Fitch Ratings has affirmed the 'BBB' rating on the following City of Sunrise, Florida (the city) special assessment bonds (the bonds):

--$70.1 million special assessment bonds, federally taxable series 2015 (parking garages project).

The Rating Outlook is Stable.

SECURITY

The bonds are payable from special assessments levied on certain properties within the Sawgrass Mills Mall (the mall) located within the city. The special assessments are levied on the property tax bill, beginning with the fiscal 2017 tax bill, and carry a co-equal lien on taxable property with property taxes. A cash-funded debt service reserve fund (DSRF) funded to maximum annual debt service (MADS) provides additional security.

KEY RATING DRIVERS

ADEQUATE BONDHOLDER PROTECTIONS: The rating reflects adequate bond holder protections that support timely debt service payment including the special assessment's first lien on property on parity with property taxes. In the event special assessments are not paid, a cash funded debt service reserve fund is available to cover payments until receipt of pledged tax certificate proceeds. These mechanisms provide partial offset to risks associated with a single site entity and potential changes in market conditions.

CONCENTRATED REVENUE STREAM: Concentration risk is inherent in the transaction as special assessments are derived exclusively from properties within the mall. Simon Property Group (Simon or the developer), the owner of the mall through its subsidiaries is ultimately responsible for paying the assessment, although a portion of the costs of special assessments paid by the developer is expected to be recovered from mall tenants as part of their obligations under their leases.

BUSINESS RISK/LONG BOND TENOR: Mall operations are exposed to changes to its competitive landscape or other events which could hamper viability. The 30-year term of the bonds elevates the likelihood that adverse market developments could erode mall performance.

HIGH PERFORMING ASSET: The mall is Florida's largest outlet and value retail destination. Sales are in excess of $1 billion and income metrics are among the highest in Simon's extensive portfolio. Occupancy rates have averaged 98% over the last six years.

RATING SENSITIVITIES

ASSET DETERIORATION: A decline in mall performance or other developments which adversely impact mall valuations could potentially hamper the ability of the county tax collector to sell tax certificates should Simon fail to pay the special assessments.

ANNUAL DISCLOSURE OF PROPERTY PERFORMANCE: Fitch expects the developer to annually to provide Fitch with financial information on mall operations in order for Fitch to ascertain property quality.

CREDIT PROFILE

The city (GO bonds rated 'AA' with a Stable Outlook) is located in southeastern Florida in Broward County. Encompassing 18 square miles, the city is located about six miles west of Fort Lauderdale. The city's population of about 90,000 represents a moderate increase since 2000.

HIGH PERFORMING ASSET

The mall is one of the largest shopping centers in Florida totaling over 2.8 million square feet of building space and among the 10 largest in the U.S. Over 350 shopping, dining and entertainment venues are located within 2.3 million square feet of retail space. The mall is an attractive draw for tourists, especially international tourists which have rendered it Florida's second largest tourist attraction next to Disney World.

The mall is owned and managed by affiliates of Simon. Simon is the largest publically traded real estate company and largest owner of regional malls and outlet centers in the nation. The mall has historically been one of the highest volume shopping centers in the U.S. and has been among the top income generators within Simon's extensive portfolio.

Sawgrass Mall is situated in the affluent but competitive market which includes Broward County (GO bonds rated 'AAA' with a Stable Outlook), Palm Beach County (GO bonds rated 'AAA' with a Stable Outlook) and Miami-Dade County (GO bonds rated 'AA' with a Stable Outlook). Competitive advantages include the mall's breadth and variety of its retail offerings and easy access to Interstate 75, Interstate 595 and the Sawgrass Expressway. In addition, more than 100 outlet retailers located at the mall are exclusive to south Florida.

TAX CERTIFICATE PROCESS PROVIDES BONDHOLDER PROTECTION

The rating reflects Fitch's belief that the cash-funded DSRF funded to MADS combined with Florida's tax certificate process provide an effective mechanism for timely payment of debt service even in the event that special assessments are not paid. While Fitch considers such a scenario to be unlikely, the transaction is exposed to concentration and market risk over the lengthy 30 year life of the bonds.

Special assessments beginning with the fiscal 2017 tax levy will be levied on the county property tax bill, subject to tax certificate sale upon delinquency. The tax certificate process ensures that funds at least equal to the taxes levied, including special assessment, are received by the taxing jurisdictions as long as certificate buyers believe the asset has sufficient value to repay the certificates. The portion of proceeds from tax certificate sales related to the special assessments is specifically pledged to bond debt service.

