6 COMPARABLE FACILITIES 24 6.1 Overview 24 6.2 Walt Disney World (Orlando, Florida USA) 24 6.3 Broadway at the Beach (Myrtle Beach, South Carolina USA) 26 6.4 Opryland (Nashville, Tennessee USA) 27 6.5 Lotte World (Seoul, South Korea) 30 6.6 New Century Global Center (Chengdu, China) 32 6.7 Planned EuropaCity Mixed-Use Project (near Paris, France) 34

7 FINANCIAL ANALYSIS 35 7.1 Comparable Financial Performance 35 7.2 Operating Pro Forma 37 7.3 Warranted Investment 38 7.4 Estimated Development Cost 39 7.5 Equity Investor Return on Investment 40 7.6 Estimated Economic Impact 41

APPENDIX | QUALIFICATIONS 42

w Certification

I certify that, to the best of my knowledge and belief:

▪The statements of fact contained in this report are true and correct. ▪The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and represents our personal, unbiased professional analyses, opinions and conclusions. ▪This consulting assignment was performed on a basis of non-advocacy; we have no present or contemplated interest in the planned business and have no personal bias with respect to the parties involved. ▪Our compensation is not contingent on an action or event resulting from the analyses, opinions, or conclusions in, or the use of, the report. ▪Our analyses, opinions, conclusions and report have been prepared in conformity with professional standards.

John Gerner Managing Director Leisure Business Advisors LLC

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w1 1 | Introduction

Leisure Business Advisors LLC (LBA) has been retained by Williamsburg Pottery Factory, Inc. to provide consulting services for a major new mixed-use destination resort near Williamsburg, Virginia. The assignment involves evaluating the concept, analyzing the market, gauging financial performance, providing business plan guidance, and estimating economic impact.

1. Report Organization

This draft final report provides preliminary results of LBA's consulting work. This report is presented in seven sections. Section 2, which follows this introduction, provides a summary. Section 3 discusses the site and area analysis. Section 4 presents the market analysis. Section 5 describes the concept and trends. Section 6 examines comparable facilities. Section 7 provides the financial analysis for the major new mixed-use destination resort near Williamsburg.

2. Standard General Limiting Conditions

Every reasonable effort has been made to ensure that the information contained in this report is accurate and timely, and it is believed to be reliable. No responsibility is assumed for inaccuracies from any data source used in preparing this report. It is based on information that was current as of May 2016 or as noted, and LBA has not undertaken any update of its research effort since such date. Achieving potential financial performance may be affected by fluctuating conditions and future events that cannot be assured. Therefore, the actual results achieved during the forecast period may vary significantly from the forecast. No warranty or representation is made by Leisure Business Advisors LLC that any of the potential values or results contained in this report will actually be achieved. LBA has incomplete knowledge of important future development and management actions on which actual results will depend, and is therefore not responsible for the outcome. Copies of this report can be presented to third parties in its entirety. Possession of the report, however, does not carry with it the right of publication thereof in any manner, including on the Internet, without first obtaining the prior consent of Leisure Business Advisors LLC. This report is also not to be used in conjunction with any public offering of securities without LBA’s prior written consent. This report is qualified in its entirety by, and should be considered in light of, these limitations, conditions and considerations.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w2 2 | Summary

A summary of this report is presented below. Supporting documentation and analysis are provided in later sections.

▪The site is located near Williamsburg, Virginia, within that state’s Coastal Virginia tourist region. This is a major tourist destination area within the United States that is centrally located on its east coast. For decades, this region has been an established destination for historic, cultural, beach, and theme park entertainment. ▪During the 1990s, the Walt Disney Company chose the state of Virginia as its third location in the country (after California and Florida) for a large-scale destination resort. It was named "Disney’s America" and would have been a mixed-use project with a theme park. Local opposition (which does not exist at the Williamsburg site) prevented that project from moving forward. Therefore, the state is still available for a similar major mixed-use tourist project. ▪Total land available for the site is 737 acres (298 hectares) by combining multiple parcels owned by the Williamsburg Pottery. The site is located next to the main interstate highway (I-64) that serves the Coastal Virginia tourist region of the state. Overall, the site has very convenient access. ▪The site is near many existing businesses that serve tourists to the area, and the adjacent Williamsburg Pottery has been a major tourist attraction in the area for decades. There are many other existing attractions in the local area, including Colonial Williamsburg, Busch Gardens Williamsburg , Water Country USA , and Williamsburg Premium Outlets. Additional attractions are located elsewhere in the region. ▪The Coastal Virginia tourist region in Virginia attracts millions of visitors annually and has been an established tourist destination area for decades. The U.S. Travel Association recently estimated that traveler expenditures in this region exceeded $3.6 billion in 2014. Many of the nearby attractions are among the top in the country, which indicates that high quality attractions have been supported by tourists to this region. ▪Long-term visitation to the region has been stable. Travelers are typically in more middle-class and upper middle-class households. There are more children age 6 to 17 visiting the region than the national distribution of the population. There are also more adults in the 35 to 44 year range and older adults age 55 to 64. ▪The resident market is defined as the area within 50 miles from the site because tourism organizations typically define "tourists" as those traveling more than this distance. The resident market includes Richmond, Newport News, Norfolk, and Virginia Beach. Future population growth for this market area is expected to be similar to nationwide population growth. Median household income is slightly higher than that for the entire country, while median age is near that for the entire country.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w3 ▪ The planned concept is a major new mixed-use destination resort. According to the Urban Land Institute (ULI), a mixed-use development is typically characterized by three or more significant revenue-producing uses that are mutually supporting. Specifically, it would be a destination resort. This is a tourist-oriented mixed-use development that has a large resort hotel and leisure uses as anchor tenants. Typical leisure tenants include attractions, themed restaurants, and tourist-oriented specialty retail shops. These tenants generally attract significant foot traffic, which helps support the other tenants. Destination resort projects are often the leading tourist attraction within the area. ▪ There are many existing comparable facilities worldwide. The largest and most established example is Walt Disney World in the Orlando area of Florida. There have been other smaller- scale examples developed elsewhere in this country, as well as in other parts of the world. Many of these comparable facilities are indoor complexes, and this has been the case with the most recent examples. This indoor approach allows comfortable year-round operation. ▪ The planned concept would therefore be mainly indoors. It would not be a gated facility and would allow free admission to the public areas. Use of its individual attractions would be charged on a per-use basis. ▪ Lodging would be the largest use at the new mixed-use destination resort. This component would also include meeting space and an indoor waterpark. Phase 1 size is 1,000 guest rooms. The indoor theme park component would offer a variety of attractions, restaurants, and merchandise shops. Phase 1 size is 500,000 square feet. In addition, 250 timeshares would also be offered in Phase 1. ▪ Potential annual operating revenues and expenses are based on the experience of comparable facilities adjusted for inflation. Future inflation is assumed to be two percent annually. ▪ The total warranted investment for Phase 1 of the new mixed-use destination resort near Williamsburg is between $602 and $730 million. LBA recommends that Phase 1 planned development costs be within this range. ▪ Phase 1 and 2 would be equal in size and both could be developed sequentially or simultaneously. The total development cost for both Phase 1 and Phase 2 combined would be between $1.2 to $1.5 billion. ▪ This financial analysis assumes 35% of the warranted investment is equity and 60% is debt financed, with the loan interest being 8% and the loan term being 20 years. Based on the assumptions used in the financial analysis shown below, the internal rate of return for equity investors under this financing scenario is 24%. The total investment internal rate of return, assuming no debt financing, would be 14%. Overall, this financial analysis indicates that the new mixed-use destination resort near Williamsburg could be profitably operated and achieve a worthwhile return-on- investment.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w4 3 | Site and Area Evaluation

