NEW ISSUE - BOOK ENTRY ONLY NOT RATED In the opinion of Squire Patton Boggs (US) LLP, Bond Counsel, under existing law (i) assuming continuing compliance with certain covenants and the accuracy of certain representations, interest on the M-TEMS Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the M-TEMS Bonds is included in the calculation of a corporation s adjusted current earnings for purposes of, and thus may be subject to, the corporate alternative minimum tax and (ii) the M-TEMS Bonds and the income thereon are exempt from taxation under the laws of the State of Florida, except estate taxes imposed by Chapter 198, Florida Statutes, as amended, and net income and franchise taxes imposed by Chapter 220, Florida Statutes, as amended. Interest on the M-TEMS Bonds may be subject to certain federal taxes imposed only on certain corporations, including the corporate alternative minimum tax as a result of the inclusion of that interest in the calculation of a corporation s adjusted current earnings for purposes of the corporate alternative minimum tax. For a more complete discussion of the tax aspects, see TAX MATTERS herein. $11,830,000 CAPITAL TRUST AGENCY Multifamily Tax-Exempt Mortgage-Backed Securities (M-TEMS SM* ) (Heather Glenn Apartments Project), Series 2017 The Capital Trust Agency Multifamily Tax-Exempt Mortgage-Backed Securities, (M-TEMS) (Heather Glenn Apartments Project), Series 2017 (the M-TEMS Bonds ) will be issued under and pursuant to an Indenture of Trust, dated as of August 1, 2017 (the Indenture ), between the Capital Trust Agency (the Issuer ) and Zions Bank, a division of ZB, National Association, as trustee (the Trustee ). The M-TEMS Bonds are issuable only as fully registered certificates without coupons and will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository of the M- TEMS Bonds. Individual purchases will be made in book-entry form only, in the amount of $1,000 original face amount and integral multiples of $1.00 in excess thereof. Purchasers will not receive certificates representing their interest in M-TEMS Bonds purchased. The M-TEMS Bonds will be issued to finance the purchase by the Trustee of a single mortgage pass-through certificate (the Mortgage-Backed Security ) guaranteed as to timely payment of principal and interest by the Federal National Mortgage Association, if and when issued. The aggregate principal amount, aggregate face amount (if different), maturity date, interest rate and delivery date for the M-TEMS Bonds will be as set forth in the Indenture and will be described, together with the initial reoffering price, if applicable, in a Supplement to this Disclosure Statement delivered by the Issuer in connection with the sale of the M-TEMS Bonds. Principal and interest payments are expected to be made to the Mortgage-Backed Security on or about the 25 th day of the month. Interest on the M-TEMS Bonds is payable on the Business Day following receipt of an interest payment under the Mortgage-Backed Security, and principal on the M-TEMS Bond is payable on the Business Day following receipt of a principal payment or repayment under the Mortgage-Backed Security. Principal and interest on the M-TEMS Bonds are payable by the Trustee to DTC, which will be responsible for remitting such principal and interest to its Participants, which will be responsible for remitting such principal and interest to the Beneficial Owners of the M-TEMS Bonds, as described under APPENDIX F BOOK-ENTRY SYSTEM herein. $11,830,000 2.77% M-TEMS Bonds Due September 1, 2027, Price 102% (Accrued Interest to be Added) (Final M-TEMS Bond Payment Date September 28, 2027) CUSIP 14052T DJ0 PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE M-TEMS BONDS ARE LIMITED AND SPECIAL REVENUE OBLIGATIONS OF THE ISSUER PAYABLE SOLELY OUT OF THE TRUST ESTATE. THE M-TEMS BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE ISSUER, THE SPONSORING POLITICAL SUBDIVISIONS, THE LOCAL AGENCY, THE STATE OF FLORIDA (THE STATE ) OR ANY OTHER MUNICIPALITY, PUBLIC AGENCY OR POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION, AND SHALL NOT CONSTITUTE OR GIVE RISE TO A PECUNIARY LIABILITY OF THE ISSUER, THE SPONSORING POLITICAL SUBDIVISIONS, THE LOCAL AGENCY, THE STATE OR ANY OTHER MUNICIPALITY, PUBLIC AGENCY OR POLITICAL SUBDIVISION THEREOF AND NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE SPONSORING POLITICAL SUBDIVISIONS, THE LOCAL AGENCY, THE STATE OR ANY OTHER MUNICIPALITY, PUBLIC AGENCY OR POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE M-TEMS BONDS. NO COVENANT OR AGREEMENT CONTAINED IN THE M-TEMS BONDS OR THE INDENTURE SHALL BE DEEMED TO BE A COVENANT OR AGREEMENT OF ANY MEMBER OF THE GOVERNING BODY OF THE ISSUER NOR SHALL ANY OFFICIAL EXECUTING SUCH M-TEMS BONDS BE LIABLE PERSONALLY ON THE M-TEMS BONDS OR BE SUBJECT TO ANY PERSONAL LIABILITY OR ACCOUNTABILITY BY REASON OF THE ISSUANCE OF THE M-TEMS BONDS. THE ISSUER HAS NO TAXING POWER. The M-TEMS Bonds are offered when, as and if received by Stifel, Nicolaus & Company, Incorporated ( Stifel ), subject to the approval of certain legal matters by Squire Patton Boggs (US) LLP, Tampa, Florida, Bond Counsel. Certain legal matters will be passed upon for Stifel by its counsel, Norton Rose Fulbright US LLP, Washington, D.C, for the Borrower by its counsel, Peter B. Nagel, P.C., Denver, Colorado, and Squire Patton Boggs (US) LLP, Tampa, Florida, and for the Issuer by Law Office of Michael J. Stebbins P.L., Pensacola, Florida. The M-TEMS Bonds are expected to be available for delivery to the Depository Trust Company in New York, New York, on or about August 15, 2017. Dated: August 9, 2017 * This is a proprietary Service Mark of Stifel. CUSIP is a registered trademark of the American Bankers Association. The CUSIP number listed above is being provided solely for the convenience of bondholders only, and the Issuer does not make any representation with respect to such number or undertake any responsibility for its accuracy. The CUSIP number is subject to being changed after the issuance of the M-TEMS Bonds.
