CONTINUING DISCLOSURE SEMI-ANNUAL REPORT $19,650,000 COMMUNITY FACILITIES DISTRICT NO IMPROVEMENT AREA NO.2

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1 CONTINUING DISCLOSURE SEMI-ANNUAL REPORT $19,650,000 COMMUNITY FACILITIES DISTRICT NO IMPROVEMENT AREA NO.2 OF THE CITY OF UPLAND (THE COLONIES AT SAN ANTONIO) SPECIAL TAX BONDS, SERIES B OF 2004

2 CONTINUING DISCLOSURE SEMI-ANNUAL REPORT $19,650,000 COMMUNITY FACILITIES DISTRICT NO , IMPROVEMENT AREA NO. 2 OF THE CITY OF UPLAND (THE COLONIES AT SAN ANTONIO) SPECIAL TAX BONDS, SERIES B OF 2004 Prepared by: The Colonies Partners, L.P East 19 th Street Upland, CA September 10, 2014

3 Table of Contents Introduction... 1 Contents of Annual Report Ownership of Property and Proposed Development within the District Development Activity Major Governmentally Imposed Preconditions Status of Completion of Development Status of Completion of Public Improvements Land Use Entitlement Amendments Status of Special Tax Payments Letters of Credit... 3

4 INTRODUCTION This Report has been prepared pursuant to Sections 3 and 4 of the Form of Major Landowner Continuing Disclosure Agreement (the Disclosure Agreement ) executed in connection with the issuance of the $19,650,000 Community Facilities District ( CFD ) No of the City of Upland Special Tax Bonds Series B of 2004 ( Bonds ). The Bonds were issued pursuant to a Bond Indenture dated as of May 1, 2004 (the Indenture ) between the City of Upland (the District ) and U.S., National Association as fiscal agent. CONTENTS OF SEMI-ANNUAL REPORT This Report contains the information requested in Section 4 of the Disclosure Agreement 1. An update to the sections in the Official Statement entitled OWNERSHIP OF THE PROPERTY and PROPOSED DEVELOPMENT WITHIN THE DISTRICT, including an updating discussion of the sources of funds to finance development of property owned by the Landowner and its Affiliates within Improvement Area No. 2, and whether any material defaults exist under loan arrangements related to such financing. Update to ownership of the property: The Colonies Pacific, LLC owns PA18 (except the 10 acres purchased by Target). The Colonies-Pacific 19C, LLC owns PA 19A, PA 19C and PA 19B. The Colonies Pacific 17, LLC owns PA17. Parcel 4 of Parcel Map is owned by Crossroads Travel center, LLC. PA20, except Parcel 4 of parcel map 17447, and PA21 are still owned in fee by The Colonies Partners, L.P. Development within the District: All offsite infrastructure excepting the rough grading of 21 and the extension of 20 th Street eastbound from Campus Ave. has been completed Onsite grading and infrastructure has been completed for parcel 4 of parcel map 17477, the remainder of PA 20 is still unimproved. All onsite infrastructure within PA18, PA 19A, PA 19B, PA 19C & PA 17 has been completed. PA 18 is 100% constructed, all shops have been occupied, due to economic conditions tenancy has varied but occupancy has remained above 95% for the planning area PA 19C is 100% constructed with no vacancies. PA 19B is 100% constructed, all shops have been occupied, due to economic conditions tenancy has varied but occupancy has remained above 95% for the planning area PA 17 is 100% constructed all constructed shops and buildings have been occupied, due to economic conditions tenancy has varied but occupancy has remained above 95% for the planning area. Phase II of Planning Area 19A is completed and open for business with some tenant improvements left to complete. The first business opened in December 2013, and the remainder of Phase II should be completed by July Phase I opened in March Financing is provided by Colonies Pacific 19C, LLC, including a construction loan obtained by the project owner. Phase III is currently under development and is anticipated to be completed mid-august Parcel 4 of tract map was sold to Colonies Travel Center. Prior to the start of construction of the remainder of PA20 and PA21, the landowner will seek a development loan to fulfill its financing needs. Offsite infrastructure was financed cooperatively by the district and privately held funds of The Colonies Partners, L.P. There is/was no loan in place, nor is there a default. Colonies Pacific construction funding, to develop the on-site infrastructure and buildings, has been provided by Union Bank as short term construction loans, which are paid back by a new permanent loans upon occupancy on the center. No material defaults exist under a loan arranged by and for, either, The Colonies Partners, L.P. or the Colonies Pacific Partnerships. City of Upland CFD No Page 1 Semi-Annual Report September 10, 2014

