Confidential Offering Memorandum

1255 West Avenue, South Beach Miami beach, Florida 33139 U.S.A.

A Unique Hotel, Restaurant, and Bar Investment Opportunity With Redevelopment Potential In the Heart of South Beach

Presented by: The Muskat Group, Inc. Phillip Muskat, Broker-President 10775 S.W. 133 Terrace, Miami, FL 33176 E. [email protected], T. 305.253.0000, F. 305.253.3200

Confidential – Do Not Copy or Distribute: The acknowledged receipt of this document constitutes acceptance of the current Bikini Hostel, Inc. terms of non-disclosure. Oral representations cannot be relied upon as correctly stating the representations of Bikini Hostel, Inc. Not an offer where prohibited by state statutes or where prior registration is required. This business plan is not an offering. All services and amenities are proposed and plans are subject to change without notice or obligation.

Table of Contents

Executive Summary ______3 Some Photos ______4 Three Investment Strategies ______5 Concept and Market Opportunity ______6 The Property ______8 Aerial Photos & Comparables ______9

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Executive Summary

The Muskat Group, Inc. is pleased to offer for sale the Bikini Hostel, Café, & Beer Garden. This is a unique opportunity for investors to acquire a fully licensed and operating hotel, restaurant, and bar complex in the heart of the trendy South Beach neighborhood of Miami Beach, Florida. And, since the complex employs more than ten employees, the investment is well suited for investors seeking EB-5 investments. This opportunity is not just an opportunity to purchase an existing business but is also an opportunity to purchase the underlying land with its amazing redevelopoment potential. The land is one of the last assembled tracts of under-developed hotel zoned land on the West Side that is grandfathered in to permit expansion of the current operation or demolition and construction of a brand new six-story hotel. Since the land falls just outside the historic district, the redevelopment can be made from scratch and from ground up. Since such land is scarce, and while the existing structures are only one and two stories whereas the land is zoned for up to six stories, the opportunity to expand vertically is a possibility – so, this is an opportunity to collateralize not just against the current business but also against valuable land which can be developed in the future to expand the current business. This unique investment opportunity provides an investor with at least three possibilities, which he can choose from on his own time frame: (1) retain and operate the existing business as is (visit http://bikinihostel.com for more information), (2) expand the existing business within the current structures, and (3) demolish the current structures and build a new hotel or condo/hotel. An exclusive, brand new $300,000,000 condo building is currently being constructed diagonally across the street. See http://monadterrace.miami.

The Bikini Hostel is grand fathered in with no more hostels allowed in the West ave cooridor and with hostels in the entire city of Miami Beach now being limited with the number of beds allowed in a room. Bikinig Hostel offers a variety of unique lodging alternatives. Ranging from a private house and apartments to shared living quarters, Bikini Hostel has “a bed for every budget” to accommodate everyone from the solo backpacker to the romancing couple to groups of any size. Walking distance to the beach, restaurants, and nightclubs, the Bikini Hostel includes the “Bikini Beach House” - an authentic 1937 Art Deco gem in the center of South Beach rumored to have been the home of the paramour of legendary gangster Al Capone and one of the only remaining true B&B houses in the area. The Bikini Beach House sleeps up to sixteen and has hosted numerous bachelor and bachelorette parties, family and friend reunions, and collegiate field trips. Need to accommodate more or less? Check out the private “Bikini Apartments” - perfect for couples and smaller groups. The Bikini Apartments are furnished one bedroom and studio apartments with full kitchens. On a tight budget? Check out the “Bikini Bunks” - intimate dormitory-style accommodations with private bathrooms.

The property consists of three separate structures which were renovated in 2011 following South Florida Building Code standards at a cost of over $1,000,000. Renovations included:

New railings New fire sprinkler system and new fire alarm system Remodeled bathrooms New custom made bunk beds New full-service restaurant, bar and lounge area Passing of 40 Year Re-certification and all city, county, and state licenses to operate as a hotel, restaurant, and bar

The business benefits greatly from its location at the eastern end of the McArthur Causeway (Highway 395), with the Alton Road exit overpass allowing easy access to the hostel by car. Public transportaion from the Miami International Airport and throughout South Beach is faciliated by the a two bus stops at the corner of the property and by the South Beach Trolley. This favorable location and on-site signage offers easy access and visibility to thousands vehicles daily. The hostel is convenient to many of the demand generators including the sand of the beach itself, Whole Foods Supermarket, Starbucks, Lincoln Road, movie theaters, restaurants, the Miami Beach Convention Center, the Childrens’ Museum, Parrot Jungle, musuems, and much more. See maps.

