MARKET STUDY & OPPORTUNITIES - October 27, 2017

 
MARKET STUDY & OPPORTUNITIES - October 27, 2017
MARKET STUDY & OPPORTUNITIES

         October 27, 2017
MARKET STUDY & OPPORTUNITIES - October 27, 2017
El Anhelo
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                                               Confidentiality
This Document, including all Appendices, is the proprietary work product of Boutique Real Estate Advisors LLC
(“BREA”) and intended solely for the use of El Anhelo SA de CV, its principals, directors, officers, and designated
advisors and associates. The Document contains information that is privileged, confidential and proprietary. If
you are not an intended recipient of this Document, please notify BREA, and then please delete and destroy all
copies and attachments. Please be advised that any unauthorized review or dissemination of, or the taking of
any action in reliance on, the information contained in or attached to this message is strictly prohibited and may
result in legal consequences.

Nothing in this Document constitutes an offer to sell or a solicitation of any investment products or other
financial product or service, or an official confirmation or of any transaction.

Through gathering information for purposes of this Document, the following resources were consulted, but is not
limited to: JLL; HVS; Dream Homes of Cabo; Snell Real Estate Engel & Völkers; Interval International; Datatur;
correspondence with competitive set representatives; and correspondence with brokers active in Los Cabos and
East Cape. Additional research was conducted via the Internet and relevant information has been compile for this
Document.

                                  100 Park Avenue | 16th Floor | New York, NY 10017
                                 411 Theodore Fremd Ave | Ste 206 S| Rye, NY 10580

                                               Jay DiGiulio, President
                                           Devin Wakeford, Vice President

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TABLE OF CONTENTS                                                              Page
  1. Executive Summary……………………………………………………………………………………………………………………… 5

  2. Mexico’s Economic Overview………………………………………………………………………………………………………. 11

  3. The Destination – East Cape, Baja California Sur……………………………………………………………………………13

  4. Tourism Overview

         a. Leisure Travel Market……………………………………………………………………………………………………… 15

         b. Mexico Tourism………………………………………………………………………………………………………………. 17

         c. Los Cabos Tourism…………………………………………………………………………………………………………... 22

         d. Access & Transportation…………………………………………………………………………………………………..24

         e. Travel Logistics………………………………………………………………………………………………………………… 26

  5. Real Estate Market Overview

         a. Retirement Destination…………………………………………………………………………………………………… 27

         b. Mexico Housing Market…………………………………………………………………………………………………… 27

         c. Los Cabos Real Estate Market………………………………………………………………………………………….. 29

         d. Trends in Second Home Market………………………………………………………………………………………. 32

         e. East Cape Real Estate Market………………………………………………………………………………………….. 32

         f.   2017 & Looking Ahead…………………………………………………………………………………………………….. 33

         g. Timeshare Market…………………………………………………………………………………………………………… 36

  6. Popular Hotel Destinations

         a. Cancun/Riviera Maya……………………………………………………………………………………………………… 39

         b. Los Cabos………………………………………………………………………………………………………………………... 41

         c. Puerto Vallarta/Riviera Nayarit…………………………………………………………………………………………43

  7. Historical Hotel Performance……………………………………………………………………………………………………….. 46

  8. Trends Shaping Mexico’s Hotel Market………………………………………………………………………………………… 47

  9. Mexico’s Hotel Brand Segments…………………………………………………………………………………………………… 48

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10. Competitive Set Properties……………………………………………………………………………………………………………53

11. El Anhelo Real Estate

        a. Product Types…………………………………………………………………………………………………………………..72

        b. Pricing Projections…………………………………………………………………………………………………………... 74

        c. Sales Pace & Phasing……………………………………………………………………………………………………….. 75

12. Conclusion………………………………………………………………………………………………………………………………….… 76

APPENDIX A: Master Plan Illustrative Map…………………………………….………………………………………….……... 78

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EXECUTIVE SUMMARY
El Anhelo SA de CV owns a spectacular development property near Los Barriles, Baja, California Sur, Mexico (the
“Project”) with development plans that include several types of for-sale real estate product. Boutique Real
Estate Advisors LLC (“BREA”) has been engaged to prepare this Market & Feasibility Study for the Project.

The information below summarizes the findings from research as provided in more detail within this document.

Project Name            El Anhelo Marina, Golf & Private Resort Community

Project Location        Los Barriles, East Cape, Baja California Sur

Description             A destination resort combining golf, marina, water access, food and beverage, spa,
                        retail and all the lifestyle experiences of the East Cape and authentic Mexico.

                        El Anhelo is a 459-acre (186-ha) master planned resort community that features an
                        Arnold Palmer designed golf course, 350-slip marina, private beach, seamless access to
                        the Sea of Cortez, approximately 1,500 real estate offerings with multiple price points,
                        hotels, retail outlets, authentic resort destination amenities and experiences –
                        delivered by a reputable, quality developer with significant success in the Mexican
                        resort market today. The Sponsor’s credibility is extremely important and being able to
                        deliver what is promised to consumers is an absolute must.

General Market          From research and speaking with real estate experts, it is evident that the market
Overview                continues to perform and react positively over the past few years and that an increase
                        in total sales volume is anticipated. Due to Hurricane Odile in 2014, many of the resorts
                        in Los Cabos and surrounding areas had to invest significant renovation and restoration
                        funds to get back to operating status. Pricing is currently staying consistent with steady
                        increases expected in the near future. There are certain areas that lack inventory which
                        might increase pricing due to demand; however, in general there is a significant
                        amount of inventory that entered/is entering the market. Due to consumer demand,
                        there is a significant amount of inventory entering the market in order to satisfy the
                        increased appetite for real estate investment in the region.

