Annual Report 2016

@FibraHotel

Annual Report 2016 2016 Highlights 2.2 Million hotel room nights 67.2% Stabilized portfolio occupancy rate +12.3% Stabilized portfolio RevPAR increase 75 Operating hotels 10

Hotels under development 503 Million distributed to CBFI holders 1,749 Million pesos invested in hotels 2,697 Million: financial debt as of December 31st, 2016 +62bps Increase in lodging contribution margin for managed hotels (2015 comparable perimeter)

Live Aqua Monterrey Valle AC by Marriott Guadalajara 2016 Report Annual 4 Page

6 Letter from the CEO

8 Introduction to FibraHotel 8 Presentation 9 FibraHotel History 10 Structure 11 Senior Management Team

13 Industry overview 15 Market Opportunity

16 FibraHotel Strategy 16 Competitive Advantage 18 Strategy 20 Acquisitions Content 21 Development

24 FibraHotel Portfolio 24 Presentation of the FibraHotel Portfolio 26 Portfolio Map 31 Brand Affiliations 33 Hotel Segments of the FibraHotel portfolio 31 Operational indicators of the FibraHotel portfolio

36 Financial section 36 2016 Financial Results 41 Cash flow and liquidity 43 Capital Expenditures 44 Cash distribution

45 FibraHotel Corporate Governance 45 Technical Committee and FibraHotel Committees 47 Long-term alignment of interest

48 FibraHotel on the Mexican Stock Exchange 48 CBFI price 48 Stock ownership

49 Post-2016 events

50 Consolidated Financial Statements

NOTE: The publication date of this Annual Report is May 31st, 2017.

5 n 2016, FibraHotel finished its first Americana Pabellon M, AC by Mar- Letter inorganic growth phase as we riott Queretaro and AC by Marriott Iopened an important number of Guadalajara, which added over 800 hotels that we had been develop- rooms and represented an invest- from ing during the past few years. These ment of over 1.6 billion pesos. hotels, along with additional actions the CEO taken by management during the FibraHotel’s current portfolio com- year, will support AFFO growth per prises 85 hotels with 12,000 rooms, Dear certificate for the coming quarters an impressive achievement if you FibraHotel and years. I would like to highlight take into account that only four years certificate five full-service hotels out of these ago it included 17 hotels and 2,500 holders: openings which complement our rooms. During 2016 alone, our inor- portfolio with highly valuable stra- ganic growth investment was more tegic assets. These hotels are Live than 2.5 billion pesos through the Aqua Monterrey Valle, Grand Fiesta acquisition of two hotels with 397 Americana Monterrey Valle, Fiesta rooms, the opening of 11 hotels with 1,518 rooms from the development portfolio and we also added four new development hotels with 660 rooms. May 2017 These assets diversified our portfolio with hotels in mixed-use projects with seven different brands across all service categories and with significant exposure to gateway cities such as Monterrey, Mexico City, Guadala- jara and Queretaro. Our first growth phase took us a couple of years to achieve as we developed landmark hotels in mixed-use projects and gateway cities, and we are certain that this growth phase will be in the best long-term interest of our share- holders as we were able to round out our portfolio, improve its quality and prove our open architecture model as we now have over 2,000 rooms with international brands and over 2,000 full service rooms with agreements based on a mostly variable fee.

From an operating perspective, 2016 was again a record year for our hotels with a RevPAR growth of over 12% for

AC by Marriott Querétaro 2016 Report Annual 6 comparable properties and reaching an average occupancy of the stabilized portfolio for the year of 67%. This organic growth continues to be a key component of FibraHotel’s success and it will continue to provide tailwinds in recently opened hotels and hotels going through their stabilization period. In the past couple of years we have seen a very healthy and dynamic lodging market in Mex- ico with significant RevPAR growth across all sectors and regions. The highest growth areas continue to be the north and the Bajio regions and gateway cities including Mexico City, Monterrey and Guadalajara. These positive operating results are further highlighted by our diversified portfolio across 26 states with different underlying dynamics. Our operating Courtyard Cd. del Carmen team continues working on raising average daily rates and maintaining Regarding growth, for 2017 we have six new hotel open- a leading penetration of our hotels in ings, three of which have already opened and three more their respective markets. that will open by the end of the year. For 2018 and going forward we have an additional batch of full-service ho- In 2017, we will focus on stabilizing tels currently in process until the core and shell of the recently opened hotels, pushing fur- buildings are finished. Depending on market conditions ther RevPAR growth and focusing on we will continue the development of these hotels and strong cost control to improve mar- open them during the next few years. Our growth strat- gins. The recent merger between egy continues to target hotels inside mixed-use projects Marriott and Starwood will help sup- with high barriers to entry that will improve quality and port these objectives by providing diversification of our portfolio. us with a larger partner in Mexico, as the two companies together will During 2016, we distributed more than one peso per have a better distribution network certificate to our holders. Additionally, during our and larger operating structure in the fourth annual investor day event, we announced for country. I am very proud of the man- the first time an AFFO growth guidance of 25% for 2017. agement team we have assembled at I would like to thank all our certificate holders, em- FibraHotel, which I believe is the best ployees, and operating partners for the strong effort in the industry and that it along with put together in 2016, which represented an important our structure offers a good platform step in consolidating the company and positioning it for future growth. for further future success.

Simón Galante CEO FibraHotel

7 development of new hotels. This strong expansion meant that in terms of geographic, segment, operators and brands, by December 31st, 2016, FibraHotel’s portfolio was comprised by the following:

> 75 hotels in operation:

• 62 hotels owned by FibraHotel as of De- cember 31st, 2015. • Two hotels acquired during 2016. • 11 new hotels that opened during 2016 and were part of the development portfolio of FibraHotel as of December 31st, 2015.

> 10 hotels under development.

As of the date of this Annual Report, the FibraHo- tel portfolio comprises 85 hotels (78 in operation and seven under development) thanks to the opening of three hotels from the development Introduction portfolio during the first months of 2017. The hotels are located in 26 Mexican states and are associated with strong hotel brands, which to FibraHotel provide significant advantages and increased demand because of their i) service quality, ii) loyalty programs, iii) modern reservation systems, iv) national and international distribution channels, and v) growing demand from travelers in Mexico. Presentation FibraHotel continues to expand its brand port- FibraHotel is a Mexican trust created primarily to own, ac- folio through development and acquisitions. quire, develop and operate hotels. FibraHotel is a Real Estate In 2016, FibraHotel added to its portfolio the Investment Trust (REIT), known as Fideicomiso de Inversión en following brands: Live Aqua and Grand Fiesta Bienes Raíces (FIBRA in Spanish) and is listed on the Mexican Americana operated by Grupo Posadas, and AC Stock Exchange (Bolsa Mexicana de Valores). The trust is the by Marriott operated by Marriott International. first lodging REIT in Latin America and the best-positioned as FibraHotel’s portfolio offers lodging services owner of one of the largest and most diversified hotel portfo- across the country to business and leisure trav- lios in Mexico. elers. Most of its hotels are located in strategic sites with significant business and industrial FibraHotel’s objective is to provide attractive returns to its CBFI activity, and are located inside or near mixed- holders through stable cash distributions and real estate value use projects such as regional shopping centers, appreciation. In addition, FibraHotel will strive toward a high- business centers, industrial parks, airports and quality portfolio through affiliations with different brands, bus terminals, among others; thus offering our prestigious operators as well as geographic diversification and guests access to a large variety of amenities segmentation. and services.

FibraHotel owns the real estate and equipment of each hotel, Part of our development portfolio, including the as such, it does not operate hotels or own hotel brands. This Fiesta Americana Viaducto, Fiesta Americana Ve- open architecture makes it possible to maximize the cash flow racruz, Fiesta Americana Tlalnepantla and Live of each asset by working with various operators or brands best Aqua San Miguel de Allende hotels, are current- suited to each specific hotel. ly advancing construction only until the core and shell of the building. FibraHotel will deter- FibraHotel was established in late 2012, with a portfolio of mine the best time to finish and open the hotels 30 operating hotels and four hotels at different stages of de- based on macroeconomic conditions and when velopment. Since then, FibraHotel has experienced sustained FibraHotel considers it is the appropriate time to growth through a mix of acquisitions of operating hotels and invest and generate value to the portfolio. 2016 Report Annual 8 FibraHotel History

Main events since the creation of FibraHotel until December 31st, 2016:

July 31st, 2012: the Trust is formed. November 30th, 2012: FibraHotel Initial 2012 Public Offering on the Mexican Stock Exchange. May 31st, 2013: FibraHotel Follow-on Offering on the Mexican Stock Exchange, raising MXN $4,878 million.

Acquisition of 19 hotels in operation (2,329 rooms / an investment of more than MXN 2013 $2,500 million). Acquisition of 13 hotels in operation (more Opening of two hotels from the than 1,800 rooms / an investment of more development portfolio (281 rooms). than MXN $1,700 million). Acquisition of six projects for hotels under Opening of four hotels from the development. development portfolio (274 rooms).

Acquisition of 10 hotel projects under development (1,201 rooms), one hotel 2014 under a repositioning process (142 rooms), cancellation of the extended stay project Acquisition of one hotel in operation in Cancun (74 rooms) and reduction in (159 rooms). room inventory in some hotels (7 rooms). Opening of five hotels from the development portfolio (670 rooms).

2015 Acquisition of 10 hotel projects under development (1,349 rooms), suspension of one project in Toluca (100 rooms), and Acquisition of two hotels in operation increase in room inventory in some hotels (397 rooms). (26 rooms).

Opening of 11 hotels from the development portfolio (1,518 rooms). 2016 Acquisition of four projects under development (660 rooms) and a reduction in rooms under development (7 rooms).

Live Aqua Monterrey Valle 9 Structure

The following diagram outlines the FibraHotel structure:

> Elects Technical Committee and appoints Common CBFIs Holders Representative. Assembly > Able to amend Trust Agreement or liquidate trust assets. > Able to terminate Advisory CBFIs Control Agreement without “cause”. Holders Trust > Approves CBFIs issuance, delisting or cancel registration of CBFIs with CNBV. > Approve large Real Estate 84.3% 15.7% transactions.

Advisory Agreement. Administradora Annual fee of 1.00 % of Deutsche Bank CI Banco, S.A. Fibra Hotelera undepreciated book value Mexicana, S.A. de of assets, net of debt, México, S.A. (Common payable quarterly. (Trustee) Representative) C.V. (Advisor)

Hotel Management Hotel Agreements Management Companies Rental Revenue (lodging)

> Receives rental revenue from Guests rooms and pays related costs and expenses as well as real estate expenses. Management > Receives after – tax dividend from the Management Subsidiary Subsidiary and pays Agreement Revenue from non-room hotel services. Fibra Hotelera, S.C. (Management > Provides hotel services and property management services (with assistance form Subsidiary) third parties). > Receives revenue from non-room related hotel services and pays related costs and Service Agreements expenses. > Pays expenses related to its own operation. Compensation of 5% of > Taxable entity. Gross Payroll. > Pays after-tax dividends to FibraHotel or Services receives distributios to cover shortfall. Companies

> Provides personnel services. > Empoyees: operating Hotel Portfolio staff of hotel portfolio.

The FibraHotel structure is composed of the following entities: advice to FibraHotel on hotel project development and acquisition strategies, long-term strategic and financial planning, Advisor implementation of important decisions, and relationships with investors. The Advisor is entitled only to perceive an annu- FibraHotel is externally advised by Administradora Fibra Ho- al commission, payable quarterly, equivalent to 1.00% of the telera, S.A. de C.V. the Advisor. It was established on September non-depreciated book value, net of debt, of FibraHotel assets. 20th, 2012 for the purpose of providing advisory services and The Advisor does not perceive any other commission (acquisi- it is dedicated solely to FibraHotel operations. Some of the tion commission, development commission or any other type responsibilities of the Advisor are to provide guidance and of commission). 2016 Report Annual 10 Administrator the Administrator is not part of the REIT’s tax structure, it must pay taxes just as any other company does. The Admin- FibraHotel is internally managed by FibraHotelera S.C., the Ad- istrator, using profits generated from non-related room rental ministrator, which was established on October 5th, 2012 with activities, pays its proportional share of FibraHotel’s general the sole purpose of assuming responsibility for the day-to-day expenditures and its taxes. After-tax profits from the Admin- management of FibraHotel’s business. As of the date of this istrator are distributed to FibraHotel, which is responsible for this Annual Report, the Administrator had a 29-person team any deficit between revenues and costs of the Administrator. (Senior Management, Administration and Finances, Legal, De- velopment, Operation and Maintenance). The Administrator is Service Companies responsible, among other tasks, for the day-to-day management of FibraHotel’s business, property and hotel maintenance, Because trusts cannot have employees, Service Companies due-diligence for potential acquisition and development op- provide FibraHotel with personnel necessary for hotel opera- portunities, overseeing renovation / redevelopment projects, tions.Ocassionally, hotel operators hire key staff, such as gen- supervising property insurance, negotiating on behalf of Fibra- eral managers, controllers, sales managers, and head house- Hotel and organizing the signing of management agreements keepers directly. associated with the hotels. In accordance with the service agreement, service companies The Administrator is also responsible for providing certain are entitled to receive a 5% commision over the total payroll services unrelated to room rental, such as food and bever- they manage to cover their operational costs and expenses. age, telephone services, Internet and other similar services for On a monthly basis, FibraHotel reimburses servicecompanies which the Administrator bills hotel guests separately; the in- wages paid to hotel service staff., by the end of 2016, service come from such services being subject to tax payment. Since companies had approximately 3,330 employees.

Senior Management Team

FibraHotel Advisor

Roberto Alberto Simón Galante Galante Galante

FibraHotel Administrator

Eduardo López Chief Executive Officer

Edouard Boudrant Guillermo Bravo José Luis Jácome Lorena García Chief Financial Head of Corporate Chief Operations Legal Counsel Officer Development & Officer Investors

> Controllership > Development > Operation > Legal issues > Tresury > Acquisitions > Maintenance > Fixed assets > Invertor Relations > Capex > Administration > International Brands Operation

11 Management Team

The entire Administrator’s team is made up by 29 people at the date of this Annual Report, which includes the senior management team, development, operations, treasury, administration, legal, maintenance and fixed-assets departments. Accounting is performed externally by Conectum, a shared service center with more than 16 years of experience in the hospitality industry.

The FibraHotel Senior Management Team is formed by the following executives:

> Simón Galante Zaga. CEO of the Advisor and member of the > Guillermo Bravo Escobosa. Head of Corporate Devel- FibraHotel Technical Committee. Founding member and Ex- opment and Investors Relations of the Administrator. ecutive Director of Grupo GDI. He has more than 20 years He has a degree in Industrial Engineering from the of experience in the hotel, commercial and residential seg- Universidad Iberoamericana of Mexico, and a Master’s ments as a real estate developer and manager, as well as in degree in Business Administration from the Chicago the acquisition, development and financing of these types of Booth School of Business. His professional experience projects. He is a member of the Fondo Hotelero Mexicano I/ includes working as a credit analyst and public rela- II, Fondo Comercial Mexicano, La Vista Country Club, Bosque tions executive at Scotiabank Inverlat in Mexico, as Real and MERCAP, all Grupo GDI companies. He specialized in well as Associate in Mergers and Acquisitions for Latin Business Administration from IPADE. America and Diversified Industries in the United States, at J.P. Morgan, New York. > Eduardo López García. CEO of the Administrator. He was Director of Hotel Investment and Development in Grupo > Lorena García Núñez. Legal Counsel of the Administrator. Posadas from 1993 until he joined as Director of Hotels at She joined Grupo GDI in 2002 and has more than 15 years Grupo GDI in 2006, when it owned only six hotels. Further- of experience in the hotel and real estate business. more, he negotiated an agreement with a Mexican developer, leader in real estate and with Grupo Posadas for the develop- > José Luis Jácome Herrera. He is the Chief Operations Of- ment of additional hotels to be managed by Grupo Posadas. ficer of the Administrator. He has a degree in Tourism He has more than 20 years of experience in hotel develop- Enterprise Management from Universidad Anhuac del ment and management. Sur and a specialization from École Supérieure de Ges- tion (ESG), Paris, France, in Hotel, International and Luxury > Edouard Boudrant. Chief Financial Officer of the Administrator. Marketing. Additionally, he has a Master´ s degree in Busi- He has a bachelor’s in Business Administration from the Uni- ness Administration from IPADE Business School, Mexico, versidad de las Americas (UDLA) in Puebla, Mexico, and from in conjunction with a Value Investing Course form Co- the Centre d’Études Supérieures Européennes de Management lumbia University, New York. His professional experience (CESEM) in Reims, France, and a Master’s degree in Corporate includes more than eight years in hotel management in Law from the École Supérieure des Sciences Économiques et different hospitality chains, such as Fairmont, Posadas Commerciales (ESSEC) in Paris. His professional experience in- and Las Brisas, holding different positions from Hotel cludes eight years in investment banking both in France (Société Director, General Director and Reception Manager, and Générale and Lazard-NATIXIS) and Mexico (BBVA Bancomer). Manager of Food and Beverages.

One Durango 2016 Report Annual 12 Mexico has one of the most attractive population pyramids globally with a demographic dividend and has recently implemented structural reforms not only in the energy and telecommunications sectors, but also in education and politics in an effort to encourage healthy competition and attract greater foreign investment. Private consumption continues being the country’s main growth engine and manufacturing continues gaining ground because of increased US demand, a favorable cost structure and increased competitiveness thanks to the depreciation of the peso and significant government investment in infrastructure. Nevertheless, manufacturing growth is at risk due to US protectionist policies and possible renegotiation of NAFTA, which could pressure foreign investment in the following years. According to UNC- TAD, foreign investment represented USD 26 billion in 2016 and an average of approximately USD 30 billion in the last five years.

As for tourism, this industry represented approximately 8.5% of Mexico’s GDP, according to OECD data, growing at a Compounded Annual Rate of Growth (“CARG”) of 6.4% from2008 to 2015, according to INEGI, only behind the manufacturing industry and the service sector’s av- Industry erage. Likewise, the number of visitors to the country has shown a favorable trend, mainly because of great service quality and tourist offering, backed by improved overview connectivity and attractive exchange rates for international travelers. On the other hand, Mexico occupies the sixth (6th) place worldwide in number of sites declared World Heritage by the United Nations Educational, Sci- entific and Cultural Organization, or UNESCO, 34 of them at last count, of which 27 are cultural, six are natural and one is mixed.

According to the World Tourism Organization, Mexico was the ninth (9th) most visited country in 2015, with approximately 32.1 million visitors, a 9.6% increase in relation to the previous year. Likewise, according to Mexico’s Ministry of Tourism, during 2016 Mexico received approximately 35 million international arrivals, 8.9% growth in relation to the year before. Cancun beat the record with approximately 7 million international Fiesta Americana Monterrey Pabellón M visitors during 2016, positioning itself as the destination with the greatest influx of foreign visitors during the year, followed closely by Mexico City and other tour- exico’s hospitality industry con- ist destinations such as Los Cabos and Puerto Vallarta. Mexico is well positioned to tinues to have a promising benefit from long-term international tourism trends because of its proximity to the Moutlook for the next few years. United States and Canada, representing approximately 359 million people who are, Recently, we have seen a significant room on average, 3.5 hours of flight away (6 hours max.) from Mexico’s main tourist desti- demand growth driven by strong private nations. Additionally, as Mexican consumers continue having more spending power, consumption, foreign direct investment, we have seen and expect to continue seeing a growing interest for domestic travel. growth in local and international tourism, low unemployment, a growing economy The following chart illustrates Mexico’s international visitors and annual spending by and macroeconomic stability. Accord- foreign visitors from 2010 to 2016: ingly to The Economist Intelligence Unit, projections indicate an average annu- International Visitors to Mexico Annual expenditure of foreign visitors al GDP growth of 3.2% during the next 15 (million) (Billions of Dollars) years (2015 to 2030), driven by the strong structure of implemented reforms and CAGR CAGR 2010-2016 2010-2016 CAGR CAGR 2010-2016 2010-2016 7.02%7.02% 8.52%8.52% Mexico’s demographic dividend. Mexico40 40 35 35 29.3 29.332.1 32.1 30 30 has also overcome the negative impact 23.4 23.424.2 24.2 19.6 19.6 30 23.330 23.323.4 23.4 17.7 17.7 from the peso devaluation, the oil indus- 20 20 13.9 13.916.2 16.2 12 1121.9 112.71.9 12.7 try deceleration and uncertainty around20 20 10 10 the North America Free Trading Agree10- 10 ment (“NAFTA”). 0 0 0 0 1 1 1 1 20 1 20 1 20 1 20 1 2015 2015 2015 2015 2013 2013 2013 2013 2012 2012 2012 2012 2016 2016 2016 2016 2010 2010 2010 2010 2014 2014 2014 2014 Source:Source: Reporte Reporte de la Actividad de la Actividad Turística Turística 2016 2016 Source:Source: Reporte Reporte de la Actividad de la Actividad Turística Turística 2016 2016