This section presents the site analysis. Individual topics include location, access, site characteristics, surrounding development, and existing attractions in the region.

3.1 Location

The site is located near Williamsburg, Virginia, within that state’s Coastal Virginia tourist region. This is a major tourist destination area within the United States that is centrally located on its east coast. This is shown below. For decades, this region has been an established destination for historic, cultural, beach, and theme park entertainment.

Exhibit 1: Site Location within the World and Country

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w5 The state of Virginia, where the site is located, is particularly well located in relation to the largest major cities on the east coast of the country. Williamsburg is approximately 110 miles (180 kilometers) from Washington DC (#1), within a three hour drive. It is also 200 miles (320 kilometers) from Philadelphia (#2), 280 miles (450 kilometers) from New York City (#3), and 460 miles (740 kilometers) from Boston (#4). During the 1990s, the Walt Disney Company chose the state of Virginia as its third location in the country (after California and Florida) for a large-scale destination resort. It was named "Disney’s America" and would have been a mixed-use project with a theme park. Images are shown on the next page. Local opposition (which does not exist at the Williamsburg site) prevented that project from moving forward. Therefore, the state is still available for a similar major mixed-use tourist project.

Exhibit 2: Site Location within the East Coast of the Country

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w6 Exhibit 3: 1990s Images of Proposed "Disney’s America" Project in the State of Virginia

Source: ©Disney.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w7 3.2 Site Size and Access

Total land available for the site is 737 acres (298 hectares) by combining multiple parcels owned by the Williamsburg Pottery. Most of this property, 574 acres (232 hectares) is in York County. The remainder, 163 acres (64 hectares), is in James City County. The site is located next to the main interstate highway (I-64) that serves the Coastal Virginia tourist region of the state. Travelers on either direction of I-64 would take Exit 234 and turn southwest on Route 199 (Humelsine Parkway). Visitors would then exit at VA-603 West (Mooretown Rd). This is shown below. Overall, the site has very convenient access. With proper directional signage, travelers should easily be able to find the site.

Exhibit 4: Site Definition and Access

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w8 3.3 Site Characteristics and Surrounding Tourist-Oriented Development

An aerial view of the site ("S") is shown below. Most of the property is currently undeveloped land. LBA is not aware of any current site physical limitations or constraints. The site is near many existing businesses that serve tourists to the area. These include the Great Wolf Lodge Williamsburg (#1), Holiday Inn Club Vacations Williamsburg Resort (#2), Holiday Inn Express Williamsburg North (#3), Williamsburg Antique Mall (#4), Williamsburg Pottery (#5), and Go-Karts Plus (#6). The adjacent Williamsburg Pottery has been a major tourist attraction in the area for decades. The Great Wolf Lodge is a waterpark resort that opened in 2005 on a 84 acre (34 hectare) land parcel. It offers 405 guest suites and an 67,000 square feet (6,220 square meter) indoor waterpark. Reported development cost was $62 million. It is one of only 14 such waterpark resorts worldwide, which typically are developed in major tourist destination areas.

Exhibit 5: Aerial View of the Site Area and Nearby Development

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w9 4. Existing Attractions in the Region

There are many existing attractions in the local area: 1. Colonial Williamsburg is one of the country’s most popular living history museums, with dozens of buildings related to its colonial history. It has spent more than $220 million in facilities renovations and new construction in the past 15 years. 2. Busch Gardens Williamsburg has repeatedly been listed as one of the Top 20 Amusement Theme Parks In North America by the Themed Entertainment Association. Annual attendance for this major theme park was approximately 2.7 million in 2014. 3. Water Country USA has been listed as one of the Top 20 Water Parks In North America by the same association. 4. Williamsburg Premium Outlets offers 525,000 square feet of gross leasable area and has been listed as one of the largest outlet centers in the country by Value Retail News.

Exhibit 6: Existing Major Attractions in the Local Area

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w10 There are other attractions elsewhere in the Coastal Virginia tourist region of the state, as shown below. These include: 1.Yorktown Victory Center celebrates the siege and subsequent surrender of British troops to General George Washington and the French Fleet in 1781, effectively ending the American Revolutionary War. 2.Virginia Air and Space Center in Hampton serves as the visitors center for NASA's Langley Research Center and Langley Air Force Base. 3.Hampton Roads Naval Museum and Nauticus in Norfolk explore the country’s naval history and provide maritime-themed science exhibits. 4.Virginia Beach is a popular seaside resort area with miles of beaches. 5.Virginia Aquarium in Virginia Beach is a marine science museum that added a major $25 million expansion in 2009.

Exhibit 7: Existing Attractions in the Region Outside the Williamsburg Area

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w11 4 | Market Analysis

This section provides the market analysis. Topics include an examination of the tourist and resident markets.

4.1 Tourist Market

The Coastal Virginia tourist region in Virginia attracts millions of visitors annually and has been an established tourist destination area for decades. It was previously known as the "Hampton Roads" region. The U.S. Travel Association recently estimated that traveler expenditures in this region exceeded $4.3 billion in 2014. The Williamsburg area has approximately 8,700 hotel rooms and an additional 6,000 time-share bedrooms. The latest Virginia State Tourism Plan was prepared for the Virginia Tourism Corporation by PricewaterhouseCoopers LLP in 2013. It points out that: "Hampton Roads has a high favorability rating among past and prospective travelers, particularly higher income earners and families. It was highly rated for being good for families, its accommodations, its overall atmosphere, and for being relaxing. The region was well recognized for warm sunny beaches and being family-friendly and historic. Virginia’s beach / ocean and the Historic Triangle area were top of mind features... History and heritage is prominent in the region and have historically served as key visitor strengths. Well-known attractions include Colonial Williamsburg, Historic Jamestowne, Jamestown Settlement, Yorktown Battlefield, and the Yorktown Victory Center. Historic homes and plantations are also located throughout the region." Annual visitation to selected existing attractions in the region is shown below. Many of these attractions are among the top in the country, as noted in the previous section of this report. This performance indicates that high quality attractions have been supported by tourists to this region.

