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El Anhelo10/27/2017Origin MarketsThe origin markets of the US and Canada are looking for alternatives to Cabo pricing,lack of access to water and limited access to other amenities. Both American andCanadian demographics for real estate are looking for active resort destination inwhich to invest and live. The location to all major services, lift, easy driving distances,and an eco-friendly resort destination fill a demand for which there is no currentsupply. The current mix of sales is still predominantly 50% US, 35% Canadian and 15%Mexican.Price & PaceThe price and pace of shared ownership and whole ownership real estate offerings inthis document are based on conservative assumptions tied with the market comp set.In summary, shared ownership prices are discounted at a rate of 15 to 20 percent fromCabo comp set offerings with the sales pace scaled back 10 to 20 percent off the samecomp set.Whole ownership sales are scaled to current East Cape real estate listings. There maybe significant increases in pricing and pace as the resort is further developed due tothe value of added amenities and services. Demand is a product of supply anddevelopers have struggled to combine all the correct pieces for a destination resortcommunity on the East Cape. A fully amenitized destination resort such as El Anhelowould capture a larger market share.El Anhelo vs.DiamanteIn order to set the tone of this document and the future development of the Project, itcan be compared to the Diamante development that has shown significant successwith their real estate product offerings. Diamante is considered to be the mostsuccessful of the projects today with annual revenues of over 50 million year overyear since 2011. A head-to-head comparison of Diamante (comparison is relevant to allother projects in the competitive set) to El Anhelo indicates a competitive advantage: Amenities – El Anhelo’s location would have a significant competitiveadvantage due to the planned programming matching Diamante; however,with a world class marina in addition. Marina, Water Activities and Access to Watersports – The planned marina atEl Anhelo would be the most consumer-friendly marina and only marinabetween La Paz and the pending marina at Costa Palmas in La Ribera(approximately 87 miles/2-hour drive). With its location on the East Cape, themarina would have excellent access to the Sea of Cortez. Golf – Diamante would have an initial competitive advantage with 36-holes ofgolf by Davis Love III and Tiger Woods; however, with Arnold Palmer DesignCompany committed as the golf course designer for the El Anhelo course, onecould potentially argue that it would only be a slight advantage. This will be9

El Anhelo10/27/2017Arnold Palmer’s first planned course in Mexico. Arnold Palmer Relationship – El Anhelo would be able to successfully leveragethe Arnold Palmer Brand for golf and real estate. Arnold Palmer is still thesingle most powerful brand in golf amongst the baby boomer demographic.Since Mr. Palmer’s passing, it is anticipated that the brand strength willincrease throughout the next few years due to his legacy.The addition of an Arnold Palmer Golf course, lodge, branded real estate,academy and public/private golf access would rapidly gain the consumerlooking for the true family centered resort destination with the full amenitiespackage offered at El Anhelo.10

El Anhelo10/27/2017MEXICO’S ECONOMIC OVERVIEWMexico’s economic outlook over the next five years remains promising. The country has been able to weatherthe economic slowdown experienced across Latin America as a result of the global decline in pricing for oil andother commodities and a softening U.S. economic outlook, among other issues. Mexico’s robust growth indomestic demand, falling unemployment rates and low inflation have helped counter any negative impactcaused by currency devaluation and overall economic slowdown experienced across the region. As a result,Mexico’s real GDP is projected to average 3% annual growth over the next decade, according to OxfordEconomics, supported by an aggressive structural reform agenda, strong private consumption andmanufacturing and increases in foreign investment.In an effort to incite healthy competition rms wereimplemented to dismantle monopolies in theenergy and telecommunications sector.Private consumption continues to be the maindriver of growth, but the manufacturingindustry is gaining ground due to improvingdemand from the United States, morefavorable cost dynamics compared to China,and improved competitiveness associatedwith the Mexican Peso’s depreciation. Inaddition, the government is investingin major infrastructure projects such as a new international airport in Mexico City. Foreign Direct Investment(FDI) projected to total US 30 billion in 2016 and grow 6% annually to 38 billion by 2020. The automotiveindustry, Mexico’s top FDI sector, is expected to continue attracting foreign investment given improvingconditions in the industrial sector and general infrastructure of the country.Mexico’s lodging market has been shaped by the recent macroeconomic trends and is poised for more growth in2017/2018. Expect to see a rise in international arrivals given the favorable exchange rate, new-build hotels inmanufacturing regions and ancillary markets and potential acquisition opportunities and mixed-useddevelopments in markets with high barriers to entry. Healthy demand fundamentals and continued momentumfrom strong RevPAR growth in 2014-2016 indicate numerous opportunities for Mexico’s top tourist destinations.Mexico has the most developed hospitality sector in Latin America and has enjoyed record-breaking visitationlevels for the past four years, evenly distributed across leisure and commercial destinations. The key indicatorsresponsible for the positive results in the hospitality market are: Increased liquidity, growing foreign investors and emerging domestic investment has projected todeliver an exponential growth of hotel acquisition by volume.11

