates and shifts in market mix." In the nine-county Bay Area region, the median price paid for new and resale homes rose to $429,000 in September 2012, which is up 4.6 percent from $410,000 in August 2012, and up 17.5 percent from $365,000 a year ago (September 2011). The median home price is also the highest since August 2008 ($447,000). In San Mateo County, the median price rose from $551,000 in September 2011 to $620,000 in September 2012, an increase of 12.5%); though, the overall Bay Area, which includes the Counties of Alameda, Contra Costa, Marin, Napa, Santa Clara, SanFrancisco, San Mateo, Solano and Sonoma, increased 17.5%) over the same period. In fact. Contra Costa County saw the highest year-over-year increase in median home price at 27.0%, followed by San Francisco, with a year-over-year increase of 21.4%. All nine counties in the survey reported a year-over-year increase in median home prices. The following chart shows the year-over-year change in home prices and sales in the city of San Mateo. iiimifiitcigMiiiiiiiiiilfii^^ San Mateo 94401 22 -40.5% $499,000 9.1% $1,075,000 $445 13.9% San Mateo 94402 23 -25.8% $1,040,000 17.1% $3,062,500 $658 30.3% San Mateo 94403 34 -10.5% $587,500 -6.9% $1,240,000 $485 2.5% San Mateo 94404 31 -3.1% $675,000 -3.9% $1,300,000 $451 17.5% As is shown in the chart above, areas ofthe city experienced positive increases in median pricing from a year ago, coupled with noticeable declines in the number of sales, suggesting the inventory of homes available is declining. A strategic, phased development ofthe subject's residential parcels is considered ideal in order to achieve market balance with supply and demand. The subject propeity, which comprises the Bay Meadows Phase II redevelopment, is approved through the she plan and architectural review (SPAR) process for as many as 1,121 residential housing units, which allows for both for-sale and for-rent product type. The Specific Plan Amendment allows up to 1,250 residential unfts in the base program. Several ofthe buildings planned for the subject property are of a mixed-use design with ground floor retail space. In order to determine the feasibility of multifamily (for-rent) development on the subject property, apartment market data willbe reviewed. According to Cassidy Turiey, in San Mateo County, the apartment market vacancy rate as of Third Quarter 2012 was 4.5% among projects with 100+ unfts, and 2.2%o among projects with 99 unfts or less. Vacancy has been generally declining for about two years since peaking in early 2009. According to Marcus & Millichap's Apartment Market Report, Third Quarter 2012, the vacancy rate for apartment projects in Central San Mateo County was 2.6%, and compared to a year ago, the vacancy rate has declined 20 basis points. - Seevers ® Jordan ® Ziegenmeyer 64 The average rental rate for an apartment in San Mateo County, as of Third Quarter 2012, was $1,728 for unfts within projects containing fewer than 100 unfts; and $2,220 for unfts within projects with 100 or more units. According to Cassidy Turiey, rental rates in the region peaked during the thftd quarter of 2008, declined for five consecutive quarters before bottoming out in the fourth quarter of 2009, and have increased since the first quarter of 2010. Further, the pace and sttength of rental rate gro-wth has reportedly accelerated in recent months. Over the past year, the average rent has increased by 15% at projects with 100 or more unfts, and 16%) at projects with fewer than 100 unfts. With the demand by investors for Class A apartment projects in Class A locations on the rise, consideration should be given to the balance of for-rent apartment projects at the subject property. According to brokerage reports by Cassidy Turiey and Colliers International, the office market recovery continues in San Mateo County. Not only has the vacancy rate declined significantly over the past 18 months, but overall leasing activity has returned to pre-recession levels. The overall vacancy rate for the office market was 13.9% in Third Quarter 2012, up slightly from 13.2%o at the end of 2011. The market recorded positive net absorption in the years 2010 and 2011 of about 375,000 and 1.1 million square feet, respectively. Through the first thi-ee quarters of 2012, net absorption was negative 240,300 square feet. However, Cassidy Turiey reports that "this is desphe the fact that demand is actually on the increase. We are cunentiy tracking just under 2.6 million square feet of user requirements in the marketplace that could tianslate into deals over the next 24 months. This number has increased by 18%) over the past three months." Most ofthe demand is coming from tech users, including software/internet companies and life science businesses. Part of the reason that absorption has been slow even though demand in the market is high, is that most users are seeking larger blocks of space (10,000 square feet or more); however, 82% ofthe available space in the market consists of office suftes smaller than 10,000 square feet. In addftion, many tech companies are loolcing for downtown creative space ideally situated near public transportation, but this type of space is also in short supply. The major downtown submarket vacancies are at a remarkably low 7.6%. This has resufted in companies relocating elsewhere in the Bay Area (primarily San Francisco) as they look to markets that can accommodate their gro-wth needs. The average office vacancy rate in Central San Mateo County was 10.1%) as ofthe Third Quarter 2012, and the average asking rental rate for office space was $3.04 psf/month (full service), up from $2.95 psf/month (full service) a year ago. While there are cunentiy no office buildings under construction in San Mateo County, in light of improving market conditions over the past two to three years, market participants expect to see some speculative constraction return to the market during the next 12 months. In terms of planned projects, the two most notable are Bay Meadows (subject propeity) and the 320,000 square foot Depot Circle in downtown Redwood City, which is planned for delivery in the first quarter of 2015. The subject property is approved for 715,000 square feet of office space in five buildings located along the western edge ofthe Bay Meadows project, proximate -Seevers ® Jordan • Ziegenmeyer 65 to the Caltrain. The developer is actively marketing the space for lease and intends to construct the buildings-with the intent to hold. According to Terranomics, a division of BT Conimercial, the retail market has shown signs of strength and improvement over the past several quarters. As reported by Tenanomics in the San Mateo County Shopping Centers Report Q3-2012, the overall vacancy rate for the retail market was 3.6% in Third Quarter 2012, up from 3.0% in the previous quarter. Retail vacancy remains very tight and demand from retailers has been strong. According to Terranomics, demand is strongest for first- tier shopping centers (typically anchored centers in urban locations with high visibility), which are seeing the highest levels of deal activify. Tenanomics also reported the average asking rental rate for retail space was $2.20 psf/month (tiiple net) as of Thhd Quarter 2012, which is up from $1.90 psf/month (triple net) a year ago. No new shopping centers were completed in 2009 or 2010 in San Mateo County. In 2011, the first phase ofa Safeway center in Burlingame added about 47,000 square feet to the market. With vacancy continuing to be extremely tight, especially among first- and second-tier properties, developers are beginning to be active again, with multiple projects in the planning stages. One ofthe more notable planned projects is Daly City Partners' Gellert Marketplace - this 140,000 square foot communify center is slated for delivery in 2014 and will be anchored by Sprouts Farmers Market and Bed Bath & Beyond. Based on the precedhig discussion, it appears residential development consistent with the entitlements approved for the Bay Meadows Phase II specific plan is financially feasible. Wfth demand for both for- sale and for-rent residential development in the area, a balance of both land uses is considered financially feasible, as long as development is phased properly with an aggressive and active sales and marketing team. It is expected the subject propeity will be competitive with the other area developments, and with other similar developments located elsewhere in the peninsula. The subject property's location proximate to prominent Silicon Valley technology companies and its location .. adjacent to the Caltrain should bode well for the subject property's office component. In fact, as will be shown in the valuation section later in this report, there have been several sales of office land purchased with the intent to construct multi-building office campuses for technology firms, with the most prominent seen in the Mission Bay redevelopment area of San Francisco. Thus, it is possible the subject's five office building sites may appeal to a single user. Nonetheless, the location is considered excellent for the intended use. The orderly development of residential and office uses should also increase demand for supporting retail uses. Maximum Productivity - Conclusion Legal, physical and market conditions have been analyzed to evaluate the highest and best use ofthe subject propeity. The analysis is presented to evaluate the type of use(s) that will generate the greatest level of future benefits possible to the property. Based on the zoning and entitlements approved for the subject propeity, a mix of residential, office and retail development, with Seevers ® Jordan • Ziegenmeyer — 66 complementary public areas, are the onty land uses that are legally permissible, physically possible and financially feasible. The maximally productive use ofthe subject is for phased development commensurate with the Bay Meadows Phase II specific plan. Probable Buyer The definition of market value is based on the components ofthe subject selling in a single, bulk transaction. The most probable buyer ofthe subject is a land developer familiar with the regional market area. -Seevers • Jordan • Ziegenmeyer 67 APPROACHES TO VALUE The valuation process is a systematic procedure used in the valuation of real property.^ This process involves the investigation, organization and analysis of pertinent market data and other related factors that affect the market value of real estate. The market data is analyzed in terms ofany one or all ofthe three ttaditional approaches to estimating real estate value. These are the cost, sales comparison, and income caphalization approaches. Each approach to value is briefly discussed and defined as follows: Cost Approach The cost approach is based on the premise that no prudent buyer would pay more for a particular property than the cost to acquhe a similar she and construct improvements of equivalent desirability and utility. Thus, this approach to value relates dhectly to the economic principle of substitution, as well as supply and demand. The cost approach is most applicable when valuing properties where the improvements are new or suffer only a minor amount of accrued depreciation, and is especially persuasive when the site value is well supported. The cost approach is also highly relevant when valuing special-purpose or specialty properties and other propeities that are not frequently exchanged in the market. The defmition ofthe cost approach is offered as follows: A set of procedures through which a value indication is derived for the fee simple interest in a property by estimating the cunent cost to constract a reproduction of (or replacement for) the existing structure, including an entiepreneurial incentive, deducting depreciation from the total cost, and adding the estimated land value. Adjustments may then be made to the indicated fee simple value ofthe subject property to reflect the value ofthe property interest being appraised.^ Sales Comparison Approach The sales comparison approach is based onthe premise thatthe value of a property is directly related to the prices being generated for comparable, competitive properties in the marketplace. Similar to the cost approach, the economic principles of substitution, as well as supply and demand are basic to the sales comparison approach. This approach has broad applicability and is particularly persuasive when there has been an adequate volume of recent, reliable tiansactions of similar properties that indicate value patterns or tiends in the market. When sufficient data are available, this approach is the most direct and systematic approach to value estimation. Typically, the sales comparison approach is most pertinent when valuing land, single-family homes and small, owner-occupied commercial and office properties. The Dictionary of Real Estate Appraisal. 5* ed. (Chicago: Appraisal Institute, 2010), 205. * The Dictionai-y of Real Estate Appraisal. 47. - Seevers ® Jordan ® Ziegenmeyer 6 8 The deflnition ofthe sales comparison approach is offered as follows: The process of deriving a value indication for the subject property by comparing market information for similar properties with the property being appraised, identifying appropriate unfts of comparison, and making qualftative comparisons with or quantftative adjustments to the sale prices (or unft prices, as appropriate) ofthe comparable properties based on relevant, market- derived elements of comparison. Income Capitalization Approach The income caphalization approach is based on the premise that income-producing real estate is typicaUy purchased as an investment. From an investor's point of view, the potential earning power of a property is the crftical element affecting value. The concepts of anticipation and change, as they relate to suppty and demand issues and substitution, are fundamental to this valuation approach. These concepts are important because the value of income-producing real estate is created by the expectation of beneffts (income) to be derived in the future, which is subjed to changes in market conditions. Value may be defined as the present worth ofthe rights to these future benefits. Within the income caphalization approach there are two basic techniques that can be utilized to estimate market value. These teclmiques of valuation are direct caphalization and yield capitalization. . Direct Capitalization: A method used to convert an estimate of a single year's income expedancy into an indication of value in one dhect step, either by dividing the net mcome estimate by an appropriate caphalization rate or by multiptying the income estimate by an appropriate factor. Dhect caphalization employs capftalization rates and multipliers extiacted or developed from market data. Onty a single year's income is used. Yield and value changes are implied but not identified. Yield Capitalization: A method used to convert future benefits into present value by 1) ._ discounting each future benefft at an appropriate yield rate, or 2) developing an overall rate that^ explicitty reflects the investment's income pattern, holding period, value change, and yield rate. The deflnition ofthe income capftalization approach is offered as follows: A set of procedures thi-ough which an appraiser derives a value indication for an income- producing property by converting fts anticipated benefits (cash flows and reversion) into propeity value. This conversion can be accomplished in two ways. One year's income expedancy can be capftalized at a market-derived capftalization rate or at a capitalization rate that reflects a specified income pattern, return on investment, and change in the value of the investment. Alternativety, the annual cash flows for the holding period and the reversion can be discounted at a specified yield rate. 7 The Dictionary nf Real Estate Appraisal. 5* ed. (Chicago: Appraisal Institute, 2010), 175, * The Dictionary of Real Estate Appraisal, 58, ^ The Dictionai-v of Real Estate Appraisal. 211. '" The Dictionary of Real Estate Appraisal. 99, - Seevers ® Jordan • Ziegenmeyer "^ Discounted Cash Flow Analysis A discounted cash flow analysis is a procedure in which a discount rate is applied to a projected revenue stream generated from the sale of individual components of a project. In this method of valuation, the appraiser/analyst specifies the quantity, variability, timing and duration ofthe revenue streams and discounts each to fts present value at a specified yield rate. -Seevers ® Jordan ® Ziegenmeyer 70 APPRAISAL METHODOLOGY The appraised property consists of all the taxable real property within City of San Mateo Community Facilities District No. 2008-1 (Bay Meadows). The estimate of market value comprises 49.978+ acres proposed for the development of five mid-rise office buildings (Station Component); four mid-rise, mixed-use residential/retail/office buildings (Mixed-Use Component); nine parcels designated for attached, for-rent and for-sale residential buildings; and one parcel designated for a combination of attached and detached residential homes (Residential Component). The subdivision development method will be used to estimate the as-is market value ofthe master developer-owned portion ofthe subject property, which relies on a discounted cash flow analysis (DCF). A DCF analysis is a procedure in which a discount rate is applied to a projected revenue stream generated from the sale of individual components of a project. In this method of valuation, the appraiser/analyst specifies the quantity, variability, timing and duration ofthe revenue streams and discounts each to its present value at a specified yield rate. The revenue component ofthe DCF will be derived by valuing the individual land use components outlined above using the sales comparison approach to value. In light ofthe fact two ofthe residential Blocks (3.1a and 3.2) have tiansfened ownership to merchant builders, the estimates of market value for these components were not included in the discounted cash flow analysis, which derived an estimate of market value for the components held by the master developer. Instead, the estimate of market value derived via the sales comparison approach to value, which was the method employed to estimate the underlying land value for the various land use components ovraed by the master developer, was solely relied upon to estimate the market value ofthe components held by Shea Homes of Northern Califomia and TRI Pointe Homes, LLC. This appraisal repoit has been conducted in accordance with appraisal standards and guidelines found in the Uniform Standards of Professional Appraisal Practice (USPAP) and the Appraisal Standards for Land Secured Financing, published by the California Debt and Investment Advisory Comntission (2004). - Seevers • Jordan ® Ziegenmeyer 71 VALUATION - DISCOUNTED CASH FLOW ANALYSTS ft is not uncommon for land secured financings to involve valuations at atypical points in time during the development process. The market recognizes typical points during the development process when master planned projects often transfer, such as upon obtaining entitiements, completion of spinal infrastructure and/or recordation of final subdivision maps, for instance. It is often the case with the valuation of master planned projects for purposes of land secured financing to employ market logic to situations that are not typical tiansition points for developments. More often than not large development projects that tiansfer with partial site development complete, as is the current condition ofthe subject property, reflect situations of duress. Recognizing that there is not duress, and yet a valuation is needed for purposes ofthe bond issuance at this time, we have employed market logic for the valuation of master planned communities and applied that logic to the physical condition reflected by the subject. Therefore, in this section, the market value ofthe master developer-owned portion ofthe subject property in bulk, subject to the impact ofthe Lien ofthe Special Tax securing the CFD No. 2008-1 (Bay Meadows) Bonds, will be estimated by employing the use of a discounted cash flow analysis; whereby, the expected revenue, absorption period, expenses and discount rate associated with the development and sell-off of the residential and conimercial land components will be taken into account. A discounted cash flow analysis is a procedure in which a discount rate is applied to a projected revenue stieam generated fromthe sale of individual components of a project. In this method of valuation, the appraiser/analyst specifies the quantity, variability, timing and duration ofthe revenue streams and discounts each to fts present value at a specified yield rate. The four main items ofthe discounted cash flow analysis are summarized as follows: <• Revenue - the gross income is based on the individual component values. 8 Absorption Analysis - the time frame requhed for sell off Of primaiy importance in this analysis is the allocation ofthe revenue over the absorption period - including the estimation of an appreciation factor (if any). « Expenses - the expenses associated with the sell-off are calculated in this section - including infrastracture costs, administration, marketing and commission costs, as well as taxes and special assessments. 9 Discount Rate - an appropriate discount rate is derived employing a variety of data. Discussions of these four concepts begin below, with the discounted cash flow analysis offered at the end ofthis section. - Seevers • Jordan • Ziegenmeyer — 72 Revenue The individual component valuations ofthe subject property comprise the revenue ofthe discounted cash flow anatysis. Specificalty, the subject property contains 52.18+ acres proposed for development of five mid-rise office buildings (Station Component); four mid-rise, mixed-use residential/rdail/office buildings (Mixed-Use Component); nine parcels designated for attached, for- rent and for-sale residential buUdings and one parcel designated for a combination of attached and detached residential homes (Residential Component). The sales comparison approach wUl be used to estimate the value of the subj ect's residential and commercial components. RESIDENTIAL LAND COMPONENT - SALES COMPARISON APPROACH In this section the market value ofthe 29.18+ acres proposed for development of 832 single- and multifamity residential unfts will be estimated by anatyzing sales of similar residential land in the region. The balance ofthe 1,066 residential unfts, 234 unfts, within the subject property are to be consttucted as part ofthe MU (mixed-use) parcels along with rdail and office uses, which will be valued as part ofthe commercial land component in the next section. The subject property is subdivided into nine developable Blocks (11 individual projects). Based on the proposed residential unfts and the developable land area, the residential projed densities range from 7.82 unfts per acre (detached component) to 50.16 units per acre. The undertying premise ofthe sales comparison approach is the market value of a property is dhectty related to the price of comparable, competitive properties in the marketplace. In the sales comparison approach, the market value ofthe subject property wiU be estimated by a comparison to similar properties that have recentty sold, are listed for sale or are under contiact. This approach is based on the economic principle of substitution. According to The Appraisal of Real Estate, 13* Edition (Chicago: Appraisal Institute, 2008), ''The principle of substitution holds ,_ that the value of property tends to be set by the price that would he paid to acquire a substitute property of similar utility and desirability within a reasonable amount oftime. The principle implies that the reliability ofthe sales comparison approach is diminished if substitute properties are not ayailable in the market." The proper application ofthis approach requhes obtaining recent sales data for comparison with the subject property. In order to assemble the comparable sales, we searched public records and other data sources for leads, then confirmed the raw data obtained with parties directty related to the ttansactions (primarily brokers, buyers and sellers). Consideration is given to factors such as propeity rights conveyed, financing, conditions of sale, and markd appreciation or depreciation since the date of sale. Differences in physical characteristics, such as location, project density, unft count/economies of scale, offsite improvements, site utility/topography. -Seevers • Jordan ® Ziegenmeyer 73 and zoning/entitlements are considered in the analysis. The entire data set wftl then be used to value this land use component. Seven sales have been identified as being representative ofthe market and it is believed the sales data collected is sufficient for comparison to the subject property and pertinent to the valuation ofthe subject land. The data from the comparable sales is summarized in the table on the following page, along with a location map. - Seevers ® Jordan * Ziegenmeyer 74 RESIDENTIAL LAND SALES SUMMARY Property Land Area Price No. of Units Hffl I dentificntion Sale Price (Acre/SF) pcrSF Units/Acre Zoiiiiig^ E-1 1 1950 Elkhom Couit Aug-12 $16,745,000 2.04 $188.44 197 San Mateo, San Mateo County 88,862 96,6 APN: 039-030-310 MB-RA 2 Mission Bay Btack 13 Nov-11 $32,760,000 1,60 $470.04 273 SanFrancisco, SanFrancisco County 69,696 170.6 APN: 8711-013 C3 3 221Town&Count:-y Aug-11 $13,000,000 2.50 $119.38 130 Sunnyvale, Santa Clara County 108,900 52.0 APN:209-07-003, -004, -005, -006, -008 and -009 360 MB-RA 4 1200 4th Street Apr-11 $41,400,000 1.80 $528.01 San Francisco (Missfon Bay neighborhood) 78,408 200.0 APN; 8711-017 C3 5 201 Town (feCounti-y Aug-10 $19,000,000 2.40 $181.74 240 100,0 Sunnyyate, Santa Clara County 104,544 APN: 209-07-014, -015, -016, -017 and -018 36 MS-ITR- 6 637 East Taylor Avenue Jul-10 $5,800,000 1.85 $71.97 19,5 R3 Sunnyvale, Santa Ctoa County 80,586 APN: 205-29-005 7 The Preseive at Redwood Stores Mar-10 $40,560,000 12.33 $75.52 156 Redwood City, San Mateo County (Rolling) 537,095 12,7 APNs: 095-460-280, -290, -300, -310, -320 & -420 TW 8 1840 Ogden Drive Sep-09 $7,180,000 0,89 $185.20 45 Bui'lingame, San Mateo County 38,768 50,6 APN: 025-121-130 -Seevers ® Jordan • Ziegenmeyer- 75 RESIDENTIAL LAND SALES MAP 11. •! ^l II and/ot'ig'suppllers -Seevers ® Jordan • Ziegenmeyer - 76 RESIDENTIAL LAND SALE 1 Property Identification Multifamily Land 1950 Elkhorn Court San Mateo, CA 94403 San Mateo County ^•-•^-^®_rS.,\ APN: 039-030-310 rX JIOAD^ %^ Sale Data Grantor Polo Court Investors, LLC Grantee Essex Elkhorn O-wner, L.P. Sale Date August 3, 2012 Deed Book Page 2012-110429 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $16,745,000 PV of Bonds $0 Land Data Land Area (SF) 88,862 Land Area (Acres) 2.04 Zoning E-1 - Executive Park (allows multifamily) Proposed Units 197 Proposed Density 96.6 units per acre Shape Irregular Corner Orientation No Street Frontage Elkhorn Court Topography Generally level Off-Site Improvements All to site On-Site Improvements Commercial building (no value) Indicators Sale Price per SF $188.44 Sale Price per Unit $85,000 Remarks This comparable previously sold in July 2011 for $ 12,000,000 to the seller, whom reportedly went into contract in 2008 and, during the prolonged escrow period, obtained entitlements in AprU 2010 for a 197-unft multifamily project, as well as an office project on an adjacent parcel (shown above as parcel 039-030-110). The buildings would share a common below-grade garage. The apartment site was improved with a fiex/R&D building that was partially leased at the time, but considered to have no contributory value to the buyers. The building has since been razed and construction is underway. The new owners are completing the development as approved. -Seevers • Jordan • Ziegenmeyer n RESIDENTIAL LAND SALE 2 Property Identification fA ^ :, ':-rA;^rA-;v-' £ .A- ' - ~ Chann?! St Residential Land ,.> J-';-„''' "^^ j J.'"' .--' ^^ -_-_-^ " ^ — -i * '.'• •-• Ml Mission Bay Block 13 ClJ•-"^'•J•^ San Francisco, CA 94158 .J?-- jl ' ,;: San Francisco County '--' J , 1 j' APN: 8711-013 ' AJ^ - f I ^•'- . _ witRtQBi 200 R- 1 .^oosle i„ft^ 1 Hart data Q-?n'l?nnnnte qlinlinrri Tpm" nM l°P tl Sale Data Grantor Bosa Development California II, Inc. Grantee EQR-Mission Bay Block 13 Limfted Partnership Sale Date November 17, 2011 Deed Book Page K525-769 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $32,760,000 PV of Bonds $1,534,597 (estimated) Land Data Land Area (SF) 69,696 SF Land Area (Acres) 1.6 acres Zoning MB-RA, Mission Bay South Redevelopment Area Proposed Units 273 Proposed Density 170.6 units per acre Shape Rectangular Comer Orientation No Street Frontage Channel Street Topography Generally level Off-Site Improvements All to she On-Site Improvements None Indicators Sale Price per SF $470.04 ($492.06 - inclusive of bonds) Sale Price per Unit $120,000 ($125,621 - inclusive of bonds) Remarlts This property was acquired with the intent to construct a residential project. The propeity is approved for a 16-stoiy, 273 unit apartment building with parking. -Seevers • Jordan • Ziegenmeyer 78 RESIDENTIAL LAND SALE 3 Property Identification Residential Land .1 221 Town & Country Sunnyvale, CA 94088 Santa Clara County APN: 209-07-003, -004, -005, -006, -008 and -009 Sale Data Grantor CapeUa Holdings LLC Grantee CP III T&C Sunnyvale LLC Sale Date August 2011 Deed Book Page 20129819 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $13,000,000 PV of Bonds $0 Land Data Land Area (SF) 108,900 SF Land Area (Acres) 2.50 acres Zoning C-3 Proposed Units 130 Proposed Density 52.0 units per acre Shape Generally Rectangular Corner Orientation Yes Street Frontage CapeUa Way; S. Frances Street; Aries Way; Taffe Street Topography Generally level Off-Site Improvements All to site On-Site Improvements None Indicators Sale Price per SF $119.38 Sale Price per Unit $100,000 Remarks This propeity was acquired with the intent to construct 130 residential units. The purchase price was $119.38 per square foot of land area. - Seevers • Jordan • Ziegenmeyer - 79 RESIDENTIAL LAND SALE 4 Property Identification ^SiV-: :-----^ii"l^* Il Residential Land ls •_.;; .-^ - •_ -JZ ?m' A.---' 1200 4'ah", Street San Francisco, CA 94158 sv San Francisco County APN: 8711-017 '._ ' cWnaBfisiilJ.l-:,._ . I, Sale Data Grantor Bosa Development California II, Inc. Grantee BRE Properties Inc. Sale Date AprU 4, 2011 Deed Book Page K373-125 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $41,400,000 PV of Bonds $3,145,123 (estimated) Land Data Land Area (SF) 78,408 SF Land Area (Acres) 1.8 acres Zoning MB-RA, Mission Bay South Redevelopment Area Proposed Units 360 Proposed Density 200 units per acre Shape Irregular Corner Orientation No Street Frontage 4* Street . Topography Generally level Off-Site Improvements All to site On-Site Improvements None Indicators Sale Price per SF $528.01 ($568.12 - inclusive of bonds) Sale Price per Unit $115,000 ($123,736 - inclusive of bonds) Remarks This propeity was acquired with the intent to construct a residential project. The previous owner had planned to construct a 360 unft residential development; however, the new owners submitted a request for building permfts for a 6 story, 172 unft apartment building, with ground floor retail and parking. -Seevers ® Jordan • Ziegenmeyer 80 RESIDENTIAL LAND SALE 5 Property Identification Residential Land ••©•• 201 Town & Country Sunnyvale, CA 94088 Santa Clara County APN: 209-07-014, -015, -016, -017 and-018 Sale Data Grantor CapeUa Holdings LLC Grantee BRE properties Inc. Sale Date August 2010 Deed Book Page 20827105 Propeity Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $19,000,000 PV of Bonds $0 Land Data Land Area (SF) 104,544 SF Land Area (Acres) 2.40 acres Zoning C-3 Proposed Units 240 Proposed Density 100.0 units per acre Shape Rectangular Corner Orientation Yes Street Frontage CapeUa Way; W. Washington Avenue; S. Frances Street Topography Generally level Off-Site Improvements All to site On-Site Improvements None Indicators Sale Price per SF $181.74 Sale Price per Unit $79,167 Remarks This propeity was acquired with the intent to construct 240 apartment unfts with complementaiy retail space; though, there were no entitlements transfened in the sale. The purchase price was $181.74 per square foot of land area. Reportedly, there was minor environmental concern that was not solved prior to the sale; however, because the property was in a highly desirable area, the buyer closed escrow and will pay to remediate the site - this reportedly did not affect the sale price. -Seevers • Jordan • Ziegenmeyer 81 RESIDENTIAL LAND SALE 6 Property Identification Residential Land 637 East Taylor Avenue Sunnyvale, CA 94086 Santa Clara County APN: 205-29-005 Sale Data Grantor Clarum East Taylor, LLC Grantee D.R. Horton Bay, Inc. Sale Date July 2010 Deed Book Page 20796369 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $5,800,000 PV of Bonds $0 Land Data Land Area (SF) 80,586 SF Land Area (Acres) 1.85 acres Zoning M-3/ITR/R-3 - Entitied for residential development Proposed Units 36 Proposed Density 19.5 units per acre Shape Rectangular Corner Orientation No Street Frontage East Taylor Avenue Topography Generally level Off-Site Improvements All to site On-Site Improvements Paving (no value) Indicators Sale Price per SF $71.97 Sale Price per Unit $161,111 Remarks This property was entitled for 36 townhome units at the time of sale. There is an affordable housing requirement, which stipulates six unfts will be sold at below market rates. The seller, Clarum Homes, indicated no she work had been completed other than demolhion and clearing of the site, which was previously used as a mobile home park. -Seevers • Jordan • Ziegenmeyer 82 RESIDENTIAL LAND SALE 7 Property Identification IH Residential Land The Preserves at Redwood Shores Redwood City, CA 94065 San Mateo County APN: 095-460-280, -290, -300, - 310,-320 &-420 Paiicl niiinnni a\ai!.\blc Sale Data Grantor Keech Properties Grantee KB Home Sale Date March 2010 (rolling option) Deed Book Page N/Av Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $40,560,000 PV of Bonds $0 Land Data Land Area (SF) 537,095 SF Land Area (Acres) 12.33 acres Zoning P - Entitled for residential development Proposed Units 156 Proposed Density 12.7 units per acre Shape Irregular Corner Orientation No Street Frontage Keech Drive Topography Generally level Off-Site Improvements All to site On-Site Improvements None Indicators Sale Price per SF $75.52 Sale Price per Unit $260,000 Remarks The Preserve at Redwood Shores is located at the intersection of Keech Drive and Whidbey Lane in Redwood City. The buyer, KB Home, has acquhed 12.33 acres of land area entitied for development of 156 townhome unfts. There is no affordable housing requirement and all homes can be sold at market rate. We did confirm that KB Home has acquired the propeity and they are actively marketing homes at this project. All offshe improvements were in place at the time of sale and the buyer was responsible for constructing all onsite development. Further, the project is not encumbered with special tax/assessment lien obligations. The buyer is taking down the project in phases and the most recent closing was in March 2010. This was the second - Seevers • Jordan • Ziegenmeyer - 83 takedown to the best of our knowledge, with the first transpiring in September 2009. While these ftems were confirmed through public records, the project's sales office and representatives of Redwood City and the City website, we could not confirm the sale price or the specific terms ofthe acquisition. We spoke with the land acquisition manager at KB Home, who indicated the sale price and terms ofthe acquisition are highly confidential and that ft was crucial for the builder's competitive advantage to keep the details ofthis tiansaction hidden from the public. The KB Home representative also stated that no parties other than the buyer and seller are privy to the exact terms ofthe acquishion and that information obtained about this tiansaction from any other party was pure speculation. The sale price reported above is based on our conversations with parties, including brokers and other market participants, who are aware ofthe transaction, but were not directly involved. Thus, the parties reported what they believed to be the terms and sale price, but could not provide final confirmation. As noted previously, we contacted both the buyer and seller in this tiansaction but could not get confirmation, ft is believed Keech Development has the right to collect 6% ofthe total revenue from home sales, premiums and upgrades. If this is confirmed to be trae and accurate, ft would constitute a revenue sharing agreement that would cost the buyer 6% of every home sale. Consequently, the effective sale price ofthe land would be greater than $260,000, assuming the negotiated sale price and the revenue sharing agreement are confirmed to be true. i - Seevers • Jordan @ Ziegenmeyer —-— 8 4 RESIDENTIAL LAND SALE 8 Property Identification Residential Land 1840 Ogden Drive Burlingame, CA 94010 San Mateo County APN: 025-121-130 Sale Data Grantor Burlingame Hills Manor, LLC Grantee Mill Ogden Villa, LLC Sale Date September 2009 Deed Book Page 1122466 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $7,180,000 PV of Bonds $0 Land Data Land Area (SF) 38,768 SF Land Area (Acres) 0.89 acre Zoning TW; Entitied for Residential Development Proposed Unfts 45 Proposed Density 50.6 unfts per acre Rectangular Shape No Corner Orientation Ogden Drive Street Frontage Generally level Topography All to site Off-Site Improvements Office building (no value) On-Sfte Improvements Indicators Sale Price per SF $185.20 Sale Price per Unft $159,556 ^'mfpropeity was approved for a 45-unft residential condominium project at the time of sale and included completed architectural plans. The project will consists of seven one-bedroom units, 32 two-bedroom unfts and six three-bedroom unfts. Five unfts are requhed to be offered at below marled rates. Reportedty, this propeity was marketed for $8,495,000 for about one yeai- pnor to seUing. An older 14,700 square foot office building was in place at the time of sale and needed to be razed prior to construction. -Seevers • Jordan • Ziegenmeyer- 85 Analysis and Conclusion The comparable sales coUected for this analysis are considered sufficient for purposes of estimating market value for the subject's underlying residential land component. Based on the data analyzed herein, and the correlation of sale price to the various unfts of comparison, e.g., land area, number of units and density, the unft of comparison used for this analysis is the sale price per square foot of land area. In order to value the subjecf s residential Blocks, the comparable transactions were ; adjusted based on the profile ofthe subject site with regard to categories that affect market value. If a comparable has an attribute that is considered superior to that ofthe subject, ft is adjusted downward to negate the effect the item has on the price of the comparable. The opposite is trae of categories that are considered inferior to the subject and are adjusted upward. In order to isolate and quantify the adjustments on the comparable sales data, percentage or dollar adjustments are considered appropriate. At a minimum, the appraiser considers the need to make adjustments for the following items: 9 Properfy Rights Conveyed 9 Financing Terms ® Conditions of Sale (motivation) 9 Market Conditions (time) • Expenditures After Sale • Location ® Physical Features A paired sales analysis is performed in a meaningful way when the quantity and quality ofdata are available. However, as a resuft ofthe limfted data present in the market, many ofthe adjustments require the appraiser's experience and knowledge ofthe market and information obtained from those knowledgeable and active in the marketplace. A detailed analysis involving each of these factors and the value conclusion for the subject is presented below. Property Rights Conveyed In transactions of real propeity, the rights being conveyed vary widely and have a significant impact on the sales price. As previously noted, the opinion of value in this report is based on a fee simple estate, subject only to the limftations imposed by the governmental powers of taxation, eminent domain, police power, and escheat; as well as non-detrimental easements, and conditions, covenants and restrictions (CC&Rs). The impact of bond indebtedness, community facility distiicts and assessment districts, is considered in our analysis. The subject and all the comparables represent fee simple estate transactions. Therefore, adjustments for this factor are not necessary. - Seevers • Jordan ® Ziegenmeyer - 86 Financing Terms In analyzing the comparables, it is necessary to adjust for financing terms that differ from market terms. Typically, ifthe buyer retained third party financing (other than the seller) for the purpose of purchasing the property, a cash price is presumed and no adjustment is required. However, in instances whereby the seller provides financing as a debt instrument, a premium may have been paid by the buyer for below market financing terms or a discount may have been demanded by the buyer ifthe financing terms were above market. The premium or discounted price must then be adjusted to a cash equivalent basis. The comparable sales are understood to be cash to the seller transactions and, therefore, do not require adjustments. Conditions of Sale (motivation) Adverse conditions of sale can account for a significant discrepancy from the sales price actually paid compared to that ofthe market. This discrepancy in price is generally attributed to the motivations ofthe buyer and the seller. Certain conditions of sale are considered to be non-market and may include the following; • A seller acting under duress, • A lack of exposure to the open market, « An inter-family or inter-business transaction for the sake of family or business interest, • An unusual tax consideration, • A premium paid for site assemblage, • A sale at legal auction, or ® An eminent domain proceeding. All ofthe comparable transactions were arms-length and do not require a conditions of sale adjustment. Expenditures after Sale For Comparables 2, 3, 4 and 7 no additional expenditures were indicated after their respective sale dates. As such, no adjustments are applied to these comparables for this element of comparison. However, Comparables 1, 6 and 8 had site and structural improvements in place at the time of sale, which require demolition to create a vacant she that is ready for development. The structural improvements are judged to have no contributory value and, as such, the Comparables are adjusted upward to account for the cost of demolition. Reportedly, Comparable 5 had minor enviromnental concems that were not solved prior to the sale; however, because the propeity was in a highly desirable area, the buyer closed escrow on the site and will pay to remediate the property - this reportedly did not affect the sale price; thus, no adjustment is made. No other adjustments are warranted for expenditures after sale. Seevers ® Jordan • Ziegenmeyer 87 Market Condition (time) Market conditions generally change over time, but the date ofthis appraisal is for a specific point in time. Therefore, in an unstable economy, one that is undergoing changes in the value ofthe dollar, interest rates and economic growth or decline, extra attention needs to be paid to assess changing market conditions. Significant monthly changes in price levels can occur in several areas ofa municipality, while prices in other areas remain relatively stable. Although the adjustment for market conditions is often referred to as a time adjustment, time is not the cause ofthe adjustment. In evaluating market conditions, changes between the comparable sales date and the effective date of this appraisal may wanant adjustment; however, if market conditions have not changed, then no adjustment is required. While the residential market was in an expansionary period during the years of 2000 to 2007, ft contiacted through 2009/2010, especially as a resuft ofthe financial crisis ofthe latter half of 2008. However, over the past two years, nearly all market participants surveyed have reported that conditions have improved for residential housing, with particular emphasis on for-rent product. In fact, according to Marcus & Millichap's Apartment Market Report, Third Quarter 2012, over the past year, the average rent has increased by 15% at projects with 100 or more unfts, and 16%) at projects with fewer than 100 units. Similarly, according to various commercial brokers/developers involved in multifamily housing in San Mateo County, capitalization rates have continued to fall over the past year, with the average overall capftalization rate in San Mateo County at 5.27%. In addftion to rising rents and the stabilization of vacancy rates, financing has become more accessible for investors, and muhifamily properties in desirable locations are receiving muhiple offers. Nearly all market participants surveyed believe that 2009 was the low point for multifamily housing in the region, given that the market was essentially frozen due to overall uncertainty in the economy and in the capital markets. With respect to for-sale residential product, the number of single-family homes sold in the city of San Mateo decreased year-over-year, as inventory declined; though, prices increased between 2.5% and 30.3% in the city. Reports suggest the Bay Area region is exhibiting signs of stabilization and, in some areas, recovery, as prices and/or rents rise in certain submarkets. Based upon the discussion above, slight upward adjustments for market conditions are applied to Sales 5 through 8, which transferred between September 2009 and August 2010. Location The subject is located in the City of San Mateo, in San Mateo County, near the Highway 101/Higliway 92 interchange, both major transportation arterials in the San Francisco Bay A-ea peninsula. Additionally, the subject's location proximate to the Caltrain is considered a highly Seevers ® Jordan ® Ziegenmeyer 88 deshable location attribute. Comparables 1 and 8 are also located proximate to these tiansportation facilities - no adjustments are necessary. Comparable 7 is located east ofthe subject property in Redwood City and is situated close to the Bay. While this project does receive premiums for Bay views, ft does not enjoy the same level of proximity to tiansportation and significant commercial services the subject property offers; thus, an upward adjustment is merited. Comparables 3 and 5 are located in downtown Sunnyvale and are considered similar in terms of location attiibutes as the subject property. Comparable 6 is located in an inferior area of Santa Clara County, in an area with generaUy lower home values when compared to the subjed property and wanants an upward adjustment. Conversely, Comparables 2 and 4 are located in the redeveloping Mission Bay neighborhood of San Frandsco, proximate to AT&T Park, the University of Califomia San Francisco campus and the San Francisco Bay. These Comparables are considered superior to the subject property in terms of location attiibutes and merft downward adjustments. Physical Features The physical characteristics of a property can impact the selling price. Those that may impact value include the following; Proiect Density rUnfts Per Acre) When analyzing land sales on a price per square foot basis, projects with lower densities tiansferred for less per square foot than projeds with higher denshies, all else being equal. In total, the subject property offers a project density of 26.7 units per acre (832 units - 31.07 acres), and range between 7.82 and 50.16 units per acre. Therefore, in comparison to the subject parcels, comparables offering a proposed density significantly greater than the density for the subject are adjusted downward and vice versa. Land Area (Economies of Scale) In terms of land area, the comparables range between 0.89-acre and 12.33 acres. The subject parcds range in size between 1.089 acres and 4.38 acres. Comparable 10 is significantly larger than the subject property and warrants an upward adjustment. Larger parcels tend to sell for less per square foot than smaller parcels, all else being equal. Offsite Improvements The retail value of each ofthe subject's residential Blocks is valued in this section, which assumes completion of all offshe improvements in place (deductions for remaining sfte improvements associated with the Blocks held by the master developer will be made in the expenses section ofthe Seevers • Jordan » Ziegenmeyer 89 discounted cash flow analysis; whereas, all offsite improvements are in place for the two parcels (Blocks 3.1 and 3.2) sold to merchant builders). The comparables possess similar offsite improvements; thus, an adjustment for offsite improvements is not necessary. Site Utility/Topography Differences in shape, topography, drainage or soil conditioris can affect the utility and, therefore, the market value of a property. The subject property exhibfts average site utility, with an inegular shape, level topography and no major impediments to development. In comparison to the subject, the land sales appear to offer similar site utility/topography, with no adjustments wananted. Zoning/Entitlements All ofthe comparables have similar zoning to the subject property and do not require adjustment, and, overall, the comparables used in this analysis are considered the best and most recent available for comparison to the subject property. The subject property has an inclusionary housing requirement in which the owner/developer is obHgated to set aside a minimum of ten percent (10%) ofthe residential unfts on a Block-by-Block basis for occupancy by, and being affordable to, moderate or lower income households. Comparables 3 and 5 also required units to be set aside for inclusionary housing. Comparables 3 and 5 did not have entitiements in place at the time of sale; however, the City of Sunnyvale has a Below Market Rate (BMR) Program for new development requhing 12.5% of for-sale units and 15% of for-rent units be set aside for BMR umts; thus, in comparison to the subject propeity, a slight upward adjustment is wananted for these sales. It is expected Comparable 1, which is also located in the city of San Mateo, would have a similar inclusionary housing requirement as the subject; thus, no adjustment is necessary. Comparable 7 does not have an inclusionary housing requirement; thus, a slight downward adjustment is considered reasonable. Comparables 2 and 4, which are both located in the city of San Francisco, have an inclusionaiy housing requirement in which the o-wner/developer is obligated to set aside a minimum of fifteen percent (15%) ofthe residential units on a Block-by-Block basis for occupancy by, and being affordable to, moderate or lower income households; thus, in compai-ison to the subject property, a slight upward adjustment is wananted for these sales. Conclusion of Value - Residential Land Component The market data analyzed herein reflects a range in value of $71.97 to $568.12 per square foot (inclusive of bonds), with the upper end ofthe range characterized by land sales within the Mission Bay area of San Francisco, both ofwhich allow for high rise multifamily development with significantly higher densities when compared to the subject property. Based on the preceding discussion, and considering the specifics ofthe subject property's residential land parcels, in particular, the subject's •Seevers • Jordan® Ziegenmeyer - 90 location in San Mateo with proximity to major tiansportation, a conclusion of land value of $170 per square foot is considered reasonable for the subject's residential land component. Applying this value per square foot to the residential land parcels (Blocks) held by the master developer results in the following component aggregate retail value: Parcel "i1t)fUnitS?lAcres' Valiie' / SFAl^^Extehsion.; Residential Land/Potential Units - Res 1 108 2.156 $170 $ 15,970,000 Residential Land/Potential Units - Res 2 80 2.999 $170 $ 22,210,000 Residential Land/Potential Units - Res 3.1b 50 1.910 $170 $ 14,140,000 Residential Land/Potential Units - Res 4 71 1.649 $170 $ 12,210,000 Residential Land/Potential Units - Res 5 76 3.864 $170 $ 28,610,000 Residential Land/Potential Units - Res 6 54 1.089 $170 $ 8,060,000 Residential Land/Potential Units - Res 7 158 2.397 $170 $ 17,750,000 Residential Land/Potential Units - Res 8 74 3.571 $170 $ 26,440,000 Residential Land/Potential Units - Res 9.1 24 3.069 $170 $ 22,730,000 Residential Land/Potential Units - Res 9.2 31 1.619 $170 $ 11,990,000 Total: 726 24.323 $180,110,000 The above component values will be incorporated into the discounted cash flow analysis later in this report to derive the market value for the ownership held by the master developer. Wliereas, Blocks 3.1a and 3.2 have transfened o'wnership to individual merchant builders, and the market values for each ownership interest are shown below: Parcel # of Units Acres Vahic/SF Extension Residential Land/Potential Units - Res 3.1a 43 1.820 $170 $ 13,480,000 Residential Land/Potential Units - Res 3.2 63 3.040 $170 $ 22,510,000 -Seevers ® Jordan • Ziegenmeyer 91 COMMERCIAL/MIXED-USE LAND COMPONENT - SALES COMPARISON APPROACH In this section the market value ofthe subject's office and mixed-use land components, which. comprise 18.55+ acres, will be estimated by analyzing sales of similar office/commercial land in the region. The subject property is subdivided into five developable Office Blocks (Stations) and four Mixed-Use Blocks. The undertying premise ofthe sales comparison approach is the market value of a property is directty related to the price of comparable, competittye properties in the marketplace. In the sales comparison approach, the market value ofthe subject property will be estimated by a comparison to similar properties that have recentty sold, are listed for sale or are under contiact. The proper application ofthis approach reqmres obtaining recent sales data for comparison with the subject property. In order to assemble the comparable sales, we searched public records and other data sources for leads, then confirmed the raw data obtained with parties directiy related to the transactions (primarity public records, brokers, buyers and sellers). For the subject's office (Station) component, the undertying land is most commonty analyzed on a price per developable floor area (FAR), which WiU be the basis of the analysis herein. Consideration is given to factors such as property rights conveyed, fmancing, conditions of sale, and market appredation or depreciation since the date of sale. Differences in physical characteristics, such as location, floor area ratio, land area, offsite hnprovements, sfte utility/topography, and zoning/entitiements are considered in the anatysis. The enthe data sd wUl then be used to value this land use component. Nine sales have been identified as being representattye ofthe market and it is believed the sales data collected is sufficient for comparison to the subjed propeity and pertinent to the valuation ofthe subject land. The data from the comparable sales is summarized in the table below, followed by a location map. -Seevers • Jordan ® Ziegenmeyer —• - 92 COMMERCIAL LAND SALES |-,Ml ri-ii'e l'iiiiii)seil'i:\isliim (SI-) iiei-lAll rse ^M m ,0 $17,750,000 6.87 M3 . $59.31 209.500 $84.73 Office ! 