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Hearing Date and Time: September 20, 2011, at 10:00 a.m.

(prevailing Eastern Time) Objection Deadline: September 13, 2011, at 4:00 p.m. (prevailing Eastern Time)

James H.M. Sprayregen, P.C. Paul M. Basta Edward O. Sassower Chad J. Husnick KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 Counsel to the Debtors and Debtors in Possession

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: MSR RESORT GOLF COURSE LLC, et al.,1 Debtors. ) ) ) ) ) ) ) Chapter 11 Case No. 11-10372 (SHL) Jointly Administered

NOTICE OF MOTION OF MSR RESORT GOLF COURSE LLC, ET AL., FOR ENTRY OF AN ORDER FURTHER EXTENDING THE EXCLUSIVE PERIODS DURING WHICH ONLY THE DEBTORS MAY FILE A CHAPTER 11 PLAN AND SOLICIT ACCEPTANCES THEREOF

The debtors in these chapter 11 cases, along with the last four digits of each debtors federal tax identification number include: MSR Resort Golf Course LLC (7388); MSR Biltmore Resort, LP (5736); MSR Claremont Resort, LP (5787); MSR Desert Resort, LP (5850); MSR Grand Wailea Resort, LP (5708); MSR Resort Ancillary Tenant, LLC (9698); MSR Resort Biltmore Real Estate, Inc. (8464); MSR Resort Desert Real Estate, Inc. (9265); MSR Resort Hotel, LP (5558); MSR Resort Intermediate Mezz GP, LLC (3864); MSR Resort Intermediate Mezz LLC (7342); MSR Resort Intermediate Mezz, LP (3865); MSR Resort Intermediate MREP, LLC (9703); MSR Resort Lodging Tenant, LLC (9699); MSR Resort REP, LLC (9708); MSR Resort Senior Mezz GP, LLC (9969); MSR Resort Senior Mezz LLC (7348); MSR Resort Senior Mezz, LP (9971); MSR Resort Senior MREP, LLC (9707); MSR Resort Silver Properties, LP (5674); MSR Resort SPE GP II LLC (5611); MSR Resort SPE GP LLC (7349); MSR Resort Sub Intermediate Mezz GP, LLC (1186); MSR Resort Sub Intermediate Mezz LLC (7341); MSR Resort Sub Intermediate Mezz, LP (1187); MSR Resort Sub Intermediate MREP, LLC (9701); MSR Resort Sub Senior Mezz GP, LLC (9966); MSR Resort Sub Senior Mezz LLC (7347); MSR Resort Sub Senior Mezz, LP (9968); and MSR Resort Sub Senior MREP, LLC (9705). The location of the debtors service address is: c/o CNL-AB LLC, 1251 Avenue of the Americas, New York, New York 10020.

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PLEASE TAKE NOTICE that a hearing on the Motion of MSR Resort Golf Course LLC, et al., for Entry of an Order Further Extending the Exclusive Periods During Which Only the Debtors May File a Chapter 11 Plan and Solicit Acceptances Thereof (the Motion) will be held before the Honorable Sean H. Lane, United States Bankruptcy Judge, United States Bankruptcy Court for the Southern District of New York (the Court), One Bowling Green, Courtroom No. 701, New York, New York 10004-1408, on September 20, 2011, at 10:00 a.m., prevailing Eastern Time. PLEASE TAKE FURTHER NOTICE that any responses or objections to the relief requested in the Motion shall: (a) be in writing; (b) conform to the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules), all General Orders, Local Bankruptcy Rules, and the Amended Order Establishing Certain Notice, Case Management, and Administrative Procedures [Docket No. 514] (the Case Management Order) approved by the Court; (c) be filed electronically with the Court on the docket of In re MSR Resort Golf Course LLC, Case No. 11-10372 (SHL) by registered users of the Courts electronic filing system and in accordance with the General Order M-399 (which is available on the Courts website at www.nysb.uscourts.gov); and (d) be served so as to be actually received by

September 13, 2011, at 4:00 p.m., prevailing Eastern Time, by (i) the entities on the Master Service List (as defined in the Case Management Order and available on the Debtors case website at www.kccllc.net/msresort) and (ii) any person or entity with a particularized interest in the subject matter of the Motion.

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PLEASE TAKE FURTHER NOTICE that only those responses that are timely filed, served, and received will be considered at the hearing. Failure to file a timely objection may result in entry of a final order granting the Motion as requested by the Debtors. Dated: September 2, 2011 New York, New York /s/ Paul M. Basta James H.M. Sprayregen, P.C. Paul M. Basta Edward O. Sassower Chad J. Husnick KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 Counsel to the Debtors and Debtors in Possession

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Hearing Date and Time: September 20, 2011, at 10:00 a.m. (prevailing Eastern Time) Objection Deadline: September 13, 2011, at 4:00 p.m. (prevailing Eastern Time)

James H.M. Sprayregen, P.C. Paul M. Basta Edward O. Sassower Chad J. Husnick KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 Counsel to the Debtors and Debtors in Possession

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: MSR RESORT GOLF COURSE LLC, et al.,1 Debtors. ) ) ) ) ) ) ) Chapter 11 Case No. 11-10372 (SHL) Jointly Administered

MOTION OF MSR RESORT GOLF COURSE LLC, ET AL., FOR ENTRY OF AN ORDER FURTHER EXTENDING THE EXCLUSIVE PERIODS DURING WHICH ONLY THE DEBTORS MAY FILE A CHAPTER 11 PLAN AND SOLICIT ACCEPTANCES THEREOF

