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National Federation of Municipal Analysts Miami Beach, Florida May 8, 2008

National Federation of Municipal Analysts Miami Beach, Florida May 8, 2008. Special Assessments/Special Tax Bonds: Do These Bonds Need “Special” Attention?. Ronald L. Mintz, CFA Principal, Fixed Income Credit Research Senior Municipal Credit Analyst. Agenda.

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National Federation of Municipal Analysts Miami Beach, Florida May 8, 2008

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  1. National Federation of Municipal AnalystsMiami Beach, FloridaMay 8, 2008 Special Assessments/Special Tax Bonds: Do These Bonds Need “Special” Attention? Ronald L. Mintz, CFA Principal, Fixed Income Credit Research Senior Municipal Credit Analyst

  2. Agenda • Investor’s Perspective – Ron Mintz • Investment Banker’s Perspective – Jon Kessler • Developer’s Perspective – Cesar Llano • Real Estate Consultant’s Perspective – Bill Bubniak

  3. Agenda – Investor’s Perspective • Statistical Review • Essential Information • What Happens in a Time of Distress • The Road to a More Positive Outlook

  4. Market Statistics – Housing Prices Source: National Association of Realtors

  5. Market Statistics – Building Permits Source: U.S. Census Bureau

  6. Market Statistics – New Home Sales Source: U.S. Census Bureau

  7. Market Statistics – Existing Home Sales Source: National Association of Realtors

  8. Market Statistics – Housing Starts Source: U.S. Census Bureau

  9. Disclosure: Essential Information Under Current Market Conditions • Primary Market • Who is the developer? • On balance sheet • Land bank • Structured options • What are its financial resources? • What is its experience? • Has it been through changing market cycles before? • What is the property worth? • Appraisals • Market Studies • Details of a particular market. Is this information typically provided? Some of it, sometimes.

  10. Disclosure: Essential Information Under Current Market Conditions • Secondary Market • What changes have there been in the development plan? • What changes have there been in the developer’s financial resources? • What is the developer’s experience with other current projects? • What is the pace of construction on this project? • What is the pace of sales on this project? • Cancellation experience. • Mortgage types and availability. • Some update or proxy for current value. Is this information typically provided? Rarely.

  11. Covenants and Disclosure • As investors focus more and more on credit quality and take the lessons since last August of how hard it is to get meaningful information on land secured bonds, it would be a good opportunity for disclosure standards to rise. • Easing the foreclosure standards in California?

  12. NFMA Update to Disclosure Standards for Land Secured Bonds • The changes have been drafted. • The draft is circulating among the team. • The market crisis has made it difficult to find the time to move forward.

  13. Current Concerns • DSRF draws. • Effect of off-balance sheet ownership and related litigation. • Colorado deals where development slowdowns have failed to generate sufficient assessed valuation to levy the amount required to pay debt service. • Markets • Florida • Inland Empire • San Diego County • Las Vegas

  14. What Happens in a Time of Distress • Information slowdown—if it’s possible to get any information at all. • Test the foreclosure and tax sale processes. • Differences by status of development • Government rhetoric on foreclosure and tax lien sales. • Workouts. • Very time consuming process. • Developer bankruptcies. • Securities firms and others looking at distressed projects. • Liquidity • Real Value • Time

  15. The Road to a More Positive Outlook • Sales and velocity increases – or even stabilization. • Price increases – or even stabilization. • Inventory reduction. • Better upfront valuation information. • Better disclosure. Reality check following an overheated market.

  16. Questions and Comments

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