                        Key highlights:

                            •   Some of the most defining features for development in the Los Cabos market is
                                based on consumer sentiment and consumer confidence.

                            •   The consumer has seen most projects come to successful fruition through
                                natural disasters and economic downturns – The area has grown and
                                flourished over the last several years with the most significant growth outside

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                     of Cabo San Lucas extending in all directions from the epicenter – Diamante,
                     and Porto Los Cabos being the prime examples.

                 •   Lift and infrastructure have improved and more visitors are coming into the
                     market year over year.

                 •   The major markets continue to be the west coast feeder states of the US,
                     Western Canada and recently the affluent Mexican market has been
                     responsible for a significant percentage of the sales.

                 •   While Cabo San Lucas was built on small intimate resorts like Las Ventanas,
                     Palmilla, Esperanza, etc. the norm has become large mixed-use resorts with
                     multiple real estate offerings. Most of Cabo San Lucas was built through the
                     monetization of accommodations by developers.

                 •   The sophisticated consumer has watched longer development cycles, mixed
                     brands and accommodation types in the resorts that have been ongoing for
                     the last decade.

                 •   All of these attributes are key barometers for development and sprawl to the
                     East Cape and the site for El Anhelo.

                 •   A mixed-use resort with marina, golf, family lifestyle, self-contained, well
                     positioned and marketed properly can have major impact and grab market
                     share of the East Cape which will naturally grow over the next 10 to 20 years.

                 •   Having a widely accepted major Mexican brand at the helm of the project also
                     adds to the credibility – It’s not just “location, location, location”, but also
                     about the financial wherewithal to deliver to consumer expectations.

Competitive   There are currently successful competitive set projects throughout the Corridor with
Landscape     resort projects located in Cabo San Lucas and Los Cabos. The East Cape would
              capitalize on location, lower price points than available in Cabo, and the current
              positive economic indicators in the origin markets.

              Notable Competitive Set Properties as listed in this document are (in no particular
              order):

                 •   Puerto Los Cabos, Cabo San Lucas
                 •   Costa Palmas by Four Seasons, La Ribera (formerly Cabo Riviera)
                 •   Diamante, Cabo San Lucas
                 •   Villa la Estancia, Cabo San Lucas
                 •   Esperanza, Cabo San Lucas
                 •   Solaz Los Cabos

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                       •   Chileno Bay Resort & Residences, Los Cabos

Los Cabos Resort   In Los Cabos, a new Grand Velas opened the end of 2016. The all-inclusive beachfront
Developments       offers 300 suites, five restaurants, a 16,370 sq. ft. convention center and a Leading Spa
                   of the World.

                   The new Quivira Towers opened in December 2016 at the Pueblo Bonito Pacifica Golf
                   & Spa Resort. In addition to 47 guest rooms and suites (some with private plunge
                   pools) the towers include a new VIP Lounge, restaurant and fitness center.

                   Chileno Bay Resort & Residences officially opened during February 2017. The new
                   hotel project was previously known as VieVage Los Cabos, an Auberge Resort.
                   Auberge Resorts Collection still manages the property that includes 60 guest rooms
                   and 32 villas with private pools. The property also has a holistic spa plus more than
                   12,000 square feet of meeting space.

                   The 250-room Le Blanc Spa Resort Los Cabos is planned to open early 2018. The all-
                   inclusive adults only Palace Resorts property has five restaurants, an expansive spa
                   plus 13,000 square feet of meeting space.

                   The 2,000-acre Puerto Los Cabos Resort on the Sea of Cortez is the setting for the Ritz
                   Carlton Reserve Los Cabos, opened this year and provides 124 oceanfront villas with
                   private plunge pools. Resort amenities include a marina plus golf courses by Jack
                   Nicklaus and Greg Norman.

                   Grand Solmar at Rancho San Lucas Resort is set for a late 2017 debut. Rancho San
                   Lucas is an 834-acre beachfront community 30 minutes from Cabo San Lucas and the
                   Magic Town of Todos Santos. Resort amenities include a Greg Norman-designed golf
                   course, tennis center and Mexican Village.

                   Also expected to open in 2018, Nobu Hotel Los Cabos will have 200 “Japanese and Los
                   Cabos-inspired” rooms, a signature Nobu Restaurant and Bar, event and meeting
                   space, a luxury spa plus retail space.

                   Solaz, a Luxury Collection Resort, Los Cabos has an opening date of March 2018. The
                   131-room property at the tip of Baja California Sur will include a spa and private beach
                   club, three restaurants, event space plus walking and running trails.

                   Montage Los Cabos is expected to open May 2018. The Hotel Corridor property
                   overlooking Santa Maria Bay will have 122 guest rooms and suites; a spa, multiple
                   dining rooms and a two-level pool.

                   Four Seasons Resort Los Cabos at Costa Palmas will open in 2018. Located in the
                   private Costa Palmas community on the Sea of Cortez, the 145-room property will

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                      include a spa, private beach and Robert Trent Jones II–designed golf course.

                      Hard Rock Hotel Los Cabos is scheduled for completion in spring 2019. The 639-room
                      property at the Diamante Cabo San Lucas Resort will include six restaurants, 54,000 sq.
                      ft. of meeting space plus a signature Hard Rock Rock Spa.