399 W, Java Drive & 1333 Bordeaux Drive Nov- 299,257 Sunnyvale, Santa Clara County APNs: 110-26-033 &-047 14.00 CG $455.86 2,000,000 $139.00 Office 2 Mission Bay Lots 26 & 27 (portfon) and Lots 29-34 Oct-10 $278,000,000 609,840 SanFrancisco, SanFrancisco County APN; 8721-029, -033; 8722-001 and 8725-001 1,03 DC $178.31 134,600 $59.44 ParkingLot May-10 $8,000,000 3 8 E San Fernando Street 44.867 San Jose, Santa Clara County APN: 467-22-142 $12,000,000 _JL49_ DC $184.89 194,713 $61.63 ParkingLot 4 285 S. Market Street May-10 64.904 San Jose, Santa Clara County APN: 259-42-080 09 $11,888,000 4.56 Ml $59.85 99,317 $119.70 Office 5 384 Santa Trinita Avenue Oct- 198.634 Sunnyvale, Santa Clara County APNs: 205-24-001 08 $1,900,000 0.52 C-l-A $83.40 7.500 $253.33 Offlce 6 100 Middlefield Road Nov 22.781 Menlo Park, San Mateo County APNs: 062-272-620, -630 Feb-08 $21,546,432 6.87 M3 $72.00 209.500 $102.85 Offlce 7 399 W.JavaDrive& 1333 BordeauxDrive 299,257 Sunnyvale, Santa Clara County APNs: 110-26-033 &-047 55 454.897 $117.61 Office/Retail Feb-08 $53,500,000 17.41 PD $70, 8 Stevens Creek Blvd. at N. Tantau Avenue 758.380 Cupertino, Santa Clara County APNs: 316-20-078,-079 &-085 S18.000.000 4.22 SP $97.88 64,700 $278.21 Office Oct-07 9 900 Franklin Lane 183.901 San Mateo, San Mateo County APNs: 040-010-190 93 -Seevers • Jordan • Ziegenmeyer- COMMERCIAL LAND SALES MAP A-Nslafif Ci-ini: Or,.,II I' vpbM.jorociVpk t ,y. \:i:_Vsar, iT .-'^'•''•""^•'"J-a.L', A's;J3T\ Y [CDpyrlglTt 9 and (P).193y-2Q08 f^crosoftiCorportion snd/of as suppEers. A« tlqhls reserved, - - i 'i"^ "—' h "t - Seevers • Jordan ® Ziegenmeyer - 94 COMMERCIAL LAND SALE 1 roi If—rail Property Identification ::®£Z:;.A:;;' Z'M^: •"-•" 110 il 26 1| Commercial Land I I 399 W. Java Avenue & 1333 ! i n •. Bordeaux Drive * -r I i:A- Sunnyvale, CA 94085 ®.' Santa Clara County I.; I j^'.. ..^^—J til - „•:• il i JJ APN: 110-26-033 &-047 Sale Data Grantor 399 West Java Drive LLC Grantee Yahoo Inc. Sale Date November 2010 Deed Book Page 20992619 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $17,750,000 PV of Bonds $0 Land Data Land Area (SF) 299,257 SF Land Area (Acres) 6.87 acres Floor Area Ratio (FAR) 209,500 SF Zoning M3 Shape Irregular Corner Orientation Yes Street Frontage Bordeaux Drive; West Java Drive Topography Generally level Off-Site Improvements All to sfte On-Site Improvements No Indicators Sale Price per SF $59.31 Sale Price per Acre $2,583,697 Sale Price per FAR $84.73 Remarlcs This comparable represents a recent sale of 6.87 acres of land permitted for the construction of 209,500 square feet of office space. The buyer, Yahoo, owns the adjacent property to the west. The property is located on a light rail line in walking distance to a transit station. The prior sale ofthis comparable is also described as Comparable 7. -Seevers • Jordan • Ziegenmeyer 95 COMMERCIAL LAND SALE 2 Property Identification B W- Conimercial Land Mission Bay Lots 26 & 27 (portion) and Lots 29-34 I San Francisco, CA 94107 San Francisco County APN: 8721-029, -033; 8722-001 mm and 8725-001 Sale Data Grantor ARE-San Francisco 22 LLC (Alexandria Real Estate Equities, Inc.) Grantee Bay JacarandaNo. 2932, LLC (Salesforce.com) Sale Date October 2010 Deed Book Page J073279 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $278,000,000 PV of Bonds $17,869,463 (estimated) Land Data Land Area (SF) 609,840 SF Land Area (Acres) 14.0 acres Floor Area Ratio (FAR) 2,000,000 SF Zoning MB-RA, Mission Bay Redevelopment Area Shape Irregular Corner Orientation Yes Street Frontage 3"^ Street; 16"^ Street Topography Generally level Off-Site Improvements All to site On-Site Improvements No Indicators Sale Price per SF $455.86 ($485.16 - inclusive of bonds) Sale Price per Acre $19,857,143 ($21,133,533 -inclusive of bonds) Sale Price per FAR $139.00 ($147.93 - inclusive of bonds) Remarks This comparable represents the November 2010 acquisition by Salesforce.com of 14 acres of land situated in the Mission Bay redevelopment area of San Francisco, just south of AT&T Park. The buyer paid $278,000,000, plus the assumption of bonds, for the construction of a new headquarters campus for the technology company. The FAR allowance is two million square feet, implying a price per FAR of $139. -Seevers • Jordan ® Ziegenmeyer- 96 COMMERCIAL LAND SALE 3 Property Identification im Commercial Land 8 East San Fernando Stieet San Jose, CA 95113 Santa Clara County -.^.ii-.-i ^ ® APN: 467-22-142 ' '1* Sale Data Grantor Redevelopment Agency ofthe City of San Jose Grantee Sobrato Interests III, LP Sale Date May 2010 Deed Book Page 20722602 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $8,000,000 PV of Bonds $0 Land Data Land Area (SF) 44,867 SF Land Area (Acres) 1.03 acres Floor Area Ratio (FAR) 134,600 SF Zoning DC Shape Rectangular Corner Orientation Yes Street Frontage 1'' Stieet; 2"'' Stieet; San Fernando Stieet Topography Generally level Off-Site Improvements All to site On-Site Improvements Paving (parking lot) Indicators Sale Price per SF • $178.31 Sale Price per Acre $7,766,990 Sale Price per FAR $59.44 Remarlis , i. r^- This comparable represents the May 2010 sale of a parking lot in downtown San Jose by the City Redevelopment Agency. The lot is across the stieet from the ICnight Ridder building at the corner of South First Stieet. The new owners reportedly will continue to use the property as a parking lot until the market ttirns and wiU re-evaluate the usage ofthe land. According to the City of San Jose zoning code, the FAR allowance is 3:1, implying a building of 134,600 square feet can be constructed. •Seevers • Jordan • Ziegenmeyer- 97 COMMERCIAL LAND SALE 4 Property Identification Conimercial Land 285 South Market Stieet San Jose, CA 95113 Santa Clara County APN: 259-42-080 Sale Data Grantor Redevelopment Agency ofthe City of San Jose Grantee Sobrato Interests III, LP SaleDate May 2010 Deed Book Page 20722600 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $12,000,000 PV of Bonds $0 Land Data Land Area (SF) 64,904 SF Land Area (Acres) 1.49 acres Floor Area Ratio (FAR) 194,713 SF Zoning DC Shape Rectangular Comer Orientation Yes Street Frontage South 1'' Stieet; South Market Stieet; E. San Carlos Street Topography Generalty level Off-Site Improvements AU to site On-Site Improvements Paving (parking lot) Indicators Sale Price per SF $184.89 Sale Price per Acre $8,053,691 Sale Price per FAR $61.63 Remarlis This comparable represents the May 2010 sale of a parking lot in downtown San Jose by the City Redevelopment Agency. The lot is opposite the civic auditorium and across the street from Cesar Chavez plaza and the San Jose Convention Center. The new owners reportedly will continue to use the property as a parking lot until the market turns and will re-evaluate the usage ofthe land. The FAR allowance is 3:1, implying a building of 194,713 square feet can be constructed. -Seevers • Jordan ® Ziegenmeyer - 98 COMMERCIAL LAND SALE 5 ... .„ ..... Property Identification • " - ' ri s II a 1 Commercial Land @ 1 «vi -- - -4 A- '••»'•' - •y .^ ^ I f 1 384 Santa Trinfta Avenue 1^ j • f. Sunnyvale, CA 94085 •^ 1 I / Santa Clara County ® 1 i / r .= 1 /• / ..ti"^C' 1 lllll ' •''??. T' // ' v'.V 1 I '^1 «• — -''«T-- -WV-*---— •*•''• APN; 205-24-001 " ,.1 •I 1 3 _ ( ' •' •' t < I'L.. i,.. •. •' 1 ' '• ' C - . AflOUEJ - — - Avf. • -- t @ Sale Data Grantor TMG-Santa Trinfta LLC Grantee Santa Trinita Office LLC SaleDate October 2009 Deed Book Page 20470130 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $11,888,000 PV of Bonds $0 Land Data Land Area (SF) 198,634 SF Land Area (Acres) 4.56 acres Floor Area Ratio (FAR) 99,317 SF Zoning Ml Shape Generally Rectangular Comer Orientation Yes Street Frontage Santa Trinfta Avenue; Kern Avenue Topography Generally level Off-Site Improvements All to site On-Site Improvements None Indicators Sale Price per SF $59.85 Sale Price per Acre $2,607,018 Sale Price per FAR $119.70 Remarks This comparable is the October 2009 sale of a vacant parcel in Sunnyvale, Santa Clara County. The property is approved for the construction of a 99,317 square foot buUding, which implies a price per FAR of $119.70. -Seevers • Jordan • Ziegenmeyer 99 COMMERCIAL LAND SALE 6 Property Identification Commercial Land 100 Middlefield Road Menlo Park, CA 94025 San Mateo County APN; 062-272-620 and -630 Sale Data Grantor Richard J. & Denise L. Beale Grantee 100 Middlefield Road Properties, LLC Sale Date September 2008 Deed Book Page 123856 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $1,900,000 PV of Bonds $0 Land Data Land Area (SF) 22,781 SF Land Area (Acres) 0.52 acre Floor Area Ratio (FAR) 7,500 SF Zoning C-l-A Shape Generally Rectangular Corner Orientation Yes Street Frontage Middlefield Road; Willow Road Topography Generally level Off-Site Improvements All to site On-Site Improvements None Indicators Sale Price per SF $83.40 Sale Price per Acre $3,653,846 Sale Price per FAR $253.33 Remarks This property was originally listed for $2,975 million and was on the market for one year. The property was formerly improved with a Chevron gas station. The FAR is 0.40, though the propeity sold with entitlements for a 7,500 square foot office building. No structures or tanks were on the site. -Seevers • Jordan ® Ziegenmeyer - 100 COMMERCIAL LAND SALE 7 ,..„. Property Identification .. A^^M^T""®''""", --l'"" .:"Al>l«^'^ 1' IRBTlt 1 Commercial Land 1 399 W. Java Avenue & 1333 1 ;r, " • •-! i ^ . s \ Bordeaux Drive »-.1 Sunnyvale, CA 94085 < BORDEAU)( '" "^ ". •> tfl,,,. >v- 1 ® Santa Clara County i... Y ,-=_-4?|iHr-. APN: 110-26-033 &-047 • -" •• i |l •' " 'i l' ^PJ W(^ t •;•• '"'^''"-^.t.r.'"-' . 'a'^-i-'i . _^ ,. ^ •. "''.V; **J. 7<,/( '.' Xji. i! ^*S-tt.. ...J.. ..nn-.^:-^,^ "^•' .„.•.% •-- --. ...-I "DRivt ® . ' •- -1 ISlvsaPI Sale Data Grantor Prhzger Realty Group Grantee TMG-Moffett (The Maitin Group) Sale Date Februaiy 2008 Deed Book Page 20992619 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $21,546,432 PV of Bonds $0 Land Data Land Area (SF) 299,257 SF Land Area (Acres) 6.87 acres Floor Area Ratio (FAR) 209,500 SF Zoning M3 Shape Irregular Comer Orientation Yes Street Frontage Bordeaux Drive; West Java Drive Topography Generally level Off-Site Improvements All to site On-Site Improvements No Indicators Sale Price per SF $72.00 Sale Price per Acre $3,136,307 Sale Price per FAR $102.85 Remarlcs This comparable is the February 2008 sale of 6.87 acres of land in Sunnyvale, adjacent to Yahoo. The site has an allowable density up to 0.70 FAR, and was later approved for 209,500 square feet of office space. The property is located on a Hght rail line in walking distance to a transft station. -Seevers • Jordan • Ziegenmeyer - 101 COMMERCIAL LAND SALE 8 Property Identification Conimercial Land Stevens Creek Boulevard at N. Tantau Avenue Cupertino, CA 95014 Santa Clara County APN; 316-20-078, -079 & -085 ©•^j^n^^g'^^'^l^Mg Sale Data Grantor Hewlett-Packard Grantee 500 Forbes LLC Sale Date February 2008 Deed Book Page 19740580 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $53,500,000 PV of Bonds $0 Land Data Land Area (SF) 758,380 SF Land Area (Acres) 17.41 acres Floor Area Ratio (FAR) 454,897 SF Zoning PD Shape Inegular Corner Orientation Yes Street Frontage Finch Ave.; Vallco Pk-wy Stevens Creek Blvd.; N. Tantau Ave. Topography Generally level Off-Site Improvements All to site On-Site Improvements None Indicators Sale Price per SF $70.55 Sale Price per Acre $3,072,947 Sale Price per FAR $117.61 Remarlis This property is the Febraary 2008 sale of 17.41 acres of land in Cupertino, across the stteet from April Inc. The estimated FAR for the sfte is 0.60, the property was proposed for the construction of 454,897 square feet of office space, implying a sale price per FAR of $117.61. -Seevers • Jordan • Ziegenmeyer 102 COMMERCIAL LAND SALE 9 Property Identification j 40-1 1 Commercial Land ^^ "•"-B/rtvft. '"" —-- ''''^ St 7---tv.. V 900 Franklin Lane •' :.**#'-•;». ""'"•'">-•--. San Mateo, CA 94403 . San Mateo County J ® APN: 040-010-190 t 1 1 '-^' '^-••••-I nin'^ .'•./v/i:ci yv '^ n/n-v ji fvnv;-'^tv-t'K" „..„/.,., -i*- "'•'•" '^—""•^^ ^——^^ Sale Data Grantor Bay Meadows Gateway Investors Grantee Kaiser Foundation Health Plan Sale Date October 2007 Deed Book Page 155207 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $18,000,000 PV of Bonds $0 Land Data Land Area (SF) 183,901 SF Land Area (Acres) 4.22 acres Floor Area Ratio (FAR) 64,700 SF (constructed) Zoning SP Shape Irregular Corner Orientation Yes Street Frontage Franlclin Parkway; Saratoga Drive; Hillsdale Boulevard Topography Generally level Off-Site Improvements All to site On-Site Improvements None Indicators Sale Price per SF $97.88 Sale Price per Acre $4,265,403 Sale Price per FAR $278.21 Remarks This comparable is the sale of an irregularly-shaped parcel located in Phase I ofthe Bay Meadows redevelopment area. The buyer planned, and subsequently completed, a 64,700 square foot medical office buUding on the site; though, the property was permitted for a maximum of 245,000 square feet. -Seevers • Jordan • Ziegenmeyer - 103 Analysis and Conclusion The comparable transactions are adjusted based on the profile ofthe subject parcels with regard to categories that affect market value. If a comparable has an attribute that is considered superior to that ofthe subject, ft is adjusted downward to negate the effect the ftem has on the price ofthe comparable. The opposite is true of categories considered inferior to the subject. Percentage or dollar adjustments are considered appropriate in order to isolate and quantify the adjustments on the comparable sales data. At a minimum, the appraiser considers adjustments for the following items: ® Property rights conveyed 9 Financing terms • Conditions of sale (motivation) • Expenditures after sale 9 Market conditions 9 Physical features A paired sales analysis is performed in a meaningful way when the quantity and quality ofdata are available. However, many ofthe adjustments require the appraiser's experience and knowledge of the market and information obtained from those knowledgeable and active in the marketplace. A discussion involving each of these factors is presented as follows: Property Rights Conveyed In transactions of real propeity, the rights being conveyed vary widely and have a significant impact on the sales price. The opinion of value in this report is based on a fee simple estate, subject only to the limftations imposed by the governmental powers of taxation, eminent domain, police power and escheat, as well as non-detrimental easements, community facility districts and conditions, covenants and restrictions (CC&Rs). AU ofthe comparables represent fee simple estate transactions. Therefore, adjustments for propeify rights are not necessary. Financing Terms ( In analyzing the comparables, it is necessary to adjust for financing terms that differ from market terms. Typically, ifthe buyer retained third party financing (other than the seller) for the puipose of purchasing the property, a cash price is presumed and no adjustment is required. However, in instances where the seller provides financing as a debt instrument, a premium may have been paid by the buyer for below market financing terms or a discount may have been demanded by the buyer ifthe financing terms were above market. The preniium or discounted price must then be adjusted to a cash equivalent basis. All ofthe comparable sales represented cash to the seller transactions and, therefore, do not require adjustments. — Seevers ® Jordan © Ziegenmeyer — 104 Conditions of Sale Adverse conditions of sale can account for a significant discrepancy from the sales price actually paid compared to that ofthe market. This discrepancy in price is generally attributed to the motivations ofthe buyer and the seller. Certain conditions of sale are considered to be non-market and may include the following: • A seller acting under duress, 9 A lack of exposure to the open market, 9 An inter-family or inter-business transaction for the sake of family or business interest, 9 An unusual tax consideration, 9 A premium paid for sfte assemblage, 9 A sale at legal auction, or 9 An eminent domain proceeding. All ofthe comparable transactions were arms-length and do not requhe a condftions of sale adjustment. Expenditures After Sale This category includes all costs required after the ttansaction. None ofthe comparables were reported to have expenditures after sale. Market Conditions Market conditions generally change over time, but the date of value is for a specific point in time. Therefore, in an unstable economy, one that is undergoing changes in the value ofthe dollar, interest rates and economic growth or decline, extia attention needs to be paid to assess changing market conditions. Significant changes in price levels can occur in several areas of a municipality, while prices in other areas remain relatively stable. Although the adjustment for market conditions is often refened to as a time adjustment, time is not the cause ofthe adjustment. In evaluating market conditions, changes between the comparable sales date and the effective date of this appraisal may wanant adjustment; however, if market conditions have not changed, then no adjustment is required. According to brokerage reports by Cassidy Turiey and Colliers International, the office market recoveiy continues in San Mateo County. Not only has the vacancy rate declined significantly over the past 18 months, but overall leasing activity has returned to pre-recession levels. The overall vacancy rate for the office market was 13.9% in Third Quarter 2012, up sHghtly from 13.2% at the end of 2011. The market recorded positive net absorption in the years 2010 and 2011 of about — Seevers ® Jordan ® Ziegenmeyer 105 375,000 and 1.1 million square feet, respectively. Through the first three quarters of 2012, net absorption was negative 240,300 square feet. However, Cassidy Turiey reports that "this is despite the fact that demand is actually on the increase. We are cunentiy tracking just under 2.6 million square feet of user requirements in the marketplace that could translate into deals over the next 24 months. This number has increased by 18%) over the past three months." Most ofthe demand is coming from tech users, including software/internet companies and life science businesses. According to Tenanomics, a division of BT Conimercial, the retail market has shown signs of strength and improvement over the past several quarters. As reported by Terranomics in the San Mateo County Shopping Centers Report Q3-2012, the overall vacancy rate for the retail market was 3.6% in Third Quarter 2012, up from 3.0% in the previous quarter. Retail vacancy remains very tight and demand from retailers has been strong. According to Terranomics, demand is strongest for first- tier shopping centers (typically anchored centers in urban locations with high visibility), which are seeing the highest levels of deal activity. There have been limited, comparable land transactions in the Peninsula in 2011 and 2012; though, this is likely due to the scarcity of supply and the limited amount of properties available on the market. As a resuft, sales activity for vacant parcels in the subject's immediate area is very Hmited. However, within the last 24 months the market has witnessed some ofthe largest land transactions in recent history. While most transactions represent purchases by speculators looking to hold for future development or sell at a later date rather than develop in the near-term, there are transactions occuning with owner/users intending to develop in the near term. As discussed in detail in the Market Overview sections earlier in this report, market activity suggests the commercial market has reached stabilization, with signs of recovery in ceitain segments ofthe market. Based on the discussion above, slight downward adjustments are made to Comparable 6 .. thi-ough 9, aft of which sold between October 2007 and November 2008. Physical Characteristics The physical characteristics of a property can impact the selling price. Those that may impact value are discussed as follows. Location The subject is considered to possess a good location for commercial development. The subject property comprises Phase II ofthe Bay Meadows Redevelopment Area; Phase I was developed with a mix of office, retail and residential development and is located immediately east ofthe subject propd-ty. The largest commercial user in Phase I is the Franlclin Templeton Investments campus, a Seevers ® Jordan • Ziegenmeyer 106 six building office park with entitiements for two addftional office buildings. Just southwest ofthe subject property is the Hillsdale Shopping Center. Separating the subject property from South El Camino Real, a major north/south arterial in San Mateo County, is the Caltiain, a railroad line owned and operated by the Peninsula Corridor Joint Powers Board, which consists of representatives from San Francisco, San Mateo and Santa Clara counties and links Gihoy (Santa Clara County) in the south with San Francisco in the north. The train service is an integral part of linking the employment centers ofthe Peninsula and SUicon Valley with average weekly ridership as of February 2011 (reported annually each year) of 41,442. Most ofthe Comparables are considered to have a good location when compared to the subject property, with proximity to transportation and commercial services; thus, no adjustments are necessary for location. Comparable 2 is located in San Francisco, in the Mission Bay redevelopment area, which is considered slightly superior to the subject property and merfts a slight downward adjustment. Visibilitv/Accessibility The visibility and accessibility of a property can have a direct impact on property value. For example, if a property is landlocked, this is considered to be an inferior position compared to a property with open accessibility. However, if a propeity has good visibility or is in proximity to major liiilcages, this is a superior amenity in comparison to a property with limited visibility. The subject propeity has a good level of visibility/accessibility from major transportation routes in the region, with proximity to Highways 101 and 92, and immediate access to the aforementioned Caltrain. The Comparables are considered to offer similar levels of visibility and accessibUity. No adjustments are applied. Land Area The market generally exhibfts an inverse relationship between parcel area and price per square foot such that larger parcels sell for a lower price per square foot than smaller parcels, all else being equal. For purposes of analysis, in comparison to the subject's office parcels, Comparables 2 and 8 merit upward adjustments for the discrepancy in land area when compared to the subject's generalty smaller parcels. Zoning Similar to the subject property, all ofthe sales have zoning permitting a variety of commercial development (office and retail). No adjustments are applied. -Seevers • Jordan ® Ziegenmeyer 107 Sfte Utility Differences in shape, topography, drainage or soil conditions can affect the utility and, therefore, the market value of undeveloped land. The subject parcels offer generally level topography and average overall sfte utility. All ofthe comparables are considered to have similar site utility, with no adjustments applied for this factor. On-Site Improvements The subject property has no on-site improvements in place. Comparables 3 and 4 sold as existing parking lots with asphalt paving in place, and the developer intends to use the sites as parking lots for an interim use, until construction ofthe properties is feasible; thus, no adjustments are wananted. Conclusion of Value - Commercial Land Component Market participants repoit office land is analyzed on a price per floor area (FAR), as a buyer's ability to constract office square footage is the overwhelming driving force in the market in light ofthe linuted supply of developable land. This is demonstrated by Comparable 2, which contained only 14 acres of land, but was permitted to constract up to two miUion square feet of office space, ultimately driving the price paid for the land. The market data analyzed herein refiects a range in value of $59.44 to $278.21 per square foot of FAR. As -with the Residential Land component analyzed previously, ft's worth noting the highest land sale comparable also included the assumption of bonds, like the subject property, suggesting the market is receptive to the financing mechanism for completing infrastractm-e improvements. The subject property contains five parcels designated for office development, which range in size from 1.43 to 2.77 acres. Based onthe preceding discussion, and considering the specifics ofthe subject property's ofiice land parcels, a conclusion of land value of $140 per square foot of floor area (FAR) is considered reasonable for the subject's office component. The subject property offers four mixed-use land parcels ranging in size from 1.4 acres to 3.76 acres. Though the development agreement allows for these parcels to be constracted with additional office space, the existing entitlements include a mix of retail, office and residential uses contamed with each building. The Comparables refiect an unadjusted range of $59.31 to $455.86 per square foot of land area. Excludmg the outliers, the range nanows to $70.55 to $184.89 per square foot. Based onthe analysis above, a conclusion of land value of $110 per square foot for the larger (2.76 acre) pai-cel and $130 per square foot for the smaller parcels is considered reasonable. Applying these values to the subject's office and mixed use land parcels resufts in the following component aggregate retail values: - Seevers • Jordan ® Ziegenmeyer — 108 Station 1 2.77 101,704 $140 $14,240,000 Station 2 2.58 189,103 $140 $26,470,000 Stations 2.31 173,866 $140 $24,340,000 Station 4 2.39 209,861 $140 $29,380,000 Station 5 Ml 95,000 $140 $13,300,000 Total - Station Land Component 11.48 $107,730,000 Component I'otal Acres TotalSF Value/SF Extensitni(Rd.) MUl 2.76 163,698 $110 $18,010,000 MU2 1.76 76,578 $130 $9,960,000 MU3 1.51 65,819 $130 $8,560,000 MU4 1.05 60,984 $130 $7,930,000 Total - MU Land Component 7.07 $44,460,000 Total Sales Revenue The total sales revenue (aggregate retail value) ofthe subject components held by the ownership of the master developer, derived in the prior section, is restated below and will serve as the revenue component ofthe DCF. Total Acres Value Per SF TotalUnits FAR Value Per FAR Aggregate Component TotalAcres Total SF Value per SF Retail Value (rd) Residential Land/Potential Units -Res 1 108 2.156 $170 $ 15,970,000 Residential Land/Potential Units -Res 2 80 2.999 $170 $ 22,210,000 Residential Land/Potential Units -Res 3.1b 50 1.910 $170 $ 14,140,000 Residential Land/Potential Units -Res 4 71 1.649 $170 $ 12,210,000 Res idential Land/Potential Units -Res 5 76 3.864 $170 $ 28,610,000 Residential Land/Potential Units -Res 6 54 1.089 $170 $ 8,060,000 Residential Land/Potential Units -Res 7 158 2.397 $170 $ 17,750,000 Residential Land/Potential Units -Res 8 74 3.571 $170 $ 26,440,000 Residential Land/Potential Units -Res 9.1 24 3.069 $170 $ 22,730,000 Residential Land/Potential Units -Res 9.2 31 1.619 $170 % 11,990,000 Total - Residential Land Component 726 24.323 $ 180,110,000 Station 1 2.77 101,704 $140 $ 14,240,000 Station 2 2.58 189,103 $140 $ 26,470,000 Station 3 2.31 173,866 $140 $ 24,340,000 Station 4 2.39 209,861 $140 $ 29,380,000 Station 5 1.43 95,000 $140 L 13,300,000 • Sub-Total - Station Land Component 11,48 $ 107,730,000 Mixed-Use 1 2,76 120,138 $110 $ 13,220,000 Mixed-Use 2 1.76 76,491 $130 $ 9,940,000 Mixed-Use 3 1.51 65,819 $130 $ 8,560,000 Mixed-Use 4 1.05 45,564 $130 $_ 5,920,000 Sub-Total - Mbced-Use Land Component 7.07 $ 37,640,000 Total Aggregate Retail -Value/Sales Revenue s 325,480,000 Slpavo j'c • Jnr tl nil • Z ip.pp.nmp.vp.r 109 Absorption Analysis Absorption rates are best measured by looking at historic absorption rates for similar properties in the region. In developing an appropriate absorption period for the disposition ofthe subject's components, we have considered historic absorption rates for similar properties and also attempted to consider the impacts of present market conditions, as well as the anticipated changes in the market. Real estate is cyclical in nature, and it is difficult to accurately forecast specific demand over a projected absorption period. In light ofthis, when estimating absorption, it is important to give significant weight to the past experience of parties marketing similar projects for sale. In attempting to estimate the exposure time that would be required for the disposition ofthe residential land component ofthe subject, both the historical exposure times and projected economic conditions have been considered. For any master planned community it is common to segment the product to allow it to appeal to the broadest spectrum of potential users (housing for rent and sale, with both offering a wide range of price points). While there is a conelation between the sell-off of the end product (rooftops) and the sell-off of the land components, the relationship may not be readily apparent. Generally, the higher priced end products are expected to experience slo-wer absorption rates than the lower priced end products, which are driven by the size ofthe respective buying pools, Thus, you could sell two land use components that will not compete.with each other, due to product and price point, at similar times in the development process without jeopardizing absorption. A master developer's goal, and the goal ofany respective builder, would be to avoid saturating the market with product. By the use of segmenting the range of product and diversifying the type of product (both for-sale and for-rent), a development can maximize the return to the land by hastening the disposition time necessary to sell off the land. A number of assumptions are made in the discounted cash flow analysis, not the least ofwhich is the forecast of absorption, or disposition, ofthe various land use components comprising the subject property. It is common for surveys of market participants to reveal different estimations of anticipated absorption periods for the sell-off of multiple components comprising a master planned development, with some developers prefening to hasten the holding period in favor of mitigating exposures to fluctuations in market conditions; whereas, other developers prefer to manage the sell-off of the property over an extended period oftime so as to minimize direct competition of product within the master plaimed project. Suiveys suggest a forecasted disposition period for the subject property may be as aggressive as two years or as long as five years In light ofthe fact the subject's land component, with the exception of Residential Unit 9.1, which is intended for detached residential homes, comprises condominium style and townhouse style product line that allows for both for-rent and for-sale product, the absoiption (lease-up) or sell off to end users will likely necessitate completion of construction ofthe veitical improvements. This, in and of Seevers • Jordan ® Ziegenmeyer 110 hself, will likely govern competition within the development. The developer released the first two Residential Blocks (3.1 and 3.2) for sale and, according to the developer's representative, received ten offers to purchase the land. It is anticipated a controlled disposition ofthe residential land could occur over a 30-month period, with the parcels proximate to the initial phase ofthe development with offsite improvements in place transferring in the first period (six months). In estimating the absorption time for the office component (Station parcels), consideration is given to current and forecasted market conditions. As discussed earlier in this report, the office market in the Bay Area continues to recover, with declines in vacancy rates over the past year. Brokers are reporting very strong demand from technology companies, with Class A office product among the lowest in terms of vacancy rates and the highest in terms of rental rates, all ofwhich should bode well for the subject propeity. With prominent office land transactions in the Peninsula occurring in 2010, if adequately exposed to the market, the subject property's five office parcels could appeal to a single, corporate user - similar to the Franklin Templeton campus in Phase I ofthe Bay Meadows redevelopment. Nevertheless, should the office parcels be marketed for sale to developers or end users, ft is projected the parcels would transfer over the projected absorption period of (24 months). In light ofthe demand for the residential component and the anticipated demand for the office parcels, the four mixed use parcels will be developed with a mix of ground floor retail, mid-level office and 234 additional residential unfts. The mixed-use parcels will provide for the greatest concentiation in retail use within the Bay Meadows Phase II project. As with the office market, the retail market, too, has shown signs of strength and improvement over the past several quarters, with vacancy rates below 5%. Based on the fact the retail space is situated on the ground floor of above ground office and residential uses, development will likely be driven by the completion ofthe other residential and office uses; thus, the mixed use parcels are estimated to sell off over the absorption period beginning in Period 1. If s worth noting the taxable portion of Block MU 1 (mixed-use) is under contract for acquisition by a school (The Nueva School). The master developer ofthe subject property has projected a disposition period ofthe various land use components based on market conditions and subject to market demand and financing. Cunentiy, the anticipated schedule is for a four year holding period in order to manage the development within the project. Based on the suiveys ofother developers of master planned communities, this forecast is considered within market parameters. Based on an analysis of market conditions and market surveys reported herein, a probable sell-off of the subject property over a 30-month period is also within market parameters and reasonable in light ofthe unique and favorable market position the subject propeify holds. In light ofthe condition ofthe subject propeity, as well as the interest in the first release of developable Blocks within the District, a disposition (absorption) period of thi-ee years, or 36 months, is considered reasonable. -Seevers • Jordan • Ziegenmeyer 111 Market conditions in the area have been stabilizing and are experiencing recovery in some segments as discussed throughout this report. However, in light of global, national and regional macroeconomic conditions, and the uncertainty of market conditions over the disposition periods, which is forecasted to be 36 months (six periods), no appreciation/depreciation rate will be applied to the revenue components in either analysis. Expenses General and Administrative The general and administrative expense category covers the various administrative costs associated with managing the overall development. This would include management, legal and accounting fees and other professional services common to a development project. For purposes ofthis analysis, we have estimated this expense at 3% ofthe total gross sale proceeds. This expense is spread evenly over the entire sellout period. Marketing and Sales The costs associated with marketing, commissions and closing costs relative to the disposition ofthe subject's components are estimated at 5% ofthe total gross sale proceeds. Although this rate is somewhat negotiable, it is consistent with cunent industry trends. Ad Valorem Taxes This appraisal is predicated on, and assumes, a sale of the appraised property. Interim ad valorem real estate taxes are based on a tax rate of 1.1042%. This rate is applied to the estimated market value (pro-rate share ofthe residential component) and divided by the total number of unfts for the residential component to yield an estimate of ad valorem taxes/lot/year. This rate is applied to the estimated market value (pro-rata share ofthe commercial component) and divided by the total number of acres for the commercial component to yield an estimate of ad valorem taxes/acre/year. The taxes for each component will be shown as separate line items. The total tax expense is gradually reduced over the absoiption period, as the land components are sold off Property taxes are increased by 2%o per year. Special Assessments (Bonds) The subject property is situated within the boundaries of a Community FaciHties District identified as CFD No. 2008-1 (Bay Meadows), with the foUowing proposed special tax obHgations. These figures were provided by the Amended and Restated Rate and Method of Apportionment, which was approved on November 21, 2011. On each July 1, commencing on Juty 1, 2012, the maximum special tax identified in the table on the following page will be increased by 2% of the amount in Seevers ® Jordan 9 Ziegenmeyer -, 112 effect for the previous fiscal year. Interest on the first series of Bonds through September 1, 2013 was funded from Bond proceeds ofthe first issuance and the owners of undeveloped property are not expected to have to pay a spedal tax on the first series of Bonds untU December 10, 2013, which coincides with Period 2 ofthe cash flow model. SimUarly, interest on the second series of Bonds through September 1,2014 is being ftmded from Bond proceeds ofthe second issuance and the owners of undeveloped property are not expeded to have to pay a special tax on the second series of Bonds untU December 10, 2014, which coinddes with Period 4 ofthe cash flow modd. As parcds are sold off by the master developer, the Special Tax obligation will be assumed by the buyer and, ultimatety, each end user, whether ft is residential unfts or commercial tenants. The purpose ofthis anatysis is to estimate the market value ofthe undertying land, which serves as the collateral to the Bond issuance. As components ofthe subject property are sold off in this anatysis, the balance ofthe Special Tax obligations necessary to service the debt assodated with the City of San Mateo CFD No. 2008-1 (Bay Meadows) Bond issuance are presumed to be collected from the new owners (buyers ofthe various land parcels) in the Distiict. As detailed in the Property Identification and Legal Data section presented earlier in this report. Special Taxes for the subject property's undeveloped parcels, which is the condftion of the propeity as ofthe date of value, is based on the Back-Up Spedal Tax rate reported in the Rate and Method of Apportionment. The maximum annual Back-Up Special Tax is $124,695 per acre; however, this amount is calculated based on the total aniount of Bond proceeds authorized ($84 million). According to the special tax consuhant, David Taussig and Associates, Inc., the CFD is forecasted to le-vy special taxes based on the following schedule: 'v^\^i\' '^^^^^^^^^^^^^^m Forecasted Special Tax Requii-ement $1,855,294 $3,173,887 $3,384,312 Taxable Acres 49.978 49.978 49.978 Special Tax Levy per Acre $37,122 $63,506 $67,716 The allocation ofthe total levy allocated to the land held by the master developer will be done on a per taxable acre basis, based on 49.978 net acres. As parcels are sold off, the tax obHgation is ttansferred from the master developer to the buyer, which will be refleded in the cash flow analysis. Remaining Infrastructure Development Costs According to the Developer, the property owner has spent $93,203,361 on the proposed development to date, including cost for the Site Plan and Archftectural Review (SPAR) process. Total remaining ^ Seevers 9 Jordan ® Ziegenmeyei 1 ^ ^ infrastructure costs for Bay Meadows Phase II is reportedly $11.7 million, which is forecasted to be incurred over the holding period. The second bond issuance associated with the Cify of San Mateo CFD No. 2008-1 (Bay Meadows) is scheduled to reimburse the developer for additional infrastructure improvements that have been completed. The developer estimates it will spend an additional $42.9 million to complete its development plan, including $11.7 million of public infrastructure costs. The market value conclusion considers only the improvements in place as ofthe date of value, and the remaining costs to complete the public infrastructm-e for Bay Meadows Phase II is deducted in the discounted cash flow. These costs are spread evenly during the first two periods ofthe cash flow. Discount Rate The project yield rate is the rate of return on the total un-leveraged investment in a development, including both equity and debt. The leveraged yield rate is the rate of return to the "base" equity position when a portion ofthe development is financed. The "base" equity position represents the total equify contribution. The developer/builder may have funded all ofthe equity contribution, or a consortium of investors/builders as in a joint venture may fund it. Most surveys indicate that the tlneshold project yield requirement is about 20%o to 30%) for production home fype projects. Instances in which project yields may be less than 20% often involve profit participation arrangements in master planned communities where the master developer limits the number of competing tracts. According to a leading publication within the appraisal industiy, the Korpacz Real Estate Investor Survey^\ discount rates for land development projects ranged from 15.00%o to 30.00%o, with an average of 20.42% during the Second Quarter 2012. This rate is down 58 basis points from the Second Quarter of 2011, but up 17 basis points from the Fourth Quarter 2011 (land survey completed every six months). These rates are free-and-clear of financing, are inclusive of developer's profit, and assume entitlements are in place. Without entitlements in place, the Korpacz survey indicates certain investors increase the discount rate between 300 and 1,500 basis points (an average increase of 833 basis points). According to the data presented in the survey prepared by Korpacz, the majority of those respondents who use the discounted cash flow (DCF) method do so free and clear of financing. Additionally, the paiticipants reflect a preference in including the developer's profit in the discount rate, versus a separate line item for this factor. As such, the range of rates presented above is inclusive ofthe developer's profit projection. The discount rates are based on a survey that includes residential, office, retail and industrial developments. Paiticipants in the survey indicate the highest expected returns are on large-scale, " Korpacz Real Estate Investor Survey. PricewaterhouseCoopers, 2"'' Quarter 2012, Volume 24, Number 2. Seevers • Jordan • Ziegenmeyer —— 114 unapproved developments. The low end ofthe range was extracted from projects where certain development risks had been lessened or eliminated. Several respondents indicate they expect slightly lower returns when approvals/entitlements are already in place. Excerpts from recent Korpacz surveys are copied below. 9 The consti-uction pipeline has started to slowly flow again for both residential and nonresidential projects as the U.S. economy continues its unhurried recovery... In the residential sector, year-over-year construction spending rose 7.5%) with new multifamily private construction spending surging 31.4%. Just a year ago, spending in this category was down 7.6%. As demand for multifamily housing has accelerated, many development land investors are racing to meet pent-up demand. While some are working off of existing inventory, others are searching for land opportunities in what 100.0% of surveyed investors view as a "buyers' market..." On the commercial side, development land opportunities remain challenged since excess supply exists in most sectors, such as office and retail. However, land investors continue to have "long-term optimism," focusing onthe continued recovery ofthe conimercial real estate industry. "The best strategies and opportunhies continue to be in acquiring existing projects, so we'fl be on the sidelines for a while," shares a development land investor. Also limiting acquisitions for development land investors is an inability to secure financing... Over the next 12 months, all investor participants except one expect development land values to increase. (Second Quarter 2012) • While some investors in the national development land market believe that investment activity has picked up greatly compared to a year ago, it seems to be occurring at the expense of those with shallow pockets... Overall, this sector of the industry remains a "tough market," especially for "middle players" who have less access to capftal. One interviewee stated "There are plenfy of opportunities to buy lots, but cash is the key element for such deals." (Fouith Quaiter 2011) 9 Although such harsh market conditions can usually create buying opportunhies for development land investors who wish to add raw land to their inventories, a choppy recovery is deterring such purchases. (Second Quarter 2011) Information for a developing in-house database of project yield rates is presented in the table on the following page. - Seevers • Jordan ® Ziegenmeyer 115 Meld/IRR lOxiJCCtations r->^^^^^^-^^ *^^ (Iiicliisivc of Profit) ^^^M PwC Real Estate Investor Survey - Range of 15.0% to 30.0%, with an average of 20,42%, inclusive of profit and Second Quarter 2012 (updated evety other quarter) assuming entitlements in place, for land development (national average) Realty Rates .com - Fourth Quarter 2011 Range of 17,67% to 38.48%, with an average of 26.95%, for subdivisions and PUDs in the California/Pacific region Chris Downey - Hon Development MinimumlRRof 20-25%; for an 8 to 10 year cash flow, mid to upper 20% range Gary Gorian - Dale Poe Development 25% IRR for land development is typical (no entitlements); slightly higher for properties with significant infrastmcture costs David Pitts - Newhall Land and Fanning 20% to 30% IRR for land development deals on an unleveraged bas is MarkPalkowitsh - MSP Califomia, LLC 35% for large land deals iiom raw unentitled to tentative map stage, unleveraged or leveraged. 