For the Period Ending December 31, 2008

Transcription

1 ANNUAL DEVELOPMENT ACTIVITY AND DISCLOSURE REPORT For the Period Ending December 31, 2008 $50,000,000 Redevelopment Authority of Allegheny County, Pennsylvania Pittsburgh Mills Project Series 2004 Redevelopment Bonds Prepared by: MUNICAP, INC. April 14, 2009

2 ANNUAL DEVELOPMENT ACTIVITY AND DISCLOSURE REPORT I. UPDATED INFORMATION 1 II. INTRODUCTION 3 III. DEVELOPMENT ACTIVITY 5 A. Overview 5 B. Governmental Approvals 5 C. Status of Development 5 D. Public Improvements 12 IV. TRUSTEE ACCOUNTS 14 V. DISTRICT OPERATIONS 16 A. Special Assessments Requirement 16 B. Special Assessments Levied and Collected 21 VI. DISTRICT FINANCIAL INFORMATION 22 A. Fund Balances 22 B. Changes to the Rate and Method of Apportionment 22 C. Changes in the Ad Valorem Tax Rates 22 D. Changes in Assessed Value of Real Property 22 E. Assessed Value of Property 23 F. District Special Assessments Levied 24 G. Status of Collection of Ad Valorem and Special Assessments 24 H. Assessed Value Appeals 24 I. Principal District Taxpayers 26 J. Land Use Amendments 27 K. Public Improvements 27 L. Debt Service Schedules 28 M. Parcel Number and Legal Owner 29 VII. SIGNIFICANT EVENTS 30 A. Developer s Significant Events 30 B. Listed Events 31

3 I. UPDATED INFORMATION Information updated from the Limited Offering Memorandum Annual Continuing Disclosure Report dated December 1, 2004 is as follows: According to the developer, The Mills Limited Partnership and/or its affiliates sold its interest in Pittsburgh Mills Limited Partnership and all property in the district. As of December 31, 2008, the developer reports that the total leaseable space in the mall is 1,059,746 square feet, consisting of 654,519 square feet for anchor stores and 405,245 square feet for specialty stores. The developer reports that leases have been signed for 626,519 square feet of the total 654,519 square feet for anchor stores in the mall, representing 95.7 percent of the leaseable space for anchor stores in the mall. As of December 31, 2008, the developer reports that leases have been signed for 352,574 square feet of the total 405,245 square feet of leasable space for specialty stores in the mall, representing 87.0 percent of the leaseable space for specialty stores in the mall. As of December 31, 2008, the developer reports it has began exploring the possibility of constructing a water park that would also contain a hotel complex. The facility would be attached to the mall in the area adjacent to Dick s Sporting Goods (E-2). The overall cost of this project would exceed $60,000,000. As of December 31, 2008, the developer reports that construction for First Commonwealth Bank, PNC Bank, Lowe s Home Improvement, Steak n Shake, Longhorn Steakhouse, Chili s, Red Robin, Wal-Mart Supercenter, Sam s Club, Eat N Park, Olive Garden, Smokey Bones, Best Buy, PetSmart, Ross, Michael s, Office Max and Doppco Development s is complete and open. The developer also reports that Springhill Suites, a 115-suite hotel, is open for business. According to the developer, as of December 31, 2008, there have been 20 lots sold, totaling approximately acres, within the village and pad sites. The developer reports that lot M-8 was under sale negotiations for a hotel site, but is currently on hold as of December 31, According to the Treasurer s Office of Allegheny County, the 2008 ad valorem tax rates for Allegheny County and Frazer Township remained the same from The ad valorem rate for Deer Lakes School District increased from $ to $ ( mills) per $1000 of assessed value from tax year 2007 to tax year As a result, the total ad valorem tax rate increased from $ to $ ( mills) per $1000 of assessed value for 2008 tax year. As of June 26, 2008, the assessed value for all parcels in the district is equal to $247,207,555, compared to a total assessed value of $252,670,255 in This reduction is due to successful assessment appeals. Total property taxes in the amount of $7,511,516 for the 2007 tax year were collected by Frazer Township, Deer Lakes School District, and Allegheny County in the amount of $394,624, $5,955,569, and $1,161,323, respectively. After distributions, the total amount of TIF revenues distributed to the Authority was $5,899,594. Page 1

4 Total property taxes in the amount of $7,463,552 for the 2008 tax year were collected by Frazer Township, Deer Lakes School District, and Allegheny County in the amount of $371,284, $5,988,446, and $1,103,823, respectively. After distributions, the total amount of TIF revenues distributed to the Authority was $5,863,894. There were no special assessments to be collected for tax year As of December 31, 2008, there have been eight parcels subject to appeals of assessed value. The assessed value of the parcels was contested based on the current land use of the properties. On February 15, 2008, the Board of Property Assessment, Appeals and Review of Allegheny County approved the tax assessment appeals. As of December 31, 2008, there are no other parcels subject to tax assessment appeals. Lowe s Home Centers, Inc., Pittsburgh Mills Limited Partnership, Sam s Real Estate Business Trust and Wal-Mart Real Estate Business Trust paid 5.79 percent, percent, 5.26 percent, and 6.97 percent, respectively, of total property taxes. No special assessments were levied. According to the developer, on December 27, 2006, Morgan Stanley Mortgage Corporation approved a loan to Pittsburgh Mills LP. The terms of the loan provided a repayment schedule of five years with no option for extension and payments of interest only during the loan period. The balance on the loan is $133,000,000, with an interest rate of 6.370%, maturing on January 8, 2012 with a prepayment privilege upon defeasance. According to the developer, on December 27, 2006, RREEF Structured Debt Fund Transwestern Mezzanine Realty Partners approved a loan to Pittsburgh Mills LP. The terms of the loan provided a repayments schedule of five years with no option for extension and payments of interest only during the loan period. As of December 31, 2008, the balance on the loan is $32,500,000 with an interest rate equal to the 30-day London Interbank Offered Rate (LIBOR) plus 5.50%, maturing on January 8, 2012 with a prepayment privilege. The developer reports the additional advance feature of $9,000,000 was terminated within the term of the loan and therefore no longer exists. Prior to termination, the additional advance of $9,000,000 had not been drawn. Page 2

