SEMI-ANNUAL REPORT LENNAR HOMES OF CALIFORNIA, INC.

Transcription

1 SEMI-ANNUAL REPORT OF LENNAR HOMES OF CALIFORNIA, INC. Dated as of March 15, 2014 Providing Continuing Disclosure for the Disclosure Period September 16, 2013, through March 15, 2014 Relating to the $5,010,000 City of Bakersfield Assessment District No (Etcheverry/Lin II/University Park) Limited Obligation Improvement Bonds To be filed with the Electronic Municipal Market Access ("EMMA") filing service maintained by the Municipal Securities Rulemaking Board Landowner Contact: Darryl Denius Vice President, Business Development Lennar Fresno, Inc N. Palm Ave., Suite 110 Fresno, CA Phone: (559)

2 TABLE OF CONTENTS INTRODUCTORY STATEMENT... 1 CUSIP NUMBERS... 1 FORWARD-LOOKING STATEMENTS... 1 REPORTING OF LISTED EVENTS... 2 SPECIFIC CONTINUING DISCLOSURE INFORMATION The Development Plans (Section 4(a)) The Financing Plans (Section 4(b)) Legal Structure of the Landowner (Section 4(c)) Parent Financial Statements (Section 4(d)) Landowner Financial Statements (Section 4(e)) Further Information (Section 4(f))... 5 CERTIFICATION... S-1 EXHIBIT A- Updated Information Regarding Development Plan and Financing Plan... A-1 EXHIBIT B- Updated Information Regarding Option Agreement... B-1

3 INTRODUCTORY STATEMENT This Semi-Annual Report (the "Semi-Annual Repmi") is hereby submitted under Section 3 of the Landowner Continuing Disclosure Certificate (Lennar Homes of California, Inc.), dated as of May 2, 2007 (the "Disclosure Ceriificate"), executed and delivered by Lennar Homes of California, Inc., a California corporation ("Lennar Homes" or the "Landowner"), in connection with the issuance by the City of Bakersfield (the "City") of $5,010,000 in principal amount of Limited Obligation Improvement Bonds (the "Bonds") for its Assessment District No (Etcheverry/Lin II/University Park) (the "Assessment District"). Capitalized terms used in this Semi-Annual Repmt but not otherwise defined have the meanings given to them in the Disclosure Certificate or the Official Statement, dated April 12, 2007 (the "Official Statement"), relating to the Bonds. CUSIP NUMBERS The following CUSIP numbers have been assigned to the outstanding Bonds by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc., and are provided for convenience of reference only. The Landowner does not assume any responsibility for the accuracy of these CUSIP data. Maturity Maturity Maturity (September 2) CUSIP Ctl (September 2) CUSIP Ctl (September 2) CUSJpCtl G G H G G H G H G H36 (I) CUSIP is a registered trademark of the American Bankers Association. Copyright American Bankers Association. All rights reserved. CUSIP data are provided by CUSIP Global Services, managed by Standard & Poor's Financial Services LLC on behalf of the American Bankers Association. These data are not intended to create a database and do not serve in any way as a substitute for CUSIP Global Services. CUSIP numbers are provided for convenience of reference only. The City takes no responsibility for the accuracy of such numbers. FORWARD-LOOKING STATEMENTS Ceriain statements included or incorporated by reference in this Semi-Annual Repmt constitute "forwardlooking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E ofthe United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as "plan," "intend," "expect," "propose," "estimate," "project," "budget," "anticipate," or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involves!mown and unlmown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements described to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Updates or revisions to these forward-looking statements may be provided pursuant to the Disclosure Ceriificate if the expectations, events, conditions, or circumstances on which such statements are based change in a material way. The forward-looking statements in this Semi-Annual Repmi are subject to risks and unceriainties that could cause actual results to differ materially from those expressed in or implied by such forward-looking statements. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE INDICATED. 1