No dealer, broker, salesman or other person has been authorized by the Issuer or Stifel to give any information or to make any representations other than those contained in this Disclosure Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Disclosure Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the M-TEMS Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. References to web site addresses presented herein are for informational purposes only and may be in the form of a hyperlink solely for the reader s convenience. Unless specified otherwise, such web sites and the information or links contained therein are not incorporated into, and are not part of, this Disclosure Statement. The information set forth herein has been obtained from the Issuer and other sources that are believed to be reliable, but it is not guaranteed as to accuracy or completeness and is not to be construed as a representation by Stifel. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Disclosure Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Issuer or any other parties described herein since the date as of which such information is presented. In connection with the offering of M-TEMS Bonds Stifel may over-allot or effect transactions that stabilize or maintain the market price of the M-TEMS Bonds described herein at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. Stifel has provided the following sentence for inclusion in this Disclosure Statement. Stifel has reviewed the information in this Disclosure Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but Stifel does not guarantee the accuracy or completeness of such information. ii
TABLE OF CONTENTS INTRODUCTION... 2 THE ISSUER... 3 DESCRIPTION OF THE M-TEMS BONDS... 6 THE MORTGAGE LOAN... 10 SECURITY FOR AND SOURCES OF PAYMENT OF M-TEMS BONDS... 10 TAX MATTERS... 11 CERTAIN LEGAL MATTERS... 14 CONTINGENT FEES... 14 NO LITIGATION... 14 ORIGINAL PURCHASE... 15 NO RATING... 15 CONTINUING DISCLOSURE... 15 THE TRUSTEE... 15 ADDITIONAL INFORMATION... 16 APPENDIX A FANNIE MAE MORTGAGE-BACKED SECURITIES PROGRAM APPENDIX B PROPOSED FORM OF OPINION OF BOND COUNSEL APPENDIX C SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE FINANCING AGREEMENT APPENDIX E FORM OF DISCLOSURE AGREEMENT APPENDIX F BOOK-ENTRY SYSTEM APPENDIX G FORM OF NOTICE OF REQUEST TO EXCHANGE APPENDIX H FORM OF PROSPECTUS SUPPLEMENT FOR MBS CERTIFICATE APPENDIX I SUPPLEMENT TO DISCLOSURE STATEMENT TERM SHEET iii
DISCLOSURE STATEMENT of CAPITAL TRUST AGENCY relating to its $11,830,000 Multifamily Tax-Exempt Mortgage-Backed Securities (M-TEMS) (Heather Glenn Apartments Project), Series 2017 This Disclosure Statement (which includes the cover page and appendices hereto) of the Capital Trust Agency (the Issuer ) provides certain information in connection with the issuance and sale of the Issuer s 11,830,000 Multifamily Tax-Exempt Mortgage-Backed Securities (M-TEMS) (Heather Glenn Apartments Project), Series 2017 (the M-TEMS Bonds ). The M-TEMS Bonds will be issued pursuant to Chapter 159, Part II, Chapter 163, Part I, Chapter 166, Part II, Chapter 617, Florida Statutes, as amended; Ordinance No. 05-97 duly enacted by the City Council (the City Council ) of Gulf Breeze, Florida (the City ), on July 7, 1997, as amended, restated and supplemented by Ordinance Nos. 04-00, 05-01 and 10-11 duly enacted by the City Council on May 15, 2000, May 7, 2001 and September 6, 2011, respectively; Ordinance 2-00 duly enacted by the Town Council (the Town Council ) of Century, Florida (the Town and together with the City, the Sponsoring Political Subdivisions ), on August 7, 2000, as amended and supplemented by Ordinance Nos. 1-01 and 5-11 duly enacted by the Town Council on May 7, 2001 and October 3, 2011, respectively; an Interlocal Agreement, dated as of August 2, 1999, between the City and the Town, as amended and supplemented, particularly as amended and supplemented by Amendment No. 79 to the Interlocal Agreement dated May 1, 2017 ( Amendment No. 79 ); Resolution No. 09-17, duly adopted by the City Council on May 1, 2017, approving Amendment No. 79; Resolution No. 06-17, duly adopted by the Town Council on April 17, 2017, approving Amendment No. 79; and Resolution Nos. 05-17 and 13-17, duly adopted by the Issuer on March 21, 2017, and August 1, 2017, respectively, and other applicable provisions of law, as amended (collectively, the Act ), and that certain resolution of the Issuer adopted August 1, 2017 (the Resolution ) and secured by an Indenture of Trust, dated as of August 1, 2017 (the Indenture ), between the Issuer and Zions Bank, a division of ZB, National Association, as trustee (the Trustee ). Pursuant to the Indenture and the Financing Agreement, dated as of August 1, 2017 (the Financing Agreement ), between the Issuer, the Trustee, and the Borrower (identified in the SUPPLEMENT TO DISCLOSURE STATEMENT TERM SHEET in APPENDIX I hereto), the Issuer is issuing the M-TEMS Bonds to provide financing for a certain low and moderate income multifamily rental housing facility known as Heather Glenn Apartments (the Project ) in Fort Walton Beach, Florida, as further described in a Supplement to this Disclosure Statement, by using the proceeds thereof to provide financing for the Mortgage-Backed Security guaranteed by the Federal National Mortgage Association. UPON THE DELIVERY OF THE MORTGAGE-BACKED SECURITY (AS DEFINED BELOW) TO THE TRUSTEE, THE ISSUER WILL SUPPLEMENT THIS DISCLOSURE STATEMENT TO IDENTIFY THE POOL NUMBER AND CUSIP NUMBER OF THE MORTGAGE-BACKED SECURITY. All capitalized terms used in this Disclosure Statement that are defined in the Indenture will have the respective meanings set forth in the Indenture. See APPENDIX C - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE Definitions. Simultaneously with the issuance of the M-TEMS Bonds, the Issuer expects to issue $2,000,000 aggregate principal amount of its Multifamily Housing Subordinate Revenue Bonds (Heather Glenn Apartments Project), Series 2017 (the Subordinate Bonds ), and use the proceeds thereof to make a subordinate mortgage loan to the Borrower to finance a portion of the cost of acquiring the Project. The Subordinate Bonds will be junior and subordinate to the Mortgage Loan backing the Mortgage-Backed Security (each as defined below), and will be issued and secured under a separate trust indenture of the Issuer. The Subordinate Bonds are not offered pursuant to this Disclosure Statement. 1
