UNIQUE HOTEL OPPORTUNITY IN SPECTACULAR … HOTEL OPPORTUNITY IN SPECTACULAR BEACH FRONT ... creation of a new spa, ... and concentration of marine fish species and is known

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MELIÁ CABO REAL • LOS CABOS • MEXICO

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UNIQUE HOTEL OPPORTUNITYIN SPECTACULAR BEACH FRONT SETTING


INTRODUCTIONJames Andrew International has been exclusively retained to offer for sale The Meliá Cabo Real Hotel, which occupies a unique and stunning location in one of Mexico’s most vibrant international tourist areas.

The Meliá Cabo Real was built in 1989 to an outstandingly original and arresting design by renowned Spanish architect Alavaro Sans (ASAH). The hotel occupies a prime sea-front position at Cabo Real, one of the finest beaches in Los Cabos, which is situated at the southern tip of the 1,000-mile-long Baja California Peninsula.

The hotel benefits from its own extensive private beach and lies adjacent to Cabo Real Golf Course, which is probably the finest PGA golf course in Mexico.

The Meliá Cabo Real Hotel offers investors an outstanding re-branding and re-positioning opportunity, allowing for the re-establishment of this fabulous hotel as a luxury international destination of distinction.

The hotel is currently operated under management by Meliá Group and this arrangement can be terminated upon completion of sale, offering significant operating flexibility for potential purchasers. In addition, expansion rights are achievable.

EXECUTIVE SUMMARY 01

INVESTMENT HIGHLIGHTS 02

LOCATION 04

ACTIVITIES 07

HOTEL DESCRIPTION 10

TENURE AND LAND DETAILS 18

MARKET HIGHLIGHTS 22

COMPETITION 24

CAPITAL EXPENDITURE 28

BASIS OF SALE 30

OPERATING ARRANGEMENTS 30

HOTEL PERFORMANCE 32

FORECAST ASSUMPTIONS 34

PROPOSAL 36

CONTACT INFORMATION 36

DISCLAIMER 36



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EXECUTIVE SUMMARYHOTEL FACILITIES• 349 rooms - (307 rooms and 42 time-share units)

• Lagoon-style swimming pool and 10-person sea-front jacuzzi

• 4 Restaurants - Kujira, La Palapa, La Terraza and El Quetzal

• El Mirador snack bar

• 3 bars

• 2 tennis courts

• Conference/meeting rooms: 7 units, ranging from an 11,022.24 sq ft (1,024 sq m) ballroom to a 516.67 sq ft (48 sq m) function room.

• Retail area - 4 retail units at beach level; these are a mix of hotel-run and separately leased operations.

• Kids’ Club - includes a club (with playground) for children aged 5-12 years old and a further club for toddlers from 4 months to 4 years old.

• Cabo Real Golf - designed by Robert Trent Jones II, golf architects, the course is located adjacent to Cabo Real PGA golf course.

LOCATION• The hotel is situated on the ‘Los Cabos Corridor’

(Corredor Turistico), a coastal area on the southern tip of the Baja California Peninsula, facing the Gulf of California and the Sea of Cortez.

• The Los Cabos Corridor contains many luxury hotels and resorts and is considered the most sought-after destination in the region, due to its fabulous beaches, excellent choice of golf courses, popular sports fishing and other outstanding tourist amenities.

• The hotel enjoys a prime sea-front location in the Cabo Real area of Los Cabos. Cabo Real is one of the best beaches in Los Cabos and is home to some of the area’s very best luxury hotels and a superb golf course.

• The hotel is ideally located just 20 minutes from Los Cabos International airport; furthermore, it is only 15 minutes from the restaurants and shops of the resort centres of Cabos San Lucas and San Jose del Cabo.

OPERATING ARRANGEMENTS• The hotel is currently operated under a Management

Agreement by Meliá Group. The operation is subject to a fixed structure fee.

• The management agreement can be terminated upon completion of purchase.

HOTEL PERFORMANCE• The average daily room rate for luxury hotels in Los

Cabos is approximately US$720, with occupancy of selected luxury destinations averaging over 70%.

• The hotel has been considerably under-performing due to significant capital expenditure requirements.

• Although turnover has risen to US$14.542 million, earnings before interest, taxes, depreciation and amortisation remain poor. This is principally because the market demands exceptional standards of luxury, which the hotel currently cannot meet.

• It is estimated that US$20-25 million is required to bring the hotel to the required luxury standards that the market demands; this would include the re-positioning of retail and restaurant/bar areas, as well as the creation of a new spa and corresponding facilities.

• Rebranding and investment in the hotel, together with the creation of a new spa, would significantly enhance the profile of the hotel and would also ensure considerable improvement of achieved net operating income.

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INVESTMENT HIGHLIGHTSIN A HIGH-PERFORMING AREALos Cabos is now one of the world’s most outstanding tourist locations and achieves the highest average room rates in the whole of Mexico (approximately US$720), with occupancy of selected luxury hotels averaging over 70%.