4 REPORTING OF LISTED EVENTS The Listed Events referenced in Section S(a) of the Disclosure Certificate and listed below have occurred with respect to the Bonds during the period covered by this Semi-Annual Report, or between the end of such period and the date ofthis Semi-Annual Report: X None of the Listed Events listed below have occurred with respect to the Bonds. Conveyance by the Landowner or any of its Affiliates or LO Land to a Successor Landowner or its Affiliates, if any, of property that, when aggregated with all other propetiy in the Assessment District then-owned by such Successor Landowner and its Affiliates, if any, is subject to the lien of greater than twenty percent (20%) of the annual assessment securing payment of the Bonds. Notwithstanding, the foregoing, the purchase of lots by the Landowner or any of its Affiliates shall not require the Landowner to report such event. Failure of the Landowner or any of its Affiliates, or LO Land, to pay prior to delinquency general propetiy taxes, special taxes, or assessments with respect to the Property. Termination of, or uncured material default under, any line of credit or loan, or any other loss of a source of funds that could have a material adverse effect on the most recently disclosed Financing Plan or Development Plan, if any, of the Landowner or LO Land, or on the ability of the Landowner or any of its Affiliates, or LO Land, if applicable, to pay prior to delinquency assessment installments with respect to the Propetiy. The occurrence of an Event of Bankruptcy with respect to the Landowner or LO Land or any of their Affiliates that could have a material adverse effect on the most recently disclosed Financing Plan or Development Plan, if any, of the Landowner or LO Land or on the ability of the Landowner or any of its Affiliates or LO Land to pay prior to delinquency assessment installments with respect to the Propetiy. An amendment(s) to land use entitlements or environmental conditions or other governmental conditions that are necessary to complete the development of the Propetiy. Previously undisclosed governmentally-imposed preconditions to commencement or continuation of development on the Propetiy, if material. Previously undisclosed legislative, administrative, or judicial challenges to development of the Propetiy, if material. Changes in the alignment, design, or likelihood of completion of significant public improvements within or serving the property in the Assessment District, including major thoroughfares, sewers, water conveyance systems, and similar facilities that could have a material adverse effect on the ability to complete the development of the Propetiy. The assumption of any obligations by a Successor Landowner pursuant to Section 6 of the Disclosure Certificate. 2

5 SPECIFIC CONTINUING DISCLOSURE INFORMATION The following information is being provided in compliance with the specific requirements contained in Section 4 of the Disclosure Ce1iificate. The source for the following information is the Landowner. 1. The Development Plans (Section 4(a)) The Landowner shall provide a general description of progress made in the Development Plan of the Landowner or LO Land, as applicable, and any significant changes in such Development Plan, Financing Plan, or zoning since the date of the Official Statement (with respect to the first Semi-Annual Report only) or the prior Disclosure Period, as applicable. The Landmvner shall track actual absorption relative to projected absmption described in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESS111ENT DISTRICT- Development and Financing Plans - Lennar Homes Development Plan." The Landowner shall identify any material deviations in actual versus expected sale prices, and identijj1 zoning changes, if any. The Landowner shall also include information conceming the recordation of final maps, if applicable, and information concerning the sale or transfer of property to Persons that are not Affiliates of the Landowner or LO Land. As of the date of the Official Statement, the Landowner owned all of the assessable prope1iy in the Lin II Area and had options to purchase all of the assessable prope1iy in the Etcheverry Area from LO Land. At such time, the Landowner expected to develop the Lin II Area with 317 residential units and the Etcheveny Area with 430 residential units. Subsequent to the issuance of the Bonds, the Landowner acquired 69 lots in the Etcheveny Area from LO Land and terminated its option to acquire the remaining 361 lots from LO Land, as described in the Landowner's previous Semi-Annual Repmis. Etcheveny. Pursuant to a Construction Agreement with LO Land, Lennar Homes is responsible for constructing infrastructure improvements to bring the lots in Etcheveny to a finished lot condition. Lennar Homes believes it has completed all of its obligations under the Construction Agreement, and there are no fmiher development conditions to recording final maps in the Etcheveny area. As for home construction, Lennar Homes intends to build out the 69 lots it acquired from LO Land. Construction activities began in October 2012 and Lennar Homes expects to complete construction by August Lennar Homes has closed escrow on 49 of the homes, and the remaining 20 homes are under construction and are expected to close escrow by August 31, As of the date of this Semi-Annual Repmi, LO Land has sold all of its prope1iy in the Etcheverry Area to Cornerstone Communities. Prior to such sale, LO Land had entered into an agreement with McMillin Homes (a third pmiy merchant builder unrelated to the Landowner) whereby McMillin Homes would build and market homes in the Etcheveny Area while LO Land retained ownership of the prope1iy. Home construction began in May 2009 under this arrangement. Approximately 321 of the 361 homes to be constructed in the Etcheverry Area have been completed by McMillin Homes or Cornerstone Communities and escrow has closed on the sale of such completed homes to individual homeowners. The remaining 40 homes will be constructed by Cornerstone Communities and are expected to be completed and to close escrow by December 31,