INTRODUCTION The Issuer, the Borrower and Stifel, Nicolaus & Company, Incorporated ( Stifel or the Original Purchaser ) have entered into a Purchase Contract (the Purchase Contract ), pursuant to which the Issuer will agree to sell the M-TEMS Bonds to Stifel. The M-TEMS Bonds will be issued to finance the purchase of a single mortgage pass-through certificate (the Mortgage-Backed Security ) guaranteed as to principal and interest by the Federal National Mortgage Association ( Fannie Mae ), if and when issued. The Mortgage-Backed Security will not be available for purchase on the date of issuance of the M-TEMS Bonds (the Settlement Date ) but is expected to be available for acquisition by the Trustee prior to the Initial Mandatory Redemption Date, as specified in the SUPPLEMENT TO DISCLOSURE STATEMENT TERM SHEET in APPENDIX I hereto. The Mortgage- Backed Security will be backed by a 10 year, fixed-rate mortgage loan (the Mortgage Loan ) secured by a mortgage constituting a first lien on the multifamily rental housing facility, the Project, for a Fannie Mae Certificate (defined below), satisfying the mortgage loan eligibility criteria of Fannie Mae. The Mortgage Loan will be made to the Borrower as mortgagor and owner of the Project on the Settlement Date. See THE MORTGAGE LOAN and APPENDIX A FANNIE MAE MORTGAGE-BACKED SECURITIES PROGRAM. Prior to the date of delivery by Fannie Mae of the Mortgage-Backed Security (the MBS Settlement Date ), the M-TEMS Bonds will be cash collateralized with (i) proceeds of the M-TEMS Bonds in an equal to the principal amount thereof deposited with the Trustee in the Bond Proceeds Account established under the Indenture and (ii) accrued interest paid on the M-TEMS Bonds deposited with the Trustee in the Revenue Account established under the Indenture in an amount equal to the interest at the pass-through rate expected on the Mortgage-Backed Security from the M-TEMS Bond Dated Date (as specified in the SUPPLEMENT TO DISCLOSURE STATEMENT TERM SHEET in APPENDIX I) to, but not including, the Initial Mandatory Redemption Date (collectively, the Cash Collateral ). Upon delivery of the Mortgage-Backed Security, the Cash Collateral will be used by the Trustee to purchase the Mortgage-Backed Security, which will then secure the payment of the M-TEMS Bonds. On or prior to the Settlement Date, Fannie Mae will enter into a commitment with the Fannie Mae approved lender (the Lender ) of the Mortgage Loan to deliver the Mortgage-Backed Security to the Trustee for purchase. The commitment to deliver the Mortgage-Backed Security is subject to the satisfaction of certain requirements and preconditions and does not extend to the benefit of any other third party, including the beneficial owners of the M- TEMS Bonds, the Issuer or the Trustee. No representations or assurances can be provided as to whether or not such conditions can or will be satisfied. The transaction entered into under the Purchase Contract (the Transaction ) will provide for the issuance and sale to Stifel of the M-TEMS Bonds in a specified principal amount, with a specified interest rate, on a specified date and at a specified price. The delivery of the M-TEMS Bonds is subject to the satisfaction of a number of conditions set forth in the Purchase Contract. The face amount of the M-TEMS Bonds will equal the face amount of the Mortgage-Backed Security, which is equal to the original aggregate principal amount of the Mortgage Loan. The principal amount of the M- TEMS Bonds will equal from time to time the then-current principal amount of the Mortgage-Backed Security, which will equal from time to time the product of the original aggregate principal amount of the Mortgage Loan and the then-applicable factor posted by Fannie Mae as the Mortgage Loan amortizes or is prepaid (the Related Factor ). With respect to Mortgage-backed Securities guaranteed by Fannie Mae ( Fannie Mae Certificates ), Related Factors will be published by Fannie Mae. As of the date of this Disclosure Statement, factors for mortgagepass through certificates guaranteed by Fannie Mae are posted at https://mbsdisclosure.fanniemae.com/pooltalk2/index.html. The interest rate on each M-TEMS Bond will equal the interest rate (the Pass-Through Rate ) on the Mortgage-Backed Security. Payments on the Mortgage-Backed Security will be remitted to the Trustee. Interest on the M-TEMS Bonds is payable on the Business Day following receipt of an interest payment under the Mortgage- Backed Security and principal on the M-TEMS Bonds is payable on the Business Day following receipt of a principal payment or repayment under the Mortgage-Backed Security. The M-TEMS Bonds are special limited obligations of the Issuer, payable from and secured solely by the pledge pursuant to the Indenture of the revenues from the Mortgage-Backed Security (the Revenues ) and the 2
funds pledged therefor under the Indenture. See SECURITY FOR AND SOURCES OF PAYMENT OF THE M- TEMS BONDS. PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE M-TEMS BONDS ARE LIMITED AND SPECIAL REVENUE OBLIGATIONS OF THE ISSUER PAYABLE SOLELY OUT OF THE TRUST ESTATE. THE M-TEMS BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE ISSUER, THE SPONSORING POLITICAL SUBDIVISIONS, THE LOCAL AGENCY, THE STATE OF FLORIDA (THE STATE ) OR ANY OTHER MUNICIPALITY, PUBLIC AGENCY OR POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION, AND SHALL NOT CONSTITUTE OR GIVE RISE TO A PECUNIARY LIABILITY OF THE ISSUER, THE SPONSORING POLITICAL SUBDIVISIONS, THE LOCAL AGENCY, THE STATE OR ANY OTHER MUNICIPALITY, PUBLIC AGENCY OR POLITICAL SUBDIVISION THEREOF AND NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE SPONSORING POLITICAL SUBDIVISIONS, THE LOCAL AGENCY, THE STATE OR ANY OTHER MUNICIPALITY, PUBLIC AGENCY OR POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE M-TEMS BONDS. NO COVENANT OR AGREEMENT