Trio Tower Final Version[1]Business Plan
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Trio Tower Final Version[1]Business Plan

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TrioTower Executive Summary San Jose, Costa Rica 6-24-09

TrioTower Executive Summary San Jose, Costa Rica 6-24-09

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    Trio Tower Final Version[1]Business Plan Trio Tower Final Version[1]Business Plan Document Transcript

    • capital investments & associates Presents TRIO TOWER Mix - Use Complex Costa Rica Business Proposal P O B o x 8 218 21, P e m b r o k e P i n e s , F l 3 3 0 8 2 • 9 5 4 - 6 5 0 - 3 8 8 4 • c a p i n v 2 4 @ g m a i l . c o m
    • Table of Contents Executive Summary 1 The Market 4 The Country 4 Business Climate 4 Tourism 5 Challenges 5 Project Description 6 The Concept 6 The Location 7 The Building 9 Sales and Marketing 11 Objective 11 Sales and Marketing Media 11 Marketing Materials and Budget 12 THE DEVELOPER 13 Experience 13 Completed Projects 13 Current Projects 13 Financing Required 14 Investment To Date 14 Capital Investments & Associates Tr i o To w e r P r o p o s a l i
    • Letters of Intent 14 Sales Projections 15 Projected Expenses 16 Construction Loan/Line of Credit Required 17 Exit Strategy 17 Addendum 1 - Financial Statements 19 Projected Profit and Loss Statement 19 Projected Cash Flow By Year 20 Assumptions - Projected Cash Flow By Year 21 Addendum 2 - Letters of Intent 22 The Hotel - Cafe KAV Group 22 The Hotel - Radisson Hotels, Original Letter of Intent Pg. 1 23 The Hotel - Radisson Hotels, Original of Letter of Intent Pg. 2 24 The Hotel - Radisson Hotels, Extension of Letter of Intent 25 Commercial and Medical Area - Dr. Gerardo Escalante López 26 Penthouse Level 1 - Escape Villas 27 The Business Center - Trio Business Lifestyle 28 Addendum 3 - Floor Plans 29 Level 1 - Commercial Area 29 Levels 2 to 5 - The Medical and Business Offices 30 Levels 6 to 13 - The Extended Stay Hotel 31 Levels 14 to 15 - The Luxury Penthouse Residences 32 Underground Levels 1 to 5 - The Parking Facilities 33 Acknowledgement 34 Capital Investments & Associates Tr i o To w e r P r o p o s a l ii
    • Executive Summary Background Trio Tower is a 15 level commercial building to be developed in Santa Ana, Costa Rica. The developer retained the firm of Baeza & Associates, Business Strategy Consultants, to perform an in-depth market study, taking into consideration the current economic situation and its’ impact on his project. Based on conclusions reached in this study, the decision was made to develop Trio Tower as a mix-use complex, a concept that has been successfully utilized in all developed countries and would be a first for Costa Rica. Trio Tower has been designed to create a space that allows for different uses leading to a better lifestyle in today’s modern business world. Trio Tower would be a place where the environment provides all of the facilities that meet the needs of living and business, either in a fixed or temporary manner. Furthermore, the report also recommended that all units be sold and not leased, thereby increasing the return on investment while mitigating any associated risks. Baeza & Associates also performed a comprehensive analysis to ensure that the types of tenants targeted for each of the sectors would be complementary: as a consequence enhancing the occupants perceived value of the complex. As such, the developer has decided to focus on two important local niches identified in the report: support for Medical Services and support for Business Travelers. Project Summary Santa Ana, where Trio Tower would be located, is one of the most prosperous regions of Costa Rica’s Central Valley. The corridor that runs from the canton of Escazu through Santa Ana to Ciudad Colon contains the highest percentage of affluent Costa Ricans, expatriates and foreign workers in the country. This combination of high income distribution and unique population demographics has resulted in a sizable demand for professional medical care facilities in the area, which is currently not being satisfied. Santa Ana is also considered to be the prime commercial and business district of the country. The sector where Trio Tower would be developed is known as “The Golden Mile”: due to the number of transnational and regional corporations, as well as, financial institutions that locate their headquarters in the district. As such, it hosts a large influx of business travelers requiring a wide variety of support services. To meet this demand for medical and business services, Trio Tower would incorporate the following marketable components: • Commercial/Retail Space • Medical Center and Offices • Business Center • Hotel Suites for the Extended Stay Market • Luxury Penthouse Apartments The developer has allocated a portion of Level 1 - Commercial/Retail Area (the ground floor) and Levels 2 - 4 for medical facilities and offices. The 5th level of the complex would be utilized as a Business Center, providing support services to businesses along with temporary office rental space. The hotel would be located on levels 6 - 13 of Trio Tower and the hotel rooms have been designed specifically for the extended stay market. The majority of extended stay visitors in Costa Rica do so for business or health care reasons. As such, the hotel would provide an important value added service to the complex. Trio Tower includes 18 luxury penthouse units as part of the complex on the last two levels. The pricing structure and size of the units are well within what is actively being sold in the market today. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 1
    • That the strategy to develop Trio Tower as a mix-use complex has been successful can be determined by the fact that the developer has received Letters of Intent (LOIs) totaling USD 32,104,336 to date. What is remarkable is that these pre-sales have occurred through word of mouth advertising, as the developer has yet to initiate his marketing campaign. Thus far, commitments have been issued for the following spaces: • Commercial/Retail Space - 250 sq. meters at USD 625,000 • Medical Center and Offices - 1300 sq. meters at USD 3,003,000 • Business Center - The entire 5th Level at USD 3,472,231 • Hotel Suites for the Extended Stay Market - Levels 6 through 13 at USD 21,827,082 • Penthouse Level I - The entire 14th Level at USD 3,177,023 It must be stressed that all issuers of (LOI’s) have financing in place. Upon notice of project funding the (LOI’s) will be converted into sales agreements. The U.S. based corporation which wishes to purchase the hotel has undertaken the necessary procedures to obtain approval for sending funds overseas. In turn, this corporation has received an (LOI) from Radisson Hotels, who wish to operate the property under their brand name. In addition, the developer has established a waiting list of prospective clients who have expressed interest in acquiring units in the