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Feasibility Study on Las Cruces

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					Updated Market Study and
Site Feasibility Analysis
For a Convention Center
to be Located in
Las Cruces, New Mexico

November 22, 2002
              Updated Market Study and Site Feasibility Analysis
                  For a Convention Center to be Located in
                          Las Cruces, New Mexico




                                    November 22, 2002




Prepared by:
Jones Lang LaSalle Hotels - Miami
2655 Le Jeune Road
Suite 1004
Miami, FL 33134

Tel:   305-779-3060
Fax:   305-779-3063
                                                                2655 Le Jeune Road, Suite 1004
                                                                Miami, Florida 33134
                                                                Tel: 305-779-3060
                                                                Fax: 305-779-3063
                                                                www.joneslanglasallehotels.com




November 22, 2002


The City of Las Cruces
Las Cruces, New Mexico


Re: Potential Convention Center in Las Cruces, New Mexico


Dear Mayor and Honorable City Council Members:

Pursuant to your request, we have completed our updated study of the potential market
demand for a convention center to be located in Las Cruces, New Mexico.

The conclusions and recommendations set forth in this updated report are based on an
analysis of the existing and potential future supply and demand for the competitive
convention center market, as of the completion of our fieldwork on November 15, 2002.
This report has been prepared for your use in reassessing the potential demand for a
convention center to be located in Las Cruces, as well as a prioritization of selected sites
most suitable for the development of such as facility within the city. This updated study
should be read in conjunction with the initial study that was completed in 1999 by PKF
Consulting and Ellerbe Beckett.

As in all studies of this type, the estimated results are based on competent and efficient
management and presume no significant change in the status of the competitive convention
center industry from that set forth in this report. The terms of this engagement are such that
we have no obligation to revise this report to reflect events or conditions that occur
subsequent to the date of completion of our fieldwork. However, we are available to discuss
the necessity for any revisions in view of changes in the economy or market factors affecting
the relevant convention center market.
The City of Las Cruces                                                     November 22, 2002

Since the potential property’s future performance is based on estimates and assumptions
which are subject to uncertainty and variation, we do not represent them as results that will
actually be achieved; however, they have been conscientiously prepared on the basis of
information obtained during the course of this assignment and our experience in the
industry. Our report is subject to the general assumptions and limiting conditions presented in
the Addenda.

It has been a pleasure to work with you on this assignment. If we can be of any further
assistance in the interpretation of our findings, please do not hesitate to contact us.




Respectfully submitted,

JONES LANG LASALLE HOTELS




____________________________
Karen Johnson
Senior Vice President



____________________________
Anwar Elgonemy
Associate



____________________________
Jenny Lee
Analyst
                      TABLE OF CONTENTS




SECTION I      INTRODUCTION

SECTION II     AREA REVIEW

SECTION III    MEETINGS MARKET ANALYSIS

SECTION IV     SITE AND FACILITIES RECOMMENDATIONS

SECTION V      ESTIMATED UTILIZATION

SECTION VI     ESTIMATED FINANCIAL OPERATING RESULTS

SECTION VII    ESTIMATED CONSTRUCTION COSTS

SECTION VIII   RECOMMENDED FUNDING SOURCES
                      TABLE OF CONTENTS



                        THE ADDENDA


A.   GENERAL ASSUMPTIONS AND LIMITING CONDITIONS

B.   QUALIFICATIONS OF THE ADVISORS

C.   COPY OF THE POTENTIAL USER SURVEY

D.   SUMMARY FINDINGS OF THE SURVEY

E.   CONSTRUCTION COST ESTIMATES BY CUMMING LLC
  SECTION I

INTRODUCTION
                                    INTRODUCTION

A.      INTRODUCTION

        1.      Overview of the Market Study

Jones Lang LaSalle Hotels has been retained by the City of Las Cruces to conduct an
updated study of the potential market demand for a convention center to be located within
the city. This study is an update to the report that was completed by PKF Consulting and
Ellerbe Beckett in 1999, and should be read in conjunction with that report.

This study includes a reassessment of the estimated level of demand for a potential
convention center in Las Cruces, and which sites within the city would be most
appropriate for the development of such a facility.

According to the City of Las Cruces Convention & Visitors Bureau (LCC&VB), it
appears that the local visitor industry has been in need of a convention center for the past
15 years. The LCC&VB feels that a considerable amount of groups have been lost due to
the lack of adequate meeting space in Las Cruces for large conventions.

It is our understanding that the Greater Las Cruces Chamber of Commerce, Hispano
Chamber of Commerce, Las Cruces Lodgers Association, LCC&VB, New Mexico State
University, and the Las Cruces Restaurant Association are anticipating this potential
project.

        2.      Methodology

In conducting the study, Jones Lang LaSalle Hotels:

     1. Updated and analyzed relevant socio-economic data regarding the regional and
        local market areas to determine whether the economic environment and indicators
        of economic growth appear suitable for the development of a convention center in
        Las Cruces;

     2. Provided a current trend analysis of the national meetings market;

     3. Updated and researched the current supply of competitive convention centers
        serving the regional market for groups that Las Cruces could potentially attract.
        This research included reviews of public convention centers catering to
        associations and other member organizations, often referred to as SMERF groups
        (Social, Military, Educational, Religious, and Fraternal groups). Variables
        addressed also included square footage of net meeting space, historical utilization
        levels, future bookings, and expansion plans;

     4. Conducted an updated analysis of the Las Cruces hotel market, with a focus on
        group meetings demand;




                                            I-1
                                  INTRODUCTION


5. Worked with the City of Las Cruces Convention & Visitors Bureau in
   incorporating and tabulating the findings that were attained via a questionnaire
   sent out in order to gain updated information on the potential demand for the
   facility;

6. Visited the existing meeting facilities in Las Cruces, as well as a number of
   regional convention centers;

7. Completed an updated analysis of lost convention business in Las Cruces
   attributed to the lack of sufficient meeting space in the city;

8. Inspected 11 potential development sites identified by the City of Las Cruces, and
   analyzed each site in terms of access and visibility from major highways,
   visibility and strategic location relative to hotel supply, ambiance of the
   surrounding area, and size and topography relative to required facilities. Of the
   11 potential sites, we identified four specific sites that Jones Lang LaSalle Hotels
   deems most appropriate for the development of a convention center in Las
   Cruces;

9. Utilized the architectural renderings, recommended facilities and construction costs
   originally prepared by the architectural firm, Ellerbe Becket, in the 1999 report as a
   benchmark;

10. Based on our updated research and analysis, we market-tested the 1999 study’s
    facility recommendations and developed preliminary recommendations for the
    optimum size of convention facility to be located at one of the most appropriate
    sites, which, in our opinion, will best meet demonstrated market demand. We
    focused on the size of the total facility (square footage), the size of the exhibit hall
    and the number of meeting rooms;

11. Updated the projections of estimated utilization of the convention center,
    including operating income and expenses;

12. Worked with Cumming LLC, a national group that specializes in convention
    center cost estimating, to provide updated estimates of the total costs of construction
    for the recommended facility;

13. Provided conclusions and recommendations pertaining to the optimum square
    footage of the convention center, taking into account the potential and necessary
    funding levels;

14. Recommended different sources of funding for the proposed convention center; and

15. Although beyond the scope of this report, we provided a brief overview of the
    potential economic impact of the convention center on the surrounding community.




                                          I-2
                                    INTRODUCTION

Several sources were used in compiling the background information and preparing the
analyses contained in this updated report. These resources included: Conference Centers,
published by Jones Lang LaSalle Hotels; the 2002 edition of The Meetings Market Report
published by Meetings & Convention Magazine; data on the regional convention center
market gathered through direct interviews with convention center directors and meeting
planners; data on the local lodging industry via interviews with Las Cruces hotel
managers; and socio-economic data attained on the region from various local
governmental and planning entities.

       3.     Summary of Conclusions

Based on the work program outlined above, we have first made a determination whether
there is still sufficient demand to justify the development of a convention center in Las
Cruces. We then identified four sites within the city that are most appropriate for the
development of a convention center, and have made a preliminary recommendation as to
the optimal sizing for such a public facility.

The conclusions of our updated research and analyses are summarized in the following
statements.

       The State of New Mexico, along with much of the Southwest, continues to be one
       of the faster growing regions in the U.S, and Las Cruces, the second largest city in
       New Mexico, is also experiencing steady growth. However, the city's location in
       southeast New Mexico is distant from the state's governmental, commercial, and
       cultural centers of Albuquerque and Santa Fe. In addition, Las Cruces does not
       benefit from direct air transport to other parts of the U.S., hindering, to a certain
       degree, its overall marketability as a destination for meetings.

       Neutralizing these unfavorable conditions is the affordability of Las Cruces in
       terms of lodging, eating/drinking, and the general cost of conducting business,
       making the city an attractive destination for state and other associations. As will
       be discussed in detail in this report, regional and state associations, as well as
       local meetings, are envisioned to be the primary demand generator for the
       proposed convention center in Las Cruces.

       We have focused our updated research on convention centers located in cities that
       are more comparable to Las Cruces in terms of overall image, profile, population,
       and commercial base. These identified cities have convention centers with an
       average size of approximately 43,000 square feet of net meeting space (excluding
       foyer, back-of-house, patio space, etc.), an average attendance ranging from
       50,000 to 900,000. The average size of exhibit hall is approximately 25,000
       square feet.

       Our analysis of existing meeting space in Las Cruces indicates that the city has a
       limited and dispersed inventory of quality, dedicated meeting space. Moreover,




                                            I-3
                             INTRODUCTION

Las Cruces significantly lacks a large exhibit hall to attract national, regional, and
state associations.

Demand for convention centers in New Mexico emanates from a variety of
generators. Based on our updated interviews with regional convention centers and
statewide meeting planners, demand continues to be derived from four sources:
local, state, regional/national groups, and consumer shows.

The responses to the qualitative survey indicated that there continues to be interest
in a potential convention center in Las Cruces, and that the city would be a
desirable location for group meetings. Approximately 83 percent of the
respondents indicated that they would consider Las Cruces for a meeting.

After analyzing the 11 sites that were brought to our attention by the City of Las
Cruces, and accounting for such variables as visibility and accessibility to
highways, proximity to the Las Cruces hotel inventory, it is our opinion that the
four following locations/sites are the most suitable for a potential convention
center:

   o   Triviz Drive and Payne Street;
   o   Hickory Loop and Hickory Drive;
   o   Lohman Avenue Extension and Sonoma Ranch Road Extension; and
   o   University Avenue and Interstate 25.


Although the events of September 11, 2001 have significantly changed the arena
of business and group meetings travel, safe, affordable and drive-to destinations,
such as Las Cruces, are in a good position to take advantage of these underlying
trends.

Based on our updated market research and analysis, and our knowledge of the
industry, it is our opinion that the construction of a modern, strategically located
convention center is deemed necessary for Las Cruces, to accommodate current
and potential levels of meeting demand in the Southwest.

Specifically, it is still recommended that the construction of a convention center
with approximately 80,000 square feet of gross building area, including 40,000
square feet of net meeting space takes place. Such a facility would also comprise
a 25,000 square-foot exhibit hall, on par with the average of the most comparable
convention facilities analyzed. The recommended square footage of the
convention center is deemed sufficient given the location and overall profile of
Las Cruces as a potential meetings destination.

Our updated analysis yields an estimated total annual attendance of approximately
94,000 by 2008 (the third year of operation), or close to 8,000 attendees per
month. It is our opinion that this level of attendance is appropriate for the



                                     I-4
                            INTRODUCTION

proposed facility, given the long-term regional market supply and demand
dynamics.

Based on our updated analysis of facility rental, food and beverage revenue, other
operating revenues, and expenses for the first three years of operation, total
income in the stabilized year is expected to be $355,000 annually (in 2002 value
dollars). Total expenses are expected to be approximately $655,000.

The resulting operating deficit of the convention center is expected to be
approximately $300,000 annually, which is close to 46 percent of total expenses,
and is within the range of the deficits highlighted by the financial statements of
comparable Southwest convention centers, that indicated a range between 40 and
77 percent.

According to Cumming LLC, the total updated construction cost for the proposed
convention center in Las Cruces is estimated at approximately $18.6 million
(excluding land).

The estimated schedule of operating results for the first three years of operation
for the proposed 81,000-square-foot convention center is provided at the end of
this section. The table provides our updated estimates in 2002 value dollars,
indicating our revenue and expenses projections on a gross square-foot basis.

This operating deficit, which is typical for the vast majority of convention centers
in the U.S., can be offset by additional sources of funding such as a potential
increase in sales tax, the creation of a countywide tourism tax, and direct funding
granted by the State of New Mexico or the U.S. Government. Although beyond
the scope of this assignment, the significant positive impact of the proposed
facility on the local economy via the multiplier effect must also be considered.




                                    I-5
 SECTION II

AREA REVIEW
                                         AREA REVIEW


A.     INTRODUCTION

Demographic and economic characteristics serve as indicators of a given market area’s ability to
support meeting and convention facilities. As such, presented in the following paragraphs is an
overview of macro-level socio-economic variables in the United States, New Mexico, and the City
of Las Cruces, indirectly impacting the potential convention center’s market performance. Future
growth in demand, which will be discussed in Section V of this report, has been estimated based in
part on our analysis of these key indicators. The maps on the following pages highlight the location
of Las Cruces in relation to the surrounding region.


B.     OVERVIEW OF THE U.S. ECONOMY

The U.S. economy is currently on a rocky recovery path after the attacks of September 11 and
the slowdown in the global economy. However, with interest rates at 40-year lows and the
persistent strength of retail sales, as well as auto and housing sales, the U.S. economy is
gradually recovering from a short and shallow recession. The economic recovery will also be
assisted by Congress partaking in proactive measures, such as the terrorism risk insurance
legislation and the control of government spending. There are, however, concerns about the
potential economic costs of military action against Iraq. The White House economic advisor
estimates that the U.S. might have to spend as much as one to two percent of U.S. gross domestic
product ($100 billion to $200 billion) if engaged in a war with Iraq.

The S&P 500 index, a frequently followed measure of the U.S. stock market, was down 11.9
percent on a total return basis as of year-end 2001, its second consecutive year of decline. The
last time the U.S. capital markets experienced double-year declines was in 1973 and 1974, a
period when the economy fell into a deep recession. However, the S&P 500 has performed
better this time than in the 1970s; the cumulative two-year decline of 2000-01 was 20 percent,
while the decline in 1973-74 was much more severe with a 37 percent drop. For the most part,
the mid- to long-term outlook for the U.S. economy is generally favorable with unemployment
and inflation expected to be less than six percent and three percent, respectively. By 2003 and
beyond, the real GDP growth rate for the U.S. is projected to be greater than four percent.

The relationship between the stock market and consumer spending is attributed to a phenomenon
identified by economists as the “wealth effect.” The wealth effect is the tendency people have to
spend (or not spend) money when they see their net worth rise (or fall).

Since the December 2001 collapse of Enron, and accounting scandals at WorldCom and Tyco,
there has been much doubt on the transparency of U.S. capital markets. Consequently, as the
stock market moves downward as a result of this doubt, the impact of the wealth effect is
reversing and having a dampening, albeit temporary, impact on the U.S. economy. On a brighter
note, the wake of the recent scandals is expected to strengthen business integrity within corporate
America, and as mentioned previously, the economy is currently on a gradual recovery path and
the mid- to long-term outlook for the U.S. economy is favorable.




                                               II-1
AREA REVIEW




              Las Cruces




    II-2
AREA REVIEW




           Las Cruces




    II-3
                                        AREA REVIEW

C.     NEW MEXICO

Culture, art, and the mystique of New Mexico are
prevalent in cities as large as Albuquerque and as quaint
as Taos. New Mexico has a deep cultural heritage
stemming from 400 years ago when the Spaniards settled
in Santa Fe, built a capital, and added to the mix of Native
American and Mexican inhabitants. Many New Mexico
cities and towns boast adobe-style and pueblo-style
architecture, with paintings and crafts in the public areas
of local hotels. It is the culture that makes New Mexico
rich in artistic and traditional value.

New Mexico, along with much of the Southwest, which is comprised of the states of Arizona,
New Mexico, Oklahoma, and Texas, is one of the faster growing areas in the U.S. In 2001, New
Mexico’s population was approximately 1,829,000, which grew at a compound annual growth
rate (CAGR) of 1.7 percent since 1990. Most of the population growth in the state is occurring
in the metropolitan areas. Once ranked among the top ten in population growth nationwide, Las
Cruces has approximately 74,000 residents, almost doubling since 1970.

There are three Metropolitan Statistical Areas (MSAs) in
the state.   The Albuquerque MSA (the largest) is
comprised of Bernalillo, Sandoval, and Valencia Counties.
The Las Cruces MSA is the second largest metropolitan
area in New Mexico and is comprised of Doña Ana
County. The Santa Fe MSA includes Los Alamos and
Santa Fe Counties.

Employment has also been growing at a steady pace over
the past decade. In 2001, there were approximately 838,000 jobs in the state, growing at a 1.5
percent CAGR since 1990, with over 61 percent of these jobs in the metro areas. In 2001, New
Mexico had an unemployment rate of approximately 4.8 percent, at par with the U.S.
unemployment rate. As of July 2002, the unemployment rate in New Mexico was 6.6 percent,
higher than the U.S. unemployment rate of 5.9 percent. Employment statistics of New Mexico
will be discussed in more detail on page II-9.

New Mexico recorded a 41.7 percent decline in exports in
2001, with $1.4 billion in exports in 2001 versus $2.4
billion in 2000. The temporary decrease in exports can be
attributed to the recent economic recession, decreased
business spending, and a slow-down in regional
manufacturing.     The waning of the world economies
spurred tight spending, and the strict border security has
caused businesses to re-evaluate “just in time” inventory
policies.




                                               II-4
                                       AREA REVIEW

D.     LAS CRUCES

       1.     Overview

The City of Las Cruces is located in the Mesilla
Valley in south-central New Mexico. Las Cruces
is set against the jagged backdrop of the 9,000-
foot Organ Mountains rising to the east, with the
Rio Grande flowing through the middle of the
Mesilla Valley to the west. Las Cruces is a
regional hub that links El Paso and Ciudad
Juárez, Mexico. The history of Las Cruces dates
back to 1598, when Don Juan de Onate led the
first colonists along the Camino Real from El
Paso Norte through Las Cruces and the Mesilla
Valley to Santa Fe. Las Cruces was founded in 1849, and it became an incorporated city in
1946. The neighboring town of Mesilla has been able to retain the ambiance of the “old west”
community it once was.

Las Cruces is New Mexico’s second-largest city, and is one of the fastest growing metropolitan
statistical areas in the Southwest. For years, its economy has been dependent on federal
expenditures at the nearby White Sands Missile Range and New Mexico State University. White
Sands performs testing and evaluation of rocket propulsion systems, materials, and other
components of the U.S. space program.

Like many Sunbelt cities, the Las Cruces economy
has been growing, influenced by several factors.
The first is due to its young resident population,
whose median age is 31.2.        The second growth
factor is private and public sector employment that
continues to fuel both the economy and the
population. The third factor is changing socio-
economic conditions in other parts of the nation
that indirectly impact New Mexico and Las
Cruces. In fact, Forbes Magazine and the Milken
Institute recently ranked Las Cruces as the best
small metro area to do business.

Las Cruces is also becoming a popular retirement destination within the nation. Las Cruces was
recently ranked by Money Magazine as one of the top seven retirement places in the U.S.




                                              II-5
                                            AREA REVIEW

       2.      Population

The Greater Las Cruces Chamber of Commerce reports that Doña Ana County’s population grew
at a CAGR of 2.4 percent over the last decade to 176,790 in 2001. Comparatively, Las Cruces’
population has been growing at a CAGR of 1.8 percent over the same period. As previously
indicated, population growth for New Mexico increased at an annual rate of 1.7 percent since
1990. The increase in population growth can be attributed to new business developments and
retirees moving into the area.

As shown on the following table, the population of New Mexico and Doña Ana County are
projected to grow at a CAGR of 1.7 percent and 2.7 percent, respectively, by 2010.
Comparatively, Las Cruces is expected to grow more rapidly at a CAGR of 2.9 by 2010. The
following table summarizes the population growth for New Mexico, Doña Ana County, and Las
Cruces.

                            New Mexico, Doña Ana County, and Las Cruces
                                            Population
                                           2000 to 2010
                        Year           New Mexico      Doña Ana County        Las Cruces
                        2000            1,819,046           174,682             74,267
                        2001            1,829,146           176,790             74,600
                        2005            2,016,000           202,430             87,700
                        2010            2,155,000           227,009             98,626
                       CAGR               1.7%               2.7%                2.9%
                  Source: Mesilla Valley Economic Development Alliance (MVEDA), Sales &
                         Marketing Management and U.S. Census



As shown above, the population of Doña Ana County and Las Cruces are projected to increase
steadily; however, the population of Las Cruces is projected to increase at a slightly faster pace
than the county population. The population of the City of Las Cruces represents approximately
four percent of the State of New Mexico’s total population, of approximately 1.8 million. Doña
Ana County represents approximately ten percent of New Mexico’s total population.