Bikini Hostel opened for business on March 1, 2012, has exceeded monthly gross revenues projections, and has been cash flow positive ever since with sales in the eight figures. An acquisition of Bikini Hostel takes advantage of the fastest growing sector of the lodging market - hostels. See: http://online.wsj.com/news/

Miami ranked #1 for hotel-room occupancy and is home to some of the biggest events which Bikini Hostel leverages. When these events come to Miami, sales at hotels, restaurants, and bars escalate. The point is that in addition to its favourable year round climate Miami has many year-round draws thus assuring a year round income flow. Miami Beach is destined to remain popular due to its world’s greatest beaches and nightlife. Free of and not bound to the restrictions of traditional hotel flag, Bikini Hostel enjoys comparative and competitive advantages through not only its location and name but also its ability to adapt and provide among the least expensive South Beach lodging alternatives to Bikini Hostel’s target markets: solo travellers (mostly singles) and small and mid-size groups (also composed mostly of singles) who may not be able to afford to stay in a traditional hotel and are willing to forego privacy and share a room to save money and/or who seek a more down-to-earth fraternity, sorority, or fellowship lodging experience akin to the European hostel accommodation concept.

Confidential – Do Not Copy or Distribute: The acknowledged receipt of this document constitutes acceptance of the current Bikini Hostel, Inc. terms of non-disclosure. 3

Some Photos (More available at www.bikinihostel.com)

Confidential – Do Not Copy or Distribute: The acknowledged receipt of this document constitutes acceptance of the current Bikini Hostel, Inc. terms of non-disclosure. 4

Confidential – Do Not Copy or Distribute: The acknowledged receipt of this document constitutes acceptance of the current Bikini Hostel, Inc. terms of non-disclosure. 5

Three Investment Strategies

This unique investment opportunity provides an investor with at least three investment strategies, which he can choose from on his own time frame.

Retain & Operate the Existing Business Operation As-Is

Bikini Hostel opened for business on March 1, 2012, has exceeded monthly gross revenues projections, and has been cash flow positive ever since. An investor, especially one with EB-5 interests, could easily keep the existing operation as is with sales in the seven digits, as he takes his time to decide what else, if anything, he wants to do with the property.

Expand the Existing Business Within the Current Structures

There is plenty of room for improvement. The existing business has a 5am 4COP Alcohol and tobacco license on the premises for both hotel guests and the public. Expansion of the current café’s operations marketing to locals would increase revenue.

Demolish & Build a New Hotel or Condo/Hotel

The current owners previously received approvals from the city design review board (which approvals have since expired but may be renewed) to demolish the existing structures on the land and build and operate a 6-story lodging and restaurant complex. See photo below of the rendering that was previously approved for the development planned for the site of a chic restaurant/bar, hotel rooms, a spectacular tri-level suite, a boutique store, a fashion show runway, and a roof top sky beach pool & bar with jacuzzi, cabanas, and sunset views of the bay.

Rendering of Prior Development Planned for the subject site (1255 West Ave.), which did not materialize.

The rectangular parcel at the southern corner of the same block measures the same as the subject property. That parcel was recently developed into a 45 unit condo hotel known as 1215 West. Since the units were designed as one bedrooms for a condo hotel, the units were larger than standard hotel rooms. A straight hotel project on the subject land would yield a greater number of rooms, up to about sixty-six rooms.

1215 West Ave. the site, which was developed and sold out.

Confidential – Do Not Copy or Distribute: The acknowledged receipt of this document constitutes acceptance of the current Bikini Hostel, Inc. terms of non-disclosure. 6

Concept & Market Opportunity

Since March 1, 2012, when it first opened, Bikini Hostel has been capitalizing on a well-known fact: South Beach is expensive! And, it’s not getting cheaper! In fact, lodging prices have been rising for the past two years. A college student or even a recent college grad, saddled with student loan debt and traveling alone, or even with a friend, simply cannot afford to stay in a traditional hotel in South Beach. Similarly, there is a lack of budget accommodations in South Beach for small and mid-size groups of student travellers (who also are mostly single). Miami Beach is destined to remain popular due to its world’s greatest beaches and nightlife. There exists therefore an opportunity to fulfil the strong demand of young, solo, single travellers for cheap accommodations in South Beach. To meet that demand, the Bikini Hostel, with a fun, bikini theme, aims to become the number one choice for that target market by offering inexpensive, shared, dorm-like accommodations in South Beach. The target market of such consumers are willing to forego privacy and share a room to save money and/or they seek a more down-to-earth fraternity, sorority, or fellowship lodging experience akin to the European hostel or American dormitory.

While hostels have existed for many years and are common in Europe, they are relatively new and scarce in the United States. However, the concept has been proven to work in South Beach. Four competitors have been in business for over five years. So, how did and how will Bikini Hostel distinguish itself and create a competitive advantage? In most of the rooms offered by Bikini’s competitors, guests have to exit the room and use a bathroom down the hall (akin to several American college dormitories). When Bikini Hostel opened its doors on March 1, 2012, it revolutionized shared dorm-like accommodations by being the first hostel in South Beach to offer in-suite bathrooms, kitchens, and televisions, and a sophisticated lobby and playground for pleasure-seeking patrons to mingle with each other and the beautiful staff with pool, Jacuzzi, billiards and ping pong tables. So, even though it opened its doors years after its competitors, Bikini Hostel was able to capture in less than that time of operation its share of the market and maintain comparable average monthly occupancy rates. In fact, on some weekends, Bikini Hostel has been 100% occupied.