development. About The Developer The developer has over 30 years experience in the construction industry in Costa Rica and the United States. His company, Compañía Constructora Occidental, specializes in the development, construction, sales and management of residential, commercial and recreational projects. He has an extensive list of successfully completed developments to his credit. Construction Loan/Line of Credit Required The parcel to be utilized for development was purchased for USD 3.58 million and has an outstanding mortgage of USD 1.0 million. Current appraisal is set at USD 4.0 million. The developer has underwritten the Architectural and Engineering Designs, the Environmental Impact Studies and the Preliminary Studies. In addition, the developer has obtained the following permits: County Letter of Pre Project Approval, SETENA, TRANSITO, and A&A Letter. To date the developer has invested a total of USD 3.86 million in Land Acquisition, Architectural and Engineering Designs, Project Permits and the construction of the on-site Sales Office. The project only requires the INVU and the Final County Permits to commence construction, a process which would take 60 days from the date of notification of project funding. This 60 day period would also be utilized for a selective bidding process to award the construction contract. Total Projected Sales for the project are set at USD 49,066,160.57 with Total Projected Expenses set at USD 36,214,712. The Projected Expenses include the developer’s investment in the project to date. The (LOI’s) received thus far represent 65% of total projected sales. Costa Rica allows the use of sales deposits for construction purposes. Upon project funding, the (LOI’s) are to be converted into sales contracts that would stipulate that 3 deposits of 10% would be made within the first 19 months of construction, with the balance due after final inspection of the units by the buyers. Taking in to consideration the positive cash flow generated by the sales deposits, the developer would require a USD 25 million line of credit to build Trio Tower. Use of funds would be specifically for construction purposes and to anticipate for any deferred deposits and unexpected construction delays.. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 2
    • Exit Strategy Once the project is funded, the (LOI’s) from each pre-approved client would be converted into sales contracts. The sales contracts would represent 128% of the total funds solicited for construction purposes. Taken together with the developer’s investment in the project they would represent 111% of total Construction Expenses. Any reduction in sales price necessitated by any future unforeseen economic developments would solely impact the developers net profit, not his ability to repay the line of credit and the associated interest payments. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 3
    • The Market The Country Costa Rica has long been considered the most politically stable of all Latin American countries. The main reasons underlying this stability have been the country’s history of continuous investment in social and educational development. Costa Rica's social indicators are the best in Latin America and, in some cases, approach levels prevailing in advanced economies. The Human Development Report considers Costa Rica to have the highest Human Development Index of all Central American nations. Costa Rica’s public healthcare development is also considered to be among the best in Latin America: allowing its populace to enjoy strong health indicators along with a long life expectancy. In addition, the World Economic Forum’s Global Competitiveness Index (GCI) ranks Costa Rica’s educational system as the best in all of Latin America. The country allocates at least 6% of its GDP to education and has a literacy rate that surpasses 95%, one of the highest rates in the western hemisphere. These educational achievements have led to the Costa Rican workforce being recognized for its high educational standards and its outstanding productivity level. Business Climate With a GDP of USD 26.2 billion in 2008, Costa Rica consistently has consistently ranked as one of the foremost countries in which to conduct business in Latin America. The 2009 (GCI) ranks Costa Rica as one of the most competitive economies in Latin America, ahead of countries such as, Brazil and Mexico. To quote from the 2009 Index: “an analysis of Costa Rica’s evolution in the rankings over the last three years highlights a remarkable upward trajectory, with a nine-place improvement since 2006.“. This solid economic stability has allowed Costa Rica to receive the most Foreign Direct Investment (FDI) in Central America. In addition, the country was ranked 2nd in Latin America for capturing the most (FDI) over GDP. Total (FDI) has compounded at an annual growth rate of 25% over the last 7 years. The country has targeted high-tech, medical device, and pharmaceutical (FDI) with a view toward diversifying from agriculture and unskilled manufacturing to skill-intensive industries. This approach has been successful in attracting multi-national companies such as; Intel, IBM, Oracle, P&G, Allergan, Baxter, Boston Scientific and Hewlett Packard, among others, to establish operations in Costa Rica. Costa Rica has gained salient and strategic market access through Free Trade Agreements (FTA) signed with: the U.S. and Puerto Rico, Mexico, the Dominican Republic, Singapore, Canada, Chile, Panama and the CARICOM nations. (FTA) negotiations are currently being held with China and the European Union. Trade with other countries accounts for 89% of GDP and has allowed Costa Rica to become the leading merchandise trading nation in Central America and the world’s 4th largest exporter of high-tech goods and services. The Globalization Index ranks Costa Rica as the 2nd most globalized country in Latin America and the nation’s Free Trade Zones are projected to surpass tourism as the largest contributor to GDP in the next 5 years. In addition,service oriented firms have also established operations in the Free Trade Zones and are now starting to rival manufacturing and distributing companies in their scope of activities. These are among the reasons that FDI Magazine has called Costa Rica “the Central American country of the future”. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 4