       3.      Economic Trends

In our assessment of the economic climate of the Las Cruces area, we have considered trends in
the following economic indicators: effective buying income (EBI), retail sales, and
eating/drinking place sales. The table below outlines growth in key economic indicators for the
Las Cruces MSA and New Mexico between 1991 and 2001.




                                                    II-6
                                               AREA REVIEW



                                             Economic Trends
                                Las Cruces MSA (1) and the State of New Mexico
                                                1991 – 2001
                                                                                    Compound Annual
                                        1991            1996             2001         Growth Rate
                                                                                       1991-2001
  Total EBI – ($000s)
  Las Cruces MSA                $1,360,000            $1,628,000       $1,989,000        4.1%
  State of New Mexico          $18,198,000           $21,868,000      $27,647,000        4.8%
  Median Household EBI
  Las Cruces MSA                 $23,000               $23,000          $27,000          2.9%
  State of New Mexico            $26,000               $28,000          $32,000          3.1%
  Retail Sales – ($000s)
  Las Cruces MSA                 $642,000             $1,099,000       $1,471,000        8.6%
  State of New Mexico           $9,645,000           $15,786,000      $21,471,000        8.3%
  Eating and Drinking Place Sales ($000s)
  Las Cruces MSA                  $69,000             $143,000         $195,000          10.9%
  State of New Mexico           $1,063,000           $2,094,000       $2,712,000         9.8%
  (1)
    Standard Metropolitan Statistical Area.
  Source: Sales and Marketing Management



The following paragraphs summarize selected economic and demographic characteristics
influencing the Las Cruces MSA.

        The 2001 Median Household EBI for Las Cruces was approximately $26,800, slightly
        lower than the state average of approximately $32,100. However, this comparatively low
        indicator is in tandem with the low cost of living in Las Cruces, an attribute that is
        attracting new residents to the city.

        Retail sales in Las Cruces increased at a CAGR of 8.6 percent during the period 1991 to
        2001, compared to the statewide annual growth rate of 8.3 percent.

        From 1991 to 2001, Eating and Drinking Place Sales have increased at a CAGR of 10.9
        percent in Las Cruces, compared to a CAGR of 9.8 percent for the state. In fact, Eating
        and Drinking Place Sales have increased comparatively more than Retail Sales during
        that same period.

        4.       Employment

As shown below, Las Cruces Public Schools and New Mexico State University are the largest
employers within the Las Cruces MSA with over 3,000 employees. Gadsden Independent
School, Memorial Medical Center, and White Sands Missile Range are also noteworthy large
employers with over 1,500 employees. It is noteworthy that there are a large number of medium
sized establishments in Las Cruces with a range of 100 to 249 employees.


                                                    II-7
                                             AREA REVIEW



                                 Major Employers in the Las Cruces Area
                                                 2002
           3,000+ Employees                    250-499 Employees
           Las Cruces Public Schools           Border Foods
           New Mexico State University         Honeywell Technology
           1,500+ Employees                    IBP Prepared Foods
           Gadsden Independent Schools         Manpower
           Memorial Medical Center             Mountain View Regional Medical Center
           White Sands Missile Range           NM Corrections Dept.
           1,000+ Employees                    NMSU Physical Science Lab
           City of Las Cruces                  Sunland Park Racetrack
           NASA LBJ Test Facility              Tresco, Inc.
           500-999 Employees
           Doña Ana Branch College
           Doña Ana County
           Excell Agent Services
           Wal-Mart
           Source: Mesilla Valley Economic Development Alliance (MVEDA)



Las Cruces is a leading center of research and technology. New Mexico State University
(NMSU), founded in 1880 and based in Las Cruces, offers expertise in agriculture, technology,
engineering, business, and industry. Substantial research and technical support facilities are also
available to aid in the area’s economic development.

A noteworthy research and technology development in Las Cruces is a joint venture between
Allied Signal and the National Aeronautics and Space Administration (NASA). The two
organizations are currently engaged in a seven-year, $324-million contract to operate the White
Sands Missile Range’s Test Facility located in the Las Cruces area.

The Las Cruces region is an important trading corridor as a result of the North American Free
Trade Agreement (NAFTA). There are three U.S. Departments of Commerce-approved Foreign
Trade Zones located next to the Las Cruces International Airport. Businesses that relocate to the
Las Cruces region can take advantage of the area’s strategic geographic location.

The Mountain View Regional Medical Center, with approximately 300 employees, opened in
August 2002. The Mesilla Valley Economic Development Alliance (MVEDA) predicts that
Mountain View Regional Medical will expand its employee base to approximately 800 within
the next five years.

In July 2002, the New Mexico Information Technology Management office selected Qwest and
WorldCom to provide high-speed data links in 25 communities across the state for its state
offices. Although the exact dollar amount of the contract was undisclosed, it is known that the
current cost of annual networking services is up to $15 million. However, due to the accounting
practices of both Qwest and WorldCom that are under investigation by the federal Security and




                                                    II-8
                                          AREA REVIEW

Exchange commission, New Mexico Information Technology Management office announced
that they were considering replacing WorldCom with New Mexico-based Oso Grande.

New Mexico State University (NMSU) has over 23,000 graduate and undergraduate students on
its main campus. Doña Ana Branch Community College (DABCC) is currently constructing a
satellite, the East Mesa Center, to be located on a 60-acre site on Las Cruces’ East Mesa. The
50,027 square-foot facility, which is planned to accommodate 2,000 full-time equivalent
students, is anticipated to be completed in early 2003. DABCC has a current enrollment of 5,000
and is expected to reach 7,000 in 2010. DABCC offers flexible training courses and is one of the
region’s best incentives for prospective industrial employers.

The region has a local labor force that is well educated with considerable technical expertise.
The region’s tradition of offering productive, cost-effective labor is largely responsible for the
healthy economic growth the region has experienced in the last 20 years.

In July 2002, the Las Cruces MSA civilian labor force was 72,000 (approximately 41 percent of
the county’s population), which is up from approximately 64,000 in 1995, growing at a 1.7
percent CAGR. The unemployment level was at 6.7 percent in 2001, which is higher than the
New Mexico and national unemployment rates. However, the unemployment rate has generally
decreased in the Las Cruces MSA since 1996. A similar trend can be observed in the
unemployment rate for the state of New Mexico, which experienced a steady decrease in
unemployment rate from 8.1 percent in 1996 to 4.8 percent in 2001. The following table
summarizes the unemployment rates in the U.S., New Mexico, and Las Cruces. The table
presented on page II-9 details Las Cruces MSA’s employment by industry for 2000 and 2001.

                                        Unemployment Rates
                          United States, New Mexico, and Las Cruces MSA
                                          1995 – July 2002
                             Year        United States New Mexico Las Cruces
                                                                    MSA
                            1995             5.6%          6.3%      8.5%
                            1996             5.4%          8.1%     10.4%
                            1997             4.9%          6.2%      8.5%
                            1998             4.5%          6.2%      8.5%
                            1999             4.2%          5.6%      8.0%
                            2000             4.0%          4.9%      7.0%
                            2001             4.8%          4.8%      6.7%
                          July 2002          5.9%          6.6%      7.9%
                       Source: New Mexico Department of Labor




                                                  II-9
                                                      AREA REVIEW



                             Las Cruces MSA Non-Agricultural Employment by Industry (1)
                                               2000 and 2001 Annual Averages
                           Sector/Industry                                  2000                         2001
   Construction & Mining                                                   3,300                            3,100
   Manufacturing                                                           3,200                            3,200
      Durable Goods                                                        1,450                            1,350
      Nondurable Goods                                                     1,800                            1,850
   Transportation and Public Utilities                                     2,150                            2,000
   Trade                                                                  11,900                           11,900
      Wholesale Trade                                                      1,350                            1,450
      Retail Trade                                                        10,500                           10,500
         General Merchandise Stores                                        1,450                            1,450
         Food Stores                                                       1,300                            1,300
         Other Retail Trade                                                7,800                            7,700
   Finance, Insurance, & Real Estate (FIRE)                                1,950                            1,900
   Services                                                               15,600                           16,400
   Government                                                             18,900                           19,300
      Federal Government                                                   3,600                            3,400
      State and Local Government                                          15,400                           15,900
         State Government (2)                                              8,100                            8,400
         Local Government                                                  7,300                            7,500
   Service Producing                                                      50,500                           51,500
   Goods Producing                                                         6,500                            6,300
   Total Non-Agricultural                                                 57,000                           57,800
   (1)
         Estimates include all full-time and part-time salary workers who worked or received pay during the pay
       period, which included the 12th day of the month. Self-employed, family workers, household workers,
       and members of the Armed Forces are excluded.
   (2)
       Employees of federally funded state programs, state supported universities, and three branches of state government.
   Source: New Mexico Department of Labor, Economic Research and Analysis Bureau




As shown in the previous table, it is evident that the government sector employs the greatest
number of people, followed by the service and trade sectors. Between 2000 and 2001, total non-
agricultural employment increased by 1.4 percent. Employment, in the services and government
sector, increased by 5.1 percent and 2.1 percent, respectively. In contrast, the number of people
employed in construction and mining, transportation and public utilities, and finance, insurance,
& real estate, decreased by 6.1 percent, 7.0 percent, and 2.6 percent, respectively. The Las
Cruces Economic Development estimates that the low cost of labor and the prime location of
industrial parks will continue to be important factors in the manufacturing sector.

            5.       Commercial Real Estate

Las Cruces continues to grow as an increasing number of retirees make this community their
adopted home. This new group brings in retail and service dollars in tandem with those who
manage the money and investments for the retirees, who in turn bring the big-box retailers to the
community.


                                                              II-10
                                           AREA REVIEW

The local business community, including managers and employees from travel agencies,
shopping centers, restaurants and the entertainment industry have indicated that the post
September 11 slowdown has not, for the most part, carried over into 2002. Patrons have not
been deterred much from traveling, eating out and going to the movies, partly because the Las
Cruces area is not threatened by potential terrorist attacks and is a drive-to destination from
larger urban areas such as El Paso and Albuquerque. The marketing director at the Mesilla
Valley Mall noted that sales post-9/11 were down for about a month but gradually increased
during the following months. In fact, the holidays, especially Christmas, proved to be very
profitable for the local merchants.

The largest office complex in Las Cruces is the 250,000 square-foot Loretto Towne Center, with
lease rates of approximately $15.50 per square foot. The largest retail center is the 110,000
square-foot El Paseo Plaza, with lease rates (base) of approximately $12.00 per square foot.

       6.     Transportation

              a.      Road

The two major freeways passing through Las Cruces are Interstate-25 (linking with Santa Fe and
Albuquerque to the north) and Interstate-10 (linking with Phoenix and Tucson, Arizona to the
west and continuing further to Los Angeles). Interstate-10 also links with El Paso and Houston,
Texas to the east and continues towards Florida. There is also the U.S. 70 and 82 freeways that
run northeast through Las Cruces.

Most travelers from New Mexico and from regions outside the state use freeway systems to
reach Las Cruces. The following table shows traveling distance from major surrounding cities to
Las Cruces.

                                    U.S. Metropolitan Cities Nearest
                                       To Las Cruces, New Mexico
                                City                               Distance
               El Paso, Texas                                        47 miles
               Albuquerque, New Mexico                              220 miles
               Tucson, Arizona                                      275 miles
               Phoenix, Arizona                                     393 miles
               Amarillo, Texas                                      400 miles
               Dallas, Texas                                        676 miles
               Los Angeles, California                              779 miles
               Source: Mesilla Valley Economic Development Alliance (MVEDA)


              b.      Air

The airline industry has been severely impacted by the downturn in the national economy as
companies began cutting back on business travel, as well as by the terrorist attacks on
September 11. Since the terrorist attacks, airline companies laid-off several thousands of its
employees and reduced the number of available flights.




                                                  II-11
                                              AREA REVIEW

The Southwest U.S. airports experienced negative impacts on passenger traffic ranging from a
slight decrease of 1.3 percent at George Bush Intercontinental Airport (Houston, Texas) to a
steeper decline of 9.2 percent at DFW International Airport (Dallas/Fort Worth, Texas), when
compared to the prior year.

The Las Cruces International Airport is a small, local airport. The airport is only available for
private or charter flights for incoming travelers to Las Cruces. For most people traveling to Las
Cruces from another state, the El Paso International Airport is used, which is a 47-mile drive to
Las Cruces.

El Paso International Airport has nine major airline carriers that provide an average of 166
flights on a daily basis (including both arrivals and departures). American, Delta, Southwest,
Continental, America-West, Frontier, and United Express provide domestic commercial services
to El Paso. Aerolitoral and Azteca serve as international carriers to El Paso. Aerolitoral provides
flights from El Paso to Chihuahua, and Azteca provides flights from El Paso to Mexico City.
The Ciudad Juárez Airport in Mexico also serves the area, which is approximately 15 miles from
El Paso International Airport.

The table below highlights total passenger volume using El Paso International Airport from 1990
to 2002 ending August. The table indicates that 1994 was a record year for total passenger
numbers, with a total of approximately 3.7 million passengers. Also, as shown, after the attacks
of September 11, El Paso International achieved an all time low of 3.1 million visitors in 2001, a
negative 6.7 percent change from the prior year. Year to date through August 2002 passenger
counts further decreased, achieving a negative 12.8 percent change from the same period during
the prior year. Overall from 1990 to 2001, total passenger counts decreased by a CAGR of 0.4
percent to 3.1 million.

                       Total Passenger Counts - El Paso International Airport, Texas
                                        1990 – 2002 Ending August
      Year            Enplaned          Deplaned             Total Passengers          Percent Change
    1990              1,656,000         1,591,000               3,246,000                     -
    1991              1,677,000         1,610,000               3,288,000                   1.3%
    1992              1,714,000         1,658,000               3,371,000                   2.5%
    1993              1,773,000         1,717,000               3,489,000                   3.5%
    1994              1,881,000         1,849,000               3,730,000                   6.9%
    1995              1,835,000         1,790,000               3,625,000                  -2.9%
    1996              1,800,000         1,759,000               3,559,000                  -1.8%
    1997              1,633,000         1,601,000               3,234,000                  -9.1%
    1998              1,635,000         1,605,000               3,241,000                   0.2%
    1999              1,692,000         1,648,000               3,340,000                   3.1%
    2000              1,688,000         1,625,000               3,313,000                  -0.8%
    2001              1,564,000         1,527,000               3,092,000                  -6.7%
   CAGR                 -0.5%             -0.4%                   -0.4%                       -
YTD Aug. 2001         1,134,000         1,100,000               2,234,000                     -
YTD Aug. 2002          983,000          966,000                 1,949,000                 -12.8%
Source: El Paso International Airport




                                                     II-12
                                         AREA REVIEW

According to the El Paso airport administration, the airport completed Phase I of the $57-million
renovation project in November 1998. Phase II, a $6 million renovation project, completed in
mid-October 2002, includes construction of office spaces, three public meeting rooms, six retail
shops, and a bar. Phase III, budgeted at approximately $6 million, is scheduled to begin in 2003;
renovations include expansion of the passenger screening checkpoint and an enhancement of the
lounge area.

       7.      Tourism

Las Cruces enjoys a mild climate with 350 days of sunshine a year, thus serving as an appealing
destination for tourists. Las Cruces receives approximately 8.5 inches of rain annually and less
than two inches of snow in the winter.

The City of Las Cruces hosts a number of events such as the International Mariachi Conference,
the Renaissance Craftfaire, La Fiesta de San Ysidro, and Wells Fargo Mesilla Valley Balloon
Rally. Museums and art galleries are a strong presence within Las Cruces. A number of local
museums portray the history of the region and the city’s unique cultural significance, namely the
New Mexico Farm & Ranch Heritage Museum. Other local area attractions include Alameda
Depot Historic District, Fort Selden State Monument, Mesquite Street-Original Town site
Historic District, and Stahmann Farms.

Regional attractions include the White Sands National Monument, Gila Cliff Dwellings (national
monument), Ruidoso Downs (horse racing), and Ski Apache (snow skiing). The White Sands
Missile Range near Alamogordo and the Lyndon B. Johnson NASA rocket testing facility near
Organ are also popular visitor attractions. The village of Mesilla’s Historical Square offers
restaurants and small stores that capture the Southwest mystique.

According to research conducted by the Las Cruces Convention & Visitors Bureau, the estimated
expenditure per day is approximately $120 for convention visitors, with an average length of stay
of 2.3 days.

In October 2002, and as an extension to the city’s Clean Indoor Air Act, a non-smoking ban was
enacted in Las Cruces that forbids smoking in all public areas, including conference facilities,
hotels, restaurants, bars, clubs, truck stops and parks. It is most likely that this ban will have an
impact on the revenue of local restaurants. For example, in New York City, a Price Waterhouse
study concluded that one month after a citywide restaurant smoking ban went into effect in 1995,
41 percent of the restaurants reported lower gross receipts. However, the smoking ban is not
expected to impact the proposed convention center given the stigma attached to smoking while
“conducting business”.

       8.      Transient Occupancy/Hotel Tax

One method of tracking visitor trends is by analyzing the transient occupancy tax (TOT)
revenue, also known as bed tax revenue. The TOT reflects taxes based on room revenue for
lodging facilities in the City of Las Cruces and, therefore, can be used indirectly as a measure of
trends in RevPAR (revenue per available room) experienced by hotels. The following table


                                               II-13
                                           AREA REVIEW

highlights the TOT collections for the City of Las Cruces between fiscal year 1993/1994 and
2001/2002.

                                  Transient Occupancy Tax Revenue
                                      Las Cruces, New Mexico
                                       1993/1994 to 2001/2002
                        Fiscal Year         Tax Rate         Tax          Percent
                      (Ending June 30)                     Revenue        Change
                           1993/94            5.0%         $800,702          -
                           1994/95            5.0%         $829,835       3.6%
                           1995/96            5.0%         $884,563       6.6%
                           1996/97            5.0%         $856,252       -3.3%
                           1997/98            5.0%         $917,945       7.2%
                           1998/99            5.0%         $903,188       -1.6%
                           1999/00            5.0%         $961,321       6.4%
                           2000/01            5.0%         $998,057       3.8%
                           2001/02            5.0%        $1,085,693       8.8%
                           CAGR                 -            2.4%            -
                      Source: The City of Las Cruces and Las Cruces CVB



Over the past three fiscal years, the TOT collections have increased significantly at a CAGR of
6.3 percent. Generally, the region experiences the highest TOT revenues during the spring
months (March, April, and May) and the fall months (October and November). As shown, the
Las Cruces TOT for fiscal year 2001/02 was approximately $1.1 million, an amount that would
increase materially with the opening of a convention center in the city.

The following table summarizes the TOT rate in other comparable cities in New Mexico,
including Tucson, Arizona, as well as Lubbock, Amarillo, and El Paso, Texas.

                               2002 Transient Occupancy Tax Rates
                        Competitive Cities in New Mexico, Texas, and Arizona
                                City                            Tax Rate
                     Las Cruces                                   5.0%
                     Ruidoso                                     4.25%
                     Taos                                         5.0%
                     Santa Fe                                     5.0%
                     Farmington                                   5.0%
                     Albuquerque                                  5.0%
                     Amarillo                                     7.0%
                     Tucson                                4.0% +$1/room night
                     Lubbock                                      7.0%
                     El Paso                                      7.0%
                     Source: Jones Lang LaSalle Hotels



The TOT statistics presented above indicate that Las Cruces has a TOT rate that is similar to
other cities in New Mexico. However, as the competing cities, such as El Paso, Lubbock, and


                                                  II-14
                                         AREA REVIEW

Amarillo, generally have higher tax rates of approximately seven percent, non-state associations
in Texas and Arizona may find the lower TOT rate offered in Las Cruces an attractive
alternative.


E.     EL PASO AND CIUDAD JUÁREZ

According to the City of El Paso’s Economic Development office, nearly two million people live
in the metropolitan area of El Paso and Ciudad Juárez. El Paso, located approximately 47 miles
southeast of Las Cruces, and with a population of 563,600, is an important commercial and trade
center in the Southwest. Ciudad Juárez, the fifth largest city in Mexico with a population of
approximately 1.2 million, is the sister city to El Paso. Over the past several years, international
trade strengthened the local economy as a result of NAFTA (North American Free Trade
Agreement) and the Mexican maquiladora program. Furthermore, information technology
served as a major economic stimulus in the region by creating new services and acting as the
primary source for job creation.

The maquiladora industry, also referred to as “production sharing”, constitutes a significant
portion of all U.S.-Mexico trade. At present, the maquiladora industry represents a significant 39
percent of global production sharing by U.S. companies. More than 80 percent of the
maquiladoras in Mexico are located in the Border States, which a large percentage of these are
based in Ciudad Juárez. Production sharing with Mexico remains an important business strategy
used by the U.S. industry to achieve industrial competitiveness in the NAFTA and global
markets.

