A revolution in the way The Preserve at Walnut Springs is marketed and sold.

PROPOSAL To temporarily utilize Manor House, a currently underperforming asset, as a luxury Bed and Breakfast destination and host to special events, as well as providing potential Preserve lot buyers with a more personalized and hosted way to experience The Preserve. Manor House will become, for a limited time, The Inn at Walnut Springs. Open most weekends throughout the year, and full weeks during area events and festivals, the Inn will serve as a luxury Hill Country getaway. Approximately one weekend per month, a special event will be hosted, targeting a niche market, in conjunction with area naturalists, vintners, educators, chefs, artists, and special-interest speakers and experts. In addition, one weekend per month the Inn may play host to guests and events from Arts Encounter at the adjacent Benini Sculpture Ranch. This will increase exposure and publicity to The Preserve at Walnut Springs, both by word of mouth in affluent niches, and by press coverage and publicity. It will also draw a steady stream of guests who may be previously unaware that luxury homesites are available at this unique development. Guests at the Inn will have the chance to fall in love with The Preserve before they realize they can own a piece of it (or perhaps Manor House, itself). The transformation of Manor House into a fully-hosted, casual-yet-luxurious experience will have a second, perhaps more significant benefit. Potential buyers will now have a more intimate and personal way to experience The Preserve. Since little residential development has occurred thus far, a major obstacle faced by potential buyers is the ability to see themselves at home at Walnut Springs. Being hosted in a warm, inviting mansion overlooking The Preserve, attended to by a unique innkeeper who, himself, has a potent love for The Preserve and who can create an extremely welcoming, homey atmosphere during their stay, will significantly counteract any hesitancy to buy and build based on the current blank canvas which is The Preserve. This experience will be provided free to potential buyers, with incurred costs subsidized by the operation of the Inn. Further, because this type of buyer will be purchasing because they want to live at The Preserve and not for investment purposes, development on lots should begin much more rapidly than is currently occurring. Additionally, profits from operation of the Inn can be utilized to upgrade and enhance aspects of Manor House which might be an obstacle to its sale. The ultimate goal is not to create a nationally-recognized or highly profitable luxury Bed and Breakfast. The goal is to take Manor House, whose salability is questionable in both its current physical condition and the current market state, and temporarily use it as a tool to boost both the sale of lots and the speed of development at The Preserve at Walnut Springs.

THE FINER POINTS The Inn at Walnut Springs will open on whatever date is agreed upon by Benjamin Starr, who will serve as innkeeper, and The Preserve at Walnut Springs, LP. Mr. Starr will agree to a minimum commitment of two years as innkeeper. The LP may terminate the operation of The Inn at any time with 3 months notice. Mr. Starr will be compensated only by a 20% share of revenue from activities at The Inn. This reflects his commitment to the success of the project and ensures his continuous efforts. Referral fees or lot sales commissions resulting from paying guests at The Inn may be negotiated. Mr. Starr will reside in the Carriage House unless actual operations suggest that the Carriage House may command a higher nightly revenue than any other room in Manor House or the Guest House. Mr. Starr may bring additional, trusted associates to assist him in the operation of the Inn and will be solely responsible for their compensation. At no time will extra associates infringe upon the occupancy or profit potential of The Inn. Mr. Starr will inform site management of additional associates and the LP may retain the right to interview, screen, approve, or reject any additional associate if they wish. Mr. Starr and associates will adhere to all policies stated by the LP and the Homeowners Association. Some renovations and/or updates will be necessary in order for Manor House to serve as a luxury B&B, and all changes will be made with an eye toward the ultimate sale of Manor House as a private residence. All renovations Mr. Starr is aware of will be stated in the budget section. Should the LP be aware of additional renovations which would be necessary for the occupying of any room or bathroom, this should be disclosed as soon as possible. All renovations and operations of the Inn will be carried out with extreme discretion and thrift, without sacrificing quality or appearance. Mr. Starr is quite experienced in this area! On the recommendation of site management, Mr. Starr will investigate the possibility of offering limited weekend dinner service to non-guests, pending approval by state, county, and city officials. Should this service be offered at the Inn, it will not infringe upon the service experienced by paying guests and potential buyers hosted at The Inn.

THE INN AT WALNUT SPRINGS The Inn will welcome overnight guests and serve a full gourmet breakfast each morning and wine (from local vintners) and cheese each afternoon, with the potential for 5-course dinner service on weekends. Spa services may be added in the future. The Inn will operate with six available rooms in two separate seasons. High Season Labor Day through Memorial Day Low Season Memorial Day through Labor Day While there are certainly more family travelers during summer, other Hill Country B&Bs report higher occupancy outside the dog days of summer, and Preserve activities are better enjoyed in the cooler seasons. Holidays, special events, and Arts Encounters during summer will operate at high season rates. The Inn will be open 50 weekends a year. 45 of these weekends, the Inn will be open Friday and Saturday night. 5 of these weekends, the Inn will be open three nights, either Thursday-Sunday (Thanksgiving) or Friday-Monday (Labor Day, Memorial Day, Presidents Day/Valentines, Columbus Day) The Inn will be open any time to host potential Preserve buyers, with as much advance notice as possible requested by Mr. Starr. The Inn may open during the week by request for multiple-night stays. The Inn will stay open all week during local events and festivals. The Inn will be closed 2 full weeks a year during the lowest projected profit period for Mr. Starrs vacation. Weekday openings are not reflected in the projected revenue statement. The Inn will observe a 2-night minimum stay during special events, Arts Encounter, and holidays. Innkeeper may impose a 2-night minimum stay during periods of high occupancy. Innkeeper may lift the minimum stay requirement if occupancy permits. Room Rates: (based on double occupancy, extra adults $20 per person, High/Low season) Hill Country Suite $249/$199 (1 king, possible rollaway for children) Upstairs Suite - $199/$149 (1 king) Upstairs Room 1 - $169/$119 (1 double) Upstairs Room 2 - $169/$119 (1 double) Guest House Room 1 - $169/$119 (1 double) Guest House Room 2 - $179/$129 (2 doubles) *Entire Guest House - $299/$249 (3 doubles, possible rollaway)