    • Tourism Tourism has been one of the main drivers of the Costa Rican economy and for almost 25 years the country has been the primary tourism destination in Central America. The World Economic Forum’s Travel and Tourism Competitiveness Index ranks the Costa Rican tourism industry as 2nd in the Latin American and Caribbean region, just behind Barbados. Industry growth has compounded at an annual rate of 9% over the past 7 years and represented 6.3 percent of total GDP and 6.5 percent of total employment in 2007. To assure continued expansion of the tourism industry, the government is promoting two higher value added sectors: eco-tourism and medical tourism. Taking advantage of country’s incredible bio-diversity and natural beauty Costa Rica is rapidly becoming the nonpareil eco-tourism destination. That this strategy has worked can be seen in the fact that even though Costa Rica receives less than 1/10th of the number of tourists compared to Mexico, the country’s tourism sector is vastly more lucrative. In addition, the country is now also supporting sustainable tourism clustering to take advantage of its’ reputation as one of the most eco-friendly nations in the world. A natural complement is Medical Tourism. Last year nearly 100,000 medical tourists visited Costa Rica. The combination of highly qualified medical practitioners and the comparatively low costs of their services, approximately 1/3 as compared to the U.S. and the EU, has resulted in this industry undergoing exponential growth over the past three years. The industry is also being helped by the fact that U.S. based insurance companies are now allowing their plans to be used in Costa Rica in order to offset their spiraling health care costs. To ensure continued growth in what is basically a recession proof sector, a Presidential edict declaring the field to be of “national interest” has been issued and Law No. 35054-S-COMEX-COM-TUR has been passed, which provides incentives to ensure the industry’s future development. Challenges The two main challenges to future development are; offsetting the impact of the economic recession in the U.S. and improving the country’s infrastructure. The (FTA) being negotiated with China will provide significant new direct investment once it is concluded and approved this year. In addition, the Instituto Costarricense de Turismo (ICT) has negotiated the entry of 10 new airlines, from non-traditional markets, to help offset the decline in travelers from the U.S. To obtain the necessary funds for repairing the country’s lagging infrastructure, Costa Rica has requested and been granted close to USD 2 billion in loans from international institutions. An example is a USD 850 billion loan from the Interamerican Development Bank (IDB), just recently approved by the Costa Rican legislature, which would fund the repair and construction of new roads, expansion of the international airports and expansion of the Caribbean Port of Limon. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 5
    • Project Description The Concept Trio Tower has been designed to create a space that allows for different uses leading to a better lifestyle in today’s modern business world. This concept is called “mix-use buildings” and has been successfully utilized in all developed countries and would be a first for Costa Rica. Trio Tower would be a place where the environment provides all of the facilities that meet the needs of living and business, either in a fixed or temporary manner. The building has been intelligently designed to ensure that all of the marketable components would be complementary in nature; assuring that the occupants perceived value of the complex would be enhanced. The building would be comprised of 15 levels of commercial and living space, as well as, 5 levels of underground parking facilities. Each unit sold would also include the sale of a corresponding number of parking spaces. The complex would include additional unassigned parking for the public in general. A brief description of each of the differing marketable components follows. Level 1 (Ground Floor): Commercial Area There would be 15 commercial spaces located on the ground floor and mezzanine of the property. The tenant mixture would lean towards businesses that could provide value added services to the building’s clientele. A portion of this space would be reserved for medical services, such as, a Pharmacy, Optometrist and Clinical Laboratory, among others. The remaining space would include restaurants and stores. This level includes 19 spaces of above ground parking. There would be a total of 2,338.34 square meters of commercial space for sale, which would include the assigned underground parking spaces. Levels 2 - 4: Medical Center and Offices There would be a total of 27 offices, 9 per floor, dedicated to Medical Services. The clientele would consist of Medical Clinics, with their affiliated doctors, to individual medical practitioners. Key points in the developer’s favor are the established upscale residents of the area and that there is a large pent up demand for modern medical facilities and offices in Costa Rica. Including underground parking, there would be a total of 6,104 square meters of medical space for sale. Level 5: Business Center This floor would be utilized as a Business Center offering business travelers and businesses access to temporary offices, conference rooms, as well as, logistical and general business support. The western side of the Central Valley, where Trio Tower would be located, receives a heavy influx of business travelers due to the well developed commercial activity of the region. Another key point in the developers favor are that business support services in the area are virtually non-existent. Including underground parking facilities this level would have 1,859 square meters for sale. Levels 6 - 13: Extended Stay Hotel In accordance with the market study performed by Baenz & Associates the hotel design would incorporate Junior or One Bedroom Suites designed for the extended stay market. The majority of extended stay visitors in Costa Rica do so for business or health care reasons. As such, the hotel would provide an important value added service to the complex. Each room would be between 60 to 95 square meters in size and incorporate a kitchenette. The hotel would consist of 144 rooms in total and be comprised of 12,021 square meters. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 6
    • Levels 14 - 15: Penthouse I and II The last two levels would consist of 16 exclusive and luxurious one and two bedrooms residences, which would range in size from 129 to 214 m2. The pricing structure and size of the units are well within what is actively being sold in the market today. Without a doubt these residences would enjoy spectacular views of the Central Valley unmatched by any other development. Owners of these units would also have the added benefit of generating rental income by contracting with or entering into an agreement with the leasing program run by the hotel’s management. Penthouse I, the 14th level, includes 1,400 square meters for sale and Penthouse II has an additional 1,439 square meters. The Location TRIO TOWER would be located in the canton of Santa Ana, which is a suburb of San Jose the capital of Costa Rica. Santa Ana, along with its neighbor canton of Escazu, are among the fastest growing sectors of the Central Valley. The region has rapidly evolved into a high-end residential area for foreign expatriates and their families, as well as, affluent Costa Ricans. The Santa Ana - Escazu corridor enjoys the highest discretionary income in the country. The area is home to a large variety of upscale stores, gourmet restaurants, entertainment complexes, private schools, commercial centers, hotels and banking facilities. Multiplaza Oeste, which is the country’s largest shopping mall and is currently undergoing the largest expansion in its’ history, is only a 10 minute drive from the proposed site for the building. TRIO TOWER would be situated in the Lindora district, which is one of the most developed areas of Santa Ana. The complex would sit on the northern side of the Santa Ana - Belen road, which connects Santa Ana to the Juan Santa Maria International Airport. This road is currently being expanded to 7 lanes and when finished would increase traffic levels to over 55,000 vehicles a day and would shorten the drive time to the international airport to just under 20 minutes. The complex would also be located only 200 meters from the Próspero Fernández highway, which connects the city to Escazu and San Jose. The Próspero Fernández highway will be part of the new freeway to the Central Pacific Beaches that is currently under construction. This freeway known as the Caldera Highway will shorten the current 2-hour drive to the beaches to only 45 minutes. The locale where the TRIO TOWER would be developed is known as the “Golden Mile” of Santa Ana: due to the presence of all major private and national banks, and due to the fact that the area is considered to be the prime commercial and business district of the country. The land surrounding the complex is primarily developed as commercial and is characterized by mid-rise office buildings. TRIO TOWER would be situated very near the Forum I and Forum II business centers, which offer state of the art business offices that meet international standards. These complexes are home to transnational corporations such as: Proctor and Gamble, Oracle, Hewlett-Packard, Chiquita Brands and Banacol. The land on which the complex would be developed is 3,384 square meters in size and consists of a flat topography. The Municipality of Santa Ana zoning designation of the property would allow for most commercial and residential uses, including: office buildings, retail centers, service industries and hotel and apartment buildings. An example of the attractiveness of Santa Ana for investment purposes can be provided by a story that appeared in the business section of one of the local english language newspapers. Legendary Wall Street investor Henry Kaufman, who is known among the insiders in the financial community as a genius at C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 7
    • contrarian investing has purchased 17 hectares of land in Santa Ana to develop a 500 unit senior living community. The USD 60 million dollar development is fully permitted and ready to break ground as early as August of this year. Kaufman believes that senior retirement communities, assisted living and even nursing care will propel the growth of Costa Rica to double digit gross national product during the next 20 years. Among the reasons cited by Mr. Kaufman for his investment are: the year round spring like climate, the high living standards, the low cost of living in general, the medical care, which is up to world standards in the private hospitals and is a fraction of the costs in the U. S. and Europe and that there are no social issues. In summary, TRIO TOWER would be located in one of the most privileged business and living districts in all of Costa Rica. Rendition of TRIO TOWER’S proposed site situated next to the Santa Ana - Belen road C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 8
    • The Building As in any building designed for mixed-use, consideration must be taken to ensure that each level is regulated by a policy of use of the facilities. Particular attention has been focused on segregating and facilitating access to the different services provided by the complex. A summary of the buildings’ amenities follows. Building Common Areas And Amenities Lobbies and Access: Access to the building would be done through two lobbies; one for the business and medical services area and another for the residential and hotel area. Reception and access control points would be established at each entrance in order to maintain a daily log of all visitors. CCTV would be utilized on all levels to provide enhanced security. In addition, a private security booth would be established outside of the building to control and monitor the exterior. Lobbies would be designed in a contemporary style utilizing wood flooring combined with premium decorative porcelain tile floors. Building corridors and elevator lobbies would utilize premium porcelain floors and have decorative aluminum panels suspended from the ceiling with mineral fiber. Facade: The building would be covered with glass curtain walls, which would provide temperature and sound insulation. The glass facade would assist in reducing energy consumption levels while helping to maintain a pleasant interior environment. The color of the glass chosen is ARTIC BLUE, which in our opinion, would bestow TRIO TOWER with a modern appearance unique in the Santa Ana/Escazu region. Elevators: The elevators would be strategically placed to separate and facilitate transit to the business and residential areas. They would require the use of access cards, which would restrict unauthorized entry to the private areas of the building. All of the units would provide service from Basement Level 5 through to the Penthouses. At least two elevators would also have access to the roof. In addition, there would be a freight elevator located in the southern section of the complex. The 5 elevators used for passenger service would have a load capacity of 8 to 14 people and operate at a speed of 3 meters per second. Telecommunications: Fiber optical cables and connection facilities are situated immediately in front of TRIO TOWER. This provides direct access to the broadband system through structured cabling, which would permit the installation of network communications directly operated by the buildings administration. This would ensure that our tenants have access to the most advanced Internet services, cable services, teleconferencing and telephony services. By furnishing the service directly, the building’s administration would be able to provide, without delay, whatever service the tenant required. Air Conditioning System: TRIO TOWER would be equipped with VRV systems (Variable Refrigerant Volume) that would maintain consumption of the coolant through condensing units located in the southern sector of the building (General Service Area). This system allows for considerable energy savings over time, since the coolant supplied to each area depends on the amount of fresh air that the tenant would require. VRV systems provide precise control of ambient temperature, low ambient noise and easy maintenance. Tenants would simply connect their Air Conditioning systems, through pre-existing pipes in each office, to the condensing units located outdoors. The tenants consumption would be charged to their respective maintenance account. General Services: There would be a freight elevator located in the southern sector of the building for waste management, general cleanup and maintenance services. Electrical, telecommunications, air conditioning, plumbing, as well as, water supply and the discharge of sewage are all located in this C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 9
