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Home , Detroit, Metro Detroit, The Dearborn Inn

DEARBORN HOTEL DEVELOPMENT SITE OUTPARCEL

University of Michigan-Dearborn World Headquarters

Confidential Offering Memorandum DISCLAIMER This Offering Memorandum has been prepared by HVS in partnership with Stokas Bieri Real Estate for use by a limited number of recipients. All information contained herein has been obtained from sources other than HVS in partnership with Stokas Bieri Real Estate, and neither nor HVS in partnership with Stokas Bieri Real Estate (nor their respective equity holders, officers, employees, and agents) makes any representations or warranties, expressed or implied, as to the accuracy or completeness of the information contained herein. Further, the Offering Memorandum does not constitute a representation that no change in the business or affairs of the Property or the Owner has occurred since the date of the preparation of the Offering Memorandum. All analysis and verification of the information contained in the Offering Memorandum is solely the responsibility of the Recipient. The Owner and HVS in partnership with Stokas Bieri Real Estate, as well as their respective officers, directors, employees, equity holders, and agents, expressly disclaim all liability that may be based upon or relate to the use of the information contained in this Offering Memorandum. Additional information and an opportunity to inspect the Property will be made available upon written request to interested and qualified prospective investors.

The Owner and HVS in partnership with Stokas Bieri Real Estate each expressly reserve the right, at their sole discretion, to reject any or all expressions of interest or offers regarding the Property and/or to terminate discussions with any entity at any time with or without notice. The Owner shall have no legal commitment or obligations to any Recipient reviewing this Offering Memorandum or making an offer to purchase the Property unless and until such offer is approved by the Owner; a written agreement for the purchase of the Property has been fully executed, delivered and approved by the Owner and its legal counsel; and any obligations set by the Owner thereunder have been satisfied or waived.

The Recipient agrees that (a) the Offering Memorandum and its contents are confidential information, except for such information contained in the Offering Memorandum, which is a matter of public record, or is provided from sources available to the public; (b) the Recipient, the Recipient’s employees, agents, and consultants (collectively, the “need to know parties”) will hold and treat it in the strictest of confidence, and the Recipient and the “need to know parties” will not, directly or indirectly, disclose or permit anyone else to disclose its contents to any other person, firm, or entity without the prior written authorization of HVS in partnership with Stokas Bieri Real Estate and the Owner; and (c) the Recipient and the “need to know parties” will not use or permit to be used this Offering Memorandum or its contents in any fashion or manner detrimental to the interest of the Owner or HVS in partnership with Stokas Bieri Real Estate, or for any purpose other than use in considering whether to purchase the Property. The Recipient and the “need to know parties” agree to keep this Offering Memorandum and all confidential information contained herein permanently confidential and further agree to use this Offering Memorandum for the purpose set forth above. If the Recipient has no interest in the Property, or if the Recipient or the Owner discontinue negotiations in the future, the Recipient will return this Offering Memorandum to HVS in partnership with Stokas Bieri Real Estate. TABLE OF CONTENTS EXECUTIVE SUMMARY...... 4 INVESTMENT HIGHLIGHTS...... 6 PROPERTY OVERVIEW...... 8 AREA OVERVIEW...... 12 ATTRACTIVE HOTEL MARKET STATISTICS. . . 16 LAND SURVEY...... 18 Executive Summary HVS, as the sole and exclusive advisory firm to Ownership, is pleased to present the opportunity to acquire the fee-simple interest in a 1.05-acre site within the growing Dearborn submarket of (herein referred to as the “subject site”).

The subject site is located adjacent to the Fairlane Town Center “super-regional” mall, which includes 150 stores and is anchored by Macy’s and JCPenney. The mall is bordered by several restaurants, a Class-B office building, and a hospital. Overall, the subject site is located near a diverse mix of corporate, leisure, and group demand generators.

The Detroit suburb of Dearborn is home to the world headquarters, as well as The , the ’ largest indoor-outdoor museum complex. Hotel performance in the Dearborn submarket has been exceedingly impressive recently. Despite the opening of three hotels in 2016, representing a 59% increase in supply, market-wide RevPAR increased by a strong 4.4% in 2017 and an astounding 14.4% through October in 2018.

Detroit is known as the world’s traditional automotive center, as the the home of the invention of the automobile and its mass production, headed by Henry Ford. Detroit also has a long history of producing groundbreaking and influential musical talent. These two historical legacies are celebrated by the city’s two familiar nicknames – Motor City and . Detroit and the surrounding region constitute a manufacturing powerhouse, most notably as home to the Big Three automobile companies: , Ford Motor Company, and Fiat Automobiles’ U.S. headquarters. Additionally, the region has become competitive in , such as driverless technology, biotechnology, nanotechnology, information technology, and hydrogen-fuel-cell (HFC) development.

