CFD 2004-3 Appraisal

8/13/2019 CFD 2004-3 Appraisal

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APPRAISAL REPORTCOM MUNITY FA CILITIES DISTRICT NO. 2004-3CITY OF INDIO

INDIO, CALIFORNIA

PREPARED FOR:CITY OF INDIOROY STEPHENSON, CITY ENGINEER100 CIVIC CENTER M ALLINDIO, CALIFORN IA 92201

PREPARED BY:WILLIAM V. SHREW SBURY, MAI/SENIOR VICE PRESIDENTJAIME Z. BASSO/ASSOC IATE APPRAISER

FIRST AMERICAN CO MMERCIAL REAL ESTATE SERVICESAPPRAISAL AND V ALUATION DIVISION1217 EAST NORMA NDY PLACESANTA AN A, CALIFORNIA 92705PH: (714) 564-8982 / FAX: (714) 564-8985DATE OF VALUE:JUNE 17, 2005

DATE OF REPORT:JULY 15, 2005Copyright 2005 by First American Commercial Real Estate Services Appraisal and Valuation Division.. All rightsreserved. Unless with the prior written permission of First American Commercial Real Estate Services Appraisal andValuation Division, no part may be reproduced, recorded, stored in a database or retrieval system or transmitted byelectronic, photocopy or any other means, whether in eye-readable or machine-readable form, microfilm or otherwise.


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AIME'? i c First American

Commercial Real Estate Services. Inc.July 15, 2005 ile No. 614

City of IndioRoy Stephenson, City Engineer100 Civic Center MallIndio, CA 92201

Re: ppraisal of Various Tracts of land (635 Lots within Phase One of the TerraLago Master Planned Community) to be Developed Under CommunityFacilities District No. 2004-3 Located in the City of Indio, CaliforniaDear Mr. Stephenson:In response to your authorization, we have prepared the following narrative appraisal reportconcerning the market value of the fee simple interest in the above-referenced real estate.Based on the investigation and analyses undertaken, our experience as real estate appraisersand subject to the definitions, assumptions and limiting conditions contained in this appraisalreport, the following opinions have been formed based on the current market data as of June17, 2005.

The estimated value of the residential parcels, discounted for the time and cost of absorption,assuming the proposed Community Facilities District No. 2004-3 financing is in placeand ready for funding, is as follows:SEVENTY ONE MILLION DOLLARS$71,000,000


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Mr. Roy StephensonJuly 15, 2005Page TwoThe definitions of value are as such:

Market Value As-Is: Means an estimate of the market value of a property in thecondition observed upon inspection and as it physically and legally exists withouthypothetical conditions, assumptions or qualifications as of the date of inspection.Market Value: Means the most probable price which a property should bring in acompetitive and open market under all conditions requisite to a fair sale, the buyer andseller each acting prudently and knowledgeably and assuming the price is not affectedby undue stimulus. Implicit in this definition is the consummation of a sale as of aspecified date and the passing of title from seller to buyer under conditions whereby:(1) Buyer and seller are typically motivated;(2) Both parties are well informed or well advised and acting in what they considertheir 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 financialarrangements comparable thereto; and(5) The price represents the normal consideration for the property sold unaffected byspecial or creative financing or sales concessions granted by anyone associatedwith the sale.

The narrative appraisal report which follows sets forth the results of our investigations andanalyses, pertinent facts about the area and the property, comparable data and the reasoningwhich, in part, led to the conclusions set forth.This report is intended to be in conformance with and is subject to the Code of ProfessionalEthics and Standards of Professional Practice of the Appraisal Institute, the UniformStandards of Professional Appraisal Practice of the Appraisal Foundation and in compliancewith CDIAC appraisal guidelines.Respectfully submitted,

\NA4u,..00.William V. Shrewsbury, MAISenior Vice PresidentCalifornia OREA License No. AG004522

1.43.30'e Z.ciate praiserCalifornia OREA License No. AT031532WVS:pa


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SUMMARY OF SALIENT FACTS AND CONCLUSIONS

EFFECTIVE DATE OF APPRAISAL: INTEREST APPRAISED: LEGAL DESCRIPTION: OWNERSHIP: SITE:

June 17, 2005Fee simple.See page 13 of this reportSee page 13 of this reportFive tracts (zones) of land to be developedunder Community Facilities District No. 2004-3PA 1:PA 2:PA 3:PA 4:PA 5:

Tract No. 31601-2Tract No. 31601-3Tract No. 31601-4Tract No. 31601-5Tract No. 31601-5

(178 Lots)(128 Lots)(86 Lots)(133 Lots)(110 Lots)

TOTAL 35 LOTS

LOCATION:

ASSESSOR'S PARCEL NOS.:

HOMAS BROTHERS GRID:

SITE:-Shape:-Earthquake Hazard:-Flood Hazard:-Environmental Issues:-Zoning:-Taxes:

ADVANTAGES OF SUBJECT:

DISADVANTAGES OF SUBJECT:

Various parcels described in the report hereinlocated in the City of Indio.CFD 2003-4 is comprised of Assessor's ParcelNumbers 601-290-003, 601-290-008 and portionsof 601-270-013, 601-270-015, and 601-270-006.Riverside County, 5410-H5 and 5411-A5, A6,B5, and B6Five separate tracts of land.IrregularNone.See Site Description in this report.See Site Description in this report.Various residential uses. See Site Description inthis report.See Property Tax Summary.Good location within a strong developing area ofIndio and surrounding desert communities.None apparent.

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION1217 NORMANDY PLACE SANTA ANA, CALIFORNIA 92705 PHONE 714.580-7056 FAX 714.550-70574


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MARKETABILITY FOR SALE/ The most likely purchaser of the subject site is aTYPICAL BUYER: large developer interested in bulk purchase of theentire parcel. MAJOR AREA INFLUENCE: The 10 Freeway Corridor, the City of Indio andthe surrounding desert communities.

HIGHEST AND BEST USE:- As Is Vacant: Developed as set forth in the proposed MasterPlan for the Community Facilities District 2004-3. FINAL VALUE ESTIMATE: $71,000,000Discounted Bulk Value

FIRST AMERICAN COMMERC IAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION1217 NORMANDY PLACE SANTA ANA, CALIFORNIA 92705 PHONE 714.580-7056 FAX 714.550-70575


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TABLE OF CONTENTS

TRANSMITTAL LETTER 2SUMMARY OF FACTS AND CONCLUSIONS 4TABLE OF CONTENTS 6INTRODUCTION 8Purpose of the Report 8Intended Use of the Report 8Intended Users of the Report 8Scope of the Appraisal 8Dates of Inspection and Valuation 9Statement of Work Product/Dates of Report Preparation 9Premises, Assumptions and Limiting Conditions 9

Special Limited Conditions 11Definitions and Reporting Standards 12Property Rights Appraised 12Property Identification 13Ownership 13Legal Description 13AREA DESCRIPTION 14Riverside County Overview 14City of Indio 21Summary 24NEIGHBORHOOD DATA 25Immediate Surroundings/Neighborhood 25Primary Neighborhood Access and Secondary Routes 25Distances and Directions from the Subject Neighborhoodto Major Business Districts 25SITE DATA 27Site Analysis 27Location 27Important Site Characteristics 27Ingress/Egress and Exposure 27Utilities and Services Available to the Subject Properties' Neighborhood 27Size and Shape 28

Adjacent P roperties 28Topography 28Proposed Uses 28Soil and Subsoil Conditions 29Earthquake, Flood, and Other Nuisances and Hazards 29Street Improvements 29Easements, Restrictions and Encroachments 29