13 According to INEGI data, employment in the tourism industry increased by 4.8% in 2016 (vs. previous year), only behind construction, restaurants and accommodation services, reaching approximately 15.6 million new direct jobs, representing 8.4% of total employment in 2016 for the Mexican economy. The urban hotel industry continues to be an expanding mar- We expect this increase in international visitors to con- ket and is extremely fragmented, especially in regard to the tinue, based on key infrastructure developments to be economy hotel segment. According to HVS, the inventory of concluded in the short term and strategic agreements for hotels in the country’s main markets shows a total of 1,328 increased flight connectivity. hotels with 146,448 rooms oriented to serving travelers from 40 select markets in the country. Of those 1,328 ho- As reported by the World Travel and Tourism Council tels, 715 are independent and 613 are branded hotels. (WTTC), from 2010 to 2015 Mexico’s capital investment in tourism had a CARG of 5.4%, which represents, approxi- According to HVS, Mexico has 30 hotel operating companies mately, twice the average annual growth of Mexico’s in the urban hotel sector, and more than 60 brands, both GDP in the same period. Capital investment in tourism local such as Camino Real, Fiesta Americana, Quinta Real, is expected to reach MXN $240 billion pesos by 2026, in Fiesta Inn, One Hotels, Real Inn, City Express, etc. and inter- comparison with MXN $126 billion pesos expected in2016, national such as Marriott, Hilton, Holiday Inn, Ibis, Fairfield which represents a CARG of 6.7%. Inn, Hampton Inn, Courtyard, etc. Grupo Posadas is the most important operating company in Mexico, with 24% of the Moreover, Mexico reached a Bilateral Air Agreement with total branded urban hotels, followed by InterContinental the United States, effective since August 21st, 2016. Accord- Hotels Group which is primarily a franchisor with approxi- ing to the US Department of Transportation, this Bilateral mately 23% and City Express with a mixed model at 15%. Agreement aims to increase competition between airline companies and expand cross-border aviation market by According to HVS, the urban hotel industry in Mexico is eliminating restrictions on air route operations between still characterized by a high penetration of indepen- both countries. The agreement allows foreign airlines to dent hotels, with the exception of the largest cities, such land and board local passengers and continue toward their as Mexico City or Monterrey. Today, 54% of the sample destination, as well as not limiting the airlines allowed to analyzed by HVS comprises independent hotels (rep- use the same route. resenting 38% of the total number of rooms), while in the United States, it is estimated that the branded ho- The Mexican hotel market has been transformed, thanks tel inventory covers approximately 65% of the total and to economic trends at national and local levels. Room de- reaches 70% to 80% in main urban and industrial cen- mand is expected to continue increasing more rapidly than ters. Additionally, the Mexican hotel market has a limited supply in 2017, and that should lead to a national increase number of owners with significant portfolios, several of in RevPAR year on year. Mexico has the most developed whom are operators with franchised brands. Generally hospitality sector in Latin America, as demonstrated by the speaking, the hotel market is quite fragmented. outstanding visitor levels during the last four years, distributed among tourist and business destinations, as well The hotel market in urban and industrial centers in Mexi- as a growing and well-established business market, which co has followed trends established in the past few years. will continue growing at par with the national economy. Supply in several areas has increased in line with industrial growth, with demand growing faster than supply overall. % of the % of the In an uncertain global environment influenced by geopolit- Number total Number total Types of Hotels ical events, setbacks in several emerging economies, and of Hotels number of rooms number of hotels of rooms election periods, especially in the United States, the Mex- ican economy has remained relatively healthy and well Affiliated to international brands 323 24% 49,516 34% positioned. Mexico has positioned itself during the last Affiliated to mexi- two decades with fundamental changes in a closed econ- can brands 290 22% 40,632 28% omy highly dependent on oil exports to an open economy Independent based on domestic consumption, services and manufac- hotels 715 54% 56,300 38% turing products for export. The automotive industry is a Total 1,328 100% 146,448 100% good example, as its development has fostered growth in Source: HVS infrastructure, qualified labor and suppliers, which have improved other manufacturing industries such as aeronau- tics. Structural reforms in the last few years, especially in 2016 Report Annual 14 of global economic deceleration, particularly in the Unit- ed States which is Mexico’s main business partner. Other possible short-term risks include further setbacks in the energy sector, political uncertainty and any deepening security issues affecting the country. the energy industry, should improve this favorable trend, though progress in the area could be slower while oil prices Mexico has the most highly developed hospitality sector remain at limited levels. in Latin America and is well positioned to continue leveraging the traveler levels into and within the country that Mexico has different regional economies, some with ro- we have witnessed in the past few years. bust economic activity and a high demand for hotel rooms, while others do not enjoy the same advantages and have a more limited hotel room demand. Investors and operators study local dynamics, including current and expected Market Opportunity economic conditions, and the supply and demand balance, in order to evaluate hotel and brand positioning and its potential behaviors in different projects and markets. Re- FibraHotel has an excellent position as an investment gionally, there are pockets of over-supply, but, in general, vehicle, which can offer investors a platform for growth these are located in cities with important growth in the and value creation with direct exposure to the lodging past few years and positive fundamental dynamics; as industry. By being only an asset owner, FibraHotel has such, a balance between demand and supply is expected attractive opportunities for synergies with other market in the short- and medium-terms. participants such as international hotel companies, hotel operators and other players in the real estate market Hotel chains and brands continue to be bullish on the in Mexico. The hotel market offers interesting opportu- market and are looking to expand their presence and dis- nities for sustained growth for both FibraHotel and their tribution channels, and as such they look to expand their CBFI holders as a result of market trends in Mexico and of presence with quality owners, projects and locations in the stabilization process of FibraHotel’s recently devel- the country. This phenomenon is allowing for a more pro- oped properties. fessionalized competitive dynamic overall, with a growth in conversions from independent hotels to branded hotels Additionally, FibraHotel is able to continue taking for a better segmentation of hotels available to consum- advantage of those opportunities thanks to its experi- ers, in which they can find different options to satisfy their enced Advisor, its management team, its relationships needs, and at the same time, allow investment groups to in Mexico’s hotel industry and the advantage of being a expand their portfolios in select markets. lodging REIT listed in the Mexican Stock Exchange, with access to capital and tax benefits for future asset con- Current ADR in Mexico, compared to the United States are tributors. as follows (1 USD = MXN $18.35): The competitive advantages and strategies that Fibra- > The ADR for limited service hotels is MXN $980 in Mex- Hotel has and will implement make and will continue ico compared to MXN $1,100 in the United States (12% making it possible for us to stand out among the compe- higher than in Mexico). tition in Mexico and shall be a source of strength to our > The ADR for selective service hotels is MXN $1,360 in objective of building a portfolio of high-quality hotel as- Mexico compared to MXN $1,500 in the United States sets in the country. (10% higher than in Mexico).

According to STR, hotel demand in Mexico is expected to increase 3.5% in 2017, with an increase of 1.6 percentage points in hotel occupation due to the 1.2% increase in existing supply with an increase of 0.9% in ADR and 0.7% in RevPAR. The new supply represents 63 hotels (9,273 rooms) under construction. There are 83 additional hotels (12,693 rooms) on the market in the planning process.

Regardless of the aforementioned growth tendencies and positive outlook, the country is not immune to the effects

Live Aqua Monterrey Valle 15 FibraHotel Strategy

AC by Marriott Guadalajara

Competitive Advantage

FibraHotel has the following competitive advantages:

Market leader with a high-quality portfolio that includes multiple brands and operators, geographically diversified and difficult to replicate.. FibraHotel has the largest and highest quality hotel portfolio in Mexico, geographically diversified with iconic properties like Live Aqua Monterrey Valle, Grand Fies- ta Americana Monterrey Valle, AC by Marriott Guadalajara and Pabellon M. The portfolio has important presence in the limited, select, full and extended stay service segments. The hotels are generally geared toward business and leisure travelers and operate in appealing segments within the Mexican hotel industry, which is characterized not only by the potential to generate attractive return on investments but also the opportunity for substantive growth because of the unmet demand for facilities of this type in Mexico, and because of internal market growth, which has been significant and driven by different regional economies and direct foreign investment. Additionally, FibraHotel owns an important number of non-stabilized rooms due to recent development openings; once these rooms complete their stabilization process FibraHotel’s income should increase as well. 2016 Report Annual 16 FibraHotel expects to continue diversifying its portfolio via For instance, it proactively oversees and advises hotel oper- the acquisition and development of new hotels in unique loca- ating companies on most aspects of their operation, including tions with attractive prospects. The hotels are associated with real estate positioning and repositioning, operation analy- well-known brands that provide advantages such as reliable sis, physical design, renovation and essential improvements. service quality, loyalty programs, reservation systems, and As a result, FibraHotel has developed an efficient operational national and international distribution channels. FibraHotel model that provides substantive operating leverage in a vari- has several well-known brands, such as Live Aqua, Live Aqua ety of conditions and market cycles. FibraHotel considers there Boutique, Sheraton, Grand Fiesta Americana, Fiesta Ameri- is a potential for increasing RevPAR, mainly by increasing ADR, cana, Camino Real, AC by Marriott, Fiesta Inn, Courtyard by which together with operating leverage will help increase the Marriott, Fairfield Inn & Suites by Marriott, One Hotels, Camino profitability as economic conditions improve in Mexico. It can Real Suites, and Fiesta Inn Lofts. These hotels are operated by and will continue increasing RevPAR and profit margins in the different companies, including Grupo Posadas, Grupo Real Tur- future as more hotels are added to the operating platform. ismo and Marriott International. Strong balance sheet, access to capital and leading position Hotels owned by FibraHotel are mostly in markets with con- on the Mexican hotel market. FibraHotel was the first lodging siderable industrial, corporate and/or touristic activity, which REIT listed in the Mexican Stock Exchange and is considered to leads to strong hotel service demand. Furthermore, they are be the best-positioned investment vehicle toward becoming a located in strategic locations withentry barriers, within or near leader in the hospitality sector in Mexico. As a company listed shopping centers, airports and/or industrial parks. These stra- in the Mexican Stock Exchange, it has and will have better ac- tegic locations are not easy to replicate and provide cess to capital and the opportunity to issue CBFIs to potential sellers in exchange for their properties, offering them an addi- Strong relationships of the management team and Control tional, tax efficient, liquidity option. Group provide wide access to investment opportunities. FibraHotel directors have extensive experience in hotel ac- FibraHotel enjoys, as of December 31st, 2016, a solid liquidity quisition, development, financing, renovation, repositioning, position. This fact, along with a solid asset base, means it has redevelopment and management. Likewise, they possess and will continue to have the capacity to incur debt, conser- in-depth knowledge of the Mexican real estate market and vatively, without reaching its leverage limits, which will make enjoy a broad contact network in the hotel industry, includ- it possible to take advantage of favorable development, ac- ing long-term relationships with hotel owners, hotel operating quisition and investment opportunities. As a result of the companies, hotel brokers and other key industry participants, established and leading presence of FibraHotel on the Mexi- such as the most prominent real estate developers in Mexico can hotel market, the scale of its operations, its high-quality (shopping centers, office and industrial parks, among others). portfolio and solid financial position, FibraHotel believes By and through these different relationships, the management that it is and will be well positioned to take advantage of team identifies and assesses numerous potential acquisition any acquisition opportunities in the highly fragmented ho- and development opportunities for profitable growth of the Fi- tel industry in Mexico, and of development opportunities by braHotel portfolio. partnering with the largest hotel operating companies looking for an equity partner. Robust relationships between the management team and hotel operating companies provide FibraHotel with valuable brand Solid growth history. The FibraHotel management team has a concept knowledge and access to numerous opportunities sound growth track record. Since the Initial Public Offering, the for development and attractive acquisitions, several of which FibraHotel portfolio has grown from 17 operational hotels and may not be available to other competitors. It is also important 2,329 rooms from the Contribution Portfolio to 85 hotels and to mention that through their relationship with Grupo GDI, Fi- 12,023 rooms by the date of this Annual Report, which repre- braHotel has access to potential acquisition opportunities and sents a compounded annual growth higher than 62%. development projects. Alignment of long-term interests with the Control Group and Assets owner with an efficient and aligned operating model. the management team. FibraHotel has a leading management A key element of FibraHotel strategy is that it holds agreements team with vast experience in the sector and market. Additionally, with hotel operating companies, which are paid predominant- the relationships between FibraHotel, its Advisor and Grupo GDI ly variable commissions based on gross operating income, is structured so that all interests are closely aligned. Pursuant thus aligning FibraHotel interests with that of hotel operating to the Trust Agreement and Adhesion Contracts, the Relevant companies and minimizing expenses on a down cycle, which Adherent Trustors have agreed to grant preferential rights to provides great flexibility and makes it possible to take advan- acquire any future lodging investment opportunity generated by tage of a relatively low break-even point. any of them insofar as such opportunity substantially complies with every investment eligibility requirement set forth in the The open architecture policy enables FibraHotel to partner Trust Agreement, as long as the Voting Trust holds at least 15% with hotel operating companies and hotel brands best suited of the CBFIs in circulation. to each hotel and circumstance. Hotels under development are developed based on architectural plans that seek to maximize It is FibraHotel’s belief that significant shareholding by the use of revenue-generating spaces and minimize both construc- Advisor’s directors and Relevant Adherent Trustors create the tion and operational costs. Moreover, it emphasizes rigorous best alignment of interests between FibraHotel, the Advisor and asset management, which improves operational productivity. Grupo GDI.

17 Strategy

The goal of FibraHotel is to generate attractive risk-adjust- awarded the hotel management contract if FibraHotel were to ed returns for its CBFI holders, mainly through distribution of acquire the hotel. its taxable income and return on capital, as determined by the Technical Committee (in 2013, 2014, 2015 and 2016 FibraHo- Take advantage of organic growth opportunities. FibraHotel tel distributed MXN $338 million, and MXN $424 million, MXN believes it is and will be able to leverage organic growth op- $436 million and MXN $503 million respectively to its certifi- portunities since: cate holders). FibraHotel intends to achieve this goal through ownership, expansion and effective operation of a high-quality (i) its focus on the strategic location of its hotels in commer- hotel portfolio with different brands, geographically diversified, cial and industrial centers will allow FibraHotel to be part operated by independent hotel operating companies renowned of Mexican economic growth (and regional economies) as throughout Mexico capable of offering attractive investment well as the increasing foreign direct investments and tour- returns and generate long-term value appreciation through ef- ism; fective asset administration. It seeks to achieve this objective (ii) It will continue to apply its efficient operating platform and by using the following investment and development strategies: disciplined management of its portfolio assets and of any acquisition/ development carried out; and Grow and consolidate Mexico’s hotel market. FibraHotel plans (iii) its larger size, due to new hotel acquisition and develop- to continue growing in large, mature markets and those with ment, is an advantage when seeking improved operational strong industrial, commercial and touristic activity through ho- margins of its portfolio hotels. tel asset acquisition and development. In this sense, FibraHotel plans to invest in strategic locations that provide a convenient FibraHotel sees an opportunity to increase the RevPAR of its alternative for travelers. hotels. In 2016, based on 56 hotels in a comparable perimeter of stabilized properties, the RevPAR was MXN $670, represent- It also seeks to continue being present in strategic locations ing an increase of 12.3% versus 2015 (MXN $597), compared to with attractive real estate prospects, such as shopping malls, a 3.4% inflation rate and a 2.4% Mexican GDP growth. This sig- airports and industrial parks, aiming to improve the FibraHo- nificant growth is partly due to market conditions and partly to tel’s operating platform and maximize RevPAR. It also focuses its assets’ quality and managements. on opportunities where value can be enhanced through proac- tive investment strategies, such as renovation, repositioning or There are several trends that make Mexico an interesting target rebranding, as in the cases of unbranded or mismanaged ho- for hotel investment including positive trends in Mexico’s inter- tels. nal consumption, the recently implemented structural reforms, growth in tourism, increasing competition in the industrial sec- FibraHotel believes that with its Advisor and management tor, stable country risk, dynamic and growing employment team’s extensive knowledge and extensive relationships with- rates, solidly capitalized banking sector, low leverage in the in the local industry, it can specify opportunities with owners private sector and diminishing demographic dependence index. and operators of small or independent hotels and even with All of these trends should continue favouring an increase in ho- operators looking to sell hotels they currently own. Similarly, tel demand. FibraHotel believes that with disciplined growth, focused on enhancing value for CBFI holders, its portfolio will continue to It is a fact that it can and will increase operational efficiency grow in the medium term and take advantage of characteristics of acquired hotels as they become part of the platform, and of the Mexican market. hotels in stabilization process or under development should improve portfolio efficiencies. Operational efficiencies include: Pursuing opportunities using FibraHotel’s unique access operating under hotel management agreements with variable to hotel investment opportunities. Through its relationship commission structures, disciplined asset administration, open with Grupo GDI, FibraHotel has access to a wide range of pos- architecture policy and management of hotel stabilization pro- sible acquisitions, including preemptive rights regarding hotel cesses. Hotel investment opportunities will also be reviewed investment opportunities. These, as well as the breadth of es- regularly for investing in hotels with the aim of enhancing tablished relationships in the Mexican real estate and hotel their quality and appeal, increase their value in the long term industries, generate a continuous source of attractive invest- and attractive returns on investment. The same rigorous asset ment opportunities outside the competitive market process management approach will be used for future hotel acquisi- through which FibraHotel can grow its portfolio in a disciplined tions. manner and increase the value to its CBFI holders. Also the use of independent hotel operating companies affords Fibra- Partnerships with leading hotel brands and hotel man- Hotel access to investment opportunities, as these companies aging companies. Use of best-in-class brands and the may provide possible operations with the expectation of being FibraHotel relationship with leading hotel operating compa- 2016 Report Annual 18 nies, both national (Grupo Posadas, Grupo Real Turismo) and the next few years will create attractive development oppor- international (Marriott International), offer significant advan- tunities for hotels in strategic locations that are difficult to tages since these brands and hotel operators are prestigious, replicate, such as mixed-use projects and shopping centers offer loyalty programs, modern reservation systems, effective and tourism hubs that will diversify the FibraHotel portfolio, product segmentation, national and international distribution, always aiming to maximize long-term return on investment to and are deeply aware of the needs of demand-driving guests, CBFI holders. the outcome of which may be a higher occupancy rate, ADR and RevPAR, as a result of the open architecture strategy that FibraHotel will be able to capitalize on this opportunity as both makes it possible to partner with the hotel managing company its Advisor and its management team have vast experience in best suited for each hotel and situation. developing hotels in Mexico. In addition, the cost per key at which FibraHotel is able to develop hotels is highly competitive A strong relationship between the Advisor’s management team and uses independent companies for hotel construction and and main hotel operating companies, together with over 50 development, eliminating any conflict of interest and maximiz- years of experience, will make it easy to work efficiently with ing its capacity to develop different hotels throughout Mexico those hotel operating companies, provide valuable knowledge while strategically maintaining the structure and supervision related to brand-initiative as well as access to acquisition and of hotel projects. This combination helps determine the most development opportunities, many of which may not be avail- profitable projects, starting with selection of the most suitable able to competitors. location for a project as well as the best brand and operator, hotel size, including room area and amenities. All develop- Wide experience for growth in hotel development in Mex- ments focus on maximization of return on investment for CBFI ico. The important growth in hotel demand in Mexico during holders and long-term portfolio diversification. FibraHotel has developed and opened more than 25 hotels.

AC by Marriott Querétaro

19 Live Aqua Monterrey Valle

Acquisitions

A central part of FibraHotel growth is based on the strategy FibraHotel has a development team that is continually creating of acquiring operating hotels at the right price so they can be a pipeline of opportunities that meet investment require- incorporated into the portfolio, adding value to CBFI holders ments. An important part of these are unique to FibraHotel by increasing distribution per CBFI. The acquisition strategy and based on the management team and Advisor’s relation- is based on the disciplined purchase of only high-quality ho- ships with participants in the hotel and real estate industries tels in strategic locations and at the right price, which meet of Mexico. Furthermore, it seeks high-quality business hotels both proper cash flow generation (cap rate) and proper repo- in strategic locations throughout the country that comple- sitioning cost (price per key). All acquisitions are evaluated ment the portfolio and generate value to CBFI holders. Every internally ensuring they add value to CBFI holders. FibraHo- investment alternative is analyzed by an internal acquisi- tel aims to acquire both stabilized hotels that are included tions committee and updated based on different negotiations in the portfolio under operating schemes with predominantly conducted by the management team, choosing only the best variable commissions and independent hotels with high real opportunities for creating long-term value. FibraHotel is con- estate value which identify an opportunity for repositioning vinced that it has a viable acquisition strategy, which makes under a new brand and transferring it to a professional oper- capitalizing on opportunities possible throughout the cycle ator in order to maximize cash flow upon portfolio inclusion. in a sustainable manner and achieves continued growth by means of hotel acquisitions. The number of acquisitions that FibraHotel can accomplish is directly linked to market conditions and purchase options available at the right price. 2016 Report Annual 20 Development

FibraHotel seeks to develop hotels in strategic locations, Once the location has been defined, the characteristics of primarily within mixed use projects in highly dynamic areas the hotel are determined through a market research, de- that will maximize return on investment in the long term. fining the service segment the hotel will cater, the size, The development strategy works as a complement of the amenities expected and different options of brands and op- acquisition. Under the same conditions, preference is given erators available. The development of new hotels helps us to the acquisition of hotels already under operation over the diversify the portfolio through the construction of hotels development of new hotels. Construction of new hotels will made with the specifications of international brands and continue in situations where hotel acquisitions can only be operators. done at an expensive price (both in terms of return on investment and cost per key), while the location of the project The Advisor and management team of FibraHotel have great gives competitive advantage by being in a mixed use project experience in hotel development. Due to the amount of proj- for example. By developing assets, FibraHotel seeks high- ects great costs per key are being achieved maintaining er return on investment in comparison with an acquisition. general supervision and structure of the hotel projects.

The process of developing a new hotel starts by identify- As of the date of this report, the portfolio of hotels in developing strategic areas and mixed-use projects in development. ment of FibraHotel is the following:

Investment by FibraHotel

Expected Number of (MXN $ millions) Invested as completion rooms under Hotel State Total of March 31st Remaining* date construction 2017 1 Aloft by Marriott Veracruz Veracruz Q4 2017 166 170.0 122.6 47.4 2 Fiesta Inn Buenavista Mexico City Q4 2017 129 185.0 94.9 90.1 3 Courtyard Toreo* Mexico City Q4 2017 146 45.0 - 45.0 Fiesta Americana Viaducto 4 Mexico City TBD 255 600.0 104.9 495.1 (VIA 515)** Full Service Villa del Mar 5 Veracruz TBD 173 275.0 39.1 235.9 Veracruz** Live Aqua San Miguel de 6 Guanajuato TBD 134 550.0 142.6 407.4 Allende** Fiesta Americana 7 Mexico City TBD 224 475.0 99.8 375.2 Tlalnepantla** Other incuding GICSA Various 194.5 Total 1,227 2,300.0 798.3 1,696.2

* Until the projects are restarted FibraHotel will only have to invest a portion of the remaining investment ** Budget under review, investment should increase due to an enlargement in room inventory

1. Aloft by Marriott Veracruz 2. Fiesta Inn Buenavista

Location: Boca del Río Veracruz Location Ciudad de México. Inside the shopping center Brand: AC by Marriott Fórum Buenavista Operator: Marriott International Brand: Fiesta Inn Segment: Full-Service Operator: Grupo Posadas Room count: 166 Segment: Select-Service Estimated opening date: Fourth Quarter, 2017 Room count: 129 Estimated opening date: Fourth Quarter, 2017 The hotel structure and façade are almost finished and work is underway on interiors and MEP (mechanical, The steel structure is finished, the façade and civil electrical and plumbing). works are 70% done, and work is underway on interiors and MEP (mechanical, electrical and plumbing).

21 3. Courtyard Toreo

Location: Mexico City Estimated opening date: Fourth Quarter, 2017 Brand: Courtyard by Marriott Operator: Marriott International The hotel’s structure and façade are finished and Segment: Select-Service work is underway on interiors and MEP (mechanical, Room count: 146 electrical and plumbing).

4. Fiesta Americana Viaducto (Vía 515) 6. Live Aqua San Miguel de Allende

Location: Mexico City. Inside the mixed-use project Location: San Miguel de Allende. Historical Center of San Vía 515 Miguel de Allende Brand: Fiesta Americana Operator: Grupo Posadas Operator: Grupo Posadas Segment: Full-Service Segment: Full-Service Room count: 134 Room count: 255 Estimated opening date: To be determined Estimated opening date: To be determined Part of the structure is complete. This hotel will be on The project is in the foundation process. This hotel hold after completion of the structure phase. will be on hold after the structure and façade phase is completed.