An investor will have the opportunity to realize the substantial value of constructing a nationally branded hotel in a growing market, creating significant upside from current cash flow and upon exit of the investment. Investment Highlights

ROBUST DEMAND GENERATORS As the world’s traditional automotive center, serves as the headquarters to America’s “Big Three” automakers: Fiat Chrysler Automobiles (FCA), Ford, and General Motors (GM). The Big Three each posted significant increases in both revenues and earnings from 2012 through 2016, which represented a record year for the U.S. auto industry, with the major Detroit automakers reporting their highest sales since the early 2000s. Moreover, each of the Big Three has announced plans of future investment in Detroit. In June 2018, Ford purchased the vacant as part of its plans to transform Corktown into its new campus for mobile technology and software development. In March 2018, GM announced plans to invest more than $100 million to upgrade manufacturing plants in to produce a self-driving Chevy Cruise. Moreover, in December 2018, FCA announced that it would convert a former Detroit engine plant to an assembly plant.

Just west of the subject site is the -Dearborn, a regional campus of University of Michigan. The university served over 9,000 students and employed roughly 1,100 faculty members during the academic year of 2017-2018. Enrollment has grown 6% over the last five years, as the university has continued to add new facilities and offer more degree programs.

Metro Detroit also ranks among the nation’s top five financial districts, with major financial service employers including KPMG, , , , Ernst & Young, and PricewaterhouseCoopers. Among the metro area’s leading information technology and computer software companies with a major presence or headquarters are , , IBM, , and Computer Sciences Corporation.

The healthcare sector is also important in this area. Headquartered in Detroit, Health System is one of the nation’s leading comprehensive, nonprofit healthcare organizations. With 8,800 employees in Detroit, the is the third-largest employer in the city. The Henry Ford Health System has a roughly $6-billion economic impact on metro Detroit; an additional 11,500 jobs are indirectly supported by transactions with the Henry Ford Health System. The is a leading academically integrated system in metropolitan Detroit and the largest healthcare provider in Southeast Michigan. VIBRANT MARKET PERFORMANCE Based on an October 2018 STR Trend Report, consisting of seven hotels ranging from upper-midscale to upscale limited-service, select-service, and extended-stay assets, the submarket achieved occupancy and average rate (ADR) levels of 81.4% and $124.45, respectively, resulting in RevPAR of $101.28 through October 2018.

• This represents an impressive 14.4% increase year-over-year.

EXCELLENT LOCATION AMONG DIVERSE DEMAND GENERATORS The subject site is located within the parking lot of the Fairlane Town Center mall. The regional shopping mall has over 1.2 million square feet of retail space housing over 125 stores and restaurants, major retail anchor tenants, and AMC theatres.

The subject site is proximate to a diverse mix of corporate and leisure demand generators, including the following:

• University of Michigan Dearborn – 0.6 miles • TPC Michigan – 1.2 miles • The Henry Ford (museum complex) – 1.2 miles • Ford Motor Company world headquarters – 1.7 miles • – 9 miles

SIGNIFICANT UPSIDE FOR DEVELOPER TO EXIT The subject site presents an opportunity for a developer to construct a limited-service, select-service, or extended- stay hotel in a major MSA, with an attractive exit capitalization rate. Following construction and stabilization of operations, this asset would be a desired investment for the comprehensive pool of area and regional investors interested in hotel products. Property Overview

Fairlane Town Center Outparcel (former automotive repair building, to the north of JCPenney), 18900 Michigan Avenue, Dearborn, Michigan 48126 Market/Tract Detroit; submarket: Dearborn

Parcel Size 1.047 Acre (45,598 SF) Within the site, which satisfies current brand prototypes. If desired, also a Parking to-be-determined easement or lease agreement with mall ownership Brand Unencumbered

Management Unencumbered

Interest Fee Simple DEARBORN, MI HOTEL DEVELOPMENT SITE FAIRLANE TOWN CENTER OUTPARCEL

8 MILES FRANCHISE POSSIBILITIES HVS has not directly contacted brand representatives in the market, but the list below includes branded, midscale to upscale hotels within a five-mile radius of the subject site. The potentially available franchises, which are not represented in the Dearborn submarket, include the following:

• AC Hotels by Marriott • Fairfield Inn & Suites by Marriott • Hyatt Place • Aloft Hotels • Four Points by Sheraton • Hyatt House • Avid by IHG • Hilton Garden Inn • Residence Inn by Marriott • Candlewood Suites • Home2 Suites by Hilton • SpringHill Suites by Marriot • Element by Westin • Homewood Suites by Hilton • Tru by Hilton • EVEN by IHG

EXISTING ASSETS The following hotel assets are currently represented in the market:

EXISTING ASSETS Property Name Distance Rooms Chain Scale Date Opened Franchise Comfort Inn Near Greenfield Village 0.5 116 Upper Midscale Aug-90 Choice

Extended Stay America Detroit Dearborn 0.8 93 Economy Mar-02 Extended Stay Hotels

Autograph Collection, The Henry 0.8 308 Upper Upscale Feb-89 Marriott

Marriott 0.9 230 Upper Upscale Jun-31 Marriott

Country Inn & Suites by Radisson Dearborn 1 100 Upper Midscale Sep-13 Radisson

Hampton Inn Detroit Dearborn 1.4 96 Upper Midscale Dec-16 Hilton

Courtyard by Marriott Detroit Dearborn 1.5 147 Upscale Dec-86 Marriott

DoubleTree by Hilton Detroit Dearborn 1.5 347 Upscale Aug-85 Hilton Hawthorn Suites by Wyndham Dearborn Detroit 1.5 128 Midscale Oct-88 Wyndham

TownePlace Suites by Marriott Detroit Dearborn 1.8 148 Upper Midscale Jan-01 Marriott

Best Western Greenfield Inn 2.3 209 Midscale Jun-66 Best Western

A Victory Inn West Dearborn 2.3 77 Midscale Jun-65 Victory Hotels

Comfort Inn & Suites Allen Park 2.4 121 Upper Midscale Oct-99 Choice

Staybridge Suites Dearborn 2.7 99 Upscale Apr-16 IHG

Red Roof Inn Detroit Dearborn 2.7 111 Economy Jan-88 Westmont

Holiday Inn Express & Suites Dearborn Southwest 2.7 107 Upper Midscale Jun-16 IHG Detroit Area Americas Best Value Inn Dearborn 2.7 71 Economy Jan-98 Red Lion

Red Roof Inn & Suites Melvindale 3.3 50 Economy Jan-10 Westmont

Holiday Inn Express & Suites Allen Park 3.3 106 Upper Midscale Jul-18 IHG

FUTURE SUPPLY PIPELINE ( JULY 2018 STR) The following hotel is anticipated in the market.

FUTURE SUPPLY PIPELINE (JULY 2018 STR)

Postal Room Proj. Opening Property Name Address City Project Phase Code Count Date TownePlace Suites by Hilton and Southfield Road Detroit, MI 48101 110 04/01/2020 Final Planning Detroit Allen Park SOURCE: STR PIPELINE REPORT, JULY 2018 DEARBORN, MI HOTEL DEVELOPMENT SITE FAIRLANE TOWN CENTER OUTPARCEL Area Overview

Detroit is known as the world’s traditional automotive center, as the city was the home of the invention of the automobile and its mass production, headed by Henry Ford. Detroit also has a long history of producing groundbreaking and influential musical talent. These two historical legacies are celebrated by the city’s two familiar nicknames – Motor City and Motown. Detroit and the surrounding region constitute a manufacturing powerhouse, most notably as home to the Big Three automobile companies: General Motors, Ford Motor Company, and Fiat Chrysler Automobiles’ U.S. headquarters. Since the end of the Great Recession, the automotive industry has improved year-over-year. In 2016, the Big Three posted record sales, and each company has invested heavily in the region to ensure continued growth. Additionally, the region has become competitive in emerging technologies, such as driverless technology, biotechnology, nanotechnology, information technology, and hydrogen-fuel-cell (HFC) development. ECONOMY As the world’s traditional automotive center, Metro Detroit serves as the headquarters to America’s “Big Three” automakers: Fiat Chrysler Automobiles (FCA), Ford, and General Motors (GM). Each of the Big Three has recently committed to the region, announcing plans for future investment in Detroit. In June 2018, Ford purchased the vacant Michigan Central Station as part of its plan to transform Corktown into its campus for mobile technology and software development. In March 2018, GM announced plans to invest more than $100 million to upgrade manufacturing plants in Southeast Michigan to produce a self-driving Chevy Cruise. The financial sector also plays a significant role in the Metro Detroit economy, with major financial service employers including Quicken Loans, KPMG, Fifth Third Bank, Comerica, Deloitte, Ernst & Young, and PricewaterhouseCoopers. In April 2016, , a Detroit-based auto lender and bank holding company, consolidated its regional offices and headquarters within the One Detroit Center office tower, while Fifth Third Bank relocated its headquarters to Downtown Detroit in October 2015. Furthermore, the healthcare sector is also important to the Detroit economy, as the city features over a dozen major hospitals, including the Detroit Medical Center and Henry Ford Health System hospitals. Headquartered in Detroit, the Henry Ford Health System is one of the nation’s leading comprehensive, nonprofit healthcare organizations and one of the largest employers in the city.

