Development Analysis For Mid Rise Building by Adam Greenfader

DEVELOPMENT ANALYSIS FOR MID-RISE DEVELOPMENT BAYAMÓN, PUERTO RICO

HILLSTONE BUILDERS INC.

ANALYSIS RESEARCH BY

ADAM GREENFADER

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Table of Contents The Goal of this Study

....................................................

Pg. 4

General Assumptions

…………………………………

Pg. 4

Market Research Sources

....................................................

Pg. 5

Executive Summary

....................................................

Pg. 6

Key Facts

…………………………………

Pg. 6

The Market Area

……………………………………Pg. 9

The Site

………………….……………… Pg 11

Vehicular Circulation Analysis

…………………………………….Pg 14

SWOT ANALYSIS

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Pg.19-23

Design recommendations

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Pg. 24-32

Housing Supply

………………………………….. Pg. 33-41

New Home Projects: Walk Ups

……………………………………Pg. 34-38

New Home Projects: Mid Rise

……………………………………Pg. 39-47

New Home Projects: Condominiums

……………………………………Pg. 48-51

Future Projects

……………………………………Pg. 52

Highest and Best Use

……………………………………Pg. 53

Price Point

……………………………………Pg. 56-57

Housing Demand & Supply

……………………………………Pg. 58-60

Absorption Rate

……………………………………Pg. 61

Conclusion

……………………………………Pg. 62

Addendum 1 – Buyer Questioner Addendum 2 – Past sales comparables Addendum 3 – AXYON Curriculum Vitae _____________________________________________________________________ 2 Axyon Advanced Solutions For Real Estate Development All Rights Reserved ®

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Market Analyst’s Certification

The study was prepared in accordance with industry standards in Puerto Rico. The results of this study are subject to the following extraordinary assumptions, which if occur, could alter the conclusions of this development analysis. 

It is assumed that increases in mortgage interest rates for the next five years will not exceed the historic levels of the past 15 years (9%).



It is assumed that loan to value ratios of mortgages will not fall below the 80% level.



It is assumed that the current political status of the island remains unchanged.



It is assumed that there are no legal restrictions for obtaining use permits and developing the site.

ADAM GREENFADER ------------------------Adam Greenfader Master of Real Estate Development (M.R.E.D.) Lic # 05728, Puerto Rico

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Goal of this Study: The goal of this study is to determine the most profitable sell out for the proposed project. In order to achieve this goal, the studyâ&#x20AC;&#x2122;s core objective is to help identify the current competition, establish the price point parameters, and develop key design criteria for the product. Key design criteria: The key design criteria will be centered on specific architectural and engineering elements that provide the greatest amount of value to the end user. As all design elements have corresponding cost trade offs, we will try to prioritize said design elements. The specific design elements fall into three main categories: Community & site design Exterior building design Interior unit design & layout

Scope of this Study: AXYON has dedicated this market study to the identification and analysis of current competition. While some future looking data has been incorporated, the scope of this study is to identify current market trends (3-5 years). General Assumptions 1.

No responsibility is assumed for the legal description, or for matter including legal or title consideration.

The information furnished by others is believed to be reliable. However, no warranty is given for its accuracy.

Any cause of action resulting between AXYON and the client in conjunction with this market study, either directly or indirectly, will be limited in damages to the amount of the study fee received for the assignment. Furthermore, it is agreed that the client indemnify AXYON, Inc for any damages, cost, expense, and attorneyâ&#x20AC;&#x2122;s fee resulting from any cause of action by any interested party, other than the client.

Possession of this report does not carry with it the right of publication. It may not be used for any purpose or by any other person other than the party to whom it is addressed without the written consent of AXYON.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Market Research Sources This report was compiled from the below noted sources: 1. 2. 3. 4. 5. 6. 7. 8. 9.

Field inspection of Bayamón/Guaynabo/Toa Alta/Caguas/San Juan Diagnostic site analysis Bayamón - Hillstone Builders Inc Researching past sales – Luis Abreu Reports/Housenet.com Interviews with local and national Real Estate experts Census 2004 data Planning Board JPU & APRE (Puerto Rico) AXYON sales data Luis Abreu Sales Data Report Demand for Housing in Puerto Rico 2005-2009, Estudios Técnicos, Inc.

Estimated Exposure Time Market conditions are constantly changing. Both local and international events can alter consumer psychology, market demand, and value of real estate developments. This report is being produced in a period of important change in Puerto Rico. Careful attention should be paid to interest rate increases, rising petroleum costs and the loss of consumer confidence. This report has an estimated exposure time of six months.

2007 Real Estate Snap Shot Since 2001, Puerto Rico’s economic growth has been anemic - less than 3%. In 2006, consumer confidence reached its low point due to a government shutdown. Significant increases in living costs, a new sale tax, and the cost of petroleum have fueled a Puerto Rican exodus towards the mainland U.S. Real Estate in particular has been affected by an inept land use plan (P.U.T.), a ―moratorium‖ of construction permits, and skyrocketing construction costs (15-25%). This real estate crisis has been particularly tough on investment properties, 2nd homes, and those projects in poor locations. Specifically, homes ranging from $350,000-$700,000 have seen their absorption rates increase from 30 days to over 120 days or more today. Lastly, but not least, the majority of Puerto Rico’s financial institutions have suffered dramatic losses due to accounting irregularities.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Executive Summary

The proposed project is located in Bayamón, Puerto Rico. The proposed development consists of 22 acres with hill top views of Guaynabo. The majority of the development infrastructure is close to the site – streets, water, electricity, and sanitary. The project is currently in the permitting process and a viable construction start is scheduled for 2009. Please find below the key facts:

Developer: HillStone Builders Inc. Total Units: 196 Zonning: The site is zoned R5 for multi-family units. Infrastructure: The site appears to have has all necessary water, electricity, and sanitary infrastructure. Development Plan: 4 separate building phases with independent recreational and security features. Unit size: 1,500 SF – 2,200 SF Construction Type: Reinforced concrete with block interior. Building Design: Caribbean contemporary. Building Type: Mid-rise 4 stories under design review - ―La Rambla‖ Unit Type: Under Design Current Status of Interim Financing: Pending Developer Experience: Vast with other similar developments in Toa Alta

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Census Data

Population According to the 2000 Census, the total population in Puerto Rico is 3,808,610. This represents an 8.1% increase over 1990. This population increase continues to fuel a strong demand in the housing market. Age Like most industrialized nations, The Puerto Rican population is aging. Below is a census table that demonstrates population by age breakdown. Note: that over 46% of the population in the year 2000 was over the age of 35.