5. Full-Service Villa Del Mar Veracruz 7. Fiesta Americana Tlalnepantla

Location: Veracruz. Inside the mixed-use Project Villa del Location: Mexico City. Inside the mixed-use project Mar Veracruz Sentura Tlalnepantla Brand: Fiesta Americana Operator: Grupo Posadas Brand: Fiesta Americana Segment: Full-Service Operator: Grupo Posadas Room count: 173 Segment: Full-Service Estimated opening date: To be determined Room count: 224 Estimated opening date: To be determined The development is currently in the structure phase of the shopping center at the transfer slab to the hotel. This The development is currently in the structure phase hotel will be on hold after finishing the structure and of the shopping center. This hotel will be on hold until façade phase. completion of the structure and façade phase. 2016 Report Annual 22 Live Aqua Monterrey Valle 23 FibraHotel Portfolio

Presentation of the Portfolio

FibraHotel opened 2016 with 80 hotels and 10,973 rooms, of FibraHotel closed 2016 with 85 hotels and 10,023 rooms, of which: which:

> 62 hotels (8,507 rooms) were in operation. > 75 hotels (10,422 rooms) were in operation. > 18 hotels (2,466 rooms) were in different stages of de- > 10 hotels (1,601 rooms) were in different stages of devel- velopment. opment.

Throughout 2016, FibraHotel increased the number of hotels in From January 1st, 2017, to the date of this Annual Report, Fi- operation and hotel development projects thanks to: braHotel:

> The acquisition of two hotels (397 rooms) in operation. > Opened three hotels from the development portfolio (390 > The opening of 11 hotels (1,518 rooms) from the develop- rooms). ment portfolio. > Increased room inventory for Courtyard Toreo hotel to 146 > The acquisition of four hotels development projects (660 rooms (16 rooms) additional rooms), the decrease of one hotel project (the Viaducto 515 project is new a Fiesta Americana hotel; it As of the date of this Annual Report, FibraHotel has 85 hotels used to be a Fiesta Inn and Fiesta Inn Lofts during the initial and 12,039 rooms, of which: project). > Decrease in room inventory in the development portfolio > 78 hotels (10,812 rooms) are in operation. (seven rooms). > 7 hotels (1,227 rooms) are in different stages of development. 2016 Report Annual 24 Grand Fiesta Americana y Live Aqua, Monterrey Valle

As of the date of this Annual Report, FibraHotel has a well-diversified portfolio inside the Mexican Repub- lic and presence in 26 states, and the three most important hotels in terms of number of rooms (Sheraton Ambassador Monterrey, Fiesta Americana Hermosillo and Fiesta Inn Perisur), represent 661 rooms alto- gether, less than 6.1% of the total number of rooms in operation.

As of the date of this Annual Report, the distribution of hotels in operation is as follows: Number of Number of SEGMENT % of hotels % of rooms hotels rooms Limited-Service 22 28.2% 2,792 25.8% Select-Service 41 52.6% 5,995 55.4% Full-Service 10 12.8% 1,649 15.3% Extended Stay 5 6.4% 376 3.5% Total FibraHotel 78 100.0% 10,812 100.0%

Number of Number of REGION % of hotels % of rooms hotels rooms Center and South 41 52.6% 5,579 51.6% Northeast 14 17.9% 1,805 16.7% Northwest 17 21.8% 2,476 22.9% West 6 7.7% 952 8.8% Total FibraHotel 78 100.0% 10,812 100.0%

25 75

15 12 Portfolio Map

25 One Patriotismo The following illustration shows the distribution of the FibraHotel 26 Fiesta Inn Ciudad Juárez portfolio as of the date of the current Annual Report. 84 27 Fiesta Inn Mexicali 38 11 28 Fiesta Inn León 14 46 29 Fiesta Inn Monclova 30 Fiesta Inn Torreón 45 85 hotels 31 Real Inn Morelia 85 (78 in operation) 32 Camino Real Puebla Suites 33 One Tapatío 25 80 34 Fiesta Inn Puebla FINSA 35 Fiesta Inn Oaxaca 36 One Puebla FINSA 74 37 Real Inn Guadalajara 38 Fiesta Inn Tlalnepantla 12,039 rooms 39 Fiesta Inn Toluca Tollocan 40 Real Inn Mexicali (10,812 in operation) 41 Fiesta Inn Lofts Monclova 63 42 One Monclova 16 43 Grand Fiesta Americana Monterrey Valle 44 Live Aqua Monterrey Valle Ciudad de 45 Courtyard Vallejo México 46 Fairfield Inn Vallejo 47 Fiesta Americana Aguascalientes 59 27 Presence in 48 Fiesta Inn Xalapa 40 49 One Xalapa 26 states 50 Fairfield Inn Villahermosa 51 Fiesta Inn Ciudad Obregón 72 26 52 Fiesta Inn Lofts Querétaro 53 Gamma León 54 Courtyard Ciudad del Carmen 79 55 Fiesta Inn Lofts Ciudad del Carmen 56 Gamma Valle Grande 9 57 Farifield Inn Los Cabos

18 58 Fiesta Inn San Luis Potosí 29 Camino Real Puebla 59 Gamma Tijuana 51 42 60 Fairfield Inn Saltillo 56 41 13 No. Hotel 61 AC Torre Américas Guadalajara 22 44 76 1 Fiesta Inn Culiacán 62 AC Antea Querétaro 60 82 70 2 Fiesta Inn Durango 63 One Perisur 66 10 24 3 64 43 73 3 One Monterrey 64 Sheraton Ambassador Monterrey 1 2 30 4 One Acapulco 65 Live Aqua Boutique Playa del Carmen Monterrey, 5 One Toluca 66 Fiesta Inn Los Mochis Nuevo León 6 One Coatzacoalcos 67 Fiesta Inn Cuernavaca 57 7 Fiesta Inn Tepic 68 One Cuernavaca 47 69 8 One Aguascalientes 69 Fairfield Inn & Suites Juriquilla 21 62 7 58 9 Fiesta Inn Hermosillo 70 One Durango 8 61 52 10 One Culiacán 71 Aloft Veracruz 53 11 Fiesta Inn Ecatepec 72 Fairfield Inn & Suites Nogales 37 83 38 78 28 36 12 Fiesta Inn Perinorte 73 Fiesta Inn Lofts Monterrey 33 23 34 65 13 Fiesta Inn Nuevo Laredo 74 Fiesta Americana Viaducto (Via 515) 19 20 75 One Cuautilán 39 32 49 14 Fiesta Inn Naucalpan 31 68 81 55 15 Fiesta Inn Cuautitlán 76 Fiesta Americana Pabellón M 5 17 48 67 71 77 54 16 Fiesta Inn Perisur 77 Fiesta Inn Villahermosa 50 17 Camino Real Puebla 78 Fiesta inn Puerto Vallarta 6 18 Fiesta Inn Chihuahua 79 Fiesta Americana Hermosillo 19 Fiesta Inn Guadalajara 80 Fiesta Inn Buenavista 35 4 20 One Querétaro 81 Full Service Villa del Mar Veracruz Desarrollo 21 Fiesta Inn Aguascalientes 82 Fiesta Inn Monterrey Valle Estabilizados 22 Fiesta Inn Monterrey 83 Live Aqua San Miguel de Allende 23 Fiesta Inn Querétaro 84 Fiesta Americana Tlalnepantla No estabilizados

2016 Report Annual 24 Fiesta Inn Saltillo 85 Courtyard Toreo 26 27 Portafolio in detail The following illustrations shows the evolution of FibraHotel portfolio between 2012 and the date of this Annual Report:

Number of rooms at end of period Annual Date of 2012 2013 2014 2015 2016 Report Acq. SELECT SERVICE - MANAGED Date 1 * Fiesta Inn Aguascalientes 1/21/13 125 125 125 125 125 2 * Fiesta Inn Ciudad Juárez 1/21/13 166 166 166 166 166 3 * Fiesta Inn Ciudad Obregón 4/7/14 123 141 141 141 4 * Fiesta Inn Chihuahua 1/21/13 152 152 152 152 152 5 * Fiesta Inn Cuernavaca 12/15/14 155 155 155 155 6 * Fiesta Inn Culiacán 12/1/12 142 142 146 146 146 146 7 * Fiesta Inn Durango 12/1/12 138 138 138 138 138 138 8 * Fiesta Inn Ecatepec 12/1/12 143 143 143 143 143 143 9 * Fiesta Inn Guadalajara 1/21/13 158 158 158 158 158 10 * Fiesta Inn Hermosillo 12/1/12 155 155 155 155 155 155 11 * Fiesta Inn León 1/21/13 160 160 160 160 160 12 * Fiesta Inn Mexicali 1/21/13 150 150 150 150 150 13 Fiesta Inn Los Mochis 12/5/16 125 125 14 * Fiesta Inn Monclova 2/28/13 121 121 121 121 121 15 * Fiesta Inn Monterrey 1/21/13 161 161 161 161 161 16 * Fiesta Inn Monterrey Valle 8/1/16 177 177 17 * Fiesta Inn Naucalpan 12/1/12 119 119 119 119 119 119 18 * Fiesta Inn Nuevo Laredo 12/1/12 120 120 120 120 120 120 19 * Fiesta Inn Oaxaca 7/5/13 145 145 145 145 145 20 * Fiesta Inn Perinorte 12/1/12 123 123 123 127 127 127 21 * Fiesta Inn Puebla FINSA 7/3/13 123 123 123 123 123 22 * Fiesta Inn Querétaro 1/21/13 175 175 175 175 175 23 * Fiesta Inn Saltillo 1/21/13 149 149 149 149 149 24 * Fiesta Inn San Luis Potosi Oriente 7/21/14 140 140 140 140 25 * Fiesta Inn Tepic 12/1/12 139 139 139 139 139 139 26 * Fiesta Inn Tlalnepantla 6/24/13 131 131 131 131 131 27 * Fiesta Inn Torreón 12/19/12 146 146 146 146 146 146 28 * Fiesta Inn Toluca 4/30/13 144 144 144 144 144 29 Fiesta Inn Puerto Vallarta 1/30/17 144 30 * Fiesta Inn Villahermosa 12/2/15 159 159 159 31 * Fiesta Inn Xalapa 3/27/14 119 119 119 119 32 * Real Inn Guadalajara 8/1/13 197 197 197 197 197 33 * Real Inn Mexicali 7/1/13 158 158 158 158 158 34 * Real Inn Morelia 3/1/13 155 155 155 155 155 35 * Gamma Ciudad Obregón (Valle Grande) 5/30/14 135 135 135 135 36 * Gamma León (Fussion 5) 5/22/14 159 159 159 159 37 * Gamma Tijuana (Lausana Tijuana) 7/27/14 140 140 140 140 38 Courtyard Vallejo 2/24/17 125 39 * Courtyard Ciudad del Carmen 11/25/15 133 133 133 Subtotal 1,225 3,795 4,770 5,084 5,386 5,655 2016 Report Annual 28 Camino Real Puebla Number of rooms at end of period Annual Date of 2012 2013 2014 2015 2016 Report Acq. Date LIMITED SERVICE - MANAGED 40 * One Acapulco 12/1/12 126 126 126 126 126 126 41 * One Aguascalientes 12/1/12 126 126 126 126 126 126 42 * One Coatzacoalcos 12/1/12 126 126 126 126 126 126 43 * One Cuernavaca 12/15/14 125 125 125 125 44 One Cuautitlán 11/17/16 156 156 45 * One Culiacán 12/1/12 119 119 119 119 119 119 46 One Durango 2/29/16 126 126 47 * One Guadalajara Tapatío 6/24/13 126 126 126 126 126 48 * One Xalapa 3/27/14 126 126 126 126 49 * One Monclova 11/1/14 66 66 66 66 50 * One Monterrey 12/1/12 126 126 126 126 126 126 51 * One Puebla FINSA 7/2/13 126 126 126 126 126 52 * One Querétaro 1/21/13 126 126 126 126 126 53 * One Toluca 12/1/12 126 126 126 126 126 126 54 * One Patriotismo 1/21/13 132 132 132 132 132 55 * One Perisur 7/16/15 144 144 144 56 Fairfield Inn & Suites Juriquilla 1/28/16 134 134 57 * Fairfield Inn Los Cabos 6/20/14 128 128 128 128 58 Fairfield Inn & Suites Nogales 11/8/16 134 134 59 * Fairfield Inn & Suites Saltillo 3/31/15 139 139 139 60 Fairfield Inn & Suites Vallejo 2/24/17 121 61 * Fairfield Inn & Suites Villahermosa 12/9/15 134 134 134 Subtotal 749 1,259 1,704 2,121 2,671 2,792

FULL SERVICE - MANAGED 62 * Fiesta Americana Aguascalientes 1/15/14 192 192 192 192 63 * Fiesta Americana Hermosillo 5/1/16 220 220 64 Fiesta Americana Pabellón M 3/31/16 178 178 65 Grand Fiesta Americana Monterrey Valle 6/13/16 180 180 66 Live Aqua Monterrey Valle 6/13/16 74 74 67 * Camino Real Puebla 12/1/12 153 153 153 153 153 153 68 * Sheraton Ambassador 11/18/14 229 229 229 229 69 AC by Marriott Antea Quéretaro 3/21/16 175 175 70 AC By Marriott Guadalajara 6/1/16 188 188 Subtotal 153 153 574 574 1,589 1,589

EXTENDED STAY - MANAGED 71 * Camino Real Hotel & Suites Puebla 3/1/14 121 121 121 121 72 * Fiesta Inn Lofts Ciudad del Carmen 9/8/15 120 120 120 73 * Fiesta Inn Lofts Monclova 11/1/14 37 37 37 37 74 Fiesta Inn Lofts Monterrey la Fé 7/19/16 48 48 75 * Fiesta Inn Lofts Querétaro 11/1/14 50 50 50 50 Subtotal - - 208 328 376 376

LEASED HOTELS 76 * Fiesta Inn Cuautitlán 12/1/12 128 128 128 128 128 128 77 * Fiesta Inn Perisur 12/1/12 212 212 212 212 212 212 78 * Live Aqua Playa del Carmen 11/19/14 60 60 60 60 Subtotal 340 340 400 400 400 400

TOTAL OPERATING ROOMS 2,467 5,547 7,656 8,507 10,422 10,812

TOTAL OPERATING HOTELS 18 39 56 62 75 78

* 2016 Stabilized Portfolio (56 stabilized hotels in operation)

29 Number of rooms at end of period Annual Opening 2012 2013 2014 2015 2016 Report DEVELOPMENT Date 79 Aloft en Veracruz 2S 2017 166 166 166 80 Fiesta Inn Buenavista 2S 2017 129 129 81 Courtyard Toreo 2017 130 130 130 146 82 Fiesta Americana Viaducto 515 TBD 269 255 255 83 Full-Service Villa del Mar Veracruz TBD 173 173 84 Live Aqua San Miguel de Allende TBD 134 134 85 Fiesta Americana Tlalnepantla TBD 224 224 Hotels opened to the Annual Report date - 489 899 1,753 1,901 390 - development. TOTAL DEVELOPMENT 489 899 1,883 2,466 1,601 1,227

NUMBER OF HOTELS IN DEVELOPMENT 4 8 14 18 10 7

TOTAL FIBRAHOTEL PORTFOLIO 2,956 6,446 9,539 10,973 12,023 12,039

NUMBER OF HOTELS 22 47 70 80 85 85

Evolution of the portfolio with number of hotels and rooms

Evolution of the 80 80 83 84 85 85 number of hotels 10 7 18 14 13 12 + 6% vs. 2015

80 80 83 84 85 85 78 70 72 75 62 66 10 7 18 14 13 12

No. of hotels in operation 78 70 72 75 2015 62 66 2016

No. of hotels in 1Q 2016 3Q 2016 2Q 2016 development Annual Report

2015 Q1 2016 Q2 2016 Q3 2016 2016 Annual Report Operation 62 10,973 66 10,973 70 11,525 72 11,703 75 12,023 12,03978 2015 2016 1Q 2016 3Q 2016 Development 18 14 13 2Q 2016 12 10 7 1,743 1,696 1,601 1,227 Total 80 2,466 80 1,853 83 84 85 85 Annual Report

Evolution of the 10,973 10,973 11,525 11,703 12,023 12,039 782 10,812 10,422 10,007 9 , number of rooms 120 9 , 8,507 1,743 1,696 1,601 1,227 2,466 1,853 + 10% vs. 2015 782 10,812 10,422 10,007 9 , 120 2015 2016 9 , 8,507 1Q 2016 3Q 2016 2Q 2016

No. of rooms in Annual Report operation

No. of rooms in 2015 development 2016 1Q 2016 3Q 2016 2Q 2016 Annual Report

2015 Q1 2016 Q2 2016 Q3 2016 2016 Annual Report Operation 8,507 9,120 9,782 10,007 10,422 10,812 Development 2,466 1,853 1,743 1,696 1,601 1,227 One Durango

2016 Report Annual Total 10,973 10,973 11,525 11,703 12,023 12,039 30 Brand Affiliations

Hotels in our portfolio operate under solid and high-standard brands. As of the date of this Annual report, the hotels operate under the following brands:

> One Hotel (Limited service), Grupo Posadas > Fiesta Inn (Select service), Grupo Posadas > Fiesta Inn Lofts (Extended stay), Grupo Posadas > Gamma by Fiesta Inn (Select service), Grupo Posadas > Fiesta Americana (Full service), Grupo Posadas > Fiesta Americana Grand (Full service), Grupo Posadas ASÍ ES MI MUNDO DE LOS NEGOCIOS. > Live Aqua (Full service), Grupo Posadas > Live Aqua Boutique (Full service), Grupo Posadas > Real Inn (Select service), Grupo Real Turismo > Camino Real (Full service), Grupo Real Turismo ASÍ ES MI MUNDO DE LOS NEGOCIOS. > Camino Real Hotel & Suites (Extended stay), Grupo Real Turismo > Fairfield Inn & Suites by Marriott (Limited service), Marriott International > Courtyard by Marriott (Select service), Marriott International > AC by Marriott (Full service), Marriott International > Sheraton (Full service), Marriott International

The following table shows the brand affiliations of the hotels in operation as of the date of this Annual Report:

Number of Number of hotels % of hotels rooms % of rooms One Hotels 16 20.5% 2,002 18.5% Fiesta Inn + Gamma 36 46.2% 5,227 48.3% Fiesta Inn Lofts 4 5.1% 255 2.4% Fiesta Americana + Live Aqua 6 7.7% 904 8.4% Grupo Posadas 62 79.5% 8,388 77.6%

Real Inn 3 3.8% 510 4.7% Camino Real 1 1.3% 153 1.4% Camino Real Hotel & Suites 1 1.3% 121 1.1% Grupo Real Turismo 5 6.4% 784 7.3%

Marriott International 11 14.1% 1,640 15.2% Marriott International 11 14.1% 1,640 15.2%

Total FibraHotel 78 100.0% 10,812 100.0%

Hotel operating companies

Grupo Posadas. Grupo Posadas, S.A.B. de C.V. is the leading esta Americana Vacation Club, Live Aqua Residence Club, one hotel operator in Mexico with 150 hotels and 24,500 owned, private club, and KIVAC; a vocational program based on released and managed rooms of the most important and visited ward points). city and beach destinations in Mexico. As a result of strong hotel brand positioning (Live Aqua, Grand Fiesta Americana, Grupo Real Turismo. Hoteles Camino Real is a Mexican hotel Fiesta Americana, The Explorean by Fiesta Americana, Fiesta company founded in 1958 by the Banco Nacional de México Inn and One Hotels) Grupo Posadas is now a Mexican com- (Banamex) and a group of private investors. In 1962, it signed pany with important international recognition. Also, Posadas an agreement to affiliate with Western International Hotels owns Fiesta Rewards, the most important loyalty and reward (which later became Westin) to establish the first group of program in Mexico, as well as long-term vacation clubs (Fi- luxury hotels in Mexico with international representation. In 31 1993, after 30 years of successful operation, the relationship with Westin concluded and it was acquired in June of 2000 by Grupo Empresarial Ángeles and incorporated as Grupo Real Turismo. Camino Real currently owns three brands: Quinta Real, Camino Real and Real Inn. It operates 40 hotels with approximately 6,659 rooms, including several world-renowned restaurants and operates in 23 states of Mexico, including Mexico City.

Marriott International, Inc. (NASDAQ:MAR). (NASDAQ:MAR) is a leading hotel company in the sector, based in Bethesda, Maryland, with more than 6,000 properties in 122 countries and territories. Marriott operates and franchise hotels as well as licenses of resorts. The top 30 Marriott s brands ´ are: Bulgari®, The Ritz-Carlton®, and The Ritz-Carlton Reserve® St. Regis®, W®, EDITION®, JW Mar- riott®, The Luxury Collection®, Marriott Hotels®, Westin®, Le Méridien®, Renaissance® Hotels, Sheraton®, Delta Hotels by MarriottSM, Marriott Executive Apartments®, Marriott Vacation Club®, Autograph Collection® Hotels, Tribute Portfolio®, Design Hotels™, Gaylord Hotels®, Courtyard®, FourPoints® by Sheraton, SpringHill Suites®, Fairfield Inn & Suites®, Residence Inn®, TownePlace Suites®, AC Hotels by Marriott®, Aloft®, Element®, Moxy® Hotels, and Protea Hotels by Marriott®. The company also operates the loyalty programs Marriott Rewards®, which includes The Ritz- Carlton Rewards® and Starwood Preferred Guest®.

We currently have agreements with three companies that provide us with hotel administration services and use their own brands for the hotels they operate. In the future, aside from continuing associating ourselves with these companies, we hope to use other leading companies, which will be able to use franchised brands owned by third parties.

Operational framework

Bajo el esquema operativo de FibraHotel, la administración de > Three hotels have a leasing agreement with Grupo Posadas los hoteles se lleva a cabo de la siguiente manera: and pay rent to FibraHotel (Fiesta Inn Cuautitlán, Fiesta Inn Perisur and Live Aqua Boutique Playa del Carmen), including > Hotel operating companies do the following tasks: they a variable component, which depends on the hotel’s total administrate hotels with their own operating team, es- revenue or results in the case of Live Aqua Boutique Playa tablish annual hotel business plans (revenue and costs/ del Carmen, while FibraHotel is responsible only for real es- expenses), determine room rate policies and marketing tate expenditures. Live Aqua Boutique Playa del Carmen in strategies, set food and beverage sales strategies and under a leasing contract since Grupo Posadas took manage- those of other types of revenue, provide correct pre- ment of the property in December 2015. ventative maintenance of major equipment and general maintenance of properties, propose capital expenditures Property maintenance policy to maintain optimum physical condition of the hotels and hire personnel to operate the business units. As the hotel owner, FibraHotel wants to maintain the properties in optimal physical conditions, for which it does preventa- > FibraHotel performs the following tasks: approval of the tive maintenance on them. The FibraHotel internal policy is to hotels’ annual business plans, review of the hotels’ re- reserve five percent of the total revenue of their administrated sults, approval of capital expenditures to maintain the hotels for capital expenditures for upkeep of the properties hotels’ physical condition, responsibility for real estate and equipment. Hotel operating companies are responsible for activities (property taxes, insurance…) and funding of the drawing up an annual capital expenditure budget, which Fibra- hotels’ operating expenses, among others. Hotel validates and implements throughout the year.