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Essential Zoning Provisions 29CC&Rs/Private Restrictions, Governing Use 29Functional Adequacy of Site 29Tax and Assessment Data 29MARKET CONDITIONS 37Physical and Locational Considerations 37Legal Considerations 38Market Feasibility 38Discounting 42HIGHEST AND BEST USE 44Highest and Best Use As Vacant 45VALUATION METHODOLOGY 48Basis of Valuation 48Valuation Approaches 48DIRECT COMPARISON APPROACH 49Introduction 49Analysis of Comparable Sales 50Single-Family Residential Land Sales Comparison Approach Analysis 56Reconciliation of Finished Lots Value Concluded Land Value 58DEVELOPMENTAL ANALYSIS 59Absorption 59General, Administrative, Taxes, Development Costs,Profit and Marketing Costs 59Discount Rate 60DISCOUNTED CASH FLOW ANALYSIS 62SUMMARY OF VALUATIONS 67VALUATION SUMMARY 68CERTIFICATION 69APPRAISER'S QUALIFICATIONS 71ADDENDUM 70-Absorption Study

FIRST AMERICAN COMM ERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION1217 NORMANDY PLACE SANTA ANA, CALIFORNL 92705 PHONE 714.580-7056 FAX 714.550-70577


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INTRODUCTION

Purpose of the ReportThe purpose of this report is to estimate the market value of the fee simple interest in thefollowing described real estate, subject to special tax levies pursuant to the Community FacilitiesDistiict Act of 1982, under the following valuation premises:The estimated as is value of the residential acreage discounted for the time and cost ofabsorption, assuming the proposed CFD funding is in place.The estimated retail market value of the subject property, assuming the proposed CFDFinancing has been funded.Intended Use of the ReportIt is these appraisers' understanding that this appraisal report is to be used for CFD bond financingnamed CFD 2004-3. The opinions set forth are subject to the premises, assumptions and limitingconditions detailed below and throughout this report. This report is intended to be inconformance with and is subject to the Code of Professional Ethics and Standards of ProfessionalPractice of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practiceof the Appraisal Foundation. It is also made in conformance to the guidelines set out by CDIAC.

Intended Users of the ReportThe intended users of the report are The City of Indio officials, underwriters, counsel andpotential investors only.

Scope of the AppraisalAs a part of this appraisal, the appraisers made a number of independent investigations andanalyses. Only the Direct Comparison Approach and a form of the Income Approach, known asthe Discounted Cash Flow Analysis, have been utilized. The Cost Approach was feltinapplicable. The investigations and analyses undertaken include the following:

1. Review of area demographic and economic information.2. Review and analysis of the market activity for the various components of thesubject property as well as the market for master planned communities.3. Accumulation and confirmation of land sales similar in use to the parcelscomprising the subject property.4. Discussions with City planners, buyers, developers and other knowledgeablepersons in the area.

All conclusions reached are presented in a self-contained, fully documented narrative appraisal

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION1217 NORMANDY PLACE SANT_ ANA, CALIFORNIA 92705 PHONE 714.580-7056 FAX 714.550-70578


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report.

Dates of Inspection and ValuationThe effective date of value in this report is June 17, 2005. No future valuation is expressed orimplied by this report. The property was last inspected on June 17, 2005 by William V.Shrewsbury, MAI.

Statement of Work Product/Dates of Report PreparationThe data used in this report was collected, verified and analyzed by William V. Shrewsbury, MAI.This report was prepared between the dates of June 1, 2005 and July 15, 2005.

Premises, Assumptions and Limiting ConditionsThe analyses and opinions set forth in this report are subject to the following assumptions andlimiting conditions.

The valuation of the subject property is based, in part, on the conceptual specific land use plan proposed bythe various developers. It is further assumed that all governmental approvals have been granted to allow sucha plan. The "as is" condition is based upon the project being developed as defined in this report. We reservethe right to alter the conclusion of the estimated values contained in this report in the event that any changein the development costs occur or there is a change in the specific land use plan as to the number of dwellingunits or acreage for any one of the defined land uses. The value contained in this report is further conditionedupon the project being developed as defined within the body of the Community Facilities District 2004-3.We assume no responsibility for matters legal in character, nor do we render any opinion as to title which isassumed to be good and marketable, and that the premises are assumed to be free and clear of all deeds oftrust, leases, use restrictions and reservations, covenants, conditions, easements, cases or actions pending,tax liens and bonded indebtedness (unless otherwise specified).No survey, legal or engineering analysis of this property has been made by me. It is assumed that the legaldescription and area computations furnished are reasonably accurate. In the absence of a survey, no opinionis made nor responsibility taken for encroachments or undisclosed easements (if any).A current soils report was not furnished to this appraiser for review. Therefore, we assume that the soilconditions at the subject site are suitable for the existing development. This appraisers reserve the right toalter his conclusions of value if so warranted by a soils report for the subject property.OH, gas, mineral rights and subsurface rights were not considered in making this appraisal unless otherwisestated and are not a part of the appraisal, if any exist.This appraisers will not be required to give testimony or attendance in court or any other governmentalhearing by reason of this appraisal unless arrangements have previously been made.In the event this appraiser is subpoenaed fora deposition, judicial or administrative proceeding and is orderedto produce this appraisal report and files, this appraiser will immediately notify the employer.This report has not been prepared for court testimony nor is the undersigned prepared for such testimony atthis time. If court testimony becomes necessary, advance arrangements will have to be made and reasonablecompensation for such additional services would have to be mutually agreed upon.The liability of First American Commercial Real Estate Services Inc. is limited to the client and to the feeactually received. There is no accountability, obligation or liability to any third party. If this report is placedin the hands of anyone other than the client, the client is responsible for making such third party aware of alllimiting conditions and assumptions of the assignment and related discussions.

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES APPRAISAL AND EVALUATION1217 NORMANDY PLACE SANTA ANA, CALIFORNLA. 92705 PHONE 714.580-7056 FAX 714.550-7057

