Proposed Hotel and Conference Center
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FEASIBILITY STUDY Proposed Hotel and Conference Center U.S. HIGHWAY 377 KELLER, TEXAS SUBMITTED TO:PR OPOSED PREPARED BY: Ms. DeAnna Reaves HVS Consulting and Valuation Services City of Keller Texas Division of TS Worldwide, LLC 1100 Bear Creek Parkway, Post Office Box 770 2601 Sagebrush Drive, Suite 101 Keller, Texas, 76248 Flower Mound, Texas 75028 +1 (817) 743-4020 +1 (214) 724-7995 August-2013 August 23, 2013 Ms. DeAnna Reaves City of Keller Texas 1100 Bear Creek Parkway, Post Office Box 770 Keller, Texas, 76248 HVS DALLAS Re: Proposed Hotel and Conference Center 2601 Sagebrush Drive, Suite 101 Keller, Texas Flower Mound, Texas 75028 +1 (214) 724-7995 HVS Reference: 2013020674 +1 (972) 899-1057 FAX www.hvs.com Atlanta Boston Boulder Chicago Dear Ms. Reaves: Dallas Denver Pursuant to your request, we herewith submit our feasibility study pertaining to Houston Las Vegas the above-captioned property. We have inspected the real estate and analyzed the Los Angeles hotel market conditions in the Keller, Texas area. We have studied the proposed Mexico City project, and the results of our fieldwork and analysis are presented in this report. Miami We have also reviewed the proposed improvements for this site. Our report was Minneapolis prepared in accordance with the Uniform Standards of Professional Appraisal Nassau Practice (USPAP), as provided by the Appraisal Foundation. New York Newport We hereby certify that we have no undisclosed interest in the property, and our Philadelphia employment and compensation are not contingent upon our findings. This study is San Francisco St. Louis subject to the comments made throughout this report and to all assumptions and Toronto limiting conditions set forth herein. Vancouver Washington Sincerely, Athens TS Worldwide, LLC Beijing Buenos Aires Dubai Hong Kong Lima London Milan Jane L. Rogers, Vice President Moscow [email protected], +1 (214) 724-7995 Mumbai State Appraiser License (TX) 1380015 G New Delhi Sao Paulo Shanghai Singapore Superior results through unrivaled hospitality intelligence. Everywhere. Table of Contents SECTION TITLE PAGE 1. Executive Summary 4 2. Description of the Site and Neighborhood 13 3. Market Area Analysis 22 4. Supply and Demand Analysis 45 5. Description of the Proposed Project 69 6. Projection of Occupancy and Average Rate 75 7. Projection of Income and Expense 83 8. Feasibility Analysis 102 9. Statement of Assumptions and Limiting Conditions 114 10. Certification 117 Addenda Penetration Explanation i Explanation of the Simultaneous Valuation Formula v Qualifications Copy of Appraisal License 1. Executive Summary Subject of the Although a specific site has not yet been chosen, for the purposes of this study, we Feasibility Study have assumed that the subject of the feasibility study is a 261,360-square-foot (6.00-acre) parcel to be improved with a select-service lodging facility and conference center; the hotel is expected to be affiliated with a national brand. The property is expected to open on January 1, 2015 and is anticipated to feature 140 rooms, a restaurant and lounge, a full-service kitchen, 14,000 square feet of meeting space, an outdoor pool, an outdoor whirlpool, an exercise room, and a business center. The hotel will also feature all necessary back-of-the-house space. The proposed subject property will be the first hotel located in the city of Keller and is expected to benefit from its location along the U.S. Highway 377 corridor. The property is also anticipated to offer a state-of-the-art conference center that should become a leading choice for mid-sized corporate meetings, civic events, and SMERFE-related events, such as weddings, bar and bat mitzvah celebrations, and charity galas. The expected strength of the chosen brand should allow the proposed subject property to successfully compete with any existing or future hotel developments located along the Highway 114 corridor. The subject site’s location is assumed to be U.S. Highway 377, Keller, Texas, 76248. Pertinent Dates The effective date of the report is August 23, 2013. The subject site and other potential sites were inspected by Jane L. Rogers on August 1, 2013. Ownership, Franchise, The proposed subject property is still in the very early planning stages; neither a and Management specific site nor a developer has yet been selected for the proposed subject Assumptions property. Details pertaining to management terms were not yet determined at the time of this report; therefore, our forecast fees represent a blended average of what would be expected on a base-fee and incentive-fee basis. We have assumed a market- appropriate total management fee of 3.0% of total revenues in our study. We recommend that the proposed subject property operate as an upscale, hotel and conference center. Appropriate brands include, but are not limited to, Hyatt Place, Aloft, Courtyard by Marriott, and Hilton Garden Inn. However, a specific franchise affiliation and/or brand has yet to be finalized. Summary of Hotel The manufacturing and aviation industries, tourism, and local corporations and Market Trends entities such as Deloitte University, Fidelity Investments, Lockheed Martin, and August-2013 Executive Summary Proposed Hotel and Conference Center – Keller, Texas 4 UPS serve as the primary sources of lodging demand in this area. In 2009, demand levels decreased concurrent with the deepening national recession, resulting in a modest occupancy decline. Demand levels rebounded in 2010, and strong growth continued through 2012. However, the introduction of the Hilton Garden Inn in September of 2011 prevented occupancy levels from illustrating a similar sharp rise that year and caused occupancy levels to remain relatively flat in 2012. The latest year-to-date data for 2013 show strong occupancy increases, despite the introduction of additional new supply, reflecting the strength of the local economy. The following table provides a historical perspective on the supply and demand trends for a selected set of hotels, as provided by Smith Travel Research. FIGURE 1-1 HISTORICAL SUPPLY AND DEMAND TRENDS (STR) Average Daily Available Room Occupied Room Average Year Room Count Nights Change Nights Change Occupancy Rate Change RevPAR Change 2008 739 269,735 — 172,418 — 63.9 % $142.42 — $91.04 — 2009 739 269,735 0.0 % 166,799 (3.3) % 61.8 127.76 (10.3) % 79.00 (13.2) % 2010 739 269,735 0.0 183,928 10.3 68.2 128.07 0.2 87.33 10.5 2011 781 285,229 5.7 201,886 9.8 70.8 131.85 3.0 93.32 6.9 2012 866 316,090 10.8 222,565 10.2 70.4 132.89 0.8 93.57 0.3 Average Annual Compounded Change: 2008-2012 4.0 % 6.6 % (1.7) % 0.7 % Year-to-Date Through June 2012 866 156,746 — 111,883 — 71.4 % $133.13 — $95.03 — 2013 913 165,300 5.5 % 120,076 7.3 % 72.6 139.74 5.0 % 101.51 6.8 % Number Year Year Hotels Included in Sample of Rooms Affiliated Opened Marriott Dallas Fort Worth Solana 294 Jun 1990 Jun 1990 Hampton Inn Suites North Fort Worth Alliance Airport 102 Feb 1999 Feb 1999 Holiday Inn Express & Suites DFW Grapevine 95 Mar 2000 Mar 2000 Hilton Dallas Southlake Town Square 248 Jun 2007 Jun 2007 Hilton Garden Inn Fort Worth Alliance Airport 127 Sep 2011 Sep 2011 Hampton Inn & Suites Trophy Club 94 Apr 2013 Apr 2013 Total 960 Source: STR Global The following tables reflect our estimates of operating data for hotels on an individual basis. These trends are presented in detail in the Supply and Demand Analysis chapter of this report. August-2013 Executive Summary Proposed Hotel and Conference Center – Keller, Texas 5 FIGURE 1-2 PRIMARY COMPETITORS – OPERATING PERFORMANCE Est. Segmentation Estimated 2010 Estimated 2011 Estimated 2012 Weighted Weighted Weighted Annual Annual Annual Number Room Average Room Average Room Average RevPAR Occupancy Yield Group Count Count Count Change Penetration Penetration Property of Rooms Commercial Meeting and Leisure Occ. Rate RevPAR Occ. Rate RevPAR Occ. Rate RevPAR Hilton Dallas Southlake Town Square 248 50 % 25 % 25 % 248 72 % $167.00 $120.24 248 76 % $176.00 $133.76 248 79 % $179.00 $141.41 5.7 % 108.5 % 145.2 % Hilton Garden Inn Fort Worth Alliance Airport 127 70 5 25 0 0 0.00 0.00 37 41 108.00 44.28 127 63 104.00 65.52 48.0 86.5 67.3 Marriott Solana Dallas Fort Worth Westlake 294 60 25 15 294 66 105.00 69.30 294 71 109.00 77.39 294 72 110.00 79.20 2.3 98.9 81.3 Sub-Totals/Averages 669 58 % 22 % 21 % 542 68.7 % $134.71 $92.61 579 71.2 % $139.58 $99.40 669 72.9 % $136.74 $99.66 0.3 % 100.1 % 102.4 % Secondary Competitors 102 70 % 5 % 25 % 66 64.0 % $104.00 $66.56 66 72.0 % $102.00 $73.44 66 72.0 % $103.00 $74.16 1.0 % 98.9 % 76.2 % Totals/Averages 771 59 % 20 % 21 % 608 68.2 % $131.57 $89.77 646 71.3 % $135.68 $96.73 735 72.8 % $133.73 $97.36 0.7 % 100.0 % 100.0 % FIGURE 1-3 SECONDARY COMPETITORS – OPERATING PERFORMANCE Est. Segmentation Estimated 2010 Estimated 2011 Estimated 2012 Weighted Weighted Weighted Total Annual Annual Annual Number Competitive Room Average Room Average Room Average Group Property of Rooms Commercial Meeting and Leisure Level Count Occ. Rate RevPAR Count Occ. Rate RevPAR Count Occ. Rate RevPAR Hampton Inn & Suites North Fort Worth Alliance Airport 102 70 % 5 % 25 % 65 % 66 64 % $104.00 $66.56 66 72 % $102.00 $73.44 66 72 % $103.00 $74.16 Totals/Averages 102 70 % 5 % 25 % 65 % 66 64.0 % $104.00 $66.56 66 72.0 % $102.00 $73.44 66 72.0 % $103.00 $74.16 Summary of Forecast Based on our analysis presented in the Projection of Occupancy and Average Rate Occupancy and chapter, we have chosen to use a stabilized occupancy level of 72% and a base- Average Rate year rate position of $110.00 for the proposed subject property.