7000000 city of calexico community facilities district

Transcription

NEW ISSUE – BOOK ENTRY ONLY
NOT RATED
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, under existing
statutes, regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements
described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an
item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further
opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from California personal income taxes. The difference
between the issue price of a Bond (the first price at which a substantial amount of Bonds of a maturity are to be sold to the public) and the stated
redemption price at maturity with respect to such Bonds constitutes original issue discount. See “TAX MATTERS” herein.
$7,000,000
CITY OF CALEXICO
COMMUNITY FACILITIES DISTRICT NO. 2013-1
(GRAN PLAZA)
IMPROVEMENT AREA NO. 1
SPECIAL TAX BONDS, ISSUE OF 2014
Dated: Date of Delivery
Due: September 1, as shown on the inside cover hereof
The City of Calexico Communities Facilities District No. 2013-1 (Gran Plaza) (the “District”) will issue its Improvement Area No. 1 Special
Tax Bonds, Issue of 2014 (the “Bonds”) pursuant to a Bond Indenture, dated as of February 1, 2014 (the “Indenture”), by and between the District
and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). Proceeds of the Bonds will be used to (i) finance certain public
facilities relating to an outlet shopping center within the District; (ii) fund a debt service reserve account; (iii) fund capitalized interest; and (iv) pay
costs of issuance of the Bonds. The Bonds will be solely payable from and secured by Net Taxes and certain moneys in the Special Tax Fund (and
designated accounts therein, but excluding the Administrative Expenses Account) established under the Indenture as further described herein. Net
Taxes are derived from certain special taxes (the “Special Taxes”) levied on property within Improvement Area No. 1 of the District according to the
rate and method of apportionment of special taxes approved by qualified electors of Improvement Area No. 1 and the City Council of the City of
Calexico (the “City Council”), acting as the legislative body of the District. See “SECURITY FOR THE BONDS” herein.
The Bonds will be issued in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The
Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository of the Bonds. Individual purchases of the Bonds
may be made in book-entry form only, in denominations of $5,000 each or any integral multiple thereof. Purchasers will not receive certificates
representing their interest in the Bonds purchased. Principal of, and interest on, the Bonds will be paid directly to DTC by the Trustee. Principal of
the Bonds is payable on the dates set forth on the inside cover hereof. Interest on the Bonds is payable on March 1 and September 1 of each year,
commencing March 1, 2014. Upon its receipt of payments of principal and interest, DTC is in turn obligated to remit such principal and interest to
DTC participants for subsequent disbursement to the beneficial owners of the Bonds. See “THE BONDS – Book-Entry Only System” and
“APPENDIX F – DTC’S BOOK-ENTRY ONLY SYSTEM.”
The Bonds are subject to optional redemption, extraordinary redemption and mandatory sinking fund redemption prior to their
maturity as described herein. See “THE BONDS—Redemption” herein.
THE BONDS ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES LEVIED WITHIN
IMPROVEMENT AREA NO. 1 AND CERTAIN MONEYS ON DEPOSIT IN THE SPECIAL TAX FUND (AND DESIGNATED ACCOUNTS
THEREIN BUT EXCLUDING THE ADMINISTRATIVE EXPENSES ACCOUNT) PLEDGED UNDER THE INDENTURE. NEITHER THE
FULL FAITH AND CREDIT NOR THE GENERAL TAXING POWER OF THE CITY OF CALEXICO, THE COUNTY OF IMPERIAL, THE
STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT
FOR THE PORTION OF THE SPECIAL TAXES THAT CONSTITUTE NET TAXES UNDER THE INDENTURE, NO OTHER TAXES ARE
PLEDGED TO THE PAYMENT OF THE BONDS.
Maturity Schedule
(see inside front cover page)
See the section of this Official Statement entitled “BONDOWNERS’ RISKS” for a discussion of certain of the risk factors that should be
considered, in addition to other matters set forth herein, in evaluating the investment quality of the Bonds. This cover page contains information
for quick reference only. It is not a summary of this issue. Potential purchasers must read the entire Official Statement to obtain information
essential to making an informed investment decision.
The Bonds are offered when, as and if issued, subject to the approval as to their legality by Stradling Yocca Carlson & Rauth, a
Professional Corporation, Newport Beach, California, Bond Counsel. Certain legal matters will also be passed on for the District by Richards,
Watson & Gershon, as Disclosure Counsel, and for the Underwriter by Nossaman LLP, as Underwriter’s Counsel. It is anticipated that the Bonds
will be available for delivery in book-entry form through the facilities of DTC on or about February 4, 2014.
Dated: January 21, 201
$7,000,000
CITY OF CALEXICO
(GRAN PLAZA)
MATURITY SCHEDULE
$2,130,000 Serial Bonds
Maturity Date
(September 1)
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Principal
Amount
$140,000
145,000
150,000
155,000
165,000
170,000
180,000
185,000
195,000
205,000
215,000
225,000
Interest
Rate
3.000%
3.250
3.625
4.000
4.250
4.500
4.625
4.750
5.000
5.125
5.250
5.250
Yield
CUSIP †
(Base 129516)
3.150%
3.500
3.900
4.250
4.550
4.800
4.950
5.100
5.250
5.350
5.450
5.500
AA8
AB6
AC4
AD2
AE0
AF7
AG5
AH3
AJ9
AK6
AL4
AM2
$1,970,000 5.50% Term Bond due September 1, 2036, Yield 6.00% CUSIP† 129516 AN0
$2,900,000 6.00% Term Bond due September 1, 2043, Yield 6.20% CUSIP† 129516 AP5
†
CUSIP Copyright 2014, CUSIP Global Services, and a registered trademark of American Bankers Association. CUSIP data herein is
provided by CUSIP Global Services, which is managed on behalf of American Bankers Association by S&P Capital IQ. None of the
City, the District nor the Underwriter takes any responsibility for the accuracy of the CUSIP data.
CITY OF CALEXICO
Imperial County, California
City Council
Bill Hodge, Mayor
John Moreno, Mayor Pro Tem
Luis J. Castro, Councilmember
Maritza Hurtado, Councilmember
Joong S. Kim, Councilmember
City Staff
Oscar G. Rodriquez, City Manager
John Quinn, City Treasurer
Gabriela Garcia, Deputy City Clerk
Jennifer Lyon, City Attorney
SPECIAL SERVICES
Bond Counsel
Disclosure Counsel
Stradling Yocca Carlson & Rauth,
a Professional Corporation
Newport Beach, California
Richards, Watson & Gershon,
A Professional Corporation
Los Angeles, California
Financial Advisor & Dissemination Agent
Special Tax Consultant
Urban Futures, Inc.
Orange, California
General Government Management Services
Rancho Mirage, California
Trustee
Appraiser
The Bank of New York Mellon Trust Company, N.A.
Los Angeles, California
McNamara & Associates
Laguna Hills, California
No dealer, broker, salesperson or other person has been authorized by the District to give any information or to make
any representations other than those contained herein. If given or made, such other information or representations
must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not
constitute an offer to sell or the solicitation of an offer to buy any of the Bonds by any person in any jurisdiction in
which such offer of 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 for such person to make such an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained
in this Official Statement which involve estimates, forecasts or matter of opinion, whether or not expressly so
described herein, are intended solely as such and are not to be construed as a representation of fact.
Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking
statements.” Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,”
“budget,” or other similar words and include, but are not limited to, statements and projections under the captions
“SECURITY FOR THE BONDS – Projected Debt Service Coverage,” “THE DISTRICT,” “THE DEVELOPER;
THE DEVELOPMENT PLAN,” and “APPENDIX C –SUMMARY APPRAISAL REPORT.” The achievement of
certain results or other expectations contained in such forward-looking statements involves known and unknown
risks, uncertainties and other factors which may cause actual results, performance or achievements described to be
materially different from any future results, performance or achievements expressed or implied by such forwardlooking statements. While the District has agreed to provide certain on-going financial and other data pursuant to a
Continuing Disclosure Agreement (see “CONTINUING DISCLOSURE”), the District does not plan to issue any
updates or revisions to those forward-looking statements if or when their expectations or events, conditions or
circumstances on which such statements are based change.
The information set forth herein has been obtained from the District and other sources that the District believes are
reliable, but it is not guaranteed as to its accuracy or completeness. The information and expressions of opinions
herein are subject to change without notice, and neither delivery of this Official Statement nor any sale made
hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the
District since the date hereof. All summaries of the resolutions, the Indenture, laws and statutes or other documents
are made subject to the provisions thereof, respectively, and do not purport to be complete statements of any or all of
such provisions.
The Underwriter has provided the following statement for inclusion in this Official Statement: The Underwriter has
reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to
investors under federal securities laws as applied to the facts and circumstances of this transaction, but the
Underwriter does not guarantee the accuracy or completeness of such information.
This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be
reproduced or used, in whole or in part, for any other purpose.
The Bonds have not been registered under the Securities Act of 1933, as amended, nor has the Indenture been
qualified under the Trust Indenture Act of 1939, as amended, in reliance upon an exception from the registration
requirements contained in such acts. The Bonds have not been registered or qualified under the securities laws of
any state.
IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE UNDERWRITER MAY OFFER AND SELL BONDS TO CERTAIN DEALERS AND OTHERS AT A
PRICE LOWER THAN THE OFFERING PRICE. THE OFFERING PRICE MAY BE CHANGED FROM TIME
TO TIME BY THE ORIGINAL PURCHASERS.
TABLE OF CONTENTS
Page
INTRODUCTION................................................ 1
General .......................................................... 1
The City of Calexico ..................................... 2
The District ................................................... 2
Security for the Bonds................................... 2
Professionals Involved in the Offering.......... 3
Continuing Disclosure................................... 3
Summaries of Documents ............................. 4
Other Information.......................................... 4
PLAN OF FINANCE ........................................... 5
ESTIMATED SOURCES AND USES
OF FUNDS ....................................................... 6
ANNUAL DEBT SERVICE ................................ 7
THE BONDS ....................................................... 8
General .......................................................... 8
Redemption ................................................... 8
Book-Entry Only System .............................. 10
SECURITY FOR THE BONDS .......................... 11
General .......................................................... 11
The Special Taxes ......................................... 12
Rate and Method ........................................... 12
Agreement Re Covenants.............................. 16
Covenant to Foreclose................................... 18
Projected Debt Service Coverage.................. 19
Parity Bonds.................................................. 21
Reserve Account ........................................... 22
THE DISTRICT ................................................... 23
General .......................................................... 23
History of District Proceedings ..................... 25
Appraisal ....................................................... 25
Direct and Overlapping Debt ........................ 27
Estimated Value-to-Lien Ratios .................... 28
THE DEVELOPER;
THE DEVELOPMENT PLAN ............................ 29
The Developer............................................... 30
Development Plan ......................................... 36
Environmental Conditions............................. 37
Financing Plan............................................... 37
Summary of Leases; Occupancy Rate........... 38
BONDOWNERS’ RISKS .................................... 40
Levy and Collection of Special Taxes........... 40
Limited Obligations of the District ............... 41
Special Tax Payments Not Personal Obligations
of Property Owners ....................................... 41
Risks of Real Estate Secured Investments
Generally; Land Values................................. 42
Concentration of Ownership..........................42
Failure to Develop Property ..........................42
Bankruptcy and Foreclosure Delays..............43
Depletion of Reserve Account.......................45
Disclosure to Future Purchasers ....................45
Cumulative Burden of Parity Liens, Taxes and
Special Assessments......................................46
Exempt Property............................................46
Natural Disasters ...........................................47
Hazardous Substances ...................................47
Threatened and Endangered Species .............48
Right to Vote on Taxes Act; Other Ballot
Measures and Initiatives ................................48
Limitations on Remedies; No Acceleration...49
Investment of Funds ......................................50
Loss of Tax Exemption .................................50
Secondary Market..........................................50
LITIGATION .......................................................50
CONTINUING DISCLOSURE............................51
LEGAL MATTERS .............................................52
TAX MATTERS ..................................................53
UNDERWRITING ...............................................54
NO RATING ........................................................55
MISCELLANEOUS.............................................55
APPENDIX A SUPPLEMENTAL INFORMATION
ON THE CITY OF CALEXICO.......................A-1
APPENDIX B RATE AND METHOD OF APPORTIONMENT
OF SPECIAL TAXES .....................................B-1
APPENDIX C SUMMARY APPRAISAL REPORT ...............C-1
APPENDIX D FORM OF BOND COUNSEL OPINION ........D-1
APPENDIX E SUMMARY OF BOND INDENTURE ...........E-1
APPENDIX F DTC’S BOOK-ENTRY ONLY SYSTEM ......F-1
APPENDIX G FORM OF ISSUER CONTINUING
DISCLOSURE AGREEMENT ........................G-1
APPENDIX H FORM OF MAJOR PROPERTY OWNER
CONTINUING DISCLOSURE AGREEMENT
..........................................................................H-1
$7,000,000
CITY OF CALEXICO
(GRAN PLAZA)
INTRODUCTION
This introduction does not purport to be complete, and reference is made to the body of this
Official Statement, appendices and the documents referred to herein for more complete information with
respect to matters concerning the Bonds. Potential investors are encouraged to read the entire Official
Statement.
General
This Official Statement, including the cover page, the inside cover and appendices hereto, is
provided to furnish information in connection with the sale by the City of Calexico Community Facilities
District No. 2013-1 (Gran Plaza) (the “District”) of its Improvement Area No. 1 Special Tax Bonds, Issue
of 2014 (the “Bonds”) in the aggregate principal amount of $7,000,000. The Bonds are being issued
pursuant to (i) the Mello-Roos Community Facilities Act of 1982, as amended, found in Articles 1
through 6, Chapter 2.5, Part 1, Division 2, Title 5 of the California Government Code (the “Mello-Roos
Act”), (ii) a Resolution adopted on October 15, 2013 by the City Council (the “City Council”) of the City
of Calexico (the “City”) acting as the legislative body of the District, and (iii) a Bond Indenture, dated as
of February 1, 2014 (the “Indenture”), by and between the District and The Bank of New York Mellon
Trust Company, N.A., as the trustee (the “Trustee”).
The Bonds are being issued to (a) finance certain public facilities relating to an outlet shopping
center within the District known as “Gran Plaza Outlets” (the “Project” or “Gran Plaza Outlets”); (b) fund
a debt service reserve account (the “Reserve Account”); (c) fund capitalized interest; and (d) pay costs of
issuance of the Bonds.
The Bonds will be solely payable from, and secured by, Net Taxes (defined below, see
“SECURITY FOR THE BONDS – General”) and moneys in the Special Tax Fund (and the designated
accounts therein but excluding the Administrative Expenses Account), which the Trustee will establish
under the Indenture. Net Taxes are derived from certain special taxes (the “Special Taxes”) levied on
property within Improvement Area No. 1 of the District according to the rate and method of
apportionment of special taxes (the “Rate and Method”) approved by qualified electors of Improvement
Area No. 1 and the City Council, acting as the legislative body of the District. See “SECURITY FOR
THE BONDS.”
Interest on the Bonds is payable on March 1 and September 1 of each year, commencing
March 1, 2014. The Bonds will mature in the amounts and on the dates and bear interest at rates shown
on the inside cover of this Official Statement.
The Bonds will be issued in fully registered form only and, when issued and delivered, will be
registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New
York (“DTC”). DTC will act as the depository for the Bonds and all payments due on the Bonds will be
made to Cede & Co. Ownership interests in the Bonds may be purchased only in book-entry form. See
“THE BONDS – Book-Entry Only System” and “APPENDIX F – DTC’S BOOK-ENTRY ONLY
SYSTEM.”
1
The City of Calexico
The City, a California general law city, is located in Imperial County (the “County”), California
(the “State”), approximately 120 miles east of the City of San Diego and approximately 60 miles west of
Yuma, Arizona. Incorporated in 1908, the City encompasses an area of approximately four square miles
with an average elevation at sea level. The City lies adjacent to the City of Mexicali, the capital of the
State of Baja, Mexico, and its strategic border location makes it a prime link between the interior of
Mexico and the major markets along the West Coast of the United States. Mexicali’s population is
approximately 1 million, and the City’s population was estimated by the State Department of Finance to
be approximately 40,493 as of January 1, 2013. Its summers are hot and dry, with the winters being mild
and generally dry; the average rainfall is 1.75 inches. The City has a Council/City Manager form of
government consisting of five Council members elected to four-year overlapping terms. The City is
included in the El Centro Metro Statistical Area, where government, agriculture, and trade, transportation
and utilities comprise the industries employing the largest numbers of persons. See “APPENDIX A –
SUPPLEMENTAL INFORMATION ON THE CITY OF CALEXICO” for more general information
about the City.
The District
The District is located between West 2nd Street to the north and the United States/Mexican border
to the south. The District includes approximately 170 acres comprised of two Improvement Areas.
Improvement Area No. 1 includes 51.80 minimum taxable acres on 71.85 acres. Improvement Area
No. 2 includes 88.18 minimum taxable acres on 98.62 acres. On August 1, 2013, the boundary map for
the District was recorded as Document No. 2013018042 and in Book 2 of Maps of Assessment and
Community Facilities District, Page 56, in the Official Records of the County Recorder. Title to the
majority of the taxable parcels within the District is currently vested in Corsair, LLC (the “Developer” or
“Corsair”), a Nevada limited liability company. The Bonds are limited obligations of the
Improvement Area No. 1 of the District. The Bonds are not payable from any special taxes levied
within Improvement Area No. 2 of the District.
The City Council adopted its resolution of intention to establish the District on July 2, 2013
(Resolution No. 2013-31). In an election held on August 20, 2013, qualified electors of the District voted
to (i) approve the Rate and Method, and (ii) authorize the District to incur bonded indebtedness in the
amount of $20,000,000 for the benefit of Improvement Area No. 1, and $20,000,000 for the benefit of
Improvement Area No. 2.
A summary report of an appraisal (the “Appraisal”) has been prepared by McNamara &
Associates (the “Appraiser”) to provide value estimates for the parcels in Improvement Area No. 1 in the
District. A copy of the Appraisal Report is reprinted in Appendix C. Subject to the assumptions and
limitations set forth in the Appraisal Report, the Appraiser estimated that the market value of the fee
simple interest of parcels in Improvement Area No. 1 in the District, as of September 27, 2013, was
$48,000,000.
See “THE DISTRICT,” “THE DEVELOPER; THE DEVELOPMENT PLAN” and “APPENDIX
C – SUMMARY APPRAISAL REPORT.”
Security for the Bonds
The Bonds are limited obligations of Improvement Area No. 1 of the District as described herein.
Neither the full faith and credit nor the general taxing power of the City, the County, the State, or any
2
political subdivision thereof is pledged to the payment of the Bonds. The Bonds are not payable from
any special taxes levied within Improvement Area No. 2 of the District.
The Bonds will be payable solely from and secured by a first pledge of Net Taxes levied within
Improvement Area No. 1 and moneys deposited in the Special Tax Fund (and the Interest Account, the
Principal Account, the Redemption Account and the Reserve Account therein, but excluding the
Administrative Expenses Account) which the Trustee will establish under the Indenture. Net Taxes mean,
generally, Special Taxes received by the District in Improvement Area No. 1, less an amount set aside for
Administrative Expenses (as defined in the Indenture, see “APPENDIX E – SUMMARY OF BOND
INDENTURE – Definitions”) of the District.
On the initial delivery date of the Bonds, $522,818.76 from the sale proceeds of the Bonds will be
deposited in the Reserve Account. Such amount is equal to the initial Reserve Requirement (defined
below, see “SECURITY FOR THE BONDS – Reserve Account”). Moneys on deposit in the Reserve
Account will be applied to pay principal of and interest on the Bonds if moneys in the Interest Account,
the Principal Account or the Redemption Account are insufficient for such purposes.
Subject to the limitations set forth in the Rate and Method, the District covenants in the Indenture
to levy Special Taxes in Fiscal Year 2015-16 and each Fiscal Year thereafter so long as Bonds and any
Parity Bonds are Outstanding, in an amount (when added to moneys on deposit in the Special Tax Fund)
sufficient to pay (1) the principal of and interest on the Bonds and any Parity Bonds when due, (2) the
Administrative Expenses, and (3) any amounts required to replenish the Reserve Account of the Special
Tax Fund to the Reserve Requirement. The amount of the Special Taxes which the District may levy each
Fiscal Year is limited by the maximum rates of Special Taxes set forth in the Rate and Method. See
“SECURITY FOR THE BONDS – The Special Taxes” and “– Rate and Method” and “APPENDIX B –
RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES.” The District also covenants to
commence judicial foreclosure procedures and prosecute the same against certain parcels with delinquent
installments of Special Taxes. See “SECURITY FOR THE BONDS – Covenant to Foreclose.”
Professionals Involved in the Offering
The Bank of New York Mellon Trust Company, N.A., Los Angeles, California, will act as
Trustee with respect to the Bonds. General Government Management Services, Rancho Mirage,
California, has acted as special tax consultant to the District. Urban Futures, Incorporated (“Urban
Futures”), Orange, California, has served as Financial Advisor to the District in structuring of the
financing relating to the Bonds. All proceedings in connection with the issuance of the Bonds are subject
to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach,
California, Bond Counsel. Certain legal matters also will be passed on for the District by Richards,
Watson & Gershon, as Disclosure Counsel. The fees and expenses of Financial Advisor, Bond Counsel
and Disclosure Counsel are contingent upon the sale and delivery of the Bonds.
Continuing Disclosure
The District, will covenant in a Continuing Disclosure Agreement (the “District Continuing
Disclosure Agreement”) to prepare and deliver an annual report to the Municipal Securities Rulemaking
Board (“MSRB”), and to provide notice of certain enumerated events. The Developer will also covenant
in a Major Property Owner Continuing Disclosure Agreement (“Major Property Owner CDA”) to provide
an annual report and semi-annual reports to the MSRB, and to provide certain other information. The
Developer’s obligation to provide such information will terminate upon the earlier occurrence of the
following: (i) the legal defeasance, prior redemption, or payment in full of all of the Bonds; (ii) the
Developer and its Affiliates (as defined in the Major Property Owner CDA), if any, collectively own
3
property within the District that is responsible for less than 20 percent of the Special Taxes levied in the
Fiscal Year, (iii) all Special Taxes attributable to property owned by the Developer or its Affiliates have
been prepaid in full, or (iv) the delivery by the Developer to the District and the Trustee of an opinion of
nationally recognized bond counsel to the effect that the information required by the Major Property
Owner CDA is no longer required. See “CONTINUING DISCLOSURE,” “APPENDIX G – FORM OF
ISSUER CONTINUING DISCLOSURE AGREEMENT” and “APPENDIX H – FORM OF MAJOR
PROPERTY OWNER CONTINUING DISCLOSURE AGREEMENT.”
Summaries of Documents
There follows in this Official Statement descriptions of the Bonds, the Indenture, the Rate and
Method, the Appraisal Report, and various other agreements and documents. The descriptions and
summaries of documents herein do not purport to be comprehensive or definitive, and reference is made
to each such document for the complete details of all terms and conditions. All statements in this Official
Statement are qualified in their entirety by reference to each such document and, with respect to certain
rights and remedies, to laws and principles of equity relating to or affecting creditors’ rights generally.
Except as otherwise provided herein, capitalized terms used but not defined herein shall have the
meanings set forth in the Indenture. Certain definitions contained in the Indenture are set forth in
Appendix E. Copies of the Indenture are available for inspection during business hours at the corporate
trust office of the Trustee in Los Angeles, California.
Other Information
This Official Statement speaks only as of its date as set forth on the cover hereof, and the
information and expressions of opinion herein are subject to change without notice, and neither the
delivery of this Official Statement nor any sale made hereunder shall under any circumstances create any
implication that there has been no change in the affairs of the District since the date hereof.
[Remainder of page intentionally left blank]
4
PLAN OF FINANCE
The Bonds are being issued to (a) finance the Public Facilities (as defined below); (b) fund the
Reserve Account; (c) fund capitalized interest; and (d) pay costs of issuance of the Bonds. See
“ESTIMATED SOURCES AND USES OF FUNDS.”
A portion of the proceeds of the Bonds will used to finance certain public facilities of benefit to
Improvement Area No. 1 in the District, including but not limited to public facilities to be constructed
with mitigation impact fees relating to the Gran Plaza Outlets currently being constructed within the
District by the Developer. Such eligible Public Facilities and estimated costs thereof are set forth in the
following table (collectively, the “Public Facilities”). Any shortfall in financing these costs is the
responsibility of the Developer. The inability of the Developer to finance any shortfall may have an
adverse effect on the Developer’s ability to complete the development as contemplated.
Description of Eligible Public Facilities
City of Calexico – Improvements
Public infrastructure as approved by the City
Street Improvements
Traffic Signals
Sewer and Water Infrastructure
Dry Utilities (to the extent permitted by law)
Landscaping of public streets, right of ways, storm drain facilities, slopes,
mitigation monitoring and appurtenant facilities (including earthwork
and finishing grade, erosion control and related improvements)
Construction contingency, architectural, engineering and other
Total Estimated Costs of City Improvements
City of Calexico – Facilities Financed By Impact Fees
Fire Facilities (Impact Fee)(1)
Police Facilities (Impact Fee)(2)
Parks and Recreation Facilities (Impact Fee)(3)
Sewer Facilities (Impact Fee)(4)
Water Facilities (Impact Fee)(5)
Traffic Transportation Facilities (Impact Fee)(6)
Corporate Facilities & Administration (Impact Fee)(7)
Total Estimated Cost of City Fees
Total
$1,281,000
422,000
722,000
406,000
493,000
871,000
$4,195,000
$
71,375
68,575
89,800
288,900
372,000
112,300
182,050
$1,185,000
$5,380,000
____________
Source: The Developer
(1) Funds will be used to buy equipment for the existing fire station that services the District.
(2) Funds will be used to make physical improvements to the police headquarters.
(3) Funds will be used for reconstruction of various parks to include new soccer fields and baseball diamonds.
(4) Funds will be used to make improvements to existing treatment facilities near the District.
(5) Funds will be used to make improvements to existing water treatment plant facilities near the District.
(6) Funds will be used for various signal projects in and around the District.
(7) Funds will be used to make capital improvements in the City’s corporate yard.
5
ESTIMATED SOURCES AND USES OF FUNDS
The following tables show the estimated sources and uses of the proceeds from the sale of the
Bonds:
Sources:
Par amount
Less: Original issue discount
Less: Underwriter’s discount
Total Sources
$7,000,000.00
(243,788.00)
(108,500.00)
$6,647,712.00
Uses:
Project Account
Interest Account (1)
Reserve Account (2)
Costs of Issuance Account (3)
Total Uses
_______________________________________
$5,233,094.01
595,399.23
522,818.76
296,400.00
$6,647,712.00
(1) Capitalized interest on the Bonds through September 1, 2015.
(2) Equal to the initial Reserve Requirement.
(3) Costs of Issuance include fees and expenses for Bond Counsel, Disclosure Counsel, Trustee, Special Tax
Consultant, Financial Advisor, Appraiser, printing expenses, and other costs.
6
ANNUAL DEBT SERVICE
The following table shows the scheduled annual debt service for the Bonds:
Bond Year Ending
September 1
2014(1)
2015(1)
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
Interest
Rate
----3.000%
3.250
3.625
4.000
4.250
4.500
4.625
4.750
5.000
5.125
5.250
5.250
5.500
5.500
5.500
5.500
5.500
5.500
5.500
6.000
6.000
6.000
6.000
6.000
6.000
6.000
Total:
Principal
----$140,000
145,000
150,000
155,000
165,000
170,000
180,000
185,000
195,000
205,000
215,000
225,000
240,000
250,000
265,000
280,000
295,000
310,000
330,000
345,000
365,000
390,000
410,000
435,000
465,000
490,000
$7,000,000
Interest(1)
$217,367.97
378,031.26
378,031.26
378,031.26
378,031.26
373,831.26
369,118.76
363,681.26
357,481.26
350,468.76
342,818.76
334,493.76
325,706.26
315,956.26
305,450.00
294,162.50
282,350.00
269,150.00
255,400.00
240,825.00
225,425.00
209,200.00
192,150.00
174,000.00
153,300.00
131,400.00
108,000.00
83,400.00
57,300.00
29,400.00
$7,873,961.85
Total Annual
Debt Service(1)
$217,367.97
378,031.26
378,031.26
378,031.26
518,031.26
518,831.26
519,118.76
518,681.26
522,481.26
520,468.76
522,818.76
519,493.76
520,706.26
520,956.26
520,450.00
519,162.50
522,350.00
519,150.00
520,400.00
520,825.00
520,425.00
519,200.00
522,150.00
519,000.00
518,300.00
521,400.00
518,000.00
518,400.00
522,300.00
519,400.00
$14,873,961.85
____________________________
Source: E.J De La Rosa & Co. Inc.
(1) Debt service through September 1, 2015 is expected to be paid from capitalized interest funded
through proceeds of the Bonds.
7
THE BONDS
General
The Bonds will be issued in the aggregate principal amount and will mature on the dates and bear
interest at the rates per annum as set forth on the inside front cover of this Official Statement. The Bonds
will be issued in authorized denominations of $5,000 or integral multiples thereof and will be dated their
date of delivery. Interest on the Bonds will be calculated on the basis of a 360-day year of twelve 30-day
months and payable on March 1 and September 1 of each year, commencing March 1, 2014 (each an
“Interest Payment Date”), until maturity or earlier redemption thereof. The Bonds will be initially
delivered as one fully registered certificate for each maturity and will be delivered by means of the bookentry system of DTC. See “Book-Entry Only System” below.
Interest on any Bond will be payable from the Interest Payment Date next preceding the date of
authentication of that Bond, unless (i) such date of authentication is an Interest Payment Date, in which
event interest will be payable from such date of authentication; (ii) the date of authentication is after a
Record Date (i.e., the 15th day of the month immediately preceding an Interest Payment Date) but before
the immediately succeeding Interest Payment Date, in which event interest will be payable from the
Interest Payment Date immediately succeeding the date of authentication; or (iii) the date of
authentication is before the close of business on the first Record Date, in which event interest will be
payable from the dated date of the Bonds; provided, however, that if at the time of authentication of a
Bond, interest is in default, interest on that Bond will be payable from the last Interest Payment Date to
which the interest has been paid or made available for payment, or if no interest has been paid or made
available for payment on that Bond, interest shall be payable from the dated date of that Bond.
Redemption
Optional Redemption. The Bonds maturing on or before September 1, 2019 are not subject to
optional redemption. The Bonds maturing on or after September 1, 2020 may be redeemed, at the option
of the District from any source of funds on any date on or after September 1, 2019, in whole, or in part
from such maturities as are selected by the District and by lot within a maturity, at a redemption price
equal to the principal amount to be redeemed, together with accrued interest to the date of redemption,
without premium.
Extraordinary Redemption. The Bonds are subject to extraordinary redemption, as a whole, or in
part on a pro rata basis among maturities, on any date on or after September 1, 2019 from money derived
from prepayment of Special Taxes, plus amounts transferred from the Reserve Account, pursuant to the
Indenture at a redemption price equal to the principal amount redeemed together with accrued interest to
the redemption date, without premium. See “SECURITY FOR THE BONDS – Rate and Method –
Prepayment” and “– Reserve Account.”
Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 2036 and
September 1, 2043 (the “Term Bonds”) will be called before maturity and redeemed, from the Sinking
Fund Payments that have been deposited into the Redemption Account, on September 1 of each year
commencing on September 1, 2030 and September 1, 2037, respectively, in accordance with the
schedules of Sinking Fund Payments set forth below. The Term Bonds so called for redemption will be
selected by the Trustee by lot and will be redeemed at a redemption price for each redeemed Term Bond
equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as
follows:
8
Term Bonds Maturing on September 1, 2036
Redemption Date
(September 1)
2030
2031
2032
2033
2034
2035
2036†
Total
___________
† Maturity
Principal Amount to
be Redeemed
$240,000
250,000
265,000
280,000
295,000
310,000
330,000
$1,970,000
Term Bonds Maturing on September 1, 2043
Redemption Date
(September 1)
2037
2038
2039
2040
2041
2042
2043†
Total
______________
† Maturity
Principal Amount to
be Redeemed
$345,000
365,000
390,000
410,000
435,000
465,000
490,000
$2,900,000
In the event of a partial optional redemption or extraordinary redemption of the Term Bonds, each
of the remaining Sinking Fund Payments for such Term Bonds, as applicable, will be reduced, as nearly
as practicable, on a pro rata basis, in integral multiples of $5,000.
Purchase In Lieu of Redemption. The Indenture provides that, in lieu or partially in lieu of any
optional redemption, extraordinary redemption or mandatory sinking fund redemption as described above,
moneys deposited in the Redemption Account may be used to purchase Outstanding Bonds. Such
purchases of Bonds may be made by the District at public or private sale as and when and at such prices
as the District may in its discretion determine but only at prices (including brokerage or other expenses)
not more than par plus accrued interest. Any accrued interest payable upon the purchase of Bonds may be
paid from the amount reserved in the Interest Account of the Special Tax Fund for the payment of interest
on the next following Interest Payment Date.
Notice of Redemption. When Bonds are due for redemption under the Indenture, the Trustee will
give notice, in the name of the District, of the redemption of such Bonds; provided, however, that a notice
of optional redemption will be conditioned on there being on deposit on the redemption date sufficient
money to pay the redemption price of the Bonds to be redeemed and may be further conditioned as stated
in the notice of redemption. If any condition stated in a redemption notice is not satisfied on or prior to
9
the redemption date stated in such notice: (i) the redemption notice will be of no force and effect, (ii) the
District will not be required to redeem such Bonds, (iii) the redemption will not be made, and (iv) the
Trustee will within a reasonable time thereafter give notice to the persons in the manner in which the
conditional redemption notice was given that such condition or conditions were not met and that the
redemption was canceled.
The Trustee will mail, at least 30 days but not more than 45 days prior to the date of redemption,
notice of the intended redemption, by first-class mail, postage prepaid, to the respective registered owners
of the Bonds (the “Owners” or “Bondowners”) at the addresses appearing on the registration books of the
Trustee kept pursuant to the Indenture, and the Underwriter as original purchaser of the Bonds. So long
as a notice of redemption by first class mail has been provided as set forth in the Indenture, the actual
receipt of such notices by the Owners is not a condition precedent to redemption, and neither the failure to
receive such notice nor any defect in such notice will affect the validity of the proceedings for redemption
of such Bonds or the cessation of interest on the date fixed for redemption.
So long as the Bonds are held in book-entry form, notice of redemption will be mailed by the
Trustee to DTC and not to the beneficial owners of the Bonds under the DTC book-entry only system.
Neither the District nor the Trustee is responsible for notifying the Beneficial Owners, who are to be
notified in accordance with the procedures in effect for the DTC book-entry system. See “– Book-Entry
Only System” and “APPENDIX F – DTC’S BOOK-ENTRY ONLY SYSTEM.”
Selection of Bonds for Redemption. If less than all of the Bonds outstanding are to be redeemed,
the portion of any Bond of a denomination of more than $5,000 to be redeemed will be in the principal
amount of $5,000 or an integral multiple thereof. In selecting portions of such Bonds for redemption, the
Trustee will treat such Bonds as representing that number of Bonds of $5,000 denominations which is
obtained by dividing the principal amount of such Bonds to be redeemed in part by $5,000.
Effect of Redemption. When notice of redemption has been given and the amount necessary for
the redemption of the Bonds called for redemption is set aside for that purpose, the following will apply:
(i) the Bonds designated for redemption will become due and payable on the date fixed for redemption,
(ii) the Trustee will pay the redemption price to the Owner of the redeemed Bonds upon presentation and
surrender of such Bonds at the office of the Trustee, (iii) as of the redemption date, the Bonds (or portions
thereof) so designated for redemption will be deemed to be no longer Outstanding and such Bonds (or
portions thereof), will cease to bear further interest; and (iv) as of the redemption date, no Owner of any
of the Bonds (or portions thereof) so designated for redemption will be entitled to any of the benefits of
the Indenture, or to any other rights, except with respect to payment of the redemption price and interest
accrued to the redemption date from the amounts so made available.
Book-Entry Only System
The Bonds will be issued as one fully registered bond without coupons for each maturity and,
when issued, will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as
securities depository of the Bonds. Individual purchases may be made in book-entry form only, in the
principal amount of $5,000 and integral multiples thereof. Purchasers will not receive certificates
representing their interest in the Bonds purchased. Principal and interest will be paid to DTC, which will
in turn remit such principal and interest to its participants for subsequent disbursement to the beneficial
owners of the Bonds as described herein. So long as DTC’s book-entry system is in effect with respect to
the Bonds, notices to Owners of the Bonds by the District or the Trustee will be sent to DTC. Notices and
communication by DTC to its participants, and then to the beneficial owners of the Bonds, will be
governed by arrangements among them, subject to then effective statutory or regulatory requirements.
See “APPENDIX F – DTC’S BOOK-ENTRY ONLY SYSTEM.”
10
In the event that such book-entry system is discontinued with respect to the Bonds, the District
will execute and deliver replacements in the form of registered certificates and, thereafter, the Bonds will
be transferable and exchangeable on the terms and conditions provided in the Indenture. The following
provisions will then apply: The principal of the Bonds and any premium due upon the redemption thereof
will be payable upon presentation and surrender of the Bonds at the principal office of the Trustee located
in Los Angeles, California or such other place as the Trustee may designate. Interest on the Bonds will be
paid by check of the Trustee mailed by first class mail, postage prepaid, to such Bondowner at his or her
address as it appears on the registration books of the Trustee as of the close of business on the Record
Date (i.e., 15th day of the month preceding the Interest Payment Date); provided that, upon a request in
writing received by the Trustee on or before the applicable Record Date from an Owner of $1,000,000 or
more in principal amount of the Bonds, payment will be made on the Interest Payment Date by wire
transfer in immediately available funds to an account designated by such Owner.
SECURITY FOR THE BONDS
General
The Bonds will be payable solely from, and secured by, a first pledge of Net Taxes levied within
Improvement Area No. 1 of the District and moneys on deposit in the Special Tax Fund (and the
designated accounts therein but excluding the Administrative Expenses Account) established and held
under the Indenture. The Bonds are not payable from any special taxes levied within Improvement
Area No. 2 of the District.
Net Taxes consist of a portion of the Special Taxes levied on the taxable property in Improvement
Area No. 1 of the District pursuant to the Rate and Method. The Indenture defines “Net Taxes” as
Special Taxes minus amounts set aside to pay Administrative Expenses. The term “Special Taxes” is
defined in the Indenture to mean: (a) the taxes levied by the legislative body of the District on property
within Improvement Area No. 1 of the District in accordance with Ordinance No. 1147 (the “Ordinance”)
authorizing the levy of Special Taxes in the District, the Resolution of Formation, the Act and the voter
approval obtained at the August 20, 2013 election in Improvement Area No. 1 of the District, including
any scheduled payments and any Prepayments thereof; and (b) the proceeds collected from the sale of
property located within Improvement Area No. 1 of the District pursuant to the foreclosure provisions of
the Indenture for the delinquency of the Special Taxes identified in paragraph (a) remaining after the
payment of all costs and expense related to such foreclosure actions.
Funds and accounts to be established and held under the Indenture include the Special Tax Fund
(and the Interest Account, the Principal Account, the Redemption Account, the Reserve Account and the
Administrative Expenses Account therein), the Surplus Fund, the Rebate Fund, and the Acquisition and
Construction Fund (and the Costs of Issuance Account and the Project Account therein). Except for
moneys deposited in the Special Tax Fund (and the Interest Account, the Principal Account, the
Redemption Account and the Reserve Account therein), none of the other funds and accounts held under
the Indenture are pledged to repayment of the Bonds and any Parity Bonds.
THE BONDS ARE LIMITED OBLIGATIONS OF IMPROVEMENT AREA NO. 1 OF THE
DISTRICT. NEITHER THE FULL FAITH AND CREDIT NOR THE GENERAL TAXING POWER
OF THE CITY, THE COUNTY, THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF IS
PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE PORTION OF THE SPECIAL
TAXES THAT CONSTITUTE NET TAXES UNDER THE INDENTURE, NO OTHER TAXES ARE
PLEDGED TO THE PAYMENT OF THE BONDS.
11
The Special Taxes
The District covenants in the Indenture that, subject to the Rate and Method, the District will levy
Special Taxes on taxable property within Improvement Area No. 1 of the District in an amount equal to
the Special Tax Requirement (defined below, see “—Rate and Method”). The District further covenants
that it will take no action that would discontinue or cause the discontinuance of the Special Tax levy or
the District’s authority to levy the Special Tax for so long as the Bonds and any Parity Bonds are
Outstanding. See “— Rate and Method” below and “APPENDIX E – SUMMARY OF BOND
INDENTURE – Covenants and Warranty.” The Rate and Method provides that Special Taxes will be
collected in the same manner as the general ad valorem taxes on real property; provided that the District
may provide for direct collection of Special Taxes in certain circumstances.
The Special Tax levy is limited to the maximum rates set forth in the Rate and Method,
which is equal to $20,000 per acre. In the event of a significant delinquency, the Trustee may have to
make a draw on the Reserve Account to pay principal of and interest on the Bonds and any Parity Bonds
then coming due. The Bonds are not subject to acceleration under the Indenture. Although Special
Taxes, when levied, will constitute a lien on parcels subject to taxation within the District, it does not
constitute a personal indebtedness of the owners of such parcels. There is no assurance that such property
owners will be financially able to pay the Special Taxes or that they will pay such taxes even if
financially able to do so. See “BONDOWNERS’ RISKS” for a discussion of certain factors which may
affect property owners’ ability or willingness to pay Special Taxes.
Rate and Method
The following is a summary of the Rate and Method, which is qualified by the complete text of the
Rate and Method reprinted in Appendix B. Please refer to Appendix B for definitions of capitalized terms
used but not defined in this summary.
General. The District is authorized to levy Special Taxes (as defined in the Rate and Method)
commencing Fiscal Year 2015-16 and for each Fiscal Year thereafter, in an amount necessary to meet the
Special Tax Requirement, subject to the Maximum Special Tax, pursuant to the Rate and Method.
“Special Tax Requirement” means that amount required in any Fiscal Year to pay: (i) the debt
service or the periodic costs on all outstanding Bonds due in the calendar year that commences in such
Fiscal Year, (ii) Administrative Expenses, (iii) the costs associated with the release of funds from an
escrow account; (iv) any amount required to establish or replenish any reserve funds established in
association with the Bonds, (v) an amount equal to any anticipated shortfall due to delinquencies in the
prior or current Fiscal Year, (vi) the collection or accumulation of funds for the acquisition or
construction of facilities authorized by Improvement Area No. 1 of CFD No. 2013-1, less (vii) any
amount available to pay debt service or other periodic costs on the Bonds, pursuant to the Indenture. See
“—Agreement Re Covenants.”
Each Fiscal Year, commencing with Fiscal Year 2015-16, each Assessor’s Parcels within
Improvement Area No. 1 of the District shall be classified as Taxable Property or Exempt Property.
Taxable Property is further divided into two categories: Developed Property or Undeveloped Property.
Each Fiscal Year, each Assessor’s Parcel within the District is assigned the appropriate classification for
purposes of levying the Special Taxes.
“Taxable Property” is defined in the Rate and Method as all Assessor’s Parcels within
Improvement Area No. 1 of the District, which are not Exempt Property.
12
“Exempt Property” means Assessor’s Parcels designated as being exempt from Special Taxes
pursuant to “Section H – Exemptions” of the Rate and Method. For a description of Exempt Property,
please see the discussion under the heading “Exemptions” below. See also “APPENDIX B - RATE AND
METHOD – SECTION H EXEMPTIONS.”
“Developed Property” is defined in the Rate and Method as all Assessor’s Parcels for which
building permits were issued on or before May 1 of the prior Fiscal Year, provided that such Assessor’s
Parcels were included in a Final Map that was recorded on or before January 1 of the prior Fiscal Year
and that each such Assessor’s Parcel is associated with a Lot, as reasonably determined by the City.
“Undeveloped Property” is defined in the Rate and Method as all Assessor’s Parcels of Taxable
Property which are not Developed Property.
Under the Rate and Method, the Maximum Special Tax that can be levied within Improvement
Area No. 1 in any Fiscal Year, for Developed Property and Undeveloped Property, shall be $20,000 per
acre.
Commencing Fiscal Year 2015-16, Special Taxes will be levied on the Taxable Property within
Improvement Area No. 1 of the District each Fiscal Year until the amount of the Special Tax equals the
Special Tax Requirement as follows:
First:
The Special Tax shall be levied proportionately on each Assessor’s Parcel of
Developed Property with a Building Permit at up to 100% of the applicable Maximum
Special Tax as needed to satisfy the Special Tax Requirement;
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 Developed Property without a Building Permit at up to 100% of
the applicable Maximum Special Tax rates as needed to satisfy the Special Tax
Requirement;
Third:
two steps have been completed, the Special Tax shall be levied Proportionately on
each Assessor’s Parcel of Undeveloped Property, excluding any Undeveloped
Property pursuant to “Section H – Exemptions” of the Rate and Method, at up to
100% of the applicable Maximum Special Tax as needed to satisfy the Special Tax
Requirement; and
Fourth:
three steps have been completed, the Special Tax shall be levied Proportionately on
each Assessor’s Parcel of Undeveloped Property classified as Undeveloped Property
pursuant to “Section H – Exemptions” of the Rate and Method at up to 100% of the
applicable Maximum Special Tax applicable to each such Assessor’s Parcel as needed
to satisfy the Special Tax Requirement.
13
Currently, there are six Assessor’s Parcels within Improvement Area No. 1 of the District, which
have the respective uses shown in the following table.
TABLE 1
City of Calexico
Community Facilities District No. 2013-01
(Gran Plaza)
Improvement Area No. 1
Current Ownership and Uses of Parcels in the District
APN
Gross
Land
Acreage
058-180-020
52.75
Corsair, LLC
Retail
Yes – 52.75
058-400-031
4.62
Corsair, LLC
Retail
Yes – 4.62
058-400-040
3.44
Corsair, LLC
Retail
Yes – 3.44
058-400-041
4.32
Corsair, LLC
058-400-032
3.17
058-180-039
3.55
Total:
71.85
Current Land Use /
Development Status
Property Owner (as of 12/13/13)
System II LLC
Retention Basin
(1)
Calexico Redevelopment Agency
(2)
Expected to be
Taxable Property
at Buildout?
No (Exempt)
Parking Lot
Yes – 3.17
Parking Lot
No (Exempt)(2)
63.98 taxable
acres at buildout
Source: General Government Management Services.
(1) System II, LLC is controlled by the same principals as Corsair.
(2) The Developer plans on acquiring the property owned by the City, as successor agency to the Calexico Community
Redevelopment Agency (“Successor Agency”) in 2014. As long as the property is owned by the Successor Agency, the parcel
will be exempt from the Special Tax. However, if the Developer does acquire the parcel, it will become taxable property.
The parcels are anticipated to change with the future recording of the tentative tract map as a final
tract map for the Project (see “APPENDIX C – SUMMARY APPRAISAL REPORT”). The acreage,
number of parcels, and Assessor’s Parcel Numbers will change in connection with the recordation of the
final tract map. However, the boundary area of Improvement Area No. 1 will not change. The Developer
currently projects that the final tract map will be recorded by the end of February 2014. Upon recordation
of the final tract map, Corsair intends to transfer ownership of its property in the District to Gran Plaza,
LP, a single purpose entity owned and controlled by the same principals as Corsair. See “THE
DEVELOPER; THE DEVELOPMENT PLAN.”
14
The following table is a description of the anticipated parcels in Improvement Area No. 1 of the
District upon the recordation of the final tract map:
TABLE 2
City of Calexico
Community Facilities District No. 2013-01
(Gran Plaza)
Projected Ownership, Acreage and Categorization of Parcels
(projected for February 1, 2014)
APN
Legal Parcel
Number
Gross Land
Acreage
Property Owner
(projected for 2/1/14)
Expected Land Use
/Development Status
Expected to be
Taxable Property at
Buildout?
To be assigned
1
24.33
Gran Plaza, LP
Undeveloped
Yes – 24.33
To be assigned
2
25.12
Gran Plaza, LP
Yes – 25.12
To be assigned
3
1.64
Gran Plaza, LP
Developed
Undeveloped
To be assigned
4
1.45
Gran Plaza, LP
Undeveloped
Yes – 1.45
To be assigned
5
1.23
Gran Plaza, LP
Undeveloped
Yes – 1.23
To be assigned
Remainder
9.99
Gran Plaza, LP
Undeveloped
Yes – 4.40(1)
058-180-039
River Tract 1
3.55
Parking Lot
No (Exempt)(2)
058-400-041
River Tract 3
4.32
Calexico Redevelopment
Agency(2)
Gran Plaza, LP
Total:
71.63
Yes – 1.64
Retention
Basin/Exempt
No (Exempt)
Total:
58.17 taxable acres
(1) Net acreage for the parcel is less due to the right of way realignment of the adjacent West Second Street. See “APPENDIX C
– SUMMARY APPRAISAL REPORT.”
(2) The Developer plans on acquiring the property owned by the City, as successor agency to the Calexico Community
Redevelopment Agency (“Successor Agency”) in 2014. As long as the property is owned by the Successor Agency, the
parcel will be exempt from the Special Tax. However, if the Developer does acquire the parcel, it will become taxable
property.
Prepayment. The Special Tax obligation of an Assessor’s Parcel of Developed Property,
Undeveloped Property for which a Building Permit has been issued, or Undeveloped Property that is
classified as such pursuant to “Section H – Exemptions” of the Rate and Method may be prepaid in full,
as described in the Rate and Method, provided that there are no delinquent Special Taxes, penalties, or
interest charges outstanding with respect to such Assessor’s Parcel at the time the Special Tax obligation
would be prepaid.
An owner of an Assessor’s Parcel intending to prepay the Special Tax obligation must provide
the City with written notice of intent to prepay, and within 5 days of receipt of such notice, the City will
notify such owner of the amount of the non-refundable deposit determined to cover the costs of the
District to calculate the prepayment amount. Within 15 days of receipt of such non-refundable deposit,
the City will notify such owner of the prepayment amount for such Assessor’s Parcel. A prepayment of
Special Taxes will result in an extraordinary redemption of Bonds. See “THE BONDS – Redemption –
Extraordinary Redemption.”
15
Exemptions. Certain property in the District, whether or not developed, is excluded from the levy
of Special Taxes. As defined in the Rate and Method, “Exempt Property” that is excluded from the levy
of Special Taxes includes (i) Assessor’s Parcels owned by the State, Federal or other local governments,
(ii) Assessor’s Parcels which are used as places of worship and are exempt from ad valorem property
taxes because they are owned by a religious organization, (iii) Assessor’s Parcels used exclusively by a
homeowners’ association, or (iv) Assessor’s Parcels with public or utility easements, making impractical
their utilization for other than the purposes set forth in the easement, provided that no such classification
would reduce the sum of all Taxable Property to less than the Minimum Taxable Acreage (i.e., 51.8 acres
for Improvement Area No. 1 of the District). Further, the Rate and Method provides that an Assessor’s
Parcel shall not be classified as Exempt Property if such classification would reduce the sum of all
Taxable Property to less than the Minimum Taxable Acreage Acres. Assessor’s Parcel that cannot be
classified as Exempt Property because such classification would reduce the Acreage of all Taxable
Property to less than the Minimum Taxable Acreage will continue to be classified as Undeveloped
Property, and will continue to be subject to Special Taxes accordingly. See “APPENDIX B - RATE
AND METHOD – SECTION H EXEMPTIONS.”
Agreement Re Covenants
The City and the Developer of the Gran Plaza Outlets have entered into an Agreement Re
Covenants (“Covenant Agreement”), dated July 2, 2013, pursuant to which the Developer has agreed to
fulfill certain covenants in exchange for the City agreeing to make payments, computed in accordance
with such Covenant Agreement (“Covenant Consideration”), from the City’s General Fund to the Trustee
for deposit in the Special Tax Fund for payment of debt service on the Bonds. The payments by the City
of the Covenant Consideration will commence on the Opening (as defined below) of the Project and will
continue for a period of 30 years thereafter (the “Operating Period”).
“Opening” as defined in the Covenant Agreement, means the date on which Conforming Retailers
Operating not less than 185,000 square feet of gross leasable area have been granted Certificates of
Occupancy and have opened for business to the public.
“Conforming Retailers” as defined in the Covenant Agreement, means (i) manufacturers that sell
their products directly to the public through their own stores (e.g., Nike, Coach, Sketchers, Aeropostal,
etc.); or (ii) major retailers that also sell their products within outlet shopping centers (e.g., Famous
Footwear, Eddie Bauer, Banana Republic, Ann Taylor).
Pursuant to the Covenant Agreement, the City is required to pay the Covenant Consideration
semi-annually, on or before February 1 and August 1 of each year during the Operating Period. The
Covenant Consideration will be payable from any source of funds legally available to the City and the
amount will be based upon the total Sales Tax Revenues received by the City (less any State Board of
Equalization adjustments that would have modified previous payments) during the applicable preceding
semi-annual period (February 1 for sales occurring during the preceding months of July through
December and August 1 for the preceding months of January through June) as confirmed by the report
furnished by the city’s sales tax consultant as provide by the State Board of Equalization.
“Sales Tax Revenues” as defined in the Covenant Agreement, means, “for each Operating Year,
that portion of taxes derived and received by the City of Calexico and legally available for unrestricted
use by the City’s General Fund from the imposition of the Bradley Burns Uniform Local Sales and Use
Tax Law, commencing with Section 7200 of the Revenue and Taxation Code of the State of California, as
amended, or its equivalent, arising from all businesses and activities conducted on the [property owned by
the Developer in Improvement Area No. 1 of the District] in accordance herewith from time to time,
which are subject to such Sales and Use Tax law, less any amounts payable with respect to Measure D as
16
required by Ordinance No. 1-2008, adopted by the Imperial County Local Transportation Authority on
July 27, 2005 which became operative on April 1, 2010.”
“Operating Year” as defined in the Covenant Agreement, means each one year period
commencing upon the first January 1 or July 1 following the Opening (the “First Operating Year”) and
annually thereafter commencing on the anniversary date of the First Operating Year throughout the
Operating Period.
Pursuant to the Covenant Agreement, the Covenant Consideration paid by the City is computed
as follows:
STEP 1 - After computing the Sales Tax Revenue for the applicable Operating Year, subtract
therefrom an amount equal to $300,000, which amount is, for computational purposes, to be retained by
the City (the “First City Retention”). If Sales Tax Revenues for the applicable Operating Year are
$300,000 Dollars or less, then no Covenant Consideration is to be paid by the City.
STEP 2 - After subtracting the amount described in STEP 1 from Sales Tax Revenues, if and to
the extent any Sales Tax Revenue remain, City shall pay to the Trustee, for deposit into the Special Tax
Fund for payment of debt service, an amount not to exceed the scheduled debt service on the Bonds for
the then current fiscal year as set forth in the Indenture (the “CFD Share”).
STEP 3 - After subtracting the amounts described in both STEP 1 and STEP 2 from the Sales Tax
Revenue if and to the extent any Sales Tax Revenue remains, an amount equal to the CFD Share is, for
computational purposes only, retained by the City (the “Second City Retention”).
STEP 4 - After subtracting the amounts described in STEP 1, STEP 2 and STEP 3 from the
remaining Sales Tax Revenues, if and to the extent any Sales Tax Revenue remain an amount equal to
50% of such remaining Sales Tax Revenue shall be payable to the Trustee for the sole purpose of
redeeming Bonds as permitted by the Indenture, with the other 50% to be retained by the City. See “THE
BONDS – Redemption.”
The Covenant Consideration would offset the amount of Special Taxes required to be paid by the
owners of taxable property within Improvement Area No. 1 of the District (currently, the Developer). No
assurance can be given that any future legislation or state or local budgetary constraints will not reduce or
eliminate the sales tax revenues used to determine the amount of Covenant Consideration, which would in
turn reduce or eliminate such Covenant Consideration. Further, no assurance can be given that a court
would not void the Covenant Agreement. See “—Lawsuit” below. See also “LITIGATION – Lawsuit
Regarding Covenant Agreement.” The Covenant Contribution does not constitute security for the Bonds
until such amount is deposited into the Special Tax Fund. Further, neither the Sales Tax Revenues
(except to the extent such amounts have been deposited with the Trustee in the Special Tax Fund) nor
amounts in the City’s General Fund are pledged security for the Bonds.
Lawsuit. The City has been served with a lawsuit related to the Covenant Agreement. See
“LITIGATION – Lawsuit Regarding Covenant Agreement.” It is possible that such lawsuit
challenging the Covenant Agreement or specific provisions thereof could be successful resulting in the
voiding of the Covenant Agreement, which would eliminate the offset by the Covenant Consideration,
provided to the Developer in the calculation of Special Tax Requirement. This would result in an
increase in the Special Tax levy to be paid by the Developer up to the maximum levy permitted under the
Rate and Method, which could in turn have an effect on the ability of the Developer to pay its Special Tax
obligation used to pay debt service on the Bonds. See “BONDOWNERS’ RISKS – Levy and Collection
of Special Taxes,” “– Concentration of Ownership,” “– Bankruptcy and Foreclosure Delays.”
17
Covenant to Foreclose
Pursuant to Section 53356.1 of the Mello-Roos Act, in the event of any delinquency in the
payment of the Special Taxes in the District, the District may order the institution of a superior court
action to enforce the lien therefore within specific time limits. In such an action, the real property subject
to the unpaid amount may be sold at a judicial foreclosure sale. Under the provisions of the Mello-Roos
Act, such judicial foreclosure action is not mandatory. However, the District covenants in the Indenture
that the District will take the following actions:
Individual Delinquencies. The District will commence judicial foreclosure proceedings against
parcels with delinquent Special Taxes in excess of $10,000 by October 1 following the close of each
Fiscal Year in which such Special Taxes are due, and will diligently pursue such proceedings until the
delinquent Special Taxes are paid.
Aggregate Delinquencies. The District will commence judicial foreclosure proceedings against
all parcels with delinquent Special Taxes by October 1 following the close of each Fiscal Year in which it
receives Special Taxes in an amount which is less than 95 percent of the total Special Taxes levied and
the amount on deposit in the Reserve Account is less than the Reserve Requirement, and will diligently
pursue such proceedings until the delinquent Special Taxes are paid.
Any foreclosure proceedings commenced as described above could be stayed because of
bankruptcy proceedings by or against the owner of the delinquent property. See “BONDOWNERS’
RISKS – Bankruptcy and Foreclosure Delays.” No assurance can be given that a judicial foreclosure
action, once commenced, will be completed or that it will be completed in a timely manner. If a judgment
of foreclosure and an order of sale is obtained, the judgment creditor (i.e., the District commencing such
action) must cause a notice of levy to be issued. Under current law, a judgment debtor (i.e., the property
owner) has 140 days (or in some cases a shorter period) from the date of service of the notice of levy and
20 days from the subsequent notice of sale in which to redeem the property to be sold. If a judgment
debtor fails to so redeem and the property is sold, such debtor’s only remedy is an action to set aside the
sale, which must be brought within 90 days of the date of sale. If, as a result of such action, a foreclosure
sale is set aside, the judgment is revived and the judgment creditor is entitled to interest on the revived
judgment as if the sale had not been made.
No assurance can be given that real property subject to sale or foreclosure will be sold or, if sold,
that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. The MelloRoos Act does not require the District to purchase or otherwise acquire any real property offered for sale
or subject to foreclosure if there is no other purchaser at such sale. The Mello-Roos Act specifies that the
Special Taxes will have the same lien priority in the case of delinquency as for ad valorem property taxes.
See “BONDOWNERS’ RISKS – Cumulative Burden of Parity Liens, Taxes and Special Assessments.”
If the Reserve Account is depleted and delinquencies in the payments of Special Taxes continue,
there could be a default or delay in the payment by such District with respect to the Bonds, pending
prosecution of foreclosure proceedings and receipt by the District of foreclosure sale proceeds, if any.
Within the limits of the Rate and Method and the Mello-Roos Act, the District may adjust the Special
Taxes levied within the District in future years to provide any amount, taking into account such
delinquencies, required to pay debt service on such Bonds and to replenish the Reserve Account. There
is, however, no assurance that the maximum Special Tax rates under the Rate and Method will be at all
times sufficient to collect the amounts required to be paid on Bonds. See “Special Taxes” and “Rate and
Method” above and “BONDOWNERS’ RISKS – Levy and Collection of Special Taxes.”
18
Projected Debt Service Coverage
The following table shows the estimated debt service coverage for the Bonds through Bond Year
Ending September 1, 2043. The table assumes that Net Taxes each Fiscal Year will equal (i) Special
Taxes, levied at the maximum rates permitted under the Rate and Method, less (ii) Administrative
Expenses.
The following projections are based on the assumptions noted above and in the footnotes to the
tables and assuming that there are no optional or extraordinary redemptions. See “SECURITY FOR THE
BONDS – The Special Taxes” and “THE BONDS – Redemption.” A number of factors and uncertainties
(e.g., a higher or lower delinquency rate) could cause actual amounts of Special Taxes levied or collected
to differ materially from those set forth herein. See also “BONDOWNERS’ RISKS.”