5 II. INTRODUCTION The Redevelopment Authority of Allegheny County, Pennsylvania issued the $50,000, Series 2004 Redevelopment Bonds. The 2004 Redevelopment Bonds were issued pursuant to the provisions of the Pennsylvania Tax Increment Financing Act (the TIF Act ), and an Indenture of Trust, dated as of December 1, 2004 (the Indenture ), by and between the Redevelopment Authority of Allegheny County (the Authority ) and Wells Fargo Bank, National Association, as trustee Pittsburgh Mills is an approximately 312-acre retail and entertainment destination campus being developed and managed by Pittsburgh Mills Limited Partnership and its affiliates in Frazer Township, Pennsylvania. At completion, the development is expected to contain: (a) The Galleria at Pittsburgh Mills, an enclosed retail and entertainment center which will total approximately 1,136,000 square feet on approximately 90 acres of land (the Mall ); and (b) The Village at Pittsburgh Mills, approximately 109 acres of land to be sold or leased to large-box, full-price and value retailers, restaurant operators and other users (the Village ) and (c) approximately 26 acres of land to be sold for retail and other uses (the Pad Sites ). The development is located in the Allegheny Valley of Southwestern Pennsylvania in Frazer Township, Pennsylvania, 16 miles northeast of downtown Pittsburgh on State Route 28. The development may be accessed within minutes from the Pennsylvania Turnpike. Pittsburgh Mills is expected to cater to a population within a market radius of 40 miles and an expected population of 2.4 million people. The property in the district is currently being developed by Pittsburgh Mills Limited Partnership. At completion, the mall is expected to feature approximately 10 anchor stores occupying approximately 700,000 square feet and approximately 170 in-line retail, restaurants and food court retailers occupying approximately 410,000 square feet of small shop space. The mall layout is planned as a one-level race-track design with standard Mills features such as hardwood floors, colorful courts and mall neighborhoods. At completion, the village is expected to include approximately 10 large-box retail stores, full-price and value retailers, a limited service hotel, a theme restaurant, a gasoline station, a convenience store, a fast food restaurant and other retail uses. The pad sites are expected to be developed simultaneously with the village. The pad sites are expected to include auto dealerships, financial institutions, a gasoline station and restaurants. The information provided herein is not intended to supplement or otherwise relate to the information provided in the Limited Offering Memorandum and any such intent is expressly disavowed. Rather, this report responds to the specific requirements of the continuing disclosure agreement. No representation is made as to the materiality or completeness of the information provided herein or as to whether other relevant information exists with respect to the period covered by this report. Other matters or events may have occurred or become known during or since that period that may be material. All information is provided as of December 31, 2008, unless otherwise stated, and no representation is made that the information contained in this report is indicative of information that may pertain since the end of the period covered by this report or in the future. Page 3

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7 III. DEVELOPMENT ACTIVITY A. OVERVIEW The Pittsburgh Mills project is an approximately 312-acre retail and entertainment destination campus being developed and managed by Pittsburgh Mills Limited Partnership and its affiliates (the Developer ) in Frazer Township, Pennsylvania. At completion, the Development is expected to contain: (a) The Galleria at Pittsburgh Mills, an enclosed retail and entertainment center which will total approximately 1,136,000 square feet (the Mall ) on approximately 90 acres or land; and (b) The Village at Pittsburgh Mills, approximately 109 acres of land to be sold or leased to large-box, full-price and value retailers, restaurant operators and other users (the Village ) and (c) approximately 26 acres of land to be sold for retail and other uses (the Pad Sites ). The development is located in the Allegheny Valley of Southwestern Pennsylvania in Frazer Township, Pennsylvania, 16 miles northeast of downtown Pittsburgh on State Route 28. The Development may be accessed within minutes of the Pennsylvania Turnpike. Pittsburgh Mills is primarily expected to cater to a population within a market radius of 40 miles and an expected population of 2.4 million people. At completion, the mall is expected to feature approximately 10 anchor stores occupying approximately 700,000 square feet and approximately 170 in-line retail, restaurant and food court retailers occupying approximately 410,000 square feet of small shop space. The mall layout is planned as a one-level race-track design with standard Mills features such as hardwood floors, colorful courts and mall neighborhoods. The property in the district is currently being developed by Pittsburgh Mills Limited Partnership. At the time of Bond issuance, the partnership was jointly owned by partnerships affiliated with The Mills Limited Partnership, Kan Am USA XX Limited Partnership and A.V. Associates Limited Partnership, an affiliate company of Zamais Services, Inc. As of December 28, 2006, according to the developer, The Mills Limited Partnership and/or its affiliates sold its interest in Pittsburgh Mills Limited Partnership and all property in the district. B. GOVERNMENTAL APPROVALS AND PERMITS A Zoning Ordinance Amendment was approved by the Frazer Board of Supervisors in September 2002 that contains many of the conditions that apply to the development. The developer has received all zoning approvals necessary in connection with the development. According to the developer, all required permits have been obtained. C. STATUS OF DEVELOPMENT (i.) Status of Mall Construction The developer hired a Maryland based general contractor, the Whiting-Turner Contracting Company, to construct the mall. Mall construction commenced in the third quarter of 2004 and the mall opened to the public on July 14, As of December 31, 2008, the developer reports that leases have been signed with eight anchor stores and 127 specialty tenants totaling 979,093 square feet, representing 92.4 percent of the leaseable space within the mall. The developer also reports that in the mall section, Macy s, Cinemark, Lucky Strike (now Abaté/Dingbats), Dick s Sporting Goods, JC Penney, Borders Books and Music, H&M and Sears Grand are complete. The space for Linens N Things is also complete, but has been vacated. As of December 31, 2008, the developer reports it has began exploring the possibility of constructing a water park that would also contain a hotel complex. The facility would be attached to the mall in the area adjacent to Dick s Sporting Goods (E-2). The overall cost of this project would exceed $60,000,000. Page 5