Exhibit 8: Visitation to Major Attractions in the Coastal Virginia Region of Virginia

Number of Name Location Visitors

Colonial National Historical Park Multiple 3,300,000 Busch Gardens Williamsburg Williamsburg 2,700,000 Colonial Williamsburg Williamsburg 1,700,000 1/ Water Country USA Williamsburg 726,000 Virginia Aquarium Virginia Beach 622,000 Hampton Roads Naval Museum Norfolk 446,000 Virginia Air and Space Center Hampton 402,000 1/ Estimated number of visitors that walk through the historic area. Paid general admission was approximately 637,000 in 2014.

Source: Individual attractions; Data is for latest year publicly available.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w12 4.1.1 Visitation Trends and Seasonality

Long-term changes in visitation for two existing major attractions in the region are presented below. Overall, visitation has been stable. Monthly seasonality is also shown below for visitors to the region. The largest peak is during the summer months of July and August, but there are other smaller seasonal peaks.

Exhibit 9: Visitation Trends and Seasonality

Colonial National Busch Gardens Historical Park Williamsburg Annual Annual Annual Percent Annual Percent Year Attendance Change Attendance Change 2004 3,327,573 --- 2,400,000 --- 2005 3,338,695 0.3% 2,600,000 8.3% 2006 3,344,018 0.2% 2,806,000 7.9% 2007 3,343,910 0.0% 3,157,000 12.5% 2008 3,332,039 -0.4% 3,094,000 -2.0% 2009 3,324,751 -0.2% 2,900,000 -6.3% 2010 3,459,965 4.1% 2,800,000 -3.4% 2011 3,414,577 -1.3% 2,744,000 -2.0% 2012 3,274,187 -4.1% 2,854,000 4.0% 2013 3,168,731 -3.2% 2,726,000 -4.5% 2014 3,335,060 5.2% 2,699,000 -1.0% Average Growth 0.0% 1.2%

Source: National Park Service; and Themed Entertainment Association (TEA).

Coastal Virginia Month Visitation January 6% February 5% March 6% April May 6% June 9% July 10% August 15% September 12% October 7% November 10% December 6% 8% Total 100%

Source: TNS Travels America. Data is for FY2014.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w13 4.1.2 Tourist Characteristics

The income distribution for travelers to the region is compared below to all U.S. residents. Coastal Virginia travelers are typically in more middle-class and upper middle-class households. Almost 70% are in households earning between $35,000 and $149,999 annually.

Exhibit 10: Tourist Household Income Comparison Visitors to the Coastal Virginia Region

United Percent Compared Income Range States of Total to U.S. Less than $34,999 29% 24% 83%

$35,000 to $74,999 29% 35% 121% $75,000 to $99,999 13% 14% 108% $100,000 to $149,999 16% 20% 125% $150,000 to $199,999 6% 5% 83% $200,000 or more 7% 2% 29% Total 100% 100% --- Median Income $63,000 ------Source: TNS Travels America; and EASI Demographics.

The age distribution for Coastal Virginia travelers is compared below to all U.S. residents. There are more children age 6 to 17 than the national distribution. There are also more adults between 25 and 44 years old and older adults age 55 to 64.

Exhibit 11: Tourist Age Comparison Visitors to the Coastal Virginia Region

United Percent Compared Age States of Total to U.S. Under 6 7.6% 6% 79% 6 to 17 15.5% 16% 103% 18 to 24 9.9% 9% 91% 25 to 34 13.6% 16% 117% 35 to 44 12.5% 14% 112% 45 to 54 13.6% 14% 103% 55 to 64 12.7% 14% 110% 65 and older 14.5% 11% 76% Total 100.0% 100% --- Source: TNS Travels America; and EASIDemographics.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w14 4.2 Resident Market

The overall resident market is defined as the area within 50 miles from the site because tourism organizations typically define "tourists" as those traveling more than this distance. This market ring is shown below. It includes Richmond, Newport News, Norfolk, and Virginia Beach.

Exhibit 12: Resident Market Ring (50 Miles)

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w15 4.2.1 Size and Growth

Past, current, and future population for the resident market is provided below. There are currently more than 2.4 million residents living within 50 miles of the site. Future population growth is also shown, and is expected to be similar to nationwide population growth.

Exhibit 13: Population Trends for the Resident Market

Resident Market Entire United States

Average Average Annual Annual Year Population Growth Population Growth 2010 2,362,993 --- 308,745,538 --- 2015 2,440,952 0.7% 319,986,834 0.7% 2020 2,527,577 0.7% 331,655,329 0.7%

Source: EASIDemographics.

4.2.2 income Distribution

Household income distribution is provided below. Median household income for the resident market is slightly higher than that for the entire country.

Exhibit 14: Household Income Distribution of Residents (in 2015)

Ratio to Resident United Entire Household Income Market States Country Less than $15,000 9.2% 10.8% 0.85 $15,000 to $24,999 7.5% 8.8% 0.85 $25,000 to $34,999 8.3% 9.0% 0.92 $35,000 to $49,999 12.6% 12.3% 1.02 $50,000 to $74,999 18.0% 16.9% 1.07 $75,000 to $99,999 14.4% 13.0% 1.10 $100,000 to $124,999 10.5% 9.4% 1.12 $125,000 to $149,999 7.1% 6.3% 1.12 $150,000 to $199,999 6.4% 6.1% 1.04 $200,000 and Over 6.1% 7.3% 0.84 Total 100.0% 100.0% 1.00 Median Income $67,173 $63,336 1.06

Source: EASI Demographics.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w16 4.2.3 Age Distribution

Age distribution is also presented below. The median age for the resident market is near that for the entire country.