The maquiladora industry’s effect on the regional economy has been significant, generating $1.6
billion dollars worth of services in the El Paso area. The El Paso Economic Adjustment
Strategic Plan states that an estimated $9 billion worth of products per year are maquiladora
purchases of Ciudad Juárez. Only two percent of these raw suppliers are from Mexican suppliers
and the remaining majority is from suppliers located in the U.S. The U.S. suppliers have not had
the industrial base necessary to supply maquiladora producers, and have therefore been pressured
to locate closer to Ciudad Juárez. Due to El Paso’s proximity to Ciudad Juárez, there is much
potential that El Paso may benefit from the expansion or relocation of suppliers.

There are approximately 312 maquiladora plants with 255,250 workers in the Ciudad Juárez
region. Since 1991, the number of operating plants increased by approximately 22 percent and
the number of workers increased by approximately 105 percent. It is noteworthy that U.S.
Fortune 500 corporations, which include TV manufacturers, electronic assembly plants, apparel
manufacturers, and 15 General Motor plants, own over 70 of the maquiladora plants in Ciudad
Juárez.




                                               II-15
                                       AREA REVIEW

F.     CONCLUSIONS

After reviewing the various socio-economic data for the Las Cruces area, it is evident that the
local and regional economy has been experiencing steady growth. Due to the expected economic
recovery both nationally and regionally, projections are expected to improve over the short-term
and long-term, albeit moderately.

The following variables have been taken into account to analyze the impact on future demand of
the convention center market area:

       New Mexico and the Southwest region are the gateway to Mexico and Latin America;

       Las Cruces is ranked by Money Magazine as one of the top ten retirement destinations in
       the U.S.;

       Las Cruces is ranked as the top small metro area to do business by Forbes Magazine and
       the Milken Institute;

       Las Cruces was awarded the 2001 and 2002 Top Destination Award by Facilities &
       Destinations Magazine;

       Las Cruces has generally been experiencing steady growth over the past seven years in
       terms of population and employment;

       The North American Free Trade Agreement (NAFTA) has opened opportunities for trade
       in Las Cruces and the surrounding region;

       Las Cruces is located approximately 45 miles from El Paso and Ciudad Juárez, an
       important metropolitan area with a combined population base of approximately two
       million; and

       El Paso International Airport is an expanding facility that services travelers to Las
       Cruces.




                                             II-16
       SECTION III

MEETINGS MARKET ANALYSIS
                             MEETINGS MARKET ANALYSIS


A.     INTRODUCTION

The overall meetings market is a portion of what is known in the industry as the “audience
support business,” characterized by a broad spectrum of meeting and assembly events. In
general, the industry can be defined as including all activities that provide entertainment or
educational benefits to large audiences. Accordingly, an understanding and analysis of the
national meetings market, and an understanding of the regional and local meeting facilities,
are key components of determining the sufficiency of demand for a potential convention
center in Las Cruces, New Mexico. We have also given consideration to the performance
trends of meeting facilities and full-service hotels in Las Cruces in formulating our
conclusions.


B.     OVERVIEW OF THE NATIONAL MEETINGS MARKET

       1.      Event Types

The following list of event types, i.e., those events where people meet for business,
education, or pleasure, combine to make the meetings market. The four major types of
events are as follows:

       •    Conventions are privately held meetings of professional groups and associations,
            which commonly occur in hotels or convention centers, and are attended by
            association members and/or affiliations wishing to exchange ideas.              A
            convention can consist of a single meeting or a number of meetings and typically
            requires an exhibit room, meeting rooms, and a ballroom. Conventions often
            produce trade shows to merchandise products and services. Conventions are
            considered "high impact" events as attendees stay several nights in the host city,
            generating increased hotel, restaurant, retail, and transportation revenues.

       •    Trade Shows are similar to conventions with exhibits, but tend to be more
            exhibit-intensive in that they have fewer meetings, if any at all. Trade shows are
            private groups or associations that meet to buy and sell products. As trade shows
            hold increasing numbers of concurrent meetings during the event, they are
            becoming less distinguishable from conventions. Compared to conventions,
            trade shows tend to attract greater numbers of attendees whose average stay is
            shorter. Convention and trade show markets are further distinguished by the fact
            that trade shows often attract more attendees from large metropolitan areas.

       •    Consumer Shows, sometimes referred to as public shows, are events quite
            similar to trade shows, with the exception that the audience is the general public.
            Consumer shows are public exhibitions to market goods and services to local
            residents. As attendees are nearly always local residents, they have a smaller
            impact on the local economy than those attending trade shows. Examples of this
            type of show would include home and garden, boat, car, recreation vehicles,
            hunting, gun collector, craft, and antique shows.


                                             III-1
                                 MEETINGS MARKET ANALYSIS



        •    Civic Events relate to community or institutional activities such as graduations,
             family entertainment, circuses, sporting events, rodeos, and concerts. These
             events almost exclusively attract local residents.

        2.       National Market Profile

                 a.       Introduction

Jones Lang LaSalle Hotels gathered published research on the industry in order to compare,
evaluate, and analyze the characteristics and trends of conventions and trade shows. A
primary source of data is information published by trade journals representing or promoting
the industry. Well-known industry publications include Meetings and Conventions Report
(M&C Report), Tradeshow Week’s Major Exhibit Hall Directory, and the HVS Global
Hospitailty Report.

Each of these publications tracks statistics for the industry and publishes pertinent data.
M&C sponsors a survey of association executives and meeting planners (who are
subscribers) on a biennial basis, with the most recent issue being 2002 that summarizes 2001
data. This survey is well designed and professionally conducted, resulting in extensive
statistical information on meetings and conventions.

M&C has been conducting a survey every two years of meeting planners since 1974. The
survey provides the travel industry with data on the number of meetings, expenditures,
attendees, and the characteristics of meeting planners. The following data was reported in the
most recent report published in 2002.

The national meetings industry experienced a slight improvement in 2001, as compared to
1999 in the number of total events, attendance, and expenditures, which all grew by less
than one percent compounded annually. As shown on the following table, total attendance
in the meetings market decreased slightly over the 10-year period from 80.8 million to 79.9
million attendees. However, the number of meetings and total expenditures increased
minimally by 0.02 perent and 1.6 percent, respectively.

                                          Total Meetings Market
                                                1991 – 2001
                                                                                   Annual Growth Rate
                              1991                1999                2001        10 Years   2 Years
 Number of Meetings             1,031,400           1,021,500           1,033,600   0.02%      0.6%
 Attendance                    80,800,000          78,900,000          79,900,000   -0.1%      0.6%
 Total Expenditures       $35,000,000,000     $40,200,000,000     $40,864,000,000   1.6%       0.8%
 Source: The Meetings Market Report – Meetings & Conventions Magazine 2002

The M&C Report sub-divides the market into three categories: corporate meetings,
association meetings, and large conventions, as summarized in the table below. As can be
noted, the majority of meetings are corporate (81.7 percent), but the largest expenditures are


                                                    III-2
                                    MEETINGS MARKET ANALYSIS

from conventions (40.6 percent), as corporations are having frequent, yet cost-efficient,
meetings.

                                       2001 Meetings Market Summary
                  Meetings         Percent    Attendance        Percent      Expenditures      Percent
 Corporate            844,100      81.7%          51,500,000     64.5%       $10,345,000,000   25.3%
 Associations         177,700      17.2%          15,900,000     19.9%       $13,942,000,000   34.1%
 Conventions           11,800       1.1%          12,500,000     15.6%       $16,577,000,000   40.6%
Source: The Meetings Market Report – Meetings & Conventions Magazine 2002




                 b.        Conventions

As highlighted above, conventions attract only 15.6 percent of total attendance but
contribute 40.6 percent of total expenditures. The convention industry has shown a slight
increase of under one percent compounded annually in all categories of meetings,
attendance, and expenditures, between 1999 and 2001. The convention industry achieved
stronger annual growth rates over the past 10 years. Since 1991, total expenditures
increased by a compound annual growth rate (CAGR) of 4.2 percent and attendance
increased by a rate of 3.8 percent. Meetings increased moderately with a 1.5 percent
CAGR.

                                                  Conventions
                                                                                      Annual Growth Rate
                                     1991               1999               2001       10 Years 2 Years
 Number of Meetings                      10,200              11,600            11,800   1.5%     0.9%
 Attendance                           8,600,000          12,300,000        12,500,000   3.8%     0.8%
 Total Expenditures             $11,000,000,000     $16,300,000,000   $16,600,000,000   4.2%     0.9%
Source: The Meetings Market Report – Meetings & Conventions Magazine 2002




                 c.        Association Meetings

Association meetings (national, regional, and state) experienced growth in all categories
over the past two years. Although overall association meetings decreased since 1991, with a
drop in attendance of 3.5 percent compounded annually, this segment did experience growth
in the number of meetings, attendance, and total expenditures of close to one percent over
the last two years.




                                                      III-3
                                   MEETINGS MARKET ANALYSIS




                                               Association Meetings
                                                                                             Annual Growth Rate
                                 1991                  1999                 2001            10 Years 2 Years
   Number of Meetings                215,000              174,200               177,700      -1.9%      1.0%
   Attendance                     22,600,000            15,600,000           15,900,000      -3.5%      1.0%
   Total Expenditures       $15,300,000,000       $13,700,000,000      $13,900,000,000       -1.0%      0.7%
 Source: The Meetings Market Report – Meetings & Conventions Magazine 2002




 Approximately 12.9 percent of association meetings held during the past year involved
 overnight accommodations, with an average daily rate of $133. Furthermore, 47 percent of
 assocation planners indicated that they have held a meeting at a suburban hotel within the
 past year. In 2001, association meetings had an average attendance of 91 persons, which
 can vary quite significantly from one state to another.

 Association planners indicated that the availability of hotels and/or other facilities stuitable
 for meetings, affordability of destination, and ease of transporting attendees to/from their
 location to be top factors in selecting a meeting destination.

 The average length of time necessary to plan an association meeting was 9.7 months, but
 venues are often selected years in advance. The average duration of an association meeting
 was two days, with a range of 1.6 to 2.2 days. As will be discussed later, most relevant to
 the proposed facility in Las Cruces are association meetings.

                   d.       Corporate Meetings

 Corporate meetings, the highest-volume meeting type, increased by a CAGR of 0.5 percent
 for each category of total meetings, attendance, and expenditures between 1999 and 2001.
 Since 1991, total meetings and attendance grew at a moderate CAGR of 0.5 percent and 0.4
 percent, respectively. As shown in the following table, total expenditures grew at a slightly
 higher CAGR of 1.7 percent.

                                             Corporate Meetings
                                                                                           Annual Growth Rate
                                1991                1999                  2001            10 Years   2 Years
 Number of Meetings                806,200             835,700                844,100       0.5%        0.5%
 Attendance                     49,600,000          51,000,000             51,500,000       0.4%        0.5%
 Total Expenditures         $8,700,000,000     $10,200,000,000       $10,300,000,000        1.7%        0.5%
Source: The Meetings Market Report – Meetings & Conventions Magazine 2002




                                                      III-4
                             MEETINGS MARKET ANALYSIS

Corporate meetings in 2001 had an average attendance per meeting of 78 people, and the
average duration was 2.7 days. Approximately 65 percent of all corporate meetings
nationwide draw under 100 attendees. Facility types utilized for corporate functions varied,
with the most popular being hotels, resorts, and convention centers. Meeting planners
indicated in 2001 that the top factors considered very important when selecting a destination
for corporate meetings were availability of hotels and/or other facilities suitable for
meetings, affordability of destination, and safety and security of destination.

       3.      Seasonality

Having identified the types and sizes of meeting events, it is important to determine the
seasonality of events. According to the M&C Report, Fall and Spring are the most popular
months for association meetings. The least popular are the Winter and Summer months.
This seasonality stems from the avoidance of extreme weather, or not wanting to conflict
with vacation schedules.

       4.      Teleconferencing

It is possible that technological advances in the area of communications will affect the
preceding profile of conventions and trade shows. Teleconferencing has become the
catchword of the meetings and convention industry during the past decade. Although the
cost of teleconferencing continues to fall while the quality of it simultaneously rises, little
can replace the personal interaction that occurs during an association meeting. However, the
corporate meetings market and even the association market is susceptible to a decline in
event frequency due to videoconferencing. In fact, among the 11 percent of association
planners that used videoconferencing, 32 percent indicated that videoconferencing replaced
one or more meetings. Very small meetings, in particular, can now be held using telephone
or video conferencing equipment.

       5.      Summary of National Meetings Market/Overall Impact of 9/11

Despite the recent economic recession and the attacks of September 11, the meetings
industry experienced growth in expenditures and number of meetings over the past decade
and over the past two years, although overall attendance declined slightly since 1991.
Consistent increases in expenditures and the number of meetings in the face of decreasing
attendance suggests that companies and meeting planners are meeting more frequently and
spending more money.

It is important to note that the post 9-11 economic conditions generally did not adversely
affect meeting planner budgets. Over half of association planners (52 percent) indicated
that their budget was unchanged. In fact, over a third (34 percent) indicated an increase in
their budgets, and the remaining (14 percent) indicated a decrease in their budgets.
Futhermore, nearly half of corporate planners perceive no change in their budgets. The
balance of the corporate planners reported nearly equally an increase and a decrease in
their budgets.



                                            III-5
                             MEETINGS MARKET ANALYSIS

As a result of September 11, almost a fifth of association planners indicated that they have
changed locations. Fewer corporate planners changed locations, with a reported 14 percent.
However, over a fourth (28 percent) have been asked to plan more meetings that are within
driving distance. This research indicates that the proposed convention center in Las Cruces
has the potential to capture regional meetings within a reasonable driving distance.


C.     ANALYSIS OF REGIONAL COMPETITIVE FACILITIES

       1.      Overview

The following table and section profiles 11 facilities that were identified as competing for
association meetings, banquets, consumer shows, and to a lesser extent, corporate meetings, in
small-to-medium sized cities in the Southwest.

As indicated, the range of square feet of net meeting space (excluding foyer, back-of-house,
patio space, etc.) for the 11 facilities is from 10,167 square feet in Farmington, New Mexico, to
645,000 in San Antonio, Texas. The average annual attendees range from approximately
50,000 per year at the Taos Convention Center in Taos, New Mexico, to 900,000 attendees per
year in Amarillo, Texas. The base rental rates (excluding audio-visual equipment and set-up
costs) for an exhibit hall range from a low of $200 per day in Farmington to a high of $37,500
per day in San Antonio.

For purposes of analysis, we have focused on convention centers located in cities that are more
comparable to Las Cruces in terms of overall image, profile, population, and commercial base.
As such, we have focused our analysis on eight cities (El Paso, Lubbock, Amarillo, Santa Fe,
Roswell, Farmington, Taos, and Ruidoso).




                                             III-6
Comparative Analysis - Southwest Region Competitive Convention Centers - (Sorted in Descending Order by Net Square Feet)

                                                                                                          Square Feet of Net Meeting                          % Exhibit Hall of Net          Maximum    Average Annual Attendees/Utilization   Rental Rates for   Rental Rates for Meeting   Lodging Within
                                                                                                                          (1)                                                                                              (2)                                                                          (3)
    City, State                                 Facility                                Population                Space                     Exhibit Hall            Sq. Ft.                  Capacity               Level                      Exhibit Hall/Day          Room/Day             Proximity          Expansion Plans
San Antonio, TX            San Antonio Convention Center                                 1,144,646                 785,000                    440,000                56%                      23,000                 475,000                   $4,500 - $37,500        $200 - $4,000             1,241               None
Albuquerque, NM            Albuquerque Convention Center                                  448,607                  167,562                    106,200                63%                      9,000                  500,000                   $2,450 - $11,700          $105 - $680              900                None
Tucson, AZ                 Tucson Convention Center                                       486,699                  144,580                    89,760                 62%                      6,000                  300,000                    $1,050 - $3,800          $120 - $150             1,037               None

Amarillo, TX               Amarillo Civic Center                                          173,627                    95,297                    26,700                   28%                   3,800                   900,000                    $600 -$750             $300 -$360               None         90,000 sq. ft. by 04/2003
El Paso, TX                El Paso Judson F. Williams Convention Center                   563,662                    94,900                    80,000                   84%                   8,000                   231,000                  $1,050 - $4,000          $300 - $375              514                   None
Lubbock, TX                Lubbock Memorial Civic Center                                  199,564                    67,334                    40,000                   59%                   4,900                   371,000                  $1,325 - $3,000           $80 - $180              465                   None
Ruidoso, NM                Ruidoso Convention & Civic Events Center                         7,698                    24,320                    14,994                   62%                   2,400                   80,000                        $600                    $75                  120                   None
Roswell, NM                Roswell Convention & Civic Center                               45,293                    20,000                    13,000                   65%                   2,000                   100,000                    $250 - $675             $50 - $100              259                   None
Santa Fe, NM               Sweeney Convention Center                                       62,203                    17,814                    10,000                   56%                   1,200                   60,000                   $1,200 - $1,600           $90 - $120              550                 Proposed
Taos, NM                   Taos Convention Center                                          29,979                    17,500                     7,500                   43%                    700                    50,000                     $520 - $600             $96 - $380              378                   None
Farmington, NM             Farmington Civic Center                                         37,844                    10,167                     7,434                   73%                   1,200                   96,000                     $200 - $750              $20 - $50              500                   None

(1)
      Excludes foyer , back-of-house, patio space etc.; our research indicates that the net meeting space of these 11 facilities comprises approximately 50% of their gross building area.
(2)
      For Amarillo and Lubbock, includes theatre, auditorium, and coliseum attendees.
(3)
      Identified as eight blocks from the convention center.

N/A = Not available (the convention center was contacted and indicated that such data is not compiled).

Source: Major Exhibit Hall Directory, U.S. Census, and Individual Facilities
                             MEETINGS MARKET ANALYSIS

The cities of San Antonio, Tucson, and Albuquerque, although still competitive, have a much
higher regional and national profile, and, therefore, were considered to be less of a benchmark
for the potential convention center in Las Cruces. These eight cities have convention centers
with an average size of approximately 43,000 square feet of net meeting space, and maximum
capacities ranging from 700 to 8,000 attendees. The average size of exhibit hall is
approximately 25,000 square feet, and the ratio of exhibit space to total net meeting area is over
57 percent. Of note is that the majority of facilities have lodging within close proximity, a
paramount criterion, in site selection for meeting planners, as will be highlighted later.

       2.      Profile of Convention Centers in New Mexico

               a.      Albuquerque Convention Center

Located in central New Mexico, along the Rio Grande, Albuquerque’s Convention Center is a
major meeting facility for the State of New Mexico. The center completed a renovation and
expansion in 1990, and currently has a total of approximately 167,600 square feet of net
meeting space and 106,200 square feet of exhibition space. The convention center is divided
into a two-story West Complex and East Complex. The convention center has a maximum
capacity of approximately 9,000 attendees at any one time.

The facility has been successful since the renovation and basically drives the downtown
hotel market. According to city officials, the lack of hotel rooms within walking distance of
the convention center resulted in lost business and has been a significant source of concern
for the city. Albuquerque has, therefore, been an advocate for additional hotel supply
downtown to better support the convention center in booking business. Specifically, it
would like to see at minimum another 400 rooms in the area to add to the some 900 rooms
that are in close proximity to the facility (within eight blocks).

Nearly 60 percent of current bookings are local and 40 percent are national association
business. Since the slowdown in the economy, the convention center has experienced an
increase in business from the local market, which has experienced an increase in booking
events close to Albuquerque. Base rental rates for the exhibit hall range from $2,450 to
$11,700 per day, while the base rental fee for meeting rooms varies from $105 to $680 a day.

               b.      Ruidoso Convention & Civic Events Center

Built in 1992, the Ruidoso Convention & Civic Events Center brings in numerous meetings and
conventions to Lincoln County. The Ruidoso facility has close to 24,300 square feet of net
meeting space and approximately 15,000 square feet of exhibition space. Several portable walls
offer 14 different combinations for meetings and conventions ranging from 540 square feet to
2,500 square feet. Meeting rooms and the exhibit hall combined provide seating for 2,400
persons theater style, 1,800 in banquet rounds, or a capability of 130 booths for exhibitions.
The city is fairly small with approximately 7,700 people and is located in south central New
Mexico, north of Las Cruces. Ruidoso benefits from its scenic location in the Sierra Blanca
mountain region, hence the convention center’s average annual attendance of approximately
80,000. Base rental rates for the exhibit hall are $600 per day, while the base rental fee for


                                              III-8
                             MEETINGS MARKET ANALYSIS

meeting rooms is $75 a day. A 120-room Hawthorne Suites opened in June 2001, adjacent to
the Ruidoso Convention & Civic Events Center.

               c.      Roswell Convention & Civic Center

The City of Roswell is located approximately 175 miles northeast of Las Cruces and has a
current population of 45,000 people. The Roswell facility has a total of 20,000 square feet of
net meeting space and 13,000 square feet of exhibition space. Over the past three years, a Motel
6, Comfort Inn, and Super 8 were built within the convention center’s proximity, increasing the
overall hotel supply by 162 rooms. Roswell has a number of local attractions such as the
Bottomless Lakes and Bitter Lake, and the International UFO Museum and Research Center.
Base rental rates for the exhibit hall range from $250 to $675 per day, while the base rental fee
for meeting rooms varies from $50 to $100 a day.

               d.      Sweeney Convention Center (Santa Fe)

The Sweeney Convention Center, with a population of approximately 62,200 people, is located
in Santa Fe, New Mexico. The convention center is located in the downtown area and has
approximately 550 hotel rooms within proximity. The Santa Fe facility has 17,814 square feet
of net meeting space and 10,000 square feet of exhibition space. The center’s main floor offers
10,000 square feet of space to accommodate 80 trade show booths, banquets for up to 700
people, or theater-style seating for 1,200. Each of the five meeting rooms provides more than
1,300 square feet of floor space with seating for approximately 150 people.