8 (ii.) Status of the Village and Pad Sites Construction The developer proposed to develop The Village of Pittsburgh Mills to include approximately 109 acres of land to be sold or leased to large-box, full-price and value retailers, restaurant operators and other users (the Village ) and approximately 26 acres of land to be sold for retail and other uses (the Pad Sites ). As of December 31, 2008, the developer reports that construction for First Commonwealth Bank, PNC Bank, Lowe s Home Improvement, Steak n Shake, Longhorn Steakhouse, Chili s, Red Robin, Wal-Mart Supercenter, Sam s Club, Eat N Park, Olive Garden, Smokey Bones, Best Buy, PetSmart, Ross, Michael s, Office Max and Doppco Development s is complete and open. The developer also reports that Springhill Suites, a 115-suite hotel, is open for business. Table III-1 below shows the status of construction and occupancy of the village and pad sites as of December 31, Table III-1 The Village and Pad Sites Construction Status Owner Use Lot Construction Occupancy Status Status First Commonwealth Bank Bank K-3 Complete Open PNC Bank Bank K-2 Complete Open Lowe s Home Centers, Inc. Lowe s O-1 Complete Open Steak n Shake Operations, Inc. Steak n Shake Restaurant C-3 Complete Open Rare Hospitality International, Inc. Longhorn Steakhouse D-4 Complete Open Brinker Penn Trust Chili s Restaurant K-1 Complete Open Red Robin International, Inc. Red Robin Restaurant D-2 Complete Open Doppco Development Doppco Development C-2 Complete Open Wal-Mart Real Estate Business Trust Wal-Mart Supercenter P-2 Complete Open Sam s Real Estate Business Trust Sam s Club P-1 Complete Open W.C.S.R., Inc. Eat N Park Restaurant B-2 Complete Open Frazier Mills Hospitality Associates LP Springhill Suites Hotel B-1 Complete Open Spirit Master Funding IV, LLC Smokey Bones Restaurant D-1 Complete Open Pitt Village LP Ross, Michael s, Office Max N-Block Complete Open Pitt Village LP Best Buy O-2 Complete Open Pitt Village LP Petsmart O-3 Complete Open GMR Restaurants of Pennsylvania, Inc. Olive Garden Restaurant D-3 Complete Open (iii.) Leasing Status Table III-2 below shows a listing of the occupancy and lease area of the mall anchors as of December 31, Page 6

9 Table III-2 Anchor Stores Tenant Type Square Feet Leased Borders Books and Music Book and Music Store 22,000 Cinemark IMAX 3D Theatre Movie Theaters 77,820 Dick s Sporting Goods Sporting Goods 50,843 H&M Clothing Store 20,005 JCPenney Clothing & Home Furnishings 99,935 Macy s Department Store 164,958 Dingbats Restaurant Restaurant 25,162 Sears Grand Clothing & Home Furnishings 165,796 Total 626,519 At the time of issuance of the Series 2004 Bonds, the developer reported that leases or letters of intent had been entered into with eight of the proposed ten anchors tenants for the mall, which accounted for approximately 90 percent of the anchor and major tenant space within the mall and approximately 56 percent of the total mall space. As of December 31, 2008, the developer reports that the total leaseable space in the mall is 1,059,746 square feet, consisting of 654,519 square feet for anchor stores and 405,245 square feet for specialty stores. The developer reports that leases have been signed for 626,519 square feet of the total 654,519 square feet for anchor stores in the mall, representing 95.7 percent of the leaseable space for anchor stores in the mall. As of December 31, 2008, the developer reports that leases have been signed for 352,574 square feet of the total 405,245 square feet of leasable space for specialty stores in the mall, representing 87.0 percent of the leaseable space for specialty stores in the mall. The developer also reports 1,246 square feet of leasable space is currently subject to letter of intent to lease, 40,069 square feet of leaseable space is under lease negotiations and 11,356 square feet of leaseable space is not subject to lease, letter of intent or lease negotiations. Table III-3 below provides a summary of the leasing status of mall parcels as of December 31, Table III-3 Status of Mall Parcel Leasing Leasing Status Anchor Specialty Tenants Leasable Space (Square Feet) 654, ,245 (i) Currently under lease 626, ,574 (ii) Currently subject to letter of intent to lease 28,000 1,246 (iii) Under lease negotiations 0 40,069 (iv) Not subject to lease, letter of intent, or lease negotiations 0 11,356 Table III-4 on the following page provides a list of those anchors and specialty shops reported by the developer as of December 31, Page 7

10 Table III-4 Specialty Tenants Tenant Type Square Feet Leased Children's Place and/or Baby Apparel-Children's 4,635 Limited Too Apparel-Children's 4,020 Subtotal- Children s Apparel 8,655 Suit Factory Apparel-Men's 7,012 Top Hat Tuxedo Apparel-Men's 649 Top Hat Tuxedo Apparel-Men's 1,052 Subtotal- Men s Apparel 8,713 Body Central Apparel-Women's 4,603 Bon Worth Apparel-Women's 2,186 C.J. Banks Apparel-Women's 3,178 Charlotte Russe Apparel-Women's 6,993 Christopher & Banks Apparel-Women's 3,001 Deb Apparel-Women's 7,119 Dress Barn/Dress Barn Women Apparel-Women's 8,022 Forever 21 Apparel-Women's 7,011 New York & Company Apparel-Women's 5,510 Victoria's Secret Apparel-Women's 6,214 Wet Seal Apparel-Women's 5,318 Subtotal- Women s Apparel 59,155 Aeropostale Apparel-Men's and Women's 3,321 American Eagle Outfitters Apparel-Men's and Women's 6,014 Brooks Brothers Apparel-Men's and Women's 8,770 Guess Apparel-Men's and Women's 4,852 Hot Topic Apparel-Men's and Women's 1,818 Pacific Sunwear Apparel-Men's and Women's 4,025 Rue 21 Apparel-Men's and Women's 3,773 Subtotal- Men s and Women s Apparel 32,573 BC Sports Athletic/Sporting Goods 1,320 Champs Sports Athletic/Sporting Goods 4,373 Finish Line Athletic/Sporting Goods 4,012 Footaction Athletic/Sporting Goods 2,595 Footlocker Athletic/Sporting Goods 2,860 Pirates Clubhouse Shop Athletic/Sporting Goods 2,903 Steelers Sideline Store Athletic/Sporting Goods 3,870 Stiller Motorsports Athletic/Sporting Goods 1,247 Subtotal- Athletic/Sporting Goods 23,180 Hallmark Gold Crown Books, Cards & Gifts 3,941 Seasons Crafts & Gifts Books, Cards & Gifts 4,026 Spencer Gifts Books, Cards & Gifts 1,904 Trend Setters Books, Cards & Gifts 2,671 Subtotal- Books, Cards & Gifts 12,542 Cingular Wireless Electronics, Music & Photos 2,042 Freedom Wireless-Verizon Wireless Electronics, Music & Photos 1,060 Hometown Wireless Electronics, Music & Photos 756 Music for a Song Electronics, Music & Photos 4,011 Page 8