6 Lin IL Lennar Homes has completed, and has received payment for, the offsite improvements of Allen Road and Riena Road. However, the interior portion of Unit I will be developed in phases. Phased developing will allow Lennar Homes to continue with the development and build out of homes with a limited cash outlay. Lennar Homes has since completed all the improvements within the interior and offsite pmiion of Unit 1 and is currently awaiting City approval for notice of completion. Lennar Homes commenced construction of homes in February As of the date of this Semi-Annual Repmi, there are 4 model homes completed, 27 homes under construction, and 205 completed and occupied homes in the Lin II Area (including the 40 Ashton Falls units that were completed and delivered in 201 0). See also Exhibit A attached hereto for updates to the information provided in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT - Development and Financing Plans - Lennar Homes Development Plan" and "- Lennar Homes Financing Plan." Exhibit A also includes updates to Tables 6 and 7 from the Official Statement. See also Exhibit B attached hereto for updates to the information provided in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT - Lennar Homes - The Option Agreement" regarding Lennar Homes' option to purchase propetiy in the Etcheveny Area. Exhibit B also includes updates to Table 4 from the Official Statement. There have been no changes to the zoning within the Etcheveny Area or the Lin II Area. 2. The Financing Plans (Section 4(b)) Describe any material changes in the Financing Plan for the Landowner's development project including, without limitation, changes in status of the Landowner's credit line (or the credit line of any Affiliates of the Landowner that own property within the Assessment District), if applicable. See Exhibit A under the heading "Lennar Homes Financing Plan," which includes updates to the Financing Plan for the Landowner's development project. Such updates would include any changes in the status of the Landowner's credit line (or the credit line of any Affiliates of the Landowner that own propetiy within the Assessment District), if applicable. 3. Legal Structure of the Landowner (Section 4(c)) Describe any material change in the legal structure of the Lando-wner or of any of its Affiliates that own property within the Assessment District. None. 4. Parent Financial Statements (Section 4(d)) Section 4(d) of the Disclosure Certificate requires that, for each fiscal year of the Landmvner, one Semi-Annual Report shall make reference to the quarterly and annual Financial Statements of the Landowner's parent company or the Landmvner, as applicable, on file with the Securities and Exchange Commission ("SEC'). 4

7 Lennar Homes is an indirect wholly owned subsidiary of Lennar Corporation ("Lennar"). The audited financial statements of Lennar Corporation, and any amendments thereto, for the fiscal year ending November 3 0, 2013, and for any subsequent fiscal quarters, are hereby incorporated by reference. The financial statements of Lennar Corporation are available on the Securities and Exchange Commission's internet website at the following address: (Central Index Key ). The audited financial statements of Lennar Corporation referenced or provided with this Semi-Annual Report are referred to for informational purposes only. In the event of a failure to pay any assessments securing the Bonds, and after depletion of the applicable reserve fund, if any, the real property in the Assessment District is the sole security for the Bonds. The obligation oflennar Homes to pay any annual assessments does not constitute a personal indebtedness of Lennar Homes or Lennar Corporation for which the funds or assets (other than the property in the Assessment District) of Lennar Homes or Lennar Corporation may be required, by operation of law or otherwise, to be used to pay debt service on the Bonds. It should not be inferred from the reference to the audited financial statements oflennar Corporation provided with this Semi-Annual Report that such funds or assets (other than the property in the Assessment District) are available to cure any delinquencies in the payment of assessments securing the Bonds. 5. Landowner Financial Statements (Section 4(e)) Section 4(e) of the Disclosure Certificate requires that, to the extent that Financial Statements are prepared separately for the Landowner, such Financial Statements must be provided. Financial Statements are not prepared separately for the Landowner. Please also see Item 4 above. 6. Further Information (Section 4(f)) None. [Remainder of Page Intentionally Left Blank] 5

