Moroccan Gardens

Moroccan Gardens • The overall resort brand should be linked to its roots -- Morocco or Marrakech, each of which have and are building continued brand equity across all markets around the world. Our research clearly shows that Morocco, and Marrakech are ‘hot brands’ -- almost taking on a “cultish” sense in a sea of clutter and mediocrity of ‘same-o’, ‘same-o’ resort concepts. • There are other possible brand identities that could work equally or better, depending on future analysis -- further brand identity development, legal clearances, and finally, focus-group testing. From this development platform, Grant Leisure would then develop the brand identity system and brand nomenclature for the various entities within the resort (there are many). • Morocco Gardens is a suggested (working) brand name for the pleasure gardens/theme park. - 76 -

Market Appeal • The success of leisure developments depend on a number of factors including • Appeal of the concept • Location and accessibility • Economic and social factors • Fit with trends • The proximity and success of competing and comparable attractions • The critical mass of complementary attractions and facilities in a given destination. • The size and characteristics of the available resident and tourist markets. • The quality of marketing and management. • Multiple income streams. • The core leisure concepts are of proven appeal. The proposed ‘Pleasure Gardens’ are based on the highly successful Tivoli Gardens in Copenhagen which draws 4.2 million visitors from resident and tourist populations similar to Marrakech. • The development includes elements that will appeal to both local resident and tourist markets including: • A mix of indoor and outdoor activities. • Unique ‘must see’ elements including large format theatre and studio tour. • Different day and evening offers – family attractions and sports for daytime audiences and concerts and a spectacular laser and pyrotechnics show in the evenings. • Strong association with location with authentic Moroccan architecture and interiors or a distinctly Moroccan contemporary style. • A programme of events to bring visitors back again and again. - 77 -

Benchmark – Tivoli Gardens • Tivoli Gardens covers 8.3 hectares in the centre of Copenhagen. • Founded in 1843 it is one of the oldest and most successful amusement parks in the world. • It includes: • 24 rides and attractions including 4 roller-coasters, towers, children’s rides, shooting galleries and Denmark’s largest amusement arcade. • 2 indoor and 3 outdoor performance venues and some 2,350 free performances are held during the summer season, as well as paid entry performances by leading performers and companies. • Gardens decorated with 400,000 flowers and illuminated by 110,000 lanterns at night. • 38 restaurants ranging from gourmet to fast food. • In the run-up to Christmas, Tivoli is decorated with 450,000 fairy lights, 1,100 Christmas trees, an ice rink and 70 stalls selling Christmas delicacies, decorations and gifts. The restaurants and amusement park re-open with Christmas themed rides and menus. • 3.2 million people visit during the summer season and over 1 million more during Christmas. • 287,000 season passes were sold generating approximately half of the visits. • Turnover in 2005 was €62m, with just under half from rides and entertainment, just over a quarter from park admission fees and the remainder from rental income, corporate events and other sources. • EBITDA was around €13m and profits after tax were €6.7m. - 78 -

Market Analysis • The site is attractive for leisure development. Just 8 kms from the centre of Marrakech, bordering the desert and with stunning views across the city and of the Atlas Mountains, the mix of Moroccan architecture and culture blended with modern entertainment and recreation will offer an exciting lifestyle and environment for visitors. • The market living within 1 hour drive of the site is over 2.25 million people, with a further 9 million within day trip driving distance of the site. • The projected opening of the TGV high speed train link with Casablanca projected within the 5 year phase 1 period will increase accessibility by millions. • By 2010 Marrakech expects to receive 3.5 million tourist visits. • The total market capable of visiting the planned attractions is expected to total nearly 15 million by 2010 and with both the resident and tourist markets projected to continue to grow thereafter will exceed 16 million by 2014. • Morocco and Marrakech in particular are well placed to take advantage of current tourism trends with new developments targeting the increasingly discerning customers who expect and demand quality and value, the expansion of the airport and open skies agreement reflecting the growth in budget airlines and short-break holidays. • Plans for MFC reflect other trends including more visitors looking to combine holidays with hobbies and interests (e.g. golf), Increased interest in holidays which promote good health and well-being (spa), increased interest in authentic experiences which provide a flavour of regional culture, traditions and history and growing second home ownership – e.g. around 800,000 Britons now have a place in the sun, up 45 per cent since July 2004. The trend is likely to continue, with another three per cent of British households intending to buy a second property abroad some time in the future. • The attractions will be managed and possibly owned by specialist management companies and the standards of marketing and management will be high. Allowance has been made for the employment of expatriates in the most senior and specialist positions, though in time it is hoped and expected that Moroccans will be trained to take over these positions. • The plans allow for maximum use of the facilities and multiple income streams. - 79 -