Exhibit 15: Age Distribution of Residents (in 2015) Ratio to Resident United Entire Age Market States Countr y Under 6 7.4% 7.6% 0.97 6 to 11 7.2% 7.7% 0.93 12 to17 7.3% 7.8% 0.94 18 to 24 11.6% 9.9% 1.17 25 to 34 14.1% 13.6% 1.04 35 to 44 12.0% 12.5% 0.96 45 to 54 13.8% 13.6% 1.01 55 to 64 12.7% 12.7% 1.00 65 to 74 8.1% 8.4% 0.96 75 to 84 4.0% 4.2% 0.96 85 and Older 1.8% 1.9% 0.94 Total 100.0% 100.0% 1.00 Median Age 37.0 37.7 0.98 Source: EASIDemographics.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w17 5 | Concept Description and Trends

This section presents an initial overview of the development concept. Topics include concept description, trends, and a list of selected existing examples that should serve as role models for certain aspects of development.

1. Concept Overview and Trends

The planned concept is a mixed-use development project. According to the Urban Land Institute (ULI), a mixed-use development is typically characterized by three or more significant revenue- producing uses that are mutually supporting. Specifically, it would be a major new mixed-use destination resort. This is a tourist-oriented mixed- use development that has a large resort hotel and leisure uses as anchor tenants. Typical leisure tenants include attractions, themed restaurants, and tourist-oriented specialty retail shops. These tenants generally attract significant foot traffic, which helps support the other tenants. Destination resort projects are often the leading tourist attraction within the area. ULI's Resort Development Handbook points out that "it is important to keep in mind that resort residents and guests come to the resorts to find something a little different from what they are used to at home, and this desire and expectations should be reflected in the design and planning." The handbook provides the following characteristics of successful destination resort. In general, they: ▪ Are heavily geared to tourists; ▪ Offer an intimate scale with a distinctive ambience and are strongly oriented toward pedestrian traffic; ▪ Create an immersive environment that increases its appeal; ▪ Present a distinctive and consistent architectural design that conveys a unifying theme; ▪ Offer a variety of entertainment facilities, restaurants, and shops that function as key tenants and help create a social ambience; ▪ May have shops offering goods with distinctive brands and, depending on the market profile, higher-end merchandise; and, ▪ Offer an ongoing program of special events and activities to entertain and inform.

The planned concept would differ from a typical theme park in many ways. It would be mainly indoors. It would not be a gated facility and would allow free admission to the public areas. Use of its individual attractions would be charged on a per-use basis. Second, because of this pricing approach, there would likely be higher foot traffic than that achieved by outdoor pay-one-price theme parks. Although overall aspects of the proposed project would appeal to families, specific components would likely target couples and single adults. There would be few, if any, thrill rides that are typically found at amusement parks.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w18 Unique attractions, themed restaurants, and tourist-oriented shops are all important in this concept, which shares many characteristics with tourist-oriented specialty retail centers. Because of the pricing approach, these projects are often labeled as unique specialty shopping centers even though many are the leading tourist attraction in their resort areas. The developer typically serves as facility landlord and leases indoor and outdoor space to tenants through long-term contracts. Condominium units, either hotel or residential, may also be sold to investors and end-users. This business approach allows the developer to minimize financial risks through pre-leasing and pre-sales before construction begins. It also allows the developer to often borrow funds using pre-signed leases and sales as collateral. For this specific new mixed-use destination resort near Williamsburg, the landowner (Williamsburg Pottery) may lease the underlying land to the developing company. That company could also choose to directly operate some or all of the tenant uses.

5.2 Existing Examples

Some of the existing comparable facilities worldwide are listed below. The largest and most established example is Walt Disney World in the Orlando area of Florida. There have been other smaller-scale examples developed elsewhere in this country, as well as in other parts of the world. Many of these comparable facilities are indoor complexes, and this has been the case with the most recent examples. This indoor approach allows comfortable year- round operation.

Exhibit 16: Selected Leisure-Oriented Mixed-Use Development Projects

Mainly Year Name Market Area Indoor Opened Walt Disney World Orlando, Florida USA No 1971

Lotte World Seoul, South Korea Yes 1989 Mall of America Bloomington, Minnesota USA Yes 1992 Broadway at the Beach Myrtle Beach, South Carolina USA No 1995 Kemah Boardwalk Houston, Texas USA No 1997 Opryland 1/ Nashville, Tennessee USA Yes 2000 2/ Kalahari Resort Wisconsin Dells, Wisconsin USA Yes 2000 Ferrari World Abu Dhabi, United Arab Emirates Yes 2010 Trans Studio Complex Bandung, Indonesia Yes 2011 New Century Global Center Chengdu, China Yes 2013 Wanda Movie Park Wuhan, China Yes 2014 Planned EuropaCity Paris, France Yes Future

1/ Includes Gaylord Opryland Resort, Opry Mills, and Grand Ole Opry. 2/ Year that Opry Mills opened, the latest of the major parts of this complex.

Source: Individual facilities.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w19 Current business uses for these comparable facilities are shown below. Likewise, the recommended concept for the new mixed-use destination resort near Williamsburg would: ▪Provide a wide range of business uses similar to Walt Disney World, Lotte World, New Century Global Center, Opryland, Mall of America, Broadway at the Beach, Kemah Boardwalk, and Kalahari Resort. ▪Be mainly indoors similar to Lotte World, New Century Global Center, Opryland, Mall of America, Kalahari Resort, Ferrari World, and Wanda Movie Park. ▪Use an visually iconic modern building similar to New Century Global Center, Ferrari World, and Wanda Movie Park. ▪Offer high-tech attractions similar to Walt Disney World, Lotte World, Mall of America, and Wanda Movie Park. ▪Provide an indoor waterpark similar to Lotte World, New Century Global Center, Mall of America, and Kalahari Resort. ▪Include many tourist-oriented restaurants and retail shops similar to Walt Disney World, Lotte World, Opryland, Mall of America, and Broadway at the Beach. ▪Have one or more major hotels similar to Walt Disney World, Lotte World, New Century Global Center, Opryland, Mall of America, Broadway at the Beach, Kemah Boardwalk, and Kalahari Resort. It should also have timeshare units and other uses.

Exhibit 17: Business Uses of Selected Leisure-Oriented Mixed-Use Development Projects

Use

a a

Are

r of r

s s b

Mainly Year e

Restaurant Area Area Restaurant Shopping Hotel(s) Meeting Area Large Timeshares Residential Offic University N Name Indoor Opened Attractions Walt Disney World No 1971        7

Lotte World Yes 1989       6 Opryland 1/ Yes 2000 2/       6 New Century Global Center Yes 2013       6 Mall of America Yes 1992     4 Broadway at the Beach No 1995     4 Kemah Boardwalk No 1997     4 Kalahari Resort Yes 2000     4 Trans Studio Complex Yes 2011     4 Planned EuropaCity Yes Future     4 Ferrari World Yes 2010  1 Wanda Movie Park Yes 2014  1

1/ Includes Gaylord Opryland Resort, Opry Mills, and Grand Ole Opry. 2/ Year that Opry Mills opened, the latest of the major parts of this complex. Source: Individual facilities.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w20 Exhibit 18: Exterior Images of Selected Existing Indoor Leisure-Oriented Mixed-Use Development Projects

Location of Images: (Upper) Wanda Movie Park; (Middle) Ferrari World, (Lower) New Century Global Center.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w21 Exhibit 19: Interior Images of Selected Existing Indoor Leisure-Oriented Mixed-Use Development Projects

Location of Images: (Upper) Gaylord Opryland Resort and Convention enter at Opryland; (Lower) New Century Global Center.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w22 5.3 Current Concept for the Site

Conceptual images are shown below for the new mixed-use destination resort on the site near Williamsburg. More details are provided in the conceptual master plan prepared by UA-HIE Design.