Tourist Attractions   Mexico has so much to offer regarding attractions and activities for tourists. Mexico's
                      fastest growing resort area of Los Cabos offers miles of empty desert and deserted
                      beaches, laid-back nightlife, whale watching, hang-gliding, snorkeling, antiquing, golf
                      and fishing, Loreto's historic mission, sport fishing, dining, Cabo Pulmo, beautiful
                      resorts and so much more.

Los Cabos Tourism     Facing unique challenges this year due to a wave of natural disasters that impacted top
                      arrival destinations like Houston, Dallas, Miami and Los Cabos itself including Tropical
                      Storm Lydia, the Mexico City earthquakes and Hurricanes Irma and Harvey, new data
                      underscores Los Cabos' rare strength and resilience:

                          •   6% surge in hotel occupancy compared to 2016 even as area hotels saw a 21%
                              rise in RevPAR during June through August 2017

                          •   20% year-over-year growth since 2015

                          •   Passenger arrivals in Los Cabos increased 17.3% from January through
                              September 2017 compared to 2016

                          •   International visitation numbers rose even higher at 17.7% from January
                              through September 2017 compared to 2016

                          •   7 out of 10 visitors are repeat guests

                          •   90% of first-time visitors say they would return

                          •   In September 2017, a traditionally slow month for the travel industry and in
                              the immediate aftermath of the U.S. State Department travel warning, the
                              data recorded a 19% increase in hotel occupancy considering the growth in
                              hotel inventory by 6% over the same period and a steady 70% hotel occupancy
                              rate.

                          •   29% growth in tourist arrivals compared to the same period in 2016

                          •   36% percent increase in international visitors compared to the same period in
                              2016

                          •   Forecasts estimate Los Cabos will end the year 5% up in tourist arrivals

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Origin Markets   The origin markets of the US and Canada are looking for alternatives to Cabo pricing,
                 lack of access to water and limited access to other amenities. Both American and
                 Canadian demographics for real estate are looking for active resort destination in
                 which to invest and live. The location to all major services, lift, easy driving distances,
                 and an eco-friendly resort destination fill a demand for which there is no current
                 supply. The current mix of sales is still predominantly 50% US, 35% Canadian and 15%
                 Mexican.

Price & Pace     The price and pace of shared ownership and whole ownership real estate offerings in
                 this document are based on conservative assumptions tied with the market comp set.
                 In summary, shared ownership prices are discounted at a rate of 15 to 20 percent from
                 Cabo comp set offerings with the sales pace scaled back 10 to 20 percent off the same
                 comp set.

                 Whole ownership sales are scaled to current East Cape real estate listings. There may
                 be significant increases in pricing and pace as the resort is further developed due to
                 the value of added amenities and services. Demand is a product of supply and
                 developers have struggled to combine all the correct pieces for a destination resort
                 community on the East Cape. A fully amenitized destination resort such as El Anhelo
                 would capture a larger market share.

El Anhelo vs.    In order to set the tone of this document and the future development of the Project, it
Diamante         can be compared to the Diamante development that has shown significant success
                 with their real estate product offerings. Diamante is considered to be the most
                 successful of the projects today with annual revenues of over $50 million year over
                 year since 2011. A head-to-head comparison of Diamante (comparison is relevant to all
                 other projects in the competitive set) to El Anhelo indicates a competitive advantage:

                     •   Amenities – El Anhelo’s location would have a significant competitive
                         advantage due to the planned programming matching Diamante; however,
                         with a world class marina in addition.

                     •   Marina, Water Activities and Access to Watersports – The planned marina at
                         El Anhelo would be the most consumer-friendly marina and only marina
                         between La Paz and the pending marina at Costa Palmas in La Ribera
                         (approximately 87 miles/2-hour drive). With its location on the East Cape, the
                         marina would have excellent access to the Sea of Cortez.

                     •   Golf – Diamante would have an initial competitive advantage with 36-holes of
                         golf by Davis Love III and Tiger Woods; however, with Arnold Palmer Design
                         Company committed as the golf course designer for the El Anhelo course, one
                         could potentially argue that it would only be a slight advantage. This will be

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    Arnold Palmer’s first planned course in Mexico.

•   Arnold Palmer Relationship – El Anhelo would be able to successfully leverage
    the Arnold Palmer Brand for golf and real estate. Arnold Palmer is still the
    single most powerful brand in golf amongst the baby boomer demographic.
    Since Mr. Palmer’s passing, it is anticipated that the brand strength will
    increase throughout the next few years due to his legacy.

    The addition of an Arnold Palmer Golf course, lodge, branded real estate,
    academy and public/private golf access would rapidly gain the consumer
    looking for the true family centered resort destination with the full amenities
    package offered at El Anhelo.

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MEXICO’S ECONOMIC OVERVIEW
Mexico’s economic outlook over the next five years remains promising. The country has been able to weather
the economic slowdown experienced across Latin America as a result of the global decline in pricing for oil and
other commodities and a softening U.S. economic outlook, among other issues. Mexico’s robust growth in
domestic demand, falling unemployment rates and low inflation have helped counter any negative impact
caused by currency devaluation and overall economic slowdown experienced across the region. As a result,
Mexico’s real GDP is projected to average 3% annual growth over the next decade, according to Oxford
Economics, supported by an aggressive structural reform agenda, strong private consumption and
manufacturing and increases in foreign investment.