CONTAINED IN THE M-TEMS BONDS OR THE INDENTURE SHALL BE DEEMED TO BE A COVENANT OR AGREEMENT OF ANY MEMBER OF THE GOVERNING BODY OF THE ISSUER NOR SHALL ANY OFFICIAL EXECUTING SUCH M-TEMS BONDS BE LIABLE PERSONALLY ON THE M-TEMS BONDS OR BE SUBJECT TO ANY PERSONAL LIABILITY OR ACCOUNTABILITY BY REASON OF THE ISSUANCE OF THE M- TEMS BONDS. THE ISSUER HAS NO TAXING POWER. Descriptions, certain definitions and final terms of the M-TEMS Bonds, the Borrower, the Project, the Mortgage Loan and the Mortgage-Backed Security are included in the SUPPLEMENT TO DISCLOSURE STATEMENT TERM SHEET in APPENDIX I hereto. All summaries or descriptions herein of documents and agreements are qualified in their entirety by reference to such documents and agreements and all summaries herein of the M-TEMS Bonds are qualified in their entirety by reference to the Indenture and the provisions with respect thereto included in the aforesaid documents and agreements. Copies of the Indenture and the Financing Agreement are available for inspection at the office of the Issuer. The Borrower will provide certain information on an ongoing basis to the Municipal Securities Rulemaking Board (the MSRB ). For a description of the Borrower s undertaking with respect to ongoing disclosure, see CONTINUING DISCLOSURE. THE ISSUER General. The Issuer is a legal entity duly created and a public agency duly organized and existing under the laws of the State established for the purposes set forth under Chapter 159, Part II, Chapter 163, Part I, Chapter 166, Part II, Chapter 617, Florida Statutes, as amended; Ordinance No. 05-97 duly enacted by the City Council (the City Council ) of Gulf Breeze, Florida (the City ), on July 7, 1997, as amended, restated and supplemented by Ordinance Nos. 04-00, 05-01 and 10-11 duly enacted by the City Council on May 15, 2000, May 7, 2001 and September 6, 2011, respectively; Ordinance 2-00 duly enacted by the Town Council (the Town Council ) of Century, Florida (the Town and together with the City, the Sponsoring Political Subdivisions ), on August 7, 2000, as amended and supplemented by Ordinance Nos. 1-01 and 5-11 duly enacted by the Town Council on May 7, 2001 and October 3, 2011, respectively; an Interlocal Agreement, dated as of August 2, 1999, between the City and the Town, as amended and supplemented, particularly as amended and supplemented by Amendment No. 79 to the Interlocal Agreement dated May 1, 2017 ( Amendment No. 79 ); Resolution No. 09-17, duly adopted by the City Council on May 1, 2017, approving Amendment No. 79; Resolution No. 06-17, duly adopted by the Town Council on April 17, 2017, approving Amendment No. 79; and Resolution Nos. 05-17 and 13-17, duly adopted by the Issuer on March 21, 2017, and August 1, 2017, respectively, and other applicable provisions of law (collectively, the Act ). The Issuer neither has nor assumes responsibility for any information in this Disclosure Statement, except for the information under the captions THE ISSUER and NO LITIGATION The Issuer. Although this Official Statement contains information from sources believed to be reliable, the Issuer makes no representations as to the contents of this Official Statement other than those referenced above. THE ISSUER ASSUMES NO 3
RESPONSIBILITY FOR THE ACCURACY, SUFFICIENCY OF DISCLOSURE OR COMPLETENESS OF ANY INFORMATION PROVIDED BY THE BORROWER, THE TRUSTEE OR ANY OTHER PERSON. The Issuer s Fees and Expenses, including its Annual Issuer s Fees and any charges for indemnity, relating to the M-TEMS Bonds or the Project are paid from amounts deposited into the Issuer s Fees And Expenses Account held by the Trustee under the Indenture and paid by the Borrower pursuant to the Financing Agreement. Limited Involvement of the Issuer. The Issuer has no obligation to review, control or oversee the activities of the Trustee or the Borrower or the compliance by any of them with any covenants or provisions of any related documents, including (without limitation) any covenants that relate to the excludability from gross income of interest on the M-TEMS Bonds. The Issuer shall be under no obligation to institute any suit or to take any remedial proceeding in the event of an Event of Default under the Indenture or to enter any appearance or in any way defend in any suit in which it may be made defendant, or to take any steps in the execution of any of the trusts thereby created or in the enforcement of any rights and powers thereunder, including, without limitation, its acceptance or possession of the Project or any component thereof, until it shall be indemnified to its satisfaction against any and all reasonable costs, expenses, outlays and reasonable counsel fees and other reasonable disbursements, and against all liability, except in those cases where such costs, expenses, outlays, fees and disbursements may be attributed to gross negligence or willful misconduct on the part of the Issuer. The Issuer nevertheless may, in its sole discretion, but is not required to, begin suit, or appear in and defend suit, or do anything else in its judgment proper to be done by it as such Issuer, without indemnity, and in such case the Issuer shall be entitled to reimbursement from any money under the Indenture (other than amounts in the Revenue Account and the Bond Proceeds Account) and, subject to the prior rights of the Trustee, shall be entitled to a preference therefor over any M-TEMS Bonds outstanding under the Indenture. The Issuer shall be entitled to advice of counsel concerning all matters under the Indenture and its duties under the Indenture and the other financing instruments. The Issuer may in all cases pay such reasonable compensation to such attorneys, agents and receivers and shall be entitled to reimbursement from the Borrower for all such compensation paid. The Issuer may act upon the opinion or advice of counsel, accountants, or such other professionals as the Issuer deems necessary and selected by it in the exercise of reasonable care. The Issuer shall not be responsible for any loss or damage resulting from any action or non-action based on its good faith reliance upon such opinion or advice. The permissive right