35 to 44 years 45 to 54 years 55 to 59 years 60 to 64 years 65 to 74 years 75 to 84 years 85 years + Total

515,663 463,036 188,883 160,564 240,951 136,480 47,706 1,753,283

13.5% 12.2% 5% 4.2% 6.3% 3.6% 1.3% 46%

Employment There are approximately 1,380,000 million people in the labor force, with 1,130,000 currently employed. This represents an unemployment rate of approximately 11%. The labor force (approximately 33% of the total population) does not take into consideration those workers who do file income taxes. Local economists have stated that this subterranean labor force has an additional 300,000-450,000 people. Homeownership Puerto Rico has a homeownership rate of approximately 68%. This homeownership rate is one of the highest in the industrial world. This high rate is a result of a culture bias for home ownership, abundant financing, limited Real Estate taxes, large subterranean labor force.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Households The total households in Puerto Rico increased from 1,188,095 in 1990 to 1,418,476 in 2000. This represented an average growth of 19% or 23,000 households per year. Empty-Nesters Trend The 2000 Census found that nonfamily households comprise 31.9% of all households, a higher percentage than married couples with children at home (29.5%). The reality is that today there are more people living alone or with one child/spouse/partner than at any other time! Construction Construction industry representatives have expressed continued concern over the permitting delays, increase in construction costs, and environmental litigation. According to the local government statistics, construction investment since the year 2000 is down 17.7% in the private sector and 23.4% in public projects. Crude-Oil Approximately 70% of Puerto Rico’s electricity is generated from crude-oil. In the past two years, the price per barrel of crude-oil has more than doubled, increasing from $28 in 2003 to over $50 in first quarter in 2007. Higher crude-oil prices are having a major impact on Puerto Rico’s economy and contributing to limited growth. Moody’s Rating Moody’s investor service announced in May 2005 that it was lowering its rating on Puerto Rico’s government debt from Baa1 to Baa2. While Baa2 rating is still considered investment grade, it is one level short of risk category. Further downgrades could make the cost of borrowing money prohibitively expensive and thus hinder Puerto Rico’s future growth.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

The Market Area The principal market area for the proposed project is the municipality of Bayamón. The municipality of Bayamón has 44.5 square miles, a population of 224,044 people, and 79,476 total households. It is the second largest municipality second only to San Juan. Census data for the past thirty years shows a growth pattern in population for Bayamón. Bayamón has had a steady growth over the past forty years. Taking into consideration the increase in population of Bayamón, the municipality has been receiving pressure to accommodate the people who migrate from other areas of the island.

Population Growth Bayamón Since 1940

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Secondary Market Area However, since the project is immediately adjacent to Guaynabo, we have considered it a secondary market. Toa Alta and Caguas are tertiary market areas. These municipalities were chosen because they all share three distinct characteristics: 1) Proximity to the metropolitan area 2) Located within 20 minutes driving time to proposed project 3) Sub-urban land use characteristics According to the 2000 Census data, there are approximately 822,400 people that live in the market area or approximately 21% of the islandâ&#x20AC;&#x2122;s population.

The municipality of San Juan has 76.9 square miles, a population of 434,374 people, and 182,101 total households. It is the largest municipality in Puerto Rico. The municipality of Guaynabo has 27.3 square miles, a population of 100,053 people, and 36,826 total households. It is the fourth largest municipality after Arecibo. The municipality of Toa Alta has 27.5 square miles, a population of 63,929 people, and 21,075 total households.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

The site is located in the municipality of Bayamón off Highway #174. The site is approximately 22 Cds. The site sits atop a picturesque mountain range and enjoys views of the Guaynabo municipality.

The area surrounding the site is known by its colloquial name ―Guyabón‖. The name is a hybrid of the two municipalities Guyanabo and Bayamón.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Although located in a sub-urban area, the site is principally accessed via heavily forested roadways. Much of the highway transit is by industrial vehicles and construction trucks moving rock from nearby quarries.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

The preponderance of heavy grade vehicular traffic is most notable along Highway #174 and Highway #833. Most of the construction surrounding the site is either quarries or small commercial establishments. There are some owner built homes in the surrounding vicinity as well as several residential communities. The residential communities such as San AgustĂn, Villa Verde, and Las AmĂŠricas are generally older, run down, and cater to families with modest incomes. Most notably missing from the immediate surrounding area is middle or high end residential developments.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Vehicular Circulation Analysis: Site To Caguas Center

The site is located within minutes of Bayamón’s city center. The vehicular circulation from the site to the intersection of highway #177 (Los Filtros) is on a well paved road and generally has light transit. From Los Filtros, vehicular congestion becomes problematic. Notwithstanding, most of Bayamón’s principal commercial, business, hospitals, recreation, and shopping are within easy reach of the site.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Vehicular Circulation Analysis: Site To Highway #1

The site is also located very close to the adjacent municipality of Guaynabo. The two principal roads leading to Guaynabo ( 836 & 837) are ―mountain‖ roads with two car lanes. The roads are generally frequented by commercial traffic and have limited turn off and passing lanes. Lighting in the evening can be poor in certain sections. Nevertheless, access is generally free of major traffic. From the site, one can also reach Highway #1 – ―La Muda‖ in less than 20 minutes.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Vehicular Circulation Analysis: Site To Caguas Center

The site is also within easy reach of the municipality of Caguas. To get to Caguas from the site take Highway #174 and head South. The road will wind through the town of Aguas Buenas and eventually end at ―Las Catalinas Mall‖. Like the roads leading to Guaynabo, circulation to Caguas is on a ―mountain‖ road with two car lanes. The road is generally frequented by commercial traffic and has limited turn off and passing lanes. Nevertheless, access is generally free of major traffic. Caguas is located within approximately thirty minutes of the site.

Vehicular Circulation Analysis: Site To San Juan (Luis Muñoz Marín Airport) _____________________________________________________________________ 16 Axyon Advanced Solutions For Real Estate Development All Rights Reserved ®

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Accessing the San Juan metropolitan area is also within easy reach of the site. From the site one can access San Juan from ―Los Filtros‖ (177), Highway #22 or Martínez Nadal (#20). All three options include well paved roads and highways with multiple car lanes.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Site Location: Conclusion

Although not immediately adjacent to a major highway, the site is in close proximity to many key roads: 174, 177, 833, 836, 20, 22 and 1. These roads provide multiple circulation routes in and out of the San Juan Metropolitan area. With a cursory inspection, the site appears to be suited primarily for the subsidy market ( i.e., it is located in a quasi industrial sector). However, after an in-depth vehicular circulation analysis, the siteâ&#x20AC;&#x2122;s location, although psychologically distant, is excellent. Note: A well designed marketing campaign will be required to counterbalance this perceived weakness.

S.W.O.T. ANALYSIS ( Strengths, Weakness, Opportunities and Threats) _____________________________________________________________________ 18 Axyon Advanced Solutions For Real Estate Development All Rights Reserved ÂŽ

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Strengths: Positive aspects inherent in the site or project. Location: Strengths The proposed project is located within 3.8 miles of the Los Filtros roadway. Within a few miles of the proposed project, can be found all of Bayamón’s principal hospitals, recreation, shopping, and educational facilities. Multiple Vehicular Accesses: Strengths As noted above, the site has multiple vehicular access streets, roadways, and freeways (See above transit study for more details). Site Views: Strengths Much of the site has panoramic views of Bayamón and Guaynabo. Lush Landscaping: Strengths The proposed development has an array of lush landscaping. Each building cluster is rich with natural vegetation.