Market Analysis – Competitive Environment • Morocco has very few amusement parks, the main venues being Sindibad in Casablanca, M’Nar Parc in Tangier, Smir Parc in M’Diq near Tetuan and Magic Park in Rabat. • There are plans for a new €34m park in Casablanca (Tibidabo) themed around the Arabian Nights tales. Due to open in 3 years it aims to attract 1 million visitors per year. Plans include 2 hotels and a commercial retail centre alongside. • An amusement park, along with an aquatic park, 3 golf courses, spa centre. Moroccan Medina and sports facilities are proposed for Le Jardin de Fleur-Sur-Mer development at Mediterrania-Saidia. • Most existing amusement parks, museums and zoological attractions charge only a small admission fee. • Admission to Magic Park ranges from 25dhs to 40 dhs depending on the day of the week. Rides are priced separately and vary from 5dhs up to 30dhs. • Temara Zoo in Rabat is relocating and aims to increase attendance from 400,000 to 1 million, albeit at a very low admission price. • In Marrakech the main tourist attraction and number one on the ‘must-see’ list is the medina and souk (including the market and street entertainers of Jemaa-el-Fna). • Other attractions include: • Majorelle Garden and Museum of Islamic Art • Sa’adian Tombs – on e of the most visited sites in Morocco • Koutoubia Mosque, Marrakech’s tallest building (non-Muslims can visit the gardens) • Museum de Marrakech – fine art, carpets, jewellery, furniture, ceramics, textiles and manuscripts • Menara Gardens • Musée Dar Si Saϊd – collections of carpets, carvings, jewellery, arms, etc. • La Plage a Marrakech (water park) • The only comparable film studio is Atlas Studios in Ouarzazate which covers an area of 150 hectares and a backlot of 500 hectares. Some organised tour groups visit the studios. In general that tour is static, not interactive and overall pedantic. - 80 -

The Theme/Amusement Park Sector • Theme parks and amusement parks are typically outdoor venues that feature rides as the primary attraction. • At most parks visitors pay at the gate and thereafter have unlimited use of the rides and attractions. Some parks do not charge admission fees but charge separately for rides. Others, like Tivoli Gardens charge a small entry fee and charge separately for rides. • The theme/amusement park market can be sub-divided into: • Destination theme parks where visitors travel long distances to visit and stay (e.g. Disneyland Paris and Port Aventura) • Regional theme parks where most visitors are on a day trip from home (or nearby holiday accommodation) • Amusement parks, normally characterised by having large white-knuckle rides as their main attractions and generally attracting older children and young adults. • There is an overlap between these sub-groups with some regional theme parks offering resort hotels, second gates and conferencing facilities and some amusement parks having some themed areas. • In 2006 the value of the world theme and amusement park market was estimated at over $23 billion and Pricewaterhouse Coopers project that theme park spending worldwide will grow at a 4.5% compound annual rate to reach $28 billion by 2010. • The European market (from which the majority of tourist visitors will come) has been growing faster than the US market (which still accounts for 50% of the world market) and is expected to do so over the coming years. • The European, Middle East and African market is expected to grow to $5.2 billion by 2010. - 81 -

Moroccan Gardens - Pricing Policy • The key driver of profitability for a visitor attraction is its ability to attract large numbers of paying visitors. • To estimate attendance it is necessary to make some broad assumptions regarding admission price and the skills of the operational management team. • The following attendance projections assume management and marketing of a high standard and are based on ticket pricing schedule shown opposite. • The proposed ticket prices are low by European standards and offer particularly good value for money for season ticket holders, with a family of up to 6 being able to visit as often as they wish for a year for €45. • At similar attractions the average season ticket holder visits 6 or more times each year, giving an entry price per visit of just €2.50 for an adult and just over €1 per family member on a family pass. • The projections show ticket prices rising by 2% per annum in real terms each year to reflect rising disposable income in the local market and on-going improvements to the park. • The ticket prices will preclude some sectors of the market – low paid locals – but at slightly higher than admission to a first run movie will be affordable for all tourists and most middle class Moroccans. - 82 -

Moroccan Gardens - Attendance Projections • The attendance forecasts are based on applying market penetration or ‘capture’ rates to the key resident and tourist market populations. The penetration rate is the annual percentage of the market segment likely to be converted into visitors. • Penetration rates are based on knowledge of the range of penetration rates achieved at other comparable attractions in similar markets and an evaluation of where within the range a new attraction might sit. • The table opposite presents a summary of the available markets, market growth projections and penetration rates for each market segment. • In total we project 390,000 people will visit the Moroccan Gardens in the first year of operations, with visitors rising to 450,000 by Year 4. • Of these visitors it is estimated that 7-8% will purchase season tickets and will visit the Gardens 6 times each year on average. • Total visits are projected to rise from approximately 650,000 in Year 1 to 800,000 by Year 5. • The proportion of visitors from the secondary market is low by international standards as the day trip to attractions market is less developed in Morocco than in Europe. • The proportion of visits by tourists is quite high (40% compared to the 27% of Tivoli Gardens visitors) for a number of reasons: • We believe that the Film City will be a popular tourist destination, particularly in the evenings. • Tourists visitors to Marrakech are expected to reach 3 times the city’s total population by 2010. • Marrakech is becoming a popular holiday home destination and we are projecting that 20% of the season ticket sales (approximately 6,000 season passes will be sold to tourists with homes in the Film City or elsewhere in and around Marrakech. - 83 -