11 Tenant Type Square Feet Leased Verizon Wireless Electronics, Music & Photos 2,792 Wireless Zone, Verizon Wireless Electronics, Music & Photos 898 Subtotal- Electronics 11,559 EB Games Entertainment 989 Giggles & Smiles Entertainment 3,464 Go! The Game Store Entertainment 2,792 J&C Hobbies Entertainment 2,677 J&C Hobbies Entertainment 5,496 J&C Hobbies (Train Depot) Entertainment 1,503 San Francisco Music Box Entertainment 2,274 Kaleidoscope Dolls Entertainment 4,003 Putting Edge Entertainment 6,030 Tilt Entertainment 3,784 Subtotal- Entertainment 33,012 Charley's Grilled Subs Food Court 834 Chicken Connection Food Court 815 East Street Deli Food Court 817 Famous Cajun Grill Food Court 832 Famous Wok Food Court 826 Subway Food Court 850 Taco Bell/KFC Food Court 813 Villa Pizza Food Court 737 Subtotal- Food Court 6,524 Journey's Footwear 2,681 Kidz Shoes Footwear 1,488 Miller's Shoes Footwear 2,168 Payless Shoe Source Footwear 2,789 Shoe Department Footwear 5,349 Subtotal- Footwear 14,475 Quality Luggage Handbags, Leather & Luggage 1,508 Fashion Avenue, Ltd. Handbags, Leather & Luggage 1,008 Subtotal- Handbags, Leather & Luggage 2,516 Bath & Body Health & Beauty 3,754 Da Ying Massage Health & Beauty 915 Elegant Nails Spa Health & Beauty 1,347 GNC and/or GNC Live Well Health & Beauty 1,154 Mastercuts Health & Beauty 988 Paris Nails Health & Beauty 988 Perfumall Health & Beauty 1,295 Philip Pelusi Health & Beauty 1,728 Regis Health & Beauty 991 Trade Secret Health & Beauty 1,200 Subtotal- Health & Beauty 14,360 American Country Collection Home Furnishings & Accessories 3,121 Corningware Corelle Revere Home Furnishings & Accessories 4,309 Joan s Fine Art Home Furnishings & Accessories 1,589 Kitchen Collection Home Furnishings & Accessories 2,732 Loya Galleries Home Furnishings & Accessories 1,764 Page 9

12 Tenant Type Square Feet Leased Midcoast Clock Company Home Furnishings & Accessories 1,497 New Dimension Art Home Furnishings & Accessories 2,616 Select Comfort Home Furnishings & Accessories 1,725 Yankee Candle Co. Home Furnishings & Accessories 1,400 Subtotal- Home Furnishings 20,753 Chateau Jewelers Jewelry & Accessories 1,470 Claire's Boutique Jewelry & Accessories 1,227 Hat World/Lids Jewelry & Accessories 951 J.B. Robinson Jewelers Jewelry & Accessories 1,459 Kay Jewelers Jewelry & Accessories 1,421 King's Jewelry Jewelry & Accessories 1,188 Littman Jewelers Jewelry & Accessories 1,544 Pearle Vision Jewelry & Accessories 2,377 Subtotal- Jewelry & Accessories 11,637 Allegheny Mountain Smoked Meats & Cheeses Restaurant & Specialty Foods 888 Auntie Anne's Restaurant & Specialty Foods 775 Different Twist Restaurant & Specialty Foods 767 DQ Orange Julius Restaurant & Specialty Foods 945 Fuzziwigs Candy Factory Restaurant & Specialty Foods 1,020 Hickory Farms Restaurant & Specialty Foods 1,289 Johnny Rockets/Houlihans Restaurant & Specialty Foods 7,590 Marble Slab Creamery Restaurant & Specialty Foods 959 Nestle Toll House Café Restaurant & Specialty Foods 995 Panera Bread Restaurant & Specialty Foods 4,755 Pollack's Candy Restaurant & Specialty Foods 980 Rafaelle s Italian Restaurant Restaurant & Specialty Foods 6,554 Sawa Japanese Steakhouse Restaurant & Specialty Foods 5,987 Starbucks Restaurant & Specialty Foods 1,238 Three Rivers Candy & Fudgery Restaurant & Specialty Foods 1,092 Subtotal- Restaurants 35,834 Century 21 Services 1,149 Destination Wellness Services 5,313 Destination Wellness Services 1,833 PA Leadership Charter School Services 1,869 Photo Tyme Portraits Services 1,926 Riverside Community Church Services 2,301 Subtotal- Services 14,391 Alamo Flag or Flag World Specialty Stores 1,168 Brookstone Specialty Stores 3,240 Day By Day Calendar Specialty Stores 1,751 Dollar Value Specialty Stores 4,043 Earthbound Trading Company Specialty Stores 2,537 Gatto's Cycle Shop Specialty Stores 4,717 Image Factory Specialty Stores 1,009 JC Penny Storage Specialty Stores 1,485 Macy s Storage Specialty Stores 918 Macy's Storage Specialty Stores 3,241 Oreck Specialty Stores 1,241 Page 10