19
Table 3
CITY OF CALEXICO
(GRAN PLAZA) IMPROVEMENT AREA NO. 1
Projected Debt Service Coverage Based on Maximum Special Tax Levy (1)
(A)
Bond Year
Ending
September 1
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
(B)
(C)
Maximum
Maximum Special Tax
Special Tax Revenues from Developed
Revenues, Net(2)
Property, Net (3)
--$1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
1,209,400
(D)
Annual Debt
Service(4)
$217,368(5)
378,031(5)
378,031
378,031
518,031
518,831
519,119
518,681
522,481
520,469
522,819
519,494
520,706
520,956
520,450
519,163
522,350
519,150
520,400
520,825
520,425
519,200
522,150
519,000
518,300
521,400
518,000
518,400
522,300
519,400
--$477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
477,400
(E)
Debt Service
Coverage
(Column B/D)
(F)
Debt Service Coverage
on Developed Property
(Column C/D)
--319.92%
319.92
233.46
233.10
232.97
233.17
231.47
232.37
231.32
232.80
232.26
232.15
232.38
232.95
231.53
232.96
232.40
232.21
232.39
232.94
231.62
233.03
233.34
231.95
233.47
233.29
231.55
232.85
--126.29%
126.29
92.16
92.01
91.96
92.04
91.37
91.73
91.31
91.90
91.68
91.64
91.73
91.96
91.39
91.96
91.74
91.66
91.73
91.95
91.43
91.98
92.11
91.56
92.16
92.09
91.40
91.91
(1) Does not take into account any prepayment by property owners or any optional or extraordinary redemption of Bonds prior to
maturity.
(2) Assumes 61.72 acres of net taxable property in Improvement Area No. 1 by September 2, 2015 that will be taxed at the maximum
rate permitted under the Rate and Method, and less $25,000 Administrative Expenses. See “SECURITY FOR THE BONDS – Rate
and Method” and Appendix B.
(3) Assumes 25.12 developed acres of net taxable property in Improvement Area No. 1 by September 2, 2015 that will be taxed at the
maximum rate permitted under the Rate and Method, and less $25,000 Administrative Expenses. See “SECURITY FOR THE
BONDS – Rate and Method” and Appendix B.
(4) Annual principal and interest on the Bonds.
(5) Debt service through September 1, 2015 will be paid from capitalized interest funded through proceeds of the Bonds.
Source: E.J. De La Rosa & Co. Inc. based upon acreage stated in the Appraisal Report.
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Parity Bonds
Following the issuance of the Bonds, $13,000,000 remains available under the bond authorization
for Improvement Area No. 1 of the District. See “INTRODUCTION – The District” and “THE
DISTRICT – History of District Proceedings.” Pursuant to the Indenture, the District may issue Parity
Bonds payable from the Net Taxes and other amounts deposited in the Special Tax Fund and secured by a
lien and charge upon such amounts equal to the lien and charge securing the Outstanding Bonds and any
other Parity Bonds issued under the Indenture or under any Supplemental Indenture. Parity Bonds may
be issued subject to the following specific conditions:
(a) The District shall be in compliance with all covenants set forth in the Indenture and any
Supplemental Indenture then in effect and a certificate of the District to that effect shall have been filed
with the Trustee; provided, however, that Parity Bonds may be issued notwithstanding that the District is
not in compliance with all such covenants so long as immediately following the issuance of such Parity
Bonds the District will be in compliance with all such covenants.
(b) The Trustee shall have received the following documents, all dated or certified, as the case
may be, as of the date of delivery of such Parity Bonds:
(1)
Parity Bonds;
(2)
a certified copy of the Supplemental Indenture authorizing the issuance of such
a written request of the District as to the delivery of such Parity Bonds;
(3)
an opinion of Bond Counsel and/or general counsel to the District to the effect
that (i) the District has the right and power under the Act to adopt the Supplemental Indenture
relating to such Parity Bonds, and the Supplemental Indenture has been duly and lawfully
adopted by the District, is in full force and effect and is valid and binding upon the District and
enforceable in accordance with its terms (subject to the usual and customary exceptions); (ii) the
Indenture creates the valid pledge which it purports to create of the Net Taxes and other amounts
as provided in the Indenture, subject to the application thereof to the purposes and on the
conditions permitted by the Indenture; and (iii) such Parity Bonds are valid and binding limited
obligations of the District, enforceable in accordance with their terms (subject to the usual and
customary exceptions) and the terms of the Indenture and all Supplemental Indentures thereto and
are entitled to the benefits of the Indenture and all such Supplemental Indentures, and such Parity
Bonds have been duly and validly authorized and issued in accordance with the Act (or other
applicable laws) and the Indenture and all such Supplemental Indentures; and a further opinion of
Bond Counsel to the effect that, assuming compliance by the District with certain tax covenants,
the issuance of the Parity Bonds will not adversely affect the exclusion from gross income for
federal income tax purposes of interest on the Bonds and any Parity Bonds theretofore issued on a
tax exempt basis, or the exemption from State of California personal income taxation of interest
on any Outstanding Bonds and Parity Bonds theretofore issued;
(4)
a certificate of the District containing such statements as may be reasonably
necessary to show compliance with the requirements of the Indenture;
(5)
a certificate or certificates from one or more Independent Financial Consultants
which, when taken together, certify that:
(i)
the Maximum Special Taxes that may be levied in each Fiscal Year on
property that, as of the date of such certificate, is not known by the District to be
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delinquent in the payment of any ad valorem taxes or any Special Taxes is not less than
the sum of the Administrative Expense Requirement plus 110% of the Annual Debt
Service in the Bond Year that begins in such Fiscal Year; and
(ii)
the aggregate amount of Maximum Special Taxes that may be levied in
each Fiscal Year on all Parcels of Developed Property that, as of the date of such
certificate, are not known by the District to be delinquent in the payment of any ad
valorem taxes or any Special Taxes is not less than the sum of (yy) the Administrative
Expense Requirement plus (zz) 100% of the Annual Debt Service in the Bond Year that
begins in such Fiscal Year; and
(iii)
no Parcel that is owned in whole or in part by any developer or an
affiliate of a developer developing the property within Improvement Area No. 1 of the
District is delinquent in the payment of any ad valorem taxes or any Special Taxes.
For purposes of the foregoing certificate, all calculations shall include the Parity Bonds proposed
to be issued and the debt service thereon except to the extent that payment of any such proposed
Parity Bonds is provided for through amounts on deposit in a fund or account held by the Trustee.
The provisions of this paragraph (5) shall not apply to Parity Bonds issued for the purpose of
refunding all or a portion of Outstanding Bonds if the District shall have received a certificate
from an Independent Financial Consultant to the effect that Annual Debt Service after the
issuance of such Parity Bonds will be no larger than Annual Debt Service would have been prior
to the issuance of such Parity Bonds in each Fiscal Year in which Bonds or Parity Bonds (other
than the refunding Parity Bonds) will remain Outstanding.
(6)
where the Parity Bonds are being issued other than to refund the Bonds or other
Parity Bonds, a certificate of the District demonstrating that: (i) during the last audited Fiscal
Year or any consecutive twelve (12) calendar month period during the immediately preceding
eighteen (18) month period, the Net Taxes were at least equal to 125% of Maximum Annual Debt
Service; and (ii) the Value of Developed Property is not currently less than five times the sum of
Direct Debt plus Overlapping Debt allocable to all property in the Improvement Area No. 1
subject to the Special Tax.
(7)
such further documents, money and securities as are required by the provisions of
the Indenture and the Supplemental Indenture providing for the issuance of such Parity Bonds.
Reserve Account
The Trustee will establish and maintain a Reserve Account within the Special Tax Fund. Upon
issuance of the Bonds, $522,818.76 will be deposited in the Reserve Account. Such amount is equal to
the initial Reserve Requirement. Reserve Requirement is defined as that amount, as of any date of
calculation, equal to the least of (i) 10 percent of the initial principal amount of the Bonds and any Parity
Bonds; (ii) Maximum Annual Debt Service on the then Outstanding Bonds and any Parity Bonds; and
(iii) 125 percent of average Annual Debt Service on the then Outstanding Bonds and any Parity Bonds.
Except as otherwise provided in the Indenture, moneys in the Reserve Account will be used solely for the
purpose of paying the principal of, including Sinking Fund Payments, and interest on the Bonds and any
Parity Bonds when due in the event that the moneys in the Interest Account and the Principal Account are
insufficient therefor or moneys in the Redemption Account are insufficient to make a Sinking Fund
Payment when due and for the purpose of making any required transfer to the Rebate Fund.
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Whenever moneys are withdrawn from the Reserve Account, after making the required transfers
to the Administrative Expenses Account, Interest Account, Principal Account and Redemption Account,
the Trustee will transfer to the Reserve Account from available moneys in the Special Tax Fund, or from
any other legally available funds which the District elects to apply to such purpose, the amount needed to
restore the amount of such Reserve Account to the Reserve Requirement. Moneys in the Special Tax
Fund will be deemed available for transfer to the Reserve Account only if the Trustee determines that
such amounts will not be needed to make the deposits required to be made to the Administrative Expenses
Account, the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund
on or before the next September 1. If amounts in the Special Tax Fund together with any other amounts
transferred to replenish the Reserve Account are inadequate to restore the Reserve Account to the Reserve
Requirement, then the District will include the amount necessary fully to restore the Reserve Account to
the Reserve Requirement in the next annual Special Tax levy to the extent of the maximum permitted
Special Tax rates.
In connection with an optional redemption or extraordinary redemption of Bonds or Parity Bonds,
or a partial defeasance of Bonds or Parity Bonds, amounts in the Reserve Account may be applied to such
redemption or partial defeasance so long as the amount on deposit in the Reserve Account following such
redemption or partial defeasance equals the Reserve Requirement.
To the extent that the Reserve Account is at the Reserve Requirement as of the first day of the
final Bond Year for the Bonds or an issue of Parity Bonds, amounts in the Reserve Account may be
applied to pay the principal of, and interest on, the Bonds or the Parity Bonds, as applicable, in the final
Bond Year for such issue. Moneys in the Reserve Account in excess of the Reserve Requirement not
transferred as described above will be withdrawn from the Reserve Account on the Business Day before
each Interest Payment Date and will be transferred to the Interest Account of the Special Tax Fund.
THE DISTRICT
General
The District was established in accordance with the Mello-Roos Act and is a legally constituted
governmental entity separate and apart from the City. Pursuant to the Mello-Roos Act, the City Council
acts as the legislative body of the District. The District was formed to finance the Public Facilities. See
“PLAN OF FINANCE.”
The District is located between West 2nd Street and the United States/Mexican Border. On
August 1, 2013, the boundary map for the District was recorded as Document No. 2013018042 and in
Book 2 of Maps of Assessment and Community Facilities District, Page 56, in the Official Records of the
County Recorder. The District includes approximately 170 acres comprised of two Improvement Areas.
Improvement Area No. 1 includes 51.80 minimum taxable acres on 71.85 acres. Improvement Area
No. 2 includes 88.18 minimum taxable acres on 98.62 acres. In Improvement Area No. 1, the Developer
plans on constructing the Project as an approximately 561,650 square foot outlet shopping center mixed
with conventional large-scale retail uses known as “Gran Plaza Outlets,” with the first phase of the
Project (referred to as Phase 1A herein) already completed. See “THE DEVELOPER; THE
DEVELOPMENT PLAN – Development Plan.” Improvement Area No. 2 is currently undeveloped land
owned by the Developer, which the Developer intends to eventually develop as a regional commercial
center with approximately 1 million square feet of retail.
The Bonds are limited obligations of the Improvement Area No. 1 of the District. The
Bonds are not payable from any special taxes levied within Improvement Area No. 2 of the District.
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There are currently six parcels in Improvement Area No. 1. Title to a majority of the parcels
within the District is currently vested in the Developer. There can be no assurance that the Developer will
continue to own any or all of its property in the District (see “THE DEVELOPER; THE
DEVELOPMENT PLAN – The Developer”). The following table summarizes the ownership, as well as
the gross land area, of the six parcels in Improvement Area No. 1:
Table 4
CITY OF CALEXICO
(GRAN PLAZA)
Ownership of parcels within Improvement Area No. 1
Assessor Parcel Number
(APN)(1)
058-180-020
058-400-031
058-400-040
058-400-041
058-400-032
058-400-039
Owner
Corsair, LLC
Corsair, LLC
Corsair, LLC
Corsair, LLC(2)
System II LLC(3)
Calexico Redevelopment Agency(4)
Total
Gross Land
Area
52.75
4.62
3.44
4.32
3.17
3.55
71.85
______________
(1)
(2)
(3)
(4)
The Assessor Parcel Numbers are anticipated to change with the future recording of the tentative
tract map as a final tract map for the Project (see “APPENDIX C – SUMMARY APPRAISAL
REPORT”). In addition, the number of parcels and acreage is anticipated to change in connection
with the recordation of the final tract map. However, the boundary area of Improvement Area No.
1 will not change. The Developer currently projects that the final tract map will be recorded by
end of February 2014. See Table 2 under “SECURITY FOR THE BONDS” for a description of
the parcels in Improvement Area No. 1 once the final tract map is recorded.
APN 058-400-041 is a retention basin.
System II LLC, a California limited liability company, is owned by the same two principals of the
Developer.
The Developer plans on acquiring the property owned by the City, as successor agency to the
Calexico Community Redevelopment Agency (“Successor Agency”) in 2014. As long as the
property is owned by the Successor Agency, the parcel will be exempt from the Special Tax.
However, if the Developer does acquire the parcel, it will become taxable property.
The parcels are anticipated to change with the future recording of the tentative tract map as
a final tract map for the Project (see “APPENDIX C – SUMMARY APPRAISAL REPORT”). The
acreage, number of parcels, and Assessor’s Parcel Numbers will change in connection with the
recordation of the final tract map. However, the boundary area of Improvement Area No. 1 will not
change. The Developer currently projects that the final tract map will be recorded by the end of February
2014. Upon recordation of the final tract map, Corsair intends to transfer ownership of its property in the
District to Gran Plaza, LP, a single purpose entity owned and controlled by the same principals as Corsair.
See “THE DEVELOPER; THE DEVELOPMENT PLAN.” The acreage of taxable property is
expected to decrease from 63.98 acres to 58.17 acres with the recording of the final tract map. See
Table 2 under “SECURITY FOR THE BONDS –for a description of the anticipated parcels once the final
tract map is recorded, which is expected to occur by the end of February 2014.
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History of District Proceedings
On July 2, 2013, the City Council adopted Resolutions 2013-31 and 2013-32 (together, the
“Resolutions of Intention”), declaring its intention to establish the District, to authorize the levy of special
taxes and to incur bonded indebtedness within the District. The Resolutions of Intention set forth, among
other things, a proposed rate and method of apportionment of special taxes (the “RMA”) for the District.
Pursuant to the Mello-Roos Act, the City Council called a public hearing, which was held on August 20,
2013, regarding the establishment of the District and other matters set forth in the Resolutions of
Intention. The City Council then adopted Resolution Nos. 2013-40 and 2013-41 (the “Resolution of
Formation”), establishing the District, designating Improvement Area No. 1 and Improvement Area
No. 2, approving the Rate and Method, declaring the necessity to incur bonded indebtedness within the
District, and calling a special election of qualified electors in Improvement Areas No. 1 and 2 of the
District to authorize the incurrence of bonded indebtedness and the levy of Special Taxes in the District.
On that same day, Corsair and System II, LLC, the landowners and qualified electors in Improvement
Area No. 1 of the District, voted to approve the issuance of bonds by the District for Improvement Area
No. 1 in a principal amount not-to-exceed $20,000,000 and the levy of Special Taxes pursuant to the Rate
and Method. In addition, Corsair, the sole landowner and qualified elector in Improvement Area No. 2 of
the District, voted to approve the issuance of bonds by the District for Improvement Area No. 2 in a
principal amount not-to-exceed $20,000,000 and the levy of Special Taxes pursuant to the rate and
method for Improvement Area No. 2. On September 10, 2013, the City Council adopted Ordinance No.
1147 (the “Ordinance”) authorizing the levy of Special Taxes in the District.
The City Council adopted a Resolution on October 15, 2013, authorizing the issuance of the
Bonds by the District for Improvement Area No. 1 in a principal amount not to exceed $7,000,000.
Appraisal
General. The Bonds are secured by Special Taxes which may include amounts realized upon
foreclosure sale of delinquent parcels. Therefore, the ability of the District to meet debt service on the
Bonds may depend on the ability of delinquent parcels to generate sufficient proceeds upon foreclosure
sale to pay delinquent Special Taxes. The City has commissioned McNamara & Associates, Laguna
Hills, California (the “Appraiser”) to perform an appraisal (the “Appraisal”) of the property values of
parcels within Improvement Area No. 1 of the District. See “APPENDIX C – SUMMARY APPRAISAL
REPORT” hereto.
Improvement Area No. 1 in the District is currently comprised of six Assessor Parcel Numbers
(“APN”) 1: APNs 058-180-020, 058-400-031, 058-400-040 and 058-400-041 (a retention basin) each
owned by Corsair, APN 058-400-032 owned by System II LLC and APN 058-400-039 owned by the
Calexico Community Redevelopment Agency (through its successor agency). The Appraiser has made an
appraisal of all the real property located in Improvement Area No. 1 of the District, except the property
comprised of APN 058-400-041 because it is a retention basin and will be exempt from the Special Tax.
The parcel owned by the Successor Agency to the Community Redevelopment Agency of the City of
Calexico (“Successor Agency”) was included in the Appraisal Report because it is anticipated that such
parcel will be acquired by Corsair in 2014, and will be subject to the Special Tax. However, no assurance
can be given that such transfer from the Successor Agency to the Developer will occur. The real property
subject to the Special Tax consists of 71.85 acres of gross land area, 61.72 acres of net land area, various
site improvements, 292,347 square feet of gross building area and 264,096 square feet of leasable
1
The Assessor Parcel Numbers are anticipated to change with the subsequent recording of the tentative tract map
for the Project as a final tract map (see “APPENDIX C – SUMMARY APPRAISAL REPORT”). However, the
boundary area of Improvement Area No. 1 will not change. See “THE DISTRICT – General”.
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building area all in various stages of completion as part of the Gran Plaza Outlets. See “THE
DEVELOPER; THE DEVELOPMENT PLAN.” The improvements are subject to a multiplicity of
executed leases set to begin November 15, 2013, leases out for signature, and letters of intent. As of the
date of the Appraisal Report, four units (or 8,981 square feet) were available for lease. Excluded from the
appraisal are any personal and/or tenant owned property.
The Appraisal Report was prepared in accordance with the 2012-2013 Uniform Standards of
Professional Appraisal Practice (USPAP) Standards Rule 1, The Appraisal Standards For Land Secured
Financings dated May 1994 and revised July 2004 by the California Debt Advisory Commission, and the
Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute. The
results of the appraisal are reported here as a summary appraisal report in accordance with the 2012-2013
Uniform Standards of Professional Appraisal Practice (USPAP) Standards Rule 2-2(b), The Appraisal
Standards For Land Secured Financings dated May 1994 and revised July 2004 by the California Debt
Advisory Commission and the Code of Professional Ethics and the Standards of Professional Practice of
the Appraisal Institute.
Valuation Methods. The primary approaches relied on by real estate investors are the discounted
cash flow analysis and the income approach by direct capitalization. Since the appraised property is
nearing completion before first occupancy, the cost approach is also relied on. Since there are very few
sales of outlet centers, use of sales of large shopping centers similar in size with similar capital
requirements, even nationally, can provide a useful indication of value. Therefore, the Appraisers have
relied on all four methods for the appraisal of the property: (1) cost approach; (2) sales comparison
approach; (3) income approach by direct capitalization; and (4) the discounted cash flow analysis. The
value indications by the four approaches were reconciled and a final conclusion of an as is stabilized fee
simple market value was made. The as is fee simple market value was arrived at by deducting rent loss
until first occupancy of tenants with leases and leases in process, deducting the costs to stabilize
occupancy for the units subject to letters of intent, deducting costs to complete construction and lastly
adding the community facilities district net proceeds that are not already reflected in the ground. See
“COST APPROACH,” “SALES COMPARISON APPROACH,” “DIRECT CAPITALIZATION,”
“DISCOUNTED CASH FLOW ANALYSIS” and “RECONCILIATION AND FINAL OPINION OF
VALUE,” each in “APPENDIX C – SUMMARY APPRAISAL REPORT” for a more detailed
description of the valuation methodology that was used by the Appraiser in determining the value of the
property.
Assumptions and Limitations. It should be noted that the Appraiser’s value estimates of the
property are based upon a number of assumptions and limitations, which may affect the value estimates.
A few of the assumptions the Appraiser assumed include, among others, the following: (1) title to the
property is assumed to be good and marketable unless otherwise stated; (2) the property is appraised free
and clear of any or all liens or encumbrances unless otherwise stated; (3) responsible ownership and
competent property management are assumed; (4) the information furnished by others is believed to be
reliable, but no warranty is given for its accuracy; and (5) all engineering studies are assumed to be
correct. See “APPENDIX C – SUMMARY APPRAISAL REPORT – ASSUMPTIONS & LIMITING
CONDITIONS” for a complete list of the assumptions and limitations used by the Appraiser in
determining the value of the property. The District has not independently investigated whether any
condition existed at the date of value, or currently exists, that would make the Appraiser’s assumptions
set forth in the Appraisal Report false or unreasonable.
Valuation Estimate. The Appraisal Report was prepared with a date of value of September 27,
2013. In the opinion of the Appraiser, the market value of the fee simple interest of the appraised
properties within Improvement Area No. 1 of the District, as of the date of value, is $48,000,000, which is
approximately 6.86 times the aggregate principal amount of Bonds issued. On the closing date, the
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Appraiser will certify that he is not aware of any event or act that occurred since the date of value of the
Appraisal which, in the opinion of the Appraiser, would materially and adversely affect the conclusions in
the Appraisal Report as to the market value of the appraised property.
The Assessor Parcel Numbers in Improvement Area No. 1 are anticipated to change with the
future recording of the tentative tract map as a final tract map for the Project (see “APPENDIX C –
SUMMARY APPRAISAL REPORT”). In addition, the acreage of several of the parcels is anticipated to
change somewhat in connection with the recordation of the final tract map. Two of the existing assessor
parcels bisect one building down the middle, with a majority of the parking on one parcel and limited
parking on another. However, the boundary area of Improvement Area No. 1 will not change. The
Developer currently projects that the final tract map will be recorded by the end of February 2014. As a
result, the Appraiser did not value and the special tax consultant did not prepare value-to-lien ratios for
each current separate parcel.
There can be no assurance that property values set forth in the Appraisal Report will not
decrease, or that at any time the amount that could be realized upon sale of a particular parcel in a
foreclosure sale for nonpayment of Special Taxes will equal that parcel’s appraised value. Neither the
City, the District, nor the Underwriter makes any representation as to the accuracy or completeness of
the Appraisal Report.
Direct and Overlapping Debt
Properties in the District are within the jurisdiction of a number of overlapping local agencies
providing public governmental services. In addition to paying the Special Taxes, property owners within
in the District will be obligated to pay ad valorem property taxes and other existing and future additional
special taxes, assessments and fees imposed by the overlapping agencies. The table below is a summary
of the direct and overlapping debt (the “Debt Report”) payable from taxes or special assessments for
properties in the District for fiscal year 2013-14. The Debt Report generally includes long term
obligations sold in the public credit markets by local agencies whose boundaries overlap the boundaries
of the District in whole or in part. In certain cases, the percentages of debt calculations are based on
assessed values, which will change significantly as sales occur and assessed values increase to reflect
housing values. The Debt Report is included for general information purposes only. The District has not
verified, and does not make any representation regarding, the completeness or accuracy of the Debt
Report.
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Table 5
CITY OF CALEXICO
(GRAN PLAZA) IMPROVEMENT AREA NO. 1
Fiscal Year 2013-14
Direct and Overlapping Debt Summary
(as of December 1, 2013)
Description
Ad Valorem Taxes
General Tax
Calexico Unified School District
Imperial Community College District
Total Ad Valorem Taxes
Direct Charges
Mosquito Abatement Service Fee
CFD 2013-1 Gran Plaza
Total Direct Charges
% of Assessed
Value (1)
1.0000%
0.0736
0.0256
1.0992%
Current Assessed
Value
Estimated
Amount
$4,634,960
$46,349.60
3,411.33
1,186.55
$50,947.48
$
Maximum Rate
$20,000/acre
Total Estimated Taxes and Direct Charges
Acres(1)
51.80
1.80
1,036,000.00
$1,036,001.80
$1,086,949.28
Percent of Assessed Value
23.451%
________________
Source: County of Imperial Tax Rolls (computed by General Government Management Services).
(1)
51.80 is the minimum taxable acreage per the Rate and Method. See Appendix B.
The District does not have any control over the amount of additional debt payable from taxes or
assessments levied on properties in the District which may be incurred in the future by other
governmental agencies with jurisdiction over all or a portion of the District. To the extent such additional
indebtedness is payable from assessments, special taxes levied pursuant to the Mello-Roos Act or other
taxes, such assessments, special taxes and other taxes will be secured on the property within the District.
The debt attributable to a property in Improvement Area No. 1 of the District could increase without any
corresponding increase in the value of such property. The imposition of such additional indebtedness
could reduce the willingness or the ability of property owners in the District to pay the Special Taxes
when due. See “BONDOWNERS’ RISKS – Cumulative Burden of Parity Liens, Taxes and Special
Assessments.”
Estimated Value-to-Lien Ratios
The aggregate principal amount of the Bonds is $7,000,000. Although the lien of the Special Tax
includes both the principal and interest on the Bonds, for purposes of calculating the value-to-lien ratio,
the principal of the Bonds will be utilized to calculate the total lien on the property in Improvement Area
No. 1 of the District. As set forth in the Table 5 above, as of December 1, 2013, there is no other
outstanding public special tax or special assessment indebtedness applicable to property in Improvement
Area No. 1 of the District. Thus, the estimated total direct and overlapping special tax and special
assessment debt allocable to property in Improvement Area No. 1 of the District is solely the principal
amount of the Bonds, $7,000,000.
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The Appraiser concluded in the Appraisal Report that the estimated market value of the fee
simple interest of properties in Improvement Area No. 1 of the District as of September 27, 2013, was
$48,000,000. Such estimated market value is approximately 6.86 times the principal amount of the
Bonds. These ratios exclude the direct and overlapping tax lien debt as shown the Debt Report.
Based on the Debt Report, the estimated aggregate assessed value of taxable property in
Improvement Area No. 1 of the District is $4,634,960, which is approximately 0.66 times the principal
amount of the Bonds.
The Assessor Parcel Numbers in Improvement Area No. 1 are anticipated to change with the
future recording of the tentative tract map as a final tract map for the Project (see “APPENDIX C –
SUMMARY APPRAISAL REPORT”). In addition, the acreage of several of the parcels is anticipated to
change somewhat in connection with the recordation of the final tract map. However, the boundary area
of Improvement Area No. 1 will not change. The Developer currently projects that the final tract map
will be recorded by the end of February 2014. As a result, the Appraiser did not value and the special tax
consultant did not prepare value-to-lien ratios for each current separate parcel.
The property values, the direct and overlapping debt and the total tax burden on property vary
among parcels within Improvement Area No. 1 of the District. The foregoing value-to-lien ratios only
represent estimated averages for the property within Improvement Area No. 1 of the District. The actual
ratios for individual parcels within the District may vary significantly.
Table 6
CITY OF CALEXICO
(GRAN PLAZA)
Value-to-Lien by Development Status (Anticipated Parcels)
Anticipated Parcel #
Development
Status
Assigned
Special Tax(1)
% of
Total
Allocation
of Debt(2)
Allocation
of Value
Valueto-Lien
2
Developed
$502,400
91.71%
$6,419,639 $41,644,613
6.49:1
1, 3, 4, 5, Remainder & Undeveloped
45,419
8.29
580,361
6,355,387 10.95:1
River Tract 1
River Tract 3
Exempt
0
0.00
0
0 N/A
All Parcels
$547,819
100.00% $7,000,000 $48,000,000
6.86:1
(1) Based on Steps 1, 2 and 3 of the Rate and Method with an estimated Special Tax Requirement of $547,819
(Assumes Maximum Annual Debt Service of $522,819 and an Administration Fee of $25,000).
(2) Allocated in proportion to amount of assigned special tax.
Source: E.J. De La Rosa & Co. Inc. based on final appraisal by McNamara & Associates.
THE DEVELOPER; THE DEVELOPMENT PLAN
The following information regarding the Developer and the ownership and planned development
of the District has been provided by the Developer for use in this Official Statement, and has not been
independently confirmed or verified by the District or the Underwriter. Neither the District nor the
Underwriter makes any representation as to the accuracy or adequacy of this information or the absence
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of any material change after the date of this Official Statement. No assurance can be given that the
proposed development will occur as described herein or that it will be completed in a timely manner.
The Special Taxes are not personal indebtedness of the property owners in Improvement Area
No. 1 of the District. Rather the Special Tax is an obligation only against the parcels of property in
Improvement Area No. 1 subject to the Special Tax. The information herein should not be construed to
suggest that the Developer or any future owners of parcels in Improvement Area No. 1 of the District is
personally liable for payment of Special Taxes or that, in the event of default on the Bonds, a deficiency
action against the Developer or any other property owner is an available remedy. See “BONDOWNERS’
RISKS – Special Tax Payments Not Personal Obligations of Property Owners.”
The Developer
Corsair, LLC (“Corsair” or the “Developer”) is a Nevada limited liability company that currently
owns a majority of the property within Improvement Area No. 1 of the District. According to the
Developer, subsequent to the issuance of the Bonds, the property within the District owned by the
Developer will be transferred to Gran Plaza, LP, a single purpose entity owned and controlled by the
principal parties of Corsair.
Formed in 1995, Corsair is a real estate investment and development company committed to the
ownership and development of quality projects. The success of the company is built largely on years of
experience in development, planning, financial analysis, construction, supervision, leasing, and property
management. Corsair, LLC is owned in equal ownership by Mark Gabay and Arman Gabay. Mr. Mark
Gabay has over 28 years of experience in all areas of real estate development specializing in acquisition,
financing, and land remediation, construction and property/lease negotiations. Mr. Arman Gabay has
over 25 years of experience in all areas of real estate development including acquisition, design/project
planning, tenant procurement, pre-construction and redevelopment of underutilized properties.
The manager of Corsair is John J. Carroll IV, Inc., a California corporation, which has extensive
experience in development and management of commercial real estate. John J. Carroll, the President of
John J. Carroll IV, Inc., has over 35 years of development experience in a wide range of projects
including residential, mixed-use, office and retail development. Mr. Carroll was also a former general
partner of Charles Dunn Company which is one of the largest full-service regional real estate firms in the
western United States. Mr. Carroll has executed over 5,000 leases and development commercial centers,
including a 300,000 square foot regional commercial center in the greater Los Angeles area known as
District Square Shopping Plaza.
Corsair’s current and past projects include an extensive inventory of successful new ground-up
construction and revitalization of underperforming properties. Examples of past projects include, but are
not limited to the following:
Carwood West Shopping Center, 4121-4267 Woodruff Avenue, Lakewood, California (2012). The
Carwood West Shopping Center was a struggling and dilapidated 105,000 square foot shopping center on
a 12-acre property in the City of Lakewood. Corsair purchased and refurbished the property to an
updated center of approximately 179,000 square feet and secured several national tenants, including
Marshalls, Harbor Freight Tools, Smart & Final, HomeGoods, and Sprouts Farmers Market. Today, the
commercial center is nearly at 100% occupancy.
Inglewood Plaza, 3140 Imperial Highway, Inglewood, California (2008). Inglewood Plaza is
located in the heart of the City of Inglewood, and at its prime intersection of Imperial Highway and
Crenshaw Boulevard. Corsair acquired the 6.31-acre site and redeveloped the property that resulted in
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successful re-tenancy of the center with several national tenants. The center currently consists of
Burlington Coat Factory, CVS Pharmacy, TMobile, and a fast food tenant.
Northgate Center, 3315 Northgate Boulevard, Sacramento, California (2005). Northgate Center
is located in the northern portion of Sacramento, 0.8-mile south of Highway 80 (Dwight D. Eisenhower
Hwy) and accessible by Northgate Boulevard exit. The 8.5-acre center was approximately 50% vacant
when Corsair purchased the property. Subsequent to acquisition, the center was revitalized, additional
commercial pad was constructed and new tenants were secured. The center is currently about 119,000
square feet in size and approximately 95% occupied.
Developer Financial Information. The following tables outline the unaudited balance sheet and
operating statement of Corsair as of December 31, 2013, as well as Corsair’s projected income and
expenses for 2014. Neither the District, the City nor the Underwriter has independently verified the
following financial information, and no assurance can be given as to its accuracy.
Table 7
CORSAIR, LLC
Balance Sheet (As of December 31, 2013)
ASSETS
Land & Building
Gran Plaza Outlets, Calexico
4166 Melrose Avenue, Los Angeles, CA 90029(1)
5160 Olympic Blvd, Los Angeles, CA 90022(2)
REAL ESTATE ASSETS
Less: Accum Depreciation
NET REAL ESTATE ASSETS
TOTAL ASSETS
LIABILITIES & EQUITY
Unsecured debt – Gran Plaza Outlet(3)
4166 Melrose Avenue, Los Angeles, CA 90029
5160 Olympic Boulevard, Los Angeles, CA 90022
TOTAL LIABILITIES
Capital
Income
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
$85,000,000
3,000,000
2,500,000
$90,500,000
(138,900)
$90,361,100
$90,361,100
$53,500,000
--$53,500,000
$36,601,780
259,320
$36,861,100
$90,361,100
_______________________________
Source: Developer. Neither the District, the City nor the Underwriter has independently verified the
information contained in this table, and no assurance can be given as to its accuracy.
(1) Entered into a land lease with McDonalds restaurant.
(2) Entered into land lease with El Pollo Loco restaurant.
(3) The unsecured debt is comprised of a loan from Excel Property Management Services to Corsair.
Excel Property Management Services is owned equally by the same principals of Corsair (Mark and
Arman Gabay). The loan is interest-only, with payments beginning in February 2014, for a term of
one year at an interest rate of 5.5%. According to Corsair, the interest payments will be made by
Gran Plaza, LP. Upon the recordation of the tentative tract map as a final tract map for the Project,
which the City and the Developer anticipate will occur at the end of February 2014, the Developer
intends to transfer the property within the District to Gran Plaza LP. Along with such transfer of
ownership, the unsecured loan will be transferred from Corsair to Gran Plaza LP.
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Table 8
CORSAIR, LLC
Operating Statement
(as of December 31, 2013)
INCOME
4140 Melrose Avenue, Los Angeles, CA(1)
5160 Olympic Blvd, Los Angeles, CA
(2)
Total Income
$135,000
124,320
$259,320
EXPENSES
4140 Melrose Avenue, Los Angeles
--
5160 Olympic Blvd, Los Angeles
--
Total Operating Expenses
$0
NET OPERATING INCOME
$259,320
________________________
Source: Developer. Neither the District, the City nor the Underwriter has independently verified
the information contained in this table, and no assurance can be given as to its accuracy.
Table 9
CORSAIR, LLC
Projected Income & Expense Statement
(Calendar Year 2014)
INCOME
4140 Melrose Avenue, Los Angeles, CA(1)
5160 Olympic Blvd, Los Angeles, CA(2)
Total Income
EXPENSES
$135,000
124,320
$259,320
--$0
$259,320
_______________
Source: Developer. Neither the District, the City nor the Underwriter has
independently verified the information contained in this table, and no assurance can
be given as to its accuracy.
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Upon the recordation of the tentative tract map as a final tract map for the Project, which the City
and the Developer anticipate will occur at the end of February 2014, the Developer intends to transfer the
property within the District to Gran Plaza LP.
Gran Plaza LP is a Delaware limited partnership whose sole asset will be the property in the
District which comprises the Gran Plaza Outlets. The general partner of Gran Plaza LP is Grand
Manager, Inc., a Delaware Corporation, whose President is Mark Gabay. The two limited partners of
Gran Plaza LP are Mark Gabay and Arman Gabay.
The following table shows the projected balance sheet for Gran Plaza LP for February 1, 2014
after the property owned by Corsair in the District is transferred to Gran Plaza LP:
Table 10
GRAN PLAZA, LP
Balance Sheet
(Projected for February 1, 2014)
ASSETS
REAL ESTATE ASSETS: Land & Building
Gran Plaza Outlets, Calexico(1)
TOTAL ASSETS
$85,000,000
$85,000,000
LIABILITIES & EQUITY
Unsecured debt – Gran Plaza Outlet(2)
TOTAL LIABILITIES
Capital
TOTAL EQUITY
$53,500,000
$53,500,000
$31,500,000
$31,500,000
TOTAL LIABILITIES AND EQUITY
$85,000,000
_______________
Source: Developer. Neither the District, the City nor the Underwriter has independently
verified the information contained in this table, and no assurance can be given as to its
accuracy.
(1) Assumes ownership of the property in the District is transferred from Corsair to Gran
Plaza LP. According to Corsair, the property in the District will be transferred from
Corsair to Gran Plaza once the final tract map is recorded, which is expected to occur by
the end of February 2014.
(2) The unsecured debt is comprised of a loan from Excel Property Management Services to
Corsair. Excel Property Management Services is owned equally by the same principals
of Corsair (Mark and Arman Gabay). The loan is interest-only, with payments beginning
in February 2014, for a term of one year at an interest rate of 5.5%. According to
Corsair, the interest payments will be made by Gran Plaza, LP. Upon the recordation of
the tentative tract map as a final tract map for the Project, which the City and the
Developer anticipate will occur at the end of February 2014, the Developer intends to
transfer the property within the District to Gran Plaza LP. Along with such transfer of
ownership, the unsecured loan will be transferred from Corsair to Gran Plaza LP.
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The following table shows the operating statement for Gran Plaza LP as of December 31, 2013:
Table 11
GRAN PLAZA, LP
Operating Statement
(As of December 31, 2013)
INCOME
Rent Income(1)
$152,383.20
41,798.08
97,443.56
$291,624.84
Promotional Fund
Triple Net Charges
Total Income
EXPENSES
Promotional & Marketing Expenses
Property Taxes
Utilities
Janitorial Contract Service & Supplies
Steam Cleaning & Pressure Washing
Security
Telephone
$179,161.98
32,930.45
12,860.14
45,721.23
1,885.00
37,457.54
120.41
Repairs & Maintenance
3,246.00
Total Expenses
$313,382.75
$(21,757.91)
________________________
Source: Developer. Neither the District, the City nor the Underwriter has
independently verified the information contained in this table, and no assurance can
be given as to its accuracy
(1) Gran Plaza LP leased the Gran Plaza Outlets from Corsair pursuant to a Ground
Lease, dated as of February 6, 2012 for a two year term. After the final tract map
is recorded, which is expected to occur at the end of February 2014, Corsair will
transfer ownership of the parcels within Improvement Area No. 1 of the District
to Gran Plaza LP. Pursuant to the Ground Lease, Gran Plaza LP subsequently
entered into leases with various retail tenants. See “—Summary of Leases;
Occupancy Rate” below.
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The following table shows the projected income and expense statement for Gran Plaza LP for
calendar year 2014:
Table 12
GRAN PLAZA, LP
Projected Income & Expense Statement(1)
(Calendar Year 2014)
INCOME
Gran Plaza Outlets(1)
Base Rental Income
Retail Sales Percent Revenue
CAM Income
Ancillary Income
(Vacancy)
Total Income
EXPENSES
Gran Plaza Outlets
Interest(2)
Utilities
Landscaping
Janitorial
Management Fee
Property Manager
G&A
Marketing
Security
Property Insurance
Property Taxes
Trash Expenses
$ 5,098,653
3,193,027
2,409,164
779,539
(535,044)
$10,945,339
$2,675,000
200,029
57,373
230,660
396,984
273,634
146,088
108,810
660,329
384,190
167,227
843,780
172,604
--$6,316,708
$4,628,631
_____________
Source: Developer. Neither the District, the City nor the Underwriter has independently verified the information
contained in this table, and no assurance can be given as to its accuracy.
(1) Gran Plaza LP leased the Gran Plaza Outlets from Corsair pursuant to a Ground Lease, dated as of February 6, 2012
for a two year term. After the final tract map is recorded, which is expected to occur at the end of February 2014,
Corsair will transfer ownership of the parcels within Improvement Area No. 1 of the District to Gran Plaza LP.
Pursuant to the Ground Lease, Gran Plaza LP subsequently entered into leases with various retail tenants.
(2) Debt service on unsecured loan of $53,500,000 from Excel Property Management Services to Corsair. Excel
Property Management Services is owned equally by the same principals of Corsair (Mark and Arman Gabay). The
loan is interest-only, with payments beginning in February 2014, for a term of one year at an interest rate of 5.5%.
According to Corsair, the interest payments will be made by Gran Plaza, LP. Upon the recordation of the tentative
tract map as a final tract map for the Project, which the City and the Developer anticipate will occur at the end of
February 2014, the Developer intends to transfer the property within the District to Gran Plaza LP. Along with such
transfer of ownership, the unsecured loan will be transferred from Corsair to Gran Plaza LP.
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Development Plan
The Developer plans on constructing the Project, located entirely within Improvement Area
No. 1, as an approximately 561,650 square foot outlet shopping center mixed with conventional largescale retail uses known as “Gran Plaza Outlets.” The Gran Plaza Outlets will include areas for a food
court and out parcels that could accommodate sit-down restaurants. The Gran Plaza Outlets will be
located adjacent to the primary border crossing into Mexicali, the state capital of Baja, Mexico. The
outlets will be built on the south side of West 2nd Street about half a mile west of the Downtown Port of
entry and are designed to capitalize on shoppers in Mexicali, which has a population of about 1 million
within 25 miles of the outlets. The project would provide 2,160 parking spaces, which would be
positioned on the eastern, northern, and western perimeter of the site.
The Project will be constructed in two phases (Phase 1A and Phase 1B) on about 62 acres of land.
Phase 1A is located on the east end of the site consisting of 11 buildings and approximately 280,000
square feet of leasable area. Phase IA is substantially completed and the Developer expects Phase 1A to
be 100% completed by 2014. Gran Plaza had its official grand opening on November 15, 2013. Phase
1B will be located on the west end of Improvement Area No. 1 with approximately 7 buildings on about
200,000 square feet of building area and a storage/maintenance building with approximately 6,400 square
feet. Construction of Phase 1B would start and proceed based on market demand, but the Developer
currently expects to commence Phase 1B in 2015. However, neither the District nor the City can give any
assurances as to when or whether Phase 1B will commence.
Phase IA consists of approximately 280,000 leasable square feet. There are a total of 68 units, of
which 38 have executed leases (200,000 square feet or 71.4% of the leasable area), and 30 have leases in
process (80,000 square feet or 28.5%). Phase 1A also contains ancillary uses such as a food court, retail
kiosks and common areas.
The majority of the current leases are for either five or ten year initial terms with most tenants
having one or more options to renew. Most leases have a percentage rent clause where the minimum
contract rent is to be paid unless gross sales exceed a certain point. Many tenants have kick out clauses
where if gross sales do not exceed a certain amount for a specified period, the tenant may vacate the lease
after the third or fifth year. Most leases are written on a triple net expense basis. Some of the tenant’s
with executed leases include: H&M, Converse, Sierra Eyewear, Carters, OshKosh, Charlotte Russe,
Kitchen Collection, Michael Kors, Gymboree, Perry Ellis, The Gap, the Children’s Place, Crocs, Nautica,
Kipling, Wilson’s Leather, DKNY, Banana Republic, Aeropostale, Coach, American Eagle Outfitters,
Skechers, Guess?, Kay Jewelers, Claire’s, Perfumania, Perfumes 4-U, Wet Seal, Nike, Lids, Levi’s,
Puma, Zumiez, Rack Room Shoes, Old Navy, Concrete, Tilly’s and Papaya. See Table 14 below for a
more comprehensive list of the leases.
It is estimated that the Gran Plaza Outlets, upon completion of Phase 1A and Phase 1B, will bring
approximately $140 million in taxable retail sales to the area, generating about $1.4 million in annual
sales tax revenue to the City, and will generate approximately 268 full time jobs and 617 part time jobs.
See “SECURITY FOR THE BONDS – Agreement Re Covenants.”
All portions of Phase 1A are owned by Corsair, LLC, except for a 3.17-acre parking lot site
which is under the ownership of System II, LLC. However, System II, LLC is owned 100% by the same
two principals of Corsair, LLC. As such, Corsair and its affiliated company control the Phase 1A site. In
addition, subsequent to the issuance of the Bonds, the property owned by System II, LLC will be
transferred to Gran Plaza, LP, a Delaware limited partnership (“Gran Plaza LP”).
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Zoning. The property within the District is zoned “CH,” which stands for “Commercial
Highway.” Under the City’s Municipal Code, the CH zone is intended as an area for the location of
highway oriented retail service and wholesale commercial activities.
Environmental Conditions.
A final environmental impact report, dated June 2011 (State Clearinghouse No. 2008111004) (the
“EIR”) has been prepared in connection with the development of the Project. The City Council approved
and certified the EIR on April 23, 2012. A Notice of Determination was filed with the County Clerk’s
office on April 30, 2012. The EIR was prepared to identify the potential impacts of the development of
the property within the Project on the environment, to discuss alternatives, and to propose mitigation
measures to offset, minimize or otherwise avoid significant environmental impacts of such development.
The EIR includes requirements for mitigation and provides for a mitigation monitoring plan. All
mitigation measures have been completed or are almost complete except with respect to certain traffic
signals and intersection improvements, which the Developer is in the process of constructing. The City of
Calexico will be responsible for confirming that the Developer has complied with all of the required
mitigations.
Financing Plan
The Developer financed the costs of the Gran Plaza Outlets with a combination of cash and a oneyear interest only loan from Excel Property Management Services in the amount of $53,500,000. Excel
Property Management Services is owned equally by the same principals of Corsair (Mark and Arman
Gabay). Subsequent to completion of the Project, the Developer intends to obtain long-term financing for
approximately seventy-five percent of the costs of the Project from a bank lender. However, the
Developer has not yet obtained a loan commitment for such long-term financing. Proceeds from the sale
of the Bonds will be used to finance the Public Facilities that will support the Gran Plaza Outlets. See
“PLAN OF FINANCE.”
The following table provides additional details regarding the approximate costs for the Project,
exclusive of any costs related to the issuance of the Bonds. Neither the City, the District nor the
Underwriter have independently verified such costs.
Table 13
APPROXIMATE CONSTRUCTION COSTS
Approximate cost
(in millions)
Item
Land Acquisition
Building Construction
Construction Management
Leasing Expenses (including commissions)
Architecture and Engineering
Marketing
Utility Service Fees and other soft costs
Financing Costs
Total
________________
Source: The Developer
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$ 3.3
47.5
2.2
2.0
2.8
2.2
2.1
2.9
$65.0
Summary of Leases; Occupancy Rate
Corsair entered into a Ground Lease, dated as of February 6, 2012 (“Ground Lease”), with Gran
Plaza LP, as tenant, for the ground lease of the Gran Plaza Outlets. The rent payable by Gran Plaza LP
under the Ground Lease is $100 per annum. The Ground Lease is for a two-year term with an expiration
date of February 6, 2014. As a condition precedent to the issuance of the Bonds, Corsair and Gran Plaza
LP will extend the Ground Lease and Gran Plaza, LP will agree to pay the Special Tax until such time as
ownership of Corsair’s property within Improvement Area No. 1 has been transferred to Gran Plaza, LP.
Gran Plaza LP subsequently leased out the Gran Plaza Outlet space, as landlord, to various retail
tenants. As of January 15, 2014, approximately 205,701 square feet of a total of approximately 277,666
square feet of retail space (approximately 74%) of the Gran Plaza Outlets was leased. All of the leases
are executed between the tenants and Gran Plaza LP.
The following table sets forth a list of the current and expected tenant leases for the Gran Plaza
Outlets, together with the number of leased square feet and the applicable lease termination dates, as of
January 15, 2014:
TABLE 14
City of Calexico
Gran Plaza Outlets Leases
(as of January 15, 2014)
Executed Leases (1)
Aeropostale
American Eagle Outfitter's
Auntie Anne's & Cinnabon
Banana Republic
Carter's
Charlotte Russe
Children's Place
Chinese
Claire's
Coach(2)
Concrete
Converse
Crocs
Cubavera / Perry Ellis
DKNY(2)
Gap
GNC
Guess
Gymboree
H&M(2)
Kay Jewelers
Kipling
Kitchen Collection
Leased Area
(Square Feet)
9,400
7,500
1,500
7,500
4,728
5,935
5,000
734
1,200
7,500
1,200
3,500
2,200
4,025
3,500
7,950
1,180
6,000
2,200
25,152
2,000
1,100
3,000
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Lease Term
10 years
10 years
5 years
5 years
10 years
10 years
10 years
5 years
5 years
10 years
5 years
5 years
10 years
5 years
5 years
5 years
5 years
10 years
10 years
10 years
10 years
10 years
5 years
Option
Two 5 years
none
One 5 year
Two 5 years
One 5 year
none
Two 5 years
Two 5 years
One 5 year
none
none
Two 5 years
none
One 5 year
One 5 year
Two 5 years
One 5 year
One 5 year
One 5 year
Four 5 years
none
none
none
Leased Area
(Square Feet)
4,500
1,400
3,500
4,800
12,015
14,500
2,662
4,000
7,170
1,200
1,200
5,500
6,000
790
3,550
1,000
7,500
3,500
3,500
3,410
Executed Leases
Levis
Lids
Michael Kors(2)
Nautica(2)
Nike
Old Navy
Osh Kosh
P.S.
Papaya
Perfumania
Perfumes 4 U
Puma
Rack Room Shoes
Sahara Eyeware
Skechers
Sunglass Hut
Tilly's
Wet Seal
Wilson’s Leather
Zumiez
Total:
Lease Term
5 years
10 years
10 years
10 years
5 years
5 years
10 years
10 years
10 years
10 years
5 years
10 years
5 years
5 years
5 years
5 years
10 years
10 years
5 years
5 years
Option
Two 5 years
none
One 5 year
none
Three 5 years
Two 5 years
One 5 year
Two 5 years
none
Two 5 years
One 5 year
none
One 5 year
One 5 year
Two 5 year
One 5 year
One 5 year
none
One 5 year
One 5 year
205,701
_____________
Source: Developer
(1) All leases are triple net leases, except for the percentage only leases and the Nike lease.
(2) Percentage only lease.
Tenants - Lease in Process
Kenneth Cole
Adidas
Reebok
Hartstrings
Total:
Square Feet
3,000
6,200
5,460
2,875
Tenants – Letter of Intent
Complete/Pending Committee Approval
A’gaci
Haggar
Hot Topic
Mami’s Mexican
Nine West
Torrid
Total:
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17,535
Square
Feet
15,000
2,800
1,500
640
2,500
2,500
24,940
Active Letter of Intent Negotiations
Evening Outlet
Reserved
Lucky Brand
Loft
Aldo
Green Leafs/Bananas
South Philly Steak & Fries
Villa Pizza
Travel Pro
Corning
Johnny’s Sports Bar
World of Coffee
Dickies
Journey’s
Total:
_____________
Source: Developer
Square Feet
1,200
660
5,175
4,000
2,980
685
707
707
1,930
3,000
2,000
1,625
1,500
2,080
28,949
BONDOWNERS’ RISKS
INVESTMENT IN THE BONDS INVOLVES ELEMENTS OF RISK. THE FOLLOWING
SECTION DESCRIBES CERTAIN SPECIFIC RISK FACTORS AFFECTING THE PAYMENT AND
SECURITY OF THE BONDS. THE FOLLOWING DISCUSSION OF RISKS IS NOT MEANT TO BE
AN EXHAUSTIVE LIST OF THE RISKS ASSOCIATED WITH THE PURCHASE OF THE BONDS
AND THE ORDER OF DISCUSSION OF SUCH RISKS DOES NOT NECESSARILY REFLECT THE
RELATIVE IMPORTANCE OF THE VARIOUS RISKS. POTENTIAL INVESTORS ARE ADVISED
TO CONSIDER THE FOLLOWING FACTORS ALONG WITH ALL OTHER INFORMATION IN
THIS OFFICIAL STATEMENT IN EVALUATING THE BONDS.
THERE CAN BE NO
ASSURANCE THAT OTHER RISK FACTORS NOT DISCUSSED UNDER THIS CAPTION WILL
NOT BECOME MATERIAL IN THE FUTURE.
Levy and Collection of Special Taxes
Rate and Method Limitations – Maximum Special Tax. The principal source of debt service
payment for the Bonds is the proceeds of the annual levy and collection of Special Taxes against property
within Improvement Area No. 1 of the District. The District’s Special Tax levy, however, is limited to
the maximum rates set forth in the Rate and Method. In the event of significant Special Tax
delinquencies in the District, no assurance can be given that Special Taxes will in fact be collected in
amounts, together with other money available in the Special Tax Fund (including the Reserve Account),
that will be sufficient to pay debt service on the Bonds when due.
No Relationship Between Annual Tax Levy and Property Value. Because the Special Tax levy is
not based on property value, the amount of Special Taxes levied rarely, if ever, results in a uniform
relationship between the value of a particular parcel of property and the amount of Special Taxes levied
against such parcel. Thus, there is rarely, if ever, a uniform relationship between the value of the parcels
of real property in the District subject to Special Taxes and their proportionate share of debt service on the
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Bonds. The following are some of the factors that might cause the levy of Special Taxes on any particular
parcel of property in the District to vary from the Special Taxes that might otherwise be expected:
x
Failure of the property owners to pay Special Taxes and delays in the collection of or
inability to collect the Special Taxes by tax sale or foreclosure and sale of the delinquent
parcels, thereby resulting in an increased tax burden on the remaining parcels.
x
Reduction in the number of parcels of property subject to the Special Tax levy for such
reasons as acquisition by a governmental entity and failure (or refusal) of such
governmental entity to pay Special Taxes based upon a claim of exemption or, in the case
of the federal government or an agency thereof, immunity from taxation, thereby
resulting in an increased tax burden on the remaining taxed parcels.
Generally, Special Taxes will be collected in the same manner as ordinary ad valorem property
taxes are collected. Special Taxes will be generally 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, if taxes are unpaid for a period of five years or more, the property is deeded to the State
and then is subject to sale by the County.
If any Special Tax installment becomes delinquent, the District can foreclose only upon the parcel
or parcels with respect to which the Special Tax is delinquent. If sales or foreclosures of property are
necessary, there could be a delay in the transfer of Special Taxes to the Trustee pending such sales or the
prosecution of foreclosure proceedings and, if the Reserve Account is depleted, there could be a delay in
payments to the Owners of the Bonds. See “—Bankruptcy and Foreclosure Delays” and “SECURITY
FOR THE BONDS – Covenant to Foreclose.”
Limited Obligations of the District
Funds for the payment of the principal of, and the interest on, the Bonds are derived from the
Special Tax levied against the taxable property in Improvement Area No. 1 of the District and certain
monies measured by Sales Tax Revenues, to the extent paid to the Trustee by the City pursuant to the
terms and conditions of the Covenant Agreement. See “SECURITY FOR THE BONDS – Agreement Re
Covenants.” While a projected coverage factor has been considered in structuring the annual debt service
on the Bonds (see “SECURITY FOR THE BONDS – Projected Debt Service Coverage”), the amount of
Special Taxes that will be collected by the District could become insufficient to pay principal of, or
interest on, the Bonds in certain circumstances. If there is a non-payment by property owners or
insufficient proceeds are received from the foreclosure sale of property within the District due to
delinquencies, a default on the Bonds may follow upon the depletion of the Reserve Account. The Bonds
do not represent the general obligations of the District. The District’s obligation with respect to payment
on the Bonds is limited to Net Taxes and moneys on deposit in the Special Tax Fund (and designated
accounts therein, but excluding the Administrative Expenses Account) held by the Trustee under the
Indenture. Neither the faith and credit nor the taxing power of the City, the County or the State or any of
its political subdivisions is pledged to the payment of the Bonds.
Special Tax Payments Not Personal Obligations of Property Owners
An owner of property subject to the Special Tax levy is not personally obligated to pay Special
Taxes. Rather, Special Taxes represent an obligation only against the parcels of property in the District
subject to the Special Tax levy. If, after a default in the payment of Special Taxes and a foreclosure sale
by the District, the resulting proceeds are insufficient, taking into account other obligations also
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constituting a parity lien against such parcels, the District will have no recourse against the owner for the
delinquency.
Risks of Real Estate Secured Investments Generally; Land Values
Purchasers of the Bonds will be subject to the risks generally incident to an investment secured by
real estate, including but not limited to, (i) adverse changes in local market conditions, such as changes in
the market value of real property in the vicinity of the District, the supply of or demand for competitive
properties in such area, and the market value of the properties in the event of sale or foreclosure,
(ii) changes in real estate tax rates and other operating expenses, government rules (including, without
limitation, zoning laws, growth control initiatives and laws relating to threatened and endangered species)
and fiscal policies, and (iii) natural disasters (including, without limitation, earthquakes and floods),
which may result in uninsured losses. These risks affect the value of the property, as well as the property
owners’ willingness and/or ability to pay Special Taxes when due.
The value of land within the District is an important factor in evaluating the investment quality of
the Bonds. In the event that a property owner defaults in Special Tax payments and the District
commences a foreclosure action on such property, prospective purchasers of the Bonds should not assume
that the property within the District could be sold for the estimated market value described herein or an
amount adequate to pay delinquent Special Taxes. The Appraisal Report provides market value estimates
by the Appraiser for the taxable parcels in Improvement Area No. 1 of the District as of the Date of
Value, i.e., September 27, 2013. Such estimates were based on various assumptions and subject to a
number of limitations, including the assumption that there are no hidden or unapparent conditions of the
property, subsoil or structures which would render the appraised property more or less valuable. See
“APPENDIX C – SUMMARY APPRAISAL REPORT” for a description of the analysis and assumptions
made by the Appraiser. The District makes no representation as to the accuracy of the Appraisal Report.
Reductions in property values within the District due to future events, such as a downturn in the economy
or the real estate market, events such as earthquakes, droughts, or floods, stricter land use regulations,
threatened or endangered species or other events may adversely impact the value of the property in
Improvement Area No. 1 of the District and, thus, the security underlying the District’s revenues from
collection of the Special Taxes.
Concentration of Ownership
Currently, the Developer is the owner of almost all of the parcels in the District that are expected
to be subject to the Special Tax levy. The Developer intends to transfer the parcels it owns in the District
to Gran Plaza LP once the final tract map is recorded (see “THE DEVELOPER: THE DEVELOPMENT
PLAN”). The willingness and ability of the Developer, as well as other property owners, to pay property
taxes and the Special Taxes could be adversely affected by changes in general or local economic
conditions, fluctuations in the real estate market and other factors. A description of the Developer is set
forth under the caption “THE DEVELOPER; THE DEVELOPMENT PLAN.” The District makes no
representation as to the accuracy or completeness of such information. Failure of the Developer (or any
future owner of a significant amount of taxable property within the District) to pay installments of such
Special Taxes when due could cause the depletion of the Reserve Account prior to reimbursement from
the resale of foreclosed property and repayment of the delinquent Special Tax. In such an event, there
may be insufficient revenues from Special Taxes to meet the District’s obligations under the Indenture.
Failure to Develop Property
In assessing the investment quality of the Bonds, prospective purchasers should be aware that
undeveloped land is often less valuable than the same land in a developed condition, should it be
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necessary for the District to foreclose due to the nonpayment of Special Taxes. Therefore, undeveloped
land in a community facilities district is generally regarded as less valuable than developed land in terms
of security to holders of bonds that are secured by revenues from special taxes levied in such district.
As described in “THE DEVELOPER; THE DEVELOPMENT PLAN,” Phase 1A of the Gran
Plaza Outlets Project is substantially complete and had its grand opening on November 15, 2013. The
Developer expects to begin Phase 1B of the Gran Plaza Outlets within the next few years. However, no
guarantee can be given that the Developer’s development plans with respect to the District will occur in
the manner or according to the schedule described in this Official Statement. There are numerous factors
that may contribute to the willingness or ability of the Developer (or any successor-in-interest) to
continue development of property in the District, including but not limited to, general economic condition
of the region or then-existing governmental policies, regulations or growth control initiatives. The
occurrence of any event which significantly impacts the ability to develop land in the District may affect
the willingness or ability of the property owners to pay the Special Tax installments when due.
Bankruptcy and Foreclosure Delays
Bankruptcy Limiting Remedies of Bondowners. The payment of Special Taxes and the ability of
the District to foreclose the lien of a delinquent tax may be limited by bankruptcy, insolvency or other
laws generally affecting creditors’ rights or by the laws of the State relating to judicial foreclosure. The
various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond
Counsel’s approving legal opinion) will be qualified as to the enforceability of the various legal
instruments by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting
creditors’ rights, by the application of equitable principles and by the exercise of judicial discretion in
appropriate cases.
Although bankruptcy proceedings would not cause Special Taxes to become extinguished,
bankruptcy of a property owner could 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
Bonds.