Closed Access: Strengths The proposed development will be accessed via a guard house and gate. The guard is stationed at the guard house seven days a week 24 hours a day. Each building cluster will further be secured by a private gate that will operated with a beeper. S.W.O.T. ANALYSIS ( Strengths, Weakness, Opportunities and Threats)

Weakness: Negative aspects inherent to the site or development. Site Rocks: Weakness The physical inspection of the site has revealed a large quantity of rocks and rock base. The various rock quarries in the area seem to substantiate the fact that the site will most likely have similar soil content. In addition to taking abundant borings, the site development plan should also consider reducing the building footprint. One advantageous solution would be to create buildings that include the parking underneath the structures. This would limit the building and parking footprint by almost 50%. _____________________________________________________________________ 19 Axyon Advanced Solutions For Real Estate Development All Rights Reserved ®

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Several projects have used a site plan where the road runs through the actual building with parkings situated on either side. Proposed Unit design: Weakness See unit design analysis below for details. Surrounding Industrial Ambiance: Weakness The proposed site is located in a semi-industrial area. This location, as mentioned above, does not appear suitable for a residential community. Special marketing efforts will be needed to combat this objection. Open Parking Plan: Weakness The proposed parking plan is open. An open parking plan limits the pricing of a multi-family product. Most consumers prefer covered or subterranean parking arrangements.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Entrance: Weakness The highway leading to the proposed project is two lanes and is transited by heavy trucks. The entrance will need ample roadway to allow for safe circulation of the project’s vehicles.

S.W.O.T. ANALYSIS ( Strengths, Weakness, Opportunities and Threats) Opportunities: Positive influence outside the control of the development team.

Bayamón Golf Course: Opportunities Bayamón recently inaugurated its first Golf Course. The Golf Course is located on Highway 177 – Lomas Verdes. The course is just minutes from the proposed project. Low Interest Rates: Opportunities Interest rates continue at historic low levels. This makes the purchase of new homes accessible, notwithstanding increases in costs. New Highway Construction Las Cumbres :Opportunities There is allegedly a plan to expand the Las Cumbres Highway. The expansion of this highway would have significantly positive ramifications for the proposed project. The highway expansion would essentially place the site in the Guaynabo market place. It should be noted however, that neither the Public Highway Authority or Public Works Department have issued a timetable for said construction.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

New Highway Construction Los Filtros: Opportunities There is allegedly a plan to expand Los Filtros roadway. The expansion of this highway would improve vehicular circulation for the proposed project. There are no imminent dates for construction of this roadway.

S.W.O.T. ANALYSIS ( Strengths, Weakness, Opportunities and Threats) Threats: Negative external forces that the developer cannot control.

Economic Recession : Threats Puerto Rico is currently in a recession. Most would agree that the recession is mainly a result of internal political strife, poor long term planning, inept financial management and a shift in economic relations with the United States. Anti-Development : Threats There is currently an anti-development wave in Puerto Rico. The government has limited permits for new projects and has even revoked permits while projects are under construction. High Loan To Value : Threats _____________________________________________________________________ 22 Axyon Advanced Solutions For Real Estate Development All Rights Reserved 速

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Puerto Rico’s financial sector has suffered many setbacks since 2006. This has created a lending environment with tighter credit restrictions and higher loan-to-values. Most experts agree that the 100% mortgages will soon disappear. High Cost of Living : Threats Since the war in Iraq, the price of crude-oil has more than doubled. High oil prices have had a negative ripple effect in the local economy. The cost of water, electricity, and other government services have increased 15-35%. Traffic Congestion: Threats The Bayamón municipality suffers from significant traffic congestion at peak traveling hours. The traffic congestion is most notable at the ―Los Filtros‖ junction. This traffic congestion is mitigated, however, by the fact that there are multiple ingress/egress roads to the site.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Design Recommendations In today’s economy, the need to differentiate one’s product cannot be over-emphasized. Product differentiation, through unique, forward- thinking design will allow the proposed project to become a vibrant community and surpass market expectations. Below you will find our design recommendations of the model apartment for the proposed project.

The proposed design is a ground floor 3/2 bedroom model. The model has approximately 2,200 S.F. including the downstairs utility room.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Master bedroom The master bedroom size is adequate. The room width (11’11‖) is a bare minimum dimension. The window placement allows for a limited bed placement. It is usually not desired to place a bed against a window. Consumers like having different options for bed placement. The walk-in closet is ample. Master bath The master bathroom is functional with a very good toilet/bidet area. The separate room for these facilities is a worthwhile luxury. The double sink is pleasant however two sinks should have a minimum linear counter of 6’.5‖ for real comfort. Bedrooms # 2 & 3 Both bedrooms # 2 & 3 are small in size. This is particularly true of the third bedroom next to the living room. For a move up/down market (where there are less than two kids), it is preferable to leave the space open and provide a large living/family area. Open space allows the apartment to look large while at the same time saving the development money on unnecessary square footage – win/win. Laundry There is too much wasted space in the laundry. Much more valuable would be if the laundry would be double-loaded and included in the kitchen with a large pantry storage area. 2nd Bath The 2nd bath is very small. Sometimes, adding a shower component or additional bidet can add significant value without much cost. Vanity The apartment bed/bath ratio is 3/2. Increasing the baths would add significant perceived value to the apartment. Foyer A foyer is a very important design element in single family homes. In apartments where traffic can be controlled at the lobby level, the foyer is less critical. In the specific apartment design, there are only two apartments per floor. In addition, there is a key pad entrance security system at the building’s door entrance. Consequently, the need for privacy is dramatically reduced. The foyer space could be better used as living area. This would also reduce construction costs.

The balcony The balcony has its principal mission to bring the outdoors…inside. In the proposed project, the natural landscape is an important sales benefit. The balcony should be increased in width in order to accommodate a table that can sit 4 people. An adequate width would be 6-8’’. Please note _____________________________________________________________________ 25 Axyon Advanced Solutions For Real Estate Development All Rights Reserved ®

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

that in the ground floor model, there is an area in the balcony that perhaps can be converted into private storage space for say, a barbecue. Utility room The utility room in the penthouse and garden apartment offers many design alternatives: guest bedroom, 2nd master bedroom, home office, mother-in-law room, entertainment center, college studentâ&#x20AC;&#x2122;s room, etcâ&#x20AC;Ś Whether the utility room is a penthouse or garden level (going down with heavy items is not for the faint hearted), elevator access is critical. By having elevator access, the utility room becomes independent. This will allow the consumer to justify the additional cost.

In creating the utility room careful attention should be paid to the bathroom design and closet space. As a general rule, the amenities of a utility room should be equivalent to those of the master bedroom. Note: There is a growing trend in two master bedroom designs.