Fitch considers the mall to be a high quality asset supported by its favorable location and Simon's considerable investment in the property. This is reflected in the mall property's solid value to lien of 6.9x based on fiscal 2016 assessed values. The value to lien ratio remains healthy at 5.9x when allocated overlapping debt of the city, county and county school board is included. The fiscal 2016 assessed value of properties subject to special assessments totaled $480.8 million, up 5.3% from $456.8 million in fiscal 2015. Based on a past appraisal of the mall which was much higher than current assessed value, Fitch believes that land to lien ratio may be conservative supporting the prospect of demand/liquidity in the tax certificate sale market.

In a stress scenario where special assessments fall short or are just not paid, DSRF monies bridge the funding gap between the May 1st principal and interest bond requirements each year and the receipt of tax certificate sale proceeds in July. Under this scenario, DSRF monies are tapped for the May 1st bond payments. Funds from the tax certificate sale, usually held in July, would be used to replenish the DSRF for the May 1st draw and provide sufficient funds for the Nov. 1st interest only payment. This mechanism could be in place until mall operations are restored, debt service is fully paid or the property is foreclosed with proceeds used to pay outstanding debt.

STRONG OCCUPANCY TRENDS

Occupancy levels have historically been strong. Current occupancy of leased space is 93.5%, which is unusually low. Since 2008, occupancy has generally averaged about 98%, according to the developer. The lower occupancy is due to the loss of anchor tenant, J.C. Penney (IDR rated 'B-' with a Stable Outlook). That space eventually will be incorporated into the planned mall expansion. The expansion is expected to add significant additional square footage to the special assessment base.

SINGLE SITE AND TAXPAYER CONCENTRATION RISK

The bonds are payable from special assessments levied solely on mall properties owned and managed by affiliates of the developer. Four relatively small parcels within the mall area, three of them owned by other organizations, are not subject to special assessments. Bond repayment is highly exposed to the economic performance of the mall as well as risks associated with single site facilities such as natural and man-made hazards.

Payment responsibility is partially diffused through tenant lease agreements which obligate mall tenants to pay a pro rata share of property taxes and special assessments. However, the developer is ultimately responsible for the assessments and retention of tenants and overall viability of the mall is reliant upon the ability of the mall operator to generate sufficient sales to cover tenant costs, including property taxes and the additional burden of special assessments.

MARKET RISK

The 30 year tenor of the bonds elevates the risk that future changes in the economic or market landscape could have an adverse impact upon mall operations. Mall activities are subject to any number of events including online shopping, economic cycles, changes in the local market, management turnover etc. which may challenge future performance.

The mall has no third party lender mortgage debt outstanding as $850 million of debt was repaid by Simon in January 2014 which affords it substantial flexibility both operationally and financially. Re-leveraging of the mall would not ordinarily be a concern for Fitch given the first priority lien of property tax and special assessments. However, the addition of underlying debt could place additional pressure on mall operations and net valuations.

LIMITED TAX/NARROW DEBT SERVICE COVERAGE

The pledged special assessments are akin to limited taxes allocated based on square footage of taxable properties and therefore not vulnerable to property value fluctuations. The city is currently levying $1.77 per square foot, well below the maximum levy of $2.48 per square foot. Fitch expects the city to levy special assessments at a rate which, net of the 4% early payment discount and associated costs, provides close to 1x coverage of debt service.

The special assessment rate is established each year based on debt service requirements. Any additional gross lease area created by the expansion will also be subject to special assessments. The added space will have the effect of allowing the city to lower special assessments while affording additional taxing cushion if needed.

Additional information is available at 'www.fitchratings.com'.

Fitch recently published an exposure draft of state and local government tax-supported criteria (Exposure Draft: U.S. Tax-Supported Rating Criteria, dated Sept. 10, 2015). The draft includes a number of proposed revisions to existing criteria. If applied in the proposed form, Fitch estimates the revised criteria would result in changes to fewer than 10% of existing tax-supported ratings. Fitch expects that final criteria will be approved and published by the end of the first quarter of 2016. Once approved, the criteria will be applied immediately to any new issue and surveillance rating review. Fitch anticipates the criteria to be applied to all ratings that fall under the criteria within a 12-month period from the final approval date.

In addition to the sources of information identified in the applicable criteria specified below, this action was informed by information from CreditScope, IHS Global Insight, and Zillow Group.

Applicable Criteria

Exposure Draft: U.S. Tax-Supported Rating Criteria (pub. 10 Sep 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869942

Tax-Supported Rating Criteria (pub. 14 Aug 2012)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. Local Government Tax-Supported Rating Criteria (pub. 14 Aug 2012)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=998683

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=998683

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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