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First American Commercial Real Estate Services, Inc. is not responsible for any costs incurred to discoveror correct any deficiencies of any type in the subject property; physical, financial and/or legal. The clientagrees that First American Commercial Real Estate Services Inc. and the analysts will be held harmless inthe case of lawsuits involving limited partnerships, syndication or stock offerings in real estate (brought onby a lender, partner or part-owner, tenant or any other party), and the client will pay any and all awards,settlements of any type, regardless of the outcome.It has been assumed that the subject improvement suffers no structural damage or termite infestation and thatUrea-Formaldehyde Foam (UFFI), asbestos or other hazardous materials may have been used in itsconstruction. It is the responsibility of the client, lender or user of this report to check for these items.These appraisers will appear at the deposition, judicial or administrative hearing with his appraisal reportand files and will answer all questions unless the employer provides the appraiser with legal counsel who theninstructs him/her not to appear, instructs him/her not to produce certain documents or instructs him/her notto answer certain questions. These instructions will be overridden by proper court order which the appraiserswill follow if legally required to do so. It shall be the responsibility of the employer to obtain a protectiveorder.The appraisers assume no responsibility for any conditions not readily observable from his/her relatedcustomary inspection of the subject and which might affect the valuation excepting those items specificallymentioned in this report.No opinion is intended to be expressed regarding matters that require legal expertise or specializedinvestigation or knowledge beyond that customarily employed by the real estate appraiser.The date of value, for which the opinions of value are expressed in this report, is June 17, 2005. The dollaramount of this value opinion is based on the purchasing power of the United States dollar on that date.These appraisers assume no responsibility for changes in economic or physical conditions occurring afterthe date of this report that may affect the valuation opinion stated in this report. Maps, plats and exhibitsincluded herein are for illustration only, as an aid for the reader in visualizing matters discussed within thereport. They should not be considered as surveys or relied upon for any other purpose, nor should they beremoved from, reproduced or used apart from this report.No consideration has been given in this appraisal to personal property located on the premise; only the realestate has been considered unless otherwise specified.Information contained in this report has been gathered from sources which are believed to be reliable and.where feasible, has been verified. No responsibility is assumed for the accuracy of information supplied byothers.Area calculations and dimensions used are for relative appraisal comparison purposes only. There is no suchthing as a completely exact measurement and definitions can vary.Any sketch or identified survey of the property included in this report is only for the purpose of assisting thereader to visualize the property.This opinion of value is intended to be an opinion of value for a point estimate of time only. Theseappraisers, in rendering this opinion, assume no responsibility for subsequent management, economic orphysical factors which may or may not affect said conclusions or opinion.The allocation of total value to land or to buildings, if shown in this report, is invalidated if used separatelyin conjunction with any other appraisal and, if a lease or partial interest valuation is given, the sum of theparts may or may not equal the entire fee simple interest in the real estate.This appraisers estimate that the marketing time to sell the property is within 12 months.The estimated income and expense estimates used in the Discounted Cash Flow Section do not constitute anaudit of this project and should not be misconstrued as such. Estimated income and expenses shown are forappraisal purposes only and represent a combination of judgments based on marketing data, experience andestimated expenses. Expenses and income used are to be considered stabilized; actual income and expensesmay be different.In this appraisal assignment, the existence of potentially hazardous materials and/or existence of toxic waste,which may or may not be present on the property, has not been considered. This appraiser has not beennotified of the existence of any such items; however, the appraiser is not qualified to detect such substances.It is suggested that the reader consult with a qualified expert in the field for the possible presence of suchmaterials and the potential cost of correction, if found.

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES APPRAISAL AND EVALUATION1217 NORMANDY PLACE SANTA ANA, CALIFORNIA 92705 PHONE 714.580-7056 FAX 714.550-7057

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Flood zones have either been confirmed with the county or city of the property. If the flood zone has notbeen confirmed with the city, then the flood zone has been researched by looking at the National FloodInsurance Program's FIRM (Flood Insurance Rate Map). Although the FIRM panel has been researched, Weare not a flood engineer and bear no responsibility for its accuracy. If there is any question as to the validityof the FIRM panel, then I suggest that the client do an independent search, confirming the subject and panelwith the National Flood Insurance Program in Washington, D.C.The Am ericans with Disabilities Act (AD A) became effective January 26, 1992. W e have not made a specificcompliance survey and analysis of this property to determine whether or not it is in conformity with thevarious detailed requirements of the ADA. It is possible that a compliance survey of the property, togetherwith detailed analysis of the requirements of the ADA, could reveal that the property is not in compliancewith one or more of the requirements of the Act. If so, this fact could have a negative effect upon the valueof the property. Since 'we have no direct evidence relating to this issue, we did not consider possiblenoncompliance with requirements of ADA in estimating the value of the property.The signatory of this appraisal report is a member of the Appraisal Institute and is licensed by the State ofCalifornia. The Bylaws and Regulations of the Institute require each member and candidate to control theuses and distribution of each appraisal report signed by such member or candidate. Therefore, except ashereinafter provided, the party for whom this appraisal report or evaluation was prepared may distributecopies of this appraisal or evaluation report in its entirety to such third parties as may be selected by the partyfor whom this appraisal report was prepared. However, selected portions of this appraisal report shall notbe given to third parties without the prior written consent of the signatory of this appraisal report. (Nothingis to be removed, particularly conclusions of value. The entire report is to be presented at all times.) Further,neither all nor any part of this appraisal report shall be disseminated to the general public by the use ofadvertising media, public relations media, news media, sales media or other media for public communicationwithout the prior written consent of the signatory of this appraisal report, particularly as to value conclusions,the identity of the appraiser or any reference to the Appraisal Institute or to the designations granted by theorganization.Any future seismic earthquakes in the Southland may have a detrimental influence upon value. We haveexamined the property from the exterior to see if there are any structural problems. As a result, we cannotsay whether the structure has been affected by any earthquakes. In addition, we do not know whether thisstructure can withstand another earthquake. Since we have no direct evidence relating to this issue, we didnot consider possible structural damage in estimating the value of the property.Acceptance of and/or use of this report by the client or any third party constitutes acceptance of the aboveconditions. First American Commercial Real Estate Services Inc. and the analysts' liability extends only tothe stated client, not subsequent parties or users, and is limited to the amount of the fee received.The appraisers assume that the flood information provided by the County of Riverside is accurate; however,if it is different, then the appraiser does not take responsibility.

Special Limited ConditionsIt should be noted that considerable weight has been considered in the absorption assumptionscontained in the Market Absorption Study CFD 2004-3, City of Indio, dated July 2005, preparedby Market Profiles. Absorption assumptions set forth in the report call for the sale of finishedproperties to end users. Our estimate refers to the sale of lots to developers or investors whowill ultimately sell off to end users. Also, the land development costs furnished by SunCalCompanies represent the costs estimated at this time for developing the tract within the CFD2004-3 development. Our value estimates reflect these assumptions. We reserve the right toamend our value estimate should they amend their absorption and/or development cost estimates.

Definitions and Reporting StandardsThe terms market value and fee simple estate, as used in this report, are defined below. The


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Property Identification/OwnershipThis property is an appraisal of the land and improvements located in the zones or tracts set forthas follows:

PA 1: Woodside Homes Tract 31601-2 178 LotsPA 2: Lennar Homes Tract 31601-3 128 LotsPA 3: Lennar Homes Tract 31601-4 86 LotsPA 4: Ashbrook Comm. Tract 31601-5 133 LotsPA 5: Ryland Homes Tract 31601-5 110 LotsTOTAL 635 LOTS

Legal DescriptionThe land referred to in this report is situated in the City of Indio, County of Riverside, State ofCalifornia, and is described in the addendum.

FIRST AMERICAN COMM ERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION1217 NORMANDY PLAC E SANTA NA, CALIFORN IA 92705 PHONE 714.580-7056 FAX 714.550-705713


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AREA DESCRIPTION

Riverside County OverviewRiverside County consists of 24 individual cities and numerous unincorporated communities, asof 2005. Riverside County is typically grouped with adjacent San Bernardino County to form theRiverside-San Bernardino Metropolitan Statistical Area (MSA), and the area is commonlyreferred to as the Inland Empire.

The major urbanized areas are located in the western portion of the county. The majorincorporated cities include Riverside, Corona and Moreno Valley. Peripheral areas such asTemecula and Moreno Valley are the most active areas for new growth. The desert area ofRiverside County, known as the Coachella Valley, includes such world-famous desertcommunities as Palm Springs, Rancho Mirage, Palm Desert and Indian Wells. Riverside Countyis bounded by Orange County to the west, San Bernardino County to the north, the state ofArizona to the east, and San Diego County and Imperial County to the south, as the map on thenext page indicates.

The following section summarizes the general population, employment, income and retail salestrends in Riverside County.

Riverside County Population TrendsAs of January 2003, the countywide population stood at approximately 1,726,754 residents, in2004 it was 1,807,858, and 2005 the population was 1,877,000. Annual population gains fromnatural increase and in-migration changed accounted for a 2.90% increase per year.

