Eagle Harbor Golf Club Harbor Golf Club Market Analysis, Operational Review and Indication of Value Table of Contents, Continued Targeting of Advertising 35 Complementary Rounds

717 North Harwood, Suite 3100 Dallas, Texas 75201 6585

Market Analysis, Operational Review and Indication of Value

Eagle Harbor Golf Club November 2003

PRIVATE & CONFIDENTIAL This document is intended solely for the internal use of the Eagle Harbor Golf Course and The Crossings at Fleming Harbor Community District Association. This document is not to be reproduced without the expressed written consent of KPMG LLP

Eagle Harbor Golf Club Market Analysis, Operational Review and Indication of Value

Table of Contents

EXECUTIVE SUMMARY I OVERVIEW ..............................................................................................................................1 Purpose of the Engagement .......................................................................................................2 Scope of the Engagement...........................................................................................................2 II SITE REVIEW ..........................................................................................................................3 Overall Community Development .............................................................................................3 Golf Course and Related Facilities ............................................................................................4 III MARKET ANALYSIS..............................................................................................................5 Definition of Market Area .........................................................................................................5 Golf Industry Trends..................................................................................................................6 Demographics ............................................................................................................................7 Sources of Demand ....................................................................................................................8 Competitive Analysis...............................................................................................................10 Other Golf Courses and New Golf Course Proposals..............................................................19 Estimate of Supply...................................................................................................................20 Overall Analysis of Supply and Demand.................................................................................21 Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis ...................................21 IV BUDGET PROCESS & MANAGEMENT INFORMATION SYSTEMS .............................23 Budgeting Process....................................................................................................................23 Management Information Systems ..........................................................................................24 V OPERATIONAL REVIEW .....................................................................................................25 Facility and Operational Review .............................................................................................25 General.....................................................................................................................................27 Patron Program and Rounds Analysis .....................................................................................27 Rounds Played per Patron........................................................................................................28 What is the Appropriate Amount of Time to be Blocked?...................................................29 What are the Actual Results to Date?...................................................................................29 Total Rounds Played and Access to the Tee ............................................................................30 Patron Privileges ......................................................................................................................30 Pricing Structure and Quality of Golf Product ........................................................................31 Net Rate per Round..................................................................................................................32 Public Access to Facilities .......................................................................................................33 Booking of Tee Times .............................................................................................................33 Special and Tournaments, and Public Play..............................................................................33 EPIC Card ................................................................................................................................34 Marketing Program ..................................................................................................................35

PRIVATE & CONFIDENTIAL This document is intended solely for the internal use of the Eagle Harbor Golf Course and The Crossings at Fleming Harbor Community District Association. This document is not to be reproduced without the expressed written consent of KPMG LLP

Eagle Harbor Golf Club Market Analysis, Operational Review and Indication of Value

Table of Contents, Continued

Targeting of Advertising..........................................................................................................35 Complementary Rounds...........................................................................................................36 Pro Shop Analysis....................................................................................................................36 Pricing Policy...........................................................................................................................36 Inventory Levels and Mix........................................................................................................36 Pro Shop Payroll Expense........................................................................................................37 Cross-Utilization of Staff .........................................................................................................37 Tee Time Reservation System .................................................................................................37 Revenue and Labor Controls ...................................................................................................37 Other Pro Shop Expenses.........................................................................................................37 Patron Trail Passes...................................................................................................................38 Greens Maintenance Analysis..................................................................................................39 Maintenance Costs versus Benchmarks ...................................................................................39 Conclusion ...............................................................................................................................39 Food and Beverage Analysis ...................................................................................................40 General and Administrative Expense Analysis........................................................................41 Administrative Payroll costs ....................................................................................................41 Capital Maintenance ................................................................................................................41 Management.............................................................................................................................42 Operational Conclusions..........................................................................................................42 Operational Summary and Estimated Impacts to Operational Cash Flow...............................44 Stakeholder Analysis ...............................................................................................................44 VI INDICATION OF VALUE .....................................................................................................48 Fair Market Value vs. Price .....................................................................................................48 Valuation Approach .................................................................................................................48 Capitalized Cash Flow Approach ............................................................................................49 Capitalized Value of the Club..................................................................................................50 Assumptions Underlying Indication of Value .........................................................................50 VII SUMMARY...........................................................................................................................51 VIII LIMITING CONDITIONS AND RESTRUCTIONS ...........................................................51 PRIVATE & CONFIDENTIAL This document is intended solely for the internal use of the Eagle Harbor Golf Course and The Crossings at Fleming Harbor Community District Association. This document is not to be reproduced without the expressed written consent of KPMG LLP

Eagle Harbor Golf Club Market Analysis, Operational Review and Indication of Value

Table of Contents, Continued

Schedules:

1 Analysis of Historic Operating Results 2 Financial Estimates September 30, 2004 to 2008 3 Indicatio