    • section. The pipes driving electrical and mechanical services would be placed through conduits, which are designed so that the technician has enough room to do the maintenance work efficiently and safely. As all services are generally located in one sector this will ensure that the building is easily maintained. Maintenance: A janitorial company would be hired to provide cleaning services. In addition to the cleaning personnel, there would be a 24 hour staff for maintenance of the building and its’ facilities. Sensors would be utilized to provide ample warning of any operational deficiencies. The administration would set a maintenance fee of between $3.00 to $3.50 per square meter for maintenance and security expenses. Emergency Electric Plant: In case of any failure of the public electrical service, the building would have its own emergency power plant, including an automatic transfer switch, which would provide 100% of the complexes electrical requirements. This would allow all systems and services to continue without interruption. Water Treatment Plant: A water treatment plant would be located in Basement 5. The plant has been designed to ensure that the treated water meets all local environmental codes. Once the water is treated it would be discharged to the Corrogres River by a pump station. Drinking Water System:, A hydro-pneumatic system has been designed, with a storage tank and pumping equipment, to ensure that water pressure is adequately maintained throughout the building. Fire Systems: TRIO TOWER meets all current fire codes and regulations. The complex would be completely outfitted with fire alarm systems and sprinklers. Electrical Systems: All electrical systems comply with all electrical code requirements. Meeting Area: TRIO TOWER would have a communal events room in which the condominiums owners would carry out activities as stipulated by the regulations of the condominium. In summary, overall total construction available for sale is 25,163 square meters and the building’s efficiency would be 69.7%. Construction density on the 3,833.92 square meters lot would be 80.26%. The building would consist of 15 above ground levels and 5 underground levels, and have available a total of 382 parking spaces. The Project has 211 units distributed in 3 sections: 51 units located in the commercial and medical center area, 144 units located in the extended stay hotel section, and 16 luxury penthouse residential units. The construction time line is estimated in 18 months. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 10
    • Sales and Marketing Objective The developer finds himself in the enviable position of having received (LOI’s) for 163 of the 211 units available for sale in the complex. The remaining units are comprised of: 9 Penthouse Residences, 14 Commercial/Retail spaces and 21 Medical offices. The project’s marketing campaign has been fashioned to effectively reach the differing tenant demographics that must be targeted. The developer plans on investing a total of USD 110,000 in a concentrated advertising campaign, selecting only the most effective and high-quality media, to exhibit the project to national and international markets. To this effect, he would divide the campaign into two phases: the first would be the initial project launch and the second would concentrate on trademark positioning. The initial launch would focus primarily on realtors, both nationally and internationally. Key components would include the introduction of the project to real estate firms, to familiarize realtors with the on site sales staff and support services, as well as, the dissemination of the marketing materials. Initial marketing tools would include magazines and newspapers positioned in the real estate sector, web publicity, including TRIO TOWER’S own web site, and organized events addressed specifically towards realtors. The second phase would be structured to directly attract potential clients and to assure the positioning of the brand name in the market. General circulation newspapers and magazines would be utilized for the trademark positioning campaign. To reach potential clients, Trade Magazines, Trade Journals and Medical Association Newsletters would be specifically targeted. In addition, events and presentations addressed directly to the various Medical Associations would be sponsored by the developer. The focus on this secondary media is not on circulation size but on the fact that they directly reach the key demographic segments. Again, TRIO TOWER’S Web presence would be an intricate part of the marketing efforts. The underlying theme of both phases would be to ensure that the marketing campaigns effectively position TRIO TOWER correctly to the specific markets. Sales and Marketing Media Sales Office The developer has opened a sales office on site and has informally initiated the marketing process to local realtors. A formal event will be organized in late July and would mark the projects’ official presentation to the real estate industry. The establishment of close relationships between the developer’s sales staff and realtors is of the utmost importance. Initial informal contacts with realtors have generated a very high level of interest in the project. The sales staff would also be responsible for: direct sales to individual clients, responding to requests submitted via the project’s Web page, providing presentations to associations and organizing promotional events. An unexpected result of having opened the sales office is the remarkable word of mouth advertising that has occurred. Sales traffic is significantly above original expectations. Print Media To assure the success of the launch campaign and the positioning of the Brand name within the market, the project will be promoted in several local newspapers and magazines. The media chosen for the initial launch phase would be focused on magazines that service the real estate industry. Media in this group would be chosen based on their specific industry related content and that they are distributed nationally. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 11
