As a quick update on Construction all proceeds ahead with the office building as we move onto the second floor construction even though we have had more rain in the past two weeks than we had been having but on, the whole not bad for November (winter as they call it) and as I remind myself even though it can be a little mucky at times it sure as hell beats 6' of frozen ground in Canada with frozen equipment, fingers and toes. In that context everything is just ducky. Two weeks ago we got our big go ahead from SETENA, the environment department, and this is usually the slowest and most painstaking of all the processes. All we have left is the final approval of our Bio-filter Sewage reatment system which was submitted to Salud (health department) two weeks ago so we should have that back this month. These same processes have long been started for our phase 2 in fact about 1 month after we started the phase 1 paperwork we moved forward with that as well so that by the time we get to it in March all paper will be complete and we can move ahead in a steady flow and not have to wait for any processes to unfold as we have had to do with the initial phase.

We are gradually working out all our suppliers and two weeks ago I also settled the contract for the supply of our doors and windows to a manufacturer in Sarchi that makes an incredible door and has a supply of Laurel from very old trees. What this means is incredibly gorgeous wood that is hard as hell. To give you an idea each of our doors will weight in at about 150 pounds. These were not the cheapest doors quoted to me but they were by far the best hence cost us about $300 more per condo than considerably inferior products would have cost. With this quality I know we have doors and windows that will last generations and still look new 20 years from now even though doors do take a lot of wear and tear in a project like this when the wood is this hard it is really difficult to harm it. In my five years in Costa Rica I have never seen a better quality product than what we are using and I assure you it is a considerable step up from what Los Suenos uses for doors along with their plastic windows. Once you get here to see one of these pieces you will indeed be impressed as I was and when it comes to woodwork I do not impress easily. We will also have a custom designed entry door with our logo carved into the center of it I hope to have a sample of such in our office within the month. At this moment I am doing a sample of one of the wood panels on my table to see what they will look like using what Sur Paints here calls there Natural Oil system that will not blister or peel under this vicious tropical UV light that is so brutal on outdoor wood finishes. They have been using this for the past four years and have found it to considerably outperform poli-urethane or varnishes that all tend to deteriorate quickly and be hard to maintain whereas once a year as part of the annual maintenance program we will apply a fresh coat of oil to maintain the luster and beauty of the wood finishes.

I also closed the contract on our wall system (Coventeck) with Panelco this is by far the most superior of the systems available providing insulation, sound proofing, great seismic rating and builds fast plus is made here in Costa Rica.To be clear here we have a concrete superstructure only, as you can see in the Construction for Dummies blog in the Discussion Forum of the website, then between the columns and beams we do what is referred to as the in-fill with the wire and styrofoam panels that are then mortared inside and out to leave them the same thickness as the superstructure. Of course more pictures will follow as we get to that stage. I do not know of anyone else using the system in Jaco although this is exclusively what Los Suenos has built with for the past eight years. I am sorry to say but in my usual manner of subtleness I categorically state that anyone building out of concrete or concrete block to either be fools or thieves. Why you might ask, well when they build out of these products what happens is they also saddle their end owners with horrific energy costs as they try to air condition something build with an R value of 2 (heat transfer). A concrete wall is just about as good as three sheets of paper for keeping out the heat during the day and then it acts as a huge heat sink as these tons of concrete radiate off this residual heat during the night, when you are trying to sleep, all the heat they accumulated during the day has to go somewhere hence into your home hence making your A/C work overtime and your power meter spin off its wheels. Most also do not insulate the roofs to keep out the daytime heat as well which of course causes the home to heat up needlessly and of course overwork the A/C system or when you come home after a day of touring or being on the beach your home is like an oven. The cost of Reflective Foil (Prodex made in CR) to insulate one of our B units is $50 and that capital cost will be returned in energy savings in 30 – 60 days. Not a bad payback in my books hence why I call anyone not employing these methods and products to be fools or thieves as what the builder does or does not do the owner gets to pay for their stupidity or intelligence in the long run the buck always stops with the owner.

