PIAZZA SAN LORENZO COMMUNITY

EXECUTIVE SUMMARY: Villa Verona, A Private Residence Club


Following is an Executive Summary of the luxury real estate fractional product Piazza San Lorenzo is offering, Villa Verona - A Private Residence Club. As a general overriding comment, Villa Verona is a true luxury Private Residence Club and not a Traditional Fractional product. Those differences tend to be glossed over by some developers and lenders in the marketplace, which can lead to some confusion. Included are short industry definitions in the Preamble below to assist in the clarification of our Private Residence Club.


PREAMBLE

The definitions following have been prepares by David G. Hanna and John Kazanjian, principals of RTK Resort Group, our Private Residence Club consultants and pioneers in the PRC concept:

Traditional Fractional Interest: In general, a condominium sold on a quarter-share or fifth-share basis to 4 or 5 owners. Prices of shares range from $35,000 to $135,000 with very limited services. On the Hobson and the Ragatz models, the retail dollar price per square foot ranges from $250 to $450 per square foot. Quality of the residence and furnishings is in the 3-Star range. Owner usage of their time is controlled on a rotating calendar basis, where the owner is scheduled by the condominium regime to occupy the residence every fourth or fifth week of the year. Purchasers are investment oriented with some usage in mind. Rental assistance by a property manager for owners’ unused time is an important component to the sale. Some examples include the early Hilton Head projects and the Trendwest projects on the Oregon coast.

Mid-Tier Fractions: A step up in quality and with the addition of some owner services and amenities, Mid-Tier Fractional condominiums are generally sold on a quarter-share, fifth or seventh share basis, although some twelfth and thirteenth shares have been offered. On the Hobson and the Ragatz models, Mid-Tier fractional projects average $580 per square foot. Quality of the residence and furnishings is in the 3 to 4-Star ranges. Service levels are at the 3-Star level, if included in the program offering. Again as in Traditional Fractions, owners’ usage of their time is controlled on a rotating calendar basis, where the owner is scheduled by the condominium regime to occupy the residence every set interval week of the year. Purchasers are investment oriented with some usage in mind. Rental assistance by a property manager for owners’ unused time is an important component to the sale. As an example of Mid-Tier Fractions, The Owners Club, a division of Club Corp, had offerings in Hilton Head SC, Austin TX and Hot Springs VA that were sold as thirteenth shares.

Private Residence Clubs [PRCs]: This is a high-end luxury product sold on a 1/7th to 1/12th share basis in price ranges of $125,000 to $450,000 plus. On a retail dollar per square foot basis as per Ragatz Associates, High-End PRC and Fractional projects average $1,000 per square foot or more. Quality of the residence and furnishings is in the 4 to 5-Star ranges. Service levels are at the 4- to 5-Star levels. Some ultra-luxury PRC product is in the $1,600 to $2,200 per square foot range.

Purchasers of PRCs are motivated by a properly designed product that they can use as they like and also see some real estate accrual. According to one of the three original pioneers of the concept, David G. Hanna of RTK Resort Group, the defining quality of the Private Residence Club is the owners’ ability to access their time in a flexible manner and literally as often as they want, similar to a golf country club and subject to the project’s Lodging Policies and Procedures. In this program, the owner’s use of the residences is on his schedule and not controlled by a calendar. Literally the owner has purchased the right to use the residence every day of the year if the other owners do not exercise their use rights.

Although they can rent some of their primary use time to friends or associates, because owners of PRCs pride themselves on privacy and exclusivity, they generally tend to not allow rentals by the HOA or the property manager. Examples include clubs that Dave Hanna has supervised through his company, Star Hospitality, LLC: Northstar Club at Northstar at Tahoe, Snowmass Club at Snowmass CO and The Cottages at National Golf Club in Pinehurst/Sand Hills NC.