13 Tenant Type Square Feet Leased Pearl of the Orient Specialty Stores 2,576 Petland Specialty Stores 2,620 Puff N Stuff Specialty Stores 736 Scrub Shack Specialty Stores 2,089 Spirit Halloween Specialty Stores 5,297 Spotlight Performance Specialty Stores 2,047 Windgate Vineyards Specialty Stores 1,980 Subtotal- Specialty Stores 42,695 Total Leased Space 352,575 (iv.) Status of Village and Pad Site Sales The village and the pad site land are comprised of approximately 28 separate parcels. At the time of issuance of the Series 2004 Bonds, one parcel had been closed and an additional eleven parcels were under contract and expected to close by December 31, These parcel sales are expected to generate approximately $36 million in land sale proceeds, representing approximately 63 percent of the land sale proceeds to be derived by the developer. At the time of Bond issuance, seven additional land sales were expected to close, representing an additional 24 percent of total land sale proceeds. The developer may instead choose to retain certain parcels to sell, lease or develop in the future. According to the developer, as of December 31, 2008, there have been 20 lots sold, totaling approximately acres, within the village and pad sites. Table III-4 below provides a list of lots sold including the owner and proposed use. The developer reports that lot M-8 was under sale negotiations for a hotel site, but is currently on hold as of December 31, The developer is actively marketing the village and pad site parcels. Page 11

14 Table III-4 Village and Pad Site Lot Sales Owner Lot Acres Land Use Pittsburgh Mills Auto Properties, LLP A-Block 12.7 Regional Shopping Center May Department Stores Company (The) M-1A 12.3 Macy s Department Store Frazier Mills Hospitality Associates LP B SpringHill Suites Hotel W.C.S.R., Inc. B Eat N Park Restaurant PinPoint Frazer Associates, LLC C Pad site Doppco C Doppco Development Steak n Shake Operations, Inc. C Steak n Shake Restaurant Spirit Master Funding IV, LLC D Smokey Bones Restaurant Red Robin International, Inc. D Red Robin Restaurant GMR Restaurants of PA, Inc. D Olive Garden Restaurant Rare Hospitality International, Inc. D Longhorn Steakhouse Restaurant Brinker Penn Trust K Chili s Restaurant PNC Bank National Association K PNC Bank First Commonwealth Bank K First Commonwealth Bank Pitt Village LP N-Block 13.6 Ross, Michael s, Office Max Lowe s Home Centers, Inc O Lowe s Pitt Village, LP O Best Buy Pitt Village, LP O Petsmart Sam s Real Estate Business Trust P Sam s Club Wal-Mart Real Estate Business Trust P Wal-Mart Supercenter (v.) Status of Financing According to the developer, on December 27, 2006, Morgan Stanley Mortgage Corporation approved a loan to Pittsburgh Mills LP in the amount of $133,000,000. The terms of the loan provided a repayment schedule of five years with no option for extension and payments of interest only during the loan period. The balance on the loan is $133,000,000, with an interest rate of 6.370%, maturing on January 8, 2012 with a prepayment privilege upon defeasance. According to the developer, on December 27, 2006, RREEF Structured Debt Fund Transwestern Mezzanine Realty Partners approved a loan to Pittsburgh Mills Limited Partnership in the amount of $32,500,000 with an additional advance of $9,000,000. The terms of the loan provided a repayment schedule of five years with no option for extension and payments of interest only during the loan period. As of December 31, 2008, the balance on the loan is $32,500,000 with an interest rate equal to the 30- day London Interbank Offered Rate (LIBOR) plus 5.50%, maturing on January 8, 2012 with a prepayment privilege. The developer reports the additional advance feature of $9,000,000 was terminated within the term of the loan and therefore no longer exists. Prior to termination, the additional advance of $9,000,000 had not been drawn. D. PUBLIC IMPROVEMENTS The construction of public infrastructure improvements funded with bond proceeds included a fullaccess interchange from Pennsylvania Route 28, including erosion control, excavation and earthwork, Page 12

15 pavements, storm sewer, guard rail and fencing, marking, lighting and signage, traffic signals and retaining wall; relocation of approximately 2,100 feet of Tawney Run Road; improvements to local roads, including traffic signals, intersection improvements, the addition of turn lanes, widening and other intersection upgrades; the installation of an off-site sewer and water systems; relocation of electrical utilities; wetland mitigation and environmental remediation; construction of connecting interior roads within the district and associated earthwork; installation of deep valley storm sewer improvements including the installation of an electric duct bank and manholes, a water main and sanitary and gas lines; and related and necessary improvements within the district. The developer reports that the platting, on-site infrastructure, Route 28/Pittsburgh Mills Boulevard interchange and the sanitary sewer are complete. The developer also reports that the off-site road improvements at Route 910 are complete. Table III-5 below shows the current status of the construction of the public improvements as of December 31, Table III-5 Status of Public Infrastructure Construction Public Improvements Percent Complete Construction of Interchange 99.0% Public Roads 99.0% Design 100% Land 100% Offsite Utilities 100% Onsite Utilities 100% Environmental 99.0% Field Office Costs 100% As of December 31, 2008, the developer reports that $50,435,290 has been expended for the construction of the public improvements. Table III-6 on the following page shows the budget of the public improvements as of December 31, Table III-6 Project Budget and Expenditures for Public Improvements Public Improvements Original Budget Spent to Date Percent Spent Construction of Interchange $21,730,708 $17,378, % Public Roads $9,379,630 $4,981, % Design $7,119,214 $6,019, % Land $2,672,432 $2,672, % Offsite Utilities $1,460,000 $356, % Onsite Utilities $16,392,941 $15,182, % Environmental $886,441 $813, % Field Office Costs $3,030,349 $3,030, % Total $62,671,715 $50,435, % Page 13