Air Conditioning for Dummies:
When you are considering being a home owner in a tropical climate especially at the beach the air conditioning system is by far the most critical and expensive of all systems to install and maintain by far. Maintenance costs here are the God and a smart owner needs to be aware of the basic issues or they will most likely end up paying dearly for their ignorance and that of their builder. The power bill in our project is our largest expense next to salaries and that will never change only get worse if anything as energy costs rise over time. Hence this has been our most labourous area in the overall engineering with painstaking care taken to each and every detail. Thank goodness we were gifted in finding Frank Czul and his company Greentech to aid us in this area. Now being Canadian this is hardly one of my areas of expertise never having had a home with a need for such a system but I have had to take a major crash course along with a huge learning curve. With that being said I have known that we needed a state of the art system to handle this critical area and one that would not penalize our owners with sky high maintenance costs. When I embarked on this path I fully well knew it was a major on going expense what I did not realize was the extent of just how expensive the maintenance and capital costs were especially to badly planned or what I call no plan Mickey Mouse systems. Again I look around at our competitors and have to laugh a little as it appears few others have taken the same course of action and care enough about the big picture to spend the time, energy and expense to ensure that what they install and flog onto their owners actually works and does so even remotely efficiently let alone at a state of the art level.

In Canada we long ago learned with our huge 140'F temperature changes that you had to deal with condensation and air flow to avoid rot in walls and deterioration of finishes. Well in the tropics our problems stem from slightly different causes but there is still a huge problem with mildew and molds that can destroy finishes and fabrics so fast it is amazing. In fact what might catch up with you in ten years in Canada will take 10 months or weeks here to do the same. To eliminate these problems the first lesson I learned is that your A/C system must be engineered specifically for the ambient humidity and temperatures of the local climate. A system that works 100% efficiently in Jaco will not have a hope of doing so if moved to Flamingo or San Jose hence our units are designed and built in Trinidad specifically for the conditions that they will operate under and hence will control the humidity just as much as they control the temperature voila molds and mildew disappear under this type of managed environment. Also not to be forgotten is the comfort of the residents is far better when you manage both issues at the same time as just cooling off a room without keeping the humidity down will not provide a comfortable living space at all. You CANNOT go to Price Smart or Home Depot get a unit off the shelf and then think it will do this job. That is about as likely to work as winning the lottery or someone showing up from the government to help you :-). Now aside from the efficient operating issues what I have also discovered through this in-depth research is just how incredibly expensive these little consumer split units, as they refer to them that we see in most hotel rooms and condos, are to maintain and how huge their life cycle costs are. I have before me a life cycle cost comparison between these cheap split units and the commercial chiller system we are going to use. Aside from not working particularly well the split units would cost our phase 1 $687,000 over the first ten years of operation whereas the chiller system cost $506,000 well that is a difference of $3,934 per condo owner. Now the good system does cost us $48,000 more up front but between the energy costs savings and the huge maintenance costs of these split units which here at the beach can start giving problems in as little as 18 months after installation and then to continue on forever in a never ending battle. Now even this cost difference only applies under the assumption that you have a top notch maintenance program and an employee there cleaning the condensers and coils at least monthly. If such is not the case then the units will last and even shorter period of time and consume even more power as their efficiency drops if they are dirty. Now I look at our next door neighbour Monte Carlo that has 24 condos and see all of these split units sticking out of the walls of their condos as well as all the second story bedrooms. Now do you think this size of project has someone on staff or contract to do this work as well as climb up a ladder and service all these second story units. Well our costs if we used this system are projected at $109 per month under a full maintenance program, what you can take to the bank is the owners next door in the long run are going to see a monthly maintenance and capital cost figure of close to $200 just to keep their A/C system running we are not talking about the consumption at all just overhead costs. Yes our system is quite capital hungry initially at $5,000 per condo which at first kind of choked me up but now looking at the alternatives and benefits this is cheap in comparison to the Mickey Mouse version!

Other negatives aside from costs, to this expensive system or should I say lack of a system....
1. Cosmetics - these units sticking out of your walls do nothing to add to the look of your home
2. Less Refrigerant used in central system in the first place hence less global warming gases going into the atmosphere along with a fraction of the maintenance happening hence the chance for leaks is way less.
3. Since there is a refrigerant in your unit there is a risk to leak into your living space this stuff is not healthy.
4. More energy consumption hence more global warming effect.
5. Noisy units since you have two or three compressors running in your condo versus zero, decrease in overall comfort level.
6. You cannot do demand control. When the resident turns on the A/C it must work immediately.
7. No way to harvest heat generated from little units.

