Page 10 - Equus - Intoductory Book

Credit Structure
Credit Overview
Credit Overview - Copperleaf Metropolitan District No. 2 is the initial phase of the 'Copperleaf' master planned community located just inside E-470 along East Quincy Ave. The District is planned to Utiliz
contain 1,652 residential units, of which 1,421 are single family homes and 231 will be townhomes. The developer has sold all of the platted lots to homebuilders but has yet to sell the platted townhomes. The assessed value for collection year 2018 is $40.2 million, an increase of more than 35 percent over 2017. The District has experienced solid growth in recent years. Nearly 75 percent of the district is owner occupied, and 171 homes are expected to be finished by the end of 2018. A primary draw for homebuyers is the location within the Cherry Creek School District and home prices are affordable compared to surrounding communities in Arapahoe County and Aurora. The 2015 bonds were issued in $500,000 minimum denominations and are backed by a limited mill levy convertible to unlimited once the District's debt-to-assessed ratio drops below 50 percent. Equus projects the 50 percent level to be met in collection year 2024.
Management - The development is being undertaken by Centre Communities, a family-owned developer led by Richard Frank and his son, Daniel. Mr. Frank has over 20 years of experience developing communities in Arapahoe County. After personal conversations and a site visit of Copperleaf with the younger Frank, Equus has determined that management's experience is deemed above average given their experience in building successful communities, demeanor during on site visits, and knowledge of the local market.
Physical Inspection - A site visit was conducted before bonds priced and the development has been visited more than five times since issuance. The development consists of a diverse mix of homes from seven diffent builders. A broad array of home models provide adequate entry points for new families looking to upgrade or relocate to the Cherry Creek School District. There is an elementary, middle, and high school all within or on the perimeter of the development. Surrounding communities are mature and complete, with most having been built in the 1980s. Copperleaf provides a stark upgrade for individuals looking to move to the Cherry Creek School District when compared to surrounding communities.
Due Diligence - Equus has personally visited the development on 6 different occasions to visually track the build out process. We've also maintained contact with the developer and have held calls with management. Quarterly reports, as well as audited financials, provide insight into the construction process and home value appreciation. Additionally, Equus utilizes Arapahoe County monthly building permit data that provides more timely insight than quarterly reports, which can be delayed by up to five months. Lastly, we have flown a drone over the district to provide an additional point of view of the development, beyond those afforded at ground level.
Credit Decision & Commentary - Copperleaf provides an enticing price point for families looking to locate their children within the Cherry Creek School District. Build out has been ahead of Equus' projections and with nearly 85 percent of single family units occupied, there is added cushion in coverage levels.
Continued Monitoring Factors - At nearly 1,200 homes completed, coverage levels should be 1.28x in 2018 and trend upwards with final buildout. Additional homes will only provide the District the flexibility to lower the tax burden on homeowners. While rising mortgage rates are a growing concern for the Denver housing market, they are less of a concern compared to early stage developments.
Financial Statement Summary
Construction Progress
BUILDOUT STATUS
Homes Completed Under Construction Percent Complete
Avg. Home Price (000s) Assessed Value (000s) YoY Growth
INCOME STATEMENT
Propety Taxes SOTs
Other
Total Revenues
Total Expenses
Net Income Capitalized Interest Revs. Avail. For Debt
Debt Service
Coverage
Fund Balance, Ending
DISTRICT METRICS
Debt Outstanding Debt to Assessed
Debt per Home Debt to Home Value Mills Levied
$ $
$
$ $
$ $
2015
634 193 50%
448 $ 15,611 $
46%
2016
751 246 60%
519 $ 23,914 $
53%
2017
996 201 72%
596 $ 29,797 $
25%
2018E
1,197 171
83%
567 $ 40,238 $
35%
2019E 2020E
1,368 1,467 99 46
89% 92%
585 $ 561 44,739 $ 54,034
11% 21% 2,451 $ 2,960
781 $ 59
1,196 $ 92
1,476 $ 126
2,204 $ 190
842 (14) 828
- 828
795
1.04
3,412
33,025 212%
52 12%
50.00
$ $
$ $
1,308 (21)
1,287 750 2,038
2,038
1.00
2,662
33,025 138%
44
8% 50.00
$ $
$ $
1,637 (25)
1,612 254 1,866
1,866
1.00
2,407
33,025 111%
33
6% 50.00
$ $
$ $
2,426 (38)
2,388 - 2,388
1,866
1.28
2,929
33,025 82%
28
5% 55.28
$ $
$ $
2,700 (42)
2,659 - 2,659
1,866
1.42
3,721
33,025 74%
24
4% 55.28
$ $
$ $
3,264 (50)
3,213 - 3,213
1,981
1.62
4,953
32,910 61%
22
4% 55.28
212
2 21 35 31 38 48
256
Homes Completed
Under Construction
District Completion 100%
75%
1,600
1,200
800
400
50% o eog25%
Da
2015
2016 2017 2018E 2019E 2020E
0%
ys Ca
sh
n Ha
nd
& De
bt S
ervic
C
vera
e
Debt to Assessed & Coverage
Assessed Value
Debt Outstanding
Debt Service Coverage
$60,000 $45,000 $30,000 $15,000
$-
2015
2016
2017
2018E
2019E
2020E
1.75 1.50 1.25 1.00 0.75 0.50
Moody's Rating NR S&P Rating NR Enhancements None
Mill Levy Homes Avail. Completed
55.28 Structure 1,652 Industry 1,197 State
General Obligation Metro District Colorado
De-Gallagher Min. Denom. Call Date
Yes $500,000 12/1/2020
Analyst Contact Phone
Scott Hanley Daniel Frank 303.520.3085
Copperleaf Metro District No. 2
4/12/2018
Series 2015 $33,025,000
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither Equus Private Wealth nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Estimates are subject to change. Redistribution is prohibited without the express written consent of the Equus Private Wealth Management, LLC. Data for this report was obtained from the Official Statement, Copperleaf Metro District's financial reports, personal conversations and internal forecasting. For questions regarding this report, please call Scott Hanley at (970) 963-2674.