As of the date of this Annual Report, of the 78 hotels operating On the other hand, FibraHotel proceeds with periodical inspec- in the FibraHotel portfolio: tion visits to the hotels in order to certify their physical aspect and correct maintenance of their main equipment. In turn, these > 75 hotels are under hotel management agreements with are compared to the report submitted by each hotel company hotel operating companies, which operate them on behalf and done by an external agency, which conducts scheduled re- of FibraHotel and deliver the hotels’ monthly operative revisions of the physical condition of each business unit. sults to it. Their fees vary, corresponding to a percentage of the operating results of each hotel. 2016 Report Annual 32 Hotel Segments of the FibraHotel portfolio

Fiesta Inn Perisur

The types of hotels in the FibraHotel portfolio, and those sought after with acquisitions and development, are described in detail below:

Limited service Full service

Limited service hotels offer convenient services but tradition- These hotels have a hearty food and beverage offer with ally do not have bars, restaurants or conference and meeting various consumption centers (restaurants and bars), meeting rooms or offer additional services. However, in the last few rooms and conference rooms for social or business events for years, the tendency has been for this class of hotels to offer more than 500 people and additional services related to full a combination of these services, including business centers, service hotels: spas, extended room service schedule, valet gyms, pools, a limited selection of meals (breakfast included) parking, concierge, bellboys and larger common areas. and limited meeting room space. As of the date of this Annual Report, FibraHotel has 10 full As of the date of this Annual Report, FibraHotel has 22 Lim- service hotels in operation, which represent 1,649 rooms (ap- ited service hotels in operation, which represent 2,792 rooms proximately 15.3% of the total number of rooms in operation), (approximately 25.8% of the total number of rooms in opera- one operated by Grupo Real Turismo under the “Camino Real” tion), 16 of which are operated by Grupo Posadas under the brand, six operated by Group Posadas under the “Fiesta Amer- “One Hotels” brand and six by Marriott International under the ican”, “Grand Fiesta Americana” brand and “Live Aqua”, three “Fairfield Inn & Suites by Marriott” brand. operated by Marriott International under the “AC by Marriott” brand and under the “Sheraton” brand. Select services Extended stay These hotels offer some additional services to those offered by limited service hotels, including food and beverage (restau- The hotels in this segment are characterized by their suite lay- rants, bars and room service), ballrooms for social events and out, in one or two-bedroom studio layouts, nearly always with workspaces, as well as other in-room services. a full kitchen and dining and work areas. Some of the services offered by these hotels are laundry rooms for guest use, public As of the date of this Annual Report, FibraHotel has 41 select recreation areas, no restaurant, but with the possibility of us- service hotels in operation, which represent 5,995 rooms (ap- ing the restaurant in a neighboring hotel, as per strategy. proximately 55.4% of the total number of rooms in operation), 36 of which are operated by Grupo Posadas under the “Fiesta As of the date of this Annual Report, FibraHotel has five ex- Inn” and “Gamma by Fiesta Inn” brands, as well as three oper- tended stay hotels in operation with 376 rooms (approximate- ated by Grupo Real Turismo under the “Real Inn” brand and ly 3.5% of the total number of rooms in operation), four oper- two by Marriott International under the “Courtyard by Mar- ated by Grupo Posadas under the “Fiesta Inn Lofts” brand, and riott” brand. one operated by Grupo Real Turismo under the “Camino Real Hotel & Suites” brand.

33 Operational indicators of the FibraHotel portfolio

Fiesta Inn Tlalnepantla

As of December 31st, 2016, the operating hotels in the FibraHotel portfolio (75 hotels) reported the following:

> Occupancy rate of 62.7%. > ADR of MXN $1,011. > RevPAR of MXN $634.

The following graph shows the 2015 and 2016 quarterly operating indicators of the 56 stabilized hotels:

67.2%ı 68.3% 69.3% 68.5%ı 64.2% 65.0% 62.9% 58.3% 7 3 980 980 1,001 950 1,025 919 9 941 4 679 16 702 684 6 638 597 6 0 546 1Q 2015 1Q 2016 3Q 2015 2Q 2015 3Q 2016 2Q 2016 4Q 2015 4Q 2016

ADR RevPAR Occupancy 2016 Report Annual 34 The following table shows some operating information by segment for the 56 stabilized hotels for the periods ending on Decem- ber 31st, 2014, 2015 and 2016:

Total Portfolio of Stabilized

Hotels (56H) Total Portfolio (75H) Year 2014 Year 2015 Year 2016 Year 2016 SEGMENT Ocup. ADR RevPAR Ocup. ADR RevPAR Ocup. ADR RevPAR Ocup. ADR RevPAR Limited- 58.3% $708 $413 63.7% $738 $470 63.2% $780 $493 58.9% $805 $475 Service Select- 62.1% $933 $579 64.8% $958 $620 69.7% $1,015 $707 67.9% $1,012 $687 Service Full-Service 58.8% $1,092 $642 57.5% $1,188 $683 60.1% $1,281 $770 50.7% $1,424 $722 Extended- 31.5% $992 $313 59.7% $1,035 $618 63.6% $1,088 $691 52.3% $999 $523 Stay

Total 60.5% $907 $549 63.7% $937 $597 67.2% $997 $670 62.7% $1,011 $634 Vs. previous year 318 bp 3.2% 8.7% 355 bp 6.4% 12.3%

The following table shows some operating information by region1 for the 56 stabilized hotels for the periods ending on December 31st, 2014, 2015 and 2016:

Total Portfolio of Stabilized

Hotels (56H) Total Portfolio (75H) Year 2014 Year 2015 Year 2016 Year 2016 REGION Ocup. ADR RevPAR Ocup. ADR RevPAR Ocup. ADR RevPAR Ocup. ADR RevPAR

Northwest 58.1% $895 $520 62.7% $911 $571 65.3% $951 $620 64.5% $939 $606 Northeast 60.1% $843 $507 64.8% $917 $594 67.7% $1,024 $693 60.0% $1,119 $671 Center and South 62.1% $946 $587 63.9% $969 $619 67.2% $1,029 $691 62.2% $1,016 $632 West 59.0% $818 $483 63.3% $847 $536 73.1% $877 $642 67.8% $943 $639

Total 60.5% $907 $549 63.7% $937 $597 67.2% $997 $670 62.7% $1,011 $634 Vs. previous year 318 bp 3.2% 8.7% 355 bp 6.4% 12.3%

(1) Northwest refers to the following states: Baja California Norte, Baja California Sur, Chihuahua, Durango, Sinaloa and Sonora. Northeast refers to the following states: Coahuila, Nuevo León and Tamaulipas. Central and South regions correspond to the: Aguascalientes, Campeche, Mexico City, State of Mexico, Gua- najuato, Guerrero, Michoacán, Morelos, Oaxaca, Puebla, Querétaro, Quintana Roo, San Luis Potosí, Tabasco and Veracruz. West refers to Jalisco and Nayarit.

Sheraton Ambassador Monterrey 35 Financial Section2

2016 Financial Results

Live Aqua Boutique Playa del Carmen

Total revenue

The financial results described in this section refer to the finan- Revenues of hotels under management agreements rose by cial statements comprising 75 hotels in operation as of Decem- 32.6%, from MXN $1,927 million to MXN $2,555 million, due to ber 31st, 2016: the following factors:

> 72 hotels under a management agreement. > Increase in RevPAR for stabilized hotels (+12.3% for the 56 > 3 hotels under a leasing agreement. stabilized hotels). > Acquisition of two hotel in operation during the year. During 2016, total revenues were MXN $2,635 million, com- > Opening of 11 hotels in the development portfolio. pared to MXN $2.008 million in 2015 (31.2% increase): > Acceleration of the hotels opened in 2015 and 2016.

> MXN $2,057 million for room rental (78.1% of total reve- Total revenues from the first to the fourth quarter of 2016 rose nue), an increase of 33.5%. because FibraHotel added hotels to the portfolio throughout > MXN $468 million for food and beverages (17.8% of total the year: revenue), an increase of 27.4%. > MXN $79.8 million for the lease of (i) three hotels and (ii) > January 2016: opening of Fairfield Inn & Suites Juriquilla retail space / antennas (3.0% of the total revenue), an in- > February 2016: opening of One Durango crease of 4.9%. > March 2016: openings of the hotels AC by Marriott Querétaro > MXN $29.5 million (1.1% of the total revenue) for other rev- and Fiesta Americana Pabellón M enue, an increase of 28.5%. > May 2016: acquisition of the Fiesta Americana Hermosillo 2016 Report Annual 36 > June 2016: openings of the hotels AC by Marriott Guadalajara, Grand Fiesta Americana Monterrey Valle and Live Aqua Monterrey Valle > July 2016: opening of Fiesta Inn Lofts Monterrey la Fe > August 2016: acquisition of the Fiesta Inn Monterrey Valle > November 2016: openings of the hotels Fairfield Inn & Suites Nogales and One Cuautitlán > December 2016: opening Fiesta Inn Los Mochis

Therefore FibraHotel revenues have increased every quarter:

1Q 2016 2Q 2016 3Q 2016 4Q 2016 Year 2016

Rooms Revenues 420.3 492.8 546.9 597.2 2,057.3 Food and Beverage 91.5 118.4 120.0 138.5 468.4 Lease 18.6 17.7 20.9 22.6 79.8 Others 3.2 6.4 8.2 11.7 29.5 Total Revenues 533.5 635.3 696.1 770.1 2,635.0

Revenues - Managed Hotels 514.9 617.7 674.2 748.4 2,555.2 % of total revenues 96.5% 97.2% 96.9% 97.2% 97.0%

# of hotels in operation 66 70 72 75 75 # of managed hotels 63 67 69 72 72 # of leased hotels 3 3 3 3 3

The following table shows the KPIs of hotels under management agreements for the four quarters of 2016, considering only hotels that generated room revenues for FibraHotel (from the acquisition or opening date / without leased hotels):

Available Occupied Room Revenues Ps. $ Year 2016 Occup. ADR RevPAR Rooms Rooms Million 1st quarter 750,630 442,090 58.9% $420.3 $951 $560 2nd quarter 815,681 506,294 62.1% $492.8 $973 $604 3rd quarter 878,446 555,836 63.3% $546.9 $984 $623 4th quarter 899,291 571,656 63.6% $597.2 $1,045 $664

Total 3,344,048 2,075,876 62.1% $2,057.3 $991 $615

Cost and general expenses Lodging contribution

In 2016, the total costs and general expenses of FibraHotel’s The lodging contribution was MXN $843 million in 2016, rep- managed hotels were MXN $1,792 million compared to MXN resenting 32.0% of total revenues, in comparison to MXN $670 $1,338 million in 2015: million in 2015 representing 33.4% of total revenues. The decrease in margin was due to the mix between hotels under > MXN $1,103 million for indirect expenses (61.6% of total management contracts and leasing contracts and to the mix costs and general expenses), including the administra- between stabilized and non-stabilized hotels: tive costs, advertising and promotion, maintenance, human resources, energy and fees paid to hotel operat- > MXN $764 million corresponded to managed hotels (29.9% ing companies. margin), compared to MXN $589 million in 2015 (30.6% > MXN $403 million for room expenses (22.5% of costs margin). and general expenses) directly related to room rental > MXN $79.5 million corresponded to leased hotels and retail revenues. spaces (100% margin), compared to MXN $81.2 million in > MXN $286 million for food and beverages costs and ex- 2015. penses (16.0% of costs and general expenses) directly related food and beverages and others revenues.

(2) Except when mentioned, all figures in the report are in accordance with International Financial Information Standards (“IFRS”), expressed in nominal Mexican pesos. Some of the financial results in this section may differ by topic to audited, consolidated Financial Statements audited in 2015 without any modification to the results and financial position of FibraHotel.

(3) Hotels leased throughout 2016 are Fiesta Inn Cuautitlán, Fiesta Inn Perisur and Live Aqua Boutique Playa del Carmen 37 Sheraton Ambassador Monterrey

The 67 basis point decrease in managed hotels lodging contribution margin between 2015 and 2016 is mainly due to recently opened hotels, which usually generate less profit than stabilized hotels for being in ramp-up period. Taking a comparable perimeter into account (same hotels perimeter between 2015 and 2016), the managed hotels lodging contribution margin rose by 62 basis points, from 30.6% to 31.2%. That increase is mainly due to the growth of 13.6% in room revenues, the operating leverage at the hotel level (expenses and costs rose 12.3%, meaning 125 basis points less than the increase in total revenue), but in the same manner, it is due to Asset Management efforts carried out by the Administrator with hotel operating companies.

During 2016 the ramp-up portfolio has increase due to hotel openings from the development portfolio, and has shown a promising trend in cash flow generation and margin performance, the contribution margin rose from 6.6% in the first quarter to 26.6% during the fourth quarter of 2016 (annual contribution margin: 19.2%).

The following chart and table show the evolution of revenues and contribution from the non-stabilized managed hotels during 2016:

Ps. $ millions 1Q 2016 2Q 2016 3Q 2016 4Q 2016 2016 FY

Total of managed hotels 12 15 16 19 19

Non stabilized managed hotels revenues 35 63 105 143 346 % of total managed hotels revenues 6.8% 10.3% 15.5% 19.1% 13.6%

Non stabilized managed hotels contribution 2 6 20 38 67 Margin 6.6% 9.2% 19.4% 26.6% 19.2% % of total managed hotels contribution 1.6% 3.2% 10.2% 16.3% 8.7%

Hoteles no estabilizados: evolución ingresos / contribución

$35.2 $2.3 $63.4 $5.8 $104.6 $20.3 $143.0 $38.0 26.6% 19.4%

9.2% 6.6% 1Q 2016 3Q 2016 2Q 2016 4Q 2016

2016 Report Annual Revenues Contribution Margin 38 The previous chart shows, the upward trend in revenues and Adjusted operating profit contribution generation; likewise a substantial increase in contribution margin, which was 19.2% for the whole of 2016, but During 2016, FibraHotel had non-operating expenses for MXN reached 26.6% levels during last quarter of the year. The strong $107 million, which correspond mainly to expenses related to acceleration is driven mainly by the five full-service hotels hotel acquisitions and development (taxes, appraisals, techni- opened between March and July of 2016 (AC Querétaro, Fiesta cal audits and pre-operative expenses, among others), while in Americana Pabellon M, AC Guadalajara, Grand Fiesta Americana 2015, these expenses were MXN $77.7 million. Monterrey Valle and Live Aqua Monterrey Valle). During the last quarter of 2016, these five hotels together had an occupancy The adjusted operating profit rose to MXN $252 million, com- rate of 46.5%, an ADR of MXN $1,865, a RevPAR of MXN $867 and pared to MXN $207 million in 2015, equivalent to a 22.0% year- provided MXN $22.6 million to the total lodging contribution. At ly growth. a contribution level, results still underperform (less than 10% of total quarter’s lodging contribution), but margin is reaching Comprehensive financing results 27.7% levels with an occupancy rate under 50%. During 2016, FibraHotel had a net debt position of MXN $2,248 Operating profit million (total debt of MXN $2,697 million) vs. MXN $476 million on December 31th, 2015 (total debt of MXN $852 million). Other operating expenses of MXN $484 million are comprised mainly of real estate expenses (MXN $33.9 million), the corpo- In the fourth quarter, FibraHotel started using available credit rate expenses (MXN $48.5 million), the advisory fee (MXN $105 lines to finance its projects, including part of the development million) and depreciation for the period (MXN $297 million). In portfolio and generated financing costs for MXN $108 million 2015, these operating expenses rose to MXN $385 million and interest during the period. In conformance with IFRS stan- the increase (+25.6%) is explained mainly by depreciation (larger dards, debt-related interest associated to development in the number of real estate assets) as administrative expenses (to ac- construction stage is capitalized as part of the investment for company FibraHotel growth) and real estate expenses (more real each specific project. During the fourth quarter of 2016, ap- estate assets) increased to a lower extent than the total lodging proximately 62.5% of total debt was related to projects under contribution. development, for which FibraHotel capitalized MXN $68.0 million in interest for the quarter. It should be mentioned that the Operating profit rose to MXN $359 million, representing 13.6 % interest was paid with cash available for developments. After of total revenues, compared to MXN $285 million (14.2% of to- each development is opened to the public, the respective inter- tal revenues) in 2015. est is no longer capitalized and the financial cost at that time is transferred to the FibraHotel income statement in accordance with IFRS standards.

Consolidated net profit

After taxes of MXN $1.8 million on profit not linked to room revenues (food and beverages…) at the subsidiary level, the consolidated net profit reached MXN $214 million. The consolidated net profit per CBFI rose to 43.27 cents (excluding CBFI corresponding to the Development Contribution Portfolio and did not have economic rights at the end of each quarter of 2016). For 2015, the consolidated net profit per CBFI reached to 47.86 cents. The decrease in consolidated net profit is due mainly to a drop in integral financing results of MXN $29.8 million for 2015 to (MXN $40.7 million) in 2016 because of interests related to credit lines, investment efforts made throughout 2016 and the interests rates increase throughout 2016 (Mexico’s Banks interest reference rate increased from 3.25% at 2015 to 5.75% at yearend 2016).

The following table shows a summary of FibraHotel consolidated net profit per CBFI for all four quarters of 2016:

1Q 2016 2Q 2016 3Q 2016 4Q 2016 Year 2016

Net Result 57.1 47.1 59.5 50.2 213.9

Number of CBFIs (million) With economic rights 494.3 494.3 494.3 494.3 494.3

Net Result / CBFI Net Res. / CBFI with eco. right $0.1155 $0.0953 $0.1203 $0.1017 $0.4327

In millions of pesos, except data per CBFI, in pesos.

39 2016, yearly and quarterly results (in millions of pesos)

1Q 2016 2Q 2016 3Q 2016 4Q 2016 Year 2016

Revenues Rooms 420,318 492,819 546,894 597,226 2,057,257 Food and Beverage 91,451 118,413 120,044 138,489 468,397 Leases 18,594 17,702 20,896 22,639 79,832 Other 3,151 6,388 8,236 11,743 29,519 TOTAL REVENUES 533,516 635,322 696,070 770,097 2,635,004

Revenues - Managed Hotels 514,921 617,697 674,189 748,388 2,555,196 % of Total Revenues 96.5% 97.2% 96.9% 97.2% 97.0%

Costs and general expenses Rooms 79,221 95,542 107,656 120,257 402,675 Food and Beverage 55,348 69,423 76,089 84,952 285,812 Administrative Expenses 233,559 268,871 291,204 309,448 1,103,083 Total Costs and General Expenses 368,129 433,837 474,949 514,657 1,791,571

TOTAL LODGING CONTRIBUTION 165,387 201,486 221,121 255,440 843,433 Total Lodging Contribution Margin 31.0% 31.7% 31.8% 33.2% 32.0%

Lodging Contribution - Managed Hotels 146,792 183,861 199,240 234,006 763,899 Margin 28.5% 29.8% 29.6% 31.3% 29.9%

Real Estate Expenses 8,573 8,103 9,698 7,536 33,910

NET OPERATING INCOME 156,814 193,383 211,422 247,904 809,523 NOI Margin 29.4% 30.4% 30.4% 32.2% 30.7%

Administrative Expenses Related to FibraHotel 12,398 12,961 12,313 10,859 48,530 Advisory Fee 26,093 26,102 26,182 26,296 104,673

EBITDA 118,324 154,320 172,927 210,749 656,320 EBITDA Margin 22.2% 24.3% 24.8% 27.4% 24.9%

Depreciation 58,017 64,518 68,807 105,587 296,930

INCOME / (LOSS) FROM OPERATIONS 60,306 89,802 104,120 105,162 359,390 Operating Income Margin 11.3% 14.1% 15.0% 13.7% 13.6%

Extraordinary Expenses, Net 4,406 39,749 34,133 28,642 106,931

ADJUSTED INCOME / (LOSS) FROM OPERATIONS 55,900 50,053 69,987 76,520 252,459

Non Operating Income / (Loss) 1,719 262 1,428 509 3,918 Comprehensive Financing Result (2,083) (2,278) (12,719) (23,621) (40,700)

INCOME BEFORE TAXES 55,537 48,037 58,696 53,408 215,678

Tax (1,556) 938 (756) 3,161 1,787

CONSOLIDATED NET (LOSS) INCOME 57,093 47,098 59,452 50,247 213,890 Net Income Margin 10.7% 7.4% 8.5% 6.5% 8.1% 2016 Report Annual 40 Cash flow and liquidity

Operating cash flow Financing cash flow

During 2016, FibraHotel generated an operating cash flow of During 2016, FibraHotel generated a financing cash flow of MXN $633 million compared to MXN $402 million in 2015. Ex- MXN $1,231 million: cluding investment-related activities (non-operating activities, payment and recuperation of VAT related to developments and > MXN $1,845 million related to the credit lines draw down acquisitions), the net operating cash flow was MXN $577 mil- during the last quarter of 2016. lion compared to MXN $516 million. > (MXN $470 million) for distribution:

Investment cash flow • (MXN $118 million) for distribution of the 2015 fourth quarter. During 2016, FibraHotel generated a negative investment cash • (MXN $99 million) in respect to distribution of the 2016 flow of (MXN $1,736 million): first quarter. • (MXN $119 million) in respect to distribution of the > (MXN $245 million) for the acquisition of 2016. 2016 second quarter. > (MXN $1,261 million) for the development portfolio (with- • (MXN $135 million) in respect to distribution of the out capitalized interests). 2016 third quarter. > (MXN $149 million) for renovation of hotels. > (MXN $57.4 million) for capitalized interest payments (total > (MXN $94 million) for CAPEX maintenance. capitalized interest of MXN $68.0 millon for 2016). > MXN $2.1 million for investment revenues (fixed assets > (MXN $46.3 million) for the acquisition of debt interest rate sale…). coverage and interest payment. > MXN $11.2 million for interests generated during the period. > (MXN $39.5 million) for interest payment and other financial expenses paid. During 2015, FibraHotel generated a net cash flow for negative investment activities of (MXN $2,530 million): During 2015, FibraHotel generated a financing cash flow of MXN $407 million: > (MXN $185 million) for 2015 acquisitions. > (MXN $2,122 million) for the portfolio development port- > MXN $852 million related to the credit lines draw down folio. during the last quarter of 2015. > (MXN $158 million) for renovation of hotels. > (MXN $429 million) for distribution: > (MXN $100 million) for final payment of the Hotel Camino • (MXN $111 million) for distribution of the 2014 fourth Real Hotel & Suites Puebla. quarter. > MXN $6.5 million for CAPEX maintenance. • (MXN $103 million) in respect to distribution of the > MXN $34.3 million for interests generated during the 2015 first quarter. period.