Glasply Marine Industries. On July 30, 1992, the United States Court of Appeals for the Ninth
Circuit issued an opinion in a bankruptcy case entitled In re Glasply Marine Industries, holding that ad
valorem property taxes levied by a county in the State of Washington after the date that the property
owner filed a petition for bankruptcy would not be entitled to priority over the claims of a secured creditor
with a prior lien on the property. Although the court upheld the priority of unpaid taxes imposed before
the bankruptcy petition, unpaid taxes imposed subsequent to the filing of the bankruptcy petition were
declared to be “administrative expenses” of the bankruptcy estate, payable after the claims of all secured
creditors. As a result, the secured creditor was able to foreclose on the subject property and retain all the
proceeds from the sale thereof except the amount of the pre-petition taxes. Pursuant to this holding, postpetition taxes would be paid only as administrative expenses and only if a bankruptcy estate has sufficient
assets to do so. In certain circumstances, payment of such administrative expenses may be allowed to be
deferred. Once the property is transferred out of the bankruptcy estate (through foreclosure or otherwise),
it would be subject only to current ad valorem taxes (i.e., not those accruing during the bankruptcy
proceeding).
The Glasply decision is controlling precedent in bankruptcy court in the State. If Glasply were
held to be applicable to Special Taxes, a bankruptcy petition filing would prevent the lien for Special
Taxes levied in subsequent fiscal years from attaching so long as the property was part of the estate in
bankruptcy, which could reduce the amount of Special Taxes available to pay debt service on the Bonds.
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However, Glasply speaks as to ad valorem property taxes, and not special taxes, and no case law exists
with respect to how a bankruptcy court would treat the lien for special taxes levied after the filing of a
petition in bankruptcy.
On October 22, 1994, Congress enacted 11 U.S.C. § 362(b)(18), which added a new exception to
the automatic stay for ad valorem property taxes imposed by a political subdivision after the filing of a
bankruptcy petition. Under this law, if a bankruptcy petition is filed on or after October 22, 1994, the lien
for ad valorem property taxes in subsequent fiscal years will attach even if the property is part of the
bankruptcy estate. The potential effect of 11 U.S.C. § 362(b)(18) on the Special Taxes depends upon
whether a court were to determine that the Special Taxes should be treated like ad valorem property taxes
for this purpose.
Property Owned by FDIC. The ability of the District to foreclose upon property for delinquent
Special Taxes may be limited with respect to properties in which the Federal Deposit Insurance
Corporation (the “FDIC”) has an interest. On November 26, 1996, the FDIC adopted a Statement of
Policy Regarding the Payment of State and Local Property Taxes (the “Policy Statement”) (which
superseded a prior statement issued by the FDIC and the Resolution Trust Corporation in 1991). The
Policy Statement applies to the FDIC when it is liquidating assets in its corporate and receivership
capacities. The Policy Statement provides, in part, that FDIC’s real property is subject to state and local
real property taxes if those taxes are assessed according to the property’s value, and that the FDIC is
immune from ad valorem real property taxes assessed on other bases. The Policy Statement also provides
that the FDIC will pay its property tax obligations when they become due and will pay claims for
delinquencies as promptly as is consistent with sound business practice and the orderly administration of
the institution’s affairs, unless abandonment of the FDIC interest in the property is appropriate. It further
provides that the FDIC will pay claims for interest on delinquent property taxes owned at the rate
provided under state law, but only to the extent the interest payment obligation is secured by a valid lien.
The FDIC will not pay for any fines or penalties and will not pay or recognize liens for such amounts.
The Policy Statement also provides that if any property taxes (including interest) on FDIC-owned
property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC
will pay those claims. No property of the FDIC is subject to levy, attachment, garnishment, foreclosure
or sale without the FDIC’s consent. In addition, a lien for taxes and interest may attach, but the FDIC will
not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC’s
consent.
With respect to challenges to assessments, the Policy Statement provides: “The [FDIC] is only
liable for state and local taxes which are based on the value of the property during the period for which
the tax is imposed, notwithstanding the failure of any person, including prior record owners, to challenge
an assessment under the procedures available under state law. In the exercise of its business judgment, the
[FDIC] may challenge assessments which do not conform with the statutory provisions, and during the
challenge may pay tax claims based on the assessment level deemed appropriate, provided such payment
will not prejudice the challenge. The [FDIC] will generally limit challenges to the current and
immediately preceding taxable year and to the pursuit of previously filed tax protests. However, the
[FDIC] may, in the exercise of its business judgment, challenge any prior taxes and assessments provided
that (1) the [FDIC’s] records (including appraisals, offers or bids received for the purchase of the
property, etc.) indicate that the assessed value is clearly excessive, (2) a successful challenge will result in
a substantial savings to the [FDIC], (3) the challenge will not unduly delay the sale of the property, and
(4) there is a reasonable likelihood of a successful challenge.”
The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including
special assessments, on property in which it has a fee simple interest unless the amount of tax is fixed at
the time the FDIC acquires its fee simple interest in the property, nor will the FDIC recognize the validity
-44-
of any lien to the extent it purports to secure the payment of any such amounts. Because the Special
Taxes are neither ad valorem taxes nor special assessments, and because they are levied under a special
tax formula under which the amount of the Special Tax is determined each year, the Special Taxes appear
to fall within the category of taxes the FDIC generally will not pay under the Policy Statement.
Following the County of Orange bankruptcy proceedings in December 1994, the FDIC filed
claims against the County of Orange in the United Stated Bankruptcy Court and in Federal District Court
which challenged the community facilities district special taxes that the County of Orange had levied on
FDIC-owned property (and which the FDIC had paid) under the Mello-Roos Act. The Bankruptcy Court
ruled that the FDIC was not liable for post-receivership special taxes under the Mello-Roos Act, and that,
to the extent paid by the FDIC, special taxes must be refunded. The United States Bankruptcy Appellate
Panel of the Ninth Circuit affirmed the decision of the Bankruptcy Court, and in a decision filed on
August 28, 2001, the United States Court of Appeals for the Ninth Circuit (the “9th Circuit Court”)
affirmed the decision of the Bankruptcy Appellate Panel. The 9th Circuit Court, while not specifically
asked to decide the issue, stated in its opinion (published in 262 F.3d 1014) that “the FDIC, as a federal
agency, is exempt from the Mello-Roos tax.”
As prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale would likely
reduce or eliminate the persons willing to purchase a parcel at a foreclosure sale, Owners of the Bonds
should assume that the District will be unable to collect Special Taxes relating to, or to foreclose on, any
parcel owned by the FDIC. Such an outcome could cause a draw on the Reserve Account and perhaps,
ultimately, a default by the District in payment on the Bonds. The District has not undertaken to
determine whether the FDIC or any FDIC-insured lending institution currently has, or is likely to acquire,
any interest in any of the parcels, and therefore expresses no view concerning the likelihood that the risks
described above will materialize while the Bonds are outstanding.
Depletion of Reserve Account
Generally under the Indenture, the Reserve Account is to be maintained at an amount equal to the
Reserve Requirement (see “SECURITY FOR THE BONDS – Reserve Account”). Money in the Reserve
Account may be used to pay principal of, and interest on, the Bonds in the event that Net Taxes derived
from the levy and collection of Special Taxes against property within Improvement Area No. 1 of the
District is insufficient for such purpose. If moneys in the Reserve Account are depleted, the Reserve
Account can be replenished from the proceeds of the Special Taxes collected by the District that are in
excess of the amount required to pay debt service on the Bonds. However, no Reserve Account
replenishment from the proceeds of the Special Taxes can occur if such Special Taxes are already being
levied at the maximum rates permitted under the Rate and Method and the proceeds from such levy
remain insufficient to pay the full debt service on the Bonds. Thus it is possible that the Reserve Account
will be depleted and not be replenished by the levy of the Special Taxes.
Disclosure to Future Purchasers
The District has caused a notice of the Special Tax lien to be recorded in the Office of the County
Recorder of the County against each Taxable Property in Improvement Area No. 1 of the District on
August 27, 2013, as Document No. 2013019767. While title companies normally refer to such notices in
title reports, there can be no guarantee that such reference will be made or, if made, that a prospective
purchaser or lender will consider such Special Tax obligation in the purchase of a parcel or a home within
the District or lending of money secured by property in the District. The Mello-Roos Act requires the
subdivider (or its agent or representative) of a subdivision to notify a prospective purchaser or long-term
lessor of any lot, parcel, or unit subject to a special tax levied pursuant to the Mello-Roos Act of the
existence and maximum amount of such special tax using a statutorily prescribed form. California Civil
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Code Section 1102.6b requires that, in the case of transfers other than those covered by the above
requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the
special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with the
above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence
of the Special Taxes, could adversely affect the willingness or ability of the purchaser or lessor to pay the
Special Taxes when due.
Cumulative Burden of Parity Liens, Taxes and Special Assessments
While the Special Taxes are secured by the property in the District subject to the Special Tax
levy, the security only extends to the value of such property that is not subject to prior and parity liens and
similar claims. Certain direct and overlapping indebtedness payable from taxes and assessments on land
within the District are currently outstanding. The District does not have any control over the ability of
other governmental entities to issue indebtedness secured by ad valorem taxes, special taxes or
assessments payable from all or a portion of the property within the District.
In general, as long as the Special Taxes are collected on the County tax roll, the Special Taxes
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 significant when collection of one or more of the taxes,
assessments or charges is sought by some other procedure, such as foreclosure and sale. In the event of
proceedings to foreclose for delinquency of the Special Taxes securing the Bonds, the Special Taxes will
be subordinate only to existing prior governmental liens, if any. Otherwise, in the event of such
foreclosure proceedings, the Special Taxes will generally be on a parity with the other taxes, assessments
and charges, and will share the proceeds of such foreclosure proceedings on a pro rata basis. Although
the Special Taxes will generally have priority over non-governmental liens on a parcel of property,
regardless of whether the non-governmental liens were in existence at the time of the Special Tax levy or
not, this result may not apply in the case of bankruptcy. The existence of other property taxes, special
taxes and special assessments may reduce the value-to-lien ratio of the affected parcels and increases the
possibility that foreclosure proceeds will not be adequate to pay delinquent Special Taxes or the principal
of, and interest on, the Bonds when due.
Exempt Property
Certain properties in the District are exempt from Special Taxes in accordance with the Rate and
Method. The Rate and Method provides that no Special Tax will be levied on (i) Assessor’s Parcels
owned by the State, Federal or other local governments, (ii) Assessor’s Parcels which are used as places
of worship and are exempt from ad valorem property taxes because they are owned by a religious
organization, (iii) Assessor’s Parcels used exclusively by a homeowners’ association, or (iv) Assessor’s
Parcels with public or utility easements (including a retention basin) making impractical their utilization
for other than the purposes set forth in the easement, provided that no such classification would reduce the
sum of all Taxable Property to less than the Minimum Taxable Acreage (51.8 acres). Assessor’s Parcels
which cannot be classified as Exempt Property because such classification would reduce the Acreage of
all Taxable Property to less than the Minimum Taxable Acreage will continue to be classified as
Undeveloped Property, and will continue to be subject to Special Taxes accordingly. Based on
information provided by the Developer, the District expects that that the parcel currently identified as
APN 058-400-041 (a retention basin) will be classified as “Exempt Property” in fiscal year 2015-16, the
first year of the Special Tax levy, and thereafter. The parcel currently owned by the Calexico Community
Redevelopment Agency, which is currently identified as APN 058-180-039 is expected to be acquired by
the Developer in year 2014, and will be subject to the Special Tax upon such transfer of ownership.
However, until such transfer, the property owned by the Calexico Community Redevelopment Agency
will be classified as “Exempt Property.” See “SECURITY FOR THE BONDS – Rate and Method –
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Exemptions” and Tables 1 and 2 thereunder, and “APPENDIX B – RATE AND METHOD OF
APPORTIONMENT OF SPECIAL TAXES.”
Pursuant to Section 53317.3 of the Mello-Roos Act, property within the District acquired by a
public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the
Special Taxes, will continue to be subject to Special Taxes. It is possible that property in the District
acquired by a public entity following a tax sale or foreclosure based upon failure to pay taxes could
become exempt from Special Taxes. In addition, although Section 53317.5 of the Mello-Roos Act
provides that if property subject to Special Taxes is acquired by a public entity through eminent domain
proceedings, the obligation to pay Special Taxes 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 Mello-Roos Act have
not been tested, meaning that such property could become exempt from Special Taxes. In the event that
additional property is dedicated to public entities, this additional property could become exempt from
Special Taxes.
Natural Disasters
The future value of the property subject to the Special Tax levy can be adversely affected by a
variety of natural occurrences, particularly those that may affect infrastructure and other public and
private improvements on such property and the continued habitability and enjoyment of such private
improvements. Such natural occurrences include, without limitation, geological conditions such as
earthquakes, landslides, floods, wildfires, droughts or tornadoes. The District, like all California
communities, may be subject to unpredictable seismic activity, fires due to the vegetation and topography,
or flooding in the event of significant rainfall. According to the seismic safety element of the City’s
General Plan, the City is located in a seismically active region. As a result, the District could be impacted
by a major earthquake from the numerous faults in the area. Seismic hazards encompass both potential
surface rupture and ground shaking. In April, 2010, there was an earthquake about 30 miles southeast of
the City, in Baja California, Mexico. The earthquake measured 7.2 on the Richter scale and caused
damage to the property in the City. The occurrence of future seismic activity in or around the District
could result in substantial damage to properties in the District, which, in turn, could substantially reduce
the value of such properties. Although the District is not located in a flood zone, there is a flood zone
area just above the north eastern area of the District. In addition, according to the City’s General Plan, the
Federal Emergency Management Agency (FEMA) hazard area map of the City shows that the 500 year
floodplain of the New River located within the City is contained in the area north of the Calexico
International Airport that is currently zoned as Open Space land. However, conditions upstream in
Mexico do affect the river. If the Mexicali area becomes more urbanized and nothing is done to control
urban runoff there, the potential for flooding could increase in the downstream areas such as Calexico.
As a result of the occurrence of a natural hazard event, a substantial portion of the property owners may
be unable or unwilling to pay the Special Taxes when due, and the reserve fund for the Bonds may
become depleted. In addition, the value of land in the District could be diminished in the aftermath of
such natural events, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in
the payment of the Special Taxes.
Hazardous Substances
Claims regarding hazardous substances can have an adverse impact on the value of property
within the District and the security for the Bonds. In general, the owners and operators of a parcel may be
required by law to remedy conditions 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 one of the most well-known and widely
applicable of these laws, but California laws with respect to hazardous substances are also generally
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regarded as 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 a parcel in the
District be affected by a hazardous substance is that the marketability and value of the parcel may be
reduced by the costs of remedying the condition, because the purchaser, upon becoming the owner, will
become obligated to remedy the condition just as is the seller. Further, such liabilities may arise not
simply from the existence of a hazardous substance but from the method of handling it. All of these
possibilities could significantly affect the financial and legal liability of a property owner (and thus affect
such owners’ ability or willingness to pay Special Taxes when due), as well as the value of the property
that is realized upon foreclosure. The market value estimates set forth in the Appraisal Report and
described herein do not take into account the possible reduction in marketability and value of any
property by reason of possible liability of the owner or operator for the remedy of a hazardous substance
condition of the parcel. The Developer reports that, to its knowledge, as of November 22, 2013, it is not
currently subject to a liability under hazardous substance law with respect to any of the parcels in the
District that it owns. However, the parcel in the District owned by the Successor Agency to the
Community Redevelopment Agency (“Successor Agency”) (Assessor Parcel Number 058-700-039),
which is the site of a former Gun Club (and is currently a parking lot), has been found to contain
hazardous substances, including but not limited to asbestos, lead based paint and lead in the soil from lead
shot. The Successor Agency has entered into an agreement with the Developer for the Developer to enter
in and/or over the site in order to perform maintenance and remediation work at the site. As long as the
property is owned by the Successor Agency, it will be exempt from the Special Tax. However, the
Developer intends to purchase the property in the future, at which point it will be subject to the Special
Tax and foreclosure in the event of default in payment of the Special Tax. Neither the City nor the
District makes any representation and gives no assurances that such hazardous substance liabilities or
conditions do not currently exist or will not arise in the future in other areas of the District.
Threatened and Endangered Species
In recent years, there has been an increase in activity at the State and Federal levels relating to the
listing, or possible future listing, as threatened or endangered species of certain plant and animal species
found in the State. In light of various concerns regarding the protection of threatened and endangered
species, as well as compliance with applicable governmental regulations, discovery of threatened and
endangered species in or around the District could delay or otherwise adversely impact the development
of undeveloped property in the District. This, in turn, could reduce the value of the affected property and
the ability or willingness of the owners of such property to pay Special Taxes when due. At present, the
District is not aware of the presence of any threatened or endangered species in the District. The District,
however, cannot provide any assurances regarding future discoveries or future changes to the State or
Federal listings of threatened or endangered species.
Right to Vote on Taxes Act; Other Ballot Measures and Initiatives
On November 5, 1996, the voters of the State of California approved Proposition 218, commonly
referred to as the “Right to Vote on Taxes Act” (the “Proposition 218”). Proposition 218 added Article
XIIIC and Article XIIID to the California Constitution. According to the “Title and Summary” 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.” The provisions
of Proposition 218 have not yet been interpreted by the courts, although a number of lawsuits have been
filed requesting the courts to interpret various aspects of Proposition 218.
Among other things, Section 3 of Article XIIIC states that “. . . the initiative power shall not be
prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or
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charge.” The Mello-Roos Act includes 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
Mello-Roos Act prohibits a legislative body from adopting any resolution to reduce the rate of any special
tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Mello-Roos
Act unless such legislative body determines that the reduction or termination of the special tax would not
interfere with the timely retirement of that debt. Government Code Section 5854, which states that:
“Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5,
1996, general election, shall not be construed to mean that any owner or beneficial owner
of a municipal security, purchased before or after that date, assumes the risk of, or in any
way consents to, any action by initiative measure that constitutes an impairment of
contractual rights protected by Section 10 of Article I of the United States Constitution.”
Accordingly, although the matter is not free from doubt, it is likely that Proposition 218 has not
conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere
with the timely retirement of the Bonds.
It may be possible, however, for voters or the City Council, acting as the legislative body of the
District, to reduce the Special Taxes in a manner which does not interfere with the timely repayment of
the Bonds but which does reduce the maximum amount of Special Taxes that may be levied in any year
below the existing levels. The District has covenanted to not reduce the maximum Special Tax rates for
the District unless certain conditions set forth in the Indenture are satisfied. See “APPENDIX E –
SUMMARY OF BOND INDENTURE – Covenants and Warranties – Reduction of Maximum Special
Taxes.”
Like its antecedents, Proposition 218 is likely to undergo both judicial and legislative scrutiny
before its impact on the District and its obligations can be determined. Certain provisions of Proposition
218 may be examined by the courts for their constitutionality under both State and federal constitutional
law. The District is not able to predict the outcome of any such examination.
The foregoing discussion of Proposition 218 should not be considered an exhaustive or
authoritative treatment of the issues relating thereto. The District does not expect to be in a position to
control the consideration or disposition of these issues and cannot predict the timing or outcome of any
judicial or legislative activity in this regard. Interim rulings, final decisions, legislative proposals and
legislative enactments may all affect the impact of Proposition 218 on the Bonds as well as the market for
the Bonds. Legislative and court calendar delays and other factors may prolong any uncertainty regarding
the effects of Proposition 218.
Proposition 218 was adopted pursuant to a measure qualified for the ballot pursuant to
California’s constitutional initiative process. Other initiatives may be adopted in the future which may
affect the collection of fees, taxes and other types of revenues by local agencies such as the District.
Subject to overriding federal constitutional principles, such collection may be materially and adversely
affected by voter-approved initiatives and, ultimately, affect the cash-flow in the payment of the
outstanding Bonds.
Limitations on Remedies; No Acceleration
Remedies available to Bondowners may be limited by a variety of factors and may be inadequate
to assure the timely payment of principal of, and interest on, the Bonds, or to preserve the tax-exempt
status of the Bonds. Bond Counsel has limited its opinion as to the enforceability of the Bonds and the
Indenture to the extent that enforceability may be limited by bankruptcy, insolvency, or similar laws
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generally affecting the enforcement of creditors’ rights. Additionally, the Bonds are not subject to
acceleration in the event of the breach of any covenant or duty under the Indenture. Lack of remedies
may entail risks of delay, limitation, or modification of Bondowner rights. Judicial remedies, such as
foreclosure and enforcement of covenants, are subject to exercise of judicial discretion. A California
court may not strictly apply certain remedies or enforce certain covenants if it concludes that application
or enforcement thereof would be unreasonable under the circumstances and it may delay the application
of such remedies and enforcement.
Investment of Funds
The Reserve Account and all other funds and accounts held under the Indenture are required to be
invested in certain Authorized Investments, as defined in the Indenture. See “APPENDIX E –
SUMMARY OF BOND INDENTURE.” All investments, including Authorized Investments, authorized
by law from time to time for investments by the District contain a certain degree of risk. Such risks
include, but are not limited to, a lower rate of return than expected, decline in market value and loss or
delayed receipt of principal. The occurrence of these events with respect to amounts held under the
Indenture could have a material adverse effect on the security for the Bonds.
Loss of Tax Exemption
Compliance by District. In order to maintain the exclusion of interest on the Bonds from gross
income for federal income tax purposes, the District has covenanted to comply with the applicable
requirements of Section 148 and certain other sections of the Internal Revenue Code of 1986, as amended,
relative to arbitrage and avoidance of characterization as private activity bonds, among other things.
Interest on the Bonds could become includable in gross income for purposes of federal income taxation
retroactive to the date of issuance of the Bonds as a result of acts or omissions of the District in violation
of these covenants. Should such an event of taxability occur, the Bonds are not subject to acceleration,
redemption or any increase in interest rates and will remain Outstanding until maturity or until redeemed
under one of the redemption provisions contained in the Indenture. See “TAX MATTERS.”
Future Legislation or Court Decisions. Legislation affecting the tax exemption of interest on the
Bonds may be considered by the United States Congress and the California state legislature. Federal and
state court proceedings and the outcome of such proceedings could also affect the tax exemption of
interest on the Bonds. No assurance can be given that legislation enacted or proposed, or actions by a
court, after the date of issuance of the Bonds will not have an adverse effect on the tax exemption of
interest on the Bonds or the market value of the Bonds.
Secondary Market
There can be no assurance that there will be a secondary market for the Bonds, or if a secondary
market exists, that such Bonds can be sold for any particular price. Occasionally, because of general
market conditions or because of adverse history or economic prospects connected with a particular issue,
secondary marketing practices in connection with a particular issue are suspended or terminated.
Additionally, pricing of issues for which a market is being made will depend upon then prevailing
circumstances. Such prices could substantially differ from the original purchase price.
LITIGATION
To the best of the District’s knowledge, there is no lawsuit or claim pending or threatened against
the District seeking to restrain or enjoin the issuance, sale or delivery of the Bonds, the application of the
proceeds of the Bonds in accordance with the Indenture, the levy and collection of Special Taxes by the
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District, the application of Net Taxes and other moneys pledged under the Indenture to pay debt service
on the Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds, or the
Indenture, or contesting the powers of the District or its authority with respect to the Bonds or its ability
to perform its obligations under the Indenture.
Lawsuit Regarding Covenant Agreement
On September 3, 2013, the Inland Oversight Committee filed a lawsuit against the City; City
Council of the City; and All Persons Interested in the Matter of that Certain Agreement Re Covenants
Approved on July 2, 2013, by the City Council of the City (Superior Court of the State of California,
County of Imperial, Case No. ECU 07821) (the “Lawsuit”). The Complaint alleges that the Covenant
Agreement constitutes a gift of public funds from the City to the Developer in violation of Article XVI,
Section 6 of the California Constitution, and also constitutes a waste in violation of Section 526a of the
California Code of Civil Procedure, which alleged waste the Council members can be required to
personally repay. In addition, the Complaint alleges that the Covenant Agreement violates the
constitutional debt limit contained in Article XVI, Section 18 of the California Constitution which
provides that no City shall incur any indebtedness or liability in any manner or for any purpose exceeding
in any year the income and revenue provided for such year, without the assent of two-thirds of the
qualified electors therein, voting at an election to be held for that purpose. See “SECURITY FOR THE
BONDS – Agreement Re Covenants.”
The Lawsuit has been brought as a combination reverse validation action under California Code
of Civil Procedure Section 863 and verified complaint for declaratory and injunctive relief and petition
for writ of mandate. The injunctive relief sought would prohibit the City from taking any further steps
towards implementing the Covenant Agreement. The writ of mandate sought would command the City to
set aside and rescind its approval of the Covenant Agreement and order the City to take no further steps
toward implementing the Covenant Agreement.
If the plaintiffs in the Lawsuit were to prevail, this would result in an increase of the Special Tax
levied on property within the District, up to the Maximum Special Tax rate. Although neither the City
nor the District can predict the outcome or end result of the Lawsuit, the City believes that the Lawsuit is
without merit. In the event the plaintiffs were to prevail in the Lawsuit, the Developers have stated that
they are willing and able to pay the Special Tax on a timely basis. However, neither the City nor the
District can guarantee that the Lawsuit will not result in an outcome that would have a detrimental effect
on the ability of the Developers to timely pay debt service on the Bonds. See “SECURITY FOR THE
BONDS – Rate and Method” and “—Agreement Re Covenants” above. See also “THE DEVELOPER;
THE DEVELOPMENT PLAN.”
CONTINUING DISCLOSURE
Pursuant to Rule 15c2-12 of the Securities and Exchange Commission (the “Rule”), the City, on
behalf of the District will enter into a Continuing Disclosure Agreement, for the benefit of holders of the
Bonds to provide certain financial information and operating data relating to the City and the District and
the balances of certain funds relating to the Bonds, no later than March 31 of each year, commencing with
the report for the 2012-13 Fiscal Year (the “District Annual Report”), and to provide notices of the
occurrence of certain enumerated events.
The Developer will enter into the Major Property Owner Continuing Disclosure Agreement
(“Major Property Owner CDA”), pursuant to which the Developer will provide certain information and
operating data regarding its development of property in the District on a semi-annual basis (the “Major
Property Owner Semi-Annual Reports”), and to provide notices of the occurrence of certain events. The
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Major Property Owner Semi-Annual Reports will be delivered on or before March 31 and September 30
of each year, commencing with the report for March 31, 2014. The Developer’s obligation to provide
such information will terminate upon the occurrence of the earlier of the following: (1) the legal
defeasance, prior redemption or payment in full of all of the Bonds; (2) the date on which the Developer
and its Affiliates, collectively own property within the District that is responsible for less than twenty
percent (20%) of the Special Taxes levied in the Fiscal Year; (3) the date on which all of the Special
Taxes attributable to the property then owned by Developer and its Affiliates in the District have been
prepaid in full; or (4) upon the delivery by the Developer to the District of an opinion of nationally
recognized bond counsel to the effect that the information required by this Disclosure Agreement is no
longer required; provided, that such opinion shall be based on information publicly provided by the
Securities and Exchange Commission or a private letter ruling obtained by the Developer or a private
letter ruling obtained by a similar entity to the Developer. The obligation of the Developer to provide
information is limited to the type of information described in the Major Property Owner CDA. The
District will assume no responsibility for the enforcement of the Developer’s obligations nor the accuracy
or completeness of the information contained in the Major Property Owner Semi-Annual Reports.
The District Annual Report and the Major Property Owner Semi-Annual Reports, as well as
notices of events, will be filed with the Municipal Securities Rulemaking Board (the “MSRB”). The
nature of the information to be provided by the District in the Annual Report and the notices of material
events is set forth under the caption “APPENDIX G – FORM OF ISSUER CONTINUING
DISCLOSURE AGREEMENT.” The nature of the information to be provided the Developer in the
Major Property Owner Semi-Annual Reports and the notices of material events is set forth under the
caption “APPENDIX H – FORM OF MAJOR PROPERTY OWNER CONTINUING DISCLOSURE
AGREEMENT.”
A failure by the District or the Developer to comply with the provisions of the Continuing
Disclosure Agreement or the Major Property Owner CDA, respectively, is not an event of default under
the Indenture (although the holders and beneficial owners of the Bonds do have remedies at law and in
equity). However, a failure to comply with the provisions of the Continuing Disclosure Agreement or the
Major Property Owner CDA must be reported in accordance with the Rule and must be considered by any
broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds.
Therefore, a failure by the District or the Developer to comply with the provisions of the Continuing
Disclosure Agreement or the Major Property Owner CDA, respectively, may adversely affect the
marketability of the Bonds on the secondary market.
Prior to the printing of this Official Statement, an examination was conducted of the continuing
disclosure filings by the City during the past five years. The result of such examination indicated a few
instances of filing delays and omissions of certain materials required to be included in the continuing
disclosure annual reports. Upon the conclusion of such examination, the City took steps to cure such past
failures identified by the examination. The City intends to implement procedures to ensure future
compliance with its continuing disclosure undertakings on a timely basis. With respect to the Developer,
this will be the Developer’s first continuing disclosure undertaking under the Rule.
LEGAL MATTERS
The legality of the issuance of the Bonds is subject to the approval of Stradling Yocca Carlson &
Rauth, a Professional Corporation, Bond Counsel. Bond Counsel’s opinions with respect to the Bonds
will be substantially in the form set forth in APPENDIX D of this Official Statement. Certain legal
matters will also be passed on for the District by Richards, Watson & Gershon, as Disclosure Counsel.
The fees and expenses of Bond Counsel and Disclosure Counsel are contingent upon the sale and delivery
of the Bonds.
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TAX MATTERS
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel,
under existing statutes, regulations, rulings and judicial decisions, interest on the Bonds (including any
original issue discount) is excluded from gross income for federal income tax purposes, and is not an item
of tax preference for purposes of the federal alternative minimum tax imposed on individuals and
corporations. In the further opinion of Bond Counsel, interest on the Bonds (including any original issue
discount) will be included as an adjustment in the calculation of alternative minimum taxable income,
which may affect the alternative minimum tax liability of such corporations.
In the opinion of Bond Counsel, the difference between the issue price of a Bond (the first price
at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated
redemption price at maturity of such Bond constitutes original issue discount. Original issue discount
accrues under a constant yield method, and original issue discount will accrue to a Bond owner before
receipt of cash attributable to such excludable income. The amount of original issue discount deemed
received by a Bond Owner will increase the Bond Owner’s basis in the applicable Bond. The amount of
original issue discount that accrues to the Owner of the Bonds is excluded from the gross income of such
Owner for federal income tax purposes, is not an item of tax preference for purposes of the federal
alternative minimum tax imposed on individuals and corporations, and is exempt from State of California
personal income tax.
Bond Counsel’s opinion as to the exclusion from gross income for federal income tax purposes of
interest on the Bonds (including any original issue discount) is based upon certain representations of fact
and certifications made by the District, the Underwriters and others and is subject to the condition that the
District complies with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”)
that must be satisfied subsequent to the issuance of the Bonds to assure that interest on the Bonds
(including any original issue discount) will not become includable in gross income for federal income tax
purposes. Failure to comply with such requirements of the Code might cause interest on the Bonds
(including any original issue discount) to be included in gross income for federal income tax purposes
retroactive to the date of issuance of the Bonds. The District has covenanted to comply with all such
requirements.
The amount by which a Beneficial Owner’s original basis for determining loss on sale or
exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity
(or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section
171 of the Code; such amortizable bond premium reduces the Beneficial Owner’s basis in the applicable
Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax
purposes. The basis reduction as a result of the amortization of bond premium may result in a Beneficial
Owner realizing a taxable gain when a Bond is sold by the Beneficial Owner for an amount equal to or
less (under certain circumstances) than the original cost of the Bond to the Beneficial Owner. Purchasers
of the Bonds should consult their own tax advisors as to the treatment, computation and collateral
consequences of amortizable bond premium.
The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of
tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be
selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a
result of such an audit of the Bonds (or by an audit of similar bonds). No assurance can be given that in
the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the
Code (or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely
affects the exclusion from gross income of interest (and original issue discount) on the Bonds or their
market value.
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Bond Counsel’s opinion may be affected by actions taken (or not taken) or events occurring (or
not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any
person, whether any such actions or events are taken or do occur. The Indenture and the Tax Certificate
relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond
Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the
exclusion from gross income for federal income tax purposes of interest (and original issue discount) with
respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than
Stradling Yocca Carlson & Rauth, a Professional Corporation.
SUBSEQUENT TO THE ISSUANCE OF THE BONDS, THERE MIGHT BE FEDERAL,
STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY
INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL,
STATE OR LOCAL TAX TREATMENT OF THE BONDS OR THE MARKET VALUE OF THE
BONDS. LEGISLATIVE CHANGES HAVE BEEN PROPOSED IN CONGRESS, WHICH, IF
ENACTED, WOULD RESULT IN ADDITIONAL FEDERAL INCOME TAX BEING IMPOSED ON
CERTAIN OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE
BONDS. THE INTRODUCTION OR ENACTMENT OF ANY OF SUCH CHANGES COULD
ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE BONDS.
NO
ASSURANCE CAN BE GIVEN THAT, SUBSEQUENT TO THE ISSUANCE OF THE BONDS,
SUCH CHANGES (OR OTHER CHANGES) WILL NOT BE INTRODUCED OR ENACTED OR
INTERPRETATIONS WILL NOT OCCUR. BEFORE PURCHASING ANY OF THE BONDS, ALL
POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING
POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR
INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE
BONDS.
Although Bond Counsel is expected to deliver an opinion that interest on the Bonds (including
any original issue discount) is excluded from gross income for federal income tax purposes provided that
the District continues to comply with certain requirements of the Code, the accrual or receipt of interest
on the Bonds (including any original issue discount) may otherwise affect the tax liability of the recipient.
Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, all potential
purchasers should consult their tax advisors before purchasing any of the Bonds.
Should interest on the Bonds (including any original issue discount) become includable in gross
income for federal income tax purposes, the Bonds are not subject to early redemption and will remain
outstanding until maturity or until redeemed in accordance with the Indenture.
A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix D.
UNDERWRITING
E. J. De La Rosa & Co., Inc. (the “Underwriter”), has agreed, subject to certain conditions, to
purchase the Bonds at a purchase price of $6,647,712 (which is equal to $7,000,000 as the principal
amount of the Bonds, less an original issue discount of $243,788, and less an Underwriter’s discount of
$108,500). The Underwriter intends to offer the Bonds to the public initially at the prices set forth on the
inside cover of this Official Statement, which prices may subsequently change without any requirement of
prior notice.
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NO RATING
The District has not applied and does not contemplate applying to any rating agency for an
assignment of rating on the Bonds.
MISCELLANEOUS
All of the preceding descriptions and summaries of the Bonds, the Indenture, the Rate and
Method, the Mello-Roos Act, other applicable legislation, agreements and other documents are made
subject to the provisions of such documents respectively and do not purport to be complete statements of
any or all of such provisions. Reference is hereby made to such documents on file with the District for
further information in connection therewith.
This Official Statement is submitted only in connection with the sale of the Bonds by the District.
This Official Statement does not constitute a contract with the purchasers of the Bonds. Any statements
made in this Official Statement involving matters of opinion or estimates, whether or not so expressly
stated, are set forth as such and not as representations of fact, and no representation is made that any of
the estimates will be realized.
The execution and delivery of this Official Statement has been duly authorized by the District.
CITY OF CALEXICO COMMUNITY FACILITIES
DISTRICT NO. 2013-1 (GRAN PLAZA)
By:
-55-
/s/ Oscar Rodriquez
City Manager of the City of Calexico
>7+,63$*(,17(17,21$//</()7%/$1.@
APPENDIX A
SUPPLEMENTAL INFORMATION ON THE CITY OF CALEXICO
The following information concerning the City of Calexico is included only for the purpose of
supplying general demographic and economic information regarding the community area of the City. The
Bonds are secured and will be paid solely from Net Taxes levied within Improvement Area No. 1 of the
District and certain funds and accounts held under the Indenture as described in the forepart of this
Official Statement. The Bonds are not a debt of the City, the County, the State or any of its political
subdivisions (other than the District) and none of the City, the County, the State, or any of its political
subdivisions (other than the District), are liable therefor.
General Information
The City is located in Imperial County, California, approximately 120 miles east of the City of
San Diego and approximately 60 miles west of Yuma, Arizona. The City lies adjacent to the City of
Mexicali, the capital of the State of Baja, Mexico, and its strategic border location makes it a prime link
between the interior of Mexico and the major markets along the West Coast of the United States.
Economically and given its geographic location immediately adjacent to the international border crossing,
the City largely functions as a suburb of the metropolitan complex of Mexicali. Mexicali’s population is
approximately 1 million. As of January 1, 2013, the City had an estimated population of 40,493. The
City encompasses an area of approximately four square miles with an average elevation at sea level. Its
summers are hot and dry, with the winters being mild and generally dry. The average rainfall is 1.75
inches. The City is a general law city incorporated in 1908 with a Council/City Manager form of
government consisting of five Council members elected to four-year overlapping terms.
Transportation and Economy
The City is served by California State Highways 98 and 111, with direct connection to Interstate
8 which lies seven miles north of the City. The City’s location adjacent to the United States - Mexican
border provides overnight trucking access to regional transportation hubs and the ports of Long Beach,
California and Ensenada, Mexico. There are eighteen common carriers for intrastate and interstate truck
service to the City. Rail service is provided by Union Pacific Railroad and connects the City with the
main line to Portland, Oregon; Rock Island, Illinois; Tucumcari, New Mexico; St. Louis, Missouri; and
New Orleans, Louisiana. The City is served by Calexico International Airport which is the U.S. Customs
and Border Protection check-point for private passenger and air-cargo flights entering the U.S. from
Mexico. General aviation facilities and scheduled passenger and air-cargo service to Los Angeles
International Airport, Phoenix Sky Harbor International Airport, and other points are available at Imperial
County Airport (Boley Field), located 17 miles north of the City.
Each year, more than 1 million vehicles and pedestrians cross into the United States through the
City’s two ports-of-entry. The East Calexico Port-of-Entry provides an improved link to major trucking
routes, and has increased the efficiency with which people and goods move between Mexico and the
United States. Mexicali is a major business center, with large manufacturing and agricultural industries
and a busy rail line into California. The economic growth in Mexicali relies on numerous assembly
plants, mainly for products to be exported to the United States, including facilities operated by
corporations that presently include: Daewoo, Mitsubishi, Honeywell, Cardinal Health, Bosch, Price
Pfister, Gulfstream, Goodrich, Kenworth and Kwikset.
A-1
Population
The following table shows the estimated population growth for the City, the County and the State
of California for calendar years 1980, 1990, 2000, and 2010 through 2013.
CITY OF CALEXICO
City, County and State Population Growth
Calendar Years 1980, 1990, 2000, 2010 through 2013(1)
Calendar City of
Year
Calexico
1980
14,412
1990
18,633
2000
27,109
2010
40,075
2011
38,954
2012
39,533
2013
40,493
% Change
from Prior
Period
35.64%(2)
29.29
45.49
47.83
-2.80
1.49
1.40
Imperial
County
92,110
109,303
142,361
183,029
175,712
179,138
180,061
% Change
from Prior
Period
23.65%(2)
18.66
30.24
28.57
-4.00
1.94
0.51
State of
California
23,782,000
29,558,000
33,873,086
38,648,090
37,427,946
37,678,563
37,966,471
% Change
from Prior
Year
18.68%(2)
24.29
14.60
14.10
-3.16
0.67
0.80
(1)
Except for years 1990 and 2000 where estimates are as of April 1, all estimates are as of January 1.
Percent change since 1970.
Source: State of California, Department of Finance estimates.
(2)
Agriculture
The City is located in the southeast portion of the Imperial Valley for which the Colorado River is
the source of irrigation water. The eighty mile long All-American Canal delivers water to the region
which is known for its midwinter vegetable crops (lettuce, cauliflower, broccoli, cabbage, asparagus and
carrots) as well as spring production of warm-season vegetables (onions, sweet corn, bell pepper, chili
peppers, cantaloupes, and melons). Alfalfa, baled for shipment to dairies throughout California, is the
area’s major agronomic crop, comprising approximately forty percent of the irrigated acreage in the
Imperial Valley. Sugar beets are also a major crop, as well as wheat, and sudangrass for hay which is
used for export. Livestock is also an integral part of the agricultural industry in Imperial County,
including large-scale feedlot operations for cattle.
The adjacent Mexicali Valley is the agricultural heart of Baja, Mexico, responsible for some of
the largest crops in Mexico, including wheat and cotton. With an ensured supply of water from the
Colorado River, Mexicali has also become an important exporter of asparagus, broccoli, green onion and
radish.
Education
The Calexico Unified School District includes seven elementary schools (Charles Elementary,
Dool Elementary, Jefferson Elementary, Kennedy Gardens Elementary, Mains Elementary and
Rockwood Elementary), three junior high schools (William Moreno Junior High, Enrique Camarena
Junior High and De Anza Junior High), two high schools (Aurora High and Calexico High) and the
Robert F. Moreno Adult Education Center.
A-2
Advanced education is available at two colleges: Imperial Valley College (a two-year campus) in
Imperial, California and the Imperial Valley Campus (the “Campus”) of the San Diego State University
(“SDSU”), which is located in the City. Established in 1959 by an act of the State legislature, the
Campus is accredited as an integral division of SDSU and offers the last two years of undergraduate
education, graduate programs, and fifth year credential programs for teacher preparation. The Campus
accepts students who have at least 60 transferable units from community colleges or other accredited
institutions.
The City of Mexicali offers many educational opportunities that contribute to the skilled work
force in the region, including the Universidad Autónoma de Baja California, Instituto Teconológico de
Mexicali, UNIVER Mexicali, and Universidad del Valle de Mexico Campus Mexicali.
City’s Taxable Valuation
Taxable valuation within the City is established by the Imperial County Assessor (the “County
Assessor”), except for utility property, which is assessed by the State Board of Equalization. Article
XIIIA of the State Constitution provides that, beginning with the 1978-79 fiscal year, property taxes in
California are limited to one percent of full cash value, except for taxes to pay debt service on
indebtedness approved by the voters prior to July 1, 1978 and debt service on bonded indebtedness for the
acquisition or improvement of real property approved on or after July 1, 1978 by a two-thirds vote of the
people. Article XIIIA defines full cash value as the County Assessor’s valuation of real property as
shown on the 1975-76 tax bill (“base year”) except in the case of newly-constructed property or property
which undergoes a change in ownership. Yearly taxable value increases following the base year are
limited to the growth in the consumer price index, but may not exceed two percent annually.
For assessment and collection purposes, property is classified either as “secured” or “unsecured,”
and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the
assessment roll containing State assessed property and property the taxes on which are a lien on real
property sufficient, in the opinion of the County Assessor, to secure payment of the taxes. Other property
is assessed on the “unsecured roll.”
A ten-year summary of the City’s taxable valuation is set forth below. These figures are
presented for historical comparison, with reference only to the time frame of the years shown inasmuch as
Article XIIIA of the State Constitution, discussed previously, will have an effect upon future taxable
valuation of the City.
A-3
CITY OF CALEXICO
TAXABLE VALUATION
FOR THE PERIOD 2003-2013
Fiscal Year
Ending June 30
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Secured
Property
Valuation(1)
Unsecured
Property
Valuation
Homeowners
Exemption
Net Secured
Valuation
$ 694,682,029
790,071,025
892,832,477
1,115,402,355
1,220,076,346
1,455,449,206
1,546,160,140
1,481,620,454
1,435,339,986
1,340,653,302
1,334,015,584
$47,340,197
45,551,014
46,483,442
52,014,072
59,801,312
61,412,763
71,120,072
67,535,957
59,552,243
57,840,885
53,023,396
$20,873,382
21,891,467
23,107,967
24,781,082
25,629,812
26,552,099
26,678,203
26,570,510
25,955,833
25,401,433
24,528,037
$ 762,895,608
857,513,506
962,423,886
1,192,197,509
1,305,507,470
1,543,414,068
1,643,958,415
1,575,726,921
1,520,848,062
1,423,895,620
1,362,510,947
(1)
Includes secured utility values
Source: County of Imperial
Tax Rate
A typical tax rate in the City of Calexico is made up as follows:
CITY OF CALEXICO
TYPICAL TAX RATE
(TRA 002-009)
Bill Rate
Basic 1% Levy
1.000000%
Calexico Unified Bonds
0.064700
Imperial Community College District 2004 Bonds 0.026100
Source: Urban Futures, Inc.
A-4
Commerce
The number of establishments selling merchandise subject to sales tax and the valuation of
taxable transactions are presented in the following tables.
CITY OF CALEXICO
TAXABLE RETAIL STORES
NUMBER OF PERMITS AND VALUATION OF TAXABLE TRANSACTIONS
Retail Stores
Total All Outlets
Year
2005
2006
2007
2008
2009(1)
2010
2011
2012(2)
(1)
(2)
Taxable
Permits
Value of
Transactions
Taxable
Permits
Value of
Transactions
1,323
1,425
1,313
1,308
1,269
1,255
1,204
1,079
$373,094,000
408,855,000
416,141,000
368,274,000
301,824,000
307,762,000
320,653,000
156,309,000
2,217
2,285
1,987
1,955
1,509
1,506
1,444
1,308
$404,590,000
445,867,000
450,425,000
395,621,000
316,895,000
323,116,000
335,833,000
166,166,000
Food Stores are included in the Retail Stores category as of 2009.
Through second quarter 2012.
Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax)
IMPERIAL COUNTY
NUMBER OF PERMITS AND VALUATION OF TAXABLE TRANSACTIONS
(Valuations in Thousands)
Retail Stores
Year
2005
2006
2007
2008
2009(1)
2010
2011
2012(2)
No. of
Permits
2,450
2,571
2,443
2,481
2,373
2,371
2,339
2,258
Taxable
Transactions
$1,436,545
1,566,648
1,554,028
1,426,909
1,216,423
1,317,759
1,414,803
708,408
Total All Outlets
Percent
Change
18.1%
9.1
-0.8
-8.2
-14.8
8.3
7.4
--
(1)
No. of
Permits
Taxable
Transactions
Percent
Change
4,343
4,421
4,079
4,118
3,432
3,432
3,390
3,288
$2,000,619
2,148,730
2,253,133
2,179,276
1,773,930
1,970,332
2,181,800
1,043,175
18.4%
7.4
4.9
-3.3
-18.6
11.0
10.7
--
Food Stores are included in the Retail Stores category as of 2009.
Through second quarter 2012.
Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax)
(2)
A-5
Employment and History
The following table summarizes the civilian labor force in Imperial County for the calendar years
2008 through 2012. These figures are countywide statistics and may not accurately reflect employment
trends in the City.
IMPERIAL COUNTY
Annual Average Industrial Employment (1)
Calendar Years 2008 through 2012
Industry
Private, non-farm
Goods producing:
Natural resources, mining and
construction
Manufacturing – durable goods
Manufacturing – non-durable goods
Service Providing:
Wholesale trade
Retail trade
Transport., warehousing and utilities
Information
Financial activities
Professional and business services
Educational and health services
Leisure and hospitality
Other services
Subtotal
Government
Farm
Total
2008
2009
2010
2011
2012
1,700
800
1,800
1,500
600
1,800
1,300
500
1,800
1,300
500
2,200
1,400
500
2,100
1,800
7,600
1,800
400
1,300
3,000
3,400
3,600
1,000
28,300
18,500
11,400
58,200
1,700
7,000
1,800
400
1,300
2,700
3,800
3,400
900
26,600
18,800
9,200
54,600
1,600
6,800
1,800
400
1,300
2,400
3,800
3,400
700
25,800
19,100
8,900
53,800
1,700
6,800
1,800
400
1,300
2,500
3,700
3,400
800
26,400
18,700
9,500
54,600
1,700
7,100
1,800
400
1,300
2,800
3,800
3,500
800
27,200
18,500
11,200
56,900
_______________________________________________________________
(1)
Employment reported by place of work; does not include persons involved in labor-management disputes. Figures are rounded
to the nearest hundred. Columns may not add due to rounding. Based on March 2009 benchmark. Not seasonally adjusted.
Source: State of California, Employment Development Department.
Industrial Development
The City has become a prime target area for manufacturing and assembly plants. Industrial
development is on the move with the near future completion and expansion of several properties. Several
sites within the City limits are zoned for light industry, the premier development being the 66-acre
Industrial Park.
There are 410 acres in the city limits zoned for light industry; about 30% is vacant and available
in parcels ranging in size from 1 to 10 acres. Included in this acreage total are three industrial parks: (1)
Calexico Industrial Park; (2) The Portico; and (3) Town Center Industrial Park.
The terrain is 1% slope. Drainage is generally good. Subsoil is adobe, and piling is not required.
Sizes of water mains range from two to 18 inches. Sizes of sewer lines range from six to 36 inches.
Description of sites zoned for industry outside the City limits in other tracts or districts: approximately
168 acres are zoned light industry and adjoin the City in the North.
A-6
Utilities
Water is supplied by the Calexico Water Department. Southern California Gas Company
supplies natural gas, and electric power is provided by Imperial Irrigation District. Telephone service is
available through Verizon Communications and trash collection is provided by Newco Company.
Community Service Facilities
The City has two general hospitals (El Centro Regional Medical Center and Pioneer Memorial
Healthcare District) and several medical clinics serving its residents.
The City has ten churches, one library, one daily newspaper, one weekly newspaper, two radio
stations, one television station, one television cable system, four banks, one savings and loan, seven
parks, two playgrounds and one theater. Other recreational facilities include the International Golf
Course and Country Club and a multitude of activities in Mexicali, Baja California, and Mexico.
The Calexico Community Center provides entertainment and recreation facilities for the
community. A monthly publication “Calexico Today” also serves the City by providing important
community information. Police and fire protection is maintained by the City to serve the residents.
Other
Geothermal energy is being produced in the area and solar and wind energy are both potentially
important sources for future development. In addition, significant archaeological discoveries have been
made in the area and there is continuing archaeological fieldwork. Recreational areas include the Glamis
Dunes, the Salton Sea, which is the State’s largest inland lake, the Laguna Mountains and the Colorado
River
A-7
Statement of Direct and Overlapping Bonded Indebtedness
The City’s direct and overlapping bonded indebtedness is summarized as follows:
CITY OF CALEXICO
Direct and Overlapping Debt Summary
2013-14 Assessed Valuation: $1,387,848,999
OVERLAPPING TAX AND ASSESSMENT DEBT:
Imperial Community College District
Calexico Unified School District
City of Calexico Community Facilities District No. 2005-1
TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT
DIRECT AND OVERLAPPING GENERAL FUND DEBT:
Imperial County Certificates of Participation
Imperial County Pension Obligations
Imperial County Office of Education Certificates of Participation
Imperial Community College District General Fund Obligations
Calexico Unified School District Certificates of Participation
City of Calexico General Fund Obligations
TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT
Less: City of Calexico General Fund Obligations (100% supported)
TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT
OVERLAPPING TAX INCREMENT DEBT (Successor Agency):
GROSS COMBINED TOTAL DEBT
NET COMBINED TOTAL DEBT
% Applicable
13.250%
85.400
100.
Debt 10/1/13
$ 9,858,193
23,365,843
13,095,000
$46,319,036
12.943%
12.943
12.943
13.250
85.400
100.
$ 1,346,719
6,239,173
67,304
241,813
2,613,240
685,000 (1)
$11,193,249
685,000
$10,508,249
$37,865,000
$95,377,285 (2)
$94,692,285
(1) Excludes issue to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital
lease obligations.
Ratios to 2013-14 Assessed Valuation:
Total Overlapping Tax and Assessment Debt ................ 3.34%
Gross Combined Direct Debt ($685,000) ................... 0.05%
Net Combined Direct Debt ............................................. 0.00%
Gross Combined Total Debt ........................................... 6.87%
Net Combined Total Debt............................................... 6.82%
Ratio to Redevelopment Incremental Valuation ($527,596,887):
Overlapping Tax Increment Debt ................................... 7.18%
_______________
(1) Excludes lease revenue bonds to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded
capital lease obligations.
Source: California Municipal Statistics.
A-8
APPENDIX B
RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES
B-1
>7+,63$*(,17(17,21$//</()7%/$1.@
EXHIBIT B1
RATE AND METHOD OF APPORTIONMENT FOR
IMPROVEMENT AREA NO. 1 OF
CITY OF CALEXICO
(GRAN PLAZA)
The following sets forth the Rate and Method of Apportionment for the levy and collection of
Special Taxes in Improvement Area No. 1 (“Improvement Area No. 1”) of the City of Calexico
Community Facilities District No. 2013-1 (Gran Plaza) ("CFD No. 2013-1"). The Special Tax
shall be levied on and collected in Improvement Area No. 1 of CFD No. 2013-1 each Fiscal Year,
in an amount determined through the application of the Rate and Method of Apportionment
described below. All of the real property within Improvement Area No. 1 of CFD No. 2013-1,
unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent,
and in the manner herein provided.
SECTION A
DEFINITIONS
The terms hereinafter set forth have the following meanings:
"Acre or Acreage" means the land area of an Assessor's Parcel as shown on an Assessor's Parcel
Map, or if the land area is not shown on an Assessor’s Parcel Map, the land area shown on the
applicable final map, parcel map, condominium plan, or other recorded County parcel map. The
square footage of an Assessor’s Parcel is equal to the Acreage multiplied by 43,560.
"Act" means the Mello-Roos Communities Facilities Act of 1982 as amended, being Chapter 2.5,
Division 2 of Title 5 of the Government Code of the State of California.
"Administrative Expenses" means any ordinary and necessary expense incurred by the City on
behalf of Improvement Area No. 1 of CFD No. 2013-1 related to the determination of the amount
of the levy of Special Taxes, the collection of Special Taxes including the expenses of collecting
delinquencies, the administration of Bonds, the payment of the allocable portion of salaries and
benefits of any City employee whose duties are directly related to the administration of
Improvement Area No. 1 of CFD No. 2013-1, and costs otherwise incurred in order to carry out
the authorized purposes of Improvement Area No. 1 of CFD No. 2013-1.
"Assessor’s Parcel" means a lot or parcel of land designated on an Assessor’s Parcel Map with
an assigned Assessor’s Parcel Number within the boundaries of Improvement Area No. 1 of CFD
No. 2013-1.
"Assessor’s Parcel Map" means an official map of the Assessor of the County designating
parcels by Assessor’s Parcel Number.
City of Calexico
August 14, 2013
Community Facilities District No. 2013-1 Improvement Area No. 1 (Gran Plaza)
Page 1
"Assessor’s Parcel Number" means that number assigned to an Assessor’s Parcel by the County
for purposes of identification.
"Bonds" means any obligation to repay a sum of money, including obligations in the form of
bonds, notes, certificates of participation, long-term leases, loans from government agencies, or
loans from banks, other financial institutions, private businesses, or individuals, or long-term
contracts, or any refunding thereof, to which Special Taxes within Improvement Area No. 1 of
CFD No. 2013-1 have been pledged.
"Building Permit" means a permit for new construction. For purposes of this definition,
"Building Permit" shall not include permits for construction or installation of, retaining walls,
utility improvements, or other such improvements not intended for human habitation.
"Calendar Year" means the period commencing January 1 of any year and ending the following
December 31.
"CFD No. 2013-1" means the City of Calexico Community Facilities District No. 2013-1 (Gran
Plaza) established by the City under the Act.
“City” means the City of Calexico.
"City Council" means the City Council of City of Calexico, acting as the legislative body of
Improvement Area No. 1 of CFD No. 2013-1, or its designee.
“Consumer Price Index (CPI)” means the annual percentage change for the Los Angeles,
measured as of the calendar year which ends in the previous Fiscal Year.
"County" means the County of Imperial.
"Developed Property" means all Assessor’s Parcels for which Building Permits were issued on
or before May 1 of the prior Fiscal Year, provided that such Assessor's Parcels were included in a
Final Map that was recorded on or before January 1 of the prior Fiscal Year and that each such
Assessor's Parcel is associated with a Lot, as reasonably determined by the City.
"Exempt Property" means all Assessor’s Parcels designated as being exempt from Special Taxes
in Section H.
"Final Map" means a subdivision of property evidenced by the recordation of a final map, parcel
map, or lot line adjustment, pursuant to the Subdivision Map Act (California Government Code
Section 66410 et seq.) or the recordation of a condominium plan pursuant to California Civil Code
1352 that creates individual lots for which Building Permits may be issued without further
subdivision.
"Fiscal Year" means the period commencing on July 1 of any year and ending the following June
30.
City of Calexico
August 14, 2013
Page 2
"Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant
to which Bonds are issued, as modified, amended and/or supplemented from time to time, and any
instrument replacing or supplementing the same.
“Improvement Area No. 1” means the area designated as Improvement Area No. 1 on the
approved boundary map for CFD No. 2013-1.
“Maximum Special Tax” means the maximum Special Tax, determined in accordance with
Section C that can be levied by CFD No. 2013-1 within Improvement Area No. 1 in any Fiscal
Year on any Assessor’s Parcel.
“Minimum Taxable Acreage” means the smallest allowable amount of taxable acreage. For
Improvement Area No. 1 of CFD No. 2013-1 the minimum taxable acreage shall not be less than
51.8 acres.
"Partial Prepayment Amount" means the amount required to prepay a portion of the Special
Tax obligation for an Assessor’s Parcel, as described in Section F.
"Prepayment Amount" means the amount required to prepay the Special Tax obligation in full
for an Assessor’s Parcel, as described in Section E.
"Proportionately" means the ratio of the actual Special Tax levy to the applicable Maximum
Special Tax is equal for all applicable Assessor’s Parcels.
“Special Tax” means any of the special taxes authorized to be levied within Improvement Area
No. 1 of CFD No. 2013-1 pursuant to the Act to fund the Special Tax Requirement.
"Special Tax Requirement" means for Improvement Area No. 1 of CFD No. 2013-1 that
amount required in any Fiscal Year to pay: (i) the debt service or the periodic costs on all
outstanding Bonds due in the Calendar Year that commences in such Fiscal Year, (ii)
Administrative Expenses, (iii) the costs associated with the release of funds from an escrow
account, and (iv) any amount required to establish or replenish any reserve funds established in
association with the Bonds, (v) an amount equal to any anticipated shortfall due to Special Tax
delinquencies in the prior or current Fiscal Year, and (vi) the collection or accumulation of funds
for the acquisition or construction of facilities authorized by Improvement Area No. 1 of CFD No.
2013-1, less (vii) any amount available to pay debt service or other periodic costs on the Bonds
pursuant to Indenture.
"Taxable Property" means all Assessor’s Parcels within Improvement Area No. 1 of CFD No.
2013-1, which are not Exempt Property.
"Undeveloped Property" means all Assessor’s Parcels of Taxable Property which are not
Developed Property.
City of Calexico
August 14, 2013
Page 3
SECTION B
CLASSIFICATION OF ASSESSOR’S PARCELS
Each Fiscal Year, beginning with Fiscal Year 2013-14, each Assessor’s Parcel within
Improvement Area No. 1 of CFD No. 2013-1 shall be classified as Taxable Property or Exempt
Property. In addition, each Fiscal Year, each Assessor’s Parcel of Taxable Property shall be
further classified as Developed Property or Undeveloped Property.
SECTION C
MAXIMUM SPECIAL TAXES
Each Fiscal Year, commencing Fiscal Year 2013-14, each Assessor’s Parcel of Developed
Property or Undeveloped Property shall be subject to a Maximum Special Tax. The Maximum
Special Tax applicable to an Assessor's Parcel of Developed Property or Undeveloped Property for
Fiscal Year 2013-14 shall be determined pursuant to Table 1 below.
TABLE 1
MAXIMUM SPECIAL TAX
Improvement Area No. 1 of CFD No. 2013-1
Land Use Type
Maximum Special Tax
Developed Property
Undeveloped Property
$20,000 per Acre
$20,000 per Acre
SECTION D
METHOD OF APPORTIONMENT OF THE SPECIAL TAX
Commencing Fiscal Year 2013-14 and for each subsequent Fiscal Year, the City Council shall
levy a Special Tax on all Taxable Property within Improvement Area No. 1 of CFD No. 2013-1
until the amount of Special Tax equals the Special Tax Requirement in accordance with the
following steps:
Step One:
The Special Tax shall be levied Proportionately on each Assessor’s Parcel of
Developed Property with a Building Permit at up to 100% of the applicable
Maximum Special Tax rates in Table 1 as needed to satisfy the Special Tax
Requirement.
Step Two:
If additional moneys 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 Developed Property without a
Building Permit at up to 100% of the applicable Maximum Special Tax rates
in Table 1 as needed to satisfy the Special Tax Requirement.
Step Three:
the first two steps have been completed, the Special Tax shall be levied
Proportionately on each Assessor’s Parcel of Undeveloped Property, excluding
City of Calexico
August 14, 2013
Page 4
any Undeveloped Property pursuant to Section H., at up to 100% of the
Maximum Special Tax rates in Table 1 applicable to each such Assessor’s
Parcel as needed to satisfy the Special Tax Requirement.
Step Four:
the first three steps have been completed, the Special Tax shall be levied
Proportionately on each Assessor’s Parcel of Undeveloped Property classified
as Undeveloped Property pursuant to Section H. at up to 100% of the
Maximum Special Tax applicable to each such Assessor’s Parcel as needed to
satisfy the Special Tax Requirement.