TOURISM & LEISURE The subject market benefits from a variety of tourism and leisure attractions in the area. Leisure demand generators include , , , Little Caesar’s Arena, and Theater. Special events also play a role during key weekends, such as concerts and sporting events. Major festivals include the North American International Auto Show, Movement Electronic Music Festival, , and America’s Thanksgiving Parade. Little Caesar’s Arena, which replaced Arena, opened in the city in 2017. The facility is home to the and and is the city’s premier indoor concert venue. The arena anchors The District Detroit, which is an ongoing, $1.4 billion, 650,000-square-foot sports and entertainment district that will feature new retail outlets, restaurants, residences, and office space, including an expansion of world headquarters.

DETROIT TOP 10 EMPLOYERS Rank Firm Employees 1 Ford Motor Company 48,000 2 General Motors Company 37,713 3 University of Michigan 32,749 4 FCA US LLC - Fiat Chrysler 32,514 5 Systems 28,038 6 U.S. Government 18,920 7 Henry Ford Health Systems 17,608 8 16,617 9 Trinity Health Michigan 14,676 10 11,893 SOURCE: DETROIT REGIONAL CHAMBER, 2017

SOURCE: WMUBRONCOS

13 CONVENTION MARKET AND FACILITIES The primary convention facility serving the southeastern Michigan region is Detroit’s Cobo Center, which is the centerpiece of Downtown Detroit’s civic center. This facility comprises 2.4 million square feet and is located along the banks of the . The facility offers 80 meeting rooms totaling 178,446 square feet, as well as 700,000 square feet of exhibit space. Additionally, the Cobo Center is attached to Cobo Hall, an entertainment venue. Prior to 2017, Cobo Center was also attached to , a popular concert venue and home to the Detroit Red Wings. The arena closed after Little Caesar’s Arena (LCA) opened in September 2017. The Cobo Center is physically linked to major Downtown locations and entertainment districts via the Detroit , an system. The Center underwent a three-phase, $279-million renovation that was completed in June 2015. Improvements included a variety of infrastructure, layout, and aesthetic upgrades to the facility. The Cobo Center remained partially open throughout the renovation efforts. The facility, which welcomed 1,321,976 delegates in 2016/17, is expected to attract major conventions and events going forward.

TRANSPORTATION Detroit Metro Airport (DTW) is served by a variety of domestic and international airlines. In 2008, a new, $418-million, 27-gate terminal opened and now accommodates all domestic and international carriers that previously operated out of the Smith and Berry Terminals. In 2012, the airport opened its $11-million Ground Run-Up Enclosure (GRE), which is designed to minimize noise pollution to the surrounding area when plane engines are after undergoing maintenance. The Airport Authority’s long-term plans include an airport rail system, a new runway, and terminal expansions; a number of proposed future developments are under consideration. A new maintenance hangar for Spirit Airlines was completed in 2017. The airport’s economic impact on the region is estimated at roughly $10.2 billion annually.

DETROIT METRO AIRPORT (DTW) Percent Percent Year Passenger Traffic Change* Change** 2008 35,135,828 — —

2009 31,357,388 (10.8) % (10.8) %

2010 32,377,064 3.3 (4.0)

2011 32,406,159 0.1 (2.7)

2012 32,242,473 (0.5) (2.1)

2013 SOURCE:32,389,544 CRAINSDETROIT0.5 WEBSITE(1.6)

2014 32,513,555 0.4 (1.3) DETROIT METRO AIRPORT (DTW) 2015 33,440,112 2.8 (0.7) 40 2016 34,401,254 2.9 (0.3)

35 2017 34,701,497 0.9 (0.1)

30 Year-to-date, Sept 25 2017 26,119,106 — — 20 2018 26,557,644 1.7 % — Passenger Traffic (millions) Traffic Passenger 15 *Annual average compounded percentage change from the previous year **Annual average compounded percentage change from first year of data 10 Source: Detroit Metro Airport