One Perisur 41 • (MXN $109 million) in respect to distribution of the 2015 second quarter. • (MXN $106 million) in respect to distribution of the 2015 third quarter. > (MXN $16.4 million) for the acquisition of debt interest rate coverage and interest payment.

Adjusted Funds from Operations

During 2016, FibraHotel generated:

> Funds From Operations (FFO) of MXN $511 million compared to MXN $450 million in 2015, representing a 13.4% increase over last year. > Adjusted Funds From Operations (AFFO) of MXN $494 million compared to $429 million in 2015, representing a 15.1% increase over last year.

AC by Marriott Querétaro Liquidity position

FibraHotel closed 2016 with:

> A cash position, including VAT, by carrying forward MXN $678 million (VAT to be recovered ascended to MXN $229 million). Excluding VAT, the cash position and cash equivalents amounted to MXN $449 million, compared to MXN $377 million on De- cember 31st, 2015. > A total debt of MXN $2,697 million. As of December 31st, 2015, FibraHotel had a total debt of MXN $852 million. The net debt position (including VAT) is MXN $2,019 million. > Approximately MXN $302 million available for unused credit lines.

The following table shows the FibraHotel liquidity position:

Ps. $ thousand 2015 2016 Comment

Cash, cash equivalents and restricted cash 376,824 448,828

Available cash and cash equiv. - Operation 222,443 207,725 Hotels’ working capital Restricted cash and cash equiv. - Operation 39,798 56,294 Available for maintenance CapEx

Available cash and cash equiv. - Investment 114,583 184,809 Cash available for investment

Cash position without restricted cash 337,026 392,534

The following table presents details of the debt position of FibraHotel:

Ps. $ millions 2016 Currency Interest rate Maturity

BBVA Bancomer 179.0 MXN TIIE 28d + 150bps Oct-27 BBVA Bancomer 123.1 MXN TIIE 28d + 150bps Oct-27 BBVA Bancomer 153.4 MXN TIIE 28d + 150bps Oct-27 BBVA Bancomer 202.4 MXN TIIE 28d + 150bps Nov-27 BBVA Bancomer 341.1 MXN TIIE 28d + 150bps Nov-27 Banorte 1 1,000.0 MXN TIIE 91d + 200bps Oct-24 Banorte 2 698.1 MXN TIIE 91d + 130bps* Jul-26 Total debt position 2,697.0 * The spread will increase to 200bps in September 2018 and to 250bps in September 2021. 2016 Report Annual 42 The following table shows details of the FibraHotel debt amortization schedule:

Year Payment % 2017 98.3 3.6% 2018 102.1 3.8% 2019 196.0 7.3% 2020 200.1 7.4% 2021 306.8 11.4% 2021 and after 1,793.7 66.5% Total 2,697.0 100.0%

As of December 31st, 2016, and according to credit agreements, FibraHotel has entered into various financial instruments destined only to covering variations of the TIIE rate (Interbank Equilibrium Interest Rate) 74% of FibraHotel´ s debt is covered. These instruments cost were paid up-front, and they have a 5-year maturity with the following characteristics:

Ps. $ millions Disposal Type Strike Limit

BBVA Bancomer 657.9 Cap Spread 5.0% 9.0% BBVA Bancomer 341.1 Cap Spread 5.0% 7.0% Banorte 1 1,000.0 Cap 6.0% Non covered 698.1

New regulation applicable to FIBRAs

During 2014, the Comisión Nacional Bancaria y de Valores (CNBV) issued a regulation to measure the leverage and index of REIT debt service coverage.

> Debt level: FibraHotel closed 2016 with a MXN $2,697 million indebtedness and total assets of MXN $12,430 million corresponding to a 21.7% debt level. It should be mentioned that the FibraHotel Trust agreement stipulates that the leveraging ratio cannot exceed 40%, while the regulation applicable to REITs indicates that this indicator cannot be over 50%. > Debt service coverage ratio: The debt service coverage ratio is calculated by taking the capacity of FibraHotel to deal with payments of their commitments with its available resources4 for the next six quarters. This ratio must be more than 1.0x. For the first, second, third and fourth quarters of 2016, FibraHotel debt service coverage ratio was 1.2x, 1.2x, 1.7x and 1.7x, respectively.

Capital Expenditures

As of December 31st, 2016, available capital reserve for maintenance expenses destined to maintain the state and conditions of hotels in operation and based on a percentage of the gross revenue of hotels under an operating agreement amounted to MXN $56.3 million compared to MXN $37.9 million to December 31st, 2015.

The most relevant FibraHotel capital expenditures during the year were:

> Maintenance CapEx: MXN $94.1 million. > Capital investment expenditures in current hotels: FibraHotel is constantly analyzing the opportunity to invest capital in the current hotel portfolio when their expected returns justify the investment. During the year, FibraHotel invested MXN $149 million in capital expenditures for renovation, mainly in the Fiesta Americana Hermosillo, Sheraton Ambassador Monterrey and Live Aqua Boutique Playa del Carmen: • Fiesta Americana Hermosillo: Renovation of (i) rooms, (ii) hallways and (iii) common areas. The renovation has a budget of MXN $85.0 million, of which MXN $70.6 million had been invested by December 31st, 2016. • Sheraton Ambassador Monterrey: Renovation of (i) rooms, (ii) hallways and (iii) common areas. The renovation has a budget of USD $5.0 million, of which MXN $73.9 million had been invested by December 31st, 2016 (Ps. $13.2 million invested in 2016). • Live Aqua Boutique Playa Del Carmen (repositioning under a new brand): (i) rooms and (ii) addition of consumption centers. The renovation has a budget of MXN $26.3 million, of which MXN $18.0 million had been invested by December 31st, 2016.

(4) For FibraHotel, the commitments correspond to i) debt service (principal and interest); ii) capital expenditures (CAPEX for maintenance of the hotels); and iii) non-discretionary developments (projects under development). Available resources correspond to i) cash and equivalents (excluding restricted cash); ii) VAT carried forward, iii) operating profit after distribution payment and iv) available credit lines. 43 Cash distribution

Distribution for 2016

FibraHotel seeks to create value for its CBFI holders. As a result, the FibraHotel Technical Committee approved distribution of a total amount of MXN $503 million for 2016, the details of which are shown in the following table:

1Q 2016 2Q 2016 3Q 2016 4Q 2016 Year 2016

Total Distribution 99.0 119.0 134.7 150.5 503.2

Taxable income 9.2 0.0 38.7 0.0 47.9 Capital Return 89.8 119.0 96.0 150.5 455.3

Number of CBFIs (million) Outstanding 499.4 499.4 499.4 499.4 499.4 With economic rights 494.3 494.3 494.3 494.3 494.3

Distribution per CBFI $0.2003 $0.2408 $0.2726 $0.3045 $1.0181 Taxable income $0.0187 $- $0.0783 $- $0.0970 Capital Return $0.1816 $0.2408 $0.1943 $0.3045 $0.9211

In millions of pesos, except data per CBFI, in pesos.

For the 2015 tax year, FibraHotel distributed a total of MXN $436 million, representing MXN $0.8812 per CBFI. The distribution increase per CBFI between 2015 and 2016 was 15.5%.

CBFI with economic restrictions

During the IPO, and in addition to the issuance of 223’611,110 CBFIs that were offered to investors, 80’290,656 CBFIs were issued to the Control Trust in exchange for 21 hotels in the Contribution Portfolio, four of which were at different stages of development (Contribution Portfolio in Development), representing a total of 9’697,897 CBFIs:

> Real Inn Morelia: issuance of 2’342,667 CBFIs. > One Guadalajara Tapatío: issuance of 688,564 CBFIs. > Camino Real Hotel & Suites Puebla: issuance of 1’538,461 CBFIs. > Courtyard by Marriott Toreo: issuance of 5’128,205 CBFIs.

These 9’697,897 CBFIs would not have economic rights (distribution…) until all four hotels under development are completed and operating. By December 31st, 2016, three of the hotels were in operation (Real Inn Morelia, One Guadalajara Tapatío and Camino Real Hotel & Suites Puebla) and the CBFIs economic rights issued in exchange for these three hotels have been released. The following table shows details of information on CBFIs, with and without economic rights.

1Q 2016 2Q 2016 3Q 2016 4Q 2016 Year 2016

Total number of CBFIs 499.4 499.4 499.4 499.4 499.4

CBFIs without economic rights 5.1 5.1 5.1 5.1 5.1 Courtyard by Marriott Toreo 5.1 5.1 5.1 5.1 5.1

CBFIs with economic rights 494.3 494.3 494.3 494.3 494.3

In millions of pesos, except data per CBFI, in pesos. 2016 Report Annual 44 FibraHotel Corporate

Governance AC by Marriott Querétaro

Technical Committee and FibraHotel Committees

To the date of this Annual Report, the FibraHotel Technical Committee is formed by 11 owner members, four of which are independent members (36%).

Members’ biographical information:

1. Roberto Galante Totah. Co-President of the FibraHotel Technical Committee, as well as Founding Partner and President of GDI, La Vista Country Club, Bosque Real and Mercap, GDI companies. 2. Alberto Galante Zaga. President of the FibraHotel Board, as well as a GDI partner and Vice President. He is an executive member of the Consejo de Fondo Hotelero Mexicano I and II, [Mexican Hotelier Fund Council I and II], Fondo Comercial Mexicano, La Vista Country Club, Bosque Real and Mercap, GDI companies. 3. Simón Galante Zaga. Founding partner and CEO of GDI with more than 20 years of experience in hotel, residential and commercial real estate, and property developer and administrator, as well as in the acquisition, development and financing of real estate projects. He is an executive member of the Consejo de Fondo Hotelero Mexicano I and II, Fondo Comercial Mexicano, La Vista Country Club, Bosque Real and Mercap, GDI companies. He specialized in Business Administration from the IPADE. 4. Adolfo Benjamín Fastlicht Kurián. CEO of Icon Group, a Mexican real estate development company. Mr.. Fastlicht was cofounder and Co-CEO of Grupo Cinemex, the second movie theater chain in the country. Current CEO of The Lot Premium Cinemas in La Jolla, California. He has held the position of President of the Asociación de Desarrolladores Inmobiliarios (ADI), [Real Estate Developers Association], the Mexican real estate industry’s top association. He also takes an active part in Councils of various educational institutions. Mr. Fastlicht holds a BA in Hotel Ad- ministration from the University of Boston (1989) and a MBA from Harvard University (1993). 5. Sandor Valner Watstein. CEO of Walton Street Capital Latin America, a worldwide administrator of real estate funds. Mr. Valner was Director of Credit Suisse First Boston in Mexico and member of the executive committee for Latin America. He has been a partner in EMVA and Valor Consultores, Investment Banks and worked with JP Morgan in corporate finances and M&A. He is cofounder and Vice President of the Asociación Mexicana de Fondos Inmo- biliarias y de Infrastuctura [Mexican Association of Real Estate Funds and Infrastructure] and member of the administrative council of various real estate companies in Latin America. Fiesta Americana Monterrey He is an active member of the World Presidents’ Organization and holds Masters degrees in Pabellón M Engineering and Business Administration from Stanford University. 45 6. Albert Galante Saadia. Graduated from the Universidad Mexican Presidency (1985-1988). He has been a Consul- Autónoma Metropolitana de México with a degree in In- tant for Asian and Latin American governments as well as dustrial Engineering. He has been a member of the board multi-lateral international organizations, international of Mex Factor, Sofom E.N.R., a founding member of Nor- commerce and competiveness. He is a member of the malización y Certificación Electrónica, S.C. and the - elec advisory council of various companies, civil associations tronics certification agency established in 2001. Since and public institutions. In 2014, he received the “Carrera 1987, Mr. Galante has been CFO, member of the board and al Universo” award, the highest distinction bestowed on consultant of Ampliequipos, S.A. de C.V., a safety testing one of its members by the Alumni Society of the Instituto laboratory as well as the Ampliaudio, S.A. de C.V. consul- Tecnológico Autónimo de México (ITAM) He has a PhD in tant, which imports and exports electronic equipment and Economics from Yale University. supplies. 10. Felipe de Yturbe Bernal. Former General Director of 7. Mayer Zaga Bucay. CFO of Grupo Industrial Miro, a tex- Grupo Financiero Scotiabank Inverlat Brokerage, as well tile and clothing manufacturer, as well as an import and as Deputy General Director of Corporate Banking, Invest- export agent for brands such as Nike, Adidas and Victo- ment Banking and Markets, Treasury and Trust in the ria’s Secret, among others, with approximately 2,000 em- same institution. He was General Director of Deustche ployees. In 1983, he was cofounder of the award-winning Bank México and General Manager of Banco Mexicano. clothing company Ocean Pacific, opening close to 50 stores He has been a partner in Yturbe, Laborde y Asociados, a throughout the country and supplying highly renowned company specializing in investment management. Mr. de department stores in Mexico. He is currently an investor in Yturbe occupied various positions for 12 years in Banco various real estate projects and a partner in GDI. Nacional de México, including, among others, Deputy 8. Manuel Zepeda Payeras. Mr. Zepeda has played a key General Director of Corporate Banking, Investment Bank- role in most of the main institutions and regulatory ing and the Trust Division. He was also the Treasurer and framework of the housing and mortgage sectors in Mex- Financial Director of Cementos Anáhuac and Vice Presi- ico. Among other activities, he presided over the Fondo dent of The First National de Operación y Financiamiento Bancario a la Vivienda 11. Pablo de la Peza Berrios. Worked in Banamex from 1976 (FOVI) [Operating Fund and Bank Financing of Housing], to 2013 and held various offices in Mexico and abroad: In- a trust fund created to provide financial support for the ternational Treasury Director, General Director of the Cali- acquisition and construction of social, affordable hous- fornia Commerce Bank, General Director of Seguros Bana- ing. He was the founder and general director of the So- mex and AFORE Banamex, Corporate Director responsible ciedad Hipotecaria Federal [Federal Mortgage Society], a for Strategic Planning and Corporate Development for financial institution created to develop primary and sec- Mexico, business affairs of Citi in Latin America, Corporate ondary mortgage markets. He was President of the Unión Director responsible for Banamex Asset Management af- Interamericana para la Vivienda [Inter-American Housing fairs (Afore, Insurance, Pensions, Promotor of Investment Union], an association of more than 100 financial inter- Funds and Trust). He has been a member of Administration mediaries in Latin America for mortgage financing; and a Councils of several investment societies administrated by consultant in various housing companies and mortgage Banamex and President of the Banamex Councils for Insur- financing companies, such as SARE Holding, MARHNOS ance, Afore and Fund Promotion. He retired from Banamex Vivienda, ARKO Promoción Inmobiliaria, Crédito Inmo- in 2013 but continues to participate in the Administration biliario and the BBVA Fondo Inmobiliario INMESP [Real Council and Committees of various companies of that Fi- Estate Fund]. He was also Head Economist of the Presi- nancial Group. He is an independent member of the Techni- dential Advisory Office from 1976 to 1982 and has been cal Committee and investment committees of some enti- a member of various non-profit organizations. He has a ties listed on the Mexican Stock Exchange. He is a member Master’s degree in Economy and another in Business Ad- of the investment committee of a large foundation, as ministration from the University of Chicago. well as a mentor in Endeavor. Mr. de la Pez Berrios earned 9. Jaime Zabludowsky Kuper. Current Executive President an Industrial Engineering degree from the Universidad of the Consejo Mexicano de la Industria de Productos de Iberoamericana. Consumo [Mexican Council for the Consumer Products Industry], an association that brings together 43 of the For more information on how our Committees work (election/ most important high turnover consumer good compa- destitution of members, sessions and voting, committee fac- nies. He is also President of the Mexican Council on For- ulties, remuneration of independent members…), refer to the eign Relations, Vice President and Founding Partner of 2016 Annual Report, available in Spanish in the FibraHotel IQOM Inteligencia Comercial. He has been an independent webpage, www.fibrahotel.com or that of the Bolsa Mexicana consultant of the PEMEX Administration Council for Ex- de Valores [Mexican Stock Exchange], www.bmv.com.mx. ploration and Production, and in that capacity, held the position of President of its Acquisitions, Leasing, Works During 2016, the Technical Committee met four times to ap- and Services Committee. He has also occupied differ- prove the Financial Statements and distributions, with previ- ent public offices, including, among others, Deputy Chief ous approval of the Auditing Committee. of Negotiation of the Free Trade Agreement between Mexico and the United States, Mexican Ambassador to From January 1st, 2017 to the writing of this Annual Report, the the European Union, Head Negotiator for the Free Trade Technical Committee met twice to approve the Financial State- Agreement between Mexico and the European Union and ments and distributions, with the previous approval of the Au- Economist on the Economic Advisory Committee of the diting Committee. 2016 Report Annual 46 Long-term alignment of interest

From the start, FibraHotel has sought to align long-term interests with its Consultant, GDI and its Holders, which translates as follows:

> GDI contributed all its assets of hotels in operation to FibraHotel. > GDI, through the Control Trust, is the majority shareholder and subject to a long- term restricted sales period. > GDI granted FibraHotel preferential rights on any future hotel opportunity that covers FibraHotel investment parameters. > The FibraHotel Consultant charges only an advisory fee corresponding to 1.00% of the value of non-depreciated assets and net debt. > CBFIs delivered to the Control Trust in exchange for property under development have no economic rights (distribution…) until such hotels are in operation.

For more information on the FibraHotel Trust Agreement, Control Trust, sale restric- tion periods, among other… go to the 2017 Annual Report, available in Spanish on the FibraHotel website (www.fibrahotel.com) or on the Mexican Stock Exchange website (www.bmv.com.mx).

Fiesta Inn Monclova

47 FibraHotel on the Mexican Stock Exchange

CBFI price

AC by Marriott Guadalajara

The following graph shows $18.0 45.0 the evolution of FibraHotel REIT price and its volumes st between January 1 and De- $16.0 30.0 cember 31st, 2016.

$14.0 15.0

$12.0 - 2015 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 v. Jul . Jan . Jun . Oct . Apr . Feb . Dec . Sep . Dec . Aug . N o Mar . May .

Volume FIHO Price FIHO IPC FIBRAS Index

Stock ownership

To the date of this Annual Report, FibraHotel 15.7% Control shareholding is as follows: Trust

PublicFree InvestorsFloat 84.3% 2016 Report Annual 48 Post-2016 events

Fairfield Inn Villahermosa

Opening of the Fiesta Inn Puerto Vallarta

On January 30th of 2017, FibraHotel announced the opening of the Fiesta Inn Puerto Vallarta hotel in inside La Isla Puerto Vallarta shopping center, with 144 select-services rooms operated by Grupo Posadas.

2016 fourth quarter results

On February 27th of 2017, FibraHotel announced its financial results and distribution of the fourth quarter of 2016.

Opening of the Courtyard by Marriott and Fairfield Inn & Suites by Marriott Vallejo

On March 1st of 2017, FibraHotel announced the opening of the 125-room select-service Courtyard by Marrio- tt Vallejo hotel and the 121-room limited-service Fairfield Inn & Suites by Marriott Vallejo hotel, both hotels will be operated by Marriott International.

Citi 2017 Global Property CEP Conference Presentation

On March 6th of 2017, FibraHotel presented in the CITI 2017 Global Property CEO Conference. 49 Consolidated Financial Statements

Gamma Tijuana

Fideicomiso Irrevocable No. F/1596 (Deutsche Bank México, S. A. Institución de Banca Múltiple, División Fiduciaria) and Subsidiary

Consolidated Financial Statements for the Years Ended December 31, 2016, 2015 and 2014, and Independent Auditors’ Report Dated March 31, 2017

Independent Auditors’ Report and Consolidated Financial Statements 2016, 2015 and 2014

Page Table of contents

51 Independent Auditors’ Report 54 Consolidated Statements of Financial Position 55 Consolidated Statements of Comprehensive Income 56 Consolidated Statements of Changes in Trustees’ Equity 57 Consolidated Statements of Cash Flows 58 Notes to the Consolidated Financial Statements Financial Statements Financial 50 51 Financial Statements Financial 52 53 Consolidated Statements of Financial Position

As of December 31, 2016, 2015 and 2014 (In thousands of Mexican pesos)

Assets Notes 2016 2015 2014

Current assets: Cash, cash equivalents and restricted cash 5. $ 448,829 $ 376,825 $ 2,091,905 Trade accounts receivable and other receivables 6. 242,685 207,912 169,174 Due from related parties 13. - 3,190 3,190 Recoverable taxes, mainly value-added tax 228,709 288,545 234,063 Prepaid expenses 16,627 5,788 2,614 Total current assets 936,850 882,260 2,500,946

Non-current assets: Hotel properties, furniture and operating equipment – Net 7. 9,970,023 7,535,661 6,725,074 Properties under development 8. 1,396,600 2,310,689 773,571 Security deposits 2,380 1,813 1,654 Deferred income taxes 11. 3,298 4,055 3,995 Derivative financial instruments 12b. 120,887 11,441 - Total non-current assets 11,493,188 9,863,659 7,504,294

Total assets $ 12,430,038 $ 10,745,919 $ 10,005,240

Liabilities and Trustees’ Equity

Current liabilities: Current portion of long-term debt 10. $ 98,288 $ 7,849 $ - Suppliers and accrued expenses 9. 348,107 316,936 233,880 Taxes payable 6,868 5,110 4,370 Total current liabilities 453,263 329,895 238,250

Long-term liabilities: Debt 10. 2,598,743 844,619 - Total long-term liabilities 2,598,743 844,619 - Total liabilities 3,052,006 1,174,514 238,250

Trustees’ equity: Contributions from trustees 14. 8,737,636 9,160,109 9,495,343 Unsubscribed equity - (15) (15) Retained earnings 580,354 414,383 271,662 Valuation effect of derivative financial instruments 12b. 60,042 (3,072) - Total trustees’ equity 9,378,032 9,571,405 9,766,990

Total liabilities and trustees’ equity $ 12,430,038 $ 10,745,919 $ 10,005,240

See accompanying notes to consolidated financial statements. Financial Statements Financial 54 Consolidated Statements of Comprehensive Income

For the years ended December 31, 2016, 2015 and 2014 (In thousands of Mexican pesos)

Notes 2016 2015 2014

Revenues from: Rooms $ 2,057,257 $ 1,541,320 $ 1,162,025 Food and beverages 468,397 367,525 289,662 Real estate rentals 79,832 75,393 68,797 Other income 29,519 23,699 10,280 2,635,005 2,007,937 1,530,764 Costs and expenses: Rooms (402,676) (288,706) (198,587) Food and beverages (285,813) (215,273) (164,666) General and administrative (1,103,084) (833,778) (585,196) Property (33,911) (24,905) (21,644) Corporate (252,458) (211,953) (160,203) Depreciation 7. (296,930) (213,782) (162,930) Business acquisition costs (7,676) (15,766) (73,689) Other income (expenses), Net 3,913 5,930 (31,783) Interest income 11,173 34,327 120,807 Interest expenses (40,282) - - Other financial expenses (13,948) (4,063) - Foreign exchange (loss) gain, Net 2,364 (508) 3,572 (2,419,328) (1,768,477) (1,274,319)

Income before income 215,677 239,460 256,445 taxes

Income taxes 11. 1,787 2,884 2,742

Consolidated net income 213,890 236,576 253,703

Other comprehensive income: Gain (loss) on hedging instruments 63,114 (3,072) -

Consolidated net comprehensive income $ 277,004 $ 233,504 $ 253,703

Net income per weighted average CBFIs $ 0.4327 $ 0.4786 $ 0.5134 with economic rights (pesos)

Net income per weighted average CBFIs $ 0.4282 $ 0.4737 $ 0.5080 (pesos)

Weighted average CBFIs with economic 494,273,561 494,273,561 494,189,262 rights

Weighted average outstanding CBFIs $ 499,401,766 499,401,766 499,401,766

See accompanying notes to consolidated financial statements.