16 IV. TRUSTEE ACCOUNTS The trustee for the Series 2004 Bonds is Wells Fargo Bank, National Association. The following table shows the beginning balance as of as of December 31, 2007, interest paid, disbursements, additional proceeds, and account balances for each fund as of December 31, 2008: Fund Balance 12/31/07 Table IV-1 Trustee Accounts Interest Paid Additional Proceeds Disbursements Balance 12/31/08 Debt Service Fund $1,364,925 $2,487 $4,164,751 $4,204,850 $1,327,313 Project Fund $0 $2,497 $6,050,893 $6,053,390 $0 Reserve Fund $5,419,664 $270,568 $0 $556,009 $5,134,223 Revenue -Tax Increment Fund $4,037,608 $86,390 $6,369,447 $6,536,985 $3,956,460 Surplus Fund $4,756,314 $107,960 $630,772 $5,494,884 $162 Public Safety Fund $500,297 $918 $500,000 $500,000 $501,216 Administration Expense Fund $7,692 $425 $36,600 $20,443 $24,275 County Tax Fund $5,731 $1,845 $823,186 $823,186 $7,576 Township Tax Fund $3,365 $1,002 $369,750 $345,269 $28,848 School District Tax Fund $19,729 $2,188 $5,988,446 $5,988,446 $21,917 Total $16,115,326 $476,279 $24,933,844 $30,523,461 $11,001,989 Additional proceeds to the Debt Service Fund were transfers from the Revenue-Tax Increment Fund for debt service payments. Additional proceeds to the Project Fund are transfers of excess TIF revenues from the Surplus Fund and interest income from the Reserve Fund to pay for the cost of public improvements. Additional proceeds to the County Tax Fund, Township Tax Fund and School District Tax Fund are receipts of tax revenues levied by the three taxing authorities. Disbursements from the Project Fund were payments for the cost of constructing the public improvements. Disbursements from the Surplus Fund are transfer of surplus TIF revenues to the Project Fund for the payment of additional costs of public improvements. Disbursements from the Revenue Tax Increment Fund are transfer of TIF revenue to the Debt Service Fund and Public Safety Fund for payment of debt service and the public safety payment, respectively. Disbursements from the Administrative Expense Fund are for payment administrative expenses. The Proceeds in the Reserve Fund are invested in Federal National Mortgage Association Discount Paper, which pays interest of approximately percent semiannually and matures December 29, The remaining bond proceeds are invested in government money market funds, which pay interest of 1.07 percent. Table IV-2 shows the rate of return on the funds and accounts held by the trustee as of December 31, Page 14

17 Investment income on the Debt Service fund will be applied to the payment of debt service. Investment income on the Project Fund will remain in the fund Table IV-2 until an authorized officer certifies that amounts then Rate of Return on deposit are not expected to be expended, at which time amounts exceeding the reserve requirement will Rate of be transferred to the Debt Service Fund to redeem Account Return principle or pay interest on the bonds. Investment income in excess of the reserve requirement on the Debt Service Fund 1.07% Reserve Fund will be transferred to the Project Fund Project Fund 1.07% or the Administrative Expense Fund at the direction Reserve Fund 5.32% of the developer prior to December 1, After Revenue Tax Increment Fund 1.07% December 1, 2008, the transfer of investment income Administrative Expense Fund 1.07% will be directed by the issuer. Investment income in County Tax Fund 1.07% the Revenue Fund will be applied to the payment of Township Tax Fund 1.07% debt service as needed when other sources of funds School District Tax Fund 1.07% are insufficient on interest and principal payment dates. Investment income on the Administrative Expense fund will remain in the fund and will be used to pay administrative expenses. Page 15

18 V. DISTRICT OPERATIONS A. SPECIAL ASSESSMENTS REQUIREMENT (i) Annual Assessment The Annual Assessment is the assessment due and payable each tax year on the assessed property within the district. The Annual Assessment imposed and collected in 2008 is equal to $4,692, (ii) Annual Payment The Annual Payment each year is equal to the Annual Assessment less the Annual Credit. The Annual Payment is the amount due and payable from the assessed property each year. The Annual Credit is described in the next section. The Annual Payment on each parcel of assessed property for each tax year is equal to the Annual Assessment Rate multiplied by the principal portion of the Special Assessment for each parcel of assessed property. The aggregate amount of the Annual Payments on all of the parcels of assessed property in any tax year shall equal the Annual Revenue Requirement for such tax year. (iii) Annual Credit The Annual Credit for each tax year is equal to the Annual Assessment less the Annual Revenue Requirement for each parcel of assessed property. (iv) Annual Revenue Requirement The Annual Revenue Requirement is defined as follows: For any tax year, the sum of the following, (1) regularly scheduled debt service on the Bonds to be paid from the Annual Payments except for principal and interest on the bonds to be paid from Special Assessment Prepayments on deposit with the trustee; (2) periodic costs associated with such bonds, including but not limited to rebate payments and credit enhancements on the bonds; and (3) administrative expenses; less (a) any credits applied under the bond indenture, such as interest earnings on any account balances, and (b) any other funds available to the bonds that may be applied to the Annual Revenue Requirement. Table V-1 provides a summary of the Annual Revenue Requirement for the 2008 tax year, which is to pay aggregate debt service and expenses during Each of these numbers is explained in the following sections. Page 16

19 Table V-1 Annual Revenue Requirement (v) Debt Service Debt Service Requirements For Series 2004 Bonds Interest on 2004 Bonds, January 1, 2009 $1,327,313 Interest on 2004 Bonds, July 1, 2009 $1,327,313 Principal on 2004 Bonds July 1, 2009 $1,635,000 Sub-total debt service $4,289,625 Public Safety Payment January 1, 2009 $515,000 Administrative Expenses $37,332 Total debt service and administrative requirements $4,841,957 Total available revenues Surplus Fund balance as of February 29, 2008 ($4,790,324) 2007 surplus TIF revenues ($662,643) 2008 estimated TIF revenues ($5,878,417) Estimated total available revenues ($11,331,384) Annual Revenue Requirement $0 Debt service includes interest on the bonds payable on January 1, 2009 and July 1, The $1,327, interest payments due on January 1, 2009 and July 1, 2009 and are equal to six months of interest on the term bonds as shown below. Term 2014 Bonds of $12,555,000 at 5.10% $320,153 Term 2023 Bonds of $35,970,000 at 5.60% $1,007,160 Total: $1,327,313 There is a principal payment of $1,635, due on the bonds on July 1, As a result, total debt service is $4,289, (vi) Public Safety Payment The annual Public Safety Payment due on January 1, 2009 to the Township is equal to $515, This payment, which is paid pursuant to the terms of the Cooperation Agreement, is paid in the recognition of the additional public safety costs that the Township incurs as a result of the Development. (vii) Administrative Expenses Administrative expenses for 2009 are estimated to be $37, Administrative expenses include payments to the trustee, the administrator, and the expenses of the RAAC related to the district. (viii) Surplus Fund As of February 29, 2008, the balance in the Surplus Fund was $4,790,324. These funds may be used to pay debt service on the Series 2004 Bonds during the 2009 tax year. Page 17