El Anhelo10/27/2017 Covering over 60% of the GDP, Mexico’s emerging middle class has restored growth in the serviceindustry that has led to phenomenal growth in lodging demand. User friendly smart phones and advances in technology are altering the relationship between hotels andguests which has transformed the hospitality industry enhancing hotel’s financial performance.12

El Anhelo10/27/2017THE DESTINATIONEast Cape, Baja California SurThe East Cape of Baja is an area of white sand beaches with warm, crystal clear waters that make for excellentdiving, some of the world's best sport fishing, world class windsurfing and kiteboarding. The area is home toseveral beautiful resorts, a living coral reef and mile after mile of exceptionally beautiful, and sometimes, wellhidden beaches.The East Cape Baja resorts are mostly in or near the Los Barriles/Buena Vista area, on the shores of Bahía LasPalmas. There are a few farther south along the coast and one to the north. The resorts of the East Cape tend tobe somewhat small in size, as resorts go; however, large on hospitality, which is a pleasant change that manyvacationers are seeking out in Baja.The remoteness was the appeal in the early days, as itremains to this day. The growing area is perceived as beingmuch more laid back than the glitzy nearby resorts of CaboSan Lucas and San Jose del Cabo. Much of the East Cape is likea different world than that of the Los Cabos resorts which areso near, yet seem so far away. "This is how Los Cabos wastwenty years ago" is often heard when discussing thetranquility of the East Cape.The abundant sport fishing is what started it all and remains the main tourism draw today. Marlin, sail fish,dorado, sierra, grouper, tuna, wahoo, snapper, yellowtail, cabrilla and the ever-powerful rooster fish are alllurking in the waters of the East Cape. Colorful tropical fish inhabit the East Cape shoreline, rocks and reefsmaking the area a "must do" for scuba divers and snorkelers alike. This is especially true at the Cabo PulmoMarine Reserve.Los Barriles is a kickback community of fishing resorts, somegreat restaurants, a few new upscale housing developments andalso some of Mexico's best wind surfing during the wintermonths. This is a small town that does a good job of keeping thelocals, and tourists, happy with good eats, great cocktails, and avariety of supplies. The beaches are incredible with an averagewater temperature near 80 degrees Fahrenheit all year. Theentire area provides a feeling of really being away from theeveryday hustle and is considered a more relaxing alternativevacation destination to Cabo San Lucas.South of Los Barriles/Buena Vista is an area that is home to a few secluded resorts, post-card perfect beaches,one small town (La Ribera) and some very unique settlements that cater mostly to fishermen, divers and naturelovers.13

El Anhelo10/27/2017Cabo Pulmo is a Mexican National Marine Park located 16miles south of Los Barriles. Cabo Pulmo is home to a livingcoral reef and millions of tropical fish, which makes for somefantastic diving and snorkeling. Everything one could wish for,as a diver, is nearby – tropical fish, game fish, manta rays, sealions and even the rare Golden Grouper. This protected areahas flourished and is an example of what the entire Sea ofCortez was like in the not so distance past.Jacques Cousteau Island an uninhabited island located off thecoast of the Cerralvo Channel near the city of La Paz in the Mexican state of Baja California Sur. It is eighteenmiles long with a land area of 136.498 km² (52.702 sq mi), and is the ninth-largest island in Mexico. It is part ofthe Municipality of La Paz. The peak of the island comes to 2,100 ft (640 m) and the ridgeline runs north-southwith many small streams draining east to the Sea of Cortez and west to the Cupalo Channel. There are manysteep bluffs on the eastern sides and many sandy beaches and points on the west side.Jean-Michel Cousteau’s Ambassadors of the Environment is a program previously introduced to the Project;however, at the time they had a non-compete due to their involvement with the Ritz-Carlton. This has sinceexpired and they are eager to re-engage in the possible opportunity.14

El Anhelo10/27/2017TOURISM OVERVIEWLeisure Travel MarketEvery year MMGY Global, the leading integrated travel and hospitality marketing firm in the U.S., releasesfindings from travel surveys they conduct. While this year's research indicates a slowdown in intent to travel anda drop in leisure travel spend in the coming months, there are opportunities that marketers can leverage tooptimize their efforts in the next 12 months.Millennial Families Driving Growth in TravelThis year's study predicts that the approximately 60 million traveling households in the U.S. will spend up to a 5billion decrease on leisure travel in the next 12 months, which is a dip of less than 1 percent from the industry'seight-year high in 2016. However, the 9.5 million households that are American Millennial families intend tospend 19 percent more on vacations during the next 12 months and intend to travel 36 percent more than theprevious year. Compare that to U.S. travelers at large, who demonstrate a 6-point increase in intent to travelthis year.The depreciation of the Mexican peso to the U.S. dollar of almost 40% also makes travel more appealing.This generational segment is also more likely to travel internationally. A quarter of Millennial family vacationswere to international destinations. That creates a substantial opportunity for international travel brands, sinceonly 15 percent of Xers, 10 percent of Boomers and 12 percent of Matures vacationed to internationaldestinations. This is likely related to the group's world view and optimism, as three-quarters of Millennialfamilies consider themselves happy and optimistic about their own futures (83 percent), not to mention thefuture of the world (62 percent).Attractions Influence Where Travelers GoAs these travelers increase their domestic vacations, attractions are becoming more relevant in influencingwhere those vacations are taken. More than half of all vacations (53 percent) included at least one visit to anattraction last year. And of those 41.5 million households, 68 percent say that they chose those attractionsbefore their vacations began. This means that travelers are building attractions into their travel planning insteadof making the decision while in the destination.And, with Millennial families on the rise, one might assume that theme parks and amusement parks create themost interest among attractions. However, this year's research indicates that the top-ranking attractions aremore educational and culturally based, with art and history museums (65 percent), aquariums (59 percent) andscience museums (56 percent) coming before theme parks (55 percent).Google Is Growing Its Footprint in TravelHow travelers search and plan for their vacations is shifting as well. Search engines, which were once justpervasive during certain phases of the travel planning process, now lead across the entire purchase. Mostsignificantly, travelers now rank search engine results as their top choice while searching for advice and ratings15