The debtors in these chapter 11 cases, along with the last four digits of each debtors federal tax identification number include: MSR Resort Golf Course LLC (7388); MSR Biltmore Resort, LP (5736); MSR Claremont Resort, LP (5787); MSR Desert Resort, LP (5850); MSR Grand Wailea Resort, LP (5708); MSR Resort Ancillary Tenant, LLC (9698); MSR Resort Biltmore Real Estate, Inc. (8464); MSR Resort Desert Real Estate, Inc. (9265); MSR Resort Hotel, LP (5558); MSR Resort Intermediate Mezz GP, LLC (3864); MSR Resort Intermediate Mezz LLC (7342); MSR Resort Intermediate Mezz, LP (3865); MSR Resort Intermediate MREP, LLC (9703); MSR Resort Lodging Tenant, LLC (9699); MSR Resort REP, LLC (9708); MSR Resort Senior Mezz GP, LLC (9969); MSR Resort Senior Mezz LLC (7348); MSR Resort Senior Mezz, LP (9971); MSR Resort Senior MREP, LLC (9707); MSR Resort Silver Properties, LP (5674); MSR Resort SPE GP II LLC (5611); MSR Resort SPE GP LLC (7349); MSR Resort Sub Intermediate Mezz GP, LLC (1186); MSR Resort Sub Intermediate Mezz LLC (7341); MSR Resort Sub Intermediate Mezz, LP (1187); MSR Resort Sub Intermediate MREP, LLC (9701); MSR Resort Sub Senior Mezz GP, LLC (9966); MSR Resort Sub Senior Mezz LLC (7347); MSR Resort Sub Senior Mezz, LP (9968); and MSR Resort Sub Senior MREP, LLC (9705). The location of the debtors service address is: c/o CNL-AB LLC, 1251 Avenue of the Americas, New York, New York 10020.

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The above-captioned debtors and debtors in possession (collectively, the Debtors) file this motion (this Motion) for entry of an order (the Order), substantially in the form attached hereto as Exhibit A, (a) extending by 120 days the exclusive periods during which only the Debtors may file a chapter 11 plan and solicit acceptances thereof and (b) granting such other relief as is just and proper. Specifically, the Debtors seek to extend the exclusive period to file a chapter 11 plan (the Exclusive Filing Period) for each Debtor through and including January 27, 2012, and the exclusive period to solicit acceptances of a chapter 11 plan of each Debtor through and including March 27, 2012 (the Exclusive Solicitation Period and, together with the Exclusive Filing Period, the Exclusive Periods). In support of this Motion, the Debtors respectfully state as follows. Preliminary Statement2 1. The Debtors have made remarkable progress in maximizing the value of their

iconic and irreplaceable resort assets in the 64 days since the first exclusivity hearing. The Debtors used that time to advance their key restructuring initiatives, including the sale of the Doral, the restructuring of the Hilton management and branding agreements, and the restructuring of the PGA West and Citrus Club membership programs. In addition, the Debtors have continued to engage in meaningful discussions with all key creditor constituencies regarding, among other subjects, proposed plan structures and potential exit alternatives. The Court should extend the Exclusive Periods to allow the Debtors to continue these value-maximizing initiatives and discussions with creditor constituencies.

Capitalized terms used but not otherwise defined in this preliminary statement shall have the meanings ascribed to them herein.

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2.

At the first exclusivity hearing, the Debtors presented evidence that a sale of the

Doral could significantly delever the Debtors existing capital structure and that restructuring or replacing the Hilton Management Agreements could increase the overall value of the Hilton-managed Resorts by 10 to 15 percent. These recent developments have bolstered the Debtors confidence that the restructuring initiatives will unlock substantial value and provide a full recovery for creditors and a significant recovery to existing equity. 3. Since the first exclusivity hearing, the Debtors marketed the Doral and secured a

signed letter of intent from a stalking horse bidder (the Stalking Horse Bidder) for a $170 million stalking horse bid for the Doral, excluding the valuable White Course, which will remain owned by the Debtors. (the Doral LOI). The Doral LOI contains all of the material terms related to the Doral sale. The Doral Sale will significantly deleverage the Debtors capital structure. The $170 million bid for the Doral will potentially deleverage the Debtors

outstanding prepetition debt by 11% and potentially reduce the Debtors annual mortgage interest expense by approximately $9.5 million. And, that bid remains subject to a higher and better offer following an extensive marketing process. In addition, the Doral sale eliminates the Debtors single largest capital expenditure obligation. Since securing the Doral LOI, the Debtors and the Stalking Horse Bidder have turned their focus to finalizing a purchase and sale agreement, which is nearly complete. Next, the Debtors will seek approval of auction

procedures, stalking horse bid protections, and a timeline for completing the Doral sale. While the Debtors have made significant progress during the first extension of the Exclusive Periods, an additional extension of exclusivity is necessary to further advance the Doral sale process (including potential litigation with Marriott discussed in detail below).

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4.

Although the Debtors have not yet completed a comprehensive valuation of all of

their Resort assets, the $170 million Doral stalking horse offer strongly supports that substantial value runs to existing equity in these chapter 11 cases. Given the $170 million, the implied earnings multiple on the $170 million bid is many times the Dorals net operating income, and therefore implies that the Debtors enterprise value significantly exceeds the $1.5 billion of existing debt. This premium for the Doral evidences the markets recognition of the

one-of-a-kind nature of the Debtors iconic and irreplaceable assets, especially here in chapter 11, where the Debtors can utilize bankruptcy toolse.g., rejection of the Marriott Management Agreement at Doralto maximize the value of their estates. 5. At the outset of these chapter 11 cases, the Debtors also recognized that

substantial value could be realized by restructuring or replacing the Hilton Management Agreements. The Debtors are negotiating with Hilton in pursuit of a consensual resolution. At the same time, however, the Debtors are negotiating with potential alternative managers and preparing to proceed to terminate the Hilton Management Agreements on a nonconsensual basis. Hilton is estopped from asserting rejection damages claims against the Hilton Owner Entities. And, even if the Court determines otherwise, the Debtors estimate that the value realized from an alternative manager will far exceed any Hilton rejection damages claim, net of any related administrative costs to the estates. 6. Finally, the Debtors also have nearly completed the restructuring of

approximately $185 million in face value of contingent membership obligations at PGA West and Citrus Club. After substantial negotiations, briefings, and two court hearings, the Debtors obtained approval of the memberships settlement agreement. The Debtors have now begun implementing the settlement agreement, which will reduce the present value of their contingent