Other luxury branded PRC examples include the Ritz Carlton Clubs in Aspen and Batchelor Gulch CO, the latest iterations of the Four Seasons Residence Club in Jackson Hole WY, and the St. Regis Residence Club in Aspen and NYC.


EXECUTIVE SUMMARY

The Villa Verona - Private Residence Club product

Piazza San Lorenzo is offering its Private Residence Club on the basis of One-tenth share interests. Buyers may purchase multiple intervals if they wish. However, when considering the amount of time owners want to access their San Antonio second home, the residence plan works for the majority of the purchasers on a one-tenth basis. The retail price per square foot for the Villa Verona PRC Residences at Piazza San Lorenzo begins at $1,200/ sf and averages $1,500/ sf over the life of the project sales term.

Residence Floor Plan Types and Mix

PSL is selling a high-lifestyle luxury Private Residence Club product, not a timeshare or traditional/ mid-tier fractional. The PSL architectural team has finalized what may be considered very spacious and livable two, three and four bedroom floor plans. PSL’s program calls for a total of 40 villas: 11 two-bedroom residences; 20 three-bedroom residences and 9 four-bedroom residences. Two bedrooms are approximately 1,400 sf; three-bedrooms are 2,000 sf, and; four bedroom floor plans are 2,700 sf. The living areas are in line with luxury PRC standards for real estate products in resort destination areas. As an urban product they are large, and that is a competitive advantage. These living areas are a reflection of proven density factors with an efficient use of space. Villa Verona owners are getting a great value for their dollar and great spaces for those who expect to entertain family, friends and associates on the Riverwalk. After all, that’s what the Riverwalk is all about, and Villa Verona and Piazza San Lorenzo will provide the setting to party in style.

The Marketing Strategy

There are some significant factors active in the San Antonio marketplace that renders PSL’s sales projection realistic and achievable. Primarily, PSL will be running two distinct marketing campaigns simultaneously: one to the Texas and displaced Texan market from other US locations, and; one to the Mexican Nationals. This is not typical of any fractional or PRC project being marketed. With an anticipated success rate of 65-70% of the PRC buyers emanating from Texas and with the remainder of 30-35% of the buyers from Mexico, these combined markets justify an assertive sales pace forecast. Other market factors include:
 

• San Antonio enjoys 26 million tourists visiting the city yearly, an unusually large amount for a city of just over 1 million in population. Finding suitable accommodations on the Riverwalk is nearly impossible. PSL will market to incoming conventioneers and conferences.
   

• Over 43,000 Mexican Nationals own second homes in San Antonio, which are primarily occupied for 4-6 weeks per year. The PRC program makes a lot more sense for those who seek the full array of hospitality services.
   

• Recent political events in Mexico are driving wealthy Mexicans to seek evidence of real estate ownership in the US. With a tightening of the border, the well-to-do Mexican Nationals will need proof for crossing the border. Ownership of real estate in Piazza San Lorenzo is a solid alternative as proof for them.
   

• There is pent up urban demand for the San Antonio PRC product, especially from those who consider San Antonio as their Texas playground.
   

• Dr. Ragatz has identified the Texan drive-to market from Dallas, Houston, Austin, Corpus Christi and other outlying towns as very significant. Only 0.34% of those eligible to buy and capable of buying the Villa Verona PRC product are necessary for a complete sell-out of fractional inventory at Villa Verona Private Residence Club. These comments do not include the available Mexican National marketplace.
   

• PSL has formed a marketing agreement with Kuper Sotheby’s International Realty, who has an accredited mail list of over 5,000 wealthy Texas ranchers and estate holders that have interest in securing ownership within the San Antonio area. Along with rancher mailing list is the important consideration of the referral capability of their existing Mexico client ownership base here in Texas.
   

• PSL has formed marketing agreements with some very influential families from Monterrey, Guadalajara and Mexico City that would open their network and use their “influence of peer pressure” to bring buyers of Villa Verona PRC interests.
   