8 CERTIFICATION The undersigned Landowner hereby certifies that this Semi-Annual Report constitutes the Semi-Annual Report required to be furnished by the Landowner under the Disclosure Ce1tificate. ANY OTHER STATEMENTS REGARDING THE LANDOWNER, THE DEVELOPMENT OF THE PROPERTY, THE LANDOWNER'S FINANCING PLAN OR FINANCIAL CONDITION, OR THE BONDS, OTHER THAN STATEMENTS MADE BY THE LANDOWNER IN AN OFFICIAL RELEASE, OR FILED WITH THE MUNICIPAL SECURITIES RULEMAKING BOARD OR A NATIONALLY RECOGNIZED MUNICIPAL SECURITIES INFORMATION REPOSITORY, ARE NOT AUTHORIZED BY THE LANDOWNER. THE LANDOWNER IS NOT RESPONSIBLE FOR THE ACCURACY, COMPLETENESS OR FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS. THE LANDOWNER HAS NO OBLIGATION TO UPDATE THIS SEMI-ANNUAL REPORT OTHER THAN AS EXPRESSLY PROVIDED IN THE DISCLOSURE CERTIFICATE. Dated: As ofmarch 15, 2014 LENNAR HOMES OF CALIFORNIA, INC. a California corporation S-1

9 EXHIBIT A UPDATED INFORMATION REGARDING DEVELOPMENT PLAN AND FINANCING PLAN Lennar Homes Development Plan Etclteveny Area. The Etcheverry Area encompasses approximately gross acres, comprising Tract No and Tract No. 6361, and is planned for subdivision into 430 R-1 lots (plus one residential lot with an existing home on it, which will not be assessed a share of the total assessment amount), two storm drain sump lots, one cell tower lot, and several public landscape lots. A portion of the Etcheverry Area, identified as Tract No and consisting of approximately gross acres, has been approved for subdivision into a combined total of 226 R-1 lots, one storm drain sump lot, and several public landscape lots, all pursuant to Vesting Tentative Tract No Tract No has been fmiher subdivided into two unit maps, both of which were recorded in June The remainder of the Etcheverry Area, identified as Tract No and consisting of approximately gross acres, has been approved for subdivision into a combined total of 204 R-1 lots (plus one residential lot with an existing home on it, which will not be assessed a share of the total assessment amount), one storm drain sump lot, one cell tower lot, and several public landscape lots, all pursuant to Vesting Tentative Tract Map No Tract No is subdivided into three phases. The planned development of the assessable propetiy within the Etcheverry Area is summarized in the table below. Tract/Phase Tract No Unit 1 Tract No Unit 2 Subtotal Tract No Tract No Unit 1 Tract No Unit 2 Tract No Unit 3 Subtotal Tract No TOTAL Total Number of Units Expected at Buildout Recordation Status of Subdivision Map Recorded Recorded Recorded Recorded Recorded With regard to the propetiy subject to the Option Agreement, Lennar Homes delivered a termination notice, dated September 19, 2007, to LO Land (the "Termination Notice"), which gave LO Land notice oflennar Homes' intention to waive and terminate its options to purchase 361 lots under the Option Agreement effective as of the date of the Termination Notice. As a result of such termination by Lennar Homes, LO Land drew on the letter of credit that was posted by Lennar Homes as security for such options. Pursuant to a Construction Agreement with LO Land, Lennar Homes is responsible for constructing infrastructure improvements to bring the lots in Etcheverry to a finished lot condition. Lennar Homes believes it has completed all of its obligations under the Construction Agreement, and there are no fmiher development conditions to recording final maps in the Etcheverry area. Grading, storm drain, sewer, offsite sewer, dry utilities, sidewalk paving, and curb and gutter are 1 00% completed, and notice of completion has been filed with the City for Tract No. 6343, Units 1 and 2. All A-1