20 (ix) Distribution of 2007 Tax Revenues and Surplus from Prior Year Total property taxes for tax year 2007 were equal to $7,511, The base property tax for 2007 was equal to $40, As a result, the incremental TIF revenues for 2007 were equal to $7,471, as shown in the table below. Pursuant to the terms of the Cooperation Agreement, the base tax, TIF Revenues and interest income realized by these tax revenues should be distributed by the trustee periodically. After deduction of base tax, each taxing body shall receive a certain percentage of the TIF revenue. The township and the county will each receive 25% and the school district will receive 20% of the total TIF revenues collected each year. Accordingly, the township, the county and school district share of 2007 TIF revenues was equal to $98,140.30, $288, and $1,184,715.59, respectively. The Authority share was equal to $5,899, Interest income realized by these tax deposits was distributed to the taxing jurisdiction in the in the first week of April Table V-2 below shows the distribution of 2007 tax revenues and the accrued interest. Table V Tax Revenue Distribution Taxing Authority Township of Frazer School District Allegheny County Total Total property taxes collected for 2007 $394, $5,955, $1,161, $7,511, less base year tax $2, $31, $6, $40, Total TIF Revenues $392, $5,923, $1,155, $7,471, Percent of TIF revenues paid to taxing bodies 25% 20% 25% TIF Revenue to taxing body $98, $1,184, $288, $1,571, Accrued Interest as of $1, $19, $5, $27, Disbursement to taxing body $102, $1,236, $300, $1,639, Disbursement to TIF Revenue Fund $294, $4,738, $866, $5,899, The estimated surplus from the prior year that may be applied to pay the annual payment in 2009 is shown in Table V-3 below. As February 29, 2008, the balance of Authority s 2007 TIF Revenues in the amount of $4,056, was held in the TIF Revenue Fund. An additional amount of $7, was available in the Administrative Expenses Fund. As a result, the aggregate TIF revenues that are available to pay debt service and administrative expenses during 2008 are equal to $4,064, A portion of these funds will be used to pay interest of $1,364, and principal of $1,475, due on the bonds on July 1, 2008 as shown below. Page 18

21 Table V-3 Surplus from Prior Year Available Funds as of February 29, 2008 TIF Revenue Fund $4,056, Administrative expense fund $7, Subtotal available funds $4,064, Debt Service: Interest payment on July 1, 2008 ($1,364,925.00) Principal payment on July 1, 2008 ($1,475,000.00) Total debt service ($2,839,925.00) Balance of 2008 administrative expenses ($36,600.00) Refunds for overpayments of 2005, 2006 and 2007 taxes ($525,063.83) Subtotal expenses ($3,401,588.83) Surplus from Prior Year $662, The debt service payment due on the bonds on July 1, 2008 will be paid with the funds currently held in the TIF Revenue Fund account as explained in the section above. Administrative services for 2008 are estimated to be $36, and will be funded with 2007 TIF revenues. Allegheny County recently provided tax exoneration to seven parcels for amounts collected in 2005, 2006 and 2007 tax years. This resulted in assessed values for these seven parcels being reduced. A portion of the Authority share of TIF revenues collected from these seven parcels in the amount of $525, was refunded to the taxpayers on March 31, Accordingly, the surplus balance of the 2007 revenues that may be applied to the annual revenue requirement for 2008 is equal to $662, as shown in the Table V-3 above. (x) Estimated TIF Revenues Pursuant to the Cooperation Agreement and the Indenture, all Tax Increment Revenues collected are pledged to secure the Bonds and shall be deposited into the Tax Increment Fund. The Tax Increment Revenue consist of a percentage of the real property taxes collected in the TIF District in excess of the base assessed value less the amount payable to the respective Taxing Bodies as provided for in the Cooperation Agreement. The base value of the taxable property in the TIF District for the base year, which was December 31, 2002, was equal to $1,331,000. As shown by Table VI-2 in the District Financial Information section of this report, the assessed value for all parcels in the district as of January 31, 2008 is equal to $247,207,555. The incremental assessed value is, therefore, estimated to equal $245,876,555 ($247,207,555- $1,331,000 = $245,876,555). Taxable property in the Allegheny County is subject to real property taxes imposed by three separate taxing bodies namely, the county, the local municipality and the local school district. The millage rates for each of the three taxing bodies and the estimated TIF revenues resulting from the incremental value, which is to be collected by the three taxing bodies for tax year 2008, is estimated to be $7,443, as shown in the table on the following page. Page 19

22 Taxing bodies Table V-4 Estimated TIF Revenues Collected in 2008 Township School District County Real Property Tax Rate (mills) Assessed 01/31/08 $247,207,555 Base Year Assessed Value ($1,331,000.00) Incremental Value $245,876,555 Estimated TIF Revenues to be collected $381, $5,909, $1,153, $7,443, Percent of TIF revenues paid to taxing bodies 25% 20% 25% Estimated TIF Revenues to taxing bodies $95, $1,181, $288, $1,565, Estimated TIF Revenues to Authority $285, $4,727, $864, $5,878, Total The Cooperation Agreement provides for all tax revenues collected from parcels within the district to be deposited into the tax funds for each taxing body that is held by the trustee as the Escrow Agent. After deduction of base tax, each taxing body shall receive a certain percentage of the TIF revenue. The township and the county will each receive a share equal to 25% and the school district will receive 20% of the total TIF revenues collected each year. The estimated TIF revenues due to the taxing bodies and the Authority are shown in the table above. Accordingly, the estimated TIF Revenues that will be available debt service and administrative requirements for tax year 2008 is equal to $5,878, (xi) Summary Debt service and other district expenses are estimated to be equal to $4,841, Total available revenues are estimated to be equal to $11,331,383.61, resulting in an estimated surplus of $6,489, As a result, the annual revenue installment for the tax year 2008 is zero. The Annual Assessments for each tax year are shown in the Assessment Roll, attached hereto as Appendix A. (xii) Annual Credit The Annual Credit for each year is equal to the Annual Assessment less the Annual Revenue Requirement. Annual Revenue Requirement for 2008 is zero. The Annual Credit for 2008 is shown below: Table V-5 Summary Annual Credit Improvement Area Annual Assessment Annual Assessment $4,692,484 Annual Revenue Requirement $0 Annual Credit $4,692,484 (xiii) Annual Payment The Annual Payment each year is equal to the Annual Assessment less the Annual Credit. The Annual Payment due for collection in 2008 is equal to zero as shown on Table V-6 on the following page: Page 20

