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<br />.". .. <br /> <br />2. Overview of the Credit Structure and the Role of Empire Economics' Research <br /> <br />Empire Economics' Market Research for CFD No. 2005-0 I will include a Price Point Analysis and also a <br />Market Absorption Study; accordingly, the primary components are as follows: <br /> <br />Type of Study: <br /> <br />Price Point Analysis <br /> <br />Market Absorption <br /> <br />Purpose <br /> <br />Estimate Current Base Prices <br />for each of the Residential Products <br /> <br />Estimate AbsorptionlEscrow Closings <br />for each of the Residential Projects <br /> <br />Special Tax Analyst <br /> <br />Set Special Taxes to Conform to the <br />Maximum Tax Burden - City Policy <br /> <br />Amount of Special Taxes paid by <br />DeveloperslBuilders vs. Homeowners <br /> <br />Appraiser <br /> <br />Consider Product Prices for <br />Estimating Land Values <br /> <br />Absorption-Discounted Cash Flow <br /> <br />So, Empire Economics will perform a Price Point Analysis and also a Market Absorption Study, and these are <br />then utilized by the Special Tax Analyst as well as the Appraiser in formulating a credit structure underlying the <br />CFD No. 2005-01 Bond Issue that is consistent with current/expected market conditions. <br /> <br />3. Methodolol!v Underlvinl! Price Point Analvsis <br /> <br />Empire Economics will perform a competitive market analysis of the proposed prices/values for the forthcoming <br />residential projects/products in CFD No. 2005-01 so that the Special Taxes as set-forth by the Rate and Method <br />are in conformance with the City of Santa Ana's tax burden policies. <br /> <br />With regards to the forthcoming residential for-sale products, some 791 condominiums/town homes/live-work <br />units in MacArthur Place South and also some 278 condominiums/Iofts in Geneva Commons, Empire <br />Economics will perform a Price Point Analysis based upon a systematic analysis of the following factors: <br /> <br />>- Expected Characteristics of the Forthcoming Residential ProjectslProducts in CFD No. 2005-01 <br />>- Identification of Comparable Projects and Market Surveys <br />>- Description of the Methodology Underlying the Analysis of Housing Prices <br />>- Statistical Analysis of Housing Prices and Value Ratios <br />>- Empire Economics' Price Recommendations <br /> <br />The Price Point Analysis will be distributed via E-Mail in PDF format to the Financing Team. <br /> <br />4. Methodolol!v Underlvinl! the Market Absorption Study <br /> <br />Based upon Empire Economics' experience in conducting more than three hundred fifty Market Studies during <br />the past twenty years, the macroeconomic factors are regarded as being significant determinants of the actual <br />performance of Planned Communities, Business Parks and Retail Centers, in the marketplace, and, as such, they <br />represent a critical component of the Market Absorption Study. With respect to the economic and real estate <br />conditions underlying the market demand for the forthcoming products in CFD No. 2005-01, Empire Economics <br />will discuss the Southern California and Orange County economies and real estate markets; this is regarded as <br />being a critical component of the Market Study, since it provides prospective bond purchasers with a more <br />accurate understanding of the market conditions underlying in CFD No. 2005-01. <br /> <br />3 <br />