Revenue per available room is still below 2007 levels, and the outlook for the future of Los Cabos is strong and encouraging.

In particular, Los Cabos is one of the top destinations for US travellers, especially from the West Coast. The area’s provision of high-quality hotels, plus extremely favourable exchange rates, adds to its attractiveness for US and other visitors.

Los Cabos visitor arrivals, occupancy rates and room rates are currently showing strong signs of growth, with strong year-on-year improvement.

These statistics should be viewed in the context of the fact that international and domestic arrivals in Los Cabos began to demonstrate truly impressive growth from 2005 onwards, at 38% (international) and 23% (domestic). This was due to hurricane-related redirected demand from Cancun and the evolution of Los Cabos as a popular group destination.

After dipping slightly in 2009, numbers increased again, improving significantly in 2010 and continuing to increase since then - which serves to reassure investors in the region of the area’s strong and growing appeal as a tourist destination.

AN ICONIC HOTEL IN A KEY LOCATIONThe Meliá Cabo Real is an iconic hotel dominating a substantial and unique stretch of beach-front real estate in an unparalleled location and on a significant site extending to 14 acres (5.66 hectares). With exclusive access to the beach extending to 8.15 acres (3.29 hectares) on a section of the Sea of Cortez that is calm due to a natural rock formation.

A POTENTIAL MEETINGS AND EVENTS DESTINATIONThe hotel contains extensive conference and meeting facilities, which provides an excellent opportunity to establish the hotel as a major meeting, conference and event destination, in addition to its role as an outstanding tourist resort.

EXPANSION RIGHTS TO THE BEACH-FRONTThe hotel has (currently unused) expansion rights, covering 8.15 acres (3.29 hectares) of beach front land. An estimated 20% of this beach-front area could be further developed subject to local approvals.

CAPABLE OF BECOMING A STAR LUXURY ATTRACTIONHaving been ranked as one of Mexico’s Top 20 hotels, the Meliá Cabo Real received the coveted AAA 3 Diamonds Award for 2011-2012 and was ranked by Travel and Leisure magazine as being in the top 250 hotels worldwide.

Therefore the name of the hotel, as well as its iconic location and amenities, have considerable intrinsic reputation, value and worth, which can be capitalised on and grown with the appropriate enhancements to the hotel’s infrastructure and functions.

The hotel has not been subject to major capital expenditure in recent years and is in need of complete refurbishment. A full list of capital expenditure is available and US$20-25 million is the estimated figure required to complete the required programme, so that it is capable of maintaining a competitive position against market competition in the area.

The hotel thus offers an outstanding opportunity for major repositioning, so as to become a star attraction within the area’s luxury hotel market. This segment is currently performing significantly better than the middle to lower tier of hotel destinations.


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LOCATION

NEW YORKCHICAGO

LOS ANGELESSAN FRANCISCO

REYKJAVIK

OSLO

LONDONPARIS

BERLIN

MADRID ROME ISTANBUL

CAPE TOWN

JOHANNESBURG

TRIPOLICAIRO

RIYADH

KABUL

MUMBAI

NAIROBIDAR ES SALAAM

DAKAR

MONROVIA

RIO DE JANEIRO

BUENOS AIRES

WELLINGTON

SYDNEY

BRISBANE

TOKYO

LA PAZLIMA

BOGOTAPANAMA

MEXICO CITY

VANCOUVER

CALGARY

ANCHORAGE

HONOLULU

MONTREAL

HELSINKI

MOSCOW

WASHINGTON D.C.

MIAMINEW ORLEANS

Situated at the southernmost end of Mexico’s Baja California Peninsula, the hotel and its surrounding resort area are approximately 900 miles south-east of San Diego, Southern California. There is a local population of around 240,000.

The municipality of Los Cabos encompasses the towns of San Jose del Cabo and Cabo San Lucas, which are connected by a 20-mile, four-lane highway known as the ‘Tourist Corridor’ that stretches along the Sea of Cortez coastline. This is now a prime stretch of real estate attracting the very best amenities and hotels, including the Meliá Cabo Real. By air, Los Cabos is located approximately two hours from US cities such as Dallas, Phoenix and Los Angeles and it is between three and five hours from Denver, Atlanta and New York. Los Cabos has one of the best micro-economies in Mexico and was the location of the 2012 G-20 Summit.

A MAJOR TOURIST DESTINATION The Los Cabos area contains one of the world’s few ‘tropical deserts’- an area of exceptionally low rainfall, which creates a unique landscape of outstanding landscapes, flora and fauna. Annual rainfall is less than 10 inches, there is no rainy season - plus there is virtually all-year-round sun. The additional factors of low humidity and a cool Pacific breeze ensure a delightfully comfortable and attractive 10-month holiday season. Unsurprisingly, the area is experiencing continued and increasing popularity for visitors from all over the world.

