MINUTES OF THE ORDINARY RESIDENTIAL OWNERS MEETING

[Pages:5]MINUTES OF THE ANNUAL RESIDENTIAL OWNERS MEETING

Grand Regina Los Cabos, BCS

March 10, 2015

The Residential Owners of the Residential Units of that certain Sub-Condominium for Private Unit Phase I of the Los Cabos PRC and Villas Master Condominium, more commonly known as the Grand Regina Resort ("Resort"), met on March 10, 2015, at the Sheraton Hacienda del Mar Golf and Spa Resort, located in Corredor Tur?stico Km 10, Lote D, Cabo del Sol, Los Cabos, Baja California Sur 23410, M?xico, Room Arcos 2, for their regular annual meeting ("Meeting"). The Meeting was not held at the Resort as is usually the case due to the extensive damages the Resort suffered as a result of Hurricane Odile. In accordance with the Sub-Condominium Regulations, Lic. Armando Antonio Aguilar Mondrag?n, Public Notary No. 1, residing in Cabo San Lucas, Baja California Sur, certified that the Resort was uninhabitable due to damage from Hurricane Odile.

At the Meeting, Mr. Gary Allcorn was present in his capacity as representative of RVC Vacation Club, S. de R.L. de C.V. ("RVC"), which is entity that serves as Residential Administrator of the Resort, and also in his capacity as a member of the Advisory Board. Additionally, the following individuals were present in their capacity as Residential Owners and members of the Advisory Board: Mr. David Zale, Mr. Michael Paolercio and Mr. Wesley Brown. Lastly, Mr. Shawn O'Brien attended the meeting as a representative of the Sub-Condominium Administrator, namely Starwood Vacation Ownership ("Starwood"). The Meeting was also broadcast over the internet for those PRC Owners who were not able to attend the Meeting in person.

I. Call to Order

The Sub-condominium Regulations require the Meeting to be called to order with a minimum representation of 75% undivided interests of the ownership of each Residential Unit. Such call was made on March 9, 2015 at 11:00 o'clock and it was certified that the quorum was not met.

The second call to order required a minimum representation of 51% undivided interests of the ownership of each Residential Unit. Such call was made on March 10, 2015, but again no quorum was achieved. As such, the Meeting was finally duly convened when the applicable quorum was met at the third call on March 10, 2015 at 9:15 am.

Mr. Allcorn opened the Meeting by welcoming all the Residential Owners in attendance and informing them of certain formalities to be observed in conducting the Meeting in accordance with Mexican law.

Mr. Allcorn then briefly summarized the results of the 2013 Residential Owners Meeting. An Annual Residential Owners Meeting could not be held in 2014 due to Hurricane Odile.

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II. Election of Examiners, President and Secretary of the Residential Meeting

Mr. Allcorn was elected as to serve as President of the Meeting, with Mr. Zale being elected as Secretary of the Meeting.

As Examiners, Mr. Roberto Perales, who performs accounting services for the Resort on behalf of the Residential Administrator, and Mrs. Marcela Canales, who serves as the General Counsel for the Residential Administrator, were elected.

The Examiners requested that the Residential Owners in attendance submit their ballots at the end of the Meeting, to be counted along with the ballots of those Residential Owners who were not present at the Meeting and who had cast their votes in advance. All of the items in the Meeting Agenda were approved by a majority of the votes.

III. Vote On Whether Residential Owners Who Are Not Current On Paying Their Residential Assessments As Of The Date Of The Meeting Shall Have The Right To Vote On Matters Brought Before The Meeting.

The President explained that this refers to those Residential Owners who have not paid residential assessment for maintenance fees due for 2014 or before.

By a vote of the majority of the Residential Owners, it was approved that Residential Owners who are not current on paying their residential assessments as of the date of the Meeting (not including residential assessment for 2015) shall not have the right to vote in this Meeting.

IV. Certification of Quorum

The Examiners certified that no quorum of Residential Owners was obtained at the first and second call for the Meeting as required by the Sub-Condominium Regulations, but that a quorum was obtained at the third call with the number of Residential Owners then present, in addition to those ballots and proxies that had previously been received from Residential Owners in anticipation of the Meeting.

V. Management Report, including Update on Hurricane Odile and Rebuilding of the Resort

Mr. Allcorn summarized the damages that the Resort sustained due to Hurricane Odile on September 2014.

He then indicated that much of the debris pertaining to the Resort had already been removed and the Resort is ready for repairs.

Mr. Allcorn further indicated that the Resort was insured through a subsidiary of American International Group, a major insurance carrier commonly known as AIG, and that he had recently reached agreement with the insurance adjustor that the insurance company would pay the maximum amount under the policy. Mr. Allcorn then mentioned that it had taken a lot of negotiations with the adjuster to reach a

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settlement on the maximum policy amount. Initially, the insurance adjuster had offered to pay less than 50% of the maximum policy amount.

Mr. Allcorn then explained that the insurance proceeds had already been received from the insurance company.

One of the Residential Owners inquired why the Grand Regina was insured with Raintree properties.

Mr. Allcorn indicated that at the time the insurance coverage was obtained, there was no legal entity representing the Residential Owners that could obtain insurance on their behalf. Therefore, RVC, in its capacity as Residential Administrator, requested that its parent company, Raintree Resorts International, include the Resort in its insurance policy. Once all of the issues pertaining to the Civil Association for the Residential Owner have been resolved and a Civil Association formed, the Resort can then be insured through such association.