The future rate of growth within the county will depend on a number of factors includingavailability of developable land, availability of water, the national and regional economicclimates, and public policy toward growth. The areas within the county which will continue toexperience the largest share of the new population growth will be the peripheral area betweenCorona and the Temecula Valley and the Moreno Valley area.

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION1217 NORMANDY PLACE *SAN TA ANA, CALIFORNLA 92705* PHONE 714.580-7056 FAX 714.550-705714


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RIVERSIDE COUNTY REGIONAL MAP

0 mi 0 0 0Copyright 1988-2003 Microsoft Corp. and/or its suppliers. All rights reserved. http://www.microsoft.com/streets Copyright 20D2 by Geographic Data Technology, Int All rights reserved. 2002 Navigation Technologies. All rights reserved. This data includes information taken with permission from Canadian authorities e 1991-2002 Government of Canada(Statistics Canada and/or Geomatics Canada), all rights reserved.


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Riverside County Employment TrendsEmp loyment data for Riverside County is compiled for the entire Riverside-San B ernardino M SA ,which includes both Riverside County and San B ernardino County. These counties have a diverseeconomy with manufacturing, construction and tourism as the major industry groups. The mostcommon measure of employment growth is the increase in non-agricultural employment.

The following information in italics was taken from Market Profiles, Inc.'s Feasibility Reportdated July 1, 2005.

Employment GrowthThe demand for new homes in the Coachella Valley is influenced by the economic vitality ofRiverside County and all of Southern California. Tourist expenditures and second homepurchases are important elements ofthe Valley's economy. The strength oflocally based, primaryhome purchases is dependent upon the vitality of the tourism industry, which, in turn, isdependent upon the strength of the national and Southern California economies.From 1997 through 2000, employment in Southern California increased at a healthy averageannual rate of 3.0 percent. During the same period, employment in Riverside and SanBernardino counties increased at a very strong rate of 5.2 percent per year.The rate of employment growth began to decline in the first three quarters of 2001 due to risinginterest rates and a slowing national economy. Following the attack on the World Trade Centerin September, job growth came to a virtual halt in the fourth quarter of 2001. Total employmentin Southern California increased by 1.2 percent for the year 2001.The economic weakness experienced in the late fourth quarter of 2001 carried over into 2002and 2003 and employment in Southern California declined slightly each of those years. Positivejob growth is projected to be reestablished in 2004 and employment is projected to grow by 1.5percent in 2004, improving to 2.2 percent in 2005.Employment growth in Riverside County is monitored by the State along with San BernardinoCounty on a combined, bi-county basis. Employment in the bi-county region is projected to growby about 2.5 percent in 2004, and the rate of job growth is projected to improve to 3.5 percentin 2005.Southern California's continuously expanding employment base will result in substantial demandfor new homes in the Coachella Valley. Locally, the Valley's economy has begun to benefitfromnew employment opportunities relating to the recent voter approval of Proposition IA whichauthorized the establishment of Las Vegas style casinos with slot machines on Indian lands inCalifornia. As a result, several major casino projects have been completed or are in variousstates of the development process in the Coachella Valley. These projects are projected to addseveral hundred jobs to the Valley's employment base and to attract several thousand

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION1217 NORMANDY PLACE SANTA ANA, CALIFORNIA 92705* PHONE 714.580-7056 FAX 714.550-7057

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EXHIBIT 11-2EMPLOYMENT GROWTH

RIVERSIDE-SAN BERNARDINO BI-COUNTY REGIONAND SOUTHERN CALIFORNIA

1980 - 2006

YearRiverside & San Bernardino Counties

Total ncrease/ ercentEmploymentDecrease hange

Southern CaliforniaTotal ncrease/

Employment ecreasePercentChange

2006 1,252,700 42,000 3.5% 8,464,400 168,000 2.0%2005 1,210,700 40,000 3.4% 8,296,400 135,100 1.7%

PROJECTED2004 1,170,700 50,500 4.5% 8,161,300 122,000 1.5%2003 1,120,200 37,700 3.5% 8,039,300 (11,200) -0.1%2002 1,082,500 31,800 3.0% 8,050,500 (12,700) -0.2%2001 1,050,700 40,600 4.0% 8,063,200 96,600 1.2%2000 1,010,100 49,800 5.2% 7,966,600 216,300 2.8%1999 960,300 56,500 6.3% 7,750,300 221,000 2.9%1998 903,800 40,700 4.7% 7,529,300 245,700 3.4%1997 863,100 38,300 4.6% 7,283,600 216,800 3.1%1996 824,800 23,100 2.9% 7,066,800 126,000 1.8%1995 801,700 28,900 3.7% 6,940,800 124,700 1.8%1994 772,800 16,900 2.2% 6,816,100 35,700 0.5%1993 755,900 4,400 0.6% 6,780,400 (102,900) -1.5%1992 751,500 10,000 1.3% 6,883,300 (205,000) -2.9%1991 741,500 6,300 0.9% 7,088,300 (180,600) -2.5%1990 735,200 46,000 6.7% 7,268,900 103,100 1.4%1989 689,200 41,500 6.4% 7,165,800 190,400 2.7%1988 647,700 36,800 6.0% 6,975,400 241,300 3.6%1987 610,900 36,500 6.4% 6,734,100 240,900 3.7%1986 574,400 37,700 7.0% 6,493,200 226,100 3.6%1985 536,700 41,000 8.3% 6,267,100 237,800 3.9%1984 495,700 30,000 6.4% 6,029,300 266,800 4.6%1983 465,700 13,100 2.9% 5,762,500 53,900 0.9%1982 452,600 (6,300) -1.4% 5,708,600 (135,800) -2.3%1981 458,900 6,900 1.5% 5,844,400 89,300 1.6%1980 452,000 N.A. N.A. 5,755,100 N.A. N.A.

S ource: Cal i fo rn ia Employmen t Depar tmen t , Ma rket Pro f iles

MARKET PROFILES, INC. 274211x2-1,2,3,4,5,6,7


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more visitors to the region. This growth will have a stimulating influence on the demand for newhomes in the Coa chella Valley. The first major impa cts of the casino expansion were felt in 2001.Casino projects recently completed and planned include the following:

The Augustine Casino, south of the City of Coachella, opened for business in2004. The casino employs approximately 300 persons.The Morongo Band of Mission Indians recently completed construction of a $250million casino resort hotel on a site located a few miles west of Palm Springs onthe north side of Interstate 10. The project is expected to create 4,000 new fobsover the next five years. When completed it will be one of the largest gamingdestinations on the West Coast.

A $90 million, 125,000 square foot casino recently opened in 2004 north ofRancho Mirage.The Aqua Caliente Band of Cahuilla Indians announced in January plans toexpand the Aqua Caliente Casino by additional 65,000 square feet, add a new 14story hotel with 400-rooms, and add 350,000 square feet of retail space. Thesevarious protects will be on the Aqua Caliente Reservation at the corner of BobHop Drive and Ramon Road, which is an unincorporated area of RiversideCounty.

In Palm Springs, the Spa Resort Casino opened in 2004. The $95 million gamingfacility has 30 tables, 1,000 slot machines, an entertainment lounge, and fourrestaurants.Construction has begun on the first phase of a 300-acre resort and corporatedevelopment located in Palm Springs. The Indian Oasis Resort and CorporateCenter w ill ultimately include a 10-story hotel, 290 condominium units, an 18-holegolf course, a 100,000 square foot shopping center, and 500,000 square feet ofoffice space.