    • General circulation newspapers and magazines would be utilized to develop public awareness of the TRIO TOWER. All media chosen in this group have national circulation and would be read by the key demographic populations. Intelligent placement of advertising within different sections, i.e. Finance Page, Home & Garden, etc., would permit the targeting of buyers directly for both the Penthouse and Medical Office units. Last in the print media group, but of prime importance to the success of the project, would be limited circulation media, such as: trade journals and magazines, Medical and Professional Association magazines and newsletters. This media group would precisely reach the desired demographic populations and would provide the greatest return on investment. Web Presence Having a well designed Web presence that can serve as a primary source of information for potential clients is fundamental to the project. The Web page must ensure that visitors are sufficiently motivated to fill out the contact form for additional information, which would commence the sales process. An important strategy is to swap links and to place Web ads with the print media utilized for promotional purposes, as well as, with Medical and Professional Association Web sites. This low cost investment would maintain market presence long after the advertising campaign has expired. Taken individually the above mentioned marketing tools would only provide partial success. The marketing plan has been designed so that the individual tools would complement each other and reinforce the overall message at each successive step. Research indicates that the marketing campaign should result in the sale of approximately 1.49 units per month. Marketing Materials and Budget To differentiate TRIO TOWER in the marketplace from other projects, all marketing brochures would be created solely using high-quality materials with exclusive designs. They must be easy and interesting to read, include all pertinent information, include only professional high-resolution photographs and provide visual support to the other marketing materials. Renderings would be utilized to create a virtual reality model of the complex. This model would be utilized in the Web page, in sales presentations, to educate realtors about the project and at the on-site sales office. Smaller scale versions would be offered to realtors for their own use. • TRIO TOWER - PROJECTED MARKETING BUDGET Website $ 10,000.00 Direct Marketing Expense $ 10,000.00 Photographs $ 2,000.00 Renderings $ 15,000.00 Project Model $ 2,000.00 National Media Expense $ 148,560.00 • TOTAL • $ 187,560.00 C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 12
    • THE DEVELOPER Experience Mr. Rafael Rojas, the developer, has over 30 years experience in the construction industry in Costa Rica and the United States. His company, Compañía Constructora Occidental specializes in the development, construction, sales and management of residential, commercial and recreational projects. He has an extensive list of successfully completed developments to his credit. Completed Projects Detailed below is a listing of projects successfully developed and sold by Compañía Constructora Occidental: Residential Projects: • Condominio Tierra del Sol Etapa I • Condominio Tierra del Sol Etapa II • Condominio Praderas del Sol • Condominio El Cedro • Condominio Sebastián • Urbanización La Promesa • Condominio Boulevard del Sol • Condominios Nirvana • Condominio Sunrise (Playa Tamarindo, Guanacaste) • Luxury House in Residencial Hacienda del Sol (Santa Ana) • Hotel el Jardín del Edén (Playa Tamarindo, Guanacaste) Recreational Projects: • Centro Ecuestre del Sol • Ampliación picadero Centro Ecuestre del Sol Commercial Projects: • Centro Comercial Sunrise • Centro Comercial Shops @ Diria • Construcenter Tamarindo • Centro Comercial Vistas de Tamarindo Current Projects Compañía Constructora Occidental has been contracted to design and develop: Condomios Flamingo Paradize and Condominios Vistas de Tamarindo. Both projects are currently in the design phase. A detailed corporate resume can be provided upon request. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 13
    • Financing Required Investment To Date The developer has spent the past 19 months in pre-construction planning and development. To date he has invested a total of USD 3.86 million in Land Acquisition, Architectural and Engineering Designs, Preliminary Studies, Marketing Media and construction of the on-site Sales Office. The table below provides a listing of the pre-construction expenses: Investment To Date Land Cost $ 2,587,293 Other Hard Costs $ 72,500 Environmental And Preliminary Studies $ 140,800 Architecture And Engineering Design $ 500,000 Marketing Material And Media $ 39,000 Management And Administration $ 512,500 Legal And Contracts $ 10,000 Total Investment To Date $ 3,862,093.00 Most of the expenses are self explanatory and require no further detailing. The parcel to be utilized for development was purchased for USD 3.58 million and has an outstanding mortgage of USD 1.0 million. Based on appreciation of surrounding properties, this parcel should appraise at USD 4 million in today’s market. Other Hard Costs refers to the construction of the on-site sales office and parking facilities, sales office furnishings, fencing of the property and the required construction banners. Marketing Material and Media Expenses refers to: creation of the projects web site, professional photography, 3-D rendering, creation of 3- D model for the project and marketing brochures. The Management and Administration Expenses include: Administrative Personnel, Office Equipment, Office Supplies, Accounting Services, Business Plan, Travel expenses, Utilities, Logo Design and Trademark Registration, among others. Letters of Intent The developer has received (LOI’s) for 163 of the 211 units for sale in TRIO TOWER. The (LOI’s) represent a total pre-sales of USD 32,104,336. Brief expositions of each (LOI) are included below. Copies of the (LOI’s) are included in the Addendum 2. Dr. Gerardo Escalante López Dr. Escalante, who is considered one of the leading in vitro specialists in the region, is the owner of the Clinica California which is located in San Jose. There are over 160 medical specialists associated with the Clinica California at its’ present location. The Doctor wishes to open a second facility in the complex and would purchase 250 square meters of Commercial Space and 1,300 square meters of Medical Office space. The agreed upon sales price is USD 3.628 million with a 3 deposits of 10% each payable throughout the first 19 months of construction. The (LOI) is signed by Dr. Escalante. A side note. The Interamerican Development Bank (IDB) offers a program in Costa Rica, which guarantees the financing issued by approved local banks to private companies operating in certain service sectors. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 14
