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Krystal Hotel Acquired to Expand Hilton Puerto Vallarta

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October 31, 2016

According to a market study, from January to July 2016 traveler demand to Puerto Vallarta increased 17% and 12% in the domestic and international markets, respectively, compared to the same period in 2015.

Puerto Vallarta, Jalisco, Mexico - Grupo Hotelero Santa Fe (The Company) recently announced the acquisition of real estate properties consisting of 54 units for hotel-only purposes, as well as an undeveloped land lot of 1,043 square meters, which currently comprise 162 hotel suites, located in usable area of approximately 15,100 square meters, and is adjacent to the Hilton Puerto Vallarta Hotel.

The transaction represented an investment of $12.0 million USD (224 million Pesos). The Company expects an additional investment of 296 million Pesos for this project for a total investment of 520 million Pesos. Given that the acquisition would consist of the expansion of an existing hotel, the Company expects to achieve operating efficiencies as well as economies of scale that will result in profit and margin increases. The anticipated opening date of the expansion project is the fourth quarter of 2017.

The target properties of the acquisition were previously owned by Promotora Turística Mexicana, S.A. de C.V., which is the current owner of Krystal Puerto Vallarta Hotel, and is considered a related entity to the Company. Due to the aforementioned, the transaction was reviewed and recommended by the Corporate Practices Committee, the Audit Committee and, subsequently, the Company’s Board of Directors unanimously decided to approve the transaction during the October 20, 2016 meeting. Notably, three valuations were undertaken by separate subject matter expert firms, and these were reviewed by the aforesaid corporate bodies.

The Company expects to renovate the existing 162 suites and develop 30 additional suites for a total of 192 luxury suites, in addition to banquet rooms, restaurants, bars and complementary services, under the Hilton brand. With this expansion, the Hilton Puerto Vallarta hotel would increase the number of rooms and luxury suites from 259 to 451, under the all-inclusive Grand Tourism category.

According to a recent market study for the Company by Grupo World Real Estate, from January to July 2016 traveler demand to Puerto Vallarta increased 17% and 12% in the domestic and international markets, respectively, compared to the same period in 2015. The study highlights that the hotel offering will remain stable in this destination.

The investment is in line with the Company's expansion strategy, which considers growth via hotels in strategic locations. With this acquisition, HOTEL would reach 709 rooms in Puerto Vallarta, which is one of the main tourist destination areas in Mexico, with a total portfolio of 5,052 rooms. This fact considers that the 162 suites will be excluded from the current room stock of the Krystal Puerto Vallarta Hotel & Resort, which is currently operated by the Company.

The Company has over 2600 employees in Mexico, is part of the ranking Super Empresas Expansión 2015 and its shares are listed on the Mexican Stock Exchange (BMV: HOTEL). Furthermore, it has been awarded as a Socially Responsible Company. ("ESR" or "Empresa Socialmente Responsible")