November 1, 2003

 Dear Owners,

 We are writing to you today to report on very important and positive developments at our building. 

At our General Assembly held last March, we gave you a detailed explanation of the cost structure involved in operating our building, placing special emphasis on the high fixed costs of our 3 main expense items – salaries and related benefits, light and water. These 3 items represent 64% of our 2003 expense budget. See the 2003 budget on our website at:  

http://www.lastorresgemelas.org/presupuesto2003.html 

We also explained to you the fact that these 3 items have a high fixed cost element, at least 40%, for reasons which many of you may understand just through sheer logic. By way of example, many pieces of equipment that use large amount of electricity (pumps, switchboard, elevators, general lighting etc.) operate between 12 to 24 hours a day regardless of the number of occupants in the building. This is also true with out payroll. Many staff position have to be covered 24 hours a day (ex. telephones, front desk, security) and a certain level of staff has to be on hand at all times since owners have become accustomed to arrive at any time and we must be prepared for this.

 We went on to explain that a constant level of occupancy is required in the building to cover these fixed costs and that since the events of September 11, together with a general decline in occupancy in Acapulco over the last 5 years, we have been more and more pressed to cover our costs. You can see an analysis of our fixed costs on our website at:

 http://www.lastorresgemelas.org/COSTOS%20FIJOS%202002.html

 There are always ways to reduce these costs, but in many cases substantial money is needed to achieve the reductions. For example, payroll can be reduced by cutting the number of employees, but as you are well aware, many of our staff members have over 10 to 20 years working for the building and the severance cost for firing each of them runs from US$6,000 to US$50,000 per employee. Water consumption could be significantly decreased by changing our toilet tanks from the existing 20 liter tanks to 5 liter tanks which are the current standard, but this requires each owner to be willing to make this investment. Light costs can be reduced by replacing low efficiency appliances such as the pumps that we have in our hydraulic system with high efficiency pumps, but these cost US$6,000 each. Our diesel costs can be reduced significantly by converting our boilers to natural gas, but this also requires a substantial investment.

 All this is not to say that we have not already made significant gains in reducing these costs over the past years. We have. Our new elevators have modern, efficient generators, our new telephone system uses much less energy that the previous electo-mechanical system, but there is still a long way to go.

 Getting the money to make these improvements is not easy. As owners, you have done you share in contributing to the 2 major projects we have undertaken in the last 3 years, the elevators and the phone system, and we as Administration have delivered what we promised within the estimated costs and within the times we promised. Our challenge now is to find ways to get the money to continue on with the needed investments without asking you for more. This requires financial creativity and experience.

 At the March meeting we proposed several creative options which did not involve an added expense to you, and we can now report to you the results we have achieved from these:

 Discount of 20% to all Owners who pay 2 years of Maintenance Fees in Advance

 In order to reduce our payroll and to generate the money necessary to cover the severance pay, the March assembly approved a 20% discount to all owners who paid 2 years of fees in advance. This money went into a special account to be used only for reducing staff. The discount which we gave will be recovered form the saving that we will have form the reduced payroll.

 We are happy to report to you that this program was a great success. To date 20 Owners have taken advantage of our offer and paid a total of US$69,990.50 into our payroll fund and received a discount of a total of US$17,929.

 In July, with this money safely deposited in the bank, our Administration sat down to negotiate with our Labor Union to achieve 4 objectives:

1.)    Reduce our full time and semi full time union staff members by 21 from 73

2.)    Increase the number of rooms cleaned by the Maids from 8 to 10 (the average is 9 to 12 at other hotels and condos in Acapulco)

3.)    Increase the number of floors/areas cleaned by the Public Areas staff

4.)    Have the union eliminate the clause in our contract which requires temporary staff to cover all days-off/vacations/sick leaves/resignations.

You can see a copy of our union contract on our website at:

http://www.lastorresgemelas.org/sindicato.html

Increasing the number of rooms/floors cleaned by the staff is essential in reducing the payroll because it will reduce the number of temporary staff we have to have on had during weekends/high season.

Since July, we have had over 20 meetings with the Union Committee negotiating this agreement and they have now agreed to the basic proposals we made with some small adjustments. The new contract will be signed next week with these changes, although we have already reduced the 21 staff members form the union in the last week of September.

At the same time, we have done a major restructuring of the Non-unionized staff to reduce 10 additional staff members from this group by consolidating responsibilities, automating some work processes through the computer network at the building which now has more than 30 workstations online.

One week ago, we implemented this second restructuring plan which also took advantage of the fact that we detected 2 incidents of corruption involving several lower level employees in the accounting and purchasing departments and which allowed us to fire these individuals with highly reduced severance payments, particularly in view of the fact that they had over 10 years seniority in the building. The fact that these incidents revealed a total lack of observance and supervision of our established purchasing procedures led us also to a decision to request the resignations of the General Manager and the Operations Manager.

In order to give you a view of the impact that these staff reduction are having, the following graph shows the daily payroll cost on March 1^st, June 1^st, August 30^th and November 1^st.

 Our payroll has now been reduced to under half of the amount we were paying in March. We have paid a total of Mex$850,000 (US$85,000) in severance pay to accomplish this. The payback period for this investment is under 5 months for the savings in payroll and taking into account the discounts given for maintenance to the Owners who participated.

 We wish to publicly thank the following owners who supported this plan by paying 2 years in advance and making this project feasible without having to ask a single owner for a Special Assessment, and to our Union for understanding our need to stabilize the buildings finances:

 You can find the detailed information about our latest payroll on the website at:

 http://www.lastorresgemelas.org/Nominas.html

 We hope that you will grasp the importance of this event and the difficulties involved in being able to string together all the elements needed to make this organizational restructuring possible. In the coming weeks and month you will also be receiving a new newsletter which wee have developed in an effort to close the information gap which exists between the committees and the Owners and, more importantly to eliminate the misinformation which many of you receive from other uniformed sources. We also wish to again emphasize that the main vehicle for communicating with you is our website located at www.lastorresgemelas.org where you will find the equivalent of over 10,000 typewritten pages of information of all kinds about our building. Never in the history of our building has so much and so detailed information been available to each owner. Those who insist on saying otherwise have not taken the trouble to visit the website.

 We thank you for your patience in reading this lengthy letter and hope you will pleased with these very positive developments regarding our building.

 Your truly,

 Administrative Committee                                Vigilance Committee