    • Dr. Escalante is in negotiations with the (IDB) and Banco Lafisse to receive backing for the purchase of the entire Medical space offered for sale in Trio Tower. If Dr. Escalante is successful in his venture, a new (LOI) would be issued. Café KAV Group, LTD Café KAV, a private corporation headquartered in Corona, California, has issued an (LOI) for the hotel component of Trio Tower. The agreement establishes a sales price of USD 21,827,082 and stipulates for 3 deposits of 10% each to be made throughout the first 19 months of construction. Also included are 2 (LOI’s) from Radisson Hotels to Café KAV: the first agreeing to become the flag operator of the hotel and the second extending the expiration date of the first letter. Café KAV’s (LOI) is signed by Fred D. Jackson, the firms’ CEO. Radisson Hotels (LOI’s) signed by Edgar Garin, VP Development for Latin America. Escape Villas Escape Villas is one of the largest property rental and management companies in the country. They specialize in the short to mid term leasing of luxury homes and condominiums. They currently operate at 6 exclusive beach resorts and wish to expand to San Jose. The (LOI) is for the purchase of the 8 Penthouse units located on the 14th level for a sales price of USD 3,177,023 and stipulates for 3 deposits of 10% each to be made throughout the first 19 months of construction. The (LOI) is signed by Elie Dayan, owner and President of Escape Villas. Trio Business Lifestyle Trio Business Lifestyle has issued a (LOI) for the 9 offices that comprise the Business Center located on the 5th level of the complex. The sales price if for USD 3,472,231 and includes a down payment of 10% upon closing. The (LOI) is signed by Rene Escalante Gonzalez, General Manager. Sales Projections Total Sales for TRIO TOWER are projected to be USD 49,066,160.57 million. The following table provides a summary regarding the sales total per marketable component and the percent of total sales represented by each component. • Projected Sales • As % of Total Sales Commercial $ 5,173,628 10.47 Medical Centers $ 8,882,532 17.97 Medical Offices $ 3,418,683.60 6.92 Business Office Center $ 3,472,230.98 7.03 Extended Stay Hotel $ 21,827,081 44.17 Penthouse Level 1 $ 3,341,874 6.76 Penthouse Level 2 $ 3,296,381.50 6.67 Total Projected Sales $ 49,412,411.08 C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 15
    • Projected Expenses Total Project Expenses are USD 36,214,712 million, which includes the developer’s investment in the project to date. Total Construction Expenses, including projected interest, are estimated to be USD 32,352,618 million. The table below provides a detailed summary of projected construction expenses: • Projected Construction Expenses Hard Costs: Land Movement $ 778,125 Foundations $ 1,478,437.50 Underground Facilities $ 4,829,562.50 Building Structure $ 5,223,812.50 Exterior Jobs $ 1,245,000 Electromechanical $ 3,112,500 Air Conditioner $ 1,245,000 Elevators $ 363,125 Building Finished $ 1,867,500 Hotel Finished $ 2,801,250 Residence Finished $ 840,375 Land Cost $ 1,000,000 Other Hard Cost $ 109,500 Hard Costs: Sub-Total $ 24,894,187.50 Soft Costs: Environmental And Preliminary Studies $ 0 Permits and Fees $ 248,803.25 Architecture And Engineering Design $ 325,000 Construction Inspections $ 544,500 Consulting Charges $ 375,000 Marketing Material And Media $ 148,560 Sales Expense $ 1,584,509.99 Management And Administration $ 1,554,013 C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 16
    • • Projected Construction Expenses Legal And Contracts $ 93,750 Interest Expense $ 2,147,957 Bank Expenses $ 61,338 Source Founding Fees 1.5% over $25MM) $ 375,000 Soft Costs: Sub-Total $ 7,458,431.24 TOTAL: $ 32,352,618.74 The amount included for Construction Expenses refers to the fact that in Costa Rica all inspections are handled by the Colegio de Ingenieros (Association of Engineers). The association provides member engineers who are assigned all inspection duties associated with the building’s construction. Each engineer is responsible for handing all inspections and providing the appropriate governmental entities with progress reports. A fixed percentage rate of total construction costs is provided to the association to cover all expenses. Sales Expense is the projected commission to be paid to realtors and/or sales staff for units sold. Management and Administration Expenses include project management fees in addition to items listed in the section titled “investment to date”. Construction Loan/Line of Credit Required To date the developer has invested a total of USD 3.86 million in Land Acquisition, Architectural and Engineering Designs, Project Permits and the construction of the on-site Sales Office. The project only requires the INVU and the Final County Permits to commence construction, a process which would take 60 days from the date of notification of project funding. This 60 day period would also be utilized for a selective bidding process to award the construction contract. Total Projected Sales for the project are set at USD 49,066,160.57 with Total Projected Expenses set at USD 36,214,712. The Projected Expenses include the developer’s investment in the project to date. The (LOI’s) received thus far represent 65% of total projected sales. Costa Rica allows the use of sales deposits for construction purposes. Upon project funding, the (LOI’s) are to be converted into sales contracts that would stipulate that 3 deposits of 10% would be made within the first 19 months of construction, with the balance due after final inspection of the units by the buyers. Taking in to consideration the positive cash flow generated by the sales deposits, the developer would require a USD 25 million line of credit to build Trio Tower. Use of funds would be specifically for construction purposes and to anticipate for any deferred deposits and unexpected construction delays.. Exit Strategy Once the project is funded, the (LOI’s) from each pre-approved client would be converted into sales contracts. The sales contracts would represent 128% of the total funds solicited for construction purposes. Taken together with the developer’s investment in the project they would represent 111% of total C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 17
    • Construction Expenses. Any reduction in sales price of unsold units necessitated by any future unforeseen economic developments would solely impact the developers net profit, not his ability to repay the line of credit and the associated interest payments. Even if pricing of space left for sale had to be reduced by 90%, the developer would still be able to pay off the financing and interest charges. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 18