25% to 30% irom tentative map to pad sales to merchant builders, unleveraged RickNieman-GFC 18% to 22% for land with some entitlements, unleveraged. 30% for raw unentitled Lin Stinson - Providence Realty Group Low 20% range yield rate required to attract capital to longer-term land holdings Dan Boyd - ESELand Company Merchant builder yield requirements in the 20% range for traditionally fmanced tract developments. Larger land holdings would require 25% to 30%. Environmentally challenged or pohtically risky development could well mn in excess of 35%. Tulare Windmill Ventures, LLC 10% discount rate excluding profit for single-family subdivisions David Jacobsen - Ridgecrest Homes 10% to 40%> for single-family residential subdivisions with 1-2year development • timelines Mike Grant - Premier Homes 15% to 20% IRR Anonymous source -Lennar As low as the low 20% range in the absence of price trending Lyle McCullogh - Califomia Pacific Homes No less than 20% IRRfor land development, either entitled orunentitled Roy Robertson -Ekotec 20% to 30% for an unentitled property; the lower end ofthe range would reflect those properties close to tentative maps Gordon MacKenzie - Brookfield Development No less than 30% when typical entitlement risk exists It is noted that the preceding survey related to production home developments at the land stage, and reflect the expectations of market participants in the residential sector. Positive attributes ofthe subject propeity include; 9 Well balanced communify with proximity to supporting commercial and communify uses • High median-income market area 9 Approved entitlements 9 Initial signs of price increases and strengthening absorption 9 Limited new home project competition in the area As reflected by the developer survey, developers typically have IRR expectations of 10%) to 30% for residential projects under stabilized market conditions. The subject is fully entitled and has received significant interest from the builder communify for the developable residential parcels within the project, with two Blocks recently acquired by merchant builders. Given the subject property is on track for development in the near term, coupled with the existing entitlements and SPAR approval for vertical construction, as well as its prime location in San Mateo, an IRR of 15% is considered reasonable for the subject under cunent market conditions given the duration ofthe absorption period (36 months). This discount rate, inclusive of developer's incentive (profit), reflects the subject's characterization as one ofthe preeminent infill developments in California. •Seevers • Jordan ® Ziegenmeyer • 116 Conclusion The table on the following page incorporates the preceding factors in estimating the market value (in bulk) ofthe subject property. The discounted cash flow analysis is calculated on a semiannual basis, with the components selling out over a 36-month period. The properfy tax calculation and discount rate have been adjusted to a semiarmual basis as well. -Seevers • Jordan • Ziegenmeyer 117 Total Aeies Value PerSF TotalUnits FAR Value Per FAR Aggregate Component TotalAcres TotalSF Value per SF RetailValue(ri)j Rcsidentnl Land/Potential Units -Res 1 108 Z156 $170 $ 15,970,000 KcsidentJal Land/Potential Units - Res 2 80 Z999 S170 $ 22,210,000 Residential Land/Potential Units -Res 3.1b 50 1.910 $170 $ 14,140,000 Residential Land/Potential Units - Res 4 71 L649 $170 12,210,000 HOLDING COSTS AND GENERAL ECTENSES $ General and Administiative (% sales) 3.0% Residential Land/Potential Units - Res i 76 3.864 $170 - $• 28,610,000 Residential Land/Potential Units -Res 6 54 1.089 $170 $ 8,060,000 Marketing and Sales 5.0% Residential Land/Potential Units - Res 7 158 2397 $170 $ 17,750,000 Annual increase in Propeity Tax iO% Residential Land/Potential Units -Res 8 74 3.571 $170 $ 26,440.000 First year annual tajES per Residential Unit: $1,967 Residential Land/Potential Units - Res 9.1 • 24 3.069 $170 $ 22,730^000 First yeaTannua]ta:ffiS per Non-Residential Acte: $62,138 Residential Land/Potential Units -Res 9a 31 1 619 $170 $ 11.990,000 Aimual Backup Special Taics per Non-Residential Acre (2013/2014) $37,122 Total-Residential Land Component 726 24.323 $ 180.110.000 Annual Backup SpecialTax^ per Non-Residential Acre (2014/2015) $63,506 Station 1 2.77 101,704 $140 $ 14;j40,000 Annual Backup SpecialTascs per Non-Residential Acre (2015/2016) $67,716 Station 2 Z58 189,103 $140 $ 26,470,000 Annual Backup Special Ta.'oss per Residential Unit (2013/2014) $U4* Station 3 231 173,866 $140 $ 24,340.000 Annual Backup Speeial Taxes per Residential Unit (2014/2015) $2,128 Station 4 239 209,861 $140 - $ 29,380,000 Annual Backup SpecialTaxis per Residential Unit (2015/2016) $2^69 Station 5 95,000 $140 $ 13300,000 Sub-Total - Station land Component 11.48 $ 107.730,000 KEMAIMNG OEFSrTE COSTS Ivfocd-Usc 1 2.76 120,138 $110 $ D.220.000 Mixed-Use 2 1,76 76,491 $130 S 9,940,000 Mi:ffid-Use3 Ul 65,819 $130 $ 8,560,000 1,05 45,564 $130 $ 5,920.000 Sub-Total - Mixed-Use Land Component -7.07 37,640,000 DISCOUNT RATE (IRR) $ 15% Total Assreeate Retail Value/Sales Rewnue $ 325,480,000 Income and Kx])eiLSC Analysis: Period (One Period = 6 Months) Total Sales (Residential Units):_ 726 Inventory (Residential Units): Sales (Station Acies):_ a Inventoty (Station Acres);^ Sales (Mised-Use Acres):__ laventoty (MisEd-Use Acres):__ 9.940,000 Total Sales Revenue s 78,180.000 $ 110.140,000 49J40.000 25,510.000 52470.000' $ $ $ $ 325.480,000 Total Rewnue $ 78,180,000 $ 110,140,000 $ 49.240,000 $ 25.510.000 $ 52,470,000 $ 9.940.000 $ (9.764.400) G;neialand Administrative $ (1,627,400) $ (1,627,400) $ (1,627,400) $ (1.627,400) $ (1,627,400) $ (1.627,400) $ (16,274,000) Maiketing and Sales $ (3,909,000) $ (5,507,000) $ (2,462,000) $ (1,275,500) S (2,623,500) $ (497,000) $ Real Estate TajES (Residential) $ (713,986) $ (511.395) $ (359,117) $ (284,886) $ ei7,938) $ $ (2,087,322) Real Estate TaffiS (Non-Residential) $ (576,271) $ (490,582) $ (236.602) $ (101,029) $ (56,762) $ (56.762) (1.518.007) $ (1.074,695) Speeial Taxes (Residential) $ - $ (323,359) $ (222,620) $ (302,123) $ (226,592) $ $ Special Txxes (Mon-Residcntial) $ - $ (293,078) $ (138,576) $ (10U29) $ (55,758) $ (59,455) $ (648,096) Remaining Of&ilclofiastructuie $ (5,850.000) $ (5,850,000) $ $ $ $ $ (11,700,000) Remaining Of&ite Fees $ - $ $ __ $_ i_ $ $ - Total E:9enscs $ (12,676,657) $ (14,602.814) $ (5.046.316) $ (3.692,167) $ (4.807,950) $ (2,240,616) $ (43.066,520) $ 282.413,480 NETINCOME $ 65,503,343 $ 95,537.186 $ 44,193,684 $ 21.817.833 $ 47.662,050 $ 7,699.384 Present Value Factor 053023 0.86533 0.80496 0.74880 0.69656 0.64796 Discounted Cash How $ 60,933,343 $ 82,671,442 $ 35,574.173 $ 16,337,205 $ 33,199,412 $ . 4.988,904 Net Present Value $ 233.704,480 CONCLUSION 0|-V.VI.IE BYDISCOINTKD C.VSII I'LOW.VN.VIA5IS (RD) S 233,700,000 •Special ta^Es are not induded as an cr^ense for Period l,as interest is capitalized -until September 2013 SUMMARY AND CONCLUSION The purpose ofthis appraisal has been to estimate the market value (fee simple estate) ofthe properfy comprising the taxable land areas situated within the boundaries of City of San Mateo CFD No. 2008-1 (Bay Meadows), located at the southern terminus of South Delaware Street, north of Hillsdale Boulevard and west of Saratoga Drive, within the city of San Mateo, San Mateo County, California. The CFD No. 2008-1 (Bay Meadows) Bond issuance is scheduled to reimburse the developer for construction of ceitain portions ofthe public improvements required for the development of 49.978± developable acres proposed for the development of five mid-rise office buildings (Station Component); four mid-rise, mixed-use residential/retail/office buildings (Mixed- Use Component); nine parcels designated for attached, for-rent and for-sale residential buildings and one parcel designated for a combination of attached and detached residential homes (Residential Component). The remaining 33.40 acres of Bay Meadows II are dedicated to parks, right away and one acre dedicated to the City for approximately 50 - 68 below-market rate (BMR) residential unfts on Mixed Use Block 1, which will be exempt from the Lien ofthe Special Tax securing the Bonds. The effective date of value is November 15,2012. As a result of our analysis, ft is our opinion the market values, by ownership, ofthe appraised property, subject to the Lien ofthe Special Tax securing the City of San Mateo CFD No. 2008-1 (Bay Meadows) Bonds, in accordance with the definitions, certifications, assumptions, hypothetical conditions and significant factors set forth on pages 10 through 12, is ... mLfimiy.jMiiif, ,cai:»uiiii: ^ii^iifM ym\^,, RES 1,2, 3.1b, 4, 5, 6,7, Bay Meado-ws Main Track Investors, LLC 8,9; MU 1, 2, 3, 4; STA 42.87 $233,700,000 1,2, 3, 4 and 5 Shea Homes of Northem Califoniia RES 3.1a 1.82 $13,480,000 TRI Pointe Homes, LLC RES 3.2 3.04 $22,510,000 Cumulative (Aggregate) Value ofthe District $269,690,000 The value estimates assume a transfer that reflects a cash transaction or terms considered to be equivalent to cash. The estimates are also premised on an assumed sale after reasonable exposure in a competitive market under all conditions requisfte to a fair sale, with buyer and seller each acting pradently, knowledgeably, for their own self interest and assuming neither is under duress. -Seevers • Jordan « Ziegenmeyer 119 ADDENDA COMMUNITY FACILITIES DISTRICT REPORT COMMUNITY FACILITIES DISTIRICT No. 2008-1 (BAY MEADOWS) CITY OF SAN MATEO COUNTY OF SAN MATEO STATE OF CALIFORNIA July 22, 2008 COMMUNITY FACILITIES DISTRICT REPORT MELLO-ROOS COMMUNITY FACILITIES ACT OF 1982 COMMUNITY FACILITIES DISTRICT NO, 2008-1 (BAYMEADOWS) CITY OF SAN MATEO, COUNTY OF SAN MATEO, STATE OF CALIFORNIA Prepared by Prepared for DAVD) TAUSSIG & ASSOCIATES, INC. CITY OF SAN MATEO 2950 Buskhk Ave, Suite 185 330 West 20th Avenue Wahiut Creek, CA 94597 San Mateo, CA 94403 (925) 938-2950 TABLE OF CONTENTS Section _^ ™__ Page L INTRODUCTION 3 H. PROJECT DESCRIPTION ] .4 HI. DESCRIPTION AND ESTIMATED COST OF PROPOSED FACILITIES AND SERVICES 5 A. Description ofProposed Services ,.,..5 B. Esthnated Cost ofProposed Public Services 6 TV. BONDED INDEBTEDNESS AND INCIDENTAL EXPENSES ....1!!!!Z!Z7 A. Projected Bond Sales , 7 B. Incidental Bond Issuance Expenses to be Included in the Proposed Bonded Indebtedness 7 B. Incidental Expenses to be Included in the Annual Levy of Special Taxes 7 V. RATE AND METHOD OF APPORTIONMENT OF THE SPECIAL TAX 8 VI. BOUNDARIES OF COMMUNITY FACILITIES DISTRICT...,. 9 VIL GENERAL TERMS AKD CONDITIONS 10 A. Substitution of Facilities and Services 10 B. Appeals XQ C. Prepaymentof SpecialTax , 10 EXHIBITS Exhibit A Rate and Method of Apportionment ExhibitB Assigned Special Tax for Developed Property Exhibit C Maximum Special Tax for Undeveloped Property, Taxable Properfy Owner Association Properfy, and Taxable Public Properfy Exhibit D Proposed Boxmdaiy Map I. INTRODUCTION ^.^....^-.--.-^---..-^^ The City CouncU ofthe Cify ofSanMateo (tiie "Cify"), adopted its ResolutionNo. 59 (2008) (the 5 sdSionTfUntion'') on June 16, 2008 m which ft declared its mtention o estabhsh a communify fadUties distiid to be designated and known as "Community f aeUitie D^^? ^a 2008^1 (Bay Meadows), City of San Mateo, Comify of San Mateo State of California (^e "Smm^fy Facilities District"), for the purpose of levying a specia tax ^^^^^^^^lif^^ acquisition and constiuction of certain public capital facilities and ^ert^^^^^P^^^development fee anUeprovisionofcertainpubUcservicespursuanttotiie'Mello-RoosC^omm^^^^^^ of 1982," being Chapter 2.5, Part 1, Division 2, Title 5 (begmmng with Section 53311) of tiie Govemment Code ofthe State of Cahfomia. The Resolution of Intention, in its Section 20, dhected: Section 20. The Dkector of Public Works is hereby dhected to study the Community FacilitiesDistiictand,atorbefoietiietimeoftiiepnblichearing,tocausetobepr^^^ filed witii the Cify Coundl a report contamhig a brief descnption oftiie facihties by typetha t m his opmion wift be requhed to adequatefy meet tire needs of tiie new development expected to occur withm the Communify Facilities District, together with estimates ofthe cost of fmancing the Fees and the acquisition and constiuction of the Facihties and an estimate ofthe inddental expenses related thereto. Upon its presentation, the report wiU be submitted to the City Comidl for review, wift be available for mspection by the public, and ^l^e made a part of the record ofthe public heming. The Dhector of Pubhc Works may retain consultants to prepare the report. David Taussig and Associates, Mc, having been retained by the Dhector ofPublic Works for that purpose, now submits the Report. July 22, 2008 City of San Mateo CFD No, 2008-1 -^ ^^^^ ^ (Bay Meadows) ' • ______• 11. PROJECT DESCRIPTION CFD No. 2008-1 consists of three zones, encompassing approximately 83.4 gross acres of land inthe Cify ofSanMateo. Of this acreage, approximately 35.3 acres in Zone 1 are expected to be developed into uses subject to a Mello-Roos special tax levy. In Zone 2, approxhnately 1.5 acres are expected to be developed into uses subjectto a Mello-Roos special tax levy and in Zone 3, approximately 10.9 acres are expected to be developed into uses subj ect to a Mello-Roos special tax levy. At buildout, it is currently expected that the three zones will contain approximately 1,121 residential dwelling units, 679,779 building square feet of office properfy and 94,349 building square feet of retail property. City of San Maieo CFD No. 2008.-1 July 22,2008 (Bay Meadows) Page 4 in. DESCRIPTION AND ESTIMATED COST OF PROPOSED FACILITIES AND SERVICES A community facilities distiict may provide for the purchase, constmction, expansion or rehabihtation of any real or tangible property, includmg public facihties and infrastiuctinre improvements, -with an estimated usefiil life of five (5) years or longer, which is necessary to meet mcreased demands placed upon local agencies as a resuft of development or rehabilitation occurring within the community facilities district. In addhion, a commurnty facilities district may pay in fidl aU amoimts necessary to eUminate any fixed special assessment hens or to pay, repay, or defease any obHgation to pay for any indebtedness secured by any tax, fee, charge, or assessment levied within the area ofthe community facilities distiict. A community facihties distiict may also provide for financmg of certain pub Uc services to meet these demands. A. Description ofProposed Facilities and Services Facilifies The types of facilities proposed to be financedb y CFD No. 2008-1 are stieet improvements, includmg grading, paving, cwbs and gutters, sidewalks, stieet signalization and signage, stieet Hghts and parkway and landscaping related thereto, sewers, storm drains, monuments, utihties, public parks and recreation facilities, detention ponds, mitigations, development hnpact fees, San Mateo Foster City School Distiict fees, San Mateo Union High School District fees, soft costs, rights-of-way and easements necessary for any of such facilities. Services The types of services proposed to be fmanced by CFD No. 2008-1 are maintenance and lighting of parks, parkways, stieets, roads, and open space, maintenance, repair and replacement of flood and storm protection services including, but not limited to, the operation and mamtenance of storm drainage systems, and services with respect to removal or remedial action for the cleanup of any haziardous substance released .or threatened to be released into the environment within or from withm CFD No, 2008-1. The preceding facilities and services are all facilities and services which the legislative body creatmg CFD No. 2008-1 is authorized to o-vvn, constiuct, operate, provide or fmance, and which are required to adequately meet the needs of development expected to occur within CFD No. 2008-1. The Special Taxes^ required to pay for tiie construction, acquisition, or financmg of said facilities, or for the provision of services, will be apportioned as described in the Rate and Method of Apportionment for CFD No. 2008-1. ^Please note that all capitalized terms used herein, unless otherwise indicated, shall have the meanings defined in the Rate and Method of Apportionment. City of San Mateo CFD No. 2008-1 July 22,2008 (Bay Meadows) ^ ^^g^^ B. Estimated Cost ofProposed FacUities and Services CFD No. 2008-1 is expected to issue three (3) Bond series to finance the purchase, constmction, expansion, improvement, or rehabilitation of the proposed facUities. The total amount of constraction proceeds to be generated from the first series of Bonds is projected to be approximately $32.9 million, the total amountof constraction proceeds from the second series is projected to be $32,0 million, and the total amount of constinction proceeds fiom the thhd series is projected to equal $20.6 miUion. These amounts are estimates and subject to change, depending on the uiterest rates ofthe Bonds, the costs ofissuance ofthe Bonds, and other factors to be determined at the tune the Bonds are issued. City of San Maleo CFD No. 2008-1 July 22, 2008 (Bay Meadows) ; • Page 6 IV. BONDED INDEBTEDNESS AND INCIDENTAL EXPENSES A. Proiected Bond Sales The maximum authorized bonded mdebtedness for CFD No. 2008-1 is $120,000,000. It is anticipated that CFD No. 2008-1 wiU seU three bond issues with terms of 30 years m March of 2009, April of 2010 and Febraary of 201L B. Incidental Bond Issuance Expenses to be Included in theJProBOsed Bonded Indebtedness Pursuant to Sedion 53345.3 oftiie Act, bonded mdebtedness may include aU costs and estimated costs incidental to, or connected witii, tiie accompHshment oftiie purpose for which tiie proposed debt is to be incurred, including, but not limited to, the estimated costs of constiuction or acquisition o.f buildings, or botii; acquisition of land, rights-of-way,water , sewer or otiier capacify or connection fees; satisfaction of contractual obligations relatmg to expenses or the advancement of fimds for expenses existing at tiie time the bonds are issued archftectural, engineering, inspection, legal, fiscal, and financial consultant fees; bond and other reserve fimds; discount fees; interest on any bonds ofthe distiict estimated to be due and payable withhi two years of issuance oftiie bonds; election costs; and aU costs of issuance ofthe bonds, mcludmg, but not limited to, fees for bond counsel, costs of obtammg credit ratings, bond msurance premiums, fees for letters of credft, and other credit eohancement costs, and printhig costs. For the bonds proposed to be issued by CFD No. 2008-1, the reserve fimd is estimated at approximatety 10.00 percent oftiie pnncipal amomit of the bonds, and capitalized interest is estimated at approximatety 8.50 percent of the principal amount of die bonds, fiicidental bond issuance expenses of 5.00 percent are estimated for the bonds. C, Incidental Expenses to be Included in the Annnal Levy of Special Taxes Pursuant to Section 53340 ofthe Act, tiie proceeds ofany special tax may onty be used to pay, in whole or part, the cost ofproviding public fadlities, services and mcidental expenses As defined by the Act, mcidental expenses include, but are not limited to, the cost of planning and designing public facUities to be financed,includui g the cost of envhonmental evaluations of tiiosefacilities ; the costs associated with tiie creation ofthe distrid, issuance of bonds, detennhiation of the amount of taxes, coflection of taxes, payment of taxes, or costs otherwise uicuned m order to carry out tiie authorized purposes of the district; any otiier expenses incidental to the constradion, completion, and inspection oftiie authonzed work; and the costs associated with tiie rethement of existing bonded indebtedness. WhUe the actual cost of admmistering CFD No. 2008-1 may vary, it is anticipated that the amount of special taxes which can be collected will be sufficient to fimd at least $40,000 in annual adininisftative expenses; City of San Mateo CFD No. 2008-1 -^"'y ^^' ^^^^ (Bay Meadows) . - -~~ ±M£-L V. RATE AND METHOB OF APPORTIONMENT AU oftiie property located witiun CFD No. 2008-1, unless exempted by law or by tiie Rate and Metiiod of Apportionment, shall be taxed for tiie purpose of providmg necessary faciUties and services to serve CFD No. 2008-1. Pursuant to Section 53325.3 oftiie Act, the tax imposed "is a special tax and not a special assessment, and there is no requhement that the tax be apportioned on the basis of benefit to any properfy." The special tax may be based on any "reasonable basis as determined by tiie legislative body," although tiie special tax may not be apportioned on an ad valorem basis pursuant to Article XTTTA ofthe Cahfomia Constitution. As sho-wn m Exhibft A, the adopted Rate and Method of Apportionment provides information sufficient to aftow each property owner withhi CFD No. 2008-1 to estimate the maxhnum annual Special Tax he or she will be required to pay. Sections A tinough D below, provide additional infonnation on tiieRat e and Method of Apportionment for CFD No. 2008-1. In order to establish tiie Special Taxes for CFD No, 2008-1 as set forth in tiie Rate and Metiiod of Apportionment, David Taussig and Associates, Inc. has relied on information hicluding, but not limited to absorption, land-use types, building square footage, and net taxable acreage which were provided to David Taussig and Associates, Inc, by otfaers. David Taussig and Associates, Inc has not independently verified such data and disclaims responsibihty for the impact of inaccurate data provided by others, if any, on tiie Rate and Method of Apportionment for CFD No. 2008-1, including the inabiUfy to meet die financial obligations of CFD No. 2008-1. City ofSanMateo CFD No, 2008-1 Jufy 22,2008 (Bay Meadows) ^ PageS VI. BOUNDARIES OF COMMUNITY FACILITIES DISTRICT The boundaries of CFD No. 2008-1 include aft land on which tiie Spedal Taxes may be levied. A reduced scale map showing tiie boundaries of CFD No. 2008-1 is provided as Exhibft D. A fiiU scale map is on file witii tiie Cify Clerk oftiie Cify of San Mateo and was recorded witii the Counfy Recorder ofthe County ofSanMateo m Book 17 of Maps of Assessment and Community FacUities Distiicts at pages 89 and 90 and as mstiument number 2008-900140, City of San Mateo CFD No. 2008-1 ^"'y ^^> ^^'^J (B A. Facilities and Services The descriptions ofthe facilities and services, as set forth in the Resolution of Intention are general in their nature. The City of San Mateo wiU, within their final description in the Resolution of Formation (should that be adopted by the City Council), determine the flnal nature and location ofthe authorized facilities and services. B. A.ppeals Pursuant to the Rate and Method of Apportionment, any landowner or resident who feels tiiat the amountof the Special Tax levied on such lando-wner's orresident's Assessor's Parcel is in enor may submit a written appeal to CFD No. 2008-1. As appropriate, a representative of the City of San Mateo shall review the appeal and ifthe representative of the Cify of San Mateo concurs, tiie amoimt ofthe Special Tax levied shall be appropriately modified. The City Coimcil may interpret the Rate and Method of Apportiomnent for CFD No. 2008-1 for puiposes of clarifying any ambiguity and make detemiinations relative to the amount of Administiative Expenses and any landowner or resident appeals. Any decision of the City CouncU shall be final and bindmg as to all persons. C. Prepayment of Spedal Tax The Special Tax apphcable to an Assessor's Parcel in CFD No. 2008-1 may be prepaid according to the prepayment provisions in Section H of the Rate and Method of Apportionment. K:\CLIENTS2\SanMateo\CFD Report\CKD Report 7-18-08.doc Cify of San Mateo CFD No. 2008-1 Jufy 22, 2008 (Bay Meadows) Page 10 EXHIBIT A CITY OF SAN MATEO COMMUMTY FACILITIES DISTRICT NO. 2008-1 (BAYMEADOWS) RATE AND METHOD OF APPORTIONMENT RATE AND METHOD OF APPORTIONMENT FOR COMMUNITY FACILITIES DISTRICT NO. 2008-1 (BAY MEADOWS) CITY OF SAN MATEO COUNTY OF SAN MATEO, STATE OF CALIFORNIA A Special Tax shall be levied on all Assessor's Parcels of Taxable Property in City of San Mateo Community Facilities District No. 2008-1 (Bay Meadows) City of San Mateo, County of San Mateo, State of CaUfomia ("CFD No. 2008-1") and coUected each Fiscal Year, commencing m Fiscal Year 2009-2010, in an amount determined through the application of this Rate and Method of Apportionment as described below. AU of the real property in CFD No. 2008-1, unless exempted by law or by the provisions hereof, shall be taxed for tihepuiposes , to the extent and in the manner hereui provided. A. DEFINITIONS The terms hereinafter set forth have the following meanings: "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, tiie land area shown on the applicable final map, parcel map, condominium plan, or other map or plan recorded -with the County. The square footage of an Assessor's Parcel is equal to the Acreage of such parcel multiplied by 43,560. "Act" means tiie MeUo-Roos Conimunity FaciHties Act of 1982, being Chapter 2.5, Part 1, Division 2 of Title 5 of the California Govemment Code. "Administrative Expenses" means the actual or reasonably estimated costs dhectly related to tiie admhustiation of CFD No. 2008-1, including but not lhnited to: tiie costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the City or designee tiiereof or botii); tiie costs of coUecting the Special Taxes (whether by the City or otherwise); the costs of remitting the Spedal Taxes to the Trastee; the costs ofthe Tmstee (mcluding fts legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, CFD No, 2008-1 or any designee thereof of comptyhig witii arbitrage rebate requhements; the costs to the City, CFD No. 2008-1 or any designee tiiereof of complying witii disclosure requhements of tiie City, CFD No. 20Q8-1 or obHgated persons associated witii applicable federal and state securities .laws and the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries. regarding the Special Taxes; the costs ofthe City, CFD No. 2008-1 or any designee tiiereof related to an appeal ofthe Special Tax; the costs associated with the release of ftmds from an escrow account; and the City's aimual administiation fees and thhd parfy expenses. Administiative Expenses shall also mclude amounts estimated by the City or advanced by the City or CFD No. 2008-1 for any other administtative purposes of CFD No. 2008-1, including attomey's fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes, "Affordable Owner-Occupied Properfy" means Affordable Rental Property on which BMR Units (i) have been constracted, aud (ii) as ofMay 1 ofthe Fiscal Year preceding the Fiscal Year for which tiie Special Taxes are being levied, are owned and occupied exclusively by affordable City OfSanMateo JunelO, 2008 CommunUy Facilities District No. 2008-1 0ay Meadows) Pagel A-l mcome-qualified homebuyers. Affordable Owner-Occupied Properfy shaU be subject to taxation under tiie same special tax sttucture as BMR Units, as listed m Table 1 of Section C, below. "Affordable Rental Properfy" means up to one acre ofPublic Property located in Zone 1 that is identified and designated by tiie City as Affordable Rental Properfy. Aff'ordable Rental Property shall be exempt from tiie Spedal Tax unless it (i) is converted into Affordable Owner- Occupied Properfy, or (ii) as ofMay 1 oftiie Fiscal Year preceding tiie Fiscal Year for which the Special Taxes are bemg levied, is sold or leased to one or more persons for any use other than affordable rental units tiiat meet tiie affordable housuig restrictions promulgated under Section 5,12 ofthe Bay Meadows Phase II Development Agreement, dated November 21, 2005, by and betiveen the Cify and Bay Meadows Land Company, and pursuant to City Mumcipal Code Section 27,16.050 and Resolution 41 (1999). "Assessor's Parcel" means a lot or parcel to which an Assessor's parcel number is assigned as determined from an Assessor Parcel Map or tiie appHcable assessment roU. "Assessor's Parcel Map" means an official map ofthe County Assessor designating parcels by Assessor's Parcel number. "Assigned Special Tax" means tiie Special Tax for each Land Use Class of Developed Property, as determined in accordance with Section C. 1 .(b) below. "Authorized FaciUties" means tiiose facilities eligible to be fiinded by CFD No. 2008-1. "A-uthorized Services" means those services ehgible to be fiinded by CFD No. 2008-1. "Backup Special Tax" means the Spedal Tax appHcable to each Assessor's Parcel of Developed Property, as determined in accordance wltii Section C. 1 .(c) below. "Below Market Rate Units" or "BMR Units" means (a) all residential dwefling units located on Affordable Owner-Occupied Property and (b) up to 110 residential dwellhig unfts located on one or more Assessor's Parcels of Residential Property that are subject to affordable housing resttictions as called for under Section 5.12 of tiie Bay Meadows Phase II Development Agreement, dated November 21, 2005, by and between tiie City and Bay Meadows Land Company, and pursuant to City Municipal Code Section 27.16.050 and Resolution 41 (1999). Units consttncted within the CFD tiiat qualify shaU be designated as BMR Units by tiie Cify in the chronological order in which the building permfts for such units are issued. However, excluding those BMR units located on Affordable O-wner-Occupied Property, if tbe total number of dwelling unfts constracted that would otherwise qualify as BMR Units exceeds 110, then the units exceeduig such total shall not be considered BMR Units for special tax levy purposes, and shall be assigned to a Land Use Class based on tiie type of use and Residential Floor Area for each such unit. "Certificate of Occupancy" means a certificate issued by tiie Cify tiiat authorizes tiie actual occupancy ofa dwelUng unit for habitation by one or more residents. "Cify" means the City of San Mateo. Cify of San Mateo JunelO, 2008 Communify Facilities District No. 2008-1 (Bay Meadows) Page.? '---— - j:^ ~ —— — — "Cify Council" means the City Council ofthe City of San Mateo. "CFD No. 2008-1" means City of San Mateo Community Facilities Distiict No. 2008-1 (Bay Meadows), City of San Mateo, County ofSanMateo, State of Cahfomia. "CFD No. 2008-1 Bonds" means any bonds or otiier debt (as defmed m Section 53317(d) ofthe Act), whether in one or more series, issued or incuned by the City for CFD No. 2008-1. "Counfy" means the County of San Mateo. "Developed Property" means, for each Fiscal Year, aU Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, for which tiie Final Subdivision was recorded on or before January 1 of the prior Fiscal Year and a buUding permit was issued after January 1,2008 and on or before May 1 ofthe Fiscal Year preceding the Fiscal Year for which tiie Special Taxes are being levied. "Final Subdivision" means a subdivision of property by recordation of a final map, parcel map, or lot line adjustment, approved by tiie Coimty pursuant to the Subdivision Map Act (Califomia Government Code Section 66410 et seq.) or recordation of a condommium plan pursuant to Califomia Civil Code 1352 that, in eitiier case, creates individual lots for which building permfts may be issued without further subdi-vision. "FiscalYear" means the period starting Juty 1 and ending on tiie following June 30. "Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which CFD No. 2008-1 Bonds are Issued, as modified, amended and/or supplemented from time to time, and any histrument replacing or supplementing the same. "Land Use Class" means any ofthe classes listed in Tables 1 through 3, below. "Maximum Special Tax" means the maximum Special Tax, determmed in accordance with Section C below, that can be levied in any Fiscal Year on any Assessor's Parcel of Taxable Property, "Non-Residential Floor Area" means the total building square footage of the non-residential building(s) or the non-residential portion of a building with both residential and non-residential areas located on an Assessor's Parcel of Developed Property, measured from outside wall to outside wall, exclusivp of overhangs, porches, patios, carports, or similar spaces attached to the buUding but generally open on at least two sides. The determination of Non-Residential Floor Area shall be made by reference to the building permft(s) issued for such Assessor's Parcel and/or to the appropriate records kept by the City's Buildmg Di-vision, as reasonably detennined by the City. "Non-Residential Property" means aU Assessor's Parcels of Developed Property in Zone 1 for which a building permit pennitting the constraction thereon of one or more non-residential facUities has been issued by the City. "Office Floor Area" means all Non-Residential Floor Area, other tiian Retail Floor Area, aty of San Mateo JunelO, 2008 Commimity Facilities District No. 2008-1 (Bay Meadows) Page 3 A3 "Outstandmg Bonds" means all CFD No, 2008-1 Bonds which are outstanding under an Indenture. "Properfy Owner Association Property" means, for each Fiscal Year, (i) any property withm the boundaries of CFD No. 2008-1 tiiat was owned by a property owner association, includhig any master or sub-assodation, as of January 1 of tiie prior Fiscal Year, (ii) any property located in a Fmal Subdivision that was recorded as oftiie May 1 preceding the Fiscal Year in which tiie Special Tax is being levied and which, as determhied from such Final Subdivision, is or will be open space, a common area recreation facilify, or a private stteet, or (in) any properfy which, as of tiie May 1 precedmg tiie Fiscal Year for which the Special Tax is bemg levied, has been conveyed, hrevocably dedicated, or inevocably offered ft) a properfy owner's association, uicluding any master or sub-association, provided such conveyance, dedication, or offer is submitted to the City Council by May I precedmg the Fiscal Year for which tiie Special Tax is being levied. "Proportionately" means, for Developed Properfy, tiiat tiie ratio oftiie actual Special Tax levy to the Assigned Spedal Tax is equal for all Assessor's Parcels of Developed Properfy. For Undeveloped Properfy, "Proportionately" means tiiat tiie ratio ofthe acttial Special Tax levy per Acre to the Maximum Special Tax per Acre, is equal for all Assessor's Parcels of Undevdoped Properfy. The term 'Troportionately" may similarly be applied to other categories of Taxable Property, as Hsted in Section D below. "Public Properfy" means property -witiim the boundaries of CFD No. 2008-1 o-wned by, or irrevocably offered or dedicated to, tiie federal government, the State, the County, tiie City, or any local government or otiier pubhc agency, provided tiiat any properfy leased by a public agency to a private entity and subject to taxation under Section 53340.1 ofthe Act shaft not be considered Public Properfy and shaU be taxed and classified according to hs acttial use, with tiie exception of Affordable Rental Properfy, which shaft retain fts exemption from the Special Tax. "Residential Floor Area" means all ofthe square footage of living area witiim tiie perimeter of a residential sttncture located on Residential Properfy or Affordable Owner-Occupied Property, not mcludmg any caiport, waUcway, garage, overhang, patio, enclosed patio, or similar area and not uicluding any Non-Residential Floor Area. The determination of Residential Floor Area for an Assessor's Parcel shall be made by reference to tiie building permit(s) issued for such Assessor's Parcel. "Residential Lot" means an Assessor's Parcel for which a building permit has been, or under law and City plannmg decisions, could be issued for a residential stracttire. "Residential Properfy" means aU Assessor's Parcels of Developed Property in Zone 1 for which a building permft permitting tiie constraction tiiereon of one or more residential dweUing unite has been issued by the City. "Retail Floor Area" means all Non-Residential Floor Area for which a building permit(s) permittmg the constraction of one or more non-residential facflities has been issued by the City which is primarily used for the sale of general merchandise, hard goods, personal services, and other ftems dhectly to consumers for any purpose other tiian resale in the regular course of business. City of San Mateo '^«"^^'^' 2008 Communify Facilities District No. 2008-1 (Bay Meadows) Page 4 "Special Tax" means the special tax to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property witiiin CFD No, 2008-1 to fund the Special Tax Requhement, "Special Tax Requirement" means that amount requhed in any Fiscal Year, commencing in Fiscal Year 2009-10, for CFD No. 2008-1 to: (i) pay debt service on all Outstandhig Bonds due in the calendar year commencing in such Fiscal Year; (ii) pay periodic costs with respect to fhe CFD No. 2008-1 Bonds, including but not limited to, costs of credit enhancement and federal arbitiage rebate payments due in the calendar year commencing in such Fiscal Year; (iii) pay Administiative Expenses payable or expected to be payable in the calendar year commencing in such Fiscal Year; (iv) pay auy amounts requhed to estabUsh or replenish any reserve fimds for all Outstanding Bonds; (v) replace revenue the City reasonably expects not to receive due to anticipated Special Tax delinquencies, if and to the extent deemed necessary and supported by a written explanation and calculation; (-vi) pay directly for Aufliorized Services in an amount equal to $30,000 increased by two percent (2%) on July 1, 2009 and each July 1 thereafter; (vii) pay dhectly for the acquisition or constraction of Authorized Facilities and/or Authorized Services to the extent that the inclusion of such amount does not requhe a Special Tax levy on Undeveloped Properfy; less (viii) a credft for fimds available to reduce the annual Special Tax levy. " State" means the State of CaUfomia. "Taxable Properfy" means all of the Assessor's Parcels within the boundaries of CFD No. 2008-1 which are not exempt from the Special Tax pursuant to applicable law or Section E below. "Taxable Property Owner Association Properfy" means aU Assessor's Parcels of Property Owner Association Property that are not exempt pursuant to Section E below, "Taxable Public Properfy" means all Assessor's Parcels ofPublic Properfy tiiat are not exempt pursuant to Section E below, "Trustee" means the trastee or fiscal agent under the Indenture. "Undeveloped Properfy" means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Taxable Property Owner Association Properfy, or Taxable Pubhc Property. "Zone 1" means the area geographically identified within the boundaries of Zone 1 as delineated in Exhibft A to this Rate and Method of Apportionment and further identified in fhe Vesting Tentative Tract Map entitied Bay Meadows Phase H, No, I, approved by tiie Planning Commission of tiie City on October 23, 2007. The area geographicaUy identified witiiin tiie boundaries of Zone 1 may be amended from time-to-time or modified in order to conform to the boundaries of the applicable fiaal map or precise site plan for such property, but only if such change will not reduce the aggregate amount of Maximum Special Tax that may be levied on all the properfy withhi CFD No. 2008-1 below an amount equal to 1,1 times tiie annual debt service in each remaining year on all Outstanding Bonds, plus the Administiative Expenses. "Zone 2" means the area geographically identified within the boundaries of Zone 2 as delineated in Exhibft A to this Rate and Method of Apportionment and further identified in the Vesting Cify OfSanMateo JunelO, 2008 Communify FaciMes District No, 2008-1 (Bay Meadows) •• ' ' • ;. -. , ' ^^-^_ A-5 Tentative Tract Map entitied Bay Meadows Phase H, No. 1, approved by tiie Planning Commission of tiie Cify on October 23, 2007. The area geographically identified witiiin tiie boundaries of Zone 2 may be amended from time-to-time or modified in order to confonn to tiie boundaries of the applicable fmal map or predse site plan for such properfy, but only if such change will not reduce tiie aggregate amount of Maximum Special Tax tiiat may be levied on aU the property witiihi CFD No. 2008-1 below an amount equal to 1.1 thnes tiie annual debt service in each remaining year on aU Outstandmg Bonds, plus the Administtative Expenses. "Zone 3" means the area geographically identified withm tiie boimdaries of Zone 3 as deUneated in Exhibft A to tins Rate and Metiiod of Apportionment and further identified in tiie Vesting Tentative Tract Map entitled Bay Meadows Phase II, No. 1, approved by tiie Planning Commission of tiie City on October 23, 2007. The area geographically .identified witiim the boundaries of Zone 3 may be amended from time-to-time or modified in order to confonn to tiie boundaries of the apphcable fmal map or precise site plan for such property, but only if such change wift not reduce the aggregate amount of Maximum Special Tax tiiat may be levied on aU tiie property withhi CFD No. 2008-1 bdow an amount equal to 1.1 times the annual debt service m each remaining year on all Outstanding Bonds, plus the Admmisteative Expenses. B. ASSI^^NMENT TO LAND USE CATEGORIES Each Fiscal Year, aU Taxable Property witiiin CFD No. 2008-1 shall be classified as Developed Property, Taxable Puhlic Property, Taxable Property Owner Association Property or Undeveloped Property, and shaft be subject to Special Taxes in accordance with this Rate and Metiiod of Apportionment deteimined pursuant to Sections C and D below. C. MAXIMUM SPECIAL TAX. RATE Residential Property shaU be assigned to Land Use Classes 1 tiirough 15 as Hsted in Table 1 below. Non-Residential Property withhi Zone 1 shaft be assigned to Land Use Classes 16 and 17 as Listed in Table 1, Developed Property witiiin Zone 2 shaft be assigned to Land Use Class 18, as shown in Table 2 below. Developed Property witiim Zone 3 shall be assigned to Land Use Class 19, as sho-wn in Table 3 below, 1. Developed Properfy (a). Maximum Special Tax The Maximum Special Tax for each Assessor's Parcel classified as Developed Property shall be the greater of (i) tiie amount derived by application ofthe Assigned Special Tas or (ii) tiie amount derived by appUcation of the Backup Special Tax. (b). Assigned Spedal Tax The Fiscal Year 2009-2010 Assigned Special Tax for each Land Use Class is shown below in Tables 1 through 3 below. Cify of San Mateo J^^^^^' ^^^^ Communify Facilities District No. 2008-1 (Bay Meadows) Page 6 TABLE 1 Assigned Special Tax for Developed Properfy within Zone 1 Community FacUities District No. 2008-1 Fiscal Year 2009-2010 • .Laiid IJse • Residential Floor."" ;- .A.ssignod" • ••' 1 ;••. Class Description "'."; " ., .. -, '.-Wa' -••' SpecialTax -' • .3 1 Residential Property . >2,300sq.ft. $9,935 per unft 2 Residential Property 2,151-2,300 sq.ft. $8,723 per unit 3 Residential Property 2,001-2,150 sq.ft. $8,112 per unit 4 Residential Property 1,851-2,000 sq.ft. $7,500 per unit 5 Residential Property 1,701-1,850 sq.ft. $6,931 per unit 6 Residential Property 1,551 -1,700 sq. ft $6,615 per unit 7 Residential Property 1,401-1,550 sq, ft. $6,262 per unit 8 Residential Property 1,251 - 1,400 sq. ft. $5,707 per unit 9 Residential Property 1,101 - 1,250 sq. ft. $4,851 perimft 10 Residential Property 951-1,100 sq.ft. $4,766 per unit 11 Residential Property 801-950 sq.ft. $3,752 per unit 12 Residential Property <= 800 sq. ft. $3,576 per unit 13 BMR Units > 1,400 sq. ft. $2,083 per unft 14 BMR Units 801 - 1,400 sq. ft. $1,837 per unit 15 . BMR Units <= 800 sq. ft $1,585 per unit Non-Residential Property - 16 NA $1,769 per sq.ft. of Non- Office Floor Area Residential Floor Area Non-Residential Property - 17 NA $0,520 per sq. ft. of Non- Retail Floor Area • Residential Floor Area City of San Mateo JunelO, 2008 Communify Facilities District No. 2008-1 (Bay Meadows) Page 7 A-7 TABLE 2 Assigned Special Tax for Developed Property within Zone 2 Community FacUities District No. 20084 Fiscal Year 2009-2010 Assjpucd I U'll I )) H 'ipiiiiii Special Fox 18 Developed Property $0,520 per sq. ft. TABLES Assigned Special Tax for Developed Property withhi Zone 3 Community Facilities District No. 2008-1 Fiscal Year 2009-2010 ,-„:Assigii'cd-- Si)ecia]-Tax- $1,769 per sq.ft. 19 Developed Property (c). Backup SneciaLlM The Fiscal Year 2009-2010 Backup Spedal Tax attributable to a Final Subdivision will equal $185,201 multiphed by tiie Acreage of aU Taxable Property, exclusive of any Taxable Property Owner Assodation Property and Taxable Public Property, tiierem. The Backup Special Tax for each Assessor's Parcel of Residential Property shaft be computed by dividing tiie Backup Special Tax attributable to tiie applicable Fmal Subdivision by tiie number of Residential Lots witiiin that Fmal Subdivision, The Backup Special Tax for each Assessor's Parcel of Non-Residential Property witiihi Zones 1, 2 and 3 shall be computed by multiplymg tiie Backup Spedal Tax by the Acreage of such Assessor s Parcel. If a Final Subdivision ui Zone 1 hicludes Assessor's Parcels of Taxable Property for which building pemiits for botii residential and non-residential constiuction have been issued, exdusive of Taxable Property Owner Assodation Property and TaxableTublic Property, tiien the Backup Special Tax for each residential dwellmg unit shaU be calculated according to tiie following formula: JunelO, 2008 City of San Maleo Pages Community Facilities District No. 2008-1 (Bay Meadows) A-8 Residential Dwelling Unft Backup Special Tax = ((Backup Special Tax) X (Acreage of Assessor's Parcel) X (Residential Floor Area/(Residential Floor Area plus Non- Residential Floor Area)) / Number of Residential DweUing Units) hi tiiis case, tiie Backup Special Tax for each square foot of Non-Residential Floor Area shall be calculated according to fhe following formula: Non-Residential Square Foot Backup Special Tax = ((Backup Special Tax) X (Acreage of Assessor's Parcel) X (Non-Residential Floor Areay(Residential Floor Area plus Non- Residential Floor Area)) / Non-Residential Square Footage) Notwitiistandhig the foregoing, if aU or any portion of tiie Fmal Subdivision(s) described in the precedhig paragraphs is subsequently changed or modified by recordation of a lot line adjustment or simhar instniment, and only ifthe City detennines that such change or modification results in a decrease in the number of Residential Lots witiim tiie Final Subdivision, then tiie Backup Special Tax for each Assessor's Parcel of Developed Property tiiat is affected by the lot line adjusttnent or similar mstrument for such Final Subdivision shall be a rate per Acre as calculated below. The Backup Special Tax previously determined for an Assessor's Parcel of Developed Property that is not affected by the lot line adjustment or similar instrament for such Final Subdivision shaU not be recalculated. 1. Determme the total Backup Special Tax anticipated to apply to the changed or modified Final Subdivision area prior to tiie change or modification. 2. The resuft of paragraph 1 above shall be divided by tiie Acreage of Taxable Property which is ultimately expected to exist in such changed or modified Final Subdivision area, as reasonably determined by the City. 3. The resuh of paragraph 2 above shaft be the Backup Special Tax per Acre which shall be applicable to Assessor's Parcels of Developed Property in such changed or modified Final Subdivision area for all remauiing Fiscal Years in which the Special Tax may be levied. (d). Increase m the Assigned Special Tax and Backup Special Tax The Fiscal Year 2009-2010 Assigned Special Tax, identified in Tables 1 tiuough 3 above, and tiie Fiscal Year 2009-2010 Fiscal Year Backup Special Tax shall increase amiually, commenchig on July 1, 2010 and on July 1 ofeach Fiscal Year thereafter, by an amount equal to two percent (2%) oftiie amount in effect forthe previous Fiscal Year. (e). Multiple Land Use Classes In some instances an Assessor's Parcel of Developed Property in Zone 1 may contain more than one Land Use Class. The Maximum Special Tax levied on an Assessor's Parcel m such case shall be the sum of the Maximum Special Tax for all Land Use aty OfSanMateo JunelO, 2008 Communify Facilities District No. 2008-1 (Bay Meadows) P"S^f Classes located on tiiat Assessor's Parcel. The City's allocation to each type of property shaU be final m the absence of marufest enor. 2. Taxable Properfy Owner Association Property, Taxable Public Properfy and Undeveloped Properfy Maximum Special Tax The Fiscal Year 2009-2010 Maximum Spedal Tax for each Assessor's Pared of Taxable Properfy Owner Association Properfy, Taxable Public Properfy and Undeveloped Properfy shall be $195,914 per Acre, and shall increase annually tiiereafter, commenchig on July 1, 2010 and on July 1 of each Fiscal Year thereafter, by an amount equal io two percent (2%) oftiie Maximum Special Tax for the previous Fiscal Year. D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX Commenchig witili Fiscal Year 2009-2010 and for each followhig Fiscal Year, the City shall determhie the Special Tax Requireraent and le-vy tiie Special Tax as follows: First: The Special Tax shall be levied on each Assessor's Parcel of Devdoped Property in an amount equal to 100% oftiie applicable Assigned Special Tax; Second: If additional monies are needed to satisfy the Special Tax Requhement after the first step has been completed, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax for Undeveloped Properfy; Third: If additional monies are needed to satisfy the Special Tax Requhement after tiie fust two steps have heen completed, tiien the levy of the Spedal Tax on each Assessor's Parcel of Developed Properfy whose Maximum Special Tax is detemiined through the appUcation of tiie Backup Special Tax shall be increased in equal percentages from tiie Assigned Special Tax up to the Maximum Special Tax for each such Assessor's Parcel; Fourth: If additional monies are needed to satisfy tiie Special Tax Requhement after tiie first three steps have been completed, tiien the Special Tax shall be levied Proportionately on each Assessor's Parcel of Taxable Public Properfy and Taxable Properfy Owner Association Properfy at up to 100% of the Maximum Spedal Tax for Taxable Public Properfy and Taxable Properfy Owner Association Property. Notwithstandhig tiie above, tiie City may, m. any Fiscal Year, levy Proportionately less than 100% of the Assigned Special Tax m. step one (above), when (i) the Special Tax is no longer requhed to be levied pursuant to steps two and three above in order to meet the Special Tax Requhement and (ii) all autiiorized CFD No. 2008-1 Bonds have aheady been issued or the City Coundl has covenanted tiiat ft wftl not issue any addftional CFD No. 2008-1 Bonds (except reftmdmg bonds) to be supported by the Special Tax. Further notwitiistanding the above, under no chcumstances will the Special Tax levied against any Assessor's Parcel of Residential Property for which a Certificate of Occupancy has been _^_«.