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Market Feasibility Study Report for the Wolverine Dilworth Hotel 300 E

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Market Feasibility Study Report for the Wolverine Dilworth Hotel 300 E MARKET FEASIBILITY STUDY REPORT FOR THE WOLVERINE DILWORTH HOTEL 300 E. WATER STREET BOYNE CITY, CHARLEVOIX COUNTY, MICHIGAN Date of Report: June 4, 2010 FOR Ms. Elisabeth Knibbe, FAIA Principal Quinn Evans Architects 219 N. Main Street Ann Arbor, Michigan 48104 June 4, 2010 Ms. Elisabeth Knibbe, FAIA Principal Quinn Evans Architects 219 N. Main Street Ann Arbor, Michigan 48104 RE: Wolverine Dilworth Hotel Boyne City, Charlevoix County, Michigan Dear Ms. Knibbe: In fulfillment of our engagement letter, we have completed our study of the market demand and economic feasibility for the proposal to redevelop the Wolverine Dilworth Hotel in Boyne City, Charlevoix County, Michigan. The developer plans to open the hotel as a 29-unit property with two restaurants and meeting space. The property is located at 300 E. Water Street. The consultants have prepared more than 1,000 similar studies over the past 20 years with various firms. The study is based upon market conditions observed as of the date of our market inspection on May 19, 2010 and research conducted in May and June, 2010. Assumptions The conclusions contained in this report are based upon a review of information provided by you, Landmark Development, and on-site field work in the market area that is described in the Scope of Assignment section. As in all studies of this type, the conclusions reached do not take into account, or make provisions for, the effect of any sharp rise or decline in local or general economic conditions not presently foreseeable. The estimated results are based on competent and efficient management of the proposed hotel, as well as an aggressive marketing program prior to and after the opening of the proposed hotel. We assume the subject will hire appropriate management personnel to operate and market the hotel. We assume that the subject will operate as a branded hotel affiliated with the Ascend Collection by Choice Hotels or similar quality brand. We assume the proposed hotel will open January 1, 2012. We presume no significant change in the competitive position of the hotel industry in the area from that as set forth in this report. We do not warrant that the estimates will be attained, but they have been conscientiously prepared on the basis of information obtained and our experience in the hotel industry. It is expressly understood that the scope of this study and the report thereon do not include the possible impact of zoning regulations, licensing requirements, or other restrictions concerning the project, except where such matters have been brought to our attention and that are set forth in this report. This report and its contents are intended solely for the information of our client for internal use relative to determining the feasibility of the project. The report should not be relied upon for any other purpose. Otherwise, neither our report nor any of its contents nor any reference to Hotel & Leisure Advisors, LLC (H&LA) may be included or quoted in 14805 Detroit Avenue, Suite 420 • Cleveland, OH 44107 • 216-228-7000 • Fax: 216-228-7320 • www.hladvisors.com Ms. Elisabeth Knibbe, FAIA June 4, 2010 Page 2 any document, offering circular, registration statement, prospectus, sales brochure, other appraisal, or other agreement without our prior written approval. Such permission will not be unreasonably withheld. We are available to perform additional consulting services on this proposed property as the scope of the development is finalized. In addition, we are available to perform a self- contained full narrative appraisal report, economic impact study, or management company analysis for the proposed development upon your request. We are also available to provide asset management services to the client if the hotel is developed. We appreciate the opportunity to be of service to your organization and look forward to working with you again. Respectfully submitted, Hotel & Leisure Advisors, LLC David J. Sangree, MAI, ISHC President Joseph Pierce Senior Associate MARKET FEASIBILITY STUDY REPORT FOR THE WOLVERINE DILWORTH HOTEL 300 E. WATER STREET BOYNE CITY, CHARLEVOIX COUNTY, MICHIGAN TABLE OF CONTENTS A. INTRODUCTION Scope of the Assignment ......................................................................... A-1 Executive Summary ................................................................................ A-2 Standard Conditions ............................................................................... A-7 Extraordinary Assumptions and Hypothetical Conditions .............................. A-10 Competency of the Consultants ................................................................ A-10 B. AREA ANALYSIS AND DESCRIPTIVE DATA Area Review .......................................................................................... B-1 Neighborhood Analysis ............................................................................ B-15 Site Analysis .......................................................................................... B-20 Description of Projected/Recommended Improvements ............................... B-25 Franchise Affiliation Analysis .................................................................... B-29 Municipal Incentives ............................................................................... B-30 C. MARKET ANALYSIS National Lodging Overview ...................................................................... C-1 Michigan Lodging Overview ...................................................................... C-8 Comparable Lodging Market Overview ....................................................... C-10 Projected Market Occupancy .................................................................... C-22 Demand Interviews ................................................................................ C-23 D. SUBJECT OCCUPANCY AND AVERAGE DAILY RATE ANALYSIS Competitive Advantages and Disadvantages of Subject Property ................... D-1 Projected Subject Occupancy ................................................................... D-2 Estimated Average Daily Rate .................................................................. D-7 E. FINANCIAL ANALYSIS Introduction .......................................................................................... E-1 Income and Expense Analysis .................................................................. E-3 Prospective Financial Analysis in Inflated Dollars ......................................... E-15 F. CERTIFICATION ......................................................................................... F-1 ADDENDA Qualifications ............................................................................ Addendum I Smith Travel Research Report ..................................................... Addendum II Building Plans and Site Plans ...................................................... Addendum III Demand Interviews Survey Form ................................................. Addendum IV Wolverine Dilworth Hotel Introduction A-1 SCOPE OF THE ASSIGNMENT Hotel & Leisure Advisors, LLC has been retained by Ms. Elisabeth Knibbe, FAIA with Quinn Evans Architects to estimate the potential market feasibility of the redevelopment of the Wolverine Dilworth Hotel in Boyne City. We made a number of independent investigations and analyses in performing this study. We evaluated the subject site and its relationship to potential demand generators as well as its attributes relative to the lodging competitors. We interviewed representatives of the Convention and Visitors Bureau, Chamber of Commerce, and assessor’s office, as well as, city officials, county officials, and economic development officials to collect information concerning the proposed site and region. We interviewed managers or owners of existing and proposed competitive hotel or resort properties. We interviewed representatives of various hotel chains to determine performance of area hotels and proposed new supply additions. We interviewed representatives of area attractions to determine usage and new supply additions. We have conducted demand interviews with various potential users of the proposed facility. In conducting our investigation and analysis, we relied on data retained in our office that is updated regularly for use in all assignments. Various agencies and databases, including the Site to Do Business database, were contacted for demographic data, land use policies and trends, growth estimates, and employment data. Neighborhood data was supplemented by a physical inspection of the subject property and the area. The subject property data considered in our analysis was provided by Ms. Elisabeth Knibbe, FAIA and Landmark Development. In addition to the subject's specific information, we have considered relevant market data in determining the projections used in our cash flow analysis. The financial analysis was based primarily upon the probable operating experience of the property relative to gross operating revenues, typical expense levels, and resultant net cash flow. Estimates of operating revenues were based upon market data relative to industry standards and comparable properties in the subject area. Expense levels were estimated based upon industry standards and operating histories of similar properties. We have estimated the financial projections for the subject facility for the year beginning January 1, 2012 for 11 years. Wolverine Dilworth Hotel Introduction A-2 EXECUTIVE SUMMARY The following chart profiles our recommendations for the Wolverine Dilworth
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