5 2. A summary of development activity within Improvement Area No. 2, including the number of parcels for which building permits have been issued, and as to property owned by the Landowner and its Affiliates, the number of parcels for which land sales have closed, including the amount of land in each transaction, and in the case of a purchase of a parcel by an entity other than the purchaser of a residential unit or a custom lot for its own use, the name of the purchaser of the parcel. Target Corporation purchased approx 10 acres from The Colonies Partners, L.P., escrow closed in June Colonies Travel Center purchased 1.35 acres, Parcel 4 of tract map within PA20 in September No other land sales have occurred. Construction has been completed on approx. 865,000 sq. ft. of Commercial buildings and 6,000 sq. ft. is currently under construction with 12,000 sq. ft. to start by first quarter Status of any major governmentally-imposed preconditions for commencement or continuation of development of the parcels within the District, including, but not limited to, those listed under THE DISTRICT Environmental Review and Permits and PROPOSED DEVELOPMENT WIHTIN THE DISTRICT Improvement Area No. 2 Improvement area No. 2 Project Approval Status. There have been no modifications to the FEIR since bond issuance. The Colonies Partners, L.P. are in compliance with active permits including the streambed alteration agreement with the California Department of Fish and Game, the WDR and SWPPP permits with CRWQCB, Santa Ana Region. The B-Level Parcel Maps for PA 17, PA18, PA 19A, PA 19B, PA19C, and PA 20 have been recorded. The B-Level Parcel Map for PA21 will be recorded prior to its development. Site Plan review/approval and building permit acquisition will occur as needed. There are currently no outstanding approvals that impact the ability to develop or build on the property. 4. Status of completion of the development being undertaken by the Landowner and its Affiliates and any major legislative, administrative and judicial challenges known to the Landowner to or affecting the construction of the development or the time for construction of an public or private improvements to be made by the Landowner or any Affiliate within Improvement Area No. 2 other than the public improvements described in (v) below (the Landowners Improvements ). Private improvements on PA 17, PA18, PA 19A, PA 19B and PA19C are complete. There are no major legislative, administrative or judicial challenges known the landowner that would affect the timing of the construction or development of the public or private improvements to be undertaken by the landowner. City of Upland CFD No Page 2 Semi-Annual Report September 10, 2014

6 5. Status of completion of the public improvements to be acquired with proceeds of the Bonds (the District Improvements ), and a description of any major legislative, administrative and judicial challenges known to the Landowners to or affecting the construction of the District Improvements. All public improvements are complete. There are no major legislative, administrative or judicial challenges known the landowner that would effect the construction of the District Improvements. 6. Any significant amendments to land use entitlements with respect to parcels within Improvement Area No. 2 that are known to the Landowner. None 7. Status of Special Tax Payments on all parcels owned by the Landowner and its Affiliates. Current 8. Stated amount of any letters of credit outstanding provided by or on behalf of Landowner, the amount of any draws on such letter of credit, if any, and information regarding any renewals of such letters of credit or any substitution of letters of credit banks. Neither Colonies- Pacific nor The Colonies Partners, L.P. have any outstanding letters of credit which affect the District Improvements. Pacific/Colonies/Cont Disclosure/Continued disclosure semi-annual 2012.doc City of Upland CFD No Page 3 Semi-Annual Report September 10, 2014

COUNTY OF RIVERSIDE, CALIFORNIA BOARD OF SUPERVISORS POLICY. Policy Subject: Number Page LAND SECURED FINANCING DISTRICTS B-12 1 of 22

COUNTY OF RIVERSIDE, CALIFORNIA BOARD OF SUPERVISORS POLICY. Policy Subject: Number Page LAND SECURED FINANCING DISTRICTS B-12 1 of 22 LAND SECURED FINANCING DISTRICTS B-12 1 of 22 : Set forth herein are the goals and policies of the County of Riverside (the County ) concerning the County s use of community facilities districts ( Community