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Club membership obligations by approximately 50 percent and protect the Clubs from volatile and unpredictable future cash outflows on account of future membership deposit liabilities. Presently, the Debtors are designing new membership programs to utilize the financial flexibility afforded by the settlement to maximize revenue and reenergize the Clubs membership sale process. 7. In addition to their progress on the three key restructuring initiatives, the Debtors

have engaged in open dialogue with all major stakeholders during the course of this current exclusivity period. 8. The Resort assets continue to perform. Year-to-date RevPAR (daily revenue per

available room, a combination of average daily rate and occupancy rate metrics) is approximately 10% higher than last year. Year-to-date performance for the Resorts is up, with a 13% increase in net operating income over this time last year. 9. Given the success of the restructuring initiatives to date, the improved Resort

performance, and the constructive dialogue with creditor constituents, the Debtors Board of Directorsincluding its independent director in separate meetingshas determined that continued pursuit of the initiatives at this time, rather than a sale of substantially all of the Debtors assets, is in the best interests of the Debtors and their stakeholders. 10. At bottom, the Debtors have made significant progress toward a reorganization But

that will maximize the value of their enterprise for the benefit of all stakeholders.

completion of the restructuring initiatives will take additional time. The Debtors believe that they can significantly advance the restructuring initiatives during the requested 120-day extension of the Exclusive Periods. And although it is unlikely that the Debtors will have filed a

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plan of reorganization by that time, the Debtors, if necessary, will be prepared to present their progress to the Court to obtain an additional extension of exclusivity. Jurisdiction and Venue 11. The United States Bankruptcy Court for the Southern District of New York has

jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334. This matter is a core proceeding within the meaning of 28 U.S.C. 157(b)(2). 12. 13. Venue is proper pursuant to 28 U.S.C. 1408 and 1409. The statutory basis for the relief requested herein is section 1121(d) of title 11 of

the United States Code (the Bankruptcy Code). Background 14. On the Petition Date, MSR Resort Golf Course LLC and 29 of its affiliates each

filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtors continue to operate their business and manage their property as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. A statutory committee of unsecured

creditors (the Creditors Committee) has been appointed by the Office of the United States Trustee for the Southern District of New York (the U.S. Trustee). 15. The Debtors invest in and own five iconic luxury resort properties and amenities,

specifically (a) the Grand Wailea Resort Hotel & Spa in Wailea, Hawaii, (b) the La Quinta Resort & Club PGA West (La Quinta) in La Quinta, California, (c) the Arizona Biltmore Resort & Spa in Phoenix, Arizona, (d) the Doral in Miami, Florida, and (e) the Claremont Resort & Spa in Berkeley, California (collectively, the Resorts). The Resorts are managed by

third-party managers (the Resort Managers) and operate as independent resorts. The Debtors business is managed by Pyramid Resort Asset Management LLC (the Asset Manager). Each

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of the Debtor fee owners of the Resorts (the Owner Entities)3 are parties to certain operating leases (the Operating Leases) with the Debtor operating lessees (the Tenant Entities). 16. The approximately 3,800 Resort employees are provided by the Resort Managers,

and most of the Debtors corporate functions are provided by the Asset Manager. Consequently, the Debtors themselves do not have any employees. Additional information regarding the Debtors business, their capital structure, and the circumstances leading to these chapter 11 filings is contained in the Declaration of Daniel Kamensky of MSR Resort Golf Course LLC (A) in Support of Debtors Chapter 11 Petitions and First Day Motions and (B) Pursuant to Local Bankruptcy Rule 1007-2, filed on the Petition Date [Docket No. 3]. 17. On June 30, 2011, the Court entered the first exclusivity order extending the

Exclusive Filing Period through and including September 29, 2011, and extending the Exclusive Solicitation Period through and including November 28, 2011. See Docket No. 466. Relief Requested 18. By this Motion, the Debtors request entry of an order: (a) extending by 120 days

the Exclusive Filing Period and the Exclusive Solicitation Period to January 27, 2012 and March 27, 2012, respectively, and (b) granting such other relief as is just and proper. The Debtors Progress in their Restructuring Initiatives 19. As the Court is aware, the Debtors are focused on three key restructuring

initiatives that will maximize the value of the Debtors enterprise: (a) pursuing a sale process for the Doral that will permit the Debtors to reduce their funded debt obligations and better position the enterprise to exit from chapter 11; (b) implementing strategies to restructure, replace, or
3

The Owner Entities are the following seven Debtors: MSR Biltmore Resort, LP; MSR Grand Wailea Resort, LP; MSR Desert Resort, LP; MSR Resort Hotel, LP; MSR Resort Silver Properties, LP; MSR Claremont Resort, LP; and MSR Resort Golf Course LLC.

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terminate the Debtors third-party resort management and branding agreements to improve the economics of the Resorts; and (c) restructuring membership deposit liabilities at the Club at PGA WEST (PGA West) and the Citrus Club (collectively with PGA West, the Clubs) at La Quinta to improve the Clubs liquidity outlook, stabilize cash flows in the face of volatile and unpredictable refund obligations, and provide flexibility in establishing new membership plans that can increase revenue and reinvigorate the Clubs membership sale process. As the Debtors have repeatedly stressed, each of these initiatives will generate significant value and improve the profile of the Resorts in furtherance of the Debtors fiduciary duty to maximize value for all of its stakeholders, including existing equity holders. To date, the Debtors have made substantial progress withand, in the case of the Club memberships settlement, nearly completedthese initiatives. I. Doral Sale. 20. At the beginning of these cases, the Debtors believed that the market would be

highly receptive to a potential sale of the Doral. The sale process to date, including the stalking horse bid of $170 million for the Doral (without the White Course), confirms the Debtors belief and justifies further pursuit of this initiative. As the Debtors previously stated in connection with the first exclusivity motion, the Doral represents a unique opportunity for potential purchasers to reposition this asset while permitting the Debtors to significantly reduce their indebtedness without a corresponding material decrease in net operating income. In addition, the Doral sale eliminates the Debtors single largest capital expenditure obligation. 21. Shortly after the Petition Date, the Debtors began evaluating a potential sale of the As described in the first exclusivity motion

Doral without the White Course.