SECTION E
PREPAYMENT OF SPECIAL TAX
The following definitions apply to this Section E:
“CFD Public Facilities” for Improvement Area No. 1 of CFD No. 2013-1 means $8,515,000
expressed in 2013 dollars, which shall increase by the Consumer Price Index (CPI) on December
31, 2013, and on each December 31 thereafter, or such lower number as (i) shall be determined by
the City as sufficient to provide the public facilities under the authorized bonding program for
Improvement Area No. 1 of CFD No. 2013-1, or (ii) shall be determined by the City Council
concurrently with a covenant that it will not issue any more Bonds to be supported by Special
Taxes levied under this Rate and Method of Apportionment.
“Future Facilities Costs” means the CFD Public Facilities minus public facility costs available
to be funded through existing construction or escrow accounts or funded by the Outstanding
Bonds, and minus public facility costs funded by interest earnings on the Construction Fund
actually earned prior to the date of prepayment.
“Outstanding Bonds” means all previously issued Bonds issued and secured by the levy of
Special Tax which will remain outstanding after the first interest and/or principal payment date
following the current Fiscal Year, excluding Bonds to be redeemed at a later date with the
proceeds of prior prepayments of Maximum Special Taxes.
The Special Tax obligation of an Assessor's Parcel of Developed Property, an Assessor's Parcel of
Undeveloped Property for which a Building Permit has been issued or an Assessor’s Parcel of
Undeveloped Property that is classified as Undeveloped Property pursuant to Section H may be
prepaid in full, provided that there are no delinquent Special Taxes, penalties, or interest charges
outstanding with respect to such Assessor’s Parcel at the time the Special Tax obligation would be
prepaid. The Prepayment Amount for an Assessor’s Parcel eligible for prepayment shall be
determined as described below.
An owner of an Assessor’s Parcel intending to prepay the Special Tax obligation shall provide the
City with written notice of intent to prepay, and within 5 days of receipt of such notice, the City
shall notify such owner of the amount of the non-refundable deposit determined to cover the cost
to be incurred by Improvement Area No. 1 of CFD No. 2013-1 in calculating the proper amount of
City of Calexico
August 14, 2013
Page 5
a prepayment. Within 15 days of receipt of such non-refundable deposit, the City shall notify such
owner of the prepayment amount of such Assessor’s Parcel.
The Prepayment Amount for each applicable Assessor's Parcel shall be calculated according to the
following formula (capitalized terms defined below):
plus
plus
plus
plus
less
equals
Bond Redemption Amount
Redemption Premium
Future Facilities Amount
Defeasance
Administrative Fee
Reserve Fund Credit
Prepayment Amount
As of the date of prepayment, the Prepayment Amount shall be calculated as follows:
1.
For Assessor’s Parcels of Developed Property, Undeveloped Property, or Undeveloped
Property pursuant to Section H., compute the Maximum Special Tax.
2.
For each Assessor’s Parcel of Developed Property, Undeveloped Property, or Undeveloped
Property pursuant to Section H. to be prepaid, divide the Maximum Special Tax computed
pursuant to paragraph 1 for such Assessor's Parcel by the sum of the estimated Maximum
Special Tax applicable to all Assessor’s Parcels of Taxable Property at build out, as
reasonably determined by the City.
3.
Multiply the quotient computed pursuant to paragraph 2 by Outstanding Bonds. The product
shall be the “Bond Redemption Amount”.
4.
Multiply the Bond Redemption Amount by the applicable redemption premium, if any, on
the Outstanding Bonds to be redeemed with the proceeds of the Bond Redemption Amount.
This product is the "Redemption Premium."
5.
If all the Bonds to be issued by CFD No. 2013-1 for Improvement Area No. 1 have not
been issued, compute the Future Facilities Cost.
6.
Multiply the quotient computed pursuant to paragraph 2 by the amount determined
pursuant to step #5 above to determine the Future Facilities Cost to be prepaid (the “Future
Facilities Amount”).
7.
Compute the amount needed to pay interest on the Bond Redemption Amount from the
first Bond interest payment date following the current Fiscal Year until the earliest
redemption date for the Outstanding Bonds.
8.
Estimate the amount of interest earnings to be derived from the reinvestment of the Bond
Redemption Amount plus the Redemption Premium until the earliest redemption date for
the Outstanding Bonds.
City of Calexico
August 14, 2013
Page 6
9.
Subtract the amount computed pursuant to paragraph 8 from the amount computed
pursuant to step #7 above. This difference is the "Defeasance."
10.
Estimate the administrative fees and expenses associated with the prepayment, including
the costs of computation of the Prepayment Amount, the costs of redeeming Bonds, and
the costs of recording any notices to evidence the prepayment and the redemption. This
amount is the "Administrative Fee."
11.
Calculate the "Reserve Fund Credit" as the lesser of: (a) the expected reduction in the
applicable reserve requirements, if any, associated with the redemption of Outstanding
Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new
reserve requirement(s) in effect after the redemption of Outstanding Bonds as a result of
the prepayment from the balance in the applicable reserve funds on the prepayment date.
Notwithstanding the foregoing, if the reserve fund requirement is satisfied by a surety bond
or other instrument at the time of the prepayment, then no Reserve Fund Credit shall be
given. Notwithstanding the foregoing, the Reserve Fund Credit shall in no event be less
than 0.
12.
The Prepayment Amount is equal to the sum of the Bond Redemption Amount, the
Redemption Premium, the Future Facilities Amount, the Defeasance, and the
Administrative Fee, less the Reserve Fund Credit.
With respect to a Special Tax obligation that is prepaid pursuant to this Section E, the City
Council shall indicate in the records of Improvement Area No. 1 of CFD No. 2013-1 that there has
been a prepayment of the Special Tax obligation and shall cause a suitable notice to be recorded in
compliance with the Act within thirty (30) days of receipt of such prepayment to indicate the
prepayment of the Special Tax obligation and the release of the Special Tax lien on such
Assessor’s Parcel, and the obligation of such Assessor’s Parcel to pay such Special Taxes shall
cease.
Notwithstanding the foregoing, no prepayment will be allowed unless the amount of Special Tax
that may be levied on Taxable Property, net of Administrative Expenses, shall be at least 1.1 times
the regularly scheduled annual interest and principal payments on all currently Outstanding Bonds
in each future Fiscal Year.
SECTION F
PARTIAL PREPAYMENT OF SPECIAL TAX
The Special Tax obligation of an Assessor's Parcel of Developed Property or Undeveloped
Property, as calculated in this Section F. below, may be partially prepaid, provided that there are
no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such
Assessor’s Parcel at the time the Special Tax obligation would be prepaid.
City of Calexico
August 14, 2013
Page 7
The Partial Prepayment Amount shall be calculated according to the following formula:
PP = (Pe - A) x F + A
The terms above have the following meanings:
PP =
Pe =
F=
A=
the Partial Prepayment Amount.
the Prepayment Amount calculated according to Section E.
the percent by which the owner of the Assessor’s Parcel is partially
prepaying the Special Tax obligation.
the Administrative Fee calculated according to Section E.
With respect to any Assessor’s Parcel that is partially prepaid, the City Council shall indicate in
the records of Improvement Area No. 1 of CFD No. 2013-1 that there has been a partial
prepayment of the Special Tax obligation and shall cause a suitable notice to be recorded in
compliance with the Act within thirty (30) days of receipt of such partial prepayment of the
Special Tax obligation, to indicate the partial prepayment of the Special Tax obligation and the
partial release of the Special Tax lien on such Assessor’s Parcel, and the obligation of such
Assessor’s Parcel to pay such prepaid portion of the Special Tax shall cease.
Notwithstanding the foregoing, no partial prepayment will be allowed unless the amount of
Special Taxes that may be levied on Taxable Property after such partial prepayment, net of
Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and
principal payments on all currently Outstanding Bonds in each future Fiscal Year.
SECTION G
TERMINATION OF SPECIAL TAX
For each Fiscal Year that any Bonds are outstanding the Special Tax shall be levied on all
Assessor’s Parcels subject to the Special Tax. If any delinquent Special Tax remain uncollected
prior to or after all Bonds are retired, the Special Tax may be levied to the extent necessary to
reimburse Improvement Area No. 1 of CFD No. 2013-1 for uncollected Special Taxes associated
with the levy of such Special Tax, but not later than the 2053-2054 Fiscal Year.
SECTION H
EXEMPTIONS
The City shall classify as Exempt Property (i) Assessor’s Parcels owned by the State of California,
Federal or other local governments, (ii) Assessor’s Parcels which are used as places of worship
and are exempt from ad valorem property taxes because they are owned by a religious
organization, (iii) Assessor’s Parcels used exclusively by a homeowners' association, or (iv)
Assessor’s Parcels with public or utility easements making impractical their utilization for other
than the purposes set forth in the easement, provided that no such classification would reduce the
sum of all Taxable Property to less than the Minimum Taxable Acreage. Notwithstanding the
above, the City Council shall not classify an Assessor’s Parcel as Exempt Property if such
classification would reduce the sum of all Taxable Property to less than the Minimum Taxable
Acreage Acres. Assessor's Parcels which cannot be classified as Exempt Property because such
City of Calexico
August 14, 2013
Page 8
classification would reduce the Acreage of all Taxable Property to less than the Minimum Taxable
Acreage will continue to be classified as Undeveloped Property, and will continue to be subject to
Special Taxes accordingly.
SECTION I
APPEALS
Any property owner claiming that the amount or application of the Special Tax is not correct may
file a written notice of appeal with the City Council not later than twelve months after having paid
the first installment of the Special Tax that is disputed. A representative(s) of Improvement Area
No. 1 of CFD No. 2013-1 shall promptly review the appeal, and if necessary, meet with the
property owner, consider written and oral evidence regarding the amount of the Special Tax, and
rule on the appeal. If the representative’s decision requires that the Special Tax for an Assessor’s
Parcel be modified or changed in favor of the property owner, a cash refund shall not be made
(except for the last year of levy), but an adjustment shall be made to the Special Tax on that
Assessor’s Parcel in the subsequent Fiscal Year(s).
The City Council may interpret this Rate and Method of Apportionment of Special Taxes for
purposes of clarifying any ambiguity and make determinations relative to the annual
administration of the Special Tax and any landowner or resident appeals. Any decision of the City
Council shall be binding as to all persons.
SECTION J
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 Improvement Area No. 1 of CFD No. 2013-1 may
collect the Special Tax at a different time or in a different manner if necessary to meet its financial
obligations.
City of Calexico
August 14, 2013
Page 9
>7+,63$*(,17(17,21$//</()7%/$1.@
APPENDIX C
SUMMARY APPRAISAL REPORT
C-1
>7+,63$*(,17(17,21$//</()7%/$1.@
S UMMARY A PPRAISAL R EPORT
Gran Plaza Outlets
City of Calexico Community Facilities District No. 2013-1 (Gran Plaza) Improvement Area No. 1
Calexico, California
Date of Value as of September 27, 2013
Date of Report as of November 18, 2013
Prepared for
City of Calexico
608 Heber Avenue
Calexico, California 92231
Prepared by
MCNAMARA & ASSOCIATES
25602 Alicia Parkway, Suite 409
Laguna Hills, California 92653
M C N AMARA & A SSOCIATES
International Valuation Consultants
25602 Alicia Parkway, Suite 409
Laguna Hills, California 92653
(949) 643-3556
November 18, 2013
City of Calexico
608 Heber Avenue
Re:
Gran Plaza Outlets
City of Calexico Community Facilities District No. 2013-1 (Gran Plaza) Improvement Area No. 1
Dear Mr. Rodriquez:
At your request and authorization, we have made an appraisal of the real property subject to the special
tax of City of Calexico Community Facilities District No. 2013-1 (Gran Plaza) Improvement Area No. 1.
The real property subject to the special tax consists of 71.85-acres of gross land area, 61.72-acres of net
land area, various site improvements, 292,347 square feet of gross building area and 264,096 square
feet of leasable building area all in various stages of completion as part of Gran Plaza Outlets (an outlet
shopping center). The improvements are subject to a multiplicity of leases to begin November 15, 2013,
leases out for signature, and letters of intent. Four units or 8,981 square feet are available. Excluded
from the appraisal are any personal and/or tenant owned property. Improvement Area No. 1 is
currently comprised of Assessor Parcel Number (APN) 058-180-020, 058-400-031, 058-400-040 and 058400-041 owned by Corsair, LLC, APN 058-400-032 owned by System II LLC and APN 058-400-039 owned
by The Calexico Community Redevelopment Agency. The Assessor Parcel Numbers are anticipated to
change with the subsequent recording of the 822 W. 2nd Street, Calexico approved tentative tract map.
However, the boundary area of Improvement Area No. 1 will not change.
The type of value appraised is market value and the interest appraised is fee simple. The date of value is
September 27, 2013. The date of this summary appraisal report is November 18, 2013. The intended
user of this summary appraisal report is our client Oscar G. Rodriquez, City Manager of the City of
Calexico and others as may be designated by our client solely in conjunction with the intended use. The
intended use is for underwriting City of Calexico Community Facilities District No. 2013-1 (Gran Plaza)
Improvement Area No. 1 Special Tax Bonds.
This appraisal was prepared in accordance with the 2012-2013 Uniform Standards of Professional
Appraisal Practice (USPAP) Standards Rule 1, The Appraisal Standards For Land Secured Financings dated
May 1994 and revised July 2004 by the California Debt Advisory Commission, and the Code of
Professional Ethics and the Standards of Professional Practice of the Appraisal Institute. The results of
the appraisal are reported here as a summary appraisal report in accordance with the 2012-2013
Uniform Standards of Professional Appraisal Practice (USPAP) Standards Rule 2-2(b), The Appraisal
Standards For Land Secured Financings dated May 1994 and revised July 2004 by the California Debt
Advisory Commission and the Code of Professional Ethics and the Standards of Professional Practice of
the Appraisal Institute.
i
After completing our investigation and appraisal and subject to the assumptions and limiting conditions
contained in this report, it is our opinion that the market value of the fee simple interest in the subject
as of September 27, 2013, is:
FORTY-EIGHT MILLION DOLLARS
($48,000,000)
This letter of transmittal is part of the narrative summary appraisal report that follows which sets forth
the identification of the property, property rights appraised, assumptions and limiting conditions,
pertinent facts about the area and the subject property, comparable data, results of the investigation
and analyses and the reasoning leading to the conclusions set forth.
Respectfully submitted,
John J. McNamara III
Managing Director
Neal E. Anderson, MAI
Senior Associate
ii
Eric C. Anderson, MAI
Senior Associate
T ABLE OF C ONTENTS
LETTER OF TRANSMITTAL ..................................................................................................................................... i
TABLE OF CONTENTS ......................................................................................................................................... iii
COMMUNITY FACILITIES DISTRICT BOUNDARY MAP ................................................................................................ 1
ASSESSOR’S PARCEL MAPS .................................................................................................................................. 2
APPROVED TENTATIVE TRACT MAP ...................................................................................................................... 3
GRAN PLAZA OUTLETS MASTER SITE PLAN ............................................................................................................ 8
SUBJECT PHOTOGRAPHS ................................................................................................................................... 12
EXECUTIVE SUMMARY ...................................................................................................................................... 15
CERTIFICATION ................................................................................................................................................ 16
ASSUMPTIONS & LIMITING CONDITIONS ............................................................................................................. 17
ASSIGNMENT ELEMENTS AND SCOPE OF WORK .................................................................................................... 19
Identification of the Subject .......................................................................................................... 19
Effective Date of Value .................................................................................................................. 19
Date of Report................................................................................................................................ 19
Interest Appraised ......................................................................................................................... 19
Type and Definition of Value ......................................................................................................... 20
Client and Intended User of the Appraisal..................................................................................... 21
Intended Use of the Appraisal ....................................................................................................... 21
Title to the Subject ......................................................................................................................... 21
Scope of Work ................................................................................................................................ 22
SUBJECT DESCRIPTION ...................................................................................................................................... 24
Introduction ................................................................................................................................... 24
Site Description .............................................................................................................................. 24
Improvement Description .............................................................................................................. 27
LAND USE CONTROLS ....................................................................................................................................... 29
California Environmental Quality Control Act ............................................................................... 29
Environmental Impact Report........................................................................................................ 29
General Plan and Zoning ................................................................................................................ 29
Development Agreement .............................................................................................................. 29
Hazardous Environmental Conditions ........................................................................................... 29
State of California Seismic Hazards................................................................................................ 30
City of Calexico Safety Element ..................................................................................................... 30
Flood Hazards................................................................................................................................. 31
Calexico International Airport........................................................................................................ 31
Department of Homeland Security ................................................................................................ 31
Other Land Use Controls ................................................................................................................ 31
REAL ESTATE ASSESSMENTS AND TAXATION ......................................................................................................... 32
REGIONAL MAP............................................................................................................................................... 33
MARKET ANALYSIS........................................................................................................................................... 34
Market Delineation ........................................................................................................................ 34
iii
Location Attributes ........................................................................................................................ 34
Retail Supply/Demand Analysis ..................................................................................................... 39
Summary ........................................................................................................................................ 41
LOCAL AREA MAP............................................................................................................................................ 42
HIGHEST AND BEST USE ANALYSIS ...................................................................................................................... 43
Introduction ................................................................................................................................... 43
Highest and Best Use as Vacant ..................................................................................................... 44
Highest and Best Use as Improved ................................................................................................ 44
VALUATION METHODOLOGY AND APPLICABILITY .................................................................................................. 45
SITE VALUATION.............................................................................................................................................. 46
Description of Market Data ........................................................................................................... 46
Unit of Comparison ........................................................................................................................ 48
Elements of Comparison ................................................................................................................ 48
Reconciliation and Estimate of Site Value ..................................................................................... 49
COST APPROACH ............................................................................................................................................. 52
Cost New Estimate ......................................................................................................................... 52
Depreciation................................................................................................................................... 54
Site Value ....................................................................................................................................... 54
Reconciliation and Estimate of Value by the Cost Approach......................................................... 54
SALES COMPARISON APPROACH......................................................................................................................... 55
Description of Market Data ........................................................................................................... 55
Unit of Comparison ........................................................................................................................ 57
Elements of Comparison ................................................................................................................ 57
Reconciliation and Estimate of Value by the Sales Comparison Approach ................................... 59
DIRECT CAPITALIZATION ................................................................................................................................... 61
Gross Scheduled Income................................................................................................................ 61
Vacancy and Collection Loss .......................................................................................................... 63
Operating Expenses ....................................................................................................................... 63
Capitalization Rate ......................................................................................................................... 64
Reconciliation and Estimate of Value by Direct Capitalization ...................................................... 66
DISCOUNTED CASH FLOW ANALYSIS ................................................................................................................... 67
Gross Scheduled Income................................................................................................................ 67
Vacancy and Collection Loss .......................................................................................................... 67
Cost to Stabilize Occupancy at Turnover ....................................................................................... 67
Operating Expenses ....................................................................................................................... 67
Reversion ....................................................................................................................................... 68
Discount Rate ................................................................................................................................. 68
Reconciliation and Estimate of Value by Discounted Cash Flow Analysis ..................................... 68
RECONCILIATION AND FINAL OPINION OF VALUE .................................................................................................. 70
ALLOCATION OF FINAL OPINION OF VALUE .......................................................................................................... 73
ADDENDA....................................................................................................................................................... 74
Exhibit A – Qualifications ............................................................................................................... 75
iv
C OMMUNITY F ACILITIES D ISTRICT B OUNDARY M AP
1
A SSESSOR ’ S P ARCEL M APS
2
A PPROVED T ENTATIVE T RACT M AP
3
4
5
6
7
G RAN P LAZA O UTLETS M ASTER S ITE P LAN
8
9
10
11
S UBJECT P HOTOGRAPHS
Looking Southeast at Phase 1A from Northwest Corner of Subject
Looking Southwest at Phase 1A from North Center of Subject
12
Looking West at Phase 1B from Center of Subject
Looking East toward Eastern Parking Area of Phase 1A
13
W. 2nd Street, Looking West from North Center of Subject, Phase 1A
W. 2nd Street, Looking East from North Center of Subject, Phase 1A
14
E XECUTIVE S UMMARY
Subject Identification
The subject of this appraisal is the real property subject to the special tax of City of Calexico Community
Facilities District No. 2013-1 (Gran Plaza) Improvement Area No. 1. The real property subject to the
special tax consists of 71.85-acres of gross land area, 61.72-acres of net land area, various site
improvements, 292,347 square feet of gross building area and 264,096 square feet of leasable building
area all in various stages of completion as part of Gran Plaza Outlets (an outlet shopping center). The
improvements are subject to a multiplicity of leases to begin November 15, 2013, leases out for
signature, and letters of intent. Four units or 8,981 square feet are available. Excluded from the
appraisal are any personal and/or tenant owned property. Improvement Area No. 1 is comprised of
Assessor Parcel Number (APN) 058-180-020, 058-400-031, 058-400-040 and 058-400-041 owned by
Corsair, LLC, APN 058-400-032 owned by System II LLC and APN 058-400-039 owned by The Calexico
Community Redevelopment Agency. The Assessor Parcel Numbers are anticipated to change with the
subsequent recording of the 888 W. 2nd Street, Calexico approved tentative tract map. However, the
boundary area of Improvement Area No. 1 will not change.
Date of Value
September 27, 2013
Date of Report
November 18, 2013
Interest Appraised
Fee Simple
Type of Value
Market Value
Intended User
Our client Oscar G. Rodriquez, City Manager of the City
of Calexico and others as may be designated by our
client solely in conjunction with the intended use.
Intended Use
Underwriting City of Calexico Community Facilities
District No. 2013-1 (Gran Plaza) Improvement Area No.
1 Special Tax Bonds.
Concluded Fee Simple Market Value
$48,000,000
15
C ERTIFICATION
I certify that, to the best of my knowledge and belief:
The statements of fact contained in this report are true and correct.
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.
I have no present or prospective interest in the property that is the subject of this report and no personal
interest with respect to the parties involved.
Eric Anderson, MAI has performed no services, as an appraiser or in any other capacity, regarding the
property that is the subject of this report within the three-year period immediately preceding acceptance
of this assignment. Neal Anderson, MAI has performed services as an appraiser regarding APN 058-400039 which is a portion of CFD 2013-1 (Gran Plaza) Improvement Area No. 1 within the three year period
immediately preceding acceptance of this assignment.
I have no bias with respect to the property that is the subject of this 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 of the 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 of this appraisal.
My analysis, opinions, and conclusions were developed, and this report has been prepared, in conformity
with the Uniform Standards of Professional Appraisal Practice.
I have made a personal inspection of the property that is the subject of this report.
No one provided significant real property appraisal assistance to the person signing this certification.
The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in
conformity with the Code of Professional Ethics and Standards of Professional Appraisal Practice of the
Appraisal Institute.
The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly
authorized representatives.
As of the date of this report Neal Anderson, MAI has completed the continuing education program of the
Appraisal Institute. As of the date of this repot, Eric Anderson, MAI has not completed the continuing
education program of the Appraisal Institute.
Neal E. Anderson, MAI
Certified General Real Estate Appraiser
State of California #AG007708
Expires September 28, 2014
Eric C. Anderson, MAI
Certified General Real Estate Appraiser
State of California #AG023751
Expires January 14, 2015
16
A SSUMPTIONS & L IMITING C ONDITIONS
This appraisal has been made with the following general assumptions:
1.
No responsibility is assumed for the legal description provided or for matters pertaining to
legal or title considerations. Title to the property is assumed to be good and marketable
unless otherwise stated.
2.
The property is appraised free and clear of any or all liens or encumbrances unless
otherwise stated.
3.
Responsible ownership and competent property management are assumed.
4.
The information furnished by others is believed to be reliable, but no warranty is given for
its accuracy.
5.
All engineering studies are assumed to be correct. The plot plans and illustrative material in
this report are included only to help the reader visualize the property.
6.
It is assumed that there are no hidden or unapparent conditions of the property, 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.
7.
It is assumed that 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 report.
8.
It is assumed that the property conforms to all applicable zoning and use regulations and
restrictions unless non-conformity has been identified, described, and considered in the
appraisal report.
9.
It is assumed that all required licenses, certificates 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 opinion of value contained in this report is based.
10.
It is assumed that the use of the land and improvements is confined within the boundaries
or property lines of the property described and that there is no encroachment or trespass
unless noted in the report.
11.
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 appraisers. The appraisers
have no knowledge of the existence of such materials on or in the property. The appraisers,
however, are not qualified to detect such substances. The presence of potentially
hazardous materials may affect the value of the property. The value estimated is predicated
on the assumption that 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 knowledge required to discover them. The intended user is urged to retain an
expert in this field, if desired.
17
12.
A land survey was not furnished, so the appraisers relied on the Community Facilities District
Report dated August 2013 for City of Calexico Community Facilities District No. 2013-1 (Gran
Plaza) prepared by General Government Management Services and the included Boundary
Map, the 888 W. 2nd Street, Calexico approved tentative tract map, and the currently
existing assessor parcel maps to determine the physical dimensions and land area of the
property. Should a survey prove this information to be inaccurate, it may be necessary for
this appraisal to be adjusted.
13.
The Americans with Disabilities Act (ADA) became effective January 26, 1992. The
appraisers have not made a specific compliance survey or analysis of the property to
determine whether or not it is in conformity with the various detailed requirements of ADA.
It is possible that a compliance survey of the property and a detailed analysis of the
requirements of the ADA would reveal that the property is not in compliance with one or
more of the requirements of the act. If so, this fact could have a negative impact upon the
value of the property. Since the appraisers have no direct evidence relating to this issue,
possible noncompliance with the requirements of ADA was not considered in estimating the
value of the property.
The use of this appraisal is limited by the following conditions:
1.
This report and the values reported herein are under the premise and purpose stated only.
They are not represented as being valued for any other use.
2.
Any allocation of the total value concluded in this report between the land and the
improvements applies only under the stated program of utilization. The separate values
allocated to the land and buildings must not be used in conjunction with any other appraisal
and are invalid if so used.
3.
The appraisers, by reason of this appraisal, are not required to give further consultation or
testimony or to be in attendance in court with reference to the property in question unless
arrangements have been previously made.
4.
Neither all nor any part of the contents of this report (especially any conclusions as to value
or the identity of the appraisers) shall be disseminated to the public through advertising,
public relations, news, sales, or other media except as authorized under Limiting Use
Condition 5 without the prior written consent and approval of the appraisers.
5.
We consent to the publication of this appraisal report in the Official Statement for the City
of Calexico Community Facilities District 2013-1 (Gran Plaza) Improvement Area No. 1.
Possession of this report, or a copy thereof, does not carry with it the right of other
publication.
18
A SSIGNMENT E LEMENTS AND S COPE OF W ORK
IDENTIFICATION OF THE SUBJECT
special tax consists of 71.85-acres of gross land area (per assessor), 61.72-acres of net land area (per
tract maps, et al), various site improvements, 292,347 square feet of gross building area and 264,096
square feet of leasable building area all in various stages of completion as part of Gran Plaza Outlets (an
outlet shopping center). The improvements are subject to a multiplicity of leases to begin November 15,
2013, leases out for signature, and letters of intent. Four units or 8,981 square feet are available.
Excluded from the appraisal are any personal and/or tenant owned property. Improvement Area No. 1
is comprised of Assessor Parcel Number (APN) 058-180-020, 058-400-031, 058-400-040 and 058-400041 owned by Corsair, LLC, APN 058-400-032 owned by System II LLC and APN 058-400-039 owned by
The Calexico Community Redevelopment Agency. The Assessor Parcel Numbers are anticipated to
change with the subsequent recording of the 888 W. 2nd Street, Calexico approved tentative tract map.
However, the boundary area of Improvement Area No. 1 will not change.
The Community Facilities District Boundary Map, the assessor parcel maps, a site plan and photographs
are located on previous pages for aid in visually identifying the subject.
DATE OF VALUE
The date of value is September 27, 2013. The comment to the USPAP 2012-2013 Edition Standards Rule
2-2(b) (vi) states that “the effective date of the appraisal establishes the context for the value opinion.”
DATE OF REPORT
The date of the report is November 18, 2013. The comment to the USPAP 2012-2013 Edition Standard
2-2(b) (vi) states that “the date of the report indicates whether the perspective of the appraiser on the
market and property as of the effective date of the appraisal was prospective, current or retrospective.”
In this appraisal the perspective is current.
INTEREST APPRAISED
The interest appraised is fee simple. Fee simple is defined as:
Absolute ownership unencumbered by any other interest or estate, subject only to the limitations
1
imposed by the governmental powers of taxation, eminent domain, police power, and escheat.
For reference, leased fee is defined as:
A freehold (ownership interest) where the possessory interest has been granted to another party by
2
creation of a contractual landlord-tenant relationship (i.e., a lease).
1
2
The Dictionary of Real Estate Appraisal, Fifth Edition, p. 78.
19
TYPE AND DEFINITION OF VALUE
The type of value appraised is Market Value. Market Value is defined as:
The most probable price in cash or in terms equivalent to cash for which the specified property rights
should sell after reasonable exposure in a competitive market under all conditions requisite to fair sale,
with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that
3
neither party is under undue duress.
The above definition is qualified by the following:
Buyer and seller are typically motivated;
Both parties are well informed or well advised, and acting in what they consider their best interests;
A reasonable time is allowed for exposure in the open market;
Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable
thereto; and
The price represents the normal consideration for the property sold unaffected by special or creative
4
financing or sales concessions granted by anyone associated with the sale.
The comment to Uniform Standards of Professional Appraisal Practice 2012-2013 Edition Standards
Rules 1-2(c) states “When developing an opinion of value, the appraiser must also develop an opinion of
reasonable exposure time linked to the value opinion.” Exposure time is defined as:
1.
The time a property remains on the market.
2.
The estimated length of time the property interest being appraised would have been offered on
the market prior to the hypothetical consummation of a sale at market value on the effective
date of the appraisal; a retrospective estimate based on an analysis of past events assuming a
competitive and open market. Exposure time is always presumed to occur prior to the effective
5
date of the appraisal.
Exposure time for the subject is based on the marketing times for similar real estate investment
properties as reported in the 2nd Quarter 2013 PwC Real Estate Investor Survey. The survey indicates
that investors are projecting the following:
TABLE 1 – EXPOSURE TIME
Property Type
Range
Average
National Regional Mall Market
3 to 24-Months
9.7-Months
National Power Center Market
2 to 18-Months
6.5-Months
National Strip Shopping Center Market
3 to 18-Months
7.4-Months
nd
Source: 2 Quarter 2013 PwC Real Estate Investor Survey
The above indicated marketing times are for completed properties with stabilized occupancy. Given the
subject’s near completion and less than stabilized occupancy as of the date of value an exposure time
toward the upper end of the ranges is reasonable. Based on the survey, a reasonable exposure time for
the subject prior to consummation of a sale would have been from nine to twenty-four months.
3
Appraisal Standards for Land-Secured Financings, Revised July 2004, California Debt and Investment Advisory Commission,
Sacramento, Page 10.
4
12C.F.R. Part 34.42(g); 55 Federal Register 34696, August 24, 1990, as amended at 57 Federal Register 12202, April 9, 1992; 59
Federal Register 29499, June 7, 1994
5
20
CLIENT AND INTENDED USER OF THE APPRAISAL
The intended user of this summary appraisal report is our client Oscar G. Rodriquez, City Manager of the
City of Calexico and others as may be designated by our client solely in conjunction with the intended
use.
INTENDED USE OF THE APPRAISAL
The intended use is for underwriting City of Calexico Community Facilities District No. 2013-1 (Gran
Plaza) Improvement Area No. 1 Special Tax Bonds.
Consistent with the intended use of this appraisal the fees and/or public facilities that are to be funded
by the bond proceeds are assumed paid or otherwise completed. This is based on the following
statement by the California Debt and Investment Advisory Commission:
Appraisals for properties in a Community Facilities District must be based upon the value of the property
taking into consideration the infrastructure improvements that will be funded by the proposed bond
issue. The appraiser must also take into account the contributing value of the infrastructure
6
improvements financed by the special tax lien and adjust the price of the subject property accordingly.
Therefore, the bond proceeds are applied as a credit toward the market value of the subject property,
less any eligible fees and/or public facilities paid to date or otherwise reflected in the market value but
not yet reimbursed. The bond proceeds considered in this appraisal are addressed in the Reconciliation
and Final Conclusion of Value section.
TITLE TO THE SUBJECT
A title report identifying the ownership of the real estate that is the subject of this appraisal was not
provided or otherwise made available. Title is summarized by the current Assessor Parcel Number (APN)
and ownership with information based on public record. The APN’s are anticipated to change with the
subsequent recording of the Gran Plaza tentative tract map. New legal parcels will be created, some by
combining existing parcels and splitting others.
APN 058-180-020, 058-400-031, 058-400-040 and 058-400-041
As of the date of value of this appraisal title to APN 058-180-020, 058-400-031, 058-400-040 and
058-400-041 is vested in Corsair, LLC, a Nevada limited liability company.
Corsair LLC acquired title to APN 058-180-020 and 058-400-031 via Grand Deed recording June
14, 2005 as Instrument No. 022569. The grantor was Force Financial Corp., a California
corporation. The sale price was not disclosed. A Deed of Trust in the amount of $922,500
recorded concurrently as Instrument No. 022570 filed in Book 2446 Page 1. The lender was
Farmers & Merchants Bank of Long Beach.
Corsair LLC acquired title to APN 058-400-040 and 058-400-041 (not subject to the special tax)
via Grand Deed recording December 12, 2005 as Instrument No. 052870. The grantor was
Ramon Lopez and Evangelina Castor de Lopez, husband and wife as join tenants who acquired
title as Ron Lopez Bernal and Evangelina Casto de Lopez, husband and wife as joint tenants.
Based on the full value of the transfer tax the sale price was approximately $1,450,000.
6
Recommended Practices in the Appraisal of Real Estate for Land Secured Financings, July 2004, California Debt and Investment
Advisory Commission, Sacramento, Page 14.
21
APN 058-400-032
As of the date of value of this appraisal title to APN 058-400-032 is vested in System II LLC.
System II LLC acquired title via Grand Deed recording May 8, 2006 as Instrument No. 022607.
The grantor was Corsair, LLC. This was a correction of vesting on Grant Deed recorded Marsh
28, 2006 as Instrument No. 015022.
Corsair LLC acquired title via Grand Deed recording March 28, 2006 as Instrument No. 015022.
The grantor was Fernando C. Canez, a married man and E.G. Piper, a married man each as to an
undivided one-half interest as tenants in common. The sale price was not disclosed.
APN 058-400-039
As of the date of value of this appraisal title to APN 058-400-039 is vested in The Calexico
Community Redevelopment Agency that acquired title via Grand Deed recording June 14, 2005
via Instrument No. 2445-1797. The grantor was The City of Calexico. The purpose and
consideration for the transfer of title is not known to the appraisers.
APN 058-400-039 was previously appraised by Neal Anderson, MAI of McNamara & Associates.
It is publicly known that Corsair, LLC is in negotiation with the City to acquire the parcel through
either purchase or land swap.
Unless otherwise noted above, we are not aware of any attempts to market for sale any portion of the
subject within the last three years nor are we aware of any unsolicited offers to purchase any portion of
the subject within the last three years. A search of the LoopNet property records revealed no public
marketing of any portion of the subject for sale within the last three years of the date of value of this
appraisal.
Site condition, intended use and development status of each parcel are summarized in the Subject
Description section of this appraisal report. Marketing history, leasing and occupancy is summarized the
Income Approach section of this appraisal report.
SCOPE OF WORK
The scope of work included the following:
Identify the subject and the assignment elements (effective date of value, interests, type and
definition of value, intended use and intended user),
Request, review and reconcile supporting documentation (site plan, development costs,
marketing history, rent roll, and operating expense projections) from the developer’s
representative,
Request, review and reconcile supporting documentation (CFD Report, development
agreement, general plan, zoning, environmental impact report, and fee schedule) from our
client the City of Calexico,
Research public documents relating to ownership of the subject parcels,
A physical inspection of the subject by the appraisers Neal Anderson, MAI and Eric Anderson,
MAI was made on August 30, 2013 and again on September 24, 2013.
22
Research of surrounding district, city, county and regional factors which might impact the
subject and its marketability and ultimately its Market Value,
Determine the highest and best use of the subject as vacant and as improved,
Develop indications of value for the subject by applying the appropriate approaches to value.
Intrinsic to the valuation process is the research, inspection and analysis of market data (sales,
rent comparables, etc.). The Valuation Methodology section of this report summarizes the
valuation procedures followed.
Reconcile the value indications and conclude as to the market value of the fee simple interest,
Provide an allocation of the final opinion of value to the individual new legal parcels created by
the approved tentative tract map, and
Report the results in a narrative summary appraisal report format
23
S UBJECT D ESCRIPTION
INTRODUCTION
special tax consists of 71.85-acres of gross land area (per assessor), 61.72-acres of net land area (per
tract maps, et al), various site improvements, 292,347 square feet of gross building area and 264,096
square feet of leasable building area all in various stages of completion as part of Gran Plaza Outlets (an
outlet shopping center). An outlet center is defined as:
A shopping center that reflects a manufacturer’s outlet stores concept and typically encompasses 50,000
to 400,000 square feet of gross leasable area, including anchors, on 10 to 50 acres. An outlet center will
typically have manufacturers’ outlet store-orientated anchors with a primary trade area of 25 to 75
7
miles.
The developer has divided the subject into two construction phases, Phase 1A and Phase 1B. Phase 1A
includes all the vertical or building construction in completed and in process of construction to date.
Phase 1B will include an additional approximately 200,000 square feet of gross building area. Ultimately
Gran Plaza Outlets will have approximately 500,000 square foot of gross building area. In addition, the
subject is adjacent to a proposed power center to the west that the developer refers to as Phase 2.
Although a portion of the land of APN 058-180-020 is outside the boundaries of Improvement Area No.
1 and within the boundaries of Improvement Area No. 2, the entire parcel is subject to the special tax
and the entire parcel is included in this appraisal. The following subsections describes Grand Plaza
Outlets as a whole and where necessary Phase 1A and Phase 1B are described separately.
SITE DESCRIPTION
The site description focuses on the physical site characteristics. Land use controls such as zoning and
entitlements are described under the Land Use Controls section of this report.
Site Size and Shape
The land gross land area for each currently existing assessor parcel number is summarized in the
following table:
TABLE 2 – GROSS LAND AREA BY CURRENT ASSESSOR PARCEL NUMBER
APN
058-180-020
058-400-031
058-400-032
058-400-039
058-400-040
058-400-041
Totals
Owner
Corsair LLC
Corsair LLC
System II LLC
CCRA
Corsair LLC
Corsair LLC
Gross
Land Area
Per Assessor
52.75
4.62
3.17
3.55
3.44
4.32
71.85
Comments
City Owned Parcel to be Acquired by Corsair in Future
Retention Basin
Note that APN 058-180-020 includes a dominant portion of Phase 1A and all of Phase 1B. It also
includes a small portion of Phase 2 of the future Gran Plaza power center as well as a remainder
7
24
parcel to be acquired by the City of Calexico. The net land area after recording the approved
Gran Plaza Outlets tentative tract map is summarized in the following table:
TABLE 3 – NET LAND AREA BY LEGAL PARCEL
Tract Map
Legal
Parcel No.
888 W. 2nd Street, Calexico
River Tract
River Tract
1
2
3
4
5
Remainder Parcel
1
3
Totals
Gross Land
Area
Net Land
Area for
Valuation
24.33
25.12
1.64
1.45
1.23
9.99
3.55
4.32
24.33
25.12
1.64
1.45
1.23
4.40
3.55
0.00
71.63
61.72
Comments
Part of Phase 1B
Encompassing all Phase 1A Vertical Construction to Date
Pad Parcel part of Phase 1A
Pad Parcel part of Phase 1A
Pad Parcel part of Phase 1B
Owned by Corsair LLC to be acquired by City of Calexico
APN 058-400-039 Owned by CCRA to be acquired by Corsair LLC
APN 058-400-041 Retention Basin Owned by Corsair LLC
Note that the gross land area by legal parcel is 0.22-acres or 9,583 square feet less than what
the assessor indicates is the gross land area. We were unable to reconcile the difference, but
believe a small portion of the difference is attributable to street widening along W. 2nd Street
adjacent to River Tract Parcel 1. Reasons for the remaining difference may be attributable to
rounding and/or the measuring standard applied by the assessor and surveyor. Overall, the
difference is minor with this appraisal relying on the net land area of 61.72-acres shown in Table
3 for valuation purposes. Also note that the Remainder Parcel shown on the 888 W. 2nd Street,
Calexico approved tentative tract map is 9.99 acres. The net acreage for the Remainder Parcel is
less 5.57 acres for W. 2nd Street right of way realignment or 4.40-acres, net. Also note that APN
058-400-039 and 058-400-041 are not located within the boundaries of the 888 W. 2nd Street,
Calexico approved tentative tract map. These two parcels are located within the River Tract as
well as within the boundaries of Improvement Area No. 1 and are not expected to physically
change with the recording of the 888 W. 2nd Street, Calexico approved tentative tract map. The
retention basin is not assigned a net land area for valuation since it is not subject to the
community facilities district special tax.
Improvement Area No. 1 has a length along the northern periphery of approximately 3,774 feet
and variable depth ranging from over 900 feet along the western periphery to 420 feet between
the eastern end of Gran Plaza Outlets and the retention basin. Improvement Area No. 1 is
irregular in shape, but given its large size is nevertheless conducive for development.
For valuation purposes the subject is divided in Phase 1A (including the 3.55-acre city owned
parcel) and Phase 1B (including the 4.40-acre remainder parcel). The reason for the division is
due to the stage of development of the land attributable to Phase 1A and Phase 1B. Phase 1A is
determined to have 31.76-acres net (28.21-acres plus 3.55-acres for the city owned parcel) or
1,383,466 square feet. Phase 1B has a total of 29.96-acres net (25.56-acres plus 4.40-acres for
the remainder parcel) or 1,305,057 square feet.
Topography and Drainage
The topography of the subject within the boundaries of Improvement Area No. 1 is generally
level. Phase 1A has been rough and finished graded so that the original topography has been
altered to conform to the grading plan. Phase 1B is currently being graded. The eastern portion
of Phase 1A, or Assessor Parcel Numbers 058-400-039 and 058-400-040, is level with Gran Plaza
Outlets, but is above grade to W. 2nd Street as this is where the street lowers to cross the New
River to the east. The retention basin is below the grade of the Gran Plaza Outlets, but above
25
grade to the New River. Based on the issuance of grading permits, the land within the
boundaries of the subject is suitable for the existing improvements.
Soils and Geology
A soils report was not available for review. No visual evidence of soil or geological problems in
the form of uneven settlement was observed at the time of inspection.
Utilities
Utility and public services are in place to the subject and lines are assumed to meet the
requirements of development consistent with the highest and best use of the site. Utilities and
service providers are summarized as follows:
Gas:
Electricity:
Water:
Sewer/Storm Drains:
Telephone
Southern California Gas Co.
Imperial Irrigation District
City of Calexico from Imperial Irrigation District
City of Calexico
SBC Pacific Bell
The cost to complete any utility infrastructure improvements will be accounted for in the
valuation section of this appraisal.
Streets and Access
At present the subject abuts the south side of W. 2nd Street with approximately 3,774 feet of
frontage. As of the date of our latest inspection September 24, 2013, W. 2nd Street improvements
were under construction in conjunction with Phase 1A improvements from the eastern boundary of
the subject to midway along the north boundary of the current Assessor Parcel 058-180-020. When
fully improved, W. 2nd Street will be a 100-foot wide 4-lane right of way. It will have asphalt paving,
striping, concrete curbs, gutters, sidewalks, street lighting and street side landscaping. Phase 1B
street improvements will involve a realignment of the western extension of W. 2nd Street. The cost
to complete any off site street improvements from the date of value will be accounted for in the
Reconciliation and Final Conclusion of Value section of this appraisal.
When complete Gran Plaza Outlets will have four vehicular access points to W. 2nd Street, three of
which are monument entries while the fourth at the east end of the site is designed for service
vehicles. Phase 1A will have three entries and Phase 1B will have one entry.
The subject is located less than one mile west of state Highway 111 the primary north/south route
through Imperial Valley. Interstate 8, the primary east/west route through Imperial Valley
connecting San Diego County and Arizona is located just less than 8 miles north of the subject and is
accessed via State Highway 111.
Calexico International Airport is a city-owned public-use airport located across W. 2nd Street from
the subject. The airport has one asphalt paved runway measuring 4,679 feet in length and is
primarily for general aviation.
Gran Plaza Outlets is marketed primarily toward the citizens of Mexicali across the border in Mexico
and secondarily to the residents of Imperial Valley. The International Port of Entry with Mexico is
located less than one mile to the east. As such the subject has better accessibility than almost any
other location in Calexico or Imperial Valley for the intended primary market.
26
Easements, Encumbrances and Exclusions to Title
A preliminary title report of the land within the boundaries of Improvement Area No. 1 was not
available for review, nor was one procured for this assignment. Our inspection of the subject
site did not reveal any obvious physical encroachments that would have a negative impact on
the marketability of the subject.
IMPROVEMENT DESCRIPTION
Photographs of the existing improvements and a site plan of the subject showing the boundaries and
the layout of the improvements is located at the beginning of this appraisal report. The following
description applies to Phase 1A only since no site improvements other than initial grading has occurred
within Phase 1B.
As of the date of the most recent inspection, September 24, 2013, Phase 1A consisted of a graded site
with partial concrete paved parking lots and ten building shells nearly complete except for some doors
and windows. Utility lines were to and in the site, but electricity to the buildings was not completed.
Construction of tenant improvements was in process as well as continued preparation for concrete
paving. The cost to complete site, building and tenant improvements will be accounted for in the
Reconciliation and Final Conclusion of Value section of this appraisal.
As of the date of value, ten buildings exist and are lettered D through M. Building areas are summarized
as follows:
TABLE 4 – PHASE 1A BUILDING AREA SUMMARY
Bldg
D
E
F
G
H
I
J
K
L
M
Unit
Count
Avg Unit
Size / SF
Unit Size
Range / SF
Total Unit
Area / SF
Service
Area / SF
Gross Bldg
Area / SF
1
5
16
7
8
14
3
6
7
2
25,152
3,637
3,269
3,461
2,158
2,983
5,972
3,557
4,469
7,335
25,152
1,200 - 6,500
790 - 7,970
1,000 - 7,350
401 - 9,400
1,000 - 7,500
1,400 - 12,015
1,430 - 6,000
1,200 - 14,500
7,150 - 7,500
25,152
18,185
52,300
24,230
17,264
41,760
17,915
21,340
31,280
14,670
500
2,065
4,470
560
7,976
3,270
20
5,810
3,080
500
25,652
20,250
56,770
24,790
25,240
45,030
17,935
27,150
34,360
15,170
69
3,827
401 - 25,152
264,096
28,251
292,347
Comments
GBA includes 4,302 SF Enlargement from Plans
Svc Area includes Internal Spine Hallway
Svc Area is Electrical Room
Svc Area includes Food Court Common Area
Svc Area includes Management Office
Svc Area is Electrical Room
Unit sizes and total unit area is based on the rent roll as provided by RH Properties LLC, the developer’s
representative. The gross building area is based on the architect’s gross building areas with one 4,302
square foot revision upward. The architect also provided leasable area for each building which is very
similar to that indicated by the rent roll.
The buildings have continuous concrete perimeter footings, interior concrete footings, concrete
foundations, concrete tilt-up walls, and a flat wood roof supported by metal truss beams and wood
joists. Each unit is plumbed for one restroom at a minimum. Common area restrooms for the public are
located Building L. Exterior wall heights are 26 feet with decorative endpoint towers at 36 feet.
Fenestration includes aluminum storefront windows and doors. Building service systems include 100 to
400 amp power depending on unit size, roof mounted packaged air conditioning systems, and full wet
fire sprinkler coverage. Building service areas include spine hallways, maintenance rooms and electrical
rooms. Building K includes a 1,430 leasable square foot on-site property management office. Based on
the pro-forma building shell cost of $83.58 per gross square foot and tenant improvement costs of
27
$51.69 per leasable square foot, the building improvements will be of average to good quality. Cost
figures are discussed in the cost approach section.
Site improvements will consist of concrete walkways, concrete paved parking lots and driveways,
striping, landscaping, and trash enclosures. Based on the extensive concrete paving, the site
improvements are of average to good quality.
Our inspection of the subject did not include a specific survey to determine the level of compliance with
the Americans with Disabilities Act (ADA). Moreover, due to the complexities and ambiguities of the
law, we are not qualified to render an opinion as to the subject’s compliance or non-compliance except
as noted. It is possible that a compliance survey of the subject could reveal that the subject is not in
compliance with one or more of the regulations.
Based on the design, quality and finish, the functional utility of the building and site improvement are
suitable for use as an outlet center.
28
L AND U SE C ONTROLS
The land use control section takes into consideration governmental and legal controls that impact the
use of the site and improvements.
CALIFORNIA ENVIRONMENTAL QUALITY CONTROL ACT
The Outlet Shopping Center and the Public Facilities projects (what is referred to in this appraisal report
as Gran Plaza Outlets Phase 1A) were previously reviewed with respect to applicability of the California
Environmental Quality Act (CEQA), the State CEQA Guidelines (California Code of Regulations, Title 14,
Sections 15000 et seq., and the City of Calexico’s environmental guidelines.
ENVIRONMENTAL IMPACT REPORT
Based on Resolution No. 2011-124 certifying the Final Environmental Impact Report the City of Calexico
approved the Gran Plaza Outlet Center Phase 1A (what is referred to in this appraisal report as Gran
Plaza Outlets Phase 1A), including all on and off site improvements to be constructed by the developer
as required by the conditions of approval, as well as the mitigation and monitoring program of the
approved and certified Final Environmental Impact Report.
GENERAL PLAN AND ZONING
Based on City of Calexico Resolution No. 2011-125 approving General Plan Amendment from Industrial
to Commercial and Resolution No. 2011-1137 approving Change of Zone from Industrial to Commercial
Highway, zoning is consistent with the General Plan. In addition to the aforementioned resolutions,
based on Resolution No 2011-126 approving Tentative Subdivision Map, Resolution No. 2011-127
approving Development Review and Resolution No. 2011-128 approving Variance, the subject as
improved is a legal and conforming use.
DEVELOPMENT AGREEMENT
The City of Calexico approved by resolution on July 2, 2013 an Agreement by and between the City of
Calexico and Corsair, LLC a California limited liability company with respect to the development and
operation of the Gran Plaza Outlets, public facilities financing matters and authorizing certain related
actions.
HAZARDOUS ENVIRONMENTAL CONDITIONS
An Environmental Site Assessment of the subject prepared by a qualified engineer was not available for
review, nor was one procured for this assignment. No obvious potential environmental hazards were
observed on the property or in the immediate vicinity. Only a qualified environmental engineer would
be able to assess any potential problems due to hazardous materials or substances that might affect the
subject property. If hazardous or toxic materials were found which affected the site, the value
conclusions stated herein would no longer be valid.
29
STATE OF CALIFORNIA SEISMIC HAZARDS
Real estate in California is subject to earthquake fault zone, liquefaction, and earthquake induced
landslide land use restrictions by the State of California. These land use restrictions are summarized in
the following sub-sections.
Earthquake Fault Zone
Earthquake fault zones, as defined by the State of California under the Alquist-Priolo Earthquake
Fault Zoning Act, prevent or otherwise restrict the construction of buildings used for human
occupancy. The State of California has not published a map for the quadrangle where the
subject is located. Therefore, as of the date of value of this appraisal the subject is not located
within the boundaries of an earthquake fault zone as defined by the State of California.
Liquefaction
Liquefaction areas, as defined by the State of California, are areas where historic occurrences of
liquefaction or local geological and groundwater conditions indicate a potential for permanent
groundwater displacement such that mitigation would be required. The State of California has
not published a Seismic Hazard Zones map for the quadrangle where the subject is located.
Therefore, as of the date of value of this appraisal the subject is not located within the
boundaries of a Liquefaction area as defined by the State of California.
Earthquake Induced Landslides
Earthquake induced landslide areas, as defined by the State of California, are areas where
previous occurrence of landslide movement, or local topographic, geological geotechnical and
subsurface water conditions indicate a potential for permanent ground displacements such that
mitigation would be required. The State of California has not published a Seismic Hazard Zones
map for the quadrangle where the subject is located. Therefore, as of the date of value of this
appraisal the subject is not located within the boundaries of an Earthquake Induced Landslides
area as defined by the State of California.
CITY OF CALEXICO SAFETY ELEMENT
Although the State of California has not published maps regarding seismic hazards for the quadrangle in
which the subject is located, The City of Calexico has addressed seismic issues and other hazards
through the Safety element of the General Plan. The Safety Element indicates that:
Calexico is most susceptible to earthquake damage from ground shaking,
Due to its flat topography, Calexico is not susceptible to landslides,
The City of Calexico and the surrounding area is particularly susceptible to liquefaction because
of crop irrigation and the geologically young and unconsolidated sediment soil,
The City of Calexico has a fire hazard rating of 5 from the ISO (Insurance Service Office)
Commercial Risk Services, Inc. The rating is based on a 1 to 10 scale with 10 being the greatest
risk and considers many factors, including adequate water pressure and supply (in addition to
the city’s maximum rate of consumption for purposes other than firefighting), fire equipment
and personnel, response time, etc.
The City has a low risk of damage from wildfires.
30
FLOOD HAZARDS
The Federal Emergency Management Agency requires flood insurance for properties located with
delineated and defined flood hazard areas. Based on Federal Emergency Management Agency, Flood
Insurance Rate Map, Map Number 06025C2067C, Effective Date September 26, 2008, the subject site is
within Zone X where flood insurance is not required. The Flood Insurance Rate Maps are for flood
insurance purposes only; they do not necessarily show all areas subject to flooding in a community.
CALEXICO INTERNATIONAL AIRPORT
The subject is located south of the Calexico International Airport. Since the runway is orientated west to
east, the subject is not below the approach or take off patterns.
DEPARTMENT OF HOMELAND SECURITY
The southern periphery of the subject site abuts the international border between the United States of
America and Mexico. As such, the U.S. Border Patrol has a 60-foot wide easement along the border.
OTHER LAND USE CONTROLS
The subject does not come under the jurisdiction of the Coastal Resources Management Area. The
subject does not appear to have any historical, cultural, scientific or recreational value. No natural
resources were evident upon the site during the inspection.
It was reported to the appraisers that the remains of four persons were discovered during grading. The
remains were determined to be approximately 100 years old, not Native American and not the subjects
of a criminal act. The remains were not otherwise claimed and have been re-entombed on the property
beneath the parking area where they were discovered. It is not known what impact if any this may have
on the marketability of the subject.
31
R EAL E STATE A SSESSMENTS AND T AXATION
As of the date of value of this appraisal, the subject consists of six Imperial County Assessor Parcel
Numbers: The 2013/2014 real estate assessments and taxation for the subject is summarized as follows:
TABLE 5 – 2013/2014 ASSESSED VALUES AND TAXES
Assessed Land Value
Assessed Improvement Value
Assessed Total Value
Tax Rate Area
2013 Tax Rate
Real Estate Taxes
Special & Direct Assessments
Total Real Estate Taxes
058-180-020
058-400-031
058-400-032
058-400-039
058-400-040
058-400-041
$2,552,441
$0
$2,552,441
002-034
0.0109920
$28,056.43
$0.71
$28,057.14
$221,948
$0
$221,948
002-009
0.0109920
$2,439.65
$0.73
$2,440.38
$258,016
$24,967
$282,983
002-009
0.0109920
$3,110.55
$13.27
$3,123.82
$0
$0
$0
002-009
0.0109920
$0.00
$0.00
$0.00
$600,029
$87,582
$687,611
002-009
0.0109920
$7,558.22
$13.26
$7,571.48
$758,332
$131,645
$889,977
002-009
0.0109920
$9,782.63
$6.63
$9,789.26
Under provisions of Proposition 13, properties are assessed based on their value as of March 1, 1975.
This value may increase no more than 2% per year until such time as the property is sold, substantial
new construction takes place, or the use of the property is substantially altered. If the property were
sold the assessed real estate taxes would reflect the new assessed value based on the sale price. Special
and direct assessments are in addition to the real estate taxes. The current assessed values and
special/direct assessments do not reflect the subject’s new construction.
The estimated annual community facilities district special tax requirement for each of the existing
Assessor Parcel Numbers based on its development status is summarized as follows:
TABLE 6 – 2014/20015 CFD SPECIAL TAX REQUIREMENT
Status per Rate and Method
Estimated CFD Special Tax
058-180-020
058-400-031
058-400-032
058-400-039
058-400-040
058-400-041
Developed
$467,858
Developed
$40,976
Undeveloped
$0
Undeveloped
$0
Undeveloped
$0
Undeveloped
$0
The annual community facilities district special tax requirement is based on the rate and method of
apportionment. According to the definition found in the rate and method of apportionment a
developed parcel has building improvements while an undeveloped parcel has no building
improvements. Thus, a parcel improved as a parking lot is considered an undeveloped parcel. Based on
the foregoing, the annual community facilities district special tax requirement for Improvement Area
No. 1 totals $508,834. The PAR amount of the bond is expected to be approximately $7,000,000.
The current Assessor Parcel Numbers are anticipated to change with the subsequent recording of the
Gran Plaza tentative tract map. New legal parcels will be created, some by combining existing parcels
and splitting others.
32
R EGIONAL M AP
33
M ARKET A NALYSIS
Market analysis provides a foundation for the conclusions of highest and best use as though vacant and
as improved as well as the economic demand data used in the approaches to value. Market analysis can
be either inferred or fundamental. Inferred analysis relies on historical data and instinctive knowledge
to arrive at conclusions. Fundamental analysis relies on quantifiable data and forecasting. In this
appraisal, we have relied on an inferred analysis.
MARKET DELINEATION
Market delineation identifies the most probable use and users (both buyers and tenants) of the subject
and a geographical market for the defined uses and users.
Most Probable Use/User
The subject Phase 1A with 264,096 leasable square feet (Phase 1B will bring the total leasable
area up to approximately 500,000 square feet) is designed and marketed as an outlet center.
This is also the most probable use.
The most probable users (tenants) are nationally branded retail tenants marketing prior year
merchandise so as not to compete with current year merchandise in regional malls.
The most probable buyers are investment companies specializing in retail trade or investors with
both management experience and the capital wherewithal to acquire an asset like the subject.
Both types of buyers would be national in scope.
Delineated Market Area
The market area for users (trade area) of an outlet center is typically a 25 to 75 mile radius. This
would encompass all of Imperial Valley plus Mexicali. Given the subject’s location along the
border near the port of entry it is marketed primarily toward the citizens of Mexicali across the
border in Mexico and secondarily to the residents of Imperial Valley. The nearest International Port
of Entry with Mexico is located less than one mile to the east.
While the trade area would be the preferred source for originating market data (land sales,
improved sales, rent comparables, etc.), given the type of development sourcing market data
requires a different perspective. As already indicated the market area for investors is national in
scope. However, given the tax peculiarities and land entitlement restrictions found in California
we have limited the search for relevant market data to Imperial Valley followed by a preference
for outlet centers and larger shopping centers in outlying areas of Riverside, San Bernardino, San
Diego and Los Angeles Counties.
LOCATION ATTRIBUTES
The location attributes section discusses Imperial Valley as a whole, with additional separate discussions
for Calexico and Mexicali due to their significance to the subject, as well as the immediate surroundings
of the subject. The purpose of the location attributes section is to summarize the underlying influences on
real property values within the subject’s market area.
The four influences on real property values are social, economic, governmental and environmental. The
primary social influences on real property values are population, households and income levels. The
primary economic influence on residential real property values is employment. Government influences real
34
property values through the land entitlement process and taxation. Significant environmental influences on
real property values in the Imperial Valley include climate, topography, water and regional transportation
linkages. The importance of each of these relative to Imperial Valley is discussed in the following sections.
Imperial Valley
As general background, Imperial County is located in the southeast corner of the State of
California. Imperial County is bordered by Riverside County on the north, the Colorado River
and the State of Arizona on the east, Mexico on the south and San Diego County on the west.
Imperial County covers an area of 4,597 square miles of which approximately 50% is undeveloped
and under federal ownership. Located in the northwestern portion of the county is the Salton Sea
which covers about 7% of the land area. Approximately 20% of the county is irrigated for
agricultural purposes. This area, known as the Imperial Valley, is located in the south central
portion of the county and extends from the Salton Sea on the north to the border with the Republic
of Mexico on the south. The majority of development in Imperial County is situated within Imperial
Valley. In order of size, the cities and unincorporated communities within the valley are: El Centro,
Calexico, Imperial, Brawley, Heber, Niland, Westmoreland, Holtville and Calipatria.
Population growth is a primary component of demand for retail growth. The following chart
summarizes population statistics for the State, Imperial County, and the various cities in the
county from January 1, 2001 through January 1, 2005. Population estimates through January 1,
2006 will not be available until approximately May 2006.