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD SepYTD 2017 Sep 2018 AERIAL OVERVIEW

DEARBORN, MI HOTEL DEVELOPMENT SITE FAIRLANE TOWN CENTER OUTPARCEL

Legend

Select Demand Generators

Retail

*Annual average compounded percentage change from the previous year **Annual average compounded percentage change from first year of data Source: Detroit Metro Airport Restaurant Attractive Hotel Market Statistics

LODGING MARKET OVERVIEW The data presented in the table and chart below are based on a trailing-twelve-month (TTM) October 2018 STR Trend Report for seven upper-midscale to upscale hotels in Dearborn.

OCTOBER 2018 STR TREND REPORT SUMMARY Average Available Occupied Daily Room Room Room Average Year Count Nights Change Nights Change Occupancy Rate Change RevPAR Change 2014 511 186,515 — 133,973 — 71.8 % $99.70 — $71.61 — 2015 511 186,515 0.0 % 142,275 6.2 % 76.3 107.53 7.8 % 82.02 14.5 % 2016 656 239,614 28.5 175,152 23.1 73.1 112.09 4.2 81.93 (0.1) 2017 813 296,745 23.8 215,957 23.3 72.8 117.34 4.7 85.40 4.2 Year-to-Date Through October 2017 813 247,152 — 185,201 — 74.9 % $118.17 — $88.55 — 2018 813 247,152 0.0 % 201,138 8.6 % 81.4 124.45 5.3 % 101.28 14.4 % Average Annual Compounded Change: 2014-2017 16.7 17.3 5.6 6.0

Number Year Year Hotels Included in Sample Class of Rooms Affiliated Opened Courtyard Detroit Dearborn Upscale 147 Dec 1986 Dec 1986 Comfort Inn Near Greenfield Village Upper Midscale 116 Sep 2011 Aug 1990 TownePlace Suites Detroit Dearborn Upper Midscale 148 Jan 2001 Jan 2001 Country Inn & Suites Dearborn Upper Midscale 100 Sep 2013 Sep 2013 Staybridge Suites Dearborn Upscale 99 Apr 2016 Apr 2016 Holiday Inn Express & Suites Dearborn Southwest Detroit Area Upper Midscale 107 Jun 2016 Jun 2016 Hampton Inn Detroit Dearborn Upper Midscale 96 Dec 2016 Dec 2016 Total 1,475

115 79.0

77.0 105 75.0

95 73.0

71.0

85 (%) Occupancy

69.0 Average Rate/RevPAR ($) Rate/RevPAR Average 75 67.0

65 65.0 2014 2015 2016 2017

Aver age Ra te Occupied Room Nights Occupancy POTENTIAL PERFORMANCE The table below illustrates the possible performance that could be expected from a 97-key, upper-midscale, limited-service hotel. HVS used a proprietary forecasting model to extrapolate top-line performance and possible gross operating profit (GOP); thus, it is our opinion that a new developer would likely achieve similar results.

PERFORMANCE SUMMARY - PROPOSED UPPER-MIDSCALE HOTEL

2021 2022 Stabilized 2024 2025

Number of Rooms: 97 97 97 97 97

Occupied Rooms: 24,429 25,492 25,846 25,846 25,846

Occupancy: 69% 72% 73% 73% 73%

Occupancy Penetration 90% 97% 100% 100% 100%

Average Rate: $137.78 $143.36 $149.16 $153.63 $158.24

Average Rate Penetration 99% 100% 101% 101% 101%

RevPAR: $95.07 Gross $103.22 Gross $108.88 Gross $112.15 Gross $115.52 Gross

GROSS HOUSE PROFIT 1,462 42.8 1,664 44.8 1,794 45.8 1,848 45.8 1,904 45.8

Assuming an asset could achieve these performance metrics, a developer could expect unlevered returns on cost of above 12% in a stabilized year three. Based on current industry metrics, a 12% unlevered return would be valuable to a local developer.

17 Land Survey

For more information contact:

DREW NOECKER Managing Director [email protected] +1 (972) 890-3348

ERIC GUERRERO Managing Director [email protected] +1 (713) 955-5665

JAMES REBULLIDA Associate [email protected] +1 (713) 955-5580

JAMES BIERI Principal Stokas Bieri Real Estate [email protected] +1 (313) 962-2800

You’ll find a wealth of hospitality knowledge at hvs.com