Executive SummaryThis offering is comprised of the fee simple interest in theBoutique Hotel (the “Hotel”), located 165 km

( 2.5 hours) northeast of Rio de Janiero on the edge ofManguinhos Beach on the northern coast of Armação dosBúzios. The property sits on 3,260 m2 in the beach section ofBuzios, RJ, Manguinhos, Brazil. The hotel, which wasrenovated in 2007, contains 18 suites, all featuring a privatebalcony and view of the sea. In addition to access to theManguinhos Beach, the Hotel offers a swimming pool,sauna, and beauty and body treatments. The hotel is beingoffered unencumbered by both management and brand.

Asking price: $2.5 million US dollarsTiming: Immediate

Hotel Boutique in BuziosBrazil

Boutique Hotel:Established in 1981, the Boutique Hotel is one of the firsthotels built in Armação dos Búzios, one of the mostbeautiful and sophisticated tourist destinations in Brazil.

For those seeking tranquility, privacy, or a romantic

and magical getaway, the Boutique Hotel offers thefollowing amenities:

• Beautiful oceanfront location on Manguinhos Beach

• Private oceanfront balconies with expansive views of the sea below in every suite

• 18 suites, either standard or deluxe (larger with 2 living environments)

• All suites have a queen size bed that is slightly elevated so guests never lose sight of the sea, as well as cable TV, air conditioning, free wireless Internet (Wi-Fi), telephone, minibar, safe with key, and DVD player (Luxury Suites).

• Swimming pool

• Sauna

• Beauty and body treatments that can be enjoyed in the rooms or in sessions outside facing the beach

• Waterfront bar

• Waterfront lounge

• Upstairs bar

• Air conditioning in all guest suites

• Game room (billiards table)

• Outdoor beds

• Proximity to the shopping, fine dining, and nightlife of Buzios

• Unencumbered by both management and brand.

Region (Buzios)

Búzios (officially known as Armação dos Búzios), an8km peninsula, a former fishing village located inRegião dos Lagos, in the state of Rio de Janeiro,Buzios is about 165km from the city of Rio deJaneiro. The peninsula was popularized by legendarymovie star Brigitte Bardot in the 1960s and is nowone of the top resort destinations in all of Brazil.Búzios has 23 beaches, each one with its own uniquecharacteristics – sandy or rocky, large or small, andwindy or calm. The main strip, Rua das Pedras, is thehome of the shopping, fine dining, and nightlife ofBuzios. The peninsula also has two nature reserves:the Emerências Reserve, where you'll find the purestAtlantic Forest vegetation, with exotic plants,bromeliads and the last golden tamarin monkeys inthe region, and the Taua Reserve, where you can seeover 300 species of butterflies and 60 types of birds.

OpportunityThe opportunity now exists to purchase theBoutique Hotel unencumbered by bothmanagement and brand. With somerenovation the property will be positioned asone of the top upscale boutique hotels in theBuzios Market.

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Martini Lounge

Romantic Escape

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Property Location

The Boutique Hotel was built in 1981in Armação dos Búzios, one of the most beautiful andsophisticated tourist destinations in Brazil. Armaçãodos Búzios is a popular resort town located in the stateof Rio de Janeiro. The peninsula was made popular bythe legendary movie star Brigitte Bardot and has 23beaches and 18 islands in its vicinity.

The west of the peninsula offers clear and calm coast for aquiet relaxing vacation, while the east side offers wildadventures such as windsurfing and other water sports.Each beach offers a different experience, and everypersonality is bound to find a suitable beach here. Some ofthe popular beaches in the area include João Fernandinho,Azeda, Ferradura, and Manguinhos. While João Fernandinhois known for its seafood and drinks, Manguinhos is knownfor water sports, especially wind surfing. In addition tobeaches, the peninsula also has an active scene ofrestaurants and nightlife.

The hotel is close to many transportationpoints and tourist attractions. It is about 2mile (5 minute on cab) from Rua DasPedras, the cobblestone street that is thecenter to all the restaurants, bars,shopping, and nightlife.

