Solis

Resort-Spa-Residences

Consulted byHasan Numan Kevin Machiz AbdulAziz Al Jasem

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Table of Contents

Project Description....p.3 Goalp.3 Objectives...p.3 Location..p.4 Detailed Features.....p.8 SOLIS RESIDENCE FEATURES..p.8 SOLIS BUILDING FEATURES:...p.8 SOLIS SERVICES & AMENITIES AVAILABLE:..p.9 Floor plans.p.10 Comparables...p.11 Economy.p.12 US Economy Overview..p.12 Miami Economy Overview.p.13 Statistical Highlights: Miami Economy Vs US Economy..p.14 Market Analysis (Miami)....p.17 Employment p.17 Construction ..p.18

Occupancy Rates:...p.19 Sales of Condos Luxury Condo Prices: Financial Analysisp.20-23 Proposed Capital Structure: Capitalization Rate Operating Statement for 2013 Hasan.Numan Page 2 of 14

Depreciation Schedule Cash Flow from Hotel Ordinary Taxable Income Schedule Equity Reversion Taxes Due on Sale Financial Profitability .p.23-25 NPV and IRR Rules of Thumb Works Cited.p.26

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Project Description

Solis project was started in 2005. This is a 52-story mixed-use project named the Solis Resort Spa and Residences that contains residential condominiums and luxury hotel rooms. The Solis will contain 297,663 heated square feet and 699,288 gross square feet upon completion. The project will include 134 for sale condominium units on the upper 28 floors and 140 luxury hotel rooms on floors 15 through 24. The development will also include a nine story parking garage located above the first two floors. In addition to the proposed residential units and hotel rooms, Solis" common elements will include a lobby with concierge service, spa, fitness center, ballroom/meeting space, restaurant, heated infinity edge swimming pool (Floors 12-14), beach access and pool bar. The site area consists of 1.31 +/- acres (57,263 square feet) and includes 151 +/- feet of frontage along the Atlantic Ocean.

Parking on the first floor was very hard to get to the entrance from the door in most other buildings. The elevation on the First Floor is 8 feet above sea level while most other high quality buildings had as much as 28 feet above sea-level. The development will include a nine story parking garage located above the first two floors. The other buildings made it impractical for tenants and guest to walk to their cars but needed to drive another car to pick up their cars. See http://www.forkoshdevelopmentgroup.com/about/ for our project site. Goal

We will be seeking very risk tolerant investors for a volatile investment in a poor economic environment.

Objectives
We are the representatives of Forkosh Development Group are seeking investors to join in on a mixed-use real estate investment project, Solis Resort, Spa, & Residences, a 5-Star luxury hotel and condominium located on the coast of Sunny Isles, Florida which is already in the process of development. We entitle the investors to 75% ownership of the completed project and a preferred dividend rate of 10% for two years, while Forkosh Development Group retains the remaining 25% of ownership. The owners will dispose of the whole property by selling all of the condos over a period of two years and then selling the hotel after a total of five years. The investor will have a required rate of return of 18.03%. This rate of return was determined by adding a risk premium of 15% to the 10 year Treasury Note rate of 3.03%.

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Location

Arial view of Sunny Isles Beach, Solis project inside the circle

At completion the Resort will sit on 1.31 acres rising high above the white sands of Sunny Isles Beach. The site is 150 feet wide by 285 feet deep for a total of 42,750 SF. In addition, there is a 150 foot wide by 20 foot deep setback separating the property line from the public beach enhancement area. The public beach enhancement area located along the oceanfront (or eastern) side of the parcel measures 150 feet wide by 75 feet deep or 11,250 SF.

Solis on Florida map Solis Resort, Spa & Residences is surrounded by the best that South Florida has to offer. The world-renowned Bal Harbour Shops, with its boutiques and designer stores such as Prada and Gucci, are just minutes away. A short drive south brings all of the electricity of South Beach and Miami, while a short drive north brings home the best of Fort Lauderdale, and incomparable activities such as yachting and golfing can easily be found just steps outside the Resort. The subject site presents a very rare hotel development opportunity in a market that has shown great acceptance by lUxury resort travelers.