El Anhelo10/27/2017as well as when they are making reservations (search engines were ranked third in both of those phases the yearprior).This is no doubt due to Google's investment in travel and release of new travel products in the last two years. Infact, Google is now ranked by U.S. travelers as the site most often used on a regular basis to obtain travelinformation and prices – a position that has been held by Expedia the last two years.Affluent TravelersAmong affluent travelers who took at least one vacation, not all are spending their discretionary income onhigh-end travel experiences. Said another way, not all affluent travelers are luxury travelers. Luxury travelers –affluent travelers who believe it's worth paying more for the very best quality for both vacationaccommodations and transportation – only make up 36 percent of affluent travelers.Luxury travelers, the most promising affluent segment for travel marketers, represent 11 percent of all Americantravelers. During the past 12 months, these 6.7 million traveling households took 40 million vacations and spent 67.5 billion on leisure travel.16

El Anhelo10/27/2017Mexico TourismAccording to the 2017 Travel and Tourism Competitiveness Index(TTCI) report, Mexico delivers a strong performance this year. It isone of the most-improved countries in the index, rising 8 positionsto reach 22nd place in the global ranking as it continues to close thegap with the US and Canada. The government’s prioritization of theT&T sector (30th) and the effective use of both natural (2nd) andcultural (10th) resources have paid off.TTCI provides a measurement of the factors that make it attractiveto developing business in the travel and tourism industry of individual countries.Source: 2017 Travel and Tourism Competitiveness Index; Colors are determined by the relative position of each score in the globaldistribution of each pillar, taken individually; Score 1-7 (Red Poor; Yellow Better; Green Best).Snapshot of Mexico Tourism Activity during the first half of 2017:1. The arrival of international tourists was 19.2 million, up 2.8 million tourists in the same period of 2016and equivalent to an annual increase of 12.2%.2. Foreign currency income from the arrival of international visitors was US 11.1 million, equivalent to anincrease of 9.8% in comparison to the same period 2016.3. The arrival of foreign visitors who reside in the United States represents 61.9% of all foreign arrivals byair-travel. From the Latin American and the Caribbean region, the countries of residence with the17

El Anhelo10/27/2017highest number of foreign arrivals in Mexico were Argentina and Colombia, with 2.8% and 2.2% of totalvisitors respectively.4. The percentage of hotel occupancy in a group of 70 resorts reached 62.4%, this is 1.8 basis points higherin comparison to the same period of 2016.5. The arrival of domestic tourists to hotel rooms was 27.9 million tourists (71.8%), the remaining arrivals(28.2%) were from foreign tourists.6. In the second quarter of 2017 around 4.0 million people were employed in the Mexican tourism sector,which accounted for 8.5% of the national employment.Overall Arrivals – During January-June 2017, the arrival of foreign air-coming visitors who reside in the UnitedStates represents 61.9% of all foreign arrivals by air. From the Latin American and the Caribbean region, thecountries of residence with the highest number of foreign arrivals in Mexico were Argentina and Colombia, with2.8% and 2.2% of total visitors respectively.18

El Anhelo10/27/2017American and Canadian Arrivals – The American residents who arrived in Mexico by air increased 11.6% inJanuary-June 2017 compared to the same period of 2016, registering 5.6 million passengers. Los Cabos airportpassengers is a large part of the over 500,000 visitors noted in the “Others” column. During the same period, 1.1million Canadian residents registered, which is 9.9% higher in comparison to 2016.Graph A – American ArrivalsLos Cabos,B.C.S.Graph B – Canadian Arrivals19

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Nobu Hotel Los Cabos. will have 200 "Japanese and Los Cabos-inspired" rooms, a signature Nobu Restaurant and Bar, event and meeting space, a luxury spa plus retail space. Solaz, a Luxury Collection Resort, Los Cabos has an opening date of March 8. The 201 131-room property at the tip of Baja California Sur will include a spa and private beach