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Desert Mountain Club Advisory Board Town Hall Meeting March 26, 2007 v. 7 a Desert Mountain Club Advisory Board Town Hall Meeting March 26, 2007 v. 7 a

Overview Purpose of Meeting • Explain the Turnover Process as set out in the Overview Purpose of Meeting • Explain the Turnover Process as set out in the Deferred Equity Plan and Bylaws • Describe Board actions and positions • Discuss Crescent’s recent announcement and the significance to members • Q&A 1

Turnover Perspective Relative Values… $millions The Desert Mountain Club’s represents <5% of home values Turnover Perspective Relative Values… $millions The Desert Mountain Club’s represents <5% of home values 2

The Turnover Process What we are buying: The Desert Mountain Club: • 6 Golf The Turnover Process What we are buying: The Desert Mountain Club: • 6 Golf Courses - including all maintenance facilities, etc. • 6 Club Houses - including restaurant facilities, shops, furnishings, etc. Buyout formula: • 3 year average cash flow x 8 (with a $95 million cap) + Club Net Current Assets. – Cash flow defined as Operating Profit + Transfer fees – Cash flow as defined is not reduced by capital spending Note: • Club to be delivered “… in first-class condition, in a manner comparable to other similar first-class clubs in the Southwestern United States. ” 3

The Turnover Process Calculating the Turnover Price – 2 Scenarios Current • • 2005 The Turnover Process Calculating the Turnover Price – 2 Scenarios Current • • 2005 2006 2007 Total Forecast $14, 481, 000 8, 870, 000 9, 742, 000 $33, 093, 000 • • • Average $11, 031, 000 • Average $13, 000 • 8 x Multiple $88, 248, 000 • 8 x Multiple $104, 000 2008 2009 2010 Total $12, 000 13, 000 14, 000 $39, 000 • Valuation Cap $95, 000 4

The Turnover Process What we have Options to purchase: • Parcel 19 & water The Turnover Process What we have Options to purchase: • Parcel 19 & water rights • Sales office & brokerage • Un-issued memberships, if offered by DMP Option Buyout formula: • Parcel 19: Option exercised 3/31/06 for $19, 625, 000 plus interest accruing at 6%, payable at closing by assessment of the membership • Sales office & brokerage: Subject to appraisal • Un-issued memberships, if offered by DMP: To be negotiated – DM Members were offered most of DMP’s excess memberships @ $260, 000 for a golf membership and $80, 000 for a club membership. DM Members voted overwhelmingly to turn down that offer. 5

Turnover Timing of Turnover • No later than December 31, 2010, closing 60 days Turnover Timing of Turnover • No later than December 31, 2010, closing 60 days after end of period • Early Turnover would require approval of members and Desert Mountain Properties 6

Financing the Turnover • Mortgage – DMP obligated to deliver a mortgage for the Financing the Turnover • Mortgage – DMP obligated to deliver a mortgage for the purchase price of Golf Course and Clubhouse related facilities • $95 million mortgage service : – 25 year @ 6. 0% = $7, 345, 000 per year – 20 year @ 6. 5% = $8, 500, 000 per year • Assessment and/or Alternative Financing For Other Assets – Parcel 19 and water rights – Sales office & brokerage – Un-issued Memberships – Working capital 7

The Turnover Process How the Turnover Process Occurs • Defined in Deferred Equity Plan The Turnover Process How the Turnover Process Occurs • Defined in Deferred Equity Plan and Bylaws • Supported by specialized legal counsel – After a nationwide search, the Advisory Board has retained the Addison Law Firm – Lead Attorney, Randy Addison, Senior Partner • Additional specialized consultants envisioned in Plan and Bylaws 8

Addison Law Perspective Randy Addison, Addison Law • Structure of Equity Member Entity • Addison Law Perspective Randy Addison, Addison Law • Structure of Equity Member Entity • Turnover and transfer process – Negotiation with DMP – Due Diligence Review – Turnover documentation • Amendment of Deferred Equity Membership Plan and Bylaws/Membership Vote • Transition and closing process 9