The average annual attendance is approximately 60,000, which has remained constant over the
past three years. The base rental rates for exhibit halls per day ranges from $1,200 to $1,600,
and meeting rooms per day ranges from $90 to $120. The convention center had a soft goods
renovation in the Summer of 2001. It is understood that HVS International was recently hired
to conduct a feasibility study of a potential redevelopment of the facility. The proposed
redevelopment could include an expansion of the exisiting facility or the construction of a new,
larger convention center, yet no specifics have been decided upon at this point.

               e.      Taos Convention Center

The Taos Convention Center is located in a ski resort area situated within the Carson National
Forest in northcentral New Mexico. The Taos facility has a total of 17,500 square feet of net
meeting space, and has 7,500 square feet of exhibition space, but with only some 380 rooms
within close proximity. It has a maximum capacity of 700 attendees at any one time. Base
rental rates for the exhibit hall range from $520 to $600 per day, while the base rental fee for
meeting rooms varies from $96 to $380 a day.




                                             III-9
                             MEETINGS MARKET ANALYSIS




               f.      Farmington Civic Center

Farmington is located in northwestern New Mexico, approximately 30 miles south of Colorado,
and approximately 50 miles east from the Arizona and Utah borders. The city has a current
population of approximately 40,000. The Farmington Civic Center is the smallest convention
facility in the region, with 10,200 square feet of net meeting space and 7,400 square feet of
exhibition space, yet is one of the busier regional facilities with approximately 96,000 attendees
per annum. The maximum capacity for the center is 1,200, and the center has an average
annual attendance of 172,000. There are approximately 500 hotel rooms within proximity to
the convention facility. Base rental rates for the exhibit hall range from $200 to $750 per day,
depending whether the group is a corporate group or a non-profit organization. The base rental
fee for meeting rooms varies from $20 to $50 a day.

       3.      Profile of Competitive Convention Centers Outside of New Mexico

Apart from those convention facilities located in New Mexico, there are five other regional
centers that would compete in varying degrees with a proposed convention facility in Las
Cruces. These facilities include: the Amarillo Civic Center, El Paso Convention Center,
Lubbock Memorial Civic Center, and the San Antonio Convention Center, all located in Texas,
as well as the Tucson Convention Center in Arizona.

The El Paso Judson F. Williams Convention Center, the most proximate facility to Las
Cruces, has a total of 94,900 square feet of net meeting space and 80,000 square feet of exhibit
space, which renders a ratio of 84 percent of exhibit space to net meeting space. The El Paso
Convention Center, with 231,000 average annual attendees, completed a 26,500-square-foot of
net meeting space expansion in May 2002 costing $23 million. The 2002 fiscal year, which
ended in August 31, generated the highest revenue ever of $1.8 million (including revenue from
the adjacent performing arts center). the year was under construction.

The Amarillo Civic Center has approximately 95,300 square feet of net meeting space and
26,700 square feet of exhibition space, attracting approximately 900,000 attendees annually.
The Amarillo facility is currently adding 90,000 square feet of meeting space, scheduled to be
completed by April 2003.

The Lubbock Memorial Civic Center, with 371,000 attendees using the facilities annually, has
approximately 67,000 net square feet of meeting space and 40,000 square feet of exhibition
space.

The San Antonio Convention Center is located in the most populated city among the cities
analyzed for the regional competitive facilities analysis, with close to 1.1 million people. The
San Antonio Convention Center has 645,000 square feet of net meeting space and 440,000
square feet of exhibit space, attracting approximately 475,000 attendees annually.




                                             III-10
                             MEETINGS MARKET ANALYSIS


Lastly, the Tucson Convention Center, with a total of 144,600 square feet of net meeting space
and 89,800 square feet of exhibition space, attracts an average of 300,000 attendees annually.
The center is located in Tucson, Arizona, the university and upscale resort city with a
population of close to 487,000.


D.     CONVENTION CENTERS IN OTHER SECONDARY/TERTIARY CITIES

For further analysis, and mainly serving as a reference point, the following section provides an
overview of a sample of convention centers located in other secondary and tertiary Western
U.S. cities. As can be noted in the table on the following page, the total net meeting space
ranges from 23,500 square feet at the Yakima Convention Center to 89,000 square feet at the
Oakland Convention Center. The average square feet of net meeting space for the eight
facilities is close to 56,000 square feet, while the average square feet of exhibit space is
approximately 37,000 square feet.

The Modesto Center Plaza has the least amount of exhibit space with 16,000 square feet,
whereas the Oakland Convention Center has the largest exhibit space, with 73,000 square feet.
The average ratio of exhibit space to net meeting space is 67 percent, and the average annual
attendees range from approximately 125,000 attendees per year at the Oakland Convention
Center to 900,000 attendees per year at the Lane County Convention Center in Eugene, Oregon.
The average annual attendees are approximately 329,000 at the surveyed convention facilities.
It should be noted that the profitable Boise Center is scheduled to expand by 127,500 square
feet by Fall 2004 and the Yakima Convention Center is to expand by 18,863 square feet by Fall
2003. All of these eight convention centers have lodging facilities within their proximity.




                                            III-11
                                                               Comparative Analysis - Convention Centers at Small/Medium Sized Western U.S. Cities - (Sorted in Descending Order by Net Square Feet)

                                                                                          Square Feet of                    % Exhibit Hall of                             Average Annual Attendees/    Lodging Within
     City, State                      Facility                        Population         Net Meeting Space   Exhibit Hall     Net Sq. Ft.        Maximum Capacity            Utilization Level (1)      Proximity
                                                                                                                                                                                                                  (2)

Oakland, CA             Oakland Convention Center                      399,484                89,000           73,000            82%                  9,857                        125,000                  645
Bakersfield, CA         Bakersfield Convention Center                  247,057                78,000           26,000            33%                  2,500                        350,000                  357
Eugene, OR              Lane County Events Center                      137,893                74,700           59,400            80%                  7,500                        900,000                  800
Spokane, WA             Spokane Convention Center                      195,629                58,500           40,000            68%                  6,000                        259,000                 1,771
Boise, ID               Boise Center                                   185,787                50,000           25,000            50%                  3,500                        200,000                  600
Bellevue, WA            Meydenbauer Center                             109,569                48,000           36,000            75%                  5,400                        200,000                 1,653
Yakima, WA              Yakima Convention Center (3)                    71,845                23,500           23,500           100%                  2,300                        126,000                  326
Modesto, CA             Modesto Center Plaza                           188,856                24,000           16,000            67%                  1,800                        271,000                  375

(1)
    For Eugene, includes theatre, auditorium, and coliseum attendees.
(2)
    Identified as eight blocks from the convention center.
(3)
    Yakima Convention Center only has one large exhibit hall that can be partioned to meeting space/rooms.

N/A = Not available (the convention center was contacted and indicated that such data is not compiled).

Source: Facility management and Sales & Marketing Management
                                   MEETINGS MARKET ANALYSIS


E.     MEETING FACILITIES IN LAS CRUCES

       1.           Corbett Center – New Mexico State University

The Corbett Center at New Mexico State University (NMSU), which opened in the mid-1960s,
is currently the largest meeting facility in the City of Las Cruces with a total of 20,300 square
feet of net meeting space. The Corbett Center, with capacities of 25 to 1,200 attendees, has an
11,289-square-foot ballroom with a capacity of 1,200, as well as 15 meeting rooms ranging
from 300 square feet to 2,021 square feet. The center also offers an auditorium, a computer
center, a convenience store, bookstore and gift shop, full-service post office, and free parking.
The NMSU Corbett Center Student Union, has three levels of meeting and convention facilities
and two cafeterias. Base rental rates for the Corbett Center for non-university events are $30
per day for one meeting room that seats 16 to 18 people, $150 for the use of one ballroom for
one day, and $250 for the use of the auditorium for one day. The following table provides a
summary of the historical trends in the performance of the facility between fiscal years 1991
and 2000.

                                    NMSU Corbett Center Performance
                                          1991/92 to 2000/01
                                                                 Event Type
               Fiscal    Total    Total Attendees                     University
               Year      Events                      New     Repeat    Event       Public
              1991/92      97          20,397         14       83         56         41
              1994/95     128          32,460         43       85         59         69
              1997/98     220          40,832         73      147        107        113
              2000/01     200          23,707         86      104        108        92
         CAGR (1)         8.4%          1.7%        22.3%    2.5%       7.6%       9.4%
        (1)
              Compound Annual Growth Rate
        Source: Corbett Center




The total number of events per year increased from 97 events in 1991/92 to 200 events in
2000/01, at a CAGR of 8.4 percent. The average annual number of events between 1991/92 to
2000/01 was 161 events. Typically, during the school year, event size ranges from 20 to 350
people, and up to 1,600 attendees per event during the summer. The total number of attendees
has also grown from a count of 20,397 in 1991/92 to 23,707 in 2000/01, at a CAGR of 1.7
percent. The average number of attendees over this period was 29,349 per annum, while the
average event size was 182 attendees (29,349 attendees divided by the indicated average of 161
events).

Approximately 75 percent of the events are university student/faculty staff bookings. A large
portion of the events at the Corbett Center are also non-profit and SMERF (sports, military,
educational, religious, and fraternal) repeat events. Very few state associations hold meetings at
the facility, as there are no commercial attractions in the immediate vicinity;dormitory
accommodations are available when school is out. It is to note, however, that there has been an


                                                    III-13
                              MEETINGS MARKET ANALYSIS

increase in the number of new events. In 1991/92, there were only 14 new events held. By
2000/01 this number grew to 86 new events, at a CAGR of 22.3 percent. Fiscal year 1997/98
experienced a record year of approximately 41,000 attendees, which can be attributed to the
Family Motor Coach Association convention, which generated close to 15,000 attendees.

        2.      Pan American Center - NMSU

The Pan American Center is the second venue facility located on the NMSU campus. It is an
indoor arena that seats a maximum capacity of 13,000. The Pan American Center was
originally built as a basketball arena, and is used primarily for sporting activities as well as for
concerts. The facility purchased a staging system to accommodate some concerts, however, the
staging space lowers the occupancy to less than 13,000, and it also lacks easy access for the
production necessary to present a large event. Some of the largest events held at the Pan
American Center include major rock concerts, such as Garth Brooks, Gloria Estefan, and
George Strait with more than 10,000 attendees..

        3.      Dickerson’s Event Center

Dickerson’s Event Center is located in the southwest portion of Las Cruces, along Picacho
Avenue. The recently remodeled, 45,000-square-foot facility hosts numerous consumer shows
per year with approximately 1,000 attendees per event. The shows that book at Dickerson’s
Event Center on a regular basis are an antique show, a gun show, a home builders event, a trade
show, and an agricultural show. It is understood that the facility hosts an average of five
consumer shows per annum.

        4.      Sertoma Bingo Hall

Lastly, the 70,000-square-foot Sertoma Bingo Hall, which has a capacity of 600 people, offers a
civic-oriented meeting facility alternative in Las Cruces.

        5.      Overview of Hotels in Las Cruces with Meeting Facilities

                a.      Hilton Las Cruces

The Hilton Las Cruces has approximately 9,000 square feet of meeting space, including a
5,000-square-foot banquet room. Opened in 1986, the hotel has a total of 202 rooms. For year-
end 2002, management estimates that approximately 16,700 room nights, or 23 percent of
demand at the hotel will have been derived from the group meetings segment. The meeting
facilities primarily attract corporate meetings, as well as various associations, government
organizations, and educational groups. Daily rental rates for meeting rooms range from $75 to
$700; during the weekends the ballroom has a minimum food and beverage fee of $3,000.




                                              III-14
                             MEETINGS MARKET ANALYSIS


               b.      Holiday Inn de Las Cruces

The Holiday Inn Las Cruces has meeting facilities that can accommodate a capacity of 800
people. The hotel has 6,250 square feet of meeting space, and there are a total of nine meeting
rooms. The hotel has recently completed a soft goods renovation of all guest rooms including,
carpet, paint, linen, drapes, and furniture. Ballroom and boardroom renovations are scheduled
to begin by the beginning of 2003; daily rental rates ranges from $130 to $1,500.

               c.      Best Western Mesilla Valley Inn

The Best Western Mesilla Valley Inn houses the Columbus Conference Center, which has over
8,560 square feet of meeting space that can accommodate up to 600 people. Approximately 50
percent of the bookings are social events, 25 percent are corporate, 15 percent are associations,
and the remaining 10 percent are government groups. The conference center estimates an
utilization rate of 60 percent. Starting in the Fall of 2002, the hotel will be undergoing a
$400,000 hard and soft goods renovation of its guest rooms. The Best Western has a total of
seven meeting rooms that are available for meetings and functions; daily rental fees ranges from
$25 to $2,500.

               d.      Other Hotels With Meeting Facilities

There are four other hotel meeting facilities in Las Cruces that generate some meeting demand,
which are as follows:

   1. Spring Hill Suites by Marriott has 1,240 square feet of meeting space for a capacity of
      75 people.
   2. The Best Western Mission Inn has a banquet hall that can accommodate up to 200
      people (1,925 square feet) and a smaller meeting room (500 square feet) that can seat up
      to 75.
   3. Teakwood Inn has a 1,700 square foot ballroom that holds up to 150 people, which can
      be sub-divided into three smaller meeting rooms. It also has a 425 square feet meeting
      room that hold up to 40 people. Each meeting room is equipped with highspeed internet
      access.
   4. La Quinta Inn houses two meeting rooms that are approximately 300 square feet and
      400 square feet. The meeting rooms can accommodate groups for up to 25 people.

       6.      Conclusion

The Corbett Center at NMSU has capacities for meetings ranging from 25 to 1,200 attendees,
the majority of which are religious groups, sports and band camps, as well as university
department-related demand. The Dickerson’s Event Center, which is unattractive and in a
generally remote area of Las Cruces, hosts mainly agricultural trade shows, while the Pan
American Center provides no meeting space. Lastly, the Hilton, Best Western Mesilla Valley
Inn, and Holiday Inn, which are dictated by their size, cater to smaller corporate groups.




                                             III-15
                              MEETINGS MARKET ANALYSIS

Based on the facts gathered and our updated analysis of existing meeting space in Las Cruces, it
is evident that the city has a limited and scattered inventory of high-quality, dedicated meeting
space. Moreover, Las Cruces lacks a large exhibit hall to attract national, regional, and state
associations. Therefore, a modern, strategically located convention center is needed in Las
Cruces to accommodate current and potential levels of meeting demand in the Southwest.


F.     FUTURE SUPPLY OF CONVENTION CENTERS

       1.      Las Cruces

According to the Las Cruces Planning Department, there are no plans for convention/event
center developments within the city.

       2.      Regional Area

As was previously discussed in this section, the Amarillo Civic Center is scheduled to
expand by 90,000 square feet by April 2003. In addition, the El Paso Convention Center
recently added close to 26,000 square feet of exhibit space. The San Antonio Convention
Center expanded in 2001, adding approximately 200,000 square feet of exhibit space and
60,000 square feet of meeting space. Lastly, Santa Fe’s Sweeney Convention Center is
undergoing a feasibility study of a potential redevelopment of the existing facility. All these
additions to supply have been accounted for in our analysis and recommendations.


G.     LAS CRUCES HOTEL MARKET

       1.      Introduction

In the following section, we review the existing stock of lodging facilities in Las Cruces and
comment upon their long-term suitability for servicing the convention market. As part of our
field research, we inspected the primary hotels in Las Cruces, and conducted interviews with
hotel management. Information gathered and analyzed include the mix and seasonality of
demand, rate structures, occupancy, and average room rates in the market, the number of guest
rooms available for conventions, the status of proposed hotel projects, and the outlook for the
local lodging market.

       2.      Existing Hotel Supply

There are a total of 2,094 hotel rooms throughout the City of Las Curces. The primary hotel
supply, defined as hotels that either have meeting space or book group business, is comprised of
a total of 13 properties and 1,381 units. The majority of the hotels are limited-service facilities
that cater predominantly to the leisure market. Key information for each of these hotels is
presented in the following table. A map detailing the location of each of these 13 properties in
Las Cruces is presented after the table.



                                              III-16
                            MEETINGS MARKET ANALYSIS


                                     Primary Hotel Supply
                                    Las Cruces, New Mexico
                                                Published Room Rates
                                 Year Number of
            Property            Opened Rooms      Single    Double               Amenities
Baymont Inn & Suites             1996    92        $49       $53                     E
Best Western Mesilla Valley Inn 1974/83 167      $49-$62   $59-$75                 A,C,E
Best Western Mission Inn        1946/79  66      $46-$54   $50-$58                 A,C,E
Comfort Suites                   1996    61      $69-$74   $74-$79                   E
Fairfield Inn                    1996    78        $65       $62                     E
Hampton Inn                      1985   119      $61-$74   $61-$74                  C,E
Hilton Las Cruces                1986   202     $77-$120 $77-$125                A,B,C,D,E
Holiday Inn Express              1997    53      $65-$90   $65-$90                   E
Holiday Inn de Las Cruces        1975   110      $59-$99 $64-$104                A,B,C,D,E
La Quinta Inn                    1985   139      $59-$67   $67-$75                   E
Sleep Inn                        1997    63      $54-$84   $64-$94                   E
SpringHill Suites                1996   101     $59-$129 $59-$129                  C,D,E
Teakwood Inn                     1974   130        $40       $53                   B,C,E
    Primary Total                      -        1,381         $68          $72
  Overall Las Cruces Total                      2,094
Amenities Codes
A – Restaurant(s)
B – Lounge
C – Meeting Rooms
D – Exercise Room
E – Swimming Pool
Source: Management of Individual Properties and The Hotel & Travel Index




                                               III-17
                          MEETINGS MARKET ANALYSIS




Source: Las Cruces C&VB




                                   III-18
                                     MEETINGS MARKET ANALYSIS

   As highlighted previously, there are seven hotels In Las Cruces that provide meeting
   facilities, the largest being the Hilton, Holiday Inn, and the Best Western Mesilla Valley
   Inn. Most hotels in Las Cruces have an affordable rate structure as they charge
   approximately $68 per night for single rooms and $72 per night for double rooms. The
   selected primary hotels range from 53 units at the Holiday Inn Express to 202 rooms at the
   largest hotel, the Hilton Las Cruces. The total average number of primary rooms is 106
   units.

            3.       Historical Market Performance

   The following table summarizes the overall growth in supply and demand of the hotels in
   the City of Las Cruces, the resulting occupancy levels, and the average daily room rates for
   the period 1993 through 2001, as well as our estimate for 2002.

                               Historical Growth of Rooms Supply and Demand
                               Overall Hotel Market in Las Cruces, New Mexico
                                      1993 to 2001 and 2002 (Estimated)
                    Annual                     Total
                   Available      Percent     Annual          Percent   Occupancy   Average Daily   Percent
  Year              Rooms         Change      Demand          Change     Percent     Room Rate      Change
  1993              572,672           -       408,900             -       71.4%        $45.49           -
  1994              572,672         0.0%      415,800           1.7%      72.6%        $46.65         2.5%
  1995              576,168         0.6%      444,200           6.8%      77.1%        $49.12         5.2%
  1996              624,852         8.4%      427,400          -3.8%      68.4%        $50.41         2.6%
  1997              743,032        18.9%      419,800          -1.8%      56.5%        $48.91        -2.9%
  1998              764,297         2.9%      450,200           7.2%      58.9%        $47.62        -2.6%
  1999e             764,297         0.0%      450,900           0.2%      59.0%        $47.50        -0.2%
  2000              764,297         0.0%      453,400           0.5%      59.1%        $52.83        11.2%
  2001              764,297         0.0%      481,500           6.2%      63.0%        $53.46         1.2%
  2002e             764,297         0.0%      557,900          15.9%      73.0%        $56.00         4.8%
 CAGR (1)            3.3%             -        3.5%               -          -          2.3%            -
e=estimated
(1)
    Compound Annual Growth Rate from 1993 to 2002e
Source: Smith Travel Research and Jones Lang LaSalle Hotels




   As summarized in the previous table, the year-end 2002 occupancy level for the overall
   hotel market in Las Cruces is improving at approximately 73 percent, with an estimated
   corresponding ADR of $56.00. The supply was generally stable between 1993 and 1995,
   with a surge in supply taking place in 1996 and 1997, as six new hotels with 425 rooms
   opened in the market. In 1996, there was a growth of 8.4 percent in hotel inventory, and in
   1997 there was a 18.9 percent spike. Since 1997, there has been a nomimal increase in
   annual available rooms. Overall, hotel supply has grown at a CAGR of 3.3 percent from
   1993 to 2002.