Room rates will be higher for special weekend events and lectures and will be charged as a complete package rate for the entire 2-night weekend. These higher rates are not reflected in the projected revenue statement. Potential Nightly Rent: $965 (high season) / $834 (low season) Available Room Nights: 87 nights (high season) / 18 nights (low season) Projected Occupancy Rate: 60% (375 guest nights1, high season) / 30% (65 guest nights, low season) PROJECTED REVENUE: $54,8772 $50373 (high season) / $4504 (low season)

PROFIT FORECAST: Year One 54877 -10975 (20% fee to Mr. Starr) -43540 (first year outlays, see Budget section) _________ -$362 Year One Year Two 54877 (assumes no growth in occupancy or rates) -10975 (20% fee to Mr. Starr) -30600 (annual operating expenses) _________ $13302 Year Two While the first year is projected at a meager loss, significant value was added to Manor House with upgrades, described below. Further, the goal is not the creation of a profitable Bed and Breakfast. The ultimate goal is the development of a temporary, selfsustaining, yet powerful marketing tool to bring increased exposure to The Preserve, to convert Inn guests into potential Preserve buyers, as well as to change the way potential buyers are hosted at The Preserve to increase the rate of sales and the speed of development.

Guest nights refers to the number of individual guests spending a night at the Inn, regardless of how many rooms are occupied. Calculated assuming double occupancy of all rooms multiplied by projected occupancy. 2 Does not include additional revenue from special events, weeknight openings, and possible non-guest dinner program. Calculated as Potenial Rent x Available Room Nights x Projected Occupancy Rate

BUDGET Capital Outlays for Renovations and Upgrades (all installations to be handled by Mr. Starr unless noted) $20003 Kitchen must have a gas/propane cooktop. Propane supply currently exists to heat pool. This item is for the extension of a separate line for the kitchen cooktop. This amenity is a must for any upscale residential kitchen. Includes basic installation of cooktop. Six-burner propane cooktop with downdraft vent. Saves the costly installation of an over-the-range vent hood which currently does not exist. Installed professionally, see previous item. Double wall oven Granite slab for island, installed professionally Large-capacity refrigerator Additional freezer High-capacity dishwasher High-capacity laundry washer and dryer Sub Total

$1200

$1000 $1000 $1800 $300 $800 $1200 _________ $9300

Startup Outlays $450 $850 $300 $400 $600 $200 $300 $40 $0 $500 __________ $3640 Bath linens Bed linens Table linens Dishes/cutlery Tables/chairs for dining area Rollaway bed for children occupying Hill Country suite w/parents Signage (to be created by Mr. Starr and artist friends) Business cards Website (to be created by Mr. Starr and web tech friends) B&B Association memberships and listings Sub Total

Estimate.

Annual Operating Expenses $60004 $4600 $12,0005 $8000 $06 ___________ $30,600 Insurance Food (based on $10 per person per night at projected occupancy) Utilities Marketing and special events Maintenance and repairs Sub Total

TOTAL FIRST YEAR OUTLAYS: $43,540

Estimated. Rates may be higher with a specific Bed and Breakfast insurance provider, or lower if purchasing liability separately through LP channels, and liquor liability from an independent vendor. 5 Estimated at $1000 per month based on Ms. Ladds suggestion. Property will only be open FridaySunday most of the time, which will minimize utility expenses. 6 Assuming this is already budgeted for Manor House in LPs operating budget

ADDITIONAL RECOMMENDATIONS Room rates can be raised if additional upgrades/amenities are added, which will also increase the salability of Manor House. I strongly suggest your consideration for the remodeling of both master baths in Manor House. I am an accomplished tiler and can remove the blue ceramic tiles and clad the downstairs master bathroom in travertine for approximately $6 per square foot, including the stone, materials, and labor. This, along with some minor plumbing fixture updates, will dramatically transform the bathroom from its current dated look, and will be inexpensive compared to a complete bathroom remodel by a contractor. (The only benefit a complete tear-out and rebuild would garner will be the addition of a shower, a glaring omission in the houses primary master bath.) I also recommend the removal of the wood-sided Jacuzzi bath in the upstairs master, replacing it with a clawfoot tub or, better yet, utilizing that space to create a larger, walkin shower. Again, this is a project I can comfortably handle, but further evaluation will be needed before I can provide an estimate. The property has a lovely pool but is missing a spa. Not only is this an amenity utilized far more frequently by guests of small inns, it would certainly be an addition any future homeowner of Manor House would make. An aboveground spa would be a comparatively inexpensive addition that would allow the room rates at the Inn to be raised and for it to be more competitive with other luxury B&Bs in the Hill Country. Carriage House is a charming addition to the Manor House complex. Much of its charm lies in its rustic state, but it would need some work to become a rentable room at the Inn. However, the market rate would be high (in the same range as the Hill Country suite) because of its privacy and charm. After a closer look at Carriage House I can provide an estimate on what might be needed to bring it into the Inns lineup of luxury rooms.