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TRANSPENINSULAR HIGHWAY

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La Fortuna

La Laguna

Santa Anita

San Jose Viejo

El ParajeLomas

Del Rosarito San José del Cabo

AEROPUERTOINTERNACIONALDE LAS CABOS

GULF OF MEXICOGULF OF

CALIFORNIA

CARIBBEAN SEA

NORTH ATLANTIC OCEAN

PACIFIC OCEAN

SAN DIEGO

LAS VEGAS

SALT LAKE CITY

MEXICO CITY

GUADALAJARA

MONTERREY

HOUSTON

SAN ANTONIO

NEW ORLEANS

ST. LOUIS

CHICAGO

ATLANTA

NEW YORK

WASHINGTON D.C.

MIAMI

ORLANDO

PHOENIX

HERMOSILLO

CHIHUAHUA

DENVER

ALBUQUERQUE

DALLAS

LOS ANGELES

UNITED STATES

MEXICO

Cuba

Bahamas

Puerto Rico

Winward Islands

Leeward Islands

Dominican RepublicHaiti

Venezuela

Guyana

Suriname

Guatemala

Belize

Honduras

El Salvador Nicaragua

Costa Rica

Panama

Colombia

Brazil


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SPORTS• Golf - Cabo is recognised as one of the world’s

preferred destinations for golf enthusiasts, due to its phenomenal courses designed by some of the sports’ greatest golf course designers. Particularly outstanding courses include the Robert Trent Jones II course adjacent to Meliá Cabo Real, as well as Palmilla, Querencia and El Dorado golf courses.

• Sports fishing - Los Cabos offers an unmatched variety and concentration of marine fish species and is known as ‘the Marlin Capital of the World’.

• Sailing - with its open waters and largely untouched coastline, Los Cabos is a highly popular resort for sailors of yachts and other ocean-going craft.

• Sea-kayaking - given the largely calm waters and abundant diversity of marine wildlife, sea kayaking is popular in the area.

WILDLIFE• Sea turtle season - several species of sea turtles, such

as Olive Ridley and Leatherback, come ashore on local beaches to make nests, where they produce, incubate and hatch their eggs. The baby turtles must then make hazardous journeys from nest to ocean, during which many are taken by predators. Working closely with the local tourist industry, there are several well-run hatchling nursery programmes in Los Cabos, which help to ensure that the baby turtles safely make it to the sea. The sea turtle season stretches from June through to March and April.

• Whale-watching season - each year in early autumn, there is an offshore migration of hundreds of whales from the Arctic to the warm waters surrounding the Baja Peninsula. From December to March, Los Cabos is the finest location the world to observe this natural event. In addition, Los Cabos provides an ideal climate, shallow waters and abundant marine life, with the bays and lagoons north of Los Cabos providing the perfect place for whales to give birth and rear their young. Of the 11 species of whales found worldwide, eight species can be found in the waters off Los Cabos, including Minke, Bryde, Fin, Sei, Humpback, Grey and Blue. The six-month, round-trip sojourn from the Arctic to Mexico and back is the longest trip made by any animal in the world.

LEISURE• Restaurants - Los Cabos boasts a world class selection

of restaurants and nightlife in both Cabo San Lucas and San Jose del Cabo. There is an excellent mix of cuisine ranging from some of the greatest sushi to a true gastronomic Mexican experience. Cabo San Lucas has a mix of fine restaurants, lively bars, live music in a truly dynamic environment.

• Beaches - There are many secluded beaches of the East Cape to explore, located along the eastern shoreline of the Sea of Cortez. This is a vast area with white sand beaches, crystal clear waters, providing excellent diving. Home to some of the world’s best sport fishing, world class windsurfing and kiteboarding. The area also has a living coral reef with mile after mile of exceptionally beautiful and well hidden beaches.

• Shopping - the rich cultural heritage of Los Cabos offers exceptional opportunities for shopping, including a variety of hand-made and artisanal items such as jewellery, clothing, ceramics and traditional Mexican decorations.

• Nightlife - Cabo San Lucas is known worldwide for its amazing nightlife, with a variety of bars, nightclubs and live music on offer.

ACTIVITIES

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BEACH-FRONT LOCATION AND SAFE OCEAN SWIMMING The Meliá Cabo Real is situated on a prime location on a stretch of beach overlooking the Sea of Cortez. The sea directly in front of the hotel is protected by a natural rock formation that ensures calm seas and safe swimming.

A NATURAL CHOICE FOR THE AREA’S MAJOR EVENTS Los Cabos hosts many international conventions and sports events and the hotel’s excellent conference facilities (plus its location close to Cabo Real golf course and marina) ensure that it is a natural accommodation choice for event participants.

BENEFITING FROM A WIDE RANGE OF YEAR-ROUND ACTIVITIES

The unique location and geography, weather and natural environment of the Los Cabos area make it the ideal location for a range of events, activities and attractions that stimulate a year-round tourist season and provide the opportunity for on-going high hotel occupancy throughout virtually all months of the year.

KEY EVENTS• Bisbee’s Black & Blue - one of the world’s major

(and richest) competitive game fishing tournaments.