Tourist Attractions

Rua Das Pedras: 2.0 mi

Bardot Seashore : 2.0 mi

Gran Cine Bardot: 2.1 mi

Transportation

Bus Station Auto Viação 1001: 2.2 mi

Umberto Modiano Airport: 2.7 mi

Cabo Frio International Airport: 14 mi

Three Fishermen: 2.5 mi

City Centre: 2.6 mi

Brigitte Bardot Statue: 3 mi

Property Description

Property Overview:Established in 1981, the Boutique Hotel is one of the

first hotels built in Armação dos Búzios, one of

the most beautiful and sophisticated touristdestinations in Brazil. Located 2 1/2 hours from Rio deJaneiro, on the edge of the calm and crystalline waters ofManguinhos beach, the hotel, which was renovated in2007, offers 18 individually decorated suites, all featuringa balcony and view of the sea - a beautiful setting whereguests can enjoy the orange Sunset and calm reflection ofthe moonlight night.

• 5 buildings in total: main building, waterfront building, 3 bedroom house, laundry building, and lounge building

• 18 guest rooms: 7 luxury suites and 11 standard suites, all ocean view with balconies

• 3,260 m2 in total

• Swimming pool, sauna, TV room, bar right next to the beach

• Beauty, body treatment, relaxing massages available in rooms or on beach

• Proximity to beach area as well as Rua Das Pedras, the main street with restaurants, bars, and nightlife

• Offers privacy, tranquility and intense contact with nature

• The only hotel on Manguinhos Beach

• Large windows provide breath-taking views

Dining:

The hotel has one restaurant. The cuisinecombines the best of Mediterranean and Braziliancuisine of the region, such as seafood, tropicalsalads, meat and pasta, and appetizers that can bedelivered in the guestrooms, or offered in thehotel restaurant, or outdoors.

Recreational Facilities:

The Boutique Hotel offers swimming pool,

sauna, TV room, games room, bar with directaccess to the beach, and gazebos for guests torelax on the beachfront. The hotel also offersbeauty and body treatments. Manicure, pedicureand hair stylists are available to guests, who canalso enjoy relaxing massages in the rooms or insessions outside facing the beach.

Property Construction

The building was built in 1981 and is in excellentcondition. It is constructed with100% masonry. Thebuilding has Spanish-style white stucco exteriorfeaturing wood-frame hinged windows and terracotta roofing.

Mechanical Systems:

There is no central HVAC systems but each room hasindividual window air conditioning units. The housealso has 2 brand new larger window units. Plumbingthroughout all the buildings are in good condition.

Hotel Management Agreement:

There is no management agreement. The hotel isowned and managed by a Brazilian limited liability

entity.

Zoning By-Laws:

The town of Armação dos Búzios has been a popularresort destination for many years and currently hasno zoning or by-laws that affects the establishment.

Real Estate Taxes:

There are annual Real Estate Taxes and WaterfrontTaxes at 8,000 Reals and 21,000 Reals respectively.

Environmental Analysis:

Ownership has revealed no environmental issues orhazardous waste issues that would impact the subjectproperty.

Guestroom Description:

There are two types of suites that make up the total of 18guestrooms: 11 Standard, with queen size double bed,and 7 Luxury, more spacious with two rooms. Both typesof suites are equipped with color television, airconditioning, telephone, minibar, safe, and free wirelessInternet (Wi-Fi), available throughout the entire property,including bedrooms. Each of the 18 individuallydecorated suites offer balconies with expansive views ofthe sea below.

Target Market:

The target market is primarily people from Rio deJaneiro, and other cities in Brazil (Belo Horizonte,Sao Paolo, etc.) The hotel also attracts other SouthAmericans from Argentina, Chile, Venezuela,etc. Finally, the hotel attracts visitors from Europe -Portugal, Spain, England, Italy, Russia, etc, andAmericans and Canadian stay at the hotel from timeto time.

Lease and Service Agreements:

The subject property is subject to minor service andlease agreements such as water, electric andutilities, and pest control. All actual expenses arereflected on the Profit and Loss statement, and allcontracts will be provided to interested parties.

Additional Information:

There is an adjacent property immediately tosubject property’s West which is a vacantcommercial lot. The owner of the lot has expressedinterest in selling, and interested parties couldpurchase and expand.

