MARKET STUDY Proposed Hotel Georgia World Congress Center 285 ANDREW YOUNG INTERNATIONAL BOULEVARD NW ATLANTA, GEORGIA SUBMITTED TO:PR OPOSED PREPARED BY: Mr. Richard Sawyer HVS Consulting and Valuation Services Geo. L. Smith II Georgia World Congress Center Division of TS Worldwide, LLC Authority 2386 Clower Street, Suite E102 285 Andrew Young International Boulevard NW Snellville, Georgia 30078 Atlanta, Georgia, 30313-1591 +1 (678) 639-3334 +1 (404) 223-4200 August-2013 August 19, 2013 Mr. Richard Sawyer Geo. L. Smith II Georgia World Congress Center Authority 285 Andrew Young International Boulevard NW Atlanta, Georgia, 30313-1591 HVS ATLANTA Re: Proposed Hotel Georgia World Congress Center 2386 Clower Street, Suite E102 Atlanta, Georgia Snellville, Georgia 30078 HVS Reference: 2013020665 +1 (678) 639-3334 +1 (678) 639-3335 FAX www.hvs.com Dear Mr. Sawyer: Atlanta Boston Pursuant to your request, we herewith submit our market study pertaining to the Boulder above-captioned property. We have inspected the real estate and analyzed the Chicago hotel market conditions in the Atlanta, Georgia area. We have studied the Dallas proposed project, and the results of our fieldwork and analysis are presented in Denver this report. We have also reviewed the proposed improvements for this site. Our Houston report was prepared in accordance with the Uniform Standards of Professional Las Vegas Appraisal Practice (USPAP), as provided by the Appraisal Foundation. Los Angeles Mexico City Miami We hereby certify that we have no undisclosed interest in the property, and our Minneapolis employment and compensation are not contingent upon our findings. This study is Nassau subject to the comments made throughout this report and to all assumptions and New York limiting conditions set forth herein. Newport Philadelphia Sincerely, San Francisco TS Worldwide, LLC St. Louis Toronto Vancouver Washington Athens Beijing Buenos Aires Adam R. Lair, Senior Vice President, Partner Dubai Hong Kong [email protected], +1 (678) 639-3334 Lima London Milan Moscow Mumbai New Delhi Sao Paulo Shanghai Michael E. Brophy, Senior Vice President, Partner Singapore [email protected], +1 (678) 628-6577 Superior results through unrivaled hospitality intelligence. Everywhere. Table of Contents SECTION TITLE PAGE 1. Executive Summary 1 2. Description of the Site and Neighborhood 16 3. Market Area Analysis 27 4. Supply and Demand Analysis 87 5. Description of the Proposed Project 124 6. Projection of Occupancy and Average Rate 132 7. Projection of Income and Expense 142 8. Discussion of Similar Projects 161 9. Statement of Assumptions and Limiting Conditions 163 10. Certification 166 Addenda Penetration Explanation i Qualifications 1. Executive Summary Project: Proposed Hotel Georgia World Congress Center Location: 285 Andrew Young International Boulevard NW Atlanta, Georgia 30313 LAND DESCRIPTION Area: 2.00 acres, or 87,120 square feet Zoning: C-5 - Central Business Support District Assessor's Parcel Number(s): 14008300060740 FEMA Flood Zone: X PROPOSED IMPROVEMENTS DESCRIPTION Expected Opening Date: July 1, 2017 Property Type: Full-service, convention headquarters lodging facility Building Area: TBD Guestrooms: 1,200 (recommended) Number of Stories: TBD Food and Beverage Facilities: Two restaurants, two lounges, a café, and a coffee kiosk Meeting Space: 110,000 square feet Main Ballroom: 30,000 square feet Junior Ballroom: 20,000 square feet Additional Meeting Space: 35,000 square feet Pre-Function Space: 25,000 square feet Additional Facilities: An outdoor pool, an outdoor whirlpool, a spa, a fitness center, a business center, a gift shop, retail outlets, and an airport shuttle Parking Spaces: TBD August-2013 Executive Summary Proposed Hotel Georgia World Congress Center – Atlanta, Georgia 1 Subject of the The subject of the market study is an estimated 87,120-square-foot (2.00-acre) Market Study parcel to be improved with a full-service, convention headquarters lodging facility; the hotel’s brand affiliation is undetermined, although we have placed emphasis on the InterContinental brand. The property is expected to open on July 1, 2017 and will feature 1,200 rooms, two restaurants, two lounges, a café, and a coffee kiosk, 110,000 square feet of meeting space, an outdoor pool, an outdoor whirlpool, a spa, a fitness center, a business center, a gift shop, retail outlets, and an airport shuttle. The hotel will also feature all necessary back-of-the-house space. The proposed subject property is anticipated to serve in concert with the 1,070- room Omni at CNN Center as the city's second convention headquarters hotel. Given the relatively low levels of exhibit space occupancy at the GWCC and the limited activity in the center's newest facility, the state-of-the-art Building C, the proposed hotel is further expected to be integrated to a large degree with Building C, serving as a bookend to the GWCC with the Omni, which is located adjacent to Building A on the center's eastern end. Four possible developmental sites are under consideration for the proposed