of the Issuer to do things enumerated in the Indenture or in the other financing instruments to which the Issuer is a party shall not be construed as duties until specifically undertaken by the Issuer. The Issuer shall only be responsible for the performance of the duties expressly set forth in the Indenture and in the other financing documents to which it is a party and shall not be answerable for other than its gross negligence or willful misconduct in the performance of those express duties. The Issuer shall be protected in acting upon any opinion of counsel, notice, request, consent, direction, requisition, certificate, order, affidavit, letter, or other paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons and which is not contrary to the express terms of the Indenture, the Financing Agreement or any financing documents. Any action taken by the Issuer pursuant thereto upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent as the Holder of any M-TEMS Bond as shown on the Bond Register will be conclusive and binding upon all future owners or holders of the same M-TEMS Bonds and upon M-TEMS Bonds issued in exchange therefor or in place of such M-TEMS Bonds. 4
Limited Recourse on M-TEMS Bonds of the Issuer. PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE M-TEMS BONDS ARE LIMITED AND SPECIAL REVENUE OBLIGATIONS OF THE ISSUER PAYABLE SOLELY OUT OF THE TRUST ESTATE. THE M-TEMS BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE ISSUER, THE SPONSORING POLITICAL SUBDIVISIONS, THE LOCAL AGENCY, THE STATE OR ANY OTHER MUNICIPALITY, PUBLIC AGENCY OR POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION, AND SHALL NOT CONSTITUTE OR GIVE RISE TO A PECUNIARY LIABILITY OF THE ISSUER, THE SPONSORING POLITICAL SUBDIVISIONS, THE LOCAL AGENCY, THE STATE OR ANY OTHER MUNICIPALITY, PUBLIC AGENCY OR POLITICAL SUBDIVISION THEREOF AND NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE SPONSORING POLITICAL SUBDIVISIONS, THE LOCAL AGENCY, THE STATE OR ANY OTHER MUNICIPALITY, PUBLIC AGENCY OR POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE M-TEMS BONDS. NO COVENANT OR AGREEMENT CONTAINED IN THE M-TEMS BONDS OR THE INDENTURE SHALL BE DEEMED TO BE A COVENANT OR AGREEMENT OF ANY MEMBER OF THE GOVERNING BODY OF THE ISSUER NOR SHALL ANY OFFICIAL EXECUTING SUCH M-TEMS BONDS BE LIABLE PERSONALLY ON THE M-TEMS BONDS OR BE SUBJECT TO ANY PERSONAL LIABILITY OR ACCOUNTABILITY BY REASON OF THE ISSUANCE OF THE M-TEMS BONDS. THE ISSUER HAS NO TAXING POWER. No recourse under or upon any obligation, covenant or agreement contained in the documents relating to the M-TEMS Bonds or under any judgment obtained against the Issuer, or the enforcement of any assessment, or any legal or equitable proceedings by virtue of any constitution or statute or otherwise, or under any circumstances under or independent of the Indenture, shall be had against any incorporator, member, director, officer, employee, agent or counsel as such, past, present or future of the Issuer, either directly or through the Issuer or otherwise, for the payment for or to the Issuer or any receiver thereof, or for or to the Holder of any M-TEMS Bond issued under the Indenture, or otherwise, of any sum that may be due and unpaid by the Issuer upon any such M-TEMS Bond. Any and all personal liability of every nature whether at common law or in equity or by statute or by constitution or otherwise of any such incorporator, member, director, officer, employee, agent or counsel, as such, to respond by reason of any act or omission on his part or otherwise, for the payment for or to the Holder of any M-TEMS Bond issued under the Indenture or otherwise of any sum that may remain due and unpaid upon the M-TEMS Bond hereby secured or any of them is, by the acceptance thereof, expressly waived and released as a condition of and in consideration for the execution of the Indenture and the issuance of the M-TEMS Bonds. Notwithstanding anything to the contrary contained in the Indenture, the M-TEMS Bonds, the Financing Agreement or in any other instrument or document executed by or on behalf of the Issuer in connection with the issuance of the M-TEMS Bonds: (i) the Issuer shall have no obligation to take action under the Financing Agreement, the Indenture, the M-TEMS Bonds or any other financing document, or any such other instruments or documents, unless the Issuer is reasonably requested in writing by an appropriate person to take such action and is provided with indemnity and assurances satisfactory to it of payment of or reimbursement for any expenses (including attorneys fees) in such action; (ii) neither the Issuer nor any member, director, officer, employee or agent of the Issuer shall be personally liable to the Borrower, the Trustee, the Holders of the M-TEMS Bonds, or any other person for any action taken by the Issuer or by its officers, agents or employees or for any failure to take action under the Indenture, the Financing Agreement, the M-TEMS Bonds, any other financing document, or any such other instruments or documents, except that the Issuer agrees to take, or to refrain from taking, any action if so required by an injunction or if required to comply with any final judgment for specific performance; and (iii) any judgment rendered against the Issuer for breach of its obligations under the Indenture, the Financing Agreement, the M-TEMS Bonds or such other instruments or documents, shall be payable solely from funds paid in accordance with or recovered pursuant to the Financing Agreement or revenues therefrom that have been pledged to payment of the M-TEMS Bonds or proceeds of the M-TEMS Bonds, and no personal liability or charge payable directly or indirectly from the general funds of the Issuer shall arise therefrom. No agreements or provisions contained in the Indenture nor any agreement, covenant or undertaking by the Issuer contained in any document executed by the Issuer in connection with the Project or the issuance, sale and 5