Moroccan Gardens - Design Day Analysis • To ascertain the optimum level of customer facilities, and to ensure that the proposed shows, rides and other activities are of sufficient scale to accommodate expected attendance levels on busy days, we have prepared initial estimates of the likely peak on site attendance levels. • To design for the absolute peak day would be uneconomic on every other day. • In the first full year of operation, the peak month is likely to be August, the peak tourist month. • However due to Morocco’s growing popularity as a winter sun destination the seasonality is not as marked as at European theme parks where 20-25% of annual attendance is during the peak month. • We have estimated the peak month at 15% of annual visits and that 27% of weekly visits will be on the busiest day of the week. • On the basis of these assumptions we would recommend that the designs ensure that a daily attendance of around 7- 8,000 can be accommodated. • With operating hours of 10.00am until 10.00pm and an expected average length of stay of 5 hours, the peak on site is likely to be approximately 60% of the daily attendance, resulting in the need to provide sufficient entertainment and customer services and facilities for around 4-5,000 visitors. • Amusement parks typically provide sufficient entertainment capacity to enable visitors 1.3 entertainment activities (rides or shows) per hour. • The Gardens have been designed to provide over 5,000 units of entertainment capacity initially with phased introduction of new rides and shows increasing capacity to 6,300 by Year 5. • Provision will also be needed for over 3 hectares of parking. - 84 -

Moroccan Gardens - Income from Admission Ticket Sales • This pricing strategy gives an average ticket yield per paying visitor of €3.35 in Year 1 rising to €3.75 by Year 5, after allowing for: • Some special promotions (such as child goes free with a full paying adult) to drive attendance in off-peak periods. • To allow for commissions on credit card sales. • VAT at 20% on all ticket sales. • The industry average of 9% of visitors paying no admission (children under 3, group organisers, carers, VIP guests, etc). • The projections assume small real increases in ticket prices over the years. • Total income from ticket sales is projected to rise from €1.31 million in the first full year of operations to €1.74 million in Year 5 - 85 -

Moroccan Gardens - Other Ticket Sales • Visitors will be able to purchase rides individually or through purchase of a ride pass offering: • Unlimited rides for €25.00 • A Gold Pass giving 20 Euros worth of rides for €15.00. • A Silver Pass giving 12 Euros worth of rides for €10.00. • Some visitors (an estimated 15%) will not purchase any additional ride or attraction tickets but will simply enjoy the free entertainment or visit the restaurants. • Some parents may only purchase ride passes for their children. • Based on projections of 25% of visitors buying the unlimited ride pass, 10% the Gold pass, 25% the Silver ride pass and 25% purchasing, on average, 3 Euros worth of single ride tickets, we have estimated an average per visit net spend of €9.17 in Year 1 and spend rising by 2% per annum in real terms thereafter. • Total income from show and ride tickets is projected to rise from €5.9m in Year 1 to €7.95m by Year 5. • Further income is projected from evening performances by local, national and potentially international performers and ensembles. • We have estimated 90 performances in Year 1 rising to 160 by Year 5. • Ticket prices ranging from an average of €5 for minor performances to €15 for major events produce total income projections of €562,500 (ex VAT) in Year 1 rising to €875,000 by Year 5. • The final projected source of ticketed income is Moroccan Dinner Shows targeting the tourist markets. With an estimated 2 events per week (100 per year), an average of 150 guests per event and an average price (inclusive of VAT) of €30 produces an income of €375,000. • No allowance has been made for income from sponsorship and advertising. - 86 -

Moroccan Gardens – Total Income and Gross Profit • In addition to park admissions and ride and entertainment ticket sales and ticketed evening performances, income will be generated from: • Merchandising • Food and beverage sales • Arcade games and sundry income sources • Fees for managing the adjacent Studio Tour attraction • The average per visitor spend on merchandising is estimated at €1.50. This assumes that the main retail operation will benefit from its location outside the pay perimeter and accessibility to people visiting the Medina and other activities and facilities within the Film City, as well as park visitors. • The average food and beverage spend is estimated at €2.00 per visitor. Though low by western standards at parks with a 5 hour average stay, this reflects the expected park visitor demographics. • Income from games and sundry other income sources such as photography is estimated at €1.00 per visitor. • The management fee estimated is based on a fee of 3% of the turnover of the Studio Tour attraction • Total income is estimated at €10.9m in Year 1 rising to €14.6m by Year 5. • The following cost of goods estimates are based on costs achieved at comparable well-managed facilities: • Merchandise – 40% • Food and Beverage – 30% • Games and photography – 30% • Function catering – 15% • The projected gross profit rises from €11m in Year 1 to €14.8m by Year 5. - 87 -

Moroccan Gardens - Salaries and Wages • The largest operating expense category will be wages and salaries. • To assess the likely labour costs, we have developed the outline staffing structure and payroll model for the attraction presented opposite. This is based on separate operating models for ‘quiet, ‘busy’ and ‘normal’ days. • We anticipate that the park will require in the region of 100 full-time staff, supported by 340 full-time equivalent temporary, seasonal and part time positions. • In total salaries, wages and other personnel costs are estimated at around 23-25% of turnover slightly below the industry average of 30% due to the lower labour costs in Morocco. • These figures exclude the cost of contracted performers and evening performance artists. • The figures assume that the General Manager, Operations Director and Rides Manager will be expatriates with experience at a leading European theme or amusement park. Over time these may be replaced by Moroccan nationals leading to cost savings. - 88 -