The Board Position on Turnover The Board’s Position & Actions • From 2003 – The Board Position on Turnover The Board’s Position & Actions • From 2003 – 2007, the Advisory Board has been proactively evaluating and exploring the Turnover Issue consistent with the Bylaws of the club • The following chronology will provide an overview of this process 10

The Board Position on Turnover 2003 - Formation of the Current Advisory Board • The Board Position on Turnover 2003 - Formation of the Current Advisory Board • Proactive education and observation process began • Clear understanding that the Turnover was a primary function of the Board – Various aspects of the Turnover have been the prime topic and focus – Almost all actions the Board has been asked to undertake or the Board has proactively initiated have had Turnover implications 11

The Board Position on Turnover 2005 - Parcel 19 Option • First significant action The Board Position on Turnover 2005 - Parcel 19 Option • First significant action in turnover process • Board did extensive work to study issue and make a recommendation • Town Hall Meetings and documents to educate membership • In March, 2006, DM Members voted, by 8: 1 margin, in favor of exercising option 12

The Board Position on Turnover 2005 - Turnover Brainstorming Sessions • Board had multiple The Board Position on Turnover 2005 - Turnover Brainstorming Sessions • Board had multiple brainstorming and white boarding sessions to explore Turnover issues (pros & cons) • Board concluded that an early Turnover would serve the best interests of DM Members • Board began exploratory discussions with DMP 13

The Board Position on Turnover Rationale for an early Turnover • 97% of DMP The Board Position on Turnover Rationale for an early Turnover • 97% of DMP real estate sold • Diverging interests between ownership & DM Members – Ownership seeks to maximize short term cash flow – Membership interest in maximizing quality and building increased long term value • Management insecurity – senior people leave and express that future uncertainty is an issue • Membership issues becoming a problem – Surrender list is growing – Excess memberships held by DMP • Crescent control post turnover if there are excess memberships 14

The Board Position on Turnover 2006 - Board Meetings with DMP & Crescent • The Board Position on Turnover 2006 - Board Meetings with DMP & Crescent • Board requested direct access to Crescent executives • In initial discussions, Crescent indicated that an early Turnover would only be acceptable if the unsold real estate was purchased as part of any deal • Board supports DM Membership’s strong belief that the club should not be in real estate business • Crescent indicates that they are committed to DM and here for the long haul 15

The Board Position on Turnover 2006 - DMP Membership Buyout Offer • Per Bylaws, The Board Position on Turnover 2006 - DMP Membership Buyout Offer • Per Bylaws, DMP offers DM Members the option to purchase excess memberships at $260, 000 for DEGM and $80, 000 for DECM • Board recommends rejection of the offer • DM Members vote overwhelmingly against offer • DMP informs Board that excess memberships will be offered to owners of DM property who do not have memberships – To Board’s knowledge, no memberships are sold as a result of that offer • DMP informs Board they intend to offer memberships to nonproperty owners 16

The Board Position on Turnover 2006 - Board Seeks Professional Support • Board begins The Board Position on Turnover 2006 - Board Seeks Professional Support • Board begins search for legal counsel • Board retains Addison Law firm following interview process • Board requests funding for legal counsel and consultants through formal letter enumerating that: Ø The Advisory Board wishes to hire outside counsel to advise and assist on the following issues: Ø Advice, counsel and formation of an entity which would acquire the club and other assets at, or prior to turnover. Ø The formation of this entity which would include organization and formation documentation as well as Articles of Incorporation and most importantly Bylaws. Ø Advice, counsel and selection of a Governance Model. Ø Review of all pertinent Developer related documents and agreements related to the transfer of the Club to the Member Entity. Ø Advice and counsel on strategies to raise sufficient funds for the Membership entity. Ø Advice and counsel on means to secure management continuity including but not limited to stay bonus arrangements and contracts. Ø Development of a Club transfer timeline and summary of the transfer process and terms. 17

The Board Position on Turnover January 2007 – Board Meets with Crescent at DM The Board Position on Turnover January 2007 – Board Meets with Crescent at DM • Board meeting with Crescent President/COO & CFO to put forward the rationale for funding of professional support • Discussions regarding Crescent position on an early Turnover suggest that Crescent would entertain a proposal which did not include real estate 18