• Cabo Marine Show - Mexico’s leading International Boat Show, Marine Products and Services Fair.

• Los Cabos Open of Surf - Mexico’s and Latin America’s largest surf and music festival.

• Los Cabos International Film Festival - a major annual collaborative event between Mexican and American film-makers.

• The annual Mercedes-Benz Trophy Golf Tournament - part of a prestigious global golf event sponsored by the famous German luxury car-makers.

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HOTEL DESCRIPTIONPROPERTY OVERVIEWThe hotel occupies a site of over 14 acres (5.66 hectares) and comprises a u-shaped building as the centre of the resort complex.

Within the building is an impressive reception area surmounted by an impressive pyramid structure of considerable height and arresting visual impact.

The hotel is surrounded by 6.3 acres (2.5 Hectares) of well-manicured lawns and gardens, containing shade-giving palms, as well as fascinating displays of tropical desert cacti and other indigenous plants.

The gardens extend from the hotel right down to the beach, encompassing the large lagoon-like swimming pool.


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AMENITIES • Lagoon-style 24,757 sq ft (2,300 sq m) swimming pool

overlooking the ocean, surrounded by lush garden areas

• Ocean-front 10-person jacuzzi

• 2 tennis courts

• Rock-climbing wall

• Gift and souvenir shops

• Fitness and massage centre

• Access to Cabo Real golf course (designed by Robert Trent Jones II, the renowned international golf course architectural firm)

• Sunbeds and sunshades in the gardens, around the pool and on the beach, with Bali Bed rental overlooking the ocean

• Children’s clubs

• Immediate access to private beach, with safe swimming

• Business centre

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RESTAURANTS, CAFÉS AND BARS

RESTAURANT CAPACITY SQ FT SQ M

La Palapa 190 12,593.77 1,170.0

El Agavero 120 5,686.68 528.3

Kujira 84 1,885.84 175.2

La Terraza 110 3,659.73 340.0

SNACK BAR CAPACITY SQ FT SQ M

El Mirador 60 489.76 45.5

BARS SQ FT SQ M

Lobby bar − 4.332.26 402.5

Pool bar − 1,076.39 100.0

Beach bar − 232.96 22.2

FOOD AND BEVERAGEThe food and beverage outlets at the Meliá Cabo Real are summarised opposite:

LA PALAPAInternational and Mexican cuisine restaurant providing approximately 190 covers. The restaurant is situated with wonderful ocean views.

EL AGAVEROLarger restaurant offering breakfast, lunch and dinner and providing a mixed cuisine of both Mexican and international flavours. The restaurant has approximately 143 covers and often is used for events, parties and themed nights.

KUJIRAAsian fusion restaurant providing 84 covers. The restaurant offers various Asian cuisines including Tepanyaki and Sushi. This restaurant is only open for dinner.

LA TERRAZAA la carte restaurant based on Mediterranean and international cuisine and provides approximately 120 covers. The restaurant is situated outside the main building and fronting the gardens, under a pergola.

EL MIRADOR SNACK BARBuffet with hamburgers, hot dogs, pizzas, nachos, salads and chips. Next to the hotel pool with fantastic views of the sea, ideal for informal meals as you enjoy a day by the pool or on the beach.

LOBBY BARGreat choice of drinks, cocktails, long drinks, gin and tonics, located in the main building, opposite reception.

POOL BAR 1/POOL BAR 2Located in the pool area with a great choice of Mexican and international drinks, cocktails and long drinks.

BEACH BARLocated on the hotel beach serving drinks and opening when hotel is 80% full.

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GUEST ACCOMMODATIONThere are 349 rooms, comprising 307 hotel rooms and 42 time-share units. Of the hotel rooms, 31 offer exceptionally luxurious accommodation, as follows:

M experience - ocean front view: 436 sq ft (40.5 sq m)

• 16 rooms

• Full ocean view

• Upgraded amenities

Junior Suite - M Experience: 560 sq ft (52 sq m)

• 8 suites

• King-size beds

• Full ocean view


Master Suite - M Experience: 1,256 sq ft (116.65 sq m)

• 7 suites

• King-size beds


• Private jacuzzi

• Living room

• Exclusive use of ‘Bali Beds’ (outdoor four-posters for sunbathing and relaxation)

• VIP service

SERVICES • Concierge service

• Golf desk

• Car rental

• Bilingual babysitters

• 24-hour medical attention available

• Laundry

• Taxi service

• Parking

• Wi-Fi

• Full activity and entertainment programmes; parties, shows and live music

ROOM TYPE NO. OF ROOMS AREA SQ FT SQ M

Standard Rooms 319 Bedroom 247.57 23.0

Terrace 64.58 6.0

Bathroom 71.04 6.6

Standard room with Kitchenette 15

Junior Suite 8 Bedroom 279.86 26.0

Terrace 64.58 6.0

Bathroom 100.75 9.4

Master Suites 7 Living Room 545.73 50.7

Bedroom 242.19 22.5

Terrace 180.62 16.8

Bathroom 129.49 12.0

TOTAL 349

Timeshares 42


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CONFERENCE AND BANQUETINGThere are 7 function rooms ranging from 516.67 sq ft (48 sq m) to a 11,022.24 sq ft (1,024 sq m) ballroom - Gran Cabo Real. Given the other wide-ranging amenities of the hotel, this portfolio of rooms allows for the efficient and effective staging of:

• Conferences

• Exhibitions

• Product launches

• Club and society meetings

• Public events

• Private parties

• Weddings

• Special celebrations

ROOM CAPACITY COCKTAIL CAPACITY THEATRE STYLE CAPACITY BANQUET SQ FT SQ M

Gran Cabo Real 1,000 1,140 800 11,022.24 1,024.0

Foyer Area 550 − 400 7,319.46 680.0

Ixtapa 80 90 60 850.35 79.0

Cancun 100 100 80 1,162.50 108.0

Vallarta 150 200 120 3,498.27 325.0

Director's (10 person boardroom) 516.67 48.0

Ambassador's (10 person boardroom) 516.67 48.0

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TENURE & LAND DETAILSTRANSPENINSULAR HIGHWAY

SAN JOSÉ DEL CABOMAIN ENTRANCE

CABO SAN LUCAS

PARKING

PARKING

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CONVENTIONCENTRE

BU

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THEATRE QUETZAL BARLOBBY

RECEPTION KUJIRA

La TerrazaRestaurant

Pool

CentralGarden MINI

CLUB

La PalapaRestaurant

Bar Palapa

SnackEl Mirador

PoolBar

Activities Club

Towels

Jacuzzi

Beach Bar

Beach

Turtle protection area

Turtle protection area

SEA OF CORTEZ

James Andrew International are advised that the hotel and gardens are owned as effective freehold.

The approximate land area is shown on the adjacent site plan outlined in red.

The beach area outlined in red dots is the subject of an agreement giving exclusive possession to the hotel owners from the Secretaria de Medio Ambiente y Recursos Naturales.

The full title documents are available on request via the website access details on request.

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TIMESHAREThe current ownership has sold 888 weeks in 30 year timeshare agreements. Please see the attached table.

These timeshares are subject to an annual maintenance charge. The timeshare properties are either studio, one bedroom or two bedroom apartments located in building 4. We believe the timeshare apartments could be relocated to another part of the property to enable creation of a spa and treatment rooms in building 4.

TENURE & LAND DETAILSSTUDIO 1 BED 2 BED

Active Contracts 888 270 367 251

Current Contracts 540 149 226 165

Delinquent Contracts 348 121 141 86

Maint. Fee ($) 2014 527 702 847

UNIT TYPE

CONTRACTED WEEKS STARTING YEAR STUDIO 1 BED 2 BED TOTAL TOTAL WEEKS LAST YEAR OF USE

30 1993 4 1 5 10 300 2,023

30 1994 22 23 17 62 1,860 2,024

30 1995 22 42 24 88 2,640 2,025

30 1996 39 70 75 184 5,520 2,026

60 1996 0 2 2 120 2,026

30 1997 61 97 79 237 7,110 2,027

60 1997 0 10 10 600 2,027

90 1997 0 2 0 2 180 2,027

15 1998 13 0 1 14 210 2,028

30 1998 75 86 43 204 6,120 2,028

60 1998 2 1 1 4 240 2,028

15 1999 4 0 2 6 90 2,029

30 1999 25 32 1 58 1,740 2,029

60 1999 3 3 6 360 2,029

15 2000 1 0 1 15 2,015

TOTAL 270 367 251 888 31,470

DELINQUENT BY YEAR STUDIO 1 BED 2 BED TOTAL TOTAL

1 53 61 43 157 103,991.45

2 14 12 8 34 45,655.75

3 15 20 8 43 88,722.29

4 14 17 7 38 100,164.02

6 14 20 12 46 182,620.31

8 4 4 4 12 62,693.58

9 3 5 3 11 62,104.00

10 4 2 1 7 39,074.00

TOTAL 685,025.40

Contracts with more than 2 years overdue maintenance fees are susceptible to cancellationCurrency: US Dollars

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MARKET HIGHLIGHTS

•Superb opportunity to acquire a substantial beach front hotel located in a prime position in the heart of Los Cabos.

•The Meliá Cabo Real occupies an impressive site area of approximately 14 acres (5.66 hectares).

•Comprising 349 guest rooms and amenities including 5 restaurants, 3 bars, 7 conference and banqueting rooms, the property was built in 1998 and has undergone US$12 million of capital expenditure since that time. The hotel is in need of complete refurbishment.

•The immediate vicinity provides some of the finest hotels situated in Los Cabos as well as being close to many of the new luxury hotels being developed. The hotel is within a 15 to 20 minute drive of the main tourist towns of Cabo San Lucas and San Jose del Cabo.