Moroccan Gardens - Operating Costs and Net Profit Projections • Marketing costs are estimated at 10% of turnover in Year , 7% of turnover thereafter. This is slightly higher than the industry average for amusement parks of 6% to reflect the additional marketing costs associated with the evening performances. • Other operating costs are based on costs incurred at comparable parks, amended to reflect local conditions and the mix of facilities and attractions proposed. • Utility costs are estimated at 3% of turnover, below the industry average of 4% reflecting lower local costs. • Repairs and maintenance costs are based on the industry average. • Property tax, rent (to the freeholder) and insurance costs have been estimated at 4% of turnover, again slightly below the industry average (5%) to reflect local conditions. • Estimates for operating supplies, services and equipment are also slightly below the industry average (4%). • Artistic event costs including contracted performers have been estimated at 6% of turnover, less than Tivoli gardens (9%) where major international artists perform regularly, but well above the industry average of 2%. • Office, admin and other costs are below the industry average of 7% reflecting the local cost of living. • A total operating profit (before interest, depreciation, lease amortization and tax) of €4.2m is projected in Year 1, rising to €6.2m by Year 5, as attendance rises. • The operating margin of around 35-40% is in line with well managed parks elsewhere in the world. - 89 -

Hotels – Feasibility Study - 90 -

Hotel Demand Analysis • Marrakech is a city that has shown significant potential for tourism – with airport passenger numbers and hotel overnight stays having shown remarkable annual growth since 2004. The growth is coming from all segments, in particular the Individual Leisure segment and the MICE segment. Furthermore, since the open-sky policy agreement was put in place new low-cost airlines, such as EasyJet and Ryanair, have been introducing direct flights to Marrakech, which will certainly further increase the city’s accessibility as a tourist destination. • With the tourist arrivals to Marrakech expected to increase to 3.5 million within the next three years hotel and residential supply will be increasing significantly in the near future. • The analysis of demand by individual market segments is important because each market segment often exhibits unique characteristics relating to factors such as growth potential, seasonality of demand, average length of stay, double occupancy, facility requirements, price sensitivity, and so forth. By quantifying the overall room night demand by market segment and defining the individual characteristics of each segment, the future potential for each market segment can be projected. • The demand for transient accommodation is generated primarily by the following four market segments – 1). Free Independent travellers (FIT). 2). Meetings, Incentives, Exhibitions and Confernences (MICE). 3). Individual Leisure and 4). Group Leisure • HVS estimate that in 2006, the distribution of accommodated hotel room night demand for those hotels that may be considered to be competitive with the hotels foreseen in the film city resort is as shown below. • This aggregate market mix, with business demand accounting for 23% and leisure demand accounting for 77% of the total area wide demand, reflects the area as primarily a leisure destination. • Marrakech is a strong leisure destination and one that captures both the long-weekend leisure traveller and the leisure traveller on a tour of Morocco for one to two weeks; the latter would, typically, start and finish his tour in Marrakech. Marrakech benefits from being within three to four hours’ flying time of most European cities, where direct flights are available. - 91 -

Current Hotel Supply and Performance • Oriented with the demand, the current hotel supply is concentrated in the 4 and 5 star hotels. • The table opposite illustrates the number of beds by category and the respective evolution during the 2000 to 2005 period. • In 2005. 74% of hotel beds were classified as 4 and 5 stars. In the same year 18% of the total hotel beds in Marrakech were 3 stars. From 2002 the hotel beds in Marrakech have registered increases in supply, following the increase in the number of visitors. • The analysis of the performance of a hotel market has a very important role in the assessment of specific projects. In spite of the tourism market in Marrakech growing and evolving with a considerable dynamic, it is important to analyse the actual situation over the last 5 years by hotel category. • According to the Marrakech Tourism Ministry, the table opposite presents the occupancy rates in Marrakech hotels by category between 2000 and 2005. • The 3, 4 and 5 stars hotels in the city registered the best occupancy performance. Since 2000 year the poorest occupancy performing period was from 2001 to 2003, when almost all the market decreased their occupancy. In 2004 the average occupancy rate of the market was only 44%. In 2005 the market has achieved 57%. • The table opposite presents the market segmentation, occupancy, average room rate and RevPAR performance of a sample of 5 star hotels operating in Marrakech • The best occupancy rate was achieved by the Palmerie and Sofitel hotels, with ARR’s of 117€ and 107€, respectively. The Amanjena as a deluxe boutique niche product leads the market in ARR performance. La Mamounia is a classic hotel with a long established reputation and producing a high ARR at the expense of its occupancy. - 92 -

Future Hotel Supply in Marrakech • Over the next two to three years the majority of new hotels entering the Marrakech market will be developed in the Aguedal area. We are aware that, in total, five sites at the Aguedal project have been allocated to five-star hotels and 13 sites have been allocated to either four-star or five-star hotels. We understand that the entire Aguedal area has to be concluded by 2009. • Furthermore, we are aware of the following new hotel openings in and around the Marrakech market. • A proposed 90-room Mandarin Oriental hotel, located approximately ten kilometres northeast of the centre of Marrakech, is set to open by mid 2008. • The proposed Four Seasons hotel and Riads will have 140 guest rooms and suites and 40 riads. The property is approximately 1.5 km northwest of the Le Meridien Hotel. The hotel is expected to be open by mid 2008; • A 160-room St Regis hotel and 40 branded apartments, operated by Starwood Hotels & Resorts, are due to open at the beginning of 2009; • A 115-room Lucien Barrière hotel is due to open in the old town by the beginning of 2009. As part a French hotel chain, this hotel is likely to attract most of its demand from the French market; • A proposed 90-room Oberoi hotel with 350 m² of conference facilities is likely to be developed in close proximity to the American School; • A proposed Campbell Gray hotel will be part of the Samanah Country Club development, which is about 17 km south of Marrakech. The hotel will comprise 170 rooms; • A proposed Banyan Tree hotel, located close to the Royal Golf Course will feature about 50 rooms and will open in September 2008; • A 260-room Barceló hotel in the Palmeraie area will open its doors in June 2007. The hotel will comprise a wellness area of 650 m² but no conference facilities. • A proposed Beachcomber hotel, located 20 km from the city centre; • A proposed Starwood Luxury Collection hotel, located close to Amelkis; • The Chrifia development, a large-scale destination development similar to the Aguedal project and comprising hotels, residential and recreational facilities. The developer behind the project is Dubai International. The total cost of the project is estimated to be approximately US$1 billion; • The Oukamaiden development, another major destination development in the Atlas Mountains comprising hotels, commercial centres and entertainment complexes. The developer for this project is Emaar Properties. The total cost of the project is estimated to be approximately US$1.4 billion; • A Leonardo da Vinci Group five-star hotel development in the Jardins de La Menara area. It is rumoured that the hotel could potentially be managed by Starwood Hotels & Resorts; • The Swiss real estate group Latsis is planning to develop two five-star hotels in Marrakech. The project is rumoured to include 200 riads, 50 bungalows, 115 villas and 64 houses. - 93 -