Now to expand on item #6 above and what is not figured into this cost comparison which would make the figures substantially more ridiculous is that what I would refer to as the Mickey Mouse system you cannot control when the residents use your power and when not. Our chiller system is designed only to run at night when the chiller kicks in at 8 pm and runs to 6 am during this time it is cooling off a 68,000 gallon water tank below the storage unit in the parking lot. This accomplishes two things it cuts our power bill down my as much as 70% when we consume power during the night when there is a power surplus. The other benefit is this also considerably extends the life of our compressors and condensers due to the fact that they are not operating during the heat of day. During the day and peak charge hours we only run the pumps that pump this cold water to your condo so that you have cool air during the day. These issues all generate bonus savings on top of the savings I already mentioned.

Also to expand upon #7 above what we have designed is a heat exchange off of the compressors to heat our hot water. In essence what we are doing here is taking the heat out of your living room where you don't want it and putting it in your shower where you do. We harvest this heat for no cost what so ever other than the initial cost of the heat exchangers that accomplish this task. In effect our water heating bill will be $5,000 less over ten years per condo than our next door neighbour whose A/C maintenance and hot water costs are going to run around $240 a month forever not to mention the capital cost of the water heaters and maintenance to those as well. Additionally for comfort and water conservation issues our hot water system is in a continuously circulating loop of piping so when you get in the shower you will have to wait as long as 1 second to have hot water. I think you would agree that is hardly the case in most hotels where you can have a nap waiting for the hot water to get to you and you can only imagine how much water this wastes and how much water has to go through the sewage treatment system as well. All of these issues only add to your end costs as an owner or higher rental rates for the tourists as someone has to pay for all of these expenses one way or another there is no free lunch!!!

When ever and where ever we can cut our costs leads us then to keep our rates lower hence attract more guests which increases our occupancy or increase our profit levels when we are not pissing money away in useless expenditures. Since ours is an investment driven project in conjunction with the fantastic lifestyle I believe every one of these issues is critical in not only the comfort of guests but in the financial performance of the unit for each and every owner. Many of these issues aside from the critical costs involved affect our Eco-Tourism designation and most importantly our corporate philosophy in that we are responsible for the cause and effects when we build energy pig projects that further strain available resources and each of us IS RESPONSIBLE in the end. Each raindrop is responsible for the flood! If we as builders and managers don't pay attention to this stuff then who will??? If we do not do everything within our power to control the ongoing costs of running the project are we not stealing the money right out of the pockets of our owners. Hence why I started this letter with the comment of of how to build and not be an idiot or a thief.

Now this finally leads me into the meat of what inspired this newsletter in the first place and that is our corporate philosophy or at least that is what I called it and this became our mission statement, just as a reminder here follows our Mission Statement:

Jardines de Ensueños was created specifically to address a serious lack of quantity and quality in tourism facilities in the Costa Rican Central Pacific market. In the process of addressing this need we shall provide high quality lodging with five star service in beautiful spacious natural surroundings, at affordable rates while maintaining exceptional returns to owners. We shall succeed by a philosophy of always being an exemplary corporate citizen that will always endeavor to be a leader and never a follower while giving back to guests, owners, employees, community and the environment.