TABLE 7 - HISTORICAL POPULATION TRENDS
Area
Brawley
Calexico
Calipatria
El Centro
Holtville
Imperial
Westmorland
Unincorporated
Imperial County
California
01/01/11
25,226
38,954
7,662
43,013
5,998
15,042
2,247
37,570
175,712
37,427,946
01/01/12
25,721
39,933
8,017
43,827
6,110
15,508
2,293
37,729
179,138
37,668,804
01/01/13
25,906
40,493
7,134
44,327
6,151
16,148
2,309
37,593
180,061
37,966,471
Annl. Change
1.34%
1.96%
-3.51%
1.52%
1.27%
3.61%
1.37%
0.03%
1.23%
0.72%
Source: State of California, Department of Finance, E-4 Population Estimates for Cities, Counties and the State, 2011-2013,
with 2010 Benchmark. Released May 1, 2013. Revised May 10, 2013.
The data shows that between January 1, 2011 and January 1, 2013, the State of California’s
population grew by an estimated 538,525 or 0.72% compounded annually. During this same
period Imperial County gained 4,349 people or an increase of 1.23% compounded annually.
The following table summarizes households, median household income and median per capita
income for Imperial County and the State of California:
TABLE 8 – HOUSEHOLDS, MEDIAN HOUSEHOLD INCOME AND PER CAPITA INCOME
Area
Imperial County
State of California
Median
Households
Household Income
48,117
$39,402
12433,172
$61,632
Source: U.S. Census Bureau, Census 2010
35
Per Capita
Income
$16,593
$29,634
Both median household income and per capita income levels are well below those for the State as a
whole.
Employment provides an indication as to the viability of a market area. Historically, agriculture has
been the largest industry in Imperial County in terms of employment followed by government
which became the largest employer in 2000. The following table summarizes employment by
industry sector.
TABLE 9 – LABOR MARKET STATISTICS EL CENTRO MSA (IMPERIAL COUNTY)
Employment Sector
Total All Industries
Total Farm
Total Non-farm
Goods Producing
Natural Resources, Mining, and Construction
Manufacturing
Service Providing
Trade, Transportation and Utilities
Information
Financial Activities
Professional and Business Services
Educational and Health Services
Leisure and Hospitality
Other Services
Government
July 2012
54,100
10,400
43,700
4,300
1,600
2,700
39,400
10,700
400
1,300
2,600
3,700
3,500
800
16,400
July 2013
Preliminary
55,200
10,000
45,200
4,700
1,700
3,000
40,500
11,000
400
1,300
2,900
4,000
3,500
700
16,700
Change
2.0%
-3.8%
3.4%
9.3%
6.3%
11.1%
2.8%
2.8%
0.0%
0.0%
11.5%
8.1%
0.0%
-0.1%
1.8%
Source: State of California, Employment Development Department, Industry Employment & Labor Force March 2012
Benchmark, El Centro MSA, Imperial County, August 16, 2013.
The following table shows the labor force, employment and unemployment from 2000 through
the most recent posted data.
TABLE 10 – IMPERIAL COUNTY LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT
Item
Civilian Labor Force
Civilian Employment
Civilian Unemployment
Civilian Unemployment Rate
State Unemployment Rate
Average
Annual
2008
72,500
56,200
16,200
22.4%
7.2%
Average
Annual
2009
75,900
54,800
21,200
27.9%
11.3%
Average
Annual
2010
77,300
54,200
23,100
29.9%
12.4%
Average
Annual
2011
78,100
54,900
23,200
29.7%
11.8%
Average
Annual
2012
78,300
56,200
22,100
28.3%
10.5%
Source: State of California, Employment Development Department, Industry Employment & Labor Force – by Annual Average
March 2012 Benchmark, El Centro MSA, Imperial County.
Unemployment is high with the agriculturally based economy responsible in part as well as the
recent recession. However, even during the boom years of the early 2000s the average annual
unemployment rate was in the mid teens.
The land entitlement process in California influences real property values by constricting supply.
The constriction occurs due to the lengthy, costly and in many instances risky entitlement process.
The risk is created by unforeseen expenses in time and money to get through the process. Because
of the risk associated with attaining each successive layer of entitlement, entitled land is worth
more than un-entitled land. The final level of entitlement is the final approved tentative tract map
36
(ready to record) with grading permit in hand. Land development costs in the Imperial Valley are
increasing as jurisdictions add fees and require additional off-site infrastructure improvements
during the entitlement process. Thus, final finished lot or parcel costs (grading, street
improvements, utilities and any required public facility infrastructure improvements) frequently
tend to be significantly higher than initially budgeted costs.
Under provisions of Proposition 13, approved by voters in 1978, properties are assessed based on
their value as of March 1, 1975. This value may increase no more than 2% per year until such time
as the property is sold, substantial new construction takes place, or the use of the property is
substantially altered.
In addition to general real estate taxes, land may also be burdened by direct assessments including
Community Facility Districts (CFD’s) special taxes. CFD’s allow the financing of infrastructure
improvements and fees through the sale of bonds. The bond debt is retired through the levy of a
special tax on the affected property. The influence of CFD financing on real estate values varies
depending on the stage of development and level of ownership involved. The advantages to the
developer include off-balance sheet financing, a lower cost of funds, and transfer of the debt
obligation to the property owner. The disadvantages to the developer include market reaction,
public disclosure of financial information, and staff time for formation and issuance of the bonds.
Further disadvantage are the higher taxes until the bond debt is retired.
Imperial County has a desert type climate which features exceptionally hot summers with
temperatures reaching the 120’s degrees Fahrenheit. Winters are short and mild. Temperatures
slightly lower than freezing occur occasionally from December through February. Rainfall is very
low averaging about 3.12 inches per year and there is a rapid rate of evaporation. The average
growing season is 302 days per year.
The Imperial Valley is a uniform plain sloping gently down from the south to the north, broken only
by the New and Alamo Rivers which carry agricultural drainage water to the Salton Sea at the
northern end of the valley. Both the western and eastern boundaries of the Imperial Valley are
characterized by desert and low mountains. The Imperial Sand Dune Recreation Area is located
along the eastern border of the county. The majority of the Imperial Valley is below mean sea level.
There is no potable underground water supply in the Imperial Valley. All water, whether
domestic, industrial or for irrigation uses, is imported by the Imperial Irrigation District (IID) from
the Colorado River approximately 60 miles to the east. The IID’s allotment from the Colorado
River is considered adequate for current needs.
Although the Imperial Valley is served by rail, municipal airfields and bus service, the most
significant transportation influence on real property values is proximity to highway and freeway
linkages. A majority of the cities and unincorporated communities within Imperial Valley are strung
along State Routes 86 and 111 in a north-south axis. Interstate 8 intersects these highways in an
east-west axis providing the only direct link to San Diego, approximately 120 miles to the west. The
following table shows the distances from the Civic Center or center of each unincorporated
community to Interstate 8. The table is arranged so that each city or community is in arranged
along a north-south axis with north at the top.
37
TABLE 11 – DISTANCES TO INTERSTATE 8
Location
Niland
Calipatria
Westmoreland
Brawley
Imperial
Holtville
El Centro
Interstate 8
Heber
Calexico
Mexicali (Mexico)
Miles
32
24
18
14
5
2.5 (+10 miles east)
1
3
6.5
7
Cities of Calexico and Mexicali
Calexico, California and Mexicali, Baja California are located across the US/Mexico border from
each other. Calexico is the smaller of the two cities with a population estimate of 40,493 at
January 1, 2013.8 Mexicali is the capital of Baja California, Mexico and has an estimated
municipal population of 689,775 in 2010. The broader metropolitan area surrounding and
including Mexicali from the border south to San Felipe has a population of 936,826 persons as of
the 2010 Census. 9 The following summary of Calexico and Mexicali is derived from the City of
Calexico General Plan.
Economically and given its geographic location immediately adjacent to the international border
crossing, Calexico largely functions as a suburb of the metropolitan complex of Mexicali, Baja
California, Mexico. Calexico also functions as one of the Imperial Valley’s communities,
surrounded by and supported by agriculture. Traditionally, Calexico has had a relatively strong
retail sector, which is oriented to providing finished goods and services for the Mexicali market.
Businesses in Calexico rely heavily on sales to Mexicali residents, and merchants have greatly
benefited from this reliance. The concern, however, has been that under this type of economic
reliance there have been periods where during economic crisis in Mexico, Calexico's economy
suffers. Mexicali is situated on the U.S./Mexican border and provides proximity and uncongested
access to the U.S.A. via freight companies and rail services, resulting in significant savings to
exporters and importers. The City of Mexicali has a significant number of Maquiladora
industries. Maquiladora industries are typified by assembly operations that occur where labor
rates are less costly – in this case, Mexicali. Consequently, an assumption can be made that the
more industry that exists in Mexicali, the more jobs that exist and the more money there is to be
spent in Calexico. In addition, the Maquiladora industries located in Mexicali will eventually
10
establish sister plants in the U.S. to aid in the distribution of the products.
Immediate Surroundings
The subject, Gran Plaza Outlets Phase 1A is located in the southwestern portion of the City of
Calexico abutting the border with Mexico. The site is bounded by West 2nd Street and the
Calexico International Airport to the north, the New River to the east, Phase 1B of the Gran
Plaza Outlet Center and vacant land part of the planned Gran Plaza Power Center to the west,
and the U.S.-Mexico border to the south. The Calexico West Port of Entry and downtown
Calexico are less than one mile to the east of the subject
8
State of California, Department of Finance, E-4 Population Estimates for Cities, Counties and the State, 2011-2013, with 2010 Benchmark.
Released May 1, 2013. Revised May 10, 2013.
9
Census 2010, Institu Nacional de Estadistica y Geografia
10
City of Calexico 2007 General Plan
38
North of the airport is the floodplain of the New River and beyond that residential development.
To the northeast along River Road are industrial uses. To the east is Calexico’s central business
district. To the west of the subject and future power center is agricultural land. Most
development including commercial and residential neighborhoods is located east and north of
the subject.
RETAIL SUPPLY/DEMAND ANALYSIS
Supply/demand analysis examines the retail market area in which the subject competes both from the
potential buyer’s perspective (nationally) and from the trade area where the property competes for
customers (Imperial Valley/Mexicali).
National Retail Market
The following summary of national retail market conditions is derived from 2Q2013 Retail
Economic Outlook, Marcus & Millichap Research Services.
Consumer spending favors the discount and luxury ends of the market underscoring that
recovery remains uneven and segments of the population continue to struggle. Significant
challenges remain for consumers, however, as they continue to adjust to high structural
unemployment, subdued personal income growth and higher payroll taxes.
Retailers have emerged from the recession with better defined concepts, healthier balance
sheets, and improved business models. New concepts continue to emerge in response to
evolving technology and consumer shopping patterns, with many of the changes emerging as
ecommerce platforms, tying to both traditional and non-traditional retailers. These evolving
concepts may be a solid driver of retail sales, but will not necessarily translate into demand for
retail space. Similarly, retailers’ focus on productivity, profits, and smaller store footprints,
particularly in urban core areas.
Tight construction pipeline supports improved retail property performance. Limited new supply
has helped to stabilize retail space fundamentals, with new supply totaling 10 to 25 percent of
the long-term average. Recovery in strip and neighborhood centers has lagged gains in malls and
power centers. Nevertheless, the national vacancy rate for shopping centers decreased 50 basis
points over the last year to 10.7 percent as of first quarter. Although rents continue to fall
nationally on a year-over-year basis, many coastal markets, such as San Francisco, Los Angeles,
New York, Boston, and South Florida, have posted strong rent growth.
Broader regional economic growth and improving financial conditions for both consumers and
retailers help limit downside risk to investment in well-located retail properties. Metros with
above average population and employment growth, such as the Texas and Southwest markets,
should post significantly improved operations while supply constrained, high income coastal
markets will continue to reap solid effective rent growth for limited availabilities. Net absorption
of retail space is forecast to total 79.7 million square feet in 2013, outstripping new supply of 55
million square feet, and firmly driving down the national vacancy rate 40 basis points to 7.7
percent. Nationally, asking rents are forecast to grow 1.8 percent to $16.06 per square foot.
In terms of financing, commercial mortgage backed securities (CMBS) financing has paved the
way for investment in a broader geography and created a more competitive financing arena for
retail properties. The arbitrage in pricing and cap rates in tertiary markets and shopping centers
will persist for some time and CMBS will continue to dominate lending in secondary and tertiary
markets. CMBS accounted for 45 percent of retail property loans last year, similar to 2011.
Banks and life companies continue to focus on major metro markets, but have grown market
11
share in retail loan originations as well.
11
2Q2013 Retail Economic Outlook, Marcus & Millichap Research Services
39
Outlet Centers
The following summary of national outlet centers market conditions is derived from 2012 State
of the Outlet Industry, Value Retail News.
In the 18 months since VRN compiled and published the last State of the Outlet Industry report,
the sector has grown to 185 outlet centers, added more than 6 million sf of GLA and nearly 1,900
outlet stores, and expanded to 322 outlet chains. Ten outlet centers have opened since the last
SOI, published in March 2011, and of 16 phase 1 projects scheduled to open by the end of 2013,
at least five look certain.
And for 2012, VRN estimates the industry’s total sales to be $25.4 billion, which is $3 billion
higher than the estimate in 2011. Sales figures given to VRN by 50 retail chains operating nearly
2,000 stores in outlet centers have increased by 9 percent to $357 psf from $331 in 2010. Sales
psf reported to VRN in 2008 was $301, which is 16 percent below the 2012 figure. For the rolling
12 months ending June 30, Tanger reported comp store sales of $375 psf for 39 outlet centers,
and SPG reported second-quarter comp sales of $554 psf for its combined 162 regional malls and
59 Premium Outlets (not including 11 outlet centers that aren’t Premium branded). For the
same period, SPG reported comp sales at Mills Corp. of $497 psf on nine of its 13 projects, eight
of which are predominately outlet.
According to 31 chains who reported to VRN, average base rents for 2012 are $29.76 psf, up 8.5
percent from 2010 and up 23 percent from 2007. In a conference call with analysts in early
August, Tanger CEO Steven B. Tanger said the developer had, for the first six months of the year,
executed 334 leases with a blended average increase in base rent of 23.7 percent. Tanger also
executed nearly 1.4 million sf of renewals at base rental rates nearly 15 percent higher than in
2011. Tanger also re-tenanted approximately 319,000 sf during the first half of the year with a
55 percent increase in base rents.
On the outlet-center ownership side, 53 development entities own 185 U.S. outlet centers, and
37 of those own just one center. That leaves 16 developers owning two or more centers. Two
developers – Tanger and SPG – operate a total of 109 centers accounting for 38.9 million sf, or 59
percent of the centers and 55 percent of the GLA. Although the totals for these two giants were
slightly different two years ago, the percentages of their outlet ownership are virtually
unchanged.
Also virtually unchanged is the industry’s average discount, which remains constant at 38
12
percent, according to 108 reporting outlet chains.
Imperial Valley/Mexicali Retail Market
Retail inventory, vacancy, rental rates and absorption is not tracked for Imperial Valley by the
large commercial real estate brokerage firms or real estate databases simply because the
market area is too small and comprised primarily of strip retail, neighborhood and community
shopping centers. The exceptions are Imperial Valley Mall, The Plaza at Imperial Valley, the El
Paseo Power Center in Calexico and Brawley Gateway anchored by a Walmart Supercenter in
Brawley.
Although significantly larger in terms of population and density than any of the cities of Imperial
Valley, retail product in Mexicali is also not regularly tracked in terms of inventory, rental rates
and occupancy.
12
2012 State of the Outlet Industry, Value Retail News
40
Large shopping centers at the periphery of the subject’s trade area include Viejas Outlet Center
70 aerial miles west, Yuma Palms Regional Center 55 miles east and Westfield Shopping Town in
Palm Desert 85 miles northwest. Outlet centers nearest in proximity to the subject include
Viejas to the west, Las Americas Premium Outlets in San Ysidro 90 miles west, Desert Hills
Premium Outlets and Cabazon Outlets both 110 miles northwest in Cabazon.
SUMMARY
The most probable users (tenants) are nationally branded retail tenants marketing prior year
merchandise so as not to compete with current year merchandise in regional malls. The most probable
buyers are investment companies specializing in retail trade or investors with both management
experience and the capital wherewithal to acquire an asset like the subject. Both types of buyers would
be national in scope. The market area for users (trade area) of an outlet center is typically a 25 to 75
mile radius. This would encompass all of Imperial Valley and Mexicali. As noted elsewhere, given its
location along the border, the Gran Plaza outlet center is marketed primarily toward the citizens of
Mexicali across the border in Mexico and secondarily to the residents of Imperial Valley.
In terms of location attributes, social influences on the Imperial Valley market area include a population
growth rate above that of the State of California, but median income levels well below the State. Economic
influences include a growing dependence on government employment as well as continued heavy reliance
on seasonal agriculture. The primary governmental influences on real property values include the
constriction of supply through the land entitlement process and real estate tax rates. Environmental
influences include the relative isolation of the Imperial Valley from the rest of Southern California and its
desert climate. Lastly and perhaps most significantly, is the influence the city of Mexicali, Mexico has on
Imperial Valley through border traffic and the subject’s position less than one mile from the Calexico West
Port of Entry.
41
L OCAL A REA M AP
42
H IGHEST AND B EST U SE A NALYSIS
INTRODUCTION
The opinion of value expressed in this appraisal is based on the highest and best use of the land as
vacant and as improved. Highest and best use 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
13
to the user and timing of the use-that is adequately supported and results in the highest present value.
Physically Possible
Improvement Area No. 1 encompasses a gross land area of 71.85-acres (per assessor) and a net
land area of 61.72-acres (per tract maps, et al). Although conducive to development, the depth
is shallow relative to the frontage along W. 2nd Street. The site is level, and at grade to W. 2nd
Street to the north and above the adjoining properties to the east that are in the vicinity of the
New River. Based on the description of the subject, there are no physical limitations to the site
other than size and to some degree shape. Thus, almost any commercial retail, office, industrial
or residential use could be physically possible.
Legally Permissible
The City of Calexico, via the development agreement, recent general plan amendment and zone
change, designates the general land use as commercial and the zoning as CH (Commercial
Highway). The cost to implement an alternative land use, such as single-family residential or
industrial would require another general plan amendment which would necessitate some cost
and time with only limited assurance of success. Thus, an alternative use would not seem likely.
Financially Feasible
All uses that will produce an income, or return, equal to or greater than the amount needed to
satisfy operating expenses, financial obligations, and capital amortization are regarded as
financially feasible. Based on the value indications by the income approach by direct
capitalization and discounted cash flow analysis (relying on the subject’s recent leases and
letters of intent) in comparison to the value indication by the cost approach, an outlet center
similar to the subject as developed is financial feasible. An alternative use such as an industrial
park is not likely financially feasible due to the availability of more suitable industrial land
available in Calexico and at the Calexico East Port of Entry. Similarly, a residential subdivision is
also not financial feasible due to the preponderance of alternative sites further along in the
entitlement process.
Maximally Productive
Since an outlet center is physically possible, legally permissible, and financially feasible it is also
the most maximally productive use at this time.
13
43
HIGHEST AND BEST USE AS VACANT
Based on the foregoing analysis the highest and best use as vacant would be to develop a speculative
commercial project marketed toward vehicular and pedestrian traffic originating through the nearby
international port of entry and to a lesser extent the population base within the Imperial Valley.
HIGHEST AND BEST USE AS IMPROVED
As of the date of value, the subject is improved with a 264,096 square foot (leasable) outlet center all
within the developer’s Phase 1A portion of the subject. As presently demised there are 69 units
(including a management office) ranging in size from 401 to 25,152 square feet of leasable area. At
present Phase 1A open surface parking is located on the north and east sides of the project. Phase 1A is
nearing completion with the grand opening scheduled for November 15, 2013. As of the date of value
of this appraisal, September 27, 2013, the project is 62.2% leased with an additional 17.9% subject to
leases in process. A total of 19.4% of the leasable area has letters of intent or is otherwise available.
Outlet shopping centers are in demand by the market as discussed in the market analysis section.
Demand in the market for large shopping centers is driven by institutional investors such as REITs or
investment firms specializing in shopping centers as evidenced by the market data relied on in the sales
comparison and income approaches. Based on the design, leasing status and demand in the market, the
highest and best use as improved is as an outlet shopping center.
44
V ALUATION M ETHODOLOGY AND A PPLICABILITY
Generally three approaches can be used to value real property: the cost approach, sales comparison
approach and income approach.
The cost approach consists of estimating the cost of constructing the improvements
(replacement/reproduction cost new) including all direct (hard) costs, indirect (soft) costs, and
entrepreneurial incentive. The depreciated value of the replacement/reproduction cost is then added
to the land value estimate. The sum of these two figures is the value estimate by the cost approach.
The sales comparison approach is based on the assumption that a prudent buyer would not pay more
for a property than it would cost to acquire a comparable substitute property. This approach involves
direct comparison of the property being appraised with other similar properties that have sold or are
currently being offered for sale.
Investment properties are normally valued on the basis of their ability to generate income. Hence, an
analysis of the property in terms of its ability to provide a sufficient net annual return on invested capital
is an important means of developing a value indication. Two methods are available to derive a value
indication, direct capitalization and discounted cash flow analysis. One year’s income expectancy can be
capitalized at a market derived capitalization rate or at a capitalization rate that reflects a specified
income pattern, return on investment, and changes in the value of the investment. Alternatively, the
annual cash flows for the holding period and the reversion can be discounted at a specified yield rate.
The direct capitalization method is useful for single tenant buildings or multi-tenant projects where lease
terms are consistent and predictable. The yield capitalization method is most useful with multi-tenant
projects where long term leases with variable terms are encountered.
The primary approaches relied on by investors are the discounted cash flow analysis and the income
approach by direct capitalization. Since the subject is nearing completion before first occupancy, the
cost approach is also relied on. Although there are very few sales of outlet centers, even nationally, use
of sales of large shopping centers similar in size with similar capital requirements can provide a useful
indication of value. Therefore, we have relied on all four methods for the appraisal of the subject.
The approaches to value are presented in the following order: cost approach (with a separate site
valuation first), sales comparison approach, income approach by direct capitalization, and the
discounted cash flow analysis. Finally, the value indications by the four approaches are reconciled and a
final conclusion of an as stabilized fee simple market value is made. The as is fee simple market value is
arrived at by deducting rent loss until first occupancy of tenants with leases and leases in process,
deducting the costs to stabilize occupancy for the units subject to letters of intent, deducting costs to
complete construction and lastly adding the community facilities district net proceeds that are not
already reflected in the ground.
45
S ITE V ALUATION
Since the underlying land value is a component of the cost approach that follows, the land is valued
separately. Six procedures are available for site valuation and include: sales comparison, extraction,
allocation, subdivision analysis, land residual and ground rent capitalization. All six procedures are
derivations of one or more of the three basic approaches to value; sales comparison, cost and income
capitalization. For this appraisal, we have relied on the sales comparison approach. The sales
comparison approach is:
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 units of comparison, and
making qualitative comparisons with or quantitative adjustments to the sale prices (or unit prices, as
14
appropriate) of the comparable properties based on relevant, market-derived elements of comparison.
DESCRIPTION OF MARKET DATA
The market data was derived from a parcel by parcel search of the RealQuest real estate database for
commercial sites or sites with potential for commercial uses in Calexico along with a global search for
commercial land sales in all of Imperial County. The search parameters were broad, but limited to the
beginning of 2011 and forward. In addition, the LoopNet real estate database and local real estate
listing board were searched for land listings and sales. From the pool of data derived, two sales and two
listings were retained for comparison to the subject. The data collection also included reviewing the
public record via RealQuest for grant deeds, trust deeds, and assessor records as well as city zoning,
general plan and building permit records. Each sale was visually inspected with observed characteristics
noted.
A map showing the location of each sale in relation to the subject is located on the following page. A
discussion of the unit of comparison, the elements of comparison the reconciliation and estimate of
value by the sales comparison approach follows as does a table summarizing the transaction details,
physical characteristics and adjustments made.
14
46
LAND SALES MAP
47
UNIT OF COMPARISON
The most common unit of comparison for valuing commercial land in the subject’s market area is price
per square foot and it will be relied on for this analysis.
ELEMENTS OF COMPARISON
The ten elements of comparison considered in the analysis of each sale and its comparison to the
subject are as follows:
1. Property Rights Conveyed
2. Financing Terms
3. Conditions of Sale
4. Buyer’s Anticipated Expenditures at the Time of Sale
5. Market Conditions
6. Location
7. Physical Characteristics
8. Economic Characteristics
9. Use (Zoning)
10. Non-realty Components of Value
To analyze the property on a price per square foot of building area, the relevance of each element of
comparison is discussed below along with the basis for any adjustment made to the individual sales.
Adjustments to the first five elements are made consecutively while the last five elements are made in
the aggregate.
Property Rights Conveyed
All of the sales were for the fee simple interest of the land. Thus, no adjustments for differences
in property rights conveyed are warranted.
Financing
Sales 1 and 2 were all cash transactions where financing was not a component of the sale. Sales
3 and 4 are current listings where the sale price assumes cash equivalency.
Conditions of Sale
All of the sales were considered arms length transactions between a willing buyer and willing
seller motivated by their own self interest. Downward adjustments are applied to the current
listings, Sales 3 and 4, reflecting an inflated asking price allowing the seller room for negotiation.
Expenditures at the Time of Sale
This accounts for costs the buyer anticipates spending immediately after acquisition and is not
otherwise reflected in the sale price. However, the unit of comparison used in this analysis,
finished lot, already takes into consideration the buyer’s anticipated expenditures. Thus, no
adjustments for expenditures at the time of sale are warranted.
Market Conditions
An increase or decrease in the market value of real estate can be caused by changes in market
conditions. Consistent with investor perceptions and the application of growth rates in the
discounted cash flow analysis approach to value we have applied a 3% annual change as a
market conditions adjustment.
48
Location
Location adjustments are typically made for differences in exposure, accessibility or proximity to
a beneficial or detrimental land use. Given the relatively small cities within Imperial Valley there
is typically a primary commercial corridor with most commercial sites having similar highway
frontage or other similar exposure. Thus, adjustments are not typically warranted. This is
supported by the relatively limited range in unit values ($9.00 to $12.00 per square foot) found
for finished parcels where utilities, grading and street improvements are to the site and
complete. The subject’s location on a secondary street off the main highway is offset by its
proximity to the border crossing. Therefore, no adjustments for location differences are made.
Physical Characteristics
Physical characteristics relate to size, shape, topography, site condition, etc. All of the sites are
conducive to development and are not limited by the shape. Similarly all of the sites are
finished parcels where the site is graded. The primary difference between the sales and the
subject is size where the subject is considerably larger than the market data. Generally, larger
sites sell for less per unit of value or comparison than do smaller sites. This is due to economies
of scale. We have applied size adjustments taking into consideration the relatively limited range
in unit values found for finished parcels in Imperial Valley. Note that Sale 4 is a part of a larger
developed shopping center that has un-stabilized occupancy and suffers from deferred
maintenance. The property is marketed for sale as a redevelopment project. The remaining
portion of the center was recently available for sale at a similar unit value, but was removed
from the market in August 2013.
Economic Characteristics (Tax Basis)
None of the land sales are subject to a community facilities district special tax. Land that is so
encumbered typically sells for less than similar properties without the same tax basis. The
subject’s community facilities special tax burden is accounted for in the Reconciliation and Final
Opinion of Value section at the end of this appraisal report.
Use (Zoning)
This element of comparison relates to permitted uses. All of the sales are zoned for commercial
land uses and are consistent with the general plan. No change is zoning or general plan use is
anticipated. Therefore, no adjustment is made.
Non-realty Components of Value
Non-realty components of value such as trade fixtures, business, personality and other items
that are not real property or are often included in the sale price of real property. None of the
sales relied on for this analysis involved non-realty components of value.
RECONCILIATION AND ESTIMATE OF SITE VALUE
The table on the following page summarizes the adjustments made to each sale as it compares to the
subject. The adjusted unit prices range from $9.50 to $13.78 per square foot of land area with a mean
of $11.55 and a median of $11.45 per square foot. After reviewing the market data and the adjustments
made greatest consideration is given to Sales 1 and 3 with a concluded unit value of $10.00 per square
foot of finished land area for the subject as reasonable. Since the forthcoming cost approach takes into
consideration on and off site land development costs, these must be deducted along with an
appropriate amount of indirect costs and entrepreneurial incentive from the concluded finished site
value. The estimated direct/hard on and off site land development cost is $5.17 per square foot of net
land area. The pro rata share of indirect costs are estimated to be 15.8% ($7,152,519 / $45,238,003) or
$0.91 per square foot (15.8% x $7,934,091 / 1,383,466 square feet) and entrepreneurial incentive is
49
estimated to be a 15.8% pro-rata share of entrepreneurial incentive or $0.91 per square foot (15.8% x
$7,975,814 / 1,383,466 square feet). The total on and off site land development cost plus pro-rata share
of indirect costs and entrepreneurial incentive is $6.99 ($5.17 + $0.91 + $0.91) per square foot rounded
to $7.00 per square foot. This is deducted from the finished site value of $10.00 per square foot to
arrive at an indicated raw land value of $3.00 per square foot or $4,150,398 for Phase 1A (1,383,466
square feet x $3.00 per square foot) rounded to $4,150,000.
The raw land value of Phase 1B is similarly calculated. The total land area is slightly smaller in size at
1,305,057 square feet or 29.96-acres so the adjustments are similar. The concluded finished value is
$10.00 per square foot. Again, the total on and off site land development cost plus pro-rata share of
indirect costs and entrepreneurial incentive is $6.99 per square foot rounded to $7.00 per square foot.
This equates to $3.00 per square foot or $3,915,171 (1,305,057 square feet x $3.00 per square foot)
rounded to $3,920,000 for the underlying raw land.
50
TABLE 12 – LAND SALE ADJUSTMENT GRID
Identification
Project Name
Location
Subject
Gran Plaza Phase 1A
W/O Hwy 111
S/S W 2nd St
Calexico
1
POL Walmart Ctr
E/S Hwy 86
S/O Wildcat Dr
Brawley
2
W/S Hwy 86
N/O Borego Salton
Salton City
3
POL Imperial Mall
E/S Dogwood Rd
S/S Danenberg Rd
El Centro
4
Part of Cal Mex Plaza
301 - 359
W 2nd St
Calexico
Outlet Center
Outlet Center
1,383,466
31.76
Assumed Graded
Assumed Complete
Assumed to Site
See Below
Commercial
CH (Cmml Hwy)
POL Shopping Ctr
POL Shopping Ctr
48,787
1.1
Graded Hwy Pad
Complete
All to Site
$0.00
n/av
C-2 (Med Cmml)
POL Shopping Ctr
POL Shopping Ctr
48,698
1.1
Graded Hwy Pad
Complete
All to Site
$0.00
Urban Area
C-2
7 Mall Pad Sites
7 Mall Pad Sites
649,480
14.91
Graded Pads
Complete
All to Site
$0.00
n/av
CG (Gen Cmml)
POL Shopping Ctr
Redevelopment
155,074
3.56
Developed
Complete
All to Site
$0.00
Industrial
CN (Cmml Nghd)
09/27/13
Fee Simple
Cash Equivalent
04/01/13
6
$505,000
Grant Deed
n/av
n/av
Fee Simple
None
All Cash
None
01/25/13
8
$650,000
Grant Deed
n/av
n/av
Fee Simple
None
All Cash
None
Listing
0
$7,659,591
Duhs Commercial
n/av
n/av
Fee Simple
None
Price Assumes
All Cash
Listing
0
$2,500,000
Masters Realty Grp.
n/av
n/av
Fee Simple
None
Price Assumes
All Cash
Unit of Comparison
$/SF Land Area
$10.35
$13.35
$11.79
$16.12
Elements of Comparison
Property Rights
Financing
Conditions of Sale
Expenditures ATOS
Market Conditions per Month
Net Market $/SF
Location
Physical - Size
Economic
Use / Zoning
Non-realty Components
Net Location & Physical Adj
Indicated $/SF Land Area
0%
0%
0%
0%
2%
$10.56
0%
-10%
0%
0%
0%
-10%
$9.50
0%
0%
0%
0%
2%
$13.62
0%
-10%
0%
0%
0%
-10%
$12.26
0%
0%
-5%
0%
0%
$11.20
0%
-5%
0%
0%
0%
-5%
$10.64
0%
0%
-5%
0%
0%
$15.31
0%
-10%
0%
0%
0%
-10%
$13.78
City/Community
Property Data
Current Use
Intended Use
Land Area/Acres
Acres
Site Condition
Street Improvements
Utilities
Cost to Finished Site
General Plan
Zoning
Sale Data
Date of Sale
Months Since DOS
Sale Price
Verification
Escrow
Marketing Time
Interest Acquired
Conditions of Sale
Down Payment
Financing
Maximum
Median
Mean
Minimum
Conclude
Less Cost to Finish Site
Indicated Unit Value
Indicated Site Value
Rounded
0.25%
$13.78
$11.45
$11.55
$9.50
$10.00
$7.00
$3.00
$4,150,398
$4,150,000
51
C OST A PPROACH
The cost approach is:
A set of procedures through which a value indication is derived for the fee simple interest in a property by
estimating the current cost to construct a reproduction of (or replacement for) the existing structure,
including an entrepreneurial incentive, deducting depreciation from the total cost, and adding the
estimated land value. Adjustments may then be made to the indicated fee simple value of the subject
15
property to reflect the value of the property interest being appraised.
Based on the definition of the cost approach procedure each of the three components of the cost
approach; cost new estimate, depreciation and site value are described below along with a
reconciliation and estimate of value by the cost approach.
COST NEW ESTIMATE
The cost new estimate consists of direct costs, indirect costs and entrepreneurial incentive and in this
appraisal is developed using reproduction cost. Reproduction cost is defined as:
The estimated cost to construct, at current prices as of the effective date of the appraisal, an exact
duplicate or replica of the building being appraised, using the same materials, construction standards,
design, layout, and quality of workmanship and embodying all the deficiencies, superadequacies, and
16
obsolescence of the subject building.
The direct costs, indirect costs, and entrepreneurial incentive components of reproduction cost are
described separately in the following sections.
Direct/Hard Costs
Direct/Hard costs include the on and off-site improvements, building shell improvements and
tenant improvements. Costs include the costs of material and labor as well as the contractor’s
profit required to construct the improvement as of the appraisal date of value.
On and off-site improvement costs are based on pro forma development costs which were
provided by RH Properties LLC, the developer’s representative, with an effective date of August
19, 2013. The development costs for the Gran Plaza outlet center are split between Phase 1A
and Phase1B. There is some discrepancy between the land areas allocated to Phase 1A and
Phase 1B in the development costs as compared to what is relied on in this appraisal. We have
taken the sum of the site development costs for Phase 1A and Phase1B of $13,917,420 and
divided the total by the net land area for valuation of 61.72-acres within Improvement Area No.
1 to arrive at a pro rata share for Phase 1A of $5.17 per square foot of net land area. This is then
multiplied by the net land area attributable to Phase 1A of 1,383,466 square feet to arrive at the
pro rata share of on and off-site land development costs of $7,152,519.
15
16
The Dictionary of Real Estate Appraisal, Fifth Edition, p. 47
52
Building shell improvements costs for Phase 1A were reported at $20,782,100. However, the
costs are based on a building area of 248,660 square feet. We have taken the reported cost and
divided it by reported building area to arrive at a unit cost of $83.58 per square foot. This is
multiplied by the gross building area of 292,347 square feet relied on in this appraisal to arrive
at a building shell cost totaling $24,434,362.
Tenant improvement costs for Phase 1A were reported at $12,854,400 based on 248,660 square
feet. We have again divided the total cost by the reported building area to arrive at a unit cost
of $51.69 per square foot. This is then multiplied by the leasable area of 264,096 square feet
relied on in this appraisal to arrive at a total tenant improvement cost of $13,651,122.
The costs per unit are reasonable when compared to costs in The Marshall Valuation Service
cost manual. The Marshall Valuation Service is an established and reputable firm used
nationwide by cost estimators, contractors, real estate appraisers, and financial institutions.
Indirect/Soft Costs
Indirect/soft costs are defined as:
Expenditures or allowances for items other than labor and materials that are necessary for
construction, but are not typically part of the construction contract. Indirect costs may include
administrative costs; professional fees; financing costs and the interest paid on construction loans;
taxes and the builder’s or developer’s all-risk insurance during construction; and marketing, sales
17
and lease-up costs incurred to achieve occupancy or sale. Also called soft costs.
Indirect/soft costs totaling $7,934,091 are taken from the pro-forma development costs provided
by RH Properties, LLC total. The indirect/soft costs include legal, architect and engineering,
insurance, real estate taxes (not including CFD special tax burden), leasing, fees and permits,
environmental and soil tests as well as other miscellaneous costs. The subject’s community
facilities special tax burden is accounted for in the Reconciliation and Final Opinion of Value
section at the end of this appraisal report.
Entrepreneurial Incentive
Entrepreneurial incentive is defined as:
The amount an entrepreneur expects to receive for his or her contribution to a project.
Entrepreneurial incentive may be distinguished from entrepreneurial profit (often called developer’s
profit) in that it is the expectation of future profit as opposed to the profit actually earned on a
18
development or improvement.
Entrepreneurial incentive can be applied against direct costs only, direct and soft costs, or both
direct and soft costs as well as land. Whatever method of application is used the final value must
be the same in each application. Thus, the rate is relative to the method of application.
Entrepreneurial incentive (what motivates the developer/investor not what is realized at sale)
typically ranges from 10% to 20% and even higher. The lower end of the range is indicative of
incentive against all costs including land. The upper end of the range reflects incentive against
direct costs only or where there is higher risk. Based on the conclusions developed in the
highest and best use analysis regarding financial feasibility, we have estimated entrepreneurial
incentive at 15% of both direct and indirect costs.
17
18
53
DEPRECIATION
Subtracted from the replacement cost new is an estimate of depreciation. Depreciation in appraising is
“a loss in property value from any cause; the difference between the cost of an improvement on the
effective date of the appraisal and the market value of the improvement on the same date.” 19 The value
difference may emanate from physical deterioration, functional obsolescence, external obsolescence, or
any combination of these sources. Since the subject is new construction nearing completion with the
grand opening set for November 15, 2013, approximately one month subsequent to the date of value of
this appraisal, no measurable physical deterioration is estimated. Further, the buildings conform to the
latest building codes and conform to market standards such as HVAC, interior, build-out, accessibility,
etc., such that an estimate for functional obsolescence is not warranted. External obsolescence caused
by depression, recession, natural disaster, etc., was not evident.
SITE VALUE
The value of the underlying raw land for Phase 1A as if vacant and available for development was
estimated in the previous site valuation section of this appraisal to be $4,150,000. Likewise the
underlying raw land for Phase 1B was estimated to be $3,920,000.
SUMMARY AND ESTIMATE OF VALUE BY THE COST APPROACH
Based on the estimates for direct costs, indirect costs, entrepreneurial incentive, accrued depreciation,
and site value each component is summarized in the following table. The indicated value by the cost
approach is $69,217,908 rounded to $69,220,000.
TABLE 13 – COST APPROACH SUMMARY
Item
Area
$/SF
Replacement Cost New
Direct/Hard Costs
On and Off-Site Improvements, Net Land Area
1,383,466
$5.17
Building Shell Improvements, Gross Building Area
292,347
$83.58
Tenant Improvements, Leasable Area
264,096
$51.69
Total Direct/Hard Costs
Indirect/Soft Costs
Total Replacement Cost New
Depreciation
Site Value of Phase 1A Raw Land
1,383,466
$3.00
Site Value of Phase 1B Raw Land
1,305,057
$3.00
Indicated Value by Cost Approach
Rounded
19
54
Rates
15.0%
Amounts
$7,152,519
$24,434,362
$13,651,122
$45,238,003
$7,934,091
$7,975,814
$61,147,908
$0
$4,150,000
$3,920,000
$69,217,908
$69,220,000
S ALES C OMPARISON A PPROACH
The sales comparison approach is:
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 units of comparison, and
making qualitative comparisons with or quantitative adjustments to the sale prices (or unit prices, as
20
appropriate) of the comparable properties based on relevant, market-derived elements of comparison.
DESCRIPTION OF MARKET DATA
The CoStar and LoopNet real estate databases were relied on for market data. Multiple searches were
made using various search parameter permutations. The broadest search parameters included all of
California and Arizona for large shopping centers going back to the beginning of 2011. The data
collection process also included reviewing the public record via RealQuest for grant deeds, trust deeds,
and assessor records. A wide variety of data was collected including REO, un-stabilized properties and
partial interest transfers. Only one sale of an outlet center was obtained. This was an older unstabilized property that has been encroached on by newer community centers. The transaction was not
relevant for inclusion here. From the pool of data derived, four sales were selected as having the most
relevance due to the size of the project, the interest transferred, the motivation of the buyer, stabilized
occupancy and reported net operating income data.
A map showing the location of each sale in relation to the subject is located on the following page.
Following the map is a discussion of the unit of comparison, the elements of comparison and a
reconciliation and estimate of value by the sales comparison approach as does a table summarizing the
transaction details, physical characteristics and adjustments made.
20
55
IMPROVED SALES MAP
56
UNIT OF COMPARISON
The unit of comparison relied on for this analysis is price per leasable square foot. Another useful unit
of measure relied on in this analysis is net operating income per square foot.
ELEMENTS OF COMPARISON
Ten elements of comparison require consideration. They are listed in order of operation.
1. Property Rights Conveyed
2. Financing Terms
3. Conditions of Sale
4. Buyer’s Anticipated Expenditures at the Time of Sale
5. Market Conditions
6. Location
7. Physical Characteristics
8. Economic Characteristics
9. Use (Zoning)
10. Non-realty Components of Value
To analyze the property on a price per square foot of leasable area, the relevance of each element of
comparison is discussed below along with the basis for any adjustment made to the individual sales
Adjustments to the first five elements are made consecutively while the last five elements are made in
the aggregate.
Property Rights Conveyed
A transaction price is always predicated on the real property interest conveyed. Although the
purpose of this appraisal is to provide an opinion of the fee simple interest, shopping centers
are sold on the leased fee value. All four sales used in this analysis were acquisitions of the
leased fee interest and no adjustment is made. The difference in property rights appraised and
the property rights conveyed by the sales will be discussed in the Reconciliation and Final
Opinion of Value section at the end of this summary appraisal report.
Financing
The transaction price of one property may differ from that of an identical property due to
different financing arrangements. The most common example is when the seller provides
financing for the transaction through a purchase money mortgage or the assumption of an
existing loan, at a favorable interest rate or down payment. Sale 1 is in escrow where the listing
price assumes an all cash transaction. Sales 2 was an all cash deal. Sales 3 and 4 were financed
with new loans via institutional lenders with typical down payment requirements. Presumably,
the loans were competitive with the market and reflect cash equivalent terms. Thus, an
adjustment for cash equivalency is not warranted.
Conditions of Sale
All of the sales were arms-length between a willing buyer and a willing seller. Sales 1, 2 and 4
were openly marketed for sale via commercial brokerage firms. Sale 3 was an off market
transaction, but the buyer and seller were both knowledgeable. No unusual conditions of sale
were reported for any of the transactions. The price for Sale 1 is based on the listing price since
the property is still in escrow and the actual sale price has not yet been disclosed. We have
applied a slight downward adjustment to reflect this.
57
Expenditures at the Time of Sale
A knowledgeable buyer considers expenditures that will have to be made upon purchase of a
property because these costs affect the price the buyer agrees to pay. Such expenditures may
include costs to cure deferred maintenance, costs to demolish and remove any portion of the
improvement, costs to petition for a zoning change, and costs to remediate environmental
contamination. An adjustment for expenditures at the time of sale accounts for costs the buyer
anticipates spending immediately after acquisition and is not otherwise reflected in the sale
price. None of the sales reported expenditures at the time of sale not already reflected in the
sale price. Therefore, adjustment is not warranted.
Market Conditions
An increase or decrease in the market value of real estate can be caused by changes in market
conditions. Consistent with investor perceptions and the application of growth rates in the
discounted cash flow analysis approach to value we have applied a 3% annual change as a
market conditions adjustment.
Location
The subject is located in the city of Calexico at the southern end of Imperial County along the
border with Mexicali. The sales are all located in Los Angeles County with varying population
density, income demographics and traffic volume as compared to the subject and even amongst
themselves. Thus, comparison of the sales to the subject based on subjective adjustments in
terms of demographics and traffic volume alone does not provide a credible analysis. Instead,
since the subject is assumed to be at stabilized occupancy and the sales were all reported to be
at relatively stable occupancy adjustments are based on differences in net operating income per
square foot and applied as an economic adjustment below. This method in theory accounts for
not only differences in location, but also physical characteristics. This is not a favored method,
but given the lack of market data it provides a useful analysis.
Physical Characteristics
Various physical differences exist between the subject and the sales including: size, age, parking,
and quality/appeal. These differences are adjusted for by comparing the differences in net
operating income per square foot and applying as an economic adjustment below. Again, this
method accounts for not only differences in location, but also physical characteristics.
Economic Characteristics
Economic characteristics are those attributes that directly impact the income producing
capability of a property. This may be related to income, expenses, vacancy, concessions or
other similar factors. All of the sales and the subject are located in the West Los Angeles submarket and are subject to similar expense, vacancy and market terms. Despite differences in
the real property tax rates between the sales and the subject, when applied the percent
difference per dollar of tax assessment is less than one percent, thus no adjustment is
warranted for differences in real property tax rates. Note that the community facilities special
tax as applied to the subject is not considered for comparison purposes since it is to be paid via
sales tax revenue.
To compensate for differences in location and physical characteristics between the sales and the
subject, net operating income (NOI) on a stabilized per square foot basis of the subject is divided
by the NOI per square foot of the sale multiplied by the sale price per square foot after
adjustments for the first five elements of comparison. The NOI for the subject property is
$21.21 per square foot per year as used in the direct capitalization method. The NOI of Sale 1 is
$11.20 per square foot which is 89% lower than the subject’s. Sale 2’s NOI is $21.71 per square
58
foot or 2% higher than the subject’s. NOI of Sale 3 is $22.33 per square foot, 5% higher than the
subject’s. Lastly, the NOI of Sale 4 is $15.55 per square foot, 73% lower than the subject’s.
Note that the net operating income for the subject and the sales does not include a community
facilities district special tax burden. The subject’s community facilities special tax burden is
accounted for in the Reconciliation and Final Opinion of Value section at the end of this
appraisal report.
Use/Zoning
The subject is an outlet shopping center whereas all of the sales are community shopping
centers. Although the tenant base is different, the lease and expense structures are similar.
Further, the leasable areas of the sales when compared to the subject are competitive requiring
similar capital resources to acquire. Differences in use are presumed accounted for in the NOI
adjustment above.
All of the sales and the subject have similar zoning. In all cases the zoning is consistent with the
General Plan. No imminent change in zoning is anticipated for the subject or for the sales. Thus,
no adjustment for differences in zoning is warranted.
Non-Realty Components of Value
Non-realty components of value such as trade fixtures, business, personality and other items
that are not real property are often included in the sale price of real property. The transactions
involved the real estate only. No business or trade fixtures present were reported as included.
Thus, an adjustment for non-realty components of value is not warranted.
RECONCILIATION AND ESTIMATE OF VALUE BY THE SALES COMPARISON APPROACH
The table on the following page summarizes the adjustments made to each sale as it compares to the
subject. The adjusted unit prices range from $264.92 to $341.04 per square foot of leasable building
area with a mean of $299.05 and a median of $295.11 per square foot. Each of the sales has strength
and weaknesses with no one sale providing an overall conclusive indication of value. After reviewing the
market data and the adjustments made a unit value of $290.00 per square foot of leasable area is
concluded as reasonable for the subject. This equates to an indicated value of $76,587,840 (264,096
square feet multiplied by $290.00 per square foot) rounded to $76,590,000. To this must be added the
raw land value for Phase 1B of $3,920,000 previously calculated in the Site Valuation section. Therefore,
the indicated value by the sales comparison is $80,510,000.
59
TABLE 14 – IMPROVED SALES ADJUSTMENT GRID
Identification
Project Name
Location
Subject
Gran Plaza Phase 1A
W/O Hwy 111
S/S W 2nd St
Calexico
1
Lancaster Cmmc Ctr
E/O Hwy 14
S/O W Ave K
Lancaster
2
Diamond Hills Plaza
2709 - 2841
S Diamond Bar Bl
Diamond Bar
3
Gateway Village
28207 - 28295
Newhall Ranch Rd
Valencia
4
SFS Promenade
11454 - 11570
Telegraph Rd
Santa Fe Springs
Outlets
264,096
1,383,466
31.76
0.19
10
+ 60
2013
Commerce
275,731
2,073,800
47.6
0.13
15
n/av
1984 - 1992
Community
139,314
619,541
14.2
0.22
7
n/av
1966 - 2011
Community
151,558
749,136
17.2
0.20
6
n/av
1969
Community
114,629
374,085
8.6
0.31
Several Attached
+ 30
1954 (1993)
09/27/13
Leased Fee
Cash Equivalency
In Escrow
0
$40,683,000
Confirmed
n/av
330-Days
Leased Fee
None
Price Assumes
All Cash
04/23/13
5
$48,000,000
Confirmed
n/av
n/av
Leased Fee
None
All Cash
None
04/10/13
6
$47,500,000
Confirmed
90-Days
Off Market
Leased Fee
None
25.1%
Institutional
01/13/12
20
$23,000,000
Confirmed
n/av
687-Days
Leased Fee
None
28.3%
Institutional
Assumed 95.0%
$5,601,140
$21.21
-
n/av
$3,087,840
$11.20
7.59%
99.4%
$3,024,000
$21.71
6.30%
94.0%
$3,386,000
$22.34
7.13%
92.7%
$1,782,500
$15.55
7.75%
Unit of Comparison
$/SF Leasable Area
$147.55
$344.55
$313.41
$200.65
Elements of Comparison
Property Rights
Financing
Conditions of Sale
Expenditures ATOS
Market Conditions per Month
Net Market $/SF
Location
Physical
Economic (NOI $/SF)
Use / Zoning
Non-realty Components
Net Location & Physical Adj
Indicated $/SF Leasable Area
0%
0%
-5%
0%
0%
$140.17
0%
0%
89%
0%
0%
89%
$264.92
0%
0%
0%
0%
1%
$348.00
0%
0%
-2%
0%
0%
-2%
$341.04
0%
0%
0%
0%
2%
$319.68
0%
0%
-5%
0%
0%
-5%
$303.70
0%
0%
0%
0%
5%
$210.68
0%
0%
36%
0%
0%
36%
$286.52
City/Community
Property Data
Shopping Center Type
Leasable Area/SF
Land Area/Acres
Acres
Floor Area Ratio
Buildings
Units
Year Built (Renovated)
Sale Data
Date of Sale
Months Since DOS
Sale Price
Verification
Escrow
Marketing Time
Interest Acquired
Conditions of Sale
Down Payment
Financing
Income Data
Occupancy ATOS
Net Operting Income
NOI $/SF
Capitalization Rate
Maximum
Median
Mean
Minimum
Conclude
Indicated Value
Rounded
Site Value of Phase 1B Land
Indicated Value
0.25%
$341.04
$295.11
$299.05
$264.92
$290.00
$76,587,840
$76,590,000
$3,920,000
$80,510,000
60
D IRECT C APITALIZATION
Direct capitalization is:
A method used to convert an estimate of a single year’s income expectancy into an indication of value in
one direct step, either by dividing the net income estimate by an appropriate capitalization rate or by
multiplying the income estimate by an appropriate factor. Direct capitalization employs capitalization
rates and multipliers extracted or developed from market data. Only a single year’s income is used. Yield
21
and value changes are implied but not identified.
The direct capitalization method involves estimating projected gross income based on market rent. A
vacancy rate and collection loss factor is applied to the projected gross income for an indication of
effective gross income. Operating expenses are then deducted to develop net operating income. Net
operating income is then capitalized at a market derived rate to provide an estimate of market value.
GROSS SCHEDULED INCOME
Gross scheduled income includes rental income, income derived from a percent of sales, and expense
reimbursements.
Rental Income
The developer’s representative, RH Properties, LLC provided the appraisers with pdf copies of
executed leases, a detailed rent roll with all units and the current negotiated lease terms for
leases, leases in process, and negotiated terms for letters of intent on spaces as well as terms
for vacant spaces which are retained in our work file. RH Properties, LLC has requested that we
do not disclose specific lease terms for individual tenants or spaces.
In summary, the rent roll consists of 264,096 leasable square feet including a 1,430 square foot
management office. There are a total of 69 units of which 33 have executed leases (164,305
square feet or 62.2% of the leasable area), ten units have leases in process (47,161 square feet
or 17.9%), and the balance of 25 units (51,200 square feet or 19.4%) are subject to letters of
intent or are otherwise available.
Most leases are written for either five or ten year initial terms with most tenants having one or
more options to renew. Most leases have a percentage rent clause where the minimum
contract rent is to be paid unless gross sales exceed a certain point. Many tenants have kick out
clauses where if gross sales do not exceed a certain amount for a specified period, the tenant
may vacate the lease. This adds a certain level of risk to the revenue stream and this is reflected
in the overall capitalization rate selected. Most tenants are responsible for common area
maintenance including insurance and utilities as well as a separate payment to reimburse the
owner for real estate taxes. Thus, most leases are written on a triple net expense basis.
Tenant’s with executed leases include: Charlotte Russe, Kitchen Collection, Michael Kors,
Gymboree, Perry Ellis, The Gap, the Children’s Place, Crocs, Nautica, Kipling, Wilson’s Leather,
DKNY, Banana Republic, Aeropostale, Coach, American Eagle Outfitters, Skechers, Guess?, Kay
Jewelers, Claire’s, Perfumania, Perfumes 4-U, Wet Seal, Nike, Lids, Levi’s, Puma, Zumiez, Rack
Room Shoes, Old Navy, Concrete, Tilly’s and Papaya.
21
61
The names of the tenants with the ten leases in process and the terms as well as the names of
the potential tenant’s with letters of intent or otherwise in various stages of negotiation with
the current terms are known to the appraiser’s, but are not disclosed here.
The leases and rent roll data were reviewed and analyzed by the appraisers as to their
credibility. The leases, leases in process and those with letters of intent were negotiated over
the last year through to the present. The rental rates and terms are competitive with other
outlet centers and are considered to be at market. Based on the leases and rent roll provided
we have estimated potential gross scheduled rental income including some income based on
percentage of sales to be $6,522,105 or $24.70 per square foot annually. This is less than what
is indicated on the developer’s rent roll since we have relied on the minimum monthly contract
rent where one is specified and not on estimates of percentage of sales which would be higher.
The exceptions are for three tenants and two leases in process where only rent based on a
percentage of sales is specified by the lease. In those cases we reviewed reported store sales
and in one case reduced the rent to what we believe is a more supportable level.
Real Estate Tax Reimbursement
The majority of the leases are written so that the tenants reimburse the owner for all real estate
taxes including any increases due to reassessment as a result of sale of the property. Most
leases indicated a projected tax burden for the tenants ranging from $2.00 to $2.50 per square
foot. The real estate taxes indicated by the direct capitalization method total $3.11 per square
foot. The estimated annual community facilities special tax burden is $508,834 or an additional
$1.93 per square foot of leasable area, more than doubling the original estimated real estate tax
reimbursement. Enforcement of the additional reimbursement may push some tenants to
attempt exercising kick out options (early lease termination due to underperformance) or other
legal challenge. Further, once the amount of the special tax is known current and future lease
negotiations may be revised to exclude the special tax if it is seen as an atypical burden or
otherwise reduce the rental rate. Lastly, and most importantly without some historical
indication of the reimbursement collection of the special tax, reimbursement collection is not
supportable. Therefore, we have not included the special tax as a reimbursement.
Common Area Maintenance Reimbursements
The majority of the leases are written so that the tenants reimburse the owner for common
area maintenance (CAM). CAM expenses include insurance, utilities, janitorial, sweeping/trash
removal, landscaping, lighting, security and repairs/maintenance. It does not include real estate
taxes, marketing expenses, management, miscellaneous or reserve expenses. The first year
dollar amount of the CAM reimbursement is specified in the leases and rent roll provided to the
appraiser’s by the developer’s representative, RH Properties, LLC. The total first year CAM
reimbursement is $1,352,556 or $5.12 per square foot of leasable area. This is somewhat higher
than our estimated annual common area maintenance expenses totaling $1,254,456 or $4.75
per square foot.
Marketing Fund
The majority of the tenants pay into an annual marketing fund. The first year dollar amount is
specified in the leases and rent roll provided to the appraiser’s by the developer’s
representative, RH Properties, LLC. The total first year CAM reimbursement is $341,068 or
$1.29 per square foot of leasable area.
62
VACANCY AND COLLECTION LOSS
An investor is primarily interested in the cash revenues that are likely to occur over a typical holding
period, not necessarily what a property could produce if it were 100% occupied. Thus, it is prudent to
expect some income loss due to actual vacancy, turnover, and collection loss.
The 2012 State of the Outlet Industry report by Value Retail News indicates U.S. Outlet Center
Occupancy of approximately 95 percent or higher. The 2Q13 PwC Real Estate Investor Survey indicates
the following for national retail markets:
TABLE 15 - PWC SURVEY OF STABILIZED OCCUPANCY
Market
Range
National Regional Mall
90.0% - 97.5%
National Power Center
80.0% - 96.0%
National Strip Shopping Center
80.0% - 97.0%
Average
93.5%
90.4%
91.6%
Based on investor projections, competition and the subject’s current level of leasing activity, we have
projected a stabilized vacancy and collection loss rate at 5.0% of gross scheduled income.
As of the date of value the subject is 62.2% leased with an additional 17.9% of the space having leases in
process for a total of 80.1% occupancy or otherwise committed. The balance of 19.9% of the space
includes spaces subject to letters of intent, available space and the management office. The cost to
stabilize occupancy will be accounted for in the Reconciliation and Final Opinion of Value section of this
appraisal.
OPERATING EXPENSES
The subject leases are written almost entirely on triple net expense basis. Some of the key or larger
tenants are on some form of gross expense basis. concluded market rents for the subject are based on a
triple net expense basis where the tenant’s reimburse the owner for real estate taxes (real estate taxes,
direct assessments and special assessments) and common area maintenance expenses (insurance,
janitorial, utilities, . The owner is responsible for management, miscellaneous expenses and reserves for
the replacement of short lived structural items.
Real Estate Taxes
Real estate taxes are based on an iteration process by multiplying the value indication from the
income approach by the tax rate of 1.09920 percent. This is the appropriate method for use in
California due to Proposition 13.
Direct Assessments
The 2013/14 real estate taxes reflect the property prior to construction. As such, direct
assessments are minimal. Direct assessments that will be applied to the subject subsequent to
completion are not known at this time. Thus we have not projected an amount for this item.
Special Taxes
The subject’s community facilities special tax burden is accounted for in the Reconciliation and
Final Opinion of Value section at the end of this appraisal report. This is consistent with the
other approaches to value as well as our projection for not collecting the special tax from the
tenants as a reimbursement to the owner.
63
Common Area Maintenance Expenses
Common area maintenance (CAM) expenses include insurance, utilities, janitorial,
sweeping/trash removal, landscaping, repairs/maintenance, lighting, and security expenses.
Management Fee
Management expenses should reflect the complexity of the property as well as the amount of
time and effort management must expend. Multi-tenant shopping centers typically have
management fees of 3.0% to 5.0% and higher of effective gross income depending on the
expense structure and lease term. Given that the majority of the subject’s leases are written
with similar terms, lease expirations and have for the most part fixed expense reimbursement
structures, we have projected property management at 4.0% of effective gross income.
Miscellaneous
Miscellaneous expenses include administrative and related office costs such as accounting, legal,
credit fees, telephone, office supplies and equipment, postage, licenses, other miscellaneous
items. We have projected this amount at 2.0% of effective gross income.
Reserves
Structural repairs and reserves for the replacement of short lived capital items such as the roof
or parking lot are an expense that the owner should assume will occur and reoccur over the life
of the property. The parking lot is concrete and will not require replacement. Likewise the
roofs are new and will not require replacement over the projected holding period. However,
HVAC systems, exterior paint, and other building service systems will likely requirement
replacement due to amount of foot traffic generated. Reserves are projected at $0.20 per
square foot annually.
CAPITALIZATION RATE
The overall capitalization rate is a mathematical relationship that exists between the net income derived
from a property and the value or price which an investor would pay for the privilege of receiving that
net income stream. Influences most affecting the price an investor would pay are the quality, quantity
and probable duration of the anticipated net income stream. Recent investor acquisitions of four large
shopping centers in the in the Southern California region along with a current listing for a small shopping
center within the subject’s market area have been investigated and are summarized in the following
table:
64
TABLE 16 – OVERALL CAPITALIZATION RATES DERIVED FROM SALES
No.
1
2
3
4
5
6
7
8
9
10
11
Location
Lancaster Commerce Center
Lancaster
Palmdale Marketplace
Palmdale
Gateway Village
Valencia
Spring Street Pavilion
Long Beach
Centerpoint Mall
Oxnard
Fallbrook Center
West Hills
Peninsula Center
Rolling Hills Estates
8000 Sunset
West Hollywood
Santa Fe Springs Promenade
Santa Fe Springs
Mission Center
El Centro
905-955 N. Imperial Ave.