Conclusions - Hotels The factors that have driven our preliminary conclusions are: • The site and its location characteristics; • The overall development concept of the Morocco Film City Resort and the envisaged mid-upper middle market positioning; • Our concern regarding the envisaged future supply of internationally managed and branded 4 and 5 star hotels in good locations and that have 1-2 year development timing advantage; • A likely over capacity of hotel rooms in the short to medium term until supply induced demand balances the market. This will lead to downward pressure on room rates and therefore yield and profitability; • The pro-active position and actions by the Moroccan government in terms of vital tourism infrastructure investment; • The growing awareness of Marrakech and its “exotic” image. Our preliminary conclusions are thus: Boutique Hotel In light of the following factors we recommend excluding this proposed hotel from the programme: • The location and overall concept of this project; • The considerable existing and future supply of existing boutique style and small upscale 5* hotel properties in a central Marrakech location providing direct access to authentic downtown attractions; • A boutique hotel property requires positioning at the upscale end of the market with premium room rates. 3 Star Hotel • There would appear to be a potential market opportunity for economy/limited service hotels to be developed in the market in the future; • In light of the other 4 star and 5 star hotel properties within the overall programme, a limited service offer should be considered; • We recommend relocating this property to and integrating it within the Medina area of the master plan; • We recommend increasing the overall number of units to 300 and the overall area/key allowance (at this stage) to 45m2/key. 4 Star Theme Hotel • We concur with the rationale for such a mid market property differentiated through potentially a theme and linking the hotel with the overall Morocco Film City concept; • We recommend relocating this property to the north eastern edge of the lake and integrating it in/around the proposed retail/convenience/souk/dining area which is in close proximity to the visitor attractions/theme park area; • We recommend increasing keys to 250 and overall area/key allowance (at this stage) to 60m2/key; - 94 -

Conclusions - Hotels 5* Resort Hotel • The 5 star Resort hotel is in an appropriate location, interfacing with the lake and golf course and within walking/buggy distance of the Casino and Medina area. • We recommend increasing the overall area/key allowance (at this stage) to 90m2/key; • Consideration may be given to locating the golf club & country clubhouse close to the hotel;I • In order to create a viable stand-alone hotel plus business and attract a potential hotel investor, consideration may be given to “bolting on” 10,000 m2 of apartment residences (100-120 units of 80m2-100m2) in to the 5 star resort hotel site. Other comments & recommendations: • Further to undertaking more detailed site and master planning analysis together with detailed market research and future hotel supply validation it will be necessary to produce detailed market and financial feasibility studies for presentation to potential funding sources and hotel management companies. Further to this, we would consider taking the 3 hotel property package to multi-brand hospitality groups such as: • Marriott, • Hilton, • Starwood, • Rezidor • Accor; • In the case of Marriott, such a branding package may consider: • Marriott for the 5* Golf Resort hotel; • Renaissance/Hard Rock for the 4* hotel; • Courtyard by Marriott for Medina 3* hotel. - 94 -

Basis of Hotel Feasibility Assessments • Our assignment methodology in estimating the indicative performance of the various hotels comprising the envisaged Morocco Film City Resort has included: • Desk based market research and related analysis within the context of the proposed resort master plan & program for the hotels; • Careful review of data provided to us, market research, plans and programme output; • Consulting and analysing the concept and programme with our key international associates, including THR Barcelona (which has an associate firm in Marrakech), ERA, HVS, Premier Resorts and Savills. Our associates have all been active in the Marrakech market within the last 6-12 months; • Using market benchmark data, key performance indicators and industry performance ratios (PKF). • In this section therefore we provide estimations of the projected Income Available for Fixed Charges (IAFC) performance of each of the three hotel properties whose key characteristics are: • Our estimations of performance assume that all properties will be operated by an international hotel group under management contract with a suitable brand offer. International distribution via the hotel operators own GDS (global distribution system) will provide the hotel with an opportunity to attract new travellers to this dynamic destination and optimise market penetration and demand levels in the crucial early years of a hotels life. • The selection of the hotel operator will immediately classify the hotel in terms of market position and quality perception. It is relevant to refer that all properties will be in a position to operate within the various market segments • Based upon our analysis of the market and appropriate benchmarks we have estimated the occupancy level and average rate for the stabilised year of the hotel and discounted this back to reflect a sustainable performance build-up. We have applied our knowledge of comparable hotel’s financial operating performance and we have developed a ten-year forecast of income and expense commencing on 1 January 2010. • We have utilised an annual inflation rate of 2.0%, based upon the forecast made by the Economist Intelligence Unit (EIU). The forecast of income and expense is expressed in inflated euros. - 95 -