55 Consolidated Statements of Changes in Trustees’ Equity

For the years ended December 31, 2016, 2015 and 2014 (In thousands of Mexican pesos)

Valuation Contribu- Unsub- effect of Total Number tions Retained scribed derivative trustees’ of CBFIs from earnings equity financial equity trustees instruments

Balances as of January 1, 2014 $ 499,401,766 $ 9,846,459 $ (15) $ 84,845 $ - $ 9,931,289

Distribution to trustees - (351,116) - (66,886) - (418,002)

Consolidated net - - - 253,703 - 253,703 comprehensive income

Balances as of 499,401,766 9,495,343 (15) 271,662 - 9,766,990 December 31, 2014

Distribution to trustees - (335,234) - (93,855) - (429,089)

Consolidated net - - - 236,576 (3,072) 233,504 comprehensive income

Balances as of December 31, 2015 499,401,766 9,160,109 (15) 414,383 (3,072) 9,571,405

Payment of - - 15 - - 15 unsubscribed equity

Distribution to trustees - (422,473) - (47,919) - (470,392)

Consolidated net - - - 213,890 63,114 277,004 comprehensive income

Balances as of $ 499,401,766 $ 8,737,636 $ - $ 580,354 $ 60,042 $ 9,378,032 December 31, 2016

See accompanying notes to consolidated financial statements. Financial Statements Financial 56 Consolidated Statements of Cash Flows

For the years ended December 31, 2016, 2015 and 2014 (In thousands of Mexican Pesos)

2016 2015 2014 Cash flows from operating activities: Consolidated net income $ 213,890 $ 236,576 $ 253,703

Adjustments for non-cash items: Income taxes recognized in net income 1,787 2,884 2,742 Adjustments for: (Gain) loss on (1,793) 2,439 15,982 sale of furniture and hotel equipment Depreciation 296,930 213,782 162,930 Interest income (11,173) (34,327) (120,807) Interest expenses 40,282 - - Other financial expenses 13,948 4,063 - 553,871 425,417 314,550

Changes in working capital: Trade accounts receivable and other (34,773) (38,738) (62,778) receivables Due from related parties 3,190 - (374) Recoverable taxes, mainly 63,061 (52,879) (29,657) value-added tax Prepaid expenses (10,839) (3,174) (653) Security deposits (567) (159) (749) Suppliers and accrued 5,785 83,056 76,720 expenses Taxes payable 1,758 740 956 Income tax paid (4,243) (6,331) (4,570) Net cash generated by operating activities 577,243 407,932 293,445

Cash flows from investing activities: Businesses acquired (244,826) (189,359) (1,764,318) Acquisition of hotel properties, furniture and (243,266) (302,068) (663,319) operating equipment Proceeds from sale of furniture and hotel 2,098 3,184 1,379 operating equipment Investment in development projects (1,261,461) (2,071,817) (265,880) Interest received 11,173 34,109 120,807 Net cash used in investing activities (1,736,282) (2,525,951) (2,571,331)

Cash flows from financing activities: Proceeds from borrowings 1,844,562 852,468 - Derivative financial instrument payment (46,332) (14,513) - Capitalized interest (57,255) (1,864) - Interest paid (25,592) - - Distribution to trustees (470,392) (429,089) (418,002) Other financial expenses (13,948) (4,063) - Net cash generated by (used in) 1,231,043 402,939 (418,002) financing activities

Cash, cash equivalents and restricted cash Net increase (decrease) in cash, cash equivalents 72,004 (1,715,080) (2,695,888) and restricted cash Cash, cash equivalents and restricted cash at the 376,825 2,091,905 4,787,793 beginning of the year

Cash, cash equivalents and restricted cash at the end of the year (including restricted cash of $241,103, $205,982 $ 448,829 $ 376,825 $ 2,091,905 and $1,968,184 as of December 31, 2016, 2015 and 2014, respectively)

See accompanying notes to consolidated financial statements.

57 Notes to Consolidated Financial Statements

For the years ended December 31, 2016, 2015 and 2014 (In thousands of Mexican Pesos)

1. Activities and significant events

Fideicomiso F/1596 (Deutsche Bank México, S. A. Institución de Banca Múltiple, División Fiduciaria) and Subsidiary (jointly referred as to “FibraHotel”) was established as a real estate investment trust on July 31, 2012 by Concentradora Fibra Hotelera Mexicana, S. A. de C. V., (the “Trustor”) and Deutsche Bank México, S. A., Institución de Banca Múltiple, División Fiduciaria (the “Trustee”). FibraHotel was established mainly to develop, acquire and hold real estate properties for use in hotel operations. The hotel services offered may be limited, select, complete and long stay, depending on the brand affiliation and service operators. The hotels in the FibraHotel portfolio operate under the following brands:

Live Aqua One Sheraton Fiesta Americana Grand Fiesta Inn Lofts Fairfield Inn & Suites by Marriott Fiesta Americana Live Aqua Boutique AC Hotels by Marriott Fiesta Inn Camino Real & Suites Courtyard by Marriott Gamma by Fiesta Inn Real Inn

To carry out its operations, FibraHotel has entered into planning advisory agreements with Administradora Fibra Hotelera Mexicana, S. A. de C. V. (“Administradora Fibra Hotelera”) (a related party), under which it pays an annual fee payable each quarter, equivalent to 1% of the carrying value of undepreciated assets, net of debt. It also has entered into hotel operations contracts with Grupo Posadas, S. A. B. de C. V. (“Posadas”), Grupo Real Turismo, S. A. de C. V. (“Real Turismo”), Operadora Marriott, S. A. de C. V. (“Marriott International”) and Starwood Hotels & Resorts Worldwide, Inc. (“Starwood Hotels”) (collectively “Operadoras”), which establish a fee based on the hotels’ gross operating profit, among other metrics. FibraHotel has also entered into lease agreements with Posadas which provide fixed income and, as the case may be, variable income, based on the income from operations.

FibraHotel has no employees and therefore no labor obligations, except for joint and several obligations which might arise due to noncompliance with the labor and tax obligations of the entities which render it personnel administrative and operating services. Any administrative services required are provided by related parties and third parties.

FibraHotel, as a real estate investment trust (“FIBRA”), qualifies to be treated as a pass-through entity for Mexican federal income tax purposes in accordance with the Mexican Income Tax Law (“LISR”). Therefore, all income derived from FibraHotel’s operations is attributed to the holders of its real estate trust certificates (“CBFIs” for its name in Spanish) and FibraHotel itself is not subject to income tax in Mexico. In order to maintain FIBRA status, the Income Tax Law (“ISR” for its name in Spanish) has established in Articles 187 and 188, FibraHotel must, among other requirements, distribute at least 95% of its net taxable income each year to the holders of its CBFIs. On October 12, 2012, FibraHotel obtained a ruling from the Mexican Treasury Department, published in the Federal Official Gazette, formally establishing FibraHotel as a FIBRA.

Fibra Hotelera S. C. is a 99.99% owned subsidiary of Fideicomiso F/1596. Its responsibilities include managing the business, providing maintenance to the real estate properties and hotels, obtaining necessary licenses and permits, supervising projects involving renovation, development and remodeling, providing insurance coverage, oversight of public services, and negotiating hotel management contracts. Fibra Hotelera, S. C. is subject to the payment of regular Income Tax (“ISR”).

The address of FibraHotel is Avenida Santa Fe No. 481 Piso 7 Col. Cruz Manca, Cuajimalpa de Morelos, 05349, Mexico City.

a. Portfolio Composition

The detail of the operating and leasing portfolio of FibraHotel by operator is as follows:

Number of hotels de hotels as of December 31 Operator 2016 2015 2014 Operating Operating Operating Leasesing Leasesing Leasesing agreement agreement agreement

Posadas 58 3 49 3 46 3 Real Turismo 5 - 5 - 5 - Marriott International 8 - 4 - 1 - Starwoods Hotels 1 1 - 1 -

Total 72 3 59 3 53 3

Total operating hotels 75 62 56 Total rooms 10,422 8,507 7,656

As of December 31, 2016, 2015 and 2014, 10, 18 and 13 hotels were under development respectively.

Construction contracts have been signed with different real estate developers to perform the in part or

Financial Statements Financial the complete construction of the hotels which make up the development portfolio. The investments by 58 FibraHotel regarding properties under development as of December 31, 2016, 2015 and 2014, amount to $1,396,600, $2,310,689 and $773,571, respectively, presented in the statement of financial position under the heading “Properties under development”. b. Business acquisition

During 2016, 2015 and 2014, FibraHotel concluded the acquisition of one hotel for 2016 and 2015, and 14 hotels for 2014. The fair value of the net assets acquired are as follows:

Hotel furniture and Year Land Building Total equipment

2016 $ 34,376 $ 203,533 $ 6,917 $ 244,826 2015 $ 38,660 $ 133,847 $ 16,852 $ 189,359 2014 $ 320,129 $ 1,269,354 $ 174,835 $ 1,764,318

The fair value of the aforementioned net assets acquired is determined based on the income approach and the market approach. The income approach is based on the present value of future cash flows generated by the assets, taking into consideration the characteristics of the business, such as income, costs and expenses, among others, and is commonly used to determine the fair value for the types of assets maintained by the Trust. As of December 31, 2016, 2015 and 2014, final fair values using the income and market approach have been obtained. The fair value measurements of the net assets acquired during the years ended December 31, 2016, 2015 and 2014, qualify as Level 2 measurements in accordance with the fair value hierarchy.

Below is a summary of the revenue and net income from the entities acquired and included in the consolidated statement of comprehensive income of FibraHotel, as well as pro forma revenue and net income as if the hotels had been acquired on January 1 of the respective year.

2016 2015 2014 Reported amount Revenue $ 32,148 $ 3,291 $ 162,656 Net income $ 11,389 $ 1,603 $ 51,025

Projected amount to 12 months (Unaudited) Revenue $ 77,155 $ 39,492 $ 1,543,395 Net income $ 27,334 $ 19,236 $ 286,954

Acquisition costs of the acquired hotels, including development cost, for the years ended December 31, 2016, 2015 and 2014 are $7,676, $15,766 and $73,689, respectively, which are recognized in the consolidated statement of comprehensive income.

FibraHotel has established growth and expansion plans, and based on its investment policies will evaluate future acquisition projects that will be submitted for approval by the Technical Committee of FibraHotel. c. Significant events

a. Disposition of credit lines

During the year 2016, FibraHotel withdrew $543.5 million from the long-term line of credit with BBVA Bancomer, S. A., Institución de Banca Múltiple, Grupo Financiero BBVA (BBVA Bancomer); in addition to the $456.5 million which had already been withdrawn in 2015, the conditions are maintained at 1.5 percentage points above the 28-day TIIE rate.

Furthermore, FibraHotel has a long-term line of credit with Banco Mercantil del Norte, S. A., Institución de Banca Múltiple, Grupo Financiero Banorte (Banorte), from which the withdrawls carried out between January and September 2016 were $604.1 million, which, together with the withdrawls from 2015 in the amount of $395.9 million, reached the limit of the line of credit of $1,000 million. This line of credit accrues interest at 91 day-TIIE rate plus 1.25 points. In November 2016, as stated in the line of credit agreement, the debt passed from revolving period to long-term period and as a result the interest rate changed to 91-day TIIE rate plus 2 points.

Finally FibraHotel negotiated a third line of credit with Banorte for an amount of $1,000 million, of which it withdrew $698.1 million; this line of credit accrues interest at the 91-day TIIE rate plus 1.3 during its revolving period. As of December 31, 2016, the undisposed balance is $301.9 million.

As a result of the above, in order to maintain relatively stable interest rate payments, FibraHotel entered into interest rate hedges to cover the withdrawls from the BBVA Bancomer and first Banorte lines of credit. For more information regarding the interest rate hedges please refer to Note 10.

b. Promise acquisition agreement of Hotel Fiesta Americana Hermosillo

On April 29, 2016, FibraHotel entered into a purchase-sale contract subject to a term, conditions precedent and a purchase option for the hotel named “Fiesta Americana Hermosillo” pursuant to the following clauses: i) the effective duration of the contract will be until January 31, 2020, ii) the consideration will be that resulting from multiplying 10.06x average EBITDA of the hotel for the last three years, less the investment made in improvements and disbursements for leasing, subject to a lower limit of $80.5 million. On the same date, FibraHotel entered into a noncancelable lease until 2020 for $10 million, which amount the 59 lessor undertakes to invest in property improvements. Also, FibraHotel agrees under the same terms to invest $75 million in such property. The sale of the property will be recognized once all the aforementioned clauses are fulfilled.

2. Application of new and revised International Financial Reporting Standards

a. Application of new and revised IFRS and interpretations that are mandatorily effective for the current year

In the current year, FibraHotel has applied a number of amendments to IFRS and new Interpretation issued by the International Accounting Standards Board (“IASB”) that are mandatorily effective for accounting periods that begin on or after January 1, 2016.

Amendments to IAS 1 Disclosure Initiative

The amendments to IAS 1 give some guidance on how to apply the concept of materiality in practice.

Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortization

The amendments to IAS 16 prohibit entities from using a revenue-based depreciation method for items of property, plant and equipment.

The amendments to IAS 38 introduce a rebuttable presumption that revenue is not an appropriate basis for amortization of an intangible asset. This presumption can only be rebutted in the following two limited circumstances:

i) When the intangible asset is expressed as a measure of revenue; or

ii) When it can be demonstrated that revenue and consumption of the economic benefits of the intangible asset are highly correlated.

Currently the management of FibraHotel uses the straight-line method for depreciation and amortization for its property, plant and equipment, and intangible assets respectively. FibraHotel believes that the straight-line method is the most appropriate method to reflect the consumption of economic benefits inherent in the respective assets.

b. New and revised IFRSs in issue but not yet effective

The Entity has not applied the following new and revised IFRSs that have been issued but are not yet effective. These IFRS allow earlier application, option that has not been elected by the Entity.

i) Effective for annual periods beginning on or after 1 January 2017, for which the Entity does not expect to have important effects on its consolidated financial information.

Amendments to IAS 12 Income Tax: Recognition of Deferred Tax Assets for Unrealized Losses

Provides requirements on the recognition and measurement of current or deferred tax liabilities or assets, and the amendments clarify the requirements on recognition of deferred tax assets for unrealized losses, to address diversity in practice.

Amendments to IAS 7 Statements of Cash Flows: Provide disclosures.

With the purpose to provide disclosures that allow users of financial statements evaluate the changes in liabilities arising from financing activities, IASB requires that the changes in liabilities arising from financing activities are disclosed: (i) from financing cash flows; (ii) from obtaining or losing control of subsidiaries or other businesses; (iii) the effect of changes in foreign exchange rates; (iv) in fair values; and (v) other changes.

ii) Effective for annual periods beginning on or after 1 January 2018, for which it is not practicable to provide a reasonably estimate of their effects on the consolidated financial statements until having performed a detailed analysis and review.

IFRS 9 Financial Instruments

· IFRS 9 requires all recognized financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement are required to be subsequently measured at amortized cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are generally measured at FVTOCI. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under IFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in net income (loss).

· With regard to the measurement of financial liabilities designated as of fair value through profit

Financial Statements Financial or loss, IFRS 9 requires that the amount of change in the fair value of the financial liability that 60 is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss is presented in profit or loss.

· In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under IAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognized.

· The new general hedge accounting requirements retain the three types of hedge accounting mechanisms currently available in IAS 39. Under IFRS 9, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled and replaced with the principle of an ‘economic relationship’. Retrospective assessment of hedge effectiveness is also no longer required. Enhanced disclosure requirements about an entity’s risk management activities have also been introduced.

IFRS 15 Revenue from Contracts with Customers The core principle of IFRS 15 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition: • 1: Identify the contract(s) with a customer • 2: Identify the performance obligations in the contract • 3: Determine the transaction price • 4: Allocate the transaction price to the performance obligations in the contract • 5: Recognize revenue when (or as) the entity satisfies a performance obligation

Therefore, income should be recognized when a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added to deal with specific scenarios, and extensive disclosures are required. When IFRS 15 becomes effective, it will supersede the revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the related Interpretations.

iii) Effective for annual periods beginning on or after 1 January 2019; during 2017 the Entity will begin the analysis and evaluation of the effects of this standard, although given the nature of its operations it would not expect significant impacts.

IFRS 16, Leases

The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. A lessee would recognize a right-of-use asset and a lease liability. The right-of-use asset is treated similarly to other non-financial assets and depreciated accordingly and the liability accrues interest. This will typically produce a front-loaded expense profile (whereas operating leases under IAS 17 would typically have had straight-line expenses) as an assumed linear depreciation of the right-of-use asset and the decreasing interest on the liability will lead to an overall decrease of expense over the reporting period. The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in the lease if that can be readily determined. If that rate cannot be readily determined, the lessee shall use their incremental borrowing rate.

For leases with a lease term of 12 months or less and containing no purchase options (this election is made by class of underlying asset); and leases where the underlying asset has a low value when new, such as personal computers or small items of office furniture (this election can be made on a lease-by- lease basis), a lessee may elect to account for lease payments as an expense on a straight-line basis over the lease term.

3. Significant accounting polices

a. Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the IASB.

b. Basis of preparation

The consolidated financial statements of FibraHotel have been prepared on the historical costs basis, except for derivative financial instruments and hotel properties, furniture and equipment, and properties under development, which were valued at fair value on 2012, at the date of contribution and acquisition, as explained in greater detail in the accounting policies below.

i. Historical cost

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

ii. Fair value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an 61 orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, FibraHotel takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realizable value in IAS 2 or value in use in IAS 36.

In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; • Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and • Level 3 inputs are unobservable inputs for the asset or liability.

c. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the FibraHotel and the subsidiaries over which it exercises control. Control is achieved when FibraHotel:

• Has power over the investee; • Is exposed, or has rights, to variable returns from its involvement with the investee; and • Has the ability to use its power to affect its returns.

FibraHotel reassesses whether it controls an entity if the facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

The subsidiary is consolidated from the date on which control is transferred to FibraHotel, and is no longer consolidated from the date that control is lost.

When necessary, adjustments to the financial statements of the subsidiary are made to align its accounting policies in accordance with the accounting policies of FibraHotel.

All balances and transactions between the subsidiary and FibraHotel have been eliminated in the consolidation.

Ownership Entity percentage 2016, Activity 2015 y 2014

Provision of advisory services and technical, legal, tax, commercial and administrative consulting related to the purchase and sale, management, Fibra Hotelera, S. C. 99.99% leasing and subletting of all kinds of land, houses, buildings, warehouses, hotels, malls and commercial premises and offices.

FibraHotel reassessed whether it has maintained effective control over entities that provide administrative, personnel and operational services mentioned in Note 1, and based on its assessment, management concluded that in accordance with IFRS 10, it does not have effective control due to the following: (i) power, FibraHotel currently does not have the ability to direct the relevant activities, (ii) exposure or rights to variable returns; the trustors of the payroll entities have not received distributions, given that paying dividends is not the objective of the payroll entities. Furthermore administrative services fees are 5%, which is representative of market value for such services. This fee is not modified for the benefit of FibraHotel. The fee covers the expenses incurred by the payroll entities for their operation and is sufficient to ensure that the payroll entities do not incur losses. In addition to the above the assets of the payroll entities are of such a nature that they cannot be used in combination with FibraHotel for its operations.

d. Business combinations

Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of paid values of the assets transferred by FibraHotel, liabilities incurred by FibraHotel to the previous owners of the entity acquired and the equity issued by FibraHotel in exchange for control over the entity acquired at the acquisition date. Acquisition-related costs are generally recognized in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value.

Goodwill is measured as the excess over the sum of the consideration transferred, the amount of any non-controlling interest in the entity acquired, and the fair value of the acquirer’s previous held equity interest in the acquired (if any) over the net of the acquisition-date amounts of identifiable assets acquired and liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s Financial Statements Financial previously held interest in the acquiree (if any), the excess is recognized immediately in profit or loss 62 as a bargain purchase gain. e. Financial instruments

Financial assets and financial liabilities are recognized when FibraHotel becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issuance of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit. f. Financial assets

Financial assets are classified into the following categories: financial assets ‘at fair value with changes through profit or loss’ (FVTPL), investments ‘available-for-sale’ (AFS), ‘financial assets loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of the initial recognition. All regular way purchases or sales of financial assets recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require the delivery of assets within the time frame established by regulation or convention in the marketplace.

Financial assets loan and accounts receivable

Accounts receivable to customers and other receivables which have fixed or determinable payments that are not listed in an active market are classified as loans and accounts receivable, which are measured at amortized cost, using the effective interest method, minus any impairment.

Impairment of financial assets

Financial assets, other than those financial assets at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the future cash flows from the investment have been affected.

For AFS equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

• Significant financial difficulty of the issuer or counterparty; or • Breach of contract, such as a default or delinquency in interest or principal payments; or • It becoming probable that the borrower will enter bankruptcy or financial re-organization; or • The disappearance of an active market for that financial asset because of financial difficulties.

