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Soma BreeZe Apartment owners will be entitled to place their apartments into a managed rental pool, during the period(s) when the apartment is not owner-occupied.  The regulations governing this program are outlined below.  The Rental Program will apply to all types of apartments except for Type K Duplex apartments.

In order to place an apartment in the rental pool, or to withdraw it therefrom, three months written notice will need to be given to The Manager. The Manager shall have sole discretion to accept or reject any application to place an apartment within the pool, but no such discretion will apply in connection with the withdrawal of apartment units from the pool.

The Manager, to be appointed by Soma Bay Development Company, shall have sole responsibility to arrange for the rental or letting of the apartments placed within the pool, and for otherwise managing all aspects of the operations of the Soma BreeZe Hotel Residences.

For this purpose Soma Bay Development Company has established a separate specialist hotel management company (named Soma Bay Hotel Management Company). This entity is responsible to manage La Résidence des Cascades (a member of The Leading Hotels of the World), The Breakers – Diving and Surfing Lodge, and the Soma BreeZe Hotel Residences.

The Manager shall account on a quarterly basis to each owner of the apartments placed in the pool for revenues generated globally from the rental of the apartments within the pool.

Expense deductions from rental revenues shall consist of:

1. The actual expenses incurred by the Hotel Residences (utilities, salaries, laundry, taxes, service charges, etc) from which shall be deducted the all-inclusive service charge collected from each apartment owner.
2. A Basic Fee accruing to the Manager amounting to 1.5% of gross rental revenues net of sales taxes.
3. The net difference between revenues and expenses for each calendar quarter shall be deemed the Gross Quarterly Operating Profit of the Pool. In the event of a Gross Operating Loss, this loss shall be carried forward and recovered from subsequent accounting periods.

The Gross Quarterly Operating Profit shall then be apportioned as follows:

• 20% - To The Manager, to be deemed the Manager's Incentive Fee.
• 80% - To the owners of the apartments within the pool, to be deemed the Net Quarterly Operating Profit (NOP). The NOP shall be apportioned among the apartments participating in the pool on a weighted basis. The weighting of each apartment shall consist of the number of days during which the apartment was included in the Pool during the relevant quarter, multiplied by a "rental index" reflecting the type and size of the apartment unit.

During the first calendar year following the official opening of the Soma BreeZe Hotel Residences the rental index for each type of unit shall be those given in the following table. Subsequently, they shall be subject to change at the Manager's discretion upon giving three months written notice to all apartment owners; any such change to reflect the actual rental revenue yielded per type of rental unit in the preceding period.

Based on the current average occupancy rates and average unit revenues achieved by Sheraton Soma Bay Resort on its premium suites (whose configuration is similar to the Basic Soma BreeZe apartment unit), and making appropriate adjustments therefrom, it has been conservatively estimated that a Soma BreeZe apartment unit placed in the proposed Rental Program should yield the owner a return of the order of 7% per annum. Occupancy rates during the first period of operation may initially be lower than anticipated as the property is first introduced to the market, but occupancy levels should improve with time to reach an anticipated average level of 65% or more per calendar year. Average unit rental revenues are also expected to increase as Soma Bay matures and becomes more widely known to the market at large. As this happens rental yields to apartment owners should increase in consequence, to reach and surpass the estimated level referred to above.

The operating track-record of hotels at Soma Bay suggests that it takes 2 to 3 years following start-up for a property to become known to the market and to reach occupancy rates approaching longer-term trends. As a result, the Developer has agreed to make-up any shortfall in rental revenues during the first three years of operation of the Soma BreeZe Hotel Residences such as to ensure a minimum annualized  pre-tax return of 5% (or 4% after taxes) to apartment owners during the period in which each apartment is placed in the Soma BreeZe Rental Program. This commitment shall not apply for Type K Duplex apartments.

The commitment of the Developer to make-up any rental shortfall during the first three calendar years of the Rental Program shall be determined at the end of each of the first three calendar years following the date of project start-up, and shall be calculated on the basis of the following formula:

In the event that the actual pre-tax NOP distributed on an apartment unit during the calendar year is equal or greater than 5% of its purchase price, the Developer's corresponding commitment will be zero. Any payment by the Developer on account of the minimum return commitment will be carried forward as a payable due to the Developer, to be repaid without interest from future Net Operating Profit, generated from the same apartment unit, subject that any such re-payment does not reduce the NOP distributed to the apartment Owner below a minimum annualized pre-tax return of 5% compared to the apartment unit's purchase price.

For the purpose of calculating the minimum return on Lock-out Studios, the purchase price of these units shall be deemed to be € 104,000.

For purposes of calculating the minimum 5% return, an apartment will be deemed to have been placed in the rental pool upon the Owner giving three months written notice to the Manager, irrespective of whether the Manager accepts or rejects such notice.