^^_. ^-™™. _ JunelO, 2008 Community Facilities District No. 2008-1 (Bay Meadows) ^"^^ ^^ issued be increased by more than ten percent above the amount that would have been levied in that Fiscal Year had there never been any such delmquencies or defaults as a consequence of delinquency or default by the o-wner of any other Assessor's Parcel within CFD No. 2008-1, E. EXEMPTIONS No Special Tax shall be levied on up to 34,6 Acres of Public Property and/or Property Owner Association Property m CFD No. 2008-1. In addition, no Special Tax shall be levied on up to 1.0 Acre tiiat tiie City has identified and designated as Affordable Rental Property. Tax-exempt status will be assigned by the City in the chronological order m which property in CFD No. 2008-1 becomes Public Property or Property Owner Association Property. However, should an Assessor's Parcel no longer be classified as PubUc Property, Property Owner Association Property,or Affordable Rental Property, ft shall become subject to tibeSpecia l Tax. Public Property or Property Owner Association Property that is not exempt from the Special Tax under this section shaft be subject to the levy of the Special Tax and shaU be taxed Proportionately as part of the fourth step in Section D above, at up to 100% of the applicable Maximum Special Tax for Taxable Public Property or Taxable Property Owner Association Property. F. MANNER OF COLLECTION The Special Tax shaft be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that the City may dhectiy bill the Special Tax, and/or may collect Special Taxes at a different thne or in a different manner if necessary to meet its fmandal obligations, and may covenant to foreclose and may actualty foreclose on deUnquent Assessor's Parcels, G. APPEALS AND INTERPRETATIONS Any property o-wner who feels that the amount ofthe Special Tax levied on his Assessor's Parcel is m. enor may submft a written appeal to tiie City. The City shall review tiie appeal and. if the City concurs, the amount of the Special Tax levied shall be appropriately modified through, an adjusttnent to the Special Tax levy in the following Fiscal Year. No refimds shaft be given in the cunent Fiscal Year, The City may interpret this Rate and Metiiod of Apportionment for puiposes of clarifying any ambiguity and make determinations relative to the annual administiation ofthe Special Tax and any landowner or resident appeals. Any decision ofthe City shaU be final and binding as to all persons. Cify of San Mateo JunelO, 2008 Communify FacilitiesDistrictNo. 2008-1 (Bay Meadows) Pageii H. PREPAYMENT OF THE SPECIALTAX The following additional defmitions apply to tiiis Section H: "Buildout" means, for CFD No. 2008-1, tiiat aU expected buildmg permits for dwdling units and non-residential fadlities to be consttncted in CFD No. 2008-1 have been issued, as reasonably determined by tiie City. "CFD Public FaciUties Costs" means eitiier $86,000,000 in 2008 dollars, which shall increase by tiie Constinction hiflation hidex on July 1, 2009, and on each Juty 1 thereafter, or such lower number as (i) shaU be determhied by the Cify as sufficient to provide fiindmg for aU of tiie Authorized FacUities, or (ii) shall be detennined by the Cify concunently witii a covenant that it will not issue any more CFD No. 2008-1 Bonds (except refimding bonds) to be supported by tiie Special Tax levy under this Rate and Method of Apportionment as described m Section D. "Construction Inflation Index" means tiie annual percentage change in tiie Engmeering News Record Building Cost hidex for tiie Cify of San Frandsco, measured as of the calendar year which ends in tiie previous Fiscal Year. In tiie event tiiis mdex ceases to be pubUshed, tiie Constinction Inflation hidex shaft be anotiier mdex as determined by the Cify tiiat is reasonably comparable to the Engineering News Record BuUding Cost hidex for tiie Cify of Sau Francisco. "Future FaciUties Costs" means tiie CFD Public Facilities Costs minus (i) costs of Autiiorized FaciUties previously paid from tiie Improvement Fund, (ii) moneys cunrently on deposft in tiie Improvement Fund available to pay costs of Authorized FadUties, (iii) moneys cunentiy on deposft in an escrow fimd that are expected to be avaUable to fmance the cost of Authorized FaciUties, and (iv) tiie amount the Cify reasonabty expects to derive from the rehivestment of these funds. "Improvement Fund" means a fund or account specificalty identified m tiie Indenture to hold fimds which are cunentiy available for expendittne to acquire or constract Authorized Facilities, "Previously Issued Bonds" means, for any Fiscal Year, all Outstandhig Bonds that are still outstanduig under the hidenttire after the principal payment date foUowmg the current Fiscal Year. 1. Prepayment in FuU The obligation oftiie Assessor's Parcel to pay tiie Spedal Tax may be prepaid and pennanently satisfied as described under tiie Prepayment in Full definition, above, provided that a prepayment may be made only for Assessor's Parcels of Developed Properfy, or an Assessor's Parcel of Undeveloped Property for which a building permit has been issued, and only if tihere are no deUnquent Special Taxes -with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax obHgation shall provide tiie City -with written notice of intent to prepay. Witiiin 30 days of receipt of such written notice, the City shall notify such owner of tiie prepayment amount for such Assessor's Parcel. The City may charge such owner a reasonable fee for providing this service. Prepayment must be made not less tiian 30 days prior to die next occuning date tiiat notice of redemption of CFD No. 2008-1 Cify of San Mateo JunelO, 2008 Communify Facilities District No. 2008-1 (Bay Meadows) Page 12 _ ___ . ^^ — Bonds from the proceeds of such prepayment may be given by the Tnistee pursuant to the Indenture. The Special Tax Prepayment Amount (defined below) shall he calculated as summarized below (capitalized terms as defmed below): Bond Redemption Amount plus Redemption Premium plus Future Facilities Amount plus Defeasance Amount plus Prepayment Fees and Expenses less Reserve Fund Credit less Capitalized Interest Credit Total; equals Special Tax Prepayment Amount As ofthe proposed date of prepayment, the Special Tax Prepayment Amount shaft be calculated as follows: 1. Confirm that no Special Tax delinquencies apply to such Assessor's Parcel, 2. For Assessor's Parcels of Developed Property, compute the Assigned Special Tax and Backup Special Tax, For Assessor's Parcels of Undeveloped Propeity for which a building pemiit has been issued, compute the. Assigned Special Tax and Backup Special Tax for tiiat Assessor's Parcel as though it were aheady designated as Developed Property, based upon the building permit which has aheady been issued for such Assessor's parcel, 3. (a) Divide the Assigned Special Tax computed pursuant to paragraph 2 by the total estimated Assigned Special Tax levy for the entire CFD No, 2008-1 based on the Developed Property Special Tax which could be levied in the cunent Fiscal Year on all expected development tinrough Buildout of CFD No, 2008-1, excluding any Assessor's Parcels which have been prepaid, and (b) Divide the Backup Special Tax computed pursuant to paragraph 2 by the total estimated Backup Special Tax at Buildout for tiie entire CFD No. 2008-1, excluding any Assessor's Parcels for which Special Taxes have been prepaid in ftdl. 4. Multiply tiie larger quotient computed pursuant to paragraph 3(a) or 3(b) by the Previously Issued Bonds to compute the amount of Previously Issued Bonds to be retired and prepaid (the "Bond Redemption Amoimt"). 5. Muftiply the Bond Redemption Amount computed pursuant to paragraph 4 by the appUcable redemption premium (e.g., tiie redemption price-100%o), if any, on the Previously Issued Bonds to be redeemed (the "Redemption Premium"). 6. Compute the current Future Facilities Costs. Cify OfSanMateo JunelO, 2008 Community Facilities District No. 2008-1 (Bay Meadows) ^"S^^^ A-13 7. Muftiply tibie larger quotient computed pursuant to paragraph 3(a) or 3(b) by tiie amount determmed pursuant to paragraph 6 to compute tiie amount of Future Fadlities Costs to be prepaid (tiie "Future Facilities Amount"). 8. Compute the amount needed to pay interest on tiie Bond Redemption Amount from the bond principal payment date followhig tihe cunent Fiscal Year until tiie earliest redemption date for tiie Previously Issued Bonds. Notwitiistandmg the above, if tiie Previously Issued Bonds may be redeemed m tiie cunent Fiscal Year, but after tiie date of prepayment, tiie amount needed hi pay tiie mterest under tiiis step shall equal zero, 9. Determhie tiie Spedal Tax levied on tiie Assessor's Pared m tiie cunent Fiscal Year which has not yet been paid. 10. Compute ttie nnnimum araount the City reasonably expects to derive from tiie ' rehivestinent of the Special Tax Prepayment Amount less tiie Future Facilities Amount and tiie Prepayment Fees and Expenses (defmed below) from tiie date of prepayment until tiie redemption date for the Previously Issued Bonds to be redeemed with tiie prepayment. 11. Add the amounts computed pursuant to paragraphs 8 and 9 and subttact the amount computed pursuant to paragraph 10 (the "Defeasance Amount"). 12. The prepayment fees and expenses of CFD No. 2008-1 are as calculated by the City and mclude tiie costs of computation of tiie prepayment, the costs to mvest tiie prepayment proceeds, tiie costs of redeemmg CFD No. 2008-1 Bonds, and tiie costs of recordmg any notices to evidence tiie prepayment and tiie redemption (the "Prepayment Fees and Expenses"), 13. The reserve fimd credft (the "Reserve Fund Credit") shaft equal tiie lesser ofi (a) tiie expected reduction in the reserve requhement (as defmed hi tihe Indenture), if any, associated witii the redemption of Previously Issued Bonds as a resuft oftiie prepa>Tnent, or (b) the amount derived by subttacting the new reserve requhement (as defmed in the Indenture) in effect after tiie redemption of Previousty Issued Bpnds as a resuft oftiie prepayment from the balance hi the reserve fimd on tiie prepayinent date, but m no event shall such amount be less than zero. No Reserve Fund Credit shall be granted if tiie amount then on deposit in the reserve fimd for the Previously Issued Bonds is below tiie reserve requirement (as defmed in the Indenture), 14. If any capitalized interest for tiie Previously Issued Bonds is projected to remain unexpended as of the date immediately following tiie principal payment followhig the current Fiscal Year, a capitalized interest credit shaU be calculated by multiptying the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the expected balance in tiie capitalized hiterest fund or account on such date (tiie "Capitalized Interest Credit"). 15. The Special Tax prepayment is equal to tiie sum ofthe amounts computed pursuant to paragraphs 4, 5, 7, 11 and 12, less the amounts computed pursuant to paragraphs 13 and 14 (the "Special Tax Prepayment Amount"). City of San Mateo -^««^^'^' 2008 Community Facilities Disti-ict No, 2008-1 (Bay Meadows) ^^'^^^M. From the Special Tax Prepayment Amount, fhe amounts computed pursuant to paragraphs 4, 5, 11, 13 and 14 shaft be deposited into the appropriate fimd as estabUshed under tiie Indenture and be used to rethe CFD No, 2008-1 Bonds or make debt service payments. The amount computed pursuant to paragraph 7 shall be deposited into the Improvement Fund. The amount computed pursuant to paragraph 12 shall be retained by the City. Upon confirmation of the payment of the current Fiscal Year's Special Tax levy as determined under paragraph 9 (above), the City shaft remove the cunent Fiscal Year's Special Tax le-vy for such Assessor's Parcel from the County tax rolls. Witii respect to any Assessor's Parcel that is prepaid, the City Council shall cause a suitable notice to be recorded in compliance witii the Act, to indicate the prepayment of the Special Tax and the release of the Special Tax lien on such Assessor's Parcel, and the obUgation of such Assessor's Parcel to pay the Special Tax shall cease. Notwitiistanding the foregoing, no Special Tax prepayment shaU be allowed unless, at the time of such proposed prepayment, the amount of Maximum Special Tax that may be le-vied on Taxable Property withm CFD No. 2008-1 (after excludhig in tiie property exempted under Section E) after the proposed prepayment is at least equal to fhe sum of (i) the Administiative Expenses, as defmed in Section A above, and (ii) 1,10 tiraes annual debt service, in each remahung Fiscal Year on the Outstanding Bonds. 2. Prepayment in Part The obligation of the Assessor's Parcel to pay the Special Tax may be partially prepaid as described herein, provided that a partial prepayment may be made only for Assessor's Parcels of Developed Property, or an Assessor's Parcel of Undeveloped Property for which a building permit has been issued, and only if there are no delinquent Special Taxes with respect to such Assessor's Parcel at the thne of partial prepayment. The amount of the prepayment shall be calculated as in Section H.l; except that a partial prepayment shall be calculated according to the following formula: PP = [(PE-PFE)xD]+A These terms have the followhig meannig: PP = the partial prepayment. PE = the Spedal Tax Prepayment Amount calculated according to Section H. 1, D = the percentage, expressed as a decimal, by which the owner of the Assessor's Parcel is partially prepaying the Special Tax, PFE - the Prepayment Fees and Expenses calculated according to Section H, 1. The owner ofany Assessor's Parcel who deshes such prepayment shall notify tihe Cify ofsuch owner's intent to partially prepay the Special Tax and tiie percentage by which the Special Tax shall be prepaid. The City shall provide the o-wner with a statement of the amount required for the partial prepayment oftiie Special Tax for an Assessor's Parcel witihin 30 days of tihe request aud may charge a reasonable fee for providuig tiiis service. With respect to any Assessor's Parcel that is partially prepaid, the Cify shall (i) distribute or cause to be distributed the fimds remitted to it according to Section H.l, and (ii) indicate in the records of CFD No. 2008-1 tiiat Cify of San Mateo JunelO, 2008 Community FacilitiesDistrictNo. 2008-1 (Bay Meadows) P'^S^J^ A~15 tiiere has been a partial prepayment of tiie Spedal Tax and tiiat a portion of the Spedal Tax witii resped to such Assessor's Pared, equal to tiie outstanding percentage (1.00 - F) ofthe remammg Maximum Special Tax, shaU continue to be levied on such Assessor's Pared pursuant to Section D. L TERM OF SPECIAL TAX The Special Tax shaU be levied for a period not to exceed fifty years commencmg with Fiscal Year 2009-2010, provided however tiiat the Special Tax wiU cease to be levied in an earlier Fiscal Year if tiie Cify has determined tiiat all required interest and prmcipal payments on the CFD No, 2008-1 Bonds have been paid. K:\CUSNTS2\San Maleo\R}iU\Bay Meado'.vs RMA 6-lQ-08.doc Communify Facilities Disti-ict No. 2008-1 (Bay Meadows) Pageld EXfflBIT A MAP OF ZONE 1, ZONE 2, AND ZONE 3 PE:NIN5UUi JOINT POWERS BOARD EXHIBIT'A' PLAT TO ACCOMPANY LEGAL DESCRIPTION LEGEND "[MH WEISS, MC. COMMUNITY FACILITIES DISTRICT BOUNDARY UNE V I I MM 150 S. ;(JfTwden Boutcvord, Suite 700 0 200' 400' 800' Son Jose, Cc S5113 INTERIOR ZONE BOUNDARY UNES (408) 286-4555 FAXt(408) 285-4553 " w*ntf..jmhw«jss-com JOB f45« 05/05/08 SCALE: 1° =400 DW JWJa r-VobiVS42-BQy WMAKS R«»lfaci\PlnM« I-lli.p\nnd M Bemg aU of Parcel 1 and a portion of Parcel 2 of Parcel Map 409, as said map was filed for record on August 30, 2006 in Book 77 of Parcel Maps, at Pages 14 through 17, San Mateo Counfy and being described as follows: Beginning at the most northerly comer of said Parcel 1; thence along the northerly, easterly and southerly boundary lines of said Parcel 1 along the following courses: Soutii 54°33'25" East 512,50 feet; Soutii 35°26'35" West 195.10 feet; Soutii 38°59'09" West 16.60 feet; Soutii 51°00'51" West 57,81 feet; along non-tangent curve to tiie right havhig a radial bearhig of South 56°02'27" West and a radius of 412.40 feet tiirough a cential angle of 25°49'09" for an arc lengtii of 185.84 feet; Soutii 08°08'24" East 1762.79 feet to tiie southerly line of said Parcel 1; thence along said southerly lme, Soutii 50°57'11" 941.61 feet; tiience leavmg said soutiierly Une, North 22°21'11" East 342.36 feet; tiience North 34''06'01" West 302,97 feet; tiience North 27°37'15" West 79.75 feet; tiience North 34°06'01" West 254,51 feet; thence North 55°54'01" East 60.00 feet; thence North 34«06'01" West 167,50 feet; tiience Soutii 55°53'59" West 10.00 feet; thence North 34''06'0l" West 775.03 feet; tihence along a non-tangent curve to tiie right having a radial bearing of North 36°20'55" West and a radius of 4000.00 feet flurough a cential angle of 00°48'50" for an arc lengtii of 56.81 feet; thence North 34°03'31" West 38.51 feet; thence along a non-tangent curve to the left having a radial bearing of South 48°15'01 West and a radius of 1044.50 feet tiuough a cential angle of 14°35'50" for an arc lengtii of 266.10 feet; tiience North 58°26'49" West 127.84 feet to the northerly lme of said Parcel 2; thence along said northerly line, Nortii 56°53'03" East 521,42 feet to comer common to said Parcels 1 and 2; thence along the nortiieriy lines of said Parcel 1 along the following courses: along a non-tangent curve to tiie right having a radial bearing of Soutii 84°09''55" West and a radius of 675,00 feet tinrough a centtal angle of 94°17'51" for an arc length of 1110,92 feet; thence Nortii 56°52'35" East 165.68 feet to tiie Point of Begmning. Said described Zone containing 63.315 acres, more or less. Kevin R Weiss Date 05/05/08 Prepared by; JMH Weiss, Inc. A-2 Legal Description Zone 2 Being a portion of Parcel 2 of Parcel Map 409, as said map was filed for record on August 30, 2006 m Book 77 of Parcel Maps, at Pages 14 tiirough 17, San Mateo Coimfy Records and a portion of tiiat parcel of land described m that Grant Deed recorded on March 26, 1956 in Volume 2992 at Page 506 of San Mateo Counfy Offidal Records and being described as follows: Beginning at the most nortiieriy comer of said Parcel 2, said comer also being a common comer -witii Parcel I of said Parcel Map 409 ; thence along tiie northerly Hne of said Parcel 2, Soutii 56°53'03" West 521.42 feet to tiie True Point of Beginning; thence continuing along said nortiieriy lme, Soutii 56°53'03" West 85.77 feet; thence leavmg said nortiieriy lme, Soutii 56°20'49" East 12.29 feet; tiience Soutii 54°14'09" East 149.30 feet; tiience along a non-tangent curve to tiie right havhig a radial bearing of South 33°39'U" West and a radius of 955.50 feet tinrough a cential angle of 13M6'44" for an arc lengtii of 229.79 feet; tiience South 41°49'18" East 82.71 feet;.tiience along a non-tangent curve to tihe right havhig a radial bearing of South 52°23'06" West and a radius of 958.00 feet through a cential angle of 03°30'53" for an arc lengtii of 58.77 feet; thence Soutii 34°06'0r' East 99.37 feet; thence Soutii 55°53'59" West 50.00 feet; thence Soutii 34°06'05" East 183.44 feet; tiience South 34°06'01" East 60.00 feet; thence Soutii 34°05'56" East 143.11 feet; thence North 55°53'59" East 50.00 feet; tiience Soutii 34°06'01" East 216.87 feet; tiience South 55"54'01" West 50.00 feet; thence Soutii 34°06'03" East 211.78 feet; tiience North 55°53"59" East 49.99 feet; thence South 34°06'01" East 163.95 fed; tiience Soutii 42^26'38" East 82,70 feet; tiience Soutii 34°06'01" East 282.85 feet; tiience South 22°2rU" West 351.09 feet to a point on tiie westerly lme of said Parcel 2; thence along the westerly and soutiierly lines of said Parcel 2, along a non-tangent curve to tiie left havmg a radial bearing of North 53°48'50" East and a radius of 2789.84 feet tinrough a central angle of 00°43'06" for an arc lengtii of 34.98 feet; tiience Nortii 50°57'H" East 69.04 feet; tiience leavmg said southerly line of said Pared 2, Norfli 22°21'll" East 342.36 feet; tiience North 34°06'01" West 302.97 feet; tiience North 27°37'15" West 79.75 feet; tiience North 34°06'01" West 254.51 feet; thence North 55°54'01" East 60.00 fed; tiience North 34°06'01" West 167.50 feet; thence Soutii 55°53'59" West 10.00 feet; tiience North 34°06'01" West 775.03 fed; thence along a non-tangent curve to the right havhig a radial bearing of North 36°20'55" West and a radius of 4000,00 feet tiarough a central angle of 00°48'50" for an arc length of 56.81 feet; thence North 34°03'31" West 38.51 feet; tiience along a non-tangent curve to tiie left having a radial bearing of Soutibi 48°15'01 West and a radius of 1044.50 feet tinrough a cential angle of 14°35'50" for an arc length of 266.10 feet; tiience North 58°26'49" West 127.84 feet to the northerly line of said Parcel 2 and tiie True Pomt of Beginning. Said described Zone containing 6.052 acres, more or less. Kevhi R Weiss Date 05/05/08 Prepared by; JMH Weiss, Inc. A-3 Legal Description Zones Being a portion of Parcel 2 of Parcel Map 409, as said map was filed for record on August 30, 2006 in Book 77 of Parcel Maps, at Pages 14 tiirough 17, San Mateo Counfy Records and a portion of tiiat parcel of land described in that Grant Deed recorded on March 26, 1956 in Volume 2992 at Page 506 of San Mateo Counfy Official Records and bemg described as follows: Beginning at the most northerly comer of said Parcel 2, said point also being a point common with the westerly Une South Delaware Stteet, as shown on said Parcel Map 409; thence along the northerly Une of said Parcel 2 along tiie following courses: Soutii 26°30'08" West 163.85 feet; tiience North 56°03'30" East 80.68 feet; tiience Norfli 26°30'08" West 250.09 feet; flience along a tangent curve to the left haymg a radius of 1000.00 feet through a central angle of 07*26'22" for an arc length of 129.84 feet; flience Soufli 33°56'30" East 875,39 feet; thence North 56°53'03" East 2,12 feet; flience South 56°20'49" East 12.29 feet; thence Soufli 54°14'09" East 149,30 feet; thence along a non-tangent curve to the right having a radial bearing of South 33*39'11" West and a radius of 955.50 feet through a centtal angle of 13M6'44" for an arc lengfli of 229.79 feet; thence Soufli 4r49'18" East 82,7.1 feet; tiience along a non-tangent curve tt) tiie right havhig a radial bearing of Soutii 52°23'06" West and a radius of 958.00 feet through a cential angle of 03°30'53" for an arc length of 58.77 fed; thence Soutii 34°06'01" East 99,37 feet; thence Soutii 55°53'59" West 50.00 feet; tiience South 34°06'05" East 183,44 feet; flience South 34°06'01" East 60.00 feet; tiience South 34°05'56" East 143.11 feet; tiience North 55°53'59" East 50.00 feet; thence Soutii 34°06'01" East 216,87 feet; thence South 55°54'01" West 50.00 fed; tiience Soutii 34°06'03" East 211,78 feet; thence North 55°53"59" East 49.99 fed; thence South 34°06'01" East 163.95 feet; thence South 42°26'38" East 82,70 feet; tiience Soutii 34°06'01" East 282.85 feet; thence Soutii 22°21'11" West 351.09 feet to a point on the westerty line of said Parcel 2; thence along the westerly and northerly lines of said Parcel 2 along tihe folldwing course: along a non-tangent curve to the right having a radial bearing of North 53°48'5b" East and a radius of 2789.84 feet tiirough a centtal angle of 02°14'40" for an arc lengtii of 109,29 fed; tiience North 33°56'30" West 2309.47 feet; tiience Soutii 51°0r30" West 5.02 feet; thence North 33°56'30" West 393.04 feet to flie northerly Ihie of said Parcel 2; thence along said northerly lme, North 56°03 '30" East 49.74 feet to tiie Point of Begmning. Said described Zone containing 14.030 acres, more or less. Kevin R Weiss Date 05/05/08 Prepared by: JMH Weiss, Inc. A-4 EXHIBITB CITY OF SAN MATEO COMMUNITY FACILITIES DISTRICT NO. 2008-1 (BAY MEADOWS) ASSIGNED SPECIAL TAX FOR DEVELOPED PROPERTY IN ZONE 1 FISCAL YEAR 2009-2010 I 1 Itl I ^ 1 I 1) [1 \ 1 II 1 Residential Properfy > 2,300 sq.ft. $9,935 per unit • 2 Residential Properfy 2,151-2,300 sq.ft. $8,723 per unit 3 Residential Properfy 2,001 ^2,150 sq.ft. $8,112 per unft 4 Residential Properfy 1,851-2,000 sq.ft. $7,500 per unft 5 Residential Property 1,701 - 1,850 sq. ft. $6,931 per unit 6 Residential Properfy 1,551-1,700 sq. ft $6,615 per unit 7 Residential Property 1,401 - 1,550 sq. ft. $6,262 per unit .8 Residential Properfy 1,251-1,400 sq.ft. $5,707 per unit 9 Residential Properfy 1,101 - 1,250 sq, ft. $4,851 per unft 10 Residential Property 951-1,100 sq.ft. $4,766 per unit 11 Residential Properfy 801-950 sq.ft. $3,752 per unft 12 Residential Property <= 800 sq. ft. $3,576 per unft 13 BMR Units >l,400sq.a $2,083 per unit 14 BMR Units 801 - 1,400 sq, ft. $1,837 per unft 15 BMR Units <= 800 sq. ft $1,585 per unft Non-Residential Property - Office $1.769persq. ft. of Non- 16 NA Floor Area Residential Floor Area Non-Residential Property - Retail $0.520persq. ft. of Non- 17 NA Floor Area Residential Floor Area * Ob each July 1, commencing on July 1,2010, the Assigned Special Tax, identified in the table above, shall be increased by two percent (2%) per Fiscal Year. ASSIGNED SPECIAL TAX FOR DEVELOPED PROPERTY IN ZONE 2 FISCAL YEAR 2009-2010 I I I 1 i\ 18 Developed Properfy $0,520 per sq, ft. * On each July 1, commencing on July 1,2010, the Assigned Special Tax, identified in the table above, shall be increased by two percent (2%) per Fiscal Year, ASSIGNED SPECIAL TAX FOR DEVELOPED PROPERTY IN ZONE 3 FISCAL YEAR 2009-2010 19 Developed Properfy $1,769 per sq.ft. * On each July 1, commencing on July 1,2010, the Assigned Special Tax, identified in the table above, shall be increased by two percent (2%) per Fiscal Year. EXHD3ITC CITY OF SAN MATEO COMMUNITY FACILITIES DISTRICT NO. 2008-1 (BAYMEADOWS) MAXIMUM SPECIAL TAX FOR UNDEVELOPED PROPERTY, TAXABLE PROPERTY OWNER ASSOCIATION PROPERTY, AND TAXABLE PUBLIC PROPERTY m Undeveloped Properfy, Taxable Properfy Owner Association Properfy, $195,914 per Acre and Taxable PubUc Properfy * The Fiscal Year 2009-2010 Maximum Special Tax, identified in the table above, shall be increased by two percent (2%) per Fiscal Year. EXHIBITD CITY OF SAN MATEO COMMUNITY FACILITIES DISTRICT NO. 2008-1 (BAYMEADOWS) PROPOSED BOUNDARY MAP SHEET 1 or .2 PROPOSED BOUNDABIES OF CITY OF SAN MATEO COMMUNITY FACILITIES DISTRICT HQ. 2008»1 (BAY I^EADOWS) COUNTY OF SAH MATEO STATE OF CALIFORNIA (1)Filed An the office of the City (2) I hereby certify that the within' Clerk of the City of San Mateo map showing the proposed . this 21iL day of clux.- . 2008. boundaries of City of San Mateo Community Facilities District No. 2008-1 (Bay Meadows), County of San Mateo, State of California, y 9:^>.^ Afiy^ ^ was approved by the City Council San Md^eo City ClerK at a regular meeting thereof, held ori this Uj/iL day of i^£!M^ 2008, by its Resolution No, 9'A^ (3) Filed this ^- day of . , 2008. at the., hour of ,^-.tp8 o'clock ^m, irt, B.ook l^-^^ of Map& bf Assessment and Community Facilities Districts VICIMTY' MAP at Page /?-^.^,?o and. as Instrument No,- ,i^t'-'9&o/4fb .,, in the office of the County Recorder in the County of San Mateo, State F.Y. 2007-2000 Assessor of California. Parcels in CFO Zone 1: 040-030-19 '(portion) Warren Slocum 046-030-20. .(portion) Assessor-County Clerk-Recorder, County of San Mateo F*Y. 2007-2008 Aasessor Parcels in OFD Zone 2; By d40-€3p-2b (portion) Deputy F.Y. 2007-2008 ASsesaor Fee- Parcels in CFO Zone 35 040-030-20 (portion) BUempt recording requested, per CA Government Code §6103 Prepored ty Oovid .XQUssJg- &:• Asapclotijs; tnc. SHEET 2 OF 2 PROPOSED BOUNDARIES OF CITY OF SAN MATEO COMMUNITY FACILITIES DISTRICT NO, 2008-1 (BAY filSEADOWa) COUNTY OF SAN MATEO STATE OF CALIFOBNIA Reference is hereby made to- the Assessor maps of the County of San Mateo for a description of the lines and dimensions of these parcels. leQEND Pnoppsed Boundaries of City of San Mateo ComiDunity FaciUties District No. zOQa,i (Bay (lieadows), county of San Mateo, state of California 040-oao-nn Assessor Parcel Numbe'r Zone 1 of CFD Md. 2008-1 Zone 2 of CFp flo. 2008.1 Zone 3 of Cp6 No.' 2008-1 , Assessor Parool. 'Line AMENDED AND RESTATED RATE AND METHOD OF APPORTIONMENT AMENDED AND RESTATED RATE AND METHOD OF APPORTIONMENT FOR COMMUNITY FACILITIES DISTRICT NO. 2008-l(BAY MEADOWS) CITY OF SAN MATEO COUNTY OF SAN MATEO, STATE OF CALIFORNIA A Special Tax shaU be levied on all Assessor's Parcels of Taxable Properfy in Cify of San Mateo Communify Facilities Distiict No. 2008-1 (Bay Meadows) Cify of San Mateo, Counfy of San Mateo, State of Califomia ("CFD No. 2008-1") and collected each Fiscal Year, commencing in Fiscal Year 2011-2012, in an amount determined through the application of this Amended and Restated Rate and Method of Apportionment as described below. All of the real properfy in CFD No. 2008-1, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS The terms hereinafter set forth have the foUowing meanings: "Acreage" means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan, or other map or plan recorded with the Counfy. 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 Communify Facilities Act of 1982, being Chapter 2.5, Pait 1, Division 2 of Titie 5 ofthe Califomia Government Code. "Administrative Expenses" means the actual or reasonably estimated costs directly related to the administiation of CFD No. 2008-1, including but not limited to: the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the Cify or designee thereof or both); the costs of collecting the Special Taxes (whether by the Cify or otherwise); lhe costs of remitting the Special Taxes to the Trustee; the costs of the Trastee (including its legal counsel) in the discharge ofthe duties required of it under the Indenture; the costs to the Cify, CFD No. 2008-1 or any designee thereof of complying with arbitiage rebate requirements; the costs to the Cify, CFD No. 2008-1 or any designee thereof of complying with disclosure requirements of the Cify, CFD No. 2008-1 or obligated persons associated with applicable federal and state securities laws and the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs ofthe Cify, CFD No. 2008-1 or any designee thereof related to an appeal ofthe Special Tax; the costs associated with the release of fimds from an escrow account; and the Cify's annual administiation fees and third parfy expenses. Administiative Expenses shall also include amounts estimated by the Cify or advanced by the Cify or CFD No. 2008-1 for any other administiative purposes of CFD No, 2008-1, including attorney's fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes. "Affordable Owner-Occupied Property" means Affordable Rental Properfy on which BMR Units (i) have been constructed, and (ii) as ofMay 1 ofthe Fiscal Year preceding the Fiscal Year • for which die Special Taxes are being levied, are owned and occupied exclusively by affordable income-qualified homebuyers. Affordable Owner-Occupied Properfy shall be subject to taxation under the same special tax structure as BMR Units, as listed in Table I of Section C, below. "Affordable Rental Properfy" means up to one acre ofPublic Properfy that is identified and designated by the Cify as Affordable Rental Properfy. Affordable Rental Properfy shall be exempt from tiie Special Tax unless it (i) is converted into Affordable Owner-Occupied Properfy, or (ii) as ofMay 1 ofthe Fiscal Year preceding tiie Fiscal Year for which tiie Special Taxes are being levied, is sold or leased to one or more persons for any use other tiian affordable rental units tiiat meet tiie affordable housing restiictions promulgated under Section 5.12 of tiie Bay Meadows Phase II Development Agreement, dated November 21,2005, by and between the Cify and Bay Meadows Land Company, and pursuant to Cify Municipal Code Section 27.16.050 and Resolution 41 (1999). "Apartment Properfy" means the first 5.306 Acres of Residential Property on which is located a stractiire or stiucttires with multiple residential dwelling units, all ofwhich are offered for rent and are not available for sale to individual owners. Apartment Property status shall be assigned to Residential Property by the CFD Administiator in the chronological order in which property m CFD No 2008-1 is classified as Apartment Property. For purposes ofthis Rate and Metiiod of Apportiomnent, dweUmg units located on the first 5.306 Acres of Apartment Property shall not be classified as Single Family Detached Units, Townhome Units, Condominium Units, or BMR Units However any Assessor's Parcels or portions of Assessor's Parcels tiiat would ordmarify be classified as Apartment Property that are created after the first 5.306 Acres of Apartment Property have already been established shall be classified as Residential Property witii Condominium Units or BMR Units located on them, and each dwelling unit located on such Residential Property shall be subject to the same Assigned Special Taxes and Backup Specia Tax rates as are assigned to Condominium Units or BMR Units, as appUcable. If Residential Property previousfy classified as Apartment Property ceases to meet the requnements of this definition (such as by the conversion of tiie dwelling units thereon into Condominium Units or BMR Units), such property shall be reclassified as Residential Property witii Condominium Units and/or BMR Units, as long as the Assigned Special Tax applied to such Residential Property after tiie reclassification is not less than the Assigned Special Tax applied to such Residential Property prior to the reclassification. The Speeial Taxes to be levied on such Condominium Units and/or BMR Units shall be determined on tiie basis ofthe Land Use Classes 1 through 15 as set forth in Table 1. Furthermore, should such reclassification occur, any other Parcel or portion tiiereof that would have been designated as Apartment Property but for the limitation on the total amount of Acres that can be so classified shaU be re-classified as Apartment Property if and to the extent that (a) such reclassification does not result in more than 5 306 Acres of Apartment Property and (b) tiie aggregate amount ofthe Assigned Special Taxes appUcable to all Taxable Property after the reclassifications of (i) the applicable Apartment Property to Condominium Units and/or BMR Units and (ii) the applicable Condominium Units and/or BMR Units to Apartment Property, is not less than tiie aggregate amount ofthe Assigned Special Taxes applicable to all Taxable Property before such reclassifications occurred. "Assessor's Parcel" means a lot or parcel to which an Assessor's parcel number is assigned as determined from an Assessor Parcel Map or die applicable assessment roll. "Assessor's Parcel Map" means an official map oftiie County Assessor designating parcels by Assessor's Parcel number. "Assigned Special Tax" means the Special Tax for each Land Use Class of Developed Properfy, as determined in accordance with Section C.l.(b) below. "Authorized Facilities" means those facilities eligible to be funded by CFD No. 2008-1, "Authorized Services" means those services eUgible to be fnnded by CFD No. 2008-1. "Backup Special Tax" means the Special Tax appUcable to each Assessor's Parcel of Developed Property, as detennined in accordance with Section C.l.(c) below. "Below Market Rate Units" or "BMR Units" means (a) all residential dwelling units iocated on Affordable Owner-Occupied Property and (b) up to 110 residential dwelling units located on one or more Assessor's Parcels of Residential Property that are subject to affordable housing restrictions as called for under Section 5.12 of the Bay Meadows Phase II Development Agreement, dated November 21, 2005, by and between tiie City and Bay Meadows Land Company, and pursuant to City Municipal Code Section 27.16,050 and Resolution 41 (1999). Units constracted within tiie CFD that qualify shaU be designated as BMR Units by the Cify in tiie chronological order in which the building permits for such units are issued. However, excluding those BMR units located on Affordable Owner-Occupied Property, ifthe total number of dweUing units constiticted tiiat would otiierwise qualify as BMR Units exceeds 110, tiien tiie units exceeding such total shall not be considered BMR Units for special tax levy purposes, and shall be assigned to a Land Use Class based on tiie type of use and Residential Floor Area for each such unit. "Certificate of Occupancy" means a certificate issued by the City that authorizes the actual occupancy of a dwelling unit for habitation by one or more residents, "Cify" means tiie City of San Mateo. "Cify Council" means the City CouncU of the Cify of San Mateo. "CFD Administrator" means the Person designated by CFD No. 2008-1 to administer the Special Tax according to this RMA, "CFD No. 2008-1" means City of San Mateo Community Facilities Distiict No, 2008-1 (Bay Meadows), City of San Mateo, County of San Mateo, State of Califomia. "CFD No, 2008-1 Bonds" means any bonds or otiier debt (as defined in Section 53317(d) ofthe Act), whether in one or more series, issued or uicurred by the City for CFD No. 2008-1, "Condominium Unit" means (1) a residential condominium as described in Civil Code Section 1351(f) and (2) any residential dwelling that is not a Smgle Family Detached Unit, a Townhome Unit, a BMR Unit, or a dwelling unit located on Apartinent Properfy, as determined by the CFD Administrator. "County" means the County of San Mateo. "Developed Property" means, for each Fiscal Year, all Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, for which tiie Final Subdivision was recorded on or before January Tof the prior Fiscal Year and a building permit was issued after January 1, 2011 and on or before May 1 oftiie Fiscal Year preceding tiie Fiscal Year for which the Special Taxes are being levied. "Final Subdivision" means a subdivision of properfy by recordation of a final map, parcel map, or lot line adjustment, approved by the Counfy pursuant to the Subdivision Map Act (Califomia Govemment Code Section 66410 et seq.) or recordation of a condominium plan pursuant to Califomia Civil Code 1352 that, in either case, creates individual lots for which building permits may be issued without further subdivision. "Fiscal Year" means tiie period starting Jufy 1 and ending on die following June 30. 3 "Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which CFD No. 2008-1 Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. "Land Use Class" means any ofthe classes listed in Table 1, below, "Maximum Special Tax" means the maximum Special Tax, determined in accordance with Section C below, that can be levied in any Fiscal Year on any Assessor's Parcel of Taxable Property, "Non-Residential Floor Area" means the total building square footage of the non-residential building(s) or the non-residential portion of a building witii botii residential and non-residential areas located on an Assessor's Parcel of Developed Property, measured from outside wall to outside wall, exclusive of overhangs, porches, patios, carports, or similar spaces attached to tiie building but generally open on at least two sides. The determination of Non-Residential Floor Area shall be made by reference to the building permit(s) issued for such Assessor's Parcel and/or to the appropriate records kept by the Cify's Building Division, as reasonably detennined by tiie City. "Non-Residential Properfy" means all Assessor's Parcels of Developed Properfy for which a building permit permitting the constraction thereon of one or more non-residential facilities has been issued by the Cify. "Office Floor Area" means all Non-Residential Floor Area, other than Retail Floor Area. "Outstaading Bonds" means all CFD No. 2008-1 Bonds which are outstanding under an Indenture. "Person" means an individual, a corporation, a partnership, an association, a. joint stock company, a trust, a limited liabilify company, an unincorporated organization, or a govemment or poUtical subdivision thereof "Properfy Owner Association Properfy" means, for each Fiscal Year, (i) any property within tiie boundaries of CFD No. 2008-1 that was owned by a property owner association, including any master or sub-association, as of January 1 of the prior Fiscal Year, (ii) any properfy located in a Final Subdivision diat was recorded as of the May 1 preceding the Fiscal Year in which tiie Special Tax is being levied and which, as determined from such Final Subdivision, is or will be open space, a common area recreation facilify, or a private street, or (iii) any property which, as of the May 1 preceding the Fiscal Year for which the Special Tax is being levied, has been conveyed, irrevocably dedicated, or irrevocably offered to a property owner's association, including any master or sub-association, provided such conveyance, dedication, or offer is submitted to die City Council by May 1 preceding the Fiscal Year for which tiie Special Tax is being levied, "Proportionately" means, for Developed Property, tiiat the ratio oftiie actual Special Tax levy to the Assigned Special Tax is equal for aU Assessor's Parcels of Developed Properfy, For Undeveloped Property, "Proportionately" means tiiat the ratio ofthe actual Special Tax levy per Acre to the Maximum Special Tax per Acre, is equal for all Assessor's Parcels of Undeveloped Property, The terai "Proportionately" may similarly be applied to other categories of Taxable Properfy, as listed in Section D below. "Public Properfy" means properfy within the boundaries of CFD No, 2008-1 owned by, or irrevocably offered or dedicated to, tiie federal govemment, the State, the County, the City, or any local govemment or otiier public agency, provided that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall not be considered Public Property and shall be taxed and classified according to its actual use, with the exception of Affordable Rental Property, which shall retain its exemption from the Special Tax. "Rate and Method of Apportionment" or "RMA" raeans diis Amended and Restated Rate and Method of Apportionment of Special Tax, "Residential Floor Area" means all ofthe square footage of living area witiiin tiie perimeter of a residential stracttire located on Residential Property or Affordable Owner-Occupied Properfy, not mcluding any carport, walkway, garage, overhang, patio, enclosed patio, or similar area and not including any Non-Residential Floor Area. The determmation of Residential Floor Area for an Assessor's Parcel shall be made by reference to the building permit(s) issued for such Assessor's Parcel. "Residential Lot" means an Assessor's Parcel for which a buUding permit has been, or under law and Cify planning decisions, could be issued for a residential stracture. "Residential Properfy" means all Assessor's Parcels of Developed Properfy for which a building permit permitting the constmction thereon of one or more residential dwelling units has been issued by the Cify, Residential Properfy includes, but is not limited to, Smgle Family Detached Units, Townhome Units, Condominium Units, BMR Units, and Apartment Property, "Retail Floor Area" means all Non-Residential Floor Area for which a building pennit(s) permitting tiie constraction of one or more non-residential facilities has been issued by the City which is primarily used for the sale of general merchandise, hard goods, personal services, and other items directly to consumers for any purpose other Uian resale in the regular course of business. "Single FaniUy Detached Unit" means an individual residential dweUing unit that does not share a common wall witii another residential dwelling unit. "Special Tax" means the special tax to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Properfy witiiin CFD No. 2008-1 to fund the Special Tax Requirement, "Special Tax Requirement" means, that amount required in any Fiscal Year, commencing in Fiscal Year 2011-12, for CFD No. 2008-1 to; (i) pay debt service on aU Outstanding Bonds due in the calendar year commencing in such Fiscal Year; (ii) pay periodic costs with respect to the CFD No. 2008-1 Bonds, including but not limited to, costs of credit enhancement and federal arbitrage rebate payments due in tiie calendar year commencing in such Fiscal Year; (iii) pay Administiative Expenses payable or expected to be payable in the calendar year commencing in such Fiscal Year; (iv) pay any amounts required to establish or replenish any reserve fimds for all Outstandmg Bonds; (v) replace revenue the Cify reasonably expects not to receive due to anticipated Special Tax delinquencies, if and to the extent deemed necessary and supported by a written explanation and calculation; (vi) pay directiy for Authorized Services in an amount equal to $30,000 increased by two percent (2%) on July 1, 2012 and each July 1 thereafter; (vii) pay directly for the acquisition or constraction of Authorized Facilities and'or Authorized Services to . the extent that the inclusion of such amount does not require a Special Tax levy on Undeveloped Property; less (viii) a credit for fimds available to reduce the annual Special Tax levy. "State" means tiie State of Califomia. "Taxable Property" means aU of tiie Assessor's Parcels witiiin tiie boundaries of CFD No. 2008-1 which are not exempt from the Special Tax pursuant to applicable law or Section E below. "Taxable Property Owner Association Properfy" means all Assessor's Parcels of Property Owner Association Property tiiat are not exempt pursuant to Section E below. "Taxable Public Properfy" means all Assessor's Parcels ofPublic Property tiiat are not exempt pursuant to Section E below. "Townhome Unit" means an individual residential dwelling unit tiiat (i) shares one or tnore common walls with anodier residential dwelUng unil, (ii) is physicaUy attached to the land undemeatii tiie unit, and (iii) tiie fee simple land undemeatii tiie unit is or will be conveyed with each such imit. "Trustee" means tiie tmstee or fiscal agent under the Indenture. "Undeveloped Properfy" means, for each Fiscal Year, all Taxable Properfy not classified as Developed Property, Taxable Property Owner Association Property, or Taxable Public Property. B. ASSIGNMENT TO LAND USE_CATEGORIES Each Fiscal Year, all Taxable Property within CFD No. 2008-1 shall be classified as Developed Property, Taxable Public Property, Taxable Property Owner Association Property or Undeveloped Property, and shall be subject to Special Taxes in accordance with this Rate and Method of Apportionment detemiined pursuant to Sections C and D below. C. MAXIMUM SPECLa..TAXRATE • Developed Property shall be assigned to Land Use Classes 1 through 18 as listed in Table 1 below, 1. Developed Properfy (a). Maximum Special Tax The Maximum Special Tax for each Assessor's Parcel classified as Developed Properfy shall be the greater of (i) tiie amount derived by application of the Assigned Special Tax or (ii) tiie amount derived by application of the Backup Special Tax, (b). Assigned Special Tax The Fiscal Year 2011-2012 Assigned Special Tax for each Land Use Class is shown in Table 1, below. TABLE 1 Assigned Special Tax for Developed Property within Communify Facilities District No. 2008-1 Fiscal Year 2011-2012 1 I 1 ill i 1 nii ll Ml 1 (1 I) mi \ 1 1 111] i Residential Property > 2,300 sq.ft. $5,405 per unit 2 Residential Property 2,151 -2,300 sq. ft. $5,288 per unit 3 Residential Property 2,001-2,150 sq.ft. $4,989 per unit 4 Residential Property 1,851-2,000 sq.ft. $4,973 per unit 5 Residential Property 1,701-1,850 sq.ft. $4,917 per unit 6 Residential Property 1,551 - 1,700 sq, ft $4,557 per unit 7 Residential Property 1,401 - 1,550 sq. ft. $4,069 per unit 8 Residential Property 1,251-1,400 sq.ft. $3,701 per umt 9 Residential Property 1,101 - 1,250 sq. ft. $3,482 per unit 10 Residential Property 951 - 1,100 sq. ft. $3,158 per umt 11 Residential Property 801 - 950 sq. ft. $2,572 per unit 12 Residential Property <= 800 sq, ft. $2,332 per unit 13 BMR Units > 1,400 sq. ft. $1,344 per unit 14 BMR Units 801 - 1,400 sq. ft. $1,344 per unit 15 BMR Units <= 800 sq. ft $1,139 per unit $60,000 per acre of 16 Apartment Property NA Aparhnent Properfy $1.769persq, ft, ofNon 17 Non-Residential Property - NA Office Floor Area Residential Floor Area $0,520 per sq. ft. ofNon 18 Non-Residential Property - NA RetaU Floor Area Residential Floor Area (c). Backup Speoial Tax The Fiscal Year 2011-2012 Backup Special Tax attributable to a Final Subdivision wiU equal $124,695 multipUed by the Acreage of all Taxable Property, exclusive of any Taxable Property Owner Association Property and Taxable Public Property, therem. The Backup Special Tax for each Assessor's Parcel of Residential Property other tiian Apartment Property shall be computed by dividing tiie Backup Special Tax attributable to tiie applicable Final Subdivision by tiie number of Residential Lots within tiiat Fina Subdivision. The Backup Special Tax for each Assessor's Parcel of Non-Residential Property shaU be computed by multiptying tiie Backup Special Tax by tiie Acreage of such Assessor's Parcel. There shall be no Backup Special Tax on Apartment Property. If a Final Subdivision includes Assessor's Parcels of Taxable Property for which buUding permits for both residential and non-residential constinction have been issued, exclusive of Apartment Property, Taxable Property Owner Association Property and Taxable Public Property, tiien tiie Backup Special Tax for each residential dwelling unit shall be calculated according to the following formula: Residential DweUing Unit Backup Special Tax = ((Backup Special Tax) X (Acreage of Assessor's Parcel) X (Residential Floor Areay(Residential Floor Area plus Non- Residential Floor Area)) / Number of Residential Dwelling Units) In this case, the Backup Special Tax for each square foot of Non-Residential Floor Area shall be calculated according to the following formula: Non-Residential Square Foot Backup Special Tax = ((Backup Special Tax) X (Acreage of Assessor's Parcel) X (Non-Residential Floor Area/(Residential Floor Area plus Non- Residential Floor Area)) / Non-Residential Square Footage) Notwithstanding the foregoing, if all or any portion oftiie Final Subdivision(s) described in the preceding paragraphs is subsequentiy changed or modified by recordation of a lot line adjustinent or similar instrament, and onty ifthe City determines that such change or modification results in a decrease in the number of Residential Lots witiun the Fmal Subdivision, then tiie Backup Special Tax for each Assessor's Parcel of Developed Property tiiat is affected by the lot line adjusttnenfor similar mstrament for such Fmal Subdivision shall be a rate per Acre as calculated below. The Backup Special Tax previousty determined for an Assessor's Parcel of Developed Property that is not affected by the lot line adjustment or similar instrument for such Final Subdtyision shall not be recalculated, 1. Determine the total Backup Special Tax anticipated to apply to the changed or modified Final Subdivision area prior to the change or modification. 