[Docket No. 324, 29], as part of their sale analysis, the Debtors have concluded that they should retain the White Course, one of five championship-level golf courses at the Doral. The 8
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White Course encompasses 131 acres on highly valuable land adjacent to dense residential developments and a proposed mixed-use city center. As a result, the Debtors believe that the White Course would be more valuable as a commercial and residential development. To this end, the Debtors are in the process of finalizing significant and valuable land entitlements, which should further enhance the White Courses development prospects. Therefore, this approach will create the greatest return on the asset. 22. The Doral sale process began in earnest in early April 2011, when the Debtors

engaged the services of Mark Elliott of Hodges, Ward & Elliott (HWE), the leader in the field of major hotel sales, to serve as real estate broker.4 Shortly thereafter, in coordination with all of the Debtors financial and legal advisors, HWE commenced solicitation of a group of the most likely potential purchasers to act as a stalking horse bidder for the Doral. HWE prepared extensive promotional materials, secured an online dataroom, contacted each potential purchaser, and met with a number of prime potential purchasers. HWE then arranged tours of the Doral for interested parties, before distributing a call for offers. After evaluating competing offers, which included three offers at or near $170 million, the Debtors concluded the first chapter of this successful process by entering into the Doral LOI with the Stalking Horse Bidder, which sets forth the material terms of the Doral sale, including a $170 million purchase price and the potential for a franchise agreement with Marriott, the existing Resort Manager. Every viable bid the Debtors have received contemplates the rejection of the Marriott Management Agreement. The Debtors believe that the Stalking Horse Bidders willingness to enter into an acceptable franchise agreement with Marriott, which would allow for continued use of a Marriott brand on
4

Mr. Elliott has personally sold more hotels than any other individual in the U.S., selling or financing hotel properties worth approximately $22 billion since 1992. Moreover, HWE is widely regarded as one of the top hotel brokerage firms for large transactions, having closed transactions worth approximately $12 billion in the last three years.

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the asset and provide a basis for Marriott to enter in to negotiations to terminate the existing management agreement on reasonable terms. 23. The Debtors and the Stalking Horse Bidder expect to finalize negotiations of a

purchase and sale agreement in the near term. Once this process is complete, the Debtors will file a motion seeking approval of the Debtors retention of HWE, the bid procedures, the stalking horse bid protections, and a hearing date for approval of the sale. The Debtors expect that a 45-day marketing period and auction will follow. The Doral sale process has been highly successful to date, but will take additional time to complete. 24. Although the Debtors preference is to leave the Marriott Management Agreement

in place, the market to date has precluded this option. Rejection of the Marriott Management Agreement, however, could give rise to a potential rejection damages claim by Marriott against certain of the Debtors. Unlike in the Hilton initiative, Marriotts potential rejection damages claim may run against the Owner Entities. Nevertheless, the Debtors estimate that any such damages will be insignificant relative to the benefit of selling the Doral free of the Marriott Management Agreement. The Debtors remain hopeful that they can reach a consensual

resolution with Marriott. Importantly, the Stalking Horse Bidder has expressed a willingness to enter into a franchise agreement with Marriott (i.e., permitting continued use of a Marriott brand at the Doral). To date, however, Marriott has rejected the proposal. If the Debtors are unable to reach an agreement with Marriott, then they are prepared to reject the Marriott Management Agreement and have the Court determine the amount of the rejection damages claim. The Debtors intend to coordinate a comprehensive litigation schedule with Marriott, including briefing, discovery, and expert reports. The issues are relatively straightforward, and the Debtors hope to minimize both the Courts time commitment and the cost and expense of what is

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essentially a claim allowance process. The Debtors estimate that the litigation process will take between 60 to 90 days. 25. The value of the stalking horse bid$170 millionis a testament to the value of

the Debtors iconic and irreplaceable Resort assets and demonstrates the success of the Doral sale initiative thus far. The Doral Sale will significantly deleverage the Debtors capital

structure. The $170 million offer for the Doral, which remains subject to a higher and better offer following an extensive marketing process, will potentially deleverage the Debtors outstanding prepetition debt by 11% and potentially reduce the Debtors annual mortgage interest expense by approximately $9.5 million. This substantial deleveraging of the Debtors estates will provide the Debtors greater access to financial markets to facilitate their exit from chapter 11. Given the $170 million, the implied earnings multiple on the $170 million bid is many times the Dorals net operating income and, therefore, implies that the Debtors enterprise value significantly exceeds the $1.5 billion of existing debt. 26. The Debtors reserve the right to consider and accept the highest or best offer In sum, the Debtors dual-track approach,

throughout the auction and sale process.

(i.e., pursuing a sale of the Doral while preparing for the potential litigation of rejection damages for the Marriott Management Agreement) ensures that the Debtors estates receive the maximum benefit from a sale of the Doral, ensures a fair process for all parties-in-interests, and paves the way for the Debtors value-maximizing exit from bankruptcy. This process, however, will take time. Accordingly, the Court should extend the Exclusive Periods to allow the Debtors to continue to pursue a sale of the Doral in this manner. II. The Hilton Management Agreements. 27. The Debtors also are making progress in the initiative aimed at restructuring or

replacing the Hilton Management Agreements. The Debtors believed from the outset of these 11
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chapter 11 cases, and continue to believe, that they can realize substantial value by restructuring, or unencumbering the Hilton-managed Resorts from, the Hilton Management Agreements. In particular, by exercising greater control over the management of the Resorts, the Debtors can achieve operational efficiencies and revenue enhancements. The Debtors also believe they can achieve a reduction in the substantial management fees and reimbursements they currently pay. Finally, the Hilton Management Agreements are a significant encumbrance on the marketability of the Hilton Resorts. Removing or modifying that encumbrance likely would increase the value of the Hilton Resorts by approximately 10% to 15%. Given the significant amount of the Debtors cash flows accounted for by the Hilton Resorts, the incremental value to the Debtors estates could be very significant. 28. The Debtors discussions with potential alternative managers for the

Hilton-managed Resorts have confirmed the Debtors beliefs. The Debtors have engaged in substantial conversations with multiple potential alternative managers. It is clear that an

alternative management and branding agreement is one method available for the Debtors to maximize value through greater operational control at the Resorts. Moreover, the Debtors would expect to receive a variety of economic inducements in exchange for the right to manage the Resorts, which almost certainly will exceed any rejection damages claims in the event the Court rules that Hilton is not bound by its estoppels.5 Thus, while the Debtors continue to negotiate with Hilton on the terms of a consensual restructuring of the Hilton Management Agreements, they are prepared to reject the Hilton Management Agreements if negotiations are unsuccessful.
5

See Waldorf=Astoria Management LLCs Response to Motion of MSR Resort Golf Course LLC, et al., for Entry of an Order Extending the Exclusive Periods During Which Only the Debtors May File a Chapter 11 Plan and Solicit Acceptances Thereof [Docket No. 394] and Debtors Reply to Waldorf=Astoria Management LLCs Response to Motion of MSR Resort Golf Course LLC, et al., for Entry of an Order Extending the Exclusivity Periods During Which Only the Debtors May File a Chapter 11 Plan and Solicit Acceptances Thereof [Docket No. 438] for a more complete discussion of the legal dispute between the Debtors and Hilton.