delivery of the M-TEMS Bonds shall give rise to any pecuniary liability of the Issuer or a charge against its general credit, or shall obligate the Issuer financially in any way except with respect to the Financing Agreement and the application of revenues therefrom and the proceeds of the M-TEMS Bonds. No failure of the Issuer to comply with any term, condition, covenant or agreement in the Indenture shall subject the Issuer, its incorporators, members, directors, officers, employees, agents and counsel to liability for any claim for damages, costs or other financial or pecuniary charge except to the extent that the same paid or recovered from funds paid pursuant to or recovered in accordance with the Financing Agreement or revenues therefrom that have been pledged to payment of the M- TEMS Bonds or proceeds of the M-TEMS Bonds. Nothing in the Indenture shall preclude a proper party in interest from seeking and obtaining, to the extent permitted by law, specific performance against the Issuer for any failure to comply with any term, condition, covenant or agreement therein; provided, that no costs, expenses or other monetary relief shall be recoverable from the Issuer or its members, trustees, officers, directors, employees, agents and counsel, except as may be payable from the Financing Agreement or revenues therefrom that have been pledged to payment of the M-TEMS Bonds or the proceeds of the M-TEMS Bonds. Disclosure Required by Florida Blue Sky Regulations. Rule 69W-400.03, Rules for Government Securities, promulgated by the Florida Office of Financial Regulation, under Section 517.051(1), Florida Statutes ( Rule 69W-400.03 ), requires the Issuer to disclose each and every default as to the payment of principal and interest with respect to an obligation issued by the Issuer after December 31, 1975. Rule 69W-400.03 further provides, however, that if the Issuer in good faith believes that such disclosures would not be considered material by a reasonable investor, such disclosures may be omitted. The Issuer, in the case of the M-TEMS Bonds, is merely a conduit for payment, in that the M-TEMS Bonds do not constitute a general debt, liability or obligation of the Issuer, but are instead secured by and payable solely from amounts payable under the Financing Agreement pledged in the Indenture (exclusive of the fees and expenses of the Issuer and amounts payable to the Issuer as indemnification under certain circumstances), and amounts on deposit in the funds created under the Indenture (other than the Rebate Fund). The M-TEMS Bonds are not being offered on the basis of the financial strength or condition of the Issuer. The Issuer believes, therefore, that disclosure of any default related to a financing not involving the Borrower or any person or entity related to the Borrower would not be material to a reasonable investor. Accordingly, the Issuer has not taken affirmative steps to contact any trustee of any other conduit bond issue of the Issuer to determine the existence of prior defaults. To the knowledge of the Issuer, based solely upon information provided by the Borrower, the Borrower has not been in default as to payment of principal or interest with respect to its obligations related to such bonds at any time after December 31, 1975. DESCRIPTION OF THE M-TEMS BONDS General. The M-TEMS Bonds may be issued in the minimum denomination of $1,000 original face amount and integral multiples of $1.00 in excess thereof. Each M-TEMS Bond will receive a designation indicating its Series. The M-TEMS Bonds are issuable only as fully registered certificates without coupons and will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository for the M-TEMS Bonds. Individual purchases will be made in bookentry form only. Purchasers will not receive certificates representing their interest in M-TEMS Bonds purchased. See APPENDIX F BOOK-ENTRY SYSTEM. The M-TEMS Bonds will be dated and have a final maturity date and a final payment date on the respective dates identified in the SUPPLEMENT TO DISCLOSURE STATEMENT TERM SHEET attached hereto as APPENDIX I. The M-TEMS Bonds will bear interest from their dated date at the Pass-Through Rate set forth in the Supplement to this Disclosure Statement. Principal and interest will be payable on the M-TEMS Bonds on the Business Day following the receipt by the Trustee of a payment of principal or interest, as applicable, on the Mortgage-Backed Security and will be in amounts equal to the payments received by the Trustee under the Mortgage-Backed Security, as described in the following paragraphs. 6
On the first Business Day following receipt of a payment representing interest under a Mortgage-Backed Security, the Trustee will pay to the M-TEMS Bond owners of record as of the applicable record date the amount so received as a payment of interest on the M-TEMS Bonds. All payments of interest with respect to the M-TEMS Bonds will be paid to M-TEMS Bond owners in proportion to the principal amount of each M-TEMS Bond owned by each such owner as set forth on the records of the Trustee at the close of business on the last day of the calendar month prior to the calendar month in which such payment occurs (the Record Date ). On the first Business Day following receipt of principal payments or repayments under a Mortgage-Backed Security, the Trustee will pay to the M-TEMS Bond owners of record as of the applicable record date the amount so received as a payment of principal on the M-TEMS Bonds. All payments of principal with respect to the M-TEMS Bonds will be paid to M-TEMS Bond owners in proportion to the principal amount of each M-TEMS Bond owned by each such owner as set forth on the records of the Trustee at the close of business on the Record Date. So long as Cede & Co. or another nominee designated by DTC is the registered owner of the M-TEMS Bonds, principal and interest on the M-TEMS Bonds are payable by the Trustee to DTC, which will be responsible for remitting such principal and interest to its Participants, which will be responsible for remitting such principal and interest to the Beneficial Owners of the M-TEMS Bonds. See APPENDIX F BOOK-ENTRY SYSTEM. Fannie Mae Certificate Payments. If and when a Fannie Mae Certificate is issued, payments on a Fannie Mae Certificate will be made on the 25th day of each month (beginning with the