The hostel market has proven so appealing that billionaire Ronald Burkle, a private-equity investor and big Democratic fund raiser, is getting in the business. His Yucaipa Cos. and the Sydell Group, a New York hotel developer and operator, have formed a partnership to roll out premium youth hostels in major U.S. cities. The venture is looking to spend $250 million to acquire and renovate as many as 10 low-cost hotels over the next two years. It plans to reposition them as high-end youth hostels in places such as New York, San Francisco, Washington and Los Angeles. See: http://online.wsj.com/news/. Their first hostel is the Freehand in Miami Beach and is a friendly competitor.

One goal thus is to develop a strong following among Bikini’s target customer base of youthful, single, individuals, generally between the ages of 18 and 34, who seek a budget yet vibrant fraternity-like lodging experience where they can meet other like- minded singles or aspiring models waiting to be discovered who are coming to South Beach to hang out and party like rock stars even if they can’t afford it. Bikini Hostel aspires to become the consummate lifestyle accommodations brand for such single travelers. The brand will become many things to many people – a tantalizing peek at a fantasy, hedonistic lifestyle; and a fun way for men and women alike to embolden their sexuality. Diverse as these themes appear, one thread remains constant throughout: The Good Life.

“The people pictured are not paid models but staff and actual guests who were so happy with their stay that they gladly offered to pose in these photos. When Bikini Hostel opened its doors on March 1, 2012, it revolutionized shared dorm-like accommodations by being the first hostel in South Beach to offer in-suite bathrooms, kitchens, and televisions, and a sophisticated lobby and playground for pleasure-seeking patrons to mingle with each other and our beautiful staff.”

Confidential – Do Not Copy or Distribute: The acknowledged receipt of this document constitutes acceptance of the current Bikini Hostel, Inc. terms of non-disclosure. 7

The Property

Bikini Hostel is located at the southeast corner of West Avenue and 13th Street in South Beach. Bikini Hostel is also located within one block diagonally across the street from the 5-star Mondrian Hotel, a $100,000,000+ project by The Morgan's Hotel Group, which are or were the owners and/or operators of the Delano (another popular hotel in South Beach) and a leader in the boutique hotel industry. See: https://www.morganshotelgroup.com/mondrian/mondrian-south-beach. Bikini Hostel is also diagonally across the street from an exclusive, brand new $250,000,000 condo building currently being planned. See: http://monadterrace.miami. That condo building is designed by Ateliers Jean Nouvel, under Pritzker Prize-winning principal Jean Nouvel, and preconstruction prices for the 56 units range from $1,700,000 to $12,000,000. To the North, a new construction Marriot Residence Inn opened in 2016.

Other Bikini property features include:

• Surrounded by famous fine dining restaurants: Texas de Brazil and Barton G. • Surrounded by popular casual dining restaurants: Panera Bread and Einstein’s. • Two Starbucks locations within 2 blocks in each direction; Whole Foods nearby. • Across the street bayside waterfront boardwalk planned by City • Ranked in top ten most affluent neighborhoods by Forbes magazine • Walking distance to Lincoln Road, Epicure Market, Flamingo Park, and the most popular clubs

The Bikini property is made up of an assemblage of three independent parcels of land.

1. The first and main parcel consists of an 18 unit, two-story apartment building located at 1247 West Avenue. The building consists of both private and shared accommodations of close to 200 beds. For example, the “Bikini Apartments” - primarily on the second floor - perfect for couples and smaller groups - are suitable for guests seeking private accommodations – akin to hotel rooms or apartments – as they are furnished one bedroom and studio apartments with full kitchens. The “Bikini Hostel” – primarily on the first floor - perfect for solo travelers or those on a tight budget – offers shared dormitory-style accommodations with in-suite bathrooms.

2. The second parcel located at 1255 West Avenue was a single family home and was converted to serve as the hostel’s lobby, reception, dining hall, kitchen, luggage and supplies storage, manager’s office, and employee bathroom. Guests check in and check out of this location and this location hosts the Cafe & Beer Garden with 5am alcohol license, 90 seat restaurant with 188 capacity and take out/delivery. A hot tub, billiards table, and table tennis table are in the courtyard and open for use to guests & the public.

3. The third parcel located at 1234 13th Street was a single family home and was converted to a bed and breakfast (B&B) called the “Bikini Beach House” and is offered by the hostel to groups looking to rent a home or for more of a B&B type of accommodation. This property is a fully furnished three bedroom and two bathroom house with a private fenced yard and sleeps up to sixteen. Guests of this property are just a few steps away from and provided full access to 1255 West Avenue and the amenities there.

Entire lot size is 17,250 sf with around 11,500 living area of close to 200 beds

Confidential – Do Not Copy or Distribute: The acknowledged receipt of this document constitutes acceptance of the current Bikini Hostel, Inc. terms of non-disclosure. 8

Confidential – Do Not Copy or Distribute: The acknowledged receipt of this document constitutes acceptance of the current Bikini Hostel, Inc. terms of non-disclosure. 9

Aerial Photo & Comparables

Confidential – Do Not Copy or Distribute: The acknowledged receipt of this document constitutes acceptance of the current Bikini Hostel, Inc. terms of non-disclosure. 10