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29.

The Debtors have attempted to engage Hilton in negotiations for a consensual

modification of the Hilton Management Agreements to avoid lengthy and expensive litigation regarding whether Hilton is estopped from asserting any claims against the applicable Owner Entities given that Hilton represented in certain estoppel certificates that it did not have any agreements with such entities. In an effort to reach a quick, consensual resolution, the Debtors provided a comprehensive term sheet to Hilton with proposed revisions to the Hilton Management Agreements. And, on August 17, 2011, the Debtors extended the period to assume or reject the Debtors operating leases until September 30, 2011, an integral component of the Hilton restructuring, to facilitate continued discussions with Hilton.6 Unfortunately, these efforts have not yet borne fruit, but conversations continue. 30. In sum, the Debtors are continuing their dual process of discussing consensual

resolutions in good faith with Hilton while actively exploring alternative managers for the Resorts managed by Hilton. The Debtors believe the process, including its attendant litigation, will take significant time. Ultimately, these issues are relatively insignificant hurdles when compared to the substantial value the Debtors stand to realize through this initiative. III. Restructuring of Membership Liabilities at PGA West and the Citrus Club. 31. The Debtors are completing the final steps for the restructuring of membership

deposit liabilities at PGA West and the Citrus Club that will: (a) reduce the present value of the $185 million in contingent deposit liabilities (face amount) by approximately 50%; (b) create
6

See the Motion of MSR Resort Golf Course LLC, et al., for Entry of an Order Extending the Time Within Which the Debtors Must Assume or Reject Operating Leases of Nonresidential Real Property [Docket No. 325] and the Debtors Reply to Waldorf=Astoria Management LLCS Response to Motion of MSR Resort Golf Course LLC, et al., for Entry of an Order Extending the Exclusivity Periods During Which Only the Debtors May File a Chapter 11 Plan and Solicit Acceptances Thereof [Docket No. 438] for a more complete description of the relationship between the Operating Leases and the Debtors resort management and branding agreements. In addition, simultaneously herewith, the Debtors filed a motion to further extend the deadline to October 31, 2011.

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additional flexibility to significantly enhance cash flows; and (c) insulate the Clubs cash outflows, making the Debtors assets more attractive to potential purchasers and financiers alike. The membership settlement is the culmination of the Debtors efforts on the memberships initiative since the Petition Date. 32. After countless communications with the thousands of Club members and months

of negotiations with their representatives, the Debtors finalized a term sheet and presented it by motion to the Court along with the first exclusivity motion on June 28 and 29, 2011. And, after responding to the Courts questions and further discussions and negotiations with the members representatives, and after a second hearing on July 27, 2011, the Court approved slightly modified terms of the settlement that provided for a limited opt-out for resigned members. Ultimately, on August 17, 2011, the Court entered the order approving the settlement agreement [Docket No. 582]. 33. As such, one of the three key restructuring initiatives previously identified by the

Debtors in their first exclusivity motion is virtually complete. The only two significant steps that remainand that are both well underway at this timeare (a) the expiration of the 30-day period for the Clubs resign members to exercise the limited opt-out of the 50% reduction for resign refunds and the seven-day period for the Debtors to consider whether to proceed with the settlement, which will end on September 29, 2011, and (b) finalizing the re-draft of the Clubs membership plans. The Clubs have already developed new memberships that fit within the settlement and have started marketing the new memberships in time for the falls peak golf membership sales season. Such new membership programs will utilize the financial flexibility afforded by the settlement to maximize revenue and reenergize the Clubs membership sale process. Other than the eventual determinations to assume or reject individual membership

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agreements for any resign members who elect to exercise their opt-out right, the Debtors expect to finalize issues related to the settlement within the next two months. The Debtors Communications with Creditor Constituents 34. The Debtors have continued their efforts to establish a constructive and active

dialogue with their creditor constituencies. Since late June, the Debtors and their advisors have had significant communications with all of the Debtors major creditors (i.e., Midland, Metlife, Singapore, Five Mile, and the Creditors Committee). Among other things, the Debtors have discussed their progress on the three key restructuring initiatives and have continued to provide detailed operating and financial information. In addition, the Debtors have had dialogue with all creditorswith discussions ranging from proposed adequate protection packages to potential treatment of their claims under a plan of reorganization and strategies for the Debtors eventual exit from chapter 11in an attempt to build consensus in these chapter 11 cases and to allow the Debtors to complete their value-maximizing restructuring initiatives. Basis for Relief 35. Section 1121(d) of the Bankruptcy Code authorizes a bankruptcy court to extend a

debtors exclusive period for filing a chapter 11 plan and to solicit votes thereon, for cause shown, by as much as 18 months (to file a plan) and 20 months (to solicit votes), respectively. 11 U.S.C. 1121(d). 36. Although the Bankruptcy Code does not define cause, the legislative history

indicates that Congress intended cause to be a flexible standard that balances the competing interests of a debtor and its creditors. See H.R. Rep. No. 95-595 at 231, 232 (1978), as reprinted in 1978 U.S.C.C.A.N. 5963, 6191. This flexibility is intended to give a debtor an adequate opportunity to stabilize its business operations at the outset of the case and to then negotiate a plan with its creditors. See In re Ames Dept Stores Inc., Case No. 90-11233 (JAG), 1991 WL