A. Community Design 1. Community Facilities and Amenities: The community recreational facilities should have multiple access points and be centrally clustered. Ideally, the community facilities should be located at or near the front of the _____________________________________________________________________ 26 Axyon Advanced Solutions For Real Estate Development All Rights Reserved ÂŽ

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

development for the reasons of higher profile and greater visibility, which are very important for the sales process. Having these facilities at or near the front entrance will also enable the security personnel to maintain watch over the facilities. The facilities should include (space permitting) a uniquely designed swimming pool integrated with a Jacuzzi and ―kiddy pool‖, gazebos, children’s play areas, and some form of exercise path for walking/jogging. In addition to these standard recreational amenities, we suggest the construction of a “community center”/multi-purpose facility that could be used as a meeting place, conference center, day care facility, and a variety of other functions for all the buildings. 2. Community Front Entrance: “Curb Appeal” The front entrance of the community is incredibly important to the image of any development. The proposed project should invest a considerable amount in the development of this frontage. This area will also act as a buffer between the proposed development and the industrial area surrounding the project. 3. Distribution/ Density of Buildings: Based on our analysis we have determined that off-setting the buildings in each cluster has the effect of making each building more individual and unique. Also, by arranging the buildings in this manner, the parking facilities can be broken up into more aesthetically pleasing groupings. This will help eliminate the undesirable ―sea of parking‖ that results from straight-line building development. 4. Parking Facilities: In addition to the previous recommendation, these facilities should offer at least one covered parking space to each unit. Research has shown that the walk-up market has a high preference for covered parking. If available, buyers will usually pay a premium for this feature, even if they are not located in direct proximity to one’s unit. 5. Security Measures: Security is the principal concern of clients in the new home. The market standard is the use of controlled access gates and a manned guard house. Our recommendation is not only to ensure 24 hour security personnel, making rounds, but we also suggest that for each cluster of units, individual entrance gates be implemented within the community. This will offer a greater level of security for each resident. In addition to/ or in place of these features, we recommend that each building be equipped with an intercom system, keyed elevators, and cameras in the lobbies.

B. Exterior Design 1. Architectural Design of Buildings: _____________________________________________________________________ 27 Axyon Advanced Solutions For Real Estate Development All Rights Reserved ®

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Our research has shown that there are three (3) specific design elements that distinguish building design: 1) Façade movement: (breaking up the straight-line continuity). 2) Balcony aspects: creating different views by way of adding large balconies within the façade movement. The proposed project offers some fabulous vistas of the Bayamón/Guaynabo mountain range. Large balconies would add considerable value to the already beautiful natural setting.

3) Window treatments such as overhangs and window frames can considerably add style and function to the façade. 2. Color-scheme: The use of different colors to accent building features or to differentiate buildings or clusters can be very effective in creating a unique feel to a development. By varying the colors of the building façade, one can cultivate a specific identity to the development. This color variation does not only apply to paint, but includes roofing materials, and window tints. 3. Front Door: The entrance to each unit is another very important feature that affects the buyer’s perceived value. The front door is the threshold to ones living space and speaks to what should be expected of the interior, just as the front entrance to the community does. _____________________________________________________________________ 28 Axyon Advanced Solutions For Real Estate Development All Rights Reserved ®

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

The use of double doors provides a more elegant entranceway, at a relatively low cost in the development process. Also, doors with beveled/molded features, elegant door-handles, knockers, or windows provide added value to this very important element of the unitâ&#x20AC;&#x2122;s exterior.

C. Interior Design 1. Elevators There is a clear trend towards elevator projects. From a sales perspective, the elevator allows the project more density but equally important, it allows the building to cater to an older demographic market.

2. Space Distribution: The three (3) major issues regarding interior distribution of space are: 1) Area of the master bedroom 2) Area of the living room/dining room space 3) Area of the kitchen (and family room space) _____________________________________________________________________ 29 Axyon Advanced Solutions For Real Estate Development All Rights Reserved ÂŽ

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

MINIMUM SQUARE FOOTAGE Master bedroom: 14’ x 12’ Living room/dining room: 21’ x 12’ Kitchen: 11’ x 12’ Balcony/ terrace: 10’ x 6’ IDEAL/ RECOMMENDED SQUARE FOOTAGE Master bedroom: 16’ x 13’ Living room/dining room: 24’ x 14’ Kitchen: 12’ x 15’ Balcony/ terrace: 14’ x 7’

3. Open Space Plans While construction costs increase, developments are forced to either raise prices or reduce room sizes. One solution to this dilemma is the open floor plan. The open floor plan allows for the maximum uninterrupted space in the living-kitchen-and dining room. The open floor plan is excellent for the empty-nester and echo-boomer markets.

4. Half bathroom with centralized location: It is important that a guest bathroom be convenient for guests to access. A half-bath can easily fit in the same space as a laundry area, pantry, or closet, and can add great value to the unit’s efficiency and livability. 5. Multiple accesses to balconies: Multiple accesses to the balcony allow greater convenience and circulation throughout the apartment. Balconies usually fall into three distinct categories: 1. Old San Juan – decorative only with a width of approximately 6‖-18‖ 2. Chair Balcony – used for chairs facing outward only with a width of 2.5’-5.5’ 3. Table Balcony – used for tables that can sit 4 people with a width of 6.5’ to 9’. The proposed project has excellent views and outdoor scenery and perhaps is best suited for a table-style balcony. 6. Window placement in rooms: The ideal window placement involves: 1) Positioning for views, ventilation, and light for each room 2) Positioning for furniture _____________________________________________________________________ 30 Axyon Advanced Solutions For Real Estate Development All Rights Reserved ®

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

It is very important to position the windows in a manner so as to take advantage of views, cross-ventilation, and lighting. However, window placement must also offer the most options for furniture arrangement.

7. Intelligent Home systems: The up-scale home market is currently using the ―Intelli-home‖ system. The ―Intelli-home‖ system joins together all rooms in the residence by wiring them specifically for music, audio/video, internet and camera/intercom. The music component seems to be the most widely used feature.

8. 12 x 12 or 18 x 18 ceramic tiles: The standard floor covering in apartments is still the 12’ x 12’ ceramic Italian tile. However, there is a trend toward larger tiles (16’ x 16’ +). The use of large tiles such as these would increase both the real and perceived value of the development. 9. Laundry location: _____________________________________________________________________ 31 Axyon Advanced Solutions For Real Estate Development All Rights Reserved ®

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

There seems to be a split between laundry locations—either close to the kitchen or in its own room adjacent to the bedroom space of the unit. While either location is satisfactory, it should not compromise the kitchen size.

10. Storage: Storage, storage, storage. Today’s buyer needs a place to put all the stuff that he/she owns and consumes. If there is a move-up/down buyer, storage becomes ever more important. The storage should be both inside the apartment (with a/c) and outside (for bikes, recreational equipment, wine, etc..).

