FREQUENTLY ASKED QUESTIONS Hale Makani 4577 Kahala Avenue

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1 FREQUENTLY ASKED QUESTIONS Hale Makani 4577 Kahala Avenue What do I actually own when purchasing a Fractional Ownership at Hale Makani? Fractional real estate ownership is very similar to ownership of your principle residence. As a fractional owner, you will enjoy the peace of mind that comes with having a deeded interest in your luxury second home. Legally, you have a fee-simple, undivided fractional interest as a tenant in common for a specific period of time with each of the other fractional homeowners. Owning a deeded interest in a private fractional home entitles you to all the benefits and rights that come with normal home ownership. How much time do I own in each year? Fractional ownership of Hale Makani is defined as a fixed sixty day time period (consecutive days), designed for your maximum enjoyment and use. Each of the six 2-month intervals is owned in perpetuity by each buyer. This allows home owners to plan their visits well in advance, year after year. What else does Fractional Ownership Interest Includes? Centralized management of Hale Makani is included and provides additional ease of ownership. Among other things, this covers weekly maid service and maid service prior to each owner s check-in date. Management also handles all of the housing expenses, such as: property taxes, landscaping, pool service, utilities (electricity, cable, basic telephone, hi-speed internet, water, sewer, etc.) maintenance, maid service, and the management fee. Who is the Management Company? Hale Makani has entered into an exclusive agreement with Makani Kai Management, the management arm of the Developer s real estate firm, Eovino & Associates, Inc. one of Honolulu s most trusted real estate brokerages, listed in the Top 100 Real Estate Firms in Hawaii (2006). They will provide conscientious, professional management of your luxury vacation home in Hawaii. Makani Kai Management is a locally owned and operated company and has been licensed in the State of Hawaii for over 30 years. What is the Management Fee? Annual management fees are paid at the beginning of each year. The fee covers fiscal, maintenance, and management responsibilities (property taxes, insurance, utilities, maintenance, cleaning, property management fees, reserve fund, etc.). The fee is estimated at $30,000 annually.

2 Can I buy more than one fractional interval? Yes, you can purchase one interval or up to all six fractional home ownership interests. What about Homeowners Insurance and Liability Insurance? Homeowners and Liability insurances cover all fractional owners of the property, as well as the physical structures on the property. How are reserves handled for future repairs? Reserves are safeguarded in a client trust account, held by Makani Kai Management. How do I sell my fractional ownership interest should I choose or need to in the future? Because you have an undivided, deeded interest in your property, you can sell your fractional interval just as you would any other residential or vacation home. You are of course free to use any broker you may desire to sell your deeded interest. If I sell my interval, how do I arrange for showings and do I have to use a specific Brokerage company? Paramount to all of our best interest is making sure each of our owners usage is not in any way compromised. For this reason we will request at least 48 hours of advance notice be given so we can better avoid interfering with an owners visit. All arrangements for showings must be coordinated through the Management Company. How many people are allowed on title? Can I leave it in a will or trust? Six owners will each have individual titles as Tenants in Common. Ownership is forever and can be left to heirs or held in a trust. It is up to the individual owner to do what is best for his or her situation. There are no limitations that would make it different than owning any other home. Can I take title as an LLC or Corporation? Yes, title may be taken by any one, single entity for each fractional ownership interval. This includes individual ownership, LLC s, Partnerships, and Corporations, to name a few. Although a single fractional interest cannot be legally divided into less than the defined sixty day interval, multiple parties can share their sixty days together. Can I rent out or exchange my interval? Intervals may be rented out for periods not less than 30 consecutive days, in accordance with the zoning laws of the City & County of Honolulu. Intervals may also be rented out by individual owners through Makani Kai Management or a management company of your choice. One of the additional 2

3 benefits of fractional home ownership is the ability to place any unused portion of your sixty day interval in a professionally managed rental program. Can I switch my interval with another owner? Yes. These desires will be assisted by a website and newsletter that will publish this type of request and will also inform all owners of on going property enhancements, and all other interesting input relating to the property and its owners. Is there storage available for my belongings? Yes. Each owner will have a secured storage locker in the garage to keep personal items at the property 365 days per year. Is financing available and what are the terms? Financing is available through several mortgage companies, including Transpacific Mortgage, with terms of 30% down and interest rates around 7-8%. Contact Eovino & Associates, Inc. and we will put you in touch with a Transpacific Mortgage broker who can provide you with more detailed information. Can I do a 1031 exchange from another property and if so, how would I transfer ownership to this property? You may be able to involve your purchase of this fractional property in a 1031 exchange, depending on the nature of your ownership, if it is used primarily for investment. As the tax laws governing 1031 exchanges are both complex and strict, you are encouraged to discuss your specific situation and goals for ownership with your tax adviser. Contact Eovino & Associates, Inc. and we will provide you with a 1031 Exchange expert who can help you. How are each owner s rights and interests protected? Hale Makani has taken considerable care in protecting each owner s rights, as well as the value of the property itself. A comprehensive set of governing documents has been developed, which each owner reviews while in escrow. This set of legal agreements is designed to provide unambiguous guidance for the operations of the fractional vacation home, and includes the Declaration, Owners Association Documents, House Rules, the Property Management Agreement, Annual Operating Budget, Declaration of Covenants, Conditions, and Restrictions (CC&Rs) of the Kahala Community Association, in which the property is located, all disclosures, and an array of additional documents for your review. 3