Derecognition of financial assets

FibraHotel derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss. g. Cash, cash equivalents and restricted cash

Cash and cash equivalents mainly consist of bank deposits in checking accounts and short-term investments. Cash is presented at fair value and cash equivalents are valued at fair value. FibraHotel considers as cash equivalents all highly liquid debt instruments acquired with a dated acquisition maturity of three months or less. Cash equivalents are represented mainly by government securities in which the resources are paid at maturity.

Restricted cash consists of cash corresponding to the fund for the investment in real estate, which will be used for the acquisition of real estate of the contribution portfolio and to the capital expenditures fund which will be used for repairs, major replacements and other capital expenditures. h. Hotel properties, furniture and operating equipment

Properties, furniture and operating equipment of the hotel are recorded initially at their acquisition cost.

Hotel properties, furniture and operating equipment are presented at cost, less accumulated depreciation and any accumulated loss from impairment.

The properties which are being constructed for purposes of exploitation, supply or administration are recorded at cost, less any recognized loss for impairment. The cost includes professional fees and, in the case of qualifying assets, capitalized interest, based on the accounting policy of FibraHotel. These properties are classified into the appropriate categories of property, plant and equipment when they are completed for their intended use. The depreciation of these assets, as in other real properties, begins when the assets are ready for their intended use.

Depreciation is calculated using the straight-line method based on the remaining useful life of the asset, considering any residual values and considering components of each asset, as FibraHotel 63 considers components more appropriate and consistent in relation to the methods used by the most representative entities of the sector. Based on technical studies, FibraHotel concluded that its buildings and their different components have different useful lives and will be subject to replacements in different periods, 10 years in the case of certain common areas and up to 55 years for metallic structures of the building. The residual value is 24% in the case of buildings; other fixed assets do not have significant residual values, as determined by independent appraisers.

Estimated useful lives, residual values and the depreciation methods are reviewed at the end of each reporting period, with the effect of any changes in estimates accounted for on a prospective basis.

Depreciation rates of hotel properties, furniture and operating equipment as of December 31 2016, 2015 and 2014:

Building finishes 10 Building improvements 10 Building components 7 Building civil construction 1 Furniture and equipment 10

The gain or loss derived from the sale or disposal of an item of the hotel’s properties, furniture and operating equipment is calculated as the difference between the resources received from the sale and the carrying value of the asset, and is recognized in results.

i. Impairment in the value of long-lived assets

At the end of each reporting period, FibraHotel reviews the carrying values of its long-lived assets to determine whether there is any indication that such assets have suffered a loss from impairment. If there is any such indication, the recoverable amount of the asset is calculated to determine the amount of the loss from impairment (if any). When it is not possible to estimate the recoverable amount of an individual asset, FibraHotel estimates the recoverable amount of the cash generating unit to which such asset belongs. When a reasonable and consistent distribution basis can be identified, corporate assets are also assigned to the individual cash generating units; otherwise, they are assigned to the smallest group of cash generating units for which a reasonable and consistent distribution basis can be identified.

The recoverable amount is the higher of the fair value less the cost to sell the asset and its value in use. When evaluating the value in use, the estimated future cash flows related to the asset are discounted at present value using a discount rate before taxes which reflects the current market assessments of the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted.

If it is estimated that the recoverable amount of an asset (or cash generating unit) is lower than its carrying value, the carrying value of the asset (or cash generating unit) is reduced to its recoverable amount. Losses from impairment are recognized immediately in results.

When a loss from impairment subsequently reverses, the carrying value of the asset (or cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the adjustment carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

j. Income taxes

As discussed in Note 1, FibraHotel is classified as and intends to maintain its classification as a FIBRA for income tax purposes; accordingly, it does not recognize a provision for income taxes, except for its subsidiary Fibra Hotelera, S. C., which is subject to the payment of regular Income Tax (“ISR”). See Note 11.

k. Provisions

Provisions are recognized when FibraHotel has a present obligation (legal or implied) as a result of a past event, it is probable that FibraHotel will be required to liquidate the obligation and it can be reliably estimate that the amount of the obligation.

The amount recognized as a provision is the best estimate of the expenditure required to settle the present obligation, at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).

l. Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

- FibraHotel as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are Financial Statements Financial added to the carrying amount of the leased asset and recognized on a straight-line basis over the 64 lease term. m. Foreign currency

Transactions performed in foreign currency are recorded at the exchange rate in effect on the date each transaction took place. Monetary assets and liabilities denominated in foreign currency are valued in Mexican pesos at the exchange rate in effect at the date of the financial statements. Exchange rate fluctuations are recorded in results. n. Financial liabilities and equity instruments

Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of FibraHotel after deducting all of its liabilities. Equity instruments are recognized at the proceeds received, net of direct issue costs.

Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.

Other financial liabilities

Other financial liabilities (including ebt and trade and other payables) are subsequently measured at amortized cost using the effective interest method.

Derecognition of financial liabilities

FibraHotel derecognizes financial liabilities when, and only when, the FibraHotel’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss. o. Derivative financial instruments

FibraHotel enters into derivative financial instruments to manage its exposure to interest rates, including cap spread contracts. Further details of derivative financial instruments are disclosed in Note 12b.

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. p. Hedge accounting

FibraHotel designates certain hedging instruments, which include cash flows hedge derivatives.

At the inception of the hedge relationship, FibraHotel documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, FibraHotel documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.

Note 12b sets out details of the fair values of the derivative instruments used for hedging purposes. q. Revenue recognition

FibraHotel recognizes its revenues as follows:

i. The revenues are obtained from the operation of the hotels, and include rentals for guest rooms, food and beverages and other revenues, which are recognized as such hotel services are rendered.

ii. The policy of FibraHotel for recognition of revenues from operating leases is described in Note 3.l. r. Classification of costs and expenses

The costs and expenses presented in the consolidated statement of comprehensive income were classified on their nature and function. s. Statement of cash flows

FibraHotel presents its statement of cash flows using the indirect method. Interest received is classified as an investing cash flow, interest paid, distributions and dividends are classified as cash flows from financing activities. t. Net income per weighted average CBFI

Net income per weighted average CBFI with economic rights is determined by dividing consolidated 65 net income by the weighted average number of outstanding CBFIs with economic rights, during the period. Net income from weighted average CBFIs with economic rights as of December 31, 2016, 2015 and 2014 was calculated subtracting 499,401,766 of outstanding CBFIs, from 5,128,205 CBFIs of 2016, 2015 and 2014, related to the contribution portfolio under development, which are not entitled to receive economic rights until the construction of the hotels has concluded and the hotels are opened to the public (see Note 14).

4. Critical accounting judgments and key sources of estimation uncertainty

In the application of the FibraHotel’s accounting policies, which are described in Note 3, the FibraHotel’s management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

a. Critical judgments in applying accounting policies

Business combinations

Management uses its professional judgment to determine whether the acquisition of a property or portfolio of properties represents a business combination or an asset acquisition. Management specifically considers the following criteria:

i. Number of properties (land and building) acquired.

ii. The extent to which significant processes are acquired and in particular the extent of ancillary services provided by the acquiree (e.g., maintenance, cleaning, security, bookkeeping, other property services, etc.).

iii. Whether the acquiree has allocated its own staff to manage the property and/or to deploy any processes (including all relevant administration such as invoicing, cash collection, provision of management information to the entity’s owners and tenant information).

This determination can have a significant effect on the manner in which acquired assets and liabilities are recognized in financial information, both as of the acquisition date and subsequent thereto. Transactions that occurred during the periods presented in the accompanying consolidated financial statements are determined to be business acquisition and presented in property, plant and equipment of the hotel.

Hotel classification (investment/asset ownership)

Investment property is held to earn rentals or for capital appreciation or both. Therefore, an investment property generates cash flows independently of other assets held by FibraHotel. This distinguishes an investment property from an owner-occupied property.

FibraHotel is the owner of the property and manages the services provided to the hotel guests by holding operating and leasing contracts; if the services provided to the guests are significant, it is not classified as an investment property but property of FibraHotel. A hotel managed by the owner is an occupied property, rather than an investment property.

It can be difficult to determine whether the services provided are significant enough that a property does not qualify as investment property. For example, the owner of a hotel sometimes transfers some responsibilities to third parties under an operating agreement. The owner’s position could be, in essence, a passive investor or the owner may simply have outsourced day to day functions while retaining significant exposure to variations in cash flows from the hotel operations.

Management uses its professional judgment to classify the contributed and acquired hotels as hotel property, plant and equipment, given that each hotel is used in its normal course of business and is, therefore, not considered as an investment property.

Lease classification

As explained in Note 3.1, leases are classified based on the extent to which the risks and rewards inherent to the ownership of the asset under lease are transferred to FibraHotel or the tenant, depending on the substance, rather than the legal form, of the lease. Based on its evaluation of contractual terms and conditions, FibraHotel has concluded that it essentially assumes all the significant risks and rewards inherent to the hotels under lease and therefore classifies the respective lease agreements as operating leases.

b. Key sources of estimation uncertainty

Estimated useful and residual lives of fixed assets

Taking into consideration the opinion of internal experts from its development area, FibraHotel evaluates the useful lives and residual values of assets at the end of each reporting period based on its operating experience, the characteristics of its assets and their operation at date of the assessment. Any changes in estimates are recognized prospectively, within accumulated depreciation in the consolidated statement of financial position and depreciation expense in the consolidated statement of

Financial Statements Financial comprehensive income. 66 Allowance for doubtful accounts

FibraHotel has not recognized an allowance for doubtful accounts because credit ratings of its customers have not significantly changed and outstanding amounts are deemed to be recoverable. FibraHotel does not hold any collateral or other credit improvements with regard to these balances; likewise, it does not have the legal right to offset these amounts against its debts with the counterparty.

Fair value measurements and valuation processes

Some of the assets and liabilities of FibraHotel are measured at fair value in the consolidated financial statements.

In estimating the fair value of an asset or a liability, FibraHotel uses observable market data when they are available. When level 1 data are not available, FibraHotel hires a qualified appraiser to conduct an independent valuation. Management works closely with the independent qualified appraiser to establish the valuation techniques and appropriate input data for the model.

Information about the valuation techniques and inputs used in determining the fair value of individual assets and liabilities are disclosed in Note 9.

5. Cash, cash equivalents and restricted cash

2016 2015 2014

Cash and bank deposits $ 207,726 $ 170,843 $ 123,721 Restricted cash: Real property investment fund (i) 184,809 168,445 1,926,518 Capital expenditure reserve fund (ii) 56,294 37,537 41,666

$ 448,829 $ 376,825 $ 2,091,905

Restricted cash

(i) Consists of a fund for the acquisition of the real properties and investment in the development portfolio. As with cash equivalents, the restricted cash is invested in government securities.

(ii) Represents amounts held in the capital expenditure reserve fund, which are restricted for the purpose of funding repairs, major replacements and other related capital expenditures. A total of up to 5% of revenues from the hotels is deposited in this fund. As in the case of cash equivalents, this restricted cash is invested in government securities.

6. Trade accounts receivable and other receivables

2016 2015 2014

Clients $ 126,774 $ 101,639 $ 111,862 Travel agencies 70,568 49,310 42,575 Credit cards 18,749 13,305 6,363 Other 20,784 38,545 2,927 236,875 202,799 163,727

RLease receivables from: Grupo Posadas, S. A. B. de C. V. (formerly Hoteles y Villas Posadas, S. A. de C. V.) 5,810 5,113 5,447

$ 242,685 $ 207,912 $ 169,174

Accounts receivable aging

FibraHotel currently has monthly collection levels that reflect its monthly billing; similarly, commercial and negotiating practices allow it to keep the majority of accounts receivable aging at less than 90 days. The accounts receivable subject to legal proceedings are immaterial, for which reason they do not merit the creation of an allowance for doubtful accounts.

2016 2015 2014

60-90 days $ 11,768 $ 9,871 $ 10,086 More than 90-120 days 30,372 28,136 21,241

Total $ 42,140 $ 38,007 $ 31,327

Average aging (days) 84 78 40

67 7. Hotel properties, furniture and operating equipment

2016 2015 2014

Land $ 1,566,756 $ 1,252,162 $ 1,176,161 Building 7,487,919 5,701,739 5,015,764 Hotel furniture and operating equipment 1,708,630 1,078,859 816,586 10,763,305 8,032,760 7,008,511

Less - Accumulated depreciation (793,282) (497,099) (283,437)

$ 9,970,023 $ 7,535,661 $ 6,725,074

Hotel furniture Cost Land Building and operating Total equipment

Balances as of January 1, 2014 $ 827,570 $ 3,532,018 $ 498,326 $ 4,857,914 Acquisitions: Contribution Portfolio 28,462 96,538 - 125,000 Acquisitions and transfer of properties 320,129 1,387,208 321,061 2,028,398 under development (1) Disposals - - (2,801) (2,801)

Balances as of December 31, 2014 1,176,161 5,015,764 816,586 7,008,511 Acquisitions: Acquisitions and transfer of properties 76,001 685,975 262,273 1,024,249 under development (1)

Balances as of December 31, 2015 1,252,162 5,701,739 1,078,859 8,032,760 Acquisitions: Acquisition (1) 34,376 70,047 473,424 577,847 Transfer of properties under development 280,218 1,716,133 157,399 2,153,750 Disposals - - (1,052) (1,052)

Balances as of December 31, 2016 $ 1,566,756 $ 7,487,919 $ 1,708,630 $ 10,763,305

Hotel furniture and Accumulated depreciation Building Total operating equipment

Balances as of January 1, 2014 $ 65,858 $ 57,450 $ 123,308 Depreciation expense 84,110 78,820 162,930 Disposals - (2,801) (2,801)

Balances as of December 31, 2014 149,968 133,469 283,437 Depreciation expense 108,550 105,232 213,782 Disposals - (120) (120)

Balances as of December 31, 2015 258,518 238,581 497,099 Depreciation expense 140,337 156,593 296,930 Disposals - (747) (747)

Balances as of December 31, 2016 $ 398,855 $ 394,427 $ 793,282

Some real properties of FibraHotel are pledged against the credit lines described in Note 10, which approximate carrying value is $3,575 million.

(1) Acquisitions include business combination, as described in Note 10 Financial Statements Financial 68 8. Properties under development

2016 2015 2014

GICSA Project $ 302,559 $ 186,306 $ - Vía Vallejo Project 272,227 69,527 35,577 Fiesta Inn Los Mochis Project 141,464 39,672 10,114 Live Aqua San Miguel Allende Project 137,419 - - Cencali Project 108,767 103,010 21,761 Aloft Veracruz Project 102,125 34,397 - Fiesta Americana Via 515 Project 100,871 50,378 - Toreo Project 94,872 94,872 94,872 Fiesta Americana Tlalnepantla Project 87,756 - - Full Service Villa del Mar Project 36,838 - - Mixto Trébol Monterrey Project - 640,390 292,303 Pabellón M Project - 372,604 - Torre Américas 1500 Guadalajara AC Project - 243,517 136,337 AC Antea Project - 190,039 28,833 Juriquilla Project - 120,718 21,956 Fairfield Inn Cuautitlán Project - 57,174 - One Durango Project - 53,639 - Fairfield Inn Nogales Project - 22,065 - Hotel Toluca Project - 8,228 8,200 Ciudad del Carmen Project - - 17,407 Fiesta Inn Lofts Ciudad del Carmen Project - - 47,927 Fairfield Inn Saltillo Project - - 27,794 Others 11,702 24,153 30,490

$ 1,396,600 $ 2,310,689 $ 773,571

As a result of the public offering dated November 30, 2012, Grupo GDI made a contribution of four hotels, and received 9,697,897 CBFIs, equivalent to $179,411. As a result of negotiations, affiliates of Grupo GDI undertook the construction of these hotels. When they are open to the public, the CBFIs will obtain economic rights and FibraHotel will pay the difference between the value of the contribution and the total cost of each of the hotels.

The release of these CBFIs was carried out as follows: i) during 2013, Grupo GDI finished construction of the hotels One Guadalajara Tapatío and Real Inn Morelia, which were in the development portfolio; FibraHotel paid the remaining investment and 3,031,231 CBFIs were released; and ii) Camino Real Hotel & Suites Puebla opened in 2014, and FibraHotel paid the remaining investment as well as releases CBFIs totaling 1,538,461. As of December 31, 2016 there are 5,128,205 CBFIs without economic rights related to a project under development.

9. Suppliers and accrued expenses

Suppliers $ 210,807 $ 165,125 $ 139,921 Accrued expenses 79,258 73,724 73,714 Other accounts payable, including interest 58,042 78,087 20,245 payable of borrowings for $27,407, $2,017 y $ -

$ 348,107 $ 316,936 $ 233,880

10. Debt a. Long-term debt is as follows:

2016 2015

Long-term line of credit with mortgage security executed with Banorte, accruing interest as of 31 December 31, 2016 at 2.00 percentage points above $ 1,000,000 $ 395,933 the 91-day TIIE rate and as of 31 December 31, 2015 at 1.25 percentage points above the 91-day TIIE rate. Long-term line of credit with mortgage security executed with Banorte accruing interest at 1.30 698,067 - percentage points above the 91-day TIIE rate. Long-term line of credit with mortgage security executed with BBVA Bancomer accruing interest at 998,964 456,535 1.50 percentage points above the 28-day TIIE rate. 2,697,031 852,468

Less – Current portion (98,288) (7,849)

Long-term debt $ 2,598,743 $ 844,619 69 b. Maturities of long-term debt:

Year Maturities

2018 $ 102,150 2019 195,977 2020 200,097 2021 306,790 More than 5 years 1,793,729

$ 2,598,743

To maintain stability in the rates, FibraHotel entered into certain interest rate hedges to cover the credit lines with BBVA Bancomer and first Banorte line in accordance with the following assumptions: Four instruments, contracted with BBVA Bancomer, covering $657.9 million of the credit lines with BBVA Bancomer in accordance with the following assumptions: - If the TIIE is lower than 5.0%, FibraHotel pays the TIIE rate. - If the TIIE is between 5.0% and 9.0%, FibraHotel exchanges the TIIE rate and pays a rate of 5.0%. - If the TIIE is above 9.0%, FibraHotel exchanges the TIIE rate against a TIIE rate, less a rebate of 4.0%. An instrument, contracted with Santander, covering $341.1 million of the credit line with BBVA Bancomer in accordance with the following assumptions: - If the TIIE is lower than 5.0%, FibraHotel pays the TIIE rate. - If the TIIE is between 5.0% and 7.0%, FibraHotel exchanges the TIIE rate and pays a rate of 5.0%. - If the TIIE is above 7.0%, FibraHotel exchanges the TIIE rate against a TIIE rate, less a rebate of 4.0%. An instrument, contracted with Banorte, covering $1,000 million of the first credit line with Banorte in accordance with the following assumptions:

- If the TIIE is lower than 4.5%, FibraHotel exchanges the TIIE rate and pays a rate of 5.0%. - If the TIIE is between 4.5% and 6.0%, FibraHotel pays the TIIE rate. - If the TIIE is above 6.0%, FibraHotel exchanges the TIIE rate and pays a rate of 6.0%. With Respect to the credit line with BBVA Bancomer and Banorte, FibraHotel must comply with covenants. As of December31, 2016, FibraHotel was in compliance with such covenants.

11. Income taxes In order to maintain its status as a FIBRA, per requirements of SAT, in conformity with Articles 187 and 188 of the Income Tax Law (LISR), FibraHotel must annually distribute at least 95% of its taxable income to the holders of the CBFIs.

Fibra Hotelera, S. C. is subject to income tax (“ISR” for its acronyms in Spanish), the rate of current income is 30%. a. Income taxes expense are as follows:

2016 2015 2014 ISR: Current tax $ 1,030 $ 2,944 $ 4,545 Deferred tax 757 (60) (1,803)

$ 1,787 $ 2,884 $ 2,742

b. At December 31, 2016, 2015 and 2014 the deferred income tax asset is composed solely of temporary differences resulting from accrued expenses of $3,298, $4,055 and $3,995, respectively.

12. Financial instruments

Equity management

FibraHotel manages its equity to ensure its ability to continue as a going concern, while maximizing the net worth of its trustors and distributions to the trustors by optimizing its use of debt and equity. FibraHotel’s overall strategy remains unchanged from 2015 and 2014.

The equity of FibraHotel is primarily composed by the net worth of its trustors. Equity management objectives include ensuring the availability of operating funds to maintain the consistency and sustainability of distributions paid to trustors, while funding the required capital expenditure requirements and providing the resources needed to acquire and develop new properties.

FibraHotel can acquire hotels subject to existing financial mortgages or other encumbrances; similarly, it can acquire new debt or refinance existing debt to acquire hotels, albeit subject to compliance with leverage policies. Under certain circumstances, it could have the obligation to pay distributions in excess of the cash available for this purpose; if necessary, it can utilize the resources generated by organizing future debt and equity offerings, selling assets or obtaining loans to make certain distributions. The debt service related to this financing or indebtedness takes priority over any distributions related to the CBFIs. Financial Statements Financial 70 - Debt index

The debt index as of December 31, 2016 is a follows:

2016

Debt (i) $ 2,724,438

Total assets $ 12,430,038

Index of debt to total assets 22%

(i) Debt is defined as long and short-term loans (excluding derivatives), as described in Note 10.

Please note that the FibraHotel trust contract stipulates that the leverage level cannot exceed 40%; however, the new regulation for FIBRAS establishes that it cannot exceed 50%.

- Debt hedge index

As of December 31, 2016, the debt service coverage ratio is 1.68x. The commitments relate to: • Debt service of $390 million • Estimated capital expenditures of $265 million • Estimated non-discretionary expenditures of $287 million

- Categories of financial instruments

2016 2015 2014 Financial assets: Cash, cash equivalents and $ 448,829 $ 376,825 $ 2,091,905 restricted cash Trade accounts receivable and $ 242,685 $ 207,912 $ 169,174 other receivables Due from related parties $ - $ 3,190 $ 3,190 Derivative financial instrument $ 120,887 $ 11,441 $ -

Financial liabilities: Amortized cost $ 2,924,622 $ 1,083,601 $ 227,748

- Financial risk management objectives

Financial risk management is intended to manage financial expectations, while generating results of operations and cash flows to improve the financial position of FibraHotel and ensure its ability to make distributions to the holders of the CBFIs and fulfill any future debt obligations.

The Technical Committee of FibraHotel is responsible for advising and instructing the trustee with regard to the sale or cancellation of the CBFIs, analyzing and improving potential investments, sales and acquisitions, providing business services, coordinating access to national financial markets, as well as monitoring and managing the financial risks derived from the operations of FibraHotel through internal risk reports which provide an analysis of the level and magnitude of FibraHotel’s risk exposure. These risks include the market risk (including exchange rate and interest rate risks), credit risk and liquidity risk.