Exhibit 20: Current Conceptual Master Plan (above) and Artist Conception (below) for the Site

Source: UA-HIE Design.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w23 6 | Comparable Facilities

This section of the report provides case studies of specific major mixed-use comparable facilities.

1. Overview

All of these comparable facilities have multiple business uses, and many are located in tourist destinations. The major mixed-use facilities that are mainly indoors are: ▪ Opryland in Nashville, Tennessee. ▪ Lotte World in Seoul, South Korea. ▪ New Century Global Center in Chengdu, China. ▪ Planned EuropaCity Mixed-Use Project near Paris, France.

Walt Disney World in Florida is included because it was one of the first major mixed-use destination resorts. Broadway at the Beach in Myrtle Beach, South Carolina, is included because it contains many popular tenants within a themed setting. These case studies, along with other comparable facility data and industry standards, form the analytical foundation for the subsequent financial analysis for the major new mixed-use destination resort near Williamsburg, Virginia.

2. Walt Disney World (Orlando, Florida USA)

Disney pioneered the destination resort concept when it opened Walt Disney World in 1971. It is the most visited vacation resort in the world, with an attendance of over 52 million annually. The property covers 25,000 acres (10,100 hectares). It features four major theme parks (Magic Kingdom, EPCOT, Disney's Hollywood Studios, and Disney's Animal Kingdom), two water parks, a shopping district, and other entertainment venues. High-tech attractions include: ▪ It's Tough to be a Bug! - 3D theater with 4D special effects. ▪ Soarin' – simulator ride within a 180-degree, 80-foot projection dome theater. ▪ ImageWorks - The "What If" Labs – a sensory-inspired play space for children.

Walt Disney World also has 27 resort hotels with nearly 29,000 guest rooms. While all of the resort hotels have achieved a AAA Four Diamond rating, Disney's Grand Floridian Resort & Spa is considered the highest tier flagship luxury resort on the Walt Disney World Resort complex. Disney Vacation Club is a vacation timeshare program owned and operated by the company. It allows buying real estate interest in the resort. Walt Disney World has 2,799 two-bedroom equivalent timeshare villas.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w24 Exhibit 21: Interior Views of Disney's Contemporary Resort (above) and Disney's Grand Floridian Resort (below)

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w25 6.3 Broadway at the Beach (Myrtle Beach, South Carolina USA)

This is an example of a tourist-oriented mixed use project that contains many popular tenants within a themed setting. It is situated on 350 acres (141 hectares, and offers approximately 750,000 square feet (69,700 square meters) of gross leasable area. It opened in 1995 at a cost $250 million, which is equal to $389 million in today’s dollars after adjusting for inflation. This amount does not include the development cost of the hotels and major attraction tenants, such as the Ripley’s Aquarium. Broadway at the Beach attracts approximately 14 million visits per year and is the number one tourist attraction in the Myrtle Beach area. It has become been a major marketing tool for tourism to that entire region and has been a catalyst for other development in the area. The complex features attractions, theaters, restaurants, nightclubs, and specialty shops. It also includes two hotels, a Fairfield Inn and a Holiday Inn Express. The mix of non-hotel indoor tenants by type is approximately 40% entertainment, 30% restaurants, and 30% merchandise shops. The attraction anchor of the complex is the Ripley’s Aquarium. Other attraction tenants include the WonderWorks discovery center, Palace Theater with live performances, a large- screen 3D theater, 16-screen cinema, rides, and children’s play area. Themed restaurants include Hard Rock Cafe, Jimmy Buffett’s Margaritaville, and Senor Frog’s The basic layout of Broadway at the Beach is a series of themed areas. Each area offers a specially-themed promenade of buildings. Restaurant locations are particularly situated to take full advantage of the lake. The three themed areas are: New England Cape Cod, Caribbean, and The Charleston Waterfront. Architecture and streetscapes match the underlying theme of each distinct area.

Exhibit 22: Broadway at the Beach

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w26 6.4 Opryland (Nashville, Tennessee USA)

Opryland is a prime example of a destination resort in this country that is primarily indoors. This complex is located within an approximately 300 acre (120 hectare) land area site that is shown on the next page. It includes the Gaylord Opryland Resort & Convention Center, Opry Mills specialty retail center, the Grand Ole Opry House, and General Jackson.

6.4.1 Overview of the Mixed-Use Destination Resort

The resort hotel has 2,882 guest rooms, including 171 suites. It also has approximately 640,000 square feet (59,500 square meters) of total meeting space. An interior view is shown below. The complex also includes Opry Mills, which is an indoor specialty retail center that is adjacent to the resort hotel. It offers more than 200 stores within approximately 1.2 million square feet of gross leasable area. Attraction tenants include the aquarium restaurant, Dave & Buster's, and a Regal Cinemas with an IMAX theater. A Madame Tussauds celebrity wax museum plans to opens in March 2017. Theme restaurants include a Rainforest Café. The Grand Ole Opry House is also located within this complex. It is a 4,000 seat performing arts theater that showcases country music. Many of these performances are broadcasted on television and radio. The General Jackson showboat is also within the complex. This riverboat features dinner shows as part of its experience. Nearby is Wyndham Vacation Resorts, with 500 timeshare units.

Exhibit 23: Interior View of the Gaylord Opryland Resort & Convention Center

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w27 6.4.2 Opryland versus the New Mixed-Use Destination Near Williamsburg

The Nashville market area is compared below to that supporting the new mixed-use destination resort near Williamsburg. As shown, the Williamsburg area compares favorably on all of these market factors. The Opryland USA theme park was located adjacent to the Gaylord Opryland Resort. It operated many years until it was closed in 1997 and replaced by Opry Mills. As noted on the previous page, Opry Mills has attractions, themed restaurants, and specialty shops that are similar to those found at an indoor theme park. The potential size of the new mixed-use destination resort near Williamsburg is smaller than the actual size of similar businesses that are currently being successfully supported by the similarly-sized Nashville market. This is an encouraging comparison. Phase 1 of the Williamsburg destination resort project would have 1,000 guest rooms and 500,000 square feet of space for its indoor theme park (with attractions, themed restaurants, and specialty shops). Combined Phase 1 and 2 would have 2,000 guest rooms and 1 million square feet of space for the indoor theme park. This compares to 2,882 guest rooms currently at the Gaylord Opryland Resort and 1.2 million square feet of space at Opry Mills.