In 2003, the growth of the Coachella Valley's economy was affected by the slowdown in tourismthat began in 2001. Hotel revenues in the Valley declined by 4.8% and 3.2% in 2001 and 2002,respectively. This drop in visitor activity had a dampening effect on the demand for new homesin the Valley. Nevertheless, the sales of new homes increased in 2002 compared to 2001 (seeNew Home Sales Trends below). Since 2003, however, tourism has started to rebound, with hotelroom revenues increasing by 2.4 percent in 2003 and 4.3 percent in 2004. Further improvementin hotel revenues is projected for 2005.The protected improvement in the health of the Southern California economy over the next twoyears will strengthen the underlying demand for new homes in the Coachella Valley. The volumeof visitors to the Valley will recover and grow, while the financial state and the confidence levelsof new home buyers will improve.Demographic and Housing ProfileThere are 365,648 persons residing in the Valley. The population has grown at a strong pace of4.1% per year since 2000. The Valley's population is projected to grow at a rate of 3.8% per


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year over the next five years. Although the percentage rate of growth is declining, the growthrate in absolute terms is projected to remain near recent levels.The averag e household size in the Coachella Va lley is 2.68 persons. This is a low figure resultingfrom a large proportion of one and two person households. Nearly two-thirds (64%) of themarket area's househo lds consist of one or two persons, compa red to 54 percent countywide. Thelarge proportion of small households is partly due to a large retired population. Nineteenpercent of the population is over 65 years of age. Countywide this age group accounts for 14percent of the population.The population of the City of Indio is 61,516 persons. At 3.46 persons, the average householdsize in the city is much larger than that of the Coachella Valley as a whole. The city has a muchlarger proportion offamily househ olds with children than do the other com munities in the Valley.The income profile of the Valley's households is very diverse. Households are distributed acrossa broad range of annual incomes from under $25,000 (21%) to over $100,000 (20%). Themedian income ofhouseholds in the Coachella Valley is $44,240. This is a modest figure that is8.6% below the countywide median figure of$48, 384. The median income ofhouseholds in Indiois $39,477.Housing ProfileSingle family detached homes account for 46 percent of the Valley's housing stock compared toa countywide proportion of 61 percent. The median housing value in the Coachella Valley is$238,378 (existing homes). This figure is slightly below the figure for Riverside County of$245,354. However, the Valley's housing stock is very diverse. The Valley has a greater thantypical proportion of the least expensive homes and of the most expensive homes. Twenty fivepercent of the Valley's housing stock is valued below $150,000 compared to 22% countywide.However, the Valley also has a higher proportion of homes valued over $400,000 (24% versus18% countywide).Housing vacancy rates are very high in the City of Palm Desert, as well as in the Cities of IndianWells, La Quinta, Palm Springs and Ran cho Mirage. These high vacan cy rates of over 30%, 40%and even 50% are due to the high incidence of second home ownership in these cities. Assumingan underlying vacancy rate offive to ten percent, second home ownership in these cities rangesfrom 20 to 45 percent of the total housing stockThe proportion of second home ownership in the City of Indio is relatively low. The proportionof second home ownership in the city is estimated to be about ten percent. However, thisproportion is projected to increase over the next five years.

New Home Sales TrendsThe volume of sales in the Valley declined from a peak of 3,356 in 1989 to 953 in 1993 due to theeffects of the regional recession that began in mid-1990. Sales activity remained moderate from1993 through 1997, then accelerated to 2,226 homes sold in 1998 and to 3,330 homes in 2000.Sales for 2001 fell to 2,510 homes due to a general slowdown in economic growth in SouthernCalifornia Sales increased to 4,236 homes in 2002. Sales activity continued to increase in 2003and in 2004 with 5,768 homes sold in 2003 and 5,851 homes sold in 2004.


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The geographic pattern of new home sales in the Coachella Valley has shifted over the past fewyears. Excluding the Indio-Coachella submarket, sales activity among the other submarket areasvaried significantly from year to year. The sales fluctuations have been due largely to supplyconsiderations. Sales in the Palm Desert submarket dropped from 1,313 homes in 2002 to 383homes in 2003 due to a decline in home supply. Alternatively, homes sales in the Palm Springs-Cathedral City submarket (including Desert Hot Springs) increased from 393 homes in 2002 to1,161 homes in 2004 due to an increase in supply. The shifting geographic pattern of salesactivity is likely to continue in the future. More sales activity is expected to emerge in PalmDesert since the city has recently ended its moratorium on development in its northern sector.In contrast to fluctuating sales activity in the other subm arket areas of the valley, new h ome salesin the Indio-Coachella Submarket have consistently increased over the past three years. Salesjumped from 591 homes in 1999 to 1,217 in 2002 and 2,890 homes in 2003. New home sales inthe Indio-Coachella Submarket continued to accelerate in 2004 with sales totaling 2,596.Moderate home prices have been a major attractor of home buyers to the submarket.Price TrendsThe average price of a detached home sold in the Coachella Valley in the third quarter of 2005was $487, 063. The average sale price hasfluctuatedfrom quarter to quarter due to the changingmix of product offerings. Although the prices of individual homes have risen significantly, theaverage sale price of all homes has risen only moderately over the past 4 years due to theincrease in the sales volume ofmodestly-priced homes located in the Indio-Coachella submarketarea. The average price of new homes sold in the Indio-Coachella submarket during the firstquarter of 2005, was $381,349. This figure is 40 percent higher than the average sale price forthe first quarter of 2004 of $272,163.Sales are spread across a broad price spectrum ranging from under $200,000 to over S400,000.During 2004 and 2005, there is a clear pattern of decreasing sales of lower priced homes as theprice structure of new homes in the Valley has shifted upward. In the first quarter of 2004, 50%of the new homes sold were priced under $300,000. By the first quarter of 2005, that proportionhas dropped to just 6.7%.The Indio-Coachella submarket area dominated the sales of homes in the Coachella Valley infirst quarter 2005 that were priced under $400,000.

Projected New Home DemandThe primary factors that have contributed to strong new home sales in the Coachella Valley thelocal job-creating projects outline above, and very low mortgage interest rates. Supported byfavorable regional and national economic trends, job growth within the Valley is projected tocontinue at a favorable pace. And, although mortgage interest rates are expected to risemoderately, a healthy volume of new homes sales is projected to be sustained within theCoachella Valley.Based on the data ana lysis, it is projected that the demand for new hom es in the Coachella Valleywill average 4,500 homes p er year over the n ext five years. With 5,851 homes sold, the 2004 salesvolume surpassed the projected annual demand of4, 500 homes. However, it is projected that thepace of sales will moderate in 2005 and 2006.

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION1217 NORMANDY PLACE SANTA ANA, CALIFORNIA 92705* PHONE 714.580-7056 FAX 714.550-7057

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The majority of the demand will be fueled by the primary buyer segment (i.e., owner occupantsas opposed to second home owners), including retired households. Second home buyers,including pre-retirement buyers, are projected to account forjust over one quarter ofthe demandThe great majority of the buyers that are active in the community of Indio consist of primaryhome buyers consisting primary of first time buyers and local move-up households.The Coachella Valley new home market is diverse. Market spread across a wide range of pricesfrom under 300,000 to over 1,000,000. The majority of the demand for new homes in the Indio-Coachella submarket emanates from primary resident households. Primary homebuyers areresponsible for the high volume of demand below the $400,000 price level.Riverside County TransportationRiverside County is served by a major airport, Ontario International, which is located in SanBernardino County. Several major airlines have flights into Ontario, providing national andinternational flight capabilities. Los Angeles International Airport is located approximately 60miles west of Riverside. Also, Palm Springs has its own airport.A network of freeways links most urbanized areas of the county. The major north-south arterialare the Devore Freew ay (Interstate 15) and the E scondido Freeway (Interstate 215). The RiversideFreeway (State Highway 91), the Pomona Freeway (State Highway 60) and the San BernardinoFreeway (Interstate 10) provide east-west access to the desert communities and Los Angeles.