Texans are showing an affinity for the two and three-bedroom residences with shorter stays; the Mexican Nationals, who travel with their children and nanny, are opting for the three-bedroom and four-bedroom configurations with longer stays. Of course, there are crossovers in these to markets as to use demand. The Villa Verona residence club program accommodates most of the qualified buyer’s demands for unit size and time flexibility.

Owner Access to their Residence

Tailored to suit the elite in San Antonio’s market, Villa Verona’s owner use plan is really more progressive than most use plans in operation, yet grounded with the principles that have been widely accepted and praised by SRG owners at other PRC clubs. Villa Verona’s lodging policies and procedures were specifically configured to meet the usage expectations from two distinct market groups: the Texan drive-to market who choose to visit San Antonio for a few nights at a time, and; the wealthy Mexican Nationals who bring their families to San Antonio for a couple of weeks several times a year.

This dual user demand is uncommon to most regional resort destinations, and is unique to the fractional marketplace. It requires a thoughtful, equitable and flexible plan to satisfy owner demand. Villa Verona’s plan accomplishes just that, while accommodating the two different user-group patterns that are seen to be non-competitive for the calendar times they will be requesting. Villa Verona owners can take as little as one night or as much as two weeks of time during any single reservation stay. The built-in vacancy factor of 23-25%, the equivalent to 10 residences, further adds to the flexibility of the program.

The common denominator check-in/ check-out day for owners using Pre-planned Vacation time is Friday, whether an owner is using a full week or they are splitting a week into 3 nights and 4 nights. Three-night stays check-in on Friday after 4PM, stay Saturday and Sunday nights with a check-out on Monday at 11AM. Four-night stays check-in on Monday afternoon, stay Tuesday, Wednesday and Thursday nights with a check-out on Friday at 11AM. Owners who take advantage of Space Available time may use as little as one night and up to 7 nights at one time. Space available users can check-in on any day of the week that a residence of their floor plan type is available.

Villa Verona Private Residence Club is not a rental product. PRC owners may only rent their Pre-planned Vacation time to whomever they choose, but the Villa Verona HOA will not assist in this activity.

Sales Process

Villa Verona is registered with the Texas Real Estate Commission. The Private Residence Club program is administered under the jurisdiction of the Timeshare Subdivision Act. Buyers are required to put 20% down toward their purchase. Purchase and sales agreements are designed as “cash sale contracts with no finance contingencies” after the rescission period. Buyers will place a $5,000 deposit to receive a Contract, Timeshare Disclosure and Condominium documents. They have a right to cancel their purchase within 5 business days of the purchase. PSL grants them longer, if they need additional time for their due diligence. Within a set period of time, usually 10 days, the purchasers then place the balance of their 20% down into escrow with Chicago Title. The final 80% will be due on delivery of Certificate of Occupancy, which is anticipated to be Fall 2010. End Loan Consumer financing is being arranged by PSL and will be offered direct to the consumers by the lenders.

In lieu of the cash deposit, purchasers may post a consumer "deposit bond" written in the amount of the 20% deposit requirement.
 

Private Residence Club Pricing

PSL is forecasting revenues from the sales of Private Residence Club interests to amount to $132.5 million. Opening prices for the two-bedroom floor plan is $140,000; $195,000 for the three-bedroom floor plan, and; $280,000 for the four-bedroom interest. PSL will employ regularly scheduled increases in price somewhere in the range of $12k to $15k at a time in order to create urgency among fence-sitters, while rewarding those who raise their hand to say “include me” early in the sales process. Our marketing and sales team understands the mechanics of a successful owner referral program and would ensure PSL’s is properly structured.

An annual assessment that includes property taxes, insurance, reserve fund, housekeeping, utilities and other maintenance costs is forecast for the two-bedroom residence at $7,600; for the three-bedroom residence at $9,250, and; for the four-bedroom villa at $11,250.
 

Property website address: www.piazzasanlorenzo.com