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259036, at *3 (S.D.N.Y. Nov. 25, 1991) (The purpose of the Bankruptcy Codes exclusivity period is to allow the debtor flexibility to negotiate with its creditors.). 37. Courts in the Southern District of New York apply a nine-factor test in deciding

whether cause exists to extend (or to terminate) a debtors exclusive periods. See, e.g., In re Adelphia Commcns Corp. (Adelphia I), 336 B.R. 610, 674 (Bankr. S.D.N.Y. 2006) (citing In re Dow Corning Corp., 208 B.R. 661, 664 (Bankr. E.D. Mich. 1997)) affd 342 B.R. 122 (S.D.N.Y. 2006). These factors include: (a) (b) (c) (d) the existence of good faith progress toward reorganization; the fact that the debtors are paying their bills as they come due; the size and complexity of the cases; the necessity of sufficient time to permit the debtors to negotiate a plan of reorganization and prepare adequate information to allow a creditor to determine whether to accept such plan; whether the debtors have demonstrated reasonable prospects for filing a viable plan; whether the debtors have made progress in negotiations with their creditors; the amount of time that has elapsed in the cases; whether the debtors are seeking an extension of exclusivity to pressure creditors to submit to the debtors reorganization demands; and whether an unresolved contingency exists.

(e) (f) (g) (h) (i)

Adelphia I, 336 B.R. at 674. Here, the evidence supports a finding of cause to further extend the Debtors Exclusive Periods in these chapter 11 cases.7

See In re Express One Intl, Inc., 194 B.R. 98, 100 (Bankr. E.D. Tex. 1996) (denying motion to terminate exclusivity and extending exclusivity on account of four supporting factors); In re Interco Inc., 137 B.R. 999, 1001 (Bankr. E.D. Mo. 1992) (denying motion to terminate exclusivity on the basis of four supporting factors); In re Texaco Inc., 76 B.R. 322, 327 (Bankr. S.D.N.Y. 1987) (holding that size and complexity of the chapter 11 case provided sufficient cause to extend exclusivity).

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I.

The Debtors Are Making Good Faith Progress Toward Reorganization. 38. As the Court previously recognized, in determining the best approach to complete

the restructuring initiatives before formulation of an exit plan, including the potential sale of the assets of the estates, the Debtors are entitled to exercise their business judgment. See Hrg Tr., June 29, 2011, 241: 623 ([T]he crux of [the] argument is theres no reason to wait on a sale for these -- until after these initiatives occur. . . . [U]ltimately, this disagreement implicates the business judgment rule in bankruptcy, where debtors are entitled to a rebuttable presumption that their directors and officers are acting in good faith and the best interest of the company.) (emphasis added); In re G Survivor Corp., 171 B.R. 755, 75758 (Bankr. S.D.N.Y. 1994) (recognizing that business judgment rule applies in chapter 11 and requires that [a] decision be accepted by courts unless it is shown that the . . . decision was one taken in bad faith or in gross abuse of . . . discretion.) affd 187 B.R. 111 (S.D.N.Y. 1995); In re JFD Enters., Inc., Case No. 99-2034, 2000 WL 560189, at *5 (1st Cir. May 1, 2000) (It is not [the courts] role to secondguess a [debtors] determination not to sell an estates assets at a given point in time so long as that determination reflects the [debtors] business judgment.) (emphasis in original); In re Highway Equip. Co., 61 B.R. 58, 60 (Bankr. S.D. Ohio 1986) ([T]he bankruptcy judge may sustain a debtor in its refusal to sell property despite the insistence of an important creditor to the contrary, where the debtor shows a valid business justification for its course of conduct.). 39. The Debtors filed these chapter 11 cases approximately seven months ago. As

part of their plan process, the Debtors undertook a comprehensive process through which to maximize the value of their assets, including an evaluation of all aspects of their business and implementing a number of key initiatives that are targeted to generate increased value at a low cost. Steps taken by the Debtors to sell the Doral, either improve the terms of or reject the Hilton Management Agreements, and restructure the Club memberships will provide important 17
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flexibility to develop an exit plan and demonstrate the Debtors ability to successfully negotiate with their creditors in these chapter 11 cases. 40. While the Club memberships settlement initiative is virtually complete, the

Debtors will need additional time to close a Doral sale. And, while the Debtors are continuing their dual pursuit of consensual resolutions with Hilton and exploring alternative managers for the Hilton-managed Resorts, to the extent the Debtors determine to terminate the Hilton Management Agreements, the Debtors will need additional time to transition the Hilton Resorts. Notwithstanding the Debtors significant progress during the current Exclusive Periods, due to the complexity of the remaining issues involved with these sale and contract negotiations, the Debtors request a further extension of the Exclusive Periods. Doing so will allow the Debtors to exercise their business judgment and focus on the robust and ongoing sale and marketing process for the Doral, avoid disruptions to the process that competing plans would create, and prudently evaluate restructuring alternatives that will yield substantial value for the Debtors estates. Given additional time to focus on these matters, the Debtors are confident that they can reach a consensual, value-maximizing exit plan. In addition, the Debtors anticipate that discussions with creditors will continue to accelerate during the next extension of exclusivity. II. The Debtors Are Paying Their Bills as They Come Due. 41. The Debtors are paying their bills in the ordinary course as they come due.

Moreover, the Debtors trade partners and vendors will not be subject to increased risk by continuing to deal with the Debtors in these chapter 11 cases for an additional period as the Resorts are cash-flow positive. Accordingly, there is no exceptional urgency to these chapter 11 cases that merits termination of the Debtors Exclusive Periods.

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III.