- Market risk

The activities of FibraHotel expose it mainly to financial risks of interest rate changes. FibraHotel subscribes a variety of financial derivatives to handle this exposure to exchange risk and interest rate risk, including interest rate cap spreads to mitigate the risk of interest rate increases.

Exposures to market risk are valued using the Value at Risk (VaR), supplemented by a sensitivity analysis.

There have been no changes in the exposure of FibraHotel to market risks or the way in which these risks are managed and valued.

a) Foreign currency risk management

As FibraHotel performs transactions denominated in U.S. dollars (“U.S. dollar”), it is exposed to exchange rate fluctuations involving the Mexican peso and the U.S. dollar.

71 i. As of December 31, the foreign currency monetary position is as follows:

2016 2015 2014 Thousands of U.S. dollars: $ Monetary assets $ 2,508 $ 1,561 1,759 Monetary liabilities (574) (238) (135)

Long position 1,934 1,323 1,624

$ Equivalent in Mexican pesos $ 39,964 22,764 $ 23,929

ii. Mexican peso exchange rates in effect at the date of the consolidates statement of financial position and at the date of issuance of these consolidates financial statements were as follows:

December 31, 2016 December 31, 2015 December 31, 2014 March 31, 2017

U.S. dollar $ 20.6640 $ 17.2065 $ 14.7348 $ 18.7079

- Foreign currency sensitivity analysis

Management considers that its exchange rate risk is not significant, given the amount of its long position in U.S. dollars.

If the exchange rate had increased or decreased by $1 peso per U.S. dollar and all other variables had remained constant, the result of the year and net worth of FibraHotel for the year ended December 31, 2016, 2015 and 2014 would have decreased/increased by approximately $1,934, $1,323 and $1,624, respectively.

iii. Interest rate risk management– Derivative financial instrument

FibraHotel is exposed to interest rate risk because it borrows funds at floating interest rates. The risk is managed by the FibraHotel by cap and or cap spread interest rate contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost- effective hedging strategies are applied. Detail of the derivative financial instruments is as follows:

Derivative financial instruments designed as interest rate hedge

Maximum Notional value Fair value Current Date of benefit Due date December 31, December 31, contract Bank holding % 2016 2016

Cap Spread Bancomer, S.A. 4 18/nov/15 30/oct/20 $ 180,000 $ 10,025 Cap Spread Bancomer, S.A. 4 16/dic/15 30/nov/20 153,400 8,703 Cap Spread Bancomer, S.A. 4 27/ene/16 31/dic/20 202,400 11,712 Cap Spread Santander, S.A. 4 11/mar/16 1/mar/21 341,067 14,182 Cap Spread Bancomer, S.A. 4 1/dic/15 30/nov/20 123,333 6,996 Collar Banorte, S.A. 6 15/sep/16 20/nov/21 1,000,000 69,269

$ 120,887

Based on the aforementioned financial derivatives, the debt hedged as of December 31, 2016 is 74%.

- Interest rate sensitivity analysis – Derivative financial instruments

The following sensitivity analyses have been determined based on the exposure to interest rates both for the derivatives and non-derivatives at the end of the reporting period. For variable rate liabilities, an analysis is prepared by assuming that the amount of the liability in effect at the end of the reporting period has been the liability in effect for the entire year. A sensitivity analysis was performed, taking into account the following interest rate scenarios (28 and 91 day TIIE): +100 basis points, +25 basis points, -25 basis points, -100 basis points, using a confidence level of between 95% and 99% for a time horizon of one day, the results of these effects as of December 31, 2016 are as follow:

Scenarios 28-day TIIE 91-day TIIE Impact

Less 100 basis points 5.11% 5.19% $ (15,000) Less 25 basis points 5.86% 5.94% (2,362) As of December 31, 2016 6.11% 6.19% - Plus 25 basis points 6.36% 6.44% 1,745 Plus 100 basis points 7.11% 7.19% 7,336 Financial Statements Financial 72 According to the results of the sensitivity analysis based on the scenarios and the characteristics and structure of the derivatives positions analyzed, we conclude that the market risks to which the entity’s swaps position is exposed are principally: a) 28 day TIIE rate; b) TIIE-IRS Curve and c) the correlation between the risk factors. The greater the correlation, the greater the volatility of the risk factors portfolio.

- Credit risk management

Credit risk refers to the situation in which counterparty defaults on its contractual obligations, thereby generating a financial loss for FibraHotel. Virtually all the revenues generated by FibraHotel are derived from the provision of hotel services. Consequently, its performance depends on its ability to collect revenues from hotel services from guests, as well as the capacity of the latter to make the required payments. FibraHotel’s income and funds available for distribution would be adversely affected if a significant number of guests or its main leaseholders defaulted on their rental payments, closed their businesses or filed bankruptcy proceedings.

FibraHotel has adopted the policy of negotiating hotel leases with solvent counterparties and obtaining sufficient guarantees, when necessary, as a means of mitigating the risk of losses generated by nonpayment.

Credit risk is generated by the balances of cash and cash equivalents, trade accounts receivable and other receivables included in the consolidated statement of financial position.

- Liquidity risk management

Liquidity risk represents the risk whereby FibraHotel faces certain difficulties when fulfilling obligations associated with financial liabilities which must be settled in cash or through the delivery of another financial asset. As FibraHotel is responsible for liquidity risk management, it has established a suitable liquidity risk management structure to manage its short, medium and long-term financing, while satisfying liquidity management requirements. FibraHotel manages its liquidity risk by maintaining adequate reserves, monitoring projected and actual revenue cash flows and reconciling the maturity profiles of financial assets and liabilities. The Treasury department monitors liability maturities so as to program the respective payments.

The following table details the remaining contractual maturities of FibraHotel for its financial liabilities with reimbursement periods established. The table has been designed based on the undiscounted projected cash flows of the financial liabilities based on the date that FibraHotel must generate/obtain the resources. The table includes the projected interest cash flows, taking into account the debt as of December 31 each year, as well as capital disbursements from the financial debt included in the statement of financial position. The variable interest rate financial debt is subject to change; if the changes in variable interest rates differ from those interest rate estimates determined at the end of the reporting period, the values below will differ:

Less than 1 year 1 and 3 years 3 + years Total

December 31, 2016 Debt $ 98,288 $ 298,127 $ 2,300,616 $ 2,697,031 Suppliers and accrued expenses 227,591 - - 227,591 Projected variable interest of debt, net of derivative financial instrument. 194,130 540,669 711,877 1,446,667

Total $ 520,009 $ 838,796 $ 3,012,493 $ 4,371,289

December 31, 2015 Debt $ 7,849 $ 253,429 $ 591,190 $ 852,468 Suppliers and accrued expenses 238,982 - - 238,982 Projected variable interest of debt, net of derivative financial instrument. 46,154 92,694 177,540 316,388

Total $ 292,985 $ 346,123 $ 768,730 $ 1,407,838

December 31, 2014 Suppliers and accrued expenses $ 227,748 $ - $ - $ 227,748

- Fair value of financial instruments

Fair value of financial instruments recorded at amortized cost. Except for long-term debt, carrying value of trade accounts receivable and other receivables, due from related parties, suppliers and accrued expenses are short-term in nature and, in certain cases, accrue interest at rates linked to market indicators. FibraHotel therefore considers that the carrying value of these financial assets and liabilities recognized at amortized cost approximates their fair values. The fair value of long-term debt is show as follows: 73 Fair value of financial instruments carried at FVTPL on a recurring basis are as follows

Fair value at Financial Fair value Techniques and key inputs instruments December December December hierarchy 31, 2016 31, 2015 31, 2014

Market value. The fair value of Debt $ 1,761,176 $ 616,308 $ - Level 3 debt is measured with unobservable information

Fair value of financial instruments carried at FVTPL on a recurring basis are as follows

Fair value at Investments in Fair value government Techniques and key inputs hierarchy securities December December December 31, 2016 31, 2015 31, 2014

Market value. The fair value of investments is measured by Debt $ 241,103 $ 205,982 $ 1,968,184 Level 1 quoted prices (unadjusted) in active markets for identical instruments.

Derivatives designates as hedge instruments

Valor razonable al Fair value Financial assets Techniques and key inputs December December December hierarchy 31, 2016 31, 2015 31, 2014

Discounted future cash flows are calculated on the basis of term Derivative financial interest rates (starting with the instruments observable yield curves at the designed as end of the period in question) $ 120,887 $ 11,441 $ - Nivel 2 hedge hedge – and contractual interest rates, Cap Spread discounted at a rate which reflects the credit risk of various counterparties.

- Fair value of land and buildings acquired on business combination

Land and buildings that FibraHotel acquired on business combination are recorded at fair value at the acquisition date, in accordance with IFRS 3.

The fair value of the land and buildings is determined based on the income a pro- ach. There has been no change in valuation technique during the period.

The fair value of the land and buildings of FibraHotel and the information about the hierarchy of fair value as of December 31, is as follows:

2016 2015 2014 Level 2 Fair value Level 2 Fair value Level 2 Fair value total total total Hotels of Acquisition Portfolio that include: – Land $ 34,376 $ 38,660 $ 320,129 – Buildings 203,534 129,483 1,269,354

$ 237,910 $ 168,143 $ 1,589,483 Financial Statements Financial 74 Valuation techniques and assumptions applied for purposes of determining the fair value

· The fair value of financial assets and financial liabilities with standard terms and traded in active liquid markets are determined with reference to quoted market prices (including unlisted redeemable notes, bills of exchange, perpetual and government bonds). · The fair value of other financial assets and liabilities (excluding those described above) are determined in accordance with pricing models generally accepted, based on the analysis of discounted cash flows using prices from observable current transactions in the market and quotations for similar instruments. In particular, the fair value of long-term debt, which is calculated only for the purpose of this disclosure and not for the accounting of the debt, which is considered measurement Level 3, as described below, it was determined using a model of discounted cash flows, using current rates estimates based on observable market TIIE curves and credit spread estimated using observable credit similar entities, which is adjusted as needed.

Financial instruments measured at fair value after initial recognition are grouped in three levels, based on the degree to which the fair value is observable: · Level 1 valuations at fair value are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; · Level 2 valuations at fair value are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and · Level 3 valuations at fair value are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable indicators).

13. Transactions and balances with related parties

a. Commercial transactions:

During the year, FibraHotel carried out the following transactions with related parties:

2016 2015 2014 Administradora Fibra Hotelera, S. A. de C. V. Management fee $ 104,673 $ 103,669 $ 96,730

Group A: Administrative services $ 51,572 $ 41,465 $ 40,646

The Group A is comprised of Prestación de Servicios Hoteleros GG, S. A. de C. V., Soluciones y Administración Estrátegica, S. A. de C. V., Fibra Hotelera, S. C., Solución de Recursos Humanos, S. A. de C. V., Administradora GDI, S. A de C. V., and Control y Desarrollo Administrativo, S. A. de C. V. FibraHotel pays an annual fee for the administrative services provision corresponding to personnel employee benefits and taxes, of 5%. The above transaction is documented through renewable five-year agreements.

b. Due from related parties:

2016 2015 2014

Controladora Cabi FHM $ - $ 2,174 $ 2,174 Alterturismo, S. de R. L. de C. V. - 734 734 Grupo Innovador Turístico y de Servicios, S. de R. L. de C. V. - 233 233 Grupo Empresarial Hermosillo - 49 49

$ - $ 3,190 $ 3,190

75 14. Trustees’ equity

Contributions

a. Equity contributions of trustors at par value are as follows:

Initial capital contribution Issuance of CBFIs Total

$ 15 $ 10,009,645 $ 10,009,660

On February 5, 2016 the initial contributed net worth of FibraHotel has been paid in full.

b. The net worth of FibraHotel is represented by an initial contribution of $15, the Contribution Portfolio, the Contribution Portfolio under Development and the resources generated by issuing the CBFIs in the IPO, as discussed below:

c. On May 30, 2013, FibraHotel held a subsequent offering of CBFIs in the Bolsa Mexicana de Valores (“BMV”) and in other international markets. The total amount of the offering was $4,877,725, offering 195,000,000 CBFIs, including overallotment at $24.95. The Control Trust of FibraHotel participated in the subscription of 2,000,000 CBFIs.

As of December 31, 2016, 2015 and 2014, there were 499,401,766 CBFIs outstanding.

Distributions-

a. As of December 2016, 2015 and 2014, the Technical Committee of FibraHotel has approved and paid distributions of the tax income accounts, to the CBFIs owners as follows:

Date of Distribution Distributions from Distributions of distribution by CBFI Total distributions equity redemption taxable income approval (Pesos)

February 16, 2016 $ 0.2380 $ 117,659 $ - $ 117,659 April 19, 2016 0.2003 89,757 9,224 98,981 July 19, 2016 0.2408 119,008 - 119,008 October 18, 2016 0.2726 96,049 38,695 134,744

Total December 2016 $ 422,473 $ 47,919 $ 470,392

Date of Distribution Distributions from Distributions of distribution by CBFI Total distributions equity redemption taxable income approval (Pesos)

February 19, 2015 $ 0.2250 $ 111,216 $ - $ 111,216 April 21, 2015 0.2074 85,452 17,052 102,504 July 21, 2015 0.2204 63,014 45,926 108,940 October 20, 2015 0.2153 75,552 30,877 106,429

Total December 2015 $ 335,234 $ 93,855 $ 429,089

February 17, 2014 $ 0.2134 $ 105,001 $ - $ 105,001 April 29, 2014 0.2001 98,590 - 98,590 July 22, 2014 0.2313 47,421 66,886 114,307 October 21, 2014 0.2025 100,104 - 100,104

Total December 2014 $ 351,116 $ 66,886 $ 418,002

b. The distribution through CBFIs is the result of dividing earnings before interest, taxes, depreciation and amortization (EBITDA in English), less the CAPEX reserve and extraordinary expenses, by the number of CBFIs outstanding with economic rights. As of December 31, 2016, 2015 and 2014 the CBFIs without economic rights were 5,128,205. Financial Statements Financial 76 15. Minimum lease payments

The aggregate annual future minimum lease payments expected to be received under existing operating leases are as follows:

Period Fiesta Inn Live Aqua Boutique

Less than 1 year $ 53,487 $ 19,443

1 to 5 years 267,435 77,772

$ 320,922 $ 97,215

The lease contracts have remaining terms ranging from one to five years.

The aforementioned minimum lease payments do not include amounts expected to be received with respect to contin- gent rentals, which is mainly comprised of rent increases based on inflation and variable income, if any. Additionally, the payments disclosed only consider the compulsory lease term and do not consider any renewal periods, related to minimum future rentals.

16. Business segment information

a. Segments financial information

Segment information reported externally was analyzed on the basis of the types of room revenues, food and beverage income, operating expenses for the different types of hotel brands that comprise the investment portfolio of FibraHotel. However, the information analyzed by management who makes operating decisions of the Trust for purposes of allocating resources and assessing segment performance is focused more specifically on the category of customer for each type of portfolio. The main categories of customers for these goods are services provided and brand. FibraHotel segments to report according to IFRS 8 are therefore the following:

Limited service

Limited service hotels offer a service, as its name implies, of convenience, which traditionally has no bars, restaurants or conference or meeting rooms, nor does it offer additional services, but in recent years the trend has been that this class hotels offer a mix of services, including business centers, gyms and swimming pools, with a limited selection of food (breakfast included) and limited spaces boardrooms.

Select service

These hotels provide certain additional services to limited service hotels, including the offer of food and drink, restaurants, bars and room service 24 hours. Rooms for social and business events, as well as additional services within the room.

Extended stay

Hotels in this segment are characterized by a suite format in studio setups with one or two bedrooms, almost always with a full kitchen and a dining space and workspace. Among the services provided by these hotels are public areas similar to a hotel of select services without meeting rooms.

Full service

These hotels have a robust supply of food and beverages with several centers of consumption (restaurants and bars), boardrooms and conference rooms for business and social events as well as in certain cases additional services related to complete service hotels such as spas, room service, valet parking, concierge, bell boys and more extensive public areas.

77 b. Income and segment results

An analysis of income and results of the Trust of continuing operations is presented by reported segment:

2016 Select service Limited service Extended stay Full service Corporate Total Revenue for: Rooms $ 1,252,953 $ 413,211 $ 67,985 $ 323,108 $ - $ 2,057,257 Food and beverages 360,156 - - 108,241 - 468,397 Real Estate Rentals 73,436 - - 6,396 - 79,832 Others - - - - 29,519 29,519 1,686,545 413,211 67,985 437,745 29,519 2,635,005 Costs and expenses: Rooms 234,077 93,643 11,961 62,995 - 402,676 Food and beverages 205,384 2,846 - 77,583 - 285,813 General and administrative 704,060 192,021 7,564 199,438 - 1,103,083 Corporate - - - - 290,133 290,133 Depreciation - - - - 296,930 296,930 1,143,521 288,510 19,525 340,016 587,063 2,378,635

Financial expenses net and others (40,693) Income before income taxes $ 215,677

2015 Select service Limited service Extended stay Full service Corporate Total Revenue for: Rooms $ 1,015,905 $ 309,166 $ 48,600 $ 167,649 $ - $ 1,541,320 Food and beverages 298,442 - - 69,083 - 367,525 Real Estate Rentals 74,251 - - 1,142 - 75,393 Others - - - - 23,699 23,699 1,388,598 309,166 48,600 237,874 23,699 2,007,937 Costs and expenses: Rooms 181,793 65,309 7,718 33,886 - 288,706 Food and beverages 171,081 - - 44,192 - 215,273 General and administrative 572,623 142,612 1,509 117,034 - 833,778 Corporate - - - - 246,694 246,694 Depreciation - - - - 213,782 213,782 925,497 207,921 9,227 195,112 460,476 1,798,233

Financial expenses net and others 29,756 Income before income taxes $ 239,460

2014 Select service Limited service Extended stay Full service Corporate Total Revenue for: Rooms $ 839,237 $ 210,495 $ 14,565 $ 97,728 $ - $ 1,162,025 Food and beverages 245,726 - - 43,936 - 289,662 Real Estate Rentals 62,825 3,777 - 2,195 - 68,797 Others - - - - 10,280 10,280 1,147,788 214,272 14,565 143,859 10,280 1,530,764 Costs and expenses: Rooms 139,077 43,245 1,907 14,358 - 198,587 Food and beverages 138,670 1,641 - 24,355 - 164,666 General and administrative 483,199 93,635 - 65,830 - 642,664 Corporate - - - - 229,851 229,851 Depreciation - - - - 162,930 162,930 760,946 138,521 1,907 104,543 392,781 1,398,698

Financial expenses net and others 124,379 Income before income taxes $ 256,445 c. The main assets and liabilities by segment as of December 31, are as follows: 17. Commitments and contingencies 2016 Select service Limited service Extended stay Full service Others Total Except as noted previously, neither FibraHotel nor its assets are subje Hotel properties, furniture and operating $ 1,772,760 $ 5,231,710 $ 415,481 $ 2,549,146 $ 926 $ 9,970,023 ct to any type of legal action, other than those stemming from its rout equipment – Net ine operations and activity. Properties under development $ 145,507 $ 768,498 $ 94,872 $ 387,723 $ - $ 1,396,600 Long-term liabilities (1) $ - $ - $ - $ - $ 2,697,031 $ 2,697,031 18. Authorization to issue the consolidated financial statements 2015 Select service Limited service Extended stay Full service Others Total The consolidated financial statements were autho- Hotel properties, furniture and operating rized for issue on March 31, 2017, by Lic. Edouard Bou- equipment – Net $ 1,343,777 $ 5,030,418 $ 369,317 $ 791,306 $ 843 $ 7,535,661 drant Finance Director and Lic. Eduardo López, Man- Propiedades en desarrollo $ 253,596 $ 538,850 $ - $ 1,496,927 $ 21,316 $ 2,310,689 aging Director of FibraHotel, consequently they do Deuda (1) $ - $ - $ - $ - $ 852,468 $ 852,468 not reflect events after this date, and subject to the approval at the Gen- eral Ordinary Trustors meeting which may be modify them. 2014 Select service Limited service Extended stay Full service Others Total Hotel properties, furniture and operating $ 946,500 $ 5,130,743 $ 125,000 $ 522,218 $ 613 $ 6,725,074 equipment – Net * * * * * * Properties under development $ 57,950 $ 179,731 $ 47,927 $ 457,473 $ 30,490 $ 773,571 Debt was issued at the holding level, which cannot be allocated to a specific segment. Financial Statements Financial 78 79

Designed by: www.katapolt.mx FIH Directory O C.P. 06500,Ciudad deMéxico Colonia Cuauthémoc,Delegación Cuauthémoc, Paseo delaReforma #115,Piso6 Miembro deDeloitte Touche Tohmatsu Limited Deloitte –Galaz Yamazaki, RuizUrquiza, S.C. EXTERNAL AUDITOR: Miguel Hidalgo, CiudaddeMéxico Col. Lomas deChapultepec, Delegación Av. Paseo delasPalmas núm.215Piso2, CI Banco S.A.,InstitucióndeBancaMúltiple COMMON REPRESENTATIVE: Delegación Miguel Hidalgo, C.P. 11000,CiudaddeMéxico Torre EsmeraldaI,ColoniaLomas deChapultepec, Blvd. Manuel Ávila Camacho,#40Piso17, de BancaMúltiple, DivisiónFiduciaria Deutsche Bank México, S.A.,Institución TRUSTEE: C.P. 05349,CiudaddeMéxico Colonia CruzManca,Delegación Cuajimalpa, Avenida SantaFe #481Piso7 Torre Corporativo World Plaza S.A. deC.V. Administradora Fibra Hotelera Mexicana, ADMINISTRATOR: www.linkedin.com/company/fibrahotel www.twitter.com/FibraHotel www.fibrahotel.com C.P. 05349,CiudaddeMéxico Colonia CruzManca,Delegación Cuajimalpa, Avenida SantaFe #481Piso7 Torre Corporativo World Plaza FibraHotel ISSUER: LiveTrébol Aqua Monterrey (con sobreasignación) Monto T (con sobreasignación) (con sobreasignación) Monto T Monto T Fecha deListadoenlaBM Clave deCotización: FIBRAS emitidosporConcentradoraFibraHoteleraMexicana, Certificados Bursátil C asa deB E v Grupo F er c otal delaOfertaenMéxico: otal delaOfertaInternacional: otal delaOfertaGlobalInicial: or olsa B e C La Bolsa Mexicana haceconstarellistadodelos La BolsaMexicana S.A. deC.V inancier asa deB Asesor y V A Banc o B olsa, S.A.deC.V V omer A Banc Características delaEmisión: IntermediariosColocadores:

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Av. Santa Fe No. 481-Piso 7, Col. Cruz Manca, CP 05349 Del. Cuajimalpa, México D.F. www.fibrahotel.com