10 improvements described in previous repmis have been completed in Tract No. 6361, Units 1, 2, and 3. The construction of a pmiion of the Snow Road Bridge over the Friant Canal and the Pinnell home relocation are both complete. In the Etcheverry Area, Lennar Homes has completed all infrastructure improvements, including the applicable Improvements. Lennar Homes has successfully completed the improvement obligations for the Etcheverry area according to the City conditions of approval. Lennar Homes has received a Notice of Completion from the public works inspection department. However, until Tract No. 6343, Unit 2, is recorded, this community will not be accepted into the one year maintenance period with the City. Lennar Homes has begun to construct single family homes on the 69 lots that it owns in Etcheverry Area, ranging in size from 1,877 to 3,185 square feet. Construction on all 69 lots is expected to be completed by August Sales effmis for these homes are being conducted from Lennar Homes Welcome Home Center within Tract No Lennar Homes has closed escrow on 49 homes, and the remaining 20 homes are under construction and are expected to close escrow by August 31, As of the date of this Semi-Annual Repmi, LO Land has sold all of its propetiy in the Etcheverry Area to Cornerstone Communities. Prior to such sale, LO Land had entered into an agreement with McMillin Homes, whereby McMillin Homes would build and market homes Tract 6343 and Tract No in the Etcheverry Area while LO Land retained ownership of such propetiy. Home construction began in May 2009 under this arrangement. Approximately 321 of the 361 homes to be constructed in the Etcheverry Area have been completed by McMillin Homes or Cornerstone Communities and escrow has closed on the sale of such completed homes to individual homeowners. There are 40 homes in the Etcheverry Area remaining to be constructed. The remaining 40 homes will be constructed by Cornerstone Communities and are expected to be completed and to close escrow by December 31,2014. Lo Land has entered into an agreement with McMillin Homes whereby McMillin Homes will build out 361 homes in Tract No and Tract No Subsequent to the execution of such agreement, Lo Land sold all of its propetiy in Tract No and Tract No to Cornerstone Communities. Approximately 321 of the 361 homes have been completed and escrow has closed on the sale of such completed homes to individual homeowners. Cornerstone Communities is marketing its homes as Bridgeton, and is offering homes ranging from 2,107 to 2,700 square feet and priced at $320,990 to $376,990. There are 40 homes remaining to be completed. Lin II Area. The Lin II Area encompasses approximately gross acres, comprising Tract No. 6453, and is planned for subdivision into 317 R-1 lots, one storm drain sump lot, one sewer lift station lot, and several public landscape lots. The Lin II Area has been fmiher subdivided into two units: Unit 1 and Unit 2. Lennar Homes plans to construct 317 single-family homes on the Lin II Area propetiy, comprised of 192 homes in Unit 1 and 125 homes in Unit 2, and has recorded subdivision maps for both Unit 1 and Unit 2 with the County Recorder. In the Lin II Area, grading, storm drain, sewer, water, curb and gutter, dry utilities, and sidewalk paving are completed. Allen Road and Reina Roads are 100% completed. Lennar Homes was issued a street permit by the City for the improvements on Allen Road and Riena Road, which permit is required for Lennar Homes to apply for partial reimbursement of costs related to such improvements. The items for which Lennar Homes will seek for reimbursement are grading, curb and gutter, sidewalks, asphalt paving, streetlights, inter connect, signage, block wall, sewer system, and sewer lift station. This pmiion of work has been completed, and payment for such work has been received from the City. A-2