4 If another owner is foreclosed on their share, how will this affect my ownership in terms of future maintenance charges and value? Your ownership is not affected by another owner s foreclosure. Your Title Insurance recognizes the value of a 1/6 th Ownership and protects you in the event that another owner is foreclosed upon. All maintenance fees are collected at the beginning of each year, and cover costs for the upcoming year. Upon the event of an owner foreclosure initiated by the managing agent, a licensed real estate firm will be selected by the association to resell the interval. Can my family and friends use my home during my allotted interval without the owner being there? Absolutely. Owners are entitled to visits from family, friends, and guest visits just like any other property, as long as the home is not rented out for periods less than 30 days. Guests can use the home without the owners being present. Will there be a Board of Directors and if so, how will future changes to house rules be handled? House rules are covered in the Declaration, and changes will require a majority 2/3 rd vote. Please contact Eovino & Associates, Inc. for more details. How are concierge services handled? Makani Kai Management can facilitate with owners throughout their time in the home to handle additional individual requirements. Are pets allowed? Is smoking allowed? No. The House Rules, as currently written do not allow pets or smoking in the property, as a respectful courtesy to other interval owners. Owners can vote in accordance with the rules set in the Declaration to change the house rules. What is the decor of my residence? The home s design seamlessly blends dramatic architecture and thoughtful interior design with exceptional, handcrafted finishes and exquisite custom furnishings. Use of the finest custom furniture, handcrafted in Hawaii and throughout the Pacific Rim, perfectly interlaces the beachfront setting and the flow of open space with artful inspiration and design. For example, the 1,800 square foot master suite s custom built double-king size bed balances the wide opening to the covered lanai, offering a wondrous view of the blue Pacific, only sixty feet away. The walls are adorned with locally produced art from current works of highly acclaimed artist Noe Tanagawa to early pieces from the days of ancient Hawaii. What happens if the property is damaged? 4

5 A site visit will occur within the last week of each interval to determine if property has been damaged during the interval. Upon checkout owners will be charged for damages above and beyond normal wear and tear. For no-fault damages, the reserve fund will be used to cover the cost of repairs. Our reserves are set up to insure the highest level of integrity with the property. If something is not at 100% or if something breaks, we request you inform us immediately so we can make sure we are better able to maintain the quality level that we all require. What is the Value of a fractional ownership in 4577 Kahala Avenue? 4577 Kahala Avenue is located in the most prestigious neighborhood in all of Hawaii. Located at the base of Diamond Head, next to Waikiki, and on world famous Kahala Avenue, it is the only brand new luxury residence available on this pristine stretch of Kahala Beach. Luxury homes in this neighborhood routinely sell for upwards of $10 Million. In the past few years nearby homes on Kahala Avenue have sold for as much as $29 Million, $19.8M, and $17.5M. You may find it interesting that the average land cost per overall square foot is $300 for vacant beach front property. Wang Industies recently bought David Geffen's lot for $34,000,000 for the land only, and Stanley Ho, Macau Billionaire, is building a new $10,000,000 home next to his existing $20,000,000 home. We are happy to provide a detailed market analysis of recent home sales on Kahala Avenue Kahala is a short walk on the beach from the Kahala Hotel, a 5-Star luxury hotel with five restaurants, a spa, and a lagoon where you can swim with dolphins, and within 3 miles of all the attractions that occur in Waikiki. What are the Purchasing Details? As a perspective owner, you will need to submit a Purchasing Application along with a deposit of $25,000 and the Sales Contract. You then have 3 weeks to deposit 25% of the purchase price into escrow. Closing will occur with a 30 day notice, when the developer has sold three intervals. The developer has the right to hold off on the closing until April 15, If the closing does not occur on or before April 15, 2008, all funds shall be refunded. If a broker is involved, he or she needs to submit a Broker Referral Form. 5