2. The resuU of paragraph 1 above shall be divided by the Acreage of Taxable Property which is ultimately expected to exist in such changed or modified Final Subdivision area, as reasonably determined by the City, 3. The result of paragraph 2 above shall be tiie Backup Special Tax per Acre which shaU be applicable to Assessor's Parcels of Developed Property in such changed or modified Final Subdivision area for all remaining Fiscal Years in which the Special Tax may be levied. (d). Increase in the Assigned Special Tax and Backup Special Tax The Fiscal Year 2011-2012 Assigned Special Tax, identified in Table l,above, and the Fiscal Year 2011-2012 Fiscal Year Backup Special Tax shaU increase annually, commencing on July 1, 2012 and on July I ofeach Fiscal Year tiiereafter, by an amount equal to two percent (2%) of tiie amount in effect for the previous Fiscal Year. (e). Multiple Land Use Classes In some instances an Assessor's Parcel of Developed Property may contain more tiian one Land Use Class. The Maximum Special Tax levied on an Assessor's Parcel in such case shall be the sum of tiie Maximum Special Tax for all Land Use Classes located on tiiat Assessor's Parcel. The City's allocation to each type of property shall be fmal in the absence of manifest error. 2. Taxable Property Owner Association Property, Taxable Public Properfy and Undeveloped Property Maximum Special Tax The Fiscal Year 2011-2012 Maximum Special Tax for each Assessor's Parcel of Taxable Properfy Owner Association Properfy, Taxable Public Properfy and Undeveloped Properfy shall be $132,693 per Acre, and shall increase annually thereafter, commencing on July 1, 2012 and on July 1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) of the Maximum Special Tax for the previous Fiscal Year. D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX Commencmg with Fiscal Year 2011-2012 and for each following Fiscal Year, tiie Cify shaU determine the Special Tax Requirement and levy the Special Tax as follows: FUst: The Special Tax shall be levied on each Assessor's Parcel of Developed Properfy in an amount equal to 100% of the applicable Assigned Special Tax; Second: If additional monies are needed to satisfy the Special Tax Requirement after the first step has been completed, tiie Special Tax shall be levied Proportionately on each Assessor's Parcel of Undeveloped Properfy at up to 100% of tiie Maximum Special Tax for Undeveloped Property; Third: If additional monies are needed to satisfy tiie Special Tax Requirement after the first tivo steps have been completed, tiien the levy of tiie Special Tax on each Assessor's Parcel of Developed Properfy whose Maximum Special Tax is determined tiirough tiie application ofthe Backup Special Tax shall be increased in equal percentages from the Assigned Special Tax up to tiie Maximum Special Tax for each such Assessor's Parcel; Fourth: If additional monies are needed to satisfy tiie Special Tax Requirement after the first tiiree steps have been completed, tiien the Special Tax shaU be levied Proportionately on each Assessor's Parcel of Taxable Public Property and Taxable Property Owner Association Property at up to 100% of tiie Maximum Special Tax for Taxable Public Property and Taxable Property Owner Association Property, Notwitiistanding the above, tiie City may, in any Fiscal Year, levy Proportionately less than 100% ofthe Assigned Special Tax in step one (above), when (i) tiie Special Tax is no longer required to be levied pursuant to steps two and tiu^e above in order to meet tiie Special Tax Requirement and (ii) all autiiorized CFD No. 2008-1 Bonds have already been issued or tiie City Council has covenanted tiiat it will not issue any additional CFD No. 2008-1 Bonds (except refimding bonds) to be supported by tiie Special Tax. Further notvyitiistanding the above, under no circumstances will tiie Special Tax levied against any Assessor's Parcel of Residential Property for which a Certificate of Occupancy has been issued be increased by more tiian ten percent above tiie amount tiiat would have been levied in that Fiscal Year had there never been any such delinquencies or defauUs as a consequence of delinquency or default by tiie owner of any other Assessor's Parcel witiiin CFD No. 2008-1. E. EXEMPTIONS No Special Tax shall be levied on up to 34,6 Acres of Public Property and/or Property Owner Association Property in CFD No, 2008-1. In addition, no Special Tax shaU be levied on up to 1.0 Acre that the City has identified and designated as Affordable Rental Property. Tax-exempt status will be assigned by the City in the chronological order in which property in CFD No. 2008-1 becomes Public Property or Property Owner Association Property. However, should an Assessor's Parcel no longer be classified as Public Property, Property^ Owner Association Property, or Affordable Rental Property, it shall become subject to the Special Tax. Public Property or Property Owner Association Property that is not exempt from the Special Tax under tiiis section shall be subject to the levy of tiie Special Tax and shall be taxed Proportionately as part of the fourth step in Section D above, at up to 100% oftiie applicable Maximum Special Tax for Taxable Public Property or Taxable Property Owner Association Property. F. MANNER OF COLLECTION The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that the City may directly bill the Special Tax, and/or may collect Special Taxes at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor's Parcels. G. APPEALS AND INTERPRETATIONS Any property owner who feels tiiat the amount of tiie Special Tax levied on his Assessor's Parcel is in error may submit a written appeal to the City. The City shall review tiie appeal and if tiie City concurs, tiie amount ofthe Special Tax levied shall be appropriately modified through an adjustinent to the Special Tax levy in tiie foUowing Fiscal Year. No refunds shall be given in the current Fiscal Year. The City may mterpret tiiis Rate and Method of Apportionment for purposes of clarifying any ambiguify and make detenninations relative to the annual administration of tiie Special Tax and any landowner or resident appeals. Any decision ofthe Cify shall be final and binding as to all persons. 10 H. PREPAYMENT OF THE SPECLAL TAX The following additional defmitions apply to tfiis Section H: "Buildout" means, for CFD No. 2008-1, that all expected building permits for dwelling units and non-residential facilities to be constracted in CFD No. 2008-1 have been issued, as reasonably detennined by the City. "CFD PubUc FaciHties Costs" means either $54,060,000 in 2011 dollars, which shall increase by tiae Constinction Inflation Index on July 1, 2012, and on each July 1 tiiereafter, or such lower number as (i) shall be determined by tiie City as sufficient to provide fimding for all of the Autiiorized Facilities, or (ii) shall be determined by tiie City concunentiy with a covenant that it will not issue any more CFD No. 2008-1 Bonds (except refimding bonds) to be supported by the Special Tax levy under this Rate and Method of Apportionment as described in Section D. "Construction Inflation Index" means the annual percentage change in the Engineering News Record Building Cost Index for the City of San Francisco, measured as of the calendar year which ends in the previous Fiscal Year. In the event tiiis index ceases to be pubUshed, the Constraction Inflation Index shall be another index as determined by the City that is reasonably comparable to the Engineering News Record BuUding Cost Index for the City of San Francisco. "Future Facilities Costs" means the CFD Public FacUities Costs minus (i) costs of Authorized Facilities previously paid from the Improvement Fund, (ii) moneys cunentiy on deposit in the Improvement Fund available to pay costs of Authorized Facilities, (iii) moneys currentiy on deposit in an escrow fimd that are expected to be available to finance the cost of Authorized Facilities, and (iv) the amount the City reasonably expects to derive from the reinvestinent of these funds. "Improvement Fund" means a fimd or account specificaUy identified in tiie Indentiire to hold fiinds which are currently available for expenditure to acquire or constinict Authorized Facilities. "Previously Issued Bonds" means, for any Fiscal Year, all Outstanding Bonds that are still outstanding under the Indentijre after the principal payment date following the cunent Fiscal Year. 1. Prepayment in FuU The obligation ofthe Assessor's Parcel to pay the Special Tax may be prepaid and permanentiy satisfied as described underthe Prepayment in Full definition, above, provided that a prepayment may be made only for Assessor's Parcels of Developed Property, or an Assessor's Parcel of Undeveloped Property for which a building permit has been issued, and only if there are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax obUgation shall provide the City with written notice of intent to prepay. Witiiin 30 days of receipt of such written notice, tiie City shall notify such owner of the prepayment amount for such Assessor's Parcel. The City may charge such owner a reasonable fee for providing this service. Prepayment must be made not less than 30 days prior to tiie next occuning date that notice of redemption of CFD No. 2008- 1 Bonds from the proceeds of such prepayment may be given by the Trastee pursuant to the Indenture. The Special Tax Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below): 11 Bond Redemption Amount plus Redemption Premium plus Future Facilities Amount plus Defeasance Amount plus PrepaymentFees and Expenses less Reserve Fund Credit less Capitalized Interest Credit Total: equals Special Tax Prepayment Amount As ofthe proposed date of prepayment, tiie Special Tax Prepayment Amount shaU be calculated as follows: 1. Confinn tiiat no Special Tax delmquencies appfy to such Assessor's Parcel. 9 For Assessor's Parcels of Developed Property, compute tiie. Assigned Special Tax and Bacl^rsScial m For Assessor's Parcels of Undeveloped Property for which a buSg pS h s been issued, compute the Assigned Special Tax -jd Backup Special Sx fo? t^^Assessor's Parcel as tiiough it were already designated as Developed P^pe^, based upon the building pemiit which has already been issued for such Assessor's Parcel, 3 Ca^ Divide the Assigned Special Tax computed pursuant to paragraph 2 by the total ilSAssi^ed Special Tax levy for the entire CFD No. 2008-1 based on tiie mvXped PrS Special Tax which could be levied in tiie cunent Fiscal Year on a expetd deveb^^^^^ Buildout of CFD No. 2008-1, excluding any Assessor s Parcels which have been prepaid, and (b) Divide the Backup Special Tax computed P^^^Vn rSf 1 ^excCin^^^^^ estimated Backup Special Tax at BuUdout for the entne CFD No_ 2008-1, excluding any Assessor's Parcels for which Special Taxes have been prepaid m fiill 4 Multipfy tiie larger quotient computed pursuant to paragi'aph ^(a) or 30)) by the Previousfy Issued Bonds to compute tiie amount of Previousty Issued Bonds to be retired and prepaid (the "Bond Redemption Amount"). 5 Multipfy the Bond Redemption Amomit computed pursuant ^ paragraph 4 by the ap^Sle redemption premium (e.g., the redemption price-300%), if any, on tiie Previousfy Issued Bonds to be redeemed (tiie "Redemption Premium ). 6. Compute the cunent Futtire Facilities Costs. 7 Multipfy tiie larger quotient computed pursuant to paragraph 3(a) or 3(b) by tiie amount deSined pursuant to paragraph 6 to compute tiie amount of Future Facilities Costs to be prepaid (tiie "Futiire FacUities Amount"). 8. Compute tiie amount needed to pay interest on tiie Bond Redemption A-ount from ^^^^^ bond principal payment date foUowing the current Fiscal Year until the earliest redemption date for the Previousfy Issued Bonds, Notwitiistanding tiie above, if the Pre Wssu^^ Bonds may be redeemed in the cunent Fiscal Year but after the date of prepayment, ttie amount needed to pay tiie interest under this step shall equal zero. 9. Detemiine ttie Special Tax levied on the Assessor's Parcel in the cunent Fiscal Year which has not yet been paid. 12 10. Compute the minhnum amount die City reasonably expects to derive from the reinvestinent of tiie Special Tax Prepayment Amount less the Futtire Facilities Amount and the Prepayment Fees and Expenses (defmed below) from tiie date of prepayment until the redemption date for the Previously Issued Bonds to be redeemed with tiie prepayment. 11. Add tiie amounts computed pursuant to paragraphs 8 and 9 and subtiact tiie amount computed pursuant to paragraph 10 (the "Defeasance Amount"). 12. The prepayment fees and expenses of CFD No. 2008-1 are as calculated by the City and mclude the costs of computation of the prepayment, the costs to invest the prepayment proceeds, tiie costs of redeeming CFD No. 2008-1 Bonds, and tiie costs of recording any notices to evidence the prepayment and the redemption (the "Prepayment Fees and Expenses"). 13. The reserve ftmd credit (tiie "Reserve Fund Credit") shall equal the lesser ofi (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated witii the redemption of Previously Issued Bonds as a result ofthe prepayment, or (b) the amount derived by subtracting the new reserve requirement (as defined in the Indentiire) in effect after the redemption of Previously Issued Bonds as a result of the prepayment from the balance in the reserve fund on tiie 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 fimd for tihiePreviousl y Issued Bonds is below the reserve requirement (as defined In the Indenture). 14. If any capitalized interest for tiie Previously Issued Bonds is projected to remain unexpended as of tiie date immediately following tiie principal payment following the cunent Fiscal Year, a capitalized interest credit shall be calculated by muhiplying the larger quotient computed pursuant to paragraph 3(a) or 3(b) by tiie expected balance in tiie capitalized interest fimd or account on such date (the "Capitalized Interest Credit"), 15. The Special Tax prepayment is equal to tiie sum of the amounts computed pursuant to paragraphs 4, 5, 7,11 and 12, less the amounts computed pursuant to paragraphs 13 and 14 (the "Special Tax Prepayment Amount"). From tibie Special Tax Prepayment Amount, the amounts computed pursuant to paragraphs 4, 5, 11, 13 and 14 shall be deposited into the appropriate fimd as estabUshed under tiie Indentiire and be used to retire CFD No. 2008-1 Bonds or make debt service payments. The amount computed pursuant to paragraph 7 shall be deposited into the Improvement Fund. The amount computed pursuant to paragraph 12 shall be retained by the Cify. Upon confirmation ofthe payment of the cunent Fiscal Year's Special Tax levy as determined under paragraph 9 (above), the Cify shall remove tiie cunent Fiscal Year's Special Tax levy for such Assessor's Parcel from tiie County tax rolls. With respect to any Assessor's Parcel tiiat is prepaid, the City Council shall cause a suitable notice to be recorded in compliance with tiie Act, to indicate tiie prepayment of tiie Special Tax and the release of the Special Tax lien on such Assessor's Parcel, and tiie obligation of such Assessor's Parcel to pay the Special Tax shall cease. Notwithstanding tiie foregoing, no Special Tax prepayment shall be allowed unless, at the time of such proposed prepayment, tiie amount of Maximum Special Tax that may be levied on Taxable Property witiiin CFD No. 2008-1 (after excluding in the property exempted under 13 Section E) after tiie proposed prepayment is at least equal to the sum of (i) tiie Administiative Expenses, as defmed in Section A above, and (il) 1,10 times annual debt service, in each remaining Fiscal Year on tiie Outstanding Bonds, 2. Prepayment in Part The obligation of the Assessor's Parcel to pay the Special Tax may be partially prepaid as described herein, provided tiiat a partial prepayment may be made only for Assessor's Parcels of Developed Property, or an Assessor's Parcel of Undeveloped Property for which a building permit has been issued, and only if tiiere are no delmquent Special Taxes wititi respect to such Assessor's Parcel at the time of partial prepayment. The amount of the prepayment shall be calculated as in Section H.l; except that a partial prepayment shall be calculated according to the following formula: PP-[(PE-PFE)xD] + A These terms have tiie following meaning: PP = the partial prepayment. PE = the Special Tax Prepayment Amount calculated according to Section H.l, D = the percentage, expressed as a decimal, by which the owner of the Assessor's Parcel is partially prepaying the Special Tax, PFE = the Prepayment Fees and Expenses calculated according to Section H.l. The owner of any Assessor's Parcel who desires such prepayment shall notify the Cify of such owner's intent to paitially prepay tiie Special Tax and tiie percentage by which the Special Tax shall be prepaid. The Cify shall provide the owner with a statement of the amount required for the partial prepayment ofthe Special Tax for an Assessor's Parcel witiiin 30 days ofthe request and may charge a reasonable fee for providing tiiis service. With respect to any Assessor's Parcel tiiat is partially prepaid, the City shall (i) distribute or cause to be disttibuted tiie fimds remitted to it accordmg to Section H.l, and (ii) indicate in the records of CFD No. 2008-1 that tiiere has been a partial prepayment oftiie Special Tax and tiiat a portion ofthe Special Tax witii respect to such Assessor's Parcel, equal to tiie outstanding percentage (1.00 - F) ofthe remaining Maximum Special Tax, shall continue to be levied on such Assessor's Parcel pursuant to Section D. I. TERM OF SPECIAL TAX The Special Tax shall be levied for a period not to exceed fifty years commencing with Fiscal Year 2011-2012, provided however that the Special Tax wUl cease to be levied in an eariier Fiscal Year if the City has detemiined that all required mterest and principal payments on tiie CFD No. 2008-1 Bonds have been paid. KACLIENTS2\San MatBo\RMA.\Rev)sed Bay Meadows RMA 8-31-11.doc 14 PRELIMINARY TITLE REPORT '!i order Number: NCS-504806-B-SM Page Number: 1 ,-v ^^^Sv^/, First American Title Insurance Company Matlonal Commercial Services 901 Mariners Island Blvd. Suite 380 San Mateo, CA 94404 Genelle Ball Bay Meadows Land Company Four Embarcadero Center, Suite 3300 SanFrancisco, CA 94111 Phone: (415)905-5383 Customer Reference; Bay Meadows Race Track ESCTOW Officer: Karen Matsunaga Phone: (650)356-1729 | PRELIMINARY REPORT in response to the above referenced appilctton fo-^^Kf ™Sra"^''dS^^^^ S I'Z^ZT'" cause tob e issued, as of the date hereof, a P°"^J/^'"^^^fnld bv r^a^^^^^^ or encumbrance not shown or referred to as T.e pHnted B read. "Hiey are available from the office which issued this report. Tde^ttfe temiVof the title insurance policy and should 1^ carefully considered. It is in,portant to r,ote U,at *is preHmlna^port i. r,ot a wntten representation as to tiie condition of title and may not list all liens, defects, and encumbrances affecting to«e to the land. First American Tide Insurance Company Order Number; NCS-504806-B-SM Page Number; 2 This report (and any supplements or amendments hereto) is Issued solely for the purpose of (acilitaUng the issuance of a policy of title insurance and no liability Is assumed hereby. If it is desired that liability be assumed prior to the Issuance of a policy of title insurance, a Binder or CDmmrtmentshniiIrCommitment shouldt bhoe rmiiBctprrequestedf, r , , Rrst American Titie Insurance Company order Number: NCS-5C)4806-B-SM Page Number: 3 Dated as of Septsmber 28, 2011 at 7:30 A.M. The fomi of Policy of titie insurance contemplated by this report is: ALTA Standard Owner Policy - 2006 A specific request should be made if anotiier form or additional coverage is desired. Titie to said estate or interest at tiie date hereof is vested in: BAY MEADOWS MAIN TRACK INVE^ORS, LLC, A DELAWARE UMITED OABILnY COMPANY The estate or Interest in die land hereinafter described or referred to covered by tiiis Report is: Fee The Land referred to herein is described as follows: (See attached Legal Description) At die date hereof exceptions to coverage in addition to the printed Exceptions and Exclusions in said policy form would be as follows: 1 General and spedal taxes and assessments for the fiscal year 2011-2012. First Installment: $ 8,955.91, PAYABLE Penalty; $895.59 Second Installment: $ 8,955.91, PAYABLE Penalty: $935.59 Tax Rate Area: 12-001 A. P, No,; 040-030-250 (Affects Block 1 of Parcel One) 2 General and spedal taxes and assessments for the fiscal year 2011-2012, First Installment: $ 12,583.52, PAYABLE Penalty: $0-00 Second Installment: $ 12,583.52, PAYABLE Penalty: $ 0-00 Tax Rate Area: 12-001 A. P. No.: 040-030-260 (Affects Block 2 of Parcel One) Rrst American Titie Insurance Company Order Number; NCS-S04806-B-SM Page Number: 4 3. General and spedal taxes and assessments for the fiscal year 2011-2012, Rrst Installmenti $ 28,185,00, PAYABLE Penalty: $0.00 Second Installment: $ 28,185.00, PAYABLE Penalty: $0.00 Tax Rate Area: 12-001 A. P. No.: 040-030-270 (Affects Block 3 of Parcel Two) 4. General and spedal taxes and assessments for the fiscal year 2011-2012, Rrst Installment: $49,278,90, PAYABLE Penalfy: $0.00 Second Installment: $ 49,278.90, PAYABLE Penalty: $0.00 Tax Rate Area: 12-001 A. P. No.: 040-030-280 (Affects Lot A of Parcel One) 5. General and spedal taxes and assessments for the fiscal year 2011-2012, Rrst Installment: $ 15,908,84, PAYABLE Penalty: $0.00 Second Installment: $ 15,908,84, PAYABLE Penalty: $ 0.00 Tax Rate Area: 12-001 A. P. No.: 040-030-290 (Affects Block 10 of Parcel One) 6. Generai and spedal taxes and assessments for the fiscal year 2011-2012. Rrst Installment: $ 201,087.87, PAYABLE Penalty: $0.00 Second Installment: $ 201,087,87, PAYABLE Penalty: $0.00 Tax Rate Area: 12-001 A. P. No.: 040-030-300 (Affects Blocks 4, 6 and 8, Lot 1 of Block 4, Lot 1 of Block 5, Lot B and the 'Designated Remainder' of Parcel Two) 7. The lien of special tax assessed pursuant to Chapter 2.5 commendng wltii Section 53311 of the California Government Code for Community Fadlities Distiict 2008-1, as dlsdosed by Notice of Spedal Tax Lien recorded August 15,2008 as Instiument No. 2008-093410 of Offidal Records. 8. . The lien of supplemental taxes, if any, assessed pursuant to Chapter 3.5 commendng with Section 75 of the California Revenue and Taxation Code. Rrst American Titie Insurance Company order Number; NCS-504805-B-SM Page Number: 5 q An easement for Interceptor sewer and Inddental purposes, recordal October 16,1948 as tnstiurnt NO 57077-H in Book/Reel 1477, Page/Image 429 of Offidal Records. Tn Favnr nf • City Of San MatSO Affertl A strip of land ten feet In widthtiaversing th e Northeriy portion of tiie herein described property 10 An easement for street and inddental purposes recorded Od:ober 31,1951 as Instiument No. 68818-J in Book/Reel 2152, Page/Image 212 of Offidal Records. in Favor of: County of San Mateo Affects: A portion of tiie land An easement for parWng and inddental purposes, recorded 10/31/1951 as instiument No. 11, 68819-1, Book/Reel 2152, Page/Image 216 of Official Records, in Favor of: County of San Mateo p^ffQ(±^' as desaibed therein 12. An offer of dedication for the purpose of tiie construction, --f^•^^••"^°"'^JP^^^^^^^^ ^ mlintPnance of a sanltatv trunk sewer and necessar/ appuri;enancesttiereto an d incideiitai pu^S, ?ec^^^^^ as instrument No, 51365-L in Book/Reel 2570, Page/Image 604 of Offidal Records,- j^. City of San Mateo, a munidpal corporation An easement for underground conduits and inddental purposes, rerot-ded August 16,1955 as 13. ?nsSent NO 77521-M in Book/Reel 2857, Page/Image 675 of Official Records, In Favor of: The Padfic Telephone and Telegraph Company Effects: A portion of tiie land 14 An easement for parWng and inddental purposes, recorded March 26,1956, as Instrment No. 39784N, Book/Reel 2992, Page/Image 426 of Offidal Records, In Favor of:. California Jockey Club Effects: A port;ion of Parcel Two 1 c; An Pa<;f>mpnt for a main, or mains, pipe line, or pipe lines and inddental purposes, '• fLTd March 15,1957 as InstnlrSent No. 35553-P in Book/Reel 3189, Page/Image 574 of Oflidal Records. • In Favor of: California Water Sen/lcfi Company yj^ffgcts: A pori;ion of tiie land An easement for underground conduits, wires, cables, other electrical cond^d:ors and inddental 16. pur^oserrecorded Janua^ 10,1975 as Instiument No. 13957-AI In Book/Reel 6765, Page/Image 637 of Offidal Records, In Favor of; Pacific Telephone and Telegraph Company ^ffg^. A portion of the land 17. An easement for gas pipes and inddental purposes, recorded June 8, 1988 as Instmment No. 88071668 of Offidal Records, In Favor of: Pacific Gas and Electric Company f^ffeds; A portion of tiie land Rrst American Titie Insurance Company Order Number: NCS-504806-&-SM Page Number; 5 18. An easement for gas pipes and Inddental purposes, recorded July 6,1989 as Instrument No. 89088176 of Offidal Records. In Favor of: Padfic Gas and Electric Company Affects: A portJon of tiie land 19. The terms and provisions contained in the document entitied Subdivision Agreement Bay Meadows 96-087 recorded June 10,1999 as Instrument No. 99101693 of Offidal Records, The terms and provisions contained in the document entitied Consent and Assignment and Assumption of Subdivision Agreement recorded April 29, 2003 as Instmment No, 2003-114507 of Offidal Records. 20. Covenants, conditions, restrictions and easements in the document recorded June 10, 1999 as Insti-ument No. 99101694 of Offidal Records, but deleting any .covenarit, condition or restriction indicating a preference, limitati'on or discrimination based on race, color, religion, sex, sexual orientation, marital statijs, ancestry, disability, handicap, familial status, national origin or source of income (as defined in California Govemment Code §12955(p)), to the extent such covenants, conditions or restrictions violate 42 U.S.C, § 3604(c) or California Govenment Code §12955 . Lawful restrictions under state and federal iaw on the age of occupants in senior housing or housing for older persons shall not be constmed as restrictions based on familial stahjs. Document(s) declaring modifications thereof recorded July 22, 2008 as Instmment No. 2008- 084563 of Offidal Records. 21. An easement for storm water drainage and inddental purposes, recorded June 11,1999 as Instiument No. 99101829 of Offlcial Records, In Favor of: Franklin Templeton Corporate Service, Inc., a Delaware Corporation Affects: Eastern portilon of the land 22. The Terms, Provisions and Easement(s) contained in the document entitied Storm Drainage Easement and Reciprocal Agreement recorded June 11,1999 as Instiument No, 99101829 of Offlcial Records, Document(s) declaring modiflcations thereof recorded July 22, 2008 as Instrument No, 2008- 084564 of Offidal Records. Document(s) declaring modiflcations thereof recorded October 22, 2010 as Instiument No. 124760 of Official Records, 23. A deed of trust to secure an original indebtedness of $50,000,000.00 recorded April 14, 2004 as Instiument No, 2004-070905 of Offidal Records. Dated: April 12, 2004 Trustor: Bay Meadows Main Track Investors, LLC, a Delaware limited liability company Trustee: Rrst American Titie Insurance Company, a California corporation Benefldary: Reel National Bank, a national banking assodation, as Agent Rrst American Titie Insurance Company Order Number: NCS-504805-B-SM Page Number: 7 A document entitied Assignment of Leases and Rents recorded April 14, 2004 as Instrument No. 2004-070906 of Offidal Records, as additional securify for the payment of ttie indebtedness secured by the deed of bust. A document recorded November 14, 2008 as Instmment No, 2008-124172 of Official Records provides tiiat ttie deed of ti-ust or tiie obligation secured thereby has been modified, Document(s) declaring modifications to ttie Assignment of Leases and Rents recorded November 14, 2008 as Instmment No. 2008-124173 of Offidal Records, A document recorded March 2, 2010 as Instmment No, 2010-023382 of Official Records provides that tiie deed of bust or tiie obligation secured tiiereby has been modified. Document(s) declaring modifications to tiie Assignment of Leases and Rents recorded March 2, 2010 as Instrument No. 2010-023383 of Ofiidai Records. 24. The temis and provisions contained in the document entitied Bay i;i^f dows Phase II Development Agreement recorded January 24,2006 as Instmment No. 2006-011071 of Offidal Records. Memorandum of Technical Con-edions to tiie Bay Meadows Phase II Development Agreement recottled July 22,2008, Instiument No. 2008-084562 of Official Records, The Temis, Provisions and Easement(s) contained in the document entitied Easement Agreement 25. recorded June 29, 2006 as Instmment No, 2006-096825 of Offidal Records, 26. The terms and provisions contained in the document entitied Lot Tie Agreement for Bay Meadows Phase II Master Tentative Parcel Map recorded December 15, 2006 as Insti-ument No. 2006-190366 of Ofildal Records. 27, A document entitied Notice of Projed: Restridions for Bay Meadows Phase II recorded August 12, 2008 as Instiument No, 2008-092336 of Ofildal Records, 28, The temis and provisions contained in the document entitied Covenant t^e^'^f^ng Expanded Gaming, Bay Meadows Phase II recorded December 29,2008 as Instmment No, 2008-138349 of Ofildal Records.. 29 The terms and provisions contained in the document entitied "Sudivislon Improvenient Agreement Bay Meadows Phase II, No, 1" recorded August 25, 2010 as Insti-ument No. 2010- 095915 of Ofildal Records. 30 An easement shown or dedicated on tiie map of Bay Meadows Phase II, No. 1 recorded August 25, 2010 and on file in Book 137, Page 37, of Maps, For. public pedestrian access, public sen/ice fadlities, public utilities, sidewalks, storm drainage, sanitary sewers and inddental purposes. Rrst American Titie Insurance Company Order Number; NCS-504806-B-SM Page Number; 8 31. Covenants, conditions, restrictions and easements in the document recorded August 25, 2010 as Instiument No. 2010-095916 of Offidal Records, but deleting any covenant, condition or resbiction indicating a preference, limitation or disalmination based on race, color, religion, sex, handicap, familial status, national origin, sexual orientation, marital statiis, ancestiy, source of income or disability, to tiie extent such covenants, conditions or restiictions violate TTtie 42, Section 3604(c), oftiie United States Codes, Lawful restiictions understate and federal iaw on tiie age of occupants in senior housing or housing for older persons shall not be consti-ued as restrictions based on familial status. 32. The terms and provisions contained in the document entitied "Sudivislon Improvement Agreement Bay Meadows Phase II, No. 2" recorded September 28, 2011 as Instmment No. 2011- 113006 of Official Records, 33. An easement shown or dedicated on tiie map of Bay Meadows Phase II, No, 2 recorded September 28, 2011 and on file in Book 137, Page 73, of Maps. For: public pedesti-ian access, ingress and egress, public sen/ice facilities, public utilities, sidewalks, storm drainage, sanitary sewers and inddental purposes. Rrst American Titie Insurance Company Order Number: NCS-5CK806-B-SM Page Number: 9 INFORMATIONAL NOTES 1. The propertY covered by this report: Is vacant land. According to tiie public records, tiiere has been no conveyance of tiie land within a period of 2. toenty-four montiis prior to the date of tills report:, except as follows; None THIS preliminary reportycommltinent was prepared based upon an application for a policy of titie 3. h;.nrS that identifled land by street address or assessot^s parcel number only, t is ti^e respSiiroft^^^^^^^ to determine whether the land referred to herein is in fad: tiie land tiiat is to be described in the policy or polides to be Issued. Should tills report be used to fadlitate your transad:ion, we must be provided with tiie following 4, prior to the issuance of the policy: A. wrm RESPECTTO A CORPORATION: a. A certificate of good standing of recent date issued by the Secretary of State of the corporation's state of domicile. b A certiflcate copy of a resolution of ttie Board of Dlred:ors authorizing the contemplated ttansaS and designating which corporate officers shall have tiie power to execute on behalf of tiie corporation, c Requirements which tiie Company may impose following Its review of ttie above material and otiier information which ttie Company may require. B WITH RESPECT TO A CAUFORNIA UMITED PARTIMERSHIP: a A certified copy of tiie certificate of limited partnership (fomi LP-1) and any amendments thereto (form LP'-2) to be recorded in tiie public records; b. A fuil copy of the partnership agreement and any amendments; , c. Satisfactory evidence of the consent of a majority in interest of the limited partners to the contemplated transaction; d Requirements which ttie Company may Impose following Its review of ttie above material and other Information which tiie Company may require, C wrm RESPECT TO A FOREIGN UMITED PARTNERSHIP: a A certifled copy of tiie application for registiation, foreign limited partnership (form LP-5) and anylmendments thereto (form LP-6) to be recorded in tiie public records; Rrst American Titie Insurance Company Order Number: NCS-504806-B-SM Page Number: 10 b. A ftjll copy of the partnership agreement and any amendment; c. Satisfactory evidence of Oie consent of a majority in interest of tiie limited partiiers to the contemplated transaction; d. Requirements which the Company may impose following its review of tiie above material and other Information which the Company may require. D, WTTH RESPECTTO A GENERAL PARTNERSHIP: a. A certified copy of a statement of partnership autiiority pursuant to Section 16303 of the Califomia Corporation Code (fomi GP-I), executed by at least hvo partners, and a certified copy of any amendments to such statement (fomi GP-7), to be recorded in tiie public records; b. A full copy of the partnership agreement and any amendments; c. Requirements which the Company may impose following its review of tiie above material required herein and otiier infomiation which the Company may require. E, WITH RESPECT TO A UMITED UABIUTY COMPANY: a. A copy of its operating agreement and any amendments tiiereto; b. If it is a California limited liability company, a certified copy of its artides of organization (LLC-l) and any cert:iflcate of correction (LLC-11), certiflcate of amendment (LLC-2), or restatement of artiides of organization (LLC-10) to be recorded in the public records; c. If it is a foreign limited liability company, a certified copy of its application for registi-ation (LLC-5) to be recorded in the public records; d. With respect to any deed, deed of bust, lease, subordination agreement or other document or instmment executed by such limited liability company and presented for recordation by the Company or upon which tiie Company is asked to rely, such document or instiument must be executed in accordance witii one of the following, as appropriate; (i) If the limited liability company properiy operates through offlcers appointed or elected pursuant to the terms of a writi:en operating agreement, such documents must be executed by at least two duly elected or appointed offlcers, as follows; the chairman of the boanl, the president or any vice president, and any secretaty, assistant secretary, the chief finandal offlcer or any assistant treasurer; (11) If the limited liability company properiy operates through a manager or managers identifled in the art:icles of organization and/or duly elected pursuant to the terms of a written operating agreement, such document must be executed by at least t^o such managers or by one manager if the limited liability company properly operates with the existence of only one manager. Rrst American Titie Insurance Company order Number; NCS-S04806-B-SM Page Number: 11 Requirements which the Company may impose following its review of tiie above material e. and ottier Information which tiie Company may require. F. Wnn RESPECT TO A TRUST; a A certification pursuant to Section 18100.5 of the California Probate Code in a form satisfartoty to the Company. h rnnies of those excerots from tiie original ttust documents and arnendments So whSi deslgnSe tiie tmstee and confer upon the tmstee the power to ad: in the pending ttansaction. Ottier requirements whidi ttie Company may Impose following its review of the c. material raiTe herein and otiier Information which ttie Company may require. G, WnH RESPECTTO INDIVIDUALS: a, A statement of Information. and provisions of the titie Insurance pollcy. If any, to whidi this map is attached. Rrst American Titie Insurance Company Order Number: NCS-504805-B-SM Page Number: 12 LEGAL DESCRIPTION Real property in tiie City of San Mateo, County of San Mateo, State of Califomia, desaibed as follows; PARCEL ONE: LOT A AND BLOCKS 1, 2 AND 10, AS SHOWN ON THE MAP ENTITLED "BAY MEADOWS PHASE II NO. 1" RL£D FOR RECORD AUGUST 25, 2010 IN BOOK 137 OF MAPS, AT PAGE(S) 37T>IROUGH 46, INCLUSIVE, OFFICIAL RECORDS OF SAN MATEO COUNTY. PARCEL TWO: BLOCKS 3,4, 6 AND 8, LOT 1 OF BLOCK 4, LOT 1 OF BLOCK 5, LOT B AND THE 'DESIGNATED REMAINDER', AS SHOWN ON THE MAP ENTTTLED "BAY MEADOWS PAHASE II, NO. 2" FILED FOR RECORD SEPTEMBER 28, 2011 IN BOOK 137 OF MAPS, AT PAGE(S) 73 THROUGH 81. INCLUSIVE, OFnCIAL RECORDS OF SAN MATEO COUNTY. APN: 040-030-250; 040-030-260; 040-030-270; 040-030-280; 040-030-290 and 040-030-300 Rrst American Titie Insurance Company Order Number: NCS-5CM806-B-SM Page Number: 13 NOnCE 1 secuon U4aiOf .eC..o.la~ceC^^^^^^^ conb-olled eso-ow company handl^funds in an ^vvo^^^J dSn?fuS TOsstah S allows fbr funds deposited by wire b-ansfer to be recording any documents'" «"nf«°" ^'^l ^„^„Sl^r^s c^e™ funds may be disbursed the next day after deposit In order to SrnSrSfoJr'tone^v:^^^^^^^^^^ If you have any questions about the effectof this new law, please contact your local First American Office for more details. NOTICE n or five hundred dollars ($500). be subject to penalty for failure to withhold if; i -rs:£rSSra\^=:^?Srr%t^^^^^ 3 Srse^r KndttarS^^i^wl^^^^ -^- the pena^ of penury that tt,BCalilbmi a rea, property being conveyed '• ?^1SAldN^^^^^ (a^defined In Sectton 1034 ofthe Intemal Revenue Code). The seller is subject,. penalty forIcnowingl y filing a freudulent certificate for the purpose of avoiding the Wrthholding requirement. The aiifomla statute referenced above in.ude provisions which a^hoHze the Franchise Tax Boar, to grant reduced withholding and waWers ^n. withholding on a case-by-case basis. The Seller May Request a Waiver by Contacting: Franchise Tax Board Withhold at Source Un'it P.O. Box 651 Saaamento, CA 95812-0651 (916) 845-4900 Rrst American Titie Insurance Company Order Number; NCS-S04806-B-SM Page Number; 14 Privacy Policy We Are Committed to Safeguarding Customer Informatioii In order to beti:er serve your needs now and In the fuhjre, we may ask you to provide us with certain inftirmation. We understand ttiat you may be concerned about what we will do witii such information - particulariy any personal or financial infomnation. We agree tiiat you have a right to know how we will utilize tiie personal information you provide to us. Therefore, togetiier wltii our parent company. The Rrst American Corporation, we have adopted tills Privacy Policy to govern the use and handling of your personal information. Applicability This Privacy Policy govems our use of tiie information which you provide to us. It does not govern the manner in which we may use information we have obtained from any other source, such as information obtained from a public record or from anotiier person or entity. First American has also adopted broader guidelines that govem our use of personal Information regardless of Its source. Rrst American calls these guidelines its Fair Information Values, a copy of which can be found on our website at www.firstam.com. Types of Information Depending upon which of our sen/lces you are utilizing, the types of nonpublic personal information that we may collect indude; » Infonmation we receive from you on applications, forms and In other communications to us, whetiier In writing, in person, by telephone or any otiier means; Information about your transactions wltii us, our affiliated companies, or otiiers; and « Information we receive from a consumer reporting agency. Use of Information We request information from you for our own legitimate, business purposes and not for tiie benefit of any nonaffiliated party. Therefore, we will not release your Information to nonaffiliated parties except; (1) as necessary for us to provide tiie product or sen/ice you have requested of us; or (2) as permitted by taw. We may, however, store such infonnation Indefinitely, induding the period afl:er which any customer relationship has ceased, Such information may be used for any intemal purpose, such as quality control efforts or customer analysis. We may also provide all of tiie types of nonpublic personal infomiation listed above to one or more of our affiliated companies. Such affiliated companl.es indude finandal sen/ice providers, such as titie Insurers, property and casualt/ Insurers, and tmst and investinent advisory companies, or companies involved in real estate services, sudi as appraisal companies, home warranty companies, and escrovy companies. Furi;hemiore, we may also provide all tiie information we collect, as- described above, to companies tiiat periderm mari Former Customers Even If you are no longer our customer, our Privacy Policy will continue to apply to you. Confidentiality and Security We will use our best efforts to ensure that no unautiiorized parties have access to any of your Information, We restrict access to nonpublic personal Infomiation about you to those individuals and entities who need to know that Infoririab'on to provide products or services to you. We will use our best efforts to ttaln and oversee our employees and agents to ensure that your Information will be handled responsibly and In accordance witii tills Privacy Policy and Rrst American's Fair Information Values, We currentiy maintain physical, electionic, and procedural safeguards tiiat comply with federal regulations to guard your nonpublic personal Infomiation, . , Rrst American Titie Insurance Company Order Number; NCS-504805-B-SM Page Number: 15 EXHIBITA UST OF PRINTED EXCEmoNS AND EXCLUSIONS (BY POUCT TlfPE) 1. CAUFORNIA UND TITLE ASSOCIATION STANDARD COVERAGE POUCY - 1990 SCHEDULE B EXCEPTIONS FROM COVERAGE or whidi may be asserted by persons In possession thereof. ^^^.^^ i—i:r;c^nto=^^^^^^^ 5 Ta) Un^SS'S^^^^ r^ttons or exceptions In patents or in Acts authorizing ^e f su^« f--^' ^^) -^^ ^3^^' ^^'^'^^ ^" or S Sttr, vl^eler or not the matters excepted under (a), (b), or (c) are shown by the public records, EXCLUSIONS FROM COVERAGE Tl,e following matter, are expressly exduded from the coverage of this policy and the Company will not pay te or damage, costs, attorneys' fees or any Improvement now or hereafter erected on me Jand, (iH) a f^^^"^ "J*"!?^^^ _. ^Z, violation of these laws, ordinances or knowledge. 3. Defects, liens, encumbrances, adverse (daims or other matters. assumed or agreed to by the Insured daimant; (c) resulting In no loss or damage to the Insured daimant; 4. Sdfty or unenforceability of the flen ofthe Insured mortgage^or =1^^" *^^^f'l"* aris^^^^^^^ *e transaction evidenced by the 2 AMERICAN LAND TITLE ASSOCIATION OWNER'S POUCY FORM B - 1970 SCHEDULE OF EXCLUSIONS FROM COVERAGE Rrst American Titie Insurance Company Order Number; NCS-504806-B-SM Page Nuniber: 16 S?i"ai^s£te?ilS°J^^^^^^^^^^^ ^ ''-^se Which would not have been sustained if the Insured daimant had 3. AMERICAN LAND HTLE ASSOCIATION OWNER'S POUCY FORM B - 1970 WITH REGIONAL EXCEPnONS SCHEDULEB This polfcy does not insure against loss or damage by reason ofthe matters shown in parts one and two following; JSo^TCS£tr°'''°^'^ ^""^"^''^"^ ^by'^mXtciu'l^^S.^.liSSior.hT^^^^ '^'^^ '"'''^'^'^ ^"^-^'^ -"'^ ^^-*'"«^ 'y-.'-P^^nof^''^ '^-i M^TnT^f daims ofeasement or encumbrances which are not shown by the public recortJs. ES'srwX'SSr' ^'°^^^'" ^"^' ""°^*"^^"^' -'"^ *- ^* ^'^' ^ ^-^^ --V would disdose, and Unpatented mining daims; resen^tions or exceptions in patents or in Ads authorizing the issuance thereof; water rights,claim s ortiOe to SS:°'"''''"° ' "'"' ^'' '"^'^' '"^' °' '"'*'"" ^^^•'°^' °^ f^^*^^"^^ '^"^'^ed, Imposed by law and notshown by the public 4. AMERICAN LAND TTrtE ASSOCIATION LOAN POUCY - 1970 WITH A,LT.A. ENDORSEMENT FORM 1 COVERAGE SCHEDULE OF EXCLUSIONS FROM COVERAGE I.l ^nWh^t °''^"^"°^ °^ governmental regulation (induding but not limfted to building and zoning ordinances) resWctlna or reoulatina or 2, L""S;SnTs?^SoZSS^^^^ Date o^PoiS"'"'*"""" °' govemmental rightso f police power unless notice ofthe exercise of sudi rightsappea^ in the public reoorts at 5, AMERICAN LAND TIUE ASSOOATION LOAN POUCY - 1970 WITH REGIONAL EXCEPnONS s.si,rr™^r.£^rs^xrrr^drss,?Sp?,^^ SCHEDULEB ThiParst Onpolfce y does not Insure against loss or damage by reason of the matte.3 shown in parts one and two following; 1. pmSr? o\Tr"pK£oT°''"'""''' ""'^"^ "^"^ "' *^ ^"^''^ °^ ^"^ ^^'"3 ^"*°*>' *^^ '^^'-^ -^x^ °^ ^-^^-nts on real XXWr?Ko^1^^^^ "^ *^ P"^"^ '^^^^ '^^ -'^^' -^« ^^ ^-'^'"^^ ^y - inspection of said land n?t^~ ^"'^l daims c)feasernent or encumbrances which are not shown by the public records. wKeSsSl^y'^puSar '''"''' '" '^"' -croachments, or any other f^cts whld, a correct sun^ey would disdose, and Unpatented mining daims; resen/ations or exceptions In patents or in Acts authorizing the issuance thereof; water rights,daim s or ftie to Ss"' °'"''''' ^° '"'"' '°r^^^' ^'^' °' -"^t^rial theretofore or hereafter fumished. Imposed by law and not shown by the public Rrst American Title Insurance Company order Number; NCS-504806-B-SM Page Number: 17 6. AMERICAN UND TTTLE ASSOCIATION "-OAN POUCY " 1992 WITH A.UT,A. ENDORSEMENT FORM 1 COVERAGE EXCLUSIONS FROM COVERAGE aS parcel of whi* the land IS or was a part; or^ivenv^^^^^^^^^^ M resuWna in no loss or damageto th e Insured daimant; ^j^ ,0^^ of the lien of the insured ft. InSlrt l„s .d,.nced » f,?M»^5„'^S, „,. Inte.^ .tths mortg..™ In»sd b, this pole, b, re.™ of th. op.,»«oa ot mth.mhssc5.ncn.tlnjtheml.re*otthel»"»'™*™JrSiMtt. 'pplMon .tth.docWh.bf "l"™""'"'*"";; transfer results from the failure; ^ ^, .^. „ rb^)SSS^«onX:So?crtS&serforval. 7. AMERICAN LAND TITLE ASSOaATION LOAN POUCY - 1992 WITH REGIONAL EXCEPTIONS SCHEDULE B S"6r™K;S:Stl»whl.».r.«otsho.hb,,h.P»b,lc«.*b.. which cbbldb..^^^^^ HEl=SS==:r:S:^rSs-h.c...so.- C.e°h«tr«*.'Sl or . C;„, .r Hght to , lien, ,o, s.™i», l.boc of hi.teh., .he« o, he„.»» ,.„»=., Imposed b,,.» ..d not sho.. b, b,e pbbl. records. 8. AMERICAN LAND TITLE ASSOCIATION OWNER'S POUCY -1992 Rrst American Titie Insurance Company Order Number: NCS-504805-B-SM Page Number; 18 EXCLUSIONS FROM COVERAGE The following matters are expressly exduded from the coverage of this policy and the Company will not pay loss or damage, costs, attorneys' fees or expenses which arise by reason of; 1. (a) Any tew, ordinance or govemmental regulation (Induding but nol limited to building and zoning laws, ordinances, or regulations) restricting, regulating, prohibiting or relating to (I) the occupancy, use, or enjoyment of the land; (il) the character, dimensions or location of any improvement now or hereafter erected on the land; (111) a separation in ownership or a diange In the dimensions or area ofthe land or any parcel of whidi the land Is or was a part; or (iv) environmental protection, or the effect of any violation of these laws, ordinances or govemmental regulations, except to the extent that a notice of the enforcement thereof or a notice of a defect^ Hen or encumbrance resulting from a violation or alleged violation affecting the land has been recorded In the public records at Date of Policy, (b) Any govemmental police power not exduded by (a) above, except to the extent that a notice of the exerdse thereof or a notice of a defect, lien or encumbrance resulting ftom a violation or alleged violation affecting the land has been recorded in the public records al Dale of Policy. 