11 Lennar Homes plans to construct 317 single-family homes of the Everything Included product type in the Lin II Area, ranging in size from 1,500 to 3,185 square feet. Home construction in Unit 1 of the Lin II area is complete and only eight homes (including four models) remain unsold. Construction of homes in Unit 2 is substantially complete, which 21 homes completed and 23 homes under construction. Forty lots within the Lin II Area are part of the residential community known as "Ashton Falls" that was developed by Lennar Homes with a total of 292 residential units. Of the 292 units, 252 of the units are located within the adjacent "Lin Area," which is not located within the Assessment District but which is within the boundaries of another assessment district within the City. In June 2007, Lennar Homes commenced development on the 40 Ashton Falls lots located within the Lin II Area. Lennar Homes began closing escrows on such 40 lots in September As of August 31, 2008, the Landowner had closed escrow on all 40 of such lots to individual homeowners. Pricing of these 40 homes ranged from $275,555 to $292,555, and homes ranged in size from 1,647 to 1,856 square feet. The planned development of the assessable property within the Lin II Area is summarized in the table below. Phase (Tract No. 6453) Unit 1 Unit2 TOTAL Total No. of Units Expected at Buildout Recordation Status of Subdivision Map Recorded Recorded Cumulative No. of Units with Construction Commenced ttl No. of Units with Closed Escrows 184.Jl 205 No. of Units to Commence Construction 0 n 81 (I) Includes 4 model units. Lennar Homes Financing Plan Etcheverry Area. Lennar Homes expects the cost of the development for the 69 lots it owns within the Etcheverry Area to total approximately $36,653,226, including the costs for all on-site and offsite improvements, land acquisition, and all home construction. Lennar Homes expended $16,074,000* to develop the 361 lots previously owned by LO Land to a finished lot condition, as required by the Construction Agreement. The following Table 6 details the construction budget for the development of the 69 lots Lennar Homes owns within the Etcheveny Area, as well as the improvement costs for the 361 lots previously owned by LO Land and that Lennar Homes has developed to finished lot condition. Such budget does not include home construction estimates for the 361 lots previously owned by LO Land and has been prepared based upon assumptions of future sales revenues, development costs, operating costs, property taxes, and other matters, all of which are subject to change. There can be no assurance that the actual development costs set fotih below will not be greater than projected. Reflects total budget for this project and includes costs expected to be reimbursed to Lennar Homes pursuant to the Construction Agreement and from Bond proceeds. A-3

12 Description of Cost Item Land Acquisition Option Costs Offsite Improvements Onsite Improvements Home Construction (including fees) for 69 lots Total TABLE6 ETCHEVERRY AREA ESTIMATED CONSTRUCTION BUDGET (As of March 15, 2014) Estimated Cost $ 6,211,424 4,664, (!) 13,938,600( ' ' 2 ) 9,702,987 $36,653,226 Expenditures $ 6,211,424 4,664,815 2,135,400 13,938,600 8,296,757 $35,246,996 (I) Approximately $1,903,602 of the offsite improvement costs are expected to be financed with Bond proceeds. Under the Construction Agreement, Lennar Homes is expected to be reimbursed for the balance of the offsite improvement costs by LO Land. (2) Under the Construction Agreement, Lennar Homes is expected to be reimbursed for its onsite improvement costs by LO Land. Source: Lennar Homes. Lennar Homes financed the development of its 69 lots within the Etcheverry Area, including all applicable Improvements not financed with proceeds from the sale of the Bonds, with available cash and home sale revenues. Lennar Homes does not expect to request or obtain any third party loans or other external credit arrangements to provide such financing. As of the date of this Semi-Annual Repmi, 49 of the homes have closed escrow, and the remaining 20 homes are under construction. Lennar Homes has represented that it currently expects the funding sources described above will be sufficient to complete the development of the Etcheverry Area as described herein. There is no assurance, however, that amounts necessmy to finance any outstanding development costs will be available from Lennar Homes, or any other source when needed. Other than the obligations of Lennar Homes in the Construction Agreement, neither Lennar Homes nor any of its affiliates is under any legal obligation of any kind to expend funds for the development of the Etcheveny Area. Any contributions by Lennar Homes to fund the costs of such development are entirely voluntary. Notwithstanding available sources of financing, neither Lennar Homes nor any of its affiliates is under any obligation to apply such sources to the completion of development within the Etcheveny Area. Lin II Area. Lennar Homes expects the cost of the development for the Lin II Area to total approximately $61,517,967, including the costs for all on-site and off-site improvements, land acquisition, and all home construction. The following Table 7 details the construction budget for the development of the Lin II Area. Such budget has been prepared based upon assumptions of future sales revenues, development costs, operating costs, propetiy taxes, and other matters. There can be no assurance that the actual development costs for the Lin II Area will not be greater than projected. Description of Cost Item Land Acquisition Offsite Improvements Onsite Improvements Home Construction (including fees) Total TABLE7 LIN II AREA ESTIMATED CONSTRUCTION BUDGET (As of March 15, 2014) Estimated Cost $ 5,665,978 2,441,350 (l) 9,858,471 44,282,128 $62,247,927 Expenditures $5,665,978 2,441,350 7,127,636 31,464,000 $46,698,964 (l) Approximately $1,397,951 of the offsite improvement costs are expected to be financed with Bond proceeds. Source: Lennar Homes. A-4