El Centro
GBA/SF
275,731
Year Built
(Renovated)
1984 - 1992
Date
of Sale
In Escrow
Price
$40,683,000
Sale
$/SF
$147.55
Overall
Cap-rate
7.59%
Comments
83.6% Occupancy
215,202
1999 - 2002
05/13/13
Not Disclosed
-
7.50%
97.0% Occupancy
151,558
2005
04/10/13
$47,500,000
$313.41
7.13%
94.0% Occupancy
93,873
1988
10/17/12
$42,200,000
$449.54
5.60%
97.6% Occupancy
380,055
1999
12/21/12
$46,000,000
$121.04
6.11%
99% Occupancy
249,816
1985
11/07/12
$25,000,000
$100.07
6.40%
100.0% Occupancy
296,027
1960 - 1996
03/19/12
$87,300,000
$294.91
5.50%
92.5% Occupancy
172,726
1992
06/29/12
$98,850,000
$572.29
6.00%
93.8% Occupancy
114,629
1954 (1993)
01/13/12
$23,000,000
$200.65
7.75%
92.7% Occupancy
19,347
1954 (1993)
Listing
$3,400,000
$175.74
7.70%
64.3% Occupancy
Listing
$5,500,000
$117.00
7.31%
100.0% Occupancy
Max
Med
Mean
Min
$572.29
$188.19
$249.22
$100.07
7.75%
7.13%
6.78%
5.50%
47,010
The market data indicates cap-rates ranging from 5.50% to 7.75% with a mean of 6.78% and a median of
7.13 percent.
The 2Q13 PwC Real Estate Investor Survey indicates the following for national retail markets:
TABLE 17 – PWC SURVEY OF OVERALL CAPITALIZATION RATES
Market
Range
Average
4.50% - 9.00%
6.52%
5.00% - 8.00%
6.67%
5.50% - 9.50%
6.95%
An appropriate overall capitalization rate for the subject must be based on the quality, quantity and
probable duration of the anticipated net income stream. The subject is an untested outlet center that is
nearing completion and scheduled for its grand opening on November 15, 2013. After considering the
available market data an overall capitalization rate of 7.50% is reasonable.
65
RECONCILIATION AND ESTIMATE OF VALUE BY DIRECT CAPITALIZATION
The following table summarizes the income approach by direct capitalization.
TABLE 18- INCOME APPROACH SUMMARY
Item
Gross Scheduled Income (GSI)
Rental Income
CAM Reimbursement
Marketing Fund
Total GSI
Vacancy & Collection Loss
Effective Gross Income
Operating Expenses
Real Estate Taxes
Direct Assessments
CFD Special Tax
Insurance
Utilities
Janitorial
Sweeping
Landscaping
Lighting
Security
Marketing
Management
Miscellaneous
Reserves
Net Operating Income
Overall Capitalization Rate
Indicated Value
Rounded
Indicated Value
Leasable SF
% Rates
$/SF/Yr
Annual Amount
%/EGI
$24.70
$3.11
$5.12
$1.29
$34.22
$6,522,105
$820,773
$1,352,556
$341,068
$9,036,502
$451,825
$8,584,677
76.0%
9.6%
15.8%
4.0%
105.3%
5.3%
100.0%
$3.11
$0.00
$0.00
$0.35
$0.50
$0.15
$0.25
$0.50
$0.75
$1.50
$0.75
$1.29
$1.30
$0.65
$0.20
$11.30
$820,773
$0
$0
$92,434
$132,048
$39,614
$66,024
$132,048
$198,072
$396,144
$198,072
$341,068
$343,387
$171,694
$52,819
$2,984,197
$5,600,480
7.50%
$74,673,067
$74,670,000
$3,920,000
$78,590,000
9.6%
0.0%
0.0%
1.1%
1.5%
0.5%
0.8%
1.5%
2.3%
4.6%
2.3%
4.0%
4.0%
2.0%
0.6%
34.8%
65.2%
264,096
5.0%
0.0109920
4.0%
2.0%
Comments
As per Leases
Current Tax Rate
Unknown at this Time
See Reconciliation
CAM
CAM
CAM
CAM
CAM
CAM
CAM
CAM
Marketing Reimbursed
Not Reimbursed
Not Reimbursed
Not Reimbursed
$282.74 / SF
The indicated value from the direct capitalization method is $74,673,067 rounded to $74,670,000. To
this must be added the raw land value for Phase 1B of $3,920,000 previously calculated in the Site
Valuation section. Therefore, the indicated value by direct capitalization is $78,590,000.
66
D ISCOUNTED C ASH F LOW A NALYSIS
Discounted cash flow analysis (DCF) is:
The procedure in which a discount rate is applied to a set of projected income streams and a reversion.
The analyst specifies the quantity, variability, timing, and duration of the income streams and the
22
quantity and timing of the reversion and discounts each to its present value at a specified yield rate.
The DCF analysis involves projecting a cash flow period (based on investor perceptions consistent with
the yield rate), estimating net operating income for each period, applying a market derived yield rate to
discount the cash flows and the reversion to the present value.
CASH FLOW PERIOD
The projection for the cash flow period is ten years with the reversion based on the eleventh year’s net
operating income, but discounted at the tenth year’s discount factor.
GROSS SCHEDULED INCOME
First year gross scheduled income is based on the income relied in the direct capitalization method.
Succeeding year rental income is based on scheduled rent increases as found in the leases, or on 3.0%
annual increases specified in the leases in process or 3.0% annual increases for units subject to letters of
intent. The monthly rent for four tenants is based only on percentage of sales. This is based on the
projected sales indicated in the rent roll provided to the appraisers by the developer’s representative RH
Properties, LLC. Real estate tax reimbursements are direct reimbursement of the tax for that year.
Common area maintenance (CAM) reimbursements are grown at 3.0% annually.
VACANCY AND COLLECTION LOSS
Vacancy and collection loss is projected at 5.0% of effective gross income, which is consistent with the
direct capitalization approach. Other than turnover, spikes in vacancy are not projected.
COST TO STABILIZE OCCUPANCY AT TURNOVER
The leases are written on 5 and 10 year initial terms plus options. Thus, some unit turnover can be
anticipated to occur at the beginning of the sixth and eleventh years of the cash flow analysis. We have
projected a tenant retention rate of 70.0% for those units subject to renewal. The cost to stabilize 30%
turnover includes rent loss over an average four month lease up period, a tenant improvement
allowance of $20.00 per square foot and loss of CAM income for four months. No leasing commissions
are projected since most renewals will be handled in house with nationally branded corporate tenants.
OPERATING EXPENSES
First year operating expenses are based on the expenses relied on in the direct capitalization method.
Real estate taxes are grown 2.0% annually as permitted in California. Management and miscellaneous
expenses are not grown since these are fixed percentages of effective gross income. All other expenses
are grown 3.0% annually.
22
67
REVERSION
Reversion is based on the net operating income for the eleventh year of the cash flow, capitalized at a
residual rate and discounted to the present value based on the tenth year’s discount factor. Our
projection for the residual cap rate is based on the 2Q13 PwC Real Estate Investor Survey which
indicates the following residual cap rates for national retail markets:
TABLE 19 – PWC SURVEY OF RESIDUAL CAPITALIZATION RATES
Market
Range
Average
4.50% - 12.00%
7.06%
6.00% - 9.00%
7.19%
6.00% - 11.00%
7.53%
The rates are approximately 50 basis points higher than the going rate. Since our going in rate used in
the direct capitalization method is 7.50% our residual rate applied in discounted cash flow analysis is
8.0% for the reversion.
DISCOUNT RATE
The 2Q13 PwC Real Estate Investor Survey indicates the following discount rates for national retail
markets:
TABLE 20 – PWC SURVEY OF DISCOUNT RATES
Market
Range
Average
5.50% - 12.00%
8.75%
6.00% - 10.00%
8.17%
6.50% - 11.50%
8.19%
An appropriate overall capitalization rate for the subject must be based on the quality, quantity and
probable duration of the anticipated net income stream. The subject is an untested outlet center that is
nearing completion and scheduled for its grand opening on November 15, 2013. Based on the foregoing
survey, a rate near the mid-point of the survey is appropriate. Based on the forgoing we have projected
a discount rate of 8.50% for the subject’s cash flows.
RECONCILIATION AND ESTIMATE OF VALUE BY DISCOUNTED CASH FLOW ANALYSIS
The table on the following page summarizes the income approach by the yield capitalization method.
The indicated value from the discounted cash flow analysis is $68,565,037 rounded to $68,570,000. To
this must be added the raw land value for Phase 1B of $3,920,000 previously calculated in the Site
Valuation section. Therefore, the indicated value by discounted cash flow analysis is $72,490,000.
68
$0.65
$72,490,000
$3,920,000
Indicated Value
$68,570,000
$5,161,738
0.921660
$5,600,480
$2,984,197
$52,819
$171,694
$68,565,037
$11.30
$0.20
$343,387
$341,068
$198,072
$396,144
$198,072
$132,048
$66,024
$39,614
Rounded
8.50%
3.0%
$1.30
$1.29
$0.75
$1.50
$0.75
$0.50
$0.25
$0.15
$132,048
$92,434
$0
$0
$820,773
$8,584,677
$451,825
$9,036,502
$341,068
$1,352,556
$820,773
$6,522,105
1
Year
Sum of Cash Flows and Reversion
Net Present Value (NPV)
Discount Rate/Factors
Reversion
Residual Cap Rate
Net Operating Income
Reserves
2.0%
3.0%
Marketing
Miscellaneous
3.0%
4.0%
3.0%
Security
Management
3.0%
3.0%
Lighting
3.0%
Sweeping
Landscaping
3.0%
Janitorial
$0.50
$0.35
3.0%
3.0%
Insurance
Utilities
$0.00
CFD Special Tax
$3.11
$0.00
2.0%
$34.22
Direct Assessments
Real Estate Taxes
Operating Expenses
Effective Gross Income
Turnover Costs
Less Vacancy & Collection Loss
Total GSI
3.0%
$1.29
$5.12
3.0%
CAM Reimbursement
$24.70
$/SF/Yr
Marketing Fund
% Rates
$3.11
5.0%
% Rates
Growth
Rental Income
Gross Scheduled Income (GSI)
Item
Fixed
$259.64 / SF
$4,874,437
0.849460
$5,738,277
$3,063,061
$54,404
$176,027
$352,054
$351,300
$204,014
$408,028
$204,014
$136,009
$68,005
$40,802
$136,009
$95,207
$0
$0
$837,188
$8,801,338
$463,228
$9,264,566
$351,300
$1,393,133
$837,188
$6,682,945
2
Year
$4,605,879
0.782910
$5,883,025
$3,144,295
$56,036
$180,546
$361,093
$361,839
$210,134
$420,269
$210,134
$140,089
$70,045
$42,026
$140,089
$98,063
$0
$0
$853,932
$9,027,320
$475,122
$9,502,442
$361,839
$1,434,927
$853,932
$6,851,744
3
Year
69
$4,350,356
0.721570
$6,029,014
$3,227,593
$57,717
$185,132
$370,264
$372,694
$216,438
$432,877
$216,438
$144,292
$72,146
$43,287
$144,292
$101,005
$0
$0
$871,011
$9,256,607
$487,190
$9,743,797
$372,694
$1,477,975
$871,011
$7,022,117
4
Year
$4,111,585
0.665050
$6,182,370
$3,313,399
$59,449
$189,915
$379,831
$383,875
$222,931
$445,863
$222,931
$148,621
$74,310
$44,586
$148,621
$104,035
$0
$0
$888,431
$9,495,769
$499,777
$9,995,546
$383,875
$1,522,314
$888,431
$7,200,926
5
Year
$395,391
$1,567,983
$906,200
$7,477,368
6
Year
$3,385,193
0.612950
$5,522,788
$3,349,411
$61,232
$177,444
$354,888
$395,391
$229,619
$459,239
$229,619
$153,080
$76,539
$45,924
$153,080
$107,156
$0
$0
$906,200
$8,872,199
$957,396
$517,347
$10,346,942
TABLE 21- DISCOUNTED CASH FLOW ANALYSIS
$3,720,066
0.564930
$6,585,004
$3,497,479
$63,069
$201,650
$403,299
$407,253
$236,508
$473,016
$236,508
$157,672
$78,835
$47,302
$157,672
$110,371
$0
$0
$924,324
$10,082,483
$530,657
$10,613,140
$407,253
$1,615,022
$924,324
$7,666,541
7
Year
$3,513,940
0.520670
$6,748,882
$3,590,419
$64,961
$206,786
$413,572
$419,471
$243,603
$487,206
$243,603
$162,402
$81,200
$48,721
$162,402
$113,682
$0
$0
$942,810
$10,339,301
$544,174
$10,883,475
$419,471
$1,663,473
$942,810
$7,857,721
8
Year
$3,321,109
0.479880
$6,920,708
$3,686,145
$66,910
$212,137
$424,274
$432,055
$250,911
$501,822
$250,911
$167,274
$83,636
$50,183
$167,274
$117,092
$0
$0
$961,666
$10,606,853
$558,255
$11,165,108
$432,055
$1,713,377
$961,666
$8,058,010
9
Year
$3,137,680
0.442290
$7,094,170
$3,784,318
$68,917
$217,570
$435,140
$445,017
$258,438
$516,877
$258,438
$172,292
$86,145
$51,688
$172,292
$120,605
$0
$0
$980,899
$10,878,488
$572,552
$11,451,040
$445,017
$1,764,778
$980,899
$8,260,346
10
Year
$28,383,054
0.442290
$64,172,950
8.00%
$5,133,836
$3,748,700
$70,985
$177,651
$355,301
$458,368
$266,191
$532,383
$266,191
$177,461
$88,729
$53,239
$177,461
$124,223
$0
$0
$1,000,517
$8,882,536
$2,312,988
$589,238
$11,784,762
$458,368
$1,817,721
$1,000,517
$8,508,156
11
Year
R ECONCILIATION AND F INAL O PINION OF V ALUE
The final step in the appraisal process is to reconcile the indications of value and provide a single opinion
of value for the interest and value appraised. This appraisal relied on four approaches which provided
the following indications of stabilized market value:
Cost Approach
Sales Comparison Approach
Direct Capitalization
Discounted Cash Flow Analysis
$69,220,000
$80,510,000
$78,590,000
$72,490,000
A review of the strengths and weaknesses of the market data and analysis used in each approach are
discussed in the following paragraphs. The purpose is to isolate the value indication or indications that
are the most credible.
The cost approach is generally a credible method when sufficient land sales are available, costs are
reliable and the improvements are relatively new so that depreciation is minimal. The subject is nearing
completion with no depreciation warranted. The weakness in the application of this approach to value
the subject is with the land sales and costs. The land sales relied on two sales of smaller properties and
two listings. The costs relied on a pro-forma budget provided by the developer’s representative RH
Properties, LLC which needed to be revised to reflect the land and building areas relied on in this
approach. Overall, the value indication provided by the cost approach is less credible and secondary.
The sales comparison approach relied on four sales of shopping centers located in Southern California.
The market data is recent and because the uses and capital requirements are similar to the subject, the
same pool of buyers is similar. However, none of the sales are outlet centers. Further, none are located
within the primary trade area of the subject. Lastly the value indication provided by the sales
comparison approach is leased fee. Without knowing the specific lease terms of the sales, it is
impossible to calculate the fee simple value. Overall, the value indication provided by the sales
comparison is less credible and secondary.
The direct capitalization method of the income approach relied on the subject’s newly executed leases,
leases in process, letters of intent, CAM and real estate tax reimbursements. Vacancy is supported by
investor surveys for this product type. Expenses are based on the developer’s projection as well as
shopping center expense comparables. The capitalization rate is based on a market survey as well as
sales of shopping centers with similar capital requirements where the net operating income is known.
Overall, the direct capitalization method of the income approach provides a credible indication of value.
The discounted cash flow analysis relied on the same income, vacancy and expense projections as the
direct capitalization method subject to market derived growth rates over the holding period. The cash
flows and reversion were then discounted to a present value. Overall, the direct capitalization method
of the income approach provides a credible indication of value.
Based on the more credible value indications provided by the direct capitalization method and the
discounted cash flow analysis these are given the greatest consideration with some consideration given
to the cost approach. Therefore, it is our opinion that the as stabilized market value of the leased fee
interest in the subject is $72,500,000. Since the value indication is based on contract rents that have
been recently negotiated and determined to be at market as well as expenses and yield rates at market
levels, the value indication is effectively equivalent to the fee simple interest. Therefore, it is our
opinion that the as stabilized market value of the fee simple interest in the subject is also $72,500,000.
70
The foregoing value indication reflects the subject with stabilized occupancy and improvements
completed as well as net of the community facilities district special tax burden. As of the date of value
of this appraisal construction of Phase 1A is not complete and first occupancy is not scheduled until the
grand opening on November 15, 2013. The as is fee simple market value of the subject is arrived at by
deducting rent loss until first occupancy of tenants with leases and leases in process, deducting the costs
to stabilize occupancy for the units subject to letters of intent, deducting costs to complete
construction, deducting the community facilities district special tax burden and lastly adding the
community facilities district net proceeds that are not already reflected in the fee simple stabilized
market value. Note that the cost to complete, rent loss and cost to stabilize occupancy are only
estimated for Phase 1A since this portion of the subject is under development. The value of Phase 1B is
based on its present condition, raw land.
The following table summarizes our estimate for the cost to complete Phase 1A:
TABLE 22 – COST TO COMPLETE
Cost
On and Off-Site Improvements, Net Land Area
Building Improvements, Gross Building Area
Tenant Improvements, Leasable Area
Total Direct/Hard Costs
Indirect/Soft Costs
Sum of Direct and Indirect Costs to Complete
Cost to Complete
Area SF
1,383,466
292,347
264,096
$/SF
$5.17
$83.58
$51.69
$ Amount
$7,152,519
$24,434,362
$13,651,122
$45,238,033
$7,934,091
% Complete
75.0%
95.0%
25.0%
95.0%
Completed
$ Amount
$5,364,389
$23,212,644
$3,412,781
$31,989,814
$7,537,386
15.0%
Remaining
$ Amount
$1,788,130
$1,221,718
$10,238,341
$13,248,189
$396,705
$13,644,894
$2,046,734
$15,691,628
The following table summarizes our estimate for the rent loss until opening and commencement of the
signed leases for Phase 1A:
TABLE 23 – RENT LOSS
Lease Status
Executed Leases
Leases in Process Rent Loss
Rent Loss
Area SF
164,305
47,161
Annual Rent
$3,809,135
$1,326,660
Monthly Rent
$317,428
$110,555
Months
Rent Loss
2
5
Rent Loss
$634,856
$552,775
$1,187,631
The following table summarizes our estimate for the cost to stabilize occupancy for Phase 1A:
TABLE 24 – COST TO STABILIZE OCCUPANCY
Lease Status
Executed Leases
Leases in Process
Total Leased Space
Leasable Area
Stabilized Occupancy at 95% Leasable Area
Stabilized Occupancy Less Leased Space
Area SF
164,305
47,161
211,466
264,096
250,891
39,425
Average
Annual $/SF
Annual
Rent
Monthly
Rent
Months
Rent Loss
Cost
To Stabilize
27.08
$1,067,491
$88,958
7
$622,706
The present value of the community facilities special tax burden is estimated to be equivalent to the
expected PAR value of the bond or approximately $7,000,000.
The cost to complete, rent loss, cost to stabilize occupancy and the community facilities district special
tax burden totals $24,501,965 ($15,691,628 + $1,187,631 + $622,706 + $7,000,000) rounded to
71
$24,500,000. Deducting this from the stabilized fee simple market value of $72,500,000 equates to
$48,000,000.
Consistent with the intended use of this appraisal the public facilities to be funded by the Community
Facilities District bond proceeds are assumed completed. Therefore, the bond proceeds are applied as a
credit toward the market value of the subject, less any eligible fees and/or public facilities paid to date
or otherwise already reflected in the market value but not yet reimbursed. The estimated net bond
proceeds to be generated is approximately $5,600,000. The total amount of fees and/or public facilities
paid to date or otherwise already reflected in the ground that are applicable to Improvement Area No. 1
is estimated to have reached $5,600,0000. Since the public facilities paid to date or otherwise already
reflected in the ground is equal to the total amount of estimated net bond proceeds, the net bond
proceeds are not credited in this analysis. Therefore, after completing our investigation and appraisal
and subject to the assumptions and limiting conditions contained in this report, it is our opinion that the
market value of the fee simple interest in the subject as of September 27, 2013 is:
FORTY-EIGHT MILLION DOLLARS
($48,000,000)
72
A LLOCATION OF F INAL O PINION OF V ALUE
The following table allocates the final opinion of value to the legal parcels created by the 888 W. 2nd
Street, Calexico approved tentative tract map yet to be recorded as well as the previous River Tract map.
Note that River Tract Parcel 1 and 3 (APN 058-400-039 and 058-400-041) are not located within the
boundaries of the 888 W. 2nd Street, Calexico approved tentative tract map. These two parcels are
located within the boundaries of Improvement Area No. 1 and are not expected to physically change
with the recording of the Gran Plaza Outlets tract map. The retention basin is not assigned a net land
area for valuation since it is not subject to the community facilities district special tax.
TABLE 25 – ALLOCATION OF FINAL OPINION OF VALUE
Tract Map
Legal
Parcel No.
River Tract
River Tract
1
2
3
4
5
Remainder Parcel
1
3
Totals
Net Land
Area for
Valuation
RMA
Status
Allocated
Value
24.33
25.12
1.64
1.45
1.23
4.40
3.55
0.00
Undeveloped
Developed
Undeveloped
Undeveloped
Undeveloped
Undeveloped
Undeveloped
-
$3,183,364
$41,644,613
$601,511
$531,824
$160,935
$575,701
$1,302,052
61.72
Comments
Phase 1B
Encompassing All Phase 1A Vertical Construction
Phase 1A
Phase 1A
Phase 1B
Phase 1B (To be Acquired by City of Calexico)
Owned by CCRA to be Acquired by Corsair, LLC
Retention Basin
$48,000,000
The majority of the value is allocated to Parcel No. 2 of the 888 W. 2nd Street, Calexico approved
tentative tract map which contains all the vertical construction completed to date. This parcel
encompasses 25.12-acres of Phase 1A. The expected PAR value of the bond or approximately
$7,000,000 reflecting the community facility special tax burden is allocated entirely to the developed
parcel, Parcel No. 2 of the 888 W. 2nd Street, Calexico approved tentative tract map. If there was no
special tax the allocated value to this parcel would increase by approximately $7,000,000. Note per the
definition of developed and undeveloped parcel, a developed parcel has building improvements and an
undeveloped parcel does not. Thus, Parcel Nos. 3 and 4 of 888 W. 2nd Street, Calexico approved
tentative tract map and River Tract Parcel No. 1, which are all currently partially improved with grading
and/or parking lot improvements, are considered undeveloped.
The allocated values are for use by the underwriter, special tax consultant, disclosure counsel, and bond
council for assigning risk only. The allocated values do not represent the separate fee simple market
values of each parcel and may not be relied on as such.
73
A DDENDA
74
E XHIBIT A – Q UALIFICATIONS
75
M C N AMARA & A SSOCIATES
International Valuation Consultants
McNamara & Associates has appraised or is currently appraising over thirty-nine community facility
districts in Southern California. A list of the community facilities districts appraised are summarized
below followed by the qualifications of the appraisers.
Location
Issuing Agency
District Number
Project Name
Imperial County
Imperial County
Imperial County
Imperial County
Imperial County
Imperial County
Imperial County
Imperial County
Riverside County
Riverside County
Riverside County
Riverside County
Riverside County
Riverside County
Riverside County
Riverside County
Riverside County
Riverside County
Riverside County
Riverside County
Riverside County
Riverside County
Riverside County
Riverside County
Riverside County
Riverside County
Riverside County
Riverside County
Riverside County
San Bernardino County
Los Angeles County
Los Angeles County
Ventura County
City of Imperial
City of Imperial
City of Imperial
City of Imperial
City of Imperial
City of Imperial
Heber PUD
City of Calexico
City of Norco
City of Norco
City of Norco
City of Murrieta
City of Murrieta
City of Murrieta
City of Murrieta
City of Murrieta
City of Murrieta
City of Murrieta
City of Murrieta
City of Murrieta
City of Murrieta
City of Murrieta
City of Murrieta
City of Murrieta
City of Murrieta
City of Murrieta
City of Murrieta
Elsinore Valley MWD
Elsinore Valley MWD
Snowline JUSD
Snowline JUSD
City of Highland
City of Upland
City of Upland
City of Upland
City of Upland
City of Lancaster
City of Lancaster
City of Moorpark
CFD 2004-1
CFD 2004-2
CFD 2004-3
CFD 2005-1
CFD 2006-1
CFD 2006-2
CFD 2005-1
CFD 2005-1
CFD 200-1
CFD 2002-1
CFD 1997-1
CFD 2000-1
CFD 2001-1
CFD 2003-1
CFD 2001-1
CFD 2003-2
CFD 2003-3
CFD 2003-4
CFD 2004-1
CFD 2004-2
CFD 2004-3
CFD 2002-2
CFD 2005-1
CFD 2005-2
CFD 2005-3
CFD 2005-5
AD 1995-1
CFD 2003-1
CFD 2002-1
CFD 2002-1
CFD 2005-3
CFD 1990-1
CFD 2003-1
CFD 2003-2
CFD 2003-2
CFD 2004-3
CFD 1991-1
CFD 1991-2
CFD 1997-1
Mayfield
Victoria Ranch
Bratton Subdivision
Springfield
Monterey Park
Woodmoor
Heber Meadows
Hearthstone
Norco Ridge Ranch
Hawks Crest
Norco Hills
Greer Ranch
Murrieta Highlands
Murrieta Springs
Greer Ranch
Blackmore Ranch
Creekside Village
Mapleton Commons
Bremerton
Murrieta Fields
Amberwalk & Meadowlane
The Oaks
Springbrook
Lantana
Hunter Road
Golden City
Murrieta Oaks
Water's Edge
Oakmont II
Vista Verde
Victorville-241
Tax Rate Area 1-2-3-5-6-7
Mountain View
Colonies
Colonies
College Park
Quartz Hill II
Lancaster Business Park
Carlsberg Business Park
No. of
Dwelling
Units
339
516
498
459
597
402
219
467
557
133
217
672
905
766
672
171
289
348
149
96
363
656
111
955
114
502
230
133
96
800
241
1,007
54
437
102 acres
Mixed
1,583
100 acres
73 acres
25602 Alicia Parkway, Suite 409, Laguna Hills, California 92653 Tel. (949) 643-3556
76
Approx.
Bond Size
in Millions
$10.00
$4.40
$3.50
$6.20
$23.00
$3.50
$1.60
$15.00
$22.00
$2.50
$6.80
$18.00
$14.00
$20.00
$15.80
$7.00
$13.00
$4.00
$4.00
$1.80
$5.00
$25.00
$3.50
$2.30
$4.60
$30.00
$5.00
$4.20
$2.00
$10.00
$2.00
$15.00
$1.50
$18.00
$15.00
TBD
$5.70
$3.00
$8.00
FAX (949) 643-5019
JOHN J. MCNAMARA III
Managing Director
APPRAISAL SPECIALIZATION
Mr. McNamara is responsible for planning and directing all appraisal engagements originated by the firm. He has
more than twenty-seven years of broad business, real estate and machinery & equipment appraisal experience in
the United States and Europe, including serving as an officer of the world’s largest appraisal practice.
Mr. McNamara has counseled major U.S. Asian and European Companies on a wide variety of valuation matters
including mergers and acquisitions, equity & debt offerings, recapitalizations, ESOP’s, asset parity, bankruptcies,
and various tax related appraisal issues. He has provided consultation as a designated appraisal expert in various
litigation support engagements.
BUSINESS EXPERIENCE
Prior business experience includes several years in commercial and investment banking, including serving as
special assistant to the Chairman of the Board of duPont Glore Forgan, a major bracket NYSE member firm.
PROFESSIONAL AFFILIATIONS
Association for Corporate Growth,-Director
Past President-Orange County Chapter,
Member-National Property Management Association, Former Member-American Tax Institute in Europe, Former
Member-Association for Corporate Growth-London Chapter
SPEAKING ENGAGEMENTS
Mr. McNamara has conducted speaking engagements on appraisal topics to the following professional groups:
Orange County Bar Association,
Tech Coast Venture Network,
National Association of Accountants, National Property Management Association, Institute of Cost & Management,
Accountants (UK.) and has participated in valuation seminars presented to a broad range of corporate financial,
tax, real estate, risk management and legal executives.
EDUCATION
Bachelor of Science, 1966,
Florida Atlantic University, College of Business Administration
Graduate-New York Institute of Finance, 1971
PREVIOUSLY HELD REGISTRATIONS
New York Stock Exchange
American Stock Exchange
National Association of
Securities Dealers
Chicago Board Options Exchange
Chicago Board of Trade
77
FAX (949) 643-5019
NEAL E. ANDERSON, MAI
Senior Associate
BUSINESS EXPERIENCE
For the past 40 plus years, Neal Anderson has been involved in the valuation of real estate and businesses. Since
January 1987, as an independent fee appraiser, he has specialized in real estate and business valuations in the
Southern California area. Prior to opening his own consulting practice, he was a senior associate of American
Appraisal Associates. In that capacity he was responsible for all real estate valuation activity in the western United
States. Earlier to that position he served as western region manager for their Financial Valuation Group.
APPRAISAL EXPERIENCE
As an independent fee appraiser he has specialized in the valuation of commercial, industrial and investment real
estate and vacant land. Representative properties include office buildings, apartments, shopping centers, retail
stores, and light and heavy industrial plants. Appraisal purposes include property tax valuations, purchase and sale
negotiations, litigation, financing, and allocation of purchase price. Interests appraised include fee, leased fee and
leasehold ownership positions. Business valuations have been conducted for litigation purposes, majority and
minority interest positions, and for establishing the value of the business for possible sale purposes.
In his most recent position with American Appraisal Associates, he was responsible for the direction, planning,
supervision and review of all real estate engagements in the western region. In that position he personally
conducted and supervised field investigations for the valuations of all types of real estate.
As manager of the financial valuation group he directed the development of values for closely held capital stock,
and intangible assets associated with transfers or reorganizations of operating business enterprises. These studies
included the valuation of patents, licenses, sports franchises, contracts, trademarks, software, going concern and
goodwill for a variety of industries such as agricultural, oil, paper, aerospace, motion pictures, medical,
construction, estates and financial institutions.
STATE CERTIFICATION
State of California Certified General Real Estate Appraiser, No. AG 007708, expires September 28, 2014
PROFESIONAL AFFILIATIONS
Appraisal Institute, MAI designation
EDUCATION
University of Wisconsin, Madison, Bachelor of Science – Geology
University of California, Brentwood – extension courses
Appraisal Institute, Courses 1, 2 and 6, Standards of Professional Practice, Report Writing and Valuation,
various seminars and workshops
COURT EXPERIENCE
Mr. Anderson has qualified as an expert witness and appeared before the Superior Court in Alameda, Brentwood
and Riverside Counties, and Property Tax Appeal Boards in Brentwood and San Diego Counties, California
78
FAX (949) 643-5019
ERIC C. ANDERSON, MAI
Senior Associate
SUMMARY
20-years commercial real estate appraisal experience,
Expertise includes community facilities district bond financing, private wealth asset
valuation, estate/gift tax filings, and institutional lending,
Property types appraised include assessment districts, both general and medical office
buildings, shopping centers, retail buildings, warehouse/distribution buildings,
business parks, auto service centers, apartment complexes, ground leases, as well as
vacant commercial, industrial and residential land,
Has appraised extensively in Los Angeles, Orange, San Bernardino, Riverside, and
Imperial Counties, other areas include Ventura, Santa Barbara San Diego, and Kern
Counties
EXPERIENCE
SUBCONTRACT AND INDEPENDENT FEE APPRAISER
2002 - PRESENT
Majority of assignments involve asset valuation for private wealth institutions and
community facilities district bond (CFD) financing. Private wealth asset valuations
involve trust management, estate and gift tax purposes with a wide range in property
types. For each CFD assignment responsibilities include coordinating with the issuing
public agency, underwriter, developers, various consultants and multiple legal
counsels.
STAFF APPRAISER WITH PENNER & ASSOCIATES
1995 - 2001
Most assignments involved investment grade real estate for banks, life insurance
companies and conduits. Cash flow (Argus and Project), lease and expense analysis
emphasized.
STAFF APPRAISER/ANALYST FOR NEAL E. ANDERSON, MAI
1991 - 1995
Most assignments involved asset valuation for private wealth institutions.
CERTIFICATION
California State Certified General Real Estate Appraiser Since 1994
SCREA No.: AG023751 Expiration January 14, 2013
EDUCATION
1991, California State University, Fullerton
Bachelor of Arts, Geography and Minor in Business Administration
1992, California State University, Fullerton, Extended Education Services
Certificate Award in Real Estate Appraisal
AFFILIATION
Appraisal Institute
79
FAX (949) 643-5019
APPENDIX D
FORM OF OPINION OF BOND COUNSEL
Upon issuance and delivery of the Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation,
Bond Counsel, proposes to render its final approving opinion in substantially the following form:
February 4, 2014
City of Calexico
Community Facilities District No. 2013-1 (Gran Plaza)
Re:
$7,000,000 City of Calexico Community Facilities District No. 2013-1
(Gran Plaza) Improvement Area No. 1 Special Tax Bonds, Issue of 2014
Ladies and Gentlemen:
We have examined the Constitution and the laws of the State of California, a certified record
of the proceedings of the City of Calexico taken in connection with the authorization and issuance by
the City of Calexico Community Facilities District No. 2013-1 (Gran Plaza) (the “District”) of its
Improvement Area No. 1 Special Tax Bonds, Issue of 2014 in the aggregate principal amount of
$7,000,000 (the “Bonds”) and such other information and documents as we consider necessary to
render this opinion. In rendering this opinion, we have relied upon certain representations of fact and
certifications made by the District, the initial purchasers of the Bonds and others. We have not
undertaken to verify through independent investigation the accuracy of the representations and
certifications relied upon by us.
The Bonds have been issued pursuant to the Mello-Roos Community Facilities Act of 1982,
as amended (comprising Chapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the
State of California), and a Bond Indenture dated as of February 1, 2014 (the “Bond Indenture”)
between the District and The Bank of New York Mellon Trust Company, N.A., as Trustee. All
capitalized terms not defined herein shall have the meaning set forth in the Bond Indenture.
The Bonds are dated their date of delivery and mature on the dates and in the amounts set
forth in the Bond Indenture. The Bonds bear interest payable semiannually on each March 1 and
September 1, commencing on March 1, 2014, at the rates per annum set forth in the Bond Indenture.
The Bonds are registered bonds in the form set forth in the Bond Indenture, redeemable in the
amounts, at the times and in the manner provided for in the Bond Indenture.
Based upon our examination of the foregoing, and in reliance thereon and on all matters of
fact as we deem relevant under the circumstances, and upon consideration of applicable laws, we are
of the opinion that:
(1)
The Bonds have been duly and validly authorized by the District and are legal, valid
and binding limited obligations of the District, enforceable in accordance with their terms and the
terms of the Bond Indenture, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’ rights
generally, or by the exercise of judicial discretion in accordance with general principles of equity or
otherwise in appropriate cases, or by the limitations on legal remedies against public agencies in the
State of California. The Bonds are limited obligations of the District but are not a debt of the City of
D-1
Calexico, the State of California or any other political subdivision thereof within the meaning of any
constitutional or statutory limitation, and, except for the Special Taxes, neither the faith and credit
nor the taxing power of the City of Calexico, the State of California, or any of its political
subdivisions is pledged for the payment thereof.
(2)
The execution and delivery of the Bond Indenture has been duly authorized by the
District, and, assuming execution by the other parties thereto, the Bond Indenture is valid and
binding upon the District and is enforceable in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws affecting creditors’ rights generally, or by the exercise of judicial
discretion in accordance with general principles of equity or otherwise in appropriate cases, or by the
limitations on legal remedies against public agencies in the State of California; provided, however,
we express no opinion as to the enforceability of the covenant of the District contained in the Bond
Indenture to levy Special Taxes for the payment of Administrative Expenses and we express no
opinion as to any provisions with respect to indemnification, penalty, contribution, choice of law,
choice of forum or waiver provisions contained therein.
(3)
The Bond Indenture creates a valid pledge of that which the Bond Indenture purports
to pledge, subject to the provisions of the Bond Indenture, except to the extent that enforceability of
the Bond Indenture may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws affecting creditors’ rights generally, or by the exercise
of judicial discretion in accordance with general principles of equity or otherwise in appropriate
cases, or by the limitations on legal remedies against public agencies in the State of California.
(4)
Under existing statutes, regulations, rulings and judicial decisions, interest (and
original issue discount) on the Bonds is excluded from gross income for federal income tax purposes
and is not an item of tax preference for purposes of calculating the federal alternative minimum tax
imposed on individuals and corporations; however, it should be noted that, with respect to
corporations, such interest (and original issue discount) will be included as an adjustment in the
calculation of alternative minimum taxable income, which may affect the alternative minimum tax
liability of corporations.
(5)
Interest (and original issue discount) on the Bonds is exempt from State of California
personal income tax.
(6)
The difference between the issue price of a Bond (the first price at which a substantial
amount of the Bonds of a maturity are to be sold to the public) and the stated redemption price at
maturity with respect to such Bond constitutes original issue discount. Original issue discount
accrues under a constant yield method, and original issue discount will accrue to a Bondowner before
receipt of cash attributable to such excludable income. The amount of original issue discount
deemed received by a Bondowner will increase the Bondowner’s basis in the applicable Bond.
Original issue discount that accrues for the Bondowner is excluded from the gross income of such
owner for federal income tax purposes, is not an item of tax preference for purposes of calculating
the federal alternative minimum tax imposed on individuals or corporations (as described in
paragraph 4 above) and is exempt from State of California personal income tax.
(7)
The amount by which a Bondowner’s original basis for determining loss on sale or
exchange in the applicable Bond (generally the purchase price) exceeds the amount payable on
maturity (or on an earlier call date) constitutes amortizable Bond premium which must be amortized
under Section 171 of the Internal Revenue Code of 1986, as amended (the “Code”); such amortizable
Bond premium reduces the Bondowner’s basis in the applicable Bond (and the amount of tax-exempt
interest received), and is not deductible for federal income tax purposes. The basis reduction as a
D-2
result of the amortization of Bond premium may result in a Bondowner realizing a taxable gain when
a Bond is sold by the owner for an amount equal to or less (under certain circumstances) than the
original cost of the Bond to the owner.
The opinion expressed in paragraph (4) above as to the exclusion from gross income for
federal income tax purposes of interest (and original issue discount) on the Bonds is subject to the
condition that the District complies with all requirements of the Code that must be satisfied
subsequent to the issuance of the Bonds to assure that such interest (and original issue discount) will
not become includable in gross income for federal income tax purposes. Failure to comply with such
requirements of the Code might cause interest (and original issue discount) on the Bonds to be
included in gross income for federal income tax purposes retroactive to the date of issuance of the
Bonds. The District has covenanted to comply with all such requirements. Except as set forth in
paragraphs (4), (5), (6) and (7) above, we express no opinion as to any tax consequences related to
the Bonds.
Certain requirements and procedures contained or referred to in the Bond Indenture may be
changed, and certain actions may be taken, under the circumstances and subject to the terms and
conditions set forth in the Bond Indenture, upon the advice or with the approving opinion of counsel
nationally recognized in the area of tax-exempt obligations. We express no opinion as to the
exclusion of interest on the Bonds from gross income for federal income tax purposes on and after
the date on which any such change occurs or action is taken upon the advice or approval of counsel
other than Stradling Yocca Carlson & Rauth, a Professional Corporation.
Our opinion is limited to matters governed by the laws of the State of California and federal
law. We assume no responsibility with respect to the applicability or the effect of the laws of any
other jurisdiction and express no opinion as to the enforceability of the choice of law provisions
contained in the Bond Indenture.
The opinions expressed herein are based upon an analysis of existing statutes, regulations,
rulings and judicial decisions and cover certain matters not directly addressed by such authorities.
We call attention to the fact that the foregoing opinions may be affected by actions taken (or
not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to
determine, or to inform any person, whether such actions or events are taken (or not taken) or do
occur (or do not occur).
We express no opinion herein as to the accuracy, completeness or sufficiency of the Official
Statement or other offering material relating to the Bonds and expressly disclaim any duty to advise
the owners of the Bonds with respect to the matters contained in the Official Statement.
Respectfully submitted,
D-3
>7+,63$*(,17(17,21$//</()7%/$1.@
APPENDIX E
SUMMARY OF BOND INDENTURE
The following is a summary of certain definitions and provisions of the Bond Indenture which
are not described elsewhere in the Official Statement. This Summary does not purport to be
comprehensive and reference should be made to the Indenture for a full and complete statement of its
provisions.
DEFINITIONS
Definitions.
following meanings:
Unless the context otherwise requires, the following terms shall have the
“Account” means any account created pursuant to the Indenture.
“Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Sections
53311 et seq. of the California Government Code.
“Administrative Expense Requirement” means the amount necessary to pay the
Administrative Expenses in any given Fiscal Year.
“Administrative Expenses” means the administrative costs with respect to the calculation and
collection of the Special Taxes, including all attorneys’ fees and other costs related thereto, the fees
and expenses of the Trustee and any Special Tax Consultant to the District, any fees and related costs
for credit enhancement for the Bonds which are not otherwise paid as Costs of Issuance, any costs
related to the District’s compliance with state and federal laws requiring continuing disclosure of
information concerning the Bonds and the District, and any other costs otherwise incurred by the City
staff on behalf of the District in order to carry out the purposes of the District as set forth in the
Resolution of Formation and any obligation of the District under the Indenture.
“Alternative Penalty Account” means the account by that name created and established in the
Rebate Fund pursuant to the Indenture.
“Annual Debt Service” means the principal amount of any Outstanding Bonds and Parity
Bonds payable in a Bond Year at maturity and any interest payable on any Outstanding Bonds and
Parity Bonds in such Bond Year, if the Bonds and Parity Bonds are retired as scheduled.
“Authorized Investments” means any of the following which at the time of investment are
legal investments under the laws of the State for the moneys proposed to be invested therein:
(1)
(A)
Direct obligations (other than an obligation subject to variation in
principal repayment) of the United States of America (“United States Treasury Obligations”);
(B) obligations fully and unconditionally guaranteed as to timely payment of principal and
interest by the United States of America; (C) obligations fully and unconditionally guaranteed
as to timely payment of principal and interest by any agency or instrumentality of the United
States of America when such obligations are backed by the full faith and credit of the United
States of America; or (D) evidences of ownership of proportionate interests in future interest
and principal payments on obligations described above held by a bank or trust company as
custodian, under which the owner of the investment is the real party in interest and has the
right to proceed directly and individually against the obligor and the underlying government
obligations are not available to any person claiming through the custodian or to whom the
custodian may be obligated.
E-1
Error! Unknown document property name.
(2)
Federal Housing Administration debentures.
(3)
The listed obligations of government-sponsored agencies which are not
backed by the full faith and credit of the United States of America:
-
-
Federal Home Loan Mortgage Corporation (FHLMC)
Participation certificates (excluded are stripped mortgage
securities which are purchased at prices exceeding their
principal amounts)
Senior Debt obligations
Federal Farm Credit Banks
Consolidated system-wide bonds and notes
Federal Home Loan Banks (FHL Banks)
Consolidated debt obligations
Federal National Mortgage Association (FNMA)
Senior debt obligations
Mortgage-backed securities (excluded are stripped
mortgage securities which are purchased at prices
exceeding their principal amounts)
(4)
Unsecured certificates of deposit, time deposits, bank deposits, demand
deposits and bankers’ acceptances (having maturities of not more than 30 days) of any bank
(including the Trustee and any affiliate) the short-term obligations of which are rated “A-1”
or better by Standard & Poor’s.
(5)
Deposits the aggregate amount of which are fully insured by the Federal
Deposit Insurance Corporation (FDIC), in banks (including the Trustee and any affiliate)
which have capital and surplus of at least $5 million.
(6)
Commercial paper (having original maturities of not more than 270 days
rated “A-1” or “A-1+” by Standard & Poor’s and “Prime-1” by Moody’s.
(7)
Money market funds rated “AAm” or “AAm-G” by Standard & Poor’s, or
better (including those of the Trustee or its affiliates).
(8)
“State Obligations,” which means:
(A)
Direct general obligations of any state of the United States of
America or any subdivision or agency thereof to which is pledged the full faith and
credit of a state the unsecured general obligation debt of which is rated “A3” by
Moody’s and “A-” by Standard & Poor’s, or better, or any obligation fully and
unconditionally guaranteed by any state, subdivision or agency whose unsecured
general obligation debt is so rated.
(B)
Direct general short-term obligations of any state agency or
subdivision or agency thereof described in (A) above and rated “A-1+” by Standard
& Poor’s and “Prime-l” by Moody’s.
(C)
Special Revenue Bonds (as defined in the United States Bankruptcy
Code) of any state, state agency or subdivision described in (A) above and rated
“AA-” or better by Standard & Poor’s and “Aa3” or better by Moody’s.
E-2
(9)
Pre-refunded municipal obligations rated by S & P and by Moody’s not
lower than United States Treasury Obligations meeting the following requirements:
(A)
the municipal obligations are (1) not subject to redemption prior to
maturity or (2) the trustee for the municipal obligations has been given irrevocable
instructions concerning their call and redemption and the issuer of the municipal
obligations has covenanted not to redeem such municipal obligations other than as
set forth in such instructions;
(B)
the municipal obligations are secured by cash or United States
Treasury Obligations which may be applied only to payment of the principal of,
interest and premium on such municipal obligations;
(C)
the principal of and interest on the United States Treasury
Obligations (plus any cash in the escrow) has been verified by the report of
independent certified public accountants to be sufficient to pay in full all principal of,
interest, and premium, if any, due and to become due on the municipal obligations
(“Verification”);
(D)
the cash or United States Treasury Obligations serving as security
for the municipal obligations are held by an escrow agent or trustee in trust for
owners of the municipal obligations;
(E)
no substitution of a United States Treasury Obligation shall be
permitted except with another United States Treasury Obligation and upon delivery
of a new Verification; and
(F)
the cash or United States Treasury Obligations are not available to
satisfy any other claims, including those by or against the trustee or escrow agent.
(10)
Repurchase agreements:
(A)
With (1) any domestic bank, or domestic branch of a foreign bank,
the long term debt of which is rated at least “A” by Standard & Poor’s and Moody’s;
or (2) any broker-dealer with “retail customers” or a related affiliate thereof which
broker-dealer has, or the parent company (which guarantees the provider) of which
has, long-term debt rated at least “A” by Standard & Poor’s and Moody’s, which
broker-dealer falls under the jurisdiction of the Securities Investors Protection
Corporation; or (3) any other entity rated “A” or better by Standard & Poor’s and
Moody’s, provided that:
(a)
The market value of the collateral is maintained at levels
equal to 102% of the amount of cash transferred by the Trustee to the provider of the
repurchase agreement plus accrued interest with the collateral being valued weekly
and marked-to-market at one current market price plus accrued interest;
(b)
The Trustee or a third party acting solely as agent therefor
or for the District (the “Holder of the Collateral”) has possession of the collateral or
the collateral has been transferred to the Holder of the Collateral in accordance with
applicable state and federal laws (other than by means of entries on the transferor’s
books);
E-3
(c)
The repurchase agreement shall state and an opinion of
counsel shall be rendered at the time such collateral is delivered that the Holder of
the Collateral has a perfected first priority security interest in the collateral, any
substituted collateral and all proceeds thereof (in the case of bearer securities, this
means the Holder of the Collateral is in possession);
(d)
The repurchase agreement shall provide that if during its
term the provider’s rating by either Moody’s or Standard & Poor’s is withdrawn or
suspended or falls below “A-“ by Standard & Poor’s or “A3” by Moody’s, as
appropriate, the provider must, at the direction of the District or the Trustee, within
10 days of receipt of such direction, repurchase all collateral and terminate the
agreement, with no penalty or premium to the District or Trustee.
(11)
Investment agreements with a domestic or foreign bank or corporation the
long-term debt of which or, in the case of a guaranteed corporation the long-term debt, or, in
the case of a monoline financial guaranty insurance company, claims paying ability, of the
guarantor is rated at least “AA-” by Standard & Poor’s and “Aa3” by Moody’s; provided that,
by the terms of the investment agreement:
(A)
interest payments are to be made to the Trustee at times and in
amounts as necessary to pay debt service (or, if the investment agreement is for the
Costs of Issuance Fund, construction draws) on the Bonds;
(B)
the invested funds are available for withdrawal without penalty or
premium, at any time upon not more than seven days’ prior notice; the District and
the Trustee agree to give or cause to be given notice in accordance with the terms of
the investment agreement so as to receive funds thereunder with no penalty or
premium paid;
(C)
the investment agreement shall state that is the unconditional and
general obligation of, and is not subordinated to any other obligation of, the provider
thereof, or, in the case of a bank, that the obligation of the bank to make payments
under the agreement ranks pari passu with the obligations of the bank to its other
depositors and its other unsecured and unsubordinated creditors;
(D)
the District and the Trustee receives the opinion of domestic
counsel (which opinion shall be addressed to the District and the Trustee) that such
investment agreement is legal, valid, binding and enforceable upon the provider in
accordance with its terms and of foreign counsel (if applicable) in form and
substance acceptable, and addressed to, the District;
(E)
the investment agreement shall provide that if during its term.
(1)
the provider’s rating by either Standard & Poor’s or
Moody’s falls below “AA-” or “Aa3”, respectively, the provider shall, at its option,
within 10 days of receipt of publication of such downgrade, either (i) collateralize the
investment agreement by delivering or transferring in accordance with applicable
state and federal laws (other than by means of entries on the provider’s books) to the
District, the Trustee or a third party acting solely as agent therefor (the “Holder of the
Collateral”) collateral free and clear of any third-party liens or claims the market
value of which collateral is maintained at levels and upon such conditions as would
be acceptable to Standard & Poor’s and Moody’s to maintain an “A” rating in an “A”
E-4
rated structured financing (with a market value approach); or (ii) repay the principal
of and accrued but unpaid interest on the investment; and
(2)
the provider’s rating by either Standard & Poor’s or
Moody’s is withdrawn or suspended or falls below “A-” or “A3”, respectively, the
provider must, at the direction of the District or the Trustee, within 10 days of receipt
of such direction, repay the principal of and accrued but unpaid interest on the
investment, in either case with no penalty or premium to the District or Trustee; and
(F)
The investment agreement shall state and an opinion of counsel
shall be rendered, in the event collateral is required to be pledged by the provider
under the terms of the investment agreement at the time such collateral is delivered,
that the Holder of the Collateral has a perfected first priority security interest in the
collateral, any substituted collateral and all proceeds thereof (in the case of bearer
securities, this means the Holder of the Collateral is in possession); and
(G)
the investment agreement must provide that if during its term
(1)
the provider shall default in its payment obligations, the
provider’s obligations under the investment agreement shall, at the direction of the
District or the Trustee, be accelerated and amounts invested and accrued but unpaid
interest thereon shall be repaid to the District or Trustee, as appropriate, and
(2)
the provider shall become insolvent, not pay its debts as
they become due, be declared or petition to be declared bankrupt, etc. (“event of
insolvency”), the provider’s obligations shall automatically be accelerated and
amounts invested and accrued but unpaid interest thereon shall be repaid to the
District or Trustee, as appropriate.
(12)
The State of California Local Agency Investment Fund; provided that the
Trustee may restrict investments in such Fund to the extent necessary to keep monies
available for the purposes of the Indenture.
“Authorized Representative of the City” means the Mayor of the City, the City Manager of
the City or any other person or persons designated by the Mayor or the City Manager by a written
certificate signed by the Mayor or the City Manager and containing the specimen signature of each
such person.
“Authorized Representative of the District” means Mayor of the City, the City Manager of the
City or any other person or persons designated by the Mayor or the City Manager by a written
certificate signed by the Mayor or the City Manager and containing the specimen signature of each
such person.
“Bond Counsel” means an attorney at law or a firm of attorneys selected by the District of
nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds
issued by states and their political subdivisions duly admitted to the practice of law before the highest
court of any state of the United States of America or the District of Columbia.
“Bond Register” means the books which the Trustee shall keep or cause to be kept on which
the registration and transfer of the Bonds and any Parity Bonds shall be recorded.
“Bondowner” or “Owner” means the person or persons in whose name or names any Bond or
Parity Bond is registered.
E-5
“Bonds” means the District’s Special Tax Bonds, Issue of 2014.
“Bond Year” means the twelve month period commencing on September 2 of each year and
ending on September 1 of the following year, except that the first Bond Year for the Bonds or an issue
of Parity Bonds shall begin on the Delivery Date and end on the first September 1 which is not more
than 12 months after the Delivery Date.
“Business Day” means a day which is not a Saturday or Sunday or a day of the year on which
banks in New York, New York, Los Angeles, California, or the city where the corporate trust office of
the Trustee is located, are not required or authorized to remain closed.
“Certificate of an Authorized Representative” means a written certificate or warrant request
executed by an Authorized Representative of the City.
“Certificate of the Special Tax Administrator” means a certificate of an Authorized
Representative of the District, or any successor entity appointed by the City, to administer the
calculation and collection of the Special Taxes.
“City” means the City of Calexico, California.
“Code” means the Internal Revenue Code of 1986, as amended, and any Regulations, rulings,
judicial decisions, and notices, announcements, and other releases of the United States Treasury
Department or Internal Revenue Service interpreting and construing it.
“Continuing Disclosure Agreement” means that certain Continuing Disclosure Agreement
dated as of February 1, 2014, executed and delivered by the District and Urban Futures, Inc., together
with any amendments thereto.
“Costs of Issuance” means the costs and expenses incurred in connection with the issuance
and sale of the Bonds and any Parity Bonds, including the acceptance and initial annual fees and
expenses of the Trustee, the Financial Advisor to the City, the Special Tax Consultant, legal fees and
expenses, costs of printing the Bonds and any Parity Bonds and the preliminary and final official
statements for the Bonds and any Parity Bonds, fees of financial consultants and all other related fees
and expenses, as set forth in a Certificate of an Authorized Representative of the City.
“Costs of Issuance Account” means the fund by that name established pursuant to the
Indenture.
“Covenant Agreement” means that certain Agreement re Covenants dated July 2, 2013, by
and between the City and the Developer.
“Delivery Date” means, with respect to the Bonds, the date on which the bonds of such issue
were issued and delivered to the initial purchasers thereof.
“Developed Property” means real property within Improvement Area No. 1 of the District for
which a building permit has been issued.
“Developer” means Corsair, LLC, a Nevada limited liability company, its successors and
assigns, including Gran Plaza, LP.
“Direct Debt” means that portion of the aggregate principal amount of the Outstanding Bonds
and Parity Bonds which is allocable to the property in Improvement Area No. 1 as described below.
For this purpose there will be allocated to the property in Improvement Area No. 1 the largest
E-6
principal amount of Bonds and Parity Bonds that results in a Value at five (5) times the sum of Direct
Debt plus Overlapping Debt allocable to all property in Improvement Area No. 1 subject to the
Special Tax.
“District” means City of Calexico Community Facilities District No. 2013-1 (Gran Plaza)
established pursuant to the Act and the Resolution of Formation.
“Event of Default” shall mean the “event of default” described in the Indenture.
“Federal Securities” means any of the following: (a) non-callable direct obligations of the
United States of America (“Treasuries”), (b) evidence of ownership of proportionate interests in future
interest and principal payments on Treasuries held by a bank or trust company as custodian, under
which the owner of the investment is the real party in interest and has the right to proceed directly and
individually against the obligor and the underlying Treasuries are not available to any person claiming
through the custodian or to whom the custodian may be obligated, and (c) pre-refunded municipal
obligations rated “AAA” and “Aaa” by Standard & Poor’s and Moody’s, respectively (or any
combination thereof).
“Fiscal Year” means the period beginning on July 1 of each year and ending on the next
following June 30.
“Indenture” means the Bond Indenture, dated as of February 1, 2014, by and between the
District and the Trustee, together with any Supplemental Indenture approved pursuant to the
Indenture.
“Independent Financial Consultant” means a financial consultant or firm of such consultants
generally recognized to be well qualified in the financial consulting field, appointed and paid by the
District, who, or each of whom:
(1)
is in fact independent and not under the domination of the District or the
(2)
City; and
does not have any substantial interest, direct or indirect, in the District or the
City;
(3)
is not connected with the District or the City as a member, officer or
employee of the District or the City, but who may be regularly retained to make annual or
other reports to the District or the City.
“Interest Account” means the account by that name created and established in the Special Tax
Fund pursuant to the Indenture.
“Interest Payment Date” means each March 1 and September 1, commencing March 1, 2014;
provided, however, that, if any such day is not a Business Day, interest up to the Interest Payment
Date will be paid on the Business Day next succeeding such date.
“Maximum Annual Debt Service” means the maximum sum obtained for any Bond Year
prior to the final maturity of the Bonds and any Parity Bonds by adding the following for each Bond
Year:
(1)
the principal amount of all Outstanding Bonds and Parity Bonds payable in
such Bond Year at maturity; and
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(2)
the interest payable on the aggregate principal amount of all Bonds and
Parity Bonds Outstanding in such Bond Year if the Bonds and any Parity Bonds are retired as
scheduled.
“Moody’s” means Moody’s Investors Service, its successors and assigns.
“Net Taxes” means Special Taxes minus amounts set aside to pay Administrative Expenses.
“Nominee” shall mean the nominee of the Depository, which may be the Depository, as
determined from time to time pursuant to the Indenture.
“Ordinance” means Ordinance No. 1147 adopted by the legislative body of the District on
August 20, 2013 providing for the levying of the Special Tax, as it may be amended from time to
time, or any other ordinance adopted by the City Council levying the Special Taxes.
“Outstanding” or “Outstanding Bonds” means all Bonds and any Parity Bonds theretofore
issued by the District, except:
(1)
Bonds and any Parity Bonds theretofore cancelled or surrendered for
cancellation in accordance with the Indenture;
(2)
Bonds and any Parity Bonds for payment or redemption of which monies
shall have been theretofore deposited in trust (whether upon or prior to the maturity or the
redemption date of such Bonds and any Parity Bonds), provided that, if such Bonds and any
Parity Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall
have been given as provided in the Indenture; and
(3)
Bonds and any Parity Bonds which have been surrendered to the Trustee for
transfer or exchange pursuant to the Indenture or for which a replacement has been issued
pursuant to the Indenture.
“Overlapping Debt” means with respect to any property within Improvement Area No. 1 of
the District, the sum of (a) the aggregate amount of all unpaid assessments which are a lien on such
property and which are pledged to secure the repayment of bonds, plus (b) a portion of the principal
amount of any outstanding bonds of other community facilities districts which are payable at least
partially from special taxes to be levied on such property (the “Other CFD Bonds”) determined by
multiplying the aggregate principal amount of the Other CFD Bonds by a fraction, the numerator of
which is the amount of special taxes levied for the Other CFD Bonds on property in the District and
the denominator of which is the total amount of special taxes levied for the Other CFD Bonds on all
parcels of property which are subject to the levy of such special taxes, based upon information which
is available for the then current Fiscal Year.
“Parcels” means a lot or parcel of land designated on an Assessor’s Parcel Map with an
assigned Assessor’s Parcel Number within the boundaries of Improvement Area No. 1 of the District.
“Parity Bonds” means all bonds, notes or other similar evidences of indebtedness issued after
the date of the Indenture, payable out of the Net Taxes and which, as provided in the Indenture or any
Supplemental Indenture, rank on a parity with the Bonds.
“Participants” shall mean those broker-dealers, banks and other financial institutions from
time to time for which the Depository holds Bonds and any Parity Bonds as securities depository.
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“Person” means natural persons, firms, corporations, partnerships, associations, trusts, public
bodies and other entities.
“Prepayments” means any amounts paid by the District to the Trustee and designated by the
District as a prepayment of Special Taxes for one or more parcels in of the District made in
accordance with the RMA.
“Principal Account” means the account by that name created and established in the Special
Tax Fund pursuant to the Indenture.
“Principal Office of the Trustee” means the corporate trust office of the Trustee located in
Los Angeles, California, or such other office or offices as the Trustee may designate from time to
time, or the office of any successor Trustee where it principally conducts its business of serving as
trustee under indentures pursuant to which municipal or governmental obligations are issued.
“Project Account” means the fund by that name established pursuant to the Indenture.
“Project Costs” means the reasonable costs incurred by the Developer in the construction of
the public improvements listed on Exhibit B to the Covenant Agreement, as well as the reasonable
costs and expenses advanced by the Developer in connection with the formation of the District and the
issuance Bonds.
“Rebate Account” means the account by that name created and established in the Rebate Fund
pursuant to the Indenture and any Parity Bonds.
“Rebate Fund” means the fund by that name established pursuant to the Indenture in which
there are established the Accounts described in the Indenture.