Our Corporate Commandments as stated in the Project Pro-forma on our website goes into greater detail as to what our philosophy is all about, well today as I was reading one of the many investment newsletters I get I read the following article that really piqued by interest in that what was discussed in this article is exactly what I have been trying to get across for over a year now to our eventual owners. This is all about what kind of a project they are considering buying into as I think if one chooses to be an ethical investor these issues are important and should be discussed just like the long term fore thought and cost containment issues I have brought to your attention today are all important to the bigger picture that each and everyone of us is a part of. Anyone that has been following our website seriously, knows very well I did not just make this stuff up today for convenience in fact it has been on our site since the day of launch a year ago. Now I have maintained all along that these greater issues were important in our business and always felt aside from being the right thing to do that in the end we would always be well rewarded for being above the crowd and always looking for the best what ever it may be. Well this new book "Firms of Endearment" along with its statistical analysis clearly proves that my personal beliefs do prove to be correct in the financial/corporate world as we see what has happened to public companies that follow this similar philosophy of what I called "Kind Capitalism" which they now coin as "Conscious Capitalism". I think this is even more important in lesser developed countries where those of us in business can lead by example. Well it is just nice to have some empirical evidence that we were not in La La land on our personal views and beliefs that what you put out you would eventually get out not that we really cared what anyone else said one way or another when it comes to discussion of a belief system of where you are going and how you are going to get there. Those that appreciate this will be our owners and those that do no will not it is as simple as that. At any rate please read on to what this article is saying if we are on the same wave length you will find it interesting.

Have yourself a great day.

Regards,

Trevor

Jardines de Ensueños was created specifically to address a serious lack of quantity and quality in tourism facilities in the Costa Rican Central

A Model For Better Business…
And Bigger Profits
Issue #608
by Dr. Mark Skousen

Dear Investment U Reader,

Last week in Guatemala I met up with John Mackey, CEO of Whole Foods Market (Nasdaq: WFMI), the fastest-growing organic food supermarket chain in the world.

I’ve known John now for four years, and we’ve developed a friendship, with our common interests in book reading, free-market economics, investments, sports, healthy living and spiritual growth. Like Bill Gates, who dropped out of college, John is a brilliant thinker and entrepreneur who’s turned Whole Foods into an $8 billion company. And his business model is spreading like wildfire…

Let’s take a look at his “stakeholder” philosophy, and the companies quickly adopting it…
Long-Term Profits In “Conscious Capitalism”

When we met last week, John had just come from a small village where his Whole Planet Foundation is making small micro credit loans to poor women.

“Mark, if you could see the light in their eyes, you would be amazed at the transformation these small loans have done to these small business owners.” John is a big fan of Muhammad Yunus and the Grameen Bank, which pioneered the concept of small loans to poor people.

“It’s the best anti-poverty program I know,” he said. “And it’s happening all around the world, including here in Guatemala.”

John’s an advocate of a new business model he calls “conscious capitalism,” one that involves a “stakeholder” rather than “shareholder” philosophy. He rejects the traditional profit-centered
business model that seeks to optimize profits for investors only.

Rather, he believes that the key to maximizing long-term profits is by “having a deeper business purpose, great products, customer satisfaction, employee happiness, excellent suppliers, community and environmental responsibility.”

Whole Foods has a policy of fulfilling the needs of many “stakeholders” in the company: customers, employees, shareholders, suppliers, the community and the environment. The company is known for
paying high wages and benefits to its workers, including stock options to most employees rather than only executives; and it donates 5% of its profits to local causes.

Critics complain that stakeholder businesses are expensive to maintain and ultimately under-perform on Wall Street. Is this really the case?

John refers to a new study that tries to answer this question: Firms of Endearment: How World-Class Companies Profit from Passion and Purpose, by David Wolfe, Rajendra Sisodia and Jagdish Sheth (2007 byWharton School Publishing). The authors identify 30 companies that are managed to optimize total stakeholder value instead of focusing strictly on profits. And they tracked the long-term stock performance of those that are publicly traded:

Amazon (Nasdaq: AMZN)
Best Buy (NYSE: BBY)
CarMax (NYSE: KMX)
Caterpillar (NYSE: CAT)
Commerce Bancorp (NYSE: CBH)
Costco (Nasdaq: COST)
eBay (Nasdaq: EBAY)
Google (Nasdaq: GOOG)
Harley Davidson (NYSE: HOG)
Honda (NYSE: HMC)
JetBlue (Nasdaq: JBLU)
Johnson & Johnson (NYSE: JNJ)
Progressive (NYSE: PGR)
Southwest Airlines (NYSE: LUV)
Starbucks (Nasdaq: SBUX)
Timberland (NYSE: TBL)
Toyota (NYSE: TM)
UPS (NYSE: UPS)
Whole Foods Market (Nasdaq: WFMI)

Take a look at how they’ve performed as a group against the S&P 500…

Source: WholeFoods.com

As the chart above indicates, “stakeholder-centered” (S-C) companies have had extraordinarily high short- and long-term stock market returns.