Crescent Negotiations Late January 2007 – Visit to Crescent in TX • Board develops Crescent Negotiations Late January 2007 – Visit to Crescent in TX • Board develops detailed proposal for an early turnover delivered to Crescent by Richard Pallan and Steve Draizin with Randy Addison • Any agreement would be subject to vote by DM Members 19

Crescent Negotiations Board Terms Sheet Delivered to Crescent 20 Crescent Negotiations Board Terms Sheet Delivered to Crescent 20

Crescent Negotiations 21 Crescent Negotiations 21

Crescent Negotiations February 2007 • Crescent turns down Board proposal March 2007 • Crescent Crescent Negotiations February 2007 • Crescent turns down Board proposal March 2007 • Crescent announces DMP up for sale Mid - March 2007 • Board meets with Jerry Crenshaw of Crescent – Crescent packaging DMP with other residential/resort properties for sale – Crescent has not changed its position regarding Board proposal 22

Crescent 8 -K March 17, 2007; Statistics as of December 31, 2006 23 Crescent 8 -K March 17, 2007; Statistics as of December 31, 2006 23

Crescent 8 -K March 17, 2007; Statistics as of December 31, 2006 24 Crescent 8 -K March 17, 2007; Statistics as of December 31, 2006 24

Crescent 8 -K March 17, 2007; Statistics as of December 31, 2006 25 Crescent 8 -K March 17, 2007; Statistics as of December 31, 2006 25

Crescent Negotiations Given Crescent’s announced plan, what are the likely outcomes? • DMP sold Crescent Negotiations Given Crescent’s announced plan, what are the likely outcomes? • DMP sold as part of the large package – New buyer keeps DM through 2010 – New buyer opens negotiations with Advisory Board • DMP is unbundled from package – Crescent offers it separately to others and/or reopens negotiations with DM Members – Crescent withdraws DMP from sale 26

Crescent Negotiations Current Board Position • Formally withdrew offer to Crescent • Formally requested Crescent Negotiations Current Board Position • Formally withdrew offer to Crescent • Formally requested beginning negotiations to amend the Deferred Equity Membership Plan, under section 13. 8. 4 of the Bylaws. (Letter to DMP follows) • Expect to receive “selling book” from JP Morgan • Seeking alternatives to take out real estate if necessary • Future actions will depend on how situation unfolds 27