In an effort to incite healthy competition and
attract     more        foreign     investment,
government-led            reforms were
implemented to dismantle monopolies in the
energy and telecommunications sector.
Private consumption continues to be the main
driver of growth, but the manufacturing
industry is gaining ground due to improving
demand from the United States, more
favorable cost dynamics compared to China,
and improved competitiveness associated
with the Mexican Peso’s depreciation. In
addition, the government is investing
in major infrastructure projects such as a new international airport in Mexico City. Foreign Direct Investment
(FDI) projected to total US $30 billion in 2016 and grow 6% annually to $38 billion by 2020. The automotive
industry, Mexico’s top FDI sector, is expected to continue attracting foreign investment given improving
conditions in the industrial sector and general infrastructure of the country.

Mexico’s lodging market has been shaped by the recent macroeconomic trends and is poised for more growth in
2017/2018. Expect to see a rise in international arrivals given the favorable exchange rate, new-build hotels in
manufacturing regions and ancillary markets and potential acquisition opportunities and mixed-used
developments in markets with high barriers to entry. Healthy demand fundamentals and continued momentum
from strong RevPAR growth in 2014-2016 indicate numerous opportunities for Mexico’s top tourist destinations.

Mexico has the most developed hospitality sector in Latin America and has enjoyed record-breaking visitation
levels for the past four years, evenly distributed across leisure and commercial destinations. The key indicators
responsible for the positive results in the hospitality market are:

    •   Increased liquidity, growing foreign investors and emerging domestic investment has projected to
        deliver an exponential growth of hotel acquisition by volume.

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•   Covering over 60% of the GDP, Mexico’s emerging middle class has restored growth in the service
    industry that has led to phenomenal growth in lodging demand.

•   User friendly smart phones and advances in technology are altering the relationship between hotels and
    guests which has transformed the hospitality industry enhancing hotel’s financial performance.

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THE DESTINATION
East Cape, Baja California Sur
The East Cape of Baja is an area of white sand beaches with warm, crystal clear waters that make for excellent
diving, some of the world's best sport fishing, world class windsurfing and kiteboarding. The area is home to
several beautiful resorts, a living coral reef and mile after mile of exceptionally beautiful, and sometimes, well-
hidden beaches.

The East Cape Baja resorts are mostly in or near the Los Barriles/Buena Vista area, on the shores of Bahía Las
Palmas. There are a few farther south along the coast and one to the north. The resorts of the East Cape tend to
be somewhat small in size, as resorts go; however, large on hospitality, which is a pleasant change that many
vacationers are seeking out in Baja.

The remoteness was the appeal in the early days, as it
remains to this day. The growing area is perceived as being
much more laid back than the glitzy nearby resorts of Cabo
San Lucas and San Jose del Cabo. Much of the East Cape is like
a different world than that of the Los Cabos resorts which are
so near, yet seem so far away. "This is how Los Cabos was
twenty years ago" is often heard when discussing the
tranquility of the East Cape.

The abundant sport fishing is what started it all and remains the main tourism draw today. Marlin, sail fish,
dorado, sierra, grouper, tuna, wahoo, snapper, yellowtail, cabrilla and the ever-powerful rooster fish are all
lurking in the waters of the East Cape. Colorful tropical fish inhabit the East Cape shoreline, rocks and reefs
making the area a "must do" for scuba divers and snorkelers alike. This is especially true at the Cabo Pulmo
Marine Reserve.

                                               Los Barriles is a kickback community of fishing resorts, some
                                               great restaurants, a few new upscale housing developments and
                                               also some of Mexico's best wind surfing during the winter
                                               months. This is a small town that does a good job of keeping the
                                               locals, and tourists, happy with good eats, great cocktails, and a
                                               variety of supplies. The beaches are incredible with an average
                                               water temperature near 80 degrees Fahrenheit all year. The
                                               entire area provides a feeling of really being away from the
                                               everyday hustle and is considered a more relaxing alternative
vacation destination to Cabo San Lucas.

South of Los Barriles/Buena Vista is an area that is home to a few secluded resorts, post-card perfect beaches,
one small town (La Ribera) and some very unique settlements that cater mostly to fishermen, divers and nature
lovers.

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Cabo Pulmo is a Mexican National Marine Park located 16
miles south of Los Barriles. Cabo Pulmo is home to a living
coral reef and millions of tropical fish, which makes for some
fantastic diving and snorkeling. Everything one could wish for,
as a diver, is nearby – tropical fish, game fish, manta rays, sea
lions and even the rare Golden Grouper. This protected area
has flourished and is an example of what the entire Sea of
Cortez was like in the not so distance past.

Jacques Cousteau Island an uninhabited island located off the
coast of the Cerralvo Channel near the city of La Paz in the Mexican state of Baja California Sur. It is eighteen
miles long with a land area of 136.498 km² (52.702 sq mi), and is the ninth-largest island in Mexico. It is part of
the Municipality of La Paz. The peak of the island comes to 2,100 ft (640 m) and the ridgeline runs north-south
with many small streams draining east to the Sea of Cortez and west to the Cupalo Channel. There are many
steep bluffs on the eastern sides and many sandy beaches and points on the west side.

Jean-Michel Cousteau’s Ambassadors of the Environment is a program previously introduced to the Project;
however, at the time they had a non-compete due to their involvement with the Ritz-Carlton. This has since
expired and they are eager to re-engage in the possible opportunity.

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TOURISM OVERVIEW
Leisure Travel Market
Every year MMGY Global, the leading integrated travel and hospitality marketing firm in the U.S., releases
findings from travel surveys they conduct. While this year's research indicates a slowdown in intent to travel and
a drop in leisure travel spend in the coming months, there are opportunities that marketers can leverage to
optimize their efforts in the next 12 months.