Brazil Macroeconomic OutlookDemand in the Brazilian market continues to grow, increasing about 8% (YTD, Feb 2010), and the appreciating Brazilian Real caused the ADR growth as the exchange rate altered (e.g. from 2.37 Real to the Dollar in February 2009 to 1.86 Real to the Dollar in February 2010. (Source: STR Global)

The expectation is of strong GDP expansion (+5.35 percent), a stable exchange rate, and an increase in SELIC rate (The Brazilian Central Bank’s Overnight lending rate). While the global economy has shown no signs of recovery, Brazil has emerged as an option: foreign direct investment (FDI) for 2010 (projected at US$37.5 billion) will be at its second-highest level in history, despite the expected reduction in global FDI.(Source: HVS Brazilian Hotel Market Overview 2009/2010)

The favorable situation has made the Brazilian hotel industry especially attractive. Large international hotel chains have set up development teams in Brazil. There are other reasons for the attention besides Brazil’s economic power:

• The country will be hosting the 2014 World Cup and the 2016 Olympics – events that induce demand, increase international visibility, and set a deadline for the execution of large public investments, thereby increasing executive confidence and ensuring strong economic activity.

• Creation of Pro-Copa line of credit, which will make available R$1 billion for the renovation and expansion of the hotel supply, with attractive interest rates and terms (starting at 6.9 percent, in up to 18 years), through the Brazilian Development Bank – BNDES. The new financing conditions will make projects more feasible and give developers and owners good mechanisms for financial leveraging.

(Source: HVS Brazilian Hotel Market Overview 2009/2010)

Competitive Lodging MarketThe is a midscale boutique hotelwith a superior location to most in its competitiveset. A unique opportunity exists to purchase thehotel and reposition it as a top luxury hotel in theregion.

Pousada Corais e Conchas is located approximately 2kilometers south along the peninsula on thesouthern side of the Buzios peninsula. The PousadaCorais e Conchas offers 28 spacious bungalows withbalconies and hammocks in a secluded green area.The property is proximate to both Downtown andGeribá, one of Búzio’s most lively beaches known forits beach sports and bars.

Pousada Byblos is located approximately 4kilometers further east along the north side of theBuzios peninsula in close proximity to the PousadaCorais e Conchas. Pousada Byblos offers 21 roomswith dazzling views of Armacao Beach. The hotel isproximate to Downtown and numerous popularbeaches.

Pousada Amancay is located approximately 5kilometers further east along the northern side ofthe Buzios Peninsula. Pousada Amancay offers 16rooms all with ocean views. It is situated on JoaoFernandes Beach, a popular local beach. The hotel isalso within walking distance of Downtown.

Hibiscus Beach Pousada is located approximately 6kilometers northwest on the northern side of Buziospeninsula. The hotel is set on a hillside overlookingthe popular Joao Fernandes Beach. Hibiscus BeachPousada offers 14 bungalows with ocean views andare set adjacent to a tropical gardens.

hotel

Competitive Hotel Summary

Pousada Corais e Conchas Pousada Byblos Pousada Amancay

Hibiscus Beach Pousada

Distance to Subject Property 1.6 km 4.2 km 5.6 km 6.5 km

Type of Facility Bed & Breakfast Bed & Breakfast Bed & Breakfast Bed & Breakfast

AAA Guide Rating Not Rated Not Rated Not Rated Not Rated

Rooms 28 21 16 14

Season Dec-Mar Dec-Mar Dec-Mar Dec-Mar

Waterfront Location Yes Yes No Yes

Amenities

Wireless Internet, Restaurant, Bar, Outdoor Pool, Television, AC

Outdoor Pool, Restaurant, Mini-Fridge, Television, AC

Outdoor Pool, Restaurant, Mini-Fridge, Television, AC

Wireless Internet, Outdoor Pool, Bike Rental, Car rental, Mini-Fridge, Television, AC

Key Market Indices

• The competitive market has been able to mitigate periods of economic downturn as it is considered a “drive-to” destination and will continue to benefit from this orientation. As such the local lodging market will continue to draw from major cities in Brazil.

• The natural beauty of the Buzios coastal region provides

the perfect backdrop for beachfront properties.

• Buzios remains a seasonal market with high season stemming from December to March and low season from April to November.

Projected Occupancy Rate And Average Daily Rate

Projected Occupancy

As stated previously, the hotel is located in one of the most picturesque locations on the Brazilian Coast. With a focused renovation, repositioning, and marketing effort as an upscale boutique hotel, along with the benefits associated with stable ownership it is anticipated that demand levels will increase considerably, by recapturing demand lost demand. Given these factors, a stabilized occupancy rate of 36 percent in 2011 is reasonable.