•The Los Cabos hotel market has grown exponentially with significant advancement in the luxury sector, boasting average room rates and occupancy levels amongst the highest in Mexico.

•The hotel is offered with vacant possession and therefore provides a unique opportunity to reposition the hotel to provide luxury beach front operation.

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DEMOGRAPHIC OVERVIEWThanks to its superbly desirable beach location, Los Cabos (population 240,000) is one of the most important, most popular and fastest-growing tourist destinations in the whole of Mexico. Annual growth of visits to Los Cabos measure 13.01%; this is well above Cancun, which reports only 6% by comparison. Los Cabos also enjoys similar popularity over and above other comparable locations in Mexico.

ECONOMIC OVERVIEWGiven these statistics and the resort’s clearly growing popularity, the Mexican government appreciates the need for expansion of the local infrastructure and there has been considerable national and foreign investment in the resort over the past three years. For example, the new Terminal 2 at San Jose del Cabo International Airport has received financial support from the Grupo Aeroportuario del Pacífico, with an investment of US$80 million.

LOS CABOS VISITATION STATISTICS TOURIST ARRIVALS (2005 - YTD 2013)

YEAR DOMESTIC % CHANGE INTERNATIONAL % CHANGE TOTAL % CHANGE

2006 237,748 − 834,981 − 1,072,729 −

2007 240,667 1.2% 854,710 2.4% 1,095,377 2.1%

2008 270,646 12.5% 1,020,013 19.3% 1,290,659 17.8%

2009 263,430 -2.7% 937,930 -8.0% 1,201,360 -6.9%

2010 317,314 20.5% 803,669 -14.3% 1,120,983 -6.7%

2011 336,362 6.0% 900,921 12.1% 1,237,283 10.4%

2012 350,286 4.1% 917,739 1.9% 1,268,025 2.5%

YTD 2012 (1) 269,876 − 674,368 − 944,244 −

YTD 2013 (1) 262,382 -2.8% 804,672 19.3% 1,067,054 13.0%

(1) YTD figures through September 2013 Tourist arrivals represent the number of tourists registered by lodging establishments in the destination Source: Los Cabos Hotel Association and SECTURCurrency: US Dollars

TRAVEL AND TOURISM OVERVIEWSan Jose del Cabo International Airport is the country’s sixth busiest airport and can accommodate both large and long-haul aircraft. The airport now has two terminals, is served by 22 airlines - and has seen a year-on-year increase of 14.5% in passenger numbers, with a total increase in international visitors of 19% from same period last year.

There are a reported 1,600 rooms being added to the Los Cabos lodging market, creating an estimated 12.5% addition to the existing hotel sector. These additions include the 124-room Ritz-Carlton Reserve, which will be located within the 2,000-acre resort of Puerto Los Cabos.

This resort also includes a planned JW Marriott hotel, as well as the newly-opened 500-room Secrets Puerto Los Cabos (with a reported investment of US$130 million), plus a 200-room Arroyo Grande Resort & Spa with an estimated investment of approximately US$160 million.

The 157-room Hyatt Palace, in San Jose del Cabo, has plans for the development of a 196-room Park Hyatt, including 36 branded residences to be located within a master-planned golf resort community. In the limited-service segment, Grupo Hotelero is to be a 90-room Holiday Inn Express in Cabo San Lucas.

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COMPETITIONThe Meliá Cabo Real Hotel has a number of competitor hotels in the immediate area, such as:

• The Barcelo/Hyatt Zeva

• Dreams

• Hola Grand Faro/Barcelo

• Royal Solaris

• Holiday Inn

Despite this competition, the Meliá Cabo Real Hotel is in a strategically strong location on the Tourist Corridor and its position directly overlooking the ocean also works strongly in its favour.

Other factors, such as safe sea bathing and the proximity of local amenities, give it a major competitive advantage - as does its nearness to the international airport.

Above all, the Meliá Cabo Real name carries with it an excellent reputation as a world-class hotel, as evidenced by the fact that, in the recent past, it was ranked as one of Mexico’s Top 20 hotels and has received an AAA 3 Diamond Award for 2011-2012.

In addition, the Meliá Cabo Real Hotel was ranked by Travel and Leisure magazine as being in the top 250 hotels worldwide - and with judicious investment, plus strong, visionary management, it could quickly retain and exceed this invaluable market positioning.