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The Resort is being positioned to operate as a luxury hotel and will sell second-home products to the leisure market by leveraging: 1) Sunny Isles Beach as a popular resort destination in North America; 2) The uniqueness and exclusiveness of the site with its invigorating panoramic water views overlooking the Atlantic Ocean to the east and dramatic Intracoastal Waterway views to the west; 3) The existing structure and development entitlements; 4) Its close proximity to both downtown Miami and Fort Lauderdale with easy access to business centers, entertainment, sports and recreation facilities and tourist attractions; 5) Its location within a 20-30 minute drive of either the Miami International Airport or Fort Lauderdale/Hollywood International Airports, and its excellent commercial airlift capacity with direct service from almost all of the major cities throughout the Americas and Europe, including to name a few: Atlanta, New York, San Francisco, Chicago, Los Angeles, Philadelphia, Houston, Detroit, Seattle, Minneapolis, Phoenix, Baltimore, Toronto, Vancouver, Mexico City, Madrid, Paris, London, Amsterdam, Barcelona, etc.; 6) The commitment of the seasoned Mansiana Ocean Residence executives and sponsors to make the Resort a successful development; 7) The unique hospitality management skills of the West Paces Hotel Group and the branding of the hotel and residences with their newly-launched "Solis" brand, a luxury boutique hotel collection being created by the founder of WPHG, Horst Schulze, the former President & COO of Ritz Carlton Hotel Company; 8) The utilization of the mixed-use, high-end resort development business model of combining the complementary financial and operational benefits of luxury hotel and serviced first / second-home residential products; and 9) The acceptance of the location by the luxury residential market as underscored by the established neighboring residential communities of Bal Harbour Park.

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SOLIS RESIDENCE FEATURES: - Oversized private balconies with glass railings featuring unparalleled views of the beach, the Atlantic Ocean, Haulover Park, and the Intracoastal Waterway from sunrise to sunset - Custom Italian kitchen cabinetry with stainless steel door handles and drawer pulls - Imported stone countertops - Stainless-steel Miele and Sub Zero appliances - Pedini kitchens - Premium Italian custom bathroom cabinetry and imported marble vanity tops - Imported marble floring in bathrooms and kitchens - Wall-to-wall vanity mirrors in all bathrooms - Top-of-the-line, full-size washer and dryer - Kohler ultra-deep overflowing bathtub in master bathroom - Floor-to-ceiling glass doors to balconies - Smart building with high-speed Internet, data/voice and cable TV access - Spacious walk-in closets - Energy-efficient, tinted, impact-resistant sliding glass doors and windows - Elegantly detailed designer fixtures and Grohe faucets

SOLIS BUILDING FEATURES: - Over 150 feet of spectacular, private oceanfront property - Infinity-Edge heated pool with private cabanas and lushly designed pool deck overlooking the ocean - Oceanfront gardens lined with fountains, palm trees and benches - Elegant porte-cochere entrance - 24-hour, covered valet parking and bellman service - 24-hour door attendant and Welcome Ambassador - Full-time maintenance staff for fully manicured landscapes and interior - High-speed elevators with electronic card access for every resident - Incredible Intracoastal, ocean and beach views - Magnificent lobby and common areas - Beach Cabanas and resort-style environment with private beach club - State-of-the-art 24-hour security service with monitored cameras - Magnificent two-story lobby - Two-story, modern, high-tech fittness salon and spa overlooking the Atlantic Ocean - Premium boutique retail environment - Modern social room

SOLIS CONDOS RESORT, SPA & RESIDENCES SERVICES & AMENITIES AVAILABLE: - Signature restaurant, indoor/outdoor bar featuring panoramic ocean views

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- Poolside dining and waiter service - Water sports - State-of-the-art business center and conference rooms - Modern, high-technology fitness center and spa - Concierge services - Housekeeping - In-room service

Floor plans Model Type Floor Levels Living s.f. Balcony s.f. Total s.f Approx. Starting Prices From $2.1M From $2.1M

Beds

Baths

View

01A

51

Direct Ocean Direct Ocean

2,115

799

2,914

01B

51

2,115

812

2,927

02A

2.5

51

Ocean, Bay 1,345 and Park Ocean, Bay 1,345 and Park Ocean, Bay 1,328 and Park Ocean, Bay 1,328 and Park

355

1,700

From $1.4M

02B

2.5

51

420

1,765

From $1.4M

03A

2.5

51

355

1,683

From $1.4M

03B

2.5

51

450

1,778

From $1.4M

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04A

51

Ocean, Bay 1,210 and Park Ocean, Bay 1,210 and Park Ocean, Bay 1,400 and Park Ocean, Bay 1,400 and Park