Feasibility Assessment – 3 Star Property • The city of Marrakech, in 2005 had only 3,433 beds of 3 stars hotels, 7% of total supply. Two hotels are branded hotels, the Ibis (Accor) and Riad (national brand). • For this 3 star property, a limited service hotel, we have not included a Food & Beverage outlet. • Considering that this property will be managed by an international brand hotel company we estimate that a reasonable occupancy rate for the future 3 star hotel is 65% in the stabilised year. Regarding the average room rate we have estimated 58€ in the stabilized year, based on our experience of similar projects in Portugal and Spain. - 96 -

Feasibility Assessment – 4 Star Property • In 2005, 4 star hotels supply in Marrakech represented 36% of the total. According to official data the 4 star category achieved in 2005, a 79% occupancy rate. • We have therefore used the Le Meridien performance data to estimate the performance of the future 4 star theme hotel, though at a slightly occupancy level. - 97 -

Feasibility Assessment – 5 Star Resort Property • According to official data the 5 star category hotels achieved a 67% occupancy rate in 2005. • We consider that the Palmerie Golf Palace, a 314 bedroom hotel with golf course, SPA and excellent views to the Atlas Mountains, is a benchmark for the future 5 star resort in the Morocco Film City. In 2005, this unit achieved a 54% occupancy rate and 117€ average rate. - 98 -

Marketing and Managing Holiday Homes • It is expected (and concurred with by Savills) that the majority of the residential units will be bought as second/holiday homes. • As noted earlier consideration may be given to “bolting on” 10,000 m2 of apartment residences (100-120 units of 80m2-100m2) in to the 5 star resort hotel site. • For this preliminary appraisal we have assumed instead that the hotels will market and manage the renting out of privately owned homes on the site. • We have estiamted that of the nearly 2,400 residences, 400 will use this service. • The hotel company will deal with all aspects of marketing and provide access to their sports and leisure facilities to visitors reting apartments through their service. • We have projected an average weekly rent of €500 per unit (approximately €150 per week per visitor with a mix of 1 and 2 bed apartments) and occupancy of 50% (the remaining 50% being for owner use of unlet). • Projections show 30% of the rental to the hotel company and 705 to the owner. • On the basis of these estimates the hotel company would generate €1.56m per annum. • Of this 30% would cover the additional costs incurred by the hotel company for use of their leisure facilities and housekeeping services. • The projected annual net profit is €1.09m - 99 -

Spa and Golf Country Club – Feasibility Assessment - 100 -

Introduction • Sports Management Consulting has worked with ILM-THR Portugal to provide some initial solutions for provision of spa, country club and golf components of the newly planned mixed use project in Marrakech called Morocco Film City; • Our initial work has involved outline proposals for the proposed new facilities, together with an indication of the economic feasibility performance that a business of this type would be expected to achieve; • Health, sports and leisure amenities will be viewed as a fundamental ingredient of the entire product offering at the destination; • This report has been produced with a limited amount of desk market research and without having visited the site or any local competitive/ comparable facilities. • Morocco is rapidly becoming on of the worlds hottest tourist destinations • In recent years attracting a new wave of visitors thanks to its natural beauty, rich and vivid culture, food, distinctive architecture and all year round sunshine • The Moroccan government too has invested €2.2 billion in infrastructure and has opened up the country to new tourist opportunities such as golf. - 101 -

Local Market Analysis - Spas SPAS IN MARRAKESH • From our desk research we have identified a few prominent spa offers:- • La Sultana’s Zen Spa - La Sultana Resort - Marrakech • le Spa de l’Hivernage - Hivernage Hotel & Spa - Marrakech • Others include - Oriental Spa, Les Bains de Marrakesh, Spa de Ferme Bere, Spa Daniel Jouvence, Les Jardins d’ Henia and Ksar Catalina • There are a number of resort developments in planning in the region and many of the top international brands are planning to establish a presence • SMC would expect many of these properties to include extensive spa and leisure offers. • There are many resorts that announce spa facilities but in fact have very little more than a small sauna or hamam with a massage service. - 102 -

Local Market Analysis - Golf • There are currently some 60.000 foreign tourist golfers in Morocco, and this is expected to rise to 217.000 by 2010. This equates to a €25M green-fee income alone. • Morocco continues to be the preferred destination for French golfers which represent 59% of the total, followed by 20% Germans, 7,5% Italians and 2,5% British. • The Moroccan National Tourism authority considers golf a strategic product and intends to raise the international awareness of its offering based on the quality of its courses, location, services, climate etc. • Today Marrakesh has 3 18-hole golf courses. It is planned to increase this by a further 4 golf clubs by 2009 in the area. • The main courses are: • The Marrakech Royal Golf Club • Palmeraie Golf Club • Amelkis Golf Club • Golf courses under construction in Marrakech • Sammanah Country Clubis under development • Société Assoufid • Le Club Tamesloht Resort (Groupe Metropol Invest) • Le Golf Resort Palace • Most of the hotels in Marrakech offer the possibility to play on any of the three existing courses. The price of each of the courses is 45 Euros. • The countries of origin for the golfers in Marrakesh are currently divided as follows: - 103 -