Average Daily Rate

The hotels average rate herein assumes that the property will achieve a stabilized average daily rate of $225.56 in 2011. Assuming significant renovations, repositioning, and aggressive marketing we anticipate significant rate gains allowing the property to compete with upper-tier lodging products in the Buzios region.

Projected Cash Flows

The projections herein utilized the financial performance of the subject property over the last three years and assumes that the property will undergo significant renovation and marketing repositioning as an upscale boutique hotel.

Presented below is a 5-year pro forma for the subject property including base year 2009 for reference. The projections assume a re-positioning to an upper-tier boutique hotel. The projections are based on calendar years beginning January 1 and ending December 31.

Financial Analysis

Forecast of Income & Expenses (Brazilian REAL)

Martin Pescador- Buzios, Brazil

Year (1)

Occupancy 34.0% 36.0% 40.0% 44.0% 60.0%

Average Daily Rate $217.45 $225.56 $243.61 $265.75 $296.23

Occupied Roomnights 2,180 2,235 2,628 2,920 3,212 4,380

$ % $ % $ % $ % $ % $ %

Revenue

Rooms 462,749 86.8% 485,886 86.8% 592,781 83.6% 711,337 83.6% 853,605 83.5% 1,297,479 84.4%

Food and Beverage 63,224 11.9% 66,385 11.9% 106,216 15.0% 129,583 15.2% 158,092 15.5% 229,233 14.9%

Rentals and Other Income 7,200 1.4% 7,200 1.3% 10,000 1.4% 10,000 1.2% 10,000 1.0% 10,000 0.7%

Total Revenue 533,173 100.0% 559,471 100.0% 708,997 100.0% 850,921 100.0% 1,021,697 100.0% 1,536,713 100.0%

Departmental Expenses

Rooms 91,277 19.7% 95,841 19.7% 119,742 20.2% 165,030 23.2% 198,036 23.2% 301,015 23.2%

Food and Beverage 42,074 66.5% 44,178 66.5% 69,040 65.0% 84,229 65.0% 102,760 65.0% 149,002 65.0%

Total Departmental Expenses 133,351 25.0% 140,019 25.0% 188,782 26.6% 249,260 29.3% 300,796 29.4% 450,017 29.3%

Total Departmental Income 399,822 75.0% 419,453 75.0% 520,215 73.4% 601,661 70.7% 720,901 70.6% 1,086,696 70.7%

Undistributed Operating Expenses

Administrative and General 14,972 2.8% 15,239 2.7% 15,935 2.2% 18,753 2.2% 19,678 1.9% 21,646 1.4%

Sales and Marketing 26,053 4.9% 26,518 4.7% 29,958 4.2% 32,954 3.9% 36,249 3.5% 39,874 4.7%

Property Operation and Maintenance 45,976 8.6% 46,797 8.4% 50,000 7.1% 50,000 5.9% 50,000 4.9% 50,000 8.4%

Utilities 61,545 11.5% 62,644 11.2% 72,028 10.2% 84,763 10.0% 88,944 8.7% 97,838 11.3%

UDOE 6,275 1.2% 6,387 1.1% 6,374 0.9% 7,501 0.9% 7,871 0.8% 15,367 1.0%

Total Undistributed Expenses 154,822 29.0% 157,585 28.2% 174,295 24.6% 193,971 22.8% 202,742 19.8% 224,725 14.6%

Gross Operating Profit 245,000 46.0% 261,868 46.8% 345,920 48.8% 407,691 47.9% 518,159 50.7% 861,970 56.1%

Income Before Fixed Charges 245,000 46.0% 261,868 46.8% 345,920 48.8% 407,691 47.9% 518,159 50.7% 861,970 56.1%

Fixed Charges

Property and Other Taxes 29,000 5.4% 29,000 5.2% 29,000 4.1% 29,000 3.4% 29,000 2.8% 29,000 1.9%

Other Fixed Charges 262,103 49.2% 262,103 46.8% 262,103 37.0% 262,103 30.8% 262,103 25.7% 262,103 17.1%

Total Fixed Charges 291,103 54.6% 291,103 52.0% 291,103 41.1% 291,103 34.2% 291,103 28.5% 291,103 18.9%

Net Operating Income (46,103) -8.6% (29,235) -5.2% 54,817 7.7% 116,588 13.7% 227,056 22.2% 570,867 37.1%

$212.27

33.2%

2009 2010 2011 2012 2013 2014

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