“Rebate Regulations” means any final, temporary or proposed Regulations promulgated
under Section 148(f) of the Code.
“Record Date” means the fifteenth day of the month preceding an Interest Payment Date,
regardless of whether such day is a Business Day.
“Redemption Account” means the account by that name created and established in the Special
“Regulations” means the regulations adopted or proposed by the Department of Treasury
from time to time with respect to obligations issued pursuant to Section 103 of the Code.
“Representation Letter” shall mean the Blanket Letter of Representations from the District to
the Depository as described in the Indenture.
“Reserve Account” means the account by that name created and established in the Special
“Reserve Requirement” means that amount as of any date of calculation equal to the lesser of
(i) 10% of the initial principal amount of the Bonds and any Parity Bonds, (ii) Maximum Annual Debt
Service on the then Outstanding Bonds and any Parity Bonds; and (iii) 125% of average Annual Debt
Service on the then Outstanding Bonds and any Parity Bonds.
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“Resolution of Formation” means Resolution No. 2013-40 adopted by the City Council of the
City on August 20, 2013, pursuant to which the City formed the District and Improvement Area No. 1
therein.
“RMA” means the Rate and Method of Apportionment of Special Taxes approved by the
qualified electors of Improvement Area No. 1 of the District at the August 20, 2013 election, as
amended from time to time.
“Sinking Fund Payment” means the annual payment to be deposited in the Redemption
Account to redeem a portion of the Term Bonds in accordance with the schedules set forth in the
Indenture and any annual sinking fund payment schedule to retire any Parity Bonds which are
designated as Term Bonds.
“Special Tax Fund” means the fund by that name created and established pursuant to the
Indenture.
“Special Taxes” means the taxes levied by the legislative body of the District on property
within Improvement Area No. 1 of the District in accordance with the Ordinance, the Resolution of
Formation, the Act and the voter approval obtained at the August 20, 2013 election in Improvement
Area No. 1 of the District, including any scheduled payments and any Prepayments thereof and the net
proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special
Taxes to the amount of said lien.
“Special Tax Consultant” means General Government Management Services, Inc. or the
successor thereto.
“Standard & Poor’s” means Standard & Poor’s Ratings Services, a Standard & Poor’s
Financial Services LLC business, and division of McGraw-Hill, its successors and assigns.
“Supplemental Indenture” means any supplemental indenture amending or supplementing the
Indenture.
“Surplus Fund” means the fund by that name created and established pursuant to the
Indenture.
“Tax Certificate” means the certificate by that name to be executed by the District on a
Delivery Date to establish certain facts and expectations and which contains certain covenants relevant
to compliance with the Code.
“Term Bonds” means the Bonds maturing on September 1, 2036 and September 1, 2043 and
any term maturities of an issue of Parity Bonds as specified in a Supplemental Indenture.
“Trustee” means The Bank of New York Mellon Trust Company, N.A., a national banking
association duly organized and existing under the laws of the United States of America, with a
corporate trust office in Los Angeles, California, and its successors or assigns, or any other bank or
trust company which may at any time be substituted in its place as provided in the Indenture and any
successor thereto.
“Underwriter” means E.J. De La Rosa & Co., Inc.
“Value” means for all Parcels located within Improvement Area No. 1 of the District which
are subject to the levy of the Special Taxes and not delinquent in the payment of any Special Taxes
then due and owing, either, as selected by the District, (i) the fair market value, as of the date of the
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appraisal provided for below of such parcels, including with respect to such parcels the value of the
then existing improvements thereon, as estimated by an appraiser, who shall be a State of California
certified general real estate appraiser selected and employed by the District, in an appraisal performed
within ninety (90) days preceding the date of such determination based upon a methodology of
valuation consistent with the District’s policy for appraisals, provided that a mass appraisal
methodology may be applied when valuing Developed Property; or (ii) the full cash value of any or all
of such Parcels, including with respect to such Parcels the value of the improvements thereon, as set
forth on the last equalized assessment roll of the County Assessor of the County of Imperial.
“Verification” shall have the meaning contained in the definition of Authorized Investments
in the Indenture.
Capitalized terms not otherwise defined in the Indenture shall have the meanings ascribed to
them in the RMA.
GENERAL AUTHORIZATION AND BOND TERMS
Place and Form of Payment. The Bonds and any Parity Bonds shall be payable both as to
principal and interest, and as to any premiums upon the redemption thereof, in lawful money of the
United States of America. The principal of the Bonds and any Parity Bonds and any premiums due
upon the redemption thereof shall be payable upon presentation and surrender thereof at the Principal
Office of the Trustee, or at the designated office of any successor Trustee. Interest on any Bond or
Parity Bond shall be payable from the Interest Payment Date next preceding the date of authentication
of that Bond or Parity Bond, unless (i) such date of authentication is an Interest Payment Date in
which event interest shall be payable from such date of authentication; (ii) the date of authentication is
after a Record Date but prior to the immediately succeeding Interest Payment Date, in which event
interest shall be payable from the Interest Payment Date immediately succeeding the date of
authentication; or (iii) the date of authentication is prior to the close of business on the first Record
Date occurring after the issuance of such Bond or Parity Bond, in which event interest shall be
payable from the dated date of such Bond or Parity Bond; provided, however, that if at the time of
authentication of such Bond or Parity Bond, interest is in default, interest on that Bond or Parity Bond
shall be payable from the last Interest Payment Date to which the interest has been paid or made
available for payment or, if no interest has been paid or made available for payment on that Bond or
Parity Bond, interest on that Bond or Parity Bond shall be payable from its dated date. Interest on any
Bond or Parity Bond shall be paid to the person whose name shall appear in the Bond Register as the
Owner of such Bond or Parity Bond as of the close of business on the Record Date. Such interest
shall be paid by check of the Trustee mailed by first class mail, postage prepaid, to such Bondowner at
his or her address as it appears on the Bond Register. In addition, upon a request in writing received
by the Trustee on or before the applicable Record Date from an Owner of $1,000,000 or more in
principal amount of the Bonds or any issue of Parity Bonds, payment shall be made on the Interest
Payment Date by wire transfer in immediately available funds to an account designated by such
Owner.
Form of Bonds and Parity Bonds. The definitive Bonds may be printed from steel
engraved or lithographic plates or may be typewritten. The Bonds and the certificate of authentication
shall be substantially in the form attached to the Indenture as Exhibit A, which form is approved and
adopted as the form of such Bonds and of the certificate of authentication. Each issue of Parity
Bonds and the certificate of authentication therefor shall be in the form provided in the Supplemental
Indenture for such issue of Parity Bonds.
Until definitive Bonds or Parity Bonds, as applicable, shall be prepared, the District may
cause to be executed and delivered in lieu of such definitive Bonds or Parity Bonds temporary bonds
in typed, printed, lithographed or engraved form and in fully registered form, subject to the same
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provisions, limitations and conditions as are applicable in the case of definitive Bonds or Parity
Bonds, except that they may be in any denominations authorized by the District. Until exchanged for
definitive Bonds or Parity Bonds, as applicable, any temporary bond shall be entitled and subject to
the same benefits and provisions of the Indenture as definitive Bonds or Parity Bonds. If the District
issues temporary Bonds or Parity Bonds, it shall execute and furnish definitive Bonds or Parity Bonds,
as applicable, without unnecessary delay and thereupon any temporary Bond or Parity Bond shall be
surrendered to the Trustee at its office, without expense to the Owner, in exchange for a definitive
Bond or Parity Bond of the same issue, maturity, interest rate and principal amount in any authorized
denomination. All temporary Bonds or Parity Bonds so surrendered shall be cancelled by the Trustee
and shall not be reissued.
Execution and Authentication. The Bonds and Parity Bonds shall be signed on behalf of
the District by the manual or facsimile signature of the Mayor of the City Council of the City and
countersigned by the manual or facsimile signature of the City Clerk of the City, or any duly
appointed deputy City Clerk, in their capacity as officers of the District. In case any one or more of
the officers who shall have signed any of the Bonds or Parity Bonds shall cease to be such officer
before the Bonds or Parity Bonds so signed have been authenticated and delivered by the Trustee
(including new Bonds or Parity Bonds delivered pursuant to the provisions of the Indenture with
reference to the transfer and exchange of Bonds or Parity Bonds or to lost, stolen, destroyed or
mutilated Bonds or Parity Bonds), such Bonds and Parity Bonds shall nevertheless be valid and may
be authenticated and delivered as provided in the Indenture, and may be issued as if the person who
signed such Bonds or Parity Bonds had not ceased to hold such office.
Only the Bonds as shall bear thereon such certificate of authentication in the form set forth in
Exhibit A attached to the Indenture shall be entitled to any right or benefit under the Indenture, and no
Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have
been signed by the Trustee.
Bond Register. The Trustee will keep or cause to be kept, at its office, sufficient books for
the registration and transfer of the Bonds and any Parity Bonds which shall upon reasonable prior
notice be open to inspection by the District during all regular business hours, and, subject to the
limitations set forth in the Indenture, upon presentation for such purpose, the Trustee shall, under such
reasonable regulations as it may prescribe, register or transfer or cause to be transferred on said Bond
Register, Bonds and any Parity Bonds as provided in the Indenture.
The District and the Trustee may treat the Owner of any Bond or Parity Bond whose name
appears on the Bond Register as the absolute Owner of that Bond or Parity Bond for any and all
purposes, and the District and the Trustee shall not be affected by any notice to the contrary. The
District and the Trustee may rely on the address of the Bondowner as it appears in the Bond Register
for any and all purposes. It shall be the duty of the Bondowner to give written notice to the Trustee of
any change in the Bondowner’s address so that the Bond Register may be revised accordingly.
Registration of Exchange or Transfer. Subject to the limitations set forth in the following
paragraph, the registration of any Bond or Parity Bond may, in accordance with its terms, be
transferred upon the Bond Register by the person in whose name it is registered, in person or by his or
her duly authorized attorney, upon surrender of such Bond or Parity Bond for cancellation at the office
of the Trustee, accompanied by delivery of written instrument of transfer in a form acceptable to the
Trustee and duly executed by the Bondowner or his or her duly authorized attorney.
Bonds or Parity Bonds may be exchanged at the office of the Trustee for a like aggregate
principal amount of Bonds or Parity Bonds for other authorized denominations of the same maturity
and issue. The Trustee shall not collect from the Owner any charge for any new Bond or Parity Bond
issued upon any exchange or transfer, but shall require the Bondowner requesting such exchange or
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transfer to pay any tax or other governmental charge required to be paid with respect to such exchange
or transfer. Whenever any Bonds or Parity Bonds shall be surrendered for registration of transfer or
exchange, the District shall execute and the Trustee shall authenticate and deliver a new Bond or
Bonds or a new Parity Bond or Parity Bonds, as applicable, of the same issue and maturity, for a like
aggregate principal amount; provided that the Trustee shall not be required to register transfers or
make exchanges of (i) Bonds or Parity Bond for a period of 15 days next preceding any selection of
the Bonds or Parity Bonds to be redeemed; or (ii) any Bonds or Parity Bonds chosen for redemption.
Mutilated, Lost, Destroyed or Stolen Bonds or Parity Bonds. If any Bond or Parity Bond
shall become mutilated, the District shall execute, and the Trustee shall authenticate and deliver, a
new Bond or Parity Bond of like tenor, date, issue and maturity in exchange and substitution for the
Bond or Parity Bond so mutilated, but only upon surrender to the Trustee of the Bond or Parity Bond
so mutilated. Every mutilated Bond so surrendered to the Trustee shall be cancelled by the Trustee
pursuant to the Indenture. If any Bond or Parity Bond shall be lost, destroyed or stolen, evidence of
such loss, destruction or theft may be submitted to the Trustee and, if such evidence is satisfactory to
the Trustee and, if any indemnity satisfactory to the Trustee shall be given, the District shall execute
and the Trustee shall authenticate and deliver, a new Bond or Parity Bonds, as applicable, of like
tenor, maturity and issue, numbered and dated as the Trustee shall determine in lieu of and in
substitution for the Bond or Parity Bond so lost, destroyed or stolen. Any Bond or Parity Bond issued
in lieu of any Bond or Parity Bond alleged to be mutilated, lost, destroyed or stolen, shall be equally
and proportionately entitled to the benefits of the Indenture with all other Bonds or Parity Bonds
issued under the Indenture. The Trustee shall not treat both the original Bond or Parity Bond and any
replacement Bond or Parity Bond as being Outstanding for the purpose of determining the principal
amount of Bonds or Parity Bonds which may be executed, authenticated and delivered under the
Indenture or for the purpose of determining any percentage of Bonds or Parity Bonds Outstanding
thereunder, but both the original and replacement Bond or Parity Bond shall be treated as one and the
same. Notwithstanding any other provision of the Indenture, in lieu of delivering a new Bond or
Parity Bond which has been mutilated, lost, destroyed or stolen, and which has matured, the Trustee
may make payment with respect to such Bonds or Parity Bonds.
Validity of Bonds and Parity Bonds. The validity of the authorization and issuance of the
Bonds and Parity Bonds shall not be affected in any way by any defect in any proceedings taken by
the District with respect to the issuance of the Bonds, and the recital contained in the Bonds or any
Parity Bonds that the same are issued pursuant to the Act and other applicable laws of the State shall
be conclusive evidence of their validity and of the regularity of their issuance.
CREATION OF FUNDS AND APPLICATION OF PROCEEDS
Creation of Funds; Application of Proceeds.
(a)
There is created and established and shall be maintained by the Trustee the following
funds and accounts:
(1)
The Community Facilities District No. 2013-1 Improvement Area No. 1
Special Tax Fund (the “Special Tax Fund”) (in which there shall be established and created
an Interest Account, a Principal Account, a Redemption Account, a Reserve Account and an
Administrative Expense Account.)
(2)
Rebate Fund (the “Rebate Fund”) (in which there shall be established a Rebate Account and
an Alternative Penalty Account).
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(3)
Acquisition and Construction Fund (the “Acquisition and Construction Fund”) (in which
there shall be established a Costs of Issuance Account and a Project Account).
(4)
Surplus Fund (the “Surplus Fund”).
The amounts on deposit in the foregoing funds and accounts shall be held by the Trustee and
the Trustee shall invest and disburse the amounts in such funds and accounts in accordance with the
provisions of the Indenture and shall disburse investment earnings thereon in accordance with the
Indenture.
The Trustee, at the direction of an Authorized Representative of the City, may create new
funds, accounts or subaccounts, or may create additional accounts within any of the foregoing funds
and accounts.
In connection with the issuance of any Parity Bonds, the Trustee, at the direction of an
Authorized Representative of the District, may create new funds, accounts or subaccounts, or may
create additional accounts and subaccounts within any of the foregoing funds and accounts for the
purpose of separately accounting for the proceeds of the Bonds and any Parity Bonds.
Deposits to and Disbursements from Special Tax Fund.
(a)
Except for Prepayments which shall be deposited to the Redemption Account as
specified in a Certificate of an Authorized Representative, the Trustee shall, on each date on which the
Special Taxes are received from the District, deposit the Special Taxes in the Special Tax Fund to be
held in trust for the Owners. The Trustee shall transfer the Special Taxes on deposit in the Special
Tax Fund on the dates and in the amounts set forth in the Indenture, in the following order of priority,
to:
(1)
the Administrative Expense Account of the Special Tax Fund;
(2)
the Interest Account of the Special Tax Fund;
(3)
the Principal Account of the Special Tax Fund;
(4)
the Redemption Account of the Special Tax Fund;
(5)
the Reserve Account of the Special Tax Fund;
(6)
the Rebate Fund; and
(7)
the Surplus Fund.
(b)
At maturity of all of the Bonds and Parity Bonds and, after all principal and interest
then due on the Bonds and Parity Bonds then Outstanding has been paid or provided for and any
amounts owed to the Trustee have been paid in full, moneys in the Special Tax Fund and any accounts
therein may be used by the District for any lawful purpose.
Administrative Expense Account of the Special Tax Fund. The Trustee shall transfer from
the Special Tax Fund and deposit in the Administrative Expense Account of the Special Tax Fund
from time to time amounts necessary to make timely payment of Administrative Expenses as set forth
in a Certificate of an Authorized Representative of the District. Moneys in the Administrative
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Expense Account of the Special Tax Fund shall be invested in any Authorized Investments as directed
in writing by an Authorized Representative of the District and shall be disbursed as directed in a
Certificate of an Authorized Representative.
Interest Account and Principal Account of the Special Tax Fund. The principal of and
interest due on the Bonds and any Parity Bonds until maturity, other than principal due upon
redemption, shall be paid by the Trustee from the Principal Account and the Interest Account of the
Special Tax Fund, respectively. For the purpose of assuring that the payment of principal of and
interest on the Bonds and any Parity Bonds will be made when due, after making the transfer required
by the Indenture, at least one Business Day prior to each March 1 and September 1, the Trustee shall
make the following transfers from the Special Tax Fund, first to the Interest Account and then to the
Principal Account; provided, however, that to the extent that deposits have been made in the Interest
Account or the Principal Account from the proceeds of the sale of the Bonds or an issue of Parity
Bonds or otherwise, the transfer from the Special Tax Fund need not be made; and provided, further,
that, if amounts in the Special Tax Fund (exclusive of the Administrative Expense Account and
Reserve Account) are inadequate to make the foregoing transfers, then any deficiency shall be made
up by transfers from the Reserve Account:
(a)
To the Interest Account, an amount such that the balance in the Interest Account one
Business Day prior to each Interest Payment Date shall be equal to the installment of interest due on
the Bonds and any Parity Bonds on said Interest Payment Date and any installment of interest due on a
previous Interest Payment Date which remains unpaid. Moneys in the Interest Account shall be used
for the payment of interest on the Bonds and any Parity Bonds as the same become due.
(b)
To the Principal Account, an amount such that the balance in the Principal Account
one Business Day prior to September 1 of each year, commencing September 1, 2014, shall equal the
principal payment due on the Bonds and any Parity Bonds maturing on such September 1 and any
principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal
Account shall be used for the payment of the principal of such Bonds and any Parity Bonds as the
same become due at maturity.
(c)
Notwithstanding the foregoing, there shall be deposited in the Interest Account the
amount specified in the Indenture which shall be applied as a credit on the interest payments due on
the Bonds on the Interest Payment Dates and in the amounts set forth in the Indenture.
Redemption Account of the Special Tax Fund.
(a)
Prepayments deposited to the Redemption Account, along with any amounts that an
Authorized Officer of the District directs to be transferred from the Reserve Account to the
Redemption Account in connection with any Prepayments, shall be applied on the redemption date
established pursuant to the Indenture for the use of such Prepayments to the payment of the principal
of, premium, and interest on the Bonds and any Parity Bonds to be redeemed with such Prepayments;
provided that amounts shall be transferred from the Reserve Account only if immediately following
such redemption the amount in the Reserve Account will meet the Reserve Requirement.
(b)
Moneys set aside in the Redemption Account shall be used solely for the purpose of
redeeming Bonds and any Parity Bonds and shall be applied on or after the redemption date to the
payment of principal of and premium, if any, on the Bonds and any Parity Bonds to be redeemed upon
presentation and surrender of such Bonds and any Parity Bonds and in the case of an extraordinary
redemption from Prepayments to pay the interest thereon; provided, however, that in lieu or partially
in lieu of such call and redemption, moneys deposited in the Redemption Account, other than
Prepayments (which shall be used to redeem Bonds and Parity Bonds on the redemption date
established pursuant to Section 4.3) may be used to purchase Outstanding Bonds and any Parity Bonds
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in the manner provided in the Indenture. Purchases of Outstanding Bonds and any Parity Bonds may
be made by the District at public or private sale as and when and at such prices as the District may in
its discretion determine but only at prices (including brokerage or other expenses) not more than par
plus accrued interest, plus, in the case of moneys set aside for an extraordinary redemption, the
premium applicable at the next following call date according to the premium schedule established
pursuant to the Indenture. Any accrued interest payable upon the purchase of Bonds and any Parity
Bonds may be paid from the amount reserved in the Interest Account of the Special Tax Fund for the
payment of interest on the next following Interest Payment Date.
Reserve Account of the Special Tax Fund. There shall be maintained in the Reserve
Account of the Special Tax Fund an amount equal to the Reserve Requirement. The amounts in the
Reserve Account shall be applied as follows:
(a)
Moneys in the Reserve Account shall be used solely for the purpose of paying the
principal of, including Sinking Fund Payments, and interest on the Bonds and any Parity Bonds when
due in the event that the moneys in the Interest Account and the Principal Account of the Special Tax
Fund are insufficient therefor and for the purpose of making any required transfer to the Rebate Fund
pursuant to the Indenture upon written direction from the District. If the amounts in the Interest
Account or the Principal Account of the Special Tax Fund are insufficient to pay the principal of or
interest on any Bonds and Parity Bonds when due, or amounts in the Special Tax Fund are insufficient
to make transfers to the Rebate Fund when required, the Trustee shall withdraw from the Reserve
Account for deposit in the Interest Account or the Principal Account of the Special Tax Fund or the
Rebate Fund, as applicable, moneys necessary for such purposes.
(b)
Whenever moneys are withdrawn from the Reserve Account, after making the
required transfers referred to in the Indenture, the Trustee shall transfer to the Reserve Account from
available moneys in the Special Tax Fund, or from any other legally available funds which the District
elects to apply to such purpose, the amount needed to restore the amount of such Reserve Account to
the Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available for transfer to
the Reserve Account only if the Trustee determines that such amounts will not be needed to make the
deposits required to be made to the Administrative Expense Account, the Interest Account, the
Principal Account or the Redemption Account of the Special Tax Fund on or before the next
September 1. If amounts in the Special Tax Fund together with any other amounts transferred to
replenish the Reserve Account are inadequate to restore the Reserve Account to the Reserve
Requirement, then the District shall include the amount necessary to restore the Reserve Account to
the Reserve Requirement in the next annual Special Tax levy to the extent of the maximum permitted
Special Tax rates.
(c)
In connection with a redemption of Bonds or any Parity Bonds pursuant to the
Indenture, or a defeasance of Bonds or any Parity Bonds in accordance with the Indenture, amounts in
the Reserve Account may be applied to such redemption or defeasance so long as the amount on
deposit in the Reserve Account following such redemption or any partial defeasance equals the
Reserve Requirement. The District shall set forth in a Certificate of an Authorized Representative the
amount in the Reserve Account to be transferred to the Redemption Account on a redemption date or
to be transferred pursuant to the Indenture to partially defease Bonds, and the Trustee shall make such
transfer on the applicable redemption or defeasance date, subject to the limitation in the preceding
sentence.
(d)
To the extent that the Reserve Account is at the Reserve Requirement as of the first
day of the final Bond Year for the Bonds or an issue of Parity Bonds, amounts in the Reserve Account
may be applied to pay the principal of and interest due on the Bonds and Parity Bonds in the final
Bond Year for such issue. Moneys in the Reserve Account in excess of the Reserve Requirement not
transferred in accordance with the preceding provisions of this section shall be withdrawn from the
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Reserve Account on the Business Day before each March 1 and September 1 and shall be transferred
to the Interest Account of the Special Tax Fund.
Rebate Fund.
(a)
The Trustee shall establish and maintain a fund separate from any other fund
established and maintained under the Indenture designated as the Rebate Fund and shall establish a
separate Rebate Account and Alternative Penalty Account therein. The District shall cause to be
deposited in the Rebate Fund such amounts as required under the applicable Tax Certificate. All
money at any time deposited in the Rebate Account or the Alternative Penalty Account of the Rebate
Fund shall be held by the Trustee in trust, for payment to the United States Treasury. A separate
subaccount of the Rebate Account and the Alternative Penalty Account shall be established for the
Bonds and each issue of Parity Bonds the interest on which is excluded from gross income for federal
income tax purposes. All amounts on deposit in the Rebate Fund shall be governed by the Indenture
and the Tax Certificate for such issue.
Without limiting the generality of the foregoing, the District agrees that there shall be
paid from time to time all amounts required to be rebated to the United States pursuant to Section
148(f) of the Code and any temporary, proposed or final treasury regulations as may be applicable to
the Bonds from time to time, which the District covenants to pay or cause to be paid to the United
States at the times and in the amounts determined under the Tax Certificate. The Trustee agrees to
comply with all instructions given to it by the District in accordance with this covenant. The Trustee
shall conclusively be deemed to have complied with the provisions of the Indenture if it follows the
instructions of the District and shall not be required to take any actions under the Indenture in the
absence of instructions from the District.
(b)
Disposition of Unexpended Funds. Any funds remaining in the Accounts of the
Rebate Fund with respect to the Bonds or an issue of Parity Bonds after payment in full of such issue
and after making the payments required to comply with the Indenture and the Tax Certificate may be
withdrawn by the Trustee at the written direction of the District and utilized in any manner by the
District.
(c)
Survival of Defeasance and Final Payment. Notwithstanding anything in the
Indenture to the contrary, the obligation to comply with the requirements of the Indenture shall
survive the defeasance and final payment of the Bonds and any Parity Bonds with respect to which an
Account has been created in the Rebate Fund.
(d)
Amendment Without Consent of Owners. Portions of the Indenture may be deleted
or amended in any manner without the consent of the Owners, provided that prior to such event there
is delivered to the District an opinion of Bond Counsel to the effect that such deletion or amendment
will not adversely affect the exclusion from gross income for federal income tax purposes of interest
on the Bonds or any issue of Parity Bonds issued on a tax-exempt basis. Notwithstanding any
provision of this section, if the District shall provide to the Trustee an opinion of a nationally
recognized bond or tax counsel that any specified action required under the Indenture is no longer
required or that some further or different action is required to maintain the tax-exempt status of
interest on the Bonds or any Parity Bonds, the Trustee and the District may conclusively rely on such
opinion in complying with the requirements of this section, and the covenants under the Indenture
shall be deemed to be modified to that extent.
Surplus Fund. After making the transfers required by the Indenture, as soon as practicable
after each September 1, and in any event prior to each October 1, the Trustee shall transfer all
remaining amounts in the Special Tax Fund to the Surplus Fund, unless on or prior to such date, it has
received a Certificate of an Authorized Representative directing that certain amounts be retained in the
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Special Tax Fund because the District has included such amounts as being available in the Special Tax
Fund in calculating the amount of the levy of Special Taxes for such Fiscal Year pursuant to the
Indenture. Moneys deposited in the Surplus Fund will be transferred by the Trustee at the direction of
an Authorized Representative of the District (i) to the Interest Account or the Principal Account of the
Special Tax Fund to pay the principal of and interest on the Bonds and any Parity Bonds when due in
the event that moneys in the Special Tax Fund and the Reserve Account of the Special Tax Fund are
insufficient therefor; (ii) to the Reserve Account in order to replenish the Reserve Account to the
Reserve Requirement; (iii) to the Administrative Expense Account of the Special Tax Fund to pay
Administrative Expenses to the extent that the amounts on deposit in the Administrative Expense
Account of the Special Tax Fund are insufficient to pay Administrative Expenses; or (iv) for any other
lawful purpose of the District.
The amounts in the Surplus Fund are not pledged to the repayment of the Bonds or the Parity
Bonds and may be used by the District for any lawful purpose. In the event that the District
reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt service on any
Outstanding Bonds or Parity Bonds, the District will notify the Trustee in a Certificate of an
Authorized Representative and the Trustee will segregate such amount into a separate subaccount and
the moneys on deposit in such subaccount of the Surplus Fund shall be invested at the written
direction of the District in Authorized Investments the interest on which is excludable from gross
income under Section 103 of the Code (other than bonds the interest on which is a tax preference item
for purposes of computing the alternative minimum tax of individuals and corporations under the
Code) or in Authorized Investments at a yield not in excess of the yield on the issue of Bonds or Parity
Bonds to which such amounts are to be applied, unless, in the opinion of Bond Counsel, investment at
a higher yield will not adversely affect the exclusion from gross income for federal income tax
purposes of interest on the Bonds or any Parity Bonds which were issued on a tax-exempt basis for
federal income tax purposes.
Acquisition and Construction Fund.
(a)
The moneys in the Costs of Issuance Account shall be disbursed by the Trustee
pursuant to a Certificate of an Authorized Representative of the District to pay Costs of Issuance, and
any remaining balance therein on the date which is six months after the date of issuance of the Bonds
shall be transferred by the Trustee to the Project Account as directed in writing by an Authorized
Representative of the District.
(b)
The moneys in the Project Account of the Acquisition and Construction Fund shall
be applied exclusively to pay the Project Costs. Amounts for Project Costs shall be disbursed by the
Trustee from the Project Account of the Acquisition and Construction Fund as specified in a Request
for Disbursement of Project Costs, substantially in the form of Exhibit B attached to the Indenture,
which must be submitted in connection with each requested disbursement. The District shall submit a
Request for Disbursement of Project Costs within 30 days of its receipt of a Developer Request for
Disbursement of Project Costs, substantially in the form set forth in Exhibit C attached to the
Indenture, together with such supporting documentation as the District reasonably requires to
determine the eligibility of such Project Costs.
(c)
Upon receipt of a Certificate of an Authorized Representative of the District stating
that all or a specified portion of the amount remaining in the Acquisition and Construction Fund is no
longer needed to pay Project Costs, the Trustee shall transfer all or such specified portion, as
applicable, of the moneys remaining on deposit in the Acquisition and Construction Fund to the
Principal Account or the Redemption Account of the Special Tax Fund or to the Surplus Fund, as
directed in the Certificate, provided that in connection with any direction to transfer amounts to the
Surplus Fund there shall have been delivered to the Trustee with such Certificate an opinion of Bond
Counsel to the effect that such transfer to the Surplus Fund will not adversely affect the exclusion
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from gross income for federal income tax purposes of interest on the Bonds or any Parity Bonds which
were issued on a tax-exempt basis for federal income tax purposes.
Investments. Moneys held in any of the Funds and Accounts under the Indenture shall be
invested at the written direction of the District in accordance with the limitations set forth below only
in Authorized Investments which shall be deemed at all times to be a part of such Funds and
Accounts. Any loss resulting from such Authorized Investments shall be credited or charged to the
Fund or Account from which such investment was made, and any investment earnings on a Fund or
Account shall be applied as follows: (i) investment earnings on all amounts deposited in the Costs of
Issuance Fund, the Special Tax Fund, the Surplus Fund and the Rebate Fund and each Account therein
(other than the Reserve Account of the Special Tax Fund) shall be deposited in those respective Funds
and Accounts, and (ii) investment earnings on all amounts deposited in the Reserve Account shall be
deposited therein to be applied as set forth in the Indenture. Moneys in the Funds and Accounts held
under the Indenture shall be invested by the Trustee as directed in writing by the District, from time to
time, in Authorized Investments subject to the following restrictions:
(a)
Moneys in the Costs of Issuance Fund shall be invested in Authorized Investments
which will by their terms mature, or in the case of an Investment Agreement are available without
penalty, as close as practicable to the date the District estimates the moneys represented by the
particular investment will be needed for withdrawal from the Costs of Issuance Fund.
(b)
Moneys in the Interest Account, the Principal Account and the Redemption Account
of the Special Tax Fund shall be invested only in Authorized Investments which will by their terms
mature, or in the case of an Investment Agreement are available for withdrawal without penalty, on
such dates so as to ensure the payment of principal of, premium, if any, and interest on the Bonds and
any Parity Bonds as the same become due.
(c)
Monies in the Reserve Account of the Special Tax Fund may be invested only in
Authorized Investments; provided that no such Authorized Investment of amounts in the Reserve
Account shall mature later than the final maturity date of the Bonds or any Parity Bonds.
(d)
Moneys in the Rebate Fund shall be invested only in Authorized Investments of the
type described in clause (1) of the definition thereof which by their terms will mature, as nearly as
practicable, on the dates such amounts are needed to be paid to the United States Government
pursuant to the Indenture or in Authorized Investments of the type described in clause (7) of the
definition thereof.
(e)
In the absence of written investment directions from the District, the Trustee shall
invest solely in Authorized Investments specified in clause (7) of the definition thereof.
Notwithstanding the foregoing, any funds held in the Redemption Account of the Special Tax
Fund for more than 13 months shall be invested in Authorized Investments that yield interest at a rate
that is not in excess than the yield on the Bonds.
The Trustee shall sell, or present for redemption, any Authorized Investment whenever it may
be necessary to do so in order to provide moneys to meet any payment or transfer to such Funds and
Accounts or from such Funds and Accounts. For the purpose of determining at any given time the
balance in any such Funds and Accounts, any such investments constituting a part of such Funds and
Accounts shall be valued at their cost, except that amounts in the Reserve Account shall be valued at
the market value thereof at least annually on or before each September 1. In making any valuations
under the Indenture, the Trustee may utilize such computerized securities pricing services as may be
available to it, including, without limitation, those available through its regular accounting system, and
conclusively rely thereon. Notwithstanding anything in the Indenture to the contrary, the Trustee shall
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not be responsible for any loss from investments, sales or transfers undertaken in accordance with the
provisions of the Indenture.
The Trustee may act as agent in the making or disposing of any investment and shall be
entitled to its customary fee for making such investment. The Trustee may sell at the best market
price obtainable, or present for redemption, any Authorized Investment so purchased whenever it shall
be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement
from the fund or account to which such Authorized Investment is credited, and, subject to the
provisions of the Indenture, the Trustee shall not be liable or responsible for any loss resulting from
such investment. For investment purposes, the Trustee may commingle the funds and accounts
established under the Indenture, but shall account for each separately.
The District acknowledges that, to the extent regulations of the Comptroller of the Currency
or other applicable regulatory entity grant the District the right to receive brokerage confirmations of
security transactions as they occur, the District specifically waives receipt of such confirmations to the
extent permitted by law. The Trustee will furnish the District periodic cash transaction statements
which shall include detail for all investment transactions made by the Trustee under the Indenture.
REDEMPTION OF BONDS
Selection of Bonds for Redemption. If less than all of the Bonds Outstanding are to be
redeemed, the portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in
the principal amount of $5,000 or an integral multiple thereof. In selecting portions of such Bonds for
redemption, the Trustee shall treat such Bonds as representing that number of Bonds of $5,000
denominations which is obtained by dividing the principal amount of such Bonds to be redeemed in
part by $5,000. The Trustee shall promptly notify the District in writing of the Bonds, or portions
thereof, selected for redemption.
Notice of Redemption. When Bonds are due for redemption under the Indenture, the Trustee
shall give notice, in the name of the District, of the redemption of such Bonds; provided, however, that
such notice for optional redemption shall be conditioned on there being on deposit on the redemption
date sufficient money to pay the redemption price of the Bonds to be redeemed and may be further
conditioned as stated in the notice of redemption. If any condition stated in the redemption notice
shall not have been satisfied on or prior to the redemption date: (i) the redemption notice shall be of
no force and effect, (ii) the District shall not be required to redeem such Bonds, (iii) the redemption
shall not be made, and (iv) the Trustee shall within a reasonable time thereafter give notice to the
persons in the manner in which the conditional redemption notice was given that such condition or
conditions were not met and that the redemption was canceled.
Such notice of redemption shall (i) specify the CUSIP numbers (if any), the bond numbers
and the maturity date or dates of the Bonds selected for redemption, except that where all of the Bonds
are subject to redemption, or all the Bonds of one maturity, are to be redeemed, the bond numbers of
such issue need not be specified; (ii) state the date fixed for redemption and surrender of the Bonds to
be redeemed; (iii) state the redemption price; (iv) state the place or places where the Bonds are to be
redeemed; (v) in the case of Bonds to be redeemed only in part, state the portion of such Bond which
is to be redeemed; (vi) state the date of issue of the Bonds as originally issued; (vii) state the rate of
interest borne by each Bond being redeemed; and (viii) state any other descriptive information needed
to identify accurately the Bonds being redeemed as shall be specified by the Trustee. Such notice
shall further state that on the date fixed for redemption, there shall become due and payable on each
Bond or portion thereof called for redemption, the principal thereof, together with any premium, and
interest accrued to the redemption date, and that from and after such date, interest thereon shall cease
to accrue and be payable. At least 30 days but no more than 45 days prior to the redemption date, the
Trustee shall mail a copy of such notice, by first class mail, postage prepaid, to the respective Owners
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thereof at their addresses appearing on the Bond Register, and to the original purchaser of the Bonds.
The actual receipt by the Owner of any Bond or the original purchaser of any Bond of notice of such
redemption shall not be a condition precedent to redemption, and neither the failure to receive nor any
defect in such notice shall affect the validity of the proceedings for the redemption of such Bonds, or
the cessation of interest on the redemption date. A certificate by the Trustee that notice of such
redemption has been given as provided in the Indenture shall be conclusive as against all parties and
the Owner shall not be entitled to show that he or she failed to receive notice of such redemption.
In addition to the foregoing notice, further notice shall be given by the Trustee as set out
below, but no defect or omission in said further notice nor any failure to give all or any portion of such
further notice shall in any manner defeat the legality or effectiveness of a call for redemption if notice
thereof is given as above prescribed.
Each further notice of redemption shall be sent not later than the date that notice of
redemption is mailed to the Bondowners pursuant to the first paragraph of this section by registered or
certified mail or overnight delivery service to the Depository and to any other registered securities
depositories then in the business of holding substantial amounts of obligations of types comprising the
Bonds as determined by the Trustee and to one or more of the national information services that the
District determines are in the business of disseminating notice of redemption of obligations such as the
Bonds.
Upon the payment of the redemption price of any Bonds being redeemed, each check or other
transfer of funds issued for such purpose shall to the extent practicable bear the CUSIP number
identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other
transfer.
Partial Redemption of Bonds and Parity Bonds. Upon surrender of any Bond or Parity
Bond to be redeemed in part only, the District shall execute and the Trustee shall authenticate and
deliver to the Bondowner, at the expense of the District, a new Bond or Bonds or a new Parity Bond
or Parity Bonds of authorized denominations equal in aggregate principal amount to the unredeemed
portion of the Bonds or Parity Bonds surrendered, with the same interest rate and the same maturity.
Effect of Notice and Availability of Redemption Money. Notice of redemption having
been duly given, as provided in the Indenture, and the amount necessary for the redemption having
been made available for that purpose and being available therefor on the date fixed for such
redemption:
(a)
the Bonds and Parity Bonds, or portions thereof, designated for redemption shall, on
the date fixed for redemption, become due and payable at the redemption price thereof as provided in
the Indenture or in any Supplemental Indenture with respect to any Parity Bonds, anything in the
Indenture or in the Bonds or Parity Bonds to the contrary notwithstanding;
(b)
upon presentation and surrender thereof at the office of the Trustee, the redemption
price of such Bonds shall be paid to the Owners thereof;
(c)
as of the redemption date the Bonds or the Parity Bonds, or portions thereof so
designated for redemption, shall be deemed to be no longer Outstanding and such Bonds, or portions
thereof, shall cease to bear further interest; and
(d)
as of the date fixed for redemption no Owner of any of the Bonds, or portions thereof
so designated for redemption, shall be entitled to any of the benefits of the Indenture or any
Supplemental Indenture, or to any other rights, except with respect to payment of the redemption price
and interest accrued to the redemption date from the amounts so made available.
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COVENANTS AND WARRANTY
Warranty. The District warrants that it shall preserve and protect the security pledged under
the Indenture to the Bonds and any Parity Bonds against all claims and demands of all persons.
Covenants. So long as any of the Bonds or Parity Bonds issued under the Indenture are
Outstanding and unpaid, the District makes the following covenants with the Bondowners under the
provisions of the Act and the Indenture (to be performed by the District or its proper officers, agents
or employees), which covenants are necessary and desirable to secure the Bonds and Parity Bonds and
tend to make them more marketable; provided, however, that said covenants do not require the District
to expend any funds or moneys other than the Special Taxes and other amounts deposited to the
Special Tax Fund:
(a)
Punctual Payment; Against Encumbrances. The District covenants that it will
receive all Special Taxes in trust for the Owners and will instruct the Treasurer to deposit all Special
Taxes with the Trustee as soon as reasonably practicable following their apportionment to the District,
and the District shall have no beneficial right or interest in the amounts so deposited except as
provided by the Indenture. All such Special Taxes shall be disbursed, allocated and applied solely to
the uses and purposes set forth in the Indenture, and shall be accounted for separately and apart from
all other money, funds, accounts or other resources of the District.
The District covenants that it will duly and punctually pay or cause to be paid the principal of
and interest on every Bond and Parity Bond issued under the Indenture, together with the premium, if
any, thereon on the date, at the place and in the manner set forth in the Bonds and the Parity Bonds
and in accordance with the Indenture to the extent that Net Taxes and other amounts pledged under the
Indenture are available therefor, and that the payments into the Funds and Accounts created under the
Indenture will be made, all in strict conformity with the terms of the Bonds, any Parity Bonds, the
Indenture, and any Supplemental Indenture, and that it will faithfully observe and perform all of the
conditions, covenants and requirements of the Indenture and all Supplemental Indentures and of the
Bonds issued under the Indenture.
The District will not mortgage or otherwise encumber, pledge or place any charge upon any
of the Special Taxes except as provided in the Indenture, and will not issue any obligation or security
having a lien or charge upon the Special Taxes superior to or on a parity with the Bonds, other than
Parity Bonds. Nothing in the Indenture shall prevent the District from issuing or incurring
indebtedness which is payable from a pledge of Special Taxes which is subordinate in all respects to
the pledge of Special Taxes to repay the Bonds and the Parity Bonds.
(b)
Levy of Special Tax. Beginning in Fiscal Year 2015-16 and so long as any Bonds or
Parity Bonds are Outstanding, the legislative body of the District covenants to levy the Special Tax in
an amount sufficient, together with other amounts on deposit in the Special Tax Fund, to pay (1) the
principal of and interest on the Bonds and any Parity Bonds when due, (2) the Administrative
Expenses, and (3) any amounts required to replenish the Reserve Account of the Special Tax Fund to
the Reserve Requirement. The District further covenants that it will take no actions that would
discontinue or cause the discontinuance of the Special Tax levy or the District’s authority to levy the
Special Tax for so long as the Bonds and any Parity Bonds are Outstanding.
(c)
Commence Foreclosure Proceedings. The District covenants for the benefit of the
Owners of the Bonds and any Parity Bonds that it (i) will commence judicial foreclosure proceedings
against parcels with delinquent Special Taxes in excess of $10,000 by the October 1 following the
close of each Fiscal Year in which such Special Taxes were due; and (ii) will commence judicial
foreclosure proceedings against all parcels with delinquent Special Taxes by the October 1 following
the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95%
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of the total Special Tax levied and the amount on deposit in the Reserve Account is at less than the
Reserve Requirement; and (iii) will diligently pursue such foreclosure proceedings until the delinquent
Special Taxes are paid.
The District covenants that it will deposit the net proceeds of any foreclosure in the Special
Tax Fund and will apply such proceeds remaining after the payment of Administrative Expenses to
make current payments of principal and interest on the Bonds and any Parity Bonds, to bring the
amount on deposit in the Reserve Account up to the Reserve Requirement and to pay any delinquent
installments of principal or interest due on the Bonds and any Parity Bonds.
(d)
Payment of Claims. The District will pay and discharge any and all lawful claims for
labor, materials or supplies which, if unpaid, might become a lien or charge upon the Net Taxes or
other funds in the Special Tax Fund (other than the Administrative Expense Account therein), or
which might impair the security of the Bonds or any Parity Bonds then Outstanding; provided,
however, that nothing in the Indenture contained shall require the District to make any such payments
so long as the District in good faith shall contest the validity of any such claims.
(e)
Books and Accounts. The District will keep proper books of records and accounts,
separate from all other records and accounts of the District, in which complete and correct entries shall
be made of all transactions relating to the improvements constructed with the proceeds of bonded
indebtedness issued by the District, the levy of the Special Tax and the deposits to the Special Tax
Fund. Such books of records and accounts shall at all times during business hours be subject to the
inspection of the Trustee or of the Owners of not less than 10% of the principal amount of the Bonds
or the Owners of not less than 10% of any issue of Parity Bonds then Outstanding or their
representatives authorized in writing.
(f)
Federal Tax Covenants. Notwithstanding any other provision of the Indenture,
absent an opinion of Bond Counsel that the exclusion from gross income of interest on the Bonds and
any Parity Bonds will not be adversely affected for federal income tax purposes, the District covenants
to comply with all applicable requirements of the Code necessary to preserve such exclusion from
gross income and specifically covenants, without limiting the generality of the foregoing, as follows:
(1)
Private Activity. The District will take no action or refrain from taking any
action or make any use of the proceeds of the Bonds or any Parity Bonds or of any other
monies or property which would cause the Bonds or any Parity Bonds to be “private activity
bonds” within the meaning of Section 141 of the Code.
(2)
Arbitrage. The District will make no use of the proceeds of the Bonds or
any Parity Bonds or of any other amounts or property, regardless of the source, or take any
action or refrain from taking any action which will cause the Bonds or any Parity Bonds to be
“arbitrage bonds” within the meaning of Section 148 of the Code.
(3)
Federal Guaranty. The District will make no use of the proceeds of the
Bonds or any Parity Bonds or take or omit to take any action that would cause the Bonds or
any Parity Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the
Code.
(4)
Information Reporting. The District will take or cause to be taken all
necessary action to comply with the informational reporting requirement of Section 149(e) of
the Code.
(5)
Hedge Bonds. The District will make no use of the proceeds of the Bonds or
any Parity Bonds or any other amounts or property, regardless of the source, or take any
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action or refrain from taking any action that would cause the Bonds or any Parity Bonds to be
considered “hedge bonds” within the meaning of Section 149(g) of the Code unless the
District takes all necessary action to assure compliance with the requirements of Section
149(g) of the Code to maintain the exclusion from gross income for federal income tax
purposes of interest on the Bonds or any Parity Bonds issued on a tax-exempt basis.
(6)
Miscellaneous. The District will take no action or refrain from taking any
action inconsistent with its expectations stated in the Tax Certificate executed on the Delivery
Date by the District in connection with the Bonds or any Parity Bonds and will comply with
the covenants and requirements stated therein and incorporated by reference in the Indenture.
(7)
Other Tax Exempt Issues. The District will not use proceeds of other tax
exempt securities to redeem any Bonds or any Parity Bonds without first obtaining the written
opinion of Bond Counsel that doing so will not impair the exclusion from gross income for
federal income tax purposes of interest on the Bonds or any Parity Bonds issued on a
tax-exempt basis.
(g)
Reduction of Maximum Special Taxes. The District finds and determines that,
historically, delinquencies in the payment of special taxes authorized pursuant to the Act in
community facilities districts in Southern California have from time to time been at levels requiring
the levy of special taxes at the maximum authorized rates in order to make timely payment of
principal of and interest on the outstanding indebtedness of such community facilities districts. For
this reason, the District determines that a reduction in the maximum Special Tax rates authorized to be
levied on parcels in the District below the levels provided in the Indenture would interfere with the
timely retirement of the Bonds and any Parity Bonds. The District determines it to be necessary in
order to preserve the security for the Bonds and Parity Bonds to covenant, and, to the maximum extent
that the law permits it to do so, the District does covenant, that it shall not initiate proceedings to
reduce the maximum Special Tax rates for the District, unless, in connection therewith, the District
receives a certificate from one or more Independent Financial Consultants which, when taken
together, certify that such changes do not reduce the maximum Special Taxes that may be levied in
each year on Developed Property within Improvement Area No. 1 of the District to an amount which
is less than 110% of the Annual Debt Service due in each corresponding future Bond Year with
respect to the Bonds and Parity Bonds Outstanding as of the date of such proposed reduction; and
(ii) the District is not delinquent in the payment of the principal of or interest on the Bonds or any
Parity Bonds. For purposes of estimating Administrative Expenses for the foregoing calculation, the
Independent Financial Consultants shall compute the Administrative Expenses for the current Fiscal
Year and escalate that amount by two percent (2%) in each subsequent Fiscal Year.
(h)
Covenants to Defend. The District covenants that, in the event that any initiative is
adopted by the qualified electors in the District which purports to reduce the maximum Special Tax
below the levels specified in the Indenture or to limit the power of the District to levy the Special
Taxes for the purposes set forth in the Indenture, it will commence and pursue legal action in order to
preserve its ability to comply with such covenants.
(i)
Limitation on Right to Tender Bonds. The District covenants that it will not adopt
any policy pursuant to Section 53341.1 of the Act permitting the tender of Bonds or Parity Bonds in
full payment or partial payment of any Special Taxes unless the District shall have first received a
certificate from an Independent Financial Consultant that the acceptance of such a tender will not
result in the District having insufficient Special Tax revenues to pay the principal of and interest on
the Bonds and Parity Bonds when due.
(j)
Continuing Disclosure. The District covenants to comply with the terms of the
Continuing Disclosure Certificate and with the terms of any agreement executed by the District with
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respect to any Parity Bonds to assist the Underwriters in complying with Rule 15(c)2-12 adopted by
the Securities and Exchange Commission.
(k)
Further Assurances. The District shall make, execute and deliver any and all such
further agreements, instruments and assurances as may be reasonably necessary or proper to carry out
the intention or to facilitate the performance of the Indenture and for the better assuring and
confirming unto the Owners of the Bonds and any Parity Bonds of the rights and benefits provided in
the Resolution.
AMENDMENTS TO INDENTURE
Supplemental Indentures or Orders Not Requiring Bondowner Consent. The District
may from time to time, and at any time, without notice to or consent of any of the Bondowners, adopt
Supplemental Indentures for any of the following purposes:
(a)
to cure any ambiguity, to correct or supplement any provisions in the Indenture
which may be inconsistent with any other provision therein, or to make any other provision with
respect to matters or questions arising under the Indenture or in any additional resolution or order,
provided that such action is not materially adverse to the interests of the Bondowners;
(b)
to add to the covenants and agreements of and the limitations and the restrictions
upon the District contained in the Indenture, other covenants, agreements, limitations and restrictions
to be observed by the District which are not contrary to or inconsistent with the Indenture as
theretofore in effect or which further secure Bond or Parity Bond payments;
(c)
to provide for the issuance of any Parity Bonds, and to provide the terms and
conditions under which such Parity Bonds may be issued, subject to and in accordance with the
provisions of the Indenture;
(d)
to modify, amend or supplement the Indenture in such manner as to permit the
qualification of the Indenture under the Trust Indenture Act of 1939, as amended, or any similar
federal statute later in effect, or to comply with the Code or regulations issued thereunder, and to add
such other terms, conditions and provisions as may be permitted by said act or similar federal statute,
and which shall not materially adversely affect the interests of the Owners of the Bonds or any Parity
Bonds then Outstanding;
(e)
to modify, alter or amend the RMA in any manner, so long as the Trustee receives a
certificate of an Independent Financial Consultant stating that such changes do not reduce the
maximum Special Taxes that may be levied in each year on Developed Property within Improvement
Area No. 1 of the District to an amount which is less than 110% of the Annual Debt Service due in
each corresponding future Bond Year with respect to the Bonds Outstanding as of the date of such
amendment; or
(f)
to modify, alter, amend or supplement the Indenture in any other respect which is not
materially adverse to the Bondowners.
Supplemental Indentures or Orders Requiring Bondowner Consent. Exclusive of the
Supplemental Indentures described in the Indenture, the Owners of not less than a majority in
aggregate principal amount of the Bonds and Parity Bonds Outstanding shall have the right to consent
to and approve the adoption by the District of such Supplemental Indentures as shall be deemed
necessary or desirable by the District for the purpose of waiving, modifying, altering, amending,
adding to or rescinding, in any particular, any of the terms or provisions contained in the Indenture;
provided, however, that nothing in the Indenture shall permit, or be construed as permitting, (a) an
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extension of the maturity date of the principal, or the payment date of interest on, any Bond or Parity
Bond; (b) a reduction in the principal amount of, or redemption premium on, any Bond or Parity Bond
or the rate of interest thereon; (c) a preference or priority of any Bond or Parity Bond over any other
Bond or Parity Bond; or (d) a reduction in the aggregate principal amount of the Bonds and Parity
Bonds the Owners of which are required to consent to such Supplemental Indenture, without the
consent of the Owners of all Bonds and Parity Bonds then Outstanding.
If at any time the District shall desire to adopt a Supplemental Indenture, which pursuant to
the terms of this section shall require the consent of the Bondowners, the District shall so notify the
Trustee and shall deliver to the Trustee a copy of the proposed Supplemental Indenture. The Trustee
shall, at the expense of the District, cause notice of the proposed Supplemental Indenture to be mailed,
by first class mail, postage prepaid, to all Bondowners at their addresses as they appear in the Bond
Register. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and
shall state that a copy thereof is on file at the office of the Trustee for inspection by all Bondowners.
The failure of any Bondowners to receive such notice shall not affect the validity of such
Supplemental Indenture when consented to and approved by the Owners of not less than a majority in
aggregate principal amount of the Bonds and Parity Bonds Outstanding as required by this section.
Whenever at any time within one year after the date of the first mailing of such notice, the Trustee
shall receive an instrument or instruments purporting to be executed by the Owners of not less than a
majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding, which instrument
or instruments shall refer to the proposed Supplemental Indenture described in such notice, and shall
specifically consent to and approve the adoption thereof by the District substantially in the form of the
copy referred to in such notice as on file with the Trustee, such proposed Supplemental Indenture,
when duly adopted by the District, shall thereafter become a part of the proceedings for the issuance
of the Bonds and Parity Bonds. In determining whether the Owners of a majority of the aggregate
principal amount of the Bonds and Parity Bonds have consented to the adoption of any Supplemental
Indenture, Bonds or Parity Bonds which are owned by the District or by any person directly or
indirectly controlling or controlled by or under the direct or indirect common control with the District,
shall be disregarded and shall be treated as though they were not Outstanding for the purpose of any
such determination.
Upon the adoption of any Supplemental Indenture and the receipt of consent to any such
Supplemental Indenture from the Owners of not less than a majority in aggregate principal amount of
the Outstanding Bonds and Parity Bonds in instances where such consent is required pursuant to the
provisions of this section, the Indenture shall be, and shall be deemed to be, modified and amended in
accordance therewith, and the respective rights, duties and obligations under the Indenture of the
District and all Owners of Outstanding Bonds and Parity Bonds shall thereafter be determined,
exercised and enforced under the Indenture, subject in all respects to such modifications and
amendments.
Notation of Bonds or Parity Bonds; Delivery of Amended Bonds or Parity Bonds. After
the effective date of any action taken as provided in the Indenture, the District may determine that the
Bonds or any Parity Bonds may bear a notation, by endorsement in form approved by the District, as
to such action, and in that case upon demand of the Owner of any Outstanding Bond or Parity Bond at
such effective date and presentation of his Bond or Parity Bond for the purpose at the office of the
Trustee or at such additional offices as the Trustee may select and designate for that purpose, a
suitable notation as to such action shall be made on such Bonds or Parity Bonds. If the District shall
so determine, new Bonds or Parity Bonds so modified as, in the opinion of the District, shall be
necessary to conform to such action shall be prepared and executed, and in that case upon demand of
the Owner of any Outstanding Bond or Parity Bond at such effective date such new Bonds or Parity
Bonds shall be exchanged at the office of the Trustee or at such additional offices as the Trustee may
select and designate for that purpose, without cost to each Owner of Outstanding Bonds or Parity
Bonds, upon surrender of such Outstanding Bonds or Parity Bonds.
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TRUSTEE
Trustee. The Bank of New York Mellon Trust Company, N.A. shall be the Trustee for the
Bonds and any Parity Bonds unless and until another Trustee is appointed by the District under the
Indenture. The Trustee represents that it has a combined capital (exclusive of borrowed capital) and
surplus of at least $100,000,000. The District may, at any time, appoint a successor Trustee satisfying
the requirements of the Indenture for the purpose of receiving all money which the District is required
to deposit with the Trustee under the Indenture and to allocate, use and apply the same as provided in
the Indenture.
The Trustee is authorized to and shall mail by first class mail, postage prepaid, or wire
transfer in accordance with the Indenture, interest payments to the Bondowners, to select Bonds and
Parity Bonds for redemption, and to maintain the Bond Register. The Trustee is authorized to pay the
principal of and premium, if any, on the Bonds and Parity Bonds when the same are duly presented to
it for payment at maturity or on call and redemption, to provide for the registration of transfer and
exchange of Bonds and Parity Bonds presented to it for such purposes, to provide for the cancellation
of Bonds and Parity Bonds all as provided in the Indenture, and to provide for the authentication of
Bonds and Parity Bonds, and shall perform all other duties assigned to or imposed on it as provided in
the Indenture. The Trustee shall keep accurate records of all funds administered by it and all Bonds
and Parity Bonds paid, discharged and cancelled by it.
The Trustee is authorized to redeem the Bonds and Parity Bonds when duly presented for
payment at maturity, or on redemption prior to maturity. The Trustee shall cancel all Bonds and
Parity Bonds upon payment thereof in accordance with the provisions of the Indenture.
The District shall from time to time, subject to any agreement between the District and the
Trustee then in force, pay to the Trustee compensation for its services, reimburse the Trustee for all its
advances and expenditures, including, but not limited to, advances to and fees and expenses of
independent accountants or counsel employed by it in the exercise and performance of its powers and
duties under the Indenture, and indemnify and save the Trustee, its officers, directors, employees and
agents, harmless against costs, claims, expenses and liabilities, including, without limitation, fees and
expenses of its attorneys, not arising from its own negligence or willful misconduct which it may incur
in the exercise and performance of its powers and duties under the Indenture. The foregoing
obligation of the District to indemnify the Trustee shall survive the removal or resignation of the
Trustee or the discharge of the Bonds.
The District shall indemnify and save the Trustee, its officers, directors, employees and
agents, harmless against from and against all costs, claims, expenses and liabilities, including, without
limitation, fees and expenses of its attorneys, not arising from its own negligence or willful
misconduct which it may incur in the exercise and performance of its powers and duties under the
Indenture. The foregoing obligation of the District to indemnify the Trustee shall survive the removal
or resignation of the Trustee or the discharge of the Bonds.
The Trustee shall receive as compensation for its services under the Indenture only such fees
as are set forth on the fee schedule attached as Exhibit D to the Indenture, which fee schedule is
incorporated therein, and the Trustee shall be entitled to be reimbursed by the District for its other
reasonable expenses under the Indenture, including the reasonable compensation, expenses and
disbursements of such agents, representatives, experts and counsel as the Trustee may employ in
connection with the exercise and performance of its rights and its duties under the Indenture. All such
fees and reimbursements shall be paid solely from amounts held in the Administrative Expense
Account, pursuant to a Certificate of an Authorized Representative.
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Removal of Trustee. The District may at any time at its sole discretion remove the Trustee
initially appointed, and any successor thereto, by delivering to the Trustee a written notice of its
decision to remove the Trustee and may appoint a successor or successors thereto; provided that any
such successor shall be a bank or trust company having a combined capital (exclusive of borrowed
capital) and surplus of at least $100,000,000, and subject to supervision or examination by federal or
state authority. Any removal shall become effective only upon acceptance of appointment by the
successor Trustee. If any bank or trust company appointed as a successor publishes a report of
condition at least annually, pursuant to law or to the requirements of any supervising or examining
authority above referred to, then for the purposes of this section the combined capital and surplus of
such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. Any removal of the Trustee and appointment of a
successor Trustee shall become effective only upon acceptance of appointment by the successor
Trustee and notice being sent by the successor Trustee to the Bondowners of the successor Trustee’s
identity and address.
Resignation of Trustee. The Trustee may at any time resign by giving written notice to the
District and by giving to the Owners notice of such resignation, which notice shall be mailed to the
Owners at their addresses appearing in the registration books in the office of the Trustee. Upon
receiving such notice of resignation, the District shall promptly appoint a successor Trustee satisfying
the criteria in the Indenture by an instrument in writing. Any resignation or removal of the Trustee
and appointment of a successor Trustee shall become effective only upon acceptance of appointment
by the successor Trustee.
Liability of Trustee. The recitals of fact and all promises, covenants and agreements
contained in the Indenture and in the Bonds and any Parity Bonds shall be taken as statements,
promises, covenants and agreements of the District, and the Trustee assumes no responsibility for the
correctness of the same and makes no representations as to the validity or sufficiency of the Indenture
or, the Bonds or any Parity Bonds, and shall incur no responsibility in respect thereof, other than in
connection with its duties or obligations specifically set forth in the Indenture, in the Bonds and any
Parity Bonds, or in the certificate of authentication assigned to or imposed upon the Trustee. The
Trustee shall be under no responsibility or duty with respect to the issuance of the Bonds or any Parity
Bonds for value. The Trustee shall not be liable in connection with the performance of its duties
under the Indenture, except for its own negligence or willful misconduct.
The Trustee shall be protected in acting upon any notice, resolution, request, consent, order,
certificate, report, Bond or Parity Bond or other paper or document believed by it to be genuine and to
have been signed or presented by the proper party or parties. The Trustee may consult with counsel,
who may be counsel to the District, with regard to legal questions, and the opinion of such counsel
shall be full and complete authorization and protection in respect of any action taken or suffered under
the Indenture in good faith and in accordance therewith.
The Trustee shall not be bound to recognize any person as the Owner of a Bond or Parity
Bond unless and until such Bond or Parity Bond is submitted for inspection, if required, and his title
thereto satisfactorily established, if disputed.