Housing Supply Housing supply can be defined as the sum of all units currently on the market for sale. This includes those units that are currently under construction and will come on line within 24 months. 1. Previously-owned homes and apartments: Studies have determined that new _____________________________________________________________________ 32 Axyon Advanced Solutions For Real Estate Development All Rights Reserved ®

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Homebuyers investigate previously owned homes as part of their purchase decisions. Existing homes in the Bayamón market area vary greatly in age and size. Prices range from $70,000 to over $2,000,000. According to Estudios Técnicos, the existing home market is not sufficiently large to absorb the entire home demand. There is an annual demand of approximately 10,000 new homes. 2. Owner-Built Homes (New Construction): A new homeowner may opt to build his/her own home instead of purchasing a home from a developer. Owner-built homes in the Bayamón market area range in price from approximately $125,000 to $2,000,000. There was no significant level of owner-built homes noticed in the area surrounding the proposed project. 3. New Home Developments The Bayamón-Guaynabo market area experienced a surge of new home developments from 1993-2000. Today, the supply of new homes is ample and the amount of construction activity significantly slower. The new home development supply in the Guaynabo/Bayamon Market Area can be divided into three main categories: Walk-Up, Mid-Rise, and Condominium. * a. Walk-Ups Walk- Ups are defined as multi-family buildings that are two or more floors. b. Mid-Rise Mid-Rise are defined as multi-family buildings with elevators – usually seven stories or less. b. Condominiums Condominiums are defined as multi-family buildings with elevators – usually eight stories or more. * Single family residences and other products are outside the scope of this study.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

NEW HOME PROJECTS: WALK UPS

$250,000 $200,000 Vista del Pinar

$150,000

Bosque Sereno Flamingo Apts.

$100,000

Altos de Panorama Alturas del Bosque

$50,000 $0 Walk-Ups

As can be noted in the attached, AXYON New Home Projects table for Bayamon-Guaynabo, there are five (5) Walk-Up projects in our market area. The projects range in price from approximately $134,000-$228,000. The price per square foot of the Walk-Up projects range from $79-$167. The average price of the Walk-Ups is $176,469 with a average price per square foot of $139. The average size of the unit is 3 bedrooms with 2 baths for a total of 1,441 square feet.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

1. Vista del Pinar: 2/2, $134,900, 96 units – 85% sold, Doral, $167 S.F. Vista del Pinar is located in Bayamón, on Road #861. This project has two model apartments. The apartment with 2 bedrooms and 2 bathrooms is approximately 990 S.F. The 3 bedrooms and 2 bathrooms is approximately 1,100 S.F. The recreational facilities include a pool with gazebo and 24 hrs guard house.

Vistas del Pinar Floor Plan 3 /2

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

2. Bosque Sereno: 3/2, $165,000, 180 units - 74% optioned, Doral Bank, $158 S.F. Bosque Sereno is located in the Rexville Area of Bayam贸n. The first building is scheduled to be delivered during the 2nd semester 2007. The 3 bed 2 bath apartment measures approximately 1,047 S.F. The project has a multi-level parking. Their facilities include access control, gazebo, gym, walking trail and pool. Bosque Sereno is now delivering the first units.

Development Analysis June 1, 2007

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3-Flamingo Apts: 3/2, $155,447, 192 units - 10% sold, Doral Bank, $158 S.F. The Flamingo Apartments is located in Bayam贸n. This project has three phases. The first phase has 50 units. Delivery started in March 2007. The apartment measure approximately 1,040 S.F. The recreational facilities include gazebo, pool and basketball court.

Alturas del Bosque: 3/2, $228,000, 270 units- 45% sold, Doral Bank, $143 S.F. The Alturas del Bosque Community is located on Road #846 close to Los Paseos Shopping Center and Las Cumbres Avenue. The apartment is approximately 1,595 S.F.

5. Altos del Panorama: 3/2, $199,000, 46 units- 89% sold, Popular, $79 S.F. Altos de Panorama is located in the Rexville Area of Bayam贸n. The project is delivering its last units. Only three Penthouse apartment remain. The Penthouses have approximately 2,531 S.F.

Development Analysis June 1, 2007

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NEW HOME PROJECTS: MID-RISE

$600,000 $500,000

Plaza del Palmar Elmaria Four Winds Solaris Casa Magiorie Los Cantiles Murano La Colina

$400,000 $300,000 $200,000 $100,000 $0 Mid-Rise

There are eight (8) Mid-Rise projects in our market area. The projects range in price from approximately $253,000-$539,000. The prices per square foot of the Mid-Rise projects range from $188-$278. The average price of the Mid-Rise is $331,000 with an average price per square foot of $213. The average size of the unit is 1,550 square feet with 3 bedrooms and 2 baths.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

1- Puerta de La Colina 3/2, $276,000, 56 units, 54% optioned, Popular, $143 S.F. Puerta La Colina is located in Bayam贸n on Road #2. It is about 20 minutes to the proposed project. Each building has five floors with two elevators per floor. This community is part of Colinas Del Bosque. The project is under construction. The apartment is approximately 1,627 S.F.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

2- Solaris: 3/2, $339,900, 108 units, 46% optioned, Santander, $249 S.F. Solaris is located in Guaynabo. It is located very close to the Centro de Bellas Artes. This project has three model apartments that measure approximately 1,365 S.F. Solaris is now in presales and deliveries are expected in summer 2009.

Development Analysis June 1, 2007

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Plaza del Palmar 3/2, $253,650 98 units, 92% optioned, Santander, $249 S.F. Plaza del Palmar is located in Guaynabo on Las Cumbres Avenue. Plaza del Palmar finished construction in the last quarter 2006. The apartment is approximately 1,350 S.F. This project has three models; standard , garden and penthouse apartment. The facilities include guard house, pool and gazebo.

Development Analysis June 1, 2007

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4- ElMaria 3/2, $259,500 90 units, Santander, $181 S.F. ElMaria is located in Cupey. It is about 5 minutes from the Luis Munoz Marin Highway. The apartment has 3 bedrooms and 2 bathrooms and measure approximately 1,430 S.F. The apartments have the ―Intelligent home system.‖ The buildings have an electric generator and 12,000 g. water tank. The community facilities include a basketball and tennis court, gazebo and pool.

Development Analysis June 1, 2007

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5- Four Winds 3/2, $295,000 1672 SF 229 units, $176 S.F. Four winds is located in Guaynabo. The typical apartment has 3 bedrooms and 2.5 bathrooms and measure approximately 1,672 S.F. The apartment amenities include smart house design and Wi-Fi internet. The community facilities include racquetball court, infinity pool, and picnic area with gated access. Four Winds is a green building. project.

6- Casa Magiorie 3/2.5, $349,000 1670 SF 90 units, 12-optioned, $209 S.F. _____________________________________________________________________ 44 Axyon Advanced Solutions For Real Estate Development All Rights Reserved 速

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Casa Magiorie located in Guaynabo on the Martínez Nadal Express Way. The apartment has 3 bedrooms and 2.5 bathrooms and is 1,670 S.F. The community amenities include a full electric generator, cistern and guard house. Each building has a ―tele entry‖ system, pool, fitness center with sauna and club house.