Riverside County AmenitiesWithin a two-hour drive of the County of Riverside are ocean and mountain ski resorts. World-famous desert communities such as Palm Springs are also found in Riverside County.

Riverside County ConclusionRiverside County is the fastest growing county in the Southern California region in terms ofpopulation and employment. The county remains poised for considerable expansion. It hasbecome diversified with an ever-growing employment base which should be a positive factor onreal estate values in general.

City of IndioThe subject property is located within the incorporated limits of the City of Indio in RiversideCounty. Indio is located in the south-central region of the Coachella Valley. Indio is locatedapproximately 78 miles southeast of the City of Riverside, which also serves as the County seat,


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130 miles southeast of the City of Los Angeles and 529 miles south of San Francisco. The Cityof Indio was incorporated May 16, 1930. The city consists of approximately 24.8 square milesand is bounded by unincorporated Riverside County to the north and south, the City of La Quintato the west and Coachella to the east. Please refer to the location map earlier in this section.

PopulationThe City of Indio has had dramatic population increases in the last 30 years. Growth from 1970to 2000 has been from a population of 14,469 to 45,700 as of January 1, 20 00, and four years laterit was 66,118, reflecting a 22.7% increase. Population shifts from other suburban developmentswithin the Coachella Valley have been a key factor in Indio's growth in recent years, as well asthe progression in growth to the east away from Palm Springs. Most future growth in the city willbe the development of the east and southern sections of the city.

The Census showed that the city's overall median age for over 65 is 18.4%. The overall medianhousehold income stood at $35,555. There is considerable fluctuation between the winter andsummer months in terms of population count, age and demographics as Indio becomes more ofa winter retreat for many baby boomers and senior citizens.

Indio's families have an average income and education compared to the county.

TransportationThe City of Indio has a variety of transportation facilities available. Rail is available by UnionPacific main line. Amtrak passenger rail service is available in Indio and Palm Springs. Trucktransportation has two carriers for direct daily service to Los Angeles. Overnight delivery isoffered to Los Angeles, San Francisco, San Diego, Phoenix and Mexicali. Air transportation isavailable. Palm Springs International Airport, 20 miles northwest, is served by nine airlines(Alaska being the largest), general facilities and an 8,500-foot runway. The Bermuda DunesAirport, a private general aviation facility, is located in adjacent Bermuda Dunes. County-ownedDesert Resorts Regional Airport, 7 miles southeast in Thermal, has general aviation facilities anda 5,000-foot runway. Bus transportation is available by Greyhound. The SunLine Transit Agencyprovides local bus service throughout the Coachella Valley from the Indio Transportation Center.The nearest ports are Los Angeles/Long Beach, 133 miles west, and San Diego, 130 milessouthwest. Highways serving Indio are the I-10 west to Los Angeles and east to Phoenix;California 111 northwest/southwest; and California 86 (NAFTA Highway) south to Brawley and

FIRST AMERICAN COMM ERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION1217 NORMANDY PLACE SANTA A NA, CALIFORNL-1 92705 PHONE 714.580-7056 FAX 714.550-705722


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El Centro in Imperial County, Yuma, Arizona, and Mexicali and Mexico City, Mexico.

IndustrialThere are 1,341 acres in the City limits zoned for industry. This is available in parcels rangingin size from '/2 to 200 acres. Included in this acreage total are 20 industrial parks. City-ownedland is no longer available.

Community CharacteristicsThe city has numerous facilities available. In the health-related area Indio has one full-servicehospital, with 130 beds; a 24-hour emergency care facility; and a base for paramedic service.Seventy-one physicians/surgeons, 18 dentists, 9 optometrists and 8 chiropractors practice in Indio.

With regard to education, the Desert Sands Unified School District has 14 elementary schools,5 middle schools, 3 high schools and 1 continuation school. The School District is planning tobuild a K-12 campus, near the subject property, north of Interstate 10 at Jefferson and A venue 39 .The high school should be completed in 2008. College of the Desert is opening up the Valley

Education Center to expand educational opportunities in Indio. The facility will partner withseveral universities to offer distance learning on a per class basis. Chapman College; NationalUniversity; California State University, San Bernardino; and University of Redlands offerprograms in Palm Desert/Palm Springs leading to bachelor's and graduate degrees.

Of cultural interest, the comm unity has two direct TV channels and one cable system (M ediaOne).Indio has 36 churches, 2 libraries, 1 daily newspaper, 3 weekly newspapers, 4 banks, 2 savingsand loans, 7 parks, 1 sports complex, 1 theater with eight screens and 1 live performing artscenter. Neighboring Coachella has 13 churches, 1 library, 1 bank, 1 boxing club, 1 radio station,1 community center and 5 parks. Other regional recreational facilities include: over 90 publicand private golf courses; 200-acre Lake Cahuilla Park (County); and Salton Sea for boating,waterskiing and fishing.

Indio offers many recreational facilities including the Indio Municipal Golf Course, HeritagePalms, Indian Springs, President's Club at Indian Palms and Landmark Golf Club, among thecity's seven public courses. Other recreational opportunities include equestrian, polo, swimming,tennis, mountain biking, hiking, four wheeling and off-roading. Indio provides a variety ofactivities for the outdoor enthusiast.

FIRST AMERICAN COMMERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION1217 NORMANDY PLACE SANTA ANA, C.ALIFORNI.A 92705 PHONE 714.580-7056 FAX 714.550-7057

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The median sales price for new and existing homes is $377,449, according to the Desert RealEstate May 2005 Report. The medium and upper-medium housing stock is growing quickly.Indio has a number of newer developments where prices range from $300,000 to over $400,000,such as The Shadow Hills residential developments, such as the El Dorado Collection, theVentanas, and Palazzo. There are also new homes being built in the Indio Ranchos area withmany prices exceeding $300,000.

There are 40 hotel/motels, with approximately 2,500 rooms in Indio. There are 20 mobile homeparks, with 3,000 spaces, in the Cities of Coachella and Indio and surrounding unincorporatedareas.

SummaryIndio is strategically located in the Coachella Valley as a service and retail center for a strong agri-business and rapidly expanding resort and recreational economy. A major interstate highway (I-10) and railroad (Union Pacific) offer excellent transportation service for an emerging industrialsector, all of which provide a healthy economy attractive for investment. Indio hosts severalemerging industry sectors, including: golf industry manufacturing cluster, agricultural industrycluster and home improvement/home furnishings industry cluster. Recent developments include:relocation/ consolidation of county facilities, including courts, Dash Golf Carts, Matzie Golf, I-10Auto Mall, Metropolitan 8 Theater, JFK Hospital expansion, East Valley Education Center andthe new casinos being developed.


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NEIGHBORHOOD DATA

Immediate Surroundings/NeighborhoodOn the following page is a neighborhood map identifying the subject properties in relation to theCity of Indio and surrounding areas. As can be seen on this neighborhood map, the subjectproperties are located in the north central section of the City of Indio.