Local Market Analysis - Golf • The Marrakech Royal Golf Club • Oldest, having being built by the pasha of Marrakech in 1923 • His Majesty King Hassan II’s favorite golf courses • 15 minutes drive from the city centre • Measures 6276 metres, has a par of 72 and is set in a sea of cypress, eucalyptus, palm, olive, orange and apricot trees • Has a David Ledbetter Golf Academy. • Palmeraie Golf Club • 18-hole Robert Trent Jones Design • Palmeraie measures 6000 and has a par of 72. • Amelkis Golf Club • designed by Cabel Robinson is probably the most eye-catching of all and probably the most exciting to play • Has expansive, undulating fairways, lakes and fountains and unique bunkers created from crushed rock • Amelkis, the longest of the three courses, measures 6657 and has a par of 72 • Host to Moroccan Open 2000 • The state strategic plan for golf in Morocco foresees the total rounds played for the country increasing to 700.000 in 2010, and for Marrakesh the number will reach 118.000. - 104 -

Strategic Recommendations • Inclusion of the Spa and Golf country Club will offer a number of benefits to Morocco Film City • Consolidates total offering and acts as a driver of property sales • Can be an independent business with substantial profit opportunity • Cost of establishing a quality leisure product can be recouped in a number of ways: • underpins the price of a property (villa, town house or apartment) • a driver of occupancy levels for hotel business by attracting new market segments • local business opportunity - members club - golf - spa - fitness - sports • Revenue from specialist services and the provision of inclusive programmes can be developed as a significant revenue contribution • Spa & Golf Country Club concept should offer a modern all-encompassing offer • Integrated solution for the site - amenity for other components e.g. hotels • A vibrant club that also acts as a social destination (the place to be and be seen) • Segregation of non relaxation components such as fitness verses spa should apply • Social hub - shared F&B, entertainment, retail etc. • The business will operate as: • A private members club for property owners and their guests • A private members club for local residents • A day spa for visitors, but on a restricted access basis • An amenity for hotel guests and as a means of attracting clients on dedicated spa breaks especially during shoulder periods • The Club should be a fun place to visit and deliver a quality experience for all guests • It will be unique in the local area in terms of its speciality facilities, the availability of the golf, sports, spa and health club services, standards of product offering, and provision of innovative programmes for different user groups. • The Club will incorporate new generation design and look to offer leading edge service by introducing state of the art technology. The arrival experience must also convey a feeling of entering somewhere rather special. • An exceptional level of service will prevails in order to instill a sense of quality. - 105 -

Financial Analysis – Spa Club - 106 -

Financial Analysis – Golf Club - 107 -

Residential Feasibility Assessment - 108 -

Introduction • Morocco’s geographical location has endeared it to the modestly adventurous foreign investor for several years. It is adjacent to Europe, but separate from it. It is also distinct from the rest of Africa as a result of the barriers of the Atlas Mountains and the Sahara Desert. Its culture is different from Europe, but less “extreme” than other countries on the continent. • Although Morocco has always had a mystic attraction to high profile individual investors, the country’s pacific social and economic progress has enhanced this investor appeal for a wider market. • The country’s reigning monarch, King Mohammed VI, is determined in his campaign to reform his country and several initiatives have been put in place to bring Morocco to the forefront within the coming 5 years. • From a foreign investor point of view, the country will transit from a niche exotic opportunity for a few high profile individual investors to a more generalized investor market supported by a sound material infrastructure, a simplified legal regime and a stable financial environment. The sustained GDP growth over recent years was increased by a further 7% rise in 2005 with important constraints on government spending helping the statistics. • Tourism is the driver for the interest in real estate development in Morocco. Recognition of the strategic importance of tourism has been consolidated in the government’s “Plan Azure” including a strong investment programme for the upgrading of infrastructures including road network and airport improvements together with overt encouragement of foreign investment in the sector. • On the basis of this programme, it is predicted that the influx of tourists will reach 10 million by 2010 compared with 2002 levels of approximately 2 million visitors, assisted by factors such as the new low-cost air carriers (approximately 3 hours from UK) which have brought Morocco into their programmes and the supply of tourist destinations which has increased significantly in harmony with this newly created demand. • Morocco represents a closer-to-home exotic destination for the primarily European travel market. With market maturity, the demand for increased authenticity and closer proximity to Morocco’s unique and important cultural and historic wealth is stimulating development further inland. • Principal Tourism Attractions: • Comfortable climatic conditions, especially on the coastal belt. • An “exotic” connotation based on its different culture and mystique. • A different continent – from the European perspective, but close enough • Good quality resorts • Inexpensive holidays • Good and inexpensive travel connexions - 109 -