The Debtors Chapter 11 Cases Are Large and Complex. 42. As this Court has recognized, the size and complexity of these chapter 11 cases

supported and still supports cause to extend the Exclusive Periods. See Hrg Tr., June 29, 2011, 238:19 (I think its hard to argue that these cases arent complex). In particular, outstanding matters include those that the Court already identified in its finding that the complexity of these chapter 11 cases warrants cause to extend the Exclusive Periods, including, complicated management structure and separate vendor and contractual relationships, the resort management [and] branding agreements, and difficulties that arise from these agreements in the context of this bankruptcy. See Hrg Tr., June 29, 2011, 238:22239:14. Accordingly, the complexity of the Debtors chapter 11 cases demanded and still demands the attention of the Debtors and their advisors on operational and financial issues and continues to complicate restructuring negotiations and, therefore, provides cause to further extend the Exclusive Periods. IV. Significant Unresolved Contingencies Exist and the Debtors Have Not Had Sufficient Time to Permit Them to Negotiate a Plan of Reorganization. 43. During the first exclusive period, the Debtors focused on stabilizing their

business, arranging postpetition financing, negotiating the use of cash collateral, concentrating on improving the efficiency of their operations, and collecting materials and information necessary to formulate and execute any plan that might ultimately be presented to the Court. Such progress represents key first steps in a comprehensive restructuring process. 44. During the current extension of the Exclusive Periodsin spite of spending the

first 30 days focused on fighting exclusivity issuesthe Debtors made the significant progress on the restructuring initiatives described above. The Debtors expect to make further progress before the end of the current extension of the Exclusive Periods and, if granted, the Debtors will use the next extension of exclusivity to take the necessary strides towards the completion of the

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restructuring initiatives and maximization of the value of the Debtors estates. The initiatives materially affect the Debtors business plan, which stakeholders will use to evaluate the Debtors financial performance and which will form the basis for a successful exit from chapter 11. 45. Given their impact on the ultimate value of the Debtors enterprise, the final steps

to complete the Club memberships settlement, the sale and marketing process for the Doral, litigation of the Marriott rejection damages, and the restructuring or replacement of the Hilton Management Agreements are significant unresolved contingencies that require resolution before the Debtors put forth a comprehensive restructuring plan. Further progress on the Debtors restructuring initiatives, therefore, is essentially progress toward an exit plan. 46. Also, the deadline for creditors to file proofs of claim in these chapter 11 cases

did not pass until August 17, 2011, toward the end of the current extension of the Exclusive Periods. In re Borders Grp., Inc., No. 11-10614 (MG), 2011 WL 2174408, at *6 (Bankr. S.D.N.Y. June 2, 2011) ([I]t is premature to conclude that the Debtors are unlikely to submit a viable plan. The . . . bar date is important so that the Debtors can understand the number, nature and amount of valid claims against the estate. The Debtors need a reasonable amount of time to review and evaluate these claims.). The Debtors are analyzing the proofs of claim filed against the Debtors estates. Beyond understanding the claims against their estates, the Debtors also require additional time to complete their restructuring initiatives, evaluate the views of relevant parties, and move further toward the structuring of an appropriate exit plan. V. Relatively Little Time Has Elapsed In These Chapter 11 Cases. 47. In the seven months since the Petition Date, the Debtors have made significant

strides forward, but, as would be expected given the scope of what must be achieved in these chapter 11 cases, work remains. Adelphia supports that the decision to extend exclusivity is focused in equal parts on what the Debtors have accomplished and what the Debtors intend to 20
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accomplish. See Adelphia I, 336 B.R. at 674 (listing factors for consideration in extending exclusive periods that focus on both the debtors past accomplishments and future goals). The Debtors anticipate that, with the requested 120-day extension of the Exclusive Periods, they will be able to make significant progress toward completing a consensual restructuring with an appropriate capital structure and improved operations. VI. The Debtors Are Not Pressuring Creditors to Submit to Any Reorganization Demands. 48. The Debtors restructuring process is intended to produce a consensual plan that

maximizes value, further supporting the relief requested herein. To that end, and in line with the Courts recommendations upon entry of the first exclusivity order, the Debtors and their advisors have continued to engage in significant communications with all their major creditors, including discussions regarding the progress of the restructuring initiatives, creditors desired form of recovery, and whether each creditor constituent is open to alternative options. And, once the Debtors have completed their key restructuring initiatives to maximize value, the Debtors look forward to launching a plan process that invites participation from all of their key stakeholders. See In re River Bend-Oxford Assocs., 114 B.R. 111, 114 (Bankr. D. Md. 1990) (Section 1121 is designed to afford a debtor an exclusive period in which to propose a plan [and] . . . furthers the purpose of a rehabilitation . . . .). At this stage, the Debtors are still fulfilling their responsibility to explore sources of potential value that will accrue to the benefit of the Debtors stakeholders. 49. Accordingly, the Adelphia analysis weighs in favor of extending the Exclusive Although the Debtors are close to completing

Periods by the requested 120 days.

implementation of the Club membership settlement, significant work remains on the other initiatives. The Debtors expect that the Doral sale and litigation process will take additional time to complete. Among other things, the Debtors will need to complete negotiation of the purchase

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and sale agreement with the Stalking Horse Bidder, obtain approval of the bidding procedures, finalize the Marriott rejection litigation, complete a marketing and sale process, and close a sale with the prevailing purchaser. The restructuring of the Hilton Management Agreements also could require significantly more time to complete. While the Debtors continue to negotiate with Hilton to reach a consensual restructuring of the Hilton Management Agreements, the Debtors have begun marketing the Resorts to alternative managers in case the Debtors are unable to reach a consensual deal. If the Debtors are unable to make significant progress in the near future, the Debtors will seek to adjudicate their dispute with Hilton regarding the enforceability of the estoppels. The outcome of this litigation will significantly inform the Debtors business

judgment in selecting a manager for the Resorts presently managed by Hilton. Together, the completion of these initiatives will enable the Debtors to finalize an exit plan that will maximize recoveries for all stakeholders. Thus, the 120-day request is an appropriate measure of time to extend the Debtors Exclusive Periods. 50. Many courts in this jurisdiction have granted similar relief. See, e.g., In re

Innkeepers USA Trust, Case No. 10-13800 (SCC) (Bankr. S.D.N.Y. Mar. 29, 2011) [Docket No. 1065] (granting a second extension of 120 days); In re Tronox Inc., Case No. 09-10156 (ALG) (Bankr. S.D.N.Y. Dec. 10, 2009) [Docket No. 959] (granting a second extension of three months); In re Charter Commcns., Inc., Case No. 09-11435 (JMP) (Bankr. S.D.N.Y. Nov. 19, 2009) [Docket No. 926] (granting a second extension of 120 days); In re Chemtura Corp., Case No. 09-11233 (REG) (Bankr. S.D.N.Y. Oct. 22, 2009) [Docket No. 1335] (granting a second extension of three months); In re Frontier Airlines Holdings, Inc., Case No. 08-11298 (RDD) (Bankr. S.D.N.Y. Jan. 21, 2009) [Docket No. 727] (granting a second