CFD 2004-3 is located north of Interstate 10, at the northeast corner of Golf Center Parkway andAvenue 43. The City of Indio has become a focal point of much of the residential, commercialand industrial expansion along the I-10 and Highway 111 Corridors within the southwesternCoachella Valley region in which the subjects are located. This expansion has absorbed muchof the skilled labor pool and created demands for skills which are available only through trainingand importation from other areas. Unskilled and, for the most part, semi-skilled workers areavailable in adequate supply.

The subject property is judged to be conducive to a single-family, detached housing development,competitive with similar developments within the immediate market areas of the subjectdevelopment. At present, the commercial area is along Highway 111 and Jackson Street.

Primary Neighborhood Access and Secondary RoutesThe primary access to this neighborhood is by automobile with some limited bus access. This issupported by the close proximity of the I-10 Freeway, located approximately 1 mile south of thesubject property.

Distances and Directions from the Subject Neighborhood to Major Business DistrictsM ajor urban areas in the vicinity of the subject property include the City of Riverside and Countyseat, located approximately 78 miles west of the subject property, and the City of Palm Springs,located approximately 15 miles northwest. The City of Ontario, which is home to the OntarioInternational Airport, is located approximately 100 miles northwest of the subject property.

In summary, the immediate neighborhood is going through a transition from agricultural/desertland uses to residential and comm ercial uses. As previously mentioned, steady growth is expectedto continue.

FIRST AMERICAN COMM ERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION1217 NORMANDY PLACE SANTA ANA, CALIFORNIA 92705 PHONE 714.580-7056 FAX 714.550-705725


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___ `94h Ave venue 50

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0 miCopyright 0 1988-2003 Microsoft Corp. and/or its suppliers. All rights reserved. http://www.microsoft.com/streets(6 Copyright 2002 by Geographic Data TechnOlogy, Inc. All ri ghts reserved. 0 2002 Navigation Technologies. All rights reserved. This data includes informati on taken with permission from Canadian authorities 19 91-2002 Government of Canada(Statistics Canada and/or Geomatics Canada), all rights reserved


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SITE DATA

Site Analysis: he subject site description is based on a personalinspection of the subject property and discussions withdevelopers, as well as a review of plat maps, Assessor'sMaps and land use plans.

Location: he subject property consists of five separate tracts,located in the City of Indio. A map showing the outline ofthe residential tracts is included on the map at the end ofthis section.Important Site Characteristics: he tracts have generally level topography. The marketarea is well supported by various residential developments.Positive Site Characteristics: verage to good proximity and freeway access.Negative Site Characteristics: o apparent negative factors were observed.Ingress/Egress and Exposure: ccess to and circulation within the developments aredepicted on the map at the end of this section.

The design of the internal collectors appears to allow foradequate travel lanes in each direction. Additionally, therewill be sidewalks and landscaping on both sides of theroadways.All roads will be constructed to City of Indio standards.The roadways will be dedicated to the City of Indio uponcompletion and maintained by the City through theassessments of a community service agency.The tracts will be valued assuming a finished map is inplace and the lots are in a ready to build condition. Theywill also be valued, discounted back to an as iscondition, with the assessment infrastructure in place.The land development costs have been furnished bySunCal Companies and are presented and applied in ourmarket value analysis.

Utilities and Services tilities and services are furnished by the followingAvailable to the Subject gencies/companies:Properties' Neighborhood: Electricity: mperial Irrigation DistrictNatural Gas: Southern California GasWater: ity of IndioWaste Water: Valley Sanitary District



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Telephone: VerizonFire: ounty of RiversidePolice: ndio Police DepartmentTransit: un Line Transit Agency

Size and Shape:

Adjacent P roperties:

Topography:Proposed Uses:

Rates for these utilities, to be provided and applied to thesubject properties, are generally competitive with theRiverside County area as a whole.All the aforementioned utilities have source linesproximate to or directly to the subject zones.The zones of the CFD 2004-3 project consist of thefollowing approximate sizes and densities.

LAND USE SUMMARYPA TotalAcreage* TotalResidentialAcreage**

# ofLots DensityBased onTotalAcreageDensityBased onResidentialAcreage

1 47.09 33.05 178 3.78 5.382 36.58 33.95 128 3.50 3.773 25.67 24.25 86 3.32 3.554 41.56 17.60 133 3.20 7.555 26.01 26.9 110 4.22 4.10

TOTAL 176.91 135.75 635 3.60 4.87Source: FAMES* Information obtained from Tract Maps**Information obtained from the Master Plan Map

The tracts are irregular in shape and will be identified assuch in the CFD 2004-3.The land area adjacent to the subject tracts is either vacantor improved with residential developm ents, similar to theproposed uses for the subject.The land is generally level.For a sum mary o f the specifics and projected prices of theresidential product type proposed for these tracts, thereader is referred to the Price and Absorption Study of thesubject tracts prepared by Market Profiles of Tustin,California. A portion of that report is included within thisappraisal report.


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Essential Zoning Provisions:

CC&Rs/Private Restrictions,Governing Use:

Functional Adequacy of Site:

A soils report was not provided for review.Based on the nature of this report, we have assumed thesoil is of suitable load-bearing capacity for the proposeddevelopment and indicated highest and best use of the siteunder study.

The subject property is not located in an environmentallyhazardous area per the City of Indio.The site is considered a seismically active area, as is all ofSouthern California. There are, however, no known activefaults on or immediately adjacent to the site, and thehazard of surface fault ruptures is considered very low.All of the parcels in CFD 2004-3 are located in Flood ZoneB, Map Page and Community Panel Number 0602550002dated May 1, 1985.In general, the subject tracts will have finished roads andutility access completed.A title report was not available for our review. We haveassumed there are no easements or encroachments whichcould adversely affect the value of the subject property.The appraisers reserve the right to alter their conclusion ovalue if subsequent information indicates a change iswarranted.The subject tracts in CFD 2004-3 consists of residentialland use sites within the Master Planned Community.There are Covenants, Conditions and Restrictions(CC&Rs). First American Commercial Real EstateServices Appraisal and Valuation Division assumes thesedo not have an adverse effect upon value.The sites appear functionally adequate for the proposeddevelopment as described in the developer's proposedplan.In California, all real property is assessed at 100% of fullcash value (which is interpreted to mean market value ofthe fee simple interest) as determined by the CountyAssessor. Generally, a reassessment occurs only when aproperty is sold (or transferred) or when new constructionoccurs (as differentiated from replacing existingconstruction). Assessments for properties that were

Soil and Subsoil Conditions:

Earthquake, Flood, andOther Nuisances and Hazards:

Street Improvements:

Easements, Restrictionsand Encroachments:

Tax and Assessment Data:



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acquired before the tax year 1975/76 were stabilized as ofthe tax year 1975/76. Property taxes are limited by Statelaw to 1% of the assessed value plus voter-approvedobligations. Taxes are payable in two equal installments,which become delinquent after December 10 and April10, respectively. The existing parcels are not currentlyassessed by individual lot parcel numbers by the RiversideCounty Tax Assessor. Total taxes will ultimately reflectthe presence of the CFD bonds, the creation of which isthe purpose of this appraisal.



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MARKET CONDITIONS

Physical and Locational ConsiderationsThe physical and locational characteristics of the five planning areas of the subject CFD No.2004-3 are considered to be very good. T he sites are all located in a master planned developmentin a developing area of Indio. The subject referred to as Phase 1 of the Master Plan, will includea 22 acre private lake with boat access, two golf courses and a recreation complex, complete withclubhouse, pool and a tennis complex. In addition each tract will have it's own neighborhoodpark. The planning areas are currently surrounded, to a large degree, by undeveloped land.Currently, strong growth is seen as imminent surrounding the subject tracts as long as theeconomy stays stabilized as it presently is.