Moroccan Real Estate • The very strong historical and cultural links with France have meant that traditionally foreign investment in real estate has predominantly come from this area. Nowadays, although continuing to be of great importance, the real estate market has a far wider appeal drawing investors from northern Europe, the Middle East and further a field. In addition to the factors that stimulate tourism in Morocco, such as the climate and culture, it is the low cost of living and high capital growth rates that also appeal to the individual property investor. The investment buyer’s logic follows on this process and now represents a substantial part of the market. • The investment conditions are propitious to real estate development with an open market and a parity between the foreign and national investment status for normal real estate. • Agricultural land is still an exception whereby foreigners are not permitted to buy this sort of property. • Individual property mortgages are available in Morocco creating a more attractive end-user package with financing normally available for up to 60% of the investment amount. • Many individual investors looking for second homes in the sun seek to earn on their investment through renting at those times of the year when not requiring use of the property. Renting is a thriving market segment, with a rental-income tax exemption available for the first five years. The buy-to-let market is now an established product. • The fact that all property owners are encouraged to retain their properties during a minimum of 10 years in order to benefit from the capital gains tax exemption also provides a degree of stability to this area. • The local currency is not apt to great fluctuations, which is also appealing to larger style investment groups, and the repatriation procedure for capital and profits is acceptable. Inflation rates tend to fall in line with those of industrialised Europe. The official rate for 2005 was 2.5%. - 110 -

Moroccan Real Estate • Morocco is also the subject of a regressing immigrant investment phenomenon, principally originating in France. Fiscal incentives up to 80% are encouraging immigrants abroad to reinvest in their home country and thereby contributing to the swelling investment in real-estate. • Property Investor Attractions: • Low prices –building costs and salaries • Politically stable • Rapidly improving infrastructures • Growing economy • Currency stability • Satisfactory tax regime • Good capital growth • Rental market • Reasonable repatriation process - 111 -

Marrakech Real Estate • There is an important difference between the coastal resort concept which has fuelled foreign investment in Moroccan real estate in recent years, and the Marrakesh scenario. • Marrakesh, which is a Berber city, is Morocco’s second largest urban centre with approximately 1 Million inhabitants living in its metropolitan area. This number has double over the past 20 years. • The city has less Arab influence than other tourist centres. It is precisely due to this fusion of Berber, Spanish and French influences with Arabia that gives Marrakech such a unique flavour. The City sits in the centre of the fertile Haouz Plain. The ancient section of the city, known as the medinah, was designated a UNESCO World Heritage site in 1985. • Marrakesh is in the forefront of the more sophisticated trend of tourism referred to above and, as an example, now has 99 regular flights per week from London at increasingly lower fares to fuel this demand. This facility of communication motivated by tourist demand is an essential forerunner to sustainability of the real estate market in any given area, and Marrakesh is now one of the country’s most sought after property investment areas for second home and investment acquisitions. • Marrakesh also enjoys the appeal of several celebrity homeowners which, in themselves, add to its attraction. There is also a healthy domestic market. The Medina offers traditional riad properties, which are of limited supply and, after restoration, are becoming increasingly expensive. On the outskirts of the city however, new high quality developments are appearing such as the Palmeraie, which have established new standards for the market. • Marrakesh has a more sophisticated appeal and a correspondingly more affluent European buyer attracted by the uniqueness of the cultural blend which is reflected in the architecture, the lifestyle etc. Whereas French and UK buyers seek properties in the $250.000 - $600.000 price range elsewhere in Morocco, Marrakesh has to some extent attracted those seeking larger units (up to 400 m2) with the corresponding price difference. This indicates a quality demand but also, implicitly, suggests an opportunity for smaller detached units (150 – 350m2) within the new developments while simultaneously offering quality clustered and apartment products. The strongest growth segment in the recent Marrakesh market appears to have been the clustered products with prices buoyant at the expense of the villa market whose prices seem to have softened over the same period. The generic villa product represented about 24% of the total tourist real-estate market in Marrakesh in 2006. - 112 -

Marrakech Real Estate • There is an unprecedented growth in Marrakesh real estate with 4981 licensing requests registered in 2005, including 135 tourist projects. • A further 153 tourist approvals were granted in 2006 bringing to 10.551 the number of new tourist units in development. • The real-estate trends currently include; • Multi-functional complexes – “complete” products that respond to an increasing market demand requiring villas, high-quality apartments, hotels, with commerce and leisure facilities in the same complex. The true concept of a resort. Plot densities vary among the developments ranging from 5 to 60%. A reference in the area, Les Jardins de la Palmeraie, has a comparatively low plot density of between 10 and 25%. • Owner rental real estate – Imobilier locative à vocation touristique (ILVT) is a rapidly developing area whereby the owner releases his property for rental through the common management company to tour operators and agencies, for those parts of the year when he himself does not intend to use the lodging. The tax relief available encourages the development of this format, as mentioned earlier. • A recent Moroccan government study has identified two special areas for development based on owner-rental schemes (ILVT) which are: • Tourist Residential Real Estate (RIT) – whereby the owners of lodgings consign the management and commercial operation of the property for a minimum of 9 years to a duly licensed company that is able to assure the homogeneity of the product. • Time Share – A homogenous group of apartments is shared among its several owners who have preferential rights to its use on specified dates. The partial title is negotiable. - 113 -

Pricing • Pricing varies significantly in this region. • According to recent press articles (Economie et Enterprise, Redoune Ghadoune) it is predictable that the prices in Marrakesh will rapidly reach those of the European capital cities, with prices between 6€ and 8€/m2. The sales prices per square metre for the Marrakesh residential product shown are drawn from several real-estate agencies in the area with reference to high quality products with good infrastructures. • A corresponding survey undertaken by the French embassy in Morocco came to the following (broadly comparable) conclusions; - 114 -

Moroccan Gardens