                                                        III-19
                                    MEETINGS MARKET ANALYSIS

Since 1997, occupancy levels have increased significantly, especially over the past two
years. Of note is that both occupancy and ADR in Las Cruces would most likely increase
materially with the opening of a convention center.

As indicated, occupancy levels are estimated to reach approximately 73 percent by year-end
2002, achieving the highest occupancy since 1995 of 77.1 percent. Year-to-date July 2002
occupancy was at 74.9 percent, showing a clear rebound in hotel performance over the same
period in 2001.

The 2002 year-to-date increase is attributed to the fact that Las Cruces is a safe, drive-to
destination, which bodes well in the post 9-11 travel environment, coupled with the demand
generated from a large Japanese group of engineers (Mitsubishi) with a contract at the White
Sands Missile Range that has been contributing close to four percent of total room nights. It
is to note, however, that the Mitsubishi contract ended in October 2002, and should have a
slight adverse impact on the 2003 Las Cruces occupancy levels.

Average daily room rates (ADRs) increased slightly between 1993 and 1996, then started to
decline between 1997 and 1999, attributed to the new supply entering the market. Starting
in 2000, ADRs began to increase and were at $55.66 as of year-to-date July 2002, estimated
to be approximately $56.00 by year-end 2002, an increase of 4.8 percent over 2001.

        4.         Las Cruces Meetings Market Demand by Segment

The highest number of groups captured by the Las Cruces meetings market is the SMERF
(Social, Military, Educational, Religious, and Fraternal) market (47 percent), followed by
corporate and government (both at 16 percent) and associations (10 percent). As shown in the
following table, SMERF, corporate and associations generate the greatest number of hotel room
nights in the city.

                  Las Cruces Meeting Market Demand by Segment (FY 2001/02) (1)
                                                 Number of Groups                   Number of Room Nights
  SMERF                                               47%                                   33%
  Corporate                                           16%                                   22%
  Government                                          16%                                   13%
  Association                                         10%                                   15%
  University                                           8%                                    6%
  City-Wide Groups                                     4%                                   11%
  Total Percentage                                   100%                                  100%
  Total Number                                        625                                  30,519
(1)
  The data does not account for meetings that were not reported to the Las Cruces CVB.
Source: Las Cruces C&VB




                                                         III-20
                             MEETINGS MARKET ANALYSIS



        5.      Future Hotel Supply

Based on discussions with city planning officials, there are presently no proposed lodging
properties that are expected to be developed in Las Cruces. Local hoteliers have heard of a
proposed Sheraton Four Points to be potentially located adjacent to the existing Walmart at the
intersection of Lohman and Walton, but no definitive plans are on record.

        6.      Conclusion

The previous section indicated that the Las Cruces hotel inventory is clustered in specific
portions of the city (see map on Page III-18), mainly situated in its southern portion.
Moreover, as highlighted earlier, the vast majority of the competitive convention centers are
situated within close proximity to hotel rooms, an important site selection criterion for most
meeting planners. As will be discussed in Section IV of this report, these two variables have
been taken into consideration in presenting our site and facility recommendations.


H.      CONVENTION CENTER DEMAND IN NEW MEXICO

        1.      Categories of Demand

In the process of analyzing demand in order to estimate facility usage and to make facility
recommendations for a proposed convention center, it is important to first identify the
different categories of meetings demand. There are three main categories of demand that a
proposed convention center could attract:

•    Demonstrated demand is that which can be qualified by examining the utilization levels
     at competitive venues.

•    Unsatisfied demand is that which is presently turned away or “lost” at the area’s
     competitive facilities due to capacity constraints (lack of available dates), or space
     constraints (insufficient square footage).

•    Induced demand is that which does not presently seek to be accommodated in the area
     under study. For example, if a city (such as Las Cruces) has never had a convention
     center facility, there are potential users, such as state associations and consumer show
     organizers that have not considered hosting large events in the area due to a lack of
     suitable space. These event planners could be persuaded to host events in the proposed
     facility.

        2.      Sources of Potential Demand

Demand for convention centers in New Mexico emanates from a variety of generators.
Based on our updated interviews with regional convention centers and statewide meeting



                                            III-21
                            MEETINGS MARKET ANALYSIS

planners, demand is derived from four sources, or segments: local, state, regional/national
groups, and consumer shows.

Local meeting demand is generated by banquets, social, and civic functions and small
associations desiring space for regularly scheduled membership. Social and banquet
functions include weddings, quinceñeras, job fairs, high school reunions, and college alumni
gatherings, among others. Demand for local meeting space in the Las Cruces area appears to
be strong as indicated by utilization levels at the NMSU Corbett Center, the 202-room
Hilton, and the 110-room Holiday Inn. Research indicates that the average size of local
meetings in New Mexico is approximately 300 persons.

Golf course related events have been a new source of local demand. In 2002, Las Cruces
hosted golf course affiliated events that produced approximately 10 percent of the total
revenue generated by events. It is worth noting that the Sonoma Ranch Golf Course, an 18-
hole championship facility that opened in May 2001, generates 3,500 to 4,000 rounds a
month, attracting a majority of its players from the El Paso area.

State convention activity is currently concentrated in Albuquerque, largely due to the city’s
large meeting facilities, its central location, and status as the population, governmental, and
business center of the state. However, most state groups and associations rotate annual
and/or semi-annual meetings to other New Mexico cities in an effort to represent member
associations in outlying areas. Other cities that accommodate these meetings are Roswell,
Ruidoso, Santa Fe, and Farmington. Las Cruces tends to attract smaller state associations,
as it currently does not offer sufficient meeting facilities that could otherwise capture a
larger portion of this potential source of demand.

Examples of state groups and associations that conduct large annual and semi-annual
meetings include the New Mexico Oil & Gas Association, New Mexico Restaurant
Association, and the New Mexico Homebuilders Association, among others. Research
indicates that there are approximately 60 state associations in New Mexico that generate
meetings with an average size of 400 to 500 attendees. The following table presents a
sample of some the state’s nearly 60 associations by average attendance.




                                            III-22
                                MEETINGS MARKET ANALYSIS



                      Potential State Association Conferences in Las Cruces
                                Association                           Average Attendance
     New Mexico Restaurant Association                                     2,500
     New Mexico Women’s State Bowling Association                          2,000
     New Mexico Oil & Gas Association                                      1,000
     New Mexico Homebuilders Association                                   1,000
     New Mexico Association of Counties                                     950
     New Mexico Municipal League                                            850
     New Mexico Square Dancing Association                                  800
     New Mexico Farm & Livestock Bureau                                     800
     New Mexico Veterinary Medical Association                              800
     New Mexico Women’s Slow Pitch Conference                               750
     Democratic Party of New Mexico                                         600
     New Mexico Bankers Association                                         500
     Realtors Association of New Mexico                                     500
     New Mexico Library Association                                         500
     New Mexico Math & Science Teachers                                     500
     New Mexico Credit Union League                                         400
     Tourism Association of New Mexico                                      400
     New Mexico Grocers Association                                         400
     New Mexico Hospital & Health Association                               350
     Historical Society of New Mexico                                       300
     New Mexico National Guard Officers Association                         300
     New Mexico Technology Student Association                              300
     New Mexico Automobile Dealership Association                           300
     New Mexico Broadcasters Association                                    250
     New Mexico Corrections Association                                     200
     New Mexico Association for Health, P.E., Recreation & Dance            200
     Source: Meeting Planners




Regional and national meetings and conventions generally encompass a delegate
attendance that is multi-state in scope. Regional conventions usually remain within the
boundaries of their membership and rotate meetings and conventions among principal cities
of a region.

Within New Mexico, Albuquerque and Santa Fe are the primary destinations for regional
and national meetings. As will be discussed in Section V of this report, due to the lack of
national air service to Las Cruces, it is unlikely that significant numbers of national
conventions will consider the city as their principal destination for meetings.

Examples of regional and national groups and associations that have conducted meetings in
the state include the United States Environmental Agency, the American Institute of
Medical Education, and the American Heart Association. Research and discussions with
meeting planners indicate that regional and national associations convening in New Mexico
range in size between approximately 300 to 500 attendees.



                                              III-23
                                MEETINGS MARKET ANALYSIS


The consumer show market has two categories, the first having vendors from the local area
that are either hobbyist or retirees, and the other having full-time vendors who will travel as
much as 1,200 miles one-way to be an exhibitor. Shows that feature local hobbyist and
retirees rarely require a civic center and primarily use churches and schools. Shows
organized by professional promoters that feature full-time vendors, on the other hand,
typically require a civic center with a minimum of 20,000 square feet of exhibit space, but
can manage with less space when the demographics do not support a larger show. In
smaller venues where more space is required, show planners will set vendors up in the
concourse and adjacent meeting rooms. As such, all available space is used for these events.

Consumer shows in New Mexico take place primarily in Albuquerque and Santa Fe, ranging
from gem, craft, and antique exhibitions to agricultural equipment and livestock shows. Our
research indicates that the size of consumer shows in the region tend to range between
approximately 1,000 to 2,000 attendees.

The seasonality pattern of convention center demand in New Mexico is highlighted in the
following graph, peaking in March and troughing in the Summer months.

                             New Mexico Convention Center Market Seasonality




                 Jan   Feb     M ar   A pr   M ay   Jun   Jul   A ug   Sep   O ct   N ov   D ec


               Source: Jones Lang LaSalle Hotels



Lastly, the vast majority of corporate meetings in New Mexico and Las Cruces are held in
hotels. It can be assumed that this trend will, for the most part, continue, and that a
convention center in Las Cruces would not serve as a primary destination for this segment.


I.     LOST CONVENTION BUSINESS IN LAS CRUCES

Lost business is essentially “unsatisfied” demand that cannot be accommodated due to either
timing constraints and/or insufficient supply. According to a recent survey conducted by the
Las Cruces Convention and Visitors Bureau (LCC&VB), 13 potential conventions were lost
to competing cities in the Southwest due to lack of a convention center in the city.



                                                    III-24
                                 MEETINGS MARKET ANALYSIS

These 13 potential meetings, would have generated a total of approximately 23,000
attendees, approximately 27,000 hotel room nights, approximately $1.8 million in hotel
room revenue and nearly $5.4 million in total city-wide spending. A potential convention
center in Las Cruces would capture all the indicated lost business, in addition to other
unidentified “unsatisfied” demand.


J.      OVERVIEW OF MEETINGS DEMAND SURVEY

        1.       Methodology

In addition to our analysis of the Las Cruces socio-economic dynamics, coupled with our
updated research on the regional and local convention centers presented earlier in this section,
we relied on a qualitative survey conducted by the City of Las Cruces of selected
organizations with demonstrated histories of holding meetings in the state of New Mexico.
The purpose of this potential user survey was to determine their broad preferences, their
bases for selecting locations for meetings, and their potential interest in meeting in Las
Cruces.

        2.       Results

The City of Las Cruces mailed out approximately 260 questionnaires, the majority of which
were to organizations based in New Mexico.

Of the 260 questionnaires mailed, 11 were considered “null”, attributed to returned mail,
disconnected phone, etc., rendering a net total of 249 questionnaires. Of these 249
questionnaires, 36 responses were received, translating into an approximately 14 percent
overall response rate. The format and content of this potential user survey, along with a brief
summary of its results, is presented in the Addenda of this report.

The key findings of the received surveys are highlighted in the following statements:

                           Summary Findings of the Potential User Survey

     - The largest number of state association meetings attendees in the survey is 500;
     - The largest number of other organization meetings attendees in the survey is 1,500;
     - A common comment was that a central location within New Mexico is preferred;
     - Approximately 97 percent of respondents were familiar with Las Cruces;
     - Close to 83 percent indicated that they would consider Las Cruces for a meeting; and
     - The vast majority of the respondents made favorable comments about Las Cruces.

      Source: Meeting Planners




                                                   III-25
                            MEETINGS MARKET ANALYSIS


       3.      Survey Conclusions

The responses to the qualitative survey indicate that there continues to be interest in a
potential convention center in Las Cruces, and that the city would be a desirable location for
group meetings. As highlighted previously, approximately 83 percent of the respondents
indicated that they would consider Las Cruces for a meeting.

Some concerns, although not insurmountable, were brough to light in relation to the
necessity of constructing a hotel adjacent to the convention center, as well as the distance of
Las Cruces from a major airport and the generally remote location of the city within New
Mexico. However, a factor that is expected to offset this perceived liability is the
affordability of Las Cruces as a destination, attracting price sensitive state and regional
associations to the city.


K.    CONCLUSIONS OF OUR UPDATED MARKET RESEARCH AND ANALYSIS

Our analysis of regional and local facilities highlights sufficient “demonstrated” meetings
demand in the region, while the qualitative survey indicates the potential for “induced”
demand from non-local users for a convention center in Las Cruces. In addition, the
analysis performed by the Las Cruces C&VB on lost business is indicative of “unsatisfied”
demand as a result of insufficient convention center space. The demand that appears to be
“unsatisfied” is clearly due to the lack of a suitable meeting facility in the City of Las
Cruces.

All variables considered, it is our opinion that there continues to be sufficient demand in the
Southwest to justify the construction of a conference center in Las Cruces. In deriving this
conclusion, and in arriving at the overall facility recommendations that will be presented in
Section IV, we took into account the following factors:




                                            III-26
                            MEETINGS MARKET ANALYSIS


                              Summary of Concluding Variables

The convention centers located in cities that are more comparable to Las Cruces in terms of overall
image, profile, population, and commercial base have facilities with an average size of approximately
43,000 square feet of net meeting space;

These facilities had an average exhibit hall size of approximately 25,000 square feet, and a ratio of
exhibit space to total net meeting area of over 57 percent;

The only conference facility in Las Cruces, the NMSU Corbett Center, provides meeting space that
is distant from the city’s commercial hubs;

Las Cruces has recently lost 13 potential meetings that would have generated a total of
approximately 23,000 attendees, due to insufficient convention center space;

The meeting planner survey reconfirmed the favorable image Las Cruces has in the Southwest as a
potential destination for associations;

There are some 60 state associations in New Mexico, with an average size of 500 members;

Our updated interviews with meeting planners indicate that an important portion of demand for a
potential convention center in Las Cruces would still be generated from the state association
meetings segment;

The vast majority of corporate meetings in New Mexico and Las Cruces are held in hotels;

Other cities in New Mexico experience relatively strong levels of convention demand from
attendees that could potentially hold their meetings in Las Cruces;

The hotel inventory in Las Cruces may be a limiting factor in attracting very large and simultaneous
conventions (with more than 2,000 attendees);

The hotel inventory in Las Cruces is clustered in specific sections of the city;

The affordability of Las Cruces and its drive-to status bodes well in the post-September 11
economic paradigm;

There are a number of convention centers in the Southwest that are either expanding or undergoing
a major renovation;

Las Cruces is ranked by Money Magazine as one of the top seven retirement places in the U.S.;

Las Cruces is ranked as the top small metro area to do business by Forbes Magazine and the
Milken Institute;

Las Cruces was awarded the 2001 and 2002 Top Destination Award by Facilities & Destinations
Magazine, and

Las Cruces does not have direct air transport accessibility, with potential meeting attendees having
to travel approximately 45 miles from El Paso International Airport.




                                               III-27
                            MEETINGS MARKET ANALYSIS


Based on the foregoing variables and the updated market research and analysis, we
conclude that there continues to be a need for a convention center in Las Cruces, and
that it would be market supported.

In analyzing similar-sized cities, and based on our knowledge of the industry, we, therefore,
recommend that a convention center with 40,000 square feet of net meeting space, and
approximately 80,000 square feet of gross building area, would be the most effective over
the long-term for Las Cruces. This square footage recommendation is on a par with the
average net meeting space at the competitive facilities (43,000 square feet), which as
highlighted in the table on page III-7.

Such a facility would also comprise an approximate 25,000-square-foot exhibit hall,
reflecting the average of the most comparable convention facilities analyzed in this section,
representing an exhibit hall-to-total-net-meeting space ratio of approximately 62 percent.

The proposed size of the convention center in Las Cruces would position the city to be
competitive (in terms of net meeting space), and is deemed appropriate given the population
base, long term potential, and location of Las Cruces.




                                           III-28
           SECTION IV

SITE AND FACILITY RECOMMENDATIONS
                         SITE AND FACILITY RECOMMENDATIONS

A.      INTRODUCTION

Our evaluation presented in Section III regarding the existing conditions of the Southwest
convention center market, the updated meeting planner survey, and our analysis of existing meeting
facilities in Las Cruces, indicate that there is still support for a public convention center with 40,000
square feet of net meeting space, and approximately 80,000 square feet of gross building area. The
next step in our evaluation process is to identify those sites in Las Cruces that are currently available
and would be most suitable for such a convention center.

As part of our field research, we inspected 11 development sites identified by the City of Las
Cruces as being available for a potential convention center. Each site was strategically analyzed
in terms of access and visibility from major highways, location relative to hotel supply, ambiance
of the surrounding area, and size and topography relative to required facilities, among other
variables.

Accordingly, the following section first provides an overview of these 11 potential development
sites, and then focuses on the four most suitable sites that Jones Lang LaSalle Hotels deems most
appropriate for the development of a convention center in Las Cruces. Based on our fieldwork,
the results of the updated meeting planner survey, interviews with competing and comparable
facilities, and our knowledge of the industry, this section also provides the updated
recommendations on the configuration and operation of the proposed facility.


B.      OVERVIEW OF THE POTENTIAL SITES

        1.      Introduction

As indicated previously, Jones Lang LaSalle Hotels inspected and analyzed 11 sites that were
identified to us by the City of Las Cruces as being available for the development of a potential
convention center. These 11 sites, which are presented in the order in which they were
inspected, are summarized below. The map on the following page highlights their location
within the City of Las Cruces.

        2.      Site Analysis

                a.      Interstate 10 & University Avenue (Site A)

This approximately 40-acre site is located at the intersection of Interstate 10 and University
Avenue, and contains the “Cotton Barn”, the oldest building in Las Cruces. The site is located
on NMSU (state) land, thus does not fall under the jurisdiction of City of Las Cruces zoning
ordinances. Although benefiting from very good accessibility from Interstate 10, it is understood
that there would be strong resistance from the local agricultural community if the site was
converted into a convention center.




                                                  IV-1
   SITE AND FACILITY RECOMMENDATIONS

Location of the 11 Potential Sites in Las Cruces




                      IV-2
                           SITE AND FACILITY RECOMMENDATIONS


                                                Site A Analysis
                                                    Excellent     Very Good   Good   Fair   Poor
 Visibility                                                                    X
 Accessibility to Highways                                           X
 Proximity to Lodging/Number of Rooms Nearby                                          X
 Proximity & Accessibility to Airport (long-term)                    X
 Attractiveness of Surrounding Area                                                   X
 Expansion Potential (acreage)                                       X
 Long-Term Strategic Potential                                                        X



                 b.      Golf Course Site Near Las Alturas Drive and Geothermal Road (Site B)

We understand that at one point Marriott International was considering this site for the
development of a hotel. Although this site has attractive surroundings, offers panoramic views
of Mesilla Valley, is proximate to the NMSU 18-hole golf course, and could be acquired without
cost, it has a somewhat remote location. Similar to Site A, the site is located on state land, thus
does not fall under the jurisdiction of City of Las Cruces zoning ordinances.

                                                Site B Analysis
                                                     Excellent    Very Good   Good   Fair   Poor
 Visibility                                                                                  X
 Accessibility to Highways                                                                   X
 Proximity to Lodging/Number of Rooms Nearby                                          X
 Proximity & Accessibility to Airport (long-term)                                     X
 Attractiveness of Surrounding Area                                   X
 Expansion Potential (acreage)                                        X
 Long-Term Strategic Potential                                                        X



                 c.       Triviz Drive and Payne Street Site (Site C)

This approximately 16-acre site (at Triviz Drive and Payne Street) has excellent visibility, and
very good access to both Interstates 10 and 25, is adjacent to the NMSU Pan American Center,
and could be acquired without cost. The Comfort and Sleep Inns, with a combined total of 124
rooms, are situated nearby. Similar to Sites A and B, the site is located on state land, thus does
not fall under the jurisdiction of City of Las Cruces zoning ordinances. We understand that the
site would be acquired only if it were to be incorporated into the City of Las Cruces.