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La Fortuna

La Laguna

Santa Anita

San Jose Viejo

El Paraje LomasDel Rosarito

San José del Cabo

Cabo San LucasCountry Club

VILLA ESTERO

THE GRAND MAYAN LOS CABOS

MarinaGolf Club

PalmillaGolf Club

QuerenciaGolf Club

El Dorado Golf& Beach Club

Cabo Real Golf Club

PuertoLos Cabos

GolfCourse

PUEBLO BONITO SUNSET BEACH

ONE & ONLY PALMILLA

PLAYA GRANDE RESORT & GRAND SPA

VILLA DEL ARCO BEACH RESORT AND GRAND SPA

HACIENDA ENCANTADA RESORT & SPA - PREMUIM ALL INCL

HOTEL RIU PALACE CABO SAN LUCAS

SHERATON HACIENDA DEL MAR

LAS VENTANAS AL PARAISO HILTON LOS CABOS BEACH & GOLF RESORTSECRETS MARQUIS LOS CABOS

BEL AIR COLLECTION RESORT & SPA CABOS

EL GANZO

FIESTA AMERICANA GRAND LOS CABOS GOLF & SPA

ESPERANZA AN AUBERGE RESORT

DREAMS LOS CABOS SUITES GOLF RESORT AND SPA

CABO AZUL RESORT AND SPAHYATT ZIVA LOS CABOS

THE WESTIN RESORT AND SPA LOS CABOS

HOTEL CASA NATALIA

INTERCONTINENTAL PRESIDENTE LOS CABOS RESORT

CAPELLA PEDREGAL RESIDENCES

AEROPUERTOINTERNACIONALDE LAS CABOS


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NEW HOTELS PLANNED (2013-2015)

HOTEL NAME PARENT COMPANY DEVELOPMENT STAGE ROOMS (ANTICIPATED) OPENING DATE

Secrets Puerto Los Cabos AM Resorts Under Construction 500 Open 2013

El Ganzo N/A Under Construction 70 Open 2013

Holiday Inn Express Cabo San Lucas Intercontinental Hotels Group Under Construction 90 Q1 2014

Hampton Inn & Suites Los Cabos Hilton Hotels & Resorts Under Construction 101 May 2014

The Arroyo Grande Resort & Spa Independent Final Planning 200 Jun 2014

Delano Cabo San Lucas Morgans Hotel Group Planning 114 Dec 2014

JW Marriott Los Cabos Marriott International Planning 300 May 2015

Ritz Carlton Reserve Los Cabos Marriott International Planning 124 Jun 2015

Park Hyatt Los Cabos Hyatt Hotels & Resorts Planning 196 Dec 2015

Source: Smith Travel Research and A & M

LOS CABOS LODGING MARKETSUPPLY AND DEMAND TRENDS (2006 - YTD 2013)

YEAR AVAILABLE ROOM NIGHTS

% CHANGE OCCUPIED ROOM NIGHTS

% CHANGE OCCUPANCY % % CHANGE ADR % CHANGE REVPAR % CHANGE

2006 2,913,532 − 1,991,934 − 68.4% − 201 − 137 −

2007 3,058,122 5.0% 1,995,191 0.2% 65.2% -4.6% 200 -0.5% 130 -5.0%

2008 3,525,399 15.3% 2,001,692 0.3% 56.8% -13.0% 199 -0.5% 113 -13.4%

2009 3,878,524 10.0% 2,027,724 1.3% 52.3% -7.9% 160 -19.6% 84 -26.0%

2010 4,273,394 10.2% 2,425,391 19.6% 56.8% 8.6% 161 0.6% 91 9.2%

2011 4,308,417 0.8% 2,541,332 4.8% 59.0% 3.9% 172 6.8% 101 11.0%

2012 4,410,352 2.4% 2,733,891 7.6% 62.0% 5.1% 175 1.7% 108 6.9%

YTD 2012 (1) 3,299,835 − 2,051,622 − 62.2% − 175 − 109 −

YTD 2013 (1) 3,361,047 1.9% 2,229,621 8.7% 66.3% 6.7% 212 21.1% 141 29.3%

(1) YTD figures through September 2013Source: Los Cabos Hotel Association and SECTURCurrency: US Dollars


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CAPITAL EXPENDITUREIn recent years, the hotel has required major capital expenditure in order to bring it up to standards that will return it to the status of a major international hotel.

The hotel is in need of complete refurbishment and requires work on buildings and the surrounding landscape. In addition, its services, décor, furnishings and amenities need updating and refreshing in order to position it as a clear leader in an area of considerable competition amongst hotels.

It is estimated that around US$20-25 million is required to complete the required programme, so that the hotel is capable of returning to the market as a luxury offering.

This would include the re-positioning of retail and restaurant/bar areas, as well as the creation of a new spa and corresponding facilities.

PERIOD LAND BUILDINGS FURNITURE COMPUTER EQUIPMENT TRANSPORT EQUIPMENT TOTAL

1987 A 2003 3,728,018.88 94,645,770.83 17,091,534.16 498,819.14 327,782.83 116,291,925.84

Exercise 2004 66,829.77 676,604.73 19,285.56 762,720.06

Exercise 2005 359,325.43 1,481,158.03 405,548.21 163,636.36 2,409,668.03

Exercise 2006 4,963,609.00 9,548,944.02 103,507.00 14,616,060.02

Exercise 2007 1,331,711.54 1,040,945.80 0.00 2,372,657.34

Exercise 2008 607,065.01 256,152.83 222,884.91 0.00 1,086,102.75

Exercise 2009 1,540,597.94 60,008.35 451,304.34 2,051,910.63

Exercise 2010 526,076.31 437,578.54 963,654.85

Exercise 2011 0.00

Exercise 2012 462,934.67 796,641.77 1,259,576.44

Year 2012 active low -154,454.55 -154,454.55

Exercise 2013 5,299,563.89 243,240.00 5,542,803.89

Year 2013 active low -225,652.17 -225,652.17

Exercise 2014 212,160.07 212,160.07

TOTAL 3,728,018.88 101,105,534.71 38,761,145.29 2,788,577.51 805,856.81 147,189,133.20

SUMMARY OF FIXED ASSET ACQUISITIONS (WITH BALANCES AT 30 APRIL 2014)