23 Table V-6 Summary Annual Payment Improvement Area Annual Assessment Annual Assessment $4,692,484 Annual Credit $4,692,484 Annual Payment $0 (xiv) Amendment of the Special Assessment Roll The Board of the Corporation shall amend the Assessment Roll each year to reflect (i) the current parcels in the district, (ii) the Special Assessment for each parcel, including any adjustments to the Special Assessments, (iii) the Annual Payment to be collected from each parcel for the current tax year, (iv) any changes in the Annual Assessments, (v) prepayments of the Special Assessments, and (vi) any other changes to the Assessment Roll. The Annual Assessments for each tax year are shown in the Assessment Roll, attached hereto as Appendix A. The Annual Assessments for each parcel in the district are shown in the Assessment Roll, attached hereto as Appendix A. B. SPECIAL ASSESSMENTS LEVIED AND COLLECTED There were no special assessments to be collected for tax year Page 21

24 VI. DISTRICT FINANCIAL INFORMATION The information provided in this section is to meet the requirements for the annual report as provided for in Section 2(a) of the Continuing Disclosure Agreement. The items listed below are in the same format and order as the items required for the annual report as listed in the Continuing Disclosure Agreement. All information in this section is provided as of December 31, 2008, unless otherwise stated. A. FUND BALANCES The fund balances in all of the funds and accounts, as of December 31, 2008, provided for in the Indenture of Trust are included in Table IV-1 of Section IV, Trustee Accounts, of this report. B. CHANGES TO THE RATE AND METHOD OF APPORTIONMENT There have been no changes to the Rate and Method of Apportionment of Special Assessments by the county since the bonds were issued. C. CHANGES IN THE AD VALOREM TAX RATES Taxable property in Allegheny County is subject to real property taxes imposed by three separate taxing bodies namely, the county, the local municipality and the local school district. According to the Treasurer s Office of Allegheny County, the 2008 ad valorem tax rates for Allegheny County and Frazer Township was 4.6, the same rate as tax year The 2008 ad valorem tax rates for Allegheny County and Frazer Township were $ and $1.55 per $1000 of assessed value, respectively. The ad valorem rate for Deer Lakes School District increased from $ to $ ( mills) per $1000 of assessed value from 2007 to As a result, the total ad valorem tax rate increased from $ to $ ( mills) per $1000 of assessed value for 2008 tax year. Table VI-1 below depicts the millage rates for Deer Lakes School District, Frazer Township, and Allegheny County for tax years 2007 and Tax rates are expressed per $1000 of assessed value. Table VI-1 Millage Rates Area Change Percent Change Allegheny County % Frazer Township % Deer Lakes School District % Total % D. CHANGES IN ASSESSED VALUE OF REAL PROPERTY Table VI-2 below shows the phased-in assessed value of the taxable property within the district as of June 26, The base value of the taxable property in the TIF District for the base year, which was December 31, 2002, was equal to $1,331,000. The assessed value for all parcels in the district as of June 26, 2008 is equal to $247,207,555. The incremental assessed value is, therefore, estimated to equal $245,876,555 ($247,207,555- $1,331,000 = $245,876,555). Page 22

25 E. ASSESSED VALUE OF PROPERTY Table VI-2 below depicts the 2008 assessed values of the properties. Property owner, land use and parcel acreage are also provided. Table VI-2 Assessed Value of Property Owner Land Use Acreage 2008 Assessed Value Brinker Penn Trust Restaurant 1.58 $2,066,900 W.C.S.R., Inc. Restaurant 2.06 $1,150,000 First Commonwealth Bank Bank 1.40 $1,360,000 Frazier Mills Hospitality Associates LP Hotel 2.58 $1,700,000 Spirit Master Funding IV, LLC Restaurant 1.94 $2,099,200 Gmr Restaurants Of Pennsylvania, Inc Restaurant 2.06 $2,330,500 Lowes Home Centers Inc Lowe s $14,324,000 May Department Stores Company (The) Macy s $11,400,000 Pinpoint Frazer Associates I LLC Pad site 1.54 $892,300 Pitt Village LP Restaurant 4.37 $2,526,000 Pitt Village LP Ross 1.91 $1,105,500 Pitt Village LP Michael s 2.57 $1,484,900 Pitt Village LP Office Max 3.11 $1,797,500 Pitt Village LP PetSmart 3.82 $2,210,200 Pitt Village LP Best Buy 3.47 $2,008,900 Pitt Village LP Restaurant 1.72 $994,600 Pittsburgh Mills Auto Properties LLP Vacant land 2.32 $928,000 Pittsburgh Mills Auto Properties LLP Pad site 2.40 $960,000 Pittsburgh Mills Auto Properties LLP Pad site 3.19 $1,276,000 Pittsburgh Mills Auto Properties LLP Pad site 2.56 $1,024,000 Pittsburgh Mills Auto Properties LLP Pad site 1.98 $792,000 Pittsburgh Mills Limited Partnership Vacant land 7.23 $35,400 Pittsburgh Mills Limited Partnership Vacant land $203,300 Pittsburgh Mills Limited Partnership Vacant land 7.30 $35,800 Pittsburgh Mills Limited Partnership Vacant land 9.59 $47,000 Pittsburgh Mills Limited Partnership Vacant land 2.24 $11,000 Pittsburgh Mills Limited Partnership Vacant land 7.01 $4,053,455 Pittsburgh Mills Limited Partnership Vacant land 9.35 $203,300 Pittsburgh Mills Limited Partnership Mall $127,969,200 Pittsburgh Mills Limited Partnership Vacant land 0.00 $11,700 Pittsburgh Mills Limited Partnership Pad site 2.23 $1,287,600 Pittsburgh Mills Limited Partnership Sears Grand $15,553,000 Pittsburgh Mills Limited Partnership Vacant land 5.48 $3,168,800 PNC Bank National Association Bank 1.48 $2,089,600 Rare Hospitality International Inc Restaurant 3.11 $2,111,700 Page 23