                                                     IV-3
                           SITE AND FACILITY RECOMMENDATIONS


                                                Site C Analysis
                                                    Excellent   Very Good   Good    Fair       Poor
 Visibility                                            X
 Accessibility to Highways                                         X
 Proximity to Lodging/Number of Rooms Nearby                                         X
 Proximity & Accessibility to Airport (long-term)                            X
 Attractiveness of Surrounding Area                                                  X
 Expansion Potential (acreage)                                     X
 Long-Term Strategic Potential                                     X



                 d.       South Main Street and Farney Drive Site (Site D)

This is an approximately 48-acre site that we understand could be acquired by the City of Las
Cruces without cost. The site has several negative characteristics, including unattractive
surroundings, proximity to railroad tracks, and distance from a cluster of hotels. The site is
currently zoned as C-2 (General Commercial).

                                                Site D Analysis
                                                    Excellent   Very Good   Good     Fair      Poor
 Visibility                                                                                     X
 Accessibility to Highways                                                                      X
 Proximity to Lodging/Number of Rooms Nearby                                          X
 Proximity & Accessibility to Airport (long-term)                                               X
 Attractiveness of Surrounding Area                                                   X
 Expansion Potential (acreage)                                                X
 Long-Term Strategic Potential                                                                  X



                 e.      Hickory Loop and Hickory Drive (Site E)

This site, which has excellent visibility and accessibility from Interstate 10, is close to the largest
hotel cluster in the city (618 rooms), and is proximate to Old Mesilla. The approximately 29-
acre site is currently zoned C-2c (General Commercial - conditional).

                                                Site E Analysis
                                                    Excellent   Very Good   Good     Fair      Poor
 Visibility                                            X
 Accessibility to Highways                             X
 Proximity to Lodging/Number of Rooms Nearby                        X
 Proximity & Accessibility to Airport (long-term)                   X
 Attractiveness of Surrounding Area                                                   X
 Expansion Potential (acreage)                                      X
 Long-Term Strategic Potential                                      X




                                                     IV-4
                           SITE AND FACILITY RECOMMENDATIONS


                 f.       Northrise Drive and Roadrunner Parkway Site (Site F)

This is an approximately 28-acre site that is located across from the Memorial Medical Center
Health Plex, the Assisted Living Center, and the 104-unit Cuestas Apartments. The site has
several negative characteristics, including distance from a cluster of hotels, a crater-like
topography that limits its visibility, and its residential-oriented surroundings. The site is
currently zoned as R-4 (Multi-Family).

                                                Site F Analysis
                                                    Excellent     Very Good   Good   Fair   Poor
 Visibility                                                                                  X
 Accessibility to Highways                                                            X
 Proximity to Lodging/Number of Rooms Nearby                                                 X
 Proximity & Accessibility to Airport (long-term)                                            X
 Attractiveness of Surrounding Area                                                          X
 Expansion Potential (acreage)                                       X
 Long-Term Strategic Potential                                                               X



                 g.       Lohman Avenue Extension and Sonoma Ranch Road Extension (Site G)

This site is comprised of approximately 29 acres that we understand could be acquired by the
City of Las Cruces without cost. The site has numerous positive attributes, namely proximity to
such amenities as the Hilton and the 18-hole Sonoma Ranch Golf Course, coupled with the
surrounding area’s (South Fork Village) future commercial development potential. The site is
currently zoned as C-2 (General Commercial).

                                                Site G Analysis
                                                    Excellent     Very Good   Good   Fair   Poor
 Visibility                                                                           X
 Accessibility to Highways                                                     X
 Proximity to Lodging/Number of Rooms Nearby                         X
 Proximity & Accessibility to Airport (long-term)                              X
 Attractiveness of Surrounding Area                                                   X
 Expansion Potential (acreage)                                       X
 Long-Term Strategic Potential                         X



                 h.       University Avenue and Interstate 25 Site (Site H)

This is an approximately 22-acre site with an option on an adjacent 11-acre site, located adjacent
to the NMSU Golf Course. Similar to Sites A, B and C, the site is located on state land,
therefore does not fall under the jurisdiction of City of Las Cruces zoning ordinances. We
understand that an RFP has been issued by NMSU for this excellently located and directly
accessible site.


                                                     IV-5
                           SITE AND FACILITY RECOMMENDATIONS


                                                Site H Analysis
                                                    Excellent   Very Good     Good   Fair   Poor
 Visibility                                            X
 Accessibility to Highways                             X
 Proximity to Lodging/Number of Rooms Nearby                                          X
 Proximity & Accessibility to Airport (long-term)                    X
 Attractiveness of Surrounding Area                                  X
 Expansion Potential (acreage)                                       X
 Long-Term Strategic Potential                                       X



                 i.       Wisconsin Avenue Site (Site I)

This approximately 20-acre site (adjacent to the Pan American Plaza to the north of University
Avenue and near Wisconsin Avenue) has very good visibility, and very good access to
Interstates 25. The Comfort and Sleep Inns, with a combined total of 124 rooms, are situated
nearby. This site, although owned by NMSU, is located within the city limits of Las Cruces.

                                                Site I Analysis
                                                    Excellent   Very Good     Good   Fair   Poor
 Visibility                                                         X
 Accessibility to Highways                                          X
 Proximity to Lodging/Number of Rooms Nearby                                          X
 Proximity & Accessibility to Airport (long-term)                              X
 Attractiveness of Surrounding Area                                                   X
 Expansion Potential (acreage)                                                 X
 Long-Term Strategic Potential                                                 X



                 j.       Interstate 10 and Interstate 25 Site (Site J)

This approximately 39-acre NMSU-owned site has excellent visibility from both Interstates 10
and 25. Although the site currently has fair accessibility to both freeways, there are discussions
to construct an off-ramp from Interstate 10 that would significantly improve this site’s
accessibility. Similar to Sites A, B, C, and H, the site is located on state land.

                                                Site J Analysis
                                                    Excellent     Very Good   Good   Fair   Poor
 Visibility                                            X
 Accessibility to Highways                                                            X
 Proximity to Lodging/Number of Rooms Nearby                                          X
 Proximity & Accessibility to Airport (long-term)                    X
 Attractiveness of Surrounding Area                                                   X
 Expansion Potential (acreage)                                       X
 Long-Term Strategic Potential                                                  X



                                                     IV-6
                              SITE AND FACILITY RECOMMENDATIONS

           k.       Interstate 25 and Highway 70/Main Street Site (Site K)

This approximately 11.5-acre site is located at the southwest quadrant of Interstate 25 and
Highway 70/Main Street. The site is situated adjacent to the recently opened Lowe’s home
improvement store, and is zoned C-2 (General Commercial).

                                                   Site K Analysis
                                                       Excellent   Very Good   Good   Fair   Poor
    Visibility                                            X
    Accessibility to Highways                             X
    Proximity to Lodging/Number of Rooms Nearby                                        X
    Proximity & Accessibility to Airport (long-term)                                          X
    Attractiveness of Surrounding Area                                                 X
    Expansion Potential (acreage)                                                             X
    Long-Term Strategic Potential                                                      X



C.         SELECTED SITES

           1.       The Four Selected Sites

As presented, we have conducted an analysis of the 11 sites that were brought to our attention by
the City of Las Cruces. After accounting for such variables as visibility and accessibility to
highways, as well as proximity to the Las Cruces hotel inventory, it is our opinion that Sites C,
E, G, and H are the most suitable for a potential convention center.

It is our opinion that Site C (Triviz Drive and Payne Street near NMSU) is superior for the
following specific reasons:

•     Excellent visibility from Interstate 25;
•     Very good accessibility to Interstate 25;
•     Proximity to NMSU, a major university with extensive facilities; and
•     Available land that allows for future expansion plans.


It is also our opinion that Site E (Hickory Loop and Hickory Drive) is superior to the other six
non-selected sites for the following reasons:

•     Excellent visibility from Interstate 10;
•     Excellent accessibility to Interstate 10;
•     Immediate proximity to the largest cluster of hotel rooms in the city (618 rooms);
•     Proximity to Historic Mesilla, with its various stores and restaurants;
•     Proximity to Las Cruces Airport, which eventually could undergo expansion; and
•     Available land that allows for future expansion plans.



                                                        IV-7
                          SITE AND FACILITY RECOMMENDATIONS

Site G (Lohman Avenue Extension and Sonoma Ranch Road Extension) has also been selected
as one of the four most suitable sites for the development of a potential convention center for the
following reasons:

•    Proximity to the 206-room Hilton, the largest and highest quality hotel in the city;
•    Location in the northern portion of Las Cruces, the commercial development hub of the city;
•    Possibility of attaining the land without cost; and
•    Available land that allows for future expansion plans.


In addition, Site H (University Avenue and Interstate 25) has been selected as one of the most
suitable sites for the following reasons:

•    Excellent location in terms of accessibility and visibility;
•    Offers panoramic views of the Mesilla Valley;
•    Proximate to the NMSU 18-hole golf course; and
•    Available land that allows for future expansion plans.


D.      PRELIMINARY FACILITY RECOMMENDATIONS

        1.      Introduction

As supported by our market analysis in Section III, it is still recommended that the proposed
convention center in Las Cruces provide approximately 80,000 square feet of gross building
area, including 40,000 square feet of net meeting space. Based on our updated market research
and analysis, the recommended net meeting space should include a 25,000-square-foot exhibit
hall, representing an exhibit hall-to-net-meeting-space ratio of approximately 62 percent, which
is comparable to the average indicated by competitive convention centers operating in the
Southwest.

It is the opinion of Jones Lang LaSalle Hotels that the recommended net square footage is
sufficient for the City of Las Cruces to accommodate the indicated and long-term demand levels
to be generated from national, regional, and state associations; banquet, social, and civic
functions; and consumer shows.

        2.      Preliminary Concept and Design

The conceptual plan for the proposed convention center in Las Cruces was conceived with a
focus on flexibility, efficiency of use, the importance of visibility to residents and visitors, and
the possibility of long-term expansion with a future performing arts center.

It should be noted that the preliminary concept and design that was prepared by the architectural
firm Ellerbe Becket in 1999 has been used as a general “benchmark” that has been market tested


                                                 IV-8
                        SITE AND FACILITY RECOMMENDATIONS

by Jones Lang LaSalle Hotels for this updated report. It is understood that a completely updated
architectural concept and design project would be undertaken in the future following the
approval of the convention center.

Each of the four selected sites (C, E, G, and H) under consideration has the benefit of providing
immediate access from both major freeways and downtown Las Cruces. Each will benefit from
the visibility (both daytime and nighttime), that results from that adjacency.

Conceptually, the proposed convention center would need to be organized around the idea of the
“Great Hall”. This exhibit hall, which should be comprised of approximately 25,000 square feet,
will be the most visible and exciting component of the building, and will define its character.
The entry lobby/pre-function space will be the memorable experience in visiting the convention
center. The exhibit hall will be a dynamic glass-walled room, modulated by steel columns and
trusses, filled with natural light predominantly from the south, providing views of the landscaped
site, outdoor terraces, and the hills beyond.

The linear nature of the geometry will serve the exhibit hall and meeting rooms in a clearly
understandable way, and will provide exciting nighttime and daytime views into the facility
during operation. This linear geometry provides maximum visibility from the freeways and will
allow for logical expansion in the future.

The balance of the plan is organized into two wings, each of which contains four large meeting
rooms, a complement of eight smaller breakout rooms, service access from the kitchen and
storage, and the necessary toilet rooms. The strength of the plan diagram is its simplicity and the
visual connection made to the exhibit hall from all public corridor spaces.

All services are handled at the rear of the building. Loading docks/compactors are centralized
and adjacent to the kitchen storage, and the main service corridors, which link directly to the
exhibit hall. The logical plan diagram contributes to ease of all back-of-house operations.

       3.      Summary

It is recommended that the exhibit hall be at least 25,000 square feet, based on the space required
to attract large association meetings and consumer shows over the long term. Additionally, a
room this size will accommodate over 1,700 people seated comfortably for a large banquet
dinner or national convention. However, as not all banquet dinners will be of this size, the main
exhibit hall should be divisible into two smaller sections of 12,500 square feet, which could be
used simultaneously. In addition, it is recommended that four divisible and adjacent meeting
rooms with a total of 11,000 square feet, coupled with eight, separate 500-square-foot breakout
meeting rooms for smaller gatherings, be situated at the sides of the proposed facility.




                                               IV-9
                       SITE AND FACILITY RECOMMENDATIONS

In sum, it is recommended that the proposed convention center in Las Cruces be comprised of
approximately 80,000 square feet of gross building area, including 40,000 square feet of net
meeting space, and 40,000 square feet of additional support space (back-of-house/corridors/dock,
pre-function/entry, kitchen/kitchen equipment, and public circulation).

After deriving the appropriate sizing of the proposed convention center, the next step is to
estimate the level of utilization that would be generated by the recommended facility, presented
in the following Section V.




                                             IV-10
      SECTION V

ESTIMATED UTILIZATION
                              ESTIMATED UTILIZATION

A.     INTRODUCTION

Section III of this updated report has indicated that there continues to be sufficient market
demand to justify the construction of a convention center with approximately 80,000
square feet of gross building area, and 40,000 square feet of net meeting space.

Section IV provided an analysis of the potential sites that could accommodate a
convention center, and presented the preliminary recommendations for the optimal
facilities that would comprise the convention center.

This section provides an overview of the projected utilization levels that the
recommended facility would generate given its location, size, and physical attributes. We
have assumed that the first full year of operation for the proposed convention center is
2006.


B.     UTILIZATION DAYS

Utilization is based on the historical market performance of the competitive and
comparable facilities interviewed, the results of our demand interviews, the meeting
planner survey, and our knowledge of the industry.

The number of events by meeting/show type, average duration, and average move-in and
move-out days (required to set up and take down equipment) were based on our updated
demand interviews, as well as the mix of events obtained at comparable and competitive
facilities.

The number of events were multiplied by the average duration and average move days to
get the corresponding number of event days and move days, which were added to attain
the total number of utilization days.

Association meetings (national, regional, and state) typically have a two-year booking
cycle. Based on our survey of meeting planners, the profile and frequency of association
meetings held in New Mexico, we estimate associations to utilize the facility eight times
per year on average in the stabilized year for national and regional meetings, with an
average duration of four days. Based on these assumptions of average duration, coupled
with the estimated average move-in/move-out days of 1.5, national and regional
associations are expected to occupy the facility 80 days per year in the stabilized year of
operation. Regarding state association meetings, we estimate that they would utilize the
facility at a higher rate of 20 times per annum on average in the stabilized year, with an
average duration of three days.

Based on these assumptions of average duration, coupled with the estimated average
move-in/move-out days of 1.0, state associations are expected to occupy the facility 120
days per year in the stabilized year of operation.




                                            V-1
                             ESTIMATED UTILIZATION

Banquet, social, and civic functions, or local demand, were estimated based on our
interviews with Las Cruces hotel managers and area suppliers of banquet space. There is
presently a need for more hotel-quality banquet space in Doña Ana County, and a quality
facility located in Las Cruces would be able to serve the city, as well as nearby
communities such as Alamogordo, Fairacres, Organ, and Mesilla.

We estimate there will be 52 banquets in the first year, which is one per weekend. We
anticipate fewer weekends available for banquets as utilization by association meetings
and consumer shows increase through the stabilized year, stabilizing at 46 events per
annum. As banquets typically occupy the facility less than one day and do not require
any extra days to setup, utilization days are estimated at half-of-one day, or 0.5. Given
these assumptions of average duration, banquet, social, and civic functions are expected
to occupy the facility 23 days per year in the stabilized year of operation.

Consumer shows were estimated based on our updated interviews with comparable
facilities and regional consumer show promoters. While comparable facilities have at
least one show per month, the small population base of Las Cruces leads us to estimate
that four consumer shows would be attracted to the proposed convention center in its first
year of operation.

As the facility gains momentum in the Southwest region, and as the Las Cruces
commercial community grows, we estimate that there would be approximately 10
consumer shows in a stabilized year, with an average duration of 3.0 days. As indicated
in Section III, the 45,000-square-foot Dickerson’s Event Center in Las Cruces hosts an
average of five consumer shows per annum. Based on these assumptions of average
duration, coupled with the estimated average move-in/move-out days of 3.0, consumer
shows are expected to occupy the facility 60 days per year in the stabilized year of
operation.

The following tables calculate the estimated annual utilization days for the proposed
convention center by demand segment for the first (2006), second (2007), and stabilized
year (2008). As can be noted in 2008, or the stabilized year of operation, the total
utilization days are estimated at 283 days, which renders an average stabilized utilization
rate of approximately 78 percent (283 divided by 365 days). It is our opinion that this
stabilized utilization rate is appropriate for the proposed convention center in Las Cruces
given the city’s location, affordability, long-term growth prospects, population base, as
well as its very limited direct air-transport accessibility.




                                           V-2
                                             ESTIMATED UTILIZATION




                                CALCULATION OF UTILIZATION DAYS - YEAR 1
                                                          Average              Average                Total
                                                                      Event
                 Event Type                    # Events   Duration            Move In/Out Move Days Utilization
                                                                      Days
                                                           (Days)               (Days)                 Days
Association Meetings - National & Regional       4              4.0    16         1.5        24         40
Association Meetings - State                     6              3.0    18         1.0        18         36
Banquet, Social, & Civic Functions               52             0.5    26         0.0         0         26
Consumer Shows                                   4              3.0    12         1.0        12         24
Total / Average Utilization                      66             1.1    72         1.3        54         126



                                CALCULATION OF UTILIZATION DAYS - YEAR 2
                                                          Average              Average                Total
                                                                      Event
                 Event Type                    # Events   Duration            Move In/Out Move Days Utilization
                                                                      Days
                                                           (Days)               (Days)                 Days
Association Meetings - National & Regional       6              4.0    24         1.5         36        60
Association Meetings - State                     16             3.0    48         1.0         48        96
Banquet, Social, & Civic Functions               48             0.5    24         0.0          0        24
Consumer Shows                                   6              3.0    18         1.0         18        36
Total / Average Utilization                      76             1.5   114         1.1        102        216



                      CALCULATION OF UTILIZATION DAYS - YEAR 3 (Stabilized Year)
                                                          Average              Average                Total
                                                                      Event
                 Event Type                    # Events   Duration            Move In/Out Move Days Utilization
                                                                      Days
                                                           (Days)               (Days)                 Days
Association Meetings - National & Regional       8              4.0    32         1.5         48        80
Association Meetings - State                     20             3.0    60         1.0         60        120
Banquet, Social, & Civic Functions               46             0.5    23         0.0          0        23
Consumer Shows                                   10             3.0    30         1.0         30        60
Total / Average Utilization                      84             1.7   145         1.1        138        283




                                                          V-3
                                         ESTIMATED UTILIZATION



                                    Stabilized Mix - Number of Events

                                                              Association
                                                          Meetings - National &
                                                                Regional
                                  Consumer Show s                 10%
                                       12%
                                                                        Association
                                                                      Meetings - State
                                                                           24%


                              Banquet, Social, &
                               Civic Functions
                                     54%




     Source: Jones Lang LaSalle Hotels



C.         ATTENDANCE

The number of events resulting from the previous estimations of average utilization by
event type from our demand interviews and updated analysis of competitive convention
centers form the basis for the estimated attendance levels.

The number of events was multiplied by estimated average daily attendance levels
(indicated in Section III) in order to calculate group attendance. Daily event attendance
multiplied by the average event days (not including move-in/out days) yields an
estimated total annual attendance of approximately 94,000 on a stabilized basis by 2008,
or close to 8,000 attendees per month. It is our opinion that this level of attendees is
appropriate for the proposed facility given the regional market’s long-term supply and
demand dynamics.