month following the month such Fannie Mae Certificate is issued), or, if such 25th day is not a Business Day, on the first Business Day next succeeding such 25th day. With respect to each Fannie Mae Certificate, Fannie Mae will distribute to the Trustee an amount equal to the total of (i) the principal due on the Mortgage Loan in the related pool underlying such Fannie Mae Certificate during the period beginning on the second day of the month prior to the month of such distribution and ending on the first day of such month of distribution, (ii) the stated principal balance of any Mortgage Loan that was prepaid in full during the calendar month next preceding the month of such distribution (including as prepaid for this purpose at Fannie Mae s election any Mortgage Loan after it is delinquent, in whole or in part, with respect to four consecutive installments of principal and interest; or because of Fannie Mae s election to repurchase such Mortgage Loan under certain other circumstances), (iii) the amount of any partial prepayment of a Mortgage Loan received in the calendar month next preceding the month of distribution, and (iv) one month s interest at the passthrough rate on the principal balance of the Fannie Mae Certificate as reported to the Trustee (assuming the Trustee is the registered holder) in connection with the previous distribution (or, respecting the first distribution, the principal balance of the Fannie Mae Certificate on its issue date). For purposes of distribution, a Mortgage Loan will be considered to have been prepaid in full if, in Fannie Mae s reasonable judgment, the full amount finally recoverable on account of such Mortgage Loan has been received, whether or not such full amount is equal to the stated principal balance of the Mortgage Loan. See also APPENDIX A FANNIE MAE MORTGAGE-BACKED SECURITIES PROGRAM. Bondholders who purchase M-TEMS Bonds at a price in excess of the principal amount thereof should consider that certain repayments of principal of the M-TEMS Bonds from distributions of principal on the Mortgage-Backed Security will be made without any premium. Transfer of M-TEMS Bonds. While DTC is securities depository for book-entry M-TEMS Bonds, the transfer of beneficial ownership of M-TEMS Bonds will take place as described in APPENDIX F BOOK- ENTRY SYSTEM. If DTC were to terminate its status as securities depository for the M-TEMS Bonds and, as a result, M-TEMS Bonds were no longer book-entry securities, no transfer of an M-TEMS Bond will be made unless made upon the records of the Issuer kept for that purpose at the corporate trust office of the Trustee, by the registered owner of the M-TEMS Bond or by its attorney duly authorized in writing, upon surrender thereof together with a written instrument of transfer satisfactory to the Trustee. Upon the transfer of any such M-TEMS Bond, the Issuer will issue and the Trustee will authenticate and deliver to and in the name of the transferee a new fully registered M-TEMS Bond, of the same Series, aggregate principal amount, interest rate, maturity and other terms as the surrendered M-TEMS Bond. At all times, the Issuer and the Trustee may deem and treat the person in whose name any M-TEMS Bond is registered upon the records of the Issuer as the absolute owner of such M-TEMS Bond, whether such M-TEMS 7
Bond is a book-entry security or not, for the purpose of receiving payment of, or on account of, the principal of and interest on such M-TEMS Bond and for all other purposes and all such payments so made to any such registered owner or upon his order will be valid and effectual to satisfy and discharge the liability upon such M-TEMS Bond to the extent of the sum or sums so paid. Optional Exchange of M-TEMS Bonds for Mortgage-Backed Security. On any date after the MBS Settlement Date, a beneficial owner of M - TEMS Bonds may file with the Trustee a written request to exchange M - TEMS Bonds for a like principal amount of the Mortgage-Backed Security originated by such M-TEMS Bonds from the trust estate, provided, that such Mortgage-Backed Security will be, when delivered, in an original face amount equal to $1,000 or a multiple of $1.00 in excess thereof. Such written request must be delivered to the Trustee at least seven Business Days prior to the exchange date and must be in the form attached hereto as APPENDIX G FORM OF NOTICE OF REQUEST TO EXCHANGE or such other form as may be approved by the Trustee (the Request Notice ). Upon receipt, the Trustee is to immediately notify the Issuer of such Request Notice. The Issuer will then have the option of either (i) delivering to the beneficial owner of the M - TEMS Bonds their proportional interest in the Mortgage-Backed Security based upon their proportional interest in the M-TEMS Bonds or (ii) redeeming the beneficial owner s M-TEMS Bonds (in exchange for the proportional interest in the Mortgage-Backed Security based upon the proportional interest of M-TEMS Bonds subject to the Request Notice) for an amount equal to the Cash Value, defined as follows: Cash Value = original face amount x MBS Factor x (1 + Redemption Premium (R) + Initial Offering Premium (I) x MBS Factor) Where R = 5% if the exchange occurs during the first five years from the Settlement Date; = 4% during the sixth year; = 3% during the seventh year; = 2% during the eighth year; = 1% during the ninth year; and = 0% thereafter I = initial offering price - 100% and MBS Factor = the applicable factor posted by Fannie Mae on the MBS from time to time as the Mortgage Loan amortizes. The Issuer is to notify the Trustee of its decision whether to exchange or redeem within six Business Days of being notified by the Trustee of the Request Notice, and immediately upon receiving the Issuer s decision, the Trustee is to notify such beneficial owner of the Issuer s decision. In the event that the Issuer elects to deliver the Mortgage-Backed Security in lieu of redeeming the M-TEMS Bonds, after validating the exchange request, the Trustee shall transfer and deliver to such requesting owner the Trustee s beneficial ownership interest in the Mortgage-Backed Security promptly following (i) delivery to the