Mr. Allcorn further indicated that Mr. Brown had been engaged to be the Project Administrator for the construction and repair work that needed to be done for the Resort and the Residential Units as a result of the damages suffered by Hurricane Odile.

Mr. Allcorn further stated that Mr. Wesley Brown has an extensive good background in construction and refurbishment is therefore qualified to act in such capacity.

On March 9, 2015, a day prior to the Meeting, Residential Owners who desired to do so were allowed to tour the Resort to see first hand the damages sustained by the Resort. Some Residential Owners who toured the Resort and also were present at the Meeting indicated that they had a better understanding of the extent of the damage to the resort .

A Residential Owner then inquired whether such owner would be refunded the maintenance fees already paid for 2015 if the Resort was not open for business at the time of such owner's reservation. Mr. Allcorn responded that the Residential Owners collectively own the Residential Units and as owners of the Resort must pay for the necessary maintenance, even if the Resort is currently closed for business and therefore there would not be a refund of such maintenance fees.

He further pointed out that even if the Resort were to be closed permanently, there would still be costs and expenses to be paid for the Resort such as security, trustee fees, maintenance, insurance etc.

Mr. Allcorn also explained that two companies have been engaged to rebuild the Resort, with the exterior of the Resort being the responsibility of DBA Constructores, S.A de C.V and the interior of the Resort being handled by International Marketing Management, Inc.

Mr. Allcorn then indicated that the repair and reconstruction work on the Resort commenced on Monday, March 9, 2015.

Mr. Brown then described the process of rebuilding, reconstruction and repairing the Residential Units at the Resort.

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He explained that fortunately there was no structural damage incurred to the Resort. However, each Residential Unit incurred different levels of damage, which prevents wholesale repair from being made to the Residential Units. He explained that Building 4 of the Resort will be the last building to be repaired and was the one which incurred the least amount of damage from the Hurricane than the other buildings.

One Residential Owner inquired whether storm shutters could be incorporated in the repairs to the Resort. Mr. Brown explained that it will be difficult to do so at this time, especially given the budget for repairs but indicated that this should be considered for the future.

VI. Income and Expense Statement for the Period ending December 31, 2014

Mr. Allcorn then presented the income and expense statement for the period ending on December 31, 2014 and answered any question posed from Residential Owners present at the Meeting or through the website.

VII. Presentation and approval of 2015 Budget and Residential Assessment

Mr. Allcorn then presented for approval to Residential Owners the 2015 Maintenance Fee and Budget.

Residential Owners approved the 2015 Budget and 2015 maintenance fee in the amount of USD$1,625.00 a two bedroom and USD$2,075.00 a three bedroom

VIII. Property Management Report

Mr. O'Brien, Starwood's representative, explained that Starwood was still in the process of resolving its claim with its insurance company, and that they did not know when the Ciruelo restaurant would reopen and that they would provide some food and beverage service when the Residential Units re-open through other means yet to be determined.

IX. Proposed assessment ("Hurricane Assessment") for the Repairs of Damages to the Property caused by Hurricane Odile

The above item was added to the Agenda due to the necessity to charge a "Hurricane Assessment" in order to rebuilt and repair the damages caused to the Resort by Hurricane Odile. The proposed Hurricane Assessment would be US$2,275 for a two bedroom unit and USD$2,875.00 for a three bedroom unit.

Mr. Allcorn explained that such Hurricane Assessment along with the insurance proceeds would allow for the rebuilding and repair of at least 50% to 75% of the resort.

A Residential Owner present in the Meeting inquired as to what the Resort would be like if repaired to the extent of 75%.

Mr. Allcorn indicated that this would repair and rebuild all of the exterior of the Resort.

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Another Residential Owner asked as to the possibility of charge a higher Hurricane Assessment so that 100% of the Resort could be repaired and rebuilt.

Mr. Allcorn answered in the affirmative but further indicated that the higher the Hurricane Assessment, the higher the default rate in Residential Owners not paying the Hurricane Assessment. He further indicated that the Hurricane Assessment amounts calculated to provide funding to repair 50-75% rebuild of the Resort was already based on a possible default rate of 25% of Residential Owners.

After further discussion, the Residential Owners approved the Hurricane Assessment in the amounts of US$2,275 for a two bedroom unit and USD$2,875.00 for a three bedroom unit.

IX. Rental/Sales Program Report

The sales program is currently administered by Joanne Berkowitz, with the rental program being administered by Josefina Buendia, who both provided information as to these programs prior to Hurricane Odile.

X. Other Matters/Question

Residential Owners were also informed as to the status of the formation of a Civil Association, which is similar to a homeowners association, so that the Residential Owners can be represented through a corporate entity with its own board of directors who could then appoint a new Residential Administrator. Residential Owners then discussed the advantages and disadvantages of managing the Resort themselves.

Thereafter, Mr. Allcorn informed the Residential Owners in attendance that another Residential Owners meeting will be held in December of this year and it is expected that at such time the Civil Association would be duly organized so that the Residential Owners could then assume management of the Resort. It was proposed that the next Residential Owners meeting be held on December 3, 2015.

One Residential Owner attending the Meeting inquired as the how reservations will be handled once the Resort is open for business again and was informed that reservations will be handled on a "first come first served" basis provided that the applicable maintenance fee has been paid. As such, the earlier the maintenance fee is paid, the earlier a reservation can be made.

One Residential Owner proposed to work on a budget for hurricane shutters.

After the attending Residential Owners had no further questions, the Meeting was duly adjourned.

___________________ Mr. Garry Allcorn President

______________________

Mr. David Zale

Secretary 5

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