                                                    V-4
                                             ESTIMATED UTILIZATION




                                    CALCULATION OF ATTENDANCE - YEAR 1
                                                            Estimated
                                                                        Total Group    Average     Estimated Total
                  Event Type                  # Events       Average
                                                                        Attendance    Event Days     Attendance
                                                         Attendance/Day
Association Meetings - National & Regional      4             400          1,600         4.0            6,400
Association Meetings - State                    6             500          3,000         3.0            9,000
Banquet, Social, & Civic Functions              52            250         13,000         0.5            6,500
Consumer Shows                                  4            1,500         6,000         3.0           18,000
Total / Average                                 66            358         23,600         1.7           39,900



                                    CALCULATION OF ATTENDANCE - YEAR 2
                                                            Estimated
                                                                        Total Group    Average     Estimated Total
                  Event Type                  # Events       Average
                                                                        Attendance    Event Days     Attendance
                                                         Attendance/Day
Association Meetings - National & Regional      6             400          2,400         4.0            9,600
Association Meetings - State                    16            500          8,000         3.0           24,000
Banquet, Social, & Civic Functions              48            250         12,000         0.5            6,000
Consumer Shows                                  6            1,500         9,000         3.0           27,000
Total / Average                                 76            413         31,400         2.1           66,600



                           CALCULATION OF ATTENDANCE - YEAR 3 (Stabilized Year)
                                                            Estimated
                                                                        Total Group    Average     Estimated Total
                  Event Type                  # Events       Average
                                                                        Attendance    Event Days     Attendance
                                                         Attendance/Day
Association Meetings - National & Regional      8             400          3,200         4.0           12,800
Association Meetings - State                    20            500         10,000         3.0           30,000
Banquet, Social, & Civic Functions              46            250         11,500         0.5            6,000
Consumer Shows                                  10           1,500        15,000         3.0           45,000
Total / Average                                 84            473         39,700         2.4           94,000




                                                          V-5
                              ESTIMATED UTILIZATION

The projected level of stabilized attendance would position the proposed convention
center in Las Cruces above the average annual attendance levels at Ruidoso, Santa Fe,
and Taos.

Farmington, with an average annual attendee level of approximately 96,000, benefits
from spectacular natural surroundings near the Four Corners area. Roswell, with an
average annual attendee level of approximately 100,000, has an international profile
attributed to alleged alien-related incidents that took place nearby in the 1950s, attracting
numerous so-called “new age” conventions. Lastly, the Albuquerque Convention Center
benefits from its location in the state’s governmental and commercial center, and has
approximately 168,000 square feet of net meeting space that accommodate close to
500,000 attendees per annum.




                                            V-6
             SECTION VI

ESTIMATED FINANCIAL OPERATING RESULTS
                      ESTIMATED FINANCIAL OPERATING RESULTS

A.      INTRODUCTION

This section translates the utilization and attendance potential of the proposed convention center
into the updated projected revenues and expenses for a typical year of operation. A typical or
stabilized year is defined as an average year over the facility's economic life. The projected
operating results are expressed in 2002 value dollars and conform to the basic system of accounts
employed by similar facilities, though no formal uniform system of accounts for public
convention centers exists.

The operating results are based on a facility built, and in a potential location, as described in
Section IV of this report, as well as the recorded operating results of comparable facilities in the
Southwest, and elsewhere. The following basic assumptions are necessary to realize the stated
projections of operating results:

•    There will be a commitment to excellence in both design and construction;

•    Full-service facilities will be provided, reflected by experienced and competent management;

•    Professional and aggressive marketing of the proposed facility will be budgeted for, and
     pursued by, the management staff; and

•    A competitive rental rate structure will be maintained over the long-term.


Financial information on comparable facilities was derived from the Jones Lang LaSalle Hotels
database that includes financial operating statements of comparable public assembly facilities.
As presented on the following page, we identified three comparable facilities in the Southwest,
as well as an additional facility in Oregon (for reference purposes only), for which detailed
financial data was made available. These facilities have an average of approximately 74,000
gross square feet, and all the three facilities in the Southwest operate at a loss.

The following table displays the detail and weighted average of the comparable facilities’
financials expressed as a dollar per gross square foot of building area (in 2001 value dollars).




                                               VI-1
                                              Ruidoso, NM                          Santa Fe, NM                      Amarillo, TX                     Lane, OR
                                                                                                  FINANCIALS FROM CONVENTION CENTERS
                                                                                                               (2001 Dollars)
                                                                                                                                  (1)
                 Facility                                     A                                   B                            C                                      D                     Weighted
        Total Building Area Sq. Ft.                         39,000                              28,000                       122,000                               134,000                      73,75
                 Location                                New Mexico                          New Mexico                       Texas                                Oregon
Operating Income                                      $         P/ Gross Sq. Ft.           $         P/ Gross Sq. Ft.    $         P/ Gross Sq. Ft.          $           P/ Gross Sq. Ft.   $
Facility Rental                                       $83,143       $2.13                  $143,343      $5.12                 $0      $0.00                  $644,886       $4.81          $290,000
Food and Beverage                                       $2,698      $0.07                    $5,641      $0.20                 $0      $0.00                  $593,049        $4.43         $200,000
Building Services                                       $8,729      $0.22                    $7,754      $0.28                 $0      $0.00                  $136,218       $1.02           $51,000
Total Income                                          $94,570       $2.42                  $156,738      $5.60           $629,114      $5.16                $1,374,153       $10.25         $564,000
Operating Expenses
Wages                                                 $81,988         $2.10                $480,857        $17.17               $0       $0.00                $809,073        $6.04          $457,000
Utilities                                             $26,178         $0.67                $146,395         $5.23               $0      $0.00                  $64,938        $0.48           $79,000
Repairs and Maintenance                               $14,418         $0.37                 $16,133         $0.58               $0      $0.00                  $90,696        $0.68           $40,000
Materials and Supplies                                $12,948         $0.33                 $18,384         $0.66               $0      $0.00                  $64,744        $0.48           $32,000
Marketing and Promotion                                $4,907         $0.13                 $28,519         $1.02               $0      $0.00                  $60,373        $0.45           $31,000
Other                                                 $16,750         $0.43                      $0         $0.00               $0      $0.00                 $201,102        $1.50           $73,000
Total Expenses                                       $157,189         $4.03                $690,288         $24.65      $1,280,708      $10.50              $1,290,925        $9.63          $855,000
                            (2)
Operating Profit (Subsidy)                           -$62,619        -$1.61               -$533,550        -$19.06       -$651,594      -$5.34                 $83,228        $0.62         -$291,000
% Total Income (Expenses)                               -40%                                  -77%                           -51%                                  6%                           -34%
(1)
      Facility management provided financials without a breakdown of Operating Income or Operating Expenses.
(2)
      Before debt service.

Source: Facility Management
Compiled by Jones Lang LaSalle Hotels
                     ESTIMATED FINANCIAL OPERATING RESULTS

B.     ESTIMATED OPERATING INCOME

       1.      Facility Rental

Revenue projections have been made by combining projected utilization (in terms of events and
event days) with average rental charges per event type. The following rate schedule and policies
form the basis for the development of average revenues by type of event. These schedules are
not intended to represent a recommended pricing policy that would ultimately be adopted, but
rather, constitute a preliminary estimate that in our opinion is reasonable and competitive.

National, regional, and state association meetings will most likely use the entire facility, which
we estimate to be $850 per event day on average, which is within the range of the competitive
facilities presented in Section III. Our calculation assumes that move days for association events
will be charged 50 percent of the event day rental, per industry standards. Rental revenue from
national and regional associations will increase in the second year and stabilize at approximately
$45,000 per year in 2002 dollars, while rental revenue from state associations will stabilize at
approximately $72,000 per year in 2002 dollars.

Banquet, social, and civic functions will likely use all or various segments of the ballroom, and
very few breakout-meeting rooms. While the main exhibit hall/ballroom will likely achieve
rental rates in excess of $1,000, we anticipate an overall average for banquets and social
functions to be $550 per day. These types of events are typically in the evening and do not
require extra days to set up, therefore no move day room rental was assumed. In the stabilized
year, banquet, social, and civic functions are expected to generate approximately $13,000
annually in rental revenue in 2002 dollars.

Consumer shows facility rental can be collected either as a flat fee from the show promoter or as
a percentage of the admission fees. Based on our interviews with show promoters and reviews
of comparable financials, we have assumed that the net facility rental to the facility will be
$1,600 per day and $800 for move days. Consumer shows are expected to generate
approximately $72,000 annually in rental income in 2002 dollars.

The following tables calculate total rental revenue for the first three years by multiplying the
event days and move days, calculated in the previous analysis, by the corresponding flat fees per
day.




                                              VI-3
                                    ESTIMATED FINANCIAL OPERATING RESULTS




                                                     FACILITY RENTAL - YEAR 1
                                                                                   Move
                                              Event                   Event Day          50% of Flat   Move Day   Total Rental
               Event Type                              Flat Fee/Day               In/Out
                                              Days                     Revenue               Fee       Revenue     Revenue
                                                                                   Days
Association Meetings - National & Regional     16         $850         $13,600      24      $425        $10,200     $23,800
Association Meetings - State                   18         $850         $15,300      18      $425        $7,650      $22,950
Banquet, Social, & Civic Functions             26         $550         $14,300       0       $0           $0        $14,300
Consumer Shows                                 12        $1,600        $19,200      12      $800        $9,600      $28,800
Total (rounded)                                72           -          $62,000      54        -         $27,000     $90,000



                                                     FACILITY RENTAL - YEAR 2
                                                                                   Move
                                              Event                   Event Day          50% of Flat   Move Day   Total Rental
               Event Type                              Flat Fee/Day               In/Out
                                              Days                     Revenue               Fee       Revenue     Revenue
                                                                                   Days
Association Meetings - National & Regional      24         $850        $20,400       36     $425        $15,300     $35,700
Association Meetings - State                    48         $850        $40,800       48     $425        $20,400     $61,200
Banquet, Social, & Civic Functions             24          $550       $13,200        0       $0           $0        $13,200
Consumer Shows                                 18         $1,600      $28,800       18      $800        $14,400     $43,200
Total (rounded)                                114           -        $103,000      102       -         $50,000    $153,000



                                             FACILITY RENTAL - YEAR 3 (Stabilized)
                                                                                   Move
                                              Event                   Event Day          50% of Flat   Move Day   Total Rental
               Event Type                              Flat Fee/Day               In/Out
                                              Days                     Revenue               Fee       Revenue     Revenue
                                                                                   Days
Association Meetings - National & Regional      32         $850        $27,200       48     $425        $20,400     $47,600
Association Meetings - State                    60         $850        $51,000       60     $425        $25,500     $76,500
Banquet, Social, & Civic Functions             23          $550       $12,650        0       $0           $0        $12,650
Consumer Shows                                 30         $1,600      $48,000       30      $800        $24,000     $72,000
Total (rounded)                                145           -        $139,000      138       -         $70,000    $209,000




                                                                   VI-4
                      ESTIMATED FINANCIAL OPERATING RESULTS

The stabilized rental revenue of approximately $209,000 renders an income level of close to
$2.60 per gross square-foot, which is within the range of the comparables.

       2.      Catering and Concessions Revenue

Based on our review of the financial performance of comparable facilities, those requiring the
least amount of subsidy as a percent of total expenses receive revenue in addition to facility
rental from sources such as food and beverage, and building services. Food and beverage
income can range from managing the food and beverage department internally, to collecting a
commission from outside caterers. We have assumed that the proposed facility in Las Cruces
will rely on outside caterers, who will pay a 10-percent commission to the facility. The
following discussion and subsequent tables estimate total food and beverage revenue of which 10
percent is considered as revenue to the proposed convention center.

We estimate the typical national or regional association to serve at least one catered meal
costing, $15.00 per person, and two coffee breaks costing $2.75 per person, or $5.50 per attendee
per event. Therefore, each attendee is estimated to generate $20.50 per event.

Regarding the typical state association, we also estimate the serving of at least one catered meal,
costing $11.50 per person, and two coffee breaks costing $2.75 per person, or $5.50 per attendee
per event. Therefore, each attendee for this segment is estimated to generate $17.00 per event.

We anticipate that not all the private banquet, social, and civic events will utilize outside catering
service, but will still be serving food to attendees, thereby using the kitchen equipment.
Therefore, we recommend assessing groups that choose to cater their own events at $1.65 per
meal served, which is close to 10 percent of the anticipated average catered meal per person.

Consumer and trade shows often provide concessions to show attendees. We estimate each
attendee to spend $1.50 on average, and assume that the concessionaire will be charged 10-
percent commission.

The following tables calculate the net food and beverage revenue for the first three years by
multiplying event attendance by the corresponding anticipated dollars to be spent by each
attendee.




                                                VI-5
                                       ESTIMATED FINANCIAL OPERATING RESULTS

                                              NET FOOD AND BEVERAGE REVENUE - YEAR 1
                                                Event              Dollar / Total F&B
                Event Type                               Meal Type                                        Commission   Net F&B
                                              Attendance           Attendee   Sales
                                                               Catering           $15.00      $96,000                  $9,600
Association Meetings - National & Regional        6,400
                                                                Breaks             $5.50      $35,200                  $3,520
                                                               Catering           $11.50     $103,500                  $10,350
Association Meetings - State                      9,000
                                                                Breaks             $5.50      $49,500                  $4,950

Banquet, Social, & Civic Functions                6,500        Catering           $16.50     $107,250                  $10,725
                                                                                                            10.0%

Consumer Shows                                   18,000       Concessions         $1.50      $27,000                    $2,700

                                                            Catering                         $306,750                  $30,675
                         Sub Total                          Concessions                      $111,700                  $11,170
                                                                 Total                       $418,000                  $42,000


                                               NET FOOD AND BEVERAGE REVENUE - YEAR 2
                                               Event               Dollar / Total F&B
              Event Type                                Meal Type                                         Commission   Net F&B
                                             Attendance           Attendee    Sales
Association Meetings - National &                            Catering             $15.00     $144,000                  $14,400
                                               9,600
Regional                                                    Concessions            $5.50      $52,800                   $5,280
                                                             Catering             $11.50     $276,000                  $27,600
Association Meetings - State                   24,000
                                                            Concessions            $5.50     $132,000                  $13,200

Banquet, Social, & Civic Functions             6,000          Catering            $16.50     $99,000                    $9,900
                                                                                                            10.0%

Consumer Shows                                 27,000       Concessions           $1.50      $40,500                    $4,050

                                                          Catering                           $519,000                  $51,900
                        Sub Total                         Concessions                        $225,300                  $22,530
                                                               Total                         $744,000                  $74,000


                                     NET FOOD AND BEVERAGE REVENUE - YEAR 3 (Stabilized)
                                               Event                              Dollar /   Total F&B
               Event Type                                    Meal Type                                    Commission   Net F&B
                                             Attendance                           Attendee     Sales
                                                              Catering             $15.00      $192,000                $19,200
Association Meetings - National & Regional      12,800
                                                             Concessions            $5.50       $70,400                $7,040
                                                              Catering             $11.50      $345,000                $34,500
Association Meetings - State                    30,000
                                                             Concessions            $5.50      $165,000                $16,500

Banquet, Social, & Civic Functions              5,750          Catering            $16.50      $94,875                  $9,488
                                                                                                             10.0%

Consumer Shows                                  45,000       Concessions            $1.50      $67,500                  $6,750

                                                               Catering                        $631,875                $63,188
                        Sub Total                              Concessions                     $302,900                $30,290
                                                               Total                           $935,000                $93,000



                                                                           VI-6
                     ESTIMATED FINANCIAL OPERATING RESULTS

The stabilized net food and beverage revenue of approximately $93,000 renders an income level
of $1.15 per gross square-foot, which is within the indicated range of the comparables.

       3.      Building Services

Building Services include rental for tables, chairs, dance floors, lecterns, and public address
equipment, as well as labor charges for setup. Among facilities of this size, there are two
approaches regarding the pricing of building services. Some centers include building services in
the cost of facility rental, while others charge separately by the table, chair, and setup-man-hour
for this equipment.

In order to maximize total income, while avoiding facility rental rates that are perceived as too
excessive, we recommend moderate facility rental pricing, paired with flexible but aggressive
building services pricing.

Based on our updated research of comparably sized facilities in the Southwest marketed in this
fashion, we estimate building services to be approximately 0.65¢ per total square foot in the
stabilized year. The first two years of building services revenue were adjusted for below
stabilized utilization. In the stabilized year, we expect building services revenue to be $53,000
dollars annually, in 2002 dollars, within the range of the comparables.


C.     ESTIMATED OPERATING EXPENSES

Operating expenses for the various departments are projected on the basis of analysis of facilities
of similar type and size, taking into account the anticipated utilization and unique characteristics
for the proposed facility.

       1.      Wages, Salaries, and Employee Benefits

Expenses for all wages, salaries and employee benefits are the single largest expense of public
assembly facility operations. Analysis of comparable financials reveals that the total personnel
cost is typically greater than the facility rental revenue.

The comparable facilities reported an average personnel cost of $6.20 per total square foot.
Based on our analysis, we estimate wages for the proposed facility to be $3.75 per total square
foot, within the range of the comparables, and accounting for the lower labor costs in Las
Cruces. In the stabilized year, wages are expected to be $304,000 annually. It is to note that the
years prior to stabilization will vary slightly with utilization.




                                               VI-7
                      ESTIMATED FINANCIAL OPERATING RESULTS

       2.      Utilities

Utility charges for electricity, water, sewer, gas and refuse collection constitute a major operating
expense. The comparable facilities reported utilities that ranged from 0.48¢ to $5.23 per total
square foot, and averaged $1.07 per total square foot.

Facilities that have high ceilings tend to be more expensive per square foot to heat and cool,
while facilities that have fewer utilization days tend to have lower utilities per square foot.
Based on the facility recommendations and estimated utilization of the proposed facility, coupled
with the ongoing turmoil in the Middle East, we estimate utilities to average $2.00 per total
square foot. While utilities will vary slightly with utilization, a certain portion of the utilities is
fixed. As such, we based the first year utilities on second year utilization. In the stabilized year,
utilities are expected to be approximately $162,000 annually.

       3.      Repairs and Maintenance

This cost category consists primarily of window washing, moveable-wall maintenance, special
electrical and plumbing, carpet cleaning, and other contractual services. The comparable
facilities reported a range for maintenance expense between 0.37¢ and 0.68¢ per total square
foot, some of which was charged back to the user in the form of building services.

Buildings with a higher level of finish and a greater degree of complexity tend to have higher
maintenance costs per square foot. Based on the useful life of the equipment, this expense
category will be lowest the first two years of operation.

According to our updated research and analysis, we estimate repairs and maintenance to be 0.40¢
and 0.50¢ per square foot for the first and second year of operation, stabilizing in the third year at
0.60¢. Based on these estimates, repairs and maintenance will stabilize at approximately
$49,000 annually, which is within the range of the comparable facilities.

       4.      Materials and Supplies

This expense category includes minor purchases of items necessary for the cleaning and
maintenance of non-salable areas, such as administrative offices, lobbies, walkways, and public
restrooms. The comparable facilities reported a range between 0.33¢ and 0.66¢ per total square
foot

As we envision this facility to have an above-average level of finish, such as having carpeting as
opposed to tiled floors, we have estimated materials and supplies to be above average as well.
We estimate materials and supplies to cost 0.50¢ per square foot and are adjusted with
utilization. As such, materials and supplies begin at $20,000 in the first year and stabilize at
$41,000 annually, in 2002 dollars, in line with the comparable facilities.




                                                VI-8
                      ESTIMATED FINANCIAL OPERATING RESULTS

       5.     Marketing and Promotion

Although marketing and promotion expenditures are not the largest, they tend to be among the
more critical elements for the success of a new facility. This expense category includes local
promotion through printed materials and media advertising, but normally excludes marketing
salaries, which are either included in the wages previously mentioned or paid by the local
convention and visitors bureau.

Most public assembly facilities are primarily used by the local community and, therefore, have a
very small marketing expense, if any at all. Because of their popularity within their community,
or lack of competition, they are routinely booked one year in advance for weekends and do not
need to advertise.

We anticipate that this would not be the case for a medium-sized facility in a generally small
metropolitan market with strong competition from regional convention centers. In such a
market, facility managers would have to co-promote events, such as consumer shows, in order to
lure them to their facility.

Of note is that our projections reflect the assumption that the proposed convention center would
operate in conjunction with the Las Cruces Convention & Visitors Bureau in terms of marketing,
thus attaining material economies of scale.

The comparable facilities reported average marketing and promotion expenses with a range
between 0.30¢ and $1.02 per square foot. In order for the proposed facility to be competitive, we
recommend a marketing and promotional budget of 0.60¢ per square foot, which will not vary
with utilization. As such, we estimate marketing and promotional expenses to be approximately
$50,000 per year, within the range of the comparable convention centers.

       6.     Other

All expenses not covered thus far, such as liability insurance and professional services were
grouped in this category, which was estimated to be on the order of $50,000 annually.




                                              VI-9
                     ESTIMATED FINANCIAL OPERATING RESULTS

D.     SCHEDULE OF UPDATED OPERATING RESULTS

Based on the preceding updated analysis of facility rental, food and beverage revenue, other
operating revenues, and expenses for the first three years of operation, total income in the
stabilized year is expected to be approximately $355,000 annually, or $4.38 per gross square
foot. Total expenses are expected to be approximately $655,000, or $8.09 per gross square foot.

The resulting deficit is expected to be approximately $300,000 annually. This result is close to
46 percent of total expenses, and is at the lower end of the range of the deficits highlighted by the
three Southwest comparable financials, indicating a range between 40 and 77 percent.

However, and as will be discussed in Section VIII, although the proposed convention center will
be operating with a deficit, the positive economic impact of the facility upon the city via the
multiplier effect must be considered.