2. Rights of eminent domain unless notice of the exercise thereof has been recorded in the public records at Date of Policy, but not exduding from coverage any taking which has occurred prtor to Date of Pollcy which would be binding on the rights of a purchaser for value without knowledge. 3. Defects, liens, encumbrances, adverse daims, or other matters; (a) created, suffered, assumed or agreed to by the Insured daimant; (b) not known to the Company, not recordedi n the public records at Date of Policy, but known to the Insured daimant and not disclosed in writing to the Company by the insured daimant prior to the date the Insured daimant became an insured under this policy; (c) resulting in no loss or damage to the insured daimant; (d) attaching or created subsequent to Date of Policy; or (e) resulting in loss or damage which would not have been sustained ifthe Insured claimant had paid value forthe estete or interest Insured by this policy. 4. /\ny claim, which arises out of the transaction vesting in the Insured the estete or interest insured by this policy, by reason of the operation of federal bankruptcy, state Insolvency, or similar creditors' righls laws, that is based on; (i) the transaction aeating the estete or interest insured by this policy being deemed a fraudulent conveyance or fraudulenttransfer ; or (ii) the transaction creating the estete or interest insured by this policy being deemed a preferential transfer except where the preferential transfer results from ttie failure; (a) to timely record the instrument of transfer; or (b) of such recordation to Impart notice to a purchaser for value or a judgment or Hen creditor. 9. AMERICAN UND TTTLE ASSOaATION OWNER'S POUCY -1992 WITH REGIONAL EXCEPTIONS 'When the /\merican Land Trtle AssodaUon pollcy is used as a Stendard Coverage Policy and not as an Extended Coverage Policy the exduslons set forth ; jn paragraph 8 above are used and the following exceptions to coverage appear In the policy, SCHEDULES This policy does not insure against loss or damage (and the Company will not pay costs, attorneys' fees or expenses) which arise by reason of: UPartOne; 1. Taxes or assessments which are not shown as existing liens by the records of any texingauthorit y that levies texeso r assessments on real property or by the public records, 2. Any facts, rights. Interests, or daims which are not shown by the public records but which could be ascertained by an inspection of said land or by making Inquiry of persons In possession thereof. 3. Easements, daims of easement or encumbrances which are not shown by the public records. 4. Discrepancies, conflicts In boundary lines, shortage in area, enaoachments, or any otiier fads which a correct survey would disclose, and which are not shown by public records. • , ' 5. Unpatented mining daims; reservations or exceptions in'patents or in Acts authorizing the Issuance thereof; water rights, claims or title to water. 6. Any lien, or right to a lien, for services, labor or material theretofore or hereafter fornished. Imposed by law and not shown by the public reconJs. 10. AMERICAN UND TTTLE ASSOCIATION REStDENTlAL TTTLE INSURANCE POUCY - 1987 EXCLUSIONS In addition to the Exceptions In Schedule B, you are not insured against loss, costs, attorneys' fees and expenses resulting fixim: 1. Govemmentel police power, and the existence or violation of any law or government regulation. This Indudes building and zoning ordinances and also laws and regulations conceming: * land use * ig^d division * Improvements on the land * environmentel protection This exclusion does not apply to violations or the enforcement of these matters which appear in the public records at Policy Date. This exdusion does not Hmtt the zoning coverage described in Items 12 and 13 of Covered Tttie Risks. 2. The right to teke the iand by condemning It, unless: Rrst American Titie Insurance Company Order Number; NCS-504S06-B-SM Page Number; 19 3. TWe Risks: : li 7. KK:,tSSs,^oSrPollc. Date - umess they appeared Inttie publi c records * 2 fi^liSSSJafter the Pollcy Date - ttiis does not limit the labor and material Hen coverage In Item 8 of Covered Tide Risks 4, Failure lo pay value for your title. ^' ^toa°ny'lSnd outside the area spedflcally described and referred toI n Item 3 of Schedule A, or * In sb-eets, alleys, or wateways ttiat touch your land ^ -mis exdusion does not limft the access coverage In Item 5 of Covered Ttie Risks. 11. EAGLE pROTECnON OWNER'S POUCY CLTA HOMEOWNER'S POUCY OF TTTLE INSURANCE - 1998 ALTA HOMEOWNER'S POUCY OF TXaE INSURANCE - 1998 C.».d„..»(S-.,.,on.,V..,.«™M3_J.-^^^^^^^^^^ EXCLUSIONS in addftion to the Exceptions in Sdiedule B, you are not Insured against loss, c«sts, attorneys' fees, and expenses resulting from; 1. Govemmentel poHce power, and tiie existence or violation of any law or government regulation. This indudes ordinances, laws and regulations conceming: a. building l^'^°"'"9 ^ ^ , .^ c land use '^- improvements on the land ' I J division f- environmentel protection This exdusion does not applytovlolaUons orttie enfo^ementofttiese matters If notice oftiie violation or enforcementappears In the •? The riahtt o teke tiie Land by condemning ft,unless : „ ,, , 5. SS oSb" te KK'lJ*. - this d»» hbt llmlth. CO..™,. doscdbed 1„ D^aed m 7, 8.d, 22, 23, 24 o, 2B. 5, Failure to pay value for Your TWe, ^' ^S an? Sn^'outslde the area specifically desaibed and referred toi n paragraph 3 of Schedule A; and b. in steeets, alleys, or waterways that toudi ttie Land. .„.,,, ,. This exdusion does not limft ttie coverage desaibed In Covered Risk U or 18. 12. AMERICAN UND TTTLE ASSOaATION LOAN POUCY - 1992 Wrm A.LT.A. ENDORSEMENT FORM 1 COVERAGE WHH EAGLE PROTECHON ADDED EXCLUSIONS FROM COVERAGE •me following matters are expressly exduded from the a,verage ofthis poHcy and the Company will not pay loss or damage, costs, attorneys' fees or Rrst American Titie Insurance Company Order Number: NCS-504806-B-SM Page Number; 20 '^f^/ ^'^^! encumbrance resulting fVom a vtolation or alleged violation affeding the land has been recorded In the Public Reconis at Date of Policy. This exdusion does not limtt the coverage provided under Insuring provisions 14,15,16 and 24 of tills policy. Wghts of eminent domain unless notice of tiie exercise tiiereof has been recorted In tiie Publfc Records at Date of Policy, but not exdudina Knwted T^^ ^"^ "" occurred prior to Date of Policy whidi would be binding on tiie rights of a purdiaser for value without Defects, liens, encumbrances, adverse daims or ottier matters: (a) created, suffered, assumed or agreed to by ttie Insured aaimant; ^i"*^ ^r"^**" *^ Comfwny, not reoirded In the Public Records at Date of Policy, but Known to ttie Insured Claimant and not disclosed in wntmg to ttie Company by the Insured Qaimant prior to tiie date ttie Insured Qaimant became an Insured under Oils pollcy; (c) resulting In no loss or damage to the Insured Qaimant; ' (d) attaching or aeated subsequent to Date of Pollcy (ttiis paragraph (d) does not limft ttie coverage provided under insuring provisions 7,8, lOf x/f ly, ^u, 21, 23, 24 and 25)j or (e) rKulOng in lo^ or damage whidi would not have been susteined if ttie Insured Qaimant had paid value for ttie Insured Mortgage. Unenforceabilrty of .ttie lien of tiie Insured Mortgage because of ttie Inability or feilure of ttie Insured at Date of Policy, or tiie inabllfty or ?ftu" ted ^"^ s"'^^"^"' °w"6r of ttie indebtedness, to comply witii applicable doing business laws ofthe stete in which ttie Land Is 5. Invalidity or unenforceability of ttie lien of tiie Insured Mortgage, or daim ttiereof, whidi arisra out of ttie transadJon evidenced by the Insured Mortgage and is based upon: (a) usury, except as provided under Insuring provision 10 of this policy; or (b) any consumer credft protection or fruth In lending law. 6. Taxe ()r assessments of any texingo r assessment auttiority whidi become a lien on ttie Land subsequent to Date bf Policy. 7. Any daim, whidi arises out of the fransactionaeatin g tiie Interest of ttie mortgagee Insured by tills pollcy, by reason of ttie operation of federal bankruptcy, stete Insolvency, or similar aedftots'rights laws, tiiat Is based on: ' •- " ' K= (a) ttie b-ansacjtion creating the interest of ttie insured mortgagee being deemed a fraudulent ainveyance or fraudulent transfer; or ,<^^ subordination of the interest of ttie Insured mortgagee as a result of ttie application of tiie dortrtne of equftable subordination; or (c) tiie bansartion creating ttie interest of ttie Insured mortgagee being deemed a preferential fransfer except where the preferential b-ansfer results from the failure: '^ >' (I) to timely record tiie insttument of fransfer;o r (li) of such recordation to impart notice to a purchaser for value or a judgment or lien aedftor. 8, Any daim of Invalidity, unenforceability or lack of priority of ttie lien of tti^ Insured Mortgage as to advances or modificaUons made after tiie insured has Knowledge that the vestee shown in Sdiedule A is no longer ttie owner of ttie estete or interest covered by ttiis policy. This exdusion does not limft the coverage provided under Insuring provision 7. > K J 9. lack of prionty of ttie iien of tiie Insured Mortgage as to each and every advance made after Date of Policy, and all interest charged thereon, over liens, enojmbrances and ottier matt:ere affeding title, ttie existence of which are Known to tiie Insured at: (a) The time of the advance; or . (b) The time a modification is, made to tiie tenns of ttie Insured Mortgage which changes ttie rate of interest charged. If the rate of Interest IS greater as a result of the modiflcaaon ttian it would have been before Oie modificaBon, This exdusion does not limft Uie coverage provided under insuring provision 7. SCHEDULEB This policy does not insure against loss or damage (and ttie Company will not pay costs, attorneys' fees or expenses) which arise by reason of: d; Environmentel protection liens provided for by ttie followingexistin g sfahjtes, whidi Hens will have priority over Oie lien of Uie Insured Mortgage when they arise; NONE 11. EAGLE PROTECnON OWNER'S POUCY CLTA HOMEOWNER'S POUCY OF TIUE INSURANCE - 2008 ALTA HOMEOWNER'S POUCY OF TITLE INSURANCE ' 2006 Covered Risks 16 (Subdivision Law Violation). 18 (Building Permit). 19 (Zoning) and 21 (Encroachment of boundary walls or fences) are subject to Deductible Amounts and Maximum Dollar Limits of Liability EXCLUSIONS In addftion to tfie Exceptions in Schedule B, You are not insured against loss, costs, attorneys' fees, and expenses resufting from: 1. Govemmentel police power, and ttie existence or violation of ttiose portions ofany law or government regulation conceming; a. building b. zoning eland use d. Improvements on ttie land e, land division f, environmentel protection This Exdusion does not limit tiie coverage described In Covered Risk 8.a., 14, 15, 16, 18,19, 20, 23 or 27. 2. The failure of Your existing sfructures, or any part of ttiem, to be consfructed in accordance witti applicable building codes. Tliis Exclusion does not limit ttie coverage described in Covered Risk 14 or 15. 3. The right to teke Uie Land by condemning it This Exdusion does not limit the coverage described In Covered Risk 17. 4. Risks: a, tiiat are aeated, allowed, or agreed to by You, whettier or not ttiey are recorded In ttie Public Records; Rrst American Title Insurance Company Order Number: NCS-5O4805-B-SM Page Number: 21 b, ttiat are Known to You at ttie Policy Date, but not to Us, unless they are recorded in ttie Public Records at ttie policy Date; d. TatT^'lTaft^l^e'pXoate - ttiis d^ nC limft ttie coverage desaibed in Covered Risk 7, B.e., 25, 26, 27 or 28. 5. Failure to pay value for Your Titie. a. to any land outside ttie area specfflcally desaibed and referred to In paragraph 3 of Sdiedule A; and b. In streets, alleys, or waterways Uiat touch tiie Land. This Exclusion does not limft ttie coverage desaibed in covered Risk 11 or 21 UMTfATlONS ON COVERED RISKS on Schedule A are as follows: Covered Risk 16:1% of Policy Amount or $5,000,00 (whldiever Is less) f i°'°?°'°° Covered Risk 18:1% of Policy Amounl or $5,000.00 (whichever Is less) ^cmn m Covered Risk 19:1% of Policy Amount or $5,000.00 (whichever Is less) if ;°°°;„ Covered Risk 21:1% of Policy Amount or $2,500.00 (whldiever Is less) $5,000.00 12.11.IRD GENERATION EAGLE LOAN POUCY AMERICAN L^DITTLE^^IATION EXPANDED COVERAGE RESIDENTIAL LOAN EXCLUSIONS FROM COVERAGE Tlie following mattem are expressly exduded from ttia coverage of ttils pollcy and Oie company Will not pay loss or damage, costs, att^^^^^^ expenses which arise by reason of: fbVy govemmentel police power. This Exclusion 1(b) does not modi^ or limft the coverage provided under Covered Risk 5, 6,13(c), 13(d), 2. Ri^to Jf eminent domain, mis Exdusion does not modify or limft ttie a.verage provided under Covered Risk 7 or 8, 3 Defects, liens, encumbrances, adverse daims, or ottier matters !SShiSi:SSSrSK^'srb.=.s^^^^^^ gSS"or'SJsSSroS"o™S"l.«, mis do» nc. m.dlf, „ 11- tho c...r„. p.-lded bhder C,en=d «s» U, 4. ssasaiSc?bS:is^sj,=^^^^^^^^ 5. :ssr:siS*j2,:s^xs'£7rbrrh=^^^ applirable building codes, This Exdusion does not modify or limft tiie coverage provided in Covered Risk 5 or 6. Rrst American Titie Insurance Company Order Number; NCS-50480S-B-SM Page Numben 22 13. AMERICAN LAND TITU ASSOCIATION LOAN POUCY - 2006 EXCLUSIONS FROM COVERAGE The following matt:ers are expressly exduded from Uie coverage of ttiis policy, and ttie Company will not pay loss or damage, costs, attorneys' fees,o r expenses that arise by reason of: a , » , , . 1. (a) Any law, ordinance, pemift, or govemmentel regutetion (Including ttioserelatin g to building and zoning) resfrlcting, regulating, prohibiting, or relatingl o =./ »( a », (I) tiie occupancy, use, or enjoyment of the Land; (ii) the character, dimensions, or location of any improvement ereded on the Land; (ill) ttie subdivision of land; or (Iv) environmentel protection; or ttie eflfect of any violation of these laws, ordinances, or govemmentel regulations. This Exdusion 1(a) does not modify or limft the coverage provided under Covered Risk 5. ' (b) Any govemmentel police power. This Exdusion 1(b) does not modify or limft ttie coverage provided under Covered Risk 6. 2. Rights of eminent domain. This Exdusion does not modify or limft ttie coverage provided under Ccwered Risk 7 or 8. 3. Defects, Hens, enqumbrances, adverse claims, or other matters (a) created, suffered, assumed, or agreed to by the Insured Qaimant; (b) not Known to the Company, nol recorded in ttie Public Records al Date of Policy, but Known to Uie Insured Qaimant and not dlsdosed in wnting to ttie company by ttie Insured Qaimant prior to tiie date ttie Insured Qaimant became an Insured under tills poHcy; (c) resulttng In no loss br damage lo the Insured Qaimant; (d) attaching or created subsequent to Date of policy (however, ttiis does not modify or limft ttie coverage provided under Covered Risk 11, 13, or 14); or ' (e) resufting in loss or damage ttial would not have been susteined ifthe Insured Qaimant had paid value for tiie Insured Mortgage. 4. Unenforceabilfty of ttie Hen of ttie Insured Mortgage because of the inabllfty or feilure of an Insured to comply wtth applicable doing- business laws of ttie stete where ttie Land is sftuated. 5. Invalldfty or unenforceability in whole or in part of tiie lien of ttie Insured Mortgage ttiat arises oul of Uie fransaction evidenced by ttie Insured Mortgage and Is based upon usury or any consumer aedft protecUon or fruth-ln-lending law. 6. ^.F'a'f"' by reason of Uie operation of federal bankruptcy, stete Insolvency, or similar aeditors' rights laws, ttiat ttie fransactionoeatln g the lien of tiie Insured Mortgage, is . ^ (a) a fraudulent conveyance or fraudulent fransfer, or (b) a preferential fransfer for any reasonno t steted in Covered Risk 13(b) of ttiis policy. 7. Any lien on ttie Trtle for real estete texeSo r assessments Imposed by govemmentel autiiorrty and aeated or attaching between Date of Pollcy and ttie date of recording of ttie Insured Mortgage In ttie Public Records. This Exdusion does not modily or limit ttie coverage • provided under Covered Risk 11(b). ^ 14. AMERICAN UND TTTLE ASSOCIA-riON LOAN POUCY - 2006 WITH REGIONAL EXCEPTIONS When the American Land Trtle Assodation policy is used as a Stendard Coverage Policy and not as an Extended Coverage Policy the exclusions set forth in paragraph 13 above are used and ttie following exceptions lo coverage appear in ttie pollcy. SCHEDULEB This pollcy does not insure against loss or damage (and ttie Company will not pay ccsts, ati:omeys' feeso r expenses) which arise by reasonof : 1. (a) Taxes or assessments Uiat are not shown as existing Hens by Uie rerords of any texing auttiority ttiat levies texeso r assessments on real property or bytiie Public Records; (b) proceedings by a pubiic agency ttiat may resuftI n texeso r assessments, or notices of such proceedings, whettier or not shown by ttie records of such agency or by ttie Public Records. 2. Any fects, rights,Interests , or claims ttiat are not shown by the Public Records but that could be ascertained by an inspection of Uie Land or that may be asserted by persons in possession of the Land. 3. Easements, liens or encumbrances, or daims thereof, not shown by the Public Records, 4. Any enaoachment, encumbrance, violation, variation, or adverse drcumstence affecting ttie Titie ttiat would be disclosed by an accurate and complele land survey oflhe Land and notshown by the Public Records. 5. (a) IJnpatented mining claims; (b) reservations or exceptions in patents or in Acts auttiorizing ttie issuance tiiereof; (c) water rights, claims or btie to water, whettier or not tiie matters excepted under (a), (b), or (c) are shown by ttie Public Records, Rrst American Titie Insurance Company Order Number: NCS-504806-B-SM page Number: 23 15. AMERICAN UND TITtE ASSOCIATION OWNER'S POUCY - 2006 EXCLUSIONS FROM COVERAGE The following »«... .re expro^sl, exduded from the covor.,. of this Pbllc, .nd the Compon, will hO, p., te or d.m,,,e, cos,., ».*.movs' prohlbfting, or relating to (I) ttie occupancy, use, or enjoyment of ttie Land; (II) ttie character, dimensions, or location of any improvement erected on ttie land; ?iS:«S;«orttieeffedofanyvlolationof^^ does not modify or limft ttie coverage provided under Covered Risk 5. .^^ H . r . «rf Rick fi (b) Any govemmentel police power. This Exdusion 1(b) does not modify or limft ttie oiverage provided under Covered Risk 6. 2. Rights of eminent domain. This Exdusion does not modily or limft ttie oiverage provided under Covered Risk 7 or 8. 3' Defects, liens, enojmbrances, adverse claims, or ottier matters SSpSSSSHs^sr^^^^^^^^^^^ ^SZ, in loB 0, d.m.«. that w«ild hot h.«. been sistolned If th. insored a.lm.nt had p.ld ..lu. for Oie TIB.. the Trtle as shown in Schedule A, is (a) a fraudulent conveyance or fraudulent tt-ansfer;o r CM =. nrpfprpnKal transfer for anv reason not stated in Covered Risk 9 ofthis policy. „, ^ t 16. AMERICAN UND TTn.E ASSOdATlON OWNER'S POUCY - 2006 WITH REGIONAL EXCEPTIONS When ttie American Land TUle Assodation policy is used as a Stendard Coverage Policy and nol as an Extended Coverage Pollcy the SsSnsS* in paragraph 15 above are used and ttie followingexception s to oiverage appear In ttie policy. SCHEDULEB This pollcy does not insure against loss or damage (and ttie Company will not pay costs, attorneys' feeso r expenses) which arise by reason . s^^^^ir-Xorirsi-;^^^^^^^^^^ ttiat may be asserted by persons In possession of tiie Land. •J Fawmpnts Hens or encumbrances, or claims ttiereof, not shown by the Public Records. 4 ™lSe™br^nce,;iolation,variation,ora^^^^^^^^^^ ^- S^Kwater,Thler rn'ot^^ excepted under (a), (b), or (c) are shown by Uie Public Records. Rrst American Titie Insurance Company READDRESSING / REASSIGNING APPRAISAL REPORTS :iegenmeyer R(>addressmg/Reassigning ABm:aisaIReBO|ls Seevers Jordan Ziegemneyer adheres to thQ requirements of 1iie^2008-2009 fition of the ^^^^^^ StoSdsofTrofessional Appraisal Practice (USPAP). This edition is effec ive January 1,2008 touS December Tu 2009'TTIO following excerpts pertain to readdressing/reassigning appraisal reports: Advisory Opmion 26, Page A-90: Once a report has been prepared for a named client(s) and any otiier if f tified intended users and for mi identified intended use, the appraiser camiot "readdiess (transfer) tiie report to anotiier party. Advisory Opinion 27, Page A-92: Situations often arise in which appraisers who have previously appraised a property are asked bv a different party to appraise the same property.... Acceptmg tiie Si^en4o^ til secoSotelal client is not prohibited by USPAP, assmning any rs confidential information is handled properly,,.. If Uiere is a new potential client, valuation services performed for tiiat new chent would constitiite a new assigi;ment and the assigmnent results would be specific to tiiat new assigmnent. Frequently Asked Questions, Page F-36: It is never permissible to *'readdress» a report by simply changing the <^Hf;f ^j;^^^/'^ a completed report, regardless of whetiier lhe firstclien t gave a release. The request ftom Lender B must be treated as a new assigmnent. GLOSSARY OF TERMS CTOSSARY OF TERMS ofRfiMEstateAEmaM. Unless otherwise noted, the following defmitions are: 5th ed. (Chicago: Appraisal Institute, 2010). Cost Approach: A set of procedures through Aggregate of Retail Values (ARV): The sum which a value indication is derived for the fee of the sepaiate and distinct maiket value simple interest in a property by estimating the opinions for each of the units in a current cost to constiruct a reproduction of (or condominium, subdivision development, or replacement for) tiie existing sti^cture, portfolio of properties, as oftiie date of including an entirepreneurial incentive, valuaUon. The aggregate of retail values does deducting depreciation ftom the total cost, and not represent an opinion of value; it is sunply addmg tiie estmiated land yalue. Adjustments the total of multiple market value conclusions. may then be made to the mdicated fee simple value oftiie subject property to reflect the As Is Market Value: The esthnate of tiie value ofthe property interest being appraised. market value of real property m its current physical concUtion, use, and zoning as oftiie Depreciation: In appraising, a loss in property appraisal date. value firom any cause; the difference between the cost of an improvement on tiie effective Band of Investment: A technique m which date ofthe appraisal and the market value of tiie capitalization rates attributable to the improvement on the same date. components of a capital investinent are weighted and combmed to derive a weighted- Direct Capitalization: A metiiod used to average rate attributable to tiietota l convert an estimate of a smgle year's income investment. expectancy into an indication of value in one direct step, eitiier by dividing tiie net income Bulk (Discounted) Value: The most probable estimate by an appropriate capitalization rate price, in a sale of all parcels withm a tiract or or by multiplying tiie income estimate by an development project, to a single purchaser or appropriate factor. Diiect capitalization ^ sales to multiple buyers, over a reasonable employs capitalization rates and multipliers absoiption period discounted to present value, extiracted or developed from market data. Only as of a specified date, m cash, or in terms a single year's income is used. Yield and equivalent to cash, for which the property value changes are impUed but not identified. - rights should sell after reasonable exposure, m , a competitive market under all conditions Discounted Cash Flow (DCF) Analysis: The requisite to a fan sale, witii buyer and seller each acting prudently, knowledgeably, and for procedure in which a discomit rate is applied ' seif-mterest, and assuming that neitiier is to a set of projected income streams and a under stress, (Appraisd.StaadardsFoLLMid^ reversion. The analyst specifies tiie quantity, SecuredFinancing, Califomia Department variability, timing, and duration oftiie income Advisory Commission, 1994) sti:eams and tiiequantit y and timing ofthe reversion, and discounts each to its present Comparative-Unit Method: A method used value at a specified yield rate. to derive a cost estimate in terms of dollars per Discount Rate: A yield rate used to convert unit of area or volume based on known costs ftiture payments or receipts into present value; of similar stinictiores tiiat are adjusted for time usually considered to be a synonym for yield and physical differences; usually applied to total building area. rate. Disposition Value: The most probable price which, if found to be false, could aiter the that a specified interest in real property should appraiser's opinions or conclusions. bring under the following conditions: 1) Extraordinary assumptions presume as fact consummation of a sale within a future otherwise uncertain information about exposure time specified by the client; 2) tiie physical, legal, or economic characteristics of property is subjected to market conditions tiie subject property; or about conditions prevailing as oftiie date of valuation; 3) both extemal to the property such as market the buyer and seller are acting pmdently and conditions or trends; or about the integrity of knowledgeably; 4) tiieselle r is under data used in an analysis. compulsion to sell; 5) the buyer is typically motivated; 6) both parties are acting in what Fair Market Value: The highest price on the they consider to be tiieirbes t interests; 7) an date of valuation that would be agreed to by a adequate marketing effort will be made during seller, being willing to seE but under no the exposure time specified by the client; 8) particular or urgent necessity for so doing, nor payment will be made in cash in U.S, dollars obliged to sell, and a buyer, being ready, or in terms of financialarrangement s willing, and able to buy but under no particular comparable tiiereto;9 ) the price represents the necessity for so doing, each dealing witii tiie normal consideration for the property sold, otiher with fiillknowledg e of all the uses and unaffected by special or creative financing or purposes for which the property is reasonably sales concessions granted by anyone adaptable and available, (Califomia Code of associated with tiie sale. Civil Procedure, Section 1263.320(a)) Easement: The right to use another's land for a Fee Simple Estate: Absolute ownership stated puipose. unencumbered by any other interest or estate, subject only to the limitations imposed by the Exposure Time: 1) The time a property govemmental powers of taxation, eminent remains on the market. 2) The estimated domain, police power, and escheat. length oftime the property interest being appraised would have been offered on the Floor Area Ratio (FAR): The relationship market prior to the hypothetical between the above-ground floor area of a consummation of a sale at market value on the building, as described by the building code, effective date ofthe appraisal; a retrospective and the area ofthe plot on which it stands; in estimate based on an analysis of past events planning and zoning, often expressed as a assuming a competitive and open market. decimal, e,g,, a ratio of 2,0 indicates that the permissible floor area of a building is twice Extemal Obsolescence: An element of the total land area. depreciation; a diminution in value caused by negative externalities and generally incurable Functional Obsolescence (Incurable): An on the part ofthe owner, landlord, or tenant. element of depreciation; a defect caused by a deficiency or superadequacy in the stmcture, Extraction: A method of estimating land materials, or design that cannot be practically value in which tiie depreciated cost ofthe or economically corrected. improvements on the improved property is calculated and deducted from tiie total sale Highest and Best Use: The reasonably price to arrive at an estimated sale price for probable and legal use of vacant land or an the land. improved property that is physically possible, appropriately supported, financially feasible, Extraordinary Assumption: An assumption, and that results in the highest value. The four directly related to a specific assignment, criteria the highest and best use must meet are flows for tiie holdmg period and tiie reversion legal permissibility, physical possibility, can be discounted at a specified yield rate. financial feasibility, and maxunum productivity. Alternatively, tiieprobabl e use Leased Fee Interest: A fireehold (ownership of land or improved property - specific witii mterest) where tiiepossessor y mterest has respect to tiie user and timing oftiie use - tiiat been granted to anotiier party by creation of a is adequately supported and results in tiie conti-actual landlord-tenant relationship. highest present value. Leasehold Interest: The tenant's possessory Highest and Best Use ofProperty as interest created by a lease. (Negative leasehold: Improved: TTie use tiiat should be made of a A lease sitiiation in which tiiemarke t rent is less property as it exists. An existing improvement tiian the contract rent. Positive leasehold: A should be renovated or retained as is so long lease sitiiation in which tiiemarke t rent is as it continues to contiibute to tiie total market greater than tiie contract rent) value oftiie property, or until the retum from a new improvement would more tiian offset Liquidation Value: See Disposition Value. tiie cost of demoUshing the existmg building and constiiicting a new one. Market Value: The most probable price tiiat a property should bring in a competitive and Highest and Best Use of Land or a Site as open maiket under all conditions requisite to a though Vacant: Among all reasonable, fair sale, tiiebuye r and seller each acting ^ altemative uses, tiieus e that yields tiie highest pmdently and knowledgeably, and assuming present land value, after payments are made tiie price is not affected by undue stunulus. _ for labor, capital, and coordination. The use of Implicit in tiiisdefmitio n is tiie consummation a property based on tiieassumptio n that tiie of a sale as of a specified date and tiie passing parcel of land is vacant or can be made vacant of title from seller to buyer under conditions by demolishmg any improvements. whereby: buyer and seller are typically motivated; botii parties are well informed or Hypothetical Condition: That which is weU advised, and acting in what ttieyconside r contiraiy to what exists but is supposed for tiie their best interests; a reasonable time is purpose of analysis, Hypotiietical conditions allowed for exposure in tiie open market; assume conditions contrary to known facts payment is made in terms of cash in U.S. about physical, legal, or economic dollars or in terms of financial anrangements characteristics oftiie subject property; or comparable tiiereto; and the price represents about conditions extemal to tiieproperty , such the normal consideration for tiie property sold as market conditions or trends; or about tiie unaffected by special or creative financing or integrity of data used in an analysis, sales concessions granted by anyone associated witii tiie sale. (Code of Federal Income Capitalization Approach: A set of Regulations, Title 12, Part 34, Section 34.42) procedures through which an appraiser derives a value indication for an income-producing property by converting its anticipated benefits Marketing Tune: An opinion oftiie amount (cash flowsan d reversion) into property value. of tune it might take to sell a real or personal This conversion can be accomplished hi two property interest at the concluded market ways, One year's income expectancy can be value level during tiieperio d immediately capitalized at a market-derived capitalization after tiie effective date of an appraisal. ^ rate or at a capitalization rate that reflects a Marketing tnne diflfers from exposure time, specified income pati;em, return on which is always presumed to precede tiie investment, and change m the value oftiie effective date of an appraisal. investinent. Alternatively, tiie annual cash Neighborhood: A group of complementary Sales Comparison Approach: The process of land uses; a congraous grouping of deriving a value indication for the subject inhabitants, buildings, or business enterprises. property by comparing market information for sinular properties with the property being Obsolescence: One cause of depreciation; an appraised, identifying appropriate units of impainnent of desimbil ity and usefrtiness comparison, and making qualitative caused by new mventions, changes in design, comparisons with or quantitative adjustments improved processes for production, or extemal to the sale prices (or unit prices, as factors that make a property less desirable and appropriate) ofthe comparable properties valuable for a continued use; may be eitiier based on relevant, market-derived elements of functional or extemal. comparison. Prospective Opinion of Value: A value Site Coverage Ratio: The gross area oftiie opmion effective as of a specified future date. building footprint divided by the site area. The tenn does not define a type of value. Instead, it identifies a value opinion as being Stabilized Occupancy: An expression ofthe effective at some specific future date. An expected occupancy of a property in its opinion of value as of a prospective date is particular market considering cunent and frequentiy sought in connection vrith projects forecasted supply and demand, assuming it is that are proposed, under constmction, or under priced at market rent. conversiori to a new use, or those that have not yet achieved sellout or a stabilized level of Subdivision Development Method: A long-term occupancy. method of estimating land value when subdivision development is the highest and Quantity Survey Method: A cost-estimating best use ofthe parcel of land behig appraised. method in which tiie quantity and quality of When all direct and indirect costs and all materials used and all categories of labor entiepreneurial incentive are deducted from an required are estimated and unit cost figures are estimate ofthe anticipated gross sales price of applied to. arrive at a total cost estimate for tiie finished lots (or residences), the resultant labor and inaterials. net sales proceeds are then discounted to present value at a market-derived rate over the Replacement Cost: The estmiated cost to development and absorption period to indicate constmct, at current prices as oftiie effective the value ofthe land. appraisal date, a substimte for the building being appraised, using modem materials and Superadequacy: An excess in the capacity or current standards, design, and layout. quality ofa stracture or stractural component; determined by market standards, Reproduction Cost: The estimated cost to constiuct, at current prices as oftiie effective Unit-In-Place Method: A cost-estimating date ofthe appraisal, an exact duplicate or method in which total building cost is replica ofthe building being appraised, using estimated by adding together tihetmi t costs for the same materials, constiruction standards, the various building components as installed; design, layout, and quality of workmanship also called the segregated cost method. and embodying all the deficiencies, superadequacies, and obsolescence ofthe Yield Capitalization: A method used to subject building. convert future benefits into present value by 1) discounting each ftiture benefit at an appropriate yield rate, or 2) developing an overall rate tiiat explicitly reflects the investment's income pattem, holding period, value change, and yield rate. Yield Rate: A rate of retum on capital, usually expressed as a compound annnal percentage rate. A yield rate considers all expected property benefits, mcluding tiie proceeds from sale at tiietermmatio n oftiie investment. QUALIFICATIONS OF APPRAISER(S) : ' Northern California/Nevada Seevers 3825 Atherton Road, Suite 500 Jordan .' Rocklin, Califomia 95765 Ziegenmeyer P: (916) 435-3883 F: (916) 435-4774 Real Estate Appraisal & Consultatton Kevin K. Ziegenmeyer, Partner M ztge^meyer is a partner with Seevers Jordan Ziegenmeye, a real ^^^ate appraisal firm that enaaaes in a wide variety of real estate valuation and consultatton assignments. In 1989, M Smryer bega^^^^^^^ career in real estate as a controller for a commercia and re^f n^^'^^^J, ^^^^^^ dSment corporation. In 1991 he began appraising and continued to be involved '" ^Pf ^J^fl Ssrqnments covering a wide variety of properties, including office, retail, industrial, 'ncon^^/^^^^de^^^ and subdivSonHhroughout the Central Valley area of California, Northern Nevada and w.thhi the Sacrametto Melopolten Area. Mr. Ziegenmeyer has developed the expertise and background _ necTsSTo deal with complex assignments covering a wide range of profrtytypes^ Over the past severaTy^a°s Mr.^^ has been handling many ofthe tirm's master-planned property appraisals. Professional Affiliations Associate Member (General)-Appraisal Institute Aroi^Rfi?^ Certitied General Real Estate Appraiser - State of California (No. AG013567) Education Bachebrof Science in Accounting. Azusa Pacitic University, Califomia Appraisal and Real Estate Courses: Standards of Professional Practice, Parts A, B & C Basic Valuation Procedures Rea! Estate Appraisal Principles Capitalization Theory and Techniques, Part A Advanced Income Capitalization Report Writing and Valuation Analysis Advanced Applications IRS Valuation Summit I & II 2008, 2009, 2010 & 2011 Economic Forecast Business Practices and Ethics . ^ . . x v i--.. ^..-.r.r. Contemporary Appraisal Issues with Small Business Administration Financing General Demonstration Appraisal Report Writing Seminar 7-Hour National USPAP Update Course Valuation of Easements and Other Partial Interests 2009 Summer Conference Uniform Appraisal Standards for Federal Land Acquisitions 2008 Economic Update Valuation of Conservation Easements Subdivision Valuation (continued on next page ) ^^^^^m Real Estate Appraisal & Consultatton P: (916) 435-3883 F: (916) 435-4774 (,, ...continued from previous page) 2005 Annual Fall Conference General Comprehensive Exam Module I, II, III & IV Advanced Income Capitalization Advanced Sales Comparison & Cost Approaches 2004 Central CA Market Update Computer-Enhanced Cash Flow Modeling Forecast 2000, 2001, 2002, 2003 & 2004 Land Valuation Assignments Land Valuation Adjustment Procedures Highest & Best Use and Market Analysis Entitiements, Land Subdivision & Valuation Real Estate Value Cycles El Dorado Hills Housing Symposium Federal Land Exchanges M & S Computer Cost-Estimating, Nonresidential Appraisal Expenence General-purpose: Offices Retail Industrial fApartments Subdivisions Land Special-purpose: Athletic Clubs Churches Educational Facilities Restaurants Assisted-living Facilities Auto Sales and Service Lodging Facilities Northern California/Nevada Seevers 825 Atherton Road, Suite 5.00 . ::;; Rod Pi (916) 435-3883 F: (916) 435-4774 >App) iCon iltatton Sample of Appraisal Experience This appraisal was completed for use by the developer for Hunters Point Shipyard-Phase I determination of possible refinancing of the San Francisco, San Francisco County, California Redevelopment Agency of the City and County of San Francisco Community Facilities Distnct (CFD) No. 7 (Hunters Point Shipyard) Bonds^The appraised proper^ comprises Phase 1 of the Hunters Pomt Shipyard redevelopment area, which is commonly referred to as the Hintop and Hillside subdivisions, and comprises approximately 75.32 gross acres of land, which includes 23 72± developable acres proposed for the construction of 1 142 residential units in a variety of attached single- family, townhouse and stacked residential units^ qnpcificallv the Hilltop development contains 15,9Z± ^^:!'^7aJioire6eUpe6 i 768 residential unite and the Hillside development contains 7 8± acres to be developed with 374 single-family residential units^ n addition, Phase I will include 36.0± acres dedicated to parks and open space and 15.6± acres of streets and rights-of-way. This appraisal was completed for use in a land-secured City of San Mateo Community Facilities District No. financing associated with the development of 52± 2008-1 (Bay Meadows) developable acres proposed for the development of San Mateo, San Mateo County, California 724 225 square feet of office space, approximately 85,374 squkre feet of retail space and 1.121 residential housing units, with 832 residential housing ^mts being developed on the residential land component and the balance (289 units) to be developed as part of he mixed-use component. The report was prepared for the City of San Mateo Department of Finance. This appraisal was completed for use in a Ifnd-secured City of Redwood City Community Facilities District financing associated with the development of 16.62± No. 2010-1 (One Marina) _ acres proposed for the construction of 231 townhome and Redwood City, San Mateo County, California flat-style residential units within 24 detached buildings The report was prepared for the City of Redwood City Department of Finance, This assignment Involved the appraisal of approximate y County of San Joaquin Community Facilities Distnct 3 457 41 gross acres of land comprising 40 separate No 2009-2 (Vernalis Interchange) Assessor's parcels devoted to {or intended for) aggregate Vernalis, San Joaquin County, Califomia mining operations by six independent mining operators, including Telchert, West Coast Aggregates, Granite, Knife River, DeSilva Gates and Cemex. The summary appraisal was completed for bond financing purposes, with the proceeds intended to finance the construction of a new interchange on State Route 132 at Bird Road which s intended to enhance traffic operation safety at this intersection. This report was prepared for the County of San Joaquin. "v; :'.,.';"••;•'>^lf.l;i'i:; ' ••/f)»Hff»'i«;/*Wi*-'''''^'^f^''-'i:*^' Seevers ,;;•:: Jordan ^c •.; Northern California/Nevada 3825 Atherton Road, Suite 500 Ziegenmeyer .\; \ Rocklin^Ca!ifbrfiia:9576S y Real Estate Appraisal & Consultation P: (916) 435-3883 F: (916) 435-4774 Sample of Appraisal Experience (continued) Bickford Ranch Community Facilities District No The hypothetical market valuation of a proposed 2003-1 master planned community that will include 847.2 acres Placer County, California of land designated for 1,783 residential lots and a 9.7- acre commercial component. The appraisal will be used for bond undenA/riting purposes and was prepared for the County of Placer. El Dorado Hills Community Facilities District No 1992- This assignment involved the hypothetical cumulative 1 (portion) or aggregate, valuation of a sizeable portion of the El Dorado County, Caiifornia existing Serrano master planned community The appraisal included 1,597 single-family residential lots 382 custom single-family residential lots, 33.05 acres of commercial land and 344 existing single-family residences. The appraisal will be used for bond underwriting purposes and was prepared for the County of El Dorado. Community Facilities District No. 16 West Sacramento, California This project involved the valuation of Bridgeway Lakes a high-end 609-lot single-family residential community located in the Southport area of West Sacramento Lot densities within the project varied from low and medium density to rural estate lots. This report was prepared for the City of West Sacramento. Community Facilities District No. 17 West Sacramento, California This assignment concerned the valuation of 252 single- family lots and 252 proposed multifamily units comprising the Parella residential community in the Southport area of West Sacramento. This report was prepared for the City of West Sacramento. Diablo Grande Community Facilities District No 1 (Series 2002) The appraisal involved the valuation of a partially Stanislaus County, California improved resort and master planned community offering 1,410 residential lots, multifamily land commercial land, a hotel site, vineyards and two 18- hole championship golf courses. The appraisal was used for bond undenwriting purposes and was prepared for Western Hills Water District. Plumas Lake Community Facilities District No 2002-1 This appraisal included the valuation of a portion of the Yuba County, Califomia proposed, and partially improved, Plumas Lake Specific Plan area, and comprised 3,314 detached single-family residential lote. The appraisal was used for bond undeiwriting purposes and was prepared for the Olivehurst Public Utility District. P: (916) 435-3883 F: (916)435-4774 sample of Appraisal Experience (continued) This assignment involved the valuation of an Brentwood Assessment District No^2003-1 assessment district ^^ontaining commercial and Brentwood, Contra Costa County. California residential componente comprising 5-66 jcres of commercial land, 882 single-family residential lote and 15 8^cres of multifamily land. The appraisal was used for bond undenwriting purposes and was prepared for the City of Brentwood. This appraisal involved the valuation of a 985-tet Patterson Gardens & Keystone Pacific Business Park single-family residential master planned community Patterson. Stanislaus County, California that included residential, commercial and public use cornionente, and a non-contingent 224-acre industnal park This report was prepared for Bank of America. Svrah is a proposed 245-unit residential condominium Syrah Condominiums dSpment with dual phase valuations. This report Sacramento, Sacramento County, California v\/as prepared for KeyBank. ; Northern California/Nevada Seevers 3825 Atherton Road, Suite 500 Jordan ':"-'. Rocklin,California95765 Ziegenmeyer P: (916) 435-3883 F: (916) 435-4774 I Estate Appraisal & Consultation Eric A. Sega!, Partner M Seqal is a Certified General real estate appraiser with Seevers Jordan Ziegenmeyer, a real estate aonr Jsal ti?rn that engages in a wide variety of real estate valuation and consultation assignments. In 1998 M S^gal bega^n his career in real estate as a research analyst/appraiser trainee for SJZ. By 1999. he began writing narrative appraisal reports covering a variety of income properties Today. Mr. Segal is a partneMn the firr^ and is involved in appraisal assignments covering a wide variety o properties fncludinq office retail, industrial, multifamily housing, master planned communities, Mello-Roos and AsSment DistS and residential subdivisions. He has developed the expenence and background necessary to deal with complex assignments covering an array of property types. Professional Affiliations Associate Member (General) - Appraisal Institute Arn'PR^^R^ Certified General Real Estate Appraiser - State of California (No. AG026558) Education BacheSr^'of Science in Business Administration (Concentrations in Finance and Real Estate & Land Use Affairs), California State University. Sacramento Appraisal and Real Estate Courses: Uniform Standards of Professional Appraisal Practice Appraisal Principles Basic Income Capitalization Highest & Best Use and Market Analysis Advanced Income Capitalization Report Writing and Valuation Analysis Appraisal Litigation Practice and Courtroom Management Computer Enhanced Cash Flow Modeling Advanced Sales Comparison & Cost Approaches Advanced Applications Seevers .; Northern California/Nevada •3825 Atherton Road, Suite 500 ;,: -;v; Rocklin, Califbmia 9S765 Real Estate Appraisal & Consultation P;(916)435-3883 F:(916)435-4774 Sample of Appraisal Experience Hunters Point Shipyard - Phase I San Francisco, San Francisco County, California Th s appraisal was completed for use by the developer for determination of possible refinancing of the Redevelopment Agency of the City and County of San Francisco Community Facilities District (CFD) No 7 (Hunters Point Shipyard) Bonds. The appraised propertv comprises Phase I of the Hunters Point Shipyard redevelopment area, which is commonly referred te as the Hilltop and Hillside subdivisions, and comprises approximately 75.32 gross acres of land, which includes i:,li^ developable acres proposed for the construction of 1,142 residential unite in a variety of attached single- family, townhouse and stacked residential unite Specifically, the Hilltop development conteins 16 92+ ^^'^®1°^U-H'^-J° 5^ developed with 768 residential unitsT and the Hillside development conteins 7.8± acres to be developed with 374 single-family residential units In addition. Phase I will include 36.0± acres dedicated to parks and open space and 15.6± acres of streete and rights-of-way. City of San Mateo Community Facilities District No This appraisal was completed for use in a land-secured 2008-1 (Bay Meadows) financing associated with the development of 52± San Mateo, San Mateo County, California SK^io^^^'^ ^'^'^^ proposed for the development of (1^,125 square feet of office space, approximately 85 374 square feet of reteil space and 1,121 residential housinq units With 832 residential housing unite being developed on the residential land component and the balance (289 units) to be developed as part of the mixed-use component. The report was prepared for the City of San Mateo Department of Finance. City of Redwood City Community Facilities District No. 2010-1 (One Marina) This appraisal was completed for use in a land-secured Redwood City, San Mateo County, Califomia financing associated with the development of 16 62-f acres proposed for the construction of 231 townhome and flat-style residential unite within 24 deteched buildings The report was prepared for the City of Redwood Citv Department of Finance. County of San Joaquin Community Facilities District No. 2009-2 (Vernalis Interchange) This assignment involved the appraisal of approximately Vernalis, San Joaquin County, California 3,457.41 gross acres of land comprising 40 separate Assessor's parcels devoted to (or intended for) aggregate mining operations by six independent mining operators including Teichert, West Coast Aggregates, Granite, Knife River, DeSilva Gates and Cemex. The summary appraisal was completed for bond financing purposes, with the proceeds intended to finance the construction of a new interchange on State Route 132 at Bird Road, which is intended to enhance traffic operation safety at this intersection. This report was prepared for the County of San Joaquin. iMMiliiMffiil!!!] :'. Northern Cailfomia/Neyada Seevers 3825 Athei-ton Road, Suite 500 Jordan •'Rocklin, California.95765 P: (916) 435-3883 F: (916) 435-4774 I fRealEstate Appraisal & Consultation Sample of Appraisal Experience (continued) This appraisal assignment involved the appraisal of nine HUD 223(f) Apartment Portfolio _ multifamily properties in San Francisco containing San FranciU San Francisco County, California Seen sev'en'and 50 unite, as w^'j^^. ^^fS nronerties including ground floor retail tenante The se IT Sined app aisal were completed in compliance wUh Federal regulatoty requiremente and guidelines that may appfyas well as the requirements of the Federal Housujg Administration (FHA) MAP P^^^^^^"^ .