As noted in the Site Description section of this report, the subject's sizes and topographies areadequate for residential development. Engineering and site work is necessary to accommodatethe use outlined in the proposed development plans but from a physical and locationalperspective, a variety of residential uses are physically possible.

Access to all zones is considered good. Accessibility and location would allow for a variety ofresidential land uses to be developed on the zones as planned. As residential units areconstructed and access roads are extended, the demand for residential and retail support useshould increase, thereby increasing an already good economic environment.

The five subject zones, as currently proposed, will consist of the following detached single-family units:

PA Lots1 1782 1283 864 1335 110

TOTAL 35



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The subject properties will consist of predominately single-family residential developments.This appears to be a logical extension of the existing residential developments near the subjectarea. The land will physically accommodate the proposed density.

Legal ConsiderationsThe legal factors influencing the highest and best use of the subject properties are primarilygovernmental regulations such as zoning and building codes.

The subject zones and tracts are zoned for residential uses w ithin the Terra L ago M aster PlannedCommunity. There are no other existing entitlements other than current City of Indio buildingrequirements for the tracts. There will be some conditions, covenants and restrictions associatedwith the tract developments; however, these are mostly cosmetic in nature and would not beexpected to negatively affect the lot value.

The developers' conceptual plan for the subject developments are currently being developed.Based on the ultimate approval of the developer's conceptual plan, which includes all residentialuse, the proposed development is assumed to be a legally conforming use.

Market FeasibilityIn this section, market conditions that influence the subject property will be considered. Themajor factor requiring consideration is the attractiveness of the subject as a real estate investmentor its financial feasibility. Financial feasibility is based, to a large degree, on market acceptanceor market feasibility.

The pathway of the growth in Riverside County has been concentrated in several growth nodes.These nodes of growth include the Cities of Corona, Riverside, Hem et/San Jacinto, Murrieta andthe Coachella Valley.

The City of Indio has historically been known as primarily an affordable housing community.The area was characterized by mobile home parks and subdivisions of small homes, and smalldetached residential product targeting the first-time buyer and/or the empty nester, retirement orwinter resident market.

FIRST AMERICAN COMM ERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION1217 NORALANDY PLACE SANTA A NA, CALIFORNIA 92705 PHONE 714.580-7056 FAX 714.550-705738


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The current conceptual plans proposed for the subject tracts appears to be the highest and bestuse of the subject property when analyzed from a market perspective. In valuing property suchas the subject, we have endeavored to analyze the m arket conditions and com pare the anticipatedsupportable development uses with the conceptual plan currently in place. Where possible, ifthe market conditions support the development of the product type proposed for the subject, itis assumed that a purchaser of the subject property would develop the site with a similar use. Inthe case of land uses outlined in the conceptual plan that are deemed not supportable by marketconditions, alternative uses are considered. Based on the data and analysis of the M arket Profilesreport for the land use, a determination is made as to whether the development plan for thesubject site is the highest and best use of the land. This market-supported development plan isthen used to estimate the value of the subject site in the Valuation section of this appraisal report.The following analyses of the m arket conditions and absorption rates by product are used as testsof reasonableness rather than a full detailed market analysis of the subject project. A number ofmarketing reports were reviewed to help in our analysis. The most important was the reportprepared by Market Profiles, Inc. The following information in italics was taken from MarketProfiles, Inc.'s Feasibility Report dated July 2005. New Home CompetitionDuring the first quarter of 2005 , there were 78 subdivisions marketing new detached homes inthe Coachella Valley. The 78 projects account for a total of 15,042 homes of which 8,213homes have been offered for sale and all but 559 of the homes offered have been sold. This is alow unsold inventory level.The Coachella Valley new home market is very diverse. The Indio-Coachella and the IndianWells-LaQuinta submarkets had the largest number of active new home subdivisions during thefirst quarter period with 26 and 24 projects, respectively. The Indio-Coachella submarketgenerated the highest sales volume during the quarter (585 homes). The sales of new homes inthe submarket were aided by the moderate prices of homes. The average sales price was$381,349 compared to $792,518 in the nearby LaQuinta-Indian Wells submarket.There were 26 new home subdivisions that were active in the Indio-Coachella Submarket duringthe first quarter of 2005. The 26 projects account for 7,330 homes, of which 3,722 have beenoffered for sale and only 155 of those remain unsold. Seventeen of the new home projects arelocated in Indio and nine are located in Coachella. With 3,200 homes, the retirement communityof Sun City in Indio (Shadow Hills) accounts for nearly half of the homes. An additional threeof the projects, accounting for 344 homes are located within the Indian Palms Country Club,also in Indio.

FIRST AMERICAN COMM ERCIAL REAL ESTATE SERVICES - APPRAISAL AND EVALUATION1217 NORMANDY PLACE SANTA ANA, CALIFORNIA 92705 PHONE 714380-7056 FAX 714.550-705739


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Inventory LevelsThe total of 559 new detached homes that remain unsold (including homes under construction,completed, and pre-selling) throughout the Coachella Valley is a favorable unsold inventoryfigure. As a rule, a balance between the unso ld inventory at the end of a quarter and the num berof homes sold during the quarter is indicative of a healthy market condition (i.e., 1:1 unsold tosold ratio). Thus, compared to the sales volume of 964 homes sold during the first quarterperiod, the unsold inventory of 559 homes at the end of the first quarter of 2005 is indicative ofa favorable market condition (0.58:1 unsold to sold ratio).Inventory conditions in the Indio/Coachella submarket area are even more restricted thanelsewhere in the Coachella Valley. At the end of the first quarter of 2005, the unsold inventoryin the Indio/Coachella submarket totaled 155 homes compared to fourth quarter sales of 585homes (0.26:1 unsold to sold ratio).

Sales RatesThe sales rates include Cumulative and Current Quarter rates. The Cumulative sales ratedescribes the rate of sales generated since the date of opening of each project, and the CurrentQuarter sales rate describes the rate of sale during the third quarter period.Cumulative sales rates range widely from 0.08 to 7.9 homes per week. The average cumulativesales rate is 2.79 homes per week per project.The new home projects that are most similar to the subject development are those that arelocated in the Shadow Hills community of north Indio. During the first quarter of 2005, therewere seven new home subdivisions active in the Shadow Hills community. The cumulative salesrates among those seven subdivisions range from 0.31 to 7.87 homes per week. The averagesales rate is 2.79 homes per week and the median rate is 1.64 homes per week.Most Competitive New Home ProjectsThe new home subdivisions that are most relevant to the subject properties are those that arelocated within the Shadow Hills community located north of the I-10 Freeway. The sevenprojects are described below.The fastest selling subdivision in Shadow Hills is Bella Tierra. The first 40 of these 3- and 5-bedroom homes have been sold at a rate of 8.12 homes per week The base prices range from$379,990 to $419,990 for plans that range in size from 1,895 to 2,629 square feet ($159.75 to$200.52 per sq. ft.). The homes are sited on 8,000 square foot lots (minimum).Another fast selling subdivision is Foxstone by KB Home. All 63 homes that were releasedduring the first quarter were sold equating to a sales rate of 4.88 homes per week The projecthas another 182 homes remaining to be sold in subsequent phases. The base prices of thesehomes range from $307,990 to $368,990 for 2- and 3-bedroom plans that range in size from1,517 to 2,526square feet ($146.07 to $203.02 per sq. ft. ). The resid

Documents

CFD 2004-3 Appraisal