Trustee (via DTC withdrawal or Deposit/Withdrawal at Custodian ( DWAC )) of the M - TEMS Bonds being exchanged and (ii) payment by the requesting owner of the Trustee s exchange fee ($1,000 as of the date of this Disclosure Statement) with respect to such M-TEMS Bonds. Such Mortgage-Backed Security will be in book-entry form. Transfers of the Mortgage-Backed Security to the Issuer or the requesting Beneficial owner, as applicable, will be made in accordance with current market practices, including the applicable provisions of the SIFMA s Uniform Practices for the Clearance and Settlement of Mortgage-Backed Securities and Other Related Securities. Upon receipt of such M - TEMS Bonds from the requesting beneficial owner, the Trustee will promptly cancel the M- TEMS Bonds being exchanged, which will not be reissued. Any portion of the Mortgage-Backed Security delivered in such an exchange will not be exchangeable for M-TEMS Bonds. If the Issuer fails to timely notify the Trustee of its decision, the Issuer will be deemed to have waived its right to redeem the M-TEMS Bonds in lieu of the requested exchange. Interest on such Mortgage-Backed Security is not excludable from gross income for federal income tax purposes. Owners of M-TEMS Bonds should consult their own tax advisors concerning that and other tax consequences of any exchange of an M-TEMS Bond for a Mortgage-Backed Security. 8
No Acceleration or Early Redemption Upon Loss of Tax Exemption on the M-TEMS Bonds. The Borrower will covenant and agree, pursuant to a Land Use Restriction Agreement, dated as of August 1, 2017, among the Issuer, the Trustee and the Borrower (the Regulatory Agreement ), to comply with the provisions of the Code relating to the exclusion from gross income for federal income tax purposes of the interest payable on the M-TEMS Bonds. In particular, the Borrower is required to rent at least forty percent (40%) of the Project apartment units to certain qualified tenants whose income does not exceed sixty percent (60%) of the area average median income where the Project is located. The Borrower s failure to comply with such provisions would not constitute a default under the M-TEMS Bonds, would not give rise to a redemption or acceleration of the M-TEMS Bonds, and would not be the basis for an increase in the rate of interest payable on the M-TEMS Bonds. Furthermore, the Borrower s failure to comply with the Regulatory Agreement would not give rise to a prepayment or acceleration of amounts due under the Mortgage-Backed Security, unless directed by Fannie Mae in its sole discretion. Consequently, interest on the M-TEMS Bonds may become includable in gross income for purposes of federal income taxation retroactive to the date of issuance of the M-TEMS Bonds if the Borrower were to fail to comply with the requirements of federal tax law. Extraordinary Mandatory Redemption upon Failure to Purchase the Mortgage-Backed Security. The M- TEMS Bonds are subject to extraordinary mandatory redemption in whole on the Initial Mandatory Redemption Date at the Offering Price plus accrued interest thereon upon five (5) Business Days notice if the Trustee has not yet purchased the Mortgage-Backed Security on a date (the Purchase Date ) occurring on or before five (5) Business Days prior to the Initial Mandatory Redemption Date. (The terms Offering Price and Initial Mandatory Redemption Date are specified in the SUPPLEMENT TO DISCLOSURE STATEMENT TERM SHEET in APPENDIX I.) The notice for any such mandatory redemption may be conditioned upon the Purchase Date not occurring by the close of business on the second Business Day preceding the Initial Mandatory Redemption Date. In the event the Mortgage-Backed Security has not been purchased by the Trustee ten (10) Business Days prior to the Initial Mandatory Redemption Date, the Trustee shall provide written notice of such non-purchase to the Borrower and the Issuer. The Initial Mandatory Redemption Date may be extended under the Indenture to a date no later than the Final Mandatory Redemption Date as specified in the SUPPLEMENT TO DISCLOSURE STATEMENT TERM SHEET in APPENDIX I. In order to extend the Initial Mandatory Redemption Date under the Indenture, the Lender must advance funds under the Mortgage Loan for deposit with the Trustee in an amount equal to interest on the M-TEMS Bonds at the Pass-Through Rate that will accrue from the Initial Mandatory Redemption Date to the extended Mandatory Redemption Date which cannot extend beyond the Final Mandatory Redemption Date. Further, if the Mandatory Redemption Date is extended beyond ninety (90) days from the Settlement Date, then an opinion of counsel is required that such extension will not adversely affect the exclusion of interest on the M-TEMS Bonds from gross income for federal income tax purposes. Purchasers of M-TEMS Bonds at a price in excess of the principal amount of the M-TEMS Bonds should consider the fact that any such premium would be lost in the case of an Extraordinary Mandatory Redemption described in the preceding paragraph. Limited Liability of Issuer. PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE M-TEMS BONDS ARE LIMITED AND SPECIAL REVENUE OBLIGATIONS OF THE ISSUER PAYABLE SOLELY OUT OF THE TRUST ESTATE. THE M-TEMS BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE ISSUER, THE SPONSORING POLITICAL SUBDIVISIONS, THE LOCAL AGENCY, THE OR ANY OTHER MUNICIPALITY, PUBLIC AGENCY OR POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION, AND SHALL NOT CONSTITUTE OR GIVE RISE TO A PECUNIARY LIABILITY OF THE ISSUER, THE SPONSORING POLITICAL SUBDIVISIONS, THE LOCAL AGENCY, THE STATE OR ANY OTHER MUNICIPALITY, PUBLIC AGENCY OR POLITICAL SUBDIVISION THEREOF AND NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE SPONSORING POLITICAL SUBDIVISIONS, THE LOCAL AGENCY, THE STATE OR ANY OTHER MUNICIPALITY, PUBLIC AGENCY OR POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE M-TEMS BONDS. NO COVENANT OR AGREEMENT CONTAINED IN THE M-TEMS BONDS OR THE INDENTURE SHALL BE DEEMED TO BE A COVENANT OR AGREEMENT OF ANY MEMBER OF THE GOVERNING BODY OF THE ISSUER NOR SHALL ANY OFFICIAL EXECUTING SUCH M-TEMS BONDS 9