7- Los Cantiles 3/2, $350,000 1400 SF 120 units, $250 S.F. _____________________________________________________________________ 45 Axyon Advanced Solutions For Real Estate Development All Rights Reserved ®

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Los Cantiles is located in Guaynabo. The project has not commenced construction. Pre-sales are projected for winter of 2008. The project consists of two towers with 15 floors. The apartments will have 3 bedrooms and 2 bathrooms with 1,400 S.F. 8- Murano 3/2, $529,000 1900 SF 196 units, $278 S.F. Murano is located in Guaynabo on Las Cumbres Avenue. The recreational facilities include pool, club house, racquetball court and gym. The interior amenities include European kitchen with granite top and marble floor. This project has four models. It is the top end project. Particular attention should be paid to their covered parking scheme.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Floor Plan - Murano Luxury

Large closets, a guest bathroom, and fine finishings are the hallmarks of the Murano Luxury model.

Development Analysis June 1, 2007

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NEW HOME PROJECTS: CONDOMINIUMS

$500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0

College Park Regency Park Plaza del Prado Santa Maria

Condominiums

There are four (4) Condominium projects in our market area. The projects range in price from approximately $160,000-$497,000. The price per square foot of the Condominium projects range from $180-$441. The average price of the Condominium is $352,000 with an average price per square foot of $281. The average size of the unit is 1,252 square feet with an average of 2.5 bedrooms with 2 baths.

Development Analysis June 1, 2007

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1- College Park 2/1 & 3/2, $160,500 892 SF 132 units, $180 S.F. College Park Condominium is located in Guaynabo close to the CPN School. College Park has two different models starting at 892 S.F. with 2 bedrooms and 1 bathroom; and 3 bedrooms and 1 bathroom. The recreational areas include a pool, guard house and gazebo. This project is delivering its last units.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

2- Regency Park 3/2, $269,000 1136 SF 145 units, 60% sold, $237 S.F. Regency Park is located in Guaynabo. It is about 2 minutes from Martínez Nadal Express Way. This project has two different models. The 3 bedroom and 2 bath model has 1,136 S.F. Deliveries commenced in 2006. There is still a substantial amount of inventory remaining – 40%.

3- Plaza del Prado 3/2.5, $480,000 1,100 SF 100 units / 95 delivered, $441 S.F. Plaza del Prado is located in Guaynabo. It is about 2 minutes from Los Filtros Road. This project has several different models; with 4 apartments per floor. Each unit has dramatic 10’ ceilings heights. The recreational facilities include a pool, a gymnasium, and a ½ basketball court (under construction).

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

4- Santa Maria 3/2.5, $497,000 1,800 SF 68 units $264 S.F., Popular The Santa Maria Condominium is located in Rio Piedras; close to Interamerican University on Road #177. The standard apartment has 3 bedrooms and 2 bathrooms and is approximately 1,881 S.F. The recreational facilities include a pool, gym and gazebo. The apartments have intelligent homes system and wi-fi internet system. The buildings include electric generator and water tank.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Future Projects In addition to current supply, there are currently fifteen (15) multi-family projects that are in the process of coming on line in the next 12-24 months. These projects are all at different stages of the entitlement process. The data was collected from the Planning Board of Puerto Rico. Out of the approximately 1,643 units listed below, 500 units have been already approved. Many of the other projects will not complete the permitting requirements, obtain financing or be successfully developed. It is assumed for the purpose of this analysis that approximately 60% of the below noted projects or 1,000 units will be absorbed into the supply pool. This represents approximately 500 new units per year.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

According to The Dictionary Of Real Estate Appraisal, 4th Edition, “The highest and best use of a property is that it must be legally permissible, physically possible, financially feasible, and maximally productive.” The highest and best use of the proposed site is to develop residential units. The proposed site is located within the zonning for residential development. The site topography is mountainous with a high probability of rock surface. The usable land will be costly to develop and limited grading to the slope will also protect the environment. Multi-family housing will allow for less land development and higher unit demsity. Historically, very few elevator products have been built in the Municipality of Bayamón. With the increase in land costs and population density, however, elevator products are inevitable. There is already an abundant supply in the neighboring municipalities as viable examples. The demand for elevator projects will most likely only increase as the Puerto Rican population continues to age. Specifically, the proposed project is being developed on the outskirts of Guyanabo where Mid-rise products are industry standard. By providing an elevator unit, the proposed project will be able to offer a comparable amenity and thus capture part of this existing market. The highest and best use for the proposed project is to build a Mid-Rise project.

Development Analysis June 1, 2007

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Projected Target Client Profile The projected target client profile is a composition of key demographic and economic metrics. The projected target client profile is intended to assist the development team build a in accordance with the client’s demographic, psychographic and economic criteria.

TABLE 1 Average family income:

$46,000-$95,000/annually

Average age:

35 years +

Children:

50% live with 1 child 15% with 2 children + 35% with 0

Profession:

Service industry/Professional

Location of employment:

60% 20% 5% 15%

Prior living arrangement :

Buying Cycle:

San Juan Area Bayamón Caguas Other

15% live at home with family 15% rental property 50% owned detached unit 20% own walk-up 35% 1st time home buyers 50% Move-up buyers 15% Move-down buyer

Development Analysis June 1, 2007

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Sensitivity Analysis

The below noted sensitivity analysis demonstrates the financing costs of a typical $250,000 unit. The scenario assumes a 100% financing option. You will note that the interest rate increase from 6% to 8% requires an additional monthly income of $1,000; or a total annual income from approximately $67,000- 79,000. *

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Price Point by Product Type In choosing the correct elevator product type, the primary focus should be to not ―price-out‖ the consumer. As can be noted above, there is a notable increase in sales price per square foot for Condominium products versus Mid-Rise buildings. Below you will find a graph with the average price per square foot per product category.

$300 $250 $200 Walk-Up Mid-Rise Condominium

$150 $100 $50 $0 $ SF

This price difference is mainly due to added construction costs associated with infrastructure, HVAC, subterranean parking, and specialized labor and machinery needed to build a Condominium product. . In a sub-urban market, where land costs are less expensive than in the city, the principal demand is for an elevator product (with covered parking) at an affordable price. If the apartment is too expensive he/she will most likely a) opt to buy an elevator product closer to the city b) not qualify c) buy a single family home. Thus being less expensive, a Mid-Rise building would be the logical choice for the proposed project.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Apartment Size and Configurations Based on the market comparables, the ideal apartment should have an open configuration. The ideal product mix consists of three different model plans: 1) 2) 3)

A two bedroom unit that ranges in size from 900 S.F. to 1, 100 S.F. A three bedroom unit that range in size from 1,300 S.F. to 1, 500 S.F. A penthouse and garden unit (with utility room with elevator access) that range in size from 1,500 S.F. to 1, 800 S.F.