^^ ,,^2 Refinance. This report was prepared for Column Guaranteed, LLC. This aoDralsal involved the valuation of a 1,464-Iot single- The Parkway & Quinto Ranch S^ily ?e St aTmaster planned community that included Santa Nella, Merced County, California reSdenlal commercial and public use components, and a nor^ coSgent 1,644-acreranch subject to a conservation easeraent. This report was prepared for IndyMac Bank, The appraised properties represented a portion of Reclamation District No. 17 - Mossdale Tract (portion) . County of San Joaquin. California Serties Sh an assessed improvement value on the most recent property tax roll. Reclamation District No. 17 TMO sdaTe T?act) iV located in San Joaquin County and contains approximately 16,107.58 acres of tend comp^ing approximately 13.335 assessors parcels. This Sport was prepared for Reclamation District No. 17, The hypothetical market valuation of a proposed master Bickford Ranch Community Facilities District No. planned community that will include f^^^ -ores o land 2003-1 designated for 1,783 residential lots and a 9-7-acre Placer County, California commercial component. The appraisal will be used for bond underwriting purposes and was prepared for the County of Placer. This assignment involved the hypothetical oumujative or El Dorado Hills Community Facilities District No, aooreaate valuation of a sizeable portion of the exis mg 1992-1 (portion) So master planned community. The appraisa^ El Dorado County, California included 1,597 single-family residential lote 382 custom singte-famiy residential lote, 33.05 acres of commercial tend and 344 existing single-family residences. The appraisal will be used for bond underwriting purposes and was prepared for the County of El Dorado. Seevers , Northern California/Nevada 3825 Atherton Road, Suite 500 Rocklin, Callfprnia. 95765 11 Real Estate Appraisal & Consultation P: (916) 435-3883 F: (916) 435-4774 Sample of Appraisal Experience (continued) Diablo Grande Community Facilities District No. 1 The appraisal involved the valuation of a partially (Series 2002) improved resort and master planned community offering Stanislaus County, California 1,410 residential lots, multifamily land, commercial land, a hotel site, vineyards and two 18-hole championship golf courses. The appraisal was used for bond underwriting purposes and was prepared for Western Hills Water District. Plumas Lake Community Facilities District No. This appraisal included the valuation of a portion of the 2002-1 proposed, and partially improved, Plumas Lake Specific Yuba County, California Plan area, and comprised 3,314 detached single-family residential lots. The appraisal was used for bond undenvriting purposes and was prepared for the Olivehurst Public Utility District Patterson Gardens & Keystone Pacific Business This appraisal involved the valuation of a 985-lot single- Park family residential master planned community that included Patterson, Stanislaus County, California residential, commercial and public use components, and a non-contingent 224-acre industrial park. This report was prepared for Bank of America. Business, li-ansportafioii & Housiag Agency • . OFFICE OF REAL ESTATE APPRAISERS REAL ESTATE APPRAISER LICENSE ERIC A, SEGAL has successfully met the requirements for a license as a general real estate apprais^ in the Sl^te 6f Califomia and is, therefore,.entitled to use the title "Certified General Real Estate Appraiser . -.- .:..• This license has been issued in icordance with the provisions ofthe Real Estate Appraisers^. ...^ ;{ Licensing and Certification Law. -•:, '•< . '•. '-'^ OREA APPRAISER IDENTIFICATIONTsnjMBER t AG026558"" •I. Date Issued: Februaiy 19,2011 Date Expires: February 18,2013 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX C SUMMARY OF TRUST AGREEMENT Certain provisions of the Trust Agreement not previously discussed in this Offlcial Statement are summarized below. These summaries do not purport to be complete or deflnitive and are qualifled in their entirety by reference to the full terms ofthe TrustAgreement Complete copies ofthe document are available upon request from the Finance Director, City of San Mateo, Califorma. Certaiii Defmitions The following are defmitions of certain of the terms defimed in the Trust Agreement, to which references are hereby made. The following definitions are equally applicable to both the singular and plural forms ofthe terms defmed herein. Capitalized terms not otherwise defimed herein will have the meanings assignedto such terms in the TrustAgreement or in the fiorepart ofi this Ofifiicial Statement. "Acquisition and Construction Fund" means the "Bay Meadows Community Facilities District Acquisition and Construction Fund" established pursuant to the Tmst Agreement and maintained by the Trustee. "Additional Bonds" means Bonds (including the Series 2013 Bonds) other than the Series 2012 Bonds and that are issued pursuant to the Trust Agreement. "Authorized Representative" means any ofthe following officers ofthe City: the Mayor, the City Manager, the Finance Director, the City Attorney the Director ofPublic Works, and any other officer speciflcally authorized to act in the premises by the City Council. "Average Annual Debt Service" means the average over all Bond Years, for all Outstanding Bonds, ofthe annual debt seivice from the date ofthe Bonds to their maturity, including: (1) the principal amount of ail such Outstanding Bonds payable in such Bond Year either at maturity or pursuant to a Sinking Account Payment; and (2) the interest payable on the aggregate principal amount of such Bonds Outstanding in such Bond Year assuming such Bonds are retired as scheduled. "Bond Year" means the period from September 2 through the following September 1. "Bonds" means the special tax bonds ofthe City, authorized by the Community Facilities District, at any time Outstanding under the Trust Agreement or under any Supplemental Trust Agreement, that are executed, issued and delivered in accordance with the provisions ofthe Trust Agi-eement or of any Supplemental Trust Agreement and that were authorized at the special election held in the Community Facilities District on August 11, 2008, which authorization was amended at the special election held in the Community Facilities District on November 21, 2011. "Serial Bonds" means the Bonds for which no Mandatoi-y Sinking Account Payments are established. "Term Bonds" means the Bonds which are redeemable or payable on or before their specified maturity date or dates from the Mandatory Sinking Account Payments established for the purpose of redeeming or paying such Bonds on or before their specified maturity date or dates. "Certificate of the City" means an instrument in writing signed by an Authorized Representative. C-l "City" means the City of San Mateo, California. "City Clerk" means the City Clerk ofthe City. "Code" means the Internal Revenue Code of 1986 and the regulations issued thereunder from time to time, and in this regard reference to any particular section of the Code shall mclude reference to any successor to such section ofthe Code. "City Council" means the City Council ofthe City. "Community Facilities District" means Community Facilities District No. 2008-1 (Bay Meadows) City of San Mateo, County of San Mateo, State of California, a community faciUties district duly organized by the City Council and existing in the City under and by virtue of the Law. "Costs of Issuance Account" means the Bay Meadows Community Facilities District Costs ofissuance Account established pursuant to the Tmst Agreement and maintained by the Tmstee. "Debt Service" means, for any period, the sum of (1) the interest payable during such pertod on all Outstanding Bonds, assuming that all Outstanding Serial Bonds are retired as scheduled anc^ that all Outstanding Term Bonds are redeemed or paid as scheduled at the times of and in amounts equa to the sum of all Mandatory Sinking Account Payments (but excluding the amount of any such interest funded from the proceeds ofthe sale of Bonds or investment earnings thereon), plus (2) he principal amount of all Outstanding Serial Bonds maturing by their terms in such period, plus 3) the aggregate amount of all Mandatory Sinking Account Payments required to be deposited in all Sinkmg Accounts ni such period For purposes of any test for the issuance of Refunding Bonds, Debt Service shall be deemed to include Debt Service on the proposed Refunding Bonds but shall not include Debt Service on any Bonds proposed to be defeased concurrently. "Developer" means Bay Meadows Main Track Investors, LLC. "Development Fees" means the development impact fees to be fmanced with proceeds of the Bonds. "Expense Fund" means the Bay Meadows Community Facilities District Expense Fund established pursuant to the Trust Agreement and maintained by the Trustee. "Expenses" means all expenses paid or incurred by the City for the cost of planning and designing the Improvements or the financing of the Development Fees, including the cost of environmental evaluations of the Improvements and the costs associated with the creation of the Community Facilities District, the issuance ofthe Bonds, the determinatton ofthe amount ofthe Special Tax the collection ofthe Special Tax and the payment ofthe Special Tax, or costs otherwise mcurred m order to carry out the authorized purposes ofthe Community Facilities District, and any other expenses incidental to the acquisition and construction ofthe Improvements or the fmancing ofthe Development Fees; all as determined in accordance with Generally Accepted Accounting Principles. "Federal Securities" means: (1) Cash; C-2 United States „f ALH.?^!-'^"™' °'' °' ."''"S""™^ guaranteed as to prineipal and interest by, tlie A. U.S. Treasury obligations; B. Ati direct or fully guaranteed obligations; C. Farmers Home Administration; D. General Services Administration; E. Guaranteed Title XI fmancing; F. Govemment National Mortgage Association (GNMA); and G. U.S. Treasury - State and Local Government Series. .he f„,I faith an/cLit ^^^SZ^ „°f te^Sdt" '''"'"' *^'' °"'**"^ ''^"^^"' A. Export-Import Bank; B. Rural Economic Community Development Administration; C. U.S. Maritime Administration; D. Small Business Administration; E. U.S. Department ofHousing & Urban Development (PHAs); 'w F. Federal Housing Administration; and G. Federal Financing Bank. other .nnn.l "^''^^ Year" means the twelve-month period terminating on June 30 ofeach year or any :fc:-d:rXSSr ^^^--^^ -^-^^ -^ ^-^^--^ ^y ^he a^ as hs Flse^al YeLT reDortin.nrn..H"^''''fXu'^'''*'S^ "^"'""^^^"S Principles" means the uniform accounting and its' su eess-lr Tv"^^^^^^^^^^^ "'' •" °'*' '^""" '^'''"'' °''''''^'"' ''"'"'^ Aecountfnts or Its successoi, 01 by any other generally accepted authority on such procedures and includes as applicable, the standards set forth by the Governmental Accouming Standards Board"; its succestr "Holder" means any person who shall be the registered owner of anv Outstanding Bond as shown on the registration books maintained by the Tmstee puLant to the Trust Igreement ^ ' the Communitv pSr'n'f l"Tu *' P"''"' ''P^'"^ improvements authorized to be fmanced under the Community Facilities District and that are to be acquired by the City from the Developer. C-3 lffl*tion «poin.ed and paid by the Ci^. and who. or each of whom: (1) is in fact independent and not mtder the domination ofthe City; (2) does not have a substantial flnancial interest, direc. or indirect, in the operations ofthe City; and thereof or supplemental thereto. for the payment of all Term Bonds. "Maximum Annual Debt Serviee" means the maximum sum obtained for any Bond Year prior to the final maturity of Bonds by totaling the followmg for eaeh Bond Yeai. (1) The amount of all such Outstanding Bonds payable in such Bond Year; (2) The principal amount of any such Bonds scheduled to be called and redeemed in such Bond Year; and (3) The interest payable on the aggregate prineipal amount of such Outstanding Bonds in such BoM Year if such Outstanding Bonds are retired as scheduled. "Moodv's" means Moody's tiivestors Serviee, tiie., a corporation duly o^-g^'^i^^d md existhigunderanr*e^elawso4eSt.e^^^^ rating agency selected by the City. "Opinion of Counsel" means a written opinton of counsel retained or employed by the City. "Outstanding," when used as of any particular time with reference to Bonds, means all Bonds pursuant to the Trust Agreement except: (1) Bonds cancelled and destroyed by the Trustee or delivered to the Trustee for cancellation and destruction; (2) Bonds paid or deemed to have been paid pursuant to the Tmst Agreement with respect to discharge of Bonds; and C-4 (3) Bonds in lieu of or m substitution for which other Bonds shall have been executed by the City and authenticated and delivered by the Trustee pursuant to the Trust Agreement with respect to mutilated, destroyed, stolen or lost Bonds. ''Permitted hivestments" means any of the following obligations if and to the extent that at tlie time of makmg the investment, they are permitted by law: ..•.• „ ^^^ ^^^^'^^ obligations of, or obligations the interest on and principal ofwhich are uncondttionally guaranteed by the United States of America, including obligations issued or held in book-entty form on the books ofthe Department ofthe Treasury ofthe United States of America and mcluding a receipt certificate or any other evidence of an ownership interest in such an obligation or in specified portions thereof (which may consist of specified portions of interest thereon); ^^ , ,. ' ^^\ Obligations issued by the Resolution Funding Corporation, the Student Loan Marketmg Association, the Federal National Mortgage Association, the Federal Home Loan Bank Board the Federal Farm Credit Bank or the Federal Home Loan Mortgage Association, or obligations,' participations or other instruments of or issued by or fully guaranteed as to interest and prineipal by the Government National Mortgage Association (excluding sttipped mortgage backed securities which are valued at greater than par on the unpaid principal); ^, . , (^) Bills of exchange or time drafts drawn on and accepted by a commercial bank othprwise known as bankers acceptances, which are eligible for purchase through a bank that is a member ot the Federal Reserve System and which are drawn on any such commercial bank the short-term obhgattons ofwhich are rated in the highest letter and numerical rating categoiy as provided by each of the Rating Agencies; provided, that purchases of eligible bankers' acceptances may not exceed one hundred eighty (180) days' maturity; (4) Commercial paper of "prime" quality of the highest letter and numerical rating category_ as provided by each of the Rating Agencies, which commercial paper is hmhed to issuing corporations that are organized and operating within the United States of America and that have total assetsm excess of five hundred million dollars ($500,000,000) and that have an "A" or higher rating for the issuers unsecured debentures, other than commercial paper, as provided by each ofthe Rating Agencies; provided, that purchases of eligible commercial paper may not exceed two hundred seventy (270) days mattirity nor represent more than ten percent (10%) of the outstanding commercial paper of ail issuing corporation; or medium-term notes with a maximum maturity of five (5) years and subject to the credrt qualifications listed above; v / .^ j (5) Negotiable and non-negotiable certificates of deposit or thrift or bank notes issued by a state or national bank or a state-licensed branch of a foreign bank that have maturities of not more than three hundred sixty-five (365) days and that are fully insured by the Federal Deposit Insurance Corporation or the short term obligations of which state or national bank or state-licensed branch of a foreign bank are rated no lower than ' Al" by Moody's and 'A+" by Standard & Poor's; (6) Any repurchase agreement or reverse repurchase agi-eement of any securities enumerated m subdivisions (1) and (2) ofthis definition with any state or national bank or government bond dea er reporting to, trading with, and recognized as a primaiy dealer by the Federal Resei-ve Bank of New York, and with respect to any such repurchase agreement, it is either: (A) with any institution which has debt rated no lower than "Al by Moody's and "A+" by Standard & Poor's or whose commercial paper IS rated no lower than "P-1" by Moody's and "A-l" by Standard & Poor's; (B) with any corporatioii or other entity that falls under the jurisdiction ofthe Federal Banlauptcy Code; provided , that (1) the term ot such repurchase agreement is less than one (1) year or due on demand; (2) the Finance Director or a C-5 third nartv acting solely as agent forth e Finance Dhector has possession ofthe collateral; (3) the market vie 0 1 c^^^^^^^ at teast once in every seven (7) days) exceeds the pnneipa amoun of tTeferuX ragreL^^ plus accrued interest and the market value of the eotiatera^^ is maintained a ? 1 Ipp^nlhle to each of the Rating Agencies; (4) failure tomaintai n the requisite collateral levels will '::^:^^tZDL^^^^^ colkeral immediately; and (5) the repurchase agreement ecu tierarfftrand dear of any thhd-party lien or claim; or (C) with financial institutions insured by hTFlTemTDerosiUnsurance Corporatioii or any broker-dealer with "retaU customers" which falls under til Lt tfon'o A^^^ Investors Protection Corporation; provided, that (1) the market value of he cohateral (af at least once in every seven (7) days) exceec^s the Pnucipal amotint of the reLrel~^^ plus accrued interest and the market value ofthe collateral is maintained at levels aeceptSto^ a^^^^^^^^^^ Ageiictes; (2) the Finance Director or a third party actmg sole y as agen L tCphianee Di^^ has possession ofthe eotiateral; (3) the Finance Director has a perteeted f^ist m- 0?^ sTXSeitt in the collateral; (4) the collateral is free and clear of third-party hens and in the ease of a Seouritie^^^^^^^^ Protection Corporation broker was not acquired pursuant to a repurchase a. -Lment or rev^^^^^^^^ agreement; and (5) failure tomaintai n the requisite collateral percentage wl uTaute t^Sic^^^^ liquidate the eotiateral immediately; and with respect to any such "etse :^;^^^^^^^^^^ the investment is solely done to supplement the ineome normally received from such securities; (1) Certificates, notes, warrants, bonds or other evidence of indebtedness ofthe State of California or any focal agencies therein which are rated in the highest short-term ratmg categoiy or witSonrof tiie ftree highest tong-term rating categories by each ofthe Rating Agencies (excluding Tetres that do not havel fixed par value and/or whose terms do not provide a fixeddotia r amount at maturity or call date); (i) Interest-bearing demand or time deposhs (including certificates of deposit) in a state or national bank fully insured by the Federal Deposit hisurance Corporation, which may inelude tiie Tmstel^hs affiliates; provided, that not greater than the aniount that is ftilly insured by the Fedeial DelSsit "suLe Corporation, in the aggregate, shall be deposited in any one financialmstitutton ; (9) Investments in unhs of a money-market fund portfolio that is rated in the highest letter and numerical rating category by each of the Rating Agencies and that is composed of obligations riled T he foTfd^^^ mid credit of the United States of America or repurchase agreements Sllta ized by stdi obligations, and includes funds for which the Trustee, its parent holding company if aS ormi?affiUates or subsidiaries ofthe Trustee provide investment advisoiy or other management services; (10) Investment agreements with any corporation, including banking or financial institutions, provided that: (a) the long-tei-m debt ofthe provider of any such investment agreement is rated, at the time of investment, in one of the two highest rating categories offered by each Rating Agency (without •egard togradation s of plus or minus, or numerical gradations, within such category), and r (h) any such agreement shall include a provision toth e effect that if (a) the tong-term debt rating of the provider of sueh agreement is downgraded below the second highest rating category offered by any Rating Agency (without regard togradation s of plus or minus, or numerieal gradation Sin sudi cLgory) (b) sueh provider shall default under sueh investment agreement, or (e) there shati Te i ev^tt of bSiptcy of sueh provider, then the City shall have the right to withdraw or cause the mstee to withdraw all funds invested in sueh agreement and thereafter toinves t such funds pursuant to the Trust Agreement, and C-6 (c) any sueh investment agreement permits withdrawal upon reasonable notice for any purpose authorized for the use of the invested flmds under the Trust Agreement. . (^^) Investments in the Local Agency Investment Fund maintained by the Office of the California State Treasurer, which such investments shall only be invested in the special portion ofthe Local Agency Investment Fund for bond proceeds that are not subjed to arbifrage restridions; provided that the Finance Director shall be designated as the authorized authority to ttansad these investments; (12) Investments in the County of San Mateo Pooled Fund; and (13) Investments approved in writing by each ofthe Rating Agencies. T^ . ,,. , "Pi'epayment Fund" means the Bay Meadows Community Facilities Distrid Prepayment Fund established pursuant to the Trust Agreement and maintained by the Trustee. "Prineipal Corporate Trust Office" means the corporate ttust offiee ofthe original Trustee at which at any particular time corporate frust business shall be administered, or such other office as it shall designate; and any such office designated by any suecessor Trustee, except that with respect to presentation of Bonds for payment or for regisfration of transfer and exchange sueh term shall mean the ottice or agency ofthe Trustee at which, at any particular time, its coiporate trast agency business shall be conducted. "Rate and Method" means the "Rate and Method of Apportionment of Special Tax" adopted by the City Council as part ofthe Resolution of Consideration ofOctober 3, 2011 and approved by the election of November 21, 2011, as the same may be amended from time to time. I "Rating Agencies" means Moody's and Standard & Poor's. "Rating Agency" means erther Moody's or Standard & Poor's. ;. "Rebate Fund" means the Bay Meadows Community Facilities Disttict Rebate Fund estabhshed pursuant to the Trast Agreement, to be maintained by the City. "Redemption Fund" means the Bay Meadows Community Facilities Disfrict Redemption Fund established pursuant to the Trust Agreement and maintained by the Trustee. "Refunding Bonds" means Bonds issued under both Section 53362 and related provisions ot the Law, and under the Trust Agreement and related provisions thereof "Required Bond Reserve" means, as of any date of calculation, an amount equal to the lesser of (a) Maximum Annual Debt Semce, (b) 10% of the proceeds (within the meaning ofSection 148 ofthe Code) of all Outstanding Bonds or (c) 125% of Average Annual Debt Service. "Reserve Fund" means the Bay Meadows Community Faeifities District Reserve Fund established pursuant to the Trust Agreement and maintained by the Trustee. "Resolufion of Change" means Resolution No. 141 (2011) adopted by the City Council on November 21,2011. ^ f J J C-7 »Resolu.ion of Coirsideration" means Resolution No. 113 (2011) adopted by the City council on Oc.ob« 3 20n. which was made effective in amending the Resolution of Formatton by the Resolution of Change. "Resolution of Formation" means Resolution No. 85 (2008), adopted by the City Coundl on August 11, 2008. "Series" means all Bonds of like designation authenticated and delivered on original TrustAgreement. "Serviees" means the seivices authorized to be funded by Spedal Tax revenues as described in the Resolution of Formation. "Sei-vices Fund" means the Bay Meadows Community Facilities Distrid Services Fund established pursuant to the Trast Agreement and maintained by the Trustee. "Sinking Account" means the account referred to by that name in the Redemption Fund established pursuant to the Trust Agreement. "Spedal Tax" means the speeial tax authorized to be levied ^d <:olleded aiimmlly on all Taxable Property in the Community Facilities Disttid under and pursuant to the Rate and Method. "Snecial Tax Fund" means the City of San Mateo Community Fadlities Distttot No. 2008-1 (Bay Mea^r^s) Special Tax Fund estabhshed pursuant to the Trast Agreement and maintained by the Trustee. "Standard & Poor's" means Standard & Poor's Ratings Services, a division of The s?.:hrrs::£r:;;^^^^^^^^^^^^^^ the City. "Sunnlemeiital Trust Agreement" means any Trust Agreement then in full force and the Trust Agreement. "Surplus Fund" means the Bay Meadows Community Facilities Disttid Surplus Fund established pursuant to the Trust Agreement and maintained by the City. "Tax Certificate" means the certificate delivered upon the issuance ofthe Bonds relating to Section 148 ofthe Code. "Taxable Property" has the meaning given in the Rate and Method. "Trustee" means The Bank of New York Melton Trast Company NA a iiational banking association duly organized and existing under and by virtue ofthe laws ofthe United States o ^ZZT^ZiJto accept and execute trasts ofthe character sd forth m the Trust Agreement, at C-8 its Principal Corporate Trust Office, or any other bank or frust company having a corporate trust office in Los Angeles or San Francisco, Califomia, which may at any time be substitoted in tts place as provided in the Trust Agreement. "Written Request of the City" means an instrument in writing signed by an Authorized Representative. Equal Security til consideration of the acceptance of the Bonds by the Holders thereof, the Trust Agreement shall be deenied to be and shall constitute a confrad between the City and the Holders from time to time to secure the full and final payment ofthe interest on and prineipal of and redemptton premiums, ifany on all Bonds which may from time to time be authorized, sold, executed, authenticated and delivered under the Trust Agreement, subjed to the agreements, condrtions, covenants and tei-ms contained therein- and all agreements, conditions, covenants and terms contained therein required to be observed or performed by or on behalf of the City shall be for the equal and proportionate benefit, security and protedion of all Holders without distmdion, preference or priority as to security or otherwise ofany Bonds over any other Bonds by reason of the number thereof or the time of execution, authentication or delivery thereof or otherwise for any cause whatsoever, except as expressly provided in the Bonds or in the Trust Agreement. General Provisions for the Bonds „ . Mutilated, Destroyed, Stolen or Lost Bonds, hi case any Bond shati become mutilated in resped ofthe body of such Bond or shall be believed by the City to have been desfroyed, stolen or lost, upon proof of ownership satisfactoiy to the City and the Trastee and upon the surrender of sueh mutilated Bond at the Principal Corporate Trust Office ofthe Trustee, or upon the receipt of evidence satisfadory to the City and the Trustee of such destruction, theft or loss and upon receipt of indemnity satisfactoiy to the City and the Trustee, and also upon payment of all expenses incurred by the City and the Trustee in the premises, the City shall execute and the Trustee shall authenticate and deliver at its Principal Corporate Trust Office a new Bond or Bonds ofthe same maturity date for the same aggi-egate principal amount in authorized denominations of like tenor and date and bearing sueh numbers and notations as the Trustee shall determme in exchange and substitution for and upon cancellation ofthe mutilated Bond or in lieu of and in substhution for the Bond so destroyed, stolen or lost. If any sueh destroyed, stolen or lost Bond shall have matured or shall have been called for redemptton, payment ofthe amount due thereon may be made by the Trustee upon receipt of like proof indemnity and payment of expenses. ' Any replacement Bonds issued pursuant to the Trust Agreement shall be entrtled to equal and proportionate benefits with all other Bonds issued thereunder, and the City and the Trustee shall not be required to freat both the original Bond and any replacement Bond as being Outstanding for the purpose of determining the principal amount of Bonds which may be issued under the Trust Agi-eement or for the purpose of determining any percentage of Bonds Outstanding thereunder, but both the original and the replacement Bond shall be treated as one and the same. Condittons to Issuance of Additional Bonds. The City may at any time issue a Series of Bonds payable ftom the Special Taxes as provided in the Trust Agreement on a parity with all other Bonds theretofore or thereafter issued under the Trust Agreement, but only subject to the following conditions which are made condhions precedent to the issuance of sueh Series of Bonds by the Trast Agreement' G-9 (.) The issuance of such Series of Bonds shall have been authorized pursuant to and in accordance with ft terns of the Law and pursuant to the Trust Agreement and shall have been provided Tby a Su^^reme^^^^^ Trust Agreement in accordance therewift and wift the Trust Agreement which shall spedfy (or provide for fte ddermination of) ftefollowing: (i) The puipose for which sueh Series of Bonds is to be issued; provided tl^^^t fte pmeeeds of sale of sueh Series of Bonds shall be applied solely for the purpose of providmg funds to fnlai^e o ref^nLe the Development Fees and/or the aequisitton and constraction costs of (or the reimbmsement for) fte Improvements, including fte incidental expenses related fterdo; (ii) The prineipal amount and designation of sueh Series of Bonds and fte auftorized denomination or denominations ofthe Bonds ofsuch Series of Bonds; (iii) The date, the matority date or dates, the Interest Payment Dates and the dates on which Mandatoiy Sinking Account Payments, if any are due for sueh Series of Bonds; provided, ftat (0 he iprfntik:srrmTr:^^^^ 5S-rr;::;;^ereptsVe^:f^^ Xte March Toi the September 1 date following their date and shati be for a penod of not longer Tnt^Zvc?m 1 lomhs- (iii) all Bonds of sueh Series of like matorify shall be identical m al respee s, exTep^^^^^^^^^ i^^nterdi-mh ation, interest rate or redemption provisions, and (iv) --1-^Jurittes of the Se al BoSsTsucl Series or Mandatory Sinking Aceount Payments for fte Term Bonds of ^"^h Senes L ait eonibinatton thereof, shall be established to provide for fte redemptton or payment ofthe Bonds of such Series on or before their respedive maturity dates; (iv) The redemption premiums and redemption terms, if any, for such Series of Bonds; (v) The form of the Bonds of such Series; (vi) The aniount, if any to be deposited from the proeeeds of sale of such Seri^^of Boiids ^1 the Redemptton Fund, and provistons eoneerning the use of sueh deposrt to pay interest on the Bonds of such Series; (vii) The amount to be deposited from the proeeeds of sale of such Series of Bonds in the Reserve M; provided, that the Reseive Fund shall be increased at the time that sueh Senes of Bonds becomes Outstanding to an amount at least equal to fte Required Bond Reserve; (viii) The amount to be deposited from the proceeds of sale of sueh Series of Bonds in the Acquisition and Construction Fund; (ix) The amount to be deposhed ftom fte proceeds of sale of such Series of Bonds in the Expense Fund; (X) The amount to be deposited from fte proceeds of sale of sueh Series of Bonds in the separate account for sueh Series of Bonds estabUshed and maintained in the Costs ofissuance Aceount, and C-10 provisioS^if th^;t=r:^ R:tSS^ ''''''-'' -^ -'- ^^^ inconsistent widi tiie comftuing; "^ ' '^' ""''' *' ^^"^* ^S^^^"^^"t ^h^" have oeeurred and shall be then on propi^ OJT,XBZ:^T^ '' delinquent with resped to the payment ofany Special Taxes eoUected'^i fuJ^' ^^"''^^ ^f 'T^^^' ''''^'^^^' *° *^ ^^^ ^f the Special Taxes were to be levied and Cel^ in the roZr;^ v rf T""^ !f '''''^''''' ^^* ^^e Rate and Method on all TaxaWe LienRagofall^:?^^::^^-^^^^ l^ropertP oXoy or r SnTaisr"the appraised valu, "^e off a' parce" 'Tl ol f Taxabl""^^^e ' ovaluatior Undevelopen of I dparce Propeifl ofy TaxabJorSevdop determined bv an MAdT S'that wo:idrr^"d'" 'Z TT f ^^^^^^^^^^^ Propeify,'means L^p^:^ of all'ptS^^ Z^ 7 ? I u"". ^developed Property ifthe Special Taxes were being levied at the time 5 Outstanf fy'^r' '" ""''Z' "Pf"''^ '' '''' aggregate prineipal amount of all Bonds hat whl be Outstandmg after the issuance of sueh Series of Additional Bonds plus the aggregate principal amount of rlT^'A T^'^y ^ certificate of an Independent Certified Public Accountant or nattonallv recognized, mdependent municipal finance consultant on file with the Trustee. The terr''vXtoTien tt 'L n-TsTuTLl^f ^^^^^^ '"^?T^ "?" *^ "^^° '''''' ^^1- °f ^" Undeveloped Plopeify to atio ofleVate OfT, T VT "Value-to-Lien Ratio" for purposes of Taxable Propeify. means the oiLndt Jft^- th / '^c"^ '° *' "^^'•"^'^^^ P"^^^^P^1 ^"^°""t of all Bonds that will be Outstandmg after the issuance of sueh Series of Additional Bonds plus the aggregate prineipal amount of all other assessment bonds and bonds issued under the Law reasonabty altocable 'X!^^lt^rt^"l:I (f) Nottviftstanding the limitations contained in paragraphs Cd) and (e) above nnthitia contamed in the Trast Agreement shall limrt the issuance of any^eftes o ils thieurSeTtf ^ Tg^erertinlr;? t^' T' 'T °?°^'^ ^^^^ °^ *^ ^''^^^ ^^-^^f^- isLruntr th?^^^^^ BoTds ul7 L W ^^^ T-^. "^*''? contained therein shall limrt the issuance of any Series of Sse^^Son a^Bondf^r^^ fte issuance and ddiveiy ofsuch Series of Bonds the annual thP^.ft u 11 . ' Outstandmg after the issuance ofsuch Series of Bonds in each Bond Year L e.feH r Bonds were Outstanding prtor to the issuance of such Series of Bonds shaUnorb meieased by reason of the issuance ofsuch Series of Bonds. G-11 Funds and Accounts C.M.^fI«.A^. Tl- Trustee shati ff^^^^^^^^^^ ^rCo'slftsr: the "Ba^^li^^d^^^^^^^i^^^i^^ Disttiet Costs of Issuance Account ( ^^ Lcoun?'). Ati money in the Costs of issu^^^^^^^^^^^ Costs ofissuance as directed ^^, *« 7"",^^,^^^^^^^^^^ numbered as''Requisition No ''and each of which sh^^^^^^^^ Cost of Issuance Aceount as disbursement, (ii) that the ^-bur-semen - ^^^^^^^^ ^^^ ,^^„ p,id from fte provided in the Trast Agreement and On '^^ *'Jf,emafting in fteCost s ofissuance Account after A equi sition and Consttuctton Fund (a) The Trttstee shall establish »--intain a fund to b^kr.™ . ^^^^^ Community Facilities District Acquisition and C<>»s.ructo,,j™^^^^^^ ^^ ,,,,,,, „f Fimd"), into which shall be deposited the amounts requned »" *= *P^^^^^^^ ^^^,/|,, 'plied by the the Ttist Agreement. All money in ' ^ Acq-.tjon^ ri ton^^^^^^ "^^^ ^_^_^^^PP ^,^_^ „, ,,^ the Communify FaciUties Disfrict. (b) Amounts in the Acquisition and Construction Fund shall be "Pf^W^flilTq^^S as directed in a Disbursement Request ofthe ^y. ^ ^t ^ e.^ S^ 0^ .he City'^^^^ =^=s:^^5=%~^rr=rFrrj^ shall be ttansferred by fte Trastee toth e Special Tax Fund. Reserve Fund. Wift resped toth e Reserve Fund established P--^^" ^^^^^^^^^^ i^^Sptdai on or before the first (1st) day in September m each year ^o- tlie^^^^^^ ^^^ ^J^_^ ^^^^ ^^^^^^^ Tax Fund, deposrt into the Reserve Fund the ^J^^^ ^.^J^J *^^^^^^^ l,%ose ati investments in the Fund to an amount equal to the Required f ^f^^^^.^^'/^^^^^^^^^^ face value thereof if sueh Reserve Fund shati be valued on - ^^^ ^^^^^^ or if sueh investments mature investmentsmature withm twelve (12 months trom tne such investments are more ftan twelve (12) months after '^^^^Jj^^^''^^ % Z so redeemable, at the lesser of (i) the redeemable by the holder at his option if so ^deemable oi n^^^^^^^ ^^^^^^^.^^^^ ^^^^^^ eost of sueh investments, or (ii) the markd value of^^fu^^^^^^^ and ^^ ™ S Y ^^.^.^^^ ^^^^^ ^^^ the Trast Agreement, the Trastee may use mid letyoico^^^^ systemr provided, that no s-f SS t:;.i:;^to^h^-r^ -d^ ^^ - -^ -- ^° - Required Bond Reserve. ..„^z-£;T^r;X"::^-'.'r:::Xit:Si'c:.;T.z G-12 Redemptton Fund available for this purpose; provided, that if as a resuh of any of the foregoing rir; T T ^f ™,^ *?;he amount of money in the Resei-ve Fund exceeds the Required Bond Si; t u ! "^/^^'^"^.^^^ ^i"«"nt of money representing such excess from such fund and shall deposit sueh amount of money in the Redemption Fund. fr...f.rr?^^^^' .^'^ I'^'^^u'' ^ °^ ^^"^ ^^^'' ^^^' transfen-ing all of the sums required to be fte Srt HelT' r'p Vf ^ T P'.°r^°"^ '^'^^ T^^^^ ^g'-^^"^^^t, the Tmstee shdl transfer to bv Sen Ren'^ m the Rebate Fund established under the Trast Agreement, sueh amount as the Cify ^nZft^v fu f.^'"^ ^fr'^ '° *' ^'•"'''^' ^h^" h^^^ indicated is necessary to be deposited in the Rebate Fund by the tenns ofthe Trast Agreement. ^ Seryices Fund. The Trastee shall establish and maintain a fund to be known as the "Bay Meadows Commumfy Facilities Distrid Serviees Fund" (the "Semces Fund"). On September 1 ofeach year after transfemng ati ofthe sums required to be fransferred on or prior to sueh date as set forth in the Tmst Agreement, the Trastee shati transfer to the Serviees Fund the amount ofthe Spedal Tax authorized for the provision of Services under subpart (vi) ofthe definifion of "Special Tax Requirement" in Exhibrt D-l to the Resolution of Consideration. At any time, the Trustee shall transfer so much ofthe money in fte Serviees Fund to the Cify as the Cify shati request in writing, for the Cify's use in providing Services, which use may be conclusivety presumed by the Trustee. ';.,.,...i ^"PP^""^^""^^'T^^Pof to Expense Fund, and Surnlus to Surplus Fnnd Money remaining in the Special Jax Fund on September 1 of eaeh year, after transfemng all ofthe sums required to be trairsferred on or prior to such date by the provisions of the Trast Agi-eemeiit, shall be deposited by the Trustee first m the Expense Fund to the extent the amount deposited in the Expense Fund was or appears to be (in the ZZT^l:f''l^"''\f'X':V'''''''' ""''''''' - ^h° ^h^" '^°t^fy the Trastee ofsuch eonelusion) recedirFeb ^'^ 1^' City's Expenses during the one-year period beginning on the immediately pieeedmg Februaiy 15 Immediatety after sueh deposit, all money remaining in the Special Tax Fund shati be transferred by the Trustee to the City for deposrt in the Surplus Fund. Surplus Fund. There is established in the tteasury of the Cify a fund to be known as the "Bay Meadows: Communify Facihttes District Surplus Fund" (the ^'Surplus Fund"), into which shall be deposited the amounts required to be deposited therein by the provisions of the Trust Agreement All money m the Surplus Fund shall be applied by the Cify in the mamier provided in the Law and in its discretion for financing the acquisrtion and consttuction ofthe Improvements or for providing Services wluch use may be conclusively presumed by the Trustee. Prepayment Fund. The Trustee shah establish and maintain a fund to be known as the "Bay Meadows Communify Factiities Distrid Prepayment Fund" (the "Prepayment Fund"). The Prepayment Fund^shall receive funds as provided in the Trast Agreemem. All money in the Prepayment Fund constitutmg the proceeds of prepayments ofthe Speeial Tax shall be used to redeem Series 2012 Bonds as provided m he Trust Agreement. Any amounts remaining in the Prepayment Fund after all Series 2012 Bonds and all Addittonal Bonds have been paid and retired shall be deposited in the Surplus Fund C-13 Covenants ofthe Cify Agreement and in the Bonds required to be observed and performed by rt. proceeds of fte Special Tax as provided in the Trast Agreement. in accordance with such instructions. (b) Without limrting the generalify ofthe foregoing, the City will payfi-n to ^^^^^ Iidin the Sfce^^^^^^^ and'no other person shall have daim to sueh money except as provided in the Tax Certificate. (c) The provisions as sd forth above shall survive the defeasance of fte Bonds. G-14 might become payable from the proefedTof'the Snect t? '"^ '"' '" '^^^"^ "^''^^^ ^hieh, if unpaid, aUocated toth e payment ofthe interestTo pnneS^^^^^^^^ ^"^^ ^" *^ ^^"ds ofthe Trustee or which might impair the securify ofthe Bonds redemption premiums, if any on the Bonds, :^h*r'^r^^^^'^^SSS^^ -Cltywi„,eep,andp„rsua„. wh«;h complete and correct entries shall be made „f a^Tfrts , "' ^"P'""' accounting records in disbursement, allocation and application of r proceeds ofttr'-'f^ '" ""= "=^'<"' '"^'^^r^.r.!. Bonds, which accounting records shall at .11 HmfT f *" ^f^'"' ^« »"<' "f *e proceeds of tlie sul^ct to the -P«.ion'of any nSt rlrCX^S """'^ ""' --abjprior ntre" wr.. consent of the City) of any Jstnieii. '=:^^tZ>^^:::f,;Z::^-Z Protection of See.iirf demands of all persons. "^'^ "^^""^"^ ^^^d defend their rights against all claims and „ ¥^^^^-a^^^-eollectioiijoftiie^ Tax The nur , ''"^"^"y ^^^^yft^S^^^i^T^^^^^^^ P n ' 2^' !!! ?."^ '' "''^ ^^'^^^ ^'-^ Outstanding, will provision for the collection of the SpeeiafTax T^^'^ ^'"'"'""^^ ^^'^""^^^ ^^^^^^^^^^ reasonable allowances for contingen i^fal :LT f^^^^^^^^^^^ -" be sufficient, after makLg amounts required for compliance with the ag^meuL^ to yield proceeds equal to th! Tiust Agreement, and which in any event will bfsuffrientt '.."''':"'''''*' ^"""^ ^''"'' contained in the Mandatoiy Sinking Aceount Payments foTnd edemX nJ "^f °" ^"' ^^^^^^^^ '^f -d ah become due and payable and to pay all euiTen"LnetTr^^^^^^ '^ '"y' ""^ *^ Bonds as they wift fteaprovisions and temis of t^ Tru^ XS "' ^f J^^ ""''T ^"' ^"^ P^^^^e in accordance manner as ordinaiy ad valorem property tLsZZnLl^J^""'"^ ?^ '^" "^^ '^°"^^ted in the same Agreement and in the Law, shall be subject to Z same netlttir^^^^^ °*''^^^^ ^''''"^'^ ^^ the Trust and hen prioi-ify in case of delinquency L is ProSSf S v^^1^::^:^^^^^°" P-^^-, sale. The Trusfee TljeJlustee W OmSl^hiiS^;^-^:^1^^^^ N.A at its Prineipal coiporate transfer to rt under the Trust Agreement andZ apnlvl and f '""^T^ ""^''^ '^'' Cify is required to Agreement forth e purpose of paying the interest Z^T T^ '"'^^^ "'"^^"^ ^' Provided in the Trust the Bonds The Cify agrees lutlmtTZ, SSTT ^^ r'^^'.-Ption premiums, if any on Los Angeles or San Francisco, California. ^ ° ^ ^™'^'^ ^^^^"S ^ 'corporate tmst offiS in sueeessof: '^^:Z:^^^:^^!^^ -^ -ysueeessor tiiereto and may appoint a bank national banking assodation or tmsreXny Itt'in' '"'^'f '"^ ^^'^^ successor sh'all be a Los Angeles or San Francisco, Califomia hS a eomhfn^ I' f^"^ ^"''^"^ " '^°^"P°'"^t^ ^^^^^ o^^^ in sruplus of at least fifty miUion dollars VsS OOO^aM t^'f/'^'^'"^^^' "^'^"^^^ ^^^Pit^D and federal or state banking authorify If such barnattoll hi,, "^ " ^"pervision or examinatton by a a report of condrtion at least aLuaUy pu^rtf at 0^^^^^'°''''^^ exammmg authorify above referred to, hen for the nml.e ?n '^l^^^'^^^^^^^ °f ^ny supervising or surplus of sueh bank, national banking assoe a^ion 01 Zt e ^f T'^^ *' ^°'"''"^^d ^^P^tal and cafHtal and surplus as setforth in its mLtreem ^^^ ^'tV'? ^f-"' ^" ^^ ^^^ -"^'^-^d -e resign by giving written iiotiee of sueh ^^S^S^t ^cl^t^ ^S^S^^S G-15 resignation by 'T^TZX^^Z'^^^'^^^ resignation, the City f^^P'°^^^Z'Lm,^L Any resignation or '™°''f "''TS w the successor '"te Trustee is authorised to pa, interest on r^c^ ^orbi^rS ^^^^^^^^^^ redenlptln^r„nothcHoMel.as^^^^^^^^^^^ the calendar month precedmg the calendar ^^ ^^^^ .^_.^^, Agreement «^ *"«f f "^H,,^ ,i,e Trfistte to expend or risk f °-^ ^ISse of a^y of «' "^^'^« P°-«= ""'™*'- nnder the Trust Agreement, or in the exercise „„. (aith by a responsible The Trustee shall no. be liable for any -' of fug-nt ^^^^Si^^r^li. facls. The aecoimtantseleetedbyltwlthdueeare. , ,,,. i„„„ Trust Agreement and no C-16 default tl^^n:;Sat1orSt»ttrer*Xt^^^^^ ^^=™-' " *=-^ '" ^-h or The term "force majeure" means an oecurrteTZ, .*''" f f '^'"""'"^ ">' """'•' """"^ "•''<""<=• have been avoided by oxereisirdue ea?e Force m T",? •*', '=°°"°' "' *' Trustee and could not s.*es, flre, flood, eWakes^^i^rcs ^2:^^;^^^-'' '>«^°* -™>;^-- "a.- riots, applicati^^fXlfeyl ^SchTaKtLtd "S""™^ '° ™r' ^°' *' =''^-'-" "- " Tmst Agreement. °' ""^rawn >" accordance with the provisions of the consolidated ::ZZ^Zyr^,t JZZZl '= '""*^' " ^°"™''='' " «* "^'^ " ™^ '" a paity or any company rS tSstee mav Ten'^ TT°"„" "™^°"«»" '» which it shall be h-ust business, shall belhe successor to^hcTuS wlou.Te'e °' rr""""^ "" ""^'"' "'P-"'" act. anyfliing in the Trust Agreement to ^,1 ^^iShstaST""" °' ' ' "*" " ''*" Trust Agt^m^rtt^qtror :Si^n^Ztf^S^ ^ T °' "°""^ ^^'^^'° " "' *= the Trust Agreement unless sueh Bondholde Ta | wf ^^^^^^ of indemnity against the costs, expenses and liabilities «tS::lX'n::^:,l':^ ^TZZ'. """"'^ °' Amendment of or Supplement to the Trust Agreement Amendment or .Supplement by Consent of HolH>,. amended'Sr^u::;Ltr:l^^^^^^^ ofthe Holders may be by the Cify and the Tmstee, which Supplement WA^^^^ TI ""nu ^"PP^^^^^'^^al Tmst Agi-eement - consents of the Holders of sixfy percent (S 1 Z -^ '^'" ^'''"'' ^'"^"^^ ^^^" the written Outstanding, exclusive of BoL'Safe^ Tmstee. No sueh amendment or suppEmshaimT^^^^^^^ ^^r'T'' ''' ^'^"^ ^''^ ^he or otherwise alter or impair the obligation of the r/tv f*^"^ f^' "^^^urify of or reduce the interest rateo n Sinking Account Payment fJoi redemption ™^ f f^ ^" "''"'''* °" °' P'^'^'^'P^^ °f °^- ^^^datoiy the rate and in the Lency and W ^L'^^^^^^^^ Z 7 ^^ '' ^^ ^^"^ '''' ^'^'^ ^'^' written consent ofthe Holder ofsuch Bond Tnl ^ •.!u " ^'"'* Agreement wrthout the. express payable from the proceeds of tlet^^^^^^^ the abilify ofthe Cify to levy and co'l e he Spec afTaxTnl 7 J'""'' ''^''''^''''' or jeopardize for fte written consent to anv such amenZent , ' ^^ '^''"'^^ ^^^ percentage of Bonds required the Trastee without itsVrSen aSem tiiel^to "''''""*' "' ^'^ "'^'^^ '''' "^'^^^ -' ^^'^g^tions of -d obli^iSfSffelSFi^^ 7^^ ^-f A^—nt and the rights execution and deliveiy of a SuppLme^l T^^u^ra^ ?^^^ °^' ^"PPl^^^^^ted at any time by the Supp.ementalTrustAg?eememshrifb?creV^rgrnrcLS,:L°^^^^^^^^^^^^^ 1 prior written consent of G-17 anyHolders, but only tothe extentpermitted by law and after receivingan approving opinion of counsel and only for any one or more ofthe following purposes. (,) TO add to the agreements an^eovenants requned in ^^^^^^^^^^ P—e by the ray other agreements and eovenants thereafter to be p^formedb^^^^^^^^ ^^ ^^^^^ o'piln Jt the Ci^) f--'y.f :^tfeS fhf T^s. Cem:,. upon .he City which shall not (iu r^i:^tX)=r.SrSrestsoftl,eHolders; („ Tomakesuchprovisionsfortl,e2-,tSZ:Striri^^^^^^^ or supplementing any 'l^-^'irrr^'Tem te»l o n^^^^^^^ "<" i"'"^'^'""* "'* "f! '""" e^j^::;thS'stn-(^*^^^^^^^^ ,., TO authorize the issuance under a^ subject -^^::X^^,T^^'^ :li;dI:gS°ntb:iipul.suanttot.,eTrus.Agreement; .„.easio„r:::t=CS^sffsr=::==- (. TO make sueh additions, deletions or modifications as may be necessary or appropria.e to maintain any then currem rating on the Bonds. Ei^q-feLB^. Bonds o™ed or l^Jd^ft. *e --of-^^^^^^ °rdSr.SrCrrgre1i,S,^Sl?^ S/to coU,, .o o, .al. »„, other action as provided in the Trust Agreement. date of any action taken as provided ^^^he Jrust^^^^e^^^^^^^ J y ^^ .^^ ^^^^ ^^^^ ^p^,^ ^ d of bear a notation by endorsement in form ^fP^^^^^^^^ presentation of his Bond for sueh purpose the Holder of any Bond Outstandmg on such effed v^^ f.^bie notation as to sueh action shall be made at the Principal Corporate Trast Office ofthe Trustee a suitame ^^^^^^ ^^^^ ^^^^H fn sueh Bond. Ifthe Cify shall so f^---^>^^l'^l Tnd eteSed Ind in that ease upon demand of be necessary to conform tosue h action shall be P^^^^d ana > ^^^^^^^ ^^^.^^^^^^ ,f h each Holder, for Bonds then Outstandmg. xt"Botdti,:srhr:pZ-"^ RemediesofHolders j^^^^^^j^^^iH^. Any Holder shall have the right for .he equal benefi. and protection of all Holders similarly situated: C-18 the Citv le p.^^yi^^'^damus or other surt or proceeding at law or in equify to enforce his rights against cYtv r^^nen ^ . ' % '"^ °^*' ^^^^'^^^^ °' ^°^P^°y^^^ «f the Cify; and to eompd tL Cify the Cify Council or any sueh officers or employees to perfomi and cany out their duties under he Uw and the agreements and covenants with the Holders eontained in the Trast Agreement the Holderi; or ^^ '"''''' ''^"'^ ^° '''^°''' '""^ "'*' °' ^^^""S' ^'^^'^^ '""^ ""^^^tul or violate the rights of or its olSirs Jj^^^^Z^Z ^^^^^1^^:^^^ ^'^ ^^^ ^^^ ^^^ -"-^' p 101 to maturity as provided m Uie Trust Agreemert from flie proceeds ofthe Speeial Tax and the otta utondS 1: in*Ss°ni.1-" f"' °' '7'' ""^ '* ''^'"* ™-- wWehlilr^^itoltet A^nSdlrBls ' " '''™' '^ """^ "^'"^ ™"^-^"' ^"'°«='''" *^ Trust subseque1itIfInhorh7ai°''ftr "'"""' "' """^ " "°*'«'' l-y any Holder shall not affect any 1 ignts and lemedies as if sueh action, proceeding or suit had not been brought or taken. HoldersttaSS]S?*T^' ^? '™"'^ '°°*"''' "P™ '" *= ^rus. Agreement or reserved to the • p:i:^sret;ts:redr™e:t;T^^^^^^^^^ Defeasance Discharge ofthe Bonds .11 r^„f. ^^- i .^ Cify shall pay or cause to be paid or there shall otherwise be paid to the Holders of all Outstandmg Bonds the interest thereon and the prindpal thereof and the redemptton pi^miumnf anv ftereon at the times aiid in the manner stipulated therein and in the Trust AgreenZHhen a^aT^^^ covenants and other obligattons ofthe Cify to the Holders ofsuch Bonds under re Trus Age^^^^^^^^ ^rrTVTr'' ^^.^ '^^^^"^^ ^^^^ ^^^ ^^ discharged and safisfied. hi suheveSre Suttee haU execute and deliver to the Cify all sueh instruments as may be necessary or desirable to evidence sueh discharge and sattsfaction, and the Tmstee shall pay over or deliver to tTie G^ foi derosTfa th G-19 in ease any of fte Bonds are tob e redeemed «" 7^^^^f P;i°;5'JXi^to the respective Holders of all agreed to mail pursuant to the Trast Agreement a nofie llll^^XZLionlorvi,,s selected by h sueh outstanding Bonds and to f---^^^^^^^^^^^^^ an escrow agent or the Trustee pursuairt to the Trust Agreement, (2) the eshall^^^^^^^ P ^^^.