Currency: Mexican Peso

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OPERATING ARRANGEMENTS

BASIS OF SALE

The hotel is currently operated under management by the Meliá Group. The operation is subject to a fixed structure fee.

Whilst currently operated under management by Meliá Group, subject to a fixed structure fee, this arrangement can be terminated upon completion of sale, offering significant operating flexibility for potential purchasers.


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HOTEL PERFORMANCEThe average daily room rate for luxury hotels in Los Cabos is around US$720 and certain luxury destinations in the area can be expected to average over 70% occupancy rates.

The Meliá Cabo Real Hotel has been significantly under-performing in recent years due to the need for major capital expenditure on buildings and infrastructure, furnishings, décor and amenities.

Although turnover has risen to US$14.542 million, earnings before interest, taxes, depreciation and amortisation remain poor. This is principally because the market in this area demands and expects exceptional standards of luxury and service, which the Meliá Cabo Real Hotel currently cannot meet until refurbishment has taken place.

It is estimated that US$20-25 million is required to bring the hotel to the required luxury standards that the market demands. Such re-investment (including the creation of a new spa) would greatly enhance the profile of the hotel and would also ensure considerable improvement of achieved net operating income.

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FORECAST ASSUMPTIONS AN OUTSTANDING REPOSITIONING OPPORTUNITYThorough renovation of the property will enhance the quality, ambience and attractiveness of the building to bring it up to a universally high standard. In addition, the re-positioning of retail and restaurant/bar areas, as well as the creation of a new spa and corresponding facilities, will provide additional opportunities to increase the revenue and profit potential of the hotel. Moreover, there is considerable flexibility with regard to the hotel’s operating arrangements, giving investors the opportunity to work alongside their preferred choice of operating partners.

CORPORATE, ENTERTAINMENT AND EVENT DEMANDThe hotel has an impressively wide range of conference rooms and facilities, giving it the potential to become a significant corporate, entertainment and event venue. The Los Cabos area is an important destination for a range of sporting and other activities and given its proximity to the USA, plus ease of access via the local international airport, the hotel could generate a major reputation as the area’s leading event destination.

SEGMENTATION SHIFTSHotel renovation would re-balance its demand profile, increasing its Meetings, Incentives, Conferences and Exhibitions (MICE) capabilities and leisure demand, while reducing to more manageable levels its discounted group tours and leisure requirements. The shift in the hotel’s market mix and subsequent re-positioning would also result in higher spend per room on food, beverages and other services.

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PROPOSAL

NICHOLAS MARKST +44 (0)20 7317 1582M +44 (0)7850 258 338E [email protected]

JEREMY GREYT +44 (0)20 3141 6603M +44 (0)7973 327 753E [email protected]

Misrepresentation Act 1967 and NoticeJames Andrew International Limited, for themselves and for the landlords of this property who’s Agents they are, give notice that: (i) These particulars do not constitute, nor constitute any part of, an offer or a contract; (ii) All statements contained in these particulars as to this property are made without responsibility on the part of James Andrew International or persons in it’s employment, nor the Landlord; (iii) None of the statements contained in these particulars as to this property are to be relied upon as statements or representations of fact; (iv) Any intending purchaser must satisfy themselves by inspection or otherwise as to the correctness of each of the statements contained in these particulars; (v) The Landlord does not make or give and neither James Andrew International, nor any person in their employment, has any authority to make or give any representation or warranty whatsoever in relation to this property. August 2014. Designed and produced by Cooper Rose 020 3440 5160.

JAMES ANDREW INTERNATIONAL72-75 Marylebone High StreetLondon W1U 5JWwww.jamesandrew.co.uk

James Andrew International are instructed to seek offers subject to contract for our clients interest in the Hotel and beach front.

Our clients are investigating whether there is any benefit in selling the shares in the Panamanian Holding company or the Mexican subsidiary.

CONTACT INFORMATIONAll enquires and requests for further information must be addressed solely to the exclusive advisors, James Andrew International in London.

Inspections of the Meliá Cabo Real Hotel shall be strictly by appointment only, to be arranged in advance through James Andrew International.


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UNIQUE HOTEL OPPORTUNITY IN SPECTACULAR … HOTEL OPPORTUNITY IN SPECTACULAR BEACH FRONT ... creation of a new spa, ... and concentration of marine fish species and is known