Millennial Families Driving Growth in Travel

This year's study predicts that the approximately 60 million traveling households in the U.S. will spend up to a $5
billion decrease on leisure travel in the next 12 months, which is a dip of less than 1 percent from the industry's
eight-year high in 2016. However, the 9.5 million households that are American Millennial families intend to
spend 19 percent more on vacations during the next 12 months and intend to travel 36 percent more than the
previous year. Compare that to U.S. travelers at large, who demonstrate a 6-point increase in intent to travel
this year.

   The depreciation of the Mexican peso to the U.S. dollar of almost 40% also makes travel more appealing.

This generational segment is also more likely to travel internationally. A quarter of Millennial family vacations
were to international destinations. That creates a substantial opportunity for international travel brands, since
only 15 percent of Xers, 10 percent of Boomers and 12 percent of Matures vacationed to international
destinations. This is likely related to the group's world view and optimism, as three-quarters of Millennial
families consider themselves happy and optimistic about their own futures (83 percent), not to mention the
future of the world (62 percent).

Attractions Influence Where Travelers Go

As these travelers increase their domestic vacations, attractions are becoming more relevant in influencing
where those vacations are taken. More than half of all vacations (53 percent) included at least one visit to an
attraction last year. And of those 41.5 million households, 68 percent say that they chose those attractions
before their vacations began. This means that travelers are building attractions into their travel planning instead
of making the decision while in the destination.

And, with Millennial families on the rise, one might assume that theme parks and amusement parks create the
most interest among attractions. However, this year's research indicates that the top-ranking attractions are
more educational and culturally based, with art and history museums (65 percent), aquariums (59 percent) and
science museums (56 percent) coming before theme parks (55 percent).

Google Is Growing Its Footprint in Travel

How travelers search and plan for their vacations is shifting as well. Search engines, which were once just
pervasive during certain phases of the travel planning process, now lead across the entire purchase. Most
significantly, travelers now rank search engine results as their top choice while searching for advice and ratings

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as well as when they are making reservations (search engines were ranked third in both of those phases the year
prior).

This is no doubt due to Google's investment in travel and release of new travel products in the last two years. In
fact, Google is now ranked by U.S. travelers as the site most often used on a regular basis to obtain travel
information and prices – a position that has been held by Expedia the last two years.

Affluent Travelers

Among affluent travelers who took at least one vacation, not all are spending their discretionary income on
high-end travel experiences. Said another way, not all affluent travelers are luxury travelers. Luxury travelers –
affluent travelers who believe it's worth paying more for the very best quality for both vacation
accommodations and transportation – only make up 36 percent of affluent travelers.

Luxury travelers, the most promising affluent segment for travel marketers, represent 11 percent of all American
travelers. During the past 12 months, these 6.7 million traveling households took 40 million vacations and spent
$67.5 billion on leisure travel.

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Mexico Tourism
According to the 2017 Travel and Tourism Competitiveness Index
(TTCI) report, Mexico delivers a strong performance this year. It is
one of the most-improved countries in the index, rising 8 positions
to reach 22nd place in the global ranking as it continues to close the
gap with the US and Canada. The government’s prioritization of the
T&T sector (30th) and the effective use of both natural (2nd) and
cultural (10th) resources have paid off.

TTCI provides a measurement of the factors that make it attractive
to developing business in the travel and tourism industry of individual countries.

Source: 2017 Travel and Tourism Competitiveness Index; Colors are determined by the relative position of each score in the global
distribution of each pillar, taken individually; Score 1-7 (Red = Poor; Yellow = Better; Green = Best).

Snapshot of Mexico Tourism Activity during the first half of 2017:

    1. The arrival of international tourists was 19.2 million, up 2.8 million tourists in the same period of 2016
       and equivalent to an annual increase of 12.2%.

    2. Foreign currency income from the arrival of international visitors was US$11.1 million, equivalent to an
       increase of 9.8% in comparison to the same period 2016.

    3. The arrival of foreign visitors who reside in the United States represents 61.9% of all foreign arrivals by
       air-travel. From the Latin American and the Caribbean region, the countries of residence with the

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       highest number of foreign arrivals in Mexico were Argentina and Colombia, with 2.8% and 2.2% of total
       visitors respectively.

   4. The percentage of hotel occupancy in a group of 70 resorts reached 62.4%, this is 1.8 basis points higher
      in comparison to the same period of 2016.

    5. The arrival of domestic tourists to hotel rooms was 27.9 million tourists (71.8%), the remaining arrivals
       (28.2%) were from foreign tourists.

    6. In the second quarter of 2017 around 4.0 million people were employed in the Mexican tourism sector,
       which accounted for 8.5% of the national employment.

Overall Arrivals – During January-June 2017, the arrival of foreign air-coming visitors who reside in the United
States represents 61.9% of all foreign arrivals by air. From the Latin American and the Caribbean region, the
countries of residence with the highest number of foreign arrivals in Mexico were Argentina and Colombia, with
2.8% and 2.2% of total visitors respectively.

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American and Canadian Arrivals – The American residents who arrived in Mexico by air increased 11.6% in
January-June 2017 compared to the same period of 2016, registering 5.6 million passengers. Los Cabos airport
passengers is a large part of the over 500,000 visitors noted in the “Others” column. During the same period, 1.1
million Canadian residents registered, which is 9.9% higher in comparison to 2016.

                                          Graph A – American Arrivals

                                                                                           Los Cabos,
                                                                                             B.C.S.

                                          Graph B – Canadian Arrivals

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Air Travel – The number of passengers arriving by air increased 11.5% in January-June 2017 in comparison to the
same period last year, reaching 33.3 million passengers, equivalent to an increase of 3.2 million passengers.

