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Proposed Capella Pedregal Resort, Market Analysis, Projections and Land Valuation and "As Complete" Appraisal

Realty Financial Resources, Inc. retained HVS to perform a feasibility study and appraisal of a proposed mixed-use resort in Cabo San Lucas, Baja California. The original need for the study was for an appraisal of the land based on a land residual approach. The resort was to include the development of a 66-unit, full service, resort; 31 fractional units; and 20 wholly-owned, single family units. The 23.7-acre site was located at the very tip of the Baja Peninsula, adjacent to downtown Cabo San Lucas, near the rock formations know as Land’s End.

The original appraisal assignment entailed performing research of the local high-end resort lodging market and performing a supply and demand analysis in order to develop a forecast of income and expense for the proposed resort hotel. The hotel was then valued via a mortgage-equity discounted cash flow analysis.

The proposed fractional and single family units were valued by investigating the market for wholly-owned, timeshare and fractional units in the Los Cabos market. Based on comparable data, adjusted for the subject’s unique characteristics, we developed a forecast of sales price and pace for the “for sale” components of the development. The net sales proceeds from the sale of the fractional and wholly owned units were discounted back to the date of opening at a market derived discount rate and summed to derive a value as of the date of completion.

The value of the resort hotel, fractionals and wholly owned units were summed to derive a value of the entire resort development. The budgeted cost to develop the resort and a developer’s profit was deducted from the “as improved” value to derive a residual value to the land.

Later in the development process HVS International was retained by Textron Financial Corporation to appraise the proposed resort in its entirety, as of the date of completion, for project financing.