Whenever in the administration of its duties under the Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or suffering any action
under the Indenture, such matter (unless other evidence in respect thereof be in the Indenture
specifically prescribed) may, in the absence of bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by a written certificate of the District, and such certificate shall
be full warrant to the Trustee for any action taken or suffered under the provisions of the Indenture
upon the faith thereof, but in its discretion the Trustee may, in lieu thereof, accept other evidence of
such matter or may require such additional evidence as to it may seem reasonable.
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The Trustee shall have no duty or obligation whatsoever to enforce the collection of Special
Taxes or other funds to be deposited with it under the Indenture, or as to the correctness of any
amounts received, but its liability shall be limited to the proper accounting for such funds as it shall
actually receive. No provision in the Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of its duties under the
Indenture, or in the exercise of its rights or powers.
The Trustee shall not be deemed to have knowledge of any default or Event of Default until
an officer at the Trustee’s corporate trust office responsible for the administration of its duties under
the Indenture shall have actual knowledge thereof or the Trustee shall have received written notice
thereof at its corporate trust office.
The Trustee shall have no responsibility for, and makes no representations with respect to,
any information, statement or recital in any official statement, offering memorandum or any other
disclosure material prepared or distributed with respect to the Bonds.
Merger or Consolidation. Any company into which the Trustee may be merged or
converted or with which it may be consolidated or any company resulting from any merger,
conversion or consolidation to which it shall be a party or any company to which the Trustee may sell
or transfer all or substantially all of its corporate trust business, shall be the successor to the Trustee
without the execution or filing of any paper or further act, anything in the Indenture to the contrary
notwithstanding.
EVENTS OF DEFAULT; REMEDIES
Events of Default. Any one or more of the following events shall constitute an “Event of
Default”:
(a)
default in the due and punctual payment of the principal of or redemption premium,
if any, on any Bond or Parity Bond when and as the same shall become due and payable, whether at
maturity as therein expressed, by declaration or otherwise;
(b)
default in the due and punctual payment of the interest on any Bond or Parity Bond
when and as the same shall become due and payable; or
(c)
except as described in (a) or (b), default shall be made by the District in the
observance of any of the agreements, conditions or covenants on its part contained in the Indenture,
the Bonds or any Parity Bonds, and such default shall have continued for a period of 30 days after the
District shall have been given notice in writing of such default by the Trustee or the Owners of 25% in
aggregate principal amount of the Outstanding Bonds and Parity Bonds.
The Trustee agrees to give notice to the Owners as soon as practicable upon the occurrence of
an Event of Default under (a) or (b) above and within 30 days of the Trustee’s knowledge of an Event
of Default under (c) above.
Remedies of Owners. Upon the occurrence of an Event of Default, the Trustee may pursue
any available remedy at law or in equity to enforce the payment of the principal of, premium, if any,
and interest on the Outstanding Bonds and Parity Bonds, and to enforce any rights of the Trustee
under or with respect to the Indenture, including:
(a)
by mandamus or other suit or proceeding at law or in equity to enforce his rights
against the District and any of the members, officers and employees of the District, and to compel the
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District or any such members, officers or employees to perform and carry out their duties under the
Act and their agreements with the Owners as provided in the Indenture;
(b)
by suit in equity to enjoin any actions or things which are unlawful or violate the
rights of the Owners; or
(c)
by a suit in equity to require the District and its members, officers and employees to
account as the trustee of an express trust.
If an Event of Default shall have occurred and be continuing and if requested so to do by the
Owners of at least twenty-five percent (25%) in aggregate principal amount of Outstanding Bonds and
Parity Bonds and if indemnified to its satisfaction, the Trustee shall be obligated to exercise such one
or more of the rights and powers conferred by the Indenture, as the Trustee, being advised by counsel,
shall deem most expedient in the interests of the Owners of the Bonds and Parity Bonds.
No remedy in the Indenture conferred upon or reserved to the Trustee or to the Owners is
intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in
addition to every other remedy given under the Indenture or now or later existing, at law or in equity
or by statute or otherwise, and may be exercised without exhausting and without regard to any other
remedy conferred by the Act or any other law.
Application of Revenues and Other Funds After Default. All amounts received by the
Trustee pursuant to any right given or action taken by the Trustee under the provisions of the
Indenture relating to the Bonds and Parity Bonds shall be applied by the Trustee in the following order
upon presentation of the several Bonds and Parity Bonds:
First, to the payment of the fees, costs and expenses of the Trustee in declaring such
Event of Default and in carrying out the provisions of the Indenture, including reasonable
compensation to its agents, attorneys and counsel, and to the payment of all other outstanding
fees and expenses of the Trustee; and
Second, to the payment of the whole amount of interest on and principal of the Bonds
and Parity Bonds then due and unpaid, with interest on overdue installments of principal and
interest to the extent permitted by law at the net effective rate of interest then borne by the
Outstanding Bonds and Parity Bonds; provided, however, that in the event such amounts shall
be insufficient to pay in full the full amount of such interest and principal, then such amounts
shall be applied in the following order of priority:
(a)
first to the payment of all installments of interest on the Bonds and Parity
Bonds then due and unpaid on a pro rata basis based on the total amount then due and owing;
(b)
second, to the payment of all installments of principal of the Bonds and
Parity Bonds then due and unpaid on a pro rata basis based on the total amount then due and
owing; and
(c)
third, to the payment of interest on overdue installments of principal and
interest on the Bonds and Parity Bonds on a pro rata basis based on the total amount then due
and owing.
Power of Trustee to Control Proceedings. In the event that the Trustee, upon the
happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise,
pursuant to its duties under the Indenture, whether upon its own discretion or upon the request of the
Owners of twenty-five percent (25%) in aggregate principal amount of the Bonds and Parity Bonds
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then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the
Owners of the Bonds and Parity Bonds, with respect to the continuance, discontinuance, withdrawal,
compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not,
unless there no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or
otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed with
it a written request signed by the Owners of a majority in aggregate principal amount of the
Outstanding Bonds and Parity Bonds under the Indenture opposing such discontinuance, withdrawal,
compromise, settlement or other such litigation. Any suit, action or proceeding which any Owner of
Bonds or Parity Bonds shall have the right to bring to enforce any right or remedy under the Indenture
may be brought by the Trustee for the equal benefit and protection of all Owners of Bonds and Parity
Bonds similarly situated and the Trustee is appointed (and the successive respective Owners of the
Bonds and Parity Bonds issued under the Indenture, by taking and holding the same, shall be
conclusively deemed so to have appointed it) the true and lawful attorney in fact of the respective
Owners of the Bonds and Parity Bonds for the purposes of bringing any such suit, action or
proceeding and to do and perform any and all acts and things for and on behalf of the respective
Owners of the Bonds and Parity Bonds as a class or classes, as may be necessary or advisable in the
opinion of the Trustee as such attorney-in-fact.
Appointment of Receivers. Upon the occurrence of an Event of Default under the Indenture,
and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of
the Trustee and of the Owners of the Bonds and Parity Bonds under the Indenture, the Trustee shall be
entitled, as a matter of right, to the appointment of a receiver or receivers of the Net Taxes and other
amounts pledged under the Indenture, pending such proceedings, with such powers as the court
making such appointment shall confer.
Non-Waiver. Nothing in the Indenture, or in the Bonds or the Parity Bonds, shall affect or
impair the obligation of the District, which is absolute and unconditional, to pay the interest on and
principal of the Bonds to the respective Owners of the Bonds and Parity Bonds at the respective dates
of maturity, as provided in the Indenture, out of the Net Taxes and other moneys therein pledged for
such payment.
A waiver of any default or breach of duty or contract by the Trustee or any Owners shall not
affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any
such subsequent default or breach. No delay or omission of the Trustee or any Owner of any of the
Bonds to exercise any right or power accruing upon any default shall impair any such right or power
or shall be construed to be a waiver of any such default or an acquiescence therein; and every power
and remedy conferred upon the Trustee or the Owners by the Act or by the Indenture may be enforced
and exercised from time to time and as often as shall be deemed expedient by the Trustee or the
Owners, as the case may be.
Limitations on Rights and Remedies of Owners. No Owner of any Bond or Parity Bond
issued under the Indenture shall have the right to institute any suit, action or proceeding at law or in
equity, for any remedy under or upon the Indenture, unless (a) such Owner shall have previously
given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a
majority in aggregate principal amount of all the Bonds and Parity Bonds then Outstanding shall have
made written request upon the Trustee to exercise the powers granted in the Indenture or to institute
such action, suit or proceeding in its own name; (c) said Owners shall have tendered to the Trustee
indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be
incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply
with such request for a period of sixty (60) days after such written request shall have been received by,
and said tender of indemnity shall have been made to, the Trustee.
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Such notification, request, tender of indemnity and refusal or omission are the Indenture
declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds and Parity
Bonds of any remedy under the Indenture; it being understood and intended that no one or more
Owners of Bonds and Parity Bonds shall have any right in any manner whatever by his or their action
to enforce any right under the Indenture, except in the manner provided in the Indenture, and that all
proceedings at law or in equity to enforce any provision of the Indenture shall be instituted, had and
maintained in the manner therein provided and for the equal benefit of all Owners of the Outstanding
Bonds and Parity Bonds.
The right of any Owner of any Bond and Parity Bond to receive payment of the principal of
and interest and premium (if any) on such Bond and Parity Bond as provided in the Indenture or to
institute suit for the enforcement of any such payment, shall not be impaired or affected without the
written consent of such Owner, notwithstanding any other provision of the Indenture.
Termination of Proceedings. In case the Trustee shall have proceeded to enforce any right
under the Indenture by the appointment of a receiver or otherwise, and such proceedings shall have
been discontinued or abandoned for any reason, or shall have been determined adversely, then and in
every such case, the District, the Trustee and the Owners shall be restored to their former positions
and rights under the Indenture, respectively, with regard to the property subject to the Indenture, and
all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken.
DEFEASANCE
Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid, to
the Owner of an Outstanding Bond or Parity Bond the interest due thereon and the principal thereof, at
the times and in the manner stipulated in the Indenture or any Supplemental Indenture, then the Owner
of such Bond or Parity Bond shall cease to be entitled to the pledge of Net Taxes, and, other than as
set forth below, all covenants, agreements and other obligations of the District to the Owner of such
Bond or Parity Bond under the Indenture and any Supplemental Indenture relating to such Parity Bond
shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a
defeasance of all Outstanding Bonds and Parity Bonds pursuant to this section, the Trustee shall
execute and deliver to the District all such instruments as may be desirable to evidence such discharge
and satisfaction, and the Trustee shall pay over or deliver to the District’s general fund all money or
securities held by it pursuant to the Indenture which are not required for the payment of the principal
of, premium, if any, and interest due on such Bonds and Parity Bonds.
Any Outstanding Bond or Parity Bond shall be deemed to have been paid within the meaning
expressed in the first paragraph of this section if such Bond or Parity Bond is paid in any one or more
of the following ways:
(a)
by paying or causing to be paid the principal of, premium, if any, and
interest on such Bond or Parity Bond, as and when the same become due and payable;
(b)
by depositing with the Trustee, in trust, at or before maturity, money which,
together with the amounts then on deposit in the Special Tax Fund (exclusive of the
Administrative Expense Account) and available for such purpose, is fully sufficient to pay the
principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the
same shall become due and payable; or
(c)
by depositing with the Trustee or another escrow bank appointed by the
District, in trust, Federal Securities, in which the District may lawfully invest its money, in
such amount as will be sufficient, together with the interest to accrue thereon and moneys
then on deposit in the Special Tax Fund (exclusive of the Administrative Expense Account)
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and available for such purpose, together with the interest to accrue thereon, to pay and
discharge the principal of, premium, if any, and interest on such Bond or Parity Bond, as and
when the same shall become due and payable.
If paid as provided above, then, at the election of the District, and notwithstanding that any
Outstanding Bonds and Parity Bonds shall not have been surrendered for payment, all obligations of
the District under the Indenture and any Supplemental Indenture with respect to such Bond or Parity
Bond shall cease and terminate, except for the obligation of the Trustee to pay or cause to be paid to
the Owners of any such Bond or Parity Bond not so surrendered and paid, all sums due thereon and
except for the covenants of the District contained in the Indenture or any covenants in a Supplemental
Indenture relating to compliance with the Code. Notice of such election shall be filed with the Trustee
not less than ten days prior to the proposed defeasance date, or such shorter period of time as may be
acceptable to the Trustee. In connection with a defeasance under (c) above, there shall be provided to
the District a verification report from an independent nationally recognized certified public accountant
stating its opinion as to the sufficiency of the moneys or securities deposited with the Trustee or the
escrow bank to pay and discharge the principal of, premium, if any, and interest on all Outstanding
Bonds or Parity Bonds to be defeased in accordance with this section, as and when the same shall
become due and payable, and an opinion of Bond Counsel (which may rely upon the opinion of the
certified public accountant) to the effect that the Bonds or Parity Bonds being defeased have been
legally defeased in accordance with the Indenture and any applicable Supplemental Indenture.
Upon a defeasance, the Trustee, upon request of the District, shall release the rights of the
Owners of such Bonds and Parity Bonds which have been defeased under the Indenture and any
Supplemental Indenture and execute and deliver to the District all such instruments as may be
desirable to evidence such release, discharge and satisfaction. In the case of a defeasance under the
Indenture of all Outstanding Bonds and Parity Bonds, the Trustee shall pay over or deliver to the
District any funds held by the Trustee at the time of a defeasance, which are not required for the
purpose of paying and discharging the principal of or interest on the Bonds and Parity Bonds when
due. The Trustee shall, at the written direction of the District, mail, first class, postage prepaid, a
notice to the Bondowners whose Bonds and Parity Bonds have been defeased, in the form directed by
the District, stating that the defeasance has occurred.
MISCELLANEOUS
Cancellation of Bonds and Parity Bonds. All Bonds and Parity Bonds surrendered to the
Trustee for payment upon maturity or for redemption shall be upon payment therefor, and any Bond or
Parity Bond purchased by the District as authorized in the Indenture and delivered to the Trustee for
such purpose shall be, cancelled forthwith and shall not be reissued. The Trustee shall destroy such
Bonds and Parity Bonds, as provided by law, and, upon request of the District, furnish to the District a
certificate of such destruction.
Execution of Documents and Proof of Ownership. Any request, direction, consent,
revocation of consent, or other instrument in writing required or permitted by the Indenture to be
signed or executed by Bondowners may be in any number of concurrent instruments of similar tenor
may be signed or executed by such Owners in person or by their attorneys appointed by an instrument
in writing for that purpose, or by the bank, trust company or other depository for such Bonds. Proof
of the execution of any such instrument, or of any instrument appointing any such attorney, and of the
ownership of Bonds or Parity Bonds shall be sufficient for the purposes of the Indenture (except as
otherwise provided in the Indenture), if made in the following manner:
(a)
The fact and date of the execution by any Owner or his or her attorney of any such
instrument and of any instrument appointing any such attorney, may be proved by a signature
guarantee of any bank or trust company located within the United States of America. Where any such
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instrument is executed by an officer of a corporation or association or a member of a partnership on
behalf of such corporation, association or partnership, such signature guarantee shall also constitute
sufficient proof of his authority.
(b)
As to any Bond or Parity Bond, the person in whose name the same shall be
registered in the Bond Register shall be deemed and regarded as the absolute owner thereof for all
purposes, and payment of or on account of the principal of any such Bond or Parity Bond, and the
interest thereon, shall be made only to or upon the order of the registered Owner thereof or his or her
legal representative. All such payments shall be valid and effectual to satisfy and discharge the
liability upon such Bond or Parity Bond and the interest thereon to the extent of the sum or sums to be
paid. Neither the District nor the Trustee shall be affected by any notice to the contrary.
Nothing contained in the Indenture shall be construed as limiting the Trustee or the District to
such proof, it being intended that the Trustee or the District may accept any other evidence of the
matters stated in the Indenture which the Trustee or the District may deem sufficient. Any request or
consent of the Owner of any Bond or Parity Bond shall bind every future Owner of the same Bond or
Parity Bond in respect of anything done or suffered to be done by the Trustee or the District in
pursuance of such request or consent.
Unclaimed Moneys. Anything in the Indenture to the contrary notwithstanding, any money
held by the Trustee in trust for the payment and discharge of any of the Outstanding Bonds and Parity
Bonds which remain unclaimed for two years after the date when such Outstanding Bonds and Parity
Bonds have become due and payable, if such money was held by the Trustee at such date, or for two
years after the date of deposit of such money if deposited with the Trustee after the date when such
Outstanding Bonds or Parity Bonds become due and payable, shall be repaid by the Trustee to the
District, as its absolute property and free from trust, and the Trustee shall thereupon be released and
discharged with respect thereto and the Owners shall look only to the District for the payment of such
Outstanding Bonds or Parity Bonds; provided, however, that, before being required to make any such
payment to the District, the Trustee, at the expense of the District, shall cause to be mailed by
first-class mail, postage prepaid, to the registered Owners of such Outstanding Bonds or Parity Bonds
at their addresses as they appear on the registration books of the Trustee a notice that said money
remains unclaimed and that, after a date named in said notice, which date shall not be less than 30
days after the date of the mailing of such notice, the balance of such money then unclaimed will be
returned to the District.
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APPENDIX F
DTC’S BOOK-ENTRY ONLY SYSTEM
The information in this Appendix concerning DTC and DTC’s book-entry system has been
obtained from sources that the District believes to be reliable, but the District takes no responsibility for
the accuracy thereof. The District gives no assurances that (i) DTC, the Direct and Indirect Participants
or others will distribute payments of principal, premium (if any) or interest with respect to the Bonds paid
to DTC or its nominee as, the registered owner, to the Beneficial Owners, (ii) such entities will distribute
redemption notices or other notices, to the Beneficial Owners, or (iii) an error or delay relating thereto
will not occur.
The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the
Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co.
(DTC’s partnership nominee) or such other name as may be requested by an authorized representative of
DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds, each in the
aggregate principal amount of such maturity, and will be deposited with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized
under the New York Banking Law, a “banking organization” within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of
the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions
of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over
3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money
market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with
DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other
securities transactions in deposited securities, through electronic computerized book-entry transfers and
pledges between Direct Participants’ accounts. This eliminates the need for physical movement of
securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned
subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for
DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are
registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC
system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks,
trust companies, and clearing corporations that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s
rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange
Commission. More information about DTC can be found at www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct Participants,
which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual
purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect
Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their
purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of
the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the
Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership
interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
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To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are
registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be
requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration
in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership.
DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the
identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be
the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain
steps to augment the transmission to them of notices of significant events with respect to the Bonds, such
as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example,
Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit
has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may
wish to provide their names and addresses to the registrar and request that copies of notices be provided
directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being
redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in
such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to
Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its
usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date.
The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to
whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Principal, premium (if any), and interest payments on the Bonds will be made to Cede & Co., or
such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to
credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information
from the District or the Trustee, on payable date in accordance with their respective holdings shown on
DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the accounts of customers in bearer form or
registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee,
or the District, subject to any statutory or regulatory requirements as may be in effect from time to time.
Principal, premium (if any), and interest payments with respect to the Bonds to Cede & Co. (or such other
nominee as may be requested by an authorized representative of DTC) is the responsibility of the District
or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC,
and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and
Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Bonds at any time
by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a
successor depository is not obtained, Bond certificates are required to be printed and delivered.
The District may decide to discontinue use of the system of book-entry-only transfers through
DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered
to DTC in accordance with the provisions of the Indenture.
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APPENDIX G
FORM OF ISSUER CONTINUING DISCLOSURE AGREEMENT
$7,000,000
City of Calexico
Community Facilities District No. 2013-1 (Gran Plaza)
Special Tax Bonds, Issue of 2014
This Continuing Disclosure Agreement (the “Disclosure Agreement”), dated as of
February 1, 2014, is executed and delivered between the City of Calexico (the “City”), acting as
legislative body of the City of Calexico Community Facilities District No. 2013-1 (Gran Plaza)
(the “District”), and Urban Futures, Inc., as dissemination agent (the “Dissemination Agent”), in
connection with the issuance by District of $7,000,000 aggregate principal amount of
Improvement Area No. 1 Special Tax Bonds, Issue of 2014 (the “Bonds”). The Bonds are being
issued pursuant to a Bond Indenture, dated as of February 1, 2014 (the “Indenture”), between the
District and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”).
The District, the City and the Dissemination Agent covenant and agree as follows:
Section 1.
Purpose of the Disclosure Agreement. This Disclosure Agreement
is being executed and delivered by the District, the City and the Dissemination Agent for the
benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating
Underwriter in complying with the Rule (as defined below).
Section 2.
Definitions. In addition to the definitions set forth in the Trust
Agreement, which apply to any capitalized term used in this Disclosure Agreement, unless
otherwise defined in this Section, the following capitalized terms shall have the following
meanings:
“Annual Report” shall mean any Annual Report of the City, provided by the
District or the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure
Agreement.
“Dissemination Agent” shall mean Urban Futures, Inc., or any successor
Dissemination Agent designated in writing by the District and the City, and which has filed with
the District, the City and the Trustee a written acceptance of such designation.
“EMMA” shall mean the Electronic Municipal Market Access system located at
http://www.emma.msrb.org, which is the centralized on-line repository for municipal disclosure
documents to be filed with the MSRB pursuant to the Rule, or such other successor repository
site as prescribed by the MSRB.
“Listed Events” shall mean any of the events listed in Section 5(a) of this
Disclosure Agreement.
“MSRB” shall mean the Municipal Securities Rulemaking Board.
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“Obligated Person” shall mean any person, including an issuer of municipal
securities, who is either generally or through an enterprise, fund, or account of such person
committed by contract or other arrangement to support payment of all, or part of the obligations
on the Bonds (other than providers of municipal bond insurance, letters of credit, or other
liquidity facilities).
“Official Statement” shall mean the final Official Statement, dated January 21,
2014, relating to the Bonds.
“Participating Underwriter” shall mean any of the original underwriters of the
Bonds required to comply with the Rule in connection with offering of the Bonds.
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as the same may be amended from time
to time.
Section 3.
Provisions of Annual Reports.
(a)
The City shall, or shall cause the Dissemination Agent to, not later than
March 31 after the end of the City’s fiscal year (which fiscal year presently ends June 30),
commencing March 31, 2014 with the report for the 2012-13 fiscal year, provide to the MSRB,
via EMMA, in an electronic format accompanied by identifying information as prescribed by the
MSRB, an Annual Report which is consistent with the requirements of Section 4 of this
Disclosure Agreement. The Annual Report may be submitted as a single document or as
separate documents comprising a package, and may include by reference other information as
provided in Section 4 of this Disclosure Agreement; provided that the audited financial
statements of the City may be submitted separately from the balance of the Annual Report, and
later than the date required above for the filing of the Annual Report if not available by that date.
If the City’s fiscal year changes, it shall give notice of such change in the same manner as for a
Listed Event under Section 5(b).
(b)
Not later than fifteen (15) Business Days prior to the date specified in
subsection (a) above for providing the Annual Report to the MSRB, the City shall provide the
Annual Report to the Dissemination Agent (if other than the City). If by such date, the
Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent
shall contact the City and the District to determine if the City is in compliance with the first
sentence of this subsection (b). The City shall provide a written certification with each Annual
Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the
Annual Report required to be furnished by it hereunder.
(c)
If the Dissemination Agent is unable to verify that an Annual Report has
been provided to the MSRB by the date required in subsection (a), the Dissemination Agent shall
send a notice to the MSRB in such form as is prescribed by or acceptable to the MSRB.
(d)
The Dissemination Agent (if other than the City) shall, if and to the extent,
the City or the District has provided an Annual Report in final form to the Dissemination Agent
for dissemination, file a report with the District and the City certifying that the Annual Report
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has been provided to the MSRB, via EMMA, pursuant to this Disclosure Agreement, and stating
the date it was provided.
Section 4.
Content of Annual Reports.
contain or incorporate by reference the following:
The City’s Annual Report shall
(a)
The Annual Report shall contain or incorporate by reference the audited
financial statements of the City for the most recently completed Fiscal Year, prepared in
accordance with generally accepted accounting principles in effect from time to time. If the
City’s audited financial statements are not available by the time the Annual Report is required to
be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements
in a format similar to the financial statements contained in the Official Statement, and the audited
financial statements shall be filed in the same manner as the Annual Report when they become
available. Such financial statements shall be accompanied by a statement substantially as
follows:
THE CITY’S ANNUAL FINANCIAL STATEMENTS ARE PROVIDED
SOLELY TO COMPLY WITH THE SECURITIES EXCHANGE
COMMISSION STAFF’S INTERPRETATION OF RULE 15c2-12. EXCEPT
FOR THE SPECIAL TAXES AND CERTAIN FUNDS AND ACCOUNTS
HELD UNDER THE BOND INDENTURE RELATING TO THE BONDS, NO
FUNDS OR ASSETS OF THE CITY ARE REQUIRED TO BE USED TO PAY
DEBT SERVICE ON THE BONDS. THE CITY IS NOT OBLIGATED TO
ADVANCE AVAILABLE FUNDS TO COVER ANY DELINQUENCIES.
INVESTORS SHOULD NOT RELY ON THE FINANCIAL CONDITION OF
THE CITY IN EVALUATING WHETHER TO BUY, HOLD OR SELL THE
BONDS.
(b)
The Annual Report shall also contain or incorporate by reference the
following information:
(i)
the principal amount of the Bonds outstanding as of the September
30 preceding the filing of the Annual Report;
(ii)
the balances in the Reserve Fund as of the September 30 preceding
the filing of the Annual Report;
(iii) any changes to the Rate and Method approved or submitted to the
qualified electors for approval prior to the filing of the Annual Report;
(iv)
a description of any parcels for which the Special Taxes have been
prepaid, including the amount prepaid, since the date of the last Annual Report;
(v)
an updated table in substantially the form of Table 3 in the Official
Statement under the caption “SECURITY FOR THE BONDS—Projected Debt Service
Coverage”;
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(vi) an updated table in substantially the form of Table 5 in the Official
Statement under the caption “THE DISTRICT—Direct and Overlapping Debt”;
(vii) an updated table in substantially the form of Table 6 in the Official
Statement under the caption “THE DISTRICT—Estimated Value-to-Lien Ratios”;
(viii) a table setting forth the estimated assessed value-to-lien ratios for
all Taxable Property (as defined in the Rate and Method) within the City based upon (A) the
most recent Special Taxes levy preceding the date of the Annual Report, (B) the assessed values
of the Taxable Property in the City based on the Imperial County Assessor’s most recent
equalized tax roll, (C) the amount of direct and overlapping debt consistent with the table
provided pursuant to item (v) above;
(ix)
a table including a list of all taxpayers within the City which own
property in the City upon which five percent or more of the total Special Taxes for the most
recently completed Fiscal Year have been levied, including (A) the assessor’s parcel number of
such taxpayer’s property, (B) the percentage of Special Taxes payable by each taxpayer, and (C)
a statement as to whether any of such taxpayers is delinquent in the payment of Special Taxes;
(x)
a table setting forth, for the five most recent Fiscal Years in which
Special Taxes were levied, the amount of Special Taxes levied in each Fiscal Year and the
percentage delinquent as of June 30 of such Fiscal Year and as of the date of the Annual Report,
and a description of the status of any foreclosure actions being pursued by the City with respect
to delinquent Special Taxes;
(xi)
any information not already included under (i) through (viii) above
that the City is required to file in its annual report to the California Debt and Investment
Advisory Commission pursuant to the provisions of the Mello-Roos Community Facilities Act of
1982, as amended.
(c)
Any or all of the items listed in (a) or (b) above may be included by
specific reference to other documents, including official statements of debt issues of the City or
related public entities, which have been submitted to each of the Repositories or the SEC. If the
document included by reference is a final official statement, it must be available from the
Municipal Securities Rulemaking Board. The City shall clearly identify each such other
document so included by reference.
Section 5.
Reporting of Significant Events.
(a)
Pursuant to the provisions of this Section 5, the District and the City shall
give, or cause to be given, notice of the occurrence of any of the following Listed Events with
respect to the Bonds, which notice shall be given in a timely manner, not in excess of ten (10)
business days after the occurrence of such Listed Event:
(1)
Principal and interest payment delinquencies;
(2)
Non-payment related defaults, if material;
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(3)
Unscheduled draws on debt service reserves reflecting financial
difficulties;
(4)
Unscheduled draws on credit enhancements reflecting financial
difficulties;
(5)
Substitution of credit or liquidity providers, or their failure to
perform;
(6)
Adverse tax opinions, the issuance by the Internal Revenue Service
of proposed or final determinations of taxability, Notices of
Proposed Issue (IRS Form 5701-TEB) or other material notices or
determinations with respect to the tax status of the security, or
other material events affecting the tax status of the security;
(7)
Modifications to rights of security holders, if material;
(8)
Bond calls, if material, and tender offers;
(9)
Defeasances;
(10)
Release, substitution, or sale of property securing repayment of the
securities, if material
(11)
Rating changes;
(12)
Bankruptcy, insolvency, receivership or similar event of the
Obligated Person;
(13)
The consummation of a merger, consolidation, or acquisition
involving an Obligated Person or the sale of all or substantially all
of the assets of the Obligated Person, other than in the ordinary
course of business, the entry into a definitive agreement to
undertake such an action or the termination of a definitive
agreement relating to any such actions, other than pursuant to its
terms, if material; and
(14)
Appointment of a successor or additional trustee or the change of
name of a trustee, if material.
(b)
As soon as reasonably practicable after obtaining knowledge of the
occurrence of any of the events listed in Section 5(a) (1), (3), (4), (5), (6), (9), (11) or (12), the
Dissemination Agent shall inform the District and the City of the occurrence of such event. As
soon as reasonably practicable after obtaining knowledge of the occurrence of such event, the
District and the City shall, or shall cause the Dissemination Agent to, file in a timely manner, not
in excess of ten (10) business days after the occurrence of any such event, a notice of such
occurrence with the MSRB, via EMMA, in an electronic format accompanied by identifying
information as prescribed by the MSRB.
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(c)
As soon as reasonably practicable after obtaining knowledge of the
occurrence of any of any of the events listed in Section 5(a) (2), (7), (8), (10), (13) or (14), the
Dissemination Agent shall inform the District and the City of the occurrence of such event and
request that the District and the City promptly notify the Dissemination Agent in writing whether
or not to report the event pursuant to subsection (d).
(d)
Whenever the District or the City obtains knowledge of the occurrence of
any event specified in Section 5(a) (2), (7), (8), (10), (13) or (14), the District and the City shall
as soon as possible determine if such event would be material under applicable Federal securities
law. If the District or the City determines that knowledge of the occurrence of such event would
be material under applicable Federal securities law, the City shall, or shall cause the
Dissemination Agent to, file in a timely manner, not in excess of ten (10) business days after the
occurrence of any such event, a notice of such occurrence with the MSRB, in an electronic
format accompanied by identifying information as prescribed by the MSRB.
Section 6.
Termination of Reporting Obligation. The District’s and the City’s
obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior
redemption or payment in full of all the Bonds. If such termination occurs prior to the final
maturity of the Bonds, the District shall give notice of such termination in the same manner as
for a Listed Event under Section 5(b).
Section 7.
Dissemination Agent.
(a)
The District and the City hereby appoint and engage Urban Futures, Inc.
as the Dissemination Agent to assist it in carrying out its obligations under this Disclosure
Agreement. The Dissemination Agent shall not be responsible in any manner for the content of
any notice or report prepared by the City pursuant to this Disclosure Agreement. The District
and the City may replace the Dissemination Agent with or without cause. If at the time there is
no designated Dissemination Agent appointed by the District or the City, the City shall be the
Dissemination Agent and undertake or assume its obligations hereunder.
Any company succeeding to all or substantially all of the Dissemination Agent’s
corporate trust business shall be the successor to the Dissemination Agent hereunder without the
execution or filing of any paper or any further act. The Dissemination Agent may resign its
duties hereunder by giving 30-days written notice to the District and the City.
(b)
The Dissemination Agent shall be paid compensation by the District and
the City for its services provided hereunder in accordance with its schedule of fees agreed to
between the Dissemination Agent and the District and the City from time to time and for all
expenses, legal fees and advances made or incurred by the Dissemination Agent in the
performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation
to review any information provided to it by the District or the City hereunder and shall not be
deemed to be acting in any fiduciary capacity for the District, the City, holders or beneficial
owners or any other party. The Dissemination Agent may rely and shall be protected in acting or
refraining from acting upon any direction from the District or the City or an opinion of nationally
recognized bond counsel.
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Section 8.
Amendment; Waiver. Notwithstanding any other provision of this
Disclosure Agreement, the District and the City may amend this Disclosure Agreement, and any
provision of this Disclosure Agreement may be waived, provided that the following conditions
are satisfied:
(a)
if the amendment or waiver relates to the provisions of Sections 3(a), 4 or
5(a), it may only be made in connection with a change in circumstances that arises from a change
in legal requirements, change in law, or change in the identity, nature, or status of an Obligated
Person with respect to the Bonds, or type of business conducted;
(b)
the undertakings herein, as proposed to be amended or waived, would, in
the opinion of nationally recognized bond counsel, have complied with the requirements of the
Rule at the time of the primary offering of the Bonds, after taking into account any amendments
or interpretations of the Rule, as well as any change in circumstances; and
(c)
the proposed amendment or waiver either (i) is approved by holders of the
Bonds in the manner provided in the Trust Agreement for amendments to the Trust Agreement
with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond
counsel, materially impair the interests of the holders or beneficial owners of the Bonds.
If the annual financial information or operating data to be provided in the Annual
Report is amended pursuant to the provisions hereof, the first annual financial information filed
pursuant hereto containing the amended operating data or financial information shall explain, in
narrative form, the reasons for the amendment and the impact of the change in the type of
operating data or financial information being provided.
If an amendment is made to the undertaking specifying the accounting principles
to be followed in preparing financial statements, the annual financial information for the year in
which the change is made shall present a comparison between the financial statements or
information prepared on the basis of the new accounting principles and those prepared on the
basis of the former accounting principles. The comparison shall include a qualitative discussion
of the differences in the accounting principles and the impact of the change in the accounting
principles on the presentation of the financial information, in order to provide information to
investors to enable them to evaluate the ability of the City to meet its obligations. To the extent
reasonably feasible, the comparison shall be quantitative. A notice of the change in the
accounting principles shall be sent to EMMA in the same manner as for a Listed Event under
Section 5(b).
No amendment to this Agreement which modifies the duties or rights of the
Dissemination Agent shall be made without the prior written consent of the Dissemination
Agent.
Section 9.
Additional Information. Nothing in this Disclosure Agreement
shall be deemed to prevent the District or the City from disseminating any other information,
using the means of dissemination set forth in this Disclosure Agreement or any other means of
communication, or including any other information in any Annual Report or notice of occurrence
of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the
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District or the City chooses to include any information in any Annual Report or notice of
occurrence of a Listed Event in addition to that which is specifically required by this Disclosure
Agreement, the District and the City shall have no obligation under this Disclosure Agreement to
update such information or include it in any future Annual Report or notice of occurrence of a
Listed Event.
Section 10. Default. In the event of a failure of the District, the City or the
Dissemination Agent to comply with any provision of this Disclosure Agreement, any
Participating Underwriter or any holder or beneficial owner of the Bonds may take such actions
as may be necessary and appropriate, including seeking mandate or specific performance by
court order, to cause the District, the City or the Dissemination Agent, as the case may be, to
comply with its obligations under this Disclosure Agreement. A default under this Disclosure
Agreement shall not be deemed an Event of Default under the Trust Agreement, and the sole
remedy under this Disclosure Agreement in the event of any failure of the District, the City or
the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel
performance.
Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The
Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure
Agreement, and the District and the City agree to indemnify and save the Dissemination Agent,
its officers, directors, employees and agents, harmless against any loss, expense and liabilities
which it may incur arising out of or in the exercise or performance of its powers and duties
hereunder, including the costs and expenses (including attorneys fees) of defending against any
claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful
misconduct. The Dissemination Agent may rely and shall be protected in acting or refraining
from acting upon any direction from the District or the City or an opinion of nationally
recognized bond counsel. The obligations of the District and the City under this Section shall
survive resignation or removal of the Dissemination Agent and payment of the Bonds.
Section 12. Notices. Any notices or communications to or among any of the
parties to this Disclosure Agreement may be given as follows:
To the City:
City of Calexico
608 Heber Avenue
Attention: City Manager
Fax: (760) 357-5864
To the Dissemination Agent: Urban Futures, Inc.
3111 North Tustin Avenue, Suite 230
Orange, California 92865
Attention: Continuing Disclosure
Fax: (714) 283-5465
Section 13. Beneficiaries. This Disclosure Agreement shall inure solely to the
benefit of the District, the City, the Dissemination Agent, the Participating Underwriter and
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holders and beneficial owners from time to time of the Bonds, and shall create no rights in any
other person or entity.
Section 14. Counterparts. This Disclosure Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall constitute but one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement
as of the date first written above.
City of Calexico Community Facilities District
No. 2013-1 (Gran Plaza)
City Manager
Urban Futures, Inc.
as Dissemination Agent
Authorized Officer
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>7+,63$*(,17(17,21$//</()7%/$1.@
APPENDIX H
FORM OF MAJOR PROPERTY OWNER CONTINUING DISCLOSURE AGREEMENT
This Major Property Owner Continuing Disclosure Agreement (this “Disclosure
Agreement”), dated as of February 1, 2014, is executed and delivered by and between Corsair,
LLC, a Nevada limited liability company (the “Landowner”), and Urban Futures, Inc., as
dissemination agent (the “Dissemination Agent”), in connection with the issuance by the City of
Calexico Community Facilities District No. 2013-1 (Gran Plaza) (the “District”) of the District’s
$7,000,000 aggregate principal amount Improvement Area No. 1 Special Tax Bonds, Issue of
2014 (the “Bonds”). The Bonds are being issued pursuant to a Bond Indenture, dated as of
February 1, 2014 (the “Indenture”), between the District and The Bank of New York Mellon
Trust Company, N.A., as trustee (the “Trustee”).
SECTION 1.
Purpose of the Disclosure Agreement. This Disclosure Agreement is
being executed and delivered by the Landowner for the benefit of the holders and Beneficial
Owners and in order to assist the Participating Underwriter in complying with the Rule (as
defined below). Pursuant to this Disclosure Agreement, the Landowner agrees to provide the
information required to be provided by the Landowner hereunder at the time and in the manner
required hereunder. This Disclosure Agreement does not address additional undertakings, if any,
by or with respect to persons other than the Landowner who may be considered Obligated
Persons for purposes of the Rule, which additional undertakings, if any, may be required for the
Participating Underwriter to comply with the Rule.
SECTION 2.
Definitions. In addition to the definitions set forth in the Indenture,
which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined
in this Section, the following capitalized terms shall have the following meanings:
“Affiliate” shall mean, with respect to any Person, (a) each Person that, directly or
indirectly, owns or controls, whether beneficially or as an agent, guardian or other fiduciary, 25
percent or more of any class of Equity Securities of such Person, (b) each Person that controls, is
controlled by or is under common control with such Person or any Affiliate of such Person or (c)
each of such Person’s executive officers, directors, joint venturers and general partners;
provided, however, that in no case shall the District be deemed to be an Affiliate of the
Landowner for purposes of this Disclosure Agreement, nor shall any Person be deemed to be an
Affiliate of the Landowner for purposes of this Disclosure Agreement solely by reason of such
Person’s ownership of a home within Improvement Area No. 1 of the District. For the purpose
of this definition, “control” of a Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise.
“Annual Report” shall mean any Annual Report provided by the Landowner pursuant to,
and as described in, Sections 3 and 4 of this Disclosure Agreement.
“Assumption Agreement” shall mean an agreement between any Transferee and the
Trustee and Dissemination Agent containing terms substantially similar to this Disclosure
Agreement, whereby such Transferee agrees to provide Annual Reports, Semiannual Reports,
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and notices of significant events with respect to the property located in the District and owned by
such Transferee.
“Beneficial Owner” shall mean any person which has or shares the power, directly or
indirectly, to make investment decisions concerning ownership of the Bonds (including persons
holding Bonds through nominees, depositories or other intermediaries).
“Continuing Disclosure Agent” or “Dissemination Agent” shall mean Urban Futures,
Inc., or any successor Dissemination Agent designated in writing by the District and which has
filed with the Trustee a written acceptance of such designation.
“EMMA” shall mean the Electronic Municipal Market Access system located at
http://www.emma.msrb.org, which is the centralized on-line repository for municipal disclosure
documents to be filed with the MSRB pursuant to the Rule, or such other successor repository
site as prescribed by the MSRB.
“Equity Securities” of any Person shall mean (a) all common stock, preferred stock,
participations, shares, general partnership interests or other equity interests in and of such person
(regardless of how designated and whether or not voting or non-voting) and (b) all warrants,
options and other rights to acquire any of the foregoing.
“Fiscal Year” shall mean the period beginning on January 1 of each year and ending on
the next succeeding December 31, or any other twelve-month period selected and designated by
the Landowner as its official fiscal year period.
“Government Authority” shall mean any national, state or local government, any political
subdivision thereof, any department, agency, authority or bureau of any of the foregoing, or any
other Person exercising executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
“Listed Event” shall mean any of the events listed in Section 5(a) of this Disclosure
Agreement.
“MSRB” shall mean the Municipal Securities Rulemaking Board.
“Obligated Person” shall mean any person, including an issuer of municipal securities,
who is either generally or through an enterprise, fund, or account of such person committed by
contract or other arrangement to support payment of all, or part of the obligations on the Bonds
(other than providers of municipal bond insurance, letters of credit, or other liquidity facilities.
“Official Statement” shall mean the final Official Statement, dated January 21, 2014,
relating to the Bonds.
“Participating Underwriter” shall mean E.J. De La Rosa & Co., Inc., the original
Underwriter of the Bonds required to comply with the Rule in connection with the offering of the
Bonds.
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“Person” shall mean any natural person, corporation, partnership, firm, association,
Government Authority or any other Person whether acting in an individual fiduciary, or other
capacity.
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the United States Securities and
Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended
from time to time.
“Semiannual Report” shall mean any report to be provided by the Landowner on or prior
to March 1 and September 1 of each year pursuant to, and as described in, Sections 3 and 4 of
this Disclosure Agreement.
“Transferee” shall have the meaning designated in Section 12 of this Disclosure
Agreement.
SECTION 3.
Provision of Annual Reports.
(a)
The Landowner shall, or upon its receipt of the Annual Report the
Dissemination Agent shall, not later than March 31 of each year, commencing March 31, 2014,
provide to the MSRB, via EMMA, in an electronic format accompanied by identifying
information as prescribed by the MSRB, the Participating Underwriter and the District an Annual
Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The
Annual Report may be submitted as a single document or as separate documents comprising a
package, and may include by reference other information as provided in Section 4 of this
Disclosure Agreement provided that the audited financial statements, if any, of the Landowner
may be submitted separately from the balance of the Annual Report and later than the date
required for the filing of the Annual Report if they are not available by that date.
In addition, the Landowner shall, or upon its receipt of the Semiannual
Report, the Dissemination Agent shall, not later than March 31 and September 30 of each year,
commencing March 31, 2014, provide to the MSRB, the Participating Underwriter and the
District a Semiannual Report which is consistent with the requirements of Section 4 of this
Disclosure Agreement.
(b)
Not later than 15 Business Days prior to the date specified in subsection
(a) for providing the Annual Report and Semiannual Report to the MSRB, the Landowner shall
provide the Annual Report or the Semiannual Report, as applicable, to the Dissemination Agent
or shall provide notification to the Dissemination Agent that the Landowner is preparing, or
causing to be prepared, the Annual Report or the Semiannual Report, as applicable, and the date
which the Annual Report or the Semiannual Report, as applicable, is expected to be available.
The Landowner shall provide a written certification with each Annual Report or Semiannual
Report, as applicable, furnished to the Dissemination Agent to the effect that such Annual Report
or Semiannual Report, as applicable, constitutes the Annual Report or Semiannual Report, as
applicable, required to be furnished by the Landowner hereunder. If by such date, the
Dissemination Agent has not received a copy of the Annual Report or the Semiannual Report, as
applicable, or notification as described in the preceding sentence, the Dissemination Agent shall
H-3
contact the Landowner to determine if the Landowner is in compliance with the requirements of
this subsection (b).
(c)
If the Dissemination Agent is unable to provide an Annual Report or
Semiannual Report to the MSRB by the date required in subsection (a) or to verify that an
Annual Report or Semiannual Report has been provided to the MSRB by the date required in
subsection (a), the Dissemination Agent shall send a notice to the MSRB in such form as is
prescribed by or acceptable to the MSRB..
(d)
The Dissemination Agent shall file a report with the Landowner and the
District certifying that the Annual Report or the Semiannual Report, as applicable, has been
provided to the MSRB pursuant to this Disclosure Agreement, and stating the date it was
provided.
SECTION 4.
Content of Annual Report and Semiannual Report.
(a)
The Landowner’s Annual Report and Semiannual Report shall contain or
include by reference the information which is available as of the date of the filing of the Annual
Report or the Semiannual Report, as applicable, relating to the following:
(i)
An update to the information and all the tables contained in the
Official Statement under the section “THE DEVELOPER; THE DEVELOPMENT PLAN,”
including a discussion of any material changes in the sources of funds to finance development of
property owned by the Landowner and its Affiliates within Improvement Area No. 1 of the
District, and whether any material defaults exist under any loan arrangement related to such
financing.
(ii)
As to property owned by the Landowner and its Affiliates, a
summary of development activity within Improvement Area No. 1 of the District, including the
number of parcels for which building permits have been issued, the number of parcels for which
land sales have closed and the amount of land in each such transaction, and in the case of a
purchase of a parcel, the name of the purchaser of the parcel and the amount of land in each such
transaction.
(iii) Status of any major governmentally-imposed preconditions for
commencement or continuation of development of the parcels within Improvement Area No. 1 of
the District.
(iv)
Status of completion of the development being undertaken by the
Landowner and its Affiliates in Improvement Area No. 1 of the District and any major
legislative, administrative and judicial challenges known to the Landowner to or affecting the
construction of such development or the time for construction of any public or private
improvements to be made by the Landowner or any Affiliate within Improvement Area No. 1 of
the District (the “Landowner Improvements”).
(v)
Any significant amendments to land use entitlements with respect
to parcels within Improvement Area No. 1 of the District that are known to the Landowner.
H-4
(vi)
Status of Special Tax payments on all parcels in Improvement
Area No. 1 of the District owned by the Landowner and its Affiliates.
(vii) In the Annual Report only, the audited financial statements of the
Landowner and any Affiliate owning sufficient property in Improvement Area No. 1 of the
District such that is responsible for at least 20% of the Special Taxes in the previous Fiscal Year,
if any, for the most recently completed fiscal year (which currently ends on each December 31),
prepared in accordance with generally accepted accounting principles as promulgated from time
to time by the Financial Accounting Standards Board. If the Landowner or any Affiliate owning
sufficient property in Improvement Area No. 1 of the District such that is responsible for at least
20% of the Special Taxes in the previous Fiscal Year, has audited financial statements prepared
and the audited financial statements are not available by the time the Annual Report is required
to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial
statements in a format similar to the financial statements for the preceding year, and the audited
financial statements shall be filed in the same manner as the Annual Report when they become
available.
(b)
Any and all of the items listed above may be included by specific
reference to other documents, including official statements of debt issues which have been
submitted to the MSRB or filed with the Securities and Exchange Commission. The Landowner
shall clearly identify each such other document so included by reference.
SECTION 5.
Reporting of Significant Events.
(a)
Pursuant to the provisions of this Section 5, the Landowner shall give, or
cause to be given, notice of the occurrence of any of the following events, if material, under
paragraphs (b) and (c) with respect to the Bonds:
(i)
Failure to pay any real property taxes, special taxes or assessments
levied within Improvement Area No. 1 of the District on a parcel owned by the Landowner or
any Affiliate;
(ii)
Damage to or destruction of any of the Landowner Improvements
which has a material adverse effect on the value of the parcels owned by the Landowner or any
Affiliate;
(iii) Material default by the Landowner or any Affiliate on any loan
with respect to the construction or permanent financing of the Landowner Improvements;
(iv)
Material default by the Landowner or any Affiliate on any loan
secured by property within Improvement Area No. 1 of the District owned by the Landowner or
any Affiliate;
(v)
Material payment default by the Landowner or any Affiliate
located in the United States and owning land within Improvement Area No. 1 of the District on
any loan of the Landowner or such Affiliate (whether or not such loan is secured by property
within Improvement Area No. 1 of the District) which is beyond any applicable cure period in
such loan;
H-5
(vi)
The filing of any proceedings with respect to the Landowner or
any Affiliate owning land within Improvement Area No. 1 of the District, in which the
Landowner or such Affiliate, may be adjudicated as bankrupt or discharged from any or all of
their respective debts or obligations or granted an extension of time to pay debts or a
reorganization or readjustment of debts; and
(vii) The filing of any lawsuit against the Landowner or any of its
Affiliates located in the United States which, in the reasonable judgment of the Landowner, will
have a material adverse effect on the completion of the Landowner Improvements or the
development of parcels owned by the Landowner or its Affiliates within Improvement Area No.
1 of the District, or litigation which if decided against the Landowner, or any of its Affiliates, in
the reasonable judgment of the Landowner, would materially adversely affect the financial
condition of the Landowner or its Affiliates owning land within Improvement Area No. 1 of the
District.
(viii) A sale or transfer of all or substantially all of the Landowner’s
assets or a sale of a majority of the membership interests, partnership interests, or outstanding
stock (as applicable) of the Landowner.
(b)
Whenever the Landowner obtains actual knowledge of the occurrence of a
Listed Event, the Landowner shall as soon as possible determine if such event would be material
under applicable federal securities laws.
(c)
If the Landowner determines that knowledge of the occurrence of a Listed
Event would be material under applicable federal securities laws, the Landowner shall promptly
file a notice of such occurrence with the Dissemination Agent which shall then distribute such
notice to the MSRB, in an electronic format accompanied by identifying information as
prescribed by the MSRB, with a copy to the District.
SECTION 6.
Termination of Reporting Obligations; Assumption Agreement.
(a)
The Landowner’s obligations under this Disclosure Agreement shall
terminate upon the earliest to occur of the following:
(i)
the legal defeasance, prior redemption or payment in full of all of
the Bonds;
(ii)
subject to Section 6(c), the date on which the Developer and its
Affiliates, collectively own property within Improvement Area No. 1 of the District that is
responsible for less than twenty percent (20%) of the Special Taxes levied in the Fiscal Year;
(iii) the date on which all of the Special Taxes attributable to the
property then owned by Developer and its Affiliates in Improvement Area No. 1 of the District
have been prepaid in full, or
(iv)
upon the delivery by the Landowner to the District of an opinion of
nationally recognized bond counsel to the effect that the information required by this Disclosure
Agreement is no longer required; provided, that such opinion shall be based on information
H-6
publicly provided by the Securities and Exchange Commission or a private letter ruling obtained
by the Landowner or a private letter ruling obtained by a similar entity to the Landowner.
The Landowner shall give a prompt written notice to the District and the Dissemination
Agent of the termination of its obligation under this Disclosure Agreement.
(b)
The Landowner shall, in connection with any sale or transfer of ownership
of land within Improvement Area No. 1 of the District to a person or entity other than a
Landowner Affiliate (together with any Affiliates of such transferee, a “Transferee”) which will
result in the Transferee (which term shall include any successors and assigns of the Landowner)
becoming responsible for the payment of more than twenty percent (20%) of the Special Taxes
levied on property within Improvement Area No. 1 of the District in the Fiscal Year following
such transfer, cause such Transferee to enter into an Assumption Agreement assuming in full the
obligations of the developer under this continuing disclosure agreement. The Landowner and the
Trustee and Dissemination Agent agree to execute a memorandum regarding the transfer of
Landowner’s obligations under this Disclosure Agreement to the Transferee, which shall be
presented to the District for recording in the Official Records in the office of the County
Recorder of Imperial County, California. From and after the date on which such Assumption
Agreement becomes effective, the Landowner shall no longer be required to take the property so
conveyed to the Transferee into account in connection with its report to be delivered under
Section 3(b).
(c)
Notwithstanding any of the foregoing, if following a sale or transfer of
property described in Section 6(b), the Landowner and its Affiliates shall collectively own
property within Improvement Area No. 1 of the District that is responsible for less than twenty
percent (20%) of the Special Taxes levied in the Fiscal Year, the Landowner’s reporting
obligations hereunder shall not terminate pursuant to clause (ii) of Section 6(a) unless and until
the Assumption Agreement required by Section 6(b) has been duly executed and delivered by the
Transferee.
(d)
Except as expressly provided in this Section 6, The Landowner may not
assign its obligations hereunder without the prior written consent of the District.
SECTION 7.
Dissemination Agent. The Landowner may from time to time, appoint
or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure
Agreement, and may discharge any such Dissemination Agent, with or without appointing a
successor Dissemination Agent. If the Dissemination Agent is not the Landowner, the
Dissemination Agent shall not be responsible in any manner for the form or content of any notice
or report prepared by the Landowner pursuant to this Disclosure Agreement. The Dissemination
Agent may resign by providing 30 days’ prior written notice to the Landowner and the Trustee
(if the Trustee is other than the Dissemination Agent). The Landowner shall notify the District in
writing within five days of any substitution of Dissemination Agent pursuant to this Section 7.
The initial Dissemination Agent shall be Urban Futures, Inc.
If and so long as the Dissemination Agent is the Trustee, any Person succeeding the
Dissemination Agent’s corporate trust business shall be the successor Dissemination Agent
without the filing of any paper or further act.
H-7
SECTION 8.
Amendment; Waiver. Notwithstanding any other provision of this
Disclosure Agreement, the Landowner may amend this Disclosure Agreement, and any provision
of this Disclosure Agreement may be waived, provided that the following conditions are
satisfied:
(a)
If the amendment or waiver relates to the provisions of Sections 3(a), 4 or
5, it may only be made in connection with a change in circumstances that arises from a change in
legal requirements, change in law, or change in the identity, nature or status of an Obligated
Person with respect to the Bonds, or the type of business conducted;
(b)
This Disclosure Agreement, as amended or taking into account such
waiver, would, in the opinion of nationally recognized bond counsel addressed to the District, the
Trustee and the Participating Underwriter, have complied with the requirements of the Rule at
the time of the original issuance of the Bonds, after taking into account any amendments or
interpretations of the Rule, as well as any change in circumstances;
(c)
The amendment or waiver either (i) is approved by the Bondowners in the
same manner as provided in the Indenture for amendments to the Indenture with the consent of
Bondowners, or (ii) does not, in the opinion of nationally recognized bond counsel addressed to
the District and the Trustee, materially impair the interests of the Bondowners or Beneficial
Owners of the Bonds; and
(d)
The Landowner, or the Dissemination Agent, shall have delivered copies
of the amendment and any opinions delivered under (b) and (c) above; provided, further, that any
amendment that affects the duties or obligations of the Dissemination Agent under this
Disclosure Agreement shall not be made unless the Landowner obtains the Dissemination
Agent’s advance written consent thereto.
In the event of any amendment or waiver of a provision of this Disclosure Agreement, the
Landowner shall describe such amendment in the next Annual Report or Semiannual Report, and
shall include, as applicable, a narrative explanation of the reason for the amendment or waiver
and its impact on the type (or, in the case of a change of accounting principles, on the
presentation) of financial information or operating data being presented by the Landowner. In
addition, if the amendment relates to the accounting principles to be followed in preparing
audited financial statements, (i) notice of such change shall be given to the MSRB; and (ii) the
Annual Report for the year in which the change is made should present a comparison (in
narrative form and also, if feasible, in quantitative form) between the financial statements as
prepared on the basis of the new accounting principles and those prepared on the basis of the
former accounting principles. The comparison of financial data described in clause (ii) of the
preceding sentence shall be provided at the time financial statements, if any, are filed under
Section 4(a)(viii) hereof.
SECTION 9.
Additional Information. Nothing in this Disclosure Agreement shall
be deemed to prevent the Landowner from disseminating any other information, using the means
of dissemination set forth in this Disclosure Agreement or any other means of communication, or
including any other information in any Annual Report, Semiannual Report, or notice of
occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement.
H-8
If the Landowner chooses to include any information in any Annual Report, Semiannual Report,
or notice of occurrence of a Listed Event in addition to that which is specifically required by this
Disclosure Agreement, the Landowner shall have no obligation under this Disclosure Agreement
to update such information or include it in any future Annual Report, Semiannual Report, or
notice of occurrence of a Listed Event.
The Landowner acknowledges and understands that other state and federal laws,
including but not limited to the Securities Act of 1933 and Rule 10b-5 promulgated under the
Securities Exchange Act of 1934, may apply to the Landowner, and that under some
circumstances compliance with this Disclosure Agreement, without additional disclosures or
other action, may not fully discharge all duties and obligations of the Landowner under such
laws.
SECTION 10.
Default. In the event of a failure of the Landowner to comply with any
provision of this Disclosure Agreement, any Participating Underwriter or any Bondowner or
Beneficial Owner of the Bonds may, take such actions as may be necessary and appropriate,
including seeking mandate or specific performance by court order, to cause the Landowner or the
Dissemination Agent to comply with its obligations under this Disclosure Agreement. A default
under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture,
and the sole remedy under this Disclosure Agreement in the event of any failure of the
Landowner or the Dissemination Agent to comply with this Disclosure Agreement shall be an
action to compel performance.
SECTION 11.
Duties, Immunities and Liabilities of Dissemination Agent. The
Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure
Agreement and the Landowner agrees to indemnify and save the Dissemination Agent, its
officers, directors, employees and agents, harmless against any loss, expense and liabilities
which they may incur arising out of or in the exercise or performance of their powers and duties
hereunder, including the costs and expenses (including attorneys fees) of defending against any
claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful
misconduct. The Dissemination Agent shall receive reasonable compensation for its services
rendered hereunder. The Dissemination Agent shall not be deemed to be acting in any fiduciary
capacity for the Landowner, the Participating Underwriter, Bondowners or Beneficial Owners or
any other party. The Dissemination Agent may rely and shall be protected in acting or refraining
from acting upon a direction from the Landowner or an opinion of nationally recognized bond
counsel. The obligations of the Landowner under this Section shall survive resignation or
removal of the Dissemination Agent and payment of the Bonds. No person shall have any right
to commence any action against the Dissemination Agent seeking any remedy other than to
compel specific performance of this Disclosure Agreement.
The Dissemination Agent will not, without the Landowner’s prior written consent, settle,
compromise or consent to the entry of any judgment in any pending or threatened claim, action
or proceeding in respect of which indemnification may be sought hereunder unless such
settlement, compromise or consent includes an unconditional release of the Landowner and its
controlling persons from all liability arising out of such claim, action or proceedings. If a claim,
action or proceeding is settled with the consent of the Landowner or if there is a final judgment
(other than a stipulated final judgment without the approval of the Landowner) for the plaintiff in
H-9
any such claim, action or proceeding, with or without the consent of the Landowner, the
Landowner agrees to indemnify and hold harmless the Dissemination Agent to the extent
described herein.
SECTION 12.
Landowner as Independent Contractor. In performing under this
Disclosure Agreement, it is understood that the Landowner is not an agent of the District.
SECTION 13.
Notices. Notices required by this Disclosure Agreement should be
sent in writing to the following addresses. The following information may be conclusively relied
upon until changed in writing.
Dissemination Agent:
Urban Futures, Inc.
3111 North Tustin Avenue, Suite 230
Orange, California 92865
(714) 283-9334
(714) 283-5465 Fax
Attention: Continuing Disclosure
Trustee:
The Bank of New York Mellon Trust Company, N.A.
400 S. Hope Street, Suite 400
Los Angeles, California 90071
Phone: (213) 630-6249
Fax: (213) 630-6215
E-mail: [email protected]
Attention: Teresa Fructuoso
Participating Underwriter:
E. J. De La Rosa & Co. Inc.
101 Montgomery Street, Suite 2150
San Francisco, California 94104
Phone: (415) 217-3390
Fax: (415) 495-8864
Attention: Ralph J. Holmes
Landowner:
Corsair, LLC
9034 W. Sunset Blvd.
West Hollywood, CA 90069
Phone: (310) 247-0900
Fax: (310) 432-5489
Attention: Arman Gabay & John Carroll
[email protected]
SECTION 14.
Severability. In case any one or more of the provisions contained
herein shall for any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision hereof.
H-10
SECTION 15.
Beneficiaries. This Disclosure Agreement shall inure solely to the
benefit of the Landowner, the District, the Dissemination Agent, the Participating Underwriter
and Bondowners and Beneficial Owners from time to time of the Bonds, and shall create no
rights in any other person or entity.
SECTION 16.
Counterparts. This Disclosure Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute and deliver this Disclosure Agreement on the date first written above.
CORSAIR, LLC
a Nevada limited liability company
By: JOHN J. CARROLL IV, INC.
Manager
By:
John J. Carroll
President
URBAN FUTURES, INC.
as Dissemination Agent
By:
Name:
Title:
H-11
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Transcription

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