13 As of the date of this Semi-Annual Repmi, of the total 317 lots planned for development in the Lin II Area, Lennar Homes owns 81 lots, having developed 236 lots with residential units and closed escrow on 205 lots to individual homeowners. Lennar Homes has built out and has obtained City approval for the offsite improvements of Allen Road and Riena Road. Currently all of Unit 1 is paved and Unit 2 is substantially complete; a notice of completion is in process with the City and is expected to be obtained by June Homebuilding in Unit 1 commenced in the first qumier of2010, and homebuilding in Unit 2 commenced in May As of the date of this Semi-Annual Repmi, there are 4 model homes completed, 27 homes under construction, and 205 completed and occupied homes in the Lin II Area (including the 40 Ashton Falls units). Lennar Homes expects to finance such development, including all applicable Improvements not financed with proceeds from the sale of the Bonds, with available cash and home sale revenues. Lennar Homes does not expect to request or obtain any third patiy loans or other external credit arrangements to provide such financing. Lennar Homes has represented that it currently expects the funding sources described above will be sufficient to complete the development of the Lin II Area as described herein. There is no assurance, however, that amounts necessary to finance any outstanding development costs will be available from Lennar Homes, or any other source when needed. Neither Lennar Homes nor any of its affiliates is under any legal obligation of any kind to expend funds for the development of the Lin II Area. Any contributions by Lennar Homes to fund the costs of such development are entirely voluntary. Notwithstanding available sources of financing, neither Lennar Homes nor any of its affiliates is under any obligation to apply such sources to the completion of development within the Lin II Area. A-5

14 EXHIBIT B UPDATED INFORMATION REGARDING OPTION AGREEMENT Since the issuance of the Bonds, the takedown schedule set fmih in the Option Agreement was amended. As of September 30, 2007, Lennar Homes had taken down a total of 69 lots within the Etcheverry Area from LO Land. The options to purchase the remaining 361 lots within the Etcheverry Area were terminated pursuant to the Termination Notice. The Lot Purchase Schedule below details the purchases and dates of the 69 lots within the Etcheverry Area that Lennar Homes acquired from LO Land. TABLE4 LOT PURCHASE SCHEDULE Option Period 1 i'l 3(1) Totals Purchase Date March 2007 June 2007 July 2007 Number of Lots ( 2 ) Cumulative Total (I) Takedown was accomplished on a revised schedule. (2) The remaining 361 lots were originally to have been taken down between September 2007 and March 2009; however, the option to purchase such lots was terminated pursuant to the Termination Notice. Source: Lennar Homes. B-1