Exhibit 24: Market Comparison

Factor Williamsburg Area Nashville Area Tourist Market: 2012 Accommodation Sales $1.1 billion 1/ $1.1 billion 2/ Resident Market: 2015 Population (50 miles) 2.4 million 3/ 2.1 million 4/ Theme Park Performance: Name Busch Gardens Opryland USA 1997 Annual Attendance 5/ 2.5 million 2 million 2014 Annual Attendance 2.7 million ---

Waterpark Performance: Name Water Country USA Nashville Shores 2014 Annual Attendance 726,000 300,000

1/ Accommodation sales for the Virginia Beach-Norfolk-Newport News, VA-NC Metro Area. 2/ Accommodation sales for the Nashville-Davidson--Murfreesboro--Franklin, TN Metro Area. 3/ 50 mile ring surrounding the site near Williamsburg. 4/ 50 mile ring surrounding the site near the Gaylord Opryland Resort. 5/ Last year of operation for the Opryland USA theme park in Nashville.

Source: U.S. Census Bureau; EASI Demographics; and Themed Entertainment Association (TEA).

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w28 Exhibit 25: Opryland Complex with Resort Hotel (#1), Shopping Mall (#2), Theater (#3), and Riverboat (#4)

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w29 6.5 Lotte World (Seoul, South Korea)

Lotte World is an excellent example of a mixed-use complex that is essentially one large structure. It is a 32 acre (13 hectare) leisure complex consisting of an indoor/outdoor theme park, a Korean folk village, Kidzania children’s play area, a shopping area, a sports center, and a hotel. The hotel has 535 guest rooms. Total floor area is 6.3 million square feet (581,645 square meters). Land area is 32 acres (12.8 hectares). Its layout is shown on the next page. The reported total investment for Lotte World when it opened in 1989 was approximately $1 billion, equal to $1.9 billion in today’s dollars after adjusting for inflation. Lotte World was conceived as a "city within a city." The entire complex offers many theaters, rides, 50 restaurants, and 40 shops. The theme park component contains the largest indoor park in world, which is approximately 871,000 square feet (80,900 square meters) in size. It also has a four acre (1.6 hectare) outdoor theme park area. It is staffed by 695 full-time, 311 part-time, and 424 seasonal employees. It is open year-round. With an annual attendance of 7.6 million in 2014, it is Asia’s fifth most popular theme park. It has a 90% repeat visitation rate. A major expansion of the complex is currently under construction. Lotte World Tower is a 123-floor, 1,821 feet (555 meter) skyscraper that will add almost 3.3 million square feet (304,081 square meters) of floor area. The tower will contain a luxury hotel, retail outlets, offices, residences, and an observation deck.

Exhibit 26: Exterior View of Lotte World

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w30 Exhibit 27: Lotte World Layout (above) and Interior View (below)

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w31 6.6 New Century Global Center (Chengdu, China)

New Century Global Center is a recent example of this mixed-use approach within a single large indoor structure. It opened in 2013 with 18 million square feet (1.7 million square meters) of floor space. Approximately 24% of this space is devoted to shopping. The 5-star Intercontinental Hotel features almost 1,000 guest rooms. Other uses include attractions, meeting space, offices, and a university. Its centerpiece is the indoor Paradise Island Water Park, which contains an artificial beach and slides. At night, a stage extends out over the pool for concerts. Other entertainment components include a 14-screen IMAX cineplex, a Mediterranean village, a pirate ship, and skating rink. Interior views are shown on the next page.

Exhibit 28: Exterior Views of New Century Global Center

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w32 Exhibit 29: Interior Views of New Century Global Center

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w33 6.7 Planned EuropaCity Mixed-Use Project (near Paris, France)

A partnership led by Dalian Wanda Group Co. plans to invest more than $3.3 billion (3 billion euros) in this major mixed-use development. It will span more than 200 acres (80 hectares) and is projected to attract 31 million visitors per year when it opens in 2014. This is more than Paris Disneyland currently attracts. EuropaCity will offer multiple hotels with a total of about 2,700 guest rooms. It will also include a theme park, show stage, other attractions, restaurants, retail areas, and meeting space. The project will provide about 20,000 jobs during construction and 14,000 jobs after it opens.

Exhibit 30: EuropaCity Layout and Artist Conceptual Images

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w34 7 | Financial Analysis

This section of the report presents LBA’s financial analysis for the new mixed-use destination resort near Williamsburg. Topics include comparable financial performance, operating revenues, expenses, earnings, warranted investment, and equity investor internal rate of return.

7.1 Comparable Financial Performance

The lodging component would be the largest part of the new mixed-use destination resort. Comparable financial performance is shown below. The Gaylord Opryland Resort is a prime comparable facility that was described in the previous section of this report. It performs better financially than the national average for all resorts on a per-room basis.

Exhibit 31: Comparable Resort Lodging Financial Performance

Gaylord Opryland Resort All Large Resort Hotels 1/ Dollars per Percent of 2014 Dollars Available Total per Available Percent of 2015 Amount Room Revenue Room Revenue Revenues: Rooms $134,293,000 $46,597 42.1% $58,332 55.6% Food and Beverage $134,321,000 $46,607 42.1% $35,591 33.9% Other $50,597,000 $17,556 15.9% $11,052 10.5% Total Revenues $319,211,000 $110,760 100.0% $104,975 100.0%

Operating Expenses: Rooms $33,133,000 $11,497 10.4% $15,308 14.6% Food and Beverage $73,689,000 $25,569 23.1% $24,433 23.3% Management Fees $4,895,000 $1,698 1.5% $3,371 3.2% Other Expenses $99,701,000 $34,594 31.2% $32,851 31.3% Total Expenses $211,418,000 $73,358 66.2% $75,963 72.4% Operating Profit 2/ $107,793,000 $37,402 33.8% $29,012 27.6%

Operating Factors: Size (Rooms) 2,882 ------878 --- Percent of Occupancy 74.9% ------74.8% --- Average Daily Rate $170 ------$214 --- Total RevPAR 3/ $303 ------$288 ---

1/ USA resorts with more than 500 guest rooms. 2/ Defined as earnings before interest, taxes, depreciation, and amortization. 3/ Revenue per Available Room.