hotel; however, given the hotel's potential to induce meeting and group demand to Building C, it is our recommendation that the proposed hotel should be developed on the Gold Deck site and should be attached to both Building C and the adjacent Building B, affording hotel guests easy access to both facilities. The selection of the Gold Deck site is further supported by the apparent likelihood that the new Atlanta Falcons stadium will be developed on the proposed South Site, proximate to the Gold Deck. The proposed hotel should be designed in line with other convention headquarters hotels in major markets, with a nationally recognized brand affiliation and corresponding rewards system, numerous food and beverage and retail outlets, and an appropriate complement of meeting space. It is our further recommendation that the proposed hotel be integrated with outside meeting space, food and beverage outlets, and entertainment venues adjacent to the GWCC and proposed stadium, creating a centralized guest experience. The subject site’s location is 285 Andrew Young International Boulevard NW, Atlanta, Georgia, 30313. August-2013 Executive Summary Proposed Hotel Georgia World Congress Center – Atlanta, Georgia 2 FIGURE 1-1 PROPOSED FACILITIES SUMMARY Guestroom Configuration Number of Units (Estimated) Standard King 350 Standard Queen/Queen 475 Club King 125 Club Queen/Queen 175 Suite 75 Total 1,200 Food & Beverage Facilities Seating Capacity (Estimated) All-Day-Dining Restaurant (Buffet) 300 Upscale, Fine-Dining Restaurant 200 Club Lounge 75 Lobby Lounge 60 Casual Café 40 Coffee Kiosk 30 Indoor Meeting & Banquet Facilities Square Footage (Estimated) Main Ballroom 30,000 Main Ballroom Pre-Function Space 12,500 Junior Ballroom 20,000 Junior Ballroom Pre-Function Space 7,500 Additional Meeting Space 35,000 Additional Pre-Function Space 5,000 Total Meeting Rooms 85,000 Total Pre-Function Space 25,000 Total Meeting Space 110,000 Amenities & Services Indoor Swimming Pool Business Center Indoor Whirlpool Gift Shop Health Spa Retail Outlets Fitness Center Airport Shuttle Infrastructure Parking Spaces TBD Elevators TBD Life-Safety Systems Sprinklers, Smoke Detectors Construction Details Class A Fireproof, Structural Steel Frame August-2013 Executive Summary Proposed Hotel Georgia World Congress Center – Atlanta, Georgia 3 Pertinent Dates The effective date of the report is August 19, 2013. The subject site was inspected by Adam R. Lair and Michael E. Brophy on July 26, 2013. Ownership, Franchise, The developer of the proposed subject property is the Georgia World Congress and Management Center Authority in conjunction with the City of Atlanta and the State of Georgia. Assumptions The recommended subject site is part of a larger site housing the Georgia World Congress Center and is currently owned by the State of Georgia; the site has not been transferred in several years and is neither listed nor under contract for sale. The proposed hotel is expected to be managed by the brand. Details pertaining to brand affiliation and management terms were not yet determined at the time of this report; therefore, our forecast fees represent a blended average of what would be expected on a base-fee and incentive-fee basis. While a limited number of affiliations are available for the Downtown Atlanta market, we have placed particular emphasis on the InterContinental brand given the presence of InterContinental Hotels Group's (IHG) North American headquarters in metropolitan Atlanta. It is our conclusion that the development of an InterContinental hotel at the GWCC would be especially attractive in that it would provide IHG with a trophy asset in its home market. However, we note that given the confidentiality of this project, interest in the InterContinental brand affiliation has not been confirmed by IHG representatives. We have assumed a market- appropriate total management fee of 3.0% of total revenues in our study. The proposed subject property is expected to be managed by the brand throughout the forecast period and will, therefore, not be subject to franchise fees. Summary of Hotel Conventions at the Georgia World Congress Center, major corporate entities with Market Trends – Local headquarter offices in Downtown Atlanta, and numerous entertainment venues Competitive Set and attractions, such as the Georgia Dome and Georgia Aquarium, represent the primary sources of demand in this market. From 2001 through 2003, market-wide occupancy levels remained at or just above 60.0% before trending upward slightly in 2004. Occupancy levels increased further in 2005 and 2006 due to heightened activity levels at the GWCC, as conventions relocated from New Orleans in the aftermath of Hurricane Katrina. Occupancy peaked in 2007 due to continued strong meeting activity and the opening of new tourist attractions, such as the World of Coca-Cola. However, the onset of the economic recession in 2008 resulted in a significant decline in occupancy, which was exacerbated by the opening of the Hilton Garden Inn Atlanta Downtown, diluting already weakening demand.