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extension of four months); In re Alper Holdings USA, Inc., Case No. 07-12148 (BRL) (Bankr. S.D.N.Y. May 8, 2008) [Docket No. 217] (granting a second extension of six months).8 Motion Practice 51. This Motion includes citations to the applicable rules and statutory authorities

upon which the relief requested herein is predicated and a discussion of their application to this Motion. Accordingly, the Debtors submit that this Motion satisfies Local Bankruptcy

Rule 9013-1(a). Notice 52. The Debtors have provided notice of this Motion to: (a) the entities on the Master

Service List (as defined in the Case Management Order and available on the Debtors case website at www.kccllc.net/msresort) and (b) any person or entity with a particularized interest in the subject matter of this Motion. In light of the nature of the relief requested herein, the Debtors respectfully submit that no further notice is necessary. No Prior Request 53. other court. [Remainder of Page Intentionally Left Blank] No prior request for the relief sought in this Motion has been made to this or any

Because of the voluminous nature of the orders cited herein, they are not attached to this Motion. Copies of these orders are available upon request of the Debtors counsel.

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WHEREFORE, the Debtors respectfully request that the Court enter an order, substantially in the form attached hereto as Exhibit A, granting the relief requested herein and granting such other relief as is just and proper.

Dated: September 2, 2011 New York, New York

/s/ Paul M. Basta James H.M. Sprayregen, P.C. Paul M. Basta Edward O. Sassower Chad J. Husnick KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 Counsel to the Debtors and Debtors in Possession

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EXHIBIT A Proposed Order

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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: MSR RESORT GOLF COURSE LLC, et al.,1 Debtors. ) ) ) ) ) ) ) Chapter 11 Case No. 11-10372 (SHL) Jointly Administered

ORDER FURTHER EXTENDING THE EXCLUSIVE PERIODS DURING WHICH ONLY THE DEBTORS MAY FILE A CHAPTER 11 PLAN AND SOLICIT ACCEPTANCES THEREOF Upon the motion (the Motion)2 of the above-captioned debtors and debtors in possession (collectively, the Debtors) for entry of an order (this Order) (a) extending by 120 days the exclusive periods during which only the Debtors may file a chapter 11 plan and solicit acceptances thereof and (b) granting such other relief as is just and proper, all as more fully set forth in the Motion; and the Court having reviewed the Motion; and a hearing on the Motion having been held on September 20, 2011 (the Hearing); and the Court having determined that the legal and factual bases set forth in the Motion establish just cause for the

The debtors in these chapter 11 cases, along with the last four digits of each debtors federal tax identification number include: MSR Resort Golf Course LLC (7388); MSR Biltmore Resort, LP (5736); MSR Claremont Resort, LP (5787); MSR Desert Resort, LP (5850); MSR Grand Wailea Resort, LP (5708); MSR Resort Ancillary Tenant, LLC (9698); MSR Resort Biltmore Real Estate, Inc. (8464); MSR Resort Desert Real Estate, Inc. (9265); MSR Resort Hotel, LP (5558); MSR Resort Intermediate Mezz GP, LLC (3864); MSR Resort Intermediate Mezz LLC (7342); MSR Resort Intermediate Mezz, LP (3865); MSR Resort Intermediate MREP, LLC (9703); MSR Resort Lodging Tenant, LLC (9699); MSR Resort REP, LLC (9708); MSR Resort Senior Mezz GP, LLC (9969); MSR Resort Senior Mezz LLC (7348); MSR Resort Senior Mezz, LP (9971); MSR Resort Senior MREP, LLC (9707); MSR Resort Silver Properties, LP (5674); MSR Resort SPE GP II LLC (5611); MSR Resort SPE GP LLC (7349); MSR Resort Sub Intermediate Mezz GP, LLC (1186); MSR Resort Sub Intermediate Mezz LLC (7341); MSR Resort Sub Intermediate Mezz, LP (1187); MSR Resort Sub Intermediate MREP, LLC (9701); MSR Resort Sub Senior Mezz GP, LLC (9966); MSR Resort Sub Senior Mezz LLC (7347); MSR Resort Sub Senior Mezz, LP (9968); and MSR Resort Sub Senior MREP, LLC (9705). The location of the debtors service address is: c/o CNL-AB LLC, 1251 Avenue of the Americas, New York, New York 10020. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Motion.

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relief granted herein; and the Court having found that it has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334; and the Court having found that this is a core proceeding pursuant to 28 U.S.C. 157(b)(2); and the Court having found that venue of this proceeding and the Motion in this district is proper pursuant to 28 U.S.C. 1408 and 1409; and the Court having found that the relief requested in the Motion is in the best interests of the Debtors estates, their creditors, and other parties in interest; and the Debtors having provided appropriate notice of the Motion and the opportunity for a hearing on the Motion under the circumstances; and the Court having reviewed the Motion and having heard the statements and evidence in support of the relief requested therein at the Hearing; and the Court having determined that the legal and factual bases set forth in the Motion and at the Hearing establish just cause for the relief granted herein; and upon all of the proceedings had before the Court; and for the reasons state on the record at the Hearing, it is HEREBY ORDERED THAT: 1. 2. The Motion is granted as set forth herein. The Exclusive Filing Period is hereby further extended through and including

January 27, 2012, and the Exclusive Solicitation Period is hereby further extended through and including March 27, 2012. 3. This Order is without prejudice to the Debtors ability to seek further extensions

of the Exclusive Periods pursuant to section 1121(d) of the Bankruptcy Code. 4. The terms and conditions of this Order shall be immediately effective and

enforceable upon its entry. 5. All time periods set forth in this Order shall be calculated in accordance with

Bankruptcy Rule 9006(a).

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6.

The Debtors are authorized to take all actions necessary to effectuate the relief

granted pursuant to this Order in accordance with the Motion. 7. The Court retains exclusive jurisdiction with respect to all matters arising from or

related to the implementation of this Order. Dated: New York, New York THE HONORABLE SEAN H. LANE UNITED STATES BANKRUPTCY JUDGE

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