Crescent Negotiations Desert Mountain Club Advisory Board c/o Stephen Draizin, Chairman 37552 N. 94 Crescent Negotiations Desert Mountain Club Advisory Board c/o Stephen Draizin, Chairman 37552 N. 94 th Street Scottsdale, AZ 85262 April 2, 2007 Desert Mountain Properties Limited Partnership Attn: Mr. Jon Underwood, President 10550 East Desert Hills Drive Scottsdale, AZ 85262 -3438 Re: Turnover of Club Facilities Gentlemen: As discussed in previous meetings with Desert Mountain Properties (“DMP” or the “Company”), the Desert Mountain Club Advisory Board (the “Advisory Board” has the responsibility to help plan for the Turnover of The Desert Mountain Club (the “Club”) and in that regard has reviewed various information provided by DMP concerning the Club and Club Facilities and additional information has been requested. As we approach Turnover, the Advisory Board is further charged with the responsibility under Section 13. 8. 4 of the Bylaws of the Club (the “Bylaws” or “Plan”) to negotiate with the Company a proposed amendment to the Plan to further clarify the implementation of the existing Turnover provisions in the Plan. The amendment shall be subject to approval by the Deferred Equity Members through a vote taken in accordance with the Plan. The Plan further states that in the event that the Company and the Advisory Board Entity are unable to agree upon the terms of a proposed Plan amendment to submit to the Deferred Equity Members, or in the event that the Deferred Equity Members do not approve a proposed Plan amendment submitted to them for approval, the Plan shall nonetheless remain in full force and effect, subject to its terms. There are several outstanding matters that have been discussed between the parties that would need to be addressed in the amendment to the Plan concerning the Turnover or any sale of the Club Facilities, which in general terms are as follows: 1. The Club’s extensive Surrender Membership List and obligations related thereto. 2. Conversion Rights of certain existing Desert Mountain Property owners, Non-Equity Members and associated obligations. 3. Improvements required to fulfill DMP obligations to maintain, at DMP’s cost and expense, the Club Facility, in a first-class condition, in a manner comparable to other similar first-class clubs in the Southwestern United States. 4. The Un-issued Deferred Equity Memberships’ (Golf and Club) rights and obligations as well are disclosure requirements related thereto. 5. Third Party Beneficiaries. 6. Existing and contingent liabilities. 7. Identification of all Club Facilities. 8. Right to repurchase un-surrendered Memberships of certain non-property owners. 9. Pro-rations at Closing. 10. Title, Survey, Environmental and other customary due diligence for real estate transactions. 11. Transition matters and related issues. 12. Terms of the Mortgage. 13. Terms of any plan of DMP to sell the un-issued Deferred Equity Memberships. As stated above, these are merely general statements of the issues to be discussed between the parties. In our November 4, 2006 letter to DMP, the Advisory Board formally requested funding for independent legal and other independent advisors we believed were necessary for us to perform our roles as specified in the Bylaws. Now, due to the recent announcement of the proposed sale of Desert Mountain Properties, the Advisory Board believes that our request is more urgent, and again respectfully requests funding for independent legal counsel and other independent advisors, as needed, for addressing the issues for the proposed Plan amendment pursuant to Section 13. 10 of the Bylaws. Please advise if DMP is willing to proceed with the requested funding and we will forward a budget for DMP’s reasonable approval pursuant to Sec 13. 10. Also, please advise a convenient date to meet and discuss these open issues so the Advisory Board may meet its responsibility under Section 13. 8. 4 of the Bylaws. Thank you. Respectively submitted, __________ Stephen Draizin, Chairman Desert Mountain Club Advisory Board Charlie Kennedy, Vice President Glenn Hughes Jim Kuntz, Secretary Roy Humphries June Cohen Mark Jorgensen Ted Hollow Richard Pallan cc: Mr. Denis H. Alberts, President and Chief Operating Officer Mr. Jerry R. Crenshaw, Consultant Crescent Real Estate Equities Company 777 Main Street, Suite 2100 Fort Worth, Texas 76102 28

Q&A Q. Why should we consider an early Turnover? A. Member control of our Q&A Q. Why should we consider an early Turnover? A. Member control of our own destiny will insure that adequate investments are made to insure that DM remains a world class Club, and, in turn, protects and enhances the value of DM Member owned real estate. Also, an early Turnover would end uncertainty about the future. It would substantially enhance our ability to attract - and, most importantly, retain - high quality employees. It would reduce or eliminate the likelihood of conflict with the developer. We will be able to control the sale and use of Parcel 19. Finally, we have been advised by local real estate brokers that the uncertainty associated with Turnover may be reducing the appeal of DM residential real estate. 29

Q&A Q. How soon does Crescent plan to sell their “resort/residential” real estate holdings? Q&A Q. How soon does Crescent plan to sell their “resort/residential” real estate holdings? A. Crescent has hired JP Morgan to market and sell all of their resort/residential holdings. A selling memorandum should be completed within 30 days. The speed of the sale will depend upon who and how many parties responds to the document. 30

Q&A Q. What is the Board’s action plan? What is the next step? A. Q&A Q. What is the Board’s action plan? What is the next step? A. Based on the response we have gotten from Crescent, we will continue to maintain our contact with them and continue to be open to a possibly mutually beneficial transaction. We will also monitor their efforts to sell their real estate “package”, explore financing options in the event we have an opportunity to negotiate and present to DM Members an early turnover plan and continue to represent DM Members in meetings with DMP. 31

Q&A Q. How does the Board plan on paying for the assets acquired at Q&A Q. How does the Board plan on paying for the assets acquired at Turnover? A. As part of Turnover, Crescent is to deliver a mortgage to DM Members for the formulaic value of the Club assets; we expect that transfer fees will cover the debt service on that mortgage and future club capital expenditures. For other assets we might acquire, we are exploring various alternatives. 32

Q&A Q. What is meant by “ 1 st Class Condition”? A. The bylaws Q&A Q. What is meant by “ 1 st Class Condition”? A. The bylaws state that the Club will be turned over to DM Members “…in a first-class condition, in a manner comparable to other similar first-class clubs in the Southwestern United States. ” We are currently working with Counsel – and expect to work with specialist consultants – to fully define this provision. 33

Q&A Q. How does the Board plan on paying for necessary professional experts to Q&A Q. How does the Board plan on paying for necessary professional experts to assist us in this process? A. Under the Bylaws and Membership Plan, Crescent is required to pay for such experts 12 – 18 months prior to Turnover. The Board believes Turnover has already begun, and has formally requested funding for legal assistance and other assistance as the Board deems necessary going forward. To date, Crescent has denied this request. The Board is exploring alternatives to pay for necessary assistance. 34

Q&A Q. Why did the Board offer to buy Crescent’s excess Deferred Equity Golf Q&A Q. Why did the Board offer to buy Crescent’s excess Deferred Equity Golf Memberships when DM Members turned down Crescent’s offer to sell them to us? Why did the Board offer $125, 000 per DEGM? A. Crescent would not entertain any offer that did not include the purchase of the excess memberships. Also, acquisition of excess DEGM’s is necessary to avoid any post-Turnover control by Crescent. DM Members rejected purchase at $260, 000, but not necessarily at $125, 000. Given that future sale of a large number of excess memberships will take time, the Board believes a bulk purchase discount is appropriate. In addition, if purchased in bulk, DM Members would have to pay carrying costs until future sale. Finally, future membership sales will likely incur marketing and sales costs. 35

Q&A Q. Are we obligated to buy Crescent’s excess DEGM’s and DECM’s? Is it Q&A Q. Are we obligated to buy Crescent’s excess DEGM’s and DECM’s? Is it in DM Members’ interests to try to buy those excess memberships? If, so, why? A. No, we are not obligated to buy any excess DEGM’s or DECM’s. However, if Crescent owns as many as one membership post-Turnover, they have the right to control membership pricing, transfer fees and related bylaws. Therefore, the Board believes it would be in DM Members’ interests to acquire the excess DEGM’s and DECM’s if that can be done economically. 36

Q&A Q. How does one calculate the number of excess Deferred Equity Golf memberships? Q&A Q. How does one calculate the number of excess Deferred Equity Golf memberships? A. The calculation is as follows at March 1, 2007: 89 Surplus memberships 82 Reserved for conversion (additional 20 at no cost) 171 Total un-issued 84 Surrender list 255 Total Memberships 37

Q&A Q. Will Crescent sell the Desert Mountain residential real estate and continue to Q&A Q. Will Crescent sell the Desert Mountain residential real estate and continue to own and operate the Desert Mountain Club? A. Crescent has said publicly that if they cannot sell the Club they will stay until normal Turnover on or before March 1, 2011. 38

Q&A Q. Will the Board run the Club after Turnover? A. The Desert Mountain Q&A Q. Will the Board run the Club after Turnover? A. The Desert Mountain Club is not your typical country club! This Board envisions a structure identical to the one currently in place, i. e. an elected Board overseeing a professional management group. 39

Q&A Q. I have heard that if we take over the club early, dues Q&A Q. I have heard that if we take over the club early, dues will skyrocket, is this true? A. The current Board philosophy is that the club operating budget should break even from current dues, fees and services. Last year, the club incurred an operating loss of $2. 2 million. Without adjusting fees or imposing minimums, the Board estimates that monthly dues would have increased between $75 and $80 per month. 40

Q&A Q. How is the Board’s Communications Plan working? A. We have successfully held Q&A Q. How is the Board’s Communications Plan working? A. We have successfully held several “Office Hours” meetings with interested members. We are holding, with DMP’s support, these Town Hall meetings. We continue to be constrained in what we can say in written communications to DM Members. DMP controls the mailing list and the email list, and allows the AB to send communications to DM Members after DMP edits what the AB has written. 41