“This is no accident,” Mackey states. “It is the result of all 30 firms creating a superior business model – the business model that I believe will become the dominant business model of the 21st century.”

Firms Of Endearment

Investment U E-Letter: Issue # 533
Thursday, May 11, 2006

Firms Of Endearment:Wall Street’s Next Hot
Strategy(the"StakeholderStrategy")Is Up 205%
by Mark Skousen, Chairman, Investment U

The world’s greatest hockey player, Wayne Gretzky, once described his success this way: “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.”

We here at Investment U take the same attitude with fads on Wall Street. Over the years, I’ve witnessed huge amounts of money being made following a hot strategy, whether it be the Nifty Fifty in the late 1960s, or the Dogs of the Dow in the 1990s. But these techniques work only for a few years, and then fall out of favor when the crowd jumps in.

The key is to invest in a strategy that is only beginning to catch on – at the beginning of a fad, not the end.

What’s the newest method of stock selection? The buzz among insiders is to buy companies with a new management style called “The stakeholder’s strategy.”

Let's take a look at this new management fad, then review the new book, Firms of Endearment.

Who’s “In” the Stakeholder's Strategy?

“In” are CEOs who have superb people skills, maintain the highest ethical standards, and build a strong team around them.

Rather than being feared, these leaders inspire loyalty, and even affection. They live up to an Adam Smith-style harmony-of-interest model rather than the Marxist conflict-of-interest model. They seek to
increase the value to all “stakeholders” in a company – not just fulfilling the needs of executives and stockholders, but customers, employees, suppliers and the community. Under the “stakeholder” model,
everyone wins.

Who’s “Out” of the Stakeholder's Strategy?

“Out” are autocratic managers who are paranoid and unwilling to share power. Sooner or later, they suffer from failed strategies, lawsuits and missed earnings – inevitably, they see their stock prices decline, and a dismissal.

We can think of many examples recently, including Disney’s Michael Eisner, Hewlett-Packard’s Carly Fiorina, and Sun Microsystems’ Scott McNealy.

'Firms of Endearment': Aquarian CEOs Return Superior Returns

This summer, a new book – written by three management specialists – identifies 35 companies they call Firms of Endearment, the title of their book. These are companies that treat their employees well and inspire them to be innovative, respond readily to consumer needs and complaints, show interest in their community and maintain high moral standards.

Whole Foods Market (Nasdaq: WFMI) is also on the book's list. And there are plenty of reasons…

Team Players In Every “Isle” And 5% Off the Top

I am especially familiar with Whole Foods, having developed a friendship with founder and CEO John Mackey.

John is a management genius, and in 20 short years, his company is now the 5th-largest grocery store chain the United States. I don’t say that just because John loves my economics books. He is very unorthodox in his “decentralized” business model.

His company is very egalitarian and democratic, while providing the incentives to encourage employees and executives to succeed. His employees are empowered and rewarded for providing the best new products to customers. Having interviewed several top execs at Whole Foods, I know that John has surrounded himself with devoted “team players” that will continue to grow this booming company. Whole Foods stores are always jammed with customers because they have the right
stuff, even if it costs a little more.

In the October issue of Reason magazine, John Mackey’s stakeholder model came under criticism by free-market economist Milton Friedman and T.J. Rodgers, libertarian CEO of Cypress semiconductor(NYSE: CY), who criticize businesses for engaging in social responsibilities such as
corporate funding of non-profit organizations. (Whole Foods gives 5% of its profits to selected charities each year, including a sizeable donation to Katrina victims.)

Interestingly, while Whole Foods stock has skyrocketed, Cypress Semiconductor has lost value for its shareholders.

Whole Foods is not the only “firm of endearment” that has done well for shareholders. The authors of the book found that these 35 top publicly traded companies returned 758% over 10 years, compared to 128% for the S&P 500. In the past five years, while the S&P 500 is just above water, these companies gained 205%.

But it’s only the beginning. I think they have a few more years to run before the public catches on and drives these stocks to new levels, as most companies play catch-up.