Source: Ryman Hospitality Properties; and PKF Hospitality Research.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w35 The indoor theme park component would offer a variety of attractions, restaurants, and merchandise shops within the new mixed-use destination resort. Financial performance for the Grapevine Mills building landlord is shown below, which currently provides these types of uses in Texas. The landlord company developed the building and leases it to tenants. Tenant financial performance, therefore, is not reflected in these amounts. Grapevine Mills is similar to Opry Mills, which was described in the previous section of this report. Grapevine Mills receives 15 million visits each year and its tenants include many attractions. These include the Legoland Discovery Center, Sea Life Aquarium, and Kidgits Club. There are also theme restaurants such as Rainforest Café and Love & War in Texas that showcases the state’s food and music. It also has many shops. These include the Disney Store Outlet. Within the Legoland Discovery Center, there are 15 different experiences. These include 4D theaters, rides, and children’s play areas. It is almost 40,000 square feet in size and achieved sales of $188 per square foot during the July 2013 to June 2014 annual period. Themed restaurants and popular brand name merchandise shop tenants typically achieve higher sales per square foot. Wyndham Vacation Ownership is the largest timeshare company in the world, and discussed its typical project level financials in a presentation on May 9, 2012. These amounts have been adjusted for inflation and used for the timeshare estimates in the operating pro form on the next page.

Exhibit 32: Grapevine Mills Landlord 2013-14 Financial Performance Per Square Amount Foot 1/ Revenues:

Rent $28,860,000 $21.57 Recoveries $15,540,000 $11.62 Other $6,247,000 $4.67 Total revenue $50,647,000 $37.86 Operating Expenses: Real Estate Tax $5,820,000 $4.35 Utilities $2,175,000 $1.63 Marketing $1,138,000 $0.85 Management Fee $1,000,000 $0.75 General & Administrative $846,000 $0.63 Repairs & Maintenance $669,000 $0.50 Insurance $341,000 $0.25 Other $2,143,000 $1.60 Total $14,132,000 $10.56 EBITDA 2/ $36,515,000 $27.30 Percent of Revenues 72% 72%

1/ Gross leasable area (GLA) is 1,337,751 square feet. 2/ Earnings before interest, taxes, depreciation, and amortization.

Source: Simon Property Group; Kroll Bond Rating Agency.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w36 7.2 Operating Pro Forma

Potential annual operating revenues and expenses are presented below, based on the experience of comparable facilities adjusted for inflation. Future inflation is assumed to be two percent annually. These amounts are for Phase 1 sizing of development, which is noted below for each of the major components of the new destination resort. Combined Phase 1 and 2 sizing is discussed later in this section of the report.

Exhibit 33: Phase 1 Operating Pro Forma for New Mixed-Use Destination Resort Near Williamsburg

Fiscal Year (starting in)

Year 1 Year 2 Year 3 Year 4 Year 5 Category 2019 2020 2021 2022 2023 Per Unit Revenues:

Lodging and Conference1/ $104,914 $107,012 $109,152 $111,335 $113,562 Indoor Theme Park Tenants 2/ $276.85 $282.39 $288.04 $293.80 $299.68 Indoor Theme Park Landlord 2/ $38.01 $38.77 $39.55 $40.34 $41.15 Timeshares 3/ $286,440 $292,169 $298,012 $303,972 $310,051 Revenues: Lodging and Conference1/ $104,914,000 $107,012,000 $109,152,000 $111,335,000 $113,562,000 Indoor Theme Park Tenants 2/ $138,425,000 $141,195,000 $144,020,000 $146,900,000 $149,840,000 Indoor Theme Park Landlord 2/ $19,005,000 $19,385,000 $19,775,000 $20,170,000 $20,575,000 Timeshares 3/ $71,610,000 $73,042,000 $74,503,000 $75,993,000 $77,513,000 Total $333,954,000 $340,634,000 $347,450,000 $354,398,000 $361,490,000

Operating Expenses:

Lodging and Conference1/ $75,957,000 $77,476,000 $79,026,000 $80,607,000 $82,219,000 Indoor Theme Park Tenants 2/ $117,566,000 $119,917,000 $122,315,000 $124,761,000 $127,256,000 Indoor Theme Park Landlord 2/ $5,500,000 $5,610,000 $5,722,000 $5,836,000 $5,953,000 Timeshares 3/ $32,295,000 $32,941,000 $33,600,000 $34,272,000 $34,957,000 Total $231,318,000 $235,944,000 $240,663,000 $245,476,000 $250,385,000 Operating Profit: 4/

Lodging and Conference1/ $28,957,000 $29,536,000 $30,126,000 $30,728,000 $31,343,000 Indoor Theme Park Tenants 2/ $20,859,000 $21,278,000 $21,705,000 $22,139,000 $22,584,000 Indoor Theme Park Landlord 2/ $13,505,000 $13,775,000 $14,053,000 $14,334,000 $14,622,000 Timeshares 3/ $39,315,000 $40,101,000 $40,903,000 $41,721,000 $42,556,000 Total $102,636,000 $104,690,000 $106,787,000 $108,922,000 $111,105,000

1/ Includes meeting space and indoor waterpark. Phase 1 size is 1,000 guest rooms. 2/ Includes attractions, restaurants, and specialty retail. Phase 1 size is 500,000 square feet. 3/ Phase 1 size is 250units. 4/ Defined as Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

Source: Leisure Business Advisors LLC.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w37 7.3 Warranted Investment

The exhibit below presents warranted investment based on potential earnings. The actual past development costs of comparable facilities have been within this warranted investment range on a per unit basis. That indicates that the future development cost of the new mixed-use destination resort near Williamsburg can be achieved within this warranted investment range. The developer could choose to lease tenant spaces within the indoor theme park rather than operate these spaces directly. In that case, the total warranted investment would be reduced by the amount associated with the tenants ($75 to $92 million). This range of warranted development costs is for all capital costs. These costs include those for buildings, structures, other improvements, furniture, fixtures, equipment, and on-site infrastructure improvements. These also include "soft costs" for planning, project management, pre-opening, working capital, and financing fees. For this analysis, these estimates also include the cost to purchase the land from its current owner (Williamsburg Pottery Factory, Inc.). The current owner may choose to lease the property rather than sell it. In that case, the estimated total warranted investment would be less.