    • Addendum 1 - Financial Statements Projected Profit and Loss Statement Projected Revenues: Projected Earnings: Commercial $ 5,142,377.60 Projected Revenues $ 49,066,160.57 Medical Center $ 8,732,381.60 Less Projected Expenses $ (34,066,754.74) Medical Offices $ 3,418,683.60 Business Office Center $ 3,472,230.98 EBIT: $ 14,999,405.83 Extended Stay Hotel $ 21,827,082.50 Interest Expense $ (2,147,957.00) Penthouse level 1 $ 3,177,022.80 Income Tax Expense $ (1,443,103.81) Penthouse level 2 $ 3,296,381.50 TOTAL $ 49,066,160.57 Net Profits $ 11,408,345.02 Projected Expenses: Hard Costs: Land Movement $ 778,125.00 Foundations $ 1,478,437.50 Underground Facilities $ 4,829,562.50 Building Structure $ 5,223,812.50 Exterior Jobs $ 1,245,000.00 Electromechanical $ 3,112,500.00 Air Conditioner $ 1,245,000.00 Elevators $ 363,125.00 Building Finished $ 1,867,500.00 Hotel Finished $ 2,801,250.00 Residence Finished $ 840,375.00 Land Cost $ 3,587,293.00 Other Hard Cost $ 182,000.00 Hard Costs: Sub-Total $ 27,553,980.50 Soft Costs: Environmental & Prelim Studies $ 140,800.00 Permits & Fees $ 248,803.25 Architecture & Engineering $ 825,000.00 Construction Inspections $ 544,500.00 Consulting Charges $ 375,000.00 Marketing Material & Media $ 187,560.00 Sales Expense $ 1,584,509.99 Management & Administration $ 2,066,513.00 Legal & Contracts $ 103,750.00 Bank Expenses $ 61,338.00 Funding Fees (Sourcing) $ 375,000.00 Soft Costs: Sub-Total $ 6,512,774.24 TOTAL: $ 34,066,754.74 C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 19
    • Projected Cash Flow By Year Worst Case Basis Gross Revenues Year 1 Year 2 Year 3 TOTAL Commercial $ 187,500.00 $ 437,500.00 $ 4,517,378.00 $ 5,142,378.00 Medical Center $ 900,900.00 $ 2,102,100.00 $ 5,729,382.00 $ 8,732,382.00 Medical Offices $ 0.00 $ 0.00 $ 3,418,683.60 $ 3,418,683.60 Business Office Center $ 0.00 $ 0.00 $ 3,472,230.98 $ 3,472,230.98 Extended Stay Hotel $ 4,365,416.00 $ 17,461,665.00 $ 0.00 $ 21,827,081.00 Penthouse Level 1 $ 623,404.00 $ 311,702.00 $ 2,241,917.00 $ 3,177,023.00 Penthouse Level 2 $ 0.00 $ 0.00 $ 3,296,381.50 $ 3,296,381.50 Total Revenue By Year $6,077,220.00 $20,312,967.00 $22,675,973.08 $49,066,160.08 Construction Expenses Land Movement $ (778,125.00) $ 0.00 $ 0.00 $ (778,125.00) Foundations $ (1,478,437.50) $ 0.00 $ 0.00 $ (1,478,437.50) Underground Facilities $ (4,829,562.50) $ 0.00 $ 0.00 $ (4,829,562.50) Building Structure $ (5,223,812.50) $ 0.00 $ 0.00 $ (5,223,812.50) Exterior Jobs $ (933,750.00) $ (311,250.00) $ 0.00 $ (1,245,000.00) Electromechanical $ (2,739,000.00) $ (373,500.00) $ 0.00 $ (3,112,500.00) Air Conditioner $ (1,095,600.00) $ (149,400.00) $ 0.00 $ (1,245,000.00) Elevators $ (272,343.75) $ (90,781.25) $ 0.00 $ (363,125.00) Building Finished $ (1,139,175.00) $ (728,325.00) $ 0.00 $ (1,867,500.00) Hotel Finished $ (1,624,725.00) $ (1,176,525.00) $ 0.00 $ (2,801,250.00) Residence Finished $ (252,112.50) $ (588,262.50) $ 0.00 $ (840,375.00) Land Cost $ (1,000,000.00) $ 0.00 $ 0.00 $ (1,000,000.00) Other Hard Cost $ 0.00 $ (112,000.00) $ 0.00 $ (112,000.00) Environmental & Preliminary Studies $ 0.00 $ 0.00 $ 0.00 $ 0.00 Permits and Fees $ (248,803.25) $ 0.00 $ 0.00 $ (248,803.25) Architecture& Engineering Design $ (325,000.00) $ 0.00 $ 0.00 $ (325,000.00) Inspections $ (393,000.00) $ (151,500.00) $ 0.00 $ (544,500.00) Consulting Charges $ (281,250.00) $ (93,750.00) $ 0.00 $ (375,000.00) Marketing Material And Media $ (49,533.33) $ (49,533.33) $ (49,533.33) $ (148,599.99) Sales Expense $ 0.00 $ (859,083.80) $ (725,426.18) $ (1,584,509.98) Management And Administration $ (368,000.00) $ (546,000.00) $ (640,013.00) $ (1,554,013.00) Legal & Contracts $ (12,000.00) $ (69,750.00) $ (12,000.00) $ (93,750.00) Bank Expenses $ (57,338.00) $ (4,000.00) $ 0.00 $ (61,338.00) Funding Fees (Sourcing) $ (375,000.00) $ 0.00 $ 0.00 $ (375,000.00) Interest Expense $ (811,835.47) $ (1,172,892.57) $ (163,229.12) $ (2,147,957.16) Total Expenses By Year $ (24,288,403.80) $ (6,476,553.45) $ (1,590,201.63) $ (32,355,158.88) Projected Yearly Disbursements $ (18,211,183.80) $ 13,836,413.55 $ 21,085,771.45 Projected Yearly Cash Balance $ (18,211,183.80) $ (4,374,770.25) $ 16,711,001.20 C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 20
    • Assumptions - Projected Cash Flow By Year • The information contained in the Projected Yearly Cash Flow Statement is a summary taken from the Projected Monthly Cash Flow Statement • Only 3 of the 4 (LOI’s) are converted to sales contracts to be utilized in the projections • Purpose is to calculate repayment capability based on solely on (LOI’s). As such there are no additional sales closings until the final month of the project • The interest, set at just over 7%, is utilized solely for showing repayment capability. Actual interest on the financing would be negotiated between the developer and provider of financing • The highest negative cash flow balance of USD 20,966,466.28 occurs in month 19 and is drastically reduced shortly thereafter • Ending balance on month 35 is negative USD 1,883,911.06 with just over USD 20 million in space left for sale • Even if pricing of space left for sale had to be reduced by 90%, the developer would still be able to pay off the financing and interest charges C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 21
    • Addendum 2 - Letters of Intent The Hotel - Cafe KAV Group Effective for Levels 6 - 13. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 22
    • The Hotel - Radisson Hotels, Original Letter of Intent Pg. 1 For operation of the hotel under their brand. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 23
    • The Hotel - Radisson Hotels, Original of Letter of Intent Pg. 2 Second page of the (LOI). C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 24
    • The Hotel - Radisson Hotels, Extension of Letter of Intent Extends the date of the original (LOI) C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 25
    • Commercial and Medical Area - Dr. Gerardo Escalante López Effective for 1300 sq. meters in the Medical Center and 250 sq. meters of Commercial Space. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 26
    • Penthouse Level 1 - Escape Villas Effective for the 14th level in its entirety. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 27
    • The Business Center - Trio Business Lifestyle Effective for the entire 5th level of the complex. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 28
    • Addendum 3 - Floor Plans Level 1 - Commercial Area Ground floor of the complex with 15 spaces for sale. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 29
    • Levels 2 to 5 - The Medical and Business Offices There are a total of 36 spaces, 9 per floor. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 30
    • Levels 6 to 13 - The Extended Stay Hotel There are 144 units in total. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 31
    • Levels 14 to 15 - The Luxury Penthouse Residences There are 8 residences per floor. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 32
    • Underground Levels 1 to 5 - The Parking Facilities There are 19 above ground and 353 underground parking spaces available. C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 33
    • Acknowledgement The original business proposal including all financial tables has been prepared by Lic. Jorge Montero Pochet of San Jose, Costa Rica. Capital Investments & Associates has edited the original proposal. All Rights Reserved C a p i ta l I n v e s t m e n t s & A s s o c i a t e s TRIO TOWER PROPOSAL 34