334

1,544

From $1.2M

04B

51

356

1,566

From $1.2M

05A

2+ den

51

745

2,145

From $1.4M

05B

2+ den

51

814

2,214

From $1.4M

Economy Miami Economy Overview Miamis economy is composed of four main strengths: tourism, strong relationships with Latin America, extensive international trade activities, and a well developed shipping and distribution infrastructure. Its economy is well diversified in which over 170 multinational corporations are headquartered in the city. Miamis strong relations with Latin America pushed its city to become a top international banking and investment center. Today its considered as the home of international trade sectors of many US financial institutions. The citys various financial institutions have successfully locked in important business related to economic development and privatization investment projects in Latin America. An interesting highlight on Miamis economy is agriculture. The Miami area is a prominent leader as the number one supplier in vegetables during winter season earning an average of US$81 million annually. In relation to the US economy, the Feds actions to stimulate the economy may have a great impact on Miamis economy because now more foreign investors (in this case Latin America) due to the devaluing US dollar. Currently, over 50% of the citys residential luxurious real estate is owned by Latin American foreign investors. Overall, the Miami

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economy will continue to strengthen through its diversified services in multiple industries both domestically and internationally.

Statistical Highlights: Miami Economy Vs US Economy

Market Analysis (Miami) Sales of Condos: Miami condo sales were surging at increasing rates of 43% in February 2010 and 35% in March 2010. The number of vacant condos has decrease by 2,600 units improving since May 2009, where unsold inventory has dropped 1,000 units since December 2009. Due to these positive continuing attributes, 68% of the 22,079 condos completed since 2003 were sold.

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Financial Analysis Proposed Capital Structure: In exchange for a $90,000,000 investment, investors will receive a 10% preferred dividend rate and a 75% equity stake in the hotel with the remaining 25% left to the developer. Investors will receive $9,000,000 per year until the sale of the hotel is completed and be entitled to 75% of all income and divestiture proceeds. The Hotel is estimated to have a market value of $65,000,000 today. There will be no debt in this project. The developer previously took out multiple mortgages and defaulted so lending terms will be highly unfavorable.

Operating Statement for 2013

Potential Gross Income of the hotel was estimated at 140 rooms, $417/room/night, and 365 days/year. Vacancy rate was estimated at 26% by the developer. Miscellaneous gross income from telephone, food & beverage, spa, and other departments was estimated at $5.63 million by the developer. Property tax, insurance, wages, utilities, management fees, and operations expenses were estimated by the developer. Replacement reserve expense was estimated by us to be 7% of gross income, which is typical for a large building of this type.

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Cash Flow from Hotel

Room rates are estimated by the developers to grow at 3% per year. We estimate that operating expenses will grow at 4% per year in order to be conservative.

Equity Reversion

We expect the hotel to appreciate by 10% over 5 years, or just under 2% per year, just enough to keep up with inflation. We assume a 6% selling expense, which is typical.

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Taxes Due on Sale

We do not assume any capital improvements in the first 3 years of the hotels life. We use a capital gains tax of 15% and a depreciation tax of 25%.

Financial Profitability Decision: Invest in this project because NPV>0 with IRR is 18.34%. NPV and IRR

Using our cap rate of 18.03% we obtain a net present value of $853,813.13 and an internal rate of return of 18.34%, therefore we decided to accept the project.

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Works Cited: PDF file on Miami-Dade http://www.eturbonews.com/14537/us-hotel-occupancy-rate-dives-537-february http://www.calculatedriskblog.com/2010/03/hotel-occupancy-increases-comparedto_25.html http://nreionline.com/news/areas/real_estate_miami_condo_construction/ http://www.miamiherald.com/2010/11/19/1933806/floridas-jobless-rate-remains.html http://www.facebook.com/note.php?note_id=122556591095395 http://www.miamilodgerealty.com/2010-miami-real-estate-statistics.html https://www.cia.gov/library/publications/the-world-factbook/geos/us.html http://www.tradingeconomics.com/economics/gdp-growth.aspx?Symbol=USD http://www.bestplaces.net/city/Miami-Florida.aspx# http://www.forkoshdevelopmentgroup.com/about/

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