^.^^ ^^^.^^ ^^,^ ^^^ ^^^ either money in an aniount whidi ^^J^^f^ .f^^^^^^^^^ redemption except by the holder tbej-eoj F oi^^^^^^^^^^ J^^^^ ^^^.^^^ S^^^^, ,f America) or in book-entry form on the books ofthe Department ot tne 1^^^^ Securities and which are rated in the municipal obhgations ^l-h have been deW^ ^^ ^^^^ ,^^jp^l ,f ,l,,h highest rating category by either Moody ^oi Standard & Fooi ^.^^^ ^^^^^ ^^^^.^^ ^^^^^ when paid witi provide money which tog *- -^^^^^^^^ Lrest to become due on sueh or fte Trastee at fte same ttme, shall f/"tticient to pay w ^^ ^^^^ ^^^^ Bonds on and prior to the matunfy dates or -f ^ Boi ,^^^^^^^^^^^ dates or the redemption prineipal of and redemption premmms if ^"J ^J^^^^ ^J^ Mdependent Certified Publie Accountant dates thereof, as the case may be, as f ^denc^^^^ ^^^^^^^^^^^^ wift the Cify and the Trastee, or natioiialty reeogiiized ^f P^^^^Xt te^^^^^ ^^tliin the next succeeding and (3) in fte event such Bonds aie not by tb^" teirns suDje F ^^^^^^^ ^ ^^^^^^ to fte ninefy (90) days, fte Cify sha I have f ^^^ to ma Ip^^^^^^^^ ^^^.^.^^^ ^^l^^^^d by it Holders of sueh Bonds and to the securities depositoie and seemrt^^ ^^^^^ ^.^^^ ^^^^^^ pursuant to the Trust Agreenient that tl- ^epo^;^^^^^^^^^^^^^ in aeeordanee wift this escrow agent or the Trustee and that ^^^^^ Bonds me d^^^^^^^^ P ^^^.^^^ ^^^^^^ .^ ^^ ^e any luon-^^I^I^l^^^stee - t-st for the payn^n^^^^^^^^^^^^ ^^ .^^^^.^^^ ,^^^.^,, thereon which remams "'^^^f ^^ for ^" 2/sta^^^^^ dates or by cati for redemptton prior to have become due and payable, ertliei ^1 their stated maturity aa^^^ maturify, if-b money was heMby^^^^^^^^^^ ^ ^^. .^,,^,,, .hereon became of such money if deposited with tbe Tiustee after me ^^^^^^^ ^ ^^^^ ^^.^^^ due and payable, shall be transferred by the ^^^f ?^ " the Ufy as tne^^^^ ^ ^^^ ^^^ ^^^^^^.^ trast, and fte Trustee shall thereupon be f ^f^, ^ and discto ^^^^^ ^^^^^^ ^^^^ shati took onty to fte City forth e payment f ™ b Bon^^^ mte e un , p ^^ ^^^ ^^^^^^^ ^^ ^^^ :;rrrdr:L^^=^^^^^^^^^^^^^^ -"- -- --• '^^ balance of sueh money then unclaimed wiU be returned to fte Cify. G-20 Miscellaneous the Tmst^fnenf t^ rf Jn Tu^^^ °^^^' ^P^^'^' ^'^- Notwithstanding anything eontained in the Trust Agreement, the Cify shall not be required to advance any money derived from Iny source of income other than the proeeeds ofthe Speeial Tax and the other funds as provided in the TrusfA^^^^ for the payment ofthe interest on or prineipal of or redemption premiums'if any on the Bonds reHen. J^^ ^''''^' are spccial tax obligations of the Cify and the interest on and prineipal of and L oTlnTdZhL^^^^^^^^^ *^ ^r'^ "^ ''''''' '^'^'^ ^^°- ^h^ P--^ds of the'spedafp X and Lm the nt. . ?^ e . T''^'"^ paragraph, and the Cify is not obligated to pay them except not^ilblTnd h f, .' ^r'l ^'^.-'"^ '""'^ °'^^^ ^"^^- The general funds and assets ofthe Cify a^e prto bi of t^l^^^^^^^ "''^'' ' ''' "^^'^ '' "°* P^^'^S^^ f°^ *^ P^y"^^"t of the interest on or Sneell Tax 1 n ^T T^T'' '?"^' °^ '^' ^''"^'' ^"^ no tax or assessment other than the nremll f "Z ^ 7'"'^ °' '""""'"^ '° P^^ the interest on or prineipal of or redemption Uen orT;'r'' "'' '^" ^°"^'- "^^^ ^^'^^^ ''' ""'' ^^^"^^^ by a legal or equitable pledge of or chV he SneelTr T ""^T T ^^Pf'"^ '^'^' ^'^ '' '""^ "^^ts income or receipts except the proeeeds of nteS n or nrincinal nf 'f'' ? '''''''^ " '""^ ^^"^^ ^^^^^'-^"^' '^' ^^ther the payment of th mteiest on or pnneipal of or redemption premiums, if any on the Bonds is a general debt; liabilify or obligation ofthe Cify. The Bonds do not constitute an indebtedness ofthe Cify ^^fthin the me;n ng 7^^^^^ constitutional or statutoiy debt limitation or resfr-ietion, and neither the Cify Counei nor the C^^^^^^ prSium77anTo?trJ^^^^^^ '.t "^'^^ ^'""^ "^^"^^^ "^^^^ ^^^^^ ^ -P--P^» ofor iSem't ol A Bgagfits ofthe Tmst Agreement Limited to Certain Parties Nothing contained in the Tmst i^f^r^^^TT^^ than the Cify the T-ustee n^^^^^^^^ fovenlt ^ "ght, remedy or daim under or by reason of the Trust Agreement, and any agreement o hai bef"r:oV T 'T'' Pf-T'.'l"^ ^" behalf of the Cify or any offi;er or employeeZeo shall be forth e sole and exclusive benefrt ofthe Trustee and the Holders. officer fe^S^ffipf^^^^ Whenever either the Cify or any deem d toiSr h '" Tf "' ''^''''^ '' ^" '^' Trast.Agreement, sueh reference shall Z deemed to indude the suecessor to the powers, duties and fonctions with resped to the adminisfration ZlotT a3'""' °'^ 'f" °'*^ "^^^ ^^^^ ''' P^^^^^^t^y -^ted in the Cify or sueh o S bSiatt of lhe r ti ^'"'""T """^ '°^T'' ^''^^^^^^ "^ '^^ Tmst Agreenient to be performed by or on ^^Ll^ thS!f S^^^^ '^^' -' ^-- to the benefrt ofthe resUe ^^,.^.^^f^^^yii2rLofJ2(^^ Any declaration, request or other instmment which is ins luments of similar tenor, and may be executed by Holders in person or by their attomevs dulv SrsrotZTf ^^'"^ 'f '''' °'.*^ ^^^'^"^'^^^ 'y '^y Holder or his attorney of anTdSatloi! Znv notat n ^r""?' °' ^/ '"^ T"^ ?P'^^"'''^^ ^'^^ ^"^'''^^y' "^^^ ^e proved by the certificat Ite o, t ? ^ ;-°?r °^^'''' '"'^°"''^ '° ^"'^^ aeknowledgiiieiits of deeds tob e recorded in the £ tumeSo-'^-iiL f %TT: ? n*^' *^ P^"^'^ ^^^"^"S ^'^h dedarattoii, request or othe rxeeroTdulv w ^ acknowledged to him the execution thereof, or by an affidavh of a witness tosue h execution duly swom to before such notaiy public or other officer. The ownership of Bonds and the tTbeTeoThlTV^f "• '"' 'f "^^^ ^^^ ''^' ^^^" b^ P--d by the registrLii boot required to be kept by the Trustee pursuant to the Trust Agreement. G-21 faith and in accordance therewith. establisheE^^it-^^^^^-^L-^ffr^^^byth^"^^^^^d in the Trust Agreement shall be ''^f^,.^^ *f J "^^^^^^^^^^ ^ „f the City, the Trustee written direction of the City. In the absence of a ""^"/"^f"^^o e^^^^^^ or fully secured by U.S. shall invest such moneys ta a'axabte money mar e P° *^J7°-^iC j„ Jtments, provided govemment securities pursuant to ,°'ause <9) °t "" ""^^^^^^ , ^„,^ „„ ^^J^H s„ch however, that any snch "-^-^.V^^f^M hte're^ e^^^^^^^^^^^ diLtion of the Ci^ (which the investment is to be made, the Tiustee shall "ave receiv ,»„„ suC, written direction ofthe City Trustee shall solicit) specifying a specific money ">arke. ftind a"^. if "» ™cn wi i„^es.ment is so received, die Trustee shall ^f^-f ™™X"C.ee .tt stl^^^^^^^^^^^^ >>-"« sr:i,rThrTrSrPars:|£." ^^:Z:SZ::^^^^ZIT?^S:^ ^«f^^ fo. any .ss suffdcd tacorcti^wCiy investment made taaccordanc e with .he Trust Agreement. The City acknowledges that .o the extent regulations of .he Co^-ller "f IJie C^^^^^^ or .!« applicable regulatory -^^^ ^;^'l^^^^fXi^Z:^t „rsueli'conflrmations t, the extent transactions as they occui *= <;^ ^P^!'™; J f^V,^ t,,, city periodic cash transaction statements ssrsK;.t;iirym:.,r::c:i::srdebytiie^uLe^^^^^^^^ which the deposrt or investment was made. stci^'^Soi'St'erpir^^^^^^^^ by the Trast Agreemem or by the Law or by any other applicable provisions of law. .. • . „f F„nd, Anv fund required to be established ta the Trast Agreement and Mamtenance of Funds. Any lund lequ re accountmg records in its customaiy maintained by the T'-t-™^^''« J^^'',^ ,^^ records, any audits ThSa'^ra^yT.s^trJrf:!.^ SrXdt ^::^::::^i^::p^^ —s and wl. due regard for Te proteefion of the security ofthe Bonds and the nghts ofthe Holdeis. G-22 iu APPENDIX D GENERAL INFORMATION ABOUT THE CTY AND THE COUNTY OF SAN MATEO ^^PerJI^^'^'Z^t^'^S'i:^^ ''' ^^-^^ '--^^^^^ '-^^ ^osrd of required by law, to: (i) levy and codect advslar^^T' ^7 '^'^''"'^°'' """'^ ^° ^"^ ^^^"^ ^<^^ordance With the law; and (ll) transit hei^^^^^^ PfV^-^^ of the Bonds In ^^y-^ntoftheprinclpalofany,ntereston%7nTat^^^^^^^^^ 15 mileltu'tnfti 'cTy ofta^F^:^,r^^^^^^ ^ ^ ^^^ California coast approximately also accessible to the San Jose and SHicon ValtovTr« "'^^°'' ^"^P'°y'^^nt base, and is Interstate 280 or U.S. Highway 101 ^ ^^ approximately 30 miles south via south Of s:n'F;^ancis:o. mran^timS 000^' '%'t ''' ^^^"^'^^ ^^^ ^^ ^2 miles on the San Frandsco Peninsula,ToredbeT^nBul^ '\lf °"" °'*^^ '^^S^-" ^^^urbs east, Belmont to the south, and fH^qSs RI!!1H D f ^^^ "°'^h, Foster City to the Mateo was incorporated in 894 "'9^'^"d^-B^y^°°d Park and Hillsborough to the west. San Population five cai|^;^^^i^5j:^^^^"'='- ^^"™'^^ '- *« °°-'^ -^ '^e State for the las. SAN IVIATEO COUNTY r^ , ^ .r Population Estimates Calendar Years 2008 through 2012 as of January 1 .1008_^___^009___2010 City ofSa;^^;,^^^^-^ l^ts^—^^n ~ '~^ '-^^^~ San Mateo County 70782S jil'll. 7?o'I°® ^^'^^^ 98.298 S°"'-'^^: state Department of Finance estimates (as of January 1). Employment and Industry Oh.isio;?MSir::^i^ :^|^2:^ ^ ^ the^S;::^;^:^ Mateo-Redwood city Metropolitan The unemployment rate in the San FranS San M«t P'H '"''/'" ^^'"^'^"° Counties. October 2012, unchanged from a revised 6 wfnQ ^feo-Redwood City MD was 6.5% in estimate of 7.8%. This comparl w^afuna^Lted un'!"" '' '°\'' ""' '^^'^^ ^^^ ^^^^"^9° and 7.5% for the nation during the same DeriidTh ^'"^"^P'oyment rate of 9.8% for Califomia county, 6.8% in San F,ranciscc^Cou^rand'6.3% in'SnTaro'C^n^^^ "" '•'"' ' ""''' D-1 The follcwin, table ...arizes ---^-^' '^'C:^^^^^ '"cfv^; UbTForrEmTy-n. and Unemp.oyn,e,,,. Employment by Industry (Annual Averages) __2010_ 2011 2007 2008 978,200 "963/100 "964^600" . n oO) 935,400 877,500 898,300 Civilian Labor Force 898,000 915,000 79,900 48,100 87,100 Employment 37',300 9.0% 8.2% Unemployment 4 QO/^ 5.0% Unemployment Rate ^2) 2,200 2,700 2,500 2,400 WageaniSalaiyEmBloyment: 2,700 200 200 Agriculture 200 200 200 32,400 32,500 Mining and Logging 44,300 35,100 45,400 37,000 37,000 Construction 42,100 38,100 43,500 23,900 24,000 Manufactunng 26,800 24,500 27,100 86,800 87,600 Wholesale Trade 94,000 87,700 95,000 36,400 35,900 Retail Trade 40,600 39,800 37,800 Transportation, Warehousing, 40,800 39,600 38,800 Utilities 39,500 40,800 57,500 60,100 58,100 Information 67,700 65,600 19,200 Finance and insurance 19,500 19,000 21,100 21,200 201,800 Real Estato and Rental and Leasing 198,300 193,600 203,900 210,100 109,800 Professional and Business Services 108,700 109,000 105,200 107,400 127,100 Educational and Health Services 126,800 122,200 122,700 124,300 37,800 39,100 Leisure and Hospitality 38,600 39,400 38,000 20,200 19,000 Other Services 19,400 19,200 18,900 35,500 35,800 Federal Government 34,900 35,600 35,400 _80^600_ 81,000 State Government 82,700 __83^500_ _81^400^ ^947^800' "934^300" "gso^soo" Local Government 991,800 ""999^300" Total, All Industnes !^;r^^^,,-,,^ie3,deuce: InCuda. sCeuiploved iudividua. unpaid ,am„, wo.ers. (1) irbrdors.icwo:;kL,a„dwo,^^^^^ 3,,,„,„,ed individuals, unpaid ta* worker,, (2) Si;ro,s^Cer::.e^ra'rwrsons.*e. fLrs,rorcX«.^o;=Totals may™, add due .0 funding^. D-2 co.pre;^eU*AtL'pLctr^:pr.^^^^^^^^^ CITY OF SAN MATEO Principal Employers for City of San Mateo Business Name Name of Percent of Total Employees County of San Mateo Medical Center* Employment 1,197 Franklin Templeton Investor 2.33% 1,110 San Mateo-Foster City Unified 2.16 1,090 San Mateo Community College District* 2.12 1,012 City of San Mateo 1.97 965 San Mateo Union High School District 1.88 800 Mills Peninsula Health Services 1.56 Fisher Investments 454 0,88 438 San Mateo County Behavioral Health 0.85 390 0.76 Nordstrom Inc 360 0.70 Total Top 10 Employers 7,816 15.21% Total Cify Labor Force(l) 51,400 (1) Total City Labor Force provided by EDD Labor Force Data nc udes all employees, including outside clinic locations RelooVcit''°'''°" °""' ''"'""' ^'"'"' ""'"'''''" ^^" '^""° ^"^ ^^"^^^ C°"^g^ i" Source: MunlServices, LLC. D-3 Construction Activity Provided below are the building permits and valuations for the City and the Counfy for calendar years 2007 through 2011. CITY OF SAN MATEO Total Building Permit Valuations (Valuations in Thousands) 2010 2011 2007 2008 2009 Pfirmit Valuation $765.9 $1,876.6 $5,212.0 $3,778.6 $4,357.3 New Single-family 9,721.0 0.0 2,169.0 2,265.1 1,012.6 24.287.6 New Multi-family 28,686.3 19.343.1 2170M Res. Alterations/Additions 28,4467 22,472.8 28,333.2 35,923.8 33,477.5 33,421.4 Total Residential 0 0.0 0.0 19,304.5 New Commercial 0.0 0.0 0 0.0 0.0 0.0 New Industrial 1,883.1 17,7037 0 3,052.1 5,2237 32.355.8 New Other 28,247^ 16,903.9 19,57U9 30,208.7 $56,588.0 $32,355.8 Com. Alterations/Additions $33,260.9 $33,471.6 $18,787.0 Total Nonresidential New Dwelling Units 5 11 24 2 Single Family 13 g 22 10 A 11 27 Multiple Family 15 95 2 TOTAL 23 ^^^^^^^^^^^^^i^^^E^i^J:^^^ Board Building Permit Summary. SAN MATEO COUNTY Total Building Permit Valuations (Valuations in Thousands) 2010 2011 2007 2008 2009 $194,950.1 Permit Valuation $245,433.9 $147,515.5 $189,296.6 New Single-family $316,491.4 21,309.0 107,040.0 67,181.1 122,424.2 74,329.6 New Multi-family 204.482.0 262,592J. 289.619.5 274,263.6 272J7L0 Res. Alterations/Additions 426,327.0 473,197.6 591,609.6 657,936.0 640,035.2 Total Residential 28,247.6 114,968.0 17,942.0 62,510.5 New Commercial 366,581.6 0.0 3,359.4 29,263.8 2,200.0 5,000.0 New Industrial 66,274.8 26,029.4 74,829.0 85,470.2 70,410.1 New Other 244,089.0 336,069.0 315,26M 235.373.3 283752^ Com. Alterations/Additions $412,537.8 $301,725.4 $806,743.4 $517,898.6 $328,725.5 Total Nonresidential 213 New DwellingJJnits 236 216 658 312 545 Single Family 393 ill 367 630 758 Multiple Family 942 629 327 TOTAL 1,025 ^^,Ji^^r^^i;^t,:[,^il^;^ Research Board. Building Permit Summary. D-4 Effective Buying Income paymenS':tm^:^^J^^S-;i - P-^ P^--' *- -^ -"tax the aggregate of wages and salaries other labor rlfl'n m '"""^V ^T°""' '"^^'^^ ''^ contributions to private pension funds^proprfeto s^^^^ ?T^ ^''"^ "' ^"^P'^^^^ imputed rentel income of owner-occuoantr o^Ln r^^ '"^^""^ ^^^'^^ includes corporations, interest income from arsources and Tnlf ^^^^^^y^' dividends paid by welfare assistence). Deducted from thk Tntl .? ^^ f^^""^^^^ (^uch as pensions and nontex payments (fines fee peaLsecanToe?fon"?' '"f-K f'"^^'' ^*"^^ ^"^ '°^^'). county^;;: ^n;srsnss::to;t:i^^^ - - cny, the City of San Mateo; County of San Mateo Effective Buying Income As of January 1, 2007 through 2011 Median Total Effective Household Buying Income Year Area . Effective _iOOO;s_Ornitted}_ Buying Income ^007 City of San Mateo $ 2,959,120 San Mateo County $58,694 23,043,253 California 65,262 814,894,438 United States 48,203 6,300,794,040 41,792 2008 City of San Mateo $ 3,077,018 $60,115 San Mateo County 23,925,603 67,466 California 832,531,445 48,952 United States , 6,443,994,426 42,303 2009 City of San Mateo $ 3,121,598 San Mateo County $63,124 23,925,603 California 67,466 844,823,319 United States 49,736 6,571,536,768 43,252 2010 City of San Mateo San Mateo County $ 3,151,550 $61,758 California 23,489,013 66,508 United States 801,393,028 47,177 6,365,020,076 41,368 2011 City of San Mateo $ 3,242,288 San Mateo County $61,786 23,717,578 Caiifornia 66,434 814,578,458 United States 47,062 6,438,704,664 41,253 Source: The Nielsen Company (US), Inc. D-5 Commercial Activity ,p 2009, .he State Board o, ^^^^^I^S;^:^^'^^^- -^ Annual tigures are not yet available for 2011. CITY OF SAN MATEO Taxable Transactions Number of Permits'and Valuation of Taxable Transactions (Dollars In Thousands) Total All Outlets Retaustores___Keiaii Jtui'^'' ^ —Tj::;;;^,i^hi^hp r Tfi^^ibi axaoie^ -~m^r Ti^^^wi N^^bj j^ransaction^ of Permits ^Jl^D^^^^^^ —^^T5^^ -KsOO^zT^ 9006 "^742 $1,316,511 3.582 % 528,279 foOl 711 1 •344.257 3,44 J ^^^^ faJ& 1694 1.269.575 3,379 i,276,170 3: S iSS •»! .-«••' 2010. Annual figures are not yet available tor COUNTY OF SAN MATEO Taxable Transactions Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands) Total A" Outlets ^ • Tli^^^ib^r fixibii NUi^^bST ^Ta^able of Permits _rransactions_ of Permits ^Jransactio]]^ —^^if^ -^12:900^^?^ 2006 • 9:467 $8,723,143 2J,082 ^3,326,306 fmi 9,278 8,998,981 20,202 ^3,137,913 -8 9,099:S?8 8,42172: ->-7 Z%9.85 3 11:3^7:0211,327.0222 11 143 7,455,767 8,840 i-,,966,338 ^. rvlfo 7:f4Sf4 D-6 APPENDIX E DTC AND THE BOOK-ENTRY ONLY SYSTEM r.oor. .X^r:XSr/e;^aforS.^:LSr E''' '"^ ^T^ ^"' transactions by an, between DrtSmcpfLotl!t',\^'\^^^^ f"r.' """' '"""' solely on Information provided by DTC AcZZnat ^^ f'l^' °'""''' '' ^ 'concerning these matters md neither the DTC PaTrE'J 'Z"'^"'^"°"' """ "^ '"""« rely on the foregoing Information Zm retail,, '^^"'"''^"'f "°'' '"^ Beneficial Owners should same .m DTcliLTTcTZr^ants^Ttt '°oal"et'"yT' '"' '"'"" ""''" "°""™ '"^ oontainad In Ihls Appendix. ^ ' "^ ^"^ responsibility for the Information /lppe„d« ,1^ cuTenrKuies'apJtSl^^^^^^^ " '"'" '"" """"""^ *scrited ,i, i/ite Com™ss,b„ and T currtnt v'^ZeJures^o? DmVj^^^^ ?""*^ """ ^'«^''="S7e Participants are on file with DTC. '°"°'"^'' " *"""" ""•» DTC deposi,o;y;S;t^lS;iL';htSS?e^.'"?^2e.^T '"^^ "" ^=' ^= '«™"'- securities registered In the Tme o C^l'^'Co (DTOs t'r,:e ,t^J'„'""' as fully-registered name as may be reauested bu ao »?,?!;„?, j ' Partnership nommee or such other Security certifL.e ^bets d or each 1 ue'oTrs^o'urm "^'^ ?"^ :""'-9'='-«^ principal amount of such issue, and wiUbe deposited w^h DTr If' h'" '" !!" '^^''^''^ Neorganizew Yorld< und'er*Ranldnr, : INe°w':^rrB':*rja'w"aS"°^'' =,?./ "f"<'n9 Law, a banking organization= ^ '™'"«^-P-P°" within the- meanin'-=' ompanq oflhye w«hV.°he meaX Of lhe TerYor"' U*rm'^Com':"™1 ?f"' ^'•*=^^"8 corporation- registered pursuan?to the provSonsof SeSion ?7A of ,l? <= r ""'' ^ "^I'^'^ring agency- DTC holds and provides as'set ser'cing forclTr 5 m i n issu:T ^U f^^^^^^ ''''• securities certificates. S p-rt-"pt-ts i:S^d:r:bta'Lr.;°ktSes"^=-n°J E-1 dealers, hanks, trust companies clearing corp„r*ns, and cert^^^ i^ Clearing CorporaSon'all ofwhich -^-^fj|^ *S isllc avaUable to others such as both of Its regulated subsidiaries. Access to the DTC system IS companies, and cleanng US and non-U.S. securities brokers and <'^^I',J;.'^'^S^™! with a Direct Participant, ^fpo'a"ions that clear through or mountain ^ custodial re^atonsnip ^^^^^^^^ ^ ^^^^^ eler directly or indirectly Hndi^^ct Participants^. On Augus^,^^^ ^ ^^^^.^ reference. u r-i- t 3. purchases of Securities -- the DTO ey.e^^^ Participants, which will ^^^'^ r%7e1ch « O^^^^") '^ '" ^"^" '' '^ 'Trm.n interest of each actual purchaser of each Security t ^ 3 ^i„ ^ot receive written on the Direct and Indirect Participants ^^^°;^| .^,^^^^^^ 3^0. however, expectedto receiv e confirmation from DTC of their Pr/^^^ase. Bene^^^^^^^^^^ ^^^,^^,^^ of t e.r written contirmations P^^^'^'^g^.d^^f'^ ^J.^f^^^^ which the Beneticial Owner entered irto holdings, from the Direct or Indirect P^^icipant tnrougn ^^ ^e accomplished by brSfonrSsTDir^r^^^^ discontinued. . . 4 TO facilitate subsequent transters, all Secur.tes deposited by Direct Par^o-pants w.h DTC are registered in the name of DTC's Partnership n^m'"^^^^ of Securities with as may be^requested by an authorized ;^P^X^f^^'""°;°oh other DTC nominee do not effect DTC and their'registration in the name of Cede & Co j^uch f ^^ ^^,,3, Beneticial Owners of any change in beneficial °^"f ^^.p. DTC has no kn^^^^^^^ ^.^^^^ Participants to whose the Securities; DTC's records ref lect °n'y th^ jfent^Y ^^^ ^^^^^j^j^, owners. The behalf of their customers 5. conveyance of notices and ^^^-^1:^-^^^ ^:^S^ Direct Participantsto indirec t Participants, and by Di ect Pa^ p ^^ ^^^ statutory or Beneticial Owners will be g°^^^"^^,^yXTf?om t"rnertime. Beneticial Owners of Securities regulatory requirements as may ^^'" effect J °m tim^^^ ^^ ^^^^ ^^ ^^,^^3 of significant may wish to teke certain steps to augment the transm ^^^^^^^^^ ^^^ ^^p^3^^ events with respectto ^h e Securities, such as redem^^^ 0^^3,3 of Securities may amendmenteto th e Security documen^s^ For example ^^^^^.^ ^^^ ^^^^^^ ^^ ^^^ wishto ascertain that the nonimee holdmg the S^^^r'^^ \. ^ g^^^^i^i^, owners may wish to and transmit notices to B-ef,c.l Ow er.^ ^^^^^^^ ^^^^ ^„p.,3 ,f notices be provide their names and addressesro in « y provided directly to them. E-2 issue are betgVeteL^I'oVc'fpra^^'iMo^Jet " '"V'r, 'H °'''" ^^=""'- -«^'" - each Direct Participant in such ilsue to* redeemed™™ "' "" "" ""°""' °' *^ '"'«^'^' <" respec.',o's*u%i°I'=un';e°L':utho'riz?d t'^^?^:;:"'''^^ "'" ^' ^ ™'^ »«^ Procedures. Under its usual pr™edures DTC maL f??,'^ J" accordance with DTC's MMI possible after the record date The Omn'ibul Prov, T'"."' '^™>' '° "'"^'' == ^°°" "^ rights to those Direct ParflciDants to Z^l \ T'^"^ °^''^ * '^°-'^ consenting or voting (identified in al,S[»Ko1he Crs^xW. "' "'""' °" "^ "^"'^ ^^'' made to cldrf c7Ttch''re:"nrm.r' *'*"' ^^^"^^"'^ °" *^ «-""«- «'" ^^ representative of DTC lDTc\ prac ice is to orfdl.'n'^fo'!. ^"'"'"^'^'' "' «" ^"'^°"^«^ SSairw1tr.K^ir-S£HHT"^^'^ name," and will be the resDon.^iiitv nf 1^1"^}°'!'^'^ '" bearer form or registered in "street securities m°anTL?T;''gM„g^rroLbrn*!%=^ ^^P°=""'.»«^ -=P-' '° ^'^ ^^^Xp:l^n=r^=--*---= E-3 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX F FORM OF ISSUER CONTINUING DISCLOSURE CERTIFICATE CONTINUING DISCLOSURE CERTIFICATE (City of San Mateo) $26,000,000 CITY OF SAN MATEO COMMUNITY FACILITIES DISTRICT NO. 2008-1 (BAY MEADOWS) SPECIAL TAX BONDS, SERIES 2013 ^en.erJ^^'^:^^^^^!^,!^^ is executed and No. 2008-1 (Bay Meadows) Citv of sl Sin n 'f^^.V '*" Community Faciiities District "District") in coLeS wi htee issuancro f the bon? °' ^f ""f"^' ^'^'^ °' ^^"^°^"'^ ^'^^ company, N.A., as trusti (L .^^ Z ^^ ^l^^to^:!^^-JZl^, ^stroj^^' e> meanings: ' ^^ '°"°"'"3 capitalized terms shall have the following describi'drrectrsarrofibrsSo^it^rafiSt^^^ '^ '^^ <="' ^"--''- -" - year (curr::;r:^r3f raiTorrci^rfiiSi^t^^^^^^^^^^^^ - - - -^'^ «- Certificate'"" ^'"""" '^''"' ""^ °' *" ''"""'^ 'l^'^" ih Section 5(a) of this Disclosure hy the securities at/B^^rjrSSnrslthr ^^'^^^^^^^^^^^^^ F-1 -Official Statement- means the flna, of«cia, statemen. executed by the City in connection with the issuance of the Bonds. with the Rule in connection with offering of the Bonds. Section 3. ProvisioD_ofAnniM-ReEorts- (3) The City Shall, or sh.. disclosure reports; and Certificate, and stating the date it was provided to the MSRB. section 4. ConteDLoLADMal^!lo_rts. The City's Annual Report shall contain or incorporate by reference the toiiowmg: ,a, The Citys edited .inanoia, statements pre^^^^^^^ F-2 ^fi^^::^:^:i:::^^^^^ -,---, Report sha„ contam ftnal Official Statement, and the audited fLndafstateme,^,^"^ statements contained in the as the Annual Report when they become available " "' "'^^ '" "^^ =™e "-anner A^iua, ^R-JP D'r^anr ?,^t:alirn tro^eSnTd' t'^'T"'^ '"'" "" ^ -'"- '^= SS sitttr '^^^'--^ -'- '=" a?sidt .:fcrspiir.a=bi^3'°; ti^ foilow,ng'4tem"enf ''''^™"'^ "^"'^^^ '^ '^^ -'^-ction (a) shail be accompanied by the WITH THTsKURITiEs"4'cHASQE roM^^^^^^^ '« ^^O^'DED SOLELY TO COMPLY 15C2-12. NO FUNDS OR ASSETS OF THE rfwll^'"''''® INTERPRETATION OFRCE DEBT SERVICE ON THE BONDS AW THF r'^Tt''Pc'l^°^'^™ ™ BE USED TO PAY AVAILABLE FUNDS TO COVER ANY DELINOMPM?^!!® '~'°^ OBLIGATED TO ADVANCE ON THE FINANCIAL CONDlS OF THE OTYTN p M^I ,1'iyESTORS SHOULD NOT RELY OR SELL THE BONDS. ""J." I Ht CITY IN EVALUATING WHETHER TO BUY, HOLD prior Fis'c^i Yea''" ""°""' °' "'^"^y"-"'^ of the Specia, Tax with respect to the District for the Of the i?iuai SpSTaxTel'^^Thrn' 'ST^^^ 7^ ^^^^°"^'^'« '°' ™- »>=" 5% tax rol, Prior to the SeptemberLxt PreSn°g"the°A'nrua:Report Dat ^^^^^^''^ '- equalized en.itled%pra^^dtSrd'Urto^S:'^^3^J:™ c;,'^^ '" *'^ °"*' Statement property owners described in subdivision (clah^lh "I'""""'''° '"°f<"^ c^ncd by tiiose avai,ab,e, provided that assessedTa ues ihown „n' .h°'I "T "^^ ""='=' ''''cent intormation recen equalized tax ro,, pnbr to the September next n^ H'" .':^"'° °°""'y ^^^essor's most substituted for appraised values. ''^^''""'"'' "exf Preceding the Annua, Report Date may be Appeni?A to .h7oS S.mem:n'.°'" '"' '''"'" °'Apportionmsn, for the District ss, forth in CalifornS Deb,1,„dTn've?tmen,Xd*ir:''comm-°" ''""'"'' '° '^ '«'•' ^Vle City with the - *. -3 information, the City wTcttL': l^nre^h^r l^nt'^AruaX^^^^^ Paragra'p4(a)'Lrg:'Tg,':f?hi^s11;':rc^l7--^ -^"'-^ .0 be piovided under as may be necessary to make the specmSrrelrH i^""'''"*^'''^^^^^ circumstances under Which they are made not mislead?ng ''^*''""'"''- '" '^e light of the F-3 . or ail of ths items listed above may be included by specifK;J^^^^^e tnttes, document'so included by reference. section 5. ReporliaJiSiflnillcMiEyente ,, The City Shall give, or cause to be given, notice of the occurrence of any tollowingllsteJEventJwith respec, to the Bonds. (1) Principal and interes, payment delinquencies. ,2) Non-payment related defaulfs. If material. unscheduled draws on deb, service reserves refleClng financial (3) difficulties. unscheduled draws on credl. enhancemen,s refieCing «nancia, (4) difficulties. ,, Subs,i,u,ien Of credi, or llquidily providers, or ,helr failure ,o pertorm. ,e) Adverse ,ax opinions .he -ahoe W the In^^nal Re^^^^^^^ --ce^' proposfd'or final determination;, o ^^^^^^^ J,ecl ,0 the tax status of p) ModificaUons ,o rights of security holders, if matenal. (8) Bond calls, if material, and tender offers. (9) Defeasances. ,0) Release, substl.u.io„, or sale of property securing repayment of the • securities, if matenal. (11) Rating changes. .^ ,2, Bankruptcy, insolvency, receivership or similar event o, the City or other °*'7I37"TI consummation 0, a merger^cons.^^^^^^^^^^^^ Citv or an obligated person, or the sale of a" cr substenua y ^^^^ ^„try into a 0 1 obSgated person (Cher than ,n the °J*nar/ c°u^e^^ ^^^^,^^,,^„ ^, , ,i„„„e r«renSg"^ ^ny-sr Sonsrr - pursuant to l.s terms, if material. ,.) APPCintment of a successor or additional trustee or the change o, name of a trustee, if material. F-4 City shS or si^rctu^j'tL'^i^iLtra^ir^L'r.ie.r^^^^ ^v ^r^ \" occurrence with the MSRB in an elprtrnnio Z.^l\ ^ , ^' *°' ^''® ^ "otice of such manner not in excess of 10 bu^inTsst'^^^ll^err 01^0^^^*: E^v^' '" = "™'>' (a)(8, aS ,9) al^TnZTo?::i-:::T,!; S'rublrn'a^r"n'T'^".' '" ^"^=-«°- ef the underlying even, is given .o'holders"ot,^^'L=d"S:nl^rSrXte"mt? '" '"'' (a)(8, (,?t'he elT.U^'aTjlTVmuZTaT^^^^i^ subparagraphs (a)(2), (a)(7), qualifier "if material - and suboaraorlnhSi, ' !' .^"^ (a)(11) of this Section 5 contain the certain notices, determinat ons orlSVvii^ TZl ' .'""f/ '""f"'"'" ** '^'^'"^ '" shall cause a notice to be filed as set forth ^ L '^^ ^'^'"s of the Bonds. The City event only to the exl ° that he Cit d^les Z"ZZ^- <" '"""^ "'" '^^P^^''° ^"i- ^"ch of U.S. federa, securities law. determines the event s occurrence is materia, for purposes (a)(12)Sove rs°rsS to occur^^bt^lVofretioZ"""' 'T''' '" ^^^'^^^ arrangement, or liquidation by a cS^rt or aovLrnm.ntar''lS '. 'l^".°' ''eci-sanlzation, iurisdiction over sub'stantially =,,'0,^0 asi."orrsi„e"rorL'cr ' '"' '"'""'""'" °' the MSRBtltfh'e^iio^iSSSelg^ ^°=™-'= P~"'-«^ 'c prescribed bythe MSRB Certificate shall be accompanied by identifying information as DisciosurltrtifLte^^sSS^S^tS^^^ City's obligations under this full of all of the Bonds If such termlnaK„„ „„ defeasance, pnor redemption or payment in City shall give no°"ce of such teZS™ r,h ••" '"•'°'''° ** """' "lafurity of the Bonds, the Section 5(b). termination ,n tho same manner as for a Listed Event under DissemfnS^'ge^SlSfTif^^ and may discharge any D sseminZn A^ f obi gatlona under this Disclosure Certificate, Dissemination Agent. The^nS Dbsemlnatfon A oenT ba.H »1">°."' eppointing a successor Any Dissemination Agent may i^si::t^Z:^ZS'£^!^^I^^:^'^!^°^>^''''' '"^• Csrtificalr'the" Gityi::^Sffl,,^:r cS ^"^°"^" ^^°*™ °' *"= °-'°-- certificate may beLivL, pro:1c;:^,^?t?irStrs::e^Srd^ °''^'^ °'^^ .ay on^'be n^r i-r^^r:r::-c!::s-^-- F-5 e,oio ,„ the proposed amendment or waiver *- (0 is apP^^^^^^^^^^^ in the manner provided in the Trus AO.eeme ' or amehdmente t ^^ ^^^.^^^^^^ ^^^ ^^^^ rours^r^rallJi^pS ttThtrrlsrorthrrers or beneficial owners Of the Bonds. ,t „e annual financial information - cp-a|,n9 da.^^^^^^^^^^ S is amended pursuant to the Pjcvisions he erf he f ^st An^ ,^ ^ rrtro^nf ,"orThrarenreraVdrim7cr"th"e' change in the type of operating data or tinancial information being provided. „ an amendment is made to this ^•rSZsi^:ZtZTXor ^:7:^^' principtes to be followed in P-Pa^ng f f-ia statem^^^^^^^^^^ statements or which the change is made f a Pn3sent a cen,Par,s^ ^^^ ^^^^^ ^^ ^^ ,^^ information prepared on .he bas of he "e« accoun ngpp^^^^^^ ^ ^^^^^^^^ _j,^^„3 basis of the former accounting P nciples- Tbe compa^ ^^ ^^^^^^ .„ ,^3 accounting of the differences in the fcccunt ng pnnc^les and ti^^^^^^ ^^ .^^^ information to ^''"^rr to°;rbirrhrm"Ha u;r.h";;r^ t; meet i.s obligations. TO .he extent 'rrsonTbly fra^ibtrcomparison shall be quantitative. A notice of any amendmen. made pursuant to this Section 9 shal, be filed in the same manner asfor a Listed Event under Section 5(b). section 10. Ad«on^,^*mSon. .NCblng 7 '^'= °f *fo7 u%'".°hf meat'of deemed'toTeven. ^^^^^f^^^^^^Z^^V^ oS^eZlZ of io'mmunica.ion, or dissemination set forth ,n this Disclosure Corticate or y ^^^^^^^^^ ^, ^ Listed Event, includinq any other information in any Annua Report or nm chooses to include 'in Sn .0 that which is -?";«'^VrTotfoerfoc^uSntoTa Listed EvL. in addl.ion to that any information in any Annual Repcrt or not ce of occu e^^^^^ ^^^^^ ^^^^ ^^ rs ihirSsrSlcate^ tr^S'^h information or Include it in any future Annual Report or notice of occurrence of a Usted Event section 11. DSM. '''be City fails to comply witb any^^^^^^^^^^^ certificate, the Participating Underwriter or any hoi eb a ^^^^^^^ ^^ ^^^^^^^ take such actions as may be necessay and app opr^te^mcudino^ ^^^ ^^^,^^^,^^^ compel performance. F-6 ^'''°" ''• Mtsjmmunltiesa^^ in this Ptclosu^r cSflte^'aTdl^^^ '^'^^ - -^ specifically set forth Agent, ite officers, directors, emi^ees and aTensha^^^ ""' '''' '^' Dissemination Habilities which it may incur arising out o^or in the exprnfJ ^^T'^ ^"^ '°'"' ^^P^"^^ and duties hereunder, including the costs and exDlnsef^nH^^'' P'^^^-^^^oe of ite powers and against any claim of liability, but exc^dino Mii. H "? ^"°'"^y^ ^^^'^ °^ defending negligence or willful misconduct. The Ssseminat^n A ^"t PU^'^" Disseminatfon Agent's review any information provided to it he eunX and flSl nnt K "T "° '''' ""^ °^"'9^tL to fiduciary capacity for the City, Bay Meadows Main T-f^ ?® ^^^""^^ *° ^^ noting in any owners or any other party The obiiqaTon^ofYh.^^^^^^^^^^^ resignatfon or removal Of the^issemlnS^Lr^nS^^^enT^^^^^ provide^Lreu^d^ il^^^^^^^^^^^ the City for ite services shall be reimbursed for all expenses, egal fees anfnH?'"""'^^^^ Dissemination Agent in the performance oflsdures hereunder''' "" ' °' ''"'''''' '' ''' this ^-^slTsreclni^^ to be among any of the parties to ^^"^'^'^'^^^ City of San Mateo 330 West 20"^ Avenue San Mateo, California 94403-1388 Attention: Finance Director To the Trustee: Th^ D , r., The Bank of New York Mellon Trust Company, N A 550 Kearney Street, Suite 600 San Francisco, California 94108 Atto: Corporate Trust Department To the Dissemination Agent- naviHTo,, • o A y«"i- David Taussig & Associates, Inc 5000 Birch Street, Suite 6000 Newport Beach, CA 92660 To the Participating UndenA/riter: Stifel Nicola. .^ fi n ?n^oPv u ^ Company, Incorporated dba Stone & Youngberg a Division of Stifel Nicolaus One Ferry Building San Francisco, California 94111 Attention: Municipal Research Department ShouldWerenf7ddrel°"or™reph^nr'Sb::('ir.o°Jh'rch°s:bd be sent. umDer(sj to which subsequen^ ^^^=°t? notice"^'^^s ^''°-or communication' ^-'^nate as .he City'lhl^Ti^^tee^lS^miJa^lon^^^gtt-^L'S^^ TT ^'^'^ '° '^« ^--^ "' beneficial owners from time to time of theS.td^^rcS '^SZZ:^^:^ F-7 rortifirate mav be executed in several _r^:*-h Of^^Sbe ^arraTan ^^atand a^ of which shall constitute one and the same instrument. Date: January 30, 2013 CITY OF SAN MATEO, ^S^i^^^^' -•• - °'-^"^'"^"°"'""'' Name Titie: F-8 EXHIBITA NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Sosi IBL^M! V'*^ l^T"^ *° '*^ Community Facilities District No s?ate:fSornte1th:''^at;.I °^ '^" ^^*^°- ^°^"*^ °^ ^- ^^teo°; NarrieofBondJssue: Sc;i?spSTa$^r:iS3 ^'^^"^ ^°- ^°°- ^-^ Dateofjssuance: January 30, 2013 .espectr[hfabrnam?d'Bo;^ras'rel'ir:d°,;l^ht c"°;- ''°'"''' ^" '^""-' ^^P'"' »* January 30, 2013, executed by°he ctty ^d counterstanerTh^n'"?. .'"^'"""^^ '=^'*'"ce'e dated ^s^-r^^ion^ent Thi City ariprslbTr^'Aru'erR-Z^tl^rt^^ir-bf'f^Jd'-S Dated: DISSEMINATION AGENT: By: Ite: F-9 EXHIBIT B FORM OF PARCELS BY LAND USE TABLE $26,000,000 CITY OF SAN MATEO COMMUNITY FACILITIES DISTRICT NO. 2008-1 (BAY MEADOWS) SPECIAL TAX BONDS, SERIES 2013 ParcelsbyJ=aniy^^^^^^^^^^^"^^— Pro Rata Share of Outstanding Value-to- FY 20_-_ Burden FY 20_-_ %of Series 2012 Bonds and Special Tax Series2013Jonds_(2) Ratio (3) Maximum Total Special Tax Levy :1 Land Uses\ Developed Property ResifJentia! Property Non-Resi ^^^ ^^ „ ,.^^^^^^,^p^^ p^^p3^„ .^33,,entiai Property." and "Non-Residential Property" have the meanings ascribed to (1) [h'emtThV'Ra^^^^^^^^ ^ J . 3^,,^,, ^ax levy as a percentage of t^e total Spec^^^^^^ S?2°BondS'ISs 2013 Bonds, and (ii) (2) returntSlrof'M?;r2o'l7thT(i)'outstanding aggregate pnncpai amount of (3) , which is the total overlapping debt. F-10 APPENDIX G FORM OF MASTER DEVELOPER CONTINUING DISCLOSURE CERTIFICATE CONTINUING DISCLOSURE CERTIFICATE (Master Developer) $26,000,000 CITY OF SAN MATEO COMMUNITY FACILITIES D^VR1?T NO. 2008-1 (BAY MEADOWS) SPECIAL TAX BONDS, SERIES 2013 ssuance by the City of San Mateo (tS "S oHhe bond's'"n.r'°''H""2 '" ^°""^^*'°" ^'^h the nfr M ^°'^'^un'ty Facilities District No 2008 1 mav M W"^?"^ '^°^' ^^^^ "^°"^^") ^'th o San Mateo. Stete of California (the "D^tnct") The'^BnnH '"'^'''^ °'^^" ^^*^°' County .between the City and The Ban^k of .Z tkT 1^^ t^^^^, ^^^^te^V and The Master Developer covenante and agrees as follows: executedtnd^dllivSff^^^SlS^^ This Disctosure Certificate is being owners of the Bonds. developer for the benefit of the holders and beneficial Agreemtrwlch^fl?3n^:';;tan^^^^^^ '^'T^' -* ^^^' ^^ove and in the Trust othemise defined in'?hi; Sition t'f SloJ nqcS,^ ^ ^'^^'^^^^^ ^^^'«-te unlesi •meanings: ^ roiiowing capitalized terms shall have the following or hoIdinTS plTrt'vote;5% or'more'of'thront f'^f^ °^ '""^"•"^^'y °^"'"g. controlling Person, (b) any Person, 5% or more o^whose "^ ^ '^ """^''"^ ''''''*''"' °f ^^-^^ othi indirectly owned, controlled, or hel5 wite power to 1^"'^"' '°*?^ ^^^^^''^'^^ ^'^ directly o Person ctirectly or indirectly controlling con^^^^^^^ orundJ.'''' °''"^ ^"^^°"' ^"^ (^) ^^V Person. Forpurposes hereof, control meanrtS^ no'°f'^ control with, such other rornThS^rr °'=--- --" crrow-r^^^^^^^^^ for the ^^zf^z:^:;^2;'::::s'or^ i^r °""-' - - ^™'-- ---• imilar to his Disclosure Certificate (as moSed for sunbu-""^'"'"'"^'"'"s substantial,; financing plans with respect to the Districrierebv snnh M '°''r.°'"™'"' development and owned by such Maior ownerand its AKtS,^;rorr:'l^r^^^^^^^ G-1 s to indemnify the Dissemination Agent (if any) pursuant to a provision Major owner, agrees to nde'^niTy sulistantially in the form of Section Dissemination Disclosure Certlticate. ^ ,. „ ^/^N nf this Disclosure .,„ad Events- means any Of the events listed in section 5(a) o, thi Certificate. ^ Digtnct that is ,,,,er owne. menses Of ariy Report D^^^^^^^^^^^ responsible in the "^^^'XXl.l^^-'S^nlltiscsl year. with the issuance of the Bona^. ,„,omorated dba Stone & SrSi:==l«erlngof.heBonds. ^^^^^^^^^ .ra^L&=eX?fa^"'-^'-" pursuantto, an d partnership, a limited liability company .„ ess=;^ScVc*S: a 1^,°^.^^-—^ °' ^ ^' or political subdivision thereof. ,.„ nistrict ..propert/' means the property owned by .he Master Developer ,n the DistncL ..Report Date- means March 31 and September 30 ef any fisca, year. ..R„,e- means Rute iac.1.b,(.-P-^V J^^^^ under the securities Exohange AC of 1934, as th .,„„ ,axable property within the Distnct. Section 3. Prgyisign.otPeriodicReports. G-2 d^::7rirrthXo^^ Cit. Not laterthan 15 calendar Dissemination Agent'(if differerfrom he Mastr'nett^nH'''^^^^ ^^P°^ *° *he provide a written certification with (or^nduded as a n^^ rf ^" /o''^ ^^'*^'" developer shall the Dissemination Agent (if different from th^M. f ^n °? ^^^^ ^^'"'^^'^ ^^P^^ furnished to the Dissemination Agent) thrPal oala li^^^^^^^ *^' '^'"'^^^ ^'^ ^'^"^^"* fr°"^ Penodic Report constitutes the pS^LportTel^^^^^^^^ *'H' ?''V"' ^^^^* ^^at such Disclosure Certificate. The DisseminSAaenrthP Tr t *° '^^^^^^^'^hed by it under this the City may conclusively rely uporsuch certStion of^^^^^^^^^^ ^' Participating Unden/.riter and duty or obligation to review the Perbdic Report The Perinnfp T°^^''"' ''^" ^'^^ "° single document or as separate documente rnrr^nH .^^^""^ ""^^ ''^ submitted as a reterence other information^asprov1dXt:cS days prioito trR^pirt^D^e^te^Dl^l^.^aLrA:^^^^^^^^ ^ ^^P°^ '''' --^- Master Developer that the Pe iodic Reoort halnnf h ^^all send a reminder notice to the 3(a) above. The reminder notS^shalfinstiuct the^^^^^^^ ^' ^"^^'^^^ ^"^^^ Section obligations under this Disclosure Certi cate help t-m^^^^^^ t° determine whether ite if so, to provide the Dissemina ton AgenfwithTnot^^^^^ ^'''''' ' ^^1°^) ^"d, as for a Listed Event (pursuant to Section 5 berwl?f ?h M ^f''T^^'^" '" *^^ '^"^^ '^^nn^'" or cause the Dissemination Aqent to nrovid! . D ' J o^ ^^^*^' Devetoper does not provide, as required in subsecttoat above Te DissemiSn AT^ H T ^'^' ''''' ^^P°^ ^^te in substentially the form attached hereto afFvMhif A ^.f "* '^^" '^"^ ^ "^tice te the MSRB the Dissemination Agent), the 1% Sh^P^llSS^g^:!;:^^;.*^ ^'^ ^-^^ ('^ other than the Perik R^SSJn fom^hedt "lie th^P ^'^^^T^*'°" ^^^"^ ^^^"' ^° ^^^ -tent report With the Master Develope (irthe DL.^^^^ Developer), the City and the PartcioL^^^ '^ °ther than the Master been provided pursuant to this Disdosure Certr. Tr'^^'":? '^^' *^" ''"'•'°d'^ ^^Pol has filed with the MSRB. L;isclosure Certificate, stafing the date it was provided te and contain o^toVoralltTeS^S^SS^ °.^^^'°P^^'^ P-'^^- ^^^ort shall • be included by speciTic reSce to iteX H ' °^^ • issues ofthe Master DevSr or related nnhnr'??' '""l^''^^ °^'^'^' ^^^^^•^^"ts of debt MSRB or the Securities and ExchageColTss^^^^^^ T ^'" ''^"^''''^ *° the final official stetement, it must be Sble fr^m the MSRR ^"ir^r'n''''^ ^"'^^""^^ '^ ^ Identify each such other document so included b^reference. ''"°'"'''"" ^'^^'"'^ Master D^;;;::.rSSL*^^^SinS r?r' ^° ^^ P^°^'^^^ '^ ^^^^^^ B, the necessay to make the specificaT^eq r "s atem^ h the'liihrTfH °" • " '''' '' ^'^ '' which they are made, not misleading. ^^^temente, m the light of the circumstances under ^®otion 5. ReportinaolSigmficaniEye^ Ofany G-3 „) bankruptcy or insolvency ^oceedings;.^^^^^^ Master Developer and, if known, any be"kruPtoy ° insow y P^_^^^^ ,,^3,, (o have a ^^n^pTc^ rr SrrTo^: aSy fo pay special Taxes or to sell or develop the Property; a.ess-ntsr^:e^;^^^r?^;S'or;rtr^^:^^^^^^^^ m *= cf a lawsuit cl ^cb^- "as.. Develop^^^^^^ rmTges^hfoh't ^-"^ °,llS\o°ha^? iXntl^ac'^on^te Jaster Developer's ability to pay 'sTeTarr'aCst to s'lor develop .he Property; (,, material damage to or destruc.ion of any of .he improvements on the Property; and anyloa^>ithr:^iSn:^:=:^^^^—— Sa^nd'^r applicable federal securities law. ,e) 1, the Master Developer determines tbat^Jnowledge of ;j-cu---| l^^ Event luld be material under apptobe Federal crit«.slaw^ ^^ ^^^ ^^^^^^^^^ ^.„ „, shall cause the Dissemina ™ A^^^^^^^ to P™";P/p^,,^,p,ji„g undenvriter. MSRB, with a copy to the Trustee, me ouy Section 6. DuratimoLReEortina_Qb^^ following: Bonds, or ,,) .,e date on which the Master Developer prepays in full all of the Specia, Taxes attributable to the Property, or (iv) the date on which (A) the Master developer has completed con|ruc.on of a« buildinjrl be constructed wWn property^ =„ be^Dis.rlc.^an^ U riyrhrbtel^L'S ct^X rc^ot^struclon, a. leas. eo% occupied a. one time or another. G-4 Oisclos^C^S^-^r ^—--^^^ under this Master Ltelo^e^, ir^Xl^to'^ptl^onC up'on^u'^r^^^ '^^^'°P^^' °^ ^^ ^™'^*^ °f the the obligations of the Master Developerhe eunder wi^ conveyance, will be a Major Owner, owned by such Major Owner and itfAfflliates mav be--'^"-'1*° ^^' ^'°^^^^ '" the Distric Af^^^liate thereof, andthe Master DevelXrobSion. h ^^ ^^ ""''' '^^j°'' O^"^'" or by an w I be terminated. In order to effect sucrassuSnn if ^?^"• """^^ ^^^P^^* to such property -nte an Assumption Agreement in flm and suS^eT^^^^ ""ti' '''^""'" °^ ^^'•""^^^ ^^all enter the Participating Unden/vriter. substance reasonably satisfactory to the City and or eng|?D"iJ3eSSS^LiI^ ^- time to time, appoint under this Disclosure Certificate, and may dfschar^/^n? ^^'n" '"'""^'""^ °ut its obligattons without appointing a successor 6issemSon Aaenf TZ "T. ^I^^^^in^tton Agent, with or the Master Devetoper. The Dissemin^ttorAaent Iv r/ *'K °'''''^'"^ ^S^^t shall be notice to the City, the Master Developerand the TruSee. ^" ^ ^'°"^'""^ *^"^^ '^^^'' ^^'tten Certifica1::t" Ma^ef^gS^if^^^^ -V ^i^- P-ision of this Disclosure his Disctosure Certificate may^evS^^verl^^ed ha? th^'f^'if''''''"*'' '"' ''^ P^°^'^'°" of (provided, however, that the Dissemination A^en^ sh^ii n o"°^'"9, condittons are satisfied amendment that modifies or increases its ItVfc M "°^ ^^ obligated under any such consent thereto): increases ite duties or obligations hereunder without ite written (a) if the amendment or waiver rpiatoo+^ tk • . may only: be made in connection wTth a chatqe h ^^^^^^^ ''^^'°"^ 2(^)' 4 or 5(a), it legal requiremente, change in law or chanae in L H t/^"^^' ^^^^ ^''^^^^ fo"^^ change in person With respecttothe'Bonds,"ort;p?o?gusrnis^'co:S^^^^^^^^ "^^^*^^ °^ - ^'''^^^^ opInionSnationa'lly reSgtiS boTd'counsTK:::' *° 'i^ T^"'^^ °^ "^'^d- -^'d- in the at the time of the prima^' offedng of the Bo d 'afferTak n'n T '^' ^^^^'^^mente of the Rule interpretations of the Rule, as weifas any change ifci:cumsta:ces,':n°d"* '"' ^^en.^ents or - in the n!:Ler ^^^1:^^^^:::!:^^ ' ^''T' '' ^^'^^^ ^^^'^ ^onds the opinton of nationally recognized bond counseritri'n"'""^ °^ ^°'^'^^' °'" ^"'^ ^^^s not, in or beneficial owners of the Bonds. ' ."'^tenally impair the intereste of the holders to P-e1.tr M^as^^S^^^^ Certificate shall be deemed dissemination set forth in this Disclosure Certificate or L [h'"^°'"^'*'°"' '^''"^ ^^e means of mduding any other information in any Periodto SL nr . ^r^ ^^' ""^^"^ °^ communication, or in addition to that which is requirerbrthi^ ofsctosure rS^^^ chooses to include any information in any Periodic f^eTortnn?- ' ^^^ ^^'^^' ^oveioper Event in addition to that which is specificallv ^eauirp?h^th-n"°'l'^ °^ occurrence of a Listed Developer shall have no obligation'underthL'S^^ ?^''^'^^^^' '^^ faster or include it in any future Periodic Report orttStroc^^r^et^Ta LisL'fve^^' ''"^^^^^^'^^ G-5 section 10. Default. In the event of a failure o^be Ma-r Develop^^^^^^^^^^^ section 11. ms,^Jmmim,,ff^^^^^,^^^^m^^^^olosn,e City of San Mateo To the Issuer: 330 West 20'^ Avenue _ San Mateo, California 94403-1388 Attention: Finance Director The Bank of New York Melton Trust Company, N.A. To the Trustee: 550 Kearney Street suite 600 San Francisco, California 94108 Atto: Corporate Trust Department To the Partidpating Undenwriter: l-.^rrgLrta'^DiSS^.rus*^ One Ferry Building San Frandsco, California 941 n Attentton: Munidpal Research Department G-6 To the Master Developer- D-,., ^« .. «'oper. Bay Meadows Main Track Investors LLC c/o Wilson Meany Four Embarcadero Center, Suite 3330 San Francisco, California 94111 differenf7ddre;Tor"t:reph^^nrriS^^^^ ^^-^ "^ted above, designate a should be sent. numper(s) to which subsequent notices or communications the City'r;:stef!S^( J^3lcS^^^^^ '•-- -'^'y to the benefit of Agent, the Participating UndelnS and holder's and bS'^'i *'" ^''''''' *^" Dissemination Bonds, and shall create no righte in anv othX^1,. ^^"^^'O'^l owners from time, to time of the Devetoper hereunder shall be fssumed bVanv len.?°n ^^ '"*"^- ""' °'^"9^*'°"« °f the Master Devetoper as a result of a sale, mer^e^c'/nsX?:: ^rore^;*^^^^^^^^^^^^^^^^ °^ ^'^ ^-^- Date: January 30, 2013 Bay Meadows Main Track Investors, LLC a Delaware limited liability company By; G-7 EXHIBIT A NOTICE OF FAILURE TO FILE PERIODIC REPORT Name of Issuer 5riicradrs)-c?-rSn-Mrer^-^^^^^^^^^^^ state of California City Of san Mateo Community Facinties Distrid No. 2008-1 (Bay Name of Bond issue: Meadows) Spedal Tax Bonds, Senes 2013 Date of issuance: Janua^^ 30, 2013 fissuance: ^^,.^^.j--. _ HOTICE IS HEREBY GIVEN that -VM-^-rolhVaTovrrbo^^^^^ OwneO has no. provided a Perloic Report w^r ^^^^, j^„,ary 30, 2013. Dated: as Dissemination Agent By: Ite: G-8 EXHIBITB PERIODIC REPORT $26,000,000 r^^.. CITYOFSANMATEC COMMUNITY FACILITIES DISTRICT NO. 2008-1 (BAY MEADOWS) SPECIAL TAX BONDS, SERIES 2013 Certificate1th'e"'D?i:io:u'?e'c:Se"^^^^^^^^^^^^ ^"'^^ f ^^'^ ' °^ ^'^ Continuing Disctosure (the "Master Developer") in con ectiJ^ Iffh the isru:L'°nf tn^' T^^*^' '' ''' undersigned City of San Mateo (the "City") with resD^ ttn ife '^^''^"^^ °^ the above-captioned bonds by the Meadows), c,tyofSanMate;'ct:„;r<^tr^;L°o°^are":S5;c'ar!^:P.^^,^.°,^^^^^^ meaningslfvtnto^SfnrDiiclosL'clrtfficat?^"" '"' "°' °'^^™''- ^^"-^ ^^ve the I- Property Ownership and Development The information in this section is provided as of be no. more than 60 days before the date of this PerioJi^RiJ^Sx — '"" '"' '""'' •Property.); ^""'"'' '""'"''' -""d by the Master Developer in the District (the Development name: Number of lots (acreage): B. Stetus of land devetopment or construcfion activities: development entitlemenL:''""'"' '"'""''' '"' ^"^ ^''^"'^'^^"t amendments to land use or G-9 D. Aggregate property sold, optioned or leased by the Master Developer fo end users or merchant builders: Since the Last Periodic Since the Date of Issuance Report oflheBonds Acres* Acres __ ^ots . Blttn^^-sal^nly (excludln^tSorflnishid-lo.s or completed buildings). , Status o, any land purchase contracts wUh^gard to the ^^^^ -^rirn^s^^^^^^^^^^^^^ (iii) merchant builders. ' A onri ipa^sd bv Master Developer, (i) square feet subjed to the lease. uegal and Financia, Status of Master Developer II. Iss such information has previously b^ Included . Incorp^ora.ed by r—- Statement. Change in Development or Financing Plans Ill Change in Deveiopmenl Ul r.Mc.w...;,. unless such information - prevto^^^^^^^^^^^^^^ ^^^^^^^^X r.^Sr.Snrr;r:e";retopment and financing plan descnbed ,n Offidal Statement. _ G-10 IV. Official statement Updates Periodi'S^^^^—Sth:rSSS^:;r -r-r^^' ^y -Terence in a Devetoper or the Property conteined n he n^^^^^^ the information relating to the Master OWNERSHIP AND PROPOSED DEVELOpSTtht,? '"''^'' *^" ^"^^'"9 "PROPERTY With the Master Devetoper's abHity to deS and en th °f "^'l'''''^ ""' ^^^^^^^'^ '"terfere Statement. ^ °®^®'°P ^"^ ^ell the Property as described in the Official Other Matenal Information informalron^'iffn;, tray°L'tier^tmXr ''T'i, =^°'^' "'"""^ ^^^ '"*er lighfofthe circumstances under wSb^yl'^rnormTs'ag"''''"' ^'='^™"'=' '" *« Certification the Pertodl^^tol^quS'fo IVtZelTZTV'T'' ^''°'''' ^^P"" --«'"'es Certificate. .urnished by the Master Developer under the Disclosure OF THE^'R^O^'jR^^v'^^H^'Mr^^ '^Zf'"''^' ™^ DEVELOPMENT CONDITION,. OR THE BONDS OTHER THAN^S^^^^^ ^'^'^ ^^^ FINANCIAL DEVELOPER IN AN OFFICIAL RELEASE OR Fli Pn wiru'tT?.^^'^^ ^^ THE MASTER RULEMAKING BOARD, ARE NOT AUTHOR^ZFn RV^^^^ MUNICIPAL SECURITIES .ePOR;^o^Sl.°--^^^^^^^^^^ J-PDA;| THIS^PER.^^^^ Dated:___ BAY MEADOWS MAIN TRACK INVESTORS LLC a Delaware limited liability company ' By:. G-11 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX H FORM OF OPINION OF BOND COUNSEL January 30, 2013 City of San Mateo San Mateo, California . City OfSanMateo Conrmunny Mties District No. 2008-1 (Bay Meadows) ^£ScianaxBonds,Jenes2013 (Final Opinion) Ladies and Gentlemen: Z-^oS?'^^^^^ in connectiorr with No. 2008-1 (Bay Meadows) Special Tax Bonds Series 201 /rl T"", ^^"^""ity Facilities District agreement, dated as of January 1, 2012 rthr'TlViZiT ? ? ""'^^ ^' ''^"'^ P"'-«"^nt to a trust supplemer^tal trust agreement/dated ^s^^tnn^Tlol'l^^^^^^ f supplemerated by a firs and, together with the Original Trust Agreement the 'Trrf.t^A Supplemental Trust Agreement" The Bank of New York Mellon Trust Comply N A J It^'^r^^^' '''^ '^^tween the Issuer and provrdes that the Bonds are issued for the XTs'e oA^anl 'i T^'"^' ^^^ ^rust Agreement the Crty of San Mateo Community Facilities Ti nJ ST 2T017T '^^''^ '^""^^^^ ^"^^ '^'^ '" ^"d for otherwrse defined herein shati have the meanings ^n^^rrtto ^t^^Z^""^' '''"'' "" WCtl:! court deSLrr:^::Srf:^^^^^ W. reguMons, ruHngs and be affected by acfions taken or omitted or evlt occmW J such authorities. Such opinions may to determme, or to inform any person, whetLr 1^^"^?^^^^^^^^ ^"ff' ^'''''- ^^ ^^^« ""* "'^dertaken any other matters come to our attention afteftLIte teoT ''' ^ ' ^'-'"'"''^ '' ''''"'' ^° °''''' °'" date and is not intended to, and may not, be relied uDoni 1'^°^^^"^^^'t^is letter speaks only as ofits actions, events or matters. Our engagem nt wS 1^"to th ^T.""^ ^" T'^''''''' ^'th any such and we disclaim any obligation to update this letter We h ^"^^^^ has concluded with theirissuance, and signatures presented tou s (whether as or S"ls Ir as lon'^^rl''.' f'^""""^^^ "^ ^" ^^-'-^^^t delivery thereof by and validity against, any p^artS o he • T^'; 'f *^ ^^^ '^^ t^g^t execution and undertaking to verity, the accuracy of the ^fS^m^^^^^^^^^^^^^^^^ H-1 • • rpfrrred to in the second paragraph Trust Agreement and the Tax Cer iric ^^^.^^^^ omissions or evems w ompliance with which is .---^J^^^^^.^^.^col for federal income tax purposes, inteiest onthe Bonds to be mcluded m gross 1 .onds the Trust Agreement statement or other offering matenal lelati g „.„« date hereof, we are ofthe Based on and subjeot to the foregoing, and in reliance thereon, as of tlie following opinions; ^f the Issuer payable solely ''"" :rrSPPle.^^^^^ ... .reeiue„t has been duly executed and delivered b„ and eo-^3tb*aSa„di,gobliga.io„of,the,ssuei.. _ ,^ ^^.^ 3. interest on the Bonds is ^-^^:-rnT::^:ZZf^SI^^^ of California pe.on» interest on, the Bonds. Faithfully yours, ORRICK, HERRINGTON & SUTCLIFFE LLP per H-2 r^ FOR ADDITIONAL BOOKSl ELABRA.COM OR (888) 93S-2272 Meadows) „___—_-_ -_— iSBZ VIL GENERAL TERMS AND CONDITIONS