Price Point Today, there are seven (7) Mid-Rise products in the Bayam贸n-Guaynabo Market Area. The prices range from $176-$278 a square foot. The average price per square foot is $213. Based on the location strengths of the proposed project, the price point today should be approximately $205 SF. Below, are three different scenarios for price point projections: Aggressive 10%, Conservative 6%, and Stagnant.

$300

$248

$272

$225

$250 $200 $205

$217

$244

$230

$224 $217

$211

3% Growth

$150 6 % Growth

$100

10% Growth

$50 $0 2007

2008

2009

2010

Adjusted Price Point For Inflation Table

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Assuming a conservative $230 SF price point (adjusted for 2 years), the above noted MidRise apartments should have the following pricing mix: 1) 2 bedroom / 2.5 bath unit that ranges in price from $207,000. to $253,000. 2) 3 bedroom / 2.5 bath unit that ranges in price from $299,000 to $345,000. 3) Penthouse and garden unit that ranges in price from $345,000 to $414,000.

Housing Demand The study Demand for Housing in Puerto Rico 2005-2009, prepared by the firm Estudios TĂŠcnicos, Inc. for the Puerto Rico Bankers Association forecasts the demand for new housing units during the 2005-2009 periods. The study projects the demand for housing by price bracket for each island municipality. The study also prepares an aggregate by region and for the whole of Puerto Rico. The primary elements in the forecasting model are projections of household formation and household income by municipality. The effective demand is then divided into two categories: regular market demand (that which can be met by private developers) and assisted demand (that which needs some form of government assistance.)

Total Annual Demand

11,022 53%

9,618 47%

Market Demand Subsidy

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For the entire island of Puerto Rico, total housing demand for the five year period (2005-2009) is 99,800 units. In the regular market category, effective demand is projected to be at 9,618 units annually or 47.5%. For the San Juan Region which includes Guaynabo and Bayamón, the total demand projection is 15,631 for the five year period or 3,126 units per year.

Housing Demand By Product In the Construction & Sales Activity Report, Estudios Técnicos, Inc. surveyed sale activity data by housing unit type. During the second quarter of 2006, a total of 3,620 housing units sold in Puerto Rico. Single family units accounted for 71% of the total units sold, walk-ups units represented 10.1%, high-rise condominium units 11.5% and other types of housing (townhouses, villas, mixed) 7.3%.

Housing Demand By Product *

7% 12% Single Family Walk-Ups Condominiums other

10%

71%

Housing Demand By Product San Juan Region Notwithstanding the natural spatial limitations of the island, single family homes remain the preferred housing type dominating all regions except for San Juan and Guaynabo. In San Juan and Guaynabo, multi-family units (Walk-Ups, Mid-Rise, Condominiums), are the leader in the market consisting of approximately 80% of all units sold. Using the weighted average from the sale activity in the San Juan Region, it can be inferred that the market demand of multi-family housing (Walk-Ups, Mid-Rise, and Condominiums), units in the $300,000 and over price is in a ratio of approximately 20% of the total units absorbed.

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

Based on the annual total market demand estimated for the 2005-2009 period, 3126 units per year, it can be inferred that the San Juan Region could demand 625 Multi-family units per year in the $300,000 and over price range ( 3126 * 20%). This would translate into a potential market demand of 3,125 units ( 5 year period) .

Housing Supply According to The study Demand for Housing in Puerto Rico 2005-2009, there is a supply of 2,624 units in the San Juan Region. This data confirms our findings as noted in the above Future Projects table. The units accounted in the supply chain are only those units available and planned as of the 2nd quarter of 2007. The new units needed minus the total available and planned supply results in the residual demand (See table below).

5 Year period

Per Year

Demand

3125

625

Supply

2624

525

Residual Demand

501

100

Based on the inferred demand estimate there is a projected unattended Multi-family housing demand in the San Juan Region of 501 units over the 2005-2009 period or approximately 100 units per year for properties in the $300,000 and over price range.

Absorption Rate

Development Analysis June 1, 2007

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This market analysis assumes that the project will be finished in the winter of 2009, or twentyfour months after the effective date of this report. The available supply should be absorbed in just over four (4) years (2,624 available units / 625 units per year = 4.2 years). As of the estimated project completion date 1,374 of the available and planned supply will still remain in the market (2,624 available units â&#x20AC;&#x201C; 1,250 units demanded in 2 years). Based on the market demand of 625 units per year, it was assumed that new units will be developed to cater to this market. Assuming 500 unaccounted units enter this market along with the subject project, a total of 2,070 units (the proposed project 196 units plus the assumed 500 new units and 1,374 of existing inventory) will cater to the $300,000 and over price range as of the proposed completion date.

The proposed project should have a capture rate of nearly 9.4%. This is assuming it commands an equal market share to its percentage of the total supply (196 units of the proposed project / 1,374 assumed total available units + 500 new units + 196 units). Based on the estimated market capture rate and the annual market demand of 625 units per year for the $300,000 and over market, the proposed projectâ&#x20AC;&#x2122;s absorption rate should approximate 58 units per year (9.4% x 625). The above noted absorption rate would conclude total project sell out by approximately 3.3 years (average sell out of 58 units per year).

Development Analysis June 1, 2007

Multi-Family Project - Bayamon, Puerto Rico HillStone Builders, Inc.

The proposed project’s location is very promissing. Although located physically in Bayamón, it is for all intents and purposes considered ―Guayabon‖. As can be noted in the circulation analysis, the site is very accessible to Bayamón, Guaynabo, Caguas and San Juan. The site’s topography is mountainous. The highest and best use is to build multi-family homes, preferably with an elevator. This should allow for the least site development costs and maximum density. The unit mix should consider the first home market with 2/2 and 3/2 home models with 1, 100 S.F. and 1,400 S.F. respectively. The empty nester and single family target market should represent a majority of home buyers. The target market will most likely need to sell their homes in order to buy at the proposed project. The project’s competitive advantage should be to provide a comfortable unit with all the amenities of a luxury condominium; elevator, security, covered parking, high bath to bed ratio, and closet space. Assuming a conservative $230 SF price point (adjusted for 2 years), the above noted MidRise apartments should range in price from $253,000 to $322,000. The penthouse units should average $379,000. The supply of inventory is projected to dwindle within the next 24 four months from 3,125 to 2,070 units in the San Juan Market Region. The proposed project should capture 9.4% of this supply and sell out in approximately 3.3 years (average sell out of 58 units per year).

Development Analysis June 1, 2007

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Addendum 1: Buyer Questioner The attached questioner was conducted to prospective clients at La Rambla pre-sale event.

Cuestionario Su opinión es muy importante para nosotros. Por favor tome 5 minutos para llenar este cuestionario. Gracias por su visita.