Domestic Passengers – The number of passengers arriving by air on domestic flights was 21.7 million,
representing 2.2 million of additional passengers (12.3%), in comparison to the same period last year.

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International Passengers – The number of passengers arriving by air on international flights increased 10%,
reaching 11.6 million passengers, 1,054 more passengers compared to the same period last year.

Cruise Passengers – During January-June 2017, the number of cruise passengers reached 3.7 million,
representing an increase of 489,000 passengers (14.8%) compared to the same period 2016.

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Cruise Ship Arrivals increased by 184 to 1,390 cruises, an increase of 15.3% in comparison to the same period
last year.

                                             Source: All graphs from Datatur

Los Cabos Tourism                                                              Snapshot of Key Los Cabos Statistics

Over the years, tourism has become an integral part of the              Hotel Occupancy                    ↑ 6%
economy in Los Cabos. The destination’s geographic location
                                                                        Passenger Arrivals                 ↑ 17.3%
and quality of infrastructure have positioned it highly within
the international tourism arena although it primarily                   International Visitation           ↑ 17.7%
maintains a focus on the North American market. Tourism                 YoY Growth since 2015              ↑ 20%
authorities and representatives from the travel industry,               Visitors to Repeat Guests          = 70%
including hotels, resorts, Tourism Board, the international
airport and Port Authority of Los Cabos, announced that the
                                                                        First-time visitors would return   = 90%
number of visitors to the region grew significantly over the            Tourist Arrivals YE 2017           ↑ 5%
past couple of years.
                                                                        For September 2017 compared to same
According to the Los Cabos Tourism Board and the Hotel                  period 2016:
Association of Los Cabos, new data reported demonstrates
                                                                        Hotel Occupancy                    ↑ 19%
the destination's leadership position as Mexico's premier
destination for tourism and investment. During the peak                 Inventory                          ↑ 6%
summer months starting from June through August 2017, the               Occupancy Rate                     = 70%
destination saw a 6 percent surge in hotel occupancy                    Tourist Arrivals                   ↑ 29%
compared to 2016 even as area hotels saw a 21 percent rise
                                                                        International Visitors             ↑ 36%

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in RevPAR.

This seasonal performance streak indicates Los Cabos is sustaining an impressive momentum of 20 percent YoY
growth since 2015. This year, passenger arrivals in Los Cabos increased 17.3 percent in January through
September 2017 compared to 2016. International visitation numbers rose even higher at 17.7 percent during
the same timeframe. The data sends a strong signal that Los Cabos continues to be an attractive destination for
tourists and investors alike that are looking to enjoy the distinct experiences and opportunities.

Facing unique challenges this year due to a wave of natural disasters that impacted top arrival destinations like
Houston, Dallas, Miami and Los Cabos itself including Tropical Storm Lydia, the Mexico City earthquakes and
Hurricanes Irma and Harvey, the new data underscores Los Cabos' rare strength as a destination where 7 out of
10 visitors are repeat guests and 90 percent of first-time visitors say they would return.

In September 2017, a traditionally slow month for the travel industry and in the immediate aftermath of the U.S.
State Department travel warning, Los Cabos remained resilient. The data recorded a 19 percent increase in hotel
occupancy considering the growth in hotel inventory by 6 percent over the same period and a steady 70 percent
hotel occupancy rate. Overall, hotel rooms went from 14,000 in 2014 to 16,000 in 2017 and 4,000 new rooms
are expected to be added by 2021. Additional findings include:

    •   29 percent growth in tourist arrivals compared to the same period in 2016

    •   36 percent increase in international visitors compared to the same period in 2016

    •   Looking ahead, forecasts estimate Los Cabos will end the year 5 percent up in tourist arrivals

A Strong Recovery

The above data points suggest that visitors are responding positively to the new Los Cabos which had to rebuild
its estimated $1 billion in losses from three years ago due to Hurricane Odile. The destination has bounced back
with brand-new resorts for a range of budgets, extensive renovations to established properties, an airport
expansion, new attractions and tours, increased airlift, and more than 5,000 new hotel rooms in the pipeline
through 2020.

Another sign of recovery is an uptick in airlift, including new nonstop flights from Los Angeles and San Diego on
Southwest Airlines. Today, some 500 weekly connections serve Los Cabos International Airport (SJD), which is
undergoing a $48 million enhancement in order to welcome more visitors in the coming years. Scheduled for
completion in 2019, SJD’s expansion will include five new
gates, a brand-new VIP lounge and a complete
refurbishment of Terminal 1.

Below are key highlights and trends for the region:

Travel – Airlift and Cruise Ships

    •   During the first half of 2017, Los Cabos recorded
        910,175 passengers representing an increase of

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        18.6% over the same period in 2016. According to the arrival information for Los Cabos, 71% were
        international passengers; with 60.2% from the United States and 7.6% from Canada. National visitor
        numbers also increased led by Mexico City at 14.7% followed by Guadalajara and Monterrey at 5.8% and
        2.8% respectfully.

    •   Cruise ship arrivals at the port of Cabo San Lucas reached 101 during the first half of 2017, this is 14.8%
        more than the same period last year. The actual increase in the number of visitors from 199,934 to
        212,481 is on track for another successful year.

The “East Cape Sprawl”

    •   The addition of new resorts along the coastline of Los Cabos and the Corridor is an evident indication
        that real estate and resort offerings are currently sprawling north towards the East Cape.

    •   While there is little to no reporting on the state of the market all indicators are that the East Cape has
        been growing in visits and occupancies to the smaller resorts. Several of the local brokers in the Cabo
        area have purchased land in East Cape as investment vehicles as they have high confidence in the
        growth.

