Page 1

Senorio de Aloha - Review 2021 JOHN RILEY January 2022 Fellow Owners
When I was elected president in July 2020, I said that returning Senorio to a high-quality community would take between 3 and 5 years. The magnitude of the deterioration of the buildings’ infrastructure (main buildings and garages), the necessary improvements to the support infrastructure (pools, irrigation, security systems, etc.) would require a high level of experience in engineering and management, and what is more important, the funds to carry out the work. My opinion on this has not changed, except to say that the challenge is more difficult than I thought at first, but it is not insurmountable and my deadline to achieve it is the same. In 2021, some progress was made that I would describe as “almost manageable”. To help you understand what I mean, I have selected a series of examples of community management to give you an idea of what really happens on a daily basis. I am brutally frank in my evaluations because I cannot afford to let you, or even myself, be complacent and lose sight of what is needed to achieve our objectives.

1. FINANCES
   (Our financial situation is very weak.) At the time of my appointment, in July 2020, the total debt of the owners to the community exceeded 500,000 euros. We owed our creditors more than 250,000 euros. As a result, the community was unable to carry out all the routine maintenance and critical repairs. The number one priority was to stabilize our financial situation. I can say that we have achieved a certain degree of stabilization in the sense that we are no longer spending money we don’t have and we are getting a better value for what we spend. With prudent financial management, I believe that in the next two or three years we can achieve a more stable balance and have funds for capital repairs. “Your community is at a critical point. Vote for change next week for a secure future”

Page 2

January 2022 President’s Letter The key improvements in 2021 that have brought us a certain degree of stability are • A 16% reduction in the total amount of money owed to us.
• Reduction of the cost of some of our subcontractors, as the contracts were pending renewal. However, I firmly believe that there is room to reduce the number of contractors and the price we pay for these services. • Our creditors knocked on the door immediately after the Shareholders’ Meeting in July 2020 asking for their money. This provided the opportunity to establish repayment plans that are in line with our income and a prudent spending plan. In the attached Appendix 1, the amount we owe to our creditors is detailed. You can also see a summary of our financial situation in the third quarter of 2021 and a comparison with 2020.

1. The surplus for 2020 is after providing 80,546.77 € for the outstanding balance owed by the owners.
2. The surplus for the 9 months until the end of September 2021 of 77,562 € includes 57,183 € of garage and storage fees, and 24,000 € of WiFi fees. These concepts are for the entire year 2021, so the surplus for these nine months is, more accurately, approximately 56,000€.
3. The net balance of the owners at the end of September was 340,000 €, but the actual amount collectible is, probably, no more than 100,000 – 150,000 €. Therefore, the real financial situation of the Community is that we owe approximately 100,000 €.

Notes

Page 3

January 2022 President’s Letter 2. INFRASTRUCTURE
Years of abandonment have left important aspects of Senorio’s infrastructure in a dangerous state. This photo shows live electrical cables with an open protection box, and the cracks in the ceiling have water running through them - a big risk! (instead of allowing our maintenance man to clean up the garden debris, Meridional should have instructed him to ensure the absolute safety of the electrical connections)
And some more concrete examples are: • A very poor painting job between 2014-2018 that simply painted over the cracks. Now it is evident that in the next few years costly repairs will be needed on the facades and terraces of all the buildings. The main cause of the damage has been the poor maintenance of the irrigation systems of the planters. When we hold a general assembly, I will probably propose disconnecting the irrigation to avoid further damage, before a plan is carried out to make the necessary costly repairs. • I would like to add that the painting contractor is still claiming 138,000 euros. The previous administrator was unable to deliver the contract and the complete invoice record (which is believed to be in the order of 800-950,000 euros), and the painting contractor is not willing to provide a copy to justify his claim. So until we see the documentation, I will not authorize the payment of this debt. • For years, a judicial process has been underway against one of the original general contractors of the community for poor-quality work on the infrastructure at ground level. This has caused substantial damage to several underground garages. It is a race against time to get a favorable indemnification through the courts (if we win the case) rather than having to get the necessary funds from the owners or external financing to initiate the repair works before the situation becomes critical. It is likely that this whole process will take several years to complete.

Page 4

January 2022 President’s Letter • For years, a judicial process has been underway against one of the original general contractors of the community for poor-quality work on the infrastructure at ground level. This has caused substantial damage to several underground garages. It is a race against time to get a favorable indemnification through the courts (if we win the case) rather than having to get the necessary funds from the owners or external financing to initiate the repair works before the situation becomes critical. It is likely that this whole process will take several years to complete. • HIGH PRIORITY - In 2000, important changes were made to the legislation on health and safety in pools. A 20-year implementation period was granted to communities to carry out costly and substantial works, for example, fencing the perimeter of each pool, inadequate water pumps, safety barriers for children, automatic cleaning and filtration systems. Senorio has not complied with the main laws, & right now we do not have sufficient funds to carry out the necessary works. As president, I am personally responsible for any accidents in the pool that we have not complied with the laws. In the event of an inspection by the authorities, our pools may be closed for 3 years. That is why, when we have a General Meeting, I will propose a plan to make our pools comply with the regulations as soon as possible. • Our community’s irrigation systems do not work properly. A previous contractor sabotaged important parts of the system, which is why the gardeners are using hoses to water. Other areas of the system have not been properly maintained and need a complete review. • SECURITY IS A BIG CONCERN - Our security systems are not what they seem (perversely, something good if they act as a deterrent). Many of the CCTV cameras that are seen do not work or do not provide the necessary coverage. And what is worse, Spanish data protection laws restrict the viewing of CCTV to the authorized security personnel or the police. This makes real-time viewing or even post-event viewing very difficult and highly ineffective. Furthermore, our door and entrance systems to the portals are frequently broken and often not repaired or maintained on time (the Mezquita side door has not been closed correctly all year). It is necessary to completely rethink our security systems, so that we can use the latest technologies to overcome the inherent weaknesses of a human security operation (Cofer - our most expensive contractor)

Page 5

January 2022 President’s Letter The magnitude of these infrastructure problems exceeds the funds available through our current community fees. The technical specialization needed to evaluate and manage these repairs exceeds our current capabilities. To resolve this, a repair budget and a work plan of “priority repairs” will be proposed at the General Meeting in March, which will include a plan to raise funds above what we receive from community fees. The deadline for this project will likely be 3 years. We will do our best to keep the increase in costs to the owners to a minimum, but I assure you that there will be a significant return on investment through the increase in the value of your property. 3. SUBCONTRACTORS
(we need a complete overhaul of the use of subcontractors) From the administrator down, Senorio’s services are carried out by subcontractors. The only exception is Luis, the maintenance manager, who is directly contracted by the community. The usual practice in Spain is that contracts last a year and are renewed afterwards. The termination of contracts mid-term can lead to the contractor claiming the full payment of the remaining contract, regardless of its execution. (A) CLEANING. At the beginning of the year, we changed our cleaning contractor from Symant to ‘Cheli Services’ because we had been paying above market rates for a cleaning service that was not of quality. To avoid costly indemnities for dismissal, the three individual cleaners were kept and placed under the supervision of Cheli Services. Unfortunately, this has not worked well. While the overall level of cleaning has improved, there are serious frictions between the three cleaners and Cheli/Meridional. The cleaners are off sick for long periods (currently all three are off sick), and our two cleaners have been to my door crying about what they consider to be unfair treatment by their supervisors. Since the beginning of the summer, it has been necessary to hire more cleaners to maintain the quality level and replace those who are off sick. I also thought it was evident that the irresponsible behavior of the “tenants”, such as leaving trash bags at the door of the apartments, vomiting in the portals, throwing food and cigarettes by mistake in the community, etc., increased the pressure on the cleaning services. The irresponsible workers who work on the renovations of several apartments also added extra work for our cleaners. Therefore, although the level of cleaning has improved, it can still be improved.

Page 6

January 2022 President’s Letter (B) GARDENING.
In July, we replaced Symant with Jaydo Services because we had been paying above market rates for a gardening service that did not meet our requirements. One peculiar aspect of the Symant contract was that it established an 8-hour working day, but the agreement with the two gardeners was that they worked 6 hours a day from 08:00 hours. This explains why several owners expressed their concern to me that the gardeners were leaving at 14:00 hours, but the garden debris (in the paths, or in the pools, etc.) had not been removed. Jaydo’s role is to supervise the gardeners’ work plan and also provide expert technical guidance on the maintenance of our gardens. Jaydo has presented cost estimates for introducing new plants to improve the gardens, but I am withholding authorization until the review and ratification of the 2022 budget. Just like with the “cleaning contract”, we have kept the employees, in this case a father-daughter team. It is clear that a 6-hour shift is insufficient and when I see Luis (our best-paid employee, and with a heavy workload of maintenance sweeping up the garden debris after the gardeners have left at 14:00 hours, my concern about our operational efficiency simply is not good enough. (C) POOLS.
A bit of a disaster, if I’m honest, & here’s why: LIFEGUARDS Many of you will know the difficulties we have had in opening the three pools this year. The key issue that I had to resolve at the beginning of the first season with Meridional was the legal requirement for lifeguards inside and outside the Covid restrictions. The law requires pools with a surface area of over 200m2 to have a lifeguard. What was unclear was the situation with multiple pools and the line of sight. In short, our three pools exceed 200m2, which would require two lifeguards (and we only had funds for one). However, since the lifeguard would not have a “line of sight” for the 3 pools, I decided that the Mezquita pool would not be officially open, and therefore the owners who used it would do so at their own personal risk. I know this was frustrating for many owners, but staying on the right side of health and safety was paramount in my decision-making. Having decided to have a lifeguard, it was particularly frustrating for me to have to instruct and then remind the lifeguard to leave his chair and his iPhone at least every 15 minutes and to take a security walk around the pools. I also had to ask him to occasionally use the poolside barrier to remove leaves and other debris from the pools, and, according to the law, to register the names of all pool users (Meridional’s approach was that pool users would go and register at the concierge office, but that simply would not work). I say I was frustrated with this service because I discovered that the lifeguard charges 4.25 euros per hour, but we pay the lifeguard contractor more than double that … but why? Yes, they ensure that the lifeguard is qualified and, if he is sick, they replace him, but does that represent good value for our money? I leave that to your imagination, but I think it highlights that we are paying an excessive margin of profit to the contractors. POOL MAINTENANCE CONTRACTOR
For years, the community maintained the same contractor who used manual dosing of chemicals. In July, Meridional recommended changing them because they were unable to maintain safe chlorine levels. A new contractor arrived, and Meridional sent Luis to receive training to take care of the chlorine (ideally, we would have automated systems). In mid-August, we were experiencing problems with cloudy water in 2 pools and had to close the pools for several days, which is not much less than a disaster in peak season. In Meridional’s words at the time, “The situation with the pools is quite complex”, which I interpreted as a series of combined problems being the cause of the pools not working properly. Now, lessons have been learned, and a new maintenance regime will be developed for 2022.

Page 7

January 2022 President’s Letter POOL FOR CHILDREN
The photo below should raise two thoughts … Risk to health and safety, and why are we paying all these contractors if this is the best they can do to seal a hazard, and leave it like that for days? It really hurts me as President that between our Administrator, Concierge, and Maintenance, we are not doing better than this. The problem with the children’s pool is a burst of underground pipes. It is necessary to dig the entire area to replace the pipes. This will be done in spring. Is safety and health? The truth is that a community’s pools should be a source of pride, but sometimes ours are a source of shame, and as mentioned earlier, they are outside the regulations. Returning our pools to full compliance and operational efficiency will be one of the main priorities in 2022. To do this, expert advice and a capital financing plan will be needed. I intend to present a proposal for approval at the Shareholders’ Meeting, which is subject to the Covid regulations, but I hope it will take place in March.

Page 8

January 2022 President’s Letter (D) SECURITY/CONCIERGE
Cofer/HELP cost us 140,000 euros in 2021, making them our most expensive subcontractor. Unfortunately, with 153,000 euros, they are also our largest creditor. In 2021, I authorized a payment of 27,000 euros towards the debt service, which is the maximum we can afford in these times of financial difficulties. I want to point out that we are paying the current fees, and the debt refers to the period prior to my Presidency, when we did not have money to pay the fees. Many complaints have been received about this service, the vast majority relating to the lack of an adequate response to a wide range of security problems, for example, illegal parking; nighttime disturbances; unauthorized use of the pool, etc. Meridional automatically renewed the contracts until 2022 without consulting me. Given the complaints about the service, and that we have paid 5,000 euros more than in 2020, I expected at least a discussion on how we could seek a better performance from Cofer. When we have the opportunity of a General Meeting, we will have an open and frank discussion about the practical security needs of the community so that Cofer can better understand what we expect. 4. INTERNAL MAINTENANCE Much of our maintenance work is carried out through a combination of Luis and, in his case, occasional contractors. Much of this work, as mentioned earlier in the “Infrastructure” section, is just patching up problems that are beyond the capabilities of our team and our current financial resources. I want to highlight some examples of where we are struggling with this current approach: • Meridional asked me in September to authorize the purchase of 1,900 euros for a new pump for the Alhambra pool because, and I quote, “the old pump is obsolete, it will be a waste of money to repair it”. The new pump broke down in a month. Initially, they told me that “there is no guarantee because it is not mechanical” (a strange concept according to EU legislation). Then they informed me that the guarantee did not apply because, despite the multiple protection filters, a foreign object or misuse had caused the turbine failure. They also informed me that “the installer will not charge for travel or labor costs for this incident and the community will only have to pay for the repair of the pump”. I spoke with him personally and as the community is a good client and wants this to be solved in the best possible way, he will do his part. The repair at cost price of the installer is less than 400 €”.Fortunately, a fellow community member is an expert in pumps and I invited him to inspect the pump room of the Alhambra. In his expert opinion, the different filters could not have damaged the new pump. The “installer” also hinted that Luis’s failure to report the problem in time contributed to the problem. Luis denies this, stating that from the first day, in his opinion, the more specified pump was not suitable for our pool, but was overruled. On October 5, Meridional promised a complete report on the pump problems … I am still waiting for it. Meanwhile, I personally sent Luis to our long-term pump repairman in San Pedro and paid 155 euros to repair the old “obsolete, a waste of money” pump (now available as a reserve) When I finally receive Meridional’s report, I hope there will be a recognition that the situation was mishandled, and it cost the community 2,300 euros unnecessarily.

Page 9

January 2022 President’s Letter • In January 2021, an absent owner allowed weeds to block the drain of the balcony, which caused a flood of rainwater that ended up flooding the apartment below at a time when the owner was 3,000 km away and could not travel. The owner spent 40-50 hours trying, first, to prevent the water from entering their apartment; second, to investigate how to compromise their insurers with the representatives of the other owners; and third, how to compromise with Meridional not only to reduce the risk of this happening again, but also to work together to have Meridional draw up a set of “emergency guidelines for water leaks”, step by step, so that all owners know what to do in such emergencies. • In February, we had another flood in Mezquita. This time a water pipe, which went from the water meter room directly to an apartment, burst above the entrance to the ground-floor lift. By the time the maintenance staff arrived, the ceiling was collapsing, but the most important thing was that three private storage rooms had been flooded, causing irreparable damage to most of the owners’ belongings. The botched repair of the pipe led to it bursting three more times in a 5-week period, and this despite Meridional calling in an external plumber. Each time, the owners (who were fortunately present at the time) had to fight to clean up the mess … and believe me, they were very stressed by the failure of a prompt and effective response, and were in constant communication with the security/concierge and Meridional to force some action. In the end, it was necessary to replace the entire section of pipes to solve the problem. The conclusion is that we lacked the necessary knowledge to respond quickly, evaluate the problem accurately, and propose a permanent solution in time. • In May, a second pipe burst from the water meter room of Mezquita to an apartment. The circumstances were very similar to those of February. Luis and the plumber were able to solve it more efficiently than the first time, but Meridional’s “emergency guidelines” were still not ready. Although it is not 100% certain, the cause of the problem appears to be that the water pipes of all the apartments, according to current regulations, are not of a sufficiently high specification to withstand the water pressure. Luis has been instructed to ensure that the water pressure in the meter rooms does not exceed the specified pressure for the pipes, as it has clearly contributed to the problem. This photo illustrates a very unprofessional approach to a serious incident. During a 5-week period, this pipe burst 4 times, causing a major flood in the lift well, the stairs, and the 3 apartments below. To this day, we are still waiting for Meridional’s “emergency guidelines” on what to do in such circumstances

Page 10

January 2022 President’s Letter You can also help maintain the correct water pressure by ensuring that the pipes and faucets in your apartment are not clogged with calcium buildup, common in hard water areas like this. You may be surprised, as I was, that the main water pipe from the meter room of the ground floor to your apartment is owned by the owners, not the community. I am still waiting for a 100% confirmation of this, as it makes no sense … how can the owners without means see or access the pipe that runs through the common area walls and ceilings to their apartment? Therefore, it is essential that Luis supervises the pressures and is aware of any deterioration of the pipes. Also, it highlights why, in the event of a pipe burst, Meridional should have already finalized a solid set of procedures to prevent this stress on the owners from happening again. Other things to consider when your apartment is at risk of suffering damage from another apartment or the community’s facilities are: • A fundamental problem when trying to react to a problem in a vacant property is the law of trespass on private property. Luis could see from an adjacent balcony that the weeds were blocking the balcony drain, but he was correctly informed that he could be prosecuted for trespass if he entered the balcony. While fires and life-threatening situations constitute an emergency that allows trespass, apparently floods do not. My advice: get to know your neighbors. • If the problem is between owner and owner, administrators generally try to limit their involvement. Fundamentally, I have a problem with this because I believe that administrators have a duty to assist all owners. They have to be willing to help as much as possible, especially if an owner is thousands of miles away and is not familiar with Spanish law and where to find local service providers such as emergency plumbers, electricians, etc. In many cases of flooding, the community’s common areas will also be affected, and as such, the administrator must become involved just like the community’s insurers. In fact, as I write this, a Giralda Portal 4 owner has just contacted me asking what to do because they have suffered water damage in the apartment above. If Meridional had carried out my request from almost a year ago to draw up the “emergency guidelines for water leaks”, then this last owner who is suffering water damage would know exactly what to do and would not be coming to me for help and advice. • If your apartment is not fully insured, you should be aware of this. If your property suffers damage, it is possible that the community’s insurance or your neighbors’ insurance will not cover you (and you may have to take your own legal action for the damages). Conversely, if the problem comes from your apartment and you are not insured, you could be sued and taken to court. • Something to think about is whether we should put a set of keys in a safe place to “store the keys”, accessible only in case of an emergency and when the owners are not present. Another option is to leave a spare set of keys with a trusted local person who can provide immediate access to your apartment in case of an emergency. Acting quickly can significantly reduce the damage and injuries. Despite changing contractors, we are still having problems with the garage doors. For example, the pedestrian door of Mezquita never closes on its own and has been like that all year, and anyone can enter the community from the street. The garage doors of Mezquita do not open fully and often get stuck. Okay, I know we don’t have the money to replace them completely, but when the hinges are in the wrong place, when the rusty metal areas can be welded to reduce the pressure on the hinges and motors, then I am sure, like you, that you are wondering why these simple maintenance tasks are not being attended to.

Page 11

January 2022 President’s Letter A 5th-floor owner in Alhambra complained for months that the main roof water was leaking into her apartment in several places after heavy rain. Finally, Meridional brought in an assessor whose report indicated that there were possible holes around the chimneys and several loose tiles that allowed water to enter. Meridional called in a roofing contractor, but only managed to get a quote of 8,300 euros. This amount of money buys a lot of time and materials, and although I am no expert, I could not see how the proposed repair could cost so much money. It is a common practice to have at least 2 and preferably 3 quotes, and I have reminded Meridional of this on several occasions when they have asked for quotes. Feeling unable to approve an 8,000-euro expense from our limited funds, I personally brought the roofing contractor to the Santa María community in Elviria and asked for a quote to repair the obvious holes and loose tiles - their price was 600 euros! I am very aware of the possibility that there may be another hole that may require the entire roof to be dismantled. But when we have limited funds, we make calculated management decisions and go the extra mile to find affordable contractors. Is it not ridiculous that the unpaid president has to spend his time finding roofers, asking for quotes, and having to go and supervise the repairs in the absence of the apartment owner? I wonder why Meridional does not recognize that this is their responsibility, for which they are paid, when a minimum of 2 quotes are required, and then 1 is not enough.

Page 12

January 2022 President’s Letter 5. VARIOUS MARIJUANA USE - During the last 3 months, a difficult situation arose with a tenant who exceeded the reasonable personal use of marijuana. For the disturbance of several affected neighbors by the smoke entering their properties, it was their opinion that our Administrator and Security did not provide an adequate response to their complaints. When I investigated the response to the owners, I was not pleased and expressed my concerns to the owners in the Facebook group, to the annoyance of Meridional. On the other hand, once alerted, the apartment owner was very receptive and eager to be seen as a good reputation member of the community. I was in direct contact with the owner and, after several warnings to the tenant, they left on January 1st. If left in Meridional’s hands, the roof repairs would have cost 8,300 euros plus 10% VAT. The presidents’ approach has cost us 580 euros, including VAT so far.

Page 13

January 2022 President’s Letter • Our community’s statutes are ambiguous, outdated, and do not cover the breadth of topics that guide owners and limit community abuse. Owners need to vote on new regulations and strengthen existing ones, so this will be on the agenda of the General Meeting in March. • Many owners rent their properties, and in most cases, they and their tenants act responsibly. However, during the peak season, there are many short-term tenants in Senorio, and a minority (you know the type) cause a disproportionate amount of damage and disturbance. Last summer, we experienced almost all imaginable disturbances and damage. The police were called on more than one occasion. I won’t go into too much detail, but I will say that it is necessary to establish a set of procedures and strict regulations to govern rentals, and perhaps sanctions for repeat offenders. If owners benefit from rentals, they should be willing to accept the costs of the damage and disturbances caused to the entire community. Perhaps it would be a big ask, but maybe owners should take responsibility for proposing to the rest of the community the procedures and sanctions that will help minimize the problems. • The state of the fire safety systems has been a concern for some time. It was evident that the community did not comply with the requirements in several aspects, and this not only posed a fire risk to the community but also put it at risk of being prosecuted. After an external evaluation carried out at the beginning of the year, all the systems were reviewed and tested, and obsolete equipment was replaced. SUMMARY What you have read in this report should tell you that Senorio’s problems are mainly management-related. The cosmetic services of cleaning, gardening, security, and general maintenance, although they have improved compared to previous years, in my opinion, are still suboptimal and, in my opinion, cost us too much money for what we get. Meridional is the typical general administrator who manages the community’s accounts, communications with owners, debt collection, and relations and negotiations with subcontractors. I refer to this as back-office work. But that is only part of what we pay for.
Abandoned objects in the common areas by irresponsible owners or contractors

Page 14

January 2022 President’s Letter The other side is the management of what happens on a daily basis within Senorio. This includes • having a very regular presence within the community to anticipate and evaluate problems; • closely supervising the work of subcontractors and not taking their performance for granted; • responding effectively to the practical problems of owners; • Real understanding of infrastructure and engineering problems; • Working closely with the President and receiving their instructions,
All of this requires good management practices and procedures. My performance expectations in this range of measures have not been met and I believe that this is a direct consequence of the lack of skills and experience and a growing tendency to avoid responsibility to the President. Frankly, I no longer trust Meridional to manage the normal functioning of the community, and even less to face the complex infrastructure problems that are now becoming increasingly priority. I do not take these conclusions lightly. I have spent many hours analyzing performance and considering how we will face the great challenges that lie ahead. When I identify problems, I seek solutions. So I want to assure you quickly that I have already identified the solutions and have spent 6 months working on an integral plan that will take us to much higher levels of performance and stability. With this, I conclude the first part of my communication with you. The next presentation is my proposal to completely reinvent the way we manage a community, replacing the current administrator with a combination of highly qualified specialists and the latest generation of management software.

Page 15

January 2022 President’s Letter APÉNDICE 1 – NUESTROS ACREEDORES

Page 16

January 2022 President’s Letter APÉNDICE 1 – OUR CREDITORS

Page 17

January 2022 President’s Letter APÉNDICE 1 – OUR CREDITORS