INFORMACIÓN GENERAL: 1. ¿En qué Municipio reside? ____San Juan ____Bayamón____Toa Alta_____Guaynabo_____Otro 2. ¿En qué Municipio trabaja? ____San Juan ____Bayamón____Toa Alta_____Guaynabo_____Otro____N/A 3. ¿Cuál fue el grado más alto de estudio que alcanzó? ____ Escuela Superior___Bachillerato ____ Maestría____ Doctorado____Otro 4. ¿En qué Grupo de edad se encuentra usted? ____Menos de 21 ____22 a 28 _____29 a 35 _____36 a 55 _____56 ó más 5. ¿Tiene hijos? ____Sí ____No

¿Cuántos? ____

Edades: ____ 0 meses a 1 año ____2 a 4 años ____5 a 7 años

____ 8 años o más

6. ¿Es esta la primera residencia que va a comprar? ____Sí ____ No 7. Describa su residencia actual. __Dueño Casa__ Dueño Walk-up__ Dueño Apartamento__Alquilado__Con Familia__Otro 8. ¿Tiene que vender su residencia para comprar? ____Sí ____ No ____N/A 9. ¿Visitó otros proyectos antes de tomar la decisión de comprar en La Rambla? ____Si _____ No. ¿Cuantas? _______ 10. ¿En qué Municipio visitó otros proyectos ? ____San Juan ____Bayamón____Toa Alta_____Guaynabo_____Otro____n/a

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11. ¿Cuales proyectos visitó? _____________________________________________________________________________________________ _____________________________________________________________ 12. ¿Cuál es el pago mensual que estimas tener en su próxima residencia? ___$1000-$1,499___$1,500-$1,999___$2,000-$2,499__$2,500-$3,999__$4,000+ 13. ¿Qué es lo más importante que les motiva a comprar en La Rambla? Marque uno. ____Localización ____Diseño del Apartamento____ Precio ____Otro 14. ¿Cuán importante es el diseño de la residencia en su decisión final de comprar? Marque uno. ___Muy importante____Importante ____Poco importante____No es importante 15. ¿Cual es la razón principal de comprar en La Rambla? Marque uno. ___Seguridad ___ Mejorar calidad de vida___Más espacio ___ Matrimonio___ Inversión___Otro 16. ¿Cual es la configuración ideal para su futuro apartamento? Marque uno. ___ 1cuarto /1.5 baño __ 2 cuartos / 2 baños ___ 3 cuartos / 2 baños __ 4 cuartos /3 baños + 17. ¿Cúantos pies cuadrados le gustaria en su próximo apartamento? Marque uno. ___ 900 pc o menos ___ 1,000-1,300 pc ___1,400-1,700 pc ___ mas de 1,700 pc 18. ¿Le gustaría hacer modificaciones a su apartamento? ___Sí ____ No ¿Cuáles? __________________________________________________ 19. ¿Qué es lo que más le gusta del apartamento? Marque uno. ____Diseño______Terminaciones_____Tamaño Cuartos____ Walk-In Closet ___Espacio Amplio____Balcones_____ La Cocina 20. ¿Qué cambiaría o mejoraría en el Apartamento? _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________ 21. ¿Cómo encuentra la fachada de los edificios? ____Muy Atractiva____Atractiva _____ Bien_____ Poco Atractiva 22. ¿Cómo clasificaría las áreas recreativas de La Rambla? ___Excelente___ Bueno___Satisfactorio___No satisfactorio 23. ¿Qué facilidades harían falta para usted poder disfrutar mejor de La Rambla? _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________ 24. ¿Comparado con otras urbanizaciones en el área de Toa Alta/Bayamón, cuál es la cualidad menos atractiva de La Rambla? Marque uno. _____Precios____Diseño de los apartamentos_____Facilidades Recreativas _____ Localización _______Otro 25. ¿Comparado con otras urbanizaciones en el área de Toa Alta/Bayamón, cuál es las mejor cualidad que tiene La Rambla? Marque uno. _____Precios____Diseño de los apartamentos_____Facilidades Recreativas

Development Analysis June 1, 2007

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_____ Localización _____Elevadores_____Planta Eléctrica_____OtroAddendum 3:

Luis Abreu Report

Past Sales The Luis Abreu Sales Report is compiled from actual closings as reported from local financial institutions. The financial institutions do not report all their closings. Moreover, not all financial institutions participate in said study. Thus, the data reported is not representative of absolute closings – total sales. Nonetheless, the Luis Abreu Sales Report does accurately reflect sales prices and closing dates.

Table 1 - Luis Abreu Past Sales Report

The attached data represents sales from 2006 & 2007 of Multi-Family units (Condominiums, Walk-Ups, and Mid-Rises) of the Guaynabo Municipality. The data collected has been divided into new units and previously owned units. The new units average 3 bedrooms with 2.5 baths and are approximately 1,897 SF. The units have 2.26 parking spaces. The average sales price was $415,655 or $214 per square foot. It is interesting to note that new units sold on average for 7% less than the appraisal price. The previously owned units average 2.8 bedrooms with 2.0 baths and are approximately 1,260 SF. The units have 1.86 parking spaces. The average sales price was $202,776 or $157 per square foot. The units sold on average for 1.8% less than the appraisal price.

Development Analysis June 1, 2007

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ADAM GREENFADER, M.R.E.D. Page 1/3

CURRICULUM VITAE A proven track record in the full lifecycle of residential developments. Expertise in land development, new home construction, sales & marketing. Established network of Real Estate professionals with over 750 million dollars of projects.

AWARDED DEGREES

PROFESSIONAL EXPERIENCE

University of Southern California - 1991 Master of Real Estate Development

MAXCAPITAL – Puerto Rico Partner

12/03-Present

AXYON, INC. - Puerto Rico Founder & President

5/00-Present

APRIL INDUSTRIES, INC. - Puerto Rico General Manager 4/98 – 4/00 Director of Sales and Marketing 2/93 – 3/98 FIRST REALTY CORP. – France Marketing Coordinator 6/91-12/92 HONORS AND ACCOLADES Business Executive of the Year

- 2005

Top Management in Real Estate

- 2003

Enterprising Executive Award

- 2002

Best Designed Development

- 2002

Project of the Year

- 2001

Clark University - - 1988 Bachelor of Arts, Major in Government ADVANCED TRAINING U.L.I Condominium Development, 2007 U.L.I Resort Development, 2005 U.L.I. Market Research, 2002 U.L.I. Fall Conferences, 1990-92 Mortgage Loan, 2004 N. A. H. B Annual Convention 93-07 Venture Capital Forum, 2000 Internet World Conference 99-00 Inman Real Estate Technology 1999 Bob Schultz Serious Real Estate Management Training 97-8 Asociacion de Constructores 93-07 M.I.P.I.M. 1992 U.C.L.A. Business Development 1990 Loyola Law School 1989 Université de La Sorbonne 1987 Université de Nice 1986 ASSOCIATIONS

LANGUAGES

National Association of Home Builders Chairman New Members Committee (Puerto Rico)

English French Spanish

Mortgage Loan Association (Puerto Rico)

LICENSES

Sales & Marketing Association (Puerto Rico)

Real Estate Broker (Puerto Rico, 05728 - 1993)

School of Urban & Regional Planning (California)