    •   The Announcement of the Four Seasons has squarely out the East Cape on the map for future growth.

Access & Transportation
A number of road infrastructure projects have been implemented over the last few years with the goal of
improving connectivity between La Paz, East Cape, San Jose del Cabo and Cabo San Lucas. In 2011, the Federal
government began work on the expansion and modernization of Highway 19 which runs along the Pacific coast
line and connects the towns of La Paz, Todos Santos and Cabo San Lucas. Reportedly, the project represented an
estimated investment of over $250 million and its scope comprised the highway’s expansion from two to four
lanes, reducing driving time from La Paz to Cabo San Lucas from 2.5 hours to 1.5 hours. The project also involves
the development of a $50-million, 4.4-mile bypass across the town of Todos Santos to improve traffic flow along
Highway 19.

In 2012 the Communications and Transportation Secretary also began construction of the bypass that will
connect San Jose del Cabo with Cabo San Lucas which is anticipated to alleviate the traffic flow along the Tourist
Corridor and improve travel time between the two towns. Reportedly, the bypass has an extension of
approximately 27 miles and represent an investment of more than $20 million.

Los Cabos is served by the San Jose del Cabo International Airport (SJD), located approximately ten miles north
of San Jose del Cabo. A total of 22 airlines service SJD including American Airlines, Alaska Airlines, US Airways,
United Airlines, Airtrain, Delta Air Lines, Virgin America, Air Canada, Volaris, Interjet and Aeromexico among
others. Several of these airlines provide direct flights numerous times during the week.

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Top 7 busiest domestic routes to Los Cabos International Airport during 2015-2016:
 Rank                 City               Passengers 2015       2016                           Airline
  1          Mexico City                         264,701       325,205     Aeroméxico, Aeroméxico Connect, Interjet,
                                                                           Magni, VivaAerobus, Volaris
   2         Jalisco, Guadalajara                106,907       121,125     Aéreo Calafia, Interjet, VivaAerobus, Volaris
   3         Nuevo León, Monterrey                38,789        52,632     VivaAerobus, Volaris
   4         Baja California, Tijuana             33,928        47,961     Volaris
   5         Sinaloa, Culiacán                    31,539        41,153     Aero Pacifico, VivaAerobus, Volaris
   6         México (state), Toluca               26,463        36,013     Interjet, Volaris
   7         Sinaloa, Mazatlán                     9,797        11,071     Magni

Top 10 busiest international routes to Los Cabos International Airport during 2015-2016:
 Rank              City             Passengers 2015    2016                                 Airline
   1
             Los Angeles, CA               198,607     212,221      Alaska, American, Delta, Southwest, United
   -
   2
             Houston, Texas                100,188     158,443      Southwest, Spirit, United Airlines, United Express
     4
   3
             Dallas, TX                    138,005     157,870      American Airlines, Spirit Airlines
     1
   4
             Phoenix, AZ                   123,633     143,314      American
     1
   5
             San Francisco, CA             110,574     125,803      Alaska Airlines, United Airlines, Virgin America
   -
   6
             San Diego, CA                 113,495     109,142      Alaska Airlines, Delta Airlines, Spirit
     2
   7
             Orange County, CA               60,678        83,203   Alaska Airlines, Southwest Airlines
     1
   8
             Denver, CO                      72,319        61,865   Frontier , Southwest Airlines, United Airlines
     1
   9
             Chicago, IL                     43,075        44,607   American Airlines, Frontier, United, Xtra Airways
     1
  10
             Calgary, Alberta                44,159        43,142   Air Canada, Air Transat, Sunwing Airlines, WestJet
     1

As shown, travelers from Texas and Arizona have become more prevalent while California remains the main
stream of visitors to the area.

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Travel Logistics
Traveling to any global destination usually makes
for a much better trip if an international airport is
near the resort or property. The best way for
visitors to arrive at El Anhelo located near Los
Barriles will be via airlift from the respective
origin markets with direct flights being the main
driver for easy access. As mentioned above, SJD
will be the most convenient port of entry for
travelers, especially those from the major US and
Canadian markets.

The SJD airport is located 13 kilometers (8 miles)
north of San Jose del Cabo, 48 kilometers (29
miles) northeast of Cabo San Lucas and 75
kilometers (47 miles) southwest of Los Barriles
(an easy 45-60-minute drive).

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REAL ESTATE MARKET OVERVIEW
Retirement Destination – Voted #1 by International Living
                                                          Mexico has always offered arguably the easiest
                                                          transition to expat life around: Low-cost, conveniently
                                                          close, friendly locals and plenty of expats—Mexico
                                                          offers an appealing balance of exotic foreign culture
                                                          and familiar First-World lifestyle.

                                                          Over recent years, crime and insecurity across the
                                                          border have made headlines there are parts of Mexico
                                                          that are not recommended; however, Mexico is a large
                                                          country and people are gravitating there. Seasoned
                                                          expats, folks who have lived in countries like Costa Rica,
                                                          Ecuador, and Belize, are moving to Mexico.

After all, there’s a reason over 1 million Americans call Mexico home. The cost of living is great – expats report
living well for as little as $1,200 a month – and has gotten even better with the weakening of the peso against
the dollar in recent years. This allows for excellent value in real estate (to buy or rent) for even less than prior
years – an apartment that cost $1,300 to rent in 2014 costs $980 now. Those dollars also go even further when it
comes to Mexican healthcare.

This proximity also makes it an ideal destination for snowbird living, perfect for escaping from the worst of the
winter weather. There is a diverse selection of climates spread out across this country, ranging from hot weather
on the beach to spring-like in the highlands.

Mexico’s Housing Market
Through research, it was found that there are no specific agencies that track the second home market in Mexico
or Los Cabos. The below information was reported approximately 12 months ago and pricing, trends and details
should be considered as such.

Mexico’s housing market has enjoyed nominal growth for a decade, but the real (inflation-adjusted) numbers
are prosaic:

    •   In 2009, house prices rose by 4.75% (0.77% inflation-adjusted)
    •   In 2010, house prices rose by 3.7% (-0.59% inflation-adjusted)
    •   In 2011, house prices rose by 5.9% (2.37% inflation-adjusted)
    •   In 2012, house prices rose by 2.9% (-1.15% inflation-adjusted)
    •   In 2013, house prices rose by 4.07% (0.39% inflation-adjusted)
    •   In 2014, prices increased 5.11% (0.84% inflation-adjusted)

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    •   In 2015, prices increased strongly by 6.75% (4.36% inflation-adjusted)
    •   In 2016, house prices rose by 7.41% (4.07% inflation-adjusted)

It should be noted that due to the depreciation of the Mexican peso over the past few years, the real estate
market has significant potential for investment and tourism.

Local house price variations

Whatever the short-term hiccups, there is an enormously strong housing market in Mexico.

The Mexican market is not driven by speculators. There are many developers, it is highly competitive. Much new
housing is built, which keeps prices down. Interest rates are (relatively) low in the social sectors, due to
subsidies. Home prices in Mexico rose by 6% annually between 2005 and 2016, according to SHF’s home price
index. The last big housing crisis occurred after the Tequila crisis of 1994, when a currency devaluation followed
by interest rates spiking caused 40% of all bank loans to default. Since then, there has been continuous growth.

In Playa del Carmen, a coastal resort town along the Yucatán Peninsula´s Riviera Maya, two-bedroom beachfront
apartments are priced from US$550,000, according to Sotheby’s International Realty. In Playacar, a gated
community of resort developments in Playa del Carmen, a four-bedroom home with an infinity pool lists for
US$2 million.

In Tulum, another resort town located in Mexico’s Caribbean coast, a two-bedroom penthouse in the exclusive
gated community of AldeaZamá, is priced about US$300,000. To the south, a four-bedroom villa is priced at
US$3.9 million. To the north, in TankahBay, a five-bedroom seafront villa with a pool is listed for US$1.6 million.

In Cancún, a city in southeastern Mexico known for its beaches, mega-resorts, and frenetic nightlife, prices for
four-bedroom villas with a pool range from US$1.4 million to US$3 million.

Luxury market buoyed by both foreign and domestic demand

Mexico’s real estate market has been buoyed by strong demand in resort communities, according to the
International Consortium of Real Estate Associations (ICREA). American and Canadian buyers are returning to
Mexico, after a several-year slump, thanks to low oil prices and the strong US dollar, pushing home values up.

American buyers are very important as owners of beachfront properties, which were badly affected by the
slump of 2009-10 in areas like Baja California Sur, Nayarit, Baja California, Guerrero and Sinaloa.

The rising middle class

Between 2000 and 2010 Mexico’s middle-class grew from 37 million to 44 million (INEGI, 2013). Last year, the
country’s middle class was estimated to account for almost half of the total households, at 14.6 million.

The middle class is expected to continue growing, with about 3.8 million more households projected to move
into the middle class by 2030, for several key reasons:

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First, inflation has halved: it was close to 10% in 2000, but between 2015 and 2016 the rate has hovered around
2.8%. The autonomy of the Bank of Mexico has played a key role.

Second, there is now trade openness. As a percentage of the economy, foreign trade (exports plus imports)
accounts for nearly 60% of GDP, making Mexico one of the most open economies in the world. By way of
comparison, the figure is 27% in Brazil, 48% in China and 30% in the United States. This is fosters competition
and puts an upper limit on the price of goods in the local market.

Third, there is the prudent management of public finances. There is no significant pressure on the fiscal balance
or public debt. Between 2000 and 2012, the fiscal deficit was at levels below 1% of GDP. The headline fiscal
deficit is expected to hover around 2.4% this year, from 3% in 2016. Total public debt, domestic and foreign,
remains below 50% of GDP in 2016.

The last component is financial inclusion. The population using banking services rose from 33 million in 2006 to
51 million in 2012, marking an annual average growth rate of 7.5%. In 2016, about 44% of adults in Mexico own
a bank account, according to the Encuesta National de Inclusion Financiera. Last year, the government also
launched the National Financial Inclusion Strategy (NFIS), which aims to accelerate access to financial services
for the more than half of the population currently left out of the formal and regulated financial system.

Los Cabos Real Estate Market
Despite a category 4 hurricane 3 years ago that
flattened many structures, Los Cabos, located on the
tip of Mexico’s Baja California peninsula, is
experiencing an explosion of ultra-luxury-home
construction. Many of the new projects are hotel-
based residences that offer owners not only valuable
property, but also extensive round-the-clock resort
services. Among the newest offerings is a collection of
30 private residences from Las Ventanas al Paraíso, a
Rosewood Resort, one of the best-known luxury
resorts in the region. Homes will boast authentic Mexican design, private infinity pools, 24-hour butler service,
and rooftop putting greens.

Penthouses are priced at $7 million and include 9,000 square feet of indoor/outdoor living space with views of
the Sea of Cortez from 3,600-square-foot rooftop terraces.

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