Exhibit 34: Phase 1 Warranted Investment for the New Mixed-Use Destination Resort

Lodging and Indoor Theme Park 2/ Factor Conference 1/ Tenants Timeshares Total Landl Units 1,000 ord 250 --- Type guest rooms villas --- 500,000 Earnings for First Year of Operations: 3/ square feet Amount $37,344,000 $20,859,000 $13,922,460 $34,331,000 $106,456,460 Earnings Multiplier:

Low 8.9 3.6 8.8 2.1 5.7 Medium 9.8 4.0 9.7 2.3 6.2 High 10.8 4.4 10.7 2.5 6.9

Warranted Investment: Low $332,000,000 $75,000,000 $123,000,000 $72,000,000 $602,000,000 Medium $366,000,000 $83,000,000 $135,000,000 $79,000,000 $663,000,000 High $403,000,000 $92,000,000 $149,000,000 $86,000,000 $730,000,000

Warranted Investment per Unit: Low $332,000 $150 $246 $288,000 --- Medium $366,000 $166 $270 $316,000 --- High $403,000 $184 $298 $344,000 ---

1/ Includes meeting space and indoor waterpark. 2/ Includes attractions, restaurants, and specialty retail. 3/ Defined as Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

Source: Leisure Business Advisors LLC.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w38 7.4 Estimated Development Cost

The preliminary development cost range for the new mixed-use destination resort near Williamsburg is provided below, based on its warranted investment. Phase 1 and 2 would be equal in size and both could be developed sequentially or simultaneously. The total warranted investment for Phase 1 of the new mixed-use destination resort near Williamsburg is between $602 and $730 million. LBA recommends that Phase 1 planned development costs be within this range. The total development cost for both Phase 1 and Phase 2 combined would be between $1.2 to $1.5 billion.

Exhibit 35: Potential Development Costs for the New Mixed-Use Destination Resort

Lodging and Indoor Theme Park 2/ Factor Conference 1/ Tenants Landlord Timeshares Total Physical Sizing:

Phase 1 1,000 500,000 square feet 250 --- Phase 1 and 2 2,000 1,000,000 square feet 500 --- Unit Type rooms gross leasable area units --- Amount per Unit: 1/ Low $332,000 $150 $246 $288,000 --- Medium $366,000 $166 $270 $316,000 --- High $403,000 $184 $298 $344,000 --- Unit Type per room per square foot per square foot per unit --- Phase 1 Development Cost:

Low $332,000,000 $75,000,000 $123,000,000 $72,000,000 $602,000,000 Medium $366,000,000 $83,000,000 $135,000,000 $79,000,000 $663,000,000 High $403,000,000 $92,000,000 $149,000,000 $86,000,000 $730,000,000 Combined Phase 1 and 2 Development Cost:

Low $664,000,000 $150,000,000 $246,000,000 $144,000,000 $1,204,000,000 Medium $732,000,000 $166,000,000 $270,000,000 $158,000,000 $1,326,000,000 High $806,000,000 $184,000,000 $298,000,000 $172,000,000 $1,460,000,000 1/ Includes meeting space and indoor waterpark. 2/ Includes attractions, restaurants, and specialty retail.

Source: Leisure Business AdvisorsLLC.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w39 7.5 Equity Investor Return on Investment

This financial analysis assumes 35% of the warranted investment is equity and 60% is debt financed, with the loan interest being 8% and the loan term being 20 years. Typically, resort developers want to leverage equity investment as much as reasonably possible. That approach generally increases the return on equity investment, since loan interest rates are relatively low. In order to include a sale or "exit" value, it is assumed that the new mixed- use destination resort near Williamsburg would be sold after the fifth year of operation at a price equal to 6.2 times its final year's earnings. Based on the assumptions used in the financial analysis shown below, the internal rate of return for equity investors under this financing scenario is 24%, which is typically considered an encouraging return on investment. Assuming no debt financing, the total investment internal rate of return would be 14%. Overall, this financial analysis indicates that the new mixed-use destination resort near Williamsburg could be profitably operated and achieve a worthwhile return-on-investment.

Exhibit 36: Estimated Phase 1 Internal Rate of Return for Equity Investors

Development Factor Period

Est. Development Cost ($663,000,000) Equity Investment (@40%) ($265,200,000)

Operating Period (fiscal year beginning in)

2019 2020 2021 2022 2023

Estimated Exit Value ------$717,680,000 Remaining Loan Balance ------($348,176,774) Earnings (EBITDA) 1/ $106,456,000 $108,587,000 $110,759,000 $112,976,000 $115,236,000 Less: Loan Payments ($39,928,000) ($39,928,000) ($39,928,000) ($39,928,000) ($39,928,000) Less: Reinvestment 2/ ($24,229,000) ($24,713,000) ($25,207,000) ($25,712,000) ($26,226,000)

Total $42,299,000 $43,946,000 $45,624,000 $47,336,000 $418,585,226

Equity Leveraged Internal Rate of Return ------22%

1/ Earnings before interest, taxes, depreciation and amortization. 2/ Reinvestment annual capital expenditures are estimated to be 7% of gross revenues.

Source: Leisure Business Advisors LLC.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w40 7.6 Estimated Economic Impact

The Virginia Tourism Corporation annually provides an economic impact analysis of tourism spending within the state, which is conducted by the Research Department of the U.S. Travel Association. The estimated current economic impact of tourism for the Coastal Virginia region is shown below. The site is located in this tourist region.

Exhibit 37: Current Economic Impact of Domestic Travelers to the Coastal Virginia Region Category Amount

Traveler Direct Expenditures $4,364,961,940 Economic Impact: Payroll Employment State Tax $860,047,556 Receipts Local Tax Receipts 41,697 $192,313,832 Factors: $151,584,238 Payroll % of Expenditures Average Payroll per Employee State Tax Receipts % of Expenditures 19.7% Local Tax Receipts % of Expenditures $20,626 4.4% 3.5%

Source: U.S. Travel Association. Data is for 2014.

The economic impact parameters from the regional analysis above has been applied below to the new mixed-use destination resort near Williamsburg. As shown, this major new development project is likely to generate substantial economic impact within the surrounding area. This major year-round resort should also benefit existing attractions in the local area and the overall tourism appeal of the region.

Exhibit 38: Potential Economic Impact of the New Mixed-Use Destination Resort Category Amount Total First Year Revenues $346,121,460

Factors: Payroll % of Expenditures 19.7% Average Payroll per Employee $20,626 State Tax Receipts % of Expenditures 4.4% Local Tax Receipts % of Expenditures 3.5% Estimated Economic Impact: Payroll $68,185,928 Employment 3,306 State Tax Receipts $15,229,344 Local Tax Receipts $12,114,251 Source: Leisure Business Advisors LLC.

Third Revised Draft Final Report: New Mixed-Use Destination Resort Near Williamsburg, Virginia w41

Table of Contents