The following table states these amounts in 2002 dollars, and the 10-year projection table at the
end of this section restates these amounts, assuming a two-percent inflation rate, and a first full
operating year of 2006.




                                               VI-10
                                             ESTIMATED SCHEDULE OF OPERATING RESULTS
                                              PROPOSED LAS CRUCES CONVENTION CENTER
                                                                  (2002 Dollars)
                                                     Year 1                         Year 2                                         Year 3
Operating Income                              $       P/ Gross Sq. Ft.       $       P/ Gross Sq. Ft.                       $      P/ Gross Sq. Ft.
Facility Rental                              $90,000        $1.11          $153,000        $1.89                          $209,000        $2.58
Food and Beverage                            $42,000        $0.52           $74,000        $0.91                           $93,000        $1.15
Building Services                            $26,000        $0.32           $41,000        $0.51                           $53,000        $0.65
Total                                       $158,000        $1.95          $268,000        $3.31                          $355,000        $4.38
Operating Expenses
Wages                                       $263,000              $3.25               $256,000              $3.16          $304,000      $3.75
Utilities                                   $127,000             $1.57                $127,000              $1.57          $162,000      $2.00
Repairs and Maintenance                      $32,000              $0.40                $41,000              $0.51           $49,000      $0.60
Materials and Supplies                       $20,000              $0.25                $32,000              $0.40           $41,000      $0.51
Marketing and Promotion                      $49,000              $0.60                $49,000              $0.60           $49,000      $0.60
Other                                        $50,000              $0.62                $50,000              $0.62           $50,000      $0.62
Total                                       $541,000              $6.68               $555,000              $6.85          $655,000      $8.09
Subsidy                                    -$383,000             -$4.73              -$287,000             -$3.54         -$300,000      -$3.70
% Total Expenses                               -71%                                      -52%                                 -46%
Note: The comments and assumptions contained in the accompaning report are an integral part of this financial analysis.

Source: Jones Lang LaSalle Hotels
                                                                                                       PROJECTED SCHEDULE OF OPERATING RESULTS
                                                                                                        PROPOSED LAS CRUCES CONVENTION CENTER
                                                                                                                    Stated Year Dollars
                                                          2006                     2007                  2008          2009             2010   2011               2012        2013        2014        2015
Operating Income
Facility Rental                                       $97,000                $169,000                 $235,000            $240,000    $245,000    $250,000    $255,000    $260,000    $265,000    $270,000
Food and Beverage                                     $45,000                 $82,000                 $105,000            $107,000    $109,000    $111,000    $113,000    $115,000    $117,000    $119,000
Building Services                                     $28,000                 $45,000                  $60,000             $61,000     $62,000     $63,000     $64,000     $65,000     $66,000     $67,000
Total                                                $170,000                $296,000                 $400,000            $408,000    $416,000    $424,000    $432,000    $440,000    $448,000    $456,000
Operating Expenses
Wages                                                $285,000                $283,000                 $342,000             $349,000    $356,000    $363,000    $370,000    $377,000    $385,000    $393,000
Utilities                                            $137,000                $140,000                 $182,000             $186,000    $190,000    $194,000    $198,000    $202,000    $206,000    $210,000
Repairs and Maintenance                               $35,000                 $45,000                  $55,000              $56,000     $57,000     $58,000     $59,000     $60,000     $61,000     $62,000
Materials and Supplies                                $22,000                 $35,000                  $46,000              $47,000     $48,000     $49,000     $50,000     $51,000     $52,000     $53,000
Marketing and Promotion                               $53,000                 $54,000                  $55,000              $56,000     $57,000     $58,000     $59,000     $60,000     $61,000     $62,000
Other                                                 $54,000                 $55,000                  $56,000              $57,000     $58,000     $59,000     $60,000     $61,000     $62,000     $63,000
Total                                                $586,000                $612,000                 $736,000             $751,000    $766,000    $781,000    $796,000    $811,000    $827,000    $843,000
Subsidy                                             -$416,000               -$316,000                -$336,000            -$343,000   -$350,000   -$357,000   -$364,000   -$371,000   -$379,000   -$387,000
% Total Expenses                                        -71%                    -52%                     -46%                 -46%        -46%        -46%        -46%        -46%        -46%        -46%
Note: The comments and assumptions contained in the accompaning report are an integral part of this financial analysis.

Source: Jones Lang LaSalle Hotels
         SECTION VII

ESTIMATED CONSTRUCTION COSTS
                        ESTIMATED CONSTRUCTION COSTS

A.     UPDATED DEVELOPMENT COSTS ANALYSIS

       1.      Introduction

In estimating development costs for the proposed convention center in Las Cruces, we
consulted with representatives of Cumming LLC, the national firm specializing in
hospitality and public assembly facility cost estimation.

Cumming LLC based their estimates on the development costs of recently constructed,
good quality convention facilities in small-to-medium Southwest cities, adjusted to
reflect local construction costs in Las Cruces.

In the following section, we provide a summary of the estimated on-site development
costs for the proposed facility, reflective of 2002 value dollars. Addendum E of this
study provides a detailed breakdown of the construction costs, a comparison to the 1999
cost estimates by Ellerbe Beckett, as well as comparable construction costs for other
convention centers.

       2.      Cost Estimates

It should be noted that the estimated development costs do not include land, site
acquisition costs, building permits, contingencies, capitalized interest, funded reserves,
off-site infrastructure, or any other charges. In other words, the development cost
estimate includes only labor, materials, and architect and engineering fees (soft costs for
the on-site convention center building construction).

As indicated previously, it is recommended that the proposed convention center in Las
Cruces be comprised of approximately 80,000 square feet of gross building area,
including 40,000 square feet of net meeting space. The proposed gross building area
would also include close to 40,000 square feet of additional support space (pre-
function/entry, back-of-house, kitchen, and public circulation).

Based on the foregoing sizing and configuration, Cumming LLC estimates that the
building construction cost for the proposed facility is approximately $16.5 million
($203.89 per square foot), as summarized in the following table.




                                          VII-1
                                ESTIMATED CONSTRUCTION COSTS



                                     Estimated Building Construction Costs
                                          Proposed Convention Center
                                            Las Cruces, New Mexico
                                 Facility                         Sq. Ft.      $/Sq. Ft.        Cost
              Exterior Signage                                       -             -              $25,000
              Systems                                                -             -              $52,000
              Kitchen Equipment                                      -             -             $834,000
              FF&E/AV Equipment                                      -             -           $2,621,000
              Building Construction Costs                            -             -          $12,990,000
              Total Building Construction Cost (1)                81,000       $203.89        $16,522,000
              (1)
                  Escalated to reflect a construction start date of January 1, 2004.
              Source: Cumming LLC



In addition, it is estimated that the proposed convention center would require
approximately 416,000 square feet of additional support (site work) areas. The cost
estimates for the overall site work area is presented in the following table.

                                    Estimated Site Work Construction Costs
                                         Proposed Convention Center
                                           Las Cruces, New Mexico
                                  Area                               Sq. Ft.      $/Sq. Ft.      Cost
            Total Site Work Construction Cost (1)                     416,000       $2.62       $1,089,000
            (1)
                Escalated to reflect a construction start date of January 1, 2004.
            Source: Cumming LLC



As such, the project subtotal is estimated at approximately $17.6 million ($16,522,000 +
$1,089,000). In addition, it is necessary to factor in architectural and engineering fees
(soft costs), which are estimated at approximately $1.0 million by Cumming LLC.

       3.          Summary

Based on the foregoing analysis, the total updated construction cost for the proposed
convention center in Las Cruces is, therefore, estimated at approximately $18.6 million,
as summarized below.

                                     Total Estimated Construction Costs (1)
                                         Proposed Convention Center
                                            Las Cruces, New Mexico
                                 Cost                             Sq. Ft.       $/Sq. Ft.          Cost
        Total Building Construction Cost                          81,000        $203.89         $16,522,000
        Total Site Work Construction Cost                        416,000          $2.62          $1,089,000
        Subtotal (Hard Costs)                                        -              -           $17,611,000
        Architect and Engineering Fees (Soft Costs)                  -              -            $1,018,000
        Total Construction Cost (Rounded) (2)                        -              -           $18,629,000
        (1)
            Excludes land cost, building permits, capitalized interest, funded reserves, contingencies, and
             off-site infrastructure costs.
        (2)
            Escalated to reflect a construction start date of January 1, 2004.
        Source: Cumming LLC




                                                         VII-2
        SECTION VIII

RECOMMENDED FUNDING SOURCES
                        RECOMMENDED FUNDING SOURCES

A.     FUNDING REQUIREMENTS

Section VII indicated that on-site development costs for the proposed convention center
in Las Cruces (excluding land and infrastructure) are estimated at approximately $18.6
million.

If the City of Las Cruces opts to finance this total construction cost, annual debt
payments are estimated at approximately $1.3 million, assuming favorable financing
terms of 4.5 percent over the course of 25 years.

In addition, as highlighted in Section VI, the proposed convention center in Las Cruces is
projected to operate at a loss of approximately $300,000 in a stabilized year of operation
(in 2002 value dollars). Based on the foregoing operating loss and debt service payments
related to the proposed convention center in Las Cruces, the annual funding requirements
for the project are estimated to be on the order of $1.6 million per year ($300,000 for the
operating deficit + $1,300,000 for the annual fixed debt service payments).

As will be discussed at the end of this section of the report, although convention centers
operate with a deficit, these facilities tend to benefit the cities in which they operate via
the economic multiplier, or ripple, effect.


B.     FINANCING OPTIONS AND RECOMMENDATIONS

       1.      Overview

Convention center construction is primarily financed with public debt, which is repaid
over a 20 to 30-year period. Sources of funds to repay the debt are usually tax revenues -
mostly those generated from the activities or businesses most likely to use, or otherwise
benefit from the convention center.

Hotel room occupancy taxes, sales taxes, car-rental fees, parking taxes, meal taxes,
airport access fees, tolls, and development fees are the revenue sources most commonly
used to repay the debt service. In addition, these tax sources are frequently used to
finance ongoing operating and marketing needs of the facility. The mix of revenue
sources selected in any given case depends upon the comparative level of existing taxes
or fees, as well as what is considered to be feasible under the unique political and
economic circumstances of each development. For Las Cruces, a high level of
commitment and a coordinated community-wide effort that includes both the public
sector and private sector is necessary to successfully fund this project.




                                           VIII-1
                           RECOMMENDED FUNDING SOURCES



          2.      Financing Structures

Pay-as-you-go-Financing - Projects that are relatively small or that are financed in
municipalities with rapidly growing tax bases are sometimes paid for directly out of
appropriated funds. The majority of facilities, however, are financed with long-term debt
so that the payment of capital cost corresponds to the period over which the facility is
used and its economic benefits are realized.

General Obligation Bond Financing – Long-term bonding using the general obligation
of the state, either directly as part of a capital outlay program or as guaranteed debt of an
authority, would provide a strong credit and relatively low borrowing costs for the
project. Most commonly, cities pay their convention center operating deficits from
general funds.

General obligation bonding (GOB) is typically reserved for projects perceived to benefit
the population as a whole, such as educational, environmental, or transportation facilities,
and is not often used directly for convention center financing. Some alternative uses of
general obligation debt might include:

   (i)         Restricting it to a portion of the project costs such as land acquisition, site
               preparation, and transportation access;
   (ii)        Creating a short-term means of paying for some or all construction costs until
               revenues triggered by the new facility are realized; and/or
   (iii)       Providing a guarantee for a new revenue source that is not initially
               creditworthy on its own.


Revenue Bond Financing - Various taxes, fees or other dedicated revenues could secure
revenue bonds for the proposed convention center in Las Cruces. Most of the recent
convention center projects throughout the U.S. have used this financing structure, which
can be tailored to fit the specific requirements of the involved state and local
governments.

In Las Cruces, the current 5.0 percent TOT (hotel) tax supports the operation of the
Convention and Visitors Bureau. The following points summarize the characteristics of
potential taxing tools that could be available for the convention center project:

Hotel Occupancy Tax - Hotel taxes have the major advantage of primarily taxing out-of-
town visitors rather than local residents. Convention centers in Orlando, Los Angeles,
New Orleans, Atlanta, Charlotte, Houston, Indianapolis, Miami, Philadelphia, St. Louis
and San Francisco have their debt service paid totally, or in part, by dedicated hotel tax
revenues.

Sales Taxes - Sales taxes provide strong credit structures because they are relatively
predictable and tend to track inflation and economic growth. A general sales-tax increase
or expansion of the base could provide a strong incremental revenue stream. However,


                                             VIII-2
                       RECOMMENDED FUNDING SOURCES

these taxes are often difficult to implement because they primarily tax local residents and
require referendum approval. Sales taxes can generate large amounts of revenue, but also
burden the local economy.

Meal Taxes - Meals taxes have been used in several cities, particularly in the Midwest, to
support the costs of convention and sport facilities. Like hotel taxes, they are directed
toward beneficiaries of the project, and to some extent, non-residents. A subset of an
overall sales tax, meals taxes can also generate substantial revenue.

Tax Increment Financing - Tax increment financings (TIFs) are based on the
incremental property tax value of the ancillary economic development projects that are
triggered by a major new facility. The tax base of a defined area (the TIF District)
surrounding the project is frozen and any increases in the future tax base are used to
repay TIF bonds. Such financings, however, have become problematic in light of the
default experience of similar bonds in Colorado and California. Depending on the size
and scope of the TIF District, this concept may be useful as a means of offsetting a
portion of the future debt service on convention center bonds or providing an additional
“backstop” for another primary revenue source. A TIF strategy may also be used to
support ancillary hotel development.

Development Fees - Fees for the right to develop projects near the proposed convention
center, or elsewhere in the area, could conceivably be used to assist in funding the
facility. These so-called “linkage fees” have been imposed in cities where available land
adjacent to a convention center is at a premium. Such fees are unlikely to produce
significant revenues and they are not a creditworthy source for debt financing given their
speculative nature.

Lease Financing - Lease, or certificate of participation, financing could be backed by
any of the revenue sources discussed, and would be entered into with a private developer
who would deliver the project on a turnkey basis.

       3.      Addressing the Operating Deficit

Any prudent financing plan should address methods of covering operating deficits
relating to the proposed convention center in Las Cruces. Depending on what revenue
sources, if any, are selected for dedication to the bonding, it could be possible to cover
most or the entire operating deficit from the required “coverage-ratio” funds above those
necessary to pay the annual debt service. Alternatively, annual appropriations from the
State of New Mexico and/or the City of Las Cruces general fund would be needed to
finance annual operating deficits.




                                          VIII-3
                              RECOMMENDED FUNDING SOURCES

          4.        Recommendations

 In the preceding paragraphs, we have outlined a set of principles to guide the
 development of a finance plan for the proposed convention center in Las Cruces.
 Throughout the legislative process, the city and state must decide on a specific set of
 revenue sources and tax rates that will raise sufficient funds to meet the financing needs
 of the facility outlined in this updated study. Moreover, the private sector, specifically
 hoteliers and retail interests, must work in concert with the public sector to facilitate a
 prudent financing strategy.

 Since the proposed convention center will primarily benefit the residents of Las Cruces, a
 substantial portion of the costs relating to the facility could be funded through the
 issuance of general obligation bonds (GOBs), after appropriate voter approval.

 In addition, we recommend the consideration of funding through a combination of
 available cash, revenue from the current 5.0 percent hotel transient occupancy tax (TOT),
 or a minimal hotel room night surcharge. Other potential sources would need to be
 sought to cover the balance of the operating costs and debt service payments. Such
 sources could include funds derived via a potential increase in sales tax (currently at 6.5
 percent), the creation of a countywide tourism tax, and direct funding granted by the State
 of New Mexico or the U.S. Government.

 Currently there is no hotel room night surcharge in Las Cruces. If, for example, $2.00 or
 $2.50 were charged for every room night generated (every room occupied per night) in
 Las Cruces, the revenue resulting from such a hypothetical surcharge would range
 between approximately $1.1 million and $1.4 million, respectively. These two scenarios
 assume an improvement in the Las Cruces hotel market’s performance by the year the
 proposed convention center stabilizes in 2008, as modeled below.

                                   Potential Hotel Surcharge Revenue
                              At $2.00 and $2.50 per Occupied Room Night
                                              Annual     Annual
                         Las Cruces          Available    Room     Room Night     Potential Hotel
                         Occupancy           Rooms (1)   Nights     Surcharge   Surcharge Revenue
2002 (Estimated)           73.0%              764,297    557,900        -                -
2008 (Projected)          75.0% (1)           764,297    573,223      $2.00         $1,146,000
2008 (Projected)          75.0% (1)           764,297    573,223      $2.50         $1,433,000
(1)
  Assume a static Las Cruces hotel supply.
Source: Jones Lang LaSalle Hotels




                                                     VIII-4
                            RECOMMENDED FUNDING SOURCES

C.     ECONOMIC IMPACT

       1.         Introduction

As indicated previously, based on the analysis of facility rental, food and beverage
revenue, other operating revenues, and expenses for the first three years of operation,
total operating income in the stabilized year is expected to be $355,000 annually in 2002
value dollars. Total expenses are expected to be approximately $655,000, with a
resulting deficit of approximately $300,000 annually.

Although beyond the scope of this report, it is imperative to note that direct, indirect, and
induced economic impacts from the operation of the proposed convention center in Las
Cruces should result from the “importation” of new spending into the local economy.

       2.         Direct Impacts

Direct economic impacts include the delegate, association, exhibitor and convention
center spending that result from the events and activities at the center itself. There are
four main categories of expenditures that fall under the category of direct impacts:

Delegate Spending is spending by delegates and attendees to conventions and meetings.
Delegates typically spend significant amounts on lodging, food, local transportation,
recreation and entertainment and other items. Delegate spending is the largest single
source of direct economic impact. Only out-of-town delegate spending is considered to
have a new economic impact. Spending by in-town delegates, on the other hand, is
considered to be a transfer of income from one sector of the local economy to another.

                                     Delegate Spending U.S. Average


                                                                             Hospitality Suites
                                   Entertainment       Restaurants                  4%
                                                          24%
                                        2%                                    Recreation &
                                                                               Shopping
                                                                                  3%
                                                                               Retail Stores
                                                                                   11%
                                Hotel Services
                                    47%                                 Car Rental/Gasoline
                                                                               6%
                                                                     Other
                                                                      3%


            Source: International Association of Convention and Visitor Bureaus (IACVB)




                                                    VIII-5
                           RECOMMENDED FUNDING SOURCES

Association Spending is the local spending (within Las Cruces or New Mexico) by
organizations that would sponsor conventions and trade shows at the proposed
convention center.

Exhibitor Spending includes the local spending by exhibitors at conventions and trade
shows for services, as well as personal expenditures. Certain exhibitor expenditure
categories such as drayage and promotion are normally not included as they are primarily
non-local expenditures.

Net Convention Center Spending is the spending by the convention center that is not
related to association spending or exhibitor spending.

       3.        Example of Direct Impact

For reference purposes only, the following table provides an example of the level of
contribution to the regional economy that a public convention/exhibition facility can have
on its surrounding community. The data in the table is related to the Bayside Expo and
Executive Conference Center, located in Suffolk County, Massachusetts, with
approximately 40,000 square feet of meeting space and approximately 200,000 square
feet of contiguous exhibit space. Although the proposed convention center in Las Cruces
would be much smaller than the Bayside Expo Center, the economic impact should not
be underestimated.

It should be recognized that the use of the economic multiplier concept (ripple effect) is
well accepted in measuring the responding impact of expenditures in the local economy.
However, the multiplier values tend to vary significantly from region to region given the
extremely complex maze of economic interrelationships involved.

                        Estimated Direct and Induced Economic Impact
                              On Suffolk County, Massachusetts
                             Bayside Expo & Conference Center
 Direct Impact:
  - Direct Purchases to Support Operations                                   $1,444,000
  - Visitor Expenditures                                                    $43,340,000
  - Exhibitor Expenditures                                                  $67,867,000
  Total Direct Impact                                                      $112,651,000
 Induced Impact:
  - Net Multiplier                                                            0.2685
 Total Induced Impact                                                      $30,247,000
 Total Annual Economic Impact                                              $142,897,000
 Source: Bayside, U.S. Department of Commerce, the Bureau of Economic Analysis and RIMS II Regional
         Economic Multiplier System




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                       RECOMMENDED FUNDING SOURCES

       4.      Indirect and Induced Impacts

Indirect economic impacts result from production changes in downstream industries
associated with the initial direct spending at the convention center. For example, a
delegate’s direct expenditure on a restaurant meal causes the restaurant to purchase food
and other items from suppliers. The portion of these restaurant purchases that are within
the city or the state is an indirect economic impact.

Induced economic impacts represent the change in local consumption due to the personal
spending by employees whose incomes are affected by direct and indirect spending. The
waiter at a restaurant, for example, has more personal income as a result